<PAGE> 1
PROSPECTUS JUNE 16, 1996
THE LAKE FOREST FUNDS
The Lake Forest Funds is a family of two no-load mutual funds that offers you
different investment opportunities. The Funds and their specific investment
objectives are listed below.
NO-LOAD MUTUAL FUNDS
The Lake Forest Funds are true "no-load" investments which means that
shareholders pay no sales charges or commissions. In addition, the Funds pay
no Rule 12b-1 fees. The minimum initial investment for each fund is $2,500
($1,000 for tax sheltered retirement plans).
LAKE FOREST CORE EQUITY FUND
The investment objective of the Lake Forest Core Equity Fund is to provide
long term capital appreciation together with current income. The Fund seeks to
achieve its objective by investing primarily in a broad range of equity
securities of large, established companies believed by its Adviser, Boberski &
Company, to have above average prospects for appreciation.
LAKE FOREST MONEY MARKET FUND
The investment objective of the Lake Forest Money Market Fund is to
provide the highest level of current income consistent with liquidity and
security of principal. The Fund is a U.S. government money market fund
designed for the short term cash balances of corporations, institutions and
individuals. It invests exclusively in U.S. government obligations and
repurchase agreements fully collateralized by U.S. government obligations.
An investment in the Lake Forest Money Market Fund is neither insured nor
guaranteed by the U.S. Government, and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per share. Shares
of the Funds are not deposits or obligations of any bank, are not endorsed or
guaranteed by any bank, and are not insured by the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board or any other government agency,
entity, or person. The purchase of Fund shares involves investment risks,
including the possible loss of principal.
This Prospectus concisely sets forth the information a prospective
investor ought to know before investing and should be retained for future
reference. A Statement of Additional Information dated June 16, 1996 has been
filed with the Securities and Exchange Commission, and is incorporated herein
by reference. The Statement of Additional Information can be obtained upon
request without charge by contacting the Transfer Agent's office listed below.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE LAKE FOREST FUNDS
c/o American Data Services, Inc.
24 W. Carver Street
Huntington, New York 11743
(800) 592-7722
<PAGE> 2
SUMMARY OF FUND EXPENSES
The tables below are provided to assist an investor in understanding the
direct and indirect expenses that an investor may incur as a shareholder in the
Funds. The expense information has been restated to reflect current fees. The
expenses are expressed as a percentage of average net assets. The Example
should not be considered a representation of future Fund performance or
expenses, both of which may vary.
The Funds are true no-load funds and, accordingly, shareholders do not
pay any sales charge or commission upon purchase or redemption of shares of the
Funds. In addition, the Funds do not pay any distribution fees under a Rule
12b-1 Plan. Unlike most other mutual funds, the Funds do not pay directly for
transfer agency, pricing, custodial, auditing or legal services, nor do they
pay directly any general administrative or other operating expenses. The
Adviser pays all of the expenses of each Fund except brokerage, taxes, interest
and extraordinary expenses.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
CORE MONEY
EQUITY MARKET
FUND FUND
------ ------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases NONE NONE
Maximum Sales Load Imposed on Reinvested Dividends NONE NONE
Deferred Sales Load NONE NONE
Redemption Fees NONE NONE
Exchange Fees NONE NONE
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees (after any fee waiver)(1) 1.00% 0.125%
12b-1 Charges NONE NONE
Other Expenses (2) NONE NONE
----- ------
Total Fund Operating Expenses 1.00% 0.125%
</TABLE>
(1) The Adviser has agreed to cap the fees at 0.125% for the Money Market
Fund at least through the fiscal year ending February 28, 1996. Without
such a cap, the Management Fees would have been 0.50% and Total Fund
Operating Expenses would have been 0.50%.
(2) Pursuant to the Management Agreement, the Adviser pays all of each Fund's
operating expenses except interest, taxes, brokerage commissions and
extraordinary expenses.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Core Equity Fund $10 $32 $55 $122
Money Market Fund $1 $4 $7 $16
</TABLE>
Note: Expenses for both funds have been restated to reflect current fees.
<PAGE> 3
THE FUNDS
Lake Forest Core Equity Fund and Lake Forest Money Market Fund (the
"Funds") are series of The Lake Forest Funds (the "Trust") organized as an Ohio
business trust on November 23, 1994. The Trust is an open-end investment
company which commenced operations on March 1, 1995. The investment adviser to
the Funds is Boberski & Company (the "Adviser").
INVESTMENT OBJECTIVES AND STRATEGIES
The descriptions that follow are designed to help you choose the Fund that
best fits your investment objectives. You may want to pursue more than one
objective by investing in more than one Fund.
LAKE FOREST CORE EQUITY FUND
The investment objective of the Lake Forest Core Equity Fund (the "Equity
Fund") is to provide long term capital appreciation together with current
income. The Fund seeks to achieve this objective by investing primarily in a
broad range of equity securities of large, established companies (those with a
market capitalization above $1 billion) which the Adviser believes have above
average prospects for appreciation, based on certain fundamental and technical
standards of selection. However, the Fund will also invest in dividend paying
stocks, and it is expected that the Fund will generate a combination of current
income and long term capital appreciation.
The Fund is intended to be a core equity portfolio designed for investors
with a long term wealth building horizon and is particularly suitable for
retirement and educational funds. The Adviser seeks to limit investment risk
by diversifying the Fund's investments across a broad range of industries and
companies, and by investing primarily in larger companies with a history of
attractive dividend yields, low price-earnings ratios and strong cash flows.
The Adviser will particularly seek large, well capitalized companies which the
Adviser believes to have the potential to compete in the global marketplace.
While the Fund ordinarily will invest in common stocks of established U.S.
companies, it may invest in foreign companies through the purchase of American
Depository Receipts.
Under normal circumstances, at least 65% of the total assets of the Fund
will be invested in equity securities. The Adviser generally intends to stay
fully invested (subject to liquidity requirements and defensive purposes) in
common stock and common stock equivalents (such as rights, warrants and
securities convertible into common stocks) regardless of the movement of stock
prices. However, the Fund may invest in preferred stocks, bonds, corporate
debt and U.S. government obligations when the Adviser believes that these
securities offer opportunities to further the Fund's investment objective. The
Fund normally will invest primarily in common stocks of established companies
that have a record of at least three years continuous operation, and whose
securities, in the opinion of the Adviser, enjoy a fair degree of
marketability. Most equity securities in the Fund's portfolio are listed on
major stock exchanges or traded over-the-counter.
For temporary defensive purposes, the Fund may hold all or a portion of
its assets in money market instruments, securities of money market registered
investment companies or repurchase agreements collateralized by U.S. government
obligations. The Fund may also make such investments at any time to maintain
liquidity or pending selection of investments in accordance with its policies.
<PAGE> 4
LAKE FOREST MONEY MARKET FUND
The investment objective of the Lake Forest Money Market Fund is to
provide the highest level of current income consistent with liquidity and
security of principal. The Fund is a U.S. government money market fund designed
for the investment of short-term cash reserves, and the Adviser believes it is
appropriate for corporations, pension and profit sharing plans, and other
institutional and individual investors.
To the extent that it is feasible to do so, the Adviser intends to invest
in U.S. government obligations which are, by federal statute, exempt from state
and local taxes. However, the Fund will not be fully invested in such
tax-exempt securities. Such securities are subject to federal taxation.
Shareholders should consult their own tax advisors regarding the tax
ramifications of an investment in the Money Market Fund.
In seeking its objective, the Fund will invest exclusively in obligations
issued or guaranteed as to principal and interest by the United States
government, its agencies or instrumentalities ("U.S. government obligations")
as well as repurchase agreements involving these securities. To the extent
that it is feasible to do so, the Adviser intends to invest in U.S. government
obligations which are, by federal statute, exempt from state and local taxes.
However, the Fund will not be fully invested in such tax-exempt securities.
The Fund seeks to maintain a stable net asset value of $1.00 per share pursuant
to a rule of the Securities and Exchange Commission, which requires that the
Fund's portfolio meet certain maturity, quality and diversification standards
(see "Share Price Calculation").
GENERAL
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, neither Fund can give any assurance that its investment
objective will be achieved. Current yields or rates of total return quoted by
a Fund may be higher or lower than past quotations, and there can be no
assurance that any current yield or rate of total return will be maintained.
See "Investment Policies and Techniques and Risk Considerations" for more
information.
<PAGE> 5
FINANCIAL HIGHLIGHTS
The following table provides you with information about the history of the
Funds' shares. The table is included as supplementary information to the
Funds' financial statements which are included in the February 29, 1996 Annual
Report which may be obtained by writing or calling the Fund. The Funds'
financial statements have been audited by the Funds' independent certified
accountants, whose unqualified opinion therein is contained in the Annual
Report.
