Registration No. 33-6836
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 19 [X]
(Check appropriate box or boxes.)
EASTCLIFF FUNDS, INC.
(Exact name of Registrant as Specified On Charter)
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 336-1444
(Registrant's Telephone Number, Including Area Code)
Copy to:
John Clymer Richard L. Teigen
900 Second Avenue South Foley & Lardner
Suite 300 777 East Wisconsin Avenue
Minneapolis, Minnesota 55402 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
__________________________
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933 pursuant to Rule 24f-2 of the
Investment Company Act of 1940, and filed its required Rule 24f-2
Notice for the Registrant's fiscal year ended June 30, 1997 on August
28, 1997.
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
It is proposed that this filing become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
EASTCLIFF FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the items of
Parts A and B of Form N-1A.)
Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
Part A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Financial Highlights; Performance
Information Information
4. General Description of Introduction; Investment Objectives
Registrant and Policies; Investment Practices
and Risks
5. Management of the Management of the Funds; Brokerage
Fund Transactions
5A. Management's Discussion Included in Annual Report to
of Fund Performance Shareholders
6. Capital Stock and Dividend Reinvestment; Dividends,
Other Securities Distributions and Taxes; Capital
Structure; Shareholder Reports
7. Purchase of Securities Distribution Plan; Determination of
Being Offered Net Asset Value; Purchase of
Shares; Exchange Privilege;
Dividend Reinvestment; Automatic
Investment Plan; Retirement Plans
8. Redemption or Repurchase Redemption of Shares; Systematic
Withdrawal Plan
9. Legal Proceedings *
Part B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and General Information and History
History
13. Investment Objectives Investment Restrictions; Investment
and Policies Considerations
14. Management of the Directors and Officers of the
Registrant Corporation
15. Control Persons and Directors and Officers of the
Principal Holders Corporation; Ownership of Management
of Securities and Principal Shareholders
16. Investment Advisory Investment Adviser, Portfolio
and Other Services Managers and Administrator;
Distribution of Shares; Custodian;
Independent Accountants
17. Brokerage Allocation and Allocation of Portfolio Brokerage
Other Practices
18. Capital Stock and Included in Prospectus under "Capital
Other Securities Structure" and Shareholder Meetings
19. Purchase, Redemption Included in Prospectus under
and Pricing of Secu- "Determination of Net Asset Value";
rities Being Offered "Dividend Reinvestment"; "Automatic
Investment Plan"; "Systematic
Withdrawal Plan"; "Exchange
Privilege"; and "Retirement Plans";
Determination of Net Asset Value and
Performance; Information Incorporated
by Reference
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Determination of Net Asset Value and
Performance Data Performance
23. Financial Statements Financial Statements
______________
* Answer negative or inapplicable
<PAGE>
(EASTCLIFF LOGO)
P R O S P E C T U S
EASTCLIFF FUNDS
EASTCLIFF GROWTH FUND
EASTCLIFF TOTAL RETURN FUND
EASTCLIFF REGIONAL SMALL
CAPITALIZATION VALUE FUND
EASTCLIFF CONTRARIAN
VALUE FUND
NO-LOAD MUTUAL FUNDS
P R O S P E C T U S DECEMBER 30, 1997
(EASTCLIFF LOGO)
EASTCLIFF FUNDS
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
(612) 336-1444
Eastcliff Funds, Inc. (the "Corporation") is an open-end, diversified management
investment company consisting of four separate portfolios, the Eastcliff Growth
Fund (the "Growth Fund"), the Eastcliff Total Return Fund (the "Total Return
Fund"), the Eastcliff Regional Small Capitalization Value Fund (the "Regional
Small Cap Fund") and the Eastcliff Contrarian Value Fund (the "Contrarian Value
Fund") (collectively, the "Eastcliff Funds" or "Funds"), offering distinct
investment choices.
EASTCLIFF GROWTH FUND
The investment objective of the Growth Fund is to produce long-term growth of
capital. The Growth Fund seeks to achieve its objective by investing
principally in equity securities.
EASTCLIFF TOTAL RETURN FUND
The investment objective of the Total Return Fund is to realize a combination of
capital appreciation and income which will result in the highest total return,
while assuming reasonable risks. The term "reasonable risks" refers to the
judgment of the Total Return Fund's investment adviser or portfolio manager that
investment in certain securities would not present an excessive risk of loss in
light of current and anticipated future general market and economic conditions,
trends in yields and interest rates, and fiscal and monetary policies. The
Total Return Fund intends to invest in a combination of equity and debt
securities.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
The investment objective of the Regional Small Cap Fund is to produce capital
appreciation. The Regional Small Cap Fund seeks to achieve its objective by
investing principally in equity securities of small capitalization companies
headquartered in Minnesota, North and South Dakota, Montana, Wisconsin,
Michigan, Iowa, Nebraska, Colorado, Illinois, Indiana and Ohio.
EASTCLIFF CONTRARIAN VALUE FUND
The investment objective of the Contrarian Value Fund is to produce long-term
capital appreciation. The Contrarian Value Fund seeks to achieve its objective
by investing in out-of-favor, undervalued companies with restructuring and
turnaround potential.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING RESOURCE TRUST COMPANY AND ANY OF ITS
AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, DUE TO
FLUCTUATIONS IN EACH FUND'S NET ASSET VALUE.
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.
This Prospectus sets forth concisely the information about the Funds that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference. This Prospectus does
not set forth all of the information included in the Registration Statement and
Exhibits thereto which the Funds have filed with the Securities and Exchange
Commission. A Statement of Additional Information, dated December 30, 1997,
which is a part of such Registration Statement, is incorporated by reference in
this Prospectus. Copies of the Statement of Additional Information will be
provided without charge to each person to whom a Prospectus is delivered upon
written or oral request made by writing to the address or calling the telephone
number, stated above. All such requests should be directed to the attention of
the Corporation's Vice President.
(EASTCLIFF LOGO)
EASTCLIFF FUNDS
TABLE OF CONTENTS
PAGE
-----
Expense Information i
Financial Highlights 1
Introduction 3
Investment Objectives and Policies 3
Investment Practices and Risks 6
Management of the Funds 10
Distribution Plan 15
Determination of Net Asset Value 15
Purchase of Shares 15
Redemption of Shares 16
Exchange Privilege 19
Dividend Reinvestment 19
Automatic Investment Plan 20
Systematic Withdrawal Plan 20
Retirement Plans 21
Dividends, Distributions and Taxes 23
Brokerage Transactions 23
Capital Structure 23
Shareholder Reports 24
Performance Information 24
Share Purchase Application centerfold
EXPENSE INFORMATION
<TABLE>
<CAPTION>
EASTCLIFF EASTCLIFF EASTCLIFF REGIONAL EASTCLIFF CONTRARIAN
GROWTH FUND TOTAL RETURN FUND SMALL CAP FUND VALUE FUND
------------ ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases or Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fee None*<F1> None*<F1> None*<F1> None*<F1>
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 1.00% 1.00% 1.00% 1.00%
12b-1 Fees 0.00%**<F2> 0.00%**<F2> 0.00%**<F2> 0.00%**<F2>
Other Expenses (after reimbursement) 0.30%***<F3> 0.30%***<F3> 0.30%***<F3> 0.30%***<F3>
-------- --------- -------- --------
TOTAL FUND OPERATING EXPENSES
(AFTER REIMBURSEMENT) 1.30%***<F3> 1.30%***<F3> 1.30%***<F3> 1.30%***<F3>
======== ======== ======== ========
*<F1>A fee of $12.00 is charged for each wire redemption.
**<F2>Although each of the Funds has adopted a 12b-1 Plan, each presently
intends not to pay any 12b-1 Fees during the fiscal year ending June 30, 1998.
***<F3>Other Expenses and Total Fund Operating Expenses reflect the fact that
the Adviser has voluntarily agreed to waive its advisory fee and/or reimburse
other operating expenses to the extent necessary to ensure that Total Fund
Operating Expenses do not exceed 1.30% of the average daily net assets of each
of the Growth Fund, the Total Return Fund, the Regional Small Cap Fund and the
Contrarian Value Fund. Total Fund Operating Expenses and Other Expenses for the
Growth Fund and the Total Return Fund for the fiscal year ended June 30, 1997
would have been 1.33% and 0.33%, respectively, for the Growth Fund and 1.49% and
0.49%, respectively, for the Total Return Fund, without the expense
reimbursement. Total Fund Operating Expenses and Other Expenses for the Regional
Small Cap Fund for the period from September 16, 1996 (commencement of
operations) to June 30, 1997 would have been 1.61% (annualized) and 0.61%
(annualized), respectively, without the expense reimbursement. Absent fee
waivers and/or reimbursements, Total Fund Operating Expenses and Other Expenses
for the Contrarian Value Fund for the fiscal year ending June 30, 1998 are
estimated to be 2.0% and 1.0%, respectively.
</TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- -------- --------
EXAMPLE:
An investor 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:
Eastcliff Growth Fund $13 $41 $71 $157
Eastcliff Total Return Fund $13 $41 $71 $157
Eastcliff Regional Small
Capitalization Value Fund $13 $41 $71 $157
Eastcliff Contrarian Value Fund $13 $41 N/A N/A
The purpose of the preceding table is to assist investors in understanding
the various costs that an investor in a particular Fund will bear, directly or
indirectly. THEY SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The
Annual Fund Operating Expenses for the Growth Fund, the Total Return Fund and
the Regional Small Cap Fund are based on the actual expenses for the year ended
June 30, 1997. The Annual Fund Operating Expenses for the Contrarian Value Fund
are based on the estimated amounts set forth above. The example assumes a 5%
annual rate of return pursuant to requirements of the Securities and Exchange
Commission. This hypothetical rate of return is not intended to be
representative of past or future performance of any of the Funds.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of a Fund outstanding throughout each period)
The Financial Highlights of the Funds should be read in conjunction with the
Funds' financial statements and notes thereto, included in the Funds' Annual
Report to Shareholders. Further information about the performance of the Funds
is also contained in the Funds' Annual Report to Shareholders, copies of which
may be obtained without charge upon request. Prior to December 17, 1987, the
investment adviser to the Total Return Fund was Resource Capital Advisers, Inc.
and from December 17, 1987 until December 31, 1994, the investment adviser to
the Total Return Fund was Fiduciary Management, Inc. The Contrarian Value Fund
commenced operations on December 30, 1997.
EASTCLIFF GROWTH FUND
FOR THE YEAR FOR THE PERIOD FROM
ENDED JULY 1, 1995+<F4>TO
JUNE 30, 1997 JUNE 30, 1996
------------- ---------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.56 $10.00
Income from investment operations:
Net investment loss (a)<F5> (0.14) (0.08)
Net realized and unrealized gains on investments 1.50 2.64
------- -------
Total from investment operations 1.36 2.56
Less distributions:
Dividend from net investment income -- --
Distribution from net realized gains -- --
------- -------
Total from distributions -- --
------- -------
Net asset value, end of period $13.92 $12.56
======= =======
TOTAL INVESTMENT RETURN 10.8% 25.6%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 46,389 46,193
Ratio of expenses (after reimbursement) to
average net assets (b)<F6> 1.3% 1.3%
Ratio of net investment loss to average net
assets (c)<F7> (1.0%) (0.8%)
Portfolio turnover rate 54.3% 40.3%
Average commission rate paid (d)<F8> $0.0600 --
+<F4>Commencement of operations.
(a)<F5>Net investment loss per share is calculated using ending balances prior
to consideration of adjustments for permanent book and tax differences.
(b)<F6>Computed after giving effect to adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been for the
years ended June 30, 1997 and 1996, 1.3% and 1.4%, respectively.
(c)<F7>If the Fund had paid all of its expenses, the ratio would have been for
the years ended June 30, 1997 and 1996, (1.0%) and (0.9%), respectively.
(d)<F8>Disclosure required for fiscal years beginning after September 1, 1995.
EASTCLIFF TOTAL RETURN FUND
<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
OCTOBER 1,
YEARS ENDED 1994 TO
JUNE 30, JUNE 30, YEARS ENDED SEPTEMBER 30,
---------------- -------- ------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year $14.62 $11.96 $11.92 $12.38 $11.96 $11.56 $9.47 $11.40 $9.88 $13.94
Income from
investment operations:
Net investment income 0.23 0.09 0.14 0.15 0.19 0.13 0.28 0.33 0.24 0.06
Net realized and
unrealized gains (losses)
on investments 3.47 2.90 0.71 0.12 1.28 1.27 2.30 (1.82) 1.40 (1.17)
------- ------ ------ ------- ------- ------- ------- ------- ------- -------
Total from investment
operations 3.70 2.99 0.85 0.27 1.47 1.40 2.58 (1.49) 1.64 (1.11)
Less distributions:
Dividends from net
investment income (0.12) (0.17) (0.14) (0.18) (0.15) (0.23) (0.36) (0.26) (0.11) --
Distributions from net
realized gains (1.34) (0.16) (0.67) (0.55) (0.90) (0.77) (0.13) (0.18) (0.01) (2.95)
------- ------ ------ ------- ------- ------- ------- ------- ------- -------
Total from distributions (1.46) (0.33) (0.81) (0.73) (1.05) (1.00) (0.49) (0.44) (0.12) (2.95)
------- ------ ------ ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $16.86 $14.62 $11.96 $11.92 $12.38 $11.96 $11.56 $9.47 $11.40 $9.88
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT
RETURN (d)<F12> 28.1% 25.4% 10.4%(a)<F9> 2.2% 13.4% 13.2% 28.7% (13.5%) 16.8% (3.0%)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of year
(in 000's $) 21,626 17,799 15,806 2,478 2,683 2,631 2,225 2,055 2,728 1,041
Ratio of expenses
(after reimbursement)
to average net assets(b)<F10> 1.3% 1.3% 1.5%(a)<F9> 2.0% 2.0% 2.7% 2.0% 2.4% 3.0% 2.8%
Ratio of net investment
income to average
net assets(c)<F11> 1.5% 0.7% 2.5%(a)<F9> 1.3% 1.5% 1.2% 2.4% 2.8% 2.8% 1.7%
Portfolio turnover rate 58.3% 95.1% 89.4% 13.2% 28.0% 34.9% 38.0% 62.7% 27.2% 51.9%
Average commission rate paid(e)$0.0624 -- -- -- -- -- -- -- -- --
<F13>
(a)<F9>Annualized.
(b)<F10>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios would have
been, for the years ended June 30, 1997 and 1996, for the period from
October 1, 1994 to June 30, 1995 and for the years ending September 30, 1994,
1993, 1992, 1991, 1990, 1989 and 1988 as follows: 1.5%, 1.6%, 2.6%(a)<F9>, 3.0%,
2.8%, 3.3%, 3.2%, 3.1%, 4.4% and 11.8%, respectively.
(c)<F11>If the Fund had paid all of its expenses, the ratios would have been,
for the years ended June 30, 1997 and 1996, for the period from October 1, 1994
to June 30, 1995 and for the years ending September 30, 1994, 1993, 1992, 1991,
1990, 1989 and 1988 as follows: 1.3%, 0.4%, 1.4%(a)<F9>, 0.2%, 0.8%, 0.6%, 1.3%,
2.1%, 1.4% and (7.4%), respectively.
(d)<F12>Effective December 31, 1994, the Fund changed investment advisers from
Fiduciary Management, Inc. to Resource Capital Advisers, Inc.
(e)<F13>Disclosure required for fiscal years beginning after September 1, 1995.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
FOR THE PERIOD FROM
SEPTEMBER 16, 1996+<F14>TO
JUNE 30, 1997
----------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income 0.02
Net realized and unrealized gains on investments 2.23
-------
Total from investment operations 2.25
Less distributions:
Dividend from net investment income (0.02)
Distribution from net realized gains --
-------
Total from distributions (0.02)
-------
Net asset value, end of period $12.23
=======
TOTAL INVESTMENT RETURN 22.5%**<F16>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 29,231
Ratio of expenses (after reimbursement) to average net assets (a)<F17>1.3%*<F15>
Ratio of net investment income to average net assets (b)<F18> 0.3%*<F15>
Portfolio turnover rate 29.4%
Average commission rate paid $0.0693
+<F14>Commencement of operations.
*<F15>Annualized.
**<F16>Not annualized.
(a)<F17>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have been
1.6%*<F15>.
(b)<F18>If the Fund had paid all of its expenses, the ratio would have been
(0.0%)*<F15>.
INTRODUCTION
The Corporation is an open-end, diversified management investment company,
better known as a mutual fund, registered under the Investment Company Act of
1940 (the "Act"). It was incorporated under the laws of Wisconsin on May 23,
1986. The Corporation consists of four funds: Eastcliff Growth Fund, Eastcliff
Total Return Fund, Eastcliff Regional Small Capitalization Value Fund and
Eastcliff Contrarian Value Fund. Each of the Funds obtains its assets by
continuously selling its shares to the public. Proceeds from such sales are
invested by the particular Fund in securities of other issuers. In this manner,
each Fund: combines the resources of many investors, with each individual
investor having an interest in every one of the securities owned by such Fund;
provides each individual investor with diversification by investing in the
securities of many different issuers; and, furnishes experienced management to
select and watch over its investments. As an open-end investment company, the
Corporation will redeem any of its outstanding shares on demand of the owner at
their next determined net asset value. Registration of the Corporation under the
Act does not involve supervision of the Corporation's management or policies by
the Securities and Exchange Commission.
INVESTMENT OBJECTIVES AND POLICIES
EASTCLIFF GROWTH FUND
The investment objective of the Growth Fund is to produce long-term growth of
capital. The Growth Fund will seek to meet its objective by investing
principally in equity securities. The Growth Fund generally will invest in
domestic equity securities that are listed on a securities exchange or traded in
the over-the-counter market. Under normal market conditions, the Growth Fund
will invest at least 65% of its total assets in equity securities, which may
include common stocks, preferred stocks, convertible securities, and warrants.
In addition, at least 80% of the Growth Fund's total assets will be invested in
domestic securities and no more than 20% of the Growth Fund's total assets may
be invested in foreign securities. The Growth Fund may also invest in corporate
bonds, debentures and notes, debt securities issued or guaranteed by the United
States government and its agencies or instrumentalities, and short-term money
market instruments, such as U.S. Treasury Bills, bank certificates of deposit,
commercial paper, commercial paper master notes and repurchase agreements. There
can be no assurance that the Growth Fund will achieve its investment objective.
See "Investment Practices and Risks."
Investments may be made in well-known established companies, as well as in
newer and relatively unseasoned companies. Potential investments for the Growth
Fund are evaluated using fundamental analysis including criteria such as:
earnings outlook, cash flow, asset values, sustainability of product cycles,
expansion opportunities, management capabilities, industry outlook, competitive
position, and current price relative to long-term value of the company.
Investments generally will not be made on the basis of market timing techniques;
rather, it is anticipated that the Growth Fund will be relatively fully
invested at most times.
At times, the Growth Fund's investment adviser or portfolio manager may
invest in put or call options, futures contracts and options on futures
contracts to hedge the Growth Fund's position in an individual security,
provided that not more than 5% of the Growth Fund's net assets will be invested
in put or call options and options on futures contracts and not more than 5% of
its net assets will be invested in futures contracts. Such investments will be
effected as a defensive measure during periods of anticipated market weakness
and will not result in leveraging the Growth Fund. A description of the
foregoing securities and the risks associated therewith is included in the
Statement of Additional Information.
EASTCLIFF TOTAL RETURN FUND
The investment objective of the Total Return Fund is to realize a combination
of capital appreciation and income which will result in the highest total
return, while assuming reasonable risks. The term "reasonable risks" refers to
the judgment of the Total Return Fund's investment adviser or portfolio manager
that investment in certain securities would not present an excessive risk of
loss in light of current and anticipated future general market and economic
conditions, trends in yields and interest rates, and fiscal and monetary
policies. Because the Total Return Fund's objective is to realize the highest
total return, the percentage of such Fund's portfolio invested to produce
capital appreciation may at any time be greater or less than the percentage of
such Fund's portfolio invested to produce current income. In seeking to attain
the Total Return Fund's objective, such Fund intends to invest in common stocks,
both growth and income-oriented, preferred stocks, securities convertible into
common stocks, warrants, corporate bonds, debentures and notes, debt securities
issued or guaranteed by the United States government and its agencies or
instrumentalities, short-term money market instruments, such as U.S. Treasury
Bills, bank certificates of deposit, commercial paper, commercial paper master
notes and repurchase agreements and securities of foreign issuers. There can be
no assurance that the Total Return Fund will achieve its investment objective.
See "Investment Practices and Risks."
No minimum or maximum percentage of the Total Return Fund's assets is
required to be invested in common stocks or any other type of security. At
times, the Total Return Fund may be 100% invested in common stocks and other
types of equity securities. On the other hand, when the Total Return Fund's
investment adviser or portfolio manager believes that in the light of current
economic and market conditions such Fund's investment objective may be more
readily attainable in debt securities, up to 100% of the Total Return Fund's
assets may be invested in such securities. Among the economic and market
conditions considered by the Total Return Fund's investment adviser are:
historic dividend yields as compared to current dividend yields; historic price-
earnings ratios as compared to current price-earnings ratios; interest rate
movements; and inflation measures. If, based on the investment adviser's
evaluation, the investment adviser determines that prices of common stocks will
generally rise, the investment adviser will cause the Total Return Fund to
invest principally in common stocks or other equity securities. If, based on the
investment adviser's evaluation, the investment adviser determines that prices
of common stocks will generally decline or remain stable, the investment adviser
will cause such Fund to invest principally in debt securities.
The Total Return Fund's investment adviser and portfolio manager will
consider various financial characteristics, including: earnings growth; book
value; net current asset value per share; replacement cost; and dividends. The
investment adviser will study the financial statements of the issuing
corporation and other companies in the same industry, market trends and economic
conditions in general. No formula is used in such analysis. Common stocks will
generally be purchased for long-term capital appreciation. However in
appropriate situations purchases may be made with the expectation of price
appreciation over a relatively short period of time. The Total Return Fund's
investments in commons stocks and other equity-type investments, such as
preferred stocks, securities convertible into common stocks and warrants, may be
made without regard to any objective criteria such as size, exchange listing or
seasoning. The Total Return Fund may invest in both exchange-listed and over-
the-counter securities, in small or large companies, and in well-established or
unseasoned companies.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
The investment objective of the Regional Small Cap Fund is to produce capital
appreciation. The Regional Small Cap Fund seeks to achieve its objective by
investing, in normal market conditions, at least 65% of its total assets in
equity securities of small capitalization companies headquartered in Minnesota,
North and South Dakota, Montana, Wisconsin, Michigan, Iowa, Nebraska, Colorado,
Illinois, Indiana and Ohio.
The Regional Small Cap Fund's investment adviser and portfolio manager
invests primarily in the securities of small capitalization companies which
generally have the following characteristics in their opinion: company-specific
fundamentals that grow shareholder value; experienced, shareholder-oriented
management; and undervaluation by the market. For these purposes, small
capitalization companies are deemed those with market capitalizations of less
than $1 billion.
In addition to the risks associated with investing in small capitalization
companies, the Regional Small Cap Fund's policy of concentrating its equity
investments in a geographic region means that it may be subject to adverse
economic, political or other developments in that region. Although the region in
which the Regional Small Cap Fund principally invests has a diverse industrial
base (including, but not limited to, agriculture, mining, retail,
transportation, utilities, heavy and light manufacturing, financial services,
insurance, computer technology and medical technology), this industrial base is
not as diverse as that of the country as a whole. The Regional Small Cap Fund
may be less diversified by industry and company than other funds with a similar
investment objective and no geographic limitation.
The Regional Small Cap Fund may also invest up to 35% of its total assets in
equity securities without regard to the location of the issuer's headquarters or
the issuer's market capitalization, corporate bonds, debentures and notes, debt
securities issued or guaranteed by the United States government and its agencies
or instrumentalities, short-term money market instruments, such as U.S. Treasury
Bills, bank certificates of deposit, commercial paper, commercial paper master
notes and repurchase agreements. There can be no assurance that the Regional
Small Cap Fund will achieve its investment objective. See "Investment Practices
and Risks".
At times the Regional Small Cap Fund's investment adviser or portfolio
manager may purchase put and call options on equity securities and on stock
indices and write covered call options on equity securities owned by the
Regional Small Cap Fund in an effort to reduce risk. Not more than 5% of the
Regional Small Cap Fund's net assets will be invested in put and call options
and the premium received by the Regional Small Cap Fund with respect to
unexpired call options written by the Regional Small Cap Fund will not exceed 5%
of the Regional Small Cap Fund's net assets. Such investments will be effected
during periods of anticipated market weakness and will not result in leveraging
the Regional Small Cap Fund. A description of the foregoing securities and the
risks associated therewith is included in the Statement of Additional
Information.
EASTCLIFF CONTRARIAN VALUE FUND
The investment objective of the Contrarian Value Fund is to produce long-term
capital appreciation. The Contrarian Value Fund seeks to achieve its objective
by investing principally in equity securities of out-of-favor, undervalued
companies with restructuring and turnaround potential.
The Contrarian Value Fund's investment adviser and portfolio manager utilize
a proprietary screening process and bottom-up analysis to identify and value a
company's individual business segments and private market value. The portfolio
manager conducts intensive fundamental research to determine whether there is
opportunity for shareholder-oriented management to refocus and grow the company
to produce higher earnings that lead to higher stock prices. The Contrarian
Value Fund's portfolio manager will meet with the senior management of the
companies selected for the portfolio.
The Contrarian Value Fund will hold a relatively limited number of securities
(i.e., generally 35-40 or less, other than money market instruments) which
generally will sell at a substantial discount to their private market value,
have the potential of doubling their earnings power, and have significant price
appreciation potential over a three-year period. This investment approach
provides for an average holding period of three years and annual turnover of
approximately 35%. It is anticipated that the Contrarian Value Fund will be
relatively fully invested at all times, with cash as a residual of the
investment process, but, in any event, will, in normal market conditions have at
least 85% of its net assets invested in common stocks. The Contrarian Value Fund
may also invest in convertible securities, preferred stocks, corporate bonds,
debentures and notes, debt securities issued or guaranteed by the United States
government and its agencies or instrumentalities, and short-term money market
instruments, such as U.S. Treasury Bills, bank certificates of deposit,
commercial paper, commercial paper master notes and repurchase agreements.
The risks associated with the Contrarian Value Fund's investment style, over
and above a general market decline, include: the company's anticipated
restructuring events do not materialize; the underlying private market value
deteriorates; or key senior management departs. In addition, a period of severe
economic or financial distress could cause a temporary decline in shareholder
value-enhancing strategies such as asset sales, debt reduction, spin-offs and
share buybacks. These actions are integral to the success of the Contrarian
Value Fund's investment process. Since out-of-favor stocks of ten are not widely
followed, there is also the risk that improving fundamentals may not be
recognized as quickly as would be the case with more widely followed stocks and
that the market for out-of-favor stocks may be more volatile than the market for
stocks where there is greater trading volume. In taking a contrarian position
there is always the risk that the negative opinion of the majority is correct.
Therefore, there can be no assurance that the Contrarian Value Fund will achieve
its investment objective. See "Investment Practices and Risks."
At times the Contrarian Value Fund's investment adviser or portfolio manager
may purchase put and call options on equity securities owned by the Contrarian
Value Fund in an effort to reduce risk. Not more than 5% of the Contrarian Value
Fund's net assets will be invested in put and call options and the premium
received by the Contrarian Value Fund with respect to unexpired call options
written by the Contrarian Value Fund will not exceed 5% of the Fund's net
assets. Such investments will be effected during periods of anticipated market
weakness and will not result in leveraging the Contrarian Value Fund. A
description of the foregoing securities and the risks associated therewith is
included in the Statement of Additional Information.
INVESTMENT PRACTICES AND RISKS
In addition to the investment policies described above (and subject to
certain restrictions described below) each of the Funds may invest in the
following securities and may employ some or all of the following investment
techniques, some of which may present special risks as described below. A more
complete discussion of certain of these securities and investment techniques and
the associated risks is contained in the Statement of Additional Information.
EQUITY SECURITIES GENERALLY
The market prices of individual stocks, and of stocks in general, are
frequently subject to significant volatility. Investors should be aware that
since the major portion of each Fund's portfolio will normally be invested in
common stocks, such Fund's net asset value may be subject to greater fluctuation
than a portfolio containing a substantial amount of fixed income securities.
Each Fund is intended for investors who can accept the risks involved in
investments in equity and equity-related securities. An investment in shares of
any of the Funds does not constitute a complete investment program. Investors
may wish to complement an investment in the Funds with other types of
investments.
SMALL CAPITALIZATION COMPANIES
Each Fund may invest a substantial portion of its assets in small
capitalization companies. While small capitalization companies can provide
greater growth potential than larger, more mature companies, investing in the
securities of such companies also involves greater risk and potential price
volatility. These companies often involve higher risks because they lack the
management experience, financial resources, product diversification, markets,
distribution channels and competitive strengths of larger companies. In
addition, in many instances, the frequency and volume of their trading is
substantially less than is typical of larger companies. Therefore, the
securities of smaller companies, as well as start-up companies, may be subject
to wider price fluctuations. The spreads between the bid and asked prices of the
securities of these companies in the U.S. over-the-counter market typically are
larger than the spreads for more actively traded securities. As a result, a Fund
could incur a loss if it determined to sell such a security shortly after its
acquisition. When making large sales, a Fund may have to sell portfolio holdings
at discounts from quoted prices or may have to make a series of small sales over
an extended period of time due to the trading volume of smaller company
securities. Small capitalization companies tend to have less potential for
current dividend income than investments in larger, more mature companies. Not
more than 5% of the Total Return Fund's assets and 10% of each of the Growth
Fund's, Regional Small Cap Fund's and Contrarian Value Fund's assets may be
invested in unseasoned companies defined as companies which have a record of
less than three years of continuous operation, including the operation of a
predecessor business of a company which came into existence as a result of a
merger, consolidation, reorganization or purchase of substantially all of the
assets of such predecessor business.
FOREIGN SECURITIES
The Total Return Fund may invest up to 25% and the Growth Fund and the
Contrarian Value Fund up to 20% of their respective assets in foreign
securities. Such investments may involve risks which are in addition to the
usual risks inherent in domestic investments. The value of a Fund's foreign
investments may be significantly affected by changes in currency exchange rates,
and a Fund may incur costs in converting securities denominated in foreign
currencies to U.S. dollars. In many countries, there is less publicly available
information about issuers than is available in the reports and ratings published
about companies in the United States. Additionally, foreign companies may not be
subject to uniform accounting, auditing and financial reporting standards.
Dividends and interest on foreign securities may be subject to foreign
withholding taxes, which would reduce a Fund's income without providing a tax
credit for a Fund's shareholders. Each Fund will limit such investments to
securities of foreign issuers domiciled in Australia and the non-communist
nations of Western Europe, North America and Eastern Asia. There is the
possibility of expropriation, confiscatory taxation, currency blockage or
political or social instability which could affect investments in those nations.
Foreign securities include sponsored and unsponsored American Depository
Receipts ("ADRs"). ADRs typically are issued by a U.S. bank or trust company and
evidence ownership of underlying securities issued by a foreign corporation.
Unsponsored ADRs differ from sponsored ADRs in that the establishment of
unsponsored ADRs are not approved by the issuer of the underlying securities. As
a result, available information concerning the issuer may not be as current or
reliable as the information for sponsored ADRs, and the price of unsponsored
ADRs may be more volatile.
WARRANTS AND RIGHTS
Each Fund may invest up to 5% of its net assets in warrants or rights, valued
at the lower of cost or market, which entitle the holder to buy securities
during a specific period of time. A Fund will make such investments only if the
underlying securities are deemed appropriate by the Fund's investment adviser or
portfolio manager for inclusion in that Fund's portfolio. Additionally, the
Total Return Fund will purchase warrants or rights only if they are sold as a
unit with another equity or debt security. Included in the 5% amount, but not to
exceed 2% of net assets, are warrants and rights whose underlying securities are
not traded on principal domestic or foreign exchanges. Warrants and rights
acquired by a Fund in units or attached to securities are not subject to these
restrictions.
