SKYLINE FUND, 485APOS, 1997-08-29

SKYLINE FUND
485APOS, 1997-08-29

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
SECURITIES ACT REGISTRATION NO. 33-11755
INVESTMENT COMPANY ACT REGISTRATION NO. 811-5022
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM N-1A
---------------

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

POST-EFFECTIVE AMENDMENT NO. 23 /X/

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/

AMENDMENT NO. 25 /X/

------------------------

SKYLINE FUNDS-REGISTERED TRADEMARK-

(Registrant)

311 SOUTH WACKER DRIVE, SUITE 4500, CHICAGO, ILLINOIS 60606
TELEPHONE NUMBER: 312/913-0900

------------------------

WILLIAM M. DUTTON JANET D. OLSEN
Skyline Funds Bell, Boyd & Lloyd
311 South Wacker Drive, Suite 4500 Three First National Plaza, Suite 3300
Chicago, Illinois 60606 Chicago, Illinois 60602

(Agents for service)

------------------------

AMENDING PARTS A, B AND C AND FILING EXHIBITS

------------------------

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:

immediately upon filing pursuant to paragraph (b)
on , 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
on pursuant to paragraph (a)(2) of rule 485

REGISTRANT HAS PREVIOUSLY ELECTED TO REGISTER PURSUANT TO RULE 24f-2 AN
INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST OF THE FOLLOWING SERIES:
SKYLINE SPECIAL EQUITIES PORTFOLIO AND SKYLINE SPECIAL EQUITIES II. BY THIS
AMENDMENT, REGISTRANT ELECTS TO REGISTER AN INDEFINITE NUMBER OF SHARES OF
BENEFICIAL INTEREST OF ITS SERIES DESIGNATED SKYLINE CONTRARIAN EQUITIES.
REGISTRANT FILED ITS RULE 24f-2 NOTICE FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996 ON FEBRUARY 28, 1997.

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THIS POST-EFFECTIVE AMENDMENT NO. 23 TO THE REGISTRATION STATEMENT OF SKYLINE
FUNDS (1933 ACT NO. 33-11755) DOES NOT AFFECT THE SERIES OF SKYLINE FUNDS
DESIGNATED SKYLINE SPECIAL EQUITIES PORTFOLIO OR SKYLINE SPECIAL EQUITIES II.
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION RELATING TO SKYLINE
SPECIAL EQUITIES PORTFOLIO AND SKYLINE SPECIAL EQUITIES II ARE THEREFORE NOT
INCLUDED IN THIS POST-EFFECTIVE AMENDMENT NO. 23.

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SKYLINE FUNDS
CROSS-REFERENCE SHEET PURSUANT TO RULE 495(a) OF REGULATION C

<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION
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<S> <C>
PART A (PROSPECTUS) SKYLINE SPECIAL EQUITIES PORTFOLIO
SKYLINE SPECIAL EQUITIES II
This post-effective amendment no. 23 to the
registration statement of Skyline Funds (1933 Act No.
33-11755) does not affect the series of Skyline Funds
designated Skyline Special Equities Portfolio or
Skyline Special Equities II. The prospectus relating to
Skyline Special Equities Portfolio and Skyline Special
Equities II is therefore not included in this
post-effective amendment no. 23.

PART A (PROSPECTUS) SKYLINE CONTRARIAN EQUITIES
1(a)&(b) Front cover
2(a) Expense Information
(b)&(c) Highlights
3(a)&(b) Not applicable
(c) Management of Skyline--Performance
(d) Not applicable
4(a)(i) Skyline and its Shares
(ii) Investment Objective and Policies; Risks;
Investment Restrictions
(b) Investment Objective and Policies; Investment
Restrictions
(c) Risks
5(a) Management of Skyline
(b) Management of Skyline; Back cover; Expense
Information
(c) Management of Skyline
(d) Not applicable
(e) Back cover
(f) Management of Skyline; Expense Information
(g) Management of Skyline
5A Not applicable
6(a) Skyline and its Shares
(b)-(d) Not applicable
(e) Skyline and its Shares
(f) Dividends and Distributions
(g) Taxes
(h) Not applicable
7 Purchasing Shares
(a) Back cover
(b) Purchasing Shares; Net Asset Value
(c) Not applicable
(d) Purchasing Shares
(e)-(g) Not applicable
8(a)-(d) Redeeming Shares
9 Not applicable
</TABLE>

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<TABLE>
<CAPTION>
ITEM LOCATION OR CAPTION
- ---------- --------------------------------------------------
PART B (STATEMENT OF ADDITIONAL INFORMATION)
SKYLINE SPECIAL EQUITIES PORTFOLIO
SKYLINE SPECIAL EQUITIES II
<S> <C>
This post-effective amendment no. 23 to the
registration statement of Skyline Funds (1933 Act No.
33-11755) does not affect the series of Skyline Funds
designated Skyline Special Equities Portfolio and
Skyline Special Equities II. The statements of
additional information relating to Skyline Special
Equities Portfolio and Skyline Special Equities II are
therefore not included in this post-effective amendment
no. 23.

PART B (STATEMENT OF ADDITIONAL INFORMATION) SKYLINE
CONTRARIAN EQUITIES
10(a)&(b) Front cover
11 Table of contents
12 Skyline and the Portfolios
13(a)-(c) Investment Objective and Policies; Investment
Restrictions
(d) Investment Objective and Policies
14(a)-(c) Management of Skyline
15(a)&(b) Not applicable
(c) Management of Skyline
16(a)(i) Investment Advisory Services
(ii) Management of Skyline
(iii) Investment Advisory Services
(b) Investment Advisory Services
(c)-(g) Not applicable
(h) General Information
(i) Not applicable
17(a) Portfolio Transactions and Brokerage
(b) Not applicable
(c) Portfolio Transactions and Brokerage
(d)&(e) Not applicable
18(a)&(b) Not applicable
19(a)-(c) Purchase and Redemption of Shares
20 Taxes
21(a) General Information--Distributor
(b)&(c) Not applicable
22(a) Not applicable
(b) Performance Information
23 Not applicable

PART C (OTHER INFORMATION)
24 Financial Statements and Exhibits
25 Persons Controlled by or Under Common Control With
Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment
Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
</TABLE>

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SKYLINE CONTRARIAN EQUITIES

Subscriptions for shares of Skyline Contrarian Equities (the "Portfolio")
are being solicited during an initial offering period currently scheduled from
[ ], 1997 through [ , 1997] (the "Subscription Period").
The subscription price will be the Portfolio's initial net asset value of $10.00
per share. Orders to purchase shares of the Portfolio received during the
Subscription Period will be accepted when the Portfolio begins operations.
Checks accompanying orders received during the Subscription Period will be held
uninvested by the Portfolio's transfer agent until the close of business on
[ ], 1997. There can be no guarantee that the Portfolio's net asset
value after the close of the Subscription Period will be more than $10.00 per
share.

Supplement dated [November ], 1997 to

Prospectus dated [November ], 1997 of Skyline Funds

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A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION
CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALES OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 29, 1997

SKYLINE FUNDS-REGISTERED TRADEMARK-

311 SOUTH WACKER DRIVE, SUITE 4500
CHICAGO, ILLINOIS 60606

IN ILLINOIS -- (312) 913-0900 COLLECT
OUTSIDE ILLINOIS -- (800) 458-5222 TOLL FREE
PRICE LINE -- (800) 828-2SKY

(800) 828-2759

[November , 1997]

SKYLINE CONTRARIAN EQUITIES-REGISTERED TRADEMARK- seeks long-term capital
appreciation primarily through investment in common stocks that the Adviser
considers undervalued relative to book value, sales or potential earnings. These
stocks are generally found among companies that are viewed negatively in the
market due to disappointing financial results. Due to the uncertainty regarding
the eventuality and timing of profitability improvements, stocks purchased for
Skyline Contrarian Equities should reflect lower valuations and therefore more
potential for capital appreciation should profitability improve.

Skyline Contrarian Equities emphasizes investments in companies whose
outstanding shares have an aggregate market value between $50 million and $2
billion.

Skyline Contrarian Equities is a "no-load" fund. There are no sales or
redemption charges, and there are no "12b-1" plans. Skyline Contrarian Equities
is a series of Skyline Funds.

This Prospectus is a concise statement of information you should know before
investing. Please retain it for future reference.

A Statement of Additional Information regarding Skyline Contrarian Equities,
dated the same date as this Prospectus, has been filed with the Securities and
Exchange Commission and (together with any supplement to it) is incorporated in
this Prospectus by reference. The Statement of Additional Information may be
obtained without charge by calling or writing Skyline Funds at the telephone
numbers or address shown above. In addition, the Securities and Exchange
Commission maintains a Website (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated in this Prospectus by
reference, and other information about Skyline Contrarian Equities.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS

<S> <C>
PAGE
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HIGHLIGHTS.................................................................... 3

EXPENSE INFORMATION........................................................... 4

INVESTMENT OBJECTIVE AND POLICIES............................................. 4

RISKS......................................................................... 5

INVESTMENT RESTRICTIONS....................................................... 5

PURCHASING SHARES............................................................. 5
BY CHECK.................................................................. 5
BY WIRE................................................................... 6
PURCHASES THROUGH INTERMEDIARIES.......................................... 6
GENERAL SHARE PURCHASE POLICIES........................................... 6

REDEEMING SHARES.............................................................. 7
BY MAIL................................................................... 7
BY TELEPHONE.............................................................. 7
GENERAL REDEMPTION POLICIES............................................... 7

NET ASSET VALUE............................................................... 8

SHAREHOLDER SERVICES.......................................................... 8
SHAREHOLDER ACCOUNTS...................................................... 8
RETIREMENT PLANS.......................................................... 8
EXCHANGE PRIVILEGE........................................................ 8
AUTOMATIC INVESTMENT PLAN................................................. 9
SYSTEMATIC WITHDRAWAL PLAN................................................ 9
DIVIDEND PURCHASE PLAN.................................................... 9

DIVIDENDS AND DISTRIBUTIONS................................................... 10

TAXES......................................................................... 10

MANAGEMENT OF SKYLINE......................................................... 11
THE TRUSTEES.............................................................. 11
THE ADVISER............................................................... 11
PORTFOLIO TRANSACTIONS.................................................... 12
PERFORMANCE............................................................... 12

SKYLINE AND ITS SHARES........................................................ 13
SHARES.................................................................... 13
VOTING RIGHTS............................................................. 13
SHAREHOLDER INQUIRIES..................................................... 13
</TABLE>

2
<PAGE>
HIGHLIGHTS

SKYLINE CONTRARIAN EQUITIES (the "Portfolio") is a series of Skyline Funds
("Skyline"). The Portfolio is a "no-load" fund. There are no sales or redemption
charges.

<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND SKYLINE CONTRARIAN EQUITIES seeks long-term capital
POLICIES........................ appreciation primarily through investment in common
stocks that the Adviser considers undervalued relative
to book value, sales or potential earnings. These stocks
are generally found among companies that are viewed
negatively in the market due to disappointing financial
results. SKYLINE CONTRARIAN EQUITIES emphasizes
investments in companies whose outstanding shares have
an aggregate market value between $50 million and $2
billion. (See "Investment Objective and Policies.")

INVESTMENT RISKS.................. The Portfolio is designed for long-term investors
willing to accept more investment risk and volatility
than the stock market in general.

MINIMUM PURCHASE.................. $1,000 for initial investments and $100 for subsequent
investments. (See "Purchasing Shares.")

DIVIDENDS AND CAPITAL GAINS....... Income dividends and capital gains, if any, are
distributed at least annually. Distributions
automatically are reinvested in additional shares at net
asset value unless payment in cash is requested. (See
"Dividends and Distributions.")

REDEMPTION PRICE.................. Current net asset value, without charge. (See "Redeeming
Shares.")

INVESTMENT ADVISER................ Skyline Asset Management, L.P. (the "Adviser") is the
investment adviser to Skyline. The Adviser managed more
than $1 billion in assets as of July 31, 1997. Daren C.
Heitman is the portfolio manager of Skyline Contrarian
Equities and is responsible for the day-to-day
management of the Portfolio. Mr. Heitman works with a
team of the Adviser's investment professionals and
analysts in making investment decisions for the
Portfolio. (See "Management of Skyline--THE ADVISER.")

EXPENSES.......................... The Portfolio pays the Adviser a comprehensive fee at an
annual rate declining from 1.50% of its average daily
net assets. The Adviser pays out of its fee the
Portfolio's ordinary costs and expenses. (See
"Management of Skyline--THE ADVISER.")

DISTRIBUTOR....................... Funds Distributor, Inc.
</TABLE>

3
<PAGE>
EXPENSE INFORMATION

The following table shows all fees paid by shareholders or assessed against
assets of the Portfolio:

<TABLE>
<CAPTION>
SKYLINE
CONTRARIAN
EQUITIES
-------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)......................... none
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price).............. none
Deferred Sales Load................................................................................. none
Redemption Fees (1)................................................................................. none
Exchange Fees....................................................................................... none

ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (including operating expenses) (2).................................................. 1.50%
12b-1 Fees.......................................................................................... none
Other Expenses (after reimbursement)................................................................ .25%
-----
Total Operating Expenses............................................................................ 1.75%
</TABLE>

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(1) A shareholder requesting payment of redemption proceeds by wire must pay the
cost of the wire transfer (currently $12). (See "Redeeming Shares.")

(2) Under the advisory agreement, the Adviser pays all of the Portfolio's
ordinary operating expenses, except the fees and expenses of Skyline's
non-interested trustees and organization costs. (See "Management of
Skyline--THE ADVISER.")

The purpose of the table is to assist the investor in understanding the
various costs and expenses that an investor in the Portfolio will bear, directly
or indirectly. The estimate of "Other Expenses" is based on the estimated
expenses that the Portfolio expects to incur during its fiscal year ending
December 31, 1998. The Adviser has undertaken to reimburse the Portfolio for any
ordinary operating expenses in excess of 1.75% of the Portfolio's average daily
net assets over each fiscal year. Without the Adviser's expense reimbursement,
"Other Expenses" during that period would be estimated to be .30%.

EXAMPLE

You would pay the following expenses on a $1,000 investment in Skyline
Contrarian Equities assuming (1) 5% annual return and (2) redemption at the end
of each time period:

<TABLE>
<S> <C>
1 year................................................................ $ 18
3 years............................................................... 55
</TABLE>

The Example should not be considered a representation of past or future
expenses; the Portfolio's actual expenses and the annual rate of return may be
greater or less than those shown. Although information such as that shown in the
Example is useful in reviewing the Portfolio's expenses and in providing a basis
for comparison of these expenses with the expenses of other mutual funds, it
should not be used for comparison with other investments using different
assumptions or time periods.

INVESTMENT OBJECTIVE AND POLICIES

The Portfolio seeks long-term capital appreciation primarily through
investment in common stocks that the Adviser considers undervalued relative to
book value, sales or potential earnings. These stocks are generally found among
companies that are viewed negatively in the market due to disappointing
financial results. Due to the uncertainty regarding the eventuality and timing
of profitability improvements, stocks

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purchased for the Portfolio should reflect lower valuations and therefore more
potential for capital appreciation should profitability improve.

The Portfolio attempts to manage investment risk by emphasizing investments
in companies with strong market positions, competitive advantages, and competent
management teams with sound business strategies under ordinary circumstances.

The Portfolio emphasizes investments in companies whose outstanding shares
have an aggregate market value between $50 million and $2 billion.

The Portfolio is ordinarily substantially fully invested, and under normal
market conditions, at least 65% of the Portfolio's assets will be invested in
common stocks. In management of cash receipts or for liquidity needs, the
Portfolio may invest without limitation in high-quality fixed-income securities
or hold assets in cash or cash equivalents.

RISKS

Because of the Portfolio's concentration in stocks of small companies, which
tend to be more volatile and less liquid than stocks of larger companies,
investment in the Portfolio may involve an above-average degree of risk. Small
companies, as compared to larger companies, may have a shorter history of
operations, may not have as great an ability to raise additional capital, may
have a less diversified product line making them susceptible to market pressure,
and may have a smaller public market for their securities. However, the
Portfolio attempts to minimize risk through portfolio diversification; the use
of a stock selection strategy that emphasizes undervalued common stocks, many of
which already reflect low valuations; and emphasizing investments in companies
with strong market positions, competitive advantages, and competent management
teams with sound business strategies under ordinary circumstances.

There can be no assurance that the Portfolio's investment objective will be
achieved. The Portfolio's investment objective and policies may be changed by
Skyline's board of trustees without shareholder approval. However, shareholder
approval is required for changes in the Portfolio's fundamental investment
restrictions. Any change in the Portfolio's investment objective might result in
the Portfolio having an investment objective that differs from the investment
objective a shareholder considered appropriate when investing.

INVESTMENT RESTRICTIONS

Skyline has adopted for the Portfolio the following investment restrictions,
among others, that may be changed only with the approval of a majority of the
outstanding shares of the Portfolio as defined in the Investment Company Act of
1940. The Portfolio may not: (1) as to 75% of its total assets, invest more than
5% of its total assets (valued at the time of investment) in the securities of
any single issuer, excluding United States government obligations; or (2) as to
75% of its total assets, invest in a security if, as a result of such
investment, the Portfolio would hold more than 10% (measured at the time of
investment) of the outstanding voting securities of the issuer of such security;
(3) borrow money except for temporary or emergency purposes, and not in excess
of 10% of its total assets; or (4) invest more than 25% of its total assets in
securities of issuers in a single industry. All of the investment restrictions
for the Portfolio are stated in the Statement of Additional Information.

PURCHASING SHARES

BY CHECK. You may purchase shares of the Portfolio by completing a share
purchase application and forwarding it, together with a check for the
investment, directly to SKYLINE FUNDS C/O FIRSTAR TRUST COMPANY, P.O. BOX 701,
MILWAUKEE, WI 53201 or to the Distributor or an authorized broker-dealer who is
responsible for promptly delivering the application and initial investment to
Skyline. The transfer agent is unable to accept third party checks both on
initial and subsequent share purchases.

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The purchase price of the Portfolio's shares is the net asset value per
share next computed after receipt by Skyline's transfer agent or authorized
agent (from the Distributor or an authorized broker-dealer or directly from a
shareholder) of your order completed in accordance with the instructions on the
account application. Your order must be received by Skyline's transfer agent or
authorized agent before the close of regular session trading on the New York
Stock Exchange (currently 3:00 p.m., central time) to receive the net asset
value calculated on that day. (See "Net Asset Value"). All purchases must be
made in U.S. dollars and checks must be drawn on U.S. banks.

Should an order to purchase the Portfolio's shares be canceled because your
check does not clear, you will be responsible for any resulting loss incurred by
the Portfolio. A charge (currently $20) will be assessed for any returned check.

DO NOT mail letters by overnight courier to the Post Office Box address.
Correspondence mailed by overnight courier should be sent to Skyline Funds c/o
Firstar Trust Company, 615 East Michigan Street, Third Floor, Milwaukee,
Wisconsin 53202.

BY WIRE. To purchase shares of the Portfolio by Federal wire transfer,
please call Skyline at (312) 913-0900 or (800) 458-5222 for instructions. To
open a new account by wire, Skyline requires that an application form be faxed
to it prior to receipt of the wire. Investors must then promptly mail the
original application form to Skyline Funds c/o Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53201. No account services will be established until
the completed application has been received by Skyline.

PURCHASES THROUGH INTERMEDIARIES. You also may purchase shares by giving
instructions by telephone to purchase shares (including your name and amount to
be invested) to an authorized broker-dealer and instructing the broker-dealer to
wire transfer the funds for your account. Funds transferred by wire in this
manner will be considered to be invested upon receipt of the order by Skyline's
transfer agent. Funds may be invested in this manner only through an authorized
broker-dealer. Any questions regarding this method of investment may be answered
by calling (312) 913-0900 or (800) 458-5222.

You also may purchase (or redeem) shares through investment dealers, banks,
or other institutions. However, these institutions may charge for their services
or place limitations on the extent to which you may use the services offered by
Skyline. Skyline does not impose any charges or limitations (other than nominal
charges for wire transfer, returned check, and similar items, as described in
this Prospectus) if you purchase (or redeem) shares directly from the
Distributor.

Some financial institutions that maintain nominee accounts with Skyline for
their clients for whom they hold shares of the Portfolio charge an annual fee of
up to .35% of the average net assets held in such accounts for accounting,
servicing, and distribution services they provide with respect to the underlying
shares of the Portfolio. Such fees are paid by the Adviser.

GENERAL SHARE PURCHASE POLICIES. The minimum initial investment to open an
account is $1,000, and subsequent investments must be at least $100. The minimum
initial investment to open an account for a spousal IRA (established for a
nonworking spouse) is $250. A Social Security or Taxpayer Identification Number
must be supplied and certified on the account application form before an account
can be established. Skyline may be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividend payments and redemption
proceeds if you fail to furnish Skyline with your correct Social Security or
Taxpayer Identification Number.

Skyline reserves the right to reject purchase orders under circumstances or
in amounts considered disadvantageous to existing shareholders. Skyline believes
that frequent purchases and redemptions of the Portfolio's shares by investors
utilizing market-timing strategies adversely affect the Portfolio. Skyline
therefore intends to reject purchase orders from investors identified by Skyline
as market-timers.

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Generally, Skyline does not issue share certificates representing shares,
although share certificates in full share amounts will be furnished upon your
written request. Fractional shares, if any, will be carried on Skyline's books
without issuance of certificates.

REDEEMING SHARES

BY MAIL. You may redeem shares of the Portfolio at the net asset value next
determined after your request is received by Skyline. Your redemption request in
proper form must be received by Skyline before the close of regular session
trading on the New York Stock Exchange (currently 3:00 p.m., central time) to
receive the net asset value calculated on that day. (See "Net Asset Value.") To
redeem shares, a written request must be received by Skyline or telephone
authorization in proper form must be received by Skyline or be on file with
Skyline. A written request for redemption must be signed by all persons in whose
names the shares are registered. Redemption requests received by facsimile
transmission or other electronic means will not be accepted. Signatures must
conform exactly to the account registration.

A signature guarantee is required on a written redemption request if (i) the
redemption proceeds are to be sent to a bank or brokerage account not previously
authorized by you in accordance with the instructions on the account
application, (ii) the proceeds of the requested redemption would be more than
$10,000, or (iii) THE ADDRESS OF RECORD HAS CHANGED WITHIN THE LAST 60 DAYS. The
signature guarantor must be a bank, member firm of a national securities
exchange, savings and loan association, credit union or other entity authorized
by state law to guarantee signatures. A NOTARY PUBLIC IS NOT AN ACCEPTABLE
GUARANTOR. Additional documentary evidence of authority is required in the event
redemption is requested by a corporation, partnership, trust, fiduciary,
executor, or administrator. CHECKS TO THIRD PARTIES, OTHER THAN A BANK OR
BROKERAGE ACCOUNT AS AUTHORIZED ABOVE, ARE NOT PERMITTED. Redemption checks will
not be forwarded if you move. The redemption request should also indicate the
change of address and include a signature guarantee.

BY TELEPHONE. Telephone redemptions can be authorized on the account
application. If telephone redemptions are so authorized, Skyline will honor
requests by telephone at (312) 913-0900 or (800) 458-5222. Reasonable procedures
are used to confirm that instructions received by telephone are genuine. Such
procedures include requesting personal identification information that appears
on the purchase application and recording the conversation. You will bear the
risk of any loss that might result from a fraudulent instruction, although
Skyline may bear such risk if reasonable procedures were not used. To reduce the
risk of a fraudulent instruction, proceeds of telephone redemptions may be sent
only to your address of record or to a bank or brokerage account designated by
you, in writing, on the purchase application or in a letter with the
signature(s) guaranteed. Skyline reserves the right to record all telephone
redemption requests. You may not redeem by telephone shares held in an IRA
account. During periods of volatile economic and market conditions, you may have
difficulty making a redemption request by telephone, in which case a redemption
request would have to be made in writing.

GENERAL REDEMPTION POLICIES. The redemption price per share is the net
asset value next determined after receipt of the redemption request, which may
be more or less than your cost depending upon the value of the Portfolio's
investment securities at the time of redemption. (See "Net Asset Value.") There
is no charge for a redemption, but an authorized broker-dealer may charge a fee
for this service. A redemption order received from a broker-dealer must be at
least $250 unless the entire account is being redeemed.

Payment for shares redeemed is made by check or wire. Payment by check
normally is mailed within seven days after receipt of the redemption request in
proper form. If specified in the account application, the check will be payable
and sent to a designated financial institution. A wire will be sent only to your

7
<PAGE>
bank or brokerage account as shown on the account application. Wire requests
generally are paid the next business day, after deduction of the cost of the
wire transfer (currently $12). That charge and any similar service fee may be
changed without prior notice to you. Wires to third parties are not permitted.

Skyline may suspend or postpone the right of redemption at times when
trading on the New York Stock Exchange is restricted or as otherwise permitted
by the Securities and Exchange Commission. If you attempt to redeem shares
within 15 days after they have been purchased by check, Skyline may delay
payment of the redemption proceeds until it can verify that payment for the
purchase of the shares has been (or will be) received.

Skyline reserves the right to redeem shares in any account with a balance of
less than $750 in share value in the Portfolio. Prior to any such redemption,
Skyline will give shareholders with accounts not meeting the minimum balance
requirement 30 days' written notice during which time they may increase their
investment to avoid having shares redeemed. The $750 minimum balance requirement
will be waived if an account balance drops below $750 due to market activity.

NET ASSET VALUE

The price per share for a purchase order or redemption request is the net
asset value next determined after receipt of the order or request, respectively.

The net asset value of the Portfolio's shares is determined as of the close
of regular session trading on the New York Stock Exchange (currently 3:00 p.m.,
central time) each day it is open for trading. The Portfolio's net asset value
per share is determined by dividing the value of all of its securities and other
assets, less its liabilities, by the number of shares of the Portfolio
outstanding. Each security traded on a national stock exchange or on the Nasdaq
National Market is valued at the last sale price or, if there have been no sales
on the valuation day, at the most recent bid price. Money market instruments
with sixty days or less remaining from the valuation date until maturity are
valued on an amortized cost basis. Other securities traded over-the-counter are
valued at the last reported bid price. Other assets and securities are valued by
methods Skyline's board of trustees believes will determine a fair value.

SHAREHOLDER SERVICES

SHAREHOLDER ACCOUNTS. Each shareholder receives a quarterly account
statement showing transactions in Portfolio shares with a balance denominated in
Portfolio shares. In addition, confirmations are sent to shareholders upon
purchase, redemption, dividend reinvestment, and change of shareholder address.
For a fee, you may obtain a historical transcript of your account by requesting
one in writing from Firstar Trust Company.

RETIREMENT PLANS. Investors may use Skyline as an investment for their
Individual Retirement Accounts ("IRAs"), profit sharing or pension plans,
Section 401(k) plans, Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations, and certain other qualified
plans. A master IRA plan, information regarding plan administration, fees, and
other details are available from the Distributor and authorized broker-dealers.

EXCHANGE PRIVILEGE. Skyline offers an exchange privilege among the
Portfolio, Skyline Special Equities Portfolio, Skyline Special Equities II
(collectively, the "Skyline Portfolios") and two portfolio series of Portico
Funds, Inc.--Money Market Fund and U.S. Government Money Market Fund (the
"Portico Money Market Funds"). Because Skyline Special Equities Portfolio is
closed to new investors, you may use the exchange privilege to exchange into
that portfolio only if you currently are eligible to invest in that portfolio.
All exchanges are based on the respective net asset value per share next
calculated after the receipt of an exchange request. Shares of either Portico
Money Market Fund or any of the Skyline Portfolios to be acquired must be
available for sale in the investor's state. To be effective on that date, a
request to exchange into or out of a Portico Money Market Fund must be received
by the purchase or

8
<PAGE>
redemption cutoff time described from time to time in the Portico Money Market
Funds prospectus, a copy of which can be obtained from Skyline at (312) 913-0900
or (800) 458-5222.

The exchange privilege is not available for shares for which certificates
have been issued or which have been held for fewer than 15 days. Exchanges by
telephone are an automatic privilege unless you notify Skyline on the account
application that such authorization has been withheld. Unless authorization is
withheld, Skyline will honor exchange requests by telephone at (312) 913-0900 or
(800) 458-5222. Skyline reserves the right to record all telephone exchange
requests. Reasonable procedures are used to confirm that instructions received
by telephone are genuine, such as requesting personal identification information
that appears on your application and recording the conversation. You will bear
the risk of loss due to unauthorized or fraudulent instructions regarding your
account, although Skyline may bear such risk if reasonable procedures were not
used. To reduce the risk of any fraudulent instruction, the registration of the
account into which shares are to be exchanged must be identical to the
registration of the originating account. During periods of volatile economic and
market conditions, you may have difficulty making an exchange request by
telephone, in which case an exchange request would have to be made in writing.

Skyline reserves the right at any time without prior notice to suspend or
terminate the use of the exchange privilege by any person or class of persons.
Skyline believes that use of the exchange privilege by investors utilizing
market-timing strategies adversely affects the Skyline Portfolios. THEREFORE,
SKYLINE GENERALLY WILL NOT HONOR REQUESTS FOR EXCHANGES BY SHAREHOLDERS
IDENTIFIED BY SKYLINE AS "MARKET-TIMERS." Moreover, Skyline reserves the right
at any time without prior notice to suspend, limit, modify, or terminate the
exchange privilege in its entirety. Because such a step would be taken only if
Skyline's board of trustees believes it would be in the best interests of the
Skyline Portfolios, Skyline expects that it would provide shareholders with
prior written notice of any such action unless it appears that the resulting
delay in the suspension, limitation, modification, or termination of the
exchange privilege would adversely affect the Skyline Portfolios. IF SKYLINE
WERE TO SUSPEND, LIMIT, MODIFY, OR TERMINATE THE EXCHANGE PRIVILEGE, A
SHAREHOLDER EXPECTING TO MAKE AN EXCHANGE MIGHT FIND THAT AN EXCHANGE COULD NOT
BE PROCESSED OR THAT THERE MIGHT BE A DELAY IN THE IMPLEMENTATION OF THE
EXCHANGE.

EXCHANGES OF SHARES ARE TAXABLE EVENTS AND MAY RESULT IN A GAIN OR LOSS FOR
FEDERAL INCOME TAX PURPOSES. A prospectus for the Portico Money Market Funds or
for Skyline Special Equities Portfolio and Skyline Special Equities II may be
obtained by calling Skyline at (312) 913-0900 or (800) 458-5222. An investor
considering an exchange should refer to the relevant prospectus for additional
information.

AUTOMATIC INVESTMENT PLAN. Skyline has a pre-authorized check plan for
shareholders who wish to make automatic periodic investments in shares of the
Portfolio. You may establish an automatic investment plan for the Portfolio by
opening an account with $1,000 or more and delivering to Skyline an automatic
investment plan application along with a voided check. The plan enables Firstar
Trust Company, Skyline's transfer agent, to withdraw funds from your bank
account or NOW account on a predetermined basis for investment in shares of the
Portfolio. You may terminate your participation in the plan at any time without
penalty by written notice to Firstar Trust Company at least 15 days prior to the
next investment date. Skyline may modify or terminate the plan at any time, or
from time to time, without notice to shareholders.

SYSTEMATIC WITHDRAWAL PLAN. A shareholder may request that Skyline
periodically redeem shares of the Portfolio having a specified redemption value.
Payment is sent by check to the record holder(s) of the account. To initiate the
Systematic Withdrawal Plan, the account must have a share balance of $5,000 or
more and the periodic withdrawal must be in an amount of not less than $100.
Skyline may modify or terminate the Systematic Withdrawal Plan at any time, or
from time to time, without notice to shareholders.

DIVIDEND PURCHASE PLAN. A shareholder may have dividends and distributions
paid by the Portfolio automatically invested in shares of one of the Portico
Money Market Funds in which an account has been opened through Skyline's
exchange privilege. Similarly, dividends paid on shares in a Portico Money

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<PAGE>
Market Fund account opened by a Skyline shareholder through the exchange
privilege may be automatically invested in shares of Skyline Contrarian Equities
or Skyline Special Equities II or, if the shareholder is eligible to invest in
Skyline Special Equities Portfolio, in shares of that portfolio. The account
into which the dividends are to be invested must meet any applicable minimum
balance requirement, and the account registration must be identical to the
registration of the account from which the dividends or distributions are paid.
The minimum subsequent investment amount will be waived. Before establishing
this plan to make investments in the Portico Money Market Funds, Skyline Special
Equities Portfolio, or Skyline Special Equities II a shareholder should obtain
and read carefully the Portico Money Market Funds prospectus or the Skyline
Special Equities Portfolio and Skyline Special Equities II prospectus, a copy of
either of which may be obtained by calling Skyline at (312) 913-0900 or (800)
458-5222.

DIVIDENDS AND DISTRIBUTIONS

Shareholders may receive two kinds of distributions from Skyline: dividends
and capital gains distributions. All dividends and capital gains distributions
are paid in the form of additional shares credited to an investor's account at
net asset value per share (without a sales charge) unless the shareholder has
requested on the account application or in writing that distributions be made in
cash. The Portfolio expects to declare and pay net investment income dividends
and distributions of net realized short- and long-term capital gains, if any, at
least annually.

TAXES

The Portfolio is a separate entity for federal income tax purposes. Skyline
intends for the Portfolio to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. To qualify, the Portfolio must meet
certain income, distribution and diversification requirements. In any year in
which the Portfolio so qualifies, it generally will not be subject to federal
income or excise tax to the extent that its taxable income is distributed to
shareholders.

Dividends paid by the Portfolio from net investment income together with
distributions of net short-term capital gains generally will be taxable to
shareholders as ordinary income, generally in the year received. Distributions
declared in October through December, to shareholders of record before January
1, and paid during January of the following year, will be considered paid on
December 31 in the calendar year declared. A portion of any dividend paid by the
Portfolio from its net investment income generally will be eligible for the
dividends-received deduction for corporations, depending upon the percentage of
the Portfolio's net income derived from qualifying dividends. Distributions by
the Portfolio of net capital gains (the excess of net long-term capital gains
over net short-term losses) which are designated as capital gain distributions
are taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held shares in the Portfolio. To the extent the Portfolio makes
a distribution in excess of its current and accumulated earnings and profits,
the distribution will be treated first as a tax-free return of capital, reducing
the tax basis in a shareholder's shares, and then, to the extent the
distribution exceeds such basis, as a taxable gain on the sale of such shares.
Shareholders will be informed annually of the amount and nature of Skyline's
income and distributions. However, shareholders who are not subject to income
taxation will not be required to pay tax on amounts distributed to them.

Under federal law, exchanges and redemptions of shares, including exchanges
of shares in the Portfolio for shares in another Skyline Portfolio or another
fund with which Skyline has exchange privileges, are taxable events and,
accordingly, may result in capital gain or loss for shareholders participating
in such transactions. Shareholders electing to reinvest dividends or redemption
proceeds in new shares will nevertheless be treated as having received such
distributions for tax purposes.

Any dividends or distributions have the effect of reducing the per share net
asset value of the shares by the amount of the dividends or distributions.
Although a dividend or distribution paid shortly after shares are purchased is
in effect a return of capital, these distributions are subject to taxes, even if
their

10
<PAGE>
effect is to reduce the per share net asset value below a shareholder's cost.
Skyline will notify you annually as to the tax status of dividend and capital
gain distributions paid by Skyline.

Dividend distributions, capital gains distributions and capital gains or
losses from redemptions and exchanges may be subject to state and local taxes.
In certain states, a portion of Skyline's income derived from certain direct
U.S. Government obligations may be exempt from state and local taxes. Skyline
will indicate each year the portion of the Portfolio's income, if any, which is
derived from such obligations.

Skyline is required by federal law to withhold, currently at the rate of
31%, from reportable payments (which may include dividends, capital gain
distributions, and proceeds from redemptions) paid to shareholders who have not
provided a Social Security or Taxpayer Identification Number, have not
represented that they either are not currently subject to backup withholding or
are exempt from backup withholding, and have not certified that such information
is correct. Any amounts withheld will be credited against a shareholder's normal
federal income tax liability.

The tax treatment of non-resident alien individuals, foreign corporations
and other non-U.S. shareholders may differ from that described above. All
shareholders should consult their own advisors concerning federal, state, and
local tax consequences of an investment in the Portfolio. This discussion is
included for general information only.

