<PAGE>
Dear Shareholder:
If I could relive 1998, I might have been inclined to work a lot less. Perhaps
I could have played some golf instead of digging through balance sheets, income
statement and difficult footnotes. The fact is, I don't play golf and even if I
did, without the advantage of hindsight, I do not believe I would have changed
any investment decision.
In 1998, all one needed to do to achieve superb performance was buy the 20 or 30
largest U.S. corporations or, if income was the primary objective, invest in 10
year U.S. Government bonds. For diversified equity or income portfolio
managers, it was nearly impossible to beat this simple formula. As 1998 came to
a close and as we begin 1999, this simplistic investment formula has now become
the conventional wisdom, expected to create great wealth for investors in the
months and years ahead.
An obvious exception to the new investment precept is The Maxus Laureate Fund.
Fund manager Alan Miller produced a 35% return in 1998 without owning one of the
30 corporate giants. Rather than buying and holding, Alan's formula is knowing
when to be in and out of the market. With a market as volatile as we have
experienced in recent months, Alan's exceptional talents were exercised to their
full potential, proving that hard work still has a place in the creation of
wealth.
The value style of investing, as characterized by the Maxus Equity, Maxus
Aggressive Value and Maxus Ohio Heartland Funds, was clearly out of favor in
1998, at least relative to the capitalization weighted S&P 500. Against the
benchmark of the Russell 2000, however, the Maxus Aggressive Value Fund had an
excellent year (measured from inception on March 1, 1998), and thus far in 1999,
Maxus Aggressive Value is showing up near the top of all national microcap
mutual funds.
Investors always have choices. The current wisdom suggests that investors
should pay 30 to 80 times earnings for companies whose earnings growth is
projected to be no more than 15% annually by analysts who almost always err on
the high side. Our formula is to seek out companies whose current market values
are less than their private market values and whose prospects for greater
success are exceptionally high.
During the past several months I have come to sense that the more sophisticated
investors are moving away from last year's overvalue approach and toward the
value style. If this trend continues, the Maxus Funds are exceptionally poised
to outperform the competition. Whatever the prospects for the immediate future,
however, the record shows that long term investors focused on value have always
outperformed other investors and investment styles.
/s/ Richard A Barone
Richard A Barone
<PAGE>
Maxus Equity Fund
Schedule of Investments
December 31, 1998
Shares/Principal Amount Market Value % of Assets
Basic Materials
100,000 National Steel 712,500 1.34%
Industrial Products & Services
20,000 A. Schulman 453,750
10,000 Angelica 186,250
35,000 B. F. Goodrich 1,255,625
60,000 Flowserve 993,750
100,000 Sensormatic Electronics * 693,750
40,000 Stoneridge * 910,000
20,000 Tenneco 681,250
65,000 Timken 1,226,875
6,401,250 12.01%
Machinery & Equipment
130,000 Agco 1,023,750
35,000 Case 763,437
60,000 Stewart & Stevenson 585,000
2,372,187 4.45%
Infrastructure & Environment
20,000 Ameron 740,000
100,000 Foster L B * 662,500
60,000 International Technology * 667,500
15,000 Ionics * 449,063
2,519,063 4.73%
Construction
40,000 Oakwood Homes 607,500 1.14%
Consumer Products
20,000 Eastman Kodak 1,440,000
85,000 Michael Anthony Jewelers * 276,250
50,000 Officemax * 612,500
10,000 Pennzoil-Quaker State 147,500
23,000 Stanley Works 638,250
25,000 The Limited 728,125
3,842,625 7.21%
Energy
45,000 Apache 1,139,062
31,200 Input\Output * 228,150
200,000 Patina Oil & Gas 587,500
10,000 Pennzenergy * 163,125
50,000 Pride Intl * 353,125
2,470,962 4.64%
The accompanying notes are an integral part of the financial statements.