CONVERTIBLE SECURITIES
Each of the Funds will limit its investments in convertible securities to
those for which such Fund's investment adviser or portfolio manager believes (a)
the underlying common stock is a suitable investment for the Fund using the
criteria described above and (b) a greater potential for total return exists by
purchasing the convertible security because of its higher yield. None of the
Funds will invest more than 5% of its net assets at the time of investment in
convertible securities rated less than investment grade. Securities rated BBB by
Standard & Poor's Corporation ("Standard & Poor's") or Baa by Moody's Investors
Service, Inc. ("Moody's"), although investment grade, do exhibit speculative
characteristics and are more sensitive than higher rated securities to changes
in economic conditions. Investments in less than investment grade securities
entail relatively greater risk of loss of income or principal than investments
in investment grade securities.
DEBT SECURITIES
Each of the Funds may invest in interest-bearing debt securities. In
particular, to achieve its investment objective, the Total Return Fund may at
times emphasize the generation of interest income by investing in interest-
bearing debt securities, both short and intermediate to long-term. Investment in
intermediate to long-term debt securities may also be made with a view to
realizing capital appreciation when a Fund's investment adviser or portfolio
manager believes that interest rates on such investments may decline, thereby
increasing their market value. Debt securities having maturities from three to
ten years are considered to be intermediate-term, and debt securities having
maturities in excess of ten years are considered to be long-term. Each of the
Funds may also purchase "deep discount bonds," i.e., bonds which are selling at
a substantial discount from their face amount, with a view to realizing capital
appreciation. The Funds will invest only in those publicly distributed
nonconvertible debt securities which have been assigned one of the highest three
ratings of either Standard & Poor's or Moody's. The values of the interest-
bearing debt securities held by a Fund are subject to price fluctuations
resulting from various factors, including rising or declining interest rates
("market risks") and the ability of the issuers of such investments to make
scheduled interest and principal payments ("financial risks"). For example,
interest-bearing securities typically experience appreciation when interest
rates decline and depreciation when interest rates rise. The investment adviser
and portfolio managers for the Funds attempt to minimize these risks when
selecting investments by taking into account interest rates, terms and
marketability of obligations, as well as the capitalization, earnings, liquidity
and other indicators of the issuer's financial condition. The Funds' investment
in securities of, or guaranteed by, the United States government, its agencies
or instrumentalities may be supported by the full faith and credit of the United
States, supported by the right of the agency to borrow from the U.S. Treasury or
supported only by the credit of the agency or instrumentality. Agencies or
instrumentalities whose securities are supported by the full faith and credit of
the United States include, but are not limited to, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration and Government National Mortgage
Association. Examples of agencies or instrumentalities whose securities are
supported by the right of the agency to borrow from the U.S. Treasury include,
but are not limited to, the Federal Home Loan Bank, Federal Intermediate Credit
Banks and Tennessee Valley Authority. There is no assurance that these
commitments will be undertaken in full. No assurances can be given that the U.S.
government will provide financial support to obligations issued or guaranteed by
agencies or instrumentalities that are not backed by the full faith and credit
of the United States, since it is not obligated to do so by law.
PREFERRED STOCKS
Each of the Funds may invest in preferred stocks. Preferred stocks have a
preference over common stocks in liquidation (and generally dividends as well)
but are subordinated to the liabilities of the issuer in all respects. As a
general rule, the market value of preferred stocks with a fixed dividend rate
and no conversion element varies inversely with interest rates and perceived
credit risks while the market price of convertible preferred stock generally
also reflects some element of conversion value. Because preferred stock is
junior to debt securities and other obligations of the issuer, deterioration in
the credit quality of the issuer will cause greater changes in the value of a
preferred stock than in a more senior debt security with similarly stated yield
characteristics. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
MONEY MARKET INSTRUMENTS
Each of the Funds has reserved the freedom to invest any portion of its
assets for temporary defensive purposes in conservative fixed-income securities
such as United States Treasury Bills, certificates of deposit of U.S. banks
(provided that the bank has capital, surplus and undivided profits (as of the
date of its most recently published annual financial statements) with a value in
excess of $100,000,000 at the date of investment), commercial paper and
commercial paper master notes (which are demand instruments without a fixed
maturity bearing interest at rates which are fixed to known lending rates and
automatically adjusted when such lending rates change) rated A-1 by Standard &
Poor's, money market mutual funds and repurchase agreements. Repurchase
agreements are agreements under which the seller of a security agrees at the
time of sale to repurchase the security at an agreed time and price. The Funds
will not enter into repurchase agreements with entities other than banks or
invest over 5% of their respective net assets in repurchase agreements.
PORTFOLIO TURNOVER
Each of the Funds typically will purchase common stocks for long-term capital
appreciation, but may on occasion place emphasis on short-term trading profits.
As a consequence, each of the Funds expects usually to have an annual portfolio
turnover rate ranging from 30% to 80%. The annual portfolio turnover rate
indicates changes in a Fund's portfolio and is calculated by dividing the lesser
of purchases or sales of portfolio securities (excluding securities having
maturities at acquisition of one year or less) for the fiscal year by the
monthly average of the value of the portfolio securities (excluding securities
having maturities at acquisition of one year or less) owned by such Fund during
the fiscal year. The annual portfolio turnover rate may vary widely from year to
year depending upon market conditions and prospects. High turnover in any year
will result in the payment by a Fund from capital of above-average amounts of
brokerage commissions and could result in the payment by shareholders of above-
average amounts of taxes on realized investment gains. Distributions to
shareholders of such investment gains, to the extent they consist of net short-
term capital gains, will be considered ordinary income for federal income tax
purposes.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued or delay-delivery
basis. When such a transaction is negotiated, the purchase price is fixed at the
time the purchase commitment is made, but delivery of and payment for the
securities take place at a later date. A Fund will not accrue income with
respect to securities purchased on a when-issued or delayed-delivery basis prior
to their stated delivery date. Pending delivery of the securities, each Fund
will maintain in a segregated account cash or liquid securities in an amount
sufficient to meet its purchase commitments. The purpose and effect of such
segregation is to prevent the Fund from gaining investment leverage from such
transactions. The purchase of securities on a when-issued or delayed-delivery
basis exposes a Fund to risk because the securities may decrease in value prior
to delivery. The Funds will engage in when-issued and delayed-delivery
transactions only for the purpose of acquiring portfolio securities consistent
with their investment objectives and not for the purpose of investment leverage.
A seller's failure to deliver securities to a Fund could prevent the Fund from
realizing a price or yield considered to be advantageous.
GENERAL CONSIDERATIONS
Under certain circumstances each of the Funds may (a) temporarily borrow
money from banks for emergency or extraordinary purposes, provided that such
borrowings not exceed 5% of the value of such Fund's net assets, (b) pledge up
to 10% of its net assets to secure borrowings and (c) purchase securities of
other investment companies. None of the Funds may invest more than 10% of its
net assets in illiquid securities, including repurchase agreements maturing in
more than seven days. The Contrarian Value Fund may invest up to 5% of its net
assets in restricted securities. The Funds' Statement of Additional Information
includes a more complete discussion of the circumstances in which each of the
Funds may engage in these activities, as well as certain other investment
restrictions applicable to the Funds. Except for the foregoing investment
restrictions and the Funds' policies with respect to investments in warrants,
repurchase agreements and securities of unseasoned companies, the investment
objective and other policies of each Fund described under "Investment Objectives
and Policies" are not fundamental policies and may be changed without
shareholder approval. A change in a particular Fund's investment objective may
result in such Fund having an investment objective different from the objective
which the shareholder considered appropriate at the time of investment in such
Fund.
MANAGEMENT OF THE FUNDS
As a Wisconsin corporation, the business and affairs of the Funds are managed
by its Board of Directors. The investment activities of the Funds are managed
through a multi-manager structure. Each of the Funds has entered into an
investment advisory agreement (the "Management Agreements") with Resource
Capital Advisers, Inc. (the "Adviser"), 900 Second Avenue South, 300
International Centre, Minneapolis, Minnesota 55402, pursuant to which the
Adviser will provide consulting, investment and administrative services to the
Funds. The specific security investments for each Fund will be made by one or
more portfolio managers (sub-advisers) selected for the Funds by the Adviser.
The Management Agreements provide that the Adviser, subject to the management
and direction of the Corporation's Board of Directors and officers, will
evaluate, select and monitor the various portfolio managers for each Fund. The
Adviser and the Funds will enter into separate subadvisory contracts with the
portfolio managers (the "Sub-Advisory Agreements").
The Adviser is the investment adviser to individuals and institutional
clients (including investment companies). The Adviser was organized in 1984 and
is a wholly-owned subsidiary of Resource Trust Company, a Minnesota state bank.
Resource Trust Company is a wholly-owned subsidiary of Resource Companies, Inc.
The Adviser was also the investment adviser to the Total Return Fund prior to
December 17, 1987. On such date the investment advisory agreement with the
Adviser was terminated and the Total Return Fund entered into a substantially
identical investment advisory agreement with Fiduciary Management, Inc. On
December 31, 1994 the investment advisory agreement with Fiduciary Management,
Inc. was terminated and the Total Return Fund entered into a substantially
identical investment advisory agreement with the Adviser. On June 30, 1995, the
investment advisory agreement with the Adviser was terminated and replaced with
the current Management Agreement.
THE ADVISER
The Adviser: (i) provides or oversees the provision of all general management
and administration, investment advisory and portfolio management, and general
services for the Funds; (ii) provides the Funds with office space, equipment and
personnel necessary to operate and administer the Funds' business, and to
supervise the provision of services by third parties such as the money managers
and custodian; (iii) develops the investment programs, selects money managers,
allocates assets among money managers and monitors the money managers'
investment programs and results; and (iv) is authorized to select, or hire money
managers to select, individual portfolio securities held by the Funds. The
Adviser bears the expenses it incurs in providing these services as well as the
costs of preparing and distributing explanatory materials concerning the Funds.
The Adviser also provides asset management consulting services including
objective-setting and asset-allocation input, and money manager research and
evaluation assistance.
For the foregoing, the Adviser receives from the Total Return Fund a monthly
fee of 1/12 of 1% (1% per annum) on the first $30,000,000 of the daily net
assets of such Fund and 1/12 of .75% (.75% per annum) on the daily net assets of
such Fund over $30,000,000; and from each of the Growth Fund, Regional Small Cap
Fund and Contrarian Value Fund a monthly fee of 1/12 of 1% (1% per annum) of the
daily net assets of such Fund. The Adviser is responsible for the payment of all
fees to the portfolio managers. The advisory fees paid by the Growth Fund, the
Total Return Fund and the Regional Small Cap Fund in the fiscal year ended June
30, 1997 were equal to 1.00%, 1.00% and 1.00% (annualized), respectively, of
such Funds' average net assets.
THE PORTFOLIO MANAGERS
The assets of each Fund are allocated currently among the portfolio managers
listed below. The allocation of a Fund's assets among portfolio managers may be
changed at any time by the Adviser. Portfolio managers may be employed or their
services may be terminated at any time by the Adviser, subject to approval by
the Corporation's Board of Directors. The employment of a new portfolio manager
for a Fund currently requires the prior approval of the shareholders of that
Fund. The Corporation, however, may request an order of the Securities and
Exchange Commission exempting the Funds from the requirement for shareholder
approval of new portfolio managers. If an order is granted, the Corporation will
notify shareholders of the Fund concerned promptly when a new portfolio manager
begins providing services. There can be no assurance, however, that the
Corporation may request such an order or that such an order will be granted with
respect to the Funds.
The Adviser pays the fees of each portfolio manager. Each portfolio manager
is paid an annual fee expressed as a percentage of Fund assets under
management; there are no performance or incentive fees. Some portfolio managers
may execute portfolio transactions for the Funds through broker-dealer
affiliates and receive brokerage commissions for doing so.
Portfolio managers are selected for the Funds based primarily upon the
research and recommendations of the Adviser, which evaluates quantitatively and
qualitatively the manager's skills and results in managing assets for specific
asset classes, investment styles and strategies. The Adviser evaluates the risks
and returns of the portfolio managers' investment style over an entire market
cycle. Short-term investment performance, by itself, is not a controlling factor
in selecting or terminating a portfolio manager.
Each portfolio manager has complete discretion to purchase and sell portfolio
securities for its segment of a Fund within such Fund's investment objectives,
restrictions and policies, and the more specific strategies developed by the
Adviser. Although the portfolio managers' activities are subject to general
oversight by the Board of Directors and officers of the Corporation, none of the
Board, the officers or the Adviser evaluate the investment merits of the
portfolio manager's individual securities selections.
As of the date of this Prospectus, the portfolio manager of the Growth Fund
is Winslow Capital Management, Inc. ("WCM"), 4720 IDS Tower, 80 South Eighth
Street, Minneapolis, Minnesota 55402. WCM was organized as a Minnesota
Corporation in 1992 and is a registered investment adviser controlled by Clark
J. Winslow, Richard E. Pyle and Gail M. Knappenberger. All investment decisions
are made by a team of investment professionals, any of whom may make
recommendations subject to final approval of Mr. Winslow or another senior
member of WCM's management team to whom he may delegate that authority. As such,
Mr. Winslow is primarily responsible for the day-to-day management of the Growth
Fund's portfolio and has been so since July 1, 1995. Mr. Winslow has served as
President, Chief Executive Officer, director and portfolio manager of WCM since
1992. Prior to such time, he was senior vice president and portfolio manager at
Alliance Capital Management from 1987 to 1992 and portfolio manager at John W.
Bristol & Co. from 1980 to 1987. WCM currently serves and has served since
October, 1992 as sub-adviser to another mutual fund, Advantus Capital
Appreciation Fund (formerly MIMLIC Capital Appreciation Fund). WCM also manages
equity portfolios for large pension and profit-sharing plans, foundations,
endowments and other private accounts. As of August 31, 1997, WCM managed
approximately $1.3 billion in assets. For its services to the Growth Fund, WCM
receives from the Adviser (not the Growth Fund) a monthly fee of 1/12 of 0.60%
(0.60% per annum) of the daily net assets of such Fund.
As of the date of this Prospectus, the portfolio manager of the Total Return
Fund is Palm Beach Investment Advisers, Inc. ("PBIA"), 249 Royal Palm Way, Suite
400, Palm Beach, Florida 33480. PBIA was incorporated as a Florida corporation
in 1990 and is a registered investment adviser. PBIA is controlled by the
Adviser. Thomas M. Keresey, the Chairman and Chief Investment Officer of PBIA,
and Patrice J. Neverett, Senior Vice President and Portfolio Manager of PBIA,
are primarily responsible for the day-to-day management of the Total Return
Fund's portfolio and have been so since July 1, 1995. Mr. Keresey and Ms.
Neverett have been employed by PBIA in various capacities since PBIA was founded
in August 1990. PBIA manages equity and fixed income portfolios for individual
and institutional clients, including pension and profit-sharing plans,
foundations and endowments. As of August 31, 1997, PBIA managed approximately
$287 million in assets. For its services to the Total Return Fund, PBIA receives
from the Adviser (not the Total Return Fund) a monthly fee of 1/12 of 0.40%
(0.40% per annum) on the first $30,000,000 of such Fund's daily net assets and
1/12 of 0.30% (0.30% per annum) on the daily net assets of such Fund in excess
of $30,000,000.
As of the date of this Prospectus, the portfolio manager of the Regional
Small Cap Fund is Woodland Partners LLC ("WP"), 60 South Sixth Street, Suite
3750, Minneapolis, Minnesota 55402. WP was organized as a Minnesota limited
liability company in 1996 and is a registered investment adviser owned in equal
parts by Richard W. Jensen, Elizabeth M. Lilly and Richard J. Rinkoff. Ms. Lilly
and Mr. Rinkoff are responsible for the day-to-day management of the Regional
Small Cap Fund's portfolio. As of August 31, 1997, WP managed approximately $350
million in assets. For its services to the Regional Small Cap Fund, WP receives
from the Adviser (not the Regional Small Cap Fund) a monthly fee of 1/12 of
0.60% (0.60% per annum) of the daily net assets of such Fund.
Prior to founding WP on June 1, 1996, Mr. Jensen, Ms. Lilly and Mr. Rinkoff
were employed at First Asset Management, a division of First Bank National
Association - Mr. Jensen since 1967, Ms. Lilly since 1992 and Mr. Rinkoff since
1977. While at First Asset Management, Ms. Lilly and Mr. Rinkoff served as
portfolio managers for the Regional Equity Fund, a series of First American
Investment Funds, Inc., and for various other similarly managed private
accounts (collectively, the "First Asset Management Regional Small Cap Value
Accounts"), all of which were managed using substantially similar, though not in
all cases identical, investment objectives, strategies and techniques as those
being used by the Regional Small Cap Fund. See "Investment Objectives and
Policies." Mr. Rinkoff alone managed the First Asset Management Regional Small
Cap Value Accounts from 1981 to April 1994 and, with Ms. Lilly, co-managed such
Accounts from April 1994 through their departure from First Asset Management on
May 31, 1996. In addition, Mr. Jensen, Ms. Lilly and Mr. Rinkoff served, with
certain of their colleagues, as members of a committee managing other accounts
with investment objectives and strategies significantly different from those
employed by the First Asset Management Regional Small Cap Value Accounts or
employed by the Regional Small Cap Fund.
Set forth below is composite historical performance data relating to the
Regional Small Cap Value Accounts (hereinafter defined), measured against
relevant broad-based market indices. The Regional Small Cap Value Accounts
include all portfolios managed by Ms. Lilly and Mr. Rinkoff with objectives,
strategies and techniques substantially similar to those employed by the
Regional Small Cap Fund, including the First Asset Management Regional Small Cap
Value Accounts as well as portfolios of WP clients and the Regional Small Cap
Funds. The composite also includes the performance from June 1, 1996 - July 5,
1996 of two portfolios which were First Asset Management Regional Small Cap
Value Accounts that were unmanaged (i.e., the portfolios did not change) during
such period and became WP portfolios on July 5, 1996. All performance data
presented is historical and investors should not consider this performance data
as an indication of the future performance of the Regional Small Cap Fund or the
results an individual investor might achieve by investing in the Regional Small
Cap Fund. Investors should not rely on the historical performance when making an
investment decision. All returns quoted are dollar-weighted total rates of
return and include the reinvestment of dividends and interest. Performance
figures reflect the assessment of estimated annual operating expenses for the
Regional Small Cap Fund of 1.3% of average assets, which expenses were higher
than those actually incurred by the composite. The Regional Small Cap Value
Accounts (other than the Regional Equity Fund series of First American
Investment Funds, Inc. and the Regional Small Cap Fund) were not subject to
certain investment limitations, diversification requirements and other
restrictions imposed by the Act and the Internal Revenue Code, which, if
applicable, may have adversely affected the performance results of the
composite.
All information presented is based on data supplied by WP or from statistical
services, reports or other sources believed by WP to be reliable. However, such
information has not been verified by any third party and is unaudited.
COMPOUNDED ANNUAL RATES OF RETURN(1)<F19>
(For the Period Ended December 31, 1996)
15 Years 10 Years 5 Years 3 Years 1Year
-------- ------- ------- ------- -----
Regional Small Cap
Value Accounts Composite(2) 16.1 17.1 18.9 20.6 16.5
<F20>
S&P 500 Index(3)<F21> 16.6 15.3 15.2 19.7 23.0
Russell 2000 Index(4)<F22> 13.5 12.4 15.6 13.6 16.5
(1)<F19>All returns quoted are dollar-weighted total rates of return and include
the reinvestment of dividends and interest. Performance figures reflect the
assessment of estimated annual operating expenses of 1.3% of average assets,
which expenses were higher than those actually incurred by the composite. Total
annual rate of return is the change in redemption value of units purchased with
an initial $1,000 investment, assuming the reinvestment of dividends. Compounded
annual rate of return represents the level annual rate which, if earned for each
year in a multiple year period, would produce the cumulative rate of return over
that period.
(2)<F20>As indicated above, Mr. Rinkoff alone managed the Regional Small Cap
Value Accounts from 1981 to April 1994 and, with Ms. Lilly, co-managed such
Accounts from April 1994 through December 31, 1996.
(3)<F21>The Standard &Poor's 500 Index consists of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The Standard & Poor's
Ratings Group designates the stocks to be included in the Index on a statistical
basis. A particular stock's weighting in the Index is based on its relative
total market value (i.e., its market price per share times the number of shares
outstanding). Stocks may be added or deleted from the Index from time to time.
(4)<F22>The Russell 2000 Index is an index comprised of 2000 publicly traded
small capitalization common stocks that are ranked in terms of capitalization
below the large and mid-range capitalization sectors of the United States equity
market. The Russell 2000 Index is a trademark/service mark of the Frank Russell
Company.
Past performance may not be indicative of future rates of return. Investors
should also be aware that other performance calculation methods may produce
different results, and that comparisons of investment results should consider
qualitative circumstances and should be made only for portfolios with generally
similar investment objectives.
As of the date of this Prospectus, the portfolio manager of the Contrarian
Value Fund is Sasco Capital, Inc. ("Sasco"), 10 Sasco Hill Road, Fairfield,
Connecticut 06430. Sasco was organized as a Connecticut corporation in 1985, and
is a registered investment adviser independently owned and managed by its
founders Ms. Hoda Bibi, Mr. Bruce Bottomley, Mr. Lee Garcia and Mr. Daniel
Leary. Messrs. Bottomley, Garcia and Leary are responsible for the day-to-day
management of the Contrarian Value Fund and have been Managing Directors and
Portfolio Managers of Sasco since its inception. Ms. Bibi currently serves as
President and Managing Director of Sasco and has been an officer of Sasco since
its inception. As of August 31, 1997, Sasco managed approximately $2.3 billion
in various accounts including corporate pension funds, state retirement plans,
endowments and foundations. For its service to the Contrarian Value Fund, Sasco
receives from the Adviser (not the Contrarian Value Fund) a monthly fee of 1/12
of .60% (0.60% per annum) of the daily net assets of such Fund.
Set forth below is composite historical performance data relating to the
Sasco Accounts (hereinafter defined), measured against relevant broad-based
market indices. The Sasco Accounts include all portfolios managed by Sasco with
objectives, strategies and techniques substantially similar to those employed by
the Contrarian Value Fund. All performance data presented is historical and
investors should not consider this performance data as an indication of the
future performance of the Contrarian Value Fund or the results an individual
investor might achieve by investing in the Contrarian Value Fund. Investors
should not rely on the historical performance when making an investment
decision. All returns quoted are dollar-weighted total rates of return and
include the reinvestment of dividends and interest. Performance figures reflect
the assessment of estimated annual operating expenses for the Contrarian Value
Fund of 1.3% of average assets, which expenses were higher than those actually
incurred by the composite. The Sasco Accounts were not subject to certain
investment limitations, diversification requirements and other restrictions
imposed by the Act and the Internal Revenue Code, which, if applicable, may have
adversely affected the performance results of the composite.
All information presented is based on data supplied by Sasco or from
statistical services, reports or other sources believed by Sasco to be reliable.
However, such information has not been verified by any third party and is
unaudited.
COMPOUNDED ANNUAL RATES OF RETURN (1)<F25>
(For the Period Ended December 31, 1996)
10 Years 5 Years 3 Years 1 Year
-------- ------ ------ ------
Sasco Accounts Composite 14.9 19.2 21.4 24.8
S&P Index(2)<F26> 15.3 15.2 19.7 23.0
Russell Midcap Index (3)<F27> 14.7 15.8 16.1 19.0
(1)<F25>All returns quoted are dollar-weighted total rates of return and include
the reinvestment of dividends and interest. Performance figures reflect the
assessment of estimated annual operating expenses of 1.3% of average assets,
which expenses were higher than those actually incurred by the composite. Total
annual rate of return is the change in redemption value of units purchased with
an initial $1,000 investment, assuming the reinvestment of dividends. Compounded
annual rate of return represents the level annual rate which if earned for each
year in a multiple year period, would produce the cumulative rate of return over
that period.
(2)<F26>The Standard & Poor's 500 Index consists of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The Standard & Poor's
Ratings Group designates the stocks to be included in the Index on a statistical
basis. A particular stock's weighting in the Index is based on its relative
total market value (i.e., its market price per share times the number of shares
outstanding). Stocks may be added or deleted from the Index from time to time.
(3)<F27>The Russell Midcap Index consists of the smallest 800 securities in the
Russell 1000 Index as ranked by total market capitalization. This index is
widely regarded to accurately capture the medium-sized universe of securities
and represents approximately 34% of the Russell 1000 market capitalization. The
Russell Midcap Index and the Russell 1000 Index are trademarks/service marks of
the Frank Russell Company.
Past performance may not be indicative of future rates of return. Investors
should also be aware that other performance calculation methods may produce
different results, and that comparisons of investment results should consider
qualitative circumstances and should be made only for portfolios with generally
similar investment objectives.
THE ADMINISTRATOR
Each of the Funds also has entered into an administration agreement
(collectively, the "Administration Agreements") with Fiduciary Management, Inc.
(the "Administrator"), 225 East Mason Street, Milwaukee, Wisconsin 53202. Under
the Administration Agreements the Administrator prepares and maintains the
books, accounts and other documents required by the Act, calculates each Fund's
net asset value, responds to shareholder inquiries, prepares each Fund's
financial statements and excise tax returns, prepares certain reports and
filings with the Securities and Exchange Commission and with state Blue Sky
authorities, furnishes statistical and research data, clerical, accounting and
bookkeeping services and stationery and office supplies, keeps and maintains
each Fund's financial and accounting records and generally assists in all
aspects of the Funds' operations. The Administrator at its own expense and
without reimbursement from any of the Funds, furnishes office space and all
necessary office facilities, equipment and executive personnel for performing
the services required to be performed by it under the Administration Agreements.
For the foregoing, the Administrator receives from each of the Funds a monthly
fee of 1/12 of 0.2% (0.2% per annum) on the first $25,000,000 of the daily net
assets of such Fund, 1/12 of 0.1% (0.1% per annum) on the next $20,000,000 of
the daily net assets of such Fund and 1/12 of 0.05% (0.05% per annum) of the
daily net assets of such Fund over $45,000,000, subject to a fiscal year minimum
of $20,000. The administration fee paid by the Growth Fund, the Total Return
Fund and the Regional Small Cap Fund in the fiscal year ended June 30, 1997 to
the Administrator were equal to 0.17%, 0.20% and 0.20% (annualized),
respectively, of such Funds' average net assets. The Administrator separately
charges the Funds for blue sky filings.
The Funds pay all of their own expenses not assumed by the Adviser or the
Administrator including, without limitation, the cost of preparing and printing
their registration statements required under the Securities Act of 1933 and the
Act and any amendments thereto, the expense of registering their shares with the
Securities and Exchange Commission and in the various states, the printing and
distribution costs of prospectuses mailed to existing investors, reports to
investors, reports to government authorities and proxy statements, fees paid to
directors who are not interested persons of the Adviser, interest charges,
taxes, legal expenses, association membership dues, auditing services, insurance
premiums, brokerage commissions and expenses in connection with portfolio
transactions, fees and expenses of the custodian of the Funds' assets, printing
and mailing expenses and charges and expenses of dividend disbursing agents,
accounting services agents, registrars and stock transfer agents.
DISTRIBUTION PLAN
Each of the Funds has adopted a Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The Plan provides that each
Fund may incur certain costs which may not exceed a maximum amount equal to 1/12
of 1% (1% per annum) of such Fund's average daily net assets. However, each of
the Funds presently intends not to pay any 12b-1 fees during the fiscal year
ending June 30, 1998. Payments made pursuant to the Plan may only be used to pay
distribution expenses incurred in the current year. Amounts paid under the Plan
by a Fund may be spent by such Fund on any activities or expenses primarily
intended to result in the sale of shares of such Fund, including but not limited
to, advertising, compensation for sales and sales marketing activities of
financial institutions and others, such as dealers or distributors, shareholder
account servicing, the printing and mailing of prospectuses to other than
current shareholders, and the printing and mailing of sales literature.
Distribution expenses will be authorized by the officers of the Corporation as
the Funds do not employ a distributor. To the extent any activity financed by
the Plan is one which a Fund may finance without a 12b-1 plan, such Fund may
also make payments to finance such activity outside of the Plan and not subject
to its limitations.
DETERMINATION OF NET ASSET VALUE
The per share net asset value of each Fund is determined by dividing the
total value of such Fund's net assets (meaning its assets less its liabilities
excluding capital and surplus) by the total number of its shares outstanding at
that time. Each Fund's net asset value is determined as of the close of regular
trading (currently 4:00 p.m. Eastern time) on the New York Stock Exchange on
each day the New York Stock Exchange is open for trading. This determination is
applicable to all transactions in shares of such Fund prior to that time and
after the previous time as of which net asset value was determined. Accordingly,
purchase orders accepted or shares tendered for redemption prior to the close of
regular trading on a day the New York Stock Exchange is open for trading will be
valued as of the close of trading, and purchase orders accepted or shares
tendered for redemption after that time will be valued as of the close of the
next trading day.
Securities traded on any national stock exchange or quoted on the Nasdaq
National Market System will be valued on the basis of the last sale price on the
date of valuation or, in the absence of any sales on that date, the most recent
bid price. Other securities will be valued by an independent pricing service at
the most recent bid price, if market quotations are readily available. Any
securities for which there are no readily available market quotations and other
assets will be valued at their fair value as determined in good faith by the
Corporation's Board of Directors. Odd lot differentials and brokerage
commissions will be excluded in calculating values.
PURCHASE OF SHARES
Shares of the Funds may be purchased directly from the Corporation. A share
purchase application form is included in the center of this Prospectus. The
price per share of each Fund is the next determined per share net asset value
after receipt of an application. Additional purchase applications may be
obtained from the Corporation. Purchase applications should be mailed directly
to: Eastcliff Funds, c/o Firstar Trust Company, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. The U.S. Postal Service and other independent delivery
services are not agents of the Funds. Therefore, deposit in the mail or with
such services of purchase applications does not constitute receipt by Firstar
Trust Company or the Fund. Do not mail letters by overnight courier to the Post
Office Box address. To purchase shares by overnight or express mail, please use
the following street address: Eastcliff Funds, c/o Firstar Trust Company, Third
Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202. All applications
must be accompanied by payment in the form of a check made payable to the full
name of the Fund whose shares are being purchased, or by direct wire transfer as
described below. All purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks. No cash will be accepted. Firstar Trust Company will charge
a $20 fee against a shareholder's account for any payment check returned to the
custodian. THE SHAREHOLDER WILL ALSO BE RESPONSIBLE FOR ANY LOSSES SUFFERED BY
ANY FUND AS A RESULT. When a purchase is made by check (other than a cashiers or
certified check), the Corporation may delay the mailing of a redemption check
until it is satisfied that the check has cleared. (It will normally take up to 3
days to clear local personal or corporate checks and up to 7 days to clear other
personal and corporate checks.) To avoid redemption delays, purchases may be
made by cashiers or certified check or by direct wire transfers. Funds should be
wired to: Firstar Bank Milwaukee, NA, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin, ABA #075000022, Firstar Trust Company, Account #112952137, for
further credit to: "full name of appropriate Fund," "name of shareholder and
existing account number" if any. The establishment of a new account by wire
transfer should be preceded by a phone call to Firstar Trust Company, 1-800-595-
5519, to provide information for the setting up of the account. A follow up
application should be sent for all new accounts opened by wire transfer.
Securities dealers and financial institutions who notify a Fund prior to the
close of any business day that they intend to wire federal funds to purchase
shares of such Fund on the next business day (prior to 10:00 a.m. Central time)
will be deemed to have purchased shares at the time of notification. Funds
should not be wired on the same day of notification. When a purchase of shares
of a Fund is made by direct wire transfer by investors other than securities
dealers and financial institutions, the purchase will become effective upon
receipt by Firstar Bank Milwaukee, N.A. Wire transmissions may be subject to
delays of several hours, in which event the effectiveness of the purchase will
be delayed. Shares cannot be purchased by direct wire transfer on any day that
the New York Stock Exchange is not open for trading. Applications are subject to
acceptance by the Corporation, and are not binding until so accepted. The
Corporation does not accept telephone orders for purchase of shares and reserves
the right to reject applications in whole or in part. The Board of Directors of
the Corporation has established $1,000 as the minimum initial purchase for each
Fund and $100 as the minimum for any subsequent purchase (except through
dividend reinvestment), which minimum amounts are subject to change at any time.
