P R O S P E C T U S
SEPTEMBER 30, 1999
(EASTCLIFF FUNDS LOGO)
Eastcliff Total Return Fund
Eastcliff Growth Fund
Eastcliff Emerging
Growth Fund
Eastcliff Regional Small
Capitalization Value Fund
Eastcliff Contrarian
Value Fund
NO-LOAD MUTUAL FUNDS
PROSPECTUS SEPTEMBER 30, 1999
(EASTCLIFF FUNDS LOGO)
The Eastcliff Funds are a family of five no load mutual funds. Each of the
Eastcliff Funds invests mainly in common stocks of U.S. companies.
The Eastcliff Funds are:
o Eastcliff Total Return Fund o Eastcliff Regional Small
Capitalization Value Fund
o Eastcliff Growth Fund
o Eastcliff Emerging Growth Fund o Eastcliff Contrarian Value Fund
Please read this Prospectus and keep it for future reference. It contains
important information, including information on how the Eastcliff Funds invest
and the services they offer to shareholders.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EASTCLIFF FUNDS
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
(612) 336-1444
TABLE OF CONTENTS
QUESTIONS EVERY INVESTOR SHOULD ASK
BEFORE INVESTING IN THE EASTCLIFF FUNDS 2
FEES AND EXPENSES 10
INVESTMENT OBJECTIVES AND STRATEGIES 12
MANAGEMENT OF THE FUNDS 14
THE FUNDS' SHARE PRICE 17
PURCHASING SHARES 17
REDEEMING SHARES 19
EXCHANGING SHARES 22
DIVIDENDS, DISTRIBUTIONS AND TAXES 22
FINANCIAL HIGHLIGHTS 23
SHARE PURCHASE APPLICATION CENTERFOLD
QUESTIONS EVERY INVESTOR SHOULD ASK BEFORE INVESTING IN THE EASTCLIFF FUNDS
1.WHAT ARE THE EASTCLIFF FUNDS' GOALS?
EASTCLIFF TOTAL RETURN FUND
Eastcliff Total Return Fund seeks a combination of long-term growth of
capital and income to achieve a high total return, while assuming reasonable
risks.
EASTCLIFF GROWTH FUND
Eastcliff Growth Fund seeks long-term growth of capital.
EASTCLIFF EMERGING GROWTH FUND
Eastcliff Emerging Growth Fund seeks long-term growth of capital.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
Eastcliff Regional Small Capitalization Value Fund seeks long-term growth of
capital.
EASTCLIFF CONTRARIAN VALUE FUND
Eastcliff Contrarian Value Fund seeks long-term growth of capital.
2.WHAT ARE THE EASTCLIFF FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
Each of the Eastcliff Funds invests mainly in common stocks of United
States companies. However, the Total Return Fund, consistent with its
investment objective, may also invest mainly in debt securities or in both
common stocks and debt securities. The Funds employ different investment
strategies to achieve their investment objectives. Unlike many mutual fund
families where most of the stock funds invest in substantially the same
companies, each of the Eastcliff Funds targets a different subset of the
domestic stock market. While from time to time there will be some
investments common to some or all of the Eastcliff Funds, their portfolios
and performance will vary significantly. Please read this Prospectus
carefully to determine which of the Eastcliff Funds best meets your
investment objectives.
EASTCLIFF TOTAL RETURN FUND
The Total Return Fund is our flexible Fund. We anticipate that the Total
Return Fund will invest mainly in common stocks most of the time. However,
because it is a flexible fund, it may also invest mainly in bonds and other
debt securities (such as notes, debentures, bills or money market
instruments), or in both common stocks and debt securities. The Total Return
Fund is not required to invest any minimum or maximum percentage of its
assets in common stocks or any other type of security. The common stocks the
Total Return Fund purchases are generally of large capitalization growth
companies (i.e. companies having a market capitalization of $7 billion or
more at the time of purchase). The debt securities the Total Return Fund
purchases are primarily U.S. government securities or corporate debt
securities rated A or better by a nationally recognized rating agency. The
debt securities the Total Return Fund purchases usually have maturities of
under 10 years. When implementing its asset allocation strategy, the Total
Return Fund reviews the economic outlook, the direction in which inflation
and interest rates are expected to move and the level of securities prices to
determine the probability that common stocks as an asset class will perform
better than debt securities of varying maturities.
EASTCLIFF GROWTH FUND
The Growth Fund is one of our two "growth" funds. Our "growth" Funds
invest in companies that have the potential for above-average future earnings
growth. We believe investing in these companies provides an opportunity for
achieving superior portfolio returns (i.e., returns in excess of the returns
of the average stock mutual fund) over the long term. The Growth Fund
generally invests in mid to large capitalization companies. These are
companies having a market capitalization in excess of $1.5 billion at the
time of purchase.
EASTCLIFF EMERGING GROWTH FUND
The Emerging Growth Fund is our second "growth" Fund. The Emerging Growth
Fund differs from the Growth Fund in that it primarily invests in small
capitalization companies and smaller mid-cap companies (i.e. companies having
a market capitalization under $3.0 billion at the time of purchase). Like
the Growth Fund, the Emerging Growth Fund invests in companies that have the
potential for above-average future earnings growth. Most of these companies
compete in new and emerging markets and often have exciting new products to
offer. The portfolio manager of the Emerging Growth Fund looks for the
"rising stars" in all industries. The Emerging Growth Fund also does not
automatically sell proven performers if their market capitalization
subsequently exceeds $3.0 billion, but generally will not add to its holdings
of these companies.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
The Regional Small Capitalization Value Fund is one of our two "value"
Funds. Our "value" Funds invest in companies which our portfolio managers
believe to be undervalued. We believe this investment approach has the
potential to produce superior portfolio returns if the market ultimately
recognizes that investments held by these Funds are undervalued. The
Regional Small Capitalization Value Fund generally will invest at least 65%
of its total assets in small capitalization companies (i.e., companies having
a market capitalization of $1.5 billion or less at the time of purchase)
headquartered in the states of Minnesota, North Dakota, South Dakota,
Montana, Wisconsin, Michigan, Iowa, Nebraska, Colorado, Illinois, Indiana and
Ohio. Our portfolio manager looks for undervalued companies with shareholder
oriented management teams that are employing strategies to grow the company's
value.
EASTCLIFF CONTRARIAN VALUE FUND
The Contrarian Value Fund is our second "value" Fund. The Contrarian Value
Fund differs from the Regional Small Capitalization Value Fund in that it
predominantly invests in larger small capitalization companies and mid-cap
companies. These are companies having a market capitalization between $1.0
billion and $7.0 billion at the time of purchase. Also, the Contrarian Value
Fund's investments are not concentrated in a geographical region of the
United States. The portfolio manager of the Contrarian Value Fund looks for
companies with restructuring and turnaround potential that are selling at a
substantial discount to their private market value.
3.WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE EASTCLIFF FUNDS?
