SECOND REVISED CODE OF ETHICS
(ADOPTED AUGUST 24, 2000)
THE JAMES ADVANTAGE FUNDS
JAMES INVESTMENT RESEARCH, INC.
A. INTRODUCTION
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Rule 17j-1 under the Investment Company Act of 1940 (the "Act") requires
registered investment companies and their investment advisers to adopt
codes of ethics and reporting requirements to prevent fraudulent, deceptive
and manipulative practices. The James Advantage Funds (the "Trust") is
registered as an open-end management investment company under the Act.
James Investment Research, Inc. (the "Adviser") is the investment adviser
of the Trust. Except as otherwise specified herein, this Code applies to
all employees, officers, directors and trustees of the Trust and the
Adviser.
This Code of Ethics is based on the principle that the officers, directors,
trustees and employees of the Trust and the Adviser have a fiduciary duty
to place the interests of the Trust before their own interests, to conduct
all personal securities transactions consistently with this Code of Ethics
(the "Code") and to do so in a manner which does not interfere with the
portfolio transactions of the Trust, or otherwise take unfair advantage of
their relationship to the Trust. Persons covered by this Code must adhere
to this general principle as well as comply with the specific provisions of
this Code. Technical compliance with this Code will not insulate from
scrutiny trades which indicate an abuse of an individual's fiduciary duties
to the Trust. Although it is not prohibited by this Code, day trading by
officers, directors, trustees and employees of the Trust and the Adviser is
not encouraged.
B. DEFINITIONS
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1. "Access Person" means (i) any employee, director, trustee or officer
of the Trust or the Adviser, (ii) any employee of any company in a
control relationship to the Trust or the Adviser, who, in the ordinary
course of his or her business, makes, participates in or obtains
information regarding the purchase or sale of securities for the Trust
or whose principal function or duties relate to the making of any
recommendation to the Trust regarding the purchase or sale of
securities and (iii) any natural person in control relationship to the
Trust or the Adviser who obtains information concerning
recommendations made to the Trust with regard to the purchase or sale
of a security. A natural person in a control relationship or an
employee of a company in a control relationship does not become an
"Access Person" simply by virtue of the following: normally assisting
in the preparation of public reports, but not receiving information
about current recommendations or trading; a single instance of
obtaining knowledge of current recommendations or trading activity;
or, infrequently and inadvertently obtaining such knowledge. The
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Compliance Officer for the Trust and the Adviser is responsible for
determining who are Access Persons and maintaining a list of such
persons.
2. A security is "being considered for purchase or sale" when the order
to purchase or sell such security has been given, or prior thereto
when, in the opinion of an investment manager, a decision, whether or
not conditional, has been made (even though not yet implemented) to
make the purchase or sale, or when the decision-making process has
reached a point where such a decision is imminent.
3. "Beneficial ownership" means the opportunity, directly or indirectly,
to profit or share in any profit derived from the purchase or sale of
the subject Securities. "Beneficial Ownership" includes, but is not
limited to, ownership of Securities held by members of the family. For
these purposes, a person's family includes the spouse, minor children,
any person living in the home and any relative to whose support the
person directly or indirectly contributes.
4. The "Compliance Officer" of the Trust and the Adviser is Thomas L.
Mangan. In his absence, and with respect to the transactions of Thomas
L. Mangan, Barry R. James will act as the Compliance Officer of the
Trust and the Adviser.
5. "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act.
6. "Disinterested trustee" means a trustee who is not an "interested
person" within the meaning of Section 2(a)(19) of the Act.
7. "Equivalent security" means any security issued by the same entity as
the issuer of a subject security, including options, rights, warrants,
preferred stock, restricted stock, phantom stock, bonds and other
obligations of that company, or a security convertible into another
security.
8. "Immediate family" of an individual means any of the following persons
who reside in the same household as the individual:
child grandparent son-in-law
stepchild spouse daughter-in-law
grandchild sibling brother-in-law
parent mother-in-law sister-in-law
step-parent father-in-law
Immediate family includes adoptive relationships and any other
relationship (whether or not recognized by law) which the Compliance
Officer determines could lead to possible conflicts of interest,
diversions of corporate opportunity, or appearances of impropriety
which this Code is intended to prevent.