Shareholders of the Funds will be advised at least thirty days in advance of any
increases in such minimum amounts. Stock certificates for shares so purchased
are not issued unless requested in writing. There are no sales loads on
purchases of shares of the Funds nor redemption charges on redemptions of such
shares. Purchase payments are fully invested at net asset value, of the
applicable Fund.
Investors may purchase Shares of the Funds through programs of services
offered or administered by broker-dealers, financial institutions or other
service providers ("Processing Intermediaries") that have entered into
agreements with the Funds. Such Processing Intermediaries may become
shareholders of record and may use procedures and impose restrictions in
addition to or different from those applicable to shareholders who invest
directly in the Funds. Certain services of the Funds may not be available or may
be modified in connection with the programs provided by Processing
Intermediaries. The Funds may only accept requests to purchase additional shares
into an account in which the Processing Intermediary is the shareholder of
record from the Processing Intermediary.
The Funds may authorize one or more Processing Intermediaries (and other
Processing Intermediaries properly designated thereby) to accept purchase orders
on the Funds' behalf. In such event, a Fund will be deemed to have received a
purchase order when the Processing Intermediary accepts the customer order, and
the order will be priced at the Fund's net asset value next computed after it is
accepted by the Processing Intermediary.
Processing Intermediaries may charge fees or assess other charges for the
services they provide to their customers. Any such fee or charge paid directly
by shareholders is retained by the Processing Intermediary and is not remitted
to the Funds or the Adviser. Additionally, the Adviser and/or the Funds may pay
fees to Processing Intermediaries to compensate them for the services they
provide. Program materials provided by the Processing Intermediary should be
read in conjunction with the Prospectus before investing in this manner. Shares
of the Funds may be purchased through Processing Intermediaries without regard
to a Fund's minimum purchase requirement.
REDEMPTION OF SHARES
A shareholder may require the Corporation to redeem his shares of any Fund in
whole or part at any time during normal business hours. Unless the telephone
redemption privilege is requested as described below, redemption requests must
be made in writing and directed to: Eastcliff Funds, c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service or other
independent delivery services are not agents of the Funds. Therefore, deposit in
the mail or with such services of redemption requests does not constitute
receipt by Firstar Trust Company or the Funds. DO NOT mail letters by overnight
courier to the Post Office Box address. Correspondence mailed by overnight
courier should be sent to Firstar Trust Company, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. If a written redemption request is
inadvertently sent to the Corporation, it will be forwarded to Firstar Trust
Company, but the effective date of redemption will be delayed until the request
is received by Firstar Trust Company. Requests for redemption by telegram and
requests which are subject to any special conditions or which specify an
effective date other than as provided herein cannot be honored.
Redemption requests should specify the name of the appropriate Fund, the
number of shares or dollar amount to be redeemed, shareholder's name, account
number, and the additional requirements listed below that apply to the
particular account.
TYPE OF REGISTRATION REQUIREMENTS
--------------------- -------------
Individual, Joint Tenants Redemption request signed by all
Sole Proprietor, Custodial person(s) required to sign for
(Uniform Gift to Minors Act), the account, exactly as it
General Partners is registered.
Corporations, Associations Redemption request and a corporate
resolution, signed by person(s) required
to sign for the account, accompanied by
signature guarantee(s).
Trusts Redemption request signed by the
trustee(s) with a signature guarantee.
(If the trustee's name is not registered
on the account, a copy of the trust
document certified within the last 60
days is also required.)
Redemption requests from shareholders in an Individual Retirement Account
must include instructions regarding federal income tax withholding. Unless
otherwise indicated, these redemptions, as well as redemptions of other
retirement plans not involving a direct rollover to an eligible plan, will be
subject to federal income tax withholding. If a shareholder is not included in
any of the above registration categories (e.g., executors, administrators,
conservators or guardians), the shareholder should call the transfer agent,
Firstar Trust Company (1-800-595-5519), for further instructions.
Signatures need not be guaranteed unless the proceeds of redemption are
requested to be sent by wire transfer, to a person other than the registered
holder or holders of the shares to be redeemed, or to be mailed to other than
the address of record, in which cases each signature on the redemption request
must be guaranteed by a commercial bank or trust company in the United States, a
member firm of the New York Stock Exchange or other eligible guarantor
institution. If certificates have been issued for any of the shares to be
redeemed, the certificates, properly endorsed or accompanied by a properly
executed stock power, must accompany the request for redemption. Redemptions
will not be effective or complete until all of the foregoing conditions,
including receipt of all required documentation by Firstar Trust Company in its
capacity as transfer agent, have been satisfied.
The redemption price for each Fund is the net asset value for such Fund next
determined after receipt by Firstar Trust Company in its capacity as transfer
agent of the request in proper form with all required documentation. The amount
received will depend on the market value of the investments in the appropriate
Fund's portfolio at the time of determination of net asset value, and may be
more or less than the cost of the shares redeemed. Proceeds for shares redeemed
will be mailed, wired or forwarded via Electronic Funds Transfer ("EFT") to the
holder no later than the seventh day after receipt of the redemption request in
proper form and all required documentation except as indicated in "Purchase of
Shares" for certain redemptions of shares purchased by check. Firstar Trust
Company currently charges a $12.00 fee for each payment made by wire or
redemption proceeds, which will be deducted from the shareholder's account.
Transfers via EFT generally will take up to 3 business days to reach the
shareholder's bank account.
If a shareholder instructs Firstar Trust Company in writing, redemption
requests may be made by telephone by calling only Firstar Trust Company, not the
Corporation, the Adviser or any portfolio manager, at (800) 595-5519 or (414)
765-4124, provided the redemption proceeds are to be mailed, wired or sent via
EFT to the shareholder's address or bank of record as shown on the records of
the transfer agent. Proceeds redeemed by telephone will be mailed, wired or sent
via EFT to an address or account other than that shown on the records of the
transfer agent only if such has been prearranged by a written request sent via
mail or facsimile copy to Firstar Trust Company. Such a request must be signed
by the shareholder with signatures guaranteed as described above. Additional
documentation may be requested from those who hold shares in a fiduciary or
representative capacity or who are not natural persons. The Funds reserve the
right to refuse a telephone redemption request if it is believed advisable to do
so. Redemption by telephone is not available for IRA accounts or if share
certificates have been issued for the account. Procedures for telephone
redemptions may be modified or terminated at any time by the Corporation or
Firstar Trust Company. Neither the Corporation, the Funds nor Firstar Trust
Company will be liable for following instructions for telephone redemption
transactions that they reasonably believe to be genuine, provided reasonable
procedures are used to confirm the genuineness of the telephone instructions,
but may be liable for unauthorized transactions if they fail to follow such
procedures. These procedures include requiring some form of personal
identification prior to acting upon the telephone instructions and recording all
telephone calls. During periods of substantial economic or market change,
telephone redemptions may be difficult to implement. In the event a shareholder
cannot contact Firstar Trust Company by telephone, he or she should make a
redemption request in writing in the manner set forth above.
Shares of the Funds purchased through programs of services offered or
administered by Processing Intermediaries that have entered into agreements with
a Fund may be required to be redeemed through such programs. Such Processing
Intermediaries may become shareholders of record and may use procedures and
impose restrictions in addition to or different from those applicable to
shareholders who redeem shares directly through the Funds. The Funds may only
accept redemption requests from an account in which the Processing Intermediary
is the shareholder of record from the Processing Intermediary. The Funds may
authorize one or more Processing Intermediaries (and other Processing
Intermediaries properly designated thereby) to accept redemption requests on the
Funds' behalf. In such event, a Fund will be deemed to have received a
redemption request when the Processing Intermediary accepts the customer
request, and the redemption price will be the Fund's net asset value next
computed after the customer redemption request is accepted by the Processing
Intermediary.
The right to redeem shares of any Fund will be suspended for any period
during which the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and may be suspended for any period
during which (a) trading on the New York Stock Exchange is restricted pursuant
to rules and regulations of the Securities and Exchange Commission, (b) the
Securities and Exchange Commission has by order permitted such suspension or (c)
an emergency, as defined by rules and regulations of the Securities and Exchange
Commission, exists as a result of which it is not reasonably practicable for the
Corporation to dispose of such Fund's securities or fairly to determine the
value of its net assets.
The Corporation reserves the right to redeem the shares held in any account:
(i) in connection with the termination of a particular Fund; (ii) if the value
of the shares in an account falls below $500 or such other amount as the Board
of Directors may establish, provided the Corporation gives the shareholder 60
days prior written notice; (iii) to reimburse the appropriate Fund for any loss
it has sustained by failure of the shareholder to make full payment for his
shares; (iv) to collect any charge relating to a transaction effected for the
benefit of a shareholder; or (v) if it would otherwise be appropriate to carry
out the Corporation's responsibilities under the Investment Company Act of 1940.
The involuntary redemption procedures are designed to facilitate reimbursement
of the Funds for any losses they sustain as a result of any failures by
shareholders to pay for their shares or required fees in connection with
transactions involving their shares and to relieve the Funds of the cost of
maintaining uneconomical accounts. Involuntary redemptions of small accounts,
however, would not be made because the value of shares in an account falls below
the minimum amount solely because of a decline in a particular Fund's net asset
value. Any involuntary redemptions would be made at net asset value.
EXCHANGE PRIVILEGE
The Corporation generally permits shareholders to exchange shares of one of
the Eastcliff Funds for shares of another Eastcliff Fund. A written request to
exchange shares of one Eastcliff Fund for shares of another may be made at no
cost to the shareholder. The shareholder must give the account name, account
number and the amount or number of shares of a particular Fund to be exchanged.
The registration of the account from which the exchange is being made and the
account to which the exchange is being made must be identical. Signatures
required are the same as explained under "Redemption of Shares."
There is currently no limitation on the number of exchanges a shareholder may
make. However, shares subject to an exchange must have a current value of at
lease $1,000. Furthermore in establishing a new account in another Eastcliff
Fund through this privilege, the exchanged shares must have a value at least
equal to the minimum investment required by the Fund into which the exchange is
being made. A completed purchase application also must be sent to Eastcliff
Funds, c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701,
immediately after establishing a new account through this privilege.
The exchange privilege is available only in states where the exchange may be
legally made. Exchange requests may be subject to other limitations, including
those relating to frequency, that may be established from time to time to ensure
that the exchanges do not disadvantage a particular Fund or its shareholders.
Shareholders will be notified at least 60 days in advance of any changes in such
limitations and may obtain the terms of any such limitation by writing to
Eastcliff Funds, c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. No exchange fee is currently imposed by the Corporation on
exchanges; however, the Corporation reserves the right to impose an
administrative fee in the future.
An exchange involves a redemption of all or a portion of the shares in one
Fund and the investment of the redemption proceeds in shares of the other Fund
and is subject to any applicable adjustments in connection with such redemption
and investment. The redemption will be made at the per share net asset value of
the shares to be redeemed next determined after the exchange request is received
as described above. The shares of the Fund to be acquired will be purchased
(subject to any applicable adjustment) at the per share net asset value of those
shares next determined coincident with the time of redemption. Both the
redemption and the investment of the redemption proceeds will take place as of
the close of regular trading (currently 4:00 p.m. Eastern time) on the New York
Stock Exchange on each day the New York Stock Exchange is open for trading.
Investors may find the exchange privilege useful if their investment
objectives should change after they invest in the Eastcliff Funds. For federal
income tax purposes, an exchange of shares is a taxable event and, accordingly,
a capital gain or loss may be realized by an investor. Before making an exchange
request, an investor should consult a tax or other financial adviser to
determine the tax consequences of a particular exchange.
DIVIDEND REINVESTMENT
Shareholders of any Fund may elect to have all income dividends and capital
gains distributions reinvested in such Fund or paid in cash, or elect to have
income dividends reinvested in such Fund and capital gains distributions paid in
cash or capital gains distributions reinvested in such Fund and income dividends
paid in cash. Shareholders having dividends and/or capital gains distributions
paid in cash may choose to have such amounts mailed or sent via EFT. Transfers
via EFT generally take up to 3 business days to reach the shareholder's bank
account. See the share purchase application form included in the center of this
Prospectus for further information. If the shareholder does not specify an
election, all income dividends and capital gains distributions automatically
will be reinvested in full and fractional shares of the appropriate Fund
calculated to the nearest 1,000th of a share. Shares of a particular Fund are
purchased at the net asset value of such Fund in effect on the business day
after the dividend record date and are credited to the shareholder's account on
the dividend payment date. As in the case of normal purchases, stock
certificates are not issued unless requested. Shareholders will be advised of
the number of shares purchased and the price following each reinvestment. An
election to reinvest or receive dividends and distributions in cash will apply
to all shares of a Fund registered in the same name, including those previously
purchased.
A shareholder may change an election at any time by notifying the appropriate
Fund in writing. If such a notice is received between a dividend declaration
date and payment date, it will become effective on the day following the payment
date. The Corporation may modify or terminate its dividend reinvestment program
at any time on thirty days' notice to participants.
AUTOMATIC INVESTMENT PLAN
Shareholders wishing to invest fixed dollar amounts in a particular Fund
monthly or quarterly can make automatic purchases in amounts of $50 or more on
any day they choose by using the Corporation's Automatic Investment Plan. If
such day is a weekend or holiday, such purchase shall be made on the next
business day. There is no service fee for participating in this Plan. To use
this service, the shareholder must authorize the transfer of funds from his
checking, NOW or savings account by completing the Automatic Investment Plan
application included as part of the share purchase application located in the
center of this Prospectus. Additional application forms may be obtained by
calling the Corporation's office at (612) 336-1444. The Corporation reserves the
right to suspend, modify or terminate the Automatic Investment Plan without
notice.
The Automatic Investment Plan is designed to be a method to implement dollar
cost averaging. Dollar cost averaging is an investment approach providing for
the investment of a specific dollar amount on a regular basis thereby precluding
emotions dictating investment decisions. Dollar cost averaging does not insure a
profit nor protect against a loss.
SYSTEMATIC WITHDRAWAL PLAN
The Corporation has available to shareholders a Systematic Withdrawal Plan,
pursuant to which a shareholder who owns shares of any Fund worth at least
$10,000 at current net asset value may provide that a fixed sum will be
distributed to him at regular intervals. To participate in the Systematic
Withdrawal Plan, a shareholder deposits his shares of a particular Fund with the
Corporation and appoints it as his agent to effect redemptions of shares of such
Fund held in his account for the purpose of making monthly or quarterly
withdrawal payments of a fixed amount to him out of his account. To utilize the
Systematic Withdrawal Plan, the shares cannot be held in certificate form. The
Systematic Withdrawal Plan does not apply to shares of either Fund held in
Individual Retirement Accounts or defined contribution retirement plans. An
application for participation in the Systematic Withdrawal Plan is included as
part of the share purchase application located in the center of this Prospectus.
Additional application forms may be obtained by calling the Corporation's office
at (612) 336-1444.
The minimum amount of a withdrawal payment is $100. These payments will be
made from the proceeds of periodic redemption of shares of a particular Fund in
the account at net asset value. Redemptions will be made on such day (no more
than monthly) as a shareholder chooses or, if that day is a weekend or holiday,
on the next business day. See the share purchase application located in the
center of this Prospectus for further information. Participation in the
Systematic Withdrawal Plan constitutes an election by the shareholder to
reinvest in additional shares of such Fund, at net asset value, all income
dividends and capital gains distributions payable by the Corporation on shares
held in such account, and shares so acquired will be added to such account. The
shareholder may deposit additional shares of such Fund in his account at any
time.
Withdrawal payments cannot be considered as yield or income on the
shareholder's investment, since portions of each payment will normally consist
of a return of capital. Depending on the size or the frequency of the
disbursements requested, and the fluctuation in the value of the applicable
Fund's portfolio, redemptions for the purpose of making such disbursements may
reduce or even exhaust the shareholder's account.
The shareholder may vary the amount or frequency of withdrawal payments,
temporarily discontinue them, or change the designated payee or payee's address,
by notifying Firstar Trust Company.
RETIREMENT PLANS
INDIVIDUAL RETIREMENT ACCOUNTS
Individual shareholders may establish their own tax-sheltered Individual
Retirement Accounts ("IRA"). Each of the Funds currently offers a Traditional
IRA and, effective January 1, 1998, each Fund will offer three types of IRAs,
including the Traditional IRA, that can be adopted by executing the appropriate
Internal Revenue Service ("IRS") Form.
Traditional IRA. In a Traditional IRA, amounts contributed to the IRA may be
tax deductible at the time of contribution depending on whether the shareholder
is an "active participant" in an employer-sponsored retirement plan and the
shareholder's income. Distributions from a Traditional IRA will be taxed at
distribution except to the extent that the distribution represents a return of
the shareholder's own contributions for which the shareholder did not claim (or
was not eligible to claim) a deduction. Distributions prior to age 59-1/2 may be
subject to an additional 10% tax applicable to certain premature distributions.
Distributions must commence by April 1 following the calendar year in which the
shareholder attains age 70-1/2. Failure to begin distributions by this date (or
distributions that do not equal certain minimum thresholds) may result in
adverse tax consequences.
Roth IRA. In a Roth IRA (sometimes known as American Dream IRA), amounts
contributed to the IRA are taxed at the time of contribution, but distributions
from the IRA are not subject to tax if the shareholder has held the IRA for
certain minimum periods of time (generally, until age 59-1/2). Shareholders
whose incomes exceed certain limits are ineligible to contribute to a Roth IRA.
Distributions that do not satisfy the requirements for tax-free withdrawal are
subject to income taxes (and possibly penalty taxes) to the extent that the
distribution exceeds the shareholder's contributions to the IRA. The minimum
distribution rules applicable to Traditional IRAs do not apply during the
lifetime of the shareholder. Following the death of the shareholder, certain
minimum distribution rules apply.
For Traditional and Roth IRAs, the maximum annual contribution generally is
equal to the lesser of $2,000 or 100% of the shareholder's compensation (earned
income). An individual may also contribute to a Traditional IRA or Roth IRA on
behalf of his or her spouse provided that the individual has sufficient
compensation (earned income). Contributions to a Traditional IRA reduce the
allowable contribution under a Roth IRA, and contributions to a Roth IRA reduce
the allowable contribution to a Traditional IRA.
Education IRA. In an Education IRA, contributions are made to an IRA
maintained on behalf of a beneficiary under age 18. The maximum annual
contribution is $500 per beneficiary. The contributions are not tax deductible
when made. However, if amounts are used for certain educational purposes,
neither the contributor nor the beneficiary of the IRA are taxed upon
distribution. The beneficiary is subject to income (and possibly penalty taxes)
on amounts withdrawn from an Education IRA that are not used for qualified
educational purposes. Shareholders whose income exceeds certain limits are
ineligible to contribute to an Education IRA.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS. The applicant
generally has the right to revoke his account within seven days after receiving
the disclosure statement and obtain a full refund of his contributions. The
custodian may, in its discretion, hold the initial contribution uninvested until
the expiration of the seven-day revocation period. The custodian does not
anticipate that it will exercise its discretion but reserves the right to do so.
SIMPLIFIED EMPLOYEE PENSION PLAN
A Traditional IRA may also be used in conjunction with a Simplified Employee
Pension Plan ("SEP-IRA"). A SEP-IRA is established through execution of Form
5305-SEP together with a Traditional IRA established for each eligible employee.
Generally, a SEP-IRA allows an employer (including a self-employed individual)
to purchase shares with tax deductible contributions not exceeding annually for
any one participant 15% of compensation (disregarding for this purpose
compensation in excess of $160,000 per year). The $160,000 compensation limit
applies for 1998 and is adjusted periodically for cost of living increases. A
number of special rules apply to SEP Plans, including a requirement that
contributions generally be made on behalf of all employees of the employer
(including for this purpose a sole proprietorship or partnership) who satisfy
certain minimum participation requirements.
SIMPLE IRA
An IRA may also be used in connection with a SIMPLE Plan established by the
shareholder's employer (or by a self-employed individual). When this is done,
the IRA is known as a SIMPLE IRA, although it is similar to a Traditional IRA
with the exceptions described below. Under a SIMPLE Plan, the shareholder may
elect to have his or her employer make salary reduction contributions of up to
$6,000 per year to the SIMPLE IRA. The $6,000 limit applies for 1997 and is
adjusted periodically for cost of living increases. In addition, the employer
will contribute certain amounts to the shareholder's SIMPLE IRA, either as a
matching contribution to those participants who make salary reduction
contributions or as a non-elective contribution to all eligible participants
whether or not making salary reduction contributions. A number of special rules
apply to SIMPLE Plans, including (1) a SIMPLE Plan generally is available only
to employers with fewer than 100 employees; (2) contributions must be made on
behalf of all employees of the employer (other than bargaining unit employees)
who satisfy certain minimum participation requirements; (3) contributions are
made to a special SIMPLE IRA that is separate and apart from the other IRAs of
employees; (4) the distribution excise tax (if otherwise applicable) is
increased to 25% on withdrawals during the first two years of participation in a
SIMPLE IRA; and (5) amounts withdrawn during the first two years of
participation may be rolled over tax-free only into another SIMPLE IRA (and not
to a Traditional IRA or to a Roth IRA). A SIMPLE IRA is established by executing
Form 5304-SIMPLE together with an IRA established for each eligible employee.
403(b)(7) CUSTODIAL ACCOUNT
A 403(b)(7) Custodial Account is available for use in conjunction with the
403(b)(7) program established by certain educational organizations and other
organizations that are exempt from tax under 501(c)(3) of the Internal Revenue
Code as amended (the "Code"). Amounts contributed to the custodial account in
accordance with the employer's 403(b)(7) program will be invested on a tax-
deductible basis in shares of any Fund. Various contribution limits apply with
respect to 403(b)(7) arrangements.
DEFINED CONTRIBUTION RETIREMENT PLAN (401(k))
A prototype defined contribution plan is available for employers who wish to
purchase shares of any Fund with tax deductible contributions. The plan consists
of both profit sharing and money purchase pension components. The profit sharing
component includes a Section 401(k) cash or deferred arrangement for employers
who wish to allow eligible employees to elect to reduce their compensation and
have such amounts contributed to the plan. The limit on employee salary
reduction contributions is $9,500 annually (as adjusted for cost-of-living
increases) although lower limits may apply as a result of non-discrimination
requirements incorporated into the plan. The Corporation has received an opinion
letter from the IRS holding that the form of the prototype defined contribution
retirement plan is acceptable under Section 401 of the Code. The maximum annual
contribution that may be allocated to the account of any participant is
generally the lesser of $30,000 or 25% of compensation (earned income).
Compensation in excess of $160,000 (as periodically indexed for cost-of-living
increases) is disregarded for this purpose. The maximum amount that is
deductible by the employer depends upon whether the employer adopts both the
profit sharing and money purchase components of the plan, or only one component.
RETIREMENT PLAN FEES
Firstar Trust Company, Milwaukee, Wisconsin, serves as trustee or custodian
of the retirement plans. Firstar invests all cash contributions, dividends and
capital gains distributions in shares of the appropriate Fund. For such
services, the following fees are charged against the accounts of participants;
$12.50 annual maintenance fee per participant account; $15 for transferring to a
successor trustee or custodian; $15 for distribution(s) to a participant; and
$15 for refunding any contribution in excess of the deductible limit. Firstar
Trust Company's fee schedule may be changed upon written notice.
Requests for information and forms concerning the retirement plans should be
directed to the Corporation. Because a retirement program may involve
commitments covering future years, it is important that the investment objective
of the Funds be consistent with the participant's retirement objectives.
Premature withdrawal from a retirement plan will result in adverse tax
consequences. Consultation with a competent financial and tax adviser regarding
the retirement plans is recommended.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each of the Funds will endeavor to qualify as a "regulated investment
company" under Subchapter M of the Code. Each Fund is taxed as a separate entity
under Subchapter M and qualifies on a separate basis. Pursuant to the
qualification requirements of Subchapter M, each Fund intends to distribute
substantially all of its net investment income to its shareholders annually.
Each of the Funds also intends to distribute substantially all of its net
capital gains less available capital loss carryovers annually and other income
to reduce or avoid federal income and excise taxes. For federal income tax
purposes, distributions by a Fund, whether invested in additional shares of
Common Stock or received in cash, will be taxable to such Fund's shareholders
unless exempt from federal taxation. Shareholders will be notified annually as
to the federal tax status of dividends and distributions.
Distributions and redemptions may also be taxed under state and local tax
laws. Investors are advised to consult their tax adviser concerning the
application of state and local taxes.
BROKERAGE TRANSACTIONS
The Management Agreements and Sub-Advisory Agreements authorize the Adviser,
WCM (with respect to the Growth Fund only), PBIA (with respect to the Total
Return Fund only), WP (with respect to the Regional Small Cap Fund only) and
Sasco (with respect to the Contrarian Value Fund only) to select the brokers or
dealers that will execute the purchases and sales of the Funds' portfolio
securities. In placing purchase and sale orders for the Funds, it is the policy
of the Adviser and the portfolio managers to seek the best execution of orders
at the most favorable price in light of the overall quality of brokerage and
research services provided.
The Management Agreements and Sub-Advisory Agreements permit the Adviser, WCM
(with respect to the Growth Fund only), PBIA (with respect to the Total Return
Fund only), WP (with respect to the Regional Small Cap Fund only) and Sasco
(with respect to the Contrarian Value Fund only) to cause the applicable Fund to
pay a broker which provides brokerage and research services to the Adviser, WCM,
PBIA, WP or Sasco a commission for effecting securities transactions in excess
of the amount another broker would have charged for executing the transaction,
provided the Adviser, WCM, PBIA, WP or Sasco as the case may be, believes this
to be in the best interests of such Fund. Although the Funds do not intend to
market their shares through intermediary broker-dealers, the Funds may place
portfolio orders with broker-dealers who recommend the purchase of their shares
to clients if the Adviser, WCM, PBIA, WP or Sasco believes the commissions and
transaction quality are comparable to that available from other brokers and
allocate portfolio brokerage on that basis.
CAPITAL STRUCTURE
The Corporation's authorized capital consists of 10,000,000,000 shares of
Common Stock, of which 300,000,000 are allocated to the Growth Fund, 300,000,000
are allocated to the Total Return Fund, 300,000,000 are allocated to the
Regional Small Cap Fund and 300,000,000 are allocated to the Contrarian Value
Fund. Each share outstanding entitles the holder to one vote. Generally shares
are voted in the aggregate and not by each Fund, except where class voting by
each Fund is required by Wisconsin law or the Act (e.g., a change in investment
policy or approval of an investment advisory agreement). By virtue of its stock
ownership Resource Trust Company controls each of the Funds and the Corporation
and First Trust National Association is deemed to control the Regional Small Cap
Fund.
The shares of each Fund have the same preferences, limitations and rights,
except that all consideration received from the sale of shares of each Fund,
together with all income, earnings, profits and proceeds thereof, belong to that
Fund and are charged with the liabilities in respect of that Fund and of that
Fund's share of the general liabilities of the Corporation in the proportion
that the total net assets of the Fund bears to the total net assets of all of
the Funds. However the Board of Directors of the Corporation may, in their
discretion direct that any one or more general liabilities of the Corporation be
allocated among the Funds on a different basis. The net asset value per share
of eachFund is based on the assets belonging to that Fund less the liabilities
charged to that Fund, and dividends are paid on shares of each Fund only out of
lawfully available assets belonging to that Fund. In the event of liquidation
or dissolution of the Corporation, the shareholders of each Fund will be
entitled, out of the assets of the Corporation available for distribution, to
the assets belonging to such Fund.
There are no conversion or sinking fund provisions applicable to the shares
of any Fund, and the holders have no preemptive rights and may not cumulate
their votes in the election of directors. Consequently the holders of more than
50% of the Corporation's shares voting for the election of directors can elect
the entire Board of Directors, and in such event, the holders of the remaining
shares voting for the election of directors will not be able to elect any person
or persons to the Board of Directors. The Wisconsin Business Corporation Law
permits registered investment companies, such as the Corporation, to operate
without an annual meeting of shareholders under specified circumstances if an
annual meeting is not required by the Act. The Corporation has adopted the
appropriate provisions in its Bylaws and does not anticipate holding an annual
meeting of shareholders to elect directors unless otherwise required by the Act.
The Corporation has also adopted provisions in its Bylaws for the removal of
directors by its shareholders.
The shares of each Fund are redeemable and are freely transferable. All
shares issued and sold by the Corporation will be fully paid and nonassessable,
except as provided in Section 180.0622(2)(b) of the Wisconsin Business
Corporation Law. Fractional shares of each Fund entitle the holder to the same
rights as whole shares of such Fund. Firstar Trust Company, 615 East Michigan
Street, Milwaukee, Wisconsin 53202, acts as the Corporation's transfer agent and
dividend disbursing agent.
The Corporation will not issue certificates evidencing shares purchased
unless so requested in writing. Where certificates are not issued, the
shareholder's account will be credited with the number of shares purchased,
relieving shareholders of responsibility for safekeeping of certificates and the
need to deliver them upon redemption. Written confirmations are issued for all
purchases of shares of each Fund. Any shareholder may deliver certificates to
Firstar Trust Company and direct that his account be credited with the shares. A
shareholder may direct Firstar Trust Company at any time to issue a certificate
for his shares without charge.
SHAREHOLDER REPORTS
Shareholders of each Fund will be provided at least semi-annually with a
report showing such Fund's portfolio and other information and annually after
the close of the Corporation's fiscal year, which currently ends June 30, with
an annual report containing audited financial statements. Shareholders who have
questions about the Funds should call Firstar Trust Company at 1-800-595-5519 or
(414) 765-4124 or write to: Eastcliff Funds, 900 Second Avenue South, 300
International Centre, Minneapolis, Minnesota 55402, Attention: Corporate Vice
President.
PERFORMANCE INFORMATION
Each of the Funds may provide from time to time, in advertisements, reports
to shareholders and other communications with shareholders, its average annual
compounded rate of return. A Fund's average annual compounded rate of return
refers to the rate of return which, if applied to an initial investment in such
Fund at the beginning of a stated period and compounded over the period, would
result in the redeemable value of the investment in such Fund at the end of the
stated period. The calculation assumes reinvestment of all dividends and
distributions and reflects the effect of all recurring fees. Each Fund may also
provide "aggregate" total return information for various periods, representing
the cumulative change in value of an investment in a Fund for a specific period
(again reflecting changes in share price and assuming reinvestment of dividends
and distributions).
Any performance results will be based on historical earnings and should not
be considered as representative of the performance of a Fund in the future. An
investment in a Fund will fluctuate in value and at redemption its value may be
more or less than the initial investment.
Each of the Funds may compare its performance to other mutual funds with
similar investment objectives and to the industry as a whole, as reported by
Morningstar, Inc. and Lipper Analytical Services, Inc., Money, Forbes, Business
Week and Barron's magazines, and The Wall Street Journal. (Morningstar, Inc. and
Lipper Analytical Services, Inc. are independent ranking services that rank over
1,000 mutual funds based upon total return performance.) Each of the Fund's may
also compare its performance to the Dow Jones Industrial Average, Nasdaq
Composite Index, Nasdaq Industrials Index, Value Line Composite Index, the S&P
500 Index, S&P400 Mid-Cap Growth Index, Lehman Intermediate Corporate Bond
Index, Russell 1000 Growth Index, Russell 2000 Index, Russell Midcap Index and
the Consumer Price Index. Such comparisons may be made in advertisements,
shareholder reports or other communications to shareholders.
EASTCLIFF FUNDS
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
612-336-1444
INVESTMENT ADVISER
RESOURCE CAPITAL ADVISERS, INC.
