ECLIPSE FINANCIAL ASSET TRUST, 485BPOS, 1996-05-01

ECLIPSE FINANCIAL ASSET TRUST
485BPOS, 1996-05-01

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<PAGE>

As filed with the Securities and Exchange Commission on May 1, 1996

Securities Act File No. 33-8865
Investment Company Act File No. 811-4847

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

Pre-Effective Amendment No. / /
------
Post-Effective Amendment No. 15 /X/
----

and/or

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

Amendment No. 14 /X/
----
(Check appropriate box or boxes)

ECLIPSE FINANCIAL ASSET TRUST
(Exact name of Registrant as Specified in Charter)

144 EAST 30TH STREET, NEW YORK, NEW YORK 10016
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number: (212) 696-4130
----------------------------------------------------------------------

Wesley G. McCain c/o Towneley Capital Management, Inc.
144 East 30th Street
New York, New York 10016

(Name and Address of Agent for Service)

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

It is proposed that this filing will become effective (check appropriate box)

/ / immediately upon filing pursuant to paragraph (b)
/x/ on May 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485

The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940, as amended, and Rule 24f-2 thereunder, and the Registrant filed a
Rule 24f-2 Notice for the fiscal year ended December 31, 1995 on February 28,
1996.
<PAGE>

ECLIPSE FINANCIAL ASSET TRUST
CROSS REFERENCE SHEET PURSUANT TO RULE 481(A)

Form N-1A, Location in Prospectus
Item Number Caption
- ----------------- ----------------------

PART A

Item 1. Cover Page. . . . . . . Cover Page

Item 2. Synopsis . . . . . . . . Prospectus Summary; Table of Fees and
Expenses

Item 3. Condensed Financial
Information . . . . . . Financial Highlights

Item 4. General Description of
Registrant. . . . . . . Investment Objectives, Policies and Risk
Considerations; Investment Restrictions;
General Information

Item 5. Management of the Fund. . The Manager; Expenses of the Trust;
General Information

Item 5A. Management's Discussion
of Fund Performance . . *

Item 6. Capital Stock and Other
Securities. . . . . . . Dividends, Distributions and Taxes;
General Information

Item 7. Purchase of Securities
Being Offered . . . . . How to Purchase and Redeem Shares;
Retirement Plans; Exchange Privilege

Item 8. Redemption or Repurchase. How to Purchase and Redeem Shares

Item 9. Pending Legal
Proceedings . . . . . . Not Applicable

- --------------------
*Contained in the annual report of Registrant.

<PAGE>

Location in Statement of
Form N1-A, Additional Information
Item Number Caption
- ----------------- ------------------------

PART B

Item 10. Cover Page. . . . . . . . Cover Page

Item 11. Table of Contents . . . . Table of Contents

Item 12. General Information and
History . . . . . . . . Not Applicable

Item 13. Investment Objectives and
Policies. . . . . . . . Investment Policies and Risk
Considerations; Investment Restrictions

Item 14. Management of the Fund. . Management

Item 15. Control Persons and
Principal Holders of
Securities. . . . . . . Management

Item 16. Investment Advisory and
Other Services. . . . . Management; Counsel and Auditors

Item 17. Brokerage Allocation and
Other Practices . . . . Portfolio Transactions and Brokerage

Item 18. Capital Stock and Other
Securities. . . . . . . Not Applicable

Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . Redemption of Shares; Net Asset Value

Item 20. Tax Status. . . . . . . . Taxation

Item 21. Underwriters. . . . . . . Not Applicable

Item 22. Calculation of Performance
Data . . . . . . . . Performance

Item 23. Financial Statements. . . Independent Auditor's Report; Financial
Statements

<PAGE>
[LOGO]

144 EAST 30TH STREET, NEW YORK, NEW YORK 10016

PROSPECTUS
MAY 1, 1996

Eclipse Financial Asset Trust (the "Trust") is a no-load, open-end, diversified
management investment company. The Trust currently has four investment
portfolios: the Ultra Short Term Income Fund, the Balanced Fund, the Growth and
Income Fund and the Equity Fund (individually a "Fund" and collectively the
"Funds").

The investment objective of the Ultra Short Term Income Fund is to seek
a high level of current income, preservation of capital and a relatively
stable net asset value. The Ultra Short Term Income Fund is designed for
the investor who seeks a higher yield than a money market fund (and is
willing to assume some principal risk) but less fluctuation in net asset
value than a longer-term bond fund. It is not a money market fund and
may not maintain a stable net asset value per share. The duration of the
Fund will not exceed one year. The Ultra Short Term Income Fund will
generally limit its investments to securities which, in the opinion of
the Fund's Manager, are issued by companies that are socially
responsible.

The investment objective of the Balanced Fund is to seek a high total
return from a combination of equity and fixed-income investments.

The investment objective of the Growth and Income Fund is to seek a high
total return consisting of both current income and realized and
unrealized capital gains from equity securities and equity-related
securities. Equity selection for the Growth and Income Fund is based on
estimated relative intrinsic value, expected future earnings growth and
current and expected dividend income.

The investment objective of the Equity Fund is to seek a high total
return from equity investments.

Securities are selected and weighted in each Fund's portfolio with a view toward
achievement of its investment objective.

Each Fund is a separate investment portfolio having its own investment objective
and policies. A shareholder in a Fund will be entitled to his pro rata share of
all dividends and distributions paid from that Fund's assets and, upon redeeming
shares of the Fund, will receive the portion of its net assets represented by
the redeemed shares.

Towneley Capital Management, Inc. serves as Manager of the Trust.

(CONTINUED ON INSIDE FRONT COVER)

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

(CONTINUED FROM FRONT COVER)

This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. A Statement
of Additional Information, dated May 1, 1996 containing additional and more
detailed information about the Trust and the Funds (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission and is
hereby incorporated by reference into this Prospectus. It is available without
charge and can be obtained by writing or calling the Shareholder Servicing Agent
at the address and telephone number on the cover.

This Prospectus should be read and retained by investors for future reference.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Table of Fees and Expenses.............................. 3
Financial Highlights.................................... 5
Prospectus Summary...................................... 9
Investment Objectives, Policies and Risk
Considerations......................................... 10
Introduction to the Trust............................. 10
Ultra Short Term Income Fund.......................... 10
Balanced Fund......................................... 12
Growth and Income Fund................................ 14
Equity Fund........................................... 15
Investment Policies Applicable to More Than One Fund.. 16
Policies Applicable to All Funds.................... 16
Policies Applicable to the Ultra Short Term Income
Fund and the Balanced Fund......................... 18
Investment Restrictions................................. 24
The Manager............................................. 24
Expenses of the Trust................................... 26
How to Purchase and Redeem Shares....................... 27
Initial Purchase of Shares............................ 27
Subsequent Purchases of Shares........................ 28
General Information Regarding Redemptions............. 28
Retirement Plans........................................ 30
Exchange Privilege...................................... 30
Dividends, Distributions and Taxes...................... 30
Federal Income Taxes.................................. 31
State and Local Taxes................................. 32
Net Asset Value......................................... 32
General Information..................................... 32
Description of Shares................................. 32
Performance........................................... 32
Custodian, Transfer Agent and Dividend Agent.......... 33
Information for Shareholders.......................... 33
Appendix A.............................................. A-1
</TABLE>

- 2 -
<PAGE>

TABLE OF FEES AND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
Ultra Short
Term Income Balanced Growth and Equity
Fund Fund Income Fund Fund
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Sales Load Imposed on Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None None None None
Exchange Fees None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES

(as a percentage of average net assets)

<TABLE>
<CAPTION>
Ultra Short
Term Income Balanced Growth and Equity
Fund Fund Income Fund Fund
--------------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
Management Fees (after any fee waiver) 0.00% 0.49% 0.00% 1.00%
12b-1 Fees None None None None
Other Expenses (after any reimbursement) 0.00 % 0.31 % 0.90 % 0.14 %
Total Fund Operating Expenses (after any
reimbursement or fee waiver) 0.00 % 0.80 % 0.90 % 1.14 %
</TABLE>

EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming 5% annual
return (cumulative through the end of each year):

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Ultra Short Term Income Fund $ 0 $ 0 $ 0 $ 0
Balanced Fund $ 8 $ 26 $ 45 $ 99
Growth and Income Fund $ 9 $ 29 $ 50 $ 111
Equity Fund $ 12 $ 36 $ 63 $ 139
</TABLE>

The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly; for a further discussion of these fees see "The Manager" and
"Expenses of the Trust" herein. The expense information under "Annual Fund
Operating Expenses" relating to the Ultra Short Term Income Fund has been
restated to reflect the current expenses of the Fund resulting from the
Manager's decision, effective in October 1995, to begin reimbursing all of the
Fund's expenses, rather than continuing to reimburse only a portion of other
expenses. The expense information under "Annual Fund Operating Expenses"
relating to the Balanced Fund and the Growth and Income Fund has been restated
to reflect the

- 3 -
<PAGE>

current expenses of each Fund resulting from the Manager's decision, effective
beginning January 1996, to include certain indirect expenses of each Fund in
calculating the expenses of each Fund for purposes of carrying out its expense
reimbursement policy (which indirect expenses had previously been excluded from
such calculation).

With respect to the Ultra Short Term Income Fund, the Manager voluntarily waived
its entire fee payable ($10,021) and reimbursed the Fund for $31,790 of the
Fund's expenses for the fiscal year ended December 31, 1995; absent such waiver
and reimbursement the Fund's management fee would have been 0.40% of the Fund's
average net assets and the Fund's other expenses would have been 1.49% of
average net assets (which would have resulted in total operating expenses of
1.89% of average net assets). With respect to the Balanced Fund, the Manager
voluntarily waived $160,241 of its fee payable for the fiscal year ended
December 31, 1995; absent such waiver the management fee would have been 0.80%
of average net assets (which would have resulted in total operating expenses of
1.11% of average net assets). With respect to the Growth and Income Fund, the
Manager voluntarily waived its entire fee payable ($41,173) and reimbursed the
Fund for $2,239 of the Fund's expenses for the fiscal year ended December 31,
1995; absent such waiver and reimbursement the Fund's management fee would have
been 0.90% of average net assets and the Fund's other expenses would have been
1.05% of average net assets (which would have resulted in total operating
expenses of 1.95% of average net assets). As of the date of this Prospectus, the
Manager is continuing to waive all of its fee for the Ultra Short Term Income
Fund and the Growth and Income Fund, and a portion of its fee for the Balanced
Fund, and to reimburse all of the expenses of the Ultra Short Term Income Fund.
Also as of the date of this Prospectus, the Manager is maintaining the expense
ratio of the Balanced Fund at a level not to exceed 0.80% and the expense ratio
of the Growth and Income Fund at a level not to exceed 0.90%, including certain
indirect expenses.

The example should not be considered a representation of past or future
expenses; actual expenses may be greater or lesser than those shown above.

- 4 -
<PAGE>

FINANCIAL HIGHLIGHTS

The following tables of selected financial information of Eclipse Financial
Asset Trust have been audited by McGladrey & Pullen, LLP, Independent Certified
Public Accountants, whose report thereon appears in the Statement of Additional
Information. Further information concerning investment performance is contained
in the Trust's annual report to shareholders, which is available without charge.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
<S> <C> <C>
ULTRA SHORT TERM INCOME FUND

<CAPTION>
DECEMBER 27,
FOR THE YEAR 1994
ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
1995 1994
- -------------------------------------------------------------------------------
Per share operating performance for a
share outstanding throughout the period
<S> <C> <C>
Net asset value, beginning of period........... $ 2.00 $ 2.00
------ ------
Income from investment operations:
Net investment income.......................... 0.11 0.00
Net realized and unrealized gains (losses) on
investments................................... 0.04 0.00
------ ------
Total from investment operations........... 0.15 0.00
------ ------
Less distributions:
Dividends from net investment income........... (0.11) 0.00
------ ------
Total distributions........................ (0.11) 0.00
------ ------
Net asset value, end of period................. $ 2.04 $ 2.00
------ ------
------ ------
Total return................................... 7.83 % 0.00 %
Ratios/Supplemental data
Net assets, end of period (000)................ $ 4,610 $ 621
Ratios to average net assets:
Expenses..................................... 0.22 %+# 0.50 %*+
Net investment income........................ 6.92 %+ 0.65 %*+
Portfolio turnover rate........................ 39.26 % 0.00 %
</TABLE>

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

* Annualized.

+ Net of management fee waived equivalent to 0.4% and 0.4% of average net assets
plus expenses reimbursed equivalent to 1.27% and 21.54% of average net assets,
respectively.

# Includes custodian fees paid indirectly.

- 5 -
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND

<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
MAY 1, 1989
(INCEPTION)
TO
DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share operating performance for a
share outstanding throughout the period
Net asset value, beginning of period.... $ 17.76 18.63 $ 17.37 $ 17.02 $ 14.69 $ 15.24 $ 15.00
-------- -------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income................... 0.64 0.56 0.62 0.73 0.71 0.74 0.44
Net realized and unrealized gains
(losses) on investments................ 3.39 (0.56) 2.32 1.28 2.33 (0.53) 0.23
-------- -------- -------- -------- -------- -------- -------
Total from investment operations.... 4.03 0.00 2.94 2.01 3.04 0.21 0.67
-------- -------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income.... (0.64) (0.56) (0.64) (0.73) (0.71) (0.76) (0.43)
Distributions from net realized gains... (0.56) (0.31) (1.04) (0.93) -- -- --
-------- -------- -------- -------- -------- -------- -------
Total distributions................. (1.20) (0.87) (1.68) (1.66) (0.71) (0.76) (0.43)
-------- -------- -------- -------- -------- -------- -------
Net asset value, end of year............ $ 20.59 $ 17.76 $ 18.63 $ 17.37 $ 17.02 $ 14.69 $ 15.24
-------- -------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------- -------
Total return............................ 22.99% 0.01% 17.06% 12.01% 20.91% 1.45% 4.50%
Ratios/Supplemental data
Net assets, end of period (000)......... $85,922 $27,703 $21,690 $14,044 $10,736 $ 4,777 $ 3,227
Ratios to average net assets:
Expenses.............................. 0.81%+# 0.80%+ 0.69%+ 0.52%+ 0.66%+ 1.00%+ 1.00%*+
Net investment income................. 3.62%+ 3.10%+ 3.42%+ 4.31%+ 5.03%+ 5.42%+ 5.55%*+
Portfolio turnover rate................. 74.72% 94.38% 65.05% 95.51% 101.51% 120.90% 23.73%
</TABLE>

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

* Annualized.

+ Net of management fee waived equivalent to 0.3%, 0.4%, 0.5%, 0.8%, 0.8%, 0.8%
and 0.8% of average net assets, plus expenses reimbursed equivalent to 0%, 0%,
0%, 0%, 0%, 0.05%, and 0.84% of average net assets, respectively.

# Includes custodian fees paid indirectly.

- 6 -
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GROWTH AND INCOME FUND

FOR THE YEAR
ENDED DECEMBER 27, 1994
DECEMBER 31, (INCEPTION) TO
1995 DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance for a
share outstanding throughout the period
Net asset value, beginning of period.......................................... $ 10.00 $ 10.00
-------- --------
Income from investment operations:
Net investment income......................................................... 0.11 0.00
Net realized and unrealized gains (losses) on investments..................... 2.57 0.00
-------- --------
Total from investment operations.......................................... 2.68 0.00
-------- --------
Less distributions:
Dividends from net investment income.......................................... (0.11) 0.00
Distributions from net realized gains......................................... (0.26) 0.00
-------- --------
Total distributions....................................................... (0.37) 0.00
-------- --------
Net asset value, end of period................................................ $ 12.31 $ 10.00
-------- --------
-------- --------
Total return.................................................................. 26.82 % 0.00 %
Ratios/Supplemental data
Net assets, end of period (000)............................................... $ 7,960 $ 315
Ratios to average net assets:
Expenses.................................................................... 1.00 %+# 1.20 %*+
Net investment income....................................................... 1.57 %+ (0.06)%*+
Portfolio turnover rate....................................................... 63.16 % 0.00 %
</TABLE>

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

* Annualized.

+ Net of management fee waived equivalent to 0.9% and 0.9% of average net assets
plus expenses reimbursed equivalent to 0.05% and 43.15% of average net assets,
respectively.

# Includes custodian fees paid indirectly.

- 7 -
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUND

<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
JANUARY 12, 1987
(INCEPTION) TO
1995 1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
- ----------------------------------------------------------------------------------------------------------------------------------
Per share
operating
performance for
a share
outstanding
throughout the
period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period......... $ 11.82 $ 13.35 $ 13.20 $ 11.73 $ 9.07 $ 10.86 $ 10.12 $ 9.35 $ 10.00
--------- --------- --------- --------- --------- --------- --------- --------- --------
Income from
investment
operations:
Net investment
income......... 0.07 0.03 0.08 0.15 0.16 0.30 0.27 0.41 0.40
Net realized and
unrealized
gains (losses)
on
investments.... 2.26 (0.66) 2.17 2.12 2.66 (1.77) 1.38 0.77 (0.67)
--------- --------- --------- --------- --------- --------- --------- --------- --------
Total from
investment
operations... 2.33 (0.63) 2.25 2.27 2.82 (1.47) 1.65 1.18 (0.27)
--------- --------- --------- --------- --------- --------- --------- --------- --------
Less
distributions:
Dividends from
net investment
income......... (0.07) (0.03) (0.08) (0.15) (0.16) (0.32) (0.27) (0.41) (0.38)
Distributions
from net
realized
gains.......... (0.52) (0.87) (2.02) (0.65) -- -- (0.64) -- --
--------- --------- --------- --------- --------- --------- --------- --------- --------
Total
distributions... (0.59) (0.90) (2.10) (0.80) (0.16) (0.32) (0.91) (0.41) (0.38)
--------- --------- --------- --------- --------- --------- --------- --------- --------
Net asset value,
end of
period......... $ 13.56 $ 11.82 $ 13.35 $ 13.20 $ 11.73 $ 9.07 $ 10.86 $ 10.12 $ 9.35
--------- --------- --------- --------- --------- --------- --------- --------- --------
--------- --------- --------- --------- --------- --------- --------- --------- --------
Total return.... 19.69% (4.74)% 17.02% 19.38% 31.18% (13.64)% 16.41% 12.72% (2.75)%
Ratios/Supplemental
data
Net assets, end
of period
(000).......... $174,705 $195,107 $197,106 $163,170 $149,385 $110,154 $184,211 $161,250 $144,215
Ratios to
average net
assets:
Expenses...... 1.14%# 1.12% 1.12% 1.15% 1.18% 1.18% 1.09% 1.12% 1.09%*+
Net investment
income....... 0.45% 0.21% 0.55% 1.17% 1.48% 2.57% 2.40% 4.05% 4.91%*+
Portfolio
turnover
rate........... 74.40% 92.20% 101.09% 110.98% 118.58% 154.15% 45.51% 30.91% 14.37%
</TABLE>

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

* Annualized.

+ Net of management fee waived equivalent to 0.1% of average net assets.

# Includes custodian fees paid indirectly.

- 8 -
<PAGE>
PROSPECTUS SUMMARY

THE TRUST is a diversified management investment company whose shares are
offered without a sales load or redemption charge. The Trust currently offers
four investment portfolios: the Ultra Short Term Income Fund, the Balanced Fund,
the Growth and Income Fund and the Equity Fund.

THE INVESTMENT OBJECTIVE of the Ultra Short Term Income Fund is to seek a high
level of current income, preservation of capital and a relatively stable net
asset value. The Ultra Short Term Income Fund is designed for the investor who
seeks a higher yield than a money market fund (and is willing to assume some
principal risk) but less fluctuation in net asset value than a longer-term bond
fund. It is not a money market fund and may not maintain a stable net asset
value per share. The duration of the Fund will not exceed one year. The Fund
will generally limit its investments to securities which, in the opinion of the
Fund's manager, are issued by companies that are socially responsible. The
investment objective of the Balanced Fund is to seek a high total return from a
combination of equity and fixed-income investments. The investment objective of
the Growth and Income Fund is to seek a high total return, consisting of both
current income and realized and unrealized capital gains, from equity securities
and equity-related securities. Equity selection for the Growth and Income Fund
is based on estimated relative intrinsic value, expected future earnings growth
and current and expected dividend income. The investment objective of the Equity
Fund is to seek a high total return from equity investments. Securities are
selected and weighted in each Fund's portfolio with a view toward achievement of
its objective. There is no assurance that a Fund's objective will be achieved.
See "Investment Objectives and Policies."

THERE IS NO SALES LOAD. Shares may be purchased and redeemed at the next
determined net asset value.

SHARES MAY BE PURCHASED AND REDEEMED directly through the Trust's transfer agent
and custodian, Investors Fiduciary Trust Company. The minimum initial investment
for each Fund is $1,000 (unless the investor chooses the automatic investment
plan or a gift account). There is no minimum for subsequent investments. See
"How to Purchase and Redeem Shares."

THE MANAGER of the Trust is Towneley Capital Management, Inc. (the "Manager"),
which also serves as investment adviser to individuals and institutional
clients. The Funds pay management fees to the Manager at the following annual
rates, which are expressed as a percentage of the average daily net assets of
each Fund:

<TABLE>
<S> <C>
Ultra Short Term Income Fund 0.40%
Balanced Fund 0.80%
Growth and Income Fund 0.90%
Equity Fund 1.00%
</TABLE>

See "Manager." The management fees paid by the Balanced Fund, the Growth and
Income Fund and the Equity Fund are higher than those paid by most mutual funds.

RISK FACTORS associated with investing in a Fund include the following. The
value of a Fund's shares will fluctuate with changes in the market value of its
portfolio securities and is consequently subject to the usual market risks of
investment. In addition, the value of the shares of the Ultra Short Term Income
Fund and the Balanced Fund, which invest in fixed-income securities (including
mortgage-backed and asset-backed securities), will fluctuate as the value of its
portfolio securities changes in response to changing market rates of interest,
principal prepayments and other factors.

The Ultra Short Term Income Fund and the Balanced Fund may invest in securities
rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or
better by Standard & Poor's Rating Group, a division of McGraw-Hill, Inc.
("S&P"). Moody's indicates that securities rated Baa, although investment grade,
have speculative elements.

- 9 -
<PAGE>
Each Fund may invest its assets in foreign securities which involves
considerations and risks such as the risk of adverse changes in currency
exchange rates, exchange controls, and the application of foreign tax laws,
including withholding taxes. Each Fund may invest in restricted securities which
are subject to statutory or contractual restrictions and delays on resale. Each
Fund may experience a high rate of portfolio turnover, which would involve
correspondingly greater expenses than a lower rate (which expenses must be borne
by the Fund and its shareholders), and possible substantial net short-term
capital gains.

DIVIDENDS of the net investment income of the Ultra Short Term Income Fund and
the Balanced Fund will normally be paid quarterly, and dividends of the net
investment income of the Growth and Income Fund and the Equity Fund will
normally be paid annually. Capital gain distributions, if any, will be made
annually. Income dividends and capital gain distributions paid by a Fund are
automatically reinvested in additional shares of the Fund unless the shareholder
instructs otherwise. See "Dividends, Distributions and Taxes."

IRA AND OTHER RETIREMENT PLANS utilizing a Fund as an investment vehicle provide
Federal income tax benefits for qualified participants. See "Retirement Plans."

EXCHANGE PRIVILEGES are offered whereby shares of the Funds may be exchanged at
their respective net asset values for each other. See "Exchange Privilege."

INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

INTRODUCTION TO THE TRUST

Eclipse Financial Asset Trust (the "Trust") is a no-load, open-end, diversified
management investment company commonly known as a "mutual fund" whose
shares are offered in separate series referred to as "portfolios." Because the
Trust offers multiple portfolios, it is known as a "series fund." Each portfolio
is a separate pool of assets constituting, in effect, a separate fund with its
own investment objective and policies. A shareholder in a portfolio will be
entitled to his pro rata share of all dividends and distributions paid from that
portfolio's assets and, upon redeeming shares of that portfolio, the shareholder
will receive the then current net asset value of that portfolio represented by
the redeemed shares. (See "How to Purchase and Redeem Shares.") The Trust is
empowered to establish, without shareholder approval, additional portfolios
which may have different investment objectives and policies.

ULTRA SHORT TERM INCOME FUND

The investment objective of the Ultra Short Term Income Fund is to seek a high
level of current income, preservation of capital and a relatively stable net
asset value. The Ultra Short Term Income Fund is designed for the investor who
seeks a higher yield than a money market fund (and is willing to assume some
principal risk) but less fluctuation in net asset value than a longer-term bond
fund. It is not a money market fund and may not maintain a stable net asset
value per share. The Fund will pursue this objective by investing in a
diversified portfolio of investment grade, short-term fixed-income securities.
Securities are selected and weighted in the portfolio with a view toward the
achievement of this objective. The Fund's investment objective is deemed a
fundamental policy of the Fund.

It is the Fund's policy that the duration of its portfolio not exceed one year.
The duration of a fixed-income security indicates the time it will take an
investor to recoup his or her investment, and approximates the price sensitivity
of a fixed-income security to interest rate changes. It was developed as a more
precise alternative to the concept of "term to maturity." Unlike effective
maturity (which measures the final maturity dates of a bond (or a bond
portfolio)), duration incorporates a bond's interest payments, final maturity,
call features and other factors into one measure. Duration is expressed as a
measure of time in years -- the longer the duration of a bond (or a bond
portfolio), the greater the impact of interest rate changes on the

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<PAGE>
bond's (or bond portfolio's) price. Generally, the higher the interest rate on a
bond, the shorter its duration will be.

The duration of the Fund is calculated by averaging the duration of each
fixed-income instrument held by the Fund with each duration "weighted" according
to the percentage of net assets that it represents. Duration takes the length of
the time intervals between the present time and the time that the interest and
principal payments are scheduled or, in the case of a callable bond, expected to
be received, and weights them by the present values of the cash to be received
at each future point in time. Because duration accounts for interest payments, a
fund's duration is usually shorter than its average maturity. Duration measures
interest rate risk only and not other risks, such as credit risk and, in the
case of non-U.S. dollar denominated securities, currency risks.

In some cases, duration cannot be calculated with certainty because certain
assumptions have to be factored into the calculation. For example, in the case
of mortgage pass-through securities (described below under "Policies Applicable
to the Ultra Short Term Income Fund and the Balanced Fund"), the stated final
maturity of such securities is generally 30 years, but current and projected
payment rates are more critical in determining the securities' interest rate
exposure. In these and other similar situations, the Fund's Manager will use
more sophisticated analytical techniques that incorporate the anticipated
economic life of a security into the determination of its interest rate
exposure.

When interest rates are falling, a portfolio with a shorter duration generally
will not generate as high a level of total return as a portfolio with a longer
duration. Conversely, when interest rates are rising, a portfolio with a shorter
duration will generally outperform longer duration portfolios. When interest
rates are flat, shorter duration portfolios generally will not generate as high
a level of total return as longer duration portfolios (assuming that long-term
interest rates are higher than short-term rates, which is commonly the case).
With respect to the composition of any fixed-income portfolio, the shorter the
duration of the portfolio, the lower the market risk and price volatility, with
however, a lower anticipated potential for total return than for a portfolio
with a longer duration. For example, in general, if a fund's duration is one
year, then a change of one percentage point in prevailing interest rates would
result in a change in the opposite direction of approximately one percentage
point in the net asset value of the fund.

The Ultra Short Term Fund will, to the extent possible, limit its investments to
securities which, in the opinion of the Fund's Manager, and based on available
information, are issued by companies that are socially responsible. The Manager
selects socially responsible portfolios using research provided by, among
others, Kinder, Lydenberg, Domini & Co., Inc. With this research, the Manager is
able to apply both inclusionary and exclusionary criteria to companies to create
a socially responsible portfolio. Investments may include federally insured
short term fixed income securities of community development banks. In addition,
the Manager attempts to enhance shareholder value through the use of proxy
research and voting. The Fund pursues its policy of making socially responsible
investments while maintaining the quality of its investment portfolio in
accordance with the guidelines set forth in this section and under "Investment
Policies Applicable to More Than One Fund."

The categories of investments which may be acquired by the Fund are described
directly below and in the section "Investment Policies Applicable to More Than
One Fund."

FOREIGN ISSUER OBLIGATIONS -- The Fund may invest in fixed-income securities of
non-U.S. issuers rated AA or better by S&P and Aa2 or better by Moody's. (See
"Investment Policies Applicable to More Than One Fund -- Foreign Securities.")

BANK OBLIGATIONS -- The Fund may invest in obligations of domestic banks and
savings and loan associations and dollar-denominated obligations of domestic
subsidiaries and branches of foreign banks, such as certificates of deposit
(including variable rate certificates of deposit) and bankers' acceptances,
provided

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<PAGE>
such instruments are issued or guaranteed by an institution having total assets
in excess of one billion dollars. As noted above, the Fund may also invest in
securities issued by community development banks not meeting the foregoing
requirements provided that the entire principal amount of such securities is
federally insured.

COMMERCIAL PAPER -- The Fund may invest in commercial paper rated at the time of
purchase A-1 by S&P or Prime-1 by Moody's. Commercial paper represents
short-term (nine months or less) unsecured promissory notes issued in bearer
form by banks or bank holding companies, corporations and finance companies.

REPURCHASE AGREEMENTS -- The Fund may also enter into repurchase agreements. A
repurchase agreement is an instrument under which an investor (E.G., the Fund)
purchases a U.S. Government security from a vendor, with an agreement by the
vendor to repurchase the security at the same price, plus interest at a
specified rate. Repurchase agreements may be entered into with member banks of
the Federal Reserve System or "primary dealers" (as designated by the Federal
Reserve Bank of New York) in U.S. Government securities. Repurchase agreements
usually have a short duration, often less than one week. In the event that a
vendor defaulted on its repurchase obligation, the Fund might suffer a loss to
the extent that the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor becomes bankrupt, the Fund might be delayed, or
may incur costs or possible losses of principal and income, in selling the
collateral. The Fund will not enter into a repurchase agreement with a duration
of more than seven days if, as a result, more than 10% of the value of the
Fund's total assets would be so invested. The Fund may also invest in repurchase
agreements with a domestic bank having total assets in excess of one billion
dollars and a long-term credit rating of at least A as determined by Moody's or
S&P. Securities subject to repurchase agreements will be placed in a segregated
account and the Manager will monitor the market value of the securities plus any
accrued interest thereon so that they will at least equal the repurchase price.

BALANCED FUND

The investment objective of the Balanced Fund is to seek a high total return
from a combination of equity securities and fixed-income investments (including
debt securities, convertible securities and preferred stocks.) (See "Equity
Securities" and "Fixed-Income Securities" below.) "Total return" refers to the
objective to achieve a return consisting of both dividend and interest income
and realized and unrealized capital gains. Securities are selected and weighted
in the portfolio with a view toward the achievement of this objective. The
Fund's investment objective is deemed a fundamental policy of the Fund.

The Balanced Fund has adopted as a fundamental policy that it be a "balanced"
fund; this fundamental policy cannot be changed without the approval of
shareholders. As a "balanced" fund, the Fund will invest at least 25% of the
value of its total assets in fixed-income securities. With respect to
convertible securities held by the Fund, only that portion of their value
attributable to their fixed-income characteristics will be used in calculating
the 25% figure. Subject to such restrictions, the percentage of the Fund's
assets invested in each type of security at any time shall be in accordance with
the judgement of the Manager.

EQUITY SECURITIES -- The equity component of the Balanced Fund will be invested
primarily in shares of companies whose average total common stock market
capitalization (price per common share multiplied by the shares outstanding) is
similar to the average total market capitalization of those stocks making up the
Standard & Poor's 500 Stock Composite Index. In selecting the equity issues to
be placed in the Fund, approximately equal weight will be given to estimated
relative intrinsic value, expected future earnings growth, and current and
expected dividend income.

FIXED-INCOME SECURITIES -- The fixed-income component of the Balanced Fund will
be invested in the following types of fixed-income securities: (i) U.S.

