THE MAXUS FUNDS
Dear Shareholder:
What a difference a year makes. The 1994 bear market in bonds gave way to a
renewed bull market in 1995; and while stocks never experienced anything close
to a bear market in 1994, it sure seems as if they did compared to the 30% plus
returns in the Dow Jones Industrials and S&P 500 in 1995. By year end, the Dow
had stampeded through the 5000 mark while the S&P 500 managed to close above
600, both historical records.
The Maxus Income Fund managed to post a total return of 16.15% for 1995, which
was a welcome balance to the negative return of 1994. The strategic positioning
of the portfolio at the end of 1994 enabled the Fund to post this return in
spite of its exceptionally short maturity mix and conservative approach to the
bond market in general. The strategy continues to pay off as The Maxus Income
Fund has continued to advance through the first several weeks of 1996, while the
bond market has remained relatively flat.
The Maxus Equity Fund posted a 22.43% total return for 1995. While this result
was clearly less than the S&P 500, it was in line with funds having a general
value-oriented philosophy. Moreover, The Maxus Equity Fund's very cautious
approach, generally high cash position, and low volatility (beta) relative to
the market, place it in a somewhat unique category relative to all funds in
general. In spite of its continuing conservative posture, The Maxus Equity Fund
continued to outperform the S&P 500 during the five year period which ended last
December.
With the spectacular results of 1995 in both stock and bonds now behind us, the
continued momentum in the early weeks of 1996 would give reason to suspect that
a market correction may be near at hand. With an increasing number of advisors
becoming bullish (generally a sign of market top), secular trend watchers are
becoming increasingly suspicious that the market can maintain this upward
thrust.
Other signs of a top also may be beginning to appear. As I pointed out in the
1995 semi-annual report, the strong upward path of both the stock and bond
markets have been sustained for over 12 years by regular reductions in interest
rates and inflation, while corporate profits have benefited by increases in
productivity due to technological advancements and downsizing, and a generally
weak dollar vis-a-vis the major world currencies.
Both interest rates and inflation have been unable to break the lows set nearly
two years ago, and while there is some speculation that rates will decline
further in the coming months, it is exceedingly clear that the opportunity for a
continued decline in these rates, compared to their secular highs set in the
early 1980's, has been pretty much exhausted. Moreover, it is now clear that the
rate of increase in corporate profits appears to be slowing significantly. That
rate has declined in each succeeding quarter of 1995, and forecasts call for
further declines in 1996. Lastly, the dollar has advanced recently in relation
to major world currencies, and this advance is bound to negatively affect the
profitability of certain foreign source revenue.
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It now appears that the latest estimates from the Bureau of Labor Statistics
indicate that productivity increases are also slowing significantly, advancing a
paltry 1.4% annual rate in the third quarter of 1995. The implication is that it
will be increasingly difficult for the economy to grow at more than 2% annually
without increases in both interest rates and inflation. The recent increases in
the price of gold and other key commodities may be indicative of these problems
down the road.
The short term implications for stock prices are always unclear. For now, the
great rush to own stocks fueled by the market performance of 1995, continues to
push prices higher. Econometric models produced by Elaine Garzarelli suggest
that interest rates and other key indicators will need to advance significantly
before the market runs into trouble. The ongoing sector corrections within the
market may also suggest that stock prices are not overly speculative, and until
increased speculation develops, a major correction is not at hand.
The danger signals, then, seem to be appearing only on the economic front. It is
no wonder that good economists do not make good money managers. For example, I
consider Robert Guilliet to be among the most insightful economists of our time.
Yet Dr. Guilliet has been suggesting for the past several years that economic
conditions are (or soon will be) ripe for the market to turn negative. He has
always qualified his remarks by pointing out that an overvalued market says
nothing about market timing, i.e. markets may be overvalued for indefinite
periods of time.
My position is more moderate. I do not believe that the market is excessively
overvalued and a bear market is about to begin nor do I believe that interest
rates and various other key indicators must advance significantly before stocks
begin to decline. Rather, it seems to me that the major stock and bond market
advance which began in the early 1980's is firmly behind us and that long term
investors should lower their expectations with regard to the years immediately
ahead.
