SKYLINE FUND, DEFS14A, 1998-07-15

SKYLINE FUND
DEFS14A, 1998-07-15

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

SKYLINE FUNDS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11

(1) Title of each class of securities to which transaction applies:

------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

------------------------------------------------------------------------
(5) Total fee paid:

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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE>
SKYLINE FUNDS
311 SOUTH WACKER DRIVE, SUITE 4500
CHICAGO, ILLINOIS 60606

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

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

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

To the Shareholders:

Notice is hereby given that a Special Meeting of Shareholders of Skyline
Special Equities Portfolio, Skyline Small Cap Value Plus and Skyline Small Cap
Contrarian (the "Funds"), each a series of Skyline Funds ("Skyline"), will be
held at 10:00 a.m. on August 28, 1998, at 311 South Wacker Drive, Conference
Center, Chicago, Illinois 60606, for the following purposes:

1. To consider and act upon a proposal to approve new investment
advisory agreements between Skyline on behalf of each of the Funds and
Skyline Asset Management, L.P. (each of the Funds voting separately).

2. To consider and act upon a proposal to elect Richard K. Pearson to
Skyline's Board of Trustees (all Funds voting together).

3. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.

The vote to approve new advisory agreements is required because of a change
in the shareholders of Skyline's general partner. THERE WILL BE NO CHANGE IN THE
MANAGEMENT OF THE FUNDS OR OF SKYLINE ASSET MANAGEMENT, L.P. Each of the
proposals is discussed in greater detail in the accompanying Proxy Statement.

Shareholders of record at the close of business on July 9, 1998 will be
entitled to receive notice of and to vote at the meeting and any adjournment or
postponement thereof.

By Order of the Trustees,

/s/ Scott C. Blim

Scott C. Blim

Secretary

Chicago, Illinois
July 15, 1998

PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
NO MATTER HOW MANY SHARES YOU OWN, YOUR VOTE IS IMPORTANT. IT IS IMPORTANT
THAT YOU VOTE NOW IN ORDER TO AVOID THE UNNECESSARY EXPENSE OF ANOTHER
SOLICITATION OF PROXIES. ACCORDINGLY, PLEASE SIGN, DATE AND MAIL YOUR
PROXY CARD IN THE RETURN ENVELOPE PROVIDED.
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SKYLINE FUNDS
PROXY STATEMENT

SPECIAL MEETING OF SHAREHOLDERS
OF
SKYLINE SPECIAL EQUITIES PORTFOLIO
SKYLINE SMALL CAP VALUE PLUS
AND
SKYLINE SMALL CAP CONTRARIAN

This proxy statement is being furnished to the shareholders of Skyline
Special Equities Portfolio, Skyline Small Cap Value Plus and Skyline Small Cap
Contrarian (together, the "Funds"), each a series of Skyline Funds ("Skyline"),
in connection with the solicitation of proxies by Skyline's Trustees on behalf
of each of the Funds for use at a Special Meeting of the Shareholders of the
Funds to be held at 10:00 a.m. on Friday, August 28, 1998 at 311 South Wacker
Drive, Conference Center, Chicago, Illinois 60606, and at any adjourned session
thereof (such meeting and any adjournment thereof hereinafter referred to as the
"Meeting").

Shareholders of record (the "Shareholders") at the close of business on July
9, 1998 (the "Record Date") are entitled to notice of and to vote at the
Meeting. As of July 9, 1998, there were issued and outstanding 23,423,850.653
shares of Skyline Special Equities Portfolio, 12,209,968.450 shares of Skyline
Small Cap Value Plus, and 781,722.952 shares of Skyline Small Cap Contrarian.
This Proxy Statement and the accompanying Notice of Special Meeting of
Shareholders and form of proxy are being mailed on or about July 17, 1998 to
Shareholders of record on the Record Date.

As more fully described below, the meeting has been called for the following
purposes:

2. To consider and act upon a proposal to elect Richard K. Pearson to
Skyline's Board of Trustees (all Funds voting together).

Each Shareholder will be entitled to one vote for each share of a Fund held
on the Record Date (with a proportionate vote for each fractional share) with
respect to each proposal submitted to the Shareholders of that Fund or to the
Shareholders of all of the Funds. Thirty percent of the shares of Skyline
entitled to vote constitutes a quorum for transaction of business at the
Meeting. If a quorum is not present in person or by proxy at the Meeting, or if
a quorum is present in person or by proxy at the Meeting but not enough votes to
approve a proposal have been received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any proposal for adjournment will require the affirmative vote of a
majority of those shares represented at the Meeting in person or by proxy. A
vote may be taken on one or more of the proposals in this Proxy Statement prior
to an adjournment if enough votes have been received for approval.

For purposes of determining the presence or absence of a quorum and for
determining whether sufficient votes have been received for approval of any
matter to be acted upon at the Meeting, abstentions and broker non-votes (I.E.,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other person entitled to vote shares
on a particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present at the Meeting
but which have not been voted. For this reason, abstentions and broker non-votes
will assist Skyline in obtaining a quorum but generally will have the practical
effect of a

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"no" vote for purposes of obtaining the requisite vote for approval of proposal
1, approval of the new advisory agreements. Abstentions will have the practical
effect of a "no" vote on proposal 2, which will be unaffected by broker
non-votes.

Shareholders may vote by mail, with the enclosed proxy card, or in person at
the meeting. If voting by mail, please complete, date, sign and promptly return
the accompanying proxy in the enclosed envelope. If the proxy is properly
executed and returned in time to be voted at the Meeting, the shares represented
thereby will, unless such proxy has previously been revoked, be voted in
accordance with the instructions marked on the proxy. Unless instructions to the
contrary are marked on the proxy, the proxy will be voted FOR the proposals
described in this proxy statement and in the discretion of the persons named as
proxies in connection with any other matters as may properly come before the
Meeting. Skyline's Trustees do not know of any matters to be considered at the
Meeting other than the matters referred to in the Notice of Special Meeting.

Any Shareholder who has given a proxy has the right to revoke it at any time
prior to its exercise by attending the Meeting and voting his or her shares in
person or by submitting, prior to the date of the Meeting, a written notice of
revocation of his or her proxy to Skyline at the following address: 311 South
Wacker Drive, Suite 4500, Chicago, Illinois 60606, Attention: Secretary.

SKYLINE WILL FURNISH, WITHOUT CHARGE, A COPY OF THE MOST RECENT ANNUAL
REPORT FOR A FUND TO A SHAREHOLDER ON REQUEST. REQUESTS MAY BE MADE TO SKYLINE
AT 311 SOUTH WACKER DRIVE, SUITE 4500, CHICAGO, ILLINOIS 60606 OR BY CALLING
(312) 913-0900 COLLECT IN ILLINOIS OR (800) 458-5222 OUTSIDE ILLINOIS.

