SEMIANNUAL REPORT
DECEMBER 31, 1997
(EASTCLIFF FUNDS LOGO)
EASTCLIFF GROWTH FUND
EASTCLIFF TOTAL RETURN FUND
EASTCLIFF REGIONAL SMALL
CAPITALIZATION VALUE FUND
NO-LOAD MUTUAL FUNDS
EASTCLIFF GROWTH FUND
February 9, 1998
Dear Shareholder:
The Eastcliff Growth 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. This investment philosophy includes large,
mid, and small market capitalization companies.
Although absolute returns were highly favorable in 1997 and considerably
exceeded the long-term annual average equity returns of 10.8%, again only a
small minority (13%) of managers outperformed their appropriate benchmarks as
reported by Indata.
For the twelve months ended December 31, 1997, the total return for the
Eastcliff Growth Fund was 22.4% as compared to the Standard & Poor's 500 at
33.4%, and the blended index comprised of 50% Russell 1000 Growth Index and 50%
Standard & Poor's MidCap Growth Index at 30.5%. The Net Asset Value as of
December 31, 1997, of the Eastcliff Growth Fund was $14.88. The Fund strives to
be fully invested in equities and at the end of the year the Fund had 95.3% of
its assets invested in common stocks. The NASDAQ symbol for the Fund is EASGX.
The Fund's Board of Directors declared a dividend of $0.63 per share from long-
term capital gains payable December 30, 1997, to shareholders of record on
December 26, 1997.
At year-end, the Fund was comprised of 41 companies in a variety of
industries. These companies continued to grow their businesses with average
earnings growth exceeding 35% in the most recent quarter versus a year ago. The
Fund continues to maintain an overweighted position in technology and consumer
cyclical companies. Some of the holdings in 1997 that contributed the most to
the Fund's total return included Pfizer (+80%), Home Depot (+76%), Peoplesoft
(+63%), and Microsoft (+56%). Recently, the Fund has increased its weighting in
the energy (oil service) sector.
We appreciate your support and interest in the Eastcliff Growth Fund and look
forward to providing 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
STATEMENT OF NET ASSETS
DECEMBER 31, 1997 (UNAUDITED)
QUOTED
MARKET
SHARES COST VALUE
------ ------ ------
LONG-TERM INVESTMENTS -- 95.3% (A)<F2>
COMMON STOCKS -- 95.3% (A)<F2>
CAPITAL GOODS SECTOR -- 5.0%
- ----------------------------
MANUFACTURE-DIVERSE -- 2.3%
25,400 Tyco International Ltd. $932,415 $1,144,600
WASTE MANAGEMENT-- 2.7%
34,100 USA Waste
Services, Inc.*<F1> 806,037 1,338,425
COMMUNICATION SERVICES SECTOR -- 2.3%
- -------------------------------------
TELECOMMUNICATIONS-LONG DISTANCE -- 2.3%
37,600 LCI International, Inc.*<F1> 622,582 1,156,200
CONSUMER CYCLICALS SECTOR -- 22.2%
- ----------------------------------
LODGING-HOTELS -- 1.5%
36,400 Prime Hospitality Corp.*<F1> 801,437 741,650
RETAIL-BUILDING SUPPLIES -- 4.1%
35,000 The Home Depot, Inc. 964,275 2,060,625
RETAIL-DEPARTMENT STORES -- 4.9%
42,606 Dollar General Corp. 499,335 1,544,467
13,400 Kohl's Corp.*<F1> 325,095 912,875
----------- -----------
824,430 2,457,342
RETAIL-GENERAL MERCHANTS -- 2.8%
31,643 Consolidated
Stores Corp.*<F1> 506,766 1,390,330
SERVICES-ADVERTISING/MARKETING -- 1.5%
17,000 Cognizant Corp. 636,554 757,571
SERVICES-COMMERCIAL & CONSUMER -- 5.5%
37,900 Cendant Corp.*<F1> 940,364 1,302,813
24,600 Gartner Group, Inc.*<F1> 686,489 916,350
36,800 PMT Services, Inc.*<F1> 652,010 510,600
2,278,863 2,729,763
TEXTILES-APPAREL -- 1.9%
27,100 Tommy Hilfiger Corp.*<F1> 921,685 951,888
CONSUMER STAPLES SECTOR -- 5.0%
- -------------------------------
ENTERTAINMENT -- 1.5%
26,400 Regal Cinemas, Inc.*<F1> 775,640 735,900
RESTAURANTS -- 3.5%
28,125 Papa John's
International, Inc.*<F1> 572,919 980,859
19,500 Starbucks Corp.*<F1> 662,776 748,313
----------- -----------
1,235,695 1,729,172
ENERGY SECTOR -- 9.0%
- ---------------------
OIL & GAS-DRILLING & EQUIPMENT -- 9.0%
30,400 Falcon Drilling
Company, Inc.*<F1>(b)<F3> 877,589 1,065,915
33,600 Santa Fe
International Corp. 1,256,099 1,367,117
25,200 Schlumberger Ltd. 1,667,942 2,028,600
----------- -----------
3,801,630 4,461,632
FINANCIALS SECTOR -- 7.3%
- -------------------------
CONSUMER FINANCE -- 3.8%