LAKE FOREST FUNDS
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED FEBRUARY 29, 1996
<TABLE>
<CAPTION>
CORE MONEY
EQUITY MARKET
-------- --------
<S> <C> <C>
Net asset value - beginning of period................ $15.00 $ 1.00
Income from investment operations
Net investment income................................ 0.56 0.06
Net realized gain on investments.................... 2.13 0.00
-------- --------
Total from investment operations..................... 2.69 0.06
Less distributions
Dividends from net investment income................. (0.15) (0.06)
Dividends from capital gains......................... (0.20) 0.00
-------- --------
Net asset value - end of period...................... $17.34 $ 1.00
======== ========
Total Return......................................... 18.59% 5.50%
Ratios/supplemental data
Net assets, end of period (in 000's)................. 1,016 1,787
Ratio of expenses to average net assets (1).......... 0.45% 0.08%
Ratio of net investment income to average net assets. 3.89% 5.50%
Portfolio turnover rate.............................. 129.77% 0.00%
</TABLE>
(1) If the expense reimbursement from the investment adviser had
not been in effect the ratio of expenses to average net assets
would have been 2.00% and 1.00%, respectively.
<PAGE> 6
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS
This section contains general information about various types of
securities and investment techniques. Each Fund may invest in any
security or employ any investment technique described in this section
unless specifically noted otherwise.
EQUITY SECURITIES
Under normal conditions, the Equity Fund will invest at least 65%
of its total assets in equity securities. Equity securities consist of
common stock, preferred stock and common stock equivalents (such as
convertible preferred stock, convertible debentures, rights and
warrants) and investment companies which invest primarily in the above.
Convertible preferred stock is preferred stock that can be
converted into common stock pursuant to its terms. Convertible
debentures are debt instruments that can be converted into common stock
pursuant to their terms. The Adviser intends to invest only in
convertible debentures rated A or higher by Standard & Poor's
Corporation ("S&P") or by Moody's Investors Services, Inc. ("Moody's").
Warrants are options to purchase equity securities at a specified price
valid for a specific time period. Rights are similar to warrants, but
normally have a short duration and are distributed by the issuer to its
shareholders. A Fund may not invest more than 5% of its net assets at
the time of purchase in rights and warrants.
Equity securities include common stocks and common stock
equivalents of domestic real estate investment trusts and other
companies which operate as real estate corporations or which have a
significant portion of their assets in real estate. Neither Fund will
acquire any direct ownership of real estate.
The Equity Fund may invest in foreign equity securities through the
purchase of American Depository Receipts. American Depository Receipts
are certificates of ownership issued by a U.S. bank as a convenience to
the investors in lieu of the underlying shares which it holds in
custody. To the extent that the Equity Fund does invest in foreign
securities, such investments may be subject to special risks, such as
changes in restrictions on foreign currency transactions and rates of
exchange, and changes in the administrations or economic and monetary
policies of foreign governments.
FIXED-INCOME SECURITIES
Each Fund may invest in fixed-income securities. Fixed-income
securities include corporate debt securities, U.S. government
securities, mortgage-related securities, repurchase agreements and
participation interests in such securities. The Money Market Fund will
not invest in corporate debt securities, and the Equity Fund will only
invest in corporate debt securities rated A or higher by S&P or Moody's.
Fixed-income securities are generally considered to be interest
rate sensitive, which means that their value will generally decrease
when interest rates rise and increase when interest rates fall.
Securities with shorter maturities, while offering lower yields,
generally provide greater price stability than longer term securities
and are less affected by changes in interest rates.
U.S. GOVERNMENT OBLIGATIONS--Each Fund may invest in U.S.
government obligations. U.S. government obligations may be backed by
the credit of the government as a whole or only by the
<PAGE> 7
issuing agency. U.S. Treasury bonds, notes, and bills and some agency
securities, such as those issued by the Federal Housing Administration
and the Government National Mortgage Association (GNMA), are backed by
the full faith and credit of the U.S. government as to payment of
principal and interest and are the highest quality government
securities. Other securities issued by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan
Banks and the Federal Home Loan Mortgage Corporation, are supported only
by the credit of the agency that issued them, and not by the U.S.
government. Securities issued by the Federal Farm Credit System, the
Federal Land Banks, and the Federal National Mortgage Association (FNMA)
are supported by the agency's right to borrow money from the U.S.
Treasury under certain circumstances, but are not backed by the full
faith and credit of the U.S. government.
MORTGAGE-RELATED SECURITIES--One form of U.S. government
obligations in which each Fund may invest is mortgage-related
securities. Mortgage-related securities include securities representing
interests in a pool of mortgages. These securities, including
securities issued by FNMA, GNMA and the Federal Home Loan Mortgage
Corporation, provide investors with payments consisting of both interest
and principal as the mortgages in the underlying mortgage pools are
repaid. The Funds will only invest in pools of mortgage loans assembled
for sale to investors by agencies or instrumentalities of the U.S.
government. Unscheduled or early payments on the underlying mortgages
may shorten the securities' effective maturities.
Other types of securities representing interests in a pool of
mortgage loans are known as collateralized mortgage obligations (CMOs)
and real estate mortgage investment conduits (REMICs) and multi-class
pass-throughs. CMOs and REMICs are debt instruments collateralized by
pools of mortgage loans or other mortgage-backed securities. Multiclass
pass-through securities are equity interests in a trust composed of
mortgage loans or other mortgage-backed securities. Payments of
principal and interest on underlying collateral provides the funds to
pay debt service on the CMO or REMIC or make scheduled distributions on
the multi-class pass-through securities. The Funds will only invest in
CMOs, REMICs and multi-class pass-through securities (collectively
"CMOs" unless the context indicates otherwise) issued by agencies or
instrumentalities of the U.S. government (such as the Federal Home Loan
Mortgage Corporation). Neither Fund will invest in "stripped" CMOs,
which represent only the income portion or the principal portion of the
CMO.
CMOs are issued with a variety of classes or "tranches," which have
different maturities and are often retired in sequence. One or more
tranches of a CMO may have coupon rates which reset periodically at a
specified increment over an index such as the London Interbank Offered
Rate ("LIBOR"). These "floating rate CMOs," typically are issued with
lifetime "caps" on their coupon rate, which means that there is a
ceiling beyond which the coupon rate may not be increased. The yield of
some floating rate CMOs varies in excess of the change in the index,
which would cause the value of such CMOs to fluctuate significantly once
rates reach the cap.
REMICs, which have elected to be treated as such under the Internal
Revenue Code, are private entities formed for the purpose of holding a
fixed pool of mortgages secured by an interest in real property. REMICs
are similar to CMOs in that they issue multiple classes of securities.
As with other CMOs, the mortgages which collateralize the REMICs in
which a Fund may invest include mortgages backed by GNMA certificates or
other mortgage pass-throughs issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
<PAGE> 8
The average life of securities representing interests in pools of
mortgage loans is likely to be substantially less than the original
maturity of the mortgage pools as a result of prepayments or
foreclosures of such mortgages. Prepayments are passed through to the
registered holder with the regular monthly payments of principal and
interest, and have the effect of reducing future payments. To the
extent the mortgages underlying a security representing an interest in a
pool of mortgages are prepaid, a Fund may experience a loss (if the
price at which the respective security was acquired by the Fund was at a
premium over par, which represents the price at which the security will
be redeemed upon prepayment). In addition, prepayments of such
securities held by a Fund will reduce the share price of the Fund to the
extent the market value of the securities at the time of prepayment
exceeds their par value. Furthermore, the prices of mortgage-related
securities can be significantly affected by changes in interest rates.
Prepayments may occur with greater frequency in periods of declining
mortgage rates because, among other reasons, it may be possible for
mortgagors to refinance their outstanding mortgages at lower interest
rates. In such periods, it is likely that any prepayment proceeds would
be reinvested by a Fund at lower rates of return.
INVESTMENT TECHNIQUES
REPURCHASE AGREEMENTS--A repurchase agreement is a short-term
investment in which the purchaser (i.e., a Fund) acquires ownership of a
U.S. Government obligation (which may be of any maturity) and the seller
agrees to repurchase the obligation at a future time at a set price,
thereby determining the yield during the purchaser's holding period
(usually not more than seven days from the date of purchase). Any
repurchase transaction in which a Fund engages will require full
collateralization of the seller's obligation during the entire term of
the repurchase agreement. In the event of a bankruptcy or other default
of the seller, a Fund could experience both delays in liquidating the
underlying security and losses in value. However, both Funds intend to
enter into repurchase agreements only with Star Bank, N.A. (the Trust's
Custodian), other banks with assets of $1 billion or more and registered
securities dealers determined by the Adviser (subject to review by the
Board of Trustees) to be creditworthy. The Adviser monitors the
creditworthiness of the banks and securities dealers with which a Fund
engages in repurchase transactions, and a Fund will not invest more than
5% of its net assets in illiquid securities, including repurchase
agreements maturing in more than seven days.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS--Each Fund may buy
and sell securities on a when-issued or delayed delivery basis, with
payment and delivery taking place at a future date. The price and
interest rate that will be received on the securities are each fixed at
the time the buyer enters into the commitment. A Fund may enter into
such forward commitments if it holds, and maintains until the settlement
date in a separate account at the Fund's Custodian, cash or U.S.
government securities in an amount sufficient to meet the purchase
price. Forward commitments involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date. Any
change in value could increase fluctuations in a Fund's share price and
yield. Although a Fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio, a Fund may
dispose of a commitment prior to the settlement if the Adviser deems it
appropriate to do so.
