INVESTMENT ADVISER
James Investment Research, Inc.
P.O. Box 8
Alpha, Ohio 45301 JAMES
[email protected] ADVANTAGE
o FUNDS
CUSTODIAN
Firstar Bank, N. A. Advised by James
425 Walnut Street Investment Research, Inc.
Cincinnati, Ohio 45202
o o
TRANSFER AGENT
Integrated Fund Services, Inc. June 30, 2000
312 Walnut Street Annual Report
Cincinnati, Ohio 45202 (Unaudited)
o
INDEPENDENT AUDITORS o
Deloitte & Touche LLP
1700 Courthouse Plaza, N.E.
Dayton, Ohio 45402 THE GOLDEN RAINBOW FUND
o
DISTRIBUTOR THE JAMES SMALL CAP FUND
CW Fund Distributors, Inc.
312 Walnut Street THE JAMES MARKET NEUTRAL FUND
Cincinnati, Ohio 45202
o THE JAMES LARGE CAP PLUS FUND
LEGAL COUNSEL
Brown, Cummins & Brown Co. L.P.A.
3500 Carew Tower
Cincinnati, Ohio 45202
1
<PAGE>
LETTER TO SHAREHOLDERS
OF THE JAMES ADVANTAGE FUNDS
================================================================================
There is often a lot of wisdom in old sayings. And so it appears that the last
fiscal year bore out the wisdom behind "for everything there is a season". The
year began with the same rabid bull market in technology stocks and ended with
many of these hot stocks in ashes. Long overlooked areas, such as chemical
companies, utilities and even bonds returned to favor. As our fiscal year ended,
our various funds were working together to provide our shareholders with a well
rounded and prudent approach to investing.
THE MARKET OVER THE PAST YEAR
There was something for everyone over this 12 month period. The technology heavy
NASDAQ roared ahead until this Spring, then fell like Icarus with wax wings
melted from the heat of the sun. Beware the Ides of March, Icarus! Out of favor
basic materials lagged through 1999, but came alive in 2000. Energy stocks got a
boost from higher oil prices, in spite of the doubts put forth by the pundits.
Semi-conductor stocks went in and out of favor so many times that portfolio
managers needed neck braces. Generic drug companies performed well, while large
drug companies struggled. This was truly a period when sectors and industries
and quality were important.
INVESTMENT GOALS AND OBJECTIVES
The goals of the James Advantage Funds are varied, but intended to complement
each other. The Golden Rainbow remains a conservative fund with preservation of
capital as a major objective. It is intended to be a solid core part of a larger
portfolio. The Large Cap Plus and Small Cap Funds are designed to take on
greater amounts of risk. An investor with shares of the Golden Rainbow may want
to discuss adding shares of these two funds for stronger returns in bull
markets. The Market Neutral Fund is designed to take advantage of the extremes
in valuations which have become common in the markets. Its ability to sell
stocks short can provide an opportunity to show positive returns even when the
overall market is going down. The Funds fit together and various combinations
can be used to create the right amount of risk for different investors.
INVESTMENT PHILOSOPHY
Value oriented styles began to perform better as internet hype declined. Stocks
with strong earnings, good management and strong earnings growth began to
outperform the broader market. James Investment Research, Inc., the Advisor to
the Funds, maintained a disciplined strategy throughout the year. The Funds did
not join in the herd mentality that pushed the price of certain internet stocks
to the stars, even as their losses continued to grow. Our focus on sustainable
earnings and realistic prices was a major factor in the Funds' performances.
FUND PERFORMANCE
THE GOLDEN RAINBOW FUND
The Golden Rainbow's heavy dependence on bonds pulled returns down over the
first six months of the fiscal year, but added value in the second half. This is
when the high credit quality of the bond portfolio was especially helpful, as
Treasury securities outperformed lower quality bonds. The 4.98% total return
(before sales load, if applicable) reflects the conservative posture of this
Fund. The benchmark (a blend of the S&P500, the Russell 2000 and the Lehman
Intermediate Government/Credit indices) outperformed the Fund, posting a 9.33%
return. The Advisor continues to believe that conservative management is the
desire of the shareholders of this Fund, and will continue to manage with
preservation of capital and income, as well as growth, as the objectives.
THE LARGE CAP PLUS FUND
For those with more aggressive needs, the Large Cap Plus was a good choice. This
Fund returned 36.50% since its inception in November 1999, versus only 7.60% for
its benchmark, the S&P500. The Fund's non-diversified structure allowed it to
concentrate in those sectors where growth was strongest, Technology and Energy.
The continued success of the Fund will depend on its ability to discern those
sectors where growth is the strongest.
2
<PAGE>
THE SMALL CAP FUND
James Small Cap Fund lost 10.61% over the year ending June 30, 2000 compared
with a strong 14.32% return on the Russell 2000. Of course, it seemed like a
tale of two Funds. In the first half of the fiscal year the Fund lost 14.66%
while in the second half it advanced 4.74%. We think the additional research
efforts of the Advisor are paying off and will help the Fund rebound to returns
consistent with its potential.
THE MARKET NEUTRAL FUND
The high level of volatility in the markets over this year offered good
opportunities for The Market Neutral strategy. This long/short fund was able to
identify these opportunities and return 7.02% for the year, versus a 5.53%
return on its benchmark, the 90-day U.S. Treasury Bill. The continued success of
this Fund will depend on in its ability to identify overvalued stocks which are
ripe for a correction and to identify undervalued stocks which have the
potential to advance. The Advisor believes its proprietary model holds the key
to this challenge.
EXPECTATIONS FOR THE FUTURE
With a Presidential election in full swing, it is difficult to forecast the
future. Rising oil prices, the Fed's inflation fears and rapidly changing
international dynamics make reading the crystal ball even more challenging.
However, we believe our quantitative research and our dedication to customer
service will be powerful weapons as we seek to achieve your objectives. Unlike
Icarus, our wings are not held on by wax, but by the tried and true. We caution
investors to be realistic in their expectations, to invest for the long run, and
to look for a proven track record.
/s/ Thomas L. Mangan
Thomas L. Mangan
Vice President and Chief Financial Officer
3
<PAGE>
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GOLDEN RAINBOW FUND, STANDARD & POOR'S 500 INDEX
AND A BLENDED 25/25/50 INDEX(A)
[GRAPHIC OMITTED]
6/00
----
The Golden Rainbow Fund (Offer) $22,284
The Golden Rainbow Fund (Nav) $23,643
Standard & Poor's 500 Index $50,513
Blended 25/25/50 Index $28,591
Past performance is not predictive of future performance.
