THE MAXUS FUNDS
Dear Shareholder:
Against the backdrop of increasing corporate profits and declining interest
rates, 1997 marked the third year in a row of superior returns in the financial
markets. The broad based Russell 3000 index of domestic equities gained 31.68%
while the Ryan Government Bond Index produced a total return of 9.43%.
With market conditions that favorable, The Maxus Equity Fund was able to advance
28.16% for 1997 in spite of my cautionary attitude during most of the year. The
relative valuation and asset allocation approach used by Maxus Equity produced a
portfolio with a relatively low correlation to market declines, while the
overall value style uncovered equities with superior returns. According to
Lipper Analytical Services, The Maxus Equity Fund ranked 12th in 1997 out of 196
mutual funds with similar characteristics.
The Maxus Income Fund, while receiving fewer accolades during 1997, had one of
its best years ever relative to other income funds with high quality, balanced
portfolios. For the year ending December 31, 1997, The Maxus Income Fund
produced a total return of 11.47%. Because of the hybrid nature of the portfolio
(high quality debt securities are held through conduits such as closed-end funds
and preferred shares), rating services such as Morningstar have the Maxus Income
Fund incorrectly categorized as an equity fund, in spite of the fact that it has
had virtually no recognizable correlation to the equity markets. Moreover, as an
important part of its overall performance, while the major advance in bond
prices came in longer duration securities (those with more risk when interest
rate rise), The Maxus Income Fund produced a very low correlation to long
duration bonds during periods of rising interest rates, i.e. bond market
declines.
The environment was tougher for The Maxus Laureate Fund, managed by Alan Miller,
which allocates its portfolio among the global equity markets. For all of 1997
Maxus Laureate produced a total return of 5.49%, and earned a four star ranking
by Morningstar for the one-year period ending December 31.
We continued to maintain our caution as we entered 1998. In spite of market
enthusiasm, it appears to me that the growth in corporate profitability, at
best, will lose momentum. Should profit margins come under pressure as
production costs increase and pricing power continues to erode, the financial
markets in 1998 will produce a much tougher environment in which to excel.
But we intend to do just that - offer our clients the best investment products
and superior performance. On February 1, The Maxus family of mutual funds became
larger. On that date, we introduced The Maxus Ohio Heartland Fund, managed by
Denis Amato, which will focus on investments in small to mid-capitalization
companies based in Ohio. Also on February 1, the Maxus Aggressive Value Fund
became a reality. This Fund, which I manage, will seek out investments in very
small companies (under $200 million in market capitalization) using a
disciplined value style.
As Maxus Fund shareholders, I want to reiterate our commitment to providing you
with the highest possible level of investor service. In doing so, I would like
to encourage you to talk with your personal financial advisor or a Maxus
Financial Advisor about how any one or combination of our Funds may be able to
help secure your financial future.
Richard A Barone
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Shares/Principal Amount Cost Market Value % of
Assets
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY
25,000 Airtouch Communications* 629,625 1,039,062
37,500 Bel Fuse* 430,647 717,188
10,000 Harris Corp 430,225 458,750
76,000 Intergraph* 528,737 760,000
39,072 Unisys* 386,950 542,125
34,000 VLSI Technology* 494,196 803,250
20,000 Western Digital* 298,650 320,000
--------- ---------
3,199,030 4,640,375 8.34%
INFRASTRUCTURE
15,000 Ameron Inc 514,513 948,750
17,000 Corrpro Companies* 132,683 250,750
111,000 Foster L B* 423,751 548,062
--------- ---------
1,070,947 1,747,562 3.14%
MACHINERY & EQUIPMENT
35,000 Flowserve 878,349 977,813
50,000 Sensormatic Electronic 682,893 821,875
30,000 Snap on Tools 861,200 1,308,750
--------- ---------
2,422,442 3,108,438 5.59%
MEDICAL SERVICES & SUPPLIES
20,000 Becton Dickinson 359,650 1,000,000
32,000 Invacare 675,488 696,000
43,300 Loewen Group 1,069,954 1,114,975
13,500 McKesson 578,558 1,463,063
--------- ---------
2,683,650 4,274,038 7.68%
REAL ESTATE
35,000 MGI Properties 480,393 840,000
25,000 Public Storage 8.25% X 652,478 1,225,000
10,000 St Joe Paper 579,110 905,000
--------- ---------
1,711,981 2,970,000 5.34%
