<PAGE>
LOGO
- --------------------------------------------------------------------------------
ECLIPSE
FINANCIAL ASSET TRUST
ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
MEMBER OF
=================
100% NO-LOAD-TM-
MUTUAL FUND
COUNCIL
==================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Chairman's Letter................................................................................ 2
Review of Eclipse-Registered Trademark- 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................................................................................ 15
Growth and Income Fund....................................................................... 23
Equity Fund.................................................................................. 26
Statements of Operations......................................................................... 33
Statements of Changes in Net Assets.............................................................. 34
Notes to Financial Statements.................................................................... 36
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>
- -Registered Trademark- Eclipse is a registered service mark of Eclipse Financial
Asset Trust.
- --------------------------------------------------------------------------------
1
<PAGE>
CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The U.S. stock and bond markets enjoyed another record year in 1996. The Dow
Jones Industrial Average made new highs, breaking yet another 1000 point barrier
when it surpassed the 6000 mark. The Standard & Poor's 500 Index also rose
smartly, gaining 23% this year. Perhaps of even greater significance, the market
increase once again extended to virtually all segments of the equity market --
including mid size and small company stocks, in addition to the large
capitalization measures cited above.
The continuation of 1995's market rise was reportedly due to a number of
factors: corporate earnings remained strong, interest rates remained low, and
there continued to be large cash inflows to the equity markets, particularly
from 401(k) retirement plans.
THE STOCK MARKET IN PERSPECTIVE
It is important to retain historical perspective in looking at the near
record-breaking returns of the last two years. Market returns of over 20% per
year are unusual.
The stock market has had several years of extraordinary performance. Let us look
at some market history to put these returns in perspective. Since 1916 the Dow
Jones Industrial Average returned only slightly over 5% on an annually
compounded basis. During the decades of the 1960's and 1970's, the return was
less than 2% a year. Contrast this with the 11% returns the Index has earned
since 1987, and especially the 33% rise in 1995 and the 26% earned in 1996, and
it is easy to understand why we believe these returns are unusual. (These
returns are price changes in the Index; they are not total returns since
dividends are not included.)
The broader Standard & Poor's 500 Index shows similar results. Over the past 50
years (since 1947) the annually compounded total return of the Standard & Poor's
500 has been slightly over 12%. In the decade ending December, 1979 the total
return of the S&P -- including reinvested dividends -- rose less than 6% per
annum; Treasury Bills gave a better return in that decade with no risk. In the
decade ended December, 1989 the return was significantly better at almost 18%
per annum, but still substantially below the results of 1995 and 1996.
Last year we stated in our letter to you that we do not know how long the
favorable underlying economic trends will continue, nor do we know how the
markets will react to any changes or perceived changes in these trends, or to
new political and economic events. All we can do is what we have consistently
done as investment managers for over 25 years, and as managers of the Eclipse
Funds since their inception in 1987: To search for what we believe are
undervalued companies and to monitor our holdings carefully and continuously.
ECLIPSE INVESTMENTS
We invest in the following types of securities, and use the following criteria
in making investment decisions, for the Eclipse Funds:
FIXED INCOME SECURITIES: Our evaluation of fixed income securities suitable for
purchase in the Eclipse Ultra Short Term Income Fund and the Eclipse Balanced
Fund includes the creditworthiness of the issuer, a credit analysis of the
specific security, its call features, if any, its coupon, and relative return.
EQUITIES: Market analysts divide the equity market into two segments -- growth
stocks and value stocks. Growth stocks are defined as those which have a high
price to stated book value, and which generally have relatively strong current
and
- ---------------------------------------------------------
2
<PAGE>
expected future growth. These stocks perform well as long as their growth
continues in line with expectations. The higher valuations (higher price
earnings ratios and higher price/book ratios) usually applied to these stocks
make them more vulnerable if their expected growth does not continue.
Value stocks are those with a low price to stated book value. This means they
sell at less than the stated "worth" of the company. Value stocks are considered
defensive; they generally have lower valuations and higher dividend yields, and
are less affected by extreme market moves.
Stocks and markets are dynamic. Today's growth stocks often become tomorrow's
value stocks, as high growth becomes difficult to sustain over long periods of
time.
In our analysis of the appropriate stocks to purchase for our Funds, our
valuation measures favor companies which are currently profitable and are
showing improving operating levels. These stocks tend to have lower
price/earnings, lower price/sales, and lower price/book value ratios than their
peers and the market. They are, in short, Towneley "value" stocks.
The one constant in the stock and financial markets is change. Various
investment styles will continue to come into and go out of favor. Value stocks
have underperformed growth stocks in 6 of the last 8 years. However, the value
style of investing has produced high returns for extended periods of time--and
WITH LESS RISK THAN GROWTH STOCKS.
MILESTONES
In closing, I would like to take this opportunity to mark two significant
anniversaries:
Eclipse Equity Fund, the first fund in the Eclipse family, marked its tenth
anniversary on January 12, 1997. The Fund began with $100,000 in assets and one
shareholder, and today has assets of $171 million.
Towneley Capital Management, Inc., your Funds' investment manager, celebrated
its twenty fifth anniversary in 1996. We are an independent investment advisor
with no ties to any other financial organization. Our business is solely
dedicated to managing the money our clients have entrusted to us. We thank our
clients and shareholders for their trust in us, and will work to continue to
merit it in the years to come.
Sincerely,
[SIGNATURE]
Wesley G. McCain
Chairman
- --------------------------------------------------------------------------------
3
<PAGE>
REVIEW OF ECLIPSE ULTRA SHORT TERM
INCOME FUND
The Eclipse Ultra Short Term Income Fund completed its second full year of
operation with a return of 5.5%, and a two year annualized return of 6.7%.
During this year the Fund adopted an investment policy of socially responsible
investing. The Fund will limit its investments to notes and bonds which, in the
opinion of the Fund's Manager and based on available information, are issued by
companies that are socially responsible. Currently the Fund excludes investments
in companies with significant operations in the following industries: alcohol,
tobacco, gambling, defense, and nuclear energy. Our research indicates that we
can adhere to this policy while earning competitive returns. (Unfortunately,
there is no socially responsible short term investment benchmark against which
to measure our results, since the Fund is, we believe, the only socially
responsible ultra short term income fund.) The Fund has provided very
competitive returns to other short duration income funds, Treasury Bills, and
Certificates of Deposit.
The Fund had a 5 for 1 reverse share split in June. All per share and return
figures have been adjusted to reflect this split.
The Fund's duration at year end was 0.94 years, and its dollar weighted average
maturity was 375 days.
- ----------------------------------------------
LARGEST INDUSTRY HOLDINGS -- 12/31/96 % OF PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<S> <C>
Finance.......................................................... 24.6%
Consumer Non-Durables............................................ 11.8
Federal Agencies................................................. 11.2
Health Technology................................................ 9.7
Utilities........................................................ 8.6
</TABLE>
- ----------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIODS ENDING DECEMBER 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED TOTAL
RETURN(1)
1 YEAR 2 YEARS RISK(2)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
Eclipse Ultra Short Term Income Fund (3,4)........ 5.5% 6.7% 1.0%
Lipper Ultra Short Obligations Funds Average
(5)............................................... 5.2 5.9 0.4
3 Month Treasury Bill............................. 5.3 5.7 0.1
1 Year Treasury Bill.............................. 5.7 6.9 0.7
</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
12/31/96 was 6.6%.
4) Net of management fee waived and after expense reimbursement by manager:
1.67% of average net assets in 1995; 1.20% of average net assets in 1996.
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 FUND 1 YEAR TREASURY BILL
<S> <C> <C>
Dec-94 10,000 10,000
Mar-95 10,200 10,300
Jun-95 10,500 10,500
Sep-95 10,600 10,600
Dec-95 10,800 10,800
Mar-96 10,900 10,900
Jun-96 11,000 11,100
Sep-96 11,200 11,200
Dec-96 11,400 11,400
</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 -- 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income dividends*........................................................................... $ 0.7193
Short-term capital gain dividends........................................................... --
Long-term capital gain dividends............................................................ --
---------
Total 1996 dividends........................................................................ $ 0.7193
---------
---------
* Adjusted for a 1 for 5 share split effective June 14, 1996.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
<PAGE>
REVIEW OF ECLIPSE BALANCED FUND
The Eclipse Balanced Fund's asset allocation remains at 60% medium to large
capitalization value stocks and 40% short term government and short term
investment grade corporate bonds. With a 12.9% return in 1996, the Fund
performed in line with the Lipper Balanced Fund Index with less risk as measured
by annualized monthly standard deviation. We continued to outperform the Lipper
Balanced Fund Index for the five year period ending December, 1996.
Several factors contributed to the performance of the Fund. While value stocks
- -- those with moderate expectations of sales and earnings increases -- performed
well, growth stocks -- those with higher than average profitability -- performed
better. The value style of investing showed strengthened performance during the
last quarter of the year. (Please see the review of the Eclipse Growth and
Income Fund for further discussion.) With corporate earnings continuing to be
strong and interest rates remaining low, intermediate term bonds rose modestly
for the year. The fixed income portion of the portfolio mirrored that return.
- ----------------------------------------------
EQUITY INDUSTRY HOLDINGS AS A PERCENT OF ENTIRE PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<S> <C>
Finance...................................... 12.8%
Utilities.................................... 9.0
Retail Trade................................. 8.9
Energy Minerals.............................. 6.9
Consumer Durables............................ 6.1
</TABLE>
- ----------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIODS ENDING DECEMBER 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN(1)
1 3 5 RETURN/
YEAR YEARS YEARS INCEPTION(2) RISK(2,3) RISK(2)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Eclipse Balanced Fund (4,5)............. 12.9% 11.6% 12.7% 11.7% 6.6% 1.8
Lipper Balanced Fund Index (4).......... 13.0 11.4 10.7 11.8 7.6 1.6
Merrill Lynch Corporate & Govt 1-9.99
Year Bond Index....................... 4.0 5.6 6.6 8.6 3.4 2.5
Standard & Poor's 500 Index............. 23.0 19.7 15.2 15.4 11.6 1.3
3 Month Treasury Bill................... 5.3 5.2 4.5 5.6 0.5 11.2
</TABLE>
- ------------
1) With income reinvested.
2) May 1, 1989 to December 31, 1996.
3) Annualized standard deviation of monthly return.
4) After all expenses.
5) Net of management fee waived equivalent to 0.8% of average net assets from
1989 through 1992, 0.5%, 0.4%, 0.3%, and 0.2% from 1993 through 1996. 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 FUND ML CORP/GOVT 1-9.99 YR BOND S&P 500
<S> <C> <C> <C>
Apr-89 10,000 10,000 10,000
Dec-89 10,400 11,000 11,700
Dec-90 10,600 12,000 11,300
Dec-91 12,800 13,700 14,800
Dec-92 14,400 14,700 15,900
Dec-93 16,800 16,000 17,500
Dec-94 16,800 15,700 17,700
Dec-95 20,700 18,100 24,400
Dec-96 23,300 18,900 30,000
</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 -- 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income dividends............................................................................ $ 0.7752
Short-term capital gain dividends........................................................... 0.8182
Long-term capital gain dividends............................................................ 0.6181
---------
Total 1996 dividends........................................................................ $ 2.2115
---------
---------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
<PAGE>
REVIEW OF ECLIPSE GROWTH AND
INCOME FUND
In 1996 the Eclipse Growth and Income Fund completed its second full year of
operation. The Fund was up 22.4% this year, and up almost 25% (24.4%) on an
annually compounded basis since its inception. It outperformed the Lipper Growth
and Income Fund Index by a substantial margin in 1996.
