<PAGE> 1
As filed with the Securities and Exchange Commission on April 30, 1997
REGISTRATION NO. 811-5865
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
PRE-EFFECTIVE AMENDMENT NO. ___
POST-EFFECTIVE AMENDMENT NO. 9 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO. 11
(Check appropriate box or boxes)
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MAXUS EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
28601 CHAGRIN BOULEVARD
CLEVELAND, OHIO 44122
(Address of Principal Executive Offices) (ZIP Code)
Registrant's Telephone Number, Including Area Code (216) 292-3434
RICHARD A. BARONE
28601 CHAGRIN BOULEVARD
CLEVELAND, OHIO 44122
(Name and Address of Agent for Service)
Copy to:
MICHAEL J. MEANEY, ESQ.
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Total No. of Pages ___
Exhibit Index at C-1
<PAGE> 2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has elected to register an indefinite number of shares of beneficial
interest. Registrant's Rule 24f-2 Notice in respect of the fiscal year ended
December 31, 1996 was filed on or about February 28, 1997.
It is proposed that this filing will become effective (check
appropriate box):
X immediately upon filing pursuant to paragraph (b) of Rule 485.
---
on (date) pursuant to paragraph (b) of Rule 485.
---
60 days after filing pursuant to paragraph (a) of Rule 485.
---
on (date) pursuant to paragraph (a) of Rule 485.
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MAXUS EQUITY FUND
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A
Item No. Caption Location
- ----------- --------------------------------- -----------------------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Highlights
3. Condensed Financial Information Summary Financial Information
4. General Description of Investment Objective and Management
Registrant Techniques, General Information
5. Management of the Fund Investment Management
6. Capital Stock and Other
Securities General Information
7. Purchase of Securities
Being Offered Purchase of Shares
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings None
Part B
Item No.
- --------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information and History
13. Investment Objectives and Investment Objectives and Policies
Policies
14. Management of the Fund Management of the Fund
15. Control Persons and Principal Ownership of Shares
Holders of Securities
</TABLE>
-2-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
16. Investment Advisory and Other
Services Investment Advisory and Other Services
17. Brokerage Allocation Brokerage Allocation
18. Capital Stock and Other
Securities Capital Stock and Other Securities
19. Purchase, Redemption and
Pricing of Securities Being
Offered Purchase, Redemption and Pricing of Securities
Being Offered
20. Tax Status Tax Status
21. Underwriters Distributor
22. Calculations of Performance
Data Performance
23. Financial Statements Financial Statements
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate Item, as numbered, in Part C to this Registration Statement.
-3-
<PAGE> 5
LOGO
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MAXUS INCOME FUND 28601 Chagrin Blvd., Suite 500
MAXUS EQUITY FUND Cleveland, Ohio 44122
MAXUS LAUREATE FUND (216) 292-3434
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Maxus Income Fund, Maxus Equity Fund and Maxus Laureate Fund (the "Funds") are
three separate diversified, open-end management investment companies.
MAXUS INCOME 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.
MAXUS EQUITY FUND has an investment objective of obtaining a total return, a
combination of capital appreciation and income. Under normal circumstances, at
least 65% of the value of this Fund's total assets will consist of equity
securities.
MAXUS LAUREATE FUND has an investment objective of achieving a high total
return, a combination of capital appreciation and income, consistent with
reasonable risk. This fund pursues its objective by investing exclusively in
shares of other open-end registered investment companies, commonly called mutual
funds.
<TABLE>
<S> <C>
THE FUNDS MAY BE SUITABLE FOR IMPORTANT FEATURES
- -- Individual Retirement Accounts -- Minimum initial investment $1000
- -- Qualified retirement plans -- Minimum subsequent investments $100
- -- Custodian accounts -- Systematic withdrawal plans
- -- Endowment funds
- -- Individual investors
</TABLE>
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Funds has been filed with the Securities and Exchange Commission (the "SEC") in
separate Statements of Additional Information dated April 30, 1997 and is
available upon request and without charge by calling the Funds at (216)
292-3434. Such additional information is hereby incorporated by reference into
this Prospectus.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS/APRIL 30, 1997
Investors are advised to read this Prospectus and to retain it for future
reference.
<PAGE> 6
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HIGHLIGHTS
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INVESTMENT OBJECTIVES. Each Fund is a diversified, open-end management
investment company. The investment objective of Maxus Income Fund is to obtain
the highest total return, a combination of income and capital appreciation,
consistent with reasonable risk. The investment objective of Maxus Equity Fund
is to obtain a total return, a combination of capital appreciation and income.
The investment objective of Maxus Laureate Fund is to achieve a high total
return, a combination of capital appreciation and income, consistent with
reasonable risk. No assurance can be given that any of the Funds will achieve
its objective. See "Investment Objectives and Management Techniques."
DISTRIBUTION PLAN. Each Fund sells and redeems its shares at net asset value
without any front-end sales charges or redemption charges. Each Fund has adopted
plans for using as much as 0.5% of its net assets annually to aid the
distribution of its shares. See "Distribution Plans."
LIQUIDITY. Each Fund continuously offers and redeems shares at the net asset
value next computed after receipt by the Fund's Transfer Agent of a purchase
order or redemption request in proper form. See "How to Purchase Shares" and
"How to Redeem Shares."
MINIMUM INVESTMENT. A minimum initial investment of $1,000 is required.
Thereafter, you can invest additional amounts of $100 or more. See "How to
Purchase Shares." Each Fund has the right to redeem the shares in an account and
pay the proceeds to the shareholder if the value of the account drops below
$1,000 because of shareholder redemptions. See "How to Redeem Shares."
DIVIDENDS. Each Fund intends to pay dividends at least once annually to
shareholders. Unless otherwise directed, all dividends will be automatically
reinvested in additional shares. See "Dividends, Distributions and Taxes."
INVESTMENT ADVISER. Maxus Asset Management Inc. ("MAM" or the "Adviser") is the
investment adviser for each Fund. Its annual fee is 1% of the first $150,000,000
of the Fund's net assets and .75% of net assets in excess of $150,000,000. This
fee is higher than that paid by most other investment companies. Since 1976 MAM
has been an investment adviser to individuals, retirement plans, corporations
and foundations. MAM is controlled by Richard A. Barone, Chairman of each Fund.
See "Investment Management."
DISTRIBUTOR. Shares of each Fund are offered exclusively by Maxus Securities
Corp ("MSC"), an NASD broker-dealer, on a best efforts basis. MSC is controlled
by Richard A. Barone, Chairman of the Funds. See "Other Information Concerning
Purchase of Shares" and "Distribution Plan."
RISK FACTORS. None of the Funds are intended to provide a balanced investment
program to meet all requirements of every investor. Maxus Equity Fund and Maxus
Income Fund may invest in (i) equity and debt securities involving a greater
risk of decline in market value than that of other securities, (ii) securities
whose market values will fluctuate based on individual corporate developments as
well as general economic conditions, and (iii) lower rated and unrated corporate
debt securities which have speculative characteristics.
Maxus Laureate Fund invests in other mutual funds and Maxus Equity Fund and
Maxus Income Fund may invest in closed-end investment companies ("closed-end
funds"). Investing through the Funds in these underlying mutual funds and
closed-end funds involves a duplication of expenses and certain tax results
which would not be present in a direct investment in the underlying funds. Also,
these underlying funds will themselves invest in securities (such as foreign
securities) which entail certain risks. In addition, Federal law imposes certain
limits on the purchase and sale of underlying fund shares by the Funds. See
"Risks and Other Considerations". "Dividends, Distributions and Taxes" and
Appendix B to this Prospectus for a discussion of these and other risk factors
associated with an investment in the Funds.
2
<PAGE> 7
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FEE TABLE
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Annual Fund Operating Expenses (as a percentage of average net assets)
<TABLE>
<CAPTION>
MAXUS MAXUS MAXUS
INCOME FUND EQUITY FUND LAUREATE FUND
----------- ----------- -------------
<S> <C> <C> <C>
Management Fees....................... 1.00% 1.00% 1.00%*
12b-1 Fees............................ 0.50% 0.50% 0.50%
Other Expenses........................ 0.41% 0.40% 2.41%
Total Fund Operating Expenses......... 1.92% 1.90% 3.92%*
</TABLE>
- ---------------
* Effective January 1, 1997, the Adviser has undertaken, until such time as it
gives investors 60 days' notice to the contrary, to waive its management fee
with respect to Maxus Laureate Fund to the extent expenses of such Fund (other
than interest, taxes, brokerage fees and commissions and extraordinary items)
exceed 2.00% of average net assets per annum, except that the total amount of
such obligation will not exceed the amount of fees received by the Adviser
from Maxus Laureate Fund for the applicable period.
The 12b-1 fee in the foregoing table is an asset-based sales charge as
defined in the Rules of Fair Practice of the National Association of Securities
Dealers (the "Rules"). The existence of this charge may cause long-term
shareholders to pay more in total sales charges than the economic equivalent of
the maximum front-end sales charges permitted under those Rules.
A shareholder who requests that the proceeds of a redemption be sent by
wire transfer will be charged for the cost of such wire, which is $10.00 as of
the date of this Prospectus (subject to change without notice).
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
Maxus Income Fund $ 19 $ 60 $ 104 $224
Maxus Equity Fund $ 19 $ 60 $ 103 $222
Maxus Laureate Fund $ 39 $ 120 $ 201 $414
</TABLE>
The purpose of the foregoing table is to assist you in understanding the
various costs and expenses that an investor in any Fund will bear, directly or
indirectly. THE EXAMPLE SET FORTH IN THE FOREGOING TABLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
3
<PAGE> 8
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MAXUS INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table sets forth selected data for a share of beneficial
interest for the periods shown. This information has been audited by McCurdy &
Associates C.P.A.'s, Inc., Certified Public Accountants, whose report appears in
the Fund's Statement of Additional Information, a copy of which will be supplied
upon request.
<TABLE>
<CAPTION>
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89
TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92* 12/31/91 12/31/90 12/31/89
-------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of Period....... $10.54 $9.73 $10.94 $10.88 $10.98 $9.94 $10.52 $10.57
Net Investment Income....... 0.70 0.72 0.74 0.68 0.42 0.80 0.76 0.68
Net Gains or Losses on
Securities (realized or
unrealized)............... 0.24 0.81 (1.22) 0.22 (0.01) 1.05 (.60) 0.49
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations................ 0.94 1.53 (0.48) 0.90 0.41 1.85 0.16 1.17
Dividends (from net
investment income)........ (0.70) (0.72) (0.73) (0.68) (0.42) (0.81) (0.74) (0.89)
Distributions (from capital
gains).................... 0.00 0.00 0.00 (0.16) (0.09) 0.00 0.00 (0.33)
Return of Capital........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions......... (0.70) (0.72) (0.73) (0.84) (0.51) (0.81) (0.74) (1.22)
NET ASSET VALUE:
End of Period............. $10.78 $10.54 $9.73 $10.94 $10.88 $10.98 $9.94 $10.52
Total Return................ 9.20% 16.15% (4.39)% 8.74% 7.89% 19.27% 1.70% 11.41%
RATIOS/SUPPLEMENTAL DATA
Net Assets
End of Period
(Thousands)............. 35,728 37,387 33,425 36,147 28,591 18,200 13,307 12,968
Ratio of Expenses to Average
Net Assets................ 1.92% 1.90% 1.81% l.90% 1.94% 2.00% 2.00% 2.00%
Ratio of Net Income to
Average Net Assets........ 6.50% 7.01% 7.10% 6.06% 7.18% 7.59% 7.43% 6.25%
Portfolio Turnover Rate..... 78% 121% 138% 88% 91% 108% 155% 145%
</TABLE>
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* Weighted Average Used
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
4
<PAGE> 9
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MAXUS EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table sets forth selected data for a share of beneficial
interest for the periods shown. This information has been audited by McCurdy &
Associates C.P.A.'s, Inc., Certified Public Accountants, whose report appears in
the Fund's Statement of Additional Information, a copy of which will be supplied
upon request.
<TABLE>
<CAPTION>
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 10/01/89**
TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92* 12/31/91* 12/31/90* 12/31/89*
-------- -------- -------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of Period... $14.57 $12.95 $13.60 $12.29 $11.41 $8.73 $9.79 $10.00
Net Investment Income... 0.27 0.30 0.25 0.13 0.14 0.06 (0.02) 0.17
Net Gains or Losses on
Securities (realized
and unrealized)....... 2.50 2.60 (0.17) 3.13 1.91 3.22 (1.04) 0.28
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations.......... 2.77 2.90 0.08 3.26 2.05 3.28 (1.06) 0.45
Dividends (from net
investment income).... (0.27) (0.27) (0.22) (0.12) (0.14) (0.06) 0.00 (0.66)
Distributions (from
capital gains)........ (1.07) (1.01) (0.51) (1.83) (1.03) (0.54) 0.00 0.00
Return of Capital....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions... (1.34) (1.28) (0.73) (1.95) (1.17) (0.60) 0.00 (0.66)
NET ASSET VALUE:
End of Period......... $16.00 $14.57 $12.95 $13.60 $12.29 $11.41 $8.73 $9.79
Total Return............ 19.13% 22.43% 0.62% 24.51% 13.56% 36.45% (10.83)% 4.61%
RATIOS/SUPPLEMENTAL DATA
Net Assets
End of Period
(Thousands)......... 38,765 31,576 17,018 11,343 5,962 3,081 1,850 1,014
Ratio of Expenses to
Average Net Assets.... 1.90% 1.96% 2.00% 2.61% 2.89% 3.94% 5.25% 0.99%
Ratio of Net Income to
Average Net Assets.... 1.71% 2.01% 1.82% 0.91% 0.80% 0.52% (0.19)% 1.16%
Portfolio Turnover
Rate.................. 111% 173% 184% 175% 187% 189% 221% 109%
</TABLE>
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* Weighted Average Used
** Commencement of Operations
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
5
<PAGE> 10
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MAXUS LAUREATE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table sets forth selected data for a share of beneficial
interest for the periods shown. This information has been audited by McCurdy &
Associates C.P.A.'s, Inc., Certified Public Accountants, whose report appears in
the Fund's Statement of Additional Information, a copy of which will be supplied
upon request.
<TABLE>
<CAPTION>
01/01/96 01/01/95 01/01/94 05/01/93*
TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of Period............................... $9.82 $9.62 $9.96 $10.00
Net Investment Income............................... (0.08) (0.19) (0.08) (0.07)
Net Gains or Losses on Securities (realized or
unrealized)....................................... 2.14 1.57 (0.26) 1.16
------ ----- ----- ------
Total from Investment Operations.................... 2.06 1.38 (0.34) 1.09
Dividends (from net investment income).............. 0.00 0.00 0.00 0.00
Distributions (from capital gains).................. (1.06) (1.18) 0.00 (1.13)
Return of Capital................................... 0.00 0.00 0.00 0.00
------ ----- ----- ------
Total Distributions............................... (1.06) (1.18) 0.00 (1.13)
NET ASSET VALUE:
End of Period..................................... $10.82 $ 9.82 $ 9.62 $ 9.96
Total Return........................................ 21.03% 14.41% (3.41)% 8.62%
RATIOS/SUPPLEMENTAL DATA
Net Assets
End of Period (Thousands)......................... 3,156 1,510 1,998 2,114
Ratio of Expenses to Average Net Assets............. 3.92% 3.85% 3.60% 2.42%
Ratio of Net Income to Average Net Assets........... (0.73)% (1.69)% (0.87)% (0.66)%
Portfolio Turnover Rate............................. 1,267% 1,377% 469% 152%
</TABLE>
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* Commencement of Operations
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
6
<PAGE> 11
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INVESTMENT OBJECTIVES AND MANAGEMENT TECHNIQUES
- --------------------------------------------------------------------------------
MAXUS INCOME FUND.
The objective of Maxus Income Fund is to obtain the highest total return, a
combination of income and capital appreciation, consistent with reasonable risk.
This objective is a fundamental policy of this Fund and may not be changed
without approval of a majority of the Fund's outstanding shares. See "General
Information." The Fund intends to invest in a wide variety of debt and equity
securities. Debt securities will include U.S. Government securities, U.S.
Government agency securities, corporate bonds and money market investments such
as commercial paper, certificates of deposit, bank or savings and loan
association interest-bearing demand accounts, bankers' acceptances and
repurchase agreements. Equity securities will include common stock, preferred
stock, preferred stock convertible into common stock and corporate bonds
convertible into common stock. In addition, for the purpose of achieving capital
appreciation a small portion of the Fund's assets (up to 5 percent) may be
invested in put and call options which trade on securities exchanges and for
which it pays a premium (cost of option). The Fund may sell the options,
exercise them or permit them to expire. See. "Risks and Other Considerations -
Maxus Income Fund and Maxus Equity Fund." There can be no assurance that the
Fund will achieve its investment objective.
In seeking its objective, Maxus Income Fund will alter the composition of
its portfolio as economic and market trends change and the Fund's portfolio may
vary considerably between debt and equity securities as these changes occur. The
Adviser will increase its investment in short-term money market debt securities
during periods when it believes interest rates will rise and stock prices will
decline and will increase its investment in long-term debt securities, such as
corporate bonds, U.S. Government securities and U.S. Government agency
securities, when it believes both interest rates and stock prices will decline.
If the Adviser anticipates that both stock prices and interest rates will rise,
it will increase its investment in equity securities, such as common stock,
preferred stock, and securities convertible into common stock. However,
individual equity securities may rise during times of generally declining stock
prices. In addition, stock prices may rise at the same time that interest rates
are declining. Therefore, the Fund may invest in a combination of debt and
equity securities and may shift its investment position as it anticipates
changes in the investment environment. Under normal circumstances, at least 65%
of this Fund's total assets will consist of income-producing securities.
Income-producing securities consist of debt securities, preferred stocks and
common and preferred shares of "closed-end" investment companies having
portfolios consisting primarily of income-producing securities. See "Investment
in Closed-End Investment Companies."
In selecting its corporate debt securities for Maxus Income Fund the
Adviser intends to invest principally in securities rated BBB or better by
Standard & Poor's Corporation rating service, but may invest in securities rated
as low as BB, B, CCC or CC or unrated securities when these investments are
believed by the Adviser to be sound. The Fund will not invest more than 20% of
its portfolio in securities rated BB or lower by Standard & Poor's Corporation
or unrated securities which, in the opinion of the Adviser, are of comparable
quality. Securities rated BBB or lower by Standard & Poor's, sometimes referred
to as "junk bonds," are usually considered lower-rated securities and have
speculative characteristics. Please refer to Appendix A of this Prospectus for a
description of these ratings. See "Risks and other Considerations - Maxus Income
Fund and Maxus Equity Fund."
7
<PAGE> 12
In selecting commercial paper investments for Maxus Income Fund, the
Adviser will invest only in commercial paper rated A-1 or A-2 by Standard &
Poor's. Please refer to Appendix A of this Prospectus for a description of these
ratings. Except with respect to commercial paper, the Advisor is not restricted
as to any specific ratings in selecting money market investments.
In selecting equity securities for Maxus Income Fund, the Adviser will
utilize both fundamental research and technical analysis to identify securities
whose downside risk appears small relative to the potential for capital
appreciation. In doing so this Fund anticipates that the majority of its equity
investments will be made in convertible bonds and convertible preferred stock,
since these securities generally have a higher yield and a lesser risk of
capital depreciation than the common stocks into which they are convertible.
Emphasis will be placed on large, well-capitalized companies listed on a
national securities exchange or actively traded on the over-the-counter market.
Limitations expressed in this section as to the percentage of the Fund's
assets which may be invested in a given type of security do not include
investments in closed-end funds which may invest in such type of security. See
"Investment Objectives and Management Techniques-Investment in Closed-End
Investment Companies."
MAXUS EQUITY FUND.
The objective of Maxus Equity Fund is to obtain a total return, a
combination of capital appreciation and income. This objective is a fundamental
policy of this Fund and may not be changed without approval of a majority of the
fund's outstanding shares.
In seeking its objective, Maxus Equity Fund intends to invest in a wide
variety of equity and debt securities. The Fund will alter the composition of
its portfolio as economic and market trends change. Under normal circumstances
at least 65% of this Fund's total assets will consist of equity securities.
Equity securities consist of common stock and preferred stock (including common
and convertible preferred shares of "closed-end" investment companies having
portfolios consisting primarily of equity securities) and securities convertible
into common stock. The Fund may invest in a wide variety of common stocks,
including those listed on an exchange as well as those traded over the counter,
those that pay dividends as well as those that do not, and those of large and
well-established companies as well as those of smaller or newly-established
companies. Common stocks of smaller or newly-established companies often involve
a greater risk of decline in market value than may be found in common stocks of
other companies.
In selecting its equity securities, Maxus Equity Fund generally seeks
investments in companies whose break-up values are significantly higher than
their current share price; companies with high free-cash flows (net income
adjusted for non-cash expenses, less funds needed for reinvestment); companies
which have the potential for rapid growth but are selling at a low
price-to-earnings ratio; and companies in which an event or series of events may
turn around poor past performance. Most of the investments in this Fund's
portfolio have one or more of these characteristics.
Although Maxus Equity Fund intends to seek its objective primarily through
investments in equity securities, this Fund may invest up to 35% of its
portfolio in debt securities (described under "Maxus Income Fund" above) in
order to seek capital appreciation and income. In selecting its debt securities,
the Fund may invest in securities given high, low or no rating by the ratings
services. The Fund will not invest more than 5% of its portfolio in securities
rated BB or lower by Standard & Poor's Corporation or unrated securities which,
in the opinion of the Adviser, are of comparable quality. Securities rated BBB
or lower by Standard & Poor's are usually considered lower-rated securities and
have speculative characteristics. Please refer to Appendix A for a description
of these ratings. See
8
<PAGE> 13
"Risks and Other Considerations - Maxus Income Fund and Maxus Equity Fund."
In addition, when the Adviser believes that market conditions warrant a
temporary defensive posture, the Fund may invest up to 100% of its assets in
high-quality short-term debt securities and money market instruments, such as
commercial paper, certificates of deposit and bank or savings and loan
association interest-bearing demand accounts.
Furthermore, for the purpose of achieving capital appreciation, a small
portion of the Fund's assets (up to 5%) may be invested in put and call options
which trade on securities exchanges and for which it pays a premium (cost of
option). The Fund may sell the options, exercise them, or permit them to expire.
See "Risks and Other Considerations - Maxus Income Fund and Maxus Equity Fund."
Limitations expressed in this section as to the percentage of the Fund's
assets which may be invested in a given type of security do not include
investments in closed-end funds which may invest in such type of security. See
"Investment Objectives and Management Techniques-Investment in Closed-End
Investment Companies."
MAXUS LAUREATE FUND.
The investment objective of Maxus Laureate Fund is to obtain a high total
return, a combination of capital appreciation and income, consistent with
reasonable risk. It seeks to achieve this objective by investing exclusively in
shares of other registered investment companies. The Fund will allocate its
assets among one or more of the following general types of mutual funds:
aggressive growth, growth, growth and income, equity income, small company,
sector/specialty, foreign stock, global stock, balanced, income, convertible
bond, high yield bond, corporate bond, government bond, foreign bond, global
bond, municipal bond, short-term world income and money market. The Fund is
unlikely at any particular moment to have all of its assets invested in only one
of these general types of funds, and may maintain at least some nominal
investment in many of these fund types on an ongoing basis. The Adviser will
vary the proportion of each type of underlying fund based on the mix of such
funds that may, in the Adviser's view, be most likely to achieve the Fund's
investment objective. The Fund will not invest in other Maxus Funds. All
investments involve risks, and there is no assurance that the investment
objective of the Fund will be achieved. The investment objective of the Fund is
a fundamental policy and may not be changed without approval of a majority of
the Fund's outstanding shares. See "General Information."
In allocating assets among general types of underlying funds, the Adviser
will employ both fundamental and technical analysis to assess relative risk and
reward potential throughout the financial markets, with the objective of
providing the best opportunity for maximizing total return without incurring
unreasonable risk. The allocation process goes beyond the basic determination of
the degree to which the Fund's assets should be invested in equity funds versus
bond funds. The Adviser engages in continual research with regard to evolving
opportunities in various asset subclasses, including: investment discipline
(i.e. "growth investing" vs. "value investing"), market capitalization (i.e.,
"small company" vs. "blue chip," geo-economic considerations (i.e. "domestic"
vs. "foreign"), fixed-income security maturities (i.e., "short-term vs.
long-term") and sector/industry rotation (e.g., "basic materials" vs. "consumer
non-durables" or "aerospace/defense" vs. "electric utilities").