--------------------------------------------------------------
The Golden Rainbow Fund
Average Annual Total Returns
1 Year 5 Years Since Inception(B)
With Sales Load -1.06% 7.99% 9.30%
Without Sales Load 4.98% 9.28% 10.02%
--------------------------------------------------------------
(A) The Blended Index is comprised of a 25% weighting in Standard & Poor's 500
Index, a 25% weighting in the Russell 2000 Index and a 50% weighting in the
Lehman Brothers Intermediate Government/Corporate Bond Index.
(B) Fund inception was July 1, 1991.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE JAMES SMALL CAP FUND AND RUSSELL 2000 INDEX
[GRAPHIC OMITTED]
6/00
----
The James Small Cap Fund (Offer) $10,003
The James Small Cap Fund (Nav) $10,614
Russell 2000 Index $15,098
Past performance is not predictive of future performance.
--------------------------------------------------------------
The James Small Cap Fund
Average Annual Total Returns
1 Year Since Inception(A)
With Sales Load -15.75% 0.02%
Without Sales Load -10.61% 3.48%
--------------------------------------------------------------
(A) Fund Inception was October 2, 1998.
4
<PAGE>
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE JAMES MARKET NEUTRAL FUND AND 90-DAY TREASURY BILL INDEX
[GRAPHIC OMITTED]
6/00
----
The James Market Neutral Fund (Offer) $ 9,507
The James Market Neutral Fund (Nav) $10,087
90-Day Treasury Bill Index $10,898
Past performance is not predictive of future performance.
--------------------------------------------------------------
The James Market Neutral Fund
Average Annual Total Returns
1 Year Since Inception(A)
With Sales Load 0.86% -2.86%
Without Sales Load 7.02% 0.50%
--------------------------------------------------------------
(A) Fund Inception was October 2, 1998.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE JAMES LARGE CAP PLUS FUND AND STANDARD & POOR'S 500 INDEX
[GRAPHIC OMITTED]
6/00
----
The James Large Cap Plus Fund (Offer) $12,865
The James Large Cap Plus Fund (Nav) $13,650
Standard & Poor's 500 Index $10,760
Past performance is not predictive of future performance.
--------------------------------------------------------------
The James Large Cap Plus Fund
Total Return
Since Inception(A)
With Sales Load 28.65%
Without Sales Load 36.50%
--------------------------------------------------------------
(A) Fund Inception was November 1, 1999.
5
<PAGE>
<TABLE>
<CAPTION>
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000
===========================================================================================================================
THE GOLDEN THE JAMES THE JAMES THE JAMES
RAINBOW SMALL CAP MARKET NEUTRAL LARGE CAP PLUS
FUND FUND FUND FUND
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities:
At amortized cost ................................... $ 72,720,548 $ 4,759,605 $ 4,773,934 $ 5,340,438
============ ============ ============ ============
At value (Note 1) ................................... $ 82,841,737 $ 5,291,876 $ 5,400,047 $ 6,244,903
Cash .................................................... 18,046 8,607 10,060 407,339
Segregated cash with brokers (Note 1) ................... -- -- 3,632,451 --
Receivable for capital shares sold ...................... 596 300 200 148,125
Receivable for securities sold .......................... -- -- 100,144 --
Dividends and interest receivable ....................... 720,497 1,268 12,833 2,505
Other assets ............................................ 7,097 4,838 2,216 10,915
------------ ------------ ------------ ------------
TOTAL ASSETS ........................................ 83,587,973 5,306,889 9,157,951 6,813,787
------------ ------------ ------------ ------------
LIABILITIES
Securities sold short (proceeds $2,888,995) (Note 1) .... -- -- 2,400,420 --
Payable for capital shares redeemed ..................... 99,057 1,200 6,359 1,136
Payable for securities purchased ........................ 601,099 40,626 46,028 521,595
Dividends payable on securities sold short .............. -- -- 1,405 --
Accrued expenses:
Management fees (Note 3) ............................ 50,632 4,424 8,433 5,534
12b-1 distribution and service fees (Note 3) ........ 35,272 8,673 9,450 5,456
Other ............................................... 47,684 773 1,684 1,234
------------ ------------ ------------ ------------
TOTAL LIABILITIES ................................... 833,744 55,696 2,473,779 534,955
------------ ------------ ------------ ------------
NET ASSETS .............................................. $ 82,754,229 $ 5,251,193 $ 6,684,172 $ 6,278,832
============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital ......................................... $ 63,712,585 $ 5,583,604 $ 7,031,858 $ 5,489,171
Undistributed net investment income ..................... 9,029 -- 4,326 --
Accumulated net realized gains (losses) from
security transactions ............................... 8,911,426 (864,682) (1,466,700) (114,804)
Net unrealized appreciation on investments .............. 10,121,189 532,271 1,114,688 904,465
------------ ------------ ------------ ------------
NET ASSETS .............................................. $ 82,754,229 $ 5,251,193 $ 6,684,172 $ 6,278,832
============ ============ ============ ============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 1) . 5,004,020 495,043 688,692 459,820
============ ============ ============ ============
Net asset value and redemption price per share (Note 1) $ 16.54 $ 10.61 $ 9.71 $ 13.65
============ ============ ============ ============
Maximum offering price per share (Note 1) ............... $ 17.55 $ 11.26 $ 10.30 $ 14.48
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
THE JAMES ADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2000
==========================================================================================================================
THE GOLDEN THE JAMES THE JAMES THE JAMES
RAINBOW SMALL CAP MARKET NEUTRAL LARGE CAP PLUS
FUND FUND FUND FUND(A)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ......................................... $ 553,571 $ 42,138 $ 31,680 $ 5,335
Interest .......................................... 3,173,936 6,782 300,911 8,447
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME ........................... 3,727,507 48,920 332,591 13,782
------------ ------------ ------------ ------------
EXPENSES
Management fees (Note 3) .......................... 703,102 56,431 111,254 31,797
12b-1 distribution and service
fees - Class A (Note 3) ......................... 235,858 11,966 16,845 6,797
Administration fees (Note 3) ...................... 66,018 -- -- --
Accounting services fees (Note 3) ................. 32,500 -- -- --
Postage and supplies .............................. 20,026 -- -- --
Professional fees ................................. 16,780 -- -- --
Custodian fees and expenses ....................... 19,042 -- -- --
Transfer agent fees (Note 3) ...................... 18,732 -- -- --
Shareholder report printing and mailing ........... 14,117 -- -- --
Trustees' fees .................................... 3,294 3,398 3,294 2,189
Dividend expense on securities sold short ......... -- -- 35,403 --
Other expenses .................................... 25,193 -- -- --
------------ ------------ ------------ ------------
Total expenses before fee waivers ............ 1,154,662 71,795 166,796 40,783
------------ ------------ ------------ ------------
Management fees waived (Note 3) ................... (23,973) -- -- --
12b-1 distribution and service fees waived (Note 3) (119,017) -- -- --
------------ ------------ ------------ ------------
Total fee waivers ............................ (142,990) -- -- --
------------ ------------ ------------ ------------
Net expenses ................................. 1,011,672 71,795 166,796 40,783
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) .......................... 2,715,835 (22,875) 165,795 (27,001)
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security
transactions .................................... 11,212,626 (850,600) 641,027 (114,804)
Net realized losses on closed short positions ..... -- -- (1,253,948) --
Net change in unrealized appreciation/depreciation
on investments ............................... (9,524,478) 38,127 819,546 904,465
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS ........................... 1,688,148 (812,473) 206,625 789,661
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ................................... $ 4,403,983 $ (835,348) $ 372,420 $ 762,660
============ ============ ============ ============
</TABLE>
(A) Represents the period from the initial public offering of shares (November
1, 1999) through June 30, 2000.