The domestic equity market had another remarkably strong year. The strength in
stocks is largely the result of economic stability (low unemployment, low
interest rates) and continued retirement cash inflows into the equity market.
This bull market has rewarded growth stocks -- i.e., those with higher than
average earnings growth expectations. Value stocks -- those with more moderate
expectations of sales and earnings increases -- have also performed well, but
not as well as growth stocks.
Eclipse Growth and Income Fund is invested in undervalued stocks and industries.
The Fund currently has a large percentage of its holdings in the financial,
retail trade, and consumer durables industries because we find stocks in these
industries to be undervalued. Conversely, the Fund has smaller percentages of
its holdings in the electronic technology, health technology, and consumer
non-durables industries, which, according to our valuation measures, are
overvalued, or "expensive."
The table below shows comparative valuation measures comparing Eclipse Growth
and Income Fund stocks with those in the unmanaged S&P 500 Index.
- ----------------------------------------------
ECLIPSE GROWTH
AND S&P500
INCOME FUND INDEX
- ------------------------------------------------------------
<TABLE>
<S> <C> <C>
Price to Sales............................... 0.9x 2.2x
Price to Earnings............................ 19.7 24.0
Price to Book Value.......................... 2.7 4.9
</TABLE>
- ----------------------------------------------------
This table indicates that stocks in the S&P 500 are more than twice as expensive
as the stocks in the Eclipse Growth and Income Fund on the basis of revenues,
more than 20% as expensive on an earnings basis, and more than 80% as expensive
according to book value ratios.
- ----------------------------------------------
LARGEST INDUSTRY HOLDINGS -- 12/31/96 % OF PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<S> <C>
Finance.......................................................... 20.7%
Retail Trade..................................................... 14.8
Energy Minerals.................................................. 12.3
Utilities........................................................ 11.1
Consumer Durables................................................ 9.7
</TABLE>
- ----------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIODS ENDING DECEMBER 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED TOTAL
RETURN(1)
1 YEAR 2 YEARS RISK(2)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
Eclipse Growth and Income Fund (3,4).............. 22.4% 24.6% 7.0%
Lipper Growth and Income Fund Index (5)........... 20.7 25.8 7.3
Standard & Poor's 500 Index....................... 23.0 30.1 8.3
3 Month Treasury Bill............................. 5.3 5.7 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
12/31/96 was 24.4%.
4) Net of management fee waived equivalent to 0.90% and 0.67% of average net
assets for 1995 and 1996. Returns are also net of reimbursed expenses
equivalent to 0.05% of average net assets in 1995.
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
Mar-95 10,500 11,000
Jun-95 11,300 12,000
Sep-95 12,200 13,000
Dec-95 12,700 13,800
Mar-96 13,400 14,500
Jun-96 13,700 15,100
Sep-96 14,100 15,600
Dec-96 15,500 16,900
</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 -- 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income dividends............................................................................ $ 0.2262
Short-term capital gain dividends........................................................... 0.6797
Long-term capital gain dividends............................................................ 0.6716
---------
Total 1996 dividends........................................................................ $ 1.5775
---------
---------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
<PAGE>
REVIEW OF ECLIPSE EQUITY FUND
The Eclipse Equity Fund was up 29.9% in 1996, surpassing all of our benchmark
indexes. The Fund's return was almost twice that of the Lipper Small Company
Growth Fund Index. The Fund is primarily invested in small capitalization value
stocks.
THE EQUITY MARKETS
In the past few years, larger capitalization growth stocks have led the market.
Investors have been willing to pay more for growth stocks because of their
higher expected earnings growth. Many companies -- especially those in the
electronic technology and technology-services industries -- met these
expectations, leading investors to believe that the high prices for these stocks
were justified.
However, high growth rates are usually not sustainable over long periods of
time. Highly profitable businesses quickly attract competitors. When growth
slows to a more realistic level, so do valuations.
THE SMALL CAPITALIZATION MARKET
Stock performance within the small capitalization sector of the market is
shifting. In 1995, small capitalization growth stocks outperformed small
capitalization value stocks. In 1996, however, small capitalization value stocks
outperformed small capitalization growth stocks by a wide margin.
Why is this change occurring? Such industries as retail, smaller banks, savings
and loans, and insurance companies, which experienced a great deal of upheaval
in the late 80's and early 90's, have gone through their transition and are
experiencing new growth. When companies restructure and retrench, historically
their revenues, cash flows, and earnings are only about average. Once the
restructuring is complete, they are in a favorable position to grow their
business.
VALUATIONS
The smaller capitalization "value" companies, in which the Eclipse Equity Fund
invests, have more favorable price to valuation ratios based on revenues, cash
flow, and earnings than either the Russell 2000 or the S&P 600 small
capitalization stock indexes. Based on operating characteristics of the
business, e.g., profit margins, asset turnover, and working capital management,
these companies are showing substantial improvement. Other larger companies are
noticing this undervaluation and improving operating characteristics, as well,
and many smaller companies are being acquired. With interest rates (and,
therefore, financing costs) so low, companies can buy businesses more cheaply
than they can build them. All of these factors contributed to the strong
performance of the small capitalization value sector of the market.
The strongest performing sectors in the small capitalization sector were
technology, finance, industrial services, retail trade and energy minerals.
Eclipse Equity Fund had significant investments in most of these industries.
- --------------------------------------------------------------------------------
LARGEST INDUSTRY HOLDINGS 12/31/96
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Finance.......................................................... 19.7%
Retail Trade..................................................... 13.8
Commercial Services.............................................. 9.6
Producer Manufacturing........................................... 8.4
Electronic Technology............................................ 7.5
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIODS ENDING DECEMBER 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN(1) RETURN/
1 YEAR 3 YEARS 5 YEARS INCEPTION(2) RISK(3) RISK(2)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Eclipse Equity Fund (3,4)......................... 29.9% 14.0% 15.7% 11.7% 11.0% 1.1
Lipper Small Company Growth Fund Index (5)........ 14.5 14.5 14.4 12.2 16.9 0.7
Standard & Poor's Small Cap 600 Index............. 21.3 14.5 16.6 10.1 17.8 0.6
Standard & Poor's 500 Index....................... 23.0 19.7 15.2 14.0 13.9 1.0
3 Month Treasury Bill............................. 5.3 5.2 4.5 6.0 0.5 12.0
</TABLE>
- ------------
1) With income reinvested.
2) Data shown are from 1/31/87. The Fund's inception was 1/12/87; its annualized
total return through 12/31/96 was 11.6.%.
3) Annualized standard deviation of monthly return.
4) Net of management fee waived in 1987 equivalent to 0.1% of average net
assets.
5) After all expenses.
- --------------------------------------------------------------------------------
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 9,700 7,800 9,300
Dec-88 10,900 9,300 10,800
Dec-89 12,700 10,600 14,200
Dec-90 11,000 8,100 13,800
Dec-91 14,400 12,000 18,000
Dec-92 17,200 14,600 19,400
Dec-93 20,100 17,300 21,300
Dec-94 19,200 16,500 21,600
Dec-95 23,000 21,400 29,700
Dec-96 29,800 26,000 36,600
</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 -- 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income dividends............................................................................ $ 0.1374
Short-term capital gain dividends........................................................... 1.1429
Long-term capital gain dividends............................................................ 2.8416
---------
Total 1996 dividends........................................................................ $ 4.1219
---------
---------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
ULTRA SHORT TERM INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
U.S. CORPORATE BONDS (82.95%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
CONSUMER NON-DURABLES (11.84%)
Coca-Cola Company Notes, 7.875%, due 09/15/98.... $ 50,000 $ 51,380
Coca-Cola Enterprises Inc. Notes, 6.50%, due
11/15/97........................................ 100,000 100,573
Heinz (H.J.) Company Notes, 5.50%, due
09/15/97........................................ 100,000 99,819
Heinz (H.J.) Company Notes, 6.75%, due
10/15/99........................................ 50,000 50,448
Kellogg Company Notes, 5.90%, due 07/15/97....... 100,000 100,117
PepsiCo, Inc. Notes, 6.875%, due 05/15/97........ 100,000 100,452
Procter & Gamble Company Notes, 6.85%, due
06/01/97 25,000 25,135
------------
527,924
------------
CONSUMER SERVICES (4.45%)
Gannett Co. Inc. Notes, 5.25%, due 03/01/98 200,000 198,382
------------
ELECTRONIC TECHNOLOGY (2.25%)
IBM Corporation Notes, 6.375%, due 11/01/97...... 100,000 100,407
------------
ENERGY MINERALS (2.24%)
Mobil Corporation Notes, 6.50%, due 02/15/97..... 100,000 100,100
------------
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
FINANCE (24.58%)
Aetna Services Inc. Notes, 8.625%, due
03/01/98........................................ $ 100,000 $ 102,756
American Express Credit Corporation Sr. Notes,
7.75%, due 03/01/97............................. 75,000 75,244
American General Finance Corporation Sr. Notes,
5.80%, due 04/01/97............................. 100,000 100,050
BankAmerica Corporation Notes, 6.00%, due
07/15/97........................................ 100,000 100,143
Chrysler Financial Corporation Notes, 5.375%, due
10/15/98........................................ 50,000 49,324
Ford Holdings, Inc. Guaranteed Notes, 9.25%, due
07/15/97........................................ 150,000 152,668
General Motors Corporation Notes, 7.625%, due
02/15/97........................................ 100,000 100,203
International Lease Finance Corporation Sr.
