Dear Shareholder:
The Maxus Funds have once again shown exceptional relative performance for the
first six months of 1999. As usual, the stock market has demonstrated its
ability to confuse investors with conflicting signals and divergent trends. For
example, while the S&P 500 index turned in a respectable 8.09 %, the Dow Jones
Industrials, with its more cyclical stock weighting, leaped ahead over 16%. Even
more pronounced was the technology heavy NASDAQ 100, which advanced over 23%
while the small cap Russell 2000, managed only 5.41% gain. All of this was
occurring at the same time that the Salomon Broad Investment Grade bond index, a
proxy for the bond market, turned in a negative total return of -2.8%.
I believe that making sense of these divergent trends is a key element in
determining if your investment portfolio is headed in the right direction during
the next several years. While you can count on the fact that history rarely
repeats itself, it does offer excellent clues as to where and how investors
should position themselves today.
Those of you who have followed the Maxus investment philosophy already know that
we believe most of the large capitalization growth companies are significantly
overvalued based upon any reasonable prospect for growth in future years.
Overvaluation, however, does not necessarily give you any insight as to the
immediate direction of stock prices. There are much better indicators to follow.
The best indicator hands down is the direction and level of interest rates.
Since the beginning of the year rates have advanced over 100 basis points to
over 6% on longer term Treasury bonds. Although stock prices have struggled with
the increase, the general market continues to act well, seemingly to suggest
that interest rates don't count.
While there is no hard and fast rule, bear markets of the past have generally
started only when rates have risen approximately 30% from their lows. In the
current environment, rates would have to exceed 7% before the market would
approach any real trouble. Our estimate, as well as those of most economic
forecasters, is that long rates will not exceed 7% in the near future, despite
any increases in short term rates by the Federal Reserve. There are two
important things to keep in mind, however.
First, once the direction in interest rates is set in motion, it tends to remain
in motion until there is an economic resolution. The only problem with this
forecast is the timing is always an unknown. Significant rate increases may take
several years to appear. The second historically meaningful fact is that any
increase in interest rates tend to negatively impact high price to earnings
stocks more than low price to earnings stocks, i. e. value stocks are more
likely to outperform growth stocks. Without exploring the economic rationale, it
is generally accepted that the absolute level of interest rates relates directly
to the price to earnings multiple of the general market, i.e. the higher
interest rates, the lower the price to earnings ratio.
A price to earnings multiple is less meaningful in analyzing value stocks since
current earnings and the prospects for future earnings are only two components
in the analysis. For growth stocks they are the only components. With the
increase in interest rates during the first six months of 1998, I believe the
movement toward value stocks has begun and is apt to continue for some time. For
example, The Maxus Equity Fund advanced 19.3% during this period against the
Russell 3000 benchmark which increased 12.7%, while The Maxus Aggressive Value
Funds, which consists exclusively of micro-cap companies, advanced 27.5% against
the small cap Russell 2000 which chalked up 9.28% for the period.
Alan Miller continued his winning ways with a 13.2% increase for the Maxus
Laureate Fund, while the Maxus Income Fund produced a total return of 2.2 % and
scored significantly over the Ryan Labs government bond index which declined -
5.40%. Even the Maxus Ohio Heartland Fund, which advanced 2.1%, did considerably
better than competing funds with the same narrow focus.
Investors who still care about a company's fundamentals and underlying business
values should consider the Maxus Funds in their investment program. I believe we
are in an excellent position to capitalize on the changing environment already
taking shape in the stock and bond markets.