Investors in the Eastcliff Funds may lose money. There are risks
associated with investments in the types of securities in which the Eastcliff
Funds invest. These risks include:
<TABLE>
TOTAL EMERGING REGIONAL SMALL CONTRARIAN
RETURN FUND GROWTH FUND GROWTH FUND CAPITALIZATION VALUE FUND VALUE FUND
------------ ----------- ----------- ------------------------- ----------
<S> <C> <C> <C> <C>
o Market Risk o Market Risk o Market Risk o Market Risk o Market Risk
o Growth o Growth o Smaller o Smaller o Value
Investing Risk Investing Risk Capitalization Capitalization Investing Risk
Companies Risk Companies Risk
o Interest
Rate Risk o Growth o Value
Investing Risk Investing Risk
o Credit Risk
o Regional
o Prepayment Risk Concentration Risk
o Asset Allocation Risk
</TABLE>
o MARKET RISK: The prices of the securities in which the Eastcliff Funds
invest may decline for a number of reasons. The price declines of common
stocks, in particular, may be steep, sudden and/or prolonged.
o SMALLER CAPITALIZATION COMPANIES RISK: The Regional Small Capitalization
Value Fund and the Emerging Growth Fund invest primarily in smaller
capitalization companies. Smaller capitalization companies typically
have relatively lower revenues, limited product lines and lack of
management depth, and may have a smaller share of the market for their
products or services, than larger capitalization companies. The stocks
of smaller capitalization companies tend to have less trading volume than
stocks of larger capitalization companies. Less trading volume may make
it more difficult for our portfolio managers to sell securities of
smaller capitalization companies at quoted market prices. Finally, there
are periods when investing in smaller capitalization stocks falls out of
favor with investors and the stocks of smaller capitalization companies
underperform.
o GROWTH INVESTING RISK: Each of the Total Return Fund, the Growth Fund
and the Emerging Growth Fund primarily invest in "growth" stocks. Our
portfolio managers may be wrong in their assessments of a company's
potential for growth and the stocks these Funds hold may not grow as our
portfolio managers anticipate. From time to time "growth" investing
falls out of favor with investors. During these periods, these Funds'
relative performance may suffer.
o VALUE INVESTING RISK: Each of the Regional Small Capitalization Value
Fund and the Contrarian Value Fund primarily invest in "value" stocks.
Our portfolio managers may be wrong in their assessment of a company's
value and the stocks these Funds hold may not reach what the portfolio
managers believe are their full values. From time to time "value"
investing falls out of favor with investors. During those periods, these
Funds' relative performance may suffer.
o REGIONAL CONCENTRATION RISK: The Regional Small Capitalization Value
Fund's policy of concentrating its common stock investments in a
geographic region means that it may be subject to adverse economic,
political or other developments in that region.
o INTEREST RATE RISK: At times, the Total Return Fund may invest primarily
in debt securities. In general, the value of bonds and other debt
securities falls when interest rates rise. Longer term obligations are
usually more sensitive to interest rate changes than shorter term
obligations. While bonds and other debt securities normally fluctuate
less in price than common stocks, there have been extended periods of
increases in interest rates that have caused significant declines in bond
prices.
o CREDIT RISK: At times, the Total Return Fund may invest primarily in
debt securities. The issuers of the bonds and other debt securities held
by the Total Return Fund may not be able to make interest or principal
payments. Even if these issues are able to make interest or principal
payments, they may suffer adverse changes in financial condition that
would lower the credit quality of the security, leading to greater
volatility in the price of the security.
o PREPAYMENT RISK: At times, the Total Return Fund may invest primarily in
debt securities. The issuers of the bonds and other debt securities held
by the Total Return Fund may prepay principal due on securities,
particularly during periods of declining interest rates. Securities
subject to prepayment risk generally offer less potential for gain when
interest rates decline, and may offer a greater potential for loss when
interest rates rise. Rising interest rates may cause prepayments to
occur at a slower than expected rate thereby increasing the average life
of the security and making the security more sensitive to interest rate
changes.
o ASSET ALLOCATION RISK: As a flexible fund, the Total Return Fund
allocates its investments among various asset classes. The Total Return
Fund's performance will be affected by its portfolio manager's ability to
anticipate correctly the relative potential returns and risks of the
asset classes in which the Total Return Fund invests. For example, the
Total Return Fund's relative investment performance would suffer if only
a small portion of the Total Return Fund's assets were allocated to
stocks during a significant stock market advance, and its absolute
investment performance would suffer if a major portion of its assets were
allocated to stocks during a market decline.
Because of these risks the Funds are a suitable investment only for those
investors who have long-term investment goals. Prospective investors who are
uncomfortable with an investment that will increase and decrease in value
should not invest in the Funds.
4.HOW HAVE THE EASTCLIFF FUNDS PERFORMED?
The bar charts and tables that follow provide some indication of the risks
of investing in the Eastcliff Funds by showing changes in the performance
from year to year of the Total Return Fund, the Growth Fund, the Regional
Small Capitalization Value Fund and the Contrarian Value Fund and how their
average annual returns over various periods compare to the performance of
various broad-based securities indexes. (The Emerging Growth Fund will
commence operations on September 30, 1999.) Please remember that each Fund's
past performance is not necessarily an indication of its future performance.
It may perform better or worse in the future.
EASTCLIFF TOTAL RETURN FUND
(TOTAL RETURN PER CALENDAR YEAR)
1995 23.19%
1996 20.48%
1997 30.04%
1998 38.69%
Note: During the four year period shown on the bar chart, the Fund's highest
total return for a quarter was 24.02% (quarter ended December 31, 1998)
and the lowest total return for a quarter was -7.10% (quarter ended
September 30, 1998).
The Fund's 1999 year to date total return is 1.78% (January 1, 1999
through the quarter ended September 30, 1999).
The bar chart does not disclose performance information for the 1989-1994
calendar years because the investment adviser to the Total Return Fund
was Fiduciary Management, Inc.
AVERAGE ANNUAL TOTAL RETURNS SINCE
(FOR THE PERIODS ENDING DECEMBER 31, 1998) PAST YEAR JANUARY 1, 1995*<F1>
- ----------------------------------------- --------- --------------------
Eastcliff Total Return Fund 38.69% 27.91%
S&P 500**<F2> 28.75% 30.61%
Lehman Brothers Intermediate Corporate
Bond Index ***<F3> 8.44% 9.80%
*<F1> The table does not disclose performance information from January
1, 1989 through December 31, 1994 because the investment adviser
to the Total Return Fund was Fiduciary Management, Inc.
**<F2> The S&P 500 is the Standard & Poor's Composite Index of 500
Stocks, a widely recognized unmanaged index of common stock
prices.
***<F3> The Lehman Brothers Intermediate Corporate Bond Index includes
all intermediate publicly issued, fixed rate, nonconvertible
investment grade, dollar denominated, SEC-registered corporate
debt. The Index includes bonds with maturities of one to ten
years and outstanding par values of at least $100 million.
EASTCLIFF GROWTH FUND
(TOTAL RETURN PER CALENDAR YEAR)
1996 16.85%
1997 22.40%
1998 29.23%
Note: During the three year period shown on the bar chart, the Fund's highest
total return for a quarter was 29.76% (quarter ended December 31, 1998)
and the lowest total return for a quarter was -16.98% (quarter ended
September 30, 1998).
The Fund's 1999 year to date total return is -6.39% (January 1, 1999
through the quarter ended September 30, 1999).
SINCE THE INCEPTION
AVERAGE ANNUAL TOTAL RETURNS OF THE FUND
(FOR THE PERIODS ENDING DECEMBER 31, 1998) PAST YEAR (JULY 1, 1995)
- ----------------------------------------- --------- -------------------
Eastcliff Growth Fund 29.23% 22.02%
S&P 500 28.75% 28.73%
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
(TOTAL RETURN PER CALENDAR YEAR)
1997 21.08%
1998 (3.86%)
Note: During the two year period shown on the bar chart, the Fund's highest
total return for a quarter was 22.26% (quarter ended December 31, 1998)
and the lowest total return for a quarter was -24.09% (quarter ended
September 30, 1998).
