U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No.
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Post-Effective Amendment No. 1
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 2
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(Check appropriate box or boxes)
LAKE SHORE FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
8280 Montgomery Road, Suite 302
Cincinnati, Ohio 45236
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (513) 579-8700
Earl V. (Buck) Newsome, Jr.
Lake Shore Fund Group, LLC
8280 Montgomery Road, Suite 302
Cincinnati, Ohio 45236
(Name and Address of Agent for Service)
Copies to:
Marcus L. Collins
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
It is proposed that this filing will become effective (check appropriate box)
/_/ immediately upon filing pursuant to paragraph (b)
/_/ on (date) pursuant to paragraph (b)
/_/ 60 days after filing pursuant to paragraph (a)
/X/ on May 1, 1999 pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940.
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LAKE SHORE FAMILY OF FUNDS
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
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PART A
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Item No. Registration Statement Caption Caption in Prospectus
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1. Front and Back Cover Pages Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks, and Performance
3. Risk/Return Summary: Fee Table Expense Information
4. Investment Objectives, Principal Investment Objectives,
Investment Strategies, and Related Investment Strategies and
Risks Risk Considerations
5. Management's Discussion of Fund Inapplicable (Included
Performance in Annual Report)
6. Management, Organization, and Operation of the Funds
Capital Structure
7. Shareholder Information How to Purchase Shares;
How to Redeem Shares;
Shareholder Services;
Exchange Privilege;
Dividends and
Distributions; Taxes
Calculation of Public
Offering Price;
Application
8. Distribution Arrangements How to Purchase Shares;
Distribution Plan
9. Financial Highlights Information Financial Highlights
(i)
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PART B
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Caption in Statement
of Additional
Item No. Registration Statement Caption Information
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10. Cover Page and Table of Contents Cover Page; Table of
Contents
11. Fund History The Trust
12. Description of the Fund and Its Definitions, Policies and
Investments and Risks Risk Considerations;
Quality Ratings of
Corporate Bonds and
Preferred Stocks;
Investment Limitations;
Portfolio Turnover
13. Management of the Fund Management of the Fund
14. Control Persons and Principal Holders Control Persons;
of Securities Principal Security
Holders
15. Investment Advisory and Other Services The Investment Adviser;
The Underwriter;
Distribution Plan; Other
Service Providers
16. Brokerage Allocation and Other Brokerage Allocation and
Practices Other Practices
17. Capital Stock and Other Securities The Trust
18. Purchase, Redemption and Pricing of Purchase, Redemption and
Shares Pricing of Shares
19. Taxation of the Fund Taxes
20. Underwriters The Underwriter
21. Calculation of Performance Data Calculation of
Performance Data
22. Financial Statements Financial Statements
(ii)
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PART C
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The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
(iii)
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LAKE SHORE
FAMILY OF FUNDS
Prospectus
May 1, 1999
Equity Fund
Balanced Fund
TABLE OF CONTENTS
Risk/Return Summary
Expense Information
Investment Objectives, Investment Strategies and
Risk Considerations
How to Purchase Shares
How to Redeem Shares
Shareholder Services
Exchange Privilege
Dividends and Distributions
Taxes
Operation of the Funds
Distribution Plan
Calculation of Public Offering Price
Financial Highlights
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PROSPECTUS
May 1, 1999
LAKE SHORE FAMILY OF FUNDS
8280 MONTGOMERY ROAD, SUITE 302
CINCINNATI, OHIO 45236
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"), 8280 Montgomery Road, Suite 302,
Cincinnati, Ohio 45236, manages the Funds' investments.
This Prospectus has information you should know before you invest. Please read
it carefully and keep it with your investment records. Although these securities
have been registered with the Securities and Exchange Commission, the Commission
has not judged them for investment merit and does not guarantee the accuracy or
adequacy of the information in this Prospectus. Anyone who informs you otherwise
is committing a criminal offense.
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FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
Nationwide (Toll-Free) . . . . . . . . . . . . . . . 800-266-9532
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RISK/RETURN SUMMARY
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WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
The Equity Fund seeks long-term growth of capital by investing primarily in
common stocks.
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.
WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
Equity Fund
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The Equity Fund maintains a core portfolio of approximately 30 common
stocks, all of which are listed on the Standard & Poor's 500 Index at the
time of investment. Approximately 20 of the stocks will be selected on the
basis of price momentum (those stocks exhibiting the most rapid increases
in price according to the Adviser's quantitative models) and the remainder
will be selected on the basis of value (those stocks which appear to be
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). Under normal circumstances,
the Fund will invest at least 65% of its total assets in common stocks.
The Adviser believes the use of two independent, contrasting styles, and
defensive action when the market is in a high-risk period, will add
consistency to the Fund's performance.
Balanced Fund
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Normally, the Balanced Fund invests between 40-75 percent of its assets in
common stocks of issuers listed on the Standard & Poor's 500 Index, 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 asset mix of the Fund will be dictated by the position of the Adviser's
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
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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 Adviser's interest rate momentum and value models are positive or
negative. The average maturity of this portion of the Fund's portfolio will
be lengthened when both models are positive and shortened when one or both
are negative.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
Equity Fund
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The return on and value of an investment in the Equity Fund will fluctuate
in response to stock market movements. Common stocks are subject to market
risks and fluctuations in value due to earnings, economic conditions and
other factors beyond the control of the Adviser. As a result, there is a
risk that you could lose money by investing in the Fund.
Balanced Fund
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The portion of the Balanced Fund's portfolio invested in common stocks will
fluctuate in response to stock market movements, and the portion of the
Fund's portfolio invested in U.S. Treasury obligations will fluctuate with
changes in interest rates. Typically a rise in interest rates causes a
decline in the market value of U.S. Treasury obligations. The Fund may not
achieve the degree of capital appreciation that a portfolio investing
solely in common stocks might achieve. The investment results of the Fund
depend upon the ability of the Adviser to correctly anticipate the relative
performance of common stocks, U.S. Treasury obligations of varying
maturities, and money market instruments. There is a risk that you could
lose money by investing in the Fund.
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EXPENSE INFORMATION
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THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU BUY AND HOLD
SHARES OF THE FUNDS.
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................. 5.00%
Deferred Sales Load.................................... None
Sales Load Imposed on Reinvested
Dividends........................................... None
Redemption Fee......................................... None*
Exchange Fee........................................... None
* A wire transfer fee is charged by the Funds' 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 EXPENSES (expenses that are deducted from Fund assets)
Equity Fund Balanced Fund
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Management Fees 1.00% 1.00%
Distribution (12b-1) Fees .25% .25%
Estimated Other Expenses .73% .73%
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Total Annual Fund Operating Expenses 1.98% 1.98%
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Other expenses are based on estimated amounts for the current fiscal year. The
Adviser currently intends to waive management fees and reimburse other expenses
to the extent necessary to limit the total annual operating expenses of each
Fund to 1.98% of its average daily net assets.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in a Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that a Fund's operating expenses remain
the same. Although your costs may be higher or lower, based on these assumptions
your costs would be:
Equity Fund Balanced Fund
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1 Year $ 701 $ 701
3 Years $1,121 $1,121
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INVESTMENT OBJECTIVES, INVESTMENT STRATEGIES AND RELATED RISKS
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The Lake Shore Family of Funds (the "Trust") has two Funds. Each Fund has its
own portfolio and investment objective. Each Fund's investment objective may be
changed by the Board of Trustees without shareholder approval, as long as notice
has been given to shareholders. Unless otherwise indicated, all investment
practices and limitations of the Funds are non-fundamental policies which may be
changed by the Board of Trustees without shareholder approval.
Equity Fund
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INVESTMENT OBJECTIVE. The Equity Fund seeks long-term growth of capital by
investing primarily in common stocks.
PRINCIPAL INVESTMENT STRATEGIES. 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 Adviser's equity management strategy 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 complementary 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, with the Adviser attempting to identify those stocks
exhibiting the most rapid increases in price according to the Adviser's
quantitative model. A second group of approximately 10 stocks will also be
selected on the basis of price momentum; however, these stocks will be selected
from a composite group of 75 stocks judged by the
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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, with the Adviser
attempting to identify 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.
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. The Fund may not achieve its investment objective during
periods when the Fund has taken such a temporary defensive position.
INVESTMENT RISKS. The Fund is designed for investors who are investing for the
long term and it is not intended for investors seeking assured income or
preservation of capital. Changes in market prices can occur at any time.
Accordingly, there is no assurance that the Fund will achieve its investment
objective. When you redeem your shares, they may be worth more or less than what
you paid for them.
Because the Fund normally invests most, or a substantial portion, of its assets
in common stocks, the value of the Fund's portfolio will be affected by changes
in the stock markets. Stock markets and stock prices can be volatile. Market
action will affect the Fund's net asset value per share, which fluctuates as the
values of the Fund's portfolio securities change. Not all stock prices change
uniformly or at the same time and not all stock markets move in the same
direction at the same time. Various factors can affect a stock's price (for
example, poor earnings reports by an issuer, loss of major customers, major
litigation against an issuer, or changes in general economic conditions or in
government regulations affecting an industry). Not all of these factors can be
predicted.
Balanced Fund
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INVESTMENT OBJECTIVE
The Balanced Fund seeks long-term growth of capital and current income by
investing in a balanced portfolio consisting of common
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stocks, U.S. Treasury obligations and money market instruments.
PRINCIPAL INVESTMENT STRATEGIES
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. 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.
The two complementary 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
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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.
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.
INVESTMENT RISKS. The Fund is designed for investors who are investing for the
long term and it is not intended for investors seeking assured income or
preservation of capital. Changes in market prices can occur at any time.
Accordingly, there is no assurance that the Fund will achieve its investment
objective. When you redeem your shares, they may be worth more or less than what
you paid for them.
Because the Fund intends to allocate its assets among common stocks, U.S.
Treasury obligations and money market instruments, at times it may not be able
to achieve 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.
The investment results of the Fund depend upon the ability of the Adviser to
correctly anticipate the relative performance and risk of commons stocks, U.S.
Treasury obligations of varying maturities, and money market instruments.
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.
Because the Fund normally invests most, or a substantial portion, of its assets
in common stocks, the value of the Fund's portfolio will be affected by changes
in the stock markets. Stock markets and stock prices can be volatile. Market
action will affect the Fund's net asset value per share, which fluctuates as the
values
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of the Fund's portfolio securities change. Not all stock prices change uniformly
or at the same time and not all stock markets move in the same direction at the
same time. Various factors can affect a stock's price (for example, poor
earnings reports by an issuer, loss of major customers, major litigation against
an issuer, or changes in general economic conditions or in government
regulations affecting an industry). Not all of these factors can be predicted.
To the extent that the Fund is invested in U.S. Treasury obligations, it is
subject to the risks of bond investing, including the tendency of prices to fall
when interest rates rise. Such a fall would lower the value of the Fund's U.S.
Treasury obligations and the value of your investment. U.S. Treasury obligations
with longer maturities generally offer both higher yields and greater exposure
to market fluctuation from changes in interest rates.
HOW TO PURCHASE SHARES
----------------------
INITIAL INVESTMENTS. Your 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.
You may open an account and make an initial investment through securities
dealers having a sales agreement with the Trust's principal underwriter, CW Fund
Distributors, Inc. (the "Underwriter"). You 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.
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 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
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the Transfer Agent after 4:00 p.m. and orders received from dealers after 5:00
p.m. 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 front-end sales load as shown in the following
table.
Sales Load as % of:
--------------------------
Public Net
Offering Amount
Amount of Investment Price Invested
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Less than $25,000 5.00% 5.26%
$25,000 but less than $250,000 4.00% 4.16%
$250,000 or more 3.00% 3.09%
REDUCED SALES LOAD. You may be eligible to use the Right of Accumulation to
combine the cost or current net asset value (whichever is higher) of your
existing shares of any Fund in the Lake Shore Family of Funds with the amount of
your 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. You should contact the Transfer Agent for
information about the Right of Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase shares of either Fund at net
asset value when your payment for the investment represents your proceeds from
the redemption of shares of any other mutual fund which has a front-end sales
load and is not distributed by the Underwriter. Your 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, you
must submit photocopies of the confirmations (or similar evidence) showing the
purchase and redemption of shares of the other fund. Your 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 you 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.
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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.
SUBSEQUENT INVESTMENTS. You may purchase and add shares to your 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.
You may also purchase and add shares to your account by bank wire. Please
telephone the Transfer Agent (Nationwide call toll-free 800-266-9532) for
instructions. Your bank may impose a charge for sending your 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.
Each additional purchase request must contain the account name and number to
permit proper crediting. While there is no minimum amount required for
subsequent investments, the Trust reserves the right to impose such a
requirement. All purchases 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 you, such broker-
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dealer will receive the concessions described above with respect to additional
investments by you.
ADDITIONAL INFORMATION. The Trust mails you confirmations of all purchases or
redemptions 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.
The Funds' account application contains provisions in favor of the Trust, 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.
If an order to purchase shares is cancelled because your check does not clear,
you will be responsible for any resulting losses or fees incurred by the Trust
or the Transfer Agent in the transaction.
HOW TO REDEEM SHARES
--------------------
You 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 your account
number. The request must be signed exactly as your name appears on the Trust's
account records. If the shares to be redeemed have a value of $25,000 or more,
your signature must be guaranteed by any eligible guarantor institution,
including banks, brokers and dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, you will be required to request a
redemption in writing with your signature guaranteed, regardless of the value of
the shares being redeemed.
You may also redeem shares of either Fund by placing a wire redemption request
through a securities broker or dealer. Unaffiliated broker-dealers may charge
you for this service. You will receive the net asset value per share next
determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
If your instructions request a redemption by wire, the proceeds will be wired
directly to your existing account in any commercial bank or brokerage firm in
the United States as designated on your
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application and you 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 your account by redemption of
shares in your account. Your 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 your
account with a commercial bank or other depository institution by way of 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 your 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, you 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 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 you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested including any sales
load paid, unaffected by market fluctuations), or $250
- 13 -
<PAGE>
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, you will be given thirty days to increase the
value of your 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. Under
unusual circumstances, when the Board of Trustees deems it appropriate, the
Funds may make payment for shares redeemed in portfolio securities of the Funds
taken at current value.
SHAREHOLDER SERVICES
--------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 266-9532) for
additional information about the shareholder services described below.
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
AUTOMATIC WITHDRAWAL PLAN. If the shares in your account have a value of at
least $5,000, you 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.
DIRECT DEPOSIT PLANS. Shares of either Fund may be purchased through direct
deposit plans offered by certain employers and government agencies. These plans
enable you to have all or a
- 14 -
<PAGE>
portion of your payroll or social security check transferred automatically to
purchase shares of the Funds.
AUTOMATIC INVESTMENT PLAN. You may make automatic monthly investments in
either Fund from your 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. Your depository institution may impose its own charge for
debiting an account which would reduce your return from an investment in the
Funds.
REINVESTMENT PRIVILEGE. If you have redeemed shares of either Fund, you 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.
EXCHANGE PRIVILEGE
------------------
Shares of the Funds may be exchanged for each other at net asset value. You may
request an exchange by sending a written request to the Transfer Agent. The
request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone 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 a Fund if the Fund is then offered for
sale in your 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.
Contact the Transfer Agent to obtain more information about exchanges among the
Funds.
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. The Board of
Trustees supervises the business activities of the Trust. Like other mutual
funds, the Trust retains various organizations to preform specialized services
for the Funds.
The Trust retains Lake Shore Fund Group, LLC (the "Adviser"), 8280 Montgomery
Road, Suite 302, Cincinnati, Ohio 45236, to manage the Funds' investments. Each
Fund pays the Adviser a fee
- 15 -
<PAGE>
equal to the annual rate of 1.00% of the average value of its daily net assets.
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 is President of the Adviser and co-founded the
Adviser with Mr. Bauer in 1997. Prior to 1997, Mr. Newsome was Managing Director
and co-owner of Cambridge Financial Group, Inc. ("Cambridge") a registered
investment advisor, founded in 1986. Mr. Bauer, Chairman of the Adviser,
co-founded Cambridge Financial Group, Inc. Mr. McLaughlin serves as Executive
Vice President and a director of both the Adviser and Cambridge. Prior to
joining Cambridge in 1996, Mr. McLaughlin served as retirement system investment
officer and assistant director of the Ohio Public Employees Retirement System.
CW Fund Distributors, Inc. (the "Underwriter"), 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202, serves as the principal underwriter for the Funds and,
as such, is the exclusive agent for the distribution of shares of the Funds. The
Underwriter is an indirect wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending.
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.
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.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on
- 16 -
<PAGE>
the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then-current net asset
value and your account will be converted to the Share Option. No interest will
accrue on amounts represented by uncashed distribution checks.
If you have received a dividend or capital gains distribution in cash from
either Fund, you 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. You or your dealer must notify the Transfer
Agent that a distribution is being reinvested pursuant to this provision.
CALCULATION OF 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 the shares of each Fund is determined
as of the close of the regular session of trading on the New York Stock
Exchange, (normally 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. The price at which a purchase or redemption of Fund shares
is effected is based on the next calculation of net asset value after the order
is placed.
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: (1) 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, (2) 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, (3) 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 (4) securities (and other assets)
- 17 -
<PAGE>
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.
TAXES
-----
Each Fund has qualified and intends to continue 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 realized capital gains to
its shareholders. Distributions of net investment income as well as from net
realized short-term capital gains, if any, are taxable as ordinary income.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) by a Fund are taxable to you as capital
gains, without regard to the length of time you have held your Fund shares.
Capital gains distributions may be taxable at different rates depending on the
length of time a Fund holds its assets.
Redemptions of shares of the Funds are taxable events on which you may realize a
gain or loss. An exchange of a Fund's shares for shares of the other Fund will
be treated as a sale of such shares and any gain on the transaction may be
subject to federal income tax.
The Funds will mail a statement to you annually indicating the amount and
federal income tax status of all distributions made during the year. The Funds'
distributions may be subject to federal income tax whether received in cash or
reinvested in additional shares. In addition to federal taxes, you may be
subject to state and local taxes on distributions.
DISTRIBUTION PLAN
-----------------
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, 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 expenses related to the
sale and distribution of their shares, 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 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
- 18 -
<PAGE>
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. Because these fees are paid out of the
Funds' assets on an on-going basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges. In the event the Plan is terminated by a Fund in accordance with its
terms, the Fund will not be required to make any payments for expenses incurred
after the date the Plan terminates.
FINANCIAL HIGHLIGHTS
--------------------
The financial highlights table is intended to help you understand the Funds'
financial performance. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned on an investment in the Funds (assuming reinvestment
of dividends and distributions). This information has been audited by Joseph
Decosimo & Company whose report, along with the Funds' financial statements, are
included in the Statement of Additional Information, which is available upon
request.
Lake Shore Equity Fund
----------------------
Selected Per Share Data and Ratios for a Share Outstanding
Throughout the Period Ended December 31, 1998 (a)
Net asset value at beginning of period $ 10.00
----------
Income from investment operations:
Net investment income 0.08
Net realized and unrealized gains on investments 1.05
----------
Total from investment operations 1.13
----------
Dividends from net investment income (0.08)
----------
Net asset value at end of period $ 11.05
==========
Total return (b) 11.34%
==========
Net assets at end of period $1,588,758
==========
Ratio of net expenses to average net assets (c) 1.91%(d)
Ratio of net investment income to average net assets 0.71%(d)
Portfolio turnover rate 4%(d)
(a) Represents the period from the initial public offering of shares (March 2,
1998) through December 31, 1998.
