- --------------------------------------------------------------------------------
LAKE SHORE FAMILY OF FUNDS
--------------------------
LAKE SHORE BALANCED FUND
SEMI-ANNUAL REPORT
June 30, 1999
(Unaudited)
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>
LAKE SHORE BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
(Unaudited)
ASSETS
Investment securities, at market value (Cost $21) $ 27
Receivable from Adviser (Note 4) 49,169
----------
TOTAL ASSETS 49,196
----------
LIABILITIES
Bank overdraft 44,790
Other accrued expenses and liabilities 1,903
----------
TOTAL LIABILITIES 46,693
----------
NET ASSETS $ 2,503
==========
NET ASSETS CONSIST OF:
Paid-in capital $ (25,072)
Accumulated net investment loss (166)
Accumulated net realized gains from security transactions 27,735
Net unrealized appreciation on investments 6
----------
NET ASSETS $ 2,503
==========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 129
==========
Net asset value and redemption price per share (Note 2) $ 19.43
==========
Maximum offering price per share (Note 2) $ 20.45
==========
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Unaudited)
INVESTMENT INCOME
Dividends $ 1,124
----------
EXPENSES
Amortization of organization expenses 19,949
Accounting services fees (Note 4) 10,000
Transfer agent fees (Note 4) 6,000
Administrative services fees (Note 4) 5,000
Insurance expense 2,875
Registration fees 2,692
Custodian fees 1,894
Postage and supplies 920
Trustees' fees and expenses 750
Investment advisory fees (Note 4) 653
Shareholder report costs 375
Distribution expense (Note 4) 106
Pricing costs 100
----------
TOTAL EXPENSES 51,314
Fees waived and expenses reimbursed by the Adviser (Note 4) (50,022)
----------
NET EXPENSES 1,292
----------
NET INVESTMENT LOSS (168)
----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions 27,730
Net decrease in unrealized appreciation/
depreciation on investments (14,171)
----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 13,559
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 13,391
==========
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Period
Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998 (a)
--------- ---------
FROM OPERATIONS:
<S> <C> <C>
Net investment income (loss) $ (168) $ 487
Net realized gains from security transactions 27,730 5
Net increase (decrease) in unrealized appreciation/
depreciation on investments (14,171) 14,177
--------- ---------
Net increase in net assets from operations 13,391 14,669
--------- ---------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (485)
--------- ---------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold -- 175,821
Net assets value of shares issued in
reinvestment of distributions to shareholders -- 485
Payments for shares redeemed (202,378) --
--------- ---------
Net increase (decrease) in net assets from
capital share transactions (202,378) 176,306
--------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS (188,987) 190,490
NET ASSETS:
Beginning of period (Note 1) 191,490 1,000
--------- ---------
End of period $ 2,503 $ 191,490
========= =========
UNDISTRIBUTED (ACCUMULATED) NET INVESTMENT INCOME (LOSS) $ (166) $ 2
========= =========
CAPITAL SHARE ACTIVITY:
Shares sold -- 17,312
Shares issued in reinvestment of distributions to shareholders -- 44
Shares redeemed (17,327) --
--------- ---------
Net increase (decrease) in shares outstanding (17,327) 17,356
Shares outstanding, beginning of period (Note 1) 17,456 100
--------- ---------
Shares outstanding, end of period 129 17,456
========= =========
</TABLE>
(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 Each Period
<TABLE>
<CAPTION>
Six Months Period
Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998 (a)
---------- ----------
<S> <C> <C>
Net asset value at beginning of period $ 10.97 $ 10.00
---------- ----------
Income from investment operations:
Net investment income (loss) (1.29) 0.03
Net realized and unrealized gains on investments 9.75 0.97
---------- ----------
Total from investment operations 8.46 1.00
---------- ----------
Dividends from net investment income -- (0.03)
---------- ----------
Net asset value at end of period $ 19.43 $ 10.97
========== ==========
Total return (b) 77.12% 9.98%
========== ==========
Net assets at end of period $ 2,503 $ 191,490
========== ==========
Ratio of net expenses to average net assets (c) 2.00%(d) 1.95%(d)
Ratio of net investment income (loss) to average net assets -0.26%(d) 1.05%(d)
Portfolio turnover rate 111%(d) 0%(d)
</TABLE>
(a) Represents the period from the initial public offering of shares (June 30,
1998) through December 31, 1998.
(b) Total returns shown exclude the effect of applicable sales loads and are
not annualized.
