<PAGE>
SEMI-ANNUAL REPORT -- June 30, 1999
SKYLINE SMALL CAP
VALUE PLUS
-----------------------
SKYLINE SPECIAL EQUITIES PORTFOLIO
SKYLINE SMALL CAP VALUE PLUS
SKYLINE SMALL CAP CONTRARIAN
[SKYLINE LOGO]
SKYLINE Funds
<PAGE>
LETTER from Kenneth S. Kailin, Portfolio Manager:(1)
- ------------------------------------------------------------------------
June 30, 1999
Dear Shareholder:
OVERVIEW
For the three-month period ending June 30, 1999, the Fund returned a very
healthy 19.14%. During this same period the Russell 2000 Index rose 15.55%,
while the average small cap fund was up 15.56%. The strong Fund results for the
quarter relate to a strong economy, increased interest in small company stocks,
and good stock selection. While these short-term results are satisfying, the
environment over the last year proved very difficult for our small company value
style of investing. The Fund returned 4.07% for the first six months of 1999 as
compared to 9.28% for the Russell 2000 Index. Recent monthly returns indicate a
favorable turn in market psychology may be occurring in small company stocks,
which would benefit our style in the future.
MARKET REVIEW
The big news of the second quarter was the improved performance of small cap
stocks, with the Russell 2000 Index showing a gain of 15.55% compared to a 6.92%
return for the S&P 500 Index. This turnaround started in mid-April when first
quarter earnings reports were announced. Investors noticed that profit growth
was accelerating after a difficult second half in 1998. At the same time,
companies reported that results from Asia were improving. This occurred at a
time when relative valuations favored small cap stocks. The combination of low
valuations and good financial news sparked a meaningful rally.
In terms of investment styles, both growth and value managers could find
something positive in the period as all major industry sectors produced solid
returns. Value-oriented investment strategies saw improved results due largely
to big gains registered by cyclical sectors of the market. Investors reasoned
that improving worldwide economic news was positive for cyclical companies. At
the same time, the technology sector was very strong, helping growth stock
managers. Interestingly, consumer stocks were laggards during the period despite
very strong consumer spending trends.
PORTFOLIO REVIEW
Compared to almost any measure, the Fund performed well in the second quarter
with a 19.14% return. The combination of a strong economy and renewed interest
in small company stocks helped create positive returns. The outperformance
largely stemmed from strong stock selections. Sector returns relative to our
benchmarks were mixed, although more heavily weighted areas such as technology
and consumer-related stocks performed well.
On an absolute basis, every industry sector showed positive returns in the
quarter, but some were more robust than others. Technology stocks were the stars
in the quarter after being a difficult area for the Fund over the last year. In
fact, these stocks were up over 40% for the Fund and represented almost 20% of
the holdings. Signs improved for the profit outlook for many of these companies
due to high sales demand and big cost saving programs. This outlook, combined
with low valuations, drove powerful moves in these stocks. We remain bullish on
this sector, although valuations are not quite as compelling.
SEMI-ANNUAL REPORT - JUNE 30, 1999 1
<PAGE>
Another important sector for the Fund was consumer-related stocks, which
represented over 25% of the holdings. These stocks were also generally strong
performers for the Fund, even though there were also a few weak positions. Low
valuations coupled with improving profit growth trends fueled solid stock
selections in this sector. We believe this area should continue to do well as we
approach the holiday season. Financial stocks in the Fund performed similar to
the financial stocks within the Russell 2000 Index. However, the return of 11%
was comparatively weak versus other sectors. Rising interest rate fears caused
other sectors to appear more attractive. As a result, the Fund's holdings in
this sector were reduced during the quarter. Other sectors of the Fund showed
mixed results.
In summary, strong stock selection highlighted by technology and consumer stocks
drove much of the superior gains in the past quarter. This strength related to
low valuations, improved profit outlooks, and increased investor attention in
the small company stock market arena. Also noteworthy was the low number of
disappointing corporate developments within the Fund's holdings during the
quarter, which is another hopeful sign for the future.
OUTLOOK
We believe that a major change occurred in the stock market in April that will
be positive for the Fund going forward. After an extended period of
outperformance by large cap stocks and growth-oriented strategies, a shift
occurred in April that favored small cap stocks and value-oriented strategies.