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
PORTFOLIO MANAGERS
EASTCLIFF GROWTH FUND
WINSLOW CAPITAL MANAGEMENT, INC.
EASTCLIFF TOTAL RETURN FUND
PALM BEACH INVESTMENT ADVISERS, INC.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
WOODLAND PARTNERS LLC
EASTCLIFF CONTRARIAN VALUE FUND
SASCO CAPITAL, INC.
ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-595-5519
or
414-765-4124
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
EASTCLIFF FUNDS
PURCHASE APPLICATION
- --- This is a follow-up application to an investment by wire transfer.
Mail completed application to:
Eastcliff Funds
c/o Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
Overnight Express Mail to:
Eastcliff Funds
c/o Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 E. Michigan Street
Milwaukee, WI 53202
Use this form for individual, custodial, trust, profit sharing or pension plan
accounts, including self-directed IRA and 401(k) plans. DO NOT USE THIS FORM
FOR THE EASTCLIFF FUNDS-SPONSORED IRAs, SEP-IRA, SIMPLE IRA, 402(b)(7),
DEFINED CONTRIBUTION (KEOGH OR CORPORATE PROFIT-SHARING AND MONEY-PURCHASE)
OR 401(K) PLANS WHICH REQUIRE FORMS AVAILABLE FROM THE EASTCLIFF FUNDS.
For information please call 1-800-595-5519 or 1-414-765-4124.
- ------------------------------------------------------------------------------
A. INVESTMENT
The minimum initial investment is $1,000 for shares in any of the Eastcliff
Funds. Minimum additions to any Fund are $100 (except $50 for the Automatic
Investment Plan).
Wiring instructions: Firstar Bank Milwaukee, NA, 777 E Wisconsin Ave.,
Milwaukee, WI 53202,
ABA: 075000022, For credit to Firstar Trust Co., Account # 112-952-137,
For further credit (insert full name of Fund) (shareholders name) & (account
-------------------------------------------- -------
number).
- ------
Notify Firstar Trust Company at 1-800-595-5519 or 1-414-765-4124 prior to
sending wire.
PAYMENT BY --- Check --- Wire AMOUNT
- --- Eastcliff Growth Fund $--------------
- --- Eastcliff Total Return Fund $--------------
- --- Eastcliff Regional Small Capitalization Value Fund $--------------
- --- Eastcliff Contrarian Value Fund $--------------
- ------------------------------------------------------------------------------
B. REGISTRATION
- --- Individual
- --- Self-Directed IRA
- ----------------- ---- --------------------- ---------------- --------
FIRST NAME M.I LAST NAME SOCIAL SECURITY # BIRTHDATE
(Mo/Dy/Yr)
- --- Joint Owner*<F22>
(Cannot be a minor)
- ----------------- ---- --------------------- ---------------- --------
FIRST NAME M.I LAST NAME SOCIAL SECURITY # BIRTHDATE
(Mo/Dy/Yr)
*<F22>Registration will be Joint Tenancy with Rights of Survivorship (JTWROS),
unless otherwise specified.
- --- Gift to Minor
- ---------------------------------------------- ---- -----------------------
CUSTODIAN'S FIRST NAME (only one permitted) M.I. LAST NAME
- --------------------------------------------- ---- -----------------------
MINOR'S FIRST NAME (only one permitted) M.I. LAST NAME
- --------------------------- ----------------------------- -----------------
MINOR'S SOCIAL SECURITY # MINOR'S BIRTH DATE (Mo/Dy/Yr) STATE OF RESIDENCE
- --- Trust, Estate or Guardianship**<F23>
- ------------------------------------------------------------------------------
NAME OF TRUSTEE(S) (if to be included in registration)**<F23>
- --- Corporate***<F24> (including Corporate Pension Plans)
- --- Partnership**<F23>
- --- Other Entity**<F23>
- ------------------------------------------------------------------------------
NAME OF TRUST**<F23> / CORPORATION***<F24> / PARTNERSHIP
- ------------------------------------------------- --------------------------
SOCIAL SECURITY # / TAX ID # DATE OF AGREEMENT (Mo/Dy/Yr)
**<F23>Additional documentation and certification may be requested
***<F24>Corporate Resolution is required
- ------------------------------------------------------------------------------
C. ADDRESS
Mailing Address
- ---------------------------------------------------- -----------------------
STREET APT / SUITE
- -------------------------------------------- ----------------- -----------
CITY STATE ZIP
- ----------------------------------------- ----------------------------------
DAYTIME PHONE # EVENING PHONE #
- --- Duplicate Confirmation (if desired) to:
- --------------------------- ----- ----------------------------------------
FIRST NAME M.I. LAST NAME
- ---------------------------------------------------- -----------------------
STREET APT / SUITE
- -------------------------------------------- ----------------- -----------
CITY STATE ZIP
- ------------------------------------------------------------------------------
D. DISTRIBUTION OPTIONS
Capital gains & dividends will be reinvested if no option is selected.
--- Capital Gains & --- Capital Gains &
Dividends Reinvested Dividends in Cash
--- Capital Gains in Cash & --- Capital Gains Reinvested &
Dividends Reinvested Dividends in Cash
If the distribution is to be paid in cash, specify payment method below:
--- Send check to mailing address in Section C.
--- Automatic deposit to my bank account via EFT. This transfer may take
up to 3 business days to reach your bank account (please complete bank
information below).
- ------------------------------------------------------------------------------
NAMES(S) ON BANK ACCOUNT
- ---------------------------------------- -----------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your application. Your signed application must be received
at least 15 business days prior to the initial distribution transaction.
- ------------------------------------------------------------------------------
E. TELEPHONE REDEMPTIONS
I authorize Eastcliff Funds, Inc. to act upon my telephone instructions to
redeem shares from my account.
--- The proceeds will be mailed to the address in Section C.
--- The proceeds of any redemption will be wired to your bank (complete bank
information below). A wire fee of $12.00 will be charged.
--- The proceeds of any redemption will be transferred via Electronic Funds
Transfer ("EFT"). This transfer may take up to 3 business days to reach your
bank (please complete bank information below).
- ------------------------------------------------------------------------------
NAMES(S) ON BANK ACCOUNT
- -------------------------------------------- -------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your application. Your signed application must be received
at least 15 business days prior to the initial redemption transaction.
- ------------------------------------------------------------------------------
F. EXCHANGE PRIVILEGE
If investment is by exchange, such exchange should be made from:
--- Eastcliff Growth Fund --- Eastcliff Total Return Fund
Account # --------------- Account #----------------------
--- Eastcliff Regional Small Capitalization Value Fund
Account # -----------------------
--- Eastcliff Contrarian Value Fund
Account #------------------------
(I understand that exchanges between the Funds are taxable transactions.)
Amount of Exchange $-------------- or Number of Shares ------------------
- ------------------------------------------------------------------------------
G. SYSTEMATIC WITHDRAWALS
I would like to withdraw from Eastcliff Fund name-----------------------------
Account # ------------- $------------------ ($100 minimum) as follows:
- --- I would like to have payments made to me on or about the ------ day of each
month, Or
- --- I would like to have payments made to me on or about the ------ day of the
months that I have circled below:
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- --- I would like my payments automatically deposited to my checking, NOW or
savings account. Complete bank account information below and attach a copy of a
voided check or savings deposit slip. (A check will be mailed to the address
from section C if this selection is not marked).
- ------------------------------------------------------------------------------
NAMES(S) ON BANK ACCOUNT
- --------------------------------------------- ------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your application. A balance of at least $10,000 is
required.
- ------------------------------------------------------------------------------
H. AUTOMATIC INVESTMENT PLAN
I would like to establish an Automatic Investment Plan for the Eastcliff
Funds as described in the Prospectus. Based on these instructions, Firstar
Trust Company as Transfer Agent for the Eastcliff Funds, will automatically
transfer money directly from my checking, NOW or savings account to purchase
shares in the Eastcliff Fund of my choice. I understand if the automatic
purchase cannot be made due to insufficient funds, stop payment or any other
reason, a $20 fee will be assessed. Your signed application must be received
at least 15 business days prior to initial transaction. Attach an unsigned,
voided check (for checking accounts) or a savings account deposit slip and
complete this form.
Please indicate the day of debit from bank account------------------------
Start Date (month & year) -------------- --- Monthly --- Quarterly
Eastcliff Fund name --------------------------------
Account Number, if known ---------------------------
Indicate amount to be withdrawn from my bank account $---------- (minimum $50)
- ------------------------------------------------------------------------------
NAMES(S) ON BANK ACCOUNT
- ---------------------------------------------- -----------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
- ------------------------------------------ ---------------------------------
SIGNATURE OF BANK ACCOUNT OWNER SIGNATURE OF JOINT OWNER (if any)
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your application.
- ------------------------------------------------------------------------------
I. SIGNATURE AND CERTIFICATION REQUIRED BY THE INTERNAL REVENUE SERVICE
Neither the Fund nor its transfer agent will be responsible for the
authenticity of transaction instructions received by telephone, provided that
reasonable security procedures have been followed.
By selecting the options in Section (G or H), I hereby authorize the Fund to
initiate debits/credits to my account at the bank indicated and for the bank
to debit/credit the same to such account through the Automated Clearing House
("ACH") system.
UNDER THE PENALTY OF PERJURY, I CERTIFY THAT (1) THE SOCIAL SECURITY NUMBER
OR TAXPAYER IDENTIFICATION NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
IDENTIFICATION NUMBER, AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER
AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR THE IRS HAS
NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. THE IRSDOES
NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
- --------------------------------- ------------------------------------------
DATE (Mo/Dy/Yr) SIGNATURE OF OWNER*<F25>
- -------------------------------- -------------------------------------------
DATE (Mo/Dy/Yr) SIGNATURE OF JOINT OWNER, if any
*<F25>If shares are to be registered in (1) joint names, both persons should
sign, (2) a custodian for a minor, the custodian should sign, (3) a trust, the
trustee(s) should sign, or (4) a corporation or other entity, an officer should
sign and print name and title on space provided below.
- ------------------------------------------------------------------------------
PRINT NAME AND TITLE OF OFFICER SIGNING FOR A CORPORATION OR OTHER ENTITY.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION December 30, 1997
EASTCLIFF FUNDS, INC.
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of Eastcliff Funds, Inc.
dated December 30, 1997. Requests for copies of the prospectus should be
made in writing to Eastcliff Funds, Inc., 900 Second Avenue South, 300
International Centre, Minneapolis, Minnesota 55402, Attention: Corporate
Secretary, or by calling (612) 336-1444.
<PAGE>
EASTCLIFF FUNDS, INC.
Table of Contents
Page No.
General Information and History . . . . . . . . . . . . . . . . . . . . 1
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Considerations . . . . . . . . . . . . . . . . . . . . . . . 3
Directors and Officers of the Corporation . . . . . . . . . . . . . . . 13
Ownership of Management and Principal Shareholders . . . . . . . . . . 16
Investment Adviser, Portfolio Managers and Administrator . . . . . . . 17
Determination of Net Asset Value and Performance . . . . . . . . . . . 22
Distribution of Shares . . . . . . . . . . . . . . . . . . . . . . . . 24
Allocation of Portfolio Brokerage . . . . . . . . . . . . . . . . . . . 25
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Shareholder Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 29
Description of Securities Ratings . . . . . . . . . . . . . . . . . . . 30
No person has been authorized to give any information or to make
any representations other than those contained in this Statement of
Additional Information and the Prospectus dated December 30, 1997 and, if
given or made, such information or representations may not be relied upon
as having been authorized by Eastcliff Funds, Inc.
The Statement of Additional Information does not constitute an
offer to sell securities.
GENERAL INFORMATION AND HISTORY
Eastcliff Funds, Inc., a Wisconsin corporation organized on May
23, 1986 (the "Corporation"), is an open-end, diversified management
investment company consisting of four portfolios, Eastcliff Growth Fund
(the "Growth Fund"), Eastcliff Total Return Fund (the "Total Return
Fund"), Eastcliff Regional Small Capitalization Value Fund (the "Regional
Small Cap Fund") and Eastcliff Contrarian Value Fund (the "Contrarian
Value Fund") (collectively, the "Eastcliff Funds" or the "Funds"). The
Corporation was called "Fiduciary Total Return Fund, Inc." prior to
December 23, 1994.
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated December 30, 1997 of the
Corporation under the caption "Investment Objectives and Policies", the
investment objective of the Growth Fund is to produce long-term growth of
capital. The investment objective of the Total Return Fund is to realize
a combination of capital appreciation and income which will result in the
highest total return, while assuming reasonable risks. The term
"reasonable risks" refers to the judgment of the Total Return Fund's
investment adviser or portfolio manager that investment in certain
securities would not present an excessive risk of loss in light of current
and anticipated future general market and economic conditions, trends in
yields and interest rates, and fiscal and monetary policies. The
investment objective of the Regional Small Cap Fund is to produce capital
appreciation. The investment objective of the Contrarian Value Fund is to
produce long-term capital appreciation. Consistent with these investment
objectives, each of the Funds has adopted the following investment
restrictions which are matters of fundamental policy. Each Fund's
fundamental investment policies cannot be changed without approval of the
holders of the lesser of: (i) 67% of that Fund's shares present or
represented at a shareholders' meeting at which the holders of more than
50% of such shares are present or represented; or (ii) more than 50% of
the outstanding shares of that Fund.
1. None of the Funds will purchase securities on margin,
participate in a joint-trading account, sell securities short, or write or
invest in put or call options, except that (a) the Growth Fund may invest
for hedging purposes up to 5% of its net assets in put or call options and
options on futures contracts and up to 5% of its net assets in futures
contracts, and (b) each of the Regional Small Cap Fund and the Contrarian
Value Fund may write or invest in put and call options to the extent
permitted by the Investment Company Act of 1940. No Fund's investments in
warrants, valued at the lower of cost or market, will exceed 5% of the
value of such Fund's net assets.
2. None of the Funds will borrow money or issue senior
securities, except for temporary bank borrowings (not in excess of 5% of
the value of its net assets) or for emergency or extraordinary purposes,
and none of the Funds will pledge any of its assets, except to secure
borrowings and only to an extent not greater than 10% of the value of such
Fund's net assets.
3. None of the Funds will lend money (except by purchasing
publicly distributed debt securities or entering into repurchase
agreements provided that repurchase agreements maturing in more than seven
days plus all other illiquid securities will not exceed 10% of such Fund's
net assets) or will lend its portfolio securities. A repurchase agreement
involves a sale of securities to a Fund with the concurrent agreement of
the seller to repurchase the securities at the same price plus an amount
equal to an agreed upon interest rate, within a specified time. In the
event of a bankruptcy or other default of a seller of a repurchase
agreement, such Fund could experience both delays in liquidating the
underlying securities and losses, including: (a) possible decline in
value of the collateral during the period while such Fund seeks to enforce
its rights thereto; (b) possible decreased levels of income during this
period; and (c) expenses of enforcing its rights.
4. None of the Funds will make investments for the purpose of
exercising control or management of any company.
5. None of the Funds will purchase securities of any issuer
(other than the United States or an agency or instrumentality of the
United States) if, as a result of such purchase, such Fund would hold more
than 10% of any class of securities, including voting securities, of such
issuer or more than 5% of such Fund's assets, taken at current value,
would be invested in securities of such issuer, except that up to 25% of
the assets of each of the Regional Small Cap Fund and the Contrarian Value
Fund may be invested without regard to these limitations.
6. None of the Funds will concentrate more than 25% of the
value of its net assets, determined at the time an investment is made,
exclusive of government securities, in securities issued by companies
primarily engaged in the same industry.
7. None of the Funds will acquire or retain any security
issued by a company, an officer or director of which is an officer or
director of the Corporation or an officer, director or other affiliated
person of any Fund's investment adviser.
8. None of the Funds will acquire or retain any security
issued by a company if any of the directors or officers of the
Corporation, or directors, officers or other affiliated persons of any
Fund's investment adviser, beneficially own more than 1/2% of such
company's securities and all of the above persons owning more than 1/2%
own together more than 5% of its securities.
9. None of the Funds will act as an underwriter or distributor
of securities other than shares of the Corporation and none of the Funds,
other than the Contrarian Value Fund, may purchase any securities which
are restricted from sale to the public without registration under the
Securities Act of 1933, as amended.
10. None of the Funds will purchase oil, gas or other mineral
leases or any interest in any oil, gas or any other mineral exploration or
development program.
11. None of the Funds will purchase or sell real estate, real
estate mortgage loans or real estate limited partnerships.
12. None of the Funds will purchase or sell commodities or
commodities contracts, except that the Growth Fund may invest in futures
contracts and options on future contracts to the extent set forth in
Investment Restriction No. 1 above.
13. The Total Return Fund will not invest more than 5% of its
total assets, and each of the Growth Fund, the Regional Small Cap Fund and
the Contrarian Value Fund will not invest more than 10% of its total
assets, in securities of issuers which have a record of less than three
years of continuous operation, including the operation of any predecessor
business of a company which came into existence as a result of a merger,
consolidation, reorganization or purchase of substantially all of the
assets of such predecessor business.
The following investment limitation is not fundamental, and may
be changed without shareholder approval.
1. None of the Funds will purchase securities of other
investment companies except (a) as part of a plan of merger, consolidation
or reorganization approved by the shareholders of such Fund; (b)
securities of money market mutual funds; or (c) securities of registered
closed-end investment companies on the open market where no commission or
profit results, other than the usual and customary broker's commission.
No purchases described in (b) and (c) will be made if as a result of such
purchase such Fund would hold more than 3% of any class of securities,
including voting securities, of any registered investment company or more
than 5% of such Fund's assets, taken at current value, would be invested
in the securities of any registered investment company or in securities of
registered closed-end investment companies.
INVESTMENT CONSIDERATIONS
Low-Rated Securities
As set forth in the Funds' prospectus dated December 30, 1997
under the caption "Investment Practices and Risks", each of the Funds will
limit its investments in convertible securities to those for which such
Fund's investment adviser believes (a) the underlying common stock is a
suitable investment for that Fund and (b) a greater potential for total
return exists by purchasing the convertible security because of its higher
yield. Moreover, none of the Funds will invest more than 5% of its net
assets at the time of investment in convertible securities rated less than
investment grade.
Corporate obligations rated less than investment grade
(hereinafter referred to as "low-rated securities") are commonly referred
to as "junk bonds", and while generally offering higher yields than
investment grade securities with similar maturities, involve greater
risks, including the possibility of default or bankruptcy. They are
regarded as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal. The special risk
considerations in connection with investments in low-rated securities are
discussed below.
Effect of Interest Rates and Economic Changes. Even though the exposure
of each of the Funds to the low-rated security market is limited to a
maximum of 5% of its net assets, the Funds are required to provide the
following discussion of such market.
The low-rated security market is relatively new and its growth
paralleled a long economic expansion. As a result, it is not clear how
this market may withstand a prolonged recession or economic downturn.
Such a prolonged economic downturn could severely disrupt the market for
and adversely affect the value of high-yield securities.
Interest-bearing securities typically experience appreciation
when interest rates decline and depreciation when interest rates rise.
The market values of low-rated securities tend to reflect individual
corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Low-rated securities also tend to be more sensitive to
economic conditions than are higher-rated securities. As a result, they
generally involve more credit risks than securities in the higher-rated
categories. During an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of low-rated securities may
experience financial stress and may not have sufficient revenues to meet
their payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate
developments, or the issuer's inability to meet specific projected
business forecasts or the unavailability of additional financing. The
risk of loss due to default by an issuer of low-rated securities is
significantly greater than issuers of higher-rated securities because such
securities are generally unsecured and are often subordinated to other
creditors. Further, if the issuer of a low-rated security defaulted, the
applicable Fund might incur additional expenses in seeking recovery.
Periods of economic uncertainty and changes would also generally result in
increased volatility in the market prices of low-rated securities and thus
in the applicable Fund's net asset value.
As previously stated, the value of a low-rated security
generally will decrease in a rising interest rate market, and accordingly,
so normally will the applicable Fund's net asset value. If such Fund
experiences unexpected net redemptions in such a market, it may be forced
to liquidate a portion of its portfolio securities without regard to their
investment merits. Due to the limited liquidity of low-rated securities
(discussed below), the Fund may be forced to liquidate these securities at
a substantial discount. Any such liquidation would reduce the Fund's
asset base over which expenses could be allocated and could result in a
reduced rate of return for the Fund.
Payment Expectations. Low-rated securities typically contain redemption,
call or prepayment provisions which permit the issuer of such securities
containing such provisions to, at their discretion, redeem the securities.
During periods of falling interest rates, issuers of low-rated securities
are likely to redeem or prepay the securities and refinance them with debt
securities with a lower interest rate. To the extent an issuer is able to
refinance the securities or otherwise redeem them, the applicable Fund may
have to replace the securities with a lower yielding security which would
result in lower returns for the Fund.
Credit Ratings. Credit ratings issued by credit rating agencies evaluate
the safety of principal and interest payments of rated securities. They
do not, however, evaluate the market value risk of low-rated securities
and therefore may not fully reflect the true risks of an investment. In
addition, credit rating agencies may or may not make timely changes in a
rating to reflect changes in the economy or in the condition of the issuer
that affect the market value of the security. Consequently, credit
ratings are used only as a preliminary indicator of investment quality.
Liquidity and Valuation. A Fund may have difficulty disposing of certain
low-rated securities because there may be a thin trading market for such
securities. Because not all dealers maintain markets in all low-rated
securities there is no established retail secondary market for many of
these securities. The Funds anticipate that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market does exist, it is generally not as
liquid as the secondary market for higher rated securities. The lack of a
liquid secondary market may have an adverse impact on the market price of
the security, and accordingly, the net asset value of a particular Fund
and its ability to dispose of particular securities when necessary to meet
its liquidity needs, or in response to a specific economic event, or an
event such as a deterioration in the creditworthiness of the issuer. The
lack of a liquid secondary market for certain securities may also make it
more difficult for a Fund to obtain accurate market quotations for
purposes of valuing their respective portfolios. Market quotations are
generally available on many low-rated issues only from a limited number of
dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales. During periods of thin trading, the spread
between bid and asked prices is likely to increase significantly. In
addition, adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the values and liquidity of
high-yield securities, especially in a thinly-traded market.
Hedging Instruments
As set forth above under the caption "Investment Restrictions",
the Growth Fund may invest up to 5% of its net assets in put or call
options and options on futures contracts and up to 5% of its net assets in
futures contracts. Similarly, as set forth in the Prospectus under the
captions "Investment Objectives and Policies -- Eastcliff Regional Small
Capitalization Value Fund" and "Investment Objectives and Policies --
Eastcliff Contrarian Value Fund", each of the Regional Small Cap Fund and
Contrarian Value Fund may purchase put and call options on equity
securities and on stock indices and write covered call options on equity
securities owned by the Fund, provided not more than 5% of the Fund's net
assets will be invested in put and call options and the premiums received
by the Fund with respect to unexpired call options written by the Fund
will not exceed 5% of the Fund's net assets. The foregoing investments
will be effected during periods of anticipated market weakness and will
not result in leveraging of the applicable Fund's portfolio.
Futures Contracts. When the Growth Fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future
date. When the Growth Fund sells a futures contract, it agrees to sell
the underlying instrument at a specified future date. The price at which
the purchase and sale will take place is fixed when the Growth Fund enters
into the contract. Futures can be held until their delivery dates, or can
be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease
in tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase the Growth Fund's
exposure to positive and negative price fluctuations in the underlying
instrument, much as if the Growth Fund had purchased the underlying
instrument directly. When the Growth Fund sells a futures contract, by
contrast, the value of its future position will tend to move in a
direction contrary to the market. Selling futures contracts, therefore,
will tend to offset both positive and negative market price changes, much
as if the underlying instrument had been sold.
Futures Margin Payments. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a Futures Commission Merchant ("FCM"), when the contract is
entered into. Initial margin deposits are equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain
may be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on
margin for purposes of the Growth Fund's investment limitations. In the
event of the bankruptcy of an FCM that holds margin on behalf of the
Growth Fund, such Fund may be entitled to return of margin owed to it only
in proportion to the amount received by the FCM's other customers,
potentially resulting in losses to the Fund.
Purchasing Put and Call Options. By purchasing a put option, the Growth
Fund, the Regional Small Cap Fund or the Contrarian Value Fund, as the
case may be, obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for
this right, the Fund pays the current market price for the option (known
as the option premium). The Growth Fund may purchase options on futures
contracts, as well as options on equity securities and stock indices. The
Regional Small Cap Fund and the Contrarian Value Fund may purchase options
on equity securities and on stock indices. The Growth Fund, the Regional
Small Cap Fund or the Contrarian Value Fund, as the case may be, may
terminate its position in a put option it has purchased by allowing it to
expire or by exercising the option. If the option is allowed to expire,
the Fund will lose the entire premium it paid. If a Fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. Such Fund may also terminate a put option position by closing it
out in the secondary market at its current price, if a liquid secondary
market exists. The buyer of a put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of purchasing
the option, a put buyer can expect to suffer a loss (limited to the amount
of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those
of put options, except that the purchaser of a call option obtains the
right to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option. Only exchange listed options will be
acquired.
Stock Index Options. Stock index options are put options and call options
on various stock indexes. In most respects, they are identical to listed
options on common stocks. The primary difference between stock options
and index options occurs when index options are exercised. In the case of
stock options, the underlying security, common stock, is delivered.
However, upon the exercise of an index option, settlement does not occur
by delivery of the securities comprising the index. The option holder who
exercises the index option receives an amount of cash if the closing level
of the stock index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of
the option. This amount of cash is equal to the difference between the
closing price of the stock index and the exercise price of the option
expressed in dollars times a specified multiple. A stock index fluctuates
with changes in the market value of the stocks included in the index. For
example, some stock index options are based on a broad market index, such
as the Standard & Poor's 500 or the Value Line Composite Index, or a
narrower market index, such as the Standard & Poor's 100. Indexes also
may be based on an industry or market segment, such as the AMEX Oil and
Gas Index or the Computer and Business Equipment Index. Options on stock
indexes are currently traded on the following exchanges: the Chicago
Board Options Exchange, the New York Stock Exchange, the American Stock
Exchange, the Pacific Stock Exchange, and the Philadelphia Stock Exchange.
Writing Call and Put Options. When the Growth Fund, the Regional Small
Cap Fund or the Contrarian Value Fund, as the case may be, writes a call
option, it receives a premium and agrees to sell the related investments
to a purchaser of the call during the call period (usually not more than
nine months) at a fixed exercise price (which may differ from the market
price of the related investments) regardless of market price changes
during the call period. If the call is exercised, the Fund forgoes any
gain from an increase in the market price over the exercise price. When
writing an option on a futures contract the Growth Fund will be required
to make margin payments to an FCM as described above for futures
contracts.
To terminate its obligations on a call which it has written,
the Growth Fund, the Regional Small Cap Fund or the Contrarian Value Fund,
as the case may be, may purchase a call in a "closing purchase
transaction." (As discussed above, such Funds may also purchase calls
other than as part of such closing transactions.) A profit or loss will
be realized depending on the amount of option transaction costs and
whether the premium previously received is more or less than the price of
the call purchased. A profit may also be realized if the call lapses
unexercised, because the Fund retains the premium received. Any such
profits are considered short-term gains for federal income tax purposes
and, when distributed, are taxable as ordinary income.
Writing calls generally is a profitable strategy if prices
remain the same or fall. Through receipt of the option premium, a call
writer mitigates the effects of a price decline. At the same time,
because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
When a Fund writes a put option, it takes the opposite side of
the transaction from the option's purchaser. In return for receipt of a
premium, the Fund assumes the obligation to pay the strike price for the
option's underlying instrument if the other party to the option chooses to
exercise it. The Growth Fund may only write covered puts and the Regional
Small Cap Fund and the Contrarian Value Fund currently will not write put
options. For a put to be covered, the Growth Fund must maintain in a
segregated account cash or high-quality, short-term readily marketable
obligations equal to the option price. A profit or loss will be realized
depending on the amount of option transaction costs and whether the
premium previously received is more or less than the put purchased in a
closing purchase transaction. A profit may also be realized if the put
lapses unexercised because the Fund retains the premium received. Any
such profits are considered short-term gains for federal income tax
purposes and, when distributed, are taxable as ordinary income.
Combined Option Positions. The Growth Fund, the Regional Small Cap Fund
or the Contrarian Value Fund may purchase and write options (subject to
the limitations discussed above) in combination with each other to adjust
the risk and return characteristics of the overall position. For example,
either Fund may purchase a put option and write a call option on the same
underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options involve multiple trades, they
result in higher transaction costs and may be more difficult to open and
close out.
Correlation of Price Changes. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the applicable Fund's
current or anticipated investments. The Growth Fund, the Regional Small
Cap Fund or the Contrarian Value Fund may invest in options and (with
respect to the Growth Fund only) futures contracts based on securities
which differ from the securities in which it typically invests. This
involves a risk that the options or futures position will not track the
performance of the Fund's investments.
Options and futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instrument match the
applicable Fund's investments well. Options and future prices are
affected by such factors as current and anticipated short-term interest
rates, changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect security
prices the same way. Imperfect correlation may also result from differing
levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and
securities are traded, or from imposition of daily price fluctuation
limits or trading halts. The Growth Fund, the Regional Small Cap Fund and
the Contrarian Value Fund may purchase or sell options and (with respect
to the Growth Fund only) futures contracts with a greater or less value
than the securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in historical volatility between the
contract and the securities, although this may not be successful in all
cases. If price changes in the applicable Fund's options or futures
positions are poorly correlated with its other investments, the positions
may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments. Successful use of these techniques
requires skills different from those needed to select portfolio
securities.
Liquidity of Options and Futures Contracts. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading
volume and liquidity if their strike prices are not close to the
underlying instruments' current price. In addition, exchanges may
establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is imposed,
it may be impossible for the Growth Fund, the Regional Small Cap Fund or
the Contrarian Value Fund, as the case may be, to enter into new positions
or close out existing positions. If the secondary market for a contract
is not liquid because of price fluctuation limits or otherwise, it could
prevent prompt liquidation of unfavorable positions, and potentially could
require the applicable Fund to continue to hold a position until delivery
or expiration regardless of changes in its value. As a result, such
Fund's access to other assets held to cover its options or futures
positions could also be impaired.
Asset Coverage for Futures and Option Positions. The Growth Fund, the
Regional Small Cap Fund and the Contrarian Value Fund will comply with
guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside cash or liquid securities in a
segregated custodial account in the amount prescribed. Securities held in
a segregated account cannot be sold while the futures or option strategy
is outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a portion of the
applicable Fund's assets could impede portfolio management or such Fund's
ability to meet redemption requests or other current obligations.
Possible Tax Limitations on Portfolio and Hedging Strategies. The
Corporation intends that each of the Funds qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code for
each taxable year. In order to so qualify, each of such Funds must, among
other things, derive less than 30% of its gross income for the fiscal year
ending June 30, 1998, but not subsequent fiscal years, from the sale or
other disposition of stock or securities (or options thereon) held less
than three months. Due to this limitation, each of such Funds will limit
the extent to which it engages in the following activities, but will not
be precluded from them: (i) selling investments, including futures, held
for less than three months, whether or not they were purchased on the
exercise of a call; (ii) the writing of calls on investments held less
than three months; (iii) the writing or purchasing of calls or the
purchasing of puts which expire in less than three months; (iv) effecting
closing transactions with respect to calls written or purchased or puts
purchased less than three months previously; and (v) exercising certain
puts or calls held for less than three months.
Special Risks of Hedging and Income Enhancement Strategies. Participation
in the options or futures markets involves investment risks and
transactions costs to which the Growth Fund, the Regional Small Cap Fund
or the Contrarian Value Fund, as applicable, would not be subject absent
the use of these strategies. If the applicable Fund's portfolio
manager(s)' prediction of movements in the direction of the securities and
interest rate markets are inaccurate, the adverse consequences to such
Fund may leave such Fund in a worse position than if such strategies were
not used. Risks inherent in the use of futures contracts and options on
futures contracts include: (1) dependence on the portfolio manager(s)'
ability to predict correctly movements in the direction of interest rates,
securities prices and currency markets; (2) imperfect correlation between
the price of options and futures contracts and options thereon and
movements in the prices of the securities being hedged; (3) the fact that
skills needed to use these strategies are different from those needed to
select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any time; and (5) the
possible need to defer closing out certain hedged positions to avoid
adverse tax consequences.
