UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDED FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8411
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James Advantage Funds
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(Exact name of registrant as specified in charter)
1349 Fairground Road, Beavercreek, Ohio 45385
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(Address of principal executive offices) (Zip code)
Barry R. James, P.O. Box 8, Alpha, Ohio 45301
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(Name and address of agent for service)
Registrant's telephone number, including area code: (937) 426-7640
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Date of fiscal year end: 6/30
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Date of reporting period: 06/30/08
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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
Annual Report
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June 30, 2008
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James Balanced:
Golden Rainbow Fund
James Small Cap Fund
James Market Neutral Fund
James Equity Fund
James Mid Cap Fund
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[LOGO] JAMES
ADVANTAGE
FUNDS
Advised by James Investment Research, Inc.
937 - 426 -7640
www.jamesfunds.com
LETTER TO SHAREHOLDERS
OF THE JAMES ADVANTAGE FUNDS
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The last year has been a stressful time for investors. The stock market peaked
out in October and has experienced several deep downturns. Our 2007 annual
report correctly warned "We believe a significant correction in stock prices is
likely over the coming year." We said this in part because we saw the ripple
effects of the sub prime crisis spreading to individuals, the economy and to
corporate earnings. In spite of this challenging environment, 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 fell by 13.12%
over the twelve months ending June 30, 2008, a very disturbing correction. The
Dow Jones Industrials fell a bit more, 13.26% while smaller capitalization
stocks, represented by the Russell 2000, fell even more, 16.19%. Equally
disturbing, financially laden value indexes, like the Russell 1000 Value and
Russell 2000 Value, fell 18.78% and 21.61%, respectively. Major stock indexes
provided no place to hide.
Energy stocks, basic materials and agricultural stocks were especially strong
over this time period as rising oil and commodity prices spurred buying. As we
spoke of last year, financial companies with exposure to the ripples of the sub
prime mortgage crisis saw their earnings plummet and prices drop considerably,
many over 50 percent. U.S. automobile producers and home builders also continued
to suffer.
The bond markets were a bright spot over the twelve months ending June 30, 2008.
The Lehman Intermediate Gov/Credit Index, a broad measure of high grade U.S.
fixed income securities, returned 7.39%. Except for a recent correction in bond
prices, they had made pretty steady progress throughout the year. At their low,
the 10 year treasury yield fell to 3.34%, a significant drop from the 5.03%
yield they started the fiscal year. The weakness in financial institutions and
recession worries pushed yields down in spite of higher oil and food prices.
Investment Goals and Objectives
James Investment Research has a long history of value investing and we do not
drift from our style because the markets are temporarily moving in one direction
or another. 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 stated objectives and 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 wisdom 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 shows value stocks outperform growth stocks over the
long run.
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.
1
Fund Performance
No style or discipline will outperform in every time period, and the James
Advantage Funds won't either. During a major downturn, a value approach will
often outperform but this isn't always true. In the last twelve months value
indexes actually fell more than growth indexes. Many investors were holding on
to the companies that they hoped would continue to grow steadily. In addition,
value indexes had many financial stocks, which fell dramatically. In spite of
the bias against value investors, most of our Funds outperformed their
benchmarks.
The Market Neutral Fund rose by 2.60% for the fiscal year ended June 30, 2008.
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. While value investing was out of
style, we avoided a heavy concentration in financial stocks in our long
portfolio. This helped us produce positive returns in an unfavorable period. The
Fund's benchmark, the 90 day Treasury Bill, is free of market risk, and returned
3.62%.
The James Small Cap Fund fell 18.03% over its fiscal year, trailing its
benchmark, the Russell 2000, as that index fell 16.19%. As previously mentioned,
the Russell 2000 Value index fell 21.63%. Even within the Russell 2000, the
larger the stock, the better the typical performance. We have stayed true to our
discipline, holding small and in some cases very small stocks. Our Fund was
helped by a lower position in financial stocks but was hurt because our heavier
position in energy stocks did not perform well.
The James Equity Fund fell by 12.20% over the fiscal year, which beat its
benchmark, the S&P 500, which fell by 13.12%. This Fund is an all capitalization
fund, but we did overweight large cap stocks. This helped to offset some of the
downturn, since smaller cap stocks fell more than larger cap stocks. Once again,
our low weighting in finance stocks helped while our energy picks
underperformed.
Over the twelve months ending June 30, 2008, the Balanced Golden Rainbow
returned 2.76%. The S&P 500 fell 13.12%, while the balanced blend benchmark (The
S&P 500, the Russell 2000 and the Lehman Intermediate Gov/Credit Bond Index)
fell 3.87%. The balanced blend more closely approximates the Fund's holdings.
The Fund took a defensive position most of the year, holding lower than normal
equity levels and higher than normal bond positions. We also actively managed
the bonds, extending maturities at a good time last fall. Our research and
active management led to solid results.
Our newest Fund, the James Mid Cap Fund, had another year of beating its
benchmark. In its second complete year the Fund fell 8.61% while S&P Mid Cap
400/Citigroup Value Index fell 13.05%. Strong performance in our industrial and
basic material stocks helped the portfolio. In addition, our lower holdings in
finance stocks once again proved timely. We are confident that this market niche
will be rewarding to investors who are in for the long run.
Please see the following charts for longer term comparisons for all our Funds.
Expectations for the Future
We believe the U.S. economy and a number of foreign economies are slipping into
recessionary trends. The collapse of the housing market both here and abroad has
led to many problems for financial institutions. Their losses have led to a
major curtailment of funds for loans. While the Federal Reserve has lowered
interest rates, the money supply, as measured by M1, has actually shrunk in the
last year.
Consumer confidence has been in the doldrums as higher food and energy prices
have coincided with higher unemployment and falling home prices. This adds to
the difficulties for our economy and stock market. We expect the market to make
its way lower as earnings remain weak. While it should have intermittent
rallies, we believe the market will move lower before a new bull market starts.
We think there will be a great buying opportunity at the market lows. This
ultimate low will be marked by low valuations on stocks and extreme pessimism.
2
Until that time, we will make a strong effort to use the opportunities that
arise to try to produce solid results. While we don't know the date for this
market bottom, we will depend on our research, as we have in the past.
/s/ Barry R. James
Barry R. James, CFA, CIC
President
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 10 Years 5 Years
2.76% 9.36% 7.15%
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[LINE CHART]
James Balanced: Standard & Poor's
Golden Rainbow Fund Blended 25/25/50 Index 500 Index
DATE BALANCE DATE BALANCE DATE BALANCE
06/30/98 10,000 06/30/98 10,000 06/30/98 10,000
09/30/98 9,842 09/30/98 9,471 09/30/98 9,005
12/31/98 10,771 12/31/98 10,350 12/31/98 10,923
03/31/99 10,604 03/31/99 10,328 03/31/99 11,467
06/30/99 10,797 06/30/99 10,882 06/30/99 12,276
09/30/99 10,760 09/30/99 10,587 09/30/99 11,509
12/31/99 11,139 12/31/99 11,456 12/31/99 13,222
03/31/00 11,301 03/31/00 11,856 03/31/00 13,525
06/30/00 11,335 06/30/00 11,773 06/30/00 13,166
09/30/00 11,678 09/30/00 11,955 09/30/00 13,038
12/31/00 11,649 12/31/00 11,744 12/31/00 12,018
03/31/01 11,410 03/31/01 11,397 03/31/01 10,593
06/30/01 11,600 06/30/01 12,005 06/30/01 11,212
09/30/01 11,532 09/30/01 11,169 09/30/01 9,566
12/31/01 11,946 12/31/01 12,040 12/31/01 10,589
03/31/02 12,210 03/31/02 12,164 03/31/02 10,618
06/30/02 12,221 06/30/02 11,701 06/30/02 9,195
09/30/02 11,656 09/30/02 10,789 09/30/02 7,606
12/31/02 11,851 12/31/02 11,294 12/31/02 8,248
03/31/03 11,605 03/31/03 11,162 03/31/03 7,988
06/30/03 12,753 06/30/03 12,376 06/30/03 9,218
09/30/03 13,194 09/30/03 12,742 09/30/03 9,462
12/31/03 14,011 12/31/03 13,584 12/31/03 10,614
03/31/04 14,473 03/31/04 14,023 03/31/04 10,794
06/30/04 14,451 06/30/04 13,923 06/30/04 10,979
09/30/04 14,896 09/30/04 13,953 09/30/04 10,774
12/31/04 15,829 12/31/04 14,787 12/31/04 11,768
03/31/05 16,068 03/31/05 14,447 03/31/05 11,516
06/30/05 16,556 06/30/05 14,843 06/30/05 11,673
09/30/05 17,033 09/30/05 15,116 09/30/05 12,094
12/31/05 17,156 12/31/05 15,281 12/31/05 12,346
03/31/06 17,600 03/31/06 15,933 03/31/06 12,866
06/30/06 17,632 06/30/06 15,693 06/30/06 12,680
09/30/06 17,909 09/30/06 16,184 09/30/06 13,399
12/31/06 18,512 12/31/06 16,893 12/31/06 14,297
03/31/07 18,842 03/31/07 17,139 03/31/07 14,389
06/30/07 19,416 06/30/07 17,587 06/30/07 15,292
09/30/07 19,793 09/30/07 17,799 09/30/07 15,603
12/31/07 20,108 12/31/07 17,710 12/31/07 15,083
03/31/08 19,754 03/31/08 17,105 03/31/08 13,658
06/30/08 19,950 06/30/08 16,906 06/30/08 13,285
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The total annual operating expense ratio as stated in the fee table of the most
recent prospectus, dated November 1, 2007, was 1.22%. For the year ended June
30, 2008, the actual total annual operating expense ratio was 1.21%.
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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.
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. The
investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of Fund shares. 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)
(18.03%) 10.28% 8.51%
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[LINE CHART]
James Small Cap Fund Russell 2000 Index
DATE BALANCE DATE BALANCE
10/02/98 10,000 10/02/98 10,000
12/31/98 11,314 12/31/98 12,078
03/31/99 10,114 03/31/99 11,423
06/30/99 11,874 06/30/99 13,200
09/30/99 9,884 09/30/99 12,365
12/31/99 10,134 12/31/99 14,646
03/31/00 9,824 03/31/00 15,683
06/30/00 10,614 06/30/00 15,090
09/30/00 10,514 09/30/00 15,257
12/31/00 10,645 12/31/00 14,203
03/31/01 10,064 03/31/01 13,278
06/30/01 11,035 06/30/01 15,176
09/30/01 9,724 09/30/01 12,021
12/31/01 11,217 12/31/01 14,556
03/31/02 12,299 03/31/02 15,135
06/30/02 12,098 06/30/02 13,872
09/30/02 10,717 09/30/02 10,903
12/31/02 10,949 12/31/02 11,575
03/31/03 10,859 03/31/03 11,055
06/30/03 13,575 06/30/03 13,644
09/30/03 14,303 09/30/03 14,883
12/31/03 16,823 12/31/03 17,044
03/31/04 18,751 03/31/04 18,111
06/30/04 18,933 06/30/04 18,196
09/30/04 18,102 09/30/04 17,676
12/31/04 21,228 12/31/04 20,166
03/31/05 20,491 03/31/05 19,089
06/30/05 21,848 06/30/05 19,914
09/30/05 23,124 09/30/05 20,848
12/31/05 22,823 12/31/05 21,083
03/31/06 25,470 03/31/06 24,022
06/30/06 25,254 06/30/06 22,816
09/30/06 24,744 09/30/06 22,917
12/31/06 25,674 12/31/06 24,956
03/31/07 25,800 03/31/07 25,443
06/30/07 27,015 06/30/07 26,568
09/30/07 25,464 09/30/07 25,747
12/31/07 24,094 12/31/07 24,570
03/31/08 22,056 03/31/08 22,138
06/30/08 22,142 06/30/08 22,266
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The total annual operating expense ratio as stated in the fee table of the most
recent prospectus, dated November 1, 2007, was 1.52%. For the year ended
June 30, 2008, the actual total annual operating expense ratio was 1.52%.
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(A) Fund inception was October 2, 1998.
