ANNUAL REPORT
JUNE 30, 1997
(Eastcliff Funds Logo)
Eastcliff Growth Fund
Eastcliff Total Return Fund
Eastcliff Regional Small
Capitalization Value Fund
NO-LOAD MUTUAL FUNDS
Eastcliff
Growth Fund
July 29, 1997
Dear Shareholder:
To summarize for new shareholders, the Fund's investment objective is to
produce long-term growth of capital. It does so by holding a portfolio of
equities that have the prospect for strong future earnings growth and are
attractively priced relative to other investment opportunities.
For the year ending June 30, 1997, the Fund has appreciated 10.8%. On June
30, 1997, the Net Asset Value of the Eastcliff Growth Fund was $13.92. As stated
in the Prospectus, the Fund will strive to maintain a near fully invested
strategy in equities, and at fiscal year end the Fund had 99.1% of its assets
invested in common stocks. During the last twelve months the sectors of emphasis
were healthcare, technology and consumer cyclicals.
After significant outperformance by a few mega cap stocks (36 largest stocks
traded) versus the broad market for much of the past year, we began to see signs
of broader market participation during the second quarter of 1997. On balance,
with the exception of some well known, mega cap blue-chip growth stocks,
valuations do not appear excessive. We remain confident that the superior
characteristics of the Fund and the favorable economic environment will be
beneficial to Growth Fund investors.
We appreciate all of your support and interest in the Fund and look forward
to providing each of our shareholders with favorable investment returns over the
long term.
Respectfully submitted,
/s/ Clark J. Winslow
Clark J. Winslow
Portfolio Manager
Past performance cannot guarantee future results. Prices will fluctuate and
redemption value may be more or less than original investment. This Fund is not
insured by the FDIC and is not a deposit or other obligation of or guaranteed by
Resource Trust Company or any of its affiliates.
EASTCLIFF GROWTH FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
JUNE 30, 1997
The stock market performance over the past year demonstrates that no matter
how much investment professionals try to forecast the economy as a precursor of
the market's direction, short-term market moves are driven by emotion. In the
past three months we have seen both sides of investor emotion - nervousness
about loss of capital with the market indices declining almost 10%, and then
enthusiasm for capital appreciation with the Dow Jones Industrial Average
galloping 1450 points or 23% in the last two months. This type of an increase
has never happened before when stocks had already risen 20% in the prior year.
The 1997-to-date total return of the S&P 500 of 20.6% was the fourth strongest
first half-year gain in the past 50 years.
The principal factors behind the strong positive returns in the equity
markets continue to be low inflation, stable interest rates, above-average
corporate profit growth and a prosperous U.S. economy. This economic stability,
combined with favorable fiscal and monetary policies, gives us confidence to
maintain our forecast of moderate GDP growth, modest inflation and flat to lower
interest rates.
The Eastcliff Growth Fund's objective is to produce long-term growth in
capital. It does so by investing in companies with strong future earnings growth
prospects at reasonable valuations. Given the Fund's investment objective and
the equity market's focus on earnings growth, we maintained a 97% weighting in
stocks during the fiscal year ended June 30, 1997. The Fund maintained its
sector emphasis in healthcare, consumer cyclicals and technology.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
EASTCLIFF GROWTH FUND, STANDARD & POOR'S 500 STOCK INDEX AND
50/50 BLEND OF RUSSELL 1000 GROWTH INDEX AND STANDARD & POOR'S 400
MIDCAP GROWTH INDEX
AVERAGE ANNUAL TOTAL RETURN
1-Year +10.8%
Since inception 7/1/95 +18.0%
50/50 Blend of Russell 1000
Eastcliff Growth Index and Standard & Standard & Poor's 500
date Growth Fund Poor's 400 MidCap Growth Index** Stock Index*
<F3> <F2>
7/1/95*<F1> 10,000 10,000 10,000
9/30/95 10,990 10,982 10,804
12/31/95 10,860 11,115 11,453
3/31/96 11,680 11,818 12,068
6/30/96 12,560 12,362 12,603
9/30/96 13,080 12,834 12,991
12/31/96 12,690 13,429 14,090
3/31/97 11,530 13,285 14,459
6/30/97 13,916 15,750 16,983
Past performance is not predictive of future performance.
*<F1> inception date
*<F2> 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.
**<F3> The Russell 1000 Growth Index contains those Russell 1000 securities
with a greater-than-average growth orientation. Securities in this Index tend
to exhibit higher price-to-book and price-earnings ratios, lower dividend
yields and higher forecasted growth values than the Value universe. The
Standard & Poor's 400 MidCap Growth Index contains 50% of the names in the
Standard & Poor's 400 MidCap Index as determined by price-book ratio. The
Standard & Poor's 400 MidCap Index consists of 400 domestic stocks chosen for
market size.
