PROSPECTUS
January 8, 1998
LAKE SHORE FAMILY OF FUNDS
7824 LAUREL AVENUE
CINCINNATI, OHIO 45243
The Lake Shore Family of Funds currently offers two separate series of shares to
investors: the Equity Fund and the Balanced Fund (individually a "Fund" and
collectively the "Funds").
The EQUITY FUND seeks long-term growth of capital by investing primarily in
common stocks. Dividend and interest income is only an incidental consideration
to the Fund's investment objective.
The BALANCED FUND seeks long-term growth of capital and current income by
investing in a balanced portfolio of common stocks, U.S. Treasury obligations
and money market instruments.
Lake Shore Fund Group, LLC (the "Adviser"), 7824 Laurel Avenue, Cincinnati, Ohio
45243, manages the Funds' investments.
This Prospectus sets forth concisely the information about the Funds that
potential investors should know before investing. Please retain this Prospectus
for future reference. A Statement of Additional Information dated January 8,
1998 has been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the number listed below.
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For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . .800-266-9532
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 5.00%
Maximum Deferred Sales Load None
Sales Load Imposed on Reinvested Dividends None
Redemption Fee None*
* A wire transfer fee is charged by the Fund's custodian in the
case of redemptions made by wire. Such fee is subject to change
and is currently $9. See "How to Redeem Shares."
ANNUAL FUND OPERATING EXPENSE:
(as a percentage of average net assets)
Management Fees 1.00%
12b-1 Fees(1) .25%
Other Expenses .73%
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Total Fund Operating Expenses 1.98%
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(1) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association
of Securities Dealers.
EXAMPLE: You would pay the following expenses on a $1,000 investment, whether or
not you redeem at the end of the period, assuming 5% annual return:
1 Year $ 70
3 Years 112
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The percentages expressing "Other Expenses" are based on
estimated amounts for the current fiscal year. THE EXAMPLE SHOWN SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN THE
FUTURE MAY BE GREATER OR LESS THAN THOSE SHOWN.
INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK CONSIDERATIONS
The Lake Shore Family of Funds (the "Trust") is comprised of two Funds,
each with its own portfolio and investment objective. Neither of the Funds is
intended to be a complete investment program and there is no assurance that the
investment objective of any Fund can be achieved. Each Fund's investment
objective may be changed by the Board of Trustees without shareholder approval,
but only after notification has been given to shareholders and after this
Prospectus has been revised accordingly. If there is a change in a Fund's
investment objective, shareholders should consider whether such Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Funds are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
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EQUITY FUND
The Equity Fund seeks long-term growth of capital by investing primarily in
common stocks. Dividend and interest income is only an incidental consideration
to the Fund's investment objective.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in common stocks. The Fund will only invest in common stocks which are
listed on the Standard & Poor's 500 Stock Index (the "S&P 500") at the time of
investment. The S&P 500 is comprised of 500 selected common stocks which tend to
be the leading companies in the leading industries within the U.S. economy, most
of which are listed on the New York Stock Exchange.
The equity management strategy employed by the Adviser is based on the
belief that quantitative disciplines, which contain both buying and selling
parameters, will add value to a portfolio. The use of two independent,
contrasting styles, and defensive action when the market is determined to be in
a high-risk period, will add consistency to the Fund's performance, in the
opinion of the Adviser.
The two complimentary styles employed by the Adviser are price momentum and
value investing. The price momentum style focuses on those stocks which are
performing the best relative to the rest of the market. The goal of this style
is to be invested in those stocks which are exhibiting rapid increases in price.
At the other end of the investment spectrum, the value style focuses on those
stocks which appear to be the most attractively priced relative to the rest of
the market, and which are expected to appreciate over time as investors
recognize their inherent value.
The Fund will maintain a core portfolio of approximately 30 stocks.
Approximately 10 of these stocks will be selected from the S&P 500 on the basis
of price momentum, i.e. those stocks exhibiting the most rapid increases in
price according to the Adviser's quantitative model. A second group of
approximately 10 stocks will be selected also on the basis of price momentum;
however, these stocks will be selected from a composite group of 75 stocks
judged by the Adviser to be among the least volatile and most risk-adverse
stocks in the S&P 500. A final group of approximately 10 stocks will be selected
from this same composite group of 75 companies on the basis of value, i.e. those
stocks which appear to be the most attractively priced relative to the rest of
the market based upon the Adviser's quantitative assessment of such factors as
yield, price-to-earnings ratio and dividend coverage.
Investments in common stocks are subject to inherent market risks and
fluctuations in value due to earnings, economic
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conditions, quality ratings and other factors beyond the control of the Adviser.
As a result, the return and net asset value of the Fund will fluctuate.
When the Adviser believes substantial price risks exist for common stocks
because of uncertainties in the investment outlook or when in the judgment of
the Adviser it is otherwise warranted in selling to manage the Fund's portfolio,
the Fund may temporarily hold for defensive purposes all or a portion of its
assets in money market instruments such as bank debt instruments (certificates
of deposit, bankers' acceptances and time deposits), commercial paper, U.S.
Government obligations having a maturity of less than one year, shares of money
market investment companies or repurchase agreements collateralized by U.S.
Government obligations.
BALANCED FUND
The Balanced Fund seeks long-term growth of capital and current income by
investing in a balanced portfolio consisting of common stocks, U.S. Treasury
obligations and money market instruments. Under normal circumstances, the asset
mix of the Fund will range between 40-75 percent in common stocks, 25-60 percent
in U.S. Treasury obligations and 0-35 percent in money market instruments.
Moderate shifts between asset classes are made in an attempt to maximize returns
or reduce risk.
The Fund attempts to achieve growth of capital through its investments in
common stocks. The Fund will invest only in the common stocks of issuers listed
on the S&P 500. The Fund attempts to earn current income and at the same time
achieve moderate growth of capital and/or reduce fluctuation in the net asset
value of its shares by investing in U.S. Treasury obligations. U.S. Treasury
obligations are backed by the "full faith and credit" of the United States
Government. However, shares of the Fund are not guaranteed or backed by the
United States Government. The Fund also attempts to earn current income and
reduce fluctuation in the net asset value of its shares by investing in money
market instruments such as bank debt instruments (certificates of deposit,
bankers' acceptances and time deposits), commercial paper, U.S. Government
obligations having a maturity of less than one year, shares of money market
investment companies or repurchase agreements collateralized by U.S. Government
obligations.
The balanced management strategy employed by the Adviser is based on the
belief that quantitative disciplines, which contain both buying and selling
parameters, will add value to a portfolio. The use of two independent,
contrasting styles will add consistency to the Fund's performance, in the
opinion of the Adviser. Credit quality and conservatism are stressed with the
purchase of only common stocks from the S&P 500, U.S. Treasury obligations and
money market instruments.
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The two complimentary styles employed by the Adviser are price momentum and
value investing. For common stocks, the price momentum style focuses on those
stocks which are performing the best relative to the rest of the market. The
goal of this style is to be invested in those stocks which are exhibiting rapid
increases in price. At the other end of the investment spectrum, the value style
focuses on those stocks which appear to be the most attractively priced relative
to the rest of the market, and which will appreciate over time as investors
recognize their inherent value.
For U.S. Treasury obligations, the price momentum style attempts to take
advantage of the Adviser's belief that once interest rate trends are in place,
they tend to persist for a relatively long period of time. Both short-term and
long-term interest rate momentum is taken into account. In regards to value, the
Adviser compares the yield between Treasury bills and the 30-year Treasury bond.
When the spread is wide, the investor is being compensated for taking risk and
longer maturity securities should be owned; when the spread is narrow, there is
not adequate compensation and shorter-term securities are preferable. The Fund
intends to invest only in U.S. Treasury obligations with remaining maturities of
10 years or less at the time of purchase.
The asset mix of the Fund will be dictated by the position of quantitative
models. When a favorable environment for stocks is indicated, the Fund intends
to maintain a portfolio of approximately 30 stocks selected according to the
momentum style (10 stocks) and value style (20 stocks). When an unfavorable
environment is indicated, the momentum style component of the portfolio, which
is generally believed by the Adviser to be the more volatile component, will be
liquidated and the proceeds will be invested in U.S. Treasury obligations or
money market instruments. The composition of the Fund's holdings in U.S.
Treasury obligations will be dependent upon whether the interest rate momentum
and value models are positive or negative. The average maturity will be
lengthened when both models are positive and shortened when one or both are
negative.
Because the Fund intends to allocate its assets among common stocks, U.S.
Treasury obligations and money market instruments, it may not be able to
achieve, at times, a total return as high as that of a portfolio with complete
freedom to invest its assets entirely in any one type of security. Likewise, the
Fund may not achieve the degree of capital appreciation that a portfolio
investing solely in common stocks might achieve.
Investments in common stocks and U.S. Treasury obligations are subject to
inherent market risks and fluctuations in value due to changes in earnings,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. U.S. Treasury obligations are also subject to price fluctuations based
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upon changes in the level of interest rates, which will generally result in all
those securities changing in price in the same way, i.e., all those securities
experiencing appreciation when interest rates decline and depreciation when
interest rates rise. Securities with longer maturities generally offer both
higher yields and greater exposure to market fluctuation from changes in
interest rates. As a result, the return and net asset value of the Fund will
fluctuate.
Investors should be aware that the investment results of the Fund depend
upon the ability of the Adviser to correctly anticipate the relative performance
and risk of commons stocks and U.S. Treasury obligations of varying maturities.
Historical evidence indicates that correctly timing portfolio allocations among
these asset classes has been an extremely difficult investment strategy to
implement successfully. There can be no assurance that the Adviser will
correctly anticipate relative asset class performance in the future on a
consistent basis. Investment results would suffer, for example, if only a small
portion of the Fund's assets were invested in common stocks during a significant
stock market advance or if a major portion were invested in common stocks during
a major decline.
