UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-04847
ECLIPSE FUNDS
(Exact name of Registrant as specified in charter)
51 Madison Avenue, New York, NY 10010
(Address of principal executive offices) (Zip code)
Robert Anselmi, Esq.
Michael Hession, Esq.
169 Lackawanna Avenue
Parsippany, New Jersey 07054
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 576-7000
Date of fiscal year end: 10/31/03
Date of reporting period: 11/01/02-10/31/03
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
- --------------------------------------------------------------------------
Eclipse Funds
October 31, 2003 Unaudited
Eclipse Growth Equity Fund
----------------------------------
Eclipse Indexed Equity Fund
----------------------------------
Eclipse Mid Cap Core Fund
----------------------------------
Eclipse Mid Cap Value Fund
----------------------------------
Eclipse Small Cap Value Fund
----------------------------------
Eclipse Tax-Managed Equity Fund
----------------------------------
Eclipse Value Equity Fund
----------------------------------
Eclipse Bond Fund
----------------------------------
Eclipse Core Bond Plus Fund
----------------------------------
Eclipse Indexed Bond Fund
----------------------------------
Eclipse Money Market Fund
----------------------------------
Eclipse Short Term Bond Fund
----------------------------------
Eclipse Ultra Short Duration Fund
----------------------------------
Eclipse Asset Manager Fund
----------------------------------
Eclipse Balanced Fund
----------------------------------
Eclipse International Broad Market Fund
----------------------------------
Eclipse International Equity Fun
- --------------------------------------------------------------------------
[NEW YORK LIFE INVESTMENT LOGO]
INVESTMENT MANAGEMENT LLC
Table of Contents
CHAIRMAN'S LETTER 2
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
AND FUND FINANCIAL STATEMENTS
EQUITY FUNDS
Eclipse Growth Equity Fund 3
Eclipse Indexed Equity Fund 14
Eclipse Mid Cap Core Fund 30
Eclipse Mid Cap Value Fund 42
Eclipse Small Cap Value Fund 54
Eclipse Tax-Managed Equity Fund 68
Eclipse Value Equity Fund 77
FIXED-INCOME FUNDS
Eclipse Bond Fund 88
Eclipse Core Bond Plus Fund 100
Eclipse Indexed Bond Fund 117
Eclipse Money Market Fund 132
Eclipse Short Term Bond Fund 143
Eclipse Ultra Short Duration Fund 152
BLENDED FUNDS
Eclipse Asset Manager Fund 164
Eclipse Balanced Fund 194
INTERNATIONAL FUNDS
Eclipse International Broad Market Fund 208
Eclipse International Equity Fund 228
NOTES TO FINANCIAL STATEMENTS
Note 1 Organization and Business 238
Note 2 Significant Accounting Policies 240
Note 3 Fees and Related Party Transactions 248
Note 4 Federal Income Tax 251
Note 5 Financial Investments 253
Note 6 Line of Credit 253
Note 7 Subsequent Events 253
Note 8 Purchases and Sales of Securities 254
Note 9 Capital Share Transactions 254
Note 10 Other Matters 256
INDEPENDENT AUDITORS' REPORT 257
SPECIAL MEETING OF SHAREHOLDERS 258
BOARD MEMBERS AND OFFICERS 260
CHAIRMAN'S LETTER
- --------------------------------------------------------------------------------
Report to shareholders for the period
November 1, 2002, through October 31, 2003
The 12-month period ended October 31, 2003, was a positive one for most
investors. Although the stock market struggled in the first few months of 2003,
it recovered strongly from mid-March through the end of October. The rally began
several days before coalition forces entered Iraq and continued long after the
conclusion of major combat operations. While situations in Iraq, the Middle
East, and North Korea continued to raise concerns, investors have tended to
focus on corporate earnings and the potential for an economic turnaround.
The Federal Reserve remained accommodative throughout the 12-month period, with
the Federal Open Market Committee lowering the targeted federal funds rate by 50
basis points in November 2002 and by an additional 25 basis points in June 2003.
Real gross domestic product, which grew at a modest 1.4% in the fourth quarter
of 2002, rose by 3.3% in the second quarter of 2003. According to preliminary
estimates by the Bureau of Economic Analysis, real gross domestic product grew
at a seasonally adjusted annual rate of 8.2% in the third quarter. Much of this
increase resulted from robust consumer spending. Although unemployment rates
remain high, the figures have declined from their peak in June 2003, and the
Federal Reserve recently observed that "the labor market appears to be
stabilizing."
Within the equity market, smaller companies generally outperformed larger ones.
Growth stocks outpaced value equities in the small- and mid-capitalization
sectors, with the reverse holding true among large-caps. The bond markets
benefited from the Federal Reserve's easing moves, and while yields on
short-term securities continued to decline, yields on longer-term bonds rose to
a peak in early September and closed the reporting period higher than where they
began. For the 12-month period, corporate bonds generally outpaced Treasury
securities and high-yield bonds and emerging-market debt provided outstanding
returns.
At Eclipse, each of our Funds seeks to achieve its performance objective with an
established investment process that is consistently applied in all market
environments. While markets may shift and results may vary, we believe that our
time-tested investment strategies can help you pursue your long-range goals with
confidence.
The reports that follow describe the specific market conditions and portfolio
management decisions that affected the performance of individual Eclipse Funds
during the 12 months ended October 31, 2003.
Sincerely,
/s/ STEPHEN C. ROUSSIN
Stephen C. Roussin
November 2003
2
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Eclipse Growth Equity Fund
- --------------------------------------------------------------------------------
It is fair to say that the last 12 months will live in the memory of equity
investors for years to come. Not only did investors have to endure the late
innings of one of the worst bear markets in history, but coalition forces
initiated military action against Iraq in March, which only added to the
market's volatility.
Looking back, October 7, 2002, marked the bottom of the bear market that began
in September of 2000. After hitting this bottom, the market rallied about 20%
through late November and then declined through much of the first quarter of
2003. From its year-to-date low in mid-March, the stock market trended upward
through the end of October 2003.
The Federal Open Market Committee lowered the targeted federal funds rate by 50
basis points in November 2002 and by another 25 basis points in June 2003, to
end the reporting period at a low 1.0%. Real gross domestic product grew at a
modest pace in the first quarter of 2003, somewhat faster in the second, and
quite rapidly in the third. According to preliminary estimates by the Bureau of
Economic Analysis, real GDP grew by 8.2% in the third quarter of 2003, its
fastest pace since the first quarter of 1984.
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse Growth Equity Fund returned
16.48% for No-Load Class shares and 16.19% for Service Class shares. Both share
classes underperformed the 19.03% return of the average Lipper(1) large-cap
growth fund over the same period. Both share classes also underperformed the
20.80% return of the S&P 500(R) Index(2) and the 21.81% return of the Russell
1000(R) Growth Index(3) for the 12 months ended October 31, 2003.
The Fund's underperformance relative to its benchmark was confined to the first
half of the Fund's fiscal year, when low-quality stocks led the rally and market
volatility remained high. In recent months, quality growth stocks have rallied
strongly, which has contributed to the Fund's modest outperformance in the last
two calendar quarters.
STRONG AND WEAK PERFORMERS
The Fund's information technology holdings posted the strongest return for the
Fund's fiscal year, rising 47.3%(4) through October 31, 2003, versus a 42.1%
gain for information technology stocks in the S&P 500 Index. For the 12-month
period, the Fund's weighting in the information technology sector remained
similar to that of the Index. VERITAS stood out as the Fund's top performer in
the sector, gaining 118% during the fiscal year. The company is a leading
provider of enterprise storage products and services, a business which has
proven to be one of the most successful subsectors in the technology market this
year. Other top-performing information technology stocks in the Fund included
Cisco Systems (+92%), Intel (+84%), and Texas Instruments (+83%). The Fund's
only information technology holding that declined during the year was Microsoft,
which fell less than 1%.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
2. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
3. The Russell 1000(R) Growth Index is an unmanaged index that measures the
performance of those Russell 1000(R) companies with higher price-to-book
ratios and higher forecasted growth values. The Russell 1000(R) Index is an
unmanaged index that measures the performance of the 1,000 largest U.S.
companies based on total market capitalization. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
4. Performance percentages reflect the total return performance of the indicated
sectors or securities for the 12 months ended October 31, 2003, or for the
portion of the reporting period such securities were held in the Fund, if
shorter. Due to purchases and sales, the performance of Fund holdings may
differ from the performance of the sectors or securities themselves.
3
The second-best performing sector within the Fund for the fiscal year was the
industrials sector, which gained 23.7% versus a 23.0% gain for industrial stocks
in the Index. Cendant (+195%), the Fund's top-performing industrial stock, rose
on strong sales trends in its real estate business. Danaher, FedEx, and United
Technologies were all up over 30% for the fiscal year, fueled by the
strengthening economy. The only two industrial stocks within the Fund that
declined during the 12-month period were General Dynamics (-42.9%) and Lockheed
Martin (-18.4%). We sold the Fund's holdings in General Dynamics and recently
reduced the Fund's position in Lockheed Martin.
Although materials stocks represent a small percentage of the Fund's total
holdings, the sector delivered strong returns during the Fund's fiscal year. The
Fund's two holdings in this sector include Praxair, which rose more than 28%
during the year, and Air Products & Chemicals, which rose more than 6%.
Praxair's strength was driven by rising optimism--similar to that seen in the
industrials sector--that earnings growth rates will increase as the economy
recovers.
The Fund's holdings in the financials sector rose 14.7% during the year versus a
13.9% increase for this portion of the Index. This relative outperformance was
further aided by the Fund's overweighted position in the sector, as financial
stocks represented 12.7% of the Fund's net assets versus a 9.2% weighting for
the Index. American Express, Morgan Stanley, and Citigroup ranked as the Fund's
top-three financial performers this year, each rising roughly 30%. Since the end
of March, American Express has rallied on the notion that the company's travel
business and credit card operations will benefit from an economic rebound. The
price of Morgan Stanley shares rose along with the equity market, since the
company's business is closely tied to market performance. Citigroup advanced on
the view that commercial lending activity will likely increase as the economy
rebounds. Among the Fund's financial stocks, BB&T was the biggest detractor and
was sold out of the portfolio. The stock was negatively impacted by net interest
margin compression and soft loan growth.
For the year, the Fund's health care holdings rose 0.4% versus a 9.1% gain for
health care stocks in the Index. The Fund was underweighted in this sector
relative to the Index, which helped to mute this relative underperformance.
Johnson & Johnson and Cardinal Health were the two biggest laggards during the
Fund's fiscal year. Johnson & Johnson was weighed down by competitive concerns
in its core business, while Cardinal Health was impacted by management's
decision to lower its long-term earnings growth forecast. Among the Fund's
winners were Boston Scientific (+68.8%) and Genentech (+327.3%). Genentech, in
particular, had a stunning rise in May after the company released positive data
from a first-line colorectal-cancer trial for its new drug, Avastin. Boston
Scientific experienced strong gains thanks to the promising market potential of
its new drug-eluting stent.
The Fund's consumer discretionary stocks rose 9.0% compared to a 30.1% rise in
consumer discretionary stocks within the S&P 500 Index. In the consumer staples
sector, the Fund's holdings rose 3.8% compared to 8.5% for related stocks in the
Index. Four of the Fund's consumer discretionary holdings declined during the
year, including Harley-Davidson, Kohl's, Viacom, and Disney. Of the four,
Harley-Davidson exacted the greatest toll on performance, as the stock dropped
16% on concerns about the company's lower-than-expected production goals for
2004. Despite these concerns, we continue to view Harley-Davidson, Kohl's, and
Viacom as solid long-term holdings. As for Disney, we sold the Fund's shares
early in the year when attendance levels at the company's theme parks didn't
improve as expected. The Fund's top-performing consumer discretionary stocks
included Lowe's (+46.1%), Omnicom Group (+40.0%) and Target (+35.5%). Among the
Fund's consumer staples positions, Kraft Foods proved to be a dramatic
underperformer, which prompted us to sell the stock. The biggest gainer in
consumer staples was Wal-Mart Stores (+9.1%), and the company continued to see
4
strength in its retail sales as the economy rebounded.
While energy stocks represented only 2.7% of the Fund's holdings, the Fund's
energy stocks declined 5.7% for the year versus an 11% increase for the energy
stocks in the Index. All of the Fund's energy holdings are in the energy
equipment & services industry, as we believe that high oil prices and the recent
decline in Iraqi production levels will prompt domestic producers to step up
their exploration and production efforts. While this trend has yet to emerge in
earnest, we continue to believe that it is only a matter of time.
LOOKING AHEAD
The market has continued to gain ground on positive economic news. We expect
stocks to maintain their upward bias as the economy continues to recover. If the
latest gross domestic product figures are any indication, we believe that more
good economic news may lie ahead. As always, we will continue to focus on
high-quality growth companies with strong growth prospects.
Whatever the markets or the economy may bring, the Fund will continue to seek
long-term growth of capital, with dividend income, if any, as a consideration
incidental to the Fund's objective of capital growth.
RUDOLPH C. CARRYL
EDMUND C. SPELMAN
Portfolio Managers
MacKay Shields LLC
5
$10,000 INVESTED IN
ECLIPSE GROWTH EQUITY FUND
VERSUS S&P 500 INDEX AND
RUSSELL 1000 GROWTH INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE GROWTH EQUITY FUND S&P 500 INDEX RUSSELL 1000 GROWTH INDEX
-------------------------- ------------- -------------------------
10/31/93 $ 10,000 $ 10,000 $ 10,000
10/31/94 10,327 10,387 10,198
10/31/95 13,420 13,133 14,224
10/31/96 16,305 16,297 16,615
10/31/97 20,306 21,531 21,678
10/31/98 24,427 26,266 27,020
10/31/99 32,314 33,008 36,273
10/31/00 36,270 35,018 39,658
10/31/01 22,364 26,297 23,816
10/31/02 17,985 22,325 19,144
10/31/03 20,949 26,968 23,321
</Table>
$10,000 INVESTED IN
ECLIPSE GROWTH EQUITY FUND
VERSUS S&P 500 INDEX AND
RUSSELL 1000 GROWTH INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
S&P 500 INDEX ECLIPSE GROWTH EQUITY FUND RUSSELL 1000 GROWTH INDEX
------------- -------------------------- -------------------------
10/31/93 $ 10,000 $ 10,000 $ 10,000
10/31/94 10,387 10,299 10,198
10/31/95 13,133 13,370 14,224
10/31/96 16,297 16,205 16,615
10/31/97 21,531 20,147 21,678
10/31/98 26,266 24,167 27,020
10/31/99 33,008 31,903 36,273
10/31/00 35,018 35,710 39,658
10/31/01 26,297 21,966 23,816
10/31/02 22,325 17,616 19,144
10/31/03 26,968 20,467 23,321
</Table>
Source: Lipper Inc., 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- ----------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- ----------------------------------------------------------------------------
Eclipse Growth Equity Fund No-Load Class 16.48% -3.02% 7.68%
Eclipse Growth Equity Fund Service
Class(2) 16.19 -3.27 7.43
Average Lipper large-cap growth fund(3) 19.03 -1.45 6.97
S&P 500 Index(4) 20.80 0.53 10.43
Russell 1000 Growth Index(5) 21.81 -2.90 8.84
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
TOTAL RETURN(1)
----------------
Year ended December 31, 1994 -2.23%
Year ended December 31, 1995 37.88
Year ended December 31, 1996 21.62
Year ended December 31, 1997 24.73
Year ended December 31, 1998 40.50
10 months ended October 31, 1999 9.96
Year ended October 31, 2000 12.24
Year ended October 31, 2001 -38.34
Year ended October 31, 2002 -19.58
Year ended October 31, 2003 16.48
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include
the service fee of .25% on an annualized basis of the average daily net
asset value of the Service Class shares.
2. Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the No-Load Class from the
Fund's inception on 1/2/91 through 12/31/94. Performance figures for these
classes will vary after 12/31/94, based on differences in their expense
structures.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
5. The Russell 1000(R) Growth Index is an unmanaged index that measures the
performance of those Russell 1000(R) companies with higher price-to-book
ratios and higher forecasted growth values. The Russell 1000(R) Index is an
unmanaged index that measures the performance of the 1,000 largest U.S.
companies based on total market capitalization. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
INFORMATION ABOUT ECLIPSE GROWTH EQUITY FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
6
ECLIPSE FUNDS
GROWTH EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (99.6%)+
SHARES VALUE
-----------------------
AEROSPACE & DEFENSE (2.7%)
Lockheed Martin Corp. ........... 76,600 $ 3,551,176
United Technologies Corp. ....... 70,500 5,970,645
------------
9,521,821
------------
AIR FREIGHT & LOGISTICS (1.9%)
FedEx Corp. ..................... 89,800 6,803,248
------------
AUTOMOBILES (1.8%)
Harley-Davidson, Inc. ........... 137,800 6,533,098
------------
BEVERAGES (2.3%)
Coca-Cola Co. (The).............. 79,400 3,684,160
PepsiCo, Inc. ................... 93,900 4,490,298
------------
8,174,458
------------
BIOTECHNOLOGY (2.1%)
Amgen, Inc. (a).................. 84,500 5,218,720
Genentech, Inc. (a).............. 27,400 2,245,978
------------
7,464,698
------------
CAPITAL MARKETS (1.7%)
Morgan Stanley................... 112,000 6,145,440
------------
CHEMICALS (3.0%)
Air Products & Chemicals,
Inc. ........................... 102,700 4,663,607
Praxair, Inc. ................... 85,700 5,963,006
------------
10,626,613
------------
COMMERCIAL BANKS (2.3%)
Bank of America Corp. ........... 60,700 4,596,811
Fifth Third Bancorp.............. 61,300 3,552,948
------------
8,149,759
------------
COMMERCIAL SERVICES & SUPPLIES (1.7%)
Cendant Corp. (a)................ 296,600 6,059,538
------------
COMMUNICATIONS EQUIPMENT (2.0%)
Cisco Systems, Inc. (a).......... 331,700 6,959,066
------------
COMPUTERS & PERIPHERALS (4.9%)
Dell, Inc. (a)................... 160,800 5,808,096
Hewlett-Packard Co. ............. 263,100 5,869,761
International Business Machines
Corp. .......................... 61,800 5,529,864
------------
17,207,721
------------
CONSUMER FINANCE (2.0%)
American Express Co. ............ 147,100 6,903,403
------------
DIVERSIFIED FINANCIAL SERVICES (1.6%)
Citigroup, Inc. ................. 121,293 5,749,288
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (1.0%)
Agilent Technologies, Inc. (a)... 148,800 3,708,096
------------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
ENERGY EQUIPMENT & SERVICES (1.6%)
Baker Hughes, Inc. .............. 62,900 $ 1,777,554
BJ Services Co. (a).............. 65,300 2,142,493
Weatherford International Ltd.
(a)............................. 47,600 1,654,100
------------
5,574,147
------------
FOOD & STAPLES RETAILING (4.6%)
Sysco Corp. ..................... 149,100 5,018,706
Walgreen Co. .................... 158,300 5,512,006
Wal-Mart Stores, Inc. ........... 96,800 5,706,360
------------
16,237,072
------------
HEALTH CARE EQUIPMENT & SUPPLIES (3.8%)
Baxter International, Inc. ...... 117,600 3,125,808
Boston Scientific Corp. (a)...... 81,000 5,485,320
Medtronic, Inc. ................. 103,400 4,711,938
------------
13,323,066
------------
HEALTH CARE PROVIDERS & SERVICES (7.2%)
Cardinal Health, Inc............. 93,100 5,524,554
Caremark Rx, Inc. (a)............ 71,900 1,801,095
HCA, Inc. ....................... 135,000 5,163,750
UnitedHealth Group, Inc. ........ 138,600 7,051,968
WellPoint Health
Networks, Inc. (a).............. 66,900 5,947,410
------------
25,488,777
------------
HOTELS, RESTAURANTS & LEISURE (0.2%)
International Game Technology.... 19,600 641,900
------------
HOUSEHOLD DURABLES (0.5%)
Lennar Corp. Class A............. 20,000 1,837,000
------------
HOUSEHOLD PRODUCTS (1.4%)
Colgate-Palmolive Co. ........... 93,600 4,978,584
------------
INDUSTRIAL CONGLOMERATES (1.6%)
General Electric Co. ............ 194,500 5,642,445
------------
INSURANCE (1.2%)
Marsh & McLennan Cos., Inc. ..... 97,800 4,180,950
------------
INTERNET & CATALOG RETAIL (1.6%)
InterActive Corp. (a)............ 154,000 5,653,340
------------
IT SERVICES (1.4%)
First Data Corp. ................ 137,700 4,915,890
------------
MACHINERY (3.6%)
Danaher Corp. ................... 74,700 6,188,895
Illinois Tool Works, Inc. ....... 86,700 6,376,785
------------
12,565,680
------------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
7
GROWTH EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
}x
MEDIA (6.1%)
Clear Channel
Communications, Inc. ........... 129,920 $ 5,303,335
Gannett Co., Inc. ............... 54,300 4,567,173
Omnicom Group, Inc. ............. 77,400 6,176,520
Viacom, Inc. Class B............. 141,361 5,636,063
------------
21,683,091
------------
MULTILINE RETAIL (3.1%)
Kohl's Corp. (a)................. 102,100 5,724,747
Target Corp. .................... 135,800 5,396,692
------------
11,121,439
------------
PHARMACEUTICALS (6.4%)
Forest Laboratories, Inc. (a).... 103,000 5,151,030
Johnson & Johnson................ 117,900 5,933,907
Pfizer, Inc. .................... 206,400 6,522,240
Teva Pharmaceutical Industries
Ltd. (b)........................ 87,100 4,955,119
------------
22,562,296
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (9.1%)
Analog Devices, Inc. (a)......... 134,900 5,980,117
Applied Materials, Inc. (a)...... 181,000 4,229,970
Intel Corp. ..................... 213,200 7,046,260
KLA-Tencor Corp. (a)............. 72,600 4,162,158
Maxim Integrated Products,
Inc. ........................... 74,800 3,718,308
Texas Instruments, Inc. ......... 236,900 6,851,148
------------
31,987,961
------------
SOFTWARE (8.5%)
Electronic Arts, Inc. (a)........ 56,100 5,556,144
Microsoft Corp. ................. 266,100 6,958,515
Oracle Corp. (a)................. 473,848 5,667,222
Symantec Corp. (a)............... 85,800 5,718,570
VERITAS Software Corp. (a)....... 166,700 6,026,205
------------
29,926,656
------------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
SPECIALTY RETAIL (5.0%)
Bed Bath & Beyond, Inc. (a)...... 146,600 $ 6,192,384
Lowe's Cos., Inc. ............... 99,700 5,875,321
TJX Cos., Inc. (The)............. 272,000 5,709,280
------------
17,776,985
------------
THRIFTS & MORTGAGE FINANCE (1.7%)
Federal National Mortgage
Association..................... 82,100 5,885,749
------------
Total Common Stocks
(Cost $327,580,919)............. 351,989,275
------------
INVESTMENT COMPANY (0.1%)
Merrill Lynch Premier
Institutional Fund.............. 427,085 427,085
------------
Total Investment Company
(Cost $427,085)................. 427,085
------------
Total Investments
(Cost $328,008,004) (c)......... 99.7% 352,416,360(d)
Cash and Other Assets, Less
Liabilities..................... 0.3 917,432
-------- -----------
Net Assets....................... 100.0% $353,333,792
========= ============
</Table>
- ------------
(a) Non-income producing security.
(b) ADR-American Depositary Receipt.
(c) The cost for federal income tax purposes is $328,122,673.
(d) At October 31, 2003 net unrealized appreciation was $24,293,687, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $47,752,063 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $23,458,376.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
8
ECLIPSE FUNDS
GROWTH EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $328,008,004)............................. $352,416,360
Cash............................................. 2,700
Receivables:
Investment securities sold..................... 5,872,108
Fund shares sold............................... 303,299
Dividends...................................... 229,877
Other assets..................................... 5,332
------------
Total assets............................... 358,829,676
------------
LIABILITIES:
Payables:
Investment securities purchased................ 4,994,285
Manager........................................ 240,466
Fund shares redeemed........................... 132,163
Transfer agent................................. 51,069
Professional................................... 37,232
Custodian...................................... 5,635
Directors...................................... 2,081
Accrued expenses................................. 32,953
------------
Total liabilities.......................... 5,495,884
------------
Net assets....................................... $353,333,792
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class.................................. $ 18,367
Service Class.................................. 582
Additional paid-in capital....................... 373,557,293
Accumulated net realized loss on investments..... (44,650,806)
Net unrealized appreciation on investments....... 24,408,356
------------
Net assets....................................... $353,333,792
============
No-Load Class
Net assets applicable to outstanding shares...... $342,761,161
============
Shares of capital stock outstanding.............. 18,366,939
============
Net asset value per share outstanding............ $ 18.66
============
Service Class
Net assets applicable to outstanding shares...... $ 10,572,631
============
Shares of capital stock outstanding.............. 582,124
============
Net asset value per share outstanding............ $ 18.16
============
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Dividends....................................... $ 2,896,641
Interest........................................ 19,680
-----------
Total income................................ 2,916,321
-----------
Expenses:
Manager......................................... 2,772,451
Transfer agent.................................. 313,745
Professional.................................... 108,077
Custodian....................................... 33,517
Shareholder communication....................... 32,758
Registration.................................... 28,234
Directors....................................... 28,228
Service--Service Class.......................... 25,895
Miscellaneous................................... 25,111
-----------
Total expenses before reimbursement......... 3,368,016
Expense reimbursement from Manager.............. (308,733)
-----------
Net expenses................................ 3,059,283
-----------
Net investment loss............................... (142,962)
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments.................. (2,856,949)
-----------
Net change in unrealized depreciation on:
Security transactions........................... 53,626,423
Written option transactions..................... 145,834
-----------
Net unrealized gain on investments and written
option transactions............................. 53,772,257
-----------
Net realized and unrealized gain on investments
and written option transactions................. 50,915,308
-----------
Net increase in net assets resulting from
operations...................................... $50,772,346
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
9
GROWTH EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ -------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss..................................... $ (142,962) $ (968,440)
Net realized loss on investments and written option
transactions........................................... (2,856,949) (17,650,104)
Net change in unrealized appreciation (depreciation) on
investments and written option transactions............ 53,772,257 (64,573,184)
------------ -------------
Net increase (decrease) in net assets resulting from
operations............................................. 50,772,346 (83,191,728)
------------ -------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 49,738,142 57,430,902
Service Class......................................... 3,583,519 6,150,156
------------ -------------
53,321,661 63,581,058
Cost of shares redeemed:
No-Load Class......................................... (76,228,177) (93,764,533)
Service Class......................................... (4,891,991) (7,895,123)
------------ -------------
Decrease in net assets derived from capital share
transactions......................................... (27,798,507) (38,078,598)
------------ -------------
Net increase (decrease) in net assets................. 22,973,839 (121,270,326)
NET ASSETS:
Beginning of year......................................... 330,359,953 451,630,279
------------ -------------
End of year............................................... $353,333,792 $ 330,359,953
============ =============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
10
(THIS PAGE INTENTIONALLY LEFT BLANK)
11
GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
----------------------------------------------------------------
YEAR ENDED OCTOBER 31
----------------------------------------------------------------
2003 2002 2001 2000
---------- ---------- ---------- ----------
Net asset value at beginning of
period............................. $ 16.02 $ 19.92 $ 37.50 $ 36.45
---------- ---------- ---------- ----------
Net investment loss (a)............. (0.01)(a) (0.04) (0.09) (0.20)
Net realized and unrealized gain
(loss) on investments.............. 2.65 (3.86) (12.79) 4.66
---------- ---------- ---------- ----------
Total from investment operations.... 2.64 (3.90) (12.88) 4.46
---------- ---------- ---------- ----------
Less distributions:
From net realized gain on
investments........................ -- -- (4.70) (3.41)
---------- ---------- ---------- ----------
Net asset value at end of period.... $ 18.66 $ 16.02 $ 19.92 $ 37.50
========== ========== ========== ==========
Total investment return............. 16.48% (19.58%) (38.34%) 12.24%
Ratios (to average net assets)/
Supplemental Data:
Net investment loss................ (0.04%) (0.22%) (0.32%) (0.52%)
Net expenses....................... 0.93% 0.93% 0.93% 0.93%
Expenses (before reimbursement).... 1.02% 1.02% 0.98% 0.93%
Portfolio turnover rate............. 35% 63% 35% 48%
Net assets at end of period (in
000's)............................. $ 342,761 $ 320,059 $ 436,898 $1,197,216
<Caption>
NO-LOAD CLASS
-----------------------------------
JANUARY 1
THROUGH YEAR ENDED
OCTOBER 31, DECEMBER 31,
1999* 1998
----------- ------------
Net asset value at beginning of
period............................. $ 33.48 $ 25.43
---------- ----------
Net investment loss (a)............. (0.14) (0.09)
Net realized and unrealized gain
(loss) on investments.............. 3.45 10.35
---------- ----------
Total from investment operations.... 3.31 10.26
---------- ----------
Less distributions:
From net realized gain on
investments........................ (0.34) (2.21)
---------- ----------
Net asset value at end of period.... $ 36.45 $ 33.48
========== ==========
Total investment return............. 9.96%(b) 40.50%
Ratios (to average net assets)/
Supplemental Data:
Net investment loss................ (0.49%)+ (0.31%)
Net expenses....................... 0.93%+ 0.94%
Expenses (before reimbursement).... 0.93%+ 0.94%
Portfolio turnover rate............. 27% 29%
Net assets at end of period (in
000's)............................. $1,049,756 $ 975,010
</Table>
- ------------
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is not annualized.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
12
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
------------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
------------------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
---------- ---------- ---------- ---------- ----------- ------------
$ 15.63 $ 19.49 $ 36.88 $ 35.99 $ 33.13 $ 25.24
---------- ---------- ---------- ---------- ---------- ----------
(0.05)(a) (0.09) (0.14) (0.29) (0.21) (0.16)
2.58 (3.77) (12.55) 4.59 3.41 10.26
---------- ---------- ---------- ---------- ---------- ----------
2.53 (3.86) (12.69) 4.30 3.20 10.10
---------- ---------- ---------- ---------- ---------- ----------
-- -- (4.70) (3.41) (0.34) (2.21)
---------- ---------- ---------- ---------- ---------- ----------
$ 18.16 $ 15.63 $ 19.49 $ 36.88 $ 35.99 $ 33.13
========== ========== ========== ========== ========== ==========
16.19% (19.81%) (38.49%) 11.93% 9.74%(b) 40.18%
(0.29%) (0.47%) (0.57%) (0.77%) (0.74%)+ (0.56%)
1.18% 1.18% 1.18% 1.18% 1.18%+ 1.19%
1.27% 1.27% 1.23% 1.18% 1.18%+ 1.19%
35% 63% 35% 48% 27% 29%
$ 10,573 $ 10,301 $ 14,732 $ 24,732 $ 25,987 $ 15,814
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
13
Eclipse Indexed Equity Fund
- --------------------------------------------------------------------------------
The U.S. equity markets staged a dramatic comeback during the 12 months ended
October 31, 2003, with the S&P 500(R) Index(1) posting an impressive 20.80%
gain. Such gains, however, were not achieved on a consistent basis, since global
turbulence led to significant equity-market volatility.
The equity market was strong in November 2002, but it reversed course in
December when the economy remained sluggish. Unemployment remained high and
consumer confidence faltered. Investors tried to respark a sustainable
equity-market rally at the start of 2003. In fact, investors cheered President
Bush's aggressive tax-cut proposal with a 5% gain in the Dow Jones Industrial
Average(2) during the first three trading days of the new year, but this
record-setting pace could not be sustained with the threat of a conflict in Iraq
looming on the horizon.
In mid-March, the stock market finally began to recover, but market dynamics
appeared to be largely disconnected from economic fundamentals. Any significant
advances by coalition forces translated into major surges for the broad equity
indices. Coalition setbacks, on the other hand, resulted in steep declines for
U.S. stocks. Through much of March 2003, investors essentially ignored the
disappointing economic data on the labor and manufacturing fronts and the fact
that consumer confidence had fallen to a near-10-year low.
Early in the second calendar quarter, a successful and reasonably quick end to
major combat operations in Iraq confirmed that high energy prices were unlikely
to derail an economic recovery. The U.S. equity markets responded favorably.
Corporate profitability also improved, although cost-cutting may have played a
bigger role than any pickup in demand. Still, economic indicators remained
mixed. Consumer confidence was higher than expected in June, and the housing
sector continued to post record sales. Manufacturing remained sluggish, however,
and the unemployment rate reached an eight-year high of 6.4% in June 2003.
Volatility continued during the third calendar quarter. The equity market
advanced in July and August. In September, however, stocks lost some ground,
primarily because of concerns about the falling U.S. dollar, rising oil prices,
and uncertain third-quarter corporate earnings. Optimism returned to the equity
markets in October with the release of positive economic data, including job
growth and lower initial unemployment claims. The manufacturing sector showed
evidence of expansion, and according to preliminary estimates from the Bureau of
Economic Analysis, real gross domestic product grew at a seasonally adjusted
annual rate of 8.2% in the third quarter, the fastest growth since early 1984.
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse Indexed Equity Fund No-Load
Class shares returned 20.59% and Service Class shares returned 20.20%. Both
share classes outperformed the 19.97% return of the average Lipper(3) S&P 500
Index objective fund for the same period. Both share classes underperformed the
20.80% return of the S&P 500 Index for the 12 months ended October 31, 2003.
Since the Fund includes real-world expenses that a hypothetical index does not,
there may be times when the Fund underperforms the Index.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Index funds generally seek to reflect the performance of an index or an
allocation among indices, unlike other funds, whose objectives may, in some
cases, involve seeking to outperform an index or other benchmark.
1. "S&P 500" is a trademark of The McGraw-Hill Companies, Inc. and has been
licensed for use. Standard & Poor's does not sponsor, endorse, sell, or
promote the Fund or represent the advisability of investing in the Fund. The
S&P 500 is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock-market performance. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
2. The Dow Jones Industrial Average is an unmanaged, price-weighted average of
30 actively traded blue-chip stocks, primarily industrials, but also
including financial, leisure, and other service-oriented firms. An investment
cannot be made directly into an index or an average.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
14
- --------------------------------------------------------------------------------
As of October 31, 2003, the Fund's No-Load Class shares were rated four stars
overall out of 1,060 large blend funds by Morningstar.(4) The Fund's No-Load
Class shares were rated three stars out of 1,060 large blend funds for the
three-year period then ended, three stars out of 757 large blend funds for the
five-year period then ended, and four stars out of 249 large blend funds for the
10-year period ended October 31, 2003.
STRONG AND WEAK SUBINDUSTRIES
Based on total returns alone, the best-performing subindustries(5) in the S&P
500 Index for the 12-month reporting period were Internet software & services
(+188.45%),(6) diversified metals & mining (+136.96%), computers & electronics
retail (+115.37%), computer storage & peripherals (+108.37%), and homebuilding
(+83.64%). Because of their higher weightings in the Index, however,
subindustries with lower total returns were among the five top contributors to
the overall performance of the S&P 500 Index. Taking both weightings and total
returns into consideration, the leading subindustry was semiconductors
(+71.25%), followed by communications equipment (+51.58%), computer hardware
(+20.79%), industrial conglomerates (+16.26%), and consumer finance (+44.54%).
Based solely on total returns, the worst-performing subindustries in the Index
for the reporting period were photo products (-27.25%), health care facilities
(-21.71%), health care distributors (-10.98%), motorcycle manufacturers
(-10.44%), and integrated telecommunication services (-9.19%). Due to a higher
Index weighting, integrated telecommunication services (-9.19%) had the greatest
negative impact on the total return of the Index for the reporting period when
weightings and total returns were taken into account. This subindustry was
followed by pharmaceuticals (-2.62%), health care facilities (-21.71%), health
care distributors (-10.98%), and brewers (-8.06%).
CORPORATE LEADERS AND LAGGARDS
For the 12 months ended October 31, 2003, the best-performing company in the S&P
500 Index based on total returns alone was Dynegy Holdings (+481.16%), followed
by Avaya (+450.64%), Corning (+433.01%), Williams (+390.38%), and AES
(+341.92%). Multi-utilities Dynegy Holdings, Williams, and AES had seen
depressed valuations in the second half of 2002 in the wake of the Enron
scandal. As impressive as these returns may be, the five stocks with the
greatest positive impact on the performance of the S&P 500 Index all had higher
weightings and lower total returns. Taking both weightings and total returns
into account, the strongest positive contributor to the performance of the Index
for the 12-month period was Intel (+80.60%), followed by Cisco Systems
(+80.71%), Citigroup (+25.90%), General Electric (+11.79%), and J.P. Morgan
Chase (+66.82%).