PROPOSAL 1.
APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENTS

Skyline's Trustees are proposing that the Shareholders approve new
investment advisory agreements between Skyline Asset Management, L.P. and
Skyline on behalf of each of the Funds (the "New Agreements"), without any
substantive changes from the Funds' prior advisory agreements (the "Old
Agreements"). At a meeting held on May 12, 1998, Skyline's Trustees, including
all of the Trustees who are not interested persons of Skyline Asset Management,
L.P. or Skyline, approved the New Agreements. The New Agreements were signed and
became effective as of May 28, 1998.

The need to enter into the New Agreements and to ask shareholders to approve
them was triggered by a change in the ownership of the general partner of
Skyline Asset Management, L.P. Skyline Asset Management, L.P. is organized as a
Delaware limited partnership. Its general partner is Affiliated Managers Group,
Inc. ("AMG"), which is in the business of making investments in investment
advisory businesses. The limited partners of Skyline Asset Management, L.P. are
corporations wholly-owned, respectively, by William M. Dutton and Kenneth S.
Kailin (the portfolio managers of Special Equities Portfolio and Small Cap Value
Plus, respectively), and Stephen F. Kendall, Geoffrey P. Lutz and Michael
Maloney, who are also senior members of the management of Skyline Asset
Management, L.P.

Until November 1997, AMG was a private company primarily owned by various
institutional investors and its directors and officers. TA Associates, Inc., a
Delaware corporation ("TA"), was deemed ultimately to control AMG (and
therefore, technically, to control Skyline Asset Management, L.P.) because TA
and its affiliates were general partners (or the equivalent) of private equity
funds that in the aggregate continuously controlled a significant block of the
outstanding voting common stock of AMG. In November 1997, AMG sold shares of its
common stock in an initial public offering and that stock now trades on The New
York Stock Exchange. After AMG's public offering, TA was deemed still to control
more than 25% of AMG's outstanding voting stock, and therefore still deemed to
control AMG and Skyline Asset Management, L.P.

At the end of May, 1998 one of the private equity funds associated with TA
distributed a portion of its holdings of AMG's common stock to its investors and
shares of AMG's non-voting common stock were

2
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converted by their holder into voting common stock. These transactions (the
"Transaction") resulted in a reduction in the percentage of voting securities in
AMG held by TA below the level that is deemed to constitute control, which in
turn could be deemed to constitute a change in control of Skyline Asset
Management, L.P.

Under the Investment Company Act, a change in control of AMG, and resulting
change in control of Skyline Asset Management, L.P., is deemed to be an
"assignment" that terminates the existing advisory agreements between Skyline
and Skyline Asset Management, L.P. The Transaction may be deemed to effect a
change of control of AMG and therefore an assignment. To avoid any uncertainty
about the status of the Funds' advisory agreements with Skyline Asset
Management, L.P., the Board of Trustees determined that it was advisable to
enter into the New Agreements and ask shareholders to approve them.

ALTHOUGH THE TRANSACTION MAY TECHNICALLY BE DEEMED TO BE A CHANGE IN
CONTROL, IT HAS NOT, AND WILL NOT, HAVE ANY EFFECT ON THE MANAGEMENT OR
OPERATIONS OF SKYLINE ASSET MANAGEMENT, L.P., OR THE INVESTMENT POLICIES,
OBJECTIVES AND OPERATIONS (INCLUDING THE PORTFOLIO MANAGERS) OF THE FUNDS.

The New Agreements are substantively identical to the Old Agreements,
differing only in the effective dates and termination dates and, for Special
Equities Portfolio and Small Cap Value Plus, deletion of a paragraph describing
an expense limitation under state securities laws that no longer apply to the
Funds. The rates of the comprehensive management fee paid by each Fund and the
contractual limitation on the aggregate expenses of each Fund are the same under
the New Agreements as under the existing agreements. In addition, the services
provided to each Fund by Skyline Asset Management, L.P., or at the expense of
Skyline Asset Management, L.P., are the same under the New Agreements as under
the Existing Agreements. The forms of the New Agreements for the Funds are
appended to this Proxy Statement as Exhibits A, B, and C, respectively.

DESCRIPTION OF THE NEW AGREEMENTS

Skyline Asset Management, L.P. has served as the investment adviser for each
of Skyline Special Equities Portfolio and Skyline Small Cap Value Plus since
September 1, 1995 and Skyline Small Cap Contrarian since its inception on
December 15, 1997. Until May 28, 1998, Skyline Asset Management, L.P. provided
investment advisory services to the Funds under the terms of the Old Agreements,
which were dated August 31, 1995 for Skyline Special Equities Portfolio and
Skyline Small Cap Value Plus, and December 15, 1997 for Skyline Small Cap
Contrarian. On May 12, 1998, the Old Agreements for Skyline Special Equities
Portfolio and Skyline Small Cap Value Plus were continued for the period ending
May 31, 1999 with respect to each such Fund by the unanimous affirmative vote of
Skyline's Board of Trustees, including all the Trustees who are not parties to
the Old Agreements or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval, a majority of whom
were present in person. The Old Agreements were last approved by a majority of
the shareholders of Skyline Special Equities Portfolio and Skyline Small Cap
Value Plus on August 29, 1995 and by the then sole shareholder of Skyline Small
Cap Contrarian on December 15, 1997, in connection with the organization of that
Fund.

The New Agreements are identical to the Old Agreements except for their
effective dates (May 28, 1998) and termination dates (May 31, 1999) and, for
Special Equities Portfolio and Small Cap Value Plus, deletion of a paragraph
describing an expense limitation under state securities laws that no longer
apply to the Funds. Under the New Agreements and the Old Agreements, Skyline
Asset Management, L.P. pays all of the Funds' ordinary costs and expenses
attendant to operating the Funds except the comprehensive management fee paid to
Skyline Asset Management, L.P., 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 Small Cap
Contrarian were advanced to Skyline by Skyline Asset Management, L.P., and Small
Cap Contrarian is reimbursing the Adviser for such expenses in equal
installments without interest over 20 calendar quarters.

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<PAGE>

Expenses borne by Skyline pursuant to the New Agreements that are
attributable to a particular Fund are charged to that Fund. Other expenses of
Skyline are allocated among the Funds on a reasonable basis as determined by or
under the direction of Skyline's Board of Trustees.

For its management and advisory services, for providing shareholder and
investor servicing, and for the assumption of the ordinary operating expenses of
the Funds, Skyline Asset Management, L.P. is paid under the New Agreements (as
it was under the Old Agreements), a monthly comprehensive fee from each Fund
based on that Fund's average daily net assets. Under the Old Agreements and the
New Agreements, each Fund pays Skyline Asset Management, L.P. 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. Skyline Special Equities Portfolio paid Skyline Asset
Management, L.P. fees totaling $5,196,131 in the year ended December 31, 1997.
Skyline Small Cap Value Plus paid Skyline Asset Management, L.P. fees totaling
$1,995,055 in the year ended December 31, 1997. Skyline Small Cap Contrarian
paid Skyline Asset Management, L.P. fees totaling $2,758 for the period from
December 15, 1997 until December 31, 1997. The fee schedules under the New
Agreements are identical to the fee schedules under the Old Agreements.