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
THE GOLDEN RAINBOW FUND
STATEMENTS OF CHANGES IN NET ASSETS
======================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999
------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ............................................ $ 2,715,835 $ 3,260,385
Net realized gains on investments ................................ 11,212,626 6,108,860
Net change in unrealized appreciation/depreciation on investments (9,524,478) (301,156)
------------ ------------
Net increase in net assets from operations ........................... 4,403,983 9,068,089
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................. (2,736,391) (3,303,746)
Distributions from net realized gains ............................ (5,724,817) (16,312,364)
------------ ------------
Decrease in net assets from distributions to shareholders ............ (8,461,208) (19,616,110)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................ 4,759,979 7,395,720
Net asset value of shares issued in reinvestment of distributions
to shareholders ................................................ 8,196,618 18,933,981
Payments for shares redeemed ..................................... (33,947,586) (40,073,518)
------------ ------------
Net decrease in net assets from capital share transactions ........... (20,990,989) (13,743,817)
------------ ------------
TOTAL DECREASE IN NET ASSETS ......................................... (25,048,214) (24,291,838)
NET ASSETS
Beginning of year ................................................ 107,802,443 132,094,281
------------ ------------
End of year ...................................................... $ 82,754,229 $107,802,443
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME .................................. $ 9,029 $ 29,585
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ...................................................... 281,457 418,738
Shares issued in reinvestment of distributions to shareholders ... 500,806 1,106,830
Shares redeemed .................................................. (2,017,962) (2,251,386)
------------ ------------
Net decrease in shares outstanding ............................... (1,235,699) (725,818)
Shares outstanding, beginning of year ............................ 6,239,719 6,965,537
------------ ------------
Shares outstanding, end of year .................................. 5,004,020 6,239,719
============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
THE JAMES SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
======================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999(A)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss .............................................. $ (22,875) $ (3,171)
Net realized losses on investments ............................... (850,600) (14,082)
Net change in unrealized appreciation/depreciation on investments 38,127 494,144
------------ ------------
Net increase (decrease) in net assets from operations ................ (835,348) 476,891
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Return of capital ................................................ -- (985)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................ 1,575,105 6,266,758
Net asset value of shares issued in reinvestment of
distributions to shareholders .................................. -- 985
Payments for shares redeemed ..................................... (2,052,318) (179,895)
------------ ------------
Net increase (decrease) in net assets from capital share transactions (477,213) 6,087,848
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (1,312,561) 6,563,754
NET ASSETS
Beginning of period .............................................. 6,563,754 --
------------ ------------
End of period .................................................... $ 5,251,193 $ 6,563,754
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ...................................................... 161,485 569,652
Shares issued in reinvestment of distributions to shareholders ... -- 90
Shares redeemed .................................................. (219,628) (16,556)
------------ ------------
Net increase (decrease) in shares outstanding .................... (58,143) 553,186
Shares outstanding, beginning of period .......................... 553,186 --
------------ ------------
Shares outstanding, end of period ................................ 495,043 553,186
============ ============
</TABLE>
(A) Represents the period from the initial public offering of shares (October
2, 1998) through June 30, 1999.
See accompanying notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
THE JAMES MARKET NEUTRAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
======================================================================================================
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999(A)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ............................................ $ 165,795 $ 95,453
Net realized gains (losses) from:
Security transactions ....................................... 641,027 (187,769)
Closed short positions ...................................... (1,253,948) (666,010)
Net change in unrealized appreciation/depreciation on investments 819,546 295,142
------------ ------------
Net increase (decrease) in net assets from operations ................ 372,420 (463,184)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............................. (164,487) (92,435)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................ 1,575,778 9,117,948
Net asset value of shares issued in reinvestment of
distributions to shareholders .................................. 164,142 92,407
Payments for shares redeemed ..................................... (3,547,416) (371,001)
------------ ------------
Net increase (decrease) in net assets from capital share transactions (1,807,496) 8,839,354
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (1,599,563) 8,283,735
NET ASSETS
Beginning of period .............................................. 8,283,735 --
------------ ------------
End of period .................................................... $ 6,684,172 $ 8,283,735
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME .................................. $ 4,326 $ 3,018
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ...................................................... 169,202 918,724
Shares issued in reinvestment of distributions to shareholders ... 17,677 9,721
Shares redeemed .................................................. (388,437) (38,195)
------------ ------------
Net increase (decrease) in shares outstanding .................... (201,558) 890,250
Shares outstanding, beginning of period .......................... 890,250 --
------------ ------------
Shares outstanding, end of period ................................ 688,692 890,250
============ ============
</TABLE>
(A) Represents the period from the initial public offering of shares (October
2, 1998) through June 30, 1999.
See accompanying notes to financial statements.
10
<PAGE>
THE JAMES LARGE CAP PLUS FUND
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
PERIOD
ENDED
JUNE 30,
2000(A)
--------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss ....................................... $ (27,001)
Net realized losses on investments ........................ (114,804)
Net change in unrealized appreciation/depreciation
on investments .......................................... 904,465
------------
Net increase in net assets from operations .................... 762,660
------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................. 5,958,176
Payments for shares redeemed .............................. (442,004)
------------
Net increase in net assets from capital share transactions .... 5,516,172
------------
TOTAL INCREASE IN NET ASSETS .................................. 6,278,832
------------
NET ASSETS
Beginning of period ....................................... --
------------
End of period ............................................. $ 6,278,832
============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................... 493,560
Shares redeemed ........................................... (33,740)
------------
Net increase in shares outstanding ........................ 459,820
Shares outstanding, beginning of period ................... --
------------
Shares outstanding, end of period ......................... 459,820
============
(A) Represents the period from the initial public offering of shares (November
1, 1999) through June 30, 2000.
