ANNUAL REPORT
June 30, 1999
(Eastcliff Funds Logo)
Eastcliff Growth Fund
Eastcliff Total Return Fund
Eastcliff Regional Small
Capitalization Value Fund
Eastcliff Contrarian
Value Fund
NO-LOAD MUTUAL FUNDS
Eastcliff Growth Fund
August 11, 1999
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 philosophy includes large and medium
market capitalization companies.
The second quarter of 1999 ended with record price levels in most of the
stock market averages. Unlike the first quarter, underperforming cyclical stocks
and small company equities performed best with gains of 20% and 15%,
respectively. Stock market enthusiasm continued unabated even as long-term U.S.
Treasury bond prices fell, pushing up interest rates from 5.5% to 6.1%. For the
first time in over three years, the breadth of the stock market improved with
sectors such as cyclicals, basic materials and energy issues strongly
outperforming the "megacap" growth stocks. Based on improving world economies
and expected lower risk premiums, market breadth should continue to improve.
We continue to believe, as we discussed in the 1998 year-end summary, that
the Internet will have an important impact on everyone's life and business. At
the end of 1998, stock valuations seemed excessive and we had only minor
exposure to these companies. When the stocks corrected in the second quarter, we
took the opportunity to add Dell Computer and America Online to the Fund's
holdings. The investment process at Winslow Capital focuses on identifying
strong future earnings growth companies and being sensitive to what we pay for
that future earnings growth stream. Other recent purchases in the Fund include
Provident Financial, General Electric and Dollar General. On "bottom up"
fundamental analysis we have concluded that these companies meet our criteria of
sustaining future earnings growth in excess of 13% and are attractively priced
relative to other investment opportunities.
The best performing sectors in the Eastcliff Growth Fund for the first half
of 1999 were Technology and Capital Goods. The Fund's holdings in both sectors
advanced nearly 20% on average during the first two quarters. The strongest
performing technology stock was Tellabs, Inc. It gained over 95% for the six
months ending June 30, 1999. The best performing holding in the Capital Goods
sector was Tyco International, with price appreciation in excess of 25% over the
same time period. Due to high valuations, we remain underweighted in the
"megacap" growth sector.
As of August 10, 1999, your Board of Directors declared a distribution of
$0.00394 per share from net short-term gains and $2.01761 per share from net
long-term capital gains, payable August 11, 1999, to shareholders of record on
August 9, 1999.
We appreciate all of your support and interest in the Fund and look forward
to providing each of our shareholders with favorable investment returns over the
long term.
Respectfully submitted,
/s/Clark J. Winslow
Clark J. Winslow
Portfolio Manager
Past performance cannot guarantee future results. Prices will fluctuate and
redemption value may be more or less than original investment. This Fund is not
insured by the FDIC and is not a deposit or other obligation of or guaranteed by
Resource Trust Company or any of its affiliates.
Eastcliff Growth Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
June 30, 1999
For the three months ending June 30, 1999, the market was led higher by a
group of stocks different from the first quarter. While the largest market
capitalization Growth companies and Internet issues dominated the first quarter
of 1999, the most recent period saw value stocks and smaller market
capitalization companies perform strongly. This can be seen in the excellent
performance of the Russell 2000 Index and the S&P 500 Small Cap Index versus the
Large cap oriented indices. The Fund outperformed the Russell 1000 Growth Index
for the quarter ending June 30, 1999, however, for the year ending June 30,
1999, the Fund underperformed due to underweighting in the largest cap stocks
which were the best performers.
Some technology stocks which the Fund owned went down during the quarter
ending March 31, 1999 due to fears about Y2K problems. For the most recent three
months, the Technology and Capital Goods sectors were the best performing
industries in the Eastcliff Growth Fund. The Fund maintained its overweighted
position in software companies during the second quarter and it proved to be
additive to performance. The fear of reduced government payments for hospital
services continued to overhang the entire Healthcare sector. For the quarter and
on a year to date basis, healthcare services continue to perform poorly, but the
underweighted exposure and positive stock selection in the Eastcliff Growth Fund
have allowed the Fund to outperform the sector. We believe that the stocks in
the portfolio represent the best combination of sustainable earnings growth and
attractive valuation.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN EASTCLIFF GROWTH FUND,
RUSSELL 1000 GROWTH INDEX AND STANDARD & POOR'S 500 STOCK INDEX
AVERAGE ANNUAL TOTAL RETURN
1-Year +8.0%
Since inception 7/1/95 +19.1%
date Eastcliff Growth Fund Russell 1000 Growth Index<F3>**Standard & Poor's
500 Stock Index*<F2>
7/1/95***<F1> 10,000 10,000 10,000
9/30/95 10,990 10,980 10,799
12/31/95 10,860 11,480 11,440
3/31/96 11,680 12,096 12,064
6/30/96 12,560 12,865 12,612
9/30/96 13,080 13,329 13,000
12/31/96 12,690 14,134 14,100
3/31/97 11,530 14,210 14,469
6/30/97 13,920 14,287 16,994
9/30/97 15,280 15,361 18,287
12/31/97 15,532 15,594 18,807
3/31/98 17,943 17,957 21,432
6/30/98 18,632 18,772 22,144
9/30/98 15,468 17,056 19,960
12/31/98 20,072 21,629 24,214
3/31/99 19,104 23,005 25,420
6/30/99 20,123 23,891 27,212
***<F1> inception date
*<F2> The Standard & Poor's 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The Standard
&Poor's Ratings Group designates the stocks to be included in the Index on a
statistical basis. A particular stock's weighting in the Index is based on
its relative total market value (i.e., its market price per share times the
number of shares outstanding). Stocks may be added or deleted from the Index
from time to time.
**<F3> The Russell 1000 Growth Index contains those Russell 1000 securities
with a greater-than-average growth orientation. Securities in this Index tend
to exhibit higher price-to-book and price-earnings ratios, lower dividend
yields and higher forecasted growth values than the Value universe.
Eastcliff Growth Fund
STATEMENT OF NET ASSETS
June 30, 1999
SHARES OR Quoted
PRINCIPAL Market
AMOUNT Cost Value
- -------- ------- -------
LONG-TERM INVESTMENTS -- 97.6% (A)<F5>
COMMON STOCKS -- 97.6% (A)<F5>
CAPITAL GOODS SECTOR -- 10.4%
- -----------------------------
ELECTRICAL EQUIPMENT -- 1.1%
4,200 General Electric Co. $ 457,790 $ 474,600
MANUFACTURER-DIVERSE -- 5.0%
22,900 Tyco International Ltd. 841,889 2,169,775
WASTE MANAGEMENT -- 4.3%
34,900 Waste Management, Inc. 921,399 1,875,875
COMMUNICATION SERVICES SECTOR -- 6.1%
- -------------------------------------
TELECOMMUNICATION-LONG
DISTANCE -- 6.1%
13,700 AT&T Corp. 832,870 764,631
17,600 MCI WorldCom Inc.*<F4> 806,843 1,514,700
1,900 Vodafone AirTouch PLC SP
ADR*<F4>(Formerly AirTouch
Communications, Inc.) 338,158 374,300
---------- ----------
1,977,871 2,653,631
CONSUMER CYCLICALS SECTOR -- 15.3%
- ----------------------------------
LODGING-HOTELS -- 2.9%
25,600 Carnival Corp. 708,104 1,241,600
RETAIL-BUILDING SUPPLIES -- 4.1%
27,500 The Home Depot, Inc. 370,058 1,772,031
RETAIL-DISCOUNTERS -- 1.6%
24,625 Dollar General Corp. 700,515 714,125
RETAIL-GENERAL MERCHANTS -- 2.0%
17,800 Wal-Mart Stores, Inc. 533,709 858,850
RETAIL-SPECIALTY -- 3.1%
60,600 Office Depot, Inc.*<F4> 1,300,647 1,336,988
TEXTILES-APPAREL -- 1.6%
9,600 Tommy Hilfiger Corp.*<F4> 357,013 705,600
CONSUMER STAPLES SECTOR -- 12.6%
- --------------------------------
BROADCAST MEDIA -- 4.4%
31,200 CBS Corp.*<F4> 884,517 1,355,250
7,985 Clear Channel
Communications, Inc.*<F4> 430,512 550,466
---------- ----------
1,315,029 1,905,716
DISTRIBUTION-FOOD & HEALTH -- 2.3%
15,300 Cardinal Health, Inc. 943,709 981,113
RESTAURANTS -- 3.2%
19,425 Papa John's
International, Inc.*<F4> 340,844 868,054
13,800 Starbucks Corp.*<F4> 222,993 518,363
---------- ----------
563,837 1,386,417
RETAIL-DRUG STORES -- 2.7%
22,800 CVS Corp. 1,120,527 1,157,100
FINANCIALS SECTOR -- 12.9%
- --------------------------
BANKS-MAJOR REGIONAL -- 3.3%
33,400 Wells Fargo Co. 1,193,197 1,427,850
BANKS-MONEY CENTER -- 1.7%
10,090 Bank of America Corp. 458,095 739,723
(Formerly BankAmerica Corp.)