We believe this shift occurred because of superior relative valuation, an
improving worldwide economic environment, and better corporate earnings growth.
In terms of relative valuation, small cap stocks have not been so attractively
priced since the early 1970s. After trading near parity with large cap stocks
for most of the past 20 years, small cap stocks are currently trading at a very
large discount. A move back to parity from current levels would provide an
enormous performance advantage for small cap stocks.
We believe the catalyst for such a move is the improving international economic
situation along with better corporate earnings growth. Recent developments on
the international front have been encouraging and corporate earnings growth
picked up in the March quarter following a rather dismal showing in the last
half of 1998. Further improvement in these areas should strongly help small cap
valuations.
The Fund remains inexpensively priced relative to the market, trading at a 20%
discount to the Russell 2000 Index and a 30% discount compared to the S&P 500
Index. The expected earnings growth rate for the companies within the Fund is
considerably better than the average company within the Russell 2000 Index or
the S&P 500 Index. We believe the move in small cap stocks in the June quarter
is just the beginning of a very long period of strong relative performance.
While not many quarters will likely be as robust as this past one, we believe
the Fund is well positioned to benefit from improving trends over the coming
years.
/s/ Kenneth S. Kailin
2 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
- - PORTFOLIO Characteristics
- ---------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP
VALUE PLUS RUSSELL 2000 S&P 500
<S> <C> <C> <C>
P/E RATIO (MEDIAN) 18.3 22.8 26.2
PRICE/BOOK 3.03 2.44 5.21
PRICE/SALES 0.97 1.22 2.26
- ------------------------------------------------------------------------------------------
EPS GROWTH--5 YRS (HISTORICAL) 18.2% 14.1% 14.8%
EPS GROWTH--1 YR (FORECASTED) 21.6% 17.1% 18.2%
- ------------------------------------------------------------------------------------------
MARKET CAP $ WGHTD. MED. $850 million $730 million $70 billion
PORTFOLIO VALUE $90 million $913 billion $11,213 billion
NUMBER OF HOLDINGS 54 2000 500
- -------------------------------------------------------------------------------
TICKER SYMBOL: SPEQX
CUSIP #: 830833406
INITIAL INVESTMENT: $1,000
SUBSEQUENT INVESTMENT: $100
NET ASSET VALUE (PER SHARE): $12.26
</TABLE>
- - TOP Ten Holdings(3)
<TABLE>
<CAPTION>
% OF NET ASSETS
- -----------------------------------------------------------------------------
<S> <C>
IVEX PACKAGING CORP.
Consumer & industrial packaging 3.2%
SAFETY-KLEEN CORP.
Industrial waste services 3.0%
DEL MONTE FOODS CO.
Canned foods 2.7%
DII GROUP, INC.
Electronics manufacturing 2.6%
NEWFIELD EXPLORATION CO.
Oil & gas producer 2.6%
WESLEY JESSEN VISIONCARE, INC.
Contact lenses manufacturer 2.6%
CACI INTERNATIONAL INC.
Technology services provider 2.4%
COVENANT TRANSPORT, INC.
Specialty truckload carrier 2.3%
PENTAIR, INC.
Diversified manufacturer 2.3%
ARTESYN TECHNOLOGIES, INC.
Power supplies 2.2%
TOP TEN HOLDINGS 25.9%
</TABLE>
SEMI-ANNUAL REPORT - JUNE 30, 1999 3
<PAGE>
- - PERFORMANCE (%)(1)
