LAKE FOREST FUNDS
SEMI-ANNUAL REPORT
AUGUST 31, 1998
Unaudited
<PAGE>
To Our Shareholders:
The United States economic outlook remains strong despite currency
problems in Asian and a worldwide flight to quality in financial markets.
Political and economic developments in Russia, and the intense media coverage,
have created an exaggerated concern about credit quality even though Russia is
not a major U.S. trading partner and its securities are not widely held.
Domestic monetary policy has been responsive to this situation and liquidity is
gradually being restored to the financial markets.
Our funds have benefited from the flight to quality: the Lake Forest
Money Market Fund portfolio holds only short-term U.S. Government securities,
and the Lake Forest Core Equity Fund portfolio consists of stock in well-known
companies that have proven their consistency and value over many years. Each of
the funds has again doubled in size during the year ended August 31, 1998. They
also continue to receive national recognition for their performance.
Volatile markets can be distracting, even to investors with sound
long-term strategies. Media coverage of Russian default, for example, can create
the impression that one is at risk in these situations even though that is not
the case. The natural reaction is to abandon proven long-term strategies and run
for cover even though experience has shown the folly of trying to time the
markets. When you hold a quality portfolio, an international flight to quality
works in your favor.
Unaudited financial statements for the period ended August 31st 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. The statements demonstrate a consistency of style in
portfolio management that you have come to expect.
Irving V. Boberski
Chief Executive Officer
<PAGE>
LAKE FOREST CORE EQUITY FUND (LFCEX)
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR FOR THE YEAR FOR THE YEAR
AUGUST 31, 1998 ENDED ENDED ENDED
(UNAUDITED) FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 25.89 $ 20.04 $ 17.34 $ 15.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.12 0.31 0.39 0.56
Net realized and unrealized gain/(loss) on investments (2.12) 5.83 3.07 2.13
--------- --------- --------- ---------
Total from investment operations ..................... (2.00) 6.14 3.46 2.69
--------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income ................. (0.14) (0.29) (0.37) (0.15)
Distribution from realized gains from security
transactions ..................................... 0.00 0.00 (0.39) (0.20)
--------- --------- --------- ---------
Total distributions .................................. (0.14) (0.29) (0.76) (0.35)
--------- --------- --------- ---------
Net asset value, end of period ....................... $ 23.75 $ 25.89 $ 20.04 $ 17.34
========= ========= ========= =========
Total return ......................................... (7.65%) 30.87% 20.65% 18.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ................. $ 9,087 $ 7,890 $ 2,592 $ 1,016
Ratio of expenses to average
net assets (Note 3) ................................ 1.26%* 1.19% 1.00% 0.45%
Ratio of net investment income to
average net assets ................................. 1.03%* 1.32% 2.10% 3.89%
Portfolio turnover rate .............................. 0.00% 0.00% 0.00% 129.77%
<FN>
* Annualized
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
LAKE FOREST MONEY MARKET FUND (LFMXX)
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR FOR THE YEAR FOR THE YEAR
AUGUST 31, 1998 ENDED ENDED ENDED
(UNAUDITED) FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
--------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.03 0.05 0.05 0.06
Net realized and unrealized gain on investments 0.00 0.00 0.00 0.00
------- ------- ------- -------
Total from investment operations .............. 0.03 0.05 0.05 0.06
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.03) (0.05) (0.05) (0.06)
Distribution from realized gains from security
transactions .............................. 0.00 0.00 0.00 0.00
------- ------- ------- -------
Total distributions ........................... (0.05) (0.05) (0.05) (0.06)
------- ------- ------- -------
Net asset value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total return .................................. 5.56%* 5.51% 5.13% 5.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .......... $ 8,342 $ 5,332 $ 3,016 $ 1,787
Ratio of expenses to average
net assets (Note 3) ......................... 0.125%* 0.125% 0.125% 0.08%
Ratio of net investment income to
average net assets .......................... 5.38%* 5.38% 5.13% 5.50%
Portfolio turnover rate........................ 0.00% 0.00% 0.00% 0.00%
<FN>
* Annualized
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
LAKE FOREST FUNDS
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
(Unadited)
<TABLE>
<CAPTION>
CORE MONEY
EQUITY MARKET
------ -------
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $8,450,976 and $8,375,000,
respectively) (Note 2) ............................ $ 9,147,000 $ 8,375,000
Receivable for fund shares sold ......................... 18,877 13,699
Receivable from interest and dividends .................. 17,621 0
----------- -----------
