<PAGE> 1
MAXUS INCOME FUND
MAXUS EQUITY FUND
MAXUS LAUREATE FUND
THE TOWER AT ERIEVIEW, 36TH FLOOR
1301 EAST NINTH STREET
CLEVELAND, OHIO 44114
(216) 687-1000
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.
By this Prospectus, each Fund is offering Investor Shares and Institutional
Shares. Investor Shares are offered to the general public. Institutional Shares
are offered to certain institutions and other specified investors. See "How to
Purchase Shares." Investor Shares and Institutional Shares are identical, except
as to minimum investment requirements and the services offered to and expenses
borne by each class.
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 the same date as this
Prospectus and is available upon request and without charge by calling the Funds
at (216) 687-1000. 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, 1998
Investors are advised to read this Prospectus and to retain it for future
reference.
<PAGE> 2
HIGHLIGHTS
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. Investor Shares of
each Fund are subject to a plan for using as much as 0.5% of net assets annually
to aid the distribution of such shares. See "Distribution Plan (Investors Shares
Only)."
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. For Investor Shares, the minimum initial investment is
$1,000, with subsequent minimum investments of $100. For Institutional Shares,
the minimum initial investment is $1,000,000, with subsequent minimum
investments of $10,000. 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,
because of shareholder redemptions, the value of the account drops below $1,000
in the case of Investor Shares or $1,000,000 in the case of Institutional
Shares. See "How to Redeem Shares."
DIVIDENDS. Each Fund intends to pay dividends at least once annually to share
holders. Unless otherwise directed, all dividends will be automatically
reinvested in additional shares. See "Dividends, Distributions and Taxes."
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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 (Investor Shares Only)."
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.
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FEE TABLE
Annual Fund Operating Expenses (as a percentage of average net assets)
<TABLE>
<CAPTION>
MAXUS INCOME FUND MAXUS EQUITY FUND MAXUS LAUREATE FUND
------------------------ ------------------------ ------------------------
INVESTOR INSTITUTIONAL INVESTOR INSTITUTIONAL INVESTOR INSTITUTIONAL
CLASS CLASS CLASS CLASS CLASS CLASS
-------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees......................... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Fees.............................. 0.50% 0.00% 0.50% 0.00% 0.50% 0.00%
Other Expenses.......................... 0.41% 0.41% 0.37% 0.37% 0.99% 0.99%
Total Fund Operating Expenses........... 1.91% 1.41% 1.87% 1.37% 2.49% 1.99%
</TABLE>
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 holders
of Investor Shares 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 in Investor
Shares, assuming redemption at the
end of each time period:
Maxus Income Fund................... $19 $60 $103 $223
Maxus Equity Fund................... $19 $59 $101 $219
Maxus Laureate Fund................. $25 $58 $133 $283
</TABLE>
<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 in
Institutional Shares, assuming
redemption at the end of each time
period:
Maxus Income Fund................... $14 $45 $ 77 $169
Maxus Equity Fund................... $14 $43 $ 75 $165
Maxus Laureate Fund................. $20 $62 $107 $232
</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.
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<PAGE> 5
================================================================================
MAXUS INCOME FUND
FINANCIAL HIGHLIGHTS
The following table sets forth selected per-share data for the periods
shown. For the periods shown, the Fund had a single class of shares, which was
reclassified as Investor Shares as of the date of this Prospectus. Institutional
Shares were not offered during these periods. 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>
01/01/97 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 TO
12/31/97 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> <C>
NET ASSET VALUE:
Beginning of Period......... $10.78 $10.54 $ 9.73 $10.94 $10.88 $10.98 $ 9.94 $10.52 $10.57
Net Investment Income........ .67 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)................. .53 0.24 0.81 (1.22) 0.22 (0.01) 1.05 (.60) 0.49
------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations.................. 1.20 0.94 1.53 (0.48) 0.90 0.41 1.85 0.16 1.17
Dividends (from net
investment income).......... (0.67) (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 0.00 (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 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions.......... (0.67) (0.70) (0.72) (0.73) (0.84) (0.51) (0.81) (0.74) (1.22)
NET ASSET VALUE:
End of Period............... $11.31 $10.78 $10.54 $ 9.73 $10.94 $10.88 $10.98 $ 9.94 $10.52
Total Return................. 11.47% 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)................. 38,620 35,728 37,387 33,425 36,147 28,591 18,200 13,307 12,968
Ratio of Expenses to Average
Net Assets.................. 1.91% 1.92% 1.90% 1.81% 1.90% 1.94% 2.00% 2.00% 2.00%
Ratio of Net Income to
Average Net Assets.......... 6.08% 6.50% 7.01% 7.10% 6.06% 7.18% 7.59% 7.43% 6.25%
Portfolio Turnover Rate...... 70% 78% 121% 138% 88% 91% 108% 155% 145%
