LAKE FOREST FUNDS
To Our Shareholders:
The past year was another favorable one for Lake Forest funds and each of our
mutual fund entities. The funds performed well in generally favorable market
conditions. The global financial crisis last autumn is now history, and there is
growing evidence of financial stability in the Asian and South American
countries most affected. Systemic political problems in Russia will slow the
economic recovery there. Worldwide inflation remains under control, and
commodity prices are still depressed. Escalated military action in the Balkans
is a new source of uncertainty for all financial markets.
As Lake Forest funds enters its fifth year of operation, each of our funds is
nationally ranked and experiencing solid growth. Lake Forest Money Market Fund
received special recognition for the third consecutive year. Lake Forest Core
Equity Fund, which is focused on large companies, has reflected the strong
performance of the blue chip sector. Now that we are past the formative stage,
we are in a position to devote considerable resources to shareholder services.
During the past year our website www.lakeforestfunds.com was enhanced to provide
detailed account information 24 hours a day. Our shareholder service center has
also introduced a new and secure audio voice response system that provides
specific individual account information on our toll-free 800.592.7722 number.
Audited financial statements for the full fiscal year ended February 28th are
enclosed for your information. They include schedules of portfolio investments
and financial highlights for each fund that are prepared in accordance with
industry standards. We believe that your funds are very well positioned to
benefit from favorable markets trends during the coming year.
Irving V. Boberski
Chief Executive Officer
-1-
<PAGE>
LAKE FOREST CORE EQUITY FUND (LFCEX)
VALUE OF A $10,000 INVESTMENT VS. S&P 500 (SPX)
- --------------------------------------------------------------------------------
3/1/95 3/1/96 3/1/97 3/1/98 3/1/99
- --------------------------------------------------------------------------------
LFCEX 10,000.00 11,858.60 14,308.20 18,725.00 21,424.70
- --------------------------------------------------------------------------------
SPX 10,000.00 12,891.69 15,120.03 22,002.45 25,690.92
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
-2-
<PAGE>
SCHEDULE OF INVESTMENTS
LAKE FOREST CORE EQUITY FUND
FEBRUARY 28, 1999
SHARES MARKET VALUE
- -------- ------------
COMMON STOCKS - 90.27%
AEROSPACE/DEFENSE - 3.39%
5,500 Boeing Co. .................................. $195,594
5,000 Lockheed Martin Corp. ....................... 188,438
63 Raytheon Co. Cl A ........................... 3,331
--------
387,363
--------
AUTOS AND TRUCKS - 3.16%
249 Daimler/Chrysler AG ......................... 23,390
4,300 Ford Motor Co. .............................. 255,044
1,000 General Motors Corp. ........................ 82,562
--------
360,996
--------
BEVERAGES - 0.96%
1,000 Coca Cola Co. ............................... 63,937
1,200 Pepsico Inc. ................................ 45,150
--------
109,087
--------
CHEMICALS - 6.15%
8,000 DuPont (E.I.) De Ne Mours ................... 410,500
200 Eastman Chemical Co. ........................ 9,437
4,500 Monsanto Co. ................................ 205,031
900 Solutia Inc. ................................ 16,031
1,400 Union Carbide Corp Hldg. Co. ................ 61,600
--------
702,599
--------
COMPUTERS-INFORMATION TECH - 0.05%
137 + NCR Corp. ................................... 5,608
--------
COMPUTERS MAIN FRAME - 0.60%
400 International Business Machines Corp. ....... 68,000
--------
COMPUTERS-MICRO - 1.85%
6,000 Compaq Computer Corp. ....................... 211,500
--------
COMPUTER SOFTWARE/SERVICES - 2.63%
2,000 + Microsoft Corp. ............................. 300,250
--------
COSMETICS & TOILETRIES - 4.70%
6,000 Proctor & Gamble Co. ........................ 537,000
--------
DIVERSIFIED FINANCIAL SERVICES - 0.80%
2,252 Associates First Capital Corp Cl A .......... 91,488
--------
DIVERSIFIED MANUFACTURING - 4.39%
5,000 General Electric Co. ........................ 501,563
--------
ELECTRIC-INTEGRATED - 0.61%
2,600 Reliant Energy Inc. ......................... 69,712
--------
ELECTRONICS-SEMICONDUCTORS - 3.03%
2,000 Intel Corp. ................................. 239,875
1,000 Motorola Inc. ............................... 70,250
400 Texas Instruments Inc. ...................... 35,675
--------
345,800
--------
-3-
<PAGE>
SHARES MARKET VALUE
- -------- ------------
FINANCIAL-BANKS, COMMERCIAL - 11.76%
12,000 Bank of New York Co. Inc. ............ 419,250
7,200 Mellon Bank Corp. .................... 486,900
8,400 PNC Bank Corp. ....................... 437,325
---------
1,343,475
---------
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.65%
2,000 Kellogg Co. .......................... 74,000
---------
FOOD-PROCESSING - 0.85%
1,200 General Mills Inc. ................... 96,825
---------
MEDICAL-DRUGS - 6.23%
4,000 American Home Products Corp. ......... 238,000
5,000 Lilly (Eli) & Co. .................... 473,438
---------
711,438
---------
MEDICAL PRODUCTS - 2.24%
3,000 Johnson & Johnson .................... 256,125