Notes, 6.50%, due 07/15/97...................... 75,000 75,294
Morgan Stanley Group Inc. Notes, 5.65%, due
06/15/97........................................ 100,000 99,988
Norwest Financial, Inc. Sr. Notes, 6.00%, due
08/15/97........................................ 100,000 100,160
Norwest Financial, Inc. Sr. Notes, 6.25%, due
03/15/99........................................ 40,000 40,017
USLife Group Corporation Sr. Notes, 6.75%, due
01/15/98........................................ 100,000 100,716
------------
1,096,563
------------
</TABLE>
- ---------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
ULTRA SHORT TERM INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
HEALTH TECHNOLOGY (9.67%)
American Home Products Corporation Notes, 6.875%,
due 04/15/97.................................... $ 100,000 $ 100,323
American Home Products Corporation Notes, 7.70%,
due 02/15/00.................................... 50,000 51,843
Lilly (Eli) & Company Notes, 6.75%, due
11/15/99........................................ 50,000 50,557
Upjohn Company Notes, 5.875%, due 04/15/00....... 75,000 73,939
Warner-Lambert Company Notes, 8.00%, due
09/01/98........................................ 150,000 154,604
------------
431,266
------------
INDUSTRIAL SERVICES (4.50%)
WMX Technologies Inc. Notes, 7.125%, due
03/22/97........................................ 75,000 75,247
WMX Technologies Inc. Notes, 6.375%, due
07/01/97........................................ 125,000 125,447
------------
200,694
------------
NON-ENERGY MINERALS (1.72%)
Alcan Aluminium Corporation Guaranteed Notes,
7.25%, due 12/15/99............................. 75,000 76,548
------------
PROCESS INDUSTRIES (3.45%)
DuPont (E.I.) De Nemours & Company Notes, 8.65%,
due 12/01/97.................................... 150,000 153,707
------------
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
PRODUCER MANUFACTURING (3.44%)
Xerox Corporation Notes, 9.625%, due 09/01/97.... $ 150,000 $ 153,633
------------
RETAIL TRADE (6.17%)
Dayton Hudson Corporation Notes, 7.50%, due
03/01/99........................................ 100,000 102,109
Penney (J.C.) Co., Inc. Notes, 5.375%, due
11/15/98........................................ 100,000 98,561
Wal-Mart Stores Inc. Notes, 5.50%, due
03/01/98........................................ 75,000 74,620
------------
275,290
------------
UTILITIES (8.64%)
New England Telephone & Telegraph Notes, 6.25%,
due 12/15/97.................................... 100,000 100,312
New York Telephone Company Notes, 5.25%, due
09/01/98........................................ 135,000 133,110
Ohio Bell Telephone Company Notes, 5.75%, due
05/01/00........................................ 100,000 98,309
Sonat, Inc. Notes, 9.50%, due 08/15/99........... 50,000 53,580
------------
385,311
------------
Total U.S. Corporate Bonds
(Cost $3,714,471)............................... $ 3,699,825
------------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
ULTRA SHORT TERM INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
YANKEE BONDS (2.24%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
PROCESS INDUSTRIES (2.24%)
Dow Capital B.V. Notes, 5.75%, due 09/15/97...... $ 100,000 $ 99,960
------------
Total Yankee Bonds (Cost $99,770)................ $ 99,960
------------
</TABLE>
FEDERAL AGENCIES (11.22%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
Federal Home Loan Bank, 5.775%, due 09/26/97..... $ 100,000 $ 100,097
Federal Home Loan Mortgage Corporation, 6.18%,
due 11/18/97.................................... 150,000 150,598
Federal National Mortgage Association (V.R.),
5.18%, due 12/14/98............................. 100,000 99,880
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
Student Loan Marketing Association (V.R.), 5.57%,
due 10/30/97.................................... $ 100,000 $ 100,062
Student Loan Marketing Association (V.R.), 5.57%,
due 01/21/98.................................... 50,000 50,031
------------
Total Federal Agencies (Cost $502,226)........... $ 500,668
------------
</TABLE>
SHORT-TERM INVESTMENTS (2.08%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
REPURCHASE AGREEMENTS (2.08%)
State Street Bank and Trust Company, 4.00%, due
01/02/97
(Collateralized by $98,000 U.S. Treasury Bills,
due 06/26/97)................................... $ 92,721 $ 92,721
------------
<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total Short-Term Investments (Cost $92,721)...... $ 92,721
------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Total Investments (98.49%) (Cost $4,409,188+).... $ 4,393,174
Cash and Other Assets in Excess of Liabilities
(1.51%)......................................... 67,347
------------
Net Assets (100.00%) 444,718 shares outstanding
(Note 3)........................................ $ 4,460,521
------------
------------
Net Asset Value, offering and redemption price
per share....................................... $10.03
------------
------------
</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 $4,143 and $20,157,
respectively.
See notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
COMMON STOCKS (61.67%)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES (1.19%)
Jacobs Engineering Group Inc.*................... 8,600 $ 203,175
Manpower, Inc.................................... 13,500 438,750
Richfood Holdings, Inc........................... 14,550 352,837
--------------
994,762
--------------
CONSUMER DURABLES (6.06%)
Chrysler Corporation............................. 33,500 1,105,500
Ford Motor Company............................... 29,100 927,562
Hasbro, Inc...................................... 26,400 1,026,300
Honda Motor Co., Ltd............................. 18,300 1,036,238
Maytag Corporation............................... 24,400 481,900
Volvo AB, ADR.................................... 23,100 502,425
--------------
5,079,925
--------------
CONSUMER NON-DURABLES (2.36%)
ConAgra, Inc..................................... 9,800 487,550
Coors (Adolph) Company Class B................... 13,600 258,400
DIMON Incorporated............................... 11,300 261,312
Universal Corporation............................ 14,600 469,025
Whitman Corporation.............................. 22,000 503,250
--------------
1,979,537
--------------
CONSUMER SERVICES (1.52%)
Darden Restaurants, Inc.......................... 47,300 413,875
Equifax Inc...................................... 28,100 860,562
--------------
1,274,437
--------------
ELECTRONIC TECHNOLOGY (2.86%)
Avnet Inc........................................ 5,000 291,250
Litton Industries, Inc.*......................... 5,000 238,125
Mitel Corporation*............................... 32,400 202,500
SCI Systems, Inc.*............................... 7,500 334,687
Storage Technology Corporation*.................. 27,900 1,328,738
--------------
2,395,300
--------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
ENERGY MINERALS (6.93%)
Mobil Corporation................................ 4,500 $ 550,125
NGC Corporation.................................. 13,700 318,525
Occidental Petroleum Corporation................. 41,900 979,412
Oryx Energy Company*............................. 61,500 1,522,125
Pennzoil Company................................. 6,000 339,000
Tosco Corporation................................ 4,800 379,800
Trizec Hahn Corporation.......................... 14,300 314,600
USX-Marathon Group............................... 24,500 584,938
Unocal Corporation............................... 20,200 820,625
--------------
5,809,150
--------------
FINANCE (12.79%)
Ahmanson (H.F.) & Company........................ 8,900 289,250
Bank of New York Company, Inc. (The)............. 16,300 550,125
Bear Stearns Companies Inc. (The)................ 32,695 911,373
City National Corporation........................ 18,700 404,388
Commerce Group, Inc. (The)....................... 15,900 401,475
Equitable Companies Inc. (The)................... 9,000 221,625
Fremont General Corporation...................... 9,200 285,200
Great Western Financial Corporation.............. 8,600 249,400
Hibernia Corporation Class A..................... 19,300 255,725
Huntington Bancshares Inc........................ 34,430 908,091
Imperial Credit Industries, Inc.*................ 9,800 205,800
Lehman Brothers Holdings, Inc.................... 21,200 665,150
National City Corporation........................ 23,800 1,068,025
Old Republic International Corporation........... 10,000 267,500
People's Bank.................................... 25,400 733,425
</TABLE>
--------------------------------------------------------------------
*Non-Income Producing. 15
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
FINANCE (CONT'D)
Reliance Group Holdings, Inc..................... 27,300 $ 249,112
Ryder System, Inc................................ 17,000 478,125
SouthTrust Corporation........................... 32,800 1,143,900
UICI*............................................ 16,300 529,750
Washington Mutual, Inc........................... 20,800 900,900
--------------
10,718,339
--------------
HEALTH SERVICES (2.55%)
AmeriSource Health Corporation Class A*.......... 6,400 308,800
Bergen Brunswig Corporation Class A.............. 13,400 381,900
Cardinal Health, Inc............................. 7,200 419,400
Tenet Healthcare Corporation*.................... 47,100 1,030,313
--------------
2,140,413
--------------
INDUSTRIAL SERVICES (0.29%)
Fluor Corporation................................ 3,900 244,725
--------------
PROCESS INDUSTRIES (3.59%)
Albemarle Corporation............................ 8,900 161,313
Cabot Corporation................................ 8,500 213,562
Owens-Illinois, Inc.*............................ 65,300 1,485,575
Sonoco Products Company.......................... 13,500 349,312
Terra Industries Inc............................. 25,200 371,700
Union Carbide Corporation........................ 10,500 429,188
--------------
3,010,650
--------------
PRODUCER MANUFACTURING (1.18%)
AGCO Corporation................................. 4,200 120,225
Cummins Engine Company, Inc...................... 6,700 308,200
ITT Industries, Inc.............................. 10,400 254,800
Johnson Controls, Inc............................ 3,700 306,638
--------------
989,863
--------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
RETAIL TRADE (8.90%)
American Stores Co............................... 12,300 $ 502,763
Charming Shoppes, Inc.*.......................... 30,400 153,900
Circuit City Stores, Inc......................... 15,800 475,975
CompUSA Inc.*.................................... 9,200 189,750
Dayton Hudson Corporation........................ 20,200 792,850
Eckerd Corporation*.............................. 7,462 238,784
Federated Department Stores, Inc.*............... 15,100 515,288
Fred Meyer, Inc.*................................ 13,400 475,700
Kmart Corporation*............................... 45,000 466,875
Kroger Company (The)*............................ 11,000 511,500
Pier 1 Imports, Inc.............................. 12,400 218,550
Price/Costco, Inc.*.............................. 23,300 585,412
Ruddick Corporation.............................. 15,900 222,600
Safeway, Inc.*................................... 11,200 478,800
Service Merchandise Company*..................... 30,200 128,350
TJX Companies, Inc. (The)........................ 6,900 326,887
Vons Companies, Inc.*............................ 4,200 251,475
Waban Inc.*...................................... 7,600 197,600
Winn-Dixie Stores, Inc........................... 11,500 363,687
Woolworth Corporation*........................... 16,700 365,313
--------------
7,462,059
--------------
TECHNOLOGY SERVICES (0.37%)
Tech Data Corporation*........................... 11,200 306,600
--------------
TRANSPORTATION (2.07%)
Continental Airlines, Inc. Class B*.............. 16,800 474,600
Federal Express Corporation*..................... 10,800 480,600
Illinois Central Corporation..................... 15,400 492,800
USAir Group, Inc.*............................... 12,300 287,513
--------------
1,735,513
--------------
</TABLE>
----------------------------
16 *Non-Income Producing.