</TABLE>
* Weighted Average Used
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
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<PAGE> 6
MAXUS EQUITY FUND
FINANCIAL HIGHLIGHTS
The following table sets forth selected per-share data for the periods
shown. For the periods shown, the Fund had a single class of shares, which was
reclassified as Investor Shares as of the date of this Prospectus. Institutional
Shares were not offered during these periods. 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>
01/01/97 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 TO
12/31/97 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> <C>
NET ASSET VALUE:
Beginning of Period......... $16.00 $14.57 $12.95 $13.60 $12.29 $11.41 $ 8.73 $ 9.79 $10.00
Net Investment Income........ 0.15 0.27 0.30 0.25 0.13 0.14 0.06 (0.02) 0.17
Net Gains or Losses on
Securities (realized or
unrealized)................. 4.33 2.50 2.60 (0.17) 3.13 1.91 3.22 (1.04) 0.28
------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations................ 4.48 2.77 2.90 0.08 3.26 2.05 3.28 (1.06) 0.45
Dividends (from net
investment income).......... (0.15) (0.27) (0.27) (0.22) (0.12) (0.14) (0.06) 0.00 (0.66)
Distributions (from capital
gains)...................... (2.10) (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 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions......... (2.25) (1.34) (1.28) (0.73) (1.95) (1.17) (0.60) 0.00 (0.66)
NET ASSET VALUE:
End of Period............... $18.23 $16.00 $14.57 $12.95 $13.60 $12.29 $11.41 $ 8.73 $ 9.79
Total Return................. 28.16% 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)... 55,637 38,765 31,576 17,018 11,343 5,962 3,081 1,850 1,014
Ratio of Expenses to Average
Net Assets.................. 1.87% 1.90% 1.96% 2.00% 2.61% 2.89% 3.94% 5.25% 0.99%
Ratio of Net Income to
Average Net Assets.......... 1.80% 1.71% 2.01% 1.82% 0.91% 0.80% 0.52 (0.19)% 1.16%
Portfolio Turnover Rate...... 89% 111% 173% 184% 175% 187% 189% 221% 109%
</TABLE>
* Weighted Average Used
** Commencement of Operations
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
6
<PAGE> 7
MAXUS LAUREATE FUND
FINANCIAL HIGHLIGHTS
The following table sets forth selected per-share data for the periods
shown. For the periods shown, the Fund had a single class of shares, which was
reclassified as Investor Shares as of the date of this Prospectus. Institutional
Shares were not offered during these periods. 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>
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93*
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of
Period............ $ 10.82 $ 9.82 $ 9.62 $ 9.96 $10.00
Net Investment
Income.............. .52 (0.08) (0.19) (0.08) (0.07)
Net Gains or Losses on
Securities (realized
or unrealized)...... .07 2.14 1.57 (0.26) 1.16
------- ------- ------- ------ ------
Total From Investment
Operations.......... 0.59 2.06 1.38 (0.34) 1.09
Dividends (from net
investment
income)............. (0.52) 0.00 0.00 0.00 0.00
Distributions (from
capital gains)...... (0.51) (1.06) (1.18) 0.00 (1.13)
Return of Capital..... 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------ ------
Total Distributions... (1.03) (1.06) (1.18) 0.00 (1.13)
NET ASSET VALUE:
End of Period....... $ 10.38 $ 10.82 $ 9.82 $ 9.62 $ 9.96
Total Return.......... 5.49% 21.03% 14.41% (3.41)% 8.62%
RATIOS/SUPPLEMENTAL
DATA
Net Assets End of
Period
(Thousands)......... 3,395 3,156 1,510 1,998 2,114
Ratio of Expenses to
Average Net
Assets.............. 2.49% 3.92% 3.85% 3.60% 2.42%
Ratio of Net Income to
Average Net
Assets.............. 4.19% (0.73)% (1.69)% (0.87)% (0.66)%
Portfolio Turnover
Rate................ 1,511% 1,267% 1,377% 469% 152%
</TABLE>
* Commencement of Operations
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
7
<PAGE> 8
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
8
<PAGE> 9
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."
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.
9
<PAGE> 10
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.
10
<PAGE> 11
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 "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
11
<PAGE> 12
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 that both stock prices
12
<PAGE> 13
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.
13
<PAGE> 14
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 1997 and 1996,
respectively, were 70% and 78% for Maxus Income Fund, 89% and 111% for Maxus
Equity Fund and 1,511% and 1,267% 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 commissions paid and could result
in high amounts of realized investment gain subject to the payment of taxes by
share holders. 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
14
<PAGE> 15
sales loads, a sub-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
15
<PAGE> 16
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.
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
16
<PAGE> 17
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 loans are callable at any time and are
continuously secured by collateral (cash or government securities) equal to no
less
17
<PAGE> 18
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
18
<PAGE> 19
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 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
19
<PAGE> 20
(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
20
<PAGE> 21
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.