FLOATING AND VARIABLE RATE OBLIGATIONS--Each Fund may invest in
floating and variable rate obligations. Floating rate obligations have
an interest rate which is fixed to a specified interest rate, such as
a bank prime rate, and is automatically adjusted when the specified interest
rate changes. Variable rate
<PAGE> 9
obligations have an interest rate which is adjusted at specified
intervals to a specified interest rate. Periodic interest rate
adjustments help stabilize the obligations' market values.
A Fund may purchase these obligations from the issuers or may
purchase participation interests in pools of these obligations from
banks or other financial institutions. Variable and floating rate
obligations may carry demand features that permit a Fund to sell the
obligations back to the issuers or to financial intermediaries at par
value plus accrued interest upon short notice at any time or prior to
specific dates. The inability of the issuer or financial intermediary
to repurchase an obligation on demand could affect the liquidity of the
Fund's portfolio. Frequently, obligations with demand features are
secured by letters of credit or comparable guarantees.
BORROWING--A Fund may borrow money for temporary or emergency
purposes in an amount not exceeding 33 1/3% of the value of the Fund's
total assets (calculated after such borrowing). Borrowings other than
from banks are limited to 5% of total assets (calculated before such
borrowing).
LOANS OF PORTFOLIO SECURITIES--Each Fund may make short and long
term loans of its portfolio securities. Under the lending policy
authorized by the Board of Trustees and implemented by the Adviser in
response to requests of broker-dealers or institutional investors which
the Adviser deems qualified, the borrower must agree to maintain
collateral, in the form of cash or U.S. government obligations, with the
Fund on a daily mark-to-market basis in an amount at least equal to 100%
of the value of the loaned securities. The Fund will continue to
receive dividends or interest on the loaned securities and may terminate
such loans at any time or reacquire such securities in time to vote on
any matter which the Board of Trustees determines to be serious. With
respect to loans of securities, there is the risk that the borrower may
fail to return the loaned securities or that the borrower may not be
able to provide additional collateral.
OPTIONS TRANSACTIONS
The Equity Fund may write covered put and call options on
individual securities, write covered put and call options on stock
indices traded on a securities exchange and engage in related closing
transactions. A put (call) option on a security is an agreement to buy
(sell) a particular portfolio security if the option is exercised at a
specified price, or before a set date. An option on a stock index gives
the holder the right to receive, upon exercising the option, a cash
settlement amount based on the difference between the exercise price and
the value of the underlying stock index. To cover the potential
obligations involved in these option transactions, the Fund will own the
underlying equity security (for a call option); will segregate with the
Custodian high grade liquid debt obligations equal to the option
exercise price (for a put option); or (for an option on a stock index)
will either hold a portfolio of stocks substantially replicating the
movement of the index or, to the extent the Fund does not hold such a
portfolio, will segregate with the Custodian high grade liquid debt
obligations equal to the market value of the stock index option, marked
to market daily. Risks associated with writing options include the
possible inability to effect closing transactions at favorable prices
and an appreciation limit on the securities set aside for settlement, as
well as (in the case of an option on a stock index) exposure to an
indeterminate liability. There is no assurance of liquidity in the
secondary market for purposes of closing out option positions. Also, the
Equity Fund may purchase put and call options on individual securities
and on stock indices for the purpose of hedging against the risk of
unfavorable price movements adversely affecting the value of the Fund's
portfolio securities or securities the Fund intends to buy. The Fund
may also sell put and call options in closing transactions.
<PAGE> 10
OTHER INVESTMENTS
Subject to applicable restrictions under the Investment Company Act
of 1940, (i) each Fund is permitted to invest in other no-load
investment companies at any time, but neither Fund will invest in the
other Fund, and (ii) each Fund may engage in short sales if, at the time
of the short sale, the Fund owns or has the right to obtain an equal
amount of the security being sold short at no additional cost. If a
Fund acquires securities of another investment company, the shareholders
of the Fund may be subject to duplicative management fees on the assets
invested in such other investment company.
GENERAL INFORMATION
FUNDAMENTAL POLICIES. The investment limitations set forth in the
Statement of Additional Information as fundamental policies may not be
changed without the affirmative vote of the majority of the outstanding
shares of the applicable Fund. The investment objective of each Fund
and all policies not specified as fundamental may be changed by the
Board of Trustees without the affirmative vote of a majority of the
outstanding shares of the Fund. Any change in objective may result in
the Fund having an investment objective different from the objective
which the shareholders considered appropriate at the time of investment
in the Fund. Except for the limitations on borrowing, percentage
restrictions apply as of the time of an investment and without regard to
later increases or decreases in the value of securities or total net
assets.
PORTFOLIO TURNOVER. Each of the Funds does not intend to purchase
or sell securities for short term trading purposes. Each Fund will,
however, sell any portfolio security (without regard to the length of
time it has been held) when the Adviser believes that market conditions,
creditworthiness factors or general economic conditions warrant such
action.
SHAREHOLDER RIGHTS. Any Trustee of the Trust may be removed by
vote of the shareholders holding not less than two-thirds of the
outstanding shares of the Trust. The Trust does not hold an annual
meeting of shareholders. When matters are submitted to shareholders for
a vote, each shareholder is entitled to one vote for each whole share he
owns and fractional votes for fractional shares he owns. All shares of
a Fund have equal voting rights and liquidation rights.
MAJOR SHAREHOLDERS. As of April 10, 1996, Schellgell Food Service,
Inc. (a company controlled by George M. Schellgell, a former trustee of
the Trust) may be deemed to control the Equity Fund as a result of its
beneficial ownership of more than 25% of the shares of the Fund.
HOW TO INVEST IN EACH FUND
Subject to a minimum initial investment of $2,500 for each Fund
($1,000 for retirement accounts) and minimum subsequent investments of
$500, you may invest any amount you choose, as often as you want, in
either Fund. You may diversify your investments by choosing a
combination of the Funds for your investment program.
<PAGE> 11
INITIAL PURCHASE
BY MAIL--You may purchase shares of each Fund by completing and
signing the investment application form which accompanies this
Prospectus and mailing it, in proper form, together with a check
(subject to the above minimum amounts) made payable to The Lake Forest
Funds, and sent to the Custodian at:
The Lake Forest Funds
c/o Star Bank, N.A.
P.O. Box 640244
Cincinnati, Ohio 45264-0244
Please identify the Fund(s) in which you wish to invest.
Your purchase of shares of the Lake Forest Core Equity Fund will be
effected at the next share price calculated after receipt of your
investment. Your order for shares of the Lake Forest Money Market Fund
will not be complete until the Fund has received federal funds. If a
check for purchase of shares is not drawn on federal funds, shares will
be purchased at the next share price calculated after the check is
converted into federal funds (normally two days or less).
BY WIRE--You may also purchase shares of each Fund by wiring
federal funds from your bank, which may charge you a fee for doing so.
If money is to be wired, you must call American Data Services, Inc., the
Funds' Transfer Agent, at (800) 592-7722 and provide the following
information:
FOR THE LAKE FOREST FOR THE LAKE FOREST
CORE EQUITY FUND: MONEY MARKET FUND:
Star Bank, N.A., CINTI/TRUST Star Bank, N.A. CINTI/TRUST
ABA #0420-0001-3 ABA #0420-0001-3
Attn: Lake Forest Core Equity Fund Attn: Lake Forest Money Market Fund
DDA # 483609095 DDA # 483609129
Account Name Account Name
(write in shareholder name) (write in shareholder name)
Shareholder Account # Shareholder Account #
(write in account #) (write in account #)
You are required to mail a signed application to the Transfer Agent
at the above address in order to complete your initial wire purchase.
Wire orders will be accepted only on a day on which the Funds and the
Custodian and Transfer Agent are open for business. A wire purchase
will not be considered made until the wired money is received and the
purchase is accepted by the Funds. Any delays which may occur in wiring
money, including delays which may occur in processing by the banks, are
not the responsibility of the Funds or the Transfer Agent. The Funds
currently do not charge a fee for use of the wire privilege, but the
Funds reserve the right to charge shareholders for this service in the
future. Your bank may charge you a fee for this service.
