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
(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
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Date of fiscal year end: 6/30
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Date of reporting period: 06/30/07
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
Item 1. Reports to Stockholders.
James Advantage Funds Annual Report
LETTER TO SHAREHOLDERS
OF THE JAMES ADVANTAGE FUNDS
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The presidential election cycle has often been a useful indicator of stock
market activity and the pre-election year has generally been the most favorable
year for stocks in this four year cycle. The last twelve months bear witness to
the value of this indicator as the markets moved steadily higher. Only one major
correction has occurred, which followed comments by a former Fed Chairman that
the U.S. economy could enter a recession. That correction was short lived. We
are pleased to present this year's Annual Report to the James Advantage Funds'
shareholders.
The Market Over the Past Year
Commonly used as a barometer of the stock market, the S&P 500 advanced by 20.59%
over the twelve months ending June 30, 2007, a very nice move. But even nicer
was the 23.04% advance of the Dow Jones Industrials. This disparity in return
underscores the advantage that large capitalization stocks enjoyed as the Dow
consists of only 30 very large companies while the S&P 500 holds 500 stocks with
market capitalizations running from the very largest down to under two billion
dollars. The Russell 2000, a good benchmark for small capitalization stocks
advanced 16.43% - further evidence of the resurgence of the blue chips.
Energy stocks, basic materials and industrials were strong over this time period
as rising commodity prices spurred buying and as private equity firms were
willing to pay unbelievable prices for companies long held in low regard by the
markets. Those brokers with a strong or leading presence in merger and
acquisition activity also did well. But brokerage houses and banks with a strong
exposure to the subprime mortgage market fared poorly as the sins of the housing
bubble came home to roost.
The bond markets contributed little to growth over the twelve months ending June
30, 2007. The Lehman U.S. Gov/Credit Index, a broad measure of high grade U.S.
fixed income securities, returned only 0.97%. Yields were quite volatile over
the year as the market assumed an easing by the Federal Reserve early in 2007.
It then turned bearish with the U.S. Treasury ten year note jumping from a yield
of 4.5% to 5.33%, before reversing again and moving back to 5%. These
extraordinary price swings could easily have trapped unseasoned portfolio
managers into costly whip-lash trades.
Investment Goals and Objectives
Value managers, those that focus on bargain stocks with lower PE ratios and
other typical value traits, often lag in periods where the market moves ahead
strongly. James Investment Research has a long history of value investing and we
do not drift from our strategy because the markets are temporarily moving in
another direction. We believe that value investing will outperform over the long
run and that value stocks will hold up better than growth or speculative stocks
in difficult markets.
The objectives of our funds are stated in the Prospectus, but each fund has a
benchmark that the portfolio management team strives to beat. This is not always
going to happen, but if we can outperform over the long run without deviating
from our strategy or style we believe we will be serving our shareholders well.
Investment Philosophy
We believe our research team is among the best in the business. We have a very
sophisticated process that is both quantitative and qualitative. We have an
investment committee that adds sophistication and experience to the quantitative
work and we have evolved a process that we believe is unparalleled in our
profession. However, all this is built on a strong foundation of value
investing. All the modeling and all the fundamental analysis is premised on our
conclusion that the preponderance of evidence suggests that value stocks
outperform growth stocks over the long run.
1
We believe that by preserving capital in declining markets and by holding
undervalued stocks we can accomplish what our clients and shareholders want,
consistent returns that will outperform the benchmarks.
Fund Performance
No style or discipline will outperform in every time period, and the James
Advantage Funds won't either. When investors flock to popular stocks without
regard to valuations or earnings, our style will not outperform and we may lag
the benchmark indexes. This was the case for most of our Funds for the last
twelve months.
The Market Neutral Fund declined by 0.84% for the fiscal year ended June 30,
2007. Because the Fund is a long/short fund, attempting to remove market risk
and focus only on the relative attractiveness of individual stocks, it is the
most sensitive to our focus on value investing. The Fund's Benchmark, the 90 day
Treasury Bill, is free of market risk, and returned 5.21%. The Market Neutral
Fund assumes that stocks that are overvalued will correct and that stocks that
are undervalued will appreciate. When this does not happen on a regular and
longer term basis, the Fund will underperform the risk free rate, which was the
situation over the last 12 months. When our style is out of favor, this product
will suffer more than the other styles, especially when the markets are rising
strongly over time periods such as the previous twelve months.
The James Small Cap Fund rose 6.97% over its fiscal year, trailing its
benchmark, the Russell 2000, as that index rose 16.43%. We note that the Russell
2000 has been getting bigger in terms of market capitalization and recently held
over 100 stocks, or almost 16% of its total, with market capitalizations greater
than $2 billion, while our discipline requires us to sell stocks in this fund if
their market capitalization exceeds $2 billion. As we noted earlier, over the
last twelve months bigger was better. The smaller stocks in the index, those
that we consider to be true small cap stocks and that are typical of stocks in
our Fund, underperformed the bigger stocks, which accounts for the
underperformance of the Fund versus its benchmark.
The James Equity Fund advanced by 11.59% over the fiscal year, which also
trailed its benchmark, the S&P 500, which rose 20.59%. This Fund is an all
capitalization fund, and while it did overweight large cap stocks, the
overweight was not enough to outperform the index. Most of the underperformance
occurred in the third calendar quarter of 2006 when falling oil prices hurt the
Fund's overweight in Energy stocks.
Over the twelve months ended June 30, 2007, the Balanced Golden Rainbow Fund
returned 10.13%. The S&P 500 advanced 20.59%, while the balanced blend benchmark
(The S&P 500, the Russell 2000 and the Lehman Intermediate Gov/Credit Bond
Index) rose 9.59%. The balanced blend more closely approximates the Fund's
holdings. The Fund also was overweight in Energy stocks early in the fiscal
year, which lead to the slight underperformance versus the balanced blend
benchmark.
Our newest fund, the James Mid Cap Fund, was our star for the 2007 fiscal year,
rising 17.41%. This fund opened on June 30, 2006 and just completed its first
year. Still, it lagged its benchmark, the S&P Mid Cap 400/ Citigroup Value
Index, which returned 18.60%. Here again, our types of stocks did not lead in
the advance, especially in the November - January period. We usually look for
mid cap stocks in the region of between $2 billion and $8 billion in market
capitalization. We are confident that this market niche will be rewarding to
investors who are in for the long run.
We believe the underperfomance of our funds is temporary. In fact, the second
quarter of 2007 saw outperformance in all five funds: The Balanced Fund rose
3.05% vs. 1.04% for its balanced blend benchmark, the Equity Fund rose 7.26% vs.
6.28% for its benchmark, the Market Neutral rose 3.26% vs. 1.27% for its
benchmark, the Mid Cap rose 7.93% vs. 4.45% for its benchmark, and the Small Cap
rose 4.71% vs. 4.42% for its benchmark. Please see the following charts for
longer term comparisons for all our funds.
Expectations for the Future
We believe the largest problem the U.S. economy currently faces is the housing
crisis, especially the meltdown in the subprime sector. The consensus among
economists, including the Federal Reserve, seems to be that this is an isolated
problem that has not and will not drag the overall economy into recession. We
believe the situation to be more troubling, and that as of mid year the worst is
still to be felt in both housing and the overall economy.
2
U.S. consumers cannot be counted on to continue spending while the value of
their major asset declines. The Fed seems unlikely to offer help with lower
interest rates because most measures of inflation remain stubbornly above the
Fed's unofficial target of 2 percent. Banks and other lenders who flooded the
economy with low cost loans at ridiculous terms are now tightening credit
standards, which is another drag on economic activity.
On the positive side, Japan's artificially low interest rates are still fueling
the global expansion and U.S. businesses with overseas sales operations are
prospering. The merger and acquisition binge continues, and probably has further
to run. While stocks have moved up nicely, they are still not overly expensive.
Still, higher energy costs as well as higher costs for food and automobiles will
eventually cut into consumer behavior, causing corporations to reduce
inventories. That may lead to a decline in corporate earnings, which the stock
market would not like. We believe a significant correction in stock prices is
likely over the coming year.
/s/ Barry R. James
Barry R. James, CFA, CIC
President
June 30, 2007
3
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
10.13% 9.70% 7.83%
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[LINE CHART]
James Balanced: Standard & Poor's
Golden Rainbow Fund Blended 25/25/50 Index 500 Index
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DATE BALANCE DATE BALANCE DATE BALANCE
06/30/97 10,000 06/30/97 10,000 06/30/97 10,000
09/30/97 10,572 09/30/97 10,694 09/30/97 10,749
12/31/97 10,454 12/31/97 10,799 12/31/97 11,058
03/31/98 10,947 03/31/98 11,527 03/31/98 12,600
06/30/98 10,947 06/30/98 11,596 06/30/98 13,016
09/30/98 10,774 09/30/98 10,983 09/30/98 11,721
12/31/98 11,791 12/31/98 12,002 12/31/98 14,218
03/31/99 11,608 03/31/99 11,977 03/31/99 14,926
06/30/99 11,820 06/30/99 12,619 06/30/99 15,978
09/30/99 11,779 09/30/99 12,277 09/30/99 14,981
12/31/99 12,194 12/31/99 13,285 12/31/99 17,210
03/31/00 12,371 03/31/00 13,748 03/31/00 17,604
06/30/00 12,408 06/30/00 13,652 06/30/00 17,136
09/30/00 12,784 09/30/00 13,864 09/30/00 16,970
12/31/00 12,752 12/31/00 13,618 12/31/00 15,643
03/31/01 12,491 03/31/01 13,217 03/31/01 13,787
06/30/01 12,698 06/30/01 13,921 06/30/01 14,594
09/30/01 12,625 09/30/01 12,952 09/30/01 12,452
12/31/01 13,078 12/31/01 13,962 12/31/01 13,783
03/31/02 13,367 03/31/02 14,106 03/31/02 13,820
06/30/02 13,379 06/30/02 13,569 06/30/02 11,968
09/30/02 12,759 09/30/02 12,512 09/30/02 9,900
12/31/02 12,974 12/31/02 13,097 12/31/02 10,736
03/31/03 12,704 03/31/03 12,944 03/31/03 10,398
06/30/03 13,960 06/30/03 14,351 06/30/03 11,998
09/30/03 14,443 09/30/03 14,776 09/30/03 12,316
12/31/03 15,337 12/31/03 15,753 12/31/03 13,816
03/31/04 15,843 03/31/04 16,261 03/31/04 14,049
06/30/04 15,820 06/30/04 16,146 06/30/04 14,291
09/30/04 16,307 09/30/04 16,180 09/30/04 14,024
12/31/04 17,328 12/31/04 17,147 12/31/04 15,318
03/31/05 17,589 03/31/05 16,753 03/31/05 14,989
06/30/05 18,124 06/30/05 17,212 06/30/05 15,194
09/30/05 18,646 09/30/05 17,529 09/30/05 15,742
12/31/05 18,780 12/31/05 17,720 12/31/05 16,070
03/31/06 19,267 03/31/06 18,476 03/31/06 16,746
06/30/06 19,301 06/30/06 18,197 06/30/06 16,505
09/30/06 19,604 09/30/06 18,767 09/30/06 17,441
12/31/06 20,265 12/31/06 19,589 12/31/06 18,609
03/31/07 20,626 03/31/07 19,738 03/31/07 18,728
06/30/07 21,253 06/30/07 19,943 06/30/07 19,905
Past performance is not predictive of future results.
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The estimated annualized gross expense ratio as of the most recent prospectus,
dated November 1, 2006, was 1.21%. For the year ended June 30, 2007, the actual
gross expense ratio was 1.18%.
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(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.