The Fund's 1999 year to date total return is 0.72% (January 1, 1999
through the quarter ended September 30, 1999).
SINCE THE INCEPTION
AVERAGE ANNUAL TOTAL RETURNS OF THE FUND
(FOR THE PERIODS ENDING DECEMBER 31, 1998) PAST YEAR (SEPTEMBER 16, 1996)
- ----------------------------------------- --------- --------------------
Eastcliff Regional Small Capitalization
Value Fund -3.86% 10.99%
Russell 2000 Index*<F4> -2.55% 11.02%
*<F4> 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. This index attempts
to accurately capture the performance of the universe of small
capitalization common stocks.
EASTCLIFF CONTRARIAN VALUE FUND
(TOTAL RETURN PER CALENDAR YEAR)
1998 (9.07%)
Note: During the one year period shown on the bar chart, the Fund's highest
total return for a quarter was 7.48% (quarter ended March 31, 1998) and
the lowest total return for a quarter was -17.29% (quarter ended
September 30, 1998).
The Fund's 1999 year to date total return is 0.63% (January 1, 1999 through
the quarter ended September 30, 1999).
SINCE THE INCEPTION
AVERAGE ANNUAL TOTAL RETURNS OF THE FUND
(FOR THE PERIODS ENDING DECEMBER 31, 1998) PAST YEAR (DECEMBER 30, 1997)
- ----------------------------------------- --------- ------------------
Eastcliff Contrarian Value Fund -9.07% -8.78%
Russell Midcap Index*<F5> 10.10% 10.36%
*<F5> The Russell Midcap Index consists of the smallest 800 securities
in the Russell 1000 Index as ranked by total market
capitalization. This index attempts to capture the performance of
the medium-sized universe of common stocks.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy
and hold shares of the Eastcliff Funds.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
EASTCLIFF
EASTCLIFF EASTCLIFF REGIONAL
TOTAL EASTCLIFF EMERGING SMALL EASTCLIFF
RETURN GROWTH GROWTH CAPITALIZATION CONTRARIAN
FUND FUND FUND VALUE FUND VALUE FUND
--------- --------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a
Percentage of offering price) No Sales No Sales No Sales No Sales No Sales
Charge Charge Charge Charge Charge
Maximum Deferred Sales
Charge (Load) No Deferred No Deferred No Deferred No Deferred No Deferred
Sales Charge Sales Charge Sales Charge Sales Charge Sales Charge
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends And Distributions No Sales No Sales No Sales No Sales No Sales
Charge Charge Charge Charge Charge
Redemption Fee None(1)<F6> None(1)<F6> None(1)<F6> None(1)<F6> None(1)<F6>
Exchange Fee None None None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution and/or
Service (12b-1) Fees 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.40%(2)<F7> 0.28% 1.00%(2)<F7>(3)<F8> 0.29% 0.54%(2)<F7>
Total Annual Fund
Operating Expenses 1.40% 1.28% 2.00% 1.29% 1.54%
</TABLE>
(1)<F6> Our transfer agent charges a fee of $12.00 for each wire redemption.
(2)<F7> Both the Total Return Fund and the Contrarian Value Fund had actual
Total Annual Fund Operating Expenses for the most recent fiscal year
that were less than the amounts shown. Our investment adviser
reimbursed each Fund to the extent necessary to insure that Total
Annual Fund Operating Expenses did not exceed the amounts set forth
below. The portfolio manager for the Emerging Growth Fund will
reimburse the Emerging Growth Fund to the extent necessary to insure
that its Total Annual Fund Operating Expenses do not exceed the amounts
set forth below:
EASTCLIFF TOTAL RETURN 1.30%
EASTCLIFF EMERGING GROWTH FUND 1.30%
EASTCLIFF CONTRARIAN VALUE FUND 1.30%
Our investment adviser and the Emerging Growth Fund's portfolio manager
may discontinue these reimbursements at any time, but will not do so
prior to June 30, 2000.
(3)<F8> Based on our estimates for the fiscal year ending June 30, 2000.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Eastcliff Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of these periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Eastcliff Total Return Fund $143 $443 $766 $1,680
Eastcliff Growth Fund $130 $406 $702 $1,545
Eastcliff Emerging Growth Fund $203 $627 $1,078 $2,327
Eastcliff Regional Small
Capitalization Value Fund $131 $409 $708 $1,556
Eastcliff Contrarian Value Fund $157 $486 $839 $1,835
INVESTMENT OBJECTIVES AND STRATEGIES
GENERAL
Eastcliff Total Return Fund seeks a combination of long-term growth of
capital and income to achieve a high total return, while assuming reasonable
risks. Eastcliff Growth Fund seeks long-term growth of capital. Eastcliff
Emerging Growth Fund seeks long-term growth of capital. Eastcliff Regional
Small Capitalization Value Fund seeks long-term growth of capital. Eastcliff
Contrarian Value Fund seeks long-term growth of capital. Each Fund may change
its investment objective without obtaining shareholder approval. Please
remember that an investment objective is not a guarantee. An investment in the
Eastcliff Funds might not appreciate and investors could lose money.
The Eastcliff Funds invest mainly in common stocks of United States
companies. However, the Total Return Fund, consistent with its investment
objective, may also invest mainly in debt securities (such as bonds, notes,
debentures, bills, or money market instruments), or in both common stocks or
debt securities. Each of the Eastcliff Funds, in response to adverse market,
economic, political or other conditions, may take temporary defensive positions.
This means a Fund will invest some or all of its assets in money market
instruments (like U.S. Treasury Bills, commercial paper or repurchase
agreements). The Eastcliff Funds will not be able to achieve their investment
objectives of capital appreciation or growth to the extent that they invest in
money market instruments since these securities earn interest but do not
appreciate in value. Also these investments will usually have a lower yield
than the longer term debt securities in which the Total Return Fund may invest.
When a Fund is not taking a temporary defensive position, it still will hold
some cash and money market instruments so that it can pay its expenses, satisfy
redemption requests or take advantage of investment opportunities.
Each of the Eastcliff Funds is diversified. All of our portfolio managers
take a "focused" approach to investing. By "focused" we mean investing in a
limited number of stocks. Usually each of the Eastcliff Funds will hold stocks
of less than 70 companies. They are not "closet indexers." ("Closet indexers"
are portfolio managers that purport to actively manage a portfolio but actually
manage it in such a way that its returns will be substantially similar to an
index.)
Our portfolio managers are patient investors. The Eastcliff Funds do not
attempt to achieve their investment objectives by active and frequent trading of
common stocks.
EASTCLIFF TOTAL RETURN FUND
The portfolio manager for the Total Return Fund utilizes a "top down"
investment approach when it determines the portion of the Total Return Fund's
assets to be allocated to stocks and the portion to be allocated to bonds and
other debt securities. The portfolio manager reviews the economic outlook, the
direction in which inflation and interest rates are expected to move and the
level of securities prices to determine the probability that common stocks as an
asset class will perform better than debt securities of varying maturities.