When the Adviser believes substantial price risks exist for common stocks
and/or U.S. Treasury obligations because of uncertainties in the investment
outlook or when in the judgment of the Adviser it is otherwise warranted in
selling to manage the Fund's portfolio, the Fund may temporarily hold for
defensive purposes up to 100% of its assets in money market instruments.
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ADDITIONAL INVESTMENT INFORMATION
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include
securities which are issued or guaranteed by the United States Treasury, by
various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government. U.S. Treasury obligations are backed by the "full faith and credit"
of the United States Government. U.S. Treasury obligations include Treasury
bills, Treasury notes and Treasury bonds. U.S. Treasury obligations also include
the separate principal and interest components of U.S. Treasury obligations
which are traded under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Agencies or instrumentalities established by
the United States Government include the Federal Home Loan Banks, the Federal
Land Bank, the Government National Mortgage Association, the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, the Student
Loan Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing Bank,
the Federal Farm Credit Banks, the Federal Agricultural Mortgage Corporation,
the Resolution Funding Corporation, the Financing Corporation of America and the
Tennessee Valley Authority. Some of these securities are supported by the full
faith and credit of the United States Government while others are supported only
by the credit of the agency or instrumentality, which may include the right of
the issuer to borrow from the United States Treasury. In the case of securities
not backed by the full faith and credit of the United States, the investor must
look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States in the event the agency or instrumentality does not meet its commitments.
Shares of the Funds are not guaranteed or backed by the United States
Government.
BORROWING AND PLEDGING. Each Fund may borrow money from banks, provided
that, immediately after any such borrowings, there is asset coverage of 300% for
all borrowings of the Fund. A Fund will not make any borrowing which would cause
its outstanding borrowings to exceed one-third of the value of its total assets.
Each Fund may pledge assets in connection with borrowings but will not pledge
more than one-third of its total assets. Borrowing magnifies the potential for
gain or loss on the portfolio securities of the Funds and, therefore, if
employed, increases the possibility of fluctuation in a Fund's net asset value.
This is the speculative factor known as leverage. Each Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares. It is the Funds'
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present intention, which may be changed by the Board of Trustees without
shareholder approval, to limit each Fund's borrowing to no more than 5% of its
net assets, and only for emergency or extraordinary purposes and not for
leverage.
LENDING PORTFOLIO SECURITIES. Each Fund may, from time to time, lend
securities on a short-term basis (i.e., for up to seven days) to banks, brokers
and dealers and receive as collateral cash, U.S. Government obligations or
irrevocable bank letters of credit (or any combination thereof), which
collateral will be required to be maintained at all times in an amount equal to
at least 100% of the current value of the loaned securities plus accrued
interest. Although each of the Funds does have the ability to make loans of all
of its portfolio securities, it is the present intention of the Trust, which may
be changed without shareholder approval, that such loans will not be made with
respect to a Fund if as a result the aggregate of all outstanding loans exceeds
one-third of the value of the Fund's total assets. Securities lending will
afford a Fund the opportunity to earn additional income because the Fund will
continue to be entitled to the interest payable on the loaned securities and
also will either receive as income all or a portion of the interest on the
investment of any cash loan collateral or, in the case of collateral other than
cash, a fee negotiated with the borrower. Such loans will be terminable at any
time. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of the insolvency of the borrower of the securities. A
Fund will have the right to regain record ownership of loaned securities in
order to exercise beneficial rights. A Fund may pay reasonable fees in
connection with arranging such loans.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements.
Repurchase agreements are transactions by which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed upon
time and price, thereby determining the yield during the term of the agreement.
In the event of a bankruptcy or other default of the seller of a repurchase
agreement, a Fund could experience both delays in liquidating the underlying
security and losses. To minimize these possibilities, each Fund intends to enter
into repurchase agreements only with its Custodian, banks having assets in
excess of $10 billion and the largest and, in the judgment of the Adviser, most
credit worthy primary U.S. Government securities dealers. Each Fund will enter
into repurchase agreements which are collateralized by U.S. Government
obligations. Collateral for repurchase agreements is held in safekeeping in the
customer-only account of the Funds' Custodian at the Federal Reserve Bank. At
the time a Fund enters into a repurchase
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agreement, the value of the collateral, including accrued interest, will
equal or exceed the value of the repurchase agreement and, in the case of a
repurchase agreement exceeding one day, the seller agrees to maintain sufficient
collateral so the value of the underlying collateral, including accrued
interest, will at all times equal or exceed the value of the repurchase
agreement. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of the net
assets of the Fund would be invested in such securities and other illiquid
securities.
PORTFOLIO TURNOVER. The Funds do not intend to use short-term trading as a
primary means of achieving their investment objectives. However, each Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. Although the annual portfolio turnover rate of the
Funds cannot be accurately predicted, it is not expected to exceed 100% with
respect to either of the Funds, but may be either higher or lower. A 100%
turnover rate would occur, for example, if all the securities of a Fund were
replaced once in a one-year period. High turnover involves correspondingly
greater commission expenses and transaction costs and may result in a Fund
recognizing greater amounts of income and capital gains, which would increase
the amount of income and capital gains which the Fund must distribute to
shareholders in order to maintain its status as a regulated investment company
and to avoid the imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
The initial investment in either Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). The Funds may, in the Adviser's sole
discretion, accept certain accounts with less than the stated minimum initial
investment. Investors may open an account and make an initial investment through
securities dealers having a sales agreement with the Trust's principal
underwriter, Countrywide Investments, Inc. (the "Underwriter"). Investors may
also make a direct initial investment by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to either
the "Equity Fund" or the "Balanced Fund". Third party checks will not be
accepted. An account application is included in this Prospectus. Additional
shares may be purchased through the Open Account Program described below.
Shares of each Fund are sold on a continuous basis at the public offering
price next determined after receipt of a purchase order by the Trust. Purchase
orders received by dealers prior to 4:00 p.m., Eastern time, on any business day
and transmitted to
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the Underwriter by 5:00 p.m., Eastern time, that day are confirmed at the public
offering price determined as of the close of the regular session of trading on
the New York Stock Exchange on that day. It is the responsibility of dealers to
transmit properly completed orders so that they will be received by the
Underwriter by 5:00 p.m., Eastern time. Dealers may charge a fee for effecting
purchase orders. Direct purchase orders received by the Transfer Agent by 4:00
p.m., Eastern time, are confirmed at that day's public offering price. Direct
investments received by the Transfer Agent after 4:00 p.m., Eastern time, and
orders received from dealers after 5:00 p.m., Eastern time, are confirmed at the
public offering price next determined on the following business day.
The public offering price of shares of the Funds is the next determined
net asset value per share plus a sales load as shown in the following table.
Sales Load as % of: Dealer
------------------- Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
- -------------------- -------- --------- --------------
Less than $25,000 5.00% 5.00% 4.50%
$25,000 but less than $250,000 4.00 4.00 3.50
$250,000 or more 3.00 3.00 2.50
Under certain circumstances, the Underwriter may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Funds may
be deemed to be underwriters under the Securities Act of 1933. The Underwriter
retains the entire sales load on all direct initial investments in Funds and on
all investments in the Funds and all investments in accounts with no designated
dealer of record.
The Trust mails investors a confirmation of each purchase or redemption of
Fund shares. Certificates representing shares are not issued. The Trust and the
Underwriter reserve the right to limit the amount of investments and to refuse
to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Underwriter, the Transfer Agent and
certain of their affiliates, excluding such entities from certain liabilities
(including, among others, losses resulting from unauthorized shareholder
transactions) relating to the various services (for example, telephone
exchanges) made available to investors.
Should an order to purchase shares be canceled because the check does not
clear, the investor will be responsible for any resulting losses or fees
incurred by the Trust or the Transfer Agent in the transaction.
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OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or telephone
number listed below.
After an initial investment, all investors are considered participants in
the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Funds over a period of years and permits the
automatic reinvestment of dividends and distributions of the Funds in additional
shares. Reinvestment of dividends and distributions in additional shares will be
made without a sales load.
Under the Open Account Program, the investor may purchase and add shares to
his or her account at any time either through a securities dealer or by sending
a check to the Lake Shore Family of Funds, P.O. Box 5354, Cincinnati, Ohio
45201-5354. The check should be made payable to the applicable Fund.
Under the Open Account Program, investors may also purchase shares of the
Funds by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 800-266-9532) for instructions. The bank may impose a charge for
sending the wire. There is presently no fee for receipt of wired funds, but the
Trust reserves the right to charge shareholders for this service upon thirty
days' prior notice to shareholders.
Each additional purchase request must contain the name of the account and
the account number to permit proper crediting to the account. While there is no
minimum amount required for subsequent investments, the Trust reserves the right
to impose such a requirement. All purchases under the Open Account Program are
made at the public offering price next determined after receipt of a purchase
order by the Trust. If a broker-dealer received concessions for selling shares
of the Funds to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing shares of any Fund in the Lake Shore Family of Funds
with the amount of his or her current purchases in order to take advantage of
the reduced sales loads set forth in the table above. Purchases made pursuant to
a Letter of Intent may also be eligible for the reduced sales loads. The minimum
initial investment under a Letter of Intent is $10,000. Shareholders should
contact the Transfer Agent for information about the Right of Accumulation and
Letter of Intent.
PURCHASES AT NET ASSET VALUE. An investor may purchase shares of either
Fund at net asset value when the payment for the investment represents the
proceeds from the redemption of shares
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of any other mutual fund which has a front-end sales load and is not distributed
by the Underwriter. The investment will qualify for this provision if the
purchase price of the shares of the other fund included a front-end sales load
and the redemption occurred within one year of the purchase of such shares and
no more than sixty days prior to purchase of shares of the Funds. To make a
purchase at net asset value pursuant to this provision, the investor must submit
photocopies of the confirmations (or similar evidence) showing the purchase and
redemption of shares of the other fund. The payment may be made with the
redemption check representing the proceeds of the shares redeemed, endorsed to
the order of the applicable Fund. The redemption of shares of the other fund is,
for federal income tax purposes, a sale on which the investor may realize a gain
or loss. These provisions may be modified or terminated at any time.
