-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DpQ0fow7NVj3PeZyd9ZAFWcykeJjtQgn1+UUtJUSAH9/m9T6xl0A4vnKnAsq0+xo z7bOoV/P/LABjL9yU61FxQ== 0001144204-05-007185.txt : 20050310 0001144204-05-007185.hdr.sgml : 20050310 20050310122045 ACCESSION NUMBER: 0001144204-05-007185 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050310 DATE AS OF CHANGE: 20050310 EFFECTIVENESS DATE: 20050310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JAMES ADVANTAGE FUNDS CENTRAL INDEX KEY: 0001045487 IRS NUMBER: 000000000 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08411 FILM NUMBER: 05671397 BUSINESS ADDRESS: STREET 1: 1349 FAIRGROUND RD CITY: BEAVERCREEK STATE: OH ZIP: 45385 BUSINESS PHONE: 9374267640 MAIL ADDRESS: STREET 1: 1349 FAIRGROUND RD CITY: BEAVERCREEK STATE: OH ZIP: 45385 FORMER COMPANY: FORMER CONFORMED NAME: JAMES FUNDS DATE OF NAME CHANGE: 19970904 N-CSRS 1 v013717_ncsrs.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-8411 The James Advantage Funds - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1349 Fairground Road, Beavercreek, Ohio 45385 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Barry R. James, P.O. Box 8, Alpha, Ohio, 45301 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (937) 426-7640 Date of fiscal year end: 6/30 Date of reporting period: 12/31/04 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. ================================================================================ [LOGO] JAMES ADVANTAGE FUNDS Advised by James Investment Research, Inc. www.jamesfunds.com o December 31, 2004 Semi-Annual Report (Unaudited) o The Golden Rainbow Fund The James Small Cap Fund The James Market Neutral Fund The James Equity Fund ================================================================================ LETTER TO SHAREHOLDERS OF THE JAMES ADVANTAGE FUNDS ================================================================================ 2004 was one of the best years ever for The James Advantage Funds. The Funds had solid returns and were recognized in several national publications for their excellent results. The election year cycle fit well with our discipline, but we are now growing less sanguine about the markets. We believe the markets will prove to be very challenging, and success will require expert research and flexibility. The Market Over the Past Six Months 2004 was a challenging year with the stock and bond markets both experiencing a high level of volatility. The Federal Reserve's tightening moves, the sharp rise in the price of oil and the election all came together to create a portfolio manager's version of the perfect storm. Fortunately, the value of independent research came through and the Funds had another good year. James Investment Research, Inc. (James) correctly called the market swoon in mid year and again correctly forecasted the strong fourth quarter. The 10.85% return on the S&P 500 was realized almost entirely in the last three months of the year. At the end of the year, the yield on longer term treasury securities was actually lower than on December 31, 2003, despite five moves by the Federal Reserve to push rates higher. Heavy foreign buying of U.S. securities, both stocks and bonds, helped to fuel the advance in the last quarter. The likelihood of that type of support continuing throughout 2005 is not great. Uncertainties over Iraq and the the high U.S. deficits may work in the opposite direction this year. Investment Goals and Objectives The four Funds in The James Advantage Funds family are designed to complement each other. The Golden Rainbow Fund is a conservative, value oriented balanced fund. It holds a large percentage of high quality bonds at all times and seeks to produce an income stream for shareholders. The bonds in this Fund will add stability when the stock market is in trouble. For this reason, The Golden Rainbow Fund is a favorite among shareholders with lower risk tolerances or shorter time horizons. The highest risk, and the highest potential for profit, is generally found in smaller capitalization funds. The James Small Cap Fund invests primarily in small cap value stocks. The Fund will generally be fully invested and seeks to outperform its benchmark which is the Russell 2000. The James Market Neutral Fund is a long/short fund which seeks to advance regardless of the direction of the stock market. By selling short stocks we believe to be over-valued, the Fund can make attractive returns when the stock market falls. The stocks held long are expected to outperform those sold short when the market rises. While this Fund is expected to earn a profit under most market conditions, it will lag the other Funds in strong bull markets. To take advantage of the opportunities in other market capitalizations The James Advantage Funds include The James Equity Fund. This Fund holds stocks of all sizes: small, mid and large. Our proprietary research attempts to identify which of these areas is the most attractive and will overweight that area. It is classified as a non-diversified fund, which can add to the risk of the product as well as to the return. Investment Philosophy James has been managing money for clients since 1972. Over this long time period, the firm has developed a reputation for conservative management and innovative research. Dr. Frank James, Ph.D. wrote his dissertation on the notion of persistency of price patterns and developed the concept that is now known as relative strength. For over thirty years, James personnel have combined the discipline of quantitative research with value. This is a style that can be applied to all market sectors and categories. In keeping with this discipline, James looks for strong companies with solid earnings and the potential for continued earnings growth. Good management is important. Portfolios are dynamic and change with the times to take advantage of opportunities which will arise as the economy changes. We find it helpful to maintain these disciplines when the chaos and turmoil of the markets rises to emotional levels that distract other investors. 1 Strategy For Meeting Fund Objectives James uses several proprietary models in analyzing stocks. The models are quantitative in nature and include many of the common ratios such as Price/Earnings, Price/Book and Earning Momentum. This ranking process helps to identify stocks which are undervalued relative to their peers, and those that are overvalued to the extent they make good candidates for a short sale in The James Market Neutral Fund. James' valuation models use close to 200 factors. Continuing research will result in new factors being added to the model, or old factors being dropped or reduced in weighting. In this manner, the models are dynamic and reflect the constantly changing environment in which the markets operate. Strong fundamental research is also a part of the James process. Combined with economic research in a top-down approach, James has designed a process to select the best stocks from a universe of over 8000 candidates. Fund Performance 2004 was an outstanding year for The James Advantage Funds. The Golden Rainbow Fund, James' balanced fund, returned 12.97 percent for the year. Its benchmark is a blend of the S&P 500, the Russell 2000 and the Lehman Brothers Intermediate Gov/Credit Index. That index returned 8.74 percent. The James Small Cap Fund returned 26.18 percent for the year compared with 18.40 percent on its benchmark, the Russell 2000. The James Market Neutral Fund returned 8.63 percent for the year, surpassing its benchmark which is the 90 Day T-Bill Index. That index rose 1.07%. The James Equity Fund returned 22.14 percent for the year compared with 10.86 percent on the S&P 500, its benchmark. Naturally, we are pleased that all the Funds in the family beat their benchmarks for the year. Expectations for the Future James invited all shareholders to its Annual Economic Outlook which was held at Sinclair College in Dayton this January. At that time the company presented its forecast for the economy and the markets for the coming year. Shareholders were told that we are preparing for a return of the bear in 2005. While the economy continues to move forward on the momentum of the election year, restraints in federal spending, rising rate hikes by the Federal Reserve and already high stock prices will be a drag on the markets and a sharp sell-off in stocks is likely some time this year. In that type of challenging market we will hold those stocks which show the strongest value characteristics. We will look for bonds that are very high in credit quality and we will concentrate on those sectors of the market that offer the greatest opportunity. Energy, health care and utility stocks are expected to offer some the best opportunities over the year. /s/ Thomas L. Mangan Thomas L. Mangan Chief Financial Officer
Average Annual Total Returns As of December 31, 2004 - ------------------------------------------------------------------------------------------------ One Five Ten Since Year Years Years Inception - ------------------------------------------------------------------------------------------------ The Golden Rainbow Fund ................ 12.97% 7.28% 9.57% 9.25% (Inception 7/1/91) The James Small Cap Fund ............... 26.18% 15.94% NA 12.82% (Inception 10/2/98) The James Market Neutral Fund .......... 8.63% 6.14% NA 3.30% (Inception 10/2/98) The James Equity Fund .................. 22.14% -6.77% NA -2.80% (Inception 11/1/99) - ------------------------------------------------------------------------------------------------
Past performance is not predictive of future results. 2 THE JAMES ADVANTAGE FUNDS REPRESENTATION OF PORTFOLIOS OF INVESTMENTS December 31, 2004 ================================================================================ The illustrations below provide the industry sectors for The James Golden Rainbow Fund, The James Small Cap Fund, The Market Neutral Fund, and The James Equity Fund. The Golden Rainbow Fund Industry Sector Allocation (% of Net Assets) [PIE CHART OMITTED] BASIC MATERIALS - 3.6% CONSUMER, CYCLICAL - 4.8% CONSUMER, NON-CYCLICAL - 13.9% ENERGY - 7.5% FINANCIAL - 4.7% INDUSTRIAL - 5.2% TECHNOLOGY - 5.5% UTILITIES - 6.5% INTERNATIONAL EQUITY FUNDS - 0.5% BONDS (over 10 years) - 5.9% BONDS (2-10 years) - 32.1% BONDS (less than 2 years) - 7.5% CASH - 1.5% OTHER - 0.8% The James Small Cap Fund Industry Sector Allocation (% of Net Assets) [PIE CHART OMITTED] BASIC MATERIALS - 4.7% CONSUMER, CYCLICAL - 26.3% CONSUMER, NON-CYCLICAL - 17.6% ENERGY - 10.0% FINANCIAL - 8.8% INDUSTRIAL - 5.4% TECHNOLOGY - 17.3% UTILITIES - 2.9% BONDS - 1.8% CASH - 4.9% OTHER - 0.3% 3 THE JAMES ADVANTAGE FUNDS REPRESENTATION OF PORTFOLIOS OF INVESTMENTS (Continued) ================================================================================ The James Market Neutral Fund Industry Sector Allocation (% of Net Assets) (Cash and Cash Equivalents not included) [BAR CHART OMITTED] Longs Shorts ------- -------- BASIC MATERIALS 6.70% 2.60% CONSUMER, CYCLICAL 11.50% 12.90% CONSUMER, NON-CYCLICAL 14.90% 18.70% ENERGY 7.00% 1.10% FINANCIAL 4.60% 5.80% INDUSTRIAL 4.00% 4.10% TECHNOLOGY 12.80% 10.80% UTILITIES 3.40% 0.00% The James Equity Fund Industry Sector Allocation (% of Net Assets) [PIE CHART OMITTED] BASIC MATERIALS - 5.2% CONSUMER, CYCLICAL - 23.3% CONSUMER, NON-CYCLICAL - 10.4% ENERGY - 16.8% FINANCIAL - 12.5% INDUSTRIAL - 15.0% TECHNOLOGY - 6.6% UTILITIES - 7.0% BONDS - 1.1% CASH - 3.3% OTHER - (1.2%) 4 THE JAMES ADVANTAGE FUNDS STATEMENTS OF ASSETS AND LIABILITIES December 31, 2004 (Unaudited) ================================================================================
