---------
JAMES
ADVANTAGE
FUNDS
---------
Advised by James
Investment Research, Inc.
o
December 31, 1998
Semi-Annual Report
(Unaudited)
o
The Golden Rainbow Fund
The James Small Cap Fund
The James Market Neutral Fund
<PAGE>
Letter to Shareholders
of the James Advantage Funds
================================================================================
The James Advantage Funds have continued to grow in the second half of 1998 with
the addition of two new funds for our clients. The James Small Cap Fund and The
James Market Neutral Fund commenced operations in October, and have been
successful in attracting client investments. Of course, The Golden Rainbow Fund
remains the flagship of the James Advantage Funds, and it retains its
conservative, value-oriented objectives.
INVESTMENT GOALS AND OBJECTIVES
Opportunities to find value became abundant in September and October as the
market corrected, only to rally later in the year. However, the fragile
condition of the markets gave added incentive to investors looking for funds,
such as The Golden Rainbow Fund, which have preservation of capital as one of
their primary objectives. The Market Neutral Fund's objective of adding value
regardless of market direction also generated interest in that Fund. The higher
risk tolerance of investors in The James Small Cap Fund was important as that
sector of the market continued its multi-year under-performance.
INVESTMENT PHILOSOPHY
Our value-oriented approach to investing is designed to be conservative in
nature. We find that companies with strong earnings and growing markets
generally attract investor interest when used in a top-down style of portfolio
management. This has been the philosophy behind The Golden Rainbow Fund since
its inception, and we remain committed to researching and discovering value in
the stock market. This pursuit is used in combination with its opposite in The
Market Neutral Fund. That is, we try to purchase stocks showing value while
selling short stocks exhibiting what our analysis shows as a lack of value. If
we are successful this style would be profitable regardless of market
conditions. The value orientation of The Small Cap Fund is determined through
our proprietary research, which uses a multi-factor approach in analyzing
stocks. In all our styles, we place value at the top of the list of desirable
traits.
STRATEGY FOR MEETING FUND OBJECTIVES
The divergence in performance of large and small cap stocks has been a dominant
factor during the year. We recognized the split personality of the markets and
added large cap stocks in The Golden Rainbow Fund, but small and mid cap stocks
with strong value traits are still held in the portfolio. Bonds added to the
growth and income of the Fund as the fixed income markets had a strong showing.
The Market Neutral Fund began the investment process and quickly developed a
strategy of letting the markets come to it. That is, a core position, either
long or short, was established and added to as the gyrations of the market
created opportunities. The steady approach to investing employed by The Small
Cap Fund eliminates the emotion of the markets and lets us rely on our pursuit
of value. In all these styles, the volatility of the markets offers
opportunities to establish or liquidate holdings. We believe this high level of
volatility is likely to remain for some time to come. We will attempt to use it
to the Funds' advantage.
FUND PERFORMANCE
Large cap stocks, and in particular technology stocks, have performed well over
the last six months. Stocks such as Lucent, Intel and Dell have proven their
value. Retail-oriented stocks such as Dayton Hudson have also added value. As we
mentioned earlier, smaller cap stocks are lagging and energy stocks are
reflecting the low cost of oil and gas. However, we believe these stocks to be
at bargain prices.
EXPECTATIONS FOR THE FUTURE
We have seen the stock market grow increasingly nervous as it soared to new
heights, and hundred point swings have become commonplace. In this higher risk
environment, our focus on value should reduce the effects of the market's
turmoil. We think small cap stocks are becoming more attractive compared to
large caps. Energy and basic materials, long neglected by the markets, may soon
have their day. Technology stocks will remain important, but many have run too
fast and need some time to consolidate their gains. As always, events in other
countries will have an impact on the U.S. markets, further complicating the
challenge. We believe we are well positioned to handle this challenge.