EASTCLIFF GROWTH FUND
STATEMENT OF NET ASSETS
JUNE 30, 1997
SHARES OR QUOTED
PRINCIPAL MARKET
AMOUNT COST VALUE
------ ----- ------
LONG-TERM INVESTMENTS -- 99.1% (A)<F4>
COMMON STOCKS -- 99.1% (A)<F4>
CAPITAL GOODS SECTOR -- 4.6%
- ----------------------------
MANUFACTURE-DIVERSE -- 1.7%
11,200 Tyco International Ltd. $ 656,981 $ 779,106
WASTE MANAGEMENT -- 2.9%
34,800 USA Waste Services, Inc.*<F5> 813,874 1,344,150
COMMUNICATION SERVICES SECTOR -- 2.2%
- -------------------------------------
TELECOMMUNICATION-LONG DISTANCE -- 2.2%
46,600 LCI International, Inc.*<F5> 854,116 1,019,375
CONSUMER CYCLICALS SECTOR -- 20.4%
- ----------------------------------
RETAIL-BUILDING SUPPLY -- 6.1%
26,800 The Home Depot, Inc. 1,114,751 1,847,538
26,200 Lowe's Companies, Inc. 851,624 972,675
---------- ----------
1,966,375 2,820,213
RETAIL-DEPARTMENT STORES -- 5.2%
38,725 Dollar General Corp. 580,108 1,452,188
18,300 Kohl's Corp.*<F5> 444,496 968,765
---------- ----------
1,024,604 2,420,953
RETAIL-GENERAL MERCHANTS -- 2.6%
34,343 Consolidated Stores Corp.*<F5> 512,148 1,193,419
RETAIL-SPECIALTY -- 1.8%
19,300 Barnes & Noble Inc.*<F5> 631,694 829,900
SERVICES-ADVERTISING/MARKETING -- 1.5%
17,000 Cognizant Corp. 636,554 688,500
SERVICES-COMMERCIAL & CONSUMER -- 1.2%
36,800 PMT Services, Inc.*<F5> 652,010 561,200
TEXTILES-APPAREL -- 2.0%
23,100 Tommy Hilfiger Corp.*<F5> 759,049 928,343
CONSUMER STAPLES SECTOR -- 2.2%
- -------------------------------
RESTAURANTS -- 2.2%
28,125 Papa John's
International, Inc.*<F5> 572,919 1,033,594
ENERGY SECTOR -- 3.2%
- ---------------------
OIL & GAS-DRILLING & EQUIPMENT -- 3.2%
16,700 Santa Fe International
Corporation*<F5> 526,167 567,800
7,200 Schlumberger Ltd. 856,276 900,000
---------- ----------
1,382,443 1,467,800
FINANCIALS SECTOR -- 6.0%
- -------------------------
CONSUMER FINANCE -- 3.0%
37,550 MBNA Corp. 673,678 1,375,269
FINANCIAL (DIVERSE) -- 3.0%
28,800 MGIC Investment Corp. 842,567 1,380,614
HEALTHCARE SECTOR -- 25.6%
- --------------------------
BIOTECHNOLOGY -- 5.1%
17,100 Amgen Inc.*<F5> 764,037 993,937
13,600 Centocor, Inc.*<F5> 459,677 422,457
34,900 Genzyme Corp.*<F5> 837,487 968,475
---------- ----------
2,061,201 2,384,869
DIVERSE -- 1.8%
21,400 Rexall Sundown, Inc.*<F5> 578,846 834,600
DRUGS MAJOR -- 5.3%
10,500 Merck & Co., Inc. 859,330 1,086,750
11,600 Pfizer Inc. 519,778 1,386,200
---------- ----------
1,379,108 2,472,950
HOSPITAL MANAGEMENT -- 1.9%
21,400 Vencor Inc.*<F5> 679,980 904,150
MANAGED CARE -- 8.0%
18,000 Oxford Health Plans, Inc.*<F5> 433,276 1,291,500
27,600 PhyCor, Inc.*<F5> 695,305 950,489
28,000 United HealthCare Corp. 1,317,698 1,456,000
---------- ----------
2,446,279 3,697,989
MEDICAL PRODUCTS & SUPPLIES -- 1.2%
15,500 STERIS Corp.*<F5> 424,313 579,312
SPECIALIZED SERVICES -- 2.3%
34,400 Omnicare, Inc. 847,325 1,079,300
TECHNOLOGY SECTOR -- 34.9%
- --------------------------
COMMUNICATION-EQUIPMENT -- 1.7%
8,900 ADC Telecommunications,
Inc.*<F5> 285,467 297,038
22,200 Aspect Telecommunications
Corp.*<F5> 469,344 493,950
---------- ----------
754,811 790,988
COMPUTER SOFTWARE/SERVICES -- 19.6%
27,050 Computer Associates
International, Inc. 840,057 1,506,360
12,400 Microsoft Corp.*<F5> 536,092 1,567,050
22,200 Oracle Corp.*<F5> 593,270 1,118,325
34,900 Parametric
Technology Corp.*<F5> 991,980 1,485,449
20,600 PeopleSoft, Inc.*<F5> 388,483 1,086,650
35,300 Sterling Commerce Inc.*<F5> 1,061,595 1,160,488
32,200 Synopsys, Inc.*<F5> 981,178 1,183,350
---------- ----------
5,392,655 9,107,672
COMPUTERS-NETWORKING -- 3.8%
26,500 Cisco Systems Inc.*<F5> 696,181 1,778,813
ELECTRONICS-SEMICONDUCTORS -- 2.5%
8,100 Intel Corp. 491,713 1,148,685
SERVICES-DATA PROCESSING -- 7.3%
15,100 Ceridian Corp.*<F5> 596,606 637,975
36,970 First Data Corp. 1,076,351 1,624,388
7,100 FIserv, Inc.*<F5> 298,604 316,837
20,775 Paychex, Inc. 417,497 789,450
---------- ----------
2,389,058 3,368,650
---------- ----------
Total common stocks 30,120,482 45,990,414
---------- ----------
Total long-term
investments 30,120,482 45,990,414
SHORT-TERM INVESTMENTS -- 0.3% (A)<F4>
VARIABLE RATE DEMAND NOTES
$112,943 Wisconsin Electric
Power Company $ 112,943 $ 112,943
---------- ----------
Total short-term
investments 112,943 112,943
---------- ----------
Total investments $30,233,425 46,103,357
===========
Cash and receivables, less
liabilities -- 0.6% (A)<F4> 285,548
-----------
Net Assets $46,388,905
===========
Net Asset Value Per Share
($0.01 par value, 300,000,000
shares authorized), offering
and redemption price
($46,388,905 / 3,331,368
shares outstanding) $ 13.92
==========
*<F5>Non-income producing security.
(a)<F4>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
EASTCLIFF GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
INCOME:
Dividends $ 95,688
Interest 57,661
----------
Total income 153,349
----------
EXPENSES:
Management fees 454,388
Administrative services 75,438
Professional fees 23,958
Transfer agent fees 17,191
Custodian fees 12,713
Amortization of organizational expenses 6,301
Printing and postage expense 4,516
Registration fees 2,501
Other expenses 7,759
----------
Total expenses before reimbursement 604,765
Less expenses assumed by adviser (14,325)
----------
Net expenses 590,440
----------
NET INVESTMENT LOSS (437,091)
----------
NET REALIZED LOSS ON INVESTMENTS (70,019)
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 5,204,147
----------
NET GAIN ON INVESTMENTS 5,134,128
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,697,037
==========
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED JUNE 30, 1997 AND FOR THE PERIOD FROM JULY 1, 1995
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
1997 1996
----------- -----------
OPERATIONS:
Net investment loss $ (437,091) $ (300,450)
Net realized loss on investments (70,019) (1,552,031)
Net increase in unrealized
appreciation on investments 5,204,147 10,665,785
----------- -----------
Net increase in net assets
resulting from operations 4,697,037 8,813,304
----------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (517,469
and 4,145,838 shares, respectively) 6,481,669 42,770,095
Cost of shares redeemed (865,221 and
466,718 shares, respectively) (10,982,363) (5,390,837)
----------- -----------
Net (decrease) increase in net
assets derived from Fund
share activities (4,500,694) 37,379,258
----------- -----------
TOTAL INCREASE 196,343 46,192,562
NET ASSETS AT THE BEGINNING OF THE PERIOD 46,192,562 --
----------- -----------
NET ASSETS AT THE END OF THE PERIOD $46,388,905 $46,192,562
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
EASTCLIFF GROWTH FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR EACH SHARE OF THE FUND OUTSTANDING THROUGHOUT EACH PERIOD)
For the For the Period from
Year Ended July 1, 1995*<F6> 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)<F7> (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)<F8> 1.3% 1.3%
Ratio of net investment loss to
average net assets (c)<F9> (1.0%) (0.8%)
Portfolio turnover rate 54.3% 40.3%
Average commission rate paid (d)<F10> $0.0600 --
*<F6> Commencement of operations.