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.
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<PAGE> 22
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
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.
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<PAGE> 23
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, 1997 are set forth below. For the periods shown, each Fund had a single
class of shares, which was reclassified as Investor Shares as of the date of
this Prospectus. Institutional Shares were not offered during these periods.
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>
11.47% 12.23% 7.99% 8.71% 11.47% 41.35% 46.84% 130.48%
</TABLE>
23
<PAGE> 24
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>
28.16% 23.18% 18.55% 15.45% 28.16% 86.91% 134.17% 227.24%
</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>
5.49% 13.46% 9.58% 5.49% 46.06% 53.23%
</TABLE>
* From commencement of operations, May 1, 1993.
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
By this Prospectus, each Fund is offering Investor Shares and Institutional
Shares. Investor Shares and Institutional Shares are identical, except as to
minimum investment requirements and the services offered to and expenses borne
by each class.
INVESTOR SHARES
Investor Shares may be purchased by any investor without a sales charge. A
minimum initial investment of $1,000 is required to open an Investor Shares
account
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<PAGE> 25
with subsequent minimum investments of $100. Investment minimums may be waived
at the discretion of each Fund.
INSTITUTIONAL SHARES
Institutional Shares may be purchased without a sales charge by (1)
financial institutions, such as banks, trust companies, thrift institutions,
mutual funds or other financial institutions, acting on their own behalf or on
behalf of their qualified fiduciary accounts, employee benefit or retirement
plan accounts or other qualified accounts, (2) securities brokers or dealers
acting on their own behalf or on behalf of their clients, (3) directors or
employees of the Funds or of the Adviser or its affiliated companies or by the
relatives of those individuals or the trustees of benefit plans covering those
individuals. These requirements for the purchase of Institutional Shares may be
waived in the sole discretion of the Funds.
A minimum initial investment of $1,000,000 is required to open an
Institutional Shares account with subsequent minimum investments of $10,000.
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
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<PAGE> 26
Information Systems Inc., The Tower at Erieview, 36th Floor, 1301 East Ninth
Street, Cleveland, Ohio 44114.
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) 687-1000. The investor's bank may charge a
fee for the wire transfer of funds.
SUBSEQUENT PURCHASES
Investors may make additional purchases 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., The Tower at Erieview,
36th Floor, 1301 East Ninth Street, Cleveland, OH 44114.
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 Systems Inc., at (216) 687-1000 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
26
<PAGE> 27
reimbursed from the shareholder's account. This telephone purchase option may be
discontinued without notice.
SYSTEMATIC INVESTMENT PLAN
The Systematic Investment Plan permits investors to purchase shares of any
Fund at monthly intervals. Provided the investor's bank or other financial
institution allows automatic withdrawals, shares may be purchased by
transferring funds from the account designated by the investor. At the
investor's option, the account designated will be debited in the specified
amount, and shares will be purchased once a month, on or about the 15th day.
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. Investors desiring to
participate in the Systematic Investment Plan should call the Transfer Agent at
(216) 687-1000 to obtain the appropriate forms. The Systematic Investment Plan
does not assure a profit and does not protect against loss in declining markets.
PRICE OF SHARES
The price paid for shares of a certain class of a Fund is the net asset
value per share of such class of such 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 class of 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.
For purposes of pricing sales and redemptions, net asset value per share of
a class of a Fund is calculated by determining the value of the class's
proportional interest in the assets of such Fund, less (i) such class's
proportional share of general liabilities and (ii) the liabilities allocable
only to such class; and dividing such amount by the number of shares of such
class outstanding.
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<PAGE> 28
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 $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
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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 The
Tower at Erieview, 36th Floor, 1301 East Ninth Street, Cleveland, Ohio 44114.
MSC, which is controlled by Richard A. Barone, Chairman of each Fund, receives
for its services as Distributor an annual distribution fee of .50% of average
net assets of Investor Shares. See "Distribution Plan (Investor Shares Only)."
Certain employees of MSC may receive compensation under the Distribution Plans.
HOW TO REDEEM SHARES
All shares of each class of each Fund offered for redemption will be
redeemed at the net asset value per share of such class 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., The Tower at Erieview, 36th Floor, 1301
East Ninth Street, Cleveland, Ohio 44114. 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.
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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) 687-1000.
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.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone by calling Maxus Information Systems
Inc. at (216) 687-1000 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)
687-1000. 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.
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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 in the case of Investor Shares or $1,000,000 in the
case of Institutional Shares. 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.
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) 687-1000.
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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 for each meeting if the
net assets of such Fund are under $10,000,000; $200 per meeting if the net
assets of such Fund are between $10,000,000 and $50,000,000; or $300 per meeting
if the net assets of such Fund are over $50,000,000.