- -------------------------------------------------
<TABLE>
<CAPTION>
2Q
1999 YTD 1 yr. 3 yrs.
<S> <C> <C> <C> <C>
SMALL CAP VALUE PLUS 19.14 4.07 -8.45 11.30
RUSSELL 2000 15.55 9.28 1.50 11.22
S&P 500 6.92 12.22 22.71 29.16
</TABLE>
- - SECTOR Weightings (as of June 30, 1999)
- -----------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer Discretionary 22.9%
Consumer Staples 4.8%
Energy 2.6%
Financial Services 17.4%
Health Care 8.7%
Materials & Processing 5.3%
Producer Durables 8.8%
Technology 19.6%
Cash 4.1%
Autos & Transportation 5.8%
</TABLE>
4 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Calendar Years
Since -----------------------------------------------------------------------
5 yrs. Inception(2) 1998 1997 1996 1995 1994 1993(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SMALL CAP VALUE PLUS 13.89 11.76 -6.7 26.2 26.6 21.0 -1.5 10.1
RUSSELL 2000 15.40 12.95 -2.6 22.4 16.5 28.4 -1.8 13.8
S&P 500 27.93 21.94 28.8 33.4 23.3 37.5 1.3 10.0
</TABLE>
- - SECTOR Performance(1) (as of June 30, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2Q 1999 YTD 1999
- ---------------------------------------------------- ----------------------------------------------------
SMALL CAP RUSSELL SMALL CAP RUSSELL
VALUE PLUS 2000 VALUE PLUS 2000
<S> <C> <C> <C> <C> <C>
Materials & Processing 57.8 % 19.9 % Energy 35.0 % 33.2 %
- ---------------------------------------------------- ----------------------------------------------------
Technology 41.1 21.5 Materials & Processing 23.8 5.9
- ---------------------------------------------------- ----------------------------------------------------
Energy 25.2 26.3 Technology 14.9 17.9
- ---------------------------------------------------- ----------------------------------------------------
Consumer Staples 22.0 6.9 Consumer Discretionary 10.5 10.6
- ---------------------------------------------------- ----------------------------------------------------
Consumer Discretionary 18.0 9.5 Consumer Staples 6.4 -9.8
- ---------------------------------------------------- ----------------------------------------------------
Health Care 11.3 11.5 Health Care -4.7 -0.8
- ---------------------------------------------------- ----------------------------------------------------
Financial Services 11.0 12.2 Financial Services -6.6 4.7
- ---------------------------------------------------- ----------------------------------------------------
Producer Durables 9.5 23.7 Producer Durables -8.2 10.7
- ---------------------------------------------------- ----------------------------------------------------
Autos & Transportation 2.8 23.4 Autos & Transportation -13.8 9.4
- ---------------------------------------------------- ----------------------------------------------------
Utilities N/A* 16.7 Utilities N/A* 20.9
- ---------------------------------------------------- ----------------------------------------------------
Other N/A* 18.0 Other N/A* -1.9
- ---------------------------------------------------- ----------------------------------------------------
</TABLE>
* NOT APPLICABLE
SEMI-ANNUAL REPORT - JUNE 30, 1999 5
<PAGE>
STOCK Highlights(3)
- ------------------------------------------------------------------------
HEIDRICK & STRUGGLES INTERNATIONAL, INC. (HSII)
HSII is the world's leading executive search firm. HSII was founded in 1954 but
only became a public company in 1999. HSII specializes in senior level searches
and receives a fee regardless of the success of the search. HSII is benefiting
from a 20% growth rate in the executive search industry caused by the increase
in senior level job-turnover and the ever-upward spiraling level of senior
management pay. HSII is growing faster than the industry by adding consultants,
opening new offices in new geographic markets, and acquiring small complementary
firms. HSII has conducted a significant number of searches for Internet
companies and has received warrants as partial compensation, representing a
hidden asset. Management's and shareholders' interests are aligned, as
management/employees control over 70% of HSII's stock. We feel HSII's stock
represents an exceptional value based on a low price/earnings ratio and
expectation of strong profit growth in the years ahead.
WHITEHALL JEWELLERS, INC. (WHJI)
WHJI is one of the largest jewelry chains in the United States. WHJI operates
over 260 mall-based stores in 29 states under multiple names including Lundstrom
Jewelers, Whitehall Jewellers, and Marks Bros. Jewelers. WHJI utilizes a small
and open front store format, which allows it to be more efficient and profitable
than most of its competitors. WHJI should be able to generate above-average
earnings growth for the next several years. The combination of rising disposable
income and the maturation of the baby boomer generation, who spend more on
jewelry than other demographic groups, and aggressive new store expansion should
fuel impressive earnings growth. Despite its high financial returns and solid
earnings growth prospects, WHJI trades at a discounted valuation, making this
stock a true "diamond in the rough".
NOTES TO PERFORMANCE
(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE PRINCIPAL VALUE AND
RETURN ON YOUR INVESTMENT WILL FLUCTUATE AND ON REDEMPTION MAY BE WORTH MORE
OR LESS THAN YOUR ORIGINAL COST. The performance for the one, three, and
five years ended June 30, 1999, and for the period February 9, 1993
(inception) through June 30, 1999, is an average annual total return
calculation which is described in the Fund's prospectus.