Not surprisingly, based on total returns alone the worst-performing security in
the S&P 500 Index for the reporting period was a member of one of the
worst-performing subindustries. That company was Tenet Healthcare (-47.92%),
which suffered from allegations of Medicare accounting irregularities. The
second-worst performing stock in the Index was Winn-Dixie Stores (-47.67%),
followed by AT&T (-32.94%), Newell Rubbermaid (-29.74%), and Schering-Plough
(-29.70%). Taking both weightings and total returns into account, Johnson &
Johnson (-14.10%) made the greatest negative contribution to the performance of
the Index, followed by Merck (-13.52%), Verizon Communications (-12.93%), SBC
Communications (-12.00%), and Schering-Plough (-29.70%).
- --------------------------------------------------------------------------------
4. For each fund with at least a three-year history, Morningstar calculates a
Morningstar Rating(TM) based on a Morningstar Risk-Adjusted Return measure
that accounts for variation in a fund's monthly performance (including the
effects of sales charges, loads, and redemption fees), placing more emphasis
on downward variations and rewarding consistent performance. The top 10% of
funds in each category receive five stars, the next 22.5% receive four stars,
the middle 35% receive three stars, the next 22.5% receive two stars, and the
bottom 10% receive one star. The Overall Morningstar Rating(TM) for a fund is
derived from a weighted average of the performance figures associated with
its three-, five-, and 10-year (if applicable) Morningstar Rating(TM)
metrics.
5. The Global Industry Classification Standard categorizes companies by sector,
industry group, industry, and subindustry. Results in this section of the
annual report reflect subindustry and company performance. In the Portfolio
of Investments that follows, companies are listed by industry.
6. Performance percentages reflect the total return performance, including
reinvestment of all dividends and capital gains, of the subindustries or the
securities mentioned for the 12 months ended October 31, 2003. Due to
purchases and sales, the performance of Fund holdings may differ from that of
the subindustries or securities themselves.
15
- --------------------------------------------------------------------------------
INDEX CHANGES
The Fund seeks to track the performance and weightings of stocks in the S&P 500
Index. The Index itself, however, may change from time to time as companies
merge, divest units, add to their market capitalization, or face financial
difficulties. Standard & Poor's may also occasionally adjust the Index to better
reflect the companies that it believes are most representative of the makeup of
our economy. During the 12 months ended October 31, 2003, there were 10
companies deleted from the Index and 10 companies added to it.
Among the additions were Comcast, Quest Diagnostics, AutoNation, Apartment
Investment & Management, McCormick, Symantec, Federated Investors, ProLogis,
Medco Health Solutions, and Express Scripts. Deletions included Comcast Class A
Special, TRW, Rational Software, AMR, HealthSouth, Household International,
Pharmacia, Mirant, McDermott International, and Quintiles Transnational.
HealthSouth was deleted from the Index when the company was investigated for a
massive accounting scandal and allegations of fraud. The government has accused
HealthSouth and a group of its former officers of deliberately overstating
earnings by $2.5 billion over several years. AMR, the parent company of American
Airlines, was deleted from the Index when it faced the threat of bankruptcy. The
company's difficulties stemmed from the sluggish economy, the war in Iraq, and
the SARS outbreak, all of which took a toll on air travel. Recent labor
concessions have helped AMR avoid bankruptcy.
LOOKING AHEAD
Evidence shows that business expenditures, long thought to be the key to a
sustainable economic turnaround, have risen by an impressive 11% in the third
calendar quarter, with investment in equipment and software increasing by 15%.
Going forward, this rise in business investment may help strengthen labor
markets, stimulate demand, and improve corporate profitability. With positive
economic data emerging while the Federal Open Market Committee is suggesting
that "policy accommodation can be maintained for a considerable period," U.S.
equity investors may have good reason to remain bullish.
Whatever the markets or the economy may bring, the Fund will continue to seek to
provide investment results that correspond to the total-return performance
(reflecting reinvestment of dividends) of common stocks in the aggregate, as
represented by the S&P 500 Index.
STEPHEN B. KILLIAN
FRANCIS J. OK
Portfolio Managers
New York Life Investment Management LLC
16
$10,000 INVESTED IN
ECLIPSE INDEXED EQUITY FUND
VERSUS S&P 500 INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE INDEXED EQUITY FUND S&P 500 INDEX
--------------------------- -------------
10/31/93 $ 10,000 $ 10,000
10/31/94 10,335 10,387
10/31/95 13,020 13,133
10/31/96 16,086 16,297
10/31/97 21,194 21,531
10/31/98 25,790 26,266
10/31/99 32,400 33,008
10/31/00 34,339 35,018
10/31/01 25,789 26,297
10/31/02 21,862 22,325
10/31/03 26,362 26,968
</Table>
$10,000 INVESTED IN
ECLIPSE INDEXED EQUITY FUND
VERSUS S&P 500 INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE INDEXED EQUITY FUND S&P 500 INDEX
--------------------------- -------------
10/31/93 $ 10,000 $ 10,000
10/31/94 10,310 10,387
10/31/95 12,970 13,133
10/31/96 15,983 16,297
10/31/97 20,998 21,531
10/31/98 25,497 26,266
10/31/99 31,954 33,008
10/31/00 33,781 35,018
10/31/01 25,302 26,297
10/31/02 21,404 22,325
10/31/03 25,727 26,968
</Table>
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- -----------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------
Eclipse Indexed Equity Fund No-Load Class 20.59% 0.44% 10.18%
Eclipse Indexed Equity Fund Service Class(2) 20.20 0.18 9.91
Average Lipper S&P 500 Index objective
fund(3) 19.97 -0.01 10.01
S&P 500 Index(4) 20.80 0.53 10.43
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
TOTAL RETURN (1)
-----------------
Year ended December 31, 1994 0.90%
Year ended December 31, 1995 36.88
Year ended December 31, 1996 22.57
Year ended December 31, 1997 32.88
Year ended December 31, 1998 28.62
10 months ended October 31, 1999 11.80
Year ended October 31, 2000 5.98
Year ended October 31, 2001 -24.90
Year ended October 31, 2002 -15.23
Year ended October 31, 2003 20.59
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares.
2. Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the No-Load Class from the
Fund's inception on 1/2/91 through 12/31/94. Performance figures for these
classes will vary after 12/31/94, based on differences in their expense
structures.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. and has been
licensed for use. Standard & Poor's does not sponsor, endorse, sell, or
promote the Fund or represent the advisability of investing in the Fund. The
S&P 500 is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock-market performance. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
INFORMATION ABOUT ECLIPSE INDEXED EQUITY FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
17
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (97.3%)+
SHARES VALUE
-----------------------------
AEROSPACE & DEFENSE (1.7%)
Boeing Co. (The)........... 82,068 $ 3,158,797
General Dynamics Corp. .... 19,210 1,607,877
Goodrich Corp. ............ 11,434 315,807
Honeywell International,
Inc. ..................... 83,934 2,569,219
Lockheed Martin Corp. ..... 43,928 2,036,502
Northrop Grumman Corp. .... 17,802 1,591,499
Raytheon Co. .............. 40,125 1,062,510
Rockwell Collins, Inc. .... 17,399 477,603
United Technologies
Corp. .................... 45,742 3,873,890
--------------
16,693,704
--------------
AIR FREIGHT & LOGISTICS (1.1%)
FedEx Corp. ............... 29,145 2,208,025
Ryder System, Inc. ........ 6,165 184,950
United Parcel Service, Inc.
Class B................... 109,800 7,962,696
--------------
10,355,671
--------------
AIRLINES (0.2%)
Delta Air Lines, Inc. ..... 12,136 158,011
Southwest Airlines Co. .... 76,351 1,481,209
--------------
1,639,220
--------------
AUTO COMPONENTS (0.2%)
Cooper Tire & Rubber Co. .. 7,245 142,436
Dana Corp. ................ 14,568 237,167
Delphi Corp. .............. 54,763 487,391
Goodyear Tire &
Rubber Co. (The) (a)...... 17,138 117,566
Johnson Controls, Inc. .... 8,720 937,662
Visteon Corp. ............. 12,574 81,228
--------------
2,003,450
--------------
AUTOMOBILES (0.6%)
Ford Motor Co. ............ 178,682 2,167,413
General Motors Corp. ...... 54,714 2,334,646
Harley-Davidson, Inc. ..... 29,560 1,401,439
--------------
5,903,498
--------------
BEVERAGES (2.6%)
Anheuser-Busch Cos.,
Inc. ..................... 80,652 3,972,918
Brown-Forman Corp. Class
B......................... 5,940 501,217
Coca-Cola Co. (The) (c).... 239,745 11,124,168
Coca-Cola Enterprises,
Inc. ..................... 44,164 890,346
Coors (Adolph) Co. Class
B......................... 3,541 198,473
Pepsi Bottling
Group, Inc. (The)......... 26,136 582,571
PepsiCo, Inc. ............. 168,308 8,048,489
--------------
25,318,182
--------------
BIOTECHNOLOGY (1.1%)
Amgen, Inc. (a)............ 125,853 7,772,681
Biogen, Inc. (a)........... 14,641 592,521
Chiron Corp. (a)........... 18,299 999,674
Genzyme Corp. (a).......... 21,675 994,883
MedImmune, Inc. (a)........ 24,633 656,716
--------------
11,016,475
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------------
BUILDING PRODUCTS (0.2%)
American Standard Cos.,
Inc. (a).................. 7,038 $ 673,536
Masco Corp. ............... 45,797 1,259,418
--------------
1,932,954
--------------
CAPITAL MARKETS (3.6%)
Bank of New York Co., Inc.
(The)..................... 75,112 2,342,743
Bear Stearns Cos., Inc.
(The)..................... 9,706 740,082
Charles Schwab Corp.
(The)..................... 131,580 1,784,225
Federated Investors, Inc.
Class B................... 10,500 290,325
Franklin Resources,
Inc. ..................... 24,508 1,162,169
Goldman Sachs
Group, Inc. (The)......... 46,200 4,338,180
J.P. Morgan Chase & Co. ... 198,671 7,132,289
Janus Capital Group,
Inc. ..................... 23,393 330,777
Lehman Brothers Holdings,
Inc. ..................... 23,654 1,703,088
Mellon Financial Corp. .... 42,088 1,257,169
Merrill Lynch & Co.,
Inc. ..................... 91,002 5,387,318
Morgan Stanley............. 106,124 5,823,024
Northern Trust Corp. ...... 21,636 1,004,992
State Street Corp. ........ 32,513 1,702,381
T.Rowe Price Group,
Inc. ..................... 12,032 495,117
--------------
35,493,879
--------------
CHEMICALS (1.4%)
Air Products & Chemicals,
Inc. ..................... 22,254 1,010,554
Dow Chemical Co. (The)..... 89,620 3,377,777
E.I. du Pont de
Nemours & Co. ............ 97,206 3,927,122
Eastman Chemical Co. ...... 7,574 245,852
Ecolab, Inc. .............. 25,326 681,016
Engelhard Corp. ........... 12,505 357,393
Great Lakes Chemical
Corp. .................... 4,891 105,157
Hercules, Inc. (a)......... 10,777 112,620
International Flavors &
Fragrances, Inc. ......... 9,160 303,196
Monsanto Co. .............. 25,557 640,203
PPG Industries, Inc. ...... 16,559 954,626
Praxair, Inc. ............. 15,949 1,109,731
Rohm & Haas Co. ........... 21,576 847,937
Sigma-Aldrich Corp. ....... 6,990 366,626
--------------
14,039,810
--------------
COMMERCIAL BANKS (6.2%)
AmSouth Bancorporation..... 34,653 818,504
Bank of America Corp. ..... 145,805 11,041,813
Bank One Corp. ............ 110,255 4,680,325
BB&T Corp. ................ 52,586 2,033,501
Charter One Financial,
Inc. ..................... 22,126 707,147
Comerica, Inc. ............ 17,172 884,015
Fifth Third Bancorp........ 55,650 3,225,474
First Tennessee National
Corp. .................... 12,290 557,474
FleetBoston Financial
Corp. .................... 102,681 4,147,285
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
18
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------------
COMMERCIAL BANKS (CONTINUED)
Huntington Bancshares,
Inc. ..................... 22,232 $ 481,545
KeyCorp.................... 41,068 1,160,171
Marshall & Ilsley Corp. ... 22,258 797,282
National City Corp. ....... 59,920 1,956,987
North Fork
Bancorp., Inc. ........... 14,900 580,802
PNC Financial Services
Group, Inc. (The)......... 27,092 1,451,318
Regions Financial Corp. ... 21,646 795,491
SouthTrust Corp. .......... 32,847 1,046,177
SunTrust Banks, Inc. ...... 27,402 1,837,852
Synovus Financial Corp. ... 29,412 811,771
U.S. Bancorp............... 187,971 5,116,571
Union Planters Corp. ...... 19,302 642,178
Wachovia Corp. ............ 129,972 5,961,816
Wells Fargo & Co. ......... 163,809 9,225,722
Zions Bancorp.............. 8,745 535,981
--------------
60,497,202
--------------
COMMERCIAL SERVICES & SUPPLIES (1.0%)
Allied Waste Industries,
Inc. (a).................. 20,385 229,943
Apollo Group, Inc. Class A
(a)....................... 17,156 1,089,921
Avery Dennison Corp. ...... 10,831 569,494
Cendant Corp. (a).......... 98,904 2,020,609
Cintas Corp. .............. 16,581 707,345
Deluxe Corp. .............. 5,353 216,101
Donnelley (R.R.) & Sons
Co. ...................... 11,115 288,990
Equifax, Inc. ............. 13,897 339,643
H&R Block, Inc. ........... 17,500 824,075
Monster Worldwide, Inc.
(a)....................... 10,923 278,208
Pitney Bowes, Inc. ........ 22,742 934,696
Robert Half International,
Inc. (a).................. 16,629 392,610
Waste Management, Inc. .... 57,756 1,497,036
--------------
9,388,671
--------------
COMMUNICATIONS EQUIPMENT (2.8%)
ADC Telecommunications,
Inc. (a).................. 78,493 200,157
Andrew Corp. (a)........... 14,936 195,363
Avaya, Inc. (a)............ 40,696 526,606
CIENA Corp. (a)............ 46,128 295,680
Cisco Systems, Inc. (a).... 684,398 14,358,670
Comverse Technology, Inc.
(a)....................... 18,429 332,459
Corning, Inc. (a).......... 129,900 1,426,302
JDS Uniphase Corp. (a)..... 140,009 497,032
Lucent Technologies, Inc.
(a)....................... 404,903 1,295,690
Motorola, Inc. ............ 226,692 3,067,143
QLogic Corp. (a)........... 9,121 511,232
QUALCOMM, Inc. ............ 77,245 3,669,137
Scientific-Atlanta,
Inc. ..................... 14,580 431,568
Tellabs, Inc. (a).......... 40,322 303,625
--------------
27,110,664
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------------
COMPUTERS & PERIPHERALS (3.9%)
Apple Computer, Inc. (a)... 35,302 $ 808,063
Dell, Inc. (a)............. 250,529 9,049,107
EMC Corp. (a).............. 213,726 2,957,968
Gateway, Inc. (a).......... 31,693 159,733
Hewlett-Packard Co. ....... 297,918 6,646,551
International Business
Machines Corp. ........... 168,667 15,092,323
Lexmark International, Inc.
(a)....................... 12,441 915,782
NCR Corp. (a).............. 9,332 335,392
Network Appliance, Inc.
(a)....................... 33,215 819,746
Sun Microsystems, Inc.
(a)....................... 315,038 1,247,550
--------------
38,032,215
--------------
CONSTRUCTION & ENGINEERING (0.0%) (b)
Fluor Corp. ............... 7,794 289,001
--------------
CONSTRUCTION MATERIALS (0.1%)
Vulcan Materials Co. ...... 9,940 440,441
--------------
CONSUMER FINANCE (1.3%)
American Express Co. ...... 125,616 5,895,158
Capital One Financial
Corp. .................... 22,156 1,347,085
MBNA Corp. ................ 124,617 3,084,271
Providian Financial Corp.
(a)....................... 28,334 314,791
SLM Corp. ................. 43,955 1,721,278
--------------
12,362,583
--------------
CONTAINERS & PACKAGING (0.2%)
Ball Corp. ................ 5,522 310,335
Bemis Co., Inc. ........... 5,158 238,506
Pactiv Corp. (a)........... 15,492 341,599
Sealed Air Corp. (a)....... 8,206 436,805
Temple-Inland, Inc. ....... 5,277 285,116
--------------
1,612,361
--------------
DISTRIBUTORS (0.1%)
Genuine Parts Co. ......... 17,168 546,285
--------------
DIVERSIFIED FINANCIAL SERVICES (2.6%)
Citigroup, Inc. ........... 502,266 23,807,408
Moody's Corp. ............. 14,515 839,402
Principal Financial Group
(The) (a)................. 31,500 987,525
--------------
25,634,335
--------------
DIVERSIFIED TELECOMMUNICATION SERVICES (2.8%)
ALLTEL Corp. .............. 30,378 1,435,968
AT&T Corp. ................ 76,940 1,430,315
BellSouth Corp. ........... 180,226 4,741,746
CenturyTel, Inc. .......... 13,922 497,712
Citizens Communications Co.
(a)....................... 27,581 343,383
Qwest Communications
International, Inc. (a)... 165,776 585,189
SBC Communications, Inc. .. 324,269 7,775,971
Sprint Corp. (FON Group)... 88,001 1,408,016
Verizon Communications,
Inc. ..................... 268,781 9,031,042
--------------
27,249,342
--------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
19
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------------
ELECTRIC UTILITIES (2.1%)
Allegheny Energy, Inc.
(a)....................... 12,272 $ 129,838
Ameren Corp. .............. 15,575 695,424
American Electric
Power Co., Inc. .......... 38,504 1,085,428
CenterPoint Energy,
Inc. ..................... 29,781 292,152
Cinergy Corp. ............. 17,340 629,615
CMS Energy Corp. (a)....... 14,077 114,305
Consolidated Edison,
Inc. ..................... 21,852 884,350
Dominion Resources,
Inc. ..................... 31,482 1,939,291
DTE Energy Co. ............ 16,383 604,205
Edison International, Inc.
(a)....................... 31,822 627,212
Entergy Corp. ............. 22,104 1,191,406
Exelon Corp. .............. 31,729 2,013,205
FirstEnergy Corp. ......... 31,732 1,091,263
FPL Group, Inc. ........... 17,865 1,138,715
PG&E Corp. (a)............. 39,924 976,142
Pinnacle West Capital
Corp. .................... 8,871 324,324
PPL Corp. ................. 17,464 697,163
Progress Energy, Inc. ..... 23,538 1,014,488
Public Service Enterprise
Group, Inc. .............. 22,083 902,532
Southern Co. (The)......... 70,682 2,106,324
TECO Energy, Inc. ......... 18,365 241,132
TXU Corp. ................. 31,506 718,967
Xcel Energy, Inc. ......... 39,003 639,649
--------------
20,057,130
--------------
ELECTRICAL EQUIPMENT (0.4%)
American Power
Conversion Corp. ......... 19,165 387,708
Cooper Industries, Ltd.
Class A................... 8,963 474,143
Emerson Electric Co. ...... 41,057 2,329,985
Power-One, Inc. (a)........ 7,807 70,731
Rockwell Automation,
Inc. ..................... 18,125 562,781
Thomas & Betts Corp. (a)... 5,700 101,460
--------------
3,926,808
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.5%)
Agilent Technologies, Inc.
(a)....................... 46,129 1,149,535
Jabil Circuit, Inc. (a).... 19,399 540,262
Molex, Inc. ............... 18,750 588,563
PerkinElmer, Inc. ......... 12,329 222,045
Sanmina-SCI Corp. (a)...... 49,810 525,496
Solectron Corp. (a)........ 80,839 447,848
Symbol Technologies,
Inc. ..................... 22,545 281,587
Tektronix, Inc. ........... 8,286 212,702
Thermo Electron Corp.
(a)....................... 16,049 352,757
Waters Corp. (a)........... 12,136 381,434
--------------
4,702,229
--------------
ENERGY EQUIPMENT & SERVICES (0.7%)
Baker Hughes, Inc. ........ 32,664 923,085
BJ Services Co. (a)........ 15,393 505,044
Halliburton Co. ........... 42,673 1,019,031
Nabors Industries, Ltd.
(a)....................... 14,187 536,269
Noble Corp. (a)............ 13,066 448,556
Rowan Cos., Inc. (a)....... 9,123 218,496
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------------
ENERGY EQUIPMENT & SERVICES (CONTINUED)
Schlumberger Ltd. ......... 56,911 $ 2,673,110
Transocean, Inc. (a)....... 31,265 599,975
--------------
6,923,566
--------------
FOOD & STAPLES RETAILING (3.8%)
Albertson's, Inc. ......... 35,958 729,588
Costco Wholesale Corp.
(a)....................... 44,661 1,579,660
CVS Corp. ................. 38,469 1,353,339
Kroger Co. (The) (a)....... 73,363 1,283,119
Safeway, Inc. (a).......... 43,089 909,178
SUPERVALU, Inc. ........... 13,033 328,692
Sysco Corp. ............... 63,386 2,133,573
Walgreen Co. .............. 100,019 3,482,662
Wal-Mart Stores, Inc. ..... 426,029 25,114,410
Winn-Dixie Stores, Inc. ... 13,757 111,294
--------------
37,025,515
--------------
FOOD PRODUCTS (1.2%)
Archer-Daniels-Midland
Co. ...................... 63,092 905,370
Campbell Soup Co. ......... 40,148 1,040,636
ConAgra Foods, Inc. ....... 52,548 1,252,744
General Mills, Inc. ....... 36,164 1,621,955
H.J. Heinz Co. ............ 34,356 1,213,797
Hershey Foods Corp. ....... 12,681 977,705
Kellogg Co. ............... 39,742 1,316,652
McCormick & Co., Inc. ..... 13,600 403,104
Sara Lee Corp. ............ 75,796 1,510,614
Wm. Wrigley Jr. Co. ....... 21,979 1,239,616
--------------
11,482,193
--------------
GAS UTILITIES (0.3%)
KeySpan Corp. ............. 15,328 536,020
Kinder Morgan, Inc. ....... 11,954 640,137
Nicor, Inc. ............... 4,293 147,121
NiSource, Inc. ............ 25,777 533,840
Peoples Energy Corp. ...... 3,563 144,123
Sempra Energy.............. 21,796 605,929
--------------
2,607,170
--------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.9%)
Applera Corp. Applied
Biosystems Group.......... 20,447 471,917
Bausch & Lomb, Inc. ....... 5,209 250,865
Baxter International,
Inc. ..................... 59,419 1,579,357
Becton, Dickinson & Co. ... 24,878 909,540
Biomet, Inc. .............. 25,005 896,679
Boston Scientific Corp.
(a)....................... 40,135 2,717,942
C.R. Bard, Inc. ........... 5,028 402,491
Guidant Corp. ............. 30,048 1,532,748
Medtronic, Inc. ........... 118,661 5,407,382
Millipore Corp. (a)........ 4,755 208,507
St. Jude Medical, Inc.
(a)....................... 16,632 967,317
Stryker Corp. ............. 19,481 1,580,104
Zimmer Holdings, Inc.
(a)....................... 22,146 1,413,136
--------------
18,337,985
--------------
HEALTH CARE PROVIDERS & SERVICES (1.8%)
Aetna, Inc. ............... 14,991 860,633
AmerisourceBergen Corp. ... 10,868 616,976
Anthem, Inc. (a)........... 13,502 923,942
Cardinal Health, Inc. ..... 43,601 2,587,283
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
20
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------------
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
CIGNA Corp. ............... 13,643 $ 778,333
Express Scripts, Inc.
(a)....................... 7,600 417,392
HCA, Inc. ................. 48,752 1,864,764
Health Management
Associates, Inc. Class
A......................... 23,354 517,291
Humana, Inc. (a)........... 15,859 321,779
IMS Health, Inc. .......... 23,202 545,943
Manor Care, Inc. .......... 8,826 293,729
McKesson Corp. ............ 28,444 861,000
Medco Health Solutions,
Inc. (a).................. 26,426 877,343
Quest Diagnostics, Inc. ... 10,300 696,795
Tenet Healthcare Corp.
(a)....................... 45,401 626,534
UnitedHealth Group,
Inc. ..................... 58,062 2,954,195
WellPoint Health
Networks, Inc. (a)........ 14,323 1,273,315
--------------
17,017,247
--------------
HOTELS, RESTAURANTS & LEISURE (1.2%)
Carnival Corp. ............ 61,450 2,145,220
Darden Restaurants,
Inc. ..................... 16,034 335,912
Harrah's Entertainment,
Inc. ..................... 10,786 469,191
Hilton Hotels Corp. ....... 36,864 583,932
International Game
Technology................ 33,704 1,103,806
Marriott International,
Inc. Class A.............. 22,841 986,731
McDonald's Corp. .......... 124,111 3,104,016
Starbucks Corp. (a)........ 38,233 1,208,163
Starwood Hotels & Resorts
Worldwide, Inc. .......... 19,644 662,592
Wendy's International,
Inc. ..................... 11,250 416,813
Yum! Brands, Inc. (a)...... 28,899 986,612
--------------
12,002,988
--------------
HOUSEHOLD DURABLES (0.5%)
American Greetings Corp.
Class A (a)............... 6,458 137,749
Black & Decker Corp.
(The)..................... 7,610 363,834
Centex Corp. .............. 6,044 589,290
Fortune Brands, Inc. ...... 14,173 923,371
KB HOME.................... 4,683 320,739
Leggett & Platt, Inc. ..... 18,877 394,341
Maytag Corp. .............. 7,669 194,793
Newell Rubbermaid, Inc. ... 27,008 615,782
Pulte Homes, Inc. ......... 6,031 521,742
Snap-on, Inc. ............. 5,687 166,857
Stanley Works (The)........ 8,320 277,389
Tupperware Corp. .......... 5,747 86,492
Whirlpool Corp. ........... 6,709 472,783
--------------
5,065,162
--------------
HOUSEHOLD PRODUCTS (1.9%)
Clorox Co. (The)........... 21,244 962,353
Colgate-Palmolive Co. ..... 52,452 2,789,922
Kimberly-Clark Corp. ...... 49,487 2,613,408
Procter & Gamble Co.
(The)..................... 126,485 12,432,211
--------------
18,797,894
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------------
INDUSTRIAL CONGLOMERATES (4.0%)
3M Co. .................... 76,312 $ 6,018,727
General Electric Co. (c)... 977,058 28,344,453
Textron, Inc. ............. 13,330 662,368
Tyco International Ltd. ... 194,893 4,069,366
--------------
39,094,914
--------------
INSURANCE (4.4%)
ACE, Ltd. ................. 26,867 967,212
AFLAC, Inc. ............... 50,090 1,827,283
Allstate Corp. (The)....... 68,614 2,710,253
Ambac Financial Group,
Inc. ..................... 10,387 734,776
American International
Group, Inc. .............. 254,388 15,474,422
Aon Corp. ................. 30,462 667,118
Chubb Corp. (The).......... 18,296 1,222,356
Cincinnati Financial
Corp. .................... 15,838 648,091
Hartford Financial Services
Group, Inc. (The)......... 27,403 1,504,425
Jefferson-Pilot Corp. ..... 14,041 670,317
John Hancock Financial
Services, Inc. ........... 28,199 996,835
Lincoln National Corp. .... 17,340 692,386
Loews Corp. ............... 18,049 776,107
Marsh & McLennan Cos.,
Inc. ..................... 51,986 2,222,402
MBIA, Inc. ................ 14,127 842,110
MetLife, Inc. ............. 74,096 2,326,614
Progressive Corp. (The).... 21,267 1,569,505
Prudential Financial,
Inc. ..................... 53,233 2,056,923
SAFECO Corp. .............. 13,555 497,469
St. Paul Cos., Inc.
(The)..................... 22,148 844,503
Torchmark Corp. ........... 11,007 482,987
Travelers Property Casualty
Corp. Class B............. 98,515 1,612,691
UNUMProvident Corp. ....... 28,168 461,110
XL Capital Ltd. Class A.... 13,312 925,184
--------------
42,733,079
--------------
INTERNET & CATALOG RETAIL (0.4%)
eBay, Inc. (a)............. 62,600 3,501,844
--------------
INTERNET SOFTWARE & SERVICES (0.3%)
Yahoo!, Inc. (a)........... 63,330 2,767,521
--------------
IT SERVICES (1.1%)
Automatic Data Processing,
Inc. ..................... 58,411 2,204,431
Computer Sciences Corp.
(a)....................... 18,339 726,591
Concord EFS, Inc. (a)...... 47,590 508,737
Convergys Corp. (a)........ 14,361 230,638
Electronic Data Systems
Corp. .................... 46,584 999,227
First Data Corp. .......... 72,199 2,577,504
Fiserv, Inc. (a)........... 18,902 667,619
Paychex, Inc. ............. 36,707 1,428,636
Sabre Holdings Corp. ...... 13,915 304,878
SunGard Data Systems, Inc.
(a)....................... 27,700 776,985
Unisys Corp. (a)........... 32,060 492,442
--------------
10,917,688
--------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
21
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------------
LEISURE EQUIPMENT & PRODUCTS (0.2%)
Brunswick Corp. ........... 8,780 $ 260,503
Eastman Kodak Co. ......... 27,971 683,332
Hasbro, Inc. .............. 16,970 369,946
Mattel, Inc. .............. 42,752 827,679
--------------
2,141,460
--------------
MACHINERY (1.3%)
Caterpillar, Inc. ......... 33,662 2,466,751
Crane Co. ................. 5,825 163,683
Cummins, Inc. ............. 3,997 189,458
Danaher Corp. ............. 14,922 1,236,288
Deere & Co. ............... 23,453 1,421,721
Dover Corp. ............... 19,815 773,181
Eaton Corp. ............... 7,370 738,769
Illinois Tool Works,
Inc. ..................... 30,028 2,208,559
Ingersoll-Rand Co. Class
A......................... 16,494 996,238
ITT Industries, Inc. ...... 8,945 608,171
Navistar International
Corp. (a)................. 6,620 267,647
PACCAR, Inc. .............. 11,345 895,801
Pall Corp. ................ 12,028 281,455
Parker-Hannifin Corp. ..... 11,483 585,289
--------------
12,833,011
--------------
MEDIA (3.9%)
Clear Channel
Communications, Inc. ..... 60,025 2,450,221
Comcast Corp. Class A
(a)....................... 219,537 7,446,695
Dow Jones & Co., Inc. ..... 7,981 414,773
Gannett Co., Inc. ......... 26,266 2,209,233
Interpublic Group of Cos.,
Inc. (The) (a)............ 38,112 567,107
Knight-Ridder, Inc. ....... 7,831 574,169
McGraw-Hill Cos., Inc.
(The)..................... 18,625 1,246,944
Meredith Corp. ............ 4,837 234,691
New York Times Co. (The)
Class A................... 14,789 702,921
Omnicom Group, Inc. ....... 18,586 1,483,163
Time Warner, Inc. (a)...... 440,209 6,730,796
Tribune Co. ............... 30,690 1,505,345
Univision Communications,
Inc. Class A (a).......... 31,422 1,066,777
Viacom, Inc. Class B....... 171,196 6,825,585
Walt Disney Co. (The)...... 199,484 4,516,318
--------------
37,974,738
--------------
METALS & MINING (0.7%)
Alcoa, Inc. ............... 82,550 2,606,104
Allegheny Technologies,
Inc. ..................... 7,866 60,175
Freeport-McMoRan Copper &
Gold, Inc. Class B........ 16,374 634,493
Newmont Mining Corp. ...... 39,774 1,741,306
Nucor Corp. ............... 7,593 416,324
Phelps Dodge Corp. (a)..... 8,747 540,040
United States Steel
Corp. .................... 10,121 239,362
Worthington Industries,
Inc. ..................... 8,413 122,662
--------------
6,360,466
--------------
MULTILINE RETAIL (1.2%)
Big Lots, Inc. (a)......... 11,318 169,883
Dillard's, Inc. Class A.... 8,233 133,128
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------------
MULTILINE RETAIL (CONTINUED)
Dollar General Corp. ...... 32,650 $ 733,646
Family Dollar Stores,
Inc. ..................... 16,760 730,904
Federated Department
Stores, Inc. ............. 18,070 859,229
J.C. Penney Co., Inc.
Holding Co. .............. 26,275 621,404
Kohl's Corp. (a)........... 33,183 1,860,571
May Department
Stores Co. (The).......... 28,247 789,786
Nordstrom, Inc. ........... 13,297 405,426
Sears, Roebuck and Co. .... 27,584 1,451,746
Target Corp. .............. 88,827 3,529,985
--------------
11,285,708
--------------
MULTI-UTILITIES & UNREGULATED POWER (0.4%)
AES Corp. (The) (a)........ 60,157 526,374
Calpine Corp. (a).......... 36,983 170,492
Constellation Energy
Group, Inc. .............. 16,141 587,048
Duke Energy Corp. ......... 88,200 1,600,830
Dynegy, Inc. Class A (a)... 36,377 145,872
El Paso Corp. ............. 58,587 430,029
Williams Cos., Inc.
(The)..................... 50,557 515,681
--------------
3,976,326
--------------
OFFICE ELECTRONICS (0.1%)
Xerox Corp. (a)............ 77,147 810,044
--------------
OIL & GAS (4.6%)
Amerada Hess Corp. ........ 8,683 448,216
Anadarko Petroleum Corp. .. 24,251 1,057,829
Apache Corp. .............. 15,861 1,105,829
Ashland, Inc. ............. 6,604 245,933
Burlington Resources,
Inc. ..................... 19,695 957,965
ChevronTexaco Corp. ....... 104,250 7,745,775
ConocoPhillips............. 66,273 3,787,502
Devon Energy Corp. ........ 22,482 1,090,377
EOG Resources, Inc. ....... 11,260 474,496
ExxonMobil Corp. .......... 647,120 23,671,650
Kerr-McGee Corp. .......... 9,857 409,066
Marathon Oil Corp. ........ 30,460 900,702
Occidental Petroleum
Corp. .................... 37,373 1,317,772
Sunoco, Inc. .............. 7,497 328,069
Unocal Corp. .............. 25,247 799,825
--------------
44,341,006
--------------
PAPER & FOREST PRODUCTS (0.5%)
Boise Cascade Corp. ....... 5,741 161,035
Georgia-Pacific Corp. ..... 24,518 644,333
International Paper Co. ... 46,842 1,843,233
Louisiana-Pacific Corp.
(a)....................... 10,187 193,757
MeadWestvaco Corp. ........ 19,570 507,254
Weyerhaeuser Co. .......... 21,419 1,290,066
--------------
4,639,678
--------------
PERSONAL PRODUCTS (0.5%)
Alberto-Culver Co. Class
B......................... 5,744 364,170
Avon Products, Inc. ....... 22,938 1,558,866
Gillette Co. (The)......... 99,552 3,175,709
--------------
5,098,745
--------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
22
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------------
PHARMACEUTICALS (8.0%)
Abbott Laboratories........ 152,381 $ 6,494,478
Allergan, Inc. ............ 12,617 954,098
Bristol-Myers Squibb
Co. ...................... 189,035 4,795,818
Forest Laboratories, Inc.
(a)....................... 35,558 1,778,256
Johnson & Johnson.......... 289,443 14,567,666
King Pharmaceuticals, Inc.
(a)....................... 23,518 315,141
Lilly (Eli) & Co. ......... 109,518 7,296,089
Merck & Co., Inc. ......... 218,313 9,660,350
Pfizer, Inc. .............. 759,308 23,994,133
Schering-Plough Corp. ..... 143,399 2,189,703
Watson Pharmaceuticals,
Inc. (a).................. 10,424 409,350
Wyeth...................... 129,870 5,732,462
--------------
78,187,544
--------------
REAL ESTATE (0.4%)
Apartment Investment &
Management Co. Class A.... 9,100 372,190
Equity Office Properties
Trust..................... 38,939 1,090,681
Equity Residential......... 26,493 774,920
Plum Creek Timber Co.,
Inc. ..................... 18,078 476,355
ProLogis................... 17,500 516,950
Simon Property Group,
Inc. ..................... 18,790 847,053
--------------
4,078,149
--------------
ROAD & RAIL (0.4%)
Burlington Northern
Santa Fe Corp. ........... 36,367 1,052,461
CSX Corp. ................. 20,898 664,974
Norfolk Southern Corp. .... 38,069 767,090
Union Pacific Corp. ....... 24,887 1,557,926
--------------
4,042,451
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (4.3%)
Advanced Micro Devices,
Inc. (a).................. 33,653 511,526
Altera Corp. (a)........... 37,393 756,460
Analog Devices, Inc. (a)... 35,708 1,582,936
Applied Materials, Inc.