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. The
investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of Fund shares. 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)
2.60% 5.61% 3.52%
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[LINE CHART]
James Market Neutral Fund 90-Day Treasury Bill Index
DATE BALANCE DATE BALANCE
10/02/98 10,000 10/02/98 10,000
12/31/98 10,195 12/31/98 10,108
03/31/99 9,804 03/31/99 10,215
06/30/99 9,426 06/30/99 10,335
09/30/99 9,279 09/30/99 10,465
12/31/99 9,090 12/31/99 10,596
03/31/00 9,685 03/31/00 10,744
06/30/00 10,087 06/30/00 10,906
09/30/00 10,710 09/30/00 11,071
12/31/00 10,574 12/31/00 11,251
03/31/01 10,595 03/31/01 11,420
06/30/01 10,770 06/30/01 11,548
09/30/01 10,764 09/30/01 11,673
12/31/01 10,749 12/31/01 11,748
03/31/02 11,156 03/31/02 11,798
06/30/02 11,529 06/30/02 11,852
09/30/02 11,850 09/30/02 11,906
12/31/02 10,921 12/31/02 11,957
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 12,063
12/31/03 11,273 12/31/03 12,094
03/31/04 11,786 03/31/04 12,123
06/30/04 11,776 06/30/04 12,152
09/30/04 12,075 09/30/04 12,196
12/31/04 12,246 12/31/04 12,255
03/31/05 13,069 03/31/05 12,325
06/30/05 13,112 06/30/05 12,413
09/30/05 13,191 09/30/05 12,516
12/31/05 13,219 12/31/05 12,631
03/31/06 13,196 03/31/06 12,760
06/30/06 13,760 06/30/06 12,908
09/30/06 13,504 09/30/06 13,079
12/31/06 13,162 12/31/06 13,243
03/31/07 13,214 03/31/07 13,409
06/30/07 13,644 06/30/07 13,580
09/30/07 13,745 09/30/07 13,761
12/31/07 14,033 12/31/07 13,906
03/31/08 13,873 03/31/08 14,029
06/30/08 13,997 06/30/08 14,073
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The total annual operating expense ratio, including dividend expense on
securities sold short, as stated in the fee table of the most recent prospectus,
dated November 1, 2007, was 2.29%. For the year ended June 30, 2008, the actual
total annual operating expense ratio, including dividend expense on securities
sold short, was 2.85%.
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(A) Fund inception was October 2, 1998.
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. The
investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of Fund shares. 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)
(12.20%) 11.98% 1.07%
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[LINE CHART]
James Equity Fund Standard & Poor's 500 Index
DATE BALANCE DATE BALANCE
11/01/99 10,000 11/01/99 10,000
12/31/99 12,260 12/31/99 10,804
03/31/00 14,550 03/31/00 11,052
06/30/00 13,650 06/30/00 10,760
09/30/00 13,039 09/30/00 10,655
12/31/00 9,210 12/31/00 9,822
03/31/01 7,720 03/31/01 8,657
06/30/01 7,649 06/30/01 9,163
09/30/01 6,289 09/30/01 7,818
12/31/01 6,965 12/31/01 8,654
03/31/02 6,929 03/31/02 8,678
06/30/02 6,633 06/30/02 7,515
09/30/02 5,584 09/30/02 6,216
12/31/02 5,581 12/31/02 6,741
03/31/03 5,558 03/31/03 6,528
06/30/03 6,226 06/30/03 7,533
09/30/03 6,271 09/30/03 7,733
12/31/03 7,069 12/31/03 8,674
03/31/04 7,291 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 8,635 12/31/04 9,618
03/31/05 8,605 03/31/05 9,411
06/30/05 8,991 06/30/05 9,540
09/30/05 9,810 09/30/05 9,884
12/31/05 9,932 12/31/05 10,090
03/31/06 11,158 03/31/06 10,515
06/30/06 11,189 06/30/06 10,363
09/30/06 10,946 09/30/06 10,950
12/31/06 11,540 12/31/06 11,684
03/31/07 11,642 03/31/07 11,758
06/30/07 12,487 06/30/07 12,497
09/30/07 12,273 09/30/07 12,750
12/31/07 11,959 12/31/07 12,326
03/31/08 10,575 03/31/08 11,161
06/30/08 10,961 06/30/08 10,856
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The total annual operating expense ratio as stated in the fee table of the most
recent prospectus, dated November 1, 2007, was 1.50%. For the year ended
June 30, 2008, the actual total annual operating expense ratio was 1.52%.
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(A) Fund inception was November 1, 1999.
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. The
investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of Fund shares. 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)
(8.61%) 3.58%
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[LINE CHART]
James Mid Cap Fund Standard & Poor's 400 Index
DATE BALANCE DATE BALANCE
06/30/06 10,000 06/30/06 10,000
09/30/06 9,861 09/30/06 9,943
12/31/06 10,579 12/31/06 10,741
03/31/07 10,880 03/31/07 11,355
06/30/07 11,744 06/30/07 11,860
09/30/07 11,482 09/30/07 11,561
12/31/07 10,753 12/31/07 11,029
03/31/08 9,817 03/31/08 10,076
06/30/08 10,730 06/30/08 10,313
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The total annual operating expense ratio as stated in the fee table of the most
recent prospectus, dated November 1, 2007, was 1.52%. For the year ended
June 30, 2008, the actual total annual operating expense ratio was 1.50%.
- --------------------------------------------------------------------------------
(A) Fund inception was June 30, 2006.
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. The
investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost. These
performance figures do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of Fund shares. Please call
1-800-995-2637 for most recent month-end performance information.
8
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS
June 30, 2008 (Unaudited)
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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)
[PIE CHART]
BASIC MATERIALS - 4.9%
CONSUMER, CYCLICAL - 2.4%
CONSUMER, NON-CYCLICAL - 4.2%
ENERGY - 3.8%
FINANCIAL - 2.8%
INDUSTRIAL - 7.3%
TECHNOLOGY - 5.2%
UTILITIES - 4.1%
INTERNATIONAL EQUITY FUNDS - 0.6%
BONDS (over 10 years) - 15.9%
BONDS (2-10 years) - 27.4%
BONDS (less than 2 years) - 17.3%
CASH EQUIVALENTS - 3.3%
OTHER - 0.8%
James Small Cap Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 9.3%
CONGLOMERATE - 1.3%
CONSUMER, CYCLICAL - 8.7%
CONSUMER, NON-CYCLICAL - 11.7%
ENERGY - 4.3%
FINANCIAL - 9.7%
INDUSTRIAL - 19.8%
TECHNOLOGY - 7.5%
UTILITIES - 9.1%
CASH EQUIVALENTS - 19.2%
OTHER - (0.6%)
9
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS (Continued)
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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 9.3% 6.5%
CONSUMER, CYCLICAL 8.4% 12.6%
CONSUMER, NON-CYCLICAL 9.6% 13.5%
ENERGY 6.2% 6.4%
FINANCIAL 4.5% 6.4%
INDUSTRIAL 9.4% 1.8%
INTERNATIONAL 0.0% 0.8%
TECHNOLOGY 7.7% 9.1%
UTILITIES 9.8% 3.0%
INTERNATIONAL EQUITY FUNDS 1.1%
James Equity Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 14.5%
CONSUMER, CYCLICAL - 9.7%
CONSUMER, NON-CYCLICAL - 8.4%
ENERGY - 8.3%
FINANCIAL - 8.4%
INDUSTRIAL - 12.7%
TECHNOLOGY - 9.0%
UTILITIES - 10.3%
PREFERRED STOCKS - 1.9%
CASH EQUIVALENTS - 30.9%
OTHER - (14.1%)
10
JAMES ADVANTAGE FUNDS
REPRESENTATION OF PORTFOLIOS OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
James Mid Cap Fund
Industry Sector Allocation (% of Net Assets)
[PIE CHART]
BASIC MATERIALS - 9.4%
CONSUMER, CYCLICAL - 9.4%
CONSUMER, NON-CYCLICAL - 18.0%
ENERGY - 6.2%
FINANCIAL - 10.6%
INDUSTRIAL - 14.2%
INTERNATIONAL - 1.7%
TECHNOLOGY - 6.5%
UTILITIES - 12.5%
PREFERRED STOCK - 2.4%
CASH EQUIVALENTS - 9.1%
11
JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2008
- --------------------------------------------------------------------------------
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 ..................... $ 432,759,490 $ 164,960,498 $ 52,507,381 $ 15,829,196 $ 5,622,336
============== ============== ============== ============== ==============
At value .............................. $ 474,856,236 $ 179,018,765 $ 55,629,660 $ 18,494,985 $ 5,998,955
Segregated cash with brokers ............. -- -- 25,245,721 -- --
Dividends and interest receivable ........ 3,363,319 184,443 77,182 12,897 6,600
Receivable for securities sold ........... -- -- 84,834 -- --
Receivable for capital shares sold ....... 1,812,549 127,356 183,987 4,078 --
Other assets ............................. 24,313 -- -- -- 475
-------------- -------------- -------------- -------------- --------------
TOTAL ASSETS ........................ 480,056,417 179,330,564 81,221,384 18,511,960 6,006,030
-------------- -------------- -------------- -------------- --------------
LIABILITIES
Dividends payable ........................ 79,529 5,685 -- -- --
Payable for securities sold short
(proceeds $37,417,510) ................ -- -- 30,772,020 -- --
Payable for dividends on
securities sold short ................. -- -- 19,156 -- --
Payable for capital shares redeemed ...... 849,332 419,788 66,577 4,066 --
Payable for securities purchased ......... -- 782,991 -- 2,279,158 --
Accrued expenses:
Management fees ....................... 289,345 186,020 65,508 14,927 4,153
12b-1 distribution and service fees ... -- 21,224 8,918 201 --
Trustees' fees ........................ 9,173 -- -- -- --
Other affiliates ...................... 24,534 -- -- -- --
Other ................................. 110,696 -- -- -- --
-------------- -------------- -------------- -------------- --------------
TOTAL LIABILITIES ................... 1,362,609 1,415,708 30,932,179 2,298,352 4,153
-------------- -------------- -------------- -------------- --------------
NET ASSETS ............................... $ 478,693,808 $ 177,914,856 $ 50,289,205 $ 16,213,608 $ 6,001,877
============== ============== ============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital .......................... $ 438,588,781 $ 196,874,769 $ 48,678,882 $ 12,317,166 $ 5,913,017
Accumulated net investment
income (loss) ......................... (79,529) (5,685) 1,963 -- 525
Accumulated net realized gains
(losses) from security transactions ... (1,912,190) (33,012,495) (8,159,409) 1,230,653 (288,284)
Net unrealized appreciation on
investments and securities sold short.. 42,096,746 14,058,267 9,767,769 2,665,789 376,619
-------------- -------------- -------------- -------------- --------------
NET ASSETS ............................... $ 478,693,808 $ 177,914,856 $ 50,289,205 $ 16,213,608 $ 6,001,877
============== ============== ============== ============== ==============
Shares of beneficial interest
outstanding (unlimited number
of shares authorized, no par) ......... 26,455,856 8,879,231 4,089,690 1,507,822 562,895
============== ============== ============== ============== ==============
Net asset value, offering price and
redemption price per share ............ $ 18.09 $ 20.04 $ 12.30 $ 10.75 $ 10.66
============== ============== ============== ============== ==============
See accompanying notes to financial statements.