Shareholders should contact their securities dealer or the Trust for further
information.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase shares of the
Funds at net asset value. To the extent permitted by regulatory authorities, a
bank trust department may charge fees to clients for whose account it purchases
shares at net asset value. Federal and state credit unions may also purchase
shares at net asset value.
In addition, shares of the Funds may be purchased at net asset value by
broker-dealers who have a sales agreement with the Underwriter, and their
registered personnel and employees, including members of the immediate families
of such registered personnel and employees.
Clients of investment advisers and financial planners may also purchase
shares of the Funds at net asset value if their investment adviser or financial
planner has made arrangements to permit them to do so with the Trust and the
Underwriter. The investment adviser or financial planner must notify the
Transfer Agent that an investment qualifies as a purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the Adviser, the
Underwriter or the Transfer Agent, including members of the immediate families
of such individuals and employee benefit plans established by such entities, may
also purchase shares of the Funds at net asset value.
ADDITIONAL INFORMATION. For purposes of determining the applicable sales
load and for purposes of the Letter of Intent and Right of Accumulation
privileges, a purchaser includes an individual, his or her spouse and their
children under the age of 21, purchasing shares for his, her or their own
account; or a
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trustee or other fiduciary purchasing shares for a single fiduciary account
although more than one beneficiary is involved; or employees of a common
employer, provided that economies of scale are realized through remittances from
a single source and quarterly confirmation of such purchases; or an organized
group, provided that the purchases are made through a central administration or
a single dealer, or by other means which result in economy of sales effort or
expense. Contact the Transfer Agent for additional information concerning
purchases at net asset value or at reduced sales loads.
SHAREHOLDER SERVICES
Contact the Transfer Agent (Nationwide call toll-free 800-266-9532) for
additional information about the shareholder services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in an account have a value of at least $5,000, the
shareholder may elect to receive, or may designate another person to receive,
monthly or quarterly payments in a specified amount of not less than $50 each.
There is no charge for this service. Purchases of additional shares of the Funds
while the plan is in effect are generally undesirable because a sales load is
incurred whenever purchases are made.
TAX-DEFERRED RETIREMENT PLANS
Shares of either Fund are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses, including
Roth IRAs and Education IRAs
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
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DIRECT DEPOSIT PLANS
Shares of either Fund may be purchased through direct deposit plans offered
by certain employers and government agencies. These plans enable a shareholder
to have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Funds.
AUTOMATIC INVESTMENT PLAN
Shareholders may make automatic monthly investments in either Fund from
their bank, savings and loan or other depository institution account. The
minimum initial and subsequent investments must be $50 under the plan. The
Transfer Agent pays the costs associated with these transfers, but reserves the
right, upon thirty days' written notice, to make reasonable charges for this
service. A shareholder's depository institution may impose its own charge for
debiting an account which would reduce the return from an investment in the
Funds.
REINVESTMENT PRIVILEGE
If a shareholder has redeemed shares of either Fund, he or she may reinvest
all or part of the proceeds without any additional sales load. This reinvestment
must occur within ninety days of the redemption and the privilege may only be
exercised once per year.
HOW TO REDEEM SHARES
Shareholders may redeem shares of either Fund on each day that the Trust is
open for business by sending a written request to the Transfer Agent. The
request must state the number of shares or the dollar amount to be redeemed and
the account number. The request must be signed exactly as the shareholder's name
appears on the Trust's account records. If the shares to be redeemed have a
value of $25,000 or more, the shareholder's signature must be guaranteed by any
eligible guarantor institution, including banks, brokers and dealers, municipal
securities brokers and dealers, government securities brokers and dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations.
Shareholders may also redeem shares by placing a wire redemption request
through a securities broker or dealer. Unaffiliated broker-dealers may impose a
fee on the shareholder for this service. Shareholders will receive the net asset
value per share next determined after receipt by the Transfer Agent of the wire
redemption request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
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<PAGE>
If the instructions request a redemption by wire, the shareholder will be
charged a $9 processing fee by the Funds' custodian. The Trust reserves the
right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from the shareholder's account by redemption of shares
in the account. The shareholder's bank or brokerage firm may also impose a
charge for processing the wire. In the event that wire transfer of funds is
impossible or impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited directly in
the shareholder's account with a commercial bank or other depository institution
via an Automated Clearing House (ACH) transaction. There is currently no charge
for ACH transactions. Contact the Transfer Agent for more information about ACH
transactions.
Shares are redeemed at their net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
check will be effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this delay, shareholders
may purchase shares of the Funds by certified check or wire.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege of
exchanging shares by telephone is automatically available to all shareholders.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require shareholders to close an account if at any time the value of
the shares in the account is less than $1,000 (based on actual
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<PAGE>
amounts invested including any sales load paid, unaffected by market
fluctuations), or $250 in the case of tax-deferred retirement plans, or such
other minimum amount as the Trust may determine from time to time. After
notification of the Trust's intention to close an account, the shareholder will
be given thirty days to increase the value of the account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
Shares of either Fund may be exchanged for shares of the other series of
the Trust at net asset value. Shareholders may request an exchange by sending a
written request to the Transfer Agent. The request must be signed exactly as the
shareholder's name appears on the Trust's account records. Exchanges may also be
requested by telephone. If a shareholder is unable to execute a transaction by
telephone (for example, during times of unusual market activity), the
shareholder should consider requesting the exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value after receipt
of a request by the Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in the
shareholder's state of residence and are subject to the applicable minimum
initial investment requirements. The exchange privilege may be modified or
terminated by the Board of Trustees upon 60 days prior notice to shareholders.
An exchange results in a sale of fund shares, which may cause the shareholder to
recognize a capital gain or loss. Before making an exchange, contact the
Transfer Agent to obtain a current prospectus and more information about
exchanges among the funds.
DIVIDENDS AND DISTRIBUTIONS
Each Fund expects to distribute substantially all of its net investment
income, if any, on a quarterly basis. Each Fund expects to distribute any net
realized long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net realized
short-term capital gains.
- 16 -
<PAGE>
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
The choice of option should be indicated on the application. If no option is
specified on the application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If the Income Option or the Cash Option is selected and the U.S. Postal
Service cannot deliver the checks or if the checks remain uncashed for six
months, dividends may be reinvested in the account at the then-current net asset
value and the account will be converted to the Share Option. No interest will
accrue on amounts represented by uncashed distribution checks.
An investor who has received in cash any dividend or capital gains
distribution from either Fund may return the distribution within thirty days of
the distribution date to the Transfer Agent for reinvestment at the net asset
value next determined after its return. The investor or his dealer must notify
the Transfer Agent that a distribution is being reinvested pursuant to this
provision.
TAXES
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. Each Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its shareholders.
Distributions of net investment income and from net realized short-term capital
gains, if any, are taxable as ordinary income. Dividends distributed by the
Funds from net investment income may be eligible, in whole or in part, for the
dividends received deduction available to corporations. Distributions of net
realized long-term capital gains are taxable
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<PAGE>
as long-term capital gains regardless of how long the shareholder has held Fund
shares. Dividends distributed by the Funds from net investment income may be
eligible, in whole or in part, for the dividends received deduction available to
corporations.
Distributions of net capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by a Fund to its shareholders
are taxable to the recipient shareholders as capital gains, without regard to
the length of time a shareholder has held Fund shares. The maximum capital gains
rate for individuals is 28% with respect to assets held for more than 12 months,
but not more than 18 months, and 20% with respect to assets held more than 18
months. The maximum capital gains rate for corporate shareholders is the same as
the maximum tax rate for ordinary income. Redemptions of shares of the Funds are
taxable events on which a shareholder may realize a gain or loss.
The Funds will mail to each of their shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Funds may be subject to
state and local taxes on distributions. Shareholders should consult their tax
advisers about the tax effect of distributions and withdrawals from the Funds
and the use of the Automatic Withdrawal Plan and the Exchange Privilege. The tax
consequences described in this section apply whether distributions are taken in
cash or reinvested in additional shares.
OPERATION OF THE FUNDS
The Funds are diversified series of the Lake Shore Family of Funds, an
open-end management investment company organized as an Ohio business trust on
September 3, 1997. The Board of Trustees supervises the business activities of
the Trust. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Funds.
The Trust retains Lake Shore Fund Group, LLC (the "Adviser"), 7824 Laurel
Avenue, Cincinnati, Ohio to manage the Funds' investments. The controlling
shareholders of the Adviser are Earl V. (Buck) Newsome, Jr. and Gregory J.
Bauer. The Adviser has not previously provided investment advisory services to a
registered investment company. Each Fund pays the Adviser a fee for its services
equal to the annual rate of 1.00% the average value of its daily net assets. As
of the date of this Prospectus, Suzanne K. Meyers Trustee, Suzanne K. Meyers
Trust, dtd 4/10/92, 5080 Squirrel Bend, Columbus, Ohio 43220, is the sole
shareholder of each Fund.
- 18 -
<PAGE>
Earl V. (Buck) Newsome, Jr., Gregory J. Bauer and Robert A. McLaughlin are
primarily responsible for managing the portfolio of the Equity Fund and the
Balanced Fund. Mr. Newsome co-founded the Adviser with Mr. Bauer in 1997. Mr.
Bauer also co-founded Cambridge Financial Group, Inc. ("Cambridge"), a
registered investment adviser, in 1986. Messrs. Bauer and Newsome are currently
the controlling shareholders of Cambridge, serving as Chairman and President
respectively. Mr. McLaughlin serves as Executive Vice President and a director
of both the Adviser and Cambridge. Prior to joining Cambridge in 1996, he served
as retirement system investment officer and assistant director of the Ohio
Public Employees Retirement System.