The New Agreements provide (as did the Old Agreements) that Skyline Asset
Management, L.P. shall not be liable for any loss suffered by Skyline or its
shareholders as a consequence of any act or omission in connection with
investment advisory or portfolio services under the agreements, except by reason
of willful misfeasance, bad faith or gross negligence on the part of Skyline
Asset Management, L.P. in the performance of its duties under the applicable
Agreement or from reckless disregard by Skyline Asset Management, L.P. of its
obligations and duties under the applicable Agreement.

Each New Agreement, like the Old Agreements, may be continued from year to
year only so long as the continuance of that New Agreement 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 that Fund. Each New Agreement is terminable with respect to a Fund
without penalty, on 60 days' notice, by the Trustees of Skyline or by vote of a
majority of the outstanding shares of that Fund, or, on not less than 90 days'
notice, by Skyline Asset Management, L.P. Each New Agreement automatically
terminates in the event of its assignment.

Skyline entered into the New Agreements in reliance on Rule 15a-4 under the
Investment Company Act. Under that rule, a mutual fund may enter into an
advisory agreement that has not been approved by the fund's shareholders if (i)
the fund's old advisory agreement was terminated by reason of an assignment of a
certain type, (ii) the agreement has been approved by the fund's board,
including a majority of the outside board members, and (iii) the compensation to
be paid to the investment adviser under the agreement is not more than was paid
under the old agreement. An agreement entered into in reliance on Rule 15a-4 may
not last more than 120 days. For that reason, the New Agreements will terminate
on September 25, 1998 if they are not approved by shareholders of the Fund on or
before that date.

EVALUATION OF THE NEW AGREEMENTS BY THE BOARD OF TRUSTEES

In evaluating the New Agreements, the Board of Trustees requested and
reviewed various materials furnished by Skyline Asset Management, L.P.,
including information regarding the investment philosophy of Skyline Asset
Management, L.P., its personnel and operations, and information on the
performance and expenses of Special Equities Portfolio and Small Cap Value Plus
prepared by Lipper Analytical Services, Inc.

The Board of Trustees considered the nature and quality of the services
provided, and to be provided, by Skyline Asset Management, L.P. The Trustees
reviewed each Fund's investment performance. For Special Equities Portfolio and
Small Cap Value Plus, the Trustees reviewed a report prepared by Lipper

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Analytical Services, Inc. (the "Lipper Report") which contained information
comparing the performance of each Fund to (a) other mutual funds considered by
Lipper generally to be comparable to the Funds, and (b) all other mutual funds
tracked by Lipper that invest primarily in equity securities of U.S. companies
with aggregate market capitalizations of less than $1 billion. That information
showed that the average annual total return achieved by Special Equities
Portfolio had ranked in the first or second quintile (top 20% or top 40%)
compared to the funds selected by Lipper as comparable and compared to all small
cap funds for the 1 year, 3 year, 5 year, and 10 year periods ended March 31,
1998, and for the life of the Fund through that date.

The average annual total return achieved by Small Cap Value Plus ranked in
the first or second quintile for the 1 year and 3 year periods ended March 31,
1998, and for the life of the Fund for the period then ended, but was slightly
below the median for the 5 year period compared to the group of Lipper-selected
comparable funds and compared to the universe of all small cap funds.

The Trustees reviewed information prepared by Skyline Asset Management, L.P.
on the performance of Small Cap Contrarian. However, because Small Cap
Contrarian has been in operation only a few months, little emphasis was placed
on its relative performance.

The Board of Trustees also considered the general financial condition of
Skyline Asset Management, L.P. and reviewed the profitability to Skyline Asset
Management, L.P. of its relationship to the Funds, based upon an analysis
presented to the Trustees by senior officers of Skyline Asset Management, L.P.
In connection with its review of the profitability of Skyline Asset Management,
L.P., the Trustees considered indirect profits to Skyline Asset Management, L.P.
from its relationship to Skyline, including the receipt by Skyline Asset
Management, L.P. of research from brokers in return for directing portfolio
transactions of the Funds to those brokers.

The Trustees reviewed the information in the Lipper Report comparing the
management fees and expenses of Special Equities Portfolio and Small Cap Value
Plus to the management fees and expenses of the Lipper-selected group of
comparable funds and all small cap funds tracked by Lipper with assets of $100
million to $600 million. The Trustees noted that the Funds' comprehensive
management fee made direct comparison to other funds' management fees difficult.
To provide more comparable information, the Trustees considered an analysis
prepared by Skyline Asset Management, L.P., of the "implied" management fee, in
which the amounts of the fees and expenses actually paid or incurred by Skyline
Asset Management, L.P. but more commonly paid by a mutual fund were deducted
from the amount of the comprehensive management fee. The Trustees compared that
implied management fee to the actual management fees paid by the other funds in
the Lipper-selected comparison groups. The comparisons of the Funds' total
expense ratios to the total expenses ratios of other funds showed that each
Fund's total expense ratio was higher than the median total expense ratio of the
other funds in the comparison groups, but below the top of the range of total
expense ratios of those funds. The Board of Trustees discussed the breakpoints
in the fee schedules and noted the current net assets of each Fund. The Board
concluded that the comprehensive management fees paid by the Funds resulted in
total expense ratios that, although above the median for comparable funds, were
within the range of total expense ratios of those funds and justified by the
above average performance achieved by the Funds.

The Board also noted the undertaking made by AMG to pay all expenses
incurred by Skyline in connection with the approval of the New Agreements,
including all fees and expenses related to the solicitation of proxies.

Based upon its review, the Board of Trustees, including all of the Trustees
who are not interested persons of Skyline Asset Management, L.P. or Skyline,
approved the New Agreements on May 12, 1998, authorized the officers to execute
and deliver the New Agreements upon effectiveness of the Transaction, and voted
to recommend approval of the New Agreements by the Shareholders of each Fund.

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TRUSTEES' RECOMMENDATION AND VOTE REQUIRED FOR APPROVAL

THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1.

Shareholders of each Fund vote separately as a distinct class on this
proposal. Approval of the New Agreement with respect to a Fund requires the
affirmative vote of a majority of the outstanding shares of that Fund. In
accordance with the Investment Company Act and as used in Proposal 1, a
"majority of the outstanding shares" of a Fund means the lesser of (1) 67% or
more of the shares of the Fund present at the Meeting if the owners of more than
50% of the shares of the Fund outstanding as of the Record Date are present in
person or by proxy, or (2) more than 50% of the outstanding shares of the Fund,
determined as of the Record Date.

