<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 33-87494
POST-EFFECTIVE AMENDMENT NO. 3
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-8906
AMENDMENT NO. 4
THE LAKE FOREST FUNDS
One Westminster Place
Lake Forest, IL 60045-1821
847-295-5700
Agent for Service:
Sheldon Stein
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
(312) 580-2014
It is proposed that this filing will become effective:
Immediately upon filing pursuant to paragraph (b)
-----
on (date), pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a)
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X on July 1, 1997 pursuant to paragraph (a) of Rule 485
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In accordance with Section 24(f) of the Investment Company Act of 1940
and Rule 24f-2 thereunder, Registrant has previously elected to register an
indefinite number of shares of beneficial interest. Registrant anticipates
that it will file, pursuant to paragraph b(1) of Rule 24f-2, a 24f-2 Notice for
the fiscal year ended February 28, 1997 on or before April 30, 1997.
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THE LAKE FOREST FUNDS (formerly Lake Forest Trust)
CROSS REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM SECTION IN PROSPECTUS
- ---- ---------------------
<S> <C>
1.............................. Cover Page
2.............................. Summary of Fund Expenses
3.............................. Financial Highlights
4.............................. The Funds, Investment Objectives and Strategies, Management of the Funds, Investment
Policies and Techniques and Risk Considerations, General Information
5.............................. Management of the Funds
5A............................. None
6.............................. Cover Page, Dividends and Distributions, Taxes, Management of the Funds, General
Information
7.............................. Cover Page, How to Invest in Each Fund, Exchange Privilege, Share Price Calculation,
Management of the Funds
8.............................. How to Redeem Shares
9.............................. None
15.............................. General Information
<CAPTION>
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
- --- ------------------------
<S> <C>
10.............................. Cover Page
11.............................. Table of Contents
12.............................. None
13.............................. Additional Information About Fund Investments and Risk Considerations, Investment
Limitations
14.............................. The Management Agreement, Trustees and Officers, Trustee Compensation
15.............................. Description of the Trust
16.............................. The Management Agreement, Custodian, Transfer Agent, Accountants
17.............................. Portfolio Transactions and Brokerage
18.............................. Description of the Trust
19.............................. Determination of Share Price
20.............................. None
21.............................. Not Applicable
22.............................. Investment Performance
23.............................. **
</TABLE>
** Financial Statements appearing in the February 28, 1997 Annual Report are
incorporated by reference.
<PAGE> 3
PROSPECTUS JULY 1, 1997
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
there are no sales charges, commissions or Rule 12b-1 fees. The minimum
initial investment for each fund is $2,500 ($1,000 for tax sheltered plans such
as IRAs or Medical Savings Accounts (MSAs)).
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 July 1, 1997 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
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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 for the Core Equity Fund 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 and 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>
SHAREHOLDER TRANSACTION EXPENSES
CORE MONEY
EQUITY MARKET
FUND FUND
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<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 * *
Exchange Fees** $5.00 $5.00
Wire Transfer Fees** $15.00 $15.00
</TABLE>
*You will be charged a redemption fee of 0.10% of the net asset value of shares
held less than 30 days.
**These fees are charged to shareholders by the Custodian and/or the Transfer
Agent. The fees reflected above are based on current fee schedules and may
change at any time.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets after fee
waivers, if any)
<TABLE>
<S> <C> <C>
Management Fees (1) 1.25% 0.125%
12b-1 Charges NONE NONE
Other Expenses (2) NONE NONE
---- ------
Total Fund Operating Expenses 1.25% 0.125%
</TABLE>
(1) The Adviser has agreed to cap the Management Fees at 0.125% for the Money
Market Fund at least through the fiscal year ending February 28, 1998.
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.
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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 $13 $40 $69 $151
Money Market Fund $ 1 $ 4 $ 7 $ 16
</TABLE>
Note: Expenses for the Core Equity Fund have been restated to reflect current
fees.
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.
3
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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.
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.
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 securities") as
well as repurchase agreements involving these 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").