- --------------------------------------------------------------------------------------------------------------------- The Golden The James The James The James Rainbow Small Cap Market Neutral Equity Fund Fund Fund Fund - --------------------------------------------------------------------------------------------------------------------- ASSETS Investment securities: At amortized cost .......................... $ 71,989,465 $ 10,575,229 $ 10,574,775 $ 7,314,600 ============== ============== ============== ============== At value ................................... $ 94,170,400 $ 16,484,335 $ 14,351,802 $ 9,554,562 Segregated cash with brokers ...................................... -- -- 9,226,870 -- Dividends and interest receivable ............ 695,652 13,323 22,073 10,919 Receivable for capital shares sold ........... 131,547 270,135 4,641 8,509 Receivable for securities sold .............................. -- -- 458,632 -- Other assets ................................. 13,039 18,330 20,231 3,951 -------------- -------------- -------------- -------------- TOTAL ASSETS ............................ 95,010,638 16,786,123 24,084,249 9,577,941 -------------- -------------- -------------- -------------- LIABILITIES Payable for securities sold short (proceeds $7,521,031) ...................... -- -- 8,519,067 -- Payable for dividends on securities sold short -- -- 1,237 -- Payable for capital shares redeemed .......... 13,511 4,299 4,077 -- Payable for securities purchased ............. -- 236,477 316,416 129,957 Accrued expenses: Management fees ............................ 58,519 14,919 21,603 8,103 Trustees' fees ............................. 2,019 -- -- -- Other ...................................... 7,670 -- -- -- -------------- TOTAL LIABILITIES ......................... 81,719 255,695 8,862,400 138,060 -------------- -------------- -------------- -------------- NET ASSETS ................................... $ 94,928,919 $ 16,530,428 $ 15,221,849 $ 9,439,881 ============== ============== ============== ============== NET ASSETS CONSIST OF: Paid-in capital .............................. $ 72,109,345 $ 10,435,016 $ 13,693,244 $ 10,623,541 Accumulated net investment income (loss) ..... (4,138) (34,850) (42,752) 7,468 Accumulated net realized gains (losses) from security transactions ...................... 642,777 221,156 (1,207,634) (3,431,090) Net unrealized appreciation on investments ... 22,180,935 5,909,106 2,778,991 2,239,962 -------------- -------------- -------------- -------------- NET ASSETS ................................... $ 94,928,919 $ 16,530,428 $ 15,221,849 $ 9,439,881 ============== ============== ============== ============== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) ............................. 5,735,274 831,481 1,328,663 1,104,464 ============== ============== ============== ============== Net asset value, offering price and redemption price per share ............................ $ 16.55 $ 19.88 $ 11.46 $ 8.55 ============== ============== ============== ==============
See accompanying notes to financial statements. 5 THE JAMES ADVANTAGE FUNDS STATEMENTS OF OPERATIONS For the Six Months Ended December 31, 2004 (Unaudited) ================================================================================
The Golden The James The James The James Rainbow Small Cap Market Neutral Equity Fund Fund Fund Fund - ------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends (Net of withholding taxes of $1,244, $221, $201, $265, respectively) ............... $ 304,406 $ 64,858 $ 37,217 $ 62,962 Interest ......................................... 975,065 2,762 86,632 1,860 ------------ ------------ ------------ ------------ TOTAL INVESTMENT INCOME ....................... 1,279,471 67,620 123,849 64,822 ------------ ------------ ------------ ------------ EXPENSES Management fees .................................. 324,059 78,924 112,565 42,961 12b-1 distribution and service fees - Class A .... 109,479 17,546 18,839 10,123 Administration fees .............................. 31,323 -- -- -- Dividend expense on securities sold short ........ -- -- 29,197 -- Professional fees ................................ 17,425 -- -- -- Accounting services fees ......................... 14,905 -- -- -- Transfer agent fees .............................. 12,487 -- -- -- Postage and supplies ............................. 14,061 -- -- -- Custodian fees and expenses ...................... 9,934 -- -- -- Trustees' fees ................................... 3,483 6,000 6,000 6,000 Shareholder report printing and mailing .......... 7,499 -- -- -- Other expenses ................................... 8,253 Compliance fees and expenses ..................... 2,330 -- -- -- ------------ ------------ ------------ ------------ TOTAL EXPENSES ................................ 555,238 102,470 166,601 59,084 ------------ ------------ ------------ ------------ NET INVESTMENT INCOME (LOSS) ....................... 724,233 (34,850) (42,752) 5,738 ------------ ------------ ------------ ------------ REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS Net realized gains from security transactions .... 1,528,080 221,156 1,202,115 281,587 Net realized losses on closed short positions .... -- -- (45,247) -- Net change in unrealized appreciation/depreciation on investments ................................ 5,866,049 1,552,795 (578,498) 973,872 ------------ ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ................................... 7,394,129 1,773,951 578,370 1,255,459 ------------ ------------ ------------ ------------ NET INCREASE IN NET ASSETS ......................... $ 8,118,362 $ 1,739,101 $ 535,618 $ 1,261,197 ============ ============ ============ ============
See accompanying notes to financial statements. 6 THE GOLDEN RAINBOW FUND STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
Six Months Year Ended Ended Dec. 31, 2004 June 30, (Unaudited) 2004 - --------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income .............................................. $ 724,233 $ 1,355,923 Net realized gains on investments .................................. 1,528,080 2,431,503 Net change in unrealized appreciation/depreciation on investments .. 5,866,049 5,616,025 -------------- -------------- Net increase in net assets from operations ........................... 8,118,362 9,403,451 -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income ............................... (728,371) (1,355,926) Distributions from net realized gains .............................. (289,929) (2,860) -------------- -------------- Decrease in net assets from distributions to shareholders ............ (1,018,300) (1,358,786) -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS Proceeds from shares sold .......................................... 6,189,903 12,039,589 Net asset value of shares issued in reinvestment of distributions to shareholders ..................................................... 991,882 1,316,516 Payments for shares redeemed ....................................... (3,245,783) (6,677,222) -------------- -------------- Net increase in net assets from capital share transactions ........... 3,936,002 6,678,883 -------------- -------------- TOTAL INCREASE IN NET ASSETS ......................................... 11,036,064 14,723,548 NET ASSETS Beginning of period ................................................ 83,892,855 69,169,307 -------------- -------------- End of period ...................................................... $ 94,928,919 $ 83,892,855 ============== ============== DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME ..................... $ (4,138) $ -- ============== ============== SUMMARY OF CAPITAL SHARE ACTIVITY Shares sold ........................................................ 392,599 814,579 Shares issued in reinvestment of distributions to shareholders ..... 61,362 88,282 Shares redeemed .................................................... (208,213) (455,525) -------------- -------------- Net increase in shares outstanding ................................. 245,748 447,336 Shares outstanding, beginning of period ............................ 5,489,526 5,042,190 -------------- -------------- Shares outstanding, end of period .................................. 5,735,274 5,489,526 ============== ==============
See accompanying notes to financial statements 7 THE JAMES SMALL CAP FUND STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
Six Months Year Ended Ended Dec. 31, 2004 June 30, (Unaudited) 2004 - --------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) ....................................... $ (34,850) $ 5,930 Net realized gains on investments .................................. 221,156 1,312,222 Net change in unrealized appreciation/depreciation on investments .. 1,552,795 2,281,240 -------------- -------------- Net increase in net assets from operations ........................... 1,739,101 3,599,392 -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income ............................... -- (5,930) Distributions from net realized gains .............................. (756,432) (35,827) -------------- -------------- Decrease in net assets from distributions to shareholders ............ (756,432) (41,757) -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS Proceeds from shares sold .......................................... 2,839,630 4,024,974 Net asset value of shares issued in reinvestment of distributions to shareholders .................................................. 743,313 39,152 Payments for shares redeemed (A) ................................... (1,220,822) (3,634,802) -------------- -------------- Net increase in net assets from capital share transactions ........... 2,362,121 429,324 -------------- -------------- TOTAL INCREASE IN NET ASSETS ......................................... 3,344,790 3,986,959 NET ASSETS Beginning of period ................................................ 13,185,638 9,198,679 -------------- -------------- End of period ...................................................... $ 16,530,428 $ 13,185,638 ============== ============== ACCUMULATED NET INVESTMENT LOSS ...................................... $ (34,850) $ -- ============== ============== SUMMARY OF CAPITAL SHARE ACTIVITY Shares sold ........................................................ 154,846 233,627 Shares issued in reinvestment of distributions to shareholders ..... 39,060 2,470 Shares redeemed .................................................... (68,884) (214,778) -------------- -------------- Net increase in shares outstanding ................................. 125,022 21,319 Shares outstanding, beginning of period ............................ 706,459 685,140 -------------- -------------- Shares outstanding, end of period .................................. 831,481 706,459 ============== ==============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee on Fund shares which have been held for less than the stated period in the prospectus. For the six months ended December 31, 2004, these fees were $5,341 and $12,181 for the year ended June 30, 2004. See accompanying notes to financial statements. 8 THE JAMES MARKET NEUTRAL FUND STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