(b) Total return shown excludes the effect of applicable sales loads and is not
annualized.
(c) Ratio of expenses to average net assets assuming no waiver of fees and
reimbursement of expenses by the Adviser was 14.24%(d) (Note 4).
(d) Annualized.
- 19 -
<PAGE>
Lake Shore Balanced Fund
------------------------
Selected Per Share Data and Ratios for a Share Outstanding
Throughout the Period Ended December 31, 1998 (a)
Net asset value at beginning of period $ 10.00
---------
Income from investment operations:
Net investment income 0.03
Net realized and unrealized gains on investments 0.97
---------
Total from investment operations 1.00
---------
Dividends from net investment income (0.03)
---------
Net asset value at end of period $ 10.97
=========
Total return (b) 9.98%
=========
Net assets at end of period $ 191,490
=========
Ratio of net expenses to average net assets (c) 1.95%(d)
Ratio of net investment income to average net assets 1.05%(d)
Portfolio turnover rate 0%
(a) Represents the period from the initial public offering of shares (June 30,
1998) through December 31, 1998.
(b) Total return shown excludes the effect of applicable sales loads and is not
annualized.
(c) Ratio of expenses to average net assets assuming no waiver of fees and
reimbursement of expenses by the Adviser was 94.94%(d) (Note 4).
(d) Annualized.
- 20 -
<PAGE>
LAKE SHORE FAMILY OF FUNDS ACCOUNT NO. L____-________________
Account Application (For Fund Use Only)
(Check appropriate Fund)
o EQUITY FUND (L1) $______________ FOR BROKER/DEALER USE ONLY
o BALANCED FUND (L2) $______________ Firm Name:________________________
Please mail account application to: Home Office Address:______________
Countrywide Fund Services, Inc. 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, (In case of custodial account
Organization, or Minor, etc. please list minors S.S.#)
Citizenship: o U.S.
_______________________________________________ o Other
Name of Joint Tenant, Partner, Custodian _____________
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 Agents
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 forredemption 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, the 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 FIs 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.
<PAGE>
LAKE SHORE FAMILY OF FUNDS
8280 Montgomery Road, Suite 302
Cincinnati, Ohio 45236
BOARD OF TRUSTEES
Gregory J. Bauer
Frank G. Doyle III
Francis A. Kovacs, Jr.
Robert A. McLaughlin
Joseph P. Rouse
Ralph P. Schwartz
William N. Stratman
INVESTMENT ADVISER
LAKE SHORE FUND GROUP, LLC
8280 Montgomery Road, Suite 302
Cincinnati, Ohio 45236
UNDERWRITER
CW Fund Distributors, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
TRANSFER AGENT
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
SHAREHOLDER SERVICE
Nationwide: (Toll-Free) 800-266-9532
Additional information about the Funds is included in the Statement of
Additional Information ("SAI"), which is incorporated by reference in its
entirety. Additional information about the Funds' investments is available in
the Funds' annual and semiannual reports to shareholders. In the Funds' annual
report you will find a discussion of the market conditions and strategies that
significantly affected the Funds' performance during their last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual report or other
information about the Funds, or to make inquiries about the Funds, please call
1-800-266-9532 (Nationwide).
Information about the Funds (including the SAI) can be reviewed and copied at
the Security and Exchange Commission's public reference room in Washington, D.C.
Information about the operation of the public reference room can be obtained by
calling the Commission at 1-800-SEC-0330. Reports and other information about
the Funds are available on the Commission's Internet site at http://www.sec.gov.
Copies of information of the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by writing to: Securities and Exchange Commission,
Public Reference Section, Washington, D.C. 20549-6009.
File Number 811-8431
- 20 -
<PAGE>
LAKE SHORE FAMILY OF FUNDS
--------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
May 1, 1999
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
May 1, 1999. 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.
TABLE OF CONTENTS
-----------------
THE TRUST
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
INVESTMENT LIMITATIONS
TRUSTEES AND OFFICERS
THE INVESTMENT ADVISER
THE UNDERWRITER
DISTRIBUTION PLAN
SECURITIES TRANSACTIONS
PORTFOLIO TURNOVER
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
OTHER PURCHASE INFORMATION
TAXES
REDEMPTION IN RIND
HISTORICAL PERFORMANCE INFORMATION
PRINCIPAL SECURITY HOLDERS
CUSTODIAN
AUDITORS
COUNTRYWIDE FUND SERVICES, INC.
ANNUAL REPORT
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THE TRUST
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The Lake Shore Family of Funds (the "Trust"), an open-end management investment
company, 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.
Shares of each Fund have equal voting rights and liquidation rights. 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 Investment
Company Act of 1940 in order to facilitate communications among shareholders.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
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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
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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' 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
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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 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.
INVESTMENT LIMITATIONS
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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.
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
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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.
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
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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.
PORTFOLIO TURNOVER
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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.
For the fiscal period ended December 31, 1998, the portfolio turnover rate for
the Equity Fund and the Balanced Fund were 4% and 0%, respectively.
TRUSTEES AND OFFICERS
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The following is a list of the Trustees and executive officers of the Trust,
their age and their aggregate compensation from the Trust for the fiscal period
ended December 31, 1998. Each Trustee who is an "interested person" of the
Trust, as defined by the Investment Company Act of 1940, is indicated by an
asterisk.
Compensation
Name Age Position Held from the Trust
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*Gregory J. Bauer 45 Chairman/Trustee $ 0
+Frank G. Doyle III 54 Trustee 750
+Francis A. Kovacs, Jr. 45 Trustee 750
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*Robert A. McLaughlin 59 Trustee 0
*Joseph P. Rouse 54 Trustee 0
+Ralph P. Schwartz 54 Trustee 750
+William N. Stratman 56 Trustee 750
Earl V. Newsome, Jr 42 President 0
Robert G. Dorsey 42 Vice President 0
Mark J. Seger 37 Treasurer 0
John F. Splain 42 Secretary 0
* 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.
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.
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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 is President and Treasurer
of Countrywide Fund Services, Inc. and CW Fund Distributors, Inc. and First Vice
President and Treasurer of Countrywide Financial Services, Inc. and Countrywide
Investments, Inc. He is also Vice President of Countrywide Tax-Free Trust,
Countrywide Strategic Trust, Countrywide Investment Trust, Markman MultiFund
Trust, Maplewood Investment Trust, a series company, The Thermo Opportunity
Fund, Inc., The Dean Family of Funds, The New York State Opportunity Funds, the
Wells Family of Real Estate Funds, Brundage Story and Rose Investment Trust,
Boyar Value Fund, Inc., Profit Funds Investment Trust, Atalanta/ Sosnoff
Investment Trust, UC Investment Trust and The Winter Harbor Fund and Assistant
Vice President of Williamsburg Investment Trust, Schwartz Investment Trust, The
Tuscarora Investment Trust, The Gannett Welsh & Kotler Funds, Firsthand Funds,
the Westport Funds, Albemarle Investment Trust and The James Advantage Funds,
all of which are registered investment companies.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is First Vice President,
Secretary and General Counsel of Countrywide Fund Services, Inc., CW Fund
Distributors, Inc., Countrywide Investments, Inc. and Countrywide Financial
Services, Inc. He is also Secretary of Countrywide Tax-Free Trust, Countrywide
Strategic Trust, Countrywide Investment Trust, Williamsburg Investment Trust,
Markman MultiFund Trust, The Tuscarora Investment Trust, Maplewood Investment
Trust, a series company, The Thermo Opportunity Fund, Inc., Brundage Story and
Rose Investment Trust, the Wells Family of Real Estate Funds, Boyar Value Fund,
Inc., Profit Funds Investment Trust and The Winter Harbor Fund and Assistant
Secretary of Schwartz Investment Trust, The Gannett Welsh & Kotler Funds,
Firsthand Funds, the New York State Opportunity Funds, the Dean Family of Funds,
the Westport Funds, Atalanta/Sosnoff Investment Trust, Albemarle Investment
Trust, The James Advantage Funds and UC Investment Trust.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio is First Vice
President and Chief Operating Officer of Countrywide Fund Services, Inc. and CW
Fund Distributors, Inc. He is also Treasurer of Countrywide Tax-Free Trust,
Countrywide Strategic Trust, Countrywide Investment Trust, Williamsburg
Investment Trust, Markman MultiFund Trust, Maplewood Investment Trust, a series
company, The Thermo Opportunity Fund, Inc., the New York State Opportunity
Funds, the Dean Family of Funds, the Wells Family of Real Estate Funds, Profit
Funds Investment Trust, Brundage Story and Rose Investment Trust, Albemarle
Investment Trust, Atalanta/Sosnoff Investment Trust, UC Investment Trust and
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The Winter Harbor Fund and Assistant Treasurer of Schwartz Investment Trust, The
Tuscarora Investment Trust, The Gannett Welsh & Kotler Funds, Firsthand Funds,
the Westport Funds, Boyar Value Fund, Inc. and The James Advantage 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.
PRINCIPAL SECURITY HOLDERS
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As of January 31, 1999, Suzanne K. Meyers, as trustee of the Suzanne K. Meyers
Trust, 5080 Squirrel Bend, Columbus, Ohio, owned of record 6.7% of the
outstanding shares of the Equity Fund; Everen Clearing Corporation, for the
benefit of Mary Lou and Ronald Dury, 111 East Kilbourne Avenue, Cincinnati,
Ohio, owned of record 5.6% of the outstanding shares of the Equity Fund; and
Advest, Inc. for the benefit of its customers, 90 State House Square, Hartford,
Connecticut, owned of record 72.2% of the outstanding shares of the Equity Fund
and 99.3% of the outstanding shares of the Balanced Fund. For purposes of voting
on matters submitted to shareholders, any person who owns more than 50% of the
outstanding shares of a Fund generally would be able to cast the deciding vote.
As of January 31, 1999, the Trustees and officers of the Trust as a group owned
of record or beneficially 5.6% of the outstanding shares of the Equity Fund and
less than 1% of the outstanding shares of the Balanced Fund.
INVESTMENT ADVISER
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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.
For the fiscal period ended December 31, 1998, the Equity Fund and the Balanced
Fund accrued advisory fees of $4,838 and $456, respectively. However, in order
to reduce the operating expenses of the Funds the Adviser voluntarily waived its
entire advisory fee and reimbursed the Funds for a portion of their operating
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expenses.
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 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 for
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 share holders, expense
of shareholders' meetings and proxy solicitations, and 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.
DISTRIBUTION PLAN
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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
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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. For the fiscal period ended December 31, 1998, the Equity Fund accrued
distribution expenses of $250.
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.
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.
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CUSTODIAN
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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
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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, 1999. 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.
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The Trust has retained Countrywide Fund Services, Inc. ("Countrywide") to act as
its transfer agent. Countrywide is an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., a New York Stock Exchange listed company
principally engaged in the business of residential mortgage lending. Countrywide
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. Countrywide 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 $1,200 per month for each
Fund. In addition, the Funds pay out-of-pocket expenses, including but not
limited to, postage, envelopes, checks, drafts, forms, reports, record storage
and communication lines.
Countrywide also provides accounting and pricing services to the Funds. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable Countrywide to perform its duties, each Fund
pays Countrywide a fee in accordance with the following schedule:
Average Monthly Net Assets Monthly Fee
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$ 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
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services.
Countrywide also provides administrative services to the Funds. In this
capacity, Countrywide supplies non-investment related statistical and research
data, internal regulatory compliance services and executive and administrative
services. Countrywide 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 Countrywide 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. For the fiscal
period ended December 31, 1998, Countrywide received transfer agency fees,
accounting services fees and administrative service fees of $10,800, $18,000 and
$9,000, respectively from the Equity Fund and $7,200, $12,000 and $6,000
respectively from the Balanced Fund.
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 Equity Fund and the Balanced Fund paid
brokerage commissions of $2,077 and $81, respectively, during the fiscal period
ended December 31, 1998.
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 discretion and to pay such brokers a commission
in excess of the commission another broker would charge if the Adviser
determines in good
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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.
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 (normally
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
- 14 -
<PAGE>
the methods used to determine the share price and the public offering price, see
"Calculation of 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.
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
- 15 -
<PAGE>
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.
THE UNDERWRITER
---------------
CW Fund Distributors, Inc. (the "Underwriter"), 312 Walnut Street, Cincinnati,
Ohio 45202, 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.
The Underwriter currently allows concessions to dealers who sell shares of the
Funds, as follows:
Dealer Reallowance as
Amount of Investment % of Public Offering Price
-------------------- --------------------------
Less than $25,000 4.5%
$25,000 but less than $250,000 3.5%
$250,000 or more 2.5%
Under certain circumstances, the Underwriter may increas or decrease the
reallowance to dealers. 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.
For the fiscal period ended December 31, 1998, the aggregate commissions
collected on sales of the Funds' shares were $56,958, of which the Underwriter
paid $50,155 to unaffiliated broker-dealers in the selling network and retained
$6,802 from underwriting and brokerage commissions.
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"
above.
- 16 -
<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 has qualified and intends to qualify annually 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 50% 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 carryforwards. 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 November 30 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
- 17 -
<PAGE>
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:
n
P (1 + T) = 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 not include the effect of the applicable
sales load which, if
- 18 -
<PAGE>
included, would reduce total return. For the period from the initial public
offering of shares (March 2, 1998) through December 31, 1998, the total return
of the Equity Fund as calculated in this manner was 11.34%. For the period from
the initial public offering of shares (June 30, 1998) through December 31, 1998,
the total return of the Balanced Fund as calculated in this manner was 9.98%. 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:
6
Yield = 2[(a-b/cd +1) -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.
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
- 19 -
<PAGE>
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.
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.
FINANCIAL STATEMENTS
--------------------
The Funds' Annual Financial Statements as of December 31, 1998, which have been
audited by Joseph Decosimo and Company, PLL, are attached to this Statement of
Additional Information.
- 20 -
<PAGE>
- --------------------------------------------------------------------------------
LAKE SHORE FAMILY OF FUNDS
--------------------------
LAKE SHORE BALANCED FUND
ANNUAL REPORT
December 31, 1998
INVESTMENT ADVISER ADMINISTRATOR
------------------ -------------
LAKE SHORE FUND GROUP, LLC COUNTRYWIDE FUND SERVICES, INC.
8280 Montgomery Road 312 Walnut Street
Suite 302 P.O. Box 5354
Cincinnati, Ohio 45236 Cincinnati, Ohio 45201-5354
1.513.794.1440 1.800.266.9532
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
LAKE SHORE
---------------
FAMILY OF FUNDS
INVESTMENT ADVISER SHAREHOLDER SERVICES
------------------ --------------------
LAKE SHORE FUND GROUP, LLC Lake Shore Family of Funds
8280 Montgomery Road P.O. Box 5354
Suite 302 Cincinnati, Ohio 45201-5354
Cincinnati, Ohio 45236 (800) 266.9532
(513) 794.1440
Dear Fellow Shareholders,
The Lake Shore Balanced Fund began operations in June of 1998 during what we
considered to be an investment environment which had greater than average risk.
Consequently, the Fund was held in riskless cash and cash equivalents until our
equity market work suggested that risk was reduced.
Major market averages rallied into July, but there was a significant degree of
deterioration in the broad market. Measures of stocks advancing in price versus
those declining in price, and stocks moving to new 52-week highs, failed to
confirm the advances in stock indices, and highlighted the narrowness of the
rise. When Russia defaulted on its treasury debt in August, a crisis ensued. A
large U.S. hedge fund, which had employed greater than usual leverage,
threatened the liquidity of the worldwide financial system as its positions had
to be unwound, and led to fears of a worldwide recession. At this point, the
market sell-off began in earnest.
In response to these events, investors quickly shifted funds into short-term
securities, driving interest rates on Treasury bills down. This was followed by
the Federal Reserve's move to lower the discount rate and inject funds into the
system, as they orchestrated a bailout of the above-mentioned hedge fund. This
improving monetary environment, in conjunction with the lower equity prices,
resulted in a more favorable outlook for stocks, and our Fund entered the market
in late October.
Major market sell-offs have shown a tendency to occur every four years, and the
decline into October fell within this time frame, suggesting that a sustained
rally may follow. In addition, two consecutive discount rate cuts by the Federal
Reserve have historically had positive ramifications for stocks. Since 1914,
there have been 19 of these instances, and the S&P 500 Index rose 18 times for
an average gain of 30.3% over the next twelve months.
<PAGE>
Clearly, the advance from the October lows has been rather narrow, with
investors concentrating on large-cap growth stocks, and there remain fundamental
and technical concerns. Valuations were already at the higher end of their
historic range when the rally began, and sentiment quickly shifted to the
positive side and remains extremely high (it is more beneficial for there to be
a higher degree of skepticism). On the other hand, the Federal Reserve is
maintaining its accommodating stance, providing plenty of liquidity for the
market, and stock buying by corporate "insiders" has been high, traditionally a
good sign for the market.
After a significant decline in interest rates resulting from an international
flight-to-quality, yields have moved higher and, at the present time, are
indicating that further declines are not on the horizon. As a result, we have
maintained the fixed-income portion of the Fund in short-term instruments until
we see a better opportunity to invest in longer maturities.
The accompanying graph compares the performance of a hypothetical $10,000
investment in the Fund relative to the S&P 500 Index, an unmanaged,
capitalization-weighted index of 500 large common stocks. The initial investment
figure for the Fund is adjusted for the 5% maximum sales load applicable to
share purchases. Through December 31, 1998, the Fund's total return since
inception (excluding the impact of applicable sales loads) was 9.98% versus
18.61% for the S&P 500 Index.
If you have any questions, please feel free to call us at (513)-794-1440.
Sincerely,
/s/ Gregory J. Bauer
Gregory J. Bauer, CFA
Chairman
Lake Shore Family of Funds
<PAGE>
Comparison of the Change in Value of a $10,000 Investment in the Lake Shore
Balanced Fund, the S&P 500 Index and the Lipper Balanced Fund Index
LAKE SHORE BALANCED FUND:
-------------------------
MONTHLY
DATE RETURN BALANCE
---- ------ -------
06/30/98 9,500
07/31/98 0.40% 9,538
08/31/98 0.40% 9,576
09/30/98 0.10% 9,586
10/31/98 2.08% 9,785
11/30/98 2.14% 9,994
12/31/98 4.54% 10,448
S&P 500 INDEX:
--------------
MONTHLY
DATE RETURN BALANCE
---- ------ -------
06/30/98 10,000
07/31/98 -1.07% 9,894
08/31/98 -14.46% 8,463
09/30/98 6.41% 9,005
10/31/98 8.13% 9,738
11/30/98 6.06% 10,328
12/31/98 5.76% 10,923
LIPPER BALANCED FUND INDEX:
---------------------------
MONTHLY
DATE RETURN BALANCE
---- ------ -------
06/30/98 10,000
07/31/98 -1.17% 9,883
08/31/98 -8.62% 9,031
09/30/98 4.32% 9,421
10/31/98 3.74% 9,774
11/30/98 3.66% 10,131
12/31/98 3.69% 10,505
--------------------------
Lake Shore Balanced Fund
Total Return
Since Inception* 4.48%
--------------------------
Past performance is not predictive of future performance.
*Initial public offering of shares was June 30, 1998.
