<PAGE>
Dear Shareholder
The first 6 months of 1998 can only be described as one of those unique periods,
which seem to occur every ten or fifteen years, in which the stock market
assumes a very noticeable split personality. The distinctive characteristics are
the participation of fewer companies in market rallies and generally
deteriorating fundamentals. We must look back to the spring of 1973 and summer
of 1987 to find comparable examples.
The very largest market capitalization companies drive the major market averages
such as the Dow Jones Industrials, the S&P 500 and the Russell 3000, because all
are capitalization weighted. Today, even the NASDAQ, dominated by Microsoft,
Cisco and Intel, has lost its emerging company character. Since the beginning of
1998, the performance of portfolios, which did not consist of most of the twenty
or so largest companies, generally fell far behind the market averages. One
noticeable exception was the Maxus Laureate Fund, which had an outstanding six
months.
All of the major market indices made most their gains in February when fourth
quarter 1997 earnings appeared to be stronger than expected and money fleeing
the deteriorating Asian economies sought the most recognizable and liquid names
available. As the large capitalization companies surged in value, their
dominance of the market averages became even more pronounced and the need to own
them appeared to be even more necessary.
What distinguishes recent months from comparable periods during the last 25
years is magnitude of divergence. The very large companies appeared
significantly overvalued on both the fundamental and historical standards while
the smaller companies appear to be significantly undervalued on both counts. The
Maxus Equity Fund, Maxus Aggressive Value Fund and the Maxus Ohio Heartland Fund
have been focused on the latter, with the expectation that in the months and
years ahead, stock market valuations will again reflect rational investment
decisions.
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Maxus Income Fund
Schedule of Investments
June 30,1998
Shares/Principal Amount Market Value % of Assets
Common Stock - Real Estate
11,600 Agree Realty 229,825
20,000 Boykin Lodging 425,000
654,825 1.61%
Closed End Bond Funds
66,422 American Opportunity Income 435,894
70,600 Americas Income * 639,813
200,000 Blackrock Income 1,387,500
50,000 Blackrock North American Government 531,250
250,000 Hyperion 1999 Term Trust * 1,781,250
100,000 Kemper Multi Market Income Trust 987,500
270,000 MFS Govt Mkts Income 1,788,750
100,000 MFS Intermediate Income 681,250
75,000 MFS Multimarket Income 529,688
130,000 Putnam Master Inter Income 1,056,250
120,000 Salomon Brothers 2008 Gov't Term 1,185,000
11,004,145 27.10%
Closed End Global Bond Funds
70,000 Dreyfus Strategic Governments 651,875
165,000 First Commonwealth 1,815,000
162,800 Kleinwort Benson Australian Income 1,109,075
140,000 Strategic Global Income 1,653,750
100,000 Templeton Global Income * 693,750
5,923,450 14.59%
Corporate Bonds
179,000 Unisys Senior Notes 10.625%, 10-1-99 180,583 0.44%
Corporate Bond Equivalents
10,000 American General 8.45% MIPs 258,125
10,000 American Re 8.5% QUIPs 257,812
11,000 BF Goodrich Cap 8.3% 280,500
14,400 Chase Cap V 7.03% 353,700
25,000 Conagra Capitol Ser B Adj Rate 542,969
10,000 DLJ 8.42% 257,500
10,000 HL&P 8.125% 254,375
12,000 NWPS Capital Financing 8.125% A 318,000
21,000 Pacificorp 8.55% QUIDs 530,250
15,000 RJR Nabisco Holdings 10.00% 373,125
30,000 Southern Company 7.75% 768,750
30,000 Texaco Cap Adj Rate 652,500
10,000 Texaco Capital 6.875% 244,375
10,000 Time Warner 8.875% 257,500
10,000 Torchmark 9.18% MIP's 258,437
5,607,918 13.81%
Preferred Shares
10,000 Associated Estates 9.75% 254,375
11,900 Crown American 11.00% 638,138
10,000 Developers Diversified 9.44% 258,750
14,000 Excel Realty 8.625% 344,750
7,000 Gabelli Global Multimedia 7.92% 178,937
7,000 Omega Healthcare 8.625% 173,687
38,600 Public Storage 8.875% 989,125
10,000 Rouse 9.25% 257,187
52,000 Royce Value Trust 8.00% 1,361,750
20,500 Simon Debartolo 8.75% 530,437
14,000 Source Capital $2.40 420,000
5,407,136 13.32%
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Maxus Income Fund
Schedule of Investments
June 30,1998
Shares/Principal Amount Market Value % of Assets
Converitble Bonds
223,000 Inco 7.75%, 3-15-16 215,753 0.53%
Convertible Preferred Shares
33,000 Camden Ppty $2.25 874,500
10,000 Chiquita Brands $2.88 458,750
25,000 Equity Residential $1.81 606,250
30,000 Glenborough Realty $1.94 731,250