26,400 Green Tree Financial Corp. 1,109,232 691,363
44,850 MBNA Corp. 449,463 1,224,988
----------- -----------
1,558,695 1,916,351
FINANCIAL (DIVERSE) -- 3.5%
26,200 MGIC Investment Corp. 749,524 1,742,300
HEALTHCARE SECTOR -- 16.0%
- --------------------------
DIVERSE -- 4.8%
12,500 Warner-Lambert Co. 1,645,978 1,550,000
27,300 Rexall Sundown, Inc.*<F1> 365,104 824,132
----------- -----------
2,011,082 2,374,132
DRUGS MAJOR -- 5.5%
16,100 Jones Medical
Industries, Inc. 492,868 615,825
10,300 Merck & Co., Inc. 842,962 1,094,375
13,500 Pfizer Inc. 299,369 1,006,601
----------- -----------
1,635,199 2,716,801
MEDICAL PRODUCTS & SUPPLIES -- 1.3%
13,400 STERIS Corp.*<F1> 366,825 646,550
SPECIALIZED SERVICES -- 4.4%
19,700 HBO & Co. 750,406 945,600
40,300 Omnicare, Inc. 1,025,875 1,249,300
----------- -----------
1,776,281 2,194,900
TECHNOLOGY SECTOR -- 28.5%
- --------------------------
COMMUNICATION-EQUIPMENT -- 3.0%
35,500 ADC Telecommunications,
Inc.*<F1> 1,214,338 1,482,125
COMPUTER SOFTWARE/SERVICES -- 15.5%
38,175 Computer Associates
International, Inc. 904,395 2,018,503
5,200 Microsoft Corp.*<F1> 220,697 672,100
13,800 Networks
Associates, Inc.*<F1> 774,536 729,675
42,200 Parametric
Technology Co.*<F1> 1,281,084 1,999,225
30,600 PeopleSoft, Inc.*<F1> 204,791 1,193,400
29,100 Sterling Commerce, Inc.*<F1> 865,460 1,118,546
----------- -----------
4,250,963 7,731,449
COMPUTERS-NETWORKING -- 4.4%
38,850 Cisco Systems, Inc.*<F1> 789,821 2,165,888
ELECTRONICS-SEMICONDUCTORS -- 1.7%
12,300 Intel Corp. 368,131 864,075
SERVICES-DATA PROCESSING -- 3.9%
22,600 FIserv, Inc.*<F1> 1,003,109 1,110,225
16,375 Paychex, Inc. 279,883 828,984
----------- -----------
1,282,992 1,939,209
----------- -----------
Total common stocks. 31,111,860 47,428,878
----------- -----------
Total long-term
investments 31,111,860 47,428,878
QUOTED
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
SHORT-TERM INVESTMENTS -- 4.8% (A)<F2>
VARIABLE RATE DEMAND NOTES
$1,800,000 American Family
Financial Services 1,800,000 1,800,000
579,415 Wisconsin Electric
Power Company 579,415 579,415
----------- -----------
Total short-term
investments 2,379,415 2,379,415
----------- -----------
Total investments $33,491,275 49,808,293
==========
Liabilities, less cash and
receivables (0.1%) (a)<F2> (28,119)
-----------
Net Assets $49,780,174
===========
Net Asset Value Per Share
($0.01 par value 300,000,000
shares authorized), offering
and redemption price
($49,780,174 / 3,344,489
shares outstanding) $14.88
======
*<F1>Non-income producing security.
(a)<F2>Percentages for the various classifications relate to net assets.
(b)<F3>Effective December 31, 1997, Falcon Drilling Company, Inc. merged with
Readings & Bates Corp. to form R&B Falcon Corp.
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDING DECEMBER 31, 1997 (UNAUDITED)
INCOME:
Dividends $64,710
Interest 33,245
----------
Total income 97,955
----------
EXPENSES:
Management fees 247,806
Administrative services 39,903
Professional fees 13,546
Transfer agent fees 7,733
Custodian fees 7,573
Amortization of organizational expenses 3,150
Printing and postage expense 1,906
Registration fees 1,734
Other expenses 3,570
----------
Total expenses before reimbursement 326,921
Less expenses assumed by adviser (14,431)
----------
Net expenses 312,490
----------
NET INVESTMENT LOSS (214,535)
----------
NET REALIZED INCOME ON INVESTMENTS 5,078,628
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 447,085
----------
NET GAIN ON INVESTMENTS 5,525,713
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,311,178
=========
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDING DECEMBER 31, 1997 (UNAUDITED) AND FOR THE YEAR ENDED
JUNE 30, 1997
DECEMBER 31, JUNE 30,
1997 1997
------------ ----------
OPERATIONS:
Net investment loss $(214,535) $(437,091)
Net realized income (loss) on investments 5,078,628 (70,019)
Net increase in unrealized appreciation
on investments 447,085 5,204,147
----------- ----------
Net increase in net assets resulting
from operations 5,311,178 4,697,037
----------- ----------
DISTRIBUTION TO SHAREHOLDERS:
Distribution from net realized gains ($0.63
and -0- per share, respectively) (2,019,090) --
