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SKYLINE SMALL CAP CONTRARIAN
Subscriptions for shares of Skyline Small Cap Contrarian (the 'Portfolio') are
being solicited during an initial offering period currently scheduled from
November 13, 1997 through December 15, 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
December 15, 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 13, 1997 to
Prospectus dated November 13, 1997 of Skyline Funds
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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 13, 1997
SKYLINE SMALL CAP CONTRARIAN 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 Small Cap Contrarian should reflect lower valuations and therefore more
potential for capital appreciation should profitability improve.
Skyline Small Cap Contrarian emphasizes investments in companies whose
outstanding shares have an aggregate market value between $50 million and $2
billion.
Skyline Small Cap Contrarian is a "no-load" fund. There are no sales or
redemption charges, and there are no "12b-1" plans. Skyline Small Cap Contrarian
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 Small Cap Contrarian,
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 Small Cap Contrarian.
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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.
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TABLE OF CONTENTS
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PAGE
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HIGHLIGHTS................................................................... 1
EXPENSE INFORMATION.......................................................... 3
INVESTMENT OBJECTIVE AND POLICIES............................................ 5
RISKS........................................................................ 5
INVESTMENT RESTRICTIONS...................................................... 6
PURCHASING SHARES............................................................ 6
BY CHECK................................................................. 6
BY WIRE.................................................................. 7
PURCHASES THROUGH INTERMEDIARIES......................................... 7
GENERAL SHARE PURCHASE POLICIES.......................................... 7
REDEEMING SHARES............................................................. 8
BY MAIL.................................................................. 8
BY TELEPHONE............................................................. 9
GENERAL REDEMPTION POLICIES.............................................. 9
NET ASSET VALUE.............................................................. 10
SHAREHOLDER SERVICES......................................................... 10
SHAREHOLDER ACCOUNTS..................................................... 10
RETIREMENT PLANS......................................................... 10
EXCHANGE PRIVILEGE....................................................... 10
AUTOMATIC INVESTMENT PLAN................................................ 12
SYSTEMATIC WITHDRAWAL PLAN............................................... 12
DIVIDEND PURCHASE PLAN................................................... 12
DIVIDENDS AND DISTRIBUTIONS.................................................. 13
TAXES........................................................................ 13
MANAGEMENT OF SKYLINE........................................................ 15
THE TRUSTEES............................................................. 15
THE ADVISER.............................................................. 15
PORTFOLIO TRANSACTIONS................................................... 16
PERFORMANCE.............................................................. 16
SKYLINE AND ITS SHARES....................................................... 17
SHARES................................................................... 17
VOTING RIGHTS............................................................ 18
SHAREHOLDER INQUIRIES.................................................... 18
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HIGHLIGHTS
SKYLINE SMALL CAP CONTRARIAN (the "Portfolio") is a series of Skyline Funds
("Skyline"). The Portfolio is a "no-load" fund. There are no sales or redemption
charges.
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INVESTMENT OBJECTIVE SKYLINE SMALL CAP CONTRARIAN seeks long-term
AND POLICIES 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. SKYLINE
SMALL CAP CONTRARIAN 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 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. (See "Risks.")
MINIMUM PURCHASE $1,000 for initial investments and $100 for
subsequent investments. (See "Purchasing
Shares.")
DIVIDENDS AND CAPITAL Income dividends and capital gains, if any,
GAINS 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 Small Cap Contrarian and is
responsible for the day-to-day management of
the Portfolio. Mr. Heitman works with a team
of the Adviser's investment
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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 out of which the Adviser
pays all of the Portfolio's ordinary costs
and expenses, except the fees and expenses
of Skyline's non-interested trustees and
organization costs. (See "Management of
Skyline -- THE ADVISER.")
DISTRIBUTOR Funds Distributor, Inc.
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EXPENSE INFORMATION
The following table shows all fees paid by shareholders or assessed against
assets of the Portfolio:
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SKYLINE
SMALL CAP
CONTRARIAN
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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 most operating expenses)(2)................ 1.50%
12b-1 Fees............................................................ none
Other Expenses (after reimbursement).................................. .25%
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Total Operating Expenses.............................................. 1.75%
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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%.
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EXAMPLE
You would pay the following expenses on a $1,000 investment in Skyline Small
Cap Contrarian assuming (1) 5% annual return and (2) redemption at the end of
each time period:
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1 year........................................................ $ 18
3 years....................................................... 55
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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.
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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.
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.
