TREMONT ADVISERS INC, 10KSB, 1997-03-12

TREMONT ADVISERS INC
10KSB, 1997-03-12
MANAGEMENT CONSULTING SERVICES

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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
_______________________
FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: Commission file number: 33-89966
December 31, 1996

TREMONT ADVISERS, INC.
(Name of small business issuer in its charter)

Delaware 06-1210532
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

555 Theodore Fremd Avenue, Rye, New York 10580
(Address of Principal Executive Offices) (Zip Code)

Issuer's telephone number, including area code: (914) 921-3400

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Issuer's knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. x
---
State issuer's revenues for its most recent fiscal year = $5,293,849.00.

The aggregate market value of the Class A Common Stock held by nonaffiliates of
the Issuer was approximately $1,883,713, based upon the average bid and ask
prices of such stock on March 5, 1997, quoted by the National Quotation Bureau
in the over-the counter market. The aggregate market value of the Class B Common
Stock held by nonaffiliates of the Issuer was approximately $3,994,872, based
upon the average bid and ask prices of such stock on March 5, 1997, quoted by
the National Quotation Bureau in the over-the-counter market.

The number of outstanding shares of the Issuer's Class A Common Stock, $.01 par
value was 1,284,718 as of March 5, 1997, and the number of outstanding shares of
the Issuer's Class B Common Stock, $.01 par value was 2,599,739 as of March 5,
1997.

DOCUMENTS INCORPORATED BY REFERENCE
None

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Table of Contents

PART I ................................................................... 1
Item 1. Description of Business............................... 1
Item 2. Description of Properties............................. 11
Item 3. Legal Proceedings..................................... 12
Item 4. Submission of Matters to a Vote of Security Holders... 12

PART II ................................................................... 12
Item 5. Market For the Registrant's Common Equity and Related
Security Holder Matters............................... 12
Item 6. Management's Discussion and Analysis.................. 14
Item 7. Financial Statements.................................. 23
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure................... 41

PART III ................................................................... 42
Item 9. Directors and Executive Officers of the Registrant.... 42
Item 10. Executive Compensation................................ 43
Item 11. Security Ownership of Certain Beneficial Owners and
Management............................................ 47
Item 12. Certain Relationships and Related Transactions........ 49
Item 13. Exhibits and Reports on Form 8-K...................... 50

EXHIBIT INDEX............................................................... 55

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PART I
Item 1. Description of Business
- --------------------------------

General

Tremont Advisers, Inc. (the "Company"), which was incorporated in the
State of Delaware on June 18, 1987, is a holding company which, through its
wholly-owned subsidiaries, is primarily engaged in rendering consulting and
specialized investment services to investment funds, investment managers,
institutional investors and high net worth individuals with respect to the
organization and management of their investment portfolio or programs, as well
as managing and sponsoring its own single-manager and multi-manager investment
funds. Further, the Company, through its subsidiaries, offers marketing and
business development consulting services to investment management firms and to
individual investment advisers. The Company derives a significant portion of its
revenues from consulting services agreements with single-manager and
multi-manager investment funds or their sponsors and advisers. The Company's
principal domestic subsidiary, Tremont Partners, Inc. ("TPI"), is a registered
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and currently serves either as a co-general partner or general
partner, of four investment limited partnerships. TPI provides investment
advisory services for the funds for which it serves as general partner. Tremont
(Bermuda) Limited ("TBL"), the Company's principal foreign subsidiary, provides
investment advisory services to several multi-manager offshore funds and acts as
the fund sponsor, primary placement agent and, in some cases, administrator, for
a select group of offshore funds managed by U.S.-based money managers. The
Company's third subsidiary, Tremont Securities, Inc. ("TSI"), is a registered
broker/dealer and was formed to assist in the purchase and sale of investment
funds and other entities, and to facilitate soft-dollar arrangements. The
Company's primary objectives are to maintain and expand its services for
single-manager and multi-manager investment programs or funds, and to develop or
sponsor its own single-manager and multi-manager investment funds.

Services and Method of Operation

The Company conducts its business through the activities and operations
of the three subsidiaries mentioned above. Although each subsidiary markets its
services to a distinct and separate group of clients, certain of the Company's
clients may utilize the services of more than one of such subsidiaries. The
Company has derived its principal revenues from TPI and TBL, and continues to do
so.

TPI. TPI was formed in 1984 as a consulting firm assisting pension and
profit sharing plans and other financial entities in the design and structure of
specialized investment programs. TPI now specializes in non-traditional
approaches to investment management and has expanded its client base to include
financial intermediaries, individuals and pension, retirement, and profit
sharing plans. TPI also provides consulting services to several multi-manager
investment funds, as well as to institutional and individual investors. Its
primary consulting services have been and continue to be rendered to plan
sponsors or managers of single-manager and multi-manager investment funds.
During the years ended December 31, 1996 and 1995, approximately 53% and 51%,
respectively, of the Company's consolidated revenues have been derived from the
operations of TPI. The principal services offered and rendered to clients by TPI
include the following:

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Investment Funds. TPI's consulting services to these funds or their
sponsors have accounted for approximately 38% of the Company's
consolidated revenues for each of the years ended December 31, 1996 and
1995. TPI has been instrumental in the organization and structure of
its current major single-manager or multi-manager investment fund
clients. In the organization of such funds, TPI assists the sponsor in:
(i) establishing investment objectives and guidelines consistent with
the client's purposes and market; (ii) defining suitable asset classes
for investment; (iii) negotiating fees and other arrangements with
investment advisers and other professionals rendering services to the
funds; and (iv) providing consultation regarding fund structure and
administration. Upon organization of such funds, TPI renders, among
other things, services for (i) the monitoring of investment performance
of such funds, including the performance of individual investment
advisers; (ii) the recommendation of the retention or replacement of
such investment advisers; (iii) the furnishing of specialized reports
responsive to the requests of the sponsors or managers of such funds;
and (iv) other administrative services as required from time to time.
In several instances, TPI is the investment adviser to such funds with
respect to the investment of their portfolio assets. TPI currently
serves as either a co-general partner or general partner of four
investment limited partnerships. TPI also renders advisory services to
investment partnerships, bank trust funds, and insurance companies in
the selection of their investments in other investment partnerships,
funds, and/or separate accounts. In addition to receiving management
fees, TPI may receive consulting fees based on the value of assets of
funds under management for which it provides its consulting or advisory
services to its investment fund clients. In several funds, TPI may
receive a performance fee at the end of a fund's first fiscal year and
yearly thereafter in addition to the fees received based on assets
under management.

Institutional and Individual Investors. TPI also offers and renders
consulting services to corporate pension and profit-sharing or similar
plans, state and local retirement systems, and high net worth
individuals with respect to the investment and management of their
investment portfolios or programs. Such services may include: (i)
design and implementation, including objectives and guidelines, of
their investment programs; (ii) identification and selection of
appropriate investment advisers for such programs; (iii) monitoring of
performance of such investment programs and (iv) administration and
reporting activities in respect of such programs. TPI generally
receives annual retainer fees or asset-based fees for its consulting
services to these institutional and individual investors.

Investment Adviser Research Program. As part of its consulting
business, TPI maintains a continuing research program with respect to
the evaluation and review of both domestic and foreign investment
advisers and advisory firms. TPI's employees meet with and interview
over 250 advisory individuals or firms each year. Interviews are
conducted with each adviser or the senior investment personnel of an
advisory firm in order to evaluate such factors as investment approach,
style, personnel turnover, delegation of investment decision-making
responsibilities and number and type of accounts under management. As a
result of TPI's investment adviser research, it has developed a
proprietary computerized database of more than 2,000 investment
advisers and investment advisory firms, including domestic and
international equity and fixed income advisers, mutual funds, private
limited partnerships, and offshore funds. This database allows TPI to
monitor and evaluate investment management performance and to simulate
the match of a fund's objectives with the investment characteristics of
different or combined investment advisers. In addition, TPI utilizes
its

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database to assist in advising investor clients in the selection of
appropriate investment advisers or investment programs.

Special Projects. TPI has offered, and continues to offer, its
investment advisory or investor clients specialized consulting services
for projects under consideration by such clients. Such projects may
include research or reports on particular aspects of the investment
management business, such as studies of risk arbitrage opportunities,
research for investing in distressed securities, recommendations for
investment products utilizing insurance programs, and market neutral
investing. Such projects have not, overall, produced significant
revenues to TPI. TPI generally receives a single project fee for its
consulting services for these types of projects.

TBL. TBL was formed as an exempted company under the Companies Act 1981
of Bermuda, as amended, in November 1988 to provide investment management
services to offshore investors. TBL currently provides investment advisory
services to several multi-manager offshore funds and acts as the fund sponsor,
primary placement agent, and in some cases administrator, for a select group of
offshore funds managed by U.S.-based money managers. For the years ended
December 31, 1996 and 1995, TBL accounted for approximately 43% and 45%,
respectively, of the Company's consolidated revenues. The Company expects that
TBL will continue to render consulting or investment advisory services to its
clients, as well as to several new offshore funds to be organized by other
sponsors.

TBL offers placement agent services to a select group of offshore
mutual funds. This activity was a logical extension of the consulting services
currently offered to financial intermediaries and investment managers through
TPI. TBL currently provides placement agent services to several offshore funds
located in offshore jurisdictions worldwide. It also has ownership in three
joint ventures to provide additional investment advisory services to offshore
clients. Services offered to these funds include:

Fund Development and Structuring. TBL coordinates all aspects of
offshore fund development, including drafting of offering materials,
creation of marketing programs and sales literature, identification of
service providers to the funds, and negotiation of fees as directed by
the fund manager.

Placement Agent Services. Upon formation of an offshore fund, TBL
assists the fund manager in raising capital for investment in these
funds from investors located outside the United States. Placement agent
services are conducted by TBL's office in Hamilton, Bermuda and by
TBL's staff traveling abroad. During 1996, substantial resources were
devoted to developing relationships with prospective investors located
in western Europe and the Far East.

Given the significant growth during recent years in the amount of money
invested in offshore funds, management believes that TBL will continue to be a
significant contributor to the Company's revenues in the future.

During the past year, the Company's business has become increasingly
focused on the development and management of single-manager and multi-manager
fund products and clients. Both TPI and TBL have been actively engaged in
seeking new single-manager and multi-manager investment fund clients for the
Company. Additionally, the growth of the offshore fund market and

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placement agent business has diversified the Company's business interests. The
Company expects to concentrate on rendering consulting services to
single-manager or multi-manager investment fund clients, to continue to develop
its own proprietary investment funds, and to develop its own distribution for
select institutional and individual markets worldwide. In 1994, TBL became a 40%
owner of a joint venture which has developed a full "turn-key" asset allocation
program that is offered on a private label basis to select financial
institutions and offshore clients around the world. In addition, during 1996 TBL
became an owner in two new joint ventures. The first, Tremont International
Insurance Ltd., of which TBL owns 24.9%, was formed as a Cayman Islands
insurance company, to offer a variety of insurance products to customers who are
not resident in the Cayman Islands. The second, Tremont Capital Limited, a
Bermuda based financial services company, of which TBL owns 40.0%, was formed to
provide a variety of corporate finance and investment services.

TSI. TSI is a registered broker-dealer under the Securities Exchange
Act of 1934, as amended. TSI is a wholly-owned subsidiary of the Company. TSI
was established to act as an introducing broker for security transactions
initiated by the Company and nonaffiliated companies, and to facilitate
soft-dollar arrangements. TSI commenced operations in 1995 and has accounted for
approximately 4% of consolidated revenues for the periods ended December 31,
1996 and December 31, 1995.

Clients

The Company's principal clients have been and continue to be TPI's and
TBL's investment funds, or the sponsors and managers of such investment funds.
The types of investment funds include mutual funds registered as investment
companies under the Investment Company Act of 1940, as amended (the "Investment
Company Act" and, collectively with the Advisers Act, the "Acts"), limited
partnerships, bank trust funds and offshore mutual funds. TPI and TBL consulting
agreements with investment fund clients accounted for approximately 64% and 66%,
respectively, of the Company's consolidated revenues for the years ended
December 31, 1996 and 1995. Accordingly, the loss of a significant portion of
these clients could have a material adverse effect on the Company.

The significant investment funds and multi-manager investment funds,
broken down by subsidiary, are as follows:

TPI:

The Minority Equity Trust, sponsored by Bankers Trust Company ("BT
Co."), is a commingled equity fund utilizing ten investment management firms
which are owned and operated by minorities or women. TPI developed the concept
for this fund and is responsible for the selection and monitoring of the
investment managers used by the fund. Since the fund's inception in May 1990,
TPI, along with a marketing consulting firm, has assisted BT Co. in marketing
the fund to tax-exempt plan sponsors who are seeking to support emerging
investment managers and/or to engage in socially responsible investment
programs. Effective December 1, 1996, the Domestic Emerging Markets Minority
Equity Trust, a similar commingled equity fund was established and approximately
$89.3 million was transferred to this fund from The Minority Equity Trust. Such
transfer was completed in contemplation of BT Co. closing the Minority Equity
Trust during the second quarter of 1997. As part of closing The Minority Equity
Trust, TPI received a one-time payment of $320,000 from the sponsor of the
Domestic Emerging Markets Minority Equity Trust in consideration for terminating
TPI's contract with the Minority Equity Trust. As of December 31, 1996, the net
asset value was

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approximately $56 million for The Minority Equity Trust. Compensation to TPI is
based upon a percentage of the net asset value at the end of each month. TPI's
relationship with the Fund is anticipated to be terminated upon the closure of
The Minority Equity Trust. TPI, however, has been asked to serve in a similar
capacity by the successor trust, Domestic Emerging Markets Minority Equity
Trust.

The Chrysler Minority Equity Trust is a domestic multi-manager trust,
utilizing investment management firms that are owned and operated by minorities.
This trust, as of December 31, 1996, had a net asset value of approximately $277
million. TPI advises on the selection and monitoring of the managers, as well as
on the allocation of funds among them. Compensation to TPI is based upon a
percentage of the net asset value at the end of each month.

Preferred Investors, L.P. is a multi-manager Delaware limited
partnership with approximately $144 million in net assets at December 31, 1996.
Preferred Investors, L.P. uses the multi-manager concept and is designed for
high net worth individuals who can accept a high degree of risk in their
investment. This limited partnership is being marketed in the United States and
focuses on investment strategies that tend to counterbalance one another during
periods of both market strength and weakness. TPI serves as consultant to the
general partner of the partnership and assists in the monitoring and selection
of investment partnerships considered for investment. TPI receives on-going
compensation from the general partner based on a percentage of assets in the
partnership at the end of each month.

Sage Capital, L.P. is a multi-manager Delaware limited partnership
composed of a diverse selection of highly skilled investment managers whose risk
profile and levels of expertise meet the standards of the general partners. As
of December 31, 1996, the fund had a net asset value of approximately $50
million. TPI serves as consultant to the general partners of the partnership and
assists in the monitoring and selection of investment partnerships considered
for investment. TPI receives on-going compensation from the general partners
based on a percentage of the assets in the partnership at the end of each month.

Pine Street Associates, L.P. is a multi-manager Delaware limited
partnership composed of a diverse selection of highly skilled investment
managers where risk profiles and levels of expertise meet the standards of the
general partners. As of December 31, 1996, the fund had a net asset value of
approximately $264 million. TPI serves as consultant to the general partners of
the Partnership and assists in the monitoring and selection of investment
partnerships considered for investment. TPI receives an annual retainer from the
general partners at the end of each year.

The Ultima Fund, L.P. is a multi-manager Delaware limited partnership
(the "Ultima Fund") organized on June 27, 1991 by Zeron Capital Management, Inc.
("Zeron") to engage principally in diversified investment strategies utilizing a
multi-manager approach to invest in securities. The Ultima Fund Limited
Partnership Agreement was first amended and restated on September 15, 1994,
whereby TPI was added as a co-general partner of the partnership with Zeron.
Effective January 1, 1997, the Limited Partnership Agreement was further amended
whereby Meridian Capital Partners, Inc. was added as a co-general partner and
Zeron will continue on as a founding partner, but will have no management role.
At December 31, 1996, TPI's investment in the Ultima Fund was $116,549 and this
investment combined with Zeron's, meets the minimum capital contribution
requirement to be made by the general partners. The partnership pays the general
partners an administrative fee and a quarterly management fee based upon the net
asset value of the partnership as

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of the end of each quarter. The partnership pays for all routine and customary
expenses including auditing, legal, accounting, investment advisory services,
communications, printing and mailing. At December 31, 1996, the approximate net
asset value of the Ultima Fund was $57.8 million.

