<PAGE>
[LOGO]
ECLIPSE
FUNDS
ANNUAL REPORT
December 31, 1999
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Chairman's Letter........................................... 1
Review of Eclipse-Registered Trademark- Funds
Eclipse Ultra Short Term Income Fund.................... 3
Eclipse Balanced Fund................................... 5
Eclipse Mid Cap Value Fund.............................. 7
Eclipse Small Cap Value Fund............................ 10
Statements of Net Assets
Eclipse Ultra Short Term Income Fund.................... 13
Eclipse Balanced Fund................................... 15
Eclipse Mid Cap Value Fund.............................. 20
Eclipse Small Cap Value Fund............................ 22
Statements of Operations.................................... 27
Statements of Changes in Net Assets......................... 28
Notes to Financial Statements............................... 30
Financial Highlights
Eclipse Ultra Short Term Income Fund.................... 33
Eclipse Balanced Fund................................... 34
Eclipse Mid Cap Value Fund.............................. 35
Eclipse Small Cap Value Fund............................ 36
Report of Independent Accountants........................... 37
Change in Independent Accountants........................... 38
Trustees and Officers....................................... 39
Towneley Capital Management, Inc., Investment Manager....... 40
Glossary.................................................... 41
</TABLE>
- -Registered Trademark- Eclipse is a registered service mark of Eclipse Funds.
<PAGE>
CHAIRMAN'S LETTER
Dear Fellow Shareholders:
This current bull market has now become the longest -- and one of the strongest
- -- in the history of the United States. It is certainly the biggest bull market
of the twentieth century. We believe it has also become one of the most
overextended and speculative.
Nineteen ninety-nine saw the continuation of prior trends; the economy racked up
another strong year and the stock markets made new highs.
THE ECONOMY
The United States continued to experience low inflation and low interest rates.
Consumer confidence was the highest it has been in 31 years; the jobless rate
was the lowest in almost three decades, with some industries experiencing labor
shortages. Savers and investors had a disincentive to own fixed-income
securities. Instead, they bought new homes, spent their money, and added to the
buying surge in the stock market.
In short, things could not have been better.
THE MARKETS
All United States stock markets were up. Consumer and investor confidence,
coupled with the buoyant economy, led to the continuation of the bull market. In
the markets, the Internet dot-com frenzy continued both in established
technology companies and initial public offerings (IPOs). The IPO market raised
a record $69 billion. Merger activity continued as low interest rates and high
stock prices made the cost of acquiring companies less expensive than growing
them.
The equity markets were strong in the first two quarters of the year, declined
sharply in the third quarter after the Federal Reserve raised interest rates,
causing investors to worry about possible further increases, and rebounded
sharply in the fourth quarter. The Dow Jones Industrial Average was up 7.0% in
the first quarter, 12.5% in the second quarter, down 5.4% in the third quarter,
back up 11.6% in the fourth quarter, and closed at +27.2% for the year. The
quarterly numbers for the Standard & Poor's 500 Index were +5.0%, +7.1%, -6.2%,
+14.9%, respectively, and up 21% for the year. The Nasdaq skyrocketed; unlike
the other two indices it was up every quarter, and closed the year up an
astonishing 86%, due, of course, primarily to technology and Internet stocks.
These returns masked a surprising fact: as many stocks in the Standard & Poor's
500 Index were down as were up. There are two reasons for the disparity between
the indexes and the average stock -- MARKET WEIGHTING AND TECHNOLOGY STOCKS. The
technology stocks have, yet again, increased so dramatically that they have
pulled the entire market (as measured by various indexes) up with them. Most
investors tend to purchase relatively equal amounts of stock. This is called
"equal weighting." Indexes, on the other hand, are constructed so that larger
capitalization companies have more of an impact. This is known as "market
weighting." For example, at year-end the two biggest stocks in the Standard &
Poor's 500 Index, Microsoft and General Electric, have the same weight, or
effect on the Index, as do the bottom 250 stocks.
A word about Internet and other growth stocks. Growth stocks are experiencing
their highest valuations ever. This aggressive pricing indicates a rosy outlook
for many years, without any interruption of growth rates, a highly unlikely
scenario. Stocks in the Standard & Poor's 500 Index are selling at a
price/earnings ratio of 33, one of the highest valuations in the history of the
Index. Rapidly growing industries inevitably attract competition, and industry
leaders today will not necessarily be the industry leaders tomorrow. Often the
new growth companies have very small floats (shares outstanding), with much of
the stock held by insiders. Changes in the market's perception of their
prospects can have a catastrophic effect on inflated prices. In other words,
once they start falling, they plummet.
THE BOND MARKET IN PERSPECTIVE
While the stock market had another record-breaking year, the bond market
suffered its worst loss since 1994. The total return of the 30 year Treasury
bond fell 14.8%. The economy's continued growth was a help to the stock market
but a
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1
<PAGE>
hindrance to the bond market. Bond investors worried that with unemployment so
low, growth in wages and prices would put upward pressure on inflation in the
future. This fear was heightened by investors' concerns about possible Y2K
disruptions. Although the actual inflation rate -- currently 2.7% -- was kept in
check, the Federal Reserve sought to combat inflationary pressures by increasing
short-term interest rates a quarter point on June 30, August 24 and
November 16. By the end of the year, the 30 year Treasury bond yield stood at
6.48%, up 138 basis points for the year.
THE STOCK MARKET IN PERSPECTIVE
In 1999, as in the prior two years, growth stocks outperformed value stocks,
large stocks outperformed small stocks, and capitalization-weighted portfolios
and indexes outperformed equal-weighted portfolios and indexes. Growth stocks
prosper in low interest rate environments. We have been experiencing the most
pronounced period favoring growth stocks over value stocks in the past twenty
years.
Below is a chart showing the difference between the Value and Growth portions of
the Standard & Poor's 500 Index from 1980 through 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 INDEX VALUE MINUS GROWTH 1980-1999
<S> <C>
Value Beats Growth
Return Growth Beats Value
1980 -15.82
1981 9.83
1982 -0.99
1983 12.65
1984 8.18
1985 -3.64
1986 7.17
1987 -2.82
1988 9.73
1989 -10.27
1990 -7.05
1991 -15.81
1992 5.46
1993 16.93
1994 -3.78
1995 -1.13
1996 -1.97
1997 -6.55
1998 -27.48
1999 -15.52
</TABLE>
Source: Frank Russell Corp.
We don't know what the future will hold. We do know that we have consistently
implemented our investment discipline through bad times and good, through bear
markets and bull markets. We are investors who search for value and will
continue doing that. We believe that the market will at some point pay attention
to earnings and to value again.
We thank you for your confidence in us, and we will work to continue to merit
your trust in the years to come.
Sincerely,
[SIGNATURE]
Wesley G. McCain
Chairman
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2
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REVIEW OF ECLIPSE ULTRA SHORT INCOME FUND
ECUIX
Eclipse Ultra Short Term Income Fund marked its five-year anniversary with a
total return of 4.1% for the year. This was in line with the Lipper Ultra Short
Obligations Funds Index, which returned 4.5%. Our Fund was the top-ranked
socially responsible bond fund in 1999 according to the Social Investment Forum.
The Federal Reserve increased short-term interest rates by a quarter of a
percentage point on three occasions this year, pushing the entire yield curve
upward. The 30 year Treasury bond yield ended the year at 6.48%, up 138 basis
points, while the one year Treasury bill ended the year at 5.96%, up 144 basis
points.
We continue to select bonds primarily on the basis of credit quality and
duration. At year-end the Fund's portfolio had an average quality rating of A+
and a duration of 0.92 years.
We seek a high level of current income, preservation of capital and a relatively
stable net asset value. We also seek a higher return than a money-market fund
with less fluctuation than a longer-term bond fund. Investments are limited to
securities of socially responsible companies.
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LARGEST INDUSTRY HOLDINGS--12/31/99 % OF PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<S> <C>
Finance 21.9%
Producer Manufacturing 9.6
Utilities 9.6
Retail Trade 9.3
Consumer Services 9.1
</TABLE>
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PERFORMANCE AND RISK DATA
PERIODS ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
ANNUALIZED TOTAL
RETURN(1)
1 YEAR 5 YEARS RISK(2) RETURN/RISK
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Eclipse Ultra Short Term Income Fund(3,4) 4.1% 6.0% 0.8 7.5
Lipper Ultra Short Obligations Funds Average(5) 4.5 5.5 0.4 13.8
3 Month Treasury Bill 4.8 5.3 0.2 27.0
1 Year Treasury Bill 4.0 6.0 0.7 8.6
</TABLE>
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<TABLE>
<C> <S>
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 12/31/99 was 6.0%.
4) Net of management fee waived and after expense reimbursement
by manager: 1.67%, 1.20%, 1.22%, 1.20% and 0.93% of average
net assets from 1995 through 1999, respectively.
5) After all expenses.
</TABLE>
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3
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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>
$ THOUSANDS
<S> <C> <C> <C>
LIPPER ULTRA
Eclipse Ultra Short Short Obligations
Term Income 1 Yr T-Bill Funds Average
Dec-94 10,000 10,000 10,000.00
Mar-95 10,200 10,250 10,163.88
Jun-95 10,453 10,473 10,342.78
Sep-95 10,556 10,622 10,488.25
Dec-95 10,784 10,809 10,655.90
Mar-96 10,890 10,926 10,770.30
Jun-96 11,018 11,069 10,898.97
Sep-96 11,191 11,239 11,054.46
Dec-96 11,375 11,421 11,215.50
Mar-97 11,501 11,551 11,339.36
Jun-97 11,707 11,763 11,519.41
Sep-97 11,903 11,954 11,693.04
Dec-97 12,083 12,118 11,852.78
Mar-98 12,265 12,292 12,018.28
Jun-98 12,448 12,463 12,177.62
Sep-98 12,708 12,724 12,384.57
Dec-98 12,842 12,833 12,495.11
Mar-99 12,983 12,976 12,643.06
Jun-99 13,074 13,122 12,755.90
Sep-99 13,232 13,287 12,895.43
Dec-99 13,371 13,351 13,054.70
</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--1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income dividends $0.6251
Short-term capital gain dividends --
Long-term capital gain dividends --
-------
Total 1999 dividends $0.6251
=======
</TABLE>
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4
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REVIEW OF ECLIPSE BALANCED FUND
EBALX
Eclipse Balanced Fund ended the year with a disappointing total return of -0.4%.
The Lipper Balanced Fund Index returned 9.0%.
The Fund invests primarily in value stocks. This hurt us in 1999 as the
disparity in returns between growth and value stocks reached extreme levels.
(See the graph in the Chairman's letter.)
Our consistent value method of investing generally involves selection of stocks
that have low relative valuations with improving fundamentals. This approach
employs "bottom-up" fundamental analysis using quantitative techniques. We
select individual stocks rather than industry groups. We are not in the
forecasting business: we do not forecast earnings or estimate future growth
rates.
At year-end retail trade was the largest stock sector in the Fund. Both Circuit
City Stores and the Limited, Inc. were up sharply. Circuit City sells video and
audio equipment, appliances and other consumer electronics and office products.
The Limited is one of the largest retailers of women's apparel.
Electric technology was another large sector. While these stocks were not
directly related to the manic Internet, this sector produced good returns. For
example, during the year the Fund bought SCI Systems Inc. and Seagate Technology
Inc., which were up sharply. SCI Systems Inc. designs, manufactures, markets,
distributes and services electronic products, while Seagate Technology Inc.
manufactures disc drives and components for computer resellers, system
integrators and retailers. On the other hand, Ingram Micro Inc., a wholesale
distributor of computer products and services worldwide, produced a
disappointing return due to poor earnings and management turnover.
Possible legislative reform could make it easier for patients to sue their
health insurers; therefore, stocks in the health services sector declined, which
had a negative impact on the Fund's return. Both Aetna and PacifiCare Health
Systems were down since mid year due to the negative environment surrounding
health care issues.
Rapid economic growth hindered the bond market. Investors worried that low
unemployment would put upward pressure on wages and prices. Inflation rose
slightly; the Consumer Price Index closed the year at a modest 2.7%. The Federal
Reserve sought to combat inflationary fears by increasing short-term interest
rates a quarter of a percent on three separate occasions.
During the year the Fund shortened the duration of its bond portfolio, thereby
reducing the volatility of the portfolio. The longer the duration of a bond
portfolio, the greater its price fluctuation, or volatility. By year-end the
duration was 3.6 years, close to the benchmark index duration (the Merrill Lynch
Corporate and Government 1-9.99 Years Bond Index). The total return of the
Fund's bond portfolio was -0.3% versus the benchmark index of 0.5%. The average
quality rating was A.