/s/ Barry R. James
Barry R. James, CFA, CIC
President
1
<PAGE>
<TABLE>
<CAPTION>
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1998 (Unaudited)
===================================================================================================================
The Golden The James The James
Rainbow Small Cap Market Neutral
Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
<S> <C> <C> <C>
At amortized cost ............................................. $101,039,101 $ 2,904,777 $ 2,486,255
============ ============ ============
At value (Note 1) ............................................. $124,971,857 $ 2,951,781 $ 2,598,524
Segregated cash with brokers (Note 1) ............................ -- -- 1,761,632
Receivable for capital shares sold ............................... 96 250 38,689
Receivable for securities sold ................................... -- 31,819 142,027
Dividends and interest receivable ................................ 999,304 2,141 7,780
Other assets ..................................................... 12,455 14 382
------------ ------------ ------------
TOTAL ASSETS .................................................. 125,983,712 2,986,005 4,549,034
------------ ------------ ------------
LIABILITIES
Securities sold short (proceeds $1,327,434) ...................... -- -- 1,331,081
Payable for capital shares redeemed .............................. 8,756 -- --
Payable for securities purchased ................................. -- 123,345 142,633
Accrued expenses:
Management fees (Note 3) ...................................... 67,979 2,924 4,021
12b-1 distribution and service fees (Note 3) .................. 48,817 1,040 963
Other ........................................................ 23,997 -- --
------------ ------------ ------------
TOTAL LIABILITIES ......................................... 149,549 127,309 1,478,698
------------ ------------ ------------
NET ASSETS ....................................................... $125,834,163 $ 2,858,696 $ 3,070,336
============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital .................................................. $101,368,302 $ 2,812,651 $ 3,033,237
Undistributed net investment income .............................. 19,073 -- 36
Accumulated net realized gains (losses) from security transactions 514,032 (959) (71,559)
Net unrealized appreciation on investments ....................... 23,932,756 47,004 108,622
------------ ------------ ------------
NET ASSETS ....................................................... $125,834,163 $ 2,858,696 $ 3,070,336
============ ============ ============
Shares of beneficial interest outstanding (unlimited number of
shares authorized, no par value) (Note 4) ..................... 7,204,118 252,663 302,152
============ ============ ============
Net asset value and redemption price per share (Note 1) .......... $ 17.47 $ 11.31 $ 10.16
============ ============ ============
Maximum offering price per share (Note 1) ........................ $ 18.24 $ 11.81 $ 10.61
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
For the Six Months Ended December 31, 1998 (Unaudited)
========================================================================================================
The Golden The James The James
Rainbow Small Cap Market Neutral
Fund Fund(A) Fund(A)
- --------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C>
Dividends ............................................ $ 468,247 $ 7,212 $ 19,114
Interest ............................................. 1,893,862 10 96
----------- ----------- -----------
TOTAL INVESTMENT INCOME ........................... 2,362,109 7,222 19,210
----------- ----------- -----------
EXPENSES
Management fees (Note 3) ............................. 460,235 4,199 5,551
12b-1 distribution and service fees - Class A (Note 3) 155,484 1,040 963
Administration fees (Note 3) ......................... 40,207 -- --
Accounting services fees (Note 3) .................... 18,000 -- --
Shareholder report printing and mailing .............. 13,986 -- --
Transfer agent fees (Note 3) ......................... 9,000 -- --
Custodian fees and expenses .......................... 8,743 -- --
Insurance expense .................................... 6,650 -- --
Professional fees .................................... 6,497 -- --
Trustees fees ........................................ 4,550 1,000 1,000
Dividend expense on securities sold short ............ -- -- 1,253
Other expenses ....................................... 7,190 -- --
----------- ----------- -----------
Total expenses before fee waivers ................. 730,542 6,239 8,767
Management fees waived (Note 3) ...................... (52,742) -- --
12b-1 distribution and service fees waived (Note 3) .. (55,954) -- --
----------- ----------- -----------
Total fee waivers ................................. (108,696) -- --
----------- ----------- -----------
Net expenses ...................................... 621,846 6,239 8,767
----------- ----------- -----------
NET INVESTMENT INCOME ................................... 1,740,263 983 10,443
----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains (losses) from security transactions 3,199,275 (959) (25,701)
Net realized gains (losses) on
closed short positions ............................ -- -- (45,858)
Net change in unrealized appreciation/depreciation
on investments .................................... 3,985,933 47,004 108,622
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS
ON INVESTMENTS ....................................... 7,185,208 46,045 37,063
----------- ----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............. $ 8,925,471 $ 47,028 $ 47,506
=========== =========== ===========
</TABLE>
(A) Represents the period from the initial public offering of shares (October
2, 1998) through December 31, 1998.
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended December 31, 1998 and June 30, 1998
============================================================================================================================
The Golden The James The James
Rainbow Small Cap Market Neutral
Fund Fund Fund
------------------------------- ------------- -------------
Six Months Period Ended Period Ended
Ended Year Ended Dec. 31, Dec. 31,
Dec. 31, 1998 June 30, 1998(A) 1998(A)
(Unaudited) 1998 (Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............................ $ 1,740,263 $ 4,809,856 $ 983 $ 10,443
Net realized gains (losses) from:
Security transactions ......................... 3,199,275 17,391,584 (959) (25,701)
Closed short positions ........................ -- -- -- (45,858)
Net change in unrealized appreciation/depreciation
on investments ............................. 3,985,933 (8,773,490) 47,004 108,622
------------- ------------- ------------- -------------
Net increase in net assets from operations .......... 8,925,471 13,427,950 47,028 47,506
------------- ------------- ------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ............. (1,794,136) (4,808,630) (983) (10,407)
Distributions from net realized gains ............ (16,312,364) (10,825,570) -- --
------------- ------------- ------------- -------------
Decrease in net assets from distributions
to shareholders .................................. (18,106,500) (15,634,200) (983) (10,407)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (Note 4):
Proceeds from shares sold ........................ 2,306,033 8,787,070 2,930,189 3,022,830
Net asset value of shares issued in reinvestment
of distributions to shareholders .............. 17,469,252 14,819,001 983 10,407
Payments for shares redeemed ..................... (16,854,374) (46,489,017) (118,521) --
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from capital
share transactions ............................... 2,920,911 (22,882,946) 2,812,651 3,033,237
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ....................................... (6,260,118) (25,089,196) 2,858,696 3,070,336
NET ASSETS:
Beginning of period .............................. 132,094,281 157,183,477 -- --
------------- ------------- ------------- -------------
End of period .................................... $ 125,834,163 $ 132,094,281 $ 2,858,696 $ 3,070,336
============= ============= ============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ................. $ 19,073 $ 72,946 $ -- $ 36
============= ============= ============= =============
SUMMARY OF CAPITAL SHARE ACTIVITY:
Shares sold ...................................... 124,077 453,412 263,215 301,134
Shares issued in reinvestment of distributions
to shareholders ............................... 1,021,173 798,284 90 1,018
Shares redeemed .................................. (906,669) (2,425,023) (10,642) --
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding .... 238,581 (1,173,327) 252,663 302,152
Shares outstanding, beginning of period .......... 6,965,537 8,138,864 -- --
------------- ------------- ------------- -------------
Shares outstanding, end of period ................ 7,204,118 6,965,537 252,663 302,152
============= ============= ============= =============
</TABLE>
(A) Represents the period from the initial public offering of shares (October
2, 1998) through December 31, 1998.
