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
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(Exact name of registrant as specified in charter)
1349 Fairground Road, Beavercreek, Ohio 45385
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(Address of principal executive offices) (Zip code)
Barry R. James, P.O. Box 8, Alpha, Ohio 45301
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(Name and address of agent for service)
Registrant's telephone number, including area code: (937) 426-7640
Date of fiscal year end: 6/30
Date of reporting period: 06/30/06
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.
James Advantage Funds
James Mid Cap Fund
Annual Report
June 30, 2006
James Advantage Funds
James Mid Cap Fund
Statement of Assets and Liabilities
June 30, 2006
Assets
Cash $100,000
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Total Assets $100,000
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Liabilities --
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Net assets for shares of beneficial
interest outstanding $100,000
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Shares outstanding 10,000
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Net asset value, offering and redemption
price per share $ 10.00
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Net assets consist of:
Paid-in capital $100,000
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The accompanying notes are an integral part of this statement.
James Advantage Funds
James Mid Cap Fund
Notes to Financial Statements
June 30, 2006
(1) James Mid Cap Fund (the "Fund") is a diversified series of James Advantage
Funds (the "Trust"), an open-end management investment company established as an
Ohio business trust under a Declaration of Trust dated August 29, 1997. The
investment objective of the Fund is to provide long-term capital appreciation.
The Fund seeks to achieve its objective by investing primarily in common stocks
of mid capitalization companies. On June 30, 2006, 10,000 shares of the Fund
were issued for cash, at $10.00 per share, to a member of management of James
Investment Research, Inc., the investment manager to the Fund. The Fund has had
no operations except for the initial issuance of shares.
(2) James Investment Research, Inc. (the "Adviser") serves as the investment
manager to the Fund. The Adviser is authorized to receive a fee equal to (a) an
annual rate of 1.25% of the average daily net assets of the Fund; minus (b) the
fees and expenses of the non-interested person trustees incurred by the Fund.
The Adviser is responsible for the payment of all operating expenses of the Fund
except for brokerage fees and commissions, taxes, interest, 12b-1 expenses and
fees and expenses of non-interested person trustees and extraordinary expenses.
(3) The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
1940 Act (the "Plan") under which the Fund may directly incur or reimburse the
Adviser for expenses related to the distribution and promotion of its shares.
The annual limitation for payment of such expenses under the Plan is 0.25% of
the Fund's average daily net assets.
(4) Reference is made to the Prospectus and the Statement of Additional
Information for a description of the Investment Management Agreement, tax
aspects of the Fund and the calculation of the net asset value of shares of the
Fund.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholder of The James Advantage Funds:
We have audited the accompanying statement of assets and liabilities of the
James Mid Cap Fund (the "Fund"), a series of The James Advantage Funds, as of
June 30, 2006. This financial statement is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. The Fund is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Fund at June 30, 2006, in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
August 18, 2006
JAMES ADVANTAGE FUNDS
Other Items (Unaudited)
Advisory Agreement Approval
The Board of Trustees of The James Advantage Funds considered the approval of
the Management Agreement for the Mid Cap Fund at a meeting held on May 24, 2006.
The Trustees referred to the materials that had been provided to them prior to
the meeting for purposes of their consideration of the Management Agreement. A
representative of the Adviser reviewed the services to be provided by the
Adviser to the Fund, as well as a comparison of the advisory services provided
to the other Funds in the Trust (the "existing Funds"; together with the Mid Cap
Fund, the "Funds") and other clients of the Adviser. They discussed recent
regulatory changes, including rules adopted pursuant to the Sarbanes-Oxley Act
of 2002, proxy voting disclosure and the compliance program requirement for
mutual funds, that had significantly increased the Adviser's regulatory burden
and costs with respect to the existing Funds.
The Trustees reviewed a table comparing the performance of the only account of
the Adviser that has investment objectives and strategies similar to the Mid Cap
Fund with the performance of the S&P Mid Cap 400/CitiGroup Value Index. A
representative of the Adviser pointed out that the Adviser had managed the
account since September 30, 1998, and he reviewed the performance of the account
(net of the estimated fees and expenses of the Mid Cap Fund) with that of the
index. The Trustees acknowledged that the account had outperformed the index by
substantial margins in 2004 and 2005, although it had underperformed the index
in earlier years.
The Trustees reviewed a description of the services to be provided by the
Adviser to the Mid Cap Fund in addition to portfolio management, such as
providing a Chief Compliance Officer to the Funds at no additional cost to the
Funds, monitoring the expenses of each Fund, and providing individualized
attention to the Funds' shareholders. The Trustees also reviewed the proposed
management fee for the Mid Cap Fund and compared the fee with the median
investment advisory fees of the Fund's peer group selected by Lipper based on
the investment style and strategies employed by the Fund, as well as by asset
size. The Trustees acknowledged that the Mid Cap Fund would have a universal fee
structure, where the Adviser pays almost all of the expenses of the Fund and is
compensated with a higher management fee, and thus noted that the peer group
comparisons for the most part were not terribly helpful. The Trustees then
compared the expense ratio to be paid by the Mid Cap Fund (excluding 12b-1 fees)
with the median expense ratio (excluding 12b-1 fees) for the peer group. It was
the consensus of the Trustees that the proposed management fee appeared
reasonable in comparison with the peer group fee. In this regard, they noted
that they thought the appropriate comparison for the Fund was the total expense
ratio (excluding 12b-1 fees), due to the fact that the Fund has a universal fee
and none of the other funds in the peer group use the universal fee structure.
With regard to profitability of the Mid Cap Fund, the Trustees acknowledged that
the proposed universal fee structure would likely result in losses to the
Adviser and that they expected the Adviser to recoup these losses in later years
if performance is good and the Fund grows to profitable levels. They then
reviewed a proposal from the Adviser to add breakpoints to the management fees
and noted that the Adviser believed the breakpoints would allow the Adviser to
recoup its losses over the years and reach a reasonable level of profitability.
The Trustees acknowledged that the Adviser was entitled to reasonable profits
and indicated that the proposed breakpoints should be implemented. The Trustees
indicated that they had reviewed the Adviser's financial condition. The Trustees
then discussed other benefits that might be realized by the Adviser as a result
of its relationship with the Funds. It was noted that the Adviser does not have
any soft dollar arrangements with broker-dealers.
The Trustees indicated that it was their consensus that the information
presented and the discussion of the information were adequate for making a
determination regarding the approval. They stated that they continue to be
satisfied with the Adviser and the performance of the existing Funds, and that
they considered the performance of the Adviser's Mid Cap account as indicative
of the Adviser's ability to successfully manage the Mid Cap Fund. They then
concluded that, based on their review of the management fees and overall expense
comparison, the proposed management fees for the Fund were reasonable and that
the arrangements would not generate excessive profits to the Adviser. The
Trustees concluded that the proposed fee breakpoints would make the Mid Cap
Fund's management fee reflective of economies of scale. As to the nature, extent
and quality of services to be provided by the Adviser, the Trustees expressed
their common opinion that the Adviser's personnel are highly qualified, that the
Adviser provides excellent services to the existing Funds, and that the extent
of the services would likewise be appropriate and consistent with the Board's
expectations for the Mid Cap Fund.
It was the consensus of the Independent Trustees, and all of the Trustees, that
the approval of the Management Agreement was in the best interest of the Mid Cap
Fund and its shareholders.
Proxy Voting Guidelines
The Adviser is responsible for exercising the voting rights associated with the
securities purchased and held by the Fund. A description of the policies and
procedures that the Adviser 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 Adviser's
website at www.jamesfunds.com. For the period ended June 30, 2006, there were no
proxies voted for the Fund.
Quarterly Portfolio Disclosure
The Adviser files a complete listing of portfolio holdings for the 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
The Fund commenced operations on June 30, 2006 and incurred no expenses on that
date. Therefore, shareholders of the Fund did not incur ongoing costs for the
period ended June 30, 2006.
James Advantage Funds
Management of the Trust (Unaudited)
Listed in the charts below is basic information regarding the Trustees and
principal officers of James Advantage Funds (the "Trust").
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Other Trusteeships
Term of Principal Portfolios in Held by Trustee
Name Position(s) Office(2) and Occupation(s) Fund Complex Outside the Fund
Address(1) Held With Length of During Last 5 Overseen by Complex
Age Trust Time Served Years Trustee
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INTERESTED TRUSTEES:
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Barry R. James, CFA(3) President Since Executive Vice 5 Director of James
Age: 49 and Trustee Inception President, James Capital Alliance, a
Investment registered investment
Research, Inc. adviser.
(1985 to Present)
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DISINTERESTED TRUSTEES:
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Anthony P. D'Angelo, Trustee Since Professor Emeritus, 5 N/A
D.B.A. Inception Graduate School of
Age: 76 Logistics and
Acquisitions
Management, Air
Force Institute of
Technology,
Wright-Patterson
AFB, Ohio (1985 to
Present)
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Leslie L. Brandon Trustee Since May 2003 Retired Partner, 5 N/A
Age: 63 Ernst & Young LLP,
Columbus, Ohio
(1966 to 2000)
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Richard C. Russell Trustee Since May 2003 Richard C. Russell, 5 N/A
Age: 59 Consultant, general
business
consulting (2002
to Present);
President, The
Danis Companies,
real estate
development and
construction
(1983 to 2002)
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(1) The address of each Trustee is c/o James Advantage Funds, 1349 Fairground
Road, Beavercreek, Ohio 45385.
(2) Each Trustee is elected to serve in accordance with the Articles of
Incorporation and Bylaws of the Trust until his or her successor is duly
elected and qualified.
(3) Mr. James is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. James Investment Research, Inc.
serves as the investment adviser to the Funds.
PRINCIPAL OFFICERS:
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Term of Principal Portfolios in Other Trusteeships
Name Position(s) Office(2) and Occupation(s) Fund Complex Held by Trustee
Address(1) Held With Length of During Last 5 Overseen by Outside the Fund
Age Trust Time Served Years Trustee Complex
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Thomas L. Mangan(2) Vice President, Since Vice President, N/A N/A
Age: 56 Chief Compliance Inception James Investment
Office, Research, Inc.
Treasurer/CFO and (1994 to Present)
Secretary
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(1) The address of Mr. Mangan is c/o James Advantage Funds, 1349 Fairground
Road, Beavercreek, Ohio 45385.
(2) Mr. Mangan is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. and is elected to serve until his
successor is duly elected and qualified. James Investment Research, Inc.
serves as the investment adviser to the Funds.
The Statement of Additional Information contains additional information about
the Trustees and is available without charge upon request by calling
1-800-995-2637.
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Annual
Report
-------------
June 30, 2006
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James Balanced:
Golden Rainbow Fund
James Small Cap Fund
James Equity Fund
James Market Neutral Fund
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[LOGO]
JAMES
ADVANTAGE
FUNDS
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Advised by James Investment Research, Inc.
937 - 426 -7640
www.jamesfunds.com
LETTER TO SHAREHOLDERS
OF THE JAMES ADVANTAGE FUNDS
================================================================================
The economy and the stock market have been somewhat erratic in the last year.
The stock market was flat in the first quarter of the fiscal year, but then
picked up steam. Unfortunately, the party ended with a correction that began in
May. The economy ended 2005 with a whimper, but surged ahead at the beginning of
2006. However, it now appears that oil prices and higher interest rates are
impacting the economy and the housing market is starting to weaken. This could
have a significant impact on the securities markets. We are pleased to present
this year's Annual Report.
The Market Over the Past Year
While major indices showed nice gains for the fiscal year, nonetheless, it was a
challenging time as there were periods of correction and some shifts in terms of
both sectors and size as far as top performance. As we have repeated over many
of these reports, small stocks led the way in the last 12 months, with the
Russell 2000 index advancing 14.58 percent, while the S&P 500 index returned
8.65 percent. After an anemic 2005, the Dow Jones Industrial Average rebounded
to return 11.08 percent. Once again we saw value outperform growth. Furthermore,
in the last 12 months, the market was paced by stocks in the energy, basic
materials, and industrial sectors. The laggards were technology and non-cyclical
stocks.