After the portfolio manager has determined the appropriate allocations among
asset classes, it selects individual investments. When purchasing common stocks
for the Total Return Fund, the portfolio manager takes a "bottom-up" approach to
identifying companies that have the potential for above average growth. When
purchasing bonds and other debt securities for the Total Return Fund, the
portfolio manager takes a "top-down" approach to determine the desired maturity
of the Fund's portfolio of debt securities and the allocation between U.S.
government securities and corporate debt securities.
The portfolio manager employs a sell discipline pursuant to which it will:
o Sell or reduce a position as part of its asset allocation process
o Sell an entire position when fundamentals are deteriorating
o Reduce or sell an entire position when it finds a better investment to
replace it
EASTCLIFF GROWTH FUND
When purchasing stocks for the Growth Fund, the portfolio manager looks for
companies having some or all of the following attributes:
o Consistent and sustainable future growth of revenue and earnings
o Low financial leverage with strong cash flow
o High return on equity/low debt-to-total capital
o Management focused on shareholder value
o Dominant market leader
The portfolio manager takes a "bottom-up" investment approach when selecting
investments for the Growth Fund. This means it bases investment decisions on
company specific factors, not general economic conditions. The portfolio
manager also employs a sell discipline pursuant to which it will:
o Trim back a position which exceeds 5% of the Growth Fund
o Sell an entire position when fundamentals are deteriorating
o Reduce or sell an entire position when it finds a better investment to
replace it
o Trim back a position after a strong relative price increase
EASTCLIFF EMERGING GROWTH FUND
When purchasing stocks for the Emerging Growth Fund, the portfolio manager
identifies companies early in their public company existence. Most of these
companies compete in new and emerging markets and often have exciting new
products to offer. When selecting investments for the Emerging Growth Fund, the
portfolio manager emphasizes a "bottom-up" approach to look for companies with
long-term growth potential whose earnings the portfolio manager expects to grow
at least 15% per year. The portfolio manager also emphasizes a sell discipline
pursuant to which it will:
o Trim back a position which exceeds 5% of the Emerging Growth Fund
o Reduce or sell an entire position when it finds a better investment to
replace it
o Sell all or substantially all of a position when fundamentals deteriorate
or where there is a change in one or more factors which led to the original
investment decision
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
When purchasing stocks for the Regional Small Capitalization Value Fund, the
portfolio manager utilizes a bottom-up investment approach. The portfolio
manager looks for undervalued companies with shareholder oriented management
teams that are employing strategies to grow the company's value. These
companies typically include:
o Companies undergoing fundamental change through new management teams or
different strategies
o "Early stage" companies with solutions to large problems
The portfolio manager also employs a sell discipline pursuant to which it
will:
o Sell a position when the price of the stock exceeds the company's intrinsic
value
o Sell a position when it has diminished confidence that management will
execute its stated strategy
EASTCLIFF CONTRARIAN VALUE FUND
When purchasing stocks for the Contrarian Value Fund, the portfolio manager
utilizes a bottom-up investment approach. The portfolio manager looks for
companies that both are selling at a substantial discount to their private
market value and have restructuring and turnaround potential. The portfolio
manager looks for companies where there is the potential for:
o Doubling of earnings over a three-year period
o Significant price appreciation over a three-year period
The portfolio manager employs a sell discipline similar to the sell
discipline of the portfolio manager for the Regional Small Capitalization Value
Fund pursuant to which it will:
o Sell a position when the price of the stock reaches the portfolio manager's
target price
o Sell a position when it has diminished confidence that management can
execute the turnaround strategy
o Sell a position when key management departs
MANAGEMENT OF THE FUNDS
RESOURCE CAPITAL ADVISERS, INC. IS THE INVESTMENT ADVISER TO THE FUNDS.
Resource Capital Advisers, Inc. (the "Adviser") is the investment adviser to
each of the Eastcliff Funds. The Adviser's address is:
900 Second Avenue South
300 International Centre
Minneapolis, MN 55402
As the investment adviser to the Funds, the Adviser:
o Provides or oversees the provision of all general management and
administration, investment advisory and portfolio management, and general
services for the Funds
o Develops the investment programs, selects portfolio managers and monitors
the portfolio managers' investment programs and results
During the last fiscal year, each of the Total Return Fund, the Growth Fund,
the Regional Small Capitalization Value Fund and the Contrarian Value Fund paid
the Adviser an annual investment advisory fee equal to 1.00% of its average net
assets. (The investment advisory fee paid by the Total Return Fund is reduced
to 0.75% with respect to average net assets in excess of $30 million.) The
Emerging Growth Fund (which will commence operations on September 30, 1999) will
pay the Adviser an annual advisory fee equal to 1.00% of its average net assets.
The Adviser was organized in 1984 and is the investment adviser to
individuals and institutional clients. It is a wholly-owned subsidiary of
Resource Trust Company, a Minnesota state bank. Resource Trust Company is a
wholly-owned subsidiary of Resource Companies, Inc.
EACH OF THE FUNDS HAVE DIFFERENT PORTFOLIO MANAGERS
The investment portfolio of each of the Eastcliff Funds is managed by a
different sub-adviser. We refer to the sub-advisers as "portfolio managers."
Each portfolio manager has complete discretion to purchase and sell portfolio
securities for the Fund for which it is acting as portfolio manager within such
Fund's investment objectives, restrictions and policies, and specific
strategies, if any, developed by the Adviser. The Adviser employs and
terminates portfolio managers, subject to approval of the Board of Directors of
the Eastcliff Funds.
The employment of a new portfolio manager for a Fund currently requires the
prior approval of the shareholders of that Fund. The Fund may request an order
of the Securities and Exchange Commission exempting the Funds from the
requirement for shareholder approval of new portfolio managers. The Securities
and Exchange Commission might not grant the request. However, if an order is
granted, the Funds will notify shareholders of any change in portfolio managers.
The Adviser pays the fees of each portfolio manager. These fees are based on
a percentage of Fund assets under management; there are no performance or
incentive fees. The portfolio managers for all of the Funds, except the Total
Return Fund, receive a fee equal to 0.60% of the average net assets of the Fund
for which it serves as portfolio manager. The portfolio manager for the Total
Return Fund receives a fee equal to 0.40% of the first $30 million of that
Fund's average net assets and 0.30% of that Fund's average net assets in excess
of $30 million.
In selecting portfolio managers, the Adviser evaluates quantitatively and
qualitatively the portfolio manager's skills and results in managing assets for
specific asset classes, investment styles and strategies. The Adviser evaluates
the risks and returns of the portfolio managers' investment style over an entire
market cycle. The Adviser does not consider short-term investment performance,
by itself, to be a controlling factor in selecting or terminating a portfolio
manager.
EASTCLIFF TOTAL RETURN FUND
Palm Beach Investment Advisers, LLC is the portfolio manager to the Total
Return Fund. Its address is:
249 Royal Palm Way
Suite 400
Palm Beach, FL 33480
Palm Beach Investment Advisers, LLC and its predecessors have managed equity
and fixed income portfolios for individual and institutional clients since 1990
and, as of June 30, 1999, managed approximately $300 million in assets. Palm
Beach Investment Advisers, LLC is controlled by the Adviser. Patrice J.
Neverett, Executive Vice President and Chief Investment Officer of Palm Beach
Investment Advisers, LLC is primarily responsible for the day-to-day management
of the Total Return Fund's portfolio. Ms. Neverett has been employed by Palm
Beach Investment Advisers, LLC and its predecessors in various capacities since
1990.