MANAGEMENT OF SKYLINE

THE TRUSTEES. The board of trustees has overall responsibility for the
conduct of Skyline's affairs. The trustees serve indefinite terms of unlimited
duration provided that a majority of trustees always has been elected by
Skyline's shareholders. The trustees appoint their own successors, provided that
at least two-thirds of the trustees, after such appointment, have been elected
by Skyline's shareholders. Skyline's shareholders may remove a trustee, with or
without cause, upon the declaration in writing or vote of two-thirds of
Skyline's outstanding shares. A trustee may be removed with or without cause
upon the written declaration of a majority of the trustees.

THE ADVISER. Skyline's investment adviser is Skyline Asset Management, L.P.
The Adviser is a Delaware limited partnership formed in 1995. The general
partner of the Adviser is Affiliated Managers Group, Inc. ("AMG"), a
Boston-based private holding company that makes equity investments in investment
management firms in which management personnel retain a significant interest in
the future of the business. Limited partnership interests in the Adviser are
held by corporations wholly owned by certain management personnel of the
Adviser. More than fifty percent of the stock of AMG is controlled by TA
Associates, Inc., a Delaware corporation founded in 1968 which directly or
indirectly has invested in more than 200 enterprises prior to its investment in
AMG.

The Adviser manages the investment and reinvestment of the Portfolio's
assets. In addition the Adviser provides office space, facilities, equipment,
and personnel for managing the assets and administering Skyline's day-to-day
operations, and provides shareholder and investor services.

In return for the comprehensive fee described below, the Adviser bears all
ordinary costs and expenses attendant to operating the Portfolio except fees
paid to non-interested trustees, organization and initial offering expenses,
taxes, interest expense, portfolio transaction costs, and any extraordinary
costs or expenses not incurred in the course of Skyline's ongoing operation. The
overall expense ratio of the Portfolio is shown in the "Expense Information"
table in this Prospectus.

For its advisory, management, and administrative services, and for the
assumption of Skyline's ordinary operating expenses, the Portfolio pays the
Adviser a monthly comprehensive fee based on its average daily net assets at the
annual rate of 1.50% of the first $200 million, 1.45% of the next $200 million,
1.40% of the next $200 million and 1.35% of average daily net assets in excess
of $600 million. Unlike most mutual funds, the Adviser rather than Skyline pays
out of its fee Skyline's ordinary operating expenses. In addition, the Adviser
has agreed to limit the Portfolio's expenses

11
<PAGE>
(including the Adviser's fee, trustees' fees and expenses, and reimbursement of
organizational expenses, but excluding extraordinary costs or expenses not
incurred in the ordinary course of Skyline's operation) to 1.75% of the
Portfolio's average daily net assets. Expenses incurred in excess of these
limits, if any, will be reimbursed to the Portfolio by the Adviser.

The portfolio manager for the Portfolio is Daren C. Heitman, who is
responsible for the day-to-day management of the Portfolio. Mr. Heitman works
with a team of the Adviser's investment professionals and analysts, including
William M. Dutton and Kenneth S. Kailin, who are portfolio managers for Skyline
Special Equities Portfolio and Skyline Special Equities II, respectively, in
making investment decisions for the Portfolio. Mr. Heitman has been a securities
analyst with the Adviser since September 1995. Between May 1994 and September
1995, Mr. Heitman was a securities analyst with Skyline's former investment
adviser, and from January 1993 to May 1994, he was a securities analyst with
Mesirow Financial, Inc., a financial services company. Before January 1993, Mr.
Heitman was a securities analyst with The Ohio Company, a regional brokerage
firm.

PORTFOLIO TRANSACTIONS. Decisions as to the purchase and sale of securities
for the Portfolio and the execution of these transactions, including the
negotiation of brokerage commissions on such transactions, are the Adviser's
responsibility. In general, the Adviser seeks to obtain prompt and reliable
execution of purchase and sale orders at the most favorable net prices or
yields. In determining the best net price and execution, the Adviser may take
into account a broker's or dealer's operational and financial capabilities and
the type of transaction involved.

The Adviser may consider research services provided by the broker or dealer,
some of which may be useful to the Adviser in its other business functions. To
the extent such research services are taken into account, the execution price
paid may be higher, but only in reasonable relation to the benefit of such
research services as determined in good faith by the Adviser. The Adviser is
authorized to place portfolio transactions with brokers or dealers participating
in the distribution of the Portfolio's shares, but only if the Adviser
reasonably believes that the execution and commission are comparable to those
available from other qualified firms.

PERFORMANCE. From time to time, in advertisements and sales literature,
Skyline may present information regarding the total return on a hypothetical
investment in the Portfolio for various periods of performance and may make
comparisons of such total return to various stock indexes (groups of unmanaged
common stocks), to the Consumer Price Index, or to groups of comparable mutual
funds.

Total return for a period is the percentage change in value during the
period of an investment in the Portfolio's shares, including the value of shares
acquired through reinvestment of all dividends and capital gains distributions.
The average annual total return for a given period may be calculated by finding
the average annual compounded rate of return that would equate a hypothetical
$1,000 investment to the value of that investment that could be redeemed at the
end of the period, assuming reinvestment of all distributions. All of the
calculations described above will assume the reinvestment of dividends and
distributions in additional shares of the Portfolio. Income taxes will not be
taken into account.

In addition to the figures described above, Skyline might use rankings or
ratings determined by Lipper Analytical Services, Inc., an independent service
that monitors the performance of over 4,700 equity mutual funds, Morningstar,
Inc., or another service to compare the performance of the Portfolio with the
performance of (i) other funds of similar size and investment objective or (ii)
broader groups of funds. Skyline may also provide information about, or compare
performance of the Portfolio to, the historical returns on various types of
financial assets.

Performance of the Portfolio will vary from time to time, and past results
are not indicative of likely future performance. Performance information
supplied by Skyline may not provide a basis of comparison with other investments
using different reinvestment assumptions or time periods.

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<PAGE>
SKYLINE AND ITS SHARES

Skyline was organized as a Massachusetts business trust on February 4, 1987,
and is an open-end, diversified management investment company.

SHARES. Under the terms of Skyline's Agreement and Declaration of Trust,
Skyline may issue an unlimited number of shares of beneficial interest without
par value for each series of shares authorized by the trustees. There are
currently three series authorized and outstanding. All shares issued will be
fully paid and non-assessable and will have no preemptive or conversion rights.
Each share of a series is entitled to participate pro rata in any dividends and
other distributions declared by Skyline's board of trustees on shares of that
series. All shares of a series have equal rights in the event of liquidation of
that series.

Under Massachusetts law, the shareholders of Skyline may, under certain
circumstances, be held personally liable for Skyline's obligations. However,
Skyline's Agreement and Declaration of Trust disclaims liability of
shareholders, Skyline's trustees, and Skyline's officers for acts or obligations
of Skyline or the Skyline Portfolios and requires that notice of such disclaimer
be given in each agreement, obligation, or contract entered into or executed by
Skyline or the board of trustees. Skyline's Agreement and Declaration of Trust
provides for indemnification out of the assets of a Skyline Portfolio of all
losses and expenses of any shareholder held personally liable for the
obligations of that Skyline Portfolio. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is remote, since it is
limited to circumstances in which the disclaimer is inoperative and Skyline
itself is unable to meet its obligations.

VOTING RIGHTS. Each Skyline share has one vote and fractional shares have
fractional votes. A separate vote of the shareholders of the Portfolio is
required for approval of Skyline's investment advisory agreement, any change in
the Portfolio's fundamental investment policies and restrictions, and any
matters which affect only the Portfolio. Shareholders of the Portfolio are not
entitled to vote on any matter not affecting the Portfolio. All shareholders of
Skyline vote together in the election of trustees.

SHAREHOLDER INQUIRIES. Inquiries should be addressed to Skyline Funds, c/o
Skyline Asset Management, L.P., 311 South Wacker Drive, Suite 4500, Chicago,
Illinois 60606. Telephone inquiries may be made at (312) 913-0900 or (800)
458-5222.

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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SHAREHOLDER SERVICES:
Skyline Funds
311 South Wacker Drive, Suite 4500
Chicago, IL 60606
(800) 458-5222
(312) 913-0900

INVESTMENT ADVISER:
Skyline Asset Management, L.P.
311 South Wacker Drive, Suite 4500
Chicago, IL 60606

DISTRIBUTOR:
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, MA 02109

CUSTODIAN AND TRANSFER AGENT:
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201

INDEPENDENT AUDITORS:
Ernst & Young LLP
233 South Wacker Drive
Chicago, IL 60606

LEGAL COUNSEL:
Bell, Boyd & Lloyd
Three First National Plaza, Suite 3300
Chicago, IL 60602

------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON IS AUTHORIZED, IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, TO ACT AS AGENT FOR SKYLINE FUNDS, NOR
IS ANY PERSON AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS OR IN SUPPLEMENTARY INFORMATION OR IN
SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY SKYLINE FUNDS, AND NO PERSON IS
ENTITLED TO RELY UPON ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN OR
THEREIN. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

SKYLINE FUNDS, THE SKYLINE LOGO, AND SKYLINE CONTRARIAN EQUITIES ARE
REGISTERED SERVICE MARKS OF AFFILIATED MANAGERS GROUP, INC.

SKYLINE FUNDS-REGISTERED TRADEMARK-

SKYLINE CONTRARIAN EQUITIES-REGISTERED TRADEMARK-

---------------------

PROSPECTUS

---------------------

[NOVEMBER ,] 1997

A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL
INFORMATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SKYLINE FUNDS-REGISTERED TRADEMARK-
311 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
(312) 913-0900
(800) 458-5222

STATEMENT OF ADDITIONAL INFORMATION
[NOVEMBER ], 1997

------------------------

Skyline Contrarian Equities is a series of Skyline Funds ("Skyline"). Each
series of Skyline represents shares of beneficial interest in a separate
portfolio of securities and other assets, with its own investment objective and
policies. This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Skyline Funds Prospectus for Skyline
Contrarian Equities dated [November ], 1997, and any supplement to that
Prospectus. That Prospectus can be obtained without charge by calling or writing
to Skyline.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Skyline and the Portfolio................................................. 2
Investment Objective and Policies......................................... 2
Investment Restrictions................................................... 3
Performance Information................................................... 4
Management of Skyline..................................................... 6
Investment Advisory Services.............................................. 8
Portfolio Transactions and Brokerage...................................... 9
Purchase and Redemption of Shares......................................... 11
Taxes..................................................................... 12
General Information....................................................... 12
</TABLE>
<PAGE>
SKYLINE AND THE PORTFOLIO

Skyline's name was changed from "Skyline Fund" to "Skyline Funds" as of
April 1997. As used in this Statement of Additional Information, the "Portfolio"
means Skyline Contrarian Equities. The Portfolio, Skyline Special Equities
Portfolio, and Skyline Special Equities II are sometimes referred to together as
the "Skyline Portfolios." Skyline Asset Management, L.P. (the "Adviser")
provides investment advisory and administrative services to the Portfolio.

INVESTMENT OBJECTIVE AND POLICIES

The Portfolio seeks long-term capital appreciation primarily through
investment in common stocks that the Adviser considers undervalued relative to
book value, sales, or potential earnings. These stocks are generally found among
companies that are viewed negatively in the market due to disappointing
financial results. Due to the uncertainty regarding the eventuality and timing
of profitability improvements, stocks purchased for the Portfolio should reflect
lower valuations and therefore more potential for capital appreciation should
profitability improve.

There can be no assurance that the Portfolio's investment objective will be
achieved. The Portfolio's investment objective and policies may be changed by
Skyline's board of trustees without shareholder approval. However, shareholder
approval is required for changes in the Portfolio's fundamental investment
restrictions, and no change in the Portfolio's investment objective will be
implemented without at least 30 days' prior notice to shareholders.

TEMPORARY INVESTMENTS. To manage cash inflows or in anticipation of
redemptions, the Portfolio may invest, without limitation, in high-quality
fixed-income securities and may hold assets in cash or cash equivalents.

REPURCHASE AGREEMENTS. The Portfolio may invest up to 5% of its assets in
repurchase agreements. Repurchase agreements involve the acquisition by the
Portfolio of an underlying debt instrument, subject to an obligation of the
seller to repurchase and the Portfolio to resell the instrument, at a fixed
price, including yield, within a specified term. The Portfolio could suffer a
loss and increased expense in connection with the sale of the securities if the
seller does not repurchase them in accordance with the terms of the repurchase
agreement. The Portfolio has no present intention of investing in repurchase
agreements.

FOREIGN SECURITIES. The Portfolio may invest in securities of foreign
issuers that are not publicly traded in the United States ("foreign
securities"). Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax provisions,
exchange and currency controls, and expropriation of assets) than investment in
securities of domestic issuers. For this purpose, foreign securities do not
include securities represented by American Depository Receipts (ADRs),
securities of Canadian issuers, and securities guaranteed by a United States
person. The Portfolio does not expect to invest more than 5% of its assets in
foreign securities.

PORTFOLIO TURNOVER. Although the Portfolio does not purchase securities
with an expectation of rapid turnover, no limitations exist on the length of
time that portfolio securities must be held. At times, the Portfolio may invest
for short-term capital appreciation. Portfolio turnover can occur for a number
of reasons such as general conditions in the securities markets, more favorable
investment opportunities in other securities, or other factors relating to the
desirability of holding or changing a portfolio investment. Because of the
Portfolio's flexibility of investment and emphasis on growth of capital, it may
have greater portfolio turnover than that of mutual funds that have primary
objectives of income or maintenance of a balanced investment position. The
future turnover rate may vary greatly form year to year. A high rate of
portfolio turnover in the Portfolio, if it should occur, would result in
increased transaction expense, which must be borne by the Portfolio. High
portfolio turnover also may result in the realization of capital gains or losses
and, to the extent net short-term capital gains are realized, any distributions
resulting from such

2
<PAGE>
gains will be considered ordinary income for Federal income tax purposes. (See
"Taxes" in the Portfolio's prospectus, and "Taxes" in this statement of
additional information.)

INVESTMENT RESTRICTIONS

For the Portfolio, Skyline has adopted the following investment restrictions
(which may not be changed without the approval of a majority of the Portfolio's
outstanding shares), under which the Portfolio may not:

1. Borrow money except (i) from banks for temporary or emergency
purposes in amounts not exceeding 10% of the value of the Portfolio's assets
at the time of borrowing (including the amount borrowed)(1) and (ii) in
connection with transactions in options, futures, or futures options.

2. Purchase or sell real estate (although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies which invest in real estate, or interests therein, except that it
may not invest over 25% of the value of its assets in real estate investment
trusts).

3. As to 75% of its total assets, invest more than 5% of its total
assets (valued at the time of investment) in securities of any one issuer,
except United States government obligations or bank certificates of deposit
and bankers' acceptances.

4. As to 75% of its total assets, acquire securities of any one issuer
which at the time of investment (i) represent more than 10% of the
outstanding voting securities of the issuer or (ii) have a value greater
than 10% of the value of the outstanding voting securities of the issuer.

5. Issue any senior security except to the extent permitted under the
Investment Company Act of 1940.

6. Sell securities short or purchase securities on margin (but the
Portfolio may obtain such short-term credits as may be necessary for the
clearance of transactions and may make margin payments in connection with
transactions in options, futures, and options on futures).

7. Invest more than 25% of its assets (valued at the time of
investment) in the securities of companies in a single industry, except
government obligations.

8. Make loans to other persons except that it reserves freedom of
action, consistent with its other investment policies and restrictions, to
purchase bonds or other debt obligations of types commonly offered publicly
or privately and purchased by financial institutions, even though the
purchase of such debt obligations may be deemed to be making loans.

9. Underwrite any issue of securities, except as it may be deemed to be
an underwriter under the Securities Act of 1933 in connection with the sale
of securities in accordance with its investment objective, policies, and
limitations.

Skyline also has adopted the following additional restrictions and policies
with respect to the Portfolio (which may be changed by the board of trustees
without shareholder approval). Under these additional policies and restrictions,
the Portfolio may not:

A. Invest in companies for the purpose of exercising control or
management.

B. Acquire securities of other investment companies except (i) by
purchase in the open market, where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's
commission and (ii) where the acquisition results from a dividend, or a
merger, consolidation or other reorganization. In addition to this
restriction, the 1940 Act provides that the Portfolio may neither purchase
more than 3% of the voting securities of any one investment company

- ------------------------

(1) The Portfolio will not purchase securities when its borrowings exceed 5% of
the value of its assets.

3
<PAGE>
nor invest more than 10% of the Portfolio's assets (valued at the time of
investment) in all investment company securities purchased by the Portfolio.

C. Invest in securities of other open-end investment companies.

D. Invest more than 15% of its assets (valued at the time of investment)
in restricted securities or securities which are not readily marketable,
including (i) securities subject to legal or contractual restrictions on
resale, (ii) fixed time deposits or certificates of deposit subject to
withdrawal penalties, other than overnight deposits, or (iii) repurchase
agreements which expire in excess of seven days.

E. Invest less than 65% of its total assets in common stocks.

F. Invest in financial futures, options, or options on financial
futures.

G. Invest in commodities or commodity contracts.

H. Invest more than 5% of its assets (measured at the time of
investment) in securities of an issuer with less than three years operating
history (including predecessors).

PERFORMANCE INFORMATION

From time to time Skyline may quote total return performance data for the
Portfolio. Total return for a period is the percentage change in value during
the period of an investment in the Portfolio's shares including the value of
shares acquired through reinvestment of all dividends and capital gains
distributions. An average annual total return for a given period may be computed
by finding the average annual compounded rate that would equate a hypothetical
initial amount invested of $1,000 to the value of that investment that could be
redeemed at the end of the period, assuming reinvestment of all distributions.
Average annual total return is computed as follows:

<TABLE>
<S> <C> <C>
ERV = P(1 + T)to the power of (n)

Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment made
at the beginning of the period at the end of the period (or
fractional portion thereof)
</TABLE>

Total return and average annual total return figures assume reinvestment of
all dividends and distributions. Income taxes are not taken into account. The
Portfolio's performance figures are not a guarantee of future results. The
performance of the Portfolio is a result of conditions in the securities
markets, portfolio management, and operating expenses. Although total return
information is useful in reviewing the Portfolio's performance and in providing
some basis for comparison with other investment alternatives, it should not be
used for comparison with other investments using different reinvestment
assumptions or time periods.

In advertising and sales literature, the performance of the Portfolio may be
compared with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, other accounts, limited
liability investment companies or partnerships managed or advised by the
Adviser, and other competing investment products available from or through other
financial institutions. The composition of these indexes, averages or accounts
differs from that of the Portfolio. The comparison of the Portfolio to an
alternative investment should consider differences in features and expected
performance.

The Portfolio may also note (or provide reprints of articles or charts
containing) its mention (including performance or other comparative rankings) in
newspapers, magazines, or other media from

4
<PAGE>
time to time. Newspapers and magazines which might mention Skyline and the
Portfolio include, but are not limited to, the following:

<TABLE>
<S> <C>
Barron's Kiplinger's Personal Finance
Bloomberg Personal Finance Los Angeles Times
Business Week Money
Changing Times The Mutual Fund Letter
Chicago Mutual Fund Values (Morningstar)
Chicago Tribune Newsweek
Chicago Sun-Times The New York Times
Crain's Chicago Business Pensions and Investments
Consumer Reports Personal Investor
Consumer Digest Smart Money
Financial Planning Time
Financial World USA Today
FA Advisor U.S. News and World Report
Forbes The Wall Street Journal
Fortune Worth
Institutional Investor
Investor's Daily
</TABLE>

When a newspaper, magazine, or other publication mentions Skyline or the
Portfolio, such mention may include: (i) listings of some or all of the
Portfolio's holdings; (ii) descriptions of characteristics of some or all of the
securities held by the Portfolio, including price-to-earnings, price-to-sales,
and price-to-book value ratios, earnings, growth rates and other statistical
information, and comparisons of that information to similar statistics for the
securities comprising any of the indexes or averages listed below; and (iii)
descriptions of the economic and market outlook, generally and for the
Portfolio, in the view of Skyline, a portfolio manager or the Adviser.

The Portfolio may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.

The performance of the Portfolio may be compared to stock market indexes or
averages, including the following:

<TABLE>
<S> <C>
Dow Jones Industrial Average New York Stock Exchange Composite Index
Russell 1000 Index American Stock Exchange Composite Index
Russell 2000 Index NASDAQ Over-the-Counter Composite Index
Russell 2500 Index NASDAQ Over-the-Counter Industrials Index
Russell 3000 Index (These indexes generally reflect the
Russell MidCap Index performance of stocks traded in the
Russell 2,000 Value Index indicated markets.)
Standard & Poor's SmallCap 600
Index
Standard & Poor's 500 Stock Index
Standard & Poor's MidCap 400 Index
Wilshire 5000
Wilshire 4500
Wilshire Quantum Small Value Index
Wilshire Next 1750 Index
Wilshire Quantum Small Cap Index
(These indexes are widely
recognized
indicators of general U.S. stock
market
results.)
</TABLE>

5
<PAGE>
The Portfolio's performance may also be compared to mutual fund industry
indexes or averages, including the following: Value Line Index; Lipper Capital
Appreciation Fund Average; Lipper Growth Funds Average; Lipper Small Company
Growth Funds Average; Lipper General Equity Funds Average; Lipper Equity Funds
Average; Lipper Mid-Cap Average; Lipper Small Company Growth Fund Index;
Morningstar Growth Average; Morningstar Aggressive Growth Average; Morningstar
U.S. Diversified Average; Morningstar Equity Fund Average; Morningstar Hybrid
Fund Average; Morningstar All Equity Funds Average; and Morningstar General
Equity Average; Morningstar MidCap/Value Average; Morningstar Small Cap Value
Average.

Lipper Small Company Growth Fund Index reflects the net asset value weighted
total return of the largest thirty growth funds as calculated, and published by
Lipper Analytical Services, Inc. ("Lipper"), an independent service that
monitors the performance of more than 4,700 funds.

Lipper and Morningstar, Inc. ("Morningstar"), classify, calculate, and
publish the Lipper and Morningstar averages, respectively, which are unweighted
averages of total return performance of mutual funds. The Portfolio may also use
comparative performance as computed in a ranking by Lipper or category averages
and rankings provided by another independent service. Should Lipper or another
service reclassify the Portfolio to a different category or develop (and place
the Portfolio into) a new category, the Portfolio may compare its performance or
ranking against other funds in the newly assigned category, as published by the
service. Moreover, the Portfolio may compare its performance or ranking against
all funds tracked by Lipper or another independent service, and may cite its
rating, recognition or other mention by Morningstar or any other entity.
Morningstar's rating system is based on risk-adjusted total return performance
and is expressed in a star-rating format. The risk-adjusted number is computed
by subtracting the Portfolio's risk score (which is a function of the
Portfolio's monthly returns less the 3-month Treasury bill return) from the
Portfolio's load-adjusted total return score. This numerical score is then
translated into rating categories, with the top 10% labeled five star, the next
22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled
two star and the bottom 10% one star. A high rating reflects either
above-average returns or below-average risk, or both.

To illustrate the historical returns on various types of financial assets,
the Portfolio may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for example, total
return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks, small company stocks, long-term corporate bonds, long-term government
bonds, intermediate-term government bonds and U.S. Treasury bills. Similarly,
the Portfolio may use Ibbotson's historical data regarding the Consumer Price
Index. The Portfolio may also use historical data compiled by Prudential
Securities, Inc., or by other similar sources believed by Skyline to be
accurate, illustrating the past performance of small-capitalization stocks,
large-capitalization stocks, common stocks, equity securities, growth stocks
(small-capitalization, large-capitalization, or both) and value stocks
(small-capitalization, large-capitalization, or both).

MANAGEMENT OF SKYLINE

Trustees and officers of Skyline, and their principal business occupations
during at least the last five years, are shown below.

WILLIAM M. DUTTON,* 43, PRESIDENT AND TRUSTEE. President and Chief
Executive Officer, Skyline Asset Management, L.P. and registered representative,
Funds Distributor, Inc., since September 1995. Previously, Executive Vice
President and Portfolio Manager (Skyline Special Equities Portfolio), Mesirow
Asset Management, Inc.

- ------------------------

* Indicates an "interested person" of Skyline, as defined in the Investment
Company Act of 1940.

6
<PAGE>
WILLIAM L. ACHENBACH, 54, TRUSTEE. President, W.L. Achenbach & Associates,
Inc., a financial counseling firm, since July 1992. Previously, Executive Vice
President, Brownson, Rehmus & Foxworth, Inc., a financial counseling firm.

PAUL J. FINNEGAN, 44, TRUSTEE. Vice President, Madison Dearborn Partners,
Inc., a venture capital firm, since January 1993. Previously, Vice President,
First Chicago Venture Capital, a venture capital firm.

STEPHEN F. KENDALL, 42, TRUSTEE. Regional Vice President, Metro Region,
Nabisco Biscuit Company.

DAVID A. MARTIN, 45, TRUSTEE. Attorney and Principal, Righeimer, Martin &
Cinquino, P.C.

KENNETH S. KAILIN, 38, EXECUTIVE VICE PRESIDENT. Principal-Portfolio
Manager, Skyline Asset Management, L.P., since September 1995. Previously,
Senior Vice President and Portfolio Manager (Skyline Special Equities II),
Mesirow Asset Management, Inc.

GEOFFREY P. LUTZ, 47, EXECUTIVE VICE PRESIDENT. Principal-Marketing,
Skyline Asset Management, L.P. and registered representative, Funds Distributor,
Inc., since September 1995. Previously, Vice President, Mesirow Asset
Management, Inc., and registered representative, Mesirow Financial, Inc. and
Mesirow Investment Services, Inc.

MICHAEL MALONEY, 35, SENIOR VICE PRESIDENT. Principal-Senior Securities
Analyst, Skyline Asset Management, L.P., since September 1995. Securities
Analyst, Mesirow Asset Management, Inc., from February 1993 to August 1995, and
prior to joining Mesirow Asset Management, Inc., Securities Analyst, Baker,
Fentress & Company, a closed-end management investment company.

SCOTT BLIM, 38, SECRETARY AND TREASURER. Chief Operating Officer, Skyline
Asset Management, L.P., since September 1995. Previously, Vice President,
Director and Chief Administrative Officer, Murray Johnstone International
Limited, an investment adviser.

DAREN C. HEITMAN, 30, SENIOR VICE PRESIDENT. Portfolio Manager, Skyline
Asset Management, L.P., since August 29, 1997. Securities Analyst Skyline Asset
Management, L.P. from September 1995 to August 29, 1997. Securities Analyst with
Mesirow Asset Management, Inc. from May 1994 to August 1995, and Securities
Analyst with Mesirow Financial, Inc. from January 1993 to May 1994. Prior to
joining Mesirow Financial, Inc., Securities Analyst, The Ohio Company, a
regional brokerage firm.

The address of Messrs. Dutton, Kailin, Lutz, Maloney, Blim and Heitman is
c/o Skyline Asset Management, L.P., 311 South Wacker Drive, Suite 4500, Chicago,
Illinois 60606. The addresses of the other trustees are: William L. Achenbach,
510 East Main Street, Charlottesville, Virginia 23902; Paul J. Finnegan, Three
First National Plaza, Suite 1330, Chicago, Illinois 60602; Stephen J. Kendall,
379 Shelbourne Terrace, Ridgewood, New Jersey 07450; David A. Martin, 135 South
LaSalle Street, Chicago, Illinois 60603.

No shares of the Portfolio were outstanding on the date of this statement of
additional information. However, prior to the commencement of the Portfolio's
operations, the Adviser will purchase shares of the Portfolio at an initial
price of $10.00.

The trustees of Skyline who are not "interested persons" of Skyline, as
defined in the Investment Company Act of 1940 (the "1940 Act"), receive from
Skyline an annual retainer of $3,000 from each of the Skyline Portfolios and a
fee of $400 for each meeting of the board of trustees (or any committee thereof)
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. The following table sets forth compensation paid by
Skyline during the fiscal year ended December 31, 1996, to

7
<PAGE>
each of the trustees of Skyline. Skyline has no retirement or pension plans. The
trustees and officers affiliated with Skyline do not receive compensation from
Skyline.

<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
NAME OF TRUSTEE FROM SKYLINE
- -------------------------------------------------------------------------------- -----------------------
<S> <C>
William L. Achenbach............................................................ $ 8,400
William M. Dutton(1)............................................................ 0
Paul J. Finnegan................................................................ 8,400
Stephen F. Kendall.............................................................. 8,400
David A. Martin................................................................. 8,400
</TABLE>

- ------------------------

(1) Indicates an "interested person" of Skyline, as defined in the 1940 Act,
during the fiscal year ended December 31, 1996.

INVESTMENT ADVISORY SERVICES

The Adviser provides investment advisory and administrative services to
Skyline for the Portfolio pursuant to an Investment Advisory Agreement dated
November [ ], 1997 (the "Agreement"). The Adviser is a Delaware limited
partnership, the general partner of which is Affiliated Managers Group, Inc.
("AMG") and the limited partners of which are corporations wholly owned by
Messrs. Dutton, Kailin, Lutz and Maloney, respectively.

AMG is a Boston-based private holding company that makes equity investments
in investment management firms in which management personnel retain a
significant interest in the future of the business. AMG is a Delaware
corporation which has its offices at Two International Place, 23rd Floor,
Boston, MA 02110. AMG may be deemed to have as its parent TA Associates, Inc., a
Delaware corporation. The address of TA Associates, Inc., is High Street Tower,
Suite 2500, 125 High Street, Boston, MA 02110.

Under the Agreement, the Adviser pays all of the Portfolio's ordinary costs
and expenses attendant to operating the Portfolio except the advisory fees, fees
paid to non-interested trustees, organization and initial offering expenses,
interest expenses, taxes, portfolio transaction costs, and any extraordinary
costs or expenses such as legal, accounting, or other costs or expenses not
incurred in the course of Skyline's ongoing operation. The initial offering and
organization expenses of $[ ] for the Portfolio were advanced to Skyline
by the Adviser, and the Portfolio is reimbursing the Adviser for such expenses
in equal installments without interest over 20 calendar quarters.

Expenses borne by Skyline pursuant to the Agreement, as described above,
that are attributable to a particular Skyline Portfolio are charged to that
portfolio. Other expenses of Skyline are allocated among the Skyline Portfolios
on a reasonable basis as determined by Skyline's board of trustees.

For its management and advisory services, for providing shareholder and
investor servicing, and for the assumption of the Portfolio's ordinary operating
expenses, the Adviser is paid a monthly comprehensive fee from the Portfolio
based on the Portfolio's average daily net assets. Under the Agreement, the
Portfolio pays the Adviser a fee at the annual rate of 1.50% of the first $200
million of its average daily net assets, 1.45% of the next $200 million, 1.40%
of the next $200 million, and 1.35% of any excess over $600 million.

The Adviser has agreed that it will reimburse the Portfolio to the extent
that, in any fiscal year, the aggregate expenses of the Portfolio, including the
advisory fee, trustees' fees and expenses, and reimbursement of organizational
expenses, but excluding extraordinary costs or expenses such as legal,
accounting, or other costs or expenses not incurred in the normal course of
Skyline's ongoing operation, exceed an annual rate of 1.75% of the Portfolio's
average daily net assets. Reimbursement, if any, is made monthly.

8
<PAGE>
The Agreement provides that the Adviser shall not be liable for any loss
suffered by Skyline or its shareholders as a consequence of any act of omission
in connection with investment advisory or portfolio services under the
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence on the part of the Adviser in the performance of its duties or from
the Adviser's reckless disregard of its obligations and duties under the
Agreement.

The Agreement may be continued from year to year only so long as the
continuance is approved annually (a) by the vote of a majority of the trustees
of Skyline who are not "interested persons" of Skyline or the Adviser cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the board of trustees of Skyline or by the vote of a majority (as defined in
the 1940 Act) of the outstanding shares of the Portfolio. The Agreement is
terminable with respect to the Portfolio without penalty, on 60 days' notice, by
the trustees of Skyline or by vote of a majority of the outstanding shares of
the Portfolio, or, on not less than 90 days' notice, by the Adviser. The
Agreement automatically terminates in the event of its assignment (as defined in
the 1940 Act).

The Adviser specializes in investing in stocks of companies with small
market capitalizations. The portfolio manager for the Portfolio is Daren C.
Heitman, who is responsible for the day-to-day management of the Portfolio. Mr.
Heitman works with a team of the Adviser's investment professionals and
analysts, including William M. Dutton and Kenneth S. Kailin, who are portfolio
managers for Skyline Special Equities Portfolio and Skyline Special Equities II,
respectively, in making investment decisions for the Portfolio.

Mr. Heitman is a Portfolio Manager of the Adviser and has been a securities
analyst for the Adviser since September 1995. He joined Mesirow Financial, Inc.
as a securities analyst in 1993 after working for approximately two years as a
securities analyst for The Ohio Company, a regional brokerage firm, and became a
securities analyst in 1994 with Mesirow Asset Management, Inc., the former
adviser to Skyline. Mr. Heitman received a Bachelor of Business Administration
degree in Finance from Iowa State University. In addition, he holds the
Chartered Financial Analyst designation.

Mr. Dutton is the Adviser's President and Chief Executive Officer. Mr.
Dutton, who is a certified public accountant, received an undergraduate degree
in English Literature from Princeton University, and has a master's degree in
accounting from the University of Illinois. He joined Mesirow Financial Services
Inc., as an analyst in 1980 after practicing as an accountant for one year, and
became a portfolio manager in 1984 with Mesirow Asset Management, Inc. In
addition to Special Equities Portfolio, Mr. Dutton manages separately managed
accounts. Mr. Dutton was named 1992 Portfolio Manager of the Year by
Morningstar, Inc.

Mr. Kailin is a Principal-Portfolio Manager of the Adviser. He joined
Mesirow Asset Management, Inc., in 1987 as a securities analyst and was promoted
to vice president in 1992 and to senior vice president in 1994. Mr. Kailin
received his Bachelor of Science degree in Finance from Indiana University and
his M.B.A. degree from the University of Chicago. In addition, he holds the
Chartered Financial Analyst designation.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Portfolio transactions are placed with those securities brokers and dealers
that the Adviser believes will provide the best value in transaction and
research services either in a particular transaction or over a period of time.
Although some transactions involve only brokerage services, many involve
research services as well.

In valuing brokerage services, the Adviser makes a judgment as to which
brokers are capable of providing the most favorable net price (not necessarily
the lowest commission considered alone) and the best execution in a particular
transaction. Best execution connotes not only general competence and reliability
of a broker, but specific expertise and effort of a broker in overcoming the
anticipated difficulties

9
<PAGE>
in fulfilling the requirements of particular transactions, because the problems
of execution and the required skills and effort vary greatly among transactions.

In valuing research services, the Adviser makes a judgment of the usefulness
of the research information provided by a broker to the Adviser in managing the
Portfolios. Although the information, e.g., data or recommendations concerning
particular securities, sometimes relates to the specific transaction placed with
the broker, the research predominately consists of a wide variety of information
concerning companies, industries, investment strategy, and economic, financial
and political conditions and prospects useful to the Adviser in advising Skyline
and other accounts.

The reasonableness of brokerage commissions paid in relation to transaction
and research services received is evaluated by the staff of the Adviser on an
ongoing basis. The general level of brokerage charges and other aspects of the
portfolio transactions for the Portfolio are reviewed periodically by Skyline's
board of trustees.

The Adviser is the principal source of information and advice to the
Portfolio and is responsible for making and initiating the execution of
investment decisions. However, the board of trustees of Skyline recognizes that
it is important for the Adviser, in performing its responsibilities to Skyline,
to continue to receive and evaluate the broad spectrum of economic and financial
information which many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of Skyline to take into account the value
of the information received for use in advising Skyline. Consequently, the
commission paid to a broker providing research services may be greater than the
amount of commission another broker would charge for the same transaction. The
extent, if any, to which receipt of such information may reduce the expenses of
the Adviser in providing management services to Skyline is not determinable. In
addition, the board of trustees understands that other clients of the Adviser
also may benefit from the information obtained for Skyline, in the same manner
that Skyline also may benefit from information obtained by the Adviser in
performing services for others.