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
UTILITIES (9.01%)
Allegheny Power System, Inc...................... 12,900 $ 391,838
BCE Inc.......................................... 24,200 1,155,550
Coastal Corporation (The)........................ 19,700 962,838
Columbia Gas System, Inc. (The).................. 13,300 846,213
Entergy Corporation.............................. 37,800 1,048,950
Long Island Lighting Company..................... 29,800 659,325
MCN Corporation.................................. 17,700 511,088
MidAmerican Energy Holdings Company.............. 25,900 411,162
PacifiCorp....................................... 22,900 469,450
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
UTILITIES (CONT'D)
Pinnacle West Capital Corporation................ 13,600 $ 431,800
Public Service Company of New Mexico............. 11,500 225,687
Southern Company (The)........................... 10,600 239,825
Washington Water Power Company (The)............. 10,700 199,287
--------------
7,553,013
--------------
Total Common Stocks (Cost $43,376,798)........... $ 51,694,286
--------------
</TABLE>
U.S. CORPORATE BONDS (31.25%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES (0.61%)
Supervalu Inc. Notes, 7.25%, due 07/15/99........ $ 300,000 $ 304,746
Supervalu Inc. Notes, 7.80%, due 11/15/02........ 200,000 208,943
--------------
513,689
--------------
CONSUMER DURABLES (0.09%)
Eastman Kodak Company Notes, 7.25%, due
04/15/97........................................ 75,000 75,353
--------------
CONSUMER NON-DURABLES (4.17%)
Anheuser-Busch Companies, Inc. Notes, 8.75%, due
12/01/99........................................ 50,000 53,016
Bass America, Inc. Guaranteed Notes, 6.75%, due
08/01/99........................................ 550,000 554,551
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
CONSUMER NON-DURABLES (CONT'D)
Coca-Cola Company Notes, 7.875%, due 09/15/98.... $ 100,000 $ 102,760
Coca-Cola Enterprises Inc. Notes, 6.50%, due
11/15/97........................................ 150,000 150,860
Coca-Cola Enterprises Inc. Notes, 7.00%, due
11/15/99........................................ 350,000 355,791
Coca-Cola Enterprises Inc. Notes, 7.875%, due
02/01/02........................................ 200,000 210,672
Heinz (H.J.) Company Notes, 5.50%, due
09/15/97........................................ 250,000 249,548
Heinz (H.J.) Company Notes, 6.75%, due
10/15/99........................................ 200,000 201,789
Hertz Corporation Sr. Notes, 8.30%, due
02/02/98........................................ 300,000 307,171
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
CONSUMER NON-DURABLES (CONT'D$$)
Hertz Corporation Sr. Notes, 7.00%, due
04/15/01........................................ 300,000 303,711
PepsiCo, Inc. Notes, 6.125%, due 01/15/98........ 200,000 200,350
PepsiCo, Inc. Notes, 7.75%, due 10/01/98......... 100,000 102,689
PepsiCo, Inc. Notes, 6.25%, due 09/01/99......... 200,000 199,939
PepsiCo, Inc. Notes, 6.80%, due 05/15/00......... 200,000 202,699
Philip Morris Companies Inc. Notes, 7.625%, due
05/15/02........................................ 100,000 103,068
RJR Nabisco, Inc. Sr. Notes, 7.625%, due
09/01/00........................................ 200,000 199,973
--------------
3,498,587
--------------
CONSUMER SERVICES (0.12%)
Gannett Co., Inc. Notes, 5.25%, due 03/01/98..... 100,000 99,191
--------------
ELECTRONIC TECHNOLOGY (2.43%)
Boeing Co. Notes, 6.35%, due 06/15/03............ 500,000 490,764
IBM Corporation Notes, 6.375%, due 11/01/97...... 100,000 100,407
IBM Corporation Notes, 6.375%, due 06/15/00...... 200,000 199,845
IBM Corporation Notes, 7.25%, due 11/01/02....... 300,000 308,959
McDonnell Douglas Finance Corporation Notes,
7.25%, due 06/15/98............................. 200,000 203,200
Raytheon Company Notes, 6.50%, due 07/15/05...... 700,000 678,338
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
ELECTRONIC TECHNOLOGY (CONT'D)
Rockwell International Corporation Notes, 8.875%,
due 09/15/99.................................... $ 50,000 $ 53,199
--------------
2,034,712
--------------
ENERGY MINERALS (1.10%)
Exxon Capital Corporation Guaranteed Notes,
7.45%, due 12/15/01............................. 300,000 312,183
Exxon Capital Corporation Notes, 6.50%, due
07/15/99........................................ 300,000 302,020
Shell Oil Company Notes, 6.95%, due 12/15/98..... 300,000 304,522
--------------
918,725
--------------
FINANCE (10.98%)
Allstate Corporation Notes, 5.875%, due
06/15/98........................................ 250,000 249,405
American Express Credit Corporation Notes,
7.375%, due 02/01/99............................ 500,000 511,413
American Express Credit Corporation Notes,
6.125%, due 06/15/00............................ 200,000 198,178
American General Finance Corporation Notes,
8.00%, due 02/15/00............................. 200,000 208,793
American General Finance Corporation Sr. Notes,
8.25%, due 01/15/98............................. 200,000 204,512
Aristar, Inc. Sr. Notes, 7.875%, due 02/15/99.... 150,000 154,534
Associates Corp. of North America Notes, 7.25%,
due 05/15/98.................................... 400,000 406,173
Associates Corp. of North America Notes, 7.875%,
due 09/30/01.................................... 100,000 104,884
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
FINANCE (CONT'D)
Associates Corp. of North America Sr. Notes,
6.875%, due 01/15/97............................ $ 150,000 $ 150,049
Berkley (W.R.) Corporation Notes, 6.25%, due
01/15/06........................................ 500,000 469,052
CIT Group Holdings, Inc. Notes, 8.75%, due
04/15/98........................................ 300,000 309,949
CNA Financial Corporation Sr. Notes, 8.875%, due
03/01/98........................................ 100,000 103,030
Chrysler Financial Corporation Notes, 6.625%, due
08/15/00........................................ 1,000,000 1,002,816
Commercial Credit Company Notes, 6.75%, due
01/15/97........................................ 300,000 300,081
Commercial Credit Company Notes, 8.25%, due
11/01/01........................................ 200,000 212,906
Ford Holdings, Inc. Guaranteed Notes, 9.25%, due
03/01/00........................................ 50,000 53,784
Ford Motor Credit Company Notes, 8.00%, due
01/15/99........................................ 100,000 103,260
Ford Motor Credit Company Notes, 7.25%, due
05/15/99........................................ 250,000 255,030
Ford Motor Credit Company Notes, 8.375%, due
01/15/00........................................ 250,000 262,913
General Electric Capital Corporation Notes,
8.00%, due 01/15/98............................. 400,000 407,964
General Motors Corporation Notes, 7.00%, due
06/15/03........................................ 700,000 705,377
Heller Financial, Inc. Notes, 7.75%, due
05/15/97........................................ 50,000 50,369
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
FINANCE (CONT'D)
Heller Financial, Inc. Notes, 9.375%, due
03/15/98........................................ $ 50,000 $ 51,834
Heller Financial, Inc. Notes, 7.875%, due
11/01/99........................................ 100,000 103,556
Household Finance Corporation Notes, 7.50%, due
03/15/97........................................ 200,000 200,662
Household Finance Corporation Notes, 7.75%, due
06/15/97........................................ 200,000 201,763
Household International Inc. (Floating Rate)
Notes, 5.688%, due 05/27/97..................... 200,000 200,183
International Lease Finance Corporation Notes,
8.125%, due 01/15/98............................ 200,000 204,187
Lehman Brothers Inc. Sr. Notes, 7.625%, due
06/01/06........................................ 350,000 354,302
Lehman Brothers Holdings, Inc. Notes, 7.625%, due
06/15/97........................................ 150,000 151,163
Merrill Lynch & Co., Inc. Notes, 7.25%, due
05/15/97........................................ 100,000 100,545
Transamerica Finance Corporation Notes, 6.75%,
due 08/15/97.................................... 300,000 301,663
Travelers Group Inc. Notes, 6.125%, due
06/15/00........................................ 300,000 297,177
USL Capital Corporation Notes, 8.125%, due
02/15/00........................................ 300,000 313,374
USLife Corporation Sr. Notes, 6.75%, due
01/15/98........................................ 300,000 302,148
--------------
9,207,029
--------------
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
HEALTH TECHNOLOGY (1.71%)
American Home Products Corporation Notes, 7.70%,
due 02/15/00.................................... $ 500,000 $ 518,428
Baxter International Inc. Notes, 7.50%, due
05/01/97........................................ 150,000 150,830
Lilly (Eli) & Company Notes, 8.125%, due
12/01/01........................................ 250,000 266,441
Pfizer Inc. Notes, 6.50%, due 02/01/97........... 150,000 150,108
Upjohn Company Notes, 5.875%, 04/15/00........... 200,000 197,171
Warner-Lambert Company Notes, 6.625%, due
09/15/02........................................ 150,000 149,634
--------------
1,432,612
--------------
INDUSTRIAL SERVICES (1.49%)
Browning-Ferris Industries Inc. Sr. Notes, 6.10%,
due 01/15/03.................................... 500,000 482,905
Lockheed Martin Corporation Guaranteed Notes,
7.25%, due 05/15/06............................. 500,000 507,876
WMX Technologies Inc. Notes, 6.375%, due
07/01/97........................................ 50,000 50,179
WMX Technologies Inc. Notes, 8.125%, due
02/01/98........................................ 200,000 204,372
--------------
1,245,332
--------------
NON-ENERGY MINERALS (0.12%)
Alcan Aluminum Corporation Guaranteed Notes,
7.25%, due 12/15/99............................. 100,000 102,064
--------------
<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 $ 51,236
DuPont (E.I.) De Nemours & Company Notes, 6.00%,
due 12/01/01.................................... 200,000 195,469
International Paper Company Notes, 7.80%, due
03/18/99........................................ 100,000 103,113
James River Corporation of Virginia, 8.375%, due
11/15/01........................................ 150,000 159,215
--------------
509,033
--------------
PRODUCER MANUFACTURING (1.18%)
Dresser Industries, Inc. Sr. Notes, 6.25%, due
06/01/00........................................ 600,000 594,121
Illinois Tool Works, Inc. Notes, 5.875%, due
03/01/00........................................ 400,000 394,171
--------------
988,292
--------------
RETAIL TRADE (1.65%)
Dayton Hudson Corporation Notes, 7.50%, due
03/01/99........................................ 300,000 306,326
Dillard Department Stores Notes, 7.375%, due
06/15/99........................................ 255,000 261,068
Limited, Inc. (The) Notes, 8.875%, due
08/15/99........................................ 200,000 209,236
Penney (J.C.) Co., Inc. Notes, 6.875%, due
06/15/99........................................ 50,000 50,514
Sears Roebuck and Company Notes, 9.25%, due
08/01/97........................................ 100,000 101,846
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
RETAIL TRADE (CONT'D)
Wal-Mart Stores Inc. Notes, 8.625%, due
04/01/01........................................ $ 50,000 $ 53,877
Wal-Mart Stores Inc. Notes, 7.25%, due
06/01/13........................................ 400,000 402,902
--------------
1,385,769
--------------
TRANSPORTATION (1.04%)
Consolidated Rail Corporation Notes, 6.90%, due
07/01/98........................................ 200,000 202,341
Kansas City Southern Industries Sr. Notes,
7.875%, due 07/01/02............................ 150,000 156,073
Union Pacific Corporation Notes, 7.375%, due
05/15/01........................................ 500,000 512,723
--------------
871,137
--------------
UTILITIES (3.95%)
Ameritech Capital Funding Inc. (Floating Rate)
Notes, 5.925%, due 05/12/98..................... 550,000 550,685
Chesapeake & Potomac Telephone-Virginia, Inc.
Notes, 7.125%, due 01/15/02..................... 300,000 305,677
Consolidated Edison Company Series F, 5.70%, due
10/01/98........................................ 350,000 347,109
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
UTILITIES (CONT'D)
GTE California, Inc. Notes, 6.75%, due
12/01/97........................................ $ 50,000 $ 50,032
GTE Corporation Notes, 8.85%, due 03/01/98....... 50,000 51,497
GTE Northwest Inc. Notes, 7.375%, due 05/01/01... 500,000 512,437
Pacific Bell Notes, 7.25%, due 07/01/02.......... 300,000 308,339
Public Service Electric & Gas Notes, 6.00%, due
01/01/98........................................ 100,000 99,833
Sonat Inc. Notes, 9.00%, due 05/01/01............ 50,000 53,918
Southern California Edison Company Notes, 5.90%,
due 01/15/97.................................... 50,000 50,003
Southern California Edison Company Notes, 5.875%,
due 02/01/98.................................... 300,000 299,325
Southern California Edison Company Notes, 6.50%,
due 06/01/01.................................... 200,000 198,717
Southwestern Bell Telephone Notes, 7.00%, due
07/01/15........................................ 500,000 485,496
--------------
3,313,068
--------------
Total U.S. Corporate Bonds
(Cost $26,154,918).............................. $ 26,194,593
--------------
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
BALANCED FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
YANKEE BONDS (0.12%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
PROCESS INDUSTRIES (0.12%)
Dow Capital B.V. Notes, 5.75%, due 09/15/97...... $ 100,000 $ 99,960
--------------
Total Yankee Bonds
(Cost $99,570).................................. $ 99,960
--------------
</TABLE>
UNITED STATES GOVERNMENT OBLIGATIONS (4.97%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
United States Treasury Note, 6.375%, due
01/15/00........................................ $ 500,000 $ 504,375
United States Treasury Note, 5.50%, due
04/15/00........................................ 500,000 491,562
United States Treasury Note, 5.875%, due
02/15/04........................................ 1,250,000 1,217,188
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
United States Treasury Note, 6.50%, due
05/15/05........................................ $1,000,000 $ 1,007,187
United States Treasury Note, 5.625%, due
02/15/06........................................ 1,000,000 946,250
--------------
Total United States Government Obligations
(Cost $4,159,901)............................... $ 4,166,562
--------------
</TABLE>
SHORT-TERM INVESTMENTS (1.21%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
REPURCHASE AGREEMENTS (1.21%)
State Street Bank and Trust Company, 4.00%, due
01/02/97 (Collateralized by $955,000 U.S.
