Dear Shareholder:
The Maxus Funds have once again shown exceptional relative performance for the
first six months of 1999. As usual, the stock market has demonstrated its
ability to confuse investors with conflicting signals and divergent trends. For
example, while the S&P 500 index turned in a respectable 8.09 %, the Dow Jones
Industrials, with its more cyclical stock weighting, leaped ahead over 16%.
Even more pronounced was the technology heavy NASDAQ 100, which advanced over
23% while the small cap Russell 2000, managed only 5.41% gain. All of this was
occurring at the same time that the Salomon Broad Investment Grade bond index, a
proxy for the bond market, turned in a negative total return of -2.8%.
I believe that making sense of these divergent trends is a key element in
determining if your investment portfolio is headed in the right direction during
the next several years. While you can count on the fact that history rarely
repeats itself, it does offer excellent clues as to where and how investors
should position themselves today.
Those of you who have followed the Maxus investment philosophy already know that
we believe most of the large capitalization growth companies are significantly
overvalued based upon any reasonable prospect for growth in future years.
Overvaluation, however, does not necessarily give you any insight as to the
immediate direction of stock prices. There are much better indicators to follow.
The best indicator hands down is the direction and level of interest rates.
Since the beginning of the year rates have advanced over 100 basis points to
over 6% on longer term Treasury bonds. Although stock prices have struggled
with the increase, the general market continues to act well, seemingly to
suggest that interest rates don't count.
While there is no hard and fast rule, bear markets of the past have generally
started only when rates have risen approximately 30% from their lows. In the
current environment, rates would have to exceed 7% before the market would
approach any real trouble. Our estimate, as well as those of most economic
forecasters, is that long rates will not exceed 7% in the near future, despite
any increases in short term rates by the Federal Reserve. There are two
important things to keep in mind, however.
First, once the direction in interest rates is set in motion, it tends to remain
in motion until there is an economic resolution. The only problem with this
forecast is the timing is always an unknown. Significant rate increases may take
several years to appear. The second historically meaningful fact is that any
increase in interest rates tend to negatively impact high price to earnings
stocks more than low price to earnings stocks, i. e. value stocks are more
likely to outperform growth stocks. Without exploring the economic rationale, it
is generally accepted that the absolute level of interest rates relates directly
to the price to earnings multiple of the general market, i.e. the higher
interest rates, the lower the price to earnings ratio.
A price to earnings multiple is less meaningful in analyzing value stocks since
current earnings and the prospects for future earnings are only two components
in the analysis. For growth stocks they are the only components. With the
increase in interest rates during the first six months of 1998, I believe the
movement toward value stocks has begun and is apt to continue for some time. For
example, The Maxus Equity Fund advanced 19.3% during this period against the
Russell 3000 benchmark which increased 12.7%, while The Maxus Aggressive Value
Funds, which consists exclusively of micro-cap companies, advanced 27.5% against
the small cap Russell 2000 which chalked up 9.28% for the period.
Alan Miller continued his winning ways with a 13.2% increase for the Maxus
Laureate Fund, while the Maxus Income Fund produced a total return of 2.2 % and
scored significantly over the Ryan Labs government bond index which declined -
5.40%. Even the Maxus Ohio Heartland Fund, which advanced 2.1%, did
considerably better than competing funds with the same narrow focus.
Investors who still care about a company's fundamentals and underlying business
values should consider the Maxus Funds in their investment program. I believe we
are in an excellent position to capitalize on the changing environment already
taking shape in the stock and bond markets.