To the extent that it is feasible to do so, the Adviser intends to invest
in U.S. government securities which are, by federal statute, exempt from state
and local taxes. Such securities are subject to federal taxation. However,
the Fund will not be fully invested in securities that are exempt from state
and local taxes. Shareholders should consult their own tax advisors regarding
the tax ramifications of an investment in the Money Market Fund.
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.
4
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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 28, 1997 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 CORE EQUITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE
ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 29,
1997 1996
----------- -------------
<S> <C> <C>
Net asset value - beginning of period $17.34 $15.00
Income from investment operations
Net investment income 0.39 0.56
Net realized gain on investments 3.07 2.13
------ ------
Total from investment operations 3.46 2.69
Less distributions
Dividends from net investment income (0.37) (0.15)
Dividends from capital gains (0.39) (0.20)
------ ------
Net asset value - end of period $20.04 $17.34
====== ======
Total Return 20.65% 18.59%
Ratios/supplemental data
Net assets, end of period (in 000's) 2,592 1,016
Ratio of expenses to average net assets 1.00% 0.45%
Ratio of net investment income to average net assets 2.10% 3.89%
Portfolio turnover rate 0 129.77%
Average commission rate per share $0.13
</TABLE>
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LAKE FOREST MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, FEBRUARY 29,
1997 1996
------------ ------------
<S> <C> <C>
Net asset value - beginning of period $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.05 0.06
Net realized gain on investments 0.00 0.00
------- -------
Total from investment operations 0.05 0.06
Less distributions
Dividends from net investment income (0.05) (0.06)
Dividends from capital gains 0.00 0.00
------- -------
Net asset value - end of period $ 1.00 $ 1.00
======= =======
Total Return 5.13% 5.50%
Ratios/supplemental data
Net assets, end of period (in 000's) 3,016 1,787
Ratio of expenses to average net assets 0.125% 0.08%
Ratio of net investment income to average net assets 5.13% 5.50%
Portfolio turnover rate 0.00% 0.00%
</TABLE>
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.
6
<PAGE> 9
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 shorter duration and are distributed by the issuer to its
shareholders. The 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 SECURITIES--Each Fund may invest in U.S. government
securities. U.S. government securities may be backed by the credit of the
government as a whole or only by the 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 (FHLMC), 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 securities 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 FHLMC, 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.
7
<PAGE> 10
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 FHLMC). 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.
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 in such securities could also subject the Funds to "maturity
extension risk" which is the possibility that rising interest rates may cause
prepayments to occur at a slower than expected rate. This particular risk may
effectively change a security which was considered a short or immediate-term
security at the time of purchase into a long-term security. Long-term
securities generally fluctuate more widely in response to changes in interest
rates than short or intermediate-term securities.
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
Security (which may be of any maturity) and the seller agrees to repurchase
the security 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 ("counter-party credit risk").
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
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<PAGE> 11
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. The Funds seek to avoid counter-party credit
risk by purchasing their securities outright whenever possible.
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 Trust'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
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 securities, 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 material. 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
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<PAGE> 12
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.
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.
HOW TO INVEST IN EACH FUND
Subject to a minimum initial investment of $2,500 for each Fund ($1,000
for tax sheltered accounts such as IRAs, MSAs and similar 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.
INITIAL PURCHASE
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<PAGE> 13
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:
<TABLE>
<S> <C>
FOR THE LAKE FOREST CORE EQUITY FUND: FOR THE LAKE FOREST 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 #)
</TABLE>
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 Transfer Agent or the Custodian may charge you a fee
for wire transfers. Currently that fee is a total of $15.00. Any charges for
wire transfers will be deducted from your Fund account by redemption of shares.
Your bank may also charge you a fee for this service.
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
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<PAGE> 14
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 PLANS
Since the Funds are oriented to longer term investments, shares of the
Funds may be an appropriate investment medium for tax sheltered plans,
including: individual retirement plans (IRAs); Medical Savings Accounts (MSAs);
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 tax sheltered accounts will be paid by the shareholder by redemption
of sufficient shares of the Fund from the account unless the fees are paid
directly to the custodian. You can obtain information about the 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 charged $20.00 and 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 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. You will be charged a fee by the Transfer Agent for each
exchange. Currently such fees are $5.00 per exchange per account.