On the fixed income side, the bond market continued to be hurt by fears of
inflation and Federal Reserve hikes. The Federal Reserve raised rates an
additional eight times, and the 10 year Treasury Bond had surged from a low of
about four percent to a high of 5-1/4 percent near the end of the year. This was
an unusual time when intermediate and long term bonds both lost ground and money
market funds outperformed them because they had positive results.
Investment Goals and Objectives
The objectives and philosophy of James Investment Research, Inc. fit well in
this volatile time. We maintain an eye toward value investing with an approach
we consider more conservative than most managers.
We strive to outperform each Fund's benchmark index (see pages 3 and 4). The
objectives of each Fund are stated more fully in the Prospectus, which provides
investors with information on the risk levels and performance of each Fund. The
research team and portfolio managers of James Investment Research, Inc. take a
personal interest in the Funds' performance, and we believe this has contributed
to our success during these volatile times.
Investment Philosophy
James Investment Research, Inc. is proud of its long tradition of original
research. Quantitative in nature and rooted in fundamental analysis, this
research decried phenomenally high stock valuations in 1999. The faithful belief
in value investing has reaped its rewards in the years that followed.
We believe that the coming years will reward value investing, and are confident
that our research will continue to show the way to superior returns. Of course,
we cannot guarantee results. Still, we note there are many strong companies with
growing earnings, even in these uncertain times. These hidden gems are waiting
to be discovered by those with the ability and resolve to find them.
Fund Performance
The James Balanced: Golden Rainbow Fund continued on a positive path in the last
year. The Fund returned 6.48 percent over the 12 months ended June 30, 2006. The
Standard & Poor's 500 Index rose 8.65 percent, and a blend of the Standard &
Poor's 500 Index, Russell 2000 Index and Lehman Brothers Intermediate
Government/Credit Bond Index, which more closely approximates the Fund's
investments, returned 5.73 percent.
The Fund's strong returns were a result of our ability to take advantage of the
market's volatility, along with our focus on value stocks. The fact that we hold
small and mid-cap stocks with a value orientation definitely helped in the past
year. Bond holdings did not help the portfolio much, but shorter term bonds did
produce positive results.
1
The James Small Cap Fund once again posted excellent results. During the 12
months ended June 30, 2006, it returned 15.59 percent. The Fund's benchmark, the
Russell 2000 Index, rose 14.58 percent in the same time period. The outstanding
performance over the last several years has led to the Fund being noted in some
national publications. Our proprietary evaluation methodology once again proved
its worth in a time when common sense investing is growing in its power to
properly determine value. Firms that are selling at reasonable multiples, and
have good earnings continue to find investors' dollars, and are featured in your
Fund.
The James Market Neutral Fund rose 4.94 percent over the 12 months ended June
30, 2006. The Fund's benchmark, the 90 Day Treasury Bill Index, returned 3.98
percent over this period. In spite of periodic rallies in the market, which were
unsettling to a market neutral style, the Fund blossomed off of its February
lows as our style gained traction.
Our research continues to find undervalued and overvalued securities. The
volatility in the market in the past 12 months provided opportunities for both
longs and shorts, and this, we believe, makes a good environment for a market
neutral approach.
The James Equity Fund gained 24.45 percent during the 12 months ended June 30,
2006. It far surpassed its benchmark, the S&P 500 Index, which rose 8.65
percent. This Fund also received acclaim in national publications, due to its
outstanding returns. The Fund was aided by good holdings in the oil and utility
sector, but also the rising tide for stocks that met our bargain criteria.
Expectations for the Future
Federal Reserve rate hikes have continued from last year. The dollar has
weakened against a basket of global currencies, and many of the leading economic
indicators point to a slowing economy. We have seen consumer borrowing taper
off, and both home prices and home sales are showing signs of sluggishness.
Earnings have remained fairly brisk throughout the last fiscal year, although we
are not seeing the core elements of earnings growing at a rate that would lead
us to believe we should see a continuation of the double digit earnings gains of
the recent past. This is a mid-term year in the presidential election cycle, and
volatility is typical. We would expect to see the markets face some major
headwinds early in the fiscal year, but this may form a great buying
opportunity.
While bonds have had troubles of their own, we expect that the slowing economy
will be good for bond holders. While inflation in the United States is running
at a pace higher than most of the industrialized world, we expect the cooling of
the economy will give bonds a boost.
We are pleased with the growth of the Funds and the results in the last year. We
certainly appreciate your support. We believe our experience and methodology are
essential to weathering difficult markets. We are also proud of our recent
successes and the launching of a new fund: The James Mid Cap Fund. We remain
optimistic for the prospects for all of our Funds.
/s/ Barry R. James
Barry R. James, CFA, CIC
President
2
Comparison of the Change in Value of a $10,000 Investment in the
James Balanced: Golden Rainbow Fund, Standard & Poor's 500 Index
and a Blended 25/25/50 Index(A)
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James Balanced: Golden Rainbow Fund
Average Annual Total Returns
1 Year 5 Years 10 Years
6.48% 8.73% 8.44%
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[LINE CHART]
JAMES BALANCED: STANDARD & POOR'S BLENDED 25/25/50
DATE GOLDEN RAINBOW FUND 500 INDEX INDEX
---- ------------------- --------- -----
06/30/96 10,000 10,000 10,000
09/30/96 10,139 10,309 10,186
12/31/96 10,801 11,168 10,659
03/31/97 10,871 11,468 10,587
06/30/97 11,655 13,470 11,625
09/30/97 12,322 14,479 12,432
12/31/97 12,184 14,895 12,553
03/31/98 12,759 16,972 13,400
06/30/98 12,759 17,533 13,480
09/30/98 12,557 15,789 12,767
12/31/98 13,742 19,151 13,952
03/31/99 13,529 20,106 13,923
06/30/99 13,776 21,523 14,668
09/30/99 13,729 20,179 14,270
12/31/99 14,212 23,181 15,442
03/31/00 14,419 23,713 15,981
06/30/00 14,462 23,083 15,870
09/30/00 14,900 22,859 16,116
12/31/00 14,863 21,071 15,830
03/31/01 14,558 18,572 15,363
06/30/01 14,800 19,659 16,183
09/30/01 14,714 16,773 15,056
12/31/01 15,242 18,565 16,229
03/31/02 15,579 18,616 16,397
06/30/02 15,593 16,121 15,772
09/30/02 14,871 13,336 14,542
12/31/02 15,121 14,461 15,223
03/31/03 14,806 14,006 15,045
06/30/03 16,271 16,161 16,680
09/30/03 16,834 16,589 17,174
12/31/03 17,876 18,610 18,309
03/31/04 18,466 18,925 18,899
06/30/04 18,438 19,250 18,766
09/30/04 19,006 18,890 18,806
12/31/04 20,196 20,633 19,930
03/31/05 20,501 20,190 19,472
06/30/05 21,124 20,466 20,005
09/30/05 21,732 21,204 20,374
12/31/05 21,889 21,646 20,595
03/31/06 22,455 22,557 21,475
06/30/06 22,492 22,232 21,151
(A) The Blended Index is comprised of a 25% weighting in the Standard & Poor's
500 Index, a 25% weighting in the Russell 2000 Index and a 50% weighting
in the Lehman Brothers Intermediate Government/Credit Index.
Comparison of the Change in Value of a $10,000 Investment in
the James Small Cap Fund and Russell 2000 Index
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James Small Cap Fund
Average Annual Total Returns
1 Year 5 Years Since Inception(A)
15.59% 18.01% 12.72%
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[LINE CHART]
DATE JAMES SMALL CAP FUND RUSSELL 2000 INDEX
- ---- -------------------- ------------------
10/02/98 10,000 10,000
10/31/98 11,060 10,808
11/30/98 11,080 11,374
12/31/98 11,314 12,078
01/31/99 11,144 12,239
02/28/99 10,114 11,247
03/31/99 10,114 11,423
04/30/99 11,114 12,446
05/31/99 11,364 12,628
06/30/99 11,874 13,199
09/30/99 9,884 12,365
12/31/99 10,134 14,645
03/31/00 9,824 15,682
06/30/00 10,614 15,089
09/30/00 10,514 15,257
12/31/00 10,644 14,203
03/31/01 10,064 13,278
06/30/01 11,034 15,175
09/30/01 9,723 12,020
12/31/01 11,217 14,556
03/31/02 12,298 15,135
06/30/02 12,097 13,871
09/30/02 10,716 10,903
12/31/02 10,948 11,574
03/31/03 10,859 11,055
06/30/03 13,574 13,644
09/30/03 14,302 14,882
12/31/03 16,822 17,043
03/31/04 18,750 18,110
06/30/04 18,932 18,195
09/30/04 18,101 17,675
12/31/04 21,227 20,165
03/31/05 20,490 19,089
06/30/05 21,844 19,913
09/30/05 23,120 20,847
12/31/05 22,819 21,083
03/31/06 25,466 24,022
06/30/06 25,250 22,816
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.
Current performance may be lower or higher than the performance data quoted.
Please call 1-800-995-2637 for most recent month-end performance information.
3
Comparison of the Change in Value of a $10,000 Investment in
the James Market Neutral Fund and 90-Day U.S. Treasury Bill Index
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James Market Neutral Fund
Average Annual Total Returns
1 Year 5 Years Since Inception(A)
4.94% 5.02% 4.21%
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[LINE CHART]
JAMES MARKET 90-DAY TREASURY
DATE NEUTRAL FUND BILL INDEX
---- ------------ ----------
10/02/98 10,000 10,000
10/31/98 9,880 10,035
11/30/98 10,170 10,068
12/31/98 10,195 10,108
01/31/99 9,994 10,144
02/28/99 9,853 10,173
03/31/99 9,803 10,214
04/30/99 9,551 10,251
05/31/99 9,441 10,291
06/30/99 9,426 10,334
09/30/99 9,279 10,465
12/31/99 9,090 10,595
03/31/00 9,685 10,743
06/30/00 10,087 10,906
09/30/00 10,710 11,070
12/31/00 10,574 11,250
03/31/01 10,595 11,420
06/30/01 10,769 11,548
09/30/01 10,764 11,673
12/31/01 10,749 11,747
03/31/02 11,155 11,798
06/30/02 11,529 11,852
09/30/02 11,849 11,905
12/31/02 10,920 11,956
03/31/03 11,220 11,993
06/30/03 10,653 12,033
09/30/03 11,006 12,062
12/31/03 11,273 12,093
03/31/04 11,786 12,122
06/30/04 11,775 12,151
09/30/04 12,074 12,196
12/31/04 12,246 12,254
03/31/05 13,069 12,324
06/30/05 13,111 12,412
09/30/05 13,190 12,515
12/31/05 13,217 12,630
03/31/06 13,195 12,759
06/30/06 13,758 12,907
Comparison of the Change in Value of a $10,000 Investment in
the James Equity Fund and Standard & Poor's 500 Index
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James Equity Fund
Average Annual Total Returns
1 Year 5 Years Since Inception(A)
24.45% 7.90% 1.70%
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[LINE CHART]
STANDARD & POOR'S
DATE JAMES EQUITY FUND 500 INDEX
---- ----------------- ---------
11/01/99 10,000 10,000
11/30/99 10,800 10,203
12/31/99 12,260 10,804
01/31/00 10,970 10,262
02/29/00 13,850 10,068
03/31/00 14,550 11,052
04/30/00 13,750 10,720
05/31/00 12,300 10,500
06/30/00 13,650 10,759
09/30/00 13,040 10,655
12/31/00 9,210 9,821
03/31/01 7,720 8,657
06/30/01 7,650 9,163
09/30/01 6,290 7,818
12/31/01 6,965 8,653
03/31/02 6,930 8,677
06/30/02 6,633 7,515
09/30/02 5,585 6,216
12/31/02 5,582 6,741
03/31/03 5,559 6,528
06/30/03 6,226 7,533
09/30/03 6,272 7,733
12/31/03 7,070 8,674
03/31/04 7,292 8,821
06/30/04 7,433 8,973
09/30/04 7,615 8,805
12/31/04 8,636 9,618
03/31/05 8,605 9,411
06/30/05 8,990 9,540
09/30/05 9,809 9,883
12/31/05 9,931 10,090
03/31/06 11,157 10,514
06/30/06 11,188 10,363
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.