(a)<F7> Net investment loss per share is calculated using ending balances
prior to consideration of adjustments for permanent book and tax differences.
(b)<F8> 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)<F9> 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)<F10> Disclosure required for fiscal years beginning after
September 1, 1995.
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Total
Return Fund
July 29, 1997
Dear Shareholder:
We are pleased to have this annual opportunity to communicate the results of
your Fund to you. Unlike a year ago, the strong continuance of the equity market
and, more recently, the Government bond market, have enhanced the Fund assets.
In addition, over the past twelve months we have distributed from income and
capital gains $1.45807 per share to shareholders.
We recognize the strength of our current markets will have occasional
corrections, as witnessed by the two that recently occurred: the first in July
1996; and, more recently, in March 1997. The resilience of your Fund and the
markets in general provided renewed appreciation following these brief
corrections. One should expect those events to recur from time to time.
On the economic front, there is no negative evidence to suggest a rapid
expansion of inflation or a dramatic reduction in Corporate America's
productivity. We believe our economic growth is presently slowing, as partially
evident with lower commodity prices.
The average compounded rate of return of your Fund was 28.1% for the one year
period, and 15.6% for the five years ending June 30, 1997. As of July 29, 1997,
your Board of Directors declared a dividend of $0.1161 per share from net
investment income and a distribution of $0.52647 per share from net long-term
capitalized gains, payable July 30, 1997, to shareholders of record on July 28,
1997.
We are pleased to again report that your shares have appreciated to $16.86
per share as of June 30, 1997. As of that date, the equity allocation was 67.5%,
as compared with 80.9% a year ago, and Government agency bonds of short-to-
intermediate maturities were 28.3% of assets, as compared with 15.1% a year ago.
Going forward, this figure will be affected as higher yielding bonds are called
while overall interest rates decline, as has been the case recently.
We continue to believe there are still good investment opportunities ahead,
although we project more modest results than those experienced over the past few
years.
We appreciate your support as shareholders and commit to strive for good
future investment returns.
Respectfully submitted,
/s/ Thomas M. Keresey /s/ Patrice J. Neverett
Thomas M. Keresey Patrice J. Neverett
Portfolio Manager Portfolio Manager
Past performance cannot guarantee future results. Prices will fluctuate and
redemption value may be more or less than original investment. This Fund is not
insured by the FDIC and is not a deposit or other obligation of or guaranteed by
Resource Trust Company or any of its affiliates.
EASTCLIFF TOTAL RETURN FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
JUNE 30, 1997
The Fund is dedicated to high quality growth by investing in companies that
are leaders in their industry, and have demonstrated an ability to lead through
product innovation, excellent long-term management, and final products or
services with broad customer acceptance.
Over the past year, the emphasis has focused on consumer non-durable
companies and selected industrial leaders. Earnings, as well as their overall
businesses, have been above average. The portfolio is broadly populated with
U.S. companies that are having significant international business success. For
example, our healthcare, pharmaceutical, and financial companies have proven
their leadership internationally, and although a strong dollar can adversely
impact short-term earnings for such companies, their performance over time has
been considerably above average.
One should not expect the continuance of our most successful last twelve
months of Fund asset appreciation to continue unabated, but we can assure our
shareholders that continued strong corporate earnings and above average results
will be where we shall seek portfolio investments. Should the equity markets
falter ahead, as some have predicted, your Fund has the flexibility to increase
bond and reserve cash holdings as bond interest rates effectively compete with
equity expectations, or adverse economic conditions develop forewarning of a
more difficult investment scenario which would cause your management to increase
its already conservative posture for above average total return results.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
EASTCLIFF TOTAL RETURN FUND, STANDARD & POOR'S 500 STOCK INDEX,
NASDAQ COMPOSITE INDEX AND LEHMAN INTERMEDIATE CORPORATE BOND INDEX
AVERAGE ANNUAL TOTAL RETURN
1-Year +28.1%
5-Year +15.6%
10-Year +12.3%
Lehman
date Eastcliff Standard Nasdaq Intermediate
Total Return & Poor's 500 Composite Corporate
Fund Stock Index*<F11> Index**<F12> Bond Index***<F13>
9/30/87 10,000 10,000 10,000 10,000
9/30/88 9,700 8,740 8,720 11,090
9/30/89 11,330 11,598 10,630 12,166
9/30/90 9,800 10,519 7,738 13,188
9/30/91 12,613 13,822 11,832 15,021
9/30/92 14,278 15,357 13,110 16,928
9/30/93 16,191 17,353 17,161 18,316
9/30/94 16,547 17,978 17,195 18,005
9/30/94 16,547 17,978 17,195 18,005
6/30/95 18,268 21,609 21,002 19,716
6/30/96 22,908 27,249 26,673 20,761
6/30/97 29,345 36,719 32,458 22,448
Past performance is not predicitve of future performance.
*<F11> 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.
**<F12> The Nasdaq Composite Index is a market capitalization price only index
that tracks the performance of domestic common stocks traded on the regular
Nasdaq market as well as National Market System - traded foreign common
stocks and ADRs.
***<F13> The Lehman Intermediate Corporate Bond Index includes all Intermediate
publicly issued, fixed rate debt issues rated investment grade or higher,
nonconvertible investment grade, dollar denominated, SEC-registered corporate
debt. The Index includes Bonds with maturities of one to ten years and have
outstanding par values of at least $100 million.
