<PAGE>
MAXUS INCOME FUND
MAXUS EQUITY FUND
MAXUS LAUREATE FUND
MAXUS OHIO HEARTLAND FUND
MAXUS AGGRESSIVE VALUE FUND
Investor Shares
Institutional Shares
Maxus Income Fund has an investment objective of obtaining the highest total
return, a combination of income and capital appreciation, consistent with
reasonable risk. The Fund pursues this objective by investing primarily in
income-producing securities.
Maxus Equity 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.
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 primarily in other
mutual funds which invest on a global basis.
Maxus Ohio Heartland Fund has an investment objective of obtaining a high total
return (a combination of income and capital appreciation). The Fund pursues this
objective by investing primarily in equity securities of companies headquartered
in the State of Ohio.
Maxus Aggressive Value Fund has an investment objective of obtaining capital
appreciation. The Fund pursues this objective by investing primarily in equity
securities of companies whose equity securities have a total market value of
between $10,000,000 and $200,000,000.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.
PROSPECTUS/April 30, 1999
<PAGE>
MAXUS INCOME FUND
RISK/RETURN SUMMARY
Investment Objective and Main Investment Strategies
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 Fund pursues this objective by investing primarily in
income-producing securities (such as debt securities, preferred stocks and
common and preferred shares of closed-end investment companies (also known as
"closed-end funds") having portfolios consisting primarily of income-producing
securities). Certain of the debt securities and preferred stocks in which the
Fund invests may be convertible into common shares. To a lesser degree, the Fund
will invest directly in common shares bearing high dividends.
Maxus Income Fund will alter the composition of its portfolio as economic
and market trends change. The Adviser will increase its investment in short-term
debt securities during periods when it believes interest rates will rise and
will increase its investment in long-term debt securities when it believes
interest rates will decline. Maxus Income Fund may invest in debt securities of
any maturity.
In selecting 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 (i) securities rated BB or lower by Standard & Poor's Corporation and/or (ii)
unrated securities which, in the opinion of the Adviser, are of quality
comparable to those rated BB or lower. Securities rated lower than BBB 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.
In selecting closed-end funds for Maxus Income Fund, the Adviser will
invest in closed-end funds which, in choosing corporate debt securities in which
they invest, adhere to ratings criteria no less strict than those followed by
Maxus Income Fund in selecting its direct investments in corporate debt
securities. Such closed-end funds may invest in debt securities of United States
or foreign issuers.
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. The taking of such a
temporary defensive posture may adversely impact the ability of the Fund to
achieve its investment objective.
Main Risks
Volatility. The value of securities in Maxus Income Fund's portfolio will
go up and down. The Fund's portfolio will reflect changes in the prices of
individual portfolio securities or general changes in securities valuations.
Consequently, the Fund's share price may decline and you could lose money.
<PAGE>
Debt Securities Risks. The Fund's portfolio will also be exposed to the
following additional risks in connection with its investments in debt securities
and in closed-end funds which invest primarily in debt securities:
- Prices of debt securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise,
prices of debt securities fall. The net asset value of the Fund may
decrease during periods of rising interest rates.
- An issuer of debt securities may default (fail to repay interest and
principal when due). If an issuer defaults or the risk of such default
is perceived to have increased, the Fund will lose all or part of its
investment. The net asset value of the Fund may fall during periods of
economic downturn when such defaults or risk of defaults increase.
- Securities rated below investment grade, also known as junk bonds,
generally entail greater risks than investment grade securities. For
example, their prices are more volatile, their values are more
negatively impacted by economic downturns, and their trading market
may be more limited.
Closed-End Funds. The closed-end funds in which the Fund invests typically
pay an advisory fee for the management of their portfolios, as well as other
expenses. Therefore, the investment by the Fund in closed-end funds often
results in a duplication of advisory fees and other expenses, thereby resulting
in a lower return for the Fund than would be the case in the absence of such
duplication.
In addition, since these closed-end funds invest in debt securities, they
are subject to the same risks described above in "Debt Securities Risks".
Also, certain of the closed-end funds in which Maxus Income Fund invests
may invest part or all of their assets in debt securities of foreign issuers.
Such investments involve the following additional risks:
- Because foreign securities ordinarily are denominated in currencies
other than the U.S. dollar, changes in foreign currency exchange rates
will affect the closed-end 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 closed-end fund. If the value of
a foreign currency declines against the U.S. dollar, the value of the
closed-end fund's assets denominated in that currency will decrease.
Although these closed-end funds may enter into "hedging" transactions
intended to minimize the risk of loss due to a decline in the value of
the subject foreign currency, in some cases all or a portion of the
closed-end fund's portfolio remains subject to this risk of loss.
- There are additional risks relating to political, economic, or
regulatory conditions in foreign countries; withholding or other
taxes; trading, settlement, custodial, and other operational risks;
and the potentially less stringent investor protection and disclosure
standards of foreign markets. All of these factors can make foreign
investments of such closed-end funds more volatile and potentially
less liquid than U.S. investments.
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Bar Chart and Performance Table
The bar chart and table shown below provide an indication of the risks of
investing in Maxus Income Fund by showing changes in the Fund's performance from
year to year over a 10-year period and by showing how the Fund's average annual
returns for one, five, and ten years compare to those of a broad-based
securities market index. How the Fund has performed in the past is not
necessarily an indication of how the Fund will perform in the future.
Maxus Income Fund
Investor Shares
[Bar Chart]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
11.4% 1.7% 19.3% 7.9% 8.7% -4.5% 16.4% 9.2% 11.5% 3.5%
During the 10-year period shown in the bar chart, the highest return for a
quarter was 7.79% (quarter ending March 31, 1991) and the lowest return for a
quarter was -3.76% (quarter ending March 31, 1994).
Average Annual Total Returns Past Past Past
(for the periods ending December One Year 5 Years 10 Years
31, 1998)
Maxus Income Fund 3.49% 6.98% 8.31%
Lehman Intermediate Corporate 8.3% 7.17% 9.19%
Index*
* The Lehman Intermediate Corporate Index is an index of investment grade
corporate bonds having at least $100,000,000 principal amount outstanding and
maturities of from one to ten years.
<PAGE>
MAXUS EQUITY FUND
RISK/RETURN SUMMARY
Investment Objective and Main Strategies
The investment objective of Maxus Equity Fund is to obtain a total return,
a combination of capital appreciation and income. This Fund pursues this
objective by investing primarily in equity securities of both smaller and larger
companies. Under normal circumstances at least 65% of the Fund's total assets
will consist of equity securities. Equity securities consist of common stock and
securities convertible into common stock. The Fund emphasizes a "value" style of
investing. In deciding which securities to buy and which to sell, the Adviser
will give primary consideration to fundamental factors. For example, securities
having relatively low ratios of share price to book value, net asset value,
earnings and cash flow will generally be considered attractive investments.