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." 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. If your account is subject to backup withholding,
you may not use the exchange privilege.
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<PAGE> 15
Because excessive trading can hurt the Funds' performance and
shareholders, the Funds also reserve the right to temporarily or permanently
terminate, with or without advance notice, the exchange privilege of any
investor who makes excessive use of the exchange privilege (e.g. more than five
exchanges per calendar year). Your exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges with a "market
timer" strategy may be disruptive to the Funds.
HOW TO REDEEM SHARES
BY MAIL--You may redeem any part of your account in either Fund 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. You will be charged a redemption fee of 0.10% of the net
asset value of shares held less than 30 days.
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
Transfer Agent and the Custodian may charge you a fee for wire transfers.
Currently that fee is a total of $15.00. Any charges for wire redemptions will
be deducted from your 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 have 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
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<PAGE> 16
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, or such other
minimum amount as the Fund may determine from time to time. A fee of $5.00 per
month will be charged to accounts (except IRAs and MSAs) that, due to
shareholder redemptions, fall below $2,500. Such fee will be paid to the
Adviser. An involuntary redemption constitutes a sale. You should consult
your tax advisor 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.
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.
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<PAGE> 17
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 securities, which
may 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.
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.
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<PAGE> 18
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 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 at
an annual rate of 1.25% 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 at an annual rate of 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, 1997. The Adviser
pays all of the expenses of each Fund except brokerage, taxes, interest and
extraordinary expenses. The Adviser will also receive any fee charged to
shareholders whose accounts have fallen below $2,500 due to shareholder
redemptions. 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
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<PAGE> 19
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 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.
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<PAGE> 20
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.
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<PAGE> 21
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 12
SHARE PRICE CALCULATION 14
DIVIDENDS AND DISTRIBUTIONS 14
TAXES 15
MANAGEMENT OF THE FUNDS 15
PERFORMANCE INFORMATION 16
</TABLE>
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<PAGE> 22
THE LAKE FOREST FUNDS
STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 1997
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 July
1, 1997. The Funds' February 28, 1997 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> 23
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C>
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 9
LEGAL COUNSEL 9
FINANCIAL STATEMENTS 9
</TABLE>
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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 15, 1997, no person owned five percent (5%) or more of the
Equity Fund.
As of April 15, 1997, the following persons owned five percent (5%) or
more of the Money Market Fund:
Thomas L. Tabern, 1247 High Point Lane, Northbrook, IL 60062 - 17.158%;
Stephen W. Bolander and John W. Brunner Trustees for Eric Bolander Construction
Co. Inc. Employer's Profit Sharing Trust, 625 W. Winchester Road, Libertyville,
IL 60048 - 12.940%; Robert L. Pasquesi as Trustee for Pasquesi Sheppard LLC
Profit Sharing Trust, 585 Bank La., Lake Forest, IL 60045-10.113%; Lynn A.
Boberski, One Westminster Place, Lake Forest, IL 60045 - 9.577%; Lake Forest
Knights of Columbus Charities, Inc., P.O. Box 507, Lake Forest, IL 60045 -
6.575%.
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.
1
<PAGE> 25
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 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 securities 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 Fund
will direct the 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 securities 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 securities 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 securities or to deposit liquid high quality debt
obligations in a separate account with the Custodian.
2
<PAGE> 26
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.
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
<PAGE> 27
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 which are 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.
7. Concentration. Neither Fund will 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.
4
<PAGE> 28
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 1.25% 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 .125% at least through the end of the fiscal year ending
February 28, 1998. 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.
During the years ended February 29, 1996 and February 28, 1997 the Core
Equity Fund paid advisory fees of $2,770 and $16,291, respectively. During the
same periods, the Money Market Fund paid advisory fees of $921 and $2,671,
respectively.
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 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.