ENTERTAINMENT
120,000 Trump Hotels Casino Resorts* 866,350 802,500 1.44%
CONSUMER PRODUCTS
100,000 Jan Bell Marketing* 221,910 250,000
50,000 Limited 933,000 1,275,000
135,000 Michael Anthony Jewelers* 389,203 329,063
59,000 Pluma* 715,255 505,187
180,000 Royal Appliance Mfg* 552,690 1,192,500
44,600 Universal Electronics* 225,274 446,000
--------- ---------
3,037,332 3,997,750 7.19%
ENVIRONMENT
15,200 Dionex* 242,016 763,800
100,000 International Tech* 779,812 750,000
15,000 U.S. Filter* 428,713 449,062
35,500 Weston Roy F* 136,661 142,188
--------- ---------
1,587,202 2,105,050 3.78%
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
MAXUS EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Shares/Principal Amount Cost Market Value % of
Assets
- --------------------------------------------------------------------------------
FINANCIAL SERVICES
20,000 American Express 848,750 1,785,000
10,000 Cincinnati Financial 567,830 1,407,500
15,000 First Chicago NBD 392,536 1,252,500
20,000 Frontier Insurance Group 475,575 457,500
30,000 Lehman Brothers Holdings 651,175 1,530,000
--------- ---------
2,935,866 6,432,500 11.56%
UTILITIES
100,000 Citizens Utilities 974,975 962,500
30,000 Kansas City Power & Light 878,675 886,875
--------- ---------
1,853,650 1,849,375 3.32%
INDUSTRIAL PRODUCTS
130,000 Algoma Steel* 597,929 450,937
17,000 Armco Inc $3.625 B 831,475 794,750
50,000 Birmingham Steel 820,256 787,500
50,000 Schulman A 1,015,820 1,256,250
25,000 Steel Dynamics* 409,345 400,000
40,000 Stoneridge* 635,275 640,000
30,000 Timken 524,175 1,031,250
15,000 USX 6.75% QUIPs 691,363 690,000
--------- ---------
5,525,638 6,050,687 10.88%
METALS
100,000 Central Fund of Canada 390,250 387,500
80,000 Inco 1,699,175 1,360,000
--------- ---------
2,089,425 1,747,500 3.14%
PRODUCT DISTRIBUTION
20,000 Applied Indl Technologies 433,087 535,000
250,000 Petrie Stores Liquidating Tr* 805,473 747,500
67,000 Pioneer Std Electrs 787,836 1,021,750
--------- ---------
2,026,396 2,304,250 4.14%
CLOSED END GLOBAL EQUITY FUNDS
20,000 Emerging Markets Telecommunications 336,023 267,500
75,000 Emerging Mkts Infrastructure 809,256 881,250
170,000 First Australia 1,462,781 1,232,500
70,000 New Germany 882,775 945,000
--------- ---------
3,490,835 3,326,250 5.98%
U.S. GOVERNMENT SECURITIES
4,000,000 US Treasury 5.375%, 5-31-98 3,989,218 3,996,625
4,000,000 US Treasury 5.5%, 11-15-98 3,988,923 3,994,625
--------- ---------
7,978,141 7,991,250 14.36%
Star Bank Treasury 2,458,873 2,458,873 4.42%
Total Investments 44,937,758 55,806,398 100.30%
Other Assets Less Liabilities (169,555) (0.30)%
Net Assets - Equivalent to $18.23 per share on
3,051,358 shares of capital stock outstanding 55,636,843 100.00%
==========
*Non-income producing securities.
The accompanying notes are an integral part of the financial statements.
MAXUS EQUITY FUND
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1997
Assets:
Investment Securities at Market Value
(Identified Cost - $44,937,758) $55,806,398
Cash 8,792
Receivables:
Investment Securities Sold 545,850
Dividends and Interest 229,333
------------
Total Assets $56,590,373
Liabilities
Payables:
Investment Securities Purchased $438,013
Shareholder Distributions 386,040
Accrued Expenses 129,477
------------
Total Liabilities 953,530
Net Assets $55,636,843
Net Assets Consist of:
Capital Paid In 44,792,034
Undistributed Net Investment Income 1,884
Accumulated Realized Gain (Loss) on Investments - Net (25,715)
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 10,868,640
------------
Net Assets, for 3,051,358 Shares Outstanding $55,636,843
Net Asset Value and Redemption Price
Per Share ($55,636,843/3,051,358 shares) $18.23
Offering Price Per Share $18.23
STATEMENT OF OPERATIONS
DECEMBER 31, 1997
Investment Income:
Dividends $779,554
Interest 496,584
------------
Total Investment Income $1,276,138
Expenses
Registration Expense 17,862
Trustee Fees (Note 3) 1,500
Accounting and Pricing 42,563
Custody 22,226
Distribution Plan Expenses 238,210
Audit 16,160
Legal 6,506
Management Fees (Note 2) 477,143
Insurance 8,539
Printing & Other Miscellaneous 61,876
------------
Total Expenses 892,585
Net Investment Income 383,553
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 5,454,407
Distribution of Realized Capital Gains from
other Investment Companies 336,115
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments 5,027,441
------------
Net Realized and Unrealized Gain (Loss) on Investments $10,817,963
Net Increase (Decrease) in Net Assets from Operations $11,201,516
============
The accompanying notes are an integral part of the financial statements.