Generally, in seeking the Fund's objective, the Adviser will alter the
composition of the Fund's portfolio as economic and market trends change and the
Fund's portfolio may vary considerably among equity, bond, and money market
mutual funds as these changes occur. The Adviser will increase its investment in
money market funds during periods when it believes interest rates will rise and
stock prices will decline and will increase its investment in bond funds when it
believes both interest rates and stock prices will decline. If the Adviser
anticipates
9
<PAGE> 14
that both stock prices and interest rates will rise, it will increase its
investment in equity funds. However, individual equity funds may rise during
times of generally declining stock prices. In addition, equity fund prices may
rise at the same time that interest rates are declining. Therefore, the Fund may
invest in a combination of equity and bond funds and may shift its investment
positions as it anticipates changes in the investment environment.
Within the framework of the foregoing guidelines, the underlying funds in
which the Fund will invest will consist of funds which seek capital growth and
appreciation by investing primarily in common stock or securities convertible
into or exchangeable for common stock (such as convertible preferred stock,
convertible debentures or warrants); funds which seek a combination of capital
appreciation and current income (including income from dividends, income from
interest, growth of income or any combination thereof) by investing primarily in
common stocks, preferred stocks, bonds and other fixed income securities
(including convertible preferred stock and convertible debentures); funds which
seek high current income by investing primarily in long or short-term bonds and
other fixed income securities (such as securities issued, guaranteed or insured
by the U.S. Government, its agencies or instrumentalities, commercial paper,
preferred stock, convertible preferred stock or convertible debentures); and
funds which seek as high a level of current income as is consistent with
preservation of capital and liquidity by investing in a broad range of high
quality, short-term money market instruments which have remaining maturities not
exceeding one year (including U.S. Government securities, bank obligations,
commercial paper, corporate debt securities and repurchase agreements). Certain
additional investments which the underlying funds may make, together with the
risks associated with those investments, are described in Appendix B to this
Prospectus.
The Fund may also deposit cash in a money market deposit account,
maintained by the Fund's custodian, (i) for temporary defensive purposes
(without monetary limitation) when and to the extent that, in the judgement of
the Adviser, other investments involve unreasonable risk, or (ii) as may be
considered necessary to accumulate cash in order to meet anticipated
redemptions. To the extent that such balances exceed $100,000, the deposit is
not protected by federal insurance.
The Adviser selects underlying funds in which to invest based, in part,
upon an analysis of their past performance (absolute, relative and
risk-adjusted), management style, and investment objectives and policies. The
Adviser also considers other factors in the selection of funds, including, but
not limited to, asset size, liquidity, expense ratios, quality of shareholder
service, reputation and tenure of portfolio managers, industry classifications
represented in their portfolios, and specific portfolio holdings. The underlying
funds may, but need not, have the same investment objective, policies and
limitations as the Fund. The Fund may be affected by the losses of such
underlying funds, and the level of risk arising from the investment practices of
such funds (such as repurchase agreements, quality standards, lending of
securities, or investment concentration) and has no control over the risks taken
by such funds. The Fund can also elect to redeem (subject to the 1% limitation
discussed in the section titled "Risks and Other Considerations") its investment
in an underlying fund if that action is considered necessary or appropriate.
PORTFOLIO TURNOVER.
The Funds are not restricted with regard to portfolio turnover and will
make changes in their investment portfolios from time to time as business and
economic conditions and market prices may dictate and their respective
investment policies may require. The portfolio turnover rates in 1996 and 1995,
respectively, were 78% and 121% for Maxus Income Fund, 111% and 173% for Maxus
Equity Fund and 1,267% and 1,377% for Maxus Laureate Fund. These rates are
greater than those of many other investment companies. A high rate of portfolio
turnover in any year will increase brokerage com-
10
<PAGE> 15
missions paid and could result in high amounts of realized investment gain
subject to the payment of taxes by shareholders. Any realized net short-term
investment gain will be taxed to shareholders as ordinary income. See
"Dividends, Distributions and Taxes" below.
Because Maxus Laureate Fund intends to employ flexible defensive investment
strategies when market trends are not considered favorable, and to reallocate
fund investments across potentially numerous asset subclasses as evolving
economic and financial conditions warrant, the portfolio turnover rate of the
Fund in any given year may be higher than that of most other funds with similar
objectives. Although the Fund invests exclusively in underlying funds that do
not charge front-end or deferred sales loads, the Custodian of the Fund does
impose a small transaction charge for each purchase or sale of underlying fund
shares. The higher the portfolio turnover rate, the greater will be the
custodial transaction charges borne by the Fund.
INVESTMENT IN CLOSED-END INVESTMENT COMPANIES.
Maxus Income Fund and Maxus Equity Fund may invest in "closed-end"
investment companies (or "closed-end funds"), subject to the investment
restrictions set forth below. Typically, the common shares of closed-end funds
are offered to the public in a one-time initial public offering by a group of
underwriters who retain a spread or underwriting commission. Such securities are
then listed for trading on a national securities exchange or in the over-
the-counter markets. Because the common shares of closed-end funds cannot be
redeemed upon demand to the issuer like the shares of an open-end investment
company (such as each Fund), investors seek to buy and sell common shares of
closed-end funds in the secondary market. The common shares of many closed-end
funds, after their initial public offering, frequently trade at a price per
share which is less than the net asset value per share, the difference
representing the "market discount" of such common shares. These Funds purchase
common shares of closed-end funds which trade at a market discount and which the
Adviser believes present the opportunity for capital appreciation or increased
income due in part to such market discount.
However, there can be no assurance that the market discount on common
shares of any closed-end fund will ever decrease. In fact, it is possible that
this market discount may increase and a Fund may suffer realized or unrealized
capital losses due to further decline in the market price of the securities of
such closed-end funds, thereby adversely affecting the net asset value of that
Fund's shares. Similarly, there can be no assurance that the common shares of
closed-end funds which trade at a premium will continue to trade at a premium or
that the premium will not decrease subsequent to a purchase of such shares by
the Fund. These Funds may also invest in preferred shares of closed-end funds.
Maxus Income Fund and Maxus Equity Fund each will structure its investments
in the securities of closed-end funds to comply with applicable provisions of
the Investment Company Act of 1940 (the "1940 Act"). The presently applicable
provisions require that (i) each Fund and affiliated person of such Fund not own
together more than 3% of the total outstanding stock of any one investment
company, (ii) each Fund not offer its shares at a public offering price that
includes a sales load of more than 1 1/2% and (iii) each Fund either seek
instructions from its shareholders with regard to the voting of all proxies with
respect to its investment in the securities of closed-end funds and vote such
proxies with respect to its investment in the securities of closed-end funds and
vote such instructions, or vote the shares held by it in the same proportion as
the vote of all other holders of such securities. The Fund intends to vote the
shares of any closed-end fund held by it in the same proportion as the vote of
all other holders of such fund's securities. The effect of such "mirror" voting
will be to neutralize each Fund's influence on corporate governance matters
regarding the closed-end funds in which such Fund invests.
11
<PAGE> 16
Maxus Income Fund and Maxus Equity Fund will not invest directly in the
securities of open-end investment companies. However, such Funds may retain the
securities of a closed-end investment company that has converted to an open-end
fund status subsequent to such Fund's investment in the securities of such
closed-end fund. Generally, shares of an open-end investment company can be
redeemed, at their net asset value, upon demand to the issuer. However, pursuant
to applicable provisions of the 1940 Act, a Fund may not redeem more than 1% of
the outstanding redeemable securities of an open-end investment company during
any period of 30 days or less. Consequently, if a Fund should own more than 1%
of the outstanding redeemable securities of an open-end investment company after
such fund's conversion from closed-end fund status, the amount in excess of 1%
may be treated as an investment in illiquid securities. Because such Fund may
not hold at any time more than 10% of the value of its net assets in illiquid
securities (e.g. securities that are not readily marketable within seven days),
such Fund may seek to divest itself, prior to any such conversion, of securities
in excess of 1% of the outstanding redeemable securities of a converting fund.
Such Fund may, however, retain such securities and any amount in excess of 1% of
the open-end fund and thereby subject to the limits on redemption would be
treated as an investment in illiquid securities subject to the aggregate limit
of 10% of such Fund's total assets.
Maxus Income Fund and Maxus Equity Fund each may invest in the securities
of closed-end funds which (i) concentrate their portfolios in issuers in
specific industries or in specific geographic areas and (ii) are non-diversified
for purposes of the 1940 Act. However, because such Funds do not intend to
concentrate their investments in any single industry and because the closed-end
funds in which each Fund will invest generally satisfy the diversification
requirements applicable to a regulated investment company under the Internal
Revenue Code, the Funds do not believe that their investments in closed-end
funds which concentrate in specific industries or geographic areas or which are
non-diversified for purposes of the 1940 Act will represent any special risks to
the shareholders of the Funds. Each Fund will treat its entire investment in the
securities of a closed-end fund that concentrates in a specific industry as an
investment in securities of an issuer in such industry.
Some of the closed-ends funds in which Maxus Income Fund and Maxus Equity
Fund invest may incur more risks than others. For example, some of these
closed-end funds may have policies that permit them to invest up to 100% of
their assets in securities of foreign issuers and to engage in foreign currency
transactions with respect to their investments; invest up to 100% of their
assets in corporate bonds which are not considered investment grade bonds by
Standard & Poor's Corporation or Moody's Investor Services, Inc., or which are
unrated; invest some portion of their net assets in illiquid securities; invest
some portion of their net assets in warrants; lend their portfolio securities;
sell securities short; borrow money in amounts up to some designated percentage
of their assets for investment purposes; write (sell) or purchase call or put
options on securities or on stock indexes; concentrate 25% or more of their
total assets in assets in one industry; enter into future contracts; and write
(sell) or purchase options on futures contracts. The risks associated with these
investment policies are described in Appendix B to this Prospectus.
Like the Funds, closed-end funds frequently pay an advisory fee for the
management of their portfolios, as well as other expenses. Therefore, investment
by a Fund in such funds often results in a "layering" of advisory fees and other
expenses, thereby increasing the overall charge to the net asset value of such
Fund's shares.
LENDING OF PORTFOLIO SECURITIES.
Consistent with applicable regulatory requirements, Maxus Income Fund and
Maxus Equity Fund each may lend its portfolio securities (principally to
broker-dealers) without limit where such
12
<PAGE> 17
loans are callable at any time and are continuously secured by collateral (cash
or government securities) equal to no less than the market value, determined
daily, of the securities loaned. As an operating policy which may be changed
without shareholders vote, the Adviser will limit such lending to not more than
one-third of the value of each Fund's total assets. The Fund lending its
portfolio securities will receive amounts equal to dividends or interest on the
securities loaned. It will also earn income for having made the loan. Any cash
collateral pursuant to these loans will be invested in money market instruments.
Where voting or consent rights with respect to loaned securities pass to the
borrower, management will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such voting or consent
rights if the issues involved have a material effect on the Fund's investment in
the securities loaned.
As with any extensions of credit, there are risks of delay in recovery and
in some cases even loss of rights in the collateral should the borrower of the
securities fail financially. Also, any securities purchased with cash collateral
are subject to market fluctuations while the loan is outstanding.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES AND RESTRICTIONS
- --------------------------------------------------------------------------------
Each Fund has adopted certain fundamental policies which may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act). Certain of these policies are
detailed below, while other policies are set forth in the Statement of
Additional Information.
MAXUS INCOME FUND AND MAXUS EQUITY FUND
Neither Maxus Income Fund nor Maxus
Equity Fund may:
(1) invest more than 5% of the value of its total assets in the securities
of any one issuer (except obligations issued or guaranteed by the United States
Government, its agencies and instrumentalities);
(2) acquire more than 10% of the outstanding voting securities of any one
issuer;
(3) invest more than 25% of the value of such Fund's total assets in
securities of companies in a particular industry (except obligations issued or
guaranteed by the United States Government, its agencies and instrumentalities);
(4) invest in securities of other registered investment companies, except
by purchase in the open market involving only customary brokerage commissions,
or except as part of a merger, consolidation, reorganization or acquisition; or
(5) invest in securities of any registered closed-end investment company,
if immediately after such purchase or acquisition such Fund would own more than
3% of the total outstanding voting stock of such closed-end company.
MAXUS LAUREATE FUND
Maxus Laureate Fund may not:
(1) invest in securities other than those issued by open-end registered
investment companies, including money market funds (this restriction does not
preclude the use of the Custodian's money market deposit account for idle cash
balances of the Fund);
(2) invest more than 25% of its total assets in the securities of
underlying funds which concentrate (i.e., invest more than 25% of their assets)
in the same industry, provided that (i) through its investment in underlying
funds, the Fund indirectly may
13
<PAGE> 18
invest more than 25% of its assets in one industry, and (ii) the Fund will
concentrate more than 25% of its assets in the mutual fund industry; or
(3) invest more than 25% of its assets in the shares of any one open-end
registered investment company.
Maxus Laureate Fund must also structure its investments to comply with
certain provisions of federal and state securities laws. Under these provisions,
among other things, this Fund may not:
(1) invest in any registered investment company if a purchase of its shares
would result in the Fund and its affiliates owning more than 3% of the total
outstanding stock of such investment company; or
(2) purchase the securities of any issuer if, as a result, more than 10% of
the value of the Fund's net assets would be invested in securities that are not
readily marketable; for this purpose, securities which are not readily
marketable include shares of an open-end registered investment company owned by
the Fund in an amount exceeding 1% of the issuer's total outstanding securities
(see "Risks and Other Considerations").
Changes in values of particular Fund assets or the assets of the Fund as a
whole will not cause a violation of the investment restrictions so long as
percentage restrictions are observed by the Fund at the time it purchases any
security. Other investment policies are discussed in this Fund's Statement of
Additional Information under the heading "Investment Policies and Restrictions."
- --------------------------------------------------------------------------------
RISKS AND OTHER CONSIDERATIONS
- --------------------------------------------------------------------------------
MAXUS INCOME FUND AND MAXUS EQUITY FUND
Maxus Income Fund and Maxus Equity Fund each may invest in equity and debt
securities involving a greater risk of decline in market value than that of
other securities. Investments in equity securities will include common stock,
preferred stock and convertible preferred stock. While these securities will
generally be chosen for their ability to pay dividends, there can be no
assurance that the dividends will be continued. Also, individual market values
of these securities will fluctuate based on individual corporate developments as
well as general economic conditions.
Investments by these Funds in corporate debt securities will be principally
in those rated BBB or better by Standard & Poor's Corporation rating service but
may be in lower rated and unrated securities. Securities rated BBB or lower by
Standard & Poor's are usually considered lower-rated securities and have
speculative characteristics. It should be noted that (a) the market prices of
lower-rated securities fluctuate more than prices of higher-rated securities;
(b) the prices of lower-rated securities may decline significantly in periods of
general economic difficulty or rising interest rates; (c) there is a greater
possibility of a financial reversal affecting the ability of issuers of
lower-rated securities to make payments of income and principal on time; (d)
lower-rated or unrated securities may include securities which are in default or
which are issued by companies in bankruptcy; and (e) the secondary trading
market for lower-rated or unrated securities may be less liquid than the market
for higher rated securities, thus possibly limiting the ability of the Fund to
dispose of such securities when the Adviser deems it desirable to do so. Unrated
securities are not necessarily of lower quality than rated securities, but they
may not be attractive to as many buyers.
14
<PAGE> 19
Each Fund also may invest in closed-end investment companies. See
"Investment Objectives and Management Techniques-Investment in Closed-End
Investment Companies" for a discussion of the risks of such investments.
Each Fund may also invest a small portion of its assets (up to five
percent) in put and call options which trade on securities exchanges and for
which it pays a premium. The Fund may suffer a total loss of its investment if
the underlying security decreases in value in the case of a call option or
increases in value in the case of a put option.
The operating expenses of these Funds are higher than those of many other
funds.
MAXUS LAUREATE FUND
Any investment in a mutual fund involves risk, and, although Maxus Laureate
Fund invests in a number of underlying funds, this practice does not eliminate
investment risk. Some of the underlying funds in which the Fund invests may
incur more risks than others. For example, some of the underlying funds may have
policies that permit them to invest up to 100% of their assets in securities of
foreign issuers and to engage in foreign currency transactions with respect to
their investments; invest up to 100% of their assets in corporate bonds which
are not considered investment grade bonds by Standard & Poor's Corporation or
Moody's Investor Services, Inc., or which are unrated; invest some portion of
their net assets in illiquid securities; invest some portion of their net assets
in warrants; lend their portfolio securities; sell securities short; borrow
money in amounts up to some designated percentage of their assets for investment
purposes; write (sell) or purchase call or put options on securities or on stock
indexes; concentrate 25% or more of their total assets in assets in one
industry; enter into future contracts; and write (sell) or purchase options on
futures contracts. The risks associated with these investment policies are
described in Appendix B to this Prospectus.
Through its investment in underlying funds, Maxus Laureate Fund indirectly
may invest more than 25% of its assets in one industry. Such indirect
concentration of the Fund's assets may subject the shares of the Fund to greater
fluctuation in value than would be the case in the absence of such
concentration.
Maxus Laureate Fund, together with any "affiliated persons" (as defined in
the 1940 Act) may purchase only up to 3% of the total outstanding securities of
any underlying fund. For this purpose, shares of underlying funds held by
private discretionary investment advisory accounts managed by the Adviser will
be aggregated with those held by the Fund. Accordingly, when affiliated persons
and other accounts managed by the Adviser hold shares of any of the underlying
funds, the Fund's ability to invest fully in shares of those funds is
restricted, and the Adviser must then in some instances, select alternative
investments that would not have been in first preference.
Under certain circumstances, an underlying fund may determine to make a
payment for redemption of its shares to Maxus Laureate Fund wholly or partly by
a distribution in kind of securities from its portfolio, in lieu of cash, in
conformity with the rules of the SEC. In such cases, the Fund may hold
securities distributed by an underlying fund until the Adviser determines that
it is appropriate to dispose of such securities. Such disposition may entail
additional costs to the Fund.
Investment decisions by the investment advisers of the underlying funds are
made independently of Maxus Laureate Fund and the Adviser. Therefore, the
investment advisor of an underlying fund may be purchasing securities of the
same issuer whose securities are being sold by the investment adviser of another
underlying fund. The result of this would be an indirected expense to the Fund
without accomplishing any investment purpose.
An investor in Maxus Laureate Fund will bear not only his proportionate
share of the expenses of the Fund but also indirectly similar expenses of the
15
<PAGE> 20
underlying funds. These expenses consist of advisory fees, expenses related to
the distribution of shares, brokerage commissions, accounting, pricing and
custody expenses, printing, legal and audit expenses and other miscellaneous
expenses.
The operating expenses of this Fund are higher than those of many other
funds.
In the event Maxus Laureate Fund holds more than one percent (1%) of an
underlying fund's shares, the 1940 Act provides that the underlying fund will be
obligated to redeem only one percent (1%) of the underlying fund's outstanding
shares during any period of less than 30 days. To the extent that, due to this
restriction, the Fund is unable at its discretion to dispose of shares of an
underlying fund, the Fund would not be able to protect itself against a decline
in value of such shares during the period such restrictions remain in effect.
Any shares of an underlying fund held by the Fund in excess of one percent (1%)
of the underlying fund's outstanding shares will be considered not readily
marketable securities that, together with other such securities, may not exceed
10% of the Fund's net assets.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
From time to time, the Funds may advertise performance data represented by
a cumulative total return or an average annual total return. Total returns are
based on the overall or percentage change in value of a hypothetical investment
in a Fund and assume all of the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over the entire period.
Because average annual returns tend to smooth out variations in the Fund's
returns, it should be recognized that they are not the same as actual
year-by-year results. The total returns for each Fund for periods ended December
31, 1996 were as follows:
MAXUS INCOME FUND
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
ONE THREE FIVE TEN ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
9.20% 6.61% 7.29% 7.91% 9.20% 21.17% 42.16% 114.18%
</TABLE>
MAXUS EQUITY FUND
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
ONE THREE FIVE LIFE OF ONE THREE FIVE LIFE OF
YEAR YEARS YEARS FUND* YEAR YEARS YEARS FUND*
- ----- ----- ----- ------- ----- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
19.13% 13.64% 15.72% 13.80% 19.13% 46.75% 107.50% 155.34%
</TABLE>
* From commencement of operations, Sept. 30, 1989.
MAXUS LAUREATE FUND
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
ONE THREE LIFE OF ONE THREE LIFE OF
YEAR YEARS* FUND* YEAR YEARS FUND*
- ----- ------ ------- ----- ----- -------
<S> <C> <C> <C> <C> <C>
21.03% 10.17% 10.72% 21.03% 33.74% 45.26%
</TABLE>
* From commencement of operations, May 1, 1993.
16
<PAGE> 21
Performance may be compared to well-known indices such as the Dow Jones
Industrial Average or alternative investments such as Treasury Bills. Also, the
Funds may include published editorial comments compiled by independent
organizations such as Lipper Analytical Services or Morningstar, Inc.
All performance information is historical in nature and is not intended to
represent or guarantee future results. The value of Fund shares when redeemed
may be more or less than their original cost.
Further information about the performance of each of the Funds is contained
in the Funds' Annual Report to Shareholders which may be obtained from the Fund
without charge.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
The shares of each Fund are sold on a continuing basis without a sales
charge. A minimum initial investment of $1,000 is required to open an account
with subsequent minimum investments of $100. Investment minimums may be waived
at the discretion of each Fund.
SHAREHOLDERS ACCOUNTS.
When a shareholder invests in a Fund, Maxus Information Systems Inc., the
Transfer Agent for each Fund, will establish an open account to which all full
and fractional shares (to three decimal places) will be credited, together with
any dividends and capital gains distributions, which are paid in additional
shares unless the shareholder otherwise instructs the Transfer Agent. Stock
certificates will be issued for full shares only when requested in writing. Each
shareholder is notified of the status of his account following each purchase or
sale transaction.
INITIAL PURCHASE.
The initial purchase may be made by check or by wire in the following
manner:
BY CHECK. The Account Application which accompanies this Prospectus should be
completed, signed, and, along with a check for the initial investment payable to
Maxus Income Fund, Maxus Equity Fund or Maxus Laureate Fund, mailed to: Maxus
Information Systems Inc., 28601 Chagrin Boulevard, Cleveland, Ohio 44122.
BY WIRE. In order to expedite the investment of funds, investors may advise
their bank or broker to transmit funds via Federal Reserve Wire System to: Star
Bank, N.A. Cinti/Trust, ABA #0420-0001-3, F/F/C Account No. 19-6201 Maxus Mutual
Funds DDA 483617213 (Star Bank Trust). Also provide the shareholder's name and
account number. In order to obtain this needed account number and receive
additional instructions, the investor may contact, prior to wiring funds, Maxus
Information Systems Inc., at (216) 292-3434. The investor's bank may charge a
fee for the wire transfer of funds.
SUBSEQUENT PURCHASES.
Investors may make additional purchases (minimum $100) in the following manner:
BY CHECK. Checks made payable to Maxus Income Fund, Maxus Equity Fund or Maxus
Laureate Fund should be sent, along with the stub from a previous purchase or
sale confirmation, to Maxus Information Systems Inc., 28601 Chagrin Boulevard,
Cleveland, OH 44122.
BY WIRE. Funds may be wired by following the previously discussed wire
instructions for an initial purchase.
BY TELEPHONE. Investors may purchase shares up to an amount equal to 3 times the
market value of shares held in the shareholder's account in a Fund on the
preceding day for which payment has been received, by telephoning Maxus
Information Sys-
17
<PAGE> 22
tems Inc., at (216) 292-3434 and identifying their account by number.
Shareholders wishing to avail themselves of this privilege must complete a
Telephone Purchase Authorization Form which is available from the Fund. A
confirmation will be mailed and payment must be received within 3 business days
of date of purchase. If payment is not received within 3 business days the Fund
reserves the right to redeem the shares purchased by telephone, and if such
redemption results in a loss to the Fund, redeem sufficient additional shares
from the shareholder's account to reimburse the Fund for the loss. Payment may
be made by check or by wire. The Adviser has agreed to hold the Fund harmless
from net losses resulting from this service to the extent, if any, not
reimbursed from the shareholder's account. This telephone purchase option may be
discontinued without notice.
PRICE OF SHARES.
The price paid for shares is the net asset value per share of each Fund
next determined after receipt by the Transfer Agent of properly identified
purchase funds, except that the price for shares purchased by telephone is the
net asset value per share next determined after receipt of telephone
instructions. Net asset value per share is computed for each Fund as of the
close of business (currently 4:00 P.M., New York time) each day the New York
Stock Exchange is open for trading and on each other day during which there is a
sufficient degree of trading in such Fund's investments to affect materially net
asset value of its redeemable securities. Net asset value is determined by
totaling the value of all portfolio securities, cash, other assets held by the
Fund, and interest and dividends accrued and subtracting from that amount all
liabilities, including accrued expenses. The total net asset value is divided by
the total number of shares outstanding to determine the net asset value of each
share.