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
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, 1998 ------------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............. $ 18.96 $ 19.31 $ 17.56 $ 18.27 $ 16.67 $ 17.81
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........................... 0.26 0.65 0.66 0.73 0.69 0.66
Net realized and unrealized gains
(losses) on investments ...................... 1.10 1.08 2.16 0.61 1.94 (0.89)
-------- -------- -------- -------- -------- --------
Total from investment operations ................... 1.36 1.73 2.82 1.34 2.63 (0.23)
-------- -------- -------- -------- -------- --------
Less distributions:
From net investment income ...................... (0.26) (0.65) (0.68) (0.74) (0.68) (0.66)
From net realized gains on investments .......... (2.59) (1.43) (0.39) (1.31) (0.35) (0.25)
-------- -------- -------- -------- -------- --------
Total distributions ................................ (2.85) (2.08) (1.07) (2.05) (1.03) (0.91)
-------- -------- -------- -------- -------- --------
Net asset value at end of period ................... $ 17.47 $ 18.96 $ 19.31 $ 17.56 $ 18.27 $ 16.67
======== ======== ======== ======== ======== ========
Total return(A) .................................... 7.71% 9.47% 16.55% 7.76% 16.54% (1.49)%
======== ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets(B) ..... 1.00%(C) 1.08% 1.09% 1.06% 1.04% 0.96%
Ratio of net investment income to average net assets 2.80%(C) 3.29% 3.63% 4.01% 4.05% 3.70%
Portfolio turnover rate ............................ 37%(C) 54% 56% 83% 48% 31%
Net assets at end of period (000's) ................ $125,834 $132,094 $157,183 $184,307 $191,473 $188,747
</TABLE>
(A) Total returns exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements, the ratios of expenses to
average net assets would have been 1.18% (C) for the six months ended
December 31, 1998 and 1.23%, 1.24%, 1.26%, 1.27%, and 1.24% for the years
ended June 30, 1998, 1997, 1996, 1995 and 1994, respectively (Note 3).
(C) Annualized.
See accompanying notes to financial statements.
5
<PAGE>
THE JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout the Period
- --------------------------------------------------------------------------------
Period
Ended
Dec. 31, 1998(A)
(Unaudited)
- --------------------------------------------------------------------------------
Net asset value at beginning of period ...................... $ 10.00
--------
Income from investment operations:
Net investment income .................................... 0.00
Net realized and unrealized gains on investments ......... 1.31
--------
Total from investment operations ............................ 1.31
--------
Less distributions:
From net investment income ............................... (0.00)
From net realized gains on investments ................... --
--------
Total distributions ......................................... --
--------
Net asset value at end of period ............................ $ 11.31
========
Total return(B) ............................................. 13.14%
========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets ................. 1.47%(C)
Ratio of net investment income to average net assets ........ 0.23%(C)
Portfolio turnover rate ..................................... 8%(C)
Net assets at end of period (000's) ......................... $ 2,859
(A) Represents the period from the initial public offering of shares (October
2, 1998) through December 31, 1998.
(B) Total returns exclude the effect of applicable sales loads and are not
annualized.
(C) Annualized.
See accompanying notes to financial statements.
6
<PAGE>
THE JAMES MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout the Period
- --------------------------------------------------------------------------------
Period
Ended
Dec. 31, 1998(A)
(Unaudited)
- --------------------------------------------------------------------------------
Net asset value at beginning of period ...................... $ 10.00
---------
Income from investment operations:
Net investment income .................................... 0.03
Net realized and unrealized gains on investments ......... 0.16
---------
Total from investment operations ............................ 0.19
---------
Less distributions:
From net investment income ............................... (0.03)
From net realized gains on investments ................... --
---------
Total distributions ......................................... (0.03)
---------
Net asset value at end of period ............................ $ 10.16
=========
Total return(B) ............................................. 1.95%
=========
Ratios/Supplemental Data:
Ratio of net expenses to average net assets,
excluding dividends on securities sold short ............. 1.91%(C)
Expenses from dividends on securities sold short ............ 0.32%(C)
---------
Ratio of net expenses to average net assets ................. 2.23%(C)
Ratio of net investment income to average net assets ........ 2.65%(C)
Portfolio turnover rate ..................................... 77%(C)
Net assets at end of period (000's) ......................... $ 3,070
(A) Represents the period from the initial public offering of shares (October
2, 1998) through December 31, 1998.