THE INVESTMENT ADVISER
Each Fund has retained as its investment adviser Maxus Asset Management Inc
("MAM" or the "Adviser"), The Tower at Erieview, 36th Floor, 1301 East Ninth
Street, Cleveland, Ohio 44114, 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., d/b/a Maxus
Investment Group, an Ohio corporation ("RMI") 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. See "Distribution Plan (Investor Shares Only)." 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
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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 Maxus Income Fund and Maxus Equity Fund. Mr. Barone has been
President of MAM since 1976 and has been Chairman of each of the Funds since
their inception.
Since January 1, 1995, Alan Miller has been the person primarily responsible
for the management of the portfolio of Maxus Laureate Fund. Mr. Miller has been
a portfolio manager with Maxus Asset Management Inc. since 1994.
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, 1997, each Fund paid the Adviser a fee equal to 1.00% of that
Fund's average net assets.
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
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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. 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 PLAN (INVESTOR SHARES ONLY)
Under a plan adopted by each Fund's Board of Trustees pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), each Fund pays MSC a shareholder servicing and
distribution fee at the annual rate of .50% of the average daily net assets of
the Investor Shares of such Fund. Such fee will be used by MSC to make payments
for administration, shareholder services and distribution assistance, including,
but not limited to (i) compensation to securities dealers and other persons and
organizations ("Service Organizations") for providing distribution assistance
with respect to Inves-
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tor Shares, (ii) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to
Investor Shares, and (iii) otherwise promoting the sale of Investor Shares,
including paying for the preparation of advertising and sales literature and the
printing and distribution of such materials to prospective investors. The fees
paid to MSC under the Plan are payable without regard to actual expenses
incurred. Third parties also may charge fees to their clients who are beneficial
owners of Investor Shares in connection with their clients' accounts. These fees
would be in addition to any amounts which may be received by them from MSC under
the 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.
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
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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. As a
result of the application of the Distribution Plan to Investor Shares only, the
amount of dividends on Institutional Shares will exceed the amount of dividends
on Investor Shares. 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 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
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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
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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.
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.
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. Each share represents an equal proportionate
interest in a Fund with other shares of the same class, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
that Fund as are declared at the discretion of the Trustees.
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Shareholders are entitled to one vote per share (with proportional voting
for fractional shares) on such matters as shareholders are entitled to vote.
Shareholders vote in the aggregate and not by class on all matters except that
(i) shares shall be voted by individual class when required by the 1940 Act or
when the Trustees have determined that the matter affects only the interests of
a particular class, and (ii) only the holders of Investor Shares will be
entitled to vote on matters submitted to shareholder vote with regard to the
Distribution Plan applicable to such class.
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.
Although none of the Funds is required to hold annual meetings of the
shareholders, shareholders holding at least 10% of a Fund's outstanding shares
have the right to call a meeting to elect or remove one or more of the Trustees
of such Fund.
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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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"), The
Tower at Erieview, 36th Floor, 1301 East Ninth Street, Cleveland, Ohio 44114, 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.
Shareholder inquiries should be directed to the Secretary of the Funds at
The Tower at Erieview, 36th Floor, 1301 East Ninth Street, Cleveland, Ohio
44114.
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APPENDIX A
DESCRIPTION OF BOND AND COMMERCIAL PAPER RATINGS**
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.
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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.
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
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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
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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 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
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<PAGE> 46
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 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
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<PAGE> 47
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
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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 markets" 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
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<PAGE> 49
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.
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<PAGE> 50
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 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.
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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 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
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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
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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.
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.
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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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[THIS PAGE INTENTIONALLY LEFT BLANK]
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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.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----------------- ----
<S> <C>
HIGHLIGHTS.................................................. 2
FINANCIAL HIGHLIGHTS........................................ 5
INVESTMENT OBJECTIVES AND MANAGEMENT TECHNIQUES............. 8
INVESTMENT POLICIES AND RESTRICTIONS........................ 18
RISKS AND OTHER CONSIDERATIONS.............................. 20
PERFORMANCE................................................. 23
HOW TO PURCHASE SHARES...................................... 24
HOW TO REDEEM SHARES........................................ 29
SYSTEMATIC WITHDRAWAL PLAN.................................. 31
INVESTMENT MANAGEMENT....................................... 32
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................... 35
GENERAL INFORMATION......................................... 38
APPENDIX A.................................................. 41
APPENDIX B.................................................. 42
</TABLE>
Investors are advised to read
this Prospectus and to retain it for future reference.
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<PAGE> 57
STATEMENT OF ADDITIONAL INFORMATION April 30, 1998
MAXUS EQUITY FUND
The Tower at Erieview, 36th Floor
1301 East Ninth Street
Cleveland, Ohio 44114
(216) 687-1000
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, The Tower at Erieview, 36th Floor, 1301
East Ninth Street, Cleveland, Ohio 44114, telephone number (216) 687-1000.