<PAGE>
LAKE SHORE BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS
Investment securities, at market value (Cost $156,153) $ 170,330
Dividends receivable 358
Receivable from Adviser (Note 4) 4,470
Organization expenses, net (Note 2) 19,949
Other assets 2,536
---------
TOTAL ASSETS 197,643
---------
LIABILITIES
Payable to affiliates (Note 4) 4,200
Other accrued expenses and liabilities 1,953
---------
TOTAL LIABILITIES 6,153
---------
NET ASSETS $ 191,490
=========
NET ASSETS CONSIST OF:
Paid-in capital $ 177,306
Undistributed net investment income 2
Accumulated net realized gains from security transactions 5
Net unrealized appreciation on investments 14,177
---------
NET ASSETS $ 191,490
---------
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) 17,456
=========
Net asset value and redemption price per share (Note 2) $ 10.97
=========
Maximum offering price per share (Note 2) $ 11.55
=========
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1998 (a)
INVESTMENT INCOME
Dividends $ 1,391
---------
EXPENSES
Accounting services fees (Note 4) 12,000
Transfer agent fees (Note 4) 7,200
Insurance expense 6,188
Administrative services fees (Note 4) 6,000
Registration fees 4,294
Amortization of organization expenses (Note 2) 2,217
Postage and supplies 2,098
Trustees' fees and expenses 1,762
Custodian fees 1,400
Investment advisory fees (Note 4) 456
Shareholder report costs 408
Pricing costs 100
---------
TOTAL EXPENSES 44,123
Fees waived and expenses reimbursed by the Adviser (Note 4) (43,219)
---------
NET EXPENSES 904
---------
NET INVESTMENT INCOME 487
---------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 5
Net increase in unrealized appreciation on investments 14,177
---------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 14,182
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 14,669
=========
(a) Represents the period from the initial public offering of shares (June 30,
1998) through December 31, 1998.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended December 31, 1998 (a)
FROM OPERATIONS:
Net investment income $ 487
Net realized gains from security transactions 5
Net increase in unrealized appreciation on investments 14,177
---------
Net increase in net assets from operations 14,669
---------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (485)
---------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 175,821
Net asset value of shares issued in
reinvestment of distributions to shareholders 485
---------
Net increase in net assets from capital share transactions 176,306
---------
TOTAL INCREASE IN NET ASSETS 190,490
NET ASSETS:
Beginning of period (Note 1) 1,000
---------
End of period $ 191,490
=========
UNDISTRIBUTED NET INVESTMENT INCOME $ 2
=========
CAPITAL SHARE ACTIVITY:
Shares sold 17,312
Shares issued in reinvestment of
distributions to shareholders 44
---------
Net increase in shares outstanding 17,356
Shares outstanding, beginning of period (Note 1) 100
---------
Shares outstanding, end of period 17,456
=========
(a) Represents the period from the initial public offering of shares (June 30,
1998) through December 31, 1998.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding
Throughout the Period Ended December 31, 1998 (a)
Net asset value at beginning of period $ 10.00
---------
Income from investment operations:
Net investment income 0.03
Net realized and unrealized gains on investments 0.97
---------
Total from investment operations 1.00
---------
Dividends from net investment income (0.03)
---------
Net asset value at end of period $ 10.97
=========
Total return (b) 9.98%
=========
Net assets at end of period $ 191,490
=========
Ratio of net expenses to average net assets (c) 1.95%(d)
Ratio of net investment income to average net assets 1.05%(d)
Portfolio turnover rate 0%
(a) Represents the period from the initial public offering of shares (June 30,
1998) through December 31, 1998.
(b) Total return shown excludes the effect of applicable sales loads and is not
annualized.
(c) Ratio of expenses to average net assets assuming no waiver of fees and
reimbursement of expenses by the Adviser was 94.94%(d) (Note 4).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
Market
Shares Value
- -------- ----------
COMMON STOCKS - 52.5%
TECHNOLOGY - 16.8%
45 AT&T Corp. $ 3,386
85 Apple Computer, Inc.* 3,480
60 Comcast Corp. 3,521
45 Dell Computer Corp.* 3,293
45 EMC Corp.* 3,825
20 IBM Corp. 3,695
35 Lucent Technologies, Inc. 3,850
110 Unisys Corp.* 3,788
30 United Technologies Corp. 3,263
----------
32,101
----------
CONSUMER, NON-CYCLICAL - 8.8%
25 Bristol-Myers Squibb Co. 3,345
45 Guidant Corp. 4,961
50 Heinz (H.J.) Co. 2,831
20 Merck & Co., Inc. 2,954
100 Sara Lee Corp. 2,819
----------
16,910
----------
CONSUMER, CYCLICAL - 6.2%
37 DaimlerChrysler AG* 3,554
80 Ford Motor Co. 4,695
45 Wal-Mart Stores, Inc. 3,665
----------
11,914
----------
ENERGY - 5.7%
35 Chevron Corp. 2,903
40 Exxon Corp. 2,925
145 Occidental Petroleum Corp. 2,447
50 Texaco, Inc. 2,643
----------
10,918
----------
BASIC MATERIALS - 5.1%
45 Georgia-Pacific Group 2,635
40 Georgia-Pacific Timber Group 953
65 International Paper Co. 2,913
65 Weyerhaeuser Co. 3,303
----------
9,804
----------
<PAGE>
LAKE SHORE BALANCED FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
Market
Shares Value
- -------- ----------
COMMON STOCKS - 52.5%
FINANCIAL SERVICES - 4.8%
40 Associates First Capital Corp. - Class A $ 1,695
60 Paychex, Inc. 3,086
60 Providian Financial Corp. 4,500
----------
9,281
----------
INDUSTRIAL - 3.2%
130 Waste Management, Inc. 6,062
----------
CONGLOMERATES - 1.9%
35 General Electric Co. 3,572
----------
TOTAL COMMON STOCKS (COST $86,385) 100,562
----------
MONEY MARKETS - 36.4%
69,768 Star Treasury Fund (Cost $69,768) 69,768
----------
TOTAL INVESTMENT SECURITIES (COST $156,153) - 88.9% 170,330
OTHER ASSETS IN EXCESS OF LIABILITIES - 11.1% 21,160
----------
NET ASSETS - 100.0% $ 191,490
==========
* Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. ORGANIZATION
The Lake Shore Family of Funds (the Trust) is registered under the Investment
Company Act of 1940 (the 1940 Act) as an open-end management investment company.
The Trust was organized as an Ohio business trust under a Declaration of Trust
dated September 3, 1997. The Trust currently offers two separate series of
shares to investors: the Equity Fund and the Balanced Fund (individually, a Fund
and, collectively, the Funds). The Trust was capitalized on December 23, 1997,
when the initial shares of each Fund were purchased at $10.00 per share. The
initial public offering of shares of the Balanced Fund commenced on June 30,
1998. The Balanced Fund had no operations prior to the public offering of shares
except for the initial issuance of shares.
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.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Balanced Fund's significant accounting
policies:
Security valuation -- The Fund's portfolio securities are valued as of the close
of business of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities traded on a national stock
exchange or quoted by NASDAQ are valued based upon the closing price on the
principal exchange where the security is traded, or, if not traded on a
particular day, at the closing bid price. 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.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The maximum offering price per share is equal to
the net asset value per share plus a sales load equal to 5.26% of the net asset
value (or 5.00% of the offering price). The redemption price per share is equal
to the net asset value per share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned. Discounts and premiums on securities
purchased are amortized in accordance with income tax regulations which
approximate generally accepted accounting principles.
Distributions to shareholders -- The Fund expects to distribute substantially
all of its net investment income, if any, on a quarterly basis. The 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.
Organization expenses -- Expenses of organization have been capitalized and are
being amortized on a straight-line basis over five years as of December 31,
1998. Effective January 1, 1999, the Fund intends to adopt the provisions of
AICPA Statement of Position 98-5, "Reporting for the Costs of Start-Up
Activities." In the event any of the initial shares of a Fund are redeemed
during the amortization period, the redemption proceeds will be reduced by a pro
rata portion of any unamortized organization expenses in the same proportion as
the number of initial shares being redeemed bears to the number of initial
shares of the Fund outstanding at the time of the redemption.
<PAGE>
LAKE SHORE BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
As of December 31, 1998, net unrealized appreciation on investments was $14,177
for federal income tax purposes, of which $15,209 related to appreciated
securities and $1,032 related to depreciated securities based on a federal
income tax cost basis of $156,153.
3. INVESTMENT TRANSACTIONS
During the period ended December 31, 1998, cost of purchases and proceeds from
sales and maturities of investment securities, other than short-term
investments, amounted to $86,385 and $0, respectively.
4. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of Lake Shore Fund
Group, LLC (the Adviser), of Countrywide Fund Services, Inc. (CFS), the
administrative services agent, shareholder servicing and transfer agent, and
accounting services agent for the Trust, or of CW Fund Distributors, Inc. (the
Underwriter), the exclusive agent for the distribution of the Fund's shares.
ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. The Fund pays the Adviser an investment advisory fee,
computed and accrued daily and paid monthly, at an annual rate of 1.00% of its
average daily net assets.
In order to voluntarily reduce operating expenses during the period ended
December 31, 1998, the Adviser waived its entire advisory fee of $456 and
reimbursed the Fund for $42,763 of other operating expenses.
<PAGE>
LAKE SHORE BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related administrative and compliance services for the Fund. CFS supervises the
preparation of tax returns, reports to shareholders, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For these services, CFS
receives a monthly fee from the Fund at an annual rate of 0.15% of its average
daily net assets up to $50 million; 0.125% of such net assets from $50 million
to $100 million; and 0.10% of such net assets in excess of $100 million, subject
to a $1,000 minimum monthly fee.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, CFS maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of the Funds shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, CFS receives a monthly fee at an annual rate of $20 per shareholder
account, subject to a $1,200 minimum monthly fee. In addition, the Fund pays
out-of-pocket expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, CFS calculates the daily
net asset value per share and maintains the financial books and records of the
Fund. For these services, CFS receives a monthly fee, based on current asset
levels, of $2,000 from the Fund. In addition, the Fund pays certain
out-of-pocket expenses incurred by CFS in obtaining valuations of the Fund's
portfolio securities.
UNDERWRITING AGREEMENT
Under the terms of an Underwriting Agreement, the Underwriter serves as the
exclusive agent for the distribution of the Fund's shares. For these services,
the Underwriter earned $917 from underwriting commissions on the sale of shares
during the period ended December 31, 1998.
PLAN OF DISTRIBUTION
The Trust has adopted a Plan of Distribution (the Plan) pursuant to Rule 12b-1
under the 1940 Act. The Plan provides that the Fund may directly incur or
reimburse the Underwriter or the Adviser for certain costs related to the
distribution of the Fund shares, not to exceed 0.25% of average daily net
assets. For the period ended December 31, 1998, the Fund incurred no such
expenses under the Plan.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Lake Shore Balanced Fund and
The Trustees of Lake Shore Family of Funds
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the Lake Shore Balanced Fund (one of the funds
of the Lake Shore Family of Funds ) as of December 31, 1998, and the related
statements of operations and changes in net assets and the financial highlights
for the period from June 30, 1998 (date of initial public offering of shares)
through December 31, 1998. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financig hlights are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and financial
highlights. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and fincial highlights referred to
above present fairly, in all material respects, the financial position of the
Lake Shore Balanced Fund of the Lake Shore Family of Funds as of December 31,
1998, and the results of its operations and financial highlights for the period
from June 30, 1998 through December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Joseph Decosimo and Company, PLL
Joseph Decosimo and Company, PLL
Cincinnati, Ohio
January 15, 1999
<PAGE>
- --------------------------------------------------------------------------------
LAKE SHORE FAMILY OF FUNDS
--------------------------
LAKE SHORE EQUITY FUND
ANNUAL REPORT
December 31, 1998
INVESTMENT ADVISER ADMINISTRATOR
------------------ -------------
LAKE SHORE FUND GROUP, LLC COUNTRYWIDE FUND SERVICES, INC.
8280 Montgomery Road 312 Walnut Street
Suite 302 P.O. Box 5354
Cincinnati, Ohio 45236 Cincinnati, Ohio 45201-5354
1.513.794.1440 1.800.266.9532
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
LAKE SHORE
---------------
FAMILY OF FUNDS
INVESTMENT ADVISER SHAREHOLDER SERVICES
------------------ --------------------
LAKE SHORE FUND GROUP, LLC Lake Shore Family of Funds
8280 Montgomery Road P.O. Box 5354
Suite 302 Cincinnati, Ohio 45201-5354
Cincinnati, Ohio 45236 (800) 266.9532
(513) 794.1440
Dear Fellow Shareholders,
The Lake Shore Equity Fund began operations in March of 1998 during what we
considered to be an investment environment which had greater than average risk.
Consequently, one-third of the Fund was held in riskless cash and cash
equivalents until our equity market analysis suggested that risk was reduced.
Major market averages rallied into July, but there was a significant degree of
deterioration in the broad market. Measures of stocks advancing in price versus
those declining in price, and stocks moving to new 52-week highs, failed to
confirm the advances in stock indices, and highlighted the narrowness of the
rise. When Russia defaulted on its treasury debt in August, a crisis ensued. A
large U.S. hedge fund, which had employed greater than usual leverage,
threatened the liquidity of the worldwide financial system as its positions had
to be unwound, and led to fears of a worldwide recession. At this point, the
market sell-off began in earnest.
In response to these events, investors quickly shifted funds into short-term
securities, driving interest rates on Treasury bills down. This was followed by
the Federal Reserve's move to lower the discount rate and inject funds into the
system, as they orchestrated a bailout of the above-mentioned hedge fund. This
improving monetary environment, in conjunction with lower equity prices,
resulted in a more favorable outlook for stocks, and our Fund moved to an
essentially fully invested position in early December.
Major market sell-offs have shown a tendency to occur every four years, and the
decline into October fell within this time frame, suggesting that a sustained
rally may follow. In addition, two consecutive discount rate cuts by the Federal
Reserve have historically had positive ramifications for stocks. Since 1914,
there have been 19 of these instances, and the S&P 500 Index rose 18 times for
an average gain of 30.3% over the next twelve months.
<PAGE>
Clearly, the advance from the October lows has been rather narrow, with
investors concentrating on large-cap growth stocks, and there remain fundamental
and technical concerns. Valuations were already at the higher end of their
historic range when the rally began, and sentiment quickly shifted to the
positive side and remains extremely high (it is more beneficial for there to be
a higher degree of skepticism). On the other hand, the Federal Reserve is
maintaining its accommodating stance, providing plenty of liquidity for the
market, and stock buying by corporate "insiders" has been high, traditionally a
good sign for the market.
Corrections in the market are to be expected, particularly given the strong
surge that occurred during the fourth quarter, but we are maintaining our fully
invested posture.
The accompanying graph compares the performance of a hypothetical $10,000
investment in the Fund relative to the S&P 500 Index, an unmanaged,
capitalization-weighted index of 500 large common stocks. The initial investment
figure for the Fund is adjusted for the 5% maximum sales load applicable to
share purchases. Through December 31, 1998, the Fund's total return since its
March 2 inception (excluding the impact of applicable sales loads) was 11.34%
versus 18.61% for the S&P 500 Index.
If you have any questions, please feel free to call us at (513)-794-1440.
Sincerely,
/s/ Gregory J. Bauer
Gregory J. Bauer, CFA
Chairman
Lake Shore Family of Funds
<PAGE>
Comparison of the Change in Value of a $10,000 Investment in the
Lake Shore Equity Fund and the S&P 500 Index
LAKE SHORE EQUITY FUND
----------------------
MONTHLY
DATE RETURN BALANCE
03/02/98 9,500
03/31/98 1.40% 9,633
04/30/98 0.79% 9,709
05/31/98 -0.98% 9,614
06/30/98 0.77% 9,688
07/31/98 -1.58% 9,535
08/31/98 -6.11% 8,952
09/30/98 3.02% 9,223
10/31/98 3.53% 9,548
11/30/98 2.91% 9,825
12/31/98 7.65% 10,578
S&P 500 INDEX
-------------
MONTHLY
DATE RETURN BALANCE
03/02/98 10,000
03/31/98 5.12% 10,512
04/30/98 1.01% 10,618
05/31/98 -1.72% 10,435
06/30/98 4.06% 10,859
07/31/98 -1.07% 10,744
08/31/98 -14.46% 9,190
09/30/98 6.41% 9,779
10/31/98 8.13% 10,574
11/30/98 6.06% 11,215
12/31/98 5.76% 11,861
------------------------
Lake Shore Equity Fund
Total Return
Since Inception* 5.78%
------------------------
Past performance is not predictive of future performance.
*Initial public offering of shares was March 2, 1998.
<PAGE>
LAKE SHORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS
Investment securities, at market value (Cost $1,373,647) $ 1,544,689
Cash 35
Dividends receivable 1,999
Receivable from Adviser (Note 4) 26,718
Organization expenses, net (Note 2) 17,733
Other assets 3,453
-----------
TOTAL ASSETS 1,594,627
-----------
LIABILITIES
Dividends payable 77
Payable to affiliates (Note 4) 4,200
Other accrued expenses and liabilities 1,592
-----------
TOTAL LIABILITIES 5,869
-----------
NET ASSETS $ 1,588,758
===========
NET ASSETS CONSIST OF:
Paid-in capital $ 1,421,229
Undistributed net investment income 13
Accumulated net realized losses from security transactions (3,526)
Net unrealized appreciation on investments 171,042
-----------
NET ASSETS $ 1,588,758
-----------
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) 143,745
===========
Net asset value and redemption price per share (Note 2) $ 11.05
===========
Maximum offering price per share (Note 2) $ 11.63
===========
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1998 (a)
INVESTMENT INCOME
Dividends $ 12,656
---------
EXPENSES
Accounting services fees (Note 4) 18,000
Transfer agent fees (Note 4) 10,800
Administrative services fees (Note 4) 9,000
Insurance expense 6,188
Custodian fees 6,173
Investment advisory fees (Note 4) 4,838
Amortization of organization expenses (Note 2) 4,433
Registration fees 4,403
Postage and supplies 2,236
Trustees' fees and expenses 1,762
Pricing costs 435
Shareholder report costs 408
Distribution expense (Note 4) 250
---------
TOTAL EXPENSES 68,926
Fees waived and expenses reimbursed by the Adviser (Note 4) (59,696)
---------
NET EXPENSES 9,230
---------
NET INVESTMENT INCOME 3,426
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (3,526)
Net increase in unrealized appreciation on investments 171,042
---------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 167,516
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 170,942
=========
(a) Represents the period from the initial public offering of shares (March 2,
1998) through December 31, 1998.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended December 31, 1998 (a)
FROM OPERATIONS:
Net investment income $ 3,426
Net realized losses from security transactions (3,526)
Net increase in unrealized appreciation on investments 171,042
-----------
Net increase in net assets from operations 170,942
-----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (3,413)
-----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,324,065
Net asset value of shares issued in
reinvestment of distributions to shareholders 3,302
Payment for shares redeemed (5,138)
-----------
Net increase in net assets from capital share transactions 1,322,229
-----------
TOTAL INCREASE IN NET ASSETS 1,489,758
NET ASSETS:
Beginning of period (Note 1) 99,000
-----------
End of Period $ 1,588,758
===========
UNDISTRIBUTED NET INVESTMENT INCOME $ 13
===========
CAPITAL SHARE ACTIVITY:
Shares sold 134,015
Shares issued in reinvestment of
distributions to shareholders 325
Shares redeemed (495)
-----------
Net increase in shares outstanding 133,845
Shares outstanding, beginning of period (Note 1) 9,900
-----------
Shares outstanding, end of period 143,745
===========
(a) Represents the period from the initial public offering of shares (March 2,
1998) through December 31, 1998.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding
Throughout the Period Ended December 31, 1998 (a)
Net asset value at beginning of period $ 10.00
----------
Income from investment operations:
Net investment income 0.08
Net realized and unrealized gains on investments 1.05
----------
Total from investment operations 1.13
----------
Dividends from net investment income (0.08)
----------
Net asset value at end of period $ 11.05
==========
Total return (b) 11.34%
==========
Net assets at end of period $1,588,758
==========
Ratio of net expenses to average net assets (c) 1.91%(d)
Ratio of net investment income to average net assets 0.71%(d)
Portfolio turnover rate 4%(d)
(a) Represents the period from the initial public offering of shares (March 2,
1998) through December 31, 1998.