(B) Total returns exclude the effect of applicable sales loads and are not
annualized.
(C) Annualized.
See accompanying notes to financial statements.
7
<PAGE>
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 53.9% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 2.1%
5,000 Ashland, Inc. ................................. $ 241,875
110,900 Barrick Gold Corporation ...................... 2,162,550
5,200 E.I. du Pont de Nemours and Company Ltd. ...... 275,925
------------
2,680,350
------------
CONSUMER, CYCLICAL -- 5.2%
45,000 Bowne & Company, Inc. ......................... 804,375
14,000 Dayton-Hudson Corporation ..................... 759,500
19,000 Furniture Brands International, Inc. * ........ 517,750
13,500 GAP, Inc. ..................................... 759,375
10,000 General Motors Corporation .................... 715,625
29,000 Jones Apparel Group, Inc. * ................... 639,813
10,000 Kellwood Company .............................. 250,000
40,500 Lowe's Companies, Inc. ........................ 2,073,094
------------
6,519,532
------------
CONSUMER, NON-CYCLICAL -- 17.3%
49,400 Allegiance Corporation ........................ 2,303,275
6,500 Amgen, Inc. * ................................. 679,656
34,333 Bindley Western Industries .................... 1,690,900
53,000 Bristol-Myers Squibb Company .................. 7,092,063
5,500 Coors (Adolph) Company - Class B .............. 310,406
18,000 Dean Foods Company ............................ 734,625
7,000 Kroger Company * .............................. 423,500
7,000 Lilly (Eli) & Co. ............................. 622,125
10,200 Pfizer, Inc. .................................. 1,279,463
51,000 Premark International, Inc. ................... 1,765,875
20,000 Procter & Gamble Company ...................... 1,826,250
13,000 Schering-Plough Corporation ................... 718,250
35,000 Supervalu, Inc. ............................... 980,000
18,000 Warner-Lambert, Inc. .......................... 1,353,375
------------
21,779,763
------------
ENERGY -- 3.4%
32,000 Exxon Corporation ............................. 2,340,000
21,000 Helmerich & Payne ............................. 406,875
5,000 Lakehead Pipeline LP .......................... 242,500
41,500 Williams Companies ............................ 1,294,281
------------
4,283,656
------------
8
<PAGE>
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 53.9% Value
- --------------------------------------------------------------------------------
FINANCE -- 3.8%
46,000 American Bankers Insurance Group .............. $ 2,225,250
21,000 The Equitable Companies ....................... 1,215,375
20,000 Lehman Brothers Holding Company ............... 881,250
10,750 Prologis Trust ................................ 223,062
5,000 UMB Financial Corporation ..................... 229,375
------------
4,774,312
------------
INDUSTRIAL -- 4.2%
26,000 Airborne Freight Corporation .................. 937,625
22,000 Southdown, Inc. ............................... 1,302,125
22,500 Lafarge Corporation ........................... 911,250
45,000 Mohawk Industries, Inc. * ..................... 1,892,813
12,000 Timken Company ................................ 226,500
------------
5,270,313
------------
INTERNATIONAL -- 2.0%
25,000 Korea Electric Power SPN-ADR .................. 392,187
77,000 YPF S.A.-ADR .................................. 2,151,188
------------
2,543,375
------------
TECHNOLOGY -- 8.4%
21,000 AT&T Corporation .............................. 1,580,250
27,000 CTS Corporation ............................... 1,174,500
20,600 Dell Computer Corporation * ................... 1,507,662
31,000 HBO & Company ................................. 889,312
26,300 Intel Corporation ............................. 3,118,194
7,100 Lucent Technologies, Inc. ..................... 781,000
11,300 Microsoft Corporation * ....................... 1,567,169
------------
10,618,087
------------
UTILITIES -- 7.5%
33,000 Columbia Energy Corporation ................... 1,905,750
35,500 Duke Energy Corporation ....................... 2,274,219
90,400 Energen Corporation ........................... 1,762,800
92,000 NIPSCO Industries ............................. 2,800,250
7,000 Pinnacle West Capital ......................... 296,625
20,000 Washington Water and Power Company* ........... 385,000
------------
9,424,644
------------
TOTAL COMMON STOCKS (Cost $48,024,302) ........ $ 67,894,032
------------
================================================================================
Par Value CORPORATE BONDS -- 4.9% Value
- --------------------------------------------------------------------------------
$2,625,000 Ameritech, 5.95%, 1/15/38 ..................... $ 2,718,818
1,200,000 Bank One Texas, 6.25%, 2/15/08 ................ 1,240,476
500,000 GTE, 7.51%, 4/1/09 ............................ 573,978
500,000 Illinois Bell Telephone, 7.125%, 7/1/23 ....... 514,761
500,000 Pacific G & E, 7.25%, 8/1/26 .................. 530,160