The Russell 2000 Index is an unmanaged, market value weighted index
comprised of small-sized companies. The S&P 500 Index, a widely quoted stock
market index, includes 500 of the largest companies publicly traded in
America. All figures take into account reinvested dividends. All indexes and
portfolio characteristics are compiled by Frank Russell Company.
Sources: Frank Russell Company & Lipper Analytical Services, Inc.
(2) Return is calculated from the Fund's inception on February 9, 1993.
(3) Fund holdings are subject to change and should not be considered a
recommendation to buy individual securities.
This report is not authorized for distribution unless accompanied or preceded by
a current prospectus.
There are risks of investing in a fund of this type which invests in stocks of
small cap companies, which tend to be more volatile and less liquid than stocks
of large cap companies.
DISTRIBUTOR: FUNDS DISTRIBUTOR INC.
6 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
This page left blank intentionally.
SEMI-ANNUAL REPORT - JUNE 30, 1999 7
<PAGE>
- - PORTFOLIO Holdings as of June 30, 1999 (unaudited)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY NUMBER MARKET
DESCRIPTION OF SHARES VALUE
----------------------------------- --------- -------------
<S> <C> <C> <C>
COMMON STOCKS
AUTOS & TRANSPORTATION - 5.8%
AIRLINE - 1.3%
Mesaba Holdings, Inc.(a) Regional airline 89,300 $ 1,138,575
AUTO RELATED - 2.2%
Dura Automotive Systems(a) OEM auto parts producer 60,700 2,018,275
TRUCKING - 2.3%
Covenant Transport, Inc.(a) Specialty truckload carrier 132,900 2,093,175
-------------
TOTAL AUTOS & TRANSPORTATION 5,250,025
CONSUMER DISCRETIONARY - 22.9%
APPAREL/TEXTILES - 3.8%
Gildan Activewear Inc.(a) Shirt manufacturer 113,000 1,906,875
Warnaco Group, Inc. (The) Apparel manufacturer 58,300 1,559,525
-------------
3,466,400
COMMERCIAL SERVICES - 8.7%
Heidrick & Struggles International,
Inc.(a) Executive recruiting 101,600 1,930,400
RemedyTemp, Inc.(a) Staffing services 120,300 1,624,050
Safety-Kleen Corp.(a) Industrial waste services 147,375 2,671,172
United Stationers Inc.(a) Office products distributor 72,900 1,603,800
-------------
7,829,422
CONSUMER PRODUCTS/SERVICES - 5.4%
Department 56, Inc.(a) Decorative collectibles 53,400 1,435,125
Kenneth Cole Productions(a) Footwear/accessories maker 61,900 1,725,462
Midas, Inc. Auto service centers franchiser 61,300 1,739,388
-------------
4,899,975
PRINTING/PUBLISHING - 2.0%
World Color Press, Inc.(a) Commercial printer 65,600 1,804,000
RESTAURANTS - 1.3%
CEC Entertainment, Inc. Children-oriented casual dining 26,700 1,128,075
RETAIL - 1.7%
Gadzooks, Inc.(a) Teen apparel retailer 43,300 692,800
Whitehall Jewellers, Inc.(a) Jewelry store chain 32,300 862,006
-------------
1,554,806
-------------
TOTAL CONSUMER DISCRETIONARY 20,682,678
</TABLE>
8 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY NUMBER MARKET
DESCRIPTION OF SHARES VALUE
----------------------------------- --------- -------------
<S> <C> <C> <C>
CONSUMER STAPLES - 4.8%
CONSUMER STAPLES - 4.8%
Del Monte Foods Co.(a) Canned foods 145,800 $ 2,442,150
International Home Foods, Inc.(a) Packaged-foods manufacturer 102,100 1,882,469
-------------
TOTAL CONSUMER STAPLES 4,324,619
ENERGY - 2.6%
EXPLORATION & PRODUCTION - 2.6%
Newfield Exploration Co.(a) Oil & gas producer 82,600 2,348,937
FINANCIAL SERVICES - 17.4%
BANKS/THRIFTS - 1.9%
Peoples Heritage Financial Group New England-based thrift 90,600 1,704,412