(b) Total return shown excludes the effect of applicable sales loads and is not
annualized.
(c) Ratio of expenses to average net assets assuming no waiver of fees and
reimbursement of expenses by the Adviser was 14.24%(d) (Note 4).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
Market
Shares Value
- -------- ----------
COMMON STOCKS - 93.2%
TECHNOLOGY - 30.6%
735 AT&T Corp. $ 55,309
1,360 Apple Computer, Inc. * 55,675
945 Comcast Corp. 55,460
750 Dell Computer Corp.* 54,890
610 EMC Corp.* 51,850
280 IBM Corp. 51,730
535 Lucent Technologies, Inc. 58,850
1,600 Unisys Corp.* 55,100
430 United Technologies Corp. 46,763
----------
485,627
----------
CONSUMER, NON-CYCLICAL - 15.1%
375 Bristol-Myers Squibb Co. 50,179
530 Guidant Corp. 58,433
785 Heinz (H.J.) Co. 44,451
295 Merck & Co., Inc. 43,568
1,560 Sara Lee Corp. 43,972
----------
240,603
----------
ENERGY - 10.9%
555 Chevron Corp. 46,030
635 Exxon Corp. 46,434
2,305 Occidental Petroleum Corp. 38,897
795 Texaco, Inc. 42,036
----------
173,397
----------
CONSUMER, CYCLICAL - 9.8%
355 DaimlerChrysler AG * 34,102
1,220 Ford Motor Co. 71,599
620 Wal-Mart Stores, Inc. 50,491
----------
156,192
----------
<PAGE>
LAKE SHORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
Market
Shares Value
- -------- ----------
COMMON STOCKS - 93.2%
BASIC MATERIALS - 8.9%
575 Georgia-Pacific Group $ 33,673
590 Georgia-Pacific Timber Group 14,049
1,050 International Paper Co. 47,053
920 Weyerhaeuser Co. 46,748
----------
141,523
----------
FINANCIAL SERVICES - 8.4%
622 Associates First Capital Corp. - Class A 26,357
935 Paychex, Inc. 48,094
772 Providian Financial Corp. 57,900
----------
132,351
----------
INDUSTRIAL - 6.2%
2,120 Waste Management, Inc. 98,845
----------
CONGLOMERATES - 3.3%
510 General Electric Co. 52,052
----------
TOTAL COMMON STOCKS (COST $1,309,548) 1,480,590
----------
MONEY MARKETS - 4.0%
64,099 Star Treasury Fund (Cost $64,099) 64,099
----------
TOTAL INVESTMENT SECURITIES (COST $1,373,647) - 97.2% 1,544,689
OTHER ASSETS IN EXCESS OF LIABILITIES - 2.8% 44,069
----------
NET ASSETS - 100.0% $1,588,758
==========
* Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. ORGANIZATION
The Lake Shore Family of Funds (the Trust) is registered under the Investment
Company Act of 1940 (the 1940 Act) as an open-end management investment company.
The Trust was organized as an Ohio business trust under a Declaration of Trust
dated September 3, 1997. The Trust currently offers two separate series of
shares to investors: the Equity Fund and the Balanced Fund (individually, a Fund
and, collectively, the Funds). The Trust was capitalized on December 23, 1997,
when the initial shares of each Fund were purchased at $10.00 per share. The
initial public offering of shares of the Equity Fund commenced on March 2, 1998.
The Equity Fund had no operations prior to the public offering of shares except
for the initial issuance of shares.
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.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Equity Fund's significant accounting policies:
Security valuation -- The Fund's portfolio securities are valued as of the close
of business of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities traded on a national stock
exchange or quoted by NASDAQ are valued based upon the closing price on the
principal exchange where the security is traded, or, if not traded on a
particular day, at the closing bid price. 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.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The maximum offering price per share is equal to
the net asset value per share plus a sales load equal to 5.26% of the net asset
value (or 5.00% of the offering price). The redemption price per share is equal
to the net asset value per share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned. Discounts and premiums on securities
purchased are amortized in accordance with income tax regulations which
approximate generally accepted accounting principles.
Distributions to shareholders -- The Fund expects to distribute substantially
all of its net investment income, if any, on a quarterly basis. The 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.
Organization expenses -- Expenses of organization have been capitalized and are
being amortized on a straight-line basis over five years. In the event any of
the initial shares of a Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by a pro rata portion of any unamortized
organization expenses in the same proportion as the number of initial shares
being redeemed bears to the number of initial shares of the Fund outstanding at
the time of the redemption.
<PAGE>
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
As of December 31, 1998, net unrealized appreciation on investments was $171,042
for federal income tax purposes, of which $191,311 related to appreciated
securities and $20,269 related to depreciated securities based on a federal
income tax cost basis of $1,373,647.
3. INVESTMENT TRANSACTIONS
During the period ended December 31, 1998, cost of purchases and proceeds from
sales and maturities of investment securities, other than short-term
investments, amounted to $1,324,411 and $11,337, respectively.
4. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of Lake Shore Fund
Group, LLC (the Adviser), of Countrywide Fund Services, Inc. (CFS), the
administrative services agent, shareholder servicing and transfer agent, and
accounting services agent for the Trust, or of CW Fund Distributors, Inc. (the
Underwriter), the exclusive agent for the distribution of the Fund's shares.
ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. The Fund pays the Adviser an investment advisory fee,
computed and accrued daily and paid monthly, at an annual rate of 1.00% of its
average daily net assets.
In order to voluntarily reduce operating expenses during the period ended
December 31, 1998, the Adviser waived its entire advisory fee of $4,838 and
reimbursed the Fund for $54,858 of other operating expenses.
<PAGE>
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related administrative and compliance services for the Fund. CFS supervises the
preparation of tax returns, reports to shareholders, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For these services, CFS
receives a monthly fee from the Fund at an annual rate of 0.15% of its average
daily net assets up to $50 million; 0.125% of such net assets from $50 million
to $100 million; and 0.10% of such net assets in excess of $100 million, subject
to a $1,000 minimum monthly fee.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, CFS maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, CFS receives a monthly fee at an annual rate of $20 per shareholder
account, subject to a $1,200 minimum monthly fee. In addition, the Fund pays
out-of-pocket expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, CFS calculates the daily
net asset value per share and maintains the financial books and records of the
Fund. For these services, CFS receives a monthly fee, based on current asset
levels, of $2,000 from the Fund. In addition, the Fund pays certain
out-of-pocket expenses incurred by CFS in obtaining valuations of the Fund's
portfolio securities.
UNDERWRITING AGREEMENT
Under the terms of an Underwriting Agreement, the Underwriter serves as the
exclusive agent for the distribution of the Fund's shares. For these services,
the Underwriter earned $5,885 from underwriting commissions on the sale of
shares during the period ended December 31, 1998.
PLAN OF DISTRIBUTION
The Trust has adopted a Plan of Distribution (the Plan) pursuant to Rule 12b-1
under the 1940 Act. The Plan provides that the Fund may directly incur or
reimburse the Underwriter or the Adviser for certain costs related to the
distribution of the Fund shares, not to exceed 0.25% of average daily net
assets. For the period ended December 31, 1998, the Fund incurred $250 of
expenses under the Plan.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Lake Shore Equity Fund and
The Trustees of Lake Shore Family of Funds
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the Lake Shore Equity Fund (one of the funds
of the Lake Shore Family of Funds ) as of December 31, 1998, and the related
statements of operations and changes in net assets and the financial highlights
for the period from March 2, 1998 (date of initial public offering of shares)
through December 31, 1998. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financig hlights are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and financial
highlights. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and fincial highlights referred to
above present fairly, in all material respects, the financial position of the
Lake Shore Equity Fund of the Lake Shore Family of Funds as of December 31,
1998, and the results of its operations and financial highlights for the period
from March 2, 1998 through December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Joseph Decosimo and Company, PLL
Joseph Decosimo and Company, PLL
Cincinnati, Ohio
January 15, 1999
<PAGE>
LAKE SHORE FAMILY OF FUNDS
--------------------------
PART C. OTHER INFORMATION
- ------- -----------------
Item 23. Exhibits
- -------- --------
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Incorporated by reference to Agreement and Declaration of
Trust and Bylaws
(d) Investment Advisory Agreement with Lake Shore Fund Group,
LLC
(e)(i) Underwriting Agreement with Countrywide Investments, Inc.
(ii) Agreement to Transfer of Underwriting Agreement to CW Fund
Distributors, Inc.
(f) Inapplicable
(g) Custody Agreement with Star Bank, N.A.
(h)(i) Administration Agreement with Countrywide Fund Services,
Inc.
(ii) Accounting Services Agreement with Countrywide Fund
Services, Inc.
(iii) Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement with Countrywide Fund Services, Inc.
(i) Opinion and Consent of Counsel*
(j) Consent of Independent Accountants
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m) Plan of Distribution Pursuant to Rule 12b-1
(n)(i) Financial Data Schedule for the Equity Fund
(ii) Financial Data Schedule for the Balanced Fund
(o) Inapplicable
- --------------------------------------
* Incorporated by reference to the Trust's Registration Statement on Form
N-1A.
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant.
- -------- --------------------------------------------------------------
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 25. Indemnification
- -------- ---------------
Article VI of the Registrant's Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject
to and except as otherwise provided in the Securities Act of
1933, as amended, and the 1940 Act, the Trust shall indemnify
each of its Trustees and officers, including persons who serve at
the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person") against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, and
except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's
office.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance
attorneys' fees or other expenses incurred by a Covered Person in
defending a proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act, and Ohio
Revised Code Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section 1701.13(E), as
amended, these
- 2 -
<PAGE>
laws, and not Ohio Revised Code Section 1701.13(E), shall govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of
any such person.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability policy. The
policy provides coverage to the Registrant, its Trustees and officers,
and Lake Shore Fund Group, LLC (the "Adviser"). Coverage under the
policy will include losses by reason of any act, error, omission,
misstatement, misleading statement, neglect or breach of duty.
The Advisory Agreement with the Adviser provides that the Adviser
shall not be liable for any action taken, omitted or suffered to be
taken by it in its reasonable
- 3 -
<PAGE>
judgment, in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this
Agreement, or in accordance with (or in the absence of) specific
directions or instructions from the Trust, provided, however, that
such acts or omissions shall not have resulted from the Adviser's
willful misfeasance, bad faith or gross negligence, a violation of the
standard of care established by and applicable to the Adviser in its
actions under this Agreement or breach of its duty or of its
obligations hereunder.
Item 26. Business and Other Connections of the Investment Adviser
- -------- --------------------------------------------------------
(a) The Adviser is a registered investment adviser, providing
investment advisory services to the Registrant.
(b) The directors and officers of the Adviser and any other business,
profession, vocation or employment of a substantial nature
engaged in at any time during the past two years:
(i) Earl V. (Buck) Newsome, Jr. - President and a controlling
shareholder of the Adviser. President and a controlling
shareholder of Cambridge Financial Group, Inc.
(ii) Gregory J. Bauer - Chairman and a controlling shareholder of
the Adviser. Chairman, Managing Director and a controlling
shareholder of Cambridge Financial Group, Inc.
(iii)Robert A. McLaughlin - Executive Vice President and a
director of the Adviser. Executive Vice President and a
director of Cambridge Financial Group, Inc.
Item 27. Principal Underwriters
- -------- ----------------------
(a) CW Fund Distributors, Inc. also acts as underwriter for the
following open-end investment companies: Atalanta/Sosnoff
Investment Trust, Brundage Story and Rose Investment Trust, The
Caldwell & Orkin Funds, Inc., Profit Funds Investment Trust,
Firsthand Funds, UC Investment Trust, The Winter Harbor Fund and
The James Advantage Funds.
(b) The following list sets forth the directors and
- 4 -
<PAGE>
executive officers of the Distributor. Unless otherwise noted
with an asterisk(*), the address of the persons named below is
312 Walnut Street, Cincinnati, Ohio 45202.
* The address is 4500 Park Granada Boulevard, Calabasas, California
91302.
Position Position
with with
Name Distributor Registrant
---- ----------- ----------
*Angelo R. Mozilo Chairman of None
the Board/
Director
*Andrew S. Bielanski Director None
*Thomas H. Boone Director None
*Marshall M. Gates Director None
Robert H. Leshner Vice Chairman/ None
Director
Robert G. Dorsey President Vice
President
Maryellen Peretzky Vice President None
John F. Splain Vice President, Secretary
Secretary and
General Counsel
M. Kathleen Leugers Vice President None
Mark J. Seger Vice President Treasurer
Terrie A. Wiedenheft Treasurer None
(c) Inapplicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at its
offices located at 8280 Montgomery Road, Cincinnati, Ohio 45236 as
well
- 5 -
<PAGE>
as at the offices of the Registrant's transfer agent located at 312
Walnut Street, 21st Floor, Cincinnati, Ohio 45202.
Item 29. Management Services Not Discussed in Parts A or B
- -------- -------------------------------------------------
Inapplicable
Item 30. Undertakings
- -------- ------------
Inapplicable
- 6 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati and State of Ohio, on the 1st day of
March, 1999.
LAKE SHORE FAMILY OF FUNDS
By: /s/ Gregory J. Bauer
-------------------------
Gregory J. Bauer
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Gregory J. Bauer Chairman March 1, 1999
- ------------------------------ and Trustee
Gregory J. Bauer
/s/ Mark J. Seger Treasurer March 1, 1999
- ------------------------------
Mark J. Seger
- ------------------------------ Trustee /s/ Marcus L. Collins
Frank G. Doyle III* Marcus L. Collins
Attorney-in-fact*
Trustee March 1, 1999
- ------------------------------
Francis A. Kovacs, Jr.*
Trustee
- ------------------------------
Robert A. McLaughlin*
Trustee
- ------------------------------
Joseph P. Rouse*
Trustee
- ------------------------------
Ralph P. Schwartz*
Trustee
- ------------------------------
William N. Stratman*
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Incorporated by reference to Agreement and Declaration of Trust and
Bylaws
(d) Investment Advisory Agreement
(e)(i) Underwriting Agreement
(ii) Agreement to Transfer Underwriting Agreement
(f) Inapplicable
(g) Custody Agreement
(h)(i) Administration Agreement
(ii) Accounting Services Agreement
(iii) Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement
(i) Opinion and Consent of Counsel*
(j) Consent of Independent Auditors
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m) Plan of Distribution Pursuant to Rule 12b-1
(n)(i) Financial Data Schedule for the Equity Fund
(ii) Financial Data Schedule for the Balanced Fund
(o) Inapplicable
- ----------------------------
* Incorporated by reference to the Trust's Registration Statement on Form
N1-A.
Lake Shore Fund Group, LLC
7824 Laurel Avenue
Cincinnati, Ohio 45243
Re: Advisory Agreement
Ladies and Gentlemen:
The Lake Shore Family of Funds (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), and subject to the rules and regulations promulgated
thereunder. The Trust's shares of beneficial interest are divided into two
separate series, the Equity Fund and the Balanced Fund, referred to individually
as the "Fund" and collectively as the "Funds". Each share of a Fund represents
an undivided interest in the assets, subject to the liabilities, allocated to
that Fund. Each Fund has a separate investment objective and separate investment
policies.
1. APPOINTMENT AS ADVISER. The Trust being duly authorized hereby appoints
and employs Lake Shore Fund Group, LLC (the "Adviser") as discretionary
portfolio manager on the terms and conditions set forth herein of the Funds.
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Adviser accepts
the appointment as discretionary portfolio manager and agrees to use its best
professional judgement to make timely investment decisions for the Funds in
accordance with the provisions of this Agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF THE ADVISER. The Adviser is hereby
employed and authorized to select portfolio securities for investment by the
Trust on behalf of the Funds, to
- 1 -
<PAGE>
purchase and sell securities of the Funds, and, upon making any purchase or sale
decision, to place orders for the execution of such portfolio transactions in
accordance with paragraphs 5 and 6 hereof. In providing portfolio management
services to the Funds, the Adviser shall be subject to such investment
restrictions as are set forth in the Act and the rules thereunder, the Internal
Revenue Code of 1986, applicable state securities laws, the supervision and
control of the Trustees of the Trust, such specific instructions as the Trustees
may adopt and communicate to the Adviser and the investment objectives, policies
and restrictions of the Trust applicable to the Funds furnished pursuant to
paragraph 4. The Adviser is not authorized by the Trust to take any action,
including the purchase or sale of securities for the Funds, in contravention of
any restriction, limitation, objective, policy or instruction described in the
previous sentence. The Adviser shall maintain on behalf of the Trust the records
listed in Schedule A hereto (as amended from time to time). At the Trust's
reasonable request, the Adviser will consult with the Trust with respect to any
decision made by it with respect to the investments of the Funds.
4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Trust will provide
the Adviser with the statement of investment objectives, policies and
restrictions applicable to the Funds as contained in the Trust's registration
statement under the Act and the Securities Act of 1933, and any instructions
adopted by the Trustees supplemental thereto. The Trust will provide the Adviser
with such further information concerning the investment
- 2 -
<PAGE>
objectives, policies and restrictions applicable thereto as the Adviser may from
time to time reasonably request. The Trust retains the right, on written notice
to the Adviser from the Trust, to modify any such objectives, policies or
restrictions in any manner at any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated by payment
to or delivery by Star Bank, N.A., or any successor custodian (the "Custodian"),
or such depositories or agents as may be designated by the Custodian in writing,
as custodian for the Trust, of all cash and/or securities due to or from the
Funds, and the Adviser shall not have possession or custody thereof. The Adviser
shall advise the Custodian and confirm in writing to the Trust and to
Countrywide Fund Services, Inc. or any other designated agent of the Trust, all
investment orders for the Funds placed by it with brokers and dealers. The
Adviser shall issue to the Custodian such instructions as may be appropriate in
connection with the settlement of any transaction initiated by the Adviser.
6. ALLOCATION OF BROKERAGE. The Adviser shall have authority and discretion
to select brokers and dealers to execute portfolio transactions initiated by the
Adviser and to select the markets on or in which the transactions will be
executed.
In doing so, the Adviser will give primary consideration to securing the
most favorable price and efficient execution. Consistent with this policy, the
Adviser may consider the financial responsibility, research and investment
information and other services provided by brokers or dealers who may effect or
- 3 -
<PAGE>
be a party to any such transaction or other transactions to which other clients
of the Adviser may be a party. It is understood that neither the Trust nor the
Adviser has adopted a formula for allocation of the Funds' investment
transaction business. It is also understood that it is desirable for the Trust
that the Adviser have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Funds than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Funds with such certain brokers, subject
to review by the Trust's Trustees from time to time with respect to the extent
and continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Adviser in connection with its services to
other clients.