See accompanying notes to financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
THE GOLDEN RAINBOW FUND
FINANCIAL HIGHLIGHTS
====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
--------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ................... 17.28 $ 18.96 $ 19.31 $ 17.56 $ 18.27
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income .............................. 0.50 0.49 0.65 0.66 0.73
Net realized and unrealized gains on investments ... 0.31 0.91 1.08 2.16 0.61
-------- -------- -------- -------- --------
Total from investment operations ....................... 0.81 1.40 1.73 2.82 1.34
-------- -------- -------- -------- --------
Less distributions:
From net investment income ......................... (0.50) (0.49) (0.65) (0.68) (0.74)
From net realized gains on investments ............. (1.05) (2.59) (1.43) (0.39) (1.31)
-------- -------- -------- -------- --------
Total distributions .................................... (1.55) (3.08) (2.08) (1.07) (2.05)
-------- -------- -------- -------- --------
Net asset value at end of year ......................... $ 16.54 $ 17.28 $ 18.96 $ 19.31 $ 17.56
======== ======== ======== ======== ========
Total return(A) ........................................ 4.98% 7.97% 9.47% 16.55% 7.76%
======== ======== ======== ======== ========
Net assets at end of year (000's) ...................... $ 82,754 $107,802 $132,094 $157,183 $184,307
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets(B) ......... 1.07% 1.00% 1.08% 1.09% 1.06%
Ratio of net investment income to average net assets ... 2.86% 2.71% 3.29% 3.63% 4.01%
Portfolio turnover rate ................................ 82% 38% 54% 56% 83%
</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 1.22%, 1.19%, 1.23%, 1.24% and 1.26% for
the years ended June 30, 2000, 1999, 1998, 1997 and 1996, respectively
(Note 3).
See accompanying notes to financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
THE JAMES SMALL CAP FUND
FINANCIAL HIGHLIGHTS
======================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999(A)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period ............................... $ 11.87 $ 10.00
------------ ------------
Income (loss) from investment operations:
Net investment loss .............................................. (0.05) (0.00)
Net realized and unrealized gains (losses) on investments ........ (1.21) 1.87
------------ ------------
Total from investment operations ..................................... (1.26) 1.87
------------ ------------
Less distributions:
Return of capital ................................................ -- (0.00)
------------ ------------
Net asset value at end of period ..................................... $ 10.61 $ 11.87
============ ============
Total return(B) ...................................................... (10.61%) 18.74%(C)
============ ============
Net assets at end of period (000's) .................................. $ 5,251 $ 6,564
============ ============
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets .......................... 1.50% 1.49%(D)
Ratio of net investment loss to average net assets ................... (0.48%) (0.11%)(D)
Portfolio turnover rate .............................................. 101% 42%(D)
</TABLE>
(A) Represents the period from the initial public offering of shares (October
2, 1998) through June 30, 1999.
(B) Total return excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
THE JAMES MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
======================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999(A)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period ............................... $ 9.30 $ 10.00
------------ ------------
Income (loss) from investment operations:
Net investment income ............................................ 0.23 0.13
Net realized and unrealized gains (losses) on investments ........ 0.41 (0.70)
------------ ------------
Total from investment operations ..................................... 0.64 (0.57)
------------ ------------
Less distributions:
From net investment income ....................................... (0.23) (0.13)
------------ ------------
Net asset value at end of period ..................................... $ 9.71 $ 9.30
============ ============
Total return(B) ...................................................... 7.02% (5.74%)(C)
============ ============
Net assets at end of period (000's) .................................. $ 6,684 $ 8,284
============ ============
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets, excluding dividends on
securities sold short ............................................ 1.95% 1.94%(D)
Expenses from dividends on securities sold short ..................... 0.53% 0.36%(D)
------------ ------------
Ratio of net expenses to average net assets .......................... 2.48% 2.30%(D)
------------ ------------
Ratio of net investment income to average net assets ................. 2.47% 2.31%(D)
Portfolio turnover rate .............................................. 90% 54%(D)
</TABLE>
(A) Represents the period from the initial public offering of shares (October
2, 1998) through June 30, 1999.
(B) Total return excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
14
<PAGE>
THE JAMES LARGE CAP PLUS FUND
FINANCIAL HIGHLIGHTS
================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
--------------------------------------------------------------------------------
PERIOD
ENDED
JUNE 30,
2000(A)
--------------------------------------------------------------------------------
Net asset value at beginning of period .................... $ 10.00
------------
Income (loss) from investment operations:
Net investment loss ................................... (0.06)
Net realized and unrealized gains on investments ...... 3.71
------------
Total from investment operations .......................... 3.65
------------
Net asset value at end of period .......................... $ 13.65
============
Total return(B) ........................................... 36.50%
============
Net assets at end of period (000's) ....................... $ 6,279
============
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets ............... 1.49%(C)
Ratio of net investment loss to average net assets ........ (0.99%)(C)
Portfolio turnover rate ................................... 95%(C)
(A) Represents the period from the initial public offering of shares (November
1, 1999) through June 30, 2000.
(B) Total return excludes the effect of applicable sales loads and is not
annualized.
(C) Annualized.
See accompanying notes to financial statements.