Transactions of Skyline in the over-the-counter market and the third market
are executed with primary market makers acting as principals except where it is
believed that better prices and execution may be obtained from others.

The Adviser is further authorized to allocate the orders placed by it on
behalf of Skyline to brokers and dealers who provide research services to
Skyline or the Adviser. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to the policy of
seeking the best price and execution as stated above, sales of shares of Skyline
by a broker-dealer may be considered by the Adviser in the selection of
broker-dealers to execute portfolio transactions for Skyline.

Although investment decisions for Skyline are made independently from those
for other investment advisory clients of the Adviser, the same investment
decision may be made for both Skyline and one or more other advisory clients. If
both Skyline and other clients purchase or sell the same class of securities on
the same day, the transactions will be allocated as to amount and price in a
manner considered equitable to each.

The Adviser may place brokerage transactions with brokers affiliated with
the distributor for Skyline, Funds Distributor, Inc. Commissions paid to such
brokers on any transaction will not exceed those paid by Skyline in similar
transactions to other brokers.

10
<PAGE>
PURCHASE AND REDEMPTION OF SHARES

Purchases and redemptions are discussed in the Prospectus under the headings
"Purchasing Shares," "Redeeming Shares," "Shareholder Services," and "Net Asset
Value." All of that information is incorporated herein by reference.

You may purchase (or redeem) shares of the Portfolio through investment
dealers, banks, or other institutions. However, these institutions may charge
for their services or place limitations on the extent to which you may use the
services offered by Skyline. Skyline imposes no charges other than those
described in the Prospectus and this Statement of Additional Information if
shares are purchased (or redeemed) directly from Skyline.

Shares of the Portfolio may be purchased and redeemed through certain
financial services companies. Generally, such purchases and redemptions will be
effected without any transaction fee, provided that under certain circumstances
a broker may charge transaction fees. For accounting, servicing, and
distribution services provided by such company with respect to shares of the
Portfolio held by accounts at such company, the company will charge a fee of up
to .35% of the annual average value of those accounts, all of which fee is paid
by the Adviser.

NET ASSET VALUE. The net asset value of the shares of the Portfolio is
determined as of the close of regular session trading on the New York Stock
Exchange (currently 3:00 p.m., central time) each day it is open for trading.
The net asset value per share of the Portfolio is determined by dividing the
value of all its securities and other assets, less its liabilities, by the
number of shares of the Portfolio outstanding.

Investments are stated at current value. Securities listed or admitted to
trading on a national securities exchange or the Nasdaq National Market are
valued at the last sales price or, if there have been no sales on the valuation
date, at the most recent bid price. Other securities traded over-the-counter are
valued at the last reported bid price. Money market instruments with sixty days
or less remaining from the valuation date until maturity are valued on an
amortized cost basis. Securities or other assets for which market quotations are
not readily available will be valued at a fair value as determined in good faith
by or under the direction of Skyline's board of trustees.

The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Washington's Birthday, Martin Luther King's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day.

REDEMPTION IN KIND. With respect to the Portfolio, Skyline intends to pay
all redemptions in cash and is obligated to redeem shares solely in cash up to
the lesser of $250,000 or one percent of the net assets of the Portfolio during
any 90-day period for any one shareholder. However, redemptions in excess of
such limit may be paid wholly or partly by a distribution in kind of readily
marketable securities. If redemptions are made in kind, the redeeming
shareholders might incur brokerage fees in selling the securities received in
the redemptions.

SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders having shares of the Portfolio with a
minimum value of $5,000. The Withdrawal Plan provides for monthly or quarterly
checks in any amount not less than $100 (which amount is not necessarily
recommended). There are no separate charges to shareholders under the Withdrawal
Plan.

Withdrawals are not dividends and to the extent that the amount of the
checks received under the Withdrawal Plan exceeds the amount of dividends or
capital gains distributions credited to the shareholder's account, the payment
will constitute a depletion of the principal in the shareholder's account.
Withdrawals made concurrently with purchases of additional shares may be
inadvisable because of tax consequences. A Withdrawal Plan may be terminated at
any time upon written notice by the shareholder or Skyline.

11
<PAGE>
TAXES

Each of the Skyline Portfolios is a separate entity for purposes of
determining federal tax treatment. Skyline intends for the Portfolio to qualify
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code, and thus not be subject to federal income taxes on amounts which it
distributes to shareholders.

GENERAL INFORMATION

CUSTODIAN. Firstar Trust Company ("Firstar"), P.O. Box 701, Milwaukee,
Wisconsin 53201, acts as Custodian of the securities and other assets of
Skyline. As Custodian, Firstar is responsible for, among other things,
safeguarding and controlling Skyline's cash and securities, handling the receipt
and delivery of securities, and collecting interest and dividends on Skyline's
investments. Firstar also performs transfer agent and portfolio accounting
services for the Portfolio. Firstar is not an affiliate of the Adviser or its
affiliates.

AUDITORS. Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago,
Illinois 60606 serves as Skyline's independent auditors, providing services
including (i) audit of the annual financial statements, (ii) assistance and
consultation in connection with Securities and Exchange Commission filings, and
(iii) review of the annual income tax returns filed on behalf of the Skyline
Portfolios.

DISTRIBUTOR. The shares of the Portfolio are offered for sale on a
continuous basis through Funds Distributor, Inc. ("Distributor") without any
sales commissions or charges to the Portfolio or its shareholders. The Chairman
of the Distributor, and Chairman and Chief Executive Officer and the majority
shareholder of its parent corporation, Boston Institutional Group, Inc., is Mr.
William J. Nutt, the Chairman and Chief Executive Officer of AMG. The
Distributor acts pursuant to a written Distribution Agreement with Skyline which
continues from year to year, provided such continuance is approved annually (i)
by a majority of the trustees or by a majority of the outstanding voting
securities of the Portfolio and (ii) by a majority of the trustees who are not
parties to the Agreement or interested persons of any such party. The Adviser
pays, as a part of its agreement to pay all of the ordinary operating expenses
of the Portfolio, all expenses in connection with registration of shares of the
Portfolio with the Securities and Exchange Commission and notice filing fees
under the various state blue sky laws and assumes the cost of preparation of
prospectuses and other expenses. The Adviser bears all sales and promotional
expenses from its own resources.

As agent, the Distributor offers shares of the Portfolio to investors in
states where the shares are available for sale, at net asset value, without
sales commissions or other sales load. The Distributor offers the Portfolio's
shares only on a best-efforts basis.

The Distributor or another broker affiliated with the Distributor may
receive brokerage commissions on purchases and sales of portfolio securities by
the Portfolio. Those amounts, if any, are described under "Portfolio
Transactions and Brokerage."

The Distributor is a selling agent for two series of Portico Funds,
Inc.--Money Market Fund and U.S. Government Money Market Fund. Those funds are
the money market funds for which shareholders may exchange their shares of the
Portfolio through the exchange privilege described in the Prospectus.

12
<PAGE>
PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements:

SKYLINE CONTRARIAN EQUITIES

None.

SKYLINE SPECIAL EQUITIES PORTFOLIO

Part A: None.

Part B: The following financial statements, but no other part of the
report, are incorporated by reference to the following portions of
Registrant's 1996 Skyline Special Equities Portfolio Annual Report:

- Report of Independent Auditors

- Statement of Assets and Liabilities at December 31, 1996

- Statement of Operations for the year ended December 31, 1996

- Statement of Changes in Net Assets for the years ended December 31,
1996 and 1995

- Portfolio Holdings at December 31, 1996

- Notes to Financial Statements

NOTE: the following schedules have been omitted for the following
reasons:

Schedule I--The required information is presented in the Portfolio
Holdings at December 31, 1996.

Schedules II, III, IV and V--The required information is not present.

NOTE: Skyline Special Equities Portfolio is not affected by, and its
prospectus and statement of additional information are not included in,
this post-effective amendment. Interim unaudited financial statements of
Skyline Special Equities Portfolio are therefore not included in this
post-effective amendment.

SKYLINE SPECIAL EQUITIES II

Part A: None.

Part B: The following financial statements, but no other part of the
report, are incorporated by reference to the following portions of
Registrant's 1996 Skyline Special Equities II Annual Report:

- Report of Independent Auditors

- Statement of Assets and Liabilities at December 31, 1996

- Statement of Operations for the year ended December 31, 1996

- Statement of Changes in Net Assets for the years ended December 31,
1996 and 1995

- Portfolio Holdings at December 31, 1996

- Notes to Financial Statements

C-1
<PAGE>
NOTE: the following schedules have been omitted for the following
reasons:

Schedule I--The required information is presented in the Portfolio
Holdings at December 31, 1996.

Schedules II, III, IV and V--The required information is not present.

NOTE: Skyline Special Equities II is not affected by, and its
prospectus and statement of additional information are not included in,
this post-effective amendment. Interim audited financial statements of
Skyline Special Equities II are therefore not included in this
post-effective amendment.

(b) Exhibits:

Note: As used herein, "Registration Statement" means the Registrant's
Registration Statement on Form N-1A, no. 33-11755,
"Post-effective Amendment no. 21" refers to post-effective
amendment no. 21 to the Registration Statement that was filed on
April 29, 1996, and "Post-effective Amendment no. 22" refers to
post-effective amendment no. 22 to the Registration Statement
that was filed on April 25, 1997.

<TABLE>
<C> <S>
1.1 Agreement and Declaration of Trust of the Registrant (incorporated by
reference to exhibit 1 to Post-effective Amendment no. 21)

1.2 Amendment No. 1 to Agreement and Declaration of Trust (incorporated by
reference to exhibit 1.2 to Post-effective Amendment no. 22)

2 By-Laws of the Registrant (incorporated by reference to exhibit 2 to
Post-effective Amendment no. 21)

3 None

4.1 Share certificate for series designated Skyline Special Equities Portfolio
(incorporated by reference to exhibit 4.1 to Post-effective Amendment
no. 21)

4.2 Share certificate for series designated Skyline Special Equities II
(incorporated by reference to exhibit 4.2 to Post-effective Amendment
no. 21)

4.3 Share certificate for series designated Skyline Contrarian Equities

5.1 Investment Advisory Agreement between the Registrant and Skyline Asset
Management, L.P., relating to Skyline Special Equities Portfolio
(incorporated by reference to exhibit 5.1 to Post-effective Amendment
no. 21)

5.2 Investment Advisory Agreement between the Registrant and Skyline Asset
Management, L.P., relating to Skyline Special Equities II (incorporated
by reference to exhibit 5.2 to Post-effective Amendment no. 21)

5.3 Investment Advisory Agreement between the Registrant and Skyline Asset
Management, L.P., relating to Skyline Contrarian Equities

6.1 Distribution Agreement between the Registrant and Funds Distributor, Inc.
(incorporated by reference to exhibit 6 to Post-effective Amendment no.
21)

6.2 Amendment to Distribution Agreement between the Registrant and Funds
Distributor, Inc.

7 None

8 Amended and Restated Custodian Agreement among the Registrant, Skyline
Asset Management, L.P., and Firstar Trust Company

9.1 Amended and Restated Transfer Agent Agreement among the Registrant,
Skyline Asset Management, L.P., and Firstar Trust Company
</TABLE>

C-2
<PAGE>
<TABLE>
<C> <S>
9.2 Amended and Restated Fund Accounting Services Agreement among the
Registrant, Skyline Asset Management, L.P., and Firstar Trust Company

10.1 Opinion and Consent of Counsel relating to Skyline Special Equities
Portfolio (incorporated by reference to exhibit 10.1 to Post-effective
Amendment no. 21)

10.2 Opinion and Consent of Counsel relating to Skyline Special Equities II
(incorporated by reference to exhibit 10.2 to Post-effective Amendment
no. 21)

10.3 Opinion and Consent of Counsel relating to Skyline Contrarian Equities

11 Consent of Independent Auditors

12 None

13 Investment representation letter of initial purchaser of shares of
beneficial interest of the Registrant (incorporated by reference to
exhibit 13 to Post-effective Amendment no. 21)

14.1 Skyline Funds Individual Retirement Account Custodial Agreement and
Disclosure Statement and related applications

14.2 Skyline Funds SIMPLE-IRA Supplement and related applications

15 None

16 Schedule for Computation of Performance Quotations (incorporated by
reference to exhibit 16 to Post-effective Amendment no. 21)

18 None

19.1 Skyline Funds Account Application relating to Skyline Special Equities
Portfolio and Skyline Special Equities II

19.2 Skyline Funds Account Application relating to Skyline Contrarian Equities

19.3 Skyline Funds Account Application relating to Skyline Contrarian Equities
for use during subscription period

27.1 Financial Data Schedule--Skyline Special Equities Portfolio (incorporated
by reference to exhibit 27.1 to Post-effective Amendment no. 22)

27.2 Financial Data Schedule--Skyline Special Equities II (incorporated by
reference to exhibit 27.2 to Post-effective Amendment no. 22)
</TABLE>

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

The Registrant does not consider that there are any persons directly or
indirectly controlling, controlled by, or under common control with the
Registrant within the meaning of this item. The information in the Prospectus
under the caption "Management of Skyline" and in the Statement of Additional
Information under the caption "Management of Skyline" and in the first paragraph
under the caption "Investment Advisory Services" is incorporated by reference.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
TITLE OF SERIES AS OF JUNE 30, 1997
- -------------------------------------------------------------------- ---------------------------
<S> <C>
Skyline Special Equities Portfolio.................................. 5809
Skyline Special Equities II......................................... 4410
Skyline Contrarian Equities......................................... 0
</TABLE>

C-3
<PAGE>
ITEM 27. INDEMNIFICATION.

See Article Tenth of Registrant's Agreement and Declaration of Trust which
is incorporated by reference herein to exhibit no. 1 to the Registration
Statement. In addition, the Trust maintains a trustees and officers liability
insurance policy with maximum coverage of $5 million under which the Trust and
its trustees and officers will be named insureds.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

The information in the Statement of Additional Information under the caption
"Management of Skyline" is incorporated by reference. Prior to August 31, 1995,
the officers of Skyline Asset Management, L.P. were officers or employees of
Mesirow Asset Management, Inc., the previous adviser to the Fund. Affiliated
Managers Group, Inc. ("AMG"), the general partner of Skyline Asset Management,
L.P., has during such time period been in the business of making equity
investments in investment management firms in which management personnel retain
a significant interest in the future of the business. AMG holds, directly or
indirectly, partnership or other equity interests in a number of entities, each
of which provides investment advice to a number of other organizations and
individuals.

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Funds Distributor, Inc. (the "Distributor") currently acts as
distributor for:

BJB Investment Funds

Burridge Funds

The Brinson Funds

Fremont Mutual Funds, Inc.

Harris Insight Funds Trust

HT Insight Funds, Inc., d/b/a Harris Insight Funds

The JPM Advisor Funds

The JPM Institutional Funds

The JPM Pierpont Funds

The JPM Series Trust

The JPM Series Trust II

LKCM Fund

Monetta Fund, Inc.

Monetta Trust

The Montgomery Funds

The Montgomery Funds II

The Munder Framlington Funds Trust

The Munder Funds Trust

The Munder Funds, Inc.

C-4
<PAGE>
Orbitex Group of Funds

The PanAgora Institutional Funds

RCM Capital Funds, Inc.

RCM Equity Funds, Inc.

St. Clair Funds, Inc.

Waterhouse Investors Cash Management Fund, Inc.

WEBS Index Fund, Inc.

The Distributor is registered with the Securities and Exchange Commission as
a broker-dealer and is a member of the National Association of Securities
Dealers. The Distributor is an indirect wholly-owned subsidiary of Boston
Institutional Group, Inc., a holding company all of whose outstanding shares are
owned by key employees.

(b) The following is a list of the executive officers, directors and
partners of the Distributor:

<TABLE>
<S> <C>
Director, President and Chief Executive Officer -- Marie E. Connolly

Executive Vice President -- Richard W. Ingram

Executive Vice President -- Donald R. Roberson

Senior Vice President, General Counsel, -- John E. Pelletier
Secretary and Clerk

Senior Vice President -- Michael S.
Petrucelli

Director, Senior Vice President, Treasurer and -- Joseph F. Tower,
Chief Financial Officer III

Senior Vice President -- Paula R. David

Senior Vice President -- Bernard A. Whalen

Director -- William J. Nutt
</TABLE>

The principal business address of all officers and directors of the
Distributor is 60 State Street, Boston, Massachusetts 02109.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

<TABLE>
<S> <C>
(1) Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201
Rule 31a-1(a)
Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8)

(2) Skyline Funds
311 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
Rule 31a-1(a); Rule 31a-1(b)(9), (10), (11);
Rule 31a-1(d); Rule 31a-1(f); Rule 31a-2(a);
Rule 31a-2(c); Rule 31a-2(e)
</TABLE>

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

C-5
<PAGE>
ITEM 32. UNDERTAKINGS.

(a) Not applicable.

(b) Registrant undertakes to file a post-effective amendment, using
financial statements of the series designated Skyline Contrarian Equities, that
need not be certified, no later than 60 days after the end of the four to six
month period after effectiveness of this Registration Statement.

(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.

C-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago and State of
Illinois on August 29, 1997.

<TABLE>
<S> <C> <C>
SKYLINE FUNDS

By: /s/ WILLIAM M. DUTTON
-----------------------------------------
William M. Dutton, PRESIDENT
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities and on the date indicated.

/s/ WILLIAM L. ACHENBACH
- ------------------------------ Trustee
William L. Achenbach

/s/ WILLIAM M. DUTTON Trustee
- ------------------------------ President (principal)
William M. Dutton executive officer)

/s/ PAUL J. FINNEGAN
- ------------------------------ Trustee
Paul J. Finnegan

August 29, 1997

/s/ STEPHEN F. KENDALL
- ------------------------------ Trustee
Stephen F. Kendall

/s/ DAVID A. MARTIN
- ------------------------------ Trustee
David A. Martin

/s/ SCOTT C. BLIM Secretary and Treasurer
- ------------------------------ (principal accounting and
Scott C. Blim financial officer)

C-7
<PAGE>
INDEX OF EXHIBITS FILED WITH THIS AMENDMENT

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
4.3 Share certificate for series designated Skyline Contrarian Equities

5.3 Investment Advisory Agreement between the Registrant and Skyline Asset Management, L.P.,
relating to Skyline Contrarian Equities

6.2 Amendment to Distribution Agreement between the Registrant and Funds Distributor, Inc.

8 Amended and Restated Custodian Agreement among the Registrant, Skyline Asset Management, L.P.,
and Firstar Trust Company

9.1 Amended and Restated Transfer Agent Agreement among the Registrant, Skyline Asset Management,
L.P., and Firstar Trust Company

9.2 Amended and Restated Fund Accounting Services Agreement among the Registrant, Skyline Asset
Management, L.P., and Firstar Trust Company

10.3 Opinion and Consent of Counsel relating to Skyline Contrarian Equities

11 Consent of Independent Auditors

14.1 Skyline Funds Individual Retirement Account Custodial Agreement and Disclosure Statement and
related applications

14.2 Skyline Funds SIMPLE-IRA Supplement and related applications

19.1 Skyline Funds Account Application relating to Skyline Special Equities Portfolio and Skyline
Special Equities II

19.2 Skyline Funds Account Application relating to Skyline Contrarian Equities

19.3 Skyline Funds Account Application relating to Skyline Contrarian Equities for use during
subscription period
</TABLE>

<PAGE>

NUMBER SHARES

SEE REVERSE FOR
CERTAIN DEFINITIONS SKYLINE FUND CUSIP
CONTRARIAN EQUITIES(SM)
A MASSACHUSETTS BUSINESS TRUST

THIS CERTIFIES THAT IS THE OWNER OF

FULLY PAID AND NONASSESSABLE SHARES OF BENEFICIAL INTEREST, WITHOUT PAR
VALUE, OF

SKYLINE FUND CONTRARIAN EQUITIES

TRANSFERABLE ON THE BOOKS OF THE TRUST BY THE HOLDER HEREOF IN PERSON
OR BY ATTORNEY UPON SURRENDER OF THIS CERTIFICATE DULY ENDORSED OR
ASSIGNED. THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE
SUBJECT TO THE LAWS OF THE STATE OF MASSACHUSETTS AND TO THE AGREEMENT
AND DECLARATION OF TRUST AND BYLAWS OF THE TRUST AND AMENDMENTS
THEREOF.

THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER
AGENT.

WITNESS THE FACSIMILE SEAL OF THE TRUST AND THE FACSIMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.

SKYLINE FUNDS

S E A L

/s/ Scott C. Blim 1987 /s/ William M. Dutton
--------------------- ------------------------
SECRETARY PRESIDENT

A MASSACHUSETTS BUSINESS TRUST

COUNTERSIGNED:

FIRSTAR TRUST CO. (Milwaukee)

BY TRANSFER AGENT

------------------------------
DATED: AUTHORIZED SIGNATURE

<PAGE>

SKYLINE FUND
SKYLINE CONTRARIAN EQUITIES

INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT, dated the ___ day of _______, 1997, made and entered into
by and between SKYLINE FUNDS, a Massachusetts business trust (the "Fund") on
behalf of the Skyline Contrarian Equities ("Contrarian Equities"), and SKYLINE
ASSET MANAGEMENT, L.P., a Delaware limited partnership (the "Adviser").

In consideration of the mutual convenants hereinafter contained, the
parties hereto hereby agree as follows:

1. ENGAGEMENT OF THE ADVISER. The Adviser shall manage the investment
and reinvestment of the assets of Contrarian Equities. The Adviser
shall determine which investments shall be made or disposed of by
Contrarian Equities and shall effect such acquisitions and
dispositions, all in furtherance of Contrarian Equities' investment
objective and policies, subject to the overall control and supervision
of the Fund's board of trustees, for the period and on the terms set
forth in this Agreement.

The Adviser is authorized to place Contrarian Equities' portfolio
transactions with securities broker-dealers and futures commission
merchants and to negotiate the terms of such transactions, including
brokerage commissions, on behalf of Contrarian Equities. The Adviser
is authorized to exercise discretion within the Fund's policy
concerning allocation of its brokerage business, as permitted by law,
including but not limited to Section 28(e) of the Securities Exchange
Act of 1934. The Adviser shall report on such activities to the
Fund's board of trustees and shall submit such reports and other
information thereon as the Fund's board of trustees shall from time to
time request. The Adviser shall provide certain other services to the
Fund in connection with the Fund's ongoing administration and
operation.

2. COMPLIANCE WITH APPLICABLE REQUIREMENTS. This Agreement will be
performed in accordance with the requirements of the Investment
Company Act of 1940 (the "Act") and the Investment Advisers Act of
1940 and the rules and regulations under such acts, to the extent that
the subject matter of this Agreement is within the purview of such
acts and such rules and regulations. The Adviser will assist the Fund
in complying with the requirements of the Act and the Securities Act
of 1933, as amended (the "1933 Act") and the rules and regulations
under such acts, and in qualifying as a regulated investment company
under the Internal Revenue Code and applicable regulations of the
Internal Revenue Service thereunder. In carrying out its obligations
under this Agreement the Adviser shall at all times conform to the
provisions of the Agreement and Declaration of Trust and By-Laws of
the Fund, the provisions of the currently effective Registration
Statement
<PAGE>

of the Fund under the Act and the 1933 Act, and any other applicable
provisions of state or federal law.

3. EXPENSES TO BE PAID BY THE ADVISOR. The Advisor shall furnish, at its
own expense, office space to the Fund and all necessary office
facilities, equipment, and personnel for managing the assets of
Contrarian Equities, providing shareholder servicing and providing
general administrative services to Contrarian Equities and to the
Fund. The Adviser shall also assume and pay all other ordinary costs
and expenses incurred by it in connection with managing the assets of
the Fund; all ordinary accounting, auditing and legal services,
clerical and statistical services, administrative costs and advisory
fees (except to the extent payable by the Fund pursuant to Section 4);
any compensation of officers and employees of the Fund; all costs
attributable to shareholder and investor services relating to
Contrarian Equities (including, without limitation, telephone and
personnel expenses and the charges, if any, of third parties
performing such services); all expenses of marketing shares of
Contrarian Equities; all expenses of maintaining the registration of
shares of Contrarian Equities under the 1933 Act and of qualifying and
maintaining qualification of shares of Contrarian Equities under the
securities laws of such United States jurisdictions as the Fund may
from time to time reasonably designate (except to the extent payable
by the Fund pursuant to Section 4); and all expenses of determining
daily price computations, placing of portfolio transaction orders, and
performing related bookkeeping services. The Adviser shall pay all
charges of depositories, custodians, and other agencies for the
safekeeping and servicing of the Fund's cash, securities, and other
property and of the Fund's transfer, dividend disbursing, and
redemption agents and registrars, if any; insurance expenses; all
compensation of trustees who are "interested persons" of the Fund as
defined in the Act and all expenses incurred in connection with their
services to the Fund; all expenses of publication of notices and
reports to the Fund's shareholders; all expenses of proxy
solicitations of the Fund or its board of trustees; and all expenses
of maintaining the Fund's existence and maintaining the registration
of the Fund under the Act.

4. EXPENSES TO BE PAID BY THE FUND. Expenses borne by the Fund, as
described below, attributable to Contrarian Equities are charged
against Contrarian Equities Other expenses of the Fund are allocated
among its portfolios on a reasonable basis as determined by the Fund's
board of trustees. The Fund shall pay all fees and expenses incurred
in connection with the services to the Fund of trustees who are not
"interested persons" of the Fund as defined in the Act; all initial
offering and organizational expenses of the Fund, including
typesetting of the Fund's initial prospectus, legal and accounting
expenses, initial registration under the Act, and initial 1933 Act
registration; all taxes and fees payable to federal, state, or other
governmental agencies, domestic or foreign; all stamp or other
transfer taxes; all interest charges; and any extraordinary costs or
expenses such as legal accounting, or other cost or expenses not
incurred in the course of the Fund's

2
<PAGE>

ongoing operation. In addition to the payment of the foregoing
expenses the Fund shall also pay all brokers' commissions and other
portfolio transaction costs.

5. LIMITATION OF EXPENSES. During the term of this Agreement, the total
expenses of Contrarian Equities, exclusive of extraordinary costs or
expenses such as legal, accounting, or other costs or expenses not
incurred in the course of the Fund's ongoing operation, but including
fees paid to the Adviser pursuant to paragraph 6 below, shall not in
any fiscal year exceed the annual rate of 1.75% of the average daily
net asset value of Contrarian Equities, and the Adviser agrees to pay
any excess expenses or to reimburse Contrarian Equities for any sums
expended for such expenses in excess of that amount. Such payment, if
any, will be paid on a monthly basis. Brokers' commissions and other
charges relating to the purchase and sale of securities shall not be
regarded as expenses for this purpose.

6. COMPENSATION OF THE ADVISER. For the services to be rendered and as
full reimbursement for all expenses of the Fund to be paid by the
Adviser pursuant to this Agreement, Contrarian Equities shall pay to
the Adviser a monthly fee computed on the basis of the average daily
net asset value of Contrarian Equities at the following annual rates:
(i) 1.50% of the first $200 million of average daily net assets;
(ii) 1.45% of the next $200 million of average daily net assets;
(iii) 1.40% of the next $200 million average daily net assets; and
(iv) 1.35% of average daily net assets in excess of $600 million. The
fee for each calendar month or portion thereof shall be payable on the
first business day of the next month.

7. SERVICES OF THE ADVISER NOT EXCLUSIVE. The services of the Adviser to
the Fund hereunder are not to be deemed exclusive. The Adviser shall
be free to render similar services to others and engage in other
activities. The Adviser shall be deemed for all purposes to be an
independent contractor and not an agent of the Fund, and unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Fund in any way.

8. SERVICES OTHER THAN AS THE ADVISER. The Adviser or its affiliates may
act as broker for the Fund in connection with the purchase of sale of
securities by or for the Fund if and to the extent permitted by
procedures adopted from time to time by the Fund's board of trustees.
Such brokerage services are not within the scope of the duties of the
Adviser under this Agreement and, within the limits permitted by law
and the Fund's board of trustees, the Adviser may receive brokerage
commissions, fees, or other remuneration from the Fund for such
service in addition to its fee for services as the Adviser. Within
the limits permitted by law, the Adviser may receive compensation from
the Fund for other services performed by it for the Fund which are not
within the scope of the duties of the Adviser under this Agreement.

3
<PAGE>

9. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be
liable to the Fund or its shareholders for any loss suffered by the
Fund or its shareholders from or as a consequence of any act or
omission of the Adviser, or of any of the directors, officers,
employees, or agents of the Adviser, in connection with, pursuant to
or arising out of investment advisory or portfolio investment services
under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence on the part of the Adviser in the
performance of such investment advisory or portfolio investment duties
or by reason of reckless disregard by the Adviser of such investment
advisory or portfolio investment obligations and duties under this
Agreement.

With respect to all other services rendered under this Agreement, the
Adviser shall not be liable to the Fund or its shareholders for any
loss suffered by the Fund or its shareholders from or as a consequence
of any act or omission of the Adviser, or of any of the directors,
officers, employees or agents of the Adviser, except by reason of
willful misfeasance, bad faith, gross negligence or negligence on the
part of the Adviser in the performance of such other duties or by
reason of reckless disregard by the Adviser of such other obligations
or duties.

10. DURATION AND RENEWAL. This Agreement has been approved on behalf of
Contrarian Equities by a majority of those trustees of the Fund who
are not "interested persons" (as defined in the Act) of the Fund or of
the Adviser, voting in person at a meeting called for the purpose of
voting on such approval. Unless terminated as provided in Section 11,
this Agreement shall continue in effect until April 30, 1999, and
thereafter from year to year only so long as such continuance is
specifically approved at least annually by the board of trustees of
the Fund, including a majority of those trustees of the Fund who are
not "interested persons" (as defined in the Act) of the Fund or of the
Adviser, voting in person at a meeting called for the purpose of
voting on such approval.

11. TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by the Fund's board of trustees or by a vote
of the holders of a majority (as defined in the Act) of the
outstanding shares of Contrarian Equities, upon 60 days' written
notice to the Adviser. This Agreement may be terminated by the
Adviser at any time upon 90 days' written notice to the Fund. This
Agreement shall terminate automatically in the event of its assignment
(as defined in the Act).

12. AMENDMENT. This Agreement may not be amended without the affirmative
vote of (a) a majority of those trustees who are not "interested
persons" as defined in the Act of the Fund or of the Adviser, voting
in person at a meeting called for the purpose of voting on such
approval, and (b) the holders of a majority of the outstanding shares
of Portfolio.

4
<PAGE>

13. GOVERNING LAW. The terms and provisions of this Agreement shall be
interpreted under and governed by the law of the State of Illinois.

14. LIMITED LIABILITY. Any obligation of the Fund hereunder shall be
binding only on the assets of the Fund (or the applicable Portfolio
thereof) and shall not be binding upon any trustee, officer, employee,
agent or shareholder of the Fund. Neither the authorization of any
action by the trustees or shareholders of the Fund nor the execution
of this Agreement on behalf of the Fund shall impose any liability
upon any trustee or any shareholder.

15. NOTICES. Any notices and communications required hereunder shall be
in writing and shall be deemed given when delivered in person or when
sent by first-class, registered or certified mail to the Adviser at
311 South Wacker Drive, Suite 4500, Chicago, Illinois 60606 and to the
Fund at 311 South Wacker Drive, Suite 4500, Chicago, Illinois 60606,
or at such address as either party may from time to time specify by
notice to the other.

[Remainder of Page Intentionally Blank]

5
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.

ATTEST: SKYLINE FUNDS

By:
- ------------------------------ -------------------------------
Name: Scott C. Blim Name: William M. Dutton
Title: Secretary Title: President

ATTEST: SKYLINE ASSET MANAGEMENT, L.P.

By:
- ------------------------------ -------------------------------
Name: Scott C. Blim Name: William M. Dutton
Title: Chief Operating Officer Title: President and Chief
Executive Officer

<PAGE>

AMENDMENT TO DISTRIBUTION AGREEMENT

AMENDMENT TO DISTRIBUTION AGREEMENT, dated as of ______________, 1997 (the
"Amendment"), by and between Skyline Funds (the "Fund") and Funds Distributor,
Inc. ("FDI").

WHEREAS, the Fund intends to create a new Series to be called Skyline
Contrarian Equities; and

WHEREAS, FDI and the Fund have entered into a Distribution Agreement (the
"Distribution Agreement") dated as of August 31, 1995 and both parties wish to
amend such Distribution Agreement.

NOW, THEREFORE for good and valuable consideration, and intending to be
legally bound hereby, the parties agree as follows:

1. Defined terms used in this Amendment have the same meaning as assigned
to them in the Distribution Agreement.

2. Exhibit A to the Distribution Agreement is hereby amended to include
Skyline Contrarian Equities; and

3. Paragraph 3 of the Distribution Agreement is hereby amended and
restated in its entirety to read as follows:

This Agreement shall become effective with respect to the Fund as of
the date hereof and will continue for an initial one-year term and
will continue thereafter so long as such continuance is specifically
approved at least annually (i) by the Fund's Board (ii) by a vote of a
majority (as defined in the Investment Company Act of 1940) of the
Shares of the Fund or the relevant Series, as the case may be,
provided that in either event its continuance also is approved by a
majority of the Board members who are not "interested persons" (as
defined in said Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
If a Series is not in existence as of the date hereof, this Agreement
shall take effect with respect to that Series on the date you become
the distributor of the Shares of such Series; Exhibit A to this
Agreement shall be deemed amended to include such Series from and
after such date. This agreement is terminable with respect to the
Fund, without penalty, on not less than sixty days' notice, by the
Fund's Board of Trustees, by vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities
of such Fund, or by you.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
Funds Distributor, Inc.

By:___________________________
Name:
Title:

Skyline Funds

By:____________________________
Name:
Title:

<PAGE>

AMENDED AND RESTATED
CUSTODIAN AGREEMENT

THIS AGREEMENT made on August 31, 1995, and amended August __, 1997
among Skyline Funds, a Massachusetts business trust ("Skyline"), Skyline Asset
Management, L. P., a Delaware limited partnership (the "Manager"), and FIRSTAR
TRUST COMPANY, a corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian"),

W I T N E S S E T H :

WHEREAS, Skyline is an open-end management investment company
registered under the Investment Company Act of 1940; and

WHEREAS, Skyline has three series, Skyline Special Equities Portfolio,
Skyline Special Equities II and Skyline Contrarian Equities (each a "Fund" and
together, the "Funds");

WHEREAS, Skyline desires that the securities and cash of each Fund
shall be hereafter held and administered by Custodian pursuant to the terms of
this Agreement;

WHEREAS, Skyline and the Manager have entered into investment advisory
agreements pursuant to which the Manager acts as investment adviser to each of
the Funds and has agreed to pay certain ordinary operating expenses of each
Fund, including the fees and expenses payable to the Custodian under this
Agreement; and

NOW, THEREFORE, in consideration of the mutual agreements herein made,
Skyline, the Manager and the Custodian agree as follows:

1. DEFINITIONS

The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.

The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of Skyline or a Fund by any two of
the President, a Vice President, the Secretary and the Treasurer of Skyline, or
any other persons duly authorized to sign by the Board of Trustees.

The word "Board" shall mean Board of Trustees of Skyline.

2. Skyline hereby employs Custodian as the custodian of its assets held in
each of the Funds. Skyline agrees to deliver to Custodian all securities and
cash owned by the Funds, and all payments of income, payments of principal or
capital distributions received by the Funds with respect to all securities owned
by the Funds from time to time, and the cash consideration

1
<PAGE>

received by Skyline for such new or treasury shares of beneficial interest in
the Funds as may be issued or sold from time to time.

3. NAMES, TITLES, AND SIGNATURES OF SKYLINE'S OFFICERS

An officer of Skyline will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Trustees, together with any changes which may occur from time to time.

