<PAGE> 1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 33-87494
POST-EFFECTIVE AMENDMENT NO. 4
And
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-8906
AMENDMENT NO. 5
THE LAKE FOREST FUNDS
One Westminister 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:
......X... Immediately upon filing pursuant to paragraph (b)
.......... on (date), pursuant to paragraph (b)
.......... 60 days after filing pursuant to paragraph (a)
.......... on July 1, 1998 pursuant to paragraph (a) of Rule 485
<PAGE> 2
THE LAKE FOREST FUNDS (formerly Lake Forest Trust)
CROSS REFERENCE SHEET
FORM N-1A
ITEM SECTION IN PROSPECTUS
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
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
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.............................. **
** Financial Statements appearing in the February 28, 1998 Annual Report are
incorporated by reference.
<PAGE> 3
PROSPECTUS JULY 1, 1998
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, 1998 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.
P.O. Box 5536
Hauppauge, New York 11788-0132
(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 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.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CORE MONEY
EQUITY MARKET
FUND FUND
---- ----
<S> <C> <C>
Maximum Sales Load Imposed on Purchases NONE NONE
Maximum Sales Load Imposed on Reinvested Dividends NONE NONE
Deferred Sales Load NONE NONE
Redemption Fees * *
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.
In addition, shareholders who maintain balances below the required minimum
balance may be subject to a $5.00 charge per month that the account is below
the required minimum. See "How to Redeem Shares -- Additional Information" for
more information.
ANNUAL FUND OPERATING (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 waived the Management Fees over 0.125% for the Money
Market Fund for an indeterminate period of time. Without such a waiver,
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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<PAGE> 5
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>
The tables are here to help you understand the various expenses that you, as an
investor, in the Fund will bear and are based on the Funds' expenses for the
year ended February 28, 1998. The 5% rate used in the example is only for
illustration and is not intended to be indicative of the future performance of
the Funds, which may be more or less than the assumed rate. Actual expenses
may be greater or lesser than those shown.
THE FUNDS
Lake Forest Core Equity Fund and Lake Forest Money Market Fund (the
"Funds") are a 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.
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<PAGE> 6
Under normal circumstances, at least 65% of the total assets of the Fund
will be invested in equity securities. The Adviser generally intends to stay
fully invested (subject to liquidity requirements and defensive purposes) in
common stock and common stock equivalents (such as rights, warrants and
securities convertible into common stocks) regardless of the movement of stock
prices. However, the Fund may invest in preferred stocks, bonds, corporate debt
and U.S. government obligations when the Adviser believes that these securities
offer opportunities to further the Fund's investment objective. The Fund
normally will invest primarily in common stocks of established companies that
have a record of at least three years continuous operation, and whose
securities, in the opinion of the Adviser, enjoy a fair degree of marketability.
Most equity securities in the Fund's portfolio are listed on major stock
exchanges or traded over-the-counter.
For temporary defensive purposes, the Fund may hold all or a portion of
its assets in money market instruments, securities of money market registered
investment companies or repurchase agreements collateralized by U.S. government
obligations. The Fund may also make such investments at any time to maintain
liquidity or pending selection of investments in accordance with its policies.
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.
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, 1998 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.