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Funds as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Adviser in the
manner it
- 4 -
<PAGE>
considers to be the most equitable and consistent with its fiduciary obligations
to the Trust and to such other clients.
For each fiscal quarter of the Trust, the Adviser shall prepare and render
reports to the Trust's Trustees of the total brokerage business placed and the
manner in which the allocation has been accomplished. Such reports shall set
forth at a minimum the information required to be maintained by Rule 31a-1(b)(9)
under the Act.
7. PROXIES. The Trust will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Funds may be invested from time
to time. At the request of the Trust, the Adviser shall provide the Trust with
its recommendations as to the voting of such proxies.
8. REPORTS TO THE ADVISER. The Trust will provide the Adviser with such
periodic reports concerning the status of the Funds as the Adviser may
reasonably request.
9. FEES FOR SERVICES. For all of the services to be rendered and payments
made as provided in this Agreement, each Fund will pay the Adviser a fee,
computed and accrued daily and paid monthly, at the annual rate of 1.00% of its
average daily net assets.
10. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall employ or provide
and compensate the executive, administrative, secretarial and clerical personnel
necessary to provide the services set forth herein, and shall bear the expense
thereof. The Adviser shall compensate all Trustees, officers and employees
- 5 -
<PAGE>
of the Trust who are also employees of the Adviser. The Adviser will pay all
expenses incurred in connection with the sale or distribution of the Funds'
shares to the extent such expenses are not assumed by the Funds under the
Trust's Distribution Expense Plan.
The Funds will be responsible for the payment of all operating expenses of
the Funds, including fees and expenses incurred by the Funds 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, insurance expenses, taxes or governmental
fees, fees and expenses of the custodian, the transfer, shareholder service and
dividend disbursing agent and the accounting and pricing agent of the Funds,
expenses including clerical expenses of the issue, sale, redemption or
repurchase of shares of the Funds, the fees and expenses of Trustees of the
Trust who are not employees, members, or officers of the Lake Shore Fund Group,
LLC (the "Adviser"), the cost of preparing, printing 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 Trust may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto, or any other expense not specifically described above incurred in the
performance of the Trust's obligations. All other expenses not
- 6 -
<PAGE>
expressly assumed by the Adviser herein incurred in connection with the
organization, registration of shares and operations of the Funds will be borne
by the Funds.
11. OTHER INVESTMENT ACTIVITIES OF THE ADVISER. The Trust acknowledges that
the Adviser or one or more of its affiliates may have investment
responsibilities or render investment advice to or perform other investment
advisory services for other individuals or entities and that the Adviser, its
affiliates or any of its or their directors, officers, agents or employees may
buy, sell or trade in any securities for its or their respective accounts
("Affiliated Accounts"). Subject to the provisions of paragraph 2 hereof, the
Trust agrees that the Adviser or its affiliates may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated Accounts which may differ from the advice given or the timing or
nature of action taken with respect to the Funds, provided that the Adviser acts
in good faith, and provided further, that it is the Adviser's policy to
allocate, within its reasonable discretion, investment opportunities to the
Funds over a period of time on a fair and equitable basis relative to the
Affiliated Accounts, taking into account the investment objectives and policies
of the Funds and any specific investment restrictions applicable thereto. The
Trust acknowledges that one or more of the Affiliated Accounts may at any time
hold, acquire, increase, decrease, dispose of or otherwise deal with positions
in investments in which the Funds may have an interest from time to time,
whether in transactions which involve the Funds or
- 7 -
<PAGE>
otherwise. The Adviser shall have no obligation to acquire for the Funds a
position in any investment which any Affiliated Account may acquire, and the
Trust shall have no first refusal, co-investment or other rights in respect of
any such investment, either for the Funds or otherwise.
12. CERTIFICATE OF AUTHORITY. The Trust and the Adviser shall furnish to
each other from time to time certified copies of the resolutions of their
Trustees or Board of Directors or executive committees, as the case may be,
evidencing the authority of officers and employees who are authorized to act on
behalf of the Trust, the Funds and/or the Adviser.
13. LIMITATION OF LIABILITY. The Adviser shall not be liable for any action
taken, omitted or suffered to be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement, or in accordance with (or in the
absence of) specific directions or instructions from the Trust, provided,
however, that such acts or omissions shall not have resulted from the Adviser's
willful misfeasance, bad faith or gross negligence, a violation of the standard
of care established by and applicable to the Adviser in its actions under this
Agreement or breach of its duty or of its obligations hereunder. Nothing in this
paragraph 13 shall be construed in a manner inconsistent with Sections 17(h) and
(i) of the Act.
14. CONFIDENTIALITY. Subject to the duty of the Adviser and the Trust to
comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the
- 8 -
<PAGE>
parties hereto shall treat as confidential all information pertaining to the
Funds and the actions of the Adviser and the Trust in respect thereof.
15. ASSIGNMENT. No assignment of this Agreement shall be made by the
Adviser, and this Agreement shall terminate automatically in the event of such
assignment. The Adviser shall notify the Trust in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Trust to consider whether an assignment will occur, and
to take the steps necessary to enter into a new contract with the Adviser.
16. REPRESENTATION, WARRANTIES AND AGREEMENTS OF THE TRUST. The Trust
represents, warrants and agrees that:
A. The Adviser has been duly appointed by the Trustees of the Trust to
provide investment advisory services to the Funds as contemplated hereby.
B. The Trust will deliver to the Adviser true and complete copies of
its then current prospectuses and statements of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Funds and such other information as is necessary for the
Adviser to carry out its obligations under this Agreement.
C. The Trust is currently in compliance and shall at all times comply
with the requirements imposed upon the Trust by applicable law and regulations.
- 9 -
<PAGE>
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
A. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940.
B. The Adviser will maintain, keep current and preserve on behalf of
the Trust, in the manner and for the time periods required or permitted by the
Act, the records identified in Schedule A. The Adviser agrees that such records
(unless otherwise indicated on Schedule A) are the property of the Trust, and
will be surrendered to the Trust promptly upon request.
C. The Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Funds as the Trust may from time to time
require to ensure compliance with the Act, the Internal Revenue Code of 1986 and
applicable state securities laws.
D. The Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Act and will provide the Trust with a copy
of the code of ethics and evidence of its adoption. Within forty-five (45) days
of the end of the last calendar quarter of each year while this Agreement is in
effect, an executive officer of the Adviser shall certify to the Trust that the
Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Adviser's code of ethics or, if
such a violation has occurred, that appropriate action was taken in response to
such violation. Upon the written request of the Trust, the
- 10 -
<PAGE>
Adviser shall permit the Trust, its employees or its agents to examine the
reports required to be made to the Adviser by Rule 17j-1(c)(1).
E. The Adviser will, promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV, furnish a copy of such
amendment to the Trust.
F. Upon request of the Trust, the Adviser will provide assistance to
the Custodian in the collection of income due or payable to the Funds.
G. The Adviser will immediately notify the Trust of the occurrence of
any event which would disqualify the Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the Act or
otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Trust, which amendment, other than
amendments to Schedule A, is subject to the approval of the Trustees and the
shareholders of the Funds in the manner required by the Act and the rules
thereunder, subject to any applicable exemptive order of the Securities and
Exchange Commission modifying the provisions of the Act with respect to approval
of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
of its execution and shall remain in force for a period of two (2) years from
such date, and from year to year thereafter but only so long as such continuance
is specifically approved at least annually by the vote of a majority of the
Trustees who are not interested persons of the Trust or the Adviser, cast in
person at a meeting called for the purpose
- 11 -
<PAGE>
of voting on such approval, and by a vote of the Board of Trustees or of a
majority of the outstanding voting securities of the Funds. The aforesaid
requirement that this Agreement may be continued "annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
20. TERMINATION. This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon written notice to the other
in the event of a breach of any provision thereof by the party so notified, or
otherwise upon sixty (60) days' written notice to the other, but any such
termination shall not affect the status, obligations or liabilities of any party
hereto to the other.
21. OBLIGATIONS OF THE TRUST. It is expressly agreed that the obligations
of the Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust and signed by
an officer of the Trust, acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust.
22. DEFINITIONS. As used in paragraphs 15 and 19 of this Agreement, the
terms "assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations hereunder.
- 12 -
<PAGE>
23. APPLICABLE LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of Ohio.
LAKE SHORE FAMILY OF FUNDS
By: /s/ Gregory J. Bauer, CFA
----------------------------
Title: Chairman
-------------------------
Date: January 8, 1998
ACCEPTANCE
----------
The foregoing Agreement is hereby accepted.
LAKE SHORE FUND GROUP, LLC
By: /s/ Robert A. McLaughlin
---------------------------
Title: Executive Vice President
------------------------
Date: January 8, 1998
- 13 -
<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISER
---------------------------------------
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases or sales, given by the Adviser on behalf of the Funds
for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modification or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Trust.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases upon which the allocation of orders for the purchase and sale of
portfolio securities to named brokers or dealers was effected, and the
division of brokerage commissions or other compensation on such purchase
and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Funds by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Trust;
(b) The Adviser; and,
(c) Any person affiliated with the foregoing persons.
(iii)Any other consideration other than the technical qualifications
of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
- 14 -
<PAGE>
C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions or
other compensation.
D. The name of the person responsible for making the determination of
such allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made by
a committee or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation or instruction supporting or
authorizing the purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are required to
be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Adviser's transactions
with respect to the Funds.
- -----------------------
* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage
firms (including their recommendation; i.e., buy, sell, hold) or any
internal reports or portfolio adviser reviews.
- 15 -
UNDERWRITING AGREEMENT
----------------------
This Agreement made as of January 8, 1998 by and between the Lake Shore
Family of Funds, an Ohio business trust (the "Trust"), and Countrywide
Investments, Inc., an Ohio corporation (the "Underwriter").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest ("Shares") of each series of shares of the Trust (the "Series");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
------------
The Trust hereby appoints Underwriter as its exclusive agent for the
distribution of Shares, and Underwriter hereby accepts such appointment under
the terms of this Agreement. While this Agreement is in force, the Trust shall
not sell any Shares except on the terms set forth in this Agreement.
Notwithstanding any other provision hereof, the Trust may terminate, suspend or
withdraw the offering of Shares whenever, in its sole discretion, it deems such
action to be desirable.
<PAGE>
2. Sale and Repurchase of Shares.
------------------------------
(a) Underwriter will have the right, as agent for the Trust, to enter
into dealer agreements with responsible investment dealers, and to sell Shares
to such investment dealers against orders therefor at the public offering price
(as defined in subparagraph 2(e) hereof) less a discount determined by
Underwriter, which discount shall not exceed the amount of the sales charge
stated in the Trust's effective Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, including the then current prospectus and
statement of additional information (the "Registration Statement"). Upon receipt
of an order to purchase Shares from a dealer with whom Underwriter has a dealer
agreement, Underwriter will promptly cause such order to be filled by the Trust.
(b) Underwriter will also have the right, as agent for the Trust, to
sell such Shares to the public against orders therefor at the public offering
price.
(c) Underwriter will also have the right, as agent for the Trust, to
sell Shares at their net asset value to such persons as may be approved by the
Trustees of the Trust, all such sales to comply with the provisions of the Act
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
(d) Underwriter will also have the right to take, as agent for the
Trust, all actions which, in Underwriter's judgment, are necessary to carry into
effect the distribution of the Shares.
- 2 -
<PAGE>
(e) The public offering price for Shares of each Series shall be the
respective net asset value of Shares of that Series then in effect, plus any
applicable sales charge determined in the manner set forth in the Registration
Statement or as permitted by the Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder. In no event shall any
applicable sales charge exceed the maximum sales charge permitted by the Rules
of Fair Practice of the NASD.
(f) The net asset value of Shares of each Series shall be determined
in the manner provided in the Registration Statement, and when determined shall
be applicable to transactions as provided for in the Registration Statement. The
net asset value of Shares of each Series shall be calculated by the Trust or by
another entity on behalf of the Trust. Underwriter shall have no duty to inquire
into or liability for the accuracy of the net asset value per Share as
calculated.
(g) On every sale, the Trust shall receive the applicable net asset
value of Shares promptly, but in no event later than the third business day
following the date on which Underwriter shall have received an order for the
purchase of Shares. Underwriter shall have the right to retain the sales charge
less any applicable dealer discount.
(h) Upon receipt of purchase instructions, Underwriter will transmit
such instructions to the Trust or its transfer agent for registration of Shares
purchased.
- 3 -
<PAGE>
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(j) Underwriter, as agent of and for the account of the Trust, may
repurchase Shares at such prices and upon such terms and conditions as shall be
specified in the Registration Statement.
3. Sale of Shares by the Trust.
----------------------------
The Trust reserves the right to issue any Shares at any time directly
to the holders of Shares ("Shareholders"), to sell Shares to its Shareholders or
to other persons approved by Underwriter at not less than net asset value and to
issue Shares in exchange for substantially all the assets of any corporation or
trust or for the shares of any corporation or trust.
4. Basis of Sale of Shares.
------------------------
Underwriter does not agree to sell any specific number of Shares.
Underwriter, as agent for the Trust, undertakes to sell Shares on a best efforts
basis only against orders therefor.
- 4 -
<PAGE>
5. Rules of NASD, etc.
-------------------
(a) Underwriter will conform to the Rules of Fair Practice of the NASD
and the securities laws of any jurisdiction in which it sells, directly or
indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter has a
dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of Shares, and
neither Underwriter nor any such dealers shall withhold the placing of purchase
orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient copies of
any agreements, plans or other materials it intends to use in connection with
any sales of Shares in adequate time for the Trust to file and clear them with
the proper authorities before they are put in use, and not to use them until so
filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or broker,
or otherwise, under all applicable state or federal laws required in order that
Shares may be sold in such states as may be mutually agreed upon by the parties.
(e) Underwriter shall not make, or permit any representative, broker
or dealer to make, in connection with any sale or solicitation of a sale of
Shares, any representations concerning Shares except those contained in the then
current prospectus and statement of additional information covering the Shares
and in printed information approved by the Trust as
- 5 -
<PAGE>
information supplemental to such prospectus and statement of additional
information. Copies of the then effective prospectus and statement of additional
information and any such printed supplemental information will be supplied by
the Trust to Underwriter in reasonable quantities upon request.
6. Records to be Supplied by Trust.
--------------------------------
The Trust shall furnish to Underwriter copies of all information,
financial statements and other papers which Underwriter may reasonably request
for use in connection with the distribution of the Shares, and this shall
include, but shall not be limited to, one certified copy, upon request by
Underwriter, of all financial statements prepared for the Trust by independent
public accountants.
7. Expenses.
---------
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling Shares. All other costs in connection
with the offering of Shares will be paid by the Trust or the Trust's investment
adviser (the "Adviser") in accordance with agreements between them as permitted
by applicable law, including the Act and rules and regulations promulgated
thereunder.
8. Indemnification of Trust.
-------------------------
Underwriter, to the extent of the net commission received by it from
the sale of Shares but to no greater amount, agrees to indemnify and hold
harmless the Trust, the Adviser and
- 6 -
<PAGE>
each person who has been, is, or may hereafter be a trustee, director, officer,
employee, shareholder or control person of the Trust or the Adviser, against any
loss, damage or expense (including the reasonable costs of investigation)
reasonably incurred by any of them in connection with any claim or in connection
with any action, suit or proceeding to which any of them may be a party, which
arises out of or is alleged to arise out of or is based upon any untrue
statement or alleged untrue statement of a material fact, or the omission or
alleged omission to state a material fact necessary to make the statements not
misleading, on the part of Underwriter or any agent or employee of Underwriter
or any other person for whose acts Underwriter is responsible, unless such
statement or omission was made in reliance upon written information furnished by
the Trust or the Adviser. Underwriter likewise, to the extent of the net
commission received by it from the sale of Shares but to no greater amount,
agrees to indemnify and hold harmless the Trust, the Adviser and each such
person in connection with any claim or in connection with any action, suit or
proceeding which arises out of or is alleged to arise out of Underwriter's
failure to exercise reasonable care and diligence with respect to its services,
if any, rendered in connection with investment, reinvestment, automatic
withdrawal and other plans for Shares. The term "expenses" for purposes of this
and the next paragraph includes amounts paid in satisfaction of judgments or in
settlements which are made with Underwriter's consent. The
- 7 -
<PAGE>
foregoing rights of indemnification shall be in addition to any other rights to
which the Trust, the Adviser or each such person may be entitled as a matter of
law.
9. Indemnification of Underwriter.
-------------------------------
Underwriter, its directors, officers, employees, shareholders and
control persons shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Trust in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of any of such persons in the performance
of Underwriter's duties or from the reckless disregard by any of such persons of
Underwriter's obligations and duties under this Agreement. The Trust will
advance attorneys' fees or other expenses incurred by any such person in
defending a proceeding, upon the undertaking by or on behalf of such person to
repay the advance if it is ultimately determined that such person is not
entitled to indemnification. Any person employed by Underwriter who may also be
or become an officer or employee of the Trust shall be deemed, when acting
within the scope of his employment by the Trust, to be acting in such employment
solely for the Trust and not as an employee or agent of Underwriter.
10. Termination and Amendment of this Agreement.
--------------------------------------------
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment. This Agreement may be amended only
if such amendment is approved (i) by Underwriter, (ii) either by action of the
Board of Trustees of
- 8 -
<PAGE>
the Trust or at a meeting of the Shareholders of the Trust by the affirmative
vote of a majority of the outstanding Shares, and (iii) by a majority of the
Trustees of the Trust who are not interested persons of the Trust or of
Underwriter by vote cast in person at a meeting called for the purpose of voting
on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
-----------------------------------
This Agreement shall take effect upon its execution and shall remain
in full force and effect for a period of two (2) years from the date of its
execution (unless terminated automatically as set forth in Section 10), and from
year to year thereafter, subject to annual approval (i) by Underwriter, (ii) by
the Board of Trustees of the Trust or a vote of a majority of the outstanding
Shares, and (iii) by a majority of the Trustees of the Trust who are not
interested persons of the Trust or of Underwriter by vote cast in person at a
meeting called for the purpose of voting on such approval.
12. Limitation of Liability.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, Shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust,
- 9 -
<PAGE>
as provided in the Agreement and Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees
and Shareholders of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees and Shareholders nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in its Agreement and
Declaration of Trust.
13. New Series.
-----------
The terms and provisions of this Agreement shall become automatically
applicable to any additional series of the Trust established during the initial
or renewal term of this Agreement.
14. Successor Investment Company.
-----------------------------
Unless this Agreement has been terminated in accordance with Paragraph
10, the terms and provisions of this Agreement shall become automatically
applicable to any investment company which is a successor to the Trust as a
result of reorganization, recapitalization or change of domicile.
15. Severability.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
- 10 -
<PAGE>
16. Questions of Interpretation.
----------------------------
(a) This Agreement shall be governed by the laws of the State of Ohio.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Act shall be resolved by reference to such term or provision of the Act
and to interpretation thereof, if any, by the United States courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
17. Notices.
--------
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust for this purpose
shall be 7824 Laurel Avenue, Cincinnati, Ohio 45243 and that the address of
Underwriter for this purpose shall be 312 Walnut Street, 21st Floor, Cincinnati,
Ohio 45202.