Six Months Year Ended Ended Dec. 31, 2004 June 30, (Unaudited) 2004 - ---------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment loss .................................... $ (42,752) $ (149,656) Net realized gains (losses) from: Security transactions .............................. 1,202,115 395,098 Closed short positions ............................. (45,247) (1,927,042) Net change in unrealized appreciation/depreciation on investments ........................................ (578,498) 2,726,352 -------------- -------------- Net increase in net assets from operations ............... 535,618 1,044,752 -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS Proceeds from shares sold .............................. 3,675,892 3,349,412 Payments for shares redeemed (A) ....................... (1,517,733) (1,084,887) -------------- -------------- Net increase in net assets from capital share transactions 2,158,159 2,264,525 -------------- -------------- TOTAL INCREASE IN NET ASSETS ............................. 2,693,777 3,309,277 NET ASSETS Beginning of period .................................... 12,528,072 9,218,795 -------------- -------------- End of period .......................................... $ 15,221,849 $ 12,528,072 ============== ============== ACCUMULATED NET INVESTMENT LOSS .......................... $ (42,752) $ -- ============== ============== SUMMARY OF CAPITAL SHARE ACTIVITY Shares sold ............................................ 328,410 317,126 Shares redeemed ........................................ (136,464) (105,079) -------------- -------------- Net increase in shares outstanding ..................... 191,946 212,047 Shares outstanding, beginning of period ................ 1,136,717 924,670 -------------- -------------- Shares outstanding, end of period ...................... 1,328,663 1,136,717 ============== ==============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee on Fund shares which have been held for less than the stated period in the prospectus. For the six months ended December 31, 2004, these fees were $4,076 and $197 for the year ended June 30, 2004. See accompanying notes to financial statements. 9 THE JAMES EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
Six Months Year Ended Ended Dec. 31, 2004 June 30, (Unaudited) 2004 - ------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income .............................................. $ 5,738 $ 15,890 Net realized gains on investments .................................. 281,587 34,190 Net change in unrealized appreciation/depreciation on investments .. 973,872 1,045,488 -------------- -------------- Net increase in net assets from operations ........................... 1,261,197 1,095,568 -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income ............................... -- (14,163) -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS Proceeds from shares sold .......................................... 1,182,155 1,491,283 Net asset value of shares issued in reinvestment of distributions to shareholders ..................................................... -- 13,379 Payments for shares redeemed (A) ................................... (252,239) (716,744) -------------- -------------- Net increase in net assets from capital share transactions ........... 929,916 787,918 -------------- -------------- TOTAL INCREASE IN NET ASSETS ......................................... 2,191,113 1,869,323 NET ASSETS Beginning of period ................................................ 7,248,768 5,379,445 -------------- -------------- End of period ...................................................... $ 9,439,881 $ 7,248,768 ============== ============== ACCUMULATED NET INVESTMENT INCOME .................................... $ 7,468 $ 1,730 ============== ============== SUMMARY OF CAPITAL SHARE ACTIVITY Shares sold ........................................................ 155,133 216,097 Shares issued in reinvestment of distributions to shareholders ..... -- 2,003 Shares redeemed .................................................... (34,988) (104,806) -------------- -------------- Net increase in shares outstanding ................................. 120,145 113,294 Shares outstanding, beginning of period ............................ 984,319 871,025 -------------- -------------- Shares outstanding, end of period .................................. 1,104,464 984,319 ============== ==============
(A) The cost of payments for shares redeemed is net of the 1% redemption fee on Fund shares which have been for less than the stated period in the prospectus. For the six months ended December 31, 2004, these fees were $215 and $229 for the year ended June 30, 2004. See accompanying notes to financial statements. 10 THE GOLDEN RAINBOW FUND FINANCIAL HIGHLIGHTS ================================================================================
Per Share Data for a Share Outstanding Throughout Each Period - ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended June 30, Dec. 31, 2004 ------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period ...... $ 15.28 $ 13.72 $ 13.80 $ 14.34 $ 16.54 $ 17.28 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income ..................... 0.13 0.26 0.27 0.40 0.40 0.50 Net realized and unrealized gains (losses) on investments ........... 1.32 1.56 0.28 0.33 (0.08) 0.31 ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations ............ 1.45 1.82 0.55 0.73 0.32 0.81 ---------- ---------- ---------- ---------- ---------- ---------- Less distributions: From net investment income ................ (0.13) (0.26) (0.27) (0.40) (0.40) (0.50) From net realized gains on investments .... (0.05) 0.00(A) (0.36) (0.87) (2.12) (1.05) ---------- ---------- ---------- ---------- ---------- ---------- Total distributions ......................... (0.18) (0.26) (0.63) (1.27) (2.52) (1.55) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value at end of period ............ $ 16.55 $ 15.28 $ 13.72 $ 13.80 $ 14.34 $ 16.54 ========== ========== ========== ========== ========== ========== Total return ................................ 9.53%(B) 13.32% 4.34% 5.37% 2.33% 4.98% ========== ========== ========== ========== ========== ========== Net assets at end of period (000's) ......... $ 94,929 $ 83,893 $ 69,169 $ 65,456 $ 65,902 $ 82,754 ========== ========== ========== ========== ========== ========== Ratios/Supplemental Data: Ratio of net expenses to average net assets: Before expense reimbursements and waived fees ........................ 1.26%(C) 1.28% 1.32% 1.24% 1.25% 1.22% After expense reimbursements and waived fees ........................ 1.26%(C) 1.28% 1.32% 1.24% 1.25% 1.07% Ratio of net investment income to average net assets ..................... 1.65%(C) 1.77% 2.08% 2.84% 2.61% 2.86% Portfolio turnover rate ..................... 34%(C) 29% 61% 54% 57% 82%
(A) Per share amount rounds to less than $0.005. (B) Not annualized. (C) Annualized. See accompanying notes to financial statements. 11 THE JAMES SMALL CAP FUND FINANCIAL HIGHLIGHTS ================================================================================
Per Share Data for a Share Outstanding Throughout Each Period - -------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended June 30, Dec. 31, 2004 -------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period .. $ 18.66 $ 13.43 $ 12.08 $ 11.03 $ 10.61 $ 11.87 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) .......... (0.09) 0.01 0.10 0.00(A) (0.04) (0.05) Net realized and unrealized gains (losses) on investments ............ 2.31 5.26 1.35 1.06 0.46 (1.21) ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations ........ 2.22 5.27 1.45 1.06 0.42 (1.26) ---------- ---------- ---------- ---------- ---------- ---------- Less distributions: From net investment income ............ -- (0.01) (0.10) (0.01) -- -- From net realized gains on investments (1.00) (0.05) -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Total distributions ..................... (1.00) (0.06) (0.10) (0.01) -- -- ---------- ---------- ---------- ---------- ---------- ---------- Paid-in capital from redemption fees .... --(A) 0.02 -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Net asset value at end of period ........ $ 19.88 $ 18.66 $ 13.43 $ 12.08 $ 11.03 $ 10.61 ========== ========== ========== ========== ========== ========== Total return ............................ 12.12%(B) 39.47% 12.20% 9.65% 3.96% (10.61%) ========== ========== ========== ========== ========== ========== Net assets at end of period (000's) ..... $ 16,530 $ 13,186 $ 9,199 $ 7,882 $ 7,066 $ 5,251 ========== ========== ========== ========== ========== ========== Ratios/Supplemental Data: Ratio of net expenses to average net assets .................... 1.50%(C) 1.50% 1.50% 1.48% 1.50% 1.50% Ratio of net investment income (loss) to average net assets ................. (0.51%)(C) 0.05% 0.90% 0.02% (0.45%) (0.48%) Portfolio turnover rate ................. 33%(C) 45% 52% 78% 75% 101%
(A) Amount rounds to less than $0.005. (B) Not annualized. (C) Annualized. See accompanying notes to financial statements. 12 THE JAMES MARKET NEUTRAL FUND FINANCIAL HIGHLIGHTS ================================================================================