GamTree, L.P. is a multi-manager Delaware limited partnership
("GamTree") formed for the purpose of achieving long-term capital growth through
diversified asset management. TPI and an affiliate of a principal shareholder,
GAMCO Investors, Inc., are the co-general partners of GamTree and, as such,
exercise ultimate authority over the partnership and are involved in the
day-to-day management of the partnership. The partnership pays the general
partners, in the aggregate, a quarterly management fee based upon the net asset
value of the partnership as of the end of each quarter. In addition, the general
partners may receive an incentive allocation based upon the net asset value of
the capital accounts of the limited partners at the end of each year if there is
a gross profit, after obtaining certain pre-established benchmarks, from
investment activities of the partnership for the relevant fiscal year. The
partnership pays its routine legal, accounting and computer fees and other
general and administrative costs as incurred. At December 31, 1996, the
approximate net asset value in the partnership was $0.9 million, of which TPI
has an investment value of $158,429.

The Broad Market Fund, L.P. is a multi-manager Delaware limited
partnership formed for the purpose of achieving long term capital growth through
hedged investments arranged by one or more money managers and/or investment
funds. TPI is the general partner of the limited partnership and, as such,
exercises ultimate authority over the partnership and is involved in the
day-to-day management of the partnership. The partnership pays the general
partner a monthly management fee based upon the net asset value of the
partnership as of the end of each month. The partnership pays its routine legal,
accounting and computer fees and other general and administrative costs as
incurred. At December 31, 1996, the approximate net asset value in the
partnership was $69.7 million, of which TPI has an investment value of $559,847.

The F.W. Thompson Fund, L.P. is a Delaware limited partnership
organized for the purpose of achieving long-term capital growth while preserving
capital. TPI is the general partner of the limited partnership and, as such,
exercises ultimate authority over the partnership and is involved in the
day-to-day management of the partnership. The partnership pays the general
partner a monthly management fee based upon the net asset value of the
partnership as of the end of each month. The partnership pays the general
partner a performance fee from the partnership's net profit after all other
fees, including the management fee, are deducted. The performance fee is payable
on a cumulative basis. The performance fee will not be payable with regard to
any period during or before which the partnership incurs a net loss and only
becomes payable after such net loss is recouped and net gains are achieved, net
of performance fees previously paid. The performance fee earned by the general
partner at December 31, 1996 for the period then ended was $195,830. The
partnership pays its routine legal, accounting and computer fees and other
general and administrative costs as incurred. At December 31, 1996, the
approximate net asset value of the partnership was $4.7 million, of which TPI
has an investment value of $36,553.

Security Equity Life Insurance Company offers a Group Flexible Premium
Variable Life Insurance contract with separate accounts for different
investments. TPI acts as the investment manager of one of these separate
accounts using a multi-manager approach. The primary investment objective of
this account is to achieve above-average, long-term capital growth. At December
31, 1996, the account had an approximate net asset value of $10.3 million. TPI
receives compensation from the account based upon a percentage of net assets in
such account.

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TBL:

Global Advisors Portfolio, N.V. was formed to provide non-American
investors access to a fund managed by a select group of international investment
managers. This multi-manager offshore fund is distributed by Lehman Brothers,
Inc. It is generally marketed to high net worth individuals who can accept a
high degree of risk in their investment. TBL advises on the selection and
monitoring of the investment managers, as well as the allocation of funds among
them. Compensation for TBL was based upon a certain percentage of the net asset
value at each month end. Compensation received by TBL for the years ended
December 31, 1996 and 1995, was $230,013 and $452,833, respectively. In
accordance with the investment management agreement dated February 22, 1993, by
and between the Global Advisors Portfolio N.V. and TBL, TBL was terminated as of
the close of business on November 15, 1996. TBL does not anticipate receiving
any further fees from this fund.

Global Advisors Portfolio II, N.V. was formed to provide non-American
investors access to a fund managed by a select group of international investment
managers. The Global Advisors Portfolio II, N.V. employs multiple investment
advisors with distinct yet complementary styles that, when combined, are
designed to reduce overall investment risk and enhance returns. In its role as
the portfolio's investment manager, TBL selects from a group of investment
managers throughout the world, monitors performance and seeks to maintain the
optimal allocation of assets among the portfolio's investment managers.
Compensation to TBL was based upon a percentage of the net asset value at the
end of each month. Compensation received by TBL for the years ended December 31,
1996 and 1995, was $31,204 and $59,919, respectively. In addition, during the
years ended December 31, 1996 and 1995, TBL received performance fees of $76,047
and $35,802, respectively. In accordance with the investment management
agreement dated April 15, 1994, by and between the Global Advisors Portfolio II,
N.V. and TBL, TBL was terminated as of the close of business on November 15,
1996. TBL does not anticipate receiving any further fees from this fund.

Ultima Investments Limited was formed in the Cayman Islands to provide
non-American investors access to a fund managed by a select group of investment
managers not usually available to the public. Investments may include open-ended
mutual funds, non-U.S. based investment partnerships, managed funds, securities
held in segregated accounts and other investment vehicles that invest or trade
in a wide range of primarily U.S. equity securities. The strategies of the
investment managers chosen by TBL may involve the purchase or sale of stocks,
bonds, options, currencies, futures, money market instruments and precious
metals. TBL evaluates, selects and monitors the fund's investment managers and
arranges for all the administrative services required for the operation of the
fund. Currently, the fund is being marketed in Japan and Europe. At December 31,
1996, the approximate net asset value of the fund was $36 million. Compensation
to TBL is based upon a percentage of the net asset value at the end of each
month.

Kingate Global Fund, Ltd. is an offshore hedge fund, incorporated under
the laws of the British Virgin Islands, marketed to high net worth individuals
who can accept a high degree of risk in their investment. As of December 31,
1996, the approximate net asset value of the fund was $109 million. TBL receives
compensation from the fund based on a percentage of the net asset value of the
fund at the end of each month.

Starvest Fund, Ltd., formerly Wafra Global Fund, Ltd., is an offshore
hedge fund that is marketed to high net worth individuals who can accept a high
degree of risk in their investment. As

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of December 31, 1996, the approximate net asset value of the fund was $84
million. TBL serves as its investment advisor and receives on-going compensation
from the fund based on a percentage of the average net assets in the fund at the
end of each month. In addition, TBL is entitled to a performance fee when and if
the fund's sponsor receives a performance fee. During the years ended December
31, 1996 and 1995, performance fees of $128,000 and $95,805, respectively, were
accrued by TBL. The performance fee for the year ended December 31, 1996 is
subject to final audit of the fund.

N. Compass Financial Services Limited, an exempted Bermuda-based
financial services organization ("N. Compass"), was incorporated in November,
1994 under the Companies Act 1981 of Bermuda, as amended. N. Compass has
developed a full "turn-key" asset allocation program, which is offered on a
private label basis through select financial institutions. Such program was
first commercialized on a test basis in May 1995, and at December 31, 1996 had
approximately $17 million in aggregate assets. N. Compass was formed as a joint
venture between TBL, Global Fund Resources, N.V., a Netherlands Antilles
financial services company and The Hemisphere Group Limited, a Bermuda-based
financial services company. Under the terms of the joint venture agreement, TBL
received 4,800 capital shares representing 40% of N. Compass' issued share
capital. TBL advises N. Compass on the selection and monitoring of the asset
class-oriented offshore mutual funds, as well as the allocation of funds among
them.

In addition to the funds and relationships noted above, TPI and TBL
have entered into several additional consulting agreements with single-manager
and multi-manager investment funds or their sponsors to render services for fees
based on assets under management. These funds were in the early stages of
development in late 1996 and revenue will not accrue until earned. They do not
currently have significant assets under management.

The percentage of revenues that any client, including the clients
described above, contributes to the Company can fluctuate substantially over
time due to the nature of the capital markets or the nature of the fee
arrangements with the client. As the Company continues to grow, it is expected
that total revenue will be less dependent on any one client.

New Clients

Set forth below are several of the new relationships developed during
1996.

The Domestic Emerging Markets Minority Equity Trust, formerly known as
The Minority Equity Trust, is a commingled equity fund utilizing ten investment
management firms which are owned and operated by minorities or women. TPI
advises the sponsor of this trust in a wide range of investment services,
including minority investment manager selection and monitoring and supervision
of its investment program. This product was launched on December 1, 1996 and as
of December 31, 1996, the net asset value was approximately $88 million. Such
assets were transferred to this product from The Minority Equity Trust on or
about December 1, 1996. Compensation to TPI is through an annual retainer.

Tremont Capital Limited, is a Bermuda-based financial services company
("TCL"), incorporated on July 3, 1996 under the Companies Act 1981 of Bermuda,
as amended. TCL's principal business is to act as a financial services company,
providing introductory brokerage, corporate finance and investment services. TCL
was formed as a joint venture between TBL, One World Asset Management Limited, a
Bermuda-based financial services company, and Zeron Capital

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Ltd., a Bermuda corporation. Under the terms of the shareholder agreement, TBL
received 51,506 capital shares representing 33.3% of TCL's issued Share Capital.

Tremont International Insurance, Ltd. ("TIIL"), is a Cayman Islands
corporation, formed in July 1996. TIIL offers certain deferred variable
annuities, variable life insurance and other insurance contracts to customers
who are not resident in the Cayman Islands. TIIL was formed as a joint venture
between TBL and The Anglo Dutch Insurance Company Limited, a Cayman Islands life
insurance company. Under the terms of shareholder agreement, TBL received 5,976
capital shares representing 24.9% of TIIL's issued share capital. At December
31, 1996, TBL has an investment value of $60,532 in the joint venture and its
proportionate share of operating losses was $1,718. TBL advises TIIL on the
selection and monitoring of TIIL's investments, as well as certain
administrative services. Compensation to TBL is based upon a percentage of the
net asset value of TIIL's investments. TIIL's initial insurance contracts were
issued in January, 1997.

The WealthPath Program (the "Program") is a domestic asset allocation
program targeted at individual investors with a minimum investment of $25,000.
TPI will serve as the registered investment adviser and provide the Program with
asset allocation models, as well as mutual fund due diligence and
recommendations. TPI's partner, Western Capital Financial and Insurance
Services, Inc. is a registered broker/dealer and will be responsible for the
marketing and distribution of the Program. Compensation to TPI will be based
upon a percentage of assets in the Program. The Program is expected to be
launched in the second quarter of 1997.

Furman Selz, LLC ("Furman"), is a Delaware limited liability company.
Effective January 1, 1997, TPI was engaged as a consultant, on a non-exclusive
basis, with respect to Furman's Private Asset Management Program and Private
Asset Management Service. In addition, TPI will provide a full range of
consulting and supervisory services in connection with the above programs. TPI
will receive a percentage of the advisory and consulting fees secured by Furman
as compensation.

Daehan Top Advisers Fund, N.V., is a corporation incorporated under the
laws of the Netherlands Antilles. Effective January 15, 1997, TBL was hired as a
consultant to the Daehan Top Advisers Fund N.V. and its investment manager. TBL
will assist the investment manager with respect to sub-investment manager
selection and supervision, and will provide a full range of consulting and
supervisory services in connection with the above fund. TBL will receive a
percentage of the advisory and consulting fees paid to the investment manager.

The Company, through its subsidiaries, enters into written agreements
with its clients. Under these agreements, TPI's and TBL's fees are typically
based on a percentage of assets under management or a percentage based on
performance of the fund, payable periodically, usually monthly or quarterly,
during the term of the agreement. In certain instances, TPI and TBL receive an
initial fixed fee from multi-manager investment fund clients for their services
in organizing the multi- manager investment funds. Other arrangements are based
on annual retainer fees, payable periodically during the term of the consulting
agreement or as a single fee for individual consulting projects. Fees for
offshore placement agent services are based on assets placed in the offshore
funds by TBL. TBL may receive from these clients a one-time fixed fee for
services rendered in organizing the offshore fund. Several contracts entered
into by TBL require the payment of asset-based fees to TBL well beyond the
termination of a particular contract, so long as those investors placed by TBL
remain investors in those funds.

<PAGE>

The Company's ability to generate and sustain revenues from its
multi-manager investment fund clients is primarily dependent on the size of the
assets under management for each of such funds and on the continuation of its
agreements with such funds. Each of these agreements generally is terminable
upon 30 to 60 days' written notice or on the expiration of a stated term of up
to two years, subject to earlier termination in certain circumstances. Other
annual retainer or ongoing agreements are also generally terminable on
short-term notice from clients.

Although the Company expects that its arrangement with its clients with
respect to the multi-manager investment funds will continue for the duration of
such funds, there can be no assurance that such arrangements will not be earlier
terminated by such clients. During 1996, TBL and Global Advisors Portfolio N.V.
and Global Advisors Portfolio II, N.V., respectively, agreed to terminate their
relationship due to what management believes are internal business reasons of
the sponsor of such clients. In addition, two multi-manager investment funds
changed the method of payment to TPI from a fee based upon a percentage of
assets under management to an annual retainer. The Company will endeavor to
expand its base of multi-manager investment fund clients and further diversify
its consulting business in an effort to reduce the adverse impact of termination
in respect to any one or more of such clients.

The following table sets forth the number of clients, by type of fee
arrangement, and the percentage of the Company's consolidated revenues
(exclusive of commissions earned by TSI) generated by such clients for each of
the two years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Number of Clients % of Revenue
----------------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Percentage Fee 28 32 79% 72%
Placement Agent Fee 22 10 12 10
Annual Retainer Fee 17 17 8 17
Single Project Fee 4 3 1 1
-- -- -- --

Total 71 62 100% 100%
</TABLE>
Competition

The Company encounters intense competition in all aspects of the
securities business and competes directly with other securities firms, a
significant number of which have substantially greater capital and other
resources and many of which offer a wider range of financial services than the
Company. In addition to competition from firms currently in the securities
business, there has recently been increasing competition from other sources,
such as commercial banks and insurance companies offering financial services,
and from other investment alternatives. The Company believes that the principal
competitive factors in the securities industry are the quality and ability of
professional personnel and relative prices of services and products offered. The
Company believes that the most important factors affecting competition among
investment consulting firms are the abilities and reputations of their
consulting and professional personnel, their ability to develop new investment
management products and technologies for clients and the personal marketing of
their services, rather than differences in their consulting fees. Barriers to
entry for investment consulting

<PAGE>

firms are low, principally due to low capital requirements. The principal factor
in maintaining a firm's competitive position is the continued involvement of its
professional management.

Regulation

The Company may be subject to or restricted by federal or state
governmental laws or regulations relating to the investment consulting services
rendered to its clients. The Company's principal subsidiary is registered as an
investment adviser under the Advisers Act. Although TPI is so registered, such
registration does not imply in any manner that TPI has been approved by the
Commission or any state or foreign regulatory authority or that the
qualifications of TPI have been passed upon by the Commission or any state
regulatory authority. To the extent that the Company renders such services, it
is subject to compliance with such Act and state law, including limitations on
the amount of fees charged by it and the transactions effected by it. Even
though management of the Company believes the Company is in compliance with
applicable regulations, changes in such regulations may affect the expense of
operation and require costly adjustments in the Company's business procedures to
ensure compliance.

The Company may, in certain instances, be deemed to be a "fiduciary"
for its clients and their funds under ERISA and U.S. Department of Labor
regulations promulgated thereunder. In such event, the Company could be subject
to certain sanctions and fines for its noncompliance with such law and
regulations.

The Company obtains a significant amount of its revenues from sponsors
or managers of single-manager and multi-manager investment funds. These sponsors
and managers are generally subject to regulation under the Acts with respect to
the amount of the fees that they may charge to their funds. Since the Company is
generally paid out of the fees received by such sponsors or managers, any
regulatory limits on such fees directly impact the fees to be received by the
Company. In addition, such Acts require that the agreements of such sponsors or
managers with their funds be generally terminable by the funds on 30 to 60 days'
notice. Accordingly, the Company's agreements with such sponsors or managers are
generally subject to such termination provisions. (See "Clients" and "New
Clients")

Employees

At December 31, 1996, the Company had 26 full-time employees.