500,000 Procter & Gamble, 7.375%, 3/1/23 .............. 530,437
------------
TOTAL CORPORATE BONDS (Amortized Cost $5,845,913) $ 6,108,630
------------
9
<PAGE>
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS-- 38.3% Value
- --------------------------------------------------------------------------------
$3,000,000 U.S. Treasury Notes, 6.25%, 4/30/01 ........... $ 3,105,939
4,000,000 U.S. Treasury Notes, 6.50%, 5/31/01 ........... 4,166,252
6,000,000 U.S. Treasury Notes, 5.50%, 1/31/03 ........... 6,174,378
16,000,000 U.S. Treasury Notes, 6.25%, 2/15/07 ........... 17,550,000
7,300,000 U.S. Treasury Notes, 6.125%, 8/15/07 .......... 7,977,535
2,000,000 U.S. Treasury Notes, 5.50%, 2/15/08 ........... 2,120,000
500,000 U.S. Treasury Bonds, 10.375%, 11/15/09 ........ 639,062
2,000,000 U.S. Treasury Bonds, 10.00%, 5/15/10 .......... 2,553,750
2,000,000 U.S. Treasury Bonds, 5.25%, 11/15/28 .......... 2,050,000
3,000,000 U.S. Treasury STRIPS, 0.00%, 5/15/08 .......... 1,896,327
------------
TOTAL U.S. GOVERNMENT &
AGENCY BONDS (Amortized Cost $44,432,934) .. $ 48,233,243
------------
================================================================================
Shares SHORT-TERM INVESTMENTS -- 2.2% Value
- --------------------------------------------------------------------------------
2,735,952 Star Treasury Money Market Fund (at cost) ..... $ 2,735,952
------------
TOTAL INVESTMENT SECURITIES -- 99.3%
(Amortized Cost $101,039,101) .............. $124,971,857
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.7% . 862,306
------------
NET ASSETS -- 100.0% .......................... $125,834,163
============
* Non-income producing security.
See accompanying notes to financial statements.
10
<PAGE>
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 96.3% Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 7.5%
4,365 AK Steel Holding Corp. ........................ $ 102,577
1,945 Mueller Industries, Inc. * .................... 39,508
5,215 National Steel Corp. - Class B ................ 37,157
2,430 RTI International Metals, Inc. * .............. 34,020
------------
213,262
------------
CONSUMER, CYCLICAL -- 16.7%
2,030 Alaska Air Group, Inc. * ...................... 89,827
2,855 Arvin Industries, Inc. ........................ 119,018
4,340 Bowne & Co., Inc. ............................. 77,577
8,210 Burlington Coat Factory Warehouse Corp. ....... 133,926
3,860 The Dress Barn, Inc. * ........................ 58,624
------------
478,972
------------
CONSUMER, NON-CYCLICAL -- 9.1%
3,995 Pilgrim's Pride Corp. - Class B ............... 79,650
5,070 The West Company, Inc. ........................ 180,936
------------
260,586
------------
ENERGY -- 13.9%
3,535 Lakehead Pipeline Partners, LP * .............. 171,448
1,880 SEACOR SMIT, Inc. * ........................... 92,942
4,915 Southwest Gas Corp. ........................... 132,091
------------
396,481
------------
FINANCIAL -- 3.1%
2,893 Fidelity National Financial, Inc. ............. 88,237
------------
INDUSTRIAL -- 31.3%
3,950 Granite Construction, Inc. * .................. 132,572
7,985 JLG Industries, Inc. .......................... 124,766
2,295 Kennametal, Inc. .............................. 48,769
7,880 Lincoln Electric Holdings, Inc. ............... 175,330
4,440 Roadway Express, Inc. ......................... 64,102
1,480 Tecumseh Products Co. - Class B ............... 66,970
2,400 Texas Industries, Inc. ........................ 64,650
6,935 Tredegar Industries, Inc. ..................... 156,037
3,170 Yellow Corp. * ................................ 60,626
------------
893,822
------------
TECHNOLOGY -- 4.3%
4,960 GenCorp, Inc. ................................. 123,690
------------
11
<PAGE>
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 96.3% Value
- --------------------------------------------------------------------------------
UTILITIES -- 10.4%
3,175 Commonwealth Energy System .................... $ 128,588
10,000 El Paso Electric Company * .................... 87,500
3,930 Public Service Company of New Mexico .......... 80,319
------------
296,407
------------
TOTAL COMMON STOCKS (Cost $2,704,481) ......... $ 2,751,457
------------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 3.5% Value
- --------------------------------------------------------------------------------
$ 100,000 U.S. Treasury Bill, 1/14/99
(Amortized Cost $99,875) ................... $ 99,903
------------
================================================================================
Shares SHORT TERM INVESTMENTS-- 3.5% Value
- --------------------------------------------------------------------------------
100,421 Star Treasury Money Market Fund (at cost) ..... $ 100,421
------------
TOTAL INVESTMENT SECURITIES -- 103.3%
(Amortized Cost $2,904,777) ................ 2,951,781
LIABILITIES IN EXCESS OF OTHER ASSETS-- (3.3)% (93,085)
------------
NET ASSETS-- 100.0% ........................... $ 2,858,696
============
* Non-income producing security.
See accompanying notes to financial statements.