MAXUS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
01/01/97 01/01/96
to to
12/31/97 12/31/96
From Operations:
Net Investment Income 383,553 620,573
Net Realized Gain (Loss) on Investments 5,790,522 2,437,747
Net Unrealized Appreciation (Depreciation) 5,027,441 3,419,289
---------- -----------
Increase (Decrease) in Net Assets from Operations 11,201,516 6,477,609
From Distributions to Shareholders
Net Investment Income (381,850) (620,392)
Net Realized Gain (Loss) from Security Transactions (5,787,553) (2,436,220)
----------- -----------
Net Increase (Decrease) from Distributions (6,169,403) (3,056,612)
From Capital Share Transactions:
Proceeds From Sale of 844,703 Shares 15,843,329 12,447,924
Net Asset Value of 315,032 Shares Issued
on Reinvestment of Dividends 5,729,950 2,637,296
Cost of 531,196 Shares Redeemed (9,733,252) (11,328,765)
----------- ------------
11,840,027 3,756,455
Net Increase in Net Assets 16,872,140 7,177,452
Net Assets at Beginning of Period
(including undistributed net investment
income of $181 and $0, respectively) 38,764,703 31,587,251
Net Assets at End of Period (including
undistributed net investment income
of $1,884 and $181, respectively) 55,636,843 38,764,703
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout the period:
- ----------------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
- ----------------------------------------------------------------------------------------------------
Net Asset Value -
Beginning of Period 16.00 14.57 12.95 13.60 12.29
Net Investment Income 0.15 0.27 0.30 0.25 0.13
Net Gains or Losses on Securities
(realized and unrealized) 4.33 2.50 2.60 (0.17) 3.13
----- ----- ----- ------ -----
Total from Investment Operations 4.48 2.77 2.90 0.08 3.26
Dividends
(from net investment income) (0.15) (0.27) (0.27) (0.22) (0.12)
Distributions (from capital gains) (2.10) (1.07) (1.01) (0.51) (1.83)
Return of Capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total Distributions (2.25) (1.34) (1.28) (0.73) (1.95)
Net Asset Value -
End of Period 18.23 16.00 14.57 12.95 13.60
Total Return 28.16% 19.13% 22.43% 0.59% 24.51%
Ratios/Supplemental Data
Net Assets -
End of Period (Thousands) 55,637 38,765 31,576 17,018 11,343
Ratio of Expenses to Average Net Assets 1.87 1.90 1.96 2.00 2.61
Ratio of Net Income to Average Net Assets 1.80 1.71 2.01 1.82 0.91
Portfolio Turnover Rate 89% 111% 173% 184% 175%
Average commission per share $0.05544 $0.05209
The accompanying notes are an integral part of the financial statements.
MAXUS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1.)SIGNIFICANT ACCOUNTING POLICIES
The Fund is a diversified, open-end management investment company,
organized as a Trust under the laws of the State of Ohio by a Declaration
of Trust dated July 12, 1989. The Fund has an investment objective of
obtaining a total return, a combination of capital appreciation and income.
Under normal circumstances, at least 65% of the value of the Fund's total
assets will consist of equity securities. Significant accounting policies
of the Fund are presented below:
SECURITY VALUATION:
The Fund intends to invest in a wide variety of equity and debt securities.
The investments in securities are carried at market value. The market
quotation used for common stocks, including those listed on the NASDAQ
National Market System, is the last sale price on the date on which the
valuation is made or, in the absence of sales, at the closing bid price.
Over-the-counter securities will be valued on the basis of the bid price at
the close of each business day. Short-term investments are valued at
amortized cost, which approximates market. Securities for which market
quotations are not readily available will be valued at fair value as
determined in good faith pursuant to procedures established by the Board of
Directors.