----------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (170,435 and
517,469 shares, respectively) 2,537,964 6,481,669
Net asset value of shares issued in
distributions (140,354 and -0- shares,
respectively) 2,015,489 --
Cost of shares redeemed (297,668 and
865,221 shares, respectively) (4,454,272) (10,982,363)
----------- ----------
Net increase (decrease) in net assets
derived from Fund share activities 99,181 (4,500,694)
----------- ----------
TOTAL INCREASE 3,391,269 196,343
NET ASSETS AT THE BEGINNING OF THE PERIOD 46,388,905 46,192,562
----------- ----------
NET ASSETS AT THE END OF THE PERIOD $49,780,174 $46,388,905
=========== ==========
The accompanying notes to financial statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR EACH SHARE OF THE FUND OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE PERIOD FOR THE FOR THE PERIOD FROM
ENDING YEAR ENDED JULY 1, 1995*<F4>TO
DEC. 31, 1997 JUNE 30, 1997 JUNE 30, 1996
------------- -------------- ---------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $13.92 $12.56 $10.00
Income from investment operations:
Net investment loss (a)<F7> (0.06) (0.14) (0.08)
Net realized and unrealized gains on investments 1.65 1.50 2.64
------- ------- -------
Total from investment operations 1.59 1.36 2.56
Less distributions:
Dividend from net investment income -- -- --
Distribution from net realized gains (0.63) -- --
------- ------- -------
Total from distributions (0.63) -- --
------- ------- -------
Net asset value, end of period $14.88 $13.92 $12.56
======= ======= =======
TOTAL INVESTMENT RETURN 11.6%**<F5> 10.8% 25.6%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 49,780 46,389 46,193
Ratio of expenses (after reimbursement) to average net assets (b)<F8> 1.3%***<F6> 1.3% 1.3%
Ratio of net investment loss to average net assets (c)<F9> (0.9%)***<F6> (1.0%) (0.8%)
Portfolio turnover rate 34.8% 54.3% 40.3%
Average commission rate paid (d)<F10> $0.0600 $0.0600 --
*<F4>Commencement of operations.
**<F5>Not annualized.
***<F6>Annualized.
(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
period ending December 31, 1997 and for the years ended June 30, 1997 and 1996,
1.3%***<F6>, 1.3% and 1.4%, respectively.
(c)<F9>If the Fund had paid all of its expenses, the ratio would have been, for
the period ending December 31, 1997 and for the years ended June 30, 1997 and
1996, (0.9%)***<F6>, (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 these
statements.
</TABLE>
EASTCLIFF TOTAL RETURN FUND
February 9, 1998
Dear Shareholder:
We appreciate this opportunity to communicate the results of your Fund to
you. The final weeks of 1997 were very volatile. The economic outlook as we
approach 1998 appears somewhat positive. Inflation is not a problem and U.S.
corporations are efficient. Productivity has increased while the work force has
been downsized. The Asian problem will affect selected U.S. companies with large
building projects.
At year end, the Net Asset Value was $17.86 per share, and the total assets
of the Fund exceeded $23 million. For the year ending December 31, 1997, the
Fund's total return was 30.0%, the average annual compounded rate of return for
the 5 years ended December 31, 1997, was 16.0%, and for the 10 years ended
December 31, 1997, was 14.7%. As of December 29, 1997, the Board of Directors
declared a dividend of $0.1333 from net investment income which will be treated
as ordinary income. The dividend was paid on December 30, 1997, to shareholders
of record on December 26, 1997. Total distributions paid in 1997 were $0.77587
per share.
We are approaching 1998 optimistically. The Fund's asset allocation at year
end was approximately 24% fixed income instruments, 74% common stocks and 2% in
cash or cash equivalents. This reflects a more cautious approach to the market
and a defensive posture.
To meet the Fund's investment objective of a combination of capital
appreciation and income, we will continue to emphasize premiere companies in
leading economic sectors.
We appreciate your confidence as shareholders and will continue to strive for
exceptional investment results.
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.
