<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
LAKE FOREST MONEY MARKET FUND
FEBRUARY 28, 1997
<C> <S> <C>
Principal Market Value
- --------- ------------
SHORT TERM DEBT 100.37%
U.S. GOVERNMENT OBLIGATIONS 100.36%
3,000,000 FHLMC Disc. Note 5.30%,due 03/03/97 2,999,116
28,000 FHLMC Disc. Note 5.33%,due 03/03/97 27,992
-----------
Total 3,027,108
(cost $ 3,027,108) -----------
Shares
- ------
118 Star Treasury Fund .01%
(cost $118) 118
-----------
TOTAL INVESTMENTS 100.37%
(cost $3,027,266) $ 3,027,226
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
LAKE FOREST CORE EQUITY FUND
FEBRUARY 28, 1997
<C> <S> <C>
Shares Market Value
------ ------------
COMMON STOCKS 98.81%
AEROSPACE/DEFENSE 7.34%
1000 Boeing Company...................... $ 101,750
1000 Lockheed Martin Corporation......... 88,500
----------
190,250
----------
AUTOS AND TRUCKS 5.68%
400 Chrysler Corporation................ 13,550
2,300 Ford Motor Company.................. 75,613
1,000 General Motors...................... 57,875
----------
147,038
----------
BEVERAGES 3.88%
1,000 Coca Cola Company.................... 61,000
1,200 Pepsico,Inc.......................... 39,450
----------
100,450
CHEMICALS 11.33%
1,000 DuPont (E.I.) De Ne Mours........... 107,250
200 Eastman Chemical Company............. 11,025
3,000 Monsanto Company..................... 109,125
1,400 Union Carbide Corp Hldg Co........... 66,150
----------
293,550
----------
COMPUTER SOFTWARE/SVCS 3.64%
1,000 Cisco Systems, Inc*.................. 55,375
400 Microsoft Corporation*............... 38,950
----------
94,325
----------
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
LAKE FOREST CORE EQUITY FUND
FEBRUARY 28, 1997
Shares Market Value
------ ------------
COSMETICS & TOILETRIES 1.39%
300 Procter & Gamble..................... $ 36,038
---------
ELECTRONICS - SEMICONDUCTORS 8.37%
500 Intel Corporation.................... 70,937
1,388 Lucent Technology.................... 74,778
1,000 Motorola Inc......................... 55,875
200 Texas Instruments Inc................ 15,425
--------
217,015
---------
ELECTRONICS - COMPUTERS 8.37%
1,200 Compaq Computer Corporation*.......... 95,100
200 International Business Machines Corp.. 28,750
137 NCR Corp*............................. 4,521
--------
128,371
--------
FINANCIAL - BANKS, REGIONAL 5.79%
600 Mellon Bank Corp..................... 48,225
2,400 PNC Bank Corporation................. 101,700
----------
149,925
----------
FOOD - DIVERSIFIED 9.84%
1,200 General Mills Inc.................... 78,300
1,000 Kellogg Co........................... 68,500
800 Phillip Morris Companies Inc......... 108,100
-------
254,900
-------
MANFACTURING - DIVERSIFIED 4.20%
600 General Electric Company............. 61,725
1,200 Tenneco Inc.......................... 47,250
-------
108,975
-------
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
LAKE FOREST CORE EQUITY FUND
FEBRUARY 28, 1997
Shares Market Value
- ------ ------------
MONEY CENTER BANKS 6.49%
2,000 Bank Of New York, Inc................ $ 77,500
1,000 Bankers Trust Co..................... 90,750
---------
168,250
---------
OIL/GAS - INTERGRATED 7.08%
1,000 Amoco Corp........................... 84,500
1,000 Texaco Inc........................... 98,875
--------
183,375
--------
PHARMACEUTICALS 8.06%
1,550 Abbott Laboratories.................. 87,188
1,000 American Home Products Corp.......... 64,000
1,000 Johnson & Johnson.................... 57,625
---------
208,813
---------
PIPELINES 2.30%
1,111 El PASO ENERGY...................... 59,577
---------
RETAIL 2.62%
400 Federated Department Stores*......... 13,900
1,000 McDonalds Corp....................... 43,250
200 Sears, Roebuck & Co.................. 10,850
--------
68,000
--------
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
LAKE FOREST CORE EQUITY FUND
FEBRUARY 28, 1997
Shares Market Value
- ------ ------------
SHIPBUILDING 0.14%
240 Newport News Shipbuilding............ $ 3,720
---------
UTILITIES- TELECOMMUNICATIONS 3.38%
2,200 AT & T................................. 87,725
---------
UTILITIES- ELECTRIC 2.33%
2,600 Houston Industries Inc............... 60,450
---------
TOTAL COMMON STOCKS..................... 2,560,747
(cost $2,218,004)
---------
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
LAKE FOREST CORE EQUITY FUND
FEBRUARY 28, 1997
Shares Market Value
- ------ ------------
SHORT TERM DEBT 1.19%
30,000 Fed Home Loan Mtg Disc 5.33%, 03/03/97.. $ 29,991
843 Star Treasury Fund........................ 843
--------
TOTAL SHORT TERM DEBT
(cost $30,834)........................... 30,834
--------
TOTAL INVESTMENTS
(cost $2,248,838)............ 100.00% $2,591,581
==========
<FN>
* Non-income producing
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
LAKE FOREST FUNDS