If Proposal 1 does not receive the required approvals from the Shareholders
of a particular Fund, the Board of Trustees would need to consider the options
then available to Skyline in light of the timing and circumstances of the
Transaction and the termination of the New Agreements on September 25, 1998 if
shareholder approval is not received on or before that date.

PROPOSAL 2.
ELECTION OF TRUSTEE

The Board of Trustees has selected and nominated and recommends the election
of Richard K. Pearson to the Board of Trustees. Mr. Pearson was named a Trustee
in February 1998 to fill a vacancy on the Board and is currently serving on the
Board of Trustees. In accordance with the requirements of the Investment Company
Act, Shareholders of all of the Funds vote together in the election of Trustees.
A Trustee will hold office until he dies, resigns, retires or is removed.

All shares represented by valid proxies will be voted for Mr. Pearson's
election as Trustee unless authority to vote for him is withheld. If Mr. Pearson
should be unable to serve, an event not now anticipated, proxies will be voted
for such other person as shall be designated by Skyline's Board of Trustees. Mr.
Pearson has agreed to continue to serve if elected. Mr. Pearson does not have an
interest in Skyline Asset Management, L.P.

TRUSTEES

Skyline's current Trustees (including Mr. Pearson), their ages at June 30,
1998 and their principal occupations during the last five years are shown below:

TRUSTEE NOMINATED FOR ELECTION

RICHARD K. PEARSON, 58, TRUSTEE. Retired. Director, Citizens Savings Bank
(Anamosa, Iowa), since February 1998, and Director, First Community Bank
(Milton, Wisconsin), since January 1998. Previously, Director and President,
LaSalle Bank, Westmont (Westmont, Illinois), from 1994 to 1997, and Director,
Chief Executive Officer and President, LaSalle Bank, Northbrook (Northbrook,
Illinois), from 1986 to 1994.

TRUSTEES PREVIOUSLY ELECTED BY SHAREHOLDERS

WILLIAM M. DUTTON*, 44, PRESIDENT AND TRUSTEE. Managing Partner and Chief
Investment Officer, Skyline Asset Management, L.P. since 1998; under the
partnership agreement of Skyline Asset Management, L.P., Mr. Dutton is and has
been, since September 1995, its President and Chief Executive Officer; and
registered representative, Funds Distributor, Inc., since September 1995.
Previously, Executive Vice President and Portfolio Manager (Special Equities
Portfolio), Mesirow Asset Management, Inc.

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WILLIAM L. ACHENBACH, 56, TRUSTEE. President, W.L. Achenbach & Associates,
Inc., a financial counseling firm.

PAUL J. FINNEGAN, 45, TRUSTEE. Vice President, Madison Dearborn Partners,
Inc., a venture capital firm.

DAVID A. MARTIN, 46, TRUSTEE. Attorney and Principal, Righeimer, Martin &
Cinquino, P.C.

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

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

SHAREHOLDINGS

The following table sets forth the number of shares of each Fund
beneficially owned by each of the Trustees, and by the Trustees and officers as
a group, as of March 31, 1998.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
-------------------------------------------------------
SKYLINE SPECIAL
EQUITIES SKYLINE SMALL CAP SKYLINE SMALL CAP
PORTFOLIO VALUE PLUS CONTRARIAN
----------------- ----------------- -----------------
<S> <C> <C> <C>
William M. Dutton......................................... 26,556 5,931 18,235
William L. Achenbach...................................... 8,858 0 12,795
Paul J. Finnegan.......................................... 2,070 3,166 10,000
David A. Martin........................................... 29,056 0 24,500
Richard K. Pearson........................................ 2,332 1,081 500
Trustees and Officers as a Group.......................... 92,226 18,767 85,970
</TABLE>

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(1) Shares are held with sole power over voting and disposition except as noted.
No trustee held as much as 1% of the outstanding shares of any Fund, except
that Messrs. Dutton, Achenbach, Finnegan, and Martin held 2.8%, 2.0%, 1.5%,
and 3.7%, respectively, of Skyline Small Cap Contrarian. The shares held by
all Trustees and officers as a group represented less than 1% of the
outstanding shares of Skyline Special Equities Portfolio and Skyline Small
Cap Value Plus, but 13.1% of the shares of Skyline Small Cap Contrarian.

TRUSTEE COMPENSATION

The trustees of Skyline who are not "interested persons" of Skyline, as
defined in the Investment Company Act, receive from Skyline an annual retainer
of $3,000 from each of the Funds 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, 1997, 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.

<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
NAME OF TRUSTEE FROM SKYLINE FUNDS
- ------------------------------------------------------------------------------------------ -----------------------
<S> <C>
William L. Achenbach...................................................................... $ 8,400
William M. Dutton(1)...................................................................... 0
Paul J. Finnegan.......................................................................... 8,400
David A. Martin........................................................................... 8,400
Richard K. Pearson(2)..................................................................... 0
</TABLE>

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(1) Indicates an "interested person" of Skyline, as defined in the 1940 Act.

(2) Mr. Pearson was appointed a trustee of Skyline on February 24, 1998, and,
consequently, received no compensation from Skyline during 1997. Mr.
Pearson's predecessor received $8,400 from Skyline as compensation for
serving as a trustee during 1997.

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BOARD MEETINGS AND COMMITTEES

During the fiscal year ended December 31, 1997, the Trustees met seven times
and the Committee of the Independent Trustees (the "Committee") met once. Each
Trustee who was serving as a Trustee or committee member attended more than 75%
of the meetings of the Board and/or any committee thereof of which he was a
member.

The Committee is the only standing committee that the Board has created. The
Committee is presently composed of Messrs. Achenbach, Finnegan, Martin, and
Pearson. The Committee is responsible for conferring with Skyline's independent
accountants, reviewing the scope and procedures of Skyline's year-end audit and
recommending selection of Skyline's independent accountants.

TRUSTEES' RECOMMENDATION AND VOTE REQUIRED FOR APPROVAL

Mr. Pearson will be elected by a majority of the shares of Skyline present
and voting at the Meeting in person or by proxy (voting as a single class), if a
quorum is present.

THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE NOMINEE.

ADDITIONAL INFORMATION

INFORMATION CONCERNING SKYLINE ASSET MANAGEMENT, L.P.

Skyline Asset Management, L.P. is a Delaware limited partnership with
offices at 311 South Wacker Drive, 45th Floor, Chicago, Illinois 60606.