12
JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 2008
- --------------------------------------------------------------------------------
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 withholding
taxes of $6,805, $2,526, $1,674,
$0 and $642, respectively) .......... $ 3,774,535 $ 4,748,899 $ 1,566,624 $ 362,412 $ 90,898
Interest .............................. 9,276,058 6,838 52,355 -- 887
-------------- -------------- -------------- -------------- --------------
TOTAL INVESTMENT INCOME ............. 13,050,593 4,755,737 1,618,980 362,412 91,785
-------------- -------------- -------------- -------------- --------------
EXPENSES
Management fees ....................... 2,868,418 3,093,152 765,401 252,799 67,654
12b-1 distribution and service fees ... 969,058 621,105 94,231 52,032 13,943
Dividend expense on securities
sold short .......................... -- -- 410,656 -- --
Servicing fees ........................ 414,290 -- -- -- --
Professional fees ..................... 77,286 -- -- -- --
Trustees' fees ........................ 16,502 12,378 10,028 9,835 9,663
Registration fees ..................... 54,436 -- -- -- --
Custodian fees and expenses ........... 57,819 -- -- -- --
Shareholder report
printing and mailing ................ 35,050 -- -- -- --
Postage and supplies .................. 31,200 -- -- -- --
Compliance fees and expenses .......... 8,249 -- -- -- --
Other expenses ........................ 22,453 -- -- -- --
-------------- -------------- -------------- -------------- --------------
TOTAL EXPENSES ...................... 4,554,761 3,726,635 1,280,316 314,666 91,260
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME .................... 8,495,832 1,029,102 338,664 47,746 525
-------------- -------------- -------------- -------------- --------------
REALIZED AND UNREALIZED
GAINS (LOSSES)
ON INVESTMENTS
Net realized gains (losses) from
security transactions ............... (767,702) (26,756,214) (1,371,210) 2,276,455 (288,284)
Net realized gains on closed
short positions ..................... -- -- 2,200,212 -- --
Net change in unrealized appreciation/
depreciation on investments
and securities sold short ........... 1,696,416 (28,143,795) (207,385) (5,165,551) (318,254)
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND
UNREALIZED GAINS (LOSSES)
ON INVESTMENTS ........................ 928,714 (54,900,009) 621,617 (2,889,096) (606,538)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS ....................... $ 9,424,546 $ (53,870,907) $ 960,281 $ (2,841,350) $ (606,013)
============== ============== ============== ============== ==============
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,
2008 2007
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................................................... $ 8,495,832 $ 6,906,976
Net realized gains (losses) from security transactions .............................. (767,702) 7,508,290
Net change in unrealized appreciation/depreciation on investments ................... 1,696,416 15,481,817
------------- -------------
Net increase in net assets from operations ............................................. 9,424,546 29,897,083
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................................ (8,538,436) (6,967,365)
Distributions from net realized gains ............................................... (6,758,977) (5,273,855)
------------- -------------
Decrease in net assets from distributions to shareholders .............................. (15,297,413) (12,241,220)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................................... 225,189,882 125,693,280
Net asset value of shares issued in reinvestment of distributions to shareholders ... 14,632,263 11,752,390
Payments for shares redeemed ........................................................ (96,919,708) (82,203,239)
------------- -------------
Net increase in net assets from capital share transactions ............................. 142,902,437 55,242,431
------------- -------------
TOTAL INCREASE IN NET ASSETS ........................................................... 137,029,570 72,898,294
NET ASSETS
Beginning of year ................................................................... 341,664,238 268,765,944
------------- -------------
End of year ......................................................................... $ 478,693,808 $ 341,664,238
============= =============
ACCUMULATED NET INVESTMENT LOSS ........................................................ $ (79,529) $ (57,518)
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ......................................................................... 12,309,745 7,069,682
Shares issued in reinvestment of distributions to shareholders ...................... 797,396 658,997
Shares redeemed ..................................................................... (5,289,755) (4,607,914)
------------- -------------
Net increase in shares outstanding .................................................. 7,817,386 3,120,765
Shares outstanding, beginning of year ............................................... 18,638,470 15,517,705
------------- -------------
Shares outstanding, end of year ..................................................... 26,455,856 18,638,470
============= =============
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,
2008 2007
- ------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................................................ $ 1,029,102 $ 1,543,958
Net realized losses from security transactions ....................................... (26,756,214) (3,997,335)
Net change in unrealized appreciation/depreciation on investments .................... (28,143,795) 25,687,814
------------- -------------
Net increase (decrease) in net assets from operations ................................... (53,870,907) 23,234,437
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................................. (1,055,734) (1,543,871)
Distributions from net realized gains ................................................ -- (2,572,028)
------------- -------------
Decrease in net assets from distributions to shareholders ............................... (1,055,734) (4,115,899)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................................................ 72,308,744 264,238,098
Net asset value of shares issued in reinvestment of distributions to shareholders .... 1,010,437 3,960,651
Payments for shares redeemed ......................................................... (167,944,495) (130,340,887)(A)
------------- -------------
Net increase (decrease) in net assets from capital share transactions ................... (94,625,314) 137,857,862
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................................................. (149,551,955) 156,976,400
NET ASSETS
Beginning of year .................................................................... 327,466,811 170,490,411
------------- -------------
End of year .......................................................................... $ 177,914,856 $ 327,466,811
============= =============
ACCUMULATED NET INVESTMENT INCOME (LOSS) ................................................ $ (5,685) $ 87
============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold .......................................................................... 3,242,422 11,336,919
Shares issued in reinvestment of distributions to shareholders ....................... 47,255 168,219
Shares redeemed ...................................................................... (7,743,880) (5,495,532)
------------- -------------
Net increase (decrease) in shares outstanding ........................................ (4,454,203) 6,009,606
Shares outstanding, beginning of year ................................................ 13,333,434 7,323,828
------------- -------------
Shares outstanding, end of year ...................................................... 8,879,231 13,333,434
============= =============
(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 year ended June 30, 2007, these fees were $50,529.
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,
2008 2007
- -----------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................................................ $ 338,664 $ 2,150,900
Net realized gains (losses) from:
Security transactions .............................................................. (1,371,210) 9,516,718
Closed short positions ............................................................. 2,200,212 (6,743,102)
Net change in unrealized appreciation/depreciation on investments .................... (207,385) (6,465,211)
------------ ------------
Net increase (decrease) in net assets from operations ................................... 960,281 (1,540,695)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................................. (629,826) (2,166,597)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................................................ 19,847,279 24,350,134
Net asset value of shares issued in reinvestment of distributions to shareholders .... 592,984 2,045,700
Payments for shares redeemed ......................................................... (22,008,205) (46,379,464)(A)
------------ ------------
Net decrease in net assets from capital share transactions .............................. (1,567,942) (19,983,630)
------------ ------------
TOTAL DECREASE IN NET ASSETS ............................................................ (1,237,487) (23,690,922)
NET ASSETS
Beginning of year .................................................................... 51,526,692 75,217,614
------------ ------------
End of year .......................................................................... $ 50,289,205 $ 51,526,692
============ ============
ACCUMULATED NET INVESTMENT INCOME (LOSS) ................................................ $ 1,963 $ (11,946)
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold .......................................................................... 1,618,095 1,960,226
Shares issued in reinvestment of distributions to shareholders ....................... 48,663 169,177
Shares redeemed ...................................................................... (1,809,295) (3,825,518)
------------ ------------
Net decrease in shares outstanding ................................................... (142,537) (1,696,115)
Shares outstanding, beginning of year ................................................ 4,232,227 5,928,342
------------ ------------
Shares outstanding, end of year ...................................................... 4,089,690 4,232,227
============ ============
(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 year ended June 30, 2007, these fees were $20,790.
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,
2008 2007
- ----------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................................................ $ 47,746 $ 97,524
Net realized gains from security transactions ........................................ 2,276,455 762,304
Net change in unrealized appreciation/depreciation on investments .................... (5,165,551) 2,125,529
------------ ------------
Net increase (decrease) in net assets from operations ................................... (2,841,350) 2,985,357
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................................. (60,087) (97,518)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................................................ 3,690,993 17,092,635
Net asset value of shares issued in reinvestment of distributions to shareholders .... 59,595 95,205
Payments for shares redeemed ......................................................... (10,508,250) (27,995,177)(A)
------------ ------------
Net decrease in net assets from capital share transactions .............................. (6,757,662) (10,807,337)
------------ ------------
TOTAL DECREASE IN NET ASSETS ............................................................ (9,659,099) (7,919,498)
NET ASSETS
Beginning of year .................................................................... 25,872,707 33,792,205
------------ ------------
End of year .......................................................................... $ 16,213,608 $ 25,872,707
============ ============
ACCUMULATED NET INVESTMENT INCOME ....................................................... $ -- $ 6
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................................................. 317,675 1,530,581
Shares issued in reinvestment of distributions to shareholders .......................... 5,227 8,075
Shares redeemed ......................................................................... (922,746) (2,492,159)
------------ ------------
Net decrease in shares outstanding ...................................................... (599,844) (953,503)
Shares outstanding, beginning of year ................................................... 2,107,666 3,061,169
------------ ------------
Shares outstanding, end of year ......................................................... 1,507,822 2,107,666
============ ============
(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 year ended June 30, 2007, these fees were $7,252.
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 Year
Ended Ended
June 30, June 30,
2008 2007
- --------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................................................ $ 525 $ 15,182
Net realized gains (losses) from security transactions ............................... (288,284) 18,217
Net change in unrealized appreciation/depreciation on investments .................... (318,254) 694,873
----------- -----------
Net increase (decrease) in net assets from operations ................................... (606,013) 728,272
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................................. (4,782) (14,614)
Distributions from net realized gains ................................................ (14,003) --
----------- -----------
Decrease in net assets from distributions to shareholders ............................... (18,785) (14,614)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................................................ 1,940,359 6,055,137
Net asset value of shares issued in reinvestment of distributions to shareholders .... 18,776 14,577
Payments for shares redeemed ......................................................... (1,773,538) (442,294)(B)
----------- -----------
Net increase in net assets from capital share transactions .............................. 185,597 5,627,420
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................................................. (439,201) 6,341,078
NET ASSETS
Beginning of year .................................................................... 6,441,078 100,000(A)
----------- -----------
End of year .......................................................................... $ 6,001,877 $ 6,441,078
=========== ===========
ACCUMULATED NET INVESTMENT INCOME ....................................................... $ 525 $ 568
=========== ===========
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold .......................................................................... 175,142 577,798
Shares issued in reinvestment of distributions to shareholders ....................... 1,700 1,383
Shares redeemed ...................................................................... (164,564) (38,564)
----------- -----------
Net increase in shares outstanding ................................................... 12,278 540,617
Shares outstanding, beginning of year ................................................ 550,617 10,000(A)
----------- -----------
Shares outstanding, end of year ...................................................... 562,895 550,617
=========== ===========
(A) The beginning of the year net assets 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,
---------------------------------------------------------------------
2008 2007 2006 2005 2004
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year .................... $ 18.33 $ 17.32 $ 17.18 $ 15.28 $ 13.72
Income from investment operations:
Net investment income ................................ 0.40 0.39 0.34 0.26 0.26
Net realized and unrealized gains on investments ..... 0.11 1.34 0.75 1.95 1.56
----------- ----------- ----------- ----------- -----------
Total from investment operations ........................ 0.51 1.73 1.09 2.21 1.82
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ........................... (0.40) (0.40) (0.34) (0.26) (0.26)
From net realized gains on investments ............... (0.35) (0.32) (0.61) (0.05) (0.00)(A)
----------- ----------- ----------- ----------- -----------
Total distributions ..................................... (0.75) (0.72) (0.95) (0.31) (0.26)
----------- ----------- ----------- ----------- -----------
Net asset value at end of year .......................... $ 18.09 $ 18.33 $ 17.32 $ 17.18 $ 15.28
=========== =========== =========== =========== ===========
Total return ............................................ 2.76% 10.13% 6.48% 14.56% 13.32%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) ....................... $ 478,694 $ 341,664 $ 268,766 $ 147,605 $ 83,893
=========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ............. 1.18% 1.18% 1.21% 1.26% 1.28%
Ratio of net investment income to average net assets .... 2.20% 2.24% 2.11% 1.70% 1.77%
Portfolio turnover rate ................................. 53% 92% 68% 36% 29%
(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,
------------------------------------------------------------------
2008 2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year .......................... $ 24.56 $ 23.28 $ 20.46 $ 18.66 $ 13.43
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) ............................... 0.10 0.11 (0.04) 0.05 0.01
Net realized and unrealized gains (losses) on investments... (4.52) 1.50 3.19 2.65 5.26
---------- ---------- ---------- ---------- ----------
Total from investment operations .............................. (4.42) 1.61 3.15 2.70 5.27
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ................................. (0.10) (0.11) (0.04) -- (0.01)
From net realized gains on investments ..................... -- (0.22) (0.30) (1.00) (0.05)
---------- ---------- ---------- ---------- ----------
Total distributions ........................................... (0.10) (0.33) (0.34) (1.00) (0.06)
---------- ---------- ---------- ---------- ----------
Paid-in capital from redemption fees (A) ...................... -- 0.00(B) 0.01 0.10 0.02
---------- ---------- ---------- ---------- ----------
Net asset value at end of year ................................ $ 20.04 $ 24.56 $ 23.28 $ 20.46 $ 18.66
========== ========== ========== ========== ==========
Total return .................................................. (18.03%) 6.97% 15.59% 15.39% 39.47%
========== ========== ========== ========== ==========
Net assets at end of year (000's) ............................. $ 177,915 $ 327,467 $ 170,490 $ 54,489 $ 13,186
========== ========== ========== ========== ==========
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 ... 0.42% 0.54% (0.25%) 0.45% 0.05%
Portfolio turnover rate ....................................... 54% 104% 59% 94% 45%
(A) Amount calculated based on average shares outstanding throughout the
period. Effective February 21, 2007, the redemption fee was eliminated.