SECURITY TRANSACTION TIMING
Security transactions are recorded on the dates transactions are entered
into (the trade dates). Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded as
earned. The Fund uses the identified cost basis in computing gain or loss
on sale of investment securities. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
INCOME TAXES:
It is the Fund's policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements of
the Internal Revenue Service. This Internal Revenue Service requirement may
cause an excess of distributions over the book year-end accumulated income.
In addition, it is the Fund's policy to distribute annually, after the end
of the calendar 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 $477,143 in investment advisory fees during the twelve
months ended December 31, 1997. Maxus Securities, who served as the
national distributor of the Fund's shares, was reimbursed $238,210 for
distribution expenses. Maxus Information Systems received fees totaling
$42,563 for services rendered to the Fund for the twelve months ended
December 31, 1997. Maxus Securities is a registered broker-dealer. Maxus
Securities effected substantially all of the investment portfolio
transactions for the Fund. For this service Maxus Securities received
commissions of $250,842 for the twelve months ending December 31, 1997.
At December 31, 1997, Maxus Securities Corp owned 20,000 shares in the
Fund.
Certain officers and/or trustees of the Fund are officers and/or directors
of the Investment Advisor and Administrator. Each director who is not an
"affiliated person" receives an attendance fee of $100 per meeting.
4.)CAPITAL STOCK AND DISTRIBUTION
At December 31, 1997 an indefinite number of shares of capital stock ($.10
par value) were authorized, and paid-in capital amounted to $44,792,034.
Transactions in common stock were as follows:
Shares sold 844,773
Shares issued to shareholders in reinvestment of dividends 315,032
----------
1,159,805
Shares redeemed (531,196)
----------
Net Increase 628,609
Shares Outstanding:
Beginning of Period 2,422,794
----------
End of Period 3,051,358
==========
Distributions to shareholders are recorded on the ex-dividend date.
Payments in excess of net investment income or of accumulated net realized
gains reported in the financial statements are due primarily to book/tax
differences. Payments due to permanent differences have been charged to
paid in capital. Payments due to temporary differences have been charged to
distributions in excess of net investment income or realized gains.
5.)PURCHASES AND SALES OF SECURITIES
During the twelve months ended December 31, 1997, purchases and sales of
investment securities other than U.S. Government obligations and short-term
investments aggregated $42,613,182 and $43,971,317 respectively. Purchases
and sales of U.S. Government obligations aggregated $7,983,593 and
$3,000,234 respectively.
6.)FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments which have any off-balance
sheet risk as of December 31, 1997.
7.)SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at December
31, 1997 was the same as identified cost. At December 31, 1997, the
composition of unrealized appreciation (the excess of value over tax cost)
and depreciation (the excess of tax cost over value) was as follows:
Appreciation (Depreciation) Net Appreciation (Depreciation)
12,268,302 (1,399,662) 10,868,640
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Directors:
Maxus Equity Fund
We have audited the accompanying statement of assets and liabilities of Maxus
Equity Fund, including the schedule of portfolioinvestments, as of December 31,
1997, 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 period then
ended, and financial highlights for each of the five years in the period 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, 1997, by correspondence with the custodian and
brokers. An audit also included assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Maxus
Equity Fund as of December 31, 1997, 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 21, 1998
THE MAXUS FUNDS
1301 East Ninth Street, Suite 3600, Cleveland, OH 44114
(216) 687-1000
INVESTMENT ADVISOR
Maxus Asset Management Inc
1301 East Ninth Street
Cleveland, Ohio 44114
BOARD OF TRUSTEES
Denis J. Amato
Richard A. Barone
Burton D. Morgan
Michael A. Rossi
Jerry Murphy
OFFICERS
Richard A. Barone, Chairman
Robert J. Conrad, Vice-President
Robert W. Curtin, Secretary
CUSTODIAN
Star Bank, N. A.
425 Walnut Street
P. O. Box 1118
Cincinnati, Ohio 45201-1118
TRANSFER AGENT
Maxus Information Systems Inc
1301 East Ninth Street
Cleveland, Ohio 44114
DISTRIBUTOR
Maxus Securities Corp
1301 East Ninth Street
Cleveland, Ohio 44114
LEGAL COUNSEL
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2378
AUDITOR
McCurdy & Associates CPA's Inc
27955 Clemens Road
Westlake, Ohio 44145