<PAGE>
Entertainment
20,000 Mirage Resorts * 298,750 0.56%
Financial Services
20,000 American Express 2,050,000
20,000 Bank One 1,021,250
25,000 Lehman Brothers Holdings 1,101,563
4,172,813 7.83%
Real Estate
11,600 Alexander & Baldwin 269,700
50,000 Associated Estates Realty 590,625
61,800 Berkshire Realty 587,100
51,300 Boykin Lodging 634,837
50,000 Glenborough Realty 7.75% Conv Pfd 912,500
20,000 Patriot American Hospitality 120,000
50,000 St Joe 1,171,875
4,286,637 8.05%
Medical Products & Services
15,000 McKesson 1,185,938
30,000 Becton Dickinson 1,280,625
2,466,563 4.63%
Wholesale Distribution
25,000 Applied Industrial Technologies 346,875
170,000 Pioneer Standard 1,593,750
1,940,625 3.64%
Information Technology
105,000 Intergraph * 603,750
50,000 LSI Logic * 806,250
100,000 Silicon Valley Group * 1,275,000
100,000 VLSI Technology * 1,093,750
3,778,750 7.09%
Utilities
185,000 Citizens Utilities 1,480,000
50,000 Kansas City Power & Light 1,481,250
23,000 Pennsylvania Enterprises 586,500
20,000 Western Resources 665,000
4,212,750 7.91%
Transportation
25,000 Canadian Pacific 471,875 0.89%
Closed End Equity Funds
10,000 Baker Fentress 153,125
160,000 Emerging Mkts Infrastructure 1,160,000
1,313,125 2.46%
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Cash Equivalents
3,000,000 US Treas 0%, 5-15-99 2,950,140
3,000,000 US Treas 0%, 8-15-99 2,916,500
2,000,000 US Treas 0%, 12-15-99 1,989,280
2,107,480 Star Bank Treasury 4,526,900
12,382,820 23.24%
Total Investments (Cost - $50,627,301) 54,250,795 101.82%
Other Assets Less Liabilities (972,107) -1.82%
Net Assets - Equivalent 53,278,688 100.00%
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Assets & Liabilities
Maxus Equity Fund December 31, 1998
Equity Fund
Assets:
Investment Securities at Market Value 54,250,795
(Identified Costs - $50,627,301)
Cash 2,946
Receivables:
Receivable for investment securities sold -
Dividends and interest receivable 150,028
Unamortized organization costs -
Total Assets 54,403,769
Liabilities:
Payable for investment purchased 1,017,198
Payable for shareholder distributions -
Accrued Expenses 107,883
Total Liabilities 1,125,081
Net Assets 53,278,688
Net Assets Consist Of:
Capital Paid In 49,676,369
Undistributed Net Investment Income 4,261
Accumulated Realized Gain (Loss) on Investments - Net (25,436)
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 3,623,494
Net Assets 53,278,688
Net Assets:
Investors Shares 53,278,688
Institutional Shares -
Total 53,278,688
Shares of capital stock
Investors Shares 3,346,129
Institutional Shares -
Total 3,346,129
Net asset value per share
Investors Shares $15.92
Institutional Shares $15.92
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Operations
Maxus Equity Fund December 31, 1998
Equity Fund
Investment Income:
Dividend income $885,538
Interest income 756,158
Total Income 1,641,696
Expenses:
Investment advisory fees (Note 2) 549,278
Distribution fees (Investor shares) 274,638
Distribution fees (Institutional shares) -
Custodial fees 33,235
Organization costs -
Transfer agent fees/Accounting and Pricing 46,077
Legal 23,045
Audit 14,825
Registration and filing fees 15,440
Trustee fees 1,600
Printing & Other Miscellaneous 43,911
Total Expenses 1,002,049
Net Investment Income (Loss) 639,647
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 1,618,637
Distribution of Realized Capital Gains from
other Investment Companies -
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments (7,245,146)
Net Realized and Unrealized Gain (Loss) on Investments (5,626,509)
Net Increase (Decrease) in Net Assets from Operations $(4,986,862)
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets
Maxus Equity Fund December 31, 1998
Maxus Equity Fund
01/01/98 01/01/97
to to
12/31/98 12/31/97
From Operations:
Net Investment Income 639,647 383,553
Net Realized Gain (Loss) on Investments 1,618,637 5,790,522
Net Unrealized Appreciation (Depreciation) (7,245,146) 5,027,441
Increase (Decrease) in Net Assets from Operations (4,986,862) 11,201,516
Distributions to investor shareholders:
Net Investment Income (637,270) (381,850)
Net Realized Gain (Loss) from
Security Transactions (1,618,358) (5,787,553)
Distributions to institutional shareholders:
Net Investment Income - -
Net Realized Gain (Loss) from Security Transactions - -
Change in net assets from distributions (2,255,628) (6,169,403)
From Capital Share Transactions:
Proceeds from sale of shares 23,163,590 15,843,329
Dividend reinvestment 2,112,247 5,729,950
Cost of shares redeemed (20,391,502) (9,733,252)