12
<PAGE>
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
================================================================================
Shares COMMON STOCKS -- 49.1% Value
- --------------------------------------------------------------------------------
CONSUMER, CYCLICAL -- 12.3%
913 Daimlerchrysler AG * .......................... $ 87,705
1,200 Maytag Corporation ............................ 74,700
2,900 Navistar International Corporation * .......... 82,650
2,600 Southwest Airlines Company .................... 58,338
3,900 Trans World Entertainment Corporation * ....... 74,344
------------
377,737
------------
CONSUMER, NON-CYCLICAL-- 13.0%
750 Amgen, Inc. * ................................. 78,422
1,350 Coors (Adolph) Company - Class B .............. 76,191
2,740 Michael Foods, Inc. ........................... 82,200
1,000 Pacificare Health Systems, Inc. * ............. 72,750
700 Pfizer, Inc. .................................. 87,806
------------
397,369
------------
ENERGY -- 4.3%
3,475 Lyondell Chemical Company ..................... 62,550
1,875 Sunoco, Inc. .................................. 67,617
------------
130,167
------------
FINANCIAL -- 2.5%
675 Transamerica Corporation ...................... 77,963
------------
INDUSTRIAL -- 4.0%
7,400 Bethlehem Steel Corporation * ................. 61,975
2,275 Texas Industries, Inc. ........................ 61,283
------------
123,258
------------
TECHNOLOGY -- 7.8%
1,625 Cordant Technologies, Inc. .................... 60,937
3,100 THQ, Inc. * ................................... 86,800
2,675 Unisys Corporation * .......................... 92,120
------------
239,857
------------
UTILITIES -- 5.2%
1,200 AT&T Corporation .............................. 90,300
1,470 Superior Telecom, Inc. ........................ 69,457
------------
159,757
------------
TOTAL COMMON STOCKS (Cost $1,394,120) ......... $ 1,506,108
------------
13
<PAGE>
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 32.5% Value
- --------------------------------------------------------------------------------
$1,000,000 U.S. Treasury Bill, 1/14/99
(Amortized Cost $998,755) .................. $ 999,036
------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 3.0% Value
- --------------------------------------------------------------------------------
93,380 Star Treasury Money Market (at cost) .......... $ 93,380
------------
TOTAL INVESTMENT SECURITIES -- 84.6%
(Amortized Cost $2,486,255) ................ 2,598,524
SECURITIES SOLD SHORT -- (43.3)% (Cost $1,327,434) (1,331,081)
OTHER ASSETS IN EXCESS OF LIABILITIES -- 58.7% 1,802,893
------------
NET ASSETS -- 100.0% .......................... $ 3,070,336
============
* Non-income producing security.
See accompanying notes to financial statements.
14
<PAGE>
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
December 31, 1998 (Unaudited)
================================================================================
Shares COMMON STOCKS SOLD SHORT-- 43.3% Value
- --------------------------------------------------------------------------------
CONSUMER, CYCLICAL -- 13.7%
1,900 Gaylord Entertainment Company ................. $ 57,238
1,450 Lamar Advertising Company * ................... 54,012
1,900 Northwest Airlines Corporation * .............. 48,569
3,800 Pep Boys - Manny, Moe & Jack .................. 59,613
2,325 Polaroid Corporation .......................... 43,448
2,300 Readers Digest Association - Class A .......... 57,931
3,000 Triarc Companies, Inc. * ...................... 48,000
1,150 Union Pacific Corporation ..................... 51,822
------------
420,633
------------
CONSUMER, NON-CYCLICAL -- 8.6%
2,000 Columbia/HCA Healthcare Corporation ........... 49,500
3,000 Dreyer's Grand Ice Cream, Inc. ................ 45,375
2,400 ICN Pharmaceuticals, Inc. ..................... 54,300
5,000 Ligand Pharmaceuticals, Inc. - Class B ........ 58,125
3,300 Rollins, Inc. ................................. 57,750
------------
265,050
------------
ENERGY -- 2.4%
4,900 Triton Energy Limited * ....................... 38,894
3,750 Pioneer Natural Resources ..................... 32,812
------------
71,706
------------
FINANCIAL -- 1.0%
2,300 Harris Financial, Inc. * ...................... 31,338
------------
INDUSTRIAL -- 5.8%
3,400 Imation Corporation * ......................... 59,500
2,400 Millipore Corporation ......................... 68,250
1,130 Synetic, Inc. * ............................... 49,720
------------
177,470
------------
TECHNOLOGY -- 6.4%
2,500 LAM Research Corporation * .................... 44,531
2,700 Manugistics Group, Inc. * ..................... 33,750
2,400 PRI Automation, Inc. * ........................ 62,400
2,250 Transkaryotic Therapies, Inc. * ............... 57,094
------------
197,775
------------
UTILITIES -- 5.4%
3,375 Intermedia Communications, Inc. * ............. 58,219
3,350 Loral Space & Communications, Ltd. * .......... 59,672
1,575 Mcleodusa, Inc. * ............................. 49,218
------------
167,109
------------
TOTAL COMMON STOCKS SOLD SHORT (Cost $1,327,434) $ 1,331,081
============
* Non-income producing security.