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
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)
6.97% 17.43% 12.05%
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[LINE CHART]
James Small Cap Fund Russell 2000 Index
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DATE BALANCE DATE BALANCE
10/02/98 10,000 10/02/98 10,000
10/31/98 11,060 10/31/98 10,808
11/30/98 11,080 11/30/98 11,374
12/31/98 11,314 12/31/98 12,078
01/31/99 11,144 01/31/99 12,239
02/28/99 10,114 02/28/99 11,247
03/31/99 10,114 03/31/99 11,423
04/30/99 11,114 04/30/99 12,446
05/31/99 11,364 05/31/99 12,628
06/30/99 11,874 06/30/99 13,199
09/30/99 9,884 09/30/99 12,365
12/31/99 10,134 12/31/99 14,645
03/31/00 9,824 03/31/00 15,682
06/30/00 10,614 06/30/00 15,089
09/30/00 10,514 09/30/00 15,257
12/31/00 10,644 12/31/00 14,203
03/31/01 10,064 03/31/01 13,278
06/30/01 11,034 06/30/01 15,175
09/30/01 9,723 09/30/01 12,020
12/31/01 11,217 12/31/01 14,556
03/31/02 12,298 03/31/02 15,135
06/30/02 12,097 06/30/02 13,871
09/30/02 10,716 09/30/02 10,903
12/31/02 10,948 12/31/02 11,574
03/31/03 10,859 03/31/03 11,055
06/30/03 13,574 06/30/03 13,644
09/30/03 14,302 09/30/03 14,882
12/31/03 16,822 12/31/03 17,043
03/31/04 18,750 03/31/04 18,110
06/30/04 18,932 06/30/04 18,195
09/30/04 18,101 09/30/04 17,675
12/31/04 21,227 12/31/04 20,165
03/31/05 20,490 03/31/05 19,089
06/30/05 21,844 06/30/05 19,913
09/30/05 23,120 09/30/05 20,847
12/31/05 22,819 12/31/05 21,083
03/31/06 25,466 03/31/06 24,022
06/30/06 25,250 06/30/06 22,816
09/30/06 24,740 09/30/06 22,916
12/31/06 25,670 12/31/06 24,956
03/31/07 25,796 03/31/07 25,442
06/30/07 27,010 06/30/07 26,567
Past performance is not predictive of future results.
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The estimated annualized gross expense ratio as of the most recent prospectus,
dated November 1, 2006, was 1.50%. For the year ended June 30, 2007, the actual
gross expense ratio was 1.50%.
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(A) Fund inception was October 2, 1998.
The performance of the above Funds does not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of Fund shares.
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.
5
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)
(0.84)% 3.42% 3.62%
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[LINE CHART]
James Market Neutral Fund 90-Day Treasury Bill Index
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DATE BALANCE DATE BALANCE
10/02/98 10,000 10/02/98 10,000
10/31/98 9,880 10/31/98 10,035
11/30/98 10,170 11/30/98 10,068
12/31/98 10,195 12/31/98 10,108
01/31/99 9,994 01/31/99 10,144
02/28/99 9,853 02/28/99 10,173
03/31/99 9,803 03/31/99 10,214
04/30/99 9,551 04/30/99 10,251
05/31/99 9,441 05/31/99 10,291
06/30/99 9,426 06/30/99 10,334
09/30/99 9,279 09/30/99 10,465
12/31/99 9,090 12/31/99 10,595
03/31/00 9,685 03/31/00 10,743
06/30/00 10,087 06/30/00 10,906
09/30/00 10,710 09/30/00 11,070
12/31/00 10,574 12/31/00 11,250
03/31/01 10,595 03/31/01 11,420
06/30/01 10,769 06/30/01 11,548
09/30/01 10,764 09/30/01 11,673
12/31/01 10,749 12/31/01 11,747
03/31/02 11,155 03/31/02 11,798
06/30/02 11,529 06/30/02 11,852
09/30/02 11,849 09/30/02 11,905
12/31/02 10,920 12/31/02 11,956
03/31/03 11,220 03/31/03 11,993
06/30/03 10,653 06/30/03 12,033
09/30/03 11,006 09/30/03 12,062
12/31/03 11,273 12/31/03 12,093
03/31/04 11,786 03/31/04 12,122
06/30/04 11,775 06/30/04 12,151
09/30/04 12,074 09/30/04 12,196
12/31/04 12,246 12/31/04 12,254
03/31/05 13,069 03/31/05 12,324
06/30/05 13,111 06/30/05 12,412
09/30/05 13,190 09/30/05 12,515
12/31/05 13,217 12/31/05 12,630
03/31/06 13,195 03/31/06 12,759
06/30/06 13,758 06/30/06 12,907
09/30/06 13,502 09/30/06 13,078
12/31/06 13,161 12/31/06 13,243
03/31/07 13,212 03/31/07 13,408
06/30/07 13,643 06/30/07 13,579
Past performance is not predictive of future results.
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The estimated annualized gross expense ratio, including dividend expense on
securities sold short, as of the most recent prospectus, dated November 1, 2006,
was 2.57%. For the year ended June 30, 2007, the actual gross expense ratio,
including dividend expense on securities sold short, was 2.26%.
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(A) Fund inception was October 2, 1998.
The performance of the above Funds does not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of Fund shares.
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.
6
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)
11.59% 13.48% 2.94%
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[LINE CHART]
James Equity Fund Standard & Poor's 500 Index
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DATE BALANCE DATE BALANCE
11/01/99 10,000 11/01/99 10,000
11/30/99 10,800 11/30/99 10,203
12/31/99 12,260 12/31/99 10,804
01/31/00 10,970 01/31/00 10,262
02/29/00 13,850 02/29/00 10,068
03/31/00 14,550 03/31/00 11,052
04/30/00 13,750 04/30/00 10,720
05/31/00 12,300 05/31/00 10,500
06/30/00 13,650 06/30/00 10,759
09/30/00 13,040 09/30/00 10,655
12/31/00 9,210 12/31/00 9,821
03/31/01 7,720 03/31/01 8,657
06/30/01 7,650 06/30/01 9,163
09/30/01 6,290 09/30/01 7,818
12/31/01 6,965 12/31/01 8,653
03/31/02 6,930 03/31/02 8,677
06/30/02 6,633 06/30/02 7,515
09/30/02 5,585 09/30/02 6,216
12/31/02 5,582 12/31/02 6,741
03/31/03 5,559 03/31/03 6,528
06/30/03 6,226 06/30/03 7,533
09/30/03 6,272 09/30/03 7,733
12/31/03 7,070 12/31/03 8,674
03/31/04 7,292 03/31/04 8,821
06/30/04 7,433 06/30/04 8,973
09/30/04 7,615 09/30/04 8,805
12/31/04 8,636 12/31/04 9,618
03/31/05 8,605 03/31/05 9,411
06/30/05 8,990 06/30/05 9,540
09/30/05 9,809 09/30/05 9,883
12/31/05 9,931 12/31/05 10,090
03/31/06 11,157 03/31/06 10,514
06/30/06 11,188 06/30/06 10,363
09/30/06 10,945 09/30/06 10,950
12/31/06 11,540 12/31/06 11,683
03/31/07 11,641 03/31/07 11,758
06/30/07 12,485 06/30/07 12,496
Past performance is not predictive of future results.
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The estimated annualized gross expense ratio as of the most recent prospectus,
dated November 1, 2006, was 1.50%. For the year ended June 30, 2007, the actual
gross expense ratio was 1.50%.
- --------------------------------------------------------------------------------
(A) Fund inception was November 1, 1999.
The performance of the above Funds does not reflect the deduction of taxes that
a shareholder would pay on Fund distributions or the redemption of Fund shares.
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.
7
Comparison of the Change in Value of a $10,000 Investment in
the James Mid Cap Fund and Standard & Poor's 400 Index
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James Mid Cap Fund
Average Annual Total Returns
1 Year Since Inception(A)
17.41% 17.41%
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[LINE CHART]
James Mid Cap Fund Standard & Poor's 400 Index
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DATE BALANCE DATE BALANCE
06/30/06 10,000 06/30/06 10,000
07/31/06 9,760 07/31/06 9,777
08/31/06 9,830 08/31/06 9,922
09/30/06 9,861 09/30/06 9,943
10/31/06 10,271 10/31/06 10,392
11/30/06 10,631 11/30/06 10,717
12/31/06 10,578 12/31/06 10,742
01/31/07 10,639 01/31/07 11,099
02/28/07 10,679 02/28/07 11,237
03/31/07 10,880 03/31/07 11,354
04/30/07 11,322 04/30/07 11,674
05/31/07 11,954 05/31/07 12,184
06/30/07 11,741 06/30/07 11,860
Past performance is not predictive of future results.
- --------------------------------------------------------------------------------
The estimated annualized gross expense ratio as of the most recent prospectus,
dated November 1, 2006, was 1.50%. For the year ended June 30, 2007, the actual
gross expense ratio was 1.49%.
- --------------------------------------------------------------------------------
(A) Fund inception was June 30, 2006.
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.
8
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
June 30, 2007 (Unaudited)
================================================================================
The illustrations below provide the industry sectors for the James Balanced:
Golden Rainbow Fund, James Small Cap Fund, James Market Neutral Fund, James
Equity Fund and James Mid Cap Fund.
James Balanced: Golden Rainbow Fund
Industry Sector Allocation (% of Net Assets)
BASIC MATERIALS - 4.2%
CONSUMER, CYCLICAL - 5.7%
CONSUMER, NON-CYCLICAL - 6.9%
ENERGY - 6.0%
FINANCIAL - 4.6%
[PIE CHART] INDUSTRIAL - 5.3%
TECHNOLOGY - 4.6%
UTILITIES - 6.6%
INTERNATIONAL EQUITY FUNDS - 2.4%
BONDS (over 10 years) - 18.8%
BONDS (2-10 years) - 2.6%
BONDS (less than 2 years) - 29.0%
CASH EQUIVALENTS - 2.3%
OTHER - 1.0%
James Small Cap Fund
Industry Sector Allocation (% of Net Assets)
BASIC MATERIALS - 7.4%
CONGLOMERATE - 0.8%
CONSUMER, CYCLICAL - 11.3%
CONSUMER, NON-CYCLICAL - 14.4%
ENERGY - 13.1%
[PIE CHART] FINANCIAL - 16.9%
INDUSTRIAL - 11.0%
TECHNOLOGY - 8.5%
UTILITIES - 12.1%
CASH EQUIVALENTS - 4.2%
OTHER - 0.3%
9
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 5.7% 3.8%
CONSUMER, CYCLICAL 11.9% 9.1%
CONSUMER, NON-CYCLICAL 9.8% 8.8%
ENERGY 8.7% 5.6%
FINANCIAL 5.8% 10.4%
INDUSTRIAL 5.3% 7.8%
TECHNOLOGY 10.1% 15.1%
UTILITIES 8.3% 5.8%
INTERNATIONAL EQUITY FUNDS 3.4%
James Equity Fund
Industry Sector Allocation (% of Net Assets)
BASIC MATERIALS - 5.0%
CONGLOMERATE - 0.8%
CONSUMER, CYCLICAL - 15.5%
CONSUMER, NON-CYCLICAL - 14.2%
ENERGY - 11.8%
[PIE CHART] FINANCIAL - 13.1%
INDUSTRIAL - 14.1%
TECHNOLOGY - 8.9%
UTILITIES - 13.7%
CASH EQUIVALENTS - 1.1%
OTHER - 1.8%
10
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
(Continued)
================================================================================
James Mid Cap Fund
Industry Sector Allocation (% of Net Assets)
BASIC MATERIALS - 9.9%
CONSUMER, CYCLICAL - 11.5%
CONSUMER, NON-CYCLICAL - 15.8%
ENERGY - 14.1%
[PIE CHART] FINANCIAL - 12.3%
INDUSTRIAL - 11.9%
TECHNOLOGY - 9.6%
UTILITIES - 10.2%
CASH EQUIVALENTS - 2.5%
OTHER - 2.2%
11
JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2007
==============================================================================================================================
James
Balanced: James James James James
Golden Rainbow Small Cap Market Neutral Equity Mid Cap
Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At amortized cost ...................... $ 297,906,956 $ 284,410,882 $ 32,062,250 $ 17,585,038 $ 5,601,348
============= ============= ============= ============= =============
At value ............................... $ 338,307,286 $ 326,612,944 $ 40,371,403 $ 25,416,378 $ 6,296,221
Segregated cash with brokers ............. -- -- 44,336,413 -- --
Dividends and interest receivable ........ 1,855,751 503,124 366,684 19,077 6,363
Receivable for securities sold ........... 1,860,635 723,381 3,245,024 534,060 146,798
Receivable for capital shares sold ....... 436,244 698,164 10,169 4,668 --
Other assets ............................. 24,339 -- -- -- --
------------- ------------- ------------- ------------- -------------
TOTAL ASSETS ......................... 342,484,255 328,537,613 88,329,693 25,974,183 6,449,382
------------- ------------- ------------- ------------- -------------
LIABILITIES
Dividends payable ........................ 87,094 26,640 21,200 1,070 --
Payable for securities sold short
(proceeds $35,865,427) ................. -- -- 34,199,426 -- --
Payable for dividends on
securities sold short .................. -- -- 22,689 -- --
Payable for capital shares redeemed ...... 339,959 677,994 196,123 63,994 --
Payable for securities purchased ......... -- -- 2,252,131 -- --
Accrued expenses:
Management fees ........................ 207,162 338,788 72,847 27,098 6,682
12b-1 distribution and service fees .... 73,547 27,380 38,585 9,314 1,622
Trustees' fees ......................... 5,677 -- -- -- --
Other affiliates ....................... 24,014 -- -- -- --
Other .................................. 82,564 -- -- -- --
------------- ------------- ------------- ------------- -------------
TOTAL LIABILITIES .................... 820,017 1,070,802 36,803,001 101,476 8,304
------------- ------------- ------------- ------------- -------------
NET ASSETS ............................... $ 341,664,238 $ 327,466,811 $ 51,526,692 $ 25,872,707 $ 6,441,078
============= ============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in capital .......................... $ 295,686,344 $ 291,521,030 $ 50,538,981 $ 19,074,828 $ 5,727,420
Accumulated net investment
income (loss) .......................... (57,518) -- (11,946) 6 568
Accumulated net realized gains (losses)
from security transactions ............. 5,635,082 (6,256,281) (8,975,497) (1,033,467) 18,217
Net unrealized appreciation on investments 40,400,330 42,202,062 9,975,154 7,831,340 694,873
------------- ------------- ------------- ------------- -------------
NET ASSETS ............................... $ 341,664,238 $ 327,466,811 $ 51,526,692 $ 25,872,707 $ 6,441,078
============= ============= ============= ============= =============
Shares of beneficial interest outstanding
(unlimited number of shares
authorized) ............................ 18,638,470 13,333,434 4,232,227 2,107,666 550,617
============= ============= ============= ============= =============
Net asset value, offering price and
redemption price per share ............. $ 18.33 $ 24.56 $ 12.17 $ 12.28 $ 11.70
============= ============= ============= ============= =============
See accompanying notes to financial statements.