15
<PAGE>
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
================================================================================
Shares COMMON STOCKS -- 46.1% Value
--------------------------------------------------------------------------------
BASIC MATERIALS -- 3.7%
15,000 Albemarle Corporation ............................ $ 296,250
65,900 Barrick Gold Corporation ......................... 1,198,556
15,500 Cabot Corporation ................................ 422,375
23,000 Georgia Pacific (The Timber Group) ............... 497,375
30,500 Newmont Mining Corporation ....................... 659,562
------------
3,074,118
------------
CONSUMER, CYCLICAL -- 3.0%
12,000 Borg-Warner Automotive, Inc. ..................... 421,500
7,500 Dow Jones & Company, Inc. ........................ 549,375
20,000 Guess?, Inc.* .................................... 280,000
10,000 Navistar International Corporation* .............. 310,625
20,000 Ryan's Family Steak Houses* ...................... 168,750
15,000 Salton, Inc.* .................................... 553,125
6,000 Sears Roebuck & Company .......................... 195,750
------------
2,479,125
------------
CONSUMER, NON-CYCLICAL -- 11.9%
26,500 Agribrands International, Inc.* .................. 1,111,344
33,000 Amgen, Inc.* ..................................... 2,318,250
14,500 Andrx Corporation* ............................... 926,867
17,000 Bristol-Myers Squibb Company ..................... 990,250
34,000 Church & Dwight Company, Inc. .................... 612,000
20,000 Darden Restaurants, Inc. ......................... 325,000
14,500 Datascope Corporation ............................ 522,000
18,500 Learning Tree International* ..................... 1,133,125
15,000 Michael Foods, Inc. .............................. 367,500
9,000 Pfizer, Inc. ..................................... 432,000
3,000 Procter & Gamble Company ......................... 171,750
6,000 Schering-Plough Corporation ...................... 303,000
35,000 Supervalu, Inc. .................................. 667,188
------------
9,880,274
------------
ENERGY -- 5.5%
6,000 Amerada Hess Corporation ......................... 370,500
10,000 El Paso Energy Corporation ....................... 509,375
20,000 Exxon Mobil Corporation .......................... 1,570,000
14,000 Santa Fe International Corporation ............... 489,125
6,000 Texaco, Inc. ..................................... 319,500
17,500 Tidewater, Inc. .................................. 630,000
13,000 Transocean Sedco Forex, Inc. ..................... 694,688
------------
4,583,188
------------
16
<PAGE>
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 46.1% Value
--------------------------------------------------------------------------------
FINANCE -- 3.1%
3,750 Case Manhattan Corporation ....................... $ 172,734
16,000 Commerce Group, Inc. ............................. 472,000
7,000 Firstmerit Corporation ........................... 149,625
2,800 Lehman Brothers Holdings ......................... 264,775
6,000 J.P. Morgan & Company ............................ 660,750
6,000 Morgan Stanley Dean Witter ....................... 499,500
10,000 Silicon Valley Bancshares* ....................... 127,875
3,000 Southwest Trust .................................. 226,250
------------
2,573,509
------------
INDUSTRIAL -- 6.4%
19,500 American Standard Company* ....................... 799,500
33,000 CTS Corporation .................................. 1,485,000
20,000 Donaldson Company, Inc. .......................... 395,000
3,000 Dover Corporation ................................ 121,687
8,000 Millipore Corporation ............................ 603,000
25,000 Southdown, Inc. .................................. 1,443,750
4,800 Technitrol, Inc. ................................. 465,000
------------
5,312,937
------------
TECHNOLOGY -- 7.1%
14,000 Infocus Corporation* ............................. 450,625
20,000 Intel Corporation ................................ 2,673,750
4,000 Keithley Instruments, Inc. ....................... 348,500
3,000 Logitech International S.A. ADR* ................. 219,000
5,800 Microsoft Corporation* ........................... 464,000
18,500 Siliconix, Inc.* ................................. 1,248,750
2,000 Sybase* .......................................... 460,000
------------
5,864,625
------------
UTILITIES -- 5.4%
24,000 Columbia Energy Group ............................ 1,575,000
25,500 Duke Energy Corporation .......................... 1,437,563
55,400 Energen Corporation .............................. 1,208,413
6,000 Public Service Enterprise ........................ 207,750
------------
4,428,726
------------
TOTAL COMMON STOCKS (Cost $28,597,670) ........... $ 38,196,502
------------
================================================================================
Par Value CORPORATE BONDS -- 5.3% Value
--------------------------------------------------------------------------------
$ 500,000 AT&T Corporation, 5.625%, 3/15/04 ................ $ 470,441
500,000 Firstar Bank, 7.80%, 7/5/10 ...................... 499,460
3,000,000 Tennessee Valley Authority, 6.00%, 9/24/02 ....... 2,939,868
500,000 Wal-Mart Stores, 6.55%, 8/10/04 .................. 493,421
------------
TOTAL CORPORATE BONDS (Amortized Cost $4,488,955) $ 4,403,190
------------
17
<PAGE>
THE GOLDEN RAINBOW FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 45.6% Value
--------------------------------------------------------------------------------
2,000,000 U.S. Treasury Notes, 6.25%, 4/30/01 .............. $ 1,996,250
3,000,000 U.S. Treasury Notes, 6.50%, 5/31/01 .............. 3,000,939
2,000,000 U.S. Treasury Notes, 6.25%, 2/15/03 .............. 1,994,376
7,500,000 U.S. Treasury Notes, 6.25%, 2/15/07 .............. 7,507,035
5,000,000 U.S. Treasury Notes, 6.625%, 5/15/07 ............. 5,103,125
2,000,000 U.S. Treasury Notes, 6.00%, 8/15/09 .............. 1,983,750
5,000,000 U.S. Treasury Notes, 6.125%, 11/25/27 ............ 981,145
500,000 U.S. Treasury Bonds, 10.375%, 11/15/09 ........... 572,969
2,000,000 U.S. Treasury Bonds, 10.00%, 5/15/10 ............. 2,290,000
4,000,000 U.S. Treasury Bonds, 5.50%, 8/15/28 .............. 3,668,752
350,000 Federal Farm Credit Bank, 7.70%, 4/25/07 ......... 347,305
2,000,000 Federal Farm Credit Bank, 5.95%, 3/16/09 ......... 1,846,200
2,000,000 Federal Home Loan Bank, 7.00%, 2/14/03 ........... 2,001,222
700,000 Federal Home Loan Bank, 8.70%, 6/01/10 ........... 702,969
750,000 Federal Home Loan Mortgage
Corporation, 6.875%, 1/15/05 ................... 745,381
3,000,000 Federal National Mortgage
Association, 6.78%, 10/30/02 ................... 2,971,362
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS
(Amortized Cost $37,104,658) ..................... $ 37,712,780
------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 3.1% Value
--------------------------------------------------------------------------------
2,529,265 Firstar Stellar Treasury Fund (Cost $2,529,265) .. $ 2,529,265
------------
TOTAL INVESTMENT SECURITIES -- 100.1%
(Amortized Cost $72,720,548) ..................... $ 82,841,737
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1%) .. (87,508)
------------
NET ASSETS -- 100.0% ............................. $ 82,754,229
============
* Non-income producing securities.
ADR - American Depositary Receipt.
See accompanying notes to financial statements.