(a)....................... 161,760 3,780,331
Applied Micro Circuits
Corp. (a)................. 29,691 172,802
Broadcom Corp. Class A
(a)....................... 29,030 927,509
Intel Corp. ............... 634,893 20,983,214
KLA-Tencor Corp. (a)....... 18,631 1,068,115
Linear Technology Corp. ... 30,535 1,301,096
LSI Logic Corp. (a)........ 36,782 339,865
Maxim Integrated
Products, Inc. ........... 31,594 1,570,537
Micron Technology, Inc.
(a)....................... 59,538 853,775
National Semiconductor
Corp. (a)................. 17,821 724,067
Novellus Systems, Inc.
(a)....................... 14,622 603,742
NVIDIA Corp. (a)........... 15,421 272,643
PMC-Sierra, Inc. (a)....... 16,413 298,224
Teradyne, Inc. (a)......... 18,447 420,223
Texas Instruments, Inc. ... 168,829 4,882,535
Xilinx, Inc. (a)........... 33,034 1,047,178
--------------
42,096,778
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------------
SOFTWARE (4.5%)
Adobe Systems, Inc. ....... 22,561 $ 989,074
Autodesk, Inc. ............ 10,937 210,537
BMC Software, Inc. (a)..... 22,798 396,229
Citrix Systems, Inc. (a)... 15,923 402,533
Computer Associates
International, Inc. ...... 56,421 1,327,022
Compuware Corp. (a)........ 36,984 207,850
Electronic Arts, Inc.
(a)....................... 14,400 1,426,176
Intuit, Inc. (a)........... 20,154 1,007,297
Mercury Interactive Corp.
(a)....................... 8,351 387,820
Microsoft Corp. (c)........ 1,054,288 27,569,631
Novell, Inc. (a)........... 36,275 212,934
Oracle Corp. (a)........... 510,636 6,107,207
Parametric Technology Corp.
(a)....................... 25,707 79,949
PeopleSoft, Inc. (a)....... 35,461 736,170
Siebel Systems, Inc. (a)... 47,504 598,075
Symantec Corp. (a)......... 14,800 986,420
VERITAS Software Corp.
(a)....................... 41,494 1,500,008
--------------
44,144,932
--------------
SPECIALTY RETAIL (2.5%)
AutoNation, Inc. (a)....... 26,784 500,861
AutoZone, Inc. (a)......... 8,722 838,184
Bed Bath & Beyond, Inc.
(a)....................... 28,754 1,214,569
Best Buy Co., Inc. (a)..... 31,464 1,834,666
Circuit City Stores,
Inc. ..................... 20,275 193,424
Gap, Inc. (The)............ 87,104 1,661,944
Home Depot, Inc. (The)..... 224,261 8,313,355
Limited Brands............. 51,185 900,856
Lowe's Cos., Inc. ......... 76,287 4,495,593
Office Depot, Inc. (a)..... 30,150 450,140
RadioShack Corp. .......... 16,473 494,025
Sherwin-Williams Co.
(The)..................... 14,349 481,265
Staples, Inc. (a).......... 47,662 1,278,294
Tiffany & Co. ............. 14,131 670,516
TJX Cos., Inc. (The)....... 49,800 1,045,302
Toys "R" Us, Inc. (a)...... 20,854 271,102
--------------
24,644,096
--------------
TEXTILES, APPAREL & LUXURY GOODS (0.3%)
Jones Apparel Group,
Inc. ..................... 12,510 431,595
Liz Claiborne, Inc. ....... 10,475 386,423
NIKE, Inc. Class B......... 25,890 1,654,371
Reebok International
Ltd. ..................... 5,837 227,351
V.F. Corp. ................ 10,548 447,763
--------------
3,147,503
--------------
THRIFTS & MORTGAGE FINANCE (1.8%)
Countrywide Financial
Corp. .................... 13,336 1,401,880
Fannie Mae................. 95,004 6,810,837
Freddie Mac................ 67,824 3,806,961
Golden West Financial
Corp. .................... 14,868 1,493,193
MGIC Investment Corp. ..... 9,643 494,782
Washington Mutual, Inc. ... 90,051 3,939,731
--------------
17,947,384
--------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
23
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------------
TOBACCO (1.0%)
Altria Group, Inc. ........ 197,989 $ 9,206,489
R.J. Reynolds Tobacco
Holdings, Inc. ........... 8,300 398,649
UST, Inc. ................. 16,422 558,676
--------------
10,163,814
--------------
TRADING COMPANIES & DISTRIBUTORS (0.0%) (b)
Grainger (W.W.), Inc. ..... 8,917 408,220
--------------
WIRELESS TELECOMMUNICATION SERVICES (0.5%)
AT&T Wireless Services,
Inc. (a).................. 264,719 1,919,213
Nextel Communications, Inc.
Class A (a)............... 100,569 2,433,770
Sprint Corp. (PCS Group)
(a)....................... 100,422 436,836
--------------
4,789,819
--------------
Total Common Stocks
(Cost $950,927,101)....... 947,632,748(d)
--------------
SHORT-TERM INVESTMENTS (10.4%)
PRINCIPAL
AMOUNT
-----------
COMMERCIAL PAPER (8.8%)
7-Eleven, Inc.
1.04%, due 12/2/03........ $ 1,800,000 1,798,388
American Honda Finance
1.03%, due 11/6/03........ 1,000,000 999,857
Cooperative Association of
Tractor Dealers, Inc.
1.07%, due 12/1/03........ 16,700,000 16,685,096
Dealers Capital Access
Trust
1.08%, due 11/7/03........ 8,400,000 8,398,487
1.08%, due 11/26/03....... 8,000,000 7,993,995
1.08%, due 12/23/03....... 800,000 798,752
HBOS Treasury Services PLC
1.04%, due 12/5/03........ 4,200,000 4,195,873
1.05%, due 11/5/03........ 800,000 799,907
Household Finance Corp.
1.04%, due 11/21/03....... 1,000,000 999,422
Public Service Co. of
North Carolina
1.08%, due 12/3/03........ 1,000,000 999,040
Schering-Plough Corp.
1.11%, due 12/3/03........ 15,700,000 15,684,499
Transamerica Finance Corp.
1.04%, due 11/7/03........ 2,900,000 2,899,497
1.05%, due 11/6/03........ 3,700,000 3,699,460
1.05%, due 11/14/03....... 4,200,000 4,198,407
1.05%, due 12/1/03........ 2,150,000 2,148,116
Wells Fargo & Co.
1.03%, due 12/22/03....... 13,200,000 13,180,735
--------------
Total Commercial Paper
(Cost $85,479,531)........ 85,479,531
--------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-----------------------------
U.S. GOVERNMENT (1.6%)
United States Treasury
Bills
0.89%, due 12/4/03 (c).... $ 6,000,000 $ 5,995,258
0.92%, due 11/20/03 (c)... 10,000,000 9,995,298
--------------
Total U.S. Government
(Cost $15,990,556)........ 15,990,556
--------------
Total Short-Term
Investments
(Cost $101,470,087)....... 101,470,087
--------------
Total Investments
(Cost $1,052,397,188)
(e)....................... 107.7% 1,049,102,835(f)
Liabilities in Excess of
Cash and Other Assets..... (7.7) (74,682,569)
----------- ---------------
Net Assets................. 100.0% $ 974,420,266
----------- ---------------
<Caption>
FUTURES CONTRACTS (0.1%)
CONTRACTS UNREALIZED
LONG APPRECIATION(g)
-----------------------------
Standard & Poor's 500 Index
December 2003............. 96 $ 740,074
Mini December 2003........ 8 602
--------------
Total Futures Contracts
(Settlement Value
$25,607,800) (d).......... $ 740,676
==============
</Table>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Segregated or designated as collateral for futures contracts.
(d) The combined market value of common stocks and settlement value of Standard
& Poor's 500 Index futures contracts represents 99.9% of net assets.
(e) The cost for federal income tax purposes is $1,056,385,193.
(f) At October 31, 2003 net unrealized depreciation was $7,282,358, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $136,831,735 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $144,114,093.
(g) Represents the difference between the value of the contracts at the time
they were opened and the value at October 31, 2003.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
24
ECLIPSE FUNDS
INDEXED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value
(identified cost $1,052,397,188)............. $1,049,102,835
Cash........................................... 12,387
Receivables:
Fund shares sold............................. 1,637,525
Dividends.................................... 1,192,522
Variation margin on futures contracts........ 24,602
Investment securities sold................... 9,976
Other assets................................... 6,083
--------------
Total assets............................. 1,051,985,930
--------------
LIABILITIES:
Payables:
Investment securities purchased.............. 75,870,744
Fund shares redeemed......................... 1,258,985
Transfer agent............................... 212,633
Professional................................. 68,829
Shareholder communication.................... 60,513
NYLIFE Distributors.......................... 40,987
Custodian.................................... 18,781
Manager...................................... 9,862
Directors.................................... 4,267
Accrued expenses............................... 20,063
--------------
Total liabilities........................ 77,565,664
--------------
Net assets..................................... $ 974,420,266
==============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class................................ $ 31,845
Service Class................................ 8,111
Additional paid-in capital..................... 1,010,140,910
Accumulated undistributed net investment
income....................................... 9,123,203
Accumulated net realized loss on investments
and futures contracts........................ (42,330,126)
Net unrealized depreciation on investments
and futures contracts........................ (2,553,677)
--------------
Net assets..................................... $ 974,420,266
==============
No-Load Class
Net assets applicable to outstanding shares.... $ 777,842,838
==============
Shares of capital stock outstanding............ 31,845,149
==============
Net asset value per share outstanding.......... $ 24.43
==============
Service Class
Net assets applicable to outstanding shares.... $ 196,577,428
==============
Shares of capital stock outstanding............ 8,111,463
==============
Net asset value per share outstanding.......... $ 24.23
==============
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Dividends...................................... $ 12,822,676
Interest....................................... 760,599
------------
Total income............................... 13,583,275
------------
Expenses:
Manager........................................ 3,856,021
Service--Service Class......................... 390,874
Transfer agent................................. 324,811
Professional................................... 216,541
Custodian...................................... 114,772
Shareholder communication...................... 85,822
Directors...................................... 51,412
Registration................................... 32,079
Miscellaneous.................................. 47,095
------------
Total expenses before reimbursement........ 5,119,427
Expense reimbursement from Manager............. (2,414,940)
------------
Net expenses............................... 2,704,487
------------
Net investment income............................ 10,878,788
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) from:
Security transactions.......................... (13,888,556)
Futures transactions........................... 16,086,474
------------
Net realized gain on investments................. 2,197,918
------------
Net change in unrealized appreciation
(depreciation) on investments:
Security transactions.......................... 137,968,487
Futures transactions........................... 420,989
------------
Net unrealized gain on investments............... 138,389,476
------------
Net realized and unrealized gain on investments.. 140,587,394
------------
Net increase in net assets resulting from
operations..................................... $151,466,182
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
25
INDEXED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................... $ 10,878,788 $ 9,358,836
Net realized gain (loss) on investments and futures
contracts.............................................. 2,197,918 (43,302,130)
Net change in unrealized appreciation (depreciation) on
investments and
futures contracts..................................... 138,389,476 (87,864,525)
------------- -------------
Net increase (decrease) in net assets resulting from
operations............................................. 151,466,182 (121,807,819)
------------- -------------
Dividends and distributions to shareholders:
From net investment income:
No-Load Class......................................... (7,726,950) (7,772,460)
Service Class......................................... (1,659,778) (1,276,935)
From net realized gain on investments:
No-Load Class......................................... -- (33,639,804)
Service Class......................................... -- (6,256,408)
------------- -------------
Total dividends and distributions to shareholders... (9,386,728) (48,945,607)
------------- -------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 293,140,422 126,157,800
Service Class......................................... 105,806,918 100,714,167
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
No-Load Class......................................... 7,719,756 40,192,374
Service Class......................................... 1,659,778 7,531,327
------------- -------------
408,326,874 274,595,668
Cost of shares redeemed:
No-Load Class......................................... (164,877,116) (112,191,421)
Service Class......................................... (66,922,507) (38,901,217)
------------- -------------
Increase in net assets derived from capital share
transactions......................................... 176,527,251 123,503,030
------------- -------------
Net increase (decrease) in net assets................. 318,606,705 (47,250,396)
NET ASSETS:
Beginning of year......................................... 655,813,561 703,063,957
------------- -------------
End of year............................................... $ 974,420,266 $ 655,813,561
============= =============
Accumulated undistributed net investment income at end of
year.................................................... $ 9,123,203 $ 7,675,229
============= =============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
26
(THIS PAGE INTENTIONALLY LEFT BLANK)
27
INDEXED EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
------------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
------------------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
---------- ---------- ---------- ---------- ----------- ------------
Net asset value at beginning
of period............................ $ 20.57 $ 25.84 $ 37.38 $ 36.99 $ 33.39 $ 27.05
---------- ---------- ---------- ---------- ---------- ----------
Net investment income................. 0.32(a) 0.31 0.30(a) 0.37 0.31 0.38
Net realized and unrealized gain
(loss) on investments................ 3.85 (3.86) (9.06) 1.86 3.60 7.36
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations...... 4.17 (3.55) (8.76) 2.23 3.91 7.74
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
From net investment income............ (0.31) (0.32) (0.36) (0.38) -- (0.38)
From net realized gain on
investments.......................... -- (1.40) (2.42) (1.46) (0.31) (1.02)
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and distributions..... (0.31) (1.72) (2.78) (1.84) (0.31) (1.40)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period...... $ 24.43 $ 20.57 $ 25.84 $ 37.38 $ 36.99 $ 33.39
========== ========== ========== ========== ========== ==========
Total investment return............... 20.59% (15.23%) (24.90%) 5.98% 11.80%(b) 28.62%
Ratios (to average net assets)/
Supplemental Data:
Net investment income................ 1.46% 1.31% 1.03% 0.95% 1.06%+ 1.29%
Net expenses......................... 0.30% 0.30% 0.30% 0.30% 0.30%+ 0.30%
Expenses (before reimbursement)...... 0.61% 0.59% 0.57% 0.54% 0.55%+ 0.56%
Portfolio turnover rate............... 3% 4% 5% 11% 7% 8%
Net assets at end of period (in
000's)............................... $ 777,843 $ 527,277 $ 612,937 $1,503,224 $1,641,591 $1,472,263
</Table>
- ------------
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is not annualized.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
28
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
-------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
-------------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
---------- ---------- ---------- ---------- ----------- ------------
$ 20.42 $ 25.68 $ 37.16 $ 36.80 $ 33.28 $ 26.99
---------- ---------- ---------- ---------- ---------- ----------
0.26(a) 0.27 0.24(a) 0.27 0.21 0.31
3.81 (3.84) (9.04) 1.85 3.62 7.31
---------- ---------- ---------- ---------- ---------- ----------
4.07 (3.57) (8.80) 2.12 3.83 7.62
---------- ---------- ---------- ---------- ---------- ----------
(0.26) (0.29) (0.26) (0.30) -- (0.31)
-- (1.40) (2.42) (1.46) (0.31) (1.02)
---------- ---------- ---------- ---------- ---------- ----------
(0.26) (1.69) (2.68) (1.76) (0.31) (1.33)
---------- ---------- ---------- ---------- ---------- ----------
$ 24.23 $ 20.42 $ 25.68 $ 37.16 $ 36.80 $ 33.28
========== ========== ========== ========== ========== ==========
20.20% (15.41%) (25.10%) 5.72% 11.60%(b) 28.24%
1.21% 1.06% 0.78% 0.70% 0.81%+ 1.04%
0.55% 0.55% 0.55% 0.55% 0.55%+ 0.55%
0.86% 0.84% 0.82% 0.79% 0.80%+ 0.81%
3% 4% 5% 11% 7% 8%
$ 196,577 $ 128,537 $ 90,127 $ 64,254 $ 61,647 $ 36,442
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
29
Eclipse Mid Cap Core Fund
- --------------------------------------------------------------------------------
After three years of progressive declines, the stock market staged a steady
recovery from mid-March 2003 through the end of October. Formerly weary and
gun-shy investors made a dramatic statement as they returned to the equity
markets.
Most investors sought riskier stocks with the potential for higher returns. As
measured by Russell indices,(1) small cap stocks outperformed mid- and
large-capitalization equities for the 12 months ended October 31, 2003, and
mid-cap stocks performed decidedly better than their large-cap counterparts.
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse Mid Cap Core Fund No-Load
Class shares returned 29.90%. The Fund underperformed the 30.88% return of the
average Lipper(2) mid-cap core fund over the same period. The Fund also
underperformed the 35.88% return of the Russell Midcap(R) Index for the 12
months ended October 31, 2003.
The Fund's underperformance of the Russell Midcap Index resulted primarily from
the Fund's conservative positioning, which favored issues with an established
history of real revenues and earnings. This positioning detracted from the
Fund's performance relative to its benchmark when more-speculative issues in the
information technology sector rallied during the reporting period.
Among the sectors that contributed positively to the Fund's performance during
the 12 months ended October 31, 2003 were industrials and energy. In the
industrials sector, the Fund benefited from an overweighted position in PACCAR,
a major truck manufacturer whose brands include Peterbilt and Kenworth.
Investors bid up the company's shares in the hopes that the three-year drought
in purchase orders would soon abate, and the nation's truck fleet, which is
about seven years old on average, would need to be upgraded. Similarly, the
Fund's underweighted position in Avery Dennison, the office services and
supplies company, contributed positively to Fund returns when the company
suffered a relatively weak 12 months.
In the energy sector, the Fund benefited from its overweighted positions in such
strong performers as Halliburton, an oil and gas equipment and services company,
and Burlington Resources, an oil and gas exploration concern.
Holdings in other sectors detracted from performance, with the greatest negative
impact coming from the information technology and consumer discretionary
sectors. In the information technology sector, the portfolio's underweighted
positions in Lucent Technologies Network Appliances, and VERITAS Software hurt
Fund performance, as each of these relatively speculative issues surged back
from bargain-basement valuations during the Fund's fiscal year.
In the consumer discretionary sector, the Fund's overweighted position in
troubled department store chain J.C. Penney proved to be a significant detractor
from overall returns. J.C. Penney's earnings in the third calendar quarter were
dragged down by the company's wholly-owned Eckerd's operation. The Eckerd's
drugstore chain suffered, as retailers such as Wal-Mart Stores and Target
continued to siphon sales away from Eckerd's nonpharmacy business.
The portfolio's overweighted position in Eastman Kodak also hurt Fund returns.
The company's stock price fell after Eastman Kodak issued a negative earnings
warning in June. At the time, quarantines and travel restrictions relating to
the SARS outbreak
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1. The Russell 1000(R) Index is an unmanaged index that measures the performance
of the 1,000 largest U.S. companies based on total market capitalization. The
Russell Midcap(R) Index is an unmanaged index that measures the performance
of the 800 smallest companies in the Russell 1000(R) Index. The Russell
2000(R) Index is an unmanaged index that measures the performance of the
2,000 smallest companies in the Russell 3000(R) Index, which, in turn, is an
unmanaged index that measures the performance of the 3,000 largest U.S.
companies based on total market capitalization. Results for all indices
assume reinvestment of all income and capital gains. An investment cannot be
made directly into an index.
2. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
30
- --------------------------------------------------------------------------------
were impeding the company's sales in Asian markets. Recently, however, Eastman
Kodak signed agreements with Cingular Wireless and Nokia aimed at encouraging
users of camera phones to print more pictures. Eastman Kodak is working to have
its digital printing business offset the decline in its traditional film
business.
LOOKING AHEAD
The economic outlook for the U.S. and the world is still open to wide
interpretation. Although major combat operations in Iraq seem to have ended,
much work remains to be done to restore peaceful conditions in Iraq and
elsewhere. The United States still faces a major budget deficit. On the other
hand, evidence shows that business expenditures, long thought to be the key to a
sustainable economic turnaround, have risen by an impressive 11% in the third
calendar quarter, with investment in equipment and software increasing 15%. The
rise in business investment could help the labor markets and may increase
underlying demand while strengthening corporate profitability. This positive
economic data comes at a time when the Federal Reserve has indicated that
"policy accommodation can be maintained for a considerable period."
If investors become more fundamentally oriented, we believe that the Fund's
model-driven performance will be more likely to produce results in line with our
expectations relative to the equity market as a whole. Whatever the markets or
the economy may bring, the Fund will continue to seek long-term growth of
capital.
HARVEY FRAM, CFA
STEPHEN B. KILLIAN
Portfolio Managers
New York Life Investment Management LLC
31
$10,000 INVESTED IN
ECLIPSE MID CAP CORE FUND
VERSUS RUSSELL MIDCAP INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE MID CAP CORE FUND RUSSELL MIDCAP INDEX
------------------------- --------------------
1/2/01 $ 10,000 $ 10,000
10/31/01 8,410 8,372
10/31/02 7,850 7,700
10/31/03 10,198 10,463
</Table>
Source: Lipper Inc., 10/31/03
THIS GRAPH ASSUMES A $10,000 INVESTMENT MADE ON 1/2/01.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- --------------------------------------------------------------------------------------------------
SINCE
ONE YEAR INCEPTION(2)
- --------------------------------------------------------------------------------------------------
Eclipse Mid Cap Core Fund No-Load Class 29.90% 0.69%
Average Lipper mid-cap core fund(3) 30.88 1.00
Russell Midcap Index(4) 35.88 1.61
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
TOTAL RETURN(1)
----------------
10 months ended October 31 2001 -15.90%
Year ended October 31 2002 -6.66
Year ended October 31 2003 29.90
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions.
2. The Fund's inception date was 1/2/01.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. The Russell Midcap(R) Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000(R) Index,
which, in turn, is an unmanaged index that measures the performance of the
1,000 largest U.S. companies based on total market capitalization. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly into an index.
INFORMATION ABOUT ECLIPSE MID CAP CORE FUND ON THIS PAGE AND THE PRECEDING PAGES
HAS NOT BEEN AUDITED.
32
ECLIPSE FUNDS
MID CAP CORE FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (99.9%)+
SHARES VALUE
----------------------
AEROSPACE & DEFENSE (0.4%)
Precision Castparts Corp. ........ 1,805 $ 74,240
Rockwell Collins, Inc. ........... 2,032 55,778
-----------
130,018
-----------
AIR FREIGHT & LOGISTICS (0.4%)
J.B. Hunt Transport Services, Inc.
(a).............................. 1,860 47,207
Ryder System, Inc. ............... 1,971 59,130
-----------
106,337
-----------
AIRLINES (0.3%)
JetBlue Airways Corp. (a)......... 1,276 73,600
-----------
AUTO COMPONENTS (1.8%)
American Axle & Manufacturing
Holdings, Inc. (a)............... 303 10,484
Autoliv, Inc. .................... 3,240 107,309
BorgWarner, Inc. ................. 914 72,745
Dana Corp. ....................... 3,386 55,124
Johnson Controls, Inc. ........... 1,400 150,542
Lear Corp. (a).................... 2,143 124,487
-----------
520,691
-----------
BEVERAGES (0.1%)
Constellation Brands, Inc. Class A
(a).............................. 911 28,578
-----------
BIOTECHNOLOGY (0.8%)
Celgene Corp. (a)................. 895 37,313
Human Genome Sciences, Inc. (a)... 1,429 19,877
IDEXX Laboratories, Inc. (a)...... 629 29,752
ImClone Systems, Inc. (a)......... 1,757 61,056
Invitrogen Corp. (a).............. 555 35,292
Millennium Pharmaceuticals, Inc.
(a).............................. 3,291 52,393
-----------
235,683
-----------
BUILDING PRODUCTS (0.3%)
American Standard Cos., Inc.
(a).............................. 777 74,359
-----------
CAPITAL MARKETS (2.3%)
A.G. Edwards, Inc. ............... 2,577 104,368
Ameritrade Holding Corp. (a)...... 2,563 34,959
BlackRock, Inc. .................. 213 10,938
E*TRADE Financial Corp. (a)....... 11,501 118,460
Franklin Resources, Inc. ......... 1,874 88,865
Friedman, Billings, Ramsey Group,
Inc. Class A..................... 1,425 28,386
Janus Capital Group, Inc. ........ 2,729 38,588
Jefferies Group, Inc. ............ 951 29,481
Legg Mason, Inc. ................. 2,215 184,399
Nuveen Investments Class A........ 237 6,636
T.Rowe Price Group, Inc. ......... 1,184 48,722
-----------
693,802
-----------
CHEMICALS (1.6%)
Airgas, Inc. ..................... 403 7,717
Cabot Corp. ...................... 1,255 35,015
Cytec Industries, Inc. (a)........ 1,317 45,976
</Table>
<Table>
<Caption>
SHARES VALUE
----------------------
CHEMICALS (CONTINUED)
Engelhard Corp. .................. 2,613 $ 74,680
Lubrizol Corp. ................... 169 5,121
Monsanto Co. ..................... 8,946 224,097
RPM International, Inc. .......... 1,352 19,536
Sigma-Aldrich Corp. .............. 1,295 67,923
-----------
480,065
-----------
COMMERCIAL BANKS (2.5%)
BancorpSouth, Inc. ............... 908 21,347
Banknorth Group, Inc. ............ 5,562 174,202
Colonial BancGroup, Inc. (The).... 1,453 22,783
Compass Bancshares, Inc. ......... 2,936 110,922
First BanCorp..................... 613 20,413
First Midwest Bancorp, Inc. ...... 545 16,840
FirstMerit Corp. ................. 856 22,068
Hudson United Bancorp............. 968 35,129
International Bancshares Corp. ... 105 4,821
Marshall & Ilsley Corp. .......... 4,130 147,937
Park National Corp. .............. 130 15,203
Popular, Inc. .................... 1,409 63,405
Zions Bancorp..................... 1,299 79,616
-----------
734,686
-----------
COMMERCIAL SERVICES & SUPPLIES (2.6%)
Allied Waste Industries, Inc.
(a).............................. 1,412 15,927
ARAMARK Corp. Class B (a)......... 1,611 43,046
Career Education Corp. (a)........ 1,061 56,817
DeVry, Inc. (a)................... 656 15,921
Donnelley (R.R.) & Sons Co. ...... 2,411 62,686
Education Management Corp. (a).... 350 22,113
H&R Block, Inc. .................. 3,980 187,418
Herman Miller, Inc. .............. 1,658 38,084
HON INDUSTRIES, Inc. ............. 1,991 81,631
IKON Office Solutions, Inc. ...... 685 5,754
ITT Educational Services, Inc.
(a).............................. 964 48,007
Manpower, Inc. ................... 883 40,971
Monster Worldwide, Inc. (a)....... 1,085 27,635
Republic Services, Inc. (a)....... 3,396 78,957
University of Phoenix Online
(a).............................. 493 33,899
Viad Corp. ....................... 790 19,734
West Corp. (a).................... 219 5,307
-----------
783,907
-----------
COMMUNICATIONS EQUIPMENT (3.9%)
ADC Telecommunications, Inc.
(a).............................. 844 2,152
ADTRAN, Inc. ..................... 673 45,784
Advanced Fibre Communications,
Inc. (a)......................... 945 22,746
Avaya, Inc. (a)................... 13,465 174,237
Avocent Corp. (a)................. 478 18,068
Comverse Technology, Inc. (a)..... 1,776 32,039
Corning, Inc. (a)................. 34,451 378,272
Foundry Networks, Inc. (a)........ 3,487 81,108
Harris Corp. ..................... 1,518 56,500
Juniper Networks, Inc. (a)........ 7,724 138,955
McDATA Corp. Class A (a).......... 1,171 12,096
Polycom, Inc. (a)................. 1,154 23,115
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
33
MID CAP CORE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
COMMUNICATIONS EQUIPMENT (CONTINUED)
QLogic Corp. (a).................. 649 $ 36,376
Scientific-Atlanta, Inc. ......... 4,801 142,110
-----------
1,163,558
-----------
COMPUTERS & PERIPHERALS (3.5%)
Apple Computer, Inc. (a).......... 12,225 279,830
Diebold, Inc. .................... 846 48,273
Imation Corp. .................... 406 13,824
Lexmark International, Inc. (a)... 1,180 86,860
Maxtor Corp. (a).................. 4,482 61,269
NCR Corp. (a)..................... 1,991 71,557
Network Appliance, Inc. (a)....... 6,891 170,070
SanDisk Corp. (a)................. 2,085 168,051
Storage Technology Corp. (a)...... 2,513 60,563
Western Digital Corp. (a)......... 6,781 91,204
-----------
1,051,501
-----------
CONSTRUCTION MATERIALS (0.4%)
Florida Rock Industries, Inc. .... 683 39,102
Lafarge North America, Inc........ 287 10,360
Martin Marietta Materials,
Inc. ............................ 542 22,206
Vulcan Materials Co. ............. 1,116 49,450
-----------
121,118
-----------
CONSUMER FINANCE (0.4%)
AmeriCredit Corp. (a)............. 1,707 22,874
Providian Financial Corp. (a)..... 9,031 100,334
-----------
123,208
-----------
CONTAINERS & PACKAGING (0.6%)
Aptargroup, Inc. ................. 930 33,294
Sealed Air Corp. (a).............. 2,888 153,728
-----------
187,022
-----------
DIVERSIFIED FINANCIAL SERVICES (3.9%)
Chicago Mercantile Exchange
(The)............................ 106 7,203
CIT Group, Inc. .................. 6,773 227,708
Instinet Group, Inc. (a).......... 1,452 8,973
S&P 500 Index-SPDR Trust Series 1
(c).............................. 4,007 422,057
S&P MidCap 400 Index-MidCap SPDR
Trust, Series 1 (c).............. 4,819 484,310
-----------
1,150,251
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.1%)
CenturyTel, Inc. ................. 1,632 58,344
Citizens Communications Co. (a)... 8,907 110,892
NTL, Inc. (a)..................... 1,493 92,163
Qwest Communications
International, Inc. (a).......... 22,077 77,932
-----------
339,331
-----------
ELECTRIC UTILITIES (6.3%)
Alliant Energy Corp. ............. 3,517 84,619
Ameren Corp. ..................... 3,676 164,132
CenterPoint Energy, Inc. ......... 6,180 60,626
Cinergy Corp. .................... 635 23,057
DPL, Inc. ........................ 2,886 52,583
Edison International (a).......... 9,731 191,798
Great Plains Energy, Inc. ........ 2,369 75,524
Northeast Utilities............... 2,889 54,429
NSTAR............................. 368 17,186
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
ELECTRIC UTILITIES (CONTINUED)
OGE Energy Corp. ................. 2,785 $ 63,526
PG&E Corp. (a).................... 12,295 300,613
Pinnacle West Capital Corp. ...... 423 15,465
PPL Corp. ........................ 1,184 47,265
Public Service Enterprise Group,
Inc. ............................ 5,707 233,245
Puget Energy, Inc................. 2,153 48,938
Texas Genco Holdings, Inc......... 512 15,309
TXU Corp. ........................ 7,351 167,750
Wisconsin Energy Corp............. 1,327 43,459
Xcel Energy, Inc. ................ 12,531 205,508
-----------
1,865,032
-----------
ELECTRICAL EQUIPMENT (0.8%)
Hubbell, Inc. Class B............. 1,140 48,838
Rockwell Automation, Inc.......... 5,661 175,774
-----------
224,612
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS (2.5%)
Arrow Electronics, Inc. (a)....... 2,212 47,226
Avnet, Inc. (a)................... 2,725 52,865
CDW Corp.......................... 693 41,615
Molex, Inc........................ 1,193 37,448
Molex, Inc. Class A............... 3,195 84,699
PerkinElmer, Inc.................. 3,834 69,050
Sanmina-SCI Corp. (a)............. 17,483 184,446
Solectron Corp. (a)............... 17,877 99,039
Symbol Technologies, Inc.......... 885 11,054
Vishay Intertechnology, Inc.
(a).............................. 3,692 69,225
Waters Corp. (a).................. 1,417 44,536
-----------
741,203
-----------
ENERGY EQUIPMENT & SERVICES (0.1%)
FMC Technologies, Inc. (a)........ 524 10,522
Helmerich & Payne, Inc............ 572 15,164
-----------
25,686
-----------
FOOD & STAPLES RETAILING (1.0%)
Rite Aid Corp. (a)................ 14,857 85,130
Safeway, Inc. (a)................. 3,900 82,290
SUPERVALU, Inc.................... 4,571 115,281
-----------
282,701
-----------
FOOD PRODUCTS (1.1%)
Dean Foods Co. (a)................ 1,538 46,524
Hershey Foods Corp................ 3,029 233,536
J.M. Smucker Co. (The)............ 551 24,117
Tyson Foods, Inc. Class A......... 2,447 34,919
-----------
339,096
-----------
GAS UTILITIES (1.2%)
AGL Resources, Inc. .............. 2,168 61,029
Kinder Morgan, Inc. .............. 896 47,981
Nicor, Inc. ...................... 502 17,204
NiSource, Inc. ................... 6,432 133,207
Peoples Energy Corp. ............. 809 32,724
Sempra Energy..................... 2,085 57,963
UGI Corp. ........................ 479 14,753
WGL Holdings, Inc. ............... 179 4,949
-----------
369,810
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
34
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.5%)
Apogent Technologies, Inc. (a).... 1,067 $ 23,421
Bausch & Lomb, Inc. .............. 784 37,757
Beckman Coulter, Inc. ............ 2,087 103,619
Bio-Rad Laboratories, Inc. Class A
(a).............................. 540 28,215
C.R. Bard, Inc. .................. 594 47,550
Edwards Lifesciences Corp. (a).... 696 20,184
Fisher Scientific International,
Inc. (a)......................... 1,221 49,145
Hillenbrand Industries, Inc. ..... 1,155 68,757
Respironics, Inc. (a)............. 394 16,426
Varian Medical Systems, Inc.
(a).............................. 757 48,403
-----------
443,477
-----------
HEALTH CARE PROVIDERS & SERVICES (5.1%)
AdvancePCS (a).................... 2,452 126,204
Aetna, Inc. ...................... 2,980 171,082
CIGNA Corp. ...................... 1,554 88,656
Coventry Health Care, Inc. (a).... 1,572 86,067
DaVita, Inc. (a).................. 1,932 67,813
Express Scripts, Inc. (a)......... 1,153 63,323
Health Net, Inc. (a).............. 3,457 109,207
Humana, Inc. (a).................. 5,527 112,143
IMS Health, Inc. ................. 2,835 66,708
Manor Care, Inc. ................. 3,081 102,536
McKesson Corp. ................... 5,608 169,754
Mid Atlantic Medical Services,
Inc. (a)......................... 1,048 61,203
Oxford Health Plans, Inc. (a)..... 951 38,515
PacifiCare Health Systems, Inc.
(a).............................. 1,197 71,221
Patterson Dental Co. (a).......... 709 45,362
Renal Care Group, Inc. (a)........ 947 35,522
Service Corp. International (a)... 6,817 33,062
Universal Health Services, Inc.
Class B (a)...................... 1,118 52,602
WellChoice, Inc. (a).............. 764 24,830
-----------
1,525,810
-----------
HOTELS, RESTAURANTS & LEISURE (3.5%)
Applebee's International, Inc. ... 206 7,727
Brinker International, Inc. (a)... 2,184 69,517
CBRL Group, Inc. ................. 1,657 64,209
GTECH Holdings Corp. ............. 1,210 54,063
Hilton Hotels Corp. .............. 7,709 122,110
International Game Technology..... 6,836 223,879
International Speedway Corp. Class
A................................ 361 15,357
Mandalay Resort Group............. 1,024 40,192
MGM MIRAGE (a).................... 1,553 55,131
Outback Steakhouse, Inc. ......... 716 30,072
Park Place Entertainment Corp.