Sincerely,
Richard Barone
President
<PAGE>
Maxus Equity Fund
Schedule of Investments
June 30, 1999 (unaudited)
Shares/Principal Amount Market Value % of Assets
Basic Materials
115,800 Agco 1,309,988
50,000 Chiquita Brands Intl 450,000
30,000 A. Schulman 515,625
35,000 Goodrich 1,487,500
20,000 Great Lakes Chemical 921,250
60,000 National Steel 502,500
5,186,863
Capital Goods
5,000 Curtiss Wright 194,375
20,000 Raytheon Cl B 1,410,000
80,500 Checkpoint Systems * 719,469
50,000 Sensormatic Electronics * 696,875
40,000 Foster L B * 235,000
30,000 Flowserve 568,125
40,000 Timken 780,000
4,603,844
Communication Services
140,000 Citizens Utilities 1,557,500
Consumer Cyclical
40,000 Stoneridge * 560,000
40,000 Tenneco 955,000
20,000 Ameron 882,500
30,000 Stanley Works 965,625
50,000 Oakwood Homes 656,250
4,500 Interstate Hotels * 18,562
50,000 Officemax * 600,000
11,574 Limited 525,170
30,000 Angelica 528,750
5,691,857
Consumer Staples
26,000 American Business Products 396,500
50,000 Mirage Resorts * 837,500
15,000 McKesson 482,813
5,000 NCH 247,500
1,964,313
Energy
120,000 Input\Output * 907,500
50,000 Apache 1,950,000
75,000 Ethyl 450,000
3,307,500
* Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Maxus Equity Fund
Schedule of Investments
June 30, 1999 (unaudited)
Shares/Principal Amount Market Value % of Assets
Financials
20,000 Bank One 1,191,250
10,000 Firstar 280,000
10,000 Frontier Insurance Group 153,750
12,000 Lasalle Holdings 204,000
90,000 Berkshire Realty 1,040,625
20,000 Boykin Lodging 307,500
50,000 Developers Diversified Realty 843,750
90,000 Equity Inns 832,500
135,000 Wyndham International * 607,500
35,000 Saint Joe 945,000
16,000 American Express 2,082,000
20,000 Lehman Brothers Holdings 1,242,500
28,600 Pioneer Group * 493,350
10,223,725
Healthcare
30,000 Becton Dickinson 900,000
40,000 Steris * 775,000
10,000 HCR Manor Care * 241,875
1,916,875
Technology
10,000 Cable Design Technologies * 154,375
100,000 Intergraph * 775,000
165,000 Pioneer Standard 1,980,000
35,000 LSI Logic * 1,614,375
100,000 Silicon Valley Group * 1,681,250
10,000 Cambridge Tech Partners * 175,625
6,380,625
Utility
20,000 Ionics * 730,000
CONVERTIBLE PREFERRED
27,000 Glenborough Realty $1.94 513,000
CLOSED END EQUITY FUNDS
30,000 Baker Fentress 570,000
59,700 Emerging Mkts Infrastructure 555,956
1,125,956
Cash Equivalents
3,000,000 US Treas 0%, 8-15-99 2,983,020
2,353,308 Firstar Bank Treasury 2,353,308
5,336,328 10.63%
Total Investments (Cost - $37,589,688) 48,538,386 96.65%
Other Assets Less Liabilities 1,681,892 3.35%
Net Assets - Equivalent to $18.99 per 50,220,278 100.00%
share based on 2,643,749 shares of
capital stock outstanding (Note 4)
* Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Assets & Liabilities
Maxus Equity Fund June 30, 1999 (unaudited)
Equity
Fund
Assets:
Investment Securities at Market Value 48,538,386
(Identified Costs - $37,589,688)
Cash 4,340
Receivables:
Receivable for investment securities sold 1,662,334
Dividends and interest receivable 127,448
Unamortized organization costs -
Total Assets 50,332,508
Liabilities:
Payable for investment purchased -
Payable for shareholder distributions -
Accrued Expenses 112,230
Total Liabilities 112,230
Net Assets 50,220,278
Net Assets Consist Of:
Capital Paid In 37,937,505
Undistributed Net Investment Income 256,110
Accumulated Realized Gain (Loss) on Investments 1,077,965
- New
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 10,948,698
Net Assets 50,220,278
Net Assets:
Investors Shares 50,217,104
Institutional Shares 3,174
Total 50,220,278
Shares of capital stock
Investors Shares 2,643,749
Institutional Shares 167
Total 2,643,916
Net asset value per share
Investors Shares $18.99
Institutional Shares $19.01