The Funds are responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Funds, fees and expenses of members of the Board of Trustees who are not
employees or officers of the Adviser, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Funds may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
Countrywide Investments, Inc. (the "Underwriter"), 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202, serves as principal underwriter for the Funds
and, as such, is the exclusive agent for the distribution of shares of the
Funds. The Underwriter is a wholly-owned indirect subsidiary of Countrywide
Credit Industries, Inc., a New York Stock Exchange listed company principally
engaged in residential mortgage lending.
The Trust retains Countrywide Fund Services, Inc. (the "Transfer Agent"),
P.O. Box 5354, Cincinnati, Ohio 45201-5354, an indirect wholly-owned subsidiary
of Countrywide Credit Industries, Inc., to serve as the Funds' transfer agent,
dividend paying agent and shareholder servicing agent.
The Transfer Agent also provides accounting and pricing services to the
Funds. The Transfer Agent receives a monthly fee from each Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
- 19 -
<PAGE>
In addition, the Transfer Agent has been retained to provide administrative
services to the Funds. In this capacity, the Transfer Agent supplies executive,
administrative and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and reports
to and filings with the Securities and Exchange Commission and state securities
authorities. Each Fund pays the Transfer Agent a fee for these administrative
services at the annual rate of .15% of the average value of its daily net assets
up to $50 million, .125% of such assets from $50 million to $100 million and
.10% of such assets in excess of $100 million; provided, however, that the
minimum fee is $1,000 per month with respect to each Fund.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may give consideration to sales of shares
of the Funds as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Funds. Subject to the requirements of the
Investment Company Act of 1940 (the "1940 Act") and procedures adopted by the
Board of Trustees, the Funds may execute portfolio transactions through any
broker or dealer and pay brokerage commissions to a broker (i) which is an
affiliated person of the Trust, or (ii) which is an affiliated person of such
person, or (iii) an affiliated person of which is an affiliated person of the
Trust, the Adviser or the Underwriter.
Shares of each Fund have equal voting rights and liquidation rights, and
are voted in the aggregate and not by Fund except in matters where a separate
vote is required by the 1940 Act or when the matter affects only the interests
of a particular Fund. When matters are submitted to shareholders for a vote,
each shareholder is entitled to one vote for each full share owned and
fractional votes for fractional shares owned. The Trust does not normally hold
annual meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon the removal
of any Trustee when requested to do so in writing by shareholders holding 10% or
more of the Trust's outstanding shares. The Trust will comply with the
provisions of Section 16(c) of the 1940 Act in order to facilitate
communications among shareholders.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Funds have adopted a plan of
distribution (the "Plan") under which the Funds may directly incur or reimburse
the Underwriter or the Adviser for certain distribution-related expenses,
including payments to securities dealers and others who are engaged in the sale
of shares of the Funds and who may be advising investors regarding the purchase,
sale or retention of Fund shares; expenses of
- 20 -
<PAGE>
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Funds; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of the Funds' shares.
The annual limitation for payment of expenses pursuant to the Plan is .25%
of each Fund's average daily net assets. Unreimbursed expenditures will not be
carried over from year to year. In the event the Plan is terminated by either
Fund in accordance with its terms, that Fund will not be required to make any
payments for expenses incurred after the date the Plan terminates.
Pursuant to the Plan, the Funds may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Funds or their shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Funds may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for a Fund, no preference will be shown for
such securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of mutual
funds. These Rules require fund-level accounting in which all sales charges -
front-end load, 12b-1
- 21 -
<PAGE>
fees or contingent deferred load - terminate when a percentage of gross sales is
reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
On each day that the Trust is open for business, the public offering price
(net asset value plus applicable sales load) of shares of each of the Funds is
determined as of the close of the regular session of trading on the New York
Stock Exchange, currently 4:00 p.m., Eastern time. The Trust is open for
business on each day the New York Stock Exchange is open for business and on any
other day when there is sufficient trading in a Fund's investments that its net
asset value might be materially affected. The net asset value per share of each
Fund is calculated by dividing the sum of the value of the securities held by
the Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund, rounded
to the nearest cent.
U.S. Government obligations are valued at their most recent bid prices as
obtained from one or more of the major market makers for such securities. Other
portfolio securities are valued as follows: (i) securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the closing bid price, (ii) securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (iii) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of each Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
From time to time, each Fund may advertise its "average annual total
return." Each Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance.
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<PAGE>
The "average annual total return" of a Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and the
deduction of the current maximum sales load from the initial investment. A Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. A nonstandardized quotation of total return may
also indicate average annual compounded rates of return over periods other than
those specified for "average annual total return." These nonstandardized returns
do not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation of total return will always be
accompanied by a Fund's "average annual total return" as described above.
The "yield" of a Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, the Funds may advertise their performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also compare
their performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average and the Standard & Poor's
500 Stock Index. In connection with a ranking, the Funds may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Funds may also present their performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Adviser's view of current or past market conditions or historical trends.
- 23 -
<PAGE>
LAKE SHORE FAMILY OF FUNDS [LOGO]
7824 Laurel Avenue
Cincinnati, Ohio 45243
BOARD OF TRUSTEES
- -----------------
Gregory J. Bauer
Frank G. Doyle III
Francis A. Kovacs, Jr. LAKE SHORE
Ronald R. McAdams ------------
Robert A. McLaughlin FAMILY OF FUNDS
Joseph P. Rouse
Ralph P. Schwartz
William N. Stratman
INVESTMENT ADVISER EQUITY FUND
- ------------------
LAKE SHORE FUND GROUP, LLC BALANCED FUND
7824 Laurel Avenue
Cincinnati, Ohio 45243
UNDERWRITER
- -----------
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
TRANSFER AGENT P R O S P E C T U S
- ------------------------ ----------------------
COUNTRYWIDE FUND SERVICES, INC. JANUARY 8, 1998
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICES
- --------------------
Nationwide: (Toll-Free) 800-266-9532
TABLE OF CONTENTS
PAGE
EXPENSE INFORMATION......................................................... 2
INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK
CONSIDERATIONS........................................................... 2
HOW TO PURCHASE SHARES...................................................... 9
SHAREHOLDER SERVICES........................................................13
HOW TO REDEEM SHARES........................................................14
EXCHANGE PRIVILEGE..........................................................16
DIVIDENDS AND DISTRIBUTIONS.................................................16
TAXES.......................................................................17
OPERATION OF THE FUNDS......................................................18
DISTRIBUTION PLAN...........................................................20
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE........................22
PERFORMANCE INFORMATION.....................................................22
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<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
<TABLE>
<S> <C>
LAKE SHORE FAMILY OF FUNDS ACCOUNT NO. L____-_________________
Account Application (Check appropriate Fund) (For Fund Use Only)
o EQUITY FUND (L6) $______________ FOR BROKER/DEALER USE ONLY
o BALANCED FUND (L7) $______________ Firm Name:_____________________________
Please mail account application to: Home Office Address:___________________
Lake Shore Family of Funds Branch Address:________________________
P.O. Box 5354 Rep Name & No.:________________________
Cincinnati, Ohio 45201-5354 Rep Signature:_________________________
- -------------------------------------------------------------------------------------------------
o Check or draft enclosed payable to the Fund(s) designated above ($1,000 minimum).
o Bank Wire From: ________________________________________________________________________
o Exchange From: ________________________________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/Tax I.D.#
____________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minors S.S.#)
Citizenship: o U.S.
____________________________________________________________
Name of Joint Tenant, Partner, Custodian o Other
ADDRESS PHONE
____________________________________________________________ ( )_______________________
Street or P.O. Box Business Phone
____________________________________________________________ ( )_______________________
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (Right of Survivorship Presumed)
o Partnership o Corporation o Trust o Custodial
o Non-Profit o Other
Occupation and Employer Name/Address____________________________________________
Are you an associated person of an NASD member? o Yes o No
- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER - Under penalties of perjury I certify that the
Taxpayer Identification Number listed above is my correct number. Check box if
appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to
backup withholding because I have not been notified that I am subject
to backup withholding as a result of a failure to report all interest or
dividends; or the Internal Revenue Service has notified me that I am no
longer subject to backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
- --------------------------------------------------------------------------------
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option - Income distributions and capital gains distributions
automatically reinvested in additional shares. o Income Option - Income
distributions and short term capital gains distributions paid in cash, long term
capital gains distributions reinvested in additional shares. o Cash Option -
Income distributions and capital gains distributions paid in cash. o By Check o
By ACH to my bank checking or savings account. PLEASE ATTACH A VOIDED CHECK.
- --------------------------------------------------------------------------------
REDUCED SALES CHARGES
RIGHT OF ACCUMULATION: I apply for Right of Accumulation subject to the Agent's
confirmation of the following holdings of the Lake Shore Family of Funds.
Account Number/Name Account Number/Name
______________________________________ ____________________________________
______________________________________ ____________________________________
Letter of Intent: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o I agree to the Letter of Intent in the current Prospectus of the Lake Shore
Family of Funds. Although I am not obligated to purchase, and the Trust is
not obligated to sell, I intend to invest over a 13 month period beginning
______________________ 19 _______ (purchase date of not more than 90 days
prior to this Letter) an aggregate amount in the Lake Shore Family of Funds
at least equal to (check appropriate box):
o $25,000 o $250,000
- --------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Funds' current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions
for automatic reinvestment in additional shares of the Funds for credit to the
investor's account and to surrender for redemption shares held in the investor's
account in accordance with any of the procedures elected above or for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release Countrywide
Fund Services, Inc., Lake Shore Family of Funds, Lake Shore Fund Group, LLC,
Countrywide Investments, Inc., and their respective officers, employees, agents
and affiliates from any and all liability in the performance of the acts
instructed herein [provided that such entities have exercised due care to
determine that the instructions are genuine. Neither the Trust, Countrywide Fund
Services, Inc., nor their respective affiliates will be liable for complying
with telephone instructions they reasonably believe to be genuine or for any
loss, damage, cost or expense in acting on such telephone instructions. The
investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund
Services, Inc., or both, will employ reasonable procedures to determine that
telephone instructions are genuine. If the Trust and/or Countrywide Fund
Services, Inc. do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.] The Internal Revenue Service does
not require your consent to any provision of this document other than the
certifications required to avoid backup withholding.
