<PAGE>
Dear Shareholder:
If I could relive 1998, I might have been inclined to work a lot less. Perhaps
I could have played some golf instead of digging through balance sheets, income
statement and difficult footnotes. The fact is, I don't play golf and even if I
did, without the advantage of hindsight, I do not believe I would have changed
any investment decision.
In 1998, all one needed to do to achieve superb performance was buy the 20 or 30
largest U.S. corporations or, if income was the primary objective, invest in 10
year U.S. Government bonds. For diversified equity or income portfolio
managers, it was nearly impossible to beat this simple formula. As 1998 came to
a close and as we begin 1999, this simplistic investment formula has now become
the conventional wisdom, expected to create great wealth for investors in the
months and years ahead.
An obvious exception to the new investment precept is The Maxus Laureate Fund.
Fund manager Alan Miller produced a 35% return in 1998 without owning one of the
30 corporate giants. Rather than buying and holding, Alan's formula is knowing
when to be in and out of the market. With a market as volatile as we have
experienced in recent months, Alan's exceptional talents were exercised to their
full potential, proving that hard work still has a place in the creation of
wealth.
The value style of investing, as characterized by the Maxus Equity, Maxus
Aggressive Value and Maxus Ohio Heartland Funds, was clearly out of favor in
1998, at least relative to the capitalization weighted S&P 500. Against the
benchmark of the Russell 2000, however, the Maxus Aggressive Value Fund had an
excellent year (measured from inception on March 1, 1998), and thus far in 1999,
Maxus Aggressive Value is showing up near the top of all national microcap
mutual funds.
Investors always have choices. The current wisdom suggests that investors
should pay 30 to 80 times earnings for companies whose earnings growth is
projected to be no more than 15% annually by analysts who almost always err on
the high side. Our formula is to seek out companies whose current market values
are less than their private market values and whose prospects for greater
success are exceptionally high.
During the past several months I have come to sense that the more sophisticated
investors are moving away from last year's overvalue approach and toward the
value style. If this trend continues, the Maxus Funds are exceptionally poised
to outperform the competition. Whatever the prospects for the immediate future,
however, the record shows that long term investors focused on value have always
outperformed other investors and investment styles.
/s/ Richard A Barone
Richard A Barone
<PAGE>
Maxus Ohio Heartland Fund
Schedule of Investments
December 31, 1998
Shares/Principal Amount Market Value % of Assets
Basic Materials
2,500 A. Schulman 56,719
2,500 Andersons 28,906
3,000 Brush Wellman 52,312
3,500 Hanna,(M.A.) 43,094
4,000 Hawk Group * 33,500
6,000 Olympic Steel * 30,000
2,200 Shiloh Industries * 28,875
2,000 Timken 37,750
311,156 15.66%
Industrial Products & Services
3,500 Applied Industrial Technologies 48,563
4,000 Chart Industries 30,500
5,250 Corrpro * 63,984
1,000 Parker Hannifin 32,750
2,000 RPM Inc 32,000
2,000 Scott Technologies Cl A * 33,062
2,000 Stoneridge * 45,500
286,359 14.41%
Consumer Cyclical
2,000 Baldwin Piano * 19,250
1,800 Cooper Tire 36,788
7,500 International Total Service * 37,500
2,000 Standard Register 61,875
155,413 7.82%
Consumer Staples
2,600 Bob Evans 67,763
1,500 Consolidated Stores 30,282
2,400 Fabri-Centers of America Cl B * 33,300
5,000 Gibson Greetings * 59,375
3,000 Huffy 49,500
3,500 Officemax * 42,875
3,000 RG Barry * 33,000
3,500 Rocky Shoes & Boots * 20,562
12,000 Royal Appliance * 44,250
2,500 Value City Dept. Stores * 34,844
2,300 Wendy's 50,169
2,500 Worthington Foods 47,500
513,420 25.83%
Financial
3,000 Associated Estates Realty 35,437
4,000 Boykin Lodging 49,500
2,500 First Merit 67,188
4,000 First Union Real Estate 23,000
5,000 Great Lakes Bancorp * 60,000
2,000 State Auto Financial 24,750
259,875 13.07%
*Non-income producing securities
The accompanying notes are an integral part of the financial statements.