(B) Amount rounds to less than $0.005.
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,
-----------------------------------------------------------------
2008 2007 2006 2005 2004
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ......................... $ 12.17 $ 12.69 $ 12.27 $ 11.02 $ 9.97
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) .............................. 0.11 0.40 0.17 0.01 (0.13)
Net realized and unrealized gains
(losses) on investments ................................. 0.20 (0.51) 0.42 1.23 1.18
---------- ---------- ---------- ---------- ----------
Total from investment operations ............................. 0.31 (0.11) 0.59 1.24 1.05
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ................................ (0.18) (0.41) (0.18) -- --
---------- ---------- ---------- ---------- ----------
Paid-in capital from redemption fees(A) ...................... -- 0.00(B) 0.01 0.01 0.00(B)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year ............................... $ 12.30 $ 12.17 $ 12.69 $ 12.27 $ 11.02
========== ========== ========== ========== ==========
Total return ................................................. 2.60% (0.84%) 4.94% 11.34% 10.53%
========== ========== ========== ========== ==========
Net assets at end of year (000's) ............................ $ 50,289 $ 51,527 $ 75,218 $ 47,303 $ 12,528
========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets, excluding
dividends on securities sold short ........................ 1.91% 1.94% 1.95% 1.95% 1.95%
Ratio of dividend expense on securities sold short ........... 0.90% 0.32% 0.62% 0.42% 0.64%
---------- ---------- ---------- ---------- ----------
Ratio of net expenses to average net assets .................. 2.81% 2.26% 2.57% 2.37% 2.59%
---------- ---------- ---------- ---------- ----------
Ratio of net investment income (loss) to average net assets .. 0.74% 3.21% 1.52% 0.11% (1.43%)
Portfolio turnover rate(C) ................................... 79% 57% 27% 35% 13%
(A) Amount calculated based on average shares outstanding throughout the
period. Effective February 21, 2007, the redemption fee was eliminated.
(B) Amount rounds to less than $0.005.
(C) Calculation does not include short positions or short transactions.
Portfolio turnover rate would be higher 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,
-----------------------------------------------------------------
2008 2007 2006 2005 2004
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year .......................... $ 12.28 $ 11.04 $ 8.89 $ 7.36 $ 6.18
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income ...................................... 0.03 0.04 0.01 0.01 0.02
Net realized and unrealized gains (losses) on investments .. (1.53) 1.24 2.16 1.53 1.18
---------- ---------- ---------- ---------- ----------
Total from investment operations .............................. (1.50) 1.28 2.17 1.54 1.20
---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ................................. (0.03) (0.04) (0.01) (0.01) (0.02)
From distributions in excess of net investment income ...... -- -- (0.01) -- --
---------- ---------- ---------- ---------- ----------
Total distributions ........................................... (0.03) (0.04) (0.02) (0.01) (0.02)
---------- ---------- ---------- ---------- ----------
Paid-in capital from redemption fees(A) ....................... -- 0.00(B) 0.00(B) 0.00(B) 0.00(B)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year ................................ $ 10.75 $ 12.28 $ 11.04 $ 8.89 $ 7.36
========== ========== ========== ========== ==========
Total return .................................................. (12.20%) 11.59% 24.45% 20.96% 19.38%
========== ========== ========== ========== ==========
Net assets at end of year (000's) ............................. $ 16,214 $ 25,873 $ 33,792 $ 16,833 $ 7,249
========== ========== ========== ========== ==========
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 .......... 0.23% 0.30% 0.06% 0.22% 0.25%
Portfolio turnover rate ....................................... 50% 58% 43% 33% 70%
(A) Amount calculated based on average shares outstanding throughout the
period. Effective February 21, 2007, the redemption fee was eliminated.
(B) Amount rounds to less than $0.005.
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,
----------------------
2008 2007
- -----------------------------------------------------------------------------------------
Net asset value at beginning of year ............................ $ 11.70 $ 10.00
--------- ---------
Income (loss) from investment operations:
Net investment income ........................................ 0.00(A) 0.04
Net realized and unrealized gains (losses) on investments .... (1.01) 1.70
--------- ---------
Total from investment operations ................................ (1.01) 1.74
--------- ---------
Less distributions:
From net investment income ................................... (0.01) --
From net realized gains on investments ....................... (0.02) (0.04)
--------- ---------
Total Distributions ............................................. (0.03) (0.04)
--------- ---------
Paid-in capital from redemption fees(B) ......................... -- 0.00(A)
--------- ---------
Net asset value at end of year .................................. $ 10.66 $ 11.70
========= =========
Total return .................................................... (8.61%) 17.41%
========= =========
Net assets at end of year (000's) ............................... $ 6,002 $ 6,441
========= =========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ..................... 1.48% 1.49%
Ratio of net investment income to average net assets ............ 0.01% 0.40%
Portfolio turnover rate ......................................... 55% 53%
(A) Amount rounds to less than $0.005.
(B) Amount calculated based on average shares outstanding throughout the
period. Effective February 21, 2007, the redemption fee was eliminated.
See accompanying notes to financial statements.
23
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
June 30, 2008
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 34.7% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 4.9%
15,000 Alliance Resource Partners, L.P. ................. $ 835,200
5,000 Barrick Gold Corporation ......................... 227,500
26,000 Celanese Corporation ............................. 1,187,160
60,500 Dow Chemical Company ............................. 2,112,055
42,000 FMC Corporation .................................. 3,252,480
10,000 Foster (L.B.) Company - Class A* ................. 332,000
30,000 Kinross Gold Corporation ......................... 708,300
79,000 Methanex Corporation ............................. 2,213,580
46,000 Newmont Mining Corporation ....................... 2,399,360
41,000 Nucor Corporation ................................ 3,061,470
45,000 PPG Industries, Inc. ............................. 2,581,650
60,000 RPM International, Inc. .......................... 1,236,000
26,000 Terra Nitrogen Company, L.P. ..................... 3,375,840
------------
23,522,595
------------
CONSUMER, CYCLICAL -- 2.4%
35,812 Air Methods Corporation* ......................... 895,300
25,000 BJ's Wholesale Club, Inc.* ....................... 967,500
58,000 Dollar Tree, Inc.* ............................... 1,896,020
80,000 McDonald's Corporation ........................... 4,497,600
15,000 Scholastic Corporation* .......................... 429,900
35,000 The Buckle, Inc. ................................. 1,600,550
33,000 Walt Disney Company .............................. 1,029,600
------------
11,316,470
------------
CONSUMER, NON-CYCLICAL -- 4.2%
20,000 Archer-Daniels-Midland Company ................... 675,000
12,000 Bunge Ltd. ....................................... 1,292,280
15,000 Caraco Pharmaceutical Laboratories, Ltd.* ........ 198,000
36,000 Corn Products International, Inc. ................ 1,767,960
66,000 EZCORP, Inc. - Class A* .......................... 841,500
15,000 Fresh Del Monte Produce, Inc.* ................... 353,550
40,000 Ingles Markets, Inc. - Class A ................... 933,200
155,000 Kroger Company ................................... 4,474,850
9,000 Manpower, Inc. ................................... 524,160
67,000 Merck & Company, Inc. ............................ 2,525,230
47,000 Pfizer, Inc. ..................................... 821,090
25,000 The Toro Company ................................. 831,750
91,000 Watson Wyatt Worldwide, Inc. ..................... 4,812,990
------------
20,051,560
------------
24
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 34.7% (Continued) Value
- --------------------------------------------------------------------------------
ENERGY -- 3.8%
9,500 Apache Corporation ................................. $ 1,320,500
43,250 Bolt Technology Corporation* ....................... 976,153
32,940 Chevron Corporation ................................ 3,265,342
12,000 Devon Energy Corporation ........................... 1,441,920
44,500 Exxon Mobil Corporation ............................ 3,921,785
48,000 Hess Corporation ................................... 6,057,120
110,200 ICO, Inc.* ......................................... 663,404
10,000 Valero Energy Corporation .......................... 411,800
------------
18,058,024
------------
FINANCIAL -- 2.8%
46,500 American Financial Group, Inc. ..................... 1,243,875
95,000 American Physicians Capital, Inc. .................. 4,601,800
20,000 Amerisafe, Inc.* ................................... 318,800
55,000 Assurant, Inc. ..................................... 3,627,800
6,000 Federal Agricultural Mortgage Corporation
- Class C .......................................... 148,680
25,000 SAFECO Corporation ................................. 1,679,000
66,750 W.R. Berkley Corporation ........................... 1,612,680
------------
13,232,635
------------
INDUSTRIAL -- 7.3%
35,000 Ampco-Pittsburgh Corporation ....................... 1,556,800
77,500 CSX Corporation .................................... 4,867,775
92,000 Cummins, Inc. ...................................... 6,027,840
50,000 Deere & Company .................................... 3,606,500
40,000 Eaton Corporation .................................. 3,398,800
3,000 Fluor Corp. ........................................ 558,240
30,000 Gardner Denver, Inc.* .............................. 1,704,000
20,000 Greif, Inc. - Class A .............................. 1,280,600
15,000 Johnson Controls, Inc. ............................. 430,200
29,500 Norfolk Southern Corporation ....................... 1,848,765
46,300 Owens-Illinois, Inc.* .............................. 1,930,247
52,000 Parker Hannifin Corporation ........................ 3,708,640
75,000 TBS International Ltd. - Class A* .................. 2,996,250
42,000 The Timken Company ................................. 1,383,480
------------
35,298,137
------------
TECHNOLOGY -- 5.2%
47,000 Arrow Electronics, Inc.* ........................... 1,443,840
17,000 Avnet, Inc.* ....................................... 463,760
12,500 Ceradyne, Inc.* .................................... 428,750
105,000 Hewlett-Packard Company ............................ 4,642,050
10,000 Hurco Companies, Inc.* ............................. 308,900
42,000 International Business Machines Corporation (IBM) .. 4,978,260
30,000 Lockheed Martin Corporation ........................ 2,959,800
60,500 Northrop Grumman Corporation ....................... 4,047,450
55,214 Seagate Technology ................................. 1,056,244
25
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 34.7% (Continued) Value
- --------------------------------------------------------------------------------
TECHNOLOGY -- 5.2% (Continued)
10,000 Sierra Wireless, Inc.* ............................. $ 146,000
131,500 Western Digital Corporation* ....................... 4,540,695
------------
25,015,749
------------
UTILITIES -- 4.1%
30,000 American Electric Power Company, Inc. .............. 1,206,900
101,000 AT&T, Inc. ......................................... 3,402,690
14,500 CenturyTel, Inc. ................................... 516,055
42,000 Edison International ............................... 2,157,960
75,800 Energen Corporation ................................ 5,914,674
14,000 FirstEnergy Corporation ............................ 1,152,620
60,000 Sempra Energy ...................................... 3,387,000
45,000 The Laclede Group, Inc. ............................ 1,816,650
------------
19,554,549
------------
TOTAL COMMON STOCKS ................................ $166,049,719
------------
- --------------------------------------------------------------------------------
Shares INTERNATIONAL EQUITY FUNDS -- 0.6% Value
- --------------------------------------------------------------------------------
16,000 iShares MSCI EMU Index Fund ........................ $ 1,567,840
97,000 iShares MSCI Japan Index Fund ...................... 1,210,560
20,000 iShares MSCI Taiwan Index Fund ..................... 282,600
------------
TOTAL INTERNATIONAL EQUITY FUNDS ................... $ 3,061,000
------------
- --------------------------------------------------------------------------------
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 58.1% Value
- --------------------------------------------------------------------------------
$ 2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09 .......... $ 2,043,422
10,000,000 Federal National Mortgage Association
Discount Note, 11/19/08 ............................ 9,902,870
1,000,000 Government National Mortgage Association,
5.500%, 6/15/23 .................................... 1,016,240
500,000 Tennessee Valley Authority, 5.625%,
1/18/11 ............................................ 525,492
10,000,000 U.S. Treasury Bills, 8/7/08 ........................ 9,981,947
25,000,000 U.S. Treasury Bills, 9/11/08 ....................... 24,916,000
10,000,000 U.S. Treasury Bills, 9/18/08 ....................... 9,960,650
50,000,000 U.S. Treasury Bonds, 5.250%, 11/15/28 .............. 54,199,200
19,000,000 U.S. Treasury Bonds, 4.500%, 2/15/36 ............... 18,864,929
5,000,000 U.S. Treasury Notes, 3.125%, 9/15/08 ............... 5,013,280
20,000,000 U.S. Treasury Notes, 4.500%, 2/15/09 ............... 20,271,880
5,000,000 U.S. Treasury Notes, 5.000%, 2/15/11 ............... 5,280,080