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<PAGE> 7
LAKE FOREST CORE EQUITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net asset value - beginning of period..... $ 20.04 $ 17.34 $ 15.00
Income from investment operations
Net investment income..................... 0.31 0.39 0.56
Net realized gain on investments.......... 5.83 3.07 2.13
---- ---- ----
Total from investment operations.......... 6.14 3.46 2.69
Less distributions
Dividends from net investment income...... (0.29) (0.37) (0.15)
Dividends from capital gains.............. 0.00 (0.39) (0.20)
---- ---- ----
Net asset value - end of period........... $ 25.89 $ 20.04 $ 17.34
===== ===== =====
Total Return.............................. 30.87% 20.65% 18.59%
Ratios/supplemental data
Net assets, end of period (in 000's)...... 7,890 2,592 1,016
Ratio of expenses to average net assets... 1.19% 1.00% 0.45%
Ratio of net investment income to
average net assets........................ 1.32% 2.10% 3.89%
Portfolio turnover rate................... 0.00% 0.00% 129.77%
Average commission rate per share......... $0.11 $0.13 N/A
</TABLE>
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<PAGE> 8
LAKE FOREST MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net asset value - beginning of period....... $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income....................... 0.05 0.05 0.06
Net realized gain on investments............ 0.00 0.00 0.00
---- ---- ----
Total from investment operations............ 0.05 0.05 0.06
Less distributions
Dividends from net investment income........ (0.05) (0.05) (0.06)
Dividends from capital gains................ 0.00 0.00 0.00
---- ---- ----
Net asset value - end of period............. $ 1.00 $ 1.00 $ 1.00
==== ==== ====
Total Return................................ 5.51% 5.13% 5.50%
Ratios/supplemental data
Net assets, end of period (in 000's)........ 5,332 3,016 1,787
Ratio of expenses to average net assets..... 0.125% 0.125% 0.08%
Ratio of net investment income to
average net assets.......................... 5.38% 5.13% 5.50%
Portfolio turnover rate..................... 0.00% 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
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<PAGE> 9
preferred stock, convertible debentures, rights and warrants) and investment
companies which invest primarily in the above.
Convertible preferred stock is preferred stock that can be converted into
common stock pursuant to its terms. Convertible debentures are debt instruments
that can be converted into common stock pursuant to their terms. The Adviser
intends to invest only in convertible debentures rated A or higher by Standard &
Poor's Corporation ("S&P") or by Moody's Investors Services, Inc. ("Moody's").
Warrants are options to purchase equity securities at a specified price valid
for a specific time period. Rights are similar to warrants, but normally have a
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
7
<PAGE> 10
instrumentalities of the U.S. government. Unscheduled or early payments on
the underlying mortgages may shorten the securities' effective maturities.
Other types of securities representing interests in a pool of mortgage
loans are known as collateralized mortgage obligations (CMOs) and real estate
mortgage investment conduits (REMICs) and multi-class pass-throughs. CMOs and
REMICs are debt instruments collateralized by pools of mortgage loans or other
mortgage-backed securities. Multiclass pass-through securities are equity
interests in a trust composed of mortgage loans or other mortgage-backed
securities. Payments of principal and interest on underlying collateral
provide 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
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<PAGE> 11
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 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 with the Fund, in the form of
cash or U.S. government securities, 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.
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<PAGE> 12
OPTIONS TRANSACTIONS
The Equity Fund may write covered put and call options on individual
securities, write covered put and call options on stock indices traded on a
securities exchange and engage in related closing transactions. A put (call)
option on a security is an agreement to buy (sell) a particular portfolio
security if the option is exercised at a specified price, or before a set date.
An option on a stock index gives the holder the right to receive, upon
exercising the option, a cash settlement amount based on the difference between
the exercise price and the value of the underlying stock index. To cover the
potential obligations involved in these option transactions, the Fund will own
the underlying equity security (for a call option); will segregate with the
Custodian high grade liquid debt obligations equal to the option exercise price
(for a put option); or (for an option on a stock index) will either hold a
portfolio of stocks substantially replicating the movement of the index or, to
the extent the Fund does not hold such a portfolio, will segregate with the
Custodian high grade liquid debt obligations equal to the market value of the
stock index option, marked to market daily. Risks associated with writing
options include the possible inability to effect closing transactions at
favorable prices and an appreciation limit on the securities set aside for
settlement, as well as (in the case of an option on a stock index) exposure to
an indeterminate liability. There is no assurance of liquidity in the
secondary market for purposes of closing out option positions. Also, the
Equity Fund may purchase put and call options on individual securities and on
stock indices for the purpose of hedging against the risk of unfavorable price
movements adversely affecting the value of the Fund's portfolio securities or
securities the Fund intends to buy. The Fund may also sell put and call
options in closing transactions.
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. Neither Fund intends 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.
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<PAGE> 13
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
BY MAIL--You may purchase shares of each Fund by completing and signing
the investment application form which accompanies this Prospectus and mailing
it, in proper form, together with a check (subject to the above minimum
amounts) made payable to The Lake Forest Funds, and sent to the Custodian at:
The Lake Forest Funds
c/o Star Bank, N.A.