Item 2. Description of Properties
- ----------------------------------

The Company owns no real property. Effective 1994, the Company moved to
a larger facility for its executive offices. The facility's lease expires May
2001 and requires monthly payments of approximately $8,450.

TBL's lease for corporate offices expired in February 1997, and was
renewed through February 2000. Such lease requires a monthly lease payment of
approximately $5,500. As of December 31, 1996, TBL agreed to sublease to an
unrelated entity approximately 50%, of this facility, at a monthly rental of
approximately $2,000. It is the intention of TBL to continue to sublet unused
space within this facility.

<PAGE>

Item 3. Legal Proceedings
- --------------------------

In August 1993, a lawsuit was initiated against the Company, TPI, TBL
and Ms. Manzke, the Chairman of the Board, in the Supreme Court of the State of
New York, County of New York, by Mr. Sass Khazzam, Capulet Management Inc. and
Kazco Mgt., Inc. alleging that there was an agreement whereby the plaintiffs
would recover 20% of the fees generated from the Global Advisors Portfolio, N.V.
Effective with the close of business on November 15, 1996, Global Advisors
Portfolio, N.V. terminated TBL and as a result, no further fees will be
generated after that date.

With regard to the lawsuit, TBL recorded reserves which it estimated
adequately covered the alleged liability. The complaint against Ms. Manzke was
dismissed and in February, 1997 the case was tried in the Supreme Court, New
York County before a judge and jury. At the commencement of the trial, all
claims asserted by plaintiffs Sass Khazzam and Capulet Management, Inc. against
the Company, TPI and TBL were discontinued with prejudice. On February 11, 1997,
the jury determined that there was no agreement between the parties, and
returned a verdict in favor of plaintiff Kazco Mgt., Inc. and against TBL in the
amount of One Hundred Twenty Five Thousand Dollars ($125,000.00), as the
reasonable value of the services rendered by plaintiff. As a result of the
verdict, a judgment will be entered in favor of Kazco Mgt., Inc. and against TBL
for One Hundred Twenty Five Thousand Dollars ($125,000.00), together with
interest at 9% per annum from January, 1995. The Court has ordered the dismissal
of the complaint against the Company and TPI. Once the judgment is entered,
Kazco Mgt., Inc., will have thirty (30) days to notice an appeal.

Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------

No matter was submitted to a vote of the holders of either the Class A
Common Stock or Class B Common Stock in the fourth quarter of 1996.

PART II

Item 5. Market For the Registrant's Common Equity and Related Security Holder
- ------------------------------------------------------------------------------
Matters
-------

The Company's Class A Common Stock has been quoted in the
over-the-counter market on the "pink sheets" under the symbol TMAV since March,
1992, when the Company completed its initial public offering of Class A Common
Stock. Prior to the initial private offering of shares of Class B Common Stock,
which closed on January 14, 1994, and subsequent effective registrations of such
shares in July 1994 and May 1995, respectively, there had been no public trading
market for the Class B Common Stock of the Company. The Class A Common Stock and
Class B Common Stock are closely held and thinly traded. The Class A Common
Stock and Class B Common Stock are not eligible for listing and registration on
a national securities exchange or for inclusion on NASDAQ. Trading, if any, in
the shares would be conducted in the over-the-counter market on the "pink
sheets" or, if then available, the National Association of Securities Dealers
"Electronic Bulletin Board."

The quotations are dealer prices without retail mark-ups, mark-downs or
commissions and may not represent actual transactions. The following table sets
forth the range of high and low bid prices of the Class A Common Stock and Class
B Common Stock (collectively, the "Common Stock")

<PAGE>

respectively, from January 1, 1995 through March 5, 1997, as quoted by the
National Quotation Bureau, Inc. The Common Stock is closely held and thinly
traded.

Price Range of Class A Common Stock

Bid Prices
---------------
High Low
1995

January 1, 1995 - March 31, 1995 $2.37 $1.25
April 1, 1995 - June 30, 1995 2.00 1.00
July 1, 1995 - September 30, 1995 2.00 1.00
October 1, 1995 - December 31, 1995 2.00 1.00

1996

January 1, 1996 - March 31, 1996 $2.00 $1.00
April 1, 1996 - June 30, 1996 3.00 1.00
July 1, 1996 - September 30, 1996 3.00 2.50
October 1, 1996 - December 31, 1996 4.50 3.00

1997

January 1, 1997 - March 5, 1997 $3.75 $3.75

Price Range of Class B Common Stock

Bid Prices
---------------
High Low
1995

January 1, 1995 - March 31, 1995 $1.50 $0.63
April 1, 1995 - June 30, 1995 1.00 .13
July 1, 1995 - September 30, 1995 .38 .13
October 1, 1995 - December 31, 1995 .50 .25

1996

January 1, 1996 - March 31, 1996 $ .50 $ .50
April 1, 1996 - June 30, 1996 .75 .50
July 1, 1996 - September 30, 1996 1.00 .75
October 1, 1996 - December 31, 1996 2.50 1.00

1997

January 1, 1997 - March 5, 1997 $2.50 $2.50

<PAGE>

Holders

As of March 5, 1997 there were approximately 69 holders of record of
the Company's Class A Common Stock and approximately 112 holders of record of
the Company's Class B Common Stock.

Dividends

Since its organization, the Company has not paid any dividends on the
Common Stock and the Company does not plan to do so in the foreseeable future.

Item 6. Management's Discussion and Analysis
- ---------------------------------------------

Financial Condition

The Company believes its relationships with its present clients are
stable. The agreements with the Company's single-manager and multi-manager
investment funds generally are terminable upon 30 to 60 days' notice or on the
expiration of a stated term of up to two years, subject to earlier termination
in certain circumstances. At December 31, 1996, the Company expects that its
arrangements with its principal single-manager and multi-manager investment fund
clients will continue for the duration of such funds and the Company has not
received any notice that any of such clients intends to terminate its
arrangement after December 31, 1996. There can be no assurance that any such
arrangements will not be earlier terminated by the client. The Company is not
currently aware of any event or events which would cause its clients to
terminate their arrangements with the Company. Several contracts entered into
over time by TBL require the payment of asset-based fees to TBL well beyond the
termination of a particular contract, so long as those investors placed by TBL
remain investors in those funds.

The Company believes that its product development efforts of 1996, as
well as the relationships formed abroad, have placed the Company in a good
position for 1997 and thereafter. Management expects to concentrate on
successfully developing new products and taking full advantage of its growing
relationships world-wide to improve its revenues and to develop independent
product distribution channels. Profitability is dependent on the ability of the
Company to maintain existing client relationships, several of which account for
a significant portion of the Company's revenues, to increase assets under
management for its client funds, and to market its services to new accounts.
Foreign currency fluctuations may also impact the Company's profitability over
time as a result of the Company's participation in foreign securities markets.

<PAGE>

Results of Operations

The Company's revenues are derived from consulting and specialized
investment services provided to institutional and other clients, as well as
management fees from certain funds under management. Consulting fees are
generally a function of the amount of assets under management and the percentage
fees charged to clients. Management fees are based on a percentage of the assets
of the managed fund and are usually paid on a monthly basis. The Company also
receives asset-based fees for investments placed by TBL in certain offshore
mutual funds. The Company provides other consulting services generally on a
fixed fee basis, whether as annual retainer fees or single project fees. The
Company's principal operating expenses consist of its costs of personnel and
independent consultants.

Fiscal year ended December 31, 1996 compared to Fiscal year ended December 31,
1995.

Consulting fees earned by the Company for the year ended December 31,
1996 increased by $1,211,007, or approximately 39.4%, as compared to the year
ended December 31, 1995. At the domestic subsidiary, TPI, consulting fees
increased from $1,735,699 for the year ended December 31, 1995 to $2,599,672 for
the year ended December 31, 1996. The increase at this subsidiary is primarily
due to increases in revenues from The Broad Market Fund, L.P. ($320,283), The
Ultima Fund, L.P. ($119,376), The F.W. Thompson Fund, L.P. ($94,467) and the
Chrysler Minority Equity Trust ($87,141). These increases, as well as a one-time
payment of $320,000 as a result of a termination agreement with the sponsor of
the Minority Equity Trust, were partially offset by declines in revenues from
Pine Street Associates, L.P. ($100,000), among others. At the foreign
subsidiary, TBL, consulting fees increased from $1,336,390 for the year ended
December 31, 1995 to $1,683,423 for the year ended December 31, 1996. The
increase at this subsidiary is primarily due to increases in revenues from the
Class B Shares of the Kingate Global Fund, Ltd. ($283,442), Winston Partners II
Offshore Ltd. ($117,206) and Ultima Investments Limited ($62,480). These
increases in revenues, as well as other increases in revenues at TBL, were
partially offset by declines in revenues from Global Advisors Portfolio, N.V.
($222,820), among others. The increase or decrease in revenues was primarily as
a result of increases or decreases in the value of the assets within the
respective investment vehicles.

Performance fees for the year ended December 31, 1996 were $780,678
compared to $209,196 for the year ended December 31, 1995. This $571,482
increase is primarily due to the underlying investment vehicles outperforming
pre-established benchmarks. The significant performance fees earned by TBL in
1996 were from Starvest Fund Ltd. ($128,000), B.P. Overseas Partners, Ltd.
($125,000) and Needham Emerging Growth International Fund, Ltd ($119,899). The
performance fee earned by TPI in 1996 was $195,830 for The F.W. Thompson Fund,
L.P. The performance fees earned for the year ended December 31, 1996 are
subject to final audit of the respective funds.

Each of Global Advisors Portfolio, N.V. and Global Advisors Portfolio
II, N.V. have terminated TBL effective as of the close of business on November
15, 1996, and as a result, no further fees will be generated after that date.
Management believes these terminations will not have a material future impact on
the Company.

<PAGE>

Commissions increased $96,124 for the year ended December 31, 1996, or
approximately 72%, as compared to the year ended December 31, 1995 as a result
of TSI having a full year of operation in 1996.

Management believes that the Company will become less dependent on a
small number of large clients, as the Company is developing relationships with a
variety of additional entities. The Company is also utilizing these
relationships to create diversified ways to package and distribute Tremont
proprietary products. In addition, management expects performance fee revenue to
increase during periods of positive market conditions, but management cannot
predict with any accuracy whether such income from performance fees will
continue in the future due to changing market conditions and other outside
factors.

Operating profits at TBL were $625,762 and $41,999 for the years ended
December 31, 1996 and 1995, respectively. The increase in operating profit from
1995 to 1996 ($583,763) was due to increases in revenues of $742,432 and an
investment gain of $130,874 partially offset by an increase in expenses of
$270,361. Identifiable assets of TBL were $1,563,788 and $731,997 at December
31, 1996 and 1995, respectively. Identifiable assets at December 31, 1996
increased from December 31, 1995 primarily as a result of TBL's net income and
increased accounts receivable as a result of higher performance fees accrued at
December 31, 1996.

Compensation expense increased for the year ended December 31, 1996 by
$572,550, or approximately 27%, over the similar period in 1995, partially as a
result of the Company's continued efforts to attract and retain qualified
employees. Such efforts resulted in an increase in the number of employees to 26
at December 31, 1996 from 23 at December 31, 1995. In addition to the increase
in the number of employees, compensation expense also increased due to salary
increases for certain employees that became effective January 1, 1996 and
increased health care costs due to the increase in the number of employees. As
part of compensation expense, $780,750 and $420,000 for the years ended December
31, 1996 and 1995, respectively, were attributable to bonuses granted by the
Company to its employees.

General and administrative expenses consist primarily of rent,
telecommunications, travel and entertainment, outside professional fees and
other related expenses. General and administrative expenses were $1,306,040 and
$997,231 for the year ended December 31, 1996 and 1995, respectively,
representing 24.7% and 29.2% of revenues, respectively. The increases in general
and administrative expenses were primarily due to costs related to the Company's
continued expansion to service its business growth. The decrease, however, in
general and administrative expense as a percentage of revenues was attributable
to the increase in revenues from the Company's proprietary products, expansion
of its client base, and the positive results from cost containment measures.

Consulting expenses increased during the year 1996, as compared to the
similar period of 1995, primarily as a result of the increase in revenues from
the clients that participate in revenue sharing arrangements. For example, TSI
has an arrangement for securities clearance services with a clearing broker
dealer whereby a certain percentage of the commissions earned is shared; this
agreement became effective in June 1995 when TSI became a registered broker
dealer. Also, TPI has revenue sharing arrangements with respect to certain
clients whose products were launched during 1996.

<PAGE>

The increase in depreciation and amortization is a result of fixed
asset purchases during the year ended December 31, 1996. These purchases
totalled $99,013 and consisted of computer equipment for the new employees hired
during the year, software purchases, as well as a computer system network for
TBL. At December 31, 1996, the Company has made commitments for additional
capital expenditures totaling approximately $27,000.

Other income increased for the year ended December 31, 1996 by $126,129
over 1995. Other income in 1996 includes an investment gain of $130,874 from the
exercise of warrants to purchase 57,639 shares of common stock of an
unaffiliated public corporation and the subsequent sale of such shares. At
December 31, 1996, TBL owns warrants to purchase common stock of the same
unaffiliated public corporation at $3.78 per share until October 19, 1998
(87,500 shares), and 18,750 shares at $3.63 per share until October 30, 1998,
respectively. Such warrants have been valued at zero on December 31, 1996.

Profitability is dependent on the ability of the Company to maintain
existing client relationships, several of which currently account for a
significant portion of the Company's revenues, to increase assets under
management for its clients, and to market its services to new accounts.

Fiscal year ended December 31, 1995 compared to Fiscal year ended December 31,
1994.

Consulting fees for the year ended December 31, 1995, increased by
$167,064, or approximately 6%, as compared to the year ended December 31, 1994.
Consulting fees increased as a result of increases in net assets of certain
client funds such as The Broad Market Fund, L.P. ($197,902), The Chrysler
Minority Equity Trust ($186,750) and The Ultima Fund, L.P. ($91,975). Consulting
fees also increased by $200,000 as a result of Pine Street Associates, L.P.
having positive investment results for the year ended December 31, 1996, as well
as from new clients that were not clients during 1994. This increase was
partially offset by the decline in consulting fees from the Global Advisors
Portfolio, N.V. and Omega Overseas Ltd. During the year ended December 31, 1995,
consulting fees with respect to Global Advisors Portfolio, N.V. averaged $37,736
per month, as opposed to $77,702 per month during the year ended December 31,
1994, representing an average decline of $39,966 per month or a total decline of
$479,598 for 1995. In addition, consulting fees received from Omega Overseas
Partners, Ltd. decreased to $90,000 for the year ended December 31, 1995 from
$500,300 in the year ended December 31, 1994 due to the decline in the average
net assets of the fund, as well as lower fees earned for the current year.

The $875,759 performance fee received by TBL in 1994 from the Global
Advisors Portfolio, N.V. was based upon the fund's performance versus the
performance of the S&P Index. Effective April 1, 1994, TBL was entitled to
receive a performance fee on a monthly basis based upon the fund's performance
versus the performance of the S&P Index for the given twelve-month period then
ended. As a result of performance subsequent to April 1, 1994, TBL has not
earned such monthly payment. For the year ended December 31, 1995, TBL recorded
$35,802, $95,805 and $42,000 as performance fees from the Global Advisors
Portfolio II, N.V., Wafra Global Fund, Ltd and One World Capital Partners -
Ultima Separate Account, respectively.

Commissions were $133,951 for the fiscal year ended December 31, 1995.
There were no commissions in 1994, as TSI was not yet operational. TSI became a
registered broker-dealer in June, 1995 and began to earn securities commissions
at that time.

<PAGE>

TBL accounted for revenues of $1,542,254 and $2,813,158 for the years
ended December 31, 1995 and 1994, respectively. The significant decrease in
revenues from 1994 to 1995 was primarily due to the decrease in consulting fees
received from Global Advisors Portfolio N.V. and Omega Overseas Partners Ltd. as
noted above. Management believes that the Company's foreign revenues will
increase due to the launching of an offshore asset allocation program. This
program is being sponsored by a joint venture in which TBL is a partner. Such
program currently has approximately $12 million invested and the principals of
the joint venture have recently contracted with two additional distributors to
market the program. The joint venture is seeking additional distributors of the
program. Management believes this venture's contribution to TBL's operating
results should increase as additional distributors begin marketing the program
No assurance can be given, however, that the program will be successful.