EASTCLIFF TOTAL RETURN FUND
STATEMENT OF NET ASSETS
JUNE 30, 1997
SHARES OR QUOTED
PRINCIPAL MARKET
AMOUNT COST VALUE
------- ----- ------
LONG-TERM INVESTMENTS -- 95.8% (A)<F14>
COMMON STOCKS -- 67.5% (A)<F14>
BASIC MATERIALS SECTOR -- 1.2%
- ------------------------------
CHEMICALS -- 1.2%
4,000 E.I du Pont de
Nemours & Co. $ 245,240 $ 251,500
CAPITAL GOODS SECTOR -- 4.2%
- ----------------------------
ELECTRICAL EQUIPMENT -- 2.7%
9,000 General Electric Co. (U.S.) 241,832 588,375
MACHINERY (DIVERSE) -- 1.5%
3,000 Caterpillar Inc. 294,555 322,125
CONSUMER CYCLICALS SECTOR -- 1.6%
- ---------------------------------
HOUSEHOLD FURNITURE & APPLIANCES -- 1.6%
9,000 Sunbeam Corporation 179,415 339,750
CONSUMER STAPLES SECTOR -- 8.9%
- -------------------------------
BEVERAGES-SOFT DRINK -- 3.1%
10,000 The Coca-Cola Company 351,275 675,000
HOUSEHOLD PRODUCTS -- 2.7%
2,000 Clorox Co. 179,620 264,000
5,000 Colgate-Palmolive Co. 202,700 326,250
---------- ----------
382,320 590,250
PERSONAL CARE -- 3.1%
7,000 Gillette Company 336,045 663,250
ENERGY SECTOR -- 6.6%
- ----------------------
OIL & GAS-DRILLING & EQUIPMENT -- 3.3%
9,000 Halliburton Co. 326,221 713,250
OIL-DOMESTIC -- 1.8%
10,000 TransMontaign Oil Co.*<F15> 142,500 198,750
7,000 USX-Marathon Group 140,420 202,125
---------- ----------
282,920 400,875
OIL-INTERNATIONAL -- 1.5%
3,000 Texaco Inc. 262,805 326,250
FINANCIALS SECTOR -- 10.5%
- --------------------------
BANKS-MAJOR REGIONAL -- 5.5%
18,000 Barnett Banks, Inc. 459,830 945,000
3,000 Fifth Third Bancorp. 160,982 246,189
---------- ----------
620,812 1,191,189
BANKS-MONEY CENTER -- 2.2%
4,000 Citicorp 162,490 482,252
INSURANCE-MULTILINE -- 2.8%
4,000 American International
Group, Inc. 273,556 597,500
HEALTHCARE SECTOR -- 18.6%
- --------------------------
DIVERSE -- 7.1%
11,000 Bristol-Myers Squibb Co. 379,893 891,000
10,000 Johnson & Johnson 299,675 643,750
---------- ----------
679,568 1,534,750
DRUGS MAJOR -- 11.5%
6,000 Eli Lilly & Co. 449,610 655,878
5,000 Merck & Co., Inc. 217,590 517,500
11,000 Pfizer Inc. 554,480 1,314,500
---------- ----------
1,221,680 2,487,878
TECHNOLOGY SECTOR -- 14.3%
- --------------------------
COMMUNICATION-EQUIPMENT -- 4.4%
6,000 Nokia Corp. "A" ADR 384,360 442,500
10,000 Plantronics, Inc.*<F15> 373,000 501,250
---------- ----------
757,360 943,750
COMPUTER HARDWARE -- 4.4%
5,000 Compaq Computer Corp.*<F15> 234,925 496,250
5,000 International Business
Machines Corp. 199,462 450,940
---------- ----------
434,387 947,190
COMPUTER SOFTWARE/SERVICES -- 3.0%
5,200 Microsoft Corp.*<F15> 302,226 657,150
ELECTRONICS-SEMICONDUCTORS -- 2.5%
3,800 Intel Corp. 269,035 538,889
UTILITIES SECTOR -- 1.6%
- ------------------------
ELECTRIC COMPANIES -- 1.6%
7,310 Duke Energy Corporation 178,898 350,427
---------- ----------
Total common stocks 7,802,640 14,601,600
FEDERAL AGENCIES -- 28.3% (A)<F14>
$100,000 FNMA, 7.00%,
due 04/16/01 100,000 100,194
300,000 FHLMC, 7.125%,
due 06/25/01 299,642 303,195
500,000 FHLB, 7.405%,
due 07/02/01 500,000 500,362
500,000 FFC, 7.43%,
due 10/07/02 500,000 502,166
200,000 FNMA, 7.30%,
due 10/28/02 200,000 200,108
500,000 FHLB, 7.27%,
due 04/15/03 500,000 499,573
200,000 FFC, 7.30%,
due 05/29/03 200,000 200,016
400,000 FHLMC, 7.29%,
due 01/23/04 400,000 399,086
500,000 FHLMC, 7.68%,
due 04/14/04 500,000 503,031
500,000 FNMA, 7.55%,
due 06/10/04 500,000 505,277
500,000 FNMA, 7.25%,
due 09/23/05 496,428 494,207
500,000 FHLMC, 7.44%,
due 04/07/06 500,000 497,055
300,000 FHLMC, 7.775%,
due 04/17/06 300,000 299,628
500,000 FHLMC, 8.00%,
due 04/09/07 500,000 502,936
500,000 FNMA, 8.00%,
due 04/09/07 500,000 501,791
100,000 FHLB, 7.375%,
due 07/09/07**<F16> 100,000 99,003
---------- ----------
Total federal agencies 6,096,070 6,107,628
---------- ----------
Total long-term
investments 13,898,710 20,709,228
SHORT-TERM INVESTMENTS -- 4.2% (A)<F14>
VARIABLE RATE DEMAND NOTES
57,289 Johnson Controls, Inc. 57,289 57,289
857,000 Wisconsin Electric
Power Company 857,000 857,000
----------- ----------
Total short-term
investments 914,289 914,289
----------- ----------
Total investments $14,812,999 21,623,517
===========
Cash and receivables,
less liabilities 0.0% (A)<F14> 2,934
-----------
Net Assets $21,626,451
===========
Net Asset Value Per Share
($0.01 par value, 300,000,000
shares authorized), offering
and redemption price
($21,626,451 / 1,282,625
shares outstanding) $ 16.86
===========
*<F15>Non-income producing security.