EASTCLIFF GROWTH FUND
Winslow Capital Management, Inc. is the portfolio manager to the Growth Fund.
Its address is:
4720 IDS Tower
80 South Eighth Street
Minneapolis, MN 55402
Winslow Capital Management, Inc. has been an investment adviser since 1992,
and as of June 30, 1999 managed approximately $1.3 billion in assets. Clark J.
Winslow, the President and Chief Executive Officer of Winslow Capital
Management, Inc., is primarily responsible for the day-to-day management of the
Growth Fund's portfolio. Mr. Winslow has served as President, Chief Executive
Officer and a portfolio manager of Winslow Capital Management, Inc. since 1992.
Prior to that time, he was senior vice president and portfolio manager at
Alliance Capital Management from 1987 to 1992, and portfolio manager at John W.
Bristol & Co. from 1980 to 1997.
EASTCLIFF EMERGING GROWTH FUND
KB Growth Advisors, LLC is the portfolio manager to the Emerging Growth Fund.
It's address is:
601 Carlson Parkway
Suite 950
Minnetonka, MN 55305
KB Growth Advisors, LLC has been an investment adviser since 1998, and as of
June 30, 1999 managed approximately $40 million in assets. Gail M.
Knappenberger, Chairman and Chief Executive Officer of KB Growth Advisors, LLC,
is primarily responsible for the day-to-day management of the Emerging Growth
Fund's portfolio. Mr. Knappenberger has served as Chairman and Chief Executive
Officer of KB Growth Advisors, LLC since its inception in 1998. Prior to that
time, he was Executive Vice President and a portfolio manager of Winslow Capital
Management, Inc. from 1993 to 1998, and President and a portfolio manager of
Jundt Associates, Inc. from 1984 to 1993.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
Woodland Partners, LLC is the portfolio manager to the Regional Small
Capitalization Value Fund. Its address is:
60 South Sixth Street
Suite 3750
Minneapolis, MN 55402
Woodland Partners, LLC has been an investment adviser since 1996, and as of
June 30, 1999, managed approximately $500 million in assets. Richard W. Jensen,
Elizabeth M. Lilly and Richard J. Rinkoff are primarily responsible for the day-
to-day management of the Regional Small Capitalization Value Fund's portfolio.
Mr. Jensen, Ms. Lilly and Mr. Rinkoff each have been portfolio managers and one-
third owners of Woodland Partners, LLC since 1996. Prior to that time, they
were employed by First Asset Management, a division of First Bank National
Association (now U.S. Bank National Association), Mr. Jensen since 1967, Ms.
Lilly since 1992 and Mr. Rinkoff since 1977.
EASTCLIFF CONTRARIAN VALUE FUND
Sasco Capital, Inc. is the portfolio manager to the Contrarian Value Fund.
Its address is:
10 Sasco Hill Road
Fairfield, CT 06430
Sasco Capital, Inc. has been an investment adviser since 1985, and as of June
30, 1999 managed approximately $1.8 billion in assets. Bruce Bottomly, Lee
Garcia and Daniel Leary are primarily responsible for the day-to-day management
of the Contrarian Value Fund's portfolio. They have been portfolio managers and
Managing Directors of Sasco Capital, Inc. since its inception in 1986.
YEAR 2000
The Funds are addressing the "Year 2000" issue. The "Year 2000" issue stems
from the use of a two-digit format to define the year in certain date-sensitive
computer application systems rather than the use of a four digit format. As a
result, date-sensitive software programs could recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in major systems or
process failures or the generation of erroneous data, which would lead to
disruptions in the Funds' business operations.
The Funds have no application systems of their own and are entirely dependent
on their service providers' systems and software. The Funds are working with
their service providers (including the Adviser, the portfolio managers, their
administrator, transfer agent and custodian) to identify and remedy any Year
2000 issues. However, the Funds cannot guarantee that all Year 2000 issues will
be identified and remedied, and the failure to successfully identify and remedy
all Year 2000 issues could result in an adverse impact on the Funds. The Year
2000 issue could also have a negative impact on the companies in which the Funds
invest, which could hurt the Funds' investment returns.
THE FUNDS' SHARE PRICE
The price at which investors purchase shares of each Fund and at which
shareholders redeem shares of each Fund is called its net asset value. Each
Fund calculates its net asset value as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern Time) on each day the New
York Stock Exchange is open for trading. The New York Stock Exchange is closed
on holidays and weekends. Each Fund calculates its net asset value based on the
market prices of the securities (other than money market instruments) it holds.
Each Fund values most money market instruments it holds at their amortized cost.
Each Fund will process purchase and redemption orders that it receives prior to
the close of regular trading on a day that the New York Stock Exchange is open
at the net asset value determined LATER THAT DAY. They will process purchase
and redemption orders that they receive AFTER the close of regular trading at
the net asset value determined at the close of regular trading on the next day
the New York Stock Exchange is open.
PURCHASING SHARES
HOW TO PURCHASE SHARES FROM THE FUNDS
1. Read this Prospectus carefully.
2. Determine how much you want to invest keeping in mind the following
minimums:
A. NEW ACCOUNTS
o All accounts $1,000
B. EXISTING ACCOUNTS
o Dividend
reinvestment No Minimum
o Automatic
Investment Plan $ 50
o All other accounts $ 100
3. Complete the Purchase Application accompanying this Prospectus, carefully
following the instructions. For additional investments, complete the
remittance form attached to your individual account statements. (The
Funds have additional Purchase Applications and remittance forms if you
need them.) If you have any questions, please call 1-800-595-5519 or 1-
414-765-4124.
4. Make your check payable to the full name of the Eastcliff Fund you intend
to purchase. All checks must be drawn on U.S. banks. The Funds will not
accept cash or third party checks. FIRSTAR MUTUAL FUND SERVICES, LLC, THE
FUNDS' TRANSFER AGENT, WILL CHARGE A $20 FEE AGAINST A SHAREHOLDER'S
ACCOUNT FOR ANY PAYMENT CHECK RETURNED FOR INSUFFICIENT FUNDS. THE
SHAREHOLDER WILL ALSO BE RESPONSIBLE FOR ANY LOSSES SUFFERED BY A FUND AS
A RESULT.
5. Send the application and check to:
BY FIRST CLASS MAIL
Eastcliff Funds
c/o Firstar Mutual
Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
BY OVERNIGHT DELIVERY SERVICE OR
EXPRESS MAIL
Eastcliff Funds
c/o Firstar Mutual Fund Services, LLC
3rd Floor
615 East Michigan Street
Milwaukee, WI 53202-5207
PLEASE DO NOT SEND LETTERS BY OVERNIGHT DELIVERY SERVICE OR EXPRESS MAIL TO
THE POST OFFICE BOX ADDRESS.