Illiquid Securities. Each of the Funds may invest up to 10% of its net
assets in securities for which there is no readily available market
("illiquid securities"). The 10% limitation includes certain securities
whose disposition would be subject to legal restrictions ("restricted
securities") which may be purchased by the Contrarian Value Fund but not
the other Funds. However, certain restricted securities that may be
resold pursuant to Rule 144A under the Securities Act may be considered
liquid. The Board of Directors of the Corporation has delegated to
Resource Capital Advisers, Inc. (the "Adviser") the day-to-day
determination of the liquidity of a security although it has retained
oversight and ultimate responsibility for such determinations. Although
no definite quality criteria are used, the Board of Directors has directed
the Adviser to consider such factors as (i) the nature of the market for a
security (including the institutional private resale markets); (ii) the
terms of these securities or other instruments allowing for the
disposition to a third party or the issuer thereof (e.g. certain
repurchase obligations and demand instruments); (iii) and availability of
market quotations; and (iv) other permissible factors.
Restricted securities may be sold in private negotiated or
other exempt transactions or in a public offering with respect to which a
registration statement is in effect under the Securities Act. When
registration is required, the Contrarian Value Fund may be obligated to
pay all or part of the registration expenses and a considerable time may
elapse between the decision to sell and the sale date. If, during such
period, adverse market conditions were to develop, the Contrarian Value
Fund might obtain a less favorable price than the price which prevailed
when it decided to sell. Restricted securities will be priced at fair
value as determined in good faith by the Board of Directors.
DIRECTORS AND OFFICERS OF THE CORPORATION
The name, age, address, principal occupation(s) during the past
five years and other information with respect to each of the directors and
officers of the Corporation are as follows:
CONLEY BROOKS, JR.*
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(PRESIDENT AND A DIRECTOR OF THE CORPORATION)
Mr. Brooks, age 52, has been President of Brooks Associates,
Inc., an asset and investment management firm, since 1982 and Chairman of
the Board of Resource Companies, Inc. since 1992. Resource Companies,
Inc. is a bank holding company which owns Resource Trust Company, the
corporate parent of Resource Capital Advisers, Inc. Mr. Brooks has been
President and a director of the Corporation since December, 1994.
JOHN J. FAUTH
3100 Metropolitan Centre
333 South Seventh Street
Minneapolis, Minnesota 55402
(A DIRECTOR OF THE CORPORATION)
Mr. Fauth, age 52, has been Chairman and Chief Executive
Officer of The Churchill Companies, a private investment company, since
April, 1982. Mr. Fauth has been a director of the Corporation since
December, 1994. He is also a director of Kinnard Investments, Inc.
A. SKIDMORE THORPE
4900 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
(A DIRECTOR OF THE CORPORATION)
Mr. Thorpe, age 68, is a private investor; he has been Chairman
of Andrus California Timberland Partnerships, a private investment firm,
since 1988. Mr. Thorpe has been a director of the Corporation since
December, 1994.
E. THOMAS WELCH*
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(VICE PRESIDENT AND A DIRECTOR OF THE CORPORATION)
Mr. Welch, age 59, has been President and Managing Director of
Resource Trust Company since 1984, President of Resource Companies, Inc.
since January, 1990 and Chief Operating Officer of Resource Capital
Advisers, Inc. since February, 1992. He has served as Vice President and
a director of the Corporation since December, 1994. Mr. Welch is also a
director of Casino Magic.
JOHN A. CLYMER
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(VICE PRESIDENT, SECRETARY AND TREASURER OF THE CORPORATION)
Mr. Clymer, age 49, has been a Managing Director of Resource
Trust Company and President of Resource Capital Advisers, Inc. since 1994.
Prior to joining the Resource companies, he was president of Minnesota
Mutual Life Insurance Company, and had held various positions within
Minnesota Mutual Life Insurance Company since 1972. Mr. Clymer has served
as a Vice President of the Corporation since June, 1996 and as Secretary
and Treasurer of the Corporation since June, 1997. Mr. Clymer is a
director of Hanover Capital Mortgage Holdings, Inc., a real estate
investment trust, and WTC Industries, Inc.
DONALD S. WILSON*
225 East Mason Street
Milwaukee, Wisconsin 53202
(A DIRECTOR OF THE CORPORATION)
Mr. Wilson, age 54, co-founded Fiduciary Management, Inc., a
Milwaukee, Wisconsin, investment advisory firm, in 1980 and has served as
a director and in various executive capacities since that time, including
as President and Treasurer since 1987. Mr. Wilson has served in various
capacities with the Corporation since its inception in 1986. He has been
a director of the Corporation since 1987. From 1986 through December,
1994, Mr. Wilson served as Vice President and Assistant Secretary of the
Corporation, and from December, 1994 through June, 1997, he served as
Secretary and Treasurer of the Corporation. Mr. Wilson also serves as a
director of Fiduciary Capital Growth Fund and FMI Focus Fund.
_______________
* Messrs. Brooks, Welch and Wilson are directors who are "interested
persons" of the Fund as that term is defined in the Investment Company Act
of 1940.
A. RODNEY BOREN
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(VICE PRESIDENT OF THE CORPORATION)
Mr. Boren, age 51, has been a Managing Director of Resource
Trust Company since January, 1996. Prior to joining Resource Trust
Company, he was with Norwest Bank since 1974, most recently serving as
Executive Vice President, Norwest Institutional Trust Services, from 1990
to 1995. Mr. Boren served as an Investment Officer of the Corporation
from February, 1996 to June, 1997 and has served as Vice President of the
Corporation since June, 1997.
THOMAS M. KERESEY
249 Royal Palm Way
Suite 400
Palm Beach, Florida 33480
(VICE PRESIDENT OF THE CORPORATION)
Mr. Keresey, age 66, has been a Chairman and Chief Investment
Officer of Palm Beach Investment Advisers, Inc. ("PBIA") since February,
1990. Prior to founding PBIA, he was Chairman of Palm Beach Capital
Management, an independent counseling firm advising the ABT family of
mutual funds, as well as private and institutional accounts. Previously,
he served as Chairman and Director of the First National Bank in Palm
Beach for ten years, Executive Vice President and Director of Kidder
Peabody Company in New York, and Executive Vice President and Director of
Clark, Dodge and Company. Mr. Keresey served as an Investment Officer of
the Corporation from February, 1996 to June, 1997 and has served as a Vice
President of the Corporation since June, 1997.
SARAH A. HILLESHEIM
900 Second Avenue South
Suite 300
Minneapolis, Minnesota 55402
(VICE PRESIDENT AND ASSISTANT SECRETARY OF THE CORPORATION)
Ms. Hillesheim, age 36, has been employed at Resource Capital
Advisers, Inc. since 1994 and has served as a Compliance Specialist since
August, 1996. From November 1992 until June 1994, she was employed at the
Center for Diagnostic Imaging; prior to that time, she was employed at
Piper Jaffray Companies from 1985 to 1992. Ms. Hillesheim has been a Vice
President and Assistant Secretary of the Corporation since November, 1995.
The Corporation's standard method of compensating directors
is to pay each director who is not an officer of the Corporation a fee of
$500 for each meeting of the Board of Directors attended. During the
fiscal year ended June 30, 1997 the Corporation paid $1,050 in directors'
fees to the Corporation's directors who are not officers of the
Corporation. The table below sets forth the compensation paid by the
Corporation to each of the current directors of the Corporation during the
fiscal year ended June 30, 1997:
COMPENSATION TABLE
Total
Pension or Compensation
Retirement Estimated from
Aggregate Benefits Annual Corporation
Compensation Accrued As Benefits and Fund
from Part of Fund Upon Complex Paid
Name of Person Corporation Expenses Retirement to Directors
Conley Brooks, Jr. $0 $0 $0 $0
John J. Fauth $450 $0 $0 $450
A. Skidmore Thorpe $600 $0 $0 $600
E. Thomas Welch $0 $0 $0 $0
Donald S. Wilson $0 $0 $0 $0
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
As of September 30, 1997, the Contrarian Value Fund did not
have any outstanding voting securities. As of the same date, all officers
and directors of the Corporation as a group (9 persons) beneficially owned
16,712 shares of the Growth Fund (which constituted 0.51% of its then
outstanding shares), 10,364 shares of the Total Return Fund (which
constituted 0.79% of its then outstanding shares) and 16,039 shares of the
Regional Small Cap Fund (which constituted 0.40% of its then outstanding
shares). As of such date, the sole beneficial holders of more than 5% of
the Growth Fund's then outstanding shares were Resource Trust Company,
Suite 300, 900 Second Avenue South, Minneapolis, Minnesota 55402, which
owned 2,932,889 shares of such Fund (constituting 89.05% of its then
outstanding shares), and Hollybrook & Company, an affiliate of Conley
Brooks, Jr., which owned 189,835 shares of the Growth Fund (constituting
5.76% of its then outstanding shares). The Growth Fund shares held by
Hollybrook & Company are included in the 2,932,889 shares held by Resource
Trust Company. As of the same date, the sole beneficial holder of more
than 5% of the Total Return Fund's then outstanding shares was Resource
Trust Company, Suite 300, 900 Second Avenue South, Minneapolis, Minnesota
55402, which owned 1,242,863 shares, or 94.40% of the total shares of such
Fund then outstanding. As of the same date, the sole beneficial holders
of more than 5% of the Regional Small Cap Fund's then outstanding shares
were Resource Trust Company, Suite 300, 900 Second Avenue South,
Minneapolis, Minnesota 55402, which owned 1,383,550 shares of such Fund
(constituting 34.14% of its then outstanding shares), and First Trust
National Association, 180 E. 5 St., P.O. Box 64488, St. Paul,
Minnesota 55164-0488, which owned 1,317,957 shares of such Fund
(constituting 32.52% of its then outstanding shares). Resource Trust
Company, a Minnesota corporation, is the parent company of Resource
Capital Advisers, Inc., the investment adviser to each of the Funds.
The Growth Fund, the Total Return Fund, the Regional Small Cap
Fund and the Corporation are controlled by Resource Trust Company. The
Regional Small Cap Fund is also deemed to be controlled by First Trust
National Association. Resource Trust Company owns sufficient shares of
the Growth Fund, the Total Return Fund and, with First Trust National
Association, the Regional Small Cap Fund to approve or disapprove all
matters brought before shareholders of such Funds, including the election
of directors of the Corporation and the approval of auditors. The
Corporation does not control any person.
INVESTMENT ADVISER, PORTFOLIO MANAGERS AND ADMINISTRATOR
As set forth in the Prospectus under the caption "Management of
the Funds" the investment adviser to each of the Funds is Resource Capital
Advisers, Inc. (the "Adviser"), the portfolio manager to the Growth Fund
is Winslow Capital Management, Inc. ("WCM"), the portfolio manager to the
Total Return Fund is Palm Beach Investment Advisers, Inc. ("PBIA"), the
portfolio manager to the Regional Small Cap Fund is Woodland Partners LLC
("WP") and the portfolio manager to the Contrarian Value Fund is Sasco
Capital, Inc. ("Sasco"). The Adviser is a wholly-owned subsidiary of
Resource Trust Company, a Minnesota state bank. Resource Trust Company is
a wholly-owned subsidiary of Resource Companies, Inc., a Minnesota
corporation. The Adviser's executive officers include E. Thomas Welch,
Chief Operating Officer, John A. Clymer, President, Compliance Officer and
Chief Investment Officer, and Dan W. Melcher, Chief Financial Officer.
The directors of the Adviser are E. Thomas Welch, Conley Brooks, Jr. and
Lyman E. Wakefield, Jr. WCM is controlled by Clark J. Winslow, its
President, Chief Executive Officer, and principal shareholder. PBIA is
controlled by the Adviser. WP is owned in equal parts by Richard W.
Jensen, Elizabeth M. Lilly and Richard J. Rinkoff. Sasco is owned by Hoda
Bibi, Bruce Bottomley, Lee Garcia and Daniel Leary.
Prior to December 31, 1994, the Total Return Fund's investment
adviser was Fiduciary Management, Inc. (the "Administrator"). On such
date the investment advisory agreement with the Administrator was
terminated and the Total Return Fund entered into a substantially
identical investment advisory agreement with the Adviser. Effective July
1, 1995, this investment advisory agreement was terminated and replaced
with a new investment advisory agreement described below.
Pursuant to separate investment advisory agreements entered into
between the Funds and the Adviser effective July 1, 1995 with respect to
the Growth Fund and the Total Return Fund, September 16, 1996 with respect
to the Regional Small Cap Fund and December 30, 1997 with respect to the
Contrarian Value Fund (the "Management Agreements"), the Adviser provides
consulting, investment and administrative services to each of the Funds.
The specific investments for each Fund will be made by one or more
portfolio managers selected for such Fund by the Adviser. The Adviser has
overall responsibility for assets under management, provides overall
investment strategies and programs for the Funds, selects portfolio
managers, allocates assets among the portfolio managers and monitors and
evaluates the portfolio managers' performance. The Adviser and each of
the Funds enter into separate sub-advisory agreements with such Fund's
portfolio managers. The Adviser also provides each of the Funds with
office space, equipment and personnel necessary to operate and administer
such Fund's business and to supervise the provision of services by third
parties such as the transfer agent and the custodian. During the period
from October 1, 1994 to December 31, 1994 and the fiscal year ended
September 30, 1994, the Total Return Fund paid the Administrator advisory
fees of $5,379 and $26,332, respectively, pursuant to an investment
advisory agreement with compensation provisions identical to the
subsequent investment advisory agreements with the Adviser, including the
new Management Agreement described above. During the fiscal years ended
June 30, 1997 and 1996 and the period from January 1, 1995 through June
30, 1995, the Total Return Fund paid the Adviser advisory fees of
$191,191, $129,207 and $17,976, respectively, and the Adviser waived $0,
$38,729 and $33,908, respectively, in additional advisory fees. The
Growth Fund did not begin operations until June 30, 1995. During the
fiscal years ended June 30, 1997 and 1996, the Growth Fund paid the
Adviser advisory fees of $454,388 and $372,152, respectively, and the
Adviser waived $0 and $15,451 in additional advisory fees, respectively.
The Regional Small Cap Fund did not begin operations until September 16,
1996. During the period from September 16, 1996 through June 30, 1997,
the Regional Small Cap Fund paid the Adviser advisory fees of $144,375.
The Contrarian Value Fund did not begin operations until December 30, 1997
and, thus, such Fund had not paid the Adviser any fees as of that date.
The Adviser has undertaken to reimburse each Fund to the extent
that the aggregate annual operating expenses exceed that percentage of the
daily net assets of such Fund for such year, as determined by valuations
made as of the close of each business day of the year, which is the most
restrictive percentage provided by the state laws of the various states in
which the shares of such Fund are qualified for sale or, if the states in
which the shares of such Fund are qualified for sale impose no such
restrictions, 2%. As of the date of this Statement of Additional
Information the shares of the Funds are not qualified for sale in any
state which imposes an expense limitation. Notwithstanding the most
restrictive applicable expense limitation of state securities commissions
set forth above or the terms of the Management Agreements, the Adviser has
voluntarily agreed to reimburse each of the Funds for expenses in excess
of 1.3% of such Fund's average daily net assets during the fiscal year
ending June 30, 1998, and did so for the fiscal years ended June 30, 1997
and 1996 for each of the Funds operating at such times. Each Fund
monitors its expense ratio on a monthly basis. If the accrued amount of
the expenses of a Fund exceeds the expense limitation, such Fund creates
an account receivable from the Adviser for the amount of such excess. In
such a situation the monthly payment of the Adviser's fee will be reduced
by the amount of such excess, subject to adjustment month by month during
the balance of such Fund's fiscal year if accrued expenses thereafter fall
below this limit. During the period from October 1, 1994 to December 31,
1994 and the fiscal year ended September 30, 1994, the Administrator
reimbursed the Total Return Fund $6,505 and $19,352, respectively, for
excess expenses pursuant to an investment advisory agreement with an
expense limitation identical to that contained in the Management
Agreement. During the fiscal years ended June 30, 1997 and 1996 and the
period from January 1, 1995 to June 30, 1995, the Adviser reimbursed the
Total Return Fund $35,832, $9,060 and $17,811, respectively (in addition
to the waiver of advisory fees described above), for excess expenses
pursuant to an investment advisory agreement also containing an identical
expense limitation. The Growth Fund did not begin operations until June
30, 1995. During the fiscal years ended June 30, 1997 and 1996, the
Adviser reimbursed the Growth Fund $14,325 and $17,342, respectively, (in
addition to the waiver of advisory fees described above) for excess
expenses pursuant to its Management Agreement. The Regional Small Cap
Fund did not begin operations until September 16, 1996. During the period
from September 16, 1996 through September 30, 1997, the Advisor reimbursed
the Regional Small Cap Fund $45,235 for excess expenses pursuant to its
Management Agreement. The Contrarian Value Fund did not begin operations
until December 30, 1997 and, thus, no expense reimbursement was required
as of such date for such Fund.
As of the date hereof, WCM is the sole portfolio manager of the
Growth Fund, PBIA is the sole portfolio manager of the Total Return Fund,
WP is the sole portfolio manager of the Regional Small Cap Fund and Sasco
is the sole portfolio manager of the Contrarian Value Fund. Each of WCM,
PBIA, WP and Sasco has entered into a separate sub-advisory contract with
the applicable Fund and the Adviser (the Sub-Advisory Agreements").
Pursuant to their respective Sub-Advisory Agreements, WCM makes specific
portfolio investments for that segment of the assets of the Growth Fund
under its management in accordance with such Fund's investment objective
and WCM's investment approach and strategies, PBIA makes specific
portfolio investments for that segment of the assets of the Total Return
Fund under its management in accordance with such Fund's investment
objective and PBIA's investment approach and strategies, WP makes specific
portfolio investments for that segment of the assets of the Regional Small
Cap Fund under its management in accordance with such Fund's investment
objectives and WP's investment approach and strategies and Sasco makes
specific portfolio investments for that segment of the assets of the
Contrarian Value Fund under its management in accordance with such Fund's
investment objectives and Sasco's investment approach and strategies.
Portfolio managers of the Funds, including WCM, PBIA, WP, and
Sasco are employed and may be terminated by the Adviser subject to prior
approval by the Board of Directors of the Corporation. The employment of
a new portfolio manager currently requires the prior approval of the
shareholders of the applicable Fund. The Corporation, however, may
request an order of the Securities and Exchange Commission exempting the
Funds from the requirements under the Investment Company Act of 1940
relating to shareholder approval of new portfolio managers. There can be
no assurance that the Corporation will request such an order, or, if
requested, that such an order will be granted with respect to the Funds.
Selection and retention criteria for portfolio managers include: (i)
their historical performance records; (ii) consistent performance in the
context of the markets and preservation of capital in declining markets;
(iii) organizational stability and reputation; (iv) the quality and depth
of investment personnel; and (v) the ability of the portfolio manager to
apply its approach consistently. Each portfolio manager will not
necessarily exhibit all of the criteria to the same degree. Portfolio
managers are paid by the Adviser (not the Funds).
The portfolio managers' activities are subject to general
supervision by the Adviser and the Board of Directors of the Corporation.
Although the Adviser and the Board do not evaluate the investment merits
of the portfolio managers' specific securities selections, they do review
the performance of each portfolio manager relative to the selection
criteria.
As set forth in the Prospectus under the caption "Management of
the Funds" the Administrator is the administrator to each of the Funds.
The Administrator is controlled by Mr. Wilson and Ted D. Kellner.
Pursuant to separate administration agreements entered into between each
of the Funds and the Administrator (the "Administration Agreements"), the
Administrator supervises all aspects of the Funds' operations except those
performed by the Adviser or the portfolio managers. In connection with
such supervision the Administrator prepares and maintains the books,
accounts and other documents required by the Investment Company Act of
1940 (the "Act"), calculates the Fund's net asset value, responds to
shareholder inquiries, prepares the Fund's financial statements and excise
tax returns, prepares reports and filings with the Securities and Exchange
Commission and with state Blue Sky authorities, furnishes statistical and
research data, clerical, accounting and bookkeeping services and
stationery and office supplies, keeps and maintains the Fund's financial
accounts and records and generally assists in all aspects of the Fund's
operations. During the fiscal years ended June 30, 1997 and 1996, the
period from October 1, 1994 to June 30, 1995 and the fiscal year ended
September 30, 1994, the Total Return Fund paid the Administrator $38,238,
$33,575, $11,452, and $5,267, respectively, pursuant to such Fund's
Administration Agreement. The Growth Fund did not commence operations
until June 30, 1995. During the fiscal years ended June 30, 1997 and
1996, the Growth Fund paid the Administrator $75,438 and $68,201,
respectively, pursuant to such Fund's Administration Agreement. The
Regional Small Cap Fund did not commence operations until September 16,
1996. During the period from September 16, 1996 through June 30, 1997,
the Regional Small Cap Fund paid the Administrator $28,875 pursuant to
each Fund's Administration Agreement. The Contrarian Value Fund did not
commence operations until December 30, 1997 and, thus, such Fund had not
paid the Administrator any fees as of that date.
The respective Management Agreements and Sub-Advisory Agreements
of each of the Funds will remain in effect as long as its continuance is
specifically approved at least annually (i) by the Board of Directors of
the Corporation, or, in the case of the Management Agreements, by the vote
of a majority (as defined in the Act) of the outstanding shares of the
applicable Fund, and (ii) by the vote of a majority of the directors of
the Corporation who are not parties to the Management Agreement or Sub-
Advisory Agreement relating to the applicable Fund or interested persons
of the Adviser or applicable Portfolio Manager, cast in person at a
meeting called for the purpose of voting on such approval. The
Administration Agreements will remain in effect until terminated. Each of
the Management Agreements provides that it may be terminated at any time
without the payment of any penalty, by the Board of Directors of the
Corporation or by vote of a majority of the applicable Fund's
shareholders, on sixty days written notice to the Adviser and by the
Adviser on the same notice to the applicable Fund, and that it shall be
automatically terminated if it is assigned. Each of the Sub-Advisory
Agreements provides that it may be terminated by any party upon giving 30
days' written notice to the other parties and that it shall be
automatically terminated if it is assigned. Each of the Administration
Agreements provides that it may be terminated at any time without the
payment of any penalty by the Board of Directors of the Corporation on
ninety days' written notice to the Administrator and by the Administrator
on the same notice to the applicable Fund.
The Management Agreements, the Sub-Advisory Agreements and the
Administration Agreements provide that the Adviser, WCM, PBIA, WP, Sasco
and the Administrator, as the case may be, shall not be liable to either
of the Funds or their shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Management Agreements, the Sub-Advisory
Agreements and the Administration Agreements also provide that the
Adviser, WCM, PBIA, WP, Sasco and the Administrator, and their respective
officers, directors and employees, may engage in other businesses, devote
time and attention to any other business whether of a similar or
dissimilar nature, and render services to others.
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
As set forth in the Prospectus under the caption "Determination
of Net Asset Value", the net asset value of each Fund will be determined
as of the close of regular trading (currently 4:00 P.M. Eastern Time) on
each day the New York Stock Exchange is open for trading. The New York
Stock Exchange is open for trading Monday through Friday except New Year's
Day, Dr. Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. Additionally, if any of the aforementioned holidays falls on a
Saturday, the New York Stock Exchange will not be open for trading on the
preceding Friday and when any such holiday falls on a Sunday, the New York
Stock Exchange will not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the ending of a monthly
or the yearly accounting period. The New York Stock Exchange may also be
closed on national days of mourning.
Any total rate of return quotation for a particular Fund will be
for a period of three or more months and will assume the reinvestment of
all dividends and capital gains distributions which were made by such Fund
during that period. Any period total rate of return quotation of a Fund
will be calculated by dividing the net change in value of a hypothetical
shareholder account established by an initial payment of $1,000 at the
beginning of the period by 1,000. The net change in the value of a
shareholder account is determined by subtracting $1,000 from the product
obtained by multiplying the net asset value per share at the end of the
period by the sum obtained by adding (A) the number of shares purchased at
the beginning of the period plus (B) the number of shares purchased during
the period with reinvested dividends and distributions. Any average
annual compounded total rate of return quotation of a Fund will be
calculated by dividing the redeemable value at the end of the period
(i.e., the product referred to in the preceding sentence) by $1,000. A
root equal to the period, measured in years, in question is then
determined and 1 is subtracted from such root to determine the average
annual compounded total rate of return.
The foregoing computation may also be expressed by the following
formula:
n
P(1+T) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the stated periods at the end
of the stated periods.
Total return is the cumulative rate of investment growth which
assumes that income dividends and capital gains are reinvested. It is
determined by assuming a hypothetical investment at the net asset value at
the beginning of the period, adding in the reinvestment of all income
dividends and capital gains, calculating the ending value of the
investment at the net asset value as of the end of the specified time
period, subtracting the amount of the original investment, and dividing
this amount by the amount of the original investment. This calculated
amount is then expressed as a percentage by multiplying by 100.
The Growth Fund's average annual compounded return for the one-
year period ended June 30, 1997 was 10.83% and for the period from the
Growth Fund's commencement of operations (July 1, 1995) through June 30,
1997 was 18.01%. The Total Return Fund's average annual compounded
returns for the one-year, five-year and ten-year periods ended June 30,
1997 and for the period from the Fund's commencement of operations
(December 30, 1986) through June 30, 1997 were 28.10%, 15.64%, 12.28% and
14.09%, respectively. The Regional Small Cap Fund's return for the period
from the Regional Small Cap Fund's commencement of operations (September
16, 1996) through June 30, 1997 was 22.50%. The Contrarian Value Fund did
not commence operation until December 30, 1997.
The results below show the value of an assumed initial
investment in the Growth Fund of $10,000 made on June 30, 1995 through
December 31, 1996, assuming reinvestment of all dividends and
distributions.
Value of
$10,000 Cumulative
December 31 Investment % Change
1995 $ 10,860 + 8.6%
1996 12,690 +26.9%
The results below show the value of an assumed initial investment
in the Total Return Fund of $10,000 made on December 30, 1986 through
December 31, 1996, assuming reinvestment of all dividends and
distributions.
Value of
$10,000 Cumulative
December 31, Investment % Change
1986 $10,000 ---
1987 11,225 + 12.2%
1988 13,554 + 35.5
1989 15,341 + 53.4
1990 14,663 + 46.6
1991 19,070 + 90.7
1992 21,052 +110.5
1993 23,381 +133.8
1994 22,909 +129.1
1995 28,221 +182.2
1996 34,000 +240.0
The results below show the value of an assumed initial investment
in the Regional Small Cap Fund of $10,000 made on September 16, 1996
through December 31, 1996, assuming reinvestment of all dividends and
distributions.
Value of
$10,000 Cumulative
Investment % Change
December 31, 1996 $10,908 9.08%
The foregoing performance results are based on historical earnings
and should not be considered as representative of the performance of the
Growth Fund, the Total Return Fund or the Regional Small Cap Fund in the
future. Such performance results also reflect reimbursements made by the
Adviser to keep total fund operating expenses at or below 1.3% of average
daily net assets. An investment in the Growth Fund, the Total Return Fund
or the Regional Small Cap Fund will fluctuate in value and at redemption
its value may be more or less than the initial investment.
DISTRIBUTION OF SHARES
Each of the Funds has adopted a Distribution Plan (the "Plan") in
anticipation that such Fund will benefit from the Plan through increased
sales of shares, thereby reducing such Fund's expense ratio and providing
an asset size that allows the Adviser greater flexibility in management.
However, each of the Funds presently intends not to utilize the Plan or
pay any 12b-1 fees during the fiscal year ending June 30, 1998. The Plan
may be terminated by any Fund at any time by a vote of the directors of
the Corporation who are not interested persons of the Corporation and who
have no direct or indirect financial interest in the Plan or any agreement
related thereto (the "Rule 12b-1 Directors") or by a vote of a majority of
the outstanding shares of such Fund. Messrs. Fauth and Thorpe are
currently the Rule 12b-1 Directors. Any change in the Plan that would
materially increase the distribution expenses of a particular Fund
provided for in the Plan requires approval of the shareholders of such
Fund and the Board of Directors, including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of
directors who are not interested persons of the Corporation will be
committed to the discretion of the directors of the Corporation who are
not interested persons of the Corporation. The Board of Directors of the
Corporation must review the amount and purposes of expenditures pursuant
to the Plan quarterly as reported to it by a Distributor, if any, or
officers of the Corporation. The Plan will continue in effect for as long
as its continuance is specifically approved at least annually by the Board
of Directors, including the Rule 12b-1 Directors. The Growth Fund did not
begin operations until June 30, 1995, and such Fund has not incurred any
distribution costs to date. The Regional Small Cap Fund did not begin
operations until September 16, 1996 and such Fund has not incurred any
distribution costs to date. The Contrarian Value Fund did not begin
operations until December 30, 1997 and, thus, such Fund has not incurred
any distribution costs as of that date.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Growth Fund are made
by the Adviser and WCM, for the Total Return Fund are made by the Adviser
and PBIA, for the Regional Small Cap Fund are made by the Adviser and WP
and for the Contrarian Value Fund are made by the Adviser and Sasco, in
each case subject to review by the Corporation's Board of Directors. In
placing purchase and sale orders for portfolio securities for the Funds,
it is the policy of the Adviser, WCM, PBIA, WP and Sasco to seek the best
execution of orders at the most favorable price in light of the overall
quality of brokerage and research services provided, as described in this
and the following paragraph. In selecting brokers to effect portfolio
transactions, the determination of what is expected to result in best
execution at the most favorable price involves a number of largely
judgmental considerations. Among these are the evaluation by the Adviser,
WCM, PBIA, WP and/or Sasco of the broker's efficiency in executing and
clearing transactions, block trading capability (including the broker's
willingness to position securities) and the broker's financial strength
and stability. The most favorable price to a Fund means the best net
price without regard to the mix between purchase or sale price and
commission, if any. Over-the-counter securities are generally purchased
and sold directly with principal market makers who retain the difference
in their cost in the security and its selling price. In some instances,
the Adviser, WCM, PBIA, WP or Sasco may feel that better prices are
available from non-principal market makers who are paid commissions
directly. Although none of the Funds intends to market its shares through
intermediary broker-dealers, a Fund may place portfolio orders with
broker-dealers who recommend the purchase of such Fund's shares to clients
if the Adviser, WCM, PBIA, WP or Sasco, as the case may be, believes the
commissions and transaction quality are comparable to that available from
other brokers and may allocate portfolio brokerage on that basis.