---------
MONEY CENTER BANKS - 4.22%
2,000 Bankers Trust New York Corp. ......... 174,000
5,250 Citigroup ............................ 308,438
---------
482,438
---------
NETWORKING PRODUCTS - 7.06%
8,250 + Cisco Systems Inc. ................... 806,953
---------
OIL-FIELD SERVICES - 2.13%
5,000 Schlumberger Ltd. .................... 242,813
---------
OIL/GAS-DOMESTIC - 0.31%
1,200 Tenneco Inc. ......................... 35,925
---------
OIL/GAS-INTERNATIONAL - 3.44%
2,647 BP Amoco PLC ......................... 224,968
3,600 Texaco Inc. .......................... 167,625
---------
392,593
---------
PIPELINES - 0.71%
2,222 El Paso Energy Corp. ................. 80,964
---------
PHARMACEUTICALS - 2.07%
5,100 Abbott Laboratories .................. 236,831
---------
RETAIL-DEPARTMENT STORES - 1.98%
400 + Federated Department Stores Inc. ..... 15,225
5,200 Sears Roebuck & Co. .................. 211,250
---------
226,475
---------
RETAIL-RESTAURANTS - 5.27%
7,000 McDonalds Corp. ...................... 595,000
120 + Tricon Global Restaurants Inc. ....... 7,440
---------
602,440
---------
SHIPBUILDINGS - 0.06%
240 Newport News Shipbuilding Inc. ....... 6,945
---------
TELECOMMUNICATION EQUIPMENT - 2.47%
2,776 Lucent Technologies Inc. ............. 281,938
---------
TELEPHONE-LONG DISTANCE - 4.31%
6,000 AT&T Corp. ........................... 492,750
---------
-4-
<PAGE>
SHARES MARKET VALUE
- -------- ------------
TOBACCO - 2.19%
6,400 Phillip Morris Companies Inc. ........ 250,400
---------
TOTAL COMMON STOCKS
(Cost $7,502,160) 10,312,294
----------
SHORT-TERM INVESTMENTS - 0.00%
435 Star Treasury Fund
(Cost $435)........................... 435
----------
SHORT-TERM DEBT - 9.12%
$1,042,000 Federal Home Loan Bank Disc Note
4.68%, due 03/01/99...................
(Cost $1,042,000) 1,042,000
----------
Total Investments at Market
(Cost $8,544,595) 99.39% 11,354,729
Other assets in excess of liabilities 0.61% 69,796
====== ===========
Total Net Assets 100.00% $11,424,525
====== ===========
(1) Federal Tax Information: At February 28, 1999 the net unrealized
appreciation based on cost for Federal Income tax purposes of
$8,544,595 was as follows:
Aggregate gross unrealized apprecation for
all investments for which there was an excess
of value over cost........................... $3,128,431
Aggregate gross unrealized deprecation for
all investments for which there was an excess
of cost over value........................... (318,297)
----------
Net unrealized appreciation................. $2,810,134
===========
+ Denotes non-income producing security
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-5-
<PAGE>
SCHEDULE OF INVESTMENTS
LAKE FOREST MONEY MARKET FUND
FEBRUARY 28, 1999
SHARES MARKET VALUE
- ------ ------------
SHORT-TERM DEBT - 100.90%
$11,572,000 Federal Home Loan Bank Disc Note
4.68%, due 03/01/99
(Cost $11,572,000) .................. $ 11,572,000
------------
SHORT-TERM INVESTMENTS- 0.00%
443 Star Treasury Fund
(Cost $443) ......................... 443
------------
Total Investments
(Cost $11,572,443) .................. 100.90% 11,572,443
Liabilities in excess of other assets (0.90)% (103,709)
------- ------------
Total Net Assets .................... 100.00% $ 11,468,734
====== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-6-
<PAGE>
LAKE FOREST FUNDS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999
<TABLE>
<CAPTION>
CORE MONEY
EQUITY MARKET
------- ---------
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $8,544,595 and $11,572,443,
respectively) (Note 2) ............................... $ 11,354,729 $ 11,572,443
Receivable for fund shares sold ............................ 0 0
Receivable from interest and dividends ..................... 15,259 0
Receivable from Money Market Fund .......................... 56,897 0
Other receivables .......................................... 10,645 0
------------ ------------
Total Assets ......................................... 11,437,530 11,572,443
------------ ------------
LIABILITIES:
Payables: <C> <C>
Fund shares redeemed ............... $ 700 $ 0
Advisory fees (Note 3) ............. 11,087 1,105
Dividends payable .................. 1,218 45,457
Due to Core Equity Fund ............ 0 56,897
Other payables ..................... 0 250
------------ ------------
Total Liabilities .................................... 13,005 103,709
------------ ------------
Net Assets ........................................... $ 11,424,525 $ 11,468,734
============ ============
NET ASSETS CONSIST OF:
Additional paid in capital ........................... $ 8,614,546 $ 11,468,734
Accumulated net investment income(loss) .............. 0 0
Accumulated net realized loss from
investment transactions ............................ (155) 0
Net unrealized appreciation on
investments ........................................ 2,810,134 0
------------ ------------
Net Assets ........................................... $ 11,424,525 $ 11,468,734
============ ============
Net asset value and redemption
price per share
($11,424,525/390,834 and $11,468,734/11,468,734 shares
of capital stock outstanding, respectively)
(Note 4 ) ............................................ $ 29.23 $ 1.00