Sincerely,
Richard Barone
President
<PAGE>
Maxus Ohio Heartland Fund
Schedule of Investments
June 30, 1999 (unaudited)
Shares/Principal Amount Market Value % of Assets
Basic Materials
2,500 A. Schulman 42,969
3,500 Hanna, M.A. 57,531
1,500 Lubrizol 40,875
2,000 RPM 28,375
3,000 Brush Wellman 54,375
1,500 Oglebay Norton 33,375
8,000 Olympic Steel * 53,000
2,200 Shiloh Industries * 31,900
4,000 Hawk Group * 35,250
377,650 17.19%
Capital Goods
2,000 Scott Technologies Cl A * 38,500
2,000 Diebold 57,500
4,700 Keithley Instruments 42,006
5,250 Corrpro * 45,281
4,000 Chart Industries 31,500
2,000 Timken 39,000
253,787 11.55%
Consumer Cyclical
3,500 Applied Industrial Technologies 66,500
1,800 Cooper Tire 42,525
3,000 Stoneridge * 42,000
2,000 Baldwin Piano * 17,000
3,000 Huffy 42,000
6,500 Gibson Greetings * 41,234
2,000 Standard Register 61,500
1,500 Consolidated Stores * 40,500
2,500 Elder Beerman Stores * 18,281
2,400 Jo-Ann Stores Cl B. * 31,200
4,500 Officemax * 54,000
2,500 Value City Dept. Stores * 30,625
4,000 RG Barry * 33,000
5,000 Rocky Shoes & Boots * 41,563
7,500 International Total Services * 23,906
585,834 26.66%
Consumer Staples
1,200 Smucker J.M. 22,800
2,500 Worthington Foods 41,250
12,500 Royal Appliance * 86,719
2,000 Bob Evans 39,750
1,800 Wendy's 51,300
241,819 11.00%
Financials
2,000 First Merit Bankcorp 56,125
5,000 Great Lakes Bancorp * 50,625
3,000 State Auto Financial 40,500
4,000 Associated Estates 47,250
4,000 Boykin Lodging 61,500
2,000 Rainbow Rentals * 23,000
279,000 12.70%
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Schedule of Investments
June 30, 1999 (unaudited)
Shares/Principal Amount Market Value % of Assets
Healthcare
7,000 NCS Healthcare * 38,063
2,000 Invacare 53,500
2,000 Steris * 38,750
130,313 5.93%
Technology
5,500 Allen Telecom * 60,500
4,000 Telxon * 31,750
2,000 Structural Dynamics * 37,125
10,000 Datatrak * 51,250
8,500 Pioneer Standard 102,000
282,625 12.86%
CLOSED END EQUITY FUNDS
3,000 Brantley Capital * 22,125 1.01%
Cash Equivalents
37,985 Firstar Bank Treasury 37,985 1.73%
Total Investments (Cost - $2,518,503 ) 2,211,138 100.62%
Other Assets Less Liabilities (13,667) -0.62%
Net Assets - Equivalent to $8.33 per share 2,197,471 100.00%
based on 160,948 shares of capital
stock outstanding (Note 4)
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Maxus Aggressive Value Fund
Schedule of Investments
June 30, 1999 (unaudited)
Shares/Principal Amount Market Value % of Assets
Basic Materials
400,000 Campbell Resources * 125,000
26,710 Olympic Steel * 176,954
301,954 2.96%
Capital Goods
10,000 Cubic 246,250
5,000 Tech Sym * 118,750
22,000 Foster L B * 129,250
20,000 Flow International * 216,250
7,300 Northwest Pipe * 121,363
831,863 8.15%
Consumer Cyclical
57,700 Martin Industries 126,219
15,000 Baldwin Piano * 127,500
22,000 Cybex International * 101,750
15,000 Family Golf Centers * 115,313
84,500 First Team Sports * 264,062
47,000 Gibson Greetings * 298,156
20,000 Designs * 30,000
70,000 Michael Anthony Jewelers * 284,375
15,000 Angelica 264,375
31,300 Rocky Shoes & Boots * 260,181
12,000 Saucony Cl A * 262,500
50,000 Tultex * 34,375
2,168,806 21.25%
Consumer Staples
20,000 Scheid Vineyards Class A * 100,000
10,000 Aviall * 188,125
20,000 Lazare Kaplan Intl * 202,500
70,500 Strategic Distribution * 163,031
25,000 Royal Olympic Cruise Lines * 71,875
15,000 Zapata 127,500
60,000 Parlux Fragrance * 105,000
20,000 Scotts Liquid Gold * 36,250