P.O. Box 640244
Cincinnati, Ohio 45264-0244
Please identify the Fund(s) in which you wish to invest.
Your purchase of shares of the Lake Forest Core Equity Fund will be
effected at the next share price calculated after receipt of your investment.
Your order for shares of the Lake Forest Money Market Fund will not be complete
until the Fund has received federal funds. If a check for purchase of shares
is not drawn on federal funds, shares will be purchased at the next share price
calculated after the check is converted into federal funds (normally two days
or less).
BY WIRE--You may also purchase shares of each Fund by wiring federal funds
from your bank, which may charge you a fee for doing so. If money is to be
wired, you must call American Data Services, Inc., the Funds' Transfer Agent,
at (800) 592-7722 and provide the following information:
FOR THE LAKE FOREST 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 #)
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.
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<PAGE> 14
ADDITIONAL INVESTMENTS
You may purchase additional shares of either Fund at any time (minimum of
$500) by mail or wire. Each additional purchase request must contain your
name, the name of your account(s), your account number(s), and the Fund(s) in
which you wish to invest. Checks should be made payable to The Lake Forest
Funds and should be sent to the Custodian's address. A bank wire should be
sent as outlined above.
AUTOMATIC INVESTMENT OPTION
You may arrange to make additional investments ($100 minimum) automatically
on a monthly or bi-monthly basis by transfers from your checking account. You
must complete the Optional Automatic Investment Plan section of the investment
application and provide the Trust with a voided check to institute this option.
You may terminate this automatic investment program at any time, and the Fund
may modify or terminate the plan at any time.
TAX SHELTERED PLANS
Since the Funds are oriented to longer term investments, shares of the
Funds may be an appropriate investment medium for tax sheltered retirement
plans, including: individual retirement plans (IRAs); 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 Funds reserve the right to limit the amount of
purchases and to refuse to sell to any person. 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
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<PAGE> 15
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.
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.
P.O. Box 5536
Hauppauge, New York 11788-0132
"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
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<PAGE> 16
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 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. The Funds charge
an account closing fee of $15.00. 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 may be charged to accounts (except IRAs and Medical Savings Accounts)
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 adviser concerning the tax consequences of involuntary
redemptions. A shareholder may increase the value of his or her shares in the
Fund to the minimum amount within the 30 day period. Each share of each Fund
is subject to redemption at any time if the Board of Trustees determines in its
sole discretion that failure to so redeem may have materially adverse
consequences to all or any of the shareholders of the Trust or any Fund of the
Trust.
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
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<PAGE> 17
outstanding at such time, rounded to the nearest cent. For the Money Market
Fund, this is known as the penny- rounding method of pricing.
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price. Lacking a
last sale price, a security is valued at its last bid price except when the last
bid price does not accurately reflect the current value of the security. All
other securities for which over-the-counter market quotations are readily
available are valued at their last bid price. When market quotations are not
readily available, when it is determined that the last bid price does not
accurately reflect the current value or when restricted securities are being
valued, such securities are valued as determined in good faith by a pricing
committee, in conformity with guidelines adopted by and subject to review of the
Board of Trustees of the Trust.
Fixed income securities generally are valued by using market quotations,
but may be valued on the basis of prices furnished by a pricing service when
the Adviser believes such prices accurately reflect the fair market value of
such securities. A pricing service utilizes electronic data processing
techniques based on yield spreads relating to securities with similar
characteristics to determine prices for normal institutional-size trading units
of debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities are valued at fair value as determined
in good faith by a pricing committee, subject to review of the Board of
Trustees. Short term investments in fixed income securities with maturities of
less than 60 days when acquired, or which subsequently are within 60 days of
maturity, are valued (except for the Money Market Fund) by using the amortized
cost method of valuation, which the Board has determined will represent fair
value.
The Money Market Fund seeks to maintain a stable net asset value of $1.00
per share pursuant to Rule 2a-7 under the Investment Company Act of 1940. In
accordance with Rule 2a-7, the Fund will maintain a dollar-weighted average
portfolio of 90 days or less, purchase only instruments having remaining
maturities of 397 days or less (except for U.S. Government 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.