- ----------------------------------------------------
LARGEST INDUSTRY HOLDINGS--12/31/99 % OF ENTIRE
PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<S> <C>
Finance 14.9%
Utilities 9.1
Electronic Technology 8.8
Retail Trade 8.6
Consumer Non-Durables 8.4
</TABLE>
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5
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PERFORMANCE AND RISK DATA
PERIODS ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN(1)
1 YEAR 5 YEARS 10 YEARS RISK(2) RETURN/RISK
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Eclipse Balanced Fund(3,4) (0.4)% 13.0% 11.5% 7.7 1.5
Lipper Balanced Fund Index(5) 9.0 16.3 12.3 8.4 1.5
Merrill Lynch Corporate & Govt 1-9.99 Years Bond Index 0.5 7.1 7.3 3.1 2.4
Standard & Poor's 500 Index 21.0 28.6 18.2 13.4 1.4
3 Month Treasury Bill 4.8 5.3 5.3 0.4 13.3
</TABLE>
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<TABLE>
<C> <S>
1 With income reinvested.
2 Annualized standard deviation of monthly return.
3 The Fund's inception was May 1, 1989; its annualized return
through December 31, 1999 was 11.2%.
4 Net of management fee waived equivalent to 0.8% of average
net assets from 1989 through 1992, 0.5%, 0.4%, 0.3%, 0.2%,
0.2%, and 0.1% from 1993 through 1998, respectively. Returns
are also net of reimbursed expenses equivalent to 0.84% of
average net assets in 1989 and 0.05% of average net assets
in 1990.
5 After all expenses.
</TABLE>
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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 LIPPER BALANCED INDEX
<S> <C> <C>
Apr-89 10,000 10,000
Dec-89 10,445 11,139
Dec-90 10,596 11,211
Dec-91 12,812 14,107
Dec-92 14,353 15,159
Dec-93 16,803 16,971
Dec-94 16,807 16,624
Dec-95 20,673 20,760
Dec-96 23,344 23,461
Dec-97 28,803 28,166
Dec-98 31,116 32,482
Dec-99 31,002 35,405
</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--1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income dividends $0.5825
Short-term capital gain dividends 0.0579
Long-term capital gain dividends 1.1041
-------
Total 1999 dividends $1.7445
=======
</TABLE>
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6
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REVIEW OF ECLIPSE MID CAP VALUE FUND
ECGIX
Eclipse Mid Cap Value Fund eked out a positive return for the year: up 0.04%.
The Fund outperformed the Russell Midcap Value Index which was down 2.3%, but
underperformed both the Russell Midcap Index, up 16.5%, and the S&P 500 Index,
up 21%.
Nineteen ninety-nine saw the continuation of the trend of high valuations in a
narrow market segment--Internet-related stocks with high expected future growth
rates. Although we found some opportunities in the technology sector, most of
the technology companies with extraordinary valuations are not profitable. For
example, Amazon.com has not yet earned any money. Because the Fund did not
invest in the high-growth Internet stocks, it did not participate in their
extraordinary returns.
We are in the midst of an information revolution. Investors are excited about
both the new technology and the prospects for investment gain. These
enthusiastic investors believe that fast-growing, high-technology companies will
inevitably be profitable. While previous investments in technologies that had a
transforming effect on the population, such as electric power, railroads,
airlines, and television and radio, may have rewarded investors handsomely in
the beginning, those high growth rates and returns declined as the industries
matured over time. For example, railroads had a monopoly over long distance
transportation until the automobile, trucking and airline industries competed
with them. The initial large returns did not continue forever. Internet
businesses are characterized by ease of entry (e.g., it is easier to start a web
magazine or a software business than it was to build a railroad) and thin profit
margins. Because of this, most Internet companies will not be able to sustain
their growth and earnings (should they have any) for long. We believe the
valuations given to most of these companies are speculative and that the
expected growth rates will not materialize.
There are two basic investment styles: value and growth. Growth companies, such
as those in the technology sector, tend to be more expensive than value
companies--they have higher price/earnings ratios, price/cash flow ratios, and
price/revenue multiples. Value companies have lower valuations. The performance
of the two types of stocks varies, often according to the economic and business
cycle. The Russell Midcap Index separates its component stocks into two
groups--growth (The Russell Midcap Growth Index) and value (The Russell Midcap
Value Index). The Growth Index was up 50.7%, while the Value Index declined
2.3%, a spread of 53 percentage points. This is the largest spread between value
and growth in the history of this index.
A QUANTITATIVE APPROACH
We use a consistent, quantitative approach to measure economic value in
selecting relatively undervalued equities. We use actual financial data to
determine a company's relative value. We do not forecast earnings or estimate
future growth rates. Our consistent application of these methods causes us to
maintain a portfolio of relatively undervalued companies with improving
profitability.
We select stocks based on their individual investment merit. The stocks we buy
usually have low relative valuations and improving current operating
characteristics. Valuations are low because the market believes these companies
do not have strong growth prospects. Relatively weak historical growth rates are
not always meaningful if a company has had some recent problems. We select
companies that we believe are emerging from situations that have restrained
profitability only temporarily.
The Fund may have a large percentage of its portfolio in certain industries, not
because of a decision to invest in them, but by default. Companies in the same
industry often experience a weak business cycle at the same time; this results
in slower growth rates and correspondingly lower valuations. Therefore, our
value-oriented selection process may lead us to invest in many companies within
one sector.
Compared to the indexes, the Fund held a relatively small position in electronic
technology--9% at year-end--which restrained Fund performance. One of the fund's
holdings in this sector, Ingram Micro, which distributes technology products and
services, declined due to poor reported earnings. The company cut its prices in
order to maintain market share.
The health services sector also held back performance. United Healthcare Corp
and Aetna Inc. continue to look relatively attractive despite falling stock
prices in the last half of the year.
Among the Fund's strongest performers have been Best Buy Co. Inc., SCI Systems
Inc., Seagate Technology, Phelps Dodge Corp. and Deere & Co. Best Buy, SCI
Systems, and Seagate Technology are technology-related companies.
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7
<PAGE>
Best Buy retails consumer electronics, home office equipment, entertainment
software and appliances. SCI Systems designs, manufactures, markets, distributes
and services electronic products sold to a wide group of technology users.
Seagate Technology manufactures disc drives and components for computer
resellers, system integrators and retailers. In our opinion, these companies
were relatively undervalued and had improving business characteristics at the
time we bought them.
Neither Phelps Dodge nor Deere are technology stocks. In fact, they are in
old-fashioned smokestack businesses. Phelps Dodge produces copper, carbon black
and magnet wire. It recently acquired Cyprus Amax Minerals Company, becoming the
world's second largest copper producer. Deere & Company manufactures and
distributes a range of agricultural, construction, commercial and consumer
equipment. The company recently made two acquisitions that will expand its
product line and its business in Europe, where the company expects stronger
growth. The stock has risen recently, which we believe is an indication that the
market has recognized that the company is well-positioned for future growth and
strong profitability.
VALUATION
We compare companies both within and across industries by analyzing financial
data with respect to the stock price, and then comparing the company to the
7000+ companies in our data base. Our goal is to buy a stock cheaply based on
various financial measures.
The table below shows year-end valuations of the stocks in Eclipse Mid Cap Value
Fund, the Russell Midcap Index, and the S&P 500 Index .
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<TABLE>
<CAPTION>
RUSSELL
ECLIPSE MID CAP S&P 500 MIDCAP
VALUE INDEX INDEX
- ----------------------------------------------------------------
<S> <C> <C> <C>
Price/Sales 1.0 6.7 5.3
Price/Earnings 17.7 33.4 35.2
Price/Book Value 3.1 9.3 6.3
</TABLE>
Stocks in the S&P 500 Index are almost seven times as expensive as the stocks in
the Eclipse Mid Cap Value Fund with respect to sales, almost twice as expensive
on earnings, and three times as expensive on book value ratios. The stocks in
the Russell Midcap Index are also more expensive than those in the Eclipse Mid
Cap Fund based upon the same criteria.
- ----------------------------------------------------
LARGEST INDUSTRY HOLDINGS 12/31/99 % OF PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<S> <C>
Retail Trade 11.1%
Producer Manufacturing 10.3
Finance 9.1
Electronic Technology 9.1
Consumer Non-Durables 7.3
</TABLE>
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PERFORMANCE AND RISK DATA
PERIODS ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN(1)
1 YEAR 5 YEARS RISK(2) RETURN/RISK
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Eclipse Mid Cap Value Fund(3,4) 0.04% 17.8% 13.8 1.3
Russell Midcap Index 18.2 21.9 14.6 1.5
Standard & Poor's 500 Index 21.0 28.6 13.8 2.1
3 Month Treasury Bill 4.8 5.3 0.2 27.0
</TABLE>
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<TABLE>
<C> <S>
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 12/31/99 was 17.8%.
4 Net of management fee waived and after expense reimbursement
by manager: 0.95%, 0.67%, 0.16%, and 0.06% of average net
assets from 1995 through 1998, respectively.
</TABLE>
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8
<PAGE>
GROWTH OF $10,000 SINCE INCEPTION
ECLIPSE MID CAP VALUE FUND WITH INCOME REINVESTED
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
$ THOUSANDS
<S> <C> <C>
ECLIPSE MID RUSSELL
CAP VALUE MIDCAP INDEX
Dec-94 10,000 10,000
Mar-95 10,460 11,041
Jun-95 11,271 11,965
Sep-95 12,212 13,025
Dec-95 12,684 13,445
Mar-96 13,395 14,254
Jun-96 13,746 14,656
Sep-96 14,076 15,115
Dec-96 15,526 16,000
Mar-97 15,699 15,869
Jun-97 17,772 18,021
Sep-97 20,176 20,414
Dec-97 20,566 20,641
Mar-98 23,612 22,871
Jun-98 23,835 22,526
Sep-98 20,454 19,187
Dec-98 22,700 22,725
Mar-99 21,587 22,618
Jun-99 24,031 25,074
Sep-99 20,989 22,919
Dec-99 22,727 26,868
</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--1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income dividends $0.1097
Short-term capital gain dividends 0.0682
Long-term capital gain dividends 1.4692
-------
Total 1999 dividends $1.6471
=======
</TABLE>
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9
<PAGE>
REVIEW OF ECLIPSE SMALL CAP VALUE FUND
EEQFX
Eclipse Small Cap Value Fund was up 3.1% in 1999. The Fund invests in small
capitalization, value companies; both these groups had poor returns. Within the
small cap value investment universe, the Fund outperformed the Russell 2000
Value Index, which was down almost 4%.
There are two basic investment styles--value and growth. Growth companies, such
as those in the technology sector, tend to be more expensive than value
companies--they have higher price/earnings ratios, price/cash flow ratios, and
price/revenue multiples. Growth companies generally do well during stronger
economic cycles when investors are willing to take more risk; investors often
prefer value stocks when the economic environment is more uncertain.
The Russell indexes measure the growth and value sectors within the small
capitalization market. The Russell 2000 Index is divided into two indexes of
1000 stocks in each. Companies with high valuations are assigned to the Russell
2000 Growth Index while those with lower valuations are included in the Russell
2000 Value Index. The dichotomy between the performance of these two indices
this past year was extraordinary: the Growth Index soared 42.5% while the Value
Index declined almost 4%. This difference of 46.5 percentage points is the
widest spread in the history of these indices.
Compared to the Russell 2000 Index, the Eclipse Small Cap Value Fund performed
poorly. The primary reason for this is technology stocks, specifically Internet
stocks. The Fund did not invest in Internet stocks because we find them
extraordinarily expensive at these levels. Nevertheless, these stocks had
remarkable returns.
As stocks increase in price, they become a more significant part of any index in
which they are included. For example, technology stocks comprised 24% of the
Russell 2000 Index in 1998 but, because of their price gains, rose to over 30%
in 1999. The Russell 2000 Growth Index rose from a 38% technology weighting in
1998 to 52% in 1999. This means that more than half of the Index returns are
attributed to technology stocks. No airlines, steel, basic machinery,
automotive, food, copper, health care, pharmaceuticals, or retail stores matter.
Only technology and Internet stocks count. The Russell 2000 Value Index,
however, has 14% in technology stocks, and Eclipse Small Cap Value Fund has 8%.
The difference in the technology sector weightings explains some of the
dispersion in the returns between the Indexes and the Fund. The companies with
the strongest performance contributions to the Russell 2000 Index this year, and
the Russell 2000 Growth Index, were Broadvision, CMGI and E*trade, all companies
in the business of providing Internet-related services.
In general, technology companies have relatively high valuations. These
valuations reflect investor expectations of high growth and higher returns on
investment. Over long periods of time, companies with higher valuations
generally have poorer performance than companies with lower valuations, because
such high expected growth rates are not sustainable. It is difficult to
determine the future of technology and technology-related companies because the
dynamics in the business change so rapidly. Currently many technology and
Internet companies have huge volume growth (revenues) but little or no
profitability (earnings). Investors believe that high revenues will inevitably
produce high profits. We believe the current expectations are out of line and
that investors are taking a lot of risk by investing in some of these companies.
We continue to select stocks based on their individual investment merit. These
stocks tend to be cheap and have strong current operating characteristics.
Valuations are relatively low because investors believe these companies do not
have strong growth or profitability prospects.
The Fund may have large positions in some industries, not because of a decision
to invest in them, but by default. Often companies in the same industry
experience a weak business cycle simultaneously. The weak cycle results in
slower growth rates and correspondingly lower valuations. Because companies in
an entire industry may be selling "cheaply," the Fund may own many companies in
one industry.
The weak performance of some companies in the finance sector of the portfolio
had a negative effect on fund returns for the year. Companies such as Stewart
Info Services, Landamerica Financial Group and Frontier Insurance Group
Incorporated reported poor earnings because of pricing pressure in their
business.