Operating profits relating to TBL were $41,999 and $836,461 for the
years ended December 31, 1995 and 1994, respectively. The decrease in operating
profit from 1994 to 1995 ($794,462) was due to the receipt of a substantial
performance fee payment in 1994 from Global Advisors Portfolio, N.V.
Identifiable assets of TBL were $731,997 and $915,682 at December 31, 1995 and
1994, respectively. Identifiable assets at December 31, 1995 decreased from
December 31, 1994 as a result of TBL distributing $253,000 in dividends to TPI
during the year.

Compensation expense for the year ended December 31, 1995 increased by
$21,667, or approximately 1%, over the year ended December 31, 1994 as a result
of (i) the Chief Operating Officer's salary being included for the entire year
of 1995 versus only seven months in 1994, (ii) salary increases of certain
employees that became effective January 1, 1995 and (iii) increased health care
costs. As part of compensation expense, $420,000 and $540,000 for years ended
December 31, 1995 and 1994, respectively, was attributable to bonuses granted by
the Company to its employees.

General and administrative expenses decreased for the year ended
December 31, 1995 by $457,467, or approximately 31% from the year ended December
31, 1994. These decreases were primarily due to decreases in bad debt expense,
as well as a reduction in miscellaneous operating costs, outside services,
travel and entertainment expenses, and results of cost containment measures.

Bad debt expense decreased by approximately $39,835 as a result of
increased collection efforts throughout the year ended December 31, 1995.
Miscellaneous operating costs and outside services decreased by approximately
$27,690 and $54,320, respectively, due to the fact that during 1994, the Company
was expanding its operations in Bermuda, which resulted in the relocation of an
employee to Bermuda, as well as the Company's move to a larger facility in Rye,
New York. Travel and entertainment costs decreased by approximately $92,080 due
to a decrease in international travel in 1995 as compared to 1994, and as a
result of TBL being reimbursed for certain travel expenses by its clients during
1995. Cost containment efforts were implemented in the fourth quarter of the
year ended December 31, 1994. As a result of these cost containment efforts,
expenses relating to printing and graphics, office supplies/materials,
telecommunications, temporary help, and subscriptions for the year ended
December 31, 1995 decreased by approximately $86,770, $47,410, $30,330, $7,150
and $6,810, respectively, as compared to the year ended December 31, 1994.

Consulting fee expenses for the year ended December 31, 1995 decreased
by approximately $155,650 from the year ended December 31, 1994. Included in
consulting fee expenses for the year ended December 31, 1994 is an amount which
was accrued for alleged claims asserted against the

<PAGE>

Company, the substance of which is discussed below in "Liquidity and Capital
Resources" and in "Item 3. Legal Proceedings."

Profitability is dependent on the ability of the Company to maintain
existing client relationships, several of which account for a significant
portion of the Company's revenues, to increase assets under management for its
client funds, and to market its services to new accounts. Foreign currency
fluctuation may also impact the Company's profitability over time as a result of
the Company's participation in foreign securities markets. Currently, all of the
Company's transactions are conducted in U.S. dollars, so the Company does not
have, at this time, any significant foreign currency risk.

Liquidity and Capital Resources

At December 31, 1996, the Company had $551,710 in cash and cash
equivalents, and working capital of $605,828 as compared to cash and cash
equivalents of $445,149 and working capital of $462,429, respectively, at
December 31, 1995. Cash flows provided by operating activities were $443,025 in
1996 compared to cash flows used by operating activities of $135,300. Primary
sources of the 1996 cash flows from operating activities were profitable
operations and increases in accrued expenses and accounts payable partially
offset by increases in accounts receivables. Cash flows used by investing
activities were $426,464 and $310,613 in 1996 and 1995, respectively. The
principal use of the 1996 cash flows in investing activities were the
investments in limited partnership and joint ventures, as well as other
investments offset partially by the sale of marketable securities. Cash flows
provided by operating activities of $80,000 in 1996 resulted from the issuance
of the Company's Class B Common Stock pursuant to the exercise of a stock option
by a Director of the Company.

The Company believes that it has adequate capital resources and working
capital to bring to market those products developed in late 1996 and those to be
developed in early 1997, and that the revenue stream from these products, as
well as from existing products, will be sufficient to support future growth. The
Company has no short or long term debt obligations.

In August 1993, a law suit was initiated against the Company, TPI, TBL
and Ms. Manzke, the Chairman of the Board, in the Supreme Court of the State of
New York, County of New York, by Mr. Sass Khazzam, Capulet Management Inc. and
Kazco Mgt., Inc. alleging that there was an agreement whereby the plaintiffs
would recover 20% of the fees generated from the Global Advisors Portfolio, N.V.
Effective with the close of business on November 15, 1996, Global Advisors
Portfolio, N.V. terminated TBL and as a result, no further fees will be
generated after that date.

<PAGE>

Hundred Twenty Five Thousand Dollars ($125,000.00) together with interest at 9%
per annum from January, 1995. The Court has ordered the dismissal of the
complaint against the Company and TPI. Once the judgment is entered, Kazco Mgt.,
Inc., will have thirty (30) days to notice an appeal.

The Company and Ms. Manzke, the Company's Chairman of the Board and
Chief Executive Officer, entered into an employment agreement with the Company
as of September 25, 1995. The agreement was amended on December 15, 1996 and
will expire on December 31, 1997, unless terminated at an earlier date pursuant
to the terms and conditions of such agreement. While employed, Ms. Manzke is
entitled to a minimum base salary of $362,000 per annum. She is also entitled to
a bonus as determined by the Board of Directors. Ms. Manzke's employment may be
terminated due to illness, disability or other incapacity to the extent that she
is unable to perform her duties for a period of ninety (90) consecutive days. If
her employment is so terminated, she will be entitled to receive her base salary
and accrued bonus until December 31, 1997. In the event of her death, her right
to compensation will cease.

In the event of the termination of Ms. Manzke's employment for any
reason, including death, the Company shall have the option, provided it is
exercised within ninety (90) days, to reacquire all of Ms. Manzke's shares of
capital stock of the Company for a price per share equal to the market value on
the date of such termination. Ms. Manzke agreed that she will not sell or
dispose of her stock, in the company, without first offering to sell the stock
to the Company at a price per share equal to the market value.

On December 13, 1996, the Company amended its employment agreement,
dated May 31, 1994, with Robert I. Schulman, President and Chief Operating
Officer of the Company. This agreement had an initial term expiring on December
31, 1996 and was renewed until December 31, 1997. Under the terms of this
amendment, Mr. Schulman is entitled to receive a minimum annual base salary of
$326,000. In addition, Mr. Schulman is entitled by the agreement to receive
incentive compensation equal to 90% of the incentive compensation payable to Ms.
Manzke in such year.

In conjunction with Mr. Schulman's initial employment agreement, the
Board of Directors granted to Mr. Schulman an option to purchase 275,000 shares
of Class B Common Stock at $1.75 per share, the then current fair value of the
stock as determined by the Board of Directors. The options vest and become
exercisable on the following schedule: 75,000 on the first day of employment;
75,000 on the first anniversary of employment; 75,000 on the second anniversary
of employment; and 50,000 on the third anniversary of employment. These options
will expire on the anniversary of the grant date in 2001. In the event of the
termination of Mr. Schulman's employment, TPI, a subsidiary of the Company,
shall have the option, exercisable no later than seven days after the date of
termination, to purchase all of Mr. Schulman's stock and vested options. The
purchase price for each share of Common Stock shall be equal to the best bid
price on the date of such termination, and the purchase price for each Option
shall be the greater of (i) $1.75 or (ii) the amount of the best bid price for a
share of Common Stock on the date of such termination less $1.75.

The Company owns no real property. The Company began to occupy its
present executive offices in 1994. This lease expires May 2001 and requires
monthly payments of approximately $8,450.

TBL's lease for corporate offices expired in February 1997, and was
renewed through February 2000. Such lease requires a monthly lease payment of
approximately $5,500. As of

<PAGE>

December 31, 1996, TBL agreed to sublease approximately 50% of this facility to
an unrelated entity at a monthly rental of approximately $2,000. It is the
intention of TBL to continue to sublet unused space within this facility.

The Ultima Fund, L.P. is a multi-manager Delaware limited partnership
organized on June 27, 1991 by Zeron to engage principally in diversified
investment strategies utilizing a multi-manager approach to invest in
securities. The Ultima Fund Limited Partnership Agreement was first amended and
restated on September 15, 1994, whereby TPI was added as a co-general partner of
the partnership with Zeron. Effective January 1, 1997, the Limited Partnership
Agreement was further amended whereby Meridian Capital Partners, Inc. was added
as a co-general partner and Zeron will continue on as a founding partner, but
will have no management role. At December 31, 1996, TPI's investment in the
Ultima Fund was $116,549 and this investment combined with Zeron's, meets the
minimum capital contribution requirement required to be made by the general
partners. The partnership pays the general partners an administrative fee and a
quarterly management fee based upon the net asset value of the partnership as of
the end of each quarter. The partnership pays for all routine and customary
expenses including auditing, legal, accounting, investment advisory services,
communications, printing and mailing. At December 31, 1996, the approximate net
asset value of the Ultima Fund was $57.8 million.

GamTree, L.P. is a multi-manager Delaware limited partnership formed
for the purpose of achieving long-term capital growth through diversified asset
management. TPI and an affiliate of a principal shareholder, GAMCO Investors,
Inc., are the co-general partners of GamTree and, as such, exercise ultimate
authority over the partnership and are involved in the day-to-day management of
the partnership. The partnership pays the general partners, in the aggregate, a
quarterly management fee based upon the net asset value of the partnership as of
the end of each quarter. In addition, the general partners may receive an
incentive allocation based upon the net asset value of the capital accounts of
the limited partners at the end of each year if there is a gross profit, after
obtaining certain pre-established benchmarks, from investment activities of the
partnership for the relevant fiscal year. The partnership pays its routine
legal, accounting and computer fees and other general and administrative costs
as incurred. At December 31, 1996, the approximate net asset value in the
partnership was $0.9 million, of which TPI has invested $158,429.

The Broad Market Fund L.P. is a multi-manager Delaware limited
partnership formed for the purpose of achieving long term capital growth through
hedged investments arranged by one or more money managers and/or investment
funds. TPI is the general partner of the limited partnership and, as such,
exercises ultimate authority over the partnership and is involved in the
day-to-day management of the partnership. The partnership pays the general
partner a monthly management fee based upon the net asset value of the
partnership as of the end of each month. The partnership pays its routine legal,
accounting and computer fees and other general and administrative costs as
incurred. At December 31, 1996, the approximate net asset value in the
partnership was $69.7 million, of which TPI has invested $559,847.

<PAGE>

fees, including the management fee, are deducted. The performance fee is payable
on a cumulative basis. The performance fee will not be payable with regard to
any period during or before which the partnership incurs a net loss and only
becomes payable after such net loss is recouped and net gains are achieved, net
of performance fees previously paid. The performance fee earned by the general
partner at December 31, 1996 for the period then ended was $195,830. The
partnership pays its routine legal, accounting and computer fees and other
general and administrative costs as incurred. At December 31, 1996, the
approximate net asset value of the partnership was $4.7 million, of which TPI
has invested $36,553.

Tremont Capital Limited is a Bermuda-based financial services company,
incorporated on July 3, 1996 under the Companies Act 1981 of Bermuda, as
amended. TCL's principal business is to act as a financial services company,
providing introductory brokerage, corporate finance and investment services. TCL
was formed as a joint venture between TBL, One World Asset Management Limited, a
Bermuda-based financial services company, and Zeron Capital Ltd., a Bermuda
corporation. Under the terms of the shareholder agreement, TBL received 51,506
capital shares representing 33.3% of TCL's issued Share Capital.

Tremont International Insurance, Ltd. is a Cayman Island corporation,
formed in July 1996. TIIL offers certain deferred variable annuities, variable
life insurance and other insurance contracts to customers who are not resident
in the Cayman Islands. TIIL was formed as a joint venture between TBL and The
Anglo Dutch Insurance Company Limited, a Cayman Island life insurance company.
Under the terms of shareholder agreement, TBL received 5,976 capital shares
representing 24.9% of TIIL's issued share capital. At December 31, 1996, TBL has
an investment value of $60,532 in the joint venture and its proportionate share
of operating losses was $1,718. TBL advises TIIL on the selection and monitoring
of TIIL's investments, as well as certain administrative services. Compensation
to TBL is based upon a percentage of the net asset value of TIIL's investments.
TIIL's initial insurance contracts were issued in January, 1997.

Inflation

The impact of inflation on the Company's revenues and results of
operations has not been significant.

<PAGE>

Item 7. Financial Statements.
- ------------------------------

Year Ended December 31, 1996
- ----------------------------
Page
________________________________________________________________________________

Report of Independent Auditors............................................. 24
Consolidated Balance Sheet as of December 31, 1996 ........................ 26
Consolidated Statements of Income for the years ended
December 31, 1996 and 1995 .............................................. 27
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1996 and 1995 .............................................. 28
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995 .............................................. 29
Notes to Consolidated Financial Statements................................. 30

<PAGE>
[LOGO]
Ernst & Young LLP [ ] 1111 Summer Street [ ] Phone: 203 326 8200
Stamford, Connecticut 06905 Fax: 203 358 9644

Report of Independent Auditors

Shareholders and Board of Directors
Tremont Advisers, Inc.

We have audited the accompanying consolidated balance sheet of Tremont Advisers,
Inc. as of December 31, 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of The Broad
Market Fund, L.P. (a limited partnership in which the Company has a .80%
interest), have been audited by other auditors whose report has been furnished
to us; insofar as our opinion on the consolidated financial statements relates
to data included for The Broad Market Fund, L.P., it is based solely on their
report. In the consolidated financial statements, the Company's investments in
The Broad Market Fund, L.P. is stated at $559,847 at December 31, 1996, and the
Company's equity in the net income of The Broad Market Fund, L.P. is stated at
$79,784 and $44,566, for the years ended December 31, 1996 and 1995,
respectively.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, and the report of other auditors, provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Tremont Advisers, Inc.
at December 31, 1996, and the consolidated results of their operations and their
cash flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

Ernst & Young LLP
------------------

February 11, 1997

24
<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Partners of
The Broad Market Fund, L.P.

We have audited the statement of financial condition of The Broad Market Fund,
L.P. (a limited partnership) as of December 31, 1996, and the related statements
of income, changes in Partners' capital, and cash flows for each of the two
years in the period then ended (not presented herein). These financial
statements are the responsibility of the General Partner. Our responsibility is
to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Broad Market Fund, L.P. as
of December 31, 1996, the results of its operations and its cash flows for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.

Goldstein Golub Kessler & Company, P.C.
- ----------------------------------------

GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York

February 5, 1997

<PAGE>
Tremont Advisers, Inc.

Consolidated Balance Sheet

December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 551,710
Accounts receivable, less allowance for bad debts of $25,000 1,419,578
Prepaid expenses and other 31,616
------------
Total current assets 2,002,904

Investments in limited partnerships (cost -- $668,467) 871,378
Investments in joint ventures (cost -- $317,400) 169,250
Other investments (cost -- $170,000) 170,000

Fixed assets:
Furniture and equipment 449,704
Leasehold improvements 10,906
Less accumulated depreciation (226,894)
------------
Fixed assets, net 233,716

Other assets 34,495
------------
Total assets $ 3,481,743
============

Liabilities and shareholders' equity Current liabilities:
Accounts payable $ 90,606
Accrued expenses 1,131,970
Income taxes payable 3,000
Deferred income taxes payable 171,500
------------
Total current liabilities 1,397,076

Deferred income taxes payable 22,600
Redeemable preferred stock:
Series A Preferred Stock, $1 par value, 650,000 shares
authorized, issued and outstanding - none -

Shareholders' equity:
Preferred Stock, $1 par value, 350,000 shares authorized, issued and
outstanding - none -
Class A Common Stock, $0.01 par value, 5,000,000 shares authorized,
1,284,718 shares issued and outstanding 12,847
Class B Common Stock, $0.01 par value, 5,000,000 shares authorized,
2,599,739 shares issued and outstanding 25,997
Additional paid in capital 4,004,063
Accumulated deficit (1,980,840)
------------
Total shareholders' equity 2,062,067
------------
Total liabilities and shareholders' equity $ 3,481,743
============
</TABLE>
See accompanying notes.