Under normal market conditions, the Portfolio is substantially fully invested.
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.
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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. In addition, under normal market
conditions, at least 65% of the Portfolio's assets will be invested in small cap
stocks. This restriction may be changed by the board of trustees. 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.
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
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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 from its own
resources.
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.
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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.
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.
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.
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.
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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
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 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, which may take up to 15 days from the date of
purchase.
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
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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
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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 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 RESERVES THE RIGHT TO TEMPORARILY OR PERMANENTLY TERMINATE, WITH OR
WITHOUT ADVANCE NOTICE, THE EXCHANGE PRIVILEGE OF ANY INVESTOR WHO MAKES
EXCESSIVE USE OF THE EXCHANGE PRIVILEGE (E.G., MORE THAN FOUR EXCHANGES PER
CALENDAR YEAR). 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,
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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. HOWEVER,
REDEMPTION REQUESTS MAY CONTINUE TO BE MADE AS DESCRIBED UNDER "REDEEMING
SHARES."
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
Market Fund account opened by a Skyline shareholder through the exchange
privilege may be automatically invested in shares of Skyline Small Cap
Contrarian 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
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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
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<PAGE>
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 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.
14
<PAGE>
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 (including the Adviser's fee,
trustees' fees and expenses, and reimbursement of organizational expenses, but
excluding extraordinary
15
<PAGE>
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 primarily
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
16
<PAGE>
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.
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
17
<PAGE>
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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<PAGE>
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
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 AND THE SKYLINE LOGO ARE REGISTERED SERVICE MARKS OF AFFILIATED
MANAGERS GROUP, INC.
- -------------------------------------
S K Y L I N E F U N D S-REGISTERED TRADEMARK-
SKYLINE SMALL CAP CONTRARIAN
- ----------------------------
PROSPECTUS
- ---------------------------------
NOVEMBER 13, 1997
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
<PAGE>
SKYLINE FUNDS-Registered Trademark-
311 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
(312) 913-0900
(800) 458-5222
STATEMENT OF ADDITIONAL INFORMATION
November 13, 1997
- --------------------------------------------------------------------------------
Skyline Small Cap Contrarian 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
Small Cap Contrarian dated November 13, 1997, and any supplement to that
Prospectus. That Prospectus can be obtained without charge by calling or
writing to Skyline.
TABLE OF CONTENTS
PAGE
-----
SKYLINE AND THE PORTFOLIO......................................................2
INVESTMENT OBJECTIVE AND POLICIES..............................................2
INVESTMENT RESTRICTIONS........................................................3
PERFORMANCE INFORMATION........................................................5
MANAGEMENT OF SKYLINE..........................................................9
INVESTMENT ADVISORY SERVICES..................................................11
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................12
PURCHASE AND REDEMPTION OF SHARES.............................................14
TAXES.........................................................................15
GENERAL INFORMATION...........................................................15
<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 Small Cap Contrarian. 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 net 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 in the coming year.
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 net 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
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<PAGE>
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 turnover rate may
vary greatly form year to year, but is expected to be less than 100%. 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 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.
- ----------------------------
(1) The Portfolio will not purchase secruities when its borrowings exceed 5% of
the value of its assets.
3
<PAGE>
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 25% or more of its total assets (valued at the time of
investment) in the securities of companies in a single industry, except
United States 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 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 net 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 of
small-capitalization issues.
4
<PAGE>
F. Invest in financial futures, options, or options on financial
futures.
G. Invest in commodities or commodity contracts.
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:
n
ERV = P(l+T)
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)
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 time to time. Newspapers and
magazines which might mention Skyline and the Portfolio include, but are not
limited to, the following:
5
<PAGE>
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
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.
6
<PAGE>
The performance of the Portfolio may be compared to stock market indexes or
averages, including the following:
<TABLE>
<CAPTION>
<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>
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
7
<PAGE>
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).
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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.
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.
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* Indicates an "interested person" of Skyline, as defined in the Investment
Company Act of 1940.
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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 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.
Aggregate Compensation
Name of Trustee From Skyline Funds
- --------------------------------------------------------------------------------
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
- ----------------------------
(1) Indicates an "interested person" of Skyline, as defined in the 1940 Act.
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INVESTMENT ADVISORY SERVICES
The Adviser provides investment advisory and administrative services to
Skyline for the Portfolio pursuant to an Investment Advisory Agreement dated
November 6, 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 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.
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
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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
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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 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
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<PAGE>
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.
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
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<PAGE>
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.
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
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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.
16