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<PAGE>
Government securities; (ii) foreign government securities; (iii) investment
grade corporate fixed-income securities; and (iv) mortgage-backed and other
asset-backed securities. These securities are described under the caption
"Investment Policies Applicable to More Than One Fund," except that certain
types of
mortgage-backed securities in which only the Balanced Fund will invest are
described in the following paragraphs.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES --
Collateralized mortgage obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
CMOs are collateralized by GNMA, FNMA or FHLMC Certificates, but also may be
collateralized by whole loans or Private Pass-Throughs (as such terms are
defined below under ("Investment Policies Applicable to More Than One Fund")
(such collateral collectively referred to herein as "Mortgage Assets").
Multiclass pass-through securities are equity interests in a trust composed of
Mortgage Assets. Unless the context indicates otherwise, all references herein
to CMOs include multiclass pass-through securities. Payments of principal of and
interest on the Mortgage Assets, and any reinvestment income thereon, provide
the funds to pay debt service on the CMOs or make scheduled distributions on the
multiclass pass-through securities. CMOs may be issued by agencies or
instrumentalities of the United States Government, or by private originators of,
or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing.

In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semiannual basis. The principal of and interest on the Mortgage Assets may be
allocated among the several classes of a series of a CMO in innumerable ways. In
a common structure, payments of principal, including any principal prepayments
on the Mortgage Assets, are applied to the classes of the series of a CMO in the
order of their respective stated maturities or final distribution dates, so that
no payment of principal will be made on any class of CMOs until all other
classes having an earlier stated maturity or final distribution date have been
paid in full.

The Fund may also invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC" Bonds). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal on such securities having the
highest priority after interest has been paid to all classes.

STRIPPED MORTGAGE-BACKED SECURITIES -- Stripped mortgage-backed securities
("SMBS") are derivative multiclass mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks, and special purpose
subsidiaries of the foregoing.

SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions on a pool of Mortgage Assets. A
common type of SMBS will have one class receiving some of the interest and most
of the principal from the Mortgage Assets, while the other class will receive
most of the interest and the remainder of the principal. In the most extreme
case, one class will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity

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<PAGE>
on an IO class is extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying Mortgage Assets, and a rapid
rate of principal payments may have a material adverse effect on the class'
yield to maturity. If the underlying Mortgage Assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the securities are rated AAA or
Aaa. Currently, SMBSs having an IO and PO class are generally illiquid, and
therefore the Fund will not invest more than 10% of the value of its net assets
in such securities. (See "Investment Restrictions," below.)

Although SMBS are purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers, these securities were
only recently developed. As a result, established trading markets have not yet
developed and, accordingly, these securities may be illiquid.

CMO RESIDUALS -- "CMO Residuals" are derivative mortgage securities issued by
agencies or instrumentalities of the United States Government or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing.

The cash flow generated by the Mortgage Assets underlying series of CMOs is
applied first to make required payments of principal of and interest on the CMOs
and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO Residual represents dividend or
interest income and/or a return of capital. The amount of residual cash flow
resulting from a CMO will depend on, among other things, the characteristics of
the Mortgage Assets, the coupon rate of each class of CMOs, prevailing interest
rates, the amount of administrative expenses and the prepayment experience on
the Mortgage Assets. In particular, the yield to maturity on CMO Residuals is
extremely sensitive to prepayments on the related underlying Mortgage Assets in
the same manner as an IO class of SMBS. (See "Stripped Mortgage-Backed
Securities," above.) In addition, if a series of a CMO includes a class that
bears interest at an adjustable rate, the yield to maturity on the related CMO
residual will also be extremely sensitive to the level of the index upon which
interest rate adjustments are based. As described above with respect to SMBS, in
certain circumstances, the Fund may fail to fully recoup its initial investment
in a CMO Residual.

CMO Residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
Residual market has only recently developed and CMO Residuals currently may not
have the liquidity of other more established securities trading in other
markets. Transactions in CMO Residuals are generally completed only after
careful review of the characteristics of the securities in question. In
addition, CMO Residuals may or, pursuant to an exemption therefrom, may not have
been registered under the Securities Act of 1933 (the "Securities Act"). CMO
Residuals, whether or not registered under the Securities Act, may be subject to
certain restrictions on transferability. Ownership of certain CMO Residuals
imposes liability for certain of the expenses of the related CMO issuer on the
purchaser; however, the Trust does not anticipate that it will purchase any CMO
Residual that imposes such liability on the Fund.

GROWTH AND INCOME FUND

The investment objective of the Growth and Income Fund is to seek a high total
return consisting of both current income and realized and unrealized capital
gains from equity securities and equity-related securities. As used herein,
"equity securities and equity-related securities" means common and preferred
stock (including convertible preferred stock); bonds, notes and debentures
convertible into common or preferred stock; stock purchase warrants and rights;
and depository receipts (traded in a U.S. market) for securities of foreign
issuers. Equity selection will be based on estimated relative intrinsic value,
expected

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<PAGE>
future earnings growth and current and expected dividend income. Securities are
selected and weighted in the portfolio with a view toward the achievement of
this objective. The Fund's investment objective is deemed a fundamental policy
of the Fund.

The Fund expects to invest primarily in the securities of U.S. issuers, although
it may also invest up to 20% of its assets in securities of foreign issuers, or
depository receipts for such securities (which are traded in a U.S. market),
which meet the criteria for investment selection set forth above. Since 20% of
the Fund's assets may consist of securities issued by foreign issuers, the Fund
may be subject to additional investment risks that are different in some
respects from those incurred by a fund which invests only in securities of U.S.
domestic issuers. (See "Investment Policies Applicable to More Than One Fund --
Foreign Securities.")

The Fund will not engage in short selling or option trading, nor will it
leverage its shares.

The Fund is subject to the usual market risks incident to its investments and
therefore there can be no assurance that the objective of the Fund will be
attained.

The Fund's investment objective and its investment policy of investing under
normal circumstances more than 65% of its assets in equity securities are deemed
fundamental and therefore may not be changed without shareholder approval. The
other investment policies of the Fund described in this section are not deemed
fundamental and may be changed by the Board of Trustees of the Fund without
shareholder approval.

EQUITY FUND

The investment objective of the Equity Fund is to seek a high total return from
equity securities (including for this purpose preferred stocks and debt
securities convertible into common stock). "Total return" refers to the
objective to achieve a return consisting of both income and realized and
unrealized capital gains. Securities are selected and weighted in the portfolio
with a view toward achievement of this objective. The Fund's investment
objective is deemed a fundamental policy of the Fund.

In selecting the issues to be placed in the Fund, approximately equal weight
will be given to estimated relative intrinsic value, expected future earnings
growth and current and expected dividend income; therefore the Fund's portfolio
will exhibit characteristics of a total return, value (I.E., seeking high net
asset values relative to market price), growth and income fund. Under normal
market conditions the Fund will invest primarily in equity securities of North
American businesses listed on the major exchanges or traded in the
over-the-counter market. In general, the companies whose shares are to be
purchased will sell at a total common stock market capitalization (price per
common share multiplied by the shares outstanding) less than the average total
market capitalization of those stocks in the Standard & Poor's 500 Stock
Composite Index. The securities of smaller capitalization companies often
involve significantly greater risks than the securities of larger, better-known
companies. The securities of smaller capitalization companies may be thinly
traded and may be subject to greater price volatility than the market as a
whole. In addition, smaller capitalization companies are generally more
adversely affected by increased competition, and are subject to a greater risk
of bankruptcy, than larger companies. Although at times the Fund

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<PAGE>
may have all of its assets invested in smaller capitalization companies, such a
policy shall not prohibit the Fund from investing in large capitalization
companies if the Manager believes such companies have intrinsic value, growth
and income potential superior to that available from smaller capitalization
companies. As a matter of fundamental policy, the Fund is required under normal
circumstances to have more than 65% of its assets invested in equity
investments.

The Fund will not engage in short selling or option trading, nor will it
leverage its shares.

The Fund is subject to the usual market risks incident to its investments and
therefore there can be no assurance that the objective of the Fund will be
attained.

INVESTMENT POLICIES APPLICABLE TO MORE THAN ONE FUND

The following additional investment policies are applicable to more than one
Fund and supplement those set forth above for the Funds.

POLICIES APPLICABLE TO ALL FUNDS:
WARRANTS -- Each Fund may invest in warrants which entitle the holder to buy
equity securities at a specific price for a specific period of time. A Fund will
not, however, purchase any warrant if, as a result of such purchase, 5% or more
of the Fund's total assets would be invested in warrants. Included within that
amount, but not to exceed 2% of the value of the Fund's total assets, may be
warrants which are not listed on the New York Stock Exchange or American Stock
Exchange. Warrants acquired by a Fund in units or attached to securities are
deemed to be without value.

TEMPORARY DEFENSIVE POSITION; CASH RESERVES -- When business or financial
conditions warrant, each Fund may take a defensive position and invest
temporarily without limit in investment grade corporate debt securities or money
market instruments. Money market instruments for this purpose include U.S.
Government securities having remaining maturities of one year or less,
commercial paper rated in the highest grade by any nationally recognized rating
agency, certificates of deposit and bankers' acceptances issued by domestic
banks having total assets in excess of one billion dollars, and repurchase
agreements relating to U.S. Government securities. A repurchase agreement is an
instrument under which an investor (E.G., a Fund) purchases a U.S. Government
security from a vendor, with an agreement by the vendor to repurchase the
security at the same price, plus interest at a specified rate. Repurchase
agreements may be entered into with member banks of the Federal Reserve System
or "primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government securities. See "Ultra Short Term Income Fund -- Repurchase
Agreements" for a description of the characteristics and risks of repurchase
agreements.

In addition, a portion of each Fund's assets will be maintained in money market
instruments as described above in such amount as the Manager deems appropriate
for cash reserves.

FOREIGN SECURITIES -- Each Fund may invest in securities issued by foreign
issuers, and thus may be subject

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<PAGE>
to additional risks for these securities that are different in some respects
from those incurred by a fund which invests only in securities of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible imposition of foreign withholding taxes on interest income payable on
the securities, changes in foreign exchange rates (including the possible
establishment of exchange controls), the possible seizure or naturalization of
foreign deposits, or the adoption of other foreign government restrictions which
might adversely affect the payment of principal and interest on such securities.
Currency fluctuations may affect the net asset value of a Fund irrespective of
the performance of the underlying investments in foreign issuers. A Fund will
not purchase securities which it believes, at the time of purchase, will be
subject to exchange controls or withholding taxes; however, there can be no
assurance that such laws may not become applicable to certain of a Fund's
investments. In addition, there may be less publicly available information about
a foreign issuer than about a domestic issuer, and foreign issuers may not be
subject to the same accounting, auditing and financial recordkeeping standards
and requirements as domestic issuers. While each Fund generally will invest only
in securities which are regularly traded on recognized exchanges or
over-the-counter markets, from time to time foreign securities may be difficult
to liquidate rapidly at the best available price. Settlement periods for foreign
securities, which are sometimes longer than those of securities of U.S. issuers,
may affect portfolio liquidity. These different settlement practices may cause
missed purchasing opportunities or the loss of interest on cash positions
pending further investments.

RESTRICTED SECURITIES (BALANCED FUND AND EQUITY FUND ONLY) -- Each Fund may
invest in restricted securities and in other assets having no ready market
(including repurchase agreements of more than seven days' duration) if such
purchases at the time thereof would not cause more than 10% of the value of the
Fund's net assets to be invested in all such restricted or not readily
marketable assets. Restricted securities may be sold only in privately
negotiated transactions, in a public offering with respect to which a
registration statement is in effect under the Securities Act or pursuant to
Rules 144 or 144A promulgated under such Act. Where registration is required, a
Fund may be obligated to pay all or part of the registration expense, and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If during such a period adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell. Restricted securities will be valued in such manner as the
Board of Trustees of the Fund in good faith deems appropriate to reflect their
fair market value.

ILLIQUID SECURITIES (ULTRA SHORT TERM INCOME FUND AND GROWTH AND INCOME FUND
ONLY) -- Each Fund may invest in illiquid securities, I.E., securities having no
ready market (including repurchase agreements of more than seven days'
duration), if such purchases at the time thereof would not cause more than 10%
of the value of the Fund's net assets to be invested in all such illiquid or not
readily marketable assets. A Fund may be unable to dispose of its holdings in
illiquid securities at acceptable prices and the disposition of such securities
may require an extended period of time. Illiquid securities may include certain
restricted securities, which may be sold only in privately negotiated
transactions, in a public offering with respect to which a registration
statement is in effect under the Securities Act or pursuant to Rules 144 or 144A
promulgated under such Act. Where registration of such securities is required, a
Fund may be obligated to pay all or part of the registration expense, and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If during such a period adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell. The Manager, under the supervision of the Board of Trustees of
the Trust, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to a Fund's restriction on investing in illiquid
securities. A determination as to whether a Rule 144A security is liquid or not
is a question of fact. In making

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<PAGE>
this determination the Manager will consider the trading markets for the
specific security, taking into account the unregistered nature of a Rule 144A
security. In addition, the Manager could consider (1) the frequency of trades
and quotes, (2) the number of dealers and potential purchasers, (3) the dealer
undertakings to make a market and (4) the nature of the security and of market
place trades (E.G., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
securities would be monitored and if, as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, a Fund's holding of
illiquid securities would be reviewed to determine what steps, if any, are
required to assure that the Fund does not invest more than the maximum
percentage of its assets in illiquid securities. Investing in Rule 144A
securities could have the effect of increasing the amount of a Fund's assets
invested in illiquid securities if qualified institutional buyers are unwilling
to purchase such securities. Illiquid securities will be valued in such manner
as the Board of Trustees of the Fund in good faith deems appropriate to reflect
their fair market value.

LENDING OF PORTFOLIO SECURITIES -- To increase its income, each Fund may lend
its portfolio securities to certain brokers or dealers, banks or other
institutional investors, such as insurance companies and pension funds and
receive collateral in the form of cash or United States Government obligations.
In the event the borrowing institution fails to redeliver the securities when
due, or becomes bankrupt, the Fund might be delayed, or may incur costs or
possible losses of principal and income, in selling the collateral. A Fund will
not lend portfolio securities in excess of 20% of the value of its total assets,
nor will the Fund lend its portfolio securities to any officer, director,
trustee, employee or affiliate of the Fund or the Manager.

PORTFOLIO TURNOVER -- The Trust anticipates that the annual portfolio turnover
rate of the Ultra Short Term Income Fund, of the equity component of the
Balanced Fund, of the Growth and Income Fund and of the Equity Fund may exceed
100%, respectively. (An annual portfolio turnover rate of 100% would occur, for
example, if all of the stocks in a Fund's portfolio were replaced in a period of
one year.) The annual portfolio turnover rate of the fixed-income component of
the Balanced Fund is not expected to exceed 100%. The Trust, however, has not
placed any limit on the rate of portfolio turnover with respect to any of the
Funds and portfolio securities may be sold without regard to the time they have
been held when, in the opinion of the Manager, investment considerations warrant
such action. A high rate of portfolio turnover involves correspondingly greater
expenses than a lower rate, which expenses must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. In order to continue to qualify as a
regulated investment company for Federal tax purposes, less than 30% of the
annual gross income of the Fund must be derived from the sale of securities held
by the Fund for less than three months.

POLICIES APPLICABLE TO THE ULTRA SHORT TERM INCOME FUND AND THE BALANCED FUND:

GOVERNMENT SECURITIES -- U.S. Government securities are securities issued or
guaranteed by the United States Government, its agencies or instrumentalities
and include: (i) U.S. Treasury obligations, which differ only in their interest
rates, maturities and times of issuance, U.S. Treasury bills (maturity of one
year or less), U.S. Treasury notes (maturities of one to ten years), and (in the
case of the Balanced Fund only) U.S. Treasury bonds (generally maturities of
greater than ten years), all of which are backed by the full faith and credit of
the United States Government; and (ii) obligations issued or guaranteed by U.S.
Government agencies or instrumentalities, some of which are backed by the full
faith and credit of the U.S. Treasury, E.G., the Export-Import Bank; some of
which are supported by the right of the issuer to borrow from the U.S.
Government, E.G., obligations of the Tennessee Valley Authority and the United
States Postal Service; and some of which are backed only by the credit of the
issuer itself, E.G. obligations of the Student Loan Marketing Association. U.S.
Government securities

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<PAGE>
also include government-guaranteed mortgage-backed securities. (See
"Mortgage-Backed and Asset-Backed Securities", below.)

The Ultra Short Term Income Fund and the Balanced Fund may invest in "zero
coupon" Treasury securities which are U.S. Treasury bills, notes and bonds which
have been stripped of their unmatured interest coupons and receipts or
certificates representing interests in such stripped debt obligations and
coupons. A zero coupon security pays no interest to its holder during its life.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value (sometimes referred to as a
"deep discount" price).

Zero coupon Treasury securities do not entitle the holder to any periodic
payments of interest prior to maturity. Accordingly, such securities usually
trade at a deep discount from their face or par value and will be subject to
greater fluctuations of market value in response to changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest. Current Federal tax law requires that a holder (such as the Fund) of a
zero coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no interest payment
in cash on the security during the year.

U.S. Government securities do not generally involve the credit risks associated
with other types of interest bearing securities, although, as a result, the
yields available from U.S. Government securities are generally lower than the
yields available from other interest bearing securities. Like other fixed-income
securities, however, the values of U.S. Government securities change as interest
rates fluctuate. When interest rates decline, the values of U.S. Government
securities can be expected to increase and when interest rates rise, the values
of U.S. Government securities can be expected to decrease.

STRIPPED CORPUS INTERESTS IN U.S. TREASURY SECURITIES -- A number of banks and
brokerage firms have separated ("stripped") the principal portions ("corpus")
from the coupon portions of the U.S. Treasury bonds and notes and sold them
separately in the form of receipts or certificates representing undivided
interests in these instruments (which instruments are generally held by a bank
in a custodial or trust account). The Funds may invest in such receipts or
certificates. The investment and risk characteristics of "zero coupon" Treasury
securities described above under "Government Securities" are shared by such
receipts or certificates. The staff of the Securities and Exchange Commission
has indicated that receipts or certificates representing stripped corpus
interests in U.S. Treasury securities sold by banks and brokerage firms should
not be deemed U.S. Government securities but rather securities issued by the
bank or brokerage firm involved.

FOREIGN GOVERNMENT AND SUPRANATIONAL ENTITY SECURITIES -- The Ultra Short Term
Income Fund may invest up to 10% of its total assets, and the Balanced Fund may
invest up to 20% of its total assets, in foreign government securities of
issuers in countries considered stable by the Manager and in securities of
supranational entities. Investing in foreign government and supranational entity
securities involves considerations and possible risks not typically associated
with investing in U.S. Government securities. (See "Investment Policies
Applicable to More Than One Fund -- Foreign Securities.")

Foreign government securities include debt securities issued or guaranteed, as
to payment of principal and interest, by governments, quasi-governmental
entities, governmental agencies, or other governmental entities (collectively,
the "Government Entities") denominated in foreign currencies or in U.S. dollars
(including debt securities of a Government Entity in a country denominated in
the currency of another country). The Fund's portfolio may include government
securities of a number of foreign countries or, depending upon market
conditions, those of a single country.

The Manager's determination that a particular country should be considered
stable depends on its evaluation of political and economic developments
affecting

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<PAGE>
the country as well as recent experience in the markets for government
securities of the country. Examples of foreign governments which the Manager
currently considers to be stable, among others, are the governments of Canada,
Germany, Japan, Sweden and the United Kingdom. The Manager does not believe that
the credit risk inherent in the obligations of such stable foreign governments
is significantly greater than that of U.S. Government securities. The percentage
of the Fund's assets invested in foreign government securities will vary
depending on the relative yields of such securities, the economies of the
countries in which the investments are made and such countries' financial
markets, the interest rate climate of such countries and the relationship of
such countries' currencies to the U.S. dollar. Currency is judged on the basis
of fundamental economic criteria (E.G., relative inflation levels and trends,
growth rate forecasts, balance of payments status and economic policies) as well
as technical and political data.

Debt securities of "quasi-governmental entities" are issued by entities owned by
either a national, state or equivalent government or are obligations of a
political unit that is not backed by the national government's full faith and
credit and general taxing powers. Examples of quasi-governmental issuers
include, among others, the Province of Ontario and the City of Stockholm. The
Fund's portfolio may also include debt securities denominated in European
Currency Units of an issuer in a country in which the Fund may invest. A
European Currency Unit represents specified amounts of the currencies of certain
of the twelve member states of the European Union.

A "supranational entity" is an entity constituted by the national governments of
several countries to promote economic development. Examples of such
supranational entities include, among others, the World Bank (International Bank
for Reconstruction and Development), the European Investment Bank, the Asian
Development Bank and the European Coal and Steel Community. The governmental
members, or "stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional
contributions if the supranational entity is unable to repay its borrowings.
Each supranational entity's lending activities are limited to a percentage of
its total capital (including "callable capital" contributed by members at the
entity's call), reserves and net income.

CORPORATE FIXED-INCOME SECURITIES -- The Funds may invest their assets in
corporate fixed-income securities which include debt securities (including
floating and variable notes), convertible securities and preferred stock of
corporate issuers. (As noted above, for purposes of the Balanced Fund's policy
of investing at least 25% of its total assets in fixed-income securities, only
that portion of the value of convertible securities attributable to their
fixed-income characteristics will be taken into account.) Differing yields on
corporate fixed-income securities of the same maturity are a function of several
factors, including the relative financial strength of the issuers. Higher yields
are generally available from securities in the lower rating categories. The
Funds will invest in investment grade securities (securities rated at the time
of purchase Baa or better by Moody's or BBB or better by S&P), and in comparable
non-rated securities. Moody's indicates that securities rated Baa, although
investment grade, have speculative elements. S&P indicates that adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and principal for securities rated BBB than is the case
with higher-rated securities, although such securities are regarded as having an
adequate capacity to pay interest and principal. (See Appendix A hereto for a
description of corporate debt ratings.) Non-rated securities will be considered
for investment by the Funds when the Manager believes that the financial
condition of the issuers of such obligations and the protection afforded by the
terms of the obligations themselves limit the risk to the Funds to a degree
comparable to that of rated securities which are consistent with the Funds'
objective and policies. The Funds may also invest in non-Treasury zero coupon
securities and in "pay-in-kind" debentures (I.E., debt obligations the interest
on which may be paid in the form of additional obligations of the same type
rather than cash), which have both investment and risk characteristics similar
to zero coupon Treasury

- 20 -
<PAGE>
securities, including the risk of the untimely disposition of portfolio
securities to fund required distributions and the resultant transaction costs.
(See "Government Securities" above and "Dividends, Distributions and Taxes,"
below.)

The ratings of fixed-income securities by Moody's and S&P are a generally
accepted barometer of credit risk. They are, however, subject to certain
limitations from an investor's standpoint. The rating of an issuer is heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time a rating is assigned and
the time it is updated. In addition, there may be varying degrees of difference
in credit risk of securities in each rating category. The Manager will attempt
to reduce the overall portfolio credit risk through diversification and
selection of portfolio securities based on considerations mentioned above. In
addition, it is the Ultra Short Term Income Fund's policy to dispose of a
security whose rating drops below Baa or BBB when it is practicable to do so if,
in the judgment of the Manager, such downgrade is likely to lead to a default.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES -- Mortgage-backed and asset-backed
securities arise through the grouping by governmental, government-related and
private organizations of loans, receivables and other assets originated by
various lenders. Interests in pools of these assets differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal paid at maturity or specified call dates. Instead,
these securities provide periodic payments which generally consist of both
interest and principal payments. The estimated life of a mortgage-backed or
asset-backed security and the average maturity of a portfolio including such
securities varies with the prepayment experience with respect to the underlying
debt instruments.

MORTGAGE-BACKED SECURITIES -- GENERAL -- Mortgage-backed securities are
securities that directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans secured by real property. There are
currently three basic types of mortgage-backed securities: (i) those issued or
guaranteed by the United States Government or one of its agencies or
instrumentalities, such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") and the Federal
Home Loan Mortgage Corporation ("FHLMC"); (ii) those issued by private issuers
that represent an interest in or are collateralized by mortgage-backed
securities issued or guaranteed by the United States government or one of its
instrumentalities; and (iii) those issued by private issuers that represent an
interest in or are collateralized by whole mortgage loans or mortgage-backed
securities without a government guarantee but usually having some form of
private credit enhancement. An issuer of mortgage-backed securities meeting
certain conditions may elect to be treated as a Real Estate Mortgage Investment
Conduit (a "REMIC") under the Internal Revenue Code of 1986, as amended. (See
"Dividends, Distributions and Taxes.")

GNMAs are pass-through interests in pools of mortgage loans insured by the
Federal Housing Administration or by the Farmer's Home Administration or
guaranteed by the Veterans Administration. GNMA is a U.S. Government corporation
within the Department of Housing and Urban Development. GNMAs are backed by the
full faith and credit of the United States, which means that the U.S. Government
guarantees that interest and principal will be paid when due. FNMA is a U.S.
Government-sponsored corporation owned entirely by private stockholders. Pass-
through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA. FHLMC issues mortgage-related securities
representing interests in residential mortgage loans pooled by it. FHLMC is a
corporate instrumentality of the U.S. Government. FHLMC guarantees the timely
payment of interest and ultimate collection of principal. FNMAs and FHLMCs are
not backed by the full faith and credit of the United States.

PRIVATE MORTGAGE PASS-THROUGH SECURITIES -- Private mortgage pass-through
securities ("Private Pass-Throughs") are structured similarly to the GNMA,

- 21 -
<PAGE>
FNMA and FHLMC mortgage pass-through securities described above and are issued
by originators of and investors in mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. Private Pass-Throughs are usually backed
by a pool of conventional fixed rate or adjustable rate mortgage loans. Since
Private Pass-Throughs typically are not guaranteed by an entity having the
credit status of GNMA, FNMA or FHLMC, such securities generally are structured
with one or more types of credit enhancement. (See "Types of Credit Support,"
below.)

TYPES OF CREDIT SUPPORT -- Mortgage-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make payments,
such securities may contain elements of credit support. Such credit support
falls into two categories -- (i) liquidity protection and (ii) protection
against losses resulting from ultimate default by an obligor on the underlying
assets. Liquidity protection refers to the provision of advances, generally by
the entity administering the pool of assets, to ensure that the receipt of
payments on the underlying pool occurs in a timely fashion. Protection against
losses resulting from ultimate default ensures ultimate payment of the
obligations on at least a portion of the assets in the pool. Such protection may
be provided through guarantees, insurance policies or letters of credit obtained
by the issuer or sponsor from third parties, through various means of
structuring the transaction or through a combination of such approaches. The
Fund will not pay any additional fees for such credit support, although the
existence of credit support may increase the price of a security.

Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceeds that required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information regarding
the level of credit risk associated with the underlying assets. Delinquency or
loss in excess of that anticipated could adversely affect the return on an
investment in such a security.

ASSET-BACKED SECURITIES -- GENERAL -- The Funds also may invest in asset-backed
securities including interests in pools of receivables, such as motor vehicle
installment purchase obligations and credit card receivables. These securities
may be in the form of pass-through instruments or asset-backed bonds. The
securities, all of which are issued by non-governmental entities and carry no
direct or indirect government guarantee, are structurally similar to the
mortgage pass-through securities described above. As with mortgage-backed
securities, asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties and use similar
credit enhancement techniques. (See "Types of Credit Support," above.)

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the benefit
of the same security interest in the related collateral. Credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. Most organizations that issue asset-backed securities
relating to motor vehicle installment purchase obligations perfect their
interests in their respective obligations only by filing a financing statement
and by having the servicer of the obligations, which is usually the originator,
take custody thereof. In such circumstances, if the servicer were to sell the
same obligations to another party, in violation

- 22 -
<PAGE>
of its duty not to do so, there is a risk that such party could acquire an
interest in the obligations superior to that of the holders of the securities.
Also, although most such obligations grant a security interest in the motor
vehicle being financed, in most states the security interest in a motor vehicle
must be noted on the certificate of title to perfect such security interest
against competing claims of other parties. Due to the large number of vehicles
involved, however, the certificate of title to each vehicle financed, pursuant
to the obligations underlying the securities, usually is not amended to reflect
the assignment of the seller's security interest for the benefit of the holders
of the securities. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on those securities. In addition, various state and federal laws give the motor
vehicle owner the right to assert against the holder of the owner's obligation
certain defenses such owner would have against the seller of the motor vehicle.
The assertion of such defenses could reduce payments on the related securities.

SPECIAL RISK CONSIDERATIONS -- The yield characteristics of mortgage-backed and
asset-backed securities differ from traditional debt securities. Among the major
differences are that interest and principal payments are made more frequently,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans or other assets generally may be prepaid at any time.
As a result, if the Fund purchases such a security at a premium, a prepayment
rate that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will have the opposite effect of
increasing yield to maturity. Conversely, if the Fund purchases these securities
at a discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity.

Prepayments on a pool of mortgage loans are influenced by a variety of economic,
geographic, social and other factors, including changes in mortgagors' housing
needs, job transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions. An acceleration in prepayments in response
to sharply falling interest rates will shorten the security's average maturity
and limit the potential appreciation in the security's value relative to a
conventional debt security. As a result, mortgage-backed securities are not as
effective in locking in high long-term yields. Conversely, in periods of sharply
rising rates, prepayments generally slow, increasing the security's average life
and its potential for price depreciation. Amounts available for reinvestment by
the Fund are therefore likely to be greater during a period of declining
interest rates and, as a result, likely to be reinvested at lower interest rates
than during a period of rising interest rates. Generally, asset-backed
securities are less likely to experience substantial prepayments than are
mortgage-backed securities, primarily because the collateral supporting
asset-backed securities is of shorter maturity than mortgage loans. However,
certain of the factors that affect the rate of prepayments on mortgage-backed
securities also affect the rate of prepayments on asset-backed securities (E.G.,
fluctuations in interest rates and unemployment), although the predominant
factors affecting prepayment rates on mortgage-backed and asset-backed
securities may be different during any particular period. In periods of rapidly
changing economic conditions, these factors can lead to volatility in the value
of certain types of mortgage-backed and asset-backed securities.

The Funds' respective returns will also be affected by the yields on instruments
in which the Fund is able to reinvest the proceeds of payments and prepayments.
Accelerated prepayments on securities purchased by the Funds at a premium also
impose a risk of loss of principal because the premium may not have been fully
amortized at the time the principal is repaid in full.

New types of mortgage-backed securities and asset-backed securities are
developed and marketed from time to time. Consistent with their respective
investment limitations, the Funds expect to invest in those new types of
instruments that the Manager believes

- 23 -
<PAGE>
may assist the Funds in achieving their respective investment objectives and to
supplement this prospectus to appropriately describe such instruments.

INVESTMENT RESTRICTIONS

Each Fund has adopted certain investment restrictions which may not be changed
without the approval of the Fund's shareholders. Briefly, these restrictions
provide that a Fund may not:

1. Purchase the securities of any one issuer, other
than the United States Government or any of its agencies or instrumentalities
if, immediately after such purchase, more than 5% of the value of its total
assets would be invested in such issuer or the Fund would own more than 10% of
the outstanding voting securities of such issuer, except that up to 25% of the
value of the Fund's total assets may be invested without regard to such 5% and
10% limitations;

2. Invest more than 25% of the value of its total
assets in any particular industry;

3. Purchase securities on margin, but it may obtain
such short-term credits from banks as may be necessary for the clearance of
purchases and sales of securities;

4. Make loans of its assets to any person, except for
the lending of portfolio securities, the purchase of debt securities and the
entering into of repurchase agreements as discussed under "Investment Objectives
and Policies;"

5. Borrow money except for (i) the short-term credits
from banks referred to in paragraph 3 above and (ii) borrowings from banks for
temporary or emergency purposes, including the meeting of redemption requests
which might require the unexpected disposition of securities. Borrowing in the
aggregate may not exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the value of the Fund's total assets
(including the amount borrowed) at the time the borrowing is made. Outstanding
borrowings will be repaid before any subsequent investments are made;

6. Mortgage, pledge or hypothecate any of its assets,
except as may be necessary in connection with permissible borrowings mentioned
in paragraph 5 above;

7. Purchase the securities of any other investment
company (other than certain issuers of mortgage-backed and asset-backed
securities), except by purchase in the open market where no commission or profit
to a sponsor or dealer (other than the customary broker's commission) results
from such purchase, and except when such purchase is part of a merger,
consolidation or acquisition of assets; and

8. Act as an underwriter of securities of other issuers,
except that the Fund may acquire restricted or not readily marketable securities
under circumstances where, if such securities were sold, the Fund might be
deemed to be an underwriter for purposes of the Securities Act. The Fund will
not, however, invest (in the case of the Balanced Fund and the Equity Fund) more
than 10% of the value of its net assets in illiquid securities, restricted
securities and not readily marketable securities and repurchase agreements of
more than seven days' duration or (in the case of the Ultra Short Term Income
Fund and the Growth and Income Fund) more than 10% of the value of its net
assets in illiquid securities and repurchase agreements of more than seven days'
duration.