STATEMENT OF NET ASSETS
DECEMBER 31, 1997 (UNAUDITED)
SHARES OR QUOTED
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ----- -------
LONG-TERM INVESTMENTS -- 98.0% (A)<F12>
COMMON STOCKS -- 74.4% (A)<F12>
BASIC MATERIALS SECTOR -- 1.1%
- ------------------------------
CONSTRUCTION/BUILDING PRODUCTS -- 1.1%
5,700 Texas Industries, Inc. $277,005 $256,500
CAPITAL GOODS SECTOR -- 2.9%
- ----------------------------
ELECTRICAL EQUIPMENT -- 2.9%
9,000 General Electric Co. (U.S.) 241,832 660,375
CONSUMER CYCLICALS SECTOR -- 1.6%
- ---------------------------------
HOUSEHOLD FURNITURE & APPLIANCES -- 1.6%
9,000 Sunbeam Corporation 179,415 379,125
CONSUMER STAPLES SECTOR -- 9.0%
- -------------------------------
BEVERAGES-SOFT DRINK -- 2.9%
10,000 The Coca-Cola Company 351,275 666,250
HOUSEHOLD PRODUCTS -- 3.0%
4,000 The Clorox Co. 179,620 316,252
5,000 Colgate-Palmolive Co. 202,700 367,500
----------- ----------
382,320 683,752
PERSONAL CARE -- 3.1%
7,000 Gillette Company 336,045 703,066
ENERGY SECTOR -- 7.2%
- ---------------------
OIL & GAS-DRILLING & EQUIPMENT -- 4.1%
18,000 Halliburton Co. 326,221 934,884
OIL-DOMESTIC -- 1.7%
10,000 TransMontaigne Oil Co.* <F11> 142,500 150,000
7,000 USX-Marathon Group 140,420 236,250
----------- ----------
282,920 386,250
OIL-INTERNATIONAL -- 1.4%
6,000 Texaco Inc. 262,805 326,250
FINANCIALS SECTOR -- 13.3%
- --------------------------
BANKS-MAJOR REGIONAL -- 8.3%
18,000 Barnett Banks, Inc. 459,830 1,293,750
6,000 Fifth Third Bancorp. 263,107 490,500
2,000 SouthTrust Corp. 102,000 126,876
----------- ----------
824,937 1,911,126
BANKS-MONEY CENTER -- 2.2%
4,000 Citicorp 162,490 505,752
INSURANCE-MULTILINE -- 2.8%
6,000 American International
Group, Inc. 273,556 652,500
HEALTHCARE SECTOR -- 19.3%
- --------------------------
DIVERSE -- 7.4%
11,000 Bristol-Myers Squibb Co. 379,892 1,040,875
10,000 Johnson & Johnson 299,675 658,750
----------- ----------
679,567 1,699,625
DRUGS MAJOR -- 11.9%
12,000 Eli Lilly & Co. 449,610 835,500
2,500 Merck & Co., Inc. 108,690 265,625
22,000 Pfizer Inc. 554,480 1,640,386
----------- ----------
1,112,780 2,741,511
TECHNOLOGY SECTOR -- 18.2%
- --------------------------
COMMUNICATION-EQUIPMENT -- 7.7%
7,000 Lucent Technologies Inc. 583,358 559,125
6,000 Nokia Corp. "A" ADR 384,360 420,000
20,000 Plantronics, Inc.*<F11> 373,000 800,000
----------- ----------
1,340,718 1,779,125
COMPUTER HARDWARE -- 5.3%
12,500 Compaq Computer Corp. 234,925 705,475
5,000 International Business
Machines Corp. 199,462 522,815
----------- ----------
434,387 1,228,290
COMPUTER SOFTWARE/SERVICES -- 2.9%
5,200 Microsoft Corp.*<F11> 302,226 672,100
ELECTRONICS-SEMICONDUCTORS -- 2.3%
7,600 Intel Corp. 269,035 533,900
UTILITIES SECTOR -- 1.8%
- ------------------------
ELECTRIC COMPANIES -- 1.8%
7,310 Duke Energy Corporation 178,898 404,791
----------- ----------
Total common stocks 8,218,432 17,125,172
----------- ----------
FEDERAL AGENCIES -- 23.6% (A)<F12>
$100,000 FNMA, 7.00%,
due 04/16/01 100,000 100,250
300,000 FHLMC, 7.125%,
due 06/25/01 299,688 305,223
500,000 FFC, 7.43%,
due 10/07/02 500,000 502,323
200,000 FFC, 7.30%,
due 05/29/03 200,000 201,101
1,000,000 FNMA, 6.38%,
due 06/25/03 995,729 994,915
400,000 FHLMC, 7.29%,
due 01/23/04 400,000 401,535
300,000 FHLMC, 6.78%,
due 03/15/04 298,525 301,027
500,000 FHLMC, 7.68%,
due 04/14/04 500,000 503,120
500,000 FNMA, 7.55%,
due 06/10/04 500,000 510,308
500,000 FHLMC, 7.44%,
due 04/07/06 500,000 501,928
500,000 FHLMC, 8.00%,
due 04/09/07 500,000 502,890
500,000 FNMA, 8.00%,
due 04/09/07 500,000 503,153
100,000 FHLB, 7.375%,
due 07/09/07 100,000 100,385
----------- ----------
Total federal agencies 5,393,942 5,428,158
----------- ----------
Total long-term
investments 13,612,374 22,553,330
SHORT-TERM INVESTMENTS -- 1.7% (A)<F12>
VARIABLE RATE DEMAND NOTES
$392,480 Warner-Lambert
Company 392,480 392,480
----------- ----------
Total short-term
investments 392,480 392,480
----------- ----------
Total investments $14,004,854 22,945,810
===========
Cash and receivables, less
liabilities 0.3% (a)<F12> 65,914
-----------
Net Assets $23,011,724
===========
Net Asset Value Per Share
($0.01 par value 300,000,000
shares authorized), offering
and redemption price
($23,011,724 / 1,288,545
shares outstanding) $17.86
======
*<F11>Non-income producing security.
FFC = Federal Farm Credit
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corp.