Additionally, the Adviser will give secondary consideration to insider
transactions and the growth of earnings.
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. The taking of such a
temporary defensive posture may adversely affect the ability of the Fund to
achieve its investment objective.
Main Risks
Volatility. The value of securities in Maxus Equity Fund's portfolio will
go up and down. The Fund's portfolio will reflect changes in the prices of
individual portfolio securities or general changes in securities valuations.
Consequently, the Fund's share price may decline and you could lose money.
Smaller Companies. The prices of equity securities fluctuate based on
changes in a company's activities and financial condition and in overall market
conditions. While Maxus Equity Fund invests in both smaller and larger
companies, the smaller companies in which the Fund invests are especially
sensitive to these factors and therefore may be subject to greater share price
fluctuations than other companies. Also, securities of these smaller companies
are often less liquid, thus possibly limiting the ability of the Fund to dispose
of such securities when the Adviser deems it desirable to do so. As a result of
these factors, securities of these smaller companies may expose shareholders of
the Fund to above average risk.
<PAGE>
Bar Chart and Performance Table
The bar chart and table shown below provide an indication of the risks of
investing in Maxus Equity Fund by showing changes in the Fund's performance from
year to year over the life of the Fund and by showing how the Fund's average
annual returns for one and five year peroids and the life of the Fund compare to
those of a broad-based securities market index. How the Fund has performed in
the past is not necessarily an indication of how the Fund will perform in the
future.
Maxus Equity Fund
Investor Shares
[Bar Chart]
1990 1991 1992 1993 1994 1995 1996 1997 1998
- -10.8% 36.4% 13.6% 24.5% 0.6% 22.4% 19.1% 28.2% -8.7%
During the 9-year period shown in the bar chart, the highest return for a
quarter was 27% (quarter ending March 31, 1991) and the lowest return for a
quarter was -21.06% (quarter ending September 30, 1998).
Average Annual Total Returns Past Past Life
(for the periods ending December One Year 5 Years of Fund
31, 1998)
Maxus Equity Fund -8.74% 11.41% 12.56%
Value Line Arithmetic Index* 5.82% 15.27% 12.88%
* The Value Line Arithmetic Index is an equal-weighted index of the 1,636 stocks
followed by Value Line Publishing, Inc.
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MAXUS LAUREATE FUND
RISK/RETURN SUMMARY
Investment Objective and Main Investment Strategy
The investment objective at Maxus Laureate Fund is to achieve a high total
return, a combination of capital appreciation and income, consistent with
reasonable risk. The Fund pursues this objective by investing primarily in other
mutual funds which invest on a global basis. The Fund will structure its
portfolio of mutual funds by (1) identifying certain global investment themes
(for example, global telecommunication or emerging markets) which are expected
to provide a favorable return over the next six to twelve months and (ii)
selecting one or more mutual funds with management styles (for example, value
vs. growth or large cap vs. small cap) or investment concentrations which
represent each theme. As market conditions change, the Fund will exit those
investment themes which appear to have run their course and replace them with
more attractive opportunities. The Fund also will look for opportunities caused
by market-moving events (such as political events, currency devaluations and
natural disasters) that cause a disequilibrium between securities prices and
their underlying intrinsic values.
The Fund may also seek to achieve its objective by investing in mutual
funds whose investment objectives are to provide investment results which either
(i) generally correspond to the performance of a recognized stock price index
("index funds"), (ii) generally correspond to a specified multiple of (for
example, two times) the performance of a recognized stock price index
("leveraged index funds"), (iii) generally correspond to the inverse (opposite)
of the performance of a recognized stock price index ("bear funds") or (iv)
generally correspond to a specified multiple of the inverse (opposite) of the
performance of a recognized stock price index ("leveraged bear funds").
The Fund may invest in index funds and/or leveraged index funds when the
Adviser believes that equity prices in general are likely to rise in the near
term. Investments in index funds and leveraged index funds are designed to allow
the Fund to seek to profit from anticipated increases in the indexes to which
such funds generally are correlated. The Fund may invest in bear funds and/or
leveraged bear funds when the Adviser believes that equity prices in general are
likely to decline in the near term. Investments in bear funds and leveraged bear
funds are designed to allow the Fund to seek to profit from anticipated
decreases in the indexes to which such funds generally are inversely correlated.
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. The taking of such a
temporary defensive posture may adversely affect the ability of the Fund to
achieve its investment objective.
Because the Fund reallocates fund investments across potentially numerous
asset subclasses as evolving economic and financial conditions warrant, the
portfolio turnover rate of the Fund is much 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 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. Also, a high rate of
portfolio turnover will result in high amounts of realized investment gain
subject to the payment of taxes by shareholders. Any realized net short-term
investment gain will be taxed to shareholders as ordinary income. See
"Dividends, Distributions and Taxes" below.
<PAGE>
Main Risks
Volatility. The value of securities in Maxus Laureate Fund's portfolio will
go up and down. The Fund's portfolio will reflect changes in the prices of
individual portfolio securities or general changes in securities valuations.
Consequently, the Fund's share price may decline and you could lose money.
Foreign Exposure. Many of the underlying funds in which this Fund invests
have substantial investments in foreign markets. Foreign securities, foreign
currencies, and securities issued by U.S. entities with substantial foreign
operations can involve additional risks relating to political, economic or
regulatory conditions in foreign countries. These risks include fluctuations in
foreign currencies; withholding or other taxes; trading, settlement, custodial
and other operational risks; and the less stringent investor protection and
disclosure standards of some foreign markets. All of these factors can make
foreign investments, especially those in emerging markets, more volatile and
potentially less liquid than U.S. investments. In addition, foreign markets can
perform differently than the U.S. market. If these factors cause the net asset
values of the underlying funds to decline, the Funds share price will decline.
Index and Leveraged Index Funds. The Fund may invest in "index funds" or
"leveraged index funds." If equity prices generally decline while the Fund is
invested in an index fund or funds, the Fund could experience substantial
losses. Such losses would be magnified to the extent the Fund is invested in a
leveraged index fund or funds.
Bear and Leveraged Bear Funds. The Fund may also invest in "bear funds" or
"leveraged bear funds." If equity prices generally rise while the Fund is
invested in a bear fund or funds, the Fund could experience substantial losses.