4. RECEIPT AND DISBURSEMENT OF MONEY

A. Custodian shall open and maintain a separate account or accounts
in the name of each Fund, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement. Custodian shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it from or
for the account of such Fund. Upon receipt of proper instructions, which may by
their terms be continuing instructions when deemed appropriate by the parties,
Custodian shall make payments of cash to, or for the account of a Fund from such
cash only:
(a) for the purchase of securities for the portfolio of that Fund
against the delivery of such securities to Custodian, registered
in the name of the Fund or of the nominee of Custodian referred
to in Section 8 or in proper form for transfer; all securities
accepted by Custodian shall be accompanied by payment of, or a
"due bill" for, any dividends, interest, or other distributions
of the issuer, due the purchaser; (b) in the case of a purchase
effected through a clearing agency or book entry system, in
accordance with the conditions set forth in Section 15 hereof; or
(c) in the case of repurchase agreements entered into between a
Fund and Custodian, or another bank (i) against delivery of the
securities either in certificate form or through an entry
crediting Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by Custodian
along with written evidence of the agreement by Custodian to
repurchase such securities from the Fund.

(b) for the repurchase or redemption of shares of beneficial interest
of a Fund upon delivery thereof to Custodian;

(c) for the payment of interest, dividends, taxes, investment
adviser's fees or fees and expenses of Skyline's non-interested
trustees;

(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by a Fund provided
that the consideration therefor to be delivered to Custodian; or

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<PAGE>

(e) for other proper corporate purposes certified by resolution of
the Board.

Before making any such payment, Custodian shall receive (and may rely
upon) an officers' certificate requesting such payment and stating that it is
for a purpose permitted under the terms of items (a), (b), (c), or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of Skyline's issues appropriate oral
or facsimile instructions to Custodian and an appropriate officers' certificate
is received by Custodian within two business days thereafter.

B. Custodian shall collect on a timely basis all income and other
payments with respect to registered securities held hereunder to which a Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other payments. In
furtherance of the foregoing, Custodian is hereby authorized to endorse all
checks, drafts or other orders for the payment of money received by Custodian
for the account of a Fund. Custodian shall collect on a timely basis all income
and other payments with respect to bearer of securities if, on the date of
payment by the issuer, such securities are held by Custodian and shall credit
such income, as collected, to the Fund's custodian account. In any case in
which Custodian does not receive any such due and unpaid income within a
reasonable time after it has made proper demands for the same (which shall be
presumed to consist of at least three demand letters and at least one telephonic
demand), it shall so notify the applicable Fund in writing, including copies of
all demand letters, any written responses thereto, and memoranda of all oral
responses thereto and to telephonic demands, and await proper instructions;
Custodian shall not be obliged to take legal action for collection unless and
until reasonably indemnified to its satisfaction. It shall also notify the
applicable Fund as soon as reasonably practicable whenever income due on
securities, in respect to which such Fund requests such notice, is not collected
in due course.

C. Custodian shall, upon receipt of proper instructions, make
federal funds available to a Fund as of specified times agreed upon from time to
time by Skyline and the Custodian in the amount of checks received in payment
for shares of that Fund which are deposited into that Fund's account.

D. In any and every case where payment for purchase of securities
for the account of a Fund is made by Custodian in advance of receipt of the
securities purchased, in the absence of specific written instructions from
Skyline on behalf of such Fund to so pay in advance, Custodian shall be
absolutely liable to such Fund for such securities to the same extent as if the
securities had been received by Custodian, except that in the case of repurchase
agreements entered into by the Fund with a bank which is a member of the Federal
Reserve System, Custodian may transfer funds to the account of such bank prior
to the receipt of written evidence that the securities subject to such
repurchase agreement have been transferred by book-

3
<PAGE>

entry into a segregated non-proprietary account of Custodian maintained with a
Federal Reserve Bank or of the safe-keeping receipt, provided that such
securities have in fact been so transferred by book entry.

5. RECEIPT OF SECURITIES

Custodian shall hold in a separate account, and physically segregated
at all times from those of any other persons, firms, or corporations, pursuant
to the provisions of this Agreement, all non-cash property, including securities
received by it from or for the account of each Fund, provided that securities
may be maintained in a securities depository or book entry system in accordance
with the conditions set forth in Section 16 of this Agreement. All such
non-cash property, including securities, shall be held or disposed of by
Custodian for, and subject at all times to the instructions, of Skyline on
behalf of a Fund and pursuant to the terms of this Agreement. Custodian shall
have no power or authority to assign, hypothecate, pledge, or otherwise dispose
of any such securities and investments, except pursuant to the direction of
Skyline on behalf of a Fund and only for the account of such Fund as set forth
in paragraph 6 of this Agreement.

6. SEGREGATED ACCOUNTS

Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of each Fund, into which
account(s) may be transferred cash and/or securities.

7. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES

Custodian shall have sole power to release or deliver any securities
of a Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only upon receipt of proper
instructions, which may by their terms be continuing instructions when deemed
appropriate by the parties, and only:

(a) upon sales of such securities for the account of the Fund and
receipt by Custodian of payment therefor;

(b) when such securities are called, redeemed or retired or otherwise
become payable, provided that the cash or other consideration
therefor is to be delivered to Custodian;

(d) in exchange for, or upon conversion into, other securities alone
or other securities and cash whether pursuant to any plan of
merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;

4
<PAGE>

(e) upon conversion of such securities pursuant to their terms into
other securities, provided that the securities and cash, if any,
are to be delivered to Custodian;

(f) upon exercise of subscription, purchase or other similar rights
represented by such securities, provided that the securities and
cash, if any, are to be delivered to Custodian;

(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities, provided that the
definitive securities are to be delivered to Custodian;

(h) for the purpose of redeeming in kind shares of beneficial
interest of a Fund upon delivery thereof to Custodian;

(i) upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by a Fund; or

(j) for other proper corporate purposes.

Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g), (h), or (i) of this Section 6
and also, in respect of item (j), upon receipt of an officers' certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officers' certificate need not precede
any such transfer, exchange or delivery of a money market instrument, or any
other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of Skyline's issues appropriate oral
or facsimile instructions to Custodian and an appropriate officers' certificate
is received by Custodian within two business days thereafter.

8. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS

Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other income
items held by it for the account of a Fund, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of that Fund; (b) collect interest and cash dividends received, with notice to
the Fund, for the account of a Fund; (c) hold for the account of a Fund
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder; and (d) execute, as agent on behalf of a
Fund, all necessary ownership certificates required by the Internal Revenue Code
or the Income Tax Regulations of the United States Treasury Department or under
the laws of any state now or hereafter in effect, inserting the Fund's name on
such certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.

5
<PAGE>

9. REGISTRATION OF SECURITIES

Except as otherwise directed by an officers' certificate, Custodian
shall register all securities, except such as are in bearer form, in the name of
the applicable Fund or of any nominee for the applicable Fund or of any
registered nominee of Custodian assigned exclusively to the applicable Fund (as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued hereunder or in any provision of any subsequent federal tax
law exempting such transaction from liability for stock transfer taxes), and
shall execute and deliver all such certificates in connection therewith as may
be required by such laws or regulations or under the laws of any state.

Skyline shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of the applicable registered nominee, any securities
which it may hold for the account of a Fund and which may from time to time be
registered in the name of a Fund. All securities accepted by Custodian on
behalf of a Fund hereunder shall be in "street" or other good delivery form.

10. VOTING AND OTHER ACTION

Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of a Fund, except in accordance
with the instructions contained in an officers' certificate. Custodian shall
deliver, or cause to be executed and delivered, to Skyline all notices, proxies
and proxy soliciting materials with relation to such securities, such proxies to
be executed by the registered holder of such securities (if registered otherwise
than in the name of the Fund), but without indicating the manner in which such
proxies are to be voted.

Custodian shall transmit promptly to the applicable Fund all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith) received by
Custodian from issuers of the securities being held for such Fund. With respect
to tender or exchange offers, Custodian shall transmit promptly to the Fund all
written information received by Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If a Fund desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the Fund shall
notify Custodian at least two business days prior to the date on which Custodian
is to take action.

11. TRANSFER TAX AND OTHER DISBURSEMENTS

Each Fund shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities of that Fund made hereunder.
The Manager shall pay or reimburse Custodian from time to time for all other
necessary and proper disbursements and expenses made or incurred by Custodian in
the performance of this Agreement.

Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be required
under the provisions of the

6
<PAGE>

Internal Revenue Code and any Regulations of the Treasury Department issued
thereunder, or under the laws of any state, to exempt from taxation any
exemptable transfers and/or deliveries of any such securities.

12. CONCERNING CUSTODIAN

Custodian shall be paid by the Manager as compensation for its
services pursuant to this Agreement such compensation as may from time to time
be agreed upon in writing among the parties. Until modified in writing, such
compensation shall be as set forth in Exhibit A attached hereto.

So long as and to the extent that it exercises reasonable care,
Custodian shall not be liable for any action taken in good faith upon any
certificate herein described or certified copy of any resolution of the Board of
Trustees of Skyline, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.

Skyline agrees on behalf of each Fund to indemnify and hold harmless
Custodian and its nominee from all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement as to that
Fund, except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized to
charge any account of the Funds for such items. In the event of any advance of
cash for any purpose made by Custodian resulting from orders or instructions of
Skyline, on behalf of a Fund, or in the event that Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the account of that
Fund shall be security therefore.

13. SUBCUSTODIANS

Custodian is hereby authorized to engage another bank or trust company
as a Subcustodian for all or any part of a Fund's assets, provided that such
bank or trust company is a bank or trust company organized under the laws of any
state of the United States, having an aggregate capital, surplus and undivided
profit, as shown by its last published report, of not less than Two Million
Dollars ($2,000,000); and provided further that if the Custodian utilizes the
services of a Subcustodian, the Custodian shall remain fully liable and
responsible to each Fund on account of actions or omissions of the Subcustodian
as fully as if the Custodian was directly responsible for any such losses under
the terms of the Custodian Agreement.

Notwithstanding anything contained herein, if Skyline on behalf of a
Fund requires the Custodian to engage specific Subcustodians for the safekeeping
and/or clearing of assets, Skyline on behalf of that Fund agrees to indemnify
and hold harmless Custodian from all claims, expenses and liabilities incurred
or assessed against it in connection with the use of such Subcustodian in regard
to the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.

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<PAGE>

14. REPORTS BY CUSTODIAN

Custodian shall furnish each Fund periodically as agreed upon with a
statement summarizing all transactions and entries for the account of that Fund.
Custodian shall furnish to each Fund, at the end of every month, a list of the
portfolio securities showing the aggregate cost of each issue and a list of all
securities transactions that remain unsettled at such time. The books and
records of Custodian pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by officers of, and of auditors
employed by, Skyline.

15. TERMINATION OR ASSIGNMENT

This Agreement may be terminated by Skyline, or by Custodian, on
ninety (90) days notice, given in writing and sent by registered mail to
Custodian at P.O. Box 20S4, Milwaukee, Wisconsin 53201, or to Skyline at 311
South Wacker Drive, Chicago, Illinois 60606-6675, as the case may be. Upon any
termination of this Agreement, Custodian shall deliver to the successor
custodian appointed by Skyline's Board of Trustees (as evidenced by a certified
vote) at the office of the Custodian, all securities and other property held by
it hereunder, with such securities duly endorsed for transfer. If no such
successor custodian shall be appointed, Custodian shall, in like manner, upon
receipt of a certified copy of a vote of the Board of Trustees of Skyline,
deliver at the office of Custodian such securities, funds and other properties
in accordance with such vote. In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of Trustees shall
have been delivered to Custodian on or before the date when such termination
shall become effective, then Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the Investment Company Act of
1940, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by Custodian and all instruments
held by Custodian relative thereto and all other property held by it under this
Agreement. Thereafter, such bank or trust company shall be the successor of
Custodian under this Agreement. Notwithstanding the foregoing, custodian shall
not be required to make any such delivery or payment until full payment shall
have been made of all liabilities constituting a charge on or against the
properties then held by custodian or on or against custodian, and until full
payment shall have been made to custodian of all its fees, compensation costs
and expenses, subject to the provisions of Section 12 of this Agreement. In the
event that securities, funds and other properties remain in the possession of
Custodian after the date of termination hereof owning to failure of Skyline to
procure the certified copy of vote referred to or of the Board of Trustees to
appoint a successor custodian, Custodian shall be entitled to compensation for
its services during such period as Custodian retains possession of such
securities, funds and other properties in accordance with the fee schedule most
recently in effect and the provisions of this Agreement relating to the duties
and obligations of Custodian shall remain in full force and effect.

This Agreement may not be assigned by Custodian without the consent of
the Funds, authorized or approved by a resolution of its Board of Trustees.
This Agreement supersedes and terminates, as of the close of business on the
date hereof, all prior contracts between Custodian and Skyline relating to
custody of the assets of the Funds.

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<PAGE>

16. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES

Custodian may deposit and/or maintain securities owned by the Funds in
a clearing agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, each of which is referred to herein as "a
Securities System," in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and subject to
the following provisions:

1. Custodian may keep securities of a Fund in a Securities System
provided that such securities are represented in an account
("Account") of Custodian in the Securities System which shall not
include any assets of Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;

2. The records of Custodian with respect to securities of each Fund which
are maintained in the Securities System shall identify by book-entry
those securities belonging to the Fund;

3. Custodian shall pay for securities purchased for the account of a Fund
upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making
of an entry on the records of Custodian to reflect such payment and
transfer for the account of the Fund. Custodian shall transfer
securities sold or loaned for the account of a Fund upon (i) receipt
of advice from the Securities System that payment or collateral for
such securities has been transferred to the Account, and (ii) the
making of an entry on the records of Custodian to reflect such
transfer and payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of securities for the
account of a Fund shall identify the Fund, be maintained for the Fund
by Custodian and be provided to the Fund at its request.

4. Custodian shall promptly provide Skyline with any report obtained by
Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the Securities System;

5. Anything to the contrary herein notwithstanding, Custodian shall be
liable to a Fund for any loss or damage to such Fund resulting from
use of the Securities System by reason of any negligence, misfeasance
or misconduct of Custodian or any of its agents or of any of its or
their employees or from failure of Custodian or any such agent to
enforce effectively such rights as it may have against the Securities
System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of Custodian with respect to any claim
against the Securities System or any other person which Custodian may
have as a consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or damage;

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<PAGE>

6. Custodian shall not be authorized to act under this Section in the
absence of an appropriate certificate of Skyline that the Board of
Trustees has approved the use of a particular Securities Systems and
any changes to arrangements in connection therewith.

17. INDEPENDENT ACCOUNTANTS. Custodian shall provide the Funds, at such times
as Skyline may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control and procedures
for safeguarding securities, including securities deposited and/or maintained in
a Securities System, relating to the services provided by Custodian under this
Agreement; such reports, which shall be of sufficient scope and in sufficient
detail, as may reasonably be required by Skyline, to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, shall so state.

18. RECORDS

Custodian shall prepare and maintain any records relating to its
activities hereunder in such manner as will meet the obligations of Skyline
pursuant to the provisions of the Investment Company Act of 1940, as amended, or
the rules and regulations promulgated thereunder, and applicable federal and
state tax laws and regulations. All such records shall be the property of
Skyline and Custodian agrees to make any such records available to Skyline its
dependent auditors and the Securities and Exchange Commission upon request and
to preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended and applicable federal and state tax
laws and regulations.

19. DISCLAIMER OF LIABILITY

This agreement is executed on behalf of Skyline by its officers in
their capacities as officers and not individually. The obligations of Skyline
under this agreement are not binding upon Skyline's trustees, officers, or
shareholders individually but are binding only upon the assets and property of
Skyline, or of the Fund to which the services performed pursuant to this
Agreement relate. Skyline's Declaration of Trust is on file with the Secretary
of the Commonwealth of Massachusetts.

20. ADDITIONAL SERIES

Skyline is authorized to issue separate classes of shares of
beneficial interest representing interests in separate investment portfolios.
The parties intend that each portfolio established by Skyline, now or in the
future, be covered by the terms and conditions of this Agreement. In order for
a future portfolio to be covered by this Agreement, Skyline shall give notice to
the Custodian of the designation of and the expected effective date of such
portfolio.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly authorized.

Executed in several counterparts, each of which is an original.

Attest: FIRSTAR TRUST COMPANY

By: By:
------------------------------- -------------------------

Title: Title:
------------------------------- -------------------------

Attest: SKYLINE ASSET MANAGEMENT, L.P.

By: By:
------------------------------- -------------------------

Title: Title:
------------------------------- -------------------------

Attest: SKYLINE FUNDS

By: By:
------------------------------- -------------------------

Title: Title:
------------------------------- -------------------------

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<PAGE>

MUTUAL FUND CUSTODIAL AGENT SERVICE
SKYLINE SPECIAL EQUITIES PORTFOLIO,
SKYLINE SPECIAL EQUITIES II and
SKYLINE CONTRARIAN EQUITIES
ANNUAL FEE SCHEDULE

- - Annual fee based on market value of assets:
- $0.20 per $1,000 (2 basis points)
less 15% discount

- - Investment transactions: (purchase, sale, exchange, tender, redemption,
maturity, receipt, delivery)
- $12.00 per book entry security (depository or Federal Reserve system)
- $25.00 per definitive security (physical)
- $75.00 per Euroclear
- $ 8.00 per principal reduction pass-through certificates
- $35.00 per option/futures contract
- $ 7.50 per variation margin transaction
- $ 7.50 per Fed wire deposit or withdrawal

- - Variable Amount Notes: Used as a short-term investment, variable amount
notes offer safety and prevailing high interest rates. Our charge, which
is 1/4 of 1%, is deducted from the variable amount note income at the time
it is credited to your account

- - Extraordinary expenses: Based on time and complexity involved

- - Out-of-pocket expenses: Charged to the account

- - Fees are billed; monthly, based on market value at the beginning of the
month

<PAGE>

AMENDED AND RESTATED
TRANSFER AGENT AGREEMENT

THIS AGREEMENT is made and entered into on this 31st day of August, 1995
and amended on August __, 1997 by and among Skyline Funds, a Massachusetts
business trust ("Skyline"), Skyline Asset Management, L.P., a Delaware limited
partnership (the "Manager"), and Firstar Trust Company, a corporation organized
under the laws of the State of Wisconsin (hereinafter referred to as the
"Agent").

W I T N E S S E T H:

WHEREAS, Skyline is an open-end management investment company registered
under the Investment Company Act of 1940;

WHEREAS, Skyline has three series, Skyline Special Equities Portfolio,
Skyline Special Equities II and Skyline Contrarian Equities (each a "Fund" and
together, the "Funds");

WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers; and

NOW THEREFORE, Skyline, the Manager, and the Agent do mutually promise and
agree as follows:

1. TERMS OF APPOINTMENT; DUTIES OF THE AGENT

Subject to the terms and conditions set forth in this Agreement, Skyline
hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent for each Fund.

The Agent shall perform all of the customary services of a transfer agent
and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), in accordance with the
conditions and procedures set forth in the prospectus and statement of
additional information relating to shares of the Funds as in effect from time to
time (together, the "prospectus") including but not limited to:

A. Receive orders for the purchase of shares, with prompt delivery,
where appropriate, of payment and supporting documentation to the
Funds' custodian;

B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated
shares being held in the appropriate shareholder account;

C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Funds'
custodian;
<PAGE>

D. Pay monies (upon receipt from the Fund's custodian, where
relevant) in accordance with the instructions of redeeming
shareholders;

E. Process transfers of shares in accordance with the shareowner's
instructions;

F. Process exchanges between Funds or between a Fund and any other
mutual fund with which a Fund offers an exchange privilege, as
described from time to time in a Fund's prospectus;

G. Issue and/or cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;

H. Prepare and transmit or credit payments for dividends and
distributions declared by the Funds;

I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);

J. Record the issuance of shares of the Funds and maintain, pursuant
to Rule 17ad-10(e), a record of the total number of shares of the
Funds which are authorized, issued and outstanding;

K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;

L. Mail shareholder reports and prospectuses to current
shareholders;

M. Prepare, mail to shareholders, and file U.S. Treasury Department
forms 1099 and other appropriate information returns required
with respect to dividends and distributions for all shareholders;

N. Provide shareholder account information upon request, and prepare
and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable transactions
as agreed upon with the Funds; and

O. Provide a Blue Sky System which will enable the Funds to monitor
the total number of shares sold in each state. In addition, the
Funds shall identify to the Agent in writing those transactions
and assets to be treated as exempt from the Blue Sky reporting to
the Funds for each state. The responsibility of the Agent for
the Funds' Blue Sky state registration status is solely limited
to the reporting of such transactions to the Funds.

P. Create and maintain records showing for each investor's account
the following:

A. Names, addresses, and tax identifying numbers;

2
<PAGE>

B. Number of shares held;

C. Historical information regarding the account of each
shareholder, including dividends paid and date and price for
all transactions;

D. Any stop or restraining order placed against the account;

E. Information with respect to withholdings in the case of a
foreign account;

F. Any dividend reinvestment order, plan application, dividend
address, and correspondence relating to the current
maintenance of the account;

G. Certificate numbers and denominations for any shareholder
holding certificates; and

H. Any information required in order for the Agent to perform
the calculations contemplated or required by this Agreement.

2. COMPENSATION

The Manager agrees to pay the Agent for performance of the duties listed in
this Agreement as may be agreed from time to time in writing and for reasonable
fees and out-of-pocket expenses including but not limited to the following:
printing, postage, forms, stationery, record retention, mailing, insertion,
programming, labels, shareholder lists and proxy expenses.

These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between Skyline and the Agent.

The Manager agrees to pay all fees and reimbursable expenses within thirty
(30) calendar days following the mailing of the billing notice.

3. REPRESENTATIONS OF AGENT

The Agent represents and warrants to Skyline that:

A. It is a trust company duly organized, existing and in good standing
under the laws of Wisconsin;

B. It is duly qualified to carry on its business in the state of
Wisconsin;

C. It is empowered under applicable laws and by its charter and bylaws to
enter into and perform this Agreement;

D. All requisite corporate proceedings have been taken to authorize it to
enter and perform this Agreement; and

3
<PAGE>

E. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.

4. REPRESENTATIONS OF SKYLINE

Skyline represents and warrants to the Agent that:

A. It is an open-end diversified investment company under the Investment
Company Act of 1940;

B. It is a business trust organized, existing, and in good standing under
the laws of Massachusetts;

C. It is empowered under applicable laws and by its Declaration of Trust
and bylaws to enter into and perform this Agreement;

D. All necessary proceedings required by the Declaration of Trust have
been taken to authorize it to enter into and perform this Agreement;
and

E. A registration statement under the Securities Act of 1933 is currently
effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect
to all shares of the Funds being offered for sale.

5. REPRESENTATIONS OF MANAGER

Manager represents and warrants to Skyline and the Agent that:

A. It is a limited partnership organized, existing, and in good standing
under the laws of Delaware;

B. It is empowered under applicable laws and by its Agreement of Limited
Partnership to enter into and perform this Agreement; and

C. All requisite action required by its Agreement of Limited Partnership
has been taken to authorize it to enter into and perform this
Agreement.

6. COVENANTS OF SKYLINE AND AGENT

Skyline shall furnish the Agent a certified copy of the resolution of the
Board of Trustees of Skyline authorizing the appointment of the Agent and the
execution of this Agreement. Skyline shall provide to the Agent a copy of its
Declaration of Trust, and bylaws, and all amendments thereto.

The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that

4
<PAGE>

all such records prepared or maintained by the Agent relating to the services to
be performed by the Agent hereunder are the property of Skyline and will be
preserved, maintained and made available in accordance with such section and
rules and will be surrendered to Skyline on and in accordance with their
request.

7. INDEMNIFICATION; REMEDIES UPON BREACH

The Agent agrees to use reasonable care and act in good faith in performing
its duties hereunder.

Provided that the Agent has used reasonable care and acted in good faith,
the Agent shall not be liable or responsible for delays or errors occurring by
reason of circumstances beyond its control, including acts of civil or military
authority, national or state emergencies, fire, mechanical or equipment failure,
flood or catastrophe, acts of God, insurrection or war. In the event of a
mechanical breakdown beyond its control, the Agent shall take all reasonable
steps to minimize service interruptions for any period that such interruption
continues beyond the Agent's control. The Agent will make every reasonable
effort to restore any lost or damaged data, and the correcting of any errors
resulting from such a breakdown will be at the Agent's expense. The Agent
agrees that it shall, at all times, have reasonable contingency plans with
appropriate parties, making reasonable provision for emergency use of electrical
data processing equipment to the extent appropriate equipment is available.
Representatives of Skyline or the Manager shall be entitled to inspect the
Agent's premises and operating capabilities at any time during regular business
hours of the Agent, upon reasonable notice to the Agent.

Skyline, on behalf of a Fund, will indemnify and hold the Agent harmless
against any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action
or suit not resulting from the Agent's bad faith or negligence, and arising out
of or in connection with the Agent's duties on behalf of that Fund hereunder,
including as a result of the Agent acting upon telephone instructions relating
to the exchange or redemption of shares received by the Agent and reasonably
believed by the Agent to have originated from the record owner of the subject
shares; or as a result of the Agent acting upon any instructions executed or
orally communicated by a person duly authorized by Skyline's Board of Trustees
to give such instructions to the Agent by Skyline, according to such lists of
authorized persons furnished to the Agent; or a result of acting in reliance
upon any genuine instrument or stock certificate signed, countersigned or
executed by any person or persons authorized to sign, countersign or execute the
same.

In order for this section to apply, it is understood that if in any case
Skyline may be asked to indemnify or hold harmless the Agent, Skyline shall be
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Agent will use reasonable care to notify Skyline
promptly concerning any situation which presents or appears likely to present a
claim for indemnification against Skyline. Skyline shall have the option to
defend the Agent against any claim which may be the subject of this
indemnification and, in the event that Skyline so elect, Skyline will so notify
the Agent, and thereupon Skyline shall take over complete defense of the claim
and the Agent shall sustain no further legal or other expenses

5
<PAGE>

in such situation for which the Agent shall seek indemnification under this
section. The Agent will in no case confess any claim or make any compromise in
any case in which Skyline will be asked to indemnify the Agent, except with
Skyline's prior written consent.

8. CONFIDENTIALITY

The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Funds and their
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by Skyline, on behalf of a Fund which
approval shall not be unreasonably withheld and may not be withheld where the
Agent may be exposed to civil or criminal contempt proceedings for failure to
comply after being requested to divulge such information by duly constituted
authorities.

9. WISCONSIN LAW TO APPLY

This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Wisconsin.

10. ADDITIONAL SERIES

11. AMENDMENT, ASSIGNMENT, TERMINATION AND NOTICE

A. This Agreement may be amended by the mutual written consent of the
parties.

B. This Agreement may be terminated upon ninety (90) day's written notice
given by one party to the other.

C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the
other party.

D. Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered,
or mailed to the principal place of business of the other party.

E. In the event that Skyline on behalf of a Fund gives to the Agent its
written intention to terminate and appoint a successor transfer agent,
the Agent agrees to cooperate in the transfer of its duties and
responsibilities to the successor, including any and all relevant
books, records and other data established or maintained by the Agent
under this Agreement.

6
<PAGE>

F. Should Skyline on behalf of a Fund exercise its right to terminate,
all out-of-pocket expenses associated with the movement of records and
material that are approved in writing in advance by Skyline or the
Manager will be paid by the Manager.

G. This Agreement supersedes and terminates, as of the close of business
on the date hereof, all prior agreements between Skyline and Agent
relating to transfer agency services and shareholder servicing.

12. DISCLAIMER OF LIABILITY

This agreement is executed on behalf of Skyline by its officers in their
capacities as officers and not individually. The obligations of Skyline under
this agreement are not binding upon Skyline's trustees, officers, or
shareholders individually but are binding only upon the assets and property of
Skyline, or of the Fund to which the services performed pursuant to this
agreement relate. Skyline's Declaration of Trust is on file with the Secretary
of the Commonwealth of Massachusetts.

7
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly authorized.

Executed in several counterparts, each of which is an original.

Attest: FIRSTAR TRUST COMPANY

By: By:
------------------------------ --------------------------

Title: Title:
--------------------------- -----------------------

Attest: SKYLINE ASSET MANAGEMENT, L.P.

By: By:
------------------------------ --------------------------

Title: Title:
--------------------------- -----------------------

Attest: SKYLINE FUNDS

By: By:
------------------------------ --------------------------

Title: Title:
--------------------------- -----------------------

8
<PAGE>

FIRSTAR TRUST COMPANY
MUTUAL FUND SERVICES

SHAREHOLDER ACCOUNTING SERVICES
SKYLINE SPECIAL EQUITIES PORTFOLIO,
SKYLINE SPECIAL EQUITIES II AND
SKYLINE CONTRARIAN EQUITIES
ANNUAL FEE SCHEDULE

Annual Fee Schedule

$13.00 per open shareholder account

$6.00 per closed shareholder account

Minimum annual fees of $6,000

$7.50 per Fed wire transfer (billed to investors)
Plus out-of-pocket expenses, including but not limited to:

Postage

Programming

Stationery, envelopes

Mailing

Proxies

Retention of records

Microfilm/fiche of records

Special reports

All other out-of-pocket expenses

ACH fees

Fees are billed monthly

<PAGE>

AMENDED AND RESTATED
FUND ACCOUNTING SERVICING AGREEMENT

This contract among Skyline Funds, a Massachusetts business trust ("Skyline"),
Skyline Asset Management, L.P., a Delaware limited partnership which acts as
investment adviser to Skyline ("Manager"), and Firstar Trust Company, a
Wisconsin corporation, (hereinafter called "FTC") is entered into on this 31st
day of August, 1995 and amended and restated on this ____ day of August, 1997.

WITNESSETH:

WHEREAS, Skyline is an open-end management investment company registered
under the Investment Company Act of 1940 and currently offering shares of
beneficial interest in series designated Skyline Special Equities Portfolio,
Skyline Special Equities II and Skyline Contrarian Equities (each a "Fund" and
together the "Funds"); and

WHEREAS, the Manager has entered into an Investment Advisory Agreement with
Skyline (the "Investment Advisory Agreement") for each Fund whereby Manager has
agreed to make certain payments and pay certain expenses on behalf of the Fund;

WHEREAS, FTC is in the business of providing, among other things, mutual
fund accounting services to investment companies;

NOW, THEREFORE, the parties do mutually promise and agree as follows:

1. SERVICES. FTC agrees to provide the following mutual fund accounting
services to each Fund:

A. Portfolio Accounting Services:

(1) Maintain portfolio records on a trade date +1 basis using
security trade information communicated from the Manager on a timely
basis.

(2) For each valuation date, obtain prices from a pricing source
approved by Skyline's Board of Trustees and apply those prices to the
portfolio positions. For those securities where market quotations are
not readily available, Skyline's Board of Trustees shall approve, in
good faith, the method for determining the fair value for such
securities.

(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments for the
accounting period.

(4) Determine gain/loss on sales of portfolio securities of each
Fund and identify them as to short-short, short- or long-term status;
account for periodic
<PAGE>

distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of each valuation
date.

B. Expense Accrual and Payment Services:

(1) For each valuation date, calculate the expense accrual
amounts as directed by the Funds as to methodology, rate or dollar
amount.

(2) Record payments for Fund expenses upon receipt of written
authorization from the Fund.

(3) Account for Fund expenditures and maintain expense accrual
balances at the level of accounting detail, as agreed upon by FTC and
the Fund.

(4) Provide expense accrual and payment reporting.

C. Fund Valuation and Financial Reporting Services:

(1) Account for Fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other Fund share activity as
reported by the transfer agent on a timely basis.

(2) Apply equalization accounting as directed by the Fund.

(3) Determine net investment income (earnings) for the Fund as
of each valuation date. Account for periodic distributions of
earnings to shareholders and maintain undistributed net investment
income balances as of each valuation date.

(4) Maintain a general ledger for the Fund in the form as agreed
upon.

(5) For each business day of the Fund (as set forth in the
prospectus and statement of additional information of Skyline
(together, the "prospectus")) relating to shares of that Fund as in
effect from time to time, determine the net asset value per share of
the Fund according to the accounting policies and procedures set forth
in the prospectus.

(6) Calculate per share net asset value, per share net earnings,
and other per share amounts reflective of Fund operation at such time
as required by the nature and characteristics of the Fund.

(7) Communicate, at an agreed upon time, the per share net asset
value for each valuation date to parties as agreed upon from time to
time.

(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.

2
<PAGE>

D. Tax Accounting Services:

(1) Maintain tax accounting records for the investment portfolio
of each Fund to support the tax reporting required for regulated
investment companies under the Internal Revenue Code of 1986, as
amended, and regulations thereunder.

(2) Maintain tax lot detail for the investment portfolio.

(3) Calculate taxable gain/loss on security sales using the tax
cost basis designated by the Fund.

(4) Provide the necessary financial information to support the
taxable components of income and capital gains distributions to the
transfer agent to support tax reporting to the shareholders.

E. Compliance Control Services:

(1) Support reporting to regulatory bodies and support financial
statement preparation by making Fund accounting records available to
Skyline, the Manager, the Securities and Exchange Commission, and
Skyline's outside auditors.

(2) Create and maintain accounting records in a manner and for
such time periods as are necessary to satisfy the obligations of the
Funds under the Investment Company Act of 1940 and regulations
provided thereunder including Section 31 thereof and rules 31a-1 and
31a-2 thereunder, and applicable federal and state tax laws.

2. CHANGES IN ACCOUNTING PROCEDURES. Any resolution passed by Skyline's
Board of Trustees that affects accounting practices and procedures under this
agreement shall be effective upon written receipt and acceptance by FTC.

3. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC. FTC reserves the right
to make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment, so long
as such changes do not adversely affect the service provided to the Funds under
this Agreement.

4. COMPENSATION. FTC shall be compensated by the Manager for providing
the services set forth in this Agreement in accordance with the Fee Schedule
attached hereto as Exhibit A and as mutually agreed upon and amended from time
to time.

5. PERFORMANCE OF SERVICE. FTC shall exercise reasonable care in the
performance of its duties under the Agreement. Skyline agrees to reimburse and
make FTC whole for any loss or damages (including reasonable fees and expenses
of legal counsel) to FTC arising out of or in connection with its actions under
this Agreement, including any act, omission to act, or delay by

3
<PAGE>

FTC in reliance on or in accordance with, any written or oral instruction FTC
receives from any duly authorized officer of Skyline, so long as FTC acts in
good faith and is not negligent or guilty of any willful misconduct.

Except as set forth below, FTC shall not be liable or responsible for
delays or errors occurring by reason of circumstances beyond its control,
including acts of civil or military authority, natural or state emergencies,
fire, mechanical breakdown, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or power supply.

In the event of a mechanical breakdown beyond its control, FTC shall
take all reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FTC's control. FTC will make every
reasonable effort to restore any lost or damaged data and the correcting of any
errors resulting from such a breakdown will be at the expense of FTC. FTC
agrees that it shall at all times have reasonable contingency plans with
appropriate parties, making reasonable provision for emergency use of electrical
data processing equipment to the extent appropriate equipment is available.
Representatives of Skyline and the Manager and their agents shall be entitled to
inspect FTC's premises and operating capabilities at any time during regular
business hours of FTC, upon reasonable notice to FTC.

Regardless of the above, FTC reserves the right to reprocess and
correct administrative errors at its own expense.

6. NO AGENCY RELATIONSHIP. Nothing herein contained shall be deemed to
authorize or empower FTC to act as agent for any other party to this Agreement,
or to conduct business in the name of, or for the account of, any other party to
this Agreement.

7. OWNERSHIP OF RECORDS. All records prepared or maintained by FTC on
behalf of the Funds remain the property of the Funds and will be surrendered
promptly on the written request of an authorized officer of the Funds.

8. CONFIDENTIALITY. FTC shall handle in confidence all information
relating to the Funds' business, which is received by FTC during the course of
rendering any service hereunder.

9. DATA NECESSARY TO PERFORM SERVICES. Skyline or its agent, which may
be the Manager or FTC, shall furnish to FTC the data necessary to perform the
services described herein at times and in such form as mutually agreed upon.

10. NOTIFICATION OF ERROR. Skyline will notify FTC of any balancing or
control error caused by FTC within three (3) business days after receipt of any
reports rendered by FTC to the Funds, or within three (3) business days after
discovery of any error or omission not covered in the balancing or control
procedure, or within three (3) business days of receiving notice from any
shareholder.

11. TERM OF AGREEMENT. This Agreement may be terminated by either party
upon giving ninety (90) days prior written notice to each party or such shorter
period as is mutually agreed upon by the parties. However, this Agreement may
be replaced or modified by a

4
<PAGE>

subsequent agreement between the parties. This Agreement supersedes and
terminates, as of the close of business on the date hereof, all prior agreements
between Skyline and FTC relating to Fund Accounting services.