CONSUMER FINANCE -- 4.0%
33,375 MBNA Corp. 221,940 1,022,109
7,800 Providian Financial Corp. 879,635 729,300
---------- ----------
1,101,575 1,751,409
FINANCIAL-DIVERSE -- 3.9%
24,800 Fannie Mae 1,557,304 1,695,700
HEALTHCARE SECTOR -- 5.9%
- -------------------------
DIVERSE -- 2.2%
13,500 Warner-Lambert Co. 900,772 936,563
DRUGS MAJOR -- 1.1%
4,500 Pfizer Inc. 99,158 493,875
SPECIALIZED SERVICES -- 2.6%
26,700 Quintiles Transnational,
Corp.*<F4> 1,150,369 1,121,400
TECHNOLOGY SECTOR -- 32.0%
- --------------------------
COMMUNICATION-EQUIPMENT -- 6.4%
25,900 ADC Telecommunications,
Inc.*<F4> 649,282 1,180,069
23,800 Tellabs, Inc.*<F4> 392,453 1,607,987
---------- ----------
1,041,735 2,788,056
COMPUTER HARDWARE -- 1.3%
14,700 Dell Computer Corp.*<F4> 532,001 543,900
COMPUTER SOFTWARE/SERVICES -- 17.3%
4,700 America Online Inc.*<F4> 524,154 519,350
32,700 BMC Software, Inc.*<F4> 1,308,122 1,765,800
46,900 Compuware Corp.*<F4> 1,164,455 1,492,006
9,400 Microsoft Corp.*<F4> 98,345 847,762
8,300 Oracle Corp.*<F4> 298,640 308,138
39,200 Sterling Commerce, Inc.*<F4> 885,086 1,430,800
20,800 Synopsys, Inc.*<F4> 963,400 1,147,900
---------- ----------
5,242,202 7,511,756
COMPUTERS-NETWORKING -- 2.4%
15,950 Cisco Systems Inc.*<F4> 92,377 1,025,784
ELECTRONICS-SEMICONDUCTORS -- 2.2%
16,000 Intel Corp. 954,854 952,000
SERVICES-DATA PROCESSING -- 2.4%
33,900 Fiserv, Inc.*<F4> 815,441 1,061,494
TRANSPORTATION SECTOR -- 2.4%
- -----------------------------
RAILROADS -- 2.4%
16,300 Kansas City Southern
Industries, Inc. 767,814 1,040,144
----------- -----------
Total common stocks 28,018,991 42,323,075
----------- -----------
Total long-term
investments 28,018,991 42,323,075
SHORT-TERM INVESTMENTS -- 1.9% (A)<F5>
VARIABLE RATE DEMAND NOTE
$814,022 Firstar Bank U.S.A., N.A. 814,022 814,022
----------- -----------
Total short-term
investments 814,022 814,022
----------- -----------
Total investments $28,833,013 $43,137,097
-----------
-----------
Cash and receivables, less
liabilities 0.5% (A)<F5> 236,759
-----------
Net Assets $43,373,856
-----------
-----------
Net Asset Value Per Share
($0.01 par value 300,000,000
shares authorized), offering
and redemption price
($43,373,856 / 2,780,733
shares outstanding) $ 15.60
----------
----------
*<F4> Non-income producing security.
(a)<F5> Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Growth Fund
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
INCOME:
Dividends $ 170,392
Interest 94,625
-----------
Total income 265,017
-----------
EXPENSES:
Management fees 471,074
Administrative services 70,745
Transfer agent fees 17,378
Professional fees 16,622
Custodian fees 14,463
Amortization of organizational expenses 6,301
Printing and postage expense 2,410
Registration fees 2,362
Board of Directors fees 1,000
Other expenses 1,555
-----------
Total expenses 603,910
-----------
NET INVESTMENT LOSS (338,893)
-----------
NET REALIZED GAIN ON INVESTMENTS 6,333,970
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (3,348,005)
-----------
NET GAIN ON INVESTMENTS 2,985,965
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,647,072
-----------
-----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1999 and June 30, 1998
1999 1998
---------- ----------
OPERATIONS:
Net investment loss $ (338,893) $ (448,758)
Net realized gain on investments 6,333,970 13,570,020
Net (decrease) increase in
unrealized appreciation
on investments (3,348,005) 1,782,157
------------ ------------
Net increase in net assets
resulting from operations 2,647,072 14,903,419
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net
realized gains
($3.2244 and $0.63 per share,
respectively) (10,153,275) (2,019,090)
------------ ------------
Total distributions (10,153,275)*<F6>(2,019,090)
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(119,876 and 327,564 shares,
respectively) 1,729,497 5,032,445
Net asset value of shares
issued in distribution
(704,428 and 140,578 shares,
respectively) 9,744,911 2,018,697
Cost of shares redeemed
(1,214,807 and 628,274 shares,
respectively) (17,188,048) (9,730,677)
------------ ------------
Net decrease in net assets
derived from Fund share activities (5,713,640) (2,679,535)
------------ ------------
TOTAL (DECREASE) INCREASE (13,219,843) 10,204,794
NET ASSETS AT THE BEGINNING OF THE YEAR 56,593,699 46,388,905
------------ ------------
NET ASSETS AT THE END OF THE YEAR $43,373,856 $56,593,699
------------ ------------
------------ ------------
*<F6>See Note 8.
The accompanying notes to financial statements are an integral part of these
statements.
Eastcliff Growth Fund
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
For the
For the Period from
Years Ended June 30, July 1, 1995*<F7>
------------------------- to June 30, 1996
1999 1998 1997 -----------------
---- ---- ----
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period $17.85 $13.92 $12.56 $10.00
Income from investment
operations:
Net investment loss (a)<F8> (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%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's $) 43,374 56,594 46,389 46,193
Ratio of expenses
(after reimbursement)
to average net assets (b)<F9> 1.3% 1.3% 1.3% 1.3%
Ratio of net investment
loss to average net
assets (c)<F10> (0.7%) (0.9%) (1.0%) (0.8%)
Portfolio turnover rate 86.3% 93.3% 54.3% 40.3%
*<F7> Commencement of operations.
(a)<F8> Net investment loss per share is calculated using ending balances
prior to consideration of adjustments for permanent book and tax differences.
(b)<F9> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios would have
been, for the years ended June 30, 1997 and 1996, 1.3% and 1.4%, respectively.
(c)<F10> If the Fund had paid all of its expenses, the ratios would have been,
for the years ended June 30, 1997 and 1996, (1.0%) and (0.9%), respectively.
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Total
Return Fund
August 11, 1999
Dear Shareholder:
The Eastcliff Total Return Fund performed well over the fiscal year ending
June 30, 1999. The Fund gained 21.7% compared to the S&P 500 Index which was up
22.8% for the same period. Equities (ex cash and fixed income holdings) were up
30.42% for this same period. The average annual compounded rate of return of the
Fund for the five and ten years ending June 30th was 23.9% and 15.9%,
respectively.
The stock market continues to flourish in the high-growth, low-interest-rate
U.S. economic environment. The market remains fairly narrowly focused despite
the rotation into some cyclical and small capitalization names. As of June 30,
1999, about 40% of companies in the S&P 500 outperformed the S&P 500 Index.
Technology and investor enthusiasm for stocks allied with the Internet
continues to fuel the market. Technology has changed the way companies do
business, increasing productivity and helping them gain a competitive edge.
The best performing individual holdings over the past twelve months were:
Nokia Corp., ADR, IBM and Cisco Systems. New stocks added include: Citigroup
Inc., Costco Companies, MediaOne Group Inc., Tellabs Inc., Time Warner Inc. and
WalMart Stores, Inc.