MANAGEMENT

The agreement of limited partnership of Skyline Asset Management, L.P.
delegates to its officers the authority to operate and administer the investment
advisory business of Skyline Asset Management, L.P. The officers have the
authority to make operating decisions freely, subject to an overall limitation
on the percentage of revenues allocated to operating expenses. Under the
agreement of limited partnership, the officers of Skyline Asset Management, L.P.
have authority over the provision of investment management services, and the
president and chief executive officer is authorized to make all decisions
relating to overall portfolio management, among other things.

The Managing Partner and Chief Investment Officer of Skyline Asset
Management, L.P. is William M. Dutton, who has served as portfolio manager of
Skyline Special Equities Portfolio since its inception. Under the partnership
agreement of Skyline Asset Management, L.P., Mr. Dutton is the president and
chief executive officer. Stephen F. Kendall is Partner and Chief Operating
Officer of Skyline Asset Management, L.P. Kenneth S. Kailin, who has served as
portfolio manager of Skyline Small Cap Value Plus since its inception, together
with Geoffrey P. Lutz and Michael Maloney, are officers of Skyline Asset
Management, L.P. Each is also an officer of Skyline and biographical information
concerning each is set forth below.

Messrs. Dutton, Kailin, Kendall, Lutz, and Maloney have entered into
non-solicitation/non-disclosure agreements pursuant to which each of them has
agreed not to compete with Skyline Asset Management, L.P. during his term of
employment and for a period of up to two years following termination of his
employment, which may be reduced under certain circumstances, including
termination of such individual by Skyline Asset Management, L.P. without cause.

OWNERSHIP

Skyline Asset Management, L.P. is owned by its general partner, AMG, and its
limited partners. The limited partners are corporations wholly-owned by Messrs.
Dutton, Kailin, Kendall, Lutz and Maloney, respectively. The limited partners
hold interests representing, in the aggregate, 38.2% of the profits of

8
<PAGE>

Skyline Asset Management, L.P. The chief executive officer of Skyline Asset
Management, L.P. has the authority to issue additional limited partner interests
so that employees of Skyline Asset Management, L.P. will hold limited partner
interests representing up to 45% of the profits of Skyline Asset Management,
L.P. The remaining interest in profits is held by AMG.

AMG, the general partner of Skyline Asset Management, L.P., is a
publicly-traded Delaware corporation which acquires interests in investment
management firms. AMG has its offices at Two International Place, 23rd Floor,
Boston, MA 02110. The largest shareholder of AMG has been and, at the date of
this proxy statement, is a group of private equity funds managed by TA (the
address of TA and each of the private equity funds is High Street Tower, Suite
2500, 125 High Street, Boston, MA 02110); however, such entities have no power
or authority to participate in the management or operations of Skyline Asset
Management, L.P. and, as a result of the Transaction, TA ceased to be deemed to
be a controlling person of AMG.

OTHER OFFICERS OF SKYLINE

The following section sets forth as to each current officer of Skyline,
other than Mr. Dutton, his or her present position, age at June 30, 1998, and
principal occupations during the last five years.

STEPHEN F. KENDALL, 43, EXECUTIVE VICE PRESIDENT. Partner and Chief
Operating Officer, Skyline Asset Management, L.P., since February 1998.
Previously, Regional Vice President, Metro Region, and other positions, Nabisco
Biscuit Company.

KENNETH S. KAILIN, 39, EXECUTIVE VICE PRESIDENT. Partner and Portfolio
Manager, Skyline Asset Management, L.P., since 1998. Principal-Portfolio Manager
of Skyline Asset Management, L.P. from September 1995 until 1998. Previously,
Senior Vice President and Portfolio Manager (Small Cap Value Plus), Mesirow
Asset Management, Inc.

GEOFFREY P. LUTZ, 47, EXECUTIVE VICE PRESIDENT. Partner, Institutional
Marketing, Skyline Asset Management, L.P. since 1998 and registered
representative, Funds Distributor, Inc., since September 1995.
Principal-Marketing of Skyline Asset Management, L.P. from September 1995 until
1998. Previously, Vice President, Mesirow Asset Management, Inc., and registered
representative, Mesirow Financial, Inc. and Mesirow Investment Services, Inc.

MICHAEL MALONEY, 36, SENIOR VICE PRESIDENT. Partner and Securities Analyst,
Skyline Asset Management, L.P., since 1998. Principal-Senior Securities Analyst
of Skyline Asset Management, L.P. from September 1995 until 1998. 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.

DAREN C. HEITMAN, 31, SENIOR VICE PRESIDENT. Portfolio Manager, Skyline
Asset Management, L.P., since August 1997. Securities Analyst with Skyline Asset
Management, L.P. from September 1995 to August 1997. Securities Analyst with
Mesirow Asset Management, Inc. from May 1994 to August 1995, and Securities
Analyst with Mesirow Financial, Inc. prior thereto.

SCOTT C. BLIM, 39, SECRETARY AND TREASURER. Chief Financial Officer, Skyline
Asset Management, L.P., since September 1995. Previously, Vice President,
Director and Chief Administrative Officer, Murray Johnstone International
Limited, an investment adviser.

MICHELE M. BRENNAN, 26, VICE PRESIDENT. Director of Fund Marketing, Skyline
Asset Management, L.P., since August 1996. Previously, Regional Marketing
Associate, Strong Capital Management, an investment adviser.

The address of each of the officers and trustees is c/o Skyline Asset
Management, L.P., 311 South Wacker Drive, Suite 4500, Chicago, Illinois 60606.

9
<PAGE>

OTHER MUTUAL FUNDS MANAGED BY SKYLINE ASSET MANAGEMENT, L.P.

Skyline Asset Management, L.P. also acts as sub-adviser to the Principal
Preservation Select Value Portfolio, with responsibility solely for portfolio
management. At June 30, 1998, that fund had total assets of approximately $11
million. Skyline Asset Management, L.P. receives compensation for its portfolio
management services to that fund at the annual rate of 0.375% of that fund's
average daily net assets.

INFORMATION ABOUT CERTAIN RECORD OWNERS

The only persons known by Skyline to own of record or "beneficially" (within
the meaning of that term as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) 5% or more of the outstanding shares of any Fund as of June 30,
1998 were: (a) Charles Schwab & Co., Inc., as a nominee for various beneficial
owners, which held 27% and the Boston Safe Deposit & Trust Co., Trustee f/b/o
Eastman Kodak Employees' Savings and Investment Plan, as record owner for
various beneficial owners, which held 8% of the shares of Special Equities
Portfolio; (b) Charles Schwab & Co., Inc., as a nominee for various beneficial
owners, which held 20% and Hartford Life Insurance Company Deferred Pension III
Separate Account, which held 7% of the shares of Small Cap Value Plus; and (c)
Charles Schwab & Co., Inc., as a nominee for various beneficial owners, which
held 32%, and Douglas H. Brown II, who held 6% of the shares of Small Cap
Contrarian. The address of Charles Schwab & Co., Inc. is 101 Montgomery Street,
San Francisco, California 94104. The address of Boston Safe Deposit & Trust Co.
is 1 Cabot Road, Medford, Massachusetts 02155. The address of the Hartford Life
Insurance Company Deferred Pension III Separate Account is P.O. Box 2999,
Hartford, Connecticut 06104. Douglas H. Brown II's address is P.O. Box 18130,
Reno, Nevada 89511.