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Operations
Maxus Equity Fund June 30, 1999 (unaudited)
Equity
Fund
Investment Income:
Dividend income $464,353
Interest income 255,433
Total Income 719,786
Expenses:
Investment advisory fees (Note 2) 248,925
Distribution fees (Investor shares) 124,458
Distribution fees (Institutional shares) -
Custodial fees 18,161
Organization costs -
Transfer agent fees/Accounting and Pricing 21,640
Legal 21,701
Audit 7,000
Registration and filing fees 10,825
Trustee fees 3,400
Printing & Other Miscellaneous 11,827
Total Expenses 467,937
Net Investment Income (Loss) 251,849
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 1,103,401
Distribution of Realized Capital Gains from
other Investment Companies -
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments 7,325,204
Net Realized and Unrealized Gain (Loss) on Investments 8,428,605
Net Increase (Decrease) in Net Assets from Operations $8,680,454
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets
Maxus Equity Fund June 30, 1999 (unaudited)
Maxus Equity Fund
01/01/99 01/01/98
to to
06/30/99 12/31/98
From Operations:
Net Investment Income 251,849 639,647
Net Realized Gain (Loss) on Investments 1,103,401 1,618,637
Net Unrealized Appreciation (Depreciation) 7,325,204 (7,245,146)
Increase (Decrease) in Net Assets from Operations 8,680,454 (4,986,862)
Distributions to investor shareholders:
Net Investment Income - (637,270)
Net Realized Gain (Loss) from Security Transactions - (1,618,358)
Distributions to institutional shareholders:
Net Investment Income - -
Net Realized Gain (Loss) from Security Transactions - -
Change in net assets from distributions - (2,255,628)
From Capital Share Transactions:
Proceeds from sale of shares 3,196,114 23,163,590
Dividend reinvestment - 2,112,247
Cost of shares redeemed (14,934,978) (20,391,502)
Change in net assets from capital transactions (11,738,864) 4,884,335
Change in net assets (3,058,410) (2,358,155)
Net Assets:
Beginning of period 53,278,688 55,636,843
End of period 50,220,278 53,278,688
Share Transactions:
Issued 191,508 1,342,925
Reinvested - 133,559
Redeemed (893,721) (1,181,713)
Net increase (decrease) in shares (702,213) 294,771
Shares outstanding beginning of period 3,346,129 3,051,358
Shares outstanding end of period 2,643,916 3,346,129
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Highlights
Maxus Equity Fund Investor Shares
Selected data for a share of capital stock outstanding throughout the period
indicated
01/01/99 01/01/98 01/01/97 01/01/96 01/01/95
to to to to to
06/30/99 12/31/98 12/31/97 12/31/96 12/31/95
Net Asset Value -
Beginning of Period 15.92 18.23 16.00 14.57 12.95
Net Investment Income 0.90 0.20 0.15 0.27 0.30
Net Gains or Losses on Securities
(realized and unrealized) 2.17 (1.80) 4.33 2.50 2.60
Total from Investment Operations 3.07 (1.60) 4.48 2.77 2.90
Distributions
Net investment income - (0.20) (0.15) (0.27) (0.27)
Capital gains - (0.51) (2.10) (1.07) (1.01)
Return of capital - - - - -
Total Distributions - (0.71) (2.25) (1.34) (1.28)
Net Asset Value -
End of Period $18.99 $15.92 $18.23 $16.00 $14.57
Total Return 19.28% -8.74% 28.16% 19.13% 22.43%
Ratios/Supplemental Data:
Net Assets at end of period
(thousands) 50,217 53,279 55,637 38,765 31,576
Ratio of expenses to average
net assets * 1.86% 1.80% 1.87% 1.90% 1.96%
Ratio of net income to average
net assets * 1.00% 1.15% 1.80% 1.71% 2.01%
Portfolio turnover rate * 70% 111% 89% 111% 173%
Institutional Shares
01/01/99 02/01/98
to to
06/30/99 12/31/98
Net Asset Value -
Beginning of Period 15.92 15.92
Net Investment Income 0.92 -
Net Gains or Losses on Securities
(realized and unrealized) 2.17 -
Total from Investment Operations 3.09 -
Distributions
Net investment income - -