If a percentage restriction is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the value of a Fund's
portfolio securities will not be considered a violation of the Fund's policies
or restrictions.

THE MANAGER

The business and affairs of the Trust are managed under the direction of its
Board of Trustees.

The manager of the Trust is Towneley Capital Management, Inc., a Delaware
corporation founded in 1971 with its office located at 144 East 30th Street, New
York, New York 10016 (the "Manager"). The Manager was, at December 31, 1995,
investment adviser for assets in excess of $950 million. In addition to the
Trust, the Manager's clients include a limited

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<PAGE>
number of corporations, insurance companies, foundations, colleges, hospitals
and individuals. Wesley G. McCain, chairman and trustee of the Trust, has been
chairman and director of the Manager since its founding in 1971 and is primarily
responsible for the day-to-day management of the Funds' portfolios. Mr. McCain
is a controlling person of the Manager on the basis of his ownership of the
Manager's stock.

Pursuant to a Management Contract for the Balanced Fund and the Equity Fund,
dated January 7, 1987 (the "1987 Contract"), and one for the Ultra Short Term
Income Fund and the Growth and Income Fund dated December 27, 1994 (the "1994
Contract" and, together with the 1987 Contract, the "Management Contracts"), the
Manager furnishes an investment program for each Fund, makes the day-to-day
investment decisions for each Fund, executes the purchase and sale orders for
the portfolio transactions of each Fund and generally manages each Fund's
investments. Subject to each Fund's objective of obtaining the most favorable
price and efficient execution, the Manager may place portfolio transactions with
brokers or dealers which have been instrumental in the sale of a Fund's shares.

Under the Management Contracts, the Manager provides persons satisfactory to the
Board of Trustees to serve as officers of the Trust. Such officers, as well as
certain other employees and trustees, may be directors, officers or employees of
the Manager. For its services under the Management Contracts, the Manager
receives fees from each Fund at the following annual rates, which are expressed
as a percentage of each Fund's average daily net assets:

<TABLE>
<S> <C>
Ultra Short Term Income Fund 0.40%
Balanced Fund 0.80%
Growth and Income Fund 0.90%
Equity Fund 1.00%
</TABLE>

These fees are accrued daily and paid monthly. The rates of the management fees
to be paid by the Balanced Fund, the Growth and Income Fund and the Equity Fund
are higher than the rates paid by most other registered investment companies.
The Manager may from time to time from its own funds (other than the management
fees paid by the Funds) compensate brokers and other persons, including Eclipse
Financial Services, Inc. and other affiliates of the Manager, for providing
shareholder services or assistance in distributing the Funds' shares. Eclipse
Financial Services, Inc. may, in turn, make payments out of amounts received
from the Manager to compensate brokers and other persons for providing
shareholder services.

The Trust has retained NYLIFE Distributors Inc., a registered broker-dealer
unaffiliated with the Manager, to administer all aspects of the Trust's
operations except those which are the responsibility of the Manager. In
connection with its responsibilities as administrator, NYLIFE Distributors Inc.
performs such supervisory, administrative, and clerical functions as are
necessary in order to provide effective administration of the Trust, including
maintaining certain books and records; authorizing the payment of Fund expenses
and maintaining control over daily cash balances; monitoring the availability of
funds for investment; overseeing and confirming portfolio holdings with the
Custodian and the Manager; coordinating and controlling on a daily basis the
administrative and professional services rendered to the Trust by others,
including the Manager, Custodian and the Transfer and Dividend Disbursing Agent,
and the Trust's Shareholder Servicing Agent, as well as accounting, auditing and
other services performed for the Trust; calculating the net asset value of the
Trust's shares; providing the Trust with adequate conference facilities for all
board meetings; overseeing the preparation and filing with the Securities and
Exchange Commission of the Trust's registration statement, prospectus and
statement of additional information; and preparing and filing all required State
Blue Sky filings. For providing such services, NYLIFE Distributors Inc. receives
a fee from the Manager equal to 0.15% of the average combined daily net assets
of the Balanced Fund and the Equity Fund up to $50 million, plus 0.12% of such
average daily net assets in excess of $50 million but not in excess of $100
million, plus 0.05% of such average daily net assets in excess of $100 million
but not in excess of $750 million and 0.02% of the average combined daily value
of the

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<PAGE>
Funds in excess of $750 million. For each of the Ultra Short Term Income Fund
and the Growth and Income Fund, NYLIFE Distributors Inc. receives from the
Manager a fee equal to the greater of $50,000 per Fund or 0.10% of a Fund's
average daily net assets up to $100 million. Average daily net assets of each
such Fund in excess of $100 million will be combined with those of the Balanced
Fund and the Equity Fund for purposes of the fee paid to NYLIFE Distributors
Inc. and such combined assets will be subject to the fee schedule described
above for the Balanced Fund and the Equity Fund. Because NYLIFE Distributors
Inc. has been retained by the Trust, the Trust can directly supervise the
performance of its administrative functions, even though NYLIFE Distributors
Inc. receives no compensation directly from the Trust.

Under the 1987 Contract, for the fiscal year ended December 31, 1995, the
Manager received a fee from the Equity Fund equal to 1.00% of the Fund's average
daily net assets. Under the Management Contracts, for the fiscal year ended
December 31, 1995, the Manager was entitled to receive fees from the Ultra Short
Term Income Fund in the amount of 0.40% of average daily net assets, which fee
was waived in its entirety by the Manager; from the Balanced Fund in the amount
of 0.80% of average daily net assets, of which $160,241 was voluntarily waived
by the Manager; and from the Growth and Income Fund in the amount of 0.90% of
average daily net assets, which fee was waived in its entirety by the Manager.

EXPENSES OF THE TRUST

Except as set forth above under "Manager," the Trust is responsible for the
payment of its expenses. Without limitation such expenses include the fees
payable to the Manager; the organizational expenses payable to the Manager; any
brokerage fees and commissions; taxes; interest; the cost of any liability
insurance or fidelity bonds; legal and auditing fees and expenses; the fees and
certain expenses of the Trust's Custodian and Transfer and Dividend Disbursing
Agent; the fees of any trade association of which the Trust is a member; the
expenses of printing and mailing reports and notices to shareholders; filing
fees and other costs for the registration or qualification of each Fund's shares
under Federal or state securities laws; the fees and expenses involved in
registering and maintaining registration of the Trust and of each Fund's shares
with the Securities and Exchange Commission; the costs of registering the Trust
as a broker or dealer; the expenses of servicing shareholders and shareholder
accounts held by the Trust directly; and any extraordinary expenses incurred by
a Fund.

Under the Management Contracts, the Manager has agreed to reimburse each Fund
for its expenses (exclusive of interest, taxes, brokerage, and extraordinary
expenses) which in any year exceed the limits prescribed by any state in which
the Fund's shares are qualified for sale. A Fund may elect not to qualify its
shares for sale in every state. The Trust believes that currently the most
restrictive expense ratio limitation imposed by any state is 2 1/2% of the first
$30 million of a Fund's average net assets, 2% of the next $70 million of its
average net assets and 1 1/2% of its average net assets in excess of $100
million. For the purpose of this limitation, expenses shall include the fees
payable to the Manager and the amortization of organization expenses. For the
purpose of this obligation to reimburse expenses, each Fund's annual expenses
are estimated and accrued daily, and any appropriate estimated payments are made
to it on a monthly basis. Each Fund's expenses comprise Trust expenses
attributable to a particular Fund, which are allocated to that Fund, and those
not wholly attributable to a particular Fund which are allocated between the
Funds in proportion to their average net assets or number of accounts.

For the fiscal year ended December 31, 1995, the expenses of the Equity Fund,
including the management fee, equaled 1.14% of the Fund's average daily net
assets. For the fiscal year ended December 31, 1995, the expenses of the
Balanced Fund equaled 0.81% of the Fund's average daily net assets (net of the
management fee waived equivalent to 0.31% of average net assets). For the fiscal
year ended December 31, 1995, the expenses of the Growth and Income Fund equaled
1.00% of the Fund's average daily net assets (net of the management fee waived
equivalent

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<PAGE>
to 0.90% of average net assets and other expenses reimbursed equivalent to 0.05%
of average net assets), and the expenses of the Ultra Short Term Income Fund
were equal to 0.22% of the Fund's average daily net assets (net of the
management fee waived equivalent to 0.40% of average net assets and other
expenses reimbursed equivalent to 1.27% of average net assets).

HOW TO PURCHASE AND REDEEM SHARES

Each Fund sells and redeems its shares on a continuing basis at its net asset
value and does not impose a sales charge for either sales or redemptions. All
transactions in Fund shares are effected through the Trust's transfer agent,
Investors Fiduciary Trust Company (the "Transfer Agent"), which accepts orders
for purchases and redemptions from investors directly. The minimum initial
investment in each Fund is $1,000. The minimum investment required to open an
individual retirement account is also $1,000. (See "Retirement Plans.") The Fund
minimum does not apply to automatic investment accounts (see "Automatic
Investment," below) or to gift accounts. Initial investments may be made in any
amount in excess of the applicable minimums. There is no minimum for subsequent
investments.

Shareholder accounts may be maintained through brokerage firms or other
financial institutions, including the Manager and its affiliates. Such
institutions may make arrangements for their customers to purchase and redeem
Fund shares by telephone, in which event a transaction fee may be charged by the
institution (not by the Trust). In addition, the $1,000 minimum initial
investment amount does not apply to shareholder accounts maintained through such
institutions, which may impose their own minimum investment amounts.

Shares of each Fund are offered at the next determined net asset value by the
Fund as an investment vehicle for individuals, institutions, fiduciaries and
retirement plans. Prospectuses, sales material and applications may be obtained
from the Trust's shareholder servicing agent, Eclipse Financial Services, Inc.,
P.O. Box 2196, Peachtree City, Georgia 30269, 800-872-2710 or 770-631-0414
(within Georgia). Orders received by Investors Fiduciary Trust Company, the
Trust's Transfer Agent, prior to 4:00 P.M., New York City time, on a Fund
business day, will result in shares being issued the same day. The price will be
based on that day's net asset value. Orders which are received after 4:00 P.M.,
New York City time, will not result in share issuance until the next Fund
business day.

For each shareholder of record, the Transfer Agent, as the shareholder's agent,
establishes an open account to which all shares purchased are credited, together
with any dividends and capital gain distributions which are paid in additional
shares. (See "Dividends, Distributions and Taxes.") It is the Funds' policy not
to issue share certificates. Each Fund reserves the right to reject any
subscription for its shares.

At the time of initial investment in the Trust, investors must elect on their
application the Fund(s) in which they wish to invest. Subject to each Fund's
initial investment minimums, investors may divide their investment in the Trust
among the Funds in any manner they choose. Subject to a $500 minimum,
stockholders may transfer all or a portion of their shares from one open Fund
account to another open Fund account at any time. Any transfer into a Fund in
which the stockholder does not have an open account must satisfy the Fund's
initial investment minimum. Stockholders will have a separate account with the
Trust for each Fund in which they invest.

INITIAL PURCHASE OF SHARES

MAIL -- To purchase shares of a Fund send a check made payable to "Eclipse
Financial Asset Trust" and a completed application to:

Eclipse Financial Asset Trust
c/o Investors Fiduciary Trust Company
P.O. Box 419595
Kansas City, MO 64179

IFTC will not accept third-party checks.

Checks are accepted subject to collection at full face value in United States
currency.

- 27 -
<PAGE>
BANK WIRE -- To purchase shares of a Fund using the wire system for transmittal
of money among banks, an investor should first telephone Eclipse Financial
Services, Inc. at 800-872-2710 or 770-631-0414 (within Georgia) to obtain a new
account number.

The investor should then instruct a member commercial bank to wire funds to:

Investors Fiduciary Trust Company
ABA 101003621
for further credit to a/c #7512554
Re: -Name of Fund-
Account Number _________________________________________________________
Account Name ___________________________________________________________
Social Security #/Tax ID # _____________________________________________

Then promptly complete and mail the subscription order form to the Transfer
Agent (Investors Fiduciary Trust Company). There may be a charge by your bank
for transmitting the money by bank wire. The Transfer Agent does not charge
investors in the Trust for the receipt of wire transfers. If you are planning to
wire funds, it is suggested that you instruct your bank early in the day so the
wire transfer can be accomplished the same day.

AUTOMATIC INVESTMENT -- By completing the automatic investment authorization,
you can direct Eclipse Financial Asset Trust to charge your bank account for the
monthly purchase of shares of the Fund(s) of your choice. Your account will be
charged on or about the 20th day of each month and you will receive a
confirmation of every transaction. There is no initial minimum if you open an
automatic investment account, but the minimum monthly purchase is $50.

SUBSEQUENT PURCHASES OF SHARES

Subsequent purchases can be made by bank wire, by automatic investment or by
mailing a check as instructed above.

There is no minimum for subsequent purchases. All payments should clearly
indicate the name of the Fund whose shares are being purchased and the
shareholder's account number.

Provided that the information on the subscription order form on file with the
Trust is still applicable, a shareholder may reopen an account without filing a
new subscription order form at any time during the year the shareholder's
account is closed or during the following calendar year.

GENERAL INFORMATION REGARDING REDEMPTIONS

Upon receipt by the Transfer Agent of a redemption request in proper form,
shares of each Fund will be redeemed at their next determined net asset value.
(See "Net Asset Value.") Redemption requests may be made by mail or by
telephone, and automatic withdrawals may be authorized by establishing a
Systematic Withdrawal Account as described below.

REDEMPTION BY MAIL -- Redemptions may be made by mail to the Transfer Agent at:

Eclipse Financial Asset Trust
c/o Investors Fiduciary Trust Company
P.O. Box 419595
Kansas City, MO 64179

The letter must specify the name of the Fund, the dollar amount or number of
shares to be redeemed, and the account number. The letter must be signed in
exactly the same way the account is registered (if there is more than one owner
of the shares, all must sign). In all cases, all the signatures on a redemption
request must be guaranteed by a bank, broker-dealer, municipal securities broker
and dealer, government securities dealer and broker, credit union, a member firm
of a national securities exchange, registered securities association or clearing
agency or savings association. The Transfer Agent may reject redemption
instructions if the guarantor is neither a member of nor a participant in a
signature guarantee program (currently known as "STAMP.") (Signature guarantees
by savings banks and notaries public are not acceptable.) Further documentation,
such as copies of corporate resolutions and instruments of authority, may be
requested from certain accounts such as corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.

- 28 -
<PAGE>

REDEMPTION BY TELEPHONE -- Shares of each Fund may also be sold by calling the
Transfer Agent at 1-800-525-0687. In order to utilize this procedure for
telephone redemption, a shareholder must have previously elected this procedure
in writing, which election will be reflected in the records of the Transfer
Agent, and the redemption proceeds must be mailed directly to the investor at
the address of record for that investor. To change your address of record, call
the Transfer Agent at 1-800-525-0687 or send a written request with signature(s)
guaranteed as described above under "Redemption by Mail" to the Transfer Agent.
Any written redemption requests received within 15 days after an address change
made by telephone must be accompanied by a signature guarantee and no telephone
redemptions will be allowed within 15 days of such a change. The Trust reserves
the right to limit the number of telephone redemptions by an investor. Once
made, telephone redemption requests may not be modified or canceled. The selling
price of each share being redeemed will be the per share net asset value next
calculated by the relevant Fund after receipt by the Transfer Agent of the
telephone redemption request.

To preserve flexibility, the Trust may revise or remove the ability to redeem
shares by telephone, or may charge a fee for such service, although currently,
the Trust does not expect to charge a fee. The Trust will not be liable for
following instructions communicated by telephone that it reasonably believes to
be genuine. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include,
among others, requiring some form of personal identification prior to acting
upon telephone instructions, providing written confirmations of all such
transactions, and/or tape recording all telephone instructions. Assuming
procedures such as the above have been followed, the Trust will not be liable
for any loss, cost, or expense for acting upon an investor's telephone
instructions or for any unauthorized telephone redemption. As a result of this
policy, the investor will bear the risk of any loss unless the Trust has failed
to follow such procedure(s).
During periods of substantial economic or market changes, telephone redemptions
may be difficult to implement. If an investor is unable to contact the Transfer
Agent by telephone, shares may also be redeemed by delivering the redemption
request to the Transfer Agent by letter as previously described.

AUTOMATIC WITHDRAWAL -- If you own Fund shares worth at least $10,000 at the
current net asset value, you may create a Systematic Withdrawal Account from
which a fixed sum will be paid to you at regular intervals. Please contact
shareholder servicing for additional information.

PAYMENT OF PROCEEDS -- Checks for redemption proceeds normally will be mailed
within three business days, but will not be mailed until all checks in payment
for the purchase of the shares to be redeemed have been cleared, which may take
up to 15 days. Unless other instructions are given, a check for the proceeds of
a redemption will be sent to the shareholder's address of record and generally
will be mailed within three business days after receipt of the request.

The Trust may suspend the right of redemption and postpone the date of payment
for more than seven days during any period when (i) trading on the New York
Stock Exchange is restricted or the Exchange is closed, other than customary
weekend and holiday closings, (ii) the Securities and Exchange Commission has by
order permitted such suspension or (iii) an emergency, as defined by rules of
the Securities and Exchange Commission, exists making disposal of portfolio
investments or determination of the value of the net assets of the Funds not
reasonably practicable. The proceeds of a redemption may be more or less than
the amount invested and, therefore, a redemption may result in a gain or loss
for income tax purposes.

REDEMPTION AT THE OPTION OF THE FUND -- To be in a position to eliminate
excessive expenses, the Trust reserves the right to redeem upon not less than 30
days' notice all shares of a Fund in an account (other than an individual
retirement account) which has a value below $500 as a result of voluntary
redemptions.

- 29 -
<PAGE>
However, a shareholder will be allowed to make additional investments prior to
the date fixed for redemption to avoid liquidation of the account.

RETIREMENT PLANS

Each Fund has available a form of individual retirement account ("IRA") for
investment in each Fund's shares. Individuals earning compensation, including
earnings from self-employment, generally may make IRA contributions of up to
$2,000 annually. However, the deductibility of an individual's IRA contribution
may be reduced or eliminated if the individual or, in the case of a married
individual, either the individual or the individual's spouse, is an active
participant in an employer-sponsored retirement plan. Thus, in the case of an
active participant, the deduction will not be available for an individual with
adjusted gross income above $35,000, a married couple filing a joint return with
adjusted gross income above $50,000 and a married individual filing separately
with adjusted gross income above $10,000. In addition, an individual with a non-
working spouse may establish a separate IRA for the spouse and annually
contribute a total of up to $2,250 to the two IRAs, provided that no more than
$2,000 may be contributed to the IRA of either spouse. The minimum investment
required to open an IRA is $1,000.

Withdrawals from an IRA, other than that portion, if any, of the withdrawal
considered to be a return of the investor's non-deductible IRA contributions,
are taxed as ordinary income when received. Such withdrawals may be made without
penalty after the participant reaches age 59 1/2, and must commence shortly
after age 70 1/2. Withdrawals before age 59 1/2 or the failure to commence
withdrawals on a timely basis after age 70 1/2 may involve the payment of
certain penalties.

Shares of either Fund may also be a suitable investment for assets of "section
403(b) accounts" and other types of qualified pension or profit-sharing plans,
including cash or deferred or salary reduction "section 401(k) plans" which give
participants the right to defer portions of their compensation for investment on
a tax-deferred basis until distributions are made from the plans.

Persons desiring information concerning investments by IRAs and other retirement
plans should write or telephone the Trust.

EXCHANGE PRIVILEGE

Shareholders of any Fund are entitled to exchange some or all of their shares
for any other Fund. An exchange of shares in a Fund pursuant to the exchange
privilege may result in a shareholder realizing a taxable gain or loss for
income tax purposes.

There is no charge for the exchange privilege or limitation as to frequency of
exchanges. The minimum amount for an exchange is $500, except that shareholders
who are establishing a new account with an investment company or a portfolio
through the exchange privilege must insure that a sufficient number of shares
are exchanged to meet the minimum initial investment required for the portfolio
into which the exchange is being made.

Instructions for exchanges may be made in writing to Investors Fiduciary Trust
Company at the appropriate address listed above or, for shareholders with
telephone exchange, by calling Investors Fiduciary Trust Company at
l-800-525-0687. The Trust reserves the right to reject any exchange request and
may modify or terminate the exchange privilege at any time.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each dividend and capital gains distribution, if any, declared by a Fund on its
outstanding shares will, at the election of each shareholder, be paid in cash or
in additional shares of the Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash amount of such
dividend or distribution. Election to receive dividends and distributions in
cash or shares is made at the time shares are subscribed for and may be changed
by notifying the Fund in writing at any time prior to the record date for a
particular dividend or distribution. If the shareholder makes no election the
Fund will make the distribution in shares. There is no sales or other charge in
connection with the reinvestment of dividends and capital gains distributions.

While it is the intention of the Funds to distribute to their respective
shareholders substantially all of each

- 30 -
<PAGE>
fiscal year's net income (quarterly with respect to the Ultra Short Term Income
Fund and the Balanced Fund, and annually with respect to the Growth and Income
Fund and the Equity Fund) and net realized capital gains, if any (annually with
respect to all of the Funds), the amount and time of any such distribution must
necessarily depend upon the realization by the Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains.

The following discussion is intended for general information only. An investor
should consult with his or her own tax adviser as to the tax consequences of an
investment in a Fund, including the status of distributions from each Fund under
applicable state or local law.

FEDERAL INCOME TAXES

Each of the Funds in the Trust qualified for the fiscal year ended December 31,
1995, and each Fund intends for each year thereafter to qualify, for tax
treatment as a "regulated investment company" under the Internal Revenue Code of
1986, as amended (the "Code"). Qualification as a regulated investment company
generally relieves a Fund of Federal income tax on that part of its net ordinary
income and net realized capital gains which it pays out to its shareholders.

Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, dividends paid by the Balanced Fund, the Growth and
Income Fund and the Equity Fund may be eligible for the dividends-received
deduction, to the extent that the Fund's income is derived from qualifying
dividends received by the Fund from domestic corporations. Distributions of the
excess of net long-term capital gains over net short-term capital losses which
are designated by a Fund as capital gain dividends are taxable to the
shareholders as long-term capital gains, irrespective of the length of time a
shareholder may have held his shares. Such long-term capital gains distributions
are not eligible for the dividends-received deduction referred to above.
Dividends are taxable to shareholders in the same manner whether received in
cash or reinvested in additional Fund shares.

A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Fund in October, November or December with a record
date in such a month and paid by the Fund during January of the following
calendar year. Such distributions will be taxable to shareholders in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received.

Each year each Fund will notify shareholders of the tax status of dividends and
distributions.

Investments by the Ultra Short Term Income Fund and the Balanced Fund in zero
coupon securities will result in income to the Fund each year equal to a portion
of the excess of the face value of the securities over their issue price, even
though the Fund receives no cash interest payments from the securities.

Both the Ultra Short Term Income Fund and the Balanced Fund may invest in
residual interests in REMICs. Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of the Fund's income that is
attributable to a residual interest in a REMIC (referred to in the Code as an
"excess inclusion") will be subject to federal income tax in all events. These
regulations are also expected to require the Fund to allocate any excess
inclusion income to its shareholders in proportion to the dividends received by
them, with the same consequences as if the shareholders held the REMIC residual
interests directly. In general, excess inclusion income (i) cannot be offset by
net operating losses, (ii) is unrelated business taxable income, thereby
potentially requiring tax-exempt entities to file a tax return and pay tax on
the income, and (iii) in the case of a foreign shareholder, will not qualify for
a reduced rate of U.S. federal withholding tax. It is anticipated that only a
small portion, if any, of the assets of the Ultra Short Term Income Fund and of
the Balanced Fund will consist of residual interests in REMICs.

- 31 -
<PAGE>
Upon the sale or other disposition of shares of a Fund, or upon receipt of a
distribution in complete liquidation of a Fund, a shareholder generally will
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares.

Each Fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's U.S. federal income tax
liability.

Further information relating to tax consequences is contained in the Statement
of Additional Information.

STATE AND LOCAL TAXES

Fund distributions may be subject to state and local taxes. Investors should
consult their own tax advisers regarding the particular tax consequences of an
investment in a Fund.

NET ASSET VALUE

The Trust determines the net asset value per share of each Fund as of 4:00 P.M.,
New York City time, by dividing the value of the Fund's net assets (i.e., the
value of its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and surplus) by the
number of shares outstanding at the time the determination is made. The Trust
determines each Fund's net asset value on each Trust business day. Trust
business day for this purpose means weekdays (Monday through Friday) except
customary national business holidays and Good Friday. Purchases and redemptions
will be effected at the time of determination of net asset value next following
the receipt of any purchase or redemption order. (See "How to Purchase and
Redeem Shares.")

Portfolio securities for which market quotations are readily available
(including asset-backed securities) are valued at market value. All other
investment assets of each Fund are valued in such manner as the Board of
Trustees of the Trust in good faith deems appropriate to reflect their fair
value.

GENERAL INFORMATION

DESCRIPTION OF SHARES

The Ultra Short Term Income Fund, the Balanced Fund, the Growth and Income Fund
and the Equity Fund are portfolios of Eclipse Financial Asset Trust, a
Massachusetts business trust established by an Agreement and Declaration of
Trust dated July 30, 1986. The Trust has an unlimited authorized number of
shares of beneficial interest which may, without shareholder approval, be
divided into any number of portfolios of shares (also sometimes referred to as
classes, or series, of shares), subject to the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"). The Trust's shares are
entitled to one vote per share with proportional voting for fractional shares.
There are no conversion or preemptive rights in connection with any shares of
the Trust. All shares when issued in accordance with the terms of the offering
will be fully paid and non-assessable. Shares of each Fund are redeemable at net
asset value, at the option of the shareholders.

As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Procedures for calling a shareholders meeting for the
removal of Trustees of the Trust, similar to those set forth in Section 16(c) of
the 1940 Act, are available to shareholders of the Trust.

PERFORMANCE

From time to time, a Fund may advertise its "average annual total return" over
various periods of time. This total return figure shows the average percentage
change in value of an investment in a Fund from the beginning date of the
measuring period to the ending date of the measuring period. The figure reflects
changes in the price of a Fund's shares and assumes that any income, dividends
and/or capital gains distributions made by the Fund during the period are
reinvested in shares of the Fund. Figures will be given for recent one-, five-
and ten-year periods (when applicable), and may be given for other periods as
well (such

- 32 -
<PAGE>
as from commencement of the Fund's operations, or on a year-by-year basis). When
considering "average" total return figures for periods longer than one year,
investors should note that a Fund's annual total return for any one year in the
period might have been greater or less than the average for the entire period. A
Fund also may use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the Fund for the
specific period (again reflecting changes in the Fund's share price and assuming
reinvestment of dividends and distributions). Aggregate total returns may be
shown by means of schedules, charts or graphs, and may indicate subtotals of the
various components of total return (that is, the change in value of initial
investment, income dividends and capital gains distributions).

A Fund may also distribute sales literature or publish advertisements containing
"principal only" performance information for a Fund that relates to various time
periods (on both an average annual and cumulative basis). "Principal only"
performance information is not total return but a measure of performance,
expressed as a percentage, that excludes from its computation income dividends
and capital gains distributions paid on the Fund's shares. Such quotations in
effect reflect only changes in the value over time of a single share of a Fund
without taking into account the compounding effect of reinvested dividends or
distributions. "Principal only" quotations may be a useful comparison with
changes in certain stock indices (which are unmanaged) that do not reflect
reinvestment of dividends on the stocks comprising the index. Any sales
literature or advertisements containing "principal only" performance information
will be accompanied by standard performance information relating to the same
time periods.

From time to time, the Ultra Short Term Income Fund and the Balanced Fund may
advertise their respective 30-day "yields." The yield of the Fund refers to the
income generated by an investment in the Fund over the 30-day period identified
in the advertisement and is computed by dividing the net investment income per
share earned by the Fund during the period by the net asset value per share on
the last day of the period. This income is "annualized" by assuming that the
amount of income is generated each month over a one-year period and is
compounded semi-annually. The annualized income is then shown as a percentage of
the net asset value.

In reports or other communications to shareholders of a Fund or in advertising
materials, the Fund may compare its performance with that of other mutual funds
as listed in the rankings prepared by Lipper Analytical Services, Inc.,
publications such as BARRONS, BUSINESS WEEK, FORBES, FORTUNE, INSTITUTIONAL
INVESTOR, KIPLINGER'S PERSONAL FINANCE, MONEY, MORNINGSTAR MUTUAL FUND VALUES,
THE NEW YORK TIMES, THE WALL STREET JOURNAL and USA TODAY or other industry or
financial publications. It is important to note that yield and total return
figures are based on historical earnings and are not intended to indicate future
performance. Comparative performance information may be used from time to time
in advertising the Fund's shares, including data from LIPPER ANALYTICAL
SERVICES, INC., THE STANDARD & POOR'S INDEX OF 500 STOCKS, THE DOW JONES
INDUSTRIAL AVERAGE and other industry publications. The Statement of Additional
Information further describes the methods used to determine a Fund's
performance.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT

Investors Fiduciary Trust Company, P.O. Box 419595, Kansas City, Missouri 64179
is custodian, transfer agent and dividend agent for the shares of the Trust.
Investors Fiduciary Trust Company does not assist in and is not responsible for
investment decisions involving assets of the Funds.

INFORMATION FOR SHAREHOLDERS

All shareholder inquiries should be directed to Eclipse Financial Services,
Inc., P.O. Box 2196, Peachtree City, Georgia, 30269 (800-872-2710 or
770-631-0414 within Georgia).

The Trust sends to all its shareholders semiannual unaudited and annual audited
reports, including a list of investment securities held.

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<PAGE>
APPENDIX A
BOND RATINGS

MOODY'S INVESTORS SERVICE, INC.

Aaa: Bonds which are rated Aaa judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.

Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Unrated: When no rating has been assigned or when no rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemptions; or for other reasons.

Note: Those bonds in the Aa, A and Baa groups which Moody's believe possess
the strongest investment attributes are designated by the symbols Aa-1, A-1
and Baa-1.

A-1
<PAGE>
STANDARD & POOR'S CORPORATION

AAA: Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.

A: Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in the
highest rated categories.

BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than in higher rated categories.

Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

A-2
<PAGE>

ECLIPSE FINANCIAL ASSET TRUST

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1996

144 EAST 30TH STREET
NEW YORK, NEW YORK 10016
(800) 872-2710
IN GEORGIA (770) 631-0414

Eclipse Financial Asset Trust (the "Trust") is a no-load, open-end,
diversified management investment company. The Trust currently has four
investment portfolios: the Ultra Short Term Income Fund, the Balanced Fund, the
Growth and Income Fund and the Equity Fund (individually a "Fund" and
collectively the "Funds").

ULTRA SHORT TERM INCOME FUND: The investment objective of
the Ultra Short Term Income Fund is to seek a high level
of current income, preservation of capital and a relatively
stable net asset value. This fund is designed for the investor
who seeks a higher yield than a money market fund (and is
willing to assume some principal risk) but less fluctuation
in net asset value than a longer-term bond fund. It is not
a money market fund and may not maintain a stable net asset
value per share. The duration of the Fund will not exceed
one year. The Ultra Short Term Income Fund will generally
limit its investments to securities which, in the opinion
of the Fund's Manager, are issued by companies that are
socially responsible.

BALANCED FUND: The investment objective of the Balanced
Fund is to seek a high total return from a combination of
equity and fixed-income investments.

GROWTH AND INCOME FUND: The investment objective of the
Growth and Income Fund is to seek a high total return
consisting of both current income and realized and unrealized
capital gains from equity securities and equity-related
securities. Equity selection for the Growth and Income Fund
will be based on estimated relative intrinsic value,
expected future earnings growth and current and expected
dividend income.

EQUITY FUND: The investment objective of the Equity Fund
is to seek a high total return from equity investments.

Securities are selected and weighted in each Fund's portfolio with a
view toward achievement of its investment objective.

Towneley Capital Management, Inc. serves as Manager to the Trust.

This Statement of Additional Information is not a prospectus and is
only authorized for distribution when preceded or accompanied by the Trust's
prospectus relating to the Funds dated May 1, 1996 (the "Prospectus"). This
Statement of Additional Information contains additional and more detailed
information than that set forth in the Prospectus and should be read in
conjunction with the Prospectus, additional copies of which may be obtained
without charge by writing or telephoning the Trust at the address and telephone
number set forth above.