SOLICITATION OF PROXIES

None of the costs of soliciting proxies will be borne by the Funds. AMG has
agreed to pay all expenses incurred by Skyline in connection with the approval
of the New Agreements, including costs of preparing this Proxy Statement and its
enclosures, as well as all printing, postage costs and solicitation expenses.

Skyline has retained D.F. King & Co., a proxy solicitation firm, to assist
in the solicitation of proxies. The costs of retaining D.F. King, which Skyline
Asset Management, L.P. anticipates will not exceed $5,000 (plus reimbursement
for its out-of-pocket expenses), will depend upon the amount and type of
services rendered. The fees and expenses of D.F. King will be paid by AMG. In
addition to solicitation of proxies by mail, officers of Skyline, officers and
employees of Skyline Asset Management, L.P., affiliates of Skyline or other
representatives of Skyline (who will not receive any compensation therefor from
Skyline), D.F. King or Firstar Trust Company (the Funds' transfer agent) may
also solicit proxies by telephone or telegraph or in person. Skyline Asset
Management, L.P. will reimburse brokerage firms and other custodians, nominees
and fiduciaries for their expenses in forwarding solicitation materials to the
beneficial owners of shares of the Funds. AMG will reimburse Skyline Asset
Management, L.P. for those expenses.

SHAREHOLDER PROPOSALS

Skyline does not hold annual meetings of shareholders. Shareholders wishing
to submit proposals for inclusion in a proxy statement for any of the Funds for
any subsequent shareholder meeting should send their written submissions to
Skyline's principal executive offices at 311 South Wacker Drive, Suite 4500,
Chicago, Illinois 60606, Attention: Secretary.

OTHER MATTERS

Skyline's Trustees are not aware of any other matters which may come before
the Meeting. However, should any such matters with respect to the Funds properly
come before the Meeting, it is the intention of the persons named in the
accompanying form of proxy to vote the proxy in accordance with their judgment
on such matters.

10
<PAGE>
Exhibit A

SKYLINE FUNDS
SKYLINE SPECIAL EQUITIES PORTFOLIO
INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT, dated as of the 28th day of May, 1998, made and entered into
by and between SKYLINE FUNDS, a Massachusetts business trust (the "Fund") on
behalf of Skyline Special Equities Portfolio (the "Portfolio"), and SKYLINE
ASSET MANAGEMENT, L.P., a Delaware limited partnership (the "Adviser").

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

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

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

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

3. EXPENSES TO BE PAID BY THE ADVISER. The Adviser shall furnish, at its
own expense, office space to the Fund and all necessary office
facilities, equipment, and personnel for managing the assets of the
Portfolio, providing shareholder servicing and providing general
administrative services to the Portfolio and to the Fund. The Adviser
shall also assume and pay all other ordinary costs and expenses incurred
by it in connection with managing the assets of the Fund; all ordinary
accounting, auditing and legal services, clerical and statistical
services, administrative costs and advisory fees (except to the extent
payable by the Fund pursuant to Section 4); any compensation of officers
and employees of the Fund; all costs attributable to shareholder and
investor services relating to the Portfolio (including, without
limitation, telephone and personnel expenses and the

A-1
<PAGE>
charges, if any, of third parties performing such services); all
expenses of marketing shares of the Portfolio; all expenses of
maintaining the registration of shares of the Portfolio under the 1933
Act and of qualifying and maintaining qualification of shares of the
Portfolio under the securities laws of such United States jurisdictions
as the Fund may from time to time reasonably designate (except to the
extent payable by the Fund pursuant to Section 4); and all expenses of
determining daily price computations, placing of portfolio transaction
orders, and performing related bookkeeping services. The Adviser shall
pay all charges of depositories, custodians, and other agencies for the
safekeeping and servicing of the Fund's cash, securities, and other
property and of the Fund's transfer, dividend disbursing, and redemption
agents and registrars, if any; insurance expenses; all compensation of
trustees who are "interested persons" of the Fund as defined in the Act
and all expenses incurred in connection with their services to the Fund;
all expenses of publication of notices and reports to the Fund's
shareholders; all expenses of proxy solicitations of the Fund or its
board of trustees; and all expenses of maintaining the Fund's existence
and maintaining the registration of the Fund under the Act.

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

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

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

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

A-2
<PAGE>
8. SERVICES OTHER THAN AS THE ADVISER. The Adviser or its affiliates may
act as broker for the Fund in connection with the purchase or sale of
securities by or for the Fund if and to the extent permitted by
procedures adopted from time to time by the Fund's board of trustees.
Such brokerage services are not within the scope of the duties of the
Adviser under this Agreement and, within the limits permitted by law and
the Fund's board of trustees, the Adviser may receive brokerage
commissions, fees, or other remuneration from the Fund for such service
in addition to its fee for services as the Adviser. Within the limits
permitted by law, the Adviser may receive compensation from the Fund for
other services performed by it for the Fund which are not within the
scope of the duties of the Adviser under this Agreement.

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

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

10. DURATION AND RENEWAL. This Agreement has been approved on behalf of the
Portfolio by a majority of those trustees of the Fund who are not
"interested persons" (as defined in the Act) of the Fund or of the
Adviser, voting in person at a meeting called for the purpose of voting
on such approval. Unless terminated as provided in Section 11, this
Agreement shall continue in effect until May 31, 1999, and thereafter
from year to year only so long as such continuance is specifically
approved at least annually by the board of trustees of the Fund,
including a majority of those trustees of the Fund who are not
"interested persons" (as defined in the Act) of the Fund or of the
Adviser, voting in person at a meeting called for the purpose of voting
on such approval.

11. TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by the Fund's board of trustees or by a vote of
the holders of a majority (as defined in the Act) of the outstanding
shares of the Portfolio, upon 60 days' written notice to the Adviser.
This Agreement may be terminated by the Adviser at any time upon 90
days' written notice to the Fund. This Agreement shall terminate
automatically (i) in the event of its assignment (as defined in the
Act); and (ii) on September 25, 1998 unless it has been approved by the
holders of a "majority of the outstanding voting securities" (as defined
in Section 2(a)(42) of the Act) of the Portfolio on or before that date.

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

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

A-3
<PAGE>
14. LIMITED LIABILITY. Any obligation of the Fund hereunder shall be binding
only on the assets of the Fund (or the applicable Portfolio thereof) and
shall not be binding upon any trustee, officer, employee, agent or
shareholder of the Fund. Neither the authorization of any action by the
trustees or shareholders of the Fund nor the execution of this Agreement
on behalf of the Fund shall impose any liability upon any trustee or any
shareholder.