Current performance may be lower or higher than the performance data quoted.
Please call 1-800-995-2637 for most recent month-end performance information.
4
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
June 30, 2006 (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 - 3.9%
CONSUMER, CYCLICAL - 4.1%
CONSUMER, NON-CYCLICAL - 2.8%
ENERGY - 5.6%
FINANCIAL - 4.7%
INDUSTRIAL - 3.4%
TECHNOLOGY - 5.5%
UTILITIES - 4.3%
INTERNATIONAL EQUITY FUNDS - 2.2%
BONDS (over 10 years) - 7.7%
BONDS (2-10 years) - 23.9%
BONDS (less than 2 years) - 28.1%
CASH EQUIVALENTS - 3.0%
OTHER - 0.8%
James Small Cap Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 7.2%
CONSUMER, CYCLICAL - 11.3%
CONSUMER, NON-CYCLICAL - 13.0%
ENERGY - 17.0%
FINANCIAL - 13.0%
INDUSTRIAL - 3.8%
TECHNOLOGY - 18.7%
UTILITIES - 9.7%
BONDS - 1.8%
CASH EQUIVALENTS - 4.3%
OTHER - 0.2%
5
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
(Continued)
================================================================================
James Market Neutral Fund
Industry Sector Allocation (% of Net Assets)
(Cash, Cash Equivalents and Other Assets in Excess of Liabilities not included)
[BAR CHART]
LONGS SHORTS
----- ------
BASIC MATERIALS 5.9 1.9
CONSUMER, CYCLICAL 14.3 16.5
CONSUMER, NON-CYCLICAL 8.4 9.7
ENERGY 8.2 5.7
FINANCIAL 7.3 10.4
INDUSTRIAL 4.3 3.9
TECHNOLOGY 16.7 18
UTILITIES 5.5 1.7
INTERNATIONAL EQUITY FUNDS 0.7 NA
BONDS 26.4 NA
OTHER 0.2 NA
James Equity Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 5.8%
CONSUMER, CYCLICAL - 11.7%
CONSUMER, NON-CYCLICAL - 11.2%
ENERGY - 19.4%
FINANCIAL - 13.4%
INDUSTRIAL - 5.0%
TECHNOLOGY - 16.7%
UTILITIES - 9.3%
CASH EQUIVALENTS - 4.9%
OTHER - 2.6%
6
JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2006
====================================================================================================================================
James
Balanced: James James James
Golden Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At amortized cost ......................................... $ 241,745,421 $ 153,650,828 $ 63,253,714 $ 27,205,116
============= ============= ============= =============
At value .................................................. $ 266,663,934 $ 170,165,076 $ 76,379,663 $ 32,910,927
Cash ......................................................... -- -- 364,906
Segregated cash with brokers ................................. -- -- 49,752,223 --
Dividends and interest receivable ............................ 2,115,587 108,663 144,782 25,326
Receivable for securities sold ............................... -- 34,763 -- --
Receivable for capital shares sold ........................... 1,236,906 2,588,843 226,805 544,959
Other assets ................................................. 18,213 -- -- --
------------- ------------- ------------- -------------
TOTAL ASSETS ............................................ 270,034,640 172,897,345 126,503,473 33,846,118
------------- ------------- ------------- -------------
LIABILITIES
Dividends payable ............................................ 57,549 -- 14,363 --
Payable for securities sold short (proceeds $54,343,141) ..... -- -- 51,028,725 --
Payable for dividends on securities sold short ............... -- -- 3,621 --
Payable for capital shares redeemed .......................... 513,793 150,325 112,591 10,139
Payable for securities purchased ............................. 412,578 2,063,544 -- --
Accrued expenses:
Management fees ........................................... 158,312 158,347 102,810 32,198
12b-1 distribution and service fees ....................... 59,444 34,718 23,749 11,576
Trustees' fees ............................................ 5,851 -- -- --
Other affiliates .......................................... 21,394 -- -- --
Other ..................................................... 39,775 -- -- --
------------- ------------- ------------- -------------
TOTAL LIABILITIES ....................................... 1,268,696 2,406,934 51,285,859 53,913
------------- ------------- ------------- -------------
NET ASSETS ................................................... $ 268,765,944 $ 170,490,411 $ 75,217,614 $ 33,792,205
============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital .............................................. $ 240,443,913 $ 153,807,395 $ 70,522,610 $ 29,882,165
Undistributed net investment income .......................... 2,871 -- 1,351 --
Accumulated net realized gains (losses) from
security transactions ..................................... 3,400,647 168,768 (11,746,712) (1,795,771)
Net unrealized appreciation on investments ................... 24,918,513 16,514,248 16,440,365 5,705,811
------------- ------------- ------------- -------------
NET ASSETS ................................................... $ 268,765,944 $ 170,490,411 $ 75,217,614 $ 33,792,205
============= ============= ============= =============
Shares of beneficial interest outstanding (unlimited
number of shares authorized) .............................. 15,517,705 7,323,828 5,928,342 3,061,169
============= ============= ============= =============
Net asset value, offering price and redemption
price per share ........................................... $ 17.32 $ 23.28 $ 12.69 $ 11.04
============= ============= ============= =============
See accompanying notes to financial statements.
7
JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 2006
====================================================================================================================================
James
Balanced: James James James
Golden Rainbow Small Cap Market Neutral Equity
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (Net of foreign withholding taxes of $4,078,
$0, $1,958, $1,353 respectively) ............................ $ 1,517,236 $ 1,183,617 $ 1,859,144 $ 352,997
Interest ...................................................... 5,480,782 26,012 788,290 3,799
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME ..................................... 6,998,018 1,209,629 2,647,434 356,796
------------ ------------ ------------ ------------
EXPENSES
Management fees ............................................... 1,555,000 1,197,147 1,091,824 279,451
12b-1 distribution and service fees ........................... 525,336 241,303 161,724 57,318
Dividend expense on securities sold short ..................... -- -- 399,923 --
Administration fees ........................................... 123,818 -- -- --
Professional fees ............................................. 77,000 -- -- --
Transfer agent fees ........................................... 60,000 -- -- --
Accounting services fees ...................................... 43,000 -- -- --
Trustees' fees ................................................ 17,500 9,374 7,898 7,141
Registration fees ............................................. 40,850 -- -- --
Custodian fees and expenses ................................... 33,000 -- -- --
Shareholder report printing and mailing ....................... 30,000 -- -- --
Postage and supplies .......................................... 24,250 -- -- --
Compliance fees and expenses .................................. 5,700 -- -- --
Other expenses ................................................ 17,351 -- -- --
------------ ------------ ------------ ------------
TOTAL EXPENSES .............................................. 2,552,805 1,447,824 1,661,369 343,910
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ..................................... 4,445,213 (238,195) 986,065 12,886
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains from security transactions ................. 4,354,056 973,968 1,432,520 1,393,779
Net realized losses on closed short positions ................. -- -- (11,320,096) --
Net change in unrealized appreciation/depreciation
on investments .............................................. 3,509,577 10,817,638 11,995,675 3,117,729
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
ON INVESTMENTS ................................................ 7,863,633 11,791,606 2,108,099 4,511,508
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................................... $ 12,308,846 $ 11,553,411 $ 3,094,164 $ 4,524,394
============ ============ ============ ============
See accompanying notes to financial statements.
8
JAMES BALANCED: GOLDEN RAINBOW FUND
STATEMENTS OF CHANGES IN NET ASSETS
====================================================================================================================================
Year Year
Ended Ended
June 30, June 30,
2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ..................................................................... $ 4,445,213 $ 1,718,477
Net realized gains on investments ......................................................... 4,354,056 6,852,704
Net change in unrealized appreciation/depreciation on investments ......................... 3,509,577 5,094,050
------------- -------------
Net increase in net assets from operations ................................................... 12,308,846 13,665,231
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ...................................................... (4,445,207) (1,715,612)
Distributions from net realized gains ..................................................... (6,923,670) (289,929)
------------- -------------
Decrease in net assets from distributions to shareholders .................................... (11,368,877) (2,005,541)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................................................. 156,716,472 57,984,009
Net asset value of shares issued in reinvestment of distributions to shareholders ......... 10,968,299 1,951,160
Payments for shares redeemed .............................................................. (47,464,018) (7,882,492)
------------- -------------
Net increase in net assets from capital share transactions ................................... 120,220,753 52,052,677
------------- -------------
TOTAL INCREASE IN NET ASSETS ................................................................. 121,160,722 63,712,367
NET ASSETS
Beginning of year ......................................................................... 147,605,222 83,892,855
------------- -------------
End of year ............................................................................... $ 268,765,944 $ 147,605,222
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME .......................................................... $ 2,871 $ 2,865
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................................................... 9,025,280 3,469,419
Shares issued in reinvestment of distributions to shareholders ............................ 638,737 117,897
Shares redeemed ........................................................................... (2,737,742) (485,412)
------------- -------------
Net increase in shares outstanding ........................................................ 6,926,275 3,101,904
Shares outstanding, beginning of year ..................................................... 8,591,430 5,489,526
------------- -------------
Shares outstanding, end of year ........................................................... 15,517,705 8,591,430
============= =============
See accompanying notes to financial statements.
8 9
JAMES SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
====================================================================================================================================
Year Year
Ended Ended
June 30, June 30,
2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) .............................................................. $ (238,195) $ 133,040
Net realized gains on investments ......................................................... 973,968 411,183
Net change in unrealized appreciation/depreciation on investments ......................... 10,817,638 1,340,299
------------- -------------
Net increase in net assets from operations ................................................... 11,553,411 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 ................................................................. 146,123,605 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) .......................................................... (41,635,792) (24,699,336)
------------- -------------
Net increase in net assets from capital share transactions ................................... 105,699,218 40,175,214
------------- -------------
TOTAL INCREASE IN NET ASSETS ................................................................. 116,001,469 41,303,304
NET ASSETS
Beginning of year ......................................................................... 54,488,942 13,185,638
------------- -------------
End of year ............................................................................... $ 170,490,411 $ 54,488,942
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME .......................................................... $ -- $ 133,040
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................................................... 6,488,734 3,236,955
Shares issued in reinvestment of distributions to shareholders ............................ 56,228 39,060
Shares redeemed ........................................................................... (1,884,121) (1,319,487)
------------- -------------
Net increase in shares outstanding ........................................................ 4,660,841 1,956,528
Shares outstanding, beginning of year ..................................................... 2,662,987 706,459
------------- -------------
Shares outstanding, end of year ........................................................... 7,323,828 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 years ended June 30, 2006 and 2005, these fees were
$40,075 and $149,700, respectively.
See accompanying notes to financial statements.
10
JAMES MARKET NEUTRAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
====================================================================================================================================
Year Year
Ended Ended
June 30, June 30,
2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ..................................................................... $ 986,065 $ 22,402
Net realized gains (losses) from:
Security transactions ................................................................... 1,432,520 1,378,774
Closed short positions .................................................................. (11,320,096) (872,058)
Net change in unrealized appreciation/depreciation on investments ......................... 11,995,675 1,087,201
------------ ------------
Net increase in net assets from operations ................................................... 3,094,164 1,616,319
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ...................................................... (1,008,466) --
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................................................. 55,571,273 37,708,584
Net asset value of shares issued in reinvestment of distributions to shareholders ......... 951,011 --
Payments for shares redeemed (A) .......................................................... (30,693,297) (4,550,046)
------------ ------------
Net increase in net assets from capital share transactions ................................... 25,828,987 33,158,538
------------ ------------
TOTAL INCREASE IN NET ASSETS ................................................................. 27,914,685 34,774,857
NET ASSETS
Beginning of year ......................................................................... 47,302,929 12,528,072
------------ ------------
End of year ............................................................................... $ 75,217,614 $ 47,302,929
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME .......................................................... $ 1,351 $ 22,402
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................................................... 4,486,840 3,104,775
Shares issued in reinvestment of distributions to shareholders ............................ 76,956 --
Shares redeemed ........................................................................... (2,491,209) (385,737)
------------ ------------
Net increase in shares outstanding ........................................................ 2,072,587 2,719,038
Shares outstanding, beginning of year ..................................................... 3,855,755 1,136,717
------------ ------------
Shares outstanding, end of year ........................................................... 5,928,342 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 years ended June 30, 2006 and 2005, these fees were
$37,999 and $23,920, respectively.