<PAGE>

TABLE OF CONTENTS

Page
----
Investment Policies and Risk Considerations. . . . . . . . . . . . . . 3

Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 5

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . 9

Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 10

Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Description of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 11

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Counsel and Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 17

General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 17

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INVESTMENT POLICIES AND RISK CONSIDERATIONS

INVESTMENT POLICIES APPLICABLE TO THE ULTRA SHORT TERM INCOME FUND AND THE
BALANCED FUND

FLOATING AND VARIABLE RATE NOTES

Floating and variable rate notes generally are unsecured obligations issued
by financial institutions and other entities. These obligations typically have
a stated maturity in excess of one year. The interest rate on such notes is
based on an identified interest rate index and is adjusted automatically at
specified intervals or when the index changes.

MORTGAGE-BACKED SECURITIES

GOVERNMENT GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. The Ultra Short
Term Income Fund and the Balanced Fund may invest in mortgage pass-through
securities representing participation interests in pools of residential mortgage
loans originated by United States governmental or private lenders and
guaranteed, to the extent provided in such securities, by the United States
Government or one of its agencies or instrumentalities. Such securities, which
are ownership interests in the underlying mortgage loans, differ from
conventional debt securities, which provide for periodic payment of interest in
fixed amounts (usually semiannually) and principal payments at maturity or on
specified call dates. Mortgage pass-through securities provide for monthly
payments that are a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees paid to the guarantor of such securities
and the servicer of the underlying mortgage loans.

The guaranteed mortgage pass-through securities in which the Fund may
invest include those issued or guaranteed by the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC").

GNMA CERTIFICATES. GNMA is a wholly-owned corporate instrumentality of the
United States within the Department of Housing and Urban Development. The
National Housing Act of 1934, as amended (the "Housing Act"), authorizes GNMA to
guarantee the timely payment of the principal of and interest on certificates
that are based on and backed by a pool of mortgage loans insured by the Federal
Housing Administration under the Housing Act, or Title V of the Housing Act of
1949 ("FHA Loans"), or guaranteed by the Veterans' Administration under the
Servicemen's Readjustment Act of 1944, as amended ("VA Loans"), or by pools of
other eligible mortgage loans. The Housing Act provides that the full faith and
credit of the United States Government is pledged to the payment of all amounts
that may be required to be paid under any guarantee. In order to meet its
obligations under such guarantee, GNMA is authorized to borrow from the United
States Treasury with no limitations as to amount.

The GNMA Certificates will represent a pro rata interest in one or more
pools of the following types of mortgage loans: (i) fixed rate level payment
mortgage loans; (ii) fixed rate graduated payment mortgage loans; (iii) fixed
rate growing equity mortgage loans; (iv) fixed rate mortgage loans secured by
manufactured (mobile) homes; (v) mortgage loans on multifamily residential
properties under construction; (vi) mortgage loans on completed multifamily
projects; (vii) fixed rate mortgage loans as to which escrowed funds are used to
reduce the borrower's monthly payments during the early years of the mortgage
loans ("buydown" mortgage loans); (viii) mortgage loans that provide for
adjustments in payments based on periodic changes in interest rates or in other
payment terms of the mortgage loans; and (ix) mortgage-backed serial notes. All
of these mortgage loans will be FHA Loans or VA Loans and, except as otherwise
specified above, will be fully-amortizing loans secured by first liens on one to
four-family housing units.

FNMA CERTIFICATES. FNMA is a federally chartered and privately owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act. FNMA was originally established in 1939 as a United
States Government agency to provide supplemental liquidity to the mortgage
market and was transformed into a stockholder owned and privately managed
corporation by legislation enacted in 1968. FNMA provides funds to the mortgage
market primarily by purchasing home mortgage loans from local lenders, thereby
replenishing their funds for additional lending. FNMA acquires funds to
purchase home mortgage loans from many capital market investors that may not
ordinarily invest in mortgage loans directly, thereby expanding the total amount
of funds available for housing.

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<PAGE>

Each FNMA Certificate will entitle the registered holder thereof to receive
amounts representing such holder's pro rata interest in scheduled principal
payments and interest payments (at such FNMA Certificate's pass-through rate,
which is net of any servicing and guarantee fees on the underlying mortgage
loans), and any principal prepayments, on the mortgage loans in the pool
represented by such FNMA Certificate and such holder's proportionate interest in
the full principal amount of any foreclosed or otherwise finally liquidated
mortgage loan. The full and timely payment of principal of and interest on each
FNMA Certificate will be guaranteed by FNMA, which guarantee is not backed by
the full faith and credit of the United States Government.

Each FNMA Certificate will represent pro rata interests in one or more
pools of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (i) fixed rate level payment mortgage loans; (ii) fixed rate
growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed rate mortgage loans secured by multifamily
projects.

FHLMC CERTIFICATES. FHLMC is a corporate instrumentality of the United
States created pursuant to the Emergency Home Finance Act of 1970, as amended
(the "FHLMC Act"). FHLMC was established primarily for the purpose of
increasing the availability of mortgage credit for the financing of needed
housing. The principal activity of FHLMC currently consists of the purchase of
first lien, conventional, residential mortgage loans and participation interests
in such mortgage loans and the resale of the mortgage loans so purchased in the
form of mortgage securities, primarily FHLMC Certificates.

FHLMC guarantees to each registered holder of an FHLMC Certificate the
timely payment of interest at the rate provided for by such FHLMC Certificate,
whether or not received. FHLMC also guarantees to each registered holder of an
FHLMC Certificate ultimate collection of all principal of the related mortgage
loans, without any offset or deduction, but does not, generally, guarantee the
timely payment of scheduled principal. FHLMC may remit the amount due on
account of its guarantee of collection of principal at any time after default on
an underlying mortgage loan, but not later than 30 days following (i)
foreclosure sale, (ii) payment of a claim by any mortgage insurer, or (iii) the
expiration of any right of redemption, whichever occurs later, but in any event
no later than one year after demand has been made upon the mortgagor for
accelerated payment of principal. The obligations of FHLMC under its guarantee
are obligations solely of FHLMC and are not backed by the full faith and credit
of the United States Government.

FHLMC Certificates represent pro rata interests in a group of mortgage
loans (an "FHLMC Certificate group") purchased by FHLMC. The mortgage loans
underlying the FHLMC Certificates will consist of fixed rate or adjustable rate
mortgage loans with original terms to maturity of between ten and thirty years,
substantially all of which are secured by first liens on one to four-family
residential properties or multifamily projects. Each mortgage loan must meet
the applicable standards set forth in the FHLMC Act. An FHLMC Certificate group
may include whole loans, participation interests in whole loans and undivided
interests in whole loans and participations comprising another FHLMC Certificate
group.

INVESTMENT POLICIES APPLICABLE TO ALL FUNDS

WARRANTS

Each Fund may invest in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time. Warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
securities which may be purchased nor do they represent any right in the assets
of the issuing company. Also, the value of a warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to have
value if it is not exercised prior to the expiration date. A Fund will not,
however, purchase any warrant if, as a result of such purchase, 5% or more of
the Fund's total assets would be invested in warrants. Included in that amount,
but not to exceed 2% of the value of the Fund's total assets, may be warrants
which are not listed on the New York or American Stock Exchange. Warrants
acquired by a Fund in units or attached to securities may be deemed to be
without value.

LENDING OF PORTFOLIO SECURITIES

Each Fund may from time to time lend securities from its portfolio to
brokers or dealers, banks or other institutional investors and receive
collateral in the form of cash or United States Government obligations. Under
each Fund's current practices, the loan collateral must be maintained at all
times in an amount equal to at least 100% of the current market value

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<PAGE>

of the loaned securities. In determining whether to lend securities to a
particular broker-dealer or financial institution, the Manager will consider all
relevant facts and circumstances, including the creditworthiness of the
broker-dealer or financial institution. A Fund may pay reasonable finders,
administrative and custodial fees in connection with a loan. A Fund will not
lend portfolio securities in excess of 20% of the value of its total assets, nor
will a Fund lend its portfolio securities to any officer, director, trustee,
employee or affiliate of the Fund or the Manager.

INVESTMENT RESTRICTIONS

Each Fund has adopted the following investment restrictions which are in
addition to those described in the Prospectus. Under the following
restrictions, which may not be changed without the approval of a Fund's
shareholders, a Fund may not:

1. Purchase or otherwise acquire interests in real estate (including, in
the case of the Ultra Short Term Income Fund and the Growth and Income
Fund, interests in real estate limited partnerships) or real estate
mortgage loans, or interests in oil, gas or other mineral exploration
or development programs, except that the Ultra Short Term Income Fund
and the Balanced Fund may acquire mortgage-backed securities;

2. Sell securities short or invest in puts, calls, straddles, spreads or
combinations thereof;

3. Purchase or acquire commodities or commodity contracts;

4. Issue senior securities, except insofar as the Fund may be deemed to
have issued a senior security in connection with any permitted
borrowing;

5. Participate on a joint, or a joint and several, basis in any
securities trading account; or

6. Invest in companies for the purpose of exercising control.

In addition, for purposes of complying with the securities regulations of
certain states, each Fund has adopted certain additional investment
restrictions, including the following, which may be changed by the Board of
Trustees without shareholder approval. None of the Funds may (i) purchase or
retain the securities of any issuer if the officers, directors or trustees of
the Trust or the Trust's adviser owning beneficially more than one-half of one
percent of the securities of any issuer together own beneficially more than 5%
of such securities, or (ii) purchase the securities of other open-end investment
companies. Neither the Balanced Fund nor the Equity Fund may invest more than
5% of its total assets in the securities of issuers which together with any
predecessors have a record of less than three years' continuous operation and
equity securities of issuers which are not readily marketable. Neither the
Growth and Income Fund nor the Ultra Short Term Income Fund may (i) invest more
than 5% of its total assets in the securities of issuers which together with any
predecessors have a record of less than three years' continuous operation, or
(ii) invest more than 15% of the total assets in the securities of issuers which
together with any predecessors have a record of less than three years'
continuous operation or securities of issuers which are restricted as to
disposition (including for this purpose Rule 144A securities).

MANAGEMENT

TRUSTEES AND OFFICERS

The Trustees and executive officers of the Trust, and their principal
occupations for the past five years, are listed below. Trustees deemed to be
"interested persons" of the Trust for purposes of the Investment Company Act of
1940 are indicated by an asterisk.

WESLEY G. MCCAIN*, Trustee, Chairman of the Board and President, is the
founder and has been Chairman of Towneley Capital Management, Inc. since 1971.
His address is 144 East 30th Street, New York, New York 10016. Mr. McCain is a
trustee of the Van Eck Funds and the Van Eck World Wide Insurance Trust, a
director of the Peregrine Fund and is a general partner of Pharaoh Partners,
L.P., which is the general partner of Libre Partners, L.P. He is also a Trustee
of Libre Group Trust, and Chairman of Millbrook Associates, Inc. and of Eclipse
Financial Services, Inc. Mr. McCain was Chairman of Finacor, Inc. from 1970 to
1992, and co-founder, Secretary and Treasurer of Millbrook Advisors, Inc. from
1982 to 1989. He is a Chartered Financial Analyst and a member of the
Association for Investment Management and Research. In addition

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<PAGE>

to managing investment portfolios, Mr. McCain's experience includes economic and
financial consulting to a diversified corporate clientele.

SIGRID A. HESS*, Trustee, Executive Vice President and Secretary, is a Vice
President of Towneley Capital Management, Inc., where she has been employed
since 1977. Her address is 144 East 30th Street, New York, New York 10016.

JOHN C. NOVOGROD, Trustee, is a partner of the law firm of Schiff, Hardin &
Waite since 1995. Prior to this, he was a partner of Hughes Hubbard & Reed from
1978 to 1986, a partner of Reboul, MacMurray, Hewitt, Maynard & Kristol from
1986 to 1991, and a partner of Novogrod & Kurlander from 1991 to 1995. His
address is 150 East 52nd Street, New York, New York 10022.

YUNG WONG, Trustee, was a Director of Shaw Investment Management (H.K.)
Limited (an asset management and direct investment firm) from 1994 to 1995, and
was a General Partner of Abacus Partners Limited Partnership (general partner of
a venture capital investment firm) from 1984 to 1994. His address is 29 Alden
Road, Greenwich, Connecticut 06831. Dr. Wong is also a director of California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal
Income Fund, Inc., Institutional Daily Income Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Inc., Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc., and a
Trustee of Reich & Tang Government Securities Trust.

JOHN C. VAN ECK, Trustee, is Chairman of the Board and President of Van Eck
Funds and Van Eck Worldwide Insurance Trust (mutual funds). He is Chairman of
Van Eck Associates Corporation, an investment adviser, and Van Eck Securities
Corporation, a broker dealer. He was Chairman of companies and investment
companies affiliated with the Van Eck Associates Corporation from 1955 to 1991,
and was director of The Henley Group, Inc. from 1986 to 1992. His address is 99
Park Avenue, New York, New York 10016.

ANTHONY W. POLIS, Vice President and Treasurer, is a Vice President of New
York Life Insurance Company and a Director, Vice President and Chief Financial
Officer of NYLIFE Securities Inc. and NYLIFE Distributors, Inc. He has also
been Vice President and Chief Financial Officer of The Mainstay Funds from 1988
to the present, Treasurer of New York Life Institutional Funds, Inc. since 1990,
and Treasurer of New York Life MFA Series Fund Inc. from 1993 to the present.
From 1983 through 1988, he was Vice President of Drexel Burnham Lambert
Incorporated, DBL Tax-Free Fund Inc., DBL Cash Fund Inc., The Drexel Burnham
Fund, Drexel Series Trust, Fenimore International Fund Inc., BT Investment Trust
and BT Tax Free Investment Trust and Assistant Treasurer, Drexel Bond-Debenture
Trading Fund.

SYLVIA MCCORMICK, Vice President, has been employed by Towneley Capital
Management, Inc. since September, 1973. She is President of Eclipse Financial
Services, Inc., the Trust's shareholder servicing agent. Her address is 21
Eastbrook Bend, Suite 119, Peachtree City, Georgia 30269.

A. THOMAS SMITH III, Assistant Secretary, has been Assistant General
Counsel of New York Life Insurance Company since 1994. Mr. Smith was Assistant
General Counsel of the Dreyfus Corporation from 1991 to 1993. From 1989 to
1991, he was Senior Associate with Willkie, Farr & Gallagher, and from 1986 to
1988, Staff Attorney in the Chief Counsel's Office of the U.S. Securities and
Exchange Commission, Division of Investment Management.

SARA L. BADLER, Assistant Secretary, has been Associate Counsel of New York
Life Insurance Company since 1994. Ms. Badler worked for Oppenheimer Management
Corporation from 1987 to 1993 as Vice President and Associate Counsel, and also
worked as a consulting attorney. From 1984 to 1987 she was Associate Counsel
for Damson Oil Corporation. From 1993 to 1994 she taught in New York City.

ANTOINETTE B. CIRILLO, Assistant Treasurer, has been Assistant Vice
President, Director and Senior Accountant of Mutual Fund Accounting Operations,
NYLIFE Securities Inc. from 1988 to the present, Assistant Treasurer of The
Mainstay Funds from 1992 to the present, Assistant Treasurer of New York Life
Institutional Funds, Inc. from 1992 to the present, Assistant Treasurer of New
York Life MFA Series Fund, Inc. from 1993 to the present, and Assistant Vice
President of NYLIFE Distributors Inc. from 1993 to the present. She held
various positions in New York Life Insurance Company from 1987 to 1988.

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<PAGE>

Effective beginning in 1995, Trustees of the Trust not affiliated with
Towneley Capital Management, Inc. or NYLIFE Distributors Inc. receive from the
Trust an annual retainer of $2,000 and a fee of $750 for each Board of Trustees
meeting attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Officers of the Trust and Trustees who are
affiliated with Towneley Capital Management, Inc. or NYLIFE Distributors Inc. do
not receive compensation from the Trust. The following table sets forth
information regarding compensation of Trustees by the Trust for the fiscal year
ended December 31, 1995.

COMPENSATION TABLE
(YEAR ENDED DECEMBER 31, 1995)

Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual Total Compensation
Name of Compensation As Part of Trust Benefits Upon From Trust
Trustee from the Trust Expenses Retirement Paid to Trustees*
- ------- -------------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Sigrid A. Hess $ 0 $0 $0 $ 0

Wesley G. McCain $ 0 $0 $0 $ 0

John C. Novogrod $5,000 $0 $0 $5,000

John C. van Eck $5,000 $0 $0 $5,000

Yung Wong $5,000 $0 $0 $5,000

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</TABLE>

* Eclipse Financial Asset Trust includes all of the funds (or portfolios)
advised by Towneley Capital Management, Inc., and is not a related person
of any other registered investment company.

MANAGER

Pursuant to a Management Contract dated January 7, 1987 with the Trust with
respect to the Balanced Fund and the Equity Fund (the "1987 Contract") and a
Management Contract dated December 27, 1994 with the Trust with respect to the
Ultra Short Term Income Fund and the Growth and Income Fund (the "1994 Contract"
and, together with the 1987 Contract, the "Management Contracts"), Towneley
Capital Management, Inc. (the "Manager") furnishes investment programs for the
Funds, makes the day-to-day investment decisions for each Fund, executes the
purchase and sale orders for the portfolio transactions of each Fund, and
generally manages each Fund's investments. Mr. McCain, chairman and trustee of
the Trust and chairman and director of the Manager, may be deemed a "controlling
person" of the Manager on the basis of his ownership of the Manager's stock.

The 1987 Contract was approved on December 8, 1986, and the 1994 Contract
was approved on December 20, 1994, in each case by the Board of Trustees,
including a majority of the trustees who are not interested persons (as defined
in the Investment Company Act of 1940) of the Trust or the Manager. The sole
initial shareholder of the Balanced Fund and the Equity Fund approved the 1987
Contract on January 7, 1987, and the sole initial shareholder of each of the
Growth and Income Fund and the Ultra Short Term Income Fund approved the 1994
Contract on December 27, 1994. Amendments to the 1987 Contract, to provide for
the management of the Balanced Fund and to eliminate 12b-1 expenses as an
allowable expense payable by either Fund, were approved on March 15, 1989 and
March 16, 1990, respectively, by the Trust's Board of Trustees, including a
majority of the Trustees who are not interested persons (as defined in such Act)
of the Trust or the Manager. The 1987 Contract, as amended, was approved by the
public shareholders of each of the Balanced Fund and the Equity Fund at a
meeting held on June 13, 1990. The 1987 Contract and the 1994 Contract (after
its initial term, which expires on December 31, 1996) shall continue in effect
as to each Fund provided that continuance is specifically approved annually by
the Trust's Board of Trustees or by vote of such Fund's shareholders, and in
either case by a majority of the

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<PAGE>

trustees who are not parties to the relevant Management Contract or interested
persons of any such party, by vote cast in person at a meeting called for the
purpose of voting on the relevant Management Contract.

Under the Management Contracts, the Funds pay management fees to the
Manager at the following rates, which are expressed as a percentage of the
average daily net assets of each Fund:

Ultra Short Term Income Fund 0.40%
Balanced Fund 0.80%
Growth and Income Fund 0.90%
Equity Fund 1.00%

For the fiscal years ended December 31, 1994 and December 31, 1995, the
Manager voluntarily waived fees of $27 and $10,021 (in each case, its entire
fee) for the Ultra Short Term Income Fund.

For the fiscal years ended December 31, 1993, December 31, 1994 and
December 31, 1995, the fees payable by the Balanced Fund under the 1987 Contract
were $146,196, $211,682 and $414,448, respectively. During the years ended
December 31, 1993, December 31, 1994 and December 31, 1995, the Manager
voluntarily waived fees for the Balanced Fund totalling $87,653 and $94,973 and
$160,241, respectively.

For the fiscal years ended December 31, 1994 and December 31, 1995, the
Manager voluntarily waived fees of $31 and $41,173 (in each case, its entire
fee) for the Growth and Income Fund.

For the fiscal years ended December 31, 1993, December 31, 1994, and
December 31, 1995, the fees paid by the Equity Fund under the Management
Contract were $1,775,532, $1,964,682 and $1,860,540.

As of the date of this Statement of Additional Information, the Manager is
continuing to waive all of its fee for the Ultra Short Term Income Fund and the
Growth and Income Fund, and a portion of its fee for the Balanced Fund, and to
reimburse all of the expenses of the Ultra Short Term Income Fund. Also as of
the date of this Statement of Additional Information, the Manager is maintaining
the expense ratio of the Balanced Fund at a level not to exceed 0.80% and the
expense ratio of the Growth and Income Fund at a level not to exceed 0.90%,
including certain indirect expenses.

Under the Management Contracts, the Manager is required to pay the fees of
the Trust's administrator (see "Administrator" below).

The Management Contracts can be terminated without penalty by the Trust on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Trustees,
or by the Manager on sixty days' written notice, and will automatically
terminate in the event of its assignment. The Management Contract provides that
in the absence of willful misfeasance, bad faith or gross negligence on the part
of the Manager, or of reckless disregard of its obligations thereunder, the
Manager shall not be liable for any action or failure to act in accordance with
its duties thereunder.

If the Manager ceases to act as the Trust's investment adviser, or, in any
event, if the Manager requests in writing, the Trust will take action to change
its name to a name not including the word "Eclipse."

ADMINISTRATOR

Pursuant to its administration contract with the Trust, NYLIFE Distributors
Inc., a registered broker-dealer unaffiliated with the Manager (the
"Administrator"), administers all aspects of the Trust's operations except those
which are the responsibility of the Manager. The Administrator is a wholly
owned subsidiary of New York Life Insurance Company.

Because of the services rendered to the Trust by the Manager and the
Administrator, the Trust itself requires no employees other than its officers,
none of whom receive compensation from the Trust and all of whom are employed by
the Manager or the Administrator. In connection with its responsibilities as
Administrator, the Administrator performs such supervisory, administrative, and
clerical functions as are necessary in order to provide effective administration
of the Trust, including maintaining certain books and records; authorizing the
payment of Fund expenses and maintaining control over daily cash balances;
monitoring the availability of funds for investment; overseeing and confirming
portfolio holdings with the

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<PAGE>

Custodian and the Manager; coordinating and controlling on a daily basis the
administrative and professional services rendered to the Trust by others,
including the Manager, the Custodian, the Trust's Transfer and Dividend
Disbursing Agent, and the Trust's Shareholder Servicing Agent, as well as
accounting, auditing and other services performed for the Trust; calculating the
net asset value of the Trust's shares; providing the Trust with adequate
conference facilities for board meetings; overseeing the preparation and filing
with the Securities and Exchange Commission of the Trust's registration
statement, prospectus and statement of additional information; and preparing and
filing all required State Blue Sky filings.

For providing such services, NYLIFE Distributors Inc. receives a fee from
the Manager at the annual rate of 0.15% of the average combined daily net assets
of the Balanced Fund and the Equity Fund up to $50 million, plus 0.12% of such
assets in excess of $50 million but not in excess of $100 million, plus 0.05% of
such assets in excess of $100 million but not in excess of $750 million and
0.02% of such assets in excess of $750 million. For each of the Growth and
Income Fund and the Ultra Short Term Income Fund, NYLIFE Distributors Inc.
receives from the Manager a fee equal to the greater of $50,000 per Fund or
0.10% of the Fund's average daily net assets up to $100 million. Average daily
net assets of each such Fund in excess of $100 million will be combined with
those of the Balanced Fund and the Equity Fund for purposes of the fee paid to
NYLIFE Distributors Inc. and such combined assets will be subject to the fee
schedule described above for the Balanced Fund and the Equity Fund.

The administration contract can be terminated by either party on sixty
days' written notice to the other and will terminate automatically upon the
termination of the Management Contract. The administration contract provides
that in the absence of willful misfeasance, bad faith or gross negligence on the
part of the Administrator, or of reckless disregard of its obligations
thereunder, the Administrator shall not be liable for any action or failure to
act in accordance with its duties.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Manager is responsible for decisions to buy and sell securities for the
Trust, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions. Purchases and sales of securities on a
securities exchange are effected through brokers who charge a commission for
their services. Brokerage commissions on United States securities exchanges are
subject to negotiation between the Manager and the broker.

In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.

In placing orders for portfolio securities of each Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers or dealers who
effect or are parties to portfolio transactions of the Funds or the Manager's
other clients. Such research and investment services are those which brokerage
houses customarily provide to institutional investors and include statistical
and economic data and research reports on particular companies and industries.
Such services are used by the Manager in connection with all of its investment
activities, and some of such services obtained in connection with the execution
of transactions for a Fund may be used in managing other investment accounts.
Conversely, brokers furnishing such services may be selected for the execution
of transactions of such other accounts, and the services furnished by such
brokers may be used by the Manager in providing investment management for a
Fund. Commission rates in the United States are established pursuant to
negotiations with the broker based on the quality and quantity of execution
services provided by the broker in the light of generally prevailing rates. The
Manager's policy is to pay higher commissions to brokers for particular
transactions than might be charged if a different broker had been selected on
occasions when, in the Manager's opinion, this policy furthers the objective of
obtaining the most favorable price and execution. In addition, the Manager is
authorized to pay higher commissions on brokerage transactions for a Fund to
brokers in order to secure research and investment services described above,
subject to review by the Trust's Board of Trustees from time to time as to the
extent and continuation of this practice. Subject to each Fund's objective of
obtaining the most favorable price and efficient execution, the Manager may
place portfolio transactions with brokers or dealers which have been
instrumental in the sale of a Fund's shares. The allocation of orders among
brokers and the commission rates paid are reviewed periodically by the Trust's
Board of Trustees.

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<PAGE>

The Trust did not pay any brokerage commissions with respect to portfolio
transactions of the Ultra Short Term Income Fund for its fiscal period ended
December 31, 1994 (its first fiscal period) or for its fiscal year ended
December 31, 1995.

For the fiscal year ended December 31, 1993, the Trust paid a total of
$36,405 in brokerage commissions with respect to portfolio transactions of the
Balanced Fund aggregating $20,946,387. For the fiscal year ended December 31,
1994, the Trust paid a total of $59,360 in brokerage commissions with respect to
portfolio transactions of the Balanced Fund aggregating $38,655,269. For the
fiscal year ended December 31, 1995, the Trust paid a total of $96,194 in
brokerage commissions with respect to portfolio transactions of the Balanced
Fund aggregating $61,899,739. Of such amount, $65,598 in brokerage commissions
with respect to portfolio transactions aggregating $37,889,095 was placed with
brokers or dealers who provide research and investment services.

The Trust did not pay any brokerage commissions with respect to portfolio
transactions of the Growth and Income Fund for its fiscal period ended December
31, 1994 (its first fiscal period). For the fiscal year ended December 31,
1995, the Trust paid a total of $14,791 in brokerage commissions with respect to
portfolio transactions of the Growth and Income Fund aggregating $11,335,219.
Of such amount, $7,607 in brokerage commissions with respect to portfolio
transactions aggregating $4,885,808 was placed with brokers or dealers who
provide research and investment services.

For the fiscal year ended December 31, 1993, the Trust paid a total of
$555,913 in brokerage commissions with respect to portfolio transactions of the
Equity Fund aggregating $270,494,988. For the fiscal year ended December 31,
1994, the Trust paid a total of $570,493 in brokerage commissions with respect
to portfolio transactions of the Equity Fund aggregating $283,510,543. For the
fiscal year ended December 31, 1995, the Trust paid a total of $545,684 in
brokerage commissions with respect to portfolio transactions of the Equity Fund
aggregating $251,277,874. Of such amount, $362,090 in brokerage commissions
with respect to portfolio transactions aggregating $161,567,976 was placed with
brokers or dealers who provide research and investment services.

REDEMPTION OF SHARES

Payment of the redemption price for shares redeemed may be made either in
cash or in portfolio securities (selected in the discretion of the Board of
Trustees of the Trust and taken at their value used in determining the net asset
value per share of the particular Fund as described under "Net Asset Value"), or
partly in cash and partly in portfolio securities. However, payments will be
made wholly in cash unless the Board of Trustees believes that economic
conditions exist which would make such a practice detrimental to the best
interests of the Trust. If payment for shares redeemed is made wholly or partly
in portfolio securities, brokerage costs may be incurred by the investor in
converting the securities to cash. The Trust will not distribute in kind
portfolio securities that are not readily marketable. The Trust has filed a
formal election with the Securities and Exchange Commission pursuant to which
the Trust will only effect a redemption in portfolio securities where the
particular shareholder of record is redeeming more than $250,000 or 1% of a
Fund's total net assets, whichever is less, during any 90-day period. In the
opinion of the Trust's management, however, the amount of a redemption request
would have to be significantly greater than $250,000 or 1% of a Fund's total net
assets before a redemption wholly or partly in portfolio securities was made.

NET ASSET VALUE

For purposes of determining the net asset value per share of each Fund,
readily marketable portfolio securities listed on the New York Stock Exchange
are valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the New York Stock Exchange on the business
day as of which such value is being determined. If there has been no sale on
such day, the securities are valued at the mean of the closing bid and asked
prices on such day. If no bid or asked prices are quoted on such day, then the
security is valued by such method as the Board of Trustees shall determine in
good faith to reflect its fair market value. Readily marketable securities not
listed on the New York Stock Exchange but listed on other securities exchanges
or admitted to trading on the National Association of Securities Dealers
Automated Quotations, Inc. ("NASDAQ") National List are valued in like manner.
Portfolio securities traded on more than one securities exchange are valued at
the last sale price on the business day as of which such value is being
determined as reflected on the tape at the close of the exchange representing
the principal market for such securities.

Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the Manager to
be over-the-counter, but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not

- 10 -

<PAGE>

quoted by NASDAQ, the National Quotation Bureau or such other comparable sources
as the Board of Trustees deems appropriate to reflect their fair market value.

Readily marketable fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed by the Trust
to reflect the fair market value of such securities. The prices provided by a
pricing service take into account institutional size trading in similar groups
of securities and any developments related to specific securities.

United States Government obligations and other debt instruments having
sixty days or less remaining until maturity are stated at amortized cost. All
other investment assets, including restricted and not readily marketable
securities, are valued in such manner as the Board of Trustees in good faith
deems appropriate to reflect their fair market value.

For purposes of determining a Fund's net asset value per share, all assets
and liabilities initially expressed in foreign currencies will be converted into
United States dollars at the mean of the bid and asked prices of such currencies
against the United States dollar last quoted by a major bank which is a regular
participant in the institutional foreign exchange markets or on the basis of a
pricing service which takes into account the quotes provided by a number of such
major banks.