12,500,000 U.S. Treasury Notes, 4.875%, 2/15/12 ............... 13,253,900
13,000,000 U.S. Treasury Notes, 3.875%, 2/15/13 ............... 13,325,000
53,000,000 U.S. Treasury Notes, 4.625%, 2/15/17 ............... 55,799,035
35,000,000 U.S. Treasury Notes, 3.500%, 2/15/18 ............... 33,690,230
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS ............... $278,044,155
------------
26
JAMES BALANCED: GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Par Value CORPORATE BONDS -- 0.5% Value
$500,000 Anheuser-Busch Companies, Inc., 6.000%, 4/15/11 .... $ 511,815
2,000,000 Walmart Stores, 5.250%, 9/1/35 ..................... 1,737,628
------------
TOTAL CORPORATE BONDS .............................. $ 2,249,443
------------
- --------------------------------------------------------------------------------
Par Value MUNICIPAL BONDS -- 2.0% Value
- --------------------------------------------------------------------------------
$1,000,000 Adams Co CO SD No 014 Ser 2006 UTGO, 5.000%,
12/1/26 ............................................ $ 1,027,620
1,000,000 Citrus CA Community College Ser 2007B UTGO,
4.750%, 6/1/31 ..................................... 951,670
1,000,000 Friendswood TX ISD Ser 2008 UTGO
(Schoolhouse), 5.000%, 2/15/37 ..................... 1,005,260
1,000,000 Judson TX ISD Ser 2008 UTGO, 5.000%, 2/1/37 ........ 1,000,650
500,000 Kane & DeKalb Cntys IL Community Unit SD Bldg
No 302
Ser 2008 UTGO, 5.500%, 2/1/28 ...................... 528,195
500,000 Lamar TX Consolidated ISD Ser 2008 UTGO
(Schoolhouse), 5.000%, 2/15/38 ..................... 502,060
1,000,000 MA St Consolidated Loan Ser 2007C UTGO,
5.250%, 8/1/22 ..................................... 1,068,470
1,000,000 Marysville MI Pub SD Ser 2007 UTGO, 5.000%,
5/1/32 ............................................. 1,013,480
500,000 Mt Healthy OH CSD Sch Impt Ser 2008 UTGO,
5.000%, 12/1/26 .................................... 515,765
550,000 OH St Higher Ed Cap Fac Ser 2000A UTGO,
5.250%, 2/1/13 ..................................... 567,303
500,000 Springboro OH Community CSD Ser 2007 UTGO,
5.250%, 12/1/23 .................................... 535,020
1,000,000 Will and DuPage Cntys IL Ser 2007 UTGO
(Bolingbrook), 5.000%, 1/1/37 ...................... 1,008,280
------------
TOTAL MUNICIPAL BONDS .............................. $ 9,723,773
------------
- --------------------------------------------------------------------------------
Shares SHORT TERM INVESTMENTS -- 3.3% Value
- --------------------------------------------------------------------------------
15,728,146 First American Treasury Money Market Fund .......... $ 15,728,146
------------
TOTAL INVESTMENT SECURITIES -- 99.2%
(Amortized Cost $432,759,490) ...................... $474,856,236
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8% ...... 3,837,572
------------
NET ASSETS -- 100.0% ............................... $478,693,808
============
* Non-income producing security.
CSD - City School District
ISD - Independent School District
SD - School District
UTGO - Unlimited Tax General Obligation
See accompanying notes to financial statements.
27
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
June 30, 2008
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 81.4% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 9.3%
27,500 Alliance Resource Partners, L.P. ................... $ 1,531,200
40,600 NOVA Chemicals Corporation ......................... 1,001,602
146,800 Olin Corporation ................................... 3,843,224
20,000 OM Group, Inc.* .................................... 655,800
73,690 Schnitzer Steel Industries, Inc. - Class A ......... 8,444,874
48,800 W.R. Grace & Company* .............................. 1,146,312
------------
16,623,012
------------
CONGLOMERATE -- 1.3%
115,200 LSB Industries, Inc.* .............................. 2,280,960
------------
CONSUMER, CYCLICAL -- 8.7%
220,003 Barry (R.G.) Corporation* .......................... 1,883,226
59,820 BJ's Wholesale Club, Inc.* ......................... 2,315,034
29,900 DreamWorks Animation SKG, Inc. - Class A* .......... 891,319
38,020 Gymboree Corporation* .............................. 1,523,461
65,800 JAKKS Pacific, Inc.* ............................... 1,437,730
51,900 Netflix, Inc.* ..................................... 1,353,033
21,300 Polaris Industries, Inc. ........................... 860,094
79,280 The Buckle, Inc. ................................... 3,625,474
20,300 The Warnaco Group, Inc.* ........................... 894,621
78,460 Zones, Inc.* ....................................... 614,342
------------
15,398,334
------------
CONSUMER, NON-CYCLICAL -- 11.7%
103,000 Cal-Maine Foods, Inc. .............................. 3,397,970
128,540 Darling International, Inc.* ....................... 2,123,481
103,386 Fresh Del Monte Produce, Inc.* ..................... 2,436,808
34,400 Lincare Holdings, Inc.* ............................ 976,960
109,300 Ruddick Corporation ................................ 3,750,083
44,340 The Brink's Company ................................ 2,900,723
152,940 Tupperware Brands Corporation ...................... 5,233,606
------------
20,819,631
------------
ENERGY -- 4.3%
30,360 Basic Energy Services, Inc.* ....................... 956,340
79,500 Frontier Oil Corporation ........................... 1,900,845
34,400 Lufkin Industries, Inc. ............................ 2,864,832
28,800 Magellan Midstream Partners, L.P. .................. 1,024,992
84,975 Parker Drilling Company* ........................... 850,600
------------
................................................................ 7,597,609
------------
28
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 81.4% (Continued) Value
- --------------------------------------------------------------------------------
FINANCIAL -- 9.7%
75,600 American Physicians Capital, Inc. .................. $ 3,662,064
46,560 Federal Agricultural Mortgage Corporation -
Class C ............................................ 1,153,757
147,750 FPIC Insurance Group, Inc.* ........................ 6,696,031
19,840 Greenhill & Company, Inc. .......................... 1,068,582
35,700 Harleysville Group, Inc. ........................... 1,207,731
80,880 Knight Capital Group, Inc. - Class A* .............. 1,454,222
75,380 Oriental Financial Group, Inc. ..................... 1,074,919
52,840 Selective Insurance Group, Inc. .................... 991,278
------------
17,308,584
------------
INDUSTRIAL -- 19.8%
38,450 Ampco-Pittsburgh Corporation ....................... 1,710,256
97,200 Applied Industrial Technologies, Inc. .............. 2,349,324
134,960 Cascade Corporation ................................ 5,711,507
133,000 Chase Corporation .................................. 2,492,420
41,950 Gardner Denver, Inc.* .............................. 2,382,760
108,550 GrafTech International Ltd.* ....................... 2,912,397
32,300 Greif, Inc. - Class A .............................. 2,068,169
29,550 GulfMark Offshore, Inc.* ........................... 1,719,219
134,550 Metalico, Inc.* .................................... 2,357,316
476,911 North American Galvanizing & Coatings, Inc.* ....... 4,192,048
48,500 Park-Ohio Holdings Corporation* .................... 715,860
85,800 Tsakos Energy Navigation Ltd. ...................... 3,181,464
34,400 Twin Disc, Inc. .................................... 719,992
97,420 VSE Corporation .................................... 2,679,050
------------
35,191,782
------------
TECHNOLOGY -- 7.5%
25,700 Comtech Telecommunications Corporation* ............ 1,259,300
23,059 Corel Corporation* ................................. 215,832
23,900 DRS Technologies, Inc. ............................. 1,881,408
113,750 Hurco Companies, Inc.* ............................. 3,513,738
24,900 Preformed Line Products Company .................... 1,003,719
37,200 Shanda Interactive Entertainment Ltd.* ............. 1,009,980
24,400 Triumph Group, Inc. ................................ 1,149,240
224,600 United Online, Inc. ................................ 2,252,738
28,100 WESCO International, Inc.* ......................... 1,125,124
------------
13,411,079
------------
UTILITIES -- 9.1%
87,751 Atlantic Tele-Network, Inc. ........................ 2,414,030
43,200 Hawaiian Electric Industries, Inc. ................. 1,068,336
86,400 New Jersey Resources Corporation ................... 2,820,960
160,700 Northwest Natural Gas Company ...................... 7,433,982
69,539 WGL Holdings, Inc. ................................. 2,415,785
------------
16,153,093
------------
TOTAL COMMON STOCKS ................................ $144,784,084
------------
29
JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Shares SHORT TERM INVESTMENTS -- 19.2% Value
- --------------------------------------------------------------------------------
14,487,631 First American Treasury Money Market Fund ....... $ 14,487,631
10,000,000 U.S. Treasury Bills, 9/18/08 .................... 9,960,650
10,000,000 U.S. Treasury Bills, 6/4/09 ..................... 9,786,400
------------
TOTAL SHORT TERM INVESTMENTS .................... $ 34,234,681
------------
TOTAL INVESTMENT SECURITIES -- 100.6%
(Cost $164,960,498) ............................. $179,018,765
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.6%).. (1,103,909)
------------
NET ASSETS -- 100.0% ............................ $177,914,856
============
* Non-income producing security.
See accompanying notes to financial statements.
30
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
June 30, 2008
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 64.9% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 9.3%
20,440 Celanese Corporation ................................ $ 933,291
17,000 Dow Chemical Company ................................ 593,470
7,800 FMC Corporation ..................................... 604,032
25,000 Methanex Corporation ................................ 700,500
9,000 Nucor Corporation ................................... 672,030
25,000 RPM International, Inc. ............................. 515,000
5,180 Terra Nitrogen Company, L.P. ........................ 672,571
------------
4,690,894
------------
CONSUMER, CYCLICAL -- 8.4%
10,975 Best Buy Company, Inc. .............................. 434,610
24,640 Bob Evans Farms, Inc. ............................... 704,704
25,575 Dollar Tree, Inc.* .................................. 836,047
18,850 McDonald's Corporation .............................. 1,059,747
25,990 The Buckle, Inc. .................................... 1,188,522
------------
4,223,630
------------
CONSUMER, NON-CYCLICAL -- 9.6%
18,970 Merck & Company, Inc. ............................... 714,979
11,100 Molson Coors Brewing Company - Class B .............. 603,063
9,100 The Brink's Company ................................. 595,322
30,460 Tupperware Brands Corporation ....................... 1,042,341
21,200 Watson Wyatt Worldwide, Inc. ........................ 1,121,269
15,300 Wyeth ............................................... 733,788
------------
4,810,762
------------
ENERGY -- 6.2%
19,500 Bolt Technology Corporation* ........................ 440,115
8,330 Devon Energy Corporation ............................ 1,000,933
10,550 Exxon Mobil Corporation ............................. 929,772
4,000 Hess Corporation .................................... 504,760
5,980 Valero Energy Corporation ........................... 246,256
------------
3,121,836
------------
FINANCIAL -- 4.5%
14,770 Assurant, Inc. ...................................... 974,229
14,400 Federal Agricultural Mortgage Corporation - Class C.. 356,832
7,800 Greenhill & Company, Inc. ........................... 420,108
6,500 Hospitality Properties Trust ........................ 158,990
25,600 Oriental Financial Group, Inc. ...................... 365,056
------------
2,275,215
------------
INDUSTRIAL -- 9.4%
15,800 CSX Corporation ..................................... 992,398
18,200 Cummins, Inc. ....................................... 1,192,464
2,500 Fluor Corporation ................................... 465,200
13,800 Greif, Inc. - Class A ............................... 883,614
8,200 GulfMark Offshore, Inc.* ............................ 477,076
16,650 Owens-Illinois, Inc.* ............................... 694,139
------------
4,704,891
------------
31
JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 64.9% (Continued) Value
- --------------------------------------------------------------------------------
TECHNOLOGY -- 7.7%
9,770 Arrow Electronics, Inc.* ........................ $ 300,134
16,700 Avnet, Inc.* .................................... 455,576
16,130 Hewlett-Packard Company ......................... 713,107
9,550 Hurco Companies, Inc.* .......................... 295,000
8,490 International Business Machines Corporation
(IBM) ........................................... 1,006,320
5,790 Northrop Grumman Corporation .................... 387,351
7,500 Precision Castparts Corporation ................. 722,775
------------
3,880,263
------------
UTILITIES -- 9.8%
20,000 Edison International ............................ 1,027,599
12,825 Energen Corporation ............................. 1,000,734
27,030 MDU Resources Group, Inc. ....................... 942,266
17,330 Sempra Energy ................................... 978,279
24,100 The Laclede Group, Inc. ......................... 972,917
------------
4,921,795
------------
TOTAL COMMON STOCKS ............................. $ 32,629,286
------------
- --------------------------------------------------------------------------------
Shares SHORT TERM INVESTMENTS -- 45.7% Value
- --------------------------------------------------------------------------------
3,232,027 First American Treasury Money Market Fund ....... $ 3,232,027
10,000,000 U.S. Treasury Bills, 8/7/08 ..................... 9,981,947
10,000,000 U.S. Treasury Bills, 6/4/09 ..................... 9,786,400
------------
TOTAL SHORT TERM INVESTMENTS .................... $ 23,000,374
------------
TOTAL INVESTMENT SECURITIES -- 110.6%
(Cost $52,507,381) .............................. $ 55,629,660
SEGREGATED CASH WITH BROKERS -- 50.2% ........... 25,245,721
SECURITIES SOLD SHORT -- (61.2)% (Proceeds
$37,417,510) .................................... (30,772,020)
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4% ... 185,844
------------
NET ASSETS -- 100.0% ............................ $ 50,289,205
============
* Non-income producing security.
