October 20, 1999
To Our Shareholders:
The economic situation, both domestic and foreign, is far more
favorable than it was a year ago. The financial markets appear to have
incorporated a third monetary tightening in their pricing. We believe that this
merely represents withdrawal of the stimulus that was applied last year in the
midst of the global currency crisis, not a response to emerging inflationary
pressures. With the enormous expansion of liquidity reserves by the Federal
Reserve System to deal with potential Y2K computer problems in the financial
sector, a final tightening is not likely to disrupt financial markets.
While the actions of the monetary authorities are reassuring, liquidity
is never a problem for the Lake Forest Money Market Fund as its entire portfolio
matures each business day. It is never in the position of having to sell
securities in order to meet redemptions. Each morning the Fund holds 100 percent
cash, which is fully available for redemptions. Further, redemptions from LFMXX
are typically done through the Federal Reserve wire transfer system which is
regarded by many as the most secure and reliable funds transfer system in the
world.
Volatile markets can be distracting, even to experienced investors with
sound long-term strategies. In the face of severe volatility, our Lake Forest
Core Equity Fund returned 20.44 percent for the year ended September 30th. This
year the economic situation has reversed. The economy is expanding at a 4.5
percent rate, S&P operating earnings are up 15 percent, and the rest of the
world is reviving, with global GDP expected to expand 3.5 percent next year.
Inflation remains muted, and the economic fundamentals are solid.
Unaudited financial statements for the period ended August 31st are
enclosed for your information. They include schedules of portfolio investments
and financial highlights for each fund that are prepared in accordance with
industry standards. The statements demonstrate a consistency of style in
portfolio management that you have come to expect.
Irving V. Boberski
Chief Executive Officer
<PAGE>
LAKE FOREST CORE EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout the period)
<TABLE>
<CAPTION>
(Unaudited)
6 months Year Year Year Year
ended ended ended ended ended
8/31/99 2/28/99 2/28/98 2/28/97 2/29/96
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.23 $ 25.89 $ 20.04 $ 17.34 $ 15.00
Income from investment operations:
Net investment income ............... 0.12 0.22 0.31 0.39 0.56
Net realized and unrealized
gain/(loss) on investments ..... 1.85 3.40 5.83 3.07 2.13
Total from investment operations .... 1.97 3.62 6.14 3.46 2.69
Less distributions:
Dividends from net investment income (0.14) (0.27) (0.29) (0.37) (0.15)
Distribution from realized gains from
security transactions .......... 0 0.00 0.00 (0.39) (0.20)
Return of capital ................... 0 (0.01)
Total distributions ................. (0.14) (0.28) (0.29) (0.76) (0.35)
Net asset value, end of period ...... $ 31.06 $ 29.23 $ 25.89 $ 20.04 $ 17.34
------- ------- ------- ------- -------
Total return ........................ 6.74% 14.03% 30.87% 20.65% 18.59%
Ratios/supplemental data:
Net assets, end of period (in 000's) $13,856 $11,425 $ 7,890 $ 2,592 $ 1,016
Ratio of expenses to average
net assets (Note 3) ............ 1.25% 1.25% 1.19% 1.00% 0.45%
Ratio of net investment income to
average net assets ............. 0.79% 0.81% 1.32% 2.10% 3.89%
Portfolio turnover rate ............. 1.53% 0.00% 0.00% 0.00% 129.77%
</TABLE>
The accompanying notes are an integral part of
these financial statements.