12
JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 2007
==============================================================================================================================
James
Balanced: James James James James
Golden Rainbow Small Cap Market Neutral Equity Mid Cap
Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (Net of foreign withholding
taxes of $5,764, $1,167, $3,077,
$1,616,$215, respectively) ......... $ 2,780,940 $ 5,853,676 $ 3,281,849 $ 579,260 $ 72,263
Interest ............................. 7,747,581 2,952 382,197 -- --
------------- ------------- ------------- ------------- -------------
TOTAL INVESTMENT INCOME ............ 10,528,521 5,856,628 3,664,046 579,260 72,263
------------- ------------- ------------- ------------- -------------
EXPENSES
Management fees ...................... 2,276,281 3,578,323 1,127,412 389,733 42,442
12b-1 distribution and service fees .. 751,824 718,777 160,373 79,720 9,514
Dividend expense on
securities sold short .............. -- -- 212,072 -- --
Servicing fees ....................... 275,691 -- -- -- --
Professional fees .................... 95,000 -- -- -- --
Trustees' fees ....................... 17,500 15,570 13,289 12,283 5,125
Registration fees .................... 60,285 -- -- -- --
Custodian fees and expenses .......... 39,000 -- -- -- --
Shareholder report
printing and mailing ............... 35,000 -- -- -- --
Postage and supplies ................. 50,250 -- -- -- --
Compliance fees and expenses ......... 8,250 -- -- -- --
Other expenses ....................... 12,464 -- -- -- --
------------- ------------- ------------- ------------- -------------
TOTAL EXPENSES ..................... 3,621,545 4,312,670 1,513,146 481,736 57,081
------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME .................. 6,906,976 1,543,958 2,150,900 97,524 15,182
------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED
GAINS (LOSSES)
ON INVESTMENTS
Net realized gains (losses) from
security transactions .............. 7,508,290 (3,997,335) 9,516,718 762,304 18,217
Net realized losses on closed
short positions .................... -- -- (6,743,102) -- --
Net change in unrealized appreciation/
depreciation on investments ........ 15,481,817 25,687,814 (6,465,211) 2,125,529 694,873
------------- ------------- ------------- ------------- -------------
NET REALIZED AND
UNREALIZED GAINS (LOSSES)
ON INVESTMENTS ....................... 22,990,107 21,690,479 (3,691,595) 2,887,833 713,090
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS ...................... $ 29,897,083 $ 23,234,437 $ (1,540,695) $ 2,985,357 $ 728,272
------------- ------------- ------------- ------------- -------------
See accompanying notes to financial statements.
13
JAMES BALANCED: GOLDEN RAINBOW FUND
STATEMENTS OF CHANGES IN NET ASSETS
=====================================================================================================
Year Year
Ended Ended
June 30, June 30,
2007 2006
- -----------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ........................................... $ 6,906,976 $ 4,445,213
Net realized gains on investments ............................... 7,508,290 4,354,056
Net change in unrealized appreciation/depreciation on
investments ................................................... 15,481,817 3,509,577
------------- -------------
Net increase in net assets from operations ......................... 29,897,083 12,308,846
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................ (6,967,365) (4,445,207)
Distributions from net realized gains ........................... (5,273,855) (6,923,670)
------------- -------------
Decrease in net assets from distributions to shareholders .......... (12,241,220) (11,368,877)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....................................... 125,693,280 156,716,472
Net asset value of shares issued in reinvestment of
distributions to shareholders ................................. 11,752,390 10,968,299
Payments for shares redeemed .................................... (82,203,239) (47,464,018)
------------- -------------
Net increase in net assets from capital share transactions ......... 55,242,431 120,220,753
------------- -------------
TOTAL INCREASE IN NET ASSETS ....................................... 72,898,294 121,160,722
NET ASSETS
Beginning of year ............................................... 268,765,944 147,605,222
------------- -------------
End of year ..................................................... $ 341,664,238 $ 268,765,944
============= =============
ACCUMULATED NET INVESTMENT INCOME (LOSS) ........................... $ (57,518) $ 2,871
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ..................................................... 7,069,682 9,025,280
Shares issued in reinvestment of distributions to
shareholders .................................................. 658,997 638,737
Shares redeemed ................................................. (4,607,914) (2,737,742)
------------- -------------
Net increase in shares outstanding .............................. 3,120,765 6,926,275
Shares outstanding, beginning of year ........................... 15,517,705 8,591,430
------------- -------------
Shares outstanding, end of year ................................. 18,638,470 15,517,705
============= =============
See accompanying notes to financial statements.
14
JAMES SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
=====================================================================================================
Year Year
Ended Ended
June 30, June 30,
2007 2006
- -----------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) .................................... $ 1,543,958 $ (238,195)
Net realized gains (losses) on investments ...................... (3,997,335) 973,968
Net change in unrealized appreciation/depreciation on
investments ................................................... 25,687,814 10,817,638
------------- -------------
Net increase in net assets from operations ......................... 23,234,437 11,553,411
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................ (1,543,871) (140,631)
Distributions from net realized gains ........................... (2,572,028) (1,110,529)
------------- -------------
Decrease in net assets from distributions to shareholders .......... (4,115,899) (1,251,160)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....................................... 264,238,098 146,123,605
Net asset value of shares issued in reinvestment of
distributions to shareholders ................................. 3,960,651 1,211,405
Payments for shares redeemed (A) ................................ (130,340,887) (41,635,792)
------------- -------------
Net increase in net assets from capital share transactions ......... 137,857,862 105,699,218
------------- -------------
TOTAL INCREASE IN NET ASSETS ....................................... 156,976,400 116,001,469
NET ASSETS
Beginning of year ............................................... 170,490,411 54,488,942
------------- -------------
End of year ..................................................... $ 327,466,811 $ 170,490,411
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ................................ $ 87 $ --
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ..................................................... 11,336,919 6,488,734
Shares issued in reinvestment of distributions to shareholders .. 168,219 56,228
Shares redeemed ................................................. (5,495,532) (1,884,121)
------------- -------------
Net increase in shares outstanding .............................. 6,009,606 4,660,841
Shares outstanding, beginning of year ........................... 7,323,828 2,662,987
------------- -------------
Shares outstanding, end of year ................................. 13,333,434 7,323,828
============= =============
(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, 2007 and June 30, 2006, these
fees were $50,529 and $40,075, respectively. Effective February 21, 2007,
the redemption fee was eliminated.
See accompanying notes to financial statements.
15
JAMES MARKET NEUTRAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
=====================================================================================================
Year Year
Ended Ended
June 30, June 30,
2007 2006
- -----------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................................ $ 2,150,900 $ 986,065
Net realized gains (losses) from:
Security transactions .......................................... 9,516,718 1,432,520
Closed short positions ......................................... (6,743,102) (11,320,096)
Net change in unrealized appreciation/depreciation on
investments .................................................... (6,465,211) 11,995,675
------------- -------------
Net increase (decrease) in net assets from operations ............... (1,540,695) 3,094,164
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................. (2,166,597) (1,008,466)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................ 24,350,134 55,571,273
Net asset value of shares issued in reinvestment of
distributions to shareholders .................................. 2,045,700 951,011
Payments for shares redeemed (A) ................................. (46,379,464) (30,693,297)
------------- -------------
Net increase (decrease) in net assets from capital share
transactions ...................................................... (19,983,630) 25,828,987
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................. (23,690,922) 27,914,685
NET ASSETS
Beginning of year ................................................ 75,217,614 47,302,929
------------- -------------
End of year ...................................................... $ 51,526,692 $ 75,217,614
============= =============
ACCUMULATED NET INVESTMENT INCOME (LOSS) ............................ $ (11,946) $ 1,351
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ...................................................... 1,960,226 4,486,840
Shares issued in reinvestment of distributions to shareholders ... 169,177 76,956
Shares redeemed .................................................. (3,825,518) (2,491,209)
------------- -------------
Net increase (decrease) in shares outstanding .................... (1,696,115) 2,072,587
Shares outstanding, beginning of year ............................ 5,928,342 3,855,755
------------- -------------
Shares outstanding, end of year .................................. 4,232,227 5,928,342
============= =============
(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, 2007 and June 30, 2006, these
fees were $20,790 and $37,999, respectively. Effective February 21, 2007,
the redemption fee was eliminated.
See accompanying notes to financial statements.
16
JAMES EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
=====================================================================================================
Year Year
Ended Ended
June 30, June 30,
2007 2006
- -----------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................................ $ 97,524 $ 12,886
Net realized gains on investments ................................ 762,304 1,393,779
Net change in unrealized appreciation/depreciation on
investments .................................................... 2,125,529 3,117,729
------------- -------------
Net increase in net assets from operations .......................... 2,985,357 4,524,394
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................. (97,518) (12,886)
Dividends in excess of net investment income ..................... -- (28,219)
------------- -------------
Decrease in net assets from distribution to shareholders ............ (97,518) (41,105)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................ 17,092,635 17,542,319
Net asset value of shares issued in reinvestment of
distributions to shareholders .................................. 95,205 40,392
Payments for shares redeemed (A) ................................. (27,995,177) (5,107,288)
------------- -------------
Net increase (decrease) in net assets from capital share
transactions (10,807,337) 12,475,423
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................. (7,919,498) 16,958,712
NET ASSETS
Beginning of year ................................................ 33,792,205 16,833,493
------------- -------------
End of year ...................................................... $ 25,872,707 $ 33,792,205
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ................................. $ 6 $ --
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ...................................................... 1,530,581 1,662,067
Shares issued in reinvestment of distributions to shareholders ... 8,075 4,122
Shares redeemed .................................................. (2,492,159) (499,385)
------------- -------------
Net increase (decrease) in shares outstanding .................... (953,503) 1,166,804
Shares outstanding, beginning of year ............................ 3,061,169 1,894,365
------------- -------------
Shares outstanding, end of year .................................. 2,107,666 3,061,169
============= =============
(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, 2007 and June 30, 2006, these
fees were $7,252 and $4,373, respectively. Effective February 21, 2007,
the redemption fee was eliminated.
See accompanying notes to financial statements.