<PAGE> 12
ADDITIONAL INVESTMENTS
You may purchase additional shares of either Fund at any time
(minimum of $500) by mail or wire. Each additional purchase request
must contain your name, the name of your account(s), your account
number(s), and the Fund(s) in which you wish to invest. Checks should
be made payable to The Lake Forest Funds and should be sent to the
Custodian's address. A bank wire should be sent as outlined above.
AUTOMATIC INVESTMENT OPTION
You may arrange to make additional investments ($100 minimum)
automatically on a monthly or bi-monthly basis by transfers from your
checking account. You must complete the Optional Automatic Investment
Plan section of the investment application and provide the Trust with a
voided check to institute this option. You may terminate this automatic
investment program at any time, and the Fund may modify or terminate the
plan at any time.
TAX SHELTERED RETIREMENT PLANS
Since the Funds are oriented to longer term investments, shares of
the Funds may be an appropriate investment medium for tax sheltered
retirement plans, including: individual retirement plans (IRAs);
simplified employee pensions (SEPs); 401(k) plans; qualified corporate
pension and profit sharing plans (for employees); tax deferred
investment plans (for employees of public school systems and certain
types of charitable organizations); and other qualified retirement
plans. You should contact the Transfer Agent for the procedure to open
an IRA or SEP plan, as well as more specific information regarding these
retirement plan options. Consultation with an attorney or tax adviser
regarding these plans is advisable. Custodial fees for an IRA will be
paid by the shareholder by redemption of sufficient shares of the Fund
from the IRA unless the fees are paid directly to the IRA custodian.
You can obtain information about the IRA custodial fees from the
Transfer Agent.
OTHER PURCHASE INFORMATION
Dividends begin to accrue after you become a shareholder. The
Funds do not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Fund's
Transfer Agent for the account of the shareholder. The rights to limit
the amount of purchases and to refuse to sell to any person are reserved
by each Fund. If your check or wire does not clear, you will be
responsible for any loss incurred. If you are already a shareholder,
the Fund can redeem shares from any identically registered account in
either Fund as reimbursement for any loss incurred. You may be
prohibited or restricted from making future purchases in either Fund.
EXCHANGE PRIVILEGE
As a shareholder in any Fund, you may exchange shares valued at
$1,000 or more for shares of any other Fund in the Trust. An exchange
may be made by written request signed by all registered owners of the
account mailed to the Transfer Agent. Exchanges may also be requested
by calling the Transfer Agent if you have completed the Optional
Telephone Redemption and Exchange section of the investment application
(see "How to Redeem Shares -- By Telephone" for information about
liability for losses due to unauthorized or fraudulent instructions).
Requests for exchanges received prior to close of trading on the
<PAGE> 13
New York Stock Exchange (currently 4:00 p.m. New York Time) will be
processed at the next determined net asset value as of the close of
business on the same day.
An exchange is made by redeeming shares of one Fund and using the
proceeds to buy shares of another Fund, with the net asset value for the
redemption and the purchase calculated on the same day. See "How To
Redeem Shares". There is no charge for this service, but the Funds
reserve the right to charge a fee in the future. An exchange results in
a sale of shares for federal income tax purposes. If you make use of
the exchange privilege, you may realize either a long term or short term
capital gain or loss on the shares redeemed.
Before making an exchange, you should consider the investment
objective of the Fund to be purchased. If your exchange creates a new
account, you must satisfy the requirements of the Fund in which shares
are being purchased. You may make an exchange to a new account or an
existing account; however, the account ownerships must be identical.
Exchanges may be made only in states where an exchange may legally be
made. The Funds reserve the right to terminate or modify the exchange
privilege in the future upon 60 days prior notice to the shareholders.
HOW TO REDEEM SHARES
BY MAIL--You may redeem any part of your account in either Fund at
no charge by mail. All redemptions will be made at the net asset value
determined after the redemption request has been received by the
Transfer Agent in proper order. The proceeds of the redemption may be
more or less than the purchase price of your shares, depending on the
market value of the Fund's securities at the time of your redemption.
Your request should be addressed to:
The Lake Forest Funds
c/o American Data Services, Inc.
24 W. Carver Street
Huntington, New York 11743
"Proper order" means your request for a redemption must include
your letter of instruction, including the Fund name, account number,
account name(s), the address and the dollar amount or number of shares
you wish to redeem. This request must be signed by all registered share
owner(s) in the exact name(s) and any special capacity in which they are
registered. For all redemptions, the Funds require that signatures be
guaranteed by a bank or member firm of a national securities exchange.
Signature guarantees are for the protection of shareholders. At the
discretion of a Fund or the Transfer Agent, a shareholder, prior to
redemption, may be required to furnish additional legal documents to
insure proper authorization.
BY TELEPHONE--You may request a redemption of your shares in either
Fund by calling the Transfer Agent and requesting that proceeds be
mailed to you or wired to your bank or brokerage firm. You must first
complete the Optional Telephone Redemption and Exchange section of the
investment application to institute this option. The redemption will be
effected at the next determined share price. The proceeds will then be
made payable to the registered shareholder and mailed to the address
registered on the account, or wired to your bank or brokerage firm, as
authorized by you on your application. The Funds and the Transfer Agent
will employ reasonable procedures to confirm that redemption or exchange
instructions communicated by telephone are genuine. There is no charge
for wire redemptions; however, the Fund reserves the right to charge for
this
<PAGE> 14
service. Any charges for wire redemptions will be deducted from
the shareholder's Fund account by redemption of shares.
The Funds, the Adviser, the Transfer Agent and the Custodian are
not liable for following redemption or exchange instructions
communicated by telephone that they reasonably believe to be genuine.
However, if they do not employ reasonable procedures to confirm that
telephone instructions are genuine, they may be liable for any losses
due to unauthorized or fraudulent instructions. Procedures employed
will include recording telephone instructions and requiring a form of
personal identification from the caller. The telephone redemption and
exchange procedures may be terminated at any time by the Funds or the
Transfer Agent. During periods of extreme market activity it is
possible that shareholders may encounter some difficulty in telephoning
the Funds, although neither the Funds nor the Transfer Agent has ever
experienced difficulties in receiving and in a timely fashion responding
to telephone requests for redemptions or exchanges. If you are unable
to reach the Funds by telephone, you may request a redemption or
exchange by mail or facsimile.
BY SYSTEMATIC WITHDRAWAL PLAN--As another convenience, the Funds
offer a Systematic Withdrawal Program whereby shareholders may request
that a check drawn in a predetermined amount be sent to them each month
or calendar quarter. A shareholder's account must have Fund shares with
a value of at least $10,000 in order to start a Systematic Withdrawal
Program, and the minimum amount that may be withdrawn each month or
quarter under the Systematic Withdrawal Program is $100. This Program
may be terminated by a shareholder or the Funds at any time without
charge or penalty and will become effective five business days following
receipt of your instructions. Shares will be sold within 3 business
days before month-end. A withdrawal under the Systematic Withdrawal
Program involves a redemption of shares, and may result in a gain or
loss for federal income tax purposes. In addition, if the amount
withdrawn exceeds the dividends credited to the shareholder's account,
the account ultimately may be depleted.
ADDITIONAL INFORMATION--If you are not certain of the requirements
for a redemption please call the Transfer Agent at (800) 592-7722.
Redemptions specifying a certain date or share price cannot be accepted
and will be returned. We will mail or wire you the proceeds on or
before the fifth business day following the redemption. However,
payment for redemption made against shares purchased by check (other
than exchanges into the other Fund) will be made only after the check
has been collected, which normally may take up to fifteen days. Also,
when the New York Stock Exchange is closed (or when trading is
restricted) for any reason other than its customary weekend or holiday
closing or under any emergency circumstances, as determined by the
Securities and Exchange Commission, we may suspend redemptions or
postpone payment dates.
Because the Funds incur certain fixed costs in maintaining
shareholder accounts, each Fund reserves the right to require any
shareholder to redeem all of his or her shares in the Fund on 30 days'
written notice from the date the value of his or her shares in the Fund
is less than $2,500 due to redemption, or such other minimum amount as
the Fund may determine from time to time. An involuntary redemption
constitutes a sale. You should consult your tax adviser concerning the
tax consequences of involuntary redemptions. A shareholder may increase
the value of his or her shares in the Fund to the minimum amount within
the 30 day period. Each share of each Fund is subject to redemption at
any time if the Board of Trustees determines in its sole discretion that
failure to so redeem may have materially adverse consequences to all or
any of the shareholders of the Trust or any Fund of the Trust.