Richard A. Barone
2
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Maxus Laureate Fund
For the calendar year 1995, the Maxus Laureate Fund achieved a total return of
14.41%. This return fell short of our benchmark as capital appreciation funds
increased just over thirty percent as measured by Lipper Analytical Services.
Although the fund was not as aggressively positioned as it could have been, it
has become apparent the overall investment strategy assumes less risk than the
average capital appreciation fund. Therefore, I must consider assuming greater
risk or look at other benchmarks for a more realistic measure of success.
Our thematic approach allows us the flexibility to invest in many differing
asset classes on a global basis. This approach is similar to the multiasset
global universe of mutual funds reported on and followed by Morningstar Mutual
Funds, Inc. Morningstar provides a respected mutual fund evaluation service for
the retail and institutional markets. As a secondary benchmark, we will report
results on this universe of mutual funds. For the calendar year 1995, the
average total return for this universe equaled 16.17%
The flow of funds into the U.S. equity market continues unabated. This liquidity
is driving the market higher. However, the valuations being reached are
troubling, especially since earning growth rates have recently been decelerating
and could deteriorate further in the months ahead. We suspect, if interest rates
disappoint the consensus by moving higher rather than lower, the equity market
will noticeably struggle to maintain its gains.
As this is written, assets have been deployed toward defensive type funds as the
market appears to be overextended. Emphasis has been in selecting funds which
concentrate their assets in energy, natural resources and other commodities.
Early in the first quarter of 1996 we deployed assets into Acorn International
and Lexington Worldwide Emerging Markets Fund. Acorn International is a foreign
stock fund focusing on small to midcap stocks. Lexington Worldwide, as its name
implies, invests in emerging markets which appear to offer returns greater than
our domestic markets over time.
The future for Laureate holds great potential and I anticipate an exciting year
ahead. More than ever I appreciate the phrase, "past performance is not
indicative of future results." We look forward to a prosperous year and thank
all our shareholders for their continued support.
Alan G. Miller
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INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Directors
Maxus Laureate Fund
We have audited the accompanying statement of assets and liabilities of Maxus
Laureate Fund, including the schedule of portfolio investments, as of December
31, 1995, 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 two years in the period then
ended and for the period from May 1, 1993 (commencement of operations) to
December 31, 1993. 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, 1995, by correspondence with the custodian and
brokers. An audit also includes 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
Laureate Fund as of December 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
periods then ended, and the financial highlights for each of the two years in
the periods then ended and for the period from May 1, 1993 to December 31, 1993,
in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
January 22, 1996
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Maxus Laureate Fund
Schedule of Investments
December 31, 1995
================================================================================
Shares Cost Market Value % of Assets
- --------------------------------------------------------------------------------
Aggressive Growth
17,921 Rydex Nova.................... 250,035 250,538
------- -------
250,035 250,538 16.59%
Growth
206 Heartland Value............... 5,952 5,766
19,380 Neuberger & Berman Manhattan F 250,025 235,271
------- -------
255,977 241,037 15.96%
Specialty/Sector
22,645 Invesco Energy Fund........... 250,025 257,246
10,808 T. Rowe Price New Era Fund.... 250,025 244,812
------- -------
500,050 502,058 33.25%
Asset Allocation
18,465 Roberts Stephens Contrarian... 250,057 254,440 16.85%
Total Investments....................... $1,256,119 $1,248,073 82.65%
Other Assets Less Liabilities.................. $261,918 17.35%
Net Assets - Equivalent to $9.82 per share on
153,780 shares of capital stock outstanding.... $1,509,991 100.00%
==========
The accompanying notes are an integral part of the financial statements.