17
JAMES MID CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
=====================================================================================================
Year Period
Ended Ended
June 30, June 30,
2007 2006 (A)
------------- -------------
FROM OPERATIONS
Net investment income ........................................... $ 15,182 $ --
Net realized gains on investments ............................... 18,217 --
Net change in unrealized appreciation/depreciation on investments 694,873 --
------------- -------------
Net increase in net assets from operations ......................... 728,272 --
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................ (14,614) --
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....................................... 6,055,137 100,000
Net asset value of shares issued in reinvestment of
distributions to shareholders ................................. 14,577 --
Payments for shares redeemed (B) ................................ (442,294) --
------------- -------------
Net increase in net assets from capital share transactions ......... 5,627,420 100,000
------------- -------------
TOTAL INCREASE IN NET ASSETS ....................................... 6,341,078 100,000
NET ASSETS
Beginning of period ............................................. 100,000 --
------------- -------------
End of period ................................................... $ 6,441,078 $ 100,000
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ................................ $ 568 $ --
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ..................................................... 577,798 10,000
Shares issued in reinvestment of distributions to shareholders .. 1,383 --
Shares redeemed ................................................. (38,564) --
------------- -------------
Net increase in shares outstanding .............................. 540,617 10,000
Shares outstanding, beginning of period ......................... 10,000 --
------------- -------------
Shares outstanding, end of period ............................... 550,617 10,000
============= =============
(A) The proceeds and shares represent the initial issuance of shares on
commencement date of June 30, 2006.
(B) 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 year ended June 30, 2007, these fees were $2.
Effective February 21, 2007, the redemption fee was eliminated.
See accompanying notes to financial statements.
18
JAMES BALANCED: GOLDEN RAINBOW FUND
FINANCIAL HIGHLIGHTS
==================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
---------------------------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ............... $ 17.32 $ 17.18 $ 15.28 $ 13.72 $ 13.80
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income ........................... 0.39 0.34 0.26 0.26 0.27
Net realized and unrealized
gains on investments .......................... 1.34 0.75 1.95 1.56 0.28
----------- ----------- ----------- ----------- -----------
Total from investment operations ................... 1.73 1.09 2.21 1.82 0.55
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ...................... (0.40) (0.34) (0.26) (0.26) (0.27)
From net realized gains on investments .......... (0.32) (0.61) (0.05) (0.00)(A) (0.36)
----------- ----------- ----------- ----------- -----------
Total distributions ................................ (0.72) (0.95) (0.31) (0.26) (0.63)
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ..................... $ 18.33 $ 17.32 $ 17.18 $ 15.28 $ 13.72
=========== =========== =========== =========== ===========
Total return ....................................... 10.13% 6.48% 14.56% 13.32% 4.34%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) .................. $ 341,664 $ 268,766 $ 147,605 $ 83,893 $ 69,169
=========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ........ 1.18% 1.21% 1.26% 1.28% 1.32%
Ratio of net investment income to average net assets 2.24% 2.11% 1.70% 1.77% 2.08%
Portfolio turnover rate ............................ 92% 68% 36% 29% 61%
(A) Amount rounds to less than $0.005.
See accompanying notes to financial statements.
19
JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
==================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
---------------------------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year .............. $ 23.28 $ 20.46 $ 18.66 $ 13.43 $ 12.08
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) ................... 0.11 (0.04) 0.05 0.01 0.10
Net realized and unrealized gains on investments 1.50 3.19 2.65 5.26 1.35
----------- ----------- ----------- ----------- -----------
Total from investment operations .................. 1.61 3.15 2.70 5.27 1.45
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ..................... (0.11) (0.04) -- (0.01) (0.10)
From net realized gains on investments ......... (0.22) (0.30) (1.00) (0.05) --
----------- ----------- ----------- ----------- -----------
Total distributions ............................... (0.33) (0.34) (1.00) (0.06) (0.10)
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees (B) .......... 0.00(A) 0.01 0.10 0.02 --
----------- ----------- ----------- ----------- -----------
Net asset value at end of year .................... $ 24.56 $ 23.28 $ 20.46 $ 18.66 $ 13.43
=========== =========== =========== =========== ===========
Total return ...................................... 6.97% 15.59% 15.39% 39.47% 12.20%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) ................. $ 327,467 $ 170,490 $ 54,489 $ 13,186 $ 9,199
=========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ....... 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income (loss)
to average net assets ........................... 0.54% (0.25%) 0.45% 0.05% 0.90%
Portfolio turnover rate ........................... 104% 59% 94% 45% 52%
(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.
20
JAMES MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
==================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
---------------------------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ......... $ 12.69 $ 12.27 $ 11.02 $ 9.97 $ 10.79
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) .............. 0.40 0.17 0.01 (0.13) (0.10)
Net realized and unrealized gains
(losses) on investments ................. (0.51) 0.42 1.23 1.18 (0.72)
----------- ----------- ----------- ----------- -----------
Total from investment operations ............. (0.11) 0.59 1.24 1.05 (0.82)
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ................ (0.41) (0.18) -- -- --
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees(B) ...... 0.00(A) 0.01 0.01 0.00(A) --
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ............... $ 12.17 $ 12.69 $ 12.27 $ 11.02 $ 9.97
=========== =========== =========== =========== ===========
Total return ................................. (0.84%) 4.94% 11.34% 10.53% (7.60%)
=========== =========== =========== =========== ===========
Net assets at end of year (000's) ............ $ 51,527 $ 75,218 $ 47,303 $ 12,528 $ 9,219
=========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets,
excluding dividends on securities sold short 1.94% 1.95% 1.95% 1.95% 1.95%
Ratio of dividend expense on securities
sold short ................................. 0.32% 0.62% 0.42% 0.64% 0.53%
----------- ----------- ----------- ----------- -----------
Ratio of net expenses to average net assets .. 2.26% 2.57% 2.37% 2.59% 2.48%
----------- ----------- ----------- ----------- -----------
Ratio of net investment income (loss)
to average net assets ...................... 3.21% 1.52% 0.11% (1.43%) (0.98%)
Portfolio turnover rate(C) ................... 57% 27% 35% 13% 86%
(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 significantly different if included.
See accompanying notes to financial statements.
21
JAMES EQUITY FUND
FINANCIAL HIGHLIGHTS
==================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
---------------------------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ...... $ 11.04 $ 8.89 $ 7.36 $ 6.18 $ 6.62
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income .................. 0.04 0.01 0.01 0.02 0.03
Net realized and unrealized gains
(losses) on investments .............. 1.24 2.16 1.53 1.18 (0.44)
----------- ----------- ----------- ----------- -----------
Total from investment operations .......... 1.28 2.17 1.54 1.20 (0.41)
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ............. (0.04) (0.01) (0.01) (0.02) (0.03)
From distributions in excess of net
investment income .................... -- (0.01) -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions ....................... (0.04) (0.02) (0.01) (0.02) (0.03)
----------- ----------- ----------- ----------- -----------
Paid-in capital from redemption fees(B) ... 0.00(A) 0.00(A) 0.00(A) 0.00(A) --
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ............ $ 12.28 $ 11.04 $ 8.89 $ 7.36 $ 6.18
=========== =========== =========== =========== ===========
Total return .............................. 11.59% 24.45% 20.96% 19.38% (6.14%)
=========== =========== =========== =========== ===========
Net assets at end of year (000's) ......... $ 25,873 $ 33,792 $ 16,833 $ 7,249 $ 5,379
=========== =========== =========== =========== ===========
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 .............................. 0.30% 0.06% 0.22% 0.25% 0.56%
Portfolio turnover rate ................... 58% 43% 33% 70% 65%
(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.
22
JAMES MID CAP FUND
FINANCIAL HIGHLIGHTS
=================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended
June 30,
2007
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ............................................................................ $ 10.00
-----------
Income from investment operations:
Net investment income ........................................................................................ 0.04
Net realized and unrealized gains on investments ............................................................. 1.70
-----------
Total from investment operations ................................................................................ 1.74
-----------
Less distributions:
From net investment income ................................................................................... (0.04)
-----------
Paid-in capital from redemption fees(B) ......................................................................... 0.00(A)
-----------
Net asset value at end of year .................................................................................. $ 11.70
===========
Total return .................................................................................................... 17.41%
===========
Net assets at end of year (000's) ............................................................................... $ 6,441
===========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ..................................................................... 1.49%
Ratio of net investment income to average net assets ............................................................ 0.40%
Portfolio turnover rate ......................................................................................... 53%
(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.
23
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
June 30, 2007
================================================================================
Shares COMMON STOCKS -- 46.3% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 4.2%
42,000 AEP Industries, Inc.*........................... $ 1,890,420
15,000 Alliance Resource Partners, L.P................. 628,500
60,000 Barrick Gold Corporation........................ 1,744,200
35,000 Castle (A.M.) & Company......................... 1,256,850
18,000 Dow Chemical Company............................ 795,960
45,650 Methanex Corporation............................ 1,147,641
46,000 Newmont Mining Corporation...................... 1,796,760
19,000 Nucor Corporation............................... 1,114,350
17,000 PPG Industries, Inc............................. 1,293,870
15,000 RPM International, Inc.......................... 346,650
19,500 Terra Nitrogen Company, L.P..................... 2,477,865
-------------
14,493,066
-------------
CONSUMER, CYCLICAL -- 5.7%
80,812 Air Methods Corporation*........................ 2,963,376
20,000 Dollar Trees Stores, Inc.*...................... 871,000
39,000 J.C. Penney Company, Inc. ...................... 2,822,820
50,000 Mattel, Inc..................................... 1,264,500
70,000 McDonald's Corporation.......................... 3,553,200
45,000 Men's Wearhouse, Inc............................ 2,298,150
34,950 PACCAR, Inc. ................................... 3,042,048
26,000 Steven Madden Ltd............................... 851,760
43,500 The Buckle, Inc................................. 1,713,900
7,000 Walt Disney Company............................. 238,980
-------------
19,619,734
-------------
CONSUMER, NON-CYCLICAL -- 6.9%
201,000 EZCORP, Inc. - Class A*......................... 2,661,240
48,000 Imperial Sugar Company.......................... 1,477,920
20,000 Ingles Markets, Inc - Class A................... 689,000
126,000 King Pharmaceuticals, Inc.*..................... 2,577,960
30,000 Kroger Co. ..................................... 843,900
24,000 Manpower, Inc................................... 2,213,760
83,000 Merck & Co., Inc................................ 4,133,400
108,000 Pfizer, Inc..................................... 2,761,560
10,534 The Andersons, Inc.............................. 477,506
43,000 The Toro Company................................ 2,532,270
55,500 Watson Wyatt Worldwide, Inc. ................... 2,801,640
-------------
23,170,156
-------------
ENERGY -- 6.0%
9,500 Apache Corporation.............................. 775,105
41,500 Bolt Technology Corporation*.................... 1,827,660