18
<PAGE>
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS
June 30, 2000
================================================================================
Shares COMMON STOCKS-- 97.0% Value
--------------------------------------------------------------------------------
BASIC MATERIALS-- 8.4%
4,800 Albemarle Corporation ............................ $ 94,800
6,500 Georgia Gulf ..................................... 135,281
3,145 Mueller Industries, Inc.* ........................ 88,060
7,700 Pope & Talbot, Inc. .............................. 123,200
------------
441,341
------------
CONSUMER, CYCLICAL -- 18.5%
8,950 Dollar Thrifty Automotive Group, Inc.* ........... 165,016
5,860 The Dress Barn, Inc.* ............................ 129,652
6,800 LNR Property Corporation ......................... 132,600
4,250 NVR, Inc.* ....................................... 242,250
3,300 Timberland Company* .............................. 233,681
5,200 Zomax, Inc.* ..................................... 68,250
------------
971,449
------------
CONSUMER NON-CYCLICAL -- 16.3%
2,800 Agribrands International, Inc.* .................. 117,425
13,200 Applica, Inc.* ................................... 149,325
7,100 Excel Technology, Inc.* .......................... 357,219
3,800 Learning Tree International* ..................... 232,750
------------
856,719
------------
ENERGY -- 6.6%
5,800 Enterprise Products Partners ..................... 130,500
7,200 HS Resources, Inc.* .............................. 216,000
------------
346,500
------------
FINANCIAL -- 7.6%
3,650 Affiliated Managers Group* ....................... 166,075
2,600 Renaissancere Holdings LT ........................ 113,263
6,800 WFS Financial, Inc.* ............................. 117,300
------------
396,638
------------
INDUSTRIAL -- 9.3%
8,190 Roadway Express, Inc. ............................ 191,953
3,000 Tecumseh Products Company - Class B .............. 123,562
3,400 Texas Industries, Inc. ........................... 98,175
5,170 Yellow Corporation* .............................. 76,258
------------
489,948
------------
TECHNOLOGY -- 26.2%
2,100 Corsair Communications* .......................... 60,375
7,700 ESS Technology* .................................. 111,650
6,200 Graco, Inc. ...................................... 201,500
8,100 Hall Kinion & Associates* ........................ 269,831
5,450 Infocus Corporation* ............................. 175,422
1,600 Keithley Instruments, Inc. ....................... 139,400
3,950 Pericom Semiconductor Corporation* ............... 268,600
8,200 Progress Software Corporation* ................... 147,088
------------
1,373,866
------------
19
<PAGE>
THE JAMES SMALL CAP FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 97.0% (Continued) Value
--------------------------------------------------------------------------------
UTILITIES -- 4.1%
9,300 El Paso Electric Company* ........................ $ 104,044
4,900 Northwest Natural Gas Company .................... 109,637
------------
213,681
------------
TOTAL COMMON STOCKS (Cost $4,557,871) ............ $ 5,090,142
------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 3.8% Value
--------------------------------------------------------------------------------
201,734 Firstar Stellar Treasury Fund (Cost $201,734) .... $ 201,734
------------
TOTAL INVESTMENT SECURITIES -- 100.8%
(Cost $4,759,605) .............................. $ 5,291,876
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8)% .. (40,683)
------------
NET ASSETS -- 100.0% ............................. $ 5,251,193
============
* Non-income producing securities
See accompanying notes to financial statements.
20
<PAGE>
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
June 30, 2000
================================================================================
Shares COMMON STOCKS -- 49.7% Value
--------------------------------------------------------------------------------
BASIC MATERIAL -- 1.7%
3,000 Albemarle Corporation ............................ $ 59,250
2,000 Cabot Corporation ................................ 54,500
------------
113,750
------------
CONSUMER, CYCLICAL -- 3.6%
6,500 Darden Restaurants, Inc. ......................... 105,625
2,550 Navistar International Corporation* .............. 79,209
1,600 Sears Roebuck & Company .......................... 52,200
------------
237,034
------------
CONSUMER, NON-CYCLICAL -- 12.6%
1,600 Andrx Corporation* ............................... 102,275
1,000 Coors (Aldolph) Company - Class B ................ 60,500
3,000 Elan Corporation PLC - ADR Rights ................ 1,500
5,000 IBP, Inc. ........................................ 77,187
2,500 IVAX Corporation* ................................ 103,750
1,500 Jones Pharma, Inc. ............................... 59,906
2,000 Learning Tree International* ..................... 122,500
4,040 Michael Foods, Inc. .............................. 98,980
1,500 Pepsico, Inc. .................................... 66,656
1,000 Quaker Oats Company .............................. 75,125
4,000 Supervalu, Inc. .................................. 76,250
------------
844,629
------------
ENERGY -- 4.9%
1,000 Apache Corporation ............................... 58,813
3,000 Ensco International, Inc. ........................ 107,438
3,000 Helmerich & Payne ................................ 112,125
1,400 Tidewater, Inc. .................................. 50,400
------------
328,776
------------
FINANCIAL -- 6.0%
1,000 Citigroup, Inc. .................................. 60,250
1,100 Marsh & McLennan Companies, Inc. ................. 114,881
750 J.P. Morgan & Company ............................ 82,593
600 National Western Life Insurance Company* ......... 43,200
2,300 T. Rowe Price Associates ......................... 97,750
------------
398,674
------------
INDUSTRIAL -- 2.3%
1,000 Dover Corporation ................................ 40,563
750 Technitrol, Inc. ................................. 72,656
1,050 Vishay Intertech., Inc.* ......................... 39,834
------------
153,053
------------
TECHNOLOGY -- 18.6%
1,700 America Online, Inc.* ............................ 89,675
1,600 Apple Computer, Inc.* ............................ 83,800
2,300 Corsair Communications* .......................... 66,125
1,350 Cypress Semiconductors* .......................... 57,038
1,400 Inet Technologies, Inc.* ......................... 75,950
3,000 Infocus Corporation* ............................. 96,563
21
<PAGE>
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCKS -- 49.7% (Continued) Value
--------------------------------------------------------------------------------
TECHNOLOGY -- 18.6% (Continued)
700 Intel Corporation ................................ $ 93,581
2,250 MedImmune, Inc.* ................................. 166,500
1,000 Merix Corporation* ............................... 47,000
1,750 Nokia Corporation - ADR .......................... 87,391
1,800 Polycom, Inc.* ................................... 169,369
800 Sun Microsystems, Inc.* .......................... 72,750
1,700 Xilinx, Inc.* .................................... 140,356
------------
1,246,098
------------
TOTAL COMMON STOCK (Cost $2,686,262) ............. $ 3,322,014
------------
================================================================================
Par Value U.S. GOVERNMENT & AGENCY BONDS -- 26.6% Value
--------------------------------------------------------------------------------
$1,000,000 Federal Home Loan Bank Discount Note, 7/17/00 .... $ 989,527
500,000 Federal National Mortgage Association, 10/12/00 .. 488,625
300,000 U.S. Treasury Bill, 8/3/00 ....................... 298,569
------------
TOTAL U.S. GOVERNMENT & AGENCY BONDS
(Amortized Cost $1,786,360) .................... $ 1,776,721
------------
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.5% Value
--------------------------------------------------------------------------------
301,312 Firstar Stellar Treasury Fund (Cost $301,312) .... $ 301,312
------------
TOTAL INVESTMENT SECURITIES -- 80.8%
(Amortized Cost $4,773,934) .................... $ 5,400,047
SEGREGATED CASH WITH BROKERS -- 54.3% ............ 3,632,451
SECURITIES SOLD SHORT -- (35.9)%
(Proceeds $2,888,995) .......................... (2,400,420)
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8% .... 52,094
------------
NET ASSETS -- 100.0% ............................. $ 6,684,172
============
* Non-income producing securities.
ADR - American Depositary Receipt.