<PAGE>
Tremont Advisers, Inc.

Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
-------------------------------
<S> <C> <C>
Revenues:
Consulting fees $4,283,096 $3,072,089
Performance fees 780,678 209,196
Commissions 230,075 133,951
-------------------------------
Total revenues 5,293,849 3,415,236

Expenses:
Compensation 2,700,862 2,128,312
General and administrative 1,306,040 997,231
Consulting 642,610 250,097
Depreciation and amortization 100,628 77,087
-------------------------------
Total expenses 4,750,140 3,452,727

Equity in earnings of limited partnerships 106,574 83,767
Loss from operations of joint ventures, net (73,150) (55,000)
Other income, net 144,954 18,825
-------------------------------
Income before income taxes 722,087 10,101
Provision for income taxes 196,542 2,300
-----------------------------------
Net income $ 525,545 $ 7,801
===================================

Net income per Common Share $ .14 $ .00
-----------------------------------
Weighted average of Common Shares and Common
Share Equivalents outstanding 3,847,575 3,844,457
===================================
</TABLE>
See accompanying notes.

27
<PAGE>

Tremont Advisers, Inc.

Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------
Shares Outstanding Par Value Additional Total
------------------------ --------------------- Paid in Accumulated Shareholders'
Class A Class B Class A Class B Capital Deficit Equity
------------------------ ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 1,284,718 2,559,739 $12,847 $25,597 $3,924,463 $(2,514,186) $1,448,721
Net income 7,801 7,801
------------------------ ---------------------------------------------------------------------
Balance at December 31, 1995 1,284,718 2,559,739 12,847 25,597 3,924,463 (2,506,385) 1,456,522
Issuance of Class B Common Stock
-Director Option - 40,000 - 400 79,600 - 80,000
Net income - - - - - 525,545 525,545
------------------------ ---------------------------------------------------------------------
Balance at December 31, 1996 1,284,718 2,599,739 $12,847 $25,997 $4,004,063 $(1,980,840) $2,062,067
======================== =====================================================================
</TABLE>
See accompanying notes.

28
<PAGE>
Tremont Advisers, Inc.

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
--------------------------
<S> <C> <C>
Operating activities
Net income $ 525,545 $ 7,801
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Depreciation and amortization 100,628 77,087
Equity in earnings of limited partnerships (106,574) (83,767)
Loss from operations of joint ventures 73,150 55,000
Deferred income taxes 194,100 -
Realized investment gain (130,874) -
Changes in operating assets and liabilities:
Accounts receivable (701,338) (229,884)
Prepaid expenses and other 3,044 (16,319)
Accounts payable 17,788 (30,071)
Accrued expenses 461,468 58,423
Deferred revenue - (8,334)
Income taxes, net 700 31,977
Other 5,388 2,787
--------------------------
Net cash provided (used) by operating activities 443,025 (135,300)

Investing activities
Purchase of fixed assets (99,013) (71,424)
Investments in limited partnerships (200,925) (149,189)
Investments in joint ventures (207,400) (90,000)
Investment in mutual fund (50,000) -
Purchase of marketable securities (128,516) -
Sale of marketable securities 259,390 -
--------------------------
Net cash used by investing activities (426,464) (310,613)

Financing activities
Exercise of Class B Common Stock Option 80,000 -
--------------------------
Net cash provided by financing activities 80,000 -

Net increase (decrease) in cash and cash equivalents 96,561 (445,913)
Cash and cash equivalents at beginning of year 455,149 901,062
--------------------------
Cash and cash equivalents at end of year $ 551,710 $ 455,149
==========================
</TABLE>
See accompanying notes.

29
<PAGE>
Tremont Advisers, Inc.

Notes to Consolidated Financial Statements

December 31, 1996

1. Basis of Presentation

The consolidated financial statements include the accounts of Tremont Advisers,
Inc. ("the Company") and its wholly-owned subsidiaries, Tremont Partners, Inc.,
("TPI"), Tremont (Bermuda) Limited ("TBL") and Tremont Securities, Inc. ("TSI").
TPI is an investment advisor registered under the Investment Advisers Act of
1940, as amended. TBL is incorporated under Bermuda law and provides advisory
services to clients located offshore. TSI, a registered broker-dealer, assists
customers in the purchase and sale of investments in other entities. All
significant intercompany transactions have been eliminated in consolidation.

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 revenues and expenses during the reporting period.
Actual results could differ from such estimates.

The Company is a holding company which, through its subsidiaries, is engaged in
one business segment. The Company is primarily engaged in rendering consulting
and specialized investment services to investment funds, investment managers,
institutional investors, and high net worth individuals with respect to the
organization and management of their investment portfolio or programs, as well
as managing and sponsoring its own multi-manager funds. In addition, the Company
offers marketing and business development consulting services to investment
management firms and to individual investment advisers.

The consolidated statements of income include revenues from a foreign subsidiary
located in Bermuda, of $2,284,686 and $1,542,254 for the years ended December
31, 1996 and 1995, respectively. Net income included in the statements of income
from this foreign subsidiary, are $625,762 and $41,999 for the years ended
December 31, 1996 and 1995, respectively. Identifiable assets of the foreign
subsidiary were $1,563,788 at December 31, 1996.

2. Summary of Significant Accounting Policies

Fair Value of Financial Instruments

The estimated fair value of amounts reported in the consolidated financial
statements have been determined by using available market information and
appropriate valuation methodologies. The carrying value for all current assets
and current liabilities approximates fair value because of their short-term
nature. The fair value of long-term investments also approximate their carrying
value.

30
<PAGE>
Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Revenue Recognition

Consulting fees are recorded as earned and are derived from consulting and
specialized investment services provided to institutional and other clients, as
well as fees earned from certain funds under management. These fees are
generally a percentage of the amount of assets under management as well as fees
for investments placed by TBL in certain offshore mutual funds. The Company
provides other consulting services generally on a fixed fee basis, whether as
annual retainer fees or single project fees. Performance fees are recorded based
on the achievement of investment performance in excess of established benchmarks
and are recognized only when they are no longer subject to market conditions.
Commissions earned by TSI are recorded on a trade date basis.

During the periods presented in the consolidated statements of income, certain
clients accounted for a significant percentage of the Company's consolidated
revenues. For the year ended December 31, 1996, The Broad Market Fund, L.P.
accounted for approximately 10% of consolidated revenues. For the year ended
December 31, 1995, the Global Advisors Portfolio, N.V. accounted for
approximately 13% of consolidated revenues. For the years ended December 31,
1996 and 1995, revenues from related entities (see Note 3) accounted for
approximately 20% and 10% of consolidated revenues, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.

Investments

The equity method of accounting is used for investments in limited partnerships
and investments in joint ventures. Other investments are recorded at cost.

Marketable Securities

Management determines whether marketable securities are to be classified as
trading or available-for-sale at the time of purchase and re-evaluates such
designation as of each balance sheet date. Securities classified as trading are
securities acquired (and generally held for short periods) to make a profit from
short-term movements in market price. These securities are carried at fair
value, with unrealized holding gains and losses included in earnings.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of tax, reported as a separate component of shareholders'
equity. Realized gains and losses and declines in value judged to be other than
temporary on available-for-sale securities are included in other income, net.
The cost of securities is based on the specific identification method.

Fixed Assets

Fixed assets are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets (3-5
years).

31
<PAGE>

Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Income Taxes

The provision for income taxes includes federal and state taxes currently
payable and those deferred because of temporary differences between the
financial statement and tax basis of assets and liabilities. A valuation
allowance is recorded based on available evidence when it is more likely than
not that some portion or all of the deferred tax assets will not be realized.

Stock Compensation

The Company accounts for its stock compensation under the provisions of APB 25,
"Accounting for Stock Issued to Employees".

Net Income Per Share

Per share amounts are based on the weighted average number of shares of common
stock outstanding during the period, plus the effect of common stock equivalents
in the periods where there is a dilutive effect.

Concentrations of Credit Risk

The Company's accounts receivable are not concentrated in any specific
geographic region, but are concentrated in the investment industry. At December
31, 1996, the Company had accounts receivable of $228,230, $166,128 and $153,702
from Ultima Investments Limited, Starvest Funds Ltd. and The F.W. Thompson Fund.
L.P., respectively. Although the Company's exposure to credit risk associated
with nonpayment by customers is affected by conditions within the investment
industry, no other customer exceeded 10% of the Company's receivables at
December 31, 1996.

3. Investments in Limited Partnerships

The Broad Market Fund, L.P.--The Broad Market Fund L.P. is a Delaware limited
partnership ("Broad Market Fund") that was organized for the purpose of
achieving long-term capital growth through hedged investments arranged by one or
more money managers and/or investment funds. At December 31, 1996, TPI, the
General Partner, had an investment of $559,847 (cost - $423,620) in the Broad
Market Fund. For the years ended December 31, 1996 and 1995, TPI's proportionate
share of the Broad Market Fund's income ($79,784 and $44,566, respectively) is
reflected in equity in earnings of limited partnerships in the consolidated
statements of income. At December 31, 1996, TPI's investment in the limited
Broad Market Fund, L.P. represented .80% of the Broad Market Fund's net assets.
The summarized audited financial information of the Broad Market Fund, based
solely on the report of other auditors, is as follows:

December 31,
1996
------------

Total assets $75,908,923
Total liabilities 6,264,461

32
<PAGE>

Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

3. Investments in Partnerships (continued)

Year ended December 31,
1996 1995
----------------------------

Net investment income $ 878,640 $ 425,293
Net realized gain on investments 7,485,139 3,562,435
----------------------------
Net income $8,363,779 $3,987,728
============================

GamTree, L.P.--GamTree, L.P., a Delaware limited partnership ("GamTree") was
organized for the purpose of achieving long-term capital growth through
diversified asset management. At December 31, 1996, TPI, a Co-General Partner
with GAMCO Investors, Inc., an affiliate of a shareholder, had an investment of
$158,429 (cost - $100,000) in GamTree. For the years ended December 31, 1996 and
1995, TPI's proportionate share of GamTree's income ($21,079 and $34,614,
respectively) is reflected in equity in earnings of limited partnerships in the
consolidated statements of income. At December 31, 1996, TPI's investment in
GamTree represented 17.9% of GamTree's net assets.

The Ultima Fund, L.P.--The Ultima Fund, L.P. is a Delaware limited partnership
(the "Ultima Fund") that was organized for the purpose of achieving a high total
return and preservation of capital utilizing a multi-manager approach to
investing. At December 31, 1996, TPI had an investment of $116,549 (cost -
$115,000) in the Ultima Fund, which represents .20% of Ultima Fund's net assets.
For the year ended December 31, 1996, TPI's proportionate share of the Ultima
Fund's income ($1,549), is reflected in equity in earnings of limited
partnerships in the consolidated statements of income. TPI did not have an
investment in the Ultima Fund at December 31, 1995. Effective January 1, 1997,
the Ultima Fund Limited Partnership Agreement was amended and restated whereby
Meridian Capital Partners, Inc. was added as a Co-General Partner with TPI.

The F.W. Thompson Fund, L.P.--In October 1995, The F.W. Thompson Fund, L.P. a
Delaware limited partnership (the "Thompson Fund"), was organized for the
purpose of achieving long-term capital growth while preserving capital. At
December 31, 1996, TPI, the General Partner, had an investment of $36,553 (cost
- - $29,847) in the Thompson Fund, which represents .60% of the fund's equity. In
addition, TPI has a commitment to fund up to 1% of the limited partnership
losses if and when such losses occur. For the years ended December 31, 1996 and
1995, TPI's proportionate share of the limited partnership's income ($4,162 and
$2,544, respectively) is reflected in equity in earnings of limited partnerships
in the consolidated statements of income.

The aggregated summarized unaudited financial information of GamTree, the Ultima
Fund and the Thompson Fund is as follows:

December 31,
1996
------------

Total assets $70,688,495
Total liabilities 7,342,820

33
<PAGE>
Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

3. Investments in Partnerships (continued)

Year Ended December 31
1996 1995
----------------------------

Net investment loss $(1,077,612) $ (522,685)
Net realized and unrealized
gain on investments 9,765,451 4,491,934
---------------------------
Net income $ 8,687,839 $3,969,249
============================

4. Investments in Joint Ventures

In October 1994, TBL entered into an agreement to form N Compass Financial
Services Limited, a joint venture, to provide investment advisory services to
off-shore clients. For the years ended December 31, 1996 and 1995, TBL's
proportionate share (40%) of operating losses of the joint venture were $95,350
and $55,000, respectively. The investment in this joint venture at December 31,
1996 was $79,650 (cost - $250,000).

At December 31, 1996, TBL's investment representing 24.9% of Tremont
International Insurance, Ltd. (TIIL"), a Cayman Island corporation formed in
July 1996, was $60,532 (cost - $62,250). TIIL is still in the formative stages
and therefore has not generated revenues. TIIL will offer certain deferred
variable annuities, variable life insurance and other insurance contracts to
customers not resident in the Cayman Islands. For the period ended December 31,
1996, TBL's proportionate share of operating losses was $1,718 and is reflected
in loss from operations of joint ventures.

At December 31, 1996, TBL's investment representing 40% of Tremont Capital
Limited ("TCL"), a Bermuda corporation, formed in July 1996, was $29,068 (cost -
$5,150). TCL provides various investment services to offshore clients and TBL's
proportionate share of operating income was $23,918 for the period ended
December 31, 1996 and is reflected in loss from operations of joint ventures.

The summarized unaudited financial information of the joint ventures is as
follows:

December 31,
1996
------------

Total assets $685,113
Total liabilities 159,059

For the Period
November 4, 1994
(inception of
Year Ended December 31, N-Compass) to
1996 December 31, 1995
--------------------------- ---------------------

Revenues $ 319,179 $ 40,435
Expenses 493,325 227,235
---------------------------------------------------------
Net loss $(174,146) $(186,800)
=========================================================

34
<PAGE>

Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

5. Other Investments

At December 31, 1996, the TBL investment in Global Fund Resources N.V.
represents a 12% interest in such corporation that was established in May 1994
under the laws of the Netherland Antilles. Global Fund Resources N. V. was
formed to provide a variety of investment services to individuals or entities
active or desiring to be active in the financial and investment markets. The
cost and estimated fair value of this investment at December 31, 1996 was
$120,000 and the investment is not considered to be readily marketable. Such
amount is included in other investments in the consolidated balance sheet.

At December 31, 1996, TBL has invested $50,000 in American Master Fund Limited,
a Cayman Islands exempt Company, which was incorporated in July 1991. The
principal activity of this Company is to operate as an investment fund to invest
primarily in offshore investment vehicles. The Fund's investment objective is to
achieve a high total rate of return by utilizing the expertise of a number of
investment managers, while preserving capital for its investors. The cost and
estimated fair value of this investment at December 31, 1996 was $50,000. Such
amount is included in other investments in the consolidated balance sheet.

At December 31, 1996, TBL owns warrants to purchase 87,500 shares of common
stock of an unaffiliated public corporation at $3.78 per share which expire
October 19, 1998, and 18,750 shares of common stock of the same unaffiliated
public corporation at $3.63 per share which expire October 30, 1998. Such
warrants have been valued at zero at December 31, 1996.

6. Accrued Expenses

Accrued expenses at December 31, 1996 consist of the following:

Professional and consulting fees $ 930,454
Compensation 150,000
Publications 30,000
Other 21,516
----------
$1,131,970
==========

Included in professional and consulting fees is an amount accrued for the claims
asserted against the Company (see Note 12).

7. Shareholders' Equity

The Company's Class A Common Stock and Class B Common Stock are entitled to
equal rights and privileges, except that:

a. with respect to voting rights, each Class A Common Stock shareholder is
entitled to four votes for each share held of record, while the Class B
Common Stock shareholders are entitled to one vote for each share held of
record; and,

b. upon liquidation, dissolution or winding up of the Company, before any
distribution in respect of the Class B Common Stock, the shareholders of
the Class A Common Stock are entitled to receive an amount equal to the
aggregate liquidation preference of $0.40 per share. The shareholders of
the Class B Common Stock are then entitled to $0.40 per share, and the
remaining assets of the Company are then distributed in equal amounts per
share.