- 11 -
<PAGE>
IN WITNESS WHEREOF, the Trust and Underwriter have each caused this
Agreement to be signed in duplicate on their behalf, all as of the day and year
first above written.
ATTEST: LAKE SHORE FAMILY OF FUNDS
/s/ Cassandra M. Wambaugh By: /s/ Earl "Buck" Newsome, Jr.
- ------------------------------ ------------------------------
Its: President
ATTEST: COUNTRYWIDE INVESTMENTS, INC.
/s/ John F. Splain By: /s/ Robert H. Leshner
- ------------------------------ ------------------------------
Its: President
- 12 -
AGREEMENT TO TRANSFER UNDERWRITING CONTRACT
-------------------------------------------
AGREEMENT made as of this 5th day of August, 1998 by and between
Countrywide Investments, Inc., a corporation organized under the laws of the
State of Ohio ("Countrywide"), and CW Fund Distributors, Inc., a corporation
organized under the laws of the State of Delaware ("Distributors").
WHEREAS, Lake Shore Family of Funds (the "Trust") is registered as a
management investment company under the Investment Company Act of 1940 (the
"1940 Act"); and
WHEREAS, Countrywide provides underwriting and distribution services to the
Equity Fund and the Balanced Fund (the "Funds"), two series of the Trust,
pursuant to an Underwriting Agreement between the Trust and Countrywide; and
WHEREAS, Countrywide proposes to make a formal transfer of its rights and
obligations under the Underwriting Agreement to Distributors, a registered
broker-dealer; and
WHEREAS, Countrywide and Distributors are each a wholly- owned subsidiary
of Countrywide Financial Services, Inc. and have identical boards of directors;
and
WHEREAS, the proposed transfer will result in no change in actual control
or management of the entity responsible for performance of the Underwriting
Agreement; and
WHEREAS, the personnel performing distribution services for Countrywide on
behalf of the Funds will not differ in any respect from those performing such
services for Distributors; and
WHEREAS, counsel to Countrywide and Distributors is of the opinion that the
proposed transfer of the Underwriting Agreement to Distributors does not
constitute an "assignment" within the meaning of Section 2(a)(4) of the 1940 Act
pursuant to Rule 2a-6 of the 1940 Act; and
WHEREAS, the Board of Trustees of the Trust has approved the proposed
transfer by Countrywide of its rights and obligations under the Underwriting
Agreement to Distributors;
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
- 1 -
<PAGE>
1. TRANSFER OF UNDERWRITING AGREEMENT. Countrywide hereby transfers all of
its rights and obligations under the Underwriting Agreement to Distributors.
2. ACCEPTANCE OF APPOINTMENT. Distributors accepts its appointment as
principal underwriter of the Funds and agrees to use its best professional
judgment for the Funds.
3. REPRESENTATIONS OF DISTRIBUTORS. Distributors represents and warrants
that it has adopted a written code of ethics complying with the requirements of
Rule 17j-1 under the 1940 Act. Distributors further represents and warrants that
it will immediately notify the Trust of the occurrence of any event which would
disqualify Distributors from serving as the principal underwriter of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
4. EFFECTIVE DATE. This Agreement shall become effective on the date first
above written and shall remain in force so long as the Underwriting Agreement
remains in force.
IN WITNESS WHEREOF, Countrywide and Distributors have each caused this
Agreement to be signed in duplicate on their behalf, all as of the date first
above written.
COUNTRYWIDE INVESTMENTS, INC.
By: /s/ Robert H. Leshner
--------------------------
President
CW FUND DISTRIBUTORS, INC.
By: /s/ Robert G. Dorsey
--------------------------
President
The above described transfer is accepted on behalf of Lake Shore Family of
Funds.
By: /s/ Gregory J. Bauer
------------------------
President
- 2 -
CUSTODY AGREEMENT
-----------------
This AGREEMENT, dated as of January 8, 1998, by and between the LAKE
SHORE FAMILY OF FUNDS (the "Trust"), a business trust organized under the laws
of the State of Ohio, acting with respect to its existing series as of the date
of this Agreement, and such other series as shall be designated from time to
time by the Trust (individually, a "Fund" and, collectively, the "Funds"), each
of them a series of the Trust and each of them operated and administered by the
Trust, and STAR BANK, N.A., a national banking association (the "Custodian").
W I T N E S S E T H:
--------------------
WHEREAS, the Trust desires that the Funds' Securities and cash be held
and administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
ARTICLE I
---------
- 2 -
<PAGE>
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Funds and named in Exhibit A hereto or in such
resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time serving
under the Trust's Agreement and Declaration of Trust, as from time to time
amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Trust computes the
net asset value of Shares of any Fund.
1.5 "FUND CUSTODY ACCOUNT" shall mean any of the accounts in the name of
the Trust, which is provided for in Section 3.2 below.
1.6 "NASD" shall mean The National Association of Securities Dealers, Inc.
- 3 -
<PAGE>
1.7 "OFFICER" shall mean the Chairman, the President, any Vice President,
any Assistant Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer of the Trust.
1.8 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions prior to the end of the
next Business Day. If such Written Instructions confirming Oral Instructions are
not received by the Custodian prior to a transaction, it shall in no way affect
the validity of the transaction or the authorization thereof by the Trust. If
Oral Instructions vary from the Written Instructions which purport to confirm
them, the Custodian shall notify the Trust of such variance but such Oral
Instructions will govern unless the Custodian has not yet acted.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
(provided that Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer,
- 4 -
<PAGE>
specifically approving the use of such clearing agency as a depository for the
Funds) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 as
amended (the "1934 Act"), which acts as a system for the central handling of
Securities where all Securities of any particular class or series of an issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities or other
obligations, and any certificates, receipts, warrants or other instruments or
documents representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or any similar
property or assets that the Custodian has the facilities to clear and to
service.
1.12 "SHARES" shall mean, with respect to a Fund, the units of beneficial
interest issued by the Trust on account of such Fund.
1.13 "SUB-CUSTODIAN" shall mean and include (i) any branch of a "U.S.
Bank," as that term is defined in Rule 17f-5 under the 1940 Act, (ii) any
"Eligible Foreign Custodian," as that term is defined in Rule 17f-5 under the
1940 Act, having a contract with the Custodian which the Custodian has
determined will provide
- 5 -
<PAGE>
reasonable care of assets of the Funds based on the standards specified in
Section 3.3 below. Such contract shall include provisions that provide: (i) for
indemnification or insurance arrangements (or any combination of the foregoing)
such that the Funds will be adequately protected against the risk of loss of
assets held in accordance with such contract; (ii) that the Funds' assets will
not be subject to any right, charge, security interest, lien or claim of any
kind in favor of the Sub-Custodian or its creditors except a claim of payment
for their safe custody or administration, in the case of cash deposits, liens or
rights in favor of creditors of the Sub-Custodian arising under bankruptcy,
insolvency, or similar laws; (iii) that beneficial ownership of the Funds'
assets will be freely transferable without the payment of money or value other
than for safe custody or administration; (iv) that adequate records will be
maintained identifying the assets as belonging to the Funds or as being held by
a third party for the benefit of the Funds; (v) that the Funds' independent
public accountants will be given access to those records or confirmation of the
contents of those records; and (vi) that the Funds will receive periodic reports
with respect to the safekeeping of the Funds' assets, including, but not limited
to, notification of any transfer to or from a Fund's account or a third party
account containing assets held for the benefit of the Fund. Such contract may
contain, in lieu of any or all of the provisions specified above, such other
provisions that the Custodian determines will
- 6 -
<PAGE>
provide, in their entirety, the same or greater level of care and protection for
Fund assets as the specified provisions, in their entirety.
1.14 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually
received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the Custodian as
custodian of all Securities and cash owned by or in the possession of the Funds
at any time during the period of this Agreement.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
- 7 -
<PAGE>
2.3 DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Trust:
a. A copy of the Declaration of Trust of the Trust certified by the
Secretary;
b. A copy of the Bylaws of the Trust certified by the Secretary;
c. A copy of the resolution of the Board of Trustees of the Trust
appointing the Custodian, certified by the Secretary;
d. A copy of the then current Prospectus of each Fund; and
e. A certification of the Chairman and Secretary of the Trust setting
forth the names and signatures of the current Officers of the Trust
and other Authorized Persons.
2.4 NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT. The Trust agrees
to notify the Custodian in writing of the appointment, termination or change in
appointment of any Dividend and Transfer Agent of the Funds.
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the Custodian
for the account of a Fund (other than Securities
- 8 -
<PAGE>
maintained in a Securities Depository or Book-Entry System) shall be physically
segregated from other Securities and non-cash property in the possession of the
Custodian (including the Securities and non-cash property of the other Funds)
and shall be identified as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNTS. As to each Fund, the Custodian shall open and
maintain in its trust department a custody account in the name of the Trust
coupled with the name of such Fund, subject only to draft or order of the
Custodian, in which the Custodian shall enter and carry all Securities, cash and
other assets of such Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. (a) In its discretion, the Custodian may appoint
one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians to hold Securities and cash of the Funds and to carry out such
other provisions of this Agreement as it may determine, provided, however, that
the appointment of any such agents and maintenance of any Securities and cash of
the Fund shall be at the Custodian's expense and shall not relieve the Custodian
of any of its obligations or liabilities under this Agreement.
(b) If, after the initial approval of Sub-Custodians by the Board of
Trustees in connection with this Agreement, the Custodian wishes to appoint
other Sub-Custodians to hold property of the Funds, it will so notify the Trust
and provide it with information reasonably necessary to determine any such new
Sub-Custodian's
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<PAGE>
eligibility under Rule 17f-5 under the 1940 Act, including a copy of the
proposed agreement with such Sub-Custodian. The Trust shall at the meeting of
the Board of Trustees next following receipt of such notice and information give
a written approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) At the end of each calendar quarter, the Custodian shall provide
written reports notifying the Board of Trustees of the placement of the
Securities and cash of the Funds with a particular Sub-Custodian and of any
material changes in the Funds' arrangements. The Custodian shall promptly take
such steps as may be required to withdraw assets of the Funds from any
Sub-Custodian that has ceased to meet the requirements of Rule 17f-5 under the
1940 Act.
(e) With respect to its responsibilities under this Section 3.3, the
Custodian hereby warrants to the Trust that it agrees to exercise reasonable
care, prudence and diligence such as a person having responsibility for the
safekeeping of property of the Funds. The Custodian further warrants that a
Fund's assets will be subject to reasonable care, based on the standards
applicable to custodians in the relevant market, if maintained with each
Sub-Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation: (i) the Sub-Custodian's
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practices, procedures, and internal controls, including, but not limited to, the
physical protections available for certificated securities (if applicable), the
method of keeping custodial records, and the security and data protection
practices; (ii) whether the Sub-Custodian has the requisite financial strength
to provide reasonable care for Fund assets; (iii) the Sub-Custodian's general
reputation and standing and, in the case of a Securities Depository, the
Securities Depository's operating history and number of participants; and (iv)
whether the Fund will have jurisdiction over and be able to enforce judgments
against the Sub-Custodian, such as by virtue of the existence of any offices of
the Sub-Custodian in the United States or the Sub-Custodian's consent to service
of process in the United States.
(f) The Custodian shall establish a system to monitor the appropriateness
of maintaining the Funds' assets with a particular Sub-Custodian and the
contract governing the Funds' arrangements with such Sub-Custodian.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or cause to
be delivered, to the Custodian all of the Funds' Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Funds with respect to such Securities, cash or
other assets owned by the Funds at any time during the period of this Agreement,
and (b) all cash received by the Funds for the issuance, at any time during such
period, of Shares. The Custodian
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shall not be responsible for such Securities, cash or other assets until
actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Trust shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities.
(b) Securities of the Funds kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
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<PAGE>
(c) The records of the Custodian with respect to Securities of a Fund
maintained in a Book-Entry System or Securities Depository shall, by
book-entry, identify such Securities as belonging to such Fund.
(d) If Securities purchased by a Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account
of such Fund. If Securities sold by a Fund are held in a Book-Entry
System or Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that payment for such Securities has been
transferred to the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment
for the account of such Fund.
(e) The Custodian shall provide the Trust with copies of any report
(obtained by the Custodian from a Book-Entry System or Securities
Depository in which Securities of the Funds are kept) on the internal
accounting controls and procedures for safeguarding Securities
deposited in such Book-Entry System or Securities Depository.
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<PAGE>
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to a
Fund resulting (i) from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful misconduct on the
part of Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from failure of
Custodian or any such Sub-Custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities Depository.
At its election, the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book- Entry System or
Securities Depository or any other person from any loss or damage to
the Funds arising from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Funds have not been made
whole for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in accordance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any Sub-Custodian appointed pursuant to Section 3.3 above) of
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such Securities registered as provided in Section 3.9 below or in
proper form for transfer, or if the purchase of such Securities is
effected through a Book-Entry System or Securities Depository, in
accordance with the conditions set forth in Section 3.5 above; (ii) in
the case of options on Securities, against delivery to the Custodian
(or such Sub-Custodian) of such receipts as are required by the
customs prevailing among dealers in such options; (iii) in the case of
futures contracts and options on futures contracts, against delivery
to the Custodian (or such Sub-Custodian) of evidence of title thereto
in favor of the Fund or any nominee referred to in Section 3.9 below;
and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Trust and a bank which is a member of the
Federal Reserve System or between the Trust and a primary dealer in
U.S. Government securities, against delivery of the purchased
Securities either in certificate form or through an entry crediting
the Custodian's account at a Book-Entry System or Securities
Depository with such Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
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<PAGE>
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest; taxes; administration, investment advisory,
accounting, auditing, transfer agent, custodian, trustee and legal
fees; and other operating expenses of the Fund; in all cases, whether
or not such expenses are to be in whole or in part capitalized or
treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Fund;
(g) For transfer in accordance with the provision of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations) regarding
account deposits in connection with transactions by the Fund;
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<PAGE>
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purpose, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or cashiers
check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an offeror's depository agent in connection with tender or other
similar offers for Securities of the Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;
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<PAGE>
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Fund, the Custodian or any Sub-Custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such
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<PAGE>
case, the new Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of the Fund,
but only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Trust, but only against receipt by
the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust;
(l) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions
by the Fund;
(m) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of
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<PAGE>
the Commodity Futures Trading Commission and/or any contract market
(or any similar organization or organizations) regarding account
deposits in connection with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for a
Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Fund is entitled either by law or pursuant
to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments;
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(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect, and prepare
and submit reports to the Internal Revenue Service ("IRS") and to the
Trust at such time, in such manner and containing such information as
is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of the
Fund; and
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a Fund
that are issued or issuable only in bearer form shall be held by the Custodian
in that form, provided that any such Securities shall be held in a Book-Entry
System if eligible therefor. All other Securities held for a Fund may be
registered in the name of such Fund, the Custodian, or any Sub-Custodian
appointed pursuant to Section 3.3 above, or in the name of any
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<PAGE>
nominee of any of them, or in the name of a Book-Entry System, Securities
Depository or any nominee of either thereof. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of a Fund.
3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Funds, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
receivable; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Funds as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to, Section 31 of the 1940 Act and Rule 31a-2 promulgated
thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in
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compliance with rules and regulations of the Securities and Exchange Commission,
(ii) be the property of the Trust and at all times during the regular business
hours of the Custodian be made available upon request for inspection by duly
authorized officers, employees or agents of the Trust and employees or agents of
the Securities and Exchange Commission, and (iii) if required to be maintained
by Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in
Rule 31a-2 under the 1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with
a daily activity statement by Fund and a summary of all transfers to or from
each Fund Custody Account on the day following such transfers. At least monthly
and from time to time, the Custodian shall furnish the Trust with a detailed
statement, by Fund, of the Securities and moneys held by the Custodian and the
Sub-Custodians for the Funds under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of a Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such
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proxies are to be voted, and shall promptly deliver to the Trust such proxies,
all proxy soliciting materials and all notices relating to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian shall promptly deliver
to the Trust all information received by the Custodian and pertaining to
Securities being held by the Funds with respect to optional tender or exchange
offers, calls for redemption or purchase, or expiration of rights as described
in the Standards of Service Guide attached as Exhibit B. If the Trust desires to
take action with respect to any tender offer, exchange offer or other similar
transaction, the Trust shall notify the Custodian at least five Business Days
prior to the date on which the Custodian is to take such action. The Trust will
provide or cause to be provided to the Custodian all relevant information for
any Security which has unique put/option provisions at least five Business Days
prior to the beginning date of the tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUNDS
---------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for a
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the Fund for which the purchase was made, (b) the name of the issuer or writer
of such Securities, and the title or other description thereof, (c) the number
of shares, principal amount (and accrued interest, if any) or other units
purchased, (d) the date of purchase and settlement, (e) the
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purchase price per unit, (f) the total amount payable upon such purchase, and
(g) the name of the person to whom such amount is payable. The Custodian shall
upon receipt of such Securities purchased by a Fund pay out of the moneys held
for the account of such Fund the total amount specified in such Written
Instructions to the person named therein. The Custodian shall not be under any
obligation to pay out moneys to cover the cost of a purchase of Securities for a
Fund, if in the relevant Fund Custody Account there is insufficient cash
available to the Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In
any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt of the Securities purchased but in
the absence of specified Written Instructions to so pay in advance, the
Custodian shall be liable to the Fund for such Securities to the same extent as
if the Securities had been received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
Fund for which the sale was made, (b) the name of the issuer or writer of such
Securities, and the title or other description thereof, (c) the number of
Shares, principal amount (and accrued interest, if any), or other units sold,
(d) the date of sale and settlement, (e) the sale price per unit, (f) the total
amount payable upon such sale, and (g) the
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<PAGE>
person to whom such Securities are to be delivered. Upon receipt of the total
amount payable to the Fund as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund for which such Securities
were delivered shall bear the risk that final payment for such Securities may
not be made or that such Securities may be returned or otherwise held or
disposed of by or through the person to whom they were delivered, and the
Custodian shall have no liability for any for the foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time
to time, the Custodian may credit the relevant Fund Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii)
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income from cash, Securities or other assets of the Fund. Any such credit shall
be conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit a Fund to use funds so
credited to its Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of a Fund's transactions in its Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
---------
REDEMPTION OF FUND SHARES
-------------------------
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the relevant Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not
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be under any obligation to effect payment or distribution by any bank designated
in Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the 1934 Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Fund,
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(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by the Fund,
(c) which constitute collateral for loans of Securities made by the Fund,
(d) for purposes of compliance by the Fund with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for a single Fund only. All Proper Instructions
relating to a segregated account shall specify the Fund involved.
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ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust or any Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any Sub-Custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Trust of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Trust or a Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or bylaws, or its investment objectives and policies
as then in effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to a Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
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7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for a Fund if such Securities are in
default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 CO-OPERATION. The Custodian shall cooperate with and supply necessary
information, by Fund, to the entity or entities appointed by the Trust to keep
the books of account of the Funds and/or compute the value of the assets of the
Funds. The Custodian shall take all such reasonable actions as the Trust may
from time
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<PAGE>
to time request to enable the Trust to obtain, from year to year, favorable
opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's reports on Form N-1A and Form N-SAR and any other reports required by
the Securities and Exchange Commission, and (b) the fulfillment by the Trust of
any other requirements of the Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION BY TRUST. The Trust shall indemnify and hold harmless
the Custodian and any Sub-Custodian appointed pursuant to Section 3.3 above, and
any nominee of the Custodian or of such Sub-Custodian, from and against any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability (including, without limitation, liability arising under the Securities
Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities
and/or banking laws) or claim arising directly or indirectly (a) from the fact
that Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such Sub-Custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a Sub-Custodian appointed
pursuant to
- 32 -
<PAGE>
Section 3.3 above, provided that neither the Custodian nor any such
Sub-Custodian shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the Custodian's or
such Sub-Custodian's negligence, bad faith or willful misconduct.