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-7-
<PAGE>
LAKE FOREST FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
CORE MONEY
EQUITY MARKET
--------- ----------
INVESTMENT INCOME:
<S> <C> <C>
Dividend ............................................ $ 141,166 $ 0
Interest ............................................ 60,294 443,671
---------- ----------
201,460 443,671
EXPENSES:
Advisory fee (Note 3) ............................... $ 122,638 $ 42,946
---------- ----------
Total expenses .......................... 122,638 42,946
---------- ----------
Less: Expense reimbursement from advisor (Note 3) .. 0 (32,228)
---------- ----------
Net expenses ............................ 122,638 10,718
---------- ----------
Net investment income ................... 78,822 432,953
---------- ----------
NET REALIZED AND UNREALIZED GAINS
ON INVESTMENTS
(Note 2)
Net realized gain from investment
transactions ............................ 58 0
Net increase in unrealized appreciation of
investments ............................. 1,203,756 0
---------- ----------
Net realized and unrealized loss
on investments .......................... 1,203,814 0
---------- ----------
Net increase in net assets resulting
from operations ......................... $1,282,636 $ 432,953
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-8-
<PAGE>
LAKE FOREST CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year For the year
ended ended
February 28, 1999 February 28, 1998
------------------- -------------------
<S> <C> <C>
Net investment income ................................... $ 78,822 $ 66,356
Net realized gain from investment transactions .......... 58 9
Net increase in unrealized appreciation of investments .. 1,203,756 1,263,635
------------ ------------
Net increase in net assets resulting from operations .... 1,282,636 1,330,000
Distributions from net investment income ................ (92,166) (60,371)
Distributions from net gain on investments .............. 0 0
Return of capital ....................................... (6,082) 0
------------ ------------
Net capital share transactions (Note 4) ................. 2,349,884 4,029,033
------------ ------------
Net increase in net assets .............................. 3,534,272 5,298,662
NET ASSETS:
Beginning of year ....................................... 7,890,253 2,591,591
------------ ------------
End of year (including undistributed investment income of
($0 and $13,344, respectively) ........................ $ 11,424,525 $ 7,890,253
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-9-
<PAGE>
LAKE FOREST MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year For the year
ended ended
February 28, 1999 February 28, 1998
-------------------- --------------------
<S> <C> <C>
Net investment income .............................. $ 432,953 $ 256,456
Net realized gain from investment transactions ..... 0 0
Net change in unrealized appreciation of investments 0 0
------------ ------------
Net increase in net assets resulting from operations 432,953 256,456
Distributions from net investment income ........... (432,953) (256,456)
Net capital share transactions (Note 4) ............ 6,137,107 2,315,420
------------ ------------
Net increase in net assets ......................... 6,137,107 2,315,420
NET ASSETS:
Beginning of year .................................. 5,331,627 3,016,207
------------ ------------
End of year ........................................ $ 11,468,734 $ 5,331,627
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-10-
<PAGE>
LAKE FOREST CORE EQUITY FUND
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
For the year For the year For the year For the year
ended ended ended ended
February 28, February 28, February 28, February 29,
1999 1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 25.89 $ 20.04 $ 17.34 $ 15.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.22 0.31 0.39 0.56
Net realized and unrealized gain/(loss) on investments 3.40 5.83 3.07 2.13
---------- ---------- ---------- ----------
Total from investment operations ..................... 3.62 6.14 3.46 2.69
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ................. (0.27) (0.29) (0.37) (0.15)
Distribution from realized gains from security
transactions ..................................... 0.00 0.00 (0.39) (0.20)
Return of capital .................................... (0.01)
---------- ---------- ---------- ----------
Total distributions .................................. (0.28) (0.29) (0.76) (0.35)
---------- ---------- ---------- ----------
Net asset value, end of period ....................... $ 29.23 $ 25.89 $ 20.04 $ 17.34
========== ========== ========== ==========
Total return ......................................... 14.03% 30.87% 20.65% 18.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ................. $ 11,425 $ 7,890 $ 2,592 $ 1,016
Ratio of expenses to average
net assets (Note 3) ................................ 1.25% 1.19% 1.00% 0.45%
Ratio of net investment income to
average net assets ................................. 0.81% 1.32% 2.10% 3.89%
Portfolio turnover rate .............................. 0.00% 0.00% 0.00% 129.77%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-11-