INSURANCE - 5.9%
CNA Surety Corp. Surety insurance 63,100 966,219
Fremont General Corp. Workers' Comp. insurance 43,700 824,838
HCC Insurance Holdings, Inc. P & C insurance 59,100 1,340,831
Radian Group Inc. Mortgage insurance 25,500 1,244,719
StanCorp Financial Group, Inc.(a) Disability insurance 32,800 984,000
-------------
5,360,607
OTHER FINANCIAL SERVICES - 7.8%
American Capital Strategies, Ltd. Commercial finance 79,000 1,441,750
ARM Financial Group, Inc. Investment products 63,200 537,200
Gabelli Asset Management Inc.(a) Asset management 115,400 1,824,762
Heller Financial, Inc. Commercial finance 63,500 1,766,094
Raymond James Financial, Inc. Investment services 60,500 1,448,219
-------------
7,018,025
REAL ESTATE INVESTMENT TRUSTS - 1.8%
Prentiss Properties Trust Office/industrial properties REIT 67,900 1,595,650
-------------
TOTAL FINANCIAL SERVICES 15,678,694
HEALTH CARE - 8.7%
HEALTH CARE SERVICES - 0.9%
US Oncology, Inc (a) Cancer treatment services 65,600 787,200
MEDICAL EQUIPMENT/PRODUCTS - 7.8%
Arrow International, Inc. Disposable catheters producer 55,900 1,446,411
Cooper Companies, Inc. (The) Eyecare products 61,400 1,531,163
DENTSPLY International Inc. Dental products manufacturer 62,000 1,790,250
Wesley Jessen VisionCare, Inc.(a) Contact lenses manufacturer 71,500 2,314,813
-------------
7,082,637
-------------
TOTAL HEALTH CARE 7,869,837
</TABLE>
SEMI-ANNUAL REPORT - JUNE 30, 1999 9
<PAGE>
- - PORTFOLIO Holdings as of June 30, 1999 (continued, unaudited)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY NUMBER MARKET
DESCRIPTION OF SHARES VALUE
----------------------------------- --------- -------------
<S> <C> <C> <C>
MATERIALS & PROCESSING - 5.3%
PACKAGING/PAPER - 3.2%
Ivex Packaging Corp.(a) Consumer & industrial packaging 132,500 $ 2,915,000
SPECIALTY CHEMICALS - 2.1%
Spartech Corp. Plastics 59,500 1,881,688
-------------
TOTAL MATERIALS & PROCESSING 4,796,688
PRODUCER DURABLES - 8.8%
AEROSPACE RELATED - 3.4%
Kellstrom Industries, Inc.(a) Resells used aircraft parts 77,600 1,416,200
TriStar Aerospace Co.(a) Distributes aerospace products 204,200 1,684,650
-------------
3,100,850
DIVERSIFIED MANUFACTURING - 4.3%
Applied Power Inc. Industrial products manufacturer 65,400 1,786,238
Pentair, Inc. Diversified manufacturer 44,900 2,054,175
-------------
3,840,413
ELECTRICAL EQUIPMENT/PRODUCTS - 1.1%
Belden Inc. Wire & cable manufacturer 40,400 967,075
-------------
TOTAL PRODUCER DURABLES 7,908,338
TECHNOLOGY - 19.6%
CONTRACT MANUFACTURING - 4.1%
DII Group, Inc.(a) Electronics manufacturing 63,200 2,358,150
SCI Systems, Inc.(a) Electronics manufacturing 27,600 1,311,000
-------------
3,669,150
DISTRIBUTION - 1.3%
ScanSource Inc.(a) Specialty technology products 55,000 1,189,375
-------------
ELECTRONIC COMPONENTS - 4.1%
Artesyn Technologies, Inc.(a) Power supplies 91,100 2,021,281
CTS Corp. Broad line specialty products 24,300 1,701,000
-------------
3,722,281
OTHER TECHNOLOGY - 5.6%
Black Box Corp.(a) Networking/communications 37,700 1,889,712
National Data Corp. Data processing services 34,000 1,453,500
Zebra Technologies Corp.(a) Bar coding equipment 44,900 1,725,844
-------------
5,069,056
</TABLE>
10 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY NUMBER MARKET
DESCRIPTION OF SHARES VALUE
----------------------------------- --------- -------------
<S> <C> <C> <C>
SERVICES - 4.5%
CACI International Inc.(a) Technology services provider 96,000 $ 2,160,000