The asset allocation as of June 30, 1999, was 91% equities, 2% fixed income
and 7% temporary cash reserves. I believe we will continue to experience market
volatility given a heightened level of concern about the Federal Reserve raising
interest rates. We will continue to search for the most dynamic, high quality
companies.
As of August 10, 1999, your Board of Directors declared a dividend of
$0.02364 per share from net investment income and a distribution of $2.5009
per share from net long-term capital gains, payable August 11, 1999, to
shareholders of record on August 9, 1999.
In closing, I would like to thank you for investing in the Eastcliff Total
Return Fund.
Sincerely,
/s/Patrice J. Neverett
Patrice J. Neverett
Portfolio Manager
Past performance cannot guarantee future results. Prices will fluctuate and
redemption value may be more or less than original investment. This Fund is not
insured by the FDIC and is not a deposit or other obligation of or guaranteed by
Resource Trust Company or any of its affiliates.
Eastcliff Total Return Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
June 30, 1999
The stock market has been pushed to new heights over the past year as a
result of low interest rates, minimal inflation, and steady corporate earnings.
The gross domestic product, perhaps the best indication of U.S. economic
strength, should grow at 3.5% to 3.75% this year. This compares to earlier
projections of 2.5% to 3.0%. Unemployment should be in the 4.0% to 4.25% range.
Trends which have enhanced overall economic growth include tremendous
advances in technology and a record level of mergers and acquisitions. This
consolidation enables industries to improve profitability and, in turn, drives
stock prices higher.
The objective of the Eastcliff Total Return Fund is to realize a combination
of capital appreciation and income resulting in the highest total return, while
assuming reasonable risks. In seeking to attain the Total Return Fund's
objective, no minimum or maximum percentage of the Fund's assets is required to
be invested in a specific asset class. At times, the Fund may be 100% invested
in common stocks. During the fiscal year ended June 30, 1999, we maintained an
asset allocation approximating 85% common equities and 15% fixed income.
Over the past year, the fund maintained its sector emphasis in technology,
communication services, healthcare, financials, and consumer staples. The fund
is dedicated to high quality "marquis name" companies with superior products and
excellent management. Although we remain positive about the market, going
forward, we will continue to cautiously select investments based on solid
company fundamentals.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
EASTCLIFF TOTAL RETURN FUND, STANDARD & POOR'S 500 STOCK INDEX
AND LEHMAN INTERMEDIATE CORPORATE BOND INDEX
AVERAGE ANNUAL TOTAL RETURN
1-Year +21.7%
5-Year +23.9%
10-Year +15.9%
Lehman
Eastcliff Standard & Intermediate
Total Poor's 500 Corporate
date Return Fund Stock Index*<F11> Bond Index**<F12>
------ ------------- ---------------- ---------------
9/30/89 10,000 10,000 10,000
9/30/90 8,650 9,070 10,840
9/30/91 11,133 11,918 12,347
9/30/92 12,602 13,241 13,915
9/30/93 14,291 14,962 15,056
9/30/94 14,605 15,501 14,800
6/30/94 14,605 15,501 14,800
9/30/94 14,605 15,501 14,800
6/30/95 15,730 18,632 16,206
6/30/96 19,725 23,495 17,065
6/30/97 25,268 31,648 18,447
6/30/98 33,682 41,237 20,015
6/30/99 40,991 50,598 20,856
*<F11> The Standard &Poor's 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The Standard
&Poor's Ratings Group designates the stocks to be included in the Index on a
statistical basis. A particular stock's weighting in the Index is based on
its relative total market value (i.e., its market price per share times the
number of shares outstanding). Stocks may be added or deleted from the Index
from time to time.
**<F12> The Lehman Intermediate Corporate Bond Index includes all
Intermediate publicly issued, fixed rate debt issues rated investment grade
or higher, nonconvertible investment grade, dollar denominated, SEC-
registered corporate debt. The Index includes Bonds with maturities of one to
ten years and have outstanding par values of at least $100 million.
Eastcliff Total Return Fund
STATEMENT OF NET ASSETS
June 30, 1999
SHARES OR Quoted
PRINCIPAL Market
AMOUNT Cost Value
- --------- ----- ------
LONG-TERM INVESTMENTS -- 92.8% (A)<F14>
COMMON STOCKS -- 90.8% (A)<F14>
CAPITAL GOODS SECTOR -- 4.1%
- ----------------------------
ELECTRICAL EQUIPMENT -- 4.1%
9,000 General Electric Co. $ 241,832 $ 1,017,000
COMMUNICATION SERVICES SECTOR -- 6.5%
- -------------------------------------
TELECOMMUNICATIONS-LONG DISTANCE -- 6.5%
10,000 MCI WorldCom Inc.*<F13> 379,350 860,625
4,000 Vodafone AirTouch PLC SP
ADR*<F13> (Formerly AirTouch
Communications, Inc.) 505,480 788,000
------------ -----------
884,830 1,648,625
CONSUMER CYCLICALS SECTOR -- 6.4%
- ---------------------------------
RETAIL-BUILDING SUPPLIES -- 2.6%
10,000 The Home Depot, Inc. 487,475 644,375
RETAIL-GENERAL MERCHANTS -- 3.8%
6,000 Costco Companies, Inc.*<F13> 468,625 480,375
10,000 Wal-Mart Stores, Inc. 458,350 482,500
------------ -----------
926,975 962,875
CONSUMER STAPLES SECTOR -- 9.2%
- -------------------------------
BEVERAGES-SOFT DRINK -- 2.5%
10,000 The Coca-Cola Co. 351,275 625,000
BROADCAST MEDIA -- 1.8%
6,000 MediaOne Group, Inc.*<F13> 453,073 446,250
ENTERTAINMENT -- 3.2%
11,000 Time Warner Inc. 783,204 808,500
HOUSEHOLD PRODUCTS -- 1.7%
4,000 Clorox Co. 179,620 427,250
FINANCIALS SECTOR -- 10.5%
- --------------------------
BANKS-MAJOR REGIONAL -- 1.8%
12,000 Bank of New York
Company, Inc. 378,720 440,250
BANKS-MONEY CENTER -- 2.2%
7,375 Bank of America Corp.
(Formerly BankAmerica
Corp.) 151,094 540,680
FINANCIAL-DIVERSE -- 2.3%
12,000 Citigroup Inc. 508,793 570,000
INSURANCE-MULTILINE -- 4.2%
9,000 American International
Group, Inc. 273,556 1,053,562
HEALTHCARE SECTOR -- 20.4%
- --------------------------
DIVERSE -- 9.1%
18,500 Bristol-Myers Squibb Co. 303,059 1,303,094
10,000 Johnson & Johnson 299,675 980,000
------------ -----------
602,734 2,283,094
DRUGS MAJOR -- 11.3%
12,000 Eli Lilly & Co. 449,610 859,500
5,000 Merck & Co., Inc. 108,690 370,000
14,500 Pfizer Inc. 315,786 1,591,375
------------ -----------
874,086 2,820,875
TECHNOLOGY SECTOR -- 32.4%
- --------------------------
COMMUNICATION-EQUIPMENT -- 14.7%
14,588 Lucent Technologies Inc. 298,780 983,778
18,000 Nokia Corp. "A" ADR 288,270 1,648,125
3,600 Plantronics, Inc.*<F13> 65,394 234,450
12,000 Tellabs, Inc.*<F13> 561,360 810,750
------------ -----------
1,213,804 3,677,103
COMPUTER HARDWARE -- 5.9%
5,000 Dell Computer Corp.*<F13> 215,312 185,000
10,000 International Business
Machines Corp. 199,462 1,292,500
------------ -----------
414,774 1,477,500
COMPUTER SOFTWARE/SERVICES -- 5.9%
16,300 Microsoft Corp.*<F13> 235,466 1,470,056
COMPUTERS-NETWORKING -- 4.1%
16,000 Cisco Systems Inc.*<F13> 440,925 1,029,000
ELECTRONICS-SEMICONDUCTORS -- 1.8%
7,600 Intel Corp. 133,423 452,200
UTILITIES SECTOR -- 1.3%
- ------------------------
ELECTRIC COMPANIES -- 1.3%
5,810 Duke Energy Corp. 135,932 315,919
------------ -----------
Total common stocks 9,671,591 22,710,114
ASSET BACKED SECURITIES -- 2.0% (A)<F14>
$500,000 Discover Card Master Trust I,
6.55%, due 02/18/03 505,579 503,438
------------ -----------
Total long-term
investments 10,177,170 23,213,552
SHORT-TERM INVESTMENTS -- 7.7% (A)<F14>
VARIABLE RATE DEMAND NOTES
1,110,000 Firstar Bank U.S.A., N.A. 1,110,000 1,110,000
812,520 Warner-Lambert Co. 812,520 812,520
------------ -----------
Total short-term
investments 1,922,520 1,922,520
------------ -----------
Total investments $12,099,690 25,136,072
------------
------------
Liabilities, less cash and
receivables (0.5%) (a)<F14> (134,486)
-----------
Net Assets $25,001,586
-----------
-----------
Net Asset Value Per Share
($0.01 par value 300,000,000
shares authorized), offering
and redemption price
($25,001,586 / 1,070,451
shares outstanding) $ 23.36
-----------
-----------
*<F13> Non-income producing security.