___________________________________ ______________________________________
Signature of Individual Owner, Signature of Joint Owner, if any
Corporate Officer, Trustee, etc
___________________________________ ______________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each joint
owner shall have full authority to act on behalf of the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund(s)) The
Automatic Investment Plan is available for all established accounts of the Lake
Shore Family of Funds. There is no charge for this service, and it offers the
convenience of automatic investing on a regular basis. The minimum investment is
$50.00 per month. For an account that is opened by using this Plan, the minimum
initial and subsequent investments must be $50.00. Though a continuous program
of 12 monthly investments is recommended, the Plan may be discontinued by the
shareholder at any time.
Please invest $ _________________ per ABA Routing Number_____________________
month in the (check the appropriate
Fund.) FI Account Number______________________
o Equity Fund o Balanced Fund
o Checking Account o Savings Account
__________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
__________________________________ o the 15th day of each month
City State o both the 15th and last business day
X_________________________________ X_______________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant - if any)
it appears on FI Records)
(Joint Signatures are required when bank account is in joint names.
Please sign exactly as signature appears on your FI's records.)
PLEASE ATTACH A VOIDED CHECK FOR THE AUTOMATIC INVESTMENT PLAN.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. (Countrywide) has put into effect, by which amounts, determined
by your depositor, payable to the applicable Fund designated above, for purchase
of shares of said Fund, are collected by Countrywide, Countrywide hereby agrees:
Countrywide will indemnify and hold you harmless from any liability to any
person or persons whatsoever arising out of the payment by you of any amount
drawn by the Funds to their own order on the account of your depositor or from
any liability to any person whatsoever arising out of the dishonor by you
whether with or without cause or intentionally or inadvertently, of any such
amount. Countrywide will defend, at its own cost and expense, any action which
might be brought against you by any person or persons whatsoever because of your
actions taken pursuant to the foregoing request or in any manner arising by
reason of your participation in this arrangement. Countrywide will refund to you
any amount erroneously paid by you to the Funds if the claim for the amount of
such erroneous payment is made by you within six (6) months from the date of
such erroneous payment; your participation in this arrangement and that of the
Funds may be terminated by thirty (30) days' written notice from either party to
the other.
- --------------------------------------------------------------------------------
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund(s))
This is an authorization for you to withdraw $____________from my mutual fund
account beginning the last business day of the month of___________________.
Please Indicate Withdrawal Schedule (Check One):
o Monthly--Withdrawals will be made on the last business day of each month.
o Quarterly--Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o Annually--Please make withdrawals on the last business day of the month
of:_____________________.
Please Select Payment Method (Check One):
o Exchange: Please exchange the withdrawal proceeds into another account
number: ____ ____ - ____ ____ ____ ____ ____ ____ - ____
o Check: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my
bank checking or savings account as indicated below. I understand that the
transfer will be completed in two to three business days and that there is no
charge.
o Bank Wire: Please send my withdrawal proceeds via bank wire, to the account
indicated below. I understand that the wire will be completed in one
business day and that there is an $8.00 fee.
Please attach a voided ___________________________________________________
check for ACH or bank wire Bank Name Bank Address
___________________________________________________
Bank ABA# Account # Account Name
o Send to special payee (other than applicant): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee________________________________________________________
Please send to:______________________________________________________
Street address City State Zip
- --------------------------------------------------------------------------------
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of the Lake
Shore Family of Funds (the Trust) and that
________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of
the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the Trust,
and it is
FURTHER RESOLVED: That any one of the above noted officers is
authorized to sign any documents necessary or appropriate to appoint Countrywide
Fund Services, Inc. as redemption agent of the corporation or organization for
shares of the applicable series of the Trust, to establish or acknowledge terms
and conditions governing the redemption of said shares and to otherwise
implement the privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and Bylaws or other empowering documents of the
________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on________________________ at
which a quorum was present and acting throughout, and that the same are now in
full force and effect. I further certify that the following is (are) duly
elected officer(s) of the corporation or organization, authorized to act in
accordance with the foregoing resolutions.
Name Title
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
Witness my hand and seal of the corporation or organization
this____________________________________day of_________________________________,
19_______.
______________________________ _____________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
</TABLE>
<PAGE>
LAKE SHORE FAMILY OF FUNDS
STATEMENT OF ADDITIONAL INFORMATION
January 8, 1998
Equity Fund
Balanced Fund
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus of the Lake Shore Family of Funds dated
January 8, 1998. A copy of the Funds' Prospectus can be obtained by writing the
Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202, or by calling
the Trust nationwide toll-free 1-800-266-9532.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Lake Shore Family of Funds
7824 Laurel Avenue
Cincinnati, Ohio 45243
TABLE OF CONTENTS
THE TRUST................................................................... 3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS............................... 3
INVESTMENT LIMITATIONS...................................................... 7
TRUSTEES AND OFFICERS....................................................... 9
THE INVESTMENT ADVISER......................................................12
THE UNDERWRITER.............................................................12
DISTRIBUTION PLAN...........................................................13
SECURITIES TRANSACTIONS.....................................................14
PORTFOLIO TURNOVER..........................................................16
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE........................16
OTHER PURCHASE INFORMATION..................................................16
TAXES.......................................................................18
REDEMPTION IN KIND..........................................................19
HISTORICAL PERFORMANCE INFORMATION..........................................19
CUSTODIAN...................................................................21
AUDITORS ...................................................................21
COUNTRYWIDE FUND SERVICES, INC..............................................21
STATEMENTS OF ASSETS AND LIABILITIES........................................22
- 2 -
<PAGE>
THE TRUST
The Lake Shore Family of Funds (the "Trust") was organized as an Ohio
business trust on September 3, 1997. The Trust currently offers two series of
shares to investors: the Equity Fund and the Balanced Fund (referred to
individually as a "Fund" and collectively as the "Funds"). Each Fund has its own
investment objective and policies.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objectives and Policies")
appears below:
MAJORITY. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
either Fund) means the lesser of (1) 67% or more of the outstanding shares of
the Trust (or the applicable Fund) present at a meeting, if the holders of more
than 50% of the outstanding shares of the Trust (or the applicable Fund) are
present or represented at such meeting or (2) more than 50% of the outstanding
shares of the Trust (or the applicable Fund).
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one
to two hundred seventy days) unsecured promissory notes issued by corporations
in order to finance their
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<PAGE>
current operations. Each Fund will only invest in commercial paper rated A-1 or
A-2 by Standard & Poor's Ratings Group ("S&P") or Prime-1 or Prime-2 by Moody's
Investors Service, Inc. ("Moody's") or which, in the opinion of Lake Shore Fund
Group, LLC (the "Adviser") is of equivalent investment quality. Certain notes
may have floating or variable rates. Variable and floating rate notes with a
demand notice period exceeding seven days will be subject to each Fund's
restrictions on illiquid investments (see "Investment Limitations") unless, in
the judgment of the Adviser, subject to the direction of the Board of Trustees,
such note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist with the
issuer; and recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated Prime-1 or Prime-2. Commercial paper rated A-1
(highest quality) by S&P has the following characteristics: liquidity ratios are
adequate to meet cash requirements; long-term senior debt is rated "A" or
better, although in some cases "BBB" credits may be allowed; the issuer has
access to at least two additional channels of borrowing; basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances;
typically, the issuer's industry is well established and the issuer has a strong
position within the industry; and the reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-1 or A-2.
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may invest
consist of certificates of deposit, bankers' acceptances and time deposits
issued by national banks and state banks, trust companies and mutual savings
banks, or of banks or institutions the accounts of which are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time (usually from fourteen days to one year) at a stated or
variable interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft which has been
- 4 -
<PAGE>
drawn on it by a customer, which instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon maturity.
Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Investments in time
deposits maturing in more than seven days will be subject to each Fund's
restrictions on illiquid investments (see "Investment Limitations").
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which a
Fund purchases a security and simultaneously commits to resell that security to
the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time a Fund enters
into a repurchase agreement, the value of the underlying security, including
accrued interest, will equal or exceed the value of the repurchase agreement,
and in the case of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including accrued interest,
will at all times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must be of a credit quality at least
equal to a Fund's investment criteria for portfolio securities and will be held
by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase agreement
is deemed to be a loan from a Fund to the seller subject to the repurchase
agreement and is therefore
- 5 -
<PAGE>
subject to that Fund's investment restriction applicable to loans. It is not
clear whether a court would consider the securities purchased by a Fund subject
to a repurchase agreement as being owned by that Fund or as being collateral for
a loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the securities before
repurchase of the security under a repurchase agreement, a Fund may encounter
delay and incur costs before being able to sell the security. Delays may involve
loss of interest or decline in price of the security. If a court characterized
the transaction as a loan and a Fund has not perfected a security interest in
the security, that Fund may be required to return the security to the seller's
estate and be treated as an unsecured creditor of the seller. As an unsecured
creditor, a Fund would be at the risk of losing some or all of the principal and
income involved in the transaction. As with any unsecured debt obligation
purchased for a Fund, the Adviser seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligor, in this
case, the seller. Apart from the risk of bankruptcy or insolvency proceedings,
there is also the risk that the seller may fail to repurchase the security, in
which case a Fund may incur a loss if the proceeds to that Fund of the sale of
the security to a third party are less than the repurchase price. However, if
the market value of the securities subject to the repurchase agreement becomes
less than the repurchase price (including interest), the Fund involved will
direct the seller of the security to deliver additional securities so that the
market value of all securities subject to the repurchase agreement will equal or
exceed the repurchase price. It is possible that a Fund will be unsuccessful in
seeking to enforce the seller's contractual obligation to deliver additional
securities.