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1997
<S> <C> <C>
CORE MONEY
ASSETS: EQUITY MARKET
------ ------
Investments in securities, at value (cost
$2,218,004 and $3,027,108 respectively).. $2,560,747 $3,027,108
Short term investment..................... 30,834 118
Receivable for dividends and interest..... 6,776 2
Other assets.............................. 0 1,000
---------- ----------
Total assets 2,598,357 3,028,228
---------- ----------
LIABILITIES:
Payable for fund shares purchased.......... 4,850 0
Accrued advisory fee....................... 1,859 269
Dividends payable.......................... 57 11,752
---------- ---------
Total Liabilities 6,766 12,021
---------- ---------
NET ASSETS:
Net assets (equivalent to $20.04 and
$1.00 per share based on 129,323 and
3,016,207 shares, respectively, of
capital stock outstanding)............. $ 2,591,591 $3,016,207
=========== ==========
Composition of Net Assets:
Paid in capital......................... $ 2,241,712 $3,016,207
Accumulated net investment income...... 7,359 0
Accumulated net realized gain (loss) on
investments............................ (223) 0
Net unrealized appreciation on
investments............................ 342,743 0
------------ -----------
NET ASSETS, February 28, 1997 $ 2,591,591 $3,016,207
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
LAKE FOREST FUNDS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1997
<S> <C> <C>
CORE EQUITY MONEY MARKET
----------- ------------
INVESTMENT INCOME:
Interest $ 12,151 $112,459
Dividends 38,645 0
-------- --------
Total Investment Income 50,796 112,459
-------- --------
EXPENSES (NOTE 3):
Advisory Fee 16,291 2,676
Interest Expense 20 0
-------- --------
Total Expenses 16,311 2,676
-------- --------
NET INVESTMENT INCOME 34,485 109,783
-------- ---------
Net realized gain on
security transactions 946 0
Net change in unrealized
appreciation on investments 279,662 0
-------- --------
Net gain on investments 280,608 0
-------- --------
Net increase in net assets
resulting from operations $ 315,093 $109,783
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
LAKE FOREST MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
For the year For the year
ended ended
February 28,1997 February 29,1996
--------------- ----------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income.................. $ 109,783 $ 63,254
Net realized gain on securities
transactions.......................... 0 0
Net change in unrealized appreciation
of investments........................ 0 0
---------- -----------
Net increase in net assets resulting
from operations........................ 109,783 63,254
---------- -----------
DISTRIBUTION TO SHAREHOLDERS:
From net investment income............. (109,783) (63,254)
From net realized gain on investments.. 0 0
FUND SHARE TRANSACTIONS:
Net increase in net assets from fund
share transactions (Note 4)............. 1,229,298 1,736,909
---------- ----------
NET ASSETS:
Beginning of period..................... 1,786,909 50,000
---------- ---------
End of period...........................$3,016,207 $ 1,786,909
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
LAKE FOREST CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
For the year For the year
ended ended
February 28, 1997 February 29,1996
----------------- ----------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income................. $ 34,485 $ 22,553
Net realized gain on securities
transactions......................... 946 45,595
Net change in unrealized appreciation
of investments....................... 279,662 63,081
---------- -----------
Net increase in net assets resulting
from operations...................... 315,093 131,229
---------- -----------
DISTRIBUTION TO SHAREHOLDERS:
From net investment income............ (32,811) (16,868)
From net realized gain on investments. (33,502) (13,262)
FUND SHARE TRANSACTIONS:
Net increase in net assets from fund
share transactions (Note 4)............ 1,327,060 864,652
---------- ----------
NET ASSETS:
Beginning of period.................... 1,015,751 50,000
---------- ---------
End of period (including
undistributed investment income of
$7,360 and $10,996 respectively)...... $2,591,591 $ 1,015,751
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
LAKE FOREST MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<S> <C> <C>
For the year For the year
ended ended
February 28,1997 February 29, 1996
---------------- -----------------
Net asset value -
beginning of period............... $ 1.00 $ 1.00
Income from investment operations
Net investment income............... .05 .06
Net realized gain on investments... .00 .00
------ -------
Total from investment operations.... .05 .06
Less distributions
Dividends from net investment income.. (.05) (.06)