For purposes of computing the net asset value per share of Maxus Income
Fund and Maxus Equity Fund, securities listed on a national securities exchange
or on the NASDAQ National Market System will be valued on the basis of the last
sale of 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 business on each day or, if market quotations
are not readily available, at fair value as determined in good faith by each
Fund's Board of Trustees. Unless the particular circumstances (such as an
impairment of the credit-worthiness of the issuer) dictate otherwise, the fair
value of short-term securities with maturities of 60 days or less shall be their
amortized cost. All other securities and other assets of each such Fund will be
valued at their fair value as determined in good faith by that Fund's Board of
Trustees.
The assets of Maxus Laureate Fund (other than cash and cash equivalents)
consist of the underlying funds that are valued at their respective net asset
values under the 1940 Act. An underlying fund values securities in its portfolio
for which market quotations are readily available at their current market value
(generally the last reported sales price) and all other securities and assets at
fair value pursuant to methods established in good faith by the board of
directors of the underlying fund. Money market funds with portfolio securities
that mature in one year or less may use the amortized cost or penny-rounding
methods to value their securities.
OTHER INFORMATION CONCERNING PURCHASE OF SHARES.
Each Fund reserves the right to reject any order, to cancel any order due
to non-payment and to waive or lower the investment minimums with respect to any
person or class of persons. If an order is cancelled because of non-payment or
because your check does not clear, you will be responsible for any loss that the
Fund incurs. If you are already a shareholder, the Fund can redeem shares from
your account to reimburse it for any loss. The Adviser has agreed to hold each
Fund harmless from net losses to that Fund resulting from the failure of a check
to clear to the extent, if any, not recovered from the investor. For purchases
of
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<PAGE> 23
$50,000 or more, each Fund may, in its discretion, require payment by wire or
cashier's or certified check.
Shares of each Fund are offered exclusively, on a best efforts basis, by
the Funds' Distributor, Maxus Securities Corp ("MSC"), an NASD broker-dealer.
Purchases of the Fund's shares through MSC will be transmitted promptly to the
Transfer Agent so that the investor's purchase order receives the net asset
value next determined following receipt of the order by MSC. The address of MSC
is 28601 Chagrin Boulevard, Cleveland, Ohio 44122. MSC, which is controlled by
Richard A. Barone, Chairman of each Fund, receives for its services as
Distributor an annual distribution fee of .25% of average net assets. In
addition, each Fund has authorized MSC to make payments for activities and
expenses permitted by that Fund's Distribution Plan, and each Fund reimburses
MSC for such expenditures. See "Distribution Plans." Certain employees of MSC
may receive compensation under the Distribution Plans.
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HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
All shares of each Fund offered for redemption will be redeemed at the net
asset value per share of that Fund next determined after receipt of the
redemption request, if in good order, by the Transfer Agent. See "Price of
Shares." Because the net asset value of each Fund's shares will fluctuate as a
result of changes in the market value of securities owned, the amount a
stockholder receives upon redemption may be more or less than the amount paid
for the shares. Redemption proceeds will be mailed to the shareholder's
registered address of record or, if $5,000 or more, may be transmitted by wire,
upon request, to the shareholder's pre-designated account at a domestic bank.
The shareholder will be charged for the cost of such wire. If shares have been
purchased by check and are being redeemed, redemption proceeds will be paid only
after the check used to make the purchase has cleared (usually within 15 days
after payment by check). This delay can be avoided if, at the time of purchase,
the shareholder provides payment by certified or cashier's check or by wire
transfer.
REDEMPTION BY MAIL.
Shares may be redeemed by mail by writing directly to the Funds' Transfer
Agent, Maxus Information Systems Inc., 28601 Chagrin Boulevard, Cleveland, Ohio
44122. The redemption request must be signed exactly as the shareholder's name
appears on the registration form, with the signature guaranteed, and must
include the account number. If shares are owned by more than one person, the
redemption request must be signed by all owners exactly as the names appear on
the registration.
If a shareholder is in possession of the stock certificate, these
certificates must accompany the redemption request and must be endorsed as
registered with a signature guarantee. Additional documents may be required for
registered certificates owned by corporations, executors, administrators,
trustees or guardians. A request for redemption will not be processed until all
of the necessary documents have been received in proper form by the Transfer
Agent. A shareholder in doubt as to what documents are required should contact
Maxus Information Systems Inc. at (216) 292-3434.
You should be able to obtain a signature guarantee from a bank,
broker-dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency or savings association. A notary public is not
an acceptable guarantor. A Fund may in its discretion waive the signature
guarantee in certain instances.
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<PAGE> 24
REDEMPTION BY TELEPHONE.
Shares may be redeemed by telephone by
calling Maxus Information Systems Inc. at (216) 292-3434 between 9:00 A.M. and
4:00 P.M. eastern time on any day the New York Stock Exchange is open for
trading. An election to redeem by telephone must be made on the initial
application form or on other forms prescribed by the Fund which may be obtained
by calling the Funds at (216) 292-3434. This form contains a space for the
shareholder to supply his own four digit identification number which must be
given upon request for redemption. A Fund will not be liable for following
instructions communicated by telephone that the Fund reasonably believes to be
genuine. If a Fund fails to employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, the Fund may be liable for
any losses due to unauthorized or fraudulent instructions. Any changes or
exceptions to the original election must be made in writing with signature
guaranteed, and will be effective upon receipt by the Transfer Agent. The
Transfer Agent and each Fund reserve the right to refuse any telephone
instructions and may discontinue the aforementioned redemption option without
notice. The minimum telephone redemption is $1,000.
OTHER INFORMATION CONCERNING REDEMPTION.
Each Fund reserves the right to take up to seven days to make payment if,
in the judgment of the Fund's Investment Adviser, such Fund could be affected
adversely by immediate payment. In addition, the right of redemption for a Fund
may be suspended or the date of payment postponed (a) for any period during
which the NYSE is closed (other than for customary week-end and holiday
closings), (b) when trading in the markets that the Fund normally utilizes is
restricted, or when an emergency, as defined by the rules and regulations of the
SEC, exists, making disposal of that Fund's investments or determination of its
net asset value not reasonably practicable, or (c) for any other periods as the
SEC by order may permit for protection of that Fund's shareholders.
Due to the high cost of maintaining accounts, each Fund has the right to
redeem, upon not less than 30 days written notice, all of the shares of any
shareholder if, through redemptions, the shareholder's account has a net asset
value of less than $1,000. A shareholder will be given at least 30 days written
notice prior to any involuntary redemption and during such period will be
allowed to purchase additional shares to bring his account up to the applicable
minimum before the redemption is processed.
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SYSTEMATIC WITHDRAWAL PLAN
- --------------------------------------------------------------------------------
Shareholders who own shares of a Fund valued at $15,000 or more may elect
to receive a monthly or quarterly check in a stated amount (minimum check amount
is $100 per month or quarter). Shares will be redeemed at net asset value as may
be necessary to meet the withdrawal payments. If withdrawal payments exceed
reinvested dividends and distributions, the investor's shares will be reduced
and eventually depleted. A withdrawal plan may be terminated at any time by the
shareholder or the applicable Fund. Costs associated with a withdrawal plan are
borne by the applicable Fund. Additional information regarding systematic
withdrawal plans may be obtained by calling Maxus Information Systems Inc. at
(216) 292-3434.
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<PAGE> 25
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INVESTMENT MANAGEMENT
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS.
The business and affairs of each Fund are managed under the direction of
its Trustees as required by Ohio law. The day-to-day operations of each Fund are
conducted through or under the direction of its officers. By virtue of the
responsibilities assumed by MAM as investment adviser (see below), the Funds
have no executive employees other than their officers, each of whom is employed
by MAM or its affiliates and none of whom devotes full time to the affairs of
any Fund. No officer, director or employee of MAM or any of its affiliates
receives any compensation from any Fund for serving as a Trustee or officer of
such Fund. Each Fund pays each Trustee who is not an officer, director or
employee of MAM or any of its affiliates a fee of $100 per meeting attended and
reimburses each such Trustee for travel and out-of-pocket expenses.
THE INVESTMENT ADVISER.
Each Fund has retained as its investment adviser Maxus Asset Management Inc
("MAM" or the "Adviser"), 28601 Chagrin Boulevard, Cleveland, Ohio 44122, an
investment management organization founded in 1976. The Adviser is actively
engaged in providing discretionary investment management services to
institutional and individual clients and is registered under the Investment
Advisers Act of 1940. The Adviser has not been sponsored, recommended or
approved, nor have its abilities or qualifications been passed upon, by the
Securities and Exchange Commission or any other government agency.
MAM is a wholly owned subsidiary of Resource Management Inc ("RMI"), an
Ohio corporation with interests primarily in the financial services industry.
RMI also owns all of the shares of Maxus Securities Corp ("MSC"), the NASD
broker/dealer through which shares of each Fund are being offered and with whom
each Fund has entered into a Distribution Agreement reimbursing MSC for certain
expenses and activities permitted under each Fund's Distribution Plan. See
"Distribution Plans." Mr. Richard A. Barone is the president and majority
shareholder of RMI and, therefore, is deemed to be in control of MAM and MSC.
Subject to the supervision and direction of each Fund's Trustees, MAM, as
investment adviser, manages each Fund's portfolio in accordance with the stated
policies of that Fund. MAM makes investment decisions for each Fund and places
the purchase and sale orders for portfolio transactions. In addition, MAM or its
affiliates furnishes office facilities and clerical and administrative services,
pays the salaries of all officers and employees who are employed by both it and
the Funds and, subject to the direction of each Fund's Board of Trustees, is
responsible for the overall management of the business affairs of each Fund,
including the provision of personnel for recordkeeping, the preparation of
governmental reports and responding to shareholder communications.
Richard A. Barone is the person primarily responsible for the management of
the portfolio of each of the Funds. Mr. Barone has been President of MAM since
1976 and has been Chairman of each of the Funds since their inception.
ADVISORY FEE.
The Adviser receives from each Fund as compensation for its services to
each Fund an annual fee of 1% on the first $150,000,000 of each Fund's net
assets, and 0.75% of each Fund's net assets in excess of $150,000,000. This fee
is higher than that paid by most other investment companies. The fee is paid
monthly and calculated on the basis of that month's net assets. For the year
ended December 31, 1996, each Fund paid the Adviser a fee equal to 1.00% of that
Fund's average net assets.
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<PAGE> 26
EXPENSES BORNE BY EACH FUND.
Each Fund pays all expenses not assumed by the Adviser, including brokerage
fees and commissions, fees of Trustees not affiliated with MAM, expenses of
registration of the Fund and of the shares of the Fund with the Securities and
Exchange Commission and the various states, charges of the custodian, dividend
and transfer agent, outside auditing and legal expenses, liability insurance
premiums on property or personnel (including officers and trustees), maintenance
of trust existence such as the filing of reports required by state law, any
taxes payable by the Fund, interest payments relating to Fund borrowings, costs
of preparing, printing and mailing registration statements, prospectuses,
periodic reports and other documents furnished to shareholders and regulatory
authorities, fees and expenses of legal counsel, and costs of printing share
certificates, portfolio pricing services and shareholder meetings,
reimbursements to RMI for organizational expenses, and costs pursuant to each
Fund's plan of distribution described below.
An investor in Maxus Laureate Fund should recognize that he may invest
directly in mutual funds and that, by investing in mutual funds indirectly
through the Fund, he will bear not only his proportionate share of the expenses
of the Fund but also indirectly similar expenses of the underlying funds. In
addition, a Maxus Laureate Fund shareholder will bear his proportionate share of
expenses related to the distribution of the Fund's shares (see "Distribution
Plan") and also may indirectly bear expenses paid by an underlying fund related
to the distribution of its shares. An investor should also recognize that, as a
result of Maxus Laureate Fund's policy of investing in other mutual funds, he
may receive taxable capital gains distributions to a greater extent than would
be the case if he invested directly in the underlying funds. See "Dividends,
Distributions and Taxes."
RMI, the parent company of the Adviser, paid the organizational expenses of
each Fund incurred prior to the initial offering of that Fund's shares,
including expenses involved in preparing, printing and mailing registration
statements and prospectuses to potential investors.
Each Fund agreed to reimburse RMI for such expenses which aggregated
$46,820 for Maxus Income Fund, $29,575 for Maxus Equity Fund and $27,193 for
Maxus Laureate Fund. Such reimbursed expenses were deferred and amortized by
each Fund on a straightline basis over a period of five years from the date of
commencement of operations.
DISTRIBUTION PLANS.
Rule 12b-1 (the "Rule") under the Act regulates the circumstances under
which an investment company may, directly or indirectly, bear the expenses of
distributing its shares. The Rule defines such distribution expenses to include
the cost of "any activity which is primarily intended to result in the sale of
fund shares." The Rule provides, among other things, that an investment company
may bear such expenses only pursuant to a Plan adopted in accordance with the
Rule.
Each Fund has adopted a Plan. The Plan of Maxus Income Fund permits, among
other things, payment for distribution in the form of (a) compensation to
securities brokers and dealers for selling shares; (b) compensation to
securities brokers and dealers, accountants, attorneys, investment advisors,
pension actuaries and service organizations for services rendered by them to
their clients in reviewing, explaining or interpreting the Fund's prospectus and
other selling materials; (c) advertising costs; (d) costs of telephone, mail, or
other direct solicitation of prospective investors and of responding to
inquiries, as well as the compensation of persons who do the soliciting or
respond to inquiries; (e) preparing and printing prospectuses and other selling
materials and the cost of distributing them (including postage); (f)
reimbursement of travel, entertainment and like expenditures made by the
Trustees in promoting the fund and its investment objective and policies;
22
<PAGE> 27
(g) fees of public relations consultants and (h) awards.
The Plans of Maxus Equity Fund and Maxus Laureate Fund permit, among other
things, payment for distribution in the form of (a) compensation to securities
brokers and dealers for selling shares; (b) compensation to securities brokers
and dealers, accountants, attorneys, investment advisors, pension actuaries and
service organizations for services rendered by them to their clients in
reviewing, explaining or interpreting the Fund's prospectus and other selling
materials; (c) advertising costs; (d) cost of telephone, mail or other direct
solicitation of prospective investors and of responding to inquiries, as well as
the compensation of persons who do the soliciting or respond to the inquiries;
(e) printing prospectuses and other selling materials and the cost of
distributing them (including postage) to other than current shareholders; (f)
reimbursement of travel, entertainment and like expenditures made by the
Trustees in promoting the Fund and its investment objective and policies; (g)
fees of public relations consultants, and (h) awards.
Each Fund may expend as much as, but not more than, .50% of its average net
assets annually pursuant to its Plan. This amount is higher than that paid under
most distribution plans. Included in such amount are fees paid to certain
persons for advising their clients regarding the purchase, sale or retention of
Fund shares, sometimes referred to as "service fees," which can range up to .25%
(on an annual basis) of the average total net asset value of Fund shares owned
by the clients of such persons. Expenses exceeding such limits in any fiscal
year may not be carried forward to the next year. For the year ended December
31, 1996, the total amount spent pursuant to each Fund's Plan constituted .50%
of average net assets.
The Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities such as shares of the Funds.
Although the scope of this prohibition under the Glass-Steagall Act has not been
fully defined, in the Distributor's opinion it should not prohibit banks from
being paid for shareholder servicing. If, because of changes in law or
regulation, or because of new interpretations of existing law, a bank or one of
the Funds were prevented from entering into or continuing these arrangements, it
is expected that the board of such Fund would make other arrangements for these
services and that shareholders would not suffer adverse financial consequences.
A report of the amounts expended under the Plan of each Fund and the
purpose of the expenditures must be made to and reviewed by the Board of
Trustees of each Fund at least quarterly. In addition, each Plan provides that
it may not be amended to increase materially the costs which the Fund may bear
for distribution pursuant to that Plan without shareholder approval and that
other material amendments of that Plan must be approved by the Board of
Trustees, and by the Trustees who are not "interested persons" of such Fund (as
defined in the 1940 Act) and who have not direct or indirect financial interest
in the operation of that Plan or in any agreements related to that plan, by vote
cast in person at a meeting called for the purpose of voting on that Plan. Each
Plan is terminable at any time by vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the operation of the Plan or in any related service agreement or by vote of the
majority of that Fund's shares. Any service agreement related to the Plan of any
Fund terminates upon assignment and is terminable at any time, without penalty,
upon not more than 60 days' written notice to any other party to the agreement,
by a vote of a majority of the Trustees of such Fund who are not "interested"
persons and who have no direct or indirect financial interest in the operation
of the Plan or in any of the related service agreements or by vote of a majority
of such Fund's shares.
No Fund is charged for interest, carrying or any other financing charges on
any unreimbursed distribution or other expense incurred in a prior plan
23
<PAGE> 28
year, nor is any Fund under a legal obligation to pay all or part of any amount
carried over.
Each Fund's Distribution Agreement with MSC (i) provides for the payment by
such Fund to MSC of a distribution fee (the "Distribution Fee") of .25% of
average net assets and (ii) authorizes MSC to make payments for activities and
expenses permitted by the Plan of such Fund, including the payment of service
fees (subject to the .25% limit on service fees described above) and provides
that such Fund shall reimburse MSC for such expenditures, in addition to payment
of the Distribution Fee. The Distribution Fee is payable without regard to the
amount of expenses incurred by MSC. MSC is not required to bear any expenses in
connection with the offering of Fund shares. Certain employees of Resource
Management Inc., MSC and the Adviser may receive compensation under each Fund's
Plan.
EXECUTION OF PORTFOLIO TRANSACTIONS.
Maxus Income Fund and Maxus Equity Fund. Orders for transactions in
portfolio securities for Maxus Income Fund and Maxus Equity Fund are placed by
the Adviser with securities broker-dealers with the objective of obtaining the
best available price, investment services and execution. Cost of execution
(commissions) is an important consideration but may not be the overriding
determinant. Based upon this consideration the Adviser makes substantial use of
the services of MSC, an affiliate of each Fund and of the Adviser, but is not
required to do so.
Maxus Laureate Fund. Orders for portfolio transactions of Maxus Laureate
Fund generally are placed through MSC. In connection therewith, MSC receives
orders from the Adviser, places them with the underlying fund's distributor,
transfer agent or other person as appropriate, confirms the trades, prices and
numbers of shares purchased or sold, assures prompt payment by or to the Fund
and proper completion of the order.
MSC also may receive distribution payments from the underlying funds or
their underwriter in accordance with the distribution plans of those funds. If
such distribution payments are received by MSC (or any affiliated person with
MSC), MSC immediately will remit all of such monies to the Fund.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Each Fund will declare and pay, at least annually, dividends to
shareholders of substantially all of its net investment income, if any, earned
during the year from investments, and will distribute net realized capital
gains, if any, once each year. All dividends and distributions will be
reinvested automatically at net asset value in additional shares of a Fund
unless the shareholder has notified such Fund in writing of his election to
receive distributions in cash. The Board of Trustees of Maxus Income Fund has
adopted a policy of making distributions of net income on a monthly basis, but
that policy is subject to change at any time.
Each Fund intends to qualify continually as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code"). Such qualification
removes from the Fund any liability for federal income taxes upon the portion of
its income distributed to shareholders and makes federal income tax upon such
distributed income generated by such Fund's investments the sole responsibility
of the shareholders. Continued qualification requires each Fund to distribute to
its shareholders each year substantially all of its income and capital gains. In
addition, amounts not distributed on a timely basis in accordance with a
calendar year distribution
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<PAGE> 29
requirement are subject to a nondeductible four percent (4%) excise tax. To
prevent imposition of the excise tax each Fund must distribute for each calendar
year an amount equal to the sum of (1) at least 98% of its calendar year net
ordinary income, (2) at least 98% of the excess of its capital gains over
capital losses (adjusted for certain ordinary losses) realized during the
one-year period ending December 31 of such year, and (3) 100% of any
undistributed net ordinary income and net capital gains for previous years. A
distribution will be treated as paid on December 31 of the calendar year if it
is declared by the Fund in December of that year with a record date in December
and paid by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received. Each Fund will notify shareholders of the tax status
of dividends and distributions.
Any dividend or distribution paid by a Fund has the effect of reducing the
net asset value per share on the ex-dividend date by the amount of the dividend
or distribution. Therefore, a dividend or distribution paid shortly after a
purchase of shares by an investor would represent, in substance, a return of
capital to the shareholder, even though subject to income taxes.
Each Fund may also, from time to time, pay dividends in excess of net
income and net realized capital gains. Any such excess dividends would
constitute a non-taxable return of capital to the shareholder.
Depending on the residence of the shareholder for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisers as to the
tax consequences of ownership of shares of a Fund in their particular
circumstances.
In accordance with the Code, each Fund may be required to withhold a
portion of dividends or redemptions or capital gains paid to a shareholder and
remit such amount to the Internal Revenue Service if the shareholder fails to
furnish the Fund with a correct taxpayer identification number, if the
shareholder fails to supply the Fund with a tax identification number
altogether, if the investor fails to make a required certification that his
taxpayer identification number is correct and that he is not subject to backup
withholding, or if the Internal Revenue Service notifies the Fund to withhold a
portion of such distributions from a shareholder's account.
SPECIAL CONSIDERATIONS FOR MAXUS LAUREATE FUND.
Income received by Maxus Laureate Fund from a mutual fund in that Fund's
portfolio (including dividends and distributions of short-term capital gains),
as well as interest received on cash held in the Custodian's money market
deposit account and net short-term capital gains received by the Fund on the
sale of mutual fund shares, will be distributed by the Fund (net of expenses
incurred by the Fund) and will be taxable to shareholders as ordinary income.
Because the Fund is actively managed and can realize taxable net short-term
capital gains by selling shares of an underlying fund with unrealized portfolio
appreciation, investing in the Fund rather than directly in the underlying funds
may result in increased tax liability to the shareholder, since the Fund must
distribute its gain in accordance with the rules of the Code.
Distributions of net capital gains received by Maxus Laureate Fund from
underlying mutual funds, as well as net long-term capital gains realized by the
Fund from the purchase and sale of underlying mutual fund shares held by the
Fund for more than one year, will be distributed by the Fund and will be taxable
to shareholders as long-term capital gains (even if the shareholder has held the
shares for less than one year). However, if a shareholder who has received a
capital gains distribution suffers a loss on the sale of his shares not more
than six months after purchase, the loss will be treated as a long-term capital
loss to the extent of the capital gains distribution received.
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<PAGE> 30
For purposes of determining the character of income received by Maxus
Laureate Fund when an underlying fund distributes net capital gains to the Fund,
the Fund will treat the distribution as a long-term capital gain, even if it has
held shares of the mutual fund for less than one year. However, any loss
incurred by the Fund on the sale of that underlying fund's shares held for six
months or less will be treated as a long-term capital loss only to the extent of
the gain distribution. The tax treatment of distributions from the Fund is the
same whether the distributions are received in additional shares or in cash.
Shareholders receiving distributions in the form of additional shares will have
a cost basis for federal income tax purposes in each share received equal to the
net asset value of a share of the Fund on the reinvestment date.
Maxus Laureate Fund may invest in underlying funds with capital loss
carry-forwards. If such an underlying fund realizes capital gains, it will be
able to offset the gains to the extent of its loss carrying forwards in
determining the amount of capital gains which must be distributed to its
shareholders.
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GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Funds are separate, diversified, open-end management investment
companies, organized as Trusts under the laws of the State of Ohio by
Declarations of Trust dated October 31, 1984 (Maxus Income Fund), July 12, 1989
(Maxus Equity Fund) and February 10, 1993 (Maxus Laureate Fund). The Declaration
of Trust of each Fund provides for an unlimited number of authorized shares of
beneficial interest in such Fund, par value $.10 per share. All shares are of
the same class and are freely transferable. Each share has equal dividend rights
and is entitled to one vote at all shareholder meetings. Shares of each Fund
have non-cumulative voting rights, so that the holders of more than 50% of the
shares voting for the election of Trustees can, if they choose to do so, elect
all the Trustees of such Fund, in which event the holders of the remaining
shares will be unable to elect any person as a Trustee. Whenever the approval of
a majority of the outstanding shares of a Fund is required in connection with
shareholder approval of an investment advisory contract, changes in the
investment objective and policies or the investment restrictions, or approval of
a distribution expense plan, a "majority" shall mean the vote of (i) 67% or more
of the shares of such Fund present at a meeting, if the holders of more than 50%
of the outstanding shares of such Fund are present in person or by proxy, or
(ii) more than 50% of the outstanding shares of such Fund, whichever is less.
The Funds each hold annual shareholder meetings.