Per Share Data for a Share Outstanding Throughout Each Period - ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended June 30, Dec. 31, 2004 --------------------------------------------------------------------- (Unaudited) 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period .. $ 11.02 $ 9.97 $ 10.79 $ 10.12 $ 9.71 $ 9.30 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) ....... (0.03) (0.13) (0.10) 0.02 0.24 0.23 Net realized and unrealized gains (losses) on investments ......... 0.47 1.18 (0.72) 0.69 0.41 0.41 ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations ........ 0.44 1.05 (0.82) 0.71 0.65 0.64 ---------- ---------- ---------- ---------- ---------- ---------- Less distributions: From net investment income ......... -- -- -- (0.04) (0.24) (0.23) ---------- ---------- ---------- ---------- ---------- ---------- Paid-in capital from redemption fees .... --(A) --(A) -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Net asset value at end of period ........ $ 11.46 $ 11.02 $ 9.97 $ 10.79 $ 10.12 $ 9.71 ========== ========== ========== ========== ========== ========== Total return ............................ 3.99%(B) 10.53% (7.60%) 7.06% 6.76% 7.02% ========== ========== ========== ========== ========== ========== Net assets at end of period (000's) ..... $ 15,222 $ 12,528 $ 9,219 $ 8,676 $ 9,651 $ 6,684 ========== ========== ========== ========== ========== ========== Ratios/Supplemental Data: Ratio of net expenses to average net assets, excluding dividends on securities sold short .............. 1.96%(C) 1.95% 1.95% 1.95% 1.95% 1.95% Ratio of dividend expense on securities sold short ................. 0.42%(C) 0.64% 0.53% 0.28% 0.25% 0.53% ---------- ---------- ---------- ---------- ---------- ---------- Ratio of net expenses to average net assets .................... 2.38%(C) 2.59% 2.48% 2.23% 2.20% 2.48% ---------- ---------- ---------- ---------- ---------- ---------- Ratio of net investment income (loss) to average net assets .......... (0.61%)(C) (1.43%) (0.98%) 0.25% 2.47% 2.47% Portfolio turnover rate ................. 71%(C) 13% 86% 154% 104% 90%
(A) Amount rounds to less than $0.005. (B) Not annualized. (C) Annualized. See accompanying notes to financial statements. 13 THE JAMES EQUITY FUND FINANCIAL HIGHLIGHTS ================================================================================
Per Share Data for a Share Outstanding Throughout Each Period - ---------------------------------------------------------------------------------------------------------------------------------- Six Months Year Year Year Year Period Ended Ended Ended Ended Ended Ended Dec. 31, 2004 June 30, June 30, June 30, June 30, June 30, (Unaudited) 2004 2003 2002 2001 2000(A) - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period .. $ 7.36 $ 6.18 $ 6.62 $ 7.65 $ 13.65 $ 10.00 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) ....... 0.01 0.02 0.03 0.01 (0.07) (0.06) Net realized and unrealized gains (losses) on investments ......... 1.18 1.18 (0.44) (1.03) (5.93) 3.71 ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations ........ 1.19 1.20 (0.41) (1.02) (6.00) 3.65 ---------- ---------- ---------- ---------- ---------- ---------- Less distributions: From net investment income ......... -- (0.02) (0.03) (0.01) -- -- ---------- ---------- ---------- ---------- ---------- ---------- Paid-in capital from redemption fees .... --(B) --(B) -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Net asset value at end of period ........ $ 8.55 $ 7.36 $ 6.18 $ 6.62 $ 7.65 $ 13.65 ========== ========== ========== ========== ========== ========== Total return ............................ 16.17%(C) 19.38% (6.14%) (13.29%) (43.96%) 36.50%(C) ========== ========== ========== ========== ========== ========== Net assets at end of period (000's) ..... $ 9,440 $ 7,249 $ 5,379 $ 3,788 $ 4,504 $ 6,279 ========== ========== ========== ========== ========== ========== Ratios/Supplemental Data: Ratio of net expenses to average net assets .................... 1.50%(D) 1.50% 1.50% 1.50% 1.50% 1.49%(D) Ratio of net investment income (loss) to average net assets .......... 0.15%(D) 0.25% 0.56% 0.20% (0.67%) (0.99%)(D) Portfolio turnover rate ................. 49%(D) 70% 65% 87% 131% 95%(D)
(A) Represents the period from the initial public offering of shares (November 1, 1999) through June 30, 2000. (B) Amount rounds to less than $0.005. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 14 THE GOLDEN RAINBOW FUND SCHEDULE OF INVESTMENTS December 31, 2004 (Unaudited) ================================================================================ Shares COMMON STOCKS -- 52.2% Value - -------------------------------------------------------------------------------- BASIC MATERIALS -- 3.6% 30,000 Barrick Gold Corporation ......................... $ 726,600 35,650 Methanex Corporation ............................. 650,969 42,000 Newmont Mining Corporation ....................... 1,865,220 10,000 RPM International, Inc ........................... 196,600 ----------- 3,439,389 ----------- CONSUMER, CYCLICAL -- 4.8% 14,000 Barnes & Noble, Inc.* ............................ 451,780 15,000 CBRL Group, Inc .................................. 627,750 11,000 Central Garden & Pet Company* .................... 459,140 19,000 Ennis Business Forms ............................. 365,750 30,000 Hartmarx Corporation* ............................ 233,100 5,000 Jarden Corporation* .............................. 217,200 35,300 Supervalu, Inc ................................... 1,218,556 4,500 The Black & Decker Corporation ................... 397,485 21,000 The Pantry, Inc.* ................................ 631,890 ----------- 4,602,651 ----------- CONSUMER, NON-CYCLICAL -- 13.9% 7,000 Aetna, Inc ....................................... 873,250 12,000 Bristol-Myers Squibb Company ..................... 307,440 60,000 Coventry Health Care, Inc.* ...................... 3,184,800 27,000 DaVita, Inc.* .................................... 1,067,310 10,000 Dynamex, Inc.* ................................... 185,300 36,000 Mine Safety Appliances Company ................... 1,825,200 10,000 Par Pharmaceutical Cos, Inc.* .................... 413,800 37,234 PolyMedica Corporation ........................... 1,388,456 12,000 Res-Care, Inc.* .................................. 182,640 18,000 Sanderson Farms, Inc ............................. 779,040 18,000 Sierra Health Services, Inc.* .................... 991,980 16,000 The Toro Company ................................. 1,301,600 25,000 TRM Corporation* ................................. 591,000 ----------- 13,091,816 ----------- ENERGY -- 7.5% 18,500 Alliance Resource Partners, L.P .................. 1,369,000 11,000 Amerada Hess Corporation ......................... 906,180 21,800 Apache Corporation ............................... 1,102,426 12,940 ChevronTexaco Corporation ........................ 679,479 30,000 Devon Energy Corporation ......................... 1,167,600 15,000 EOG Resources, Inc ............................... 1,070,400 10,000 Exxon Mobil Corporation .......................... 512,600 5,000 Kerr-McGee Corporation ........................... 288,950 ----------- 7,096,635 ----------- 15 THE GOLDEN RAINBOW FUND SCHEDULE OF INVESTMENTS (Continued) ================================================================================ Shares COMMON STOCKS -- 52.2% Value - -------------------------------------------------------------------------------- FINANCIAL -- 4.7% 15,000 Allstate Corporation ............................. $ 775,800 11,000 Bear Stearns Companies, Inc ...................... 1,125,410 37,500 Rent-A-Center, Inc.* ............................. 993,750 22,000 Stewart Information Services Corporation ......... 916,300 14,000 W.R. Berkley Corporation ......................... 660,380 ----------- 4,471,640 ----------- INDUSTRIAL -- 5.2% 10,000 Aviall, Inc.* .................................... 229,700 16,000 Ball Corporation ................................. 703,680 20,000 BorgWarner, Inc .................................. 1,083,400 30,000 Briggs & Stratton Corporation .................... 1,247,400 3,000 Caterpiller, Inc ................................. 292,530 15,000 Deere & Company .................................. 1,116,000 5,500 Middleby Corporation ............................. 278,960 ----------- 4,951,670 ----------- TECHNOLOGY -- 5.5% 10,000 Armor Holdings, Inc.* ............................ 470,200 65,000 Catalyst Semiconductor, Inc.* .................... 357,500 12,000 Diodes, Inc.* .................................... 271,560 55,000 Earthlink, Inc.* ................................. 633,600 1,324 Freescale Semiconductor, Inc.- Class B* .......... 24,309 5,948 Gamestop Corporation - Class B* .................. 133,295 31,000 Komag, Inc.* ..................................... 582,180 15,000 Moog, Inc. - Class A* ............................ 680,250 12,000 Motorola, Inc .................................... 206,400 11,000 Nextel Communications - Class A* ................. 330,000 33,000 THQ, Inc.* ....................................... 757,019 25,000 WESCO International, Inc.* ....................... 741,000 ----------- 5,187,313 ----------- UTILITIES -- 6.5% 10,000 ALLTEL Corporation ............................... 587,600 20,000 CenterPoint Energy, Inc .......................... 226,000 21,000 DPL, Inc ......................................... 527,310 53,000 Edison International ............................. 1,697,590 35,400 Energen Corporation .............................. 2,086,830 16,500 TXU Corporation .................................. 1,065,240 ----------- 6,190,570 ----------- INTERNATIONAL EQUITY FUNDS -- 0.5% 6,000 Chile Fund, Inc .................................. 83,940 10,000 Greater China Fund, Inc .......................... 157,500 24,000 iShares MSCI Japan Index Fund .................... 262,080 ----------- 503,520 ----------- TOTAL COMMON STOCKS .............................. $49,535,204 ----------- 16 THE GOLDEN RAINBOW FUND SCHEDULE OF INVESTMENTS (Continued) ================================================================================ Par Value U.S. GOVERNMENT & AGENCY BONDS -- 43.2% Value - -------------------------------------------------------------------------------- $2,000,000 Federal Farm Credit Bank, 5.950%, 3/16/09 ........ $ 2,166,232 1,000,000 U.S. Treasury Bonds, 10.000%, 5/15/10 ............ 1,026,562 2,500,000 U.S. Treasury Bonds, 5.000%, 2/15/11 ............. 2,659,473 2,000,000 U.S. Treasury Bonds, 4.875%, 2/15/12 ............. 2,113,906 1,500,000 U.S. Treasury Bonds, 3.875%, 2/15/13 ............. 1,479,962 1,000,000 U.S. Treasury Bonds, 5.250%, 2/15/29 ............. 1,048,984 4,200,000 U.S. Treasury Bonds, 5.375%, 2/15/31 ............. 4,541,578 6,500,000 U.S. Treasury Notes, 3.500%, 11/15/06 ............ 6,554,846 6,000,000 U.S. Treasury Notes, 6.250%, 2/15/07 ............. 6,386,250 3,000,000 U.S. Treasury Notes, 6.625%, 5/15/07 ............. 3,236,367 2,500,000 U.S. Treasury Notes, 3.250%, 8/15/07 ............. 2,503,710 1,000,000 U.S. Treasury Notes, 3.000%, 2/15/08 ............. 991,836 2,000,000 U.S. Treasury Notes, 2.625%, 3/15/09 ............. 1,932,578 4,000,000 U.S. Treasury Notes, 6.000%, 8/15/09 ............. 4,411,564 ----------- TOTAL U.S. GOVERNMENT & AGENCY BONDS ........... $41,053,848 ----------- ================================================================================ Par Value CORPORATE BONDS -- 2.3% Value - -------------------------------------------------------------------------------- $ 500,000 Anheuser-Busch Companies, Inc., 6.000%, 4/15/11 $ 545,413 500,000 Barrick Gold Finance, Inc., 7.500%, 5/1/07 .... 541,878 500,000 General Electric Capital Corporation, 7.875%, 12/1/06 ............................. 540,113 500,000 Tennessee Valley Authority, 5.625%, 1/18/11 ... 