(a)<F14> Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Total Return Fund
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
INCOME:
Dividends $ 141,985
Interest 293,041
----------
Total income 435,026
----------
EXPENSES:
Management fees 251,628
Administrative services 49,530
Professional fees 16,961
Transfer agent fees 15,966
Custodian fees 5,933
Registration fees 4,731
Printing and postage expense 2,819
Board of Directors fees 1,000
Other expenses 3,150
----------
Total expenses before reimbursement 351,718
Less expenses assumed by adviser (25,397)
----------
Net expenses 326,321
----------
NET INVESTMENT INCOME 108,705
----------
NET REALIZED GAIN ON INVESTMENTS 3,979,587
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 901,682
----------
NET GAIN ON INVESTMENTS 4,881,269
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,989,974
----------
----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1999 and June 30, 1998
1999 1998
------ ------
OPERATIONS:
Net investment income $ 108,705 $ 280,595
Net realized gain on investments 3,979,587 1,218,630
Net increase in unrealized
appreciation on investments 901,682 5,324,182
----------- -----------
Net increase in net assets
resulting from operations 4,989,974 6,823,407
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment
income ($0.16696 and $0.2494 per share,
respectively) (192,872) (321,741)
Distributions from net realized gains
($2.35253 and $0.52647 per share,
respectively) (2,719,992) (680,452)
----------- -----------
Total distributions (2,912,864)*<F15>(1,002,193)
----------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(119,629 and 163,200 shares,
respectively) 2,609,981 2,976,105
Net asset value of shares
issued in distributions
(120,051 and 40,964
shares, respectively) 2,587,962 697,988
Cost of shares redeemed
(352,993 and 303,025
shares, respectively)
(7,727,554) (5,667,671)
----------- -----------
Net decrease in net assets
derived from Fund share
activities (2,529,611) (1,993,578)
----------- -----------
TOTAL (DECREASE) INCREASE (452,501) 3,827,636
NET ASSETS AT THE BEGINNING OF THE YEAR 25,454,087 21,626,451
----------- -----------
NET ASSETS AT THE END OF THE YEAR
(including undistributed net investment
income of $24,705 and $108,880,
respectively) $25,001,586 $25,454,087
----------- -----------
----------- -----------
*<F15>See Note 8.
The accompanying notes to financial statements are an integral part of these
statements.
Eastcliff Total Return Fund
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
For the
Period
from
October 1,
1994 to
Years Ended June 30, June 30,
----------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ------
PER SHARE OPERATING
PERFORMANCE:
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)
----- ----- ----- ----- -----
Net asset value, end
of period $23.36 $21.50 $16.86 $14.62 $11.96
----- ----- ----- ----- -----
----- ----- ----- ----- -----
TOTAL INVESTMENT
RETURN (d)<F19> 21.7% 33.3% 28.1% 25.4% 10.4%(a)<F16>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's $) 25,002 25,454 21,626 17,799 15,806
Ratio of expenses
(after reimbursement)
to average net
assets(b)<F17> 1.3% 1.3% 1.3% 1.3% 1.5%(a)<F16>
Ratio of net investment
income to average net
assets(c)<F18> 0.4% 1.2% 1.5% 0.7% 2.5%(a)<F16>
Portfolio turnover rate 32.9% 38.4% 58.3% 95.1% 89.4%
(a)<F16> Annualized.
(b)<F17> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios would have
been, for the years ended June 30, 1999, 1998, 1997 and 1996 and for the period
from October 1, 1994 to June 30, 1995, as follows: 1.4%, 1.4%, 1.5%, 1.6% and
2.6%(a), respectively.
(c)<F18> If the Fund had paid all of its expenses, the ratios would have been,
for the years ended June 30, 1999, 1998, 1997 and 1996 and for the period from
October 1, 1994 to June 30, 1995, as follows: 0.3%, 1.1%, 1.3%, 0.4% and
1.4%(a), respectively.
(d)<F19> Effective December 31, 1994, the Fund changed investment advisers from
Fiduciary Management, Inc. to Resource Capital Advisers, Inc.
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Regional
Small Capitalization
Value Fund
August 11, 1999
Dear Shareholder:
There is an adage in the stock market that says "a trend in motion tends to
remain in motion." The only rub is that the statement is true until the trend
reverses. In this case, the trend in motion, the outperformance from owning a
select group of large capitalization stocks versus small capitalization stocks
continued through the last twelve months. If one had perfectly predicted the
future to us in the summer of 1998 we would have had reason to doubt them. To
believe that the historical extremes in relative valuation would widen even more
and continue for another nine months would have caused us to at least question
that viewpoint. Since we invest exclusively in small capitalization value
stocks, there would have been little we could have done to alter the situation.
However, as so often happens, at the end of the first quarter of 1999 just when
the wisdom of investing in small cap stocks was under its greatest challenge,
the trend reversed direction with a "bang." Your portfolio of small
capitalization companies provided a return of 18.1% for the second quarter of
1999 versus its benchmark Russell 2000 index portfolio return of 15.5% thereby
offsetting a first quarter decline and producing a return of 6.5% and 9.3%
respectively for the first half of 1999.
At June 30, 1999 the funds assets were $53.8 million and the net asset value
was $13.28.
Important contributions to second quarter's strong results were: SPX Corp -
(up 66% in 2Q99) - applying the EVA (Economic Value Analysis) Value Improvement
Process to the assets of General Signal that were acquired should generate
tremendous cash flow and economic value over the next several years; Polaris
Industries - (up 37% in 2Q99) under the leadership of a new CEO, this
manufacturer of motorized recreational and utility equipment is trying to
accelerate its growth by leveraging its dominant market position; US Can Corp. -
(up 51% in 2Q99) - as a leading manufacturer of aerosol cans in the U.S., the
new management team is focusing on improving returns on invested capital and
maximizing cash flow; and Geon - (up 42% in 2Q99) - this shareholder oriented
management team has transformed Geon from a commodity oriented PVC producer into
a specialty chemical growth company over the last several years.
A comment made last year was that tending to the portfolio by investing in
the best companies we could find until the pendulum "swings back" to favor our
arena has generally produced excellent rewards for our patience and diligence.
That comment is no less true today than it was then.
Sincerely,
/s/Richard W. Jensen /s/Elizabeth M. Lilly /s/Richard J. Rinkoff
Richard W. Jensen Elizabeth M. Lilly Richard J. Rinkoff
Portfolio Manager Portfolio Manager Portfolio Manager
Past performance cannot guarantee future results. Prices will fluctuate and
redemption value may be more or less than original investment. This Fund is not
insured by the FDIC and is not a deposit or other obligation of or guaranteed by
Resource Trust Company or any of its affiliates.
Eastcliff Regional Small Capitalization Value Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
June 30, 1999
Woodland Partners is often asked for its opinion about the level of the stock
market and general economic conditions. We spend only a nominal amount of time
trying to determine the future direction of the economy, interest rates or the
stock market. We don't know with any useful precision whether the economy will
speed up or slow down, interest rates will rise or fall or whether inflation
will rear its ugly head. Rather than focusing on the level of the market, our
task is to concentrate every day on investing in the best companies we can find
for the Fund. Longer term, we continue to believe that compounding money at a
steady rate is the best strategy and that stocks will provide better returns
than bonds or cash. Last year's Russian Debt crisis and the implosion of Long-
term Capital Management are events that rarely can be forecast in advance with
any degree of accuracy. In retrospect, at their unfolding "events" tend to be
very challenging but time and thoughtful action tend to bring about a healing
process. For the "short-term trader" they bring fear and abandonment. For the
long-term investor they bring opportunity. The economic performance of the
United States continues to outrun the dire forecasts of its demise. How long
this will continue, we don't know. Our task is to focus our attention on those
areas where we believe we have an edge that will benefit the Fund.