In 1999, the sectors that contributed the most to overall Fund performance were
retail trade, electronic technology and producer manufacturing. In the retail
trade sector, two stocks, Best Buy Corp. and Elcom International Inc., were
________________________________________________________________________________
10
<PAGE>
the best performers. Best Buy Corp. retails consumer electronics; Elcom
International Inc. enables companies to conduct interactive electronic commerce.
In the electronic technology sector, the best performing company was Oak
Technology, a supplier of semiconductors and software to the multimedia personal
computer market. These companies were purchased at a time when their valuation
levels were relatively low. As the valuation of these companies has risen, we
have trimmed the positions. The best performing company in the producer
manufacturing sector was Case Corporation, a manufacturer of farm and
construction equipment, which was recently acquired.
We buy stocks of undervalued companies at a low price. These companies are often
acquired by other firms, which are able to buy revenues and assets cheaply. It
is often cheaper for companies to increase their growth by buying assets of
another company than to expand internally. In 1999, there were 44 mergers and
acquisitions of Fund stock holdings, totaling $38 million, or more than 10% of
the total value of the Fund.
The table below gives comparative valuation data for Eclipse Small Cap Value
Fund and the Russell 2000 Index at December 31, 1999 and shows why we believe
the stocks we buy are undervalued. Stocks in the Russell 2000 Index are more
than 12 times as expensive as the stocks in Eclipse Small Cap Value Fund with
respect to sales, more than twice as expensive in terms of earnings, and almost
three times as expensive on book value.
- ----------------------------------------------------
<TABLE>
<CAPTION>
RUSSELL
ECLIPSE SMALL CAP VALUE 2000
<S> <C> <C>
- ---------------------------------------------------------
Price/Sales 0.7 12.1
Price/Earnings 16.0 33.1
Price/Book Value 2.6 7.6
</TABLE>
- ----------------------------------------------------
LARGEST INDUSTRY HOLDINGS 12/31/99 % OF PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<S> <C>
Retail Trade 12.8%
Consumer Durables 10.0
Producer Manufacturing 8.8
Electronic Technology 8.1
Commercial Services 7.5
</TABLE>
- ----------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE AND RISK DATA
PERIODS ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURN(1)
1 YEAR 5 YEARS 10 YEARS RISK(2) RETURN/RISK
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Eclipse Small Cap Value Fund(3,4) 3.1% 17.2% 12.8% 13.0 1.0
Lipper Small Cap Value Fund Index(5) 1.3 12.2 11.1 13.6 0.8
Standard & Poor's Small Cap 600 Index 12.4 17.1 13.1 17.2 0.8
Russell 2000 Index 21.3 16.7 13.4 17.2 0.8
Standard & Poor's 500 Index 21.0 28.6 18.2 13.4 1.4
3 Month Treasury Bill 4.8 5.3 5.3 0.4 13.3
- ---------------
</TABLE>
<TABLE>
<C> <S>
1 With income reinvested.
2 Annualized standard deviation of monthly return.
3 The Fund's inception was 1/12/87; its annualized total
return through 12/31/99 was 11.8.%.
4 Net of management fee waived in 1987 equivalent to 0.1% of
average net assets.
5 After all expenses.
</TABLE>
- --------------------------------------------------------------------------------
________________________________________________________________________________
11
<PAGE>
GROWTH OF $10,000 SINCE INCEPTION
ECLIPSE SMALL CAP VALUE FUND WITH INCOME REINVESTED
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
$ THOUSANDS
<S> <C> <C>
ECLIPSE SMALL RUSSELL
CAP VALUE 2000 IINDEX
Jan-87 10,000 10,000
Dec-87 9,704 8,172
Dec-88 10,936 10,206
Dec-89 12,732 11,864
Dec-90 10,994 9,550
Dec-91 14,421 13,947
Dec-92 17,215 16,515
Dec-93 20,143 19,638
Dec-94 19,185 19,280
Dec-95 22,964 24,763
Dec-96 29,821 28,848
Dec-97 39,748 35,299
Dec-98 41,104 34,400
Dec-99 42,361 41,712
</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.
[Previously we used the Lipper Small Cap Fund Index as one of our benchmarks.
Lipper no longer provides that Index. We are now using the Lipper Small Cap
Value Index, which is the most appropriate of the Lipper small cap indices, and
is the one in which Lipper has placed Eclipse Small Cap Value Fund. We have
provided comparative data in the table above. Eclipse's inception was January,
1987, while the inception of the Index was in 1989. Therefore, we are unable to
show it as a benchmark against the Fund.]
- --------------------------------------------------------------------------------
PER SHARE DIVIDEND INFORMATION--1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income dividends $0.0054
Short-term capital gain dividends 0.1030
Long-term capital gain dividends 0.4151
-------
Total 1999 dividends $0.5235
=======
</TABLE>
- --------------------------------------------------------------------------------
________________________________________________________________________________
12
<PAGE>
STATEMENT OF NET ASSETS--DECEMBER 31, 1999 ECLIPSE ULTRA SHORT TERM INCOME FUND
- --------------------------------------------------------------------------------
U.S. CORPORATE BONDS 86.33%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES 1.30%
Donnelley (R.R.) & Son Notes, 6.34%, due 06/21/00 $ 100,000 $ 100,064
----------
CONSUMER DURABLES 5.16%
Ford Motor Credit Company Notes, 6.85%, due 08/15/00 200,000 200,415
Ford Motor Credit Company Notes, 5.125%, due 10/15/01 100,000 96,957
Mattel, Inc. Notes, 6.75%, due 05/15/00 100,000 99,928
----------
397,300
----------
CONSUMER NON-DURABLES 1.29%
Coca-Cola Enterprises Inc. Notes, 6.375%, due 08/01/01 100,000 99,435
----------
CONSUMER SERVICES 9.08%
Disney (Walt) Company Sr. Notes, 6.375%, due 03/30/01 300,000 299,114
Gannett Co., Inc. Sr. Notes, 5.85%, due 05/01/00 300,000 299,716
Time Warner, Inc. Notes, 7.95%, due 02/01/00 100,000 100,121
----------
698,951
----------
ELECTRONIC TECHNOLOGY 3.23%
IBM Corporation Notes, 6.375%, due 06/15/00 100,000 100,154
IBM Corporation Notes, 5.80%, due 05/15/01 150,000 148,371
----------
248,525
----------
FINANCE 21.85%
American Express Credit Corporation Sr. Notes, 6.125%, due
06/15/00 240,000 239,906
American General Finance Corporation Sr. Notes, 6.125%,
due 09/15/00 90,000 89,721
Associates Corp. of North America Notes, 5.60%, due
01/15/01 200,000 197,668
Commercial Credit Group, Inc. Sr. Notes, 5.75%, due
07/15/00 100,000 99,740
Fleet Financial Group, Inc. Notes, 7.125%, due 05/01/00 200,000 200,516
Household Finance Corporation Notes, 6.375%, due 06/30/00 175,000 174,947
International Lease Finance Corporation Notes, 6.42%, due
09/11/00 200,000 199,899
Marsh & McLennan Co's., Inc. Sr. Notes, 6.625%, due
06/15/04 35,000 34,172
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
FINANCE (CONT'D)
<S> <C> <C>
Merrill Lynch & Co., Inc. Notes, 6.00%, due 02/12/03 $ 200,000 $ 193,694
Norwest Financial, Inc. Notes, 5.125%, due 04/15/00 50,000 49,834
Transamerica Finance Corporation Sr. Notes, 7.50%, due
09/14/01 200,000 200,811
----------
1,680,908
----------
HEALTH TECHNOLOGY 5.01%
American Home Products Corporation Notes, 7.70%, due
02/15/00 200,000 200,356
Upjohn Company Notes, 5.875%, due 04/15/00 185,000 184,897
----------
385,253
----------
NON-ENERGY MINERALS 1.95%
Alcan Aluminum Corporation Ltd. Notes, 5.875%, due
04/01/00 150,000 149,887
----------
PROCESS INDUSTRIES 6.36%
Engelhard Corporation Notes, 7.00%, due 08/01/01 250,000 248,905
International Paper Company Notes, 6.875%, due 07/10/00 100,000 100,077
Monsanto Company Notes, 6.00%, due 07/01/00 140,000 139,953
----------
488,935
----------
PRODUCER MANUFACTURING 9.59%
Deere (John) Capital Corporation Notes, 6.15%, due
08/01/00 200,000 199,558
Deere (John) Capital Corporation Notes, 6.23%, due
10/18/00 200,000 199,068
Dresser Industries, Inc. Sr. Notes, 6.25%, due 06/01/00 100,000 100,107
Ingersoll-Rand Company Sr. Notes, 6.255%, due 02/15/01 100,000 99,284
Xerox Corporation Notes, 5.50%, due 11/15/03 150,000 139,913
----------
737,930
----------
RETAIL TRADE 9.32%
Dillard's Department Stores Inc. Notes, 5.79%, due
11/15/01 100,000 96,847
Penney (J.C.) Co., Inc. Notes, 6.375%, due 09/15/00 250,000 247,530
Sears Roebuck Acceptance Corporation Notes, 6.50%, due
06/15/00 50,000 50,005
Sears Roebuck Acceptance Corporation Notes, 6.70%, due
08/13/01 200,000 197,987
</TABLE>
________________________________________________________________________________
13
<PAGE>
ECLIPSE ULTRA SHORT TERM INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
RETAIL TRADE (CONT'D)
<S> <C> <C>
Wal-Mart Stores Notes, 6.75%, due 05/15/02 $ 125,000 $ 124,856
----------
717,225
----------
TRANSPORTATION 2.60%
CSX Corporation Notes, 9.50%, due 08/01/00 50,000 50,777
Norfolk Southern Corporation Notes, 6.95%, due 05/01/02 150,000 148,860
----------
199,637
----------
UTILITIES 9.59%
Ameritech Capital Funding Notes, 5.65%, due 01/15/01 200,000 198,035
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
UTILITIES (CONT'D)
<S> <C> <C>
Cincinnati Gas & Electric Company Notes, 6.45%, due
02/15/04 $ 150,000 $ 143,936
Ohio Bell Telephone Company Notes, 5.75%, due 05/01/00 100,000 99,818
US West Communications, Inc. Notes, 6.375%, due 10/15/02 150,000 147,331
WorldCom, Inc. Notes, 6.125%, due 08/15/01 150,000 148,375
----------
737,495
----------
Total U.S. Corporate Bonds
(Cost $6,752,993) $6,641,545
----------
</TABLE>
FEDERAL AGENCIES 6.48%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
Student Loan Marketing Association (V.R.), 6.163%, due
08/10/00 $ 250,000 $ 250,028
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
Student Loan Marketing
<S> <C> <C>
Association (V.R.), 5.723%, due 03/07/01 $ 250,000 $ 248,778
----------
Total Federal Agencies
(Cost $499,803) $ 498,806
----------
</TABLE>
SHORT-TERM INVESTMENTS 5.37%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
CERTIFICATES OF DEPOSIT 2.60%
Louisville Community Development Bank, 4.55%, due 04/08/00 $ 100,000 $ 100,000
Self Help Credit Union, 4.70%, due 03/19/00 100,000 100,000
----------
200,000
----------
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
REPURCHASE AGREEMENTS 2.77%
<S> <C> <C>
State Street Bank and Trust Company, 2.50%, due 01/03/00
(Collateralized by $205,000 U.S. Treasury Bond, 7.25%,
due 08/15/22, Market Value -- $221,913) $ 212,825 $ 212,825
----------
Total Short-Term Investments
(Cost $412,825) $ 412,825
----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Total Investments (98.18%)
(Cost $7,665,621+) $7,553,176
Cash and Other Assets in Excess of Liabilities (1.82%) 139,883
----------
Net Assets (100.00%) 784,243 shares outstanding (Note 3) $7,693,059
==========
Net Asset Value, offering and redemption price per share $9.81
==========
</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 $69 and
$112,514, respectively.
The accompanying notes form an integral part of these financial statements.
