UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8431
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Lake Shore Family of Funds
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(Exact name of registrant as specified in charter)
8280 Montgomery Road, Suite 302, Cincinnati, Ohio 45236
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(Address of principal executive offices) (Zip code)
Earl V. (Buck) Newsome, 8280 Montgomery Road, Suite 302, Cincinnati, Ohio 45236
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(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 794-0002
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Date of fiscal year end: 12/31
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Date of reporting period: 6/30/03
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
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LAKE SHORE FAMILY OF FUNDS
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LAKE SHORE EQUITY FUND
SEMI-ANNUAL REPORT
June 30, 2003
(Unaudited)
INVESTMENT ADVISER ADMINISTRATOR
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LAKE SHORE FUND GROUP, LLC INTEGRATED FUND SERVICES, INC.
8280 Montgomery Road 221 East Fourth Street
Suite 302 Suite 300
Cincinnati, Ohio 45236 Cincinnati, Ohio 45202
1.513.794.1440 1.800.266.9532
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LAKE SHORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
ASSETS
Investment securities, at value (cost $1,070,992) $ 1,211,428
Dividends and interest receivable 965
Receivable from Adviser 47,109
Other assets 6,510
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TOTAL ASSETS 1,266,012
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LIABILITIES
Payable to Affiliates 8,223
Accrued expenses 31,556
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TOTAL LIABILITIES 39,779
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NET ASSETS $ 1,226,233
============
NET ASSETS CONSIST OF:
Paid-in capital $ 1,873,565
Accumulated net investment loss (7,565)
Accumulated net realized losses from security transactions (780,203)
Net unrealized appreciation on investments 140,436
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NET ASSETS $ 1,226,233
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Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 160,166
============
Net asset value, offering price and redemption price per share $ 7.66
============
Maximum offering price per share $ 8.06
============
See accompanying notes to financial statements.
LAKE SHORE EQUITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2003
(Unaudited)
INVESTMENT INCOME
Dividends $ 9,965
Interest 61
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TOTAL INVESTMENT INCOME 10,026
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EXPENSES
Investment advisory fees 5,902
Accounting services fees 12,000
Transfer agent fees 7,200
Insurance expense 6,498
Professional fees 6,319
Administration fees 6,000
Reports to shareholders 5,579
Postage and supplies 4,039
Custodian fees 3,680
Trustees' fees and expenses 1,439
Registration fees 1,083
Pricing costs 609
Distribution expense 126
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TOTAL EXPENSES 60,474
Fees waived and expenses reimbursed by the Adviser (42,883)
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NET EXPENSES 17,591
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NET INVESTMENT LOSS (7,565)
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REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (4,394)
Net change in unrealized appreciation/
depreciation on investments 91,056
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NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 86,662
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 79,097
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See accompanying notes to financial statements.
LAKE SHORE EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the
Six Months For the
Ended Year
June 30, Ended
2003 December 31,
(Unaudited) 2002
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FROM OPERATIONS
Net investment loss $ (7,565) $ (25,045)
Net realized losses from security transactions (4,394) (22,388)
Net change in unrealized appreciation/
depreciation on investments 91,056 (159,155)
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Net increase (decrease) in net assets from operations 79,097 (206,588)
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FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 6,637 77,064
Payments for shares redeemed (50,534) (772,461)
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Net decrease in net assets from capital share transactions (43,897) (695,397)
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TOTAL INCREASE (DECREASE) IN NET ASSETS 35,200 (901,985)
NET ASSETS
Beginning of period 1,191,033 2,093,018
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End of period $ 1,226,233 $ 1,191,033
============ ============
CAPITAL SHARE ACTIVITY
Shares sold 141 9,971
Shares redeemed (6,634) (109,182)
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Net decrease in shares outstanding (6,493) (99,211)
Shares outstanding, beginning of period 166,659 265,870
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Shares outstanding, end of period 160,166 166,659
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See accompanying notes to financial statements.
LAKE SHORE EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a
Share Outstanding Throughout Each Period
For the
Six Months For the For the For the For the For the
Ended Year Year Year Year Period
June 30, Ended Ended Ended Ended Ended
2003 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2002 2001 2000 1999 1998 (a)
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Net asset value at beginning of period $ 7.15 $ 7.87 $ 9.04 $ 15.43 $ 11.05 $ 10.00
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Income (loss) from investment operations:
Net investment income (loss) (0.05) (0.15) (0.11) (0.21) (0.11) 0.08
Net realized and unrealized gains
(losses) on investments 0.56 (0.57) (1.05) (3.49) 4.76 1.05
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.51 (0.72) (1.16) (3.70) 4.65 1.13
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Less distributions:
From net investment income -- -- -- -- -- (0.08)
From net realized gains -- -- (0.01) (2.69) (0.27) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions -- -- (0.01) (2.69) (0.27) (0.08)
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Net asset value at end of period $ 7.66 $ 7.15 $ 7.87 $ 9.04 $ 15.43 $ 11.05
========== ========== ========== ========== ========== ==========
Total return (b) 7.13%(c) (9.15%) (12.88%) (24.18%) 42.26% 11.34%(c)
========== ========== ========== ========== ========== ==========
Net assets at end of period $1,226,233 $1,191,033 $2,093,018 $2,429,087 $3,453,747 $1,588,758
========== ========== ========== ========== ========== ==========
Ratio of gross expenses to
average net assets (d) 10.24%(e) 7.12% 5.94% 3.61% 4.86% 14.24%(e)
Ratio of net expenses to
average net assets 2.98%(e) 2.98% 2.98% 2.98% 2.32% 1.91%(e)
Ratio of net investment income (loss)
to average net assets (1.28%)(e) (1.40%) (1.27%) (1.48%) (1.06)% 0.71%(e)
Portfolio turnover rate 60%(e) 77% 120% 145% 64% 4%(e)
(a) Represents the period from the initial public offering of shares (March 2,
1998) through December 31, 1998.