**<F16>When-issued Security.
FFC = Federal Farm Credit
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corp.
FNMA = Federal National Mortgage Association
(a)<F14>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
EASTCLIFF TOTAL RETURN FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
INCOME:
Dividends $ 182,888
Interest 356,797
----------
Total income 539,685
----------
EXPENSES:
Management fees 191,191
Administrative services 38,238
Professional fees 24,498
Transfer agent fees 13,122
Custodian fees 5,343
Printing and postage expense 4,223
Registration fees 2,884
Other expenses 4,881
----------
Total expenses before reimbursement 284,380
Less expenses assumed by adviser (35,832)
----------
Net expenses 248,548
----------
NET INVESTMENT INCOME 291,137
----------
NET REALIZED GAIN ON INVESTMENTS 1,161,127
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 3,367,773
----------
NET GAIN ON INVESTMENTS 4,528,900
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,820,037
==========
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
----------- -----------
OPERATIONS:
Net investment income $ 291,137 $ 113,519
Net realized gain on investments 1,161,127 1,265,449
Net increase in unrealized
appreciation on investments 3,367,773 2,394,305
----------- -----------
Net increase in net assets
resulting from operations 4,820,037 3,773,273
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.11856 and $0.16617 per share,
respectively) (147,615) (207,699)
Distributions from net realized gains
($1.33951 and $0.16455 per share,
respectively) (1,639,171) (204,567)
----------- -----------
Total distributions (1,786,786)** (412,266)*
<F18> <F17>
----------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (186,332
and 285,109 shares, respectively) 2,803,684 3,666,446
Net asset value of shares issued in
distributions (122,270 and 16,739 shares,
respectively) 1,640,933 213,524
Cost of shares redeemed (243,315 and
405,622 shares, respectively) (3,650,816) (5,247,179)
----------- -----------
Net increase (decrease) in net
assets derived from Fund share
activities 793,801 (1,367,209)
----------- -----------
TOTAL INCREASE 3,827,052 1,993,798
NET ASSETS AT THE BEGINNING OF THE YEAR 17,799,399 15,805,601
----------- -----------
NET ASSETS AT THE END OF THE YEAR
(including undistributed net investment
income of $150,041 and $33,702,
respectively) $21,626,451 $17,799,399
=========== ===========
*<F17> Total distributions include $324,352 of ordinary income, of which 27% is
eligible for the corporate dividends received deduction.
**<F18>Total distributions include $1,209,453 of ordinary income, of which 23%
is eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of these
statements.
EASTCLIFF TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR EACH SHARE OF THE FUND OUTSTANDING THROUGHOUT EACH YEAR)
<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) 28.1% 25.4% 10.4%(a)<F19> 2.2% 13.4% 13.2% 28.7% (13.5%) 16.8% (3.0%)
<F22>
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)<F20> 1.3% 1.3% 1.5%(a)<F19> 2.0% 2.0% 2.7% 2.0% 2.4% 3.0% 2.8%
Ratio of net investment income
to average net
assets(c)<F21> 1.5% 0.7% 2.5%(a)<F19> 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)<F23> $0.0624 -- -- -- -- -- -- -- -- --
(a)<F19> Annualized.
(b)<F20> 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)<F19>,
3.0%, 2.8%, 3.3%, 3.2%, 3.1%, 4.4% and 11.8%, respectively.
(c)<F21> 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)<F19>,
0.2%, 0.8%, 0.6%, 1.3%, 2.1%, 1.4% and (7.4%), respectively.
(d)<F22> Effective December 31, 1994, the Fund changed investment advisers from
Fiduciary Management, Inc. to Resource Capital Advisers, Inc.
(e)<F23> Disclosure required for fiscal years beginning after
September 1, 1995.
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Regional
Small Capitalization
Value Fund
July 29, 1997
Dear Shareholder:
The first half of 1997 has been a rewarding period for investors. Your
portfolio has produced a return of 12.3% versus 10.2% for the Russell 2000 year
to date. At June 30, 1997 the Fund's assets were over $29 million and the net
asset value had appreciated to $12.23.
Some of the investments that contributed to the performance in the first half
of 1997 are: Funco, Inc., a Minnesota headquartered video game retailer that is
benefiting from the Nintendo 64/Sony Playstation boom and greater management
focus on profitability; Merrill Corp., a printing company based in Minnesota
that is enjoying robust demand for its services from the financial, mutual fund,
legal, and corporate markets; Federal-Mogul Corp., a Michigan based manufacturer
of parts for automobiles and light trucks which is undergoing significant
operational restructuring that should enhance the long-term earnings power; and,
Central Newspapers, Inc., an Indiana based newspaper publisher which dominates
the Phoenix and Indianapolis markets and is taking steps to improve the value of
the company's papers.
As of July 29, 1997, your Board of Directors declared a dividend of $0.00566
per share from net investment income and a distribution of $0.07183 from short-
term realized capital gains which will be treated as ordinary income, payable
July 30, 1997, to shareholders of record on July 28, 1997.
As always, we want to acknowledge that without your support we would not be
where we are today. Our challenge everyday is to repay your trust. We think it
is important to note that significant amount of our net worth is also invested
with you in the Eastcliff Regional Small Capitalization Value Fund. Therefore,
we treat your investments as if they were our own. We look forward to the
continuation of what we hope will be a very successful partnership.
Sincerely,
/s/ Richard W. Jensen /s/ Elizabeth M. Lilly /s/ Richard J. Rinkoff
Richard W. Jensen Elizabeth M. Lilly Richard J. Rinkoff
Past performance cannot guarantee future results. Prices will fluctuate and
redemption value may be more or less than original investment. This Fund is not
insured by the FDIC and is not a deposit or other obligation of or guaranteed by
Resource Trust Company or any of its affiliates.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
JUNE 30, 1997
Woodland Partners is often asked for its opinion about the level of the stock
market and general economic conditions. We spend only a nominal amount of time
trying to determine the future direction of the economy, interest rates or the
stock market. We don't know with any useful precision whether the economy will
speed up or slow down, interest rates will rise or fall or whether inflation
will rear its ugly head. Rather than focusing in the level of the market, our
task is to concentrate every day on investing in the best companies we can find
for the Fund. Longer term, we continue to believe that compounding money at a
steady rate is the best strategy and that stocks will provide better returns
than bonds or cash. The first six months of 1997 rewarded that approach. As we
enter the second half, we see nothing that will materially disturb the current
environment which is beneficial for equity ownership. We will always stay alert
to change but focus our time where we believe we have an edge that will benefit
the Fund.