________________________________________________________________________________
14
<PAGE>
STATEMENT OF NET ASSETS--DECEMBER 31, 1999 ECLIPSE BALANCED FUND
- --------------------------------------------------------------------------------
COMMON STOCKS 57.36%
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES 2.32%
Manpower Inc. 22,500 $ 846,563
Sysco Corporation 23,800 941,587
-----------
1,788,150
-----------
CONSUMER DURABLES 1.44%
Briggs & Stratton Corporation 4,300 230,587
General Motors Corporation 8,300 603,306
Midway Games Inc.* 11,700 280,069
-----------
1,113,962
-----------
CONSUMER NON-DURABLES 5.73%
Dial Corporation (The) 32,100 780,431
Hormel Foods Corporation 22,000 893,750
IBP, Inc. 35,500 639,000
Kellogg Company 26,100 804,206
Liz Claiborne, Inc. 8,500 319,813
NIKE, Inc. Class B 19,900 986,294
-----------
4,423,494
-----------
CONSUMER SERVICES 1.39%
Central Newspapers, Inc. Class A 5,300 208,687
Tribune Company 15,600 858,975
-----------
1,067,662
-----------
ELECTRONIC TECHNOLOGY 6.85%
Boeing Company (The) 10,000 415,625
CTS Corporation 4,600 346,725
Hewlett-Packard Company 9,900 1,127,981
Intel Corporation 5,100 419,794
Novell, Inc.* 19,100 762,806
RSA Security Inc.* 7,000 542,500
SCI Systems, Inc.* 14,800 1,216,375
Texas Instruments Incorporated 4,700 455,313
-----------
5,287,119
-----------
FINANCE 4.93%
Allstate Corporation (The) 19,900 477,600
Bear Stearns Companies Inc. (The) 18,502 790,961
CNA Financial Corporation* 19,400 755,388
Horace Mann Educators Corporation 4,100 80,462
Old Republic International Corporation 23,800 324,275
PartnerRe Ltd. 17,500 567,656
SAFECO Corporation 17,300 430,338
<CAPTION>
VALUE
SHARES (NOTE 1)
FINANCE (CONT'D)
<S> <C> <C>
Unitrin, Inc. 10,100 $ 380,012
-----------
3,806,692
-----------
HEALTH SERVICES 3.35%
Aetna Inc. 17,100 954,394
First Health Group Corporation* 10,900 292,937
PacifiCare Health Systems, Inc.* 14,600 773,800
United HealthCare Corporation 10,600 563,125
-----------
2,584,256
-----------
HEALTH TECHNOLOGY 3.67%
Bard (C.R.), Inc. 21,500 1,139,500
Chiron Corporation* 20,400 864,450
Mallinckrodt Inc. 26,000 827,125
-----------
2,831,075
-----------
INDUSTRIAL SERVICES 1.94%
BJ Services Company* 7,800 326,137
Diamond Offshore Drilling, Inc. 11,500 351,469
Fluor Corporation 17,900 821,163
-----------
1,498,769
-----------
NON-ENERGY MINERALS 2.65%
Georgia-Pacific Corporation 11,400 578,550
Phelps Dodge Corporation 21,900 1,470,038
-----------
2,048,588
-----------
PROCESS INDUSTRIES 2.09%
Anixter International Inc.* 10,800 222,750
Grace (W.R.) & Co.* 15,100 209,512
Imation Corporation* 9,600 322,200
Loews Corporation 8,500 515,844
Westvaco Corporation 10,500 342,563
-----------
1,612,869
-----------
PRODUCER MANUFACTURING 6.70%
American Standard Companies Inc.* 20,100 922,088
Cooper Industries, Inc. 10,800 436,725
Crown Cork & Seal Company, Inc. 48,600 1,087,425
Johnson Controls, Inc. 15,400 875,875
Mark IV Industries, Inc. 11,900 210,481
Minnesota Mining and Manufacturing Company 9,100 890,663
Navistar International Corporation* 12,300 582,712
</TABLE>
* NON-INCOME PRODUCING. ________________________________________________________
15
<PAGE>
ECLIPSE BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
PRODUCER MANUFACTURING (CONT'D)
<S> <C> <C>
Polycom, Inc.* 2,600 $ 165,587
-----------
5,171,556
-----------
RETAIL TRADE 8.09%
AutoNation, Inc.* 46,500 430,125
BJ's Wholesale Club, Inc.* 13,600 496,400
Best Buy Co., Inc.* 4,000 200,750
Circuit City Stores-Circuit City Group 21,400 964,337
Consolidated Stores Corporation* 17,200 279,500
Costco Wholesale Corporation* 7,800 711,750
Dillard's, Inc. Class A 34,900 704,544
Footstar, Inc.* 3,500 106,750
Kmart Corporation* 16,000 161,000
Lands' End, Inc.* 3,600 125,100
Limited, Inc. (The) 22,700 983,194
Toys "R" Us, Inc.* 75,300 1,077,731
-----------
6,241,181
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
TECHNOLOGY SERVICES 1.40%
<S> <C> <C>
Seagate Technology, Inc.* 19,300 $ 898,656
Symantec Corporation* 3,100 181,738
-----------
1,080,394
-----------
TRANSPORTATION 3.63%
AMR Corporation* 14,800 991,600
Delta Air Lines, Inc. 6,900 343,706
UAL Corporation* 9,000 698,062
US Airways Group, Inc.* 23,800 763,088
-----------
2,796,456
-----------
UTILITIES 1.18%
Energy East Corporation 24,600 511,988
PP&L Resources, Inc. 17,500 400,312
-----------
912,300
-----------
Total Common Stocks
(Cost $42,140,027) $44,264,523
-----------
</TABLE>
U.S. CORPORATE BONDS 33.99%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES 0.63%
Sysco Corporation Sr. Notes, 6.50%, due 06/15/05 $ 500,000 $ 482,379
-----------
CONSUMER DURABLES 3.29%
Chrysler Financial Corporation Notes, 6.625%, due
08/15/00 1,250,000 1,251,291
Ford Motor Credit Company Notes, 8.375%, due 01/15/00 250,000 250,150
General Motors Acceptance Corporation Notes, 5.50%, due
12/15/01 100,000 97,120
General Motors Corporation Notes, 7.00%, due 06/15/03 700,000 694,791
General Motors Corporation Notes, 7.10%, due 03/15/06 250,000 245,171
-----------
2,538,523
-----------
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
CONSUMER NON-DURABLES 2.65%
<S> <C> <C>
Coca-Cola Enterprises, Inc. Notes, 7.875%, due 02/01/02 $ 200,000 $ 203,668
Coca-Cola Enterprises, Inc. Notes, 6.625%, due 08/01/04 100,000 97,790
Heinz (H.J.) Company Notes, 6.875%, due 01/15/03 100,000 99,878
Hertz Corporation Sr. Notes, 7.375%, due 06/15/01 100,000 100,429
PepsiCo, Inc. Notes, 6.80%, due 05/15/00 340,000 340,867
Phillip Morris Companies Inc. Notes, 7.625%, due 05/15/02 100,000 99,591
Sara Lee Corporation Notes, 6.00%, due 01/15/08 1,200,000 1,099,804
-----------
2,042,027
-----------
CONSUMER SERVICES 0.58%
Disney (Walt) Company (The) Notes, 6.375%, due 03/30/01 200,000 199,409
</TABLE>
________________________________________________________ * NON-INCOME PRODUCING.
16
<PAGE>
ECLIPSE BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
CONSUMER SERVICES (CONT'D)
<S> <C> <C>
McDonald's Corporation Sr. Notes, 6.625%, due 09/01/05 $ 255,000 $ 250,837
-----------
450,246
-----------
ELECTRONIC TECHNOLOGY 1.99%
Boeing Co. Notes, 6.35%, due 06/15/03 500,000 486,005
IBM Corporation Notes, 6.375%, due 06/15/00 450,000 450,694
IBM Corporation Notes, 7.25%, due 11/01/02 300,000 303,983
Lucent Technologies, Inc. Notes, 6.90%, due 07/15/01 100,000 100,374
Rockwell International Corporation Notes, 6.625%, due
06/01/05 200,000 193,883
-----------
1,534,939
-----------
ENERGY MINERALS 0.52%
Exxon Capital Corporation Guaranteed Notes, 7.45%, due
12/15/01 300,000 303,917
Exxon Capital Corporation Guaranteed Notes, 6.625%, due
08/15/02 100,000 99,593
-----------
403,510
-----------
FINANCE 9.97%
American Express Credit Corporation Notes, 6.125%, due
06/15/00 200,000 199,922
American General Finance Corporation Notes, 8.00%, due
02/15/00 200,000 200,391
American General Finance Corporation Notes, 5.875%, due
07/01/00 1,000,000 997,984
Associates Corp. of North America Notes, 7.875%, due
09/30/01 100,000 101,439
Associates Corp. of North America Notes, 6.375%, due
10/15/02 100,000 98,344
Associates Corp. of North America Sr. Notes, 6.50%, due
08/15/02 100,000 98,807
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
FINANCE (CONT'D)
<S> <C> <C>
BankAmerica Corporation Notes, 7.125%, due 03/01/09 $ 900,000 $ 872,649
Citigroup Inc. Notes, 6.125%, due 06/15/00 300,000 299,479
Commercial Credit Group Inc. Notes, 8.25%, due 11/01/01 200,000 204,445
Commercial Credit Group Inc. Notes, 6.375%, due 09/15/02 200,000 196,336
Household Finance Corporation Notes, 6.70%, due 06/15/02 100,000 98,703
Household Finance Corporation Notes, 6.375%, due 08/01/10 500,000 449,034
International Lease Finance Corporation Notes, 6.875%,
due 05/01/01 250,000 249,946
Lehman Brothers Inc. Sr. Notes, 7.625%, due 06/01/06 350,000 345,766
Merrill Lynch & Co., Inc. Notes, 7.00%, due 01/15/07 700,000 677,393
Morgan (J.P.) & Co. Inc. Notes, 6.25%, due 02/15/11 300,000 266,962
Norwest Corporation Notes, 6.125%, due 10/15/00 500,000 498,371
Norwest Corporation Notes, 6.80%, due 05/15/02 1,100,000 1,095,513
Norwest Financial, Inc. Sr. Notes, 6.85%, due 07/15/09 125,000 119,688
Progressive Corporation Notes, 6.60%, due 01/15/04 150,000 145,275
USL Capital Corporation Notes, 8.125%, due 02/15/00 475,000 475,900
-----------
7,692,347
-----------
HEALTH TECHNOLOGY 2.09%
American Home Products Corporation Notes, 7.70%, due
02/15/00 725,000 726,292
Lilly (Eli) & Company Notes, 8.125%, due 12/01/01 250,000 255,980
</TABLE>
________________________________________________________________________________
17
<PAGE>
ECLIPSE BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
HEALTH TECHNOLOGY (CONT'D)
<S> <C> <C>
Upjohn Company Notes, 5.875%, due 04/15/00 $ 250,000 $ 249,861
Warner-Lambert Company Notes, 6.625%, due 09/15/02 150,000 149,421
Warner-Lambert Company Notes, 6.00%, due 01/15/08 250,000 233,314
-----------
1,614,868
-----------
PROCESS INDUSTRIES 2.57%
Engelhard Corporation Notes, 7.00%, due 08/01/01 125,000 124,453
Fort James Corporation Notes, 8.375%, due 11/15/01 150,000 153,117
International Paper Company Notes, 6.125%, due 11/01/03 600,000 573,662
Sherwin-Williams Company Notes, 6.85%, due 02/01/07 200,000 193,248
Union Camp Corporation Notes, 6.50%, due 11/15/07 1,000,000 939,020
-----------
1,983,500
-----------
PRODUCER MANUFACTURING 1.29%
Dresser Industries, Inc. Sr. Notes, 6.25%, due 06/01/00 650,000 650,698
Honeywell, Inc. Notes, 7.125%, due 04/15/08 150,000 146,802
Pitney-Bowes Credit Corporation Notes, 6.625%, due
06/01/02 200,000 198,641
-----------
996,141
-----------
RETAIL TRADE 0.51%
Wal-Mart Stores Inc. Notes, 7.25%, due 06/01/13 400,000 393,469
-----------
UTILITIES 7.90%
Bell Atlantic Financial Notes, 6.25%, due 06/01/00 1,000,000 999,544
BellSouth Telecommunications Notes, 5.875%, due 01/15/09 300,000 271,433
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
UTILITIES (CONT'D)
<S> <C> <C>
Carolina Telephone & Telegraph Notes, 6.75%, due
08/15/13 $ 100,000 $ 92,081
Chesapeake & Potomac Telephone-Virginia, Inc. Notes,
7.125%, due 01/15/02 300,000 299,472
Chesapeake & Potomac Telephone-West Virginia, Inc.
Notes, 7.00%, due 08/15/04 100,000 98,894
Citizens Utilities Company Notes, 7.60%, due 06/01/06 250,000 251,251
GTE North, Inc. Series F Notes, 6.375%, due 02/15/10 500,000 462,832
GTE Northwest, Inc. Notes, 7.375%, due 05/01/01 500,000 502,267
IES Utilities Inc. Series A Sr. Notes, 6.625%, due
08/01/09 1,500,000 1,386,103
New York Telephone Company Notes, 6.25%, due 02/15/04 150,000 144,496
New York Telephone Company Notes, 6.125%, due 01/15/10 1,000,000 900,225
Pacific Bell Notes, 7.25%, due 07/01/02 300,000 302,364
Potomac Electric Power Company Notes, 6.50%, due 03/15/08 100,000 93,912
Southern California Edison Company Notes, 6.50%, due
06/01/01 200,000 199,093
Southwestern Bell Telephone Company Notes, 6.375%, due
11/15/07 100,000 94,123
-----------
6,098,090
-----------
Total U.S. Corporate Bonds
(Cost $27,404,635) $26,230,039
-----------
</TABLE>
________________________________________________________________________________
18
<PAGE>
ECLIPSE BALANCED FUND
- --------------------------------------------------------------------------------
FEDERAL AGENCIES 5.20%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
Federal Home Loan Mortgage Corporation, 6.50%, due
01/15/12 $ 750,000 $ 684,111
Federal National Mortgage Association, 6.50%, due
03/18/08 500,000 484,900
Federal National Mortgage Association, 6.50%, due
11/25/13 1,000,000 932,830
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
Government National
<S> <C> <C>
Mortgage Association, 7.00%, due 02/20/20 $1,000,000 $ 995,271
Government National Mortgage Association, 6.50%, due
08/20/25 1,000,000 916,963
-----------
Total Federal Agencies
(Cost $4,204,777) $ 4,014,075
-----------
</TABLE>
SHORT-TERM INVESTMENTS 3.58%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
REPURCHASE AGREEMENTS 3.58%
State Street Bank and Trust Company, 2.50%, due 01/03/00
(Collateralized by $2,460,000 U.S. Treasury Bond, 8.00%,
due 11/15/21, Market Value -- $2,816,700) $2,760,655 $ 2,760,655
-----------
<CAPTION>
VALUE
(NOTE 1)
<S> <C> <C>
Total Short-Term Investments
(Cost $2,760,655) $ 2,760,655
-----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Total Investments (100.13%)
(Cost $76,510,094+) $ 77,269,292
Liabilities in Excess of Cash and Other Assets (-0.13%) (100,576)
------------
Net Assets (100.00%) 3,952,272 shares outstanding (Note
3) $ 77,168,716
============
Net Asset Value, offering and redemption price per share $19.53
============
</TABLE>
<TABLE>
<C> <S>
+ The cost stated also represents the aggregate cost for federal income tax
purposes. Aggregate unrealized appreciation and depreciation of invest-
ments, based on cost for federal income tax purposes, are $6,807,906 and
$6,048,708, respectively.