The prospectus to which this Statement relates is dated the same date as
this Statement of Additional Information.
The date of this Statement of Additional Information is April 30,
1998.
<PAGE> 58
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>
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<PAGE> 59
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.
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<PAGE> 60
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, 1997 and 1996 was 89% and 111% , 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
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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.
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
-5-
<PAGE> 62
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 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
The Tower at Erieview, 36th Floor Treasurer Corp (broker-dealer), Maxus
1301 East Ninth Street and Trustee Asset Management Inc. (invest-
Cleveland, Ohio 44114 ment adviser) and Resource
</TABLE>
-6-
<PAGE> 63
<TABLE>
<S> <C> <C>
Management Inc., dba Maxus
Investment Group (financial services)
Denis J. Amato* Trustee Chief Investment Officer, Gelfand.
The Tower at Erieview, 36th Floor Maxus Asset Management, Inc. (invest-
1301 East Ninth Street ment adviser) since 1997; previously,
Cleveland, Ohio 44114 Managing Director, Gelfand Partners
Asset Management (investment
adviser)
Burton D. Morgan Trustee Chairman, Morgan Bank (bank);
Park Place President, Basic Search, Inc.
10 West Streetsboro Road (venture capital); Chairman,
Hudson, Ohio 44236 Multi-Color Corporation (printing);
Chairman, Morgan Funshares, Inc.
(mutual fund)
Murlan J. Murphy, Jr. Trustee Independent Investor
11249 Lake Forest Drive
Chesterland, Ohio 44026
Michael A. Rossi, C.P.A. Trustee Certified Public Accountant
6559 Wilson Mills Road
Highland Heights, Ohio 44143
Robert J. Conrad Vice President Vice President, Resource Management,
The Tower at Erieview, 36th Floor Inc.; formerly Vice President, American
1301 East Ninth Street Income Plus
Cleveland, Ohio 44114
Robert W. Curtin Secretary Senior Vice President and Secretary,
The Tower at Erieview, 36th Floor Maxus Securities Corp; formerly
1301 East Ninth Street Executive Vice President,
Cleveland, Ohio 44114 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.
Each Trustee who is not an interested person in MAM will receive from the Fund
the following fees for each Board or shareholders meeting attended : $100 per
meeting if net assets of the Fund are under $10,000,000; $200 per meeting if net
assets of the Fund are between $10,000,000 and $50,000,000; and $300 per meeting
if net assets of the Fund are over $50,000,000. The estimated fees payable to
the Trustees for the current fiscal year, which are the only compensation or
benefits payable to Trustees, are summarized in the following table:
-7-
<PAGE> 64
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation From All Maxus Funds
Name of Trustee from the Fund Payable to Trustees
--------------- ------------- ---------------------
<S> <C> <C>
Richard A. Barone $ 0 $ 0
Denis J. Amato $ 0 $ 0
Burton D. Morgan $1,200 $3,600
Murlan J. Murphy, Jr $1,200 $3,600
Michael A. Rossi $1,200 $3,600
</TABLE>
OWNERSHIP OF SHARES
As of February 6, 1998, 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 6, 1998, all officers and Trustees as a group
beneficially owned 33,227 shares, constituting 1.1% 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, 1997,
1996 and 1995 , the Adviser received management fees from the Fund in the
amounts of $477,143, $365,389 and $250,329, 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 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
-8-
<PAGE> 65
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 19, 1998.
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 Distribution and Shareholder Servicing Plan (the
"Plan") pursuant to Rule 12b-1 under the Act, pursuant to which the Fund pays
Maxus Securities Corp ("MSC") .50% of average net assets of Investor Shares
annually for the costs of activities intended to result in the sale of
Investor Shares. See "Investment Management -- Distribution Plan" in the Fund's
Prospectus. During the fiscal year ended December 31, 1997, $238,210 (.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 the holders of Investor Shares. 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 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.
-9-
<PAGE> 66
The Fund has entered into an Administration Agreement with Maxus
Information Systems Inc. ("MIS"), The Tower at Erieview, 36th Floor, 1301 East
Ninth Street, Cleveland, Ohio 44114, pursuant to which MIS has agreed to act
as the Fund's Transfer, Redemption and Dividend Disbursing Agent . 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 pays MIS an annual fee, paid monthly, equal to $6.75 per
shareholder account (with a monthly minimum of $775) plus $12 per month for each
state in which the Fund is registered under such state's securities laws, 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 $42,563 during the fiscal year ended
December 31, 1997. MIS is a 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 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
-10-
<PAGE> 67
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
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
-11-
<PAGE> 68
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, 1997, 1996 and 1995 , the
aggregate amount of brokerage commissions paid by the Fund were $250,842,
$293,236 and $233,530 , 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.