Treasury Bonds, 7.125%, due 02/15/23)........... $1,011,328 $ 1,011,328
--------------
<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total Short-Term Investments
(Cost $1,011,328)............................... $ 1,011,328
--------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Total Investments
(99.22%)
(Cost $74,802,515+)..... $83,166,729
Cash and Other Assets
Less Liabilities
(0.78%)................. 658,432
-----------
Net Assets (100.00%)
3,991,125 shares
outstanding (Note 3).... $83,825,161
-----------
-----------
Net Asset Value, offering
and redemption price per
share................... $21.00
-----------
-----------
</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 $9,595,208 and $1,230,994,
respectively.
See notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
COMMON STOCKS (98.47%)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES (2.22%)
Jacobs Engineering
Group Inc.*..................................... 2,700 $ 63,788
Manpower, Inc.................................... 2,500 81,250
Richfood Holdings, Inc........................... 2,950 71,537
-----------
216,575
-----------
CONSUMER DURABLES (9.68%)
Chrysler Corporation............................. 5,700 188,100
Ford Motor Company............................... 5,500 175,313
Hasbro, Inc...................................... 4,600 178,825
Honda Motor Co., Ltd............................. 3,000 169,875
Maytag Corporation............................... 4,200 82,950
Toll Brothers, Inc.*............................. 4,800 93,600
Volvo AB, ADR.................................... 2,500 54,375
-----------
943,038
-----------
CONSUMER NON-DURABLES (2.34%)
DIMON Incorporated............................... 4,200 97,125
Universal Corporation............................ 2,300 73,888
Whitman Corporation.............................. 2,500 57,187
-----------
228,200
-----------
CONSUMER SERVICES (2.68%)
Darden Restaurants, Inc.......................... 5,300 46,375
Equifax Inc...................................... 7,000 214,375
-----------
260,750
-----------
ELECTRONIC TECHNOLOGY (3.62%)
Avnet Inc........................................ 800 46,600
Data General Corporation*........................ 5,700 82,650
Storage Technology Corporation*.................. 4,700 223,837
-----------
353,087
-----------
ENERGY MINERALS (12.34%)
Mobil Corporation................................ 700 85,575
NGC Corporation.................................. 5,200 120,900
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
ENERGY MINERALS (CONT'D)
Occidental Petroleum Corporation................. 7,300 $ 170,638
Oryx Energy Company*............................. 9,900 245,025
Pennzoil Company................................. 1,400 79,100
Tosco Corporation................................ 800 63,300
Trizec Hahn Corporation.......................... 4,200 92,400
USX-Marathon Group............................... 8,300 198,162
Unocal Corporation............................... 3,600 146,250
-----------
1,201,350
-----------
FINANCE (20.71%)
Ahmanson (H.F.) & Company........................ 1,600 52,000
Bank of New York Company, Inc. (The)............. 1,400 47,250
Bear Stearns Companies, Inc. (The)............... 7,350 204,881
City National Corporation........................ 2,900 62,713
Commerce Group, Inc. (The)....................... 4,200 106,050
Equitable Companies Inc. (The)................... 2,600 64,025
Fremont General Corporation...................... 1,800 55,800
Great Western Financial Corporation.............. 1,700 49,300
Hibernia Corporation Class A..................... 7,900 104,675
Imperial Credit
Industries, Inc.*............................... 1,900 39,900
Lehman Brothers
Holdings, Inc................................... 6,400 200,800
National City Corporation........................ 3,700 166,038
Old Republic International Corporation........... 2,000 53,500
People's Bank.................................... 4,000 115,500
Reliance Group
Holdings, Inc................................... 5,400 49,275
Ryder System, Inc................................ 6,300 177,187
SouthTrust Corporation........................... 5,800 202,275
UICI*............................................ 1,900 61,750
Washington Mutual, Inc........................... 4,700 203,569
-----------
2,016,488
-----------
</TABLE>
--------------------------------------------------------------------
*Non-Income Producing. 23
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
HEALTH SERVICES (4.64%)
AmeriSource Health Corporation Class A*.......... 1,300 $ 62,725
Bergen Brunswig Corporation Class A.............. 2,600 74,100
Cardinal Health, Inc............................. 2,250 131,062
Tenet Healthcare Corporation*.................... 8,400 183,750
-----------
451,637
-----------
INDUSTRIAL SERVICES (0.39%)
Fluor Corporation................................ 600 37,650
-----------
PROCESS INDUSTRIES (7.29%)
Albemarle Corporation............................ 2,600 47,125
Cabot Corporation................................ 2,800 70,350
Mead Corporation (The)........................... 1,500 87,188
Owens-Illinois, Inc.*............................ 10,800 245,700
Sonoco Products Company.......................... 3,000 77,625
Terra Industries Inc............................. 6,500 95,875
Union Carbide Corporation........................ 2,100 85,837
-----------
709,700
-----------
PRODUCER MANUFACTURING (2.44%)
AGCO Corporation................................. 1,300 37,213
Cummins Engine
Company, Inc.................................... 1,000 46,000
ITT Industries, Inc.............................. 4,600 112,700
Johnson Controls, Inc............................ 500 41,437
-----------
237,350
-----------
RETAIL TRADE (14.77%)
American Stores Co............................... 2,100 85,838
Circuit City Stores, Inc......................... 1,900 57,237
CompUSA Inc.*.................................... 4,900 101,063
Dayton Hudson Corporation........................ 3,700 145,225
Eckerd Corporation*.............................. 1,375 44,000
Federated Department
Stores, Inc.*................................... 4,000 136,500
Fred Meyer, Inc.*................................ 2,800 99,400
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
RETAIL TRADE (CONT'D)
Kmart Corporation*............................... 8,300 $ 86,112
Kroger Company (The)*............................ 2,300 106,950
Pier 1 Imports, Inc.............................. 2,600 45,825
Price/Costco, Inc.*.............................. 4,100 103,013
Ruddick Corporation.............................. 3,100 43,400
Safeway, Inc.*................................... 2,400 102,600
Service Merchandise Company, Inc.*............... 5,800 24,650
TJX Companies, Inc. (The)........................ 1,200 56,850
Vons Companies, Inc.*............................ 1,600 95,800
Winn-Dixie Stores, Inc........................... 1,900 60,087
Woolworth Corporation*........................... 2,000 43,750
-----------
1,438,300
-----------
TECHNOLOGY SERVICES (0.62%)
Tech Data Corporation*........................... 2,200 60,225
-----------
TRANSPORTATION (3.60%)
Continental Airlines, Inc. Class B*.............. 2,800 79,100
Federal Express Corporation*..................... 2,200 97,900
Illinois Central Corporation..................... 2,800 89,600
USAir Group, Inc.*............................... 3,600 84,150
-----------
350,750
-----------
UTILITIES (11.13%)
Allegheny Power
System, Inc..................................... 3,100 94,163
BCE Inc.......................................... 1,900 90,725
Columbia Gas System, Inc. (The).................. 3,000 190,875
Entergy Corporation.............................. 4,000 111,000
Long Island Lighting Company..................... 3,700 81,862
MCN Corporation.................................. 3,300 95,288
MidAmerican Energy Holdings Company.............. 4,400 69,850
PacifiCorp....................................... 4,300 88,150
Pinnacle West Capital Corporation................ 4,400 139,700
</TABLE>
----------------------------
24 *Non-Income Producing.
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
UTILITIES (CONT'D)
Public Service Company of New Mexico............. 2,300 $ 45,137
Southern Company (The)........................... 1,900 42,987
Washington Water Power Company (The)............. 1,800 33,525
-----------
1,083,262
-----------
Total Common Stocks
(Cost $8,004,902)............................... $ 9,588,362
-----------
</TABLE>
SHORT-TERM INVESTMENTS (2.32%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
REPURCHASE AGREEMENTS (2.32%)
State Street Bank and Trust Company, 4.00%, due
01/02/97 (Collateralized by $215,000 U.S.
Treasury Bonds, 7.125%, due 02/15/03)........... $225,615 $ 225,615
-----------
Total Short-Term Investments
(Cost $225,615)................................. $ 225,615
-----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Total Investments (100.79%)
(Cost $8,230,517+).............................. $ 9,813,977
Liabilities in Excess of Cash and Other Assets
(-0.79%)........................................ (76,887)
-----------
Net Assets (100.00%) 721,722 shares outstanding
(Note 3)........................................ $ 9,737,090
-----------
-----------
Net Asset Value, offering and redemption price
per share....................................... $13.49
-----------
-----------
</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 $1,747,432 and $163,972,
respectively.
See notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
COMMON STOCKS (98.02%)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES (9.62%)
ABM Industries Inc............................... 55,800 $ 1,032,300
Bearings, Inc.................................... 38,600 1,075,975
Borg-Warner Security Corporation*................ 45,500 489,125
Cameron Ashley Building Products*................ 31,000 434,000
CompuCom Systems, Inc.*.......................... 87,600 941,700
Graphic Industries, Inc.......................... 50,600 512,325
Hughes Supply, Inc............................... 26,200 1,129,875
ICO, Inc......................................... 74,600 456,925
JP Foodservice, Inc.*............................ 27,800 774,925
Jacobs Engineering Group Inc.*................... 30,100 711,112
Jenny Craig, Inc.*............................... 96,100 852,887
MicroAge, Inc.*.................................. 26,700 534,000
Norrell Corporation.............................. 32,700 891,075
Performance Food Group Company*.................. 52,350 811,425
Pinkerton's, Inc.*............................... 42,800 1,075,350
Rexel, Inc.*..................................... 85,500 1,357,313
Richfood Holdings, Inc........................... 31,596 766,203
United Stationers Inc.*.......................... 10,000 195,000
Volt Information Sciences, Inc.*................. 22,400 980,000
Wackenhut Corporation Class A.................... 37,300 643,425
World Fuel Services Corporation.................. 34,100 758,725
-------------
16,423,665
-------------
CONSUMER DURABLES (6.26%)
Beazer Homes USA, Inc.*.......................... 24,900 460,650
Cavalier Homes, Inc.............................. 47,812 549,838
Champion Enterprises, Inc.*...................... 91,216 1,778,712
Chrysler Corporation............................. 12,700 419,100
Continental Homes Holding Corporation............ 50,700 1,077,375
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
CONSUMER DURABLES (CONT'D)
Ford Motor Company............................... 14,500 $ 462,188
Hasbro, Inc...................................... 10,700 415,962
Honda Motor Co., Ltd............................. 9,000 509,625
Huffy Corporation................................ 72,300 1,039,312
M.D.C. Holdings, Inc............................. 144,400 1,245,450
Maytag Corporation............................... 27,100 535,225
Skyline Corporation.............................. 40,800 1,009,800
Southern Energy Homes, Inc.*..................... 10,100 116,150
Thor Industries, Inc............................. 13,900 350,975
Toll Brothers, Inc.*............................. 23,200 452,400
Volvo AB, ADR.................................... 12,400 269,700
--------------
10,692,462
--------------
CONSUMER NON-DURABLES (3.28%)
ConAgra, Inc..................................... 8,300 412,925
DIMON Incorporated............................... 43,900 1,015,188
Golden Poultry Company, Inc...................... 33,600 363,300
Morningstar Group, Inc. (The)*................... 57,600 1,130,400
National Beverage Corporation*................... 27,200 244,800
Standard Commercial Corporation*................. 30,428 616,167
Universal Corporation............................ 29,400 944,475
Whitman Corporation.............................. 14,200 324,825
Worthington Foods, Inc........................... 29,066 552,254
--------------
5,604,334
--------------
CONSUMER SERVICES (1.40%)
Consolidated Products, Inc.*..................... 53,460 1,042,470
Darden Restaurants, Inc.......................... 19,100 167,125
Equifax Inc...................................... 15,600 477,750
Hilton Hotels Corporation........................ 14,300 373,588
Piccadilly Cafeterias, Inc....................... 36,300 335,775
--------------
2,396,708
--------------
</TABLE>
----------------------------
26 *Non-Income Producing.