The accompanying notes form an integral part of these financial state-
ments.
</TABLE>
________________________________________________________________________________
19
<PAGE>
ECLIPSE MID CAP VALUE FUND STATEMENT OF NET ASSETS--DECEMBER 31,1999
- --------------------------------------------------------------------------------
COMMON STOCKS 99.15%
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES 5.78%
Manpower Inc. 24,900 $ 936,863
SuperValu Inc. 93,500 1,870,000
Sysco Corporation 43,700 1,728,881
U.S Foodservice* 15,600 261,300
-----------
4,797,044
-----------
CONSUMER DURABLES 2.67%
Briggs & Stratton Corporation 10,700 573,787
General Motors Corporation 15,400 1,119,388
Midway Games Inc.* 21,900 524,231
-----------
2,217,406
-----------
CONSUMER NON-DURABLES 7.26%
Hormel Foods Corporation 31,700 1,287,812
IBP, Inc. 75,200 1,353,600
Kellogg Company 37,600 1,158,550
Liz Claiborne, Inc. 21,600 812,700
NIKE, Inc. Class B 28,600 1,417,488
-----------
6,030,150
-----------
CONSUMER SERVICES 2.40%
Central Newspapers, Inc. Class A 7,900 311,062
Tribune Company 30,600 1,684,913
-----------
1,995,975
-----------
ELECTRONIC TECHNOLOGY 9.12%
Boeing Company (The) 10,600 440,562
CTS Corporation 5,200 391,950
Hewlett-Packard Company 17,000 1,936,938
Intel Corporation 5,700 469,181
Novell, Inc.* 21,300 850,669
RSA Security Inc.* 10,400 806,000
SCI Systems, Inc.* 26,500 2,177,969
Texas Instruments Incorporated 5,200 503,750
-----------
7,577,019
-----------
FINANCE 9.14%
Allstate Corporation (The) 31,200 748,800
Bear Stearns Companies Inc. (The) 41,797 1,786,822
CNA Financial Corporation* 31,200 1,214,850
Horace Mann Educators Corporation 9,400 184,475
Old Republic International Corporation 77,800 1,060,025
PartnerRe Ltd. 34,600 1,122,337
SAFECO Corporation 30,300 753,713
<CAPTION>
VALUE
SHARES (NOTE 1)
FINANCE (CONT'D)
<S> <C> <C>
Unitrin, Inc. 19,200 $ 722,400
-----------
7,593,422
-----------
HEALTH SERVICES 5.77%
Aetna Inc. 30,800 1,719,025
First Health Group Corporation* 27,300 733,687
PacifiCare Health Systems, Inc.* 11,400 604,200
United HealthCare Corporation 32,600 1,731,875
-----------
4,788,787
-----------
HEALTH TECHNOLOGY 5.11%
Bard (C.R.), Inc. 40,500 2,146,500
Chiron Corporation* 38,200 1,618,725
Mallinckrodt Inc. 15,200 483,550
-----------
4,248,775
-----------
INDUSTRIAL SERVICES 4.64%
BJ Services Company* 18,000 752,625
Diamond Offshore Drilling, Inc. 31,900 974,944
Fluor Corporation 46,300 2,124,012
-----------
3,851,581
-----------
NON-ENERGY MINERALS 4.27%
Georgia-Pacific Corporation 21,500 1,091,125
Phelps Dodge Corporation 36,600 2,456,775
-----------
3,547,900
-----------
PROCESS INDUSTRIES 4.64%
Anixter International Inc.* 20,500 422,812
Grace (W.R.) & Co.* 30,000 416,250
Imation Corporation* 21,200 711,525
Lancaster Colony Corporation 12,900 427,313
Loews Corporation 16,700 1,013,481
Westvaco Corporation 26,400 861,300
-----------
3,852,681
-----------
PRODUCER MANUFACTURING 9.63%
American Standard Companies Inc.* 10,200 467,925
Cooper Industries, Inc. 20,300 820,881
Crown Cork & Seal Company, Inc. 91,200 2,040,600
Deere & Company 19,300 837,138
Johnson Controls, Inc. 10,000 568,750
Mark IV Industries, Inc. 28,600 505,863
Minnesota Mining and Manufacturing Company 13,000 1,272,375
</TABLE>
________________________________________________________ * NON-INCOME PRODUCING.
20
<PAGE>
ECLIPSE MID CAP VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
PRODUCER MANUFACTURING (CONT'D)
<S> <C> <C>
Navistar International Corporation* 24,900 $ 1,179,637
Polycom, Inc.* 4,800 305,700
-----------
7,998,869
-----------
RETAIL TRADE 11.81%
AutoNation, Inc.* 87,800 812,150
BJ's Wholesale Club, Inc.* 9,300 339,450
Best Buy Co., Inc.* 15,500 777,906
Circuit City Stores - Circuit City Group 18,200 820,138
Consolidated Stores Corporation* 20,000 325,000
Costco Wholesale Corporation* 10,900 994,625
Dillard's, Inc. Class A 59,300 1,197,119
Footstar, Inc.* 8,100 247,050
Kroger Company (The)* 28,400 536,050
Lands' End, Inc.* 5,000 173,750
Limited, Inc. (The) 42,600 1,845,112
Payless Shoesource, Inc.* 12,200 573,400
Toys "R" Us, Inc.* 81,800 1,170,763
-----------
9,812,513
-----------
<CAPTION>
VALUE
SHARES (NOTE 1)
TECHNOLOGY SERVICES 5.30%
<S> <C> <C>
Avnet, Inc. 8,700 $ 526,350
Ingram Micro, Inc. Class A* 58,900 773,063
Seagate Technology, Inc.* 62,200 2,896,187
Symantec Corporation* 3,500 205,187
-----------
4,400,787
-----------
TRANSPORTATION 6.93%
AMR Corporation* 33,800 2,264,600
Delta Air Lines, Inc. 10,600 528,012
UAL Corporation* 12,800 992,800
US Airways Group, Inc.* 61,500 1,971,844
-----------
5,757,256
-----------
UTILITIES 4.68%
Energy East Corporation 31,600 657,675
IPALCO Enterprises, Inc. 30,000 511,875
PP&L Resources, Inc. 33,000 754,875
UtiliCorp United Inc. 100,900 1,961,244
-----------
3,885,669
-----------
Total Common Stocks
(Cost $79,629,884) $82,355,834
-----------
</TABLE>
SHORT-TERM INVESTMENTS 0.03%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
REPURCHASE AGREEMENTS 0.03%
State Street Bank and Trust Company, 2.50%, due
01/03/00 (Collateralized by $25,000 U.S. Treasury
Bond, 8.875%, due 08/15/17, Market Value -- $31,094) $ 24,399 $ 24,399
------------
<CAPTION>
VALUE
(NOTE 1)
Total Short-Term Investments
<S> <C> <C>
(Cost $24,399) $ 24,399
------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Total Investments (99.18%)
(Cost $79,654,283+) $ 82,380,233
Cash and Other Assets in Excess of Liabilities (0.82%) 683,288
------------
Net Assets (100.00%) 5,172,471 shares outstanding
(Note 3) $ 83,063,521
============
Net Asset Value, offering and redemption price per
share $16.06
============
</TABLE>
<TABLE>
<C> <S>
+ 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 $12,348,090
and $9,622,140, respectively.
The accompanying notes form an integral part of these financial statements.
</TABLE>
* NON-INCOME PRODUCING. ________________________________________________________
21
<PAGE>
ECLIPSE SMALL CAP VALUE FUND STATEMENT OF NET ASSETS--DECEMBER 31, 1999
- --------------------------------------------------------------------------------
COMMON STOCKS 95.83%
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMERCIAL SERVICES 7.50%
Administaff, Inc.* 33,100 $ 1,001,275
Applied Industrial Technologies, Inc. 20,000 332,500
Berlitz International, Inc.* 6,200 106,563
Bowne & Co., Inc. 41,300 557,550
CDI Corporation* 42,900 1,034,963
Handleman Company* 141,400 1,891,225
Hughes Supply, Inc. 18,700 403,219
Insurance Auto Auctions, Inc.* 139,000 2,189,250
Manpower Inc. 6,600 248,325
NPC International, Inc.* 70,500 555,188
Navigant International, Inc.* 199,200 2,328,150
Noland Company 7,000 125,125
Performance Food Group Company* 60,800 1,482,000
Right Management Consultants, Inc.* 50,000 575,000
Rush Enterprises, Inc.* 109,100 1,581,950
Staff Leasing, Inc.* 55,300 525,350
SuperValu, Inc. 20,900 418,000
Sysco Corporation 12,000 474,750
U.S. Foodservice, Inc.* 66,800 1,118,900
Wackenhut Corporation (The) 43,600 651,275
Westaff Inc.* 99,900 824,175
World Fuel Services Corporation 56,650 424,875
------------
18,849,608
------------
CONSUMER DURABLES 10.01%
Audiovox Corporation* 70,800 2,150,550
Beazer Homes USA, Inc.* 25,200 485,100
Boston Acoustics, Inc. 64,900 904,544
Briggs & Stratton Corporation 23,400 1,254,825
Castle & Cooke, Inc.* 84,700 1,074,631
Coastcast Corporation* 23,200 385,700
Crossman Communities, Inc.* 28,100 435,550
Fedders Corporation 158,100 869,550
General Motors Corporation 2,900 210,794
Jan Bell Marketing, Inc.* 298,200 857,325
K - Swiss, Inc. 55,600 1,032,942
M.D.C. Holdings, Inc. 82,400 1,292,650
M/I Schottenstein Homes, Inc. 37,000 575,813
Midway Games, Inc.* 58,100 1,390,769
NVR, Inc.* 37,700 1,800,175
National R.V. Holdings, Inc.* 33,700 648,725
Rowe Companies (The) 33,770 284,934
Royal Appliance Mfg. Co.* 261,100 1,272,862
Ryland Group, Inc. (The) 25,200 581,175
<CAPTION>
VALUE
SHARES (NOTE 1)
CONSUMER DURABLES (CONT'D)