See accompanying notes to financial statements.
11
JAMES EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
====================================================================================================================================
Year Year
Ended Ended
June 30, June 30,
2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ..................................................................... $ 12,886 $ 22,304
Net realized gains on investments ......................................................... 1,393,779 523,127
Net change in unrealized appreciation/depreciation on investments ......................... 3,117,729 1,321,992
------------ ------------
Net increase in net assets from operations ................................................... 4,524,394 1,867,423
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ...................................................... (12,886) (24,033)
Dividends in excess of net investment income .............................................. (28,219) --
------------ ------------
Decrease in net assets from distributions to shareholders .................................... (41,105) (24,033)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................................................. 17,542,319 9,091,949
Net asset value of shares issued in reinvestment of distributions to shareholders ......... 40,392 23,591
Payments for shares redeemed (A) .......................................................... (5,107,288) (1,374,205)
------------ ------------
Net increase in net assets from capital share transactions ................................... 12,475,423 7,741,335
------------ ------------
TOTAL INCREASE IN NET ASSETS ................................................................. 16,958,712 9,584,725
NET ASSETS
Beginning of year ......................................................................... 16,833,493 7,248,768
------------ ------------
End of year ............................................................................... $ 33,792,205 $ 16,833,493
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME .......................................................... $ -- $ 1
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................................................... 1,662,067 1,074,885
Shares issued in reinvestment of distributions to shareholders ............................ 4,122 2,654
Shares redeemed ........................................................................... (499,385) (167,493)
------------ ------------
Net increase in shares outstanding ........................................................ 1,166,804 910,046
Shares outstanding, beginning of year ..................................................... 1,894,365 984,319
------------ ------------
Shares outstanding, end of year ........................................................... 3,061,169 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 years ended June 30, 2006 and 2005, these fees were
$4,373 and $2,315, respectively.
See accompanying notes to financial statements.
12
JAMES BALANCED: GOLDEN RAINBOW FUND
FINANCIAL HIGHLIGHTS
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
====================================================================================================================================
Year Ended June 30,
----------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ................ $ 17.18 $ 15.28 $ 13.72 $ 13.80 $ 14.34
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income ............................ 0.34 0.26 0.26 0.27 0.40
Net realized and unrealized
gains on investments ........................... 0.75 1.95 1.56 0.28 0.33
----------- ----------- ----------- ----------- -----------
Total from investment operations .................... 1.09 2.21 1.82 0.55 0.73
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ....................... (0.34) (0.26) (0.26) (0.27) (0.40)
From net realized gains on investments ........... (0.61) (0.05) (0.00)(A) (0.36) (0.87)
----------- ----------- ----------- ----------- -----------
Total distributions ................................. (0.95) (0.31) (0.26) (0.63) (1.27)
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ...................... $ 17.32 $ 17.18 $ 15.28 $ 13.72 $ 13.80
=========== =========== =========== =========== ===========
Total return ........................................ 6.48% 14.56% 13.32% 4.34% 5.37%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) ................... $ 268,766 $ 147,605 $ 83,893 $ 69,169 $ 65,456
=========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ......... 1.21% 1.26% 1.28% 1.32% 1.24%
Ratio of net investment income to average net assets 2.11% 1.70% 1.77% 2.08% 2.84%
Portfolio turnover rate ............................. 68% 36% 29% 61% 54%
(A) Amount rounds to less than $0.005.
See accompanying notes to financial statements.
13
JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
-----------------------------------------------------------------------
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ...................... $ 20.46 $ 18.66 $ 13.43 $ 12.08 $ 11.03
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ........................... (0.04) 0.05 0.01 0.10 0.00(A)
Net realized and unrealized gains on investments ....... 3.19 2.65 5.26 1.35 1.06
----------- ----------- ----------- ----------- -----------
Total from investment operations .......................... 3.15 2.70 5.27 1.45 1.06
----------- ----------- ----------- ----------- -----------
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) ................... 0.01 0.10 0.02 -- --
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ............................ $ 23.28 $ 20.46 $ 18.66 $ 13.43 $ 12.08
=========== =========== =========== =========== ===========
Total return .............................................. 15.59% 15.39% 39.47% 12.20% 9.65%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) ......................... $ 170,490 $ 54,489 $ 13,186 $ 9,199 $ 7,882
=========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ............... 1.50% 1.50% 1.50% 1.50% 1.48%
Ratio of net investment income (loss) to average net assets (0.25%) 0.45% 0.05% 0.90% 0.02%
Portfolio turnover rate ................................... 59% 94% 45% 52% 78%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the year.
See accompanying notes to financial statements.
14
JAMES MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
---------------------------------------------------------------------
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ......................... $ 12.27 $ 11.02 $ 9.97 $ 10.79 $ 10.12
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) .............................. 0.17 0.01 (0.13) (0.10) 0.02
Net realized and unrealized gains
(losses) on investments ................................. 0.42 1.23 1.18 (0.72) 0.69
---------- ---------- ---------- ---------- ----------
Total from investment operations ............................. 0.59 1.24 1.05 (0.82) 0.71
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ................................ (0.18) -- -- -- (0.04)
---------- ---------- ---------- ---------- ----------
Paid-in capital from redemption fees(B) ...................... 0.01 0.01 0.00(A) -- --
---------- ---------- ---------- ---------- ----------
Net asset value at end of year ............................... $ 12.69 $ 12.27 $ 11.02 $ 9.97 $ 10.79
========== ========== ========== ========== ==========
Total return ................................................. 4.94% 11.34% 10.53% (7.60%) 7.06%
========== ========== ========== ========== ==========
Net assets at end of year (000's) ............................ $ 75,218 $ 47,303 $ 12,528 $ 9,219 $ 8,676
========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets, excluding
dividends on securities sold short ........................ 1.95% 1.95% 1.95% 1.95% 1.95%
Ratio of dividend expense on securities
sold short to average net assets .......................... 0.62% 0.42% 0.64% 0.53% 0.28%
---------- ---------- ---------- ---------- ----------
Ratio of net expenses to average net assets .................. 2.57% 2.37% 2.59% 2.48% 2.23%
---------- ---------- ---------- ---------- ----------
Ratio of net investment income (loss) to average net assets .. 1.52% 0.11% (1.43%) (0.98%) 0.25%
Portfolio turnover rate (C) .................................. 27% 35% 13% 86% 154%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the year.
(C) Calculation does not include short positions or short transactions.
Portfolio turnover rate would be lower if included.
See accompanying notes to financial statements.
15
JAMES EQUITY FUND
FINANCIAL HIGHLIGHTS
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
----------------------------------------------------------------------
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ....................... $ 8.89 $ 7.36 $ 6.18 $ 6.62 $ 7.65
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income ................................... 0.01 0.01 0.02 0.03 0.01
Net realized and unrealized gains (losses) on investments 2.16 1.53 1.18 (0.44) (1.03)
---------- ---------- ---------- ---------- ----------
Total from investment operations ........................... 2.17 1.54 1.20 (0.41) (1.02)
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income .............................. (0.01) (0.01) (0.02) (0.03) (0.01)
From distributions in excess of net investment income ... (0.01) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions ........................................ (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 year ............................. $ 11.04 $ 8.89 $ 7.36 $ 6.18 $ 6.62
========== ========== ========== ========== ==========
Total return ............................................... 24.45% 20.96% 19.38% (6.14%) (13.29%)
========== ========== ========== ========== ==========
Net assets at end of year (000's) .......................... $ 33,792 $ 16,833 $ 7,249 $ 5,379 $ 3,788
========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ................ 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income to average net assets ....... 0.06% 0.22% 0.25% 0.56% 0.20%
Portfolio turnover rate .................................... 43% 33% 70% 65% 87%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the year.
See accompanying notes to financial statements.
16
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
June 30, 2006
================================================================================
Shares COMMON STOCKS -- 36.5% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 3.9%
15,000 Alliance Resource Partners, L.P.......... $ 543,450
40,000 Barrick Gold Corporation................. 1,184,000
35,000 Castle (A.M.) & Company.................. 1,128,750
31,000 Dow Chemical Company..................... 1,209,930
45,650 Methanex Corporation..................... 966,867
26,000 Newmont Mining Corporation............... 1,376,180
24,000 NS Group, Inc.*.......................... 1,321,920
40,000 Polyone Corporation - W/I*............... 351,200
17,000 PPG Industries, Inc...................... 1,122,000
59,500 Terra Nitrogen Company, L.P.............. 1,288,175
---------------
10,492,472
---------------
CONSUMER, CYCLICAL -- 4.1%
20,000 Air Methods Corporation*................. 523,600
35,000 EZCORP, Inc. - Class A*.................. 1,319,150
30,000 J.C. Penney Company, Inc................. 2,025,300
60,000 Mesa Air Group, Inc.*.................... 591,000
10,000 Office Depot, Inc.*...................... 380,000
19,300 PACCAR, Inc.............................. 1,589,934
16,300 Supervalu, Inc........................... 500,410
6,934 The Andersons, Inc....................... 288,524
29,000 The Buckle, Inc.......................... 1,214,230
43,000 The Pantry, Inc.*........................ 2,474,220
---------------
10,906,368
---------------
CONSUMER, NON-CYCLICAL -- 2.8%
10,000 Archer-Daniels-Midland Company........... 412,800
15,000 AT&T, Inc................................ 418,350
21,500 Coventry Health Care, Inc.*.............. 1,181,210
55,000 King Pharmaceuticals, Inc.*.............. 935,000
25,000 Magellan Health Services, Inc.*.......... 1,132,750
13,000 Papa John's Intl., Inc.*................. 431,600
21,000 Pfizer, Inc.............................. 492,870
20,000 Sierra Health Services, Inc.*............ 900,600
32,000 The Toro Company......................... 1,494,400
---------------
7,399,580
---------------
ENERGY -- 5.6%
10,000 Anadarko Petroleum Corporation........... 476,900
20,800 Apache Corporation....................... 1,419,600
32,940 Chevron Corporation...................... 2,044,256