In allocating brokerage business for the Funds, the Adviser, WCM,
PBIA, WP and Sasco also take into consideration the research, analytical,
statistical and other information and services provided by the broker,
such as general economic reports and information, reports or analyses of
particular companies or industry groups, market timing and technical
information, and the availability of the brokerage firm's analysts for
consultation. While each of the Adviser, WCM, PBIA, WP and Sasco believes
these services have substantial value, they are considered supplemental to
the efforts of the Adviser, WCM, PBIA, WP or Sasco in the performance of
its duties under the applicable Management Agreement or Sub-Advisory
Agreement. Other clients of the Adviser, WCM, PBIA, WP or Sasco may
indirectly benefit from the availability of these services to the Adviser,
WCM, PBIA, WP or Sasco, and the Funds may indirectly benefit from services
available to the Adviser, WCM, PBIA, WP or Sasco as a result of
transactions for other clients. Each of the Management Agreements and
Sub-Advisory Agreements provides that the Adviser, WCM, PBIA, WP or Sasco,
as the case may be, may cause the applicable Fund to pay a broker which
provides brokerage and research services to the Adviser, WCM, PBIA, WP or
Sasco, a commission for effecting a securities transaction in excess of
the amount another broker would have charged for effecting the
transaction, if the Adviser, WCM, PBIA, WP or Sasco determines in good
faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing broker
viewed in terms of either the particular transaction or the overall
responsibilities of the Adviser, WCM, PBIA, WP or Sasco with respect to
the applicable Fund and the other accounts as to which it exercises
investment discretion. The Growth Fund did not begin operations until June
30, 1995. During the fiscal years ended June 30, 1996 and 1997, the
Growth Fund paid brokerage commissions of $70,820 on transactions having a
total market value of $67,831,156 and $43,545 on transactions having a
total market value of $25,936,201, respectively. Brokerage commissions
paid by the Total Return Fund totaled $1,814 on transactions having a
total market value of $911,515, $25,313 on transactions having a total
market value of $37,754,478, $28,705 on transactions having a total market
value of $32,270,945 and $19,854 on transactions having a total market
value of $15,590,327 during the fiscal year ended September 30, 1994, the
period from October 1, 1994 to June 30, 1995, and the fiscal years ended
June 30, 1996 and 1997, respectively. (The investment advisory agreement
between the Total Return Fund and the Administrator contained a provision
similar to that of the Total Return Fund's Management Agreement and Sub-
Advisory Agreement described above regarding allocation of portfolio
brokerage.) The Regional Small Cap Fund did not commence operations until
September 16, 1996. During the period from September 16, 1996 through
June 30, 1997, the Regional Small Cap Fund paid brokerage commissions of
$50,392 on transactions having a total market value of $15,758,909. All
of the brokers to whom commissions were paid by the Growth Fund, the Total
Return Fund and the Regional Small Cap Fund provided research services to
the Administrator and/or the Adviser. The Contrarian Value Fund did not
commence operations until December 30, 1997 and, thus, such Fund had not
paid any brokerage commissions as of that date.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Funds. As such, Firstar Trust
Company holds all securities and cash of the Funds, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Corporation. Firstar Trust Company does not
exercise any supervisory function over the management of the Funds, the
purchase and sale of securities or the payment of distributions to
shareholders. Firstar Trust Company also acts as the Funds' transfer
agent and dividend disbursing agent.
TAXES
As set forth in the Prospectus under the caption "Dividends,
Distributions and Taxes", each of the Funds will endeavor to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, as amended.
Dividends from each Fund's net investment income and distributions
from each Fund's net realized capital gains are taxable to shareholders,
whether received in cash or additional shares of such Fund. The 70%
dividends-received deduction for corporations will apply to dividends from
a Fund's net investment income, subject to proportionate reductions if the
aggregate dividends received by a Fund from domestic corporations in any
year are less than 100% of the net investment company income taxable
distributions made by the Fund.
Any dividend or capital gains distribution paid shortly after a
purchase of shares will have the effect of reducing the per share net
asset value of such shares by the amount of the dividend or distribution.
Furthermore, if the net asset value of the shares immediately after a
dividend or distribution is less than the cost of such shares to the
shareholder, the dividend or distribution will be taxable to the
shareholder even though it results in a return of capital to him.
Each Fund may be required to withhold Federal income tax at a rate
of 31% ("backup withholding") from dividend payments and redemption
proceeds if a shareholder fails to furnish such Fund with his social
security number or other tax identification number and certify under
penalty of perjury that such number is correct and that he is not subject
to backup withholding due to the under reporting of income. The
certification form is included as part of the share purchase application
and should be completed when the account is opened.
SHAREHOLDER MEETINGS
The Wisconsin Business Corporation Law permits registered
investment companies, such as the Corporation, to operate without an
annual meeting of shareholders under specified circumstances if an annual
meeting is not required by the Act. The Corporation has adopted the
appropriate provisions in its bylaws and, at its discretion, may not hold
an annual meeting in any year in which none of the following matters is
required to be acted upon by the shareholders under the Act: (i) election
of directors; (ii) approval of an investment advisory agreement; (iii)
ratification of the selection of auditors; and (iv) approval of a
distribution agreement.
The Corporation's bylaws also contain procedures for the removal of
directors by its shareholders. At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting, the Secretary of the Corporation shall promptly call a special
meeting of shareholders for the purpose of voting upon the question of
removal of any director. Whenever ten or more shareholders of record who
have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding
shares, whichever is less, shall apply to the Corporation's Secretary in
writing, stating that they wish to communicate with other shareholders
with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request
which they wish to transmit, the Secretary shall within five business days
after such application either: (1) afford to such applicants access to a
list of the names and addresses of all shareholders as recorded on the
books of the Corporation; or (2) inform such applicants as to the
approximate number of shareholders of record and the approximate cost of
mailing to them the proposed communication and form of request.
If the Secretary elects to follow the course specified in clause
(2) of the last sentence of the preceding paragraph, the Secretary, upon
the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all shareholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the Securities and Exchange Commission may,
and if demanded by the Board of Directors or by such applicants shall,
enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 3100 Multifoods Tower, 33 South 6th Street,
Minneapolis, Minnesota 55402, currently serves as the independent
accountants for the Corporation and has so served since the fiscal year
ended September 30, 1989. The Corporation changed its fiscal year end to
June 30 effective as of June 30, 1995.
FINANCIAL STATEMENTS
The following audited financial statements are incorporated by
reference to the Annual Report, dated June 30, 1997, of Eastcliff Funds,
Inc. (File No. 811-4722), as filed with the Securities and Exchange
Commission on August 6, 1997:
- Statements of Net Assets
- Statements of Operations
- Statements of Changes in Net Assets
- Financial Highlights
- Notes to the Financial Statements
- Report of Independent Accountants
DESCRIPTION OF SECURITIES RATINGS
As set forth in the Prospectus under the caption "Investment
Objectives and Policies", each of the Funds may invest in various
securities assigned ratings of either Standard & Poor's Corporation or
Moody's Investors Service, Inc. A brief description of the ratings
symbols and their meanings follows.
Standard & Poor's Corporation Bond Ratings. A Standard & Poor's
corporate debt rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers of lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes
in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights;
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in the
higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB, B, CCC, CC Bonds are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation. BB indicates the lowest
degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics,
they are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Moody's Investors Service, Inc Bond Ratings.
Aaa - Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large,
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each of the
foregoing generic rating classifications. The modifier 1 indicates that
the company ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the company ranks in the lower end of its generic rating category.
Standard & Poor's Commercial Paper Ratings. A Standard & Poor's
commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. The three highest
categories are as follows:
A-1. This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2. Capacity for timely payment on issues with this designation is
satisfactory. However the relative degree of safety is not as high as for
issuers designated "A-1".
A-3. Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects
of changes in circumstances than obligations carrying a higher
designation.
Standard & Poor's Preferred Stock Ratings. A Standard & Poor's
preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations. A preferred stock rating differs from a bond rating inasmuch
as it is assigned to an equity issue, which issue is intrinsically
different from, and subordinated to, a debt issue. Therefore, to reflect
this difference, the preferred stock rating symbol will normally not be
higher than the bond rating symbol assigned to, or that would be assigned
to, the senior debt of the same issuer.
The preferred stock ratings are based on the following
considerations:
I. Likelihood of payment -- capacity and willingness of the issuer
to meet the timely payment of preferred stock dividends and any applicable
sinking fund requirements in accordance with the terms of the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
"AAA" This is the highest rating that may be assigned by Standard
& Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated "AA" also qualifies as a high-
quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
"A" An issued rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions.
"BBB" An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
make payments for a preferred stock in this category than for issues in
the "A" category.
"BB," "B," "CCC" Preferred stock rated "BB," "B," and "CCC" are
regarded, on balance, as predominately speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB" indicates the
lowest degree of speculation and "CCC" the highest degree of speculation.
While such issues will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Audited Financial Statements (Financial Highlights included in
Part A and all incorporated by reference to the Annual Report, dated June
30, 1997 (File No. 811-4722) of Eastcliff Funds, Inc. (as filed with the
Securities and Exchange Commission on August 6, 1997)).
Eastcliff Funds, Inc.
Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
(b.) Exhibits
(1.1) Registrant's Restated Articles of Incorporation, as
amended.
(1.2) Articles of Amendment relating to Series D Common Stock of
Eastcliff Funds, Inc.
(2) Registrant's By-Laws, as amended; Exhibit 2 to Amendment
No. 18 to Registrant's Registration Statement on Form N-1A
(hereinafter referred to as "Amendment 18") is incorporated
by reference pursuant to Rule 411 under the Securities Act
of 1933 (hereinafter referred to as "Rule 411").
(3) None
(4) None
(5.1) Investment Advisory Agreement between Eastcliff Total
Return Fund (formerly Fiduciary Total Return Fund) and
Resource Capital Advisers, Inc: Exhibit 5.1 to Amendment
No. 18 is incorporated by reference pursuant to Rule 411.
(5.2) Investment Advisory Agreement between Eastcliff Growth Fund
and Resource Capital Advisers, Inc.; Exhibit 5.2 to
Amendment No. 18 is incorporated by reference pursuant to
Rule 411.
(5.3) Sub-Advisory Agreement among Eastcliff Growth Fund,
Resource Capital Advisers, Inc. and Winslow Capital
Management, Inc.; /Exhibit 5.3 to Amendment No. 18 is
incorporated by reference pursuant to Rule 411.
(5.4) Sub-Advisory Agreement among Eastcliff Total Return Fund,
Resource Capital Advisers, Inc. and Palm Beach Investment
Advisers, Inc.; Exhibit 5.4 to Amendment No. 18 is
incorporated by reference pursuant to Rule 411.
(5.5) Investment Advisory Agreement between Eastcliff Regional
Small Capitalization Value Fund and Resource Capital
Advisers, Inc.; Exhibit 5.5 to Amendment No. 15 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference to Rule 411.
(5.6) Sub-Advisory Agreement among Eastcliff Regional Small
Capitalization Value Fund, Resource Capital Advisers, Inc.
and Woodland Partners LLC.; Exhibit 5.6 to Amendment No. 15
to Registrant's Registration Statement on Form N-1A is
incorporated by reference to Rule 411.
(5.7) Investment Advisory Agreement between Eastcliff Contrarian
Value Fund and Resource Capital Advisers, Inc.
(5.8) Sub-Advisory Agreement among Eastcliff Contrarian Value
Fund, Resource Capital Advisers, Inc. and Sasco Capital,
Inc.
(6) None
(7) None
(8.1) Custodian Agreement between Eastcliff Total Return Fund
(formerly Fiduciary Total Return Fund) and Firstar Trust
Company; Exhibit 8.1 to Amendment No. 18 is incorporated
by reference pursuant to Rule 411.
(8.2) Custodian Agreement between Eastcliff Growth Fund and
Firstar Trust Company; Exhibit 8.2 to Amendment No. 18 is
incorporated by reference pursuant to Rule 411.
(8.3) Custodian Agreement between Eastcliff Regional Small
Capitalization Value Fund and Firstar Trust Company;
Exhibit 8.3 to Amendment No. 18 is incorporated by
reference pursuant to Rule 411.
(8.4) Custodian Agreement between Eastcliff Contrarian Value Fund
and Firstar Trust Company.
(9.1) Administrative Agreement, including addendum, between
Eastcliff Total Return Fund (formerly Fiduciary Total
Return Fund) and Fiduciary Management, Inc.; Exhibit 9.1
to Amendment No. 18 is incorporated by reference pursuant
to Rule 411.
(9.2) Administrative Agreement, including addendum, between
Eastcliff Growth Fund and Fiduciary Management, Inc.;
Exhibit 9.2 to Amendment No. 18 is incorporated by
reference pursuant to Rule 411.
(9.3) Administrative Agreement, including addendum, between
Eastcliff Regional Small Capitalization Value Fund and
Fiduciary Management, Inc.; Exhibit 9.4 to Amendment No. 15
to Registrant's Registration Statement on Form N-1A is
incorporated by reference to Rule 411.
(9.4) Administrative Agreement, including addendum, between
Eastcliff Contrarian Value Fund and Fiduciary Management,
Inc.
(10) Opinion of Foley & Lardner, counsel for Registrant;
Exhibit 10 to Amendment No. 18 is incorporated by reference
pursuant to Rule 411.
(11) Consent of Price Waterhouse LLP.
(12) None
(13) Subscription Agreement; Exhibit 13 to Amendment No. 18 is
incorporated by reference pursuant to Rule 411.
(14.1) Eastcliff Funds (formerly Fiduciary Funds) Individual
Retirement Account; Exhibit 14.1 to Amendment No. 18 is
incorporated by reference pursuant to Rule 411.
(14.2) Eastcliff Funds (formerly Fiduciary Funds) Self-Employed
Defined Contribution Retirement Plan; Exhibit 14.2 to
Amendment No. 18 is incorporated by reference pursuant to
Rule 411.
(14.3) Eastcliff Funds (formerly Fiduciary Funds) Simplified
Employee Pension; Exhibit 14.3 to Amendment No. 18 is
incorporated by reference pursuant to Rule 411.
(14.4) Eastcliff Funds Savings Incentive Match Program for Small
Employers ("SIMPLE") Individual Retirement Account;
Exhibit 14.4 to Amendment No. 18 is incorporated by
reference pursuant to Rule 411.
(14.5) Eastcliff Funds Section 403(b)(7) Retirement Plan; Exhibit
14.5 to Amendment No. 18 is incorporated by reference
pursuant to Rule 411.
(15.1) Amended and Restated Servicing and Distribution Plan of
Eastcliff Funds, Inc.; Exhibit 15.1 to Amendment No. 18 is
incorporated by reference pursuant to Rule 411.
(15.2) Servicing and Distribution Agreement; Exhibit 15.2 to
Amendment No. 18 is incorporated by reference pursuant to
Rule 411.
(16) Schedule for Computation of Performance Quotations; Exhibit
16 to Amendment No. 16 to Registrant's Registration
Statement on Form N-1A is incorporated by reference
pursuant to Rule 411.
(17) Financial Data Schedule.
(18) None.
Item 25. Persons Controlled by or under Common Control with Registrant
The Registrant, the Eastcliff Total Return Fund, the Eastcliff
Growth Fund and the Eastcliff Regional Small Capitalization Value Fund are
controlled by Resource Trust Company, which owned 94.40%, 89.05% and
34.14% of the Total Return Fund's, the Growth Fund's and the Regional
Small Cap Fund's outstanding shares, respectively, as of September 30,
1997. The Regional Small Cap Fund is also deemed to be controlled by
First Trust National Association, which owned 32.52% of the Regional Small
Cap Fund's outstanding shares as of September 30, 1997. Registrant does
not control any person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of September 30, 1997
Common Stock (Series A) 47
Common Stock (Series B) 62
Common Stock (Series C) 163
Common Stock (Series D) 0
Item 27. Indemnification
Pursuant to the authority of the Wisconsin Business Corporation
Law, Registrant's Board of Directors has adopted the following By-Law
which is in full force and effect and has not been modified or canceled:
Article VII
INDEMNIFICATION
7.01 Provision of Indemnification. The corporation shall
indemnify all of its corporate representatives against expenses,
including attorney's fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by them in
connection with the defense of any action, suit or proceeding,
or threat or claim of such action, suit or proceeding, whether
civil, criminal, administrative, or legislative, no matter by
whom brought, or in any appeal in which they or any of them are
made parties or a party by reason of being or having been a
corporate representative, if the corporate representative acted
in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation and with
respect to any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful provided that the
corporation shall not indemnify corporate representatives in
relation to matters as to which any such corporate
representative shall be adjudged in such action, suit or
proceeding to be liable for gross negligence, willful
misfeasance, bad faith, reckless disregard of the duties and
obligations involved in the conduct of his office, or when
indemnification is otherwise not permitted by the Wisconsin
Business Corporation Law.
7.02 Determination of Right to Indemnification. In the
absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each
corporate representative shall be indemnified hereunder only if
a determination that indemnification of the corporate
representative is proper because he has met the applicable
standard of conduct set forth in Section 7.01. Such
determination shall be made: (i) by the board of directors, by
a majority vote of a quorum which consists of directors who were
not parties to the action, suit or proceeding nor interested
persons of the corporation as defined in Section 2(a)(19) of the
Investment Company Act of 1940; (ii) if the required quorum is
not obtainable or if a quorum of disinterested directors so
direct, by independent legal counsel in a written opinion; or
(iii) by the shareholders. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person was guilty of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties and obligations involved in the conduct
of his or her office, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
7.03 Allowance of Expenses. Expenses, including
attorneys' fees, incurred in the preparation of and/or
presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding as
authorized in the manner provided in Sections 180.0853 or
180.0856 of the Wisconsin Business Corporation Law and in
accordance with the requirements of the Securities and Exchange
Commission upon receipt of an undertaking by or on behalf of the
corporate representative to repay such amount unless it shall
ultimately be determined that he or she is entitled to be
indemnified by the corporation as authorized in this by-law.
7.04 Additional Rights to Indemnification. The
indemnification provided by this by-law shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled under these by-laws, any agreement, vote of
shareholders or disinterested directors or otherwise, both as to
action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person subject to the
limitations imposed from time to time by the Investment Company
Act of 1940, as amended.
7.05 Insurance. This corporation shall have power to
purchase and maintain insurance on behalf of any corporate
representative against any liability asserted against him or her
and incurred by him or her in such capacity or arising out of
his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability
under this by-law, provided that no insurance may be purchased
or maintained to protect any corporate representative against
liability for gross negligence, willful malfeasance, bad faith,
or reckless disregard of the duties and obligations involved in
the conduct of his or her office.
7.06 Definitions. "Corporate Representative" means an
individual who is or was a director, officer, agent or employee
of the corporation or who serves or served another corporation,
partnership, joint venture, trust or other enterprise in one of
these capacities at the request of the corporation and who, by
reason of his or her position, is, was or is threatened to be
made a party to a proceeding described herein.
In reference to Article VII, Section 7.01 of the By-laws,
Section 180.0851 of the Wisconsin Business Corporation Law provides for
mandatory indemnification (a) if a corporate representative was successful
on the merits or otherwise in the defense of a proceeding, and (b) if the
corporate representative was not successful on the merits or otherwise but
the liability incurred was not the result of a breach or failure to
perform a duty which constituted any of the following: (1) a willful
failure to deal fairly with the corporation or its shareholders in
connection with a matter in which the corporate representative has a
material conflict of interest; (2) a violation of criminal law, unless the
corporate representative had reasonable cause to believe his or her
conduct was lawful or no reasonable cause to believe his or her conduct
was unlawful; (3) a transaction from which the corporate representative
derived an improper personal profit; or (4) willful misconduct.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, 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 Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, 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 of whether such indemnification 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
Information with respect to Messrs. Wilson, Brooks, Welch, Fauth
and Thorpe is incorporated by reference to pages 12 and 13 of the
Statement of Additional Information pursuant to Rule 411 under the
Securities Act of 1933.
Item 29. Principal Underwriters
Registrant has no principal underwriters.
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder are in the physical possession of
Registrant's Administrator, Fiduciary Management, Inc., at its corporate
offices, 225 East Mason Street, Milwaukee, Wisconsin 53202, Registrant's
investment adviser, Resource Capital Advisers, Inc., at its corporate
offices, 300 International Centre, 900 Second Avenue South, Minneapolis,
Minnesota 55402, the Eastcliff Growth Fund's portfolio manager, Winslow
Capital Management, Inc., at its corporate offices, 4720 IDS Tower, 80
South Eighth Street, Minneapolis, Minnesota 55402, the Eastcliff Regional
Small Capitalization Value Fund's portfolio manager, Woodland Partners
LLC, at its corporate offices, 60 South Sixth Street, Suite 3750,
Minneapolis, Minnesota 55402, or Firstar Trust Company, 615 East Michigan
Street, Milwaukee, Wisconsin 53202.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to provide its Annual Report to
Shareholders upon request without charge to any recipient of a Prospectus.
With respect to shareholder meetings, Registrant undertakes to
call shareholder meetings in accordance with the provisions of Article II
of its Bylaws, which are discussed in Parts A and B of this Registration
Statement.
Registrant undertakes to file a post-effective amendment to this
amended Registration Statement within four to six months of the effective
date of this amended Registration Statement which will contain financial
statements (which need not be certified) as of and for the time period
reasonably close or as soon as practicable to the date of such post-
effective amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis and
State of Minnesota on the 6th day of October, 1997.
EASTCLIFF FUNDS, INC.
(Registrant)
By: /s/ Conley Brooks, Jr.
Conley Brooks, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Name Title Date
/s/ Conley Brooks, Jr. Principal Executive, October 6, 1997
Conley Brooks, Jr. Financial and
Accounting Officer
and Director
/s/ E. Thomas Welch Vice President and October 6, 1997
E. Thomas Welch Director
/s/ John J. Fauth Director October 6, 1997
John J. Fauth
/s/ A. Skidmore Thorpe Director October 6, 1997
A. Skidmore Thorpe
/s/ Donald S. Wilson Director October 9, 1997
Donald S. Wilson
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1.1) Registrant's Restated Articles of
Incorporation, as amended
(1.2) Articles of Amendment relating to Series D
Common Stock of Eastcliff Funds, Inc.
(2) Registrant's By-Laws, as amended*
(3) None
(4) None
(5.1) Investment Advisory Agreement between
Eastcliff Total Return Fund (formerly
Fiduciary Total Return Fund) and Resource
Capital Advisers, Inc.*
(5.2) Investment Advisory Agreement between
Eastcliff Growth Fund and Resource Capital
Advisers, Inc.*
(5.3) Sub-Advisory Agreement among Eastcliff
Growth Fund, Resource Capital Advisers,
Inc. and Winslow Capital Management, Inc.*
(5.4) Sub-Advisory Agreement among Eastcliff
Total Return Fund, Resource Capital
Advisers, Inc. and Palm Beach Investment
Advisers, Inc.*
(5.5) Investment Advisory Agreement between
Eastcliff Regional Small Capitalization
Value Fund and Resource Capital Advisers,
Inc.*
(5.6) Sub-Advisory Agreement among Eastcliff
Regional Small Capitalization Value Fund,
Resource Capital Advisers, Inc. and
Woodland Partners LLC*
(5.7) Investment Advisory Agreement between
Eastcliff Contrarian Value Fund and
Resource Capital Advisers, Inc.
(5.8) Sub-Advisory Agreement among Eastcliff
Contrarian Value Fund, Resource Capital
Advisers, Inc. and Sasco Capital, Inc.
(6) None
(7) None
(8.1) Custodian Agreement between Eastcliff Total
Return Fund (formerly Fiduciary Total
Return Fund) and Firstar Trust Company*
(8.2) Custodian Agreement between Eastcliff
Growth Fund and Firstar Trust Company*
(8.3) Custodian Agreement between Eastcliff
Regional Small Capitalization Value Fund
and Firstar Trust Company*
(8.4) Custodian Agreement between Eastcliff
Contrarian Value Fund and Firstar Trust
Company.
(9.1) Administrative Agreement, including
addendum, between Eastcliff Total Return
Fund (formerly Fiduciary Total Return Fund)
and Fiduciary Management, Inc.*
(9.2) Administrative Agreement, including
addendum, between Eastcliff Growth Fund and
Fiduciary Management, Inc.*
(9.3) Administrative Agreement, including
addendum, between Eastcliff Regional Small
Capitalization Value Fund and Fiduciary
Management, Inc.*
(9.4) Administrative Agreement, including
addendum, between Eastcliff Contrarian
Value Fund and Fiduciary Management, Inc.
(10) Opinion of Foley & Lardner, Counsel for
Registrant*
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreement*
(14.1) Eastcliff Funds (formerly Fiduciary Funds)
Individual Retirement Account*
(14.2) Eastcliff Funds (formerly Fiduciary Funds)
Defined Contribution Retirement Plan*
(14.3) Eastcliff Funds (formerly Fiduciary Funds)
Simplified Employee Pension*
(14.4) Eastcliff Funds Savings Incentive Match
Program for Small Employers ("SIMPLE")
Individual Retirement Account*
(14.5) Eastcliff Funds Section 403(b)(7)
Retirement Plan*
(15.1) Amended and Restated Servicing and
Distribution Plan of Eastcliff Funds, Inc.*
(15.2) Servicing and Distribution Agreement*
(16) Schedule for Computation of Performance
Quotations*
(17) Financial Data Schedule
(18) None
_______________
* Incorporated by reference.
</TABLE>
Exhibit 1.1
RESTATED
ARTICLES OF INCORPORATION
OF
EASTCLIFF FUNDS, INC.
The following Restated Articles of Incorporation duly adopted
pursuant to the authority and provisions of Chapter 180 of the Wisconsin
Statutes supersede and take the place of the existing articles of
incorporation of Fiduciary Total Return Fund, Inc. and any amendments
thereto:
ARTICLE I
The name of the corporation (hereinafter called "Corporation")
is:
EASTCLIFF FUNDS, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purpose or purposes for which the Corporation is organized
are:
A. To engage in the business of a diversified open-end
management investment company.
B. To purchase or otherwise acquire, hold for investment or
otherwise, and to sell, exchange or otherwise dispose of the following
types of securities: common stocks, debt securities and preferred stocks
(including those convertible into common stock), warrants, United States
treasury bills and notes, certificates of deposit, commercial paper,
repurchase agreements and commercial paper master notes and other
investments.
C. To deposit its funds from time to time in such checking
account or accounts as may be reasonably required, and to deposit its
funds at interest in a bank, savings bank or trust company in good
standing organized under the laws of the United States of America or any
state thereof, or of the District of Columbia.
D. To conduct research and investigations with respect to
securities, organizations and business conditions in the United States and
elsewhere; to secure information and advice pertaining to the investment
and employment of the assets and funds of the Corporation and to pay
compensation to others for the furnishing of any or all of the foregoing.
E. Subject to any restrictions contained in the Investment
Company Act of 1940, the applicable state securities or "Blue Sky" laws,
or any rules or regulations issued pursuant to any of the foregoing, to
exercise in respect of all securities, property and assets owned by it,
all rights, powers and privileges which could be exercised by any natural
person owning the same securities, property or assets.
F. To acquire all or any part of the good will, property or
business of any firm, person, association or corporation heretofore or
hereafter engaged in any business similar to any business which this
Corporation has the power to conduct, and to hold, utilize, enjoy, and in
any manner dispose of the whole or part of the rights, property and
business so acquired and to assume in connection therewith any liabilities
of any such person, firm, association or corporation.
G. Without the vote or consent of the shareholders of the
Corporation, to purchase, acquire, hold, dispose of, transfer and reissue
or cancel shares of its own capital stock in any manner or to any extent
now or hereafter permitted by the laws of Wisconsin and by these Articles
of Incorporation.
H. To carry out all or any part of the aforesaid objects and
purposes and to conduct its business in all or any of its branches in any
or all states, territories, districts and possessions of the United States
of America and in foreign countries; to maintain offices and agencies in
any and all states, territories, districts and possessions of the United
States of America and in foreign countries.
The foregoing objects and purposes shall, except when otherwise
expressed, be in no way limited or restricted by reference to or inference
from the terms of any clause of this or any other Article of these
Articles of Incorporation, or any amendment thereto, and shall each be
regarded as independent and construed as powers as well as objects and
purposes.
The Corporation shall be authorized to exercise and enjoy all of
the powers, rights and privileges granted to, or conferred upon,
corporations of a similar character by the laws of the State of Wisconsin
now or hereafter enacted, and the enumeration of the foregoing shall not
be deemed to exclude any powers, rights or privileges so granted or
conferred.
ARTICLE IV
A. The aggregate number of shares which the Corporation shall
have authority to issue is Ten Billion (10,000,000,000) shares of Common
Stock, consisting of one class only designated as "Common Stock." The
Common Stock shall initially be divided into one (1) series designated as
Series A ("Eastcliff Total Return Fund" or such other name designated by
the Board of Directors). The Series A Common Stock of the Corporation
shall consist of Three Hundred Million (300,000,000) shares. The Board of
Directors may from time to time create one or more additional series of
shares of Common Stock and determine the number of shares and such series
and the designations, preferences, limitations and relative rights
thereof, and may amend these Articles of Incorporation to provide for such
additional series, without shareholder action, to the extent permitted by
the Wisconsin Business Corporation Law. The Board of Directors may also,
without shareholder action, amend these Articles of Incorporation to alter
or revoke any preferences, limitations or relative rights of a series
created by the Board of Directors provided shares of such series have not
been issued.
B. Shares of Series A Common Stock of the Corporation shall
have the following preferences, limitations and relative rights:
(1) Definition. For purposes of this Section B of Article IV,
the shares of Series A Common Stock and any subsequently created
series shall be defined individually and collectively as a "Series."
(2) Assets Belonging to a Series. All consideration that is
received by the Corporation for the issue or sale of shares of any
Series of the Corporation's Common Stock (a) shall not be commingled
with the consideration that is received by the Corporation for the
issue or sale of shares of any other Series of Common Stock; and
(b) together with all assets in which such consideration is invested
and reinvested, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
thereof, any such funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, and any general
assets of the Corporation not belonging to a particular Series of
Common Stock of the Corporation which the Board of Directors may, in
its sole discretion, allocate to a Series, shall irrevocably belong
to the Series of the Corporation's Common Stock with respect to which
such assets, payments or funds were received or allocated for all
purposes, subject only to the rights of creditors, and shall be so
handled upon the books of account of the Corporation. Such assets
and the income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and
any assets derived from any reinvestment of such proceeds in whatever
form, are herein referred to as "assets belonging to" such Series.
Shareholders of any Series of Common Stock of the Corporation shall
have no right, title or interest in or to the assets belonging to any
other Series of Common Stock. Any assets, income, earnings, profits
and proceeds thereof, funds or payments which are not readily
attributable to any particular Series of the Corporation's Common
Stock shall be allocable among any one or more of the Series of the
Corporation's Common Stock in such manner and on such basis as the
Board of Directors, in its sole discretion, shall deem fair and
equitable. The power to make such allocations may be delegated by
the Board of Directors from time to time to one or more of the
officers of the Corporation.
(3) Liabilities Belonging to a Series. The assets belonging to
any Series of the Corporation's Common Stock shall be charged with
the direct liabilities in respect of such Series and shall also be
charged with such Series' proportionate share of the general
liabilities of the Corporation as determined by comparing the assets
belonging to such Series with the aggregate assets of the
Corporation; provided that the Board of Directors may, in their
discretion, direct that any one or more general liabilities of the
Corporation be allocated to the respective Series of its Common Stock
on a different basis. The liabilities so charged to a Series of
Common Stock are herein referred to as "liabilities belonging to"
such Series. The power of the Board of Directors to make allocations
may be delegated by the Board of Directors from time to time to one
or more of the officers of the Corporation.
(4) Dividends and Distributions. Shares of a Series of the
Corporation's Common Stock shall be entitled to such dividends and
distributions, in stock or in cash or both, as may be declared from
time to time by the Board of Directors, acting in their sole
discretion, with respect to such Series; provided, however, that such
dividends and distributions shall be paid only out of the lawfully
available "assets belonging to" such Series as such phrase is defined
in this Article IV.
(5) Liquidation Dividends and Distributions. In the event of
the liquidation or dissolution of the Corporation, the shareholders
of a Series of the Corporation's Common Stock shall be entitled to
receive out of the assets of the Corporation available for
distribution to shareholders, but other than general assets not
belonging to any particular Series of Common Stock, the assets
belonging to such Series, and the assets so distributable to the
shareholders of any Series of the Corporation's Common Stock shall be
distributed among such shareholders in proportion to the number of
shares of such Series of the Corporation's Common Stock held by them
and recorded on the books of the Corporation. In the event that
there are any general assets not belonging to any particular Series
of the Corporation's Common Stock and available for distribution, the
shareholders of any Series of Common Stock shall be entitled to
receive a portion of such general assets determined by comparing the
assets belonging to such Series with the aggregate assets of the
Corporation; and the assets so distributable to the shareholders of
such Series shall be distributed among such shareholders in
proportion to the number of shares of such Series of the
Corporation's Common Stock held by them and recorded on the books of
the Corporation.