(a).............................. 3,245 31,152
Ruby Tuesday, Inc. ............... 690 18,871
Starwood Hotels & Resorts
Worldwide, Inc. ................. 5,074 171,146
Station Casinos, Inc. ............ 805 23,949
Yum! Brands, Inc. (a)............. 3,034 103,581
-----------
1,030,956
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
HOUSEHOLD DURABLES (3.1%)
Fortune Brands, Inc. ............. 4,148 $ 270,242
Harman International Industries,
Inc. ............................ 878 112,560
KB HOME........................... 925 63,353
Mohawk Industries, Inc. (a)....... 1,713 126,968
NVR, Inc. (a)..................... 187 91,518
Ryland Group, Inc. (The).......... 855 76,009
Snap-on, Inc. .................... 665 19,511
Whirlpool Corp. .................. 2,346 165,323
-----------
925,484
-----------
INDUSTRIAL CONGLOMERATES (0.5%)
ALLETE, Inc. ..................... 984 29,727
Carlisle Cos., Inc. .............. 708 40,604
Textron, Inc. .................... 1,345 66,833
-----------
137,164
-----------
INSURANCE (5.3%)
Ambac Financial Group, Inc. ...... 2,807 198,567
Aon Corp. ........................ 5,732 125,531
Cincinnati Financial Corp. ....... 1,510 61,789
Erie Indemnity Co. Class A........ 305 12,194
Fidelity National Financial,
Inc. ............................ 2,810 86,885
First American Corp. ............. 1,542 44,178
HCC Insurance Holdings, Inc. ..... 2,150 62,651
John Hancock Financial Services,
Inc. ............................ 2,846 100,606
Lincoln National Corp. ........... 6,071 242,415
Loews Corp. ...................... 1,485 63,855
Markel Corp. (a).................. 288 72,688
MBIA, Inc. ....................... 605 36,064
Mercury General Corp. ............ 889 42,254
Nationwide Financial Services,
Inc. Class A..................... 1,143 38,828
Odyssey Re Holdings Corp. ........ 278 5,833
Old Republic International
Corp. ........................... 4,127 148,324
Protective Life Corp. ............ 566 18,378
Reinsurance Group of America,
Inc. ............................ 455 18,177
Torchmark Corp. .................. 1,361 59,721
Transatlantic Holdings, Inc. ..... 247 18,945
Unitrin, Inc. .................... 1,031 38,147
W.R. Berkley Corp. ............... 1,709 58,602
Wesco Financial Corp. ............ 32 10,512
-----------
1,565,144
-----------
INTERNET SOFTWARE & SERVICES (0.4%)
DoubleClick, Inc. (a)............. 1,180 9,829
VeriSign, Inc. (a)................ 6,946 110,233
-----------
120,062
-----------
IT SERVICES (1.8%)
Acxiom Corp. (a).................. 718 11,416
Alliance Data Systems Corp. (a)... 508 14,112
Certegy, Inc. .................... 619 20,836
CheckFree Corp. (a)............... 804 22,134
Computer Sciences Corp. (a)....... 3,999 158,440
Convergys Corp. (a)............... 3,945 63,357
DST Systems, Inc. (a)............. 901 34,076
Electronic Data Systems Corp. .... 4,265 91,484
Global Payments, Inc. ............ 310 12,911
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
35
MID CAP CORE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
----------------------
IT SERVICES (CONTINUED)
SunGard Data Systems, Inc. (a).... 511 $ 14,334
Total System Services, Inc. ...... 425 11,722
Unisys Corp. (a).................. 5,809 89,226
-----------
544,048
-----------
LEISURE EQUIPMENT & PRODUCTS (1.2%)
Brunswick Corp. .................. 2,895 85,895
Hasbro, Inc. ..................... 4,774 104,073
Marvel Enterprises, Inc. (a)...... 933 27,477
Mattel, Inc. ..................... 4,444 86,036
Polaris Industries, Inc. ......... 497 42,543
-----------
346,024
-----------
MACHINERY (2.6%)
Cummins, Inc. .................... 1,183 56,074
Donaldson Co., Inc. .............. 424 24,261
Eaton Corp. ...................... 1,699 170,308
Graco, Inc. ...................... 1,016 38,710
Harsco Corp. ..................... 463 17,737
Navistar International Corp.
(a).............................. 606 24,501
PACCAR, Inc. ..................... 3,499 276,281
Parker-Hannifin Corp. ............ 1,384 70,542
Pentair, Inc. .................... 343 14,063
SPX Corp. (a)..................... 1,780 85,654
-----------
778,131
-----------
MEDIA (0.8%)
Belo Corp. Class A................ 1,599 43,589
Cablevision Systems Corp. New York
Group Class A (a)................ 949 19,170
Dow Jones & Co., Inc. ............ 472 24,530
Getty Images, Inc. (a)............ 721 32,229
PanAmSat Corp. (a)................ 675 13,972
Regal Entertainment Group Class
A................................ 885 18,142
UnitedGlobalCom, Inc. Class A
(a).............................. 1,887 13,360
Wiley (John) & Sons, Inc. Class
A................................ 547 14,222
XM Satellite Radio Holdings, Inc.
Class A (a)...................... 3,353 67,932
-----------
247,146
-----------
METALS & MINING (1.0%)
CONSOL Energy, Inc. .............. 461 10,004
Freeport-McMoRan Copper & Gold,
Inc. Class B..................... 4,057 157,209
Peabody Energy Corp. ............. 1,049 34,963
Phelps Dodge Corp. (a)............ 979 60,443
United States Steel Corp. ........ 1,174 27,765
-----------
290,384
-----------
MULTILINE RETAIL (3.6%)
Big Lots, Inc. (a)................ 1,294 19,423
Dollar General Corp. ............. 6,511 146,302
Family Dollar Stores, Inc. ....... 1,713 74,704
Federated Department Stores,
Inc. ............................ 6,190 294,334
J.C. Penney Co., Inc. Holding
Co............................... 3,181 75,231
May Department Stores Co. (The)... 3,128 87,459
Neiman Marcus Group Inc. (The)
Class A (a)...................... 21 999
Neiman Marcus Group Inc. (The)
Class B (a)...................... 990 43,164
</Table>
<Table>
<Caption>
SHARES VALUE
----------------------
MULTILINE RETAIL (CONTINUED)
Nordstrom, Inc. .................. 1,462 $ 44,576
Saks, Inc. (a).................... 2,866 39,837
Sears, Roebuck and Co. ........... 4,622 243,256
-----------
1,069,285
-----------
MULTI-UTILITIES & UNREGULATED POWER (3.1%)
AES Corp. (The) (a)............... 14,324 125,335
Calpine Corp. (a)................. 4,068 18,754
Constellation Energy Group,
Inc. ............................ 5,654 205,636
Dynegy, Inc. Class A (a).......... 6,210 24,902
Energy East Corp. ................ 1,612 36,189
MDU Resources Group, Inc. ........ 3,807 86,152
National Fuel Gas Co. ............ 2,064 46,130
ONEOK, Inc. ...................... 1,019 20,268
Questar Corp. .................... 2,829 89,821
Reliant Resources, Inc. (a)....... 954 4,722
SCANA Corp. ...................... 2,493 85,485
Williams Cos., Inc. (The)......... 17,713 180,673
-----------
924,067
-----------
OFFICE ELECTRONICS (0.8%)
Xerox Corp. (a)................... 23,926 251,223
-----------
OIL & GAS (3.6%)
Amerada Hess Corp. ............... 839 43,309
Chesapeake Energy Corp. .......... 2,117 25,256
Cross Timbers Royalty Trust....... 35 875
EOG Resources, Inc. .............. 1,050 44,247
Kerr-McGee Corp. ................. 1,182 49,053
Marathon Oil Corp. ............... 9,168 271,098
Murphy Oil Corp. ................. 1,765 104,100
Newfield Exploration Co. (a)...... 897 35,638
Noble Energy, Inc. ............... 1,168 46,393
Pogo Producing Co. ............... 1,428 59,704
Sunoco, Inc. ..................... 1,725 75,486
Unocal Corp. ..................... 2,788 88,324
Valero Energy Corp. .............. 3,910 166,957
Western Gas Resources, Inc. ...... 201 8,542
XTO Energy, Inc. ................. 1,940 45,920
-----------
1,064,902
-----------
PAPER & FOREST PRODUCTS (1.1%)
Boise Cascade Corp. .............. 1,325 37,166
Georgia-Pacific Corp. ............ 8,563 225,036
Rayonier, Inc. ................... 1,275 53,614
-----------
315,816
-----------
PERSONAL PRODUCTS (0.6%)
Alberto-Culver Co. Class B........ 933 59,152
Estee Lauder Cos., Inc. (The)
Class A.......................... 3,482 130,192
-----------
189,344
-----------
PHARMACEUTICALS (1.5%)
American Pharmaceutical Partners,
Inc. (a)......................... 616 15,000
Endo Pharmaceuticals Holdings,
Inc. (a)......................... 1,098 17,963
ICN Pharmaceuticals, Inc. ........ 2,395 46,248
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
36
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
----------------------
PHARMACEUTICALS (CONTINUED)
IVAX Corp. (a).................... 1,513 $ 29,140
Mylan Laboratories, Inc. ......... 9,296 224,498
Pharmaceutical Resources, Inc.
(a).............................. 760 54,933
Sepracor, Inc. (a)................ 868 23,115
Watson Pharmaceuticals, Inc.
(a).............................. 1,220 47,909
-----------
458,806
-----------
REAL ESTATE (4.6%)
AMB Property Corp. ............... 883 26,481
Archstone-Smith Trust............. 2,134 56,978
Arden Realty, Inc. ............... 1,942 54,318
Camden Property Trust............. 658 26,057
CarrAmerica Realty Corp. ......... 1,631 49,044
CBL & Associates Properties,
Inc. ............................ 715 38,109
Cousins Properties, Inc. ......... 796 22,885
Developers Diversified Realty
Corp. ........................... 1,698 49,072
Duke Realty Corp. ................ 686 20,086
Equity Residential................ 4,393 128,495
Federal Realty Investment Trust... 484 18,368
Forest City Enterprises, Inc.
Class A.......................... 154 6,824
General Growth Properties,
Inc. ............................ 1,414 108,171
Kimco Realty Corp. ............... 339 14,123
Liberty Property Trust............ 480 17,462
LNR Property Corp. ............... 425 17,382
Mack-Cali Realty Corp. ........... 1,314 49,525
New Plan Excel Realty Trust....... 2,276 51,665
Pan Pacific Retail Properties,
Inc. ............................ 442 19,603
Public Storage, Inc. ............. 2,646 105,840
Regency Centers Corp. ............ 870 32,260
Rouse Co. (The)................... 1,762 75,766
Simon Property Group, Inc. ....... 4,112 185,369
Trizec Properties, Inc. .......... 1,854 24,751
United Dominion Realty Trust,
Inc. ............................ 1,614 28,164
Vornado Realty Trust.............. 2,745 138,760
-----------
1,365,558
-----------
ROAD & RAIL (0.1%)
Swift Transportation Co., Inc.
(a).............................. 1,130 25,346
Werner Enterprises, Inc. ......... 531 9,579
-----------
34,925
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.9%)
Altera Corp. (a).................. 3,872 78,331
Amkor Technology, Inc. (a)........ 3,130 59,001
Atmel Corp. (a)................... 14,099 79,518
Broadcom Corp. Class A (a)........ 4,889 156,204
Cypress Semiconductor Corp. (a)... 4,216 90,475
Fairchild Semiconductor
International, Inc. (a).......... 1,097 24,792
Integrated Circuit Systems, Inc.
(a).............................. 697 23,398
International Rectifier Corp.
(a).............................. 2,196 104,815
Intersil Corp. Class A (a)........ 1,550 39,975
Lam Research Corp. (a)............ 2,930 84,208
LSI Logic Corp. (a)............... 8,113 74,964
MEMC Electronic Materials, Inc.
(a).............................. 252 2,822
National Semiconductor Corp.
(a).............................. 6,239 253,491
NVIDIA Corp. (a).................. 3,482 61,562
Rambus, Inc. (a).................. 498 12,330
-----------
1,145,886
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------------------
SOFTWARE (2.8%)
Adobe Systems, Inc. .............. 713 $ 31,258
Cadence Design Systems, Inc.
(a).............................. 9,140 140,665
Citrix Systems, Inc. (a).......... 5,634 142,428
Compuware Corp. (a)............... 7,663 43,066
Electronic Arts, Inc. (a)......... 1,147 113,599
Fair Isaac Corp. ................. 499 31,826
Jack Henry & Associates, Inc. .... 740 14,785
Macromedia, Inc. (a).............. 1,902 36,347
Mercury Interactive Corp. (a)..... 823 38,220
Novell, Inc. (a).................. 8,390 49,249
PeopleSoft, Inc. (a).............. 1,363 28,296
Red Hat, Inc. (a)................. 1,469 22,094
Symantec Corp. (a)................ 1,528 101,841
Synopsys, Inc. (a)................ 1,601 50,784
-----------
844,458
-----------
SPECIALTY RETAIL (3.9%)
Abercrombie & Fitch Co. Class A
(a).............................. 1,046 29,811
Advanced Auto Parts, Inc. (a)..... 828 64,766
AutoNation, Inc. (a).............. 5,954 111,340
AutoZone, Inc. (a)................ 739 71,018
Barnes & Noble, Inc. (a).......... 512 15,258
Blockbuster, Inc. Class A......... 413 7,959
Borders Group, Inc. (a)........... 2,090 47,338
CarMax, Inc. (a).................. 2,322 73,166
Claire's Stores, Inc. ............ 1,366 52,864
Foot Locker, Inc. ................ 4,856 86,922
O'Reilly Automotive, Inc. (a)..... 473 20,476
PETsMART, Inc. ................... 983 25,175
Pier 1 Imports, Inc. ............. 1,053 24,324
RadioShack Corp. ................. 5,763 172,832
Regis Corp. ...................... 493 18,744
Rent-A-Center, Inc. (a)........... 2,401 75,055
Ross Stores, Inc. ................ 1,758 87,918
Sherwin-Williams Co. (The)........ 1,105 37,062
Staples, Inc. (a)................. 4,068 109,104
Toys "R" Us, Inc. (a)............. 2,428 31,564
-----------
1,162,696
-----------
TEXTILES, APPAREL & LUXURY GOODS (0.9%)
Coach, Inc. (a)................... 6,215 220,446
Polo Ralph Lauren Corp. .......... 483 14,683
Timberland Co. (The) Class A
(a).............................. 413 21,456
-----------
256,585
-----------
THRIFTS & MORTGAGE FINANCE (2.0%)
Astoria Financial Corp. .......... 907 31,418
Doral Financial Corp. ............ 1,314 66,357
Independence Community Bank
Corp. ........................... 538 19,773
New York Community Bancorp,
Inc. ............................ 2,404 87,025
Radian Group, Inc. ............... 2,526 133,625
Roslyn Bancorp, Inc. ............. 3,193 86,019
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
37
MID CAP CORE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
----------------------
THRIFTS & MORTGAGE FINANCE (CONTINUED)
Sovereign Bancorp, Inc. .......... 5,877 $ 122,300
Washington Federal, Inc. ......... 1,417 37,324
-----------
583,841
-----------
TOBACCO (0.1%)
Loews Corp.-Carolina Group........ 925 23,171
-----------
TRADING COMPANIES & DISTRIBUTORS (0.0%) (b)
MSC Industrial Direct Co., Inc.
Class A.......................... 527 12,464
-----------
WIRELESS TELECOMMUNICATION SERVICES (0.6%)
American Tower Corp. Class A
(a).............................. 6,573 76,247
Crown Castle International Corp.
(a).............................. 2,825 35,764
Sprint Corp. (PCS Group) (a)...... 18,083 78,661
-----------
190,672
-----------
Total Investments
(Cost $24,515,243) (d)........... 99.9% 29,693,384(e)
Cash and Other Assets,
Less Liabilities................. 0.1 29,679
------- ----------
Net Assets........................ 100.0% $29,723,063
------- ----------
------- ----------
</Table>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Exchange Traded Fund--represents a basket of securities that are traded on
an exchange.
(d) The cost for federal income tax purposes is $24,563,690.
(e) At October 31, 2003 net unrealized appreciation was $5,129,694, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $5,349,017 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $219,323.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
38
ECLIPSE FUNDS
MID CAP CORE FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $24,515,243)............................... $29,693,384
Cash.............................................. 69,114
Receivables:
Investment securities sold...................... 51,759
Dividends....................................... 15,033
Fund shares sold................................ 19
Other assets...................................... 1,409
-----------
Total assets................................ 29,830,718
-----------
LIABILITIES:
Payables:
Investment securities purchased................. 63,219
Manager......................................... 12,261
Custodian....................................... 4,559
Transfer agent.................................. 2,625
Directors....................................... 738
Accrued expenses.................................. 24,253
-----------
Total liabilities........................... 107,655
-----------
Net assets........................................ $29,723,063
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class................................... $ 2,937
Additional paid-in capital........................ 29,063,524
Accumulated undistributed net investment
income.......................................... 75,077
Accumulated net realized loss on investments...... (4,596,616)
Net unrealized appreciation on investments........ 5,178,141
-----------
Net assets........................................ $29,723,063
===========
No-Load Class
Net assets applicable to outstanding shares....... $29,723,063
===========
Shares of capital stock outstanding............... 2,937,475
===========
Net asset value per share outstanding............. $ 10.12
===========
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Dividends (a).................................... $ 356,947
Interest......................................... 55
-----------
Total income................................. 357,002
-----------
Expenses:
Manager.......................................... 205,552
Custodian........................................ 34,253
Professional..................................... 28,037
Registration..................................... 17,910
Transfer agent................................... 15,504
Portfolio pricing................................ 12,179
Directors........................................ 11,206
Shareholder communication........................ 2,829
Miscellaneous.................................... 15,013
-----------
Total expenses before reimbursement.......... 342,483
Expense reimbursement from Manager............... (100,657)
-----------
Net expenses................................. 241,826
-----------
Net investment income.............................. 115,176
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments................... 512,384
Net change in unrealized depreciation on
investments...................................... 6,009,353
-----------
Net realized and unrealized gain on investments.... 6,521,737
-----------
Net increase in net assets resulting from
operations....................................... $ 6,636,913
===========
</Table>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $315.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
39
MID CAP CORE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
----------- -----------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 115,176 $ 84,395
Net realized gain (loss) on investments................. 512,384 (1,976,949)
Net change in unrealized depreciation on investments.... 6,009,353 74,759
----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................. 6,636,913 (1,817,795)
----------- -----------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (82,305) (97,301)
----------- -----------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 2,326,100 4,485,135
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 8,055 8,051
----------- -----------
2,334,155 4,493,186
Cost of shares redeemed:
No-Load Class......................................... (1,117,764) (1,781,952)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 1,216,391 2,711,234
----------- -----------
Net increase in net assets............................ 7,770,999 796,138
NET ASSETS:
Beginning of year......................................... 21,952,064 21,155,926
----------- -----------
End of year............................................... $29,723,063 $21,952,064
=========== ===========
Accumulated undistributed net investment income at end of
year.................................................... $ 75,077 $ 52,464
=========== ===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
40
ECLIPSE FUNDS
MID CAP CORE FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
---------------------------------------------------------
YEAR ENDED OCTOBER 31 JANUARY 2, 2001*
----------------------------- THROUGH
2003 2002 OCTOBER 31, 2001
------- ------- ----------------
Net asset value at beginning of period...................... $ 7.82 $ 8.41 $ 10.00
------- ------- -------
Net investment income....................................... 0.04 0.03 0.03
Net realized and unrealized gain (loss) on
investments............................................... 2.29 (0.58) (1.62)
------- ------- -------
Total from investment operations............................ 2.33 (0.55) (1.59)
------- ------- -------
Less dividends:
From net investment income.................................. (0.03) (0.04) --
------- ------- -------
Net asset value at end of period............................ $ 10.12 $ 7.82 $ 8.41
======= ======= =======
Total investment return..................................... 29.90% (6.66%) (15.90%)(a)
Ratios (to average net assets)/Supplemental Data:
Net investment income..................................... 0.48% 0.34% 0.35%+
Net expenses.............................................. 1.00% 1.00% 1.00%+
Expenses (before reimbursement)........................... 1.42% 1.27% 1.27%+
Portfolio turnover rate..................................... 150% 151% 106%
Net assets at end of period (in 000's)...................... $29,723 $21,952 $21,156
</Table>
- ------------
* Commencement of Operations.
+ Annualized.
(a) Total return is not annualized.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
41
Eclipse Mid Cap Value Fund
- --------------------------------------------------------------------------------
All broadly watched equity indices provided positive performance for the 12
months ended October 31, 2003. Small-capitalization stocks showed the strongest
relative performance, followed by mid-capitalization and then
large-capitalization stocks. The market favored the growth style over the value
style of investing in the small- and mid-capitalization sectors, while value
stocks outperformed growth stocks in the large-capitalization sector.
For most of the first quarter of 2003, the market remained uncertain because of
political conflicts in the Middle East. As coalition troops assembled in Kuwait
in mid-March, the stock market began to rise. Investors tended to react
positively from the time coalition forces approached Baghdad until President
Bush announced that major combat operations had concluded. From May through
October, sentiments remained positive, and the domestic equity market continued
to rise. Low interest rates and indications of rebounding economic activity
helped to fuel an optimistic outlook. Consumer confidence, which rose sharply in
April, has been relatively stagnant since then and could continue in a holding
pattern if the labor market fails to improve.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, Eclipse Mid Cap Value Fund
returned 30.59% for No-Load Class shares and 30.18% for Service Class shares.
Over the same period, L Class shares returned 29.48%, excluding all sales
charges. All share classes underperformed the 30.88% return of the average
Lipper(1) mid-cap core fund over the same period. All share classes
underperformed the 35.88% return of the Russell Midcap Index(2) and the 33.48%
return of the Russell Midcap Value Index(3) for the 12 months ended October 31,
2003. All share classes outperformed the 20.80% return of the S&P 500 Index.(4)
The relative performance of Fund holdings in the technology hardware &
equipment, retailing, and capital goods industry groups was weaker than that of
related stocks in the Russell Midcap Value Index.
STRONG AND WEAK PERFORMERS
The Fund selects stocks based on a quantitative approach that focuses on
relative valuation and strong current operating results, using publicly
available annual and quarterly financial statistical data. Aside from a
company's quantitative history, the story behind a stock is irrelevant to the
Fund's investment process.
During the reporting period, stocks from various industries made positive
contributions to the Fund's performance.
CarMax (+106.5%)(5) was among the Fund's strongest performers. The company is a
franchiser of retail superstores for new and used cars as well as light trucks
and is a spin-off from Circuit City Stores.
PacifiCare Health Systems (+91%) is the biggest publicly traded operator of
Medicare Health plans. The company reported a strong second quarter, based on
rising profits and cost controls.
Hovnanian Enterprises (+90%) is a leading national homebuilder. Low interest
rates have helped the company post record earnings and revenue.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1. Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
2. The Russell Midcap(R) Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000(R) Index,
which, in turn, is an unmanaged index that measures the performance of the
1,000 largest U.S. companies based on total market capitalization. Results
assume reinvestment of all income and capital gains. An investment cannot
be made directly into an index.
3. The Russell Midcap(R) Value Index is an unmanaged index that measures the
performance of those Russell Midcap companies with lower price-to-book
ratios and lower forecasted growth values. Results assume reinvestment of
all income and capital gains. An investment cannot be made directly into an
index.
4. "S&P 500" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
5. Performance percentages reflect total returns of Fund holdings in the
securities mentioned, including purchases and sales, for the 12 months
ended 10/31/03, or for the portion of the reporting period such securities
were held in the Fund, if shorter.
42
J.B. Hunt Transport Services (+88%) is the third-largest U.S. trucking company,
and it posted better-than-expected profits for the third quarter of 2003.
AutoNation (+72%) is America's largest retailer of new and used vehicles. The
company reported good earnings for the third quarter by reducing costs and
increasing sales in its finance and insurance division.
Not all of the Fund's holdings made positive contributions. Michaels Stores
(-46%) operates a chain of retail specialty stores. The company announced that
it expected profit for the year to be lower than analysts' forecasts, and the
Fund sold its entire position in the company in February 2003.
Calpine (-35%) is an independent power producer that posted disappointing first-
and second-quarter earnings and deteriorating margins. The Fund eliminated its
position in the stock in October 2003.
Saks (-30%) is a U.S. department store company that continued to suffer
disappointing revenues in the first quarter of 2003, in part, due to the
lackluster economy. We sold the Fund's entire position in the stock in March of
2003.
Adolph Coors (-28%) is the third-largest U.S. brewer. The company posted
disappointing first-quarter earnings in 2003 after its U.K. business experienced
a loss, and in April 2003, we eliminated the stock from the Fund's portfolio.
Black & Decker (-26%) is the largest U.S. power-tool manufacturer, and the
Fund's entire position was sold during the months of February and March 2003.
PURCHASES AND SALES
The Fund purchases stocks that have relatively improving operating
characteristics and are relatively undervalued based on our proprietary model.
Maxtor, ADTRAN, and Doral Financial were among the securities that fit the
Fund's purchase criteria during the reporting period.
Maxtor (+92%) produces hard disk drive storage products for desktop systems.
Strong second- and third-quarter 2003 financials have been helped by the
company's focus on cost and expense controls. The Fund purchased the company's
shares in May and June and continues to hold them.
ADTRAN (+99%) designs, develops, manufacturers, markets, and services a variety
of high-speed digital transmission products. The company reported strong second-
and third-quarter 2003 financials and has introduced new products. The stock,
which was purchased in February and March of 2003, is still part of the
portfolio.
Doral Financial (+86%) is a diversified financial holding company. The low
interest-rate environment and the continued strength of the Puerto Rican
residential mortgage market helped the company report good earnings in 2003. The
Fund purchased this holding in November 2002, and it has been a strong performer
for the portfolio.
The Fund sells stocks that exhibit deteriorating operating results and/or are
relatively overvalued. Some examples of this were three stocks sold during the
fiscal year, Rational Software, Rent-a-Center, and Neiman Marcus Group.
Rational Software (+58%) is a computer software developer that was acquired by
International Business Machines in an all-cash transaction in February 2003. For
the portion of the reporting period the stock was held in the Fund, it provided
strong positive results.
Rent-a-Center (+72%) offers home electronics, appliances, furniture, and
accessories under flexible rental/purchase agreements. The company exhibited
strong revenue and earnings growth for the first three quarters of 2003. The
entire position was sold in August 2003.
Neiman Marcus Group (+72%) is a high-end specialty retailer that reported strong
revenues while reducing costs for its fiscal year. We sold the Fund's position
in the stock in August 2003 at a substantial gain for the portion of the
reporting period the stock was held in the Fund.
WEIGHTING CHANGES
A significant change in the Fund's weightings was an increase in the technology
43
hardware & equipment industry group from 5.7% of net assets on October 31, 2002,
to 12.8% on October 31, 2003. The shift in weight resulted from new purchases
and improved performance of technology hardware & equipment stocks relative to
other industry groups.
Another significant change was a decrease in retailing industry group holdings
from 14.6% of net assets at the beginning of the reporting period to 6.9% at the
end. The decline in weight resulted from position sales and weak performance of
retailers relative to other industry groups.
As of October 31, 2003, the Fund was overweighted relative to the Russell Midcap
Value Index in the consumer durables & apparel, technology hardware & equipment,
and health care equipment & services industry groups. The Fund's performance
benefited from the relative overweightings in health care equipment & services
and consumer durables & apparel. Although the Fund's technology hardware &
equipment holdings showed positive performance, the results were weaker than the
industry group's performance in the Russell Midcap Value Index.
At the end of the Fund's fiscal year, the equity portion of the Fund's portfolio
was underweighted relative to the Russell Midcap Value Index in the utilities,
materials, banks, and insurance industry groups. The Fund benefited from its
relative underweighting in the insurance and materials industry groups. Although
the Fund was underweighted in utilities, its performance in this industry group
was weaker than that of related stocks in the Russell Midcap Value Index.
LOOKING AHEAD
We will continue to utilize the Fund's proprietary quantitative methodologies to
select mid-capitalization stocks of companies that our model indicates are
relatively undervalued and have strong operating characteristics. Whatever the
markets or the economy may bring, the Fund will continue to seek high total
return.
WESLEY G. MCCAIN
KATHY A. O'CONNOR
Portfolio Managers
New York Life Investment Management LLC
44
$10,000 INVESTED IN
ECLIPSE MID CAP VALUE FUND
VERSUS RUSSELL MIDCAP INDEX,
RUSSELL MIDCAP VALUE INDEX, AND S&P 500 INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE MID CAP VALUE
FUND RUSSELL MIDCAP INDEX RUSSELL MIDCAP VALUE S&P 500
--------------------- -------------------- -------------------- -------
12/27/94 $ 10000 $ 10000 $ 10000 $ 10000
95 12320 12734 12655 12919
96 14320 15237 15333 16032
97 19620 19621 20315 21180
98 21465 20496 21482 25838
99 21500 24005 22707 32470
00 23688 29701 25397 34448
01 23129 24349 25047 25869
02 23041 22395 24300 21961
10/31/03 30090 30431 32439 26529
</Table>
$10,000 INVESTED IN
ECLIPSE MID CAP VALUE FUND
VERSUS RUSSELL MIDCAP INDEX,
RUSSELL MIDCAP VALUE INDEX, AND S&P 500 INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES GRAPH]
<Table>
<Caption>
LIPPER BALANCED FUND BALANCED COMPOSITE
ECLIPSE BALANCED FUND INDEX INDEX S&P 500
--------------------- -------------------- ------------------ -------
12/27/94 $ 10000 $ 10000 $ 10000 $ 10000
95 12285 12734 12655 12919
96 14249 15237 15333 16032
97 19478 19621 20315 21180
98 21262 20496 21482 25838
99 21251 24005 22707 32470
00 23362 29701 25397 34448
01 22744 24349 25047 25869
02 22619 22395 24303 21961
10/31/03 29445 30431 32439 26529
</Table>
$10,000 INVESTED IN
ECLIPSE MID CAP VALUE FUND
VERSUS RUSSELL MIDCAP INDEX,
RUSSELL MIDCAP VALUE INDEX, AND S&P 500 INDEX
CLASS L SHARES
[L CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE MID CAP VALUE
FUND RUSSELL MIDCAP INDEX RUSSELL MIDCAP VALUE S&P 500
--------------------- -------------------- -------------------- -------
12/27/94 $ 9900 $ 10000 $ 10000 $ 10000
95 12096 12734 12655 12919
96 13907 15237 15333 16032
97 18821 19621 20315 21180
98 20391 20496 21482 25838
99 20185 24005 22707 32470
00 22000 29701 25397 34448
01 21281 24349 25047 25869
02 20982 22395 24303 21961
10/31/03 27168 30431 32439 26529
</Table>
[LEGEND]
Source: Lipper Inc. and Bloomberg, 4/30/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 12/27/94 AND, FOR CLASS L
SHARES, REFLECT THE DEDUCTION OF ALL SALES CHARGES THAT WOULD HAVE APPLIED FOR
THE PERIOD OF INVESTMENT.
Source: Lipper Inc., 4/30/03
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- -------------------------------------------------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION(2)
- -------------------------------------------------------------------------------------------------------------------------
Eclipse Mid Cap Value Fund No-Load Class 30.59% 6.99% 13.25%
Eclipse Mid Cap Value Fund Service Class(2) 30.18 6.73 12.98
Eclipse Mid Cap Value Fund Class L (without sales
charges)(3) 29.48 5.91 12.08
Eclipse Mid Cap Value Fund Class L (with sales charges)(3) 27.20 5.69 11.95
Average Lipper mid-cap core fund(4) 30.88 10.65 12.80
Russell Midcap Index(5) 35.88 8.23 13.43
Russell Midcap Value Index(6) 33.48 8.59 14.25
S&P 500 Index(7) 20.80 0.53 11.65
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE CHART]
<Table>
TOTAL RETURN(1)
---------------
Year ended December 31, 1995 26.82
Year ended December 31, 1996 22.40
Year ended December 31, 1997 32.46
Year ended December 31, 1998 10.35
Year ended December 31, 1999 0.04
Year ended December 31, 2000 5.83
10 months ended October 31, 2001 -3.72
Year ended October 31, 2002 -0.38
Year ended October 31, 2003 30.59
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares. Class L shares are subject to a 1% sales
charge and a contingent deferred sales charge (CDSC) of 1% if redeemed within
one year of purchase. Performance figures for Class L shares reflect the .75%
distribution fee and .25% service fee.
45
2. Performance figures for the Service Class, first offered to the public on
7/1/02, include the historical performance of the No-Load Class from the
Fund's inception on 12/27/94 through 6/30/02. Performance figures for these
classes will vary after 6/30/02, based on differences in their expense
structures.
3. Performance figures for Class L shares, first offered to the public on
12/30/02, include the historical performance of the No-Load Class shares from
the Fund's inception on 12/27/94 up to 12/30/02.
4. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
5. The Russell Midcap(R) Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000(R) Index,
which, in turn, is an unmanaged index that measures the performance of the
1,000 largest U.S. companies based on total market capitalization. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly into an index.
6. The Russell Midcap(R) Value Index is an unmanaged index that measures the
performance of those Russell Midcap(R) companies with lower price-to-book
ratios and lower forecasted growth values. The Russell Midcap(R) Index is an
unmanaged index that measures the performance of the 800 smallest companies
in the Russell 1000(R) Index, which, in turn, is an unmanaged index that
measures the performance of the 1,000 largest U.S. companies based on total
market capitalization. Results for all indices assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
7. "S&P 500" is a trademark of the McGraw-Hill Companies, Inc. The S&P 500 is an
unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
INFORMATION ABOUT ECLIPSE MID CAP VALUE FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
46
ECLIPSE FUNDS
MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (96.9%)+
SHARES VALUE
------------------------
AIR FREIGHT & LOGISTICS (1.1%)
J.B. Hunt Transport Services,
Inc. (a)........................ 6,200 $ 157,356
-----------
CAPITAL MARKETS (2.7%)
Bear Stearns Cos., Inc. (The).... 2,097 159,896
Federated Investors, Inc.
Class B......................... 2,950 81,568
Lehman Brothers Holdings,
Inc. ........................... 1,700 122,400
-----------
363,864
-----------
COMMERCIAL BANKS (2.1%)
International Bancshares
Corp. .......................... 2,700 123,984
Silicon Valley Bancshares (a).... 4,700 164,970
-----------
288,954
-----------
COMMERCIAL SERVICES & SUPPLIES (0.2%)
Deluxe Corp. .................... 600 24,222
-----------
COMMUNICATIONS EQUIPMENT (2.3%)
ADTRAN, Inc. .................... 2,300 156,469
JDS Uniphase Corp. (a)........... 44,500 157,975
-----------
314,444
-----------
COMPUTERS & PERIPHERALS (4.8%)
Dell, Inc. (a)................... 4,800 173,376
InFocus Corp. (a)................ 26,500 174,635
Maxtor Corp. (a)................. 16,200 221,454
Sun Microsystems, Inc. (a)....... 23,100 91,476
-----------
660,941
-----------
CONSTRUCTION & ENGINEERING (2.3%)
Jacobs Engineering Group, Inc.
(a)............................. 3,000 138,960
Quanta Services, Inc. (a)........ 21,700 177,506
-----------
316,466
-----------
CONSUMER FINANCE (3.6%)
AmeriCredit Corp. (a)............ 11,200 150,080
SLM Corp. ....................... 4,600 180,136
Student Loan Corp. (The)......... 700 90,664
WFS Financial, Inc. (a).......... 1,500 65,415
-----------
486,295
-----------
DIVERSIFIED FINANCIALS (1.4%)
Moody's Corp. ................... 3,300 190,839
-----------
ELECTRIC UTILITIES (1.3%)
Edison International (a)......... 9,000 177,390
-----------
ELECTRICAL EQUIPMENT (1.4%)
American Power Conversion
Corp. .......................... 9,300 188,139
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS (5.2%)
Avnet, Inc. (a).................. 9,100 176,540
Sanmina-SCI Corp. (a)............ 19,500 205,725
</Table>
<Table>
<Caption>
SHARES VALUE
------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (CONTINUED)
Solectron Corp. (a).............. 26,100 $ 144,594
Tektronix, Inc. ................. 7,300 187,391
-----------
714,250
-----------
ENERGY EQUIPMENT & SERVICES (0.4%)
Helmerich & Payne, Inc. ......... 2,300 60,973
-----------
FOOD PRODUCTS (2.1%)
Dean Foods Co. (a)............... 4,150 125,538
Hormel Foods Corp. .............. 6,400 158,016
-----------
283,554
-----------
GAS UTILITIES (0.5%)
UGI Corp. ....................... 2,050 63,140
-----------
HEALTH CARE PROVIDERS & SERVICES (9.1%)
AdvancePCS (a)................... 4,000 205,880
Coventry Health Care, Inc. (a)... 3,900 213,525
Health Net, Inc. (a)............. 6,100 192,699
Humana, Inc. (a)................. 8,900 180,581
Manor Care, Inc. ................ 6,300 209,664
PacifiCare Health Systems, Inc.
(a)............................. 3,900 232,050
-----------
1,234,399
-----------
HOTELS, RESTAURANTS & LEISURE (4.5%)
CBRL Group, Inc. ................ 4,100 158,875
Choice Hotels International, Inc.