DESCRIPTION OF SHARES

On April 15, 1996, there were 2,324,811 shares of beneficial interest of
the Ultra Short Term Income Fund outstanding; 4,121,540 shares of beneficial
interest of the Balanced Fund outstanding; 630,252 shares of beneficial
interest of the Growth and Income Fund outstanding; and 12,066,857 shares of
beneficial interest of the Equity Fund outstanding. On March 31, 1996, the
officers and trustees of the Trust as a group beneficially owned, directly or
indirectly, including the power to vote or to dispose of, less than 1% of the
outstanding shares of beneficial interest of each of the Balanced Fund and
the Equity Fund, less than 45% of the outstanding shares of beneficial
interest in the Ultra Short Term Income Fund and less than 12% of the
outstanding shares of beneficial interest in the Growth and Income Fund.
Set forth below is certain information as to persons who owned 5% or more of
the outstanding shares of the Ultra Short Term Income Fund, the Balanced Fund,
the Growth and Income Fund and the Equity Fund as of April 15, 1996:

ULTRA SHORT TERM INCOME FUND

Name and Address % of Shares Nature of Ownership
- ---------------- ----------- --------------------
<S> <C> <C>
New York Foundling Hospital 21.4 Beneficial
590 Avenue of the Americas
New York, New York 10011

W.G. McCain, Trustee 18.9 Beneficial
FBO Manastee River Rev. Tr.
144 E. 30th Street
New York, New York 10016

Towneley Capital Mgmt., Inc. 18.2 Beneficial
Profit Sharing Plan
144 E. 30th Street
New York, New York 10016

Towneley Capital Mgmt., Inc. 7.3 Beneficial
144 E. 30th Street
New York, New York 10016
</TABLE>

BALANCED FUND

Name and Address % of Shares Nature of Ownership
- ---------------- ----------- --------------------
<S> <C> <C>

Mac & Co. 58.6 Beneficial
Mellon Bank NA Mutual Funds
P.O. Box 3198
Pittsburgh, Pennsylvania 15230-0320

Vernat Company 6.0 Beneficial
Trust Company
P.O. Box 800
Brattleboro, Vermont 05302

</TABLE>

- 11 -

<PAGE>

GROWTH AND INCOME FUND

Name and Address % of Shares Nature of Ownership
- ---------------- ----------- --------------------
<S> <C> <C>

Robert J. Bodine Living Trust 16.3 Beneficial
Mary Jane Bodine Living Trust
Tennants in Common
c/o Towneley Capital Management
144 E. 30th Street
New York, New York 10016

Bank of Butterfield 11.6 Beneficial
c/o Harris Trust & Savings Bank
111 West Monroe Street
Chicago, Illinois 60603

Vernat Company 8.6 Beneficial
Trust Department
P.O. Box 800
Brattleboro, Vermont 05302

Towneley Capital Mgmt., Inc. 6.3 Beneficial
Profit Sharing Plan
144 E. 30th Street
New York, New York 10016

</TABLE>

EQUITY FUND

Name and Address % of Shares Nature of Ownership
- ---------------- ----------- --------------------
<S> <C> <C>

Allied Signal Savings Plan #7928 35.1 Beneficial
c/o State Street Bank & Trust Co.
Master Trust Division
P.O. Box 1992
Boston, Massachusetts 02105

Delta Airlines, Inc., TCM 18.5 Beneficial
c/o Harris Trust & Savings Bank
111 West Monroe Street
Chicago, Illinois 60603

Coats & Clark, TCM 5.7 Beneficial
First Union National Bank
1200 Two First Union Center - 1151
Charlotte, North Carolina 28288

</TABLE>

TAXATION

Each Fund intends to qualify annually and to elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code").

To qualify as a regulated investment company, each Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of certain assets (namely, (i) stock or securities,
(ii) options, futures, and forward contracts (other than those on foreign
currencies), and (iii) foreign currencies (including options, futures, and
forward contracts on such currencies) not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities)) held less than 3 months; (c) diversify
its holdings so that, at the end of each quarter of the taxable year, (i) at
least 50% of the market value of the Fund's assets is represented by cash and
cash items (including receivables), U.S. Government securities, the securities
of other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of the Fund's total assets and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its total assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies); and (d) distribute at least 90% of its
investment company taxable income (which includes, among other items, dividends,
interest and net short-term capital gains in excess of net long-term capital
losses) each taxable year.

As a regulated investment company, each Fund generally will not be subject
to U.S. federal income tax on its investment company taxable income and net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to shareholders. Each Fund intends
to distribute to its shareholders, at least annually, substantially all of its
investment company taxable income and net capital gains. Amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise tax. To prevent imposition
of the excise tax, each Fund must distribute during each calendar year an amount
equal to the sum of (1) at least 98% of its ordinary income (not taking into
account any capital gains or losses) for the calendar year, (2) at least 98% of
its capital gains in excess of its capital losses (adjusted for certain ordinary
losses) for the one-year period ending on October 31 of the calendar year, and
(3) any ordinary income and capital gains for previous years that was not
distributed during those years. A distribution will be treated as paid on
December 31 of the current calendar year if it is declared by a Fund in October,
November or December with a record date in such a month and paid by the Fund
during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To prevent application of the excise tax, each Fund intends to make its
distributions in accordance with the calendar year distribution requirement.

- 12 -

<PAGE>

DISTRIBUTIONS

Dividends paid out of a Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. Because a portion of the
income of each of the Balanced Fund, the Growth and Income Fund and the Equity
Fund may consist of dividends paid by U.S. corporations, a portion of the
dividends paid by each such Fund is expected to be eligible for the corporate
dividends-received deduction. Distributions of net capital gains, if any,
designated as capital gain dividends are taxable as long-term capital gains,
regardless of how long the shareholder has held the Fund's shares, and are not
eligible for the dividends-received deduction. Shareholders receiving
distributions in the form of additional shares, rather than cash, generally will
have a cost basis in each such share equal to the net asset value of a share of
the relevant Fund on the reinvestment date. Shareholders will be notified
annually as to the U.S. federal tax status of distributions, and shareholders
receiving distributions in the form of additional shares will receive a report
as to the net asset value of those shares.

CURRENCY FLUCTUATIONS - "SECTION 988" GAINS OR LOSSES

Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security and the date of
disposition also are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses, may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to its shareholders as ordinary income.

SALE OF SHARES

Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.

INVESTMENTS IN REAL ESTATE MORTGAGE INVESTMENT CONDUITS

The Ultra Short Term Income Fund and the Balanced Fund may invest in
residual interests in real estate mortgage investment conduits ("REMICs").
Under Treasury regulations that have not yet been issued, but may apply
retroactively, a portion of the Funds' income that is attributable to a residual
interest in a REMIC (referred to in the Code as an "excess inclusion") will be
subject to federal income tax in all events. These regulations are also
expected to provide that excess inclusion income of a regulated investment
company, such as the Funds, will be allocated to shareholders of the regulated
investment company in proportion to the dividends received by such shareholders,
with the same consequences as if the shareholders held the related REMIC
residual interest directly. In general, excess inclusion income allocated to
shareholders (i) cannot be offset by net operating losses (subject to a limited
exception for certain thrift institutions), (ii) will constitute unrelated
business taxable income to entities (including a qualified pension plan, an
individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt
entity) subject to tax on unrelated business income, thereby potentially
requiring such an entity that is allocated excess inclusion income, and
otherwise might not be required to file a tax return, to file a tax return and
pay tax on such income, and (iii) in the case of a foreign shareholder, will not
qualify for any reduction in U.S. federal withholding tax. In addition, if at
any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. It is anticipated that only a small portion, if any,
of the assets of the Ultra Short Term Income Fund and the Balanced Fund will
consist of residual interests in REMICs.

- 13 -

<PAGE>

ZERO COUPON SECURITIES

Investments by the Ultra Short Term Income Fund and the Balanced Fund in
zero coupon securities will result in income to the Funds equal to a portion of
the excess of the face value of the securities over their issue price (the
"original issue discount") each year that the securities are held, even though
the Funds receive no cash interest payments. This income is included in
determining the amount of income which the Funds must distribute to maintain
their status as regulated investment companies and to avoid the payment of
federal income tax and the 4% excise tax.

MARKET DISCOUNT BONDS

Gain derived by the Ultra Short Term Income Fund or by the Balanced Fund
from the disposition of any market discount bonds (I.E., bonds purchased other
than at original issue, where the face value of the bonds exceeds their purchase
price) held by the Funds will be taxed as ordinary income to the extent of the
accrued market discount on the bonds, unless the Funds elect to include the
market discount in income as it accrues.

PASSIVE FOREIGN INVESTMENT COMPANIES

If a Fund invests in stock of certain foreign investment companies, the
Fund may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income tax rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.

A Fund may be able to make an election, in lieu of being taxable in the
manner described above, to include annually in income its pro rata share of the
ordinary earnings and net capital gain of the foreign investment company,
regardless of whether it actually received any distributions from the foreign
company. These amounts would be included in the Fund's investment company
taxable income and net capital gain which, to the extent distributed by the Fund
as ordinary or capital gain dividends, as the case may be, would not be taxable
to the Fund. In order to make this election, the Fund would be required to
obtain certain annual information from the foreign investment companies in which
it invests, which in many cases may be difficult to obtain. Alternatively, the
Fund may be eligible to elect to mark to market its foreign investment company
stock, resulting in the stock being treated as sold at fair market value on the
last business day of each taxable year. Any resulting gain would be reported as
ordinary income, and any resulting loss would not be recognized. If this
election were made, the special rules described above with respect to excess
distributions and dispositions would still apply.

FOREIGN WITHHOLDING TAXES

Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.

BACKUP WITHHOLDING

Each Fund may be required to withhold U.S. federal income tax at the rate
of 31% of all taxable distributions payable to shareholders who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. federal income tax liability.

- 14 -

<PAGE>

FOREIGN SHAREHOLDERS

The tax consequences to a foreign shareholder of an investment in a Fund
may be different from those described herein. Foreign shareholders are advised
to consult their own tax advisers as to the particular tax consequences to them
of an investment in a Fund.

OTHER TAXATION

Fund shareholders may be subject to state, local and foreign taxes on their
Fund distributions. In many states, Fund distributions which are derived from
interest on certain U.S. Government obligations may be exempt from taxation.
Shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Fund.

PERFORMANCE

From time to time, the Trust may quote a Fund's total return or yield in
advertisements or in reports and other communications to shareholders. A Fund's
performance will vary from time to time depending upon market conditions, the
composition of its portfolio and its operating expenses. Consequently, any
given performance quotation should not be considered representative of a Fund's
performance for any specified period in the future. In addition, because
performance will fluctuate, it may not provide a basis for comparing an
investment in a Fund with certain bank deposits or other investments that pay a
fixed yield for a stated period of time. Investors comparing a Fund's
performance with that of other mutual funds should give consideration to the
quality and maturity of the respective investment companies' portfolio
securities.

YIELD

A Fund's 30-day yield figure described in the Prospectus is calculated
according to a formula prescribed by the SEC. The formula can be expressed as
follows:
6
YIELD = 2[(a-b + 1) - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.

For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations purchased by the Ultra Short Term Income Fund or by
the Balanced Fund at a discount or premium, the formula generally calls for
amortization of the discount or premium; the amortization schedule will be
adjusted monthly to reflect changes in the market values of the debt
obligations.

AVERAGE ANNUAL TOTAL RETURN

The Funds' "average annual total return" figures described below and in the
Prospectus are computed according to a formula prescribed by the SEC. The
formula can be expressed as follows:

n
P(1 + T) = ERV

Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years

ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a 1-, 5-, or 10-year period at the
end of a 1-, 5-, or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and
distributions.

- 15 -

<PAGE>

AGGREGATE TOTAL RETURNS

The Funds' aggregate total return figures described in the Prospectus
represent the cumulative change in the value of an investment in the Fund for
the specified period and are computed by the following formula.

AGGREGATE TOTAL RETURN = ERV - P
-------
P

Where: P = a hypothetical initial payment of $1,000.

ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of the 1-, 5- or 10-year period at the
end of the 1-, 5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and
distributions.

Comparative performance information may be used from time to time in advertising
the Funds' shares, including data from Lipper Analytical Services, Inc., the
Standard & Poor's Index of 500 Stocks, the Dow Jones Industrial Average and
other industry publications.

The Trust may also distribute sales literature or publish advertisements
containing "principal only" performance information for a Fund that relates to
various time periods (on both an average annual and cumulative basis).
"Principal only" performance information is not total return but a measure of
performance, expressed as a percentage, that excludes from its computation
income dividends and capital gains distributions paid on the Fund's shares.
Such quotations in effect reflect only changes in the value over time of a
single share of the Fund without taking into account the compounding effect of
reinvested dividends or distributions. "Principal only" quotations may be a
useful comparison with changes in certain stock indexes (which are unmanaged)
that do not reflect reinvestment of dividends on the stocks comprising the
index. Any sales literature or advertisements containing "principal only"
performance information will be accompanied by standard performance information
relating to the same time periods.

The following are average annual total return and principal only
performance for the indicated time periods for each of the Ultra Short Term
Income Fund, the Balanced Fund, the Growth and Income Fund and the Equity Fund.

ULTRA SHORT TERM INCOME FUND
------------------------------------------
Inception
(December 27, 1994)
Year Ended to
December 31, 1995 December 31, 1995
----------------- -------------------
<S> <C> <C>
Average Annual
Compounded Total Return 7.83% 7.74%

Principal Only
Performance 2.00% 2.00%

</TABLE>

BALANCED FUND
---------------------------------------------------------
Twelve Months Five Years Inception
Ended Ended (May 1, 1989) to
December 31, 1995 December 31, 1995 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Average Annual
Compounded Total Return 22.99% 14.29% 11.50%

Principal Only
Performance 15.93% 6.99% 4.86%

</TABLE>

- 16 -

<PAGE>

GROWTH AND INCOME FUND
------------------------------------------
Inception
(December 27, 1994)
Year Ended to
December 31, 1995 December 31, 1995
----------------- -------------------
<S> <C> <C>
Average Annual
Compounded Total Return 26.82% 26.49%

Principal Only
Performance 23.10% 23.10%

</TABLE>

EQUITY FUND
---------------------------------------------------------
Twelve Months Five Years Inception
Ended Ended (May 1, 1989) to
December 31, 1995 December 31, 1995 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Average Annual
Compounded Total Return 19.69% 15.88% 9.78%

Principal Only
Performance 14.72% 8.38% 3.45%

</TABLE>

A Fund's investment performance is not fixed and will fluctuate in response
to prevailing market conditions or as a function of the type and quality of the
securities in the Fund's portfolio and the Fund's expenses. Performance
information is useful in reviewing the Fund's results but such information may
not provide a basis for comparison with bank deposits or other investments which
pay a fixed return for a stated period of time. An investor's principal
invested in a Fund is not fixed and will fluctuate in response to prevailing
market conditions.

COUNSEL AND AUDITORS

Legal matters in connection with the issuance of shares of the Trust are
passed upon by Dechert Price & Rhoads, 477 Madison Avenue, New York, New York
10022.

McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017,
independent certified public accountants, have been selected as auditors for the
Trust.

GENERAL INFORMATION

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in
each agreement, obligation, or instrument the Trust or its Trustees enter into
or sign.

In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required to use its property to protect or
compensate the shareholder. On request, the Trust will defend any claim made
and pay any judgment against a shareholder for any act or obligation of the
Trust. Therefore, financial loss resulting from liability as a shareholder will
occur only if the Trust itself cannot meet its obligations to indemnify
shareholders and pay judgments against them.

- 17 -

<PAGE>
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
Chairman's Letter................................................................................ 2

Review of Eclipse Funds

Ultra Short Term Income Fund................................................................. 4

Balanced Fund................................................................................ 6

Growth and Income Fund....................................................................... 8

Equity Fund.................................................................................. 10

Statements of Net Assets

Ultra Short Term Income Fund................................................................. 12

Balanced Fund................................................................................ 16

Growth and Income Fund....................................................................... 25

Equity Fund.................................................................................. 28

Statements of Operations......................................................................... 34

Statements of Changes in Net Assets.............................................................. 35

Notes to Financial Statements.................................................................... 37

Selected Financial Information

Ultra Short Term Income Fund................................................................. 40

Balanced Fund................................................................................ 41

Growth and Income Fund....................................................................... 42

Equity Fund.................................................................................. 43

Independent Auditor's Report..................................................................... 44

Trustees and Officers............................................................................ 45

Towneley Capital Management, Inc., Investment Manager............................................ 46

Glossary......................................................................................... 47
</TABLE>

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

1
<PAGE>
CHAIRMAN'S LETTER

Dear Fellow Shareholder:

Last year was a good one for the American stock markets. In fact, as measured by
the Standard and Poor's 500 Index, 1995 ranked in the top 10% for calendar year
equity market returns over the past seventy years.

The market was driven by a number of factors:

1. Relatively low and declining interest rates prevalent in 1995 were an
inducement to equity and bond investing.

2. The lower interest rates benefited financial companies such as commercial
banks, thrifts, and savings and loans, by increasing loan volume and
lowering their financing costs, leading to higher profit margins.

3. Corporate restructurings have allowed many companies to lower their cost of
operations, which has helped earnings growth. Although companies have
restructured in various ways, the most significant trend in restructuring
is the use of technology to enhance production. This has led to a large
number of employees taking early retirement or being laid off.

4. The increased use of technology has strengthened revenue and earnings
growth of technology companies. This growth was a continuation of the 1994
trend and was recognized by the equity markets. Technology stocks soared
during the year.

5. The technology sector in most equity indexes was one of the largest factors
in their return, and became a larger proportional component of various
stock indexes.

We do not know how long these trends will continue, or whether the support of
these sectors in the equity market is in line with the true relative economic
growth of the companies. We also do not know the potential impact on the equity
market of the layoffs, early retirements, slower consumer spending and high
levels of consumer debt. But history suggests that a sluggish economic
environment and slower corporate earnings growth lie ahead.

MARKET CYCLES AND INVESTMENT STYLES

Just as the stock market has cycles, so do investment styles. Investment styles
are often characterized as either "growth" or "value." "Growth" investing is
generally defined as investing in equities with high price to book value and/or
high price to earnings ratios, while "value" investing is generally defined as
investing in equities with low price to book value and/or low price to earnings
ratios. The strength in the market this year has largely been "growth" stock
driven, with a particular focus on technology. On the value side, the finance
sector benefited. Timing the market or sectors is a risky strategy and one in
which we do not participate.

Our approach has been and remains value-driven, using a "bottom-up" style of
stock selection. That means that we choose companies based on an examination of
their assets, revenues and earnings relative to current market prices. We add
stocks to our portfolios that we calculate are undervalued.

Over time, we continue to monitor our portfolios carefully, and when a stock
becomes overvalued we rebalance the portfolio, replacing the overvalued stocks
with undervalued ones. This rebalancing may result in missing part of the short
term price momentum; however, we believe it is in the best interests of our
shareholders to maintain the undervalued characteristics of the portfolios.

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

2
<PAGE>
Our returns, based on our strategy of selecting value stocks, were very good
this year. However, because the 1995 market rewarded technology and other high
growth stocks that do not fit with our value-oriented investment philosophy, our
stock and balanced funds results trailed several market benchmarks.

We believe that our consistent, value-centered approach will, over time,
continue to provide solid returns at lower risk than other, more aggressive,
investment strategies. As you can see from the enclosed statistics, the risk
inherent in our three stock funds, as measured by standard deviation, is
substantially lower than that of the market and mutual fund indices against
which they are measured.

THE FUTURE

As many of you know, the Eclipse fund "family" has now grown to four funds.
We're pleased with the reception of our two latest additions, the Ultra Short
Term Income Fund and the Growth and Income Fund.

- The Eclipse Ultra Short Term Income Fund had excellent absolute and relative
returns this year. We expect good growth in both assets and shareholder
numbers when investors start to seek safety, liquidity, and returns from
fixed income.

- We saw continued and growing interest in the Eclipse Balanced Fund for
401(k) and IRA programs, where individuals wish to have us consistently
rebalance to a 60% value equity and 40% short term bond portfolio. Such
asset allocation funds are growing in popularity, as increasing numbers of
Americans in their middle years focus on investment for a secure retirement,
but do not wish to make the asset allocation decision themselves.

- The Growth and Income Fund, new last year, is an exciting offering for us.
It is a 100% equity portfolio using the same strategies as the equity
portion of the Balanced Fund. We expect interest in this fund to continue to
grow, as investors increasingly appreciate the benefits inherent in "value"
investing, but desire to create their own "balance." They may choose to do
this with municipal or other fixed income funds.

- Lastly, the Eclipse Equity Fund's value style has been out of favor for some
time. Most small company mutual funds focus on growth and price momentum;
such funds have produced superior results in recent years when compared to
the Equity Fund, which focuses on assets and revenues relative to market
price. We are unable to predict style shifts, but when the markets move away
from excessive valuation and speculation, we believe this fund will show
better relative results.

We thank you for your continued confidence in the Eclipse Funds and wish you a
successful and financially rewarding 1996.

Sincerely,

/s/ Wesley G. McCain
Wesley G. McCain
Chairman

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

3
<PAGE>
REVIEW OF ECLIPSE ULTRA SHORT TERM
INCOME FUND

The Eclipse Ultra Short Term Income Fund is managed with the three objectives of
seeking a high level of current income, preserving capital, and maintaining a
relatively stable net asset value.

To meet these objectives, the Ultra Short Term Income Fund invests in a
portfolio of short term, high quality fixed income securities.

Completing its first full year of operation, the Eclipse Ultra Short Term Income
Fund's total return was 7.8%, outperforming the Lipper Ultra Short Obligation
Fund Average, which had a return of 6.6%. The fund ranked third among the
eighteen funds averaged for total return, and ranked sixth on a yield basis.

At year end, the Fund's duration was 0.89 years, and its dollar weighted average
maturity was 362 days.
- ----------------------------------------------
LARGEST INDUSTRY HOLDINGS -- 12/31/95 % OF PORTFOLIO
- ------------------------------------------------------------

<TABLE>
<S> <C>
U.S. Federal Agency.......................... 25.4%
Finance...................................... 12.6
U.S. Treasury................................ 12.0
Consumer Non-Durables........................ 10.4
</TABLE>

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

- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIOD ENDING DECEMBER 31, 1995

<TABLE>
<CAPTION>
TOTAL RETURN(1)
1 YEAR RISK(2)
<S> <C> <C>
- -------------------------------------------------------------------
Eclipse Ultra Short Term Income Fund (3,4)........ 7.8 % 1.0 %
Lipper Ultra Short Obligation Funds Average (5)... 6.6 0.2
3 Month Treasury Bill............................. 6.0 0.1
1 Year Treasury Bill.............................. 7.9 0.6
</TABLE>

- ------------
1) With income reinvested.

2) Annualized standard deviation of monthly return.

3) The Fund's inception was 12/27/94; its annualized total return through
12/31/95 was 7.7%.

4) Net of management fee waived and after expense reimbursement by manager. For
the year ended December 31, 1995 this amounted to 1.67% of annualized average
net assets.

5) After all expenses.
- --------------------------------------------------------------------------------

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

4
<PAGE>
GROWTH OF $10,000 SINCE INCEPTION
ECLIPSE ULTRA SHORT TERM INCOME FUND WITH INCOME REINVESTED

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ECLIPSE ULTRA SHORT TERM INCOME 1 YR. T-BILL
<S> <C> <C>
Dec-94 10,000 10,000
Jan-95 10,100 10,100
Feb-95 10,151 10,189
Mar-95 10,200 10,248
Apr-95 10,301 10,307
May-95 10,402 10,399
Jun-95 10,453 10,458
Jul-95 10,453 10,510
Aug-95 10,504 10,560
Sep-95 10,556 10,603
Oct-95 10,660 10,667
Nov-95 10,713 10,730
Dec-95 10,784 10,790
</TABLE>

All returns represent past performance, which are not predictive of future
results. Investment returns and share price will vary and shares, when redeemed,
may be worth more or less than their cost.

- --------------------------------------------------------------------------------
PER SHARE DIVIDEND INFORMATION -- 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Income dividends............................................................................ $ 0.1139
Short-term capital gain dividends........................................................... --
Long-term capital gain dividends............................................................ --
---------
Total 1995 dividends........................................................................ $ 0.1139
---------
---------
</TABLE>

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

5
<PAGE>
REVIEW OF ECLIPSE BALANCED FUND

The Eclipse Balanced Fund was up 23% in 1995. Since inception it has had about
the same return as the Lipper Balanced Fund Index with less risk, as measured by
annualized standard monthly deviation.

For the three and five year periods ending December, 1995, we outperformed the
Lipper Balanced Fund Index by a wide margin.

As with Eclipse Equity and Eclipse Growth and Income Funds, the equity portion
of the Balanced Fund was overweighted in some underperforming sectors and
underweighted in sectors that outperformed. (See discussion under those funds.)

Our continuing commitment to invest in shorter duration bonds also contributed
to the shortfall. This strategy protects investors in a stock and bond markets
downturn, but investors do not participate in the strong returns that long term
bonds can provide, as they did this year. We remain confident that our asset
allocation mix of 60% large capitalization stocks and 40% short term government
and investment grade corporate bonds will continue to provide excellent income
and growth in capital over time with relatively low risk levels.

- --------------------------------------------------------------------------------
COMPARATIVE EQUITY INDUSTRY HOLDINGS AS A PERCENT OF ENTIRE PORTFOLIO

<TABLE>
<CAPTION>
12/31/95 12/31/94 CHANGE
<S> <C> <C> <C>
- ------------------------------------------------------------------------
Utilities............................... 20.8% 1.1% +19.7%
Retail Trade............................ 9.4 12.2 -2.8
Electronic Technology................... 5.6 15.0 -9.4
Consumer Non-Durables................... 3.4 2.4 +1.0
Finance................................. 3.2 0.0 +3.2
Energy Minerals......................... 1.9 9.8 -7.9
Process Industries...................... 0.8 6.4 -5.6
</TABLE>

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

- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIOD ENDING DECEMBER 31, 1995

<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN(1)
INCEPTION
TO
1 YEAR 3 YEARS 5 YEARS 12/95(2) RISK(2,3)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Eclipse Balanced Fund (4,5)....................... 23.0% 12.9% 14.3% 11.5% 6.7%
Lipper Balanced Fund Index (4).................... 24.6 10.7 12.9 11.4 7.7
Merrill Lynch 3-5 Year Government Bond Index...... 16.1 7.2 8.8 9.5 3.8
Standard & Poor's 500 Index....................... 37.5 15.3 16.6 14.2 11.7
3 Month Treasury Bill............................. 6.0 4.5 4.7 5.7 0.6
</TABLE>

- ------------
1) With income reinvested.

2) May 1, 1989 to December 31, 1995

3) Annualized standard deviation of monthly return.

4) After all expenses.

5) Net of management fee waived equivalent to 0.8%, 0.8%, 0.8%, 0.8%, 0.5%,
0.4%, and 0.3% of average net assets for the years 1989 through 1995,
respectively. Returns are also net of reimbursed expenses equivalent to 0.84%
of average net assets in 1989 and 0.05% of average net assets in 1990.
- --------------------------------------------------------------------------------

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

6
<PAGE>
GROWTH OF $10,000 SINCE INCEPTION
ECLIPSE BALANCED FUND WITH INCOME REINVESTED

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ECLIPSE BALANCED ML 3-5 YR. CORP S&P 500
<S> <C> <C> <C>
Apr-89 10,000 10,000 10,000
Dec-89 10,445 10,891 11,683
Dec-90 10,596 11,766 11,312
Dec-91 12,812 13,536 14,768
Dec-92 14,353 14,641 15,900
Dec-93 16,803 16,085 17,820
Dec-94 16,807 15,820 17,718
Dec-95 20,673 18,757 24,350
</TABLE>

All returns represent past performance, which are not predictive of future
results. Investment returns and share price will vary and shares, when redeemed,
may be worth more or less than their cost.

<TABLE>
<S> <C>
Income dividends............................................................................ $ 0.6436
Short-term capital gain dividends........................................................... 0.2051
Long-term capital gain dividends............................................................ 0.3554
---------
Total 1995 dividends........................................................................ $ 1.2041
---------
---------
</TABLE>

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

7
<PAGE>
REVIEW OF ECLIPSE GROWTH AND
INCOME FUND

The Eclipse Growth and Income Fund is managed with the long term objective of
seeking a high total return -- including both capital gains and current dividend
income -- from a portfolio composed entirely of undervalued, larger
capitalization stocks. In its first full year of operation the Fund was up
26.8%.

In 1995 the Fund achieved 88% of the return of the Lipper Growth and Income Fund
Index, with less risk, as measured by annualized monthly standard deviation for
the year.

Several factors contributed to the performance of this fund: First, it was not
fully invested in equities until the second quarter. Second, and similar to our
other funds, the Growth and Income Fund was overweighted in some underperforming
sectors, such as retail trade, and underweighted in sectors such as electronic
technology and finance, which led the markets. In 1995, we reduced our holdings
in electronic technology stocks as some stocks became overvalued. As a result of
this rebalancing, we did not participate in some of the short term price
movement of that industry.

We have in recent years been reluctant to invest heavily in the financial sector
due to the difficulty of assessing the quality of assets held at financial
institutions. This difficulty has become aggravated by the ability of companies
to alter their balance sheet risk overnight through the use of derivative
securities. We recently have developed measures which we believe adequately
determine the risk associated with a portfolio of investments in financial
institutions, which will allow us to have a stronger participation in this
sector.

The strategy of the Eclipse Growth and Income Fund is value-based. The concept
behind our value-oriented investment process is to select companies which are
economically undervalued and have -- or are expected to have -- above average
profitability. In theory and historical practice, owning companies that are
undervalued and have high profitability offers superior investment returns. We
continue to believe that our undervalued securities have solid prospects for
long term capital appreciation.
- ----------------------------------------------
LARGEST INDUSTRY HOLDINGS -- 12/31/95 % OF PORTFOLIO
- ------------------------------------------------------------

<TABLE>
<S> <C>
Utilities.................................... 19.6%
Retail Trade................................. 16.6
Electronic Technology........................ 13.0
Producer Manufacturing....................... 7.2
Commercial Services.......................... 6.8
</TABLE>

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

- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIOD ENDING DECEMBER 31, 1995

<TABLE>
<CAPTION>
TOTAL RETURN(1)
1 YEAR RISK(2)
<S> <C> <C>
- -------------------------------------------------------------------
Eclipse Growth and Income Fund (3,4).............. 26.8% 4.2%
Lipper Growth and Income Fund Index (5)........... 30.5 5.0
Standard & Poor's 500 Index....................... 37.5 4.9
3 Month Treasury Bill............................. 6.0 0.1
</TABLE>

- ------------
1) With income reinvested.

2) Annualized standard deviation of monthly return.

3) The Fund's inception was 12/27/94; its annualized total return through
12/31/95 was 26.5%.

4) Net of management fee waived and after expense reimbursement by manager. For
the year ended December 31, 1995 this amounted to 0.95% of annualized average
net assets.

5) After all expenses.
- --------------------------------------------------------------------------------

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

8
<PAGE>
GROWTH OF $10,000 SINCE INCEPTION
ECLIPSE GROWTH AND INCOME FUND WITH INCOME REINVESTED

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ECLIPSE GROWTH AND INCOME S&P 500
<S> <C> <C>
Dec-94 10,000 10,000
Jan-95 10,000 10,260
Feb-95 10,190 10,658
Mar-95 10,460 10,974
Apr-95 10,830 11,293
May-95 10,991 11,739
Jun-95 11,271 12,015
Jul-95 11,741 12,415
Aug-95 11,811 12,448
Sep-95 12,212 12,970
Oct-95 12,322 12,925
Nov-95 12,521 13,493
Dec-95 12,684 13,743
</TABLE>

All returns represent past performance, which are not predictive of future
results. Investment returns and share price will vary and shares, when redeemed,
may be worth more or less than their cost.

<TABLE>
<S> <C>
Income dividends............................................................................ $ 0.1059
Short-term capital gain dividends........................................................... 0.2640
Long-term capital gain dividends............................................................ --
---------
Total 1995 dividends........................................................................ $ 0.3699
---------
---------
</TABLE>

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

9
<PAGE>
REVIEW OF ECLIPSE EQUITY FUND

The Eclipse Equity Fund was up 19.7% for the year.

We continue to concentrate our efforts in our definition of value stocks, which
did not do as well this year as growth stocks did. Therefore, our results
trailed the performance of the small capitalization indexes for the year ended
December 31, 1995.

We had substantial holdings in such sectors as retail trade (15.2%), utilities
(11.2%), and commercial services (11.2%), which underperformed the market, and
were underweighted in the electronic technologies (8.2%) and financial (4.4%)
sectors, which led the indexes.

During the year we took profits in some electronic technology stocks as they
became overvalued according to our investment criteria, reducing our holdings
from 11.6% of the portfolio in December, 1994 to 8.2% in December, 1995. As a
result of this rebalancing, we did not participate in much of the short term
momentum of that group.

As we mentioned in our review of the Eclipse Growth and Income Fund, we had
previously been reluctant to invest heavily in the financial sector due to the
difficulty of assessing the quality of assets held at financial institutions. We
recently have developed measures which we believe will, for our purposes,
adequately determine the risk associated with a diversified investment in
financial institutions, and this will allow us to have a stronger participation
in this sector in the future.

The strategy of the Eclipse Equity Fund is to select small company value stocks.
By contrast, our investment style attribution analysis of the Lipper Small
Company Growth Fund Index and the Russell 2000 Index indicates that most of
their returns are attributed to growth styles and/or to mid- to larger
capitalization growth stocks. We believe, therefore, that these indexes are not
appropriate comparative measures, and that the S&P Small Cap 600 Index is a more
accurate benchmark. From inception to date the Eclipse Equity Fund outperformed
the Standard & Poor's 600 Index with only 58% of the risk as measured by the
annualized standard deviation.

We continue to believe that our undervalued securities have solid prospects for
long term capital appreciation.

Highlighted in the following table are the six largest industry holdings for the
fund at year end 1995 and 1994, and the change in the portfolio of the largest
holdings from a year ago.