32,940 Chevron Corporation............................. 2,774,866
6,000 Cimarex Energy Company.......................... 236,460
21,000 Devon Energy Corporation........................ 1,644,090
24
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 46.3% (Continued) Value
- --------------------------------------------------------------------------------
ENERGY -- 6.0% (Continued)
8,000 EOG Resources, Inc. ............................ $ 584,480
44,500 Exxon Mobil Corporation......................... 3,732,660
41,400 Hess Corporation................................ 2,440,944
105,200 ICO, Inc.*...................................... 1,111,964
5,000 Lufkin Industries, Inc. ........................ 322,750
28,300 Sunoco, Inc. ................................... 2,254,944
38,000 Valero Energy Corporation....................... 2,806,680
-------------
20,512,603
-------------
FINANCIAL -- 4.6%
32,500 AllianceBernstein Holding L.P................... 2,830,425
Shares COMMON STOCKS -- 66.4% (Continued)
48,750 American Physicians Capital, Inc.*.............. 1,974,375
14,500 Assurant, Inc................................... 854,340
42,500 CIT Group, Inc.................................. 2,330,275
28,000 CNA Surety Corporation*......................... 529,480
7,000 KeyCorp......................................... 240,310
47,500 Rent-A-Center, Inc.*............................ 1,245,925
25,000 SAFECO Corporation.............................. 1,556,500
82,500 W.R. Berkley Corporation........................ 2,684,550
-------------
15,834,155
-------------
INDUSTRIAL -- 5.3%
14,000 Cascade Corporation............................. 1,098,160
42,000 CSX Corporation................................. 1,893,360
43,000 Cummins, Inc. .................................. 4,352,030
8,000 Deere & Company................................. 965,920
15,000 Eaton Corporation............................... 1,395,000
10,000 Johnson Controls, Inc........................... 1,157,700
75,000 Metal Management, Inc. ......................... 3,305,250
29,000 Norfolk Southern Corporation.................... 1,524,530
27,000 Superior Essex, Inc.*........................... 1,008,450
42,000 The Timken Company.............................. 1,516,620
-------------
18,217,020
-------------
TECHNOLOGY -- 4.6%
41,000 Arrow Electronics, Inc*......................... 1,575,630
6,000 Ceradyne, Inc.*................................. 443,760
537 Citadel Broadcasting Corporation................ 3,464
61,500 Hewlett-Packard Company......................... 2,744,130
20,000 International Business Machines
Corporation (IBM)............................. 2,105,000
20,000 Komag, Inc.*.................................... 637,800
5,000 Lockheed Martin Corporation..................... 470,650
55,500 Northrop Grumman Corporation.................... 4,321,785
10,000 Precision Castparts Corporation................. 1,213,600
119,000 Western Digital Corporation*.................... 2,302,650
-------------
15,818,469
-------------
25
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 46.3% (Continued) Value
- --------------------------------------------------------------------------------
UTILITIES -- 6.6%
30,000 American Electric Power Company, Inc............ $ 1,351,200
84,000 AT&T, Inc....................................... 3,486,000
39,500 CenturyTel, Inc. ............................... 1,937,475
34,000 Edison International............................ 1,908,080
75,800 Energen Corporation............................. 4,164,452
14,000 FirstEnergy Corporation......................... 906,220
52,000 IDACORP, Inc.................................... 1,666,080
20,000 Integrys Energy Group, Inc. .................... 1,014,600
43,500 MDU Resources Group, Inc........................ 1,219,740
30,500 Sempra Energy................................... 1,806,515
20,000 The Empire District Electric Company............ 447,400
38,000 TXU Corporation................................. 2,557,400
-------------
22,465,162
-------------
INTERNATIONAL EQUITY FUNDS -- 2.4%
14,500 Chile Fund, Inc. ............................... 336,400
12,000 Greater China Fund, Inc......................... 321,720
11,000 India Fund, Inc. ............................... 480,150
8,000 iShares MSCI EMU Index Fund..................... 941,920
124,000 iShares MSCI Japan Index Fund................... 1,801,720
5,000 iShares MSCI South Africa Index Fund............ 625,400
46,000 iShares MSCI Sweden Index Fund.................. 1,654,620
50,000 iShares MSCI Taiwan Index Fund.................. 798,000
55,000 Japan Smaller Capitalization Fund, Inc. ........ 622,600
15,000 New Ireland Fund, Inc. ......................... 454,800
-------------
8,037,330
-------------
TOTAL COMMON STOCKS ............................ $ 158,167,695
-------------
26
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 49.6% Value
- --------------------------------------------------------------------------------
$ 2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09....... $ 2,023,344
550,000 Federal Home Loan Bank, 4.500%, 2/17/10......... 540,088
5,000,000 U.S. Treasury Bills, 7/26/07.................... 4,983,863
7,500,000 U.S. Treasury Bonds, 4.875%, 2/15/12............ 7,490,625
50,000,000 U.S. Treasury Bonds, 5.250%, 11/15/28........... 50,343,749
10,000,000 U.S. Treasury Bonds, 4.500%, 2/15/36............ 9,054,690
16,500,000 U.S. Treasury Notes, 3.250%, 8/15/07............ 16,469,864
14,000,000 U.S. Treasury Notes, 3.000%, 2/15/08............ 13,826,092
16,000,000 U.S. Treasury Notes, 5.500%, 2/15/08............ 16,046,256
8,000,000 U.S. Treasury Notes, 4.625%, 3/31/08............ 7,976,248
38,000,000 U.S. Treasury Notes, 4.875%, 5/31/08............ 37,964,356
2,554,680 U.S. Treasury Notes, 3.625%, 4/15/28............ 2,959,638
-------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS ........... $ 169,678,813
-------------
================================================================================
Par Value CORPORATE BONDS -- 0.8% Value
- --------------------------------------------------------------------------------
$ 500,000 Anheuser-Busch Companies, Inc., 6.000%,
4/15/11....................................... $ 508,313
500,000 Tennessee Valley Authority, 5.625%, 1/18/11..... 506,885
2,000,000 Walmart Stores, 5.250%, 9/1/35.................. 1,748,298
-------------
TOTAL CORPORATE BONDS........................... $ 2,763,496
-------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 2.3%
- --------------------------------------------------------------------------------
7,697,282 First American Treasury Obligations Fund........ $ 7,697,282
-------------
TOTAL INVESTMENT SECURITIES -- 99.0%
(Amortized Cost $297,906,956)................... $ 338,307,286
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%... 3,356,952
-------------
NET ASSETS -- 100.0%............................ $ 341,664,238
=============
* Non-income producing security.
See accompanying notes to financial statements.
27
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
June 30, 2007
================================================================================
Shares COMMON STOCKS -- 95.5% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 7.4%
27,500 Alliance Resource Partners, L.P................. $ 1,152,250
136,910 Castle (A.M.) & Company......................... 4,916,438
93,400 Innospec, Inc................................... 5,530,214
20,000 OM Group, Inc.*................................. 1,058,400
164,280 Quanex Corporation.............................. 8,000,436
73,690 Schnitzer Steel Industries, Inc. - Class A...... 3,532,699
-------------
24,190,437
-------------
CONGLOMERATE -- 0.8%
115,200 LSB Industries, Inc.*........................... 2,462,976
-------------
CONSUMER, CYCLICAL -- 11.3%
191,215 Barry (R.G.) Corporation*....................... 2,265,898
187,850 Bob Evans Farms, Inc............................ 6,922,272
141,525 Brown Shoe Company, Inc......................... 3,441,888
51,824 Champion Industries, Inc. ...................... 373,133
355,900 Charming Shoppes, Inc.*......................... 3,854,397
99,312 Crown Crafts, Inc.*............................. 412,145
80,900 E Com Ventures, Inc.*........................... 1,842,093
83,300 Famous Dave's of America, Inc.*................. 1,855,924
41,300 JAKKS Pacific, Inc.*............................ 1,162,182
194,800 Pinnacle Airlines Corporation*.................. 3,652,500
71,500 Steiner Leisure Ltd.*........................... 3,512,080
175,200 The Buckle, Inc................................. 6,902,880
78,460 Zones, Inc.*.................................... 706,140
-------------
36,903,532
-------------
CONSUMER, NON-CYCLICAL -- 14.4%
221,225 Axcan Pharma, Inc.*............................. 4,276,279
58,129 DRAXIS Health, Inc.*............................ 344,124
466,325 First Consulting Group, Inc.*................... 4,430,088
169,525 Fresh Del Monte Produce, Inc. .................. 4,246,601
143,700 Imperial Sugar Company.......................... 4,424,523
242,725 Ingles Markets, Inc. - Class A.................. 8,361,876
53,400 Nutraceutical International Corporation*........ 884,838
372,700 Spartan Stores, Inc............................. 12,265,557
276,580 Tupperware Corporation.......................... 7,948,909
-------------
47,182,795
-------------
ENERGY -- 13.1%
30,360 Basic Energy Services, Inc.*.................... 776,305
80,400 Bolt Technology Corporation*.................... 3,540,816
228,165 Copano Energy LLC............................... 9,735,800
250,710 ICO, Inc.*...................................... 2,650,005
34,400 Lufkin Industries, Inc. ........................ 2,220,520
383,625 Matrix Service Company*......................... 9,533,081
28
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 95.5% (Continued) Value
- --------------------------------------------------------------------------------
ENERGY -- 13.1% (Continued)
199,175 Parker Drilling Company*........................ $ 2,099,305
157,165 Suburban Propane Partners, L.P.................. 7,523,489
80,410 W-H Energy Services, Inc.*...................... 4,978,183
-------------
43,057,504
-------------
FINANCIAL -- 16.9%
75,600 American Physicians Capital, Inc.*.............. 3,061,800
188,050 ASTA Funding, Inc............................... 7,226,761
236,100 CNA Surety Corporation*......................... 4,464,651
192,100 FelCor Lodging Trust, Inc....................... 5,000,363
147,750 FPIC Insurance Group, Inc.*..................... 6,023,768
272,770 LTC Properties, Inc............................. 6,205,518
122,700 Max Re Capital Ltd.............................. 3,472,410
432,325 MCG Capital Corporation......................... 6,925,846
75,300 Mercer Insurance Group, Inc. ................... 1,498,470
158,500 MicroFinancial, Inc............................. 982,700
117,525 NYMAGIC, Inc.................................... 4,724,505
38,250 The Midland Company............................. 1,795,455
119,400 United America Indemnity Ltd.*.................. 2,969,478
76,500 UTEK Corporation................................ 1,093,950
-------------
55,445,675
-------------
INDUSTRIAL -- 11.0%
134,960 Cascade Corporation............................. 10,586,262
101,600 Chase Corporation............................... 1,706,880
90,530 Metal Management, Inc. ......................... 3,989,657
283,050 North American Galvanizing & Coatings, Inc.*.... 2,428,569
20,300 Pope Resources Limited Partnership.............. 987,798
212,430 Superior Essex, Inc.*........................... 7,934,261
127,640 The Eastern Company............................. 3,709,218
17,200 Twin Disc, Inc.................................. 1,236,852
97,420 VSE Corporation................................. 3,587,979
-------------
36,167,476
-------------
TECHNOLOGY -- 8.5%
107,600 American Technical Ceramics Corporation*........ 2,568,412
147,490 ASE Test Ltd.*.................................. 2,075,184
71,470 ASM International N.V.*......................... 1,913,252
233,600 Avici Systems, Inc.............................. 1,752,000
985,200 BroadVision, Inc.*.............................. 1,960,548
67,000 Ducommun, Inc.*................................. 1,723,910
130,905 EPIQ Systems, Inc.*............................. 2,115,425
70,100 Hurco Companies, Inc.*.......................... 3,503,598
41,900 Teledyne Technologies, Inc.*.................... 1,925,305
147,600 Trio-Tech International......................... 2,944,620
224,600 United Online, Inc.............................. 3,703,654
52,100 Universal Security Instruments, Inc.*........... 1,634,377
-------------
27,820,285
-------------
29
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 95.5% (Continued) Value
- --------------------------------------------------------------------------------
UTILITIES -- 12.1%
352,200 Alaska Communications Systems Group, Inc. ...... $ 5,578,848
31,800 Atlantic Tele-Network, Inc...................... 910,752
160,950 Central Vermont Public Service Corporation...... 6,064,596
302,950 El Paso Electric Company*....................... 7,440,452
107,800 Northwest Natural Gas Company................... 4,979,282
221,330 South Jersey Industries, Inc. .................. 7,830,655
200,470 Southwest Gas Corporation....................... 6,777,891
-------------
39,582,476
-------------
TOTAL COMMON STOCKS........................... $ 312,813,156
-------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.2% Value
- --------------------------------------------------------------------------------
13,799,788 First American Treasury Obligations Fund........ $ 13,799,788
-------------
TOTAL INVESTMENT SECURITIES -- 99.7%
(Cost $284,410,882)............................. $ 326,612,944
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%... 853,867
-------------
NET ASSETS -- 100.0%............................ $ 327,466,811
=============
* Non-income producing security.
See accompanying notes to financial statements.