(a)............................. 1,900 62,738
GTECH Holdings Corp. ............ 2,800 125,104
Mandalay Resort Group............ 2,500 98,125
Outback Steakhouse, Inc. ........ 3,900 163,800
-----------
608,642
-----------
HOUSEHOLD DURABLES (6.8%)
Centex Corp. .................... 1,700 165,750
Hovnanian Enterprises, Inc. Class
A (a)........................... 2,200 178,816
KB HOME.......................... 1,200 82,188
La-Z-Boy, Inc. .................. 5,600 113,120
M.D.C. Holdings, Inc. ........... 1,200 80,784
NVR, Inc. (a).................... 400 195,760
Ryland Group, Inc. (The)......... 1,300 115,570
-----------
931,988
-----------
HOUSEHOLD PRODUCTS (2.9%)
Clorox Co. (The)................. 4,000 181,200
Energizer Holdings, Inc. (a)..... 6,000 220,800
-----------
402,000
-----------
INDUSTRIAL CONGLOMERATES (0.4%)
Alleghany Corp. ................. 300 60,438
-----------
INSURANCE (3.2%)
Ambac Financial Group, Inc. ..... 1,400 99,036
Jefferson-Pilot Corp. ........... 1,300 62,062
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
47
MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
INSURANCE (CONTINUED)
MBIA, Inc. ...................... 2,400 $ 143,064
Torchmark Corp. ................. 2,900 127,252
-----------
431,414
-----------
LEISURE EQUIPMENT & PRODUCTS (2.6%)
Callaway Golf Co. ............... 11,200 182,000
Hasbro, Inc. .................... 7,900 172,220
-----------
354,220
-----------
MULTILINE RETAIL (1.7%)
Federated Department Stores,
Inc. ........................... 1,700 80,835
Kmart Holding Corp. (a).......... 2,400 69,576
Sears, Roebuck and Co. .......... 1,600 84,208
-----------
234,619
-----------
MULTI-UTILITIES & UNREGULATED POWER (1.4%)
Williams Cos., Inc. (The)........ 18,500 188,700
-----------
OIL & GAS (1.3%)
Overseas Shipholding Group,
Inc. ........................... 6,300 171,738
-----------
PERSONAL PRODUCTS (1.2%)
Estee Lauder Cos., Inc. (The)
Class A......................... 4,300 160,777
-----------
PHARMACEUTICALS (3.3%)
Medicis Pharmaceutical Corp.
Class A......................... 2,500 158,375
Mylan Laboratories, Inc. ........ 6,600 159,390
Perrigo Co. ..................... 10,400 139,880
-----------
457,645
-----------
REAL ESTATE (5.6%)
AMB Property Corp. .............. 4,400 131,956
Cousins Properties, Inc. ........ 3,800 109,250
Equity Office Properties Trust... 3,200 89,632
Hospitality Properties Trust..... 2,400 88,008
HRPT Properties Trust............ 13,200 123,552
LNR Property Corp. .............. 3,000 122,700
Reckson Associates Realty
Corp. .......................... 4,700 104,434
-----------
769,532
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.1%)
Advanced Micro Devices, Inc.
(a)............................. 5,400 82,080
Novellus Systems, Inc. (a)....... 4,900 202,321
-----------
284,401
-----------
SOFTWARE (3.8%)
Ascential Software Corp. (a)..... 5,200 115,388
Autodesk, Inc. .................. 8,600 165,550
Citrix Systems, Inc. (a)......... 9,200 232,576
-----------
513,514
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
------------------------
SPECIALTY RETAIL (4.9%)
American Eagle Outfitters, Inc.
(a)............................. 3,900 $ 62,361
AutoNation, Inc. (a)............. 7,700 143,990
CarMax, Inc. (a)................. 4,387 138,234
Sherwin-Williams Co. (The)....... 5,500 184,470
Talbots, Inc. (The).............. 1,700 55,879
Zale Corp. (a)................... 1,500 77,640
-----------
662,574
-----------
TEXTILES, APPAREL & LUXURY GOODS (1.4%)
Reebok International, Ltd. ...... 4,800 186,960
-----------
THRIFTS & MORTGAGE FINANCE (6.6%)
Countrywide Financial Corp. ..... 1,400 147,168
Doral Financial Corp. ........... 3,200 161,600
Freddie Mac...................... 1,600 89,808
GreenPoint Financial Corp. ...... 3,300 102,795
IndyMac Bancorp, Inc. ........... 4,600 135,240
MGIC Investment Corp. ........... 2,300 118,013
Radian Group, Inc. .............. 2,700 142,830
-----------
897,454
-----------
TOBACCO (1.6%)
R.J. Reynolds Tobacco Holdings,
Inc. ........................... 4,500 216,135
-----------
WIRELESS TELECOMMUNICATION SERVICES (1.1%)
Crown Castle International Corp.
(a)............................. 11,500 145,590
-----------
Total Investments (Cost
$10,354,040) (b)................ 96.9% 13,203,567(c)
Cash and Other Assets,
Less Liabilities................ 3.1 416,453
---------- -----------
Net Assets....................... 100.0% $13,620,020
========== ===========
</Table>
- ------------
(a) Non-income producing security.
(b) The cost for federal income tax purposes is $10,368,371.
(c) At October 31, 2003 net unrealized appreciation was $2,835,196, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $2,925,492 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $90,296.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
48
ECLIPSE FUNDS
MID CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $10,354,040)............................... $13,203,567
Cash.............................................. 425,531
Receivables:
Fund shares sold................................ 19,167
Dividends and interest.......................... 11,269
Other assets...................................... 10,102
-----------
Total assets................................ 13,669,636
-----------
LIABILITIES:
Payables:
Professional.................................... 19,387
Shareholder communication....................... 4,294
Manager......................................... 4,134
Transfer agent.................................. 3,898
Custodian....................................... 2,756
Trustees........................................ 1,104
Registration.................................... 480
Accrued expenses.................................. 13,563
-----------
Total liabilities........................... 49,616
-----------
Net assets........................................ $13,620,020
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share)
1 billion shares authorized
No-Load Class................................... $ 6,481
Service Class................................... 1
L Class......................................... 1
Additional paid-in capital........................ 10,669,031
Accumulated net realized gain on investments...... 94,979
Net unrealized appreciation on investments........ 2,849,527
-----------
Net assets........................................ $13,620,020
===========
No-Load Class
Net assets applicable to outstanding shares....... $13,616,513
===========
Shares of capital stock outstanding............... 648,079
===========
Net asset value per share outstanding............. $ 21.01
===========
Service Class
Net assets applicable to outstanding shares....... $ 2,106
===========
Shares of capital stock outstanding............... 100
===========
Net asset value per share outstanding............. $ 20.97
===========
L Class
Net assets applicable to outstanding shares....... $ 1,401
===========
Shares of capital stock outstanding............... 67
===========
Net asset value per share outstanding............. $ 20.86
Maximum sales charge (1.00% of offering price).... 0.21
-----------
Maximum offering price per share outstanding...... $ 21.07
===========
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Dividends (a)................................... $ 722,783
Interest........................................ 9,797
-----------
Total income................................ 732,580
-----------
Expenses:
Manager......................................... 435,716
Transfer agent.................................. 63,895
Professional.................................... 48,218
Registration.................................... 46,549
Trustees........................................ 16,677
Custodian....................................... 11,535
Shareholder communication....................... 10,480
Portfolio pricing............................... 8,324
Distribution--L Class........................... 8
Service--Service Class.......................... 3
Service--L Class................................ 3
Miscellaneous................................... 18,614
-----------
Total expenses before reimbursement......... 660,022
Expense reimbursement from Manager.............. (115,167)
Fees paid indirectly (See Note 2(D))............ (41,364)
-----------
Net expenses................................ 503,491
-----------
Net investment income............................. 229,089
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................. 10,470,034
Net change in unrealized appreciation on
investments..................................... 787,704
-----------
Net realized and unrealized gain on investments... 11,257,738
-----------
Net increase in net assets resulting from
operations...................................... $11,486,827
===========
</Table>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of
$1,101.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
49
MID CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
DECREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 229,089 $ 269,991
Net realized gain (loss) on investments................. 10,470,034 (84,013)
Net change in unrealized appreciation on investments.... 787,704 (481,540)
------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................. 11,486,827 (295,562)
------------ ------------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (220,660) (291,613)
Service Class......................................... (1) --
------------ ------------
Total dividends to shareholders..................... (220,661) (291,613)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 6,543,744 26,415,345
Service Class......................................... 1,529 175
L Class............................................... 1,148 --
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 219,240 289,672
Service Class......................................... 1 --
------------ ------------
6,765,662 26,705,192
Cost of shares redeemed:
No-Load Class......................................... (55,643,197) (31,793,864)
L Class............................................... (104) --
------------ ------------
Decrease in net assets derived from capital share
transactions......................................... (48,877,639) (5,088,672)
------------ ------------
Net decrease in net assets............................ (37,611,473) (5,675,847)
NET ASSETS:
Beginning of year......................................... 51,231,493 56,907,340
------------ ------------
End of year............................................... $ 13,620,020 $ 51,231,493
============ ============
Accumulated undistributed net investment income at end of
year.................................................... $ -- $ 163,474
============ ============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
50
(THIS PAGE INTENTIONALLY LEFT BLANK)
51
MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31 JANUARY 1, 2001 YEAR ENDED DECEMBER 31
---------------------- THROUGH --------------------------------
2003 2002 OCTOBER 31, 2001* 2000 1999 1998
-------- -------- ----------------- -------- -------- --------
Net asset value at beginning of period..... $ 16.16 $ 16.30 $ 16.93 $ 16.06 $ 17.73 $ 17.76
-------- -------- -------- -------- -------- --------
Net investment income (loss)............... 0.08(a) 0.09 0.06 0.06 0.11 0.06
Net realized and unrealized gain (loss) on
investments............................... 4.84 (0.14) (0.69) 0.88 (0.13) 1.76
-------- -------- -------- -------- -------- --------
Total from investment operations........... 4.92 (0.05) (0.63) 0.94 (0.02) 1.82
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income................. (0.07) (0.09) -- (0.06) (0.11) (0.06)
From net realized gain on investments...... -- -- -- (0.01) (1.54) (1.79)
-------- -------- -------- -------- -------- --------
Total dividends and distributions.......... (0.07) (0.09) -- (0.07) (1.65) (1.85)
-------- -------- -------- -------- -------- --------
Net asset value at end of period........... $ 21.01 $ 16.16 $ 16.30 $ 16.93 $ 16.06 $ 17.73
======== ======== ======== ======== ======== ========
Total investment return.................... 30.59% (0.38%) (3.72%)(b) 5.83% 0.04% 10.35%
Ratios (to average net assets)/Supplemental
Data:
Net investment income (loss).............. 0.47% 0.46% 0.41%+ 0.35% 0.51% 0.33%
Net expenses.............................. 1.13%# 1.17%# 1.19%+#(d) 1.06%# 1.05% 0.98%
Expenses (before reimbursement)........... 1.37%# 1.29%# 1.22%+#(d) 1.06%# 1.05% 1.08%
Portfolio turnover rate.................... 90% 75% 69% 114% 51% 81%
Net assets at end of period (in 000's)..... $ 13,617 $ 51,231 $ 56,907 $ 67,401 $ 83,064 $124,525
</Table>
- ------------
<Table>
* The Fund changed its fiscal year end from December 31 to
October 31.
** Commencement of Operations.
+ Annualized.
# Includes transfer agent fees paid indirectly which amounted
to 0.09%, 0.13% and 0.15% of average net assets for the
years ended October 31, 2003 and October 31, 2002 and the
ten months ended October 31, 2001, respectively, and
custodian fees and other expenses paid indirectly which
amounted to 0.02% of average net assets for the year ended
December 31, 2000.
(a) Per share data based on average shares outstanding during
the period.
(b) Total return is not annualized.
(c) Less than one thousand dollars.
(d) Restated.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
52
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS L CLASS
----------------------------------- -------------------
JULY 1, 2002** DECEMBER 30, 2002**
YEAR ENDED THROUGH THROUGH
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003
---------------- ---------------- -------------------
$ 16.16 $ 17.77 $ 15.87
-------- -------- --------
0.05(a) 0.06 (0.06)(a)
4.81 (1.67) 5.05
-------- -------- --------
4.86 (1.61) 4.99
-------- -------- --------
(0.05) -- --
-- -- --
-------- -------- --------
(0.05) -- --
-------- -------- --------
$ 20.97 $ 16.16 $ 20.86
======== ======== ========
30.18% (9.06%)(b) 31.44%(b)
0.22% 0.21%+ (0.53%)+
1.38%# 1.42%+# 2.13%+#
1.62%# 1.54%+# 2.37%+#
90% 75% 90%
$ 2 $ 0(c) $ 1
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
53
Eclipse Small Cap Value Fund
- --------------------------------------------------------------------------------
All broadly watched equity indices provided positive performance for the 12
months ended October 31, 2003. Small-capitalization stocks showed the strongest
relative performance, followed by mid-capitalization and then
large-capitalization stocks. The market favored the growth style over the value
style of investing in the small- and mid-capitalization sectors, while value
stocks outperformed growth stocks in the large-capitalization sector.
For most of the first quarter of 2003, the market remained uncertain because of
political conflicts in the Middle East. As coalition troops assembled in Kuwait
in mid-March, the stock market began to rise. Investors tended to react
positively from the time coalition forces approached Baghdad until President
Bush announced that major combat operations had concluded. From May through
October, sentiments remained positive, and the domestic equity market continued
to rise. Low interest rates and indications of rebounding economic activity
helped to fuel an optimistic outlook. Consumer confidence, which rose sharply in
April, has been relatively stagnant since then and could continue in a holding
pattern if the labor market fails to improve.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, Eclipse Small Cap Value Fund
returned 42.04% for No-Load Class shares and 41.80% for Service Class shares.
Over the same period, L Class shares returned 40.87%, excluding all sales
charges. All share classes outperformed the 37.89% return of the average
Lipper(1) small-cap value fund over the same period. All share classes also
outperformed the 40.29% return of the Russell 2000(R) Value Index but
underperformed the 43.37% return of the Russell 2000(R) Index over the same
period.(2) All share classes outperformed the 33.58% return of the S&P SmallCap
600(R) Index,(3) the 20.80% return of the S&P 500 Index,(4) and the 39.62%
return of the Lipper Small Cap Value Funds Index,(5) for the 12 months ended
October 31, 2003.
The Fund's holdings in the food, beverage & tobacco, consumer durables &
apparel, health care equipment & services, and real estate industry groups
showed stronger relative performance than securities of the Russell 2000 Value
Index in the same industry groups.
STRONG AND WEAK PERFORMERS
The Fund selects stocks based on a quantitative approach that focuses on
relative valuation and strong current operating results, using publicly
available annual and quarterly financial statistical data. Aside from a
company's quantitative history, the story behind a stock is irrelevant to the
Fund's investment process. During the reporting period, the five best-performing
stocks in the Fund spanned a wide range of industries.
Brightpoint (+257%)(6) provides distribution and integrated logistics services
to the wireless communications industry throughout the world. The Fund purchased
the stock in August of 2003.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Stocks of small companies may be subject to greater price volatility,
significantly lower trading volumes, and greater spreads between bid and ask
prices than stocks of larger companies. Small companies may be more vulnerable
to adverse business or market developments than mid- or large-capitalization
companies.
1. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
2. The Russell 2000(R) Value Index is an unmanaged index that measures the
performance of those Russell 2000(R) companies with lower price-to-book
ratios and lower forecasted growth values. The Russell 2000(R) Index is an
unmanaged index that measures the performance of the 2,000 smallest companies
in the Russell 3000(R) Index, which, in turn, is an unmanaged index that
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization. Results for all indices assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
3. The S&P SmallCap 600(R) Index is an unmanaged, market-value weighted index of
600 small-capitalization common stocks. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
4. "S&P 500" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is an
unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
5. The Russell 2000()(R) Index is an unmanaged index that measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index,
which, in turn, is an unmanaged index that measures the performance of the
3,000 largest U.S. companies based on total market capitalization. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly into an index.
6. Performance percentages reflect total returns of Fund holdings in the
securities mentioned, including purchases and sales, for the 12 months ended
10/31/03, or for the portion of the reporting period such securities were
held in the Fund, if shorter.
54
W.R. Grace (+222%) supplies construction, specialty-chemical, and container
products. The company has been one of the many companies involved in asbestos
claims. In late June and early July 2003, legislation regarding funding and
limits for asbestos claims was being debated in the Senate. These limits would
have been favorable to W.R. Grace's liability. The price moved up on the news of
these debates and we sold the stock in July.
Enterasys Networks (+180%) is a computer-networking equipment company. The
company announced new products and received favorable product reviews in the
marketplace. The Fund both purchased and sold shares of the stock during the
fiscal year.
ALARIS Medical Systems (+177%) designs, manufactures and markets intravenous
medication delivery devices. The company has reported strong results throughout
the latest year. The Fund has reduced its position in this stock during the
Fund's fiscal year.
William Lyon Homes (+131%) is a home-building company with development
communities in California, Arizona, New Mexico, and Nevada. The company has
benefited from strong housing demand.
Not all of the Fund's holdings made positive contributions. The worst-performing
stock in the portfolio was Penn Traffic (-88%), which operates supermarkets
under the Big Bear, Big Bear Plus, Bi-Lo, P&C, and Quality trade names. On May
20, 2003, a news report was released indicating that the company was preparing
to file for bankruptcy protection. The Fund sold the position after the news was
released.
Emerson Radio (-40%) designs, markets, and licenses consumer electronic
products. The company reported that sales were lower than in the previous year.
Graphic Packaging International (-37%) provides paperboard and packaging
solutions for frozen and nonfrozen foods and beverage products. The company was
involved in a series of transactions, including acquisitions of and by other
companies. The Fund's entire position was sold in March of 2003.
Steel Technologies (-35%) processes flat-rolled steel for industrial customers.
The company experienced lower demand from the automotive industry.
Stewart Enterprises (-34%) owns and operates funeral homes and cemeteries in
several countries. The company went through significant management changes
during the year.
PURCHASES AND SALES
The Fund purchases stocks that have relatively improving operating
characteristics and are relatively undervalued based on our proprietary model.
Brightpoint (+257%), the Fund's top-performing stock, was among the securities
that fit the Fund's purchase criteria during the reporting period.
The Fund also established a position in John B. Sanfilippo & Son (+110%), a
company that processes, packages, markets, and distributes shelled nuts and
sesame sticks under the Evon's, Fisher, and Flavor Tree brand names, among
others. The Fund began purchasing the company's stock in February of 2003.
CellStar (+103%) is a global provider of distribution and value-added logistics
services to the wireless communications industry. The Fund purchased the stock
in April of 2003.
The Fund sells stocks that exhibit deteriorating operating results and/or are
relatively overvalued. Among the stocks that were sold during the fiscal year
were W.R. Grace, PacificCare Health Systems, and Silgan Holdings. W.R. Grace
(+222%), the Fund's next-to-best performing stock, was discussed earlier.
PacificCare Health Systems (+97%) is a managed health care services company that
provides managed care products for employer groups and Medicare beneficiaries.
The Fund sold the stock in August of 2003.
Silgan Holdings (+58%) manufactures consumer-goods packaging products. The Fund
sold the stock in June of 2003.
WEIGHTING CHANGES
For the 12 months ended October 31, 2003, among the most significant industry
group weighting changes for Eclipse Small Cap
55
Value Fund were increases in technology hardware & equipment from 1.5% at the
beginning of the reporting period to 8.9% at the end of October, an increase
from 0% to 7.4% in telecommunication services, and from 1.2% to 8.4% in
insurance for the same dates. These weighting shifts were the result of new
purchases and improved performance of the industry groups relative to other
industry groups.
Other significant changes in the Fund's industry-group weightings included a
decrease in materials holdings from 9.7% at the beginning of the reporting
period to 3.2% at the end, a reduction of banks holdings from 24.4% to 18.3%,
and a decrease in retailing holdings from 8.2% to 2.9% over the same period. The
reductions in weightings were the result of position sales and weaker relative
performance of the industry groups.
As of October 31, 2003, the Fund was overweighted relative to the Russell 2000
Value Index in the food, beverage & tobacco, telecommunication services,
insurance, and technology hardware & equipment industry groups. The Fund's
performance benefited from the relative overweighted positions in the food,
beverage & tobacco, telecommunication services, and insurance industry groups.
Although the Fund's technology hardware & equipment holdings showed positive
performance, the results were weaker than the industry group's performance in
the Russell 2000 Value Index.
At the end of October 2003, the Fund was underweighted relative to the Russell
2000 Value Index in the capital goods, utilities, materials, and transportation
industry groups. The Fund benefited from its relative underweighted positions in
the transportation industry group. Although the Fund was underweighted in the
capital goods, utilities, and materials industry groups, Fund holdings in these
areas underperformed related stocks in the Russell 2000 Value Index.
LOOKING AHEAD
The Fund will continue to invest in small-capitalization stocks of companies
that, according to our proprietary quantitative model, are relatively
undervalued and have strong operating characteristics. Whatever the markets or
the economy may bring, the Fund will continue to seek high total return.
WESLEY G. MCCAIN
KATHY A. O'CONNOR
Portfolio Managers
New York Life Investment Management LLC
56
$10,000 INVESTED IN
ECLIPSE SMALL CAP VALUE FUND
VERSUS RUSSELL 2000 INDEX,
RUSSELL 2000 VALUE INDEX,
S&P SMALLCAP 600 INDEX, S&P 500 INDEX,
AND LIPPER SMALL CAP VALUE FUNDS INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
LIPPER SMALLCAP
ECLIPSE SMALL RUSSELL 2000 RUSSELL 2000 VALUE FUNDS S&P SMALLCAP
CAP VALUE FUND INDEX VALUE INDEX INDEX 600 INDEX
-------------- ------------ ------------ --------------- ------------
10/31/93 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00
10/31/94 9,971.00 9,965.00 9,986.00 10,336.00 9,657.00
10/31/95 11,179.00 11,793.00 11,580.00 11,631.00 11,701.00
10/31/96 13,878.00 13,751.00 13,847.00 13,611.00 14,096.00
10/31/97 19,552.00 17,785.00 18,995.00 18,567.00 18,601.00
10/31/98 18,896.00 15,679.00 17,534.00 16,317.00 16,545.00
10/31/99 19,711.00 18,010.00 17,660.00 16,681.00 18,537.00
10/31/00 20,079.00 21,145.00 20,714.00 19,857.00 23,220.00
10/31/01 20,079.00 18,459.00 22,528.00 21,429.00 21,726.00
10/31/02 21,252.00 16,324.00 21,958.00 20,809.00 20,905.00
10/31/03 30,186.00 23,403.00 30,805.00 29,440.00 27,924.00
<Caption>
S&P 500 INDEX
-------------
10/31/93 $ 10,000.00
10/31/94 10,387.00
10/31/95 13,133.00
10/31/96 16,297.00
10/31/97 21,531.00
10/31/98 26,266.00
10/31/99 33,008.00
10/31/00 35,018.00
10/31/01 26,297.00
10/31/02 22,325.00
10/31/03 26,968.00
</Table>
$10,000 INVESTED IN
ECLIPSE SMALL CAP VALUE FUND
VERSUS RUSSELL 2000 INDEX,
RUSSELL 2000 VALUE INDEX,
S&P SMALLCAP 600 INDEX, S&P 500 INDEX,
AND LIPPER SMALL CAP VALUE FUNDS INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
LIPPER SMALLCAP
ECLIPSE SMALL RUSSELL 2000 RUSSELL 2000 VALUE FUNDS S&P SMALLCAP
CAP VALUE FUND INDEX VALUE INDEX INDEX 600 INDEX
-------------- ------------ ------------ --------------- ------------
10/31/93 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00
10/31/94 9,932.00 9,965.00 9,986.00 10,336.00 9,657.00
10/31/95 11,111.00 11,793.00 11,580.00 11,631.00 11,701.00
10/31/96 13,762.00 13,751.00 13,847.00 13,611.00 14,096.00
10/31/97 19,313.00 17,785.00 18,995.00 18,567.00 18,601.00
10/31/98 18,670.00 15,679.00 17,534.00 16,317.00 16,545.00
10/31/99 19,333.00 18,010.00 17,660.00 16,681.00 18,537.00
10/31/00 19,683.00 21,145.00 20,714.00 19,857.00 23,220.00
10/31/01 19,629.00 18,459.00 22,528.00 21,429.00 21,726.00
10/31/02 20,746.00 16,324.00 21,958.00 20,809.00 20,905.00
10/31/03 29,418.00 23,403.00 30,805.00 29,440.00 27,924.00
<Caption>
S&P 500 INDEX
-------------
10/31/93 $ 10,000.00
10/31/94 10,387.00
10/31/95 13,133.00
10/31/96 16,297.00
10/31/97 21,531.00
10/31/98 26,266.00
10/31/99 33,008.00
10/31/00 35,018.00
10/31/01 26,297.00
10/31/02 22,325.00
10/31/03 26,968.00
</Table>
$10,000 INVESTED IN
ECLIPSE SMALL CAP VALUE FUND
VERSUS RUSSELL 2000 INDEX,
RUSSELL 2000 VALUE INDEX,
S&P SMALLCAP 600 INDEX, S&P 500 INDEX,
AND LIPPER SMALL CAP VALUE FUNDS INDEX
CLASS L SHARES
[L CLASS SHARES LINE GRAPH]
<Table>
<Caption>
LIPPER SMALLCAP
RUSSELL 2000 RUSSELL 2000 VALUE FUNDS S&P SMALLCAP
L SHARES INDEX VALUE INDEX INDEX 600 INDEX
-------- ------------ ------------ --------------- ------------
10/31/93 $ 9,900.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00
10/31/94 9,718.00 9,965.00 9,986.00 10,336.00 9,657.00
10/31/95 10,760.00 11,793.00 11,580.00 11,631.00 11,701.00
10/31/96 13,201.00 13,751.00 13,847.00 13,611.00 14,096.00
10/31/97 18,300.00 17,785.00 18,995.00 18,567.00 18,601.00
10/31/98 17,351.00 15,679.00 17,534.00 16,317.00 16,545.00
10/31/99 17,919.00 18,010.00 17,660.00 16,681.00 18,537.00
10/31/00 18,064.00 21,145.00 20,714.00 19,857.00 23,220.00
10/31/01 17,868.00 18,459.00 22,528.00 21,429.00 21,726.00
10/31/02 18,750.00 16,324.00 21,958.00 20,809.00 20,905.00
10/31/03 26,413.00 23,403.00 30,805.00 29,440.00 27,924.00
<Caption>
S&P 500 INDEX
-------------
10/31/93 $ 10,000.00
10/31/94 10,387.00
10/31/95 13,133.00
10/31/96 16,297.00
10/31/97 21,531.00
10/31/98 26,266.00
10/31/99 33,008.00
10/31/00 35,018.00
10/31/01 26,297.00
10/31/02 22,325.00
10/31/03 26,968.00
</Table>
[NO-LOAD CLASS SHARES GRAPH]
Source: Lipper Inc., 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93 AND, FOR CLASS L
SHARES, REFLECT THE DEDUCTION OF ALL SALES CHARGES THAT WOULD HAVE APPLIED FOR
THE PERIOD OF INVESTMENT.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------
Eclipse Small Cap Value Fund No-Load Class 42.04% 9.88% 11.68%
Eclipse Small Cap Value Fund Service Class(2) 41.80 9.67 11.39
Eclipse Small Cap Value Fund Class L (without sales
charges)(3) 40.87 8.77 10.31
Eclipse Small Cap Value Fund Class L (with sales charges)(3) 38.47 8.55 10.20
Average Lipper small-cap value fund(4) 37.89 13.34 12.14
Russell 2000 Index(5) 43.37 8.34 8.87
Russell 2000 Value Index(6) 40.29 11.93 11.91
S&P SmallCap 600 Index(7) 33.58 11.04 10.81
S&P 500 Index(8) 20.80 0.53 10.43
Lipper Small Cap Value Funds Index(9) 39.62 14.69 12.95
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
TOTAL RETURN (1)
----------------
Year ended December 31, 1994 -4.74%
Year ended December 31, 1995 19.69
Year ended December 31, 1996 29.87
Year ended December 31, 1997 33.30
Year ended December 31, 1998 3.40
Year ended December 31, 1999 3.05
Year ended December 31, 2000 -9.44
10 months ended October 31, 2001 3.66
Year ended October 31, 2002 5.84
Year ended October 31, 2003 42.04
</Table>
57
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all
dividend and capital gain distributions and, for the Service Class shares,
include the service fee of .25% on an annualized basis of the average daily
net asset value of the Service Class shares. Class L shares are subject to
a 1% sales charge and a contingent deferred sales charge (CDSC) of 1% if
redeemed within one year of purchase. Performance figures for Class L
shares reflect the .75% distribution fee and .25% service fee.
2. Performance figures for the Service Class, first offered to the public on
7/1/02, include the historical performance of the No-Load Class from the
Fund's inception on 1/12/87 through 6/30/02. Performance figures for these
classes will vary after 6/30/02, based on differences in their expense
structures.
3. Performance figures for Class L shares, first offered to the public on
12/30/02, include the historical performance of the No-Load Class shares
from the Fund's inception on 1/12/87 up to 12/30/02.
4. Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
5. The Russell 2000()(R) Index is an unmanaged index that measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index,
which, in turn, is an unmanaged index that measures the performance of the
3,000 largest U.S. companies based on total market capitalization. Results
assume reinvestment of all income and capital gains. An investment cannot
be made directly into an index.
6. The Russell 2000(R) Value Index is an unmanaged index that measures the
performance of those Russell 2000 companies with lower price-to-book ratios
and lower forecasted growth values. The Russell 2000(R) Index is an
unmanaged index that measures the performance of the 2,000 smallest
companies in the Russell 3000(R) Index, which, in turn, is an unmanaged
index that measures the performance of the 3,000 largest U.S. companies
based on total market capitalization. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
INFORMATION ABOUT ECLIPSE SMALL CAP VALUE FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
58
ECLIPSE FUNDS
SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (92.9%)+
SHARES VALUE
-------------------------
AEROSPACE & DEFENSE (0.0%) (b)
Fairchild Corp. (The) Class A
(a)............................ 1,600 $ 7,856
------------
AUTO COMPONENTS (1.1%)
Dura Automotive Systems, Inc.
Class A (a).................... 85,100 822,066
Intermet Corp. ................. 43,000 189,200
Standard Motor Products,
Inc. .......................... 5,000 55,750
Tenneco Automotive, Inc. (a).... 129,300 770,628
------------
1,837,644
------------
BUILDING PRODUCTS (0.4%)
Jacuzzi Brands, Inc. (a)........ 90,400 637,320
------------
CAPITAL MARKETS (3.8%)
Friedman, Billings, Ramsey
Group, Inc. Class A............ 7,740 154,181
iShares Russell 2000 Index Fund
(c)............................ 14,300 1,508,650
iShares Russell 2000 Value Index
Fund (c)....................... 10,000 1,501,000
iShares S&P SmallCap 600 Index
Fund (c)....................... 11,900 1,517,488
iShares S&P SmallCap 600/ BARRA
Value Index Fund (c)........... 16,000 1,508,000
SWS Group, Inc.................. 4,000 86,800
------------
6,276,119
------------
CHEMICALS (0.9%)
Ethyl Corp. (a)................. 85,700 1,379,770
LESCO, Inc. (a)................. 12,700 143,256
------------
1,523,026
------------
COMMERCIAL BANKS (5.9%)
AmericanWest Bancorp (a)........ 7,010 139,920
BancFirst Corp. ................ 200 10,794
C&F Financial Corp. ............ 1,900 85,538
Capital City Bank Group,
Inc. .......................... 2,575 99,524
CB Bancshares, Inc. Hawaii...... 3,590 226,170
Century Bancorp, Inc. .......... 9,200 319,976
City Holding Co. ............... 5,600 189,392
Columbia Bancorp................ 42,600 1,185,132
Exchange National Bancshares,
Inc. .......................... 2,250 81,112
First Financial Corp. .......... 32,000 944,320
First M&F Corp. ................ 18,000 664,020
FLAG Financial Corp. ........... 51,700 669,515
FloridaFirst Bancorp, Inc. ..... 8,400 223,020
FNB Corp........................ 53,900 1,272,040
Great Southern Bancorp, Inc. ... 4,600 185,610
Humboldt Bancorp................ 4,000 65,200
Independent Bank Corp. ......... 34,476 997,396
Interchange Financial Services
Corp. ......................... 800 19,704
Nara Bancorp, Inc. ............. 2,900 65,540
Oak Hill Financial, Inc. ....... 19,900 590,831
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
COMMERCIAL BANKS (CONTINUED)
Oriental Financial Group,
Inc. .......................... 3,400 $ 87,108
Provident Bankshares Corp. ..... 2,100 65,163
Southern Financial Bancorp,
Inc. .......................... 7,480 278,705
Southside Bancshares, Inc. ..... 24,835 428,404
Southwest Bancorp, Inc. ........ 13,800 218,178
State Bancorp, Inc. ............ 9,660 199,479
State Financial Services Corp.
Class A........................ 11,600 305,428
Taylor Capital Group, Inc. ..... 2,500 63,550
Trust Company of New Jersey
(The).......................... 2,700 84,834
------------
9,765,603
------------
COMMERCIAL SERVICES & SUPPLIES (1.4%)
Ambassadors International,
Inc. .......................... 5,200 66,560
Duratek, Inc. (a)............... 2,500 23,500
Gundle/SLT Environmental, Inc.
(a)............................ 30,500 523,075
Mail-Well, Inc. (a)............. 43,000 177,160
McGrath Rentcorp................ 3,100 88,350
MemberWorks, Inc. (a)........... 42,400 1,224,512
United Rentals, Inc. (a)........ 8,100 141,102
------------
2,244,259
------------
COMMUNICATIONS EQUIPMENT (2.0%)
Audiovox Corp. Class A (a)...... 84,600 1,015,200
Digi International, Inc. (a).... 14,200 130,640
Enterasys Networks, Inc. (a).... 9,100 35,490
New Focus, Inc. (a)............. 397,000 2,060,430
------------
3,241,760
------------
COMPUTERS & PERIPHERALS (2.0%)
Intergraph Corp. (a)............ 33,500 873,010
Komag, Inc. (a)................. 23,400 441,324
Quantum Corp. (a)............... 20,800 64,688
Western Digital Corp. (a)....... 137,300 1,846,685
------------
3,225,707
------------
CONSTRUCTION & ENGINEERING (1.0%)
Perini Corp. (a)................ 152,000 1,260,080
Quanta Services, Inc. (a)....... 22,900 187,322
Washington Group International,
Inc. (a)....................... 5,900 163,548
------------
1,610,950
------------
CONSUMER FINANCE (2.1%)
ASTA Funding, Inc. ............. 4,700 139,073
United PanAm Financial Corp.
(a)............................ 24,100 443,440
World Acceptance Corp. (a)...... 160,900 2,886,546
------------
3,469,059
------------
DISTRIBUTORS (0.5%)
Noland Co. ..................... 23,700 885,906
------------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
59
SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (4.2%)
Cincinnati Bell, Inc. (a)....... 444,200 $ 2,269,862
Primus Telecommunications Group,
Inc. (a)....................... 66,700 614,974
TALK America Holdings, Inc.
(a)............................ 2,500 31,200
Time Warner Telecom, Inc. Class
A (a).......................... 383,100 3,965,085
------------
6,881,121
------------
ELECTRIC UTILITIES (0.2%)
Green Mountain Power Corp. ..... 15,100 342,921
------------
ELECTRICAL EQUIPMENT (0.0%) (b)
General Cable Corp. ............ 7,500 71,175
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (3.2%)
Brightpoint, Inc. (a)........... 51,525 1,476,191
CellStar Corp. (a).............. 137,900 1,694,791
MTS Systems Corp. .............. 84,700 1,489,873
Pemstar, Inc. (a)............... 150,000 526,500
------------
5,187,355
------------
ENERGY EQUIPMENT & SERVICES (0.1%)
Seabulk International, Inc.
(a)............................ 32,100 245,565
------------
FOOD & STAPLES RETAILING (0.7%)
Pantry, Inc. (The) (a).......... 65,300 1,070,920
------------
FOOD PRODUCTS (8.6%)
Central Garden & Pet Co. (a).... 132,600 3,667,716
John B. Sanfilippo & Son, Inc.
(a)............................ 179,400 6,162,390
M & F Worldwide Corp. (a)....... 341,400 3,772,470
Omega Protein Corp. (a)......... 58,700 303,479
Seneca Foods Corp. Class B
(a)............................ 2,500 51,250
Zapata Corp. (a)................ 2,900 157,325
------------
14,114,630
------------
GAS UTILITIES (0.1%)
UGI Corp. ...................... 4,250 130,900
------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.2%)
ALARIS Medical Systems, Inc.
(a)............................ 119,100 1,847,241
Dade Behring Holdings, Inc.
(a)............................ 2,200 67,254
------------
1,914,495
------------
HEALTH CARE PROVIDERS & SERVICES (0.3%)
Gentiva Health Services, Inc.
(a)............................ 38,900 443,849
Prime Medical Services, Inc.
(a)............................ 1,200 5,160
------------
449,009
------------
HOTELS, RESTAURANTS & LEISURE (1.0%)
Dave & Buster's, Inc. (a)....... 49,600 652,240
Isle of Capri Casinos, Inc.