If you wish to open an account by wire, please call 1-800-595-5519 or 1-414-
765-4124 prior to wiring funds in order to obtain a confirmation number and to
ensure prompt and accurate handling of funds. YOU SHOULD WIRE FUNDS TO:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
ABA #075000022
CREDIT:
Firstar Mutual Fund Services, LLC
Account #112-952-137
FURTHER CREDIT:
(name of Fund to be purchased)
(shareholder registration)
(shareholder account number,
if known)
You should then send a properly signed Purchase Application marked "FOLLOW-
UP" to either of the addresses listed above. PLEASE REMEMBER THAT FIRSTAR BANK
MILWAUKEE, N.A. MUST RECEIVE YOUR WIRED FUNDS PRIOR TO THE CLOSE OF REGULAR
TRADING ON THE NEW YORK STOCK EXCHANGE FOR YOU TO RECEIVE SAME DAY PRICING. THE
FUNDS AND FIRSTAR BANK MILWAUKEE, N.A. ARE NOT RESPONSIBLE FOR THE CONSEQUENCES
OF DELAYS RESULTING FROM THE BANKING OR FEDERAL RESERVE WIRE SYSTEM, OR FROM
INCOMPLETE WIRING INSTRUCTIONS.
PURCHASING SHARES FROM BROKER-DEALERS, FINANCIAL INSTITUTIONS AND OTHERS
Some broker-dealers may sell shares of the Eastcliff Funds. These broker-
dealers may charge investors a fee either at the time of purchase or redemption.
The fee, if charged, is retained by the broker-dealer and not remitted to the
Funds or the Adviser. Some broker-dealers may purchase and redeem shares on a
three day settlement basis.
The Funds may enter into agreements with broker-dealers, financial
institutions or other service providers ("Servicing Agents") that may include
the Funds as investment alternatives in the programs they offer or administer.
Servicing agents may:
o Become shareholders of record of the Funds. This means all requests to
purchase additional shares and all redemption requests must be sent through
the Servicing Agent. This also means that purchases made through Servicing
Agents are not subject to the Funds' minimum purchase requirements.
o Use procedures and impose restrictions that may be in addition to, or
different from, those applicable to investors purchasing shares directly
from the Funds.
o Charge fees to their customers for the services they provide them. Also,
the Funds and/or the Adviser may pay fees to Servicing Agents to compensate
them for the services they provide their customers.
o Be allowed to purchase shares by telephone with payment to follow the next
day. If the telephone purchase is made prior to the close of regular
trading on the New York Stock Exchange, it will receive same day pricing.
o Be authorized to accept purchase orders on behalf of the Funds. This means
that a Fund will process the purchase order at the net asset value which is
determined following the Servicing Agent's receipt of the customer's order.
If you decide to purchase shares through Servicing Agents, please carefully
review the program materials provided to you by the Servicing Agent. When you
purchase shares of the Funds through a Servicing Agent, it is the responsibility
of the Servicing Agent to place your order with the Fund on a timely basis. If
the Servicing Agent does not, or if it does not pay the purchase price to the
Funds within the period specified in its agreement with the Funds, it may be
held liable for any resulting fees or losses.
OTHER INFORMATION ABOUT PURCHASING SHARES OF THE FUNDS
The Funds may reject any Purchase Application for any reason. The Funds will
not accept purchase orders made by telephone unless they are from a Servicing
Agent which has an agreement with the Fund.
The Funds will not issue certificates evidencing shares purchased unless the
investor makes a written request for a certificate. The Funds will send
investors a written confirmation for all purchases of shares, whether or not
evidenced by certificates.
The Funds offer an automatic investment plan allowing shareholders to make
purchases on a regular and convenient basis. The Funds also offer the following
retirement plans:
o Traditional IRA
o Roth IRA
o Education IRA
o SEP-IRA
o Simple IRA
o 401(k) Plan
o 403 (b)(7) Custodial Accounts
Investors can obtain further information about the automatic investment plan
and the retirement plans by calling the Funds at 1-800-595-5519. The Eastcliff
Funds recommend that investors consult with a competent financial and tax
advisor regarding the retirement plans before investing through them.
REDEEMING SHARES
HOW TO REDEEM (SELL) SHARES BY MAIL
1. Prepare a letter of instruction containing:
o the name of the Fund(s)
o account number(s)
o the amount of money or number of shares being redeemed
o the name(s) on the account
o daytime phone number
o additional information that the Funds may require for redemptions by
corporations, executors, administrators, trustees, guardians, or others
who hold shares in a fiduciary or representative capacity. Please
contact the Funds' transfer agent, Firstar Mutual Fund Services, LLC, in
advance, at 1-800-595-5519 or 1-414-765-4124 if you have any questions.
2. Sign the letter of instruction exactly as the shares are registered. Joint
ownership accounts must be signed by all owners.
3. If there are certificates representing your shares, enclose the
certificates and execute a stock power exactly as your shares are
registered.
4. Have the signatures guaranteed by a commercial bank or trust company in the
United States, a member firm of the New York Stock Exchange or other
eligible guarantor institution in the following situations:
o The redemption proceeds are to be sent to a person other than the person
in whose name the shares are registered
o The redemption proceeds are to be sent to an address other than the
address of record
A NOTARIZED SIGNATURE IS NOT AN ACCEPTABLE SUBSTITUTE FOR A SIGNATURE
GUARANTEE.
5. Send the letter of instruction to:
BY FIRST CLASS MAIL
Eastcliff Funds
c/o Firstar Mutual
Fund Services, LLC
Shareholder Services Center
P. O. Box 701
Milwaukee, WI 53201-0701
BY OVERNIGHT DELIVERY SERVICE OR
EXPRESS MAIL
Eastcliff Funds
c/o Firstar Mutual Fund Services, LLC
3rd Floor
615 East Michigan Street
Milwaukee, WI 53202-5207
PLEASE DO NOT SEND LETTERS OF INSTRUCTION BY OVERNIGHT DELIVERY SERVICE OR
EXPRESS MAIL TO THE POST OFFICE BOX ADDRESS.
HOW TO REDEEM (SELL) SHARES
BY TELEPHONE
1. Instruct Firstar Mutual Fund Services, LLC that you want the option of
redeeming shares by telephone. This can be done by completing the
appropriate section on the Purchase Application. If you have already
opened an account, you may write to Firstar Mutual Fund Services, LLC
requesting this option. When you do so, please sign the request exactly as
your account is registered and have the signatures guaranteed. Shares held
in retirement plans and shares represented by certificates cannot be
redeemed by telephone.
2. Assemble the same information that you would include in the letter of
instruction for a written redemption request.
3. Call Firstar Mutual Fund Services, LLC at 1-800-595-5519 or 1-414-765-4124.
PLEASE DO NOT CALL THE FUND OR THE ADVISER.
HOW TO REDEEM (SELL) SHARES THROUGH
SERVICING AGENTS
If your shares are held by a Servicing Agent, you must redeem your shares
through the Servicing Agent. Contact the Servicing Agent for instructions on
how to do so.
REDEMPTION PRICE
The redemption price per share you receive for redemption requests is the
next determined net asset value after:
o Firstar Mutual Fund Services, LLC receives your written request in proper
form with all required information.
o Firstar Mutual Fund Services, LLC receives your authorized telephone
request with all required information.
o A Servicing Agent that has been authorized to accept redemption requests on
behalf of the Funds receives your request in accordance with its
procedures.