<S> <C> <C>
Salton, Inc.* 55,600 $ 1,859,125
Schuler Homes, Inc.* 54,800 356,200
Starrett (L.S.) Company (The) Class A 7,600 170,525
TBC Corporation* 57,200 357,500
Thor Industries, Inc. 42,850 1,304,247
U.S. Home Corporation* 23,600 603,275
WMS Industries Inc.* 60,500 794,063
Windmere - Durable Holdings, Inc.* 26,200 445,400
Winnebago Industries, Inc. 87,300 1,751,456
------------
25,150,405
------------
CONSUMER NON-DURABLES 4.36%
Brooke Group Ltd. 88,725 1,325,330
Brown Shoe Company, Inc. 90,100 1,272,662
Cagle's, Inc. 19,500 221,813
Coors (Adolph) Company 18,100 950,250
Garan, Inc. 34,200 978,975
Haggar Corporation 120,400 1,369,550
Hormel Foods Corporation 8,100 329,063
IBP, Inc. 19,200 345,600
Kellogg Company 15,800 486,838
Liz Claiborne, Inc. 5,900 221,987
M & F Worldwide Corporation* 98,500 498,656
NIKE, Inc. Class B 7,400 366,762
Saucony, Inc. Class B* 107,600 1,492,950
WLR Foods, Inc.* 190,900 1,097,675
------------
10,958,111
------------
CONSUMER SERVICES 7.24%
Advanced Marketing Services, Inc. 86,800 2,468,375
Aztar Corporation* 166,600 1,811,775
Benihana Inc.* 33,100 477,881
Bristol Hotels & Resorts* 27,000 136,687
Central Newspapers, Inc. Class A 16,500 649,687
Isle of Capri Casinos, Inc.* 147,900 1,950,431
Players International, Inc.* 290,400 2,386,740
Ryan's Family Steak Houses, Inc.* 135,800 1,154,300
SCP Pool Corporation* 67,400 1,748,188
Sunburst Hospitality Corporation* 190,000 1,068,750
Taco Cabana, Inc.* 187,300 1,521,813
Tribune Company 6,800 374,425
</TABLE>
________________________________________________________ * NON-INCOME PRODUCING.
22
<PAGE>
ECLIPSE SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
CONSUMER SERVICES (CONT'D)
<S> <C> <C>
Trump Hotels & Casino Resorts, Inc.* 340,800 $ 1,150,200
VICORP Restaurants, Inc.* 79,200 1,277,100
------------
18,176,352
------------
ELECTRONIC TECHNOLOGY 8.05%
Bel Fuse Inc. Class A* 19,450 542,169
Bel Fuse Inc. Class B 19,450 465,584
Boeing Company (The) 9,300 386,531
CTS Corporation 12,000 904,500
ESCO Electronics Corporation* 82,000 953,250
Excel Technology, Inc.* 39,300 704,944
Gehl Company* 82,000 1,476,000
Hewlett - Packard Company 6,000 683,625
Intel Corporation 7,700 633,806
Komag, Inc.* 388,100 1,212,812
Microsemi Corporation* 51,700 458,838
Novell, Inc.* 28,400 1,134,225
Oak Technology, Inc.* 384,500 3,628,719
Primex Technologies, Inc. 36,900 765,675
RSA Security Inc.* 28,300 2,193,250
SCI Systems, Inc.* 5,100 419,156
Sequa Corporation* 8,200 442,288
Texas Instruments Incorporated 7,000 678,125
Trident Microsystems, Inc.* 181,700 1,862,425
United Industrial Corporation 73,800 682,650
------------
20,228,572
------------
FINANCE 5.84%
Advanta Corp. 46,500 848,625
Allstate Corporation (The) 6,500 156,000
Annaly Mortgage Management, Inc. 77,600 679,000
Bear Stearns Companies Inc. (The) 9,376 400,824
Berkley (W.R.) Corporation 15,600 325,650
Bluegreen Corporation* 105,900 529,500
CNA Financial Corporation* 5,900 229,731
Charter Municipal Mortgage Acceptance Company 31,100 365,425
Charter One Financial, Inc. 14,590 279,034
Cincinnati Financial Corporation 2,900 90,444
Echelon International Corporation* 2,200 50,600
Foremost Corporation of America 13,900 394,412
Franklin Select Realty Trust 51,400 353,375
<CAPTION>
VALUE
SHARES (NOTE 1)
FINANCE (CONT'D)
<S> <C> <C>
Grove Property Trust 38,800 $ 514,100
HMN Financial, Inc. 3,300 37,125
Harleysville Group Inc. 12,400 176,700
Home Federal Bancorp 7,800 175,500
Horace Mann Educators Corporation 22,600 443,525
InterContinental Life Corporation* 20,000 185,000
Investors Real Estate Trust 35,200 277,200
LandAmerica Financial Group, Inc. 14,200 260,925
MAF Bancorp, Inc. 14,850 310,922
Meridian Insurance Group, Inc. 16,456 230,384
National Western Life Insurance Company* 3,500 240,187
New Century Financial Corporation* 54,600 859,950
Old Republic International Corporation 18,700 254,787
PFF Bancorp, Inc. 41,200 798,250
PICO Holdings, Inc.* 9,300 114,506
PMA Capital Corporation 24,600 488,925
PMI Group, Inc. (The) 14,250 695,578
PartnerRe Ltd. 7,400 240,038
Professionals Insurance Company Management Group* 5,203 121,945
RLI Corporation 10,375 352,750
ReliaStar Financial Corporation 6,975 273,333
Richmond County Financial Corporation 23,500 424,469
SAFECO Corporation 5,900 146,763
SCPIE Holdings Inc. 1,800 57,825
Stewart Information Services Corporation 78,800 1,049,025
Tarragon Realty Investors, Inc. 50,826 520,967
USBANCORP, Inc. 21,900 257,325
Unitrin, Inc. 5,000 188,125
Westcorp 17,900 259,550
------------
14,658,299
------------
HEALTH SERVICES 2.75%
Aetna Inc. 8,900 496,731
Bindley Western Industries, Inc. 93,433 1,407,335
Coventry Health Care, Inc.* 148,500 1,002,375
D & K Healthcare Resources, Inc.* 52,800 772,200
</TABLE>
* NON-INCOME PRODUCING. ________________________________________________________
23
<PAGE>
ECLIPSE SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
HEALTH SERVICES (CONT'D)
<S> <C> <C>
First Health Group Corporation* 58,300 $ 1,566,812
PacifiCare Health Systems, Inc.* 9,600 508,800
Priority Healthcare Corporation* 26,274 760,304
United HealthCare Corporation 7,500 398,438
------------
6,912,995
------------
HEALTH TECHNOLGY 0.92%
Bard (C.R.), Inc. 10,500 556,500
Chiron Corporation* 10,100 427,987
Cooper Companies Inc. 18,900 569,362
Inamed Corporation* 8,700 381,713
Mallinckrodt Inc. 12,000 381,750
------------
2,317,312
------------
INDUSTRIAL SERVICES 4.41%
BJ Services Company* 42,300 1,768,669
Butler International, Inc.* 72,200 794,200
Butler Manufacturing Company 65,500 1,461,469
Diamond Offshore Drilling, Inc. 6,900 210,881
EMCOR Group, Inc.* 93,200 1,700,900
Fluor Corporation 11,900 545,913
IT Group, Inc. (The)* 118,200 1,085,962
MYR Group, Inc. 81,000 2,379,375
Trigen Energy Corporation 20,300 352,712
Zapata Corporation* 166,800 771,450
------------
11,071,531
------------
MISCELLANEOUS 0.06%
Eastern American Natural Gas Trust (The) 15,200 156,750
------------
NON-ENERGY MINERALS 4.27%
Ameron International Corporation 36,400 1,440,075
Associated Materials Incorporated 107,100 1,753,763
Birmingham Steel Corporation 160,500 852,656
Centex Corporation 10,700 417,300
Georgia - Pacific Corporation 5,800 294,350
Ispat International NV 49,800 803,025
NS Group, Inc. 73,000 556,625
Phelps Dodge Corporation 11,100 745,087
Roanoke Electric Steel Corporation 47,600 773,500
Rouge Industries, Inc. 104,800 825,300
Universal Forest Products, Inc. 78,600 1,159,350
<CAPTION>
VALUE
SHARES (NOTE 1)
NON-ENERGY MINERALS (CONT'D)
<S> <C> <C>
WHX Corporation* 123,200 $ 1,108,800
------------
10,729,831
------------
PROCESS INDUSTRIES 5.19%
Agribrands International, Inc.* 37,600 1,729,600
Ampal-American Israel Corporation* 93,300 863,025
Andersons, Inc. (The) 120,400 993,300
Anixter International Inc.* 15,500 319,687
Applied Extrusion Technologies, Inc.* 114,200 699,475
Atlantis Plastics, Inc.* 59,700 835,800
Delta Woodside Industries, Inc. 286,000 536,250
Geon Company (The) 62,400 2,028,000
Grace (W.R.) & Co.* 74,900 1,039,238
Imation Corporation* 47,300 1,587,506
Lancaster Colony Corporation 35,100 1,162,688
Loews Corporation 2,900 175,994
Olin Corporation 41,800 828,163
Westvaco Corporation 7,700 251,212
------------
13,049,938
------------
PRODUCER MANUFACTURING 8.73%
AGCO Corporation 133,500 1,793,906
American Standard Companies Inc.* 2,800 128,450
Caterpillar Inc. 7,400 348,262
Commercial Metals Company 28,500 967,219
Commonwealth Industries, Inc. 148,500 1,930,500
Cooper Industries, Inc. 5,400 218,363
Crown Cork & Seal Company, Inc. 16,400 366,950
Deere & Company 10,600 459,775
Detroit Diesel Corporation 53,700 1,030,369
Franklin Electric Co., Inc. 6,300 442,181
Gencor Industries, Inc.*# 109,400 229,740
International Aluminum Corporation 13,600 319,600
Johnson Controls, Inc. 7,400 420,875
Mark IV Industries, Inc. 67,500 1,193,906
Minnesota Mining and Manufacturing Company 3,800 371,925
Navistar International Corporation* 12,400 587,450
Oshkosh Truck Corporation Class B 60,750 1,780,734
Polycom, Inc.* 12,900 821,569
</TABLE>
________________________________________________________ * NON-INCOME PRODUCING.
24
<PAGE>
ECLIPSE SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
PRODUCER MANUFACTURING (CONT'D)
<S> <C> <C>
Robbins & Myers, Inc. 34,200 $ 773,775
Ryerson Tull, Inc. Class A 28,801 559,819
Specialty Equipment Companies, Inc. 62,800 1,503,275
Steel Technologies Inc. 51,500 746,750
TB Wood's Corporation 36,300 308,550
Tecumseh Products Company Class A 21,700 1,023,969
Terex Corporation* 60,800 1,687,200
Transportation Technologies Industries, Inc.* 105,500 1,905,594
------------
21,920,706
------------
RETAIL TRADE 12.79%
Ames Department Stores, Inc.* 37,000 1,066,062
Arden Group, Inc. Class A* 6,000 216,000
AutoNation, Inc.* 23,600 218,300
BJ's Wholesale Club, Inc.* 31,400 1,146,100
Best Buy Co., Inc.* 2,500 125,469
Blair Corporation 34,800 487,200
Books-A-Million, Inc.* 103,100 857,019
CPI Corporation 24,400 550,525
Catherines Stores Corporation* 58,400 1,226,400
Circuit City Stores-Circuit City Group 8,400 378,525
Consolidated Stores Corporation* 5,400 87,750
Costco Wholesale Corporation* 2,900 264,625
Creative Computers, Inc.* 59,000 431,437
Dillard's, Inc. Class A 10,600 213,988
Drug Emporium, Inc.* 95,100 422,006
Elcom International, Inc.* 197,000 6,698,000
Finlay Enterprises* 25,400 368,300
Fleming Companies, Inc. 74,100 759,525
Footstar, Inc.* 21,800 664,900
Fred's, Inc. 25,150 400,828
Gottschalks Inc.* 60,900 452,944
Group 1 Automotive, Inc.* 31,500 439,031
Haverty Furniture Companies, Inc. 58,500 738,562
InterTan, Inc.* 71,600 1,870,550
Kmart Corporation* 17,500 176,094
Lands' End, Inc.* 13,400 465,650
Limited, Inc. (The) 9,500 411,469
Lithia Motors, Inc. * 40,300 720,363
Multiple Zones International, Inc.* 86,500 621,719
<CAPTION>
VALUE
SHARES (NOTE 1)
RETAIL TRADE (CONT'D)
<S> <C> <C>
Musicland Stores Corporation* 86,700 $ 731,531
Payless Shoesource, Inc.* 2,400 112,800
PriceSmart, Inc.* 22,700 889,556
REX Stores Corporation* 43,000 1,505,000
Schultz Sav-O Stores, Inc. 31,700 404,175
Seaway Food Town, Inc. 29,050 472,063
Sharper Image Corporation* 39,600 502,425
Shoe Carnival, Inc.* 14,500 145,906
Sonic Automotive, Inc.* 57,500 560,625
Toys "R" Us, Inc.* 19,100 273,369
Tractor Supply Company* 25,200 403,200
Ugly Duckling Corporation* 112,200 771,375
Ultimate Electronics, Inc.* 48,100 1,190,475
United Retail Group, Inc.* 77,000 635,250
Value City Department Stores, Inc.* 70,400 1,064,800
------------
32,141,891
------------
TECHNOLOGY SERVICES 2.91%
Avnet, Inc. 27,600 1,669,800
Good Guys, Inc. (The)* 72,900 678,881
Inso Corporation* 90,600 2,921,850
Pioneer - Standard Electronics, Inc. 74,100 1,069,819
Seagate Technology, Inc.* 14,700 684,469
Symantec Corporation* 4,800 281,400
------------
7,306,219
------------
TRANSPORTATION 5.06%
AMR Corporation* 10,800 723,600
Amtran, Inc.* 26,700 517,312
Arkansas Best Corporation* 133,400 1,600,800
Delta Air Lines, Inc. 2,000 99,625
Frontier Airlines, Inc.* 173,200 1,970,150
Hub Group, Inc.* 85,400 1,708,000
Landstar System Holdings, Inc.* 17,000 727,813
Midwest Express Holdings, Inc.* 27,700 882,937
RailTex, Inc.* 101,800 1,819,675
Roadway Express, Inc. 85,900 1,857,588
UAL Corporation* 3,400 263,713
US Airways Group, Inc.* 16,500 529,031
------------
12,700,244
------------
UTILITIES 5.74%
Bangor Hydro-Electric Company 114,900 1,874,306
CH Energy Group, Inc. 16,100 531,300
CMP Group, Inc. 78,200 2,155,387
</TABLE>
* NON-INCOME PRODUCING. ________________________________________________________
25
<PAGE>
ECLIPSE SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
UTILITIES (CONT'D)
<S> <C> <C>
Central Vermont Public Service Corporation 93,000 $ 988,125
E'town Corporation 31,900 1,985,775
Eastern Utilities Associates 43,900 1,330,719
Energen Corporation 42,200 762,237
Energy East Corporation 8,000 166,500
IPALCO Enterprises, Inc. 55,600 948,675
Otter Tail Power Company 27,000 1,012,500
PP&L Resources, Inc. 8,900 203,588
<CAPTION>
VALUE
SHARES (NOTE 1)
UTILITIES (CONT'D)
<S> <C> <C>
Patina Oil & Gas Corporation 141,200 $ 1,217,850
United Illuminating Company (The) 15,800 811,725
UtiliCorp United Inc. 22,100 429,569
------------
14,418,256
------------
Total Common Stocks
(Cost $228,684,609) $240,747,020
------------
</TABLE>
SHORT-TERM INVESTMENTS 3.66%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
REPURCHASE AGREEMENTS 3.66%
State Street Bank and Trust Company, 2.50%, due
01/03/00 (Collateralized by $8,205,000 U.S. Treasury
Bond, 8.00%, due 11/15/21, Market Value -- $9,394,725) $9,208,762 $ 9,208,762
------------
<CAPTION>
VALUE
(NOTE 1)
Total Short-Term Investments
<S> <C> <C>
(Cost $9,208,762) $ 9,208,762
------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Total Investments (99.49%)
(Cost $237,893,371+) $249,955,782
Cash and Other Assets in Excess of Liabilities (0.51%) 1,273,212
------------
Net Assets (100.00%) 21,354,815 shares outstanding
(Note 3) $251,228,994
============
Net Asset Value, offering and redemption price per
share $11.76
============
</TABLE>
<TABLE>
<C> <S>
# Fair valued security.
+ Aggregate cost for federal income tax purposes is $237,912,726. Aggregate
unrealized appreciation and depreciation of investments, based on cost for
federal income tax purposes, are $45,552,680 and 33,509,624, respectively.