<PAGE>
Health Care
10,000 Collaborative Clinical Research * 40,000
2,000 Invacare 48,000
88,000 4.43%
Technology
5,500 Allen Telecom * 36,781
2,000 Diebold 71,375
4,700 Keithley Instruments 42,887
8,500 Pioneer Standard 79,687
2,000 Structural Dynamics * 39,750
2,000 Telxon 27,750
298,230 15.01%
Cash Equivalents
75,514 Star Bank Treasury 75,514 3.80%
Total Investments (Cost - $2,353,265 ) 1,987,967 100.03%
Other Assets Less Liabilities (647) - 0.03%
Net Assets - Equivalent 1,987,320 100.00%
*Non-income producing securities
The accompanying notes are an integral part of the financial statements.
<PAGE>
Maxus Aggressive Value Fund
Schedule of Investments
December 31, 1998
Shares/Principal Amount Market Value % of Assets
Basic Materials
15,000 Birmingham Steel 62,813
400,000 Campbell Resources * 100,000
10,000 Olympic Steel * 50,000
212,813 4.93%
Consumer Products
10,000 Cone Mills * 56,250
20,000 Designs * 38,750
15,000 Donna Karan * 114,375
65,000 First Team Sports * 89,375
40,000 Martin Industries 110,000
50,000 Michael Anthony Jewelers * 162,500
47,500 Parlux Fragrance * 65,625
21,100 Saucony Cl A * 150,338
20,000 Scheid Vineyards * 97,500
20,000 Scotts Liquid Gold 28,750
10,000 TCBY Enterprises 70,000
10,000 Tultex * 8,750
992,213 22.99%
Education
10,000 Whitman Education Group * 33,125 0.77%
Energy
25,000 Howell 51,562
40,000 Patina Oil & Gas 117,500
169,062 3.92%
Entertainment
16,000 Baldwin Piano * 154,000
15,000 Isle Capri Casinos * 59,531
19,800 Royal Olympic Cruises * 66,825
280,356 6.50%
Financial Services
5,700 Atlanta Sosnoff Capital 47,381
10,000 Great Lakes Bancorp * 120,000
7,500 National Discount Brokers * 150,000
317,381 7.35%
Industrial Products & Services
38,500 Catalina Lighting * 86,625
9,700 Cybex * 41,225
12,000 FerroFluidics * 34,500
12,000 Flow International * 116,250
15,000 International Total Services * 75,000
353,600 8.19%
*Non-income producing securities
The accompanying notes are an integral part of the financial statements.
<PAGE>
Information Technology
10,000 Aydin * 101,875
10,000 Cidco Com. * 28,750
10,000 Cohr * 51,250
10,000 Datum * 65,625
10,000 In Focus System * 88,750
15,000 Media 100 * 88,125
17,000 Perceptron * 112,625
7,000 Premisy Communs * 64,313
10,000 Standard Microsystmes Com * 78,125
3,000 Tech Sym * 66,750
10,000 Trident Microsystems * 41,250
787,438 18.25%
Infrastructure & Environment
22,000 Foster L B * 145,750 3.38%
Machinery & Equipment
4,000 Cubic 75,000 1.74%
Medical Products & Services
10,000 Collaborative Clinical Research * 40,000
15,100 Cholestech * 57,569
15,000 Orthologic * 50,156
147,725 3.42%
Realestate
5,000 Asset Investors 63,750 1.48%
Wholesale Distribution
10,000 Lazare Kaplan * 70,000
20,000 Strategic Distribution * 48,750
118,750 2.75%
Closed End Eqity Funds
23,000 Brantley Capital 163,875
7,000 Equus II 112,875
276,750 6.41%
Cash Equivalents
412,403 Star Bank Treasury 412,403 9.56%
Total Investments (Cost - $4,494,690) 4,386,116 101.64%
Other Assets Less Liabilities (70,853) -1.64%
Net Assets - Equivalent 4,315,263 100.00%
*Non-income producing securities
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Assets & Liabilities
Ohio Heartland & Aggressive Value Funds December 31, 1998
Ohio
Heartland Aggressive
Fund Value Fund
Assets:
Investment Securities at Market Value 1,987,967 4,386,116
(Identified Costs - $2,353,265 and $4,494,690)
Cash 4,855 5,887
Receivables:
Receivable for investment securities sold - 171,863
Dividends and interest receivable 4,759 2,201
Unamortized organization costs 12,464 12,464
Total Assets 2,010,045 4,578,531
Liabilities:
Payable for investment purchased - 228,171
Payable for shareholder distributions - 9,862
Accrued Expenses 22,725 25,235