-12-
<PAGE> 69
As a result of the application of the Distribution and Shareholder
Servicing Plan to Investor Shares only, the amount of dividends on Institutional
Shares will exceed the amount of dividends on Investor Shares.
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 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.
-13-
<PAGE> 70
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.
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. Pursuant to the Distribution
and Shareholder Servicing Plan, MSC receives an annual distribution fee of .50%
of average net assets of Investor Shares for distributing and marketing
Investor Shares. Certain employees of MSC may receive compensation under the
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> 71
<TABLE>
<CAPTION>
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
=======================================================================================================================
SHARES/PRINCIPAL AMOUNT COST MARKET VALUE % OF ASSETS
=======================================================================================================================
INFORMATION TECHNOLOGY
<S> <C> <C> <C> <C>
25,000 Airtouch Communications* 629,625 1,039,062
37,500 Bel Fuse* 430,647 717,188
10,000 Harris Corp 430,225 458,750
76,000 Intergraph* 528,737 760,000
39,072 Unisys* 386,950 542,125
34,000 VLSI Technology* 494,196 803,250
20,000 Western Digital* 298,650 320,000
--------------- ---------------
3,199,030 4,640,375 8.34%
INFRASTRUCTURE
15,000 Ameron Inc 514,513 948,750
17,000 Corrpro Companies* 132,683 250,750
111,000 Foster L B* 423,751 548,062
--------------- ---------------
1,070,947 1,747,562 3.14%
MACHINERY & EQUIPMENT
35,000 Flowserve 878,349 977,813
50,000 Sensormatic Electronic 682,893 821,875
30,000 Snap on Tools 861,200 1,308,750
--------------- ---------------
2,422,442 3,108,438 5.59%
MEDICAL SERVICES & SUPPLIES
20,000 Becton Dickinson 359,650 1,000,000
32,000 Invacare 675,488 696,000
43,300 Loewen Group 1,069,954 1,114,975
13,500 McKesson 578,558 1,463,063
--------------- ---------------
2,683,650 4,274,038 7.68%
REAL ESTATE
35,000 MGI Properties 480,393 840,000
25,000 Public Storage 8.25% X 652,478 1,225,000
10,000 St Joe Paper 579,110 905,000
--------------- ---------------
1,711,981 2,970,000 5.34%
</TABLE>
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
-15-
<PAGE> 72
<TABLE>
<CAPTION>
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
=======================================================================================================================
SHARES/PRINCIPAL AMOUNT COST MARKET VALUE % OF ASSETS
=======================================================================================================================
ENTERTAINMENT
<S> <C> <C> <C> <C>
120,000 Trump Hotels Casino Resorts* 866,350 802,500 1.44%
CONSUMER PRODUCTS
100,000 Jan Bell Marketing* 221,910 250,000
50,000 Limited 933,000 1,275,000
135,000 Michael Anthony Jewelers* 389,203 329,063
59,000 Pluma* 715,255 505,187
180,000 Royal Appliance Mfg* 552,690 1,192,500
44,600 Universal Electronics* 225,274 446,000
--------------- ---------------
3,037,332 3,997,750 7.19%
ENVIRONMENT
15,200 Dionex* 242,016 763,800
100,000 International Tech* 779,812 750,000
15,000 U.S. Filter* 428,713 449,062
35,000 Weston Roy F* 136,661 142,188
--------------- ---------------
1,587,202 2,105,050 3.78%
FINANCIAL SERVICES
20,000 American Express 848,750 1,785,000
10,000 Cincinnati Financial 567,830 1,407,500
15,000 First Chicago NBD 392,536 1,252,500
20,000 Frontier Insurance Group 475,575 457,500
30,000 Lehman Brothers Holdings 651,175 1,530,000
--------------- ---------------
2,935,866 6,432,500 11.56%
UTILITIES
100,000 Citizens Utilities 974,975 962,500
30,000 Kansas City Power & Light 878,675 886,875
--------------- ---------------
1,853,650 1,849,375 3.32%
INDUSTRIAL PRODUCT S