At present, we have forty-seven companies represented in the portfolio. As
managers of a capital appreciation fund, we believe in investing a relatively
high portion of the portfolio in a limited number of companies. We follow a
bottom-up strategy to investing that pays nominal attention to forecasting the
economy or moves in interest rates. Instead, we focus on investing in the best
companies we can find with strong managements and that are undervalued by the
market.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND AND RUSSELL 2000 INDEX
date Eastcliff Regional
Small Capitalization Value Fund Russell 2000 Index*<F24>
9/16/96*<F25> 10,000 10,000
9/30/96 9,850 10,128
12/31/96 10,908 10,655
3/31/97 10,517 10,104
6/30/97 12,250 11,742
Past performance is not predictive of future performance.
*<F25> inception date 9/16/96
*<F24> 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.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
STATEMENT OF NET ASSETS
JUNE 30, 1997
SHARES OR QUOTED
PRINCIPAL MARKET
AMOUNT COST VALUE
- ------ ----- -------
LONG-TERM INVESTMENTS -- 96.1% (A)<F27>
COMMON STOCKS -- 96.1% (A)<F27>
BASIC MATERIALS SECTOR -- 5.7%
- ------------------------------
CHEMICALS-SPECIALTY -- 3.7%
17,400 Ferro Corp. $ 563,887 $ 644,896
7,800 H.B. Fuller Co. 395,366 429,000
----------- -----------
959,253 1,073,896
IRON & STEEL -- 0.7%
19,000 Dynamic Materials Corp.*<F26> 152,619 220,875
METALS MINING -- 1.3%
22,300 Citation Corp.*<F26> 322,216 381,887
CAPITAL GOODS SECTOR -- 20.6%
- -----------------------------
AEROSPACE/DEFENSE -- 2.2%
11,500 Alliant Techsystems Inc.*<F26> 595,144 632,500
ELECTRICAL EQUIPMENT -- 3.4%
36,300 MagneTek, Inc.*<F26> 585,297 603,488
40,600 TSI Inc. 390,113 385,700
----------- -----------
975,410 989,188
MANUFACTURE-DIVERSE -- 5.0%
19,300 IDEX Corp. 488,178 636,900
8,500 Pentair, Inc. 243,232 279,438
20,000 Premark International, Inc. 435,103 535,000
----------- -----------
1,166,513 1,451,338
MANUFACTURE-SPECIAL -- 6.1%
19,300 Donaldson Company, Inc. 581,164 733,400
17,500 Graco Inc. 487,229 527,187
22,900 OmniQuip
International, Inc.*<F26> 336,350 529,563
----------- -----------
1,404,743 1,790,150
OFFICE EQUIPMENT & SUPPLIES -- 2.2%
24,500 National Computer
Systems, Inc. 535,313 652,312
TRUCKS & PARTS -- 1.7%
56,500 Deflecta-Shield Corp.*<F26> 491,238 494,375
CONSUMER CYCLICALS SECTOR -- 30.5%
- ----------------------------------
AUTO PARTS & EQUIPMENT -- 11.0%
44,300 Federal-Mogul Corp. 1,037,171 1,550,500
19,400 SPX Corp. 684,995 1,257,372
9,400 Tower Automotive, Inc.*<F26> 284,511 404,200
----------- -----------
2,006,677 3,212,072
CONSUMER (JEWELRY/GIFT) -- 3.1%
27,200 Stanhome Inc. 740,421 894,200
FOOTWEAR -- 1.4%
31,900 The Stride Rite Corp. 461,503 410,712
PUBLISHING-NEWSPAPER -- 3.6%
14,700 Central Newspapers, Inc. 726,826 1,052,887
RETAIL-GENERAL MERCHANDISE -- 1.3%
21,300 Fingerhut Companies, Inc. 297,341 371,429
RETAIL-SPECIALTY -- 1.6%
25,600 Funco, Inc.*<F26> 289,760 473,600
SERVICES-ADVERTISING/MARKETING -- 3.1%
45,900 AC Nielsen Corp.*<F26> 819,474 900,787
TEXTILES-APPAREL -- 5.4%
12,100 Samsonite Corp.*<F26> 528,530 533,913
62,800 Sport-Haley, Inc.*<F26> 946,687 1,051,900
----------- -----------
1,475,217 1,585,813
CONSUMER STAPLES SECTOR -- 11.8%
- --------------------------------
ENTERTAINMENT -- 3.9%
34,400 Ballantyne of Omaha, Inc.*<F26> 382,923 619,200
51,200 LodgeNet
Entertainment Corp.*<F26> 628,880 512,000
----------- -----------
1,011,803 1,131,200
FOODS -- 4.8%
56,500 International
Multifoods Corp. 1,038,983 1,419,562
RESTAURANTS -- 1.1%
26,700 VICORP Restaurants, Inc.*<F26> 369,213 320,400
SPECIALTY PRINTING -- 2.0%
15,800 Merrill Corp. 352,269 574,725
FINANCIALS SECTOR -- 7.7%
- -------------------------
BANKS-MAJOR REGIONAL -- 1.8%
13,500 Community First
Bankshares, Inc. 340,825 518,063
INSURANCE-PROPERTY -- 3.2%
19,000 Horace Mann
Educators Corp. 742,174 931,000
SAVINGS & LOAN -- 2.7%
15,900 TCF Financial Corp. 644,475 785,063
HEALTHCARE SECTOR -- 8.1%
- -------------------------
DRUGS MAJOR -- 0.9%
46,700 Orphan Medical, Inc.*<F26> 381,823 280,200
MEDICAL PRODUCTS & SUPPLIES -- 7.2%
34,700 Applied Biometrics, Inc.*<F26> 406,017 195,188
50,000 Empi, Inc.*<F26> 846,446 912,500
25,100 Lifecore Biomedical, Inc.*<F26> 386,537 345,125
60,600 Rehabilicare Inc.*<F26> 187,506 212,100
10,400 Rochester Medical Corp.*<F26> 181,088 148,200
17,800 Urologix Inc.*<F26> 273,144 302,600
----------- -----------
2,280,738 2,115,713
TECHNOLOGY SECTOR -- 11.7%
- --------------------------
COMMUNICATION-EQUIPMENT -- 2.5%
50,600 Communications
Systems, Inc. 713,325 721,050
COMPUTER HARDWARE -- 4.2%
28,100 Ciprico Inc.*<F26> 401,900 428,525
53,100 Control Data Systems, Inc.*<F26> 1,076,044 789,863
----------- -----------
1,477,944 1,218,388
ELECTRONICS-INSTRUMENTS -- 1.5%
31,500 Bolder Technologies Corp.*<F26> 445,588 441,000
ELECTRONICS-SEMICONDUCTORS -- 1.5%
24,100 Aetrium Inc.*<F26> 281,475 445,850
PHOTOGRAPHY/IMAGING -- 2.0%
22,500 Imation Corp.*<F26> 603,290 593,438
----------- -----------
Total common stocks 24,103,593 28,083,673
----------- -----------
Total long-term
investments 24,103,593 28,083,673
SHORT-TERM INVESTMENTS -- 4.8% (A)<F27>
VARIABLE RATE DEMAND NOTES
$ 225,819 Johnson Controls, Inc. 225,819 225,819
1,183,500 Wisconsin Electric
Power Company 1,183,500 1,183,500
----------- -----------
Total short-term
investments 1,409,319 1,409,319
----------- -----------
Total investments $25,512,912 29,492,992
===========
Liabilities, less cash and
receivables (0.9%) (A)<F27> (261,674)
-----------
Net Assets $29,231,318
===========
Net Asset Value Per Share
($0.01 par value, 300,000,000
shares authorized), offering
and redemption price
($29,231,318 / 2,390,051
shares outstanding) $ 12.23
===========
*<F26>Non-income producing security.