<TABLE>
<S> <C>
NAME POSITION
*Irving V. Boberski President, Treasurer, Secretary and Trustee
Robert E. Alfe Trustee
Philip M. Hackbarth Trustee
</TABLE>
5
<PAGE> 29
Gary M. Patyk Trustee
The ages as of April 15, 1997, 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.
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.
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
Retirement
Benefits Estimated Total Compensation
Aggregate Accured As Part Annual Benefits From Trust (the
Compensation of Trust Upon Trust is not in a Fund
Name From Trust* Expenses Retirement Complex)*
---- ------------- ------------ -------------- --------------------
<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 $1,500 0 0 1,500
</TABLE>
* Under the Management Agreement the Adviser pays these fees.
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
6
<PAGE> 30
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.
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 28, 1997, the Core Equity Fund paid
brokerage commissions in the aggregate amount of $2,893. 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 28, 1997.
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.
7
<PAGE> 31
INVESTMENT PERFORMANCE
The Core Equity Funds' total return for the fiscal years ended February
28, 1997 and February 29, 1996 was 20.65% and 18.59%, respectively.
The Money Market Fund's current and effective yields for the seven day
period ended February 28, 1997 were 5.09% and 5.22% respectively. The 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 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 IBC
Financial Data, 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.
8
<PAGE> 32
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 hereto, 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 28, 1997.
9
<PAGE> 33
THE LAKE FOREST FUNDS
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part B:
(1) Statement of Assets and
Liabilities for the Core Equity Fund as of
February 28, 1997.
(2) Report of Independent Public
Accountant.
(3) Statement of Assets and
Liabilities for the Money Market Fund as of
February 28, 1997.
(4) Statement of Operations for
the Core Equity Fund for the period ended
February 28, 1997.
(5) Statement of Operations for
the Money Market Fund for the period ended
February 28, 1997.
(6) Notes to Financial Statements.
(b) Exhibits
(1) Conformed copy of the Declaration of
Trust, incorporated by reference to Post- Effective
Amendment No. 2, File No. 33-87494.
(2) By-Laws, as amended, incorporated by
reference to Post-Effective Amendment No. 2, File No.
33-87494.
(3) Not Applicable.
(4) Not Applicable.
(5)(a) Investment Management Agreement, as amended.
(5)(b) Administrative Agreement, incorporated by reference to
Exhibit 5(c) to Post- Effective Amendment No. 2, File
No. 33-87494.
(6) Not Applicable.
(7) Not Applicable.
(8) Custodian Agreement, incorporated by
reference to Post-Effective Amendment No. 2, File No.
33-87494.
(9) Transfer Agency Agreement,
incorporated by reference to Post-Effective Amendment
No. 2, File No. 33-87494.
<PAGE> 34
(10) Opinion and Consent of Counsel, incorporated by reference
to Post-Effective Amendment No. 2, File No. 33-87494.
(11)(a) Consent of McCurdy & Associates C.P.A.'s, Inc.
(11)(b) Report of McCurdy & Associates C.P.A.'s, Inc.
(12) Financial Statements, included in Statement of Additional
Information.
(13) Letter from initial shareholder, incorporated by
reference to Post-Effective Amendment No. 2, File
No. 33-87494.
(14) Model Plan used in Establishment of IRA/SEP,
incorporated by reference to Post-Effective Amendment
No. 2, File No. 33-87494.
(15) Not Applicable.
(16) Schedule for Computation of Each Performance Quotation,
incorporated by reference to Post-Effective Amendment
No. 2, File No. 33-87494.
(17) Powers of Attorney, incorporated by reference to
Post-Effective Amendment No. 2, File No. 33-87494.
Item 25. Persons Controlled by or Under Common Control with the Registrant
None.
Item 26. Number of Holders of Securities (as of April 22, 1997):
Title of Class Number of Record Holders
- -------------- ------------------------
Lake Forest Core Equity Fund 206
Lake Forest Money Market Fund 145
Item 27. Indemnification
(a) Article VI of the Registrant's Declaration of Trust provides
for indemnification of officers and Trustees follows:
Section 6.4 Indemnification of Trustees, Officers, etc.