Such losses would be magnified to the extent the Fund is invested in a leveraged
bear fund or funds.
Duplication of Expenses. An investor in the Fund will bear not only his
proportionate share of the expenses of the Fund but also indirectly similar
expenses of the underlying mutual funds in which the Fund invests. 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.
Industry Concentration. Through its investment in underlying funds, the
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.
<PAGE>
Bar Chart and Performance Table
The bar chart and table shown below provide an indication of the risks of
investing in Maxus Laureate Fund by showing changes in the Fund's performance
from year to year over the life of the Fund and by showing how the Fund's
average annual returns for one and five year periods and the life of the Fund
compare to those of a broad-based securities market index. How the Fund has
performed in the past is not necessarily an indication of how the Fund will
perform in the future.
Maxus Laureate Fund
Investor Shares
[Bar Chart]
1994 1995 1996 1997 1998
-3.4% 14.4% 21.0% 5.5% 35.1%
During the 5-year period shown in the bar chart, the highest return for a
quarter was 21.10% (quarter ending December 31, 1998) and the lowest return for
a quarter was -11.99% (quarter ending September 30, 1998).
Average Annual Total Returns Past Past Life
(for the periods ending December One Year 5 Years of Fund
31, 1998)
Maxus Laureate Fund 35.14% 13.78% 13.71%
Morgan Stanley Capital 24.34% 15.68% 15.25%
International World Index*
<PAGE>
* The Morgan Stanley Capital International World Index is a total return market
capitalization weighted index of the equity markets of 23 developed countries.
<PAGE>
MAXUS OHIO HEARTLAND FUND
RISK/RETURN SUMMARY
Investment Objective and Main Investment Strategies
The investment objective of Maxus Ohio Heartland Fund is to obtain a high
total return (a combination of income and capital appreciation). The Fund
pursues this objective primarily by investing in equity securities of companies
headquartered in the State of Ohio. Under normal circumstances the Fund will
invest at least 65% of its total assets in such securities. Equity securities
consist of common stock and securities convertible into common stock. In
selecting such companies, the Fund emphasizes a "value" style of investing. In
deciding which securities to buy and which to sell, the Adviser will give
primary consideration to fundamental factors. For example, securities having
relatively low ratios of share price to book value, net asset value, earnings
and cash flow will generally be considered attractive investments.
While investments may be made in all types and sizes of companies
headquartered in Ohio, the primary focus of this Fund will be to invest in
companies having annual revenues or a market capitalization of less than $5
billion, many of which may be traded in the over-the-counter market. However,
the Fund will generally not invest in companies having annual revenues less than
$25,000,000.
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. The taking of such a temporary
defensive posture may adversely affect the ability of the Fund to achieve its
investment objective.
Main Risks
Volatility. The value of securities in Maxus Ohio Heartland Fund's portfolio
will go up and down. The Fund's portfolio will reflect changes in the prices of
individual portfolio securities or general changes in securities valuations.
Consequently, the Fund's share price may decline and you could lose money.
Geographic Concentration. Since this Fund concentrates its investments in the
State of Ohio, its assets may be at greater risk because of economic, political
or regulatory risk which may become associated with the State. For example, if
adverse tax laws uniquely affecting Ohio-based companies were passed, such a
development could have an adverse effect upon this Fund. This Fund also is
subject to the additional risk that at certain times only a limited number of
securities meeting the Fund's investment criteria may be available.
Smaller Companies. The prices of equity securities fluctuate based on changes
in a company's activities and financial condition and in overall market and
financial conditions. While Maxus Ohio Heartland Fund invests in both smaller
and larger companies, the smaller companies in which the Fund invests are
especially sensitive to these factors and therefore may be subject to greater
share price fluctuations than other companies. Also, securities of these smaller
companies are often less liquid, thus possibly limiting the ability of the Fund
to dispose of such securities when the Adviser deems it desirable to do so. As a
result of these factors, securities of these smaller companies may expose
shareholders of the Fund to above average risk. Bar Chart and Performance Table
<PAGE>
A bar chart and performance table is not provided for Maxus Ohio Heartland
Fund since this Fund has not had annual total returns for a full calendar year.
MAXUS AGGRESSIVE VALUE FUND
RISK/RETURN SUMMARY
Investment Objective and Main Investment Strategies
The investment objectives of Maxus Aggressive Value Fund is to obtain capital
appreciation. The Fund pursues this objective by investing primarily in equity
securities of companies whose equity securities have a total market value of
between $10,000,000 and $200,000,000. Equity securities consist of common stock
and securities convertible into common stock. The Fund emphasizes a "value"
style of investing. In deciding which securities to buy and which to sell, the
Adviser will give primary consideration to fundamental factors. For example,
securities having relatively low ratios of share price to book value, net asset
value, earnings and cash flow will generally be considered attractive
investments. Additionally, the Adviser will give secondary consideration to
insider transactions and the growth of earnings.
As a result of its focus on smaller companies and its intent to take
short-term positions in certain equity securities, this Fund may be considered
to be more "aggressive" than other mutual funds having a "value" style of
investing.
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. The taking of such a temporary
defensive posture may adversely affect the ability of the Fund to achieve its
investment objective.
Main Risks
Volatility. The value of securities in Maxus Aggressive Value Fund's portfolio
will go up and down. The Fund's portfolio will reflect changes in the prices of
individual portfolio securities or general changes in securities valuations.
Consequently, the Fund's share price may decline and you could lose money.
Smaller Companies. The prices of equity securities fluctuate based on changes
in a company's activities and financial condition and in overall market and
financial conditions. The smaller companies in which the Fund invests are
especially sensitive to these factors and therefore may be subject to greater
share price fluctuations than other companies. Also, securities of these smaller
companies are often less liquid, thus possibly limiting the ability of the Fund
to dispose of such securities when the Adviser deems it desirable to do so. As a
result of these factors, securities of these smaller companies may expose
shareholders of the Fund to above average risk.
<PAGE>
Bar Chart and Performance Table
A bar chart and performance table is not provided for Maxus Aggressive Value
since this Fund has not had annual total returns for a full calendar year.
<PAGE>
FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Fund.
Annual Fund Operating Expenses (expenses that are deducted from Fund).