35
<PAGE>

Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

7. Shareholders' Equity (continued)

No dividends may be declared or paid on either class of Common Stock as long as
there are accumulated and unpaid dividends on Series A Preferred Stock. The
Company has not declared or paid dividends on either Class of Common Stock
during the two year period ended December 31, 1996.

The Company also has authorized 350,000 shares of $1 par value voting Preferred
Stock; no shares of such Preferred Stock have been issued. In addition, the
Company has authorized 650,000 shares of Series A Preferred Stock (Redeemable
Preferred Stock) $1 par value. The Redeemable Preferred has no voting rights,
except to elect one member of the Company's Board of Directors and to vote, as a
separate class, on any merger, consolidation, or sale of the Company's assets.
At December 31, 1996, there is no Redeemable Preferred Stock issued and
outstanding.

8. Stock Options

In April 1994, the Board of Directors granted to the president and chief
operating officer an option to purchase 275,000 shares of Class B Common Stock
at $1.75 per share, the then current fair market value of the stock. The options
will vest and become exercisable on the following schedule: 75,000 on the first
day of employment; 75,000 on the first anniversary of employment, 75,000 on the
second anniversary of employment, and 50,000 on the third anniversary of
employment. These options will expire on the anniversary of the grant date in
2001. In the event of the termination of the executive's employment, TPI will
have the option, exercisable no later than seven days after the date of
termination, to purchase all of the executive's stock and vested options. The
purchase price of each share of stock shall be equal to the best bid price on
the date of such termination, and the purchase price for each option shall be
the greater of (i) $1.75 or (ii) the amount of the best bid price for a share of
stock on the date of such termination less $1.75.

During December 1994, an option to purchase 40,000 share of Class B Common Stock
at $2.00 per share was granted to a director and an option to purchase 10,000
shares of Class B Common Stock at $2.00 per share was granted to an employee.
The director exercised his option and purchased 40,000 shares of Class B Common
Stock in December 1996. The employee's options, which are now fully vested, will
expire on the anniversary of the grant date in 1999. In the event of the
termination of the employee's employment, the Company will have the option,
exercisable no later than seven days after the date of termination, to purchase
all of the employee's stock and vested options. The purchase price for each
share of stock shall be equal to the best bid price on the date of such
termination, and the purchase price for each option shall be the greater of (i)
$2.00 or (ii) the amount of the best bid price for a share of stock on the date
of such termination less $2.00.

36
<PAGE>

Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

8. Stock Options

A summary of changes in stock options in 1996 and 1995 is:

Number of Price
Shares Per Share
-----------------------------------

Outstanding at December 31, 1994 325,000 $1.75 - $2.00
Granted - -
Exercised - -
Cancelled - -
-----------------------------------
Outstanding at December 31, 1995 325,000 1.75 - 2.00
Granted - -
Exercised 40,000 2.00
Cancelled - -
-----------------------------------
Outstanding at December 31, 1996 285,000 1.75 - 2.00

Options exercisable at:
December 31, 1995 195,000 1.75 - 2.00
December 31, 1996 235,000 1.75 - 2.00

9. Other Income, Net

1996 1995
-----------------------------------

Interest income $ 14,080 $18,825
Realized investment gain 130,874 -
-----------------------------------
$144,954 $18,825
===================================

10. Income Taxes

The provision for income taxes is summarized as follows:

1996 1995
-----------------------------------
Current:
State $ 2,442 $ 2,300
-----------------------------------
2,442 2,300
Deferred:
Federal 194,100 -
-----------------------------------
Total tax expense $196,542 $ 2,300
===================================

37
<PAGE>

Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

10. Income Taxes (continued)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and deferred tax assets as of December
31, 1996 are as follows:

Deferred tax liabilities:
Tax over book depreciation $ 19,200
Unrealized appreciation from limited partnerships 8,500
Undistributed earnings of foreign subsidiary 208,000
---------
Total deferred tax liabilities 235,700

Deferred tax assets:
Bad debt reserves 4,000
Organization costs 5,100
Net operating loss carryforward 32,500
---------
Total deferred tax assets 41,600
---------
Net deferred tax liability $194,100
=========

The valuation allowance was reduced to zero at December 31, 1996 from $62,100 at
December 31, 1995 primarily as a result of the utilization of net operating loss
carryforwards in 1996.

The income tax provision gives effect to permanent differences between financial
and taxable income, resulting in a lower effective tax rate than the statutory
income tax rate. The statutory income tax rate is graduated from 15% to 34% on
net income up to $10 million; a 5% surcharge applies to net income over
$100,000, for a maximum surcharge of $11,250. The reconciliation of income tax
attributable to income before income taxes computed at the U.S. federal
statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------------------
Amount Percent Amount Percent
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Statutory federal income tax rate $245,510 34.0 $ 1,515 15.0
State taxes, net of federal benefit 1,612 .2 1,955 19.4
Travel and entertainment - nondeductible 7,435 1.0 1,875 18.6
Change in valuation allowance (62,100) (8.6) (3,582) (35.5)
Other 4,085 .6 537 5.3
---------------------------------------------------------------
$196,542 27.2 $ 2,300 22.8
===============================================================
</TABLE>
In 1996 and 1995, the Company made no federal income tax payments and paid
$1,742 and $1,839, respectively, in state minimum and capital taxes.

At December 31, 1996, the Company had a net operating loss carryforward of
approximately $87,000, for tax purposes which expires, if not previously
utilized in 2009.

38
<PAGE>

Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

11. Commitments

On December 13, 1996, the Company entered into a amendment to the employment
contract with the Chairman of the Board of Directors that expires on December
31, 1997. Under the terms of this agreement, the Chairman is entitled to receive
a minimum annual base salary of $362,000. In addition, the Chairman could
receive incentive compensation, to be determined by the Board of Directors, at
the end of each fiscal year.

On December 13, 1996, the Company entered into an amendment to the employment
contract with the President and Chief Operating Officer of the Company that
expires on December 31, 1997. Under the terms of such amended agreement, the
executive is entitled to receive a minimum annual bases salary of $326,000. In
addition, the executive will receive incentive compensation equal to an amount
pursuant to a predetermined percentage of the incentive compensation paid to the
Company's Chairman of the Board of Directors.

TBL has entered into an agreement to provide a loan facility to TCL up to
$175,000 at twelve percent (12%). Interest on any amounts drawn will be payable
quarterly, and principal and any unpaid accrued interest will be due and payable
December 31, 1998. On the due date of the facility, an additional one time
payment equal to twenty-five percent (25%) of the amount of the highest
principal amount outstanding will be due and payable to TBL. At December 31,
1996, no amounts have been drawn against this facility.

At December 31, 1996, the Company has made commitments for capital expenditures
totaling $27,000.

Effective in 1994, the Company entered into an agreement whereby the Company
assumed a lease for its executive offices. The facility's lease expires May 2001
and requires monthly payments of approximately $8,450.

TBL's lease for corporate offices expired in February 1997, and was renewed
through February 2000. Such lease requires monthly payments of approximately
$5,500. At December 31, 1996, TBL has sublet to an unrelated entity
approximately 50% of this facility at a monthly rental of approximately $2,000.

Rent expense for the years ended December 31, 1996 and 1995 was $173,457 and
$233,328, respectively. Future minimum obligations under noncancellable
operating leases at December 31, 1996 were as follows: 1997-$198,500,
1998-$187,700, 1999-$171,500, 2000-$104,100 and 2001-$43,400.

<PAGE>

Tremont Advisers, Inc.

Notes to Consolidated Financial Statements (continued)

12. Contingencies

In February 1997 a case was tried in the Supreme Court, New York County before a
judge and jury against the Company, TPI and TBL by Mr. Sass Khazzam, Capulet
Management Inc. and Kazco Management Inc. alleging that there was an agreement
whereby the plaintiffs would recover 20% of the fees generated from the Global
Advisors Portfolio, N.V. Effective with the close of business on November 15,
1996, Global Advisors Portfolio N.V. terminated TBL and as a result, no further
fees were generated after that date. On February 11, 1997, the jury determined
that there was no agreement and returned a verdict in favor of plaintiff Kazco
Mgt., Inc. and against TBL in the amount of $125,000 together with interest at
9% per annum from January, 1995, as the reasonable value of the services
provided. The Court ordered dismissal of the complaint against the Company and
TPI. Once the judgment is entered, Kazco Mgt., Inc. will have (30) thirty days
to decide whether it intends to appeal. TBL recorded reserves which are
estimated to adequately cover the liabilities resulting from this litigation.

13. Employee Benefit Plan

The Company has a defined contribution plan, the Tremont Advisers 401(k) Savings
Plan (the "Plan"), which has been designed to provide retirement benefits for
the Company's employees. All employees who have attained the age of eighteen and
who have completed one month of service with the Company are eligible to
participate in the Plan. An employee may elect to defer up to 15% of his or her
compensation per year to contribute to the Plan and may allocate such
contributions among eight investment mutual funds and the Class A or Class B
Common Stock of the Company. There is no provision for employer matching
contributions.

The Company may contribute a sum to be determined each plan year by employer
resolution. The amount allocated to each participant is generally governed by
each employee's compensation. For the year ended December 31, 1996, the Company
has contributed $31,728 to the Plan. No such contribution was made in 1995.

40
<PAGE>

Item 8. Changes in and Disagreements With Accountants on Accounting and
- -------------------------------------------------------------------------
Financial Disclosure.
---------------------

Not Applicable

<PAGE>
PART III

Item 9. Directors and Executive Officers of the Registrant.
- ------------------------------------------------------------

The present Directors and Executive Officers of the Company are set forth below:

Name Age Position
---- --- --------
Sandra L. Manzke 48 Chairman of the Board of Directors
and Chief Executive Officer
Robert I. Schulman 51 Director, President and Chief Operating Officer
John L. Keeley, Jr. 56 Director
Jimmy L. Thomas 55 Director
Suzanne S. Hammond 50 Secretary and Treasurer
Stephen T. Clayton 36 Chief Financial Officer

All directors of the Company hold office until the next annual meeting
of stockholders of the Company and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal. Executive
officers are elected by the Board of Directors on an annual basis and serve at
the discretion of the Board of Directors. Sandra L. Manzke and Robert I.
Schulman are the only officers subject to the terms of any employment agreement.
There are no family relationships among any of the directors or executive
officers of the Company.

Sandra L. Manzke is the Company's Chairman of the Board and Chief
Executive Officer. Prior to May 31, 1994, she had been President and a director
of the Company since September 1987 when the Company acquired TPI. Ms. Manzke
was one of the principal founders of TPI in 1984 and has been its Chairman and
President since its inception. Ms. Manzke also serves as a director of TBL. Ms.
Manzke has and continues to be principally responsible for the operations and
client relationships of the Company.

Robert I. Schulman became the Company's President and Chief Operating
Officer as of May 31, 1994. He has been a Director of the Company since October
1993. Mr. Schulman also became President, Chief Executive Officer and a Director
of Tremont Securities, Inc. as of June 1994. Prior to May 31, 1994, he was
Executive Vice President, Director of Products & Services at Smith Barney
Shearson. He began his career in 1969 as an Account Executive trainee with E.F.
Hutton & Co., Inc. He then became assistant branch manager of the Columbus
Circle branch of E.F. Hutton & Co., Inc. in New York City. Subsequently, Mr.
Schulman served as Vice President and Regional Options and Futures Director of
the Atlantic Region, Senior Vice President and National Director of Leveraged
Products, and as Executive Vice President of all product sales at E.F. Hutton &
Co., Inc. He has served on the NYSE Derivative Product Committee, CBOE Retail
Advisory Council, NASD Options and Derivative Product Committee, Board of the
New York Futures Exchange, and the NYSE Option Specialist Allocation Committee.
Mr. Schulman is a member of the Company's Audit Committee.

John L. Keeley, Jr. became a Director of the Company in January 1994.
Mr. Keeley is President, Treasurer and a Director of Keeley Investment
Corporation, a registered broker-dealer. He has held these positions since 1977.
He is also President, Treasurer and a Director of Keeley Asset

<PAGE>

Management Corporation, a registered investment advisor, Keeley Small Cap Value
Fund, Inc., an open-end mutual fund, various investment partnerships and the
John L. Keeley, Jr. Foundation. Mr. Keeley also became a Director of the
Marquette National Corporation and an advisor to the Finance Department of
DePaul University in 1994. Mr. Keeley is a member of the Company's Audit
Committee.

Jimmy L. Thomas became a Director of the Company in November 1994. Mr.
Thomas has been Senior Vice President - Financial Services and Treasurer of
Gannett Co., Inc. since December 1991. Prior to 1991, Mr. Thomas was Vice
President - Financial Services and Treasurer of Gannett Co., Inc. He is also a
Director of Broadway/Brown Development Co. Mr. Thomas serves on the Investment
Advisory Board of the Newspaper Association of America and the Regional Advisory
Boards of Marine Midland Bank and Arkwright Boston Manufacturers Mutual
Insurance Company. Mr. Thomas is a member of the Company's Audit Committee.

Suzanne S. Hammond has been the Secretary and Treasurer of the Company
since August 1991. Ms. Hammond became a consultant to TPI in April 1989, and
prior to that time, she served for six years as a Senior Analyst with Rogers,
Casey & Associates, Inc., a firm engaged in the business of pension consulting,
where she was responsible for monitoring the New York City Teachers' Retirement
System Variable Annuity Fund A and the related South Africa divestiture
proceedings. Ms. Hammond also currently serves as a Vice President, Treasurer
and Secretary of TPI, and as a director of TBL.

Stephen T. Clayton joined the Company on January 10, 1994 and was
appointed Chief Financial Officer on January 19, 1994. Mr. Clayton also became
the Financial and Operations Principal and a Director of TSI in June 1994. Mr.
Clayton was a Senior Manager with Ernst & Young LLP, an independent public
accounting firm, from October 1989 until he joined the Company. Prior to
becoming a Senior Manager, he worked for six years at Ernst & Young LLP.

Item 10. Executive Compensation.
- --------------------------------

The following table sets forth the annual and long-term compensation
for the Company's Chief Executive Officer and other executive officers whose
total cash compensation exceeded $100,000 for services rendered to the Company
and its subsidiaries for the fiscal year ended December 31, 1996 (the "Named
Officers").

<PAGE>
Summary Compensation Table

Annual Compensation
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Long Term Compensation
------------------------------------------------
Annual Compensation Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------
Restricted Securities LTIP All other
Name and Principal Other Stock Underlying Payout Compen-
Position Salary Bonus Annual Award(s) Options/ ($) sation ($)
Year ($)(a) ($) Compen- ($) SARs (#)
sation
($)(b)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sandra L. Manzke, 1996 262,500 325,000 - - - - -
Chief Executive Officer --------------------------------------------------------------------------------------------
1995 250,000 196,500 - - - - -
--------------------------------------------------------------------------------------------
1994 250,000 250,000 - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Robert I. Schulman, 1996 236,250 292,500 - - - - -
Chief Operating --------------------------------------------------------------------------------------------
Officer 1995 225,000 147,375 - - - - -
--------------------------------------------------------------------------------------------
1994 131,250 225,000 - - 275,000 - -
- ---------------------------------------------------------------------------------------------------------------------
Stephen T. Clayton, 1996 110,000 32,500 - - - - -
Chief Financial Officer --------------------------------------------------------------------------------------------
1995 105,000 13,850 - - - - -
--------------------------------------------------------------------------------------------
1994 87,642 11,250 - - 10,000 - -
- ---------------------------------------------------------------------------------------------------------------------
Bruce D. Ruehl, Senior 1996 85,000 55,000 - - - - -
Vice President and --------------------------------------------------------------------------------------------
Director of Manager 1995 75,538 10,000 - - - - -
Research for TPI --------------------------------------------------------------------------------------------
1994 65,000 5,000 - - - - -
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) On December 13, 1996, the Company entered into an Amendment to the
employment agreement dated September 15, 1995 with Ms. Manzke that expires on
December 31, 1997. Under the terms of this agreement, Ms. Manzke is entitled to
receive a minimum annual base salary of $362,000. In addition, Ms. Manzke could
receive incentive compensation, to be determined by the Board of Directors. On
December 13, 1996, the Company entered into an Amendment to the employment
agreement dated April 27, 1994 with Mr. Schulman that expires on December 31,
1997. Under the terms of this amendment, Mr. Schulman is entitled to receive a
minimum annual base compensation of $326,000. In addition, Mr. Schulman must
receive incentive compensation equal to 90% of the incentive compensation paid
to Ms. Manzke.