Subject to and except as otherwise provided in the
Securities Act of 1933, as amended, and the 1940 Act, the
Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as
directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor
or otherwise (hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered Person
in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before
any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a
party or otherwise or with which such person may be or may
have been threatened, while in office or thereafter, by
reason of being or having been such a Trustee or officer,
director or trustee, and except
<PAGE> 35
that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office.
Section 6.5 Advances of Expenses. The Trust shall
advance attorneys' fees or other expenses incurred by a
Covered Person in defending a proceeding to the full extent
permitted by the Securities Act of 1933, as amended, the 1940
Act, and Ohio Revised Code Chapter 1707, as amended. In the
event any of these laws conflict with Ohio Revised Code
Section 1701.13(E), as amended, these laws, and not Ohio
Revised Code Section 1701.13(E), shall govern.
Section 6.6 Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VI shall
not be exclusive of or affect any other rights to which any
such Covered Person may be entitled. As used in this Article
VI, "Covered Person" shall include such person's heirs,
executors and administrators. Nothing contained in this
article shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and officers, and
other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.
The Registrant may not pay for insurance which protects the
Trustees and officers against liabilities rising from action
involving willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
their offices.
(c) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the Registrant
pursuant to the provisions of Ohio law and the Agreement and
Declaration of the Registrant or the By-Laws of the
Registrant, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by
a trustee, officer or controlling person of the Trust in the
successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
A. Boberski & Company (the "Adviser") is a registered investment
adviser. It has engaged in no other business during the past two
fiscal years of the Trust.
B. The Directors and officers of the Adviser have had no other
business connections during the past two years except that Irving V.
Boberski is also President and a Director of Boberski Capital
Markets, One Westminster Place, Lake Forest, Illinois 60045-1821.
Item 29. Principal Underwriters
None.
<PAGE> 36
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at One
Westminster Place, Lake Forest, Illinois 60045-1821 and/or by the
Registrant's Custodian, Star Bank, N.A., 425 Walnut Street,
Cincinnati, Ohio 45202 or transfer and shareholder service agent,
American Data Services, Inc., 24 W. Carver Street, Huntington, New
York 11743.
Item 31. Management Services Not Discussed in Parts A or B
None.
Item 32. Undertakings
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 28th day of April, 1997.
THE LAKE FOREST FUNDS
By: /s/Jessica R. Droeger
-----------------------------
Jessica R. Droeger
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Irving V. Boberski* President, Chief Financial April 28, 1997
- ------------------ Officer and Trustee
Irving V. Boberski
Robert E. Alfe* Trustee April 28, 1997
- --------------
Robert E. Alfe
Philip M. Hackbarth* Trustee April 28, 1997
- -------------------
Philip M. Hackbarth
Gary M. Patyk* Trustee April 28, 1997
- -------------
Gary M. Patyk
</TABLE>
*By: /s/Jessica R. Droeger
-------------------------
Jessica R. Droeger,
Attorney-in-Fact
*Jessica R. Droeger signs this document on behalf of the Registrant and the
foregoing Officers and Trustees pursuant to the power of attorney filed as
Exhibit 17 to Post-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N1-A.
<PAGE> 1
EXHIBIT 5(a)
AMENDED MANAGEMENT AGREEMENT
TO: Boberski & Company
One Westminster Place
Lake Forest, Illinois 60045-1821
Dear Sirs:
The Lake Forest Funds (the "Trust") herewith confirms our agreement with
you.
The Trust has been organized to engage in the business of an investment
company. The Trust currently offers two series of shares to investors: the Lake
Forest Core Equity Fund series and the Lake Forest Money Market Fund series
(the "Funds"). The Trust's Board of Trustees (the "Board") is authorized from
time to time, as it deems necessary or desirable, to establish and designate
additional series of shares.