(c) Absent fee waivers and expense reimbursements, the ratios of expenses to
average net assets would have been 79.25%(d) and 94.94%(d) for the periods
ended June 30, 1999 and December 31, 1998, respectively (Note 4).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Market
Shares Value
- ----------- -------------
COMMON STOCKS - 1.1%
TELECOMMUNICATIONS - 1.1%
1 AT&T Corp. $ 27
-------------
TOTAL INVESTMENT SECURITIES (Cost $21) - 1.1% $ 27
OTHER ASSETS IN EXCESS OF LIABILITIES - 98.9% 2,476
-------------
NET ASSETS - 100.0% $ 2,503
=============
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
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 (the Fund). 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 investment objective of the Fund is to seek 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 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
(normally 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.
<PAGE>
LAKE SHORE BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are determined 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 June 30, 1999, net unrealized appreciation on investments was $6 for
federal income tax purposes, of which all related to appreciated securities
based on a federal income tax cost basis of $21.
3. INVESTMENT TRANSACTIONS
During the six months ended June 30, 1999, cost of purchases and proceeds from
sales and maturities of investment securities, other than short-term
investments, amounted to $42,950 and $157,044, 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 six months ended
June 30, 1999, the Adviser waived its entire advisory fee of $653 and reimbursed
the Fund for $49,369 of other operating expenses.
<PAGE>
LAKE SHORE BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
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 from the Fund at an annual rate of $20 per
shareholder account, subject to a $1,200 minimum monthly fee. In addition, the
Fund pays CFS 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 CFS 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. During the six months
ended June 30, 1999, the Underwriter received no compensation for these
services.
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 shares of the Fund, not to exceed 0.25% of average daily net
assets. For the six months ended June 30, 1999, the Fund incurred $106 of
expenses under the Plan.
<PAGE>
- --------------------------------------------------------------------------------
LAKE SHORE FAMILY OF FUNDS
--------------------------
LAKE SHORE EQUITY FUND
SEMI-ANNUAL REPORT
June 30, 1999
(Unaudited)
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
an affiliate of P.O. Box 5354
Cambridge Financial Group, Inc. Cincinnati, Ohio 45201-5354
7824 Laurel Drive 1.800.266.9532
Cincinnati, OH 45243
513.579.8700
Dear Fellow Shareholders,
The stock market generated positive returns during the second quarter in a
period that was punctuated by shifting sentiment and uncertainty over the trends
in economic growth, inflation and interest rates.
The United States remained the only major economy in the world showing favorable
growth as reflected in the strength of the dollar. In early April, a number of
European Central Banks reduced interest rates in an effort to spur economic
growth. This action coincided with the low in U.S. Treasury Bond yields which
moved from a low of 5.4% to a high of 6.2% in late June.
Contributing to the rise in Treasury yields was the Consumer Price Index report
for April which showed a larger-than-expected gain. Much of this increase was
due to a rise in the price of energy, as crude oil prices rose close to 60% from
their lows, while other commodity prices remained near multi-year lows,
indicating that a broad rise in inflation was not underway. The subsequent
report for May confirmed that inflationary trends remained moderate. Also
raising fears of higher prices was a very tight labor market, with the
unemployment rate at its lowest level in nearly 30 years, and a concern that the
unprecedented gains in productivity, which have held unit labor costs to a low
level, are unsustainable.
Another factor was a stream of economic reports which indicated that U.S.
economic growth was continuing at a decent pace. In conjunction with this
growth, the stock market saw a shift in emphasis toward economically-sensitive
stocks as well as "value" stocks, which have underperformed "growth" stocks and
the market indices for several years. Smaller capitalization stocks also saw a
resurgence as they have been poor performers for quite some time and strong
growth and higher inflation would benefit these companies.
<PAGE>
The Federal Reserve Board attempted to strike an equilibrium in the stock market
by adopting a tightening bias in monetary policy in May, and then raising
interest rates and reverting to a neutral bias in June. The Fed continues to be
vigilant against an uptick in inflationary pressures, but also must be on guard
against restricting the economy into the end of the year when Y2K uncertainty
will probably cause distortions. Future increases in interest rates would likely
have an adverse impact on stocks, but the current yield on the 10-Year Treasury
remains below the important 6% level.
Corporate earnings growth was expected to have accelerated during the second
quarter, but the S&P price/earnings ratio remained at a historically high level
causing concern that ideal conditions have been priced into the market and any
disappointments will lead to severe adjustments. One factor to consider in this
comparison, however, is that nearly 300 of the S&P 500 stocks have changed in
the last decade. Many of the additions represent technology and service-oriented
companies and tend to have higher growth rates and returns than the companies
that they replaced. They also sell at higher price/earnings multiples, making
comparisons with past periods more difficult.