Upon issuance and sale in accordance with the terms of this Prospectus,
each share will be fully paid and non-assessable. Shares of the Fund have no
preemptive, subscription or conversion rights and are redeemable as set forth
under "How to Redeem Shares." The Declaration of Trust of each Fund also
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of such Fund and that every agreement, obligation or
instrument entered into or executed by such Fund shall contain a provision to
the effect that the shareholders are not personally liable thereunder. Although
each Fund is offering its own shares, it is possible that one Fund may become
liable for any misstatement in this Prospectus about one of the other Funds.
Maxus Laureate Fund intends to vote the shares of the underlying funds held
by it in the same proportion as the vote of all other holders of such underlying
fund's securities. The effect of such "mirror" voting will be to neutralize such
Fund's influence on corporate governance matters regarding the underlying funds
in which the Fund invests.
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<PAGE> 31
Shareholders of Maxus Laureate Fund will not have the opportunity to vote
on matters submitted to shareholders of the underlying funds. However,
shareholders of such Fund will, of course, have the opportunity to vote on
matters required to be submitted to shareholders of the Fund.
Maxus Laureate Fund is not available to residents of the State of Montana.
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45201, is the
custodian for each Fund's securities and cash. Maxus Information Systems Inc.
("MIS"), 28601 Chagrin Boulevard, Cleveland, Ohio 44122, is each Fund's
Transfer, Redemption and Dividend Distributing Agent. MIS is a subsidiary of
RMI, the parent company of the Adviser.
McCurdy & Associates C.P.A.'s, Inc., 27955 Clemens Road, Westlake, Ohio
44145, have been appointed as independent accountants for the Funds.
Benesch, Friedlander, Coplan & Aronoff, 2300 BP America Building, 200
Public Square, Cleveland, Ohio 44114, is legal counsel to the Funds and to the
Adviser.
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APPENDIX A
DESCRIPTION OF BOND AND COMMERCIAL PAPER RATINGS*
STANDARD & POOR'S CORPORATION
- --------------------------------------------------------------------------------
BONDS
AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA: Bonds rated AA have very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in the higher rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for the bonds in higher rated categories.
BB, B, CCC AND CC: Bonds rated BB, B, CCC and CC are regarded on balance as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
COMMERCIAL PAPER
A-1: Commercial paper rated A-1 indicates that the degree of safety
regarding timely payment is very strong.
A-2: Commercial paper rated A-2 indicates that the capacity for timely
payment is strong. However, the relative degree of safety is not as overwhelming
as for issues designated A-1.
- ------------------------
*As described by Standard & Poor's Corporation.
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APPENDIX B
DESCRIPTION OF VARIOUS SECURITIES INVESTED IN,
AND TECHNIQUES EMPLOYED BY,
FUNDS IN WHICH THE MAXUS FUNDS MAY INVEST
- --------------------------------------------------------------------------------
As described in this Prospectus under "Investment Objectives and Management
Techniques" and under "Risks and Other Considerations," Maxus Income Fund and
Maxus Equity Fund may invest in the shares of closed-end investment companies
(or "closed-end funds") and Maxus Laureate Fund may invest in the shares of
open-end investment companies (or "mutual funds"). These closed-end funds and
mutual funds (collectively referred to in this Appendix as "underlying funds")
may
incur certain risks which are described in this
Appendix B.
FOREIGN SECURITIES
An underlying fund may invest up to 100% of its assets in securities of
foreign issuers. Investments in foreign securities involve risks relating to
political and economic developments abroad as well as those that may result from
the differences between the regulation to which U.S. issuers are subject and
that applicable to foreign issuers. These risks may include expropriation,
confiscatory taxation, withholding taxes on dividends and interest, limitations
on the use or transfer of an underlying fund's assets and political or social
instability or diplomatic developments.
Individual foreign economies may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. Securities of many foreign companies may be less liquid and
their prices more volatile than securities of comparable U.S. companies.
Moreover, the underlying funds generally calculate their net asset values and
complete orders to purchase, exchange or redeem shares only on days when the New
York Stock Exchange is open. However, foreign securities in which the underlying
funds may invest may be listed primarily on foreign stock exchanges that may
trade on other days (such as U.S. holidays and weekends). As a result, the net
asset value of an underlying fund's portfolio may be significantly affected by
such trading on days when the Adviser does not have access to the underlying
funds and shareholders do not have access to the Fund.
Additionally, because foreign securities ordinarily are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect an underlying fund's net asset value, the value of dividends
and interest earned, gains and losses realized on the sale of securities and net
investment income and capital gain, if any, to be distributed to shareholders by
the underlying fund. If the value of a foreign currency rises against the U.S.
dollar, the value of the underlying fund's assets denominated in that currency
will increase; correspondingly, if the value of a foreign currency declines
against the U.S. dollar, the value of the underlying fund's assets denominated
in that currency will decrease. The exchange rates between the U.S. dollar and
other currencies are determined by supply and demand in the currency exchange
markets, international balance of payments, governmental intervention,
speculation and other economic and political conditions. The costs attributable
to foreign investment that an underlying fund must bear frequently are higher
than those attributable to
domestic investing. For example, the costs of maintaining custody of foreign
securities exceed custodian costs relating to domestic securities.
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<PAGE> 34
FOREIGN CURRENCY TRANSACTIONS
In connection with its portfolio transactions in securities traded in a
foreign currency, an underlying fund may enter into forward contracts to
purchase or sell an agreed upon amount of a specific currency at a future date
that may be any fixed number of days from the date of the contract agreed upon
by the parties at a price set at the time of the contract. Under such an
arrangement, concurrently with the entry into a contract to acquire a foreign
security for a specified amount of currency, the fund would purchase with U.S.
dollars the required amount of foreign currency for delivery at the settlement
date of the purchase; the fund would enter into similar forward currency
transactions in connection with the sale of foreign securities. The effect of
such transactions would be to fix a U.S. dollar price for the security to
protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date the security purchased or sold and the date on which
payment is made or received, the normal range of which is three to fourteen
days. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for trades. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the subject currency, they tend to
limit commensurately any potential gain that might result should the value of
such currency increase during the contract period.
HIGH-YIELD SECURITIES
The Funds may, from time to time, invest in shares of underlying funds
which invest in lower-rated securities (rated BBB or lower by Standard & Poor's
Corporation Rating Service) or in unrated securities, when, in the view of the
Adviser, such investments are consistent with the Fund's investment objective.
Certain risk factors that investors should recognize as being associated with
the Adviser's discretion to invest in such underlying funds are set forth below.
In general, when interest rates decline, the value of fixed income
securities can be expected to rise. Conversely, when interest rates rise, the
value of fixed income securities can be expected to decline. Prices of
lower-rated securities (also sometimes referred to as "high-yield" securities)
have been found to be less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic changes or individual
corporate developments. In addition, periods of economic uncertainty and changes
can be expected to result in increased volatility of market prices of
lower-rated securities.
The values of lower-rated securities tend to reflect individual corporate
developments to a greater extent than higher-rated securities, which react
primarily to fluctuations in the general level of interest rates. Further,
securities rated BB or lower by Standard & Poor's are below investment grade and
are considered, on balance, to be predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation and will generally involve more credit risk than securities in the
higher rating categories. In some cases, such securities are subordinated to the
prior payment of senior indebtedness, thus potentially limiting the underlying
fund's ability to receive payments when senior securities are in default or to
recover full principal. Many issuers of lower-rated corporate debt securities
are substantially leveraged, which may impair their ability to meet debt service
obligations. Also, during an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain additional
financing. Upon any default, the underlying fund may incur additional expenses
to the extent it is required to seek recovery
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of the payment of principal or interest on the relevant portfolio holding.
In addition, lower-rated securities may tend to trade in markets that are
relatively less liquid than the market for higher rated securities. It is thus
possible that the underlying fund's ability to dispose of such securities, when
its investment adviser deems it desirable to do so, may be limited. The lack of
a liquid secondary market may also have an adverse impact on market price and
the underlying fund's ability to dispose of particular issues when necessary to
meet the underlying fund's liquidity needs or in response to a specific economic
event, such as a deterioration in the creditworthiness of the issuer. In
addition, a less liquid market may interfere with the ability of the underlying
fund to accurately value lower-rated securities and, consequently, value the
fund's assets. Furthermore, adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may decrease the values and liquidity of
lower-rated securities, especially in a thinly-traded market.
The market for "high yield" fixed-income securities has not weathered a
major economic recession and it is unknown what effect a recession might have on
such securities. It is likely, however, that any such recession could severely
disrupt the market for such securities and may have an adverse impact on the
value of such securities. In addition, it is likely that any such economic
downturn would adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon.
Standard & Poor's Corporation ("S&P") is a private service that provides
rates of the credit quality of debt obligations. A description of ratings
assigned to commercial paper and corporate debt obligations by S&P can be found
in Appendix A to this Prospectus. These ratings represent S&P's opinion as to
the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality. Consequently, securities with the same maturity, interest rate and
rating may have different market prices. Subsequent to its purchase by an
underlying fund, an issue of securities may cease to be rated or its ratings may
be reduced below the minimum rating required for purchase by an underlying fund.
CONVERTIBLE PREFERRED STOCKS AND DEBT SECURITIES
Certain preferred stocks and debt securities that may be held by an
underlying fund have conversion features allowing the holder to convert
securities into another specified security (usually common stock) of the same
issuer at a specified conversion ratio (e.g., two shares of preferred for one
share of common stock) at some specified future date or period. The market value
of convertible securities generally includes a premium that reflects the
conversion right. That premium may be negligible or substantial. To the extent
that any preferred stock or debt security remains unconverted after the
expiration of the conversion period, the market value will fall to the extent
represented by that premium.
ILLIQUID SECURITIES
An underlying fund may invest in securities for which no readily available
market exists ("illiquid securities") or securities the disposition of which
would be subject to legal restrictions (so-called "restricted securities") and
repurchase agreements maturing in more than seven days. A considerable period
may elapse between an underlying fund's decision to sell securities and the time
when the fund is able to sell such securities. If, during such a period, adverse
market conditions were to develop, the underlying fund might obtain a less
favorable price than prevailed when it decided to sell.
INDUSTRY CONCENTRATION
An underlying fund may concentrate its investments within one industry.
Because the scope of investment alternatives within an industry is limited, the
value of the shares of such an underlying fund
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<PAGE> 36
may be subject to greater market fluctuation than an investment in a fund that
invests in a broader range of securities.
OPTION ACTIVITIES
An underlying fund may write (i.e., sell) call options ("calls") if the
calls are "covered" throughout the life of the option. A call is "covered" if
the fund owns the optioned securities. When a fund writes a call, it receives a
premium and gives the purchaser the right to buy the underlying security at any
time during the call period (usually not more than nine months in the case of
common stock) at a fixed exercise price regardless of market price changes
during the call period. If the call is exercised, the fund will forego any gain
from an increase in the market price of the underlying security over the
exercise price.
An underlying fund may purchase a call on securities only to effect a
"closing transaction," which is the purchase of a call covering the same
underlying security and having the same exercise price and expiration date as a
call previously written by the fund on which it wishes to terminate its
obligation. If the fund is unable to effect a closing transaction, it will not
be able to sell the underlying security until the call previously written by the
fund expires (or until the call is exercised and the fund delivers the
underlying security).
An underlying fund also may write and purchase put options ("puts"). When a
fund writes a put, it receives a premium and gives the purchaser of the put the
right to sell the underlying security to the fund at the exercise price at any
time during the option period. When a fund purchases a put, it pays a premium in
return for the right to sell the underlying security at the exercise price at
any time during the option period. An underlying fund also may purchase stock
index puts, which differ from puts on individual securities in that they are
settled in cash based on the values of the securities in the underlying index
rather than by delivery of the underlying securities. Purchase of a stock index
put is designed to protect against a decline in the value of the portfolio
generally rather than an individual security in the portfolio. If any put is not
exercised or sold, it will become worthless on its expiration date.
An underlying fund's option positions may be closed out only on an exchange
that provides a secondary market for options of the same series, but there can
be no assurance that a liquid secondary market will exist at any given time for
any particular option. In this regard, trading in options on certain securities
(such as U.S. Government securities) is relatively new, so that it is impossible
to predict to what extent liquid markets will develop or continue.
An underlying fund's custodian, or a securities depository acting for it,
generally acts as escrow agent as to the securities on which the fund has
written puts or calls, or as to other securities acceptable for such escrow so
that no margin deposit is required of the fund. Until the underlying securities
are released from escrow, they cannot be sold by the fund.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation ("OCC") has the
authority to permit other, generally comparable securities to be delivered in
fulfillment of option exercise obligations. If the OCC exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the OCC may impose special
exercise settlement procedures.
FUTURES CONTRACTS
An underlying fund may enter into futures contracts for the purchase or
sale of debt securities and stock indexes. A futures contract is an agreement
between two parties to buy and sell a security or an index for a set price on a
future date. Futures contracts are traded on designated "contract mar-
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<PAGE> 37
kets" that, through their clearing corporation, guarantee performance of the
contracts.
Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of debt securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if an underlying fund holds long-term U.S. Government
securities and it anticipates a rise in long-term interest rates (and therefore
a decline in the value of those securities), it could, in lieu of disposing of
those securities, enter into futures contracts for the sale of similar long-term
securities. If rates thereafter increase and the value of the fund's portfolio
securities thus declines, the value of the fund's futures contracts would
increase, thereby protecting the fund by preventing the net asset value from
declining as much as it otherwise would have. Similarly, entering into futures
contracts for the purchase of debt securities has an effect similar to the
actual purchase of the underlying securities, but permits the continued holding
of securities other than the underlying securities. For example, if an
underlying fund expects long-term interest rates to decline, it might enter into
futures contracts for the purchase of long-term securities so that it could gain
rapid market exposure that may offset anticipated increases in the cost of
securities it intends to purchase while continuing to hold higher-yield
short-term securities or waiting for the long-term market to stabilize.
A stock index futures contract may be used to hedge an underlying fund's
portfolio with regard to market risk as distinguished from risk relating to a
specific security. A stock index futures contract does not require the physical
delivery of securities, but merely provides for profits and losses resulting
from changes in the market value of the contract to be credited or debited at
the close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract reflect
changes in the specified index of equity securities on which the contract is
based.
There are several risks in connection with the use of futures contracts. In
the event of an imperfect correlation between the futures contract and the
portfolio position that is intended to be protected, the desired protection may
not be obtained and the fund may be exposed to risk of loss. Further,
unanticipated changes in interest rates or stock price movements may result in a
poorer overall performance for the fund than if it had not entered into futures
contracts on debt securities or stock indexes.
In addition, the market price of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions that could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an
exchange or board of trade that provides a secondary market for such futures.
There is no assurance that a liquid secondary market on an exchange or board of
trade will exist at any particular time.
OPTIONS ON FUTURES CONTRACTS
An underlying fund may purchase and write (sell) put and call options on
futures contracts. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put), at a specified exercise price at any time during the option
period. When an option on a futures contract is exercised, delivery of the
futures position
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is accompanied by cash representing the difference between the current market
price of the futures contract and the exercise price of the option. A fund may
purchase put options on futures contracts in lieu of, and for the same purpose
as, a sale of a futures contract. It also may purchase such put options in order
to hedge a long position in the underlying futures contract in the same manner
as it purchases "protective puts" on securities.
As with options on securities, the holder of an option on a futures
contract may terminate its position by selling an option of the same series.
There is no guarantee that such closing transactions can be effected. An
underlying fund is required to deposit initial margin and variation margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those applicable to futures contracts described
above and, in addition, net option premiums received will be included as initial
margin deposits.
In addition to the risks that apply to all options transactions, there are
several special risks relating to options on futures contracts. The ability to
establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. There can be no
certainty that liquid secondary markets for all options on futures contracts
will develop. Compared to the use of futures contracts, the purchase of options
on futures contracts involves less potential risk to an underlying fund because
the maximum amount of risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the use of an option on a
futures contract would result in a loss to the fund when the use of a futures
contract would not, such as when there is no movement in the prices of the
underlying securities. Writing an option on a futures contract involves risks
similar to those arising in the sale of futures contracts, as described above.
SHORT SALES
An underlying fund may sell securities short. In a short sale, the fund
sells securities that it does not own, making delivery with securities
"borrowed" from a broker. The fund is then obligated to replace the borrowed
securities by purchasing them at the market price at the time of replacement.
This price may or may not be less than the price at which the securities were
sold by the fund. Until the securities are replaced, the fund is required to pay
to the lender any dividends or interest that accrue during the period of the
loan. In order to borrow the securities, the fund may also have to pay a premium
that would increase the cost of the securities sold. The proceeds of the short
sale will be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out.
The fund also must deposit in a segregated account an amount of cash or
U.S. Government securities equal to the difference between (a) the market value
of the securities sold short at the time they were sold short and (b) the value
of the collateral deposited with the broker in connection with the sale (not
including the proceeds from the short sale). Each day the short position is
open, the fund must maintain the segregated account at such a level that the
amount deposited in it plus the amount deposited with the broker as collateral
(1) equals the current market value of the securities sold short and (2) is not
less than the market value of the securities at the time they were sold short.
Depending upon market conditions, up to 80% of the value of a fund's net assets
may be deposited as collateral for the obligation to replace securities borrowed
to effect short sales and allocated to a segregated account in connection with
short sales.
An underlying fund will incur a loss as a result of a short sale if the
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 price between those dates. The amounts of any gain
will be decreased and the amount of any loss in-
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<PAGE> 39
creased by the amount of any premium, dividends or interest the fund may be
required to pay in connection with the short sale.
A short sale is "against the box" if at all times when the short position
is open the fund owns an equal amount of the securities or securities
convertible into, or exchangeable without further consideration for, securities
of the same issue as the securities sold short. Such a transaction serves to
defer a gain or loss for federal income tax purposes.
WARRANTS
An underlying fund may invest in warrants, which are options to purchase a
specified security, usually an equity security such as common stock, at a
specified price (usually representing a premium over the applicable market value
of the underlying equity security at the time of the warrant's issuance) and
usually during a specified period of time. Moreover, they are usually issued by
the issuer of the security to which they relate. While warrants may be traded,
there is often no secondary market for them. The prices of the warrants do not
necessarily move parallel to the prices of the underlying securities. Holders of
warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer. To the extent that the market value of the
security that may be purchased upon exercise of the warrant rises above the
exercise price, the value of the warrant will tend to rise. To the extent that
the exercise price equals or exceeds the market value of such security, the
warrant is not exercised within the specified time period, it will become
worthless and the fund will lose the purchase price paid for the warrant and the
right to purchase the underlying security.
MASTER DEMAND NOTES
Although the Funds themselves will not do so, underlying funds
(particularly money market mutual funds) may invest up to 100% of their assets
in master demand notes. Master demand notes are unsecured obligations of U.S.
corporations redeemable upon notice that permit investment by a fund of
fluctuating amounts at varying rates of interest pursuant to direct arrangements
between the fund and the issuing corporation. Because they are direct
arrangements between the fund and the issuing corporation, there is no secondary
market for the notes. However, they are redeemable at face value, plus accrued
interest, at any time.
REPURCHASE AGREEMENTS
Underlying funds, particularly money market funds, may enter into
repurchase agreements with banks and broker-dealers under which they acquire
securities subject to an agreement with the seller to repurchase the securities
at an agreed upon time and price. These agreements are considered under the
Investment Company Act of 1940 to be loans by the purchaser collateralized by
the underlying securities. If the seller should default on its obligation to
repurchase the securities, the underlying fund may experience delay or
difficulties in exercising its rights to realize upon the securities held as
collateral and might incur a loss if the value of the securities should decline.
LOANS OF PORTFOLIO SECURITIES
An underlying fund may lend its portfolio securities provided: (1) the loan
is secured continuously by collateral of U.S. Government securities or cash or
cash equivalents maintained on a daily mark-to-market basis in an amount at
least equal to the current market value of the securities loaned; (2) the fund
may at any time call the loan and obtain the return of the securities loaned;
(3) the fund will receive any interest or dividends paid on the loaned
securities; and (4) the aggregate market value of securities loaned will not at
any time exceed one-third of the total assets of the fund. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
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HEDGING
An underlying fund may employ many of the investment techniques described
in this section not only for investment purposes, but also for hedging purposes.
For example, an underlying fund may purchase or sell put and call options on
common stocks to hedge against movements in individual common stock prices, or
purchase and sell stock index futures and related options to hedge against
marketwide movements in common stock prices. Although such hedging techniques
generally tend to minimize the risk of loss that is hedged against, they also
may limit commensurately the potential gain that might have resulted had the
hedging transaction not occurred. Also, the desired protection generally
resulting from hedging transactions may not always be achieved.
LEVERAGE THROUGH BORROWING
An underlying fund may borrow up to 25% of the value of its net assets on
an unsecured basis from banks to increase its holdings of portfolio securities.
Under the Investment Company Act of 1940, the fund is required to maintain
continuous asset coverage of 300% with respect to such borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if it
should decline to less than 300% due to market fluctuations or otherwise, even
if disadvantageous from an investment standpoint. Leveraging will exaggerate the
effect of any increase or decrease in value of portfolio securities on the
fund's net asset value, and money borrowed will be subject to interest costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the interest and option premiums
received from the securities purchased with borrowed funds.
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No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Funds or the Adviser. This
Prospectus does not constitute an offering in any state in which such offering
may not lawfully be made.
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TABLE OF CONTENTS PAGE
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Highlights........................... 2
Financial Highlights................. 4
Investment Objectives and Management
Techniques......................... 7
Investment Policies and
Restrictions....................... 13
Risk and Other Considerations........ 14
Performance.......................... 16
How to Purchase Shares............... 17
How to Redeem Shares................. 19
Systematic Withdrawal Plan........... 20
Investment Management................ 21
Dividends, Distributions and Taxes... 24
General Information.................. 26
Appendix A........................... 28
Appendix B........................... 29
</TABLE>
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Investors are advised to read
this Prospectus and to retain
it for future reference.
LOGO
MUTUAL FUNDS
-----------------------------------------------------------
PROSPECTUS
April 30, 1997
INCOME - EQUITY - LAUREATE FUNDS
<PAGE> 45
REGISTRATION INSTRUCTIONS
------------------------------------------------
] Please use this form to establish an account with a purchase by check or wire
into any Maxus Fund.
] If you need assistance, a Maxus Associate will be happy to help you. Call us
toll-free at 1-800-44-MAXUS.
] THIS FORM MAY NOT BE USED TO OPEN AN IRA OR OTHER RETIREMENT PLAN. Please call
us for the correct retirement account form.
- ---------------------------------------------------------------------
1 YOUR ACCOUNT REGISTRATION
Please provide the information exactly as you wish it to appear on your account
(e.g., as your name appears on your other financial/legal records, such as your
bank account, will, etc.). Corporations, trusts, or others in any representative
capacity may need to provide additional documents before registering an account.
Call Maxus (1-800-44-MAXUS) for details. PLEASE PROVIDE YOUR TAXPAYER
IDENTIFICATION NUMBER. FOR MOST INDIVIDUALS, THIS IS YOUR SOCIAL SECURITY
NUMBER.
- ---------------------------------------------------------------------
2 YOUR ADDRESS
Please provide your complete mailing address in addition to the other requested
information.
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3 YOUR INVESTMENT
Please be sure to indicate Maxus Fund(s) and amount.
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4 DIVIDENDS AND CAPITAL GAINS OPTIONS
Unless a box is checked, all distributions will be reinvested.
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5 PERSONAL FINANCIAL DATA
Please check all the appropriate boxes.
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6 SIGNATURES
Please sign exactly as your name is registered in Section 1.
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7 TELEPHONE PURCHASE AND REDEMPTION
AUTHORIZATION (TPR)
Enjoy the privilege of telephone purchase and redemption associated with your
Maxus Fund account(s) (minimum $1,000). Simply sign the agreement on the
application form in exactly the same manner that you signed under Section 6.
- ---------------------------------------------------------------------
8 WIRING AND SYSTEMATIC WITHDRAWAL
OPTIONS
For the convenience of redeeming shares by wire, please complete this section
now. Proceeds will be wired to your bank account upon your request.
WIRE REDEMPTION -- a voided, preprinted check from your checking account or a
preprinted deposit slip from your checking or savings account must be attached.
SYSTEMATIC WITHDRAWAL PLAN (SWP) -- transfers money from your Maxus account to
your bank account on a monthly, bi-monthly, quarterly, semi-annual, or annual
basis. (Minimum $15,000 initial investment and $100/withdrawal.).
To arrange for this service, please specify the type of service and attach a
voided, preprinted check from your checking account or a preprinted deposit slip
from your checking or savings account. Please note that passbook savings
accounts are not eligible for this service, and that your bank must be a member
of the Automated Clearing House (ACH) network. NOTE: PLEASE SPECIFY THE AMOUNT
OF WITHDRAWAL ($100 MINIMUM) AND THE TRANSACTION DATE.