FNMA = Federal National Mortgage Association
(a)<F12>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDING DECEMBER 31, 1997 (UNAUDITED)
INCOME:
Dividends $102,105
Interest 206,720
---------
Total income 308,825
---------
EXPENSES:
Management fees 115,576
Administrative services 23,115
Professional fees 14,952
Transfer agent fees 6,411
Custodian fees 2,696
Registration fees 2,339
Printing and postage expense 1,702
Other expenses 1,794
---------
Total expenses before reimbursement 168,585
Less expenses assumed by adviser (18,337)
---------
Net expenses 150,248
---------
NET INVESTMENT INCOME 158,577
---------
NET REALIZED GAIN ON INVESTMENTS 17,572
NET INCREASE IN UNREALIZED APPRECIATION
ON INVESTMENTS 2,130,438
---------
NET GAIN ON INVESTMENTS 2,148,010
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $2,306,587
==========
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDING DECEMBER 31, 1997 (UNAUDITED) AND FOR THE YEAR ENDED
JUNE 30, 1997
DECEMBER 31, JUNE 30,
1997 1997
------------ ---------
OPERATIONS:
Net investment income $158,577 $291,137
Net realized gain on investments 17,572 1,161,127
Net increase in unrealized appreciation on
investments 2,130,438 3,367,773
---------- ----------
Net increase in net assets resulting
from operations 2,306,587 4,820,037
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.2494 and $0.11856 per share, respectively) (321,740) (147,615)
Distributions from net realized gains ($0.52647
and $1.33951 per share, respectively) (680,452) (1,639,171)
---------- ----------
Total distributions (1,002,192) (1,786,786)*
<F13>
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (80,905 and 186,332
shares, respectively) 1,421,607 2,803,684
Net asset value of shares issued in distributions
(40,964 and 122,270 shares, respectively) 697,988 1,640,933
Cost of shares redeemed (115,949 and 243,315
shares, respectively) (2,038,717) (3,650,816)
---------- ----------
Net increase in net assets derived from Fund
share activities 80,878 793,801
---------- ----------
TOTAL INCREASE 1,385,273 3,827,052
NET ASSETS AT THE BEGINNING OF THE PERIOD 21,626,451 17,799,399
---------- ----------
NET ASSETS AT THE END OF THE PERIOD
(including (overdistributed) undistributed net
investment income
of ($13,123) and $150,041, respectively) $23,011,724 $21,626,451
=========== ===========
*<F13>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.
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR EACH SHARE OF THE FUND OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FOR THE
(UNAUDITED) PERIOD
FOR THE FROM
PERIOD OCTOBER 1,
ENDED YEARS ENDED 1994 TO
DEC. 31, JUNE 30, JUNE 30, YEARS ENDED SEPTEMBER 30,
---------------- ------------------------------------------------------------
1997 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
--------- ------- ------ ------ ----- ------ ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period $16.86 $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 0.12 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 1.66 3.47 2.90 0.71 0.12 1.28 1.27 2.30 (1.82) 1.40 (1.17)
------ ------ ------ ------ ------ ------ ------ ------ ------- ----- -----
Total from investment
operations 1.78 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 (0.25) (0.12) (0.17) (0.14) (0.18) (0.15) (0.23) (0.36) (0.26) (0.11) --
Distributions from net
realized gains (0.53) (1.34) (0.16) (0.67) (0.55) (0.90) (0.77) (0.13) (0.18) (0.01) (2.95)
------- ------- ------- ------ ------ ------ ------ ------- ------- ------ ----
Total from distributions (0.78) (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 period $17.86 $16.86 $14.62 $11.96 $11.92 $12.38 $11.96 $11.56 $9.47 $11.40 $9.88
====== ====== ======= ======= ======= ====== ======= ======= ====== ====== =====
TOTAL INVESTMENT
RETURN (d)<F18> 12.1%*<F14>28.1% 25.4% 10.4%(a)<F15> 2.2% 13.4% 13.2% 28.7% (13.5%) 16.8% (3.0%)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period
(in 000's $) 23,012 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)<F16>1.3%(a)<F15> 1.3% 1.3% 1.5%(a)<F15> 2.0% 2.0% 2.7% 2.0% 2.4% 3.0% 2.8%
Ratio of net investment
income to average
net assets(c)<F17> 1.4%(a)<F15> 1.5% 0.7% 2.5%(a)<F15> 1.3% 1.5% 1.2% 2.4% 2.8% 2.8% 1.7%
Portfolio turnover rate 14.9% 58.3% 95.1% 89.4% 13.2% 28.0% 34.9% 38.0% 62.7% 27.2%5 1.9%
Average commission rate
aid(e)<F19> $0.0616 $0.0624 -- -- -- -- -- -- -- -- --
*<F14>Not annualized.
(a)<F15>Annualized.
(b)<F16>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 period ending December 31, 1997, and 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%(a)<F15>, 1.5%, 1.6%, 2.6%(a)<F15>, 3.0%, 2.8%, 3.3%, 3.2%, 3.1%,
4.4%, and 11.8%, respectively.
(c)<F17>If the Fund had paid all of its expenses, the ratios would have been,
for the period ending December 31, 1997, and 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:
1.2%(a)<F15>, 1.3%, 0.4%, 1.4%(a)<F15>, 0.2%, 0.8%, 0.6%, 1.3%, 2.1%, 1.4%, and
(7.4%), respectively.
(d)<F18>Effective December 31, 1994, the Fund changed investment advisers from
Fiduciary Management, Inc. to Resource Capital Advisers, Inc.
(e)<F19>Disclosure required for fiscal years beginning after September 1, 1995.
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
February 9, 1998
Dear Shareholder:
The last time we wrote to you we spoke of a small beginning on a long
journey. 1997 presented its challenges as well as opportunities. For the twelve
months ended December 31, 1997 the total return for the Eastcliff Regional Small
Capitalization Value Fund was 21.1% as compared to the Russell 2000 Index at
22.4%. The net asset value at year end was $13.09 (after adjustments for capital
gain and income distributions) and the Fund's assets were over $53 million.