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<PAGE> 18
Each Fund intends to qualify each year as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended. By so qualifying, a Fund
will not be subject to federal income taxes to the extent that it distributes
substantially all of its net investment income and any realized capital gains.
For federal income tax purposes, each Fund is treated as a separate entity
for the purpose of computing taxable net income and net realized capital gains
and losses. Dividends paid by each Fund from ordinary income and short-term
capital gains are taxable to shareholders as ordinary income, but may be
eligible in part for the dividends received deduction for corporations. Any
distributions designated as being made from net realized long term capital
gains are taxable to shareholders as long term capital gains regardless of the
holding period of the shareholder. Distributions are taxable whether received
in cash or reinvested in additional shares.
A dividend received shortly after the purchase of shares reduces the net
asset value of the shares by the amount of the dividend, and although in effect
a return of capital, such dividend will be taxable to the shareholder. If a
shareholder realizes a loss on the sale or exchange of any shares held for six
months or less and if the shareholder received a capital gain distribution
during such six-month period, then the loss is treated as a long-term capital
loss to the extent of the capital gain distribution.
Each Fund will mail to each shareholder after the close of the calendar
year a statement setting forth the federal income tax status of distributions
made during the year. Dividends and capital gains distributions may also be
subject to state and local taxes.
If for any reason you don't provide the Funds with your correct Social
Security or Tax I.D. number (or certify that you are not subject to backup
withholding), the Funds are required by the Code to withhold 31% of taxable
dividends and proceeds of certain exchanges and redemptions.
MANAGEMENT OF THE FUNDS
Each Fund is a diversified series of The Lake Forest Funds, an open-end
management investment company organized as an Ohio business trust on November
23, 1994. The Board of Trustees supervises the 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. Currently, the Adviser voluntarily waives fees over 0.125% for
the Money Market Fund. There is no agreement to continue this reduction for any
particular period of time. 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 who refer investors to the Funds. Such fees are based
on investments made and maintained by investors 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
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<PAGE> 19
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., 150 Motor Parkway, Suite 109, Hauppauge, New
York, 11788 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
The Core Equity Fund may periodically advertise "average annual total
return." The "average annual total return" of a Fund refers to the average
annual compounded rate of return over the stated period that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions.
Each Fund may also periodically advertise its total return over various
periods in addition to the value of a $10,000 investment (made on the date of
the initial public offering of the Fund's shares) as of the end of a specified
period. The "total return" for a Fund refers to the percentage change in the
value of an account between the beginning and end of the stated period,
assuming no activity in the account other than reinvestment of dividends and
capital gains distributions.
The Money Market Fund may periodically advertise its "yield" and "effective
yield." The "yield" of the Fund refers to the income generated by an investment
in the Fund over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of
income generated 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.
P.O. Box 5536
Hauppauge, New York 11788-0132
(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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TABLE OF CONTENTS
SUMMARY OF FUND EXPENSES...................................................... 2
THE FUNDS..................................................................... 3
INVESTMENT OBJECTIVES AND STRATEGIES.......................................... 3
FINANCIAL HIGHLIGHTS.......................................................... 5
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS.................... 6
GENERAL INFORMATION...........................................................10
HOW TO INVEST IN EACH FUND....................................................10
EXCHANGE PRIVILEGE............................................................12
HOW TO REDEEM SHARES..........................................................13
SHARE PRICE CALCULATION.......................................................14
DIVIDENDS AND DISTRIBUTIONS...................................................15
TAXES.........................................................................15
MANAGEMENT OF THE FUNDS.......................................................16
PERFORMANCE INFORMATION.......................................................16
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<PAGE> 22
THE LAKE FOREST FUNDS
STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 1998
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, 1998. The Funds' February 28, 1998 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 P.O. Box 5536 Hauppauge, New York
11788-0132, or by calling 1-800-592-7722.
<PAGE> 23
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<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>
<PAGE> 24
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 June 9, 1998, the following persons owned five percent (5%) or more
of the Equity Fund:
Charles Peters, 1786 Golf Ridge Dr. South, Bloomfield Hills, MI 48302-1730
- - 7.226%.