-2-
<PAGE>
LAKE FOREST MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout the period)
<TABLE>
<CAPTION>
(Unaudited)
6 months Year Year Year Year
ended ended ended ended ended
8/31/99 2/28/99 2/28/98 2/28/97 2/29/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .......................... 0.02 0.05 0.05 0.05 0.06
Net realized and unrealized
gain on investments ....................... 0.00 0.00 0.00 0.00 0.00
Total from investment operations ............... 0.02 0.05 0.05 0.05 0.06
Less distributions:
Dividends from net investment income ........... (0.02) (0.05) (0.05) (0.05) (0.06)
Distribution from realized gains from
security transactions ..................... 0.00 0.00 0.00 0.00 0.00
Total distributions ............................ (0.02) (0.05) (0.05) (0.05) (0.06)
Net asset value, end of period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Total return ................................... 2.41% 5.10% 5.51% 5.13% 5.50%
Ratios/supplemental data:
Net assets, end of period (in 000's) ........... $13,193 $11,469 $ 5,332 $ 3,016 $ 1,787
Ratio of expenses to average net assets (Note 3) 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of expenses to average net assets,
after reimbursement (Note 3) ................ 0.125% 0.125% 0.125% 0.125% 0.08%
Ratio of net investment income to
average net assets ........................ 4.76% 4.67% 5.01% 4.75% 5.09%
Ratio of net investment income to
average net assets, after reimbursement ... 4.76% 5.04% 5.38% 5.13% 5.50%
Portfolio turnover rate ........................ 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
The accompanying notes are an integral part of
these financial statements.
-3-
<PAGE>
LAKE FOREST FUNDS
STATEMENT OF ASSETS AND LIABILITIES
(Unaudited)
August 31, 1999
<TABLE>
<CAPTION>
CORE MONEY
EQUITY MARKET
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $10,400,568 and $13,254,000,
respectively) (Note 2) ................. $ 13,852,333 $ 13,254,000
Receivable for fund shares sold ................. 100 0
Receivable from interest and dividends .......... 17,979 0
Total Assets ........................... 13,870,412 13,254,000
LIABILITIES:
Payables:
Advisory fees (Note 3) ................. 14,552 1,400
Dividends payable ...................... 0 59,181
Other payables ......................... 0 496
Total Liabilities ...................... 14,552 61,077
Net Assets ............................. $ 13,855,860 $ 13,192,923
NET ASSETS CONSIST OF:
Additional paid in capital ............. $ 10,323,276 $ 13,192,923
Accumulated net investment
income(loss) ....................... (6,404) 0
Accumulated net realized gain from
investment transactions ............ 87,224 0
Net unrealized appreciation on
investments ........................ 3,451,764 0
Net Assets ............................. $ 13,855,860 $ 13,192,923
Net asset value and redemption
price per share
($13,855,860/446,143 and
$13,192,923/13,192,923
shares of capital stock outstanding,
respectively, Note 4) .................. $ 31.06 $ 1.00
------------ ------------
</TABLE>
The accompanying notes are an integral part of
these financial statements
-4-
<PAGE>
LAKE FOREST FUNDS
STATEMENTS OF OPERATIONS
(Unaudited)
For the six months ended August 31, 1999
<TABLE>
<CAPTION>
CORE MONEY
EQUITY MARKET
INVESTMENT INCOME:
<S> <C> <C>
Dividend .......................................... $ 82,780 $ 0
Interest .......................................... 51,677 318,838
134,457 318,838
EXPENSES:
Advisory fee (Note 3) ............................. $ 82,593 $ 32,667
Total expenses ........................... 82,593 32,667
Less: Expense reimbursement
from advisor (Note 3) .................... 0 (24,483)
Net expenses ........................ 82,593 8,184
Net investment income ............... 51,864 310,654
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS
(Note 2)
Net realized gain from investment
transactions ............................. 87,379 0
Net increase in unrealized appreciation of
investments .............................. 641,630 0
Net realized and unrealized gain
on investments ........................... 729,009 0
Net increase in net assets resulting
from operations .......................... $ 780,873 $ 310,654
</TABLE>
The accompanying notes are an integral part of
these financial statements
-5-
<PAGE>
SCHEDULE OF INVESTMENTS
LAKE FOREST CORE EQUITY FUND
August 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------ ------------
COMMON STOCKS - 94.50%
<C> <S>
AEROSPACE/DEFENSE - 3.16% <C>