537,164 ------------ TOTAL CORPORATE BONDS ......................... $ 2,164,568 ----------- ================================================================================ Shares SHORT TERM INVESTMENTS -- 1.5% Value - -------------------------------------------------------------------------------- 1,416,780 First American Treasury Obligations Fund ....... $ 1,416,780 ------------ TOTAL INVESTMENT SECURITIES -- 99.2% (Amortized Cost $71,989,465 .................... $94,170,400 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8% .. 758,519 ----------- NET ASSETS -- 100.0% ........................... $94,928,919 =========== * Non-income producing security. See accompanying notes to financial statements. 17 THE JAMES SMALL CAP FUND SCHEDULE OF INVESTMENTS December 31, 2004 (Unaudited) ================================================================================ Shares COMMON STOCKS -- 93.0% Value - -------------------------------------------------------------------------------- BASIC MATERIALS -- 4.7% 5,200 Arch Chemicals, Inc .............................. $ 149,656 3,800 Bandag, Inc ...................................... 189,278 910 Octel Corporation ................................ 18,937 12,300 Schnitzer Steel Industries, Inc. - Class A ....... 417,339 ----------- 775,210 ----------- CONSUMER, CYCLICAL -- 26.3% 16,000 Aldila, Inc ...................................... 247,840 3,275 Banta Corporation ................................ 146,589 3,450 Books-A-Million, Inc ............................. 33,189 7,600 Brown Shoe Company, Inc .......................... 226,708 5,630 Central Garden & Pet Company* .................... 234,996 4,550 Chromcraft Revington, Inc.* ...................... 55,965 1,180 Department 56, Inc.* ............................. 19,647 18,700 Guess?, Inc.* .................................... 234,685 12,500 Handelman Company ................................ 268,500 2,650 J. Alexander's Corporation* ...................... 19,610 1,500 Johnson Outdoors, Inc. - Class A* ................ 30,150 10,130 Landry's Restaurants, Inc ........................ 294,378 12,950 Nash Finch Company ............................... 488,992 1,680 Nutraceutical International Corporation* ......... 25,889 1,390 Orleans Homebuilders, Inc.* ...................... 27,592 1,890 Perini Corporation* .............................. 31,544 6,700 Sharper Image Corporation* ....................... 126,295 10,500 Steiner Leisure Ltd.* ............................ 313,740 4,860 The Ryland Group, Inc ............................ 279,644 11,130 The Toro Company ................................. 905,426 26,800 Trans World Entertainment Corporation* ........... 334,196 ----------- 4,345,575 ----------- CONSUMER, NON-CYCLICAL -- 17.6% 12,100 Cal-Maine Foods, Inc ............................. 146,289 2,550 CCA Industries, Inc .............................. 29,172 8,900 Corrections Corporation of America* .............. 360,005 2,150 Dynamex, Inc.* ................................... 39,840 16,920 Helen of Troy Ltd.* .............................. 568,681 10,000 Ingles Markets, Inc. - Class A ................... 123,900 17,100 Lance, Inc ....................................... 325,413 19,237 Sanderson Farms, Inc ............................. 832,578 15,915 Sola International, Inc.* ........................ 438,299 2,050 TRM Corporation* ................................. 48,462 ----------- 2,912,639 ----------- 18 THE JAMES SMALL CAP FUND SCHEDULE OF INVESTMENTS (Continued) ================================================================================ Shares COMMON STOCKS -- 93.0% (Continued) Value - -------------------------------------------------------------------------------- ENERGY -- 10.0% 1,800 Adams Resources & Energy, Inc .................... $ 31,752 11,000 Frontier Oil Corporation ......................... 293,260 5,100 Giant Industries, Inc.* .......................... 135,201 23,236 Patina Oil & Gas Corporation ..................... 871,350 3,000 South Jersey Industries, Inc ..................... 157,680 7,500 Terra Nitrogen Company, L.P ...................... 167,325 ----------- 1,656,568 ----------- FINANCIAL -- 8.8% 13,950 Aaron Rents, Inc ................................. 348,750 1,170 ACE Cash Express, Inc.* .......................... 34,702 3,780 Capital Title Group, Inc ......................... 21,433 7,600 Delta Financial Corporation ...................... 78,280 980 Donegal Group, Inc. - Class A .................... 22,471 12,670 FPIC Insurance Group, Inc.* ...................... 448,264 11,420 Irwin Financial Corporation ...................... 324,214 4,400 United Fire & Casualty Company ................... 148,324 1,280 World Acceptance Corporation* .................... 35,213 ----------- 1,461,651 ----------- INDUSTRIAL -- 5.4% 7,700 Briggs & Stratton Corporation .................... 320,166 1,000 Middleby Corporation ............................. 50,720 29,000 OMI Corporation .................................. 488,650 820 Rofin-Sinar Technologies, Inc.* .................. 34,809 ----------- 894,345 ----------- TECHNOLOGY -- 17.3% 8,400 Aviall, Inc.* .................................... 192,948 3,800 Catalyst Semiconductor, Inc.* .................... 20,900 9,500 Diodes, Inc.* .................................... 214,985 6,900 Hutchinson Technology, Inc.* ..................... 238,533 41,800 Imergent, Inc.* .................................. 633,270 5,000 John H. Harland Company .......................... 180,500 11,900 MTS Systems Corporation .......................... 402,339 2,800 Schick Technologies, Inc.* ....................... 44,100 10,595 United Industrial Corporation .................... 410,450 17,500 WESCO International, Inc.* ....................... 518,700 ----------- 2,856,725 ----------- UTILITIES -- 2.9% 11,600 El Paso Electric Company* ........................ 219,704 9,800 Golden Telecom, Inc .............................. 258,916 ----------- 478,620 ----------- TOTAL COMMON STOCKS .............................. $15,381,333 ----------- 19 THE JAMES SMALL CAP FUND SCHEDULE OF INVESTMENTS (Continued) ================================================================================ Par Value U.S. GOVERNMENT & AGENCY BONDS -- 1.8% Value - -------------------------------------------------------------------------------- $300,000 Federal Home Loan Bank Discount Note, 1/4/05 ..... $ 299,918 ----------- ================================================================================ Shares SHORT TERM INVESTMENTS -- 4.9% Value - -------------------------------------------------------------------------------- 803,084 First American Treasury Obligations Fund ......... $ 803,084 ----------- TOTAL INVESTMENT SECURITIES -- 99.7% (Cost $10,575,229) ............................... $16,484,335 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3% .... 46,093 ----------- NET ASSETS -- 100.0% ............................. $16,530,428 =========== * Non-income producing security. See accompanying notes to financial statements. 20 THE JAMES MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS December 31, 2004 (Unaudited) ================================================================================ Shares COMMON STOCKS -- 64.9% Value - -------------------------------------------------------------------------------- BASIC MATERIALS -- 6.7% 10,500 Methanex Corporation ............................. $ 191,730 4,000 Quanex Corporation ............................... 274,280 16,500 Schnitzer Steel Industries, Inc.- Class A ........ 559,845 ----------- 1,025,855 ----------- CONSUMER, CYCLICAL -- 11.5% 9,200 AnnTaylor Stores Corporation* .................... 198,076 7,000 Barnes & Noble, Inc.* ............................ 225,890 4,900 CBRL Group, Inc .................................. 205,065 10,000 Central Garden & Pet Company* .................... 417,400 3,600 The Black & Decker Corporation ................... 317,988 7,500 The Pantry, Inc.* ................................ 225,675 2,500 Timberland Company - Class A* .................... 156,675 ----------- 1,746,769 ----------- CONSUMER, NON-CYCLICAL -- 14.9% 5,000 Coventry Health Care, Inc.* ...................... 265,400 8,000 DaVita, Inc.* .................................... 316,240 14,000 Helen of Troy Ltd.* .............................. 470,540 13,000 Humana, Inc.* .................................... 385,970 9,400 Sierra Health Services, Inc.* .................... 518,033 3,750 The Toro Company ................................. 305,063 ----------- 2,261,246 ----------- ENERGY -- 7.0% 7,896 Apache Corporation ............................... 399,301 10,000 Devon Energy Corporation ......................... 389,200 5,500 Exxon Mobil Corporation .......................... 281,930 ----------- 1,070,431 ----------- FINANCIAL -- 4.6% 7,200 CIT Group Inc .................................... 329,904 14,250 Rent-A-Center, Inc.* ............................. 377,625 ----------- 707,529 ----------- INDUSTRIAL -- 4.0% 6,000 Ball Corporation ................................. 263,880 4,250 PACCAR, Inc ...................................... 342,040 ----------- 605,920 ----------- TECHNOLOGY -- 12.8% 13,000 Autodesk, Inc .................................... 493,350 10,000 Komag, Inc.* ..................................... 187,800 6,702 Moog, Inc. - Class A* ............................ 303,936 5,000 Motorola, Inc .................................... 86,000 10,000 MTS Systems Corporation .......................... 338,100 18,000 WESCO International, Inc.* ....................... 533,519 ----------- 1,942,705 ----------- 21 THE JAMES MARKET NEUTRAL FUND SCHEDULE OF INVESTMENTS (Continued) ================================================================================ Shares COMMON STOCKS -- 64.9% (Continued) Value - -------------------------------------------------------------------------------- UTILITIES -- 3.4% 10,000 Edison International ............................. $ 320,300 3,000 TXU Corporation .................................. 193,680 ----------- 513,980 ----------- TOTAL COMMON STOCKS .............................. $ 9,874,435 ----------- ================================================================================ Par Value U.S. GOVERNMENT & AGENCY BONDS -- 25.4% Value - -------------------------------------------------------------------------------- $500,000 Federal Home Loan Bank Discount Note, 4/15/05 .... $ 496,544 1,000,000 Federal National Mortgage Association Discount Note, 5/25/05 990,060 500,000 Federal National Mortgage Association Discount Note, 1/5/05 ................................... 499,861 500,000 U.S. Treasury Bills, 3/24/05 ..................... 497,600 400,000 U.S. Treasury Bills, 4/21/05 ..................... 397,204 1,000,000 U.S. Treasury Bills, 6/23/05 ..................... 988,208 ----------- TOTAL U.S. GOVERNMENT & AGENCY BONDS ............. $ 3,869,477 ----------- ================================================================================ Shares SHORT TERM INVESTMENTS -- 4.0% Value - -------------------------------------------------------------------------------- 607,890 First American Treasury Obligations Fund ......... $ 607,890 ----------- TOTAL INVESTMENT SECURITIES -- 94.3% (Amortized Cost $10,574,775) ..................... $14,351,802 SEGREGATED CASH WITH BROKERS -- 60.6% ............ 