As of June 9, 1998, the following persons owned five percent (5%) or more
of the Money Market Fund:
Thomas L. Tabern, 1247 High Point Lane, Northbrook, IL 60062 - 6.025%;
77th Street Depot F.C.U. #2505, 210 W. 79th Street, Chicago, IL 60620 - 6.58%,
Sherwin-Williams C.U., 16230 Prince Dr. South Holland, IL 60473-3233 - 39.073%.
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
2
<PAGE> 26
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.
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.
3
<PAGE> 27
2. Senior Securities. The Funds will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is (a) consistent with or permitted by the
Investment Company Act of 1940, as amended, the rules and regulations
promulgated thereunder or interpretations of the Securities and Exchange
Commission or its staff and (b) as described in the Prospectus and this
Statement of Additional Information.
3. Underwriting. The Funds will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent
that, in connection with the disposition of portfolio securities (including
restricted securities), the Fund may be deemed an underwriter under certain
federal securities laws.
4. Real Estate. The Funds will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies 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.
4
<PAGE> 28
5. Options. A Fund will not purchase or sell puts, calls, options or
straddles except as described in the Prospectus and this Statement of
Additional Information.
6. Illiquid Investments. A Fund will not invest more than 5% of its net
assets in securities for which there are legal or contractual restrictions on
resale and other illiquid securities.
Except for the limitations on borrowing set forth above, all percentage
restrictions, whether fundamental or non-fundamental, apply as of the time of
an investment without regard to any later fluctuations in the value of
portfolio securities or other assets.
THE MANAGEMENT AGREEMENT
Under the terms of the management agreement (the "Agreement"), the
Adviser, Boberski & Company, One Westminster Place, Lake Forest, Illinois,
manages the Funds' investments subject to approval of the Board of Trustees and
pays all of the operating expenses of the Funds except brokerage, taxes,
interest and extraordinary expenses. Although the Agreement states that the
Funds are responsible for payment of expenses incurred in connection with the
organization and initial registration of their shares, the Adviser has paid all
of those expenses and has agreed not to seek reimbursement for such expenses.
As compensation for its management services and agreement to pay the Funds'
expenses, the Funds are obligated to pay the Adviser a fee computed and accrued
daily and paid monthly at an annual rate of 1.25% 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 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. Currently, the Adviser voluntarily waives the
fees for the Money Market Fund over 0.125%. There is no agreement to continue
this reduction for any particular period of time.
During the years ended February 29, 1996, February 28, 1997 and February
28, 1998 the Core Equity Fund paid advisory fees of $2,770, $16,291, and
$59,603, respectively. During the same periods, the Money Market Fund paid
advisory fees of $921, $2,671, and $5,957, 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.
5
<PAGE> 29
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>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
*Irving V. Boberski President, Treasurer, Secretary and Trustee
Robert E. Alfe Trustee
Philip M. Hackbarth Trustee
Gary M. Patyk Trustee
</TABLE>
The ages as of April 15, 1998, 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., 58, 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, 58, 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, 62, 140 South Dearborn Street, Suite 404, Chicago,
Illinois, is an attorney in private practice.
Gary M. Patyk, 58, 8225 W. Center St. Apt. #1, Milwaukee, Wisconsin 53222,
has been a consultant with LA-Z-BOY Furniture Galleries since 1997. From 1995
to 1997, he was a consultant with Transworld Systems, Inc., an accounts
receivable recovery firm, since 1995. Prior 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
Aggregate Retirement Estimated Total Compensation
Compensation Benefits Annual Benefits From Trust (the
From Trust* Accrued As Part Upon Trust is not in a Fund
----------- of Trust Retirement Complex*) ----
Name Expenses ---------- --------
---- --------
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert E. Alfe $1,000 0 0 $1,000
- -------------------------------------------------------------------------------------------
Irving V. Boberski 0 0 0 0
- -------------------------------------------------------------------------------------------
Philip M. Hackbarth $1,000 0 0 $1,000
- -------------------------------------------------------------------------------------------
Gary M. Patyk $1,000 0 0 1,000
- -------------------------------------------------------------------------------------------
</TABLE>
* Under the Management Agreement, the Adviser pays these fees.