12. DUTIES IN THE EVENT OF TERMINATION. In the event that in connection
with termination a successor to any of FTC's duties or responsibilities
hereunder is designated by Skyline by written notice to FTC, FTC will promptly,
upon such termination and at the expense of the Manager, transfer to such
Successor all relevant books, records, correspondence and other data established
or maintained by FTC under this Agreement in a form reasonably acceptable to
Skyline (if such form differs from the form in which FTC has maintained the same
in accordance with the terms of this Agreement, the Manager shall pay any
expenses associated with transferring the same to such form), and will cooperate
in the transfer of such duties and responsibilities, including provision for
assistance from FTC's personnel in the establishment of books, records and other
data by such successor.

13. CHOICE OF LAW. This Agreement shall be construed in accordance with
the laws of the State of Wisconsin.

14. ADDITIONAL SERIES. Skyline is authorized to issue separate classes of
shares of beneficial interest representing interests in separate investment
portfolios. The parties intend that each portfolio established by Skyline, now
or in the future, be covered by the terms and conditions of this Agreement. In
order for a future portfolio to be covered by this Agreement, Skyline shall give
notice to the Custodian of the designation of and the expected effective date of
such portfolio.

15. MISCELLANEOUS. This Agreement is executed on behalf of Skyline by its
officers in their capacities as officers and not individually. The obligations
of Skyline under this Agreement are not binding upon Skyline's trustees,
officer, or shareholders individually but are binding only upon the assets and
property of Skyline, or of the Fund to which the services performed pursuant to
this Agreement relate. Skyline's Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts.

5
<PAGE>

Executed in several counterparts, each of which is an original.

Attest: FIRSTAR TRUST COMPANY

By: By:
-------------------------- ---------------------------

Title: Title:
----------------------- ------------------------

Attest: SKYLINE ASSET MANAGEMENT, L.P.

By: By:
-------------------------- ---------------------------

Title: Title:
----------------------- ------------------------

Attest: SKYLINE FUNDS

By: By:
-------------------------- ---------------------------

Title: Title:
----------------------- ------------------------

6
<PAGE>

FUND VALUATION AND ACCOUNTING
ASSET PRICING COSTS

Charge per Item per Valuation
Asset Type (daily, weekly, etc.)
- ---------- ------------------------------

Domestic and Canadian Equities $0.15
Options $0.15
Corporate/Government/Agency Bonds $0.50
CMOs $0.80
International Equities and Bonds $0.50
Municipal Bonds $0.80
Money Market Instruments $0.80

PRICING COSTS ARE BILLED MONTHLY

<PAGE>

GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881

TELEPHONE (617) 376-1000
TELECOPIER (617) 323-1231

August 29, 1997

Skyline Funds
311 South Wacker Drive
Suite 4500
Chicago, IL 60606

Ladies and Gentlemen:

As special Massachusetts counsel to Skyline Funds (the "Trust"), a
Massachusetts business trust, we have been asked to render our opinion with
respect to the issuance of an indefinite number of shares of beneficial
interest of the Trust (the "Shares") representing interests in Skyline
Contrarian Equities, as more fully described in the Prospectus and Statement
of Additional Information contained in Post-Effective Amendment No. 23 (the
"Amendment") to the Trust's Registration Statement on Form N-1A (Securities
Act Registration No. 33-11755, Investment Company Act Registration No.
811-5022) filed with the Securities and Exchange Commission.

We have examined (i) the Agreement and Declaration of Trust of the Trust
dated February 4, 1987, as amended, (ii) the By-Laws of the Trust, (iii) a
certificate as of a recent date of the Secretary of State of The Commonwealth
of Massachusetts as to the good standing of the Trust and the authority of
the Trust to transact business in the Commonwealth, (iv) a resolutions
adopted at a meeting of the Trustees, (v) the Prospectus and Statement of
Additional Information contained in the Amendment, and (vi) such other
documents, records and certificates as we have deemed necessary for the
purposes of this opinion. As to matters of fact underlying the opinion
expressed herein, we have relied exclusively upon certificates of certain
public officials and officers of the Trust. We have assumed the authenticity
of all documents submitted to us as originals, the genuineness of all
signatures, the legal capacity of natural persons and the conformity to the
originals of all documents submitted to us as copies.

Based upon and subject to the foregoing, we are of the opinion that the
Shares, when sold in accordance with the terms of the Prospectus and
Statement of Additional Information in effect at the time of sale, will be
legally issued, fully paid and non-assessable by the Trust.

We hereby consent to the filing of this opinion as an exhibit to the
Amendment.

Very truly yours,

/s/ GOODWIN, PROCTER & HOAR LLP
GOODWIN, PROCTER & HOAR LLP

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "General
Information - Auditors" and to the incorporation by reference of our reports
with respect to Special Equities Portfolio and Special Equities II dated
January 20, 1997, in the Registration Statement of Skyline Funds on Form N-1A
filed with the Securities and Exchange Commission in this Post-Effective
Amendment No. 23 to the Registration Statement under the Securities Act of
1933 (Registration No. 33-11755) and in this Amendment No. 25 to the
Registration Statement under the Investment Company Act of 1940 (Registration
No. 811-5022).

/s/ Ernst & Young LLP

Chicago, Illinois
August 29, 1997

<PAGE>

SKYLINE FUND

SKYLINE IRA PLAN

[Photograph]

<PAGE>

- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN
- --------------------------------------------------------------------------------

You can purchase shares regularly by requesting electronic transfer of money
from your checking, NOW or savings account to your Skyline Funds account.
Investments will be made on the 5th, or 15th, or 25th of
the month, or the following business day.

GUIDELINES
- - Your bank must be a member of the Automated Clearing House (ACH).
- - If the transfer is from a checking account, THIS APPLICATION MUST BE
ACCOMPANIED BY A VOIDED CHECK.
- - If the transfer is from a savings account, THIS APPLICATION MUST BE
ACCOMPANIED BY A WITHDRAWAL SLIP including your financial institution's
nine digit routing number.
- - Please allow 15 business days prior to the next transaction.
- - Your Skyline Funds account must be established with a $1,000 minimum
balance before your first scheduled investment under the Plan goes into
effect.
- - The minimum monthly investment under the Plan is $50.
- - If an automatic purchase cannot be made due to insufficient funds or any
other reason, a $20 service fee will be assessed.
- - The Plan will be terminated upon redemption, including redemption by
exchange, of all shares.
- - Termination or changes MUST BE IN WRITING to Firstar Trust.

Regular investments made on / / 5th, or / / 15th, or / / 25th
of $
------------------------------------------
$50 MINIMUM

Please note the maximum annual contribution allowed for an individual IRA
is $2,000.

/ / Checking or NOW Account / / Savings Account

------------------------------------------------------------------------
CHECKING/NOW OR SAVINGS ACCOUNT NUMBER

------------------------------------------------------------------------
NAME(S) ON ACCOUNT

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NAME OF BANK (MUST BE A MEMBER OF AUTOMATED CLEARING HOUSE - ACH)

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BANK ADDRESS

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CITY/STATE/ZIP

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SIGNATURE OF JOINT OWNER OF ACCOUNT (IF ANY)

I (we) authorize you via the ACH Network to honor all debit entries initiated by
me (us) from time to time through Mellon Bank on behalf of Firstar Trust
Company. All such debits are subject to sufficient collected funds in my (our)
account to pay the debit when presented. I (we) agree that your treatment of
each entry, and your rights to respect it, shall be the same as if it were
signed personally by me (or either of us). I (we) further agree that if any
such entries are dishonored with good and sufficient cause, you shall be under
no liability whatsoever.

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SHAREHOLDER AUTHORIZATION
- --------------------------------------------------------------------------------

Under penalties of perjury, the undersigned hereby certifies (1) that the Social
Security Number given is correct and (2) that the account owner is not subject
to backup withholding because (a) the undersigned has not been notified of being
subject to backup withholding as a result of a failure to report all interest or
dividend, or (b) the IRS has provided notification that the account owner is no
longer subject to backup withholding. (Cross out (2) if it is not correct.)
The IRS does not require your consent to any provision of this document except
the certifications in this paragraph required to avoid backup withholding.

I certify that I am of legal age and have received and read the prospectus and
agree to its terms. In accordance with the terms and conditions set forth in
this form, the current prospectus I have received, and the instructions above,
please establish a shareholder account for me in accordance with the
instructions on this application. APPLICATIONS WHICH ARE NOT FULLY COMPLETED
MAY BE REJECTED. This application may be used to open a new IRAaccount or to
revise an existing account.

I understand that the Exchange Privilege will apply to my account unless I have
specifically declined the privilege. I understand that by signing this
application, unless the Privilege is declined, I agree that neither the Funds
nor their Transfer Agent, their agents, officers, trustees, or employees will be
liable for any loss, liability, cost or expense for acting on instructions given
under the Privilege, placing the risk of any loss on me. See "How to Redeem
Shares -- By Exchange" in the prospectus.

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/ / SELECT ONLY IF YOU ARE PARTICIPATING IN THE AUTOMATIC INVESTMENT
PLAN
I have read and understand the guidelines for the Skyline Funds
Automatic Investment Plan. I also understand that the Plan may be
terminated or modified at any time without notice by Skyline Funds or
Firstar Trust Company.
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SIGNATURE DATE

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DUPLICATE STATEMENT
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- ------------------------------------------ -----------------------------------
INVESTMENT ADVISOR# RR#

- ------------------------------------------ -----------------------------------
FIRM NAME ADVISOR NAME

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ADDRESS

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CITY/STATE/ZIP

( ) ( )
- ------------------------------------------ -----------------------------------
PHONE FAX

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AUTHORIZED SIGNATURE

Are you a broker dealer? Yes / / No / /
If yes, please provide broker dealer
name
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<PAGE>

Skyline
IRA

SKYLINE INDIVIDUAL RETIREMENT ACCOUNT PLAN
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TABLE OF CONTENTS
- -----------------

How to Open a Skyline IRA. . . . . . . . . . . . . . . . . . . . . . . . 3
Regular IRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SEP-IRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SIMPLE-IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Rollover IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Direct Rollover to a Skyline IRA from a qualified retirement plan. . . . 5
Transfer to a Skyline IRA from another IRA . . . . . . . . . . . . . . . 5
Investment of your IRA . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
When can an account be opened? . . . . . . . . . . . . . . . . . . . . . 6
Do I pay tax on dividends and distributions? . . . . . . . . . . . . . . 6
When may I make withdrawals? . . . . . . . . . . . . . . . . . . . . . . 6
What if I make a withdrawal before age 59 1/2? . . . . . . . . . . . . . 6
Minimum contribution . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Skyline Fund Individual Retirement Custodial Account . . . . . . . . . . 21

<PAGE>

GENERAL INFORMATION
ABOUT THE INDIVIDUAL RETIREMENT ACCOUNT PLAN
- --------------------------------------------------------------------------------

HOW TO OPEN A SKYLINE IRA

Return your signed Skyline IRA Application along with your check made payable to
the Portfolio in which you are investing. Mail to:

Attn: Skyline Fund
Mutual Fund Services
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-0701

If you and your spouse are each setting up an IRA, two separate account
applications will be required. Have your spouse fill out the extra application
and beneficiary form, and return both to Firstar Trust Company.

REGULAR IRA

Who qualifies? You qualify in any year when you have earnings from employment
or self-employment. You qualify even if you are also covered by a retirement
program of your employer or a Keogh plan. However, if you and/or your spouse
are active participants in such a plan, your deduction for your IRA contribution
may be reduced or eliminated depending on your income. See the disclosure
statement, section 2, DEDUCTIBLE CONTRIBUTIONS AND NONDEDUCTIBLE CONTRIBUTIONS.
You may contribute up to $2,000 or 100% of your earned income, whichever is
less. Alimony and separate maintenance payments are treated as earned income for
this purpose. You may not contribute to your regular IRA for any year if you are
over age 70 1/2 before the end of the year.

If your spouse has less than $2,000 in earned income and you file a joint
return, you may jointly contribute up to the lesser of $4,000 or 100% of your
combined earned income. The contribution may be divided between your IRA and
your spouse's IRA in any way you decide, so long as the portion allocated to
either one does not exceed $2,000. (If you are making a contribution for 1996,
the combined limit is the lesser of $2,250 or your earned income.)

SEP-IRA
Your employer may set up a simplified employee pension plan (SEP) and contribute
to your IRA and the IRA of each other eligible employee up to $30,000 or 15% of
compensation, whichever is less. The employer contribution must be based on a
written formula, which cannot

<PAGE>

discriminate in favor of officers, shareholders or self-employed or highly
compensated individuals.

You can have a Regular IRA, even if you have a SEP-IRA, too. See the disclosure
statement, section 1(c), SEP-IRA, for more details.

SIMPLE-IRA

Up until 1997, employers with up to 25 employees could allow eligible employees
to elect to have a portion of their pay withheld and contributed to a special
type of SEP-IRA called a "salary reduction SEP", or SAR-SEP. Beginning in 1997,
SAR-SEPs have been abolished, and a new type of IRA, called a SIMPLE-IRA, has
been established in their place for employers with up to 100 employees. In a
SIMPLE-IRA, you can elect to have up to $6,000 of your compensation in any year
withheld and deposited in an IRA, and your employer must generally make an
additional contribution to your account as well. SIMPLE-IRAs are otherwise very
similar to SEP-IRAs. See disclosure statement, section 1(d), SIMPLE-IRAs, for
more details.

The Skyline IRA Application Form cannot be used for a SIMPLE-IRA. Contact
Skyline for the necessary forms if you or your employer is interested in this
type of plan.

ROLLOVER IRA

If you receive a distribution from the qualified retirement plan of a former
employer, you may be eligible to roll over the distribution to an IRA free of
tax. You may under certain circumstances make a rollover again to the profit
sharing or pension plan of a new employer. If you want to have that right,
however, your rollover IRA derived from an employer's qualified plan must be
kept separate from any other IRA you may have. Qualified retirement plans are
required to withhold 20% of most distributions to you for payment of income
taxes unless your plan balance is transferred directly to an IRA or another
qualified plan. This means that a direct transfer may be preferable to a
rollover for moving your qualified plan balance to a Skyline IRA. See DIRECT
ROLLOVER TO A SKYLINE IRA FROM A QUALIFIED RETIREMENT PLAN.

You may also make a rollover to a Skyline IRA from another IRA. However, a
rollover of the same funds from one IRA to another may be made no more than once
during a 12-month period. An amount withdrawn from a SIMPLE-IRA during the first
two years of participation may only be rolled over into another SIMPLE-IRA.

Any rollover must be made within 60 days after receipt of the distribution from
your employer's qualified plan or your previous IRA. Otherwise, the distribution
will be subject to tax for the year you receive it. See disclosure statement,
section 1(b), ROLLOVER IRA.

<PAGE>

DIRECT ROLLOVER TO A SKYLINE IRA FROM A QUALIFIED RETIREMENT PLAN

You may directly roll over funds from your employer's qualified retirement plan
to a Skyline IRA. Retirement plans are required to roll over most types of
distributions directly to an IRA if the employee directs, and are also required
to withhold 20% of the distribution for taxes if a distribution is not
transferred directly to an IRA or another plan. Generally speaking, these rules
regarding direct transfers apply to any distribution that could be rolled over
into an IRA.

The procedure for making a direct transfer from a retirement plan into a Skyline
IRA is the same as the procedure for a direct transfer from another IRA.

TRANSFER TO A SKYLINE IRA FROM ANOTHER IRA

You may also transfer assets directly from another IRA to a Skyline IRA. The
12-month restriction on IRA rollovers does not apply to direct transfers. The
transfer must be direct from your existing IRA to a Skyline IRA without your
having physical contact with the assets transferred. To make a transfer:

1. Complete the Skyline IRA Application.

2. Complete the Transfer Form to instruct your present custodian or trustee to
transfer the assets of your present account to Firstar Trust Company as
successor custodian. Have your signature guaranteed if required by your
present custodian.

3. Send the completed transfer form, along with the Skyline IRA Application,
to Firstar Trust Company.

4. Firstar Trust Company and your present custodian or trustee will complete
the details of transferring your assets to your Skyline IRA.

INVESTMENT OF YOUR IRA

Contributions to your IRA are invested at your election in the Skyline Fund or
Portico Money Market Fund.

TAX BENEFITS

You may be able to deduct part or all of the yearly contributions to your IRA
from your gross income, depending on whether you and/or your spouse are active
participants in a retirement program of your employer or a Keogh plan and
depending on your income. See the disclosure statement, section 2, DEDUCTIBLE
CONTRIBUTIONS. You may claim such a deduction even if you do not itemize your
deductions. The Skyline IRA is in the form of IRS Form 5305-A, which is
automatically deemed acceptable by the Internal Revenue Service. The approval by
the IRS relates only to the form of the account and not to the merits of using
the account as a retirement plan.

<PAGE>

WHEN CAN AN ACCOUNT BE OPENED?

You can open your account and make a contribution for any year at any time up to
the due date of your federal income tax return for that year (excluding
extensions). Rollovers and direct transfers from other IRAs or retirement plans
can be made at any time during the year, so long as a rollover contribution is
made within 60 days after the distribution from the other IRA or retirement plan
is received by you. A distribution from a qualified plan may be subject to
income tax even if the distribution is rolled over to an IRA. See ROLLOVER IRA
AND DIRECT ROLLOVER TO A SKYLINE IRA FROM A QUALIFIED RETIREMENT PLAN.

DO I PAY TAX ON DIVIDENDS AND DISTRIBUTIONS?

No, all dividends and distributions accumulate tax-free. Tax is paid when you
(or your beneficiary) withdraw your retirement benefits. See the disclosure
statement, section 5, INCOME AND PENALTY TAXES.

WHEN MAY I MAKE WITHDRAWALS?

Withdrawals can start after age 59 1/2, and must start by April 1 after the end
of the year in which you (or your spouse, in the case of a spousal account)
reach age 70 1/2. Withdrawals can be made in a lump sum or in installments. The
Internal Revenue Code imposes complex limits on the length of time over which
withdrawals from an IRA can be made. See the disclosure statement, section 4,
DISTRIBUTIONS FROM YOUR IRA. Withdrawals are subject to tax as ordinary income,
except for any portion rolled over to another IRA or considered to be a return
of nondeductible contributions. See disclosure statement, section 5, INCOME AND
PENALTY TAXES.

WHAT IF I MAKE A WITHDRAWAL BEFORE AGE 59 1/2?

A withdrawal can be made without penalty before age 59 1/2 only in case of
death or permanent disability, in the case of certain periodic payments, or to
pay certain medical expenses (including medical insurance premiums if you are
unemployed). Otherwise, a withdrawal before age 59 1/2 is a premature
withdrawal and is subject to a penalty tax of 10% of the portion that is
included in your income, in addition to the regular income tax. But neither the
regular income tax nor the 10% penalty tax applies to any portion rolled over to
another IRA or considered as a return of your nondeductible contributions. If
you make a withdrawal from a SIMPLE-IRA during the first two years of your
participation, the penalty tax is 25% instead of 10%.
-------------------

MINIMUM CONTRIBUTION

The initial contribution must be at least $1,000. Subsequent contributions must
be at least $100. However, you

<PAGE>

are not required to make a contribution every year.
- -------------------------------

The Skyline IRA Plan is sponsored by Skyline Fund. This brief outline of the
Plan is not intended as a full explanation of the Individual Retirement Plan,
but we hope that we have answered some of your questions.

WE URGE YOU TO READ THE ATTACHED MATERIAL THOROUGHLY.

IF YOU WOULD LIKE TO KNOW MORE ABOUT THE FUNDS ADVISED BY SKYLINE, PLEASE CALL
US AT 1-800-458-5222.

<PAGE>

DISCLOSURE STATEMENT

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This disclosure statement is being given to you to assure that you are
informed and understand the nature of an Individual Retirement Account ("IRA").
This disclosure statement explains the rules governing IRAs.

YOUR RIGHT TO REVOKE THIS IRA. You may revoke this IRA at any time within
seven days after the later of the date you received this disclosure statement or
the day you established this IRA. For purposes of revocation, it will be assumed
that you received the disclosure statement no later than the date of your check
or transfer direction with which you opened your IRA. To revoke the IRA, you
must either mail or deliver a notice of revocation to the following address:

Attn: Skyline Fund
Mutual Fund Services
Firstar Trust Company
615 E. Michigan Ave.
Milwaukee, Wisconsin 53202

If a notice of revocation is mailed, it will be deemed mailed on the date
of the postmark (or if sent by certified or registered mail, the date of
certification or registration) if it is deposited in the mail in the United
States, first class postage prepaid and properly addressed. If you revoke your
IRA, you are entitled to a return of the entire amount contributed.

(1) TYPES OF INDIVIDUAL RETIREMENT ACCOUNTS; ELIGIBILITY

IN GENERAL. There are several types of IRAs. For example, there is a
"Regular IRA" to which you may make contributions for yourself or for your
spouse. There is a "Rollover IRA" which you can set up to receive assets from a
qualified plan, annuity or another IRA. There is a SEP-IRA (which is also known
as a Simplified Employee Pension Plan) which your employer can establish for
you. Finally, effective January 1, 1997, there is a SIMPLE-IRA (also known as a
Salary Incentive Match Plan IRA) which an employer can use for a salary
reduction plan. Following is a general description of the rules which apply to
each of these types of IRAs and who is eligible to establish them.

(a) REGULAR IRA. You may contribute up to the lesser of $2,000 or 100% of
your compensation if you have not reached age 70 1/2 during the taxable year.
You may make this contribution even if you or your spouse is an active
participant in a qualified employer plan. However, as explained below, the
amount of the contribution which you may deduct may be limited. Compensation
includes wages, salary, commissions, bonuses, tips, etc. but does not include
income from interest, dividends or other earnings or profits

<PAGE>

from property, or amounts not includable in your gross income.

If your spouse's compensation in a year is less than $2,000, your spouse
may still be able to make a contribution to an IRA if you file a joint income
tax return for the year. Under such an arrangement, you and your spouse may
qualify for a total contribution equal to the lesser of $4,000 (beginning in
1997) or 100% of your combined compensation for the taxable year. You may choose
to determine how to divide the contribution between the two accounts but you
cannot contribute more than $2,000 annually into either one. While you cannot
contribute to your IRA in the taxable year in which you reach 70 1/2, you can
still contribute to your spouse's IRA if he or she has not reached 70 1/2. A
spousal IRA does not involve the creation of a joint account. The account of
each spouse is separately owned and treated independently from the account of
the other spouse.

For years prior to 1997, the maximum combined contribution to your IRA and
your spouse's IRA is $2,250, and a spousal IRA can be established only if your
spouse either had no earned income for the year, or elects to be treated as
having no earned income for this purpose. Your spouse's election for years prior
to 1997 is made by claiming a spousal IRA deduction on your tax return.

(b) ROLLOVER IRA. All or a portion of certain distributions from qualified
retirement plans, annuities and other IRAs may be "rolled over" tax-free without
regard to the limits on annual contributions to a Regular IRA, but no deduction
is allowed with respect to such a contribution. There are three basic types of
rollovers: rollovers from a qualified pension or profit-sharing plan, rollovers
from another IRA, and rollovers from a tax-sheltered annuity. ALL DISTRIBUTIONS
MUST BE ROLLED OVER WITHIN 60 DAYS AFTER YOU RECEIVE THE DISTRIBUTION TO RECEIVE
TAX-FREE TREATMENT.

FROM A QUALIFIED PLAN. In general, you may roll over any portion of a
distribution that you receive from a qualified employer-sponsored pension or
profit-sharing plan (including a 401(k) plan), except that you cannot roll over
(1) one of a series of substantially equal periodic payments (such as an
annuity), (2) a minimum distribution required to be made after you reach the age
of 70 1/2, or (3) the portion of a distribution that represents the return of
your own after-tax contributions. If you receive a distribution of property
rather than cash, you can sell the property and roll over the sale proceeds, as
long as you complete the rollover within 60 days from the original date of
distribution.

If you make a rollover from a qualified employer plan to an IRA, you may in
turn, under certain circumstances, make a rollover from the IRA into the
qualified plan of a subsequent employer. To preserve that right, however, you
must keep the rollover IRA separate from any other IRA you may have, since you
cannot make a rollover to an employer plan from an IRA to which you have made
yearly contributions.

<PAGE>

Instead of receiving a distribution from a qualified plan and rolling it
over, you may also direct the trustee or custodian of any qualified retirement
plan to transfer a distribution from the plan directly to an IRA. If a
distribution from a plan can be rolled over, the plan is required by law to
transfer the distribution directly to an IRA, or another employer's plan, if you
so direct. If you do not direct the distribution to be transferred directly to
an IRA or another plan, the plan making the distribution will be required to
withhold 20% of the distribution for the payment of income taxes, even if you
subsequently roll over the distribution.

Rollover amounts you receive from a qualified employer plan may not be
deposited in your spouse's IRA, but if you should die while still a participant
in a qualified plan, in certain cases your spouse may be allowed to make a
tax-free rollover to an IRA. The amount of the death payout rolled over by a
spouse into an IRA may not subsequently be rolled over into another employer's
qualified plan or annuity. Beneficiaries other than your spouse are not allowed
to roll over distributions they receive after your death.

FROM ANOTHER IRA. In general, any distribution or withdrawal that you
receive from an IRA can be rolled over into another IRA within 60 days, except
that (1) you cannot roll over the minimum distributions you are required to
receive after age 70 1/2, (2) you can only make a rollover from one IRA to
another once in any twelve-month period, and (3) a distribution from a
SIMPLE-IRA that is made within the first two years after you first begin to
participate in the SIMPLE-IRA can only be rolled over to another SIMPLE-IRA. You
may also request the trustee or custodian of an IRA to make a direct transfer to
the trustee or custodian of another IRA. Such direct transfers are not limited
to one in a twelve month period. Unlike the trustees of qualified retirement
plans, trustees of IRAs are not legally required to make direct transfers, but
most of them do. Your spouse may generally roll over distributions that he or
she receives from your IRA after your death, but no beneficiaries other than
your spouse may do so.

TAX SHELTERED ANNUITIES. Tax-sheltered annuity plans, sometimes called
"403(b) plans", are a retirement benefit offered by certain governmental and
not-for-profit employers, such as schools and hospitals. If you receive a
distribution from a tax sheltered annuity plan other than in the form of an
annuity, it may generally be rolled over to an IRA under rules similar to those
that apply to distributions from qualified employer plans, as described above.
As with a rollover distribution from an employer plan, you should keep a
rollover from a tax sheltered annuity plan in a separate IRA account and not
make any other contributions to it (including rollovers from other types of
plans) if you wish to preserve the right to roll over to another tax sheltered
annuity plan in the future. Distributions from other types of governmental
retirement plans may or may not be eligible for a rollover depending on whether
the

<PAGE>

employer has chosen to comply with IRS guidelines. Distributions from voluntary
deferred compensation plans maintained by government and not-for-profit
employers, sometimes known as "Section 457 plans", are NOT eligible for a
rollover to an IRA.

Strict requirements must be met to qualify for tax-free rollover treatment.
You should consult your personal tax advisor in connection with rollovers to and
from your IRA.

(c) SIMPLIFIED EMPLOYEE PENSION PLAN (SEP-IRA). An employer may adopt a
SEP-IRA and contribute to your SEP-IRA even if you are covered by another
retirement plan. The Code permits an employer to contribute to your SEP-IRA up
to 15% of your compensation (computed without regard to the contribution) or
$30,000 (or such other amount as may be prescribed by the Secretary of the
Treasury), whichever is less. The contributions are deductible by the employer
and are generally not includable in your income until you receive distributions.
Employer contributions must be made under a written allocation formula which
cannot discriminate in favor of so-called "highly compensated employees" (as
defined in the Code). Employer contributions are considered discriminatory
unless they bear a uniform relationship to the first $160,000 of each
participant's compensation.

An employer must cover each employee who has attained age 21 and has
performed service for the employer during at least three of the immediately
preceding five calendar years, but employees who earn less than $300 in the year
in question, employees covered by certain collective bargaining agreements and
certain nonresident aliens may be excluded. "Leased employees" (i.e., those
individuals who are not the employer's employees, who are hired through a
"leasing organization", are under the primary direction or control of the
employer, and who provide services on a substantially full-time basis for more
than a year) must be treated as regular employees for the purposes of making
SEP-IRA contributions, unless the leasing organization provides prescribed
minimum pension benefits to the leased employees. Any SEP-IRA contribution made
by the leasing organization attributable to services performed for the employer
may be used to reduce the employer's contribution to a leased employee's
SEP-IRA.

Generally, if the employer does not maintain an integrated plan at any time
during the taxable year, Old Age and Survivor Disability Insurance ("OASDI")
contributions may be taken into account as contributions by the employer to the
employee's SEP-IRA but only if such OASDI contributions are taken into account
with respect to each employee maintaining a SEP-IRA. If the SEP-IRA is part of a
top-heavy plan as defined in the Code, the employer must make a minimum
contribution to each non-key employee's SEP-IRA for each year that the plan is
top-heavy. Generally, a plan is top-heavy if the aggregate of the accounts of
key employees as defined in Code Section 416 (i.e., certain

<PAGE>

officers, owners and highly compensated individuals) exceeds 60% of the
aggregate of the accounts of all employees. If the employer maintains more than
one plan, such plans may, or under certain circumstances must, be aggregated for
purposes of determining whether the SEP-IRA is top-heavy. Generally, the minimum
contribution required to be made to the SEP-IRA of each non-key employee in a
top-heavy year is 3% of the employee's compensation.

(d) SIMPLE-IRA. Up until 1997, employers with up to 25 eligible employees
could allow employees to elect to have a portion of their pay withheld and
contributed to a special type of SEP-IRA, called a "salary reduction SEP", or
SAR-SEP. Beginning in 1997, SAR-SEPs have been abolished, and a new type of IRA,
called a SIMPLE-IRA, has been established instead. Although new SAR-SEPs cannot
be established after 1996, SAR-SEPs that were in existence on December 31, 1996,
can remain in existence and continue to receive contributions in future years,
including contributions for new employees. Beginning in 1997, employers with up
to 100 eligible employees can establish SIMPLE-IRAs. In a SIMPLE-IRA, you can
elect to have up to $6,000 of your compensation in any year withheld and
deposited in an IRA, and your employer must generally make an additional
contribution to match the amount that you have withheld, up to a maximum of 3%
of your compensation. The employer may elect to lower the maximum matching
contribution to as low as 1% in some years, but may not lower the maximum match
in more than two years out of every five. The employer may also elect to make a
contribution equal to 2% of compensation for all eligible employees in any year
instead of making matching contributions. All employees who have been paid at
least $5,000 in two prior years and expect to be paid $5,000 in the current year
must be eligible to participate (excluding nonresident aliens and union workers
whose collective bargaining agreement does not provide for them to participate).
SIMPLE-IRAs are otherwise very similar to SEP-IRAs.

Although SEP-IRAs and SIMPLE-IRAs are primarily intended to be adopted by
employers for the benefit of their employees, these types of IRAs can also be
established by a self-employed person for his own benefit, which may enable him
to make a larger deductible contribution than would be permitted using a Regular
IRA. The rules governing SEP-IRAs and SIMPLE-IRAs are complex. We suggest that
you discuss them with your tax advisor.

You may contribute to a Regular IRA even if you participate in a SEP-IRA or
SIMPLE-IRA (although the deductibility of your contribution may be limited as
described below). Except as otherwise noted, your SEP-IRA or SIMPLE-IRA
generally is subject to the rules governing a Regular IRA. Your rights to
withdraw amounts held in a SEP-IRA or SIMPLE-IRA cannot be restricted by your
employer.

<PAGE>

(2) CONTRIBUTIONS

IN GENERAL. As explained in this part, the amount of your IRA contributions
which you can deduct is subject to limits. All contributions and transfers to
your Skyline IRA must be in cash, except that a rollover contribution may be
made either in cash or in shares of Skyline Fund. Contributions to your or your
spouse's Regular IRA may be made up to the due date for filing your tax return
for the taxable year (excluding extensions thereof) even if you file before the
due date. In making contributions, you must indicate the tax year to which the
contribution applies. If no tax year is designated, the Custodian will assume
that the contribution is intended to apply to the calendar year in which it is
received. The time limit for designating the applicable tax year is April 15.

Contributions made by an employer to your SEP-IRA or SIMPLE-IRA for a
calendar year may be made no later than the due date of your employer's tax
return (including extensions). In making a SEP-IRA or SIMPLE-IRA contribution,
the tax year to which the contribution relates must also be specified or it will
be deemed to relate to the calendar year in which it is received. In a SEP-IRA
or SIMPLE-IRA, this designation of the tax year of a contribution must be made
by the due date for contributions described above.

DEDUCTIBLE CONTRIBUTIONS. If you are single and are not an "active
participant" in a retirement plan maintained by your employer, you can deduct
the full amount of your IRA contribution up to the lesser of $2,000 or 100% of
your compensation for the year. If you are married, you can deduct the full
amount of your IRA contribution so long as neither you nor your spouse is an
"active participant" in a retirement plan maintained by your respective
employers. These plans include qualified pension, profit-sharing, stock bonus or
money purchase plans, 401(k) plans, SEP-IRAs, SIMPLE-IRAs, qualified annuity
plans, tax-sheltered annuities and custodial accounts (403(b) plans), and
pension or retirement plans of governmental agencies (but not voluntary deferred
compensation plans known as "Section 457 plans"). In general, you are considered
to be an active participant in a plan if an employer contribution or forfeiture
was credited to your account during the year in the case of a defined
contribution plan or, in the case of a defined benefit plan, you are eligible to
participate even if you choose not to. You are considered to be an active
participant in a plan if you make a contribution to the plan during a year even
if your employer does not. For active participation, it does not matter whether
any interest you have in a plan is vested or unvested.

If you or your spouse is an active participant in a plan, the amount of the
deduction you can claim for an IRA contribution is reduced or totally denied
depending upon the amount by which your adjusted gross income for the year
exceeds the "applicable dollar amount." The applicable dollar amount is $25,000
for single people and $40,000 for married individuals filing a joint tax return.
If you are married but are filing separate tax returns, your applicable dollar
amount is $0.

<PAGE>

If your adjusted gross income exceeds your applicable dollar amount by more
than $10,000, you may not deduct any portion of your IRA contribution. However,
if it is between $0 and $10,000 more than your applicable dollar amount, you can
claim a tax deduction for your contribution. To determine the amount of the
deduction, follow these steps. First, determine the amount of the contribution
you can make. If, for example, you have compensation in excess of $2,000 you
could make a $2,000 contribution to your Regular IRA. Next, subtract the
applicable dollar amount from your adjusted gross income. If you are single and
your adjusted gross income is $30,000, the difference would be $5,000. Next,
divide this difference by $10,000. In the example $5,000/ $10,000 equals
one-half. Accordingly, you may deduct one-half of your contribution. If the
deduction limitation is not a multiple of $10, round the deduction to the next
$10. If your adjusted gross income does not exceed $35,000 and you are single or
$50,000 and you are married, you can deduct $200 regardless of how the
computation comes out.

Married persons who file separate returns are treated as unmarried for
purposes of these rules if they did not live together at any time during the
year.

NONDEDUCTIBLE CONTRIBUTIONS. Even though you may not be entitled to claim a
deduction for contributions to your IRA, you are still allowed to make the
contributions to the extent described in "Types of IRAs" above. To the extent
that the amount of your contribution exceeds the deduction limit, it is
considered a nondeductible contribution. Earnings on these contributions are not
taxed until distributed, just like the earnings on deductible contributions. It
may therefore be worthwhile to make nondeductible contributions.

You are required to report the amount of your nondeductible contributions
on Form 8606 and attach it to your income tax return. If you overstate this
amount, you may be liable for a tax penalty of $100 per overstatement.

(3) INVESTMENT AND HOLDING OF CONTRIBUTIONS

Contributions to your IRA, and the earnings thereon, are invested in shares
of one or more of the Portfolios of Skyline Fund, or Portico Money Market Fund.
You may invest in any of those funds only if, at the time of your investment,
shares are being offered for sale to investors in your state.