You have been selected to act as the sole investment adviser of the
Trust and to provide certain other services, as more fully set forth below, and
you are willing to act as such investment adviser and to perform such services
under the terms and conditions hereinafter set forth. Accordingly, the Trust
agrees with you as follows upon the date of the execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Trust with such investment advice as you
in your discretion deem advisable and will furnish a continuous investment
program for each of the Trust's series consistent with the respective series'
investment objectives and policies. You will determine the securities to be
purchased for each series of the Trust, the portfolio securities to be held or
sold by each series of the Trust and the portion of each series' assets to be
held uninvested, subject always to the Fund's investment objectives,
policies and restrictions, as each of the same shall be from time to time in
effect, and subject further to such policies and instructions as the Board may
from time to time establish. You will advise and assist the officers of the
Trust in taking such steps as are necessary or appropriate to carry out
decisions of the Board and the appropriate committees of the Board regarding
the conduct of the business of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES
Except as provided herein, you will pay all operating expenses of the
Trust, including the compensation and expenses of any trustees, officers and
employees of the Trust and of any other persons rendering any services to the
Trust; clerical and shareholder service staff salaries; office space and other
office expenses; fees and expenses incurred by the Trust in connection with
membership in investment company organizations; legal, auditing and accounting
expenses; non-organizational expenses of registering shares under federal and
state securities laws; insurance expenses; fees and expenses of the custodian,
transfer agent, dividend disbursing agent, shareholder service agent, plan
agent, administrator, accounting and pricing services agent and underwriter of
the Trust; expenses, including clerical expenses of issue, sale, redemption or
repurchase of shares of the Trust; the cost of preparing and distributing
reports and notices to shareholders, the cost of printing or preparing
prospectuses and statements of additional information for delivery to the
Trust's current and prospective shareholders; the cost of printing or preparing
stock certificates or any other documents, statements or reports to
shareholders; expenses of shareholder's meetings and proxy solicitations;
advertising, promotion and other expenses incurred directly or indirectly in
connection with the sale or distribution of the Trust's shares; and all other
operating expenses not specifically assumed by the Trust.
Notwithstanding the above, you may instruct the custodian and/or the
transfer agent to charge individual shareholder accounts for certain services
such as wire transfers, exchanges, bad checks, location of shareholders without
a current address and fees for closing accounts so long as the fees charged to
shareholders are no more than the custodian's or transfer agent's current fee
schedule for such services. In addition, you may charge individual shareholders
a fee for maintaining an account balance below the minimum balance set for the
Funds from time to time by the Board of Directors and disclosed in the current
prospectus. However, the amount of such minimum balance fees must be
<PAGE> 2
approved by the Board of Trustees. You may charge or waive all such individual
account fees as set forth in the current prospectus for the Funds.
The Trust will pay all brokerage fees and commissions, taxes,
interest, expenses incurred by the Trust in connection with the organization and
initial registration of shares of any series of the Trust, and such
extraordinary or non-recurring expenses as may arise, including litigation to
which the Trust may be a party and indemnification of the Trust's trustees and
officers with respect thereto. You may obtain reimbursement from the Trust, at
such time or times as you may determine in your sole discretion, for any of the
expenses advanced by you, which the Trust is obligated to pay, and such
reimbursement shall not be considered to be part of your compensation pursuant
to this Agreement.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments to be made as
provided in this Agreement, as of the last business day of each month, the Lake
Forest Money Market Fund will pay you a fee at the annual rate of 0.50% of the
average value of its daily net assets and the Lake Forest Core Equity Fund will
pay you a fee at the annual rate of 1.25% of the average value of its daily net
assets.
Your compensation with respect to each additional series of the Trust
established after the date of this Agreement shall be one of the fees described
above unless the Board of Trustees, including a majority of Trustees who are not
interested persons as defined in the Investment Company Act of 1940 of you or
the Trust, determines otherwise. If the Board of Trustees adopts a different fee
arrangement for an additional series, the fee arrangement shall be approved
pursuant to the provisions of Section 15 of the Investment Company Act of 1940.
The average value of the daily net assets of a series shall be
determined pursuant to the applicable provisions of the Declaration of Trust of
the Trust or a resolution of the Board, if required. If, pursuant to such
provisions, the determination of net asset value of a series is suspended for
any particular business day, then for the purposes of this paragraph, the value
of the net assets of the series as last determined shall be deemed to be the
value of the net assets as of the close of the business day, or as of such other
time as the value of the series' net assets may lawfully be determined, on that
day. If the determination of the net asset value of a series has been suspended
for a period including such month, your compensation payable at the end of such
month shall be computed on the basis of the value of the net assets of the
series as last determined (whether during or prior to such month).