(a)<F27>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 16, 1996 (COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1997
INCOME:
Dividends $ 139,222
Interest 87,751
----------
Total income 226,973
----------
EXPENSES:
Management fees 144,375
Administrative services 28,875
Custodian fees 14,331
Professional fees 12,977
Registration fees 11,436
Transfer agent fees 10,780
Amortization of organizational expenses 3,730
Printing and postage expense 2,324
Other expenses 4,094
----------
Total expenses before reimbursement 232,922
Less expenses assumed by adviser (45,235)
----------
Net expenses 187,687
----------
NET INVESTMENT INCOME 39,286
----------
NET REALIZED GAIN ON INVESTMENTS 163,139
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 3,980,080
----------
NET GAIN ON INVESTMENTS 4,143,219
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,182,505
==========
The accompanying notes to financial statements are an integral part of this
statement.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM SEPTEMBER 16, 1996 (COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1997
OPERATIONS:
Net investment income $ 39,286
Net realized gain on investments 163,139
Net increase in unrealized appreciation on investments 3,980,080
-----------
Net increase in net assets resulting
from operations 4,182,505
-----------
DISTRIBUTION TO SHAREHOLDERS:
Distribution from net investment income
($0.0175 per share) (28,177)*
<F28>
-----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (2,565,434 shares) 27,036,329
Net asset value of shares issued in
distribution (1,341 shares) 14,533
Cost of shares redeemed (176,724 shares) (1,973,872)
-----------
Net increase in net assets derived
from Fund share activities 25,076,990
-----------
TOTAL INCREASE 29,231,318
NET ASSETS AT THE BEGINNING OF THE PERIOD --
-----------
NET ASSETS AT THE END OF THE PERIOD
(including undistributed net investment
income of $13,906) $29,231,318
===========
*<F28>Total distributions include $28,177 of ordinary income, of which 57% is
eligible for the corporate dividends received deduction.
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR EACH SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIOD)
For the Period from
September 16, 1996+<F29> 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%**<F31>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 29,231
Ratio of expenses (after reimbursement)
to average net assets (a)<F32> 1.3%*<F30>
Ratio of net investment income to average net assets (b)<F33> 0.3%*<F30>
Portfolio turnover rate 29.4%
Average commission rate paid $0.0693
+<F29>Commencement of operations.
*<F30>Annualized.
**<F31>Not annualized.
(a)<F32>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%*<F30>.
(b)<F33>If the Fund had paid all of its expenses, the ratio would have been
(0.0)%*<F30>.
The accompanying notes to financial statements are an integral part of these
statements.
EASTCLIFF FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The following is a summary of significant accounting policies of the
Eastcliff Funds, Inc. (the "Company"), which is registered as an open-end
management investment company under the Investment Company Act of 1940. This
Company consists of a series of three funds: Eastcliff Growth Fund (the
"Growth Fund'), Eastcliff Total Return Fund (the "Total Return Fund") and
Eastcliff Regional Small Capitalization Value Fund (the "Regional Small Cap
Fund") (collectively the "Funds"). The assets and liabilities of each Fund are
segregated and a shareholder's interest is limited to the Fund in which the
shareholder owns shares. The Company was incorporated under the laws of
Wisconsin on May 23, 1986.
The investment objective of the Growth Fund is to produce long-term growth of
capital by investing principally in equity securities; 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 by
investing in a combination of equity and debt securities, while assuming
reasonable risks; the investment objective of the Regional Small Cap Fund is
to produce capital appreciation by investing principally in equity securities
of small capitalization companies headquartered in Colorado, Illinois,
Indiana, Iowa, Michigan, Minnesota, Montana, Nebraska, North and South Dakota,
Ohio and Wisconsin.
(a) Each security, excluding short-term investments, is valued at the last sale
price reported by the principal security exchange on which the issue is traded,
or if no sale is reported, the latest bid price. Securities which are traded
over-the-counter are valued at the latest bid price. Securities for which
quotations are not readily available are valued at fair value as determined by
the investment adviser under the supervision of the Board of Directors. Short-
term investments are valued at amortized cost which approximates quoted market
value. Investment transactions are recorded no later than the first business day
after the trade date. The cost amount of securities for Federal income tax
purposes aggregates $30,285,117, $14,816,993 and $25,526,311 for the Growth
Fund, Total Return Fund and Regional Small Cap Fund, respectively. The
difference between cost amounts for book purposes and tax purposes is due to
deferred wash sale losses.