130,000 Algoma Steel* 597,929 450,937
17,000 Armco Inc $3.625 B 831,475 794,750
50,000 Birmingham Steel 820,256 787,500
50,000 Schulman A 1,015,820 1,256,250
25,000 Steel Dynamics* 409,345 400,000
40,000 Stoneridge* 635,275 640,000
30,000 Timken 524,175 1,031,250
15,000 USX 6.75% QUIPs 691,363 690,000
--------------- ---------------
5,525,638 6,050,687 10.88%
</TABLE>
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
-16-
<PAGE> 73
<TABLE>
<CAPTION>
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
=======================================================================================================================
SHARES/PRINCIPAL AMOUNT COST MARKET VALUE % OF ASSETS
=======================================================================================================================
<S> <C> <C> <C> <C>
100,000 Central Fund of Canada 390,250 387,500
80,000 Inco 1,699,175 1,360,000
--------------- ---------------
2,089,425 1,747,500 3.14%
PRODUCT DISTRIBUTION
20,000 Applied Indl Technologies 433,087 535,000
250,000 Petrie Stores Liquidating Tr* 805,473 747,500
67,000 Pioneer Std Electrs 787,836 1,021,750
--------------- ---------------
2,026,396 2,304,250 4.14%
CLOSED END GLOBAL EQUITY FUNDS
20,000 Emerging Markets Telecommunications 336,023 267,500
75,000 Emerging Mkts Infrastructure 809,256 881,250
170,000 First Australia 1,462,781 1,232,500
70,000 New Germany 882,775 945,000
--------------- ---------------
3,490,835 3,326,250 5.98%
U.S. GOVERNMENT SECURITIES
4,000,000 US Treasury 5.375%, 5-31-98 3,989,218 3,996,625
4,000,000 US Treasury 5.5%, 11-15-98 3,988,923 3,994,625
--------------- ---------------
7,978,141 7,991,250 14.36%
Star Bank Treasury 2,458,873 2,458,873 4.42%
Total Investments 44,937,758 55,806,398 100.30%
ARTICLE I
= Other Assets Less Liabilities (169,555) (0.30)%
Net Assets - Equivalent to $18.23 per share on
3,051,358 shares of capital stock outstanding 55,636,843 100.00%
</TABLE>
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
-17-
<PAGE> 74
<TABLE>
<CAPTION>
MAXUS EQUITY FUND
STATEMENT OF ASSETS & LIABILITIES
December 31, 1997
<S> <C>
Assets:
Investment Securities at Market Value
(Identified Cost - $44,937,758) $55,806,398
Cash 8,792
Receivables:
Investment Securities Sold 545,850
Dividends and Interest 229,333
Total Assets $56,590,373
Liabilities
Payables:
Investment Securities Purchased $438,013
Shareholder Distributions 386,040
Accrued Expenses 129,477
Total Liabilities 953,530
Net Assets $55,636,843
Net Assets Consist of:
Capital Paid In 44,792,034
Undistributed Net Investment Income 1,884
Accumulated Realized Gain (Loss) on Investments - Net (25,715)
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 10,868,640
Net Assets, for 3,051,358 Shares Outstanding $55,636,843
Net Asset Value and Redemption Price
Per Share ($55,636,843/3,051,358 shares) $18.23
Offering Price Per Share $18.23
STATEMENT OF OPERATIONS
<CAPTION>
DECEMBER 31, 1997
<S> <C>
Investment Income:
Dividends $779,554
Interest 496,584
Total Investment Income $1,276,138
Expenses
Registration Expense 17,862
Trustee Fees (Note 3) 1,500
Accounting and Pricing 42,563
Custody 22,226
Distribution Plan Expenses 238,210
Audit 16,160
Legal 6,506
Management Fees (Note 2) 477,143
Insurance 8,539
Printing & Other Miscellaneous 61,876
Total Expenses 892,585
</TABLE>
The accompanying notes are an integral part of the financial statements.
-18-
<PAGE> 75
<TABLE>
<S> <C>
MAXUS EQUITY FUND
Net Investment Income 383,553
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 5,454,407
Distribution of Realized Capital Gains from other Investment Companies 336,115
Unrealized Gain (Loss) from Appreciation (Depreciation) on Investments 5,027,441
Net Realized and Unrealized Gain (Loss) on Investments $10,817,963
Net Increase (Decrease) in Net Assets from Operations $11,201,516
</TABLE>
The accompanying notes are an integral part of the financial statements.