See accompanying notes to financial statements.
32
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
June 30, 2008
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 60.1% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 6.5%
48,375 AbitibiBowater, Inc. .............................. $ 451,339
93,365 Gammon Gold, Inc. ................................. 1,013,010
32,120 Georgia Gulf Corporation .......................... 93,149
71,150 Louisiana-Pacific Corporation ..................... 604,063
44,437 MAG Silver Corporation ............................ 437,704
53,700 NovaGold Resources, Inc. .......................... 400,065
1,725 Patriot Coal Corporation .......................... 264,425
------------
3,263,755
------------
CONSUMER, CYCLICAL -- 12.6%
25,050 Centex Corporation ................................ 334,918
59,250 Champion Enterprises, Inc. ........................ 346,612
71,880 Cumulus Media, Inc. - Class A ..................... 283,207
36,300 GSI Commerce, Inc. ................................ 494,769
82,630 Isle of Capri Casinos, Inc. ....................... 395,798
19,080 KB HOME ........................................... 323,024
5,900 Las Vegas Sands Corporation ....................... 279,896
42,900 Leapfrog Enterprises, Inc. ........................ 356,928
14,630 Lennar Corporation ................................ 180,535
15,450 Lululemon Athletica, Inc. ......................... 448,977
6,860 M.D.C. Holdings, Inc. ............................. 267,952
11,800 MercadoLibre, Inc. ................................ 406,982
44,500 Morgans Hotel Group ............................... 458,350
39,090 Pulte Homes, Inc. ................................. 376,437
35,980 RCN Corporation ................................... 387,864
183,400 Rite Aid Corporation .............................. 291,606
60,945 Warner Music Group Corporation .................... 435,147
36,340 XM Satellite Radio Holdings, Inc. ................. 284,906
------------
6,353,908
------------
CONSUMER, NON-CYCLICAL -- 13.5%
57,550 Accuray, Inc. ..................................... 419,539
28,800 Advanced Medical Optics, Inc. ..................... 539,712
64,280 Allscripts Healthcare Solutions, Inc. ............. 797,715
13,600 AMAG Pharmaceuticals, Inc. ........................ 463,760
34,450 Conceptus, Inc. ................................... 636,980
50,630 CV Therapeutics, Inc. ............................. 416,685
63,440 ev3, Inc. ......................................... 601,411
28,875 Insulet Corporation ............................... 454,204
36,230 MDS, Inc. ......................................... 586,926
35,000 Pilgrim's Pride Corporation - Class B ............. 454,650
35,769 Reddy Ice Holdings, Inc. .......................... 489,320
28,900 Rigel Pharmaceuticals, Inc. ....................... 654,874
54,690 Senomyx, Inc. ..................................... 269,622
------------
6,785,398
------------
33
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 60.1% (Continued) Value
- --------------------------------------------------------------------------------
ENERGY -- 6.4%
11,350 Atlas Pipeline Partners, L.P. ...................... $ 443,331
14,160 Cheniere Energy, Inc. .............................. 61,880
38,950 Clean Energy Fuels Corporation ..................... 447,535
37,000 Delta Petroleum Corporation ........................ 944,240
37,470 FX Energy, Inc. .................................... 197,467
5,950 Goodrich Petroleum Corporation ..................... 493,374
23,450 Hiland Holdings GP, L.P. ........................... 631,743
------------
3,219,570
------------
FINANCIAL -- 6.4%
26,000 Citigroup, Inc. .................................... 435,760
62,575 First Horizon National Corporation ................. 464,932
8,070 Forest City Enterprises, Inc. - Class A ............ 260,016
8,450 Legg Mason, Inc. ................................... 368,166
13,975 Merrill Lynch & Company, Inc. ...................... 443,147
17,500 PrivateBancorp, Inc. ............................... 531,650
27,480 Superior Bancorp ................................... 233,306
39,460 TFS Financial Corporation .......................... 457,341
------------
3,194,318
------------
INDUSTRIAL -- 1.8%
93,700 Accuride Corporation ............................... 398,225
70,000 Symyx Technologies, Inc. ........................... 488,600
------------
886,825
------------
INTERNATIONAL -- 0.8%
133,400 Semiconductor Manufacturing International
Corporation ........................................ 388,194
------------
TECHNOLOGY -- 9.1%
47,335 3D Systems Corporation ............................. 449,682
34,100 ACI Worldwide, Inc. ................................ 599,819
71,700 Advanced Micro Devices, Inc. ....................... 418,011
61,000 AudioCodes Ltd. .................................... 223,871
27,715 InfoSpace, Inc. .................................... 230,866
22,310 Marvell Technology Group Ltd. ...................... 393,995
72,090 Micron Technology, Inc. ............................ 432,540
44,270 Momenta Pharmaceuticals, Inc. ...................... 544,521
24,045 Rambus, Inc. ....................................... 458,538
38,130 Theravance, Inc. ................................... 452,603
33,650 Wind River Systems, Inc. ........................... 366,448
------------
4,570,894
------------
UTILITIES -- 3.0%
29,975 Cbeyond, Inc. ...................................... 480,200
29,725 EnerNOC, Inc. ...................................... 533,564
29,583 Neutral Tandem, Inc. ............................... 517,702
------------
1,531,466
------------
TOTAL COMMON STOCKS SOLD SHORT ..................... $ 30,194,328
------------
34
JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
- --------------------------------------------------------------------------------
Shares INTERNATIONAL EQUITY FUNDS -- 1.8% Value
- --------------------------------------------------------------------------------
3,600 iShares FTSE/Xinhua China 25 Index Fund $ 473,364
4,200 Powershares Golden Dragon Halter USX China Portfolio 104,328
------------
TOTAL INTERNATIONAL EQUITY FUNDS SOLD SHORT $ 577,692
------------
TOTAL INVESTMENTS SOLD SHORT -- 61.2% (Proceeds
$37,417,510) $ 30,772,020
============
See accompanying notes to financial statements.
35
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS
June 30, 2008
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 81.3% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 14.5%
10,630 Celanese Corporation................................ $ 485,366
2,240 Dow Chemical Company................................ 78,198
7,400 FMC Corporation..................................... 573,056
3,780 Nucor Corporation................................... 282,253
7,965 Schnitzer Steel Industries, Inc. - Class A.......... 912,788
------------
2,331,661
------------
CONSUMER, CYCLICAL -- 9.7%
7,500 Darden Restaurants, Inc. ........................... 239,550
5,900 JAKKS Pacific, Inc.*................................ 128,915
10,400 McDonald's Corporation.............................. 584,688
4,900 Netflix, Inc.*...................................... 127,743
9,116 The Buckle, Inc..................................... 416,875
2,540 Walt Disney Company................................. 79,248
------------
1,577,019
------------
CONSUMER, NON-CYCLICAL -- 8.4%
950 Bunge Ltd. ......................................... 102,306
7,240 Fresh Del Monte Produce, Inc.*...................... 170,647
6,580 Hewitt Associates, Inc. - Class A*.................. 252,211
3,320 Molson Coors Brewing Company - Class B.............. 180,376
1,980 The Brink's Company................................. 129,532
10,000 Watson Wyatt Worldwide, Inc. ....................... 528,899
------------
1,363,971
------------
ENERGY -- 8.3%
1,970 Apache Corporation.................................. 273,830
2,240 Devon Energy Corporation............................ 269,158
4,900 Exxon Mobil Corporation............................. 431,837
15,660 Frontier Oil Corporation............................ 374,431
------------
1,349,256
------------
FINANCIAL -- 8.4%
10,665 American Financial Group, Inc. ..................... 285,289
9,180 American Physicians Capital, Inc.................... 444,678
4,360 Assurant, Inc....................................... 287,586
3,120 Federal Agricultural Mortgage Corporation - Class C. 77,314
5,660 Knight Capital Group, Inc.*......................... 101,767
6,240 Mercer Insurance Group, Inc. ....................... 108,576
4,360 Oriental Financial Group, Inc....................... 62,174
------------
1,367,384
------------
36
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 81.3% (Continued) Value
- --------------------------------------------------------------------------------
INDUSTRIAL -- 12.7%
4,660 CSX Corporation..................................... $ 292,695
7,200 Cummins, Inc. ...................................... 471,743
6,960 Gardner Denver, Inc.*............................... 395,328
7,500 GrafTech International Ltd.*........................ 201,225
3,760 Greif, Inc. - Class A............................... 240,753
2,240 GulfMark Offshore, Inc.*............................ 130,323
8,030 Owens-Illinois, Inc.*............................... 334,771
------------
2,066,838
------------
TECHNOLOGY -- 9.0%
11,700 Hewlett-Packard Company............................. 517,257
2,990 International Business Machines Corporation (IBM)... 354,405
6,300 Northrop Grumman Corporation........................ 421,470
8,260 Seagate Technology.................................. 158,014
------------
1,451,146
------------
UTILITIES -- 10.3%
17,200 AT&T, Inc........................................... 579,468
1,900 DTE Energy Company.................................. 80,636
1,580 Edison International................................ 81,180
10,890 Energen Corporation................................. 849,747
2,140 The Laclede Group, Inc. ............................ 86,392
------------
1,677,423
------------
TOTAL COMMON STOCKS................................. $ 13,184,698
------------
- --------------------------------------------------------------------------------
Shares PREFERRED STOCKS -- 1.9% Value
- --------------------------------------------------------------------------------
FINANCIAL -- 0.6%
4,000 General Electric Capital Corporation,
6.00%, 4/24/12 ..................................... $ 101,520
------------
UTILITIES -- 1.3%
3,000 American Electric Power, 8.75%, 3/01/13............. 77,280
5,000 AT&T, Inc., 6.375%, 2/15/12......................... 125,050
------------
202,330
------------
TOTAL PREFERRED STOCKS.............................. $ 303,850
------------
37
JAMES EQUITY FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Shares SHORT TERM INVESTMENTS -- 30.9% Value
- --------------------------------------------------------------------------------
3,213,520 First American Treasury Money Market Fund........... $ 3,213,520
1,800,000 U.S. Treasury Bills, 9/18/08........................ 1,792,917
------------
TOTAL SHORT TERM INVESTMENTS........................ $ 5,006,437
------------
TOTAL INVESTMENT SECURITIES -- 114.1%
(Cost $15,829,196).................................. $ 18,494,985
LIABILITIES IN EXCESS OF OTHER ASSETS -- (14.1%).... (2,281,377)
------------
NET ASSETS -- 100.0% ............................... $ 16,213,608
============
* Non-income producing security.