At present we have forty-two companies represented in the portfolio. As
manager of a capital appreciation fund, we believe in investing a relatively
high portion of the portfolio in a limited number of companies. We continue to
follow a bottom-up strategy to investing that focuses on investing in the best
companies we can find with strong managements and that are undervalued by the
market.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND AND RUSSELL 2000 INDEX
AVERAGE ANNUAL TOTAL RETURN
1-Year (1.2%)
Since inception 9/16/96 +11.4%
Eastcliff Regional
Small Capitalization Russell 2000
date Value Fund Index*<F21>
------ -------------------- ----------------
9/16/96** 10,000 10,000
9/30/96 9,850 10,128
12/31/96 10,908 10,655
3/31/97 10,517 10,104
6/30/97 12,251 11,742
9/30/97 13,847 13,489
12/31/97 13,209 13,030
3/31/98 14,168 14,346
6/30/98 13,683 13,672
9/30/98 10,387 10,917
12/31/98 12,698 12,698
3/31/99 11,446 12,009
6/30/99 13,523 13,877
**<F20> inception date 9/16/96
*<F21> The Russell 2000 Index is an index comprised of 2000 publicly traded
small capitalization common stocks that are ranked in terms of capitalization
below the large and mid-range capitalization sectors of the United States
equity market. The Russell 2000 Index is a trademark/service mark of the
Frank Russell Company.
Eastcliff Regional Small Capitalization Value Fund
STATEMENT OF NET ASSETS
June 30, 1999
SHARES OR Quoted
PRINCIPAL Market
AMOUNT Cost Value
- --------- ------ ---------
LONG-TERM INVESTMENTS -- 97.8% (A)<F23>
COMMON STOCKS -- 97.8% (A)<F23>
BASIC MATERIALS SECTOR -- 15.9%
- -------------------------------
AGRICULTURAL PRODUCTS -- 2.0%
35,000 Corn Products
International, Inc. $ 1,137,237 $ 1,065,312
CHEMICALS -- 1.6%
26,900 Geon Co. 549,628 867,525
CHEMICALS-SPECIALTY -- 12.3%
68,300 Ferro Corp. 1,604,478 1,878,250
45,800 H.B. Fuller Co. 2,406,084 3,131,575
108,500 Material Sciences Corp.*<F22> 1,426,771 1,627,500
------------ ------------
5,437,333 6,637,325
CAPITAL GOODS SECTOR -- 30.1%
- -----------------------------
AEROSPACE/DEFENSE -- 3.7%
23,300 Alliant Techsystems Inc.*<F22> 1,326,737 2,015,450
CONTAINERS-METAL/GLASS -- 3.5%
83,800 U.S. Can Corp.*<F22> 1,403,443 1,864,550
ELECTRICAL EQUIPMENT -- 6.8%
56,400 MagneTek, Inc.*<F22> 977,807 595,725
36,900 SPX Corp.*<F22> 1,647,280 3,081,150
------------ ------------
2,625,087 3,676,875
MACHINERY-DIVERSE -- 3.1%
54,400 Terex Corp.*<F22> 1,121,600 1,655,800
MANUFACTURER-DIVERSE -- 11.0%
66,400 Graco Inc. 1,462,713 1,950,500
33,700 Premark International, Inc. 868,860 1,263,750
27,800 Sames Corp.*<F22> (Formerly
Binks Sames Corp.) 986,000 552,525
126,580 U.S. Industries, Inc. 2,472,489 2,151,860
------------ ------------
5,790,062 5,918,635
MANUFACTURER-SPECIAL -- 1.0%
21,200 Donaldson Company, Inc. 298,117 519,400
OFFICE EQUIPMENT & SUPPLIES -- 1.0%
15,700 National Computer
Systems, Inc. 161,700 529,875
CONSUMER CYCLICALS SECTOR -- 26.8%
- ----------------------------------
AUTO PARTS & EQUIPMENT -- 7.4%
45,500 Meritor Automotive, Inc. 1,101,278 1,160,250
52,000 Standard Motor
Products, Inc. 933,387 1,274,000
61,000 Tower Automotive, Inc.*<F22> 1,211,156 1,551,688
------------ ------------
3,245,821 3,985,938
CONSUMER-JEWELRY/GIFT -- 0.7%
16,300 Enesco Group Inc. 426,542 376,937
FOOTWEAR -- 2.1%
108,500 The Stride Rite Corp. 1,349,802 1,118,906
LEISURE TIME-PRODUCTS -- 4.1%
50,300 Polaris Industries Inc. 1,686,048 2,188,050
PUBLISHING-NEWSPAPER -- 2.9%
41,200 Central Newspapers, Inc. 1,091,388 1,550,150
RETAIL-SPECIALTY -- 1.9%
54,600 Funco, Inc.*<F22> 805,985 1,006,688
SERVICES-ADVERTISING/MARKETING -- 4.0%
71,400 AC Nielsen Corp.*<F22> 1,364,862 2,159,850
SERVICES-COMMERCIAL & CONSUMER -- 3.0%
64,000 Alternative Resources
Corp.*<F22> 699,740 448,000
41,000 Midas, Inc. 1,250,212 1,163,375
------------ ------------
1,949,952 1,611,375
TEXTILES-APPAREL -- 0.7%
76,400 Sport-Haley, Inc.*<F22> 1,089,441 367,675
CONSUMER STAPLES SECTOR -- 8.6%
- -------------------------------
ENTERTAINMENT -- 1.9%
72,800 LodgeNet Entertainment
Corp.*<F22> 797,411 1,014,650
FOODS -- 4.3%
103,300 International Multifoods
Corp. 2,275,132 2,330,706
RESTAURANTS -- 1.2%
39,000 VICORP Restaurants, Inc.*<F22> 561,561 677,625
SPECIALTY PRINTING -- 1.2%
43,400 Merrill Corp. 517,250 629,300
ENERGY SECTOR -- 0.7%
- ---------------------
OIL-EXPLORATION & PRODUCTS -- 0.7%
18,500 Basin Exploration, Inc.*<F22> 333,990 371,156
FINANCIALS SECTOR -- 8.4%
- -------------------------
BANKS-MAJOR REGIONAL -- 4.3%
23,800 Community First
Bankshares, Inc. 288,700 568,225
62,000 TCF Financial Corp. 1,407,150 1,728,250
------------ ------------
1,695,850 2,296,475
INSURANCE-LIFE/HEALTH -- 0.7%
67,900 RTW, Inc.*<F22> 564,385 398,913
INSURANCE-PROPERTY -- 3.4%
67,900 Horace Mann Educators
Corp. 1,564,759 1,846,031
HEALTHCARE SECTOR -- 5.4%
- -------------------------
MEDICAL PRODUCTS & SUPPLIES -- 5.4%
86,300 Empi, Inc.*<F22> 1,644,691 2,103,562
98,300 Rehabilicare Inc.*<F22> 321,212 325,619
46,900 Rochester Medical Corp.*<F22> 745,026 469,000
------------ ------------
2,710,929 2,898,181
TECHNOLOGY SECTOR -- 1.9%
- -------------------------
ELECTRONICS-INSTRUMENTS -- 0.9%
59,100 Bolder Technologies Corp.*<F22> 752,113 517,125
ELECTRONICS-SEMICONDUCTORS -- 1.0%
61,500 Aetrium Inc.*<F22> 1,003,800 561,188
------------ ------------
Total common stocks 45,637,965 52,657,666
------------ ------------
Total long-term
investments 45,637,965 52,657,666
SHORT-TERM INVESTMENTS -- 2.0% (A)<F23>
VARIABLE RATE DEMAND NOTE
$1,061,963 Firstar Bank U.S.A., N.A. 1,061,963 1,061,963
------------ ------------
Total short-term
investments 1,061,963 1,061,963
------------ ------------
Total investments $46,699,928 53,719,629
------------
------------
Cash and receivables, less
liabilities 0.2% (A)<F23> 90,841
------------
Net Assets $53,810,470
------------
------------
Net Asset Value Per Share
($0.01 par value 300,000,000
shares authorized), offering
and redemption price
($53,810,470 / 4,051,780
shares outstanding) $ 13.28
------------
------------
*<F22> Non-income producing security.
