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 Laureate Fund
Schedule of Investments
June 30, 1999 (unaudited)
Shares/Principal Amount Market Value % of Assets
Mutual Funds Equity
34,423 Acorn Foreign 40 450,259
15,595 American Century 20th Century Intl 160,000
25,628 Artisan International 478,478
12,634 Baron Asset 765,982
5,217 Baron Growth 163,921
22,656 Berger Small Cap Value Fund 505,008
5,468 Heartland Value Fund 178,847
33,145 Icon Asia Region 325,155
10,365 Invesco Worldwide Communications 333,041
6,284 Janus Enterprise 295,481
14,921 Janus Overseas Fund 332,137
21,709 Lexington Crosby Small Cap Asian 168,459
17,755 Lexington Worldwide Emerging Mkt Fnd 157,841
425 Montgomery Emerging Asia Fund 5,179
31,342 Montgomery Emerging Mkts Fund 320,943
18,622 Montgomery Global Communications 497,753
1,211 Mutual Series European 17,093
32,087 Oakmark International 481,947
17,656 Oakmark International Sm Cap 221,405
32,938 Oakmark Small Cap 502,641
21,268 Potomac Small Cap 257,977
26,377 Robertson Stephens Emerg Growth 905,794
15,752 Robertson Stephens Global Natural 157,520
55,032 Robertson Stephens Informtion Age 1,278,953
28,838 Robertson Stephens Microcap Growth 495,718
34,896 Rydex Basic Materials 321,396
36,202 Rydex Biotechnology 495,964
15,510 Rydex Nova 589,370
14,545 Rydex Otc Fund 752,995
61,071 Ssga Emerging Market Fund 638,805
9,918 Strong Asia Pacific 91,845
417 Turner Small Cap Equity Fund 13,785
49,180 Ultrashort Profund Investor Shares 432,295
9,342 Van Wagoner Emerg Growth Fund 210,475
7,179 Van Wagoner Post 168,712
52,757 Warburg Pincus Emg Mkts Fund 478,502
32,580 Warburg Pincus Japan Growth Fund 551,906
75,744 Warburg Pincus Japan Small Co 977,861
11,858 Warburg Pincus Small Co Value 160,672
8,070 Worldwide Hong Kong 114,193
15,456,307 95.07%
Cash Equivalents
1,505,284 Star Bank Treasury 1,505,284 9.25%
Total Investments (Cost - $14,221,547) 16,961,591 104.25%
Other Assets Less Liabilities (691,218) -4.25%
Net Assets - Equivalent to $15.04
per share 16,270,373 100.00%
based on 1,081,419 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 Laureate Fund June 30, 1999 (unaudited)
Laureate
Fund
Assets:
Investment Securities at Market Value 16,961,591
(Identified Costs - $14,221,547)
Cash 5,460
Receivables:
Receivable for investment securities sold 471,890
Dividends and interest receivable 10,048
Unamortized organization costs -
Total Assets 17,448,989
Liabilities:
Payable for investment purchased 1,120,189
Payable for shareholder distributions -
Accrued Expenses 58,427
Total Liabilities 1,178,616
Net Assets 16,270,373
Net Assets Consist Of:
Capital Paid In 13,482,117
Undistributed Net Investment Income (123,544)
Accumulated Realized Gain (Loss) on Investments - Net 171,756
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 2,740,044
Net Assets 16,270,373
Net Assets:
Investors Shares 16,260,284
Institutional Shares 10,089
Total 16,270,373
Shares of capital stock
Investors Shares 1,081,419
Institutional Shares 668
Total 1,082,087
Net asset value per share
Investors Shares $15.04
Institutional Shares $15.11
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Operations
Maxus Laureate Fund June 30, 1999 (unaudited)
Laureate
Fund
Investment Income:
Dividend income $207
Interest income 23,748
Total Income 23,955
Expenses:
Investment advisory fees (Note 2) 66,854
Distribution fees (Investor shares) 33,404
Distribution fees (Institutional shares) -
Custodial fees 4,399
Organization costs -
Transfer agent fees/Accounting and Pricing 14,358
Legal 12,210
Audit 6,000
Registration and filing fees 1,384
Trustee fees 1,800
Printing & Other Miscellaneous 7,090
Total Expenses 147,499
Net Investment Income (Loss) (123,544)
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 171,756
Distribution of Realized Capital Gains from other
Investment Companies -
Unrealized Gain (Loss) from Appreciation (Depreciation)
on Investments 1,603,601
Net Realized and Unrealized Gain (Loss) on Investments 1,775,357
Net Increase (Decrease) in Net Assets from Operations $1,651,813
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets
Maxus Laureate Fund June 30, 1999 (unaudited)
Maxus Laureate Fund
01/01/99 01/01/98
to to
06/30/99 12/31/98