39,000 Devon Energy Corporation................. 2,355,990
25,500 EOG Resources, Inc....................... 1,768,170
34,500 Exxon Mobil Corporation.................. 2,116,575
7,000 Headwaters, Inc.*........................ 178,920
15,900 Hess Corporation......................... 840,315
29,000 MDU Resources Group, Inc................. 1,061,690
17
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 36.5% (Continued) Value
- --------------------------------------------------------------------------------
ENERGY -- 5.6% (Continued)
23,300 Sunoco, Inc.............................. $ 1,614,457
20,000 Valero Energy Corporation................ 1,330,400
---------------
15,207,273
---------------
FINANCIAL -- 4.7%
13,000 Alliance Bernstein Holding L.P........... 794,820
32,500 American Physicians Capital, Inc.*....... 1,709,175
12,500 Bear Stearns Companies, Inc.............. 1,751,000
36,500 CIT Group, Inc........................... 1,908,585
18,000 Corus Bankshares, Inc.................... 471,240
14,000 KeyCorp.................................. 499,520
37,500 Rent-A-Center, Inc.*..................... 932,250
20,000 SAFECO Corporation....................... 1,127,000
11,000 Safety Insurance Group, Inc.............. 523,050
22,000 Stewart Information Services Corporation. 798,820
61,500 W.R. Berkley Corporation................. 2,098,995
---------------
12,614,455
---------------
INDUSTRIAL -- 3.4%
20,000 BorgWarner, Inc.......................... 1,302,000
7,000 Cascade Corporation...................... 276,850
27,000 CSX Corporation.......................... 1,901,880
19,000 Cummins, Inc............................. 2,322,750
8,000 Eaton Corporation........................ 603,200
40,000 Goldcorp, Inc............................ 1,208,800
23,000 Norfolk Southern Corporation............. 1,224,060
4,500 The Black & Decker Corporation........... 380,070
---------------
9,219,610
---------------
TECHNOLOGY -- 5.5%
45,000 Armor Holdings, Inc.*.................... 2,467,350
35,000 Covansys Corporation*.................... 439,950
105,000 Earthlink, Inc.*......................... 909,300
30,000 Hewlett-Packard Company.................. 950,400
41,000 Komag, Inc.*............................. 1,893,380
18,000 MicroStrategy, Inc.*..................... 1,755,360
17,000 Motorola, Inc............................ 342,550
37,500 Northrop Grumman Corporation............. 2,402,250
35,000 Sykes Enterprises, Inc.*................. 565,600
30,000 WESCO International, Inc.*............... 2,070,000
58,000 Western Digital Corporation*............. 1,148,980
---------------
14,945,120
---------------
UTILITIES -- 4.3%
7,000 ALLTEL Corporation....................... 446,810
60,000 Edison International..................... 2,340,000
70,800 Energen Corporation...................... 2,719,428
38,000 Otter Tail Corporation................... 1,038,540
24,500 Sempra Energy............................ 1,114,260
18
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 36.5% (Continued)........ Value
- --------------------------------------------------------------------------------
UTILITIES -- 4.3% (Continued)
11,000 The Laclede Group, Inc................... $ 377,960
38,000 TXU Corporation.......................... 2,272,020
25,000 WPS Resources Corporation................ 1,240,000
---------------
11,549,018
---------------
INTERNATIONAL EQUITY FUNDS -- 2.2%
15,000 Greater China Fund, Inc.................. 268,200
30,000 India Fund, Inc.......................... 1,385,700
124,000 iShares MSCI Japan Index Fund............ 1,691,360
57,000 iShares MSCI Taiwan Index Fund........... 730,740
40,000 Japan Smaller Capitalization Fund, Inc... 560,800
48,000 New Ireland Fund, Inc.................... 1,173,600
---------------
5,810,400
---------------
TOTAL COMMON STOCKS...................... $ 98,144,296
---------------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 58.9% Value
- --------------------------------------------------------------------------------
$ 2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09 $ 2,025,628
550,000 Federal Home Loan Bank, 4.500%, 2/17/10.. 532,239
5,000,000 U.S. Treasury Bills, 7/13/06............. 4,992,000
12,000,000 U.S. Treasury Bills, 9/21/06............. 11,872,440
2,500,000 U.S. Treasury Bonds, 5.000%, 2/15/11..... 2,493,848
3,500,000 U.S. Treasury Bonds, 4.875%, 2/15/12..... 3,461,717
24,000,000 U.S. Treasury Bonds, 4.500%, 2/15/16..... 22,833,744
22,000,000 U.S. Treasury Bonds, 5.125%, 5/15/16..... 21,974,216
20,200,000 U.S. Treasury Bonds, 5.375%, 2/15/31..... 20,548,773
6,000,000 U.S. Treasury Notes, 3.000%, 12/31/06.... 5,932,734
11,000,000 U.S. Treasury Notes, 6.250%, 2/15/07..... 11,060,588
3,000,000 U.S. Treasury Notes, 6.625%, 5/15/07..... 3,032,460
8,000,000 U.S. Treasury Notes, 4.375%, 5/15/07..... 7,938,752
11,500,000 U.S. Treasury Notes, 3.250%, 8/15/07..... 11,251,577
14,000,000 U.S. Treasury Notes, 3.000%, 2/15/08..... 13,526,954
3,000,000 U.S. Treasury Notes, 4.625%, 3/31/08..... 2,971,641
2,000,000 U.S. Treasury Notes, 2.625%, 5/15/08..... 1,909,766
5,000,000 U.S. Treasury Notes, 6.000%, 8/15/09..... 5,124,805
3,000,000 U.S. Treasury Notes, 5.000%, 8/15/11..... 2,990,976
2,000,000 U.S. Treasury Notes, 4.000%, 2/15/15..... 1,842,968
---------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS..... $ 158,317,826
---------------
19
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value CORPORATE BONDS -- 0.8% Value
- --------------------------------------------------------------------------------
$ 500,000 Anheuser-Busch Companies, Inc.,
6.000%, 4/15/11 ....................... $ 506,559
500,000 Barrick Gold Finance, Inc.,
7.500%, 5/1/07 ........................ 506,963
500,000 General Electric Capital Corporation,
7.875%, 12/1/06 ....................... 504,732
500,000 Tennessee Valley Authority,
5.625%, 1/18/11 ....................... 501,275
----------------
TOTAL CORPORATE BONDS ................... $ 2,019,529
----------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 3.0% Value
- --------------------------------------------------------------------------------
8,182,283 First American Treasury Obligations Fund $ 8,182,283
----------------
TOTAL INVESTMENT SECURITIES -- 99.2%
(Amortized Cost $241,745,421) ........... $ 266,663,934
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8% 2,102,010
----------------
NET ASSETS -- 100.0% .................... $ 268,765,944
================
* Non-income producing security.
See accompanying notes to financial statements.
20
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
June 30, 2006
================================================================================
Shares COMMON STOCKS -- 93.7% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 7.2%
27,500 Alliance Resource Partners, L.P. ............. $ 996,325
75,100 Castle (A.M.) & Company ...................... 2,421,975
69,500 Oregon Steel Mills, Inc.* .................... 3,520,870
47,400 Schnitzer Steel Industries, Inc. - Class A ... 1,681,752
54,000 Shiloh Industries, Inc.* ..................... 812,160
81,100 Terra Nitrogen Company, L.P. ................. 1,755,815
16,700 Universal Forest Products, Inc. .............. 1,047,591
-------------
12,236,488
-------------
CONSUMER, CYCLICAL -- 11.3%
93,200 Air Methods Corporation* ..................... 2,439,976
98,650 Aldila, Inc. ................................. 2,497,818
32,350 Books-A-Million, Inc. ........................ 539,598
222,600 Charming Shoppes, Inc.* ...................... 2,502,024
39,000 JAKKS Pacific, Inc.* ......................... 783,510
95,000 Mesa Air Group, Inc.* ........................ 935,750
71,500 Steiner Leisure Ltd.* ........................ 2,826,395
86,700 The Buckle, Inc. ............................. 3,630,129
54,575 The Pantry, Inc.* ............................ 3,140,246
-------------
19,295,446
-------------
CONSUMER, NON-CYCLICAL -- 13.0%
70,050 Advocat, Inc.* ............................... 1,198,556
147,200 Alpharma, Inc. - Class A ..................... 3,538,688
280,000 CBIZ, Inc.* .................................. 2,074,800
120,700 Central Parking Corporation .................. 1,931,200
35,000 Dollar Thrifty Automotive Group, Inc.* ....... 1,577,450
58,900 Ingles Markets, Inc. - Class A ............... 1,001,300
88,000 Magellan Health Services, Inc.* .............. 3,987,280
105,000 Premium Standard Farms, Inc. ................. 1,704,150
151,100 Spartan Stores, Inc. ......................... 2,210,593
165,000 Sun Healthcare Group, Inc.* .................. 1,433,850
177,900 ViroPharma, Inc.* ............................ 1,533,498
-------------
22,191,365
-------------
ENERGY -- 17.0%
24,000 BP Prudhoe Bay Royalty Trust ................. 1,917,600
127,050 Edge Petroleum Corporation* .................. 2,538,459
49,000 Giant Industries, Inc.* ...................... 3,260,950
51,200 Lufkin Industries, Inc. ...................... 3,042,816
126,950 RPC, Inc. .................................... 3,082,346
83,800 Swift Energy Company* ........................ 3,597,534
459,000 VAALCO Energy, Inc.* ......................... 4,479,839
76,400 Veritas DGC, Inc.* ........................... 3,940,712
61,200 W-H Energy Services, Inc.* ................... 3,110,796
-------------
28,971,052
-------------
21
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 93.7% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 13.0%
17,200 1st Source Corporation ....................... $ 581,876
42,400 American Physicians Capital, Inc.* ........... 2,229,816
54,900 ASTA Funding, Inc. ........................... 2,056,005
70,400 Bluegreen Corporation* ....................... 806,784
164,580 Capital Title Group, Inc. .................... 1,212,955
85,000 CNA Surety Corporation* ...................... 1,468,800
64,000 FelCor Lodging Trust, Inc. ................... 1,391,360
73,450 FPIC Insurance Group, Inc.* .................. 2,846,188
44,500 LandAmerica Financial Group, Inc. ............ 2,874,700
55,600 LTC Properties, Inc. ......................... 1,242,660
98,700 Safety Insurance Group, Inc. ................. 4,693,184
22,000 State Auto Financial Corporation ............. 715,880
-------------
22,120,208
-------------
INDUSTRIAL -- 3.8%
42,100 Arkansas Best Corporation .................... 2,113,841
16,900 Cascade Corporation .......................... 668,395
149,800 OMI Corporation .............................. 3,243,170
17,200 Twin Disc, Inc. .............................. 526,492
-------------
6,551,898
-------------
TECHNOLOGY -- 18.7%
80,000 Datalink Corporation* ........................ 416,800
71,600 EarthLink, Inc.* ............................. 620,056
64,000 Hurco Companies, Inc.* ....................... 1,644,160
98,800 IXYS Corporation* ............................ 948,480
49,625 John H. Harland Company ...................... 2,158,688
85,800 Komag, Inc.* ................................. 3,962,244
102,500 Park Electrochemical Corporation ............. 2,639,375
261,000 RealNetworks, Inc.* .......................... 2,792,700
48,820 Rofin-Sinar Technologies, Inc.* .............. 2,805,685
198,000 Sykes Enterprises, Inc.* ..................... 3,199,680
41,900 Teledyne Technologies, Inc.* ................. 1,372,644
184,300 United Online, Inc. .......................... 2,211,600
142,700 Xyratex Ltd.* ................................ 3,774,415
143,300 Zoran Corporation* ........................... 3,487,922
-------------
32,034,449
-------------
UTILITIES -- 9.7%
171,000 Avista Corporation ........................... 3,903,930
72,000 Black Hills Corporation ...................... 2,471,760
110,000 Comstock Resources, Inc.* .................... 3,284,600
76,400 New Jersey Resources Corporation ............. 3,573,992
118,700 Otter Tail Corporation ....................... 3,244,071
-------------
16,478,353
-------------
TOTAL COMMON STOCKS .......................... $ 159,879,259
-------------
22
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 1.8% Value
- --------------------------------------------------------------------------------
$ 3,000,000 Federal Home Loan Bank Discount Note, 7/6/06.. $ 2,998,713
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.3% Value
- --------------------------------------------------------------------------------
7,287,104 First American Treasury Obligations Fund ..... $ 7,287,104
-------------
TOTAL INVESTMENT SECURITIES -- 99.8%
(Amortized Cost $153,650,828) ................ $ 170,165,076
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% 325,335
-------------
NET ASSETS -- 100.0% ......................... $ 170,490,411
* Non-income producing security.
See accompanying notes to financial statements.