(a)............................ 49,300 1,027,905
------------
1,680,145
------------
HOUSEHOLD DURABLES (3.4%)
CSS Industries, Inc. ........... 1,350 36,436
Emerson Radio Corp. (a)......... 46,500 190,185
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
HOUSEHOLD DURABLES (CONTINUED)
Enesco Group, Inc. (a).......... 8,200 $ 80,442
Fedders Corp. .................. 113,800 665,730
Hooker Furniture Corp. ......... 45,100 1,758,900
M.D.C. Holdings, Inc. .......... 1,000 67,320
M/I Schottenstein Homes,
Inc. .......................... 500 20,815
Standard Pacific Corp. ......... 1,500 71,775
William Lyon Homes, Inc. (a).... 42,500 2,754,000
------------
5,645,603
------------
INDUSTRIAL CONGLOMERATES (0.2%)
United Capital Corp. (a)........ 20,000 345,600
------------
INSURANCE (7.5%)
Allmerica Financial Corp. (a)... 2,600 69,238
American Physicians Capital,
Inc. (a)....................... 32,000 845,440
Enstar Group, Inc. (The) (a).... 18,200 746,200
FPIC Insurance Group, Inc.
(a)............................ 7,900 139,356
Independence Holding Co. ....... 6,200 143,220
Kansas City Life Insurance
Co. ........................... 40,700 1,911,272
LandAmerica Financial Group,
Inc. .......................... 54,500 2,725,545
National Western Life Insurance
Co. Class A (a)................ 500 71,906
NYMAGIC, Inc. .................. 56,800 1,363,768
Odyssey Re Holdings Corp. ...... 35,200 738,496
SCPIE Holdings, Inc. ........... 73,000 981,850
Stewart Information Services
Corp. (a)...................... 83,200 2,591,680
------------
12,327,971
------------
INTERNET & CATALOG RETAIL (0.8%)
Blair Corp. .................... 53,800 1,221,260
Systemax, Inc. (a).............. 19,800 132,660
------------
1,353,920
------------
INTERNET SOFTWARE & SERVICES (2.4%)
InfoSpace, Inc. (a)............. 126,100 3,288,688
Keynote Systems, Inc. (a)....... 53,200 603,820
------------
3,892,508
------------
IT SERVICES (0.6%)
CompuCom Systems, Inc. (a)...... 122,500 624,750
Computer Horizons Corp. (a)..... 109,500 416,100
------------
1,040,850
------------
LEISURE EQUIPMENT & PRODUCTS (1.1%)
K2, Inc. (a).................... 112,400 1,864,716
------------
MACHINERY (0.8%)
Ampco-Pittsburgh Corp. ......... 67,600 821,340
EnPro Industries, Inc. (a)...... 25,700 259,827
Greenbrier Cos, Inc. (The)
(a)............................ 11,100 140,304
Joy Global, Inc. (a)............ 3,700 70,522
------------
1,291,993
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
60
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
MEDIA (1.4%)
Digital Generation Systems, Inc.
(a)............................ 83,100 $ 160,383
Pegasus Communications Corp.
(a)............................ 73,400 1,340,284
PRIMEDIA, Inc. (a).............. 216,300 581,847
Young Broadcasting, Inc. Class A
(a)............................ 11,300 227,017
------------
2,309,531
------------
METALS & MINING (2.1%)
Metal Management, Inc. (a)...... 32,100 753,387
Oregon Steel Mills, Inc. (a).... 1,100 3,905
Quanex Corp. ................... 35,100 1,405,755
Schnitzer Steel Industries, Inc.
Class A........................ 21,400 806,352
Steel Technologies, Inc. ....... 27,700 426,857
------------
3,396,256
------------
MULTI-UTILITIES & UNREGULATED POWER (0.9%)
Avista Corp. ................... 4,100 69,700
Energen Corp. .................. 2,400 88,488
ONEOK, Inc. .................... 50,300 1,000,467
Westar Energy, Inc. ............ 11,700 233,766
------------
1,392,421
------------
OFFICE ELECTRONICS (0.8%)
Gerber Scientific, Inc. (a)..... 171,700 1,356,430
------------
OIL & GAS (4.8%)
Comstock Resources, Inc. (a).... 49,900 745,007
Denbury Resources, Inc. (a)..... 15,200 191,824
General Maritime Corp. (a)...... 10,800 136,620
Harvest Natural Resources, Inc.
(a)............................ 205,400 1,400,828
KCS Energy, Inc. (a)............ 64,900 517,253
Maritrans, Inc. ................ 5,600 88,256
North Coast Energy, Inc. (a).... 40,400 465,408
PetroCorp, Inc. (a)............. 7,100 95,140
Tesoro Petroleum Corp. (a)...... 372,900 4,251,060
------------
7,891,396
------------
PHARMACEUTICALS (0.1%)
Alpharma, Inc. Class A.......... 4,400 80,080
------------
REAL ESTATE (9.9%)
American Land Lease, Inc. ...... 3,700 67,340
American Mortgage Acceptance
Co. ........................... 37,400 621,214
Anworth Mortgage Asset Corp. ... 95,200 1,336,608
Bluegreen Corp. (a)............. 14,300 94,237
BRT Realty Trust................ 35,500 754,375
Corporate Office Properties
Trust.......................... 40,600 785,204
Corrections Corp. of America
(a)............................ 39,400 967,664
Cousins Properties, Inc......... 2,300 66,125
CRIIMI MAE, Inc. (a)............ 194,200 2,180,866
Entertainment Properties
Trust.......................... 30,900 994,362
HRPT Properties Trust........... 33,700 315,432
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
REAL ESTATE (CONTINUED)
Impac Mortgage Holdings, Inc. .. 180,600 $ 2,718,030
LTC Properties, Inc. ........... 34,100 403,744
National Health Investors,
Inc. .......................... 10,900 231,625
Newcastle Investment Corp. ..... 2,900 67,860
Novastar Financial, Inc. ....... 43,600 3,215,500
Prime Group Realty Trust (a).... 14,400 89,568
Redwood Trust, Inc. ............ 20,800 1,031,680
Senior Housing Properties
Trust.......................... 4,600 68,494
Thornburg Mortgage, Inc. ....... 12,100 329,725
------------
16,339,653
------------
ROAD & RAIL (0.1%)
SCS Transportation, Inc. (a).... 8,700 130,587
------------
SOFTWARE (0.3%)
RSA Security, Inc. (a).......... 33,000 428,010
------------
SPECIALTY RETAIL (1.3%)
Building Materials Holding
Corp. ......................... 13,200 186,648
Finlay Enterprises, Inc. (a).... 17,800 269,492
Friedman's, Inc. Class A........ 97,200 1,177,092
Hollywood Entertainment Corp.
(a)............................ 12,900 196,080
Rent-Way, Inc. (a).............. 11,300 67,800
Syms Corp. (a).................. 300 2,010
TBC Corp. (a)................... 6,100 165,859
------------
2,064,981
------------
TEXTILES, APPAREL & LUXURY GOODS (0.8%)
Hampshire Group, Ltd. (a)....... 19,600 686,784
Perry Ellis International, Inc.
(a)............................ 24,500 668,850
------------
1,355,634
------------
THRIFTS & MORTGAGE FINANCE (10.0%)
Bank Mutual Corp. .............. 6,970 82,459
BankUnited Financial Corp.
(a)............................ 2,900 64,119
EverTrust Financial Group,
Inc. .......................... 53,600 1,546,360
First Federal Financial Corp. of
Kentucky....................... 12,000 365,160
FIRSTFED AMERICA BANCORP,
Inc. .......................... 11,800 302,198
FirstFed Financial Corp. (a).... 11,100 499,500
Flagstar Bancorp, Inc. ......... 75,900 1,692,570
Fremont General Corp. .......... 16,500 274,395
GA Financial, Inc. ............. 3,200 90,624
Heritage Financial Corp. ....... 2,600 57,122
Horizon Financial Corp. ........ 46,200 803,418
Hudson River Bancorp., Inc. .... 5,800 193,720
ITLA Capital Corp. (a).......... 29,900 1,391,845
Klamath First Bancorp, Inc. .... 14,100 341,220
MASSBANK Corp. ................. 16,900 685,295
New Century Financial Corp. .... 73,150 2,712,402
Ocwen Financial Corp. (a)....... 14,200 69,012
Provident Financial Holdings,
Inc. .......................... 23,200 736,832
Quaker City Bancorp, Inc. ...... 24,650 1,052,802
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
61
SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
THRIFTS & MORTGAGE FINANCE (CONTINUED)
R&G Financial Corp. Class B..... 7,600 $ 250,040
Sound Federal Bancorp, Inc. .... 17,500 281,925
Sterling Financial Corp. (a).... 2,200 68,882
United Community Financial
Corp. ......................... 39,100 433,228
Warwick Community Bancorp,
Inc. .......................... 54,800 1,611,120
Willow Grove Bancorp, Inc. ..... 300 5,025
WSFS Financial Corp. ........... 20,500 874,325
------------
16,485,598
------------
TOBACCO (0.4%)
Standard Commercial Corp. ...... 33,900 646,812
Universal Corp. ................ 1,500 65,370
------------
712,182
------------
WIRELESS TELECOMMUNICATION SERVICES (2.5%)
Aether Systems, Inc. (a)........ 14,500 69,600
American Tower Corp. Class A
(a)............................ 8,100 93,960
Arch Wireless, Inc. Class A
(a)............................ 8,600 135,450
Crown Castle International Corp.
(a)............................ 262,500 3,323,250
Dobson Communications Corp.
Class A (a).................... 57,100 495,057
SBA Communications Corp. (a).... 16,100 65,527
------------
4,182,844
------------
Total Common Stocks (Cost
$116,032,725).................. 152,702,209
------------
</Table>
<Table>
<Caption>
SHORT-TERM INVESTMENT (3.0%)
PRINCIPAL
AMOUNT VALUE
------------------------
REPURCHASE AGREEMENT (3.0%)
Bank of New York (The)
0.85%, dated 10/31/03 due
11/3/03
Proceeds at Maturity $5,000,354
(Collateralized by U.S.
Treasury Note 3.625%, due
3/31/04 with a Principal Amount
of $5,031,000 and a Market
Value of $5,099,115 including
accrued interest).............. $5,000,000 $ 5,000,000
------------
Total Short-Term Investment
(Cost $5,000,000).............. 5,000,000
------------
Total Investments (Cost
$121,032,725) (d).............. 95.9% 157,702,209(e)
Cash and Other Assets,
Less Liabilities............... 4.1 6,733,038
---------- ------------
Net Assets...................... 100.0% $164,435,247
========== ============
</Table>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Exchange Traded Fund--represents a basket of securities that are traded on
an exchange.
(d) The cost for federal income tax purposes is $121,037,094.
(e) At October 31, 2003 net unrealized appreciation was $36,665,115, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $38,848,155 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $2,183,040.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
62
ECLIPSE FUNDS
SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $121,032,725)............................. $157,702,209
Cash............................................. 210,370
Receivables:
Fund shares sold............................... 7,348,460
Dividends and interest......................... 88,403
Other assets..................................... 12,995
------------
Total assets............................... 165,362,437
------------
LIABILITIES:
Payables:
Fund shares redeemed........................... 509,565
Investment securities purchased................ 215,305
Manager........................................ 133,168
Shareholder communication...................... 15,373
Transfer agent................................. 9,382
Custodian...................................... 3,209
Trustees....................................... 1,725
NYLIFE Distributors............................ 217
Accrued expenses................................. 39,246
------------
Total liabilities.......................... 927,190
------------
Net assets....................................... $164,435,247
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share)
1 billion shares authorized
No-Load Class.................................. $ 100,472
Service Class.................................. 660
L Class........................................ 2
Additional paid-in capital....................... 118,668,822
Accumulated undistributed net investment
income......................................... 216,019
Accumulated undistributed net realized gain on
investments.................................... 8,779,788
Net unrealized appreciation on investments....... 36,669,484
------------
Net assets....................................... $164,435,247
============
No-Load Class
Net assets applicable to outstanding shares...... $163,362,257
============
Shares of capital stock outstanding.............. 10,047,199
============
Net asset value per share outstanding............ $ 16.26
============
Service Class
Net assets applicable to outstanding shares...... $ 1,071,488
============
Shares of capital stock outstanding.............. 65,980
============
Net asset value per share outstanding............ $ 16.24
============
L Class
Net assets applicable to outstanding shares...... $ 1,502
============
Shares of capital stock outstanding.............. 93
============
Net asset value per share outstanding............ $ 16.15
Maximum sales charge (1.00% of offering price)... 0.16
------------
Maximum offering price per share outstanding..... $ 16.31
============
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Dividends (a)................................... $ 2,044,195
Interest........................................ 60,927
-----------
Total income................................ 2,105,122
-----------
Expenses:
Manager......................................... 1,219,011
Transfer agent.................................. 148,203
Professional.................................... 78,313
Registration.................................... 61,860
Shareholder communication....................... 35,848
Custodian....................................... 35,649
Trustees........................................ 25,575
Service--Service Class.......................... 694
Service--L Class................................ 3
Distribution--L Class........................... 8
Miscellaneous................................... 30,916
-----------
Total expenses before
reimbursement.............................. 1,636,080
Expense reimbursement from Manager.............. (90,559)
Fees paid indirectly (See Note 2(D))............ (94,194)
-----------
Net expenses................................ 1,451,327
-----------
Net investment income............................. 653,795
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments.................. 14,921,032
Net change in unrealized appreciation on
investments..................................... 30,247,013
-----------
Net realized and unrealized gain on investments... 45,168,045
-----------
Net increase in net assets resulting from
operations...................................... $45,821,840
===========
</Table>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $1,704.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
63
SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------- -------------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 653,795 $ 1,388,869
Net realized gain (loss) on investments................. 14,921,032 (1,037,211)
Net change in unrealized appreciation on investments.... 30,247,013 1,660,729
------------- -------------
Net increase in net assets resulting from operations.... 45,821,840 2,012,387
------------- -------------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (1,275,510) (1,037,656)
Service Class......................................... (1,461) --
------------- -------------
Total dividends to shareholders..................... (1,276,971) (1,037,656)
------------- -------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 123,830,893 130,010,307
Service Class......................................... 853,598 86,266
L Class............................................... 1,149 --
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 1,237,937 999,866
Service Class......................................... 1,461 --
------------- -------------
125,925,038 131,096,439
Cost of shares redeemed:
No-Load Class......................................... (117,287,648) (128,906,405)
Service Class......................................... (16,449) --
L Class............................................... (102) --
------------- -------------
Increase in net assets derived from capital share
transactions......................................... 8,620,839 2,190,034
------------- -------------
Net increase in net assets............................ 53,165,708 3,164,765
NET ASSETS:
Beginning of year......................................... 111,269,539 108,104,774
------------- -------------
End of year............................................... $ 164,435,247 $ 111,269,539
============= =============
Accumulated undistributed net investment income at end of
year.................................................... $ 216,019 $ 1,011,260
============= =============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
64
(THIS PAGE INTENTIONALLY LEFT BLANK)
65
SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
-------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31 JANUARY 1, 2001 YEAR ENDED DECEMBER 31
---------------------- THROUGH ----------------------------------
2003 2002 OCTOBER 31, 2001* 2000 1999 1998
-------- -------- ----------------- -------- -------- --------
Net asset value at beginning of
period............................... $ 11.58 $ 11.04 $ 10.65 $ 11.76 $ 11.93 $ 14.19
-------- -------- -------- -------- -------- --------
Net investment income (loss).......... 0.07(d) 0.15 0.08 (0.00)(a) 0.01 (0.00)(a)
Net realized and unrealized gain
(loss) on investments................ 4.74 0.50 0.31 (1.11) 0.35 0.42
-------- -------- -------- -------- -------- --------
Total from investment operations...... 4.81 0.65 0.39 (1.11) 0.36 0.42
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income............ (0.13) (0.11) -- -- (0.01) --
From net realized gain on
investments.......................... -- -- -- -- (0.52) (2.68)
-------- -------- -------- -------- -------- --------
Total dividends and distributions..... (0.13) (0.11) -- -- (0.53) (2.68)
-------- -------- -------- -------- -------- --------
Net asset value at end of period...... $ 16.26 $ 11.58 $ 11.04 $ 10.65 $ 11.76 $ 11.93
======== ======== ======== ======== ======== ========
Total investment return............... 42.04% 5.84% 3.66%(b) (9.44%) 3.05% 3.40%
Ratios (to average net assets)/
Supplemental Data:
Net investment income (loss)......... 0.53% 1.08% 0.70%++ (0.00%)+ 0.05% (0.00%)+
Net expenses......................... 1.27%# 1.26%# 1.23%++#(c) 1.21%# 1.18%# 1.14%#
Expenses (before reimbursement)...... 1.34%# 1.27%# 1.23%++#(c) 1.21%# 1.18%# 1.14%#
Portfolio turnover rate............... 135% 103% 77% 105% 56% 73%
Net assets at end of period (in
000's)............................... $163,362 $111,181 $108,105 $157,630 $251,229 $201,492
</Table>
- ------------
<Table>
* The Fund changed its fiscal year end from December 31 to
October 31.
** Commencement of Operations.
+ Less than 0.01% of average net assets.
++ Annualized.
# Includes transfer agent fees paid indirectly which amounted
to 0.08%, 0.07% and 0.08% of average net assets for the
years ended October 31, 2003 and October 31, 2002 and the
ten months ended October 31, 2001, respectively, and
custodian fees and other expenses paid indirectly which
amounted to 0.02% of average net assets for the year ended
December 31, 2000 and less than 0.01% of average net assets
for the other years indicated.
(a) Less than one cent per share.
(b) Total return is not annualized.
(c) Restated.
(d) Per share data based on average shares outstanding during
the period.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
66
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS L CLASS
------------------------------------ -------------------
JULY 1, 2002** DECEMBER 30, 2002**
YEAR ENDED THROUGH THROUGH
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003
----------------- ---------------- -------------------
$ 11.58 $ 13.91 $ 11.46
-------- -------- --------
0.04(d) 0.00(a) (0.05)(d)
4.75 (2.33) 4.74
-------- -------- --------
4.79 (2.33) 4.69
-------- -------- --------
(0.13) -- --
-- -- --
-------- -------- --------
(0.13) -- --
-------- -------- --------
$ 16.24 $ 11.58 $ 16.15
======== ======== ========
41.80% (16.75%)(b) 40.92%(b)
0.28% 0.83%++ (0.47%)++
1.52%# 1.51%++# 2.27%++#
1.59%# 1.52%++# 2.34%++#
135% 103% 135%
$ 1,071 $ 88 $ 2
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
67
Eclipse Tax-Managed Equity Fund
- --------------------------------------------------------------------------------
During the 12 months ended October 31, 2003, the S&P 500(R) Index(1) returned
20.80% with all income and capital gains reinvested. Although this was positive
news for investors who had seen negative returns in recent years, the 12-month
period was not without its ups and downs.
In early November 2002, the Federal Reserve moved to support the economy by
lowering the targeted federal funds rate by 50 basis points to a low 1.25%.
Following this cut, the stock market advanced through the end of November. As
the year came to a close, however, the market gave back its November gains as it
reacted to a sluggish U.S. economy.
Large-cap stock prices rose in the first two weeks of 2003 but declined from
mid-January through early March as the threat of war in Iraq intensified. As
coalition troops amassed in Kuwait, the market staged a general recovery that
reached an initial peak with the "shock and awe" strikes on Baghdad. After
faltering briefly, the rally continued beyond the end of major combat operations
in May and well into the third quarter, supported by evidence of improving
corporate profitability. Still, economic indicators remained mixed. Consumer
confidence was higher than expected, and the housing sector continued to post
record sales. On the other hand, manufacturing remained sluggish, and the
unemployment rate continued to hover above 6.0%. At the end of June, the Federal
Open Market Committee lowered the targeted federal funds rate by another 25
basis points to a multidecade low of 1.0%.
In September, the U.S. equity market lost some ground, primarily because of the
falling U.S. dollar, rising oil prices, and concerns about third-quarter
corporate earnings. Optimism returned to the equity markets in October with the
release of positive economic data, including job growth and lower initial
unemployment claims. The manufacturing sector showed evidence of expansion, and
according to preliminary estimates by the Bureau of Economic Analysis, real
gross domestic product grew at a seasonally adjusted annual rate of 8.2% in the
third-quarter, the fastest growth rate since early 1984. Toward the end of
October, the Federal Open Market Committee stated its belief that "policy
accommodation can be maintained for a considerable period."
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse Tax-Managed Equity Fund
returned 5.17% for No-Load Class shares and 4.74% for Service Class shares. For
the same period, the Fund's L Class shares returned 4.31%, excluding all sales
charges. All share classes underperformed the 17.78% return of the average
Lipper(2) large-cap core fund over the same period. All share classes also
underperformed the 20.80% return of the S&P 500 Index for the 12 months ended
October 31, 2003.
The Fund's relative underperformance resulted from two primary factors. First,
there was a flight away from quality in the U.S. equity markets during much of
the Fund's fiscal year as investors embraced sectors and securities with a
higher degree of risk. For the first 10 months of 2003, stocks in the S&P 500
Index that are rated low quality by Standard & Poor's outperformed the
highest-quality stocks by approximately 45%. These lower-quality stocks
outperformed the better-quality stocks in the Index for five consecutive months
and posted their largest six-month gain since 1991.(3) As rated by Standard &
Poor's, high-quality stocks are those companies with the best earnings quality,
balance-sheet structures, dividend safety, and growth. Low-quality stocks, on
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
2. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
3. All the stocks in the S&P 500 Index are ranked by quality by Standard &
Poor's. High-quality stocks have rankings of A+ through B. Low-quality stocks
typically have rankings of B- through D. In the discussion above, those
stocks referred to as low quality were rated C and D; those stocks referred
to as highest quality were rated A- or better.
68
- --------------------------------------------------------------------------------
the other hand, have poor-quality balance sheets, little if any dividend growth
or safety, and high price/earnings ratios compared to their high-quality
competitors. The Fund consists of stocks of the highest quality, and during the
reporting period, this rare "quality effect" was particularly challenging for
the Fund.
With the shift in investor sentiment toward higher-risk stocks came renewed
strong performance in the information technology sector of the S&P 500 Index. As
a result, the second factor negatively impacting the Fund's relative performance
was its significantly underweighted position in information technology. Although
the financials sector showed strong performance during the reporting period, the
Fund was underweighted in the sector, which detracted from performance.
The Fund consistently applied its proprietary quantitative mathematical model to
select securities and sectors throughout the reporting period.
STRONG AND WEAK PERFORMERS
Among the Fund's strongest-performing securities over the 12-month reporting
period were Intel (+90.46%)(4) and Texas Instruments (+82.35%), both
semiconductor manufacturers; Cisco Systems (+87.21%), a networking and
communications company; and J.P. Morgan (+73.01%) and Merrill Lynch (+55.99%),
both large financial-services companies. These positions and positive results
were due to superior stock selection within the respective sectors.
Among the Fund's worst-performing stocks were SBC Communications (-6.55%),
Viacom (-10.63%), and Verizon Communications (-11.02%), all of which are in the
telecommunication services sector. Other poor performers during the reporting
period included Merck (-13.91%) and Johnson & Johnson (-14.33%), both of which
are in the pharmaceuticals industry.
Significant stock-specific transactions during the Fund's fiscal year involved
the sale of securities that had declined in price. The Fund sought to actively
harvest losses for tax-management purposes.
We sold the Fund's entire position in Altria Group on April 8, 2003, because the
stock declined past the predetermined threshold set at the last rebalancing of
the portfolio on December 27, 2002. Since the Fund seeks tax-efficient
transactions, losses are actively harvested. Legal battles relating to tobacco
lawsuits were among the reasons for the stock's decline. Consistent with the
Fund's investment strategy, the loss improved the Fund's after-tax performance.
We intend to repurchase the stock at an opportune time, now that the wash-sale
period has passed.(5)
We sold the Fund's entire position in SBC Communications on March 5, 2003,
because the stock had declined past the predetermined threshold set at the last
rebalancing of the portfolio on December 27, 2002. Since the Fund actively
harvests tax losses and the sale improved the Fund's after-tax performance, the
sale had positive aspects for tax-conscious investors. The Fund repurchased the
stock on April 8, 2003, and SBC Communications had a positive return from that
date through the end of the reporting period.
During the second quarter of 2003, we removed one stock from the Fund to
actively harvest tax losses for the portfolio and to eliminate a security with
questionable activities. On June 9, 2003, Freddie Mac, a mortgage investment
company, announced that key executives had been removed amid a general
management shakeup. On June 11, the government announced that it had opened a
probe into Freddie Mac's activities. Over this brief time period, Freddie Mac
shares fell in price by $9.57 per share, a 15.98% decline. On June 12, our
management team made the decision to remove the stock from the Fund's portfolio.
- --------------------------------------------------------------------------------
4. Performance percentages reflect the price performance of the securities
mentioned for the 12 months ended 10/31/03. Due to purchases and sales, the
performance of Fund holdings may differ from that of the securities
themselves.
5. A tax rule prohibits the use of a stock sale for immediate tax losses (or to
offset gains) if an equivalent stock is purchased within 30 days before or
after the date of the sale. A stock that is sold and repurchased within 30
calendar days is called a "wash sale."
69
- --------------------------------------------------------------------------------
WEIGHTINGS AND WEIGHTING CHANGES
Because of the Fund's tax-sensitive nature, the Fund was rebalanced to the model
portfolio twice over the past 12 months. The major reweightings occurred on
December 27, 2002, and October 10, 2003. While the portfolio adjustments did not
significantly affect the Fund's performance, they did result in several shifts
in sector weightings.
The Fund increased its overweighted position in the consumer discretionary
sector from 2.6% at the beginning of the fiscal year to a 7.7% weighting at the
end of October. We also decreased the Fund's allocation in the financials sector
from 23.7% at the start of the reporting period to 16.4% at the end of the 12
months. This change reduced the Fund's already-underweighted exposure to the
financials sector relative to the S&P 500 Index.
As of October 31, 2003, the Fund was significantly underweighted in the
information technology sector and in the financials sector. The Fund was
significantly over-weighted in the consumer staples sector and in the health
care sector.
LOOKING AHEAD
In our view, the U.S. equity market appears richly priced overall. This is
especially evident to us when comparing the average price/earnings ratio of
small-cap stocks to that of large-cap stocks and the average price/earnings
ratio of the information technology sector with that of the energy sector. From
a historical perspective, we would expect to see greater differentials than we
did at the end of the Fund's fiscal year.
Over the past few months, the U.S. equity market has also seen low volatility
and volume. However, we anticipate that volatility and volume will both return
to normal levels in the coming months. We believe that the Fund's portfolio is
well-positioned to take advantage of these changes should they occur.
Whatever the market or the economy may bring, the Fund will continue to seek to
provide enhanced after-tax total return relative to the return of the S&P 500
Index.
DR. BERNARD TEW
Portfolio Manager
New York Life Investment Management LLC
70
$10,000 INVESTED IN
ECLIPSE TAX-MANAGED EQUITY FUND
VERSUS S&P 500 INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE TAX-MANAGED EQUITY FUND S&P 500 INDEX
------------------------------- -------------
4/19/2002 $ 10,000 $ 10,000
10/31/2002 8,480 7,948
10/31/2003 8,919 9,601
</Table>
$10,000 INVESTED IN
ECLIPSE TAX-MANAGED EQUITY FUND
VERSUS S&P 500 INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
S&P 500 INDEX ECLIPSE TAX-MANAGED EQUITY FUND
------------- -------------------------------
4/19/2002 $ 10,000 $ 10,000
10/31/2002 7,948 8,480
10/31/2003 9,601 8,882
</Table>
$10,000 INVESTED IN
ECLIPSE TAX-MANAGED EQUITY FUND
VERSUS S&P 500 INDEX
CLASS L SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
S&P 500 INDEX ECLIPSE TAX-MANAGED EQUITY FUND
------------- -------------------------------
4/19/2002 $ 10,000 $ 9,900
10/31/2002 7,948 8,346
10/31/2003 9,601 8,706
</Table>
[GRAPH LEGEND]
Source: Lipper Inc., 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 4/19/02 AND, FOR CLASS L
SHARES, REFLECT THE DEDUCTION OF ALL SALES CHARGES THAT WOULD HAVE APPLIED FOR
THE PERIOD OF INVESTMENT.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------
ONE YEAR SINCE INCEPTION(2)
- ---------------------------------------------------------------------------------------------------------------------
Eclipse Tax-Managed Equity Fund No-Load Class 5.17% -7.18%
Eclipse Tax-Managed Equity Fund Service Class 4.74 -7.42
Eclipse Tax-Managed Equity Fund Class L (without sales
charges)(3) 4.31 -8.02
Eclipse Tax-Managed Equity Fund Class L (with sales
charges)(3) 2.28 -8.62
Average Lipper large-cap core fund(4) 17.78 -4.70
S&P 500 Index(5) 20.80 -2.62
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE CHART]
<Table>
<Caption>
TOTAL RETURN(1)
---------------
Six months ended October 31 2002 -15.20%
Year ended October 31 2003 5.17
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares. Class L shares are subject to a 1% sales
charge and a contingent deferred sales charge (CDSC) of 1% if redeemed within
one year of purchase. Performance figures for Class L shares reflect the .75%
distribution fee and .25% service fee.
2. The Fund's inception date was 4/19/02.
3. Performance figures for Class L shares, first offered to the public on
12/30/02, include the historical performance of the No-Load Class shares from
the Fund's inception on 4/19/02 up to 12/30/02.
4. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
5. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
INFORMATION ABOUT ECLIPSE TAX-MANAGED EQUITY FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
71
TAX-MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (99.4%)+
SHARES VALUE
---------------------
AEROSPACE & DEFENSE (0.5%)
United Technologies Corp. .......... 2,750 $ 232,897
-----------
BEVERAGES (8.6%)
Anheuser-Busch Cos., Inc. .......... 18,500 911,310
Coca-Cola Co. (The)................. 34,500 1,600,800
PepsiCo, Inc. ...................... 27,050 1,293,531
-----------
3,805,641
-----------
BIOTECHNOLOGY (2.7%)
Amgen, Inc. (a)..................... 19,200 1,185,792
-----------
CAPITAL MARKETS (2.0%)
Goldman Sachs Group, Inc. (The)..... 2,350 220,665
J.P. Morgan Chase & Co. ............ 6,200 222,580
Merrill Lynch & Co., Inc. .......... 3,850 227,920
Morgan Stanley...................... 4,250 233,197
-----------
904,362
-----------
CHEMICALS (2.1%)
E.I. du Pont de Nemours & Co. ...... 22,800 921,120
-----------
COMMERCIAL BANKS (10.0%)
Bank of America Corp. .............. 19,400 1,469,162
Bank One Corp. ..................... 5,600 237,720
U.S. Bancorp........................ 39,700 1,080,634
Wachovia Corp. ..................... 5,200 238,524
Wells Fargo & Co. .................. 25,000 1,408,000
-----------
4,434,040
-----------
COMMUNICATIONS EQUIPMENT (0.5%)
Cisco Systems, Inc. (a)............. 10,400 218,192
-----------
COMPUTERS & PERIPHERALS (4.7%)
Dell, Inc. (a)...................... 6,350 229,362
Hewlett-Packard Co. ................ 10,600 236,486
International Business Machines
Corp. ............................. 17,750 1,588,270
-----------
2,054,118
-----------
CONSUMER FINANCE (0.5%)
American Express Co. ............... 4,600 215,878
-----------
DIVERSIFIED FINANCIAL SERVICES (0.4%)
Citigroup, Inc. .................... 4,000 189,600
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (6.5%)
BellSouth Corp. .................... 15,250 401,227
SBC Communications, Inc. ........... 46,100 1,105,478
Verizon Communications, Inc. ....... 40,050 1,345,680
-----------
2,852,385
-----------
FOOD & STAPLES RETAILING (5.1%)
Wal-Mart Stores, Inc. .............. 37,850 2,231,257
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
---------------------
HEALTH CARE EQUIPMENT & SUPPLIES (2.3%)
Medtronic, Inc. .................... 22,500 $ 1,025,325
-----------
HOUSEHOLD PRODUCTS (3.8%)
Procter & Gamble Co. (The).......... 17,000 1,670,930
-----------
INDUSTRIAL CONGLOMERATES (3.1%)
3M Co. ............................. 14,600 1,151,502
General Electric Co................. 6,850 198,719
-----------
1,350,221
-----------
INSURANCE (0.7%)
American International Group,
Inc. .............................. 5,400 328,482
-----------
MEDIA (3.3%)
Comcast Corp. Class A (a)........... 7,100 240,832
Time Warner, Inc. (a)............... 49,000 749,210
Viacom, Inc. Class B................ 5,300 211,311
Walt Disney Co. (The)............... 10,800 244,512
-----------
1,445,865
-----------
MULTILINE RETAIL (0.5%)
Target Corp. ....................... 5,650 224,531
-----------
OIL & GAS (9.8%)
ChevronTexaco Corp. ................ 17,100 1,270,530
ConocoPhillips...................... 16,200 925,830
ExxonMobil Corp. ................... 58,800 2,150,904
-----------
4,347,264
-----------
PHARMACEUTICALS (22.3%)
Abbott Laboratories................. 26,900 1,146,478
Bristol-Myers Squibb Co. ........... 37,500 951,375
Johnson & Johnson................... 37,300 1,877,309
Lilly (Eli) & Co. .................. 19,450 1,295,759
Merck & Co., Inc. .................. 30,650 1,356,263
Pfizer, Inc. ....................... 69,362 2,191,839
Wyeth............................... 23,600 1,041,704
-----------
9,860,727
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.2%)
Intel Corp. ........................ 7,550 249,528
Texas Instruments, Inc.............. 9,200 266,064
-----------
515,592
-----------
SOFTWARE (0.9%)
Microsoft Corp. .................... 7,450 194,818
Oracle Corp. (a).................... 18,050 215,878
-----------
410,696
-----------
SPECIALTY RETAIL (2.2%)
Home Depot, Inc. (The).............. 6,600 244,662
Lowe's Cos., Inc. .................. 12,000 707,160
-----------
951,822
-----------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
72
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
---------------------
THRIFTS & MORTGAGE FINANCE (2.7%)
Federal National Mortgage
Association........................ 16,550 $ 1,186,470
-----------
TOBACCO (3.0%)
Altria Group, Inc................... 28,650 1,332,225
-----------
Total Investments
(Cost $44,696,924) (b)............. 99.4% 43,895,432(c)
Cash and Other Assets,
Less Liabilities................... 0.6 263,400
------- -----------
Net Assets.......................... 100.0% $44,158,832
======= ===========
</Table>
- ------------
(a) Non-income producing security.
(b) The cost for federal income tax purposes is $44,726,866.
(c) At October 31, 2003 net unrealized depreciation was $831,434, based on cost
for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $2,300,110 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $3,131,544.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
73
TAX-MANAGED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $44,696,924)............................... $43,895,432
Cash.............................................. 221,236
Receivables:
Dividends....................................... 83,873
Other assets...................................... 11,504
-----------
Total assets................................ 44,212,045
-----------
LIABILITIES:
Payables:
Manager......................................... 23,317
Transfer agent.................................. 2,198
Directors....................................... 810
Accrued expenses.................................. 26,888
-----------
Total liabilities........................... 53,213
-----------
Net assets........................................ $44,158,832
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class................................... $ 5,000
Service Class................................... 0(a)
L Class......................................... 0(a)
Additional paid-in capital........................ 49,865,275
Accumulated undistributed net investment
income.......................................... 505,822
Accumulated net realized loss on investments...... (5,415,773)
Net unrealized depreciation on investments........ (801,492)
-----------
Net assets........................................ $44,158,832
===========
No-Load Class
Net assets applicable to outstanding shares....... $44,156,424
===========
Shares of capital stock outstanding............... 5,000,018
===========
Net asset value per share outstanding............. $ 8.83
===========
Service Class
Net assets applicable to outstanding shares....... $ 1,268
===========
Shares of capital stock outstanding............... 144
===========
Net asset value per share outstanding............. $ 8.81
===========
L Class
Net assets applicable to outstanding shares....... $ 1,140
===========
Shares of capital stock outstanding............... 130
===========
Net asset value per share outstanding............. $ 8.77
Maximum sales charge (1.00% of offering price).... 0.09
-----------
Maximum offering price per share outstanding...... $ 8.86
===========
</Table>
- ------------
(a) Less than one dollar.