<PAGE> 15
SHARE PRICE CALCULATION
The share price (net asset value) of the Equity Fund is calculated
once daily, as of the close of trading on the New York Stock Exchange
(4:00 p.m., New York Time), on any day when the New York Stock Exchange
and the Custodian are open for business. The net asset value of shares
of the Money Market Fund is calculated twice daily as of 12:00 p.m. and
4:00 p.m., New York Time, on any day when the New York Stock Exchange
and the Custodian are open for business. The price of the shares of a
Fund will also be calculated on other days if there is sufficient
trading in the Fund's portfolio securities that its net asset value
might be materially affected. The net asset value per share of each
Fund is computed by dividing the sum of the value of the securities held
by the Fund plus any cash or other assets minus all liabilities
(including estimated accrued expenses) by the total number of shares
outstanding at such time, rounded to the nearest cent. For the Money
Market Fund, this is known as the penny-rounding method of pricing.
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price.
Lacking a last sale price, a security is valued at its last bid price
except when the last bid price does not accurately reflect the current
value of the security. All other securities for which over-the-counter
market quotations are readily available are valued at their last bid
price. When market quotations are not readily available, when it is
determined that the last bid price does not accurately reflect the
current value or when restricted securities are being valued, such
securities are valued as determined in good faith by a pricing
committee, in conformity with guidelines adopted by and subject to
review of the Board of Trustees of the Trust.
Fixed income securities generally are valued by using market
quotations, but may be valued on the basis of prices furnished by a
pricing service when the Adviser believes such prices accurately reflect
the fair market value of such securities. A pricing service utilizes
electronic data processing techniques based on yield spreads relating to
securities with similar characteristics to determine prices for normal
institutional-size trading units of debt securities without regard to
sale or bid prices. When prices are not readily available from a
pricing service, or when restricted or illiquid securities are being
valued, securities are valued at fair value as determined in good faith
by a pricing committee, subject to review of the Board of Trustees.
Short term investments in fixed income securities with maturities of
less than 60 days when acquired, or which subsequently are within 60
days of maturity, are valued (except for the Money Market Fund) by using
the amortized cost method of valuation, which the Board has determined
will represent fair value.
The Money Market Fund seeks to maintain a stable net asset value of
$1.00 per share pursuant to Rule 2a-7 under the Investment Company Act
of 1940. In accordance with Rule 2a-7, the Fund will maintain a
dollar-weighted average portfolio of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less (except for
U.S. Government obligations, which will have remaining maturities of 762
days or less) and invest only in U.S. dollar denominated securities
determined in accordance with procedures established by the Board of
Trustees to present minimal credit risks.
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to distribute substantially all of its net
investment income as dividends to its shareholders. The Equity Fund
intends to declare and pay dividends on a quarterly basis, and the Money
Market Fund intends to declare dividends daily and pay them monthly.
Each Fund intends to distribute its net long term capital gains at least
once a year and its net short term capital gains at least once a year.
<PAGE> 16
Income dividends and capital gain distributions are automatically
reinvested in additional shares at the net asset value per share on the
distribution date. An election to receive a cash payment of dividends
and/or capital gain distributions may be made in the application to
purchase shares or by separate written notice to the Transfer Agent.
Shareholders will receive a confirmation statement reflecting the
payment and reinvestment of dividends and summarizing all other
transactions. If cash payment is requested, a check normally will be
mailed within five business days after the payable date. If you
withdraw your entire account, all dividends accrued to the time of
withdrawal, including the day of withdrawal, will be paid at that time.
You may elect to have distributions on shares held in IRAs and 403(b)
plans paid in cash only if you are 59 1/2 years old or permanently and
totally disabled or if you otherwise qualify under the applicable plan.
TAXES
This section is not intended to be a full discussion of all the
aspects of the federal income tax law and its effects on shareholders.
Shareholders are urged to consult their own tax advisers regarding
specific questions as to federal, state or local taxes, the tax effect
of distributions and withdrawals from the Fund and the use of the
Exchange Privilege.
Each Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. By so
qualifying, a Fund will not be subject to federal income taxes to the
extent that it distributes substantially all of its net investment
income and any realized capital gains.
For federal income tax purposes, each Fund is treated as a separate
entity for the purpose of computing taxable net income and net realized
capital gains and losses. Dividends paid by each Fund from ordinary
income and short-term capital gains are taxable to shareholders as
ordinary income, but may be eligible in part for the dividends received
deduction for corporations. Any distributions designated as being made
from net realized long term capital gains are taxable to shareholders as
long term capital gains regardless of the holding period of the
shareholder. Distributions are taxable whether received in cash or
reinvested in additional shares.
A dividend received shortly after the purchase of shares reduces
the net asset value of the shares by the amount of the dividend, and
although in effect a return of capital, such dividend will be taxable to
the shareholder. If a shareholder realizes a loss on the sale or
exchange of any shares held for six months or less and if the
shareholder received a capital gain distribution during such six-month
period, then the loss is treated as a long-term capital loss to the
extent of the capital gain distribution.
Each Fund will mail to each shareholder after the close of the
calendar year a statement setting forth the federal income tax status of
distributions made during the year. Dividends and capital gains
distributions may also be subject to state and local taxes.
If for any reason you don't provide the Funds with your correct
Social Security or Tax I.D. number (or certify that you are not subject
to backup withholding), the Funds are required by the Code to withhold
31% of taxable dividends and proceeds of certain exchanges and
redemptions.
MANAGEMENT OF THE FUNDS
Each Fund is a diversified series of The Lake Forest Funds, an
open-end management investment company organized as an Ohio business
trust on November 23, 1994. The Board of Trustees supervises the
<PAGE> 17
business activities of the Trust. Like other mutual funds, the Trust
retains various organizations to perform specialized services. It
retains Boberski & Company, One Westminster Place, Lake Forest, Illinois
60045 (the "Adviser") to manage the Trust's investments and its business
affairs. The Adviser is an Illinois-based company of which Irving V.
Boberski is the controlling shareholder. Mr. Boberski is responsible
for the day-to-day management of the portfolio of each Fund. He is the
President, Chief Financial Officer, Treasurer and a Trustee of the
Trust, and President, Treasurer, and a Director of the Adviser. The
Adviser, founded by Mr. Boberski in 1966, also provides investment
advice to individuals and institutions.
The Adviser is paid a monthly fee for its services to the Equity
Fund equal to an annual average rate of 1.00% of the Equity Fund's
average daily net assets. For its services to the Money Market Fund,
the Adviser is authorized to receive a monthly fee equal to 0.50% of the
Money Market Fund's average daily net assets. The Adviser has agreed to
cap the fee for the Money Market Fund at 0.125% at least through the
fiscal year ending February 28, 1996. The Adviser pays all of the
expenses of each Fund except brokerage, taxes, interest and
extraordinary expenses. The Adviser may waive all or a part of its fee,
at any time, at its sole discretion, but such action shall not obligate
the Adviser to waive fees at any time. Subject to its obligation to
seek the best qualitative execution, the Adviser may give consideration
to sales of shares of the Trust as a factor in the selection of brokers
and dealers to execute portfolio transactions. The Adviser (not the
Funds) may pay fees to certain persons based on investments made and
maintained by investors such persons have referred to the Funds. The
Adviser (not the Funds) also may pay certain financial institutions
(which may include banks, securities dealers and other industry
professionals) a "servicing fee" for performing certain administrative
servicing functions for Fund shareholders to the extent these
institutions are allowed to do so by applicable statute, rule or
regulation.
American Data Services, Inc., 24 West Carver Street, Huntington,
New York, serves as the Funds' Administrator. The Administrator
provides for preparation and maintenance of accounting and financial
data, coordination with third parties furnishing services to the Funds,
state regulatory filings, and other management services. American Data
Services also serves as Transfer Agent for the Funds. As discussed
above, American Data Services is paid by the Adviser and not by the
Trust.
PERFORMANCE INFORMATION
Each Fund may periodically advertise "average annual total return."
The "average annual total return" of a Fund refers to the average annual
compounded rate of return over the stated period that would equate an
initial amount invested at the beginning of a stated period to the
ending redeemable value of the investment. The calculation of "average
annual total return" assumes the reinvestment of all dividends and
distributions.
Each Fund may also periodically advertise its total return over
various periods in addition to the value of a $10,000 investment (made
on the date of the initial public offering of the Fund's shares) as of
the end of a specified period. The "total return" for a Fund refers to
the percentage change in the value of an account between the beginning
and end of the stated period, assuming no activity in the account other
than reinvestment of dividends and capital gains distributions.
The Money Market Fund may periodically advertise its "yield" and
"effective yield." The "yield" of the Fund refers to the income
generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated
<PAGE> 18
by the investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Funds may also include in advertisements data comparing
performance with other mutual funds as reported in non-related
investment media, published editorial comments and performance rankings
compiled by independent organizations and publications that monitor the
performance of mutual funds (such as Lipper Analytical Services, Inc.,
Morningstar, Inc. or the Donoghue Organization, Inc.). Performance
information may be quoted numerically or may be presented in a table,
graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the
Standard & Poor's (S&P) 500 Index or the Dow Jones Industrial Average.