<PAGE>
LAKE FOREST MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
For the year For the year For the year For the year
ended ended ended ended
February 28, February 28, February 28, February 29,
1999 1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.05 0.05 0.05 0.06
Net realized and unrealized gain on investments 0.00 0.00 0.00 0.00
--------- ---------- ----------- ----------
Total from investment operations .............. 0.05 0.05 0.05 0.06
--------- ---------- ----------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.05) (0.05) (0.05) (0.06)
Distribution from realized gains from security
transactions .............................. 0.00 0.00 0.00 0.00
--------- ---------- ----------- ----------
Total distributions ........................... (0.05) (0.05) (0.05) (0.06)
--------- ---------- ----------- ----------
Net asset value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========== =========== ==========
Total return .................................. 5.10% 5.51% 5.13% 5.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .......... $ 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%
Ratio of expenses to average
net assets, after reimbursement (Note 3) .... 0.125% 0.125% 0.125% 0.08%
Ratio of net investment income to
average net assets .......................... 4.67% 5.01% 4.75% 5.09%
Ratio of net investment income to
average net assets, after reimbursement ..... 5.04% 5.38% 5.13% 5.50%
Portfolio turnover rate ....................... 0.00% 0.00% 0.00% 0.00%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-12-
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
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.
-13-
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
(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 28,
1999. In this regard, it should be noted that most investment companies pay
their own operating expenses directly, while each Funds' expenses except those
specified above are paid by the Advisor.
The Adviser may waive all or part of its fee, at any time, and at its
sole discretion, but such action shall not obligate the Adviser to waive any
fees in the future. For the year ended February 28, 1999, the Adviser has
received a fee of $122,638 from the Equity Fund and $10,718 from the Money
Market Fund.
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of February 28, 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:
<TABLE>
<CAPTION>
CORE EQUITY CORE EQUITY
----------- -----------
For the year For the year
ended ended
February 28, 1999 February 28, 1998
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold 181,831 $ 4,935,734 199,440 $ 4,583,911
Shares issued in reinvestment of
dividends 3,521 96,067 2,598 59,409
Shares redeemed (99,237) (2,681,917) (26,643) (614,287)
----------- ----------- ----------- -----------
Net increase 86,115 $ 2,349,884 175,395 $ 4,029,033
----------- ----------- ----------- -----------
</TABLE>
-14-
<PAGE>
LAKE FOREST FUNDS
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
(Continued)
<TABLE>
<CAPTION>
MONEY MARKET MONEY MARKET
------------ ------------
For the year For the year
ended ended
February 28, 1999 February 28, 1998
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold 8,693,271 $ 8,693,271 12,239,025 $12,239,025
Shares issued in reinvestment of
dividends 372,716 372,716 238,127 238,127
Shares redeemed (2,928,880) (2,928,880) (10,161,733) (10,161,733)
----------- ----------- ----------- -----------
Net increase 6,137,107 $ 6,137,107 2,315,419 $ 2,315,419
----------- ----------- ----------- -----------
</TABLE>
NOTE 5. DISTRIBUTIONS TO SHAREHOLDERS
For the year ended February 28, 1999, the Equity Fund made quarterly
distributions totaling $.27, aggregating $92,166 from investment income. The
Fund also made a Return of Capital distribution totaling $.01, aggregating
$6,082.
For the year ended February 28, 1999, the Money Market Fund made
monthly distributions totaling $.05, aggregating $60,371 from net investment
income.
NOTE 6. INVESTMENT TRANSACTIONS
Purchases and sales, excluding short term securities, for the year
ended February 28, 1999 aggregated $1,935,550 and $112 respectively for the
Equity Fund.
-15-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To The Shareholders and
Board of Trustees
The Lake Forest Funds:
We have audited the accompanying statement of assets and liabilities of The Lake
Forest Funds (comprising, respectively, the Core Equity Fund and the Money
Market Fund), including the schedule of portfolio investments, as of February
28, 1999, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and financial highlights for each of the four years in the period then
ended. These financial statements and financial high- lights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held by
the custodian as of February 28, 1999, by correspondence with the custodian. An
audit also included assess- ing 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, 1999, 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 four years in the period then ended, in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
March 25, 1999
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