5,500 Boeing Co .................................. $249,219
5,000 Lockheed Martin Corp ....................... 185,000
63 Raytheon Co. Cl A .......................... 4,229
438,448
AUTOS AND TRUCKS - 2.32%
249 Daimler/Chrysler AG ........................ 18,722
698 Delphi Automative Systems .................. 13,088
4,300 Ford Motor Co .............................. 224,138
1,000 General Motors Corp ........................ 66,125
322,072
BEVERAGES - 3.19%
1,000 Coca Cola Co ............................... 59,813
11,200 Pepsico Inc ................................ 382,200
442,013
CHEMICALS - 5.76%
8,000 DuPont (E.I.) De Ne Mours .................. 507,000
200 Eastman Chemical Co ........................ 9,288
4,500 Monsanto Co ................................ 184,781
900+ Solutia Inc................................. 18,000
1,400 Union Carbide Corp Hldg. Co ................ 79,625
798,694
COMPUTERS-INFORMATION TECH - 0.04%
137+ NCR Corp.................................... 5,994
COMPUTERS-MAIN FRAME - 0.72%
800 International Business Machines Corp ....... 99,650
COMPUTERS-MICRO - 1.00%
6,000 Compaq Computer Corp ....................... 139,125
COMPUTER SOFTWARE/SERVICES - 4.01%
6,000+ Microsoft Co................................ 555,375
COSMETICS & TOILETRIES - 4.30%
6,000 Proctor & Gamble Co ........................ 595,500
DIVERSIFIED FINANCIAL SERVICES - 1.80%
7,252 Associates First Capital Corp Cl A ......... 248,834
DIVERSIFIED MANUFACTURING - 4.05%
5,000 General Electric Co ........................ 561,563
ELECTRIC-INTEGRATED - 0.52%
2,600 Reliant Energy Inc ......................... 71,988
ELECTRONICS-SEMICONDUCTORS - 5.51%
4,000 Intel Corp ................................. 328,750
4,000 Motorola Inc ............................... 369,000
800 Texas Instruments Inc ...................... 65,650
763,400
+ Denotes non-income producing security
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
SCHEDULE OF INVESTMENTS
LAKE FOREST CORE EQUITY FUND
August 31, 1999(Unaudited) - (Continued)
SHARES MARKET VALUE
- ------ ------------
FINANCIAL-BANKS, COMMERCIAL - 9.74%
12,000 Bank of New York Co. Inc ............. $ 429,000
14,400 Mellon Bank Corp ..................... 480,600
8,400 PNC Bank Corp ........................ 439,425
1,349,025
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.51%
2,000 Kellogg Co ........................... 71,125
FOOD-PROCESSING - 0.73%
1,200 General Mills Inc .................... 100,500
MEDICAL-DRUGS - 5.39%
9,000 American Home Products Corp .......... 373,500
5,000 Lilly (Eli) & Co ..................... 373,125
746,625
MEDICAL PRODUCTS - 2.21%
3,000 Johnson & Johnson .................... 306,750
MONEY CENTER BANKS - 2.53%
7,875 Citigroup ............................ 349,945
Networking Products - 8.08%
16,500+ Cisco Systems......................... 1,118,906
OIL-FIELD SERVICES - 2.41%
5,000 Schlumberger Ltd ..................... 333,750
OIL/GAS-DOMESTIC - 0.17%
1,200 Tenneco Inc .......................... 24,150
OIL/GAS-INTERNATIONAL - 3.79%
2,646 BP Amoco PLC ......................... 296,683
3,600 Texaco Inc ........................... 228,600
525,283
PIPELINES - 0.59%
2,222 El Paso Energy Corp .................. 81,242
PHARMACEUTICALS - 3.16%
10,100 Abbott Laboratories .................. 438,088
RETAIL-DEPARTMENT STORES - 1.54%
400+ Federated Department Inc.............. 18,400
5,200 Sears Roebuck & Co ................... 195,000
213,400
RETAIL-FOOD STORES - 1.67%
10,000+ Kroger Co............................. 231,250
RETAIL-RESTAURANTS - 4.22%
14,000 McDonalds Corp ....................... 579,250
120+ Tricon Global Restaurants Inc......... 4,875
584,125
Shipbuilding - 0.05%
240 Newport News Shipbuilding Inc ........ 7,545
+ Denotes non-income producing security
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
SCHEDULE OF INVESTMENTS
LAKE FOREST CORE EQUITY FUND
August 31, 1999
(Unaudited) - (Continued)
SHARES MARKET VALUE
------ ------------
TELECOMMUNICATION EQUIPMENT - 3.95%
8,552 Lucent Technologies Inc .............. 547,863
TELEPHONE-LONG DISTANCE - 5.65%
9,000 AT&T Corp ............................ $405,000
5,000+ MCI Worldcom Inc ..................... 378,750
783,750
TOBACCO - 1.73%
6,400 Phillip Morris Companies Inc ......... 239,600
TOTAL COMMON STOCKS
(Cost $9,643,810) .................... 13,095,575
SHORT-TERM INVESTMENTS - 0.01%
758 Star Treasury Fund
(Cost $758) .......................... 758
SHORT-TERM DEBT - 5.46%
$756,000 Federal Home Loan Bank Disc Note
5.40%, due 09/01/99.