9,226,870 SECURITIES SOLD SHORT -- (56.0%) (Proceeds $7,521,031) ...................................... (8,519,067) OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.1% .... 162,244 ----------- NET ASSETS -- 100.0% ............................. $15,221,849 =========== * Non-income producing security. See accompanying notes to financial statements. 22 THE JAMES MARKET NEUTRAL FUND SCHEDULE OF SECURITIES SOLD SHORT December 31, 2004 (Unaudited) ================================================================================ Shares COMMON STOCKS -- 56.0% Value - -------------------------------------------------------------------------------- BASIC MATERIALS -- 2.6% 7,225 Apex Silver Mines Ltd.* .......................... $ 124,125 9,000 Domtar, Inc ...................................... 108,630 11,000 Glatfelter ....................................... 168,080 ----------- 400,835 ----------- CONSUMER, CYCLICAL -- 12.9% 11,000 99 Cents Only Stores* ............................ 177,760 18,800 AMR Corporation* ................................. 205,860 16,000 Callaway Golf Company ............................ 216,000 4,815 Comcast Corporation Special Class A* ............. 158,125 5,400 Cox Radio, Inc. Class A* ......................... 88,992 5,500 Fairmont Hotels & Resorts, Inc ................... 190,520 4,200 Gaylord Entertainment Company* ................... 174,426 12,155 Northwest Airlines Corporation* .................. 132,854 16,500 TiVo, Inc.* ...................................... 96,855 13,200 ValueVision Media, Inc. Class A* ................. 183,612 16,000 Visteon Corporation .............................. 156,320 5,400 WMS Industries, Inc.* ............................ 181,116 ----------- 1,962,440 ----------- CONSUMER, NONCYCLICAL -- 18.7% 14,000 Adolor Corporation* .............................. 138,880 6,900 Amylin Pharmaceuticals, Inc.* .................... 161,184 14,300 CV Therapeutics, Inc.* ........................... 328,900 9,450 DeVry, Inc.* ..................................... 164,052 1,500 Dreyer's Grand Ice Cream Holdings, Inc ........... 120,645 5,000 Elan Corporation Plc.* ........................... 136,250 7,850 Hain Celestial Group, Inc.* ...................... 162,259 13,740 Impax Laboratories, Inc.* ........................ 218,191 9,790 Nektar Therapeutics* ............................. 198,150 3,050 Neurocrine Biosciences, Inc.* .................... 150,365 6,200 NPS Pharmaceuticals, Inc.* ....................... 113,336 7,500 ScheringPlough Corporation ....................... 156,600 2,900 Sepracor, Inc.* .................................. 172,173 3,400 Shurgard Storage Centers, Inc .................... 149,634 6,400 Taro Pharmaceutical Industries Ltd.* ............. 217,792 3,000 Tejon Ranch Company .............................. 122,400 12,400 Tenet Healthcare Corporation* .................... 136,152 ----------- 2,846,963 ----------- ENERGY -- 1.1% 4,800 GlobalSantaFe Corporation ........................ 158,928 ----------- 23 THE JAMES MARKET NEUTRAL FUND SCHEDULE OF SECURITIES SOLD SHORT (Continued) ================================================================================ Shares COMMON STOCKS -- 56.0% Value - -------------------------------------------------------------------------------- FINANCIAL -- 5.8% 8,500 Brookline Bancorp, Inc ........................... $ 138,720 6,300 Capitol Federal Financial ........................ 226,800 16,255 LaBranche & Company, Inc.* ....................... 145,645 3,000 Paychex, Inc ..................................... 102,240 7,500 Provident Financial Services, Inc ................ 145,275 1,500 XL Capital Ltd. Class A .......................... 116,475 ----------- 875,155 ----------- INDUSTRIAL -- 4.1% 20,600 Ballard Power Systems, Inc.* ..................... 139,668 20,500 Exelixis, Inc.* .................................. 194,750 16,190 PowerOne, Inc.* .................................. 144,415 4,250 Tidewater, Inc ................................... 151,342 ----------- 630,175 ----------- TECHNOLOGY -- 10.8% 11,500 ASML Holding N.V.* ............................... 182,965 16,580 Bearingpoint, Inc.* .............................. 133,137 8,800 FEI Company* ..................................... 184,800 11,350 Genesis Microchip, Inc.* ......................... 184,097 11,600 IDT Corporation* ................................. 170,288 10,400 InterDigital Communications Corporation* ......... 229,840 5,400 National Instruments Corporation ................. 147,150 9,350 NVIDIA Corporation* .............................. 220,286 8,000 Power Integrations, Inc.* ........................ 158,240 3,931 Tellabs, Inc.* ................................... 33,768 ----------- 1,644,571 ----------- TOTAL COMMON STOCKS (Proceeds $7,521,031) ........ $ 8,519,067 =========== See accompanying notes to financial statements. 24 THE JAMES EQUITY FUND SCHEDULE OF INVESTMENTS December 31, 2004 (Unaudited) ================================================================================ Shares COMMON STOCKS -- 96.8% Value - -------------------------------------------------------------------------------- BASIC MATERIALS -- 5.2% 2,400 Dow Chemical ..................................... $ 118,824 10,600 Methanex Corporation ............................. 193,556 5,250 Schnitzer Steel Industries, Inc.- Class A ........ 178,133 ----------- 490,513 ----------- CONSUMER, CYCLICAL -- 23.3% 7,000 Aldila, Inc ...................................... 108,430 4,400 Barnes & Noble, Inc.* ............................ 141,988 4,400 CVS Corporation .................................. 198,308 9,700 Dave & Buster's, Inc.* ........................... 195,940 18,800 Hartmarx Corporation* ............................ 146,076 5,510 Johnson Controls, Inc ............................ 349,554 5,300 Supervalu, Inc ................................... 182,956 2,900 The Black & Decker Corporation ................... 256,157 7,900 The Gap, Inc ..................................... 166,848 5,500 The Home Depot, Inc .............................. 235,070 7,600 The Pantry, Inc.* ................................ 228,684 ----------- 2,210,011 ----------- CONSUMER, NON-CYCLICAL -- 10.4% 3,700 Bunge Ltd ........................................ 210,937 9,250 Cendant Corporation .............................. 216,265 17,000 EZCORP, Inc. - Class A* .......................... 261,970 5,400 Helen of Troy Ltd.* .............................. 181,494 2,000 Sierra Health Services, Inc.* .................... 110,220 ----------- 980,886 ----------- ENERGY -- 16.8% 6,950 Alliance Resource Partners, L.P .................. 514,300 1,300 Amerada Hess Corporation ......................... 107,094 3,820 Anadarko Petroleum Corporation ................... 247,574 4,000 Exxon Mobil Corporation .......................... 205,040 6,300 Giant Industries, Inc.* .......................... 167,013 6,515 Marathon Oil Corporation ......................... 245,029 4,800 Terra Nitrogen Company, L.P ...................... 107,088 ----------- 1,593,138 ----------- FINANCIAL -- 12.5% 2,800 Aetna, Inc ....................................... 349,300 2,100 Allstate Corporation ............................. 108,612 1,900 Bear Stearns Companies, Inc ...................... 194,389 5,150 CIT Group, Inc ................................... 235,973 3,100 National City Corporation ........................ 116,405 4,100 Stewart Information Services Corporation ......... 170,765 ----------- 1,175,444 ----------- 25 THE JAMES EQUITY FUND SCHEDULE OF INVESTMENTS (Continued) ================================================================================ Shares COMMON STOCKS -- 96.8% Value - -------------------------------------------------------------------------------- INDUSTRIAL -- 15.0% 7,100 Aviall, Inc.* .................................... $ 163,087 2,500 Deere & Company .................................. 186,000 2,600 Eaton Corporation ................................ 188,136 2,325 Magna International, Inc. - Class A .............. 191,929 2,800 Norfolk Southern Corporation ..................... 101,332 2,550 PACCAR, Inc ...................................... 205,224 12,700 WESCO International, Inc.* ....................... 376,428 ----------- 1,412,136 ----------- TECHNOLOGY -- 6.6% 4,200 Armor Holdings, Inc.* ............................ 197,484 14,800 Earthlink, Inc.* ................................. 170,496 1,869 Gamestop Corporation - Class B* .................. 41,884 11,200 Komag, Inc.* ..................................... 210,336 ----------- 620,200 ----------- UTILITIES -- 7.0% 5,600 Edison International ............................. 179,368 3,200 Energen Corporation .............................. 188,640 8,775 Southern Company ................................. 294,138 ----------- 662,146 ----------- TOTAL COMMON STOCKS .............................. $ 9,144,474 ----------- ================================================================================ Par Value U.S. GOVERNMENT & AGENCY BONDS -- 1.1% Value - -------------------------------------------------------------------------------- $100,000 Federal Home Loan Bank Discount Note, 1/4/05 ..... $ 99,973 ----------- ================================================================================ Shares SHORT TERM INVESTMENTS -- 3.3% Value - -------------------------------------------------------------------------------- 310,115 First American Treasury Obligations Fund ......... $ 310,115 ----------- TOTAL INVESTMENT SECURITIES -- 101.2% (Cost $7,314,600) ................................ $ 9,554,562 LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.2%) .. (114,681) ----------- NET ASSETS -- 100.0% ............................. $ 9,439,881 =========== * Non-income producing security. See accompanying notes to financial statements. 