Maxus Maxus Maxus Maxus Ohio Maxus
Income Equity Laureate Heartland Agressivse
Fund Fund Fund* Value Fund Fund
In- In- In- In- In- In- In- In- In- In-
vestor stitu- vestor stitu- vestor stitu- vestor stitu- vestor stitu-
Class tional Class tional Class tional Class tional Class tional
Class Class Class Class Class
Manage-
ment
Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distri-
bution
and/or
Service
(12b-1)
Fees 0.50% 0.00% 0.50% 0.00% 0.50% 0.00% 0.50% 0.00% 0.50% 0.00%
Other
Ex-
penses 0.37% 0.37% 0.30 0.30% 1.13% 1.13% 1.74% 1.74% 1.19% 1.19%
Total
Annual
Fund
Opera-
ting
Ex-
penses 1.87% 1.37% 1.80% 1.30% 2.63% 2.13% 3.24% 2.74% 2.69% 2.19%
*Expenses shown do not include expenses of the underlying funds in which Maxus
Laureate Fund invests.
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).
Examples: These Examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Examples also assume that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor Shares
Maxus Income Fund $190 $588 $1011 $2190
Maxus Equity Fund $183 $566 $ 975 $2116
Maxus Laureate Fund $266 $817 $1395 $2964
Maxus Ohio Heartland Fund $327 $998 $1693 $3540
Maxus Aggressive Value $272 $835 $1425 $3022
Fund
Institutional Shares
Maxus Income Fund $139 $434 $ 750 $1646
Maxus Equity Fund $132 $412 $ 713 $1568
Maxus Laureate Fund $216 $667 $1144 $2462
Maxus Ohio Heartland Fund $277 $850 $1450 $3070
Maxus Aggressive Value $222 $685 $1175 $2524
Fund
<PAGE>
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 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, Mutual Shareholder Services, a
division of Maxus Information Systems Inc. ("Mutual Shareholder Services"), 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, Maxus Laureate Fund, Maxus Ohio Heartland
Fund or Maxus Aggressive Value Fund, mailed to: Mutual Shareholder Services, The
Tower at Erieview, 36th Floor, 1301 East Ninth Street, Cleveland, Ohio 44114.
<PAGE>
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, Mutual
Shareholder Services, 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, Maxus
Laureate Fund, Maxus Ohio Heartland Fund or Maxus Aggressive Value Fund should
be sent, along with the stub from a previous purchase or sale confirmation, to
Mutual Shareholder Services, 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 Mutual
Shareholder Services, 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
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 Mutual Shareholder
Services 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.
<PAGE>
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 your investment in proper form, 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.
The assets of the Funds (except Maxus Laureate Fund) are valued primarily
on the basis of market quotations. The assets of Maxus Laureate Fund are valued
primarily on the basis of the reported net asset values of the underlying mutual
funds in which this Fund invests.
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 canceled 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.
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.
<PAGE>
Redemption by Mail
Shares may be redeemed by mail by writing directly to the Funds' Transfer
Agent, Mutual Shareholder Services, 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.
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
Mutual Shareholder Services 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 Mutual Shareholder Services
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.
Other Information Concerning Redemption
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).
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.
<PAGE>
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 Mutual Shareholder Services at (216)
687-1000.
INVESTMENT MANAGEMENT
The Investment Adviser
Each Fund has retained as its investment adviser Maxus Asset Management Inc
(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.
Subject to the supervision of each Fund's Board of Trustees, the Adviser
manages each Fund's assets, including buying and selling portfolio securities.
The Adviser also furnishes office space and certain administrative services to
the Fund.
During 1998, the Adviser received from each Fund as compensation for its
services an annual fee of 1% of such Fund's net assets.
Portfolio Managers
Richard A. Barone has been the portfolio manager of Maxus Income Fund,
Maxus Equity Fund and Maxus Aggressive Value Fund since the inception of each
Fund. Mr. Barone has been President of the Adviser since 1976.
<PAGE>
Alan Miller has been the portfolio manager of Maxus Laureate Fund since
January 1, 1995. Mr. Miller has been a portfolio manager with the Adviser since
1994.
Denis J. Amato has been the portfolio manager of the Maxus Ohio Heartland
Fund since its inception. Mr. Amato has been Chief Investment Officer of Gelfand
Maxus Asset Management Inc., a subsidiary of RMI, since 1997. Previously, he was
Managing Director of Gelfand Partners Asset Management since 1991.
Rule 12b-1 Plan (Investor Shares Only)
Each Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing
and servicing fees to the Distributor for the sale, distribution and customer
servicing of each Fund's Investor Shares. Such fees are payable at the annual
rate of .50% of the average daily net assets of the Investor Shares of each
Fund. Because Investor Shares pay marketing and servicing fees on an ongoing
basis, your investment cost may be higher over time than other shares with
different sales charges and fees.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund declares and pays any dividends annually to shareholders.
Dividends are paid to all shareholders invested in the Fund on the record date.
The record date is the date on which a shareholder must officially own shares in
order to earn a dividend.
In addition, the Fund pays any capital gains at least annually. Your
dividends and capital gains distributions will be automatically reinvested in
additional Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before a Fund declares a dividend or capital
gain distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a distribution, whether or not you
reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
Each Fund sends an annual statement of your account activity to assist you
in completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions may be both dividends and capital gains. Generally,
distributions from Maxus Income Fund are expected to be primarily ordinary
income dividends, while distributions from the other Funds are expected to be
primarily capital gains distributions. Redemptions and exchanges are taxable
sales. Please consult your tax adviser regarding your federal, state, and local
tax liability.
<PAGE>
THE YEAR 2000 PROBLEM
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the Year
1900 (commonly known as the "Year 2000 Problem"). The Funds could be adversely
affected if the computer systems used by the Adviser or other Fund service
providers do not properly address this problem before January 1, 2000. The
Adviser expects to have addressed this problem before then, and does not
anticipate that the services it provides will be adversely affected. The Fund's
other service providers have told the Adviser that they also expect to resolve
the Year 2000 Problem, and the Adviser will continue to monitor the situation as
the Year 2000 approaches. However, if the problem has not been fully addressed,
the Funds could be negatively affected. The Year 2000 Problem could also have a
negative impact on the companies in which the Funds invest, and this could hurt
the Funds' investment returns.
GENERAL INFORMATION
Maxus Laureate Fund is not available to residents of the State of Montana.
Shares of each Fund are offered exclusively by the Fund's Distributor,
Maxus Securities Corp. an affiliate of the Adviser. The Distributor's address is
The Tower at Erieview, 36th Floor, 1301 East Ninth Street, Cleveland, Ohio
44114.
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45201, is the
custodian for each Fund's securities and cash. Mutual Shareholder Services, a
division of 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 Tower, 200 Public Square,
Cleveland, Ohio 44114, is legal counsel to the Funds and to the Adviser.