Capital gains - -
Return of capital - -
Total Distributions - -
Net Asset Value -
End of Period $19.01 $15.92
Total Return 19.41% 0.00%
Ratios/Supplemental Data:
Net Assets at end of period (thousands) 3 0
Ratio of expenses to average
net assets * 1.36% 1.30%
Ratio of net income to average
net assets * 1.50% 1.65%
Portfolio turnover rate * 70% 111%
* Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE>
Notes to Financial Statements
Maxus Equity Fund
June 30, 1999 (unaudited)
1.) SIGNIFICANT ACCOUNTING POLICIES
The Fund is a diversified, open-end management investment company, organized
as a Trust under the laws of the State of Ohio by a Declaration of Trust dated
July 12, 1989. The Fund has an investment objective of obtaining a total
return, a combination of capital appreciation and income. The Fund pursues
this objective by investing primarily in 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
fiscal year, any remaining net investment income and net realized capital
gains.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2.) INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory and administration agreement
with Maxus Asset Management Inc. a wholly owned subsidiary of Resource
Management Inc. The Investment Advisor receives from the Fund as compensation
for its services to the Fund an annual fee of 1% on the first $150,000,000 of
the Fund's net assets, and 0.75% of the Fund's net assets in excess of
$150,000,000.
3.) RELATED PARTY TRANSACTIONS
Resource Management, Inc. has three wholly owned subsidiaries that 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 $248,925 in investment advisory fees during the six months ending June
30, 1999. Maxus Securities, who served as the national distributor of the
Fund's shares, was reimbursed $124,458 for distribution expenses. Maxus
Information Systems received fees totaling $21,640 for services rendered to
the Fund for the six months ending June 30, 1999. Maxus Securities is a
registered broker-dealer. Maxus Securities effected substantially all of the
investment portfolio transactions for the Fund. For this service Maxus
Securities received commissions of $127,233 for the six months ending June 30,
1999.
At June 30, 1999, 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 $100 per meeting.
<PAGE>
4.) CAPITAL STOCK AND DISTRIBUTION
At June 30, 1999 an indefinite number of shares of capital stock ($.10 par
value) were authorized, and paid-in capital amounted to $37,937,505.
Distributions to shareholders are recorded on the ex-dividend date. Payments
in excess of net investment income or of accumulated net realized gains
reported in the financial statements are due primarily to book/tax
differences. Payments due to permanent differences have been charged to paid
in capital. Payments due to temporary differences have been charged to
distributions in excess of net investment income or realized gains.
5.) PURCHASES AND SALES OF SECURITIES
During the six months ending June 30, 1999, purchases and sales of investment
securities other than U.S. Government obligations and short-term investments
aggregated $16,602,544 and $23,656,332 respectively. Purchases and sales of
U.S. Government obligations aggregated $0 and $4,992,180 respectively.
6.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments that have any off-balance sheet
risk as of June 30, 1999.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at June
30, 1999 was the same as identified cost.
At June 30, 1999, the composition of unrealized appreciation (the excess
of value over tax cost) and depreciation (the excess of tax cost over
value) was as follows:
Appreciation (Depreciation) Net Appreciation
(Depreciation)
11,812,703 (864,005) 10,948,698
<PAGE>