(a)<F23> Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Regional Small Capitalization Value Fund
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
INCOME:
Dividends $ 468,361
Interest 59,151
------------
Total income 527,512
------------
EXPENSES:
Management fees 499,522
Administrative services 72,409
Transfer agent fees 17,598
Custodian fees 15,080
Professional fees 15,010
Printing and postage expense 9,056
Amortization of organizational expenses 4,974
Registration fees 4,657
Board of Director fees 1,000
Other expenses 6,375
------------
Total expenses 645,681
------------
NET INVESTMENT LOSS (118,169)
------------
NET REALIZED LOSS ON INVESTMENTS (875,261)
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (1,017,084)
------------
NET LOSS ON INVESTMENTS (1,892,345)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(2,010,514)
------------
------------
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Regional Small Capitalization Value Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1999 and June 30, 1998
1999 1998
-------------- -------------
OPERATIONS:
Net investment loss $ (118,169) $ (72,349)
Net realized (loss) gain
on investments (875,261) 655,165
Net (decrease) increase in
unrealized appreciation
on investments (1,017,084) 4,056,705
-------------- ------------
Net (decrease) increase in
net assets resulting
from operations (2,010,514) 4,639,521
-------------- ------------
DISTRIBUTIONs TO SHAREHOLDERS:
Dividend from net investment
income ($0.00566 per share) -- (13,912)
Distributions from net
realized gains
($0.1144 and $0.08783
per share, respectively) (522,086) (241,045)
-------------- ------------
Total distributions (522,086)*<F29> (254,957)
-------------- ------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(819,149 and 4,074,336 shares,
respectively) 9,853,719 53,855,081
Net asset value of shares
issued in distributions
(40,053 and 19,272 shares, respectively) 499,462 246,086
Cost of shares redeemed
(1,389,608 and 1,901,473
shares, respectively) (16,148,675) (25,578,485)
-------------- ------------
Net (decrease) increase
in net assets derived
from Fund share activities (5,795,494) 28,522,682
-------------- ------------
TOTAL (DECREASE) INCREASE (8,328,094) 32,907,246
NET ASSETS AT THE BEGINNING OF THE YEAR 62,138,564 29,231,318
-------------- ------------
NET ASSETS AT THE END OF THE YEAR $53,810,470 $62,138,564
-------------- ------------
-------------- ------------
*<F29>See Note 8.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
For the Years For the Period from
Ended June 30, September 16,1996
------------------ +<F24>to
1999 1998 June 30, 1997
---- ---- -------------------
PER SHARE OPERATING PERFORMANCE:
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%(b)<F26>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's $) 53,810 62,139 29,231
Ratio of expenses
(after reimbursement)
to average net assets (c)<F27> 1.3% 1.3% 1.3%(a)<F25>
Ratio of net investment (loss)
income to average net
assets (d)<F28> (0.2%) (0.1%) 0.3%(a)<F25>
Portfolio turnover rate 29.2% 35.5% 29.4%
+<F24> Commencement of operations.
(a)<F25> Annualized.
(b)<F26> Not annualized.
(c)<F27> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses for the period September
16, 1996+ to June 30, 1997, the ratio would have been 1.6%(a).
(d)<F28> If the Fund had paid all of its expenses for the period September 16,
1996+ to June 30, 1997, the ratio would have been (0.0)%(a).
The accompanying notes to financial statements are an integral part of these
statements.
Eastcliff Contrarian Value Fund
August 11, 1999
Dear Shareholder:
The world is clearly not as financially risky in 1999 as it was in 1998. As
a consequence, the U.S. stock market finally began to broaden out to include
smaller and medium size companies, cyclicals, energy, and most recently,
utilities to improve the returns of value investors after the long bear market
of 1998 and first quarter 1999. When external global (Asia, Russia) or macro
financial crises create enough fear in enough investors, they are driven to the
perceived safety of large-cap quality growth without respect to price. There
were few places to hide in true value stocks in 1998. "Ground zero", the
psychological bottom for our mid-cap value portfolio of out-of-favor
restructuring stocks was March 1999, with the kind of value we have not seen
since 1973-74. A year ago we said in our letter that the current economic
environment would not favor our late cycle turnaround ideas until the world's
financial crises were over, but that the eventual bounce off the bottom in these
undervalued companies would be large with high absolute rates of return. The
Eastcliff Contrarian Value Fund was +17.0% versus +10.9% for the Russell Mid-Cap
benchmark in the second quarter as the evidence continued to mount that a
stronger global economy would expand investor confidence to invest outside the
previously unbeatable large-capitalization growth companies. Value outperformed
growth in the second quarter across the capitalization range for the first time
in two years and small-cap outperformed large-cap companies. We believe this
change of leadership in the recent quarter sets the stage for both small and
mid-cap value investors to lead the market in performance over the next few
years. We believe that not only is the bear market in value stocks over, but
what we have witnessed so far in the second quarter is just the set-up for
significant gains in basic industry/cyclical value stocks over the next several
years.
The six-month performance of your shares as of June 30, 1999 was +9.2% versus
+10.3% for the Russell Mid-Cap Index. We appreciate your patience during this
initial difficult period of our fund in 1998 and expect out disciplined research
in undervalued companies to provide significant and positive absolute returns as
the stock market continues to broaden in 1999 and 2000.
As of August 10, 1999, your Board of Directors declared a dividend of
$0.05814 per share from net investment income, payable August 11, 1999, to
shareholders of record on August 9, 1999.
Respectfully submitted,
/s/Bruce D. Bottomley /s/Lee C. Garcia
Bruce D. Bottomley Lee C. Garcia
Portfolio Manager Portfolio Manager
Past performance connot 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 Contrarian Value Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
June 30, 1999
The Fund invests in unloved, undervalued and underperforming companies where
there is an unrecognized "jewel" or growth business masked by underachieving low
return businesses. Our typical company sells at a large discount to asset value
and future earning power and we try to buy these companies at six to seven times
cash flow in a stock market selling at 16x cash flow. These companies only
appreciate in value when highly incentivized management restructures the
business through asset sales, spin-offs, debt paydown, strategic acquisitions
and share buybacks, leading to higher profitability.
Approximately 35% of our portfolio companies are in basic industries,
manufacturing, and energy. Those companies, along with most smaller and medium-
cap companies underperformed the broad market for the four quarters of 1998 and
the first quarter of 1999 in spite of significant internal restructuring
progress. April, 1999 was the turnaround month for what had been the pariah of
the stock market. One half of the Fund's portfolio (17 stocks) was up 10% or
more during the quarter, with several of our energy, chemical and steel stocks
up +50% off the March bottom. Eastcliff's restructuring value portfolio should
continue to benefit from numerous significant corporate events in the second
half of 1999. The resumption of revenue growth with dramatic earnings leverage
from two years of cost cutting and streamlining of manufacturing processes will
attract new investor attention. Our portfolio remains severely undervalued in
the context of the S&P 500 and has less risk with the dissipation of the global
over-capacity and deflationary issues.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN EASTCLIFF CONTRARIAN
VALUE FUND AND RUSSELL MIDCAP INDEX
AVERAGE ANNUAL TOTAL RETURN
1-Year (5.3%)
Since inception 12/30/97 (0.9%)
date Eastcliff Contrarian Value Fund Russell Midcap Index*<F31>
-------- ------------------------------- --------------------------
12/30/97** 10,000 10,000
12/31/97 10,030 10,026
3/31/98 10,780 11,110
6/30/98 10,410 10,942
9/30/98 8,611 9,320
12/31/98 9,121 11,039
3/31/99 8,465 10,987
6/30/99 9,860 12,180
**<F30> inception date 12/30/97
*<F31>The Russell Midcap Index consists of the smallest 800 securities
in the Russell 1000 Index as ranked by total market capitalization. This index
is widely regarded to accurately capture the medium-sized universe of securities
and represents approximately 34% of the Russell 1000 market capitalization. The
Russell Midcap Index and the Russell 1000 Index are trademarks/service marks of
the Frank Russell Company.