See accompanying notes to financial statements.
22
<PAGE>
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT
June 30, 2000
================================================================================
Shares COMMON STOCKS SOLD SHORT -- 35.9% Value
--------------------------------------------------------------------------------
BASIC MATERIALS -- 2.0%
6,400 Lyondell Chemical Company ........................ $ 107,200
1,500 USX - US Steel Group, Inc. ....................... 27,844
------------
135,044
------------
CONSUMER, CYCLICAL -- 3.9%
500 Clear Channel Communications, Inc.* .............. 37,500
4,000 Fox Entertainment Group* ......................... 121,500
3,000 Hearst-Argyle TV, Inc.* .......................... 58,500
1,000 Lamar Advertising Company* ....................... 43,312
------------
260,812
------------
CONSUMER, NON-CYCLICAL -- 6.8%
2,000 Campbell Soup Company ............................ 58,250
1,500 Coca-Cola Company ................................ 86,156
2,600 Coca-Cola Enterprises, Inc. ...................... 42,412
1,600 Coulter Pharmaceuticals* ......................... 32,800
1,100 Enzon, Inc.* ..................................... 46,750
2,000 The Gillette Company ............................. 69,875
1,000 Seagram Company Ltd. ............................. 58,000
1,500 Starbucks Corporation* ........................... 57,281
------------
451,524
------------
ENERGY -- 2.1%
3,000 Kinder Morgan, Inc. .............................. 103,687
3,000 Pennzoil-Quaker State Company .................... 36,188
------------
139,875
------------
FINANCIAL -- 4.4%
4,500 Amsouth Bancorp .................................. 70,875
4,600 W.R. Berkley Corporation ......................... 86,250
2,500 E*Trade Group, Inc.* ............................. 41,250
4,300 Ohio Casualty Corporation ........................ 45,688
700 Progressive Corporation .......................... 51,800
------------
295,863
------------
INDUSTRIAL -- 2.7%
5,500 Catelytica* ...................................... 60,500
1,800 Costar Group, Inc.* .............................. 45,112
5,225 Norfolk Southern Corporation ..................... 77,722
------------
183,334
------------
23
<PAGE>
THE JAMES MARKET NEUTRAL FUND
SCHEDULE OF SECURITIES SOLD SHORT (Continued)
================================================================================
Shares COMMON STOCKS SOLD SHORT -- 35.9% (Continued) Value
--------------------------------------------------------------------------------
TECHNOLOGY -- 12.6%
600 Allegiance Telecom Inc.* ......................... $ 38,400
2,100 Amazon.com, Inc.* ................................ 76,256
1,400 Ask Jeeves, Inc.* ................................ 25,288
2,000 Digital River, Inc.* ............................. 15,375
1,000 Global Crossing Ltd.* ............................ 26,313
1,600 Healtheon/WEBMD Corporation* ..................... 23,700
2,500 IGEN International, Inc.* ........................ 41,406
4,500 Imgram Micro Inc. - Class A* ..................... 78,469
1,500 Internap Network Services* ....................... 62,273
1,000 Kana Communications, Inc.* ....................... 61,875
600 Level 3 Communications* .......................... 52,800
8,150 Loral Space & Communications Ltd.* ............... 56,541
2,700 Network Peripherals, Inc.* ....................... 45,225
3,000 Probusiness Series, Inc.* ........................ 79,688
2,000 Psinet, Inc.* .................................... 50,250
4,000 Storage Technology Corporation* .................. 43,750
1,350 Ticketmaster Online-City* ........................ 21,515
2,000 Usinternetworking, Inc.* ......................... 40,875
------------
839,999
------------
UTILITIES -- 1.4%
3,000 Citizens Communications* ......................... 51,750
3,500 Global Telesystem, Inc.* ......................... 42,219
------------
93,969
------------
TOTAL COMMON STOCKS SOLD SHORT
(Proceeds $2,888,995) .......................... $ 2,400,420
============
* Non-income producing securities.
See accompanying notes to financial statements.
24
<PAGE>
THE JAMES LARGE CAP PLUS FUND
SCHEDULE OF INVESTMENTS
June 30, 2000
================================================================================
Shares COMMON STOCK -- 94.7% Value
--------------------------------------------------------------------------------
CONSUMER, CYCLICAL -- 4.5%
3,900 Dow Jones & Company, Inc. ........................ $ 285,676
------------
ENERGY -- 9.5%
2,275 Amerada Hess Corporation ......................... 140,481
4,230 Apache Corporation ............................... 248,777
3,450 Kerr-McGee Corporation ........................... 203,334
------------
592,592
------------
INDUSTRIAL -- 4.8%
3,800 LSI Logic Corporation* ........................... 205,675
1,300 Millipore Corporation ............................ 97,988
------------
303,663
------------
TECHNOLOGY -- 75.9%
3,000 ADC Telecommunications* .......................... 251,625
3,050 Adobe Systems, Inc. .............................. 396,500
4,030 America Online, Inc.* ............................ 212,583
3,900 Analog Devices* .................................. 296,400
2,850 Applied Materials, Inc.* ......................... 258,281
2,600 Cisco Systems, Inc.* ............................. 165,262
6,200 EMC Corporation* ................................. 477,013
1,700 KLA - Tencor Corporation* ........................ 99,556
3,200 National Semiconductor* .......................... 181,600
4,400 Network Appliance, Inc.* ......................... 354,200
2,000 Nortel Networks Corporation ...................... 136,500
5,600 Novellus Systems, Inc.* .......................... 316,750
3,700 Oracle Corporation* .............................. 311,031
1,700 Qualcomm, Inc.* .................................. 102,000
5,600 Scientific-Atalanta, Inc. ........................ 417,200
2,825 Teradyne, Inc.* .................................. 207,638
2,460 Texas Instruments ................................ 168,971
2,900 Xilinx, Inc.* .................................... 239,431
1,350 Yahoo!, Inc.* .................................... 167,231
------------
4,759,772
------------
TOTAL COMMON STOCKS (Cost $5,037,238) ............ $ 5,941,703
------------
25
<PAGE>
THE JAMES LARGE CAP PLUS FUND
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares SHORT TERM INVESTMENTS -- 4.8% Value
--------------------------------------------------------------------------------
303,200 Firstar Stellar Treasury Fund (Cost $303,200) .... $ 303,200
------------
TOTAL INVESTMENT SECURITIES -- 99.5%
(Cost $5,340,438)$ ............................. 6,244,903
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5% .... 33,929
------------
NET ASSETS -- 100.0% ............................. $ 6,278,832
============
* Non-income producing securities.
See accompanying notes to financial statements.