23
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
June 30, 2006
================================================================================
Shares COMMON STOCKS -- 71.3% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 5.9%
16,000 Barrick Gold Corporation ..................... $ 473,600
35,000 Goldcorp, Inc. ............................... 1,057,700
31,400 Methanex Corporation ......................... 665,052
23,250 Quanex Corporation ........................... 1,001,378
20,500 Schnitzer Steel Industries, Inc. - Class A ... 727,340
15,000 Terra Nitrogen Company, L.P. ................. 324,750
20,000 The Goodyear Tire & Rubber Company* .......... 222,000
-------------
4,471,820
-------------
CONSUMER, CYCLICAL -- 14.3%
27,600 Conn's, Inc.* ................................... 732,780
26,000 Darden Restaurants, Inc. ........................ 1,024,400
18,000 J.C. Penney Company, Inc. ....................... 1,215,180
23,400 Office Depot, Inc.* ............................. 889,200
14,950 PACCAR, Inc. .................................... 1,231,581
44,000 Papa John's Intl., Inc.* ........................ 1,460,800
22,000 The Buckle, Inc. ................................ 921,140
23,400 The Home Depot, Inc. ............................ 837,486
29,900 The Pantry, Inc.* ............................... 1,720,446
25,800 Timberland Company - Class A* ................... 673,380
-------------
10,706,393
-------------
CONSUMER, NON-CYCLICAL -- 8.4%
15,000 Archer-Daniels-Midland Company ............... 619,200
20,600 Coventry Health Care, Inc.* .................. 1,131,764
13,000 EZCORP, Inc. - Class A* ...................... 489,970
40,000 King Pharmaceuticals, Inc.* .................. 680,000
20,000 Magellan Health Services, Inc.* .............. 906,200
30,300 Sierra Health Services, Inc.* ................ 1,364,409
23,900 The Toro Company ............................. 1,116,130
-------------
6,307,673
-------------
ENERGY -- 8.2%
10,096 Apache Corporation ........................... 689,052
22,300 Devon Energy Corporation ..................... 1,347,143
13,000 Exxon Mobil Corporation ...................... 797,550
10,000 Sunoco, Inc. ................................. 692,900
90,000 VAALCO Energy, Inc.* ......................... 878,400
26,900 Valero Energy Corporation .................... 1,789,388
-------------
6,194,433
-------------
FINANCIAL -- 7.3%
6,450 Bear Stearns Companies, Inc. ................. 903,516
45,000 Berkley (W.R.) Corporation ................... 1,535,850
20,600 CIT Group, Inc. .............................. 1,077,174
34,800 Corus Bankshares, Inc. ....................... 911,064
24
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 71.3% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 7.3% (Continued)
5,650 Hospitality Properties Trust ................. $ 248,148
22,600 KeyCorp ...................................... 806,368
-------------
5,482,120
-------------
INDUSTRIAL -- 4.3%
10,000 CSX Corporation .............................. 704,400
5,000 Cummins, Inc. ................................ 611,250
13,550 Norfolk Southern Corporation ................. 721,131
14,400 The Black & Decker Corporation ............... 1,216,224
-------------
3,253,005
-------------
TECHNOLOGY -- 16.7%
19,800 Armor Holdings, Inc.* ........................ 1,085,634
109,610 EarthLink, Inc.* ............................. 949,223
32,000 Hewlett-Packard Company ...................... 1,013,760
43,000 Komag, Inc.* ................................. 1,985,740
21,500 MicroStrategy, Inc.* ......................... 2,096,680
61,000 Motorola, Inc. ............................... 1,229,150
15,600 Northrop Grumman Corporation ................. 999,336
30,000 Park Electrochemical Corporation ............. 772,500
34,400 WESCO International, Inc.* ................... 2,373,599
-------------
12,505,622
-------------
UTILITIES -- 5.5%
27,150 Edison International ......................... 1,058,850
20,800 MDU Resources Group, Inc. .................... 761,488
10,000 Sempra Energy ................................ 454,800
17,000 The Laclede Group, Inc. ...................... 584,120
21,900 TXU Corporation .............................. 1,309,401
-------------
4,168,659
-------------
INTERNATIONAL EQUITY FUNDS -- 0.7%
40,000 iShares MSCI Japan Index Fund ................ 545,600
-------------
TOTAL COMMON STOCKS .......................... $ 53,635,325
-------------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 26.4% Value
- --------------------------------------------------------------------------------
$10,000,000 U.S. Treasury Bills, 7/13/06 ................. $ 9,983,999
10,000,000 U.S. Treasury Bills, 9/21/06 ................. 9,893,700
-------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS ......... $ 19,877,699
-------------
25
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares SHORT TERM INVESTMENTS -- 3.8% Value
- --------------------------------------------------------------------------------
2,866,639 First American Treasury Obligations Fund ..... $ 2,866,639
-------------
TOTAL INVESTMENT SECURITIES -- 101.5%
(Amortized Cost $63,253,714) ................. $ 76,379,663
SEGREGATED CASH WITH BROKERS -- 66.1% ........ 49,752,223
SECURITIES SOLD SHORT -- (67.8)%
(Proceeds $54,343,141) ....................... (51,028,725)
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%. 114,453
-------------
NET ASSETS -- 100.0% ......................... $ 75,217,614
=============
* Non-income producing security.
See accompanying notes to financial statements.
26
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
June 30, 2006
================================================================================
Shares COMMON STOCKS -- 67.8% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 1.9%
65,000 Cooper Tire & Rubber Company ................. $ 724,100
13,450 James River Coal Company ..................... 356,290
12,500 NOVA Chemicals Corporation ................... 359,875
-------------
1,440,265
-------------
CONSUMER, CYCLICAL -- 16.5%
56,860 99 Cents Only Stores ......................... 594,756
70,000 AFC Enterprises, Inc. ........................ 892,500
8,760 Amazon.com, Inc. ............................. 338,837
54,000 Audiovox Corporation - Class A ............... 737,640
20,050 Churchill Downs, Inc. ........................ 750,872
16,200 Dow Jones & Company, Inc. .................... 567,162
12,700 Four Seasons Hotels, Inc. .................... 780,288
29,200 General Motors Corporation ................... 869,868
42,000 InterContinental Hotels Group PLC - ADR ...... 739,200
41,190 JetBlue Airways Corporation .................. 500,047
12,500 Lamar Advertising Company .................... 673,250
62,000 Lions Gate Entertainment Corporation ......... 530,100
20,000 P.F. Chang's China Bistro .................... 760,400
100,000 Pathmark Stores, Inc. ........................ 941,000
40,500 Pep Boys - Manny, Moe & Jack ................. 475,065
62,100 Sirius Satellite Radio, Inc. ................. 294,974
14,000 Wynn Resorts Ltd. ............................ 1,026,200
65,000 XM Satellite Radio Holdings, Inc. ............ 952,250
-------------
12,424,409
-------------
CONSUMER, NON-CYCLICAL -- 9.7%
41,300 CV Therapeutics, Inc. ........................ 576,961
20,000 Cyberonics, Inc. ............................. 426,400
3,500 Discovery Holding Company .................... 51,204
51,390 Impax Laboratories, Inc. ..................... 320,674
24,000 MedImmune, Inc. .............................. 650,400
37,420 Nektar Therapeutics .......................... 686,283
65,700 Nuvelo, Inc. ................................. 1,093,905
14,500 Onyx Pharmaceuticals, Inc. ................... 244,035
46,000 Prestige Brands Holding, Inc. ................ 458,620
23,000 Sepracor, Inc. ............................... 1,314,220
19,000 SonoSite, Inc. ............................... 741,760
68,600 Taro Pharmaceutical Industries Ltd. .......... 727,846
-------------
7,292,308
-------------
ENERGY -- 5.7%
35,000 Delta Petroleum Corporation .................. 599,550
24,500 Energy Conversion Devices, Inc. .............. 892,535
48,160 FX Energy, Inc. .............................. 222,499
17,500 Goodrich Petroleum Corporation ............... 496,825
72,400 KFx, Inc. .................................... 1,106,272
27
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
================================================================================
Shares COMMON STOCKS -- 67.8% (Continued) Value
- --------------------------------------------------------------------------------
ENERGY -- 5.7% (Continued)
40,000 Reliant Energy, Inc. ......................... $ 479,200
75,000 Syntroleum Corporation ....................... 455,250
-------------
4,252,131
-------------
FINANCIAL -- 10.4%
55,400 Affordable Residential Communities ........... 595,550
46,100 Brookline Bancorp, Inc. ...................... 634,797
30,000 IPC Holdings, Ltd. ........................... 739,800
45,000 Max Re Capital Ltd. .......................... 982,800
40,000 Montpelier Re Holdings Ltd. .................. 691,600
47,200 NewAlliance Bancshares, Inc. ................. 675,432
34,000 Platinum Underwriters Holdings, Ltd. ......... 951,320
56,000 Primus Guaranty Ltd. ......................... 621,600
52,500 Spirit Finance Corporation ................... 591,150
16,000 Transatlantic Holdings, Inc. ................. 894,400
8,000 XL Capital Ltd. - Class A .................... 490,400
-------------
7,868,849
-------------
INDUSTRIAL -- 3.9%
65,000 American Superconductor Corporation .......... 573,950
20,000 ESCO Technologies, Inc. ...................... 1,069,000
33,500 Nalco Holding Company ........................ 590,605
38,000 Tecumseh Products Company - Class A .......... 729,600
-------------
2,963,155
-------------
TECHNOLOGY -- 18.0%
50,000 3D Systems Corporation ....................... 1,004,500
78,000 Activision, Inc. ............................. 887,640
36,000 Affymetrix, Inc. ............................. 921,600
62,700 ATI Technologies, Inc. ....................... 915,420
51,500 AudioCodes Ltd. .............................. 561,350
71,480 BearingPoint, Inc. ........................... 598,288
105,000 Diversa Corporation .......................... 1,014,300
7,500 Electronic Arts, Inc. ........................ 322,800
40,000 Flamel Technologies S.A. - ADR ............... 738,800
50,000 GSI Commerce, Inc. ........................... 676,500
113,500 Mattson Technology, Inc. ..................... 1,108,895
36,600 Medicines Company ............................ 715,530
60,000 Micro International Ltd. - ADR ............... 461,400
40,000 Per-Se Technologies, Inc. .................... 1,007,200
28,000 Rambus, Inc. ................................. 638,680
44,200 SINA Corporation ............................. 1,104,116
30,000 Tessera Technologies, Inc. ................... 825,000
-------------
13,502,019
-------------
28
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
================================================================================
Shares COMMON STOCKS -- 67.8% (Continued) Value
- --------------------------------------------------------------------------------
UTILITIES -- 1.7% (Continued)
35,000 American Power Conversion Corporation ........ $ 682,150
45,715 IDT Corporation .............................. 603,439
-------------
1,285,589
-------------
TOTAL COMMON STOCKS SOLD SHORT
(Proceeds $54,343,141) ....................... $ 51,028,725
=============
ADR - American Depository Receipt.
See accompanying notes to financial statements.