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9. "Purchase or sale of a security" includes, without limitation, the
writing, purchase or exercise of an option to purchase or sell a
security, conversions of convertible securities and short sales.
10. "Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include shares of registered open-end
investment companies, securities issued by the Government of the
United States, short-term debt securities which are "government
securities" within the meaning of Section 2(a)(16) of the Act,
bankers' acceptances, bank certificates of deposit, commercial paper,
and other liquid, high-quality money market instruments.
Security does not include futures contracts or options on futures
contracts (provided these instruments are not used to indirectly
acquire an interest which would be prohibited under this Code).
C. PRE-CLEARANCE REQUIREMENTS
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All Access Persons shall clear in advance through the Compliance Officer
any purchase or sale, direct or indirect, of any Security in which such
Access Person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership interest. The Compliance Officer shall retain
written records of such clearance requests.
The Compliance Officer will not grant clearance for any purchase or sale of
a Security on the same day the Security is being considered for purchase or
sale or being purchased or sold by the Trust. If the Security proposed to
be purchased or sold by the Access Person is an option, clearance will not
be granted if the securities subject to the option are being considered for
purchase or sale as indicated above. If the Security proposed to be
purchased or sold is a convertible security, clearance will not be granted
if either that security or the securities into which it is convertible are
being considered for purchase or sale as indicated above.
The Compliance Officer may refuse to preclear a transaction if he deems the
transaction to involve a conflict of interest, possible diversion of
corporate opportunity, or an appearance of impropriety.
Clearance is effective, unless earlier revoked, until the earlier of (1)
the close of business on that trading day, or (2) the Access Person learns
that the information provided to the Compliance Officer in such Access
Person's request for clearance is not accurate. If an Access Person places
an order for a transaction on a trading day but such order is not executed
on that trading day (e.g., a limit order), clearance needs to be
reobtained. Clearance may be revoked at any time and is deemed revoked if,
subsequent to receipt of clearance, the Access Person has knowledge that a
security to which the clearance relates is being considered for purchase or
sale.
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D. EXEMPTED TRANSACTIONS
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The pre-clearance requirements in Section C of this Code shall not apply
to:
1. Purchases or sales which are non-volitional on the part of either the
Access Person or the Trust.
2. Purchases which are part of an automatic dividend reinvestment plan.
3. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
4. Writing of covered call options.
5. Purchases or sales by (1) a disinterested trustee or a member of his
or her immediate family, or (2) a person whose only affiliation with
the Trust and the Adviser is as a director of the Adviser or a member
of his or her immediate family.
6. Purchases or sales of debt obligations issued by or on behalf of
states and municipalities and other qualifying issuers which pay
interest that is exempt from federal and/or state income tax.
7. Purchases or sales of obligations issued or guaranteed by an agency or
instrumentality of the Government of the United States.
8. Purchases or sales by any limited partnership or investment pool for
which the Adviser or an affiliated person of the Adviser provides
investment management services, or by any account managed by the
Adviser for the purpose of developing a new product.
E. PROHIBITED ACTIONS AND TRANSACTIONS
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Notwithstanding a grant of clearance under Section C hereof, the following
actions and transactions are prohibited and will result in sanctions
including but not limited to the sanctions expressly provided for in this
Section. The prohibitions of paragraphs 1 through 7 of this Section do not
apply to any limited partnership or investment pool for which the Adviser
or an affiliated person of the Adviser provides investment management
services or to any account managed by the Adviser for the purpose of
developing a new product. The prohibitions of paragraph 1 through 7 of this
Section also do not apply to disinterested trustees and members of their
immediate families or to persons whose only affiliation with the Trust and
the Adviser is as a director of the Adviser and members of their immediate
families.
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1. An Access Person shall not acquire, for any account in which such
Access Person has a beneficial ownership interest, any common stock or
security convertible into common stock in an initial public offering.
2. An Access Person shall not execute a Securities transaction on a day
during which the Trust has a pending buy or sell order in that same
Security or an equivalent Security. An Access Person shall disgorge
any profits realized on trades within such period to the applicable
Fund. The prohibitions of this paragraph 2 shall not apply to
disinterested trustees and members of their families or persons whose
only affiliation with the Trust and the Adviser is as a director of
the Adviser and members of their immediate families, unless such
trustee or director, at the time of that transaction, knew or, in the
ordinary course of fulfilling his or her official duties as a trustee
or director, should have known that, during the 15-day period
immediately preceding the date of the transaction by the trustee or
director, such Security was purchased or sold by the Trust or was
being considered for purchase or sale by the Trust.