The accompanying notes form an integral part of these financial statements.
</TABLE>
________________________________________________________________________________
26
<PAGE>
STATEMENTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1999 ECLIPSE FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ECLIPSE ECLIPSE ECLIPSE ECLIPSE
ULTRA SHORT TERM BALANCED MID CAP SMALL CAP
INCOME FUND FUND VALUE FUND VALUE FUND
---------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $502,967 $ 2,425,397 $ 47,634 $ 161,980
Dividends (a) -- 755,530 1,539,413 2,500,519
-------- ----------- ----------- -----------
Total Income 502,967 3,180,927 1,587,047 2,662,499
-------- ----------- ----------- -----------
Expenses (Note 2):
Management Fee 32,290 673,283 918,205 2,183,901
Custodian and related shareholder expenses 11,777 96,256 87,468 306,879
Legal, compliance and filing fees 21,447 33,265 39,355 43,911
Audit and accounting 5,200 15,450 13,350 21,598
Trustees' fees 291 3,494 3,733 7,482
Other 13,422 19,632 8,207 17,589
-------- ----------- ----------- -----------
Total expenses before reimbursement 84,427 841,380 1,070,318 2,581,360
Fees paid indirectly -- -- -- (25,885)
Expense reimbursement from Manager (74,733) -- -- --
-------- ----------- ----------- -----------
Net expenses 9,694 841,380 1,070,318 2,555,475
-------- ----------- ----------- -----------
Net investment income 493,273 2,339,547 516,729 107,024
-------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments (63,145) 4,734,333 7,274,847 10,533,110
Change in unrealized appreciation
(depreciation) of investments (102,180) (7,598,879) (8,247,636) (3,506,401)
-------- ----------- ----------- -----------
Net gain (loss) on investments (165,325) (2,864,546) (972,789) 7,026,709
-------- ----------- ----------- -----------
Increase (decrease) in net assets from
operations $327,948 $ (524,999) $ (456,060) $ 7,133,733
======== =========== =========== ===========
</TABLE>
(a) Dividends recorded net of foreign withholding taxes of $0, $0, $0 and
$5,216, respectively.
The accompanying notes form an integral part of these financial statements.
________________________________________________________________________________
27
<PAGE>
ECLIPSE FUNDS STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ECLIPSE ECLIPSE
ULTRA SHORT TERM INCOME FUND BALANCED FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 493,273 $ 431,551 $ 2,339,547 $ 2,691,054
Net realized gain (loss) on investments (63,145) (19,508) 4,734,333 10,110,764
Change in unrealized appreciation (depreciation)
of investments (102,180) 873 (7,598,879) (5,047,773)
---------- ---------- ------------ ------------
Increase (decrease) in net assets from operations 327,948 412,916 (524,999) 7,754,045
---------- ---------- ------------ ------------
Distributions to shareholders:
From net investment income (493,141) (432,793) (2,339,547) (2,693,263)
From net realized gains on investments -- -- (4,347,341) (10,108,555)
In excess of net realized gains on investments -- -- -- (474,893)
---------- ---------- ------------ ------------
Total distributions to shareholders (493,141) (432,793) (6,686,888) (13,276,711)
---------- ---------- ------------ ------------
Transactions in shares of beneficial interest (Note
3) (862,323) 3,347,248 (44,484,678) 50,141,881
---------- ---------- ------------ ------------
Total increase (decrease) (1,027,516) 3,327,371 (51,696,565) 44,619,215
Net Assets:
Beginning of year 8,720,575 5,393,204 128,865,281 84,246,066
---------- ---------- ------------ ------------
End of year $7,693,059 $8,720,575 $ 77,168,716 $128,865,281
========== ========== ============ ============
Undistributed net investment income $ 132 $ -- $ -- $ --
========== ========== ============ ============
</TABLE>
The accompanying notes form an integral part of these financial statements.
________________________________________________________________________________
28
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS ECLIPSE FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ECLIPSE ECLIPSE
MID CAP VALUE FUND SMALL CAP VALUE FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 516,729 $ 378,483 $ 107,024 $ (3,251)
Net realized gain on investments 7,274,847 11,470,206 10,533,110 36,314,495
Change in unrealized appreciation
(depreciation) of investments (8,247,636) (1,147,314) (3,506,401) (29,998,149)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
operations (456,060) 10,701,375 7,133,733 6,313,095
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (514,504) (377,837) (107,102) --
Net realized gains on investments (7,241,043) (11,471,120) (10,533,110) (36,324,385)
In excess of net realized gain on investments -- -- (14,659) --
------------ ------------ ------------ ------------
Total distributions to shareholders (7,755,547) (11,848,957) (10,654,871) (36,324,385)
------------ ------------ ------------ ------------
Transactions in shares of beneficial interest
(Note 3) (33,250,256) 16,221,359 53,258,055 41,538,416
------------ ------------ ------------ ------------
Total increase (decrease) (41,461,863) 15,073,777 49,736,917 11,527,126
Net Assets:
Beginning of year 124,525,384 109,451,607 201,492,077 189,964,951
------------ ------------ ------------ ------------
End of year $ 83,063,521 $124,525,384 $251,228,994 $201,492,077
============ ============ ============ ============
Undistributed net investment income $ 2,225 $ -- $ 78 $ --
============ ============ ============ ============
</TABLE>
The accompanying notes form an integral part of these financial statements.
________________________________________________________________________________
29
<PAGE>
ECLIPSE FUNDS NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Eclipse Funds (the "Funds"), a Massachusetts business trust registered under the
Investment Company Act of 1940, is a no-load, diversified, open-end management
investment company. There are currently four investment portfolios, Eclipse
Ultra Short Term Income Fund, Eclipse Balanced Fund, Eclipse Mid Cap Value Fund
and Eclipse Small Cap Value Fund. The investment objective of Eclipse Ultra
Short Term Income Fund is to seek a high level of current income, capital
preservation, 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
Mid Cap Value Fund seeks a high total return by investing in mid capitalization
common stocks that the Manager (defined below) determines are value stocks. The
investment objective of the Small Cap Value Fund is to seek a high total return
by investing primarily in small capitalization common stocks that the Manager
determines are value stocks. The financial statements are prepared in accordance
with accounting principles generally accepted in the United States 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 Mid Cap
Value Fund and the Small Cap Value Fund. Capital gains, if any, are paid
annually. 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 Funds' policy to take possession of
securities as collateral under repurchase agreements and to determine on a
daily basis that the value of such securities plus accrued interest are
sufficient to cover the value of the repurchase agreements.
2. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Management Contract, the Funds pay a management fee to Towneley
Capital Management, Inc. (Manager) equal to an annual rate of the average daily
net assets of .40%, .75%, .90% and 1.00% for the Ultra Short Term Income Fund,
the Balanced Fund, the Mid Cap Value Fund and the Small Cap Value Fund,
respectively. The Manager has contractually waived .20% of its management fee of
the Ultra Short Term Income Fund through December 31, 2001. In addition, the
Manager has
________________________________________________________________________________
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS ECLIPSE FUNDS
- --------------------------------------------------------------------------------
voluntarily waived the rest of its Management Fee for this Fund, and partially
reimbursed the Fund for its other expenses. For the year ended December 31,
1999, total management fees waived were $32,290 and reimbursed expenses were
$42,443.
Fees are paid to Trustees who are unaffiliated with the Manager on the basis of
$2,000 per annum plus $750 per meeting attended.
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Small Cap Value Fund's expenses. For the period, the Fund's expenses were
reduced by $24,345 under this arrangement. In addition the Funds have entered
into arrangements with their custodian whereby interest earned on uninvested
cash balances was used to offset a portion, of the Fund's expenses. During the
period the Funds custodian fees were reduced under these arrangements by $1,540
for the Small Cap Value Fund.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
At December 31, 1999, the Funds had an unlimited authorized number of shares of
beneficial interest ($.01 par value). Capital paid in amounted to $7,955,684,
$76,409,401, $80,301,542 and $239,181,242 for the Ultra Short Term Income Fund,
the Balanced Fund, the Mid Cap Value Fund and the Small Cap Value Fund,
respectively. Transactions were as follows:
<TABLE>
<CAPTION>
ECLIPSE ULTRA SHORT TERM INCOME FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 262,088 $ 2,631,145 487,275 $ 4,944,505
Issued on reinvestment of dividends 45,925 454,901 39,951 401,696
Redeemed (393,157) (3,948,369) (196,979) (1,998,953)
-------- ----------- -------- -----------
Net increase (decrease) (85,144) $ (862,323) 330,247 $ 3,347,248
======== =========== ======== ===========
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ECLIPSE BALANCED FUND
-----------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 338,099 $ 7,170,659 3,342,278 $ 76,521,072
Issued on reinvestment of dividends 335,936 6,617,744 611,406 13,101,486
Redeemed (2,752,988) (58,273,081) (1,725,772) (39,480,677)
---------- ------------ ---------- ------------
Net increase (decrease) (2,078,953) $(44,484,678) 2,227,912 $ 50,141,881
========== ============ ========== ============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ECLIPSE MID CAP VALUE FUND
-----------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 550,008 $ 9,634,173 1,859,741 $ 35,912,212
Issued on reinvestment of dividends 488,313 7,705,583 668,983 11,727,277
Redeemed (2,887,891) (50,590,012) (1,668,003) (31,418,130)
---------- ------------ ---------- ------------
Net increase (decrease) (1,849,570) $(33,250,256) 860,721 $ 16,221,359
========== ============ ========== ============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
________________________________________________________________________________
31
<PAGE>
ECLIPSE FUNDS NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ECLIPSE SMALL CAP VALUE FUND
-----------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 12,424,388 $145,782,068 8,684,170 $124,507,422
Issued on reinvestment of dividends 904,873 10,433,112 3,011,532 35,084,351
Redeemed (8,869,351) (102,957,125) (8,191,231) (118,053,357)
---------- ------------ ---------- ------------
Net increase 4,459,910 $ 53,258,055 3,504,471 $ 41,538,416
========== ============ ========== ============
- -----------------------------------------------------------------------------------------------------------
</TABLE>
4. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than U.S. Government direct
and agency obligations and short-term investments, totaled $3,042,866 and
$2,999,081 for the Ultra Short Term Income Fund, $29,446,044 and $78,913,044 for
the Balanced Fund, $50,576,072 and $88,418,396 for the Mid Cap Value Fund and
$160,521,488 and $120,248,854 for the Small Cap Value Fund. Included in the
proceeds of sales for the Eclipse Balanced Fund is $22,961,057 representing the
value of securities disposed of in payment of redemption in-kind resulting in
realized losses of $88,018. As a result of the redemption in-kind, net realized
gains differ for financial statement and tax purposes. These realized losses
have been reclassified from undistributed realized gains to paid in capital in
the accompanying financial statements. Accumulated realized losses at
December 31, 1999, amounted to $150,312 for the Ultra Short Term Income Fund.
Such losses represent tax basis capital losses which may be carried forward to
offset future capital gains and expire December 31, 2004 to 2007. Accumulated
undistributed realized gains amounted to $117 and $33,804 for the Balanced Fund
and Mid Cap Value Fund, respectively. Distribution in excess of realized gains
amounted to $14,659 for the Small Cap Value Fund.