While the market has continued to advance, our momentum indicators have not
moved up into what we consider dangerous territory. This suggests to us that the
upward trend will continue, but does not indicate that a correction or pause is
not possible at any time. Trends in interest rates will be a key variable, as
restrictive monetary conditions will make earnings growth more difficult and
would put pressure on price/earnings ratios. We will monitor this situation
closely, but at the present time, we still believe that a fully invested
position is advised.
Sincerely,
/s/ Gregory J. Bauer
Gregory J. Bauer, CFA
Chairman
Lake Shore Family of Funds
<PAGE>
LAKE SHORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
(Unaudited)
ASSETS
Investment securities, at market value (Cost $1,997,215) $ 2,369,778
Dividends receivable 2,796
Receivable from Adviser (Note 4) 25,782
Organization expenses, net (Note 2) 15,516
Other assets 7,624
------------
TOTAL ASSETS 2,421,496
------------
LIABILITIES
Bank overdraft 117
Payable for capital shares redeemed 60
Payable to affiliates (Note 4) 4,200
Other accrued expenses and liabilities 5,333
------------
TOTAL LIABILITIES 9,710
------------
NET ASSETS $ 2,411,786
============
NET ASSETS CONSIST OF:
Paid-in capital $ 1,988,286
Accumulated net investment loss (5,140)
Accumulated net realized gains from security transactions 56,077
Net unrealized appreciation on investments 372,563
------------
NET ASSETS $ 2,411,786
============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 190,746
============
Net asset value and redemption price per share (Note 2) $ 12.64
============
Maximum offering price per share (Note 2) $ 13.31
============
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Unaudited)
INVESTMENT INCOME
Dividends $ 13,659
----------
EXPENSES
Accounting services fees (Note 4) 12,000
Investment advisory fees (Note 4) 9,501
Transfer agent fees (Note 4) 7,200
Insurance expense 6,312
Administrative services fees (Note 4) 6,000
Custodian fees 4,898
Registration fees 2,577
Amortization of organization expenses (Note 2) 2,217
Postage and supplies 1,082
Trustees' fees and expenses 750
Distribution expense (Note 4) 692
Shareholder report costs 500
Pricing costs 366
----------
TOTAL EXPENSES 54,095
Fees waived and expenses reimbursed by the Adviser (Note 4) (35,283)
----------
NET EXPENSES 18,812
----------
NET INVESTMENT LOSS (5,153)
----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 59,603
Net increase in unrealized appreciation/
depreciation on investments 201,521
----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 261,124
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 255,971
==========
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Period
Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998 (a)
------------ ------------
FROM OPERATIONS
<S> <C> <C>
Net investment income (loss) $ (5,153) $ 3,426
Net realized gains (losses) from security transactions 59,603 (3,526)
Net increase in unrealized appreciation/
depreciation on investments 201,521 171,042
------------ ------------
Net increase in net assets from operations 255,971 170,942
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
From net investment income -- (3,413)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 585,311 1,324,065
Net asset value of shares issued in
reinvestment of distributions to shareholders -- 3,302
Payment for shares redeemed (18,254) (5,138)
------------ ------------
Net increase in net assets from capital share transactions 567,057 1,322,229
------------ ------------
TOTAL INCREASE IN NET ASSETS 823,028 1,489,758
NET ASSETS
Beginning of period (Note 1) 1,588,758 99,000
------------ ------------
End of period $ 2,411,786 $ 1,588,758
============ ============
UNDISTRIBUTED (ACCUMULATED) NET INVESTMENT
INCOME (LOSS) $ (5,140) $ 13
============ ============
CAPITAL SHARE ACTIVITY
Shares sold 48,309 134,015
Shares issued in reinvestment of distributions
to shareholders -- 325
Shares redeemed (1,308) (495)
------------ ------------
Net increase in shares outstanding 47,001 133,845
Shares outstanding, beginning of period (Note 1) 143,745 9,900
------------ ------------
Shares outstanding, end of period 190,746 143,745
============ ============
</TABLE>
(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 Each Period
<TABLE>
<CAPTION>
Six Months Period
Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998 (a)
------------ ------------
<S> <C> <C>
Net asset value at beginning of period $ 11.05 $ 10.00
------------ ------------
Income from investment operations:
Net investment income (loss) (0.03) 0.08
Net realized and unrealized gains on investments 1.62 1.05
------------ ------------
Total from investment operations 1.59 1.13
------------ ------------
Dividends from net investment income -- (0.08)
------------ ------------
Net asset value at end of period $ 12.64 $ 11.05
============ ============
Total return (b) 14.39% 11.34%
============ ============
Net assets at end of period $ 2,411,786 $ 1,588,758
============ ============
Ratio of net expenses to average net assets (c) 1.98%(d) 1.91%(d)
Ratio of net investment income (loss) to average net assets -0.54%(d) 0.71%(d)
Portfolio turnover rate 65%(d) 4%(d)
</TABLE>
(a) Represents the period from the initial public offering of shares (March 2,
1998) through December 31, 1998.