Total Liabilities 22,725 263,268
Net Assets 1,987,320 4,315,263
Net Assets Consist Of:
Capital Paid In 2,381,819 4,423,825
Undistributed Net Investment Income - -
Accumulated Realized Gain (Loss)
on Investments - Net (29,201) 12
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net (365,298) (108,574)
Net Assets 1,987,320 4,315,263
Net Assets
Investors Shares 1,234,261 3,159,436
Institutional Shares 753,059 1,155,827
Total 1,987,320 4,315,263
Shares of capital stock
Investors Shares 151,283 658,099
Institutional Shares 92,012 239,994
Total 243,295 898,093
Net asset value per share
Investors Shares $8.16 $4.80
Institutional Shares $8.18 $4.82
The accompanying notes are an integral part of the financial statements.
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Statement of Operations
Ohio Heartland & Aggressive Value Funds December 31, 1998
Ohio
Heartland Aggressive
Fund Value Fund
Investment Income:
Dividend income $22,447 6,895
Interest income 16,720 33,005
Total Income 39,167 39,900
Expenses:
Investment advisory fees (Note 2) 16,389 29,111
Distribution fees (Investor shares) 5,643 9,576
Distribution fees (Institutional shares) - -
Custodial fees 3,101 5,288
Organization costs 2,785 2,785
Transfer agent fees/Accounting and Pricing 4,497 7,940
Legal 8,016 8,109
Audit 6,000 6,000
Registration and filing fees 386 447
Trustee fees 400 400
Printing & Other Miscellaneous 3,903 4,293
Total Expenses 51,120 73,949
Net Investment Income (Loss) (11,953) (34,049)
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments (29,201) 66,583
Distribution of Realized Capital Gains
from other Investment Companies - -
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments (365,298) (108,574)
Net Realized and Unrealized Gain (Loss) on Investments (394,499) (41,991)
Net Increase (Decrease) in Net Assets from Operations $(406,452) (76,040)
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets
Ohio Heartland & Aggressive Value Funds December 31, 1998
Ohio Aggressive
Heartland Fund Value Fund
02/01/98 02/01/98
to to
12/31/98 12/31/98
From Operations:
Net Investment Income (11,953) (34,049)
Net Realized Gain (Loss) on Investments (29,201) 66,583
Net Unrealized Appreciation (Depreciation) (365,298) (108,574)
Increase (Decrease) in Net Assets from Operations (406,452) (76,040)
Distributions to investor shareholders:
Net Investment Income - -
Net Realized Gain (Loss) from Security Transactions - (23,824)
Distributions to institutional shareholders:
Net Investment Income - -
Net Realized Gain (Loss) from Security Transactions - (8,698)
Change in net assets from distributions - (32,522)
From Capital Share Transactions:
Proceeds from sale of shares 2,792,343 4,484,083
Dividend reinvestment - 22,660
Cost of shares redeemed (498,571) (182,918)
Change in net assets from capital transactions 2,293,772 4,323,825
Change in net assets 1,887,320 4,215,263
Net Assets:
Beginning of period 100,000 100,000
End of period 1,987,320 4,315,263
Share Transactions:
Issued 293,342 913,733
Reinvested - 4,715
Redeemed (60,047) (40,355)
Net increase (decrease) in shares 233,295 878,093
Shares outstanding beginning of period 10,000 20,000
Shares outstanding end of period 243,295 898,093
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Highlights
Ohio Heartland & Aggressive Value Funds
Selected data for a share of capital stock
outstanding throughout the period indicated
Ohio Heartland Fund Aggressive Value Fund
2/1/98 to 12/31/98 2/1/98 to 12/31/98
Investor Institutional Investor Institutional
Net Asset Value -
Beginning of Period 10.00 10.00 5.00 5.00
Net Investment Income (0.05) (0.03) (0.07) (0.05)
Net Gains or Losses on Securities
(realized and unrealized) (1.79) (1.79) (0.09) (0.09)