-19-
<PAGE> 76
<TABLE>
<CAPTION>
<S> <C>
MAXUS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
01/01/97 01/01/96
to to
12/31/97 12/31/96
<S> <C> <C> <C>
From Operations:
Net Investment Income 383,553 620,573
Net Realized Gain (Loss) on Investments 5,790,522 2,437,747
Net Unrealized Appreciation (Depreciation) 5,027,441 3,419,289
Increase (Decrease) in Net Assets from Operations 11,201,516 6,477,609
From Distributions to Shareholders
Net Investment Income (381,850) (620,392)
Net Realized Gain (Loss) from Security Transactions (5,787,553) (2,436,220)
Net Increase (Decrease) from Distributions (6,169,403) (3,056,612)
From Capital Share Transactions:
Proceeds From Sale of 844,703 Shares 15,843,329 12,447,924
Net Asset Value of 315,032 Shares Issued on Reinvestment of Dividends 5,729,950 2,637,296
Cost of 531,196 Shares Redeemed (9,733,252) (11,328,765)
11,840,027 3,756,455
Net Increase in Net Assets 16,872,140 7,177,452
Net Assets at Beginning of Period (including undistributed net investment
income of $181 and $0, respectively) 38,764,703 31,587,251
Net Assets at End of Period (including undistributed net investment income
of $1,884 and $181, respectively) 55,636,843 38,764,703
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout the period:
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Net Asset Value -
Beginning of Period 16.00 14.57 12.95 13.60 12.29
Net Investment Income 0.15 0.27 0.30 0.25 0.13
Net Gains or Losses on Securities
(realized and unrealized) 4.33 2.50 2.60 (0.17) 3.13
Total from Investment Operations 4.48 2.77 2.90 0.08 3.26
Dividends
(from net investment income) (0.15) (0.27) (0.27) (0.22) (0.12)
Distributions (from capital gains) (2.10) (1.07) (1.01) (0.51) (1.83)
Return of Capital 0.00 0.00 0.00 0.00 0.00
Total Distributions (2.25) (1.34) (1.28) (0.73) (1.95)
Net Asset Value -
End of Period 18.23 16.00 14.57 12.95 13.60
Total Return 28.16% 19.13% 22.43% 0.59% 24.51%
</TABLE>
The accompanying notes are an integral part of the financial statements.
-20-
<PAGE> 77
<TABLE>
<CAPTION>
MAXUS EQUITY FUND
<S> <C> <C> <C> <C> <C>
Ratios/Supplemental Data
Net Assets -
End of Period (Thousands) 55,637 38,765 31,576 17,018 11,343
Ratio of Expenses to Average Net Assets 1.87 1.90 1.96 2.00 2.61
Ratio of Net Income to Average Net Assets 1.80 1.71 2.01 1.82 0.91
Portfolio Turnover Rate 89% 111% 173% 184% 175%
Average commission per share $0.05544 $0.05209
</TABLE>
The accompanying notes are an integral part of the financial statements.
-21-
<PAGE> 78
MAXUS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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. The 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 the Fund's total
assets will consist of equity securities. Significant accounting policies
of the Fund are presented below:
SECURITY VALUATION:
The Fund intends to invest in a wide variety of equity and debt securities.
The investments in securities are carried at market value. The market
quotation used for common stocks, including those listed on the NASDAQ
National Market System, is the last sale price on the date on which the
valuation is made or, in the absence of sales, at the closing bid price.
Over-the-counter securities will be valued on the basis of the bid price at
the close of each business day. Short-term investments are valued at
amortized cost, which approximates market. Securities for which market
quotations are not readily available will be valued at fair value as
determined in good faith pursuant to procedures established by the Board of
Directors.
SECURITY TRANSACTION TIMING
Security transactions are recorded on the dates transactions are entered
into (the trade dates). Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded as
earned. The Fund uses the identified cost basis in computing gain or loss
on sale of investment securities. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
INCOME TAXES:
It is the Fund's policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements of
the Internal Revenue Service. This Internal Revenue Service requirement may
cause an excess of distributions over the book year-end accumulated income.
In addition, it is the Fund's policy to distribute annually, after the end
of the calendar year, any remaining net investment income and net realized
capital gains.
ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2.) INVESTMENT ADVISORY AGREEMENT
The 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 $477,143 in investment advisory fees during the twelve
months ended December 31, 1997. Maxus Securities, who served as the
national distributor of the Fund's shares, was reimbursed $238,210 for
distribution expenses. Maxus Information Systems received fees totaling
$42,563 for services rendered to the Fund for the twelve months ended
December 31, 1997. 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 $250,842 for the twelve months ending December 31, 1997.
The accompanying notes are an integral part of the financial statements.
-22-
<PAGE> 79
MAXUS EQUITY FUND
At December 31, 1997, 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 $100 per meeting.
4.) CAPITAL STOCK AND DISTRIBUTION
At December 31, 1997 an indefinite number of shares of capital stock ($.10
par value) were authorized, and paid-in capital amounted to $44,792,034.
Transactions in common stock were as follows:
<TABLE>
<S> <C>
Shares sold 844,773
Shares issued to shareholders in reinvestment of dividends 315,032
1,159,805
Shares redeemed (531,196)
Net Increase 628,609
Shares Outstanding:
Beginning of Period 2,422,794
End of Period 3,051,358
</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, 1997, purchases and sales of
investment securities other than U.S. Government obligations and short-term
investments aggregated $42,613,182 and $43,971,317 respectively. Purchases
and sales of U.S. Government obligations aggregated $7,983,593 and
$3,000,234 respectively.
6.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments which have any off-balance
sheet risk as of December 31, 1997.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at December
31, 1997 was the same as identified cost. At December 31, 1997, 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> <C>
12 268 302 (1,399,662) 10,868,640
</TABLE>
-23-
<PAGE> 80
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,
1997, 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, 1997, 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, 1997, 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
January 21, 1998
-24-