The Funds' Annual Report contains additional performance information.
The Report is available upon request and without charge from the Funds'
Transfer Agent.
The advertised performance data of each Fund is based on historical
performance and is not intended to indicate future performance. Yields
and rates of total return quoted by a Fund may be higher or lower than
past quotations, and there can be no assurance that any yield or rate of
total return will be maintained. The principal value of an investment
in the Equity Fund will fluctuate so that a shareholder's shares, when
redeemed, may be worth more or less than the shareholder's original
investment.
<PAGE> 19
INVESTMENT ADVISER
Boberski & Company
One Westminster Place
Lake Forest, Illinois 60045
CUSTODIAN (ALL INITIAL AND SUBSEQUENT PURCHASES)
The Lake Forest Funds
c/o Star Bank, N.A.
P.O. Box 640244
Cincinnati, Ohio 45264-0244
TRANSFER AGENT (ALL REDEMPTION AND EXCHANGE REQUESTS AND SHAREHOLDER
INQUIRIES)
American Data Services, Inc.
24 W. Carver Street
Huntington, New York 11743
(800) 592-7722
AUDITORS
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, Ohio 44145
LEGAL COUNSEL
D'Ancona & Pflaum
30 N. LaSalle Street
Chicago, Illinois 60602
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in
connection with the offering contained in this Prospectus, and if given
or made, such information or representations must not be relied upon as
being authorized by either Fund. This Prospectus does not constitute an
offer by either Fund to sell its shares in any state to any person to
whom it is unlawful to make such offer in such state.
<PAGE> 20
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . 2
THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVES AND STRATEGIES . . . . . . . . . . . . . . . 3
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS . . . . 6
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 10
HOW TO INVEST IN EACH FUND . . . . . . . . . . . . . . . . . . . . 10
EXCHANGE PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . 12
HOW TO REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . 13
SHARE PRICE CALCULATION. . . . . . . . . . . . . . . . . . . . . . 15
DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 15
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . 16
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 21
THE LAKE FOREST FUNDS
STATEMENT OF ADDITIONAL INFORMATION
JUNE 16, 1996
LAKE FOREST CORE EQUITY FUND
LAKE FOREST MONEY MARKET FUND
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of The Lake Forest Funds dated June
16, 1996. The Funds' February 29, 1996 Annual Report accompanies this
Statement of Additional Information. The financial statements appearing in the
Annual Report are incorporated herein by reference. A copy of the Prospectus
can be obtained by writing the Transfer Agent at 24 W. Carver Street,
Huntington, New York 11743, or by calling 1-800-592-7722.
<PAGE> 22
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
----
DESCRIPTION OF THE TRUST.............................................. 1
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS. 1
INVESTMENT LIMITATIONS................................................ 3
THE MANAGEMENT AGREEMENT.............................................. 4
TRUSTEES AND OFFICERS................................................. 5
TRUSTEE COMPENSATION.................................................. 6
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................. 6
DETERMINATION OF SHARE PRICE.......................................... 7
INVESTMENT PERFORMANCE................................................ 7
CUSTODIAN............................................................. 8
TRANSFER AGENT........................................................ 8
ACCOUNTANTS........................................................... 8
LEGAL COUNSEL......................................................... 8
FINANCIAL STATEMENTS.................................................. 8
i
<PAGE> 23
DESCRIPTION OF THE TRUST
The Lake Forest Funds (the "Trust") is an open-end investment company
established under the laws of Ohio by an Agreement and Declaration of Trust
dated November 23, 1994 (the "Trust Agreement"). The Trust Agreement permits
the Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value. Shares of two series have been authorized,
which shares constitute the interests in Lake Forest Core Equity Fund (the
"Equity Fund") and Lake Forest Money Market Fund (the "Money Market Fund").
Each share of a series represents an equal proportionate interest in the
assets and liabilities belonging to that series with each other share of that
series and is entitled to such dividends and distributions out of income
belonging to the series 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 series into a greater or lesser number of shares of that series so long
as the proportionate beneficial interest in the assets belonging to that series
and the rights of shares of any other series are in no way affected. In case
of any liquidation of a series, the holders of shares of the series being
liquidated will be entitled to receive as a class a distribution out of the
assets, net of the liabilities, belonging to that series. Expenses
attributable to any series are borne by that series. Any general expenses of
the Trust not readily identifiable as belonging to a particular series are
allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable. No shareholder is liable to
further calls or to assessment by the Trust without his or her express consent.
Upon sixty days prior written notice to shareholders, a Fund may make
redemption payments in whole or in part in securities or other property if the
Trustees determine that existing conditions make cash payments undesirable.
For other information concerning the purchase and redemption of shares of the
Funds, see "How to Invest in Each Fund," "How to Redeem Shares" and "Exchange
Privilege" in the Prospectus. For a description of the methods used to
determine the share price and value of each Fund's assets, see "Share Price
Calculation" in the Prospectus.
As of April 10, 1996, the following persons owned five percent (5%) or
more of the Equity Fund: Lynn A. Boberski, One Westminster Place, Lake Forest,
Illinois 60045 -- 16.36%; Schellgell Food Service, Inc. (a Wisconsin
corporation), 1200 S. 43rd Street, Milwaukee, Wisconsin 53214 -- 38.53%;
Clarence W. Payne, Living Trust, Virginia and Richard C. Payne, Trustees, 104
Rutgers Court, Glenview, Illinois 60025 -- 7.86%; Irving V. Boberski IRA, One
Westminster Place, Lake Forest, Illinois 60045 -- 7.83%.
As of April 10, 1996, the following persons owned five percent (5%) or
more of the Money Market Fund: Lynn A. Boberski --21.16%; Stephen W. Bolander,
trustee, 625 W. Winchester Road, Libertyville, Illinois 60048 -- 15.91%;
Phillip M. Hackbarth IRA, Star Bank, N.A. Custodian, 3 West Onwentsia Road,
Lake Forest, Illinois 60045 -- 7.07%; Lake Forest Knights of Columbus
Charities, Inc., P.O. Box 507, Lake Forest, Illinois 60045 -- 5.47%; Robert L.
Pasquesi, trustee, 585 Bank Lane, Lake Forest, Illinois 60045 - 13.04%;
Frances B. Hansen, 262 N. Ahwahnee Lane, Lake Forest, Illinois 60045 -- 8.04%;
Eugene Potente IRA, Star Bank N.A. Custodian, 914 60th Street, Kenosha,
Wisconsin 53140 -- 8.02%.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments a Fund may make and some of the techniques it may use, as described
in the Prospectus (see "Investment Objectives and Strategies" and "Investment
Policies and Techniques and Risk Considerations").
A. Mortgage-Related Securities. Government-related organizations which
issue mortgage-related securities include the Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association ("FNMA") and
Federal Home Loan Mortgage Corporation ("FHLMC"). Securities issued by GNMA
and FNMA are fully modified pass through securities, i.e., the timely payment
of principal and interest is guaranteed by the issuer. FHLMC securities are
modified pass through securities, i.e., the timely payment of interest is
guaranteed by FHLMC, principal is passed through as collected but payment
thereof is guaranteed not later than one year after it becomes payable.
B. Corporate Debt Securities. Corporate debt securities are long and
short term debt obligations issued by companies (such as publicly issued and
privately placed bonds, notes and commercial paper). The Adviser intends to
invest Equity Fund assets only in corporate debt securities rated A or higher
by Standard & Poor's Corporation ("S&P") or Moody's Investors
1
<PAGE> 24
Services, Inc. ("Moody's"), or if unrated, determined by the Adviser to be of
comparable quality. Debt securities rated A or higher are in the three highest
ratings categories and generally have adequate to strong protection of
principal and interest payments.
C. Forward Commitments. Each Fund will direct its Custodian to place
cash, U.S. government obligations or other liquid high grade debt obligations
in a separate account of the Trust in an amount equal to the commitments of the
Fund to purchase securities as a result of its forward commitment agreement
obligations. With respect to forward commitments to sell securities, the Trust
will direct its Custodian to place the securities in a separate account. When
a separate account is maintained in connection with forward commitment
transactions to purchase securities, the securities deposited in the separate
account will be valued daily at market for the purpose of determining the
adequacy of the securities in the account. If the market value of such
securities declines, additional cash, U.S. government obligations or liquid
high grade debt obligations will be placed in the account on a daily basis so
that the market value of the account will equal the amount of the Fund's
commitments to purchase securities. To the extent funds are in a separate
account, they will not be available for new investment or to meet redemptions.
Securities purchased on a forward commitment basis and the securities held
in each Fund's portfolio are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in all of those securities
changing in value in the same way, i.e., all those securities experiencing
appreciation when interest rates decline and depreciation when interest rates
rise). Therefore, if in order to achieve a higher level of income, the Fund
remains substantially fully invested at the same time that it has purchased
securities on a forward commitment basis, there will be a possibility that the
market value of the Fund's assets will have greater fluctuation.