<PAGE>
MAXUS INCOME FUND
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McCurdy & Associates C.P.A.'s, Inc., whose
report, along with the Fund's financial statements, are included in the SAI,
which is available upon request.
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 $ 11.31 $ 10.78 $ 10.54 $ 9.73 $ 10.94
Net Investment Income 0.72 .67 0.70 0.72 0.74
Net Gains or Losses on
Securities (realized
or unrealized) (0.33) .53 0.24 0.81 (1.22
Total From Investment
Operations 0.39 1.20 0.94 1.53 (0.48)
Dividends (from net
investment income) (0.72) (0.67) (0.70) (0.72) (0.73)
Distributions (from capital
gains (0.37) 0.00 0.00 0.00 0.00
Return of Capital 0.00 0.00 0.00 0.00 0.00
Total Distributions (1.09) (0.67) (0.70) (0.72) (0.73)
Net Asset Value:
End of Period $ 10.61 $ 11.31 $ 10.78 $ 10.54 $ 9.73
Total Return 3.49% 11.47% 9.20% 16.15% (4.39)%
Ratios/Supplemental Data
Net Assets End of Period
(Thousands) 39,650 38,620 35,728 37,387 33,425
Ratio of Expenses to
Average Net Assets 1.87% 1.91% 1.92% 1.90% 1.81%
Ratio of Net Income to
Average Net Assets 6.52% 6.08% 6.50% 7.01% 7.10%
Portfolio Turnover Rate 55% 70% 78% 121% 138%
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
<PAGE>
MAXUS EQUITY FUND
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McCurdy & Associates C.P.A.'s, Inc., whose
report, along with the Fund's financial statements, are included in the SAI,
which is available upon request.
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 or
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
Dividends (from net
investment income) (0.20) (0.15) (0.27) (0.27) (0.22)
Distributions (from
capital gains) (0.51) (2.10) (1.07) (1.01) (0.51)
Return of Capital 0.00 0.00 0.00 0.00 0.00
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% 0.62%
Ratios/Supplemental Data
Net Assets
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 111% 89% 111% 173% 184%
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
<PAGE>
MAXUS LAUREATE FUND
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McCurdy & Associates C.P.A.'s, Inc., whose
report, along with the Fund's financial statements, are included in the SAI,
which is available upon request.
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 $10.38 $10.82 $ 9.82 $ 9.62 $ 9.96
Net Investment Income (0.12) .52 (0.08) (0.19) (0.08)
Net Gains or Losses on
Securities (realized
or unrealized) 3.76 .07 2.14 1.57 (0.26)
Total From Investment
Operations 3.64 0.59 2.06 1.38 (0.34)
Dividends (from net
investment income) 0.00 (0.52) 0.00 0.00 0.00
Distributions (from
capital gains) (0.73) (0.51) (1.06) (1.18) 0.00
Return of Capital 0.00 0.00 0.00 0.00 0.00
Total Distributions (0.73) (1.03) (1.06) (1.18) 0.00
Net Asset Value:
End of Period $13.29 $10.38 $10.82 $ 9.82 $ 9.62
Total Return 35.14% 5.49% 21.03% 14.41% (3.41)%
Ratios/Supplemental Data
Net Assets End of Period
(Thousands) 8,059 3,395 3,156 1,510 1,998
Ratio of Expenses to
Average Net Assets 2.63% 2.49% 3.92% 3.85% 3.60%
Ratio of Net Income to
Average Net Assets -1.10% 4.19% (0.73)% (1.69)% (0.87)%
Portfolio Turnover Rate 2,078% 1,511% 1,267% 1,377% 469%
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
<PAGE>
MAXUS OHIO HEARTLAND FUND
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by McCurdy & Associates
C.P.A.'s, Inc., whose report, along with the Fund's financial statements, are
included in the SAI, which is available upon request.
02/01/98*
to
12/31/98
Net Asset Value:
Beginning of Period $10.00
Net Investment Income (0.05)
Net Gains or Losses on Securities
(realized or unrealized) (1.79)
Total From Investment Operations (1.84)
Dividends (from net investment income) 0.00
Distributions (from capital gains) 0.00
Return of Capital 0.00
Total Distributions 0.00
Net Asset Value:
End of Period $ 8.16
Total Return -18.40%
Ratios/Supplemental Data
Net Assets End of Period (Thousands) 1,234
Ratio of Expenses to Average Net Assets 3.24%
Ratio of Net Income to Average Net Assets -0.88%
Portfolio Turnover Rate 5.72%
*Commencement of operations.
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
<PAGE>
MAXUS AGGRESSIVE VALUE FUND
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by McCurdy & Associates
C.P.A.'s, Inc., whose report, along with the Fund's financial statements, are
included in the SAI, which is available upon request.
02/01/98*
to
12/31/98
Net Asset Value:
Beginning of Period $ 5.00
Net Investment Income (0.07)
Net Gains or Losses on Securities
(realized or unrealized) (0.09)
Total From Investment Operations (0.16)
Dividends (from net investment
income) 0.00
Distributions (from capital
gains) (0.04)
Return of Capital 0.00
Total Distributions (0.04)
Net Asset Value:
End of Period 4.80
Total Return -3.27%
Ratios/Supplemental Data
Net Assets End of Period (Thousands) 3,159
Ratio of Expenses to Average Net Assets 2.69%
Ratio of Net Income to Average Net
Assets -1.33%
Portfolio Turnover Rate 89.11%
*Commencement of operations.
Notes to Financial Statements appear in the Fund's Statement of Additional
Information.
<PAGE>
APPENDIX A
Description of Bond Ratings*
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.
*As described by Standard & Poor's Corporation.
<PAGE>
TABLE OF CONTENTS Page
RISK/RETURN SUMMARY 2
HOW TO PURCHASE SHARES 13
HOW TO REDEEM SHARES 15
SYSTEMATIC WITHDRAWAL PLAN 17
INVESTMENT MANAGEMENT 17
DIVIDENDS, DISTRIBUTIONS AND TAXES 18
THE YEAR 2000 PROBLEM 18
GENERAL INFORMATION 19
FINANCIAL HIGHLIGHTS 20
APPENDIX A 25
A Statement of Additional Information (SAI) dated April 30, 1999, is
incorporated by reference into this prospectus. Additional information about the
Funds' investments is available in the Funds' annual and semi-annual reports to
shareholders. The annual report discusses market conditions and investment
strategies that significantly affected each Fund's performance during its last
fiscal year. To obtain the SAI, the annual report, semi-annual report and other
information without charge and to make shareholder inquires, call the Funds at
1-800-44-MAXUS.