Total Assets ...................................... 9,183,498 8,388,699
----------- -----------
LIABILITIES:
Payables:
Fund shares redeemed .............................. $ 86,286 $ 0
Advisory fees (Note 3) ............................ 9,843 780
Dividends payable ................................. 0 44,984
Other payables .................................... 0 870
----------- -----------
Total Liabilities ................................. 96,129 46,634
----------- -----------
Net Assets ........................................ $ 9,087,369 $ 8,342,065
=========== ===========
NET ASSETS CONSIST OF:
Additional paid in capital ........................ $ 8,376,353 $ 8,342,065
Accumulated net investment income ................. 15,164 0
Accumulated net realized loss from
investment transactions ......................... (172) 0
Net unrealized appreciation on
investments ..................................... 696,024 0
----------- -----------
Net Assets ........................................ $ 9,087,369 $ 8,342,065
=========== ===========
Net asset value and redemption
price per share
($9,087,369/382,553 and $8,342,065/8,342,065 shares
of capital stock outstanding, respectively)
(Note 4 ) ......................................... $ 23.75 $ 1.00
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
LAKE FOREST FUNDS
STATEMENTS OF OPERATIONS
For the six months ended August 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
CORE MONEY
EQUITY MARKET
------ ------
<S> <C> <C>
INVESTMENT INCOME:
Dividend ............................................ $ 65,603 $ 0
Interest ............................................ 37,742 202,534
--------- ---------
103,345 202,534
Expenses:
Advisory fee ........................................ $ 56,807 $ 4,554
--------- ---------
Total expenses .......................... 56,807 4,554
--------- ---------
Net investment income ................... 46,538 197,980
--------- ---------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
(Note 2)
Net realized gain from investment
transactions ............................ 41 0
Net decrease in unrealized appreciation of
investments ............................. (910,354) 0
--------- ---------
Net realized and unrealized loss
on investments .......................... (910,313) 0
--------- ---------
Net increase/(decrease) in net assets resulting
from operations ......................... $(863,775) $ 197,980
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
SCHEDULE OF INVESTMENTS
LAKE FOREST CORE EQUITY FUND
AUGUST 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ------ ------------
<S> <C>
COMMON STOCKS - 90.22%
AEROSPACE/DEFENSE - 4.31%
5,500 Boeing Co. .................................. $170,156
2,500 Lockheed Martin Corp. ....................... 218,594
63 Raytheon Co. Cl A ........................... 2,823
--------
391,573
--------
AUTOS AND TRUCKS - 2.91%
400 Chrysler Corp. .............................. 17,850
4,300 Ford Motor Co. .............................. 189,200
1,000 General Motors Corp. ........................ 57,750
--------
264,800
--------
BEVERAGES - 1.08%
1,000 Coca Cola Co. ............................... 65,125
1,200 Pepsico Inc. ................................ 33,225
--------
98,350
--------
CHEMICALS - 8.74%
8,000 DuPont (E.I.) De Ne Mours ................... 461,500
200 Eastman Chemical Co. ........................ 10,313
4,500 Monsanto Co. ................................ 246,094
900 Solutia Inc. ................................ 20,194
1,400 Union Carbide Corp Hldg. Co. ................ 56,262
--------
794,363
--------
COMPUTERS-INFORMATION TECH - 0.04%
137 + NCR Corp. ................................... 3,622
--------
COMPUTERS MAIN FRAME - 0.50%
400 International Business Machines Corp. ....... 45,050
--------
COMPUTERS-MICRO - 1.85%
6,000 Compaq Computer Corp. ....................... 167,625
--------
COMPUTER SOFTWARE/SERVICES - 2.11%
2,000 + Microsoft Corp. ............................. 191,875
--------
COSMETICS & TOILETRIES - 5.05%
6,000 Proctor & Gamble Co. ........................ 459,000
--------
DIVERSIFIED FINANCIAL SERVICES - 0.73%
1,126 Associates First Capital Corp Cl A .......... 66,575
--------
DIVERSIFIED MANUFACTURING - 4.40%
5,000 General Electric Co. ........................ 400,000
--------
ELECTRIC-INTEGRATED - 0.82%
2,600 Houston Industries Inc. ..................... 74,913
--------
ELECTRONICS-SEMICONDUCTORS - 2.25%
2,000 Intel Corp. ................................. 142,375
1,000 Motorola Inc. ............................... 43,062
400 Texas Instruments Inc. ...................... 19,075
--------
204,512
--------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ------ ------------
<S> <C>
FINANCIAL-BANKS, COMMERCIAL - 11.29%
12,000 Bank of New York Co. Inc. ............ 290,250
7,200 Mellon Bank Corp. .................... 374,400
8,400 PNC Bank Corp. ....................... 361,200
---------
1,025,850
---------
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.67%
2,000 Kellogg Co. .......................... 61,000
---------
FOOD-PROCESSING - 0.86%
1,200 General Mills Inc. ................... 78,525
---------
MEDICAL-DRUGS - 5.81%
4,000 American Home Products Corp. ......... 200,500
5,000 Lilly (Eli) & Co. .................... 327,500