Total from Investment Operations (1.84) (1.82) (0.16) (0.14)
Distributions
Net investment income - - - -
Capital gains - - (0.04) (0.04)
Return of capital - - - -
Total Distributions - - (0.04) (0.04)
Net Asset Value -
End of Period $8.16 $8.18 $4.80 $4.82
Total Return -18.40% -18.20% -3.27% -2.87%
Ratios/Supplemental Data:
Net Assets at end
of period (thousands) 1,234 753 3,159 1,156
Ratio of expenses to
average net assets * 3.24% 2.74% 2.69% 2.19%
Ratio of net income to
average net assets * -0.88% -0.38% -1.33% -0.83%
Portfolio turnover rate 6.82% 6.82% 108.60% 108.60%
* Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE>
Notes to Financial Statements
Maxus Ohio Heartland & Aggressive Value Funds
December 31, 1998
1.) SIGNIFICANT ACCOUNTING POLICIES
Maxus Ohio Heartland Fund and Maxus Aggressive Value Fund (the "Funds") are
two separate diversified portfolios of MaxFund Trust (the "Trust"), an
open-end management investment company, organized as a Trust under the laws of
the State of Ohio by a Declaration of Trust dated November 7, 1997. The
investment objective of Maxus Ohio Heartland Fund is to obtain a total return
(a combination of capital appreciation and income). The Fund pursues this
objective by investing primarily in equity securities of companies
headquartered in the State of Ohio. The investment objective of Maxus
Aggressive Value Fund is to obtain capital appreciation. The Fund pursues this
objective by investing primarily in equity securities of companies who have a
total market value of not less the $10,000,000 or more that $200,000,000 as of
the date of investment. Significant accounting policies of the Funds are
presented below:
SECURITY VALUATION
Both Funds intend to invest in a wide variety of equity and debt securities.
The investments in securities are carried at market value. The market
quotation used for common stocks, including those listed on the NASDAQ
National Market System, is the last sale price on the date on which the
valuation is made or, in the absence of sales, at the closing bid price.
Over-the-counter securities will be valued on the basis of the bid price at
the close of each business day. Short-term investments are valued at amortized
cost, which approximates market. Securities for which market quotations are
not readily available will be valued at fair value as determined in good faith
pursuant to procedures established by the Board of Directors.
SECURITY TRANSACTION TIMING
Security transactions are recorded on the dates transactions are entered into
(the trade dates). Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded as earned. Both
Funds use the identified cost basis in computing gain or loss on sale of
investment securities. Discounts and premiums on securities purchased are
amortized over the life of the respective securities.
INCOME TAXES
It is both Funds' policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements of the
Internal Revenue Service. This Internal Revenue Service requirement may cause
an excess of distributions over the book year-end accumulated income. In
addition, it is both Funds' policy to distribute annually, after the end of
the calendar year, any remaining net investment income and net realized
capital gains.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2.) INVESTMENT ADVISORY AGREEMENT
The Trust has entered into an investment advisory and administration agreement
with Maxus Asset Management Inc. a wholly owned subsidiary of Resource
Management Inc. The Investment Advisor receives from each Fund as compensation
for its services to that Fund an annual fee of 1% on the first $150,000,000 of
the Fund's net assets, and 0.75% of the Fund's net assets in excess of
$150,000,000.