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio securities for the
account of each series of the Trust, it is understood that you will arrange for
the placing of all orders for the purchase and sale of portfolio securities for
the account with brokers or dealers selected by you, subject to review of this
selection by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and portfolio brokerage. In
the selection of such brokers or dealers and the placing of such orders, you are
directed at all times to seek for the series the best qualitative execution,
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.
You should generally seek favorable prices and commission rates that
are reasonable in relation to the benefits received. In seeking best qualitative
execution, you are authorized to select brokers or dealers who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Trust and/or other
accounts over which you exercise investment discretion. You are authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a Trust portfolio transaction which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if you determine in good faith that the amount of
the commission is reasonable in relation to
- 2 -
<PAGE> 3
the value of the brokerage and research services provided by the executing
broker or dealer. The determination may be viewed in terms of either a
particular transaction or your overall responsibilities with respect to the
Trust and to accounts over which you exercise investment discretion. The Trust
and you understand and acknowledge that, although the information may be useful
to the Trust and you, it is not possible to place a dollar value on such
information. The Board shall periodically review the commissions paid by the
Trust to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits of the Trust.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best qualitative execution
as described above, you may give consideration to sales of shares of
the Trust as a factor in the selection of brokers and dealers to execute Trust
portfolio transactions.
Subject to the provisions of the Investment Company Act of 1940, as
amended, and other applicable law, you or any of your affiliates may retain
compensation in connection with effecting the Trust's portfolio transactions,
including transactions effected through others. If any occasion should arise in
which you give advice to clients of yours concerning the shares of the Trust,
you will act solely as investment counsel for such client and not in any way on
behalf of the Trust. Your services to the Trust pursuant to this Agreement are
not to be deemed to be exclusive and it is understood that you may render
investment advice, management and other services to others, including other
registered investment companies.
5. LIMITATION OF LIABILITY OF ADVISER
You may rely on information reasonably believed by you to be accurate
and reliable. Except as may otherwise be required by the Investment Company Act
of 1940 or the rules thereunder, neither you nor your shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error judgment, mistake of law, any
act or omission connected with or arising out of any services rendered under,
or payments made pursuant to, this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of your duties
under this Agreement, or by reason of reckless disregard by any of such
persons of your obligations and duties under this Agreement.
Any person, even though also a director, officer, employee,
shareholder or agent of you, who may be or become an officer, director, trustee,
employee or agent of the Trust, shall be deemed, when rendering services to the
Trust or acting on any business of the Trust (other than services or business in
connection with your duties hereunder), to be rendering such services to or
acting solely for the Trust and not as a director, officer, employee,
shareholder or agent of you, or one under your control or direction, even though
paid by you.
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall take effect on July 1, 1997 and shall remain in
force for a period of two (2) years from such with respect to each of the
Trust's series established on the date of such execution, and, with respect to
any additional series registered after the date of execution, until the next
anniversary date of the Agreement following the date on which such series
becomes effectively registered for sale in a public offering, and from year to
year thereafter as to each series of the Trust's shares, subject to annual
approval by (i) the Board or (ii) a vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of such
series, provided that in either event continuance is also approved by a
majority of the trustees who are not "interested persons," as defined in the
Investment Company Act of 1940, of you or the Trust, by a vote cast in person
at a meeting called for the purpose of voting such approval.
If the shareholders of any series of the Trust's shares fail to
approve the Agreement in the manner set forth above, upon request of the Board,
you will continue to serve or act in such capacity for the series for the period
- 3 -
<PAGE> 4
of time pending required approval of the Agreement, of a new agreement with you
or a different adviser or other definitive action; provided that the
compensation to be paid by the Trust to you for services to and payments on
behalf of the series will be equal to the lesser of your actual costs incurred
in furnishing such services and payments or the amount you would have received
under this Agreement for furnishing such services and payments.