8.2 INDEMNIFICATION BY CUSTODIAN. The Custodian shall indemnify and hold
harmless the Trust from and against any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability (including without limitation,
liability arising under the Securities Act of 1933, the 1934 Act, the 1940 Act,
and any state or foreign securities and/or banking laws) or claim arising from
the negligence, bad faith or willful misconduct of the Custodian or any
Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.4 SECURITY. If the Custodian advances cash or Securities to a Fund for
any purpose, either at the Trust's request or as
- 33 -
<PAGE>
otherwise contemplated in this Agreement, or in the event that the Custodian or
its nominee incurs, in connection with its performance under this Agreement, any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability or claim (except such as may arise from its or its nominee's
negligence, bad faith or willful misconduct), then, in any such event, any
property at any time held for the account of such Fund shall be security
therefor, and should such Fund fail promptly to repay or indemnify the
Custodian, the Custodian shall be entitled to utilize available cash of such
Fund and to dispose of other assets of such Fund to the extent necessary to
obtain reimbursement or indemnification.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to
- 34 -
<PAGE>
obtain labor, material, equipment or transportation; provided, however, that the
Custodian in the event of a failure or delay (i) shall not discriminate against
the Funds in favor of any other customer of the Custodian in making computer
time and personnel available to input or process the transactions contemplated
by this Agreement and (ii) shall use its best efforts to ameliorate the effects
of any such failure or delay.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Funds and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or
- 35 -
<PAGE>
for the benefit of the Funds at the successor custodian, provided that the Trust
shall have paid to the Custodian all fees, expenses and other amounts to the
payment or reimbursement of which it shall then be entitled. Upon such delivery
and transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which (a) is a "bank"
as defined in the 1940 Act and (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, all Securities, cash and other property held by Custodian under this
Agreement and to transfer to an account of or for the Funds at such bank or
trust company all Securities of the Funds held in a Book-Entry System or
Securities Depository. Upon such delivery and transfer, such bank or trust
company shall be the successor custodian under this Agreement and the Custodian
shall be relieved of all obligations under this Agreement.
- 36 -
<PAGE>
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Funds are set forth in Exhibit C attached
hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust, as from time to time amended. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the above-mentioned Agreement and
Declaration of Trust.
- 37 -
<PAGE>
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Trust:
-------------
Lake Shore Family of Funds
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Telephone: (513) 629-2000
Facsimile: (513) 629-2008
To Custodian:
-------------
Star Bank, N.A.
425 Walnut Street, M.L. 6118
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (513) 632-3016
Facsimile: (513) 632-4448
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian
- 38 -
<PAGE>
without the prior written approval of Custodian, excepting printed matter
contained in the prospectus or statement of additional information for a Fund
and such other printed matter as merely identifies Custodian as custodian for
one or more Funds. The Trust shall submit printed matter requiring approval to
Custodian in draft form, allowing sufficient time for review by Custodian and
its counsel prior to any deadline for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise, and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
- 39 -
<PAGE>
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: LAKE SHORE FAMILY OF FUNDS
/s/ Cassandra M. Wambaugh By: /s/ Gregory J. Bauer
- ------------------------------- ------------------------------
Its: Chairman
ATTEST: STAR BANK, N.A.
/s/ Lynnette C. Gibson By:/s/ Marsha a Croxton
- ------------------------------- ------------------------------
Its: Senior Vice President
- 40 -
<PAGE>
EXHIBIT A
---------
AUTHORIZED PERSONS
------------------
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Accounts.
Name Signature
- ---- ---------
Earl V. (Buck) Newsome, Jr. /s/ Earl V. (Buck) Newsome, Jr.
----------------------------------
Gregory J. Bauer /s/ Gregory J. Bauer
----------------------------------
John F. Splain /s/ John F. Splain
----------------------------------
Robert G. Dorsey /s/ Robert G. Dorsey
----------------------------------
Mark J. Seger /s/ Mark J. Seger
----------------------------------
M. Kathleen Leugers /s/ M. Kathleen Leugers
----------------------------------
Christina H. Kelso /s/ Christina H. Kelso
----------------------------------
Gary H. Goldschmidt /s/ Gary H. Goldschmidt
----------------------------------
Tina D. Hosking /s/ Tina D. Hosking
----------------------------------
- 41 -
<PAGE>
EXHIBIT B
STAR BANK, N.A.
STANDARDS OF SERVICE GUIDE
Star Bank, N.A., is committed to providing superior quality service to all
customers and their agents at all times. We have compiled this guide as a tool
for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Star Bank to guarantee
processing. Failure to meet these deadlines will result in settlement at our
client's risk. In all cases, Star Bank will make every effort to complete all
processing on a timely basis.
Star Bank is a direct participant of the Depository Trust Company, a direct
member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers Trust
Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Star Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the WALL STREET
JOURNAL,
For bond calls and mandatory puts, Star Bank utilizes SEI's Bond Source,
Kenny Information Systems, Standard & Poor's Corporation, and DTC Important
Notices. Star Bank will not notify clients of optional put opportunities.
Any securities delivered free to Star Bank or its agents must be received
three (3) business days prior to any payment or settlement in order for the Star
Bank standards of service to apply.
Should you have any questions regarding the information contained in this
guide, please feel free to contact your account representative.
The information contained in this Standards Service Guide is subject to change.
Should any changes be made Star Bank will provide you with an updated copy of
its Standards of Service Guide.
<PAGE>
<TABLE>
<CAPTION>
STAR BANK SECURITY SETTLEMENT STANDARDS
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
- ---------------- ----------------------- ---------------------
<S> <C> <C>
DTC 1:30 P.M. on Settlement Date DTC Participant #2219
Agent Bank ID #27895
Institutional #___________
For Account #_____________
Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of
Cinti/Trust for Star Bank, N.A.
ABA# 042000013
For Account #_____________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of
(Repurchase Agreement Cinti/Spec for Star Bank, N.A.
Collateral Only) ABA# 042000013
For Account #_____________
PTC Securities 12:00 P.M. on Settlement Date PTC For Account BTRST/CUST
(GNMA Book Entry) Sub Account: Star Bank, N.A. #090334
Physical Securities 9:30 A.M. EST on Settlement Date Bankers Trust Company
(for Deliveries, by 4:00 P.M. on 16 Wall Street 4th Floor, Window 43
Settlement Date minus 1) for Star Bank Account #090334
<PAGE>
CEDEL/EURO-CLEAR 11:00 A.M. on Settlement Date Eurclear Via Cedel Bridge
minus 2 In favor of Bankers Trust Comp
Cedel 53355
For Star Bank Account #501526354
Cash Wire Transfer 3:00 P.M. Star Bank, N.A.
Cinti/Trust ABA# 042000013
Credit Account #9901877
Further Credit to Account # __________
</TABLE>
*All times listed are Cincinnati time.
<PAGE>
STAR BANK PAYMENT STANDARDS
- --------------------------------------------------------------------------------
SECURITY TYPE INCOME PRINCIPAL
- --------------------------------------------------------------------------------
Equities Payable Date
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date Payable Date
Federal Reserve Bank
Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1
CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
SBA Loan Certificates When Received When Received
Unit Investment Trust Payable Date Payable Date
Certificates*
Certificates of Deposit* Payable Date Payable Date
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank
Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
NOTE: If a payable date falls on a weekend or bank holiday, payment will be made
on the immediately following business day.
<PAGE>
<TABLE>
<CAPTION>
STAR BANK CORPORATE REORGANIZATION STANDARDS
- ------------------------------------------------------------------------------------------------------------------------------------
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO STAR BANK POSTING
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days prior 5 business days prior to expiration Upon receipt
and Optional Mergers to expiration or receipt of notice
Mandatory Puts with Later of 10 business days prior 5 business days prior to expiration Upon receipt
Option to Retain to expiration or receipt of notice
Class Actions 10 business days prior to 5 business days prior to expiration Upon receipt
expiration date
Voluntary Tenders, Later of 10 business days prior 5 business days prior to expiration Upon receipt
Exchanges, to expiration or receipt of notice
and Conversions
Mandatory Puts, Defaults, At posting of funds or securities None Upon receipt
Liquidations, Bankruptcies, received
Stock Splits, Mandatory
Exchanges
Full and Partial Calls Later of 10 business days prior None Upon receipt
to expiration or receipt of notice
</TABLE>
NOTE:Fractional shares/par amounts resulting from any of the above will be sold.
<PAGE>
EXHIBIT C
STAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
---------------------------
(a) For each repurchase agreement transaction $ 7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $ 9.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA/Prin/Int Paydown, GNMA Sales $ 8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euroclear transaction $80.00
(h) For each Disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange.
II. AGGREGATE MARKET VALUE FEE
--------------------------
Based upon an annual rate of: MILLION
-------
.00020 (2.0 Basis Points) on First $ 25
.00015 (1.5 Basis Points) on Next $ 25
.00010 (1.0 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND $300.00
----------------------------
IV. OUT-OF-POCKET EXPENSES
----------------------
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees.
V. EARNINGS CREDITS
----------------
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees
generated. Earnings credits are based on a Cost of Funds Tiered Earnings
Credit Rate.
<PAGE>
STAR BANK, N.A.
CASH MANAGEMENT FEE SCHEDULE
SERVICES UNIT COST($) MONTHLY COST($)
-------- ------------ ---------------
D.D.A. Account Maintenance 14.00
Deposits .399
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00 1st Acct
35.00 each add'l
ACH Transaction .105
ACH Monthly Maintenance 40.00
ACH Additions, Deletions,
Changes 3.50
ACH Debits .12
Controlled Disbursement
(1st account) 110.00
Each additional account 25.00
Deposited Items Returned 6.00
International Returned Items 10.00
NSF Returned Check 25.00
Stop Payments 22.00
Data Transmission per account 110.00
Data Capture* .10
Drafts Cleared .179
Lockbox Maintenance** 55.00
Lockbox items Processed
with copy of check .32
without copy of check .26
Checks Printed .20
Positive Pay .06
Issued Items .015
ARP Tape/Transmission/Diskette 25.00
Special Statements 6.00
Invoicing for Service Charge 15.00
Wires Incoming
Domestic 10.00
International 10.00
Wires Outgoing
Domestic International
Repetitive 12.00 Repetitive 35.00
Non-Repetitive 13.00 Non-Repetitive 40.00
PC - Initiated Wires:
Domestic International
Repetitive 9.00 Repetitive 25.00
Non-Repetitive 9.00 Non-Repetitive 25.00
***Uncollected Charge
Star Bank Prime Rate as of first of month plus 4%
* Price can vary depending upon what information needs to be captured
** With the use of lockbox, the collected balance in the demand deposit
account will be significantly increased and therefore earnings to offset
cash managment service fees will be maximized.
*** Fees for uncollected balances are figured on the MONTHLY AVERAGE of all
combined accounts.
**** Other available cash management services are priced separately.
ADMINISTRATION AGREEMENT
------------------------
AGREEMENT dated as of January 8, 1998 between Lake Shore Family of Funds,
an Ohio business trust (the "Trust"), and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to serve as
its administrative agent; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
--------------
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing the
original issue of its shares;
B. Each Registration Statement filed with the Securities and Exchange
Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and Declaration of
Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to Countrywide;
E. Specimens of all new forms of share certificates accompanied by Board
of Trustees' resolutions approving such forms;
<PAGE>
F. Such other certificates, documents or opinions which Countrywide may,
in its discretion, deem necessary or appropriate in the proper
performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Investment Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or withdrawal
plans which are offered or may be offered in the future by the Trust
and for which Countrywide is to act as plan agent.
3. TRUST ADMINISTRATION.
---------------------
Subject to the direction and control of the Trustees of the Trust,
Countrywide shall supervise the Trust's business affairs not otherwise
supervised by other agents of the Trust. To the extent not otherwise the primary
responsibility of, or provided by, other agents of the Trust, Countrywide shall
supply (i) office facilities, (ii) internal auditing and regulatory services,
and (iii) executive and administrative services. Countrywide shall coordinate
the preparation of (i) tax returns, (ii) reports to shareholders of the Trust,
(iii) reports to and filings with the SEC and state securities authorities
including preliminary and definitive proxy materials, post-effective amendments
to the Trust's registration statement, and the Trust's Form N-SAR, and (iv)
necessary materials for Board of Trustees' meetings unless prepared by other
parties under agreement with the Trust. Countrywide shall provide personnel to
serve as officers of the Trust if so elected by the Board of Trustees; provided,
however, that the Trust shall reimburse Countrywide for the reasonable
out-of-pocket expenses incurred by such personnel in attending Board of
Trustees' meetings and shareholders' meetings of the Trust.
4. RECORDKEEPING AND OTHER INFORMATION.
------------------------------------
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall
- 2 -
<PAGE>
make available during regular business hours all records and other data created
and maintained pursuant to this Agreement for reasonable audit and inspection by
the Trust, any person retained by the Trust, or any regulatory agency having
authority over the Trust.
5. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
6. COMPENSATION.
-------------
For the performance of Countrywide's obligations under this Agreement,
each series of the Trust shall pay Countrywide, on the first business day
following the end of each month, a monthly fee at the annual rate of .15% of
such series' average daily net assets up to $50 million; .125% of such assets
from $50 to $100 million; and .10% of such assets in excess of $100 million;
provided, however, that the minimum fee shall be $1,000 per month for each
series.
7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
8. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent, and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
- 3 -
<PAGE>
9. INDEMNIFICATION OF COUNTRYWIDE.
-------------------------------
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
- 4 -
<PAGE>
10. TERMINATION
-----------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's Trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due as of the date of
such termination, and shall likewise reimburse Countrywide for any out-of-pocket
expenses and disbursements reasonably incurred by Countrywide to such date.
C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
11. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
12. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the
- 5 -
<PAGE>
Trust, acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
13. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
14. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Ohio. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said 1940 Act. In addition, where the effect of a
requirement of the 1940 Act, reflected in any provision of this Agreement, is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
15. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Lake Shore Family of Funds
7824 Laurel Avenue
Cincinnati, Ohio 45243
Attention: Earl V. (Buck) Newsome, Jr.
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 15. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
- 6 -
<PAGE>
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
16. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
17. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
18. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
19. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
20. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
LAKE SHORE FAMILY OF FUNDS
By: /s/ Earl "Buck" Newsome Jr.
---------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
---------------------------
Its: President
- 8 -
ACCOUNTING SERVICES AGREEMENT
-----------------------------
AGREEMENT dated as of January 8, 1998 between the Lake Shore Family of
Funds, an Ohio business trust (the "Trust"), and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to provide
the Trust with certain accounting and pricing services; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
-------------------------------
Countrywide will calculate the net asset value of each series of the
Trust and the per share net asset value of each series of the Trust, in
accordance with the Trust's current prospectus and statement of additional
information, once daily as of the time selected by the Trust's Board of
Trustees. Countrywide will prepare and maintain a daily valuation of all
securities and other assets of the Trust in accordance with instructions from a
designated officer of the Trust or its investment adviser and in the manner set
forth in the Trust's current prospectus and statement of additional information.
In valuing securities of the Trust, Countrywide may contract with, and rely upon
market quotations provided by, outside services.
3. BOOKS AND RECORDS.
------------------
Countrywide will maintain and keep current the general ledger for each
series of the Trust, recording all income and expenses, capital share activity
and security transactions of the Trust. Countrywide will maintain such further
books and records
<PAGE>
as are necessary to enable it to perform its duties under this Agreement, and
will periodically provide reports to the Trust and its authorized agents
regarding share purchases and redemptions and trial balances of each series of
the Trust. Countrywide will prepare and maintain complete, accurate and current
all records with respect to the Trust required to be maintained by the Trust
under the Internal Revenue Code of 1986, as amended (the "Code"), and under the
rules and regulations of the 1940 Act, and will preserve said records in the
manner and for the periods prescribed in the Code and the 1940 Act. The
retention of such records shall be at the expense of the Trust.
All of the records prepared and maintained by Countrywide pursuant to this
Section 3 which are required to be maintained by the Trust under the Code and
the 1940 Act will be the property of the Trust. In the event this Agreement is
terminated, all such records shall be delivered to the Trust at the Trust's
expense, and Countrywide shall be relieved of responsibility for the preparation
and maintenance of any such records delivered to the Trust.
4. PAYMENT OF TRUST EXPENSES.
--------------------------
Countrywide shall process each request received from the Trust or its
authorized agents for payment of the Trust's expenses. Upon receipt of written
instructions signed by an officer or other authorized agent of the Trust,
Countrywide shall prepare checks in the appropriate amounts which shall be
signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
-----------
Countrywide shall maintain such records within its control and shall
be requested by the Trust to assist the Trust in fulfilling the requirements of
Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
-----------------------------
Countrywide shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
7. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
- 2 -
<PAGE>
8. FEES.
-----
For the performance of the services under this Agreement, each series
of the Trust shall pay Countrywide a monthly fee in accordance with the schedule
attached hereto as Schedule A. The fees with respect to any month shall be paid
to Countrywide on the last business day of such month. The Trust shall also
promptly reimburse Countrywide for the cost of external pricing services
utilized by Countrywide.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
10. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent, and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
11. EQUIPMENT FAILURES.
-------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
12. INDEMNIFICATION OF COUNTRYWIDE.
-------------------------------
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors,
- 3 -
<PAGE>
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Trust
in connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of any such persons in the performance of the duties of Countrywide under
this Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder, or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of those entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
13. TERMINATION.
------------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in
- 4 -
<PAGE>
effect for two years from that date and shall continue in force from year to
year thereafter, but only so long as such continuance is approved (1) by
Countrywide, (2) by vote, cast in person at a meeting called for the purpose, of
a majority of the Trust's Trustees who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party, and (3) by
vote of a majority of the Trust's Board of Trustees or a majority of the Trust's
outstanding voting securities.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due as of the date of
such termination, and shall likewise reimburse Countrywide for any out-of-pocket
expenses and disbursements reasonably incurred by Countrywide to such date.
C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
14. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
15. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose
- 5 -
<PAGE>
any liability on any of them personally, but shall bind only the trust property
of the Trust.
16. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
17. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Ohio. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act, reflected in any
provision of this Agreement, is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
18. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Lake Shore Family of Funds
7824 Laurel Avenue
Cincinnati, Ohio 45243
Attention: Earl V. (Buck) Newsome, Jr.
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 18. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer
- 6 -
<PAGE>
back if by telex, telefax or other telegraphic method; and (d) on the date upon
which the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be, if
mailed.
19. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
20. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
21. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
22. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
23. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LAKE SHORE FAMILY OF FUNDS
By: /s/ Earl "Buck" Newsome Jr.