The assets in your account are held in a custodial account exclusively for
your benefit and the benefit of such beneficiaries as you may designate in
writing delivered to the Custodian. The balance in your IRA represents a
separate account which is clearly identified as your property and generally may
not be combined for investment with the property of another individual. Your
right to the entire balance in your account is nonforfeitable. No part of the
assets of your account may be invested in life insurance contracts or in
collectibles such as works of art, antiques, coins, stamps, etc.

<PAGE>

(4) DISTRIBUTIONS FROM YOUR IRA

DISTRIBUTION DURING YOUR LIFE. The law permits distributions to be made
from an IRA at any time after you attain age 59 1/2 without penalty, and
requires that distributions commence no later than April 1 following the
calendar year in which you attain age 70 1/2. Distributions may be in the form
of a single payment or, in accordance with regulations, in substantially equal
monthly, quarterly or annual payments over your life or the joint lives of you
and your designated beneficiary, or over a period certain not extending beyond
your life expectancy or the joint and last survivor life expectancy of you and
your designated beneficiary. However, if your beneficiary is not your spouse,
the law imposes an additional requirement called the minimum distribution
incidental benefit requirement. In general, this requirement puts a further
limit on the maximum payout period. This further limit is based on a table in
the income tax regulations, and if this limit applies to you, you should consult
your tax advisor to determine your minimum distribution.

If you direct distributions over your life or the joint lives of you and
your designated beneficiary, the Custodian will, at your request, transfer your
IRA balance to purchase an immediate annuity contract from an insurance company
you choose and your payments will be made under the annuity. You must make all
arrangements with and provide a completed annuity application to the Custodian
from the insurance company of your choosing.

Any distribution instruction must specify the reason for the distribution.
Examples of such reasons are: premature distributions (i.e., distributions
before age 59 1/2), rollovers, disability, death, normal (59 1/2 or over),
excess contribution returns and other.

DISTRIBUTIONS AFTER YOUR DEATH. If you die after the April 1 after you
reach age 70 1/2, but before the entire amount of your IRA has been distributed
to you, the balance of your IRA must be distributed to your designated
beneficiary at least as rapidly as under the method of distribution in effect
before your death.

If you die before April 1 following the year in which you
reach age 70 1/2, the entire balance of the account must be distributed by
December 31 of the year in which the fifth anniversary of your death occurs.
However, distribution need not be made within this five-year period if your
beneficiary receives payments over a period measured by his or her life or life
expectancy beginning no later than December 31 of the year following the year in
which you die. If the beneficiary is your spouse, those installment payments
don't have to begin until the later of December 31 of the year following the
year in which you die or December 31 of the year in which you would have reached
age 70 1/2. In addition, a distribution need not be made within five years of
your death if your spouse is your beneficiary and he or she elects to treat the
entire interest in the IRA (or the remaining part of such interest if
distribution has already begun) as his or her

<PAGE>

own IRA subject to the regular IRA distribution requirements. In such a case,
your spouse will be considered to be the covered individual under the IRA. If
you die before the entire IRA has been distributed to you and your spouse is not
your beneficiary, no additional cash contributions or rollover contributions may
be accepted by the IRA.

If distributions are made from your IRA to your surviving spouse (or to a
trust of which your surviving spouse is the income beneficiary), the amount
which your surviving spouse or the trust is entitled to receive in each year
must be at least equal to the income of your IRA (or of the portion of your IRA
which benefits your surviving spouse or the trust) for that year.

CALCULATIONS OF LIFE EXPECTANCY. As discussed above, the minimum amount
that you or your beneficiary must withdraw from your IRA is in many cases
determined by your life expectancy or your beneficiary's life expectancy. In
general, life expectancies are determined based on actuarial tables issued by
the IRS for each year in which you or your beneficiary is required to receive a
minimum distribution. If you die before reaching age 70 1/2 and your
beneficiary is your surviving spouse, your spouse will also generally
recalculate his or her life expectancy for each year in which a minimum
distribution is required. Since life expectancies go up as people get older,
recalculating your or your spouse's life expectancy each year will ordinarily
result in a lower required annual distribution. However, it can also result in
an acceleration of the amount that must be distributed, and the tax that must be
paid, when you or you and your primary beneficiary die. To avoid this, you (or
your surviving spouse) may elect instead to calculate your life expectancy at
the time that you are required to begin receiving mandatory distributions. This
election must be made before the date on which mandatory distributions must
begin, and can't be changed after that date. Accordingly, it is very important
that you consult a qualified tax advisor before you are required to begin
receiving distributions.

(5) INCOME AND PENALTY TAXES

INCOME TAX TREATMENT. Income tax on deductible IRA contributions and
earnings on both deductible and nondeductible IRA contributions is generally
deferred until you receive distributions. If you have made both deductible and
nondeductible contributions to IRAs you maintain, a portion of each distribution
you receive from any IRA (whether or not it is the one to which you made
nondeductible contributions) will be considered to be a return of nondeductible
contributions and therefore not included in your income for tax purposes. The
balance of each distribution will be taxed as ordinary income regardless of its
original source. The amount of any distribution which is considered to be a
return of nondeductible contributions (and therefore not taxed) is determined by
multiplying the amount of the distribution by a fraction. The numerator of the
fraction is the aggregate amount of nondeductible contributions you have made to
all of your IRAs over the years and the denominator is the balance in all your

<PAGE>

IRAs at the end of the year (after adding back any distributions you received
during the year). The aggregate amount which can be excluded from income for all
years cannot exceed the amount of nondeductible contributions that you made in
those years.

Taxable distributions from your account are taxed as ordinary income
regardless of their original source. They are not eligible for special tax
treatment that may apply to lump sum distributions from qualified employer
plans.

PENALTY TAX FOR PREMATURE DISTRIBUTIONS. Your IRA is intended to provide
income for you upon retirement. Accordingly, the law generally imposes a penalty
on premature distributions. If you receive a taxable distribution from the IRA
before reaching age 59 1/2 and do not roll it over, a nondeductible 10% penalty
will be imposed on the portion of the distribution which is included in your
gross income. (IF YOU WITHDRAW FUNDS FROM A SIMPLE-IRA WITHIN THE FIRST TWO
YEARS AFTER YOU BEGIN TO PARTICIPATE, THE PENALTY IS 25% RATHER THAN 10%.) This
penalty is in addition to any income tax you must pay on the distribution
itself. The penalty does not apply to the extent that the distribution is
considered a return of nondeductible contributions or a return of an excess
contribution which is permitted tax-free (see below). The penalty also will not
apply if the distribution is made due to your permanent disability or death or
if the distribution is one of a series of substantially equal periodic payments
made over your life (or life expectancy) or over the joint lives (or life
expectancies) of you and your beneficiary. Beginning in 1997, the penalty does
not apply to certain withdrawals used to pay medical insurance premiums after
you have been unemployed for at least 12 weeks, or certain larger medical bills.

PENALTY TAX FOR EXCESS CONTRIBUTIONS. Contributions to an IRA above the
permissible limits are nondeductible and are subject to an annual nondeductible
excise tax of 6% of the amount of such excess contributions for each year that
the excess is not withdrawn or eliminated. The tax is paid by the person to whom
a deduction is allowed or in the case of a Rollover IRA, by the person for whose
benefit it is established. If the person who contributed the excess takes no
deduction for it and withdraws the excess amount plus the net earnings
attributable to such excess on or before the due date (including extensions) for
filing the Federal income tax return for the year for which the contribution was
made, the 6% excise tax will not be applied, but the 10% tax on premature
distributions will be applied to the amount of net earnings. Generally, if the
excess is withdrawn after the due date (including extensions) for filing the tax
return for the year for which the contribution was made, not only will the
excess contribution be subject to the 6% excise tax, but the amount of such
excess and the net income attributable to it will also be includable in income;
and if you have not attained the age of 59 1/2, or are not disabled, you will
also be subject to the previously mentioned 10% penalty tax on premature
distributions. The law provides, however, that if an individual has made a
contribution to an IRA for a

<PAGE>

year which does not exceed $2,000 (excluding rollover amounts), all or part of
which is an excess contribution for which he did not claim a deduction, and he
does not correct the excess contribution before the due date (including
extensions) for filing his tax return for the year, he nevertheless may withdraw
the excess amount contributed (without the net income attributable thereto) at
any time without incurring the 10% penalty tax on premature distributions or
being required to include the amount withdrawn in income. The 6% excise tax will
be imposed even in this special situation for the year of the excess
contribution and each subsequent year until the excess is withdrawn or
eliminated.

The rules discussed above generally apply to SEP-IRAs and SIMPLE-IRAs as
well. The law also allows you to withdraw tax-free and without penalty an excess
contribution, regardless of the amount, made with respect to a rollover
contribution (including an attempted rollover contribution), if the excess
contribution occurred because you reasonably relied on erroneous information
required to be supplied by the plan, trust or institution making the
distribution that was the subject of the rollover.

As an alternative to withdrawing excess contributions made to an IRA, such
amounts may be eliminated by making reduced contributions; however, you will be
required to pay the 6% excise tax on the amount of the excess for the year of
the contribution and for each subsequent year until the amount of the excess is
deducted in a later year for which you have not contributed the maximum
deductible amount. If a contribution is made to your account in an amount less
than the permissible limit in order to correct an excess contribution for a
previous year for which you did not claim a deduction, you may under certain
circumstances, taking into account the limits on contributions, be allowed to
treat the amount of the reduction in the current year's contribution as an
additional contribution for the current taxable year.

PENALTY TAX FOR UNDER-DISTRIBUTION. If after April 1 following the year in
which you attain age 70 1/2, the amount distributed is less than the minimum
amount required by law to be distributed, a 50% excise tax may be imposed on any
such deficiency. The minimum amount required by law to be distributed is
generally based on your life expectancy or the joint and survivor life
expectancy of you and your beneficiary. However, if your beneficiary is not your
spouse, the law imposes an additional requirement which is called the minimum
distribution incidental benefit requirement. In general, this requirement is
designed to prevent you from naming a beneficiary who is much younger than
yourself in order to extend your payout period. You should consult your tax
advisor to determine your maximum distribution.

The Internal Revenue Service may waive the penalty tax for
under-distribution if the deficiency was due to reasonable error and reasonable
steps are being taken to correct the deficiency.

<PAGE>

PENALTY TAX FOR EXCESS DISTRIBUTIONS AND ACCUMULATIONS. A 15% penalty tax
is generally imposed on annual distributions from retirement arrangements
(including IRAs) to the extent that such distributions in a year are
considered "excess distributions." A distribution is an "excess
distribution" if it exceeds $160,000 (or such higher amount as may be
specified by the IRS) during any calendar year. In addition, upon your death,
your estate may be subject to a tax of 15% of the excess of the balance in
all such retirement arrangements over an amount equal to the present value of
an annuity of $160,000 per year. The tax on excess distributions (but not the
additional estate tax on excess accumulations) has been suspended for
distributions received during 1997, 1998 and 1999. You should discuss how
these rules apply to you with your tax advisor.

PROHIBITED TRANSACTIONS AND PLEDGING ACCOUNT ASSETS. If during any taxable
year you engage in a so-called "prohibited transaction" with respect to your
IRA, the account will lose its tax-exempt status. In this event, the fair market
value of all account assets, valued as of the first day of such taxable year,
will be deemed distributed to you and includable in your gross income. These
prohibited transactions would include borrowing money from your account. If you
pledge your account or any portion thereof as security for a loan, such pledged
portion will be deemed distributed to you and, to the extent that it does not
represent a return of nondeductible contributions, includable in your gross
income. If you have not yet attained age 59 1/2, the 10% or 25% penalty tax on
premature distributions discussed above will also apply. If your spouse engages
in a prohibited transaction with respect to his or her account, the results will
be the same.

(6) MISCELLANEOUS

FEDERAL INCOME TAX WITHHOLDING. Distributions from an IRA to the covered
individual or to a beneficiary are subject to Federal income tax withholding
unless the covered individual or beneficiary elects to have no withholding
apply. The current withholding rate required by the Internal Revenue Code is
10%. Additional information concerning withholding and election forms will be
available no later than at the time a distribution is requested.

FEDERAL ESTATE AND GIFT TAXES. Generally, your IRA will be included in your
estate for Federal estate tax purposes. If your spouse is your beneficiary, your
IRA may qualify for a deduction for purposes of that tax. An election under an
IRA to have a distribution payable to a beneficiary on the death of the covered
individual will not be treated as a gift subject to Federal gift tax.

REPORTS TO THE INTERNAL REVENUE SERVICE. You are not required to file Form
5329 with the IRS unless you owe one of the IRA penalty taxes. These are the
taxes on excess contributions, premature distributions, prohibited transactions
and under distributions after age 70 1/2.

<PAGE>

FINANCIAL INFORMATION. The growth in value of the mutual fund shares held
in your account can neither be guaranteed nor projected.

PLAN SPONSOR. Skyline Fund is the sponsor of Skyline IRA and performs most
of the administrative functions in connection with the maintenance of the
accounts established under Skyline IRA.

CUSTODIAN FEES. Firstar Trust Company as the Custodian of your IRA
currently charges an annual maintenance fee per account, per fund in which you
have an investment. You should refer to the enclosed IRA Application for fees
which are applicable. Note that IRAs for spouses require separate accounts, even
if only one spouse makes the contributions. Each spouse's account is subject to
the enclosed fee schedule. The annual maintenance fee will be deducted from your
account unless you choose to prepay the fee. The Custodian may change any of the
above fees from time to time.

REQUIREMENTS FOR TAX QUALIFICATION. In order to qualify for tax-exempt
status, an IRA must be a trust or custodial account created in the United States
for the exclusive benefit of the depositor and his beneficiaries, and the trust
or custodial agreement must meet the following requirements: (1) annual
contributions must be limited as described above; (2) the trustee or custodian
must either be a bank, or another financial institution that has been approved
by the IRS; (3) no part of the IRA can be invested in life insurance contracts;
(4) the interest of the depositor must be nonforfeitable; (5) the assets of the
IRA cannot be commingled with other property except in a common trust fund or
common investment fund; and (6) the IRA must satisfy the minimum distribution
requirements summarized above. Skyline IRA is in the form of IRS Form 5305-A,
which is automatically deemed acceptable by the IRS as to form. The approval by
the IRS relates only to the form of the account and not to the merits of using
the account as a retirement plan. (Form 5305-A may not be used to establish a
SIMPLE-IRA. If you or your employer wish to establish a SIMPLE-IRA, you should
contact Skyline to receive the correct forms.)

ADDITIONAL INFORMATION. You may obtain additional information regarding the
taxation of IRAs from any district office of the Internal Revenue Service.

<PAGE>

FORM 5305-A
(REV. OCTOBER, 1992)
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

SKYLINE FUND INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
(Under Section 408(a) of the Internal Revenue Code)
(January 1, 1997)

ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993 include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).

ARTICLE II

The Depositor's interest in the balance in the custodial account is
nonforfeitable.

ARTICLE III

1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).

2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.

ARTICLE IV

1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.

2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated

<PAGE>

annually. Such election shall be irrevocable as to the Depositor and the
surviving spouse and shall apply to all subsequent years. The life expectancy
of a non-spouse beneficiary may not be recalculated.

3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year end in which the Depositor reaches age 70 1/2). By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the custodial account distributed in:

(a) A single sum payment.

(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.

(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.

(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.

(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.

4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:

(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with
paragraph 3.

(b) If the Depositor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Depositor or, if the
Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either.

(i) Be distributed by December 31 of the year containing the fifth anniversary
of the Depositor's death, or

(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2.

<PAGE>

required beginning date, even though payments may actually have been made before
that date.

(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in the
account.

5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire Interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph 3, determine the initial life expectancy (or joint
life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.

6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.

ARTICLE V

1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations section 1.408-5 and 1.408-6.

2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.

ARTICLE VI

Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.

ARTICLE VII

This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.

<PAGE>

ARTICLE VIII

1. DEFINITIONS.

"Investment Company" shall mean an investment company as defined in Internal
Revenue Code Section 851(a), shares of which Skyline Fund has agreed to offer
for investment under this Account. "Investment Company Shares" or "Shares" shall
mean shares of beneficial interest or capital stock of the Investment Company.

2. INVESTMENT OF ACCOUNT ASSETS.

(a) Each contribution forwarded by the Depositor to the Custodian shall
identify the Depositor's account number and be accompanied by a statement signed
by the Depositor identifying the Investment Company Shares in which that
contribution is to be invested. The Custodian may return to the Depositor,
without liability for interest thereon, any contributions which are not
accompanied by adequate account identification or an appropriate signed
statement directing investment of those contributions.

(b) Contributions shall be invested in whole and fractional Investment Company
Shares at the price and in the manner in which such shares are then being
publicly offered by the Investment Company. All distributions received on
Investment Company Shares held in the Custodial Account shall be reinvested in
like Shares and credited to such Account. If any distribution of Investment
Company Shares may be received at the election of the shareholder in additional
like Shares or in cash or other property, the Custodian shall elect to receive
such distribution in additional like Investment Company Shares.

(c) All Investment Company Shares acquired by the Custodian shall be registered
in the name of the Custodian or its registered nominee. The Depositor shall be
the beneficial owner of all Investment Company Shares held in the Custodial
Account and the Custodian shall not vote any of such shares, except upon written
direction of the Depositor. The Custodian agrees to forward to every Depositor a
then current Prospectus, reports, notices, proxies and related proxy soliciting
materials applicable to Investment Company Shares received by the Custodian.

(d) The Depositor may at any time, by a manually signed direction delivered to
the Custodian, redeem any number of Investment Company Shares held for his
account and reinvest the proceeds in the Shares of any other Investment Company.
Reinvestments shall be done at the price and in the manner in which such Shares
are then being redeemed or offered by the respective Investment Companies.

3. AMENDMENT AND TERMINATION.

(a) Skyline Fund may, with the written approval of the Custodian, amend the
Custodial Account in whole or in part (including retroactive amendments) by

<PAGE>

delivering to the Depositor written notice of such amendment setting forth the
substance and effective date of the amendment. The Depositor shall be deemed to
have consented to any such amendments not objected to in writing by the
Depositor within thirty (30) days of receipt of the notice, provided that no
amendment shall cause or permit any part of the assets of the Custodial Account
to be diverted to purposes other than for the exclusive benefit of the Depositor
or his beneficiaries, nor shall any amendment be made except in accordance with
the applicable law and regulations affecting this Custodial Account.

(b) The Depositor may at any time terminate the Custodial Account by delivering
to the Custodian a written notice of such termination setting forth the
effective date thereof, together with any required withholding information.

(c) The Custodial Account created by this Agreement shall automatically
terminate upon distribution to the Depositor or the beneficiary designated under
Paragraph 6 of Article VIII hereof of the entire balance in the Custodial
Account.

(d) The Custodian may be removed by the Depositor at any time upon thirty (30)
days written notice to the Custodian. The Custodian may elect to terminate the
Custodial Account upon thirty (30) days written notice to the Depositor.

(e) In the event that the assets of any Investment Company in which the
Custodial Account is invested are transferred to or acquired by any other
investment company or other commingled investment fund which is a permissible
investment for an individual retirement account, by merger or otherwise, the
Custodian may make such amendments to this Agreement, or take such other action,
as it may determined to be necessary or appropriate to accomplish such
transaction and the exchange of Investment Company Shares for shares or other
appropriate units of ownership in such successor fund. The consent of the
Depositor shall not be required for any such amendment or action, but the
Depositor shall be promptly notified thereof, and shall have the right to
withdraw the funds in the Custodial Account without fee, charge, load or penalty
of any kind.

4. TAXES AND CUSTODIAL FEES. Any income taxes or other taxes of any kind
whatsoever that may be levied or assessed upon or in respect of the assets of
the Custodial Account, or the income arising therefrom, any transfer taxes
incurred, all other administrative expenses incurred by the Custodian in the
performance of its duties, including fees for legal services rendered to the
Custodian, and the Custodian's compensation, shall be paid from the Custodial
Account. Unusual administrative responsibilities not contemplated by the fee
schedule will result in such additional charges as will reasonably compensate
the Custodian for the services performed.

<PAGE>

redemption proceeds at the time of distribution or redemption and the remaining
balance will be remitted to the Depositor in the case of distribution, or will
be reinvested in accordance with the Depositor's instructions.

5. REPORTS AND NOTICES.

(a) The Custodian shall keep adequate records of transactions it is required
to perform hereunder. No later than sixty (60) days after the close of each
calendar year, or after the Custodian's resignation or removal pursuant to
Article VIII, Paragraph 3, the Custodian shall render to Depositor a written
report or reports reflecting the transactions effected by it during such period
and the assets and liabilities of the Custodial Account at the close of the
period.

(b) All communications or notices required or permitted to be given herein
shall be deemed to be given upon receipt by the Custodian at P.O. Box 701,
Milwaukee, Wisconsin 53201-0701, the Investment Company and Skyline Fund at
P.O. Box 701, Milwaukee, Wisconsin 53201-0701, or the Depositor at his most
recent address shown in the Custodian's records. The Depositor agrees to advise
the Custodian promptly, in writing, of any change of address.

6. DESIGNATION OF BENEFICIARY.

The Depositor shall have the right, by written notice to the Custodian, to
designate a beneficiary or beneficiaries, primary and contingent, to receive any
benefit to which such Depositor may be entitled in the event of his death prior
to the complete distribution of such benefit. In the event the Depositor has not
designated any beneficiaries, or if all beneficiaries shall predecease the
Depositor, the following persons shall take in the order named:

(a) Spouse of the Depositor;

(b) If the spouse shall predecease the Depositor, then in equal shares to any
children surviving the Depositor and to the descendants then living of a
deceased child, by the right of representation, or

(c) If the Depositor shall leave neither spouse nor descendants surviving, then
to the personal representative of the Depositor's estate.

The determination of the Custodian as to the person entitled to receive any
distribution from the Custodial Account following the death of the Depositor, if
made in good faith, shall be conclusive and binding on all persons claiming an
interest in the Depository Account; provided that nothing provided herein shall
be construed to preclude the Custodian from filing an action in the nature of
interpleader or other appropriate proceeding in a court of competent
jurisdiction to determine the person entitled to receive such distribution. Any
expenses incurred by the Custodian in determining the person entitled to receive
a distribution from the Custodial Account, including without limitation
attorneys fees in any such action, shall be reimbursed from the Custodial
Account.

<PAGE>

7. INALIENABILITY OF BENEFITS. The benefits provided hereunder shall not be
subject to alienation, assignment, garnishment, attachment, execution or levy of
any kind; any attempt to cause such benefits to be so subjected shall not be
recognized except to the extent as may be required by law.

8. ROLLOVER CONTRIBUTIONS. The Custodian may receive rollover contributions as
described in section 408(d)(3) or any other applicable provisions of the Code,
and regulations promulgated thereunder. If any property is transferred to the
Custodian as a rollover contribution, such property shall be sold by the
Custodian and the proceeds reinvested as provided in section 2 of this Article
VIII. The Custodian reserves the right to refuse to accept any contributions
which are not in the form of cash.

9. CONFLICT IN PROVISIONS. To the extent that any of the provisions of Article
VIII shall conflict with the provisions of Articles IV, V, or VII, the
provisions of Article VIII shall prevail.

10. STATUS OF DEPOSITORS. Neither the Depositor nor any other person shall have
any legal or equitable right against the Custodian or the Investment Company
except as provided herein. The Depositor agrees to indemnify and hold the
Custodian harmless from and against any liability that the Custodian may incur
in the administration of the Account unless arising from the Custodian's own
negligence or misconduct.

11. LOSS OF EXEMPTION. If the Custodian receives notice that the Depositor's
Account has lost its tax-exempt status under section 408 of the Code for any
reason, including by reason of a transaction prohibited by section 4975 of the
Code, the Custodian shall distribute to the Depositor the entire balance in the
Account, in cash or in kind, in the sole discretion of the Custodian no later
than 90 days after the date the Custodian receives such notice.

12. APPLICABLE STATE LAW. This Custodial Account shall be construed,
administered and enforced according to the laws of the State of Wisconsin except
to the extent Federal law supersedes Wisconsin law.

13. DISTRIBUTIONS TO SURVIVING SPOUSE. If distributions from the Custodial
Account are to be made to the Depositor's surviving spouse, or to a trust of
which the Depositor's surviving spouse is the income beneficiary, the amount
which the surviving spouse (or such trust) is entitled to receive in each year
shall not be less than the income of the Custodial Account (or of the portion of
the Custodial Account with respect to which the surviving spouse or such trust
is the beneficiary) for such year, as determined under section 2056(b)(7) of the
Code.

14. MINIMUM DISTRIBUTIONS; ELECTION NOT TO RECALCULATE LIFE EXPECTANCIES.
The following provisions supplement the provisions of Article IV with respect to
minimum required distributions, and shall control over the provisions of Article
IV in the event of any inconsistency. All paragraph references in this paragraph
14

<PAGE>

are to paragraphs of Article IV unless otherwise provided.

(a) If the Depositor fails to withdraw the entire balance in the Custodial
Account by the April 1 of the year following the year in which he attains age
70 1/2, he shall be deemed to have elected to receive payments under paragraph
3(d) or, if he has a designated beneficiary (as determined under Part D of
Proposed Regulations section 1.401(a)(9)-1) under paragraph 3(e). A beneficiary
shall be deemed to have elected the method described in paragraph 4(b)(ii) if
either he withdraws the minimum amount required for the first year under the
method described in paragraph 4(b)(ii) and does not specifically elect the
method described in paragraph 4(b)(i) by the end of such year, or if the date
specified in paragraph 4(b)(i) occurs first and he has not withdrawn the entire
balance in the Custodial Account by that time; otherwise, the beneficiary shall
be deemed to have elected the method described in paragraph 4(b)(i).

(b) If there is more than one beneficiary entitled to receive distributions on
equal priority upon the death of the Depositor or a prior beneficiary then, to
the extent permitted by Proposed Regulations section 1.401(a)(9)-1, Q&A H-2, and
subject to such requirements and limitations as the Custodian may establish, the
Custodial Account may be divided into separate accounts for purposes of Article
IV and this paragraph.

(c) Notwithstanding the references to "equal or substantially equal" payments,
if the Depositor or a beneficiary is receiving distributions under paragraph
3(d), 3(e), or 4(b)(ii), he may withdraw amounts that exceed the minimum amount
required by paragraph 5 in any year, provided that any excess shall not be
credited against the minimum amount required to be withdrawn in subsequent
years. Withdrawals may also be made at irregular intervals, provided that the
minimum amount required for each year shall be withdrawn by the last day of such
year, except that the minimum amount for the year in which the Depositor attains
age 70 1/2, but no subsequent year, may be withdrawn by April 1 of the following
year.

(d) In lieu of the methods of recalculating life expectancies annually as
specified in paragraph 2, the Depositor may elect for purposes of paragraph 3(c)
or 3(d), and the Depositor's surviving spouse may elect for purposes of
paragraph 4(b)(ii), to have his life expectancy, or his and his designated
beneficiary's joint and last survivor life expectancy, or the surviving spouse's
life expectancy, initially calculated in the year specified in paragraph 5 and
thereafter reduced by one year in each subsequent year. All elections described
in this paragraph 14(d) shall be made in writing in accordance with procedures
established by the Custodian and the Proposed Regulations or successors thereto.
Such elections must be made and, if made, shall be irrevocable after the date
upon which distributions are required to commence under paragraph 3 or 4(b)(ii).

<PAGE>

(e) All references to the Proposed Regulations section 1.401(a)(9)-1 and
1.401(a)(9)-2 contained in Article IV and this paragraph 14 include the
applicable provisions of Proposed Regulations section 1.408-8 applying such
Proposed Regulations to individual retirement accounts, any subsequent
amendments to any such Proposed Regulations, and the applicable provisions of
the permanent Regulations, when issued, all of which are incorporated by
reference and shall control over any contrary provision of this Agreement.
Reference to specific provisions of the Proposed Regulations shall not be
construed to limit reference to other provisions where appropriate in the
interpretation of Article IV and this paragraph 14.

(f) Distributions will be made only upon the request of the Depositor (or the
Depositor's authorized agent, beneficiary, executor, or administrator), in such
form and manner as is acceptable to the Custodian. For such distributions, life
expectancy and joint-life and last-survivor expectancy are calculated based on
information provided by the Depositor (or the Depositor's authorized agent,
beneficiary, executor, or administrator) using the expected return multiples
under Treasury Regulations Section 1.72-9. The Custodian will not be liable for
errors in such calculations resulting from its reliance on such information. If
any assets held on the Depositor's behalf in a Custodial Account are transferred
directly to a trustee or custodian of another individual retirement account
described in Code Section 408(a) established for the Depositor, it shall be the
Depositor's responsibility to ensure that any required minimum distribution
required by Article IV is made prior to giving the Custodian such transfer
instructions.

<PAGE>

THIS PAGE INTENTIONALLY LEFT BLANK

<PAGE>

SKYLINE FUND

311 South Wacker Drive
Suite 4500
Chicago, Illinois 60606

fax 312.913.1980
telephone 312.913.0900
800.458.5222

01/97
29
<PAGE>

- --------------------------------------------------------------------------------
MAILING INSTUCTIONS
- --------------------------------------------------------------------------------

Regular Delivery: Overnight Express:

Mutual Fund Services Mutual Fund Services
Attn: Skyline Funds Attn: Skyline Funds
Firstar Trust Company Firstar Trust Company
P.O. Box 701 615 E. Michigan Street, Third Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202-5207

IF YOU HAVE ANY QUESTIONS, PLEASE CALL SKYLINE

- --------------------------------------------------------------------------------
IRA PARTICIPANT
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FIRST NAME MIDDLE INITIAL LAST NAME

- --------------------------------------------------------------------------------
DATE OF BIRTH SOCIAL SECURITY NUMBER

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

( ) ( )
- --------------------------------------------------------------------------------
DAYTIME PHONE EVENING PHONE

- --------------------------------------------------------------------------------
BENEFICIARY DESIGNATION
- --------------------------------------------------------------------------------
PRIMARY:

- --------------------------------------------------------------------------------
FIRST NAME MIDDLE INITIAL LAST NAME

- --------------------------------------------------------------------------------
DATE OF BIRTH SOCIAL SECURITY NUMBER

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

( ) ( )
- --------------------------------------------------------------------------------
DAYTIME PHONE EVENING PHONE

- --------------------------------------------------------------------------------
BENEFICIARY DESIGNATION
- --------------------------------------------------------------------------------
SECONDARY:

- --------------------------------------------------------------------------------
FIRST NAME MIDDLE INITIAL LAST NAME

- --------------------------------------------------------------------------------
DATE OF BIRTH SOCIAL SECURITY NUMBER

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

( ) ( )
- --------------------------------------------------------------------------------
DAYTIME PHONE EVENING PHONE

- --------------------------------------------------------------------------------
EXCHANGE PROVISIONS
- --------------------------------------------------------------------------------

Exchange privilege is automatic unless checked below. Exchanges may only be
made to identically registered accounts. (The Funds reserve the right to record
all exchange requests and the exchange privilege may be changed or withdrawn by
the Funds at any time.)

/ / I DO NOT AUTHORIZE TELEPHONE EXCHANGES.

[Logo]

- --------------------------------------------------------------------------------
IRA APPLICATION

Fee Schedule: (Fees are subject to change by the custodian upon notice to the
depositor.)

Annual maintenance fee per account (or $25 for two or more accounts) . . $12.50
Transfer to successor trustee. . . . . . . . . . . . . . . . . . . . . . $15.00
Distribution to a participant. . . . . . . . . . . . . . . . . . . . . . $15.00
Refund of excess contribution. . . . . . . . . . . . . . . . . . . . . . $15.00
Annual distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . $15.00
Any outgoing wire. . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.00

- --------------------------------------------------------------------------------
CONTRIBUTION TYPE
- --------------------------------------------------------------------------------

Contribution is for tax year
-------------------

CONTRIBUTION WILL BE FOR THE CURRENT YEAR UNLESS OTHERWISE NOTED. IF PRIOR YEAR,
MUST BE MAILED ON OR BEFORE APRIL 15TH.

Please select one:

/ / Regular IRA (maximum $2,000).
/ / Spousal IRA for a nonworking spouse.
/ / Transfer of Assets. A transfer form must be completed.
/ / SEP-IRA. An application and 5305 SEP form must be completed for each
employee.

/ / Corporate / / Keogh
/ / 403 (b) / / SEP-IRA
/ / IRA to which you contributed / / Other
-----------------

DO NOT USE THIS FORM FOR A SIMPLE-IRA. PLEASE CONTACT SKYLINE FOR THE
CORRECT FORM.

- --------------------------------------------------------------------------------
INVESTMENT OF CONTRIBUTIONS
- --------------------------------------------------------------------------------

You must select a Portfolio. Make check payable to the Portfolio in which you
are investing. Minimum initial investment is $1,000.

Contribution amount of $
----------------------------
$1,000 MINIMUM

SKYLINE FUNDS

/ / Special Equities Portfolio (014) (CLOSED TO NEW INVESTORS)
/ / Special Equities II (020)
/ / Contrarian Equities

SKYLINE-PORTICO MONEY MARKET FUND

/ / Money Market Fund (022)
/ / U.S. Government Money Market Fund (023)

<PAGE>
- --------------------------------------------------------------------------------
MAILING INSTRUCTIONS
- --------------------------------------------------------------------------------

Regular Delivery: Overnight Express:

Mutual Fund Services Mutual Fund Services
Attn: Skyline Fund Attn: Skyline Fund
Firstar Trust Company Firstar Trust Company
P.O. Box 701 615 E. Michigan Street, Third Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202-5207

IF YOU HAVE ANY QUESTIONS, PLEASE CALL SKYLINE FUND AT 800-458-5222.

- --------------------------------------------------------------------------------
TO: PRESENT CUSTODIAN/TRUSTEE
- --------------------------------------------------------------------------------

COMPLETED BY SKYLINE IRA INVESTOR

- --------------------------------------------------------------------------------
NAME OF PRESENT CUSTODIAN/TRUSTEE

- --------------------------------------------------------------------------------
MUTUAL FUND (IF APPLICABLE)

- --------------------------------------------------------------------------------
ACCOUNT NUMBER

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

( ) ( )
- --------------------------------------------------------------------------------
DAYTIME PHONE EVENING

ROLLOVER IRA ASSETS ROLLING OVER FROM:

/ / Qualified employer plan or IRA / / Other type of IRA (NOTE: certain
derived from a rollover from distributions from a SIMPLE-IRA
such a plan can only be rolled into another
SIMPLE-IRA)
/ / Tax-sheltered annuity (403(b))
plan or IRA derived from a
rollover from such a plan

I have established an account under the Skyline Fund Individual Retirement
Account. Please transfer the assets, cash only, indicated below to Firstar
Trust Company as successor custodian.

/ / All assets / / $ only
------------------

/ / At maturity date of
---------------------------

/ / Immediately (I am aware of any penalties)

- --------------------------------------------------------------------------------
ACCEPTANCE
- --------------------------------------------------------------------------------

Custodian Authorization: Firstar Trust Company hereby accepts its appointment
as Custodian of the above IRA account and upon receipt of assets, will deposit
such assets in a Skyline Fund(s) IRA on behalf of the Depositor authorizing this
transfer or direct rollover.

[LOGO]

- --------------------------------------------------------------------------------
IRA TRANSFER FORM/
DIRECT ROLLOVER FORM

Complete this form to transfer an existing IRA or plan balance to a Skyline IRA.

- --------------------------------------------------------------------------------
TO: FIRSTAR TRUST COMPANY
- --------------------------------------------------------------------------------

COMPLETED BY SKYLINE IRA INVESTOR

- --------------------------------------------------------------------------------
FIRST NAME MIDDLE INITIAL LAST NAME

- --------------------------------------------------------------------------------
SOCIAL SECURITY NUMBER

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

( ) ( )
- --------------------------------------------------------------------------------
DAYTIME PHONE EVENING

- --------------------------------------------------------------------------------
SIGNATURE DATE

The assets received are to be invested in:

/ / MY EXISTING SKYLINE IRA

---------------------------------------------------------------------------
PORTFOLIO NAME

---------------------------------------------------------------------------
ACCOUNT NUMBER

/ / MY NEW SKYLINE IRA

A signed Skyline Fund IRA Application must be completed and returned with
this Skyline Fund IRA Transfer Form.