Information about each Fund (including the SAI) can be reviewed and copied
at the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Reports and other information about each Fund are available on
the Commission's Internet site at http://www.sec.gov and copies of this
information may be obtained, upon payment of a duplicating fee, by writing the
Public Reference Section of the Commission, Washington, D.C. 20549-6009. You can
call 1-800-SEC-0330 for information on the Public Reference Room's operations
and copying charges.
The Maxus Funds
The Tower at Erieview, 36th Floor
1301 East Ninth Street
Cleveland, Ohio 44114
(216) 687-1000
Investment Company Act File Nos: Income Fund: 811-4144
Equity Fund: 811-5865
Laureate Fund: 811-7516
Ohio Heartland and
Aggressive Value Funds: 811-8499
1
MAXUS FUND PROSPECTUS
<PAGE>STATEMENT OF ADDITIONAL INFORMATION April 30, 1999
MAXUS LAUREATE FUND
The Tower at Erieview, 36th Floor
1301 East Ninth Street
Cleveland, Ohio 44114
(216) 687-1000
Maxus Laureate 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 is not a 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 date of this Statement of Additional Information and of the prospectus
to which it relates is April 30, 1999.
<PAGE>
TABLE OF CONTENTS
CAPTION PAGE LOCATION IN PROSPECTUS
Fund History 3 Not Applicable
Investments and Risks 3 Maxus Laureate Fund - Risk/
Return Summary
Management of the Fund 9 Investment Management
Ownership of Shares 11 Not Applicable
Investment Advisory and
Other Services 11 Investment Management
Capital Stock and Other Securities 16 Not Applicable
Purchase, Redemption and Pricing 16 How to Purchase Shares/
of Shares How to Redeem Shares
Taxation of Fund 17 Dividends, Distributions
and Taxes
Distributor 17 Investment Management
Performance Data 13 Not Applicable
Financial Statements 14 Maxus Laureate Fund - Financial
Highlights
<PAGE>
FUND HISTORY
Maxus Laureate Fund (the "Fund") was organized as a Trust under the laws of
the State of Ohio pursuant to a Declaration of Trust dated February 10, 1993.
INVESTMENTS AND RISKS
Classification
The Fund is a diversified, open-end management investment company.
Investment Strategies and Risks
The Fund has an investment objective of obtaining the highest total return,
a combination of capital appreciation and income. The principal investment
strategies used by the Fund to pursue this objective, together with the
principal risks of investing in the Fund, are described in the Prospectus under
the heading "Maxus Laureate Fund - Risk/Return Summary."
Any investment in a mutual fund involves risk, and, although the 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
future contracts. The risks associated with these investment policies are
described in Appendix A to this Statement of Additional Information.
Fund Policies
The Fund has adopted the following fundamental investment policies and
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 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:
<PAGE>
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.
4. 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.
5. 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.
6. Invest in securities of issuers which are subject to restrictions
on disposition under the Securities Act of 1933 if, at the time of such
purchase, more than ten percent (10%) of its assets (taken at value) would
be so invested.
7. Lend money or securities, provided that the making of
interest-bearing demand deposits with banks and the purchase of mutual
funds which invest in debt securities in accordance with their objectives
and policies are not prohibited.
8. Borrow money except for temporary or emergency purposes from banks
(but not for the purpose of investments) and then only in an amount not to
exceed five percent (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.
9. 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.
10. Purchase warrants, or purchase or write (sell) put or call
options, or any combinations thereof.
<PAGE>
11. Purchase or retain any 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.
12. Invest for the purpose of exercising control or management of
another issuer.
13. Invest in commodities or commodity futures contracts or in real
estate or real estate limited partnerships, although it may invest in
open-end investment companies which invest in real estate securities.
14. Purchase participations or other direct interests in oil, gas, or
other mineral exploration or development programs.
15. Underwrite securities issued by other except to the extent the
Fund may be deemed to be an underwriter, under the federal securities law,
in connection with the disposition of portfolio securities.
16. Issue securities or other obligations senior to the Fund's shares
of beneficial interest.
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.
Defensive Investments
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 money market
mutual funds, commercial paper, certificates of deposit and bank or savings and
loan association interest-bearing demand accounts. The taking of such a
temporary defensive posture may adversely affect the ability of the Fund to
achieve its investment objective.
Portfolio Turnover
The Fund is not restricted with regard to portfolio turnover and will make
changes in its investment portfolios from time to time as business and economic
conditions and market prices may dictate and its investment policies may
require. The portfolio turnover rates in 1998 and 1997 were 2,078% and 1,511%,
respectively. A high rate of portfolio turnover in any year will increase
custodial transaction charges paid and could result in high amounts of realized
investment gain subject to the payment of taxes by shareholders.
<PAGE>
MANAGEMENT OF THE FUND
The Board of Trustees is responsible for managing the Fund's business
affairs and for exercising all the Fund's powers except those reserved for the
shareholders. The day-to-day operations of the Fund are conducted by its
officers. 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, Maxus Equity Fund and MaxFund Trust, three other open-end
management investment companies.
Position Held Principal Occupation(s)
Name and Address With the Fund During Past 5 Years
Richard A. Barone* Chairman, President of Maxus Securities
The Tower at Erieview, Treasurer Corp (broker-dealer), Maxus
36th Floor and Trustee Asset Management Inc. (investment
1301 East Ninth Street adviser) and Resource Management,
Cleveland, Ohio 44114 Inc., dba Maxus Investment Group
(financial services)
Denis J. Amato* Trustee Chief Investment Officer, Gelfand.
The Tower at Erieview, Maxus Asset Management, Inc.
36th Floor (investment adviser) since 1997;
1301 East Ninth Street previously, Managing Director,
Cleveland, Ohio 44114 Gelfand Partners Asset Management
(investment adviser)
Kent W. Clapp Trustee Chairman, Medical Mutual of Ohio
2060 East Ninth Street (health insurer)
Cleveland, Ohio 44114
Steven M. Kasarnich Trustee President/Business Manager, Northeast
47 Alice Drive Ohio District Council of Carpenters;
Akron, Ohio 44319 Executive Secretary-Treasurer, Ohio
State Council of Carpenters
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)
<PAGE>
Michael A. Rossi, C.P.A. Trustee Certified Public Accountant
6559 Wilson Mills Road
Highland Heights, Ohio 44143
Joseph H. Smith Trustee Chief Financial Officer,
1404 East Ninth Street Diocese of Cleveland
8th Floor
Cleveland, Ohio 44114
Alan G. Miller President Portfolio Manager, Maxus Asset
The Tower at Erieview, Management, Inc.