Dividends from capital gains.......... .00 .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........................... .125% .08%
Ratio of net investment income to
average net assets................... 5.13% 5.50%
Portfolio turnover rate............... .00% .00%
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
LAKE FOREST CORE EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<S> <C> <C>
For the year For the year
ended ended
February 28, 1997 February 29, 1996
----------------- -----------------
Net asset value -
beginning of period............... $17.34 $15.00
Income from investment operations
Net investment income............... .39 .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.. (.37) (.15)
Dividends from capital gains.......... (.39) (.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% .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..... $0.130704
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS- FEBRUARY 28, 1997
NOTE 1. ORGANIZATION
The Lake Forest Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust was 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").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIEs
The following is a summary of significant accounting policies followed by
the Funds in the preparation of its financial statements.
Security Valuation-Securities which are traded on any exchange or on the
NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking
a last sale price, a security is valued at its last bid price except when the
last bid price does not accurately reflect the current value of the security.
All other securities for which over-the-counter market quotations are readily
available are valued at their last bid price. When market quotations are not
readily available, when it is determined that the last bid price does not
accurately reflect the current value or when restricted securities are being
valued, such securities are valued as determined in good faith by a pricing
committee, in conformity with guidelines adopted by and subject to review of the
Board of Trustees of the Trust.
Fixed income securities generally are valued by using market quotations,
but may be valued on the basis of prices furnished by a pricing service when the
Adviser believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. When prices are not readily available from
a pricing service, or when restricted or illiquid securities are being valued,
securities are valued at fair value as determined in good faith by a pricing
committee, subject to review of the Board of Trustees. Short term investments in
fixed income securities with maturities of less than 60 days when acquired, or
which subsequently are within 60 days of maturity, are valued (except for the
Money Market Fund) by using the amortized cost method of valuation, which the
Board has determined will represent fair value.
Options Transactions-The Equity Fund may write covered put and call
options on individual securities, write covered put and call options on stock
indices traded on a securities exchange and engage in related closing
transactions. A put (call) option on a security is an agreement to buy (sell) a
particular portfolio security if the option is exercised at a specified price,
or before a set date. An option on a stock index gives the holder the right to
receive, upon exercising the option, a cash settlement amount based on the
difference between the exercise price and the value of the underlying stock
index. To cover the potential obligations involved in these option transactions,
the Fund will own the underlying equity security (for a call option); will
segregate with the Custodian high grade liquid debt obligations equal to the
option exercise price (for a put option); or (for an option on a stock index)
will either hold a portfolio of stocks substantially replicating the movement of
the index or, to the extent the Fund does not hold such a portfolio, will
segregate with the Custodian high grade liquid debt obligations equal to the
market value of the stock index option, marked to market daily. Risks associated
with writing options include the possible inability to effect closing
transactions at favorable prices and an appreciation limit on the securities set
aside for settlement, as well as (in the case of an option on a stock index)
exposure to an indeterminate liability. There is no assurance of liquidity in
the secondary market for purposes of closing out option positions. Also, the
Equity Fund may purchase put
<PAGE>
Lake Forest Funds
Notes to Financial Statements (Continued)
February 28, 1997
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 securities or securities the Fund intends to
buy. The Fund may also sell put and call options in closing transactions.