STRIPS. STRIPS are U.S. Treasury bills, notes, and bonds that have been
issued without interest coupons or stripped of their unmatured interest coupons,
interest coupons that have been stripped from such U.S. Treasury securities, and
receipts or certificates representing interests in such stripped U.S. Treasury
securities and coupons. A STRIPS security pays no interest in cash to its holder
during its life although interest is accrued for federal income tax purposes.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value. Investing in STRIPS may help
to preserve capital during periods of declining interest rates.
STRIPS do not entitle the holder to any periodic payments of interest prior
to maturity. Accordingly, such securities usually trade a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to
- 6 -
<PAGE>
changing interest rates than debt obligations of comparable maturities which
make periodic distributions of interest. On the other hand, because there are no
periodic interest payments to be reinvested prior to maturity, STRIPS eliminate
the reinvestment risk and lock in a rate of return to maturity. Current federal
tax law requires that a holder of a STRIPS security accrue a portion of the
discount at which the security was purchased as income each year even though the
holder received no interest payment in cash on the security during the year.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan collateral must,
on each business day, at least equal the value of the loaned securities. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by a Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to the Fund. The Funds receive amounts
equal to the dividends or interest on loaned securities and also receive one or
more of (a) negotiated loan fees, (b) interest on securities used as collateral,
or (c) interest on short-term debt securities purchased with such collateral;
either type of interest may be shared with the borrower. The Funds may also pay
fees to placing brokers as well as custodian and administrative fees in
connection with loans. Fees may only be paid to a placing broker provided that
the Trustees determine that the fee paid to the placing broker is reasonable and
based solely upon services rendered, that the Trustees separately consider the
propriety of any fee shared by the placing broker with the borrower, and that
the fees are not used to compensate the Adviser or any affiliated person of the
Trust or an affiliated person of the Adviser or other affiliated person. The
terms of the Funds' loans must meet applicable tests under the Internal Revenue
Code and permit the Funds to reacquire loaned securities on five days' notice or
in time to vote on any important matter.
INVESTMENT LIMITATIONS
The Trust has adopted certain fundamental investment limitations designed
to reduce the risk of an investment in each Fund. These limitations may not be
changed with respect to either Fund without the affirmative vote of a majority
of the outstanding shares of that Fund.
1. BORROWING MONEY. The Fund will not borrow money, except from a bank,
provided that immediately after such borrowing there is asset coverage of 300%
for all borrowings of the Fund. The Fund will not make any borrowing which would
cause its outstanding borrowings to exceed one-third of the value of its total
assets.
- 7 -
<PAGE>
2. PLEDGING. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings.
3. MARGIN PURCHASES. The Fund will not purchase any securities or evidences
of interest thereon on "margin" (except such short-term credits as are necessary
for the clearance of transactions).
4. OPTIONS. The Fund will not purchase or sell puts, calls, options,
futures, straddles, commodities or commodities futures contracts.
5. REAL ESTATE. The Fund will not purchase, hold or deal in real estate or
real estate mortgage loans, except that a Fund may purchase (a) securities of
companies (other than limited partnerships) which deal in real estate or (b)
securities which are secured by interests in real estate.
6. SHORT SALES. The Fund will not make short sales of securities, or
maintain a short position, other than short sales "against the box."
7. MINERAL LEASES. The Fund will not purchase oil, gas or other mineral
leases or exploration or development programs.
8. UNDERWRITING. The Fund will not act as underwriter of securities issued
by other persons, either directly or through a majority owned subsidiary. This
limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), the
Fund may be deemed an underwriter under certain federal securities laws.
9. ILLIQUID INVESTMENTS. The Fund will not purchase securities which cannot
be readily resold to the public because of legal or contractual restrictions on
resale or for which no readily available market exists or engage in a repurchase
agreement maturing in more than seven days if, as a result thereof, more than
15% of the value of the Fund's net assets would be invested in such securities.
10. CONCENTRATION. The Fund will not invest 25% or more of its total assets
in the securities of issuers in any particular industry; provided, however, that
there is no limitation with respect to investments in obligations issued or
guaranteed by the United States Government or its agencies or instrumentalities
or repurchase agreements with respect thereto.
- 8 -
<PAGE>
11. INVESTING FOR CONTROL. The Fund will not invest in companies for the
purpose of exercising control.
12. SENIOR SECURITIES. The Fund will not issue or sell any senior security.
This limitation is not applicable to short-term credit obtained by the Fund for
the clearance of purchases and sales or redemptions of securities.
13. LOANS. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
bonds, debentures, commercial paper or corporate notes, and similar marketable
evidences of indebtedness.
With respect to the percentages adopted by the Trust as maximum limitations
on each Fund's investment policies and restrictions, an excess above the fixed
percentage (except for the percentage limitations relative to the borrowing of
money and the holding of illiquid securities) will not be a violation of the
policy or restriction unless the excess results immediately and directly from
the acquisition of any security or the action taken.
The Trust does not intend to pledge, mortgage or hypothecate the assets
of any Fund. The Fund does not intend to make short sales of securities "against
the box" as described in investment limitation 6. The statements of intention in
this paragraph reflect nonfundamental policies which may be changed by the Board
of Trustees without shareholder approval.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk.
Estimated Annual
Compensation
Name Age Position Held from the Trust
- ---- --- ------------- --------------
*Gregory J. Bauer 44 Chairman/Trustee $ 0
+Frank G. Doyle III 53 Trustee 1,000
+Francis A. Kovacs, Jr. 44 Trustee 1,000
Ronald R. McAdams 61 Trustee 1,000
*Robert A. McLaughlin 58 Trustee 0
*Joseph P. Rouse 53 Trustee 1,000
+Ralph P. Schwartz 53 Trustee 1,000
+William N. Stratman 55 Trustee 1,000
Earl V.(Buck) Newsome, Jr. 41 President 0
Robert G. Dorsey 40 Vice President 0
Mark J. Seger 35 Treasurer 0
John F. Splain 41 Secretary 0
- 9 -
<PAGE>
* Messrs. Bauer, McLaughlin, and Rouse are "interested persons"
of the Trust within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
GREGORY J.BAUER, 1650 Lake Shore Drive, Suite 280, Columbus, Ohio 43204, is
Chairman of Lake Shore Fund Group, LLC (the investment adviser to the Trust). He
is also Chairman and Managing Director of Cambridge Financial Group, Inc., a
registered investment adviser.
FRANK G. DOYLE III, 8041 Hosbrook Road, Suite 200, Cincinnati, Ohio 45236,
owns Preferred Business Services, which leases office space and provides
secretarial support for its clients and AD Mail, a direct mail service company.
FRANCIS A. KOVACS, JR., 155 East Broad Street, 16th Floor, Columbus, Ohio
43215, is a partner of Coolidge, Wall, Womsley & Lombard Co., L.P.A. Previously,
he was a partner of Schottenstein, Zox & Dunn.
ROBERT A. MCLAUGHLIN, 1650 Lake Shore Drive, Suite 280, Columbus, Ohio
43204, is Executive Vice President of Lake Shore Fund Group, LLC. He is also
Executive Vice President and a director of Cambridge Financial Group, Inc. Mr.
McLaughlin previously served as retirement system investment officer and
assistant director of the Ohio Public Employees Retirement System.
RONALD R. MCADAMS, 2371 Cliff Road, North Bend, Ohio 45052, is the
President of Pave Prep Corp., which manufactures and sells paving and roofing
products.
JOSEPH P. ROUSE, 1800 Provident Tower, One East Fourth Street, Cincinnati,
Ohio 45202, is a partner of Keating, Muething & Klekamp, a law firm.
RALPH P. SCHWARTZ, 2289 West Centerville Road, Dayton, Ohio 45459, is a
self-employed certified public accountant.
WILLIAM N. STRATMAN, 7949 Graves Road, Cincinnati, Ohio 45243, is a
co-owner of the Mariners Inn banquet halls. Previously, he owned The Bohlenger
Engraving Company.
- 10 -
<PAGE>
EARL V. (BUCK) NEWSOME, JR., 7824 Laurel Avenue, Cincinnati, Ohio 45243 is
President of Lake Shore Fund Group, LLC. He is also the President of Cambridge
Financial Group, Inc.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio 45202, is President
and Treasurer of Countrywide Fund Services, Inc. (a registered transfer agent)
and Treasurer of Countrywide Investments, Inc. (a registered broker-dealer and
investment adviser and the Trust's principal underwriter) and Countrywide
Financial Services, Inc. (a financial services company and parent of Countrywide
Fund Services, Inc. and Countrywide Investments, Inc.). He is also Vice
President of Brundage, Story and Rose Investment Trust, PRAGMA Investment Trust,
Markman MultiFund Trust, Dean Family of Funds, The New York State Opportunity
Funds, Maplewood Investment Trust and Assistant Vice President of Interactive
Investments, Schwartz Investment Trust, The Tuscarora Investment Trust,
Williamsburg Investment Trust and The Gannett Welsh & Kotler Funds (all of which
are registered investment companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio 45202, is Vice
President of Countrywide Financial Services, Inc. and Vice President and Chief
Operating Officer of Countrywide Fund Services, Inc. He is also Treasurer of
Countrywide Investment Trust, Countrywide Tax-Free Trust, Countrywide Strategic
Trust, Brundage, Story and Rose Investment Trust, Markman MultiFund Trust,
PRAGMA Investment Trust, Williamsburg Investment Trust, The New York State
Opportunity Funds, Maplewood Investment Trust and Dean Family of Funds and
Assistant Treasurer of Interactive Investments, Schwartz Investment Trust, The
Tuscarora Investment Trust and The Gannett Welsh & Kotler Funds.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio 45202, is Secretary and
General Counsel of Countrywide Fund Services, Inc., Countrywide Investments,
Inc. and Countrywide Financial Services, Inc. He is also Secretary of
Countrywide Investment Trust, Countrywide Tax-Free Trust, Countrywide Strategic
Trust, Brundage, Story and Rose Investment Trust, Markman MultiFund Trust, The
Tuscarora Investment Trust, Williamsburg Investment Trust, and Maplewood
Investment Trust and Assistant Secretary of PRAGMA Investment Trust, Dean Family
of Funds, Interactive Investments, Schwartz Investment Trust, The New York State
Opportunity Funds and The Gannett Welsh & Kotler Funds.