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
ELECTRONIC TECHNOLOGY (7.50%)
ASM International N.V.* 77,400 $ 744,975
Advanced Logic Research, Inc.*................... 69,300 857,588
Applied Magnetics Corporation*................... 72,700 2,171,913
Avnet Inc........................................ 8,400 489,300
ESCO Electronics Corporation..................... 98,400 984,000
GenRad, Inc.*.................................... 66,800 1,553,100
MTS Systems Corporation.......................... 41,900 838,000
Mitel Corporation*............................... 127,000 793,750
Orbotech Ltd.*................................... 51,100 734,562
Storage Technology Corporation*.................. 11,700 557,212
TSI Incorporated................................. 75,900 872,850
Western Digital Corporation*..................... 20,600 1,171,625
Xicor, Inc.*..................................... 101,600 1,041,400
--------------
12,810,275
--------------
ENERGY MINERALS (4.25%)
Ashland Inc...................................... 10,500 460,688
Getty Petroleum Corporation...................... 37,900 615,875
Giant Industries, Inc............................ 12,600 176,400
NGC Corporation.................................. 26,000 604,500
Occidental Petroleum Corporation................. 19,500 455,812
Oryx Energy Company*............................. 25,200 623,700
Pennzoil Company................................. 6,200 350,300
Tesoro Petroleum Corporation*.................... 78,900 1,104,600
Tosco Corporation................................ 4,500 356,063
Trizec Hahn Corporation.......................... 52,600 1,157,200
USX-Marathon Group............................... 36,500 871,437
Ultramar Diamond Shamrock Corporation............ 3,774 119,353
Unocal Corporation............................... 8,700 353,437
--------------
7,249,365
--------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
FINANCE (19.71%)
Ahmanson (H.F.) & Company........................ 3,300 $ 107,250
American Federal Bank, FSB....................... 45,900 866,363
American Insured Mortgage Investors L.P. Series
88.............................................. 12,700 176,212
AmeriCredit Corporation*......................... 72,600 1,488,300
AmVestors Financial Corporation.................. 35,100 517,725
Atalanta/Sosnoff Capital Corporation............. 10,600 94,075
Bank of New York Company, Inc. (The)............. 6,700 226,125
BankAtlantic Bancorp, Inc. Class A .............. 9,319 121,147
BankAtlantic Bancorp, Inc. Class B .............. 37,275 498,553
Bankers Life Holding Corporation................. 13,400 335,000
Bear Stearns Companies Inc. (The)................ 8,100 225,787
CV Reit, Inc..................................... 26,100 358,875
California Federal Bank, FSB*.................... 17,400 426,300
City National Corporation........................ 29,100 629,288
Coastal Bancorp, Inc............................. 16,300 372,863
Comdisco, Inc.................................... 28,400 901,700
Commerce Group, Inc. (The)....................... 40,500 1,022,625
Conseco, Inc..................................... 9,400 599,250
D&N Financial Corporation*....................... 39,400 659,950
Edwards (A.G.), Inc.............................. 7,000 235,375
Evergreen Bancorp, Inc........................... 12,500 204,687
FNB Corporation.................................. 4,600 105,800
Fahnestock Viner Holdings, Inc................... 16,600 240,700
First Financial Caribbean Corporation............ 14,000 388,500
FirstBank Puerto Rico............................ 24,300 631,800
</TABLE>
--------------------------------------------------------------------
*Non-Income Producing. 27
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
FINANCE (CONT'D)
<CAPTION>
<S> <C> <C>
Fremont General Corporation...................... 32,800 $ 1,016,800
Gainsco, Inc..................................... 49,400 475,475
Glendale Federal Bank, FSB*...................... 39,700 923,025
Green Tree Financial Corporation................. 2,400 92,700
HUBCO, Inc....................................... 48,451 1,187,049
Hibernia Corporation Class A..................... 34,500 457,125
Imperial Credit Industries, Inc.*................ 13,300 279,300
Independent Bank Corporation..................... 75,100 788,550
Lawyers Title Corporation........................ 23,000 451,375
Lehman Brothers Holdings Inc..................... 32,700 1,025,962
Lexington Corporate Properties, Inc.............. 10,400 152,100
Magna Group, Inc................................. 4,300 126,850
Medford Savings Bank............................. 24,400 628,300
Meridian Insurance Group, Inc.................... 20,300 299,425
Morgan Keegan, Inc............................... 80,500 1,378,562
National City Corporation........................ 18,600 834,675
North Fork Bancorporation, Inc................... 13,900 495,187
Oriental Bank and Trust.......................... 21,840 455,910
Paine Webber Group Inc........................... 8,200 230,625
People's Bank.................................... 42,100 1,215,638
Peoples Heritage Financial Group, Inc............ 14,424 403,872
Pioneer Financial Services, Inc.................. 64,400 1,610,000
Poncebank........................................ 1,600 40,000
Presidential Life Corporation.................... 47,800 576,588
Quick & Reilly Group, Inc. (The)................. 7,200 215,100
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
FINANCE (CONT'D)
<CAPTION>
<S> <C> <C>
Reliance Bancorp, Inc............................ 36,700 $ 715,650
Reliance Group Holdings, Inc..................... 94,200 859,575
Riggs National Corporation....................... 68,100 1,174,725
Ryder System, Inc................................ 15,800 444,375
Sherwood Group, Inc. (The)*...................... 16,300 169,113
Silicon Valley Bancshares*....................... 12,000 387,000
SouthTrust Corporation........................... 11,400 397,575
Southwest Securities Group, Inc.................. 38,800 582,000
Sovereign Bancorp, Inc........................... 32,900 431,813
Thornburg Mortgage Asset Corporation............. 1,500 32,063
Titan Holdings, Inc.............................. 21,800 359,700
UICI*............................................ 28,600 929,500
Washington Mutual, Inc........................... 8,500 368,156
--------------
33,645,688
--------------
HEALTH SERVICES (2.52%)
AmeriSource Health Corporation Class A*.......... 18,800 907,100
Bergen Brunswig Corporation Class A.............. 25,100 715,350
Kinetic Concepts, Inc............................ 58,300 714,175
Syncor International Corporation*................ 99,200 1,326,800
Tenet Healthcare Corporation*.................... 29,200 638,750
--------------
4,302,175
--------------
HEALTH TECHNOLOGY (0.46%)
OEC Medical Systems, Inc.*....................... 52,600 789,000
--------------
</TABLE>
----------------------------
28 *Non-Income Producing.
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
INDUSTRIAL SERVICES (2.01%)
Dreco Energy Services Ltd. Class A*.............. 22,500 $ 824,063
EMCOR Group, Inc.*............................... 66,900 869,700
Fluor Corporation................................ 3,200 200,800
Guy F. Atkinson Company of California*........... 50,200 527,100
Philip Environmental, Inc.*...................... 47,500 688,750
Robertson-Ceco Corporation*...................... 40,300 317,362
--------------
3,427,775
--------------
NON-ENERGY MINERALS (1.66%)
Centex Construction Products, Inc................ 44,000 792,000
Republic Group Inc............................... 24,900 389,063
Roanoke Electric Steel Corporation............... 35,100 587,925
Universal Forest Products, Inc................... 80,200 1,062,650
--------------
2,831,638
--------------
PROCESS INDUSTRIES (4.12%)
Albemarle Corporation............................ 32,700 592,688
Cabot Corporation................................ 7,800 195,975
Culp, Inc........................................ 26,100 398,025
Darling International Inc.*...................... 20,000 590,000
International Specialty Products Inc.*........... 56,600 693,350
Mead Corporation (The)........................... 3,500 203,437
Orange-co., Inc.................................. 22,600 175,150
Owens-Illinois, Inc.*............................ 25,900 589,225
Shiloh Industries, Inc.*......................... 64,000 1,040,000
Sonoco Products Company.......................... 14,400 372,600
Spartech Corporation............................. 101,500 1,129,188
Terra Industries Inc............................. 60,400 890,900
Union Carbide Corporation........................ 4,100 167,587
--------------
7,038,125
--------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
PRODUCER MANUFACTURING (8.39%)
AGCO Corporation................................. 17,000 $ 486,625
Allied Products Corporation...................... 12,200 362,950
Ampco-Pittsburgh Corporation..................... 54,800 657,600
Avondale Industries Inc.*........................ 58,400 1,255,600
Chart Industries, Inc............................ 61,800 1,058,325
Commercial Metals Company........................ 8,000 241,000
Core Industries Inc.............................. 24,200 399,300
Cummins Engine Company, Inc...................... 5,200 239,200
Fairchild Corporation (The)*..................... 40,200 592,950
Gardner Denver Machinery, Inc.*.................. 32,000 1,096,000
Genlyte Group Inc. (The)*........................ 61,400 767,500
Griffon Corporation*............................. 57,600 705,600
ITT Industries, Inc.............................. 19,900 487,550
Inter-City Products Corporation*................. 33,500 96,312
Johnson Controls, Inc............................ 2,400 198,900
Katy Industries, Inc............................. 26,100 378,450
Lamson & Sessions Co. (The)*..................... 116,300 843,175
Mestek, Inc.*.................................... 22,300 367,950
Nortek, Inc.*.................................... 74,600 1,492,000
Oshkosh Truck Corporation Class B................ 23,300 247,562
Patrick Industries, Inc.......................... 20,300 307,038
Powell Industries, Inc.*......................... 47,100 653,513
Shelter Components Corporation................... 46,625 571,156
Watsco, Inc...................................... 28,500 822,938
--------------
14,329,194
--------------
</TABLE>
--------------------------------------------------------------------
*Non-Income Producing. 29
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
RETAIL TRADE (13.81%)
American Stores Co............................... 10,000 $ 408,750
Borders Group, Inc.*............................. 6,300 226,012
Carr Gottstein Foods Company*.................... 18,600 69,750
Carson Pirie Scott & Co.*........................ 40,400 1,020,100
Central Garden and Pet Company*.................. 42,400 893,050
Charming Shoppes, Inc.*.......................... 71,600 362,475
Circuit City Stores, Inc......................... 13,300 400,662
CompUSA, Inc.*................................... 15,400 317,625
Damark International, Inc. Class A*.............. 46,100 437,950
Dayton Hudson Corporation........................ 11,300 443,525
Delchamps, Inc................................... 44,300 858,313
Dress Barn, Inc. (The)*.......................... 37,500 562,500
E-Z Serve Corporation*........................... 78,200 92,862
Eagle Hardware & Garden, Inc.*................... 48,700 1,010,525
Eckerd Corporation*.............................. 6,284 201,088
Federated Department Stores, Inc.*............... 15,400 525,525
Filene's Basement Corporation*................... 104,000 429,000
Fred Meyer, Inc.*................................ 21,000 745,500
Genesco Inc.*.................................... 105,700 977,725
Great Atlantic & Pacific Tea Company, Inc.