(b) The Funds may purchase securities on a when-issued or delayed delivery
basis. Although the payment and interest terms of these securities are
established at the time the purchaser enters into the agreement, these
securities may be delivered and paid for at a future date, generally within 45
days. The Fund records purchases of when-issued securities and reflects the
values of such securities in determining net asset value in the same manner as
other portfolio securities.
(c) Net realized gains and losses on common stock are computed on the basis of
the cost of specific certificates.
(d) Provision has not been made for Federal income taxes since the Regional
Small Cap Fund will elect and the Growth Fund and Total Return Fund have elected
to be taxed as "regulated investment companies" and intend to distribute
substantially all income to shareholders and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. The Growth Fund has $166,241 and $1,030,979 of net capital losses
which expire June 30, 2004 and 2005, respectively and $373,138 of post-October
losses, both of which may be used to offset capital gains in future years to the
extent provided by tax regulations.
(e) Dividend income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
(f) The Funds have investments in short-term variable rate demand notes, which
are unsecured instruments. The Funds may be susceptible to credit risk with
respect to these notes to the extent the issuer defaults on its payment
obligation. The Funds' policy is to monitor the creditworthiness of the issuer
and does not anticipate nonperformance by these counterparties.
(g) Generally accepted accounting principles require that permanent financial
reporting and tax differences be reclassified to paid-in capital.
(h) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES --
The Funds have entered into management agreements with Resource Capital
Advisers, Inc. ("RCA"), with whom certain officers and directors of the Funds
are affiliated, to serve as investment adviser and manager. Under the terms of
the agreements, the Funds pay RCA a monthly fee at the annual rate of 1% of
such Funds daily net assets.
In addition to the reimbursement required under the management agreements,
RCA has voluntarily reimbursed the Funds for expenses over 1.3% of the daily
net assets of the Funds. These reimbursements amounted to $14,325, $35,832 and
$45,235 for the year ending June 30, 1997, for the Growth Fund and Total
Return Fund, and for the period from September 16, 1996 to June 30, 1997 for
the Regional Small Cap Fund, respectively. These voluntary reimbursements may
be modified or discontinued at any time by RCA.
The Funds have administrative agreements with Fiduciary Management, Inc.
("FMI"), with whom certain directors of the Funds are affiliated, to supervise
all aspects of the Funds' operations except those performed by RCA. Under the
terms of the agreements, the Funds will each pay FMI a monthly administrative
fee at the annual rate of 0.2% on the first $30,000,000 of the daily net
assets of such Fund and 0.1% on the daily net assets of such Fund over
$30,000,000.
The Funds have entered into Distribution Plans (the "Plans"), pursuant to
Rule 12b-1 under the Investment Company Act of 1940 with RCA. The Plans
provide that the Funds may incur certain costs which may not exceed the lesser
of a monthly amount equal to 1% of the Funds' daily net assets or the actual
distribution costs incurred by RCA during the year. Amounts payable under the
Plans are paid monthly to RCA for any activities or expenses primarily
intended to result in the sale of shares of such Fund. For the period ending
June 30, 1997, no such expenses were incurred.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains are distributed to shareholders.
On July 29, 1997, the Total Return Fund distributed a dividend from net
investment income of $150,041 ($0.1161 per share). In addition, the Total
Return Fund distributed $680,437 ($0.52647 per share) from net long-term
realized gains. Also, the Regional Small Cap Fund distributed a dividend from
net investment income of $13,906 ($0.00566 per share) and $176,538 ($0.07183
per share) from net short-term realized gains. The distributions were paid on
July 30, 1997, to shareholders of record on July 28, 1997.
(4) DEFERRED EXPENSES --
Organizational expenses for the Growth Fund and the Regional Small Cap Fund
were deferred and are being amortized on a straight-line basis over a period
of five years beginning with the date of sales of shares to the public. These
expenses were advanced by RCA who will be reimbursed by the Growth Fund and
the Regional Small Cap Fund over a period of five years. The unamortized
organizational expenses at June 30, 1997, were $18,903 and $21,137,
respectively.
(5) INVESTMENT TRANSACTIONS --
For the year ending June 30, 1997, purchases and proceeds of sales of
investment securities of the Growth Fund (excluding short-term securities)
were $24,044,163 and $28,834,332, respectively; purchases and proceeds of
sales of investment securities of the Total Return Fund (excluding short-term
securities) were $10,739,463 and $11,636,642, respectively; purchases and
proceeds of sales of investment securities of the Regional Small Cap Fund for
the period from September 16, 1996 to June 30, 1997, (excluding short-term
securities) were $28,912,807 and $4,972,353, respectively, and $1,999,500 and
$0, respectively for short-term U.S. Government Securities.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of June 30, 1997, liabilities of the Funds included the following:
TOTAL REGIONAL
GROWTH FUND RETURN FUND SMALL CAP FUND
----------- ----------- --------------
Payable to brokers for
investments purchased $ 102,171 $ 100,000 $ 275,292
Payable to RCA for
management fees and
deferred expenses 57,160 17,732 44,165
Other liabilities 15,023 3,563 5,230
(7) SOURCES OF NET ASSETS --
As of June 30, 1997, the sources of net assets were as follows:
Fund shares issued and
outstanding $32,141,023 $13,989,449 $25,074,193
Net unrealized
appreciation
on investments 15,869,932 6,810,518 3,980,080
Undistributed net
realized
(losses) gains
on investments (1,622,050) 676,443 163,139
Undistributed net
investment income -- 150,041 13,906
----------- ----------- -----------
$46,388,905 $21,626,451 $29,231,318
=========== =========== ===========
Aggregate net unrealized appreciation as of June 30, 1997, consisted of the
following:
Aggregate gross
unrealized
appreciation $16,078,688 $ 6,818,394 $ 5,007,317
Aggregate gross
unrealized
depreciation (208,756) (7,876) (1,027,237)
----------- ----------- -----------
Net unrealized
appreciation $15,869,932 $ 6,810,518 $ 3,980,080
=========== =========== ===========
REPORT OF INDEPENDENT ACCOUNTANTS
(PRICE WATERHOUSE LLP LOGO)
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402
Telephone 612 332 7000
July 24, 1997
To the Shareholders and Board of Directors
of Eastcliff Funds, Inc.
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Eastcliff Growth Fund, Eastcliff Total Return Fund and Eastcliff Regional Small
Capitalization Value Fund (constituting Eastcliff Funds, Inc., hereafter
referred to as the "Funds") at June 30, 1997, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1997 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
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
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
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