With respect to 75% of the total assets of each Fund, the value of the
Fund's commitments to purchase the securities of any one issuer, together with
the value of all securities of such issuer owned by the Fund, may not exceed 5%
of the value of the Fund's total assets at the time the commitment to purchase
such securities is made; provided, however, that this restriction does not
apply to U.S. government obligations or repurchase agreements with respect
thereto. In addition, each Fund will maintain an asset coverage of 300% for
all of its borrowings. Subject to the foregoing restrictions, there is no
limit on the percentage of the Fund's total assets which may be committed to
such purchases.
D. Option Transactions. The Equity Fund may engage in option transactions
involving individual securities and market indices. An option involves either
(a) the right or the obligation to buy or sell a specific instrument at a
specific price until the expiration date of the option, or (b) the right to
receive payments or the obligation to make payments representing the difference
between the closing price of a market index and the exercise price of the
option expressed in dollars times a specified multiple until the expiration
date of the option. Options are sold (written) on securities and market
indices. The purchaser of an option on a security pays the seller (the writer)
a premium for the right granted but is not obligated to buy or sell the
underlying security. The purchaser of an option on a market index pays the
seller a premium for the right granted, and in return the seller of such an
option is obligated to make the payment. A writer of an option may terminate
the obligation prior to expiration of the option by making an offsetting
purchase of an identical option. Options are traded on organized exchanges and
in the over-the-counter market. Options on securities which the Fund sells
(writes) will be covered or secured, which means that it will own the
underlying security (for a call option); will segregate with the Custodian high
quality liquid debt obligations equal to the option exercise price (for a put
option); or (for an option on a stock index) will hold a portfolio of
securities substantially replicating the movement of the index (or, to the
extent it does not hold such a portfolio, will maintain a segregated account
with the Custodian of high quality liquid debt obligations equal to the market
value of the option, marked to market daily). When the Fund writes options, it
may be required to maintain a margin account, to pledge the underlying
securities or U.S. government obligations or to deposit liquid high quality
debt obligations in a separate account with the Custodian.
The purchase and writing of options involves certain risks. The purchase
of options limits the Fund's potential loss to the amount of the premium paid
and can afford the Fund the opportunity to profit from favorable movements in
the price of an underlying security to a greater extent than if transactions
were effected in the security directly. However, the purchase of an option
could result in the Fund losing a greater percentage of its investment than if
the transaction were effected directly. When the Fund writes a covered call
option, it will receive a premium, but it will give up the opportunity to
profit from a price increase in the underlying security above the exercise
price as long as its obligation as a writer continues, and it will retain the
risk of loss should the price of the security decline. When the Fund writes a
covered put option, it will receive a premium, but it will assume the risk of
loss should the price of the underlying security fall below the exercise price.
When the Fund writes a covered put option on a stock index, it will assume the
risk that the price of the index will fall below the exercise price, in which
case the Fund may be required to enter into a closing transaction at a loss.
An analogous risk would apply if the Fund writes a call option on a stock index
and the price of the index rises above the exercise price.
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<PAGE> 25
E. Illiquid Securities. The portfolio of each Fund may contain illiquid
securities. Illiquid securities generally include securities which cannot be
disposed of promptly and in the ordinary course of business without taking a
reduced price. Securities may be illiquid due to contractual or legal
restrictions on resale or lack of a ready market. The following securities are
considered to be illiquid: repurchase agreements and time deposits maturing in
more than seven days, options traded in the over-the-counter market,
nonpublicly offered securities, CMOs for which there is no established market,
restricted securities, and mortgage-related securities which cannot be disposed
of within seven days in the usual course of business without taking a reduced
price. The Adviser and the Trustees will continually monitor the secondary
markets for mortgage-related securities and are responsible for making the
determination of which securities are considered to be illiquid. Neither Fund
will invest more than 5% of its net assets in illiquid securities.
F. Other Investment Companies. Each Fund is permitted to invest in other
investment companies at any time so long as such investment meets the
requirements under the Investment Company Act of 1940. Currently, these are
that such investment does not cause a Fund to (a) have more than 5% of the
value of its total assets invested in any one such company, (b) have more than
10% of the Fund's total assets invested in such companies, or (c) own more than
3% of the total outstanding voting stock of any such company.
INVESTMENT LIMITATIONS
Fundamental Investment Restrictions. The investment restrictions
described below are fundamental and may not be changed without the affirmative
vote of a majority of the outstanding shares of the applicable Fund. As used
in the Prospectus and this Statement of Additional Information, the term
"majority" of the outstanding shares of the Trust (or of any series) means the
lesser of (1) 67% or more of the outstanding shares of the Trust (or the
applicable series) present at a meeting, if the holders of more than 50% of the
outstanding shares of the Trust (or applicable series) are present or
represented at such meeting; or (2) more than 50% of the outstanding shares of
the Trust (or the applicable series).
1. Borrowing Money. The Funds will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude a Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage
of 300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. The Funds will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is (a) consistent with or permitted by the
Investment Company Act of 1940, as amended, the rules and regulations
promulgated thereunder or interpretations of the Securities and Exchange
Commission or its staff and (b) as described in the Prospectus and this
Statement of Additional Information.
3. Underwriting. The Funds will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent
that, in connection with the disposition of portfolio securities (including
restricted securities), the Fund may be deemed an underwriter under certain
federal securities laws.
4. Real Estate. The Funds will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or have a significant portion of
their assets in real estate (including real estate investment trusts).
5. Commodities. The Funds will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude a Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Funds will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
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<PAGE> 26
7. Concentration. The Funds will not invest 25% or more of its total
assets in a particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. government, its
agencies and instrumentalities or repurchase agreements with respect thereto.
Non-Fundamental Investment Restrictions. The following policies have been
adopted by the Trust with respect to each Fund and may be changed at any time
by the Board of Trustees without shareholder approval.
1. Pledging. A Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. Borrowing. A Fund will not purchase any security while borrowings
(including reverse repurchase agreements) representing more than 5% of its
total assets are outstanding.
3. Margin Purchases. A Fund will not purchase securities or evidences of
interest thereon on "margin." This limitation is not applicable to short term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
4. Short Sales. A Fund will not effect short sales of securities unless
it owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short.
5. Options. A Fund will not purchase or sell puts, calls, options or
straddles except as described in the Prospectus and this Statement of
Additional Information.
6. Illiquid Investments. A Fund will not invest more than 5% of its net
assets in securities for which there are legal or contractual restrictions on
resale and other illiquid securities.
Except for the limitations on borrowing set forth above, all percentage
restrictions, whether fundamental or non-fundamental, apply as of the time of
an investment without regard to any later fluctuations in the value of
portfolio securities or other assets.
THE MANAGEMENT AGREEMENT
Under the terms of the management agreement (the "Agreement"), the
Adviser, Boberski & Company, One Westminster Place, Lake Forest, Illinois,
manages the Funds' investments subject to approval of the Board of Trustees and
pays all of the operating expenses of the Funds except brokerage, taxes,
interest and extraordinary expenses. Although the Agreement states that the
Funds are responsible for payment of expenses incurred in connection with the
organization and initial registration of their shares, the Adviser has paid all
of those expenses and has agreed not to seek reimbursement for such expenses.
As compensation for its management services and agreement to pay the Funds'
expenses, the Funds are obligated to pay the Adviser a fee computed and accrued
daily and paid monthly at an annual rate of 1.00% of the average daily net
assets of the Equity Fund and 0.50% of the average daily net assets of the
Money Market Fund. The Adviser has agreed to cap the fee paid by the Money
Market Fund at 0.125% at least through the end of the fiscal year ending
February 29, 1996.
The Adviser may waive all or part of its fee, at any time, and at its sole
discretion, but such action shall not obligate the Adviser to waive any fees in
the future.
The Adviser retains the right to use the name "Lake Forest" in connection
with another investment company or business enterprise with which the Adviser
is or may become associated. The Trust's right to use the name "Lake Forest"
automatically ceases thirty days after termination of the Agreement and may be
withdrawn by the Adviser on thirty days written notice.
The Adviser may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing
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<PAGE> 27
securities. Although the scope of this prohibition under the Glass-Steagall
Act has not been clearly defined by the courts or appropriate regulatory
agencies, management of the Funds believes that the Glass-Steagall Act should
not preclude a bank from providing such services. However, state securities
laws on this issue may differ from the interpretations of federal law expressed
herein and banks and financial institutions may be required to register as
dealers pursuant to state law. If a bank were prohibited from continuing to
perform all or a part of such services, the Adviser believes that there would
be no material impact on the Funds or their shareholders. Banks may charge
their customers fees for offering these services to the extent permitted by
applicable regulatory authorities, and the overall return to those shareholders
availing themselves of the bank services will be lower than to those
shareholders who do not. The Funds may from time to time purchase securities
issued by banks which provide such services; however, in selecting investments
for the Funds, no preference will be shown for such securities.