(The)........................................... 10,600 337,875
Ingles Markets, Inc. Class A..................... 83,800 1,047,500
Intelligent Electronics, Inc.*................... 91,600 732,800
Kmart Corporation*............................... 19,900 206,462
Kroger Company (The)*............................ 9,300 432,450
Lazare Kaplan International Inc.*................ 15,800 270,575
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
RETAIL TRADE (CONT'D)
Longs Drug Stores Corporation.................... 25,200 $ 1,237,950
Marsh Supermarkets, Inc. Class B................. 12,500 142,188
Penney (J.C.) Co., Inc........................... 9,112 444,210
Pier 1 Imports, Inc.............................. 37,600 662,700
Price/Costco, Inc.*.............................. 22,800 572,850
Riser Foods, Inc. Class A........................ 32,900 1,044,575
Ross Stores, Inc................................. 21,400 1,070,000
Ruddick Corporation.............................. 72,600 1,016,400
Safeway, Inc.*................................... 10,400 444,600
Service Merchandise Company, Inc.*............... 83,400 354,450
Shopko Stores, Inc............................... 44,200 663,000
Smart & Final, Inc............................... 6,000 129,750
Syms Corporation*................................ 21,400 181,900
TJX Companies, Inc. (The)........................ 11,500 544,812
Value City Department Stores, Inc.*.............. 35,400 371,700
Vons Companies, Inc.*............................ 9,800 586,775
Waban Inc.*...................................... 16,900 439,400
Wet Seal, Inc. Class A*.......................... 12,700 271,463
Winn-Dixie Stores, Inc........................... 6,100 192,913
Woolworth Corporation* 9,200 201,250
--------------
23,583,485
--------------
TECHNOLOGY SERVICES (2.50%)
CHS Electronics, Inc.*........................... 80,500 1,378,562
Computer Data Systems, Inc....................... 31,700 958,925
Inacom Corporation*.............................. 28,500 1,140,000
Tech Data Corporation* 29,000 793,875
--------------
4,271,362
--------------
</TABLE>
----------------------------
30 *Non-Income Producing.
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
TRANSPORTATION (5.10%)
Air Express International Corporation............ 27,000 $ 870,750
Atlantic Coast Airlines, Inc.*................... 83,200 1,019,200
Continental Airlines, Inc. Class B*.............. 16,600 468,950
Federal Express Corporation*..................... 6,400 284,800
Harper Group, Inc. (The)......................... 39,500 938,125
Hawaiian Airlines, Inc.*......................... 144,200 486,675
Illinois Central Corporation..................... 12,900 412,800
Landstar System, Inc*............................ 38,900 904,425
Mesa Air Group, Inc.*............................ 82,100 554,175
Mesaba Holdings, Inc.*........................... 20,300 301,962
Reno Air, Inc.*.................................. 39,900 291,769
USAir Group, Inc.*............................... 49,500 1,157,063
Yellow Corporation*.............................. 71,200 1,023,500
-------------
8,714,194
-------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
UTILITIES (5.43%)
Allegheny Power System, Inc...................... 7,200 $ 218,700
BCE Inc.......................................... 12,700 606,425
Coastal Corporation (The)........................ 17,500 855,312
Dycom Industries, Inc.*.......................... 95,000 878,750
Edison International............................. 11,300 224,588
Edisto Resources Corporation*.................... 54,600 457,275
Jabil Circuit, Inc.*............................. 67,100 2,684,000
Kaneb Services, Inc.*............................ 54,400 176,800
Long Island Lighting Company..................... 25,200 557,550
PacifiCorp....................................... 10,100 207,050
Pinnacle West Capital Corporation................ 6,600 209,550
Public Service Company of New Mexico............. 42,200 828,175
TNP Enterprises, Inc............................. 34,700 949,913
Washington Water Power Company (The)............. 21,800 406,025
-------------
9,260,113
-------------
Total Common Stocks
(Cost $132,390,320)............................. $ 167,369,558
-------------
</TABLE>
SHORT-TERM INVESTMENTS (2.13%)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
REPURCHASE AGREEMENTS (2.13%)
State Street Bank and Trust Company, 4.00%, due
01/02/97 (Collateralized by $3,435,000 U.S.
Treasury Bonds, 7.125% due
02/15/23)....................................... $3,642,454 $ 3,642,454
-------------
<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total Short-Term Investments
(Cost $3,642,454)............................... $ 3,642,454
-------------
</TABLE>
--------------------------------------------------------------------
*Non-Income Producing. 31
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
EQUITY FUND
STATEMENT OF NET ASSETS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Total Investments (100.15%)
(Cost $136,032,774+)............................ $ 171,012,012
Liabilities in Excess of Cash and Other Assets
(-0.15%)........................................ (265,269)
-------------
Net Assets (100.00%) 12,671,399 shares
outstanding (Note 3)............................ $ 170,746,743
-------------
-------------
Net Asset Value, offering and redemption price
per share....................................... $13.47
</TABLE>
+ Aggregate cost for federal income tax purposes is $136,057,446. Aggregate
unrealized appreciation and depreciation of investments, based on cost for
federal income tax purposes, are $38,932,221 and $3,977,655, respectively.
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ULTRA SHORT
TERM BALANCED GROWTH AND EQUITY
INCOME FUND FUND INCOME FUND FUND
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest.............................. $310,550 $ 2,315,008 $ 10,920 $ 180,486
Dividends (a)......................... -- 1,348,185 207,863 3,060,941
-------------- -------------- ------------- --------------
Total income........................ 310,550 3,663,193 218,783 3,241,427
-------------- -------------- ------------- --------------
Expenses (Note 2):
Management Fee........................ 18,414 672,074 76,816 1,657,486
Custodian and related shareholder
expenses............................ 20,609 134,919 38,817 135,882
Legal, compliance and filing fees..... 7,194 38,617 8,767 66,468
Audit and accounting.................. 7,857 14,500 7,908 22,000
Trustees' fees........................ 253 4,718 437 9,592
Other................................. 1,054 8,123 1,355 15,327
-------------- -------------- ------------- --------------
Total expenses before
reimbursement..................... 55,381 872,951 134,100 1,906,755
Fees paid indirectly.................. (84) -- -- (1,589)
Expense reimbursement from Advisor.... (55,297) (200,877) (57,284) --
-------------- -------------- ------------- --------------
Net expenses........................ -- 672,074 76,816 1,905,166
-------------- -------------- ------------- --------------
Net investment income................... 310,550 2,991,119 141,967 1,336,261
-------------- -------------- ------------- --------------
<CAPTION>
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
<S> <C> <C> <C> <C>
Net realized gain (loss) on
investments............................ (36,917) 5,295,291 879,420 38,831,528
Change in unrealized appreciation
(depreciation) of investments.......... (25,313) 1,655,120 742,727 3,677,561
-------------- -------------- ------------- --------------
Net gain (loss) on investments........ (62,230) 6,950,411 1,622,147 42,509,089
-------------- -------------- ------------- --------------
Increase in net assets from
operations............................. $248,320 $ 9,941,530 $1,764,114 $ 43,845,350
-------------- -------------- ------------- --------------
-------------- -------------- ------------- --------------
</TABLE>
(a) Dividends recorded net of foreign withholding taxes of $0, $6,849, $829 and
$9,374, respectively.
See notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ULTRA SHORT TERM
INCOME FUND BALANCED FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income................. $ 310,550 $ 173,438 $ 2,991,119 $ 1,875,136
Net realized gain (loss) on
investments......................... (36,917) 230 5,295,291 2,248,284
Change in unrealized appreciation
(depreciation) of investments....... (25,313) 9,299 1,655,120 6,046,085
------------- ------------- ------------- -------------
Increase in net assets from
operations.......................... 248,320 182,967 9,941,530 10,169,505
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income................. (314,948) (169,141) (2,991,194) (1,877,538)
Net realized gains on investments..... -- -- (5,295,439) (2,248,136)
------------- ------------- ------------- -------------
Total distributions to
shareholders...................... (314,948) (169,141) (8,286,633) (4,125,674)
------------- ------------- ------------- -------------
Transactions in shares of beneficial
interest
(Note 3)............................... (83,335) 3,975,264 (3,751,938) 52,175,819
------------- ------------- ------------- -------------
Total increase (decrease)........... (149,963) 3,989,090 (2,097,041) 58,219,650
Net Assets:
Beginning of year..................... 4,610,484 621,394 85,922,202 27,702,552
------------- ------------- ------------- -------------
End of year (including undistributed
net investment income of $173,
$4,341, $278 and $353,
respectively)....................... $ 4,460,521 $ 4,610,484 $ 83,825,161 $ 85,922,202
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND EQUITY FUND
-------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income..................... $ 141,967 $ 71,920 $ 1,336,261 $ 832,809
Net realized gain on investments.......... 879,420 165,914 38,831,528 6,400,213
Change in unrealized appreciation of
investments............................. 742,727 840,733 3,677,561 26,485,424
------------ ------------ ------------ ------------
Increase in net assets from operations.... 1,764,114 1,078,567 43,845,350 33,718,446
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income..................... (147,097) (66,641) (1,333,568) (829,705)
Net realized gains on investments......... (879,204) (165,914) (38,672,513) (6,388,563)
In excess of realized gains on
investments............................. -- (216) -- --
------------ ------------ ------------ ------------
Total distributions to shareholders..... (1,026,301) (232,771) (40,006,081) (7,218,268)
------------ ------------ ------------ ------------
Transactions in shares of beneficial
interest (Note 3).......................... 1,038,837 6,799,365 (7,797,705) (46,902,152)
------------ ------------ ------------ ------------
Total increase (decrease)............... 1,776,650 7,645,161 (3,958,436) (20,401,974)
Net Assets:
Beginning of year......................... 7,960,440 315,279 174,705,179 195,107,153
------------ ------------ ------------ ------------
End of year (including undistributed net
investment income of $147, $5,277,
$7,178 and $4,485, respectively)........ $9,737,090 $7,960,440 $170,746,743 $174,705,179
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
35
<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) 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.
d) 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 increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
e) 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.
- --------------------------------------------------------------------------------
36
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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, 1996. For the year ended December 31, 1996, the
Manager voluntarily waived fees for the Ultra Short Term Income Fund, the
Balanced Fund and the Growth and Income Fund of $18,414, $200,877 and $57,284,
respectively. In addition, the Manager reimbursed expenses of $36,883 for the
Ultra Short Term 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 $84 and $1,589 for the Ultra
Short Term Income Fund and the Equity Fund.
3. TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST
At December 31, 1996, the Trust had an unlimited authorized number of shares of
beneficial interest ($.01 par value). Capital paid in amounted to $4,513,279,
$75,460,669, $8,153,483 and $135,601,312 for the Ultra Short Term Income Fund,
the Balanced Fund, the Growth and Income Fund and the Equity Fund. The Ultra
Short Term Income Fund underwent a one for five share split on June 14, 1996.