Keane, Inc.(a) Software consulting 41,300 934,413
Metro Information Services, Inc.(a) Information technology staffing 55,200 917,700
-------------
4,012,113
-------------
TOTAL TECHNOLOGY 17,661,975
-------------
TOTAL COMMON STOCKS - 95.9%
(Cost $73,042,782) 86,521,791
MONEY MARKET INSTRUMENTS(b)
Yield 4.701% to 4.890%
due July 1999 to April 2000
General Mills, Inc. ($3,048,290 Par Value) 3,048,290
Pitney Bowes Credit Corp. ($312,000 Par Value) 312,000
Warner Lambert Corp. ($981,958 Par Value) 981,958
Wisconsin Corp. Credit Union ($1,701,524 Par Value) 1,701,524
-------------
TOTAL MONEY MARKET INSTRUMENTS - 6.7%
(Cost $6,043,772) 6,043,772
-------------
TOTAL INVESTMENTS - 102.6%
(Cost $79,086,554) 92,565,563
LIABILITIES LESS OTHER ASSETS - (2.6%) (2,341,079)
-------------
NET ASSETS - 100.0% $ 90,224,484
-------------
-------------
</TABLE>
a Non-income producing security.
b Variable rate demand notes. Interest rates are reset every seven days. Rates
disclosed represent rates in effect on June 30, 1999.
Based on cost of investments for federal income tax purposes of $79,086,554 on
June 30, 1999, net unrealized appreciation was $13,479,009, consisting of gross
unrealized appreciation of $16,339,554 and gross unrealized depreciation of
$2,860,545.
See accompanying notes to financial statements.
SEMI-ANNUAL REPORT - JUNE 30, 1999 11
<PAGE>
STATEMENT of Assets & Liabilities as of June 30, 1999 (unaudited)
- ------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost:
$79,086,554) $92,565,563
Receivable for:
Securities sold $ 217,707
Dividends and interest 80,599
Fund shares sold 198,629 496,935
----------
Organization costs (net of accumulated
amortization of $21,146) 1,095
-----------
Total assets 93,063,593
LIABILITIES & NET ASSETS
Payable for:
Securities purchased $1,348,427
Fund shares redeemed 1,379,048
Comprehensive management fee 109,113
Fees to unaffiliated trustees 81
Organization costs 2,440 2,839,109
---------- -----------
Net assets applicable to shares
outstanding $90,224,484
-----------
-----------
Shares outstanding--no par value
(unlimited number of shares
authorized) 7,358,061
-----------
-----------
PRICING OF SHARES
Net asset value, offering price and
redemption price per share $ 12.26
-----------
-----------
ANALYSIS OF NET ASSETS
Paid-in capital $78,840,642
Accumulated net realized loss on
sales of investments (1,855,090)
Unrealized net appreciation of
investments 13,479,009
Accumulated net investment loss (240,077)
-----------
Net assets applicable to shares
outstanding $90,224,484
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
12 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
STATEMENT of Operations For the Six Months Ended June 30, 1999 (unaudited)
- ------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income
Dividends $ 347,765
Interest 181,967
---------
Total investment income 529,732
Expenses:
Comprehensive management fee 761,076
Fees to unaffiliated trustees 7,388
Amortization of organization costs 1,345
---------
Total expenses 769,809
---------
Net investment loss (240,077)
Net realized and unrealized gain (loss) on
investments:
Net realized loss on sales of investments (378,924)
Net change in unrealized appreciation 981,133
---------
Net realized and unrealized gain on investments 602,209
---------
Net increase in net assets resulting from
operations $ 362,132
---------
---------
</TABLE>
See accompanying notes to financial statements.