(b) Other annual compensation received by Ms. Manzke and Mr. Clayton did not
exceed the lesser of $50,000 or 10% of her/his annual salary and bonus. Mr.
Schulman did not receive any other annual compensation.

<PAGE>

Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year End Option Values

Presented below is information with respect to unexercised stock options to
purchase the Company's Class B Common Stock held by each Named Officer as of
December 31, 1996.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money Options
Options at at December 31,
December 31, 1996($)
1996 (#)

Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sandra L. Manzke - - - -

Robert I. Schulman - - 225,000/50,000 $168,750/$37,500

Stephen T. Clayton - - 10,000/0 $5,000/$ -

Bruce D. Ruehl - - - -
</TABLE>

Directors' Compensation

Directors of the Company who are salaried employees of the Company do
not receive any additional compensation for serving as a director. Non-employee
directors of the Company receive $2,500 for each Board of Directors meeting
attended and $1,250 for each telephonic Board Meeting attended.

Employment Contracts, Termination of Employment and Change in Control
Arrangements.

The Company and Sandra L. Manzke, the Company's Chairman of the Board
and Chief Executive Officer, entered into an amended employment agreement
whereby Ms. Manzke is entitled to a minimum base salary of $362,000 per annum.
She was also entitled to a bonus as determined by the Board of Directors. Ms.
Manzke's employment may be terminated due to illness, disability or other
incapacity such that she is unable to perform her duties for a period of ninety
(90) consecutive days. If her employment is so terminated, she will be entitled
to receive her base salary and accrued bonus until December 31, 1997. In the
event of her death, her right to compensation will cease.

In the event of the termination of Ms. Manzke's employment for any
reason, including death, the Company shall have the option, provided it is
exercised within ninety (90) days, to reacquire all of Ms. Manzke's shares of
capital stock of the Company for a price per share equal to the market value on
the date of such termination. Ms. Manzke agrees that she will not sell or
dispose of her stock in the Company without first offering to sell the stock to
the Company at a price per share equal to the market value.

Robert I. Schulman, the President and Chief Operating Officer of the
Company, entered into an amendment to the employment agreement with the Company
as of December 13, 1996. The amendment expires on December 31, 1997, with
automatic renewals from year to year unless either party terminates it in a
timely manner. Mr. Schulman is entitled to a minimum base salary of

<PAGE>

$326,000 plus a bonus as the Board of Directors may determine; provided,
however, that in no event will Mr. Schulman's base salary in any year subsequent
to 1995 be less than 90% of the base salary payable to Ms. Manzke for such year
and in no event will Mr. Schulman's bonus be less than 90% of the incentive
compensation payable to Ms. Manzke in such year. If Mr. Schulman is disabled or
his employment is terminated by the Company without cause or by him with cause,
then he will be entitled to receive his base salary and accrued bonus until
December 31, 1997. In the event of the termination of his employment by the
Company with cause or by him without cause or in the event of his death, his
right to compensation will cease upon the date of termination or death.

Upon executing his initial employment agreement in 1994, Mr. Schulman
was granted options to purchase 275,000 shares of the Company's Class B Common
Stock, at an exercise price of $1.75 per share, the then current fair market
value of the Class B Common Stock. The options vest and become exercisable on
the following schedule: 75,000 on the first day of employment; 75,000 on the
first anniversary of the first day of employment; 75,000 on the second
anniversary of the first day of employment; and 50,000 on the third anniversary
of the first day of employment. These options will expire on the anniversary of
the grant date in 2001. In the event of the termination of Mr. Schulman's
employment for any reason, including the expiration of the employment agreement,
any unvested options will lapse; vested but unexercised options will remain
outstanding and exercisable under the original terms and conditions, subject to
an option in favor of TPI to purchase all of Mr. Schulman's stock no later than
seven days after the date of termination for a per share price equal to the best
bid price on the date of termination and the purchase price for each option
shall be the greater of (i) $1.75 or (ii) the amount of the best bid price for a
share of Common Stock on the date of termination less $1.75. Mr. Schulman has
agreed that he will not dispose of the Class B Common Stock he acquires pursuant
to the options or the unexercised options without first offering them to TPI for
the per share price applicable in the case of the termination of his employment.

Class B Options

In December 1994, an option to purchase 40,000 shares of Class B Common
Stock was granted to a director and an option to purchase 10,000 shares of Class
B Common Stock was granted to an officer. The director exercised his option and
purchased 40,000 shares of Class B Common Stock in December 1996. The officer's
option to purchase Class B Common Stock will expire on fifth anniversary of the
date of grant (December 15, 1999). The employees' options are now fully vested.
In the event of the termination of the officer's employment, the Company will
have the option, exercisable no later than seven days after the date of
termination, to purchase all of the officer's stock and vested options. The
purchase price for each share of Class B Common Stock shall be equal to the best
bid price on the date of such termination, and the purchase price for each
option shall be the greater of (i) $2.00 or (ii) the amount of the best bid
price for a share of Class B Common Stock on the date of such termination less
$2.00.

As of December 31, 1996, options to purchase 225,000 shares and 10,000
shares of Class B Common Stock for $1.75 and $2.00, respectively, were
exercisable by the Company's executives.

<PAGE>

Indemnification for Certain Liabilities

The By-Laws of the Company provide that the Company may indemnify its
directors and officers to the fullest extent permitted by the laws of the
Delaware General Corporation Law against all expenses, liability and loss
(including attorneys' fees, judgment, fines and amounts paid in settlement)
incurred by them in any action, suit or proceeding arising out of certain of
their actions or omissions in their capacities as directors or officers. Article
Seven of the Company's Restated Certificate of Incorporation provides that, with
certain exceptions, no director of the Company may be liable to the Company for
monetary damages as a result of a breach of his fiduciary duties as a director.
The Company has acquired directors' and officers' liability insurance for its
directors and officers.

The Delaware Supreme Court has held the directors' duty of care to a
corporation and its shareholders requires the exercise of an informed business
judgment. Having become informed of all material information reasonably
available to them, directors must act with requisite care in the discharge of
their duties. The Delaware General Corporation Law permits a corporation through
its certificate of incorporation to exonerate its directors from personal
liability to the corporation or its shareholders for monetary damages for a
breach of their fiduciary duty of care as a director, with certain exceptions.
The exceptions include a breach of the director's duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, improper declaration of dividends and transactions from which
the director derived an improper personal benefit. As noted above, the Company's
Restated Certificate of Incorporation exonerates its directors, acting in such
capacity, from monetary liability to the extent permitted by this statutory
provision. This limitation of liability provision does not eliminate a
shareholder's right to seek non-monetary, equitable remedies such as an
injunction or rescission in order to redress an action taken by directors.
However, as a practical matter, equitable remedies may not be available in all
situations, and there may be instances in which no effective remedy is
available.

Item 11. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------

The following table contains information relating to the beneficial
ownership of Common Stock by members of the Board of Directors, and by such
members and by the Company's officers as a group, as well as certain other
beneficial owners as of March 5, 1997. Information as to the number of shares of
Common Stock owned and the nature of ownership has been provided by these
individuals and is not within the direct knowledge of the Company. Unless
otherwise indicated, the named individuals possess sole voting and investment
power with respect to the shares listed. The following information has been
furnished to the Company or is based on Schedules 13D, or any amendments
thereto, received by the Company as filed with the Commission.

<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Owned % of
Name and Address of ------------ ----
Beneficial Owner Class A Class B Class A Class B
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sandra L. Manzke (1) 199,762 381,151 16% 15%
555 Theodore Fremd Avenue
Rye, New York

Robert I. Schulman(2) 1,964 290,051 * 10
555 Theodore Fremd Avenue
Rye, New York

John L. Keeley, Jr. (3) 81,590 370,000 6 14
401 South LaSalle Street
Chicago, Illinois

Jimmy L. Thomas - 40,000 - 2
1100 Wilson Boulevard
Arlington, VA 22234

Stephen T. Clayton (4) 759 25,167 * 1
555 Theodore Fremd Avenue
Rye, New York

Bruce D. Ruehl (5) 201 96,370 * 4
555 Theodore Fremd Avenue
Rye, New York

Mario J. Gabelli (6) 570,080 196,695 44 8
555 Theodore Fremd Avenue
Rye, New York

Lynch Corporation (7) - 163,718 - 6
8 Sound Shore Drive
Greenwich, CT

W&M Partners - 340,000 - 15
140 West 71st Street
New York, New York

Directors and Officers
as a group: 284,276 1,242,572 22 44
</TABLE>

* Less than one percent.

(1) Includes 10,000 shares of Class A Common Stock held by the Tremont Advisers,
Inc., 401(k) Savings Plan for the benefit of Ms. Manzke and 16,162 shares of
Class A Common Stock which are registered in the names of Ms. Manzke's children,
of which she possesses sole voting power and investment power with respect to
such shares. The 381,151 shares of Class B Common Stock include 40,500 shares
held by the Tremont Advisers, Inc. 401(k) Savings Plan for the benefit of Ms.
Manzke.

(2) The shares of Class A Common Stock are held by the Tremont Advisers, Inc.
401(k) Savings Plan for the benefit of Mr. Schulman. Of the 290,051 shares of
Class B Common Stock, 225,000 shares represent certain stock options granted to
Mr. Schulman by the Company that have vested and 1,254 shares are held by the
Tremont Advisers, inc. 401(k) Savings Plan for the benefit of Mr. Schulman.

(3) The 81,590 shares of Class A Common Stock are owned by Keeley Investment
Corp ("KIC"). Mr. Keeley is the President, Treasurer, a Director and the sole
shareholder of KIC. KIC is a broker-dealer, organized under the laws of
Illinois. Of the 370,000 shares of Class B Common Stock reported, 260,000 shares
reported are beneficially owned by Mr. Keeley and include 20,000 shares held in
the name of his wife, 35,000 shares held by the KIC Profit Sharing Plan & Trust
for the benefit of Mr. Keeley for which Mr. Keeley is Trustee, and 35,000 shares
held by the KIC Pension Plan & Trust for the benefit of Ms. Keeley and for which
Mr. Keeley is Trustee. Of the remaining 110,000

<PAGE>

shares of Class B Common Stock, 100,000 shares are owned by Kamco Limited
Partnership No. 1 ("KLP") and 10,000 shares held by JGJ Partnership of which
Mr. Keeley is a partner. Mr. Keeley is the sole general partner of KLP, an
investment partnership organized under the laws of Illinois. Mr. Keeley is
deemed to have a beneficial ownership of securities owned beneficially by each
of the foregoing entities.

(4) The 759 shares of Class A Common Stock are held by the Tremont Advisers,
Inc. 401(k) Savings Plan for the benefit of Mr. Clayton. Of the 25,167 shares of
Class B Common Stock, 10,000 shares represent certain stock options granted to
Mr. Clayton by the Company that have vested, 2,666 shares are held by the
Tremont Advisers, Inc. 401(k) Savings Plan for the benefit of Mr. Clayton and
3,500 shares are held in the name of his wife, for which Mr. Clayton
specifically disclaims beneficial ownership.

(5) The 201 shares of Class A Common Stock are held by the Tremont Advisers,
Inc. 401(k) Savings Plan for the benefit of Mr. Ruehl. Of the 96,370 shares of
Class B Common Stock, 1,370 shares are held by the Tremont Advisers, Inc. 401(k)
Savings Plan for the benefit of Mr. Ruehl.

(6) Includes 325,385 shares of Class A Common Stock and 2,267 shares of Class B
Common Stock owned by family trusts or partnerships over which Mr. Gabelli has
sole voting power and investment power. Does not include shares listed elsewhere
in this table which are held by Lynch Corporation ("Lynch"), of which Mr.
Gabelli specifically disclaims beneficial ownership. Mr. Gabelli is the
principal shareholder, as well as the Chairman of the Board and Chief Executive
Officer, of Gabelli Funds, Inc. ("GFI"), a registered investment adviser under
the Investment Advisers Act of 1940, as amended and the ultimate parent company
for a variety of operating companies engaged in various aspects of the
securities business, including GAMCO Investors, Inc. ("GAMCO"), a majority-owned
subsidiary of GFI and a registered investment adviser; Gabelli Securities, Inc.
("GSI"), a majority-owned subsidiary of GFI; and Gabelli & Company, Inc.
("Gabelli & Company"), a wholly-owned subsidiary of GSI and a registered
broker-dealer. Mr. Gabelli is also Chief Investment Officer of GAMCO and a
registered representative of Gabelli & Company. GFI, GAMCO, GSI and Gabelli &
Company are herein referred to as "affiliates" of Mr. Gabelli. Acting in these
capacities, Mr. Gabelli has the authority for making voting and investment
decisions on behalf of the affiliates and, therefore, may be deemed to be the
beneficial owner of shares of the Company owned by or held in accounts of such
affiliates. Of the remaining 244,695 shares of Class A Common Stock owned by Mr.
Gabelli and affiliates of Gabelli, 43,041 shares are held by Gabelli Securities,
Inc. and 105,500 shares are held by GFI, each of which has the sole voting power
and sole investment power for their clients with respect to these securities.

(7) Mr. Gabelli is Chairman of the Board and Chief Executive Officer of Lynch,
and he and his affiliates and their clients are principal shareholders of Lynch.
Mr. Gabelli may be deemed to be a beneficial owner of the shares of the Company
owned by Lynch by virtue of his and certain affiliated parties' beneficial
ownership of 336,250 shares, or 24.4%, of the common stock of Lynch. Mr.
Gabelli, however, specifically disclaims beneficial ownership of all of the
shares of the Company's Common Stock held by Lynch.

Item 12. Certain Relationships and Related Transactions.
- ---------------------------------------------------------

Class B Options

In December 1994, an option to purchase 40,000 shares of Class B Common
Stock was granted to Jimmy L. Thomas, a director of the Company. In December
1996, Mr. Thomas exercised the option and purchased 40,000 shares of the
Company's Class B Common Stock at $2.00 per share, the then fair market value.

Joint Venture Investment

At December 31, 1996, TBL had an investment of $60,532 (24.9%
ownership) in TIIL. TIIL will offer certain deferred variable annuities,
variable life insurance and other insurance contracts to customers not resident
in the Cayman Islands. For the period ended December 31, 1996, TBL's
proportionate share of operating losses was $1,718.

Selection of Investment Advisers

As part of its services rendered, and in its capacity as investment
consultant to various clients, the Company monitors and evaluates the
performance of investment managers for clients based on a criteria of matching
the objectives of the clients with the investment characteristics of an
investment manager. Based on such monitoring and evaluation, the Company will
either recommend the

<PAGE>

selection, continuation or termination of an investment manager to the Company's
clients. The final decision is made by the client. In certain instances, clients
have requested that affiliates of the Company act as investment manager. GAMCO,
an affiliate of Mario J. Gabelli, was selected to be one of the investment
managers, along with others, to one of the Company's consulting clients upon the
recommendation of TPI or TBL. Such recommendation was made based on an
evaluation of all relevant factors by TPI or TBL. In addition, TBL has been
retained as the investment advisor of the Global Advisors Portfolio, N.V. and an
investment by this fund has been made in Gabelli International II, a fund
operated by an affiliate of the Company. In accordance with the terms of this
fund, no affiliate of TPI or TBL can manage more than 15% of the assets of this
fund. In accordance with the investment management agreement dated February 22,
1993, by and between the Global Advisors Portfolio N.V. and TBL, TBL was
terminated as of the close of business on November 15, 1996. TBL does not
anticipate receiving further fees from this Fund.

In the future, the Company may enter into transactions with its
directors, officers, stockholders of 5% of its Common Stock or affiliates of
Lynch or Mr. Gabelli, but will do so only if the terms of such transactions are
no less favorable to the Company than could be obtained by the Company from
unaffiliated third parties.

Item 13. Exhibits and Reports on Form 8-K.
- --------------------------------------------

(a) Documents filed as part of this report:

1. The following consolidated financial statements of the Company are
included in Item 7:

Year Ended December 31, 1996
- ------------------------------

Report of Independent Auditors
Consolidated Balance Sheet as of December 31, 1996
Consolidated Statements of Income for the years ended
December 31, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995
Notes to Consolidated Financial Statements

<PAGE>

3. Exhibits.

Exhibit No.
- -----------

3.1 Restated Certificate of Incorporation of the Company (incorporated
herein by reference to the Company's Form S-1 filed with the Commission
on December 16, 1991).