(6) Voting Rights. Shareholders of a Series of the
Corporation's Common Stock shall be entitled to one (1) vote for each
full share, and a fractional vote for each fractional share, of such
Series then sanding in his or her name on the books of the
Corporation. On any matter submitted to a vote of shareholders, all
shares of a Series of the Corporation's Common Stock then issued and
outstanding and entitled to vote shall be voted in the aggregate with
all other shares of the Corporation's Common Stock then issued and
outstanding and entitled to vote, irrespective of Series, and not as
a separate voting group, except (a) as otherwise required by the
Wisconsin Business Corporation Law, the Investment Company Act of
1940 or the regulations thereunder, or other applicable law; or
(b) when the matter to be acted upon affects only the interests of
shareholders of one or more Series of the Corporation's Common Stock
(in which case only shares of the affected Series shall be entitled
to vote thereon). At all elections of directors of the Corporation,
each shareholder shall be entitled to vote the shares owned of record
by such shareholder for as many persons as there are directors to be
elected, but shall not be entitled to exercise any right of
cumulative voting.
(7) Redemption of Shares. To the extent of the assets of the
Corporation legally available for such redemptions, a shareholder of
the Corporation shall have the right to require the Corporation to
redeem his full and fractional shares of any Series of Common Stock
out of the assets belonging to such Series at a redemption price
equal to the net asset value per share next determined after receipt
of a request to redeem in proper form as determined by the Board of
Directors, subject to the right of the Corporation to suspend the
right of redemption of shares or postpone the date of payment of such
redemption price in accordance with the provisions of applicable law.
The Board of Directors shall establish such rules and procedures as
they deem appropriate for the redemption of shares, provided that all
redemptions shall be in accordance with the Investment Company Act of
1940 and the Wisconsin Business Corporation Law. Without limiting
the foregoing, the Corporation shall, to the extent permitted by
applicable law, have the right at any time to redeem the shares of
any Series of Common Stock owned by any holder thereof: (a) in
connection with the termination of any Series of the Corporation's
Common Stock as provided hereunder; (b) if the value of such shares
in the account maintained by the Corporation or its transfer agent
for any Series is less than Five Hundred Dollars ($500) or such other
amount as the Board may establish provided that the Corporation shall
provide a shareholder with written notice at least sixty (60) days
prior to effecting such a redemption of shares as a result of not
satisfying such requirement; (c) to reimburse the Corporation for any
loss it has sustained by reason of the failure of such shareholder to
make full payment for shares of the Corporation's Common Stock
purchased by such shareholder; (d) to collect any charge relating to
a transaction effected for the benefit of such shareholder which is
applicable to shares of the Corporation's Common Stock as provided in
the prospectus relating to such shares; or (e) it if would otherwise
be appropriate to carry out the Corporation's responsibilities under
the Investment Company Act of 1940, in each case subject to such
further terms and conditions as the Board of Directors may from time
to time establish. The redemption price of shares of any Series of
the Corporation's Common Stock shall, except as otherwise provided in
this sub-section, be the net asset value thereof as determined by the
Board of Directors from time to time in accordance with the
provisions of applicable law, less such redemption fee or other
charge, if any, as may be fixed by the Board of Directors. Payment
of the redemption price, if any, shall be made in cash by the
Corporation at such time and in such manner as may be determined from
time to time by the Board of Directors unless, in the opinion of the
Board of Directors, which shall be conclusive, conditions exist which
make payment wholly in cash unwise or undesirable; in such event the
Corporation may make payment in the assets belonging or allocable to
the Series redemption of which is being sought, the value of which
shall be determined as provided herein. Any shares of a Series of
the Corporation's Common Stock that are redeemed by the Corporation
shall be deemed to be cancelled and returned to the status of
authorized but unissued shares of the particular Series involved and,
unless otherwise determined by the Board of Directors of the
Corporation, may be reissued from time to time in the same manner and
to the same extent as other authorized, unissued shares of the same
Series.
(8) Termination of Series. Without the vote of the shares of
any Series of the Corporation's Common Stock then outstanding (unless
otherwise required by applicable law), the Corporation may, if so
determined by the Board of Directors:
(a) Sell and convey the assets belonging to any Series of
Common Stock to another corporation or trust that is a
management investment company (as defined in the Investment
Company Act of 1940) and is organized under the laws of any
jurisdiction within the United States for consideration which
may include the assumption of all outstanding obligations, taxes
and other liabilities, accrued or contingent, belonging to such
Series and which may include securities issued by such
corporation or trust. Following such sale and conveyance, and
after making provision for the payment of any liabilities
belonging to such Series of Common Stock that are not assumed by
the purchaser of the assets belonging to such Series, the
Corporation may, at its option, redeem all outstanding shares of
such Series at the net asset value thereof as determined by the
Board of Directors in accordance with the provisions of
applicable law, less such redemption fee or other charge, if
any, as may be fixed by the Board of Directors. Notwithstanding
any other provision of these Articles of Incorporation to the
contrary, the redemption price may be paid in cash or by
distribution of the securities or other consideration received
by the Corporation for the assets belonging to such Series of
Common Stock upon such conditions as the Board of Directors
deem, in their sole discretion, to be appropriate consistent
with applicable law and these Articles of Incorporation;
(b) Sell and convert the assets belonging to a Series of
Common Stock into money and, after making provisions for the
payment of all obligations, taxes and other liabilities, accrued
or contingent, belonging to such Series, the Corporation may, at
its option (i) redeem all outstanding shares of such Series at
the net asset value thereof as determined by the Board of
Directors in accordance with the provisions of applicable law,
less such redemption fee or other charge, if any, as may be
fixed by the Board of Directors upon such conditions as the
Board of Directors deem, in their sole discretion, to be
appropriate consistent with applicable law and these Articles of
Incorporation; or (ii) combine the assets belonging to such
Series following such sale and conversion with the assets
belonging to any one or more other Series of Common Stock of the
Corporation pursuant to and in accordance with Section (B)(8)(c)
of this Article IV; or
(c) Combine the assets belonging to a Series of Common
Stock with the assets belonging to any one or more other Series
of Common Stock of the Corporation if the Board of Directors
reasonably determine that such combination will not have a
material adverse effect on the shareholders of any Series of
Common Stock of the Corporation participating in such
combination. In connection with any such combination of assets,
the shares of any Series of Common Stock then outstanding may,
if so determined by the Board of Directors, be converted into
shares of any other Series of Common Stock of the Corporation
with respect to which conversion is permitted by applicable law,
or may be redeemed, at the option of the Corporation, at the net
asset value thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less such
redemption fee or other charge, or conversion cost, if any, as
may be fixed by the Board of Directors upon such conditions as
the Board of Directors deem, in their sole discretion, to be
appropriate consistent with applicable law and these Articles of
Incorporation. Notwithstanding any other provisions of these
Articles of Incorporation to the contrary, any redemption price,
or part thereof, paid pursuant to this Section (B)(8)(c) may be
paid in shares of any other Series of Common Stock of the
Corporation participating in such combination.
(9) No Preemptive Rights. No holder of shares of any Series of
the Corporation's Common Stock shall, as such holder, have any
preemptive or other right to purchase, subscribe for or otherwise
acquire any shares of any Series of Common Stock of the Corporation,
or any securities of the Corporation convertible into such shares or
carrying a right to subscribe to or acquire such shares (whether such
shares or securities are now or hereinafter authorized or are
acquired by the Corporation after the issuance thereof), other than
such right, if any, as the Board of Directors, in their discretion,
may determine.
ARTICLE V
Any determination made in good faith, and so far as accounting
matters are involved in accordance with accepted accounting practices, by
or pursuant to the direction of the Board of Directors of the Corporation
as to the amount and value of assets, obligations or liabilities of the
Corporation of any Series of Common Stock, as to the amount of net income
of the Corporation or any Series of Common Stock from dividends and
interest for any period or amounts at any time legally available for the
payment of dividends, as to the amount of any reserves or charges set up
and the propriety thereof, as to the time of or purpose for creating
reserves or as to the use, alteration or cancellation of any reserves or
charges (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or
discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation or
any Series of Common Stock, as to the allocation of any assets or
liabilities to a Series of Common Stock, as to the times at which shares
of any Series of Common Stock shall be deemed to be outstanding or no
longer outstanding or as to any other matters relating to the issuance,
sale, redemption or other acquisition or disposition of securities or
shares of the Corporation, and any reasonable determination made in good
faith by the Board of Directors of the Corporation as to whether any
transaction constitutes a purchase of securities on "margin," a sale of
securities "short", or an underwriting of the sale of, or a participation
in any underwriting or selling group in connection with the public
distribution of, any securities, shall be final and conclusive, and shall
be binding upon the Corporation and all holders of its shares past,
present and future, and shares of the Corporation are issued and sold on
the condition and understanding, evidenced by the purchase of such shares
or acceptance of share certificates, that any and all such determination
shall be binding as aforesaid. No provision of these Articles of
Incorporation shall be effective to (i) require a waiver of compliance
with any provision of the Securities Act of 1933 or the Investment Company
Act of 1940, or of any valid rule, regulation or order of the Securities
and Exchange Commission thereunder; or (ii) protect or purport to protect
any director or officer of the Corporation against any liability to the
Corporation or its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
ARTICLE VI
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the shareholders:
A. The Board of Directors of the Corporation shall authorize
an initial issuance of shares of each Series of Common Stock for such
consideration as the Board of Directors shall determine. After such
initial issuance, the Board of Directors may authorize the issuance
form time to time of shares of Common Stock and the reissuance from
time to time of retired shares of Common Stock, whether now or
hereafter authorized, for such consideration as said Board of
Directors may deem advisable, provided that, except with respect to
shares issued as a share dividend or distribution, such consideration
shall be in the form of cash or its equivalent and shall not be less
than the net asset value of such shares.
B. The holders of any fractional shares of any Series of
Common Stock shall be entitled to the payment of dividends on such
fractional shares, to receive the net asset value thereof upon
redemption, to share in the assets of the Corporation upon
liquidation and to exercise voting rights with respect thereto as
provided herein.
C. The Board of Directors shall have full power in accordance
with good accounting practice: (a) to determine what receipts of the
Corporation shall constitute income available for payment of
dividends and what receipts shall constitute principal and to make
such allocation of any particular receipt between principal and
income as it may deem proper; and (b) from time to time, in its
discretion (i) to determine whether any and all expenses and other
outlays paid or incurred (including any and all taxes, assessments or
governmental charges which the Corporation may be required to pay or
hold under any present or future law of the United States of America
or of any other taxing authority therein) shall be charged to or paid
from principal or income or both, and (ii) to apportion any and all
of said expenses and outlays, including taxes, between principal and
income.
D. The Board of Directors shall have the power to determine
from time to time whether and to what extent and at what times and
places and under what conditions and regulations the books, accounts
and documents of the Corporation, or any of them, shall be open to
the inspection of the shareholders, except as otherwise provided by
statute or by law; and except as so provided, no shareholder shall
have any right to inspect any book, account or document of the
Corporation unless authorized to do so by resolution of the Board of
Directors.
E. Each director and each officer of the Corporation shall be
indemnified by the Corporation against all liabilities and expenses
reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding in which he may
be involved or with which he may be threatened by reason of his being
or having been such a director or officer to the full extent
permitted by the Wisconsin Business Corporation Law and the
Investment Company Act of 1940, as such statutes are now or hereafter
in force, and shall be entitled to the advance of related expenses.
F. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders of the purchase of
shares of any Series of Common Stock, and may, in addition, require
such orders to be in such minimal amounts as it shall determine.
G. Each holder of shares of the Corporation's Common Stock,
irrespective of the Series, may, upon request to the Corporation
accompanied by surrender of the appropriate stock certificate or
certificates, if any, in proper form for transfer and after complying
with any other conversion procedures established by the Board of
Directors, convert such shares into shares of any other Series of the
Corporation's Common Stock on the basis of their relative net asset
values (determined in accordance with the Bylaws of the Corporation)
less a conversion charge or discount determined by the Board of
Directors. Any fee so imposed shall be uniform as to all
stockholders.
H. In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Wisconsin the Board of
Directors of the Corporation is expressly authorized:
(1) To make, alter or repeal the By-Laws of the
Corporation, except where such power is reserved by the By-Laws
to the shareholders, and except as otherwise required by the
Investment Company Act of 1940, as now or hereafter in force.
(2) Without the assent or vote of the shareholders, to
authorize the issuance from time to time of shares of any Series
of Common Stock of the Corporation for such consideration as the
Board of Directors may deem advisable.
(3) Without the assent or vote of the shareholders, to
authorize and issue such obligations of the Corporation, secured
and unsecured, as the Board of Directors may determine, and to
authorize and cause to be executed mortgages and liens upon the
property of the Corporation, real or personal.
(4) Notwithstanding anything in these Articles of
Incorporation to the contrary, to establish in its absolute
discretion the basis or method for determining the value of the
assets belonging to any Series of Common Stock of the
Corporation, the value of the liabilities belonging to any
Series of Common Stock, the allocation of assets or liabilities
to any Series of Common Stock, the times at which shares of any
Series of Common Stock shall be deemed outstanding and the net
asset value of each share of each Series of Common Stock for
purposes of sales, redemptions and repurchases and for any other
purposes.
(5) To determine in accordance with accepted accounting
principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine
what accounting periods shall be used by the Corporation for any
purposes, whether annual or any other period, including daily;
to set apart out of any funds of the Corporation such reserves
for such purposes as it shall determine and to abolish the same;
to declare and pay any dividends and distributions in cash,
securities or other property from surplus or any funds legally
available therefor, at such intervals (which may be as
frequently as daily) or on such other periodic basis, as it
shall determine; to declare such dividends or distributions by
means of a formula or other method of determination, at meetings
held less frequently than the frequency of the effectiveness of
such declarations; to establish payment dates for dividends or
any other distributions on any basis, including dates occurring
less frequently than the effectiveness of declarations thereof;
and to provide for the payment of declared dividends on a date
earlier or later than the specified payment date in the case of
shareholders of the Corporation redeeming their entire ownership
of shares of any Series of the Corporation.
(6) In addition to the powers and authorities granted
herein and by statute expressly conferred upon it, the Board of
Directors is authorized to exercise all such powers and do all
such acts and things as may be exercised or done by the
Corporation, subject nevertheless, to the provisions of
Wisconsin law, these Articles of Incorporation and Bylaws of the
Corporation.
ARTICLE VII
The Corporation reserves the right to enter into, from time to
time, investment advisory and administration agreements providing for the
management and supervision of the investments of the Corporation, the
furnishing of advice to the Corporation with respect to the desirability
of investing in, purchasing or selling securities or other property and
the furnishing of clerical and administrative services to the Corporation.
Such agreements shall contain such other terms, provisions and conditions
as the Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate distributors, custodians, transfer
agents, registrars and/or dividend disbursing agents for the stock and
assets of the Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation for each such distributor, custodian,
transfer agent, registrar and/or dividend disbursing agent.
ARTICLE VIII
The number of directors shall be such number (not less than
three) as is fixed from time to time by the By-Laws.
ARTICLE IX
The address of the registered office of the Corporation is
225 East Mason Street, Milwaukee, Wisconsin 53202, which is in Milwaukee
County and the name of the initial registered agent of the Corporation at
such address is Donald S. Wilson.
CERTIFICATE
This is to certify that these Restated Articles of Incorporation
of EASTCLIFF FUNDS, INC. contain an amendment to the articles of
incorporation, adopted on December 12, 1994 by the Board of Directors and
shareholders of Fiduciary Total Return Fund, Inc. in accordance with
Section 180.1003 of the Wisconsin Statutes. Upon the effectiveness of the
foregoing Restated Articles of Incorporation, each then outstanding share
of Common Stock, $.01 par value, shall automatically be reclassified into
a share of Series A Common Stock.
Executed on behalf of the Corporation on December 20, 1994.
/s/ Ted D. Kellner
Ted D. Kellner, President
This instrument was drafted by Richard L. Teigen of Foley &
Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
<PAGE>
ARTICLES OF AMENDMENT
relating to
SERIES B COMMON STOCK
of
EASTCLIFF FUNDS, INC.
________________________________________
Pursuant to Sections 180.0602 and 180.1002
of the Wisconsin Business Corporation Law
________________________________________
I, CONLEY BROOKS, JR., President of EASTCLIFF FUNDS, INC., a
corporation organized and existing under the Wisconsin Business
Corporation Law (the "Corporation"), in accordance with the provisions of
Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT:
A. Pursuant to the authority conferred upon the Board of Directors
of the Corporation by its Restated Articles of Incorporation, and in
accordance with Sections 180.0602 and 180.002 of the Wisconsin Business
Corporation Law, said Board of Directors adopted resolutions on June 6,
1995, creating a new series of shares of Common Stock of the Corporation,
designated as "Series B Common Stock".
B. Said resolution of the Board of Directors of the Corporation
creating the series designated as "Series B Common Stock" provides that
said series shall have such designation and number of shares and such
preferences, limitations and relative rights as are set forth in the
paragraphs below:
Series B Common Stock
1. Designation and Amount. The Corporation is authorized
to issue a series of Common Stock, which is hereby designated as
"Series B Common Stock" ("Eastcliff Growth Fund" or such other
name designated by the Board of Directors). The Series B Common
Stock of the Corporation shall consist of Three Hundred
Million (300,000,000) shares.
2. Preferences, Limitations and Relative Rights. Shares
of Series B Common Stock shall have the preferences, limitations
and relative rights of a "Series" of Common Stock as set forth
in Article III.B. of the Corporation's Restated Articles of
Incorporation.
3. Other Terms. Shares of Series B Common Stock shall be
subject to the other terms, provisions and restrictions set
forth in the Restated Articles of Incorporation with respect to
the shares of a Series of Common Stock of the Corporation.
* * *
C. No shares of Series B Common Stock have been issued as of the
date hereof.
D. The amendment creating the Series B Common Stock was adopted by
the Board of Directors of the Corporation in accordance with
Section 180.1002 of the Wisconsin Business Corporation Law and shareowner
action was not required.
IN WITNESS WHEREOF, the undersigned has executed and subscribed these
Articles of Amendment on behalf of the Corporation and does affirm the
foregoing as true this 7th day of June, 1995.
By: /s/ Conley Brooks, Jr.
Conley Brooks, Jr.
President
_______________
This instrument was drafted by and should be returned to Todd B.
Pfister of the firm of Foley & Lardner, 777 South Flagler Drive,
Suite 200, West Palm Beach, Florida 33401.
<PAGE>
ARTICLES OF AMENDMENT
relating to
SERIES C COMMON STOCK
of
EASTCLIFF FUNDS, INC.
___________________________________
Pursuant to Sections 180.0602 and 180.1002
of the Wisconsin Business Corporation Law
___________________________________
I, Conley Brooks, Jr., President of Eastcliff Funds, Inc., a
corporation organized and existing under the Wisconsin Business
Corporation Law (the "Corporation"), in accordance with the provisions of
Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT:
A. Pursuant to the authority conferred upon the Board of Directors
of the Corporation by its Restated Articles of Incorporation, and in
accordance with Sections 180.0602 and 180.002 of the Wisconsin Business
Corporation Law, said Board of Directors adopted resolutions on June 14,
1996, creating a new series of shares of Common Stock of the Corporation,
designated as "Series C Common Stock".
B. Said resolution of the Board of Directors of the Corporation
creating the series designated as "Series C Common Stock" provides that
said series shall have such designation and number of shares and such
preferences, limitations and relative rights as are set forth in the
paragraphs below:
Series C Common Stock
1. Designation and Amount. The Corporation is authorized
to issue a series of Common Stock, which is hereby designated as
"Series C Common Stock" ("Eastcliff Regional Small
Capitalization Value Fund" or such other name designated by the
Board of Directors). The Series C Common Stock of the
Corporation shall consist of Three Hundred Million (300,000,000)
shares.
2. Preferences, Limitations and Relative Rights. Shares
of Series C Common Stock shall have the preferences, limitations
and relative rights of a "Series" of Common Stock as set forth
in Article IV.B. of the Corporation's Restated Articles of
Incorporation.
3. Other Terms. Shares of Series C Common Stock shall be
subject to the other terms, provisions and restrictions set
forth in the Restated Articles of Incorporation with respect to
the shares of a Series of Common Stock of the Corporation.
* * *
C. No shares of Series C Common Stock have been issued as of the
date hereof.
D. The amendment creating the Series C Common Stock was adopted by
the Board of Directors of the Corporation in accordance with Section
180.1002 of the Wisconsin Business Corporation Law and shareowner action
was not required.
IN WITNESS WHEREOF, the undersigned has executed and subscribed these
Articles of Amendment on behalf of the Corporation and does affirm the
foregoing as true this ___ day of ___________, 1996.
By: _________________________________
Conley Brooks, Jr.
President
___________________
This instrument was drafted by and should be returned to Todd B.
Pfister of the firm of Foley & Lardner, 777 South Flagler Drive, Suite
200, West Palm Beach, Florida 33401.
<PAGE>
ARTICLES OF AMENDMENT
relating to
SERIES D COMMON STOCK
of
EASTCLIFF FUNDS, INC.
___________________________________
Pursuant to Sections 180.0602 and 180.1002
of the Wisconsin Business Corporation Law
___________________________________
I, Conley Brooks, Jr., President of Eastcliff Funds, Inc., a
corporation organized and existing under the Wisconsin Business
Corporation Law (the "Corporation"), in accordance with the provisions of
Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT:
A. Pursuant to the authority conferred upon the Board of
Directors of the Corporation by its Restated Articles of Incorporation,
and in accordance with Sections 180.0602 and 180.1002 of the Wisconsin
Business Corporation Law, said Board of Directors adopted resolutions on
October 6, 1997, creating a new series of shares of Common Stock of the
Corporation, designated as "Series D Common Stock".
B. Said resolution of the Board of Directors of the
Corporation creating the series designated as "Series D Common Stock"
provides that said series shall have such designation and number of shares
and such preferences, limitations and relative rights as are set forth in
the paragraphs below:
Series D Common Stock
1. Designation and Amount. The Corporation is authorized
to issue a series of Common Stock, which is hereby designated as
"Series D Common Stock" ("Eastcliff Contrarian Value Fund" or
such other name designated by the Board of Directors). The
Series D Common Stock of the Corporation shall consist of Three
Hundred Million (300,000,000) shares.
2. Preferences, Limitations and Relative Rights. Shares
of Series D Common Stock shall have the preferences, limitations
and relative rights of a "Series" of Common Stock as set forth
in Article IV.B. of the Corporation's Restated Articles of
Incorporation.
3. Other Terms. Shares of Series D Common Stock shall be
subject to the other terms, provisions and restrictions set
forth in the Restated Articles of Incorporation with respect to
the shares of a Series of Common Stock of the Corporation.
* * *
C. No shares of Series D Common Stock have been issued as of
the date hereof.
D. The amendment creating the Series D Common Stock was
adopted by the Board of Directors of the Corporation in accordance with
Section 180.1002 of the Wisconsin Business Corporation Law and shareowner
action was not required.
IN WITNESS WHEREOF, the undersigned has executed and subscribed
these Articles of Amendment on behalf of the Corporation and does affirm
the foregoing as true this 6th day of October, 1997.
By: /s/ Conley Brooks, Jr.
Conley Brooks, Jr.
President
_________________________
This instrument was drafted by and should be returned to Richard L.
Teigen of the firm of Foley & Lardner, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202-5367.
Exhibit 1.2
ARTICLES OF AMENDMENT
relating to
SERIES D COMMON STOCK
of
EASTCLIFF FUNDS, INC.
___________________________________
Pursuant to Sections 180.0602 and 180.1002
of the Wisconsin Business Corporation Law
___________________________________
I, Conley Brooks, Jr., President of Eastcliff Funds, Inc., a
corporation organized and existing under the Wisconsin Business
Corporation Law (the "Corporation"), in accordance with the provisions of
Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT:
A. Pursuant to the authority conferred upon the Board of
Directors of the Corporation by its Restated Articles of Incorporation,
and in accordance with Sections 180.0602 and 180.1002 of the Wisconsin
Business Corporation Law, said Board of Directors adopted resolutions on
October 6, 1997, creating a new series of shares of Common Stock of the
Corporation, designated as "Series D Common Stock".
B. Said resolution of the Board of Directors of the
Corporation creating the series designated as "Series D Common Stock"
provides that said series shall have such designation and number of shares
and such preferences, limitations and relative rights as are set forth in
the paragraphs below:
Series D Common Stock
1. Designation and Amount. The Corporation is authorized
to issue a series of Common Stock, which is hereby designated as
"Series D Common Stock" ("Eastcliff Contrarian Value Fund" or
such other name designated by the Board of Directors). The
Series D Common Stock of the Corporation shall consist of Three
Hundred Million (300,000,000) shares.
2. Preferences, Limitations and Relative Rights. Shares
of Series D Common Stock shall have the preferences, limitations
and relative rights of a "Series" of Common Stock as set forth
in Article IV.B. of the Corporation's Restated Articles of
Incorporation.
3. Other Terms. Shares of Series D Common Stock shall be
subject to the other terms, provisions and restrictions set
forth in the Restated Articles of Incorporation with respect to
the shares of a Series of Common Stock of the Corporation.
* * *
C. No shares of Series D Common Stock have been issued as of
the date hereof.
D. The amendment creating the Series D Common Stock was
adopted by the Board of Directors of the Corporation in accordance with
Section 180.1002 of the Wisconsin Business Corporation Law and shareowner
action was not required.
IN WITNESS WHEREOF, the undersigned has executed and subscribed
these Articles of Amendment on behalf of the Corporation and does affirm
the foregoing as true this 6th day of October, 1997.
By: /s/ Conley Brooks, Jr.
Conley Brooks, Jr.
President
_________________________
This instrument was drafted by and should be returned to Richard L.
Teigen of the firm of Foley & Lardner, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202-5367.
Exhibit 5.7
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT ("Agreement"), made this 30th
day of December, 1997, between EASTCLIFF FUNDS, INC., a Wisconsin
corporation (the "Company"), and RESOURCE CAPITAL ADVISERS, INC., a
Minnesota corporation (the "Adviser").
W I T N E S S E T H :
WHEREAS, the Company is currently registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the
"Act") as an open-end management investment company consisting of three
series, the Eastcliff Total Return Fund, the Eastcliff Growth Fund and the
Eastcliff Regional Small Capitalization Value Fund;
WHEREAS, the Adviser provides investment advisory services to
the Eastcliff Total Return Fund, the Eastcliff Growth Fund and the
Eastcliff Regional Small Capitalization Value Fund;
WHEREAS, the Company is in the process of creating a third
series, the Eastcliff Contrarian Value Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940
and which is engaged principally in the business of rendering investment
supervisory services within the meaning of Section 202(a)(13) of the
Investment Advisors Act of 1940, as the investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund and to
administer its business and administrative operations, subject to the
direction of the Board of Directors of the Company (the "Board of
Directors") and the officers of the Company, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such
employment for the compensation herein provided and agrees during such
period to render the services and to assume the obligations herein set
forth.
2. Authority of the Adviser. The Adviser shall for all
purposes herein be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to
act for or represent the Company or the Fund in any way or otherwise be
deemed an agent of the Company or the Fund. However, one or more
shareholders, officers, directors or employees of the Adviser may serve as
directors and/or officers of the Company, but without compensation or
reimbursement of expenses for such services from the Company. Nothing
herein contained shall be deemed to require the Company to take any action
contrary to its Articles of Incorporation, as amended, restated or
supplemented, or any applicable statute or regulation, or to relieve or
deprive the Board of Directors of its responsibility for and control of
the affairs of the Fund.
3. Obligations of and Services to be Provided by the Adviser.
The Adviser undertakes to provide the services hereinafter set forth and
to assume the following obligations:
A. Management and Administrative Services.
(1) The Adviser shall furnish to the
Company adequate office space, which may be space
within the offices of the Adviser or in such other
place as may be agreed upon from time to time, and all
office furnishings, facilities and equipment as may be
reasonably required for performing services relating
to advisory, research, asset allocation, portfolio
manager selection and evaluation activities and
otherwise managing and administering the business and
operations of the Fund.
(2) The Adviser shall employ or provide and
compensate the executive, administrative, secretarial
and clerical personnel necessary to supervise the
provision of the services set forth in sub-paragraph
3(A)(1) and shall bear the expense of providing such
services, except as provided in Section 4 of this
Agreement. The Adviser shall also compensate all
officers and employees of the Company who are officers
or employees of the Adviser or its affiliated
companies.
B. Investment Management Services.
(1) The Adviser shall, subject to and in
accordance with the investment objective and policies
of the Fund and any directions which the Board of
Directors may issue to the Adviser, have overall
responsibility for the general management and
investment of the assets and securities portfolios of
the Fund.
(2) The Adviser may delegate its investment
responsibilities under sub-paragraph 3(B)(1) with
respect to the Fund or segments thereof to one or more
persons or companies ("Portfolio Manager[s]") pursuant
to an agreement between the Adviser, the Company and
each such Portfolio Manager ("Sub-Advisory
Agreement"). Each Sub-Advisory Agreement may provide
that the Portfolio Manager, subject to the control and
supervision of the Board of Directors and the Adviser,
shall have full investment discretion for the Fund and
shall make all determinations with respect to the
investment of the Fund's assets assigned to the
Portfolio Manager and the purchase and sale of
portfolio securities with those assets, and such steps
as may be necessary to implement its decision. Any
delegation of duties pursuant to this paragraph shall
comply with any applicable provisions of Section 15 of
the Act, except to the extent permitted by any
exemptive order of the Securities and Exchange
Commission or similar relief. Adviser shall not be
responsible or liable for the investment merits of any
decision by a Portfolio Manager to purchase, hold or
sell a security for the Fund's portfolio.
(3) The Adviser shall develop overall
investment programs and strategies for the Fund, or
segments thereof, shall revise such programs as
necessary, and shall monitor and report periodically
to the Board of Directors concerning the
implementation of the programs.
(4) The Adviser shall research and evaluate
Portfolio Managers and shall advise the Board of
Directors of the Company of the Portfolio Managers
which the Adviser believes are best-suited to invest
the assets of the Fund; shall monitor and evaluate the
investment performance of each Portfolio Manager;
shall determine the portion of the Fund's assets to be
managed by each Portfolio Manager; shall recommend
changes or additions of Portfolio Managers when
appropriate; and shall coordinate the investment
activities of the Portfolio Managers.
(5) The Adviser shall be solely responsible
for paying the fees of each Portfolio Manager.
(6) The Adviser shall render to the Board
of Directors such periodic reports concerning the
business and investments of the Fund as the Board of
Directors shall reasonably request.
C. Provision of Information Necessary for
Preparation of Securities Registration Statements, Amendments
and Other Materials.
The Adviser will make available and provide financial,
accounting and statistical information required by the Fund for
the preparation of registration statements, reports and other
documents required by federal and state securities laws, and
with such information as the Fund may reasonably request for use
in the preparation of such documents or of other materials
necessary or helpful for the underwriting and distribution of
the Fund's shares.
D. Provision of Personnel.
The Adviser shall make available its officers and
employees to the Board of Directors and officers of the Company
for consultation and discussions regarding the administration
and management of the Company and its investment activities.
4. Expenses. The Adviser shall not be required to pay any
expenses of the Fund except as provided herein; provided, however, that if
the aggregate annual operating expenses, including the Adviser's fee and
the fees paid to the Fund's Administrator but excluding all federal, state
and local taxes, interest, brokerage commissions and other costs incurred
in connection with the purchase or sale of portfolio securities and
extraordinary items, in any year exceed that percentage of the average net
assets of the Fund for such year, as determined by valuations made as of
the close of each business day of the year, which is the most restrictive
percentage provided by the state laws of the various states in which the
Fund's shares are qualified for sale or, if the states in which the Fund's
shares are qualified for sale impose no such restrictions, 2%, then the
Adviser's fee shall be reduced as hereinafter provided. Notwithstanding
the foregoing, if the laws of any such state require that fees paid
pursuant to the Company's Distribution Plan be included in the calculation
of the expense limitation percentage, the Fund shall (a) not qualify its
shares for sale in such state, (b) withdraw or rescind its qualification
for sale in such state, or (c) take such other actions which result in
payments made pursuant to the Distribution Plan not being included in the
calculation of the expense limitation percentage. The expenses of the
Fund's operations borne by the Fund include by way of illustration and not
limitation, directors fees paid to those directors who are not officers of
the Company, the costs of preparing and printing registration statements
required under the Securities Act of 1933 and the Act (and amendments
thereto), the expense of registering its shares with the Securities and
Exchange Commission and in the various states, the printing and
distribution cost of prospectuses mailed to existing shareholders, the
cost of stock certificates (if any), director and officer liability
insurance, reports to shareholders, reports to government authorities and
proxy statements, interest charges, taxes, legal expenses, salaries of
administrative and clerical personnel, association membership dues,
auditing and accounting services, insurance premiums, brokerage and other
expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser in the amount of such excess. In such
a situation the monthly payment of the Adviser's fee will be reduced by
the amount of such excess, subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses thereafter fall
below the expense limitation.
5. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Company, through and on behalf of
the Fund, shall pay to the Adviser an advisory fee, paid monthly, based on
the average net asset value of the Fund, as determined by valuations made
as of the close of each business day of the month. The advisory fee shall
be 1/12 of 1.0% of the average daily net asset value of the Fund. For any
month in which this Agreement is not in effect for the entire month, such
fee shall be reduced proportionately on the basis of the number of
calendar days during which it is in effect and the fee computed upon the
average net asset value of the business days during which it is so in
effect.
6. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the Fund, and shall not permit any of its
shareholders, officers, directors or employees to take a long or short
position in the shares of the Fund, except for the purchase of shares of
the Fund for investment purposes at the same price as that available to
the public at the time of purchase or in connection with the initial
capitalization of the Fund.
7. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has agreed to permit the
Company to use the name "Eastcliff", if it so desires, it is understood
and agreed that the Adviser reserves the right to use and to permit other
persons, firms or corporations, including investment companies, to use
such name. During the period that this Agreement is in effect, and except
as herein provided, the Adviser shall be the Fund's sole investment
adviser.
8. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Brokerage Commissions. The Adviser, subject to the control
and direction of the Board of Directors, and any Portfolio Managers,
subject to the control and direction of the Board of Directors and the
Adviser, shall have authority and discretion to select brokers and dealers
to execute portfolio transactions for the Fund and for the selection of
the markets on or in which the transactions will be executed. The Adviser
or the Portfolio Managers may cause the Fund to pay a broker-dealer which
provides brokerage and research services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934 (the "Exchange Act"),
to the Adviser or the Portfolio Managers a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser or the
Portfolio Manager determines in good faith that such amount of commission
is reasonable in relation to the value of brokerage and research services
provided by the executing broker-dealer viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act). The Adviser shall provide such
reports as the Board of Directors may reasonably request with respect to
each Fund's total brokerage and the manner in which that brokerage was
allocated.
10. Code of Ethics. The Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the Act and has
provided the Company with a copy of the code of ethics and evidence of its
adoption. Upon the written request of the Company, the Adviser shall
permit the Company to examine the reports required to be made by the
Adviser pursuant to Rule 17j-1(c)(1).
11. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the Board of Directors in the manner
required by the Act, and by the vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the Board of Directors or by a vote
of the majority of the outstanding voting securities of the Fund, as
defined in the Act, upon giving sixty (60) days' written notice to the
Adviser. This Agreement may be terminated by the Adviser at any time upon
the giving of sixty (60) days' written notice to the Company. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for an
initial period beginning as of the date hereof and ending December 29,
1999 and indefinitely thereafter, but only so long as the continuance
after such initial period is specifically approved annually by (i) the
Board of Directors or by the vote of the majority of the outstanding
voting securities of the Company, as defined in the Act, and (ii) the
Board of Directors in the manner required by the Act, provided that any
such approval may be made effective not more than sixty (60) days
thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
RESOURCE CAPITAL ADVISERS, INC.
(the "Adviser")
By: _________________________________
John A. Clymer, President
EASTCLIFF FUNDS, INC.
(the "Company")
By: _________________________________
Conley Brooks, Jr., President
Exhibit 5.8
SUB-ADVISORY AGREEMENT
EASTCLIFF CONTRARIAN VALUE FUND
THIS SUB-ADVISORY AGREEMENT, made this 30th day of December,
1997, by and among EASTCLIFF FUNDS, INC., a Wisconsin corporation (the
"Company"), RESOURCE CAPITAL ADVISERS, INC., a Minnesota corporation (the
"Adviser"), and SASCO CAPITAL, INC., a Connecticut corporation (the
"Portfolio Manager").
W I T N E S S E T H :
The Company is a diversified open-end management investment
company registered as an investment company under the Investment Company
Act of 1940 (the "Act"), and subject to the rules and regulations
promulgated thereunder. The Company's authorized shares of Common Stock
are presently divided into four series designated as Series A, Series B,
Series C and Series D, respectively, each of which constitutes a separate
investment portfolio or fund with different investment objectives and
policies. Each share of a fund represents an undivided interest in the
assets, subject to the liabilities, allocated to that portfolio. The
Series D Common Stock comprises the Eastcliff Contrarian Value Fund (the
"Fund").
The Adviser acts as the "investment adviser" to the Fund (as
defined in Section 2(a)(20) of the Act) pursuant to the terms of an
Investment Advisory Agreement. The Adviser is responsible for the day-to-
day management and overall administration of the Fund and the coordination
of investment of the Fund's assets in portfolio securities. However,
specific portfolio purchases and sales for the Fund's investment
portfolio, or a portion thereof, are to be made by advisory organizations
recommended and selected by the Adviser, subject to the approval of the
Board of Directors of the Company.
WHEREAS, the Adviser and the Company desire to retain the
Portfolio Manager as the investment adviser and portfolio manager for the
Fund.
NOW, THEREFORE, the Company, the Adviser and the Portfolio
Manager do mutually promise and agree as follows:
1. Employment. The Adviser being duly authorized hereby
appoints and employs the Portfolio Manager as a discretionary portfolio
manager to the Fund for those assets of the Fund which the Adviser
determines to assign to the Portfolio Manager (those assets being referred
to as the "Fund Account"), for the period and on the terms set forth in
this Agreement. The Portfolio Manager hereby accepts the appointment as a
discretionary portfolio manager and agrees to use its best professional
judgment to make timely investment decisions for the Fund with respect to
the investments of the Fund Account in accordance with the provisions of
this Agreement.
2. Authority of the Portfolio Manager. The Portfolio Manager
shall for all purposes herein be deemed to be an independent contractor
and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Company or the Fund in any way or
otherwise be deemed an agent of the Company or the Fund.
3. Portfolio Management Services of Portfolio Manager.
Portfolio Manager is hereby employed and authorized to select portfolio
securities for investment by the Fund, to purchase and sell securities of
the Fund Account, and upon making any purchase or sale decision, to place
orders for the execution of such portfolio transactions in accordance with
paragraphs 5 and 6 hereof and such operational procedures as may be agreed
to from time to time by the Portfolio Manager and the Company or the
Adviser (the "Operational Procedures"). In providing portfolio management
services to the Fund Account, Portfolio Manager shall be subject to such
investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws,
the supervision and control of the Board of Directors of the Company, such
specific instructions as the Board of Directors may adopt and communicate
to Portfolio Manager, the investment objectives, policies and restrictions
of the Fund furnished pursuant to paragraph 4, the provisions of Schedule
A hereto and instructions from the Adviser. Portfolio Manger is not
authorized by the Company to take any action, including the purchase or
sale of securities for the Fund Account, in contravention of any
restriction, limitation, objective, policy or instruction described in the
previous sentence. Portfolio Manager shall maintain on behalf of the Fund
the records listed in Schedule A hereto (as amended from time to time).
At the Company's or the Adviser's reasonable request, Portfolio Manager
will consult with Company or with the Adviser with respect to any decision
made by it with respect to the investments of the Fund Account.
4. Investment Objectives, Policies and Restrictions. The
Company will provide Portfolio Manager with a statement of the investment
objectives, policies and restrictions applicable to the Fund and any
specific investment restrictions applicable to the Fund as established by
the Company, including those set forth in its registration statement under
the Act and the Securities Act of 1933. Company retains the right, on
written notice to Portfolio Manager from Company or Adviser, to modify any
such objectives, policies or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be
consummated by payment to or delivery by Firstar Trust Company (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or
securities due to or from the Fund Account, and Portfolio Manager shall
not have possession or custody thereof or any responsibility or liability
with respect thereto. Portfolio Manager shall advise Custodian and
confirm in writing to Company and to the Fund's administrator, Fiduciary
Management, Inc., or any other designated agent of Company, all
transactions for the Fund Account executed by it with brokers and dealers
at the time and in the manner as set forth in the Operational Procedures.
Portfolio Manager shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated
by Portfolio Manager. Company shall be responsible for all custodial
arrangements and the payment of all custodial charges and fees, and, upon
giving proper instructions to the Custodian, Portfolio Manager shall have
no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian, except that it
shall be the responsibility of the Adviser to take appropriate action if
the Custodian fails to confirm in writing proper execution of the
instructions.
6. Proxies. The Portfolio Manager will vote all proxies
solicited by or with respect to the issuers of securities in which assets
of the Fund Account may be invested from time to time.
7. Compensation of the Portfolio Manager. The compensation of
Portfolio Manager for its services under this Agreement shall be
calculated and paid by Adviser in accordance with the attached Schedule B.
Pursuant to the provisions of the Management and Advisory Agreement
between Company and Adviser, Adviser is solely responsible for the payment
of fees to Portfolio Manager, and Portfolio Manager agrees to seek payment
of its fees solely from Adviser.
8. Other Investment Activities of Portfolio Manager. Company
acknowledges that Portfolio Manager or one or more of its affiliates may
have investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that Portfolio Manager, its affiliates or any of its or their directors,
officers, agents or employees may buy, sell or trade in any securities for
its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of paragraph 3 hereof, Company agrees that Portfolio Manager or
its affiliates may give advice or exercise investment responsibility and
take such other action with respect to other Affiliated Accounts which may
differ from the advice given or the timing or nature of action taken with
respect to the Fund Account, provided that Portfolio Manager acts in good
faith, and provided further, that it is Portfolio Manager's policy to
allocate, within its reasonable discretion, investment opportunities to
the Fund Account over a period of time on a fair and equitable basis
relative to the Affiliated Accounts, taking into account the investment
objectives and policies of the Fund and any specific investment
restrictions applicable thereto. Company acknowledges that one or more of
the Affiliated Accounts may at any time hold, acquire, increase, decrease,
dispose of or otherwise deal with positions in investments in which the
Fund Account may have an interest from time to time, whether in
transactions which involve the Fund Account or otherwise. Portfolio
Manager shall have no obligation to acquire for the Fund Account a
position in any investment which any Affiliated Account may acquire, and
Company shall have no first refusal, co-investment or other rights in
respect of any such investment, either for the Fund Account or otherwise.
9. Certificate of Authority. Company, Adviser and Portfolio
Manager shall furnish to each other from time to time certified copies of
the resolutions of their Boards of Directors or executive committees, as
the case may be, evidencing the authority of officers and employees who
are authorized to act on behalf of Company, the Fund Account, the
Portfolio Manager and/or Adviser.
10. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Portfolio Manager, Portfolio Manager shall not be
liable for any act or omission in the course of, or connected with,
rendering services hereunder, or for any losses that may be sustained in
the purchase, holding or sale of any security.
11. Brokerage Commissions. The Adviser, subject to the control
and direction of the Board of Directors of the Company, and the Portfolio
Manager, subject to the control and direction of the Board of Directors of
the Company and the Adviser, shall have authority and discretion to select
brokers and dealers to execute portfolio transactions initiated by the
Portfolio Manager for the Fund and for the selection of the markets on or
in which the transactions will be executed. The Adviser or the Portfolio
Manager may cause the Fund to pay a broker-dealer which provides brokerage
and research services, as such services are defined in Section 28(e) of
the Securities Exchange Act of 1934 (the "Exchange Act"), to the Adviser
or the Portfolio Manager a commission for effecting a securities
transaction in excess of the amount another broker-dealer would have
charged for effecting such transaction, if the Adviser or the Portfolio
Manager determines in good faith that such amount of commission is
reasonable in relation to the value of brokerage and research services
provided by the executing broker-dealer viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act). The Portfolio Manager shall
provide such reports as the Board of Directors of the Company or the
Adviser may reasonably request with respect to the Fund's total brokerage
and the manner in which that brokerage was allocated.
12. Confidentiality. Subject to the duty of Portfolio Manager
and Company to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all information pertaining to the Fund Account
and the actions of Portfolio Manager and Company in respect thereto.
13. Representations, Warranties and Agreements of Company.
Company represents, warrants and agrees that:
A. Portfolio Manager has been duly appointed by the
Board of Directors of Company to provide investment services to
the Fund Account as contemplated hereby.
B. Company will deliver to Portfolio Manager a true
and complete copy of its then current prospectus and statement
of additional information as effective from time to time and
such other documents or instruments governing the investment of
the Fund Account and such other information as is necessary for
Portfolio Manager to carry out its obligations under this
Agreement.
14. Representations, Warranties and Agreements of Portfolio
Manager. Portfolio Manager represents, warrants and agrees that:
A. Portfolio Manager is registered as an "investment
adviser" under the Investment Advisers Act of 1940 ("Advisers
Act"); or is a "bank" as defined in Section 202(a)(2) of the
Advisers Act or an "insurance company" as defined in Section
202(a)(2) of the Advisers Act.
B. Portfolio Manager will maintain, keep current and
preserve on behalf of Company, in the manner required or
permitted by the Act, the records identified in Schedule A.
Portfolio Manager agrees that such records (unless otherwise
indicated on Schedule A) are the property of Company, and will
be surrendered to the Company promptly upon request.
C. Portfolio Manager will complete such reports
concerning purchases or sales of securities on behalf of the
Fund Account as the Adviser or Company may from time to time
require to ensure compliance with the Act, the Internal Revenue
Code and applicable state securities laws.
D. Portfolio Manager will adopt a written code of
ethics complying with the requirements of Rule 17j-1 under the
act and will provide Company with a copy of the code of ethics
and evidence of its adoption. Upon the written request of
Company, Portfolio Manager shall permit Company, its employees
or its agents to examine the reports required to be made to
Portfolio Manager by Rule 17j-1(c)(1).
E. Portfolio Manager will promptly after filing with
the Securities and Exchange Commission an amendment to its Form
ADV furnish a copy of such amendment to each Company and the
Adviser.
F. Portfolio Manager will immediately notify Company
and the Adviser of the occurrence of any event which would
disqualify Portfolio Manager from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the
Act or otherwise.
15. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the Board of Directors in the manner
required by the Act.
16. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by any party hereto immediately upon
written notice to the others in the event of a breach of any provision
hereof by the party so notified, or otherwise, upon giving thirty (30)
days' written notice to the others, but any such termination shall not
affect the status, obligations or liabilities of any party hereto to the
others. This Agreement shall terminate automatically in the event of its
assignment (as defined in Section 2(a)(4) of the Act). Subject to prior
termination as hereinbefore provided, this Agreement shall continue in
effect for an initial period beginning as of the date hereof and ending
December 29, 1999 and indefinitely thereafter, but only so long as the
continuance after such initial period is specifically approved annually by
the Board of Directors of the Company in the manner required by the Act.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
EASTCLIFF FUNDS, INC.
(the "Company")
By: _________________________________
Conley Brooks, Jr., President
RESOURCE CAPITAL ADVISERS, INC.
(the "Adviser")
By: _________________________________
John A. Clymer, President
SASCO CAPITAL, INC.
(the "Portfolio Manager")
By: _________________________________
Hoda Bibi, President
<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (1940 Act Rule 31a-1(b)(5) and (6)). A record of each brokerage
order, and all other portfolio purchases and sales, given by the
Portfolio Manager on behalf of the Fund for, or in connection with,
the purchase or sale of securities, whether executed or unexecuted.
Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications
or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the
Fund.
2. (1940 Act Rule 31a-1(b)(9)). A record for each fiscal quarter,
completed within ten (10) days after the end of the quarter, showing
specifically the basis or bases upon which the allocation of orders
for the purchase and sale of portfolio securities to named brokers or
dealers was effected, and the division of brokerage commissions or
other compensation on such purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers
to:
(a) The Fund,
(b) The Adviser,
(c) The Portfolio Manager, and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the determination
of such allocation and such division of brokerage commissions or
other compensation.
3. (1940 Act Rule 31a-1(b)(10)). A record in the form of an appropriate
memorandum identifying the person or persons, committees or groups
authorizing the purchase or sale of portfolio securities. Where an
authorization is made by a committee or group, a record shall be kept
of the names of its members who participate in the authorization.
There shall be retained as part of this record: any memorandum,
recommendation or instruction supporting or authorizing the purchase
or sale of portfolio securities and such other information as is
appropriate to support the authorization. 1
___________
1 Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from
brokerage firms (including their recommendation; i.e., buy, sell,
hold) or any internal reports or portfolio adviser reviews).
4. (1940 Act Rule 31a-1(f)). Such accounts, books and other documents
as are required to be maintained by registered investment advisers by
rule adopted under Section 204 of the Investment Advisers Act of
1940, to the extent such records are necessary or appropriate to
record the Portfolio Manager's transactions with respect to the Fund
Account.
<PAGE>
SCHEDULE B
FEE SCHEDULE
For its services to the Fund, the Adviser shall pay the
Portfolio Manager a fee, paid monthly, based on the average net asset
value of the Fund, as determined by valuations made as of the close of
each business day of the month. The fee shall be 1/12 of 0.6% of the
average daily net asset value of the Fund.
The fee shall be pro-rated for any month during which the
Agreement is in effect for only a portion of the month.
Exhibit 8.4
CUSTODIAN AGREEMENT
THIS AGREEMENT made on December 30, 1997, between EASTCLIFF
CONTRARIAN VALUE FUND, a Wisconsin corporation (hereinafter called the
"Fund"), and FIRSTAR TRUST COMPANY, a corporation organized under the
laws of the State of Wisconsin (hereinafter called "Custodian").
W I T N E S S E T H :
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two of the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of Eastcliff
Contrarian Value Fund.
2. Names, Titles and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund. Custodian shall
make payments of cash to, or for the account of, the Fund from such cash
only:
(a) for the purchase of securities for the portfolio of
the Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon
proper instructions from the Eastcliff Small Capitalization
Value Fund;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses (including,
without limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by
the Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c)
or (d) of this Subsection A, and also, in respect of item (e), upon
receipt of an officers' certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made; provided, however, that an
officers' certificate need not precede the disbursement of cash for the
purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the
Fund upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether pursuant
to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f) and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g) or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in
writing, such compensation shall be as set forth in Exhibit A attached
hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Fund for such items.
In the event of any advance of cash for any purpose made by
Custodian resulting from orders or instructions of the Fund, or in the
event that Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefore.
Custodian agrees to indemnify and hold harmless Fund from all
charges, expenses, assessments, and claims/liabilities (including counsel
fees) incurred or assessed against it in connection with the performance
of this agreement, except such as may arise from the Fund's own negligent
action, negligent failure to act, or willful misconduct.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at 900 Second Avenue South, 300 International Centre, Minneapolis,
Minnesota 55402, as the case may be. Upon any termination of this
Agreement, pending appointment of a successor to Custodian or a vote of
the shareholders of the Fund to dissolve or to function without a
custodian of its cash, securities and other property, Custodian shall not
deliver cash, securities or other property of the Fund to the Fund, but
may deliver them to a bank or trust company of its own selection, having
an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement; provided, however, that Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by
the Fund of all liabilities constituting a charge on or against the
properties then held by Custodian or on or against Custodian, and until
full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository; provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRSTAR TRUST COMPANY
_________________________________ By _________________________________
ASSISTANT SECRETARY VICE PRESIDENT
Attest: EASTCLIFF CONTRARIAN VALUE FUND
_________________________________ By _________________________________
Exhibit 9.4
ADMINISTRATIVE AGREEMENT
Agreement (the "Agreement") made this 30th day of December,
1997, between Eastcliff Funds, Inc. (the "Company"), and Fiduciary
Management, Inc., a Wisconsin corporation (the "Administrator").
W I T N E S S E T H:
WHEREAS, the Company is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (the "Act")
as an open-end management investment company consisting of multiple series
or funds; and
WHEREAS, the Company desires to retain the Administrator to
perform the following management-related services for the Eastcliff
Contrarian Value Fund (the "Fund") and the Administrator desires to
perform such services for the Fund.
NOW, THEREFORE, the Company and the Administrator do mutually
promise and agree as follows:
1. Employment. The Company employs the Administrator to be
the Administrator for the Fund for the period and on the terms set forth
in this Agreement. The Administrator hereby accepts such employment for
the compensation herein provided and agrees during such period to render
the services and to assume the obligations herein set forth.
2. Authority and Duties of the Administrator. The
Administrator shall perform the following management-related services for
the Fund:
(a) Prepare and maintain the books, accounts and other
documents specified in Rule 31a-1, under the Act in
accordance with the requirements of Rule 31a-1 and Rule
31a-2 under the Act;
(b) Calculate the Fund's net asset value in accordance with the
provisions of the Company's Restated Articles of
Incorporation, as amended, and its Registration Statement;
(c) Prepare the financial statements contained in reports to
stockholders of the Fund;
(d) Prepare reports to and filings with the Securities and
Exchange Commission (other than the Company's Registration
Statement on Form N-1A);
(e) Furnish statistical and research data, clerical, accounting
and bookkeeping services and stationery and office
supplies; and
(f) Prepare and file with the appropriate state securities
authorities required compliance filings and monitor and
maintain such state registrations; and
(g) Keep and maintain the Fund's financial accounts and
records, and generally assist in all aspects of the Fund's
operations to the extent agreed to by the Administrator and
the Company.
The Administrator shall not act, and shall not be required to
act, as an investment adviser to the Fund and shall not have any authority
to supervise the investment or reinvestment of the cash, securities or
other property comprising the Fund's assets or to determine what
securities or other property may be purchased or sold by the Fund. The
Administrator shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized,
have no authority to act for or represent the Company or the Fund in any
way or otherwise be deemed an agent of the Company or the Fund.
3. Expenses. Except as indicated below the Administrator, at
its own expense and without reimbursement from the Fund, shall furnish
office space, and all necessary office facilities, equipment and executive
personnel for performing the services required to be performed by it under
this Agreement. The Administrator shall not be required to pay any
expenses of the Fund. The expenses of the Fund's operations borne by the
Fund include by way of illustration and not limitation, directors fees
paid to those directors who are not interested persons of the Company, as
defined in the Act, the professional costs of preparing and the costs of
printing its registration statements required under the Securities Act of
1933 and the Act (and amendments thereto), the expense of registering its
shares with the Securities and Exchange Commission and in the various
states, the printing and distribution cost of prospectuses mailed to
existing shareholders, the cost of stock certificates, director and
officer liability insurance, the printing and distribution costs of
reports to stockholders, reports to government authorities and proxy
statements, interest charges, taxes, legal expenses, association
membership dues, auditing services, insurance premiums, brokerage and
other expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
printing and mailing expenses and charges and expenses of dividend
disbursing agents, registrars and stock transfer agents. The Fund shall
reimburse the Administrator for its proportionate share of the Price
Waterhouse Blue 2 annual maintenance and support charge.
4. Compensation of the Administrator. For the services to be
rendered by the Administrator hereunder, the Fund shall pay to the
Administrator an administration fee, paid monthly, based on the average
net assets of the Fund, as determined by valuations made as of the close
of each business day of the month. The administration fee shall be 1/12
of 0.2% of such net assets up to and including $25,000,000, 1/12 of 0.1%
of the next $20,000,000 of daily net assets and 1/12 of 0.05% of the daily
net assets in excess of $45,000,000; provided, however, that the minimum
fee payable by the Fund shall be $20,000 annually. For any month in which
this Agreement is not in effect for the entire month, such fee shall be
reduced proportionately on the basis of the number of calendar days during
which it is in effect and the fee computed upon the net assets of the
business days during which it is so in effect. For any fiscal year, in
which this Agreement is not in effect for the entire year, the minimum fee
shall be reduced proportionately on the basis of the number of calendar
days during which it is in effect.
In addition to the above fees the Fund shall pay to the
Administrator annually a fee of $100 for each state in which shares of the
Fund are qualified for sale, a fee of $80 for each state in which the Fund
is registered as an issuer-dealer and a fee of $50 for each agent
registration maintained on behalf of the Fund, none of which fees shall be
reduced if registrations are maintained for less than an entire fiscal
year.
5. Exclusivity. The services of the Administrator to the Fund
hereunder are not to be deemed exclusive and the Administrator shall be
free to furnish similar services to others as long as the services
hereunder are not impaired thereby. During the period that this Agreement
is in effect, the Administrator shall be the Fund's sole administrator.
6. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Administrator, the Administrator shall not be
subject to liability to the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
7. Amendments and Termination. This Agreement may be amended
by the mutual consent of the parties. This Agreement may be terminated at
any time, without the payment of any penalty, by the board of directors of
the Company upon the giving of ninety (90) days' written notice to the
Administrator. This Agreement may be terminated by the Administrator at
any time upon the giving of ninety (90) days' written notice to the
Company. Upon termination of the Agreement the Administrator shall
deliver to the Company all books, accounts and other documents then
maintained by it pursuant to Section 2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FIDUCIARY MANAGEMENT, INC.
(the "Administrator")
By:_____________________________
President
EASTCLIFF FUNDS, INC.
(the "Company")
By:_____________________________
President
<PAGE>
December 30, 1997
Fiduciary Management, Inc.
225 East Mason Street
Milwaukee, Wisconsin 53202
Gentlemen:
Pursuant to Section 2(g) of the Administrative Agreement dated
December 30, 1997 you are hereby authorized to perform the following
ministerial services in connection with the Eastcliff Contrarian Value
Fund (the "Fund") investments in commercial paper master notes and
repurchase agreements purchased through Firstar Trust Co. Prior to 10:30
a.m. on each day the New York Stock Exchange is open for trading you will
review the activity account statement for the Fund for the previous
business day provided to you by Firstar Trust Co. and a list of the
securities transactions to be settled by the Fund on such date. Such list
of securities transactions will be compiled by you from information
supplied to you by the Fund's investment adviser.
After reviewing such list and statement you will subtract [the sum
obtained by adding (the purchase price and related commissions and
expenses to be paid by the Fund in connection with all purchases of
securities by the Fund to be settled on such date) to (the amounts to be
paid to honor redemption requests, if any, received by Firstar Trust Co.
on the previous business day)] from [the sum obtained by adding (the
proceeds to be received from all sales of securities of the Fund to be
settled on such date) to (the amounts received pursuant to all purchase
orders, if any, received by Firstar Trust Co. on the previous business
day)].
The Fund's investment adviser has determined that if the result of
such subtraction is a positive number, the remainder shall be invested to
the extent allowed by the Fund's prospectus in the commercial paper master
notes or repurchase agreements then offered by Firstar Trust Co. bearing
the highest rates of interest. In the event that one or more commercial
paper master notes bear the same rate of interest, the order of preference
in investing shall be based on the assets of the issuers, with the issuer
having the most assets being given the highest preference. Investments in
the commercial paper master notes of any issuer may not exceed 5% of such
Fund's total assets on the date of purchase.
The Fund's investment adviser has determined that if the result of
such subtractions is a negative number, the deficiency shall be obtained
by selling the commercial paper master notes or repurchase agreement then
held by the Fund bearing the lowest rates of interest. In the event that
one or more commercial paper master notes bear the same rate of interest,
the order of preference in selling shall be the inverse of the order set
forth in the preceding paragraph.
You are instructed to notify Firstar Trust Co. each day prior to
10:30 a.m. of the commercial paper master notes or repurchase agreement to
be purchased and sold by the Fund as determined above.
If the amount to be invested exceeds the amount which can be invested
as provided above, you will so inform the Fund's investment adviser who
will tell you how the excess should be invested.
These instructions will remain in effect unless and until you are
notified by the Fund's investment adviser to the contrary.
Very truly yours,
EASTCLIFF FUNDS, INC.
By:
President
Accepted and agreed to
FIDUCIARY MANAGEMENT, INC.
By: ____________________________
President
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting parts of
this Post-Effective Amendment No. 17 to the registration statement on Form
N-1A (the "Registration Statement") of our report dated July 24, 1997,
relating to the financial statements and financial highlights appearing in
the June 30, 1997 Annual Report to Shareholders of Eastcliff Funds, Inc.,
portions of which are incorporated by reference into the Registration
Statement. We also consent to the reference to us under the heading
"Independent Accountants" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
October 16, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> EASTCLIFF TOTAL RETURN FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 14,813
<INVESTMENTS-AT-VALUE> 21,624
<RECEIVABLES> 124
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,748
<PAYABLE-FOR-SECURITIES> 100
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22
<TOTAL-LIABILITIES> 122
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,989
<SHARES-COMMON-STOCK> 1,283
<SHARES-COMMON-PRIOR> 1,217
<ACCUMULATED-NII-CURRENT> 150
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 676
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,811
<NET-ASSETS> 21,626
<DIVIDEND-INCOME> 183
<INTEREST-INCOME> 357
<OTHER-INCOME> 0
<EXPENSES-NET> 249
<NET-INVESTMENT-INCOME> 291
<REALIZED-GAINS-CURRENT> 1,161
<APPREC-INCREASE-CURRENT> 3,368
<NET-CHANGE-FROM-OPS> 4,820
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 147
<DISTRIBUTIONS-OF-GAINS> 1,639
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 187
<NUMBER-OF-SHARES-REDEEMED> 243
<SHARES-REINVESTED> 122
<NET-CHANGE-IN-ASSETS> 3,827
<ACCUMULATED-NII-PRIOR> 34
<ACCUMULATED-GAINS-PRIOR> 1,127
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 191
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 284
<AVERAGE-NET-ASSETS> 19,130
<PER-SHARE-NAV-BEGIN> 14.62
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 3.47
<PER-SHARE-DIVIDEND> 0.12
<PER-SHARE-DISTRIBUTIONS> 1.34
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.86
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> EASTCLIFF GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 30,233
<INVESTMENTS-AT-VALUE> 46,103
<RECEIVABLES> 441
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 46,563
<PAYABLE-FOR-SECURITIES> 102
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72
<TOTAL-LIABILITIES> 174
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,141
<SHARES-COMMON-STOCK> 3,331
<SHARES-COMMON-PRIOR> 3,679
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,622)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,870
<NET-ASSETS> 46,389
<DIVIDEND-INCOME> 96
<INTEREST-INCOME> 58
<OTHER-INCOME> 0
<EXPENSES-NET> 591
<NET-INVESTMENT-INCOME> (437)
<REALIZED-GAINS-CURRENT> (70)
<APPREC-INCREASE-CURRENT> 5,204
<NET-CHANGE-FROM-OPS> 4,697
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 517
<NUMBER-OF-SHARES-REDEEMED> 865
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 196
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 454
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 605
<AVERAGE-NET-ASSETS> 45,443
<PER-SHARE-NAV-BEGIN> 12.56
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 1.50
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.92
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> SEP-16-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 25,513
<INVESTMENTS-AT-VALUE> 29,493
<RECEIVABLES> 41
<ASSETS-OTHER> 21
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29,555
<PAYABLE-FOR-SECURITIES> 275
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 324
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,074
<SHARES-COMMON-STOCK> 2,390
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 14
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 163
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,980
<NET-ASSETS> 29,231
<DIVIDEND-INCOME> 139
<INTEREST-INCOME> 88
<OTHER-INCOME> 0
<EXPENSES-NET> 188
<NET-INVESTMENT-INCOME> 39
<REALIZED-GAINS-CURRENT> 163
<APPREC-INCREASE-CURRENT> 3,980
<NET-CHANGE-FROM-OPS> 4,182
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 28
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,566
<NUMBER-OF-SHARES-REDEEMED> 177
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 29,231
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 144
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 233
<AVERAGE-NET-ASSETS> 18,233
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 2.23
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.23
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