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Dividends........................................ $ 964,546
Interest......................................... 755
-----------
Total income................................. 965,301
-----------
Expenses:
Manager.......................................... 295,726
Amortization of offering costs................... 61,142
Professional..................................... 43,597
Registration..................................... 30,493
Transfer agent................................... 13,144
Directors........................................ 11,619
Portfolio pricing................................ 7,524
Shareholder communication........................ 6,738
Custodian........................................ 3,753
Distribution--L Class............................ 7
Service--Service Class........................... 3
Service--L Class................................. 2
Miscellaneous.................................... 32,012
-----------
Total expenses before
reimbursement............................... 505,760
Expense reimbursement from Manager............... (104,406)
-----------
Net expenses................................. 401,354
-----------
Net investment income.............................. 563,947
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments................... (2,324,037)
Net change in unrealized depreciation on
investments...................................... 3,941,715
-----------
Net realized and unrealized gain on investments.... 1,617,678
-----------
Net increase in net assets resulting from
operations....................................... $ 2,181,625
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
74
ECLIPSE FUNDS
TAX-MANAGED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 2003 and the period April 19, 2002 through
October 31, 2002
<Table>
<Caption>
2003 2002
----------- -----------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 563,947 $ 218,219
Net realized loss on investments........................ (2,324,037) (3,091,736)
Net change in unrealized depreciation on investments.... 3,941,715 (4,743,207)
----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................. 2,181,625 (7,616,724)
----------- -----------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (408,502) --
Service............................................... (2) --
----------- -----------
Total dividends to shareholders..................... (408,504) --
----------- -----------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... -- 50,000,250
Service Class......................................... 1,000 250
L Class............................................... 1,147 --
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 2 --
Service............................................... 2 --
----------- -----------
2,151 50,000,500
Cost of shares redeemed:
No-Load Class......................................... (62) --
Service Class......................................... (61) --
L Class............................................... (93) --
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 1,935 50,000,500
----------- -----------
Net increase in net assets............................ 1,775,056 42,383,776
NET ASSETS:
Beginning of period....................................... 42,383,776 --
----------- -----------
End of period............................................. $44,158,832 $42,383,776
=========== ===========
Accumulated undistributed net investment income at end of
period.................................................. $ 505,822 $ 289,129
=========== ===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
75
TAX-MANAGED EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS SERVICE CLASS L CLASS
------------------------------------ ------------------------------------ -------------------
APRIL 19, 2002* APRIL 19, 2002* DECEMBER 30, 2002*
YEAR ENDED THROUGH YEAR ENDED THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2003 2002 2003 2002 2003
----------- ---------------- ----------- ---------------- -------------------
Net asset value at
beginning of period..... $ 8.48 $ 10.00 $ 8.48 $ 10.00 $ 8.21
------- ------- ------- ------- -------
Net investment income..... 0.11(a) 0.04 0.09(a) 0.03 0.04(a)
Net realized and
unrealized gain (loss)
on investments.......... 0.32 (1.56) 0.31 (1.55) 0.52
------- ------- ------- ------- -------
Total from investment
operations.............. 0.43 (1.52) 0.40 (1.52) 0.56
------- ------- ------- ------- -------
Less dividends:
From net investment
income.................. (0.08) -- (0.07) -- --
------- ------- ------- ------- -------
Net asset value at end of
period.................. $ 8.83 $ 8.48 $ 8.81 $ 8.48 $ 8.77
======= ======= ======= ======= =======
Total investment return... 5.17% (15.20%)(b) 4.74% (15.20%)(b) 6.82%(b)
Ratios (to average net
assets)/Supplemental
Data:
Net investment income... 1.33% 0.94%+ 1.08% 0.69%+ 0.33%+
Net expenses............ 0.95% 0.95%+ 1.20% 1.20%+ 1.95%+
Expenses (before
reimbursement)........ 1.20% 1.39%+ 1.45% 1.64%+ 2.20%+
Portfolio turnover rate... 45% 35% 45% 35% 45%
Net assets at end of
period (in 000's)....... $44,156 $42,384 $ 1 $ 0(c) $ 1
</Table>
- ------------
* Commencement of Operations.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is not annualized.
(c) Less than one thousand dollars.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
76
Eclipse Value Equity Fund
- --------------------------------------------------------------------------------
The equity markets enjoyed very strong performance for the 12 months ended
October 2003, and the Fund participated in the market's advance. Early in this
period, stocks rallied as investors found valuations more appealing and signs of
a macroeconomic recovery emerged. An early November 2002 interest-rate cut by
the Federal Reserve was also a positive factor.
Investor behavior was negatively influenced in the early part of calendar 2003
by the possibility of a war in Iraq and general geopolitical uncertainty. At the
same time, employment and consumer-sentiment trends began to weaken and stocks
surrendered most of their late calendar-2002 gains. Investors became
increasingly concerned that the economy might once again shift into a recession
and that corporate profit growth would not materialize.
A number of encouraging influences, however, helped turn investor sentiment
decidedly positive in mid-March, and equities posted strong gains through the
end of October 2003. Investors reacted favorably to progress in the war in Iraq,
interest-rate policy remained accommodative, a tax cut provided fiscal stimulus,
most equity valuations were reasonable, and a weakening U.S. dollar provided
potential benefits for U.S. exporters and companies traditionally subject to
import competition.
The equity rally appeared justified by a solid recovery in the economy and in
corporate earnings. Real gross domestic product rose 1.4% in the first quarter
of 2003, 3.3% in the second quarter, and according to preliminary estimates from
the Bureau of Economic Analysis, 8.2% in the third quarter. Operating earnings
for companies in the S&P 500(R) Index(1) grew by 6% in the second quarter of
2003 and an estimated 11% in the third quarter. Investors must now weigh these
positive trends--and recent evidence that the stubbornly weak labor markets are
improving--against higher stock valuations and a geopolitical landscape that
remains unpredictable.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, Eclipse Value Equity Fund
returned 21.43% for No-Load Class shares and 21.14% for Service Class shares.
Both share classes outperformed the 20.70% return of the average Lipper(2)
large-cap value fund over the same period. Both share classes also outperformed
the 20.80% return of the S&P 500 Index but underperformed the 22.87% return of
the Russell 1000(R) Value Index(3) for the 12 months ended October 31, 2003.
STRONG AND WEAK PERFORMERS
Good stock selection in the industrials sector was a major positive contributor
to the Fund's performance. Shares of truck manufacturer Navistar International
advanced 80%(4) as signs of a recovery in the heavy-duty truck market emerged.
Investors were attracted to Navistar International's low-end valuation and
significant earnings leverage in such a recovery. Electrical-components maker
Cooper Industries was up 74%, helped by a cyclical recovery in the company's
end-markets and strong free cash flow.
In the financials sector, FleetBoston Financial was up 82%, helped by an
acquisition bid from Bank of America late in the fiscal year. The Fund's
capital-markets sensitive holdings rebounded with the rally in the equity
markets. Merrill Lynch led the way with a 58% gain, Citigroup gained 32%, and
Goldman Sachs also advanced 32%. Washington Mutual (+27%) also added value to
the Fund. The mortgage lender benefited from a strong housing market.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
2. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
3. The Russell 1000(R) Value Index is an unmanaged index that measures the
performance of those Russell 1000(R) companies with lower price-to-book
ratios and lower forecasted growth values. The Russell 1000(R) Index is an
unmanaged index that measures the performance of the 1,000 largest U.S.
companies based on total market capitalization. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
4. Performance percentages reflect the price performance of the securities
mentioned for the 12 months ended October 31, 2003, or for the portion of the
reporting period shares were held in the Fund, if shorter. Percentages do not
reflect the impact of dividends received, if any. Due to purchases and sales,
the performance of Fund holdings may differ from that of the securities
themselves.
77
- --------------------------------------------------------------------------------
The Fund's holdings in the semiconductors & semiconductor equipment industry
performed well as demand for microprocessors rebounded while pricing held firm.
We took advantage of low valuations in Advanced Micro Devices and Intel. The
price of Advanced Micro Devices shares rose 148% as optimism surrounding the
launch of a new high-performance chip grew. The improving semiconductor cycle
also benefited Intel, which saw its stock price rise 71% from the beginning of
the fiscal year through the time when we sold the Fund's entire position in
October. Intel shares had reached our price target.
Shares of Apple Computer detracted from the Fund's performance. The stock fell
18% from the beginning of the fiscal year until we sold the Fund's position in
mid-April. We were concerned about published reports that Apple Computer was
interested in buying a large music company--reports that the company would not
refute. Our concern was that a large acquisition outside the company's area of
core competence would present considerable downside risk. No deal has yet been
announced and Apple Computer shares have risen since the Fund sold its position.
McDonald's suffered from a series of earnings-shortfall announcements and store
closings. In February, after determining that the company's fundamentals had
deteriorated, we sold the Fund's entire position in the stock. McDonald's shares
were down 25% from the beginning of the fiscal year through the time of our last
sale.
A shifting competitive landscape continues to impact the Fund's holdings in the
telecommunication services sector. Local telecommunications providers BellSouth
(+4%), SBC Communications (-1%), and Verizon (-7%) underperformed and detracted
from the Fund's results. Cash flow remains strong and dividend yields are high
for the local incumbent carriers. We have, however, tilted the Fund's holdings
in this sector to an underweighted position. It is our view that a new round of
competitive pressure is likely to come from cable operators in the form of voice
services.
SECTOR WEIGHTINGS
At the end of October 2003, the Fund was overweighted in the industrials,
materials, and energy sectors and underweighted in the consumer discretionary,
financials, telecommunication services, and utilities sectors.
LOOKING AHEAD
Steadily improving GDP and employment trends continue to be the main drivers of
the stock market. Corporate earnings growth has also been steadily improving,
but we believe that the assumption of continued good growth may already be
embedded in most stock prices. Investors have been willing to give stocks the
benefit of the doubt, but continued economic growth and positive employment
trends will need to be maintained if the market is to sustain its current rally
into next year. These improving economic trends are very favorable for our
investment discipline, which has led us to many names that may benefit from
increased economic activity. We still find many attractive stocks in the
industrials, materials, and energy sectors that we believe may benefit from an
improving industrial economy.
Many companies in the industrials and materials sectors have spent much of the
past few years restructuring their manufacturing facilities, reducing their
break-even levels, and positioning themselves for what some believe to be an
inevitable economic recovery. Companies that took this bold action should
experience unprecedented efficiency and profitability once overall demand
rebounds. Despite this favorable outlook, many stocks in these sectors still
command valuation metrics at the lower end of their historical ranges. We have
taken meaningful positions in the shares of such companies and believe that they
may offer excellent prospects for capital appreciation over the next 12 to 18
months.
We continue to believe that since consumer balance sheets are stretched,
incremental consumer spending trends may be less encouraging when the
mortgage-refinancing boom begins to wane. For these reasons, we are
underweighted in many consumer discretionary and consumer lending stocks.
78
- --------------------------------------------------------------------------------
We are also concerned that improved commercial-loan growth could be offset by
very low historical net interest margins and low investment yields at many
banks, and we continue to underweight the commercial banks industry. The Fund's
weighting in information technology has diminished throughout the year as the
sector rallied and many of the Fund's holdings reached our price targets. We
will continue to use our disciplined value investing approach to seize
opportunities in quality companies with value-enhancing attributes when they
arise.
Whatever the markets or the economy may bring, the Fund will continue to seek
maximum long-term total return from a combination of capital growth and income.
RICHARD A. ROSEN
Portfolio Manager
MacKay Shields LLC
79
$10,000 INVESTED IN
ECLIPSE VALUE EQUITY FUND VERSUS
RUSSELL 1000 VALUE INDEX AND
S&P 500 INDEX
NO-LOAD CLASS SHARES
[NO LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE VALUE EQUITY FUND RUSSELL 1000 VALUE INDEX S&P 500 INDEX
------------------------- ------------------------ -------------
10/31/93 $ 10,000.00 $ 10,000.00 $ 10,000.00
94 10,488.00 10,076.00 10,387.00
95 12,197.00 12,566.00 13,133.00
96 14,970.00 15,548.00 16,297.00
97 18,497.00 20,708.00 21,531.00
98 18,296.00 23,779.00 26,266.00
99 19,465.00 27,708.00 33,008.00
00 21,666.00 29,237.00 35,018.00
01 20,087.00 25,769.00 26,297.00
02 16,780.00 23,187.00 22,325.00
10/31/03 20,375.00 28,491.00 26,968.00
</Table>
$10,000 INVESTED IN
ECLIPSE VALUE EQUITY FUND VERSUS
RUSSELL 1000 VALUE INDEX AND
S&P 500 INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE VALUE EQUITY FUND RUSSELL 1000 VALUE INDEX S&P 500 INDEX
------------------------- ------------------------ -------------
10/31/93 $ 10,000.00 $ 10,000.00 $ 10,000.00
94 10,462.00 10,076.00 10,387.00
95 12,155.00 12,566.00 13,133.00
96 14,881.00 15,548.00 16,297.00
97 18,348.00 20,708.00 21,531.00
98 18,097.00 23,779.00 26,266.00
99 19,204.00 27,708.00 33,008.00
00 21,317.00 29,237.00 35,018.00
01 19,710.00 25,769.00 26,297.00
02 16,430.00 23,187.00 22,325.00
10/31/03 19,903.00 28,491.00 26,968.00
</Table>
Source: Lipper Inc., 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- -------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------
Eclipse Value Equity Fund No-Load Class 21.43% 2.18% 7.38%
Eclipse Value Equity Fund Service
Class(2) 21.14 1.92 7.13
Average Lipper large-cap value fund(3) 20.70 2.07 8.90
S&P 500 Index(4) 20.80 0.53 10.43
Russell 1000(R) Value Index(5) 22.87 3.68 11.04
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
<Caption>
YEAR ENDED TOTAL RETURN (1)
- ----------- -------------------
1994 1.22%
Year ended December 31 1995 29.42
1996 22.41
1997 22.63
1998 -8.10
10 months ended October 31 1999 7.91
2000 11.31
2001 -7.29
2002 -16.46
2003 21.43
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares.
2. Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the No-Load Class from the
Fund's inception on 1/2/91 through 12/31/94. Performance figures for these
classes will vary after 12/31/94, based on differences in their expense
structures.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
5. The Russell 1000(R) Value Index is an unmanaged index that measures the
performance of those Russell 1000(R) companies with lower price-to-book
ratios and lower forecasted growth values. The Russell 1000(R) Index is an
unmanaged index that measures the performance of the 1,000 largest U.S.
companies based on total market capitalization. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
INFORMATION ABOUT ECLIPSE VALUE EQUITY FUND ON THIS PAGE AND THE PRECEDING PAGES
HAS NOT BEEN AUDITED.
80
ECLIPSE FUNDS
VALUE EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (94.7%)+
SHARES VALUE
------------------------
AEROSPACE & DEFENSE (4.6%)
Boeing Co. (The)................ 63,000 $ 2,424,870
Northrop Grumman Corp. ......... 29,400 2,628,360
Raytheon Co. ................... 103,900 2,751,272
------------
7,804,502
------------
AUTO COMPONENTS (1.3%)
Delphi Corp. ................... 238,800 2,125,320
------------
BUILDING PRODUCTS (1.6%)
American Standard Cos., Inc.
(a)............................ 28,000 2,679,600
------------
CAPITAL MARKETS (6.5%)
Goldman Sachs Group, Inc.
(The).......................... 52,000 4,882,800
iShares Russell 1000 Value Index
(b)............................ 62,900 3,438,114
Merrill Lynch & Co., Inc. ...... 44,100 2,610,720
------------
10,931,634
------------
COMMERCIAL BANKS (9.7%)
Bank of America Corp. .......... 56,500 4,278,745
Bank One Corp. ................. 52,000 2,207,400
FleetBoston Financial Corp. .... 81,316 3,284,353
PNC Financial Services Group,
Inc. (The)..................... 63,200 3,385,624
Wachovia Corp. ................. 70,800 3,247,596
------------
16,403,718
------------
COMMUNICATIONS EQUIPMENT (1.2%)
Motorola, Inc. ................. 152,800 2,067,384
------------
COMPUTERS & PERIPHERALS (2.0%)
International Business Machines
Corp. ......................... 38,400 3,436,032
------------
CONTAINERS & PACKAGING (2.4%)
Smurfit-Stone Container Corp.
(a)............................ 265,400 4,113,700
------------
DIVERSIFIED FINANCIAL SERVICES (3.8%)
Citigroup, Inc. ................ 134,833 6,391,084
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (4.9%)
ALLTEL Corp. ................... 53,500 2,528,945
BellSouth Corp. ................ 84,300 2,217,933
SBC Communications, Inc. ....... 37,500 899,250
Verizon Communications, Inc. ... 77,000 2,587,200
------------
8,233,328
------------
ELECTRIC UTILITIES (0.6%)
FirstEnergy Corp. .............. 27,800 956,042
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------------------------
ELECTRICAL EQUIPMENT (2.7%)
Cooper Industries Ltd. Class
A.............................. 85,700 $ 4,533,530
------------
ENERGY EQUIPMENT & SERVICES (1.1%)
Transocean, Inc. (a)............ 93,300 1,790,427
------------
FOOD & STAPLES RETAILING (5.1%)
CVS Corp. ...................... 141,800 4,988,524
Kroger Co. (The) (a)............ 209,700 3,667,653
------------
8,656,177
------------
FOOD PRODUCTS (1.1%)
Kraft Foods, Inc. Class A....... 63,400 1,844,940
------------
HEALTH CARE PROVIDERS & SERVICES (1.7%)
HCA, Inc. ...................... 72,700 2,780,775
------------
HOUSEHOLD PRODUCTS (0.5%)
Kimberly-Clark Corp. ........... 17,300 913,613
------------
INSURANCE (8.5%)
Allstate Corp. (The)............ 93,200 3,681,400
Hartford Financial Services
Group, Inc. (The).............. 73,500 4,035,150
Prudential Financial, Inc. ..... 95,200 3,678,528
Travelers Property Casualty
Corp. Class B.................. 185,691 3,039,762
------------
14,434,840
------------
IT SERVICES (2.3%)
Computer Sciences Corp. (a)..... 99,800 3,954,076
------------
MACHINERY (3.6%)
Navistar International Corp.
(a)............................ 149,700 6,052,371
------------
METALS & MINING (3.1%)
Alcoa, Inc. .................... 166,272 5,249,207
------------
MULTILINE RETAIL (0.5%)
Target Corp. ................... 21,100 838,514
------------
OIL & GAS (11.1%)
ChevronTexaco Corp. ............ 63,521 4,719,610
ConocoPhillips.................. 90,000 5,143,500
ExxonMobil Corp. ............... 115,700 4,232,306
Kerr-McGee Corp. ............... 60,600 2,514,900
Sunoco, Inc. ................... 48,000 2,100,480
------------
18,710,796
------------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
81
VALUE EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
PAPER & FOREST PRODUCTS (5.3%)
Bowater, Inc. .................. 63,900 $ 2,609,037
International Paper Co. ........ 117,500 4,623,625
MeadWestvaco Corp. ............. 66,264 1,717,563
------------
8,950,225
------------
PHARMACEUTICALS (3.2%)
Bristol-Myers Squibb Co. ....... 79,500 2,016,915
Merck & Co., Inc. .............. 78,300 3,464,775
------------
5,481,690
------------
ROAD & RAIL (2.1%)
Burlington Northern Santa Fe
Corp. ......................... 124,100 3,591,454
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.0%)
Advanced Micro Devices, Inc.
(a)............................ 112,200 1,705,440
------------
SPECIALTY RETAIL (1.0%)
Gap, Inc. (The)................. 90,900 1,734,372
------------
THRIFTS & MORTGAGE FINANCE (2.2%)
Washington Mutual, Inc. ........ 83,000 3,631,250
------------
Total Common Stocks
(Cost $144,548,717)............ 159,996,041
------------
<Caption>
PURCHASED CALL OPTIONS (0.2%)
NUMBER
OF
CONTRACTS(c)
----------
ENERGY EQUIPMENT & SERVICES (0.1%)
ENSCO International, Inc.
Strike Price $24.00
Expire 3/19/04 (a)(d).......... 544 205,816
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.1%)
Micron Technology, Inc.
Strike Price $12.50
Expire 1/17/04 (a)(d).......... 784 184,240
------------
Total Purchased Call Options
(Cost $348,968)................ 390,056
------------
<Caption>
SHORT-TERM INVESTMENTS (5.4%)
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------
COMMERCIAL PAPER (5.4%)
Federal National Mortgage
Association
1.00%, due 11/5/03............. $3,245,000 $ 3,244,639
Morgan Stanley Dean Witter & Co.
1.03%, due 11/7/03............. 3,000,000 2,999,485
UBS Finance Delaware LLC
1.03%, due 11/3/03............. 2,850,000 2,849,837
------------
9,093,961
------------
Total Short-Term Investments
(Cost $9,093,961).............. 9,093,961
------------
Total Investments
(Cost $153,991,646) (e)........ 100.3% 169,480,058(f)
Liabilities in Excess of
Cash & Other Assets............ (0.3) (540,998)
---------- ------------
Net Assets...................... 100.0% $168,939,060
========== ============
</Table>
- ------------
(a) Non-income producing security.
(b) Exchange Traded Fund--represents a basket of securities that are traded on
an exchange.
(c) One contract relates to 100 shares.
(d) Options can be exercised into the underlying common stock.
(e) The cost for federal income tax purposes is $155,298,364.
(f) At October 31, 2003 net unrealized appreciation was $14,181,694, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $16,885,087 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $2,703,393.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
82
ECLIPSE FUNDS
VALUE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $153,991,646)............................. $169,480,058
Cash............................................. 2,686
Receivables:
Dividends...................................... 266,650
Fund shares sold............................... 167,245
Other assets..................................... 5,782
------------
Total assets............................... 169,922,421
------------
LIABILITIES:
Payables:
Investment securities purchased................ 662,577
Fund shares redeemed........................... 131,015
Manager........................................ 100,493
Transfer agent................................. 40,100
Custodian...................................... 3,699
Directors...................................... 1,328
Accrued expenses................................. 44,149
------------
Total liabilities.......................... 983,361
------------
Net assets....................................... $168,939,060
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1
billion shares authorized
No-Load Class.................................. $ 14,520
Service Class.................................. 480
Additional paid-in capital....................... 185,710,465
Accumulated undistributed net investment
income......................................... 1,909,734
Accumulated net realized loss on investments and
option transactions............................ (34,184,551)
Net unrealized appreciation on investments....... 15,488,412
------------
Net assets....................................... $168,939,060
============
No-Load Class
Net assets applicable to outstanding shares...... $163,550,608
============
Shares of capital stock outstanding.............. 14,520,430
============
Net asset value per share outstanding............ $ 11.26
============
Service Class
Net assets applicable to outstanding shares...... $ 5,388,452
============
Shares of capital stock outstanding.............. 479,585
============
Net asset value per share outstanding............ $ 11.24
============
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Dividends................................................ $ 3,492,403
Interest................................................. 98,677
-----------
Total income......................................... 3,591,080
-----------
Expenses:
Manager.................................................. 1,323,673
Transfer agent........................................... 227,179
Professional............................................. 61,402
Registration............................................. 28,578
Custodian................................................ 24,989
Directors................................................ 18,439
Shareholder communication................................ 18,030
Service--Service Class................................... 11,870
Miscellaneous............................................ 22,670
-----------
Total expenses before
reimbursement....................................... 1,736,830
Expense reimbursement from Manager....................... (261,135)
-----------
Net expenses......................................... 1,475,695
-----------
Net investment income...................................... 2,115,385
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND WRITTEN OPTION TRANSACTIONS:
Net realized gain (loss) from:
Security transactions.................................... (6,127,395)
Written option transactions.............................. 302,173
-----------
Net realized loss on investments and written option
transactions............................................. (5,825,222)
-----------
Net change in unrealized appreciation (depreciation) on:
Security transactions.................................... 34,347,289
Written option transactions.............................. (27,897)
-----------
Net unrealized gain on investments and written option
transactions............................................. 34,319,392
-----------
Net realized and unrealized gain on investments and written
option transactions...................................... 28,494,170
-----------
Net increase in net assets resulting from operations....... $30,609,555
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
83
VALUE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................... $ 2,115,385 $ 1,637,186
Net realized loss on investments and option
transactions........................................... (5,825,222) (25,128,233)
Net change in unrealized appreciation (depreciation) on
investments and written option transactions............ 34,319,392 (1,259,304)
------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................. 30,609,555 (24,750,351)
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
No-Load Class......................................... (1,595,725) (3,627,313)
Service Class......................................... (40,231) (114,666)
From net realized gain on investments:
No-Load Class......................................... -- (13,192,357)
Service Class......................................... -- (467,805)
------------ ------------
Total dividends and distributions to shareholders... (1,635,956) (17,402,141)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 33,010,544 63,199,165
Service Class......................................... 1,233,322 797,968
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
No-Load Class......................................... 1,593,669 16,808,141
Service Class......................................... 40,013 578,759
------------ ------------
35,877,548 81,384,033
Cost of shares redeemed:
No-Load Class......................................... (36,240,410) (43,166,219)
Service Class......................................... (1,037,345) (838,179)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions................................... (1,400,207) 37,379,635
------------ ------------
Net increase (decrease) in net assets................. 27,573,392 (4,772,857)
NET ASSETS:
Beginning of year......................................... 141,365,668 146,138,525
------------ ------------
End of year............................................... $168,939,060 $141,365,668
============ ============
Accumulated undistributed net investment income at end of
year.................................................... $ 1,909,734 $ 1,430,305
============ ============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
84
(THIS PAGE INTENTIONALLY LEFT BLANK)
85
VALUE EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
--------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
--------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
-------- -------- -------- -------- ----------- ------------
Net asset value at beginning of period....... $ 9.38 $ 12.55 $ 14.00 $ 12.69 $ 11.76 $ 16.36
-------- -------- -------- -------- -------- --------
Net investment income........................ 0.14(c) 0.13(c) 0.16(c) 0.15 0.09 0.18
Net realized and unrealized gain (loss) on
investments................................. 1.85 (1.86) (1.15) 1.27 0.84 (1.58)
-------- -------- -------- -------- -------- --------
Total from investment operations............. 1.99 (1.73) (0.99) 1.42 0.93 (1.40)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income................... (0.11) (0.31) (0.15) (0.11) (0.00)(a) (0.18)
From net realized gain on investments........ -- (1.13) (0.31) -- -- (3.02)
-------- -------- -------- -------- -------- --------
Total dividends and distributions............ (0.11) (1.44) (0.46) (0.11) (0.00)(a) (3.20)
-------- -------- -------- -------- -------- --------
Net asset value at end of period............. $ 11.26 $ 9.38 $ 12.55 $ 14.00 $ 12.69 $ 11.76
======== ======== ======== ======== ======== ========
Total investment return...................... 21.43% (16.46%) (7.29%) 11.31% 7.91%(b) (8.10%)
Ratios (to average net assets)/
Supplemental Data:
Net investment income....................... 1.37% 1.12% 1.28% 1.12% 0.84%+ 1.04%
Net expenses................................ 0.94% 0.94% 0.94% 0.94% 0.96%+ 0.98%
Expenses (before reimbursement)............. 1.11% 1.12% 1.00% 0.94% 0.96%+ 0.98%
Portfolio turnover rate...................... 64% 65% 94% 96% 49% 76%
Net assets at end of period (in 000's)....... $163,551 $137,069 $140,919 $742,924 $741,300 $800,993
</Table>
- ------------
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
(a) Less than one cent per share.
(b) Total return is not annualized.
(c) Per share data based on average shares outstanding during the period.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
86
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
--------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
--------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
-------- -------- -------- -------- ----------- ------------
$ 9.36 $ 12.52 $ 13.97 $ 12.66 $ 11.76 $ 16.35
-------- -------- -------- -------- -------- --------
0.11(c) 0.10(c) 0.14(c) 0.10 0.06 0.14
1.85 (1.85) (1.16) 1.28 0.84 (1.57)
-------- -------- -------- -------- -------- --------
1.96 (1.75) (1.02) 1.38 0.90 (1.43)
-------- -------- -------- -------- -------- --------
(0.08) (0.28) (0.12) (0.07) (0.00)(a) (0.14)
-- (1.13) (0.31) -- -- (3.02)
-------- -------- -------- -------- -------- --------
(0.08) (1.41) (0.43) (0.07) (0.00)(a) (3.16)
-------- -------- -------- -------- -------- --------
$ 11.24 $ 9.36 $ 12.52 $ 13.97 $ 12.66 $ 11.76
======== ======== ======== ======== ======== ========
21.14% (16.64%) (7.54%) 11.00% 7.65%(b) (8.30%)
1.12% 0.87% 1.03% 0.87% 0.59%+ 0.79%
1.19% 1.19% 1.19% 1.19% 1.21%+ 1.23%
1.36% 1.37% 1.25% 1.19% 1.21%+ 1.23%
64% 65% 94% 96% 49% 76%
$ 5,388 $ 4,296 $ 5,219 $ 5,776 $ 7,418 $ 9,740
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
87
Eclipse Bond Fund
- --------------------------------------------------------------------------------
When the reporting period began in November 2002, economic growth was tepid,
with consumer and government spending buoying the economy, while business
spending was anemic at best. In response, the Federal Reserve cut the targeted
federal funds rate to 1.25% on November 6, 2002, to restore business and
investor confidence and to stimulate economic growth.
During the first half of 2003, the virtual absence of three key economic
drivers--business confidence, capital spending, and hiring--left consumers to
pick up the slack. With interest rates falling, many homeowners moved to
refinance their mortgages and the "found money" helped to prop up the economy.
In June, the Federal Open Market Committee lowered the targeted federal funds
rate to 1.00%, the lowest level in four decades.
In the first four months of 2003, turbulence in the Treasury market echoed
conflicting viewpoints regarding the economy, geopolitical tensions, falling
energy prices, a weaker dollar, and accommodative monetary and fiscal policies.
As the year progressed, the Federal Reserve's concerns over the threat of
deflation triggered a dramatic Treasury rally. By mid-June, 10-year notes
touched an exceedingly low yield of 3.1%. Shortly thereafter, the bond market
reversed course amid investor disappointment over the size of the Fed's June
easing move in the face of perceived deflationary risk. Ten-year Treasuries rose
to approximately 4.5% by early September, before falling slightly when mixed
economic news left the outlook uncertain. October's economic data--including an
unusually high advance estimate for third-quarter real gross domestic product
growth--was more upbeat, and yields moved higher as the 12-month reporting
period came to a close.
Aside from Treasuries, the dominant theme in the bond market was a renewed
investor appetite for risk. Many investors turned risk averse in 2002 in the
midst of an uncertain stock market, a sluggish economy, and a series of
corporate scandals. Within this context, gloomy assessments of the durability of
revenue streams led investors to reevaluate corporate-bond risk, and prices of
corporate securities declined accordingly. In 2003, however, the economic
picture brightened and corporate-bond prices rallied sharply, especially among
lower-rated securities. Investors were drawn to the higher yields available from
corporate bonds as government yields remained relatively low.
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse Bond Fund returned 5.69% for
No-Load Class shares and 5.43% for Service Class shares. No-Load Class shares
outperformed and Service Class shares underperformed the 5.66% return of the
average Lipper(1) intermediate investment grade debt fund over the same period.
Both share classes outperformed the 4.90% return of the Lehman Brothers
Aggregate Bond Index(2) for the one year period ended October 31, 2003.
The Fund benefited from its overweighted position in the corporate-bond sector,
especially its emphasis on BBB-rated(3) bonds, which generally outperformed
other investment-grade sectors during the reporting period. In the
corporate-bond market, we enhanced results using a three-pronged strategy.
First, to avoid large concentrations in any one area, we held a well-diversified
pool of issuers. Second, our emphasis on moderate-quality credits correctly
tapped into the favorable risk-reward characteristics of this portion of the
corporate-bond market. Third, and perhaps most important, we avoided
company-specific events that hurt the creditworthiness of particular firms.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
2. The Lehman Brothers Aggregate Bond Index is an unmanaged index that includes
the following other unmanaged Lehman Brothers indices: the Government Index,
the Corporate Index, the Mortgage-Backed Securities Index, and the
Asset-Backed Securities Index. To qualify for inclusion in the Lehman
Brothers Aggregate Bond Index, securities must be U.S. dollar denominated and
investment grade and have a fixed-rate coupon, a remaining maturity of at
least one year, and a par amount outstanding of at least $150 million.
Results assume reinvestment of all income and capital gains. An investment
cannot be made directly into an index.
3. Debt rated BBB by Standard & Poor's is deemed by Standard & Poor's to exhibit
adequate protection parameters. It is the opinion of Standard & Poor's,
however, that adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation than would be the case for debt in higher-rated
categories. When applied to Fund holdings, ratings are based solely on the
creditworthiness of the bonds in the portfolio and are not meant to represent
the security or safety of the Fund.
88
The Fund's performance was also aided by a tactical exposure to emerging-market
credits.(4) Among these were certain Mexican bonds and select industrial
corporate bonds, both of which we believed offered compelling risk/reward
characteristics.
STRATEGIC POSITIONING
As of October 31, 2003, the Fund held an overweighted position in asset-backed
securities, corporate bonds, and cash relative to the Lehman Brothers Aggregate
Bond Index. At the same time, the Fund was underweighted relative to its
benchmark in agencies and commercial mortgage-backed securities.
We continue to like asset-backed securities for their high credit quality and
potential yield advantages relative to Treasuries. We took a special interest in
auto loan/lease securitizations and obligations collateralized with solid
tariffs that electric utilities are allowed to pass on to their customers.
During the reporting period, we shifted to an overweighted position in corporate
bonds seeking to capitalize on the best total-return opportunities in the
investment-grade universe. In the fall of 2002, we believed that corporate bonds
were oversold and anticipated that they would outperform Treasuries. Our
analysis was based on several emerging trends, including greater business
emphasis on fiscal discipline and balance-sheet strength, slower new issuance as
hiring stalled, broader use of corporate bonds as substitutes for stocks, and
higher levels of investable cash.
The Fund's underweighted positions in agencies and commercial mortgage-backed
securities were based on our perceptions of the relative value of these
securities. By the fourth quarter of 2002, we believed that agencies had
approached fair value, and we were concerned that the sector could weaken as the
housing government-sponsored enterprises (Fannie Mae and Freddie Mac) came under
pressure from two sources. First, Congress was calling for reforms to curb the
risks of the agencies' investment portfolios; and second, accounting
irregularities at Freddie Mac raised questions about earnings quality. We
reduced the Fund's exposure in the commercial mortgage-backed securities market,
since we believed that investors were not being properly compensated to bear the
risk of a potential downturn in commercial real estate.
The Fund's duration was typically set to match the duration of its benchmark. On
several occasions, however, we tactically repositioned the Fund's duration to
take advantage of interest-rate trends. These tilts normally shortened or
lengthened the Fund's duration within a range of 5% short or long relative to
the benchmark.
LOOKING AHEAD
We plan to remain underweighted in sectors that we feel are fully valued, such
as agencies and commercial mortgage-backed securities, where narrow spreads to
Treasuries leave little room for improvement. At the same time, we will seek to
strengthen portfolio yield with commitments to securitized obligations.
Corporate bonds remain attractive as the economy improves and as investors
continue to seek higher yields. We will also continue to seek potential
opportunities in the mortgage-backed securities market, such as mortgages with
5.5% to 6.0% coupons, where prepayments should slow markedly as interest rates
rise.
Given the uncertainties that remain in the economy, it is understandable that
Treasuries have not found a trading range and appear to be at an inflection
point in terms of yield. Against this background, we believe we may continue to
find opportunities for the Fund in tactical duration rebalancing.
Whatever the markets or the economy may bring, the Fund will continue to seek to
maximize total return, consistent with liquidity, low risk to principal, and
investment in debt securities.
GARY GOODENOUGH
CHRISTOPHER HARMS
Portfolio Managers
MacKay Shields LLC
- --------------------------------------------------------------------------------
4. Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy. These
risks are likely to be greater in emerging markets than in developed markets.
89
$10,000 INVESTED IN ECLIPSE BOND FUND VERSUS LEHMAN BROTHERS AGGREGATE BOND
INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
LEHMAN BROTHERS AGGREGATE BOND
ECLIPSE BOND FUND INDEX
----------------- ------------------------------
10/31/93 $ 10,000 $ 10,000
94 9,572 9,633
95 10,989 11,140
96 11,560 11,792
97 12,480 12,840
98 13,569 14,039
99 13,427 14,114
00 14,260 15,144
01 16,265 17,349
02 16,545 18,370
10/31/03 17,487 19,271
</Table>
Source: Lipper Inc., 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93.