26
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
================================================================================
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"), and The James Large Cap Plus Fund is a non-diversified series of
the Trust. 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 Large Cap Plus 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, 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 James Large Cap Plus 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 U. S.
companies with large capitalizations. The Fund generally buys stocks in the S&P
500 Index and will typically hold 25-30 stocks.
The following is a summary of significant accounting policies followed by the
Funds in preparation of their financial statements, in accordance with
accounting principles generally accepted in the United States of America (
"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 6.10% of net asset value (or 5.75% 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 James
Investment Research, Inc. 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.
27
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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-sized trading units
of debt securities, without regard to sale or bid prices.
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 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 June 30, 2000, 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 are 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, if any, 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 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 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.
28
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
The following information is based upon the federal income tax cost of portfolio
investments and securities sold short as of June 30, 2000:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
The Golden The James The James The James
Rainbow Small Cap Market Neutral Large Cap Plus
Fund Fund Fund Fund
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized appreciation .......... $ 11,709,447 $ 955,701 $ 1,471,985 $ 1,217,376
Gross unrealized depreciation .......... (1,588,258) (423,430) (357,297) (312,911)
------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation) $ 10,121,189 $ 532,271 $ 1,114,688 $ 904,465
============ ============ ============ ============
Federal income tax cost ................ $ 72,720,548 $ 4,759,605 $ 2,440,661 $ 5,340,438
============ ============ ============ ============
------------------------------------------------------------------------------------------------------------
</TABLE>
As of June 30, 2000, The James Small Cap Fund and The James Market Neutral Fund
have capital loss carryforwards for federal income tax purposes of $561,145 and
$1,387,987, respectively, which expire in the year 2008. In addition, during the
period from November 1, 1999 through June 30, 2000, The James Small Cap Fund,
The James Market Neutral Fund and The James Large Cap Plus Fund had net realized
capital losses of $303,537, $78,713 and $114,804, respectively, which are
treated for federal income tax purposes as arising during the Fund's tax year
ending June 30, 2001. These capital loss carryforwards and "post-October" losses
may be utilized in future years to offset net realized capital gains, if any,
prior to distributing such gains to shareholders.
RECLASSIFICATION OF CAPITAL ACCOUNTS
The James Small Cap Fund and The James Large Cap Plus Fund had net investment
losses of $22,875 and $27,001, respectively, for the period ended June 30, 2000
which have been reclassified to paid-in capital on the Statements of Assets and
Liabilities. Such reclassifications, the result of permanent differences between
financial statement and income tax reporting requirements, have no effect on
each Fund's net assets or net asset value per share. Permanent book to tax basis
differences are not included in ending undistributed/distributions in excess of
net investment income for purposes of calculating net investment income/loss per
share in the financial highlights.
2. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term U.S.
government obligations for The Golden Rainbow Fund for the year ended June 30,
2000 equaled $44,465,291 and $55,581,301, respectively. Purchases and sales
(including maturities) of investments in other long-term securities for the
period ended June 30, 2000 equaled $28,298,275 and $41,793,268, respectively,
for The Golden Rainbow Fund, $4,780,346 and $5,333,065, respectively, for The
James Small Cap Fund, $3,028,558 and $4,590,371, respectively, for The James
Market Neutral Fund and $7,829,660 and $2,677,618, respectively, for The James
Large Cap Plus Fund. For the year ended June 30, 2000, the cost of securities
purchased to cover short sales and the proceeds from securities sold short were
$4,609,473 and $6,353,069, 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 service agent for the
Trust, or of IFS Fund Distributors, Inc. ("Underwriter"), the exclusive agent
for the distribution of the Funds' shares.
INVESTMENT MANAGEMENT AGREEMENT
The Funds retain James Investment Research, Inc. 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.
29
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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. James voluntarily agreed to waive a
portion of its fee and/or reimburse fund expenses to the extent necessary to
limit Fund expenses to 1.09% through June 26, 2000. Accordingly, James
voluntarily waived $23,973 of management fees for the Fund during the year ended
June 30, 2000. 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 Small Cap Fund and The Large Cap Plus 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, The
Market Neutral Fund and The Large Cap Plus 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 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 Large Cap Plus Fund, at the annual rate of 0.10% of
the average value of each Fund's respective daily net assets up to $25 million;
0.075% of such assets from $25 million to $50 million; and 0.05% of such assets
in excess of $50 million, subject to a $1,000 monthly minimum 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 Fund's 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 Large Cap Plus Fund, at an annual rate of $20 per shareholder
account, subject to a $1,500 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 of
$3,000 from The Golden Rainbow Fund and $2,000 from James with respect to each
of the James Small Cap Fund, The James Market Neutral Fund and The James Large
Cap Plus 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.
UNDERWRITING AGREEMENT
Under the terms of an Underwriting Agreement between the Trust and IFS Fund
Distributors (the "Distributor"), the Distributor acts as the principal
distributor of each Fund's shares. The Distributor earned $63, $435, $416 and
$1,322 from underwriting commissions on the sale of shares of The Golden Rainbow
Fund, The James Small Cap Fund, The James Market Neutral Fund and The James
Large Cap Plus Fund, respectively. Additionally, the Distributor earned $193,
$1,889 and $105 from broker commissions on the sale of shares of The Golden
Rainbow Fund, The James Small Cap Fund and The James Large Cap Plus Fund,
respectively.
30
<PAGE>
THE JAMES ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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. James agreed to limit the
total operating expenses of The Golden Rainbow Fund to 1.09% of its average
daily net assets through June 26, 2000. Accordingly, James voluntarily waived
$119,017 of distribution expenses for The Golden Rainbow Fund during the year
ended June 30, 2000.
4. FEDERAL TAX INFORMATION (UNAUDITED)
In accordance with federal tax requirements, the following provides shareholders
with information concerning distributions from net realized gains, if any, made
by the Funds during the year ended June 30, 2000. On December 17, 1999, The
Golden Rainbow Fund declared and paid a long-term capital gain distribution of
$1.0412 per share and a short-term capital gain distribution of $0.0046 per
share. As required by federal regulations, shareholders will receive
notification of their portion of a Fund's taxable capital gain distribution, if
any, paid during the 2000 calendar year early in 2001.
31
<PAGE>
INDEPENDENT AUDITORS' REPORT
================================================================================
To the Trustees and Shareholders of The James Advantage Funds:
We have audited the accompanying statements of assets and liabilities of The
James Advantage Funds, including The Golden Rainbow Fund, The James Small Cap
Fund, The James Market Neutral Fund and The James Large Cap Plus Fund (the
"Funds"), including the schedules of investments and securities sold short, as
of June 30, 2000, and the related statements of operations, the statements of
changes in net assets, and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the custodians and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of June 30, 2000, the results of their operations, the changes in their
net assets, and the financial highlights for the respective stated periods, in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Dayton, Ohio
August 11, 2000
32