Eastcliff Contrarian Value Fund
STATEMENT OF NET ASSETS
June 30, 1999
SHARES OR Quoted
PRINCIPAL Market
AMOUNT Cost Value
- --------- ---- ------
LONG-TERM INVESTMENTS -- 98.1% (A)<F33>
COMMON STOCKS -- 98.1% (A)<F33>
BASIC MATERIALS SECTOR -- 27.1%
- -------------------------------
ALUMINUM -- 3.7%
8,800 Reynolds Metals Co. $ 517,362 $ 519,200
CHEMICALS-DIVERSE -- 4.7%
23,300 Engelhard Corp. 462,387 527,162
32,500 Terra Industries, Inc. 366,521 130,000
----------- -----------
828,908 657,162
CHEMICALS-SPECIALTY -- 8.0%
31,300 W.R. Grace & Co.*<F32> 436,649 575,137
13,500 Hercules Inc. 527,813 530,719
----------- -----------
964,462 1,105,856
IRON & STEEL -- 10.7%
23,200 AK Steel Holding
Corp. 409,584 522,000
25,400 Allegheny Teledyne Inc. 573,597 574,675
57,200 Armco, Inc.*<F32> 275,371 378,950
----------- -----------
1,258,552 1,475,625
CAPITAL GOODS SECTOR -- 12.5%
- -----------------------------
CONTAINERS-METAL/GLASS -- 5.3%
8,700 Ball Corp. 294,148 367,575
12,800 Crown Cork & Seal
Co., Inc. 422,294 364,800
----------- -----------
716,442 732,375
MANUFACTURER-DIVERSE -- 7.2%
17,100 Tenneco, Inc. 649,873 408,262
34,300 U.S. Industries, Inc. 856,199 583,100
----------- -----------
1,506,072 991,362
CONSUMER CYCLICALS SECTOR -- 9.7%
- ---------------------------------
HARDWARE & TOOLS -- 2.4%
10,200 The Stanley Works 255,386 328,312
RETAIL-APPAREL -- 4.0%
14,800 Footstar, Inc.*<F32> 400,413 550,375
RETAIL-SPECIALTY -- 3.3%
44,000 Venator Group, Inc.*<F32> 713,644 459,250
CONSUMER STAPLES SECTOR -- 6.3%
- -------------------------------
BROADCAST MEDIA -- 1.0%
3,200 CBS Corp.*<F32> 87,384 139,000
HOUSEHOLD PRODUCTS -- 2.3%
8,300 Fort James Corp. 244,180 314,363
SPECIALTY PRINTING -- 3.0%
11,100 R. R. Donnelley & Sons Co. 394,238 411,394
ENERGY SECTOR -- 15.9%
- ----------------------
OIL & GAS-DRILLING & EQUIPMENT -- 2.2%
8,200 Cooper Cameron Corp.*<F32> 200,180 303,913
OIL & GAS-REFINING & MARKETING -- 6.6%
25,600 PennzEnergy Co. 545,397 427,200
15,919 Sunoco, Inc. 594,023 480,555
----------- -----------
1,139,420 907,755
OIL-EXPLORATION & PRODUCTS -- 7.1%
11,773 Kerr-McGee Corp. 634,174 590,857
7,600 Ocean Energy, Inc.*<F32> 74,598 73,150
28,800 Pioneer Natural
Resources Co. 522,027 316,800
----------- -----------
1,230,799 980,807
FINANCIALS SECTOR -- 5.3%
- -------------------------
FINANCIAL-DIVERSE -- 5.3%
3,066 Alleghany Corp.*<F32> 520,595 567,210
4,800 Chicago Title Corp. 175,196 171,300
----------- -----------
695,791 738,510
TECHNOLOGY SECTOR -- 2.9%
- -------------------------
PHOTOGRAPH/IMAGING -- 2.9%
6,000 Eastman Kodak Co. 372,400 406,500
TRANSPORTATION SECTOR -- 1.5%
- -----------------------------
RAILROADS -- 1.5%
3,500 Union Pacific Corp. 150,072 204,094
UTILITIES SECTOR -- 16.9%
- -------------------------
ELECTRIC COMPANIES -- 9.5%
35,300 Citizens Utilities Co. Cl B*<F32> 284,762 392,712
22,000 Northeast Utilities*<F32> 300,792 389,125
20,300 Western Resources, Inc. 773,718 540,488
----------- -----------
1,359,272 1,322,325
NATURAL GAS -- 7.4%
13,800 Eastern Enterprises 546,630 548,550
23,450 UGI Corp. 600,183 473,397
----------- -----------
1,146,813 1,021,947
----------- -----------
Total common stocks 14,181,790 13,570,125
----------- -----------
Total long-term
investments 14,181,790 13,570,125
SHORT-TERM INVESTMENTS -- 1.5% (A)<F33>
VARIABLE RATE DEMAND NOTE
$210,377 Wisconsin Corporate
Central Credit Union 210,377 210,377
----------- -----------
Total short-term
investments 210,377 210,377
----------- -----------
Total investments 14,392,167 13,780,502
-----------
-----------
Cash and receivables, less
liabilities 0.4% (A)<F33> 48,499
-----------
Net Assets $13,829,001
-----------
-----------
Net Asset Value Per Share
($0.01 par value 300,000,000
shares authorized), offering
and redemption price
($13,829,001 / 1,459,648
shares outstanding) $ 9.47
---------
---------
*<F32>Non-income producing security.
(a)<F33>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Contrarian Value Fund
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
INCOME:
Dividends $316,859
Interest 31,610
-----------
Total income 348,469
-----------
EXPENSES:
Management fees 158,237
Administrative services 31,647
Professional fees 15,097
Transfer agent fees 14,651
Custodian fees 10,910
Amortization of organizational expenses 4,652
Registration fees 3,652
Printing and postage expense 1,093
Board of Directors fees 1,000
Other expenses 2,203
-----------
Total expenses before reimbursement 243,142
Less expenses assumed by adviser (37,434)
-----------
Net expenses 205,708
-----------
NET INVESTMENT INCOME 142,761
-----------
NET REALIZED LOSS ON INVESTMENTS (1,010,104)
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (975,472)
-----------
NET LOSS ON INVESTMENTS (1,985,576)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(1,842,815)
-----------
-----------
The accompanying notes to financial statements are an integral part of this
statement.
Eastcliff Contrarian Value Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended June 30, 1999 and For the Period from December 30, 1997
(commencement of operations) to June 30, 1998
1999 1998
---- ----
OPERATIONS:
Net investment income $ 142,761 $ 66,808
Net realized (loss) gain on investments (1,010,104) 225,965
Net (decrease) increase in unrealized
appreciation on investments (975,472) 363,807
----------- ----------
Net (decrease) increase in net
assets resulting from operations (1,842,815) 656,580
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment
income ($0.07285 per share) (137,368) --
Distributions from net realized
gains ($0.29322 per share) (547,599) --
----------- ----------
Total distributions (684,967)*<F34> --
----------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(360,391 and 2,027,118 shares,
respectively) 3,450,436 20,406,328
Net asset value of shares issued
in distributions (58,268 shares) 524,234 --
Cost of shares redeemed (839,208 and
146,921 shares, respectively) (7,187,121) (1,493,674)
----------- ----------
Net (decrease) increase in net
assets derived from Fund share
activities (3,212,451) 18,912,654
----------- ----------
TOTAL (DECREASE) INCREASE (5,740,233) 19,569,234
NET ASSETS AT THE
BEGINNING OF THE PERIOD 19,569,234 --
----------- ----------
NET ASSETS AT THE END OF THE PERIOD
(including undistributed net
investment income of $77,482
and $68,602, respectively) $13,829,001 $19,569,234
----------- ----------
----------- ----------
*<F34> See Note 8.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
Year Ended For the Period from
June 30,December 30, 1997+<F35> to
1999 June 30, 1998
----------- -----------------
PER SHARE OPERATING PERFORMANCE:
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%(b<F37>)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 13,829 19,569
Ratio of expenses
(after reimbursement)
to average net assets (c)<F38> 1.3% 1.3%(a)<F36>
Ratio of net investment income to
average net assets (d)<F39> 0.9% 0.7%(a)<F36>
Portfolio turnover rate 45.0% 13.6%
+<F35> Commencement of operations.
(a)<F36> Annualized.
(b)<F37> Not annualized.