Change in net assets from capital transactions 4,884,335 11,840,027
Change in net assets (2,358,155) 16,872,140
Net Assets:
Beginning of period 55,636,843 38,764,703
End of period 53,278,688 55,636,843
Share Transactions:
Issued 1,342,925 844,728
Reinvested 133,559 315,032
Redeemed (1,181,713) (531,196)
Net increase (decrease) in shares 294,771 628,564
Shares outstanding beginning of period 3,051,358 2,422,794
Shares outstanding end of period 3,346,129 3,051,358
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
<TABLE>
<S> <C> <C> <C> <C> <C>
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
Net Asset Value -
Beginning of Period 18.23 16.00 14.57 12.95 13.60
Net Investment Income 0.20 0.15 0.27 0.30 0.25
Net Gains or Losses on Securities
(realized and unrealized) (1.80) 4.33 2.50 2.60 (0.17)
Total from Investment Operations (1.60) 4.48 2.77 2.90 0.08
Distributions
Net investment income (0.20) (0.15) (0.27) (0.27) (0.22)
Capital gains (0.51) (2.10) (1.07) (1.01) (0.51)
Return of capital - - - - -
Total Distributions (0.71) (2.25) (1.34) (1.28) (0.73)
Net Asset Value -
End of Period $15.92 $18.23 $16.00 $14.57 $12.95
Total Return * -8.74% 28.16% 19.13% 22.43% 0.59%
Ratios/Supplemental Data:
Net Assets at end of
period (thousands) 53,279 55,637 38,765 31,576 17,018
Ratio of expenses to
average net assets * 1.80% 1.87% 1.90% 1.96% 2.00%
Ratio of net income to
average net assets * 1.15% 1.80% 1.71% 2.01% 1.82%
Portfolio turnover rate * 118% 89% 111% 173% 184%
</TABLE>
Institutional Shares
02/01/98
to
12/31/98
Net Asset Value -
Beginning of Period 15.92
Net Investment Income -
Net Gains or Losses on Securities
(realized and unrealized) -
Total from Investment Operations -
Distributions
Net investment income -
Capital gains -
Return of capital -
Total Distributions -
Net Asset Value -
End of Period $15.92
Total Return * 0.00%
Ratios/Supplemental Data:
Net Assets at end of period (thousands) 0
Ratio of expenses to average net assets * 1.30%
Ratio of net income to average net assets * 1.65%
Portfolio turnover rate * 118%
* Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE>
Notes to Financial Statements
Maxus Equity Fund
December 31, 1998
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 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 $549,278 in investment advisory fees during the fiscal year ending
December 31, 1998. Maxus Securities, who served as the national distributor of
the Fund's shares, was reimbursed $274,638 for distribution expenses. Maxus
Information Systems received fees totaling $46,077 for services rendered to
the Fund for the fiscal year ending December 31, 1998. Maxus Securities is a
registered broker-dealer. Maxus Securities effected substantially all of the
investment portfolio transactions for the Fund. For this service Maxus
Securities received commissions of $379,744 for the fiscal year ending
December 31, 1998.
<PAGE>
At December 31, 1998, 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 $100 per meeting.
4.) CAPITAL STOCK AND DISTRIBUTION
At December 31, 1998 an indefinite number of shares of capital stock ($.10 par
value) were authorized, and paid-in capital amounted to $49,676,369.
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 fiscal year ending December 31, 1998, purchases and sales of
investment securities other than U.S. Government obligations and short-term
investments aggregated $63,892,598 and $61,857,990 respectively. Purchases and
sales of U.S. Government obligations aggregated $18,683,404 and $18,974,121
respectively.
6.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments which have any off-balance sheet
risk as of December 31, 1998.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at
December 31, 1998 was the same as identified cost.
At December 31, 1998, the composition of unrealized appreciation (the
excess of value over tax cost) and depreciation (the excess of tax cost
over value) was as follows:
Appreciation (Depreciation) Net Appreciation
(Depreciation)
7,789,724 (4,166,230) 3,623,494
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees
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,
1998, 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 periods then
ended, and financial highlights for each of the five years in the periods 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, 1998, 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, 1998, 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 12, 1999
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