SEMI-ANNUAL REPORT - JUNE 30, 1999 13
<PAGE>
STATEMENTS of Changes in Net Assets
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED 6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
-------------- -------------
<S> <C> <C>
From operations:
Net investment loss $ (240,077) $ (668,879)
Net realized loss on sales of investments (378,924) (1,476,166)
Net change in unrealized appreciation 981,133 (7,833,754)
-------------- -------------
Net increase (decrease) in net assets resulting
from operations 362,132 (9,978,799)
Distributions to shareholders from:
Net realized gains -- (1,234,409)
Return of capital -- (112,960)
-------------- -------------
Decrease in net assets resulting from
distributions to shareholders -- (1,347,369)
From fund share transactions:
Proceeds from fund shares sold 38,514,947 94,550,013
Reinvestments of capital gain distributions 0 1,318,065
Payments for fund shares redeemed (83,554,175) (115,327,102)
-------------- -------------
Net decrease in net assets resulting from share
transactions (45,039,228) (19,459,024)
-------------- -------------
Total decrease in net assets (44,677,096) (30,785,192)
Net assets at beginning of period 134,901,580 165,686,772
-------------- -------------
Net assets at end of period $ 90,224,484 $ 134,901,580
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes to financial statements.
14 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
FINANCIAL Highlights
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED 6/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Net asset value at
beginning of period $ 11.78 $ 12.75 $ 11.94 $ 11.29 $ 10.14 $ 10.79
-------------- ----------- ----------- ----------- --------- ---------
Income from investment
operations
Net investment (loss)
income (0.06) (0.06) (0.03) (0.02) 0.06 0.02
Net realized and
unrealized gain (loss)
on investments 0.54 (0.79) 3.13 2.94 2.06 (0.19)
-------------- ----------- ----------- ----------- --------- ---------
Total from investment
operations 0.48 (0.85) 3.10 2.92 2.12 (0.17)
-------------- ----------- ----------- ----------- --------- ---------
Less distributions from:
Dividends from net
investment income -- -- -- (0.01) (0.06) (0.02)
Dividends from net realized
gains on investments -- (0.11) (2.29) (2.26) (0.91) (0.46)
Dividends from return of
capital -- (0.01) -- -- -- --
-------------- ----------- ----------- ----------- --------- ---------
Total distributions -- (0.12) (2.29) (2.27) (0.97) (0.48)
-------------- ----------- ----------- ----------- --------- ---------
Net asset value at end of
period $ 12.26 $ 11.78 $ 12.75 $ 11.94 $ 11.29 $ 10.14
-------------- ----------- ----------- ----------- --------- ---------
-------------- ----------- ----------- ----------- --------- ---------
Total Return 4.07%(a) (6.66%) 26.21% 26.60% 20.95% (1.52%)
Ratios/Supplemental Data
Ratio of expenses to average
net assets 1.52%(b) 1.51% 1.51% 1.53% 1.52% 1.51%
Ratio of net investment
(loss) income to average
net assets (0.47%)(b) (0.43%) (0.30%) (0.24%) 0.50% 0.22%
Portfolio turnover rate 98%(b) 106% 104% 145% 102% 82%
Net assets, end of period
(in thousands) $90,224 $ 134,902 $ 165,687 $ 105,333 $ 89,203 $ 99,638
-------------- ----------- ----------- ----------- --------- ---------
-------------- ----------- ----------- ----------- --------- ---------
</TABLE>
Effective August 31, 1995, the Fund's Investment Adviser changed from Mesirow
Asset Management, Inc., to Skyline Asset Management, L.P.
a For the six months ended June 30, 1999.
b Ratios have been determined on an annualized basis.
See accompanying notes to financial statements.
SEMI-ANNUAL REPORT - JUNE 30, 1999 15
<PAGE>
NOTES to Financial Statements (unaudited)
- ------------------------------------------------------------------------
Skyline Funds is an open-end, diversified investment management company which
consists of Special Equities Portfolio, Small Cap Value Plus (formerly Special
Equities II), and Small Cap Contrarian. The Funds commenced public offering of
their shares as follows: Special Equities Portfolio on April 23, 1987, Small Cap
Value Plus on February 9, 1993, and Small Cap Contrarian on December 15, 1997.
The following notes relate solely to the accompanying financial statements of
Small Cap Value Plus ("Fund").
1
SIGNIFICANT ACCOUNTING POLICIES
/ / SECURITY VALUATION - Investments are stated at value. Securities listed or
admitted to trading on any national securities exchange or the Nasdaq National
Market are valued at the last sales price on the principal exchange or market on
which they are traded or listed or, if there has been no sale that day, at the
most recent bid price. For certain fixed-income securities, Skyline Funds' Board
of Trustees has authorized the use of market valuations provided by an
independent pricing service. Variable rate demand notes with sixty days or less
to maturity are valued at amortized cost which approximates market value.