If you are establishing options that use more than one bank account, please
indicate the appropriate option on your voided check or deposit slip.
<PAGE> 46
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MAIL TO: LOGO Account Number_________________________
Maxus Mutual Funds Broker/Dealer__________________________
Maxus Information Systems Inc. Agent__________________________________
28601 Chagrin Boulevard, Suite 500 Number_________________________________
Cleveland, Ohio 44122
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</TABLE>
ACCOUNT REGISTRATION FORM
---------------------------------------------
BEFORE YOU COMPLETE THE ACCOUNT REGISTRATION FORM, PLEASE BE SURE TO READ THE
INSTRUCTIONS ON THE REVERSE SIDE.
PLEASE DO NOT USE THIS APPLICATION TO OPEN AN IRA OR OTHER RETIREMENT PLAN
PLEASE PRINT, PREFERABLY WITH BLACK INK.
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1 YOUR ACCOUNT REGISTRATION (CHECK ONE BOX)
[ ] INDIVIDUAL OR JOINT ACCOUNT
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<S> <C>
--------------------------------------------------------------------
Owner's Name: First, Initial (if used), Last
---------------------------- -------------------------------------
Owner's Date of Birth Owner's Social Security Number
--------------------------------------------------------------------
Joint Owner's name: First, Initial (if used), Last
---------------------------- -------------------------------------
Joint Owner's Date of Birth Joint Owner's Social Security Number
</TABLE>
JOINT ACCOUNTS WILL BE REGISTERED JOINT TENANTS WITH THE RIGHT OF SURVIVORSHIP
UNLESS OTHERWISE SPECIFIED.
[ ] GIFT OR TRANSFER TO MINOR
<TABLE>
<S> <C>
--------------------------------------------------------------------
Custodian's Name (One Name Only): First, Initial (if used), Last
--------------------------------------------------------------------
Minor's Name (One Name Only): First, Initial (if used), Last
under the ____________________ Uniform Gifts/Transfers to Minors
Act.
(State of Minor's Residence)
-------------------------------------
Minor's Social Security Number
</TABLE>
[ ] TRUST
<TABLE>
<S> <C>
--------------------------------------------------------------------
Trustee(s) Name
--------------------------------------------------------------------
Name of Trust Agreement
--------------------------------------------------------------------
Beneficiary's Name
---------------------------- -------------------------------------
Date of Trust Document
Taxpayer ID Number (must be completed for registration)
</TABLE>
[ ] CORPORATION, PARTNERSHIP, OR OTHER ENTITY
[ ] Corporation [ ] Partnership [ ] Other
<TABLE>
<S> <C>
--------------------------------------------------------------------
Name of Corporation or Other Entity
---------------------------- -------------------------------------
Taxpayer ID Number Officer or Authorized Individual
</TABLE>
- ---------------------------------------------------------------------
2 YOUR ADDRESS
Do you have other Maxus accounts? [ ] Yes [ ] No
<TABLE>
<S> <C>
--------------------------------------------------------------------
Street or P.O. Box Number
--------------------------------------------------------------------
City State Zip
Citizenship: [ ] U.S. [ ] Resident Alien
[ ] Non-Resident Alien
(Country)
( )___________________________ ( )______________________________
Daytime Telephone Evening Telephone
--------------------------------------------------------------------
Employer Name, City and State
--------------------------------------------------------------------
Occupation
</TABLE>
- ---------------------------------------------------------------------
3 YOUR INVESTMENT
Enclosed is my check made payable to the applicable Fund:
<TABLE>
<S> <C>
[ ] Maxus Income Fund $___________________
[ ] Maxus Equity Fund $___________________
[ ] Maxus Laureate Fund $___________________
</TABLE>
FOR HELP WITH THIS APPLICATION, OR FOR MORE INFORMATION, CALL US TOLL FREE:
1-800-44-MAXUS (800-446-2987)
- ---------------------------------------------------------------------
4 DIVIDENDS AND CAPITAL GAINS OPTIONS
All income dividends and capital gains distributions will be reinvested in
<TABLE>
<S> <C>
shares unless noted below:
[ ] Pay all income in cash
[ ] Pay all capital gains in cash
</TABLE>
- ---------------------------------------------------------------------
5 PERSONAL FINANCIAL DATA
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES RISK TOLERANCE
[ ] Aggressive Growth [ ] Aggressive
[ ] Long-Term Growth [ ] Moderate
[ ] Income [ ] Conservative
ANNUAL INCOME NET WORTH
[ ] Less than $25,000 [ ] Less than $50,000
[ ] $25,000 - $75,000 [ ] $50,000 - $150,000
[ ] Greater than $75,000 [ ] Greater than $150,000
</TABLE>
- ---------------------------------------------------------------------
6 SIGNATURE (SIGN BELOW)
By signing this form, I/we certify that:
- - I/We have full authority and legal capacity to purchase Fund shares.
- - I/We have received a current prospectus of the Fund and agree to be bound by
its terms.
- - Under penalty of perjury, I/we also certify that--
a. The number shown on this form is my correct taxpayer ID number.
b. I am not subject to backup withholding because (i) I have not been notified
by the Internal Revenue Service that I am subject to backup withholding as
a result of a failure to report all interest or dividends, or (ii) the IRS
has notified me that I am no longer subject to backup withholding. (CROSS
OUT ITEM "B" IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO
BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR
TAX RETURN.)
PLEASE SIGN BELOW: (IF JOINT ACCOUNT, BOTH OWNERS MUST SIGN.)
- ---------------------------------------------------------------------
- ------------------------------------------------------ -------------------
SIGNATURE (OWNER, TRUSTEE, CUSTODIAN, ETC.) DATE
- ------------------------------------------------------ -------------------
SIGNATURE (JOINT OWNER, CO-TRUSTEE) DATE
- ---------------------------------------------------------------------
7 TELEPHONE PURCHASE AND REDEMPTION
AUTHORIZATION (TPR)
The undersigned hereby authorizes Maxus Information Systems Inc. ("Transfer
Agent"), acting as the undersigned's attorney in fact, to accept telephone
purchases and redemptions from the undersigned (or any of the undersigned if
more than one owner) at the net asset value per share next determined after the
receipt of the call. The minimum telephone purchase or redemption is $1,000. The
maximum purchase for any Fund is three (3) times the net asset value of unissued
shares of that Fund held in the undersigned's account on the day preceding such
telephone purchase for which payment has been received. THE UNDERSIGNED
UNDERSTANDS AND AGREES THAT PAYMENT FOR THE TELEPHONE PURCHASE MUST BE RECEIVED
BY THE TRANSFER AGENT WITHIN THREE (3) BUSINESS DAYS. IF SUCH PAYMENT IS NOT
RECEIVED, THE TRANSFER AGENT WILL REDEEM THE TELEPHONE PURCHASE SHARES, AND IF
SUCH REDEMPTION RESULTS IN A LOSS TO THE FUND, REDEEM SUFFICIENT ADDITIONAL
SHARES FROM THE UNDERSIGNED'S ACCOUNT TO REIMBURSE THE FUND FOR SUCH LOSS.
A check for the net amount of a REDEMPTION will be made payable to owner(s)
as designated on the registration of account and mailed to the owner's address
as designated on the registration, within five (5) business days.
The undersigned hereby authorizes the Transfer Agent to honor any telephone
purchase or redemption believed by the Transfer Agent to be genuine and agrees
to be bound by the Transfer Agent's records of such instructions and the
undersigned and his assigns and successors release the Transfer Agent and the
Fund and their respective officers and employees from any and all liability for
so acting.
It is understood that this Authorization Form will continue in effect until
the Transfer Agent receives written notice of its cancellation from the
undersigned. This service may be discontinued without notice. A current
prospectus of the Fund should be read in advance of purchase hereunder.
- ---------------------------------------------------------------------
- ------------------------------------------------------ ----------------------
INVESTOR'S SIGNATURE ACCOUNT NUMBER
- ------------------------------------------------------ ----------------------
CO-INVESTOR'S SIGNATURE AUTHORIZATION NUMBER
NOTE: A bill is not received for telephone purchases. Confirmation Statements
are sent by the Transfer Agent after payments have been received for purchases
or instructions received for redemptions. Shareholders should send payments
promptly with a payment stub from a prior Confirmation Statement or enclose an
explanatory note. Four digit authorization numbers must be selected for your
protection and presented to the Transfer Agent for each telephone redemption.
<PAGE> 47
- --------------------------------------------------------------------------------
8 WIRING AND SYSTEMATIC WITHDRAWAL OPTIONS
To arrange for the wire redemption service, please provide your bank's telephone
number below and attach a voided, preprinted check from your checking account or
a preprinted deposit slip from your checking or savings account. A canceled
check or deposit receipt WILL NOT be accepted. Passbook savings accounts ARE NOT
eligible for these services.
( ) ______________________________
Bank Telephone Number
PLEASE INDICATE THE TYPE OF SERVICE YOU WISH TO ESTABLISH:
[ ] WIRE REDEMPTION
[ ] SYSTEMATIC WITHDRAWAL PLAN (SWP) (MINIMUM $100/WITHDRAWAL): Please transfer
$ ____________ from my Maxus account to my bank account.
Please indicate the payment frequency (e.g., monthly, every other month,
quarterly, semi-annually)______________________________________________.
MINIMUM INITIAL INVESTMENT FOR SYSTEMATIC WITHDRAWAL PLAN $15,000
- --------------------------------------------------------------------------------
9 APPOINTMENT OF INVESTMENT ADVISOR
1._________________________I (we) have provided full investment discretion to
(Customer(s) Signature)
________________________________________________ ("Customer's Adviser") by
a separate agreement and Customer's Adviser has full authority to purchase
and redeem shares of the Fund.
2.________________________Upon receipt of management fee bills from Customer's
(Customer(s) Signature)
Adviser, the Fund is authorized and directed to redeem enough of my (our)
shares in the Fund to pay such fees and to send the proceeds directly to
Customer's Adviser.
LOGO
F U N D S
ACCOUNT REGISTRATION FORM
<PAGE> 48
STATEMENT OF ADDITIONAL INFORMATION April 30, 1997
MAXUS EQUITY FUND
28601 Chagrin Boulevard
Cleveland, Ohio 44122
(216) 292-3434
Maxus Equity Fund (the "Fund") is a diversified, open-end management
investment company with an investment objective of obtaining the highest total
return, a combination of capital appreciation and income, consistent with
reasonable risk. This Statement of Additional Information relating to the Fund
is not a prospectus and should be read in conjunction with the Fund's
prospectus. A copy of the Fund's prospectus can be obtained from the Fund's
distributor, Maxus Securities Corp, 28601 Chagrin Boulevard, Cleveland, Ohio
44122, telephone number (216) 292-3434. The date of the prospectus to which this
Statement relates is April 30, 1997.
The date of this Statement of Additional Information is April 30, 1997.
<PAGE> 49
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
CAPTION PAGE LOCATION IN PROSPECTUS
- ------- ---- ----------------------
<S> <C> <C>
General Information and History 3 General Information
Investment Objective and Policies 3 Investment Objectives
and Management Techniques
Management of the Fund 6 Investment Management
Ownership of Shares 8 Not Applicable
Investment Advisory and Other Services 8 Investment Management
Brokerage Allocation 10 Execution of Portfolio
Transactions
Capital Stock and Other Securities 12 General Information
Purchase, Redemption and Pricing of 12 How to Purchase Shares/
Securities Being Offered How to Redeem Shares
Determination of Net Asset Value 12 How to Purchase Shares
Tax Status 13 Dividends, Distributions
and Federal Taxes
Distributor 14 Investment Management
Financial Statements 15 Financial Highlights
</TABLE>
-2-
<PAGE> 50
GENERAL INFORMATION AND HISTORY
Maxus Equity Fund (the "Fund") is a diversified, open-end management
investment company that seeks the highest total return, a combination of income
and capital appreciation, consistent with reasonable risk. The Fund was
organized as a Trust under the laws of the State of Ohio pursuant to a
Declaration of Trust dated July 12, 1989.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are briefly described
in the Fund's prospectus under the heading "Investment Objective And Management
Techniques." The Fund has also adopted the following fundamental investment
policies and restrictions in addition to the fundamental investment policies
described in the Prospectus under the subheading "Investment Restrictions."
These policies cannot be changed without approval by the holders of a majority
of the outstanding voting securities of the Fund. As defined in the Investment
Company Act of 1940 (the "Act"), the "vote of a majority of the outstanding
voting securities" of the Fund means the lesser of the vote of (a) 67% of the
shares of the Fund at a meeting where more than 50% of the outstanding shares
are present in person or by proxy or (b) more than 50% of the outstanding shares
of the Fund. The Fund may not:
1. Invest more than 10% of the Fund's total assets in
securities of issuers which with their predecessors have a record
of less than three years continuous operation.
2. Invest more than 10% of the Fund's net assets in securities
for which market quotations are not readily available and
repurchase agreements maturing in more than seven days.
3. Lend money or securities, provided that the making of
interest-bearing demand deposits with banks and the purchase of
debt securities in accordance with its objective and policies are
not prohibited and the Fund may lend its portfolio securities as
described in the Prospectus under the caption "Investment
Objectives and Management Techniques -- Lending of Portfolio
Securities."
4. Borrow money except for temporary or emergency purposes
from banks (but not for the purpose of purchase of investments)
and then only in an amount not to exceed 5% of the Fund's net
assets; or pledge the Fund's securities or receivables or transfer
or assign or otherwise encumber them in an amount exceeding the
amount of the borrowings secured thereby.
5. Make short sales of securities, or purchase any securities
on margin except to obtain such short-term credits as may be
necessary for the clearance of transactions.
-3-
<PAGE> 51
6. Write (sell) put or call options, combinations thereof or
similar options; nor may it purchase put or call options if more
than 5% of the Fund's net assets would be invested in premiums on
put and call options, combinations thereof or similar options.
7. Purchase or retain the securities of any issuer if any of
the officers or Trustees of the Fund or its investment adviser
owns beneficially more than 1/2 of 1% of the securities of such
issuer and together own more than 5% of the securities of such
issuer.
8. Invest for the purpose of exercising control or management
of another issuer.
9. Invest in commodities or commodity futures contracts or in
real estate, although it may invest in securities which are
secured by real estate and securities of issuers which invest or
deal in real estate.
10. Invest in interests in oil, gas or other mineral
exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
11. Underwrite securities issued by others except to the
extent the Fund may be deemed to be an underwriter, under the
federal securities laws, in connection with the disposition of
portfolio securities.
12. Issue senior securities as defined in the Act.
13. Purchase securities subject to restrictions on disposition
under the Securities Act of 1933.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation.
The Fund's portfolio turnover rate (see "INVESTMENT OBJECTIVES AND
MANAGEMENT TECHNIQUES" in the Prospectus) for the fiscal years ended December
31, 1996 and 1995 was 111% and 173%, respectively.
The Fund will not invest more than 5% of its assets in repurchase
agreements. A repurchase agreement is an instrument under which the Fund
acquires ownership of an obligation but the seller agrees, at the time of sale,
to repurchase the obligation at a mutually agreed-upon time and price. The
resale price is in excess of the purchase price and reflects an agreed-upon
market rate unrelated to the interest rate on the purchased security. The Fund
will make payments for repurchase agreements only upon physical delivery or
evidence of book entry transfer to the account of the custodian or bank acting
as agent. In the event of bankruptcy or other default of a seller of a
repurchase agreement, the Fund could experience both delays in liquidating the
underlying securities and losses including: (a) possible decline in the value of
the underlying securities during the period while the Fund seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of access to
income during this period; and (c) expenses of enforcing its rights.
-4-
<PAGE> 52
The Fund may invest up to 5% of its assets in put and call options
which trade on securities exchanges. Such options may be on individual
securities or on indexes. A put option gives the Fund, in return for the payment
of a premium, the right to sell the underlying security or index to another
party at a fixed price. If the market value of the underlying security or index
declines, the value of the put option would be expected to rise. If the market
value of the underlying security or index remains the same or rises, however,
the put option could lose all of its value, resulting in a loss to the Fund.
A call option gives the Fund, in return for the payment of a premium,
the right to purchase the underlying security or index from another party at a
fixed price. If the market value of the underlying security or index rises, the
value of the call option would also be expected to rise. If the market value of
the underlying security or index remains the same or declines, however, the call
option could lose all of its value, resulting in a loss to the Fund.
Risk Factors
- ------------
As stated in the Prospectus, in selecting its corporate debt securities
the Adviser intends to invest principally in securities rated BBB or better by
Standard & Poor's Corporation Rating Service, but may invest up to 5% of its
portfolio in securities rated as low as BB, B, CCC or CC or unrated securities
when these investments are believed by the Adviser to be sound. Securities rated
BBB or lower by Standard & Poor's are usually considered lower-rated securities.
The Prospectus sets forth certain risk factors which should be noted in
connection with the Adviser's discretion to invest in lower-rated securities.
Set forth below is an expanded discussion of such risk factors. It also should
be noted that the sections of the Prospectus captioned "Investment Objectives
and Management Techniques" and "Risk Factors and Other Considerations", as well
as Appendix B to the Prospectus, contain a discussion of additional risk factors
which should be considered in connection with an investment in the Fund.
In general, when interest rates decline, the value of fixed income
securities can be expected to rise. Conversely, when interest rates rise, the
value of fixed income securities can be expected to decline. Prices of
lower-rated securities (also sometimes referred to as "high-yield" securities)
have been found to be less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic changes or individual
corporate developments. In addition, periods of economic uncertainty and changes
can be expected to result in increased volatility of market prices of
lower-rated securities.
The values of lower-rated securities tend to reflect individual
corporate developments to a greater extent than higher-rated securities, which
react primarily to fluctuations in the general level of interest rates. Further,
securities rated BB or lower by Standard & Poor's are below investment grade and
are considered, on balance, to be predominately speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation and will generally involve more credit risk than securities in the
higher rating categories. In some cases, such securities are subordinated to the
prior payment of senior indebtedness, thus potentially limiting the Fund's
ability to receive payments when senior securities are in default or to recover
full principal. Many issuers of lower-rated corporate debt securities are
substantially leveraged, which may impair their ability to meet debt service
obligations. Also, during an economic downturn or substantial period of rising
-5-
<PAGE> 53
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain additional
financing. Upon any default, the Fund may incur additional expenses to the
extent it is required to seek recovery of the payment of principal or interest
on the relevant portfolio holding.
In addition, lower-rated securities may tend to trade in markets that
are relatively less liquid than the market for higher rated securities. It is
thus possible that the Fund's ability to dispose of such securities, when the
Adviser deems it desirable to do so, may be limited. The lack of a liquid
secondary market may also have an adverse impact on market price and the Fund's
ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. In addition, a less liquid
market may interfere with the ability of the Fund to accurately value
lower-rated securities and, consequently, value the Fund's assets. Furthermore,
adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of lower-rated securities,
especially in a thinly-traded market.
The market for "high yield" fixed-income securities has not weathered a
major economic recession and it is unknown what effect a recession might have on
such securities. It is likely, however, that any such recession could severely
disrupt the market for such securities and may have an adverse impact on the
value of such securities. In addition, it is likely that any such economic
downturn would adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon.
MANAGEMENT OF THE FUND
The following table provides biographical information with respect to
each current Trustee and officer of the Fund. Each Trustee who is or may be
deemed to be an "interested person" of the Fund, as defined in the Act, is
indicated by an asterisk. Each Trustee of the Fund is also a Trustee of Maxus
Income Fund and Maxus Laureate Fund, two other open-end management investment
companies.
<TABLE>
<CAPTION>
Position Held Principal Occupation(s)
Name and Address With the Fund During Past 5 Years
- ---------------- ------------- ---------------------
<S> <C> <C>
Richard A. Barone* Chairman, President of Maxus Securities
28601 Chagrin Boulevard Treasurer Corp (broker-dealer), Maxus
Cleveland, Ohio 44122 and Trustee Asset Management Inc. (invest-
ment adviser) and Resource
Management Inc. (financial
services)
</TABLE>
-6-
<PAGE> 54
<TABLE>
<CAPTION>
<S> <C> <C>
N. Lee Dietrich Trustee Retired; formerly Vice
7090 Morley Road President, Ohio Convenient
Painesville, Ohio 44077 Food Mart, Inc.
Sanford Fox, D.D.S. Trustee Endodontist
6789 Ridge Road, #301
Parma, Ohio 44129
Burton D. Morgan Trustee Chairman, Morgan Bank (bank);
Park Place President, Basic Search, Inc.
10 West Streetsboro Road (venture capital); Chairman,
Hudson, OH 44236 Multi-Color Corporation (printing);
Chairman, Morgan Funshares, Inc.
(mutual fund)
Murlan J. Murphy Trustee Independent Investor
Michael A. Rossi, C.P.A. Trustee Certified Public Accountant
6559 Wilson Mills Road
Highland Heights, Ohio 44143
Robert A. Schenkelberg, Jr.* Trustee President, Entrust Inc.
One Commerce Park (financial planning)
Suite 300
23200 Chagrin Boulevard
Beachwood, Ohio 44122
James Onorato Vice President Vice President, Resource
28601 Chagrin Boulevard Management Inc.
Cleveland, Ohio 44122
Robert W. Curtin Secretary Senior Vice President and Secretary,
28601 Chagrin Boulevard Maxus Securities Corp; formerly
Cleveland, OH 44122 Executive Vice President,
Roulston & Company, Inc.
</TABLE>
No officer, director or employee of Maxus Asset Management Inc. ("MAM"
or the "Investment Adviser") or of any parent or subsidiary receives any
compensation from the Fund for serving as an officer or Trustee of the Fund.
During the fiscal year ended December 31, 1996, the Fund paid a fee of $100 for
each Board or shareholders meeting attended by each Trustee who is not an
interested person of MAM. Such fees, which were the only compensation or
benefits paid to Trustees, are summarized in the following table:
-7-
<PAGE> 55
COMPENSATION TABLE
------------------
<TABLE>
<CAPTION>
Name of Trustee* Aggregate Compensation Total Compensation From All
from the Fund Maxus Funds Paid to Trustees
<S> <C> <C>
Richard A. Barone $ 0 $ 0
N. Lee Dietrich $300 $ 900
Sanford A. Fox, D.D.S. $400 $1,200
Burton D. Morgan $400 $1,200
Michael A. Rossi $300 $ 900
Robert A. Schenkelberg, Jr. $ 0 $ 0
<FN>
*Murlan J. Murphy was not a Trustee during 1996 and therefore received no
compensation.
</TABLE>
OWNERSHIP OF SHARES
As of February 27, 1997, no person was known by the Fund to be the
beneficial owner of more than 5% of the outstanding shares of the Fund.
As of February 27, 1997, all officers and Trustees as a group
beneficially owned 76,129 shares, constituting 3.0% of the outstanding shares of
the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Maxus Asset Management, Inc. ("MAM"), the Fund's investment adviser, is
a wholly-owned subsidiary of RMI. MAM is registered as an investment adviser
under the Investment Advisers Act of 1940. MAM has not been sponsored,
recommended or approved, nor have its abilities or qualifications been passed
upon, by the Securities and Exchange Commission or any other governmental
agency.
As compensation for MAM's services rendered to the Fund, the Fund pays
a fee, computed and paid monthly, at an annual rate of 1% of the average value
of the first $150,000,000 of the Fund's daily net assets and .75% of average
daily net assets in excess of $150,000,000. This fee is higher than that paid by
most other investment companies. For the fiscal years ended December 31, 1996,
1995 and 1994 , the Adviser received management fees from the Fund in the
amounts of $365,389, $250,329, and $150,281, respectively.
MAM acts as investment adviser to the Fund pursuant to an Investment
Advisory and Administration Agreement dated August 16, 1989. Subject to the
supervision and direction of the Fund's Trustees, MAM, as investment adviser,
manages the Fund's portfolio in accordance with the
-8-
<PAGE> 56
stated policies of the Fund. MAM makes investment decisions for the Fund and
places the purchase and sale orders for portfolio transactions. In addition, MAM
furnishes office facilities and clerical and administrative services, and pays
the salaries of all officers and employees who are employed by both it and the
Fund and, subject to the direction of the Fund's Board of Trustees, is
responsible for the overall management of the business affairs of the Fund,
including the provision of personnel for recordkeeping, the preparation of
governmental reports and responding to shareholder communications.