(b) Total returns shown exclude the effect of applicable sales loads and are
not annualized.
(c) Absent fee waivers and expense reimbursements, the ratios of expenses to
average net assets would have been 5.68%(d) and 14.24%(d) for the periods
ended June 30, 1999 and December 31, 1998, respectively (Note 4).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Market
Shares Value
-------- -----------
COMMON STOCKS - 87.6%
TECHNOLOGY - 28.0%
1,580 Apple Computer, Inc.* $ 73,174
1,890 Comcast Corp. 72,647
1,500 Dell Computer Corp.* 55,500
1,380 EMC Corp.* 75,900
560 IBM Corp. 72,380
1,250 Lucent Technologies, Inc. 84,297
2,207 Oracle Corp.* 81,935
580 Texas Instruments, Inc. 84,100
1,910 Unisys Corp.* 74,371
-----------
674,304
-----------
FINANCIAL SERVICES - 16.2%
787 Associates First Capital Corp. - Class A 34,874
1,095 Bank of America Corp. 83,852
1,240 Bank One Corp. 73,857
2,455 Firstar Corp. 68,740
1,785 Paychex, Inc. 56,897
782 Providian Financial Corp. 73,117
-----------
391,337
-----------
CONSUMER, NON-CYCLICAL - 10.6%
1,060 Bristol-Myers Squibb Co. 74,664
1,060 Guidant Corp. 54,524
1,475 Heinz (H.J.) Co. 73,934
715 Merck & Co., Inc. 52,910
-----------
256,032
-----------
CONSUMER, CYCLICAL - 9.9%
580 Delphi Automotive Systems Corp. 10,768
1,660 Ford Motor Co. 93,686
830 General Motors Corp. 54,780
1,665 Wal-Mart Stores, Inc. 80,336
-----------
239,570
-----------
INDUSTRIAL - 8.0%
1,220 FDX Corp.* 66,185
700 Minnesota Mining & Manufacturing Co. 60,856
2,205 Norfolk Southern Corp. 66,426
-----------
193,467
-----------
<PAGE>
LAKE SHORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Market
Shares Value
-------- -----------
COMMON STOCKS - 87.6%
TELECOMMUNICATIONS - 6.0%
1,103 AT&T Corp. $ 61,533
1,270 Bell Atlantic Corp. 83,026
-----------
144,559
-----------
CONGLOMERATES - 3.2%
690 General Electric Co. 77,970
-----------
BASIC MATERIALS - 3.1%
3,270 Allegheny Teledyne, Inc. 73,984
-----------
ENERGY - 2.6%
655 Chevron Corp. 62,348
-----------
TOTAL COMMON STOCKS (Cost $1,741,008) $ 2,113,571
-----------
MONEY MARKETS - 10.6%
256,207 Firstar Stellar Treasury Fund (Cost $256,207) $ 256,207
-----------
TOTAL INVESTMENT SECURITIES (Cost $1,997,215) - 98.2% $ 2,369,778
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.8% 42,008
-----------
NET ASSETS - 100.0% $ 2,411,786
===========
* Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
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 (the Fund) and the Balanced Fund. 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 investment objective of the Fund is to seek 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 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
(normally 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, if any, at least once
each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains.
<PAGE>
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
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.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are determined 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 June 30, 1999, net unrealized appreciation on investments was $372,563 for
federal income tax purposes, of which $386,264 related to appreciated securities
and $13,701 related to depreciated securities based on a federal income tax cost
basis of $1,997,215.
3. INVESTMENT TRANSACTIONS
During the six months ended June 30, 1999, cost of purchases and proceeds from
sales and maturities of investment securities, other than short-term
investments, amounted to $934,172 and $562,315, 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.
<PAGE>
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
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 six months ended
June 30, 1999, the Adviser waived its entire advisory fee of $9,501 and
reimbursed the Fund for $25,782 of other operating expenses.
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 from the Fund at an annual rate of $20 per
shareholder account, subject to a $1,200 minimum monthly fee. In addition, the
Fund pays CFS 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 CFS 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 $1,531 from underwriting commissions on the sale of
shares during the six months ended June 30, 1999.
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 shares of the Fund, not to exceed 0.25% of average daily net
assets. For the six months ended June 30, 1999, the Fund incurred $692 of
expenses under the Plan.