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

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

<TABLE>
<S> <C>
ATTEST: SKYLINE FUNDS

/s/ Stephen F. Kendall By: /s/ William M. Dutton
- ------------------------------------------ ------------------------------------------
Name: Stephen F. Kendall Name: William M. Dutton
Title: Executive Vice President Title: President

ATTEST: SKYLINE ASSET MANAGEMENT, L.P.

A-4
<PAGE>
Exhibit B

SKYLINE FUNDS
SKYLINE SMALL CAP VALUE PLUS
INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT, dated as of the 28th day of May, 1998, made and entered into
by and between SKYLINE FUNDS, a Massachusetts business trust (the "Fund") on
behalf of Skyline Small Cap Value Plus (the "Portfolio"), and SKYLINE ASSET
MANAGEMENT, L.P., a Delaware limited partnership (the "Adviser").

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

B-1
<PAGE>
charges, if any, of third parties performing such services); all
expenses of marketing shares of the Portfolio; all expenses of
maintaining the registration of shares of the Portfolio under the 1933
Act and of qualifying and maintaining qualification of shares of the
Portfolio under the securities laws of such United States jurisdictions
as the Fund may from time to time reasonably designate (except to the
extent payable by the Fund pursuant to Section 4); and all expenses of
determining daily price computations, placing of portfolio transaction
orders, and performing related bookkeeping services. The Adviser shall
pay all charges of depositories, custodians, and other agencies for the
safekeeping and servicing of the Fund's cash, securities, and other
property and of the Fund's transfer, dividend disbursing, and redemption
agents and registrars, if any; insurance expenses; all compensation of
trustees who are "interested persons" of the Fund as defined in the Act
and all expenses incurred in connection with their services to the Fund;
all expenses of publication of notices and reports to the Fund's
shareholders; all expenses of proxy solicitations of the Fund or its
board of trustees; and all expenses of maintaining the Fund's existence
and maintaining the registration of the Fund under the Act.

5. LIMITATION OF EXPENSES. During the term of this Agreement, the total
expenses of the Portfolio, exclusive of extraordinary costs or expenses
such as legal, accounting, or other costs or expenses not incurred in
the course of the Fund's ongoing operation, but including fees paid to
the Adviser pursuant to paragraph 6 below, shall not in any fiscal year
exceed the annual rate of 2.00% of the average daily net asset value of
the Portfolio, and the Adviser agrees to pay any excess expenses or to
reimburse the Portfolio for any sums expended for such expenses in
excess of that amount. Such payment, if any, will be paid on a monthly
basis. Brokers' commissions and other charges relating to the purchase
and sale of securities shall not be regarded as expenses for this
purpose.

B-2
<PAGE>
8. SERVICES OTHER THAN AS THE ADVISER. The Adviser or its affiliates may
act as broker for the Fund in connection with the purchase or sale of
securities by or for the Fund if and to the extent permitted by
procedures adopted from time to time by the Fund's board of trustees.
Such brokerage services are not within the scope of the duties of the
Adviser under this Agreement and, within the limits permitted by law and
the Fund's board of trustees, the Adviser may receive brokerage
commissions, fees, or other remuneration from the Fund for such service
in addition to its fee for services as the Adviser. Within the limits
permitted by law, the Adviser may receive compensation from the Fund for
other services performed by it for the Fund which are not within the
scope of the duties of the Adviser under this Agreement.

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

B-3
<PAGE>

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

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

<TABLE>
<S> <C>
ATTEST: SKYLINE FUNDS

/s/ Stephen F. Kendall By: William M. Dutton
- ------------------------------------------ ------------------------------------------
Name: Stephen F. Kendall Name: William M. Dutton
Title: Executive Vice President Title: President

ATTEST: SKYLINE ASSET MANAGEMENT, L.P.

B-4
<PAGE>
Exhibit C

SKYLINE FUNDS
SKYLINE SMALL CAP CONTRARIAN
INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT, dated as of the 28th day of May, 1998, made and entered into
by and between SKYLINE FUNDS, a Massachusetts business trust (the "Fund") on
behalf of Skyline Small Cap Contrarian ("Contrarian" or the "Portfolio"), and
SKYLINE ASSET MANAGEMENT, L.P., a Delaware limited partnership (the "Adviser").

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

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

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

3. EXPENSES TO BE PAID BY THE ADVISER. The Adviser shall furnish, at its
own expense, office space to the Fund and all necessary office
facilities, equipment, and personnel for managing the assets of
Contrarian, providing shareholder servicing and providing general
administrative services to Contrarian and to the Fund. The Adviser shall
also assume and pay all other ordinary costs and expenses incurred by it
in connection with managing the assets of the Fund; all ordinary
accounting, auditing and legal services, clerical and statistical
services, administrative costs and advisory fees (except to the extent
payable by the Fund pursuant to Section 4); any compensation of officers
and employees of the Fund; all costs attributable to shareholder and
investor services relating to Contrarian (including, without limitation,
telephone and personnel expenses and the

C-1
<PAGE>
charges, if any, of third parties performing such services); all
expenses of marketing shares of Contrarian; all expenses of maintaining
the registration of shares of Contrarian under the 1933 Act and of
qualifying and maintaining qualification of shares of Contrarian under
the securities laws of such United States jurisdictions as the Fund may
from time to time reasonably designate (except to the extent payable by
the Fund pursuant to Section 4); and all expenses of determining daily
price computations, placing of portfolio transaction orders, and
performing related bookkeeping services. The Adviser shall pay all
charges of depositories, custodians, and other agencies for the
safekeeping and servicing of the Fund's cash, securities, and other
property and of the Fund's transfer, dividend disbursing, and redemption
agents and registrars, if any; insurance expenses; all compensation of
trustees who are "interested persons" of the Fund as defined in the Act
and all expenses incurred in connection with their services to the Fund;
all expenses of publication of notices and reports to the Fund's
shareholders; all expenses of proxy solicitations of the Fund or its
board of trustees; and all expenses of maintaining the Fund's existence
and maintaining the registration of the Fund under the Act.

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

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

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

C-2
<PAGE>
8. SERVICES OTHER THAN AS THE ADVISER. The Adviser or its affiliates may
act as broker for the Fund in connection with the purchase or sale of
securities by or for the Fund if and to the extent permitted by
procedures adopted from time to time by the Fund's board of trustees.
Such brokerage services are not within the scope of the duties of the
Adviser under this Agreement and, within the limits permitted by law and
the Fund's board of trustees, the Adviser may receive brokerage
commissions, fees, or other remuneration from the Fund for such service
in addition to its fee for services as the Adviser. Within the limits
permitted by law, the Adviser may receive compensation from the Fund for
other services performed by it for the Fund which are not within the
scope of the duties of the Adviser under this Agreement.