Other expenses are borne by the Fund and include brokerage fees and
commissions, fees of Trustees not affiliated with MAM, expenses of registration
of the Fund and of the shares of the Fund with the Securities and Exchange
Commission (the "SEC") and the various states, charges of the custodian,
dividend and transfer agent, outside auditing and legal expenses, liability
insurance premiums on property or personnel (including officers and trustees),
maintenance of business trust existence, any taxes payable by the Fund, interest
payments relating to Fund borrowings, costs of preparing, printing and mailing
registration statements, prospectuses, periodic reports and other documents
furnished to shareholders and regulatory authorities, reimbursement to RMI for
organizational expenses, including costs of printing share certificates,
portfolio pricing services and Fund meetings, and costs incurred pursuant to the
Fund's Plan of Distribution described below.
The Investment Advisory and Administration Agreement is subject to
annual approval by (i) the Trustees of the Fund or (ii) vote of a majority (as
defined in the Act) of the outstanding voting securities of the Fund, provided
that in either event the continuance is also approved by a majority of the
Trustees who are not "interested persons" (as defined in the Act) of the Fund or
MAM by vote cast in person at a meeting called for the purpose of voting on such
approval. The Board of Trustees, including a majority of the Trustees who are
not "interested persons," most recently voted to continue the Investment
Advisory and Administration Agreement at a meeting held on February 14, 1996.
The Investment Advisory and Administration Agreement is terminable without
penalty, on not less than 60 days' notice, by the Board of Trustees of the Fund
or by vote of the holders of a majority of the Fund's shares or, upon not less
than 90 days' notice, by MAM. The Investment Advisory and Administration
Agreement will terminate automatically in the event of its assignment.
The Fund has a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act, pursuant to which the Fund may expend up to .50% of its average
net assets annually for the costs of activities intended to result in the sale
of Fund shares. See "Investment Management --Distribution Plan" in the Fund's
Prospectus. The Fund's Distribution Agreement with Maxus Securities Corp ("MSC")
(i) provides for payment by the Fund to MSC of a distribution fee of .25% for
distributing and marketing Fund shares and (ii) authorizes MSC to make payments
for activities and expenditures permitted by the Plan and provides that the Fund
shall reimburse MSC for such expenditures in addition to payment of the
distribution fee. During the fiscal year ended December 31, 1996, $182,598 (.50%
of average net assets) was expended by the Fund pursuant to the Plan.
The Trustees believe that the Plan has benefitted and will continue to
benefit the Fund and its shareholders. Among these benefits are: (1) reductions
in the per share expenses of the Fund as a result of increased assets in the
Fund; (2) reductions in the cost of executing portfolio transactions and the
possible ability of the Investment Adviser in some cases to negotiate lower
purchase prices for securities, due to the potentially larger blocks of
securities which may be traded by the Fund as
-9-
<PAGE> 57
its net assets increase in size; and (3) a more predictable flow of cash which
may provide investment flexibility in seeking the Fund's investment objective
and may better enable the Fund to meet redemption demands without liquidating
portfolio securities at inopportune times.
The Fund has entered into an Administration Agreement with Maxus
Information Systems Inc. ("MIS"), 28601 Chagrin Boulevard, Cleveland, Ohio
44122, pursuant to which MIS has agreed to act as the Fund's Transfer,
Redemption and Dividend Disbursing Agent and as Administrator of Plans of the
Fund. As such, MIS maintains the Fund's official record of shareholders and is
responsible for crediting dividends to shareholders' accounts. In consideration
of such services, the Fund has agreed to pay MIS an annual fee, paid monthly,
equal to $6.75 per shareholder account (with a monthly minimum of $775) plus
out-of-pocket expenses. In addition, the Fund has entered into an Accounting
Services Agreement with MIS, pursuant to which MIS has agreed to provide
portfolio pricing and related services, for the payment of an annual fee of
$17,400 for the first $25,000,000 in net assets, $8,500 for the next $25,000,000
in net assets and $4,750 for each additional $25,000,000 in net assets, plus
out-of-pocket expenses. Under the Administration Agreement and the Accounting
Services Agreement the Fund paid MIS $46,093 during the fiscal year ended
December 31, 1996. MIS is a wholly-owned subsidiary of RMI, the parent company
of the Investment Adviser.
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45201, serves as
the Fund's custodian. As custodian, Star Bank maintains custody of the Fund's
cash and portfolio securities.
McCurdy & Associates C.P.A.'s, Inc., independent certified public
accountants located at 27955 Clemens Road, Westlake, Ohio 44145, has been
selected as auditors for the Fund. In such capacity, McCurdy & Associates
C.P.A.'s, Inc. periodically reviews the accounting and financial records of the
Fund and examines its financial statements.
BROKERAGE ALLOCATION
Decisions to buy and sell securities for the Fund are made by MAM
subject to the overall supervision and review by the Fund's Trustees. Portfolio
security transactions for the Fund are effected by or under the supervision of
MAM.
Transactions on stock exchanges involve the payment of negotiated
brokerage commissions. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price of those
securities includes an undisclosed commission or markup. The cost of securities
purchased from underwriters includes an underwriting commission or concession,
and the prices at which securities are purchased from and sold to dealers
include a dealer's markup or markdown.
In executing portfolio transactions and selecting brokers and dealers,
it is the Fund's policy to seek the best overall terms available. The Investment
Advisory and Administration Agreement between the Fund and MAM provides that, in
assessing the best overall terms available for any transaction, MAM shall
consider the factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker
-10-
<PAGE> 58
or dealer, and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In addition, the Investment Advisory and
Administration Agreement authorizes MAM, in selecting brokers or dealers to
execute a particular transaction, and, in evaluating the best overall terms
available, to consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which MAM exercises investment discretion.
The Fund's Board of Trustees periodically reviews the commissions paid
by the Fund to determine if the commissions paid over representative periods of
time were reasonable in relation to the benefits inuring to the Fund. It is
possible that certain of the services received will primarily benefit one or
more other accounts for which investment discretion is exercised. Conversely,
the Fund may be the primary beneficiary of services received as a result of
portfolio transactions effected for other accounts. MAM's fee under the
Investment Advisory and Administration Agreement is not reduced by reason of
MAM's receiving such brokerage and research services.
Under the Act, a mutual fund may not pay brokerage commissions to an
affiliate which exceed the usual and customary broker's commissions. A
commission is deemed as not exceeding the usual and customary broker's
commission if (i) the commission is reasonable and fair compared to the
commission received by other brokers in connection with comparable transactions
involving similar securities being purchased or sold during a comparable period
of time and (ii) the Board of Trustees, including a majority of the Trustees who
are not interested persons of the mutual fund, have adopted procedures
reasonably designed to provide that such commission is consistent with the
above-described standard, review these procedures annually for their continuing
appropriateness and determine quarterly that all commissions paid during the
preceding quarter were in compliance with these procedures.
The Fund's Board of Trustees has determined that any portfolio
transaction for the Fund, including in certain instances over-the-counter
purchases and sales, may be effected through MSC if, in MAM's judgment, the use
of MSC is likely to result in price and execution at least as favorable as those
of other qualified brokers, and if, in the transaction, MSC charges the Fund a
commission rate consistent with those charged by MSC to comparable unaffiliated
customers in similar transactions. Each quarter, the Trustees review a report
comparing the commissions charged the Fund by MSC to the commissions which would
have been charged for the same transactions by a national discount brokerage
firm and a full-service brokerage firm at its institutional rates. Based upon
such review, the Board of Trustees determines on a quarterly basis whether the
commissions charged by MSC meet the requirements of the Act. MSC will not
participate in commissions from brokerage given by the Fund to other brokers or
dealers. Over-the-counter purchases and sales are transacted through brokers and
dealers with principal market makers. The Fund will in no event effect principal
transactions with MSC in over-the-counter securities in which MSC makes a
market. MSC is a wholly owned subsidiary of RMI, a corporation controlled by
Richard A. Barone, Chairman of the Fund. Richard A. Barone is, therefore,
considered to control MSC.
Under the rules adopted by the SEC, MSC may not execute transactions
for the Fund on the floor of any national securities exchange, but may effect
transactions for the Fund by transmitting orders for execution, providing for
clearance and settlement, and arranging for the performance of those functions
by members of the exchange not associated with MSC. MSC will be required to pay
-11-
<PAGE> 59
fees charged by those persons performing the floor brokerage elements out of the
brokerage compensation it receives from the Fund. The Fund has been advised by
MSC that on most transactions, the floor brokerage generally constitutes from
10% to 40% of the total commissions paid.
Even though investment decisions for the Fund are made independently
from those of the other accounts managed by MAM, investments of the kind made by
the Fund may also be made by those other accounts. When the Fund and one or more
accounts managed by MAM are prepared to invest in, or desire to dispose of, the
same security, available investments or opportunities for sales will be
allocated in a manner believed by MAM to be equitable. In some cases, this
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained for or disposed of by the Fund.
During the years ended December 31, 1996, 1995 and 1994 , the aggregate
amount of brokerage commissions paid by the Fund were $293,236, $233,530 and
$173,301 , respectively, substantially all of which was paid to MSC.
CAPITAL STOCK AND OTHER SECURITIES
See "General Information" in the Fund's prospectus.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
The information pertaining to the purchase and redemption of the Fund's
shares appearing in the Prospectus under the captions "How To Purchase Shares"
and "How To Redeem Shares" is hereby incorporated by reference.
DETERMINATION OF NET ASSET VALUE
The information pertaining to the determination of net asset value
appearing in the Prospectus under the caption "How to Purchase Shares -- Price
of Shares" is hereby incorporated by reference.
TAX STATUS
The Fund's policy is to distribute at least annually, prior to the end
of the calendar year, dividends sufficient to satisfy excise tax requirements of
the Internal Revenue Service and to distribute annually, after the end of the
calendar year, any remaining net investment income and net realized capital
gains. Unless a shareholder elects otherwise, dividends and capital gains
distributions are paid in additional shares that are credited to the
shareholder's account with the Fund.
The Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code").
Qualification as a regulated investment company
-12-
<PAGE> 60
will result in the Fund's paying no taxes on net income and net realized capital
gains distributed to shareholders. To qualify for this treatment, the Fund must
derive at least 90% of its gross income from dividends, interest, and gains from
the sale or other disposition of securities; derive less than 30% of its gross
income from the sale or other disposition of securities held for fewer than
three months; invest in securities within certain limits; and distribute to its
shareholders at least 90% of its net taxable income earned in any year.
Dividends derived from the Fund's net investment income, whether
received in additional shares or in cash, will be taxable to shareholders as
ordinary income, but a portion may be eligible for the 70% dividends received
deduction available to corporations.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to a shareholder in the year in which
received (except as set forth in the next paragraph), whether those
distributions are accepted in cash or in additional shares, and regardless of
the length of time the shareholder has held his Fund shares. These
distributions, like dividends, may also be subject to state and local taxes.
In addition to any dividends paid within the calendar year, dividends
and capital gain distributions declared in December and paid the following
January will be taxable in the year they are declared.
Investors should consider carefully the tax implications of purchasing
shares of the Fund just prior to the record date of a dividend or capital gains
distribution. Although a dividend or distribution paid shortly after shares have
been purchased is in effect a return of investment, it is subject to taxation as
described above, and a sale at a loss of shares held not more than six months
will be long-term capital loss to the extent of any long-term capital gain
dividends received within that period.
Shareholders must furnish the Fund with their correct Taxpayer
Identification Number to avoid being subject to a 20% federal backup withholding
tax on dividend distributions. Investors also must certify on the Account
Application that the stated Tax Identification Number is correct and that the
Investor is not subject to 20% backup withholding for previous under-reporting
to the IRS. Shareholders not subject to income taxation do not have to pay an
income tax on the dividend or capital gain distributions.
Shareholders shall upon demand disclose to the Fund in writing such
information with respect to direct and indirect ownership of Shares of the Fund
as the Trustees of the Fund deem necessary to comply with the provisions of the
Internal Revenue Code, or to comply with the requirements of any other taxing
authority.
Statements as to the tax status of each shareholder's dividends and
distributions will be mailed annually by the Fund's transfer agent. Shareholders
are urged to consult their own tax advisers regarding specific questions as to
Federal, state or local taxes.
-13-
<PAGE> 61
DISTRIBUTOR
Shares of the Fund are offered on a best-efforts basis by Maxus
Securities Corp, a registered NASD broker-dealer. MSC is a wholly-owned
subsidiary of RMI, which is controlled by Richard A. Barone, Chairman of the
Fund.
Pursuant to the Distribution Agreement between the Fund and MSC, MSC
has agreed to hold itself available to receive orders, satisfactory to MSC, for
the purchase of the Fund's shares, to accept such orders on behalf of the Fund
as of the time of receipt of such orders and to transmit such orders to the
Fund's transfer agent as promptly as practicable. MSC receives an annual
distribution fee of .25% of average net assets for distributing and marketing
the shares of the Fund. The Distribution Agreement also authorizes MSC to make
payments for activities and expenses permitted by the Fund's Distribution Plan,
including the payment of so-called "service fees" (subject to an annual limit on
service fees of .25% of average net assets), and provides that the Fund shall
reimburse MSC for such expenditures in addition to payment of the distribution
fee. Certain employees of MSC may receive compensation under the Distribution
Plan. See "Investment Advisory and Other Services."
The Distribution Agreement provides that MSC shall arrange to sell the
Fund's Shares as agent for the Fund and may enter into agreements with
registered broker-dealers as it may select to arrange for the sale of such
shares. MSC is not obligated to sell any certain number of shares.
-14-
<PAGE> 62
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares/Principal Cost Market % of
Amount Value Assets
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY
<S> <C> <C> <C> <C>
36,500 Adage* 139,483 123,187
20,000 Airtouch Communications* 509,950 505,000
16,000 Bel Fuse* 167,709 226,000
10,000 Bellsouth 265,450 403,750
20,000 Silicon Valley Group* 342,161 402,500
30,000 Tech Sym* 841,863 892,500
10,000 Telephone & Data Systems 361,112 362,500
$150,000 Unisys 8.25%, Conv Debs 8-1-00 141,975 144,000
32,300 VLSI Technology* 413,801 771,163
------- -------
3,183,504 3,830,600 8.58%
INFRASTRUCTURE
15,000 Ameron 514,513 774,375
10,000 Corrpro* 72,975 95,000
123,800 Foster L. B.* 478,456 464,250
106,200 ICF Kaiser Intl* 250,610 199,125
--------- ---------
1,316,554 1,532,750 3.95%
MACHINERY & EQUIPMENT
11,000 Duriron 292,824 298,375
15,000 Ingersoll Rand 581,525 667,500
14,000 Penn Engr & Mfg 225,315 287,000
26,000 Raymond 465,312 451,750
30,000 Snap on Tools 861,200 1,068,750
--------- ---------
2,426,176 2,773,375 7.15%
MEDICAL SERVICES & SUPPLIES
20,000 Becton Dickinson 359,650 867,500
10,000 ICN Pharmaceuticals 195,600 196,250
40,000 Mariner Health Group* 303,837 335,000
20,000 Maxxim Medical* 270,651 250,000
13,500 Mckesson 578,557 754,312
18,000 Roberts Pharmaceutical* 203,065 202,500
49,000 Transitional Hospitals 408,402 471,625
--------- ---------
2,319,762 3,077,187 7.94%
REAL ESTATE
100,000 Crown American Realty 795,500 750,000
35,000 MGI Properties 480,392 770,000
25,000 Public Storage Inc 8.25% Conv Pfd 652,478 1,303,125
10,000 St Joe Corp 579,110 650,000
--------- ---------
2,507,480 3,473,125 8.96%
</TABLE>
The accompanying notes are an integral
part of the financial statements.
15
<PAGE> 63
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares/Principal Cost Market % of
Amount Value Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ENTERTAINMENT
40,000 Bob Evans Farms 510,408 540,000
$1,200,000 Time Warner Conv 0.00%, 6-22-13 563,095 516,000
--------- --------
1,073,503 1,056,000 2.73%
CONSUMER PRODUCTS
87,900 Jan Bell Marketing* 195,204 181,295
20,000 Limited 358,700 367,500
160,000 Michael Anthony Jewelers* 457,350 490,000
30,000 OfficeMax 320,475 322,500
200,000 Royal Appliance* 610,810 1,375,000
38,400 Universal Electronics* 277,535 211,200
--------- ---------
2,220,074 2,947,495 7.60%
BASIC MATERIALS
100,000 Hanson PLC 651,313 675,000
10,000 Valero Energy Conv Pfd 506,960 577,500
--------- ---------
1,158,273 1,252,500 3.23%
ENVIRONMENT
20,000 Dionex* 319,560 700,000
20,000 International Technology Conv pfd 335,700 337,500
65,000 Weston Roy F* 268,194 227,500
------- ---------
923,454 1,265,000 3.26%
FINANCIAL SERVICES
5,000 Advanta Corp Cl-A 226,950 213,750
20,000 American Express 848,750 1,130,000
15,000 Cincinnati Financial 858,925 973,125
20,000 First Chicago NBD 525,381 1,075,000
30,000 Lehman Brothers Holdings 651,175 941,250
10,000 Salomon 361,300 471,250
--------- ---------
3,472,481 4,804,375 12.39%
UTILITIES
50,000 Niagara Mohawk Power* 373,625 493,750 2.58%
INDUSTRIAL PRODUCTS
35,000 Algoma Steel* 114,712 182,109
15,500 Armco 3.625 Conv Pfd 766,862 670,375
25,000 Birmingham Steel 394,150 475,000
10,000 Dow Chemical 797,475 783,750
23,300 Lamson & Sessions 170,033 168,925
12,000 Millenium Chemicals* 236,470 213,000
10,000 NCH 558,350 602,500
25,000 Timken 909,850 1,143,750
--------- ---------
3,947,902 4,239,409 10.94%
</TABLE>
The accompanying notes are an integral
part of the financial statements.
16
<PAGE> 64
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares/Principal Cost Market % of
Amount Value Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
METALS
50,000 Royal Oak Mines 166,944 162,500 0.42%
PRODUCT DISTRIBUTION
26,000 Bell Industries 498,878 555,750
20,600 Dynamics Corp of America* 584,886 581,950
270,000 Petrie Stores Liquidating Trust* 884,968 742,500
37,000 Pioneer Std Electronics 401,565 485,625
--------- ---------
2,370,297 2,365,825 6.10%
CLOSED END EQUITY FUNDS
10,000 Pilgrim Amer Bank & Thrift 122,975 157,500 0.41%
CLOSED END GLOBAL EQUITY FUNDS
40,000 Emerging Markets Telecommunications 682,162 610,000
55,000 Emerging Markets Infrastructure 582,712 598,125
64,200 First Australia 576,568 557,737
50,000 New Germany 604,125 668,750
--------- ---------
2,445,567 2,434,612 6.28%
U.S. GOVERNMENT SECURITIES
3,000,000 US Treasury 6.00%, 8-31-97 3,003,733 3,007,500 7.76%
Total Investments 33,032,304 38,873,503 100.28%
Other Assets Less Liabilities (108,800) -0.28%
Net Assets - Equivalent to $16.00 per
share on 2,422,749 shares of capital
stock outstanding 38,764,703 100.00%
==========
<FN>
* Non-Income Producing.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
17
<PAGE> 65
MAXUS EQUITY FUND
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investment Securities at Market Value
(Identified Cost - $33,032,304) $38,873,503
Cash 244,652
Receivables:
Investment Securities Sold 317,539
Dividends and Interest 350,527
-----------
Total Assets $39,786,221
Liabilities
Payables:
Investment Securities Purchased $585,267
Shareholder Distributions 361,864
Accrued Expenses 74,387
---------
Total Liabilities 1,021,518
Net Assets $38,764,703
Net Assets Consist of:
Capital Paid In 32,952,007
Undistributed Net Investment Income 181
Accumulated Realized Gain (Loss) on Investments - Net (28,684)
Unrealized Appreciation in Value 5,841,199
of Investments Based on Identified Cost - Net
-----------
Net Assets, for 2,422,749 Shares Outstanding $38,764,703
Net Asset Value and Redemption Price
Per Share ($38,764,703/2,422,749 shares) $16.00
Offering Price Per Share $16.00
STATEMENT OF OPERATIONS
DECEMBER 31, 1996
Investment Income:
Dividends $835,629
Interest 478,127
----------
Total Investment Income $1,313,756
Expenses
Registration Expense 19,992
Trustee Fees (Note 3) 2,100
Accounting and Pricing 46,093
Custody 15,589
Distribution Plan Expenses 182,598
Audit 7,504
Legal 19,749
Management Fees (Note 2) 365,389
Printing & Other Miscellaneous 34,169
-------
Total Expenses 693,183
Net Investment Income 620,573
Realized and Unrealized Gain (Loss) on Investments
Realized Gain (Loss) on Investments 2,307,789
Capital Gains from Mutual Funds 129,958
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments 3,419,289
----------
Net Realized and Unrealized Gain (Loss) on Investments $5,857,036
Net Increase (Decrease) in Net Assets from Operations $6,477,609
==========
</TABLE>
The accompanying notes are an integral
part of the financial statements
18
<PAGE> 66
MAXUS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
01/01/96 01/01/95
to to
12/31/96 12/31/95
From Operations:
Net Investment Income $620,573 $505,329
Net Realized Gain (Loss) on Investments 2,437,747 2,096,323
Net Unrealized Appreciation (Depreciation) 3,419,289 1,976,461
--------- ---------
Increase (Decrease) in Net Assets from Operations 6,477,609 4,578,113
From Distributions to Shareholders
Net Investment Income (620,392) (509,760)
Net Realized Gain (Loss)from Security Transactions (2,436,220) (2,058,315)
----------- -----------
Net Increase (Decrease) from Distributions (3,056,612) (2,568,075)
From Capital Share Transactions:
Proceeds From Sale of 817,160 Shares 12,447,924 13,187,714
Net Asset Value of 165,922 Shares Issued
on Reinvestment of Dividends 2,637,296 2,211,574
Cost of 727,924 Shares Redeemed (11,328,765) (2,839,852)
------------ -----------
3,756,455 12,559,436
Net Increase in Net Assets 7,177,452 14,569,474
Net Assets at Beginning of Period
(including undistributed net investment
income of $0 and $385, respectively) 31,587,251 17,017,777
Net Assets at End of Period
(including undistributed net investment
income of $181 and $0, respectively) $38,764,703 $31,587,251
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock
outstanding throughout the period:
<TABLE>
<CAPTION>
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
to to to to to
12/31/96 12/31/95 02/31/94 12/31/93 12/31/92*
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value-
Beginning of Period $14.57 $12.95 $13.60 $12.29 $11.41
Net Investment Income 0.27 0.30 0.25 0.13 0.14
Net Gains or Losses on Securities
(realized and unrealized) 2.50 2.60 (0.17) 3.13 1.91
---- ---- ------ ---- ----
Total from Investment Operations 2.77 2.90 0.08 3.26 2.05
Dividends
(from net investment income) (0.27) (0.27) (0.22) (0.12) (0.14)
Distributions
(from capital gains) (1.07) (1.01) (0.51) (1.83) (1.03)
Return of Capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total Distributions (1.34) (1.28) (0.73) (1.95) (1.17)
Net Asset Value -
End of Period $16.00 $14.57 $12.95 $13.60 $12.29
Total Return 19.13% 22.43% 0.59% 24.51% 13.56%
Ratios/Supplemental Data
Net Assets -
End of Period (Thousands) 38,765 31,576 17,018 11,343 5,962
Ratio of Expenses to Average
Net Assets 1.90% 1.96% 2.00% 2.61% 2.89%
Ratio of Net Income to Average
Net Assets 1.71% 2.01% 1.82% 0.91% 0.80%
Portfolio Turnover Rate 111% 173% 184% 175% 187%
<FN>
*Weighted Average Used
</TABLE>
The accompanying notes are an integral
part of the financial statements
19
<PAGE> 67
MAXUS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 July
12, 1989. 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 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 liabilites and disclosure of
contingent assets and liabilites 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.
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 $365,389 in investment advisory fees during the twelve months ended
December 31, 1996. Maxus Securities, who served as the national distributor of
the Fund's shares, was reimbursed $182,598 for distribution expenses. Maxus
Information Systems received fees totaling $46,093 for services rendered to the
Fund for the twelve months ended December 31, 1996. 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 $293,236 for the twelve months ending
December 31, 1996.
20
<PAGE> 68
MAXUS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
At December 31, 1996, Maxus Securities Corp owned 20,000 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 $100 per meeting.
4.) Capital Stock and Distribution
At December 31, 1996 an indefinite number of shares of capital stock ($.10 par
value) were authorized, and paid-in capital amounted to $32,952,007.