29
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS
June 30, 2006
================================================================================
Shares COMMON STOCKS -- 92.5% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 5.8%
13,900 Alliance Resource Partners, L.P. ............. $ 503,597
4,800 Dow Chemical Company ......................... 187,344
18,100 Methanex Corporation ......................... 383,358
5,500 PPG Industries, Inc. ......................... 363,000
8,850 Schnitzer Steel Industries, Inc. - Class A ... 313,998
9,600 Terra Nitrogen Company, L.P. ................. 207,840
-------------
1,959,137
-------------
CONSUMER, CYCLICAL -- 11.7%
19,500 Air Methods Corporation* ..................... 510,510
16,000 Aldila, Inc. ................................. 405,120
6,000 Conn's, Inc.* ................................ 159,300
11,000 Darden Restaurants, Inc. ..................... 433,400
6,400 J.C. Penney Company, Inc. .................... 432,064
45,000 Mesa Air Group, Inc.* ........................ 443,250
5,250 PACCAR, Inc. ................................. 432,495
10,000 The Buckle, Inc. ............................. 418,700
12,500 The Pantry, Inc.* ............................ 719,250
-------------
3,954,089
-------------
CONSUMER, NON-CYCLICAL -- 11.2%
16,350 Archer-Daniels-Midland Company ............... 674,928
28,500 EZCORP, Inc. - Class A* ...................... 1,074,165
29,000 King Pharmaceuticals, Inc.* .................. 493,000
13,000 Magellan Health Services, Inc.* .............. 589,030
15,000 Pfizer, Inc. ................................. 352,050
13,100 The Toro Company ............................. 611,770
-------------
3,794,943
-------------
ENERGY -- 19.4%
12,000 Alliant Energy Corporation ................... 411,600
7,640 Anadarko Petroleum Corporation ............... 364,352
4,300 Apache Corporation ........................... 293,475
10,000 Cimarex Energy Company ....................... 430,000
8,850 Devon Energy Corporation ..................... 534,629
7,000 Exxon Mobil Corporation ...................... 429,450
25,400 Frontier Oil Corporation ..................... 822,959
10,860 Hess Corporation ............................. 573,950
9,000 Lufkin Industries, Inc. ...................... 534,870
6,515 Marathon Oil Corporation ..................... 542,700
7,800 Sunoco, Inc. ................................. 540,462
50,000 VAALCO Energy, Inc.* ......................... 488,000
8,400 Valero Energy Corporation .................... 558,768
-------------
6,525,215
-------------
30
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 92.5% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 13.4%
6,200 AllianceBernstein Holding L.P. ............... $ 379,068
6,800 American Physicians Capital, Inc.* ........... 357,612
3,800 Bear Stearns Companies, Inc. ................. 532,304
13,000 Bluegreen Corporation* ....................... 148,980
9,150 CIT Group, Inc. .............................. 478,454
22,500 CNA Surety Corporation* ...................... 388,800
6,000 LandAmerica Financial Group, Inc. ............ 387,600
17,500 Safety Insurance Group, Inc. ................. 832,125
6,100 Stewart Information Services Corporation ..... 221,491
2,000 The Goldman Sachs Group, Inc. ................ 300,860
15,000 W.R. Berkley Corporation ..................... 511,950
-------------
4,539,244
-------------
INDUSTRIAL -- 5.0%
4,400 Cummins, Inc. ................................ 537,900
4,600 Eaton Corporation ............................ 346,840
2,325 Magna International, Inc. - Class A .......... 167,330
6,100 Norfolk Southern Corporation ................. 324,642
3,900 The Black & Decker Corporation ............... 329,394
-------------
1,706,106
-------------
TECHNOLOGY -- 16.7%
8,200 Armor Holdings, Inc.* ........................ 449,606
13,200 Hewlett-Packard Company ...................... 418,176
17,300 Komag, Inc.* ................................. 798,914
22,100 Motorola, Inc. ............................... 445,315
22,400 Park Electrochemical Corporation ............. 576,800
27,100 Sykes Enterprises, Inc.* ..................... 437,936
12,700 WESCO International, Inc.* ................... 876,300
25,000 Western Digital Corporation* ................. 495,250
20,000 Xyratex Ltd.* ................................ 529,000
25,000 Zoran Corporation* ........................... 608,500
-------------
5,635,797
-------------
UTILITIES -- 9.3%
10,000 AT&T, Inc. ................................... 278,900
12,000 CenturyTel, Inc. ............................. 445,800
10,600 Edison International ......................... 413,400
12,100 Energen Corporation .......................... 464,761
14,000 MDU Resources Group, Inc. .................... 512,540
9,000 Otter Tail Corporation ....................... 245,970
9,300 Sempra Energy ................................ 422,964
7,200 WPS Resources Corporation .................... 357,120
-------------
3,141,455
-------------
TOTAL COMMON STOCKS .......................... $ 31,255,986
-------------
31
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.9% Value
- --------------------------------------------------------------------------------
1,654,941 First American Treasury Obligations Fund ..... $ 1,654,941
-------------
TOTAL INVESTMENT SECURITIES -- 97.4%
(Cost $27,205,116) ........................... $ 32,910,927
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.6% 881,278
-------------
NET ASSETS -- 100.0% ......................... $ 33,792,205
=============
* Non-income producing security.
See accompanying notes to financial statements.
32
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
================================================================================
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. The James Mid Cap Fund commenced its public offering of
shares on June 30, 2006. The James Mid Cap Fund is included in a separate
report, however, going forward will be included in this report.
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.
33
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Securities Valuation
Securities that are traded on any exchange are valued at the last quoted sale
price. Lacking a last sale price, a security is valued at its last bid price
except when, in James's opinion, the last bid price does not accurately reflect
the current value of the security. Securities that are traded on the NASDAQ
over-the-counter market are valued at their NASDAQ Official Closing Price
("NOCP") for all NASDAQ National Market ("NNM") and NASDAQ SmallCap MarketSM
securities. When market quotations are 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. The Funds may use pricing services
to determine market value for securities.
In accordance with the Trust's good faith pricing guidelines, James is required
to consider all appropriate factors relevant to the value of securities for
which it has determined other pricing sources are not available or reliable as
described above. No single standard for determining fair value controls, since
fair value depends upon the circumstances of each individual case. As a general
principle, the current fair value of an issue of securities being valued by the
adviser would appear to be the amount which the owner might reasonably expect to
receive for them upon their current sale. Methods which are in accord with this
principle may, for example, be based on (i) a multiple of earnings; (ii) a
discount from market of a similar freely traded security (including a derivative
security or a basket of securities traded on other markets, exchanges or among
dealers); or (iii) yield to maturity with respect to debt issues, or a
combination of these and other methods.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from security transactions are determined using the specific
identification method. Securities purchased or sold on a when-issued or delayed
delivery basis may have extended settlement periods. Any securities so purchased
are subject to market fluctuation during this period. The James Balanced: Golden
Rainbow Fund will instruct its custodian to segregate assets in a separate
account with a current value at least equal to the amount of its when-issued and
delayed delivery purchase commitments. As of June 30, 2006, the James Balanced:
Golden Rainbow Fund had no such outstanding purchase commitments. Withholding
taxes on foreign dividends have been provided for in accordance with the Trust's
understanding of the applicable country's tax rules and rates.
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.
34
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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.
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, 2006 and
2005 was as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
James Balanced: James Small Cap
Golden Rainbow Fund Fund
--------------------------------------------------------------------------
2006 2005 2006 2005
--------------------------------------------------------------------------
From ordinary income ........................... $ 4,473,409 $ 1,715,612 $ 140,631 $ --
From long-term capital gains ................... 6,895,468 289,929 1,110,529 756,432
----------- ----------- ----------- -----------
$11,368,877 $ 2,005,541 $ 1,251,160 $ 756,432
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
James Market Neutral James Equity
Fund Fund
2006 2005 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
From ordinary income ........................... $ 994,103 $ -- $ 41,105 $ 24,033
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------------
35
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
The following information is computed on a tax basis for each item as of June
30, 2006:
- ------------------------------------------------------------------------------------------------------------------------------------
James James James James
Balanced: Golden Small Cap Market Neutral Equity
Rainbow Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Tax cost of portfolio investments .......... $ 241,826,981 $ 153,650,828 $ 114,373,045 $ 27,205,116
============= ============= ============= =============
Gross unrealized appreciation .............. $ 28,753,979 $ 22,520,772 $ 19,708,320 $ 6,694,777
Gross unrealized depreciation .............. (3,917,026) (6,006,524) (3,358,561) (988,966)
------------- ------------- ------------- -------------
Net unrealized appreciation ................ 24,836,953 16,514,248 16,349,759 5,705,811
Capital loss carryforward .................. -- -- (2,485,252) (1,795,771)
Post-October losses ........................ -- -- (9,170,855) --
Undistributed net investment income ........ 60,420 -- 15,714 --
Undistributed long-term gains .............. 3,482,207 168,768 -- --
Other temporary differences ................ (57,549) -- (14,362) --
------------- ------------- ------------- -------------
Accumulated earnings .................... $ 28,322,031 $ 16,683,016 $ 4,695,004 $ 3,910,040
============= ============= ============= =============
- ------------------------------------------------------------------------------------------------------------------------------------
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, 2006, the James Equity Fund utilized $1,393,779
of capital loss carryforwards. The capital loss carryforwards remaining as of
June 30, 2006 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
$ 642,007 June 30, 2014
James Equity Fund ............................. $1,487,712 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.
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Funds' tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. Management believes that the
adoption of FIN 48 will have no impact on the financial statements of the Funds.
36
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Reclassification of Capital Accounts
Reclassifications result primarily from the difference in the tax treatment of
net investment losses and distributions in excess of net investment income. The
following reclassifications have been made on the Statements of Assets and
Liabilities and have no impact on the net assets or net asset value of the
Funds:
- --------------------------------------------------------------------------------
Undistributed Accumulated
Paid-In Net Investment Net Realized
Capital Income Gains (Losses)
- --------------------------------------------------------------------------------
James Small Cap Fund ....... $(139,932) $ 245,786 $(105,854)
James Market Neutral Fund... $ -- $ 1,350 $ (1,350)
James Equity Fund .......... $ (28,218) $ 28,218 $ --
- --------------------------------------------------------------------------------
2. Securities Transactions
Purchases and sales (including maturities) of investments in long-term U.S.
Government obligations for James Balanced: Golden Rainbow Fund for the year
ended June 30, 2006 were as follows:
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund $173,874,844 $105,582,500
- --------------------------------------------------------------------------------
Purchases and sales (including maturities) of investments in other securities
for the year ended June 30, 2006 were as follows:
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund $ 40,936,160 $ 22,573,193
James Small Cap Fund ............... 149,209,648 53,698,169
James Market Neutral Fund .......... 23,371,102 12,050,391
James Equity Fund .................. 19,716,341 9,396,218
- --------------------------------------------------------------------------------
For the year ended June 30, 2006, the cost of securities purchased to cover
short sales and the proceeds from securities sold short were $42,039,645 and
$68,744,370, respectively, for the James Market Neutral Fund.
3. Management Fee and Other Transactions with Affiliates
A trustee and certain officers of the Trust are also officers of James or
Integrated Investment Services, Inc. (Integrated), formerly Integrated Fund
Services, Inc., 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 equal to (a) 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
37
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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,
Integrated 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, Integrated
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, Integrated 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, Integrated 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
Integrated out-of-pocket expenses including, but not limited to, postage and
supplies.
Accounting Services Agreement
Under the terms of the Accounting Services Agreement with the Trust, Integrated
calculates the daily net asset value per share and maintains the financial books
and records of each Fund. For these services, Integrated 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, Integrated is reimbursed by James Balanced: Golden Rainbow Fund and
James for certain out-of-pocket expenses incurred by Integrated in obtaining
valuations of the Funds' portfolio securities.
Plan of Distribution
Each Fund has a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act
(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
Integrated, Integrated provides certain compliance services to the Trust,
including developing and assisting in implementing a compliance program for
Integrated 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.
38
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
================================================================================
To the Board of Trustees and Shareholders of The James Advantage Funds:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments and securities sold short, of The James Advantage
Funds (the "Funds") comprising James Balanced: Golden Rainbow Fund, James Small
Cap Fund, James Market Neutral Fund and James Equity Fund as of June 30, 2006,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Funds
are not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Funds' internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of June 30, 2006, by correspondence with the custodian
and brokers. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the funds constituting the The James Advantage Funds, as of June 30, 2006,
the results of their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
August 18, 2006
39
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Unaudited)
================================================================================
Dividends Received Deduction
For corporate shareholders, the following ordinary dividends paid during the
year ended June 30, 2006 qualify for the corporate dividends receiveddeducation:
James Balanced: Golden Rainbow Fund 28%
James Market Neutral Fund 6%
James Equity Fund 100%
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 (January 1, 2006 through June 30, 2006).
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 June 30, 2006" 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.
40
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Continued)
================================================================================
Note that expenses shown in the table are meant to highlight and help you
compare ongoing costs 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.
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses Paid
Net Expense During the
Ratio Beginning Ending Six Months
Annualized Account Value Account Value Ended
June 30, January 1, June 30, June 30,
2006 2006 2006 2006*
- ------------------------------------------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund
Actual ............................ 1.23% $1,000.00 $1,027.70 $ 6.18
Hypothetical ...................... 1.23% $1,000.00 $1,018.70 $ 6.16
James Small Cap Fund
Actual ............................ 1.49% $1,000.00 $1,106.50 $ 7.78
Hypothetical ...................... 1.49% $1,000.00 $1,017.41 $ 7.45
James Market Neutral Fund
Actual ............................ 2.57% $1,000.00 $1,040.90 $13.01
Hypothetical ...................... 2.57% $1,000.00 $1,012.05 $12.82
James Equity Fund
Actual ............................ 1.50% $1,000.00 $1,126.50 $ 7.91
Hypothetical ...................... 1.50% $1,000.00 $1,017.36 $ 7.50
* Expenses are equal to the Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Advisory Agreement Approval
The Board of Trustees of The James Advantage Funds considered the renewal of the
Management Agreement for each Fund at a meeting held on May 24, 2006. The
Trustees referred to the materials that had been provided to them prior to the
meeting for purposes of their consideration of the Management Agreements. A
representative of the Adviser reviewed the services provided by the Adviser to
the Funds, as well as a comparison of the advisory services provided to the
Funds and other clients of the Adviser. They discussed recent regulatory
changes, including rules adopted pursuant to the Sarbanes-Oxley Act of 2002,
proxy voting disclosure and the compliance program requirement for mutual funds,
that had significantly increased the Adviser's regulatory burden and costs with
respect to the Funds.