(b) Total returns shown exclude the effect of applicable sales loads.
(c) Not annualized.
(d) Represents the ratio of expenses to average net assets absent fee waivers
and/or expense reimbursements by the Adviser.
(e) Annualized.
See accompanying notes to financial statements.
LAKE SHORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 2003
(Unaudited)
Market
Shares Value
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COMMON STOCKS -- 94.1%
CONSUMER, NON-CYCLICAL -- 37.5%
685 Aetna, Inc. $ 41,237
550 Amgen, Inc.* 36,542
3,195 Archer-Daniels-Midland Co. 41,120
695 Avon Products, Inc. 43,229
590 Boston Scientific Corp.* 36,049
695 C. R. Bard, Inc. 49,559
730 Colgate-Palmolive Co. 42,304
1,850 ConAgra Foods, Inc. 43,660
945 PepsiCo, Inc. 42,053
1,600 Sherwin-Williams Co. 43,008
600 Stryker Corp. 41,622
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460,383
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CONSUMER, CYCLICAL -- 14.4%
1,010 Eastman Kodak Co. 27,624
1,745 Mattel, Inc. 33,015
1,475 May Department Stores Co. 32,834
1,690 R. R. Donnelley & Sons Co. 44,176
1,160 V.F. Corp. 39,405
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177,054
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TECHNOLOGY -- 11.0%
2,190 Citrix Systems, Inc.* 44,588
2,855 Nextel Communications, Inc. - Class A* 51,619
855 Zimmer Holdings, Inc. 38,518
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134,725
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FINANCIAL SERVICES -- 10.5%
525 Bank of America Corp. 41,491
635 Bear Stearns Co., Inc. 45,986
1,050 SLM Corp. 41,129
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128,606
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LAKE SHORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 2003
(Unaudited)
Market
Shares Value
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UTILITIES -- 9.8%
2,675 American Power Conversion Corp. 41,703
805 Entergy Corp. 42,488
1,150 Southern Co. 35,834
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120,025
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INDUSTRIAL -- 7.9%
780 FedEx Corp. 48,383
560 Johnson Controls, Inc. 47,936
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96,319
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ENERGY -- 3.0%
1,620 Halliburton Co. 37,260
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TOTAL COMMON STOCKS $ 1,154,372
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MONEY MARKETS -- 4.7%
57,056 First American Treasury $ 57,056
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TOTAL INVESTMENT SECURITIES-- 98.8%
(Cost $1,070,992) $ 1,211,428
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.2% 14,805
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NET ASSETS -- 100.0% $ 1,226,233
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* Non-income producing security.
See accompanying notes to financial statements.
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
1. ORGANIZATION
The Lake Shore Family of Funds (the Trust) is registered under the Investment
Company Act of 1940 (the 1940 Act) as an open-end management investment company.
The Trust was organized as an Ohio business trust under a Declaration of Trust
dated September 3, 1997. The Trust currently offers one series of shares to
investors: the Lake Shore Equity Fund (the Fund). The Trust was capitalized on
December 23, 1997, when the initial shares of the Fund were purchased at $10.00
per share. The initial public offering of shares of the Fund commenced on March
2, 1998. The Fund had no operations prior to the public offering of shares
except for the initial issuance of shares.
The Fund seeks long-term growth of capital by investing primarily in common
stocks.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Equity Fund's significant accounting policies:
Security valuation -- The Fund's portfolio securities are valued as of the close
of business of the regular session of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time). Securities traded on a national stock
exchange or quoted by NASDAQ are valued based upon the closing price on the
principal exchange where the security is traded, or, if not traded on a
particular day, at the closing bid price. U.S. Government obligations are valued
at their most recent bid prices as obtained from one or more of the major market
makers for such securities. Securities for which market quotations are not
readily available are valued at their fair value as determined in good faith in
accordance with consistently applied procedures established by and under the
general supervision of the Board of Trustees.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The maximum offering price per share is equal to
the net asset value per share plus a sales load equal to 5.26% of the net asset
value (or 5.00% of the offering price). The redemption price per share is equal
to the net asset value per share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned. Discounts and premiums on securities
purchased are amortized in accordance with income tax regulations, which
approximate generally accepted accounting principles.