Transactions in common stock were as follows:
<TABLE>
<CAPTION>
<S> <C>
Shares sold 817,160
Shares issued to shareholders in reinvestment of dividends 165,922
-------
983,082
Shares redeemed (727,924)
Net Increase 255,158
Shares Outstanding:
Beginning of Period 2,167,591
---------
End of Period 2,422,749
=========
</TABLE>
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 twelve months ended December 31, 1996, purchases and sales of
investment securities other than U.S. Government obligations and short-term
investments aggregated $48,668,674 and $40,418,015 respectively. Purchases and
sales of U.S. Government obligations aggregated $7,980,312 and $12,963,593
respectively.
6.) Financial Instruments Disclosure
There are no reportable financialinstruments which have any off-balance sheet
risk as of December 31, 1996.
7.) Security Transactions
For Federal income tax purposes, the cost of investments owned at December 31,
1996 was the same as identified cost. At December 31, 1996, the composition of
unrealized appreciation (the excess of value over tax cost) and depreciation
(the excess of tax cost over value) was as follows:
<TABLE>
<CAPTION>
Appreciation (Depreciation) Net Appreciation (Depreciation)
<S> <C> <C>
6,609,961 (768,762) 5,841,199
</TABLE>
21
<PAGE> 69
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Directors:
Maxus Equity Fund
We have audited the accompanying statement of assets and liabilities of Maxus
Equity Fund, including the schedule of portfolio investments, as of December 31,
1996, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and financial highlights for each of the five years in the period then
ended. 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 investments and cash held by
the custodian as of December 31, 1996, by correspondence with the custodian and
brokers. An audit also included 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 Maxus
Equity Fund as of December 31, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
January 15, 1997
22
<PAGE> 70
C-1
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements:
The Financial Statements filed as part of this
Registration Statement are as follows:
Statement of Assets and Liabilities as of December
31, 1996.
Statement of Operations for the year ended December
31, 1996.
Statement of Changes in Net Assets for the year ended
December 31, 1996.
Supplementary Information for the years ended
December 31, 1996, 1995, 1994, 1993 and 1992.
Schedule of Investments at December 31, 1996.
(b) Exhibits:
Exhibit
Number Description
------ -----------
1 Registrant's Declaration of Trust dated
July 12, 1989. (1)
2 Registrant's By-Laws. (1)
3 None.
4 Specimen Certificate for Registrant's
Shares of Beneficial Interest. (2)
5 Investment Advisory and Administration
Agreement. (1)
6(a) Distribution Agreement. (3)
6(b) Amendment to Distribution Agreement
dated March 21, 1993.(4)
7 None.
C-1
<PAGE> 71
8 Custody Agreement.
9(a) Administration Agreement. (1)
9(b) Accounting Services Agreement. (1)
9(c) Amendment to Administration Agreement
and Accounting Services Agreement. (5)
10 Opinion and consent. (2)
11 Consent of Independent Auditors.
12 None.
13 Subscription Agreement between the Fund
and Resource Management Inc. (1)
14 Individual Retirement Account Documents.
(3)
15(a) Plan of Distribution Pursuant to Rule
12b-1. (3)
15(b) Amendment to Plan of Distribution dated
March 21, 1993.(4)
27 Financial Data Schedule
(1) Incorporated by reference to the corresponding exhibit to Registration
Statement No. 33-30003.
(2) Incorporated by reference to the corresponding exhibit to Pre-Effective
Amendment No. 1 to Registration Statement No. 33-30003.
(3) Incorporated by reference to the corresponding exhibit to Pre-Effective
Amendment No. 2 to Registration Statement No. 33-30003.
(4) Incorporated by reference to the corresponding exhibit to
Post-Effective Amendment No. 5 to Registration Statement No. 33-30003.
(5) Incorporated by reference to the corresponding exhibit to
Post-Effective Amendment No. 4 to Registration Statement No. 33-30003.
Item 25. Persons Controlled by or Under Common Control with Registrant.
-------------------------------------------------------------
The Fund, together with Maxus Income Fund and Maxus Laureate Fund (two
other investment companies), may be deemed to be under common control
on the basis of
C-2
<PAGE> 72
the fact that all officers and Trustees of the Fund are also officers
and Trustees of the other two funds.
In addition, the Fund and Resource Management Inc. (together with its
subsidiaries, MAM, MSC and MIS) may be deemed to be under common
control of Richard A. Barone, the Chairman of the Fund and the
President and controlling shareholder of Resource Management Inc.
Item 26. Number of Holders of Securities.
-------------------------------
As of February 27, 1997 there were 1,158 record holders of the Fund's
Shares of Beneficial Interest.
Item 29. Principal Underwriters.
----------------------
(a) Maxus Securities Corp, the distributor for the Fund, also
distributes securities for Maxus Income Fund and Maxus Laureate Fund.
(b) The following information is provided with respect to each
director and officer of Maxus Securities Corp:
<TABLE>
<CAPTION>
Name and Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
------------------ ------------------- -------------------
<S> <C> <C> <C>
Richard A. Barone President, Treasurer Chairman, Treasurer
28601 Chagrin Boulevard and Director and a Trustee
Cleveland, Ohio 44122
Robert W. Curtin Senior Vice President Secretary
28601 Chagrin Boulevard and Secretary
Cleveland, Ohio 44122
</TABLE>
Item 30. Location of Accounts and Records.
--------------------------------
All accounts, books and documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and Rules 31a-1 through 31a-3 thereunder are maintained at the
office of the Registrant and the Transfer Agent at 28601 Chagrin
Boulevard, Suite 500, Cleveland, Ohio 44122, except that all records
relating to the activities of the Fund's Custodian are maintained at
the office of the Custodian, Star Bank, N.A., 425 Walnut Street,
Cincinnati, Ohio 45201.
Items 27, 28 and 31 of Part C of the Registration Statement filed with the
Commission on Form N-1A are hereby incorporated by reference in this
Post-Effective Amendment.
C-3
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cleveland, State of Ohio, on the 30th day of
April, 1997. The Registrant hereby certifies that this Amendment meets all the
requirements for effectiveness under Rule 485(b) of the Securities and Exchange
Commission.
MAXUS EQUITY FUND
By: /s/ Richard A. Barone
------------------------------
Richard A. Barone, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Richard A. Barone Chairman, Treasurer April 30, 1997
and Trustee (Principal
Executive Officer,
Financial Officer and
Accounting Officer)
N. Lee Dietrich Trustee April 30, 1997
Sanford Fox, D.D.S. Trustee April 30, 1997
Burton D. Morgan Trustee April 30, 1997
Michael A. Rossi Trustee April 30, 1997
Robert A. Schenkelberg, Jr. Trustee April 30, 1997
</TABLE>
Richard A. Barone, by signing his name below, signs this Registration
Statement on behalf of the above-named Trustees of the Registrant pursuant to
Powers of Attorney filed with the Securities and Exchange Commission.
Dated: April 30, 1997 /s/ Richard A. Barone
-------------------------------------
RICHARD A. BARONE, Attorney-in-Fact
<PAGE> 74
POWER OF ATTORNEY
-----------------
The undersigned Trustee of Maxus Equity Fund (the "Fund"), an Ohio
business trust, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, a
Post-Effective Amendment to its registration statement on Form N-1A, hereby
constitutes and appoints RICHARD A. BARONE with full power of substitution and
resubstitution, as attorney to sign for the undersigned and in my name, place
and stead, as Trustee of said Fund, said Amendment and any and all amendments
and exhibits thereto, and any and all applications and documents to be filed
with the Securities and Exchange Commission pertaining to such Amendment, with
full power and authority to do and perform any and all acts and things
whatsoever requisite, necessary or advisable to be done in the premises, as
fully and for all intents and purposes as the undersigned could do if personally
present, hereby approving the acts of said attorney, and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
February, 1997.
/s/ Sanford A. Fox, D.D.S.
----------------------------------
SANFORD A. FOX
<PAGE> 75
POWER OF ATTORNEY
-----------------
The undersigned Trustee of Maxus Equity Fund (the "Fund"), an Ohio
business trust, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, a
Post-Effective Amendment to its registration statement on Form N-1A, hereby
constitutes and appoints RICHARD A. BARONE with full power of substitution and
resubstitution, as attorney to sign for the undersigned and in my name, place
and stead, as Trustee of said Fund, said Amendment and any and all amendments
and exhibits thereto, and any and all applications and documents to be filed
with the Securities and Exchange Commission pertaining to such Amendment, with
full power and authority to do and perform any and all acts and things
whatsoever requisite, necessary or advisable to be done in the premises, as
fully and for all intents and purposes as the undersigned could do if personally
present, hereby approving the acts of said attorney, and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
February, 1997.
/s/ Burton D. Morgan
----------------------------
BURTON D. MORGAN
<PAGE> 76
POWER OF ATTORNEY
-----------------
The undersigned Trustee of Maxus Equity Fund (the "Fund"), an Ohio
business trust, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, a
Post-Effective Amendment to its registration statement on Form N-1A, hereby
constitutes and appoints RICHARD A. BARONE with full power of substitution and
resubstitution, as attorney to sign for the undersigned and in my name, place
and stead, as Trustee of said Fund, said Amendment and any and all amendments
and exhibits thereto, and any and all applications and documents to be filed
with the Securities and Exchange Commission pertaining to such Amendment, with
full power and authority to do and perform any and all acts and things
whatsoever requisite, necessary or advisable to be done in the premises, as
fully and for all intents and purposes as the undersigned could do if personally
present, hereby approving the acts of said attorney, and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
February, 1997.
/s/ Robert A. Schenkelberg, Jr.
---------------------------------
ROBERT A. SCHENKELBERG, JR.
<PAGE> 77
POWER OF ATTORNEY
-----------------
The undersigned Trustee of Maxus Equity Fund (the "Fund"), an Ohio
business trust, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, a
Post-Effective Amendment to its registration statement on Form N-1A, hereby
constitutes and appoints RICHARD A. BARONE with full power of substitution and
resubstitution, as attorney to sign for the undersigned and in my name, place
and stead, as Trustee of said Fund, said Amendment and any and all amendments
and exhibits thereto, and any and all applications and documents to be filed
with the Securities and Exchange Commission pertaining to such Amendment, with
full power and authority to do and perform any and all acts and things
whatsoever requisite, necessary or advisable to be done in the premises, as
fully and for all intents and purposes as the undersigned could do if personally
present, hereby approving the acts of said attorney, and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
February, 1997.
/s/ N. Lee Dietrich
------------------------------
N. LEE DIETRICH
<PAGE> 78
POWER OF ATTORNEY
-----------------
The undersigned Trustee of Maxus Equity Fund (the "Fund"), an Ohio
business trust, which anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, a
Post-Effective Amendment to its registration statement on Form N-1A, hereby
constitutes and appoints RICHARD A. BARONE with full power of substitution and
resubstitution, as attorney to sign for the undersigned and in my name, place
and stead, as Trustee of said Fund, said Amendment and any and all amendments
and exhibits thereto, and any and all applications and documents to be filed
with the Securities and Exchange Commission pertaining to such Amendment, with
full power and authority to do and perform any and all acts and things
whatsoever requisite, necessary or advisable to be done in the premises, as
fully and for all intents and purposes as the undersigned could do if personally
present, hereby approving the acts of said attorney, and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
February, 1997.
/s/ Michael A. Rossi
-------------------------------
MICHAEL A. ROSSI
<PAGE> 1
Exhibit 8
CUSTODY AGREEMENT
This agreement (the "Agreement") is entered into as of the 30th day of
August, 1995, by and between Maxus Equity Fund, (the "Fund"), an open-end
diversified investment business trust organized under the laws of Ohio and
having its office at Maxus Investment Group, 28601 Chagrin Blvd., Suite 500,
Cleveland, Ohio 44122 and Star Bank, National Association, (the "Custodian"), a
national banking association having its principal office at 425 Walnut Street,
Cincinnati, Ohio, 45202.
WHEREAS, the Fund and the Custodian desire to enter into this Agreement
to provide for the custody and safekeeping of the assets of the Fund as required
by the Investment Company Act of 1940, as amended (the "Act").
WHEREAS, the Fund hereby appoints the Custodian as custodian of all the
Fund's Securities and moneys at any time owned by the Fund during the term of
this Agreement (the "Fund Assets").
WHEREAS, the Custodian hereby accepts such appointment as Custodian and
agrees to perform the duties thereof as hereinafter set forth.
THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
-----------
The following words and phrases, when used in this Agreement, unless
the context otherwise requires, shall have the following meanings:
AUTHORIZED PERSON - the Chairman, President, Secretary, Treasurer,
Controller, or Senior Vice President of the Fund, or any other person, whether
or not any such person is an officer or employee of the Fund, duly authorized by
the Board of Trustees of the Fund to give Oral Instructions and
<PAGE> 2
Written Instructions on behalf of the Fund, and listed in the Certificate
annexed hereto as Appendix A, or such other Certificate as may be received by
the Custodian from time to time.
BOOK-ENTRY SYSTEM - the Federal Reserve Bank book-entry system for
United States Treasury securities and federal agency securities.
DEPOSITORY - The Depository Trust Company ("DTC"), a limited purpose
trust company, its successor(s) and its nominee(s) or any other person or
clearing agency.
DIVIDEND AND TRANSFER AGENT - the dividend and transfer agent
appointed, from time to time, pursuant to a written agreement between the
dividend and transfer agent and the Fund.
FOREIGN SECURITIES - a) securities issued and sold primarily outside of
the United States by a foreign government, a national of any foreign country, or
a trust or other organization incorporated or organized under the laws of any
foreign country OR; b) securities issued or guaranteed by the government of the
United States, by any state, by any political subdivision or agency thereof, or
by any entity organized under the laws of the United States or of any state
thereof, which have been issued and sold primarily outside of the United States.
MONEY MARKET SECURITY - debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including certificates
of deposit, bankers' acceptances, repurchase agreements and reverse repurchase
agreements with respect to the same), and time deposits of domestic banks and
thrift institutions whose deposits are insured by the Federal Deposit Insurance
Corporation, and short-term corporate obligations where the purchase and sale of
such securities normally require settlement in federal funds or their equivalent
on the same day as such purchase and sale, all of which mature in not more than
thirteen (13) months.
2
<PAGE> 3
OFFICERS - the Chairman, President, Secretary, Treasurer, Controller,
and Senior Vice President of the Fund listed in the Certificate annexed hereto
as Appendix A, or such other Certificate as may be received by the Custodian
from time to time.
ORAL INSTRUCTIONS - verbal instructions received by the Custodian from
an Authorized Person (or from a person that the Custodian reasonably believes in
good faith to be an Authorized Person) and confirmed by Written Instructions in
such a manner that such Written Instructions are received by the Custodian on
the business day immediately following receipt of such Oral Instructions.
PROSPECTUS - the Fund's then currently effective prospectus and
Statement of Additional Information, as filed with and declared effective from
time to time by the Securities and Exchange Commission.
SECURITY OR SECURITIES - Money Market Securities, common stock,
preferred stock, options, financial futures, bonds, notes, debentures, corporate
debt securities, mortgages, and any certificates, receipts, warrants, or other
instruments representing rights to receive, purchase, or subscribe for the same
or evidencing or representing any other rights or interest therein, or any
property or assets.
WRITTEN INSTRUCTIONS - communication received in writing by the
Custodian from an Authorized Person.
ARTICLE II
DOCUMENTS AND NOTICES TO BE FURNISHED BY THE FUND
-------------------------------------------------
A. The following documents, including any amendments thereto, will be
provided contemporaneously with the execution of the Agreement, to the Custodian
by the Fund:
1. A copy of the Declaration of Trust of the Fund
certified by the Secretary.
2. A copy of the By-Laws of the Fund certified by the
Secretary.
3
<PAGE> 4
3. A copy of the resolution of the Board of Trustees of
the Fund appointing the Custodian, certified by the
Secretary.
4. A copy of the then current Prospectus.
5. A Certificate of the President and Secretary of the
Fund setting forth the names and signatures of the
Officers of the Fund.
B. The Fund agrees to notify the Custodian in writing of the
appointment of any Dividend and Transfer Agent.
ARTICLE III
RECEIPT OF FUND ASSETS
----------------------
A. During the term of this Agreement, the Fund will deliver or cause to
be delivered to the Custodian all moneys constituting Fund Assets. The Custodian
shall be entitled to reverse any deposits made on the Fund's behalf where such
deposits have been entered and moneys are not finally collected within 30 days
of the making of such entry.
B. During the term of this Agreement, the Fund will deliver or cause to
be delivered to the Custodian all Securities constituting Fund Assets. The
Custodian will not have any duties or responsibilities with respect to such
Securities until actually received by the Custodian.
C. As and when received, the Custodian shall deposit to the account(s)
of the Fund any and all payments for shares of the Fund issued or sold from time
to time as they are received from the Fund's distributor or Dividend and
Transfer Agent or from the Fund itself.
4
<PAGE> 5
ARTICLE IV
DISBURSEMENT OF FUND ASSETS
---------------------------
A. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Fund's Secretary, either (i)
setting forth the date of the declaration of any dividend or distribution in
respect of shares of the Fund, the date of payment thereof, the record date as
of which Fund shareholders entitled to payment shall be determined, the amount
payable per share to Fund shareholders of record as of that date, and the total
amount to be paid by the Dividend and Transfer Agent on the payment date, OR
(ii) authorizing the declaration of dividends and distributions in respect of
shares of the Fund on a daily basis and authorizing the Custodian to rely on a
Certificate setting forth the date of the Declaration of any such dividend or
distribution, the date of payment thereof, the record date as of which Fund
shareholders entitled to payment shall be determined, the amount payable per
share to Fund shareholders of record as of that date, and the total amount to be
paid by the Dividend and Transfer Agent on the payment date.
On the payment date specified in such resolution or Certificate
described above, the Custodian shall segregate such amounts from moneys held for
the account of the Fund so that they are available for such payment.
B. Upon receipt of Written Instructions so directing it, the Custodian
shall segregate amounts necessary for the payment of redemption proceeds to be
made by the Dividend and Transfer Agent from moneys held for the account of the
Fund so that they are available for such payment.
C. Upon receipt of a Certificate directing payment and setting forth
the name and address of the person to whom such payment is to be made, the
amount of such payment, and the purpose for which payment is to be made, the
Custodian shall disburse amounts as and when directed from
5
<PAGE> 6
the Fund Assets. The Custodian is authorized to rely on such directions and
shall be under no obligation to inquire as to the propriety of such directions.
D. Upon receipt of a Certificate directing payment, the Custodian shall
disburse moneys from the Fund Assets in payment of the Custodian's fees and
expenses as provided in Article VIII hereof.
ARTICLE V
CUSTODY OF FUND ASSETS
----------------------
A. The Custodian shall open and maintain a separate bank account or
accounts in the United States in the name of the Fund, subject only to draft or
order by the Custodian acting pursuant to the terms of this Agreement, and shall
hold all cash received by it from or for the account of the Fund, other than
cash maintained by the Fund in a bank account established and used by the Fund
in accordance with Rule 17f-3 under the Act. Moneys held by the Custodian on
behalf of the Fund may be deposited by the Custodian to its credit as Custodian
in the banking department of the Custodian. Such moneys shall be deposited by
the Custodian in its capacity as such, and shall be withdrawable by the
Custodian only in such capacity.
B. The Custodian shall hold all Securities delivered to it in
safekeeping in a separate account or accounts maintained at Star Bank, N.A. for
the benefit of the Fund.
C. All Securities held which are issued or issuable only in bearer
form, shall be held by the Custodian in that form; all other Securities held for
the Fund shall be registered in the name of the Custodian or its nominee. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold, or deliver in proper form for transfer, any Securities that
it may hold for the account of the Fund and which may, from time to time, be
registered in the name of the Fund.
6
<PAGE> 7
D. With respect to all Securities held for the Fund , the Custodian
shall on a timely basis (concerning items 1 and 2 below, as defined in the
Custodian's Standards of Service Guide, as amended from time to time, annexed
hereto as Appendix C):
1.) Collect all income due and payable with respect to
such Securities;
2.) Present for payment and collect amounts payable upon
all Securities which may mature or be called,
redeemed, or retired, or otherwise become payable;
3.) Surrender Securities in temporary form for definitive
Securities; and
4.) Execute, as agent, any necessary declarations or
certificates of ownership under the Federal income
tax laws or the laws or regulations of any other
taxing authority, including any foreign taxing
authority, now or hereafter in effect.
E. Upon receipt of a Certificate AND NOT OTHERWISE, the Custodian
shall:
1.) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby the
authority of the Fund as beneficial owner of any
Securities may be exercised;
2.) Deliver any Securities in exchange for other
Securities or cash issued or paid in connection with
the liquidation, reorganization, refinancing, merger,
consolidation, or recapitalization of any trust, or
the exercise of any conversion privilege;
3.) Deliver any Securities to any protective committee,
reorganization committee, or other person in
connection with the reorganization, refinancing,
merger, consolidation, recapitalization, or sale of
assets of any trust, and receive and hold under the
terms of this Agreement such certificates of deposit,
interim
7
<PAGE> 8
receipts or other instruments or documents as may be
issued to it to evidence such delivery;
4.) Make such transfers or exchanges of the assets of the
Fund and take such other steps as shall be stated in
said Certificate to be for the purpose of
effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Fund; and
5.) Deliver any Securities held for the Fund to the
depository agent for tender or other similar offers.
F. The Custodian shall promptly deliver to the Fund all notices, proxy
material and executed but unvoted proxies pertaining to shareholder meetings of
Securities held by the Fund. The Custodian shall not vote or authorize the
voting of any Securities or give any consent, waiver or approval with respect
thereto unless so directed by a Certificate or Written Instruction.
G. The Custodian shall promptly deliver to the Fund all information
received by the Custodian and pertaining to Securities held by the Fund with
respect to tender or exchange offers, calls for redemption or purchase, or
expiration of rights.
ARTICLE VI
PURCHASE AND SALE OF SECURITIES
-------------------------------
A. Promptly after each purchase of Securities by the Fund, the Fund
shall deliver to the Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, Written Instructions, and (ii) with
respect to each purchase of Money Market Securities, Written Instructions or
Oral Instructions, specifying with respect to each such purchase the;
1.) name of the issuer and the title of the Securities,
8
<PAGE> 9
2.) principal amount purchased and accrued interest, if
any,
3.) date of purchase and settlement,
4.) purchase price per unit,
5.) total amount payable, and
6.) name of the person from whom, or the broker through
which, the purchase was made.
The Custodian shall, against receipt of Securities purchased by or for the Fund,
pay out of the Fund Assets, the total amount payable to the person from whom or
the broker through which the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Written Instructions or Oral
Instructions, as the case may be.
B. Promptly after each sale of Securities by the Fund, the Fund shall
deliver to the Custodian (i) with respect to each sale of Securities which are
not Money Market Securities, Written Instructions, and (ii) with respect to each
sale of Money Market Securities, Written Instructions or Oral Instructions,
specifying with respect to each such sale the;
1.) name of the issuer and the title of the Securities,
2.) principal amount sold and accrued interest, if any,
3.) date of sale and settlement,
4.) sale price per unit,
5.) total amount receivable, and
6.) name of the person to whom, or the broker through
which, the sale was made.
The Custodian shall deliver the Securities against receipt of the total amount
receivable, provided that the same conforms to the total amount receivable as
set forth in such Written Instructions or Oral Instructions, as the case may be.
9
<PAGE> 10
C. On contractual settlement date, the account of the Fund will be
charged for all purchased Securities settling on that day, regardless of whether
or not delivery is made. Likewise, on contractual settlement date, proceeds from
the sale of Securities settling that day will be credited to the account of the
Fund, irrespective of delivery.
D. Purchases and sales of Securities effected by the Custodian will be
made on a delivery versus payment basis. The Custodian may, in its sole
discretion, upon receipt of a Certificate, elect to settle a purchase or sale
transaction in some other manner, but only upon receipt of acceptable
indemnification from the Fund.
E. The Custodian shall, upon receipt of a Written Instructions so
directing it, establish and maintain a segregated account or accounts for and on
behalf of the Fund. Cash and/or Securities may be transferred into such account
or accounts for specific purposes, to-wit:
1.) in accordance with the provision of any agreement
among the Fund, the Custodian, and a broker-dealer
registered under the Securities and Exchange Act of
1934, as amended, and also a member of the National
Association of Securities Dealers (NASD) (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with
the rules of the Options Clearing Corporation and of
any registered national securities exchange, the
Commodity Futures Trading Commission, any registered
contract market, or any similar organization or
organizations requiring escrow or other similar
arrangements in connection with transactions by the
Fund;
2.) for purposes of segregating cash or government
securities in connection with options purchased,
sold, or written by the Fund or commodity futures
contracts or options thereon purchased or sold by the
Fund;
10
<PAGE> 11
3.) for the purpose of compliance by the fund with the
procedures required for reverse repurchase
agreements, firm commitment agreements, standby
commitment agreements, and short sales by Act Release
No. 10666, or any subsequent release or releases or
rule of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies; and
4.) for other corporate purposes, ONLY IN THE CASE OF
THIS CLAUSE 4 upon receipt of a copy of a resolution
of the Board of Trustees of the Fund, certified by
the Secretary of the Fund, setting forth the purposes
of such segregated account.