See accompanying notes to financial statements.
15
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (Unaudited)
================================================================================
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Golden Rainbow Fund, The James Small Cap Fund, and The James Market Neutral
Fund (the "Funds") are each a diversified series of The James Advantage Funds
(the "Trust"), an open-end management investment company, 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 Fund 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 the public offering of shares on October 2, 1998.
The Golden Rainbow Fund seeks to provide total return through a combination of
growth, income and preservation of capital in declining markets. The Fund seeks
to achieve its objective by investing primarily in equity 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
U.S. companies with small market capitalizations. James selects stocks that it
believes are undervalued and more likely to appreciate.
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 following is a summary of significant accounting policies followed by the
Funds in preparation of their financial statements, in accordance with generally
accepted accounting principles.
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 maximum offering price per share is equal to net asset value
per share plus a sales load equal to 4.38% of net asset value (or 4.2% of the
offering price). The redemption price per share is equal to the net asset value
per share.
SECURITIES VALUATION
Securities which are traded on any exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price. Lacking a last sale price, a
security is valued at its last bid price. All other securities for which
over-the-counter market quotations are readily available are valued at their
last bid price. When market quotations are not readily available, when the
Adviser determines the last bid price does not accurately reflect the current
value or when restricted securities are being valued, such 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
of Trustees.
Fixed income securities generally are valued using market quotations, but may be
valued on the basis of prices furnished by a pricing service when market
quotations are not readily available. 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.
16
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
SECURITIES TRANSACTIONS
Securities transactions are recorded on a trade date basis. Realized gains and
losses from security transactions are determined on 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 Funds have instructed their 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. At
December 31, 1998, the Funds 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.
All short sales must be fully collateralized. The Fund maintains the collateral
in segregated accounts consisting of cash and/or U.S. Government securities
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 long-term debt securities when required
for federal income tax purposes.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income is 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 loss
carryovers. 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 generally accepted accounting principles.
Accordingly, temporary over-distributions 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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
FEDERAL INCOME TAXES
The Funds 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.
17
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
The following information is based upon the federal income tax cost of portfolio
investments as of December 31, 1998:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
The Golden The James The James
Rainbow Small Cap Market Neutral
Fund Fund Fund
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized appreciation .. $ 26,155,882 $ 172,467 $ 231,389
Gross unrealized depreciation .. (2,223,126) (125,463) (122,767)
------------- ----------- -----------
Net unrealized appreciation .... $ 23,932,756 $ 47,004 $ 108,622
============= =========== ===========
Federal income tax cost ........ $ 101,039,101 $ 2,904,777 $ 2,486,255
============= =========== ===========
- -----------------------------------------------------------------------------------------
</TABLE>
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, 1998 equaled $4,102,813 and $22,845,874, respectively. Purchases
and sales (including maturities) of investments in other long-term securities
for the periods ended December 31, 1998 equaled $18,047,889 and $12,917,194,
respectively, for The Golden Rainbow Fund, $2,743,293 and $37,852, respectively,
for The James Small Cap Fund, and $1,600,031 and $180,209, respectively, for The
James Market Neutral Fund. For the period ended December 31, 1998, the cost of
securities purchased to cover short sales and the proceeds from securities sold
short were $201,988 and $1,484,314, 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
Countrywide Fund Services, Inc. (CFS), the administrative services agent for the
Trust.
INVESTMENT MANAGEMENT AGREEMENT
The Funds retain James to manage the Funds' investments. The investment
decisions for the Funds are made by a committee of the Adviser, which is
primarily responsible for the day-to-day management of each Fund's portfolio.
The Golden Rainbow Fund is authorized to pay the Adviser a fee equal to an
annual rate of 0.74% of its average daily net assets, and the Adviser has agreed
to waive a portion of its fee so that through June 30, 1999 the fee after waiver
will be 0.65%. The Golden Rainbow Fund, like most other mutual funds, 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 Small Cap Fund and 1.70% of The Market Neutral
Fund; minus (b) the fees and expenses of the non-interested person trustees
incurred by the applicable Fund. James is responsible for the payment of all
operating expenses of The Small Cap Fund and The Market Neutral Fund, except for
brokerage fees and commissions, taxes, interest, 12b-1 expenses, fees and
expenses of non-interested person trustees and extraordinary expenses.
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of an Administrative Agreement with the Trust, CFS 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, The Golden Rainbow Fund pays CFS a monthly fee,
at the annual rate of .10% of the average value of its daily net assets up to
$25,000,000; .075% of such assets from $25,000,000 to $50,000,000; and .05% of
such assets in excess of $50,000,000;
18
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
subject to a $1,000 monthly minimum fee. James pays CFS a monthly fee for each
of the James Small Cap and Market Neutral Funds at the annual rate of .10% of
the average value of its daily net assets up to $25,000,000; .075% of such
assets from $25,000,000 to $50,000,000; and .05% of such assets in excess of
$50,000,000; subject to a $1,000 monthly minimum fee.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement with the Trust, CFS maintains the records of each
shareholder's account, answers shareholder inquiries concerning their accounts,
processes purchases and redemptions of each Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.