________________________________________________________________________________
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS ECLIPSE FUNDS
- --------------------------------------------------------------------------------
5. FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ECLIPSE ULTRA SHORT TERM INCOME FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance for a share
outstanding throughout the year (a)
Net asset value, beginning of year $ 10.03 $ 10.00 $ 10.03 $ 10.20 $ 10.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.63 0.59 0.64 0.71 0.57
Net realized and unrealized gains (losses) on
investments (0.22) 0.03 (0.03) (0.16) 0.20
--------- --------- --------- --------- ---------
Total from investment operations 0.41 0.62 0.61 0.55 0.77
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.63) (0.59) (0.64) (0.72) (0.57)
--------- --------- --------- --------- ---------
Total distributions (0.63) (0.59) (0.64) (0.72) (0.57)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 9.81 $ 10.03 $ 10.00 $ 10.03 $ 10.20
========= ========= ========= ========= =========
Total return 4.12% 6.27% 6.21% 5.48% 7.83%
Ratios/Supplemental data
Net assets, end of year (000) $ 7,693 $ 8,721 $ 5,393 $ 4,461 $ 4,610
Ratios to average net assets:
Expenses 0.12%+# 0.05%+# 0.00%+# 0.00%+# 0.22%+#
Net investment income 6.11%+ 6.20%+ 6.61%+ 6.76%+ 6.92%+
Portfolio turnover rate 43.57% 36.02% 45.10% 46.82% 39.26%
</TABLE>
- -----------------
<TABLE>
<C> <S>
+ Net of management fee waived equivalent to 0.4%, 0.4%, 0.4%,
0.4% and 0.4% of average net assets plus expenses reimbursed
equivalent to 0.53%, 0.80%, 0.82%, 0.80% and 1.27% of
average net assets, respectively.
# Includes custody fees paid indirectly which amounted to
0.00%, less than 0.01%, 0.00%, less than 0.01% and 0.04% of
average net assets, respectively.
(a) Per share amounts for years ended prior to December 31, 1996
have been restated to reflect a 1 for 5 reverse share split
effective June 14, 1996.
</TABLE>
- --------------------------------------------------------------------------------
________________________________________________________________________________
33
<PAGE>
ECLIPSE FUNDS NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ECLIPSE BALANCED FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance for a share
outstanding throughout the year
Net asset value, beginning of year $ 21.37 $ 22.15 $ 21.00 $ 20.59 $ 17.76
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.58 0.61 0.66 0.78 0.64
Net realized and unrealized gains (losses) on
investments (0.68) 1.14 4.14 1.85 3.39
--------- --------- --------- --------- ---------
Total from investment operations (0.10) 1.75 4.80 2.63 4.03
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.58) (0.61) (0.66) (0.78) (0.64)
Distributions from net realized gains (1.16) (1.84) (2.99) (1.44) (0.56)
Distributions in excess of net realized gains -- (0.08) -- -- --
--------- --------- --------- --------- ---------
Total distributions (1.74) (2.53) (3.65) (2.22) (1.20)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 19.53 $ 21.37 $ 22.15 $ 21.00 $ 20.59
========= ========= ========= ========= =========
Total return (0.36)% 8.03% 23.40% 12.91% 22.99%
Ratios/Supplemental data
Net assets, end of year (000) $ 77,169 $ 128,865 $ 84,246 $ 83,825 $ 85,922
Ratios to average net assets:
Expenses 0.94% 0.87%+ 0.84%+# 0.80%+ 0.81%+#
Net investment income 2.61% 2.76%+ 2.85%+ 3.56%+ 3.62%+
Portfolio turnover rate 33.17% 69.85% 46.66% 71.51% 74.72%
</TABLE>
- -----------------
<TABLE>
<C> <S>
+ Net of management fee waived equivalent to 0.1%, 0.2%, 0.2%,
and 0.3% of average net assets.
# Includes custody fees paid indirectly which amount to less
than 0.01% of average net assets.
</TABLE>
- --------------------------------------------------------------------------------
________________________________________________________________________________
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS ECLIPSE FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ECLIPSE MID CAP VALUE FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance for a share
outstanding throughout the year
Net asset value, beginning of year $ 17.73 $ 17.76 $ 13.49 $ 12.31 $ 10.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.11 0.06 0.03 0.22 0.11
Net realized and unrealized gains (losses) on
investments (0.13) 1.76 4.34 2.54 2.57
--------- --------- --------- --------- ---------
Total from investment operations (0.02) 1.82 4.37 2.76 2.68
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.11) (0.06) (0.03) (0.23) (0.11)
Distributions from net realized gains (1.54) (1.79) (0.07) (1.35) (0.26)
--------- --------- --------- --------- ---------
Total distributions (1.65) (1.85) (0.10) (1.58) (0.37)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 16.06 $ 17.73 $ 17.76 $ 13.49 $ 12.31
========= ========= ========= ========= =========
Total return 0.04% 10.35% 32.46% 22.40% 26.82%
Ratios/Supplemental data
Net assets, end of year (000) $ 83,064 $ 124,525 $ 109,452 $ 9,737 $ 7,960
Ratios to average net assets:
Expenses 1.05% 0.98%+ 0.94%+ 0.90%+ 1.00%+#
Net investment income 0.51% 0.33%+ 0.36%+ 1.66%+ 1.57%+
Portfolio turnover rate 50.65% 80.72% 51.66% 102.24% 63.16%
</TABLE>
- -----------------
<TABLE>
<C> <S>
+ Net of management fee waived equivalent to 0.1%, 0.2%,
0.7%,and 0.9% of average net assets plus expenses reimbursed
equivalent to 0.00%, 0.00%, 0.00% and 0.05% of average net
assets, respectively.
# Includes custody fees paid indirectly which amounted to
0.10% of average net assets.
</TABLE>
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35
<PAGE>
ECLIPSE FUNDS NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ECLIPSE SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance for a share
outstanding throughout the year
Net asset value, beginning of year $ 11.93 $ 14.19 $ 13.47 $ 13.56 $ 11.82
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income (loss) 0.01 (0.00)* (0.02) 0.14 0.07
Net realized and unrealized gains on investments 0.35 0.42 4.40 3.89 2.26
--------- --------- --------- --------- ---------
Total from investment operations 0.36 0.42 4.38 4.03 2.33
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.01) -- -- (0.14) (0.07)
Distributions from net realized gains (0.52) (2.68) (3.66) (3.98) (0.52)
--------- --------- --------- --------- ---------
Total distributions (0.53) (2.68) (3.66) (4.12) (0.59)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.76 $ 11.93 $ 14.19 $ 13.47 $ 13.56
========= ========= ========= ========= =========
Total return 3.05% 3.40% 33.30% 29.87% 19.69%
Ratios/Supplemental data
Net assets, end of year (000) $ 251,229 $ 201,492 $ 189,965 $ 170,747 $ 174,705
Ratios to average net assets:
Expenses 1.18%# 1.14%# 1.14%# 1.15%# 1.14%#
Net investment income 0.05% (0.00)%+ (0.12)% 0.81% 0.45%
Portfolio turnover rate 56.09% 73.39% 55.47% 82.05% 74.40%
</TABLE>
- -----------------
<TABLE>
<C> <S>
* Less than one cent per share.
+ Less than 0.01% of average net assets.
# Includes custody fees and other expenses paid indirectly
which amounted to less than 0.01% of average net assets for
each year indicated.
</TABLE>
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36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Eclipse Funds:
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Eclipse Ultra Short Term Income Fund, Eclipse Balanced Fund, Eclipse Mid Cap
Value Fund, and Eclipse Small Cap Value Fund, series of Eclipse Funds,
(hereafter referred to as the "Funds") at December 31, 1999, and the results of
each of their operations, the changes in each of their net assets and the
financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above. The financial statements for the year ended
December 31, 1998, including the financial highlights for each of the four years
in the period then ended, were audited by other independent accountants whose
report dated January 28, 1999 expressed an unqualified opinion on those
financial statements.
PricewaterhouseCoopers LLP
New York, New York
January 31, 2000
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37
<PAGE>
CHANGE IN INDEPENDENT ACCOUNTANTS
On August 13, 1999, McGladrey & Pullen, LLP ("McGladrey") resigned as
independent accountants of the Funds pursuant to an agreement by
PricewaterhouseCoopers LLP ("PwC") to acquire McGladrey's investment company
practice. The McGladrey partners and professionals serving the Funds at the time
of the acquisition joined PwC.
The reports of McGladrey on the financial statements of the Funds during the
past two fiscal years contained no adverse opinion or disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with its audits for the two most recent fiscal years and through
August 13, 1999 there were no disagreements with McGladrey on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
McGladrey, would have caused it to make reference to the subject matter of
disagreement in connection with its report.
On September 22, 1999, the Fund, with the approval of its Board of Trustees and
its Audit Committee, engaged PwC as its independent accountants.
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38
<PAGE>
ECLIPSE FUNDS TRUSTEES AND OFFICERS
<TABLE>
<S> <C>
Wesley G. McCain Trustee, Chairman and President
Sigrid A. Hess Trustee, Secretary, Executive Vice President
John Novogrod Trustee
John C. Van Eck Trustee
Yung Wong Trustee
John Flanagan Vice President, Treasurer
Sylvia McCormick Vice President
Patrick J. Farrell Assistant Treasurer
Antoinette B. Cirillo Assistant Treasurer
</TABLE>
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39
<PAGE>
TOWNELEY CAPITAL MANAGEMENT, INC.
Towneley Capital Management, Inc. is the Manager of the Eclipse Funds.
Established in 1971, Towneley is a registered investment advisor serving
individual and institutional clients. As of December 31, 1999 total assets under
management were over nine hundred million dollars.
The firm's four lines of business are the investment management of the Eclipse
Funds, of separate accounts, of portfolios of no-load mutual funds customized to
meet clients' financial planning objectives, and of three hedge funds.
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, master's degrees from Columbia and Stanford, and a bachelor's degree
from the University of Michigan, was formerly on the faculty of the Graduate
School of Business of Columbia University. He is also a Chartered Financial
Analyst (CFA).
The co-manager of the Ultra Short Term Income Fund and the Balanced Fund is Joan
Sabella, who has been with Towneley since 1978. She holds a BBA in Finance from
Baruch College, and is a Certified Financial Planner (CFP).
The co-manager of the Mid Cap Value and the Small Cap Value Funds is Kathy
O'Connor. She holds a BA from the University of Massachusetts, an MBA from
Babson College, and is a Chartered Financial Analyst. She joined Towneley in
1987.
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40
<PAGE>
GLOSSARY
CAPITALIZATION WEIGHTING with reference to an index, means that the larger the
market capitalization of a company, the greater its weight, or influence, will
be. Medium and small capitalization companies will have a much smaller influence
on the index.
CURRENT YIELD is the annual interest paid by a bond, divided by its current
market value.
EQUAL WEIGHTING refers to investing equal dollar amounts in each portfolio
holding. With reference to an index, it means that each component of the index
has an equal influence.
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 STOCKS are companies that are experiencing faster than average gains in
earnings, and that are expected to continue to enjoy relatively rapid profit
increases. These companies tend to have higher valuations such as higher
price/earnings ratios, higher price/ cash flow ratios, and higher price/revenue
ratios.
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 & 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 ULTRA SHORT OBLIGATIONS 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
MID CAPITALIZATION (See Large Capitalization)
QUANTITATIVE METHODS use financial accounting statement data to analyze
companies' fundamental operating characteristics and returns of the business in
order to determine, among other things, their quality and value. MEASURES OF
QUALITY may include asset turnover (sales/ assets), net income margins (net
income/sales), working capital (short-term assets -- short-term liabilities) and
leverage (debt/equity). MEASURES OF VALUE may include 1) price to sales
ratios, 2) price to cash flow ratios, 3) price to earnings ratios, 4) dividend
yields, and 5) price to book value ratios.
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
________________________________________________________________________________
41
<PAGE>
determined by market capitalization. The index represents 98% of the U.S. equity
market. Source: Frank Russell Company
RUSSELL MIDCAP INDEX measures the performance of the smallest 800 securities in
the Russell 1000 Index, ranked by total market capitalization. This index
captures the medium-sized universe of securities and represents approximately
35% of the total market capitalization of the Russell 1000. 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.
VALUATION MEASURES are used to determine the relative worth of a company. They
include, for example, 1) price to sales ratios, 2) price to cash flow
ratios, 3) price to earnings ratios, 4) dividend yields, and 5) price to book
value ratios.
VALUE STOCKS are companies that are cheap relative 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, relatively high dividends, and low
price to sales ratios.
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).
________________________________________________________________________________
42
<PAGE>
MANAGER
Towneley Capital Management, Inc.
470 Park Avenue South
16th Floor
New York, New York 10016
www.towneley.com
SHAREHOLDER
SERVICING AGENT
Eclipse Financial Services, Inc.
P.O. Box 2196
Peachtree City, Georgia 30269
Telephone: 800.872.2710
In Georgia: 770.631.0414
CUSTODIAN
State Street
TRANSFER AGENT
National Financial Data Services
330 West 9th Street
Kansas City, Missouri 64105
WEBSITE
Visit our website at www.eclipsefund.com
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This report is submitted for the general information of the shareholders of
the Funds. It is not authorized for distribution to prospective investors in
the Funds unless preceded or accompanied by an effective prospectus, which
includes information regarding the Funds' objectives and policies, experience
of its management, marketability of shares, and other information.