<PAGE>
3.) RELATED PARTY TRANSACTIONS
Resource Management, Inc. has three wholly owned subsidiaries which provide
services to the Funds. These subsidiaries are Maxus Asset Management Inc,
Maxus Securities Corp, and Maxus Information Systems Inc. Maxus Asset
Management was paid $16,389 by Maxus Ohio Heartland Fund and $29,111 by Maxus
Aggressive Value Fund in investment advisory fees during the fiscal year
ending December 31, 1998. Maxus Securities, who served as the national
distributor of the Funds' shares, was reimbursed $5,643 by Maxus Ohio
Heartland Fund and $9,576 by Maxus Aggressive Value Fund for distribution
expenses. Maxus Information Systems received fees totaling $4,497 from Maxus
Ohio Heartland Fund and $7,940 from Maxus Aggressive Value Fund for services
rendered to the Fund for the fiscal year ending December 31, 1998. Maxus
Securities is a registered broker-dealer. Maxus Securities effected
substantially all of the investment portfolio transactions for the Fund. For
this service Maxus Securities received commissions of $9,769 from Maxus Ohio
Heartland Fund and $41,250 from Maxus Aggressive Value Fund for the fiscal
year ending December 31, 1998.
At December 31, 1998, Resource Management owned 10,000 shares in Maxus Ohio
Heartland Fund and 100,000 shares in Maxus Aggressive Value Fund.
Certain officers and/or trustees of the Funds are officers and/or directors of
the Investment Advisor and Administrator. Each director who is not an
"affiliated person" receives an attendance fee of $100 per Fund per meeting.
4.) CAPITAL STOCK AND DISTRIBUTION
At December 31, 1998, an indefinite number of shares of capital stock ($.10
par value) were authorized, and paid-in capital amounted to $2,381,819 for the
Maxus Ohio Heartland Fund and $4,423,825 for the Maxus Aggressive Value Fund.
Distributions to shareholders are recorded on the ex-dividend date. Payments
in excess of net investment income or of accumulated net realized gains
reported in the financial statements are due primarily to book/tax
differences. Payments due to permanent differences have been charged to paid
in capital. Payments due to temporary differences have been charged to
distributions in excess of net investment income or realized gains.
5.) PURCHASES AND SALES OF SECURITIES
The table below displays information describing purchases and sales of
investment securities, both U.S. Government obligations and non U.S.
Government obligations made during the fiscal year ending December 31, 1998.
Maxus Ohio Maxus Aggressive
Type of obligation Heartland Value Fund
Fund
Purchase of non U.S. 2,420,123 6,643,170
Government *
Sale of non U.S. 94,732 2,623,190
Government *
Purchase of U.S. 0 0
Government
Sale of U.S. Government 0 0
* This value includes short-term investments.
6.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments that have any off-balance sheet
risk as of December 31, 1998.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at December 31,
1998 was the same as identified cost.
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At December 31, 1998, the composition of unrealized appreciation (the excess
of value over tax cost) and depreciation (the excess of tax cost over value)
was as follows:
Maxus Ohio Maxus
Heartland Fund Aggressive
Value Fund
Appreciation 147,042 508,833
(Depreciation) (512,340) (617,407)
Net Appreciation (365,298) (108,574)
(Depreciation)
8.) RECLASSIFICATION
In accordance with AICPA Statement of Position 93-2, the components of the net
assets of the Ohio Heartland Fund have been reclassified to the extent that
the net investment loss of ($11,953) sustained during the fiscal year ended
December 31, 1998, which represents a permanent difference for income tax
purposes, has been reclassified as a decrease in the net capital paid in.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
MaxFund Trust:
We have audited the statements of assets and liabilities including the
portfolios of investments, of the MaxFund Trust (comprising, respectively, of
the Maxus Ohio Heartland Fund and the Maxus Aggressive Value Fund) as of
December 31, 1998, and the related statements of operations, the statements of
changes in net assets, and the financial highlights for each of the periods
indicated. These financial statements and financial highlights are the
responsibility of the Fund's 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 generally accepted auditing
standards. 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
December 31, 1998 by correspondence with the custodian 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 each
of the respective portfolios constituting the MaxFund Trust as of December 31,
1998, the results of their operations, the changes in their net assets, and the
financial highlights for each of the periods indicated in conformity with
generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
January 13, 1999