36th Floor
1301 East Ninth Street
Cleveland, Ohio 44114
Robert J. Conrad Vice President Vice President, Resource Management,
The Tower at Erieview, Inc.; formerly Vice President,
36th Floor American Income Plus
1301 East Ninth Street
Cleveland, Ohio 44114
Robert W. Curtin Secretary Senior Vice President and Secretary,
The Tower at Erieview, Maxus Securities Corp; formerly
36th Floor Executive Vice President,
1301 East Ninth Street Roulston & Company, Inc.
Cleveland, Ohio 44114
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:
Compensation Table
Name of Trustee Aggregate Total
Compensation Compensation
from the From All Maxus
Fund Funds Payable
to Trustees
Richard A. Barone $ 0 $ 0
Denis J. Amato $ 0 $ 0
Kent W. Clapp $200 $1,600
Steven M. Kasarnich $200 $1,600
Burton D. Morgan $600 $4,400
Michael A. Rossi $600 $4,400
Joseph H. Smith $200 $1,600
<PAGE>
OWNERSHIP OF SHARES
As of February 19, 1999, 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 19, 1999, all officers and Trustees as a group beneficially
owned 13,347 shares, constituting 1.5% of the outstanding shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser
Maxus Asset Management, Inc. ("MAM"), the Fund's investment adviser, 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 offered.
Richard A. Barone is the president and a principal shareholder of RMI and,
therefore, is deemed to be in control of MAM and MSC.
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. For 1998, 1997 and 1996, the Adviser
received management fees from the Fund in the amounts of $47,163, $14,360 and
$21,014, respectively.
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 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, costs of printing share
certificates, portfolio pricing services and Fund meetings, amortization of
organizational expenses and costs incurred pursuant to the Fund's Distribution
and Shareholder Servicing Plan described below.
<PAGE>
Distribution Plan
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,
regardless of the amount of expenses actually incurred by MSC. In 1998, $23,580
(.50% of average net assets) was paid by the Fund to MSC pursuant to the Plan.
Of such amount, $22,047 was used by MSC to compensate securities dealers and
other persons and organizations for providing distribution assistance and
shareholder services with respect to Investor Shares, and $1,533 was expended
for advertising and marketing.
The Fund does not participate in any joint distribution activities with
respect to another series or investment company.
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 n 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.
Other Service Providers
The Fund has entered into an Administration Agreement with Maxus
Information Systems Inc. ("MIS"), 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. For 1998, 1997 and 1996, the Fund paid MIS fees under
the Administration Agreement and the Accounting Services Agreement in the
amounts of $24,713, $21,368 and $13,378, respectively. MIS is a subsidiary of
RMI, the parent company of the Investment Adviser.
<PAGE>
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.
CAPITAL STOCK AND OTHER SECURITIES
The Declaration of Trust provides for an unlimited number of authorized
shares of beneficial interest in the Fund. Shares of the Fund or divided into
two classes, Investor Shares and Institutional Shares. Each share represents an
equal proportionate interest in the 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 the Fund as are declared at the discretion of the
Trustees.
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 the 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 the 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 the Fund, whichever is less.
Although the Fund is not required to hold annual meetings of the
shareholders, shareholders holding at least 10% of the Fund's outstanding shares
have the right to call a meeting to elect or remove one or more of the Trustees
of the Fund.
Upon issuance and sale in accordance with the terms of the Prospectus, each
share will be fully paid and non-assessable. Shares of the Fund have no
preemptive, subscription or conversion rights. The Declaration of Trust also
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of the Fund and that every agreement, obligation or
instrument entered into or executed by the Fund shall contain a provision to the
effect that the shareholders are not personally liable thereunder.
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
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.
The price paid for shares of a certain class of the Fund is the net asset
value per share of such class 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 the 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 the 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 the Fund is calculated by determining the value of the class's
proportional interest in the assets of the 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.
The assets of the Fund (other than cash and cash equivalents) consist of
the underlying funds that are valued at their respective net asset values under
the 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.
TAXATION OF THE FUND
The Fund intends to qualify each year as a "regulated investment company"
under the requirements of Subchapter M of 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. If these requirements are not met, the Fund
will not receive special tax treatment and will pay federal income tax, thus
reducing the total return of the Fund.
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.
<PAGE>
Income received by the Fund from a mutual fund in the 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 the 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
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 the 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.
The 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, 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.
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. MSC does not receive any commissions
or other compensation for the sale of shares of the Fund. However, pursuant to
the Plan, MSC receives an annual distribution fee of .50% of average net assets
of Investor Shares. Certain employees of MSC may receive compensation under the
Plan. See "Investment Advisory and Other Services - Distribution Plan."
<PAGE>
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.
PERFORMANCE
From time to time, the Fund 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 the 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 Investor Shares of
the Fund for periods ended December 31, 1998 are set forth below.