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Maxus Laureate Fund
Statement of Assets & Liabilities
December 31, 1995
Assets:
Investment Securities at Market Value
(Identified Cost - $1,256,119) ............................. $1,248,073
Cash ........................................................ 231,849
Receivables:
Investment Securities Sold ................................. 0
Dividends and Interest ..................................... 37,821
Other Assets ................................................. 13,313
------
Total Assets ........................................... $1,531,056
Liabilities
Payables:
Investment Securities Purchased ............................ $0
Shareholder Distributions .................................. 0
Accrued Expenses ........................................... 7,425
Other ...................................................... 13,640
------
Total Liabilities ...................................... $21,065
Net Assets ..................................................... $1,509,991
Net Assets Consist of:
Capital Paid In .............................................. $1,536,866
Accumulated Realized Gain (Loss) on Investments - Net ........ (18,829)
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net ............... (8,046)
-------
Net Assets, for 153,780 Shares Outstanding ................... $1,509,991
Net Asset Value and Redemption Price
Per Share ($1,509,991/153,780 shares) .................... $9.82
Offering Price Per Share ..................................... $9.82
Statement of Operations
December 31, 1995
Investment Income:
Dividends ................................................... $19,173
Interest .................................................... 17,467
------
Total Investment Income ................................. $36,640
Expenses:
Accounting and Pricing ...................................... 9,044
Amortization of Organization Expense ........................ 5,712
Audit ....................................................... 6,066
Custody ..................................................... 5,301
Distribution Plan Expenses .................................. 8,467
Legal ....................................................... 5,460
Management Fees (Note 2) .................................... 16,939
Registration ................................................ 2,025
Trustee Fees (Note 3) ....................................... 1,300
Printing & Miscellaneous .................................... 5,099
-----
Total Expenses .......................................... 65,413
Net Investment Income (Loss) ................................... (28,773)
Realized and Unrealized Gain (Loss) on Investments
Realized Gain (Loss) on Investments ........................ 263,105
Unrealized Gain (Loss)
from Appreciation (Depreciation) on Investments .......... (12,316)
--------
Net Realized and Unrealized Gain (Loss) on Investments ......... $250,789
Net Increase (Decrease) in Net Assets from Operations .......... $222,016
========
The accompanying notes are an integral part of the financial statements.
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Maxus Laureate Fund
Statement of Changes in Net Assets
01/01/95 01/01/94
to to
12/31/95 12/31/94
-------- --------
From Operations:
Net Investment Income (Loss) .................. $(28,773) $(22,131)
Net Realized Gain (Loss) on Investments ....... 263,105 (112,382)
Net Unrealized Appreciation (Depreciation) .... (12,316) 40,980
-------- ------
Increase (Decrease) in Net Assets from
Operation .................................... 222,016 (93,533)
From Distributions to Shareholders
Net Investment Income (Loss) .................. 0 0
Net Realized Gain (Loss) from Security
Transactions .................................. (163,629) 0
--------- -------
Net Increase (Decrease) from Distributions .... (163,629) 0
From Capital Share Transactions:
Proceeds From Sale of 12,041 Shares ........... 121,069 802,743
Net Asset Value of 14,922 shares issued on
Reinvestment of Dividends ................... 147,644 182,239
Cost of 80,976 Shares Redeemed ................ (815,064) (1,007,386)
--------- -----------
(546,351) (22,404)
Net Increase (Decrease) in Net Assets ............ (487,964) (115,937)
Net Assets at Beginning of Period (including
undistributed net investment
income of 0 and $0, respectively) ................ 1,997,955 2,113,892
Net Assets at End of Period (including
undistributed net investment income
of $0 and $10, respectively) .................. $1,509,991 $1,997,955
========== ==========
Financial Highlights
Selected data for a share of common stock outstanding throughout the period:
01/01/95 01/01/94 05/01/93
to to to
12/31/95 12/31/94 12/31/93*
-------- -------- ---------
Net Asset Value -
Beginning of Period .................. $9.62 $9.96 $10.00
Net Investment Income ................... (0.19) (0.08) (0.07)
Net Gains or (Losses) on Securities
(realized and unrealized) ............. 1.57 (0.26) 1.16
---- ------ ----
Total from Investment Operations ........ 1.38 (0.34) 1.09
Dividends
(from net investment income) .......... 0.00 0.00 0.00
Distributions (from capital gains) ...... (1.18) 0.00 (1.13)
Return of Capital ....................... 0.00 0.00 0.00
---- ---- ----
Total Distributions .................. (1.18) 0.00 (1.13)
Net Asset Value -
End of Period ........................ $9.82 $9.62 $9.96
Total Return ............................ 14.41% (3.41)% 8.62%
Ratios/Supplemental Data
Net Assets -
End of Period (Thousands) ........... 1,510 1,998 2,114
Ratio of Expenses to Average Net Assets . 3.85% 3.60% 2.42%
Ratio of Net Income to Average Net Assets (1.69)% (0.87)% (0.66)%
Portfolio Turnover Rate ................. 13.77 4.69 1.52
* Weighted average used
The accompanying notes are an integral part of the financial statements.