SKYLINE FUND

/ / Special Equities Portfolio / / Special Equities II
/ / Contrarian Equities

SKYLINE-PORTICO MONEY MARKET FUND

/ / Money Market Fund / / U.S. Government Money
Market Fund

<PAGE>

SKYLINE FUND SIMPLE-IRA SUPPLEMENT
January 1, 1997
- --------------------------------------------------------------------------------
311 South Wacker Drive, Suite 4500 Chicago, Illinois 60606 1-800-458-5222
- --------------------------------------------------------------------------------

The documents contained in this packet may be used to establish a Salary
Incentive Match Plan IRA, also known as a SIMPLE-IRA. SIMPLE-IRAs are a new
type of individual retirement account that became available for the first time
in 1997. A SIMPLE-IRA plan must be established by an employer (including a
self-employed person), and it enables all eligible employees of the employer to
elect to have up to $6,000 per year deducted from their paychecks on a
before-tax basis and deposited directly into a SIMPLE-IRA maintained for the
individual employee. The employer is also generally required to make
contributions, as described in more detail below.

Because of the differences between a SIMPLE-IRA and other types of IRAs, the
forms contained in the regular Skyline Fund IRA booklet cannot be used to
establish a SIMPLE-IRA. Instead, you must use the forms contained in this
booklet. However, the Disclosure Statement contained in the regular IRA booklet
includes important information that also applies to a SIMPLE-IRA. YOU SHOULD
CAREFULLY REVIEW THE DISCLOSURE STATEMENT INCLUDED IN THE SKYLINE FUND IRA
BOOKLET, BEFORE USING THE FORMS IN THIS BOOKLET TO ESTABLISH A SIMPLE-IRA.

WHAT IS A SIMPLE-IRA?

A SIMPLE-IRA is a special type of IRA, and is generally subject to the same
rules that apply to all IRAs. However, as an individual you cannot make
contributions directly to a SIMPLE-IRA (except for rollovers as described
below). Instead, your employer must establish a SIMPLE-IRA plan, and make
contributions to your SIMPLE-IRA on your behalf. An employer can establish a
SIMPLE-IRA plan in any year in which it has no more than 100 employees who
earned at least $5,000 in the prior year, and does not maintain any other
tax-qualified pension or profit-sharing plan (other than a frozen plan).

If your employer establishes a SIMPLE-IRA plan and you are an eligible employee,
you can elect to have up to $6,000 of your compensation in any year withheld and
deposited in a SIMPLE-IRA on your behalf. Amounts that you elect to have
deposited in your SIMPLE-IRA are not subject to federal income tax until you
withdraw them (although they are subject to Social Security tax). In addition
to the amount that you elect to have deposited in your SIMPLE-IRA, your employer
must generally make an additional contribution to match the amount that you have
withheld, up to a maximum of 3% of your compensation. The employer may elect to
lower the maximum matching contribution to as low as 1% in some years, but may
not lower the maximum match in more than two years out of every five. The
employer may also elect to make a contribution equal to 2% of compensation for
all eligible employees in any year instead of making matching contributions.
All employees who have been paid at least $5,000 in two prior years and expect
to be paid $5,000 in the current year must be eligible to participate (excluding

1
<PAGE>

nonresident aliens and union workers whose collective bargaining agreement does
not provide for them to participate).

Although SIMPLE-IRAs can only be established under a plan set up by an employer,
each participating employee is the owner of his or her own SIMPLE-IRA account.
All amounts deposited in your SIMPLE-IRA account are fully vested, and can be
withdrawn at any time, as with any other type of IRA. However, amount withdrawn
are subject to tax, and tax penalties may also apply to amounts withdrawn before
you reach the age of 59 1/2, as described in the Disclosure Statement.

SIMPLE-IRA plans can generally be set up by any employer with no more than 100
eligible employees that does not maintain any other tax qualified plan,
including self-employed persons, nonprofits, and government agencies. However,
in determining whether an employer has more than 100 employees, the employees of
certain employers under common ownership must be combined. An employer that
establishes a SIMPLE-IRA plan when it has no more than 100 employees can
continue to maintain it for two years after the number of its employees
increases to more than 100.

SETTING UP A SIMPLE-IRA PLAN

It is important to keep in mind the distinction between a SIMPLE-IRA PLAN and
SIMPLE-IRA ACCOUNTS. A SIMPLE-IRA PLAN is a written document established by an
employer that specifies which employees are eligible to make contributions to
SIMPLE-IRAs. SIMPLE-IRA ACCOUNTS are the separate accounts established by each
participating employee to hold and invest the contributions made on their
behalf. An employer that wishes to establish a SIMPLE-IRA plan can use Form
5304-SIMPLE, which has been issued by the IRS for this purpose. Use of this
forms is not mandatory, and an employer can also use a customized plan document.
(The IRS has also issued Form 5305-SIMPLE, but this form can only be used if all
employees are required to initially deposit their SIMPLE-IRA contributions with
the same designated financial institution.)

This packet includes a Form 5304-SIMPLE that can be used by an employer that
wishes to establish a SIMPLE-IRA plan. The employer will need to complete this
Form to determine which employees will be eligible to participate, and how often
employees will be able to make and change withholding elections. After
completing the Form 5304-SIMPLE, the employer should execute the Form and retain
it in its files. In addition, as discussed below, copies must be furnished to
each eligible employee. Do NOT file Form 5304-SIMPLE with the IRS.

Once the employer has established a SIMPLE-IRA plan, it must notify all eligible
employees of their right to elect to have a portion of their compensation
deferred under the plan. Each employee must be permitted to make a deferral
election at least during the 60 day period immediately preceding the first day
of the year (I.E., during the period from November 2 through December 31 of the
preceding year.) However, if the employer establishes the plan later in the
year, the 60 day period can precede the effective date of the plan. The
employer may permit longer or more frequent election periods if it wishes to do
so, but the 60 day election period prior to the beginning of the year is
required.

2
<PAGE>

The employer must notify each employee of his or her right to make a deferral
election immediately prior to the beginning of the required 60 day election
period, and must also give each eligible employee a summary description of the
plan. A model notice that can be given to each eligible employee is included
with the materials immediately following Form 5304-SIMPLE, and the summary
description requirement can be satisfied by attaching a copy of the completed
Form 5304-SIMPLE to the notice. THIS NOTICE AND SUMMARY DESCRIPTION MUST BE
GIVEN EACH YEAR, NOT JUST IN THE FIRST YEAR IN WHICH THE PLAN IS ESTABLISHED.

In addition, an employer that establishes a SIMPLE-IRA plan must also furnish
all participating employees with information regarding the procedures for
withdrawing funds from their SIMPLE-IRA accounts, and the consequences of such
withdrawals. Skyline Fund will furnish this information directly to the
participating employees who establish their SIMPLE-IRA accounts with Skyline
Fund.

ESTABLISHING A SIMPLE-IRA ACCOUNT

Although the employer establishes the SIMPLE-IRA plan, each participating
employee must establish his or her own SIMPLE-IRA account to hold the
contributions under the plan. Each employee is the absolute owner of his or her
own account, and has the right to make withdrawals at any time. Enclosed with
these materials are a copy of the Skyline Fund SIMPLE-IRA Account Agreement,
which is used to establish a Skyline Fund SIMPLE-IRA. The Skyline Fund
SIMPLE-IRA Account Agreement is in the form of IRS Form 5305-SA, which is
automatically deemed acceptable by the Internal Revenue Service. The approval
by the IRS relates only to the form of the account and not to the merits of
using the account as a retirement plan.

In order to establish a Skyline Fund SIMPLE-IRA, a participant must
complete the Skyline Fund SIMPLE-IRA Application Form, which is included in this
booklet. If the employer has designated Skyline Fund as the designated
financial institution under the plan, then all SIMPLE-IRAs under the plan will
automatically be established with Skyline Fund, and participants need only
complete the Application Form. If any participant fails to complete an
Application Form, the employer may complete the form for the employee.

If an employee is establishing a SIMPLE-IRA account under the plan of an
employer that has NOT named Skyline Fund as the designated financial
institution, the employee will need to complete the application form, and will
also need to notify his or her employer to send all contributions to Skyline
Fund. The employer establishing the plan should furnish the employee with the
necessary forms to accomplish this notification.

ROLLOVERS AND DIRECT TRANSFERS

Amounts which are held in other SIMPLE-IRAs can also be transferred to a Skyline
Fund SIMPLE-IRA, either by rollover or direct transfer. ROLLOVERS AND DIRECT
TRANSFERS TO A SIMPLE-IRA CAN NOT BE MADE FROM ANY OTHER KIND OF IRA, OR FROM A
QUALIFIED PLAN OR TAX-DEFERRED ANNUITY.

3
<PAGE>

In order to make a rollover or direct transfer to a Skyline Fund SIMPLE-IRA from
another SIMPLE-IRA, you will need to complete an application form if you do not
already have a Skyline Fund SIMPLE-IRA. If the funds are being transferred by
direct transfer, you will also need to complete the Transfer Form that
immediately follows the application form in this booklet. If the transfer is a
rollover, you will need to send your check made payable to Skyline Fund not
later than 60 days after you receive the distribution from the other SIMPLE-IRA.

For more information on direct transfers and rollovers, including the limits on
the frequency of rollovers, see the Disclosure Statement.

The Skyline Fund Custodial Account for SIMPLE-IRAs is sponsored by Skyline Fund.
This brief outline of the Account is not intended as a full explanation of the
Account, but we hope that we have answered some of the questions that occur to
you.

WE URGE YOU TO READ THE ENCLOSED MATERIAL, AND THE DISCLOSURE STATEMENT INCLUDED
IN THE SKYLINE FUND IRA BOOKLET, THOROUGHLY.

If you would like to know more about the Funds advised by Skyline, please call
us at 1-800-458-5222.

4
<PAGE>

Form 5305-SA
(December 1996)
Department of the Treasury
Internal Revenue Service

SKYLINE FUND CUSTODIAL ACCOUNT
FOR SIMPLE-IRAS

(Under Sections 408(a) and 408(p) of the Internal Revenue Code)
(January 1, 1997)

ARTICLE I
The Custodian will accept cash contributions on behalf of the Participant
by the Participant's employer under the terms of a SIMPLE plan described in
408(p). In addition, the Custodian will accept transfers or rollovers from
other SIMPLE IRAs of the Participant. No other contributions will be accepted
by the Custodian.

ARTICLE II

The Participant's interest in the balance in the Custodial Account is
nonforfeitable.

ARTICLE III

1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the Custodial Account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).

2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3), which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.

ARTICLE IV

1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Participant's interest in the Custodial Account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.

2. Unless otherwise elected by the time distributions are required to
begin to the Participant under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies shall
be recalculated annually. Such election shall be irrevocable as to the
Participant and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.

3. The Participant's entire interest in the Custodial Account must be, or
begin to be, distributed by the Participant's required beginning date (April 1
following the calendar year end in which the Participant reaches age 70 1/2). By
that date, the Participant may elect, in a manner acceptable to the Custodian,
to have the balance in the Custodial Account distributed in:

(a) A single sum payment.

(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Participant.

<PAGE>

(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last survivor lives of
the Participant and his or her designated beneficiary.

(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the Participant's life expectancy.

(e) Equal or substantially equal annual payments over a specified
period that may not be longer than the joint life and last survivor expectancy
of the Participant and his or her designated beneficiary.

4. If the Participant dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be distributed as
follows:

(a) If the Participant dies on or after distribution of his or her
interest has begun, distribution must continue to be made in accordance with
paragraph 3.

(b) If the Participant dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of the
Participant or, if the Participant has not so elected, at the election of the
beneficiary or beneficiaries, either

(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Participant's death, or

(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Participant's death. If, however, the beneficiary is
the Participant's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Participant would have reached age 70 1/2.

(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Participant's
required beginning date, even though payments may actually have been made before
that date.

(d) If the Participant dies before his or her entire interest has
been distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in the
account.

5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Participant's entire Interest in the Custodial Account as
of the close of business on December 31 of the preceding year by the life
expectancy of the Participant (or the joint life and last survivor expectancy of
the Participant and the Participant's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph 3, determine the initial life expectancy (or joint
life and last survivor expectancy) using the attained ages of the Participant
and designated beneficiary as of their birthdays in the year the Participant
reaches age 70 1/2. In the case of a distribution in accordance with paragraph
4(b)(ii), determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.

<PAGE>

ARTICLE V

1. The Participant agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under sections
408(i) and 408(l)(2) and Regulations sections 1.408-5 and 1.408-6.

2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Participant prescribed by the Internal Revenue Service.

3. The Custodian also agrees to provide the Participant's employer the
summary description described in section 408(l)(2) unless this SIMPLE IRA is a
transfer SIMPLE IRA.

ARTICLE VI

ARTICLE VII

This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.

ARTICLE VIII

1. DEFINITIONS.

"Investment Company" shall mean an investment company as defined in
Internal Revenue Code Section 851(a), shares of which Skyline Fund has agreed to
offer for investment under this Account. "Investment Company Shares" or
"Shares" shall mean shares of beneficial interest or capital stock of the
Investment Company.

2. INVESTMENT OF ACCOUNT ASSETS.

(a) Each contribution forwarded by the Participant to the Custodian shall
identify the Participant's account number and be accompanied by a statement
signed by the Participant identifying the Investment Company Shares in which
that contribution is to be invested. The Custodian may return to the
Participant, without liability for interest thereon, any contributions which are
not accompanied by adequate account identification or an appropriate signed
statement directing investment of those contributions.

(b) Contributions shall be invested in whole and fractional Investment
Company Shares at the price and in the manner in which such shares are then
being publicly offered by the Investment Company. All distributions received on
Investment Company Shares held in the Custodial Account shall be reinvested in
like Shares and credited to such Account. If any distribution of Investment
Company Shares may be received at the election of the shareholder in additional
like Shares or in cash or other property, the Custodian shall elect to receive
such distribution in additional like Investment Company Shares.

(c) All Investment Company Shares acquired by the Custodian shall be
registered in the name of the Custodian or its registered nominee. The
Participant shall be the beneficial owner of all Investment Company Shares held
in the Custodial Account and the Custodian shall not vote any of such shares,
except upon written direction of the Participant. The Custodian agrees to
forward to every Participant a then current Prospectus, reports, notices,
proxies and related proxy soliciting materials applicable to Investment Company
Shares received by the Custodian.

(d) The Participant may at any time, by a manually signed direction
delivered to the Custodian, redeem any number of Investment Company Shares held
for his account and reinvest the proceeds in the Shares of

<PAGE>

any other Investment Company. Telephone redemptions and reinvestments shall be
done at the price and in the manner in which such Shares are then being redeemed
or offered by the respective Investment Companies.

3. AMENDMENT AND TERMINATION.

(a) Skyline Fund may, with the written approval of the Custodian, amend
the Custodial Account in whole or in part (including retroactive amendments) by
delivering to the Participant written notice of such amendment setting forth the
substance and effective date of the amendment. The Participant shall be deemed
to have consented to any such amendments not objected to in writing by the
Participant within thirty (30) days of receipt of the notice, provided that no
amendment shall cause or permit any part of the assets of the Custodial Account
to be diverted to purposes other than for the exclusive benefit of the
Participant or his beneficiaries, nor shall any amendment be made except in
accordance with the applicable law and regulations affecting this Custodial
Account.

(b) The Participant may at any time terminate the Custodial Account by
delivering to the Custodian a written notice of such termination setting forth
the effective date thereof, together with any required withholding information.

(c) The Custodial Account created by this Agreement shall automatically
terminate upon distribution to the Participant or the beneficiary designated
under Paragraph 6 of Article VIII hereof of the entire balance in the Custodial
Account.

(d) The Custodian may be removed by the Participant at any time upon
thirty (30) days written notice to the Custodian. The Custodian may elect to
terminate the Custodial Account upon thirty (30) days written notice to the
Participant.

(e) In the event that the assets of any Investment Company in which the
Custodial Account is invested are transferred to or acquired by any other
investment company or other commingled investment fund which is a permissible
investment for an individual retirement account, by merger or otherwise, the
Custodian may make such amendments to this Agreement, or take such other action,
as it may determined to be necessary or appropriate to accomplish such
transaction and the exchange of Investment Company Shares for shares or other
appropriate units of ownership in such successor fund. The consent of the
Participant shall not be required for any such amendment or action, but the
Participant shall be promptly notified thereof, and shall have the right to
withdraw the funds in the Custodial Account without fee, charge, load or penalty
of any kind.

The annual maintenance fee will be deducted on the last business day in
September for each year and enough fund shares will be redeemed to cover this
fee. Fees as listed on the fee schedule will be deducted from the refund or
redemption proceeds at the time of distribution or redemption and the remaining
balance will be remitted to the Participant in the case of distribution, or will
be reinvested in accordance with the Participant's instructions.

5. REPORTS AND NOTICES.

(a) The Custodian shall keep adequate records of transactions it is
required to perform hereunder. No later than sixty (60) days after the close of
each calendar year, or after the Custodian's resignation or removal pursuant to
Article VIII, Paragraph 3, the Custodian shall render to Participant a written
report or reports reflecting the transactions effected by it during such period
and the assets and liabilities of the Custodial Account at the close of the
period.

<PAGE>

(b) All communications or notices required or permitted to be given herein
shall be deemed to be given upon receipt by the Custodian at P.O. Box 701,
Milwaukee, Wisconsin 53201-0701, the Investment Company and Skyline Fund at
P.O. Box 701, Milwaukee, Wisconsin 53201-0701, or the Participant at his most
recent address shown in the Custodian's records. The Participant agrees to
advise the Custodian promptly, in writing, of any change of address.

6. DESIGNATION OF BENEFICIARY. The Participant shall have the right, by
written notice to the Custodian, to designate a beneficiary or beneficiaries,
primary and contingent, to receive any benefit to which such Participant may be
entitled in the event of his death prior to the complete distribution of such
benefit. In the event the Participant has not designated any beneficiaries, or
if all beneficiaries shall predecease the Participant, the following persons
shall take in the order named:

(a) Spouse of the Participant;

(b) If the spouse shall predecease the Participant, then in equal shares
to any children surviving the Participant and to the descendants then living of
a deceased child, by the right of representation, or

(c) If the Participant shall leave neither spouse nor descendants
surviving, then to the personal representative of the Participant's estate.

The determination of the Custodian as to the person entitled to receive any
distribution from the Custodial Account following the death of the Participant,
if made in good faith, shall be conclusive and binding on all persons claiming
an interest in the Participant Account; provided that nothing provided herein
shall be construed to preclude the Custodian from filing an action in the nature
of interpleader or other appropriate proceeding in a court of competent
jurisdiction to determine the person entitled to receive such distribution. Any
expenses incurred by the Custodian in determining the person entitled to receive
a distribution from the Custodial Account, including without limitation
attorneys fees in any such action, shall be reimbursed from the Custodial
Account.

7. INALIENABILITY OF BENEFITS. The benefits provided hereunder shall not
be subject to alienation, assignment, garnishment, attachment, execution or levy
of any kind of any attempt to cause such benefits to be so subjected shall not
be recognized except to the extent as may be required by law.

8. ROLLOVER CONTRIBUTIONS. The Custodian may receive rollover
contributions as described in section 408(d)(3) and regulations promulgated
thereunder, but only from other SIMPLE-IRAs. If any property is transferred to
the Custodian as a rollover contribution, such property shall be sold by the
Custodian and the proceeds reinvested as provided in section 2 of this Article
VIII. The Custodian reserves the right to refuse to accept any contributions
which are not in the form of cash.

9. CONFLICT IN PROVISIONS. To the extent that any of the provisions of
Article VIII shall conflict with the provisions of Articles IV, V, or VII, the
provisions of Article VIII shall prevail.

10. STATUS OF PARTICIPANTS. Neither the Participant nor any other person
shall have any legal or equitable right against the Custodian or the Investment
Company except as provided herein. The Participant agrees to indemnify and hold
the Custodian harmless from and against any liability that the Custodian may
incur in the administration of the Account unless arising from the Custodian's
own negligence or misconduct.

11. LOSS OF EXEMPTION. If the Custodian receives notice that the
Participant's Account has lost its tax-exempt status under section 408 of the
Code for any reason, including by reason of a transaction prohibited by section
4975 of the Code, the Custodian shall distribute to the Participant the entire
balance in the Account, in cash or in kind, in the sole discretion of the
Custodian no later than 90 days after the date the Custodian receives such
notice.

<PAGE>

13. DISTRIBUTIONS TO SURVIVING SPOUSE. If distributions from the
Custodial Account are to be made to the Participant's surviving spouse, or to a
trust of which the Participant's surviving spouse is the income beneficiary, the
amount which the surviving spouse (or such trust) is entitled to receive in each
year shall not be less than the income of the Custodial Account (or of the
portion of the Custodial Account with respect to which the surviving spouse or
such trust is the beneficiary) for such year, as determined under section
2056(b)(7) of the Code.

(a) If the Participant fails to withdraw the entire balance in the
Custodial Account by the April 1 of the year following the year in which he
attains age 70 1/2, he shall be deemed to have elected to receive payments under
paragraph 3(d) or, if he has a designated beneficiary (as determined under Part
D of Proposed Regulations section 1.401(a)(9)-1) under paragraph 3(e). A
beneficiary shall be deemed to have elected the method described in paragraph
4(b)(ii) if either he withdraws the minimum amount required for the first year
under the method described in paragraph 4(b)(ii) and does not specifically elect
the method described in paragraph 4(b)(i) by the end of such year, or if the
date specified in paragraph 4(b)(i) occurs first and he has not withdrawn the
entire balance in the Custodial Account by that time; otherwise, the beneficiary
shall be deemed to have elected the method described in paragraph 4(b)(i).

(b) If there is more than one beneficiary entitled to receive
distributions on equal priority upon the death of the Participant or a prior
beneficiary then, to the extent permitted by Proposed Regulations section
1.401(a)(9)-1, Q&A H-2, and subject to such requirements and limitations as the
Custodian may establish, the Custodial Account may be divided into separate
accounts for purposes of Article IV and this paragraph.

(c) Notwithstanding the references to "equal or substantially equal"
payments, if the Participant or a beneficiary is receiving distributions under
paragraph 3(d), 3(e), or 4(b)(ii), he may withdraw amounts that exceed the
minimum amount required by paragraph 5 in any year, provided that any excess
shall not be credited against the minimum amount required to be withdrawn in
subsequent years. Withdrawals may also be made at irregular intervals, provided
that the minimum amount required for each year shall be withdrawn by the last
day of such year, except that the minimum amount for the year in which the
Participant attains age 70 1/2, but no subsequent year, may be withdrawn by
April 1 of the following year.

(d) In lieu of the methods of recalculating life expectancies annually as
specified in paragraph 2, the Participant may elect for purposes of paragraph
3(c) or 3(d), and the Participant's surviving spouse may elect for purposes of
paragraph 4(b)(ii), to have his life expectancy, or his and his designated
beneficiary's joint and last survivor life expectancy, or the surviving spouse's
life expectancy, initially calculated in the year specified in paragraph 5 and
thereafter reduced by one year in each subsequent year. All elections described
in this paragraph 14(d) shall be made in writing in accordance with procedures
established by the Custodian and the Proposed Regulations or successors thereto.
Such elections must be made and, if made, shall be irrevocable after the date
upon which distributions are required to commence under paragraph 3 or 4(b)(ii).

(f) Distributions will be made only upon the request of the Participant
(or the Participant's authorized agent, beneficiary, executor, or
administrator), in such form and manner as is acceptable to the Custodian. For
such distributions, life expectancy and joint-life and last-survivor expectancy
are calculated based on information

<PAGE>

provided by the Participant (or the Participant's authorized agent, beneficiary,
executor, or administrator) using the expected return multiples under Treasury
Regulations Section 1.72-9. The Custodian will not be liable for errors in such
calculations resulting Form its reliance on such information. If any assets
held on the Participant's behalf in a Custodial Account are transferred directly
to a trustee or Custodian of another individual retirement account described in
Code Section 408(a) established for the Participant, it shall be the
Participant's responsibility to ensure that any requested minimum distribution
required by Article IV is made prior to giving the Custodian such transfer
instructions.

<PAGE>

SKYLINE FUNDS SIMPLE-IRA APPLICATION

COMPLETE THIS APPLICATION AND SEND IT TO: FIRSTAR TRUST COMPANY, Attn: Skyline
Funds, P.O. Box 701, Milwaukee, Wisconsin, 53201-0701.

1. SIMPLE-IRA APPLICANT
Name of Individual: Social Security No.:
----------------------------------- -----------------------------------
Street Address: Birth Date:
----------------------------------- -----------------------------------
City: State: Zip Code:
---------------------- ------------------ ------------------------------
Home Phone: ( ) Business Phone: ( )
------------------------------ ----------------------------------------

2. CONTRIBUTION TYPE. Check the appropriate box below. This Application Form
can only be used to establish a SIMPLE-IRA, which receives contributions
under a Savings Incentive Match Plan (SIMPLE) established by your employer.
You can also make rollover or direct transfer contributions from another
SIMPLE-IRA to this SIMPLE-IRA. If you wish to establish another type of
IRA, you should obtain a regular IRA application form from Skyline Funds.

[ ] Contributions under a SIMPLE-IRA plan. If your employer has
established a SIMPLE -IRA plan check here and insert the name and
address of your employer:_____________________________________________
______________________________________________________________________
Your employer must also sign below. You can either include your
employer's check payable to Firstar Trust Company, or arrange to have
your employer send its check directly to Firstar Trust Company,
Attention: Skyline Funds, P.O. Box 701, Milwaukee, Wisconsin
53201-0701.

[ ] Rollover from another SIMPLE-IRA. If you are rolling over a
distribution that you received within the past 60 days from another
SIMPLE-IRA, check here and include your check payable to Firstar Trust
Company.

[ ] Direct transfer from another SIMPLE-IRA. If this is a direct
transfer from another SIMPLE-IRA, check here and complete the
attached Transfer Form.

3. INVESTMENT OF CONTRIBUTIONS

You must select a Portfolio. Make check payable to the Portfolio in which
you are investing. Minimum initial investment is $1,000.

Contribution amount of $_____________________
$1,000 MINIMUM

SKYLINE FUNDS
[ ] Special Equities Portfolio
[ ] Special Equities II
[ ] Contrarian Equities

SKYLINE-PORTICO MONEY MARKET FUND
[ ] Money Market Fund
[ ] U.S. Government Money Market Fund

---------------------------------
Application continued on reverse.
---------------------------------

<PAGE>

SKYLINE FUNDS SIMPLE-IRA APPLICATION (CONTINUED)

5. TELEPHONE EXCHANGE The telephone exchange privilege offered by the Skyline
Funds is automatically available unless you check the box below. The
exchange privilege authorizes the Funds and their transfer agent to act on
telephone instructions from any person to make an exchange.

[ ] I do not authorize telephone exchanges

6. BENEFICIARY DESIGNATION I hereby designate the following as my
Beneficiary(ies) under my Skyline Funds SIMPLE Individual Retirement
Account (SIMPLE-IRA):

- ----------------------------------- ---------------------------------------
Name Relationship

- ----------------------------------- ---------------------------------------
Street Address Social Security No.

- ------------------ -------------------- ------------- -------------------
City State Zip Code Birth Date

Every payment under my SIMPLE-IRA by reason of my death shall be made to my
Beneficiary if he or she is living at the time such payment becomes due; and if
there is no designated Beneficiary living at the time any such payment becomes
due, the payment shall be made to my estate.

A Beneficiary Designation shall be valid only if dated, signed and filed
with the Custodian under the Plan before my death. I understand that I may
change my beneficiary designation by completing a "Change of Beneficiary" form
that I can obtain by calling 1-800-458-5222 and returning it to the Custodian.

- -----------------------
SIGNATURE OF APPLICANT:
- -----------------------

I hereby adopt the Skyline Funds Custodial Agreement for SIMPLE-IRAs. I
appoint Firstar Trust Company as Custodian and agree to be bound by the
provisions of the Custodial Agreement. I certify that the foregoing information
is correct and that I received a copy of the Disclosure Statement relating to
the Account and custodian fees, as well as a copy of the current prospectus(es)
of the Fund(s) in which my initial investment is to be made. The terms,
provisions and limitations of the Custodial Agreement, as amended from time to
time, are controlling and shall always govern all rights of myself, my
Beneficiaries and all persons claiming under, by or through them, or any of
them.

- ------------------------------------ -----------------------------------
Date Signature of Applicant

- ----------------------
SIGNATURE OF EMPLOYER:
- ----------------------

The undersigned, as the employer sponsoring the SIMPLE under which the
foregoing SIMPLE-IRA account is established, represents to Firstar Trust Company
and Skyline Funds that it will furnish the account owner with the information
required by paragraphs (1) through (4) of Q&A H-1 of IRS Notice 97-6 or any
successor thereto, and releases Firstar Trust Company and Skyline Funds from any
obligation to provide such information to the undersigned. By accepting
contributions to such account, Firstar Trust Company and Skyline Funds represent
to the undersigned that they will provide the information required by paragraph
(5) thereof directly to the account owner.

- ------------------------------------ -----------------------------------
Date Signature of Employer

THIS DOCUMENT WILL BE RETAINED BY FIRSTAR TRUST COMPANY.

<PAGE>

-------------
TRANSFER FORM
-------------

COMPLETE THIS FORM
TO TRANSFER AN EXISTING SIMPLE-IRA BALANCE
TO A SKYLINE FUNDS SIMPLE-IRA

- ------
PART I (To be completed by investor and mailed to Firstar Trust Company,
- ------ Attention: Skyline Funds,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. If you are opening a
new account, enclose
a Skyline Funds SIMPLE-IRA application.)

TO: FIRSTAR TRUST COMPANY:
<TABLE>

<S><C>
The assets received are to be invested in:
[ ] My existing Skyline Funds SIMPLE-IRA in_________________________________ Account No. _______________.
(Fund name)

[ ] My new Skyline Funds SIMPLE-IRA. (A signed SIMPLE-IRA Application must be completed and returned with
this Transfer Form.)

- ------------------------------------------------------- --------------------------------------------
Investor's Name Daytime Phone

- ---------------------------------------- ------------------------- -------------------- ---------
Street City State Zip Code

Investor's Signature ___________________________________ Date ______________________________________

TO: NAME OF PRESENT CUSTODIAN/TRUSTEE:

------------------------------------------------------------------------------------------------------

Mutual Fund (if applicable)______________________________ Acct. No.___________________________________

Address__________________________________________________ Phone No.___________________________________
Street

-------------------------------------------------- -------------------------- -------------------
City State Zip Code

</TABLE>

Present Custodian/Trustee:

I have established an account under the Skyline Funds Individual Retirement
Account. Please transfer the assets (cash only) indicated below to Firstar
Trust Company as successor custodian.

[ ] All Assets [ ] $_______ only [ ] At maturity date of__________

[ ] Immediately (I am aware of any penalties which may occur)

- ----------
PART II
- ----------
(To be completed by Firstar Trust Company)

TO: THE ABOVE-NAMED CUSTODIAN/TRUSTEE:

Firstar Trust Company accepts its appointment as custodian for the above
account. Please forward a check, as directed above by the investor, payable to:

Firstar Trust Company, FBO ___________________________________

Mail check and accompanying documents, if any, to:
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701

FIRSTAR TRUST COMPANY

<PAGE>

FORMS THAT MAY BE USED BY AN EMPLOYER TO
ESTABLISH A SIMPLE-IRA PLAN

In order to establish a SIMPLE-IRA plan, an employer may complete the
blanks in Form 5304-SIMPLE contained in the following pages, and execute the
Form. This form should be kept with the employer's records. Do not file Form
5304-SIMPLE with the Internal Revenue Service. Form 5304-SIMPLE is a form
issued by the Internal Revenue Service, not by Skyline Funds.

You must also notify each eligible employee of his or her right to elect to
make contributions to a SIMPLE-IRA. This notice must be given to each employee
EACH YEAR prior to the beginning of the period during which he or she may elect
to make such contributions, which must be at least 60 days in length. A copy of
a model notice that can be used for this purpose is enclosed, and immediately
follows Form 5304-SIMPLE. A copy of the completed Form 5304-SIMPLE must be
attached to this notice.

Each employee who wishes to participate must elect to have a portion of his
or her compensation withheld and deposited into a SIMPLE-IRA account. A written
election form that can be used for this purpose is also enclosed. You can also
use any other election form that provides the same information.

Finally, each employee who elects to participate must open a Skyline Funds
SIMPLE-IRA account. A copy of the SIMPLE-IRA application form should also be
furnished to each eligible employee. If the employer makes contributions to all
eligible employees, rather than just the employees who elect to participate, and
any employee fails to complete a SIMPLE-IRA application, the employer may
complete the application for the employee.

Form 5304-SIMPLE and the attached notification and election forms are
promulgated by the Internal Revenue Service, not by Skyline Funds. Copies of
these forms are provided solely as a convenience, and Skyline Funds has no
responsibility for these forms or the manner in which they are prepared or
utilized by the employer. Each employer may also use individually drafted
documents to establish a SIMPLE-IRA plan, or to notify employees or allow them
to elect deferrals. CONSULT YOUR OWN TAX AND LEGAL ADVISORS BEFORE USING THESE
FORMS.
<PAGE>

<S><C>
Form 5304-SIMPLE SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES OF OMB NO. 1545-1502
(DECEMBER 1996)
SMALL EMPLOYERS (SIMPLE) DO NOT FILE WITH
(NOT SUBJECT TO THE DESIGNATED FINANCIAL INSTITUTION RULES) THE INTERNAL
DEPARTMENT OF THE TREASURY REVENUE SERVICE
INTERNAL REVENUE SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
establishes the following simple
- ------------------------------------------------------------------------------------------------
NAME OF EMPLOYER

plan under section 408(p) of the Internal Revenue Code and pursuant to the instructions contained in this form.
- ------------------------------------------------------------------------------------------------------------------------------------
ARTICLE I--EMPLOYEE ELIGIBILITY REQUIREMENTS (Complete appropriate box(es) and blanks--see instructions.)
- ------------------------------------------------------------------------------------------------------------------------------------

1 GENERAL ELIGIBILITY REQUIREMENTS. The Employer agrees to permit salary reduction contributions to be made in each
calendar year to the SIMPLE IRA established by each employee who meets the following requirements (SELECT EITHER 1a or
1b):
a / / FULL ELIGIBILITY. All employees are eligible.
b / / LIMITED ELIGIBILITY. Eligibility is limited to employees who are described in both (i) and (ii) below:
(i) CURRENT COMPENSATION. Employees who are reasonably expected to receive at least $________ in compensation
(NOT TO EXCEED $5,000) for the calendar year.
(ii) PRIOR COMPENSATION. Employees who have received at least $ ________in compensation (NOT TO EXCEED $5,000)
during any ________calendar year(S) (INSERT 0, 1, OR 2) preceding the calendar year.
2 EXCLUDABLE EMPLOYEES (OPTIONAL)
/ / The Employer elects to exclude employees covered under a collective bargaining agreement for which retirement
benefits were the subject of good faith bargaining.
- ------------------------------------------------------------------------------------------------------------------------------------
ARTICLE II--SALARY REDUCTION AGREEMENTS (COMPLETE THE BOX AND BLANK, IF APPROPRIATE--SEE INSTRUCTIONS.)
- ------------------------------------------------------------------------------------------------------------------------------------

1 SALARY REDUCTION ELECTION. An eligible employee may make a salary reduction election to have his or her compensation for
each pay period reduced by a percentage. The total amount of the reduction in the employee's compensation cannot exceed
$6,000* for any calendar year.