The Fund only holds common stocks and short-term investments. At year-end
1997, 87.5% was invested in equities with the remainder invested in short-term
investments. Your fund holds investments in 49 companies representing a variety
of industries. 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.
Some of the investments that contributed to the performance in 1997, with
returns ranging from 80-100%, were: Merrill Corporation, a financial and
corporate printer based in Minnesota benefiting from the growth in mutual funds
and their compliance printing requirements; Community First Bankshares, a bank
holding company headquartered in North Dakota, which continues to enjoy strong
profit growth from in-market acquisitions; Deflecta-Shield, an Iowa company in
the midst of a successful restructuring that was acquired by a competitor at
year-end; Federal-Mogul, a Michigan based auto parts company undergoing a
restructuring with a new management team and a strategy that is generating
returns far exceeding our expectations.
As we stated last year, without your support we would not be where we are
today. Our challenge is to repay your trust.
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.
STATEMENT OF NET ASSETS
DECEMBER 31, 1997 (UNAUDITED)
SHARES OR QUOTED
PRINCIPAL MARKET
AMOUNT COST VALUE
------- ----- -------
LONG-TERM INVESTMENTS -- 87.5% (A)<F21>
COMMON STOCKS -- 87.5% (A)<F21>
BASIC MATERIALS SECTOR -- 8.7%
- -------------------------------
CHEMICALS-SPECIALTY -- 5.8%
54,000 Ferro Corp. $1,276,535 $1,312,902
22,200 H.B. Fuller Co. 1,177,916 1,098,900
56,300 Material Sciences Corp.*<F20> 832,342 686,184
----------- ----------
3,286,793 3,097,986
CONTAINERS & PACKAGING -- 0.9%
19,800 Ivex Packaging Corp.*<F20> 378,839 475,200
IRON & STEEL -- 0.7%
48,300 Dynamic Materials Corp.*<F20> 477,192 386,400
METALS MINING -- 1.3%
41,800 Citation Corp.*<F20> 680,766 679,250
CAPITAL GOODS SECTOR -- 20.2%
- -----------------------------
AEROSPACE/DEFENSE -- 2.2%
21,100 Alliant Techsystems Inc.*<F20> 1,200,136 1,176,325
CONTAINERS-METAL/GLASS -- 0.6%
19,600 U.S. Can Corp.*<F20> 333,078 330,750
ELECTRICAL EQUIPMENT -- 3.6%
67,200 MagneTek, Inc.*<F20> 1,250,833 1,310,400
60,400 TSI Inc. 573,972 604,000
----------- ----------
1,824,805 1,914,400
MACHINERY-DIVERSE -- 1.4%
24,500 Zurn Industries, Inc. 886,477 770,231
MANUFACTURE-DIVERSE -- 3.9%
32,500 IDEX Corp. 941,695 1,133,437
33,700 Premark
International, Inc. 868,860 977,300
----------- ----------
1,810,555 2,110,737
MANUFACTURE-SPECIAL -- 6.1%
18,300 Donaldson Company, Inc. 544,031 824,653
33,700 Graco Inc. 1,029,650 1,257,448
61,300 OmniQuip
International, Inc. 1,076,543 1,222,199
----------- ----------
2,650,224 3,304,300
OFFICE EQUIPMENT & SUPPLIES -- 2.4%
36,400 National Computer
Systems, Inc. 924,612 1,283,100
CONSUMER CYCLICALS SECTOR -- 25.4%
- ----------------------------------
AUTO PARTS & EQUIPMENT -- 10.6%
52,900 Federal-Mogul Corp. 1,386,267 2,142,450
29,000 SPX Corp. 1,236,233 2,001,000
39,900 Standard Motor
Products, Inc. 817,113 900,264
15,800 Tower Automotive, Inc.*<F20> 570,545 664,595
----------- ----------
4,010,158 5,708,309
CONSUMER (JEWELRY/GIFT) -- 1.6%
33,400 Stanhome Inc. 927,355 857,979
ENTERTAINMENT -- 0.1%
3,700 Musicland Stores Corp.*<F20> 22,422 27,058
FOOTWEAR -- 1.2%
52,100 Stride Rite Corp. 746,219 625,200
PUBLISHING-NEWSPAPER -- 3.5%
25,300 Central Newspapers, Inc. 1,483,497 1,870,631
RETAIL-GENERAL MERCHANDISE -- 1.5%
37,800 Fingerhut Companies, Inc. 659,415 807,975
RETAIL-SPECIALTY -- 1.2%
43,900 Funco, Inc.*<F20> 652,123 653,013
SERVICES-ADVERTISING/MARKETING -- 3.7%
80,600 ACNielsen Corp.*<F20> 1,616,789 1,964,625
TEXTILES-APPAREL -- 2.0%
99,000 Sport-Haley, Inc.*<F20> 1,505,596 1,089,000
CONSUMER STAPLES SECTOR -- 11.1%
- --------------------------------
ENTERTAINMENT -- 3.0%
47,700 Ballantyne of
Omaha, Inc.*<F20> 618,009 858,600
66,500 LodgeNet
Entertainment Corp.*<F20> 818,480 731,500
----------- ----------
1,436,489 1,590,100
FOODS -- 4.2%
80,500 International
Multifoods Corp. 1,728,484 2,279,197
RESTAURANTS -- 1.6%
49,800 VICORP
Restaurants, Inc.*<F20> 731,429 871,500
SPECIALTY PRINTING -- 2.3%
52,600 Merrill Corp. 820,006 1,222,950
FINANCIALS SECTOR -- 7.9%
- -------------------------
BANKS-MAJOR REGIONAL -- 1.9%
19,700 Community First
Bankshares, Inc. 635,825 1,049,025
INSURANCE-PROPERTY -- 4.1%
14,900 Highlands Insurance
Group, Inc.*<F20> 339,735 422,788
62,600 Horace Mann
Educators Corp. 1,424,795 1,780,219
----------- ----------
1,764,530 2,203,007
SAVINGS & LOAN -- 1.9%
30,700 TCF Financial Corp. 618,862 1,041,897
HEALTHCARE SECTOR -- 7.1%
- -------------------------