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Maxus Laureate Fund
Notes to Financial Statements
December 31, 1995
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 February 10, 1993. Significant
accounting policies of the Fund are presented below:
SECURITY VALUATION: The Fund intends to invest exclusively in other open-end
management investment companies (mutual funds). The investments in mutual
funds are carried at market value. The market quotation used for mutual
funds is the net asset value on the date on which the valuation is made. The
cost of securities sold is determined on the identified cost basis.
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.
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 Mutual + Shareholder
Services Corporation. Maxus Asset Management was paid $16,939 in investment
advisory fees during the twelve months ended December 31, 1995. Maxus
Securities, who served as the national distributor of the Fund's shares, was
reimbursed $8,467 for distribution expenses. Mutual + Shareholder Services,
who provides accounting and shareholder services, received fees totaling
$9,044 for services rendered to the Fund for the twelve months ended
December 31, 1995. 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 $5,100 for the twelve months ended December 31, 1995 At
December 31, 1995, Resource Management owned 10,000 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 $100 per meeting.
4.) CAPITAL STOCK AND DISTRIBUTION At December 31, 1995 an indefinite number of
shares of capital stock ($.10 par value) were authorized, and paid-in
capital amounted to $1,524,992. Transactions in common stock were as
follows:
Shares sold .................. 12,041
Shares issued to shareholders
in reinvestment of dividends. 14,922
------
26,963
Shares redeemed .............. 80,976
------
Net Increase (Decrease) ...... (54,013)
Shares Outstanding:
Beginning of Period ....... 207,793
-------
End of Period ............... 153,780
=======
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Maxus Laureate Fund
Notes To Financial Statements
December 31, 1995
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.) ORGANIZATION COSTS Organization costs are being amortized on a straight line
basis over a five year period.
6.) SECURITY TRANSACTION TIMING Security transactions are recorded on the dates
transactions are entered into (the trade dates). Dividend income and
distributions to shareholders are in 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.
7.) PURCHASES AND SALES OF SECURITIES During the twelve months ended December
31, 1995 purchases and sales of investment securities other than U.S.
Government obligations and short-term investments aggregated $19,435,502 and
$20,253,623 respectively.
8.) FINANCIAL INSTRUMENTS DISCLOSURE There are no reportable financial
instruments which have any off-balance sheet risk as of December 31, 1995.
9.) SECURITY TRANSACTIONS For Federal income tax purposes, the cost of
investments owned at December 31, 1995 was the same as identified cost. At
December 31, 1995, 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)
------------ -------------- -------------------------------
12,107 (20,153) (8,046)
10.)RECLASSIFICATION OF CAPITAL ACCOUNTS The Fund has adopted Statement of
Position 93-2, Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by
Investment Companies. As a result of this statement, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, undistributed net
investment loss has been adjusted to paid in capital as of December, 1995 in
the following amounts. These restatements did not affect net investment
income, net realized gain (loss) or net assets for the year ended December
31, 1995.
Capital Paid In Undistributed Net Investment Gain
--------------- ---------------------------------
(28,773) 28,773
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The Maxus Funds
28601 Chagrin Boulevard, Cleveland, Ohio 44122
(216) 292-3434
Investment Advisor
Maxus Asset Management Inc
28601 Chagrin Boulevard
Cleveland, Ohio 44122
Board of Trustees
Richard A. Barone
N. Lee Dietrich
Sanford A. Fox, D.D.S.
Burton D. Morgan
Michael A. Rossi
Robert A. Schenkelberg, Jr.
F. Carl Walter
Officers
Richard A. Barone, Chairman
James C. Onorato, Vice-President
Robert W. Curtin, Secretary
Custodian
Star Bank, N. A.
425 Walnut Street
P. O. Box 1118
Cincinnati, Ohio 45201-1118
Transfer Agent
Maxus Information Systems Inc
28601 Chagrin Boulevard
Cleveland, Ohio 44122
Distributor
Maxus Securities Corp
28601 Chagrin Boulevard
Cleveland, Ohio 44122
Legal Counsel
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2378
Auditor
McCurdy & Associates CPA's Inc
27955 Clemens Road
Westlake, Ohio 44145
10