6,000 USX Corp $3.25 289,125
2,959,875 7.29%
U.S. Government Securities
5,000,000 US T-notes 0%, 11-15-12 2,204,500
2,000,000 US T-notes 11.75%, 02-15-01 2,301,563
4,506,063 11.10%
Cash and Equivalents
1,500,000 Fed Home Loan 0%, 8-5-98 1,491,960
2,695,790 Star Bank Treasury 2,695,790
4,187,750 10.31%
Total Investments 40,647,498 100.11%
Other Assets Less Liabilities (42,673) -0.11%
Net Assets - Equivalent 40,604,825 100.00%
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Assets & Liabilities
Maxus Income Fund June 30, 1998 (unaudited)
Income
Fund
Assets:
Investment Securities at Market Value 40,647,498
(Identified Costs - $40,470,094)
Cash 5,720
Receivables:
Receivable for investment securities sold 131,961
Dividends and interest receivable 279,509
Unamortized organization costs -
Total Assets 41,064,688
Liabilities:
Payable for investment purchased 316,538
Payable for shareholder distributions 39,149
Accrued Expenses 104,176
Total Liabilities 459,863
40,604,825
Net Assets:
Capital Paid In 39,994,904
Undistributed Net Investment Income 274,507
Accumulated Realized Gain (Loss) on Investments - Net 158,010
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 177,404
Net Assets 40,604,825
Net Assets
Investors Shares 40,604,825
Institutional Shares -
Total 40,604,825
Shares of capital stock
Investors Shares 3,630,715
Institutional Shares -
Total 3,630,715
Net asset value
Investors Shares $11.18
Institutional Shares $11.18
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Operations
Maxus Income Fund June 30, 1998 (unaudited)
Income
Fund
Investment Income:
Dividend income $583,239
Interest income 1,135,823
Total Income 1,719,062
Expenses:
Investment advisory fees (Note 2) 192,021
Distribution fees (Investor shares) 96,011
Distribution fees (Institutional shares) -
Custodial fees 11,481
Organization costs -
Transfer agent fees/Accounting and Pricing 20,233
Legal 10,886
Audit 7,500
Registration and filing fees 31,248
Printing & Other Miscellaneous 16,033
Gross Expenses 385,413
Net Investment Income (Loss) 1,333,649
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 692,831
Distribution of Realized Capital Gains
from other Investment Companies -
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments (972,318)
Net Realized and Unrealized Gain (Loss) on Investments (279,487)
Net Increase (Decrease) in Net Assets from Operations $1,054,162
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets
Maxus Income Fund June 30, 1998 (unaudited)
Maxus Income Fund
01/01/98 01/01/97
to to
06/30/98 12/31/97
From Operations:
Net Investment Income 1,333,649 2,217,642
Net Realized Gain (Loss) on Investments 692,831 927,701
Net Unrealized Appreciation (Depreciation) (972,318) 804,642
Increase (Decrease) in Net Assets from Operations 1,054,162 3,949,985
Distributions to investor shareholders:
Net Investment Income (1,059,142) (2,215,429)
Net Realized Gain (Loss) from
Security Transactions (464,739) -
Distributions to institutional shareholders:
Net Investment Income - -
Net Realized Gain (Loss) from Security Transactions - -
Change in net assets from distributions (1,523,881) (2,215,429)
From Capital Share Transactions:
Proceeds from sale of shares 7,168,465 8,907,950
Dividend reinvestment 1,284,173 1,680,395
Cost of shares redeemed (5,998,232) (9,430,667)
Change in net assets from capital transactions 2,454,406 1,157,678
Change in net assets 1,984,687 2,892,234
Net Assets:
Beginning of period 38,620,138 35,727,904
End of period 40,604,825 38,620,138
Share Transactions:
Issued 631,954 799,064
Reinvested 113,126 151,394
Redeemed (528,261) (850,768)
Net increase (decrease) in shares 216,819 99,690
Shares outstanding beginning of period 3,413,896 3,314,206
Shares outstanding end of period 3,630,715 3,413,896
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Highlights
Maxus Income Fund
<TABLE>
<S> <C> <C> <C> <C> <C>
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
to to to to to
06/30/98 12/31/97 12/31/96 12/31/95 12/31/94
Net Asset Value -
Beginning of Period 11.31 10.78 10.54 9.73 10.94
Net Investment Income 0.36 0.67 0.70 0.72 0.74
Net Gains or Losses on Securities
(realized and unrealized) (0.05) 0.53 0.24 0.81 (1.22)
Total from Investment Operations 0.31 1.20 0.94 1.53 (0.48)
Distributions
Net investment income (0.26) (0.67) (0.70) (0.72) (0.73)
Capital gains (0.18) - - - -
Return of capital - - - - -
Total Distributions (0.44) (0.67) (0.70) (0.72) (0.73)
Net Asset Value -
End of Period $11.18 $11.31 $10.78 $10.54 $9.73
Total Return * 5.50% 11.47% 9.20% 16.15% -4.39%