Maxus Laureate Fund
Average Annual Total Returns Cumulative Total Returns
One Three Five Life of One Three Five Life
Year Years Years Fund* Year Years Years of Fund*
35.14% 19.94% 13.78% 13.71% 35.14% 72.53% 90.65% 107.08%
* 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 the Fund is contained in the
Fund's Annual Report to Shareholders which may be obtained from the Fund without
charge.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees
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, 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 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, 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
<PAGE>
Maxus Laureate Fund
Schedule of Investments
December 31,1998
Shares/Principal Amount Market Value % of Assets
Mutual Funds Equity
52,271 American Century 20th
Century Intl Growth 500,754
14,667 Baron Asset 741,252
137 Heartland Value 4,018
35,809 Invesco European 639,915
7,109 Invesco Health Sciences 433,928
14,675 Janus Overseas 294,674
25,284 Montgomery Emerging Asia 200,506
42,847 Montgomery Global Communications 918,201
1,211 Mutual Series European Class Z 15,180
57,014 Oakmark Small Cap 842,104
16,461 Robertson Stephens Inv Microcap Growth A 234,733
55,032 Robertson Stephens Information Age 988,382
21,202 Robertson Stephens Inv Emerging Growth 486,584
15,510 Rydex Nova 515,388
20,414 Rydex OTC 844,305
417 Turner Small Cap Equity 11,138
7,671,062 95.07%
Cash Equivalents
428,026 Star Bank Treasury 428,026 5.31%
Total Investments (Cost - $6,962,645) 8,099,088 100.38%
Other Assets Less Liabilities (31,015) -0.38%
Net Assets - Equivalent 8,068,073 100.00%
Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Assets & Liabilities
Maxus Laureate Fund December 31, 1998
Laureate Fund
Assets:
Investment Securities at Market Value 8,099,088
(Identified Costs - $6,962,645)
Cash 4,936
Receivables:
Receivable for investment securities sold -
Dividends and interest receivable 5,294
Unamortized organization costs -
Total Assets 8,109,318
Liabilities:
Payable for investment purchased -
Payable for shareholder distributions -
Accrued Expenses 41,245
Total Liabilities 41,245
Net Assets 8,068,073
Net Assets Consist Of:
Capital Paid In 6,931,630
Undistributed Net Investment Income -
Accumulated Realized Gain (Loss) on Investments - Net -
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 1,136,443
Net Assets 8,068,073
Net Assets:
Investors Shares 8,059,194
Institutional Shares 8,879
Total 8,068,073
Shares of capital stock
Investors Shares 606,564
Institutional Shares 668
Total 607,232
Net asset value per share
Investors Shares $13.29
Institutional Shares $13.29
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Operations
Maxus Laureate Fund December 31, 1998
Laureate Fund
Investment Income:
Dividend income $21,113
Interest income 51,673
Total Income 72,786
Expenses:
Investment advisory fees (Note 2) 47,163
Distribution fees (Investor shares) 23,580
Distribution fees (Institutional shares) -
Custodial fees 4,013
Organization costs 1,149
Transfer agent fees/Accounting and Pricing 24,713
Legal 5,948
Audit 6,200
Registration and filing fees 2,047
Trustee fees 600
Printing & Other Miscellaneous 10,135
Total Expenses 125,548
Net Investment Income (Loss) (52,762)
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 468,275
Distribution of Realized Capital Gains
from other Investment Companies -
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments 1,125,684
Net Realized and Unrealized Gain (Loss) on Investments 1,593,959
Net Increase (Decrease) in Net Assets from Operations $1,541,197
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets
Maxus Laureate Fund December 31, 1998
Maxus Laureate Fund
01/01/98 01/01/97
to to
12/31/98 12/31/97
From Operations:
Net Investment Income (52,762) 155,271
Net Realized Gain (Loss) on Investments 468,275 156,212
Net Unrealized Appreciation (Depreciation) 1,125,684 (95,242)
Increase (Decrease) in Net Assets from Operations 1,541,197 216,241
Distributions to investor shareholders:
Net Investment Income - (155,173)
Net Realized Gain (Loss) from Security Transactions (417,895) (156,184)
Distributions to institutional shareholders:
Net Investment Income - -
Net Realized Gain (Loss) from Security Transactions (463) -
Change in net assets from distributions (418,358) (311,357)
From Capital Share Transactions:
Proceeds from sale of shares 4,475,218 1,753,927
Dividend reinvestment 409,851 293,207
Cost of shares redeemed (1,335,080) (1,712,497)
Change in net assets from capital transactions 3,549,989 334,637
Change in net assets 4,672,828 239,521
Net Assets:
Beginning of period 3,395,245 3,155,724
End of period 8,068,073 3,395,245
Share Transactions:
Issued 359,682 155,832
Reinvested 30,779 28,121
Redeemed (110,248) (148,601)
Net increase (decrease) in shares 280,213 35,352
Shares outstanding beginning of period 327,019 291,667
Shares outstanding end of period 607,232 327,019
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
<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 10.38 10.82 9.82 9.62 9.96
Net Investment Income (0.12) 0.52 (0.08) (0.19) (0.08)
Net Gains or Losses on Securities
(realized and unrealized) 3.76 0.07 2.14 1.57 (0.26)
Total from Investment Operations 3.64 0.59 2.06 1.38 (0.34)
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 $13.29 $10.38 $10.82 $9.82 $9.62
Total Return 35.14% 5.49% 21.03% 14.41% -3.41%
Ratios/Supplemental Data:
Net Assets at end of period (thousands) 8,059 3,395 3,156 1,510 1,998
Ratio of expenses to average net assets * 2.63% 2.49% 3.92% 3.85% 3.60%
Ratio of net income to average net assets * -1.10% 4.19% -0.73% -1.69% -0.87%
Portfolio turnover rate 2792% 1511% 1267% 1377% 469%
</TABLE>
Institutional Shares
02/01/98
to
12/31/98
Net Asset Value -
Beginning of Period 10.38
Net Investment Income (0.11)
Net Gains or Losses on Securities
(realized and unrealized) 3.76
Total from Investment Operations 3.65
Distributions
Net investment income -
Capital gains (0.73)
Return of capital -
Total Distributions (0.73)
Net Asset Value -
End of Period $13.30
Total Return 35.24%
Ratios/Supplemental Data:
Net Assets at end of period (thousands) 9
Ratio of expenses to average net assets * 2.13%
Ratio of net income to average net assets * -0.60%
Portfolio turnover rate 2792%
* Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE>
Notes to Financial Statements
Maxus Laureate 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
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 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 $47,163 in investment advisory fees during the fiscal year ended December
31, 1998. Maxus Securities, who served as the national distributor of the
Fund's shares, was reimbursed $23,580 for distribution expenses. Maxus
Information Systems, who provides accounting and shareholder services,
received fees totaling $24,713 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. 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>
At December 31, 1998, 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 $100 per meeting.
4.)CAPITAL STOCK AND DISTRIBUTION
At December 31, 1998 an indefinite number of shares of capital stock ($.10 par
value) were authorized, and paid-in capital amounted to $6,953,273.
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 which ended during February, 1998.
6.) 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 $102,083,239 and $99,315,754
respectively.
7.) FINANCIAL INSTRUMENTS DISCLOSURE There are no reportable financial
instruments which have any off-balance
sheet risk as of December 31, 1998.
8.) 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)
1,149,796 (13,353) 1,136,443
8.) RECLASSIFICATION
In accordance with AICPA Statement of Position 93-2, the components of the net
assets of the Fund have been reclassified to the extent that the net
investment loss of ($21,643) sustained during the fiscal year ended December
31, 1998, which represents a permanent difference for income tax purposes, has
been reclassified as a decrease in the net capital paid in.
<PAGE>
APPENDIX A
Description of Various Strategies (and Related Risks)
Employed By
Funds In Which the Fund May Invest
As described in this Statement of Additional Information under "Investments
and Risks," the Fund may invest in the shares of open-end investment companies
(or "mutual funds"). These mutual funds (referred to in this Appendix as
"underlying funds") may incur certain risks which are described in this Appendix
A.
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.
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
<PAGE>
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 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 Fund 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 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.
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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 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 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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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 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 Fund itself 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 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.
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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.
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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