3.2 By-Laws of the Company (incorporated herein by reference to the
Company's Form S-1 filed with the Commission on December 16, 1991).

3.3 Amendment to the Certificate of Incorporation of the Company, dated
December 23, 1993 (incorporated herein by reference to the Company's
Form 10-K filed with the Commission on March 29, 1994).

4.1 Specimen representing the Rights Certificate of the Company
(incorporated herein by reference to the Company's Form S-1 filed with
the Commission on December 16, 1991).

4.2 Specimen representing the Class A Common Stock, $0.01 par value, of the
Company (incorporated herein by reference to the Company's Form S-1
filed with the Commission on December 16, 1991).

10.5 Investment Management Agreement dated September 20, 1990, between
American Masters Fund (Cayman) Limited (referenced in the Prospectus as
"The Ultima Funds Limited") and Tremont (Bermuda) Limited (incorporated
herein by reference to the Company's Form S-1 filed with the Commission
on December 16, 1991).

10.9 Consulting Services Agreement dated as of May 1, 1991, between Harold
Cohen and Tremont Partners, Inc. (incorporated herein by reference to
the Company's Form S-1 filed with the Commission on December 16, 1991).

10.17 Consulting Agreements between Leon Meyers and each of Tremont Partners,
Inc. and Tremont (Bermuda) Limited (incorporated herein by reference to
the Company's Form 8-K filed with the Commission on January 12, 1993).

<PAGE>

10.22 Letter Agreement dated October 25, 1993, between the Company
and Sandra L. Manzke (incorporated herein by reference to the
Company's Form 10-K filed with the Commission on March 29,
1994).

10.24 Assignment and Assumption of Lease dated February 14, 1994
between Company and Omni Funding Corporation (incorporated
herein by reference to the Company's Form 10-K filed with the
Commission on March 29, 1994).

10.25 Lease between Gateside-Rye Company and Omni Funding
Corporation, dated October 29, 1990 (incorporated herein by
reference to the Company's Form 10-K filed with the Commission
on March 29, 1994).

10.26 Assignment and Assumption of Lease dated February 18, 1994
between Company and GAMCO Investors, Inc. (incorporated herein
by reference to the Company's Form 10-K filed with the
Commission on March 29, 1994).

10.27 Lease between First Properties of Bermuda Ltd and Tremont
(Bermuda) Limited, dated February 23, 1994 (incorporated
herein by reference to the Company's Form 10-K filed with the
Commission on March 29, 1994).

10.29 Consulting Services Agreement between Omega Overseas Partners,
Ltd. and Tremont (Bermuda) Limited dated April 1, 1994
(incorporated herein by reference to the Company's Form 10-K
filed with the Commission on March 29, 1994).

10.30 Employment Agreement dated April 22, 1994 between the Company
and Robert I. Schulman (incorporated herein by reference to
the Company's Form 10-Q filed with the Commission on May 12,
1994).

10.31 Stock option Agreement dated April 22, 1994 between the
Company and Robert I. Schulman (incorporated herein by
reference to the Company's Form 10-Q filed with the Commission
on May 12, 1994).

10.32 Stock option Agreement dated December 15, 1994 between the
Company and Jimmy L. Thomas (incorporated herein by reference
to the Company's Registration Statement No. 33-89966 on Form S-1
and Post-Effective Amendment No. 1 to Registration Statement
No. 33-81438 on Form S-1 filed with the Commission on
March 3, 1995).

10.33 Stock option Agreement dated December 15, 1994 between the
Company and Stephen T. Clayton (incorporated herein by
reference to the Company's Registration Statement No. 33-89966
on Form S-1 and Post-Effective Amendment No. 1 to Registration
Statement No. 33-81438 on Form S-1 filed with the Commission
on March 3, 1995).

10.34 Employment Agreement dated September 25, 1995 between the
Company and Sandra L. Manzke (incorporated herein by reference
to the Company's Form 10-Q filed with the Commission on
November 13, 1995).

10.35 Amended Employment Agreement dated as of December 15, 1995, between the
Company and Robert I. Schulman.

<PAGE>

10.36 Amended Employment Agreement dated as of December 13, 1996, between the
Company and Sandra L. Manzke.

10.37 Amended Employment Agreement dated as of December 13, 1996, between the
Company and Robert I. Schulman.

21.1 Subsidiaries of the Company (incorporated herein by reference
to the Company's Form 10-K filed with the Commission on March
28, 1996).

23.1 Consent of Ernst & Young LLP, independent auditors.

23.2 Consent of Goldstein Golub Kessler & Company, P.C., independent
auditors.

99.1 Press Release dated January 5, 1993 (incorporated herein by
reference to the Company's Form 8-K filed with the Commission
on January 12, 1993).

99.2 Proxy from Leon Meyers to Mario J. Gabelli dated December 28,
1992 (incorporated herein by reference to the Company's Form
8-K filed with the Commission on January 12, 1993).

99.3 Press Release dated January 18, 1994 (incorporated herein by
reference to the Company's Form 8-K filed with the Commission
on January 18, 1994).

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

TREMONT ADVISERS, INC.
(Registrant)

By: /s/ Stephen T. Clayton
-------------------------------
Stephen T. Clayton
Chief Financial Officer

Dated: March 12, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

Signature Title Date
- --------- ----- ----

/s/ Sandra L. Manzke Chairman of
- ----------------------- the Board and Chief March 12, 1997
Sandra L. Manzke Executive Officer

/s/ Robert I. Schulman
- ----------------------- President; Chief Operating March 12, 1997
Robert I. Schulman Officer and Director

/s/ John L. Keeley, Jr.
- ----------------------- Director March 12, 1997
John L. Keeley, Jr.

/s/ Jimmy L. Thomas
- ----------------------- Director March 12, 1997
Jimmy L. Thomas

/s/ Suzanne S. Hammond
- ----------------------- Secretary & Treasurer March 12, 1997
Suzanne S. Hammond

/s/ Stephen T. Clayton
- ----------------------- Chief Financial Officer March 12, 1997
Stephen T. Clayton

<PAGE>

EXHIBIT INDEX

Exhibit No.
- -----------

3.1 Restated Certificate of Incorporation of the Company (incorporated
herein by reference to the Company's Form S-1 filed with the Commission
on December 16, 1991).

3.2 By-Laws of the Company (incorporated herein by reference to the
Company's Form S-1 filed with the Commission on December 16, 1991).

3.3 Amendment to the Certificate of Incorporation of the Company, dated
December 23, 1993 (incorporated herein by reference to the Company's
Form 10-K filed with the Commission on March 29, 1994).

4.1 Specimen representing the Rights Certificate of the Company
(incorporated herein by reference to the Company's Form S-1 filed with
the Commission on December 16, 1991).

4.2 Specimen representing the Class A Common Stock, $0.01 par value, of the
Company (incorporated herein by reference to the Company's Form S-1
filed with the Commission on December 16, 1991).

10.22 Letter Agreement dated October 25, 1993, between the Company and Sandra
L. Manzke (incorporated herein by reference to the Company's Form 10-K
filed with the Commission on March 29, 1994).

10.24 Assignment and Assumption of Lease dated February 14, 1994 between
Company and Omni Funding Corporation (incorporated herein by reference
to the Company's Form 10-K filed with the Commission on March 29, 1994).

<PAGE>

10.25 Lease between Gateside-Rye Company and Omni Funding Corporation, dated
October 29, 1990 (incorporated herein by reference to the Company's Form
10-K filed with the Commission on March 29, 1994).

10.26 Assignment and Assumption of Lease dated February 18, 1994 between
Company and GAMCO Investors, Inc. (incorporated herein by reference to
the Company's Form 10-K filed with the Commission on March 29, 1994).

10.27 Lease between First Properties of Bermuda Ltd and Tremont (Bermuda)
Limited, dated February 23, 1994 (incorporated herein by reference to
the Company's Form 10-K filed with the Commission on March 29, 1994).

10.29 Consulting Services Agreement between Omega Overseas Partners, Ltd. and
Tremont (Bermuda) Limited dated April 1, 1994 (incorporated herein by
reference to the Company's Form 10-K filed with the Commission on March
29, 1994).

10.30 Employment Agreement dated April 22, 1994 between the Company and Robert
I. Schulman (incorporated herein by reference to the Company's Form 10-Q
filed with the Commission on May 12, 1994).

10.31 Stock option Agreement dated April 22, 1994 between the Company and
Robert I. Schulman (incorporated herein by reference to the Company's
Form 10-Q filed with the Commission on May 12, 1994).

10.32 Stock option Agreement dated December 15, 1994 between the Company and
Jimmy L. Thomas (incorporated herein by reference to the Company's
Registration Statement No. 33- 89966 on Form S-1 and Post-Effective
Amendment No. 1 to Registration Statement No. 33- 81438 on Form S-1
filed with the Commission on March 3, 1995).

10.33 Stock option Agreement dated December 15, 1994 between the Company and
Stephen T. Clayton (incorporated herein by reference to the Company's
Registration Statement No. 33- 89966 on Form S-1 and Post-Effective
Amendment No. 1 to Registration Statement No. 33- 81438 on Form S-1
filed with the Commission on March 3, 1995).

10.34 Employment Agreement dated September 25, 1995 between the Company and
Sandra L. Manzke (incorporated herein by reference to the Company's Form
10-Q filed with the Commission on November 13, 1995).

10.35 Amended Employment Agreement dated as of December 15, 1995, between the
Company and Robert I. Schulman.

10.36 Amended Employment Agreement dated as of December 13, 1996, between the
Company and Sandra L. Manzke.

10.37 Amended Employment Agreement dated as of December 13, 1996, between the
Company and Robert I. Schulman.

21.1 Subsidiaries of the Company (incorporated herein by reference to the
Company's Form 10-KSB filed with the Commission on March 28, 1996).

23.1 Consent of Ernst & Young LLP, independent auditors.

23.3 Consent of Goldstein Golub Kessler & Company, P.C., independent

<PAGE>
99.1 Press Release dated January 5, 1993 (incorporated herein by reference to
the Company's Form 8-K filed with the Commission on January 12, 1993).

99.2 Proxy from Leon Meyers to Mario J. Gabelli dated December 28, 1992
(incorporated herein by reference to the Company's Form 8-K filed with
the Commission on January 12, 1993).

99.3 Press Release dated January 18, 1994 (incorporated herein by reference
to the Company's Form 8-K filed with the Commission on January 18,
1994).

<PAGE>

AMENDMENT
TO
EMPLOYMENT AGREEMENT

AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") dated this 13th of
December, 1996, by and between TREMONT ADVISERS, INC., a Delaware corporation
having its principal executive offices at Corporate Center at Rye, 555 Theodore
Fremd Avenue, Rye, New York ("Tremont"); and SANDRA L. MANZKE, an individual
residing in Pound Ridge, New York ("Executive").

WITNESSETH:

WHEREAS, Executive is employed by Tremont pursuant to and in accordance
with the terms and conditions contained in an employment agreement dated
September 25, 1995 (the "Employment Agreement"), by and between Tremont and
Executive; and

WHEREAS, Executive and Tremont are each desirous of amending the
Employment Agreement in accordance with this Amendment, effective January 1,
1997.

NOW, THEREFORE, in consideration of the promises and mutual covenants,
terms and conditions hereinafter set forth and in the Employment Agreement, the
parties hereto hereby agree as follows:

1. Section 3(a)(i) of the Employment Agreement is hereby amended by
deleting the following phrase: "two hundred fifty thousand dollars ($250,000)"
and inserting in its place "three hundred sixty-two thousand dollars
($362,000)."

2. Section 5 shall be amended by deleting all references therein to
"December 31, 1996" and inserting in its place "December 31, 1997."

3. Except to the extent amended by this Amendment, the terms and
conditions of the Employment Agreement shall remain in full force and effect.
In the event of any conflict between the terms of the Employment Agreement and
the Amendment, the Amendment shall control.

4. Each party hereby represents and warrants to the other that each has
read the foregoing provisions and that each has had a sufficient opportunity to
discuss this Amendment with anyone each party might desire prior to signing
below. Further, in signing this Amendment, each party has not relied on or been
induced to execute this Amendment by any statements, representations, agreements
or promises, oral or written, made by the other except for those expressly
contained in this Amendment.

IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first above written.

WITNESS

/s/ Suzanne S. Hammond By: /s/ Sandra L. Manzke
- ---------------------------- ---------------------------
Suzanne S. Hammond Sandra L. Manzke
Secretary and Treasurer

ATTEST TREMONT ADVISERS, INC.

/s/ Stephen T. Clayton /s/ Robert I. Schulman
- ---------------------------- ---------------------------
Stephen T. Clayton Robert I. Schulman
Chief Financial Officer Chief Operating Officer

<PAGE>

AMENDMENT
TO
EMPLOYMENT AGREEMENT

AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") dated this 13th of
December, 1996, by and between TREMONT ADVISERS, INC., a Delaware corporation
having its principal executive offices at Corporate Center at Rye, 555 Theodore
Fremd Avenue, Rye, New York ("Tremont"); and ROBERT I. SCHULMAN, an individual
residing at 18 Green Valley Road, Armonk, New York ("Executive").

WITNESSETH:

WHEREAS, Executive is employed by Tremont pursuant to and in accordance
with the terms and conditions contained in an employment agreement dated April
22, 1994 (the "Employment Agreement"), by and between Tremont and Executive; and

WHEREAS, Executive and Tremont are each desirous of amending the
Employment Agreement in accordance with this Amendment, effective January 1,
1997.

NOW, THEREFORE, in consideration of the promises and mutual covenants,
terms and conditions hereinafter set forth and in the Employment Agreement, the
parties hereto hereby agree as follows:

1. Section 3(a)(i) of the Employment Agreement is hereby amended by
deleting the following phrase: "two hundred twenty-five thousand dollars
($225,000)" and inserting in its place "three hundred twenty-six thousand
dollars ($326,000)."

2. Section 5 shall be amended by deleting all references therein to
"December 31, 1996" and inserting in its place "December 31, 1997."

IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first above written.

WITNESS

/s/ Suzanne S. Hammond By: /s/ Robert I. Schulman
- ------------------------------ -------------------------------
Suzanne S. Hammond Robert I. Schulman
Secretary and Treasurer

ATTEST TREMONT ADVISERS, INC.

/s/ Stephen T. Clayton /s/ Sandra L. Manzke
- ------------------------------ -------------------------------
Stephen T. Clayton Sandra L. Manzke
Chief Financial Officer Chief Executive Officer

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-78346) pertaining to the Tremont Advisers, Inc. 401(k) Savings Plan
of our report dated February 11, 1997, with respect to the consolidated
financial statements of Tremont Advisers, Inc. included in the Annual Report
(Form 10-KSB) for the year ended December 31, 1996.

Ernst & Young LLP
-----------------
Stamford, Connecticut
March 10, 1997

<PAGE>

INDEPENDENT AUDITOR'S CONSENT

To the Board of Directors of
Tremont Advisers, Inc.

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-78346) pertaining to the Tremont Advisers, Inc.
401(k) Savings Plan of our report dated February 5, 1997 on the financial
statements of The Broad Market Fund, L.P. as of December 31, 1996 and for each
of the two years in the period then ended which report is included in the Annual
Report on Form 10-KSB of Tremont Advisers, Inc. for the year ended December 31,
1996.

Goldstein Golub Kessler & Company, P.C.
- ---------------------------------------

GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York

March 10, 1997

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 551,710
<SECURITIES> 0
<RECEIVABLES> 1,444,578
<ALLOWANCES> (25,000)
<INVENTORY> 0
<CURRENT-ASSETS> 2,002,904
<PP&E> 460,610
<DEPRECIATION> (226,894)
<TOTAL-ASSETS> 3,481,743
<CURRENT-LIABILITIES> 1,397,076
<BONDS> 0
0
0
<COMMON> 38,844
<OTHER-SE> 2,023,223
<TOTAL-LIABILITY-AND-EQUITY> 3,481,743
<SALES> 0
<TOTAL-REVENUES> 5,293,849
<CGS> 0
<TOTAL-COSTS> 4,750,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 722,087
<INCOME-TAX> 196,542
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 525,545
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0

</TABLE>