Distributions to shareholders -- The Fund expects to distribute substantially
all of its net investment income, if any, on a quarterly basis. The Fund expects
to distribute any net realized long-term capital gains, if any, at least once
each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are determined on a highest cost basis. In prior years,
the Fund had accounted for securities sold on a specific identification basis.
As the Fund carries its securities at market value, this change has no effect on
total assets or change in net assets from operations.
Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare and pay as
dividends in each calendar year at least 98% of its net investment income
(earned during the calendar year) and 98% of its net realized capital gains
(earned during the twelve months ended October 31) plus undistributed amounts
from prior years.
The tax character of distributions paid for the following periods were as
follows:
Year Year
Ended Ended
December 31, December 31,
2002 2001
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From long-term capital gains $ -- $ 1,581
As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:
Cost of portfolio investments $ 1,089,675
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Gross unrealized appreciation $ 128,443
Gross unrealized depreciation (79,063)
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Net unrealized appreciation 49,380
Capital loss carryforward (775,809)
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Accumulated deficit $ (726,429)
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As of June 30, 2003, the Fund had capital loss carryforwards for federal income
tax purposes of $775,809 of which $753,091 expires December 31, 2009 and $22,718
expires December 31, 2010. These capital loss carryforwards may be utilized in
the current and future years to offset net realized gains, if any, prior to
distributing such gains to shareholders.
3. INVESTMENT TRANSACTIONS
For the six months ended June 30, 2003, cost of purchases and proceeds from
sales and maturities of investment securities, other than short-term
investments, amounted to $346,183 and $393,224, respectively.
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
4. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of Lake Shore Fund
Group, LLC (the Adviser), of Integrated Fund Services, Inc. (IFS), the
administrative services agent, shareholder servicing and transfer agent, and
accounting services agent for the Trust, or of IFS Fund Distributors, Inc. (the
Underwriter), the exclusive agent for the distribution of the Fund's shares.
ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. The Fund pays the Adviser an investment advisory fee,
computed and accrued daily and paid monthly, at an annual rate of 1.00% of its
average daily net assets.
In order to voluntarily reduce operating expenses for the six months ended June
30, 2003, the Adviser waived investment advisory fees of $5,902 and agreed to
reimburse the Fund for $36,981 of other operating expenses.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, IFS supplies non-investment
related administrative and compliance services for the Fund. IFS supervises the
preparation of tax returns, reports to shareholders, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For these services, IFS
receives a monthly fee from the Fund, based on current asset levels of the Fund,
subject to a minimum monthly fee.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, IFS 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 shareholder service functions. For these
services, IFS receives a monthly fee from the Fund, based on the number of
shareholder accounts, subject to a minimum monthly fee. In addition, the Fund
pays IFS out-of-pocket expenses including, but not limited to, postage and
supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, IFS calculates the daily
net asset value per share and maintains the financial books and records of the
Fund. For these services, IFS receives a monthly fee, based on current asset
levels, from the Fund. In addition, the Fund pays certain IFS out-of-pocket
expenses incurred by IFS in obtaining valuations of the Fund's portfolio
securities.
UNDERWRITING AGREEMENT
Under the terms of an Underwriting Agreement, the Underwriter serves as the
exclusive agent for the distribution of the Fund's shares. The Underwriter
earned nothing from underwriting commissions on the sale of shares during the
six months ended June 30, 2003.
LAKE SHORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
PLAN OF DISTRIBUTION
The Trust has adopted a Plan of Distribution (the Plan) pursuant to Rule 12b-1
under the 1940 Act. The Plan provides that the Fund may directly incur or
reimburse the Underwriter or the Adviser for certain costs related to the
distribution of the Fund's shares, not to exceed 0.25% of average daily net
assets. For the six months ended June 30, 2003, the Fund incurred $126 of
expenses under the Plan.
ITEM 2. CODE OF ETHICS. Not applicable to Semiannual Reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to Semiannual
Reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable to Semiannual
Reports.
ITEMS 5-6.RESERVED
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES. Not Applicable.
ITEM 8. RESERVED
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended are effective as of a date within 90
days of the filing date of this report. (b) There were no significant changes in
the registrant's internal control over financial reporting that occurred during
the registrant's last fiscal half-year that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a) (1) Code of Ethics. Not Applicable
(2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2(b) under the Investment Company Act of 1940.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Lake Shore Family of Funds
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By (Signature and Title)
/s/ Earl V. "Buck" Newsome
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Earl V. "Buck" Newsome
President
Date: September 8 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
/s/ Earl V. "Buck" Newsome
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Earl V. "Buck" Newsome
President
Date: September 8 2003
By (Signature and Title)
/s/ Gregory J. Bauer
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Gregory J. Bauer
Treasurer Chief Financial Officer
Date: September 8 2003
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