See accompanying notes to financial statements.
38
JAMES MID CAP FUND
SCHEDULE OF INVESTMENTS
June 30, 2008
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 88.5% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 9.4%
5,000 Albermarle Corporation.............................. $ 199,550
4,500 Commercial Metals Company........................... 169,650
7,000 Methanex Corporation................................ 196,140
------------
565,340
------------
CONSUMER, CYCLICAL -- 9.4%
4,000 BJ's Wholesale Club, Inc.*.......................... 154,800
2,000 Bristow Group, Inc.*................................ 98,980
4,000 Darden Restaurants, Inc. ........................... 127,760
5,500 Dollar Tree, Inc.*.................................. 179,795
------------
561,335
------------
CONSUMER, NON-CYCLICAL -- 18.0%
3,500 Corn Products International, Inc.................... 171,885
8,500 Darling International, Inc.*........................ 140,420
2,000 Molson Coors Brewing Company - Class B.............. 108,660
4,000 Ruddick Corporation................................. 137,240
3,000 The Brink's Company................................. 196,260
3,200 The Toro Company.................................... 106,464
4,000 Watson Wyatt Worldwide, Inc. ....................... 211,560
------------
1,072,489
------------
ENERGY -- 6.2%
5,000 Frontier Oil Corporation............................ 119,550
1,600 Questar Corporation................................. 113,664
3,000 Sunoco Logistics Partners L.P. ..................... 140,700
------------
373,914
------------
FINANCIAL -- 10.6%
5,000 American Financial Group, Inc. ..................... 133,750
3,000 Assurant, Inc....................................... 197,880
4,000 International Bancshares Corporation................ 85,480
7,500 Knight Capital Group, Inc.*......................... 134,850
3,500 W.R. Berkley Corporation............................ 84,560
------------
636,520
------------
INDUSTRIAL -- 14.2%
2,500 AGCO Corporation*................................... 131,025
3,500 Gardner Denver, Inc.*............................... 198,800
7,500 GrafTech International Ltd.*........................ 201,225
3,000 Greif, Inc. - Class A............................... 192,090
4,000 The Timken Company.................................. 131,760
------------
854,900
------------
39
JAMES MID CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS -- 88.5% (Continued) Value
- --------------------------------------------------------------------------------
INTERNATIONAL -- 1.7%
2,500 Sims Group Ltd. ADR................................. $ 99,750
------------
TECHNOLOGY -- 6.5%
2,500 Comtech Telecommunications Corporation*............. 122,500
3,000 Teledyne Technologies, Inc.*........................ 146,370
3,500 Western Digital Corporation*........................ 120,855
------------
389,725
------------
UTILITIES -- 12.5%
4,000 CenturyTel, Inc. ................................... 142,360
3,000 DTE Energy Company.................................. 127,320
3,500 Energen Corporation................................. 273,105
6,000 MDU Resources Group, Inc............................ 209,160
------------
751,945
------------
TOTAL COMMON STOCKS................................. $ 5,305,918
------------
- --------------------------------------------------------------------------------
Shares PREFERRED STOCK -- 2.4% Value
- --------------------------------------------------------------------------------
FINANCIAL -- 2.4%
2,500 Celanese Corporation, Series P, 4.25%............... $ 146,875
------------
- --------------------------------------------------------------------------------
Shares SHORT TERM INVESTMENTS -- 9.1% Value
- --------------------------------------------------------------------------------
147,736 First American Treasury Money Market Fund........... $ 147,736
400,000 U.S. Treasury Bills, 9/18/08........................ 398,426
------------
TOTAL SHORT TERM INVESTMENTS........................ $ 546,162
------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $5,622,336)................................... $ 5,998,955
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.0%........ 2,922
------------
NET ASSETS -- 100.0% $ 6,001,877
============
* Non-income producing security.
ADR - American Depository Receipts.
See accompanying notes to financial statements.
40
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
- --------------------------------------------------------------------------------
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.
41
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, 2008, 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, 2008, 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.
42
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.
43
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
The tax character of distributions paid for the years ended June 30, 2008 and
2007 was as follows:
- -------------------------------------------------------------------------------------------------
James Balanced: James Small Cap
Golden Rainbow Fund Fund
-----------------------------------------------------------
2008 2007 2008 2007
- -------------------------------------------------------------------------------------------------
From ordinary income ............ $ 8,530,879 $ 6,967,365 $ 1,055,734 $ 3,153,359
From long-term capital gains .... 6,766,534 5,273,855 -- 649,545
From return of capital .......... -- -- -- 144,227
----------- ----------- ----------- -----------
$15,297,413 $12,241,220 $ 1,055,734 $ 3,947,131
=========== =========== =========== ===========
- -------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
James Market Neutral James Equity James Mid Cap
Fund Fund Fund
-------------------------------------------------------------------------------------
2008 2007 2008 2007 2008 2007
- ---------------------------------------------------------------------------------------------------------------------------
From ordinary income ............ $ 629,826 $2,166,597 $ 47,752 $ 97,518 $ 18,785 $ 14,614
From long-term capital gains .... -- -- 12,335 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 629,826 $2,166,597 $ 60,087 $ 97,518 $ 18,785 $ 14,614
========== ========== ========== ========== ========== ==========
- ---------------------------------------------------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of June
30, 2008:
- ----------------------------------------------------------------------------------------------------------------------------
James
Balanced: James James James James
Golden Rainbow Small Cap Market Neutral Equity Mid Cap
Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
Cost of portfolio investments .......... $ 433,416,829 $ 164,960,498 $ 52,505,418 $ 15,829,196 $ 5,622,336
============= ============= ============= ============= =============
Gross unrealized appreciation .......... $ 47,831,489 $ 24,850,734 $ 4,912,329 $ 3,218,823 $ 740,112
Gross unrealized depreciation .......... (6,392,082) (10,792,467) (1,788,087) (553,034) (363,493)
------------- ------------- ------------- ------------- -------------
Net unrealized appreciation ............ 41,439,407 14,058,267 3,124,242 2,665,789 376,619
Net unrealized appreciation
on securities sold short ............. -- -- 6,645,490 -- --
Capital loss carryforward .............. -- (17,239,544) (7,293,231) -- (47,388)
Post-October losses .................... (1,285,637) (15,772,951) (866,178) -- (240,896)
Undistributed net investment income .... -- -- -- -- 525
Undistributed long-term gains .......... 30,786 -- -- 1,230,653 --
Other temporary differences ............ (79,529) (5,685) -- -- --
------------- ------------- ------------- ------------- -------------
Accumulated earnings ............... $ 40,105,027 $ (18,959,913) $ 1,610,323 $ 3,896,442 $ 88,860
============= ============= ============= ============= =============
- ----------------------------------------------------------------------------------------------------------------------------
The difference between the cost of portfolio investments and financial statement
cost for the Funds is due to certain timing differences differences in the
recognition of capital losses under income tax regulations and GAAP.
44
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
During the year ended June 30, 2008, the James Market Neutral and the James
Equity Fund utilized $1,649,049 and $1,033,467 of capital loss carryforwards,
respectively. The capital loss carryforwards remaining as of June 30, 2008 in
the table below expire as follows:
- --------------------------------------------------------------------------------
Amount Expiration Date
- --------------------------------------------------------------------------------
James Small Cap Fund ..................... $17,239,544 June 30, 2016
James Market Neutral Fund ................ $194,196 June 30, 2013
$642,007 June 30, 2014
$6,457,028 June 30, 2015
James Mid Cap Fund ....................... $47,388 June 30, 2016
- --------------------------------------------------------------------------------
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. The Funds
have analyzed their tax positions on Federal income tax returns for all open
years (tax years ended June 30, 2005 through 2008) for purposes of implementing
FIN?48 and have concluded that no provision for income tax is required in the
financial statements.
Reclassification of Capital Accounts
Reclassifications result primarily from the difference in the tax treatment of
net investment losses and distributions in excess of net invesment 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 Gains (Losses)
- ---------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund .... $ -- $ 20,593 $ (20,593)
James Small Cap Fund ................... $ (20,947) $ 20,947 $ --
James Market Neutral Fund .............. $ (292,157) $ 305,071 $ (12,914)
James Equity Fund ...................... $ -- $ 12,335 $ (12,335)
James Mid Cap Fund ..................... $ -- $ 4,214 $ (4,214)
- ---------------------------------------------------------------------------------------------------
45
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
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, 2008 were as follows:
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund........... $ 177,819,932 $ 96,094,716
- --------------------------------------------------------------------------------
Purchases and sales (including maturities) of investments in other securities
for the year ended June 30, 2008 were as follows:
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund........... $ 105,504,832 $ 75,128,514
James Small Cap Fund........................... 127,259,424 240,380,359
James Market Neutral Fund...................... 27,343,026 23,730,793
James Equity Fund.............................. 9,937,003 18,698,485
James Mid Cap Fund............................. 3,265,322 3,337,186
- --------------------------------------------------------------------------------
For the year ended June 30, 2008, the cost of securities purchased to cover
short sales and the proceeds from securities sold short were $37,100,726 and
$38,652,810, 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"), the administrative services agent,
shareholder services and transfer agent and accounting services agent for the
Trust during the year ended June 30, 2008.
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) and 12b-1 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.
46
JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
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 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. 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, 2008,
Charles Schwab & Co., Inc. owned, for the benefit of its customers, 43.91% of
the James Balanced: Golden Rainbow Fund. James, Dr. Frank James, and other
affiliates of James owned 62.84% 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.
47
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 James Advantage Funds
(the "Funds") comprising James Balanced: Golden Rainbow Fund, James Small Cap
Fund, James Market Neutral Fund, James Equity Fund, and James Mid Cap Fund as of
June 30, 2008, 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, 2008, 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 portfolios constituting James Advantage Funds as of June 30, 2008, 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 22, 2008
48
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Unaudited)
- --------------------------------------------------------------------------------
Dividends Received Deduction
For corporate shareholders, the following ordinary dividends paid during the
year ended June 30, 2008 qualify for the corporate dividends received deduction:
James Balanced: Golden Rainbow Fund 40%
James Small Cap Fund 100%
James Market Neutral Fund 54%
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 two types of costs: (1) transaction
costs, including reinvested dividends or other distributions; and redemption
fees; and (2) ongoing costs, including management fees; distribution (12b-1)
fees; and other Fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the Funds and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (January 1, 2008 through June 30, 2008).
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, 2008" to estimate the expenses you paid on your account
during this period, if you held your shares for the entire period.
49
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Funds' actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Funds' actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Note that expenses shown in the table are meant to highlight and help you
compare ongoing cost only. The calculations assume no shares were bought or sold
during the period. Your actual costs may have been higher or lower, depending on
the amount of your investment and the timing of any purchases or redemptions.
- --------------------------------------------------------------------------------------------------------
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,
2008 2008 2008 2008*
- --------------------------------------------------------------------------------------------------------
James Balanced: Golden Rainbow Fund
Actual .............................. 1.19% $1,000.00 $ 992.30 $5.89
Hypothetical ........................ 1.19% $1,000.00 $1,018.95 $5.97
James Small Cap Fund
Actual .............................. 1.50% $1,000.00 $ 919.20 $7.16
Hypothetical ........................ 1.50% $1,000.00 $1,017.40 $7.52
James Market Neutral Fund
Actual .............................. 3.33% $1,000.00 $ 997.60 $16.54
Hypothetical ........................ 3.33% $1,000.00 $1,008.31 $16.63
James Equity Fund
Actual .............................. 1.50% $1,000.00 $ 916.70 $7.15
Hypothetical ........................ 1.50% $1,000.00 $1,017.40 $7.52
James Mid Cap Fund
Actual .............................. 1.50% $1,000.00 $ 998.10 $7.45
Hypothetical ........................ 1.50% $1,000.00 $1,017.40 $7.52
* Expenses are equal to the Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by 182/366 (to
reflect the one-half year period).
50
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, the James Mid Cap Fund and the James
Market Neutral Fund at a meeting held on May 21, 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 the Adviser to the Funds, as well as a
comparison of the advisory services provided to the Funds and to other clients
of the Adviser.