30
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
June 30, 2007
================================================================================
Shares COMMON STOCKS -- 69.0% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 5.7%
14,160 Castle (A.M.) & Company......................... $ 508,486
15,000 Dow Chemical Company............................ 663,300
20,000 Methanex Corporation............................ 502,800
10,480 Quanex Corporation.............................. 510,376
6,000 Terra Nitrogen Company, L.P..................... 762,420
-------------
2,947,382
-------------
CONSUMER, CYCLICAL -- 11.9%
26,000 Darden Restaurants, Inc. ....................... 1,143,740
18,000 J.C. Penney Company, Inc. ...................... 1,302,840
10,080 McDonald's Corporation.......................... 511,661
22,425 PACCAR, Inc. ................................... 1,951,871
30,000 The Buckle, Inc................................. 1,182,000
-------------
6,092,112
-------------
CONSUMER, NON-CYCLICAL -- 9.8%
54,000 EZCORP, Inc. - Class A*......................... 714,960
15,000 Imperial Sugar Company.......................... 461,850
30,000 King Pharmaceuticals, Inc.*..................... 613,800
21,900 Merck & Co., Inc. .............................. 1,090,620
30,000 Pfizer, Inc..................................... 767,100
23,900 The Toro Company................................ 1,407,471
-------------
5,055,801
-------------
ENERGY -- 8.7%
15,000 Bolt Technology Corporation*.................... 660,600
9,600 Devon Energy Corporation........................ 751,584
12,170 Exxon Mobil Corporation......................... 1,020,820
30,000 Matrix Service Company*......................... 745,500
14,000 Tesoro Corporation.............................. 800,100
6,920 Valero Energy Corporation....................... 511,111
-------------
4,489,715
-------------
FINANCIAL -- 5.8%
20,600 CIT Group, Inc. ................................ 1,129,498
40,000 CNA Surety Corporation*......................... 756,400
5,650 Hospitality Properties Trust.................... 234,419
4,000 The Goldman Sachs Group, Inc.................... 867,000
-------------
2,987,317
-------------
INDUSTRIAL -- 5.3%
7,590 Cascade Corporation............................. 595,360
14,000 Cummins, Inc. .................................. 1,416,940
2,500 Deere & Company................................. 301,850
10,000 Metal Management, Inc. ......................... 440,700
-------------
2,754,850
-------------
31
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 69.0% (Continued) Value
- --------------------------------------------------------------------------------
TECHNOLOGY -- 10.1%
16,000 Arrow Electronics, Inc.*........................ $ 614,880
6,900 Ceradyne, Inc.*................................. 510,324
25,000 Hewlett-Packard Company......................... 1,115,500
10,000 Hurco Companies, Inc.*.......................... 499,800
6,700 International Business Machines
Corporation (IBM)............................. 705,175
18,430 MKS Instruments, Inc.*.......................... 510,511
6,690 Northrop Grumman Corporation.................... 520,950
6,000 Precision Castparts Corporation................. 728,160
-------------
5,205,300
-------------
UTILITIES -- 8.3%
30,000 CenturyTel, Inc. ............................... 1,471,500
13,370 Edison International............................ 750,324
31,200 MDU Resources Group, Inc........................ 874,848
20,000 Sempra Energy................................... 1,184,600
-------------
4,281,272
-------------
INTERNATIONAL EQUITY FUNDS -- 3.4%
5,000 iShares FTSE/Xinhua China 25 Index Fund......... 644,000
40,000 iShares MSCI Japan Index Fund................... 581,200
15,000 iShares MSCI Sweden Index Fund.................. 539,550
-------------
1,764,750
-------------
TOTAL COMMON STOCKS............................. $ 35,578,499
-------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 9.3% Value
- --------------------------------------------------------------------------------
4,792,904 First American Treasury Obligations Fund........ $ 4,792,904
-------------
TOTAL INVESTMENT SECURITIES -- 78.3%
(Cost $32,062,250).............................. $ 40,371,403
SEGREGATED CASH WITH BROKERS -- 86.1% .......... 44,336,413
SECURITIES SOLD SHORT -- (66.4)%
(Proceeds $35,865,427) ....................... (34,199,426)
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.0%... 1,018,302
-------------
NET ASSETS -- 100.0%............................ $ 51,526,692
=============
* Non-income producing security.
See accompanying notes to financial statements.
32
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
June 30, 2007
================================================================================
Shares COMMON STOCKS -- 66.4% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 3.8%
32,000 Bowater, Inc.................................... $ 798,400
86,980 International Coal Group, Inc................... 520,141
16,000 Zoltek Companies, Inc. ......................... 664,480
-------------
1,983,021
-------------
CONSUMER, CYCLICAL -- 9.1%
13,500 Centex Corporation.............................. 541,350
24,100 Circuit City Stores, Inc........................ 363,429
23,360 DTS, Inc........................................ 508,547
67,650 Fleetwood Enterprises, Inc...................... 612,232
43,770 Jamba, Inc...................................... 400,059
31,250 Overstock.com, Inc.............................. 570,937
78,650 Pier 1 Imports, Inc............................. 667,738
34,950 Warner Music Group Corporation.................. 505,027
42,400 XM Satellite Radio Holdings, Inc. .............. 499,048
-------------
4,668,367
-------------
CONSUMER, NON-CYCLICAL -- 8.8%
71,480 BearingPoint, Inc............................... 522,519
82,270 Cumulus Media, Inc. - Class A................... 769,224
79,350 Keryx Biopharmaceuticals, Inc. ................. 775,249
37,800 Mannkind Corporation............................ 466,075
49,650 Nektar Therapeutics............................. 471,178
15,950 Sirona Dental Systems, Inc...................... 603,388
12,780 SonoSite, Inc................................... 401,676
11,500 Tejon Ranch Company............................. 508,300
-------------
4,517,609
-------------
ENERGY -- 5.6%
15,510 Cheniere Energy, Inc............................ 601,633
45,000 Delta Petroleum Corporation..................... 903,600
53,800 Evergreen Solar, Inc. .......................... 500,340
57,940 FuelCell Energy, Inc............................ 458,885
48,160 FX Energy, Inc. ................................ 440,664
-------------
2,905,122
-------------
FINANCIAL -- 10.4%
104,310 BankAtlantic Bancorp, Inc....................... 898,109
29,246 BankFinancial Corporation....................... 451,851
30,270 Brookline Bancorp, Inc.......................... 348,408
41,680 Hudson City Bancorp, Inc........................ 509,330
50,920 INVESTools, Inc................................. 507,163
38,750 Investors Bancorp, Inc. ........................ 520,412
71,750 LaBranche & Company, Inc........................ 529,515
39,540 Midwest Banc Holdings, Inc...................... 573,330
35,050 NewAlliance Bancshares, Inc..................... 515,936
50,350 Superior Bancorp................................ 515,080
-------------
5,369,134
-------------
33
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
================================================================================
Shares COMMON STOCKS -- 66.4% (Continued) Value
- --------------------------------------------------------------------------------
INDUSTRIAL -- 7.8%
37,630 American Superconductor Corporation............. $ 726,635
17,000 Energy Conversion Devices, Inc.................. 523,940
10,950 ESCO Technologies, Inc.......................... 397,047
17,350 Intermec, Inc................................... 439,128
12,070 Silicon Laboratories, Inc....................... 417,743
24,790 Tecumseh Products Company - Class A............. 389,451
15,020 The Shaw Group, Inc. ........................... 695,276
83,970 Verenium Corporation............................ 425,728
-------------
4,014,948
-------------
TECHNOLOGY -- 15.1%
32,580 3D Systems Corporation.......................... 810,265
19,950 Affymetrix, Inc. ............................... 496,555
8,860 American Tower Corporation - Class A............ 372,120
61,000 AudioCodes Ltd.................................. 342,820
35,000 Cyberonics, Inc................................. 588,700
73,950 InPhonic, Inc................................... 344,607
49,190 Leapfrog Enterprises, Inc....................... 504,197
22,310 Marvell Technology Group Ltd.................... 406,265
33,260 Momenta Pharmaceutical, Inc. ................... 335,261
72,490 Opsware, Inc.................................... 689,380
62,630 Powerwave Technologies, Inc..................... 419,621
14,020 Rambus, Inc..................................... 252,080
20,050 Riverbed Technology, Inc........................ 878,591
30,100 Senomyx, Inc.................................... 406,350
37,350 TurboChef Technologies, Inc. ................... 519,912
39,880 Wind River Systems, Inc. ....................... 438,680
-------------
7,805,404
-------------
UTILITIES -- 5.8%
21,000 Aqua America, Inc. ............................. 472,290
93,800 Aquila, Inc..................................... 383,642
21,000 Consolidated Water Co., Ltd..................... 615,510
20,410 Crosstex Energy, Inc............................ 586,379
20,000 Ormat Technologies, Inc......................... 753,600
40,000 Vonage Holdings Corporation..................... 124,400
-------------
2,935,821
-------------
TOTAL COMMON STOCKS SOLD SHORT
(Proceeds $35,865,427)..................... .. $ 34,199,426
=============
See accompanying notes to financial statements.
34
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS
June 30, 2007
================================================================================
Shares COMMON STOCKS -- 97.1% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 5.0%
9,510 Alliance Resource Partners, L.P................. $ 398,469
6,883 PPG Industries, Inc............................. 523,865
7,965 Schnitzer Steel Industries, Inc. - Class A...... 381,842
-------------
1,304,176
-------------
CONGLOMERATE -- 0.8%
9,600 LSB Industries, Inc.*........................... 205,248
-------------
CONSUMER, CYCLICAL -- 15.5%
9,737 Barry (R.G.) Corporation*....................... 115,383
10,435 Crown Crafts, Inc.*............................. 43,305
13,318 Darden Restaurants, Inc. ....................... 585,859
5,060 E Com Ventures, Inc.*........................... 115,216
6,870 Famous Dave's of America, Inc.*................. 153,064
9,120 J.C. Penney Company, Inc. ...................... 660,106
10,400 McDonald's Corporation.......................... 527,904
11,331 PACCAR, Inc. ................................... 986,251
20,456 The Buckle, Inc................................. 805,966
5,709 Zones, Inc.*.................................... 51,381
-------------
4,044,435
-------------
CONSUMER, NON-CYCLICAL -- 14.2%
3,632 DRAXIS Health, Inc.*............................ 21,501
55,500 EZCORP, Inc. - Class A*......................... 734,820
4,750 Ingles Markets, Inc. - Class A.................. 163,638
26,100 King Pharmaceuticals, Inc.*..................... 534,006
14,850 Merck & Co., Inc. .............................. 739,530
19,710 Pfizer, Inc. ................................... 503,985
8,000 The Toro Company................................ 471,120
10,000 Watson Wyatt Worldwide, Inc. ................... 504,800
-------------
3,673,400
-------------
ENERGY -- 11.8%
4,840 Bolt Technology Corporation*.................... 213,154
3,500 Copano Energy LLC............................... 149,345
6,300 Exxon Mobil Corporation......................... 528,444
22,860 Frontier Oil Corporation........................ 1,000,581
4,760 Hess Corporation................................ 280,650
11,730 Marathon Oil Corporation........................ 703,331
6,970 Matrix Service Company*......................... 173,205
-------------
3,048,710
-------------
35
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 97.1% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 13.1%
5,580 AllianceBernstein Holding L.P................... $ 485,962
10,665 American Financial Group, Inc. ................. 364,210
9,180 American Physicians Capital, Inc.*.............. 371,790
12,695 CIT Group, Inc. ................................ 696,067
20,250 CNA Surety Corporation*......................... 382,928
6,240 Mercer Insurance Group, Inc. ................... 124,176
4,440 The Goldman Sachs Group, Inc.................... 962,369
-------------
3,387,502
-------------
INDUSTRIAL -- 14.1%
11,160 Cascade Corporation............................. 875,390
8,460 Chase Corporation............................... 142,128
12,591 Cummins, Inc. .................................. 1,274,335
7,830 Eaton Corporation............................... 728,190
10,900 Metal Management, Inc. ......................... 480,363
4,730 The Eastern Company............................. 137,454
-------------
3,637,860
-------------
TECHNOLOGY -- 8.9%
9,530 American Technical Ceramics Corporation*........ 227,481
14,600 Avici Systems, Inc.............................. 109,500
58,140 BroadVision, Inc.*.............................. 115,699
23,400 Hewlett-Packard Company......................... 1,044,108
6,300 Northrop Grumman Corporation.................... 490,581
9,225 Trio-Tech International......................... 184,039
4,130 Universal Security Instruments, Inc.*........... 129,558
-------------
2,300,966
-------------
UTILITIES -- 13.7%
8,640 American Electric Power Company, Inc. .......... 389,146
17,200 AT&T, Inc....................................... 713,799
13,310 CenturyTel, Inc. ............................... 652,856
7,110 El Paso Electric Company*....................... 174,622
10,890 Energen Corporation............................. 598,297
11,000 MDU Resources Group, Inc........................ 308,440
11,870 Sempra Energy................................... 703,059
-------------
3,540,219
-------------
TOTAL COMMON STOCKS............................. $ 25,142,516
-------------
36
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares SHORT TERM INVESTMENTS -- 1.1% Value
- --------------------------------------------------------------------------------
273,862 First American Treasury Obligations Fund........ $ 273,862
-------------
TOTAL INVESTMENT SECURITIES -- 98.2%
(Cost $17,585,038).............................. $ 25,416,378
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.8%... 456,329
-------------
NET ASSETS -- 100.0%............................ $ 25,872,707
=============
* Non-income producing security.
See accompanying notes to financial statements.