26 THE JAMES ADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS December 31, 2004 (Unaudited) ================================================================================ 1. General Information and Significant Accounting Policies The Golden Rainbow Fund, The James Small Cap Fund, and The James Market Neutral Fund are each a diversified series of The James Advantage Funds (the "Trust"), and The James Equity Fund (formerly, The James Large Cap Plus Fund) is a non-diversified series of the Trust (individually the "Fund," collectively the "Funds"). The Trust is an open-end management investment company that was organized as an Ohio business trust on August 29, 1997. The Trust is registered under the Investment Company Act of 1940 (the "1940 Act"). The Golden Rainbow Fund was originally organized as a series of the Flagship Admiral Funds Inc., a Maryland corporation. On June 26, 1998, pursuant to an Agreement and Plan of Reorganization, The Golden Rainbow Fund was restructured through a tax-free reorganization as a series of the Trust. The James Small Cap Fund and The James Market Neutral Fund each commenced its public offering of shares on October 2, 1998. The James Equity Fund commenced its public offering of shares on November 1, 1999. The Golden Rainbow Fund seeks to provide total return through a combination of growth and income and preservation of capital in declining markets. The Fund seeks to achieve its objective by investing primarily in common stocks and/or debt securities that the Fund's adviser, James Investment Research, Inc. ("James"), believes are undervalued. The James Small Cap Fund seeks to provide long-term capital appreciation. The Fund seeks to achieve its objective by investing primarily in common stocks of small capitalization companies. The James Market Neutral Fund seeks to provide positive returns regardless of the direction of the stock markets. The Fund seeks to achieve its objective by investing in common stocks that James believes are undervalued and more likely to appreciate, and selling short common stocks that James believes are overvalued and more likely to depreciate. The James Equity Fund seeks to provide long-term capital appreciation and outperform the Standard & Poor's 500 Index (the "S&P 500 Index"). The Fund seeks to achieve its objective by investing primarily in common stocks of large capitalization companies. The Fund often buys stocks in the S&P 500 Index. The following is a summary of significant accounting policies followed by the Funds in preparation of their financial statements, in accordance with U.S. generally accepted accounting principles (GAAP). Share Valuation The net asset value per share of each Fund is calculated daily by dividing the total value of the Fund's assets, less liabilities, by the number of shares outstanding. The net asset value is determined as of the close of the NYSE (generally, 4:00 p.m., Eastern time) on each day that the NYSE is open for business, and on any other day on which there is sufficient trading in a Fund's securities to materially affect the net asset value. Redemption Fees Effective November 1, 2004, The James Small Cap Fund, The James Market Neutral Fund and The James Equity Fund each charge a redemption fee of 1.00% of the amount redeemed if the shares sold were held for fewer than 90 days. From November 1, 2003 through October 31, 2004, the redemption fee charged was 1.00% of the amount redeemed if the shares sold were held for fewer than 180 days. Redemption fees are paid directly to the Fund. Securities Valuation Each Fund's equity securities are valued based on market value. If a market quotation for a security is not readily available, if an event occurs after the close of the trading market (but before the Fund calculates its net asset value) that materially affects a security's value, when James determines that the market quotation does not accurately reflect the current value or when a restricted security is being valued, that security will be valued at its fair value as determined in good faith in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust ("Board"). The Funds may use pricing services to determine market value for securities. 27 THE JAMES ADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ Fixed-income securities are valued on the basis of prices furnished by a pricing service. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at their fair value as determined in good faith in accordance with consistently applied procedures established by and under the general supervision of the Board. Short-term investments in fixed-income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. Securities Transactions Securities transactions are recorded on a trade date basis. Realized gains and losses from security transactions are determined using the specific identification method. Securities purchased or sold on a when-issued or delayed delivery basis may have extended settlement periods. Any securities so purchased are subject to market fluctuation during this period. The Golden Rainbow Fund will instruct its custodian to segregate assets in a separate account with a current value at least equal to the amount of its when-issued and delayed delivery purchase commitments. As of December 31, 2004, The Golden Rainbow Fund had no such outstanding purchase commitments. Short Sales and Segregated Cash The James Market Neutral Fund actively sells short common stocks. Short sales are transactions in which the Fund sells a security it does not own in anticipation of a decline in the market value of that security. To complete such a transaction, the Fund must borrow the security to deliver to the buyer upon the short sale; the Fund is then obligated to replace the security borrowed by purchasing it in the open market at some later date. The Fund will incur a loss if the market price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the security declines in value between those dates. If a security sold short pays a dividend while the Fund is short that security, the Fund will pay the dividend and record that amount as an expense. All short sales are collateralized, as required by the Fund's prime broker. The Fund maintains the collateral in segregated accounts consisting of cash and/or high-grade liquid assets sufficient to collateralize the market value of its short positions. Investment Income Dividend income is recorded on the ex-dividend date. Interest income is determined on the basis of interest accrued, adjusted for amortization of premiums and accretion of discounts on all debt securities. 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. 28 THE JAMES ADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ Federal Income Taxes The Funds generally intend to distribute all taxable income and capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal tax provision is required. The tax character of distributions paid for the years ended June 30, 2004 and 2003 was as follows:
- ---------------------------------------------------------------------------------------- The Golden Rainbow The James Small Cap Fund Fund ------------------------------------------------- 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------- From ordinary income ............... $1,355,926 $1,318,738 $ 5,930 $ 68,743 From long-term capital gains ....... 2,860 1,688,540 35,827 -- ---------- ---------- ---------- ---------- $1,358,786 $3,007,278 $ 41,757 $ 68,743 ========== ========== ========== ==========
- ---------------------------------------------------------------------------------------- The James Market Neutral The James Equity Fund Fund ------------------------------------------------- 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------- From ordinary income ............... $ -- $ -- $ 14,163 $ 27,940 From long-term capital gains ....... -- -- -- -- ---------- ---------- ---------- ---------- $ -- $ -- $ 14,163 $ 27,940 ========== ========== ========== ========== - ----------------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of June 30, 2004:
- --------------------------------------------------------------------------------------------------- The The James The James The James Golden Rainbow Small Cap Market Neutral Equity Fund Fund Fund Fund - --------------------------------------------------------------------------------------------------- Cost of portfolio investments ...... $ 67,132,070 $ 8,781,753 $ 15,052,262 $ 5,993,678 ============ ============ ============ ============ Gross unrealized appreciation ...... 17,184,966 4,820,195 3,951,005 1,401,277 Gross unrealized depreciation ...... (870,080) (463,884) (593,516) (135,187) ------------ ------------ ------------ ------------ Net unrealized appreciation ........ 16,314,886 4,356,311 3,357,489 1,266,090 Post-October losses ................ -- -- (1,294,300) -- Capital loss carryforward .......... (595,374) -- (1,070,202) (3,712,677) Undistributed ordinary income ...... -- -- -- 1,730 Undistributed long-term gains ...... -- 756,432 -- -- ------------ ------------ ------------ ------------ Accumulated earnings (deficit) .. $ 15,719,512 $ 5,112,743 $ 992,987 $ (2,444,857) ============ ============ ============ ============ - ---------------------------------------------------------------------------------------------------
The difference between the cost of portfolio investments and financial statement cost for the Funds is due to certain timing differences in the recognition of capital losses under income tax regulations and generally accepted accounting principles. 29 THE JAMES ADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ The capital loss carryforwards as of June 30, 2004 in the table above expire as follows: - ------------------------------------------------------------------------------ Amount Expiration Date - ------------------------------------------------------------------------------ The Golden Rainbow Fund .................... $ 595,374 June 30, 2011 The James Market Neutral Fund .............. $ 82,512 June 30, 2008 $ 987,690 June 30, 2012 The James Equity Fund ...................... $ 427,706 June 30, 2009 $ 2,976,912 June 30, 2010 $ 130,880 June 30, 2011 $ 177,179 June 30, 2012 - ------------------------------------------------------------------------------ The capital loss carryforwards may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders. 2. Securities Transactions Purchases and sales (including maturities) of investments in long-term U.S. Government obligations for The Golden Rainbow Fund for the six months ended December 31, 2004 were as follows: - ------------------------------------------------------------------------------ Purchases Sales - ------------------------------------------------------------------------------ The Golden Rainbow Fund ................... $ 9,572,609 $ 6,203,906 - ------------------------------------------------------------------------------ Purchases and sales (including maturities) of investments in other securities for the six months ended December 31, 2004 were as follows: - ------------------------------------------------------------------------------ Purchases Sales - ------------------------------------------------------------------------------ The Golden Rainbow Fund .................... $ 8,795,250 $ 8,569,549 The James Small Cap Fund ................... 3,148,866 2,164,613 The James Market Neutral Fund .............. 3,350,845 3,308,846 The James Equity Fund ...................... 