Premiums received from put or call options written are recorded as an
asset with an equal liability which is marked-to-market daily with any
difference between the option's current market value and premiums received
recorded as an unrealized gain or loss. If the option is not exercised, premiums
received are realized as a gain at the expiration date. If the position is
closed prior to expiration, a gain or loss is realized based on premiums
received less the cost of the closing transaction. When an option is exercised,
premiums received are added to the proceeds from the sale of the underlying
securities and a gain or loss is realized accordingly.
Put and call options purchased are accounted for in the same manner as
portfolio securities. The cost of securities acquired through the exercise of
call options is increased by premiums paid. The proceeds from securities sold
through the exercise of put options are decreased by the premiums paid.
Federal Income Taxes-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 invesment income and
any realized capital gains.
Dividends and Distributions-Each Fund intends to distribute substanitally
all of its net invesment 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.
Other- Each Fund follows industry practice and records security
transactions on the trade date. The specific identification method is used for
determining gains or losses for financial statements and income tax purposes.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrued basis. Discounts and premiums on securities purchased are
amortized over the life of the respective securities.
Estimates- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
Lake Forest Funds
Notes to Financial Statements (Continued)
February 28, 1997
NOTE 3. INVESTMENT ADVISORY AGREEMENT
The Trust has an investment advisory agreement with Boberski & Company.
Under the terms of the management agreement, the Adviser manages the Fund's
investments subject to the supervision of the Board of Trustees and pays all of
the operating expenses of the Fund except brokerage, taxes, interest and
extraordinary expenses. The Funds are responsible for payment of expenses
incurred in connection with the organization and initial registration of their
shares. As compensation for its management services and agreement to pay the
Funds' expenses, the Funds are obligated to pay the Adviser a fee computed and
accrued daily and paid monthly at an annual rate of 1.00% of the average daily
net assets of the Equity Fund and .50% of the average daily net assets of the
Money Market Fund. The adviser has agreed to cap the fee for the Money Market
Fund at 0.125% at least through the fiscal year ended February 28, 1997. In this
regard, it should be noted that most investment companies pay their own
operating expenses directly, while each Fund's expenses except those specified
above are paid by the Adviser.
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. For the year ended February 28, 1997, the Adviser has received a fee
of $16,291 from the Core Equity Fund and $2,671 from the Money Market Fund.
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of February 28, 1997 there was an unlimited number of no par value
shares of capital stock authorized for each fund.
<TABLE>
<S> <C> <C> <C> <C>
Transactions in capital stock were as follows:
Core Equity Money Market
-------------- -----------------
For the year For the year
ended ended
February 28, 1997 February 28, 1997
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 119,842 $2,188,004 2,559,936 $ 2,559,936
Shares issued in reinvestment
of dividends 3,705 65,903 95,988 95,988
Shares redeemed (52,799) (926,847) (1,426,626) (1,426,626)
------- --------- --------- ---------
Net increase 70,748 $1,327,060 1,229,298 $ 1,229,298
======= ========= ========= =========
Total paid in capital $2,241,711 $ 3,016,207
========= =========
</TABLE>
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS (cont.)
FEBRUARY 28, 1997
NOTE 5. INVESTMENTS
For the year ended February 28, 1997, purchases and sales of investment
securities, other than short-term investments, for the Core Equity Fund,
aggregated $1,272,768 and $0 respectively. The gross unrealized appreciation for
all securities totaled $363,928 and the gross unrealized depreciation for all
securities totaled $21,185 or a net unrealized appreciation of $342,743. The
aggregate cost of securities for federal income tax purposes at February 28,
1997 was $2,248,838.