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk.
NAME POSITION
*Irving V. Boberski President, Treasurer, Secretary and Trustee
Robert E. Alfe Trustee
Philip M. Hackbarth Trustee
Gary M. Patyk Trustee
The ages as of April 16, 1996, the addresses and the principal occupations
of the executive officers and Trustees of the Trust during the past five years
are set forth below:
Irving V. Boberski, Ph.D., 57, One Westminster Place, Lake Forest,
Illinois, is the founder and president of Boberski & Company, the Fund's
Investment Adviser, an investment counseling firm organized in 1966. He is
also the founder and president of Boberski Capital Markets, Inc., a commodity
trading adviser engaged in institutional hedging and arbitrage, that was
organized in 1981. From 1964 to 1992 he was, successively: director, chairman
of the management committee, president and CEO, and chairman of the board of
directors of Avondale Federal Savings Bank. He has also served as a
professional economist and adviser to a number of business organizations,
industry trade groups, government agencies and philanthropic organizations.
In July, 1992, Mr. Boberski entered into a settlement agreement with the
Office of Thrift Supervision ("OTS") settling an administrative proceeding
alleging violations of banking regulations and breaches of fiduciary duty in
connection with the operations of Avondale Federal Savings Bank ("Avondale"),
of which Mr. Boberski was a director and former chief executive officer. In
the settlement, Mr. Boberski agreed to pay a civil money penalty, to make
restitution to Avondale and to be removed from his position as a director of
Avondale and be prohibited from participating in the conduct of affairs of
Avondale. He also agreed not to participate in the affairs of a federally
insured banking institution without prior approval of the OTS. Mr. Boberski
was advised to settle the proceeding in order to avoid the time and expense of
litigation, and he did so, expressly denying every allegation. The Adviser was
not a party to the above described proceeding.
Robert E. Alfe, 57, 582 Oakwood Avenue, Lake Forest, Illinois, is an
architect and builder, and the President of Alfe Development Corporation, a
real estate development company.
Philip M. Hackbarth, 61, 140 South Dearborn Street, Suite 404, Chicago,
Illinois, is an attorney in private practice.
Gary M. Patyk, 57, 777 West Glencoe Place, Suite 111, Milwaukee, Wisconsin
53127, has been a consultant with Transworld Systems, Inc., an accounts
receivable recovery firm, since 1995. From 1990 to 1995, he was a consultant
with Trend Consulting, a general business consulting firm.
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<PAGE> 28
TRUSTEE COMPENSATION
The compensation paid to the Trustees of the Trust during the last fiscal
year is set forth in the following table:
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual From Trust (the
Compensation From Accrued As Part of Benefits Upon Trust is not in a
Name Trust(1) Trust Expenses Retirement Fund Complex)(1)
- ---- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Robert E. Alfe $1,500 0 0 $1,500
Irving V. Boberski 0 0 0 0
Philip M. Hackbarth $1,500 0 0 $1,500
Gary M. Patyk(2) 0 0 0 0
George M. Schellgell(2) $1,500 0 0 $1,500
</TABLE>
1 Under the Management Agreement the Adviser pays these fees.
2 Mr. Schellgell resigned, effective April 15, 1996. Mr. Patyk was elected
as a Trustee effective April 16, 1996.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, the
Adviser is responsible for the Trust's portfolio decisions and the placing of
the Trust's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Trust, 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 Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Trust and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the
commission is reasonable in relation to the value of the brokerage and research
services provided. The determination may be viewed in terms of a particular
transaction or the Adviser's overall responsibilities with respect to the Trust
and to other accounts over which it exercises investment discretion.
Research services include supplemental research, securities and economic
analyses, statistical services and information with respect to the availability
of securities or purchasers or sellers of securities and analyses of reports
concerning performance of accounts. The research services and other
information furnished by brokers through whom the Trust effects securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving
other clients may be useful to the Adviser in connection with its services to
the Trust. Although research services and other information are useful to the
Trust and the Adviser, it is not possible to place a dollar value on the
research and other information received. It is the opinion of the Board of
Trustees and the Adviser that the review and study of the research and other
information will not reduce the overall cost to the Adviser of performing its
duties to the Trust under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities
are normally purchased directly from the issuer, an underwriter or a market
maker. Purchases include a concession paid by the issuer to the underwriter
and the purchase price paid to market makers may include the spread between the
bid and asked prices.
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<PAGE> 29
To the extent that the Trust and another of the Adviser's clients seek to
acquire the same security at about the same time, the Trust may not be able to
acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Trust may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one client, the resulting
participation in volume transactions could produce better executions for the
Trust. In the event that more than one client wants to purchase or sell the
same security on a given date, the purchases and sales will normally be made by
random client selection.
During the fiscal year ended February 29, 1996, the Core Equity Fund paid
brokerage commissions in the aggregate amount of $11,436. Since money market
transactions are usually principal transactions with issuers or dealers the
Money Market Fund ordinarily pays no brokerage commissions. The Fund paid no
commissions during the fiscal year ended February 29, 1996.
DETERMINATION OF SHARE PRICE
The prices (net asset values) of the shares of each Fund are determined as
of 4:00 p.m., New York Time (and the price of the Money Market Fund is also
determined as of 12:00 p.m., New York Time) on each day the Trust is open for
business and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The Trust is open
for business on every day except Saturdays, Sundays and the following holidays:
New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas. For a description of the methods used
to determine the net asset value (share price), see "Share Price Calculation"
in the Prospectus.
INVESTMENT PERFORMANCE
The Core Equity Funds' total return for the fiscal year ended February 29,
1996 was 18.59%.
The Money Market Fund's current and effective yields for the seven day
period ended February 29, 1996 were 5.05% and 5.18% respectively.
"Average annual total return," as defined by the Securities and Exchange
Commission, is computed by finding the average annual compounded rates of
return (over the one and five year periods and the period from initial public
offering through the end of a Fund's most recent fiscal year) 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 $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable period
of the hypothetical $1,000 investment made at the beginning
of the applicable period.
The computation assumes that all dividends and distributions are
reinvested at the net asset value on the reinvestment dates and that a complete
redemption occurs at the end of the applicable period.
Current yield for the Money Market Fund is computed by determining the net
change in the value of a hypothetical pre-existing account with a balance of
one share at the beginning of a seven calendar day period (the "Base Period")
and dividing the net change by the value of the account at the beginning of the
Base Period to obtain the base period return, and then multiplying the base
period return by (365/7) with the resulting yield figure carried to at least
the nearest hundredth of one percent. Effective yield is computed by
compounding the base period return, according to the following formula:
effective yield = [(base period return + 1) (365/7)] - 1.
A Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time
periods used in calculating non-standardized investment performance should be
considered when comparing the Fund's performance to those
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<PAGE> 30
of other investment companies or investment vehicles. The risks associated
with the Fund's investment objective, policies and techniques should also be
considered. At any time in the future, investment performance may be higher or
lower than past performance, and there can be no assurance that any performance
will continue.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of the Funds
may be compared to indices of broad groups of unmanaged securities considered
to be representative of or similar to the portfolio holdings of the appropriate
Fund or considered to be representative of the stock market in general. The
Funds may use the Standard & Poor's 500 Stock Index or the Dow Jones Industrial
Average.
In addition, the performance of either Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc., Morningstar, Inc. or the
Donoghue Organization, Inc. The objectives, policies, limitations and expenses
of other mutual funds in a group may not be the same as those of the applicable
Fund. Performance rankings and ratings reported periodically in national
financial publications such as Barron's and Fortune also may be used.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is Custodian
of each Fund's investments. The Custodian acts as each Fund's depository,
safekeeps its portfolio securities, collects all income and other payments with
respect thereto, disburses funds at the Fund's request and maintains records in
connection with its duties.
TRANSFER AGENT
American Data Services, Inc., 24 W. Carver Street, Huntington, New York
11743, acts as each Fund's transfer agent and, in such capacity, 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
accounting and shareholder service functions. In addition, American Data
Services, Inc. provides each Fund with certain monthly reports, record-keeping
and other management-related services.
ACCOUNTANTS
The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road,
Westlake, Ohio 44145, has been selected as independent public accountants for
the Trust. McCurdy & Associates performs an annual audit of the Funds'
financial statements and provides financial, tax and accounting consulting
services as requested.
LEGAL COUNSEL
The firm of D'Ancona & Pflaum, 30 N. LaSalle Street, Chicago, Illinois
60602 acts as legal counsel to the Funds.
FINANCIAL STATEMENTS
The Financial Statements are incorporated herein by reference to the
Funds' Annual Report for the fiscal year ended February 29, 1996.
8