2 TIMING OF SALARY REDUCTION ELECTIONS

a For a calendar year, an eligible employee may make or modify a salary reduction election during the 60-day period
immediately preceding January 1 of that year. However, for the year in which the employee becomes eligible to make salary
reduction contributions, the period during which the employee may make or modify the election is a 60-day period that
includes either the date the employee becomes eligible or the day before.
b In addition to the election periods in 2a, eligible employees may make salary reduction elections or modify prior
elections ________________________________________________________________________________________________________________
_________________________________(IF THE EMPLOYER CHOOSES THIS OPTION, INSERT A PERIOD OR PERIODS (E.G. SEMI-ANNUALLY,
QUARTERLY, MONTHLY, OR DAILY) THAT WILL APPLY UNIFORMLY TO ALL ELIGIBLE EMPLOYEES.)
c No salary reduction election may apply to compensation that an employee received, or had a right to immediately receive,
before execution of the salary reduction election.
d An employee may terminate a salary reduction election at any time during the calendar year. / / If this box is checked, an
employee who terminates a salary reduction election not in accordance with 2b may not resume salary reduction
contributions during the calendar year.
- ------------------------------------------------------------------------------------------------------------------------------------
ARTICLE III--CONTRIBUTIONS (COMPLETE THE BLANK, IF APPROPRIATE--SEE INSTRUCTIONS.)
- ------------------------------------------------------------------------------------------------------------------------------------

1 SALARY REDUCTION CONTRIBUTIONS. The amount by which the employee agrees to reduce his or her compensation will be
contributed by the Employer to the employee's SIMPLE IRA.
2 OTHER CONTRIBUTIONS
a MATCHING CONTRIBUTIONS
(i) For each calendar year, the Employer will contribute a matching contribution to each eligible employee's SIMPLE
IRA equal to the employee's salary reduction contributions up to a limit of 3% of the employee's compensation
for the calendar year.
(ii) The Employer may reduce the 3% limit for the calendar year in (i) only if:
(1) The limit is not reduced below 1%; (2) The limit is not reduced for more than 2 calendar years during the
5-year period ending with the calendar year the reduction is effective; and (3) Each employee is notified of the
reduced limit within a reasonable period of time before the employees' 60-day election period for the calendar
year (DESCRIBED IN ARTICLE II, ITEM 2a).
b NONELECTIVE CONTRIBUTIONS
(i) For any calendar year, instead of making matching contributions, the Employer may make nonelective contributions
equal to 2% of compensation for the calendar year to the SIMPLE IRA of each eligible employee who has at least
$_________ (NOT MORE THAN $5,000) in compensation for the calendar year. No more than $160,000* in
compensation can be taken into account in determining the nonelective contribution for each eligible employee.
(ii) For any calendar year, the Employer may make 2% nonelective contributions instead of matching contributions only
if:
(1) Each eligible employee is notified that a 2% nonelective contribution will be made instead of a matching
contribution; and
(2) This notification is provided within a reasonable period of time before the employees' 60-day election
period for the calendar year (DESCRIBED IN ARTICLE II, ITEM 2a).
3 TIME AND MANNER OF CONTRIBUTIONS
a The Employer will make the salary reduction contributions (described in 1 above) for each eligible employee to the SIMPLE
IRA established at the financial institution selected by that employee no later than 30 days after the end of the month in
which the money is withheld from the employee's pay. See instructions.
b The Employer will make the matching or nonelective contributions (described in 2a and 2b above) for each eligible employee
to the SIMPLE IRA established at the financial institution selected by that employee no later than the due date for filing
the Employer's tax return, including extensions, for the taxable year that includes the last day of the calendar year for
which the contributions are made.

- ------------------------------------------------------------------------------------------------------------------------------------

FOR PAPERWORK REDUCTION ACT NOTICE, SEE INSTRUCTIONS. . . . . Cat No. 23377W Form 5304-SIMPLE (12-96)
<PAGE>
Form 5304-SIMPLE (12-96) Page 2
- ------------------------------------------------------------------------------------------------------------------------------------
ARTICLE IV--OTHER REQUIREMENTS AND PROVISIONS
- ------------------------------------------------------------------------------------------------------------------------------------
1 CONTRIBUTIONS IN GENERAL. The Employer will make no contributions to the SIMPLE IRAs other than salary reduction
contributions (DESCRIBED IN ARTICLE III, ITEM 1) and matching or nonelective contributions (DESCRIBED IN ARTICLE III,
ITEMS 2a AND 2b).
2 VESTING REQUIREMENTS. All contributions made under this SIMPLE plan are fully vested and nonforfeitable.
3 NO WITHDRAWAL RESTRICTIONS. The Employer may not require the employee to retain any portion of the contributions in his
or her SIMPLE IRA or otherwise impose any withdrawal restrictions.
4 SELECTION OF IRA TRUSTEE. The employer must permit each eligible employee to select the financial institution that will
serve as the trustee, custodian, or issuer of the SIMPLE IRA to which the employer will make all contributions on behalf of
that employee.
5 AMENDMENTS TO THIS SIMPLE PLAN. This SIMPLE plan may not be amended except to modify the entries inserted in the blanks
or boxes provided in ARTICLES I, II, III, VI, and VII
6 EFFECTS OF WITHDRAWALS AND ROLLOVERS
a An amount withdrawn from the SIMPLE IRA is generally includible in gross income. However, a SIMPLE IRA balance may be
rolled over or transferred on a tax-free basis to another IRA designed solely to hold funds under a SIMPLE plan. In
addition, an individual may roll over or transfer his or her SIMPLE IRA balance to any IRA on a tax-free basis after a
2-year period has expired since the individual first participated in a SIMPLE plan. Any rollover or transfer must comply
with the requirements under section 408.
b If an individual withdraws an amount from a SIMPLE IRA during the 2-year period beginning when the individual first
participated in a SIMPLE plan and the amount is subject to the additional tax on early distributions under section 72(t),
this additional tax is increased from 10% to 25%.
- ------------------------------------------------------------------------------------------------------------------------------------
ARTICLE V--DEFINITIONS
- ------------------------------------------------------------------------------------------------------------------------------------
1 COMPENSATION
a GENERAL DEFINITION OF COMPENSATION. Compensation means the sum of the wages, tips, and other compensation from the
Employer subject to federal income tax withholding (as described in section 6051(a)(3)) and the employee's salary
reduction contributions made under this plan, and, if applicable, elective deferrals under a section 401(k) plan, a
SARSEP, or a section 403(b) annuity contract and compensation deferred under a section 457 plan required to be reported by
the Employer on Form W-2 (as described in section 6058(a)(8)).
b COMPENSATION FOR SELF-EMPLOYED INDIVIDUALS. For self-employed individuals, compensation means the net earnings from self-
employment determined under section 1402(a) prior to subtracting any contributions made pursuant to this plan on behalf of
the individual.
2 EMPLOYEE. Employee means a common-law employee of the Employer. The term employee also includes a self-employed
individual and a leased employee described in section 414(n) but does not include a nonresident alien who received no
earned income from the Employer that constitutes income from sources within the United States.
3 ELIGIBLE EMPLOYEE. An eligible employee means an employee who satisfies the conditions in ARTICLE I, ITEM 1 and is not
excluded under ARTICLE 1, ITEM 2.
4 SIMPLE IRA. A SIMPLE IRA is an individual retirement account described in section 408(a), or an individual retirement
annuity described in section 408(b), to which the only contributions that can be made are contributions under a SIMPLE
plan and rollovers or transfers from another SIMPLE IRA.
- ------------------------------------------------------------------------------------------------------------------------------------
ARTICLE VI--PROCEDURES FOR WITHDRAWAL. (THE EMPLOYER WILL PROVIDE EACH EMPLOYEE WITH THE PROCEDURES FOR
WITHDRAWALS OF CONTRIBUTIONS RECEIVED BY THE FINANCIAL INSTITUTION SELECTED BY THAT EMPLOYEE, AND THAT FINANCIAL
INSTITUTION'S NAME AND ADDRESS (BY ATTACHING THAT INFORMATION OR INSERTING IT IN THE SPACE BELOW) UNLESS: (1) THAT
FINANCIAL INSTITUTION'S PROCEDURES ARE UNAVAILABLE. OR (2) THAT FINANCIAL INSTITUTION PROVIDES THE PROCEDURES DIRECTLY TO
THE EMPLOYEE. SEE EMPLOYEE NOTIFICATION SECTION IN THE INSTRUCTIONS.)
- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------
ARTICLE VII--EFFECTIVE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
THIS SIMPLE PLAN IS EFFECTIVE______________________________________________________________________________. (SEE INSTRUCTIONS.)

-- -- -- -- --

- -------------------------------------------------------------------- ----------------------------------------------------------
NAME OF EMPLOYER BY: SIGNATURE DATE

- ------------------------------------------------------------------- ----------------------------------------------------------
ADDRESS OF EMPLOYER NAME AND TITLE

*THIS AMOUNT WILL BE ADJUSTED TO REFLECT ANY ANNUAL COST-OF-LIVING INCREASES ANNOUNCED BY THE IRS.
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

Form 5304-SIMPLE (12-96) Page 3
- --------------------------------------------------------------------------------
MODEL NOTIFICATION TO ELIGIBLE EMPLOYEES

I. OPPORTUNITY TO PARTICIPATE IN THE SIMPLE PLAN
You are eligible to make salary reduction contributions to the ____________
SIMPLE plan. This notice and the attached summary description provide you with
information that you should consider before you decide whether to start,
continue, or change your salary reduction agreement.

II. EMPLOYER CONTRIBUTION ELECTION
For the __________calendar year, the employer elects to contribute to your
SIMPLE IRA (EMPLOYER MUST SELECT EITHER (1), (2), OR (3)):
/ / (1) A matching contribution equal to your salary reduction
contributions up to a limit of 3% of your compensation for the year;
/ / (2) A matching contribution equal to your salary reduction
contributions up to a limit of ___________% (EMPLOYER MUST INSERT A
NUMBER FROM 1 TO 3 AND IS SUBJECT TO CERTAIN RESTRICTIONS) of your
compensation for the year; or
/ / (3) A nonelective contribution equal to 2% of your compensation for
the year (limited to $160,000*) if you are an employee who makes at
least $_________(EMPLOYER MUST INSERT AN AMOUNT THAT IS $5,000 OR
LESS) in compensation for the year.
III. ADMINISTRATIVE PROCEDURES
If you decide to start or change your salary reduction agreement, you must
complete the salary reduction agreement and return it to_______________________
___________________________________________________(EMPLOYER SHOULD DESIGNATE A
PLACE OR INDIVIDUAL) by ________ (EMPLOYER SHOULD INSERT A DATE THAT IS NOT LESS
THAN 60 DAYS AFTER NOTICE IS GIVEN).

IV. EMPLOYEE SELECTION OF FINANCIAL INSTITUTION
You must select the financial institution that will serve as the trustee,
custodian, or issuer of your SIMPLE IRA and notify your employer of
your selection.
- --------------------------------------------------------------------------------
MODEL SALARY REDUCTION AGREEMENT
I. SALARY REDUCTION ELECTION
Subject to the requirements of the SIMPLE plan of ______________(NAME OF
EMPLOYER) I authorize_____% or $_________ (which equals ________% of my current
rate of pay)to be withheld from my pay for each pay period and contributed to my
SIMPLE IRA as a salary contribution.

II. MAXIMUM SALARY REDUCTION
I understand that the total amount of my salary reduction contributions in
any calendar year cannot exceed $6,000.*

III. DATE SALARY REDUCTION BEGINS
I understand that my salary reduction contributions will start as soon as
permitted under the SIMPLE plan and as soon as administratively
feasible or, if later,____________ (FILL IN THE DATE YOU WANT THE SALARY
REDUCTION CONTRIBUTIONS TO BEGIN. THE DATE MUST BE AFTER YOU SIGN THIS
AGREEMENT.)

IV. EMPLOYEE SELECTION OF FINANCIAL INSTITUTION
I select the following financial institution to serve as the trustee,
custodian, or issuer of my SIMPLE IRA.

----------------------------------------------------------------
Name of financial institution

----------------------------------------------------------------
Address of financial institution

----------------------------------------------------------------
SIMPLE IRA account name and number

I understand that I must establish a SIMPLE IRA to receive any
contributions made on my behalf under this SIMPLE plan. If the information
regarding my SIMPLE IRA is incomplete when I first submit my salary reduction
agreement, I realize that it must be completed by the date contributions must be
made under the SIMPLE plan. If fail to update my agreement to provide this
information by that date, I understand that my employer may select a financial
institution for my SIMPLE IRA.

V. DURATION OF ELECTION

This salary reduction agreement replaces any earlier agreement and will
remain in effect as long as I remain an eligible employee under the
SIMPLE plan or until I provide my employer with a request to end my salary
reduction contributions or provide a new salary reduction agreement
as permitted under this SIMPLE plan.

Signature of employee
-----------------------------------------------

Date
-----------------------------------------------

*THIS AMOUNT WILL BE ADJUSTED TO REFLECT ANY ANNUAL COST-OF-LIVING INCREASES
ANNOUNCED BY THE IRS.

- --------------------------------------------------------------------------------

<PAGE>
Form 5304-SIMPLE (12-96) Page 4
- --------------------------------------------------------------------------------

PAPERWORK REDUCTION
ACT NOTICE
You are not required to provide the information requested on a form that is
subject to the Paperwork Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of
any Internal Revenue law. Generally, tax returns and return information are
confidential, as required by section 6103.

The time needed to complete this form will vary depending on individual
circumstances. The estimated average time is:
RECORDKEEPING . . 3 hr., 38 min.
LEARNING ABOUT THE
LAW OR THE FORM . . 2 hr., 26 min.
PREPARING THE FORM. . .. 47 min.
If you have comments concerning the accuracy of these time estimates or
suggestions for making this form simpler, we would be happy to hear from you.
You can write to the Tax Forms Committee, Western Area Distribution Center,
Rancho Cordova, CA 95743-00001. DO NOT send this form to this address.
Instead, keep it for your records.

GENERAL INSTRUCTIONS
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE UNLESS OTHERWISE NOTED.
NOTE: THE INSTRUCTIONS FOR THIS FORM ARE DESIGNED TO ASSIST IN THE
ESTABLISHMENT AND ADMINISTRATION OF THE SIMPLE PLAN; THEY ARE NOT INTENDED TO
SUPERSEDE ANY PROVISIONS IN THE SIMPLE PLAN.

PURPOSE OF FORM
Form 5304-SIMPLE is a model Savings Incentive Match Plan for Employees of Small
Employers (SIMPLE) plan document that an employer may use to establish a SIMPLE
plan described in section 408(p), under which each eligible employee is
permitted to select the financial institution for his or her SIMPLE IRA. It is
important that you keep this form for your records. DO NOT file this form with
the IRS. For more information, see PUB. 560, Retirement Plans for the Self-
Employed, and PUB. 590, individual Retirement Arrangements (IRAs).

INSTRUCTIONS FOR THE EMPLOYER
WHICH EMPLOYERS MAY ESTABLISH AND MAINTAIN A SIMPLE PLAN?
You are eligible to establish and maintain a SIMPLE plan only if you meet both
of the following requirements:
1. Last calendar year, you had no more than 100 employees (including
self-employed individuals) who earned $5,000 or more in compensation from you
during the year. If you have a SIMPLE plan but later exceed this 100-employee
limit, you will be treated as meeting the limit for the two years following the
calendar year in which you last satisfied the limit. If the failure to continue
to satisfy the 100-employee limit is due to an acquisition or similar
transaction involving your business, special rules apply. Consult your tax
advisor to find out if you can still maintain the plan after the transaction.
2. You do not maintain during any part of the calendar year another
qualified plan with respect to which contributions are made, or benefits are
accrued, for service in the calendar year. For this purpose, a qualified plan
(defined in section 219(g)(5)) includes a qualified pension plan, a profit-
sharing plan, a stock bonus plan, a qualified annuity plan, a tax-sheltered
annuity plan, and a simplified employee pension (SEP) plan.
Certain related employers (trades or businesses under common control) must
be treated as a single employer for purposes of the SIMPLE requirements. These
are: (1) a controlled group of corporations under section 414(b); (2) a
partnership or sole proprietorship under common control under section 414(c); or
(3) an affiliated service group under section 414(m). In addition, if you have
leased employees required to be treated as your own employees under the rules of
section 414(n), then you must count all such leased employees for the
requirements listed above.

WHAT IS A SIMPLE PLAN?
A SIMPLE plan is a written arrangement that provides you and your employees with
a simplified way to make contributions to provide retirement income for your
employees. Under a SIMPLE plan, employees may choose whether to make salary
reduction contributions to the SIMPLE plan rather than receiving these amounts
as part of their regular compensation. In addition, you will contribute
matching or nonelective contributions on behalf of eligible employees (see
EMPLOYEE ELIGIBILITY REQUIREMENTS below and CONTRIBUTIONS on page 5). All
contributions under this plan will be deposited into a SIMPLE individual
retirement account or annuity established for each eligible employee with the
financial institution selected by each eligible employee (SIMPLE IRA).
The information provided below is intended to help you understand and
administer the rules of your SIMPLE plan.

WHEN TO USE FORM
5304-SIMPLE
A SIMPLE plan may be established by using this Model Form or any other document
that satisfies the statutory requirements. Thus, you are not required go use
Form 5304-SIMPLE to establish and maintain a SIMPLE plan. Further do not use
Form 5304-SIMPLE if:
1. You want to require that all SIMPLE plan contributions initially go to
a financial institution designated by you. (i.e., you do not want to permit
each of your eligible employees to choose a financial institution that will
initially receive contributions.) However, FORM 5305-SIMPLE, Savings Incentive
Match Plan for Employees of Small Employers (SIMPLE) (for Use With a Designated
Financial Institution), may be used in such a case;
2. You want employees who are nonresident aliens receiving no earned
income from you that constitutes income from sources within the United States to
be eligible under this plan; or
3. You want to establish a SIMPLE 401(k) plan.

COMPLETING FORM
5304-SIMPLE
Page 1 and 2 of Form 5304-SIMPLE contain the operative provisions of your SIMPLE
plan. This SIMPLE plan is considered adopted when you have completed all
appropriate

<PAGE>
Form 5304-SIMPLE (12-96) Page 5
- --------------------------------------------------------------------------------

boxes and blanks and it has been executed by you.
The SIMPLE plan is a legal document with important tax consequences for you
and your employees. You may want to consult with your attorney or tax advisor
before adopting this plan.

EMPLOYEE ELIGIBILITY
REQUIREMENTS (ARTICLE 1)
Each year for which this SIMPLE plan is effective, you must permit salary
reduction contributions to be made by all of your employees who are reasonably
expected to receive at least $5,000 in compensation from you during the year,
and who received at least $5,000 in compensation from you in any 2 preceding
years. However, you can expand the group of employees who are eligible to
participate in the SIMPLE plan by completing the options provided in Article I,
items 1a and 1b. To choose full eligibility, check the box in Article I, item
1a. Alternatively, to choose limited eligibility, check the box in Article I,
item 1b, and then insert $5,000 or a lower compensation amount (including zero)
and 2 or a lower number of years of service in the blanks in (i) and (ii) of
Article I, item 1b.
In addition, you can exclude from participation those employees covered
under a collective bargaining agreement for which retirement benefits were the
subject of good faith bargaining. You may do this by checking the box in
Article I, item 2.

SALARY REDUCTION
AGREEMENTS (ARTICLE II)
As indicated in Article II, item 1, a salary reduction agreement permits an
eligible employee to make a salary reduction election to have his or her
compensation for each pay period reduced by a percentage (expressed as a
percentage or dollar amount). The total amount of the reduction in the
employee's compensation cannot exceed $6,000* for any calendar year.

TIMING OF SALARY REDUCTION ELECTIONS
For a calendar year, an eligible employee may make or modify a salary reduction
election during the 60-day period immediately preceding January 1 of that year.
However, for the year in which the employee becomes eligible to make salary
reduction contributions, the period during which the employee may make or modify
the election is a 60-day period that includes either the date the employee
becomes eligible or the day before.
You can extend the 60-day election periods to provide additional
opportunities for eligible employees to make or modify salary reduction
elections using the blank in Article II, item 2b. For example, you can provide
that eligible employees may make new salary reduction elections or modify prior
elections for any calendar quarter during the 30 days before that quarter.
You may use (but are not required to) the MODEL SALARY REDUCTION AGREEMENT
on page 3 to enable eligible employees to make or modify salary reduction
elections.
Employees must be permitted to terminate their salary reduction elections
at anytime. They may resume salary reduction contributions if permitted under
Article II, item 2b. However, by checking the box in Article II, item 2d, you
may prohibit an employee who terminates a salary reduction election outside the
normal election cycle from resuming salary reduction contributions during the
remainder of the calendar year.

CONTRIBUTIONS (ARTICLE III)
Only contributions described below may be made to this SIMPLE plan. No
additional contributions may be made.

SALARY REDUCTION CONTRIBUTIONS
As indicated in Article III, item 1, salary reduction contributions consist of
the amount by which the employee agrees to reduce his or her compensation. You
must contribute the salary reduction contributions to the financial institution
selected by each eligible employee.

OTHER CONTRIBUTIONS
MATCHING CONTRIBUTIONS
In general, you must contribute a matching contribution to each eligible
employee's SIMPLE IRA equal to the employee's salary reduction contributions.
This matching contribution cannot exceed 3% of the employee's compensation. See
DEFINITION OF COMPENSATION, below.
You may reduce this 3% limit to a lower percentage, but not lower than 1%.
You cannot lower the 3% limit for more than 2 calendar years out of the 5-year
period ending with the calendar year the reduction is effective.
NOTE: IF ANY YEAR IN THE 5-YEAR PERIOD DESCRIBED ABOVE IS A YEAR BEFORE YOU
FIRST ESTABLISHED ANY SIMPLE PLAN, YOU WILL BE TREATED AS MAKING A 3% MATCHING
CONTRIBUTION FOR THAT YEAR FOR PURPOSES OF DETERMINING WHEN YOU MAY REDUCE THE
EMPLOYER MATCHING CONTRIBUTION.
In order to elect this option, you must notify the employees of the reduced
limit within a reasonable period of time before the applicable 60-day election
periods for the year. See TIMING OF SALARY REDUCTION ELECTIONS above.
NONELECTIVE CONTRIBUTIONS.--Instead of making a matching contribution, you may,
for any year, make a nonelective contribution equal to 2% of compensation for
each eligible employee who has at least $5,000 in compensation for the year.
Nonelective contributions may not be based on more than $160,000* of
compensation.
In order to elect to make nonelective contributions, you must notify
employees within a reasonable period of time before the applicable 60-day
election periods for such year. See TIMING OF SALARY REDUCTION ELECTIONS above.
NOTE: Insert $5,000 in Article III, item 2b(i) to impose the $5,000
compensation requirement. You may expand the group of employees who are
eligible for nonelective contributions by inserting a compensation amount lower
than $5,000.

EFFECTIVE DATE (ARTICLE VII)
Insert in Article VII, the date you want the provisions of the SIMPLE plan to
become effective. You must insert January 1 of the applicable year unless this
is the first year for which you are adopting any SIMPLE plan. If this is the
first year for which you are adopting a SIMPLE plan, you may insert any date
between January 1 and October 1, inclusive of the applicable year. Do not
insert any date before January 1, 1997.

*This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
<PAGE>

Form 5304-SIMPLE (12-96) Page 6
- --------------------------------------------------------------------------------

OTHER IMPORTANT
INFORMATION ABOUT YOUR
SIMPLE PLAN

TIMING OF SALARY REDUCTION
CONTRIBUTIONS

Under the Internal Revenue Code, for all SIMPLE plans, the employer must make
the salary reduction contributions to the financial institution selected by each
eligible employee for his or her SIMPLE IRA no later than the 30th day of the
month following the month in which the amounts would otherwise have been payable
to the employee in cash. The Department of Labor has indicated that most SIMPLE
plans are also subject to Title I of the Employees Retirement Income Security
Act of 1974 (ERISA). The Department of Labor has informed the IRS that, as a
matter of enforcement policy, for these plans, salary reduction contributions
must be made to each participant's SIMPLE IRA as of the earliest date on which
those contributions can reasonably be segregated from the employer's general
assets, but in no event later than the 30-day deadline described above.

DEFINITION OF COMPENSATION

"Compensation" means the amount described in section 6051(a)(3) (wages, tips,
and other compensation from the employer subject to federal income tax
withholding under section 3401(a)). Usually, this is the amount shown in box 1
of FORM W-2, Wage and Tax Statement. For further information, see Pub. 15
(Circular E), Employer's Tax Guide. Compensation also includes the salary
reduction contributions made under this plan, and, if applicable, compensation
deferred under a section 457 plans. In determining an employee's compensation
for prior years, the employee's elective deferrals under a section 401(k) plan,
a SARSEP, or a section 403(b) annuity contract are also included in the
employee's compensations.
For self-employed individuals, compensation means the net earnings from
self-employment determined under section 1402(a) prior to subtracting any
contributions made pursuant to this SIMPLE plan on behalf of the individual.

EMPLOYEE NOTIFICATION
You must notify each eligible employee prior to the employee's 60-day election
period described above that he or she can make or change salary reduction
elections and select the financial institutional that will serve as the trustee,
custodian, or issuer of the employee's SIMPLE IRA. In this notification, you
must indicate whether you will provide:
1. A matching contribution equal to your employee's salary reduction
contributions up to a limit of 3% of their compensation;
2. A matching contribution equal to your employees' salary reduction
contributions subject to a percentage limit that is between 1 and 3% of their
compensation; or
3. A nonelective contribution equal to 2% of your employees'
compensation.
You can use the MODEL NOTIFICATION TO ELIGIBLE EMPLOYEES on page 3 to
satisfy these employee notification requirements for this SIMPLE plan. A
SUMMARY DESCRIPTION must also be provided to eligible employees at this time.
This summary description requirement may be satisfied by providing a complete
copy of pages 1 and 2 of Form 5304-SIMPLE (including the information described
in Article VI -- Procedures for Withdrawal).
If you fail to provide the employee notification (including the summary
description) described above, you will be liable for a penalty of $50 per day
until the notification is provided. If you can show that the failure was due to
reasonable cause, the penalty will not be imposed.
If the summary description information with respect to the financial
institution (i.e., the name and address of the financial institution and its
withdrawal procedures) is not available at the time the employee must be given
the summary description, you must provide the summary description without this
information. In such a case, you will have reasonable cause for not including
this information with respect to the financial institution in the summary
description, but only if you see to it that this information is provided to the
employee as soon as administratively feasible once the financial institution has
been selected.

REPORTING REQUIREMENTS

You are not required to file any annual information returns for your SIMPLE
plan, such as Forms 5500, 5500-C/R, or 5500-EZ. However, you must report to the
IRS which eligible employees are active participants in the SIMPLE plan and the
amount of your employees' salary reduction contributions to the salary SIMPLE
plan on Form W-2. These contributions are subject to social security, medicare,
railroad retirement, and federal unemployment tax.

DEDUCTING CONTRIBUTIONS
Contributions to this SIMPLE plan are deductible in your tax year containing the
end of the calendar year for which the contributions are made.
Contributions will be treated as made for a particular tax year if they are
made for that year and are made by the due date (including extensions) of your
income tax return for that year.

SUMMARY DESCRIPTION
Each year the SIMPLE plan is in effect, the financial for the SIMPLE IRA of each
eligible employee must provide the employer the information described in section
408(I)(2)(B). This requirement may be satisfied by providing the employer a
current copy of Form 5304-SIMPLE (including instructions) together with the
financial institution's procedures for withdrawals from SIMPLE IRAs established
at that financial institution, including the financial institution's name and
address. The summary description must be received by the employer in sufficient
time to comply with the EMPLOYEE NOTIFICATION requirements above.
There is a penalty of $50 per day imposed on the financial institution for
each failure by the financial institution to provide the summary description
described above. However, if the failure was due to reasonable cause, the
penalty will not be imposed.

<PAGE>
This application is to:
/ / Establish a new account
/ / Change an existing account

- --------------------------------------------------------------------------------
SKYLINE FUNDS ACCOUNT NUMBER

- --------------------------------------------------------------------------------
MAILING INSTRUCTIONS
- --------------------------------------------------------------------------------

Regular Delivery: Overnight Express:

IF YOU HAVE ANY QUESTIONS, PLEASE CALL SKYLINE FUNDS AT 800-458-5222.

- --------------------------------------------------------------------------------
ACCOUNT REGISTRATION
- --------------------------------------------------------------------------------

Check type of account and complete all information. Unless otherwise indicated,
each account with multiple owners is deemed to be held in joint tenancy with
right of survivorship except where this form of ownership is not recognized
under applicable local law.

TAX IDENTIFICATION NUMBER

---------------------------------------------------------------------------
SOCIAL SECURITY NUMBER OR EMPLOYER NUMBER
(USE MINOR'S SOCIAL SECURITY NUMBER FOR TRANSFER/GIFT TO MINORS)

/ / INDIVIDUAL OR JOINT ACCOUNT

---------------------------------------------------------------------------
INDIVIDUAL OWNER'S FULL NAME

---------------------------------------------------------------------------
JOINT TENANT'S FULL NAME

/ / TRANSFER TO A MINOR

as custodian for
--------------------------------------------
CUSTODIAN'S NAME (ONE NAME ONLY)

under the
--------------------------------------------
MINOR'S NAME

Uniform Transfer/Gift to Minors Act
------------------------
STATE

------------------------
MINOR'S DATE OF BIRTH

/ / TRUST

---------------------------------------------------------------------------
NAME OF TRUST DATE OF TRUST

---------------------------------------------------------------------------
NAME OF TRUSTEE(S)

/ / ORGANIZATION

---------------------------------------------------------------------------
NAME OF ORGANIZATION

Type: / / Corporation / / Partnership
/ / Other (please specify)
-----------------------------------------

[LOGO]

- --------------------------------------------------------------------------------
APPLICATION

- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

( )
- --------------------------------------------------------------------------------
DAYTIME PHONE

( )
- --------------------------------------------------------------------------------
EVENING PHONE

U.S. Citizen / / Yes / / No

- --------------------------------------------------------------------------------
INITIAL INVESTMENT &
PORTFOLIO OPTIONS
- --------------------------------------------------------------------------------

You must select a Portfolio. Make check payable to the Portfolio in which you
are investing.

Initial investment of $
---------------------------------------------
$1,000 MINIMUM

SKYLINE FUNDS
/ / Special Equities Portfolio (014) (CLOSED TO NEW INVESTORS)
/ / Special Equities II (020)

SKYLINE-PORTICO MONEY MARKET FUND
/ / Money Market Fund (022)
/ / U.S. Government Money Market Fund (023)

- --------------------------------------------------------------------------------
DISTRIBUTION OPTION
- --------------------------------------------------------------------------------

Your distributions will be reinvested in additional shares of the Fund unless
the following boxes are checked. Please mail me a check for each:

/ / Dividend / / Capital gain distribution

- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------

Exchange privilege is AUTOMATIC unless checked below.

Exchanges may only be made to identically registered accounts.

(The Funds reserve the right to record all exchange requests and the exchange
privilege may be changed or withdrawn by the Funds at any time.)

/ / I DO NOT AUTHORIZE TELEPHONE EXCHANGES

<PAGE>
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN
- --------------------------------------------------------------------------------

Regular investments made on / /5th, or / /15th, or / /25th
of $
------------------------------
$50 MINIMUM

/ / Checking or NOW Account / / Savings Account

- --------------------------------------------------------------------------------
CHECKING/NOW OR SAVINGS ACCOUNT NUMBER

- --------------------------------------------------------------------------------
NAME(S) ON ACCOUNT

- --------------------------------------------------------------------------------
NAME OF BANK (MUST BE A MEMBER OF AUTOMATED CLEARING HOUSE - ACH)

- --------------------------------------------------------------------------------
BANK ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

- --------------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER OF ACCOUNT (IF ANY)

- --------------------------------------------------------------------------------
TELEPHONE REDEMPTION
- --------------------------------------------------------------------------------

You can redeem shares in your Skyline Funds account by telephone. All
redemption proceeds will be sent to the address below:

/ / Payment to be made to my address of record, or
/ / Payment to my brokerage account listed below, or
/ / Payment to my financial institution listed below

- --------------------------------------------------------------------------------
BANK NAME/ACCOUNT # BANK ABA ROUTING NO.

- --------------------------------------------------------------------------------
BROKERAGE FIRM (if applicable) ACCOUNT NO.

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

- --------------------------------------------------------------------------------
DUPLICATE STATEMENT
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
INVESTMENT ADVISOR# RR#

- --------------------------------------------------------------------------------
FIRM NAME ADVISOR NAME

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

( ) ( )
- --------------------------------------------------------------------------------
PHONE FAX

- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE

Are you a broker dealer? / /Yes / /No
If yes, please provide broker dealer
name
----------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SHAREHOLDER AUTHORIZATION
- --------------------------------------------------------------------------------

Please establish a shareholder account in accordance with the instructions on
this application. I (we) certify that I am (we are) of legal age and have
received and read the prospectus and agree to its terms. APPLICATIONS WHICH ARE
NOT SIGNED OR FULLY COMPLETED WILL BE REJECTED. This application may be used to
open new account(s) or to revise existing account(s).

I (we) understand that the Exchange Privilege will apply to my (our) account
unless I (we) have specifically declined the privilege. I (we) understand
that by signing this application, unless the Privilege is declined, I (we)
agree that neither the Funds nor their Transfer Agent, agents, officers,
trustees, or employees will be liable for any loss, liability, cost or
expense for acting on instructions given under the Privilege, placing the
risk of any loss on me (us). See "How to Redeem Shares--By Exchange" in the
prospectus.

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/ / SELECT ONLY IF YOU ARE PARTICIPATING IN THE AUTOMATIC INVESTMENT PLAN
I (we) have read and understand the guidelines for Skyline Funds Automatic
Investment Plan. I (we) also understand that the Plan may be terminated or
modified at any time without notice by Skyline Funds or Firstar Trust
Company.
- --------------------------------------------------------------------------------

UNDER PENALTIES OF PERJURY, THE UNDERSIGNED HEREBY CERTIFY (1) THAT THE SOCIAL
SECURITY NUMBER GIVEN IS CORRECT AND (2) THAT THE ACCOUNT OWNER(S) IS (ARE) NOT
SUBJECT TO BACKUP WITHHOLDING BECAUSE (a) THE UNDERSIGNED HAVE NOT BEEN NOTIFIED
OF BEING SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL
INTEREST OR DIVIDENDS, OR (b) THE I.R.S. HAS PROVIDED NOTIFICATION THAT THE
ACCOUNT OWNER(S) IS (ARE) NO LONGER SUBJECT TO BACKUP WITHHOLDING. (CROSS OUT
(2) IF IT IS NOT CORRECT.)

THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.

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SIGNATURE (OWNER, TRUSTEE) DATE

- --------------------------------------------------------------------------------
SIGNATURE (JOINT OWNER, CO-TRUSTEE) DATE

Funds Distributor, Inc., Distributor
05/01/97

<PAGE>
This application is to:
/ / Establish a new account
/ / Change an existing account

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SKYLINE FUNDS ACCOUNT NUMBER

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MAILING INSTRUCTIONS
- --------------------------------------------------------------------------------

Regular Delivery: Overnight Express:

IF YOU HAVE ANY QUESTIONS, PLEASE CALL SKYLINE FUNDS AT 800-458-5222.

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ACCOUNT REGISTRATION
- --------------------------------------------------------------------------------

TAX IDENTIFICATION NUMBER

---------------------------------------------------------------------------
SOCIAL SECURITY NUMBER OR EMPLOYER NUMBER
(USE MINOR'S SOCIAL SECURITY NUMBER FOR TRANSFER/GIFT TO MINORS)

/ / INDIVIDUAL OR JOINT ACCOUNT

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INDIVIDUAL OWNER'S FULL NAME

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JOINT TENANT'S FULL NAME

/ / TRANSFER TO A MINOR

as custodian for
--------------------------------------------
CUSTODIAN'S NAME (ONE NAME ONLY)

under the
--------------------------------------------
MINOR'S NAME

Uniform Transfer/Gift to Minors Act
------------------------
STATE

------------------------
MINOR'S DATE OF BIRTH

/ / TRUST

---------------------------------------------------------------------------
NAME OF TRUST DATE OF TRUST

---------------------------------------------------------------------------
NAME OF TRUSTEE(S)

/ / ORGANIZATION

---------------------------------------------------------------------------
NAME OF ORGANIZATION

Type: / / Corporation / / Partnership
/ / Other (please specify)
-----------------------------------------

[LOGO]

- --------------------------------------------------------------------------------
APPLICATION

- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ADDRESS

- --------------------------------------------------------------------------------
CITY/STATE/ZIP

( )
- --------------------------------------------------------------------------------
DAYTIME PHONE

( )
- --------------------------------------------------------------------------------
EVENING PHONE

U.S. Citizen / / Yes / / No

You must select a Portfolio. Make check payable to the Portfolio in which you
are investing.

Initial investment of $
---------------------------------------------
$1,000 MINIMUM

SKYLINE FUNDS
/ / Contrarian Equities