THE MAXUS EQUITY FUND
The Maxus Equity Fund produced a total return of 19.13% for its investors during
1996. Although this was slightly below the return of the S&P 500 index, it
matched exactly the much broader and more representative Russell 3000 Index
which returned 19.19%. Moreover, the Fund continued to demonstrate lower
volatility, relative to these indices, during periods of market decline, such as
we experienced last July.
The portfolio is managed predominantly according to a "value" style of
investing. I look for investment opportunities across a wide range of equity
securities, including securities convertible into equities. Therefore, the
portfolio will generally contain large capitalization as well as very small
capitalization companies. Based upon a value discipline, I look for companies in
which I believe the private market value (the underlying value of the Company's
various business segments, as well as its cash and other hard assets) is higher
than its current stock quotation. I also look for companies with a high free
cash flow relative to its share price. This generally suggests that the Company
has a variety of business opportunities, including debt repayment, share
repurchases, acquisitions, or other transactions, each of which tend to increase
shareholder value.
Throughout 1996, the shares of many large capitalization companies rose to
levels which seem to suggest that market speculation has increased
substantially. Secondary stocks, however, continue to appear reasonably valued,
and the general focus of new equity purchases has centered on these companies.
In December, well selected secondary stocks began to appreciate relative to the
general market, and that trend has continued through the first two months of
1997. My expectation is that the trend toward relatively better performance by
secondary stocks will continue, and I intend to take advantage of this
opportunity throughout the year.
Richard A Barone
<PAGE>
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Shares/Principal Cost Market % of
Amount Value Assets
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY
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%
The accompanying notes are an integral
part of the financial statements.
<PAGE>
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Shares/Principal Cost Market % of
Amount Value Assets
- --------------------------------------------------------------------------------
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%
The accompanying notes are an integral
part of the financial statements.
<PAGE>
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Shares/Principal Cost Market % of
Amount Value Assets
- --------------------------------------------------------------------------------
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%
==========
* Non-Income Producing.
The accompanying notes are an integral
part of the financial statements.
<PAGE>
MAXUS EQUITY FUND
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1996
Assets:
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
==========
The accompanying notes are an integral
part of the financial statements
<PAGE>
MAXUS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
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
=========== ===========
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock
outstanding throughout the period:
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*
-------------------------------------------------
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%
*Weighted Average Used
The accompanying notes are an integral
part of the financial statements
<PAGE>
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.
<PAGE>
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:
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
=========
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:
Appreciation (Depreciation) Net Appreciation (Depreciation)
6,609,961 (768,762) 5,841,199
<PAGE>
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
<PAGE>
THE MAXUS FUNDS
28601 Chagrin Boulevard, Cleveland, Ohio 44122
(216) 292-3434
INVESTMENT ADVISOR
Maxus Asset Management Inc
28601 Chagrin Boulevard
Cleveland, Ohio 44122
BOARD OF TRUSTEES
Richard A. Barone
N. Lee Dietrich
Sanford A. Fox, D.D.S.
Burton D. Morgan
Michael A. Rossi
Robert A. Schenkelberg, Jr.
F. Carl Walter
OFFICERS
Richard A. Barone, Chairman
James C. Onorato, Vice-President
Robert W. Curtin, Secretary
CUSTODIAN
Star Bank, N. A.
425 Walnut Street
P. O. Box 1118
Cincinnati, Ohio 45201-1118
TRANSFER AGENT
Maxus Information Systems Inc
28601 Chagrin Boulevard
Cleveland, Ohio 44122
DISTRIBUTOR
Maxus Securities Corp
28601 Chagrin Boulevard
Cleveland, Ohio 44122
LEGAL COUNSEL
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2378
AUDITOR
McCurdy & Associates CPA's Inc
27955 Clemens Road
Westlake, Ohio 44145