(Cost $756,000) ...................... 756,000
Total Investments at Market
(Cost $10,400,568) 99.97% 13,852,333
Other assets in excess of liabilities 0.03% 3,527
Total Net Assets 100.00% $13,855,860
(1) Federal Tax Information: At August 31, 1999 the net unrealized appreciation
based on cost for Federal Income tax purposes of $10,400,568 was as follows:
Aggregate gross unrealized apprecation for all investments for which
there was an excess of value over cost $3,643,804 Aggregate gross
unrealized deprecation for all investments for which there was an
excess of cost over value (192,040) Net unrealized appreciation
$3,451,764
+ Denotes non-income producing security
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
SCHEDULE OF INVESTMENTS
LAKE FOREST MONEY MARKET FUND
August 31, 1999
(Unaudited)
PAR VALUE MARKET VALUE
--------- ------------
SHORT-TERM DEBT - 100.46%
$13,254,000 Federal Home Loan Bank Disc Note
5.40%, due 09/01/99
(Cost $13,254,000) ................... $13,254,000
Total Investments
(Cost $13,254,000) 100.46% 13,254,000
Liabilities in excess
of other assets (0.46)% (61,077)
Total Net Assets 100.00% $13,192,923
The accompanying notes are an integral part of these financial statements.
</TABLE>
-9-
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1999(Unaudited)
NOTE 1. ORGANIZATION
The Lake Forest Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management company.
The Trust was established under the laws of Ohio by an Agreement and Declaration
of Trust dated November 23, 1994 (the "Trust Agreement"). The Trust Agreement
permits the Trustees to issue an unlimited number of shares of beneficial
interest of separate series without par value. Share of two series have been
authorized, which constitute the interest in Lake Forest Core Equity Fund ("the
Equity Fund") and Lake Forest Money Market Fund (the "Money Market Fund"). The
investment objective of the Equity Fund is to provide long term capital
appreciation together with current income. The investment objective of the Money
Market Fund is to provide the highest level of current income consistent with
liquidity and security of principal.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
by the Trust in the preparation of its financial statements.
SECURITY VALUATION-Securities which are traded on any exchange or on
the NASDAQ over-the-counter market are valued at the last quoted sale price.
Lacking a last sale price, a security is valued at its last bid price except
when the last bid price does not accurately reflect the current value of the
security. All other securities for which over-the-counter market quotations are
readily available are valued at their last bid price. When market quotations are
not readily available, when it is determined that the last bid price does not
accurately reflect the current value or when restricted securities are being
valued, such securities are valued as determined in good faith by a pricing
committee, in conformity with guidelines adopted by and subject to review of the
Board of Trustees of the Trust.
Fixed income securities generally are valued by using market quotation,
but may be valued on the basis of prices furnished by a pricing service when the
Adviser believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. When prices are not readily available from
a pricing service, or when restricted or illiquid securities are being valued,
securities are valued at fair value as determined in good faith by a pricing
committee, subject to review of the Board of Trustees. Short term investments in
fixed income securities with maturities of less than 60 days when acquired, or
which subsequently are within 60 days of maturity, are valued (except for the
Money Market Fund) by using the amortized cost method of valuation, which the
Board has determined will represent fair value.