This Agreement may, on sixty days written notice, be terminated with
respect to a series at any time without the payment of any penalty, by the
Board, by a vote of a majority of the outstanding voting securities of the
series or by you. This Agreement shall automatically terminate in the event of
its assignment.
7. USE OF NAME
The Trust and you acknowledge that all rights to the name "Lake Forest"
belong to you, and that the Trust is being granted a limited license to use such
words in its Trust name or in any series name. In the event you cease to be the
adviser to the Trust, the Trust's rights to the use of the name "Lake Forest"
shall automatically cease on the thirtieth day following the termination of this
Agreement. The right to the name may also be withdrawn by you during the term of
this Agreement upon thirty (30) days' written notice by you to the Trust.
Nothing contained herein shall impair or diminish in any respect, your right to
use the name "Lake Forest" in the name of, or in connection with, any other
business enterprises with which you are or may become associated. There is no
charge to the Trust for the right to use these names.
8. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, and no amendment of this Agreement shall be effective until
approved by the Board, including a majority of the trustees who are not
interested persons of your or the Trust, cast in person at a meeting called for
the purpose of voting on such approval, and (if required under current
interpretations of the Act by the Securities and Exchange Commission) by vote of
the holders of a majority of the outstanding voting securities of the series to
which the amendment relates.
9. LIMITATION OF LIABILITY TO TRUST PROPERTY
The term "The Lake Forest Funds" means and refers to the Trustees from
time to time serving under the Trust's Declaration of Trust as the same may
subsequently thereto have been, or subsequently hereto be, amended. It is
expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the trustees, shareholders, nominees, officers, agents, or
employees of the Trust, personally, but bind only the trust property of the
Trust, as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the trustees and
shareholders of the Trust and signed by officers of the Trust, acting as such,
and neither such authorization by such trustees and shareholders nor such
execution and delivery by such officers shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Trust as provided in its
Declaration of Trust. A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of the State of Ohio.
10. SEVERABILITY
In the event any provision of this Agreement is determined to be void or
unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
11. QUESTIONS OF INTERPRETATION
(a) This Agreement shall be governed by the laws of the State of Ohio.
- 4 -
<PAGE> 5
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Investment Company Act of 1940, as amended (the "Act") shall be resolved
by reference to such term or provision of the Act and to interpretation
thereof, if any, by the United States courts or in the absence of any
controlling decision of any such court, by rules, regulations or orders of the
Securities and Exchange Commission issued pursuant to such Act. In addition,
where the effect of a requirement of the Act, reflected in any provision of
this Agreement is revised by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect
of such rule, regulation or order.
12. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and your address
for this purpose shall be One Westminster Place, Lake Forest, Illinois
60045-1821.
13. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14. BINDING EFFECT
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
15. CAPTIONS
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
upon the date hereof.
Yours very truly,
THE LAKE FOREST FUNDS
By: /s/ Irving V. Boberski
-------------------------------
Irving V. Boberski, President
ACCEPTANCE
The foregoing Agreement is hereby accepted.
BOBERSKI & COMPANY
By: /s/ Irving V. Boberski
-------------------------------
Irving V. Boberski, President
- 5 -
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement (Form
N-1A), and related Statement of Additional Information of The Lake Forest Funds
and to the inclusion of our report dated March 27, 1997 to the Shareholders and
Board of Trustees of The Lake Forest Funds.
/s/McCurdy & Associates CPA's, Inc.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
April 28, 1997
<PAGE> 1
EXHIBIT 11(b)
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees of
The Lake Forest Funds:
We have audited the accompanying statement of assets and liabilities of the
Lake Forest Funds (comprising, respectively, the Core Equity Fund and the
Money Market Fund), including the schedule of portfolio investments, as of
February 28, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for the year in the period then
ended, and financial highlights for each of the two years in the period then
ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held
by the custodian as of February 28, 1997, by correspondence with the custodian.
An audit also included assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Lake Forest Funds as of February
28, 1997, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
March 27, 1997