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. The Trustees also reviewed
the Funds' performance with their respective benchmarks. With regard to the
Balanced Golden Rainbow Fund, they noted that the Fund had outperformed its
benchmark and its peer group for the one-year, three-year and five-year periods.
For the Small Cap Fund, the Trustees noted that the Fund had outperformed its
benchmark and its peer group for the five-year period, but that it had
underperformed both the benchmark and the peer group for the one- and three-year
periods. Representatives from the Adviser explained the Small Cap Fund's
underperformance and stated that the Adviser had made adjustments, based on its
analysis, to temporarily focus more on the larger stocks within the small cap
universe because the smaller stocks were underperforming. The Trustees then
noted that the Equity Fund had outperformed its benchmark and peer group for the
three-year and five-year periods, but that it had underperformed for the
one-year period. Representatives of the Adviser explained that the Equity Fund's
underperformance was due to the same factors that had affected the Small Cap
Fund's performance. The Trustees then noted that the Market Neutral Fund had
outperformed its benchmark for the one- and five-year periods, and
underperformed for the three-year period; and that it had underperformed its
peer group for the three- and five-year periods, but significantly outperformed
the peer group for the one-year period. Representatives of the Adviser
acknowledged good relative performance, but noted that strategy had not
performed as well as they had expected in the current market environment. The
Trustees then discussed the performance of the Mid Cap Fund, noting that it had
outperformed its benchmark for the one-year period and underperformed its
benchmark for the period since inception (June 30, 2006) and its peer group for
the one-year period and since inception. The Trustees noted that the Mid Cap
Fund's performance represented less than two years performance, and noted that
its performance over the last year had improved relative to the benchmark and
peer group. At the conclusion of the review and analysis of the Funds'
performance, the Trustees indicated that they believed it was more appropriate
that performance be reviewed on a long-term basis.
The Trustees next reviewed a description of the services provided to the Funds
by the Adviser 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. Representatives of the Adviser reminded the
Trustees that the Market Neutral, Small Cap, Mid Cap and Equity Funds have a
universal fee structure whereby the Adviser pays all of the expenses of the
Funds in exchange for collecting a higher management fee, and noted that most of
the funds in the peer group comparisons do not share this structure. In this
regard, the Trustees noted that they thought the appropriate comparison for
these four Funds was the total expense ratio, due to the fact that those Funds
had universal fees. The Trustees also discussed the fact that many of the funds
in the peer groups were one class of a fund that had many classes, and thus
benefited from economies of scale provided by the other classes. After some
discussion, it was the consensus of the Trustees that the Funds' management fees
and expense ratios appeared reasonable in comparison with the peer group data.
51
JAMES ADVANTAGE FUNDS
OTHER ITEMS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
The Trustees referred to an analysis of the Adviser's profitability with respect
to the Funds, noting that the materials included in the analysis allocated the
Adviser's expenses based on two different allocations of the Adviser's common
expenses: total assets under management by the Adviser and total revenues to the
Adviser. The Adviser's President reminded the Trustees that, when the Small Cap,
Market Neutral, Equity and Mid Cap Funds adopted the universal fee structure,
the Board and Fund counsel had indicated that the fee structure would likely
result in losses to the Adviser in the early years of the Funds (but would also
keep expense ratios lower for the shareholders) and that the Adviser was
expected to recoup these losses in later years if performance was good and the
Funds grew to profitable levels. Additionally, representatives from the Adviser
reminded the Trustees that they had previously established breakpoints in fees
that should pass on the benefits of any economies of scale to shareholders.
After discussion, it was the consensus of the Trustees that the profitability
levels of those Funds that were profitable to the Adviser were in the acceptable
range.
The Trustees indicated that they had reviewed the Adviser's financial condition.
The Trustees then discussed other benefits that might be realized by the Adviser
as a result of its relationship with the Funds. It was noted that the Adviser
does not have any soft dollar arrangements with broker dealers.
The Trustees indicated that it was their consensus that the information
presented, including the Adviser's Form ADV and balance sheet, 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 the
Adviser's 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 the Adviser, that the management
fees for the Funds being considered were reasonable and that the arrangements
were not generating excessive profits to the Adviser. 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 the Adviser, the Trustees expressed their common
opinion that the Adviser's personnel are highly qualified, that the Adviser
provides excellent services to the Funds, and that the extent of the services is
consistent with the Board's expectations.
It was the consensus of the Board that the continuation of each Fund's
Management Agreement was in the best interest of the applicable Fund and its
shareholders. Therefore, the Board, including each of the Independent Trustees
voted to approve each of the Management Agreements for continuance through May
31, 2009.
52
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").
Portfolios Other
Term of in Trusteeships
Office(1) Fund Held by
and Complex Trustee
Name Position(s) Length of Principal Overseen Outside the
Address Held With Time Occupation(s) by Fund
Age Trust Served During Last 5 years Trustee Complex
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
Barry R. James, CFA (2) President Since President, James Investment 5 Director of James
1349 Fairground Road and Trustee Inception Research, Inc. (1985 to Present) Capital Alliance,
Beavercreek, Ohio 45385 a registered
Age: 51 investment
adviser.
DISINTERESTED TRUSTEES:
Anthony P. D'Angelo, Trustee Since Professor Emeritus, Graduate 5 N/A
D.B.A. Inception School of Logistics and
c/o The James Advantage Acquisitions Management, Air
Funds Force Institute of Technology,
1349 Fairground Road Wright-Patterson AFB, Ohio
Beavercreek, Ohio 45385 (1985 to Present)
Age: 78
Leslie L. Brandon Trustee Since Retired Partner, Ernst & Young 5 N/A
c/o The James Advantage May 2003 LLP, Columbus, Ohio (1966 to
Funds 2000)
1349 Fairground Road
Beavercreek, Ohio 45385
Age: 65
Richard C. Russell Trustee Since Richard C. Russell, Consultant, 5 N/A
c/o The James Advantage May 2003 general business consulting
Funds (2002 to Present); President,
1349 Fairground Road The Danis Companies, real
Beavercreek, Ohio 45385 estate development and
Age: 61 construction (1983 to 2002)
(1) Each Trustee is elected to serve in accordance with the Articles of
Incorporation and Bylaws of the Trust until his or her successor is duly
elected and qualified.
(2) Mr. James is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with James Investment Research, Inc. James Investment Research, Inc.
serves as the investment adviser to the Funds.
PRINCIPAL OFFICERS:
Portfolios in Other Trusteeships
Name Position(s) Term of Office1 Principal Fund Complex Held by Trustee
Address Held With and Length Occupation(s) Overseen by Outside the Fund
Age Trust of Time Served During Last 5 years 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: 58 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.
53
THIS PAGE INTENTIONALLY LEFT BLANK.
THIS PAGE INTENTIONALLY LEFT BLANK.
INVESTMENT ADVISER
James Investment Research, Inc.
P.O. Box 8
Alpha, Ohio 45301
info@jamesfunds.com
o
CUSTODIAN
U.S. Bank
425 Walnut Street
Cincinnati, Ohio 45202
o
TRANSFER AGENT
JPMorgan Chase Bank, N.A.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
250 East Fifth Street
Suite 1900
Cincinnati, Ohio 45202
o
DISTRIBUTOR
IFS Fund Distributors, Inc.
303 Broadway
Cincinnati, Ohio 45202
o
LEGAL COUNSEL
Thompson Hine LLP
312 Walnut Street
14th Floor
Cincinnati, Ohio 45202
www.jamesfunds.com
For information about the Funds, or to
make inquiries about the Funds, please call
1-800-99JAMES (1-800-995-2637).
FORM IFS-163-0201
Item 2. Code of Ethics.
(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 was one amendment
to the provisions of the code of ethics allowing for a de minimis below which
personal transactions do not require pre-clearance.
(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 with all amendments.
Item 3. Audit Committee Financial Expert.
(a) The registrant's board of trustees has determined that Les L. Brandon is an
audit committee financial expert. Mr. Brandon is independent for purposes of
this Item 3.
(b) For purposes of this Item, an "audit committee financial expert" means a
person who has the following attributes:
(1) An understanding of generally accepted accounting principles and
financial statements;
(2) The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
(3) Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
(4) An understanding of internal control over financial reporting; and
(5) An understanding of audit committee functions.
(c) A person shall have acquired such attributes through:
(1) Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
(2) Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor, or person
performing similar functions;
(3) Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
(4) Other relevant experience.
(d) (1) A person who is determined to be an audit committee financial expert
will not be deemed an "expert" for any purpose, including without limitation for
purposes of Section 11 of the Securities Act of 1933 (15 U.S.C. 77k), as a
result of being designated or identified as an audit committee financial expert
pursuant to this Item.
(2) The designation or identification of a person as an audit committee
financial expert pursuant to this Item does not impose on such person any
duties, obligations, or liability that are greater than the duties, obligations,
and liability imposed on such person as a member of the audit committee and
board of directors in the absence of such designation or identification.
(3) The designation or identification of a person as an audit committee
financial expert pursuant to this Item does not affect the duties, obligations,
or liability of any other member of the audit committee or board of directors.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
- ------------------------------------------------------------------------
June 30, 2008 June 30, 2007
- ------------------------------------------------------------------------
$65,750 $59,700
- ------------------------------------------------------------------------
Such fees represent the aggregate fees billed for the fiscal years ended June
30, 2008 and June 30, 2007 for professional services rendered by Deloitte &
Touche LLP for the audit of the registrant's annual financial statements.
(b) Audit-Related Fees
- --------------------------------------------------------------------------------
Registrant Adviser
- --------------------------------------------------------------------------------
June 30, 2008 $0 $0
- --------------------------------------------------------------------------------
June 30, 2007 $0 $0
- --------------------------------------------------------------------------------
Neither the registrant nor the adviser was billed any fees by Deloitte & Touche
LLP for the fiscal years ended June 30, 2008 and June 30, 2007 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, 2008 $9,850 $0
- --------------------------------------------------------------------------------
June 30, 2007 $9,300 $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, 2008 $0 $0
- --------------------------------------------------------------------------------
June 30, 2007 $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, 2008 and June 30,
2007.
(e) Pre-Approval Policies and Procedures
(1) Pursuant to the registrant's Audit Committee Charter ("Charter"), the
Audit Committee is directly responsible for the appointment, termination,
compensation, and oversight of the work of any registered public accounting firm
employed by the registrant. In addition, the Charter provides that the Audit
Committee is responsible for reviewing and approving in advance any and all
proposals under which the independent auditor would provide "permissible
non-audit services" (as defined in the Charter) to the registrant or to the
investment adviser to the registrant (not including any sub-adviser whose role
is primarily portfolio management and that is sub-contracted or overseen by the
investment adviser to the registrant) or any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant if those permissible non-audit services relate
directly to the operations and financial reporting of the registrant. In
determining whether to pre-approve non-audit services, the Audit Committee
considers whether such services are consistent with the independent auditor's
independence.
(2)
- --------------------------------------------------------------------------------
Registrant Adviser
- --------------------------------------------------------------------------------
Audit Related n/a n/a
- --------------------------------------------------------------------------------
Tax Fees 0% 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, 2008 $9,850 $0
- --------------------------------------------------------------------------------
June 30, 2007 $9,300 $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, 2008 and June 30, 2007, as identified above, that
were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, are compatible with maintaining Deloitte & Touche LLP's
independence.
Item 5. Audit Committee of Listed Companies.
Not applicable.
Item 6. Schedule of Investments.
The schedule is included as part of the report to shareholders filed under Item
1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed End
Management Investment Companies.
Not Applicable.
Item 8. Portfolio Managers of Closed-End Funds.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of trustees.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the 1940 Act) the registrant's
principal executive officer and principal financial officer have concluded that
the registrant's disclosure controls and procedures are effective as of a date
within 90 days of the filing date of this report.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that have materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of Ethics identified in Item 2 of Form N-CSR was filed with
registrant's June 30, 2005 N-CSR and is hereby incorporated by reference.
(a)(2) Certifications required by Item 11(b) of Form N-CSR are filed herewith.
(b) Certification required by Rule 30a-2(b) under the Investment Company Act
of 1940 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The James Advantage Funds
-------------------------------------------
By (Signature and Title)
/s/ Barry R. James
- ------------------
Barry R. James
President
Date: November 4, 2008
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: November 4, 2008
By (Signature and Title)
/s/ Thomas L. Mangan
- --------------------
Thomas L. Mangan
Treasurer, Chief Financial Officer
Date: November 4, 2008