3. An Access Person shall not accept from any person or entity that does
or proposes to do business with or on behalf of the Trust a gift or
other thing of more than de minimis value or any other form of
advantage. The solicitation or giving of such gifts by an Access
Person is also prohibited. For purposes of this subparagraph, "de
minimis" means $100 or less if received in the normal course of
business.
4. An Access Person shall not serve on the board of directors of publicly
traded companies, absent prior authorization from Dr. Francis E.
James, Jr. Dr. James will not serve on the board of directors of any
publicly traded companies, absent prior authorization from the
Compliance Officer. However, any directorships held by an Access
Person as of the date of the adoption of this Code of Ethics shall be
deemed to be authorized. Dr. James will grant authorization only if it
is determined that the board service would not be inconsistent with
the interests of the Trust. In the event board service is authorized,
such individuals serving as directors shall be isolated from those
making investment decisions through procedures designed to safeguard
against potential conflicts of interest, such as a firewall policy or
investment restrictions.
5. An Access Person shall not acquire a security in a private placement,
absent prior authorization from the Compliance Officer. The Compliance
Officer will not grant clearance for the acquisition of a security in
a private placement if it is determined that the investment
opportunity should be reserved for the Trust or that the opportunity
to acquire the security is being offered to the individual requesting
clearance by virtue of such individual's position with the Adviser or
the Trust (as applicable). The Compliance Officer shall maintain a
permanent record of all authorizations for acquisition of a private
placement, which record shall include a statement concerning why
authorization was given. An individual who has been granted clearance
to acquire securities in a private placement shall disclose such
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investment when participating in a subsequent consideration by the
Trust of an investment in the issuer. A subsequent decision by the
Trust to purchase such a security shall be subject to independent
review by investment personnel with no personal interest in the
issuer.
6. An Access Person shall not purchase during the underwriting of the
security any common stock or security convertible into common stock
which, due to its public demand in relation to the amount offered, is
likely to increase in value (i.e. "hot issue").
7. An Access Person shall not execute a securities transaction while in
possession of material non-public information regarding the security
or its issuer.
8. An Access Person shall not execute a securities transaction which is
intended to raise, lower, or maintain the price of any security or to
create false appearance of active trading (anti-market manipulation).
9. An Access Person shall not cause or attempt to cause the Trust to
purchase, sell, or hold any security in a manner calculated to create
any personal benefit to such Access Person or his or her immediate
family. If an Access Person or his or her immediate family stands to
materially benefit from an investment decision for the Trust that the
Access Person is recommending or in which the Access Person is
participating, the Access Person shall disclose to the persons with
authority to make investment decisions for the Trust, any beneficial
ownership interest that the Access Person or his or her immediate
family has in such security or an equivalent security, or in the
issuer thereof, where the decision could create a material benefit to
the Access Person or his or her immediate family or the appearance of
impropriety.
10. Political Contributions (Pay-to-Play)
a. "Pay-to-Play" is defined as one or more political contributions
by the Adviser or an officer of the Adviser to a person holding
public office, running for public office, or to a committee
formed for that end, for the purpose of obtaining or retaining
advisory contacts with governmental entities.
b. "Pay-to-Play" or other political contributions made in exchange
for advisory business are prohibited. However, this Code does not
prohibit participation in the political process. Rather, this
Code refers to a contribution with a clear advisory quid pro quo.
c. If an officer is uncertain whether a proposed contribution
violates this prohibition, the officer should seek advice from
the President of the Adviser or the Compliance Officer of the
Adviser.
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F. REPORTING
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1. Each Access Person, except a disinterested trustee of the Trust or a
person whose only affiliation with the Trust and the Adviser is as a
director of the Adviser, shall arrange for the Compliance Officer to
receive directly from the broker-dealer effecting a transaction in any
security in which such Access Person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership
interest, duplicate copies of each confirmation for each securities
transaction and periodic account statements for each brokerage account
in which such Access Person has any beneficial ownership interest.