-----------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
-----------------------------
Its: President
- 8 -
<PAGE>
Schedule A
----------
COMPENSATION
------------
Each series of the Trust will pay Countrywide a monthly fee, according
to the average monthly net assets of such series during such month, as follows:
Monthly Fee Average Net Assets During Month
----------- -------------------------------
$2,000 $0 - $ 50,000,000
$2,500 $50,000,000 - $100,000,000
$3,000 $100,000,000 - $200,000,000
$4,000 $200,000,000 - $300,000,000
$5,000 + .001% of Over - $300,000,000
average net assets
- 9 -
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
--------------------------------------------------
AND PLAN AGENCY AGREEMENT
-------------------------
AGREEMENT dated as of January 8, 1998 between Lake Shore Family of Funds,
an Ohio business trust (the "Trust"), and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to serve as
its transfer, dividend disbursing, shareholder service and plan agent; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
--------------
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing
the original issue of its shares;
B. Each Registration Statement filed with the Securities and
Exchange Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to Countrywide;
E. Specimens of all new forms of share certificates accompanied by
Board of Trustees' resolutions approving such forms;
<PAGE>
F. Such other certificates, documents or opinions which Countrywide
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Investment Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or
withdrawal plans which are offered or may be offered in the
future by the Trust and for which Countrywide is to act as plan
agent.
3. COUNTRYWIDE TO RECORD SHARES.
-----------------------------
Countrywide shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the SEC a record of the total number of
shares of the Trust which are authorized, issued and outstanding, based upon
data provided to it by the Trust. Countrywide shall also provide the Trust on a
regular basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
4. COUNTRYWIDE TO VALIDATE TRANSFERS.
----------------------------------
Upon receipt of a proper request for transfer and upon surrender to
Countrywide of certificates, if any, in proper form for transfer, Countrywide
shall approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
Countrywide shall notify the Trust in writing of each such transaction and shall
make appropriate entries on the shareholder records maintained by Countrywide.
5. SHARE CERTIFICATES.
-------------------
If the Trust authorizes the issuance of share certificates and an
investor requests a share certificate, Countrywide will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased shares shall be
mailed to the investor until the cash purchase price of such shares has
- 2 -
<PAGE>
been collected and credited to the account of the Trust maintained by the
Custodian. The Trust shall supply Countrywide with a sufficient supply of blank
share certificates and from time to time shall renew such supply upon request of
Countrywide. Such blank share certificates shall be properly signed, manually
or, if authorized by the Trust, by facsimile; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to sign share
certificates, Countrywide may continue to countersign certificates which bear
the manual or facsimile signature of such officer until otherwise directed by
the Trust. In case of the alleged loss or destruction of any share certificate,
no new certificates shall be issued in lieu thereof, unless there shall first be
furnished an appropriate bond satisfactory to Countrywide and the Trust, and
issued by a surety company satisfactory to Countrywide and the Trust.
6. RECEIPT OF FUNDS.
-----------------
Upon receipt of any check or other instrument drawn or endorsed to it
as agent for, or identified as being for the account of, the Trust or
Countrywide Investments, Inc., as underwriter of the Trust (the "Underwriter"),
Countrywide shall stamp the check or instrument with the date of receipt,
determine the amount thereof due the Trust and shall forthwith process the same
for collection. Upon receipt of notification of receipt of funds eligible for
share purchases in accordance with the Trust's then current prospectus and
statement of additional information, Countrywide shall notify the Trust, at the
close of each business day, in writing of the amount of said funds credited to
the Trust and deposited in its account with the Custodian, and shall similarly
notify the Underwriter of the amount of said funds credited to the Underwriter
and deposited in its account with its designated bank.
7. PURCHASE ORDERS.
----------------
Upon receipt of an order for the purchase of shares of the Trust,
accompanied by sufficient information to enable Countrywide to establish a
shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit when requested to do so by the Trust.
- 3 -
<PAGE>
8. RETURNED CHECKS.
----------------
In the event that Countrywide is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, Countrywide will:
A. Give prompt notification to the Trust and the Underwriter of the
non-payment of said check;
B. In the absence of other instructions from the Trust or the
Underwriter, take such steps as may be necessary to redeem any shares purchased
on the basis of such returned check and cause the proceeds of such redemption
plus any dividends declared with respect to such shares to be credited to the
account of the Trust and to request the Trust's Custodian to forward such
returned check to the person who originally submitted the check; and
C. Notify the Trust and Underwriter of such actions and correct the
Trust's records maintained by Countrywide pursuant to this Agreement.
9. SALES CHARGE.
-------------
In computing the number of shares to credit to the account of a
shareholder, Countrywide will calculate the total of the applicable sales
charges with respect to each purchase as set forth in the Trust's current
prospectus and statement of additional information and in accordance with any
notification filed with respect to combined and accumulated purchases.
Countrywide will also determine the portion of each sales charge payable by the
Underwriter to the dealer of record participating in the sale in accordance with
such schedules as are from time to time delivered by the Underwriter to
Countrywide; provided, however, that Countrywide shall have no liability
hereunder arising from the incorrect selection by Countrywide of the gross rate
of sales charges except that this exculpation shall not apply in the event the
rate is specified by the Underwriter or the Trust and Countrywide fails to
select the rate specified.
10. DIVIDENDS AND DISTRIBUTIONS.
----------------------------
The Trust shall furnish Countrywide with appropriate evidence of
trustee action authorizing the declaration of dividends and other distributions.
Countrywide shall establish procedures in accordance with the Trust's then
current prospectus and statement of additional information and with other
authorized actions of the Trust's Board of Trustees under which it will have
available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Countrywide shall, as agent for each
shareholder who so
- 4 -
<PAGE>
requests, invest the dividends and other distributions in full and fractional
shares in accordance with the Trust's then current prospectus and statement of
additional information. If a shareholder has elected to receive dividends or
other distributions in cash, then Countrywide shall disburse dividends to
shareholders of record in accordance with the Trust's then current prospectus
and statement of additional information. Countrywide shall, on or before the
mailing date of such checks, notify the Trust and the Custodian of the estimated
amount of cash required to pay such dividend or distribution, and the Trust
shall instruct the Custodian to make available sufficient funds therefor in the
appropriate account of the Trust. Countrywide shall mail to the shareholders
periodic statements, as requested by the Trust, showing the number of full and
fractional shares and the net asset value per share of shares so credited. When
requested by the Trust, Countrywide shall prepare and file with the Internal
Revenue Service, and when required, shall address and mail to shareholders, such
returns and information relating to dividends and distributions paid by the
Trust as are required to be so prepared, filed and mailed by applicable laws,
rules and regulations.
11. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
------------------------------------------------------
Countrywide shall, at least annually, furnish in writing to the Trust
the names and addresses, as shown in the shareholder accounts maintained by
Countrywide, of all shareholders for which there are, as of the end of the
calendar year, dividends, distributions or redemption proceeds for which checks
or share certificates mailed in payment of distributions have been returned.
Countrywide shall use its best efforts to contact the shareholders affected and
to follow any other written instructions received from the Trust concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
12. REDEMPTIONS AND EXCHANGES.
--------------------------
A. Countrywide shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired in
- 5 -
<PAGE>
federal funds to the bank account designated by the shareholder, or (c)
effectuate such other redemption procedures which are authorized by the Trust's
Board of Trustees or its then current prospectus and statement of additional
information. The requirements as to instruments of transfer and other
documentation, the applicable redemption price and the time of payment shall be
as provided in the then current prospectus and statement of additional
information, subject to such supplemental instructions as may be furnished by
the Trust and accepted by Countrywide. If Countrywide or the Trust determines
that a request for redemption does not comply with the requirements for
redemptions, Countrywide shall promptly notify the shareholder indicating the
reason therefor.
B. If shares of the Trust are eligible for exchange with shares of any
other investment company, Countrywide, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
C. Countrywide shall notify the Trust, the Custodian and the
Underwriter on each business day of the amount of cash required to meet payments
made pursuant to the provisions of this Paragraph 12, and, on the basis of such
notice, the Trust shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Trust.
Procedures for effecting redemption orders accepted from shareholders or dealers
of record by telephone or other methods shall be established by mutual agreement
between Countrywide and the Trust consistent with the Trust's then current
prospectus and statement of additional information.
D. The authority of Countrywide to perform its responsibilities under
Paragraph 7, Paragraph 10, and this Paragraph 12 shall be suspended with respect
to any series of the Trust upon receipt of notification by it of the suspension
of the determination of such series' net asset value.
13. AUTOMATIC WITHDRAWAL PLANS.
---------------------------
Countrywide will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the current
prospectus and statement of additional information of the Trust. Payments upon
such withdrawal order shall be made by Countrywide from the appropriate account
maintained by the Trust with the Custodian on approximately the last business
day of each month in which a payment has been requested, and Countrywide will
withdraw from a shareholder's account and present for repurchase or redemption
as
- 6 -
<PAGE>
many shares as shall be sufficient to make such withdrawal payment pursuant to
the provisions of the shareholder's withdrawal plan and the current prospectus
and statement of additional information of the Trust. From time to time on new
automatic withdrawal plans a check for payment date already past may be issued
upon request by the shareholder.
14. LETTERS OF INTENT.
------------------
Countrywide will process such letters of intent for investing in
shares of the Trust as are provided for in the Trust's current prospectus and
statement of additional information. Countrywide will make appropriate deposits
to the account of the Underwriter for the adjustment of sales charges as therein
provided and will currently report the same to the Underwriter.
15. WIRE-ORDER PURCHASES.
---------------------
Countrywide will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
Countrywide or the Underwriter, with copies to the Underwriter. Upon receipt of
any check drawn or endorsed to the Trust (or Countrywide, as agent) or otherwise
identified as being payment of an outstanding wire-order, Countrywide will stamp
said check with the date of its receipt and deposit the amount represented by
such check to Countrywide's deposit accounts maintained with the Custodian.
Countrywide will compute the respective portions of such deposit which represent
the sales charge and the net asset value of the shares so purchased, will cause
the Custodian to transfer federal funds in an amount equal to the net asset
value of the shares so purchased to the Trust's account with the Custodian, and
will notify the Trust and the Underwriter before noon of each business day of
the total amount deposited in the Trust's deposit accounts, and in the event
that payment for a purchase order is not received by Countrywide or the
Custodian on the tenth business day following receipt of the order, will prepare
an NASD "notice of failure of dealer to make payment" and forward such
notification to the Underwriter.
16. OTHER PLANS.
------------
Countrywide will process such accumulation plans, group programs and
other plans or programs for investing in shares of the Trust as are now provided
for in the Trust's current prospectus and statement of additional information
and will act as plan agent for shareholders pursuant to the terms of such plans
and programs duly executed by such shareholders.
- 7 -
<PAGE>
17. RECORDKEEPING AND OTHER INFORMATION.
------------------------------------
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust, any
person retained by the Trust, or any regulatory agency having authority over the
Trust.
18. SHAREHOLDER RECORDS.
--------------------
Countrywide shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each shareholder,
including dividends and distributions in cash or invested in shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term gains and
realized long-term gains;
F. Any instructions from a shareholder including all forms furnished by
the Trust and executed by a shareholder with respect to (i) dividend
or distribution elections and (ii) elections with respect to payment
options in connection with the redemption of shares;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder holding
certificates;
- 8 -
<PAGE>
I. Any stop or restraining order placed against a shareholder's account;
J. Information with respect to withholding in the case of a foreign
account or any other account for which withholding is required by the
Internal Revenue Code of 1986, as amended; and
K. Any information required in order for Countrywide to perform the
calculations contemplated under this Agreement.
19. TAX RETURNS AND REPORTS.
------------------------
Countrywide will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
20. OTHER INFORMATION TO THE TRUST.
-------------------------------
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
21. ACCESS TO SHAREHOLDER INFORMATION.
----------------------------------
Upon request, Countrywide shall arrange for the Trust's investment
adviser to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.
22. COOPERATION WITH ACCOUNTANTS.
-----------------------------
Countrywide shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
- 9 -
<PAGE>
23. SHAREHOLDER SERVICE AND CORRESPONDENCE.
---------------------------------------
Countrywide will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating to
account status, share purchases, redemptions and exchanges and other investment
plans available to Trust shareholders. Countrywide will answer written
correspondence from shareholders relating to their share accounts and such other
written or oral inquiries as may from time to time be mutually agreed upon, and
Countrywide will notify the Trust of any correspondence or inquiries which may
require an answer from the Trust.
24. PROXIES.
--------
Countrywide shall assist the Trust in the mailing of proxy cards and
other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
25. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
26. COMPENSATION.
-------------
For the performance of Countrywide's obligations under this Agreement,
each series of the Trust shall pay Countrywide, on the first business day
following the end of each month, a monthly fee in accordance with the schedule
attached hereto as Schedule A. The Trust shall promptly reimburse Countrywide
for any out-of-pocket expenses and advances which are to be paid by the Trust in
accordance with Paragraph 27.
27. EXPENSES.
---------
Countrywide shall furnish, at its expense and without cost to the
Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) the use of
data processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 27 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of
- 10 -
<PAGE>
outside pricing services, use of outside mailing firms, necessary outside record
storage, media for storage of records (e.g., microfilm, microfiche, computer
tapes), printing, confirmations and any other shareholder correspondence and any
and all assessments, taxes or levies assessed on Countrywide for services
provided under this Agreement. Postage for mailings of dividends, proxies,
reports and other mailings to all shareholders shall be advanced to Countrywide
three business days prior to the mailing date of such materials.
28. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
29. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent, and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
30. EQUIPMENT FAILURES.
-------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
31. INDEMNIFICATION OF COUNTRYWIDE.
-------------------------------
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors,
- 11 -
<PAGE>
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Trust
in connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of any such persons in the performance of the duties of Countrywide under
this Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. The Trust shall indemnify and hold harmless Countrywide, its
directors, officers, employees, shareholders, agents, control persons and
affiliates from and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law) of any and every
nature which Countrywide may sustain or incur or which may be asserted against
Countrywide by any person by reason of, or as a result of: (i) any action taken
or omitted to be taken by Countrywide in good faith in reliance upon any
certificate, instrument, order or share certificate reasonably believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the oral instructions or written instructions of an authorized
person of the Trust or upon the opinion of legal counsel for the Trust or its
own counsel; or (ii) any action taken or omitted to be taken by Countrywide in
connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
32. TERMINATION
-----------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force
- 12 -
<PAGE>
from year to year thereafter, but only so long as such continuance is approved
(1) by Countrywide, (2) by vote, cast in person at a meeting called for the
purpose, of a majority of the Trust's Trustees who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any such party,
and (3) by vote of a majority of the Trust's Board of Trustees or a majority of
the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due as of the date of
such termination, and shall likewise reimburse Countrywide for any out-of-pocket
expenses and disbursements reasonably incurred by Countrywide to such date.
C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
33. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
34. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
- 13 -
<PAGE>
35. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
36. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Ohio. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said 1940 Act. In addition, where the effect of a
requirement of the 1940 Act, reflected in any provision of this Agreement, is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
37. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Lake Shore Family of Funds
7824 Laurel Avenue
Cincinnati, Ohio 45243
Attention: Earl V. (Buck) Newsome, Jr.
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 37. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
- 14 -
<PAGE>
38. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
39. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
40. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
41. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
42. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LAKE SHORE FAMILY OF FUNDS
By: /s/ Earl "Buck" Newsome Jr.
------------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
------------------------------
Its: President
- 16 -
<PAGE>
Schedule A
----------
COMPENSATION
------------
Services FEE
- -------- ---
As Transfer Agent,
Dividend Disbursing Agent
and Shareholder Servicing Agent: (Per Account)
Equity Fund Payable monthly at
rate of $20.00/
account; subject to
a minimum of $1,200
per month
Balanced Fund Payable monthly at
rate of $20.00/
account; subject to
a minimum of $1,200
per month
- 17 -
PLAN OF DISTRIBUTION
--------------------
PURSUANT TO RULE 12B-1
----------------------
WHEREAS, Lake Shore Family of Funds (the "Trust"), a business trust
organized under the laws of the State of Ohio, engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest without par value (the "Shares"), which may be divided into
two or more Series of Shares; and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the 1940 Act, that there is
a reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule
12b-1 under the 1940 Act, on the following terms and conditions:
1. DISTRIBUTION ACTIVITIES. Subject to the supervision of the Trustees of
the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Shares, which activities may include, but are not
limited to, the following: (a) payments to securities dealers and others who are
engaged in the sale of Shares and who may be advising shareholders of the Trust
regarding the purchase, sale or retention of Shares; (b) expenses of maintaining
personnel (including personnel of organizations with which the Trust has entered
into agreements related to this Plan) who engage in or support distribution of
Shares or who render shareholder support services not otherwise provided by the
Trust's transfer agent, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding the Trust, processing shareholder transactions, and
<PAGE>
providing such other shareholder services as the Trust may reasonably request;
(c) formulating and implementing marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (d) preparing, printing
and distributing sales literature; (e) preparing, printing and distributing
prospectuses and statements of additional information and reports of the Trust
for recipients other than existing shareholders of the Trust; and (f) obtaining
such information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other activities
related to the distribution of Shares, either directly or through other persons
with which the Trust has entered into agreements related to this Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the Trust pursuant
to this Plan and the basis upon which payment of such expenditures will be made
shall be determined by the Trustees of the Trust, but in no event may such
expenditures exceed in any fiscal year an amount calculated at the rate of .25%
of the average daily net asset value of any Series of the Trust. Such payments
for distribution activities may be made directly by the Trust or the Trust's
investment adviser or principal underwriter may incur such expenses and obtain
reimbursement from the Trust. Unreimbursed expenditures will not be carried over
from year to year. In the event the Plan is terminated with respect to any
Series, such Series will not be required to make any payments for expenses
incurred after the date the plan terminates.
3. TERM AND TERMINATION. (a) This Plan shall become effective on the date
hereof. Unless terminated as herein provided, this Plan shall continue in effect
for one year from the date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Plan may be terminated with respect to any Series at any time by
vote of a majority of the Rule 12b-1 Trustees or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of such Series.
4. AMENDMENTS. This Plan may not be amended to increase materially the
amount of a Series' expenditures provided for in Section 2 hereof unless such
amendment is approved by a vote of the majority of the outstanding voting
securities of such Series
- 2 -
<PAGE>
(as defined in the 1940 Act), and no material amendment to this Plan shall be
made unless approved in the manner provided for annual renewal of this Plan in
Section 3(a) hereof.
5. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of Trustees who are not interested persons (as defined
in the 1940 Act) of the Trust shall be committed to the discretion of the
Trustees who are not interested persons of the Trust.
6. QUARTERLY REPORTS. The Treasurer of the Trust shall provide to the
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
7. RECORDKEEPING. The Trust shall preserve copies of this Plan and any
related agreements and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
8. LIMITATION OF LIABILITY. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of the State of Ohio and notice
is hereby given that this Plan is executed on behalf of the Trustees of the
Trust as trustees and not individually and that the obligations of this
instrument are not binding upon the Trustees or shareholders of the Trust
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
date set forth below.
Dated: December 17, 1997
Attest: LAKE SHORE FAMILY OF FUNDS
/s/ John F. Splain By: /s/ Earl "Buck" Newsome Jr.
- ----------------------------- -----------------------------
Secretary President
- 3 -
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our name and
to all references to our firm included in, or made a part of this Post-Effective
Amendment No. 1
/s/ Joseph Decosimo and Company, PLL
------------------------------------
Joseph Decosimo and Company, PLL
Cincinnati, Ohio
February 26, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001046396
<NAME> Lake Shore Family of Funds
<SERIES>
<NUMBER> 2
<NAME> Lake Shore Family of Funds - Equity Fund
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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<NAME> Lake Shore Family of Funds
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<NAME> Lake Shore Family of Funds - Balanced Fund
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