37
JAMES MID CAP FUND
SCHEDULE OF INVESTMENTS
June 30, 2007
================================================================================
Shares COMMON STOCKS -- 95.3% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 9.9%
5,000 Albermarle Corporation.......................... $ 192,650
4,500 Commercial Metals Company....................... 151,965
10,000 Kinross Gold Corp.*............................. 116,800
7,000 Methanex Corporation............................ 175,980
-------------
637,395
-------------
CONSUMER, CYCLICAL -- 11.5%
1,800 Columbia Sportswear Company..................... 123,624
1,700 Darden Restaurants, Inc. ....................... 74,783
5,500 Dollar Tree Stores, Inc.*....................... 239,525
2,500 International Speedway Corporation - Class A.... 131,775
3,350 Men's Wearhouse, Inc............................ 171,085
-------------
740,792
-------------
CONSUMER, NON-CYCLICAL -- 15.8%
8,000 King Pharmaceuticals, Inc.*..................... 163,680
1,700 Manpower, Inc................................... 156,808
2,000 Molson Coors Brewing Company - Class B.......... 184,920
4,000 Newell Rubbermaid, Inc.......................... 117,720
3,200 The Toro Company................................ 188,448
4,000 Watson Wyatt Worldwide, Inc. ................... 201,919
-------------
1,013,495
-------------
ENERGY -- 14.1%
5,000 Copano Energy LLC............................... 213,350
5,000 Frontier Oil Corporation........................ 218,850
2,400 Questar Corporation............................. 126,840
3,000 Sunoco Logistics Partners L.P. ................. 180,240
3,000 Tesoro Corporation.............................. 171,450
-------------
910,730
-------------
FINANCIAL -- 12.3%
1,800 AllianceBernstein Holding L.P................... 156,762
5,000 American Financial Group, Inc. ................. 170,750
3,000 Assurant, Inc................................... 176,760
2,000 Hospitality Properties Trust.................... 82,980
1,500 SAFECO Corporation.............................. 93,390
3,500 W.R. Berkley Corporation........................ 113,890
-------------
794,532
-------------
INDUSTRIAL -- 11.9%
1,400 Cummins, Inc. .................................. 141,694
2,500 GATX Corporation................................ 123,125
3,000 Greif Bros. Corporation - Class A............... 178,830
4,000 Metal Management, Inc. ......................... 176,280
4,000 The Timken Company.............................. 144,440
-------------
764,369
-------------
38
JAMES MID CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 95.3% (Continued) Value
- --------------------------------------------------------------------------------
TECHNOLOGY -- 9.6%
4,000 Arrow Electronics, Inc.*........................ $ 153,720
3,100 Ceradyne, Inc.*................................. 229,276
3,000 Teledyne Technologies, Inc.*.................... 137,850
4,900 Western Digital Corporation*.................... 94,815
-------------
615,661
-------------
UTILITIES -- 10.2%
2,450 Alliant Energy Corporation...................... 95,183
4,000 CenturyTel, Inc. ............................... 196,200
2,500 Energen Corporation............................. 137,350
2,100 Great Plains Energy, Inc........................ 61,152
1,100 Integrys Energy Group, Inc. .................... 55,803
3,950 MDU Resources Group, Inc........................ 110,758
-------------
656,446
-------------
TOTAL COMMON STOCKS ............................ $ 6,133,420
-------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 2.5% Value
- --------------------------------------------------------------------------------
162,801 First American Treasury Obligations Fund........ $ 162,801
-------------
TOTAL INVESTMENT SECURITIES -- 97.8%
(Cost $5,601,348)............................... $ 6,296,221
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.2%... 144,857
-------------
NET ASSETS -- 100.0%............................ $ 6,441,078
=============
* Non-income producing security.
See accompanying notes to financial statements.
39
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
================================================================================
1. General Information and Significant Accounting Policies
James Balanced: Golden Rainbow Fund, James Small Cap Fund, James Market Neutral
Fund and James Mid Cap 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.
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.
James Mid Cap Fund seeks to provide long-term capital appreciation. The Fund
seeks to achieve its objective by investing primarily in common stocks of mid
capitalization companies.
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 February 21, 2007, the Board of Trustees of the James Advantage Funds
voted to abolish the redemption fees for the James Small Cap Fund, the James
Market Neutral Fund, the James Equity Fund, and the James Mid Cap Fund. Prior to
February 21, 2007, the Funds charged a redemption fee of 1.00% of the amount
redeemed if the shares sold were held for fewer than 90 days. The redemption
fees were paid directly to the Funds.
40
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 Capital Market(R)
securities. When market quotations are not readily available, if an event occurs
after the close of the trading market (but before the time as of which 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. Short-term
investments in fixed-income securities with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are valued by
using the amortized cost method of valuation, which the Board has determined
will represent fair value.
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.
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement on Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current generally accepted accounting principles from the
application of this Statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. As of June 30, 2007, the Funds do not believe the adoption
of SFAS No. 157 will impact the amounts reported in the financial statements;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements reported on the
statement of changes in net assets for a fiscal period.
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, 2007, 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.
41
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Short Sales and Segregated Cash
The James Market Neutral Fund (the "Fund") actively sells short common stocks.
Short sales are transactions in which the Fund sells a security it does not own
in anticipation of a decline in the market value of that security. To complete
such a transaction, the Fund must borrow the security to deliver to the buyer
upon the short sale; the Fund is then obligated to replace the security borrowed
by purchasing it in the open market at some later date.
The Fund will incur a loss if the market price of the security increases between
the date of the short sale and the date on which the Fund replaces the borrowed
security. The Fund will realize a gain if the security declines in value between
those dates. If a security sold short pays a dividend while the Fund is short
that security, the Fund will pay the dividend and record that amount as an
expense.
All short sales are collateralized, as required by the Fund's prime broker. The
Fund maintains the collateral in segregated accounts consisting of cash and/or
high-grade liquid assets sufficient to collateralize the market value of its
short positions.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premiums and accretion of discounts on all debt securities. Amortization and
accretion is calculated using the effective yield method.
Dividends and Distributions to Shareholders
Net investment income, if any, is generally declared and distributed to
shareholders of each Fund quarterly. Net realized capital gains from security
transactions, if any, are distributed to shareholders not less frequently than
annually. Furthermore, capital gains are distributed only to the extent they
exceed available capital loss carryforwards. Distributions to shareholders of
net investment income and net realized capital gains are recorded on the
ex-dividend date. The amount and timing of distributions are determined in
accordance with federal income tax regulations, which may differ from GAAP.
Accordingly, temporary overdistributions as a result of these differences may
occur and will be classified as either distributions in excess of net investment
income and/or distributions in excess of net realized gains from security
transactions, where applicable.
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.
42
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
The tax character of distributions paid for the years ended June 30, 2007 and
2006 was as follows:
- ---------------------------------------------------------------------------------------------------------------
James Balanced: James Small Cap
Golden Rainbow Fund Fund
----------------------------- -----------------------------
2007 2006 2007 2006
- ---------------------------------------------------------------------------------------------------------------
From ordinary income ........................ $ 6,967,365 $ 4,473,409 $ 3,153,359 $ 140,631
From long-term capital gains ................ 5,273,855 6,895,468 649,545 1,110,529
From return of capital ...................... -- -- 144,227 --
------------- ------------- ------------- -------------
$ 12,241,220 $ 11,368,877 $ 3,947,131 $ 1,251,160
============= ============= ============= =============
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
James Market Neutral James Equity James Mid Cap
Fund Fund Fund
----------------------------- ----------------------------- -------------
2007 2006 2007 2006 2007
- ---------------------------------------------------------------------------------------------------------------
From ordinary income........... $ 2,166,597 $ 994,103 $ 97,518 $ 41,105 $ 14,614
------------- ------------- ------------- ------------- -------------
- ---------------------------------------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of June
30, 2007:
- ---------------------------------------------------------------------------------------------------------------
James
Balanced: James James James James
Golden Rainbow Small Cap Market Neutral Equity Mid Cap
Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------
Tax cost of investment
securities .................. $ 298,192,183 $ 284,410,882 $ 66,294,893 $ 17,585,038 $ 5,601,348
============= ============= ============= ============= =============
Gross unrealized
appreciation ................ $ 43,426,435 $ 52,655,160 $ 12,359,389 $ 7,945,974 $ 775,676
Gross unrealized depreciation . (3,311,332) (10,453,098) (2,417,452) (114,634) (80,803)
------------- ------------- ------------- ------------- -------------
Net unrealized appreciation ... 40,115,103 42,202,062 9,941,937 7,831,340 694,873
Capital loss carryforward ..... -- -- (8,942,280) (1,033,467) --
Post-October losses ........... -- (6,256,281) -- -- --
Undistributed net investment
income ...................... 29,576 26,640 9,254 1,076 18,785
Undistributed long-term gains . 5,920,309 -- -- -- --
Other temporary differences ... (87,094) (26,640) (21,200) (1,070) --
------------- ------------- ------------- ------------- -------------
Accumulated earnings ...... $ 45,977,894 $ 35,945,781 $ 987,711 $ 6,797,879 $ 713,658
============= ============= ============= ============= =============
- ---------------------------------------------------------------------------------------------------------------
The difference between the cost of investment securities 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.
43
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
During the year ended June 30, 2007, the James Equity Fund utilized $762,304 of
capital loss carryforwards. The capital loss carryforwards remaining as of June
30, 2007 in the table below expire as follows:
- --------------------------------------------------------------------------------
Amount Expiration Date
- --------------------------------------------------------------------------------
The James Market Neutral Fund................ $ 82,513 June 30, 2008
$ 987,690 June 30, 2012
$ 773,042 June 30, 2013
$ 642,007 June 30, 2014
$ 6,457,028 June 30, 2015
The James Equity Fund........................ $ 725,408 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. Recent SEC guidance
allows implementing FIN 48 in fund NAV calculations as late as the fund's last
NAV calculation in the first required financial statement reporting period. As a
result, the Funds will incorporate FIN 48 in its semi-annual report on December
31, 2007. Management is in the process of determining the impact of adoption.
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 Statement 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 (Loss) Gains (Losses)
- --------------------------------------------------------------------------------
James Small Cap Fund............. $ (144,227) $ (87) $ 144,314
James Market Neutral Fund........ $ 1 $ 2,400 $ (2,401)
- --------------------------------------------------------------------------------
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, 2007 were as follows:
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund..... $ 186,808,371 $ 207,269,691
- --------------------------------------------------------------------------------
44
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Purchases and sales (including maturities) of investments in other securities
for the year ended June 30, 2007 were as follows:
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund.... $ 96,290,779 $ 58,038,710
James Small Cap Fund.................... 410,436,492 279,194,738
James Market Neutral Fund............... 27,444,391 50,201,263
James Equity Fund....................... 18,137,607 27,136,912
James Mid Cap Fund...................... 7,290,089 1,869,759
- --------------------------------------------------------------------------------
For the year ended June 30, 2007, the cost of securities purchased to cover
short sales and the proceeds from securities sold short were $63,878,490 and
$45,400,776, respectively, for the James Market Neutral Fund.
3. Management Fee and Other Transactions with Affiliates
A trustee and certain officers of the Trust were also officers of James or
JPMorgan Chase Bank, N.A. ("JPMorgan") (formerly Integrated Investment 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 during the
year ended June 30, 2007. On April 1, 2007 Integrated Investment Services, Inc.
was purchased by JPMorgan Chase Bank, N.A.
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, James Equity Fund and
James Mid Cap 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, James Equity Fund, and James
Mid Cap Fund, except for brokerage fees and commissions, taxes, interest
(including dividend expense on securities sold short), 12b-1 expenses, fees and
expenses of non-interested person trustees and extraordinary expenses.
Administrative Services Agreement
Under the terms of an Administrative Services Agreement with the Trust, JPMorgan
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, JPMorgan 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, James Equity Fund and James Mid Cap 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, JPMorgan 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, JPMorgan receives a
45
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
monthly fee paid by James Balanced: Golden Rainbow Fund, and paid by James for
the James Small Cap Fund, James Market Neutral Fund, James Equity Fund and James
Mid Cap Fund, subject to a minimum monthly fee for each Fund. In addition, James
Balanced: Golden Rainbow Fund and James pay JPMorgan 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, JPMorgan
calculates the daily net asset value per share and maintains the financial books
and records of each Fund. For these services, JPMorgan 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, James Equity Fund and James
Mid Cap Fund. In addition, JPMorgan is reimbursed by James Balanced: Golden
Rainbow Fund and James for certain out-of-pocket expenses incurred by JPMorgan
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, James Equity Fund and
James Mid Cap 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
JPMorgan, JPMorgan provides certain compliance services to the Trust, including
developing and assisting in implementing a compliance program for JPMorgan on
behalf of the funds and providing administrative support services to the Funds'
Compliance Program and Chief Compliance Officer.