- --------------------------------------------------------------------------------
COMPARATIVE INDUSTRY HOLDINGS -- % OF PORTFOLIO

<TABLE>
<CAPTION>
12/31/95 12/31/94 CHANGE
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
Retail Trade...................................... 15.2% 17.7% -2.5%
Utilities......................................... 11.2 1.0 +10.2
Commercial Services............................... 11.2 7.9 +3.3
Consumer Durables................................. 9.3 5.4 +3.9
Electronic Technology............................. 8.2 11.6 -3.4
Producer Manufacturing............................ 6.9 4.5 +2.4
Transportation.................................... 4.0 6.3 -2.3
Consumer Non-Durables............................. 3.4 9.6 -6.2
Energy Minerals................................... 2.1 9.5 -7.4
</TABLE>

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

10
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIOD ENDING DECEMBER 31, 1995

<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN(1)
INCEPTION
TO
1 YEAR 3 YEARS 5 YEARS 12/95(2) RISK(2,3)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Eclipse Equity Fund (4,5)......................... 19.7% 10.1% 15.9% 9.8% 10.9%
Lipper Small Company Growth Fund Index (4)........ 31.4 15.2 20.4 11.9 17.0
Standard & Poor's Small Cap 600 Index............. 28.6 12.5 19.9 7.2 18.8
Standard & Poor's 500 Index....................... 37.5 15.3 16.6 12.9 14.2
3 Month Treasury Bill............................. 6.0 4.5 4.7 6.1 0.6
</TABLE>

- ------------
1) With income reinvested.

2) January 31, 1987 to December 31, 1995

3) Annualized standard deviation of monthly return.

4) After all expenses.

5) Net of management fee waived in 1987 equivalent to 0.1% of average net
assets.
- --------------------------------------------------------------------------------

GROWTH OF $10,000 SINCE INCEPTION
ECLIPSE EQUITY FUND WITH INCOME REINVESTED

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ECLIPSE EQUITY S&P 600 S&P 500
<S> <C> <C> <C>
Jan-87 10,000 10,000 10,000
Dec-87 9,723 7,670 9,277
Dec-88 10,957 8,977 10,837
Dec-89 12,757 10,007 14,249
Dec-90 11,016 7,463 13,797
Dec-91 14,449 10,887 18,012
Dec-92 17,249 13,003 19,394
Dec-93 20,183 15,293 21,331
Dec-94 19,223 14,401 21,610
Dec-95 23,009 18,521 29,698
</TABLE>

All returns represent past performance, which are not predictive of future
results. Investment returns and share price will vary and shares, when redeemed,
may be worth more or less than their cost.
- --------------------------------------------------------------------------------
PER SHARE DIVIDEND INFORMATION -- 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Income dividends............................................................................ $ 0.0672
Short-term capital gain dividends........................................................... 0.1488
Long-term capital gain dividends............................................................ 0.3684
---------
Total 1995 dividends........................................................................ $ 0.5844
---------
---------
</TABLE>

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

11
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
ULTRA SHORT TERM INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------

U.S. CORPORATE BONDS (45.66%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

CONSUMER NON-DURABLES (10.44%)
Coca-Cola Company (The) Notes, 7.75%, due
02/15/96........................................ $ 100,000 $ 100,273
Heinz (H.J.) Company Notes, 5.50%, due
09/15/97........................................ 50,000 50,071
Hertz Corporation Senior Notes, 9.125%, due
08/01/96........................................ 100,000 101,992
PepsiCo, Inc. Notes, 6.875%, due 05/15/97........ 100,000 102,011
Procter & Gamble Company Notes, 6.85%, due
06/01/97........................................ 25,000 25,509
Ralston Purina Company Notes, 9.00%, due
06/15/96........................................ 100,000 101,437
------------
481,293
------------

ELECTRONIC TECHNOLOGY (4.38%)
IBM Corporation Notes, 6.375%, due 11/01/97...... 100,000 101,620
Martin Marietta Technologies, Inc. Notes, 8.50%,
due 03/01/96.................................... 100,000 100,464
------------
202,084
------------

FINANCE (12.64%)
Avco Financial Services, Inc. Senior Notes,
8.85%, due 02/01/96............................. 50,000 50,123

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

FINANCE (CONT'D)
Chrysler Financial Corporation Notes, 5.375%, due
10/15/98........................................ $ 50,000 $ 49,469
Fireman's Fund Mortgage Corporation Notes, 8.25%,
due 11/01/96.................................... 100,000 101,896
General Motors Corporation Notes, 7.625%, due
02/15/97........................................ 100,000 102,221
Household Finance Corporation Notes, 7.80%, due
11/01/96........................................ 100,000 101,862
International Lease Finance Corporation Senior
Notes, 6.50%, due 07/15/97...................... 75,000 76,010
U.S. Leasing International, Inc. Notes, 8.75%,
due 05/01/96.................................... 100,000 100,965
------------
582,546
------------

HEALTH TECHNOLOGY (3.33%)
American Home Products Corporation Notes, 6.875%,
due 04/15/97.................................... 100,000 101,743
Lilly (Eli) & Company Notes, 6.75%, due
11/15/99........................................ 50,000 51,878
------------
153,621
------------

INDUSTRIAL SERVICES (1.66%)
WMX Technologies, Inc. Notes, 7.125%, due
03/22/97........................................ 75,000 76,475
------------
</TABLE>

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

12
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
ULTRA SHORT TERM INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

PRODUCER MANUFACTURING (1.15%)
Xerox Corporation Notes, 9.625%, due 09/01/97.... $ 50,000 $ 53,256
------------

RETAIL TRADE (5.32%)
Penney (J.C.) Company Notes, 5.375%, due
11/15/98........................................ 100,000 99,351
Sears Roebuck & Company Notes, 8.55%, due
08/01/96........................................ 70,000 71,214
Wal-Mart Stores, Inc. Notes, 5.50%, due
03/01/98........................................ 75,000 74,942
------------
245,507
------------

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

UTILITIES (6.74%)
MCI Communications Senior Notes, 7.625%, due
11/07/96........................................ $ 50,000 $ 50,905
New England Telephone & Telegraph Notes, 6.25%,
due 12/15/97.................................... 100,000 101,270
Sonat, Inc. Notes, 9.50%, due 08/15/99........... 50,000 55,689
Transcontinental Gas Pipeline Company Notes,
9.00%, due 11/15/96............................. 100,000 102,805
------------
310,669
------------
Total U.S. Corporate Bonds
(Cost $2,098,988)............................... $ 2,105,451
------------
</TABLE>

YANKEE BONDS (4.34%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

PROCESS INDUSTRIES (2.17%)
Dow Capital B.V. Notes, 5.75%, due 09/15/97...... $ 100,000 $ 99,919
------------

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

PRODUCER MANUFACTURING (2.17%)
Hanson Overseas B.V. Notes, 5.50%, due
01/15/96........................................ $ 100,000 $ 99,991
------------
Total Yankee Bonds (Cost $199,444)............... $ 199,910
------------
</TABLE>

UNITED STATES GOVERNMENT OBLIGATIONS (12.01%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
United States Treasury Note, 7.875%, due
02/15/96........................................ $ 100,000 $ 100,313
United States Treasury Note, 5.125%, due
03/31/96........................................ 75,000 74,976

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
United States Treasury Note, 7.625%, due
04/30/96........................................ $ 100,000 $ 100,812
United States Treasury Note, 7.375%, due
05/15/96........................................ 100,000 100,781
</TABLE>

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

13
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
ULTRA SHORT TERM INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
United States Treasury Note, 6.00%, due
06/30/96........................................ $ 75,000 $ 75,281
United States Treasury Note, 6.375%, due
06/30/97........................................ 100,000 101,688
------------

<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total United States Government Obligations (Cost
$551,963)....................................... $ 553,851
------------
</TABLE>

FEDERAL AGENCIES (25.37%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
Federal Home Loan Bank, 6.85%, due 02/25/97...... $ 300,000 $ 305,057
Federal Home Loan Mortgage Corporation, 7.24%,
due 02/05/96.................................... 155,000 155,276
Federal Home Loan Mortgage Corporation, 6.18%,
due 11/18/97.................................... 150,000 151,951
Federal Land Bank, 7.95%, due 10/21/96........... 100,000 102,111
Federal National Mortgage Association, 8.45%, due
10/21/96........................................ 200,000 204,793

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
Federal National Mortgage Association (V.R.)
5.72%, due 12/14/98............................. $ 100,000 $ 99,943
Student Loan Marketing Association (V.R.), 5.40%,
due 10/30/97.................................... 100,000 100,219
Student Loan Marketing Association (V.R.), 5.40%,
due 01/21/98.................................... 50,000 50,117
------------
Total Federal Agencies (Cost $1,168,985)......... $ 1,169,467
------------
</TABLE>

SHORT-TERM INVESTMENTS (1.74%)

<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)

<S> <C> <C>
REPURCHASE AGREEMENTS (1.74%)
State Street Bank and Trust Company, 4.25%, due
01/02/96
(collateralized by $62,000 U.S. Treasury Bonds,
8.75%, due 05/15/17)............................ $ 80,228 $ 80,228
------------
Total Short-Term Investments (Cost $80,228)...... $ 80,228
------------
</TABLE>

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

14
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
ULTRA SHORT TERM INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C> <C>
Total Investments (89.12%) (Cost $4,099,608+).... $ 4,108,907
Other Assets (11.63%)
Cash............................................. 2,000
Fund shares sold................................. 401,397
Interest receivable.............................. 73,366
Receivable from advisor.......................... 33,255
Deferred organization expenses................... 26,236
------------
Total assets..................................... 4,645,161
------------

Liabilities (0.75%)
Payable for deferred organization expenses....... 12,634
Fund shares redeemed............................. 793
Dividends payable................................ 55
Accrued expenses................................. 21,195
------------
Total liabilities................................ 34,677
------------
Net Assets (100.00%) 2,262,377 shares outstanding
(Note 3)........................................ $ 4,610,484
------------
------------
Net Asset Value, offering and redemption price
per share....................................... $2.04
------------
------------
</TABLE>

+ The cost stated also represents the aggregate cost for federal income tax
purposes. Aggregate unrealized appreciation and depreciation of investments,
based on cost for federal income tax purposes, are $14,058 and $4,759,
respectively.

See notes to financial statements.

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

15
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------

COMMON STOCKS (59.71%)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

COMMERCIAL SERVICES (3.08%)
Kelly Services, Inc. Class A..................... 17,700 $ 491,175
Supervalu, Inc................................... 32,500 1,023,750
Sysco Corporation................................ 34,800 1,131,000
--------------
2,645,925
--------------

CONSUMER DURABLES (1.67%)
Honda Motor Co., Ltd............................. 28,000 1,176,000
Volvo AB, ADR.................................... 12,400 255,363
--------------
1,431,363
--------------

CONSUMER NON-DURABLES (3.39%)
ConAgra, Inc..................................... 32,100 1,324,125
IBP, Inc......................................... 15,100 762,550
Universal Corporation............................ 23,300 567,938
Whitman Corporation.............................. 11,000 255,750
--------------
2,910,363
--------------

ELECTRONIC TECHNOLOGY (5.58%)
Avnet Inc........................................ 19,600 877,100
Digital Equipment Corporation*................... 15,800 1,013,175
Gateway 2000, Inc.*.............................. 28,400 695,800
Polaroid Corporation............................. 23,500 1,113,312
SCI Systems, Inc.*............................... 14,000 434,000
United Technologies Corporation.................. 7,000 664,125
--------------
4,797,512
--------------

ENERGY MINERALS (1.91%)
Kerr-McGee Corporation........................... 9,700 615,950
Occidental Petroleum Corporation................. 16,000 342,000
Panhandle Eastern Corporation.................... 5,000 139,375
USX-Marathon Group............................... 27,800 542,100
--------------
1,639,425
--------------

<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

FINANCE (3.22%)
Bear Stearns Companies Inc. (The)................ 12,300 $ 244,462
Great Western Financial Corporation.............. 19,600 499,800
National City Corporation........................ 15,400 510,125
SouthTrust Corporation........................... 19,600 502,250
USF&G Corporation................................ 29,200 492,750
Washington Mutual, Inc........................... 17,800 513,975
--------------
2,763,362
--------------

HEALTH SERVICES (2.28%)
Bergen Brunswig Corporation Class A.............. 20,700 514,913
Cardinal Health, Inc............................. 17,400 952,650
McKesson Corporation............................. 9,700 491,062
--------------
1,958,625
--------------

INDUSTRIAL SERVICES (0.58%)
Fluor Corporation................................ 7,600 501,600
--------------

NON-ENERGY MINERALS (0.29%)
Manville Corporation*............................ 19,200 252,000
--------------

PROCESS INDUSTRIES (0.83%)
Terra Industries, Inc............................ 15,500 218,938
Union Carbide Corporation........................ 13,100 491,250
--------------
710,188
--------------

PRODUCER MANUFACTURING (3.15%)
Canadian Pacific, Ltd............................ 28,000 507,500
Cummins Engine Company, Inc...................... 26,000 962,000
Johnson Controls, Inc............................ 18,000 1,237,500
--------------
2,707,000
--------------
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

16
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

RETAIL TRADE (9.37%)
American Stores Co............................... 17,500 $ 468,125
Eckerd Corporation*.............................. 12,100 539,963
Food Lion, Inc. Class A.......................... 98,000 560,442
Giant Food Inc. Class A.......................... 16,100 507,150
Kroger Company (The)*............................ 27,600 1,035,000
Rite Aid Corporation............................. 30,700 1,051,475
Safeway, Inc.*................................... 20,000 1,030,000
Smith's Food & Drug Centers, Inc................. 13,300 335,825
Vons Companies, Inc.*............................ 19,000 536,750
Walgreen Company................................. 32,800 979,900
Winn-Dixie Stores, Inc........................... 27,300 1,006,687
--------------
8,051,317
--------------

TECHNOLOGY SERVICES (0.91%)
Arrow Electronics, Inc.*......................... 18,200 784,875
--------------

TRANSPORTATION (2.62%)
Federal Express Corporation*..................... 12,600 930,825
KLM Royal Dutch Airlines, ADR.................... 30,000 1,057,500
Northwest Airlines Corporation*.................. 5,200 265,200
--------------
2,253,525
--------------

UTILITIES (20.83%)
Allegheny Power System, Inc...................... 41,700 1,193,663
American Electric Power Company, Inc............. 25,700 1,040,850

<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

UTILITIES (CONT'D)
Central Illinois Public Service Company Inc...... 7,100 $ 276,900
CMS Energy Corporation........................... 25,900 773,762
Central & South West Corporation................. 33,100 922,663
Coastal Corporation (The)........................ 23,000 856,750
Columbia Gas System, Inc. (The)*................. 24,400 1,070,550
DQE.............................................. 32,800 1,008,600
Detroit Edison Company........................... 26,700 921,150
FPL Group, Inc................................... 21,600 1,001,700
Illinova Corporation............................. 31,800 954,000
Korea Electric Power Corporation, ADR............ 19,600 524,300
New York State Electric & Gas Corporation........ 40,400 1,045,350
Ohio Edison Company.............................. 40,000 940,000
Pacific Gas & Electric Company................... 24,900 706,538
Pinnacle West Capital Corporation................ 35,900 1,032,125
Public Service Company of Colorado............... 26,000 919,750
SCEcorp.......................................... 52,000 923,000
Unicom Corporation............................... 30,000 982,500
Western Resources, Inc........................... 24,000 801,000
--------------
17,895,151
--------------

Total Common Stocks (Cost $45,549,298)........... $ 51,302,231
--------------
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

17
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------

U.S. CORPORATE BONDS (34.33%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

COMMERCIAL SERVICES (0.62%)
Supervalu Inc. Notes, 7.25%, due 07/15/99........ $ 300,000 $ 314,534
Supervalu Inc. Notes, 7.80%, due 11/15/02........ 200,000 219,283
-------------
533,817
-------------

CONSUMER DURABLES (0.09%)
Eastman Kodak Company Notes, 7.25%, due
04/15/97........................................ 75,000 76,772
-------------

CONSUMER NON-DURABLES (5.19%)
Anheuser-Busch Companies, Inc. Notes, 8.75%, due
12/01/99........................................ 50,000 55,360
Bass America, Inc. Guaranteed Notes, 6.75%, due
08/01/99........................................ 550,000 568,171
Coca-Cola Company Notes, 7.875%, due 09/15/98.... 100,000 105,996
Coca-Cola Enterprises Notes, 6.50%, due
11/15/97........................................ 150,000 152,825
Coca-Cola Enterprises Notes, 7.00%, due
11/15/99........................................ 350,000 365,787
Coca-Cola Enterprises Notes, 7.875%, due
02/01/02........................................ 200,000 219,669
Gillette Company (The) Notes, 4.75%, due
08/15/96........................................ 300,000 298,952
Heinz (H.J.) Company Notes, 5.50%, due
09/15/97........................................ 250,000 250,357
Heinz (H.J.) Company Notes, 6.75%, due
10/15/99........................................ 200,000 207,392

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

CONSUMER NON-DURABLES (CONT'D)
Hertz Corporation Senior Notes, 8.30%, due
02/02/98........................................ $ 300,000 $ 316,106
Hertz Corporation Senior Notes, 7.00%, due
04/15/01........................................ 300,000 313,019
PepsiCo, Inc. Notes, 7.875%, due 08/15/96........ 100,000 101,526
PepsiCo, Inc. Notes, 7.00%, due 11/15/96......... 50,000 50,712
PepsiCo, Inc. Notes, 6.125%, due 01/15/98........ 200,000 202,795
PepsiCo, Inc. Notes, 7.75%, due 10/01/98......... 100,000 105,759
PepsiCo, Inc. Notes, 6.25%, due 09/01/99......... 200,000 204,378
PepsiCo, Inc. Notes, 6.80%, due 05/15/00......... 200,000 208,400
Philip Morris Companies Inc. Med. Term Notes,
7.80%, due 09/24/96............................. 100,000 101,405
Philip Morris Companies Inc. Med. Term Notes,
8.90%, due 07/15/98............................. 100,000 107,068
Philip Morris Companies Inc. Notes, 7.50%, due
03/15/97........................................ 100,000 102,263
Philip Morris Companies Inc. Notes, 6.375%, due
01/15/98........................................ 100,000 101,296
Philip Morris Companies Inc. Notes, 7.625%, due
05/15/02........................................ 100,000 107,206
RJR Nabisco Inc. Medium Term Notes, 7.625%, due
09/01/00........................................ 200,000 211,217
-------------
4,457,659
-------------

CONSUMER SERVICES (0.12%)
Gannett Co., Inc. Notes, 5.25%, due 03/01/98..... 100,000 99,579
-------------
</TABLE>

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

18
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

ELECTRONIC TECHNOLOGY (1.15%)
Boeing Co. Notes, 8.375%, due 03/01/96........... $ 100,000 $ 100,468
IBM Corporation Notes, 6.375%, due 11/01/97...... 100,000 101,620
IBM Corporation Notes, 6.375%, due 06/15/00...... 200,000 204,835
IBM Corporation Notes, 7.25%, due 11/01/02....... 300,000 321,403
McDonnell Douglas Finance Corp. Med. Term Notes,
7.25%, due 06/15/98............................. 200,000 206,834
Rockwell International Corporation Notes, 8.875%,
due 09/15/99.................................... 50,000 55,438
-------------
990,598
-------------

ENERGY MINERALS (1.10%)
Exxon Capital Corporation Notes, 6.50%, due
07/15/99........................................ 300,000 308,763
Exxon Capital Corporation Notes, 7.45%, due
12/15/01........................................ 300,000 324,982
Shell Oil Company Notes, 6.95%, due 12/15/98..... 300,000 312,010
-------------
945,755
-------------

FINANCE (13.69%)
Allstate Corporation Notes, 5.875%, due
06/15/98........................................ 250,000 251,257
American Express Credit Corporation Notes,
7.375%, due 02/01/99............................ 500,000 524,492
American Express Credit Corporation Notes,
6.125%, due 06/15/00............................ 200,000 202,882

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

FINANCE (CONT'D)
American Express Credit Corporation Sr. Notes,
7.75%, due 03/01/97............................. $ 50,000 $ 51,271
American General Finance Corporation Notes,
8.00%, due 02/15/00............................. 200,000 215,158
American General Finance Corporation Sr. Notes,
5.80%, due 04/01/97............................. 300,000 301,187
American General Finance Corporation Sr. Notes,
8.25%, due 01/15/98............................. 200,000 210,136
Aristar, Inc. Senior Notes, 7.875%, due
02/15/99........................................ 150,000 159,037
Associates Corp. of North America Notes, 8.75%,
due 02/01/96.................................... 50,000 50,122
Associates Corp. of North America Notes, 7.25%,
due 05/15/98.................................... 400,000 414,670
Associates Corp. of North America Notes, 7.875%,
due 09/30/01.................................... 100,000 109,164
Associates Corp. of North America Sr. Notes,
8.80%, due 03/01/96............................. 50,000 50,251
Associates Corp. of North America Sr. Notes,
6.875%, due 01/15/97............................ 150,000 152,136
Avco Financial Services, Inc. Notes, 7.50%, due
11/15/96........................................ 50,000 50,861
Avco Financial Services, Inc. Sr. Notes, 5.875%,
due 10/15/97.................................... 300,000 301,891
</TABLE>

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

19
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

FINANCE (CONT'D)
CIT Group Holdings, Inc. Notes, 8.75%, due
02/15/96........................................ $ 50,000 $ 50,184
CIT Group Holdings, Inc. Notes, 8.75%, due
04/15/98........................................ 300,000 320,235
CNA Financial Corporation Sr. Notes, 8.875%, due
03/01/98........................................ 100,000 105,873
Chrysler Financial Corporation Notes, 6.625%, due
08/15/00........................................ 1,000,000 1,025,492
Commercial Credit Company Medium Term Notes,
6.75%, due 01/15/97............................. 300,000 303,718
Commercial Credit Company Notes, 8.25%, due
11/01/01........................................ 200,000 221,627
Farmers Group, Inc. Notes, 8.25%, due 07/15/96... 350,000 354,362
Ford Holdings Inc. Notes, 9.25%, due 03/01/00.... 50,000 56,118
Ford Motor Credit Company Notes, 8.875%, due
03/15/96........................................ 50,000 50,318
Ford Motor Credit Company Notes, 8.00%, due
12/01/96........................................ 100,000 102,170
Ford Motor Credit Company Notes, 5.625%, due
03/03/97........................................ 200,000 200,262
Ford Motor Credit Company Notes, 8.00%, due
01/15/99........................................ 100,000 106,122
Ford Motor Credit Company Notes, 7.25%, due
05/15/99........................................ 250,000 260,934

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

FINANCE (CONT'D)
Ford Motor Credit Company Notes, 8.375%, due
01/15/00........................................ $ 250,000 $ 272,464
General Electric Capital Corporation Notes,
8.00%, due 01/15/98............................. 400,000 418,925
General Motors Acceptance Corporation Notes,
8.00%, due 10/01/96............................. 300,000 305,265
General Motors Corporation Notes, 7.00%, due
06/15/03........................................ 700,000 730,405
Heller Financial, Inc. Notes, 8.85%, due
04/15/96........................................ 100,000 100,905
Heller Financial, Inc. Notes, 7.75%, due
05/15/97........................................ 50,000 51,408
Heller Financial, Inc. Notes, 9.375%, due
03/15/98........................................ 50,000 53,743
Heller Financial, Inc. Notes, 7.875%, due
11/01/99........................................ 100,000 106,483
Household Finance Corporation Notes, 7.80%, due
11/01/96........................................ 100,000 101,862
Household Finance Corporation Notes, 7.50%, due
03/15/97........................................ 200,000 204,526
Household Finance Corporation Notes, 7.75%, due
06/15/97........................................ 200,000 206,059
Household International Inc. (Floating Rate)
Notes, 6.0625%, due 05/27/97.................... 200,000 200,191
International Lease Finance Corporation Notes,
4.75%, due 07/15/96............................. 200,000 199,167
</TABLE>

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

20
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

FINANCE (CONT'D)
International Lease Finance Corporation Notes,
6.375%, due 11/01/96............................ $ 100,000 $ 100,631
International Lease Finance Corporation Notes,
8.125%, due 01/15/98............................ 200,000 209,581
International Lease Finance Corporation Sr.
Notes, 7.90%, due 10/01/96...................... 100,000 101,654
Lehman Brothers Holdings, Inc. Notes, 7.625%, due
06/15/97........................................ 150,000 153,596
Merrill Lynch & Co., Inc. Notes, 7.25%, due
05/15/97........................................ 100,000 102,233
Pitney Bowes Credit Corporation Notes, 5.625%,
due 02/15/97.................................... 300,000 300,647
Transamerica Finance Corporation Notes, 6.75%,
due 08/15/97.................................... 300,000 305,580
Travelers Group Inc. Notes, 6.125%, due
06/15/00........................................ 300,000 302,686
USL Capital Corporation Notes, 8.125%, due
02/15/00........................................ 300,000 323,862
USLife Corporation Sr. Notes, 6.75%, due
01/15/98........................................ 300,000 305,562
Xerox Credit Corp. Notes, 6.25%, due 01/15/96.... 400,000 400,075
-------------
11,759,440
-------------

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

HEALTH TECHNOLOGY (1.90%)
American Home Products Corporation Notes, 7.70%,
due 02/15/00.................................... $ 500,000 $ 535,289
Baxter International Inc. Notes, 7.50%, due
05/01/97........................................ 150,000 153,741
Becton, Dickinson & Co. Notes, 7.875%, due
12/15/96........................................ 150,000 153,334
Lilly (Eli) & Company Notes, 8.125%, due
12/01/01........................................ 250,000 278,258
Pfizer Inc. Notes, 6.50%, due 02/01/97........... 150,000 151,872
Upjohn Company Notes, 5.875%, 04/15/00........... 200,000 200,934
Warner-Lambert Company Notes, 6.625%, due
09/15/02........................................ 150,000 156,169
-------------
1,629,597
-------------

INDUSTRIAL SERVICES (0.54%)
WMX Technologies Inc. Notes, 4.875%, due
06/15/96........................................ 200,000 199,447
WMX Technologies Inc. Notes, 6.375%, due
07/01/97........................................ 50,000 50,601
WMX Technologies Inc. Sr. Notes, 8.125%, due
02/01/98........................................ 200,000 209,844
-------------
459,892
-------------

NON-ENERGY MINERALS (0.12%)
Alcan Aluminum Corporation Guaranteed Notes,
7.25%, due 12/15/99............................. 100,000 104,815
-------------
</TABLE>

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

21
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

PROCESS INDUSTRIES (0.61%)
DuPont (E.I.) De Nemours & Company Notes, 8.65%,
due 12/01/97.................................... $ 50,000 $ 52,933
DuPont (E.I.) De Nemours & Company Notes, 6.00%,
due 12/01/01.................................... 200,000 201,857
International Paper Company Med. Term Notes,
7.80%, due 03/18/99............................. 100,000 105,803
James River Corporation of Viriginia, 8.375%, due
11/15/01........................................ 150,000 165,672
-------------
526,265
-------------

PRODUCER MANUFACTURING (1.29%)
Dresser Industries, Inc. Senior Notes, 6.25%, due
06/01/00........................................ 600,000 609,005
Illinois Tool Works, Inc. Notes, 5.875%, due
03/01/00........................................ 400,000 401,075
Ingersoll-Rand Company Notes, 8.25%, due
11/01/96........................................ 50,000 51,082
Xerox Corporation Notes, 9.20%, due 07/15/99..... 50,000 51,083
-------------
1,112,245
-------------

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

RETAIL TRADE (1.92%)
Dayton Hudson Corporation Notes, 7.50%, due
03/01/99........................................ $ 300,000 $ 315,189
Dillard Department Stores Notes, 7.375%, due
06/15/99........................................ 255,000 268,753
Kmart Corporation Medium Term Notes, 8.50%, due
05/09/97........................................ 100,000 85,046
Limited, Inc. (The) Notes, 8.875%, due
08/15/99........................................ 200,000 219,071
Nordstrom Credit Inc. Medium Term Notes, 8.05%,
due 08/28/96.................................... 100,000 101,591
Penney (J.C.) Co., Inc. Notes, 6.875%, due
06/15/99........................................ 50,000 51,770
Sears Roebuck and Company Notes, 9.25%, due
08/01/97........................................ 100,000 105,510
Wal-Mart Stores Inc. Notes, 5.50%, due
09/15/97........................................ 250,000 250,156
Wal-Mart Stores Inc. Notes, 8.625%, due
04/01/01........................................ 50,000 56,198
Woolworth Corporation Medium Term Notes, 6.50%,
due 01/24/96.................................... 200,000 200,156
-------------
1,653,440
-------------

TRANSPORTATION (1.75%)
CSX Corporation Notes, 8.25%, due 11/01/96....... 100,000 102,243
Consolidated Rail Corporation Medium Term Notes,
5.20%, due 02/12/96............................. 500,000 500,019
</TABLE>

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

22
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

TRANSPORTATION (CONT'D)
Consolidated Rail Corporation Notes, 6.90%, due
07/01/98........................................ $ 200,000 $ 205,993
Kansas City Southern Industries Senior Notes,
7.875%, due 07/01/02............................ 150,000 164,731
Union Pacific Corporation Notes, 7.375%, due
05/15/01........................................ 500,000 530,279
-------------
1,503,265
-------------

UTILITIES (4.24%)
AT&T Capital Corp. Medium Term Notes, 7.40%, due
11/01/96........................................ 150,000 152,232
AT&T Corporation Notes, 4.50%, due 02/15/96...... 50,000 49,943
Ameritech Capital Funding Inc. (Floating Rate)
Notes, 5.925%, due 05/12/98..................... 550,000 549,921
Bell Atlantic-Virginia, Inc. Notes, 7.125%, due
01/15/02........................................ 300,000 317,102
Consolidated Edison Company Series F, 5.70%, due
10/01/98........................................ 350,000 350,055
GTE California, Inc. Notes, 6.75%, due
12/01/97........................................ 50,000 50,144
GTE Corporation Notes, 8.85%, due 03/01/98....... 50,000 53,027

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

UTILITIES (CONT'D)
GTE Northwest, Inc. Notes, 7.375%, due
05/01/01........................................ $ 500,000 $ 530,974
Pacific Bell Notes, 7.25%, due 07/01/02.......... 300,000 318,227
Pacific North West Bell Telephone Notes, 7.50%,
due 12/01/96.................................... 300,000 304,900
Public Service Electric & Gas Notes, 6.00%, due
01/01/98........................................ 100,000 100,469
Sonat, Inc. Notes, 9.00%, due 05/01/01........... 50,000 56,448
Southern California Edison Company Notes, 5.90%,
due 01/15/97.................................... 50,000 50,112
Southern California Edison Company Notes, 5.875%,
due 02/01/98.................................... 300,000 300,774
Southern California Edison Company Notes, 6.50%,
due 06/01/01.................................... 200,000 204,720
Southwestern Bell Telephone Notes, 8.30%, due
06/01/96........................................ 250,000 252,601
-------------
3,641,649
-------------
Total U.S. Corporate Bonds
(Cost $28,683,749).............................. $ 29,494,788
-------------
</TABLE>

YANKEE BONDS (0.35%)

<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)

<S> <C> <C>
NON-ENERGY MINERALS (0.12%)
Alcan Aluminum Ltd. Notes, 8.20%, due 09/01/96... $ 100,000 $ 101,727
-------------
</TABLE>

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

23
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

PROCESS INDUSTRIES (0.23%)
Dow Capital B.V. Notes, 8.25%, due 02/15/96...... $ 100,000 $ 100,266
Dow Capital B.V. Notes, 5.75%, due 09/15/97...... 100,000 99,919
-------------
200,185
-------------
Total Yankee Bonds
Cost ($307,194)................................. $ 301,912
-------------
</TABLE>

UNITED STATES GOVERNMENT OBLIGATIONS (3.64%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
United States Treasury Note, 6.375%, due
01/15/00........................................ $ 500,000 $ 518,593
United States Treasury Note, 5.50%, due
04/15/00........................................ 500,000 503,750
United States Treasury Note, 5.875%, due
02/15/04........................................ 500,000 510,155

<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
United States Treasury Note, 6.50%, due
05/15/05........................................ $ 1,500,000 $ 1,598,438
-------------
Total United States Government Obligations
(Cost $2,980,532)............................... $ 3,130,936
-------------
</TABLE>

Short-term Investments (4.71%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)

<S> <C> <C>
REPURCHASE AGREEMENTS (4.71%)
State Street Bank and Trust Co., 4.25%, due
01/02/96 (Collateralized by $3,105,000 U.S.
Treasury Notes, 8.75%, due 05/15/17)............ $ 4,046,671 $ 4,046,671
-------------

<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total Short-Term Investments
(Cost $4,046,671)............................... $ 4,046,671
-------------
</TABLE>

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

<TABLE>
<S> <C> <C>
Total Investments
(102.74%)
(Cost $81,567,444+)..... $88,276,538
Liabilities in Excess of
Cash and Other Assets
(-2.74%)................ (2,354,336)
-----------
Net Assets (100.00%)
4,173,768 shares
outstanding (Note 3).... $85,922,202
-----------
-----------
Net Asset Value, offering
and redemption price per
share................... $20.59
-----------
-----------
</TABLE>

See notes to financial statements.