994,281 9.74%
Energy
15,000 Howell 76,875
58,800 Patina Oil & Gas 371,175
448,050 4.39%
Financials
10,000 Great Lakes Bancorp 101,250
10,000 Asset Investors 149,375
47,900 First Union Real Estate * 215,550
24,400 Bluegreen * 132,675
25,000 Atlanta Sosnoff Capital 235,938
834,788 8.18%
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Schedule of Investments
June 30, 1999 (unaudited)
Shares/Principal Amount Market Value % of Assets
Healthcare
35,000 Carrington Labs * 100,625
25,895 Cholestech * 66,356
15,000 Hologic * 84,375
20,000 Orthologic * 49,375
18,100 Whitman Education Group * 108,600
409,331 4.01%
Technology
5,000 Communication Sys 61,875
32,000 Datum * 354,000
35,000 Ultrak * 205,625
10,000 In Focus System * 150,000
15,000 Media 100 * 75,937
10,000 Standard Microsystems * 75,625
15,000 Intelligroup * 106,875
38,000 Datatrak * 194,750
50,000 Perceptron * 228,125
27,900 Barringer Tech * 180,477
15,000 Osmonics * 163,125
12,000 Veritas DGC * 219,750
2,016,164 19.76%
Utilities
25,000 Virginia Gas * 109,375 1.07%
CLOSED END EQUITY FUNDS
30,100 Brantley Cap 221,988
12,500 Equus II 202,344
16,800 Templeton China World Fund 148,050
572,382 5.61%
Cash Equivalents
1,415,386 Firstar Bank Treasury 1,415,386 13.87%
Total Investments (Cost - $8,903,901) 10,102,380 99.00%
Other Assets Less Liabilities 102,346 1.00%
Net Assets - Equivalent to $6.12 per 10,204,726 100.00%
share based on 1,111,363 shares of \
capital stock outstanding (Note 4)
*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 June 30, 1999 (unaudited)
Ohio
Heartland Aggressive
Fund Value Fund
Assets:
Investment Securities at Market Value 2,211,138 10,102,380
(Identified Costs - $2,518,503
and $8,903,901)
Cash 1,889 4,523
Receivables:
Receivable for investment securities sold - 115,296
Dividends and interest receivable 2,514 8,443
Unamortized organization costs 10,946 10,946
Total Assets 2,226,487 10,241,588
Liabilities:
Payable for investment purchased - -
Payable for shareholder distributions - -
Accrued Expenses 29,017 36,862
Total Liabilities 29,017 36,862
Net Assets 2,197,470 10,204,726
Net Assets Consist Of:
Capital Paid In 2,538,567 8,485,555
Undistributed Net Investment Income (19,568) (53,579)
Accumulated Realized Gain (Loss) on
Investments - Net (14,164) 574,271
Unrealized Appreciation in Value
of Investments Based on Identified
Cost - Net (307,365) 1,198,479
Net Assets 2,197,470 10,204,726
Net Assets
Investors Shares 1,340,499 6,802,962
Institutional Shares 856,972 3,401,764
Total 2,197,471 10,204,726
Shares of capital stock
Investors Shares 160,948 1,111,363
Institutional Shares 102,395 553,029
Total 263,343 1,664,392
Net asset value per share
Investors Shares $8.33 $6.12
Institutional Shares $8.37 $6.15
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Operations
Ohio Heartland & Aggressive Value Funds June 30, 1999 (unaudited)
Ohio
Heartland Aggressive
Fund Value Fund
Investment Income:
Dividend income $15,931 16,727
Interest income 985 15,932
Total Income 16,916 32,659
Expenses:
Investment advisory fees (Note 2) 9,891 36,138
Distribution fees (Investor shares) 3,041 12,094
Distribution fees (Institutional shares) - -
Custodial fees 2,886 4,898
Organization costs 1,519 1,519
Transfer agent fees/Accounting and Pricing 2,722 9,933
Legal 9,257 10,480
Audit 4,000 4,500
Registration and filing fees 1,105 1,105
Trustee fees 1,300 1,300
Printing & Other Miscellaneous 763 4,271
Total Expenses 36,484 86,238