FEDERAL INCOME TAXES-Each Fund intends to comply with requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its net investment income as dividends to its
shareholders. The Equity Fund intends to declare and pay dividends on a
quarterly basis, and the Money Market Fund intends to declare daily and pay
monthly. Each Fund intends to distribute its net long-term capital gains and its
net short-term capital gains at least once a year. Therefore no provision for
income taxes is required.
OTHER-Each Fund follows industry practice and records security
transactions on the trade date. The specific identification method is used for
determining gains or losses for financial statement and income tax purposes.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis. Discounts and premiums on securities purchased are
amortized over the life of the respective securities.
-10-
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
(Unaudited) - (Continued)
ESTIMATES-The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3. INVESTMENT ADVISORY AGREEMENT
The Trust has an investment advisory agreement with Boberski & Company
("the Adviser"). Under the terms of the management agreement, The Adviser
manages the Fund's investments subject to the supervision of the Board of
Trustees and pays all of the operating expenses of the Funds except brokerage,
taxes, interest and extraordinary expenses. The Funds are responsible for
payment of expenses incurred in connection with the organization and initial
registration of their shares. As compensation for its management services and
agreement to pay the Funds' expenses, the Funds are obligated to pay the Adviser
a fee computed and accrued daily and paid monthly at an annual rate of 1.25% of
the average daily net assets of the Equity Fund and .50% of the average daily
net assets of the Money Market Fund. The Adviser has agreed to cap the fee for
the Money Market Fund at .125% at least through the year ended February 29,
2000. In this regard, it should be noted that most investment companies pay
their own operating expenses directly, while each Funds' expenses except those
specified above are paid by the Advisor.
The Adviser may waive all or part of its fee, at any time, and at its
sole discretion, but such action shall not obligate the Adviser to waive any
fees in the future. For the six months ended August 31, 1999, the Adviser has
received a fee of $82,593 from the Equity Fund and $8,184 from the Money Market
Fund.
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of August 31, 1999 there was an unlimited number of no par value
shares of capital stock authorized for each Fund.
Transactions in capital stock were as follows:
Core Equity Core Equity
----------- -----------
For the six For the year
months ended ended
August 31, 1999 February 28, 1999
(Unaudited)
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 79,962 $ 2,476,883 181,831 $ 4,935,734
Shares issued in
reinvestment of
dividends 1,852 57,274 3,521 96,067
Shares redeemed (26,505) (825,427) (99,237) (2,681,917)
Net increase 55,309 $ 1,708,730 86,115 $ 2,349,884
-11-
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
(Unaudited)-(Continued)
Money Market Money Market
------------ ------------
For the six For the year
months ended ended
August 31, 1999 February 28, 1999
(Unaudited)
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 3,018,013 $ 3,018,013 8,693,271 $ 8,693,271
Shares issued
in reinvestment of
dividends 273,831 273,831 372,716 372,716
Shares redeemed (1,567,655) (1,567,655) (2,928,880) (2,928,880)
Net increase 1,724,189 $ 1,724,189 6,137,107 $ 6,137,107
NOTE 5. DISTRIBUTIONS TO SHAREHOLDERS
For the six months ended August 31, 1999, the Equity Fund made
quarterly distributions totaling $.14, aggregating $58,268 from investment
income.
For the six months ended August 31, 1999, the Money Market Fund made
monthly distributions totaling $.02,
aggregating $310,654 from net investment income.
NOTE 6. INVESTMENT TRANSACTIONS
Purchases and sales, excluding short term securities, for the six
months ended August 31, 1999 aggregated $2,411,105 and $170,759, respectively,
for the Equity Fund.
- --------------------------------------------------------------------------------
This 1999 Semi-Annual Report must be accompanied with or preceded by a
current prospectus of the Lake Forest Funds. Read it carefully before investing
or sending money.
-12-