Beneficial Ownership
The beneficial ownership, either directly or indirectly, of more than 25% of the
voting securities of a fund creates a presumption of control of the fund under
section 2(a)(9) of the Investment Company Act of 1940. As of June 30, 2007,
Charles Schwab & Co., Inc. owned, for the benefit of its customers, 40.36%,
37.51%, and 27.41% of the James Balanced: Golden Rainbow Fund, the James Small
Cap Fund, and the James Market Neutral Fund, respectively. Dr. Frank James and
other affiliates owned 68.68% of the James Mid Cap Fund.
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.
46
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
================================================================================
To the Board of Trustees and Shareholders of 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: The Golden Rainbow Fund, The
James Small Cap Fund, The James Market Neutral Fund, The James Equity Fund, and
The James Mid Cap Fund as of June 30, 2007, 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, 2007, 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 James Advantage Funds, as of June 30, 2007, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
August 24, 2007
47
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Unaudited)
================================================================================
Dividends Received Deduction
For corporate shareholders, the following ordinary dividends paid during the
year ended June 30, 2007 qualify for the corporate dividends received deduction:
James Balanced: Golden Rainbow Fund 17%
James Small Cap Fund 100%
James Market Neutral Fund 28%
James Equity Fund 100%
James Mid Cap 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 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, 2007 through June 30, 2007).
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, 2007" 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.
48
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Unaudited) (Continued)
================================================================================
Note that expenses shown in the table are meant to highlight your ongoing costs
only. The calculations also 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. Therefore,
the second line of the table is useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning different funds. The
James Small Cap Fund, James Market Neutral Fund, James Equity Fund and James Mid
Cap Fund each charge a redemption fee of 1.00% of the amount redeemed if the
shares sold were held for fewer than 90 days. If these transactional costs were
incurred and were included, your costs would have been higher.
- ------------------------------------------------------------------------------------------------------------
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,
2007 2007 2007 2007*
- ------------------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund
Actual .................................... 1.18% $1,000.00 $1,048.80 $ 5.99
Hypothetical .............................. 1.18% $1,000.00 $1,018.94 $ 5.91
James Small Cap Fund
Actual..................................... 1.50% $1,000.00 $1,052.20 $ 7.63
Hypothetical............................... 1.50% $1,000.00 $1,017.36 $ 7.50
James Market Neutral Fund
Actual..................................... 1.95% $1,000.00 $1,036.70 $ 9.85
Hypothetical............................... 1.95% $1,000.00 $1,015.12 $ 9.74
James Equity Fund
Actual..................................... 1.50% $1,000.00 $1,082.00 $ 7.74
Hypothetical............................... 1.50% $1,000.00 $1,017.36 $ 7.50
James Mid Cap Fund
Actual..................................... 1.50% $1,000.00 $1,110.10 $ 7.85
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).
49
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Unaudited) (Continued)
================================================================================
Advisory Agreement Approval
The Board of Trustees of the James Advantage Funds considered the renewal of the
Management Agreements for the James Balanced: Golden Rainbow Fund, the James
Small Cap Fund, the James Equity Fund and the James Market Neutral Fund at a
meeting held on May 24, 2007. The James Mid Cap Fund's Management Agreement is
not required to be renewed until May 2008. The Trustees referred to materials
that had been provided to them previously for purposes of their consideration of
the Management Agreements. Representatives of the Adviser reviewed the services
provided by James to the Funds, as well as a comparison of the advisory services
provided to the Funds and to other clients of James. They discussed the
regulatory environment and potential changes including possible new rules, proxy
voting and the Funds' compliance program, as well as the costs of these items.
The Trustees reviewed a table comparing the average total returns of each Fund
(one year, three years, five years) with a peer group of funds with the same or
very similar investment objectives and strategies. Each peer group had been
selected by Morningstar based on investment styles and strategies employed by
the Funds, as well as by asset size. The Trustees also reviewed the Funds'
performance with their respective benchmarks, noting that each of the Funds had
generally outperformed its peer group over the longer term (five years) and
underperformed over the last year. The representatives of the Adviser explained
the underperformance, pointing out that recent performance had made up some of
the deficit, and the Trustees indicated that they believed it was more
appropriate that performance be reviewed on a long-term basis.
The Trustees reviewed a description of the services provided by James 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 client service to the Funds' shareholders. The
Trustees also reviewed the management fee for each Fund and compared each Fund's
expense ratio with the median expense ratio and the range of expense ratios for
the Fund's peer group. It was the consensus of the Trustees that the management
fees and expense ratios appeared reasonable in comparison with the peer group
data.
The Trustees referred to an analysis of James' profitability with respect to the
Funds, noting that the materials included in the analysis allocated the James'
expenses based on two different allocations of James' common expenses: total
assets under management by James and total revenues to James. James reminded the
Trustees that they had previously established breakpoints in fees that should
pass on economies of scale to shareholders, but still allow James to recoup
previous losses over the years and reach a reasonable level of profitability.
The Trustees acknowledged that James was entitled to reasonable profits and
concluded that the profitability levels were in an acceptable range. The
Trustees indicated that they had reviewed James' financial condition. The
Trustees then discussed other benefits that might be realized by James as a
result of its rela2tionship with the Funds. It was noted that James 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 Management Agreement renewals. They stated that they
had considered the comparative performance of the Funds and that they were
satisfied with James' explanation of each Fund's performance. They then
concluded that, based on their review of the management fees and the expense
ratios, as well as information relating to the profitability of James, that the
management fees for the Funds being considered were reasonable and that the
arrangements were not generating excessive profits to James. They also agreed
that the breakpoints should make each Fund's management fee reflective of the
economies of scale that would come with future growth. As to the nature, extent
and quality of services provided by James, the Trustees expressed their common
opinion that James' personnel are highly qualified, that James 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 Fund's Management Agreement was in the best interest of
the applicable Fund and its shareholders.
50
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
Portfolios Held by
Term of in Fund Trustee
Name Position(s) Office(1) and Principal Complex Outside
Address Held With Length of Occupation(s) Overseen the Fund
Age Trust Time Served During Last 5 years by Trustee Complex
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
Barry R. James, CFA (2) President Since President, James Investment 5 Director of
1349 Fairground Road and Trustee Inception Research, Inc. (1985 to Present) James Capital
Beavercreek, Ohio 45385 Alliance, a
Age: 50 registered
investment
adviser.
DISINTERESTED TRUSTEES:
Anthony P. D'Angelo, D.B.A. Trustee Since Professor Emeritus, Graduate 5 N/A
c/o The James Advantage Funds Inception School of Logistics and Acquisitions
1349 Fairground Road Management, Air Force Institute of
Beavercreek, Ohio 45385 Technology, Wright-Patterson AFB,
Age: 77 Ohio (1985 to Present)
Leslie L. Brandon Trustee Since Retired Partner, Ernst & Young LLP, 5 N/A
c/o The James Advantage Funds May 2003 Columbus, Ohio (1966 to 2000)
1349 Fairground Road
Beavercreek, Ohio 45385
Age: 64
Richard C. Russell Trustee Since Richard C. Russell, Consultant, general 5 N/A
c/o The James Advantage Funds May 2003 business consulting (2002 to Present);
1349 Fairground Road President, The Danis Companies, real
Beavercreek, Ohio 45385 estate development and construction
Age: 60 (1983 to 2002)
(1) Each Trustee is elected to serve in accordance with the Articles of
Incorporation and Bylaws of the Trust until his or her successor is duly
elected and qualified.
(2) Mr. James is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. James Investment Research, Inc.
serves as the investment adviser to the Funds.
PRINCIPAL OFFICERS:
Other
Trusteeships
Portfolios Held by
Term of in Fund Trustee
Name Position(s) Office(1) and Principal Complex Outside
Address Held With Length of Occupation(s) Overseen the Fund
Age Trust Time Served During Last 5 years by Trustee Complex
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas L. Mangan (1) Vice Since Senior Vice President, James N/A N/A
1349 Fairground Road President, Inception Investment Research, Inc.
Beavercreek, Ohio 45385 Chief (1994 to Present)
Age: 57 Compliance
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.
51
INVESTMENT ADVISER -------------------------------------
James Investment Research, Inc.
P.O. Box 8 Annual
Alpha, Ohio 45301 Report
info@jamesfunds.com
O -------------
June 30, 2007
CUSTODIAN -------------
U.S. Bank
425 Walnut Street
Cincinnati, Ohio 45202
O
TRANSFER AGENT
JPMorgan Chase Bank, N.A.
P.O. Box 5354
Cincinnati, Ohio 45201-5354 James Balanced:
Golden Rainbow Fund
O
James Small Cap Fund
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM James Market Neutral Fund
Deloitte & Touche LLP
250 East Fifth Street James Equity Fund
Suite 1900
Cincinnati, Ohio 45202 James Mid Cap Fund
O
DISTRIBUTOR [LOGO]
IFS Fund Distributors, Inc. JAMES
303 Broadway ADVANTAGE
Cincinnati, Ohio 45202 FUNDS
O Advised by James Investment
Research, Inc.
LEGAL COUNSEL
Thompson Hine LLP
312 Walnut Street
14th Floor
Cincinnati, Ohio 45202
937 - 426 -7640
www.jamesfunds.com 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) Code of Ethics was filed with registrant's June 30, 2005 N-CSR and is hereby
incorporated by reference.
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
-2-
(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, 2007 June 30, 2006
- ------------------------------------------------------------------------
$59,700 $47,075
- ------------------------------------------------------------------------
Such fees represent the aggregate fees billed for the fiscal years ended June
30, 2007 and June 30, 2006 for professional services rendered by Deloitte &
Touche LLP for the audit of the registrant's annual financial statements.
-3-
(b) Audit-Related Fees
- ---------------------------------------------------------------------------
Registrant Adviser
- ---------------------------------------------------------------------------
June 30, 2007 $0 $0
- ---------------------------------------------------------------------------
June 30, 2006 $0 $0
- ---------------------------------------------------------------------------
Neither the registrant nor the adviser was billed any fees by Deloitte & Touche
LLP for the fiscal years ended June 30, 2007 and June 30, 2006 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, 2007 $9,300 $
- ---------------------------------------------------------------------------
June 30, 2006 $7,225 $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, 2007 $0 $0
- ---------------------------------------------------------------------------
June 30, 2006 $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, 2007 and June 30,
2006.
(e) Pre-Approval Policies and Procedures
(1) Pursuant to the registrant's Audit Committee Charter ("Charter"), the
Audit Committee is directly responsible for the appointment, termination,
compensation, and oversight of the work of any registered public accounting firm
employed by the registrant. In addition, the Charter provides that the Audit
Committee is responsible for reviewing and approving in advance any and all
proposals under which the independent auditor would provide "permissible
non-audit services" (as defined in the Charter) to the registrant or to the
investment adviser to the registrant (not including any sub-adviser whose role
is primarily portfolio management and that is sub-contracted or overseen by the
investment adviser to the registrant) or any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant if those permissible non-audit services relate
directly to the operations and financial reporting of the registrant. In
determining whether to pre-approve non-audit services, the Audit Committee
considers whether such services are consistent with the independent auditor's
independence.
-4-
(2)
- ---------------------------------------------------------------
Registrant Adviser
- ---------------------------------------------------------------
Audit Related n/a n/a
- ---------------------------------------------------------------
Tax Fees 100% n/a
- ---------------------------------------------------------------
Other Fees n/a n/a
- ---------------------------------------------------------------
(f) Not applicable.
(g) Aggregate non-audit fees billed by registrant's accountant:
- ---------------------------------------------------------------------------
Registrant Adviser
- ---------------------------------------------------------------------------
June 30, 2007 $9,300 $
- ---------------------------------------------------------------------------
June 30, 2006 $7,225 $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, 2007 and June 30, 2006, as identified above, that
were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, are compatible with maintaining Deloitte & Touche LLP's
independence.
Item 5. Audit Committee of Listed Companies.
Not applicable.
Item 6. Schedule of Investments.
The schedule is included as part of the report to shareholders filed under Item
1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed End
Management Investment Companies.
Not Applicable.
Item 8. Portfolio Managers of Closed-End Funds.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of trustees.
-5-
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as 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.
(b) Certification required by Rule 30a-2(b) under the Investment Company Act
of 1940 are filed herewith.
-6-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The James Advantage Funds
By (Signature and Title)
/s/ Barry R. James
- ----------------------------------
Barry R. James
President
Date: September 4, 2007
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 4, 2007
By (Signature and Title)
/s/ Thomas L. Mangan
- ----------------------------------
Thomas L. Mangan
Treasurer, Chief Financial Officer
Date: September 4, 2007
-7-