Net Investment Income (Loss) (19,568) (53,579)
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 15,037 574,259
Distribution of Realized Capital Gains from
other Investment Companies - -
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments 57,934 1,307,053
Net Realized and Unrealized Gain (Loss)
on Investments 72,971 1,881,312
Net Increase (Decrease) in Net Assets from
Operations $53,403 1,827,733
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets
Ohio Heartland & Aggressive Value Funds June 30, 1999 (unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Ohio Ohio Aggressive Aggressive
Heartland Fund Heartland Fund Value Fund Value Fund
01/01/99 02/01/98 01/01/99 02/01/98
to to to to
06/30/99 12/31/98 06/30/99 12/31/98
From Operations:
Net Investment Income (19,568) (11,953) (53,579) (34,049)
Net Realized Gain (Loss) on Investments 15,038 (29,201) 574,259 66,583
Net Unrealized Appreciation
(Depreciation) 57,933 1,307,053 1,307,053 -
Increase (Decrease) in Net Assets from
Operations 53,403 1,265,899 1,827,733 32,534
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 378,296 2,792,343 4,911,904 4,484,083
Dividend reinvestment - - - 22,660
Cost of shares redeemed (221,548) (498,571) (850,174) (182,918)
Change in net assets from capital
transactions 156,748 2,293,772 4,061,730 4,323,825
Change in net assets 210,151 3,559,671 5,889,463 4,323,837
Net Assets:
Beginning of period 1,987,320 100,000 4,315,263 100,000
End of period 2,197,471 1,987,320 10,204,726 4,315,263
Share Transactions:
Issued 48,276 293,342 922,581 913,733
Reinvested - - - 4,715
Redeemed (28,228) (60,047) (156,282) (40,355)
Net increase (decrease) in shares 20,048 233,295 766,299 878,093
Shares outstanding beginning of period 243,295 10,000 898,093 20,000
Shares outstanding end of period 263,343 243,295 1,664,392 898,093
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Highlights
Ohio Heartland Fund Investor Shares
Selected data for a share of capital stock outstanding throughout the period
indicated
01/01/99 02/01/98
to to
06/30/99 12/31/98
Net Asset Value -
Beginning of Period 8.16 10.00
Net Investment Income 0.06 (0.05)
Net Gains or Losses on Securities
(realized and unrealized) 0.11 (1.79)
Total from Investment Operations 0.17 (1.84)
Distributions
Net investment income - -
Capital gains - -
Return of capital - -
Total Distributions - -
Net Asset Value -
End of Period $8.33 $8.16
Total Return 2.08% -18.40%
Ratios/Supplemental Data:
Net Assets at end of period
(thousands) 1,340 1,234
Ratio of expenses to average
net assets * 3.64% 3.24%
Ratio of net income to average
net assets * -1.95% -0.88%
Portfolio turnover rate * 28% 6%
Institutional Shares
01/01/99 02/01/98
to to
06/30/99 12/31/98
Net Asset Value -
Beginning of Period 8.18 10.00
Net Investment Income 0.08 (0.03)
Net Gains or Losses on Securities
(realized and unrealized) 0.11 (1.79)
Total from Investment Operations 0.19 (1.82)
Distributions
Net investment income - -
Capital gains - -
Return of capital - -
Total Distributions - -
Net Asset Value -
End of Period $8.37 $8.18
Total Return 2.32% -18.20%
Ratios/Supplemental Data:
Net Assets at end of period
(thousands) 857 753
Ratio of expenses to average
net assets * 3.14% 2.74%
Ratio of net income to average
net assets * -1.45% -0.38%
Portfolio turnover rate * 28% 6%
* Annualized
<PAGE>
Financial Highlights
Aggressive Value Fund Investor Shares
Selected data for a share of capital stock outstanding throughout the period