DRUGS MAJOR -- 0.4%
43,700 Orphan Medical, Inc.*<F20> 309,937 210,328
MEDICAL PRODUCTS & SUPPLIES -- 6.7%
91,700 Empi, Inc.*<F20> 1,763,015 1,811,075
23,900 Lifecore Biomedical, Inc.*<F20> 337,987 522,812
98,300 Rehabilicare Inc.*<F20> 321,212 294,900
35,600 Rochester Medical Corp.*<F20> 576,413 480,600
27,700 Urologix, Inc.*<F20> 476,894 502,063
----------- ----------
3,475,521 3,611,450
TECHNOLOGY SECTOR -- 7.1%
- -------------------------
COMMUNICATION-EQUIPMENT -- 2.4%
74,200 Communications
Systems, Inc. 1,188,625 1,317,050
COMPUTER HARDWARE -- 1.0%
45,500 Ciprico, Inc.*<F20> 669,831 534,625
COMPUTERS-NETWORKING -- 1.2%
38,800 Digi International Inc.*<F20> 561,523 659,600
ELECTRONICS-INSTRUMENTS -- 1.0%
57,700 BOLDER Technologies
Corp.*<F20> 802,238 555,363
ELECTRONICS-SEMICONDUCTORS -- 1.5%
45,000 Aetrium Inc.*<F20> 790,725 810,000
----------- ----------
Total common stocks 41,611,076 47,088,561
----------- ----------
Total long-term
investments 41,611,076 47,088,561
SHORT-TERM INVESTMENTS -- 9.3% (A)<F21>
VARIABLE RATE DEMAND NOTES
$1,874,076 Johnson Controls, Inc. 1,874,076 1,874,076
2,575,000 Warner-Lambert
Company 2,575,000 2,575,000
550,000 Wisconsin Electric
Power Company 550,000 550,000
----------- ----------
Total short-term
investments 4,999,076 4,999,076
----------- ----------
Total investments $46,610,152 52,087,637
==========
Cash and receivables, less
liabilities 3.2% (a)<F21> 1,697,795
-----------
Net Assets $53,785,432
==========
Net Asset Value Per Share
($0.01 par value 300,000,000
shares authorized), offering
and redemption price
($53,785,432 / 4,109,223
shares outstanding) $13.09
======
*<F20>Non-income producing security.
(a)<F21>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDING DECEMBER 31, 1997 (UNAUDITED)
INCOME:
Dividends $166,701
Interest 90,169
---------
Total income 256,870
---------
EXPENSES:
Management fees 224,263
Administrative services 37,532
Professional fees 16,148
Custodian fees 8,643
Transfer agent fees 7,633
Registration fees 5,044
Printing and postage expense 2,994
Amortization of organizational expenses 2,487
Other expenses 1,920
---------
Total expenses before reimbursement 306,664
Less expenses assumed by adviser (22,442)
---------
Net expenses 284,222
---------
NET INVESTMENT LOSS (27,352)
---------
NET REALIZED GAIN ON INVESTMENTS 257,623
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 1,497,405
---------
NET GAIN ON INVESTMENTS 1,755,028
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,727,676
=========
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDING DECEMBER 31, 1997 (UNAUDITED) AND
FOR THE PERIOD FROM SEPTEMBER 16 1996 (COMMENCEMENT OF OPERATIONS) TO
JUNE 30, 1997
DECEMBER 31, 1997 JUNE 30, 1997
----------------- -------------
OPERATIONS:
Net investment (loss) income $(27,352) $39,286
Net realized gain on investments 257,623 163,139
Net increase in unrealized appreciation
on investments 1,497,405 3,980,080
------------ -----------
Net increase in net assets resulting
from operations 1,727,676 4,182,505
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.00566 and $0.0175 per share, respectively) (13,912) (28,177)*
Distributions from net realized gains <F22>
($0.08783 per share) (241,045) --
------------ -----------
(254,957) (28,177)
FUND SHARE ACTIVITIES:
Proceeds from shares issued (2,477,650 and
2,565,434 shares, respectively) 32,832,057 27,036,329
Net asset value of shares issued in distribution
(19,272 and 1,341 shares, respectively) 246,086 14,533
Cost of shares redeemed (777,750 and 176,724
shares, respectively) (9,996,748) (1,973,872)
------------ -----------
Net increase in net assets derived from
Fund share activities 23,081,395 25,076,990
------------ -----------
TOTAL INCREASE 24,554,114 29,231,318
NET ASSETS AT THE BEGINNING OF THE PERIOD 29,231,318 --
------------ -----------
NET ASSETS AT THE END OF THE PERIOD
(including undistributed net investment
income of $-0- and $13,906, respectively) $53,785,432 $29,231,318
=========== ===========
*<F22>Total distributions include $28,177 of ordinary income, of which 57% is
eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR EACH SHARE OF THE FUND OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE PERIOD FOR THE PERIOD FROM
ENDED SEPTEMBER 16, 1996+<F23>TO
DECEMBER 31, 1997 JUNE 30, 1997
----------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $12.23 $10.00
Income from investment operations:
Net investment (loss) income (0.01) 0.02
Net realized and unrealized gains on investments 0.96 2.23
------- -------
Total from investment operations 0.95 2.25
Less distributions:
Dividends from net investment income (0.01) (0.02)