F. Except as otherwise may be agreed upon by the parties hereto, the
Custodian shall not be required to comply with any Written Instructions to
settle the purchase of any Securities on behalf of the Fund unless there is
sufficient cash in the account(s) at the time or to settle the sale of any
Securities from an account(s) unless such Securities are in deliverable form.
Notwithstanding the foregoing, if the purchase price of such Securities exceeds
the amount of cash in the account(s) at the time of such purchase, the Custodian
may, in its sole discretion, advance the amount of the difference in order to
settle the purchase of such Securities. The amount of any such advance shall be
deemed a loan from the Custodian to the Fund payable on demand and bearing
interest accruing from the date such loan is made up to but not including the
date such loan is repaid at a rate per annum customarily charged by the
Custodian on similar loans.
11
<PAGE> 12
ARTICLE VII
FUND INDEBTEDNESS
-----------------
In connection with any borrowings by the Fund, the Fund will cause to
be delivered to the Custodian by a bank or broker requiring Securities as
collateral for such borrowings (including the Custodian if the borrowing is from
the Custodian), a notice or undertaking in the form currently employed by such
bank or broker setting forth the amount of collateral. The Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to each such
borrowing: (a) the name of the bank or broker, (b) the amount and terms of the
borrowing, which may be set forth by incorporating by reference an attached
promissory note duly endorsed by the Fund, or a loan agreement, (c) the date,
and time if known, on which the loan is to be entered into, (d) the date on
which the loan becomes due and payable, (e) the total amount payable to the Fund
on the borrowing date, and (f) the description of the Securities securing the
loan, including the name of the issuer, the title and the number of shares or
the principal amount. The Custodian shall deliver on the borrowing date
specified in the Certificate the required collateral against the lender's
delivery of the total loan amount then payable, provided that the same conforms
to that which is described in the Certificate. The Custodian shall deliver, in
the manner directed by the Fund, such Securities as additional collateral, as
may be specified in a Certificate, to secure further any transaction described
in this Article VII. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it.
The Custodian may, at the option of the lender, keep such collateral in
its possession, subject to all rights therein given to the lender because of the
loan. The Custodian may require such
12
<PAGE> 13
reasonable conditions regarding such collateral and its dealings with
third-party lenders as it may deem appropriate.
ARTICLE VIII
CONCERNING THE CUSTODIAN
------------------------
A. Except as otherwise provided herein, the Custodian shall no be
liable for any loss or damage resulting from its action or omission to act or
otherwise, except for any such loss or damage arising out of its own gross
negligence or willful misconduct. The Fund shall defend, indemnify and hold
harmless the Custodian and its directors, officers, employees and agents with
respect to any loss, claim, liability or cost (including reasonable attorneys'
fees) arising or alleged to arise from or relating to the Fund's duties
hereunder or any other action or inaction of the Fund or its Trustees, officers,
employees or agents, except such as may arise from the negligent action,
omission, willful misconduct or breach of this Agreement by the Custodian. The
Custodian may, with respect to questions of law, apply for and obtain the advice
and opinion of counsel, at the expense of the Fund, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
the advice or opinion of counsel. The provisions under this paragraph shall
survive the termination of this Agreement.
B. Without limiting the generality of the foregoing, the Custodian,
acting in the capacity of Custodian hereunder, shall be under no obligation to
inquire into, and shall not be liable for:
1.) The validity of the issue of any Securities purchased by or
for the account of the Fund, the legality of the purchase
thereof, or the propriety of the amount paid therefor;
13
<PAGE> 14
2.) The legality of the sale of any Securities by or for the
account of the Fund, or the propriety of the amount for which
the same are sold;
3.) The legality of the issue or sale of any shares of the Fund,
or the sufficiency of the amount to be received therefor;
4.) The legality of the redemption of any shares of the Fund, or
the propriety of the amount to be paid therefor;
5.) The legality of the declaration or payment of any dividend by
the Fund in respect of shares of the Fund;
6.) The legality of any borrowing by the Fund on behalf of the
Fund, using Securities as collateral;
C. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from any Dividend and
Transfer Agent of the Fund nor to take any action to effect payment or
distribution by any Dividend and Transfer Agent of the Fund of any amount paid
by the Custodian to any Dividend and Transfer Agent of the Fund in accordance
with this Agreement.
D. Notwithstanding Section D of Article V, the Custodian shall not be
under any duty or obligation to take action to effect collection of any amount,
if the Securities upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless and until (i) it
shall be directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction (including prepayment thereof) of reimbursement of
its costs and expenses in connection with any such action.
E. The Fund acknowledges and hereby authorizes the Custodian to hold
Securities through its various agents described in Appendix B annexed hereto.
The Fund hereby represents that
14
<PAGE> 15
such authorization has been duly approved by the Board of Trustees of the Fund
as required by the Act. The Custodian acknowledges that although certain Fund
Assets are held by its agents, the Custodian remains primarily liable for the
safekeeping of the Fund Assets.
In addition, the Fund acknowledges that the Custodian may appoint one
or more financial institutions, as agent or agents or as sub-custodian or
sub-custodians, including, but not limited to, banking institutions located in
foreign countries, for the purpose of holding Securities and moneys at any time
owned by the Fund. The Custodian shall not be relieved of any obligation or
liability under this Agreement in connection with the appointment or activities
of such agents or sub-custodians. Any such agent or sub-custodian shall be
qualified to serve as such for assets of investment companies registered under
the Act. Upon request, the Custodian shall promptly forward to the Fund any
documents it receives from any agent or sub-custodian appointed hereunder which
may assist trustees of registered investment companies fulfill their
responsibilities under Rule 17f-5 of the Act.
F. The Custodian shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the account of
the Fund are such as properly may be held by the Fund under the provisions of
the Articles of Incorporation and the Fund's By-Laws.
G. The Custodian shall treat all records and other information relating
to the Fund and the Fund Assets as confidential and shall not disclose any such
records or information to any other person unless (i) the Fund shall have
consented thereto in writing or (ii) such disclosure is required by law.
H. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian such compensation as shall be determined pursuant to
Appendix D attached hereto, or as shall be determined pursuant to amendments to
such Appendix D. The Custodian shall be entitled to charge
15
<PAGE> 16
against any money held by it for the account of the Fund, the amount of any of
its fees, any loss, damage, liability or expense, including counsel fees. The
expenses which the Custodian may charge against the account of the Fund include,
but are not limited to, the expenses of agents or sub-custodians incurred in
settling transactions involving the purchase and sale of Securities of the Fund.
I. The Custodian shall be entitled to rely upon any Oral Instructions
and any Written Instructions. The Fund agrees to forward to the Custodian
Written Instructions confirming Oral Instructions in such a manner so that such
Written Instructions are received by the Custodian, whether by hand delivery,
facsimile or otherwise, on the same business day on which such Oral Instructions
were given. The Fund agrees that the failure of the Custodian to receive such
confirming instructions shall in no way affect the validity of the transactions
or enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund for acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions.
J. The Custodian will (i) set up and maintain proper books of account
and complete records of all transactions in the accounts maintained by the
Custodian hereunder in such manner as will meet the obligations of the Fund
under the Act, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder and those records are the property of the Fund, and (ii)
preserve for the periods prescribed by applicable Federal statute or regulation
all records required to be so preserved. All such books and records shall be the
property of the Fund, and shall be open to inspection and audit at reasonable
times and with prior notice by Officers and auditors employed by the Fund.
16
<PAGE> 17
K. The Custodian shall send to the Fund any report received on the
systems of internal accounting control of the Custodian, or its agents or
sub-custodians as the Fund may reasonably request from time to time.
L. The Custodian performs only the services of a custodian and shall
have no responsibility for the management, investment or reinvestment of the
Securities from time to time owned by the Fund. The Custodian is not a selling
agent for shares of the Fund and performance of its duties as custodian shall
not be deemed to be a recommendation to the Fund's depositors or others of
shares of the Fund as an investment.
M. The Custodian shall take all reasonable action, that the Fund may
from time to time request, to assist the Fund in obtaining favorable opinions
from the Fund's independent accountants, with respect to the Custodian's
activities hereunder, in connection with the preparation of the Fund's Form
N-1A, Form N-SAR, or other annual reports to the Securities and Exchange
Commission.
N. The Fund hereby pledges to and grants the Custodian a security
interest in any Fund Assets to secure the payment of any liabilities of the Fund
to the Custodian, whether acting in its capacity as Custodian or otherwise, or
on account of money borrowed from the Custodian. This pledge is in addition to
any other pledge of collateral by the Fund to the Custodian.
ARTICLE X
TERMINATION
-----------
A. Either of the parties hereto may terminate this Agreement for any
reason by giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than ninety (90) days after the date
of giving of such notice. If such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Trustees of the Fund,
certified by the
17
<PAGE> 18
Secretary of the Fund, electing to terminate this Agreement and designating a
successor custodian or custodians. In the event such notice is given by the
Custodian, the Fund shall, on or before the termination date, deliver to the
Custodian a copy of a resolution of the Board of Trustees of the Fund, certified
by the Secretary, designating a successor custodian or custodians to act on
behalf of the Fund. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a bank or trust
company having not less than $100,000,000 aggregate capital, surplus, and
undivided profits. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian, provided that it has received a notice of
acceptance by the successor custodian, shall deliver, on that date, directly to
the successor custodian all Securities and monies then owned by the Fund and
held by it as Custodian. Upon termination of this Agreement, the Fund shall pay
to the Custodian on behalf of the Fund such compensation as may be due as of the
date of such termination. The Fund agrees on behalf of the Fund that the
Custodian shall be reimbursed for its reasonable costs in connection with the
termination of this Agreement.
B. If a successor custodian is not designated by the Fund, or by the
Custodian in accordance with the preceding paragraph, or the designated
successor cannot or will not serve, the Fund shall, upon the delivery by the
Custodian to the Fund of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund, be deemed to be the custodian for the Fund, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the Book-Entry
System, which cannot be delivered to the Fund, which shall be held by the
Custodian in accordance with this Agreement.
18
<PAGE> 19
ARTICLE XI
MISCELLANEOUS
-------------
A. Appendix A sets forth the names and the signatures of all Authorized
Persons, as certified by the Secretary of the Fund. The Fund agrees to furnish
to the Custodian a new Appendix A in form similar to the attached Appendix A, if
any present Authorized Person ceases to be an Authorized Person or if any other
or additional Authorized Persons are elected or appointed. Until such new
Appendix A shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the then current Authorized Persons as set forth in the last delivered Appendix
A.
B. No recourse under any obligation of this Agreement or for any claim
based thereon shall be had against any organizer, shareholder, Officer,
Director, past, present or future as such, of the Fund or of any predecessor or
successor, either directly or through the Fund or any such predecessor or
successor, whether by virtue of any constitution, statute or rule of law or
equity, or be the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that this Agreement and the obligations
thereunder are enforceable solely against the Fund, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
organizers, shareholders, Officers, Trustees of the Fund or of any predecessor
or successor, or any of them as such. To the extent that any such liability
exists, it is hereby expressly waived and released by the Custodian as a
condition of, and as a consideration for, the execution of this Agreement.
C. The obligations set forth in this Agreement as having been made by
the Fund have been made by the Board of Trustees, acting as such Trustees for
and on behalf of the Fund, pursuant to the authority vested in them under the
laws of the State of Ohio, the Declaration of Trust and the By-Laws of the Fund.
This Agreement has been executed by Officers of the Fund as officers, and not
19
<PAGE> 20
individually, and the obligations contained herein are not binding upon any of
the Trustees, Officers, agents or holders of shares, personally, but bind only
the Fund.
D. Provisions of the Prospectus and any other documents (including
advertising material) specifically mentioning the Custodian (other than merely
by name and address) shall be reviewed with the Custodian by the Fund prior to
publication and/or dissemination or distribution, and shall be subject to the
consent of the Custodian.
E. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at Star
Bank Center, 425 Walnut Street, M. L. 6118, Cincinnati, Ohio 45202, attention
Mutual Fund Custody Department, or at such other place as the Custodian may from
time to time designate in writing.
F. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given when
delivered to the Fund or on the second business day following the time such
notice is deposited in the U.S. mail postage prepaid and addressed to the Fund
at its office at Maxus Investment Group, 28601 Chagrin Blvd., Suite 500,
Cleveland, Ohio 44122 or at such other place as the Fund may from time to time
designate in writing.
G. This Agreement, with the exception of the Appendices, may not be
amended or modified in any manner except by a written agreement executed by both
parties with the same formality as this Agreement, and authorized and approved
by a resolution of the Board of Trustees of the Fund.
H. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by
20
<PAGE> 21
the Fund or by the Custodian and no attempted assignment by the Fund or the
Custodian shall be effective without the written consent of the other party
hereto.
I. This Agreement shall be construed in accordance with the laws of the
State of Ohio.
J. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized as of the day
and year first above written.
ATTEST: MAXUS EQUITY FUND
/s/ Lynn Saralli By: /s/ Richard A. Barone
- ------------------------ ----------------------------
Title: Chairman
----------------------------
ATTEST: STAR BANK, N.A.
By: /s/ Marsha A. Crofton
- ------------------------------ ----------------------------
Title: Vice President
----------------------------
21
<PAGE> 22
APPENDIX A
<TABLE>
<CAPTION>
Authorized Persons Specimen Signatures
------------------ -------------------
<S> <C> <C>
Chairman: Richard A. Barone /s/ Richard A. Barone
------------------ ---------------------
President:
------------------ ----------------------
Secretary: Robert W. Curtin /s/ Robert W. Curtin
------------------ --------------------
Vice President: James C. Onorato /s/ James C. Onorato
----------------- --------------------
Controller:
------------------ ----------------------
Adviser Employees: Lynn C. Saralli /s/ Lynn Saralli
------------------ ----------------------
Transfer Agent/Fund Accountant
Employees:
------------------ ----------------------
/s/ Robin M. Hanks
------------------ ----------------------
/s/ Robin D. Haffa
------------------ ----------------------
------------------ ----------------------
</TABLE>
22
<PAGE> 23
APPENDIX B
The following agents are employed currently by Star Bank, N.A. for securities
processing and control . . .
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible Securities)
23
<PAGE> 24
APPENDIX C
STAR BANK, N.A.
STANDARDS OF SERVICE GUIDE
Star Bank, N.A. is committed to providing superior quality service to
all customers and their agents at all times. We have compiled this guide as a
tool for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Star Bank to guarantee
processing. Failure to meet these deadlines will result in settlement it our
client's risk. In all cases, Star Bank will make every effort to compete all
processing on a timely basis.
Star Bank is a direct participant of the Depository Trust Company, a
direct member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers
Trust Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Star Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and THE WALL STREET
JOURNAL.
For bond calls and mandatory puts, Star Bank utilizes SEI's Bond
Source, Kenny Information Systems, Standard & Poor's Corporation, and DTC
Important Notices. Star Bank will not notify clients of optional put
opportunities.
Any securities delivered free to Star Bank or its agents must be
received three (3) business days prior to any payment or settlement in order for
the Star Bank standards of service to apply.
Should you have any questions regarding the information contained in
this guide, please feel free to contact your account representative.
The information contained in this Standards of Service Guide
is subject to change. Should any changes be made Star Bank
will provide you with an updated copy of its Standards of
Service Guide.
24
<PAGE> 25
STAR BANK SECURITY SETTLEMENT STANDARDS
<TABLE>
<CAPTION>
- ----------------------------- ------------------------------------- ---------------------------
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
- ----------------------------- ------------------------------------- ---------------------------
<S> <C> <C>
DTC - Clearing House Funds 11:00 A.M. on Settlement Date DTC Participant #2219
For Account #________
DTC - Same Day Funds 12:30 P.M. on Settlement Date DTC Participant #2219
Settlement For Account #________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of
Cinti/Trust for Star Bank, N.A.
ABA #042000013
For Account #________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of
(Repurchase Agreement Cinti/Spec for Star Bank, N.A.
Collateral Only) ABA #042000013
For Account #________
PTC Securities (GNMA Book 12:00 P.M. on Settlement Date (for PTC For Account
Entry) Deliveries by 5:00 P.M. on Settlement BTRST/CUST Sub Account:
Date minus 1) Star Bank, N.A. #090334
Physical Securities 10:00 A.M. EST on Settlement Date Bankers Trust Company
(for Deliveries, by 4:00 P.M. on 16 Wall Street 4th Floor,
Settlement Date minus 1) Window 43 for Star Bank
Account #090334
CEDEL/EURO-CLEAR 4:00 P.M. on Settlement Date minus 3 Euroclear Via Cedel Bridge
In favor of Bankers Trust
Comp Cedel 53355
For Star Bank Account
#501526354
Cash Wire Transfer 3:00 P.M. Star Bank, N.A. Cinti/Trust
ABA #042000013
Credit Account #9901877
Further Credit to ________
Account #________
- --------
<FN>
* All times listed are Cincinnati time.
</TABLE>
25
<PAGE> 26
STAR BANK PAYMENT STANDARDS
<TABLE>
<CAPTION>
- ----------------------------------------------------- --------------------------------------- ------------------------
SECURITY TYPE INCOME PRINCIPAL
- ----------------------------------------------------- --------------------------------------- ------------------------
<S> <C> <C>
Equities Payable Date + 1
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date + 1 Payable Date
Federal Reserve Bank Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1
CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 2 Payable Date + 2
SBA Loan Certificates When Received When Received
Unit Investment Trust Certificates* Payable Date + 1 Payable Date + 1
Certificates of Deposit* Payable Date + 1 Payable Date + 1
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date +1
Bankers Trust Payable Date + 2 Payable Date + 2
</TABLE>
NOTE: If a payable date falls on a weekend or bank holiday,
payment will be made on the immediately following
business day.
26
<PAGE> 27
STAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<CAPTION>
- --------------------------- ------------------------------------------ ------------------------------------- -------------------
TYPE OF ACTION NOTIFICATION OF CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION POSTING
TO STAR BANK
- --------------------------- ------------------------------------------ ------------------------------------- -------------------
<S> <C> <C> <C>
RIGHTS, WARRANTS, AND LATER OF 10 BUSINESS DAYS PRIOR TO 5 BUSINESS DAYS PRIOR TO EXPIRATION UPON RECEIPT
OPTIONAL MERGERS EXPIRATION OR RECEIPT OF NOTICE
MANDATORY PUTS WITH OPTION LATER OF 10 BUSINESS DAYS PRIOR TO 5 BUSINESS DAYS PRIOR TO EXPIRATION UPON RECEIPT
TO RETAIN EXPIRATION
CLASS ACTIONS 10 BUSINESS DAYS PRIOR TO EXPIRATION DATE 5 BUSINESS DAYS PRIOR TO EXPIRATION UPON RECEIPT
VOLUNTARY TENDERS, LATER OF 10 BUSINESS DAYS PRIOR TO 5 BUSINESS DAYS PRIOR TO EXPIRATION UPON RECEIPT
EXCHANGES, AND CONVERSIONS EXPIRATION OR RECEIPT OF NOTICE
MANDATORY PUTS, DEFAULTS, AT POSTING OF FUNDS OR SECURITIES RECEIVED NONE UPON RECEIPT
LIQUIDATIONS, BANKRUPTCIES,
STOCK SPLITS, MANDATORY
EXCHANGES
FULL AND PARTIAL CALLS LATER OF 10 BUSINESS DAYS PRIOR TO NONE UPON RECEIPT
EXPIRATION OR RECEIPT OF NOTICE
</TABLE>
NOTE: FRACTIONAL SHARES/PAR AMOUNTS RESULTING FROM ANY OF THE ABOVE WILL BE
SOLD.
27
<PAGE> 28
APPENDIX D
STAR BANK, N.A.
CUSTODY FEE SCHEDULE FOR MAXUS FAMILY OF FUNDS
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
--------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserve $9.00
(c) For each portfolio transaction processed through
our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $5.00
</TABLE>
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:
II. MARKET VALUE FEE (Collective for all funds)
----------------
Based upon an annual rate of: Million
-------
.0004 (4 Basis Points) on First $10
.0003 (3 Basis Points) on Next $20
.0002 (2 Basis Points) on Next $20
.00015 (1.5 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND (Collective for all funds) $1,200.00
----------------------------
IV. OUT-OF-POCKET EXPENSES
----------------------
The only out-of-pocket expenses charged to your account will be
shipping fees or transfer fees.
28
<PAGE> 29
V. TURNKEY IRA SERVICES
--------------------
See Attached IRA Fee Page.
VI. EARNINGS CREDIT
---------------
On a monthly basis any earnings credits generated from uninvested
custody balances will be applied against any cash management service
fees generated. Earnings credits are based on the average yield on the
91 day U.S. Treasury Bill for the preceding thirteen weeks less the 10%
reserve.
29
<PAGE> 30
APPENDIX D
STAR BANK
CASH MANAGEMENT FEE SCHEDULE
FOR
THE MAXUS FAMILY OF FUNDS
<TABLE>
<CAPTION>
SERVICES UNIT COST MONTHLY COST
-------- --------- ------------
<S> <C> <C>
D.D.A. Account Maintenance $12.00
Deposits .37
Deposited Items .105
Checks Paid .159
Balance Reporting - P.C. Access 50.00
ACH Transaction .085
ACH Monthly Maintenance 40.00
Controlled Disbursement (lst account) 110.00
Each additional account 25.00
Deposited Items Returned 5.00
NSF 20.00
Data Transmission per account 110.00
Data Capture* .10
Drafts Cleared .179
Lockbox Maintenance** 55.00
Lockbox items Processed
(with copy of check) .32
(without copy of check) .24
Wires - Outgoing (Repetitive) 10.00
(Non-Repetitive) 11.00
- - Incoming (With Notification) 10.00
PC - initiated wire (outgoing)
(Repetitive) 8.50
(Non-Repetitive) 9.00
Stop Payments 20.00
<FN>
***Uncollected Charge Star Bank Prime Rate as of
first of month plus 4%
* Price can vary depending upon what information needs to be captured
** With the use of lockbox, the collected balance in the demand deposit
account will be significantly increased and therefore earnings to
offset cash management service fees will be maximized.
*** Fees for uncollected balances are figured on the monthly average of all
combined accounts.
</TABLE>
30
<PAGE> 31
APPENDIX D
STAR BANK, N.A.
THIRD PARTY ACCESS COMPENSATION SCHEDULE
FOR
THE MAXUS FAMILY OF FUNDS
Third Party access is available within two (2) weeks and requires dial-up
software which will allow your organization to access its Star Bank account from
any location.
REQUIREMENTS AND EXPENSES
- -------------------------
<TABLE>
<CAPTION>
<S> <C>
There will be a one time expense for the purchase of software from SEI
which includes internal password control and ability to dial a local
IBM Information Systems number.
(Generally anywhere in the continental U.S.A.) $225.00
ONGOING EXPENSES
- ----------------
Telephone Connect time $ .37/minute
</TABLE>
31
<PAGE> 32
APPENDIX D
COST OF TURNKEY IRA SERVICES
FOR
MAXUS FAMILY OF FUNDS
<TABLE>
<CAPTION>
<S> <C>
Custody and Account Maintenance Per IRA Account/Per Year $14
- - Includes toll-free technical support and monthly IRA Newsletter.
- Each withdrawal form* .07
- Each election form* .07
- Each plan agreement/disclosure statement* .60 -.70
and account application
- Future account deposit form* .07
(additional deposits to existing IRA)
Other
-----
- Conversion of each existing IRA account (if applicable) $1
- IRA training session(s) for Shareholder Services Negotiated
Representatives.
- - Prices can vary depending on any custom features which may be desired.
</TABLE>
See Exhibit One for Sample IRA Copies
32
<PAGE> 1
Exhibit 11
[MCCURDY & ASSOCIATES CPA'S, INC. LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the use in this Post-Effective Amendment No. 9 to Maxus Equity
Fund's Registration Statement on Form N-1A of our report dated January 15, 1997
on the financial statements of Maxus Income Fund and the Summary Financial
Information included in the Prospectus and to the references made to us under
the caption "General Information" included in the Prospectus and under the
caption "Investment Advisory and Other Services" included in the Statement of
Additional Information.
/s/ McCURDY & ASSOCIATES CPA'S, INC.
McCURDY & ASSOCIATES CPA'S, INC.
Westlake, Ohio
February 20, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 33,034
<INVESTMENTS-AT-VALUE> 38,874
<RECEIVABLES> 668
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</TABLE>