Transactions were as follows:
- --------------------------------------------------------------------------------
37
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
ULTRA SHORT TERM INCOME FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold..................................................... 388,853 $1,211,511 2,141,483 $4,361,299
Issued on reinvestment of dividends...................... 49,121 314,637 83,063 169,028
Redeemed................................................. (387,823) (1,609,483) (272,844) (555,063)
Reduction in shares due to reverse share split........... (1,867,810) -- -- --
--------- ---------- --------- ---------
Net increase (decrease).................................. (1,817,659) $ (83,335) 1,951,702 $3,975,264
--------- ---------- --------- ---------
--------- ---------- --------- ---------
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
BALANCED FUND
------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.......................................................... 579,937 $ 12,210,767 2,895,766 $57,764,393
Issued on reinvestment of dividends........................... 390,889 8,225,985 198,878 4,040,631
Redeemed...................................................... (1,153,469) (24,188,690) (480,370) (9,629,205)
---------- ------------ --------- -----------
Net increase (decrease)....................................... (182,643) $ (3,751,938) 2,614,274 $52,175,819
---------- ------------ --------- -----------
---------- ------------ --------- -----------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold............................................................ 52,143 $ 691,069 608,522 $ 6,717,270
Issued on reinvestment of dividends............................. 71,032 958,216 16,609 203,130
Redeemed........................................................ (47,879) (610,448) (10,233) (121,035)
--------- ------------ --------- -----------
Net increase.................................................... 75,296 $ 1,038,837 614,898 $ 6,799,365
--------- ------------ --------- -----------
--------- ------------ --------- -----------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
EQUITY FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................................................ 515,755 $ 7,634,352 94,373 $ 1,236,042
Issued on reinvestment of dividends......................... 2,963,304 39,737,905 532,276 7,175,073
Redeemed.................................................... (3,688,581) (55,169,962) (4,246,137) (55,313,267)
----------- ------------ ---------- ------------
Net decrease................................................ (209,522) $ (7,797,705) (3,619,488) $(46,902,152)
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
4. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than U.S. Government direct
and agency obligations and short-term investments, totaled $1,942,184 and
$726,269 for the Ultra Short Term Income Fund, $56,997,996 and $65,426,465 for
the Balanced Fund, $8,758,311 and $8,455,344 for the Growth and Income
Fund and $133,067,443 and $177,628,824 for the Equity Fund. Accumulated
undistributed realized gains at December 31, 1996 amounted to $159,015 for the
Equity Fund. Accumulated realized losses at December 31, 1996 amounted to
$36,917 for the Ultra Short Term Income Fund. Such losses represent tax basis
capital losses which may be carried forward to offset future capital gains. Such
losses expire December 31, 2004.
- --------------------------------------------------------------------------------
39
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
ULTRA SHORT TERM INCOME FUND
FOR THE YEAR FOR THE YEAR
ENDED ENDED DECEMBER 27, 1994
DECEMBER 31, DECEMBER 31, (INCEPTION) TO
1996 1995 DECEMBER 31, 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance for a
share outstanding throughout the period (a)
Net asset value, beginning of period.............. $10.20 $10.00 $10.00
------------- ------------- --------
Income from investment operations:
Net investment income............................. 0.71 0.57 --
Net realized and unrealized gains (losses) on
investments...................................... (0.16) 0.20 --
------------- ------------- --------
Total from investment operations.............. 0.55 0.77 --
------------- ------------- --------
Less distributions:
Dividends from net investment income.............. (0.72) (0.57) --
------------- ------------- --------
Total distributions........................... (0.72) (0.57) --
------------- ------------- --------
Net asset value, end of period.................... $10.03 $10.20 $10.00
------------- ------------- --------
------------- ------------- --------
Total return...................................... 5.48% 7.83% 0.00%
Ratios/Supplemental data
Net assets, end of period (000)................... $4,461 $4,610 $ 621
Ratios to average net assets:
Expenses........................................ 0.00%+# 0.22%+# 0.50%*+
Net investment income........................... 6.76%+ 6.92%+ 0.65%*+
Portfolio turnover rate........................... 46.82% 39.26% 0.00%
</TABLE>
- -------------
* Annualized
+ Net of management fee waived equivalent to 0.4%, 0.4% and 0.4% of average net
assets plus expenses reimbursed equivalent to 0.80%, 1.27% and 21.54% of
average net assets, respectively.
# Includes custodian fees paid indirectly which amounted to less than 0.01% and
0.04% of average net assets, respectively.
(a) Per share amounts for periods ended prior to December 31, 1996 have been
restated to reflect a 1 for 5 share split effective June 14, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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,
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance for a
share outstanding throughout the year
Net asset value, beginning of year...... $ 20.59 $ 17.76 $ 18.63 $ 17.37 $ 17.02
-------- --------- -------- -------- --------
Income from investment operations:
Net investment income................... 0.78 0.64 0.56 0.62 0.73
Net realized and unrealized gains
(losses)
on investments......................... 1.85 3.39 (0.56) 2.32 1.28
-------- --------- -------- -------- --------
Total from investment operations.... 2.63 4.03 0.00 2.94 2.01
-------- --------- -------- -------- --------
Less distributions:
Dividends from net investment income.... (0.78) (0.64) (0.56) (0.64) (0.73)
Distributions from net realized gains... (1.44) (0.56) (0.31) (1.04) (0.93)
-------- --------- -------- -------- --------
Total distributions................. (2.22) (1.20) (0.87) (1.68) (1.66)
-------- --------- -------- -------- --------
Net asset value, end of year............ $ 21.00 $ 20.59 $ 17.76 $ 18.63 $ 17.37
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
Total return............................ 12.91% 22.99% 0.01% 17.06% 12.01%
Ratios/Supplemental data
Net assets, end of year (000)........... $ 83,825 $ 85,922 $ 27,703 $ 21,690 $ 14,044
Ratios to average net assets:
Expenses.............................. 0.80%+ 0.81%+# 0.80%+ 0.69%+ 0.52%+
Net investment income................. 3.56%+ 3.62%+ 3.10%+ 3.42%+ 4.31%+
Portfolio turnover rate................. 71.51% 74.72% 94.38% 65.05% 95.51%
Average commission rate paid............ $ 0.0476 (a) (a) (a) (a)
</TABLE>
- -------------
+ Net of management fee waived equivalent to 0.2%, 0.3%, 0.4%, 0.5%, and 0.8%
of average net assets.
# Includes custody fees paid indirectly which amounted to less than 0.01% of
average net assets.
(a) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
41
<PAGE>
- --------------------------------------------------------------------------------
ECLIPSE FINANCIAL ASSET TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. SELECTED FINANCIAL INFORMATION (CONT'D)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND
DECEMBER 27,
FOR THE YEAR FOR THE YEAR 1994
ENDED ENDED (INCEPTION)
DECEMBER 31, DECEMBER 31, TO DECEMBER
1996 1995 31, 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance for a
share outstanding throughout the period
Net asset value, beginning of period.............. $12.31 $10.00 $10.00
------------- ------------- -------------
Income from investment operations:
Net investment income............................. 0.22 0.11 --
Net realized and unrealized gains on
investments...................................... 2.54 2.57 --
------------- ------------- -------------
Total from investment operations.............. 2.76 2.68 --
------------- ------------- -------------
Less distributions:
Dividends from net investment income.............. (0.23) (0.11) --
Distributions from net realized gains............. (1.35) (0.26) --
------------- ------------- -------------
Total distributions........................... (1.58) (0.37) --
------------- ------------- -------------
Net asset value, end of period.................... $13.49 $12.31 $10.00
------------- ------------- -------------
------------- ------------- -------------
Total return...................................... 22.40% 26.82% 0.00%
Ratios/Supplemental data
Net assets, end of period (000)................... $9,737 $7,960 $ 315
Ratios to average net assets:
Expenses........................................ 0.90%+ 1.00%+# 1.20%*+
Net investment income........................... 1.66%+ 1.57%+ (0.06)%*+
Portfolio turnover rate........................... 102.24% 63.16% 0.00%
Average commission rate paid...................... $0.0454 (a) (a)
</TABLE>
- -------------
* Annualized
+ Net of management fee waived equivalent to 0.7%, 0.9% and 0.9% of average net
assets plus expenses reimbursed equivalent to 0.00%, 0.05% and 43.15% of
average net assets, respectively.
# Includes custodian fees paid indirectly which amounted to 0.10% of average
net assets.
(a) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance for a
share outstanding throughout the year
Net asset value, beginning of year...... $ 13.56 $ 11.82 $ 13.35 $ 13.20 $ 11.73
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................... 0.14 0.07 0.03 0.08 0.15
Net realized and unrealized gains
(losses) on investments................ 3.89 2.26 (0.66) 2.17 2.12
--------- --------- --------- --------- ---------
Total from investment operations.... 4.03 2.33 (0.63) 2.25 2.27
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income.... (0.14) (0.07) (0.03) (0.08) (0.15)
Distributions from net realized gains... (3.98) (0.52) (0.87) (2.02) (0.65)
--------- --------- --------- --------- ---------
Total distributions................. (4.12) (0.59) (0.90) (2.10) (0.80)
--------- --------- --------- --------- ---------
Net asset value, end of year............ $ 13.47 $ 13.56 $ 11.82 $ 13.35 $ 13.20
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return............................ 29.87% 19.69% (4.74)% 17.02% 19.38%
Ratios/Supplemental data
Net assets, end of year (000)........... $ 170,747 $ 174,705 $ 195,107 $ 197,106 $ 163,170
Ratios to average net assets:
Expenses.............................. 1.15%# 1.14%# 1.12% 1.12% 1.15%
Net investment income................. 0.81% 0.45% 0.21% 0.55% 1.17%
Portfolio turnover rate................. 82.05% 74.40% 92.20% 101.09% 110.98%
Average commission rate paid............ $ 0.0431 (a) (a) (a) (a)
</TABLE>
- -------------
# Includes custody fees paid indirectly which amounted to less than 0.01% of
average net assets for each period indicated.
(a) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
43
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees and Shareholders of
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, 1996, 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, 1996, by correspondence with the custodian. 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, 1996, 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 31, 1997
- ---------------------------------------------------------
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
Patrick J. Farrell Assistant Treasurer
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, 1996 total assets under
management approximated $900 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 CORPORATE & GOVERNMENT 1-9.99 YEAR BOND INDEX is a market
capitalization weighted index including U.S. Government and fixed coupon
domestic investment grade corporate bonds with at least $100 million par amount
outstanding. Source: Merrill Lynch
- --------------------------------------------------------------------------------
47
<PAGE>
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.
RUSSELL 2000 INDEX tracks the smallest 2,000 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.
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>
MANAGER
Towneley Capital Management, Inc.
144 East 30th Street
New York, New York 10016
SHAREHOLDER SERVICING AGENT
Eclipse Financial Services, Inc.
P.O. Box 2196
Peachtree City, GA 30269
Telephone: 800.872.2710
In Georgia: 770.631.0414
CUSTODIAN, TRANSFER AGENT & DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company
210 West 10th Street
Kansas City, Missouri 64105-1716
This report is submitted for the general information of the shareholders of
the Trust. It is not authorized for distribution to prospective investors in
the Trust unless preceded or accompanied by an effective prospectus, which
includes information regarding the Trust's objectives and policies, experience
of its management, marketability of shares, and other information.