PAYMENT OF REDEMPTION PROCEEDS
o For those shareholders who redeem shares by mail, Firstar Mutual Fund
Services, LLC will mail a check in the amount of the redemption proceeds no
later than the seventh day after it receives the redemption request in
proper form with all required information.
o For those shareholders who redeem by telephone, Firstar Mutual Fund
Services, LLC will mail a check in the amount of the redemption proceeds no
later than the seventh day after it receives the redemption request, or
transfer the redemption proceeds to your designated bank account if you
have elected to receive redemption proceeds by either Electronic Funds
Transfer or wire. An Electronic Funds Transfer generally takes up to 3
business days to reach the shareholder's account whereas Firstar Mutual
Fund Services, LLC generally wires redemption proceeds on the business day
following the calculation of the redemption price. However, the Funds may
direct Firstar Mutual Fund Services, LLC to pay the proceeds of a telephone
redemption on a date no later than the seventh day after the redemption
request.
o For those shareholders who redeem shares through Servicing Agents, the
Servicing Agent will transmit the redemption proceeds in accordance with
its redemption procedures.
OTHER REDEMPTION CONSIDERATIONS
When redeeming shares of the Funds, shareholders should consider the
following:
o The redemption may result in a taxable gain.
o Shareholders who redeem shares held in an IRA must indicate on their
redemption request whether or not to withhold federal income taxes. If
not, these redemptions, as well as redemptions of other retirement plans
not involving a direct rollover to an eligible plan, will be subject to
federal income tax withholding.
o The Funds may delay the payment of redemption proceeds for up to seven days
in all cases.
o If you purchased shares by check, the Funds may delay the payment of
redemption proceeds until they are reasonably satisfied the check has
cleared (which may take up to 15 days from the date of purchase).
o Firstar Mutual Fund Services, LLC will send the proceeds of telephone
redemptions to an address or account other than that shown on its records
only if the shareholder has sent in a written request with signatures
guaranteed.
o The Funds reserve the right to refuse a telephone redemption request if
they believe it is advisable to do so. The Funds and Firstar Mutual Fund
Services, LLC may modify or terminate their procedures for telephone
redemptions at any time. Neither the Funds nor Firstar Mutual Fund
Services, LLC will be liable for following instructions for telephone
redemption transactions that they reasonably believe to be genuine,
provided they use reasonable procedures to confirm the genuineness of the
telephone instructions. They may be liable for unauthorized transactions
if they fail to follow such procedures. These procedures include requiring
some form of personal identification prior to acting upon the telephone
instructions and recording all telephone calls. During periods of
substantial economic or market change, you may find telephone redemptions
difficult to implement. If a shareholder cannot contact Firstar Mutual
Fund Services, LLC by telephone, he or she should make a redemption request
in writing in the manner described earlier.
o Firstar Mutual Fund Services, LLC currently charges a fee of $12 when
transferring redemption proceeds to your designated bank account by wire
but does not charge a fee when transferring redemption proceeds by
Electronic Funds Transfer.
o If your account balance falls below $500 because you redeem shares, you
will be given 60 days to make additional investments so that your account
balance is $500 or more. If you do not, the Funds may close your account
and mail the redemption proceeds to you.
o The Funds may pay redemption requests "in kind." This means that the Funds
may pay redemption requests entirely or partially with securities rather
than with cash.
EXCHANGING SHARES
Shares of any of the Eastcliff Funds may be exchanged for shares of any other
Eastcliff Fund at their relative net asset values. You may have a taxable gain
or loss as a result of an exchange because the Internal Revenue Code treats an
exchange as a sale of shares.
HOW TO EXCHANGE SHARES
1. Read this Prospectus carefully.
2. Determine the number of shares you want to exchange keeping in mind that
exchanges are subject to a $1,000 minimum.
3. Write to Eastcliff Funds, c/o Firstar Mutual Fund Services, LLC, 3rd Floor,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each of the Eastcliff Funds distributes substantially all of its net
investment income and substantially all of its capital gains annually. You have
four distribution options:
o ALL REINVESTMENT OPTION - Both dividend and capital gains distributions
will be reinvested in additional Fund shares.
o PARTIAL REINVESTMENT OPTION - Dividends will be paid in cash and capital
gains distributions will be reinvested in additional Fund shares.
o PARTIAL REINVESTMENT OPTION - Dividends will be reinvested in additional
Fund shares and capital gains distributions will be paid in cash.
o ALL CASH OPTION - Both dividend and capital gains distributions will be
paid in cash.
You may make this election on the Purchase Application. You may change your
election by writing to Firstar Mutual Fund Services, LLC or by calling 1-800-
595-5519.
Each Fund's distributions, whether received in cash or additional shares of
the Fund, may be subject to federal and state income tax. These distributions
may be taxed as ordinary income and capital gains (which may be taxed at
different rates depending on the length of time the Fund holds the assets
generating the capital gains). The Eastcliff Growth Fund, the Eastcliff
Emerging Growth Fund, the Eastcliff Regional Small Capitalization Value Fund and
the Eastcliff Contrarian Value Fund expect that their distributions generally
will consist primarily of long-term capital gains. The Eastcliff Total Return
Fund expects that its distributions will consist of both ordinary income and
long-term capital gains.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand a Fund's
financial performance for the past five fiscal years of operations for the
Eastcliff Total Return Fund and for the period of its operations for each of the
Eastcliff Growth Fund, Eastcliff Regional Small Capitalization Value Fund and
Eastcliff Contrarian Value Fund. Certain information reflects financial results
for a single Fund share. The total returns in the tables represent the rate
that an investor would have earned on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Funds'
financial statements, are included in the Annual Report which is available upon
request. The Eastcliff Emerging Growth Fund will commence operations on
September 30, 1999.
<TABLE>
EASTCLIFF TOTAL RETURN FUND
FOR THE YEARS ENDED JUNE 30,
--------------------------------------------------- 10/1/94 TO
1999 1998 1997 1996 6/30/95(1)<F9>
------ ------ ------ ------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.50 $16.86 $14.62 $11.96 $11.92
Income from investment operations:
Net investment income 0.10 0.23 0.23 0.09 0.14
Net realized and unrealized gains
on investments 4.28 5.19 3.47 2.90 0.71
------- ------- ------- ------- -------
Total from investment operations 4.38 5.42 3.70 2.99 0.85
Less distributions:
Dividends from net investment income (0.17) (0.25) (0.12) (0.17) (0.14)
Distributions from net realized gains (2.35) (0.53) (1.34) (0.16) (0.67)
------- ------- ------- ------- -------
Total from distributions (2.52) (0.78) (1.46) (0.33) (0.81)
------- ------- ------- ------- -------
$23.36 $21.50 $16.86 $14.62 $11.96
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return(2)<F10> 21.7% 33.3% 28.1% 25.4% 10.4%(3)<F11>
Supplemental data and ratios:
Net assets, end of period (000s) $25,002 $25,454 $21,626 $17,799 $15,806
Ratio of expenses (after reimbursement)
to average net assets(4)<F12> 1.3% 1.3% 1.3% 1.3% 1.5%(3)<F11>
Ratio of net investment income
to average net assets(5)<F13> 0.4% 1.2% 1.5% 0.7% 2.5%(3)<F11>
Portfolio turnover rate 32.9% 38.4% 58.3% 95.1% 89.4%
</TABLE>
(1)<F9> Prior to October 1, 1994, the Fund's fiscal year ended on September 30.
(2)<F10> Effective December 31, 1994, the Fund changed investment advisers from
Fiduciary Management, Inc. to Resource Capital Advisers, Inc.
(3)<F11> Annualized.