(c)<F38> 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 year endedJune 30, 1999 and for the period December 30, 1997+ to
June 30, 1998, 1.5% and 1.5%(a), respectively.
(d)<F39> If the Fund had paid all of its expenses, the ratios would have been
for the year endedJune 30, 1999 and for the period December 30, 1997+ to June
30, 1998, 0.7% and 0.5%(a), respectively.
The accompanying notes to financial statements are an integral part of these
statements.
Eastcliff Funds
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(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
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.
(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. For financial reporting purposes, investment transactions are recorded on
trade date. The cost amount of securities for Federal income tax purposes
aggregates $28,888,890, $12,239,887, $46,842,188 and $14,573,152 for the Growth
Fund, Total Return Fund, Regional Small Cap Fund and Contrarian Value Fund,
respectively. The difference between cost amounts for book purposes and tax
purposes is due to deferred wash sale losses.
(b) The Funds may purchase securities on a when-issued or delayed delivery
basis. Although the payment and interest terms of these securities are
established at the time the purchaser enters into the agreement, these
securities may be delivered and paid for at a future date, generally within 45
days. The Funds record purchases of when-issued securities and reflect the value
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
identified cost basis.
(d) Provision has not been made for Federal income taxes since the Funds have
elected to be taxed as "regulated investment companies" and intend to distribute
substantially all net investment company taxable income and net capital gains to
shareholders and otherwise comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. The Regional Small Cap Fund
has $746,400 of a capital loss carryover which expires June 30, 2007. To the
extent the Regional Small Cap Fund realizes future net capital gains, those
gains will be offset by any unused capital loss carryover. The Contrarian Value
Fund has $1,150,751 of post-October losses, which are deferred for tax purposes
until the year ending June 30, 2000.
(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 nonperformance by these counterparties is not anticipated.
(g) Generally accepted accounting principles require that permanent differences
between income for financial reporting and tax purposes be reclassified in the
capital accounts.
(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 Growth Fund, Regional Small Cap Fund and Contrarian Value
Fund pay RCA a monthly fee at the annual rate of 1% of such Funds daily net
assets and for the Total Return Fund, 1% on the first $30,000,000 of the daily
net assets and 0.75% on the daily net assets over $30,000,000.
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 $25,397 and $37,434
for the year ending June 30, 1999, for the Total Return Fund and for the
Contrarian Value 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 $25,000,000 of the daily net
assets of such Fund, 0.1% on the daily net assets of such Fund on the next
$20,000,000 and 0.05% on the daily net assets of such Fund over $45,000,000.
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 year ending
June 30, 1999, no such expenses were incurred.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains are distributed to shareholders.
The distributions were paid on August 11, 1999, to shareholders of record on
August 9, 1999.
TOTAL REGIONAL CONTRARIAN
GROWTH FUND RETURN FUND SMALL CAP FUND VALUE FUND
--------------------------------------------------------
Dividend from net
investment income $ -- $ 24,705 $ -- $ 77,482
$ per share -- 0.02364 -- 0.05814
Short-term gains 10,271 -- -- --
$ per share 0.00394 -- -- --
Long-term capital
gains 5,271,888 2,614,434 -- --
$ per share 2.01761 2.5009 -- --
Shareholders will be sent a 1999 Form 1099-DIV in January, 2000 representing
their proportionate share of these distributions. The Form 1099-DIV would
consider the impact of any retroactive tax law changes.
(4) DEFERRED EXPENSES --
Organizational expenses for the Growth Fund, Regional Small Cap Fund and
Contrarian Value 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, Regional Small Cap Fund and Contrarian Value Fund over a
period of five years. The unamortized organizational expenses at June 30,
1999, were $6,301, $11,189 and $16,281, respectively.
(5) INVESTMENT TRANSACTIONS --
For the year ending June 30, 1999, purchases and proceeds of sales of
investment securities of the Growth Fund (excluding short-term securities)
were $39,336,486 and $55,819,381, respectively; purchases and proceeds of
sales of investment securities of the Total Return Fund (excluding short-term
securities) were $7,904,444 and $14,651,227, respectively; purchases and
proceeds of sales of investment securities of the Regional Small Cap Fund,
(excluding short-term securities) were $14,377,380 and $20,462,137,
respectively; and purchases and proceeds of sales of investment securities of
the Contrarian Value Fund (excluding short-term securities) were $6,849,173
and $10,402,246, respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of June 30, 1999, liabilities of the Funds included the following:
TOTAL REGIONAL CONTRARIAN
GROWTH FUND RETURN FUND SMALL CAP FUND VALUE FUND
--------------------------------------------------------
Payable to brokers
for investments
purchased $ -- $203,452 $ -- $ 9,982
Payable to RCA for
management fees and
deferred expenses 41,401 15,604 53,994 22,331
Other liabilities 26,358 5,335 19,455 2,400
(7) SOURCES OF NET ASSETS --
TOTAL REGIONAL CONTRARIAN
GROWTH FUND RETURN FUND SMALL CAP FUND VALUE FUND
--------------------------------------------------------
As of June 30, 1999,
the sources of net
assets were as follows:
Fund shares issued
and outstanding $23,738,396 $ 9,466,262 $47,679,429 $15,694,920
Net unrealized
appreciation
(depreciation)
on investments 14,304,084 13,036,382 7,019,701 (611,665)
Undistributed net
realized gains
(losses) on
investments 5,331,376 2,474,237 (888,660) (1,331,736)
Undistributed net
investment income -- 24,705 -- 77,482
----------- ------------ ------------ -----------
$43,373,856 $25,001,586 $53,810,470 $13,829,001
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Aggregate net unrealized appreciation (depreciation) as of June 30, 1999,
consisted of the following:
Aggregate gross
unrealized
appreciation $14,626,489 $13,075,658 $11,057,250 $ 1,567,816
Aggregate gross
unrealized
depreciation (322,405) (39,276) (4,037,549) (2,179,481)
----------- ------------ ------------ -----------
Net unrealized
appreciation
(depreciation) $14,304,084 $13,036,382 $ 7,019,701 $ (611,665)
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
(8) REQUIRED FEDERAL INCOME TAX DISCLOSURES (UNAUDITED) --
In early 1999, shareholders received information regarding all distributions
paid to them by the Funds during the fiscal year ended
June 30, 1999. The Funds hereby designate the following amounts as long-term
capital gains distributions.
Total Regional Contrarian
Growth Fund Return Fund Small Cap Fund Value Fund
- --------------------------------------------------------------------------------
$7,457,611 $2,607,190 $207,885 --
For the Growth Fund, Total Return Fund, Regional Small Cap Fund and
Contrarian Value Fund, the percentage of ordinary income which is eligible for
the corporate dividend received deduction for the fiscal year ended June 30,
1999, was 8.3%, 60.1%, 94.6% and 53.5%, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
(PricewaterhouseCoopers logo)
100 East Wisconsin Avenue
Telephone 414 212 1600
Suite 1500
Milwaukee, WI 53202
July 30, 1999
To the Shareholders and Board of Directors
of Eastcliff Funds, Inc.
In our opinion, the accompanying statements of net assets of Eastcliff Growth
Fund, Eastcliff Total Return Fund, Eastcliff Regional Small Capitalization Value
Fund, and Eastcliff Contrarian Value Fund (constituting Eastcliff Funds, Inc.,
hereafter referred to as the "Funds") and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Funds at June 30, 1999, the
results of each of their operations, the changes in each of their net assets and
the financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
EASTCLIFF FUNDS
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
612-336-1444
INVESTMENT ADVISER
RESOURCE CAPITAL ADVISERS, INC.
900 Second Avenue South
300 International Centre
Minneapolis, Minnesota 55402
PORTFOLIO MANAGERS
EASTCLIFF GROWTH FUND
WINSLOW CAPITAL MANAGEMENT, INC.
EASTCLIFF TOTAL RETURN FUND
PALM BEACH INVESTMENT ADVISERS, INC.
EASTCLIFF REGIONAL SMALL CAPITALIZATION VALUE FUND
WOODLAND PARTNERS LLC
EASTCLIFF CONTRARIAN VALUE FUND
SASCO CAPITAL, INC.
ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
FIRSTAR MUTUAL FUND SERVICES, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-595-5519
or
414-765-4124
CUSTODIAN
FIRSTAR BANK MILWAUKEE, NA
615 East Michigan Street
Milwaukee, Wisconsin 53202
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