From Operations:
Net Investment Income (123,544) (52,762)
Net Realized Gain (Loss) on Investments 171,756 468,275
Net Unrealized Appreciation (Depreciation) 1,603,601 1,125,684
Increase (Decrease) in Net Assets from Operations 1,651,813 1,541,197
Distributions to investor shareholders:
Net Investment Income - -
Net Realized Gain (Loss) from Security Transactions - (417,895)
Distributions to institutional shareholders:
Net Investment Income - -
Net Realized Gain (Loss) from Security Transactions - (463)
Change in net assets from distributions - (418,358)
From Capital Share Transactions:
Proceeds from sale of shares 8,273,947 4,475,218
Dividend reinvestment - 409,851
Cost of shares redeemed (1,723,460) (1,335,080)
Change in net assets from capital transactions 6,550,487 3,549,989
Change in net assets 8,202,300 4,672,828
Net Assets:
Beginning of period 8,068,073 3,395,245
End of period 16,270,373 8,068,073
Share Transactions:
Issued 597,515 359,682
Reinvested - 30,779
Redeemed (122,660) (110,248)
Net increase (decrease) in shares 474,855 280,213
Shares outstanding beginning of period 607,232 327,019
Shares outstanding end of period 1,082,087 607,232
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Highlights
Maxus Laureate 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 13.29 10.38 10.82 9.82 9.62
Net Investment Income 0.13 (0.12) 0.52 (0.08) (0.19)
Net Gains or Losses on Securities
(realized and unrealized) 1.62 3.76 0.07 2.14 1.57
Total from Investment Operations 1.75 3.64 0.59 2.06 1.38
Distributions
Net investment income - - (0.52) - -
Capital gains - (0.73) (0.51) (1.06) (1.18)
Return of capital - - - - -
Total Distributions - (0.73) (1.03) (1.06) (1.18)
Net Asset Value -
End of Period $15.04 $13.29 $10.38 $10.82 $9.82
Total Return 13.17% 35.14% 5.49% 21.03% 14.41%
Ratios/Supplemental Data:
Net Assets at end of period
(thousands) 16,260 8,059 3,395 3,156 1,510
Ratio of expenses to average
net assets * 2.24% 2.63% 2.49% 3.92% 3.85%
Ratio of net income to average
net assets * -1.87% -1.10% 4.19% -0.73% -1.69%
Portfolio turnover rate * 1546% 2078% 1511% 1267% 1377%
Institutional Shares
01/01/99 02/01/98
to to
06/30/99 12/31/98
Net Asset Value -
Beginning of Period 13.30 10.38
Net Investment Income 0.19 (0.11)
Net Gains or Losses on Securities
(realized and unrealized) 1.62 3.76
Total from Investment Operations 1.81 3.65
Distributions
Net investment income - -
Capital gains - (0.73)
Return of capital - -
Total Distributions - (0.73)
Net Asset Value -
End of Period $15.11 $13.30
Total Return 13.61% 35.24%
Ratios/Supplemental Data:
Net Assets at end of period
(thousands) 10 9
Ratio of expenses to average
net assets * 1.74% 2.13%
Ratio of net income to average
net assets * -1.37% -0.60%
Portfolio turnover rate * 1546% 2078%
* Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE>
Notes to Financial Statements
Maxus Laureate 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
February 10, 1993. The 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. 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.
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 $66,854 in investment advisory fees during the fiscal year ended June 30,
1999. Maxus Securities, who served as the national distributor of the Fund's
shares, was reimbursed $33,404 for distribution expenses. Maxus Information
Systems, who provides accounting and shareholder services, received fees
totaling $14,358 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. The fees collected by Maxus Securities represent transaction
charges imposed by the custodian. Maxus Securities pays these charges to the
custodian without a mark-up.
<PAGE>
Notes to Financial Statements
Maxus Laureate Fund
June 30, 1999 (unaudited)
At June 30, 1999, Maxus Securities Corp 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 $100 per meeting.
4.)CAPITAL STOCK AND DISTRIBUTION
At June 30, 1999 an indefinite number of shares of capital stock ($.10 par
value) were authorized, and paid-in capital amounted to $13,482,117.
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 $92,781,689 and $86,779,517
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)
2,789,083 (49,039) 2,740,044
<PAGE>