Each Trustee who is not an employee or officer of the Adviser will receive
a $250 fee for each Board meeting attended and will be reimbursed for travel and
other expenses incurred in the performance of their duties.
- 11 -
<PAGE>
THE INVESTMENT ADVISER
Lake Shore Fund Group, LLC (the "Adviser") is the Funds' investment
manager. Earl V. (Buck) Newsome, Jr. and Gregory J. Bauer are the controlling
shareholders of the Adviser. Mr. Newsome and Mr. Bauer, by reason of such
affiliation, may directly or indirectly receive benefits from the advisory fees
paid to the Adviser.
Under the terms of the advisory agreement between the Trust and the
Adviser, the Adviser manages the Funds' investments. Each Fund pays the Adviser
a fee computed and accrued daily and paid monthly at an annual rate of 1.00% of
its average daily net assets.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The compensation and expenses of any officer,
Trustee or employee of the Trust who is an officer, member, director, employee
or stockholder of the Adviser are paid by the Adviser.
By its terms, the Trust's advisory agreement will remain in force until
January 8, 2000 and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of the majority of a Fund's outstanding
voting securities; provided that in either event continuance is also approved by
a majority of the Trustees who are not interested persons of the Trust, by a
vote cast in person at a meeting called for the purpose of voting such approval.
The Trust's investment advisory agreement may be terminated at any time, on
sixty days' written notice, without the payment of any penalty, by the Board of
Trustees, by a vote of the majority of a Fund's outstanding voting securities,
or by the Adviser. The investment advisory agreement automatically terminates in
the event of its assignment, as defined by the Investment Company Act of 1940
and the rules thereunder.
THE UNDERWRITER
Countrywide Investments, Inc. (the "Underwriter") is the principal
underwriter of the Funds and, as such, is the exclusive agent for distribution
of shares of the Funds. The Underwriter is obligated to sell the shares on a
best efforts basis only against purchase orders for the shares. Shares of each
Fund are offered to the public on a continuous basis.
- 12 -
<PAGE>
The Underwriter currently allows concessions to dealers who sell shares of
the Funds. The Underwriter receives that portion of the sales load which is not
reallowed to the dealers who sell shares of the Funds. The Underwriter retains
the entire sales load on all direct initial investments in the Funds and on all
investments in accounts with no designated dealer of record. The Underwriter
bears promotional expenses in connection with the distribution of the Funds'
shares to the extent that such expenses are not assumed by the Funds under their
plan of distribution.
The Funds may compensate dealers, including the Underwriter and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plan" below.
DISTRIBUTION PLAN
As stated in the Prospectus, the Funds have adopted a plan of distribution
(the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940
which permits each Fund to pay for expenses incurred in the distribution and
promotion of its shares, including but not limited to, the printing of
prospectuses, statements of additional information and reports used for sales
purposes, advertisements, expenses of preparation and printing of sales
literature, promotion, marketing and sales expenses, and other
distribution-related expenses, including any distribution fees paid to
securities dealers or other firms who have executed a distribution or service
agreement with the Underwriter. The Plan expressly limits payment of the
distribution expenses listed above in any fiscal year to a maximum of .25% of
the average daily net assets of each Fund.
The continuance of the Plan must be specifically approved at least annually
by a vote of the Trust's Board of Trustees and by a vote of the Trustees who are
not interested persons of the Trust and have no direct or indirect financial
interest in the Plan (the "Independent Trustees") at a meeting called for the
purpose of voting on such continuance. The Plan may be terminated by either Fund
at any time by a vote of a majority of the Independent Trustees or by a vote of
the holders of a majority of the outstanding shares of such Fund. In the event
the Plan is terminated in accordance with its terms, the affected Fund will not
be required to make any payments for expenses incurred by the Adviser after the
termination date. The Plan may not be amended to increase materially the amount
to be spent for distribution without shareholder approval. All material
amendments to the Plan must be approved by a vote of the Trust's Board of
Trustees and by a vote of the Independent Trustees.
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In approving the Plan, the Trustees determined, in the exercise of their
business judgment and in light of their fiduciary duties as Trustees, that there
is a reasonable likelihood that the Plan will benefit each Fund and its
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plan should assist in the growth of
the Funds which will benefit each Fund and its shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plan is in effect, all amounts spent by the Funds pursuant
to the Plan and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. In addition, the
selection and nomination of those Trustees who are not interested persons of the
Trust are committed to the discretion of the Independent Trustees during such
period.
By reason of their ownership of shares of the Adviser, Earl V. (Buck)
Newsome, Jr. and Gregory J. Bauer may each be deemed to have a financial
interest in the operation of the Plan.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Funds and the placing of the
Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
The Funds may attempt to deal directly with the dealers who make a market
in the securities involved unless better prices and execution are available
elsewhere. Such dealers usually act as principals for their own account. On
occasion, portfolio securities for the Funds may be purchased directly from the
issuer.
The Adviser is specifically authorized to select brokers who also provide
brokerage and research services to the Funds and/or other accounts over which
the Adviser exercises investment
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<PAGE>
discretion and to pay such brokers a commission in excess of the commission
another broker would charge if the Adviser determines in good faith that the
commission is reasonable in relation to the value of the brokerage and research
services provided. The determination may be viewed in terms of a particular
transaction or the Adviser's overall responsibilities with respect to the Funds
and to accounts over which it exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Underwriter and other
affiliates of the Trust or the Adviser may effect securities transactions which
are executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. No Fund will effect any
brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Funds do not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Underwriter nor
affiliates of the Trust or the Adviser will receive reciprocal brokerage
business as a result of the brokerage business transacted by the Funds with
other brokers.
CODE OF ETHICS. The Trust and the Adviser have each adopted a Code of
Ethics under Rule 17j-1 of the Investment Company Act of 1940. The Code
significantly restricts the personal investing activities of all employees of
the Adviser. No employee may purchase or sell any security which at the time is
being purchased or sold (as the case may be), or to the knowledge of the
employee, is being considered for purchase or sale by any Fund.
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<PAGE>
PORTFOLIO TURNOVER
A Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. The Adviser anticipates that each Fund's portfolio turnover rate normally
will not exceed 100%. A 100% turnover rate would occur if all of a Fund's
portfolio securities were replaced once within a one year period.
Generally, each Fund intends to invest for long-term purposes. However, the
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when the Adviser believes that portfolio changes
are appropriate.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
The share price (net asset value) and the public offering price (net asset
value plus applicable sales load) of the shares of each Fund are determined as
of the close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time), on each day the Trust is open for business.
The Trust is open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The Trust may also be open for business on other days in
which there is sufficient trading in a Fund's portfolio securities that its net
asset value might be materially affected. For a description of the methods used
to determine the share price and the public offering price, see "Calculation of
Share Price and Public Offering Price" in the Prospectus.
OTHER PURCHASE INFORMATION
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of shares of
the Funds is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
shares of a Fund has the right to combine the cost or current net asset value
(whichever is higher) of his existing shares of any Fund in the Lake Shore
Family of Funds with the amount of his current purchases in order to take
advantage of the reduced sales loads set forth in the tables in the Prospectus.
The purchaser or his dealer must notify Countrywide Fund Services, Inc. (the
"Transfer Agent") that an investment qualifies for a reduced sales load. The
reduced sales load will be granted upon confirmation of the purchaser's holdings
by the Transfer Agent.
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<PAGE>
LETTER OF INTENT. The reduced sales loads set forth in the tables in the
Prospectus may also be available to any "purchaser" (as defined in the
Prospectus) of shares of a Fund who submits a Letter of Intent to the Transfer
Agent. The Letter must state an intention to invest in any Fund in the Lake
Shore Family of Funds within a thirteen month period a specified amount which,
if made at one time, would qualify for a reduced sales load. A Letter of Intent
may be submitted with a purchase at the beginning of the thirteen month period
or within ninety days of the first purchase under the Letter of Intent. Upon
acceptance of this Letter, the purchaser becomes eligible for the reduced sales
load applicable to the level of investment covered by such Letter of Intent as
if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases at
the purchaser's cost (without a retroactive downward adjustment of the sales
load). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose a sales load or imposes a
reduced sales load in connection with purchases of shares of the Funds made
under the reinvestment privilege or the purchases described in the "Reduced
Sales Load" or "Purchases at Net Asset Value" sections in the Prospectus because
such purchases require minimal sales effort by the Underwriter. Purchases
described in the "Purchases at Net Asset Value" section may be made for
investment only, and the shares may not be resold except through redemption by
or on behalf of the Trust.
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<PAGE>
TAXES
The Prospectus describes generally the tax treatment of distributions by
the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. To so qualify a Fund must, among other things, (i) derive at least
90% of its gross income in each taxable year from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock, securities or foreign currency, or certain other income (including but
not limited to gains from options, futures and forward contracts) derived with
respect to its business of investing in stock, securities or currencies; and
(ii) diversify its holdings so that at the end of each quarter of its taxable
year the following two conditions are met: (a) at least 75% of the value of the
Fund's total assets is represented by cash, U.S. Government securities,
securities of other regulated investment companies and other securities (for
this purpose such other securities will qualify only if the Fund's investment is
limited in respect to any issuer to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer) and (b) not
more than 25% of the value of the Fund's assets is invested in securities of any
one issuer (other than U.S. Government securities or securities of other
regulated investment companies).