2. Each Access Person shall report to the Compliance Officer no later
than 10 days after the end of each calendar quarter the information
described below with respect to transactions in any Security in which
such Access Person has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership interest in the security;
provided, however, that an Access Person shall not be required to make
a report with respect to transactions effected for any account over
which such Access Person does not have any direct or indirect
influence.
a. The date of the transaction and the name of the Security;
b. The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition); and
c. The name of the broker, dealer or bank with or through whom the
transaction was effected.
Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or
she has any direct or indirect beneficial ownership in the Security to
which the report relates.
Each Access Person shall also report to the Compliance Officer no
later than 10 days after the end of each quarter the name of any
covered securities account established by the Access Person during the
quarter and the date the account was established.
3. Each Access Person shall upon commencement of employment and annually
thereafter verify in writing that all transactions in any Security in
which such Access Person has, or by reason of such transaction has
acquired, any direct or indirect beneficial ownership in the Security
have been reported to the Compliance Officer. If an Access Person had
no transactions during the year, such Access Person shall so advise
the Compliance Officer. The reporting requirements of this paragraph 3
do not apply to disinterested trustees of the Trust or persons whose
only affiliation with the Trust and the Adviser is as a director of
the Adviser.
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4. Each Access Person shall, within 10 days of commencement of employment
or being designated an Access Person, and annually thereafter, be
required to disclose the following information to the Compliance
Officer:
a. his or her current personal Securities holdings and
b. all covered securities accounts held in his or her name.
This Annual Holdings Report must contain information correct as of a
date no more than 30 days before the Report is submitted.
5. A disinterested trustee of the Trust or a person whose only
affiliation with the Trust and the Adviser is as a director of the
Adviser need only report a transaction in a Security if such trustee
or director, at the time of that transaction, knew or, in the ordinary
course of fulfilling his or her official duties as a trustee or
director, should have known that, during the 15-day period immediately
preceding the date of the transaction by the trustee or director, such
Security was purchased or sold by the Trust or was being considered
for purchase or sale by the Trust.
6. The Adviser or the Trust may, in its discretion, require an Access
Person to disclose in connection with a report, recommendation or
decision of such Access Person to purchase or sell a Security any
direct or indirect beneficial ownership by such person of such
Security.
7. The Compliance Officer will report to the Board of Trustees of the
Trust on a quarterly basis as to any violations of the Code of Ethics.
8. At least annually, the Compliance Officer shall report in writing to
the Board of Trustees:
a. a description of all issues that arose during the previous year
under the Code; and
b. information regarding material Code violations and sanctions
imposed in response to the material violations; and
c. that the Trust and the Adviser have adopted procedures reasonably
necessary to prevent Access Persons from violating the Code of
Ethics.
G. CONFIDENTIALITY OF TRANSACTIONS AND INFORMATION
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1. Every Access Person shall treat as confidential information the fact
that a security is being considered for purchase or sale by the Trust,
the contents of any research report, recommendation or decision,
whether at the preliminary or final level, and the holdings of the
Trust and shall not disclose any such confidential information
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without prior consent from the Compliance Officer. Notwithstanding the
foregoing, the holdings of the Trust shall not be considered
confidential after such holdings by the Trust have been disclosed in a
public report to shareholders or to the Securities and Exchange
Commission.
2. Access Persons shall not disclose any such confidential information to
any person except those employees and trustees who need such
information to carry out the duties of their position with the Trust
or the Adviser.
H. SANCTIONS
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Upon discovering a violation of this Code, the Board of Trustees of the
Trust or the Board of Directors of the Adviser (as applicable) may impose
such sanctions as it deems appropriate, including, without limitation, a
letter of censure or suspension or termination of the employment of the
violator. All material violations of this Code and any sanctions imposed
with respect thereto shall be reported periodically to the Board of
Trustees of the Trust and the Board of Directors of the Adviser.
I. CERTIFICATION OF COMPLIANCE
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Each Access Person, except a disinterested trustee or a person whose only
affiliation with the Trust and the Adviser is as a director of the Adviser,
shall annually certify that he or she has read and understands this Code
and recognizes that he or she is subject hereto.
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