10. DURATION AND RENEWAL. This Agreement has been approved on behalf of
Contrarian by a majority of those trustees of the Fund who are not
"interested persons" (as defined in the Act) of the Fund or of the
Adviser, voting in person at a meeting called for the purpose of voting
on such approval. Unless terminated as provided in Section 11, this
Agreement shall continue in effect until May 31, 1999, and thereafter
from year to year only so long as such continuance is specifically
approved at least annually by the board of trustees of the Fund,
including a majority of those trustees of the Fund who are not
"interested persons" (as defined in the Act) of the Fund or of the
Adviser, voting in person at a meeting called for the purpose of voting
on such approval.

11. TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by the Fund's board of trustees or by a vote of
the holders of a majority (as defined in the Act) of the outstanding
shares of Contrarian, upon 60 days' written notice to the Adviser. This
Agreement may be terminated by the Adviser at any time upon 90 days'
written notice to the Fund. This Agreement shall terminate automatically
(i) in the event of its assignment (as defined in the Act); and (ii) on
September 25, 1998 unless it has been approved by the holders of a
"majority of the outstanding voting securities" as defined in Section 2
(a)(42) of the Act) of Contrarian on or before that date.

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

C-3
<PAGE>
14. LIMITED LIABILITY. Any obligation of the Fund hereunder shall be binding
only on the assets of the Fund (or the applicable Portfolio thereof) and
shall not be binding upon any trustee, officer, employee, agent or
shareholder of the Fund. Neither the authorization of any action by the
trustees or shareholders of the Fund nor the execution of this Agreement
on behalf of the Fund shall impose any liability upon any trustee or any
shareholder.

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

<TABLE>
<S> <C>
ATTEST: SKYLINE FUNDS

ATTEST: SKYLINE ASSET MANAGEMENT, L.P.

C-4
<PAGE>

SKYLINE SPECIAL EQUITIES PORTFOLIO

By signing and dating this card, you
authorize William M. Dutton, Stephen
F. Kendall and Scott C. Blim, or any
of them, each with the power of
substitution, to vote your shares of
SKYLINE FUNDS Skyline Special Equities Portfolio at
311 SOUTH WACKER DR. the scheduled meeting of Skyline
CHICAGO, IL 60606 Funds shareholders and at any
adjournment of the meeting. THEY
SHALL VOTE AS RECOMMENDED BY THE
BOARD, UNLESS OTHERWISE INDICATED BY
YOU, AND IN THEIR DISCRETION UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING, OR ANY ADJOURNMENT
[OUTGOING ADDRESS] THEREOF.

Where shares are registered with
joint owners, all joint owners should
sign. Persons signing as executors,
administrators, trustees, etc. should
so indicate.

To vote your shares, please sign and
date this proxy and return it in the
envelope provided. By returning this
card, you authorize the proxies to
vote on each proposal as marked, or,
if not marked, to vote for proposals 1
and 2.

Detach the proxy card below, and sign,
date and mail it in the postage paid
envelope provided.

[ACCOUNT INFORMATION]

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: /X/
SKYSPE KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
________________________________________________________________________________
SKYLINE SPECIAL EQUITIES PORTFOLIO
------------------------
SCAN LINE
------------------------

THIS PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES.

Your Trustees unanimously recommend a vote FOR the following proposals.

Vote on Proposals For Against Abstain

1. To approve a new investment advisory agreement
between Skyline Special Equities Portfolio and
Skyline Asset Management, L.P. / / / / / /

For Withhold

2. To elect Richard K. Pearson to the Board of Trustees. / / / /

_______________________________________ ________________________________

_______________________________________ ________________________________
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
________________________________________________________________________________

<PAGE>

SKYLINE SMALL CAP VALUE PLUS

By signing and dating this card, you
authorize William M. Dutton, Stephen
F. Kendall and Scott C. Blim, or any
of them, each with the power of
substitution, to vote your shares of
SKYLINE FUNDS Skyline Small Cap Value Plus at the
311 SOUTH WACKER DR. scheduled meeting of Skyline
CHICAGO, IL 60606 Funds shareholders and at any
adjournment of the meeting. THEY
SHALL VOTE AS RECOMMENDED BY THE
BOARD, UNLESS OTHERWISE INDICATED BY
YOU, AND IN THEIR DISCRETION UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING, OR ANY ADJOURNMENT
[OUTGOING ADDRESS] THEREOF.

Where shares are registered with
joint owners, all joint owners should
sign. Persons signing as executors,
administrators, trustees, etc. should
so indicate.

Detach the proxy card below, and sign,
date and mail it in the postage paid
envelope provided.

[ACCOUNT INFORMATION]

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: /X/
SMLCAP KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
________________________________________________________________________________
SKYLINE SMALL CAP VALUE PLUS
------------------------
SCAN LINE
------------------------

THIS PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES.

Your Trustees unanimously recommend a vote FOR the following proposals.

Vote on Proposals For Against Abstain

1. To approve a new investment advisory agreement
between Skyline Small Cap Value Plus and Skyline
Asset Management, L.P. / / / / / /

For Withhold

2. To elect Richard K. Pearson to the Board of Trustees. / / / /

_______________________________________ ________________________________

<PAGE>

SKYLINE SMALL CAP CONTRARIAN

By signing and dating this card, you
authorize William M. Dutton, Stephen
F. Kendall and Scott C. Blim, or any
of them, each with the power of
substitution, to vote your shares of
SKYLINE FUNDS Skyline Small Cap Contrarian at the
311 SOUTH WACKER DR. scheduled meeting of Skyline
CHICAGO, IL 60606 Funds shareholders and at any
adjournment of the meeting. THEY
SHALL VOTE AS RECOMMENDED BY THE
BOARD, UNLESS OTHERWISE INDICATED BY
YOU, AND IN THEIR DISCRETION UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING, OR ANY ADJOURNMENT
[OUTGOING ADDRESS] THEREOF.

Where shares are registered with
joint owners, all joint owners should
sign. Persons signing as executors,
administrators, trustees, etc. should
so indicate.

Detach the proxy card below, and sign,
date and mail it in the postage paid
envelope provided.

[ACCOUNT INFORMATION]

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: /X/
SMLCON KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
________________________________________________________________________________
SKYLINE SMALL CAP CONTRARIAN
------------------------
SCAN LINE
------------------------

THIS PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES.

Your Trustees unanimously recommend a vote FOR the following proposals.

Vote on Proposals For Against Abstain

1. To approve a new investment advisory agreement
between Skyline Small Cap Contrarian and Skyline
Asset Management, L.P. / / / / / /

For Withhold

2. To elect Richard K. Pearson to the Board of Trustees. / / / /

_______________________________________ ________________________________