A Fund's net realized capital gains from securities transactions will be
distributed only after reducing such gains by the amount of any available
capital loss carries forward. Capital losses may be carried forward to offset
any capital gains for eight years, after which any undeducted capital loss
remaining is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess, if
any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a portion
(31%) of dividend income on any account unless the shareholder provides a
taxpayer identification number and
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certifies that such number is correct and that the shareholder is not subject to
backup withholding.
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
From time to time, each Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5 and 10 year periods at the end
of the 1,5 or 10 year periods (or fractional portion thereof)
The calculation of average annual total return assumes the reinvestment of
all dividends and distributions and the deduction of the current maximum sales
load from the initial $1,000 payment. If a Fund has been in existence less than
one, five or ten years, the time period since the date of the initial public
offering of shares will be substituted for the periods stated. Each Fund may
also advertise total return (a "non-standardized quotation") which is calculated
differently from average annual total return. A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. This computation does
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not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation may also indicate average
annual compounded rates of return without including the effect of the applicable
sales load or over periods other than those specified for average annual total
return. A nonstandardized quotation of total return will always be accompanied
by the Fund's average annual total return as described above.
From time to time, each of the Funds may advertise its yield. A yield
quotation is based on a 30-day (or one month) period and is computed by dividing
the net investment income per share earned during the period by the maximum
offering price per share on the last day of the period, according to the
following formula:
Yield = 2[(a-b/cd +1)6 -1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that a Fund
owns the security. Generally, interest earned (for the purpose of "a" above) on
debt obligations is computed by reference to the yield to maturity of each
obligation held based on the market value of the obligation (including actual
accrued interest) at the close of business on the last business day prior to the
start of the 30-day (or one month) period for which yield is being calculated,
or, with respect to obligations purchased during the month, the purchase price
(plus actual accrued interest). With respect to the treatment of discount and
premium on mortgage or other receivables-backed obligations which are expected
to be subject to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an increase or
decrease to interest income during the period and discount or premium on the
remaining security is not amortized.
To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding each Fund may discuss
various measures of Fund performance, including current performance ratings
and/or rankings appearing in financial magazines, newspapers and publications
which track mutual fund performance. Advertisements may also compare performance
(using the calculation methods set forth in the Prospectus) to performance as
reported by other
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investments, indices and averages. When advertising current ratings or rankings,
the Funds may use the following publications or indices to discuss or compare
Fund performance:
Lipper Mutual Fund Performance Analysis measures total return for the
mutual fund industry and ranks individual mutual fund performance over specified
time periods assuming reinvestment of all distributions, exclusive of sales
loads. In addition, the Funds may use comparative performance information
appearing in relevant indices, including the Standard & Poor's 500 Index (the
"S&P 500 Index") and the Dow Jones Industrial Average. The S&P 500 Index is an
unmanaged index of 500 stocks, the purpose of which is to portray the pattern of
common stock price movement. The Dow Jones Industrial Average is a measurement
of general market price movement for 30 widely held stocks listed on the New
York Stock Exchange.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Funds' portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Funds to calculate
their performance. In addition, there can be no assurance that the Funds will
continue this performance as compared to such other averages.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio, has been retained to
act as Custodian for the Funds' investments. Star Bank acts as each Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties.
AUDITORS
The firm of Joseph Decosimo and Company, PLL, 221 E.4th Street, Suite 2727,
Cincinnati, Ohio 45202, has been selected as independent auditors for the Trust
for the fiscal year ending December 31, 1998. Joseph Decosimo and Company
performs an annual audit of the Trust's financial statements and advises the
Trust as to certain accounting matters.
COUNTRYWIDE FUND SERVICES, INC.
The Trust's transfer agent, Countrywide Fund Services, Inc. (the "Transfer
Agent"), maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Funds'
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shares, acts as dividend and distribution disbursing agent and performs other
shareholder service functions. The Transfer Agent receives for its services as
transfer agent a fee at an annual rate of $20 per account from each of the
Funds, provided, however, that the minimum fee is $1,200 per month for each
Fund. In addition, the Funds pay out-of-pocket expenses, including but not
limited to, postage, envelopes, checks, drafts, forms, reports, record storage
and communication lines.
The Transfer Agent also provides accounting and pricing services to the
Funds. For calculating daily net asset value per share and maintaining such
books and records as are necessary to enable the Transfer Agent to perform its
duties, each Fund will pay the Transfer Agent a fee in accordance with the
following schedule:
Average Monthly Net Assets Monthly Fee
---------------------------- ------------
$ 0 - $ 50,000,000 $2,000
50,000,000 - 100,000,000 2,500
100,000,000 - 200,000,000 3,000
200,000,000 - 300,000,000 4,000
Over 300,000,000 5,000 + .001% of
average monthly
net assets
In addition, each Fund pays all costs of external pricing services.
The Transfer Agent also provides administrative services to the Funds. In
this capacity, the Transfer Agent supplies non-investment related statistical
and research data, internal regulatory compliance services and executive and
administrative services. The Transfer Agent supervises the preparation of tax
returns, reports to shareholders of the Funds, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance of these
administrative services, each Fund pays the Transfer Agent a fee at the annual
rate of .15% of the average value of its daily net assets up to $50 million,
.125% of such assets from $50 million to $100 million and .10% of such assets in
excess of $100 million, provided, however, that the minimum fee is $1,000 per
month for each Fund.
STATEMENTS OF ASSETS AND LIABILITIES
The Funds' Statements of Assets and Liabilities as of December 23, 1997,
which have been audited by Joseph Decosimo and Company, PLL, are attached to
this Statement of Additional Information.
<PAGE>
EQUITY FUND
BALANCED FUND
OF
LAKE SHORE FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AS OF
DECEMBER 23, 1997
TOGETHER WITH
ACCOUNTANTS' REPORT
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JOSEPH DECOSIMO
AND COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
AN OHIO REGISTERED PARTNERSHIP HAVING LIMITED LIABILITY
- --------------------------------------------------------------------------------
PRIVATE COMPANIES PRACTICE SECTION MEMBER AICPA DIVISION FOR CPA FIRMS
SEC PRACTICE SECTION
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of Lake Shore Equity Fund
and Lake Shore Balanced Fund
The Trustees of Lake Shore Family of Funds
We have audited the accompanying statements of assets and liabilities of Lake
Shore Equity Fund and Lake Shore Balanced Fund (the Funds), both series of Lake
Shore Family of Funds (the Trust), as of December 23, 1997. These statements of
assets and liabilities are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these statements of assets and
liabilities 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 statements of assets and liabilities are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statements of assets and liabilities presentation. We believe that our audits of
the statements of assets and liabilities provide a reasonable basis for our
opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of Lake Shore
Equity Fund and Lake Shore Balanced Fund as of December 23, 1997, in conformity
with generally accepted accounting principles.
Cincinnati, Ohio /s/ Joseph Decosimo and Company, PLL
December 23, 1997
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LAKE SHORE FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 23, 1997
-----------------------------------------------------------------
LAKE SHORE LAKE SHORE
Equity Balanced
Fund Fund
ASSETS
Cash $ 99,000 $ 1,000
Organization Costs 22,500 22,500
--------- ----------
TOTAL ASSETS 121,500 $ 23,500
LIABILITIES
Accrued Organization Costs 22,500 22,500
--------- ----------
NET ASSETS FOR SHARES OF BENEFICIAL
INTEREST OUTSTANDING $ 99,000 $ 1,000
========= ==========
Common Shares - no par value
Authorized - unlimited for both funds
Issued and Outstanding - 9,900 Lake Shore
Equity Fund and 100 Lake Shore 9,900 100
Balanced Fund ========= ==========
Net Asset Value, Offering Price and
Redemption Price per Share $ 10.00 $ 10.00
========= ==========
The accompanying notes are an integral part of these statements of assets and
liabilities.
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LAKE SHORE FAMILY OF FUNDS
NOTES TO STATEMENTS OF ASSETS AND LIABILITIES
December 23, 1997
----------------------------------------------------------------------
(1) Lake Shore Family of Funds (the Trust) is a diversified open-end
investment company established as an Ohio business trust under a
Declaration of Trust dated September 3, 1997. The Trust has established
two series to date, the Lake Shore Equity Fund and the Lake Shore
Balanced Fund (the Funds). The Funds have had no operations except for
the initial issuance of shares. On December 23, 1997, 9,900 shares of
the Lake Shore Equity Fund and 100 shares of the Lake Share Balanced
Fund were issued for cash at $10.00 per share.
(2) Costs incurred in connection with the organization of the Trust and the
initial offering of shares are estimated to be $45,000 which includes
$40,000 paid to Countrywide Fund Services, Inc., the Funds'
administrator. These costs have been paid by Lake Shore Fund Group, LLC
(the Adviser). Upon commencement of the public offering of shares of
the Funds, each Fund will reimburse the Adviser for an equal share of
such costs, with that amount being capitalized and amortized to
operations on a straight-line basis over five years. As of December 23,
1997, all outstanding shares of the Funds were held by an affiliate of
the Adviser, who purchased these initial shares in order to provide the
Trust with its required capital. In the event the initial shares of the
Funds are redeemed below the required minimum initial capitalization of
$100,000 by any holder thereof any time prior to the complete
amortization of organization expenses, the redemption proceeds payable
with respect to such shares will be reduced by the pro rata share
(based upon the portion of the shares redeemed in relation to the
required minimum initial capitalization) of the unamortized deferred
organizational expenses as of the date of such redemption.
(3) Reference is made to the Prospectus, and this Statement of Additional
Information for a description of the Advisory Agreement, the Plan of
Distribution, Administration Agreement, tax aspects of the Funds and
the calculation of the net asset value of shares of the Funds.
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