For these services, CFS receives a monthly fee paid by The Golden Rainbow Fund
at an annual rate of $20 per shareholder account, subject to a $1,500 minimum
monthly fee, and a monthly fee paid by James for the James Small Cap and Market
Neutral Funds at an annual rate of $20 per shareholder account, subject to a
$1,500 minimum monthly fee for each Fund. In addition, each Fund pays
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, CFS
calculates the daily net asset value per share and maintains the financial books
and records of each Fund. For these services, CFS receives a monthly fee of
$3,000 from the Golden Rainbow Fund and $2,000 from James with respect to each
of the James Small Cap and Market Neutral Funds. In addition, CFS is reimbursed
for certain out-of-pocket expenses incurred by CFS in obtaining valuations of
each Fund's 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. While the annual limitation for payment of such expenses under each Plan
is 0.40% of the average daily net assets of the Fund, the Board of Trustees has
currently authorized only 0.25% for such expenditures.
19
<PAGE>
INVESTMENT ADVISER
James Investment Research, Inc.
P.O. Box 8
Alpha, Ohio 45301
[email protected]
o
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
o
TRANSFER AGENT
Countrywide Fund Services, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
o
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1700 Courthouse Plaza, N.E.
Dayton, Ohio 45402
o
DISTRIBUTOR
CW Fund Distributors, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
o
LEGAL COUNSEL
Brown, Cummins & Brown Co. L.P.A.
3500 Carew Tower
Cincinnati, Ohio 45202
<TABLE> <S> <C>
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUN-30-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 101,039,101
<INVESTMENTS-AT-VALUE> 124,971,857
<RECEIVABLES> 999,400
<ASSETS-OTHER> 12,455
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125,983,712
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 149,549
<TOTAL-LIABILITIES> 149,549
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,368,302
<SHARES-COMMON-STOCK> 7,204,118
<SHARES-COMMON-PRIOR> 6,965,537
<ACCUMULATED-NII-CURRENT> 19,073
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 514,032
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,932,756
<NET-ASSETS> 125,834,163
<DIVIDEND-INCOME> 468,247
<INTEREST-INCOME> 1,893,862
<OTHER-INCOME> 0
<EXPENSES-NET> 621,846
<NET-INVESTMENT-INCOME> 1,740,263
<REALIZED-GAINS-CURRENT> 3,199,275
<APPREC-INCREASE-CURRENT> 3,985,933
<NET-CHANGE-FROM-OPS> 8,925,471
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,794,136
<DISTRIBUTIONS-OF-GAINS> 16,312,364
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<NUMBER-OF-SHARES-SOLD> 124,077
<NUMBER-OF-SHARES-REDEEMED> 906,669
<SHARES-REINVESTED> 1,021,173
<NET-CHANGE-IN-ASSETS> (6,260,118)
<ACCUMULATED-NII-PRIOR> 72,946
<ACCUMULATED-GAINS-PRIOR> 13,627,121
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<GROSS-ADVISORY-FEES> 460,235
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<GROSS-EXPENSE> 730,542
<AVERAGE-NET-ASSETS> 123,339,521
<PER-SHARE-NAV-BEGIN> 18.96
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 1.10
<PER-SHARE-DIVIDEND> .26
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<PER-SHARE-NAV-END> 17.47
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<PERIOD-START> OCT-02-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 2,904,777
<INVESTMENTS-AT-VALUE> 2,951,781
<RECEIVABLES> 34,210
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,986,005
<PAYABLE-FOR-SECURITIES> 123,345
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<TOTAL-LIABILITIES> 127,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,812,651
<SHARES-COMMON-STOCK> 252,663
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<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (959)
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 7,212
<INTEREST-INCOME> 10
<OTHER-INCOME> 0
<EXPENSES-NET> 6,239
<NET-INVESTMENT-INCOME> 983
<REALIZED-GAINS-CURRENT> (959)
<APPREC-INCREASE-CURRENT> 47,004
<NET-CHANGE-FROM-OPS> 47,028
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 983
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 263,215
<NUMBER-OF-SHARES-REDEEMED> 10,642
<SHARES-REINVESTED> 90
<NET-CHANGE-IN-ASSETS> 2,858,696
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,199
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<GROSS-EXPENSE> 6,239
<AVERAGE-NET-ASSETS> 1,757,565
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.31
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.31
<EXPENSE-RATIO> 1.47
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<AVG-DEBT-PER-SHARE> 0
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<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 2,486,255
<INVESTMENTS-AT-VALUE> 2,598,524
<RECEIVABLES> 188,496
<ASSETS-OTHER> 382
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,336,065
<TOTAL-LIABILITIES> 1,478,698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,033,237
<SHARES-COMMON-STOCK> 302,152
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 36
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<ACCUMULATED-NET-GAINS> (71,559)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 108,622
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<NET-INVESTMENT-INCOME> 10,443
<REALIZED-GAINS-CURRENT> (71,559)
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<NET-CHANGE-FROM-OPS> 47,506
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,407
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 301,134
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<SHARES-REINVESTED> 1,018
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<OVERDISTRIB-NII-PRIOR> 0
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<EXPENSE-RATIO> 2.23
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</TABLE>