Transactions for all options written in the Core Equity Fund during the
year ended February 28, 1997 were as follows:
<TABLE>
<S> <C> <C>
Number of
Contracts Premiums
------------ -----------
Options written 175 $ 944
Options expired (175) (944)
---------- ----------
Options outstanding at February 28, 1997 0 $ 0
========= ==========
</TABLE>
NOTE 6. MAJOR SHAREHOLDERS
As of February 28, 1997 the Boberski family may be deemed to control the
Lake Forest Money Market Fund , as a result of their respective beneficial
ownership of the shares of the Funds.
NOTE 7. REVOLVING CREDIT AGREEMENT
In order to meet shareholder redemption requests pending liquidation of
the portfolio assets, the Lake Forest Core Equity Fund has established a
revolving credit agreement with Star Bank, N.A. payable by February 6, 1997,
with maximum borrowings outstanding at one time not to exceed $250,000. Any
borrowings would bear interest at the Bank's prime rate, payable quarterly, and
would be secured by the Fund's securities. At February 28, 1997, there were no
outstanding liabilities under this agreement.
NOTE 8. DISTRIBUTIONS TO SHAREHOLDERS
For the year ended February 28, 1997, the Core Equity Fund made a
distribution of $ .39 aggregating $33,502 from short term capital gains that are
taxable as ordinary income dividends, and quarterly distributions totaling $ .37
aggregating $ 32,811 from net investment income.
For the year ended February 28, 1997, the Money Market Fund made a monthly
distribution totaling $ .05 aggregating $109,783 from net investment income.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To The Shareholders and
Board of Trustees
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 each of the two years in the period then
ended, and financial highlights for each of the two years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Funds' 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.
/s/ McCurdy & Associates, CPA's, Inc.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
March 27, 1997
<PAGE>
LAKE FOREST FUNDS
Annual Report, Fiscal Year Ended 2/28/97
Lake Forest Core Equity Fund (LFCEX)
Value of a $10,000 Investment vs. S&P 500 (SPX)
[Graph appears here]
This graph compares the performance of the fund against its Benchmark (S&P 500).
The following chart describes the returns and performance that this graph
depicts.
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN, %
1 YEAR 2 YEARS SINCE INCEPTION, 3/1/95
20.65 19.52 19.52
</TABLE>
Past Performance is not predictive of future performance.
The past year was another favorable one for Lake Forest Funds and each
of our mutual fund entities. The funds performed well in generally receptive
market conditions. Economic activity remained strong during the period, raising
concerns by monetary authorities about the potential for inflationary pressure.
Potential inflationary pressures are not, however, visible in the national
economic data. Warranted or not, short-term interest rates were raised in early
1997 and financial markets responded with increased volatility.
Higher short-term rates immediately benefited the Lake Forest Money
Market Fund shareholders. Public statements by the Federal Reserve Chairman, in
fact, pushed short-term rates higher in anticipation of the actual policy
change. The stock market has responded negatively to the policy change, with
declining prices and increased price volatility. While stock prices are
influenced more by corporate earnings and by long-term rates, uncertainty about
public policy also affects prices.
Excellent performance by the Lake Forest Core Equity Fund was sustained
last year in a favorable market for blue chips. We search for companies that
enjoy superior technology, financial and management resources, and low cost
production structures. Because stock prices discount futures earnings, our
selection process places considerable emphasis on demonstrable earnings
potential. In many cases, these large companies are creating shareholder value
by spinning off secondary activities to more effectively focus their resources.
Audited financial statements for the full fiscal year are enclosed for
your information. They include schedules of portfolio investments and financial
highlights for each fund that are prepared in accordance with industry
standards. We believe that your funds are very well positioned to benefit from
market trends during the coming year.
/s/ Irving V. Boberski, CEO
-Irving V. Boberski, CEO
For more complete information, including management fees, expenses and risk
considerations, you may also obtain a prospectus by calling 888.295.5707. Read
it carefully before you invest. Past performance is no guarantee of future
results.
MARKETING SERVICES: 888.295.5707 SHAREHOLDER SERVICES: 800.592.7722