Ratios/Supplemental Data:
Net Assets at end of period
(thousands) 40,605 38,620 35,728 37,387 33,425
Ratio of expenses to average
net assets * 1.96% 1.91% 1.92% 1.90% 1.81%
Ratio of net income to
average net assets * 6.77% 6.08% 6.50% 7.01% 7.10%
Portfolio turnover rate * 49% 70% 78% 121% 138%
Average commission per share 0.05270 0.05317 0.05238
* Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAXUS INCOME FUND
JUNE 30, 1998 (UNAUDITED)
1.)SIGNIFICANT ACCOUNTING POLICIES
The Fund is a diversified, open-end management investment company,
organized as a Trust under the laws of the State of Ohio by a Declaration
of Trust dated October 31, 1984. The Fund has an investment objective of
obtaining the highest total return, a combination of income and capital
appreciation, consistent with reasonable risk. Under normal circumstances,
at least 65% of the value of this Fund's total assets will consist of
income-producing securities. Significant accounting policies of the Fund
are presented below:
SECURITY VALUATION:
The Fund intends 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. The Fund uses 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 the Fund's 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 the Fund's policy to distribute annually, after the end
of the fiscal 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 Fund 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 the Fund as
compensation for its services to the 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. The Investment Advisor agrees to reimburse its
fee to the Fund in the amount by which the Fund expenses exceed 2% of
average annual net assets.
3.)RELATED PARTY TRANSACTIONS
Resource Management, Inc. has three wholly owned subsidiaries which provide
services to the Fund. These subsidiaries are Maxus Asset Management Inc,
Maxus Securities Corp, and Maxus Information Systems Inc. Maxus Asset
Management was paid $192,021 in investment advisory fees during the six
months ended June 30, 1998. Maxus Securities, who served as the national
distributor of the Fund's shares, was reimbursed $96,011 for distribution
expenses. Maxus Information Systems, who provides accounting and
shareholder services, received fees totaling $20,233 for services rendered
to the Fund for the six months ended June 30, 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 $72,315 for the six months ending June
30, 1998.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAXUS INCOME FUND
JUNE 30, 1998 (UNAUDITED)
At June 30, 1998, Maxus Securities Corp owned 60,000 shares in the Fund.
Certain officers and/or trustees of the Fund are officers and/or directors
of the Investment Advisor and Administrator. Each director who is not an
"affiliated person" receives an attendance fee of $100 per meeting.
4.)CAPITAL STOCK AND DISTRIBUTION
At June 30, 1998 an indefinite number of shares of capital stock ($.10 par
value) were authorized, and paid-in capital amounted to $39,994,904.
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
During the six months ended June 30, 1998, purchases and sales of
investment securities other than U.S. Government obligations and short-term
investments aggregated $13,204,570 and $9,675,952 respectively. Purchases
and sales of U.S. Government obligations aggregated $0 and $3,534,030
respectively.
6.)FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments which have any off-balance
sheet risk as of June 30, 1998.
7.)SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at June 30,
1998 was the same as identified cost.
At June 30, 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:
Appreciation (Depreciation) Net Appreciation (Depreciation)
819,928 (642,524) 177,404
<PAGE>
THE MAXUS FUNDS
1301 East Ninth Street, Suite 3600, Cleveland, OH 44114
(216) 687-1000
INVESTMENT ADVISOR
Maxus Asset Management Inc
1301 East Ninth Street
Cleveland, Ohio 44114
BOARD OF TRUSTEES
Denis J. Amato
Richard A. Barone
Burton D. Morgan
Michael A. Rossi
Jerry Murphy
OFFICERS
Richard A. Barone, Chairman
Robert J. Conrad, Vice-President
Robert W. Curtin, Secretary
CUSTODIAN
Star Bank, N. A.
425 Walnut Street
P. O. Box 1118
Cincinnati, Ohio 45201-1118
TRANSFER AGENT
Maxus Information Systems Inc
1301 East Ninth Street
Cleveland, Ohio 44114
DISTRIBUTOR
Maxus Securities Corp
1301 East Ninth Street
Cleveland, Ohio 44114
LEGAL COUNSEL
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2378
AUDITOR
McCurdy & Associates CPA's Inc
27955 Clemens Road
Westlake, Ohio 44145
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