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

24
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------

COMMON STOCKS (96.27%)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

COMMERCIAL SERVICES (6.80%)
Alco Standard Corporation........................ 2,400 $ 109,500
Rykoff-Sexton, Inc............................... 4,400 77,000
Supervalu, Inc................................... 5,800 182,700
Sysco Corporation................................ 5,300 172,250
-----------
541,450
-----------

CONSUMER DURABLES (3.76%)
Honda Motor Co., Ltd............................. 5,900 247,800
Volvo AB, ADR.................................... 2,500 51,484
-----------
299,284
-----------

CONSUMER NON-DURABLES (3.72%)
ConAgra, Inc..................................... 3,000 123,750
IBP, Inc......................................... 2,300 116,150
Universal Corporation............................ 2,300 56,062
-----------
295,962
-----------

ELECTRONIC TECHNOLOGY (13.00%)
Avnet Inc........................................ 1,700 76,075
Dell Computer Corporation*....................... 2,200 76,175
Digital Equipment Corporation*................... 3,600 230,850
Gateway 2000, Inc.*.............................. 5,500 134,750
Philips Electronics N.V.......................... 2,800 100,450
Polaroid Corporation............................. 3,400 161,075
SCI Systems, Inc.*............................... 1,500 46,500
United Technologies Corporation.................. 2,200 208,725
-----------
1,034,600
-----------

ENERGY MINERALS (3.31%)
Kerr-McGee Corporation........................... 1,100 69,850
Sun Company, Inc................................. 5,000 136,875
USX-Marathon Group............................... 2,900 56,550
-----------
263,275
-----------

<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

FINANCE (3.17%)
Bear Stearns Companies Inc. (The)................ 2,500 $ 49,688
Great Western Financial Corporation.............. 2,000 51,000
SouthTrust Corporation........................... 2,000 51,250
USF&G Corporation................................ 2,900 48,937
Washington Mutual, Inc........................... 1,800 51,975
-----------
252,850
-----------

HEALTH SERVICES (5.37%)
Bergen Brunswig Corporation Class A.............. 3,600 89,550
Cardinal Health, Inc............................. 3,400 186,150
McKesson Corporation............................. 3,000 151,875
-----------
427,575
-----------

INDUSTRIAL SERVICES (3.07%)
Fluor Corporation................................ 3,700 244,200
-----------

NON-ENERGY MINERALS (0.63%)
Manville Corporation*............................ 3,800 49,875
-----------

PROCESS INDUSTRIES (3.11%)
Union Carbide Corporation........................ 6,600 247,500
-----------

PRODUCER MANUFACTURING (7.24%)
Canadian Pacific, Ltd............................ 1,800 32,625
Cummins Engine Company, Inc...................... 6,000 222,000
Johnson Controls, Inc............................ 3,500 240,625
Lear Seating Corporation*........................ 2,800 81,200
-----------
576,450
-----------

RETAIL TRADE (16.56%)
American Stores Co............................... 2,400 64,200
Eckerd Corporation*.............................. 1,900 84,788
Food Lion, Inc. Class A.......................... 10,000 57,188
Giant Food Inc. Class A.......................... 3,000 94,500
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

25
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

RETAIL TRADE (CONT'D)
Kroger Company (The)*............................ 6,600 $ 247,500
Rite Aid Corporation............................. 3,000 102,750
Safeway, Inc.*................................... 2,800 144,200
Smith's Food & Drug Centers, Inc................. 3,400 85,850
Vons Companies, Inc.*............................ 2,600 73,450
Walgreen Company................................. 6,000 179,250
Winn-Dixie Stores, Inc........................... 5,000 184,375
-----------
1,318,051
-----------

TECHNOLOGY SERVICES (1.84%)
Arrow Electronics, Inc.*......................... 3,400 146,625
-----------

TRANSPORTATION (5.12%)
Federal Express Corporation*..................... 1,900 140,363
KLM Royal Dutch Airlines, ADR.................... 6,000 211,500
Northwest Airlines Corporation*.................. 1,100 56,100
-----------
407,963
-----------

<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

UTILITIES (19.57%)
Allegheny Power System, Inc...................... 2,600 $ 74,425
Central & South West Corporation................. 4,300 119,862
Columbia Gas System, Inc. (The)*................. 4,100 179,888
Detroit Edison Company........................... 4,800 165,600
FPL Group, Inc................................... 2,700 125,213
Illinova Corporation............................. 5,700 171,000
Korea Electric Power Corporation, ADR............ 2,000 53,500
Ohio Edison Company.............................. 3,600 84,600
Pinnacle West Capital Corporation................ 5,900 169,625
Public Service Company of Colorado............... 3,400 120,275
SCEcorp.......................................... 7,500 133,125
Unicom Corporation............................... 4,900 160,475
-----------
1,557,588
-----------
Total Common Stocks
(Cost $6,822,515)............................... $ 7,663,248
-----------
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

26
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------

SHORT-TERM INVESTMENTS (7.10%)

<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>

REPURCHASE AGREEMENTS (7.10%)
State Street Bank and Trust Company, 4.25%, due
01/02/96 (collateralized by $435,000 U.S.
Treasury Bonds, 8.75%, due 05/15/17)............ $ 565,192 $ 565,192
-------------
Total Short-Term Investments (Cost $565,192)..... $ 565,192
-------------
</TABLE>

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

<TABLE>
<S> <C> <C>
Total Investments (103.37%)
(Cost $7,387,707+).............................. $ 8,228,440
Liabilities in Excess of Cash and Other Assets
(-3.37%)........................................ (268,000)
-----------
Net Assets (100.00%) 646,426 shares outstanding
(Note 3)........................................ $ 7,960,440
-----------
-----------
Net Asset Value, offering and redemption price
per share....................................... $12.31
-----------
-----------
</TABLE>

+ Aggregate cost for federal income tax purposes is $7,387,950. Aggregate
unrealized appreciation and depreciation of investments, based on cost for
federal income tax purposes, are $965,984 and $125,494, respectively.

See notes to financial statements.

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

27
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------

COMMON STOCKS (96.95%)

<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

COMMERCIAL SERVICES (11.15%)
ABM Industries Inc............................... 38,100 $ 1,057,275
ADIA S.A. ADR*................................... 51,900 1,050,975
Advo, Inc........................................ 42,200 1,097,200
Alco Standard Corporation........................ 7,600 346,750
Bearings, Inc.................................... 4,000 117,000
CompuCom Systems, Inc.*.......................... 20,900 198,550
Computer Task Group, Inc......................... 25,900 511,525
Hughes Supply, Inc............................... 41,700 1,178,025
JP Foodservice, Inc.*............................ 27,800 542,100
Jacobs Engineering Group Inc.*................... 16,600 415,000
Kelly Services, Inc. Class A..................... 36,800 1,021,200
Norrell Corporation.............................. 34,000 998,750
Performance Food Group Company*.................. 42,500 1,009,375
Rexel, Inc.*..................................... 25,400 342,900
Richfood Holdings, Inc........................... 139,064 3,719,962
Sun Distributors L.P. Class B.................... 54,300 271,500
Super Food Services, Inc......................... 19,200 249,600
Supervalu, Inc................................... 33,000 1,039,500
Sysco Corporation................................ 21,300 692,250
UniFirst Corporation............................. 52,600 946,800
United Stationers Inc............................ 10,000 277,500
Volt Information Sciences, Inc.*................. 54,600 1,487,850
Wackenhut Corporation Class A.................... 50,800 914,400
-------------
19,485,987
-------------

CONSUMER DURABLES (9.30%)
Anthony Industries, Inc.......................... 66,741 1,535,043
Champion Enterprises, Inc.*...................... 114,700 3,541,362
</TABLE>

<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

CONSUMER DURABLES (CONT'D)
First Brands Corporation......................... 23,200 $ 1,104,900
Honda Motor Co., Ltd............................. 32,000 1,344,000
M.D.C. Holdings, Inc............................. 144,400 1,028,850
Polaris Industries, Inc.......................... 29,250 859,219
Redman Industries, Inc.*......................... 119,200 4,023,000
Toro Company (The)............................... 66,800 2,196,050
Volvo AB, ADR.................................... 12,400 255,363
Windmere Corporation............................. 49,800 354,825
-------------
16,242,612
-------------

CONSUMER NON-DURABLES (3.43%)
Block Drug Company, Inc. Class A................. 19,673 683,637
ConAgra, Inc..................................... 25,600 1,056,000
IBP, Inc......................................... 34,800 1,757,400
International Multifoods Corporation............. 46,500 935,812
Interstate Bakeries Corporation.................. 58,100 1,299,988
Whitman Corporation.............................. 11,000 255,750
-------------
5,988,587
-------------

CONSUMER SERVICES (3.99%)
AMC Entertainment Inc.*.......................... 42,000 981,750
Aaron Rents, Inc. Class B........................ 72,900 1,312,200
Buffets, Inc.*................................... 82,500 1,134,375
Consolidated Products, Inc.*..................... 53,460 788,535
DAKA International, Inc.*........................ 31,500 866,250
NPC International, Inc. Class A.................. 55,600 403,100
Roto-Rooter, Inc................................. 10,800 356,400
Ryan's Family Steak Houses, Inc.*................ 162,200 1,135,400
-------------
6,978,010
-------------
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

28
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

ELECTRONIC TECHNOLOGY (8.23%)
Avnet Inc........................................ 8,700 $ 389,325
Dell Computer Corporation*....................... 8,600 297,775
Digital Equipment Corporation*................... 13,500 865,688
Esterline Technologies Corporation*.............. 48,200 1,138,725
Gateway 2000, Inc.*.............................. 33,500 820,750
HADCO Corporation*............................... 50,600 1,423,125
Lockheed Martin Corporation...................... 6,700 529,300
Logicon, Inc..................................... 2,200 60,500
Micron Electronics, Inc.*........................ 37,100 398,825
Park Electrochemical Corporation................. 54,200 1,788,600
Polaroid Corporation............................. 19,500 923,812
Quantum Corporation*............................. 42,800 690,150
SCI Systems, Inc.*............................... 68,900 2,135,900
United Technologies Corporation.................. 8,900 844,388
Western Digital Corporation*..................... 115,800 2,069,925
--------------
14,376,788
--------------

ENERGY MINERALS (2.11%)
EOTT Energy Partners, L.P........................ 5,600 102,200
Getty Petroleum Corporation...................... 33,400 450,900
KCS Energy, Inc.................................. 50,800 762,000
Kerr-McGee Corporation........................... 7,500 476,250
Tesoro Petroleum Corporation*.................... 78,900 680,512
Tosco Corporation................................ 24,100 918,813
USX-Marathon Group............................... 15,300 298,350
--------------
3,689,025
--------------

<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

FINANCE (4.40%)
American Annuity Group, Inc...................... 22,900 $ 271,938
American Federal Bank, FSB....................... 17,200 262,300
BankAtlantic Bancorp, Inc........................ 13,500 253,125
Bear Stearns Companies Inc. (The)................ 25,000 496,875
California Federal Bank, FSB*.................... 15,800 248,850
City National Corporation........................ 18,500 259,000
Comdisco, Inc.................................... 11,000 248,875
Firstbank Puerto Rico............................ 4,800 107,400
Gainsco, Inc..................................... 48,600 552,825
Glendale Federal Bank, FSB*...................... 14,800 259,000
Great Western Financial Corporation.............. 19,600 499,800
Independent Bank Corporation..................... 13,600 100,300
Morgan Keegan, Inc............................... 19,800 249,975
National City Corporation........................ 15,400 510,125
People's Bank.................................... 13,200 250,800
Peoples Heritage Financial Group, Inc............ 4,700 106,925
Presidential Life Corporation.................... 25,000 246,875
Quick & Reilly Group (The), Inc.................. 10,900 223,450
Reliance Group Holdings, Inc..................... 29,800 257,025
Riggs National Corporation*...................... 17,900 232,700
SouthTrust Corporation........................... 19,600 502,250
United Insurance Companies, Inc.*................ 28,600 539,825
USF&G Corporation................................ 29,200 492,750
Washington Mutual, Inc........................... 17,800 513,975
--------------
7,686,963
--------------
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

29
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

HEALTH SERVICES (6.55%)
Bergen Brunswig Corporation Class A.............. 96,000 $ 2,388,000
Bindley Western Industries, Inc.................. 122,500 2,082,500
Coventry Corporation*............................ 52,200 1,076,625
FHP International Corporation*................... 37,600 1,071,600
Foxmeyer Health Corporation*..................... 62,700 1,677,225
Health Systems International, Inc.*.............. 2,400 77,100
McKesson Corporation............................. 13,700 693,562
Owens & Minor, Inc............................... 7,800 99,450
Physicians Health Services Inc. Class A*......... 37,000 1,369,000
United Wisconsin Services, Inc................... 41,500 913,000
--------------
11,448,062
--------------

NON-ENERGY MINERALS (2.41%)
Castle (A.M.) & Company.......................... 58,050 1,632,656
J & L Specialty Steel, Inc....................... 62,500 1,171,875
Manville Corporation*............................ 19,200 252,000
Roanoke Electric Steel Corporation............... 15,300 254,363
Universal Forest Products, Inc................... 97,500 901,875
--------------
4,212,769
--------------

PROCESS INDUSTRIES (3.42%)
AEP Industries, Inc.*............................ 34,100 750,200
Darling International Inc.*...................... 38,100 1,023,938
Geon Company (The)............................... 32,600 794,625
Material Sciences Corporation*................... 39,000 580,125
Mercer International Inc.*....................... 12,000 246,000

<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

PROCESS INDUSTRIES (CONT'D)
Shiloh Industries, Inc.*......................... 20,200 $ 251,237
Spartech Corporation............................. 33,800 236,600
Springs Industries, Inc. Class A................. 21,500 889,563
Union Carbide Corporation........................ 13,100 491,250
United Dominion Industries Ltd................... 33,000 713,625
--------------
5,977,163
--------------

PRODUCER MANUFACTURING (6.85%)
Allied Products Corporation...................... 12,200 292,800
Avondale Industries Inc.*........................ 16,200 234,900
Butler Manufacturing Company..................... 39,250 1,540,562
Canadian Pacific, Ltd............................ 28,000 507,500
Citation Corporation*............................ 57,600 691,200
Cummins Engine Company, Inc...................... 20,200 747,400
Franklin Electric Company, Inc................... 6,200 204,600
Griffon Corporation*............................. 103,000 927,000
HON INDUSTRIES Inc............................... 24,600 571,950
Jason Inc.*...................................... 36,500 237,250
Johnson Controls, Inc............................ 14,000 962,500
Larizza Industries Inc.*......................... 22,100 142,269
Lear Seating Corporation*........................ 82,100 2,380,900
Oshkosh Truck Corporation Class B................ 6,800 103,700
Sterling Chemicals, Inc.*........................ 40,000 325,000
Titan Wheel International Inc.................... 14,400 234,000
Tower Automotive, Inc.*.......................... 10,000 175,000
Tredegar Industries, Inc......................... 25,500 828,750
UNR Industries, Inc.............................. 28,400 244,950
Varlen Corporation............................... 28,340 609,310
--------------
11,961,541
--------------
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

30
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

RETAIL TRADE (15.20%)
American Stores Co............................... 12,200 $ 326,350
Ben Franklin Retail Stores, Inc.*................ 10,450 28,738
Big B, Inc....................................... 60,000 600,000
Borders Group, Inc.*............................. 6,300 116,550
Carr Gottstein Foods Co.*........................ 18,600 106,950
Casey's General Stores, Inc...................... 59,600 1,303,750
Claire's Stores, Inc............................. 64,800 1,142,100
CompUSA, Inc.*................................... 34,200 1,064,475
Eckerd Corporation*.............................. 25,400 1,133,475
Fabri-Centers of America, Inc. Class B*.......... 42,500 456,875
Fay's Inc........................................ 29,700 222,750
Food Lion, Inc. Class A.......................... 79,000 451,785
Genovese Drug Stores Class A..................... 98,505 1,108,181
Giant Food Inc. Class A.......................... 3,000 94,500
Goody's Family Clothing, Inc.*................... 11,900 104,125
Hannaford Bros. Company.......................... 73,900 1,819,787
Kroger Company (The)*............................ 29,200 1,095,000
Longs Drug Stores Corporation.................... 25,200 1,206,450
Petco Animal Supplies, Inc.*..................... 34,800 1,017,900
Regis Corporation................................ 111,200 2,668,800
Rex Stores Corporation*.......................... 24,700 438,425
Rite Aid Corporation............................. 30,700 1,051,475
Ross Stores, Inc................................. 12,600 240,975
Ruddick Corporation.............................. 84,000 966,000
Safeway, Inc.*................................... 15,300 787,950
Service Merchandise Company, Inc.*............... 83,400 417,000
Shopko Stores, Inc............................... 44,200 497,250
Smart & Final, Inc............................... 1,200 25,500
Smith's Food & Drug Centers, Inc................. 35,700 901,425
Sportmart, Inc.*................................. 14,700 69,825

<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

RETAIL TRADE (CONT'D)
Stop & Shop Companies, Inc.*..................... 36,400 $ 841,750
Vons Companies, Inc.*............................ 83,000 2,344,750
Walgreen Company................................. 26,400 788,700
Winn-Dixie Stores, Inc........................... 30,000 1,106,250
--------------
26,545,816
--------------

TECHNOLOGY SERVICES (4.70%)
Arrow Electronics, Inc.*......................... 38,200 1,647,375
Bell Industries, Inc.*........................... 46,095 1,037,138
Control Data Systems, Inc.*...................... 85,100 1,670,087
Kaman Corporation Class A........................ 84,200 936,725
Safeguard Scientifics, Inc.*..................... 59,100 2,925,450
--------------
8,216,775
--------------

TRANSPORTATION (4.03%)
Air Express International Corporation............ 77,550 1,783,650
American Medical Response, Inc.*................. 25,400 825,500
American President Companies, Ltd................ 40,800 938,400
Amtran, Inc.*.................................... 20,000 255,000
Federal Express Corporation*..................... 10,000 738,750
Harper Group, Inc.(The).......................... 39,500 701,125
KLM Royal Dutch Airlines, ADR.................... 23,800 838,950
Landstar System, Inc.*........................... 6,000 160,500
Northwest Airlines Corporation*.................. 5,200 265,200
Old Dominion Freight Line, Inc.*................. 39,600 316,800
WorldCorp, Inc.*................................. 22,500 225,000
--------------
7,048,875
--------------
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

31
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

UTILITIES (11.18%)
Allegheny Power System, Inc...................... 29,300 $ 838,713
American Electric Power Company, Inc............. 18,000 729,000
CMS Energy Corporation........................... 34,500 1,030,687
Carolina Power & Light Company................... 29,500 1,017,750
Central & South West Corporation................. 28,600 797,225
Coastal Corporation (The)........................ 25,200 938,700
Columbia Gas System, Inc. (The)*................. 19,900 873,113
DQE.............................................. 29,300 900,975
Destec Energy, Inc.*............................. 85,000 1,168,750
Detroit Edison Company........................... 29,200 1,007,400
FPL Group, Inc................................... 22,300 1,034,162
Illinova Corporation............................. 35,800 1,074,000
Jabil Circuit, Inc.*............................. 6,700 75,375
Korea Electric Power Corporation, ADR............ 19,600 524,300

<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>

UTILITIES (CONT'D)
New York State Electric & Gas Corporation........ 28,300 $ 732,263
Ohio Edison Company.............................. 40,300 947,050
Pacific Gas & Electric Company................... 27,500 780,312
Pinnacle West Capital Corporation................ 25,100 721,625
Public Service Company of Colorado............... 22,500 795,937
SCEcorp.......................................... 46,700 828,925
Tejas Gas Corporation*........................... 16,000 846,000
Unicom Corporation............................... 30,300 992,325
Western Resources, Inc........................... 26,000 867,750
--------------
19,522,337
--------------
Total Common Stocks
(Cost $138,122,889)............................. $ 169,381,310
--------------
</TABLE>

WARRANTS (0.03%)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
Unitrode Corporation*............................ 11,535 $ 43,256
-------------

<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total Warrants
(Cost $0)....................................... $ 43,256
-------------
</TABLE>

SHORT-TERM INVESTMENTS (4.79%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)

<S> <C> <C>
REPURCHASE AGREEMENTS (4.79%)
State Street Bank and Trust Company 4.25%, due
01/02/96 (Collateralized by $6,425,000 U.S.
Treasury Bonds, 8.75%, due 05/15/17)............ $8,373,783 $ 8,373,783
-------------

<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total Short-Term Investments
(Cost $8,373,783)............................... $ 8,373,783
-------------
</TABLE>

- --------------------------------------------------------*Non-Income Producing.

32
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total Investments (101.77%) (Cost
$146,496,672+).................................. $ 177,798,349
Liabilities in Excess of Cash and Other Assets
(-1.77%)........................................ (3,093,170)
-------------
Net Assets (100.00%) 12,880,921 shares
outstanding (Note 3)............................ $ 174,705,179
-------------
-------------

<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Net Asset Value, offering and redemption price
per share....................................... $13.56
-------------
-------------
</TABLE>

See notes to financial statements.

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

33
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ULTRA SHORT
TERM BALANCED GROWTH AND EQUITY
INCOME FUND FUND INCOME FUND FUND
-------------- -------------- ------------- --------------

<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest.............................. $177,846 $ 1,495,957 $ 15,979 $ 488,594
Dividends (a)......................... -- 793,627 97,114 2,468,351
-------------- -------------- ------------- --------------
Total income........................ 177,846 2,289,584 113,093 2,956,945
-------------- -------------- ------------- --------------
Expenses (Note 2):
Management Fee........................ 10,021 414,448 41,173 1,860,540
Custodian and related shareholder
expenses............................ 16,318 108,481 25,358 144,467
Legal, compliance and filing fees..... 12,846 32,378 13,932 72,072
Audit and accounting.................. 5,500 11,501 5,500 21,999
Trustees' fees........................ 156 2,724 209 11,834
Other................................. 2,567 9,488 2,817 13,795
-------------- -------------- ------------- --------------
Total expenses before
reimbursement..................... 47,408 579,020 88,989 2,124,707
Fees paid indirectly.................. (1,189) (4,331) (4,404) (571)
Expense reimbursement from Advisor.... (41,811) (160,241) (43,412) --
-------------- -------------- ------------- --------------
Net expenses........................ 4,408 414,448 41,173 2,124,136
-------------- -------------- ------------- --------------
Net investment income................... 173,438 1,875,136 71,920 832,809
-------------- -------------- ------------- --------------
- --------------------------------------

<CAPTION>
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS -
- -
- --------------------------------------
<S> <C> <C> <C> <C>
Net realized gain on investments........ 230 2,248,284 165,914 6,400,213
Change in unrealized appreciation of
investments............................ 9,299 6,046,085 840,733 26,485,424
-------------- -------------- ------------- --------------
Net gain on investments............... 9,529 8,294,369 1,006,647 32,885,637
-------------- -------------- ------------- --------------
Increase in net assets from
operations............................. $182,967 $ 10,169,505 $1,078,567 $ 33,718,446
-------------- -------------- ------------- --------------
-------------- -------------- ------------- --------------
</TABLE>

(a) Dividends recorded net of foreign withholding taxes of $0, $1,237, $121 and
$3,221, respectively.

See notes to financial statements.

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

34
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
STATEMENTS OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ULTRA SHORT TERM
INCOME FUND BALANCED FUND
-------------------------------- --------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994* 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>

INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C> <C> <C>
Operations:
Net investment income.................................... $ 173,438 $ 44 $ 1,875,136 $ 820,345
Net realized gain on investments......................... 230 -- 2,248,284 473,376
Change in unrealized appreciation of
investments............................................ 9,299 -- 6,046,085 (1,350,226)
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from
operations............................................. 182,967 44 10,169,505 (56,505)
--------------- --------------- --------------- ---------------
Distributions to shareholders from:
Net investment income.................................... (169,141) -- (1,877,538) (819,017)
Net realized gains on investments........................ -- -- (2,248,136) (473,376)
--------------- --------------- --------------- ---------------
Total distributions to shareholders.................... (169,141) -- (4,125,674) (1,292,393)
--------------- --------------- --------------- ---------------
Transactions in shares of beneficial interest
(Note 3).................................................. 3,975,264 621,350 52,175,819 7,361,085
--------------- --------------- --------------- ---------------
Total increase......................................... 3,989,090 621,394 58,219,650 6,012,187
Net Assets:
Beginning of period...................................... 621,394 -- 27,702,552 21,690,365
--------------- --------------- --------------- ---------------
End of period (including undistributed net investment
income of $4,341, $44, $353 and $2,755,
respectively).......................................... $ 4,610,484 $ 621,394 $ 85,922,202 $ 27,702,552
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>

* Commenced operations on December 27, 1994.

See notes to financial statements.

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

35
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
STATEMENTS OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND EQUITY FUND
--------------------------------- ----------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994* 1995 1994
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>

INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss)........................... $ 71,920 $ (2) $ 832,809 $ 413,885
Net realized gain on investments....................... 165,914 -- 6,400,213 13,339,329
Change in unrealized appreciation of
investments.......................................... 840,733 -- 26,485,424 (23,395,147)
--------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets from
operations........................................... 1,078,567 (2) 33,718,446 (9,641,933)
--------------- ---------------- ---------------- ----------------
Distributions to shareholders from:
Net investment income.................................. (66,641) -- (829,705) (413,663)
Net realized gains on investments...................... (165,914) -- (6,388,563) (13,339,329)
In excess of realized gains on investments............. (216) -- -- (6,248)
--------------- ---------------- ---------------- ----------------
Total distributions to shareholders.................. (232,771) -- (7,218,268) (13,759,240)
--------------- ---------------- ---------------- ----------------
Transactions in shares of beneficial interest
(Note 3)................................................ 6,799,365 315,281 (46,902,152) 21,402,251
--------------- ---------------- ---------------- ----------------
Total increase (decrease)............................ 7,645,161 315,279 (20,401,974) (1,998,922)
Net Assets:
Beginning of period.................................... 315,279 -- 195,107,153 197,106,075
--------------- ---------------- ---------------- ----------------
End of period (including undistributed net investment
income of $5,277, ($2), $4,485 and $1,381,
respectively)........................................ $ 7,960,440 $ 315,279 $ 174,705,179 $ 195,107,153
--------------- ---------------- ---------------- ----------------
--------------- ---------------- ---------------- ----------------
</TABLE>

* Commenced operations on December 27, 1994.

See notes to financial statements.

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

36
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS

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

1. SUMMARY OF ACCOUNTING POLICIES

Eclipse Financial Asset Trust (the "Trust"), a Massachusetts business trust
registered under the Investment Company Act of 1940, is a no-load, diversified,
open-end management investment company. The Trust currently has four investment
portfolios, the Ultra Short Term Income Fund, the Balanced Fund, the Growth and
Income Fund and the Equity Fund. The investment objective of the Ultra Short
Term Income Fund is to seek a high total return consisting of current income,
preservation of capital, and a relatively stable net asset value. The Balanced
Fund seeks a high total return from a combination of equity and fixed-income
investments. The Growth and Income Fund seeks a high total return consisting of
both current income and realized and unrealized capital gains from equity
securities and equity-related securities. The investment objective of the Equity
Fund is to seek a high total return from equity investments. The financial
statements are prepared in accordance with generally accepted accounting
principles for investment companies as follows:

a) Valuation of Securities

Securities traded on a national securities exchange or admitted to trading
on the National Association of Securities Dealers Inc. Automated Quotations
National List are valued at the last reported sales price on the last
business day of the fiscal period. Common stocks for which no sale was
reported on that date and over-the-counter securities are valued at the
mean between the last reported bid and asked prices. United States
Government obligations and other debt instruments having sixty days or less
remaining until maturity are stated at amortized cost. Debt instruments
having a remaining maturity of more than sixty days will be valued at the
highest bid price obtained from a dealer maintaining an active market in
that security or on the basis of prices obtained from a pricing service
approved as reliable by the Board of Trustees. All other investment assets,
including restricted and not readily marketable securities, are valued in
such a manner as the Board of Trustees in good faith deems appropriate to
reflect their fair market value.

b) Federal Income Taxes

It is the policy of each Fund to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
provision for federal income tax is required.

c) Organization Expenses

Costs incurred with the initial organization and registration of the Ultra
Short Term Income Fund and the Growth and Income Fund are estimated to be
approximately $26,200 for each Fund. Each Fund will amortize its respective
organization expenses over the period commencing when the Fund's asset size
reaches $25 million to December 26, 1999.

d) Dividends and Distributions to Shareholders

Dividends and distributions are recorded on the ex-dividend date. Dividends
from net investment income will be declared and paid quarterly for the
Ultra Short Term Income Fund and the Balanced Fund, and annually for the
Growth and Income Fund and the Equity Fund. Distributions from net realized
gains and income distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for deferral of
wash sales.

e) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of

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

37
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.

f) General

Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned and dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities transactions are recorded
on the identified cost basis. It is the Trust's policy to take possession
of securities as collateral under repurchase agreements and to determine on
a daily basis that the value of such securities plus accrued interest are
sufficient to cover the value of the repurchase agreements.

2. INVESTMENT MANAGEMENT FEES AND
OTHER TRANSACTIONS WITH AFFILIATES

Under the Management Contract, the Trust pays a management fee to Towneley
Capital Management, Inc. (Manager) equal to an annual rate of the average daily
net assets of .40%, .80%, .90% and 1.00% for the Ultra Short Term Income Fund,
the Balanced Fund, the Growth and Income Fund and the Equity Fund, respectively.
The Manager is required to reimburse each Fund for its expenses (exclusive of
interest, taxes, brokerage, allowable distribution expenses, and extraordinary
expenses) to the extent that such expenses, including the management fee, for
any fiscal year exceed 2.5% of the first $30 million of the Fund's average net
assets, 2% of the next $70 million of its average net assets and 1.5% of its
average net assets in excess of $100 million. No such reimbursement was required
for the year ended December 31, 1995. For the year ended December 31, 1995, the
Manager voluntarily waived fees for the Ultra Short Term Income Fund, the
Balanced Fund and the Growth and Income Fund of $10,021, $160,241 and $41,173,
respectively. In addition the Manager reimbursed expenses of $31,790 for the
Ultra Short Term Income Fund and $2,239 for the Growth and Income Fund.

Fees are paid to Trustees who are unaffiliated with the Manager on the basis of
$2,000 per annum plus $750 per meeting attended.

Included in the statement of operations under the caption "Custodian and related
shareholder expenses" are custodian fee offsets of $1,189, $4,331, $4,404 and
$571 for the Ultra Short Term Income Fund, the Balanced Fund, the Growth and
Income Fund and the Equity Fund, respectively.