2,709,826 1,873,059 - ------------------------------------------------------------------------------ For the six months ended December 31, 2004, the cost of securities purchased to cover short sales and the proceeds from securities sold short were $5,132,610 and $5,618,380, respectively, for The James Market Neutral Fund. 3. Management Fee and Other Transactions with Affiliates Certain trustees and officers of the Trust are also officers of James or Integrated Fund Services, Inc. ("IFS"), the administrative services agent, shareholder services and transfer agent and accounting services agent for the Trust, or of IFS Fund Distributors, Inc., the exclusive agent for the distribution of the Funds' shares. Investment Management Agreement The Funds retain James to manage the Funds' investments. The investment decisions for the Funds are made by a committee of James' personnel, which is primarily responsible for the day-to-day management of each Fund's portfolio. The Golden Rainbow Fund is authorized to pay James a fee equal to an annual rate of 0.74% of its average daily net assets. The Golden Rainbow Fund is responsible for the payment of all operating expenses of the Fund. James is authorized to receive a fee (a) equal to an annual rate of 1.25% of the average daily net assets of The James Small Cap Fund and The James Equity Fund and 1.70% of The James Market Neutral Fund; minus (b) the fees and expenses of 30 THE JAMES ADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ the non-interested person trustees incurred by the applicable Fund. James is responsible for the payment of all operating expenses of The James Small Cap Fund, The James Market Neutral Fund and The James Equity Fund except for brokerage fees and commissions, taxes, interest (including dividend expense on securities sold short), 12b-1 expenses, fees and expenses of non-interested person trustees and extraordinary expenses. Administrative Services Agreement Under the terms of an Administrative Services Agreement with the Trust, IFS supplies executive and regulatory services, supervises the preparation of tax returns, and coordinates the preparation of reports to shareholders and reports to and filings with the Securities and Exchange Commission and state securities authorities. For these services, IFS receives a monthly fee paid by The Golden Rainbow Fund, and paid by James for The James Small Cap Fund, The James Market Neutral Fund and The James Equity Fund, based on each Fund's respective average daily net assets, subject to a minimum monthly fee for each Fund. Transfer Agent and Shareholder Service Agreement Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and Plan Agency Agreement with the Trust, IFS maintains the records of each shareholder's account, answers shareholder inquiries concerning their accounts, processes purchases and redemptions of each Funds' shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions. For these services, IFS receives a monthly fee paid by The Golden Rainbow Fund, and paid by James for The James Small Cap Fund, The James Market Neutral Fund and The James Equity Fund, subject to a minimum monthly fee for each Fund. In addition, The Golden Rainbow Fund and James pay IFS out-of-pocket expenses including, but not limited to, postage and supplies. Accounting Services Agreement Under the terms of the Accounting Services Agreement with the Trust, IFS calculates the daily net asset value per share and maintains the financial books and records of each Fund. For these services, IFS receives a monthly fee from The Golden Rainbow Fund and from James with respect to each of The James Small Cap Fund, The James Market Neutral Fund and The James Equity Fund. In addition, IFS is reimbursed by The Golden Rainbow Fund and James for certain out-of-pocket expenses incurred by IFS in obtaining valuations of the Funds' portfolio securities. Plan of Distribution Each Fund has a Plan of Distribution (the "Plan") under which the Fund may incur or reimburse James for expenses related to the distribution and promotion of its shares. The annual limitation for payment of such expenses under the Plans of The Golden Rainbow Fund, The James Small Cap Fund, The James Market Neutral Fund and The James Equity Fund is 0.25% of the average daily net assets of each respective Fund. Compliance Services Agreement Under the terms of the Compliance Services Agreement between the Trust and IFS, IFS provides certain compliance services to the Trust, including developing and assisting in implementing a compliance program for IFS on behalf of the funds and providing administrative support services to the Funds' Compliance Program and Chief Compliance Officer. 4. Commitments and Contingencies The Funds indemnify the Trust's officers and trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which 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. 31 THE JAMES ADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) ================================================================================ 5. 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 twelve month period ended June 30, 2004 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. 6. 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 beginning with the September 2004 quarter. 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. 7. Schedule of Shareholder Expenses As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including reinvested dividends or other distributions; and redemption fees; and (2) ongoing costs, including investment advisory fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2004 through December 31, 2004). Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six Months Ended December 31, 2004" to estimate the expenses you paid on your account during this period, if you held your shares for the entire period. 32 THE JAMES ADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS (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.
Expenses Paid Net Expense Total Return During the Ratio Six Months Beginning Ending Six Months Annualized Ended Account Value Account Value Ended December 31, December 31, July 1, December 31, December 31, 2004 2004 2004 2004 2004* - -------------------------------------------------------------------------------------------------------------- The Golden Rainbow Fund Actual ..................... 1.26% 9.53% $1,000.00 $1,095.30 $ 6.65 Hypothetical ............... 1.26% 2.52% $1,000.00 $1,018.85 $ 6.41 The James Small Cap Fund Actual ..................... 1.50% 12.12% $1,000.00 $1,121.20 $ 8.02 Hypothetical ............... 1.50% 2.52% $1,000.00 $1,017.64 $ 7.63 The James Equity Fund Actual ..................... 1.50% 16.17% $1,000.00 $1,161.70 $ 8.17 Hypothetical ............... 1.50% 2.52% $1,000.00 $1,017.64 $ 7.63 The James Market Neutral Fund Actual ..................... 2.38% 3.99% $1,000.00 $1,039.90 $ 12.24 Hypothetical ............... 2.38% 2.52% $1,000.00 $1,013.21 $ 12.08
* Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by [number of days in most recent fiscal half-year/365] (to reflect the one-half year period). 33 February 11, 2005 The James Advantage Funds Supplement to Prospectus Dated November 1, 2004 The name of "The Golden Rainbow Fund" has been changed to "the James Balanced: Golden Rainbow Fund." Throughout the Prospectus, replace "The Golden Rainbow Fund" with "the James Balanced: Golden Rainbow Fund." As a result of the name change, the James Balanced: Golden Rainbow Fund will, under normal circumstances, invest at least 25% of its assets in common stock and at least 25% of its assets in debt securities. This should be read in conjunction with the current prospectus (see "What are the Funds' Principal Investment Strategies?"), which indicates that the James Balanced: Golden Rainbow Fund normally holds both common stocks and debt securities, generally with 40%-60% invested in common stocks and 40%-60% invested in debt securities. 34 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 Integrated Fund Services, Inc. P.O. Box 5354 Cincinnati, Ohio 45201-5354 o INDEPENDENT AUDITORS Deloitte & Touche LLP 250 East Fifth Street Suite 1900 Cincinnati, Ohio 45202 o DISTRIBUTOR IFS Fund Distributors, Inc. 221 East Fourth Street Suite 300 Cincinnati, Ohio 45202 o LEGAL COUNSEL Thompson Hine LLP 312 Walnut Street 14th Floor Cincinnati, Ohio 45202 www.jamesfunds.com For information about the Funds, or to make inquiries about the Funds, please call 1-800-99JAMES (1-800-995-2637). FORM IFS-163-0201 Item 2. Code of Ethics. Not applicable. Item 3. Audit Committee Financial Expert. Not applicable. Item 4. Principal Accountant Fees and Services. Not applicable. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. This information is included as part of the report to shareholders filed under Item 1 of this Form. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable. Item 10. Controls and Procedures. (a) Based on an evaluation of the registrant's disclosure controls and procedures as of March 1, 2005, the disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Forms N-CSR is recorded, processed, summarized, and reported on a timely basis. (b) There were no significant changes in the registrant's internal control over financial reporting that occurred during the second quarter of the registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits. (a)(1) Not applicable. (a)(2) Certifications required by Item 11(a) of Form N-CSR are filed herewith. (a)(3) Not applicable. (b) Certifications required by Item 11(b) of Form N-CSR are filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) The James Advantage Funds By (Signature and Title) /s/ Barry R. James - ----------------------------------------- Barry R. James President Date: March 8, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Barry R. James - ----------------------------------------- Barry R. James President Date: March 8, 2005 By (Signature and Title) /s/ Thomas L. Mangan - ----------------------------------------- Thomas L. Mangan Treasurer and Chief Financial Officer Date: March 8, 2005 EX-99.CERT 2 v013717_ex99-cert.txt Exhibit 31.302CERT CERTIFICATIONS I, Barry R. James, certify that: 1. I have reviewed this report on Form N-CSR of the James Advantage Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 8, 2005 /s/ Barry R. James ---------------------------------------- Barry R. James President, James Advantage Funds Exhibit 31.302CERT CERTIFICATIONS I, Thomas L. Mangan, certify that: 1. I have reviewed this report on Form N-CSR of the James Advantage Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 8, 2005 /s/ Thomas L. Mangan ---------------------------------------- Thomas L. Mangan Treasurer and CFO, James Advantage Funds EX-99.906CERT 3 v013717_ex99-906cert.txt EX-32.906CERT CERTIFICATION Barry R. James, Chief Executive Officer, and Thomas L. Mangan, Chief Financial Officer of the James Advantage Funds (the "Registrant"), each certify to the best of his or her knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended December 31, 2004 (the "Form N-CSR") fully complies with the requirements of Sections 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Chief Executive Officer Chief Financial Officer James Advantage Funds James Advantage Funds /s/ Barry R. James /s/ Thomas L. Mangan - ---------------------------- -------------------------------- Barry R. James Thomas L. Mangan Date: March 8, 2005 Date: March 8, 2005 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the James Advantage Funds and will be retained by the James Advantage Funds and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----