(4)<F12> Computed after giving effect to the Adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios
would have been 1.4%, 1.4%, 1.5%, 1.6% and 2.6%(3)<F11> for the years
ended June 30, 1999, 1998, 1997 and 1996, and for the period from
October 1, 1994 to June 30, 1995, respectively.
(5)<F13> The ratios of net investment income to average net assets prior to the
Adviser's expense limitation undertaking for the years ended
June 30, 1999, 1998, 1997 and 1996, and for the period from October
1,1994 to June 30, 1995 would have been 0.3%, 1.1%, 1.3%, 0.4% and
1.4%(3)<F11>, respectively.
<TABLE>
EASTCLIFF GROWTH FUND
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------
1999 1998 1997 1996(1)<F14>
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.85 $13.92 $12.56 $10.00
Income from investment operations:
Net investment loss(2)<F15> (0.18) (0.15) (0.14) (0.08)
Net realized and unrealized gains on investments 1.15 4.71 1.50 2.64
------- ------- ------- -------
Total from investment operations 0.97 4.56 1.36 2.56
Less distributions:
Dividend from net investment income -- -- -- --
Distributions from net realized gains (3.22) (0.63) -- --
------- ------- ------- -------
Total from distributions (3.22) (0.63) -- --
------- ------- ------- -------
Net asset value, end of period $15.60 $17.85 $13.92 $12.56
------- ------- ------- -------
------- ------- ------- -------
Total investment return 8.0% 33.9% 10.8% 25.6%
Supplemental data and ratios:
Net assets, end of period (000s) $43,374 $56,594 $46,389 $46,193
Ratio of expenses (after reimbursement)
to average net assets(3)<F16> 1.3% 1.3% 1.3% 1.3%
Ratio of net investment loss to average net assets(4)<F17> (0.7%) (0.9%) (1.0%) (0.8%)
Portfolio turnover rate 86.3% 93.3% 54.3% 40.3%
</TABLE>
(1)<F14> The Fund commenced operations on July 1, 1995.
(2)<F15> Net investment loss per share is calculated using ending balances
prior to consideration of adjustments for permanent book and tax
differences.
(3)<F16> Computed after giving effect to the Adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios
would have been 1.3% and 1.4% for the years ended June 30, 1997 and
1996, respectively.
(4)<F17> The ratios of net investment loss to average net assets prior to the
Adviser's expense limitation undertaking for the years ended June 30,
1997 and 1996 would have been (1.0%) and (0.9%), respectively.
<TABLE>
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
FOR THE YEARS
ENDED JUNE 30,
--------------------- 9/16/96(1)<F18>
1999 1998 TO 6/30/97
------ ------ ----------
<S> <C> <C> <C>
Net asset value, beginning of period $13.56 $12.23 $10.00
Income from investment operations:
Net investment (loss) income (0.03) (0.01) 0.02
Net realized and unrealized (losses) gains on investments (0.14) 1.43 2.23
------- ------- -------
Total from investment operations (0.17) 1.42 2.25
Less distributions:
Dividends from net investment income -- (0.00) (0.02)
Distributions from net realized gains (0.11) (0.09) --
------- ------- -------
Total from distributions (0.11) (0.09) (0.02)
------- ------- -------
Net asset value, end of period $13.28 $13.56 $12.23
------- ------- -------
------- ------- -------
Total investment return (1.2%) 11.7% 22.5%(2)<F19>
Supplemental data and ratios:
Net assets, end of period (000s) $53,810 $62,139 $29,231
Ratio of expenses (after reimbursement)
to average net assets(4)<F21> 1.3% 1.3% 1.3%(3)<F20>
Ratio of net investment (loss) income
to average net assets(5)<F22> (0.2%) (0.1%) 0.3%(3)<F20>
Portfolio turnover rate 29.2% 35.5% 29.4%
</TABLE>
(1)<F18> Commencement of Operations
(2)<F19> Not annualized.
(3)<F20> Annualized.
(4)<F21> Computed after giving effect to the Adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio
would have been 1.6%(3)<F20> for the period September 16, 1996 to
June 30, 1997.
(5)<F22> The ratio of net investment income to average net assets prior to the
Adviser's expense limitation undertaking for the period September 16,
1996 to June 30, 1997 would have been (0.0%)(3)<F20>.
<TABLE>
EASTCLIFF CONTRARIAN VALUE FUND
YEAR ENDED 12/30/97(1)<F23>
6/30/99 TO 6/30/98
---------- ----------------
<S> <C> <C>
Net asset value, beginning of period $10.41 $10.00
Income from investment operations:
Net investment income 0.09 0.04
Net realized and unrealized (losses) gains on investments (0.66) 0.37
------- -------
Total from investment operations (0.57) 0.41
Less distributions:
Dividends from net investment income (0.07) --
Distributions from net realized gains (0.30) --
------- -------
Total from distributions (0.37) --
------- -------
Net asset value, end of period $ 9.47 $10.41
------- -------
------- -------
Total investment return (5.3%) 4.1%(2)<F24>
Supplemental data and ratios:
Net assets, end of period (000s) $13,829 $19,569
Ratio of expenses (after reimbursement) to average net assets(4)<F26> 1.3% 1.3%(3)<F25>
Ratio of net investment income to average net assets(5)<F27> 0.9% 0.7%(3)<F25>
Portfolio turnover rate 45.0% 13.6%
</TABLE>
(1)<F23> Commencement of Operations.
(2)<F24> Not annualized.
(3)<F25> Annualized.
(4)<F26> Computed after giving effect to the Adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios
would have been 1.5% and 1.5%(3)<F25>, for the year ended June 30,
1999 and for the period December 30, 1997 to June 30, 1998,
respectively.
(5)<F27> The ratios of net investment income to average net assets prior to the
Adviser's expense limitation undertaking for the year ended June 30,
1999 and for the period December 30,1997 to June 30, 1998 would have
been 0.7% and 0.5%(3)<F25>, respectively.
To learn more about the Eastcliff Funds you may want to read the Eastcliff
Funds' Statement of Additional Information (or "SAI") which contains additional
information about the Funds. The Eastcliff Funds have incorporated by reference
the SAI into the Prospectus. This means that you should consider the contents
of the SAI to be part of the Prospectus.
You also may learn more about the Eastcliff Funds' investments by reading the
Eastcliff Funds' annual and semi-annual reports to shareholders. The annual
report includes a discussion of the market conditions and investment strategies
that significantly affected the performance of the Funds during their last
fiscal year.
The SAI and the annual and semi-annual reports are all available to
shareholders and prospective investors without charge, simply by calling 1-800-
595-5519.
Prospective investors and shareholders who have questions about the Eastcliff
Funds may also call the above number or write to the following address:
EASTCLIFF FUNDS, INC.
900 SECOND AVENUE SOUTH
300 INTERNATIONAL CENTRE
MINNEAPOLIS, MN 55402
The general public can review and copy information about the Eastcliff Funds
(including the SAI) at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. (Please call 1-800-SEC-0330 for information on the
operations of the Public Reference Room.) Reports and other information about
the Eastcliff Funds are also available at the Securities and Exchange
Commission's Internet site at http://www.sec.gov and copies of this information
may be obtained, upon payment of a duplicating fee, by writing to:
PUBLIC REFERENCE SECTION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-6009
Please refer to the Eastcliff Funds' Investment Company Act File No. 811-
04722, when seeking information about the Eastcliff Funds from the Securities
and Exchange Commission.