Securities or other assets for which market quotations are not readily
available, which may include certain restricted securities, are valued at a fair
value as determined in good faith by the Skyline Funds' Board of Trustees.
/ / SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions are
accounted for on the trade date (date the order to buy or sell is executed), and
dividend income is recorded on the ex-dividend date. Interest income is recorded
on an accrual basis and includes amortization of money market instrument premium
and discount. Realized gains and losses from security transactions are reported
on an identified cost basis.
/ / FUND SHARE VALUATION - Fund shares are sold on a continuous basis and
redeemed on a continuous basis at net asset value. Net asset value per share is
determined as of the close of regular session trading on the New York Stock
Exchange (normally 3:00 p.m. Central time) each day that the Exchange is open
for trading. The net asset value per share is determined by dividing the value
of all securities and other assets, less liabilities, by the number of shares of
the Fund outstanding.
/ / FEDERAL INCOME TAXES, DIVIDENDS, AND DISTRIBUTIONS TO SHAREHOLDERS - It is
the Fund's policy to comply with the special provisions of the Internal Revenue
Code applicable to regulated investment companies and, in the manner provided
therein, to distribute all of its taxable income to shareholders. Such
provisions were complied with and, therefore, no federal income taxes have been
accrued.
As of December 31, 1998, the Fund had capital loss carryforwards of $1,476,166.
This loss may be used to offset future gains arising in tax years through 2006.
Dividends payable to its shareholders are recorded by the Fund on the
ex-dividend date. Dividends are determined in accordance with tax principles
which may treat certain transactions differently from generally accepted
accounting principles.
16 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
- ------------------------------------------------------------------------
/ / EXPENSES - Expenses arising in connection with a particular fund are
allocated to that fund. Other expenses of the Skyline Funds, such as trustees'
fees, are allocated among the three funds comprising Skyline Funds.
2
TRANSACTIONS WITH AFFILIATES
The Fund's Investment Adviser is Skyline Asset Management, L.P. ("Adviser"). For
the Adviser's management and advisory services and the assumption of most of the
Fund's ordinary operating expenses, the Fund pays 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 any excess over $600 million. The total comprehensive management
fee charged for the period ended June 30, 1999 was $761,076.
Certain officers and trustees of the Skyline Funds are also officers, limited
partners or shareholders of limited partners of the Adviser. The Fund makes no
direct payments to the officers or trustees who are affiliated with the Adviser.
For the period ended June 30, 1999, fees of $7,388 were paid by the Fund to the
unaffiliated trustees.
3
FUND SHARE TRANSACTIONS
Shares sold and redeemed as shown in the statements of changes in net assets
were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year ended
6/30/99 12/31/98
---------------------------------
<S> <C> <C>
Shares sold 3,452,956 7,559,639
Shares issued in reinvestment of
dividends -- 113,150
------------------ -------------
3,452,956 7,672,789
Less shares redeemed (7,549,456) (9,216,532)
------------------ -------------
Net decrease in shares outstanding (4,096,500) (1,543,743)
------------------ -------------
------------------ -------------
Paid-In-Capital $ 78,840,642 $ 123,879,870
------------------ -------------
------------------ -------------
</TABLE>
4
INVESTMENT TRANSACTIONS
Investment transactions (exclusive of money market instruments) for the period
ended June 30, 1999 were as follows:
<TABLE>
<S> <C>
Cost of purchases $ 48,952,094
Proceeds from sales 93,054,856
</TABLE>
SEMI-ANNUAL REPORT - JUNE 30, 1999 17
<PAGE>
REPORT for the Six Months Ended June 30, 1999
- ------------------------------------------------------------------------
This report, including the unaudited financial statements contained herein, is
submitted for the general information of the shareholders of the Fund.
Funds Distributor Inc. is the principal underwriter of Skyline Funds.
18 SEMI-ANNUAL REPORT - JUNE 30, 1999
<PAGE>
For 24-hour account information CALL: 1.800.828.2SKY
(1.800.828.2759)
To speak with a Skyline Funds Representative during
normal business hours CALL: 1.800.828.2SKY and press 0 when prompted.
- ------------------------------------------------
[SKYLINE FUNDS LOGO]
311 South Wacker Drive
Suite 4500
Chicago, Illinois 60606