---------
528,000
---------
MEDICAL PRODUCTS - 2.28%
3,000 Johnson & Johnson .................... 207,000
---------
MONEY CENTER BANKS - 4.13%
2,000 Bankers Trust New York Corp. ......... 148,625
2,100 Citicorp ............................. 227,063
---------
375,688
---------
NETWORKING PRODUCTS - 4.96%
5,500 + Cisco Systems Inc. ................... 450,312
---------
OIL-FIELD SERVICES - 2.41%
5,000 Schlumberger Ltd. .................... 219,062
---------
OIL/GAS-DOMESTIC - 0.42%
1,200 Tenneco Inc. ......................... 38,025
---------
OIL/GAS-INTERNATIONAL - 4.20%
4,000 Amoco Corp. .......................... 181,250
3,600 Texaco Inc. .......................... 200,025
---------
381,275
---------
PIPELINES - 0.61%
2,222 El Paso Energy Corp. ................. 55,133
---------
PHARMACEUTICALS - 2.16%
5,100 Abbott Laboratories .................. 196,350
---------
RETAIL-DEPARTMENT STORES - 2.79%
400 + Federated Department Stores Inc. ..... 17,425
5,200 Sears Roebuck & Co. .................. 236,275
---------
253,700
---------
RETAIL-RESTAURANTS - 4.37%
7,000 McDonalds Corp. ...................... 392,438
120 + Tricon Global Restaurants Inc. ....... 4,447
---------
396,885
---------
SHIPBUILDINGS - 0.06%
240 Newport News Shipbuilding Inc. ....... 5,640
---------
TELECOMMUNICATION EQUIPMENT - 2.17%
2,776 Lucent Technologies Inc. ............. 196,749
---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ------ ------------
<S> <C>
TELEPHONE-LONG DISTANCE - 3.31%
6,000 AT&T Corp. ........................... 300,750
-----------
TOBACCO - 2.93%
6,400 Phillip Morris Companies Inc. ........ 266,000
-----------
TOTAL COMMON STOCKS
(Cost $5,566,664) .................... 8,198,202
-----------
SHORT-TERM DEBT - 8.83%
947,000 Federal Home Loan Bank Disc Note
5.70%, due 09/01/98
(Cost $947,000) ...................... 947,000
-----------
SHORT-TERM INVESTMENTS - 0.01%
1,798 Star Treasury Fund
(Cost $1,798) ........................ 1,798
-----------
Total Investments at Market
(Cost $8,450,976) .............100.66% 9,147,000
Liabilities in excess of
Other Assets..................(0.66%) (59,631)
---------------------
Total Net Assets ..............100.00% $9,087,369
=====================
(1) Federal Tax Information: At August 31, 1998 the net unrealized
appreciation based on cost for Federal Income tax purposes of $8,450,976
was as follows:
Aggregate gross unrealized apprecation
for all investments for which there was an
excess of value over cost................. $1,093,269
Aggregate gross unrealized deprecation for
all investments for which there was an
excess of cost over value................. (397,245)
-------------
Net unrealized appreciation............... $696,024
=============
<FN>
+ Denotes non-income producing security
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
SCHEDULE OF INVESTMENTS
LAKE FOREST MONEY MARKET FUND
AUGUST 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ---------------- ------------
<S> <C>
SHORT-TERM DEBT - 100.39%
8,375,000 Federal Home Loan Bank Disc Note
5.70%, due 09/01/98
(Cost $8,375,000)....................... $8,375,000
----------
Total Investments
(Cost $8,375,000) 100.39% 8,375,000
Liabilities in excess of Other Assets (0.39%) (32,935)
-----------------------
100.00% $8,342,065
========================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
LAKE FOREST CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
AUGUST 31, ENDED
1998 FEBRUARY 28,
(UNAUDITED) 1998
----------- ------------
<S> <C> <C>
Net investment income ......................................... $ 46,538 $ 66,356
Net realized gain from investment transactions ................ 41 9
Net increase/decrease in unrealized appreciation of investments (910,354) 1,263,635
----------- -----------
Net increase/decrease in net assets resulting from operations . (863,775) 1,330,000
Distributions from net investment income ...................... (44,718) (60,371)
Distributions from net gain on investments .................... 0 0
Net capital share transactions (Note 4) ....................... 2,105,609 4,029,033
----------- -----------
Net increase in net assets .................................... 1,197,116 5,298,662
NET ASSETS:
Beginning of period ........................................... 7,890,253 2,591,591
----------- -----------
End of period (including undistributed investment income of
$15,164 and $13,344, respectively) .......................... $ 9,087,369 $ 7,890,253
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
LAKE FOREST MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
AUGUST 31, 1998 ENDED
(UNAUDITED) FEBRUARY 28, 1998
------------------- -------------------
<S> <C> <C>
Net investment income .............................. $ 197,980 $ 256,456
Net realized gain from investment transactions ..... 0 0
Net change in unrealized appreciation of investments 0 0
----------- -----------
Net increase in net assets resulting from operations 197,980 256,456
Distributions from net investment income ........... (197,980) (256,456)
Net capital share transactions (Note 4) ............ 3,010,438 2,315,420
----------- -----------
Net increase in net assets ......................... 3,010,438 2,315,420
NET ASSETS:
Beginning of period ................................ 5,331,627 3,016,207
----------- -----------
End of period ...................................... $ 8,342,065 $ 5,331,627
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
(Unaudited)
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 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. Share of two series have been
authorized, which constitute the interest in Lake Forest Core Equity Fund ("the
Equity Fund") and Lake Forest Money Market Fund (the "Money Market Fund"). The
investment objective of the Equity Fund is to provide long term capital
appreciation together with current income. The investment objective of the Money
Market Fund is to provide the highest level of current income consistent with
liquidity and security of principal.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
by the Trust 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 quotation,
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.
OPTION 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 specific price, on
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 Equity 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 index) will
either hold a portfolio of stocks substantially replicating the movement of the
index or, the extent the Equity Fund does not hold such a
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
(Continued)
(Unaudited)
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 purposes of hedging against the risk of unfavorable
price movements adversely affecting the value of the Equity Fund's securities or
securities the Equity Fund intends to buy. The Equity 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 closing the 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 comply with requirements of
the Internal Revenue Code applicable to regulated investment companies and 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 daily and pay
monthly. Each Fund intends to distribute its net long-term capital gains and its
net short-term capital gains at least once a year. Therefore no provision for
income taxes is required.
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 statement and income tax purposes.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual 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
August 31, 1998
(Continued)
(Unaudited)
NOTE 3. INVESTMENT ADVISORY AGREEMENT
The Trust has an investment advisory agreement with Boberski & Company
("the Adviser"). 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 Funds 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 1.25% 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 .125% at least through the year ended February 28,
1999. In this regard, it should be noted that most investment companies pay
their own operating expenses directly, while each Funds' expenses except those
specified above are paid by the Advisor.
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 six months ended August 31, 1998, the Adviser has
received a fee of $56,807 from the Equity Fund and $4,554 from the Money Market
Fund.
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of August 31, 1998 there was an unlimited number of no par value
shares of capital stock authorized for each Fund.
Transactions in capital stock were as follows:
CORE EQUITY CORE EQUITY
----------- -----------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 1998 FEBRUARY 28, 1998
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold 115,652 $3,114,032 199,440 $4,583,911
Shares issued in
reinvestment of dividends 1,627 43,761 2,598 59,409
Shares redeemed (39,444) (1,052,184) (26,643) (614,287)
-------- --------- -------- ----------
Net increase 77,835 $2,105,609 175,395 $4,029,033
-------- ---------- ------- ----------
Total paid in capital $8,376,353 $6,270,744
---------- ----------
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
(Continued)
(Unaudited)
MONEY MARKET MONEY MARKET
------------ ------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 1998 FEBRUARY 28, 1998
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold 3,945,746 $3,945,746 12,239,025 $12,239,026
Shares issued in reinvestment
of dividends 160,567 160,567 238,128 238,128
Shares redeemed (1,095,875) (1,095,875) (10,161,733) (10,161,733)
----------- ----------- ------------ -----------
Net increase 3,010,438 $3,010,438 2,315,420 $2,315,420
----------- ---------- ----------- ----------
Total paid in capital $8,342,065 $5,331,627
---------- ----------
NOTE 5. DISTRIBUTIONS TO SHAREHOLDERS
For the six months ended August 31, 1998, the Equity Fund made
quarterly distributions totaling $.14, aggregating $44,718 from investment
income.
For the six months ended August 31, 1998, the Money Market Fund made
monthly distributions totaling $.03, aggregating $197,980 from net investment
income.
NOTE 6. INVESTMENT TRANSACTIONS
Purchases and sales, excluding short term securities, for the six
months ended August 31, 1998 aggregated $1,935,550 and $77 respectively for the
Equity Fund.
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This 1998 Semi-Annual Report must be accompanied with or preceded by a current
prospectus of the Lake Forest Funds. Read it carefully before investing or
sending money.