indicated
01/01/99 02/01/98
to to
06/30/99 12/31/98
Net Asset Value -
Beginning of Period 4.80 5.00
Net Investment Income 0.04 (0.07)
Net Gains or Losses on Securities
(realized and unrealized) 1.28 (0.09)
Total from Investment Operations 1.32 (0.16)
Distributions
Net investment income - -
Capital gains - (0.04)
Return of capital - -
Total Distributions - (0.04)
Net Asset Value -
End of Period $6.12 $4.80
Total Return 27.50% -3.27%
Ratios/Supplemental Data:
Net Assets at end of period
(thousands) 6,803 3,159
Ratio of expenses to average
net assets * 2.38% 2.69%
Ratio of net income to average
net assets * -1.48% -1.33%
Portfolio turnover rate * 99% 89%
Institutional Shares
01/01/99 02/01/98
to to
06/30/99 12/31/98
Net Asset Value -
Beginning of Period 4.82 5.00
Net Investment Income 0.05 (0.05)
Net Gains or Losses on Securities
(realized and unrealized) 1.28 (0.09)
Total from Investment Operations 1.33 (0.14)
Distributions
Net investment income - -
Capital gains - (0.04)
Return of capital - -
Total Distributions - (0.04)
Net Asset Value -
End of Period $6.15 $4.82
Total Return 27.59% -2.87%
Ratios/Supplemental Data:
Net Assets at end of period
(thousands) 3,402 1,156
Ratio of expenses to average
net assets * 1.88% 2.19%
Ratio of net income to average
net assets * -0.98% -0.83%
Portfolio turnover rate * 99% 89%
* Annualized
<PAGE>
Notes to Financial Statements
Maxus Ohio Heartland & Aggressive Value Funds
June 30, 1999 (unaudited)
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>
Notes to Financial Statements
Maxus Ohio Heartland & Aggressive Value Funds
June 30, 1999 (unaudited)
3.) RELATED PARTY TRANSACTIONS
Resource Management, Inc. has three wholly owned subsidiaries that 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 $9,891 by Maxus Ohio Heartland Fund and $36,138 by Maxus
Aggressive Value Fund in investment advisory fees during the six months ending
June 30, 1999. Maxus Securities, who served as the national distributor of the
Funds' shares, was reimbursed $3,041 by Maxus Ohio Heartland Fund and $12,094
by Maxus Aggressive Value Fund for distribution expenses. Maxus Information
Systems received fees totaling $2,722 from Maxus Ohio Heartland Fund and
$9,933 from Maxus Aggressive Value Fund for services rendered to the Fund for
the six months ending June 30, 1999. 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 $1,397 from Maxus Ohio Heartland Fund and $29,323 from
Maxus Aggressive Value Fund for the six months ending June 30, 1999.
At June 30, 1999, 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 $100 per Fund per meeting.
4.) CAPITAL STOCK AND DISTRIBUTION
At June 30, 1999, an indefinite number of shares of capital stock ($.10 par
value) were authorized, and paid-in capital amounted to $2,538,567 for the
Maxus Ohio Heartland Fund and $8,485,555 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 six months ending June 30, 1999.
Maxus Ohio Maxus Aggressive
Type of obligation Heartland Value Fund
Fund
Purchase of non U.S. 465,703 6,027,644
Government *
Sale of non U.S. 277,975 3,185,675
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 June 30, 1999.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at June 30,
1999 was the same as identified cost.
At June 30, 1999, 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 198,961 1,789,520
(Depreciation) (506,326) (591,041)
Net Appreciation (307,365) 1,198,479
(Depreciation)
<PAGE>