6
<PAGE> 30
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, the
Adviser is responsible for the Trust's portfolio decisions and the placing of
the Trust's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Trust, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Trust and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to
other accounts over which it exercises investment discretion.
Research services include supplemental research, securities and economic
analyses, statistical services and information with respect to the availability
of securities or purchasers or sellers of securities and analyses of reports
concerning performance of accounts. The research services and other
information furnished by brokers through whom the Trust effects securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving
other clients may be useful to the Adviser in connection with its services to
the Trust. Although research services and other information are useful to the
Trust and the Adviser, it is not possible to place a dollar value on the
research and other information received. It is the opinion of the Board of
Trustees and the Adviser that the review and study of the research and other
information will not reduce the overall cost to the Adviser of performing its
duties to the Trust under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities
are normally purchased directly from the issuer, an underwriter or a market
maker. Purchases include a concession paid by the issuer to the underwriter
and the purchase price paid to market makers may include the spread between the
bid and asked prices.
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, 1998, the Core Equity Fund paid
brokerage commissions in the aggregate amount of $5,615. 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, 1998.
7
<PAGE> 31
DETERMINATION OF SHARE PRICE
The prices (net asset values) of the shares of each Fund are determined as
of 4:00 p.m., New York Time (and the price of the Money Market Fund is also
determined as of 12:00 p.m., New York Time) on each day the Trust is open for
business and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The Trust is open
for business on every day except Saturdays, Sundays and the following holidays:
New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas. For a description of the methods used
to determine the net asset value (share price), see "Share Price Calculation"
in the Prospectus.
INVESTMENT PERFORMANCE
The Core Equity Funds' total return for the fiscal years ended February
28, 1998, February 28, 1997 and February 29, 1996 was 30.87%, 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 5.48% and 5.63%, respectively. The 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:
365/7
effective yield = [(base period return + 1) ] - 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.
8
<PAGE> 32
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.
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., P.O. Box 5536, Hauppauge, New York
11788-0132, 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, 1998.
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, 1998.
(2) Report of Independent Public Accountant.
(3) Statement of Assets and Liabilities for the Money Market
Fund as of February 28, 1998.
(4) Statement of Operations for the Core Equity Fund for the
period ended February 28, 1998.
(5) Statement of Operations for the Money Market Fund for
the period ended February 28, 1998.
(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 July 1,
1997, incorporated by reference to Post-Effective
Amendment No. 3, File No. 33-87494.
(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.
<PAGE> 34
(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.
(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 June 9, 1998):
- -------- -----------------------------------------------------
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Lake Forest Core Equity Fund 473
Lake Forest Money Market Fund 286
</TABLE>
Item 27. Indemnification
- -------- ---------------
(a) Article VI of the Registrant's Declaration of Trust provides
for indemnification of officers and Trustees as 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
<PAGE> 35
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 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 three
fiscal years of the Trust.
<PAGE> 36
B. The Directors and officers of the Adviser have had no other
business connections during the past three 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.
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., 150 Motor Parkway, Suite 109,
Hauppauge, N.Y. 11788.
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 26th day of June, 1998.
THE LAKE FOREST FUNDS
By: /s/Sheldon R. Stein
----------------------
Sheldon R. Stein
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.
Irving V. Boberski* President, Chief Financial June 26, 1998
- ------------------ Officer and Trustee
Irving V. Boberski
Robert E. Alfe* Trustee June 26, 1998
- --------------
Robert E. Alfe
Philip M. Hackbarth* Trustee June 26, 1998
- -------------------
Philip M. Hackbarth
Gary M. Patyk* Trustee June 26, 1998
- -------------
Gary M. Patyk
*By: /s/ Sheldon R. Stein
----------------------
Sheldon R. Stein,
Attorney-in-Fact
*Sheldon R. Stein 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 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 26, 1998 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
June 23, 1998
<PAGE> 1
EXHIBIT 11(b)
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, 1998, 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 the financial highlights for each of the three years in the
period then ended. These financial statements and 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, 1998, 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, 1998, 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 three years in the period then ended, in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
March 26, 1998