Distributions from net realized gains (0.08) --
------- -------
Total from distributions (0.09) (0.02)
------- -------
Net asset value, end of period $13.09 $12.23
======= ======
TOTAL INVESTMENT RETURN 7.8%**<F25> 22.5%**
RATIOS/SUPPLEMENTAL DATA: <F25>
Net assets, end of period (in 000's $) 53,785 29,231
Ratio of expenses (after reimbursement) to average net assets (a)<F26> 1.3%*<F24> 1.3%*
<F24>
Ratio of net investment (loss) income to average net assets (b)<F27> (0.1%)*<F24> 0.3%*
<F24>
Portfolio turnover rate 20.4% 29.4%
Average commission rate paid $0.0623 $0.0693
+<F23>Commencement of operations.
*<F24>Annualized.
**<F25>Not annualized.
(a)<F26>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would
have been 1.4%*<F24> for the period ending December 31, 1997 and 1.6%*<F23>
for the period September 16, 1996 to June 30, 1997.
(b)<F27>If the Fund had paid all of its expenses, the ratio would have been
(0.2%)*<F24> for the period ending December 31, 1997 and (0.0%)*<F23> for the
period September 16, 1996 to June 30, 1997.
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
EASTCLIFF FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (UNAUDITED)
(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 four funds: 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
the Eastcliff Contrarian Value Fund (the "Contrarian Value 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; and the investment objective of the Contrarian Value Fund
is to produce long-term capital by investing in out-of-favor, undervalued
companies with restructuring and turnaround potential. The Contrarian Value
Fund commenced operations on December 30, 1997.
(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.
(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 Growth Fund,
Total Return Fund and Regional Small Cap 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
utilized $1,622,050 of capital loss carrovers to offset current year net capital
gains.
(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 $14,431, $18,337 and
$22,442 for the period ending December 31, 1997, for the Growth Fund, Total
Return Fund, and 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
December 31, 1997, no such expenses were incurred.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains are distributed to shareholders.
On December 29, 1997, the Growth Fund distributed $2,019,241 ($0.6300 per
share) from net long-term realized gains. The Total Return Fund distributed a
dividend from net investment income of $158,647 ($0.1333 per share). Also, the
Regional Small Cap Fund distributed $64,497 ($0.0160 per share) from net
short-term realized gains. The distributions were paid on December 30, 1997,
to shareholders of record on December 26, 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 December 31, 1997, were $15,753 and $18,650,
respectively.
(5) INVESTMENT TRANSACTIONS --
For the period ending December 31, 1997, purchases and proceeds of sales of
investment securities of the Growth Fund (excluding short-term securities)
were $16,582,500 and $20,669,741, respectively; purchases and proceeds of
sales of investment securities of the Total Return Fund (excluding short-term
securities) were $3,314,998 and $3,619,212, respectively; and purchases and
proceeds of sales of investment securities of the Regional Small Cap Fund
(excluding short-term securities) were $25,696,299 and $8,446,439,
respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of December 31, 1997, liabilities of the Funds included the following:
TOTAL REGIONAL
GROWTH FUND RETURN FUND SMALL CAP FUND
---------- ---------- --------------
Payable to RCA for management
fees and deferred expenses $56,850 $19,537 $64,471
Other liabilities 11,826 6,236 14,754
(7) SOURCES OF NET ASSETS --
As of December 31, 1997, the sources of net assets were as follows:
Fund shares issued and
outstanding $32,025,669 $14,070,327 $48,128,236
Net unrealized appreciation
on investments 16,317,017 8,940,956 5,477,485
Undistributed net realized
gains on investments 1,437,488 13,563 179,717
Overdistributed net investment
income -- (13,122) (6)
---------- ----------- ----------
$49,780,174 $23,011,724 $53,785,432
========== =========== ==========
Aggregate net unrealized appreciation as of December 31, 1997, consisted of
the following:
Aggregate gross unrealized
appreciation $17,306,107 $8,987,263 $7,979,964
Aggregate gross unrealized
depreciation (989,090) (46,307) (2,502,479)
---------- --------- ----------
Net unrealized appreciation $16,317,017 $8,940,956 $5,477,485
========== ========== ==========
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