The Trustees reviewed a table comparing the average total returns of each Fund
(one year, three years, five years and for the James Balanced: Golden Rainbow
Fund, ten years) with a peer group of funds with the same, or very similar,
investment objectives and strategies. Each peer group was selected by Lipper
based on the investment style and strategies employed by the Funds, as well as
by asset size. They also reviewed comparisons of the Funds' performance with
their respective benchmarks.
41
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Continued)
================================================================================
The Trustees reviewed a description of the services provided by the Adviser to
the Funds in addition to portfolio management, such as providing a Chief
Compliance Officer to the Funds at no additional cost to the Funds, monitoring
the expenses of each Fund, and providing individualized attention to the Funds'
shareholders. The Trustees also reviewed the management fee for each Fund and
compared the fee with the median investment advisory fees of the Fund's
respective peer group. It was the consensus of the Trustees that the management
fees appeared reasonable in comparison with the peer group fees.
The Trustees referred to an analysis of the Adviser's profitability with respect
to the Funds, noting that the materials included in the analysis allocated the
Adviser's expenses based on two different allocations of the Adviser's common
expenses: total assets under management and total revenues to the Adviser. They
then reviewed a proposal from the Adviser to add breakpoints to the management
fees and noted that the Adviser believed the breakpoints would allow the Adviser
to recoup its losses over the years and reach a reasonable level of
profitability. The Trustees acknowledged that the Adviser was entitled to
reasonable profits and indicated that the proposed breakpoints should be
implemented. The Trustees indicated that they had reviewed the Adviser's
financial condition. The Trustees then discussed other benefits that might be
realized by the Adviser as a result of its relationship with the Funds. It was
noted that the Adviser does not have any soft dollar arrangements with
broker-dealers.
The Trustees indicated that it was their consensus that the information
presented and the discussion of the information were adequate for making a
determination regarding the renewal. They stated that they considered the
comparative performance of the Funds as outstanding and that they were satisfied
with the Adviser's and each Fund's performance. They then concluded that, based
on their review of the management fees and overall expense comparison, as well
as all information relating to the profitability of the Adviser, that the
management fees for each Fund were reasonable and that the arrangements were not
generating excessive profits to the Adviser. The Trustees concluded that the
introduction of the proposed fee breakpoints would make each Fund's management
fee reflective of economies of scale. As to the nature, extent and quality of
services provided by the Adviser, the Trustees expressed their common opinion
that the Adviser's personnel are highly qualified, that the Adviser provides
excellent services to the Funds, and that the extent of the services is
consistent with the Board's expectations.
It was the consensus of the Independent Trustees, and all of the Trustees, that
the continuation of each Management Agreement was in the best interest of the
applicable Fund and its shareholders.
42
JAMES ADVANTAGE FUNDS
MANAGEMENT OF THE TRUST (Unaudited)
================================================================================
Listed in the charts below is basic information regarding the Trustees and
principal officers of James Advantage Funds (the "Trust").
Other
Trusteeships
Term of Held by
Office(1) Portfolios in Trustee
Name Position(s) and Length Principal Fund Complex Outside the
Address Held With of Time Occupation(s) Overseen by Fund
Age Trust Served During Last 5 years Trustee Complex
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
Barry R. James, CFA (2) President and Since Executive Vice President, James 5 Director of
1349 Fairground Road Trustee Inception Investment Research, Inc. (1985 to James Capital
Beavercreek, Ohio 45385 Present) Alliance, a
Age: 49 registered
investment
adviser.
DISINTERESTED TRUSTEES:
Anthony P. D'Angelo, D.B.A. Trustee Since Professor Emeritus, Graduate School 5 N/A
c/o The James Advantage Funds Inception of Logistics and Acquisitions
1349 Fairground Road Management, Air Force Institute of
Beavercreek, Ohio 45385 Technology, Wright-Patterson AFB,
Age: 76 Ohio (1985 to Present)
Leslie L. Brandon Trustee Since May Retired Partner, Ernst & Young LLP, 5 N/A
c/o The James Advantage Funds 2003 Columbus, Ohio (1966 to 2000)
1349 Fairground Road
Beavercreek, Ohio 45385
Age: 63
Richard C. Russell Trustee Since May Richard C. Russell, Consultant, 5 N/A
c/o The James Advantage Funds 2003 general business consulting (2002 to
1349 Fairground Road Present); President, The Danis
Beavercreek, Ohio 45385 Companies, real estate development
Age: 59 and construction (1983 to 2002)
(1) Each Trustee is elected to serve in accordance with the Articles of
Incorporation and Bylaws of the Trust until his or her successor is duly
elected and qualified.
(2) Mr. James is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. James Investment Research, Inc.
serves as the investment adviser to the Funds.
PRINCIPAL OFFICERS:
Term of Portfolios Other
Officel in Trusteeships
and Fund Held by Trustee
Name Position(s) Length Principal Complex Outside the
Address Held With of Time Occupation(s) Overseen by Fund
Age Trust Served During Last 5 years Trustee Complex
- -----------------------------------------------------------------------------------------------------------------------
Thomas L. Mangan (1) Vice Since Vice President, James N/A N/A
1349 Fairground Road President, Inception Investment
Beavercreek, Ohio 45385 Chief Research, Inc. (1994 to
Age: 56 Compliance Present)
Officer,
Treasurer/CFO
and Secretary
(1) Mr. Mangan is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. James Investment Research, Inc.,
serves as the investment adviser to the Funds.
The Statement of Additional Information contains additional information
about the Trustees and is available without charge upon request by calling
1-800-995-2637.
43
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 Investment 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).
Item 2. Code of Ethics.
(a) As of the end of the period covered by this report, the registrant has
adopted a code of ethics that applies to the registrant's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party.
(b) For purposes of this item, "code of ethics" means written standards that are
reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in reports
and documents that a registrant files with, or submits to, the Commission and in
other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and regulations;
(4) The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) Amendments: During the period covered by the report, there have not been any
amendments to the provisions of the code of ethics.
(d) Waivers: During the period covered by the report, the registrant has not
granted any express or implicit waivers from the provisions of the code of
ethics.
(e) Not applicable.
(f) The registrant's code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, is filed herewith.
Item 3. Audit Committee Financial Expert.
(a) The registrant's board of trustees has determined that Les L. Brandon is an
audit committee financial expert. Mr. Brandon is independent for purposes of
this Item 3.
(b) For purposes of this Item, an "audit committee financial expert" means a
person who has the following attributes:
(1) An understanding of generally accepted accounting principles and
financial statements;
(2) The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
(3) Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
(4) An understanding of internal control over financial reporting; and
(5) An understanding of audit committee functions.
(c) A person shall have acquired such attributes through:
(1) Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
(2) Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor, or person
performing similar functions;
(3) Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
(4) Other relevant experience.
(d) (1) A person who is determined to be an audit committee financial expert
will not be deemed an "expert" for any purpose, including without limitation for
purposes of Section 11 of the Securities Act of 1933 (15 U.S.C. 77k), as a
result of being designated or identified as an audit committee financial expert
pursuant to this Item.
(2) The designation or identification of a person as an audit committee
financial expert pursuant to this Item does not impose on such person any
duties, obligations, or liability that are greater than the duties, obligations,
and liability imposed on such person as a member of the audit committee and
board of directors in the absence of such designation or identification.
(3) The designation or identification of a person as an audit committee
financial expert pursuant to this Item does not affect the duties, obligations,
or liability of any other member of the audit committee or board of directors.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
- ------------------------------------------------------------------------
June 30, 2006 June 30, 2005
- ------------------------------------------------------------------------
$47,075 $45,700
- ------------------------------------------------------------------------
Such fees represent the aggregate fees billed for the fiscal years ended June
30, 2006 and June 30, 2005 for professional services rendered by Deloitte &
Touche LLP for the audit of the registrant's annual financial statements.
(b) Audit-Related Fees
- -----------------------------------------------------------------------------
Registrant Adviser
- -----------------------------------------------------------------------------
June 30, 2006 $0 $0
- -----------------------------------------------------------------------------
June 30, 2005 $0 $0
- -----------------------------------------------------------------------------
Neither the registrant nor the adviser was billed any fees by Deloitte & Touche
LLP for the fiscal years ended June 30, 2006 and June 30, 2005 for assurance and
related services that were reasonably related to the performance of the audit of
the registrant's financial statement and not otherwise included under "Audit
Fees" above.
(c) Tax Fees
- -----------------------------------------------------------------------------
Registrant Adviser
- -----------------------------------------------------------------------------
June 30, 2006 $7,225 $0
- -----------------------------------------------------------------------------
June 30, 2005 $7,000 $0
- -----------------------------------------------------------------------------
"Tax fees" shown in the table above were for services provided by Deloitte &
Touche LLP in relation to the preparation of excise filings and income tax
returns for the registrant.
(d) All Other Fees
- -----------------------------------------------------------------------------
Registrant Adviser
- -----------------------------------------------------------------------------
June 30, 2006 $0 $0
- -----------------------------------------------------------------------------
June 30, 2005 $0 $0
- -----------------------------------------------------------------------------
The registrant was not billed any fees by Deloitte & Touche LLP for products and
services provided by Deloitte & Touche LLP, other than the services reported
above in items (a) - (c), for the fiscal years ended June 30, 2006 and June 30,
2005.
(e) Pre-Approval Policies and Procedures
(1) Pursuant to the registrant's Audit Committee Charter ("Charter"), the
Audit Committee is directly responsible for the appointment, termination,
compensation, and oversight of the work of any registered public accounting firm
employed by the registrant. In addition, the Charter provides that the Audit
Committee is responsible for reviewing and approving in advance any and all
proposals under which the independent auditor would provide "permissible
non-audit services" (as defined in the Charter) to the registrant or to the
investment adviser to the registrant (not including any sub-adviser whose role
is primarily portfolio management and that is sub-contracted or overseen by the
investment adviser to the registrant) or any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant if those permissible non-audit services relate
directly to the operations and financial reporting of the registrant. In
determining whether to pre-approve non-audit services, the Audit Committee
considers whether such services are consistent with the independent auditor's
independence.
(2)
- -----------------------------------------------------------------------------
Registrant Adviser
- -----------------------------------------------------------------------------
Audit Related n/a n/a
- -----------------------------------------------------------------------------
Tax Fees 100% n/a
- -----------------------------------------------------------------------------
Other Fees n/a n/a
- -----------------------------------------------------------------------------
(f) Not applicable.
(g) Aggregate non-audit fees billed by registrant's accountant:
- -----------------------------------------------------------------------------
Registrant Adviser
- -----------------------------------------------------------------------------
June 30, 2006 $0 $0
- -----------------------------------------------------------------------------
June 30, 2005 $0 $0
- -----------------------------------------------------------------------------
(h) The registrant's audit committee of the board of trustees has considered
that the provision of non-audit services that were rendered to an entity
controlling, controlled by, or under common control with the registrant's
investment adviser that provides ongoing services to the registrant for the
fiscal years ended June 30, 2006 and June 30, 2005, as identified above, that
were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, are compatible with maintaining Deloitte & Touche LLP's
independence.
Item 5. Audit Committee of Listed Companies.
Not applicable.
Item 6. Schedule of Investments.
The schedule is included as part of the report to shareholders filed under Item
1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed End
Management Investment Companies.
Not Applicable.
Item 8. Portfolio Managers of Closed-End Funds.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of trustees.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the 1940 Act) the registrant's
principal executive officer and principal financial officer have concluded that
the registrant's disclosure controls and procedures are effective as of a date
within 90 days of the filing date of this report.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that have materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of Ethics identified in Item 2 of Form N-CSR was filed with
registrant's June 30, 2005 N-CSR and is hereby incorporated by
reference.
(a)(2) Certifications required by Item 11(b) of Form N-CSR are filed
herewith.
(a)(3) Not applicable.
(b) Certification required by Rule 30a-2(b) under the Investment Company
Act of 1940 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The James Advantage Funds
---------------------------------------------------
By (Signature and Title)
/s/ Barry R. James
Barry R. James
President
Date: September 7, 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: September 7, 2006
By (Signature and Title)
/s/ Thomas L. Mangan
Thomas L. Mangan
Treasurer, Chief Financial Officer
Date: September 7, 2006