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

38
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS

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

3. TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST

At December 31, 1995, the Trust had an unlimited authorized number of shares of
beneficial interest ($.01 par value). Capital paid in amounted to $4,596,614,
$79,212,607, $7,114,646 and $143,399,017 for the Ultra Short Term Income Fund,
the Balanced Fund, the Growth and Income Fund and the Equity Fund. Transactions
were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
BALANCED FUND
ULTRA SHORT TERM INCOME FUND --------------------------------------------------
----------------------------------------

YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------- ----------------- ------------------------ ------------------------

SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold.......................... 2,141,483 $4,361,299 310,675 $621,350 2,895,766 $ 57,764,393 501,006 $ 9,339,173
Issued on reinvestment of
dividends.................... 83,063 169,028 -- -- 198,878 4,040,631 69,574 1,250,599
Redeemed...................... (272,844) (555,063) -- -- (480,370) (9,629,205) (175,210) (3,228,687)
--------- ---------- ------- -------- ---------- ------------ ---------- ------------
Net increase.................. 1,951,702 $3,975,264 310,675 $621,350 2,614,274 $ 52,175,819 395,370 $ 7,361,085
--------- ---------- ------- -------- ---------- ------------ ---------- ------------
--------- ---------- ------- -------- ---------- ------------ ---------- ------------

<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH AND INCOME FUND EQUITY FUND
------------------------------------- --------------------------------------------------

PERIOD ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 1994 DECEMBER 31, 1995 DECEMBER 31, 1994
------------------- ---------------- ------------------------ ------------------------

SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold.......................... 608,522 $6,717,270 31,528 $315,281 94,373 $ 1,236,042 1,801,239 $ 23,749,360
Issued on reinvestment of
dividends.................... 16,609 203,130 -- -- 532,276 7,175,073 1,159,524 13,717,171
Redeemed...................... (10,233) (121,035) -- -- (4,246,137) (55,313,267) (1,225,156) (16,064,280)
------- ---------- ------ -------- ---------- ------------ ---------- ------------
Net increase (decrease)....... 614,898 $6,799,365 31,528 $315,281 (3,619,488) ($46,902,152) 1,735,607 $ 21,402,251
------- ---------- ------ -------- ---------- ------------ ---------- ------------
------- ---------- ------ -------- ---------- ------------ ---------- ------------
</TABLE>

4. INVESTMENT TRANSACTIONS

Purchases and sales of investment securities, other than U.S. Government direct
and agency obligations and short-term investments, totalled $2,101,619 and
$228,550 for the Ultra Short Term Income Fund, $81,725,552 and $32,591,144 for
the Balanced Fund, $9,306,782 and $2,650,181 for the Growth and Income Fund and
$131,430,752 and $177,771,126 for the Equity Fund.

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

39
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS

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

5. SELECTED FINANCIAL INFORMATION.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
ULTRA SHORT TERM INCOME FUND

DECEMBER 27,
FOR THE 1994
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance for a share
outstanding throughout the period
Net asset value, beginning of period........................ $ 2.00 $ 2.00
--------------- ---------------
Income from investment operations:
Net investment income....................................... 0.11 --
Net realized and unrealized gains
on investments............................................. 0.04 --
--------------- ---------------
Total from investment operations........................ 0.15 --
--------------- ---------------
Less distributions:
Dividends from net investment income........................ (0.11) --
--------------- ---------------
Total distributions..................................... (0.11) --
--------------- ---------------
Net asset value, end of period.............................. $ 2.04 $ 2.00
--------------- ---------------
--------------- ---------------
Total return................................................ 7.83% 0.00%
Ratios/Supplemental data
Net assets, end of period (000)............................. $4,610 $ 621
Ratios to average net assets:
Expenses.................................................. 0.22%+# 0.50%*+
Net investment income..................................... 6.92%+ 0.65%*+
Portfolio turnover rate..................................... 39.26% 0.00%
</TABLE>

- -------------
* Annualized.

+ Net of management fee waived equivalent to 0.4% and 0.4% of average net assets
plus expenses reimbursed equivalent to 1.27% and 21.54% of average net assets,
respectively.
# Includes custodian fees paid indirectly.
- --------------------------------------------------------------------------------

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

40
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS

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

5. SELECTED FINANCIAL INFORMATION (CONT'D)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
BALANCED FUND
FOR THE YEAR ENDED DECEMBER 31,

1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating
performance for a share
outstanding throughout the
year
Net asset value, beginning of
year......................... $ 17.76 $ 18.63 $ 17.37 $ 17.02 $ 14.69
--------- --------- --------- --------- ---------
Income from investment
operations:
Net investment income......... 0.64 0.56 0.62 0.73 0.71
Net realized and unrealized
gains (losses)
on investments............... 3.39 (0.56) 2.32 1.28 2.33
--------- --------- --------- --------- ---------
Total from investment
operations............... 4.03 0.00 2.94 2.01 3.04
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment
income....................... (0.64) (0.56) (0.64) (0.73) (0.71)
Distributions from net
realized gains............... (0.56) (0.31) (1.04) (0.93) --
--------- --------- --------- --------- ---------
Total distributions....... (1.20) (0.87) (1.68) (1.66) (0.71)
--------- --------- --------- --------- ---------
Net asset value, end of
year......................... $ 20.59 $ 17.76 $ 18.63 $ 17.37 $ 17.02
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return.................. 22.99% 0.01% 17.06% 12.01% 20.91%
Ratios/Supplemental data
Net assets, end of year
(000)........................ $ 85,922 $ 27,703 $ 21,690 $ 14,044 $ 10,736
Ratios to average net assets:
Expenses.................. 0.81%+# 0.80%+ 0.69%+ 0.52%+ 0.66%+
Net investment income..... 3.62%+ 3.10%+ 3.42%+ 4.31%+ 5.03%+
Portfolio turnover rate....... 74.72% 94.38% 65.05% 95.51% 101.51%
</TABLE>

- ------------
+ Net of management fee waived equivalent to 0.3%, 0.4%, 0.5%, 0.8% and 0.8% of
average net assets.
# Includes custodian fees paid indirectly.
- --------------------------------------------------------------------------------

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

41
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS

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

5. SELECTED FINANCIAL INFORMATION (CONT'D)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND

FOR THE YEAR DECEMBER 27, 1994
ENDED DECEMBER (INCEPTION) TO
31, 1995 DECEMBER 31, 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share operating performance for a share
outstanding throughout the period
Net asset value, beginning of period.............................. $ 10.00 $ 10.00
-------- --------
Income from investment operations:
Net investment income............................................. 0.11 --
Net realized and unrealized gains
on investments................................................... 2.57 --
-------- --------
Total from investment operations.............................. 2.68 --
-------- --------
Less distributions:
Dividends from net investment income.............................. (0.11) --
Distributions from net realized gains............................. (0.26) --
-------- --------
Total distributions........................................... (0.37) --
-------- --------
Net asset value, end of period.................................... $ 12.31 $ 10.00
-------- --------
-------- --------
Total return...................................................... 26.82% 0.00%
Ratios/Supplemental data
Net assets, end of period (000)................................... $ 7,960 $ 315
Ratios to average net assets:
Expenses........................................................ 1.00%+# 1.20%*+
Net investment income........................................... 1.57%+ (0.06)%*+
Portfolio turnover rate........................................... 63.16% 0.00%
</TABLE>

- -------------
* Annualized.

+ Net of management fee waived equivalent to 0.9% and 0.9% of average net assets
plus expenses reimbursed equivalent to 0.05% and 43.15% of average net assets,
respectively.
# Includes custodian fees paid indirectly.
- --------------------------------------------------------------------------------

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

42
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS

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

5. SELECTED FINANCIAL INFORMATION (CONT'D)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
EQUITY FUND
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance for a
share
outstanding throughout the year
Net asset value, beginning of year........ $ 11.82 $ 13.35 $ 13.20 $ 11.73 $ 9.07
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income..................... 0.07 0.03 0.08 0.15 0.16
Net realized and unrealized gains (losses)
on investments........................... 2.26 (0.66) 2.17 2.12 2.66
---------- ---------- ---------- ---------- ----------
Total from investment operations...... 2.33 (0.63) 2.25 2.27 2.82
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income...... (0.07) (0.03) (0.08) (0.15) (0.16)
Distributions from net realized gains..... (0.52) (0.87) (2.02) (0.65) --
---------- ---------- ---------- ---------- ----------
Total distributions................... (0.59) (0.90) (2.10) (0.80) (0.16)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.............. $ 13.56 $ 11.82 $ 13.35 $ 13.20 $ 11.73
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total return.............................. 19.69% (4.74)% 17.02% 19.38% 31.18%
Ratios/Supplemental data
Net assets, end of year (000)............. $ 174,705 $ 195,107 $ 197,106 $ 163,170 $ 149,385
Ratios to average net assets:
Expenses................................ 1.14%# 1.12% 1.12% 1.15% 1.18%
Net investment income................... 0.45% 0.21% 0.55% 1.17% 1.48%
Portfolio turnover rate................... 74.40% 92.20% 101.09% 110.98% 118.58%
</TABLE>

- -------------
# Includes custodian fees paid indirectly.
- --------------------------------------------------------------------------------

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

43
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Trustees and Shareholders
Eclipse Financial Asset Trust

We have audited the accompanying statements of net assets of the Ultra Short
Term Income Fund, the Balanced Fund, the Growth and Income Fund, and the Equity
Fund series of Eclipse Financial Asset Trust, as of December 31, 1995, and the
related statements of operations, changes in net assets and selected financial
information for the periods indicated in the accompanying financial statements.
These financial statements and selected financial information are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and selected financial information based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of the Ultra Short Term Income Fund, the Balanced Fund, the Growth and
Income Fund, and the Equity Fund series of Eclipse Financial Asset Trust as of
December 31, 1995, the results of their operations, the changes in their net
assets and the selected financial information for the periods indicated, in
conformity with generally accepted accounting principles.

/s/ McGladrey & Pullen, LLP
New York, New York
January 26, 1996

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

44
<PAGE>
- --------------------------------------------------------------------------------

ECLIPSE FINANCIAL ASSET TRUST
TRUSTEES AND OFFICERS

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

<TABLE>
<S> <C>
Wesley G. McCain Trustee, Chairman and President

Trustee, Secretary, Executive Vice
Sigrid A. Hess President

John Novogrod Trustee

John C. Van Eck Trustee

Yung Wong Trustee

Anthony W. Polis Vice President, Treasurer

Sylvia McCormick Vice President

Antoinette B. Cirillo Assistant Treasurer

A. Thomas Smith III Assistant Secretary

Sara L. Badler Assistant Secretary
</TABLE>

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

45
<PAGE>
TOWNELEY CAPITAL MANAGEMENT, INC.

Towneley Capital Management, Inc. is the Manager of the Eclipse Funds.

Established in 1971, Towneley is a registered investment adviser serving
individual and institutional clients. As of December 31, 1995 total assets under
management exceeded $950 million.

The firm's three lines of business are the investment management of the Eclipse
Funds, of separate accounts, and of portfolios of no-load mutual funds
customized to meet clients' financial planning objectives.

Towneley Capital Management is organized for efficient investment decision
making and administration with electronically linked offices in New York City,
Laguna Hills, California and Peachtree City, Georgia.

Hallmarks of each of Towneley Capital Management's investment services are
integration of risk management with pursuit of investment return, dedication to
clients' investment goals, application of fundamentally sound quantitative
strategies and extension of institutional investment expertise to individuals
and groups through low cost approaches.

Towneley Capital Management's founder and chairman, Wesley G. McCain, directs
the investment process, in collaboration with a staff of 25 professional and
administrative personnel. Dr. McCain, who holds a doctoral degree from Stanford
University and master's degrees from Columbia and Stanford, was formerly on the
faculty of the Graduate School of Business of Columbia University. Towneley
Capital Management has managed the Eclipse Funds since their inception.

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

46
<PAGE>
GLOSSARY

ASSET/VALUE STOCKS are defined as companies which are cheap to their economic
book value or adjusted net worth. These companies typically have low price to
stated book value ratios, low price to earnings ratios, high dividends, and low
price to sales ratios.

CURRENT YIELD is the annual interest paid by a bond, divided by its current
market value.

DURATION is a measure of the expected life of all fixed income securities in a
fund. It is market value weighted and incorporates each bond's yield, coupon
interest payments, final maturity and call feature into one measure. In general,
the lower the coupon rate of interest, the longer the duration, and the higher
the coupon, the shorter the duration. Duration is used as a proxy for the
sensitivity of prices to changes in interest rates. The shorter the duration,
the less sensitive the price is to interest rate changes.

GROWTH/VALUE STOCKS are defined as companies which have experienced a high level
of profitability from a combination of high margins and/or asset turns. They
generally have good working capital and debt management, and typically have low
price to sales ratios, high price earnings ratios, nominal dividends, and high
historical earnings or revenue growth.

LARGE CAPITALIZATION is defined by Eclipse by ranking all publicly traded
companies in our universe based on market capitalization. We then divide that
universe into ten groups, each with an equal number of companies. The 10% with
the highest market capitalization are considered large. The next 10-20% are
mid-size and the balance of the universe we consider small companies. As the
stock market and the economic environment change, companies once considered
large may become mid-size or small and vice versa.

LIPPER BALANCED FUND INDEX tracks the performance of the 30 largest balanced
funds, adjusted for the reinvestment of capital gain distributions and income
dividends. Source: Lipper Analytical Services

LIPPER GROWTH AND INCOME FUND INDEX tracks the performance of the 30 largest
growth and income funds, adjusted for the reinvestment of capital gains
distributions and income dividends. These growth and income funds combine a
growth of earnings orientation and an income requirement for level and/or rising
dividends. Source: Lipper Analytical Services

LIPPER SMALL COMPANY GROWTH FUND INDEX tracks the performance of the 30 largest
small company growth funds, adjusted for the reinvestment of capital gains
distributions and income dividends. Source: Lipper Analytical Services

LIPPER ULTRA SHORT OBLIGATION FUNDS AVERAGE is an average of funds which invest
at least 65% of their assets in investment grade debt issues, or better, and
maintain a portfolio dollar-weighted average maturity between 91 days and 365
days. Source: Lipper Analytical Services

MARKET CAPITALIZATION refers to the market value of all of a company's shares of
common stock outstanding. If a company has five million shares of common stock
selling at $50 a share, its market capitalization is $250 million dollars.

MERRILL LYNCH 3-5 YEAR GOVERNMENT BOND INDEX is an index of all currently
available United States Treasury Bonds maturing in three to five years. Source:
Merrill Lynch & Company

RISK, in the sense of market risk, refers to the possibility that an asset might
lose value or not gain value because of price fluctuations. There are virtually
riskless investments, such as Treasury bills and low-risk investments like
short-term high quality bonds. Medium- and high-risk investments include stocks,
bonds, options, etc. A fundamental principle of finance is that investors make
riskier investments because they expect higher returns over time.

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

47
<PAGE>
RUSSELL 2000 INDEX tracks the smallest 2000 companies in the Russell 3000 Index.
The Russell 3000 includes the largest 3,000 United States companies as
determined by market capitalization. The index represents 98% of the U.S. equity
market. Source: Frank Russell Company

S&P 500 COMPOSITE STOCK PRICE INDEX is a market value weighted benchmark of
common stock performance. The S&P Composite Index includes 500 stocks in 87
industries and represents over 70% of the total U.S. equity market. Source:
Standard & Poor's Securities.

S&P SMALL CAPITALIZATION 600 INDEX is a market value weighted benchmark of 600
smaller capitalization common stocks. Source: Standard & Poor's Securities.

SHARPE RATIO measures return in excess of the risk-free rate per unit of risk.
For example, Treasury bills pay a risk-free rate of return. Subtract the
Treasury bill rate of return from the portfolio's rate of return to get the
extra return earned by taking a greater risk. Divide the excess return by the
portfolio's standard deviation (a measure of risk) to get the Sharpe Ratio. By
comparing the Sharpe Ratios of different funds and indexes, you can see which
provided more excess return per unit of risk. (Calculations are based on
arithmetic monthly averages of returns and standard deviations.)

SMALL CAPITALIZATION (see Large Capitalization)

STANDARD DEVIATION is a statistical measure, often used to evaluate market risk.
Standard deviation compares the volatility or variation of all the individual
returns to the average return of an investment over a time period. The bigger
the price fluctuations, the higher the variation and the riskier the return.

WEIGHTED AVERAGE MATURITY is the remaining life of all the bonds in a portfolio
adjusted for the size of each holding. If you held 60% of your investment in
Bond A, which matured in 4 years, and 40% in Bond B, maturing in 2 years, your
average weighted maturity would be 3.2 years (60% of 4 plus 40% of 2).

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

48
<PAGE>
Eclipse Financial Services, Inc.
P.O. Box 2196
Peachtree City, GA 30269
Telephone: 800.872.2710
In Georgia: 770.631.0414

Towneley Capital Management, Inc.
144 East 30th Street
New York, New York 10016

Investors Fiduciary Trust Company
210 West 10th Street
Kansas City, Missouri 64105-1716
<PAGE>

PART C
OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits.

(a) Financial Statements

Included in Prospectus: Financial Highlights.

Included in the Statement of Additional Information: Independent
Auditors' Report, dated January 26, 1996; Statement of Net Assets,
Equity Portfolio - dated December 31, 1995; Statement of Net Assets,
Balanced Portfolio - dated December 31, 1995; Statement of Net Assets,
Growth and Income Portfolio - dated December 31, 1995; Statement of
Net Assets, Ultra Short Term Income Portfolio - dated December 31,
1995; Statements of Operations - year ended December 31, 1995;
Statements of Changes in Net Assets - years ended December 31, 1995
and December 31, 1994; Notes to Financial Statements.

(b) Exhibits:

(1) (a) Copy of Agreement and Declaration of Trust of the Registrant
(Exhibit 1 to Registration Statement on Form N-1A filed on
September 19, 1986 (File Nos. 33-8865 and 811-4847) and
incorporated herein by reference).

(b) Copy of First Amendment of Eclipse Financial Asset Trust
(formerly Eclipse Equity Trust) (Exhibit 1(b) to Pre-
Effective Amendment No. l to Registration Statement on Form
N-1A filed on January 9, 1987 (File Nos. 33-8865 and 811-
4847) and incorporated herein by reference).

(c) Form of Certificate of Designation of Eclipse Financial
Asset Trust relating to the Ultra Short Term Income Fund and
the Growth and Income Fund (Exhibit 1(c) to Post Effective
Amendment No. 12 to Registration Statement on Form N-1A
filed on October 13, 1994 (File Nos. 33-8865 and 811-4847)
and incorporated herein by reference).

C-1

<PAGE>

(2) Copy of the By-laws of the Registrant (Exhibit 2 to Registration
Statement on Form N-1A filed on September 19, 1986 (File Nos. 33-
8865 and 811-4847) and incorporated herein by reference).

(5) (a) Copy of Amended Management Contract between the Registrant
and Towneley Capital Management, Inc. (Exhibit 5 to Post-
Effective Amendment No. 6 to Registration Statement on Form
N-1A filed on April 30, 1990 (File Nos. 33-8865 and 811-
4847) and incorporated herein by reference).

(b) Form of Management Contract between the Registrant and
Towneley Capital Management, Inc. relating to the Ultra
Short Term Income Fund and the Growth and Income Fund
(Exhibit 5 to Post-Effective Amendment No. 12 to
Registration Statement on Form N-1A filed on October 13,
1994 (File Nos. 33-8865 and 811-4847) and incorporated
herein by reference).

(8) (a) Copy of Custody Agreement between the Registrant and
Investors Fiduciary Trust Company. (Exhibit 8 to Post-
Effective Amendment No. 6 to Registration Statement on Form
N-1A filed on April 30, 1990 (File Nos. 33-8865 and 811-
4847) and incorporated herein by reference.)

(b) Copy of Transfer Agency Agreement between the Registrant and
Investors Fiduciary Trust Company. (Exhibit 8 to Post-
Effective Amendment No. 6 to Registration Statement on Form
N-1A filed on April 30, 1990 (File Nos. 33-8865 and 811-
4847) and incorporated herein by reference.)

(9) Copy of Administration Contract between the Registrant and NYLIFE
Securities Inc. (Exhibit 9 to Post-Effective Amendment No. 9 to
Registration Statement on Form N-1A filed on April 30, 1991 (File
Nos. 33-8865 and 811-4847) and incorporated herein by reference.)

(10) Opinion of Messrs. Seward & Kissel (Exhibit 1O(a) to Pre-
Effective Amendment No. 1 to Registration Statement on Form N-1A
filed on January 9, 1987 (File Nos. 33-8865 and 811-4847) and
incorporated herein by reference).

C-2

<PAGE>

(11) (a) Opinion of Messrs. Sullivan & Worcester (Exhibit 11(a) to
Pre-Effective Amendment No. 1 to Registration Statement on
Form N-1A filed on January 9, 1987 (File Nos. 33-8865 and
811-4847) and incorporated herein by reference).

(b) Consent of Independent Auditors.

(13) Investment representation letter of initial purchaser of shares
of beneficial interest of the Registrant (Exhibit 13 to Pre-
Effective Amendment No. 1 to Registration Statement on Form N-1A
filed on January 9, 1987 (File Nos. 33-8865 and 811-4847) and
incorporated herein by reference).

(16) Schedule for computation of each performance quotation provided
in response to Item 22.

(27) Financial Data Schedules.

Other Exhibits: Powers of Attorney of Ms. Hess and Messrs. McCain, Van
Eck and Wong (Other Exhibits to Post-Effective Amendment No. 1 to Registration
Statement on Form N-1A filed on July 2, 1987 (File Nos. 33-8865 and 811-4847)
and incorporated herein by reference).

ITEM 25. Persons Controlled by or under Common Control with Registrant.

No such persons.

ITEM 26. Number of Holders of Securities.

The following information is furnished as of April 15, 1996:

(1) (2)
Number of Record
Title of Class Holders
-------------------------- -----------------
Equity Fund Shares of Beneficial
Interest, par value $.01 per share 1,060

Balanced Fund Shares of Beneficial
Interest, par value $.01 per share 1,321

Growth and Income Fund Shares of Beneficial
Interest, par value $.01 per share 278

Ultra Short Term Income Fund Shares of
Beneficial Interest, par value $.01
per share 98

C-3

<PAGE>

ITEM 27. Indemnification

Registrant incorporates herein by reference the response to Item 27 of
the Registration Statement on Form N-1A filed with the Commission on September
19, 1986.

ITEM 28. Business and Other Connections of Investment Adviser.

The description of Towneley Capital Management, Inc. under the
captions "The Manager" in the Prospectus and "Management" in the Statement of
Additional Information constituting Parts A and B, respectively, of this
Registration Statement are incorporated herein by reference.

Wesley G. McCain, the sole director of Towneley Capital Management,
Inc., is also a director of the Van Eck Funds and the Van Eck World Wide
Insurance Trust, and is a general partner of Pharaoh Partners, L.P.

ITEM 29. Principal Underwriters.

Not Applicable

ITEM 30. Location of Accounts and Records.

The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of NYLIFE Securities Inc., 51 Madison
Avenue, New York, New York 10010. Additional records are maintained at the
offices of Investors Fiduciary Trust Company, P.O. Box 419595, Kansas City,
Missouri, 64179, the Registrant's custodian.

ITEM 31. Management Services.

Not applicable.

ITEM 32. Undertakings.

The Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of Trustee or Trustees when
requested to do so by the holders of at least 10% of the Registrant's
outstanding shares, and in connection with such meeting to comply with the
shareholders communications provisions of Section 16(c) of the Investment
Company Act of 1940.

The Registrant undertakes to furnish to each person to whom a
Prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

C-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the Securities
Act of 1933, and the Registrant has duly caused this Post-Effective Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York, on
the 1st day of May, 1996.

Eclipse Financial Asset Trust

By: /s/ Wesley G. McCain
---------------------------
Wesley G. McCain,
President

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

(1) Principal
Executive Officer

/s/ Wesley G. McCain President May 1, 1996
--------------------
Wesley G. McCain

(2) Principal Financial
and Accounting Officer

/s/ Anthony Polis Treasurer May 1, 1996
--------------------
Anthony Polis

(3) Majority of Trustees:

/s/ Wesley G. McCain Trustee May 1, 1996
--------------------
Wesley G. McCain

Sigrid A. Hess* Trustee
John C. Van Eck* Trustee
Yung Wong* Trustee

*By: /s/ Wesley G. McCain May 1, 1996
--------------------
Wesley G. McCain as
Attorney-in-fact

<PAGE>

Exhibit 11(b)

[LETTERHEAD]

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use of our report dated January 26, 1996 on the
financial statements of the Ultra Short Term Income Fund, the Balanced Fund,
the Growth and Income Fund, and the Equity Fund series of Eclipse Financial
Asset Trust referred to therein, in Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A as filed with the Securities and Exchange
Commission.

We also consent to the reference to our firm in the Prospectus under the
caption "Selected Financial Information" and in the Statement of Additional
Information under the caption "Counsel and Auditors."

/s/ McGladrey & Pullen, LLP
---------------------------
McGladrey & Pullen, LLP

New York, New York
April 30, 1996

<PAGE>

EXHIBIT 16

ECLIPSE FINANCIAL ASSET TRUST

Principal Only Performance Calculation

T = Total return
P = A hypothetical initial investment at:
$2.00 per share for the Ultra Short Term Income Fund
$15.00 per share for the Balanced Fund
$10.00 per share for the Growth and Income Fund
$10.02 per share for the Equity Fund
BV = Value of a hypothetical share at beginning of period
ERV = Ending redeemable value of a hypothetical share
N = Number of years

ULTRA SHORT TERM INCOME FUND

Year Ended December 31, 1995

T = (ERV - BV)/BV

T = ($2.04 - $2.00)/$2.00 = 2.00%

BALANCED FUND

Year Ended December 31, 1995

T = (ERV - BV)/BV

T = ($20.59 - $17.76)/$17.76 = 15.93%

Five Years Ended December 31, 1995

1/n
T = (ERV/BV)

T = 5.00 ($20.59/$14.69) -1 = 6.99%

Inception to December 31, 1995

1/n
T = (ERV/BV)

T = 6.67 ($20.59/$15.00) -1 = 4.86%

<PAGE>

GROWTH AND INCOME FUND

Year Ended December 31, 1995

T = (ERV - BV)/BV

T = ($12.31 - $10.00)/$10.00 = 23.10%

EQUITY FUND

Year Ended December 31, 1995

T = (ERV - BV)/BV

T = ($13.56 - $11.82)/$11.82 = 14.72%

Five Years Ended December 31, 1995

1/n
T = (ERV/BV)

T = 5.00 ($13.56/$9.07) -1 = 8.38%

Inception to December 31, 1995

1/n
T = (ERV/BV)

T = 8.92 ($13.56/$10.02) -1 = 3.45%

- 2 -

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> ECLIPSE EQUITY FUND
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 146,496,672
<INVESTMENTS-AT-VALUE> 177,798,349
<RECEIVABLES> 724,040
<ASSETS-OTHER> 2,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,524,389
<PAYABLE-FOR-SECURITIES> 3,497,270
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 321,940
<TOTAL-LIABILITIES> 3,819,210
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143,399,017
<SHARES-COMMON-STOCK> 12,880,921
<SHARES-COMMON-PRIOR> 16,500,409
<ACCUMULATED-NII-CURRENT> 4,163
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 322
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31,301,677
<NET-ASSETS> 174,705,179
<DIVIDEND-INCOME> 2,468,351
<INTEREST-INCOME> 488,594
<OTHER-INCOME> 0
<EXPENSES-NET> 2,124,136
<NET-INVESTMENT-INCOME> 832,809
<REALIZED-GAINS-CURRENT> 6,400,213
<APPREC-INCREASE-CURRENT> 26,485,424
<NET-CHANGE-FROM-OPS> 33,718,446
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (829,705)
<DISTRIBUTIONS-OF-GAINS> (6,388,563)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 94,373
<NUMBER-OF-SHARES-REDEEMED> (4,246,137)
<SHARES-REINVESTED> 532,276
<NET-CHANGE-IN-ASSETS> (20,401,974)
<ACCUMULATED-NII-PRIOR> 1,381
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,860,540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,124,707
<AVERAGE-NET-ASSETS> 186,054,939
<PER-SHARE-NAV-BEGIN> 11.820
<PER-SHARE-NII> 0.070
<PER-SHARE-GAIN-APPREC> 2.260
<PER-SHARE-DIVIDEND> (0.070)
<PER-SHARE-DISTRIBUTIONS> (0.520)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.560
<EXPENSE-RATIO> 1.140
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> ECLIPSE BALANCED FUND
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 81,567,444
<INVESTMENTS-AT-VALUE> 88,276,538
<RECEIVABLES> 906,478
<ASSETS-OTHER> 2,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 89,185,016
<PAYABLE-FOR-SECURITIES> 3,085,749
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 177,065
<TOTAL-LIABILITIES> 3,262,814
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,212,607
<SHARES-COMMON-STOCK> 4,173,768
<SHARES-COMMON-PRIOR> 1,559,494
<ACCUMULATED-NII-CURRENT> 353
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 148
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,709,094
<NET-ASSETS> 85,922,202
<DIVIDEND-INCOME> 793,627
<INTEREST-INCOME> 1,495,957
<OTHER-INCOME> 0
<EXPENSES-NET> 414,448
<NET-INVESTMENT-INCOME> 1,875,136
<REALIZED-GAINS-CURRENT> 2,248,284
<APPREC-INCREASE-CURRENT> 6,046,085
<NET-CHANGE-FROM-OPS> 10,169,505
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,877,538)
<DISTRIBUTIONS-OF-GAINS> (2,248,136)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,895,766
<NUMBER-OF-SHARES-REDEEMED> (480,370)
<SHARES-REINVESTED> 198,878
<NET-CHANGE-IN-ASSETS> 58,219,650
<ACCUMULATED-NII-PRIOR> 2,755
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 414,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 579,020
<AVERAGE-NET-ASSETS> 51,805,933
<PER-SHARE-NAV-BEGIN> 17.760
<PER-SHARE-NII> 0.640
<PER-SHARE-GAIN-APPREC> 3.390
<PER-SHARE-DIVIDEND> (0.640)
<PER-SHARE-DISTRIBUTIONS> (0.560)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.590
<EXPENSE-RATIO> 0.800
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> ECLIPSE ULTRA SHORT TERM INCOME FUND
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4,099,608
<INVESTMENTS-AT-VALUE> 4,108,907
<RECEIVABLES> 509,518
<ASSETS-OTHER> 28,236
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,646,661
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,177
<TOTAL-LIABILITIES> 36,177
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,596,614
<SHARES-COMMON-STOCK> 2,262,377
<SHARES-COMMON-PRIOR> 310,675
<ACCUMULATED-NII-CURRENT> 4,341
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 230
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,299
<NET-ASSETS> 4,610,484
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 177,846
<OTHER-INCOME> 0
<EXPENSES-NET> 4,408
<NET-INVESTMENT-INCOME> 173,438
<REALIZED-GAINS-CURRENT> 230
<APPREC-INCREASE-CURRENT> 9,299
<NET-CHANGE-FROM-OPS> 182,967
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (169,141)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,141,483
<NUMBER-OF-SHARES-REDEEMED> (272,844)
<SHARES-REINVESTED> 83,063
<NET-CHANGE-IN-ASSETS> 3,989,090
<ACCUMULATED-NII-PRIOR> 44
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,021
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 48,908
<AVERAGE-NET-ASSETS> 2,505,362
<PER-SHARE-NAV-BEGIN> 2.000
<PER-SHARE-NII> 0.110
<PER-SHARE-GAIN-APPREC> 0.040
<PER-SHARE-DIVIDEND> (0.110)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 2.040
<EXPENSE-RATIO> 0.180
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> ECLIPSE GROWTH AND INCOME FUND
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 7,387,707
<INVESTMENTS-AT-VALUE> 8,228,440
<RECEIVABLES> 24,485
<ASSETS-OTHER> 28,195
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,281,120
<PAYABLE-FOR-SECURITIES> 253,367
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 67,313
<TOTAL-LIABILITIES> 320,680
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,114,646
<SHARES-COMMON-STOCK> 646,426
<SHARES-COMMON-PRIOR> 31,528
<ACCUMULATED-NII-CURRENT> 5,277
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 216
<ACCUM-APPREC-OR-DEPREC> 840,733
<NET-ASSETS> 7,960,440
<DIVIDEND-INCOME> 97,114
<INTEREST-INCOME> 15,979
<OTHER-INCOME> 0
<EXPENSES-NET> 41,173
<NET-INVESTMENT-INCOME> 71,920
<REALIZED-GAINS-CURRENT> 165,914
<APPREC-INCREASE-CURRENT> 840,733
<NET-CHANGE-FROM-OPS> 1,078,567
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (66,641)
<DISTRIBUTIONS-OF-GAINS> (166,130)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 608,522
<NUMBER-OF-SHARES-REDEEMED> (10,233)
<SHARES-REINVESTED> 16,609
<NET-CHANGE-IN-ASSETS> 7,645,161
<ACCUMULATED-NII-PRIOR> (2)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 41,173
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 90,490
<AVERAGE-NET-ASSETS> 4,574,811
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.110
<PER-SHARE-GAIN-APPREC> 2.570
<PER-SHARE-DIVIDEND> (0.110)
<PER-SHARE-DISTRIBUTIONS> (0.260)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.310
<EXPENSE-RATIO> 0.900
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>