$10,000 INVESTED IN ECLIPSE BOND FUND VERSUS LEHMAN BROTHERS AGGREGATE BOND
INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
LEHMAN BROTHERS AGGREGATE BOND
ECLIPSE BOND FUND INDEX
----------------- ------------------------------
10/31/93 $ 10,000 $ 10,000
94 9,546 9,633
95 10,933 11,140
96 11,469 11,792
97 12,350 12,840
98 13,386 14,039
99 13,215 14,114
00 14,003 15,144
01 15,945 17,349
02 16,195 18,370
10/31/03 17,074 19,271
</Table>
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- -------------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------------
Eclipse Bond Fund No-Load Class 5.69% 5.20% 5.75%
Eclipse Bond Fund Service Class(2) 5.43 4.99 5.50
Average Lipper intermediate investment grade debt
fund(3) 5.66 5.74 5.98
Lehman Brothers Aggregate Bond Index(4) 4.90 6.54 6.78
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
TOTAL RETURN (1)
----------------
Year ended December 31, 1994 -3.31%
Year ended December 31, 1995 17.88
Year ended December 31, 1996 2.80
Year ended December 31, 1997 8.57
Year ended December 31, 1998 7.93
10 months ended October 31, 1999 -1.61
Year ended October 31, 2000 6.21
Year ended October 31, 2001 14.06
Year ended October 31, 2002 1.73
Year ended October 31, 2003 5.69
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares.
2. Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the No-Load Class from the
Fund's inception on 1/2/91 through 12/31/94. Performance figures for these
classes will vary after 12/31/94, based on differences in their expense
structures.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. The Lehman Brothers Aggregate Bond Index is an unmanaged index that includes
the following other unmanaged Lehman Brothers indices: the Government Index,
the Corporate Index, the Mortgage-Backed Securities Index and the
Asset-Backed Securities Index. To qualify for inclusion in the Lehman
Brothers Aggregate Bond Index, securities must be U.S. dollar denominated and
investment grade and have a fixed-rate coupon, a remaining maturity of at
least one year, and a par amount outstanding of at least $150 million.
Results assume reinvestment of all income and capital gains. An investment
cannot be made directly into an index.
INFORMATION ABOUT ECLIPSE BOND FUND ON THIS PAGE AND THE PRECEDING PAGES HAS NOT
BEEN AUDITED.
90
ECLIPSE FUNDS
BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
LONG-TERM INVESTMENTS (95.7%)+
ASSET-BACKED SECURITIES (4.8%)
PRINCIPAL
AMOUNT VALUE
--------------------------
CONSUMER FINANCE (2.2%)
BMW Vehicle Owner Trust Series
2003-A Class A3
1.94%, due 2/25/07............ $ 670,000 $ 670,915
Consumer Funding LLC
Series 2001-1 Class A6
5.76%, due 10/20/16........... 1,175,000 1,229,657
Volkswagen Auto Loan Enhanced
Trust
Series 2003-2 Class A3
2.27%, due 10/22/07........... 1,180,000 1,180,519
------------
3,081,091
------------
CONSUMER LOANS (0.4%)
Atlantic City Electric
Transition Funding LLC
Series 2002-1 Class A4
5.55%, due 10/20/23........... 550,000 551,817
------------
DIVERSIFIED FINANCIAL SERVICES (1.1%)
Capital One Master Trust
Series 2001-5 Class A
5.30%, due 6/15/09............ 370,000 393,963
DaimlerChrysler Auto Trust
Series 2001-D Class A3
3.15%, due 11/6/05............ 1,094,576 1,102,154
------------
1,496,117
------------
MULTI-UTILITIES & UNREGULATED POWER (0.8%)
Public Service of New Hampshire
Funding LLC
Series 2002-1 Class A
4.58%, due 2/1/08............. 1,063,333 1,114,384
------------
THRIFTS & MORTGAGE FINANCE (0.3%)
Vanderbilt Mortgage Finance
Series 1999-B Class 1A4
6.545%, due 4/7/18............ 350,000 364,308
------------
Total Asset-Backed Securities
(Cost $6,428,858)............. 6,607,717
------------
CORPORATE BONDS (23.5%)
AEROSPACE & DEFENSE (0.3%)
General Dynamics Corp.
4.50%, due 8/15/10............ 480,000 486,600
------------
AUTOMOBILES (0.9%)
DaimlerChrysler NA Holdings
6.50%, due 11/15/13........... 670,000 676,358
General Motors Corp.
8.375%, due 7/15/33........... 485,000 511,704
------------
1,188,062
------------
BEVERAGES (0.7%)
Anheuser-Busch Cos., Inc.
4.95%, due 1/15/14............ 250,000 250,994
Miller Brewing Co.
4.25%, due 8/15/08 (a)........ 665,000 671,552
------------
922,546
------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
-------------------------
<Caption>
ASSET-BACKED SECURITIES (4.8%)
BUILDING PRODUCTS (0.7%)
Masco Corp.
6.50%, due 8/15/32............ $ 550,000 $ 569,690
6.75%, due 3/15/06............ 355,000 388,626
------------
958,316
------------
CAPITAL MARKETS (2.4%)
Bear Stearns Cos., Inc. (The)
4.00%, due 1/31/08............ 370,000 375,921
Goldman Sachs Group, Inc. (The)
4.75%, due 7/15/13............ 350,000 337,979
5.25%, due 10/15/13........... 2,170,000 2,174,101
Morgan Stanley Dean Witter &
Co.
3.625%, due 4/1/08............ 520,000 518,288
------------
3,406,289
------------
COMMERCIAL BANKS (1.9%)
Bank of America Corp.
5.125%, due 11/15/14.......... 865,000 863,512
BankBoston N.A.
7.00%, due 9/15/07............ 385,000 434,225
FleetBoston Financial Corp.
3.85%, due 2/15/08............ 340,000 344,155
PNC Funding Corp.
5.25%, due 11/15/15........... 745,000 740,229
Wells Fargo Co.
5.00%, due 11/15/14........... 210,000 208,569
------------
2,590,690
------------
COMPUTERS & PERIPHERALS (0.6%)
International Business Machines
Corp.
8.375%, due 11/1/19........... 660,000 859,260
------------
CONSTRUCTION MATERIALS (0.4%)
CRH America, Inc.
5.30%, due 10/15/13........... 585,000 589,447
------------
CONSUMER FINANCE (2.2%)
Capital One Bank
4.875%, due 5/15/08........... 495,000 507,596
5.75%, due 9/15/10............ 285,000 298,925
Ford Motor Credit Co.
7.00%, due 10/1/13 (c)........ 945,000 928,976
General Motors Acceptance Corp.
6.875%, due 8/28/12........... 375,000 384,402
Household Finance Corp.
6.75%, due 5/15/11............ 270,000 302,153
John Deere Capital Corp.
3.90%, due 1/15/08............ 280,000 283,487
MBNA Corp.
6.25%, due 1/17/07............ 370,000 400,995
------------
3,106,534
------------
CONTAINERS & PACKAGING (0.4%)
Rock-Tenn Co.
8.20%, due 8/15/11............ 260,000 305,594
Sealed Air Corp.
8.75%, due 7/1/08 (a)......... 225,000 264,947
------------
570,541
------------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
91
BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
DIVERSIFIED FINANCIAL SERVICES (0.7%)
Citigroup, Inc.
4.875%, due 5/7/15............ $ 240,000 $ 232,562
J Paul Getty Trust
5.875%, due 10/1/33........... 365,000 358,519
NiSource Finance Corp.
5.40%, due 7/15/14............ 370,000 369,957
------------
961,038
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.3%)
Citizens Communications Co.
9.00%, due 8/15/31............ 935,000 1,209,385
9.25%, due 5/15/11............ 240,000 299,550
Intelsat, Ltd.
6.50%, due 11/1/13 (a)........ 265,000 270,342
------------
1,779,277
------------
ELECTRIC UTILITIES (0.3%)
CenterPoint Energy, Inc.
7.25%, due 9/1/10 (a)......... 395,000 423,283
------------
ELECTRICAL EQUIPMENT (0.2%)
Emerson Electric Co.
6.00%, due 8/15/32............ 275,000 277,612
------------
ENERGY EQUIPMENT & SERVICES (0.4%)
Entergy-Koch, LP
3.65%, due 8/20/06 (a)........ 585,000 588,965
------------
FOOD & STAPLES RETAILING (1.0%)
Fred Meyer, Inc.
7.375%, due 3/1/05............ 530,000 566,103
Safeway, Inc.
4.125%, due 11/1/08........... 280,000 279,049
Wal-Mart Stores, Inc.
4.55%, due 5/1/13............. 560,000 550,052
------------
1,395,204
------------
HEALTH CARE PROVIDERS & SERVICES (1.0%)
Highmark, Inc.
6.80%, due 8/15/13 (a)........ 1,010,000 1,079,095
Medco Health Solutions, Inc.
7.25%, due 8/15/13............ 265,000 281,938
------------
1,361,033
------------
INSURANCE (0.5%)
Fund American Cos., Inc.
5.875%, due 5/15/13........... 680,000 679,174
------------
MACHINERY (0.5%)
Deere & Co.
7.85%, due 5/15/10............ 560,000 674,386
------------
MEDIA (3.1%)
Comcast Cable Communications,
Inc.
8.875%, due 5/1/17............ 210,000 265,720
Liberty Media Corp.
3.50%, due 9/25/06............ 200,000 197,517
Tele-Communications, Inc.
9.80%, due 2/1/12............. 765,000 993,779
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
-------------------------
<Caption>
MEDIA (CONTINUED)
Time Warner Entertainment Co.
LP
10.15%, due 5/1/12............ $1,544,000 $ 2,045,480
Time Warner, Inc.
6.875%, due 6/15/18........... 315,000 338,961
8.05%, due 1/15/16............ 360,000 421,730
------------
4,263,187
------------
MULTILINE RETAIL (1.0%)
Target Corp.
6.35%, due 11/1/32............ 915,000 958,747
8.60%, due 1/15/12............ 315,000 392,466
------------
1,351,213
------------
MULTI-UTILITIES & UNREGULATED POWER (0.9%)
PSE&G Power LLC
6.875%, due 4/15/06........... 1,135,000 1,242,727
------------
OIL & GAS (1.1%)
Kern River Funding Corp.
4.893%, due 4/30/18 (a)....... 666,157 653,527
Tosco Corp.
8.125%, due 2/15/30........... 735,000 922,875
------------
1,576,402
------------
PERSONAL PRODUCTS (0.2%)
Estee Lauder Cos., Inc.
5.75%, due 10/15/33........... 315,000 307,066
------------
THRIFTS & MORTGAGE FINANCE (0.6%)
Washington Mutual, Inc.
4.00%, due 1/15/09............ 780,000 773,840
------------
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
AT&T Wireless Services, Inc.
8.75%, due 3/1/31............. 255,000 306,649
------------
Total Corporate Bonds
(Cost $32,003,288)............ 32,639,341
------------
CORPORATE BONDS-FOREIGN (3.0%)
BEVERAGES (0.5%)
CIA Brasileira de Bebidas
10.50%, due 12/15/11.......... 580,000 656,850
------------
BEVERAGES & TOBACCO (0.1%)
Coca-Cola HBC Finance BV
5.125%, due 9/17/13 (a)....... 205,000 205,066
------------
COMMERCIAL BANKS (0.1%)
HSBC Holding PLC
5.25%, due 12/12/12........... 200,000 203,018
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%)
Telefonos de Mexico S.A. de
C.V.
8.25%, due 1/26/06............ 250,000 276,563
------------
ELECTRIC UTILITIES (0.2%)
Singapore Powerassets Ltd.
5.00%, due 10/22/13 (a)....... 305,000 304,047
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
92
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS-FOREIGN (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
METALS & MINING (1.0%)
BHP Finance USA Ltd.
4.80%, due 4/15/13............ $ 740,000 $ 736,383
Corporacion Nacional del
Cobre-Codelco, Inc.
5.50%, due 10/15/13 (a)....... 330,000 331,493
Inco Ltd.
5.70%, due 10/15/15........... 275,000 278,537
------------
1,346,413
------------
WIRELESS TELECOMMUNICATION SERVICES (0.9%)
Vodafone Group PLC
3.95%, due 1/30/08............ 535,000 541,706
5.00%, due 12/16/13........... 700,000 689,543
------------
1,231,249
------------
Total Corporate Bonds-Foreign
(Cost $4,141,905)............. 4,223,206
------------
FOREIGN GOVERNMENTS (0.8%)
FOREIGN GOVERNMENTS (0.8%)
Province of Quebec
5.00%, due 7/17/09............ 470,000 494,769
United Mexican States
4.625%, due 10/8/08........... 75,000 75,188
6.625%, due 3/3/15............ 200,000 205,500
7.50%, due 1/14/12............ 240,000 268,200
------------
1,043,657
------------
Total Foreign Governments
(Cost $978,861)............... 1,043,657
------------
MORTGAGE-BACKED SECURITY (1.3%)
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATION) (1.3%)
Fannie Mae Grantor Trust
Series 2003-T1 B
4.491%, due 11/25/12.......... 1,775,000 1,757,928
------------
Total Mortgage-Backed Security
(Cost $1,750,134)............. 1,757,928
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (61.8%)
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (3.9%)
5.00%, due 8/1/33 (e)......... 2,994,817 2,949,218
5.50%, due 2/1/33 (e)......... 2,403,813 2,425,188
------------
5,374,406
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.7%)
4.625%, due 5/1/13 (c)........ 670,000 645,058
4.75%, due 1/2/07............. 2,365,000 2,481,396
5.25%, due 8/1/12............. 1,005,000 1,019,663
5.50%, due 5/2/06............. 820,000 877,301
6.25%, due 2/1/11............. 255,000 278,908
7.00%, due 7/15/05............ 1,175,000 1,274,600
------------
6,576,926
------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
-------------------------
<Caption>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (27.5%)
4.00%, due 9/1/18............. $1,485,310 $ 1,447,601
4.50%, due 7/1/18............. 2,565,086 2,564,532
4.50%, due 11/18/18 TBA (b)... 4,160,000 4,154,800
5.00%, due 9/1/17-10/1/33..... 2,427,455 2,424,512
5.50%, due 1/1/17-2/1/17
(e)......................... 2,684,049 2,764,527
5.50%, due 11/13/33-1/14/34
TBA (b)..................... 8,305,000 8,345,672
6.00%, due 10/1/29-8/1/32
(e)......................... 4,230,374 4,352,225
6.00%, due 11/13/33-1/14/34
TBA (b)..................... 6,890,000 7,067,011
6.50%, due 6/1/31-10/1/31
(e)......................... 1,540,313 1,600,454
7.00%, due 2/1/32-4/1/32
(e)......................... 2,016,525 2,123,183
7.50%, due 8/1/31 (e)......... 1,252,613 1,334,725
------------
38,179,242
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (4.1%)
6.00%, due 4/15/29-8/15/32.... 3,531,936 3,651,054
6.50%, due 7/15/28............ 383,522 402,023
7.50%, due 12/15/28-8/15/30
(e)......................... 1,480,295 1,584,480
------------
5,637,557
------------
UNITED STATES TREASURY BONDS (3.7%)
5.375%, due 2/15/31........... 1,700,000 1,756,777
6.25%, due 8/15/23............ 1,585,000 1,788,821
6.875%, due 8/15/25 (c)....... 1,335,000 1,618,218
------------
5,163,816
------------
UNITED STATES TREASURY NOTES (17.9%)
3.00%, due 2/15/08............ 145,000 145,079
4.375%, due 5/15/07 (c)....... 4,135,000 4,375,024
4.625%, due 5/15/06 (c)....... 5,955,000 6,319,976
4.875%, due 2/15/12........... 3,355,000 3,539,263
5.75%, due 11/15/05-8/15/10
(c)......................... 5,420,000 5,858,798
6.00%, due 8/15/09............ 1,245,000 1,407,725
6.75%, due 5/15/05 (c)........ 2,990,000 3,224,060
------------
24,869,925
------------
Total U.S. Government &
Federal Agencies
(Cost $85,041,422)............ 85,801,872
------------
YANKEE BONDS (0.5%) (F)
INSURANCE (0.5%)
Montpelier Re Holdings Ltd.
6.125%, due 8/15/13........... 725,000 732,386
------------
Total Yankee Bonds
(Cost $721,564)............... 732,386
------------
Total Long-Term Investments
(Cost $131,066,032)........... 132,806,107
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
93
BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
SHORT-TERM INVESTMENTS (32.0%)
PRINCIPAL
AMOUNT VALUE
-------------------------
COMMERCIAL PAPER (9.4%)
American Express Credit Corp.
1.02%, due 11/4/03............ $3,000,000 $ 2,999,745
Bunge Asset Corp. (d)
1.0849%, due 11/3/03.......... 2,479,852 2,479,852
Morgan Stanley Dean Witter &
Co.
1.03%, due 11/7/03............ 3,000,000 2,999,485
UBS Finance Delaware LLC
1.00%, due 11/3/03............ 4,665,000 4,664,733
------------
Total Commercial Paper
(Cost $13,143,815)............ 13,143,815
------------
FEDERAL AGENCIES (7.4%)
Federal Home Loan Bank
(Discount Note)
0.95%, due 11/6/03............ 4,000,000 3,999,472
Federal National Mortgage
Association
(Discount Note)
1.00%, due 11/5/03............ 6,220,000 6,219,309
------------
Total Federal Agencies
(Cost $10,218,781)............ 10,218,781
------------
SHARES
----------
INVESTMENT COMPANIES (4.9%)
AIM Institutional Funds Group
(d)........................... 542,188 542,188
Merrill Lynch Premier
Institutional Fund............ 6,232,521 6,232,521
------------
Total Investment Companies
(Cost $6,774,709)............. 6,774,709
------------
PRINCIPAL
AMOUNT
----------
MASTER NOTE (3.2%)
Bank of America LLC
1.19%, due 11/3/03 (d)........ $4,477,000 4,477,000
------------
Total Master Note
(Cost $4,477,000)............. 4,477,000
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------------
REPURCHASE AGREEMENTS (7.1%)
Countrywide Securities Corp.
1.14%, dated 10/31/03 due
11/3/03 Proceeds at Maturity
$6,000,190 (d) (Collateralized
by Various Bonds with a
Principal Amount of $7,082,786
and a Market Value of
$6,148,536)................... $6,000,000 $ 6,000,000
Merrill Lynch Government
Securities, Inc. 1.06%, dated
10/31/03 due 11/3/03 Proceeds
at Maturity $3,806,121 (d)
(Collateralized by Various
Bonds with a Principal Amount
of $3,808,630 and a Market
Value of $3,949,209).......... 3,806,000 3,806,000
------------
Total Repurchase Agreements
(Cost $9,806,000)............. 9,806,000
------------
Total Short-Term Investments
(Cost $44,420,305)............ 44,420,305
------------
Total Investments
(Cost $175,486,337) (g)....... 127.7% 177,226,412(h)
Liabilities in Excess of
Cash and Other Assets......... (27.7) (38,428,179)
---------- ------------
Net Assets..................... 100.0% $138,798,233
========== ============
</Table>
- ------------
(a) May be sold to institutional investors only.
(b) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and maturity
date will be determined upon settlement. The market value of these
securities at October 31, 2003 is $19,567,483.
(c) Represents securities out on loan or a portion which is out on loan. (See
Note 2(M))
(d) Represents security or a portion thereof, purchased with cash collateral
received for securities on loan.
(e) Segregated or partially segregated as collateral for TBAs.
(f) Yankee bond--dollar-denominated bond issued in the United States by foreign
banks and corporations.
(g) The cost for federal income tax purposes is $175,571,684.
(h) At October 31, 2003 net unrealized appreciation was $1,654,728, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $2,217,053 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $562,325.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
94
ECLIPSE FUNDS
BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $175,486,337)--including $16,472,859
market value of securities loaned.............. $177,226,412
Cash............................................. 6,209
Receivables:
Investment securities sold..................... 3,927,973
Interest....................................... 1,396,069
Fund shares sold............................... 59,775
Other assets..................................... 5,660
------------
Total assets............................... 182,622,098
------------
LIABILITIES:
Securities lending collateral.................... 17,305,040
Payables:
Investment securities purchased................ 26,348,709
Manager........................................ 75,405
Fund shares redeemed........................... 29,023
Transfer agent................................. 5,920
Custodian...................................... 4,209
Directors...................................... 1,214
Accrued expenses................................. 54,264
Dividend payable................................. 81
------------
Total liabilities.......................... 43,823,865
------------
Net assets....................................... $138,798,233
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class.................................. $ 13,534
Service Class.................................. 587
Additional paid-in capital....................... 147,830,863
Accumulated undistributed net investment
income......................................... 146,030
Accumulated net realized loss on investments..... (10,932,856)
Net unrealized appreciation on investments....... 1,740,075
------------
Net assets....................................... $138,798,233
============
No-Load Class
Net assets applicable to outstanding shares...... $133,040,943
============
Shares of capital stock outstanding.............. 13,534,070
============
Net asset value per share outstanding............ $ 9.83
============
Service Class
Net assets applicable to outstanding shares...... $ 5,757,290
============
Shares of capital stock outstanding.............. 586,783
============
Net asset value per share outstanding............ $ 9.81
============
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Interest......................................... $5,995,690
Income from securities loaned--net............... 40,133
----------
Total income................................. 6,035,823
----------
Expenses:
Manager.......................................... 1,026,770
Professional..................................... 60,066
Transfer agent................................... 35,932
Registration..................................... 27,316
Custodian........................................ 26,232
Directors........................................ 17,689
Service--Service Class........................... 15,347
Shareholder communication........................ 15,000
Portfolio pricing................................ 13,892
Miscellaneous.................................... 15,296
----------
Total expenses before reimbursement.......... 1,253,540
Expense reimbursement from Manager............... (211,423)
----------
Net expenses................................. 1,042,117
----------
Net investment income.............................. 4,993,706
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments................... 2,529,860
Net change in unrealized appreciation on
investments...................................... (117,475)
----------
Net realized and unrealized gain on investments.... 2,412,385
----------
Net increase in net assets resulting from
operations....................................... $7,406,091
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
95
BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 4,993,706 $ 5,463,007
Net realized gain (loss) on investments................. 2,529,860 (918,572)
Net change in unrealized appreciation on investments.... (117,475) (2,545,889)
------------ ------------
Net increase in net assets resulting from operations.... 7,406,091 1,998,546
------------ ------------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (4,956,086) (9,394,597)
Service Class......................................... (216,223) (377,552)
------------ ------------
Total dividends to shareholders..................... (5,172,309) (9,772,149)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 25,071,012 34,022,775
Service Class......................................... 2,413,628 4,117,871
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 4,950,953 8,871,376
Service Class......................................... 214,243 339,859
------------ ------------
32,649,836 47,351,881
Cost of shares redeemed:
No-Load Class......................................... (29,935,885) (20,951,015)
Service Class......................................... (2,840,675) (3,260,860)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions................................... (126,724) 23,140,006
------------ ------------
Net increase in net assets............................ 2,107,058 15,366,403
NET ASSETS:
Beginning of year......................................... 136,691,175 121,324,772
------------ ------------
End of year............................................... $138,798,233 $136,691,175
============ ============
Accumulated undistributed net investment income at end of
year.................................................... $ 146,030 $ 72,389
============ ============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
96
(THIS PAGE INTENTIONALLY LEFT BLANK)
97
BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
----------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
----------------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
-------- -------- -------- -------- ----------- ------------
Net asset value at beginning of period....... $ 9.66 $ 10.32 $ 9.75 $ 9.75 $ 9.91 $ 9.71
-------- -------- -------- -------- -------- --------
Net investment income........................ 0.36(c) 0.45(c) 0.55(c)(d) 0.57 0.47 0.57
Net realized and unrealized gain (loss) on
investments................................. 0.18 (0.30) 0.76(d) (0.01) (0.63) 0.20
-------- -------- -------- -------- -------- --------
Total from investment operations............. 0.54 0.15 1.31 0.56 (0.16) 0.77
-------- -------- -------- -------- -------- --------
Less dividends:
From net investment income................... (0.37) (0.81) (0.74) (0.56) (0.00)(b) (0.57)
-------- -------- -------- -------- -------- --------
Net asset value at end of period............. $ 9.83 $ 9.66 $ 10.32 $ 9.75 $ 9.75 $ 9.91
======== ======== ======== ======== ======== ========
Total investment return...................... 5.69% 1.73% 14.06% 6.21% (1.61%)(a) 7.93%
Ratios (to average net assets)/ Supplemental
Data:
Net investment income....................... 3.66% 4.62% 5.53%(d) 6.05% 5.55%+ 5.57%
Net expenses................................ 0.75% 0.75% 0.75% 0.75% 0.75%+ 0.75%
Expenses (before reimbursement)............. 0.90% 0.91% 0.88% 0.83% 0.85%+ 0.86%
Portfolio turnover rate...................... 153% 159% 257% 361% 245% 335%
Net assets at end of period (in 000's)....... $133,041 $130,813 $116,344 $193,466 $174,521 $182,402
</Table>
- ------------
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
(a) Total return is not annualized.
(b) Less than one cent per share.
(c) Per share data based on average shares outstanding during the period.
(d) As required, effective November 1, 2000, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
year ended October 31, 2001 is shown below. Per share ratios and
supplemental data for periods prior to November 1, 2000 have not been
restated to reflect this change in presentation.
<Table>
<Caption>
NO-LOAD SERVICE
CLASS CLASS
------- -------
Decrease net investment income.............................. ($0.02) ($0.02)
Increase net realized and unrealized gains and losses....... 0.02 0.02
Decrease ratio of net investment income..................... (0.21%) (0.21%)
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
98
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
----------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
----------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
-------- -------- -------- -------- ----------- ------------
$ 9.64 $ 10.28 $ 9.70 $ 9.69 $ 9.88 $ 9.68
-------- -------- -------- -------- -------- --------
0.34(c) 0.42(c) 0.53(c)(d) 0.55 0.47 0.54
0.18 (0.28) 0.76(d) (0.01) (0.66) 0.20
-------- -------- -------- -------- -------- --------
0.52 0.14 1.29 0.54 (0.19) 0.74
-------- -------- -------- -------- -------- --------
(0.35) (0.78) (0.71) (0.53) (0.00)(b) (0.54)
-------- -------- -------- -------- -------- --------
$ 9.81 $ 9.64 $ 10.28 $ 9.70 $ 9.69 $ 9.88
======== ======== ======== ======== ======== ========
5.43% 1.57% 13.87% 5.96% (1.92%)(a) 7.73%
3.41% 4.37% 5.28%(d) 5.80% 5.30%+ 5.32%
1.00% 1.00% 1.00% 1.00% 1.00%+ 1.00%
1.15% 1.16% 1.13% 1.08% 1.10%+ 1.11%
153% 159% 257% 361% 245% 335%
$ 5,757 $ 5,879 $ 4,981 $ 3,181 $ 3,742 $ 4,290
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
99
Eclipse Core Bond Plus Fund
- --------------------------------------------------------------------------------
When the reporting period began in November 2002, economic growth was tepid,
with consumer and government spending buoying the economy, while business
spending was anemic at best. In response, the Federal Reserve cut the targeted
federal funds rate to 1.25% on November 6, 2002, to restore business and
investor confidence and to stimulate economic growth.
During the first half of 2003, the virtual absence of three key economic
drivers--business confidence, capital spending, and hiring--left consumers to
pick up the slack. With interest rates falling, many homeowners moved to
refinance their mortgages and the "found money" helped to prop up the economy.
In June, the Federal Open Market Committee lowered the targeted federal funds
rate to 1.00%, the lowest level in four decades.
In the first four months of 2003, turbulence in the Treasury market echoed
conflicting viewpoints regarding the economy, geopolitical tensions, falling
energy prices, a weaker dollar, and accommodative monetary and fiscal policies.
As the year progressed, the Federal Reserve's concerns over the threat of
deflation triggered a dramatic Treasury rally. By mid-June, 10-year notes
touched an exceedingly low yield of 3.1%. Shortly thereafter, the bond market
reversed course amid investor disappointment over the size of the Fed's June
easing move in the face of perceived deflationary risk. Ten-year Treasuries rose
to approximately 4.5% by early September, before falling slightly when mixed
economic news left the outlook uncertain. October's economic data--including an
unusually high advance estimate for third-quarter real gross domestic product
growth--was more upbeat, and yields moved higher as the 12-month reporting
period came to a close.
Aside from Treasuries, the dominant theme in the bond market was a renewed
investor appetite for risk. Many investors turned risk averse in 2002 in the
midst of an uncertain stock market, a sluggish economy, and a series of
corporate scandals. In this context, gloomy assessments of the durability of
revenue streams led investors to reevaluate corporate-bond risk, and prices of
corporate securities declined accordingly. In 2003, however, the economic
picture brightened and corporate-bond prices rallied sharply, especially among
lower-rated securities. Investors were drawn to the higher yields available from
corporate bonds as government yields remained relatively low.
PERFORMANCE REVIEW
For the one-year period ended October 31, 2003, Eclipse Core Bond Plus Fund
No-Load Class shares returned 10.71%. The Fund outperformed the 7.28% return of
the average Lipper(1) general bond fund over the same period. The Fund also
outperformed the 4.90% return of the Lehman Brothers Aggregate Bond Index(2) for
the one-year period ended October 31, 2003.
The Fund benefited from its overweighted position in the corporate bond sector,
and especially from its emphasis on securities rated BBB(3) and below. In the
corporate-bond market, we enhanced results using a three-
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
High-yield securities ("junk bonds") are generally considered speculative
because they present a greater risk of loss than higher-quality debt securities;
these
securities may also be subject to greater price volatility. Foreign securities
may be subject to greater risks than U.S. investments, including currency
fluctuations,
less-liquid trading markets, greater price volatility, political and economic
instability, less publicly available trading information, and changes in tax or
currency
laws or monetary policy. These risks are likely to be greater in emerging
markets than in developed markets. The Fund may invest in derivatives, which may
increase the volatility of the Fund's net asset value and may result in a loss
to the Fund.
1. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
2. The Lehman Brothers Aggregate Bond Index is an unmanaged index that includes
the following other unmanaged Lehman Brothers indices: the Government
Index, the Corporate Index, the Mortgage-Backed Securities Index, and the
Asset-Backed Securities Index. To qualify for inclusion in the Lehman
Brothers Aggregate Bond Index, securities must be U.S. dollar denominated and
investment grade and have a fixed-rate coupon, a remaining maturity of at
least one year, and a par amount outstanding of at least $150 million.
Results assume reinvestment of all income and capital gains. An investment
cannot be made directly into an index.
3. Debt rated BBB by Standard & Poor's is deemed by Standard & Poor's to exhibit
adequate protection parameters. It is the opinion of Standard & Poor's,
however, that adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation than would be the case for debt in higher-rated
categories. When applied to Fund holdings, ratings are based solely on the
creditworthiness of the bonds in the portfolio and are not meant to represent
the security or safety of the Fund.
100
pronged strategy. First, to avoid large concentrations in any one area, we held
a well-diversified pool of issuers. Second, our emphasis on moderate- and
lower-quality credits correctly tapped into the favorable risk-reward
characteristics of this portion of the corporate-bond market. Third, and perhaps
most important, we avoided company-specific events that hurt the
creditworthiness of particular firms.
The Fund's performance was also aided by its overweighted position in
international bonds. Investors were attracted to non-dollar denominated bonds
due in part to their superior yields relative to U.S. Treasuries. We believed
that international bond prices would rise if foreign central banks lowered
interest rates as the U.S. Federal Reserve was doing, and our assessment proved
true. The Fund's tactical exposure to emerging-market debt was also beneficial.
In particular, our holdings in select Mexican and Russian bonds, as well as
industrial corporate bonds from Brazil and Russia strengthened the Fund's
return.
STRATEGIC POSITIONING
As of October 31, 2003, the Fund was overweighted relative to the Lehman
Brothers Aggregate Bond Index in asset-backed securities, high-yield corporate
bonds, foreign bonds, and cash. At the same time, the Fund was underweighted
relative to its benchmark in agencies, mortgage-backed securities, Treasuries,
and investment-grade corporate bonds.
We continue to like asset-backed securities for their high credit quality and
potential yield advantages relative to Treasuries. We took a special interest in
auto loan/lease securitizations and obligations collateralized with solid
tariffs that electric utilities are allowed to pass on to their customers.
During the reporting period, we shifted to an overweighted position in
high-yield corporate bonds to capitalize on the best total return opportunities
in the corporate-bond universe. In the fall of 2002, we believed that high-yield
corporate bonds were oversold and anticipated that they would outperform
Treasuries. Our analysis was based on several emerging trends, including greater
business emphasis on fiscal discipline and balance-sheet strength, slower new
issuance as hiring stalled, broader use of corporate bonds as substitutes for
stocks, and higher levels of investable cash. The Fund's overweighted position
in foreign bonds reflected their yield premium relative to Treasuries and their
capital appreciation potential.
The Fund's underweighted positions in agencies and commercial mortgage-backed
securities were based on our perceptions of the relative value of these
securities. By the fourth quarter of 2002, we believed that agencies had
approached fair value, and we were concerned that the sector could weaken as the
housing government-sponsored enterprises (Fannie Mae and Freddie Mac) came under
pressure from two sources. First, Congress was calling for reforms to curb the
risks of the agencies' investment portfolios; and second, accounting
irregularities at Freddie Mac raised questions about earnings quality. We
reduced the Fund's exposure in the mortgage-backed securities market, since we
believed that investors were not being properly compensated to bear the risk of
a potential downturn in commercial real estate. The Fund's underweighted
positions in Treasuries and investment-grade corporate bonds reflected our
belief that better return potential was available from other sectors.
The Fund's duration was typically set to match the duration of its benchmark. On
several occasions, however, we tactically repositioned the Fund's duration to
take advantage of interest-rate trends. These tilts normally shortened or
lengthened the Fund's duration within a range of 5% short or long relative to
the benchmark.
LOOKING AHEAD
We plan to remain underweighted in sectors that we feel are fully valued, such
as agencies and commercial mortgage-backed securities, where narrow spreads to
Treasuries leave little room for improvement. At the same time, we will seek to
strengthen portfolio yield with commitments to securitized
101
obligations. Corporate bonds remain attractive as the economy improves and as
investors continue to seek higher yields. We will also continue to seek
potential opportunities in the mortgage-backed securities market, such as
mortgages with 5.5% to 6.0% coupons, where prepayments should slow markedly as
interest rates rise.
Given the uncertainties that remain in the economy, it is understandable that
Treasuries have not found a trading range and appear to be at an inflection
point in terms of yield. Against this background, we believe we may continue to
find opportunities for the Fund in tactical duration rebalancing.
Whatever the markets or the economy may bring, the Fund will continue to seek to
maximize total return, consistent with the preservation of capital.
GARY GOODENOUGH
CHRISTOPHER HARMS
Portfolio Managers
MacKay Shields LLC
102
$10,000 INVESTED IN
ECLIPSE CORE BOND PLUS FUND VERSUS
LEHMAN BROTHERS AGGREGATE BOND INDEX
NO-LOAD CLASS SHARES
[CORE BOND PLUS FUND GRAPH]
<Table>
<Caption>
LEHMAN BROTHERS AGGREGATE BOND
ECLIPSE CORE BOND PLUS FUND INDEX
--------------------------- ------------------------------
1/2/01 $ 10,000 $ 10,000
10/31/01 10,795 11,066
10/31/02 10,972 11,718
10/31/03 12,148 12,292
</Table>
Source: Lipper Inc., 10/31/03
THIS GRAPH ASSUMES A $10,000 INVESTMENT MADE ON 1/2/01.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- ----------------------------------------------------------------------------------------------------
ONE YEAR SINCE INCEPTION(2)
- ----------------------------------------------------------------------------------------------------
Eclipse Core Bond Plus Fund No-Load Class 10.71% 7.11%
Average Lipper general bond fund(3) 7.28 5.97
Lehman Brothers Aggregate Bond Index(4) 4.90 7.56
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE CHART]
<Table>
10 months ended October 31 2001 7.95
1.65
Year ended October 31 2003 10.71
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions.
2. The Fund's inception date was 1/2/01.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. The Lehman Brothers Aggregate Bond Index is an unmanaged index that includes
the following other unmanaged Lehman Brothers indices: the Government Index,
the Corporate Index, the Mortgage-Backed Securities Index, and the
Asset-Backed Securities Index. To qualify for inclusion in the Lehman
Brothers Aggregate Bond Index, securities must be U.S. dollar denominated and
investment grade and have a fixed-rate coupon, a remaining maturity of at
least one year, and a par amount outstanding of at least $150 million.
Results assume reinvestment of all income and capital gains. An investment
cannot be made directly into an index.
INFORMATION ABOUT ECLIPSE CORE BOND PLUS FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
103
CORE BOND PLUS FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
LONG-TERM BONDS (94.7%)+
ASSET-BACKED SECURITIES (3.2%)
PRINCIPAL
AMOUNT VALUE
-------------------------
AIRLINES (0.1%)
Northwest Airlines, Inc.
Pass-Through Certificates
Series 2001-1 Class C
7.626%, due 4/1/10............ $ 30,210 $ 24,966
-----------
CONSUMER FINANCE (1.4%)
BMW Vehicle Owner Trust Class
2003-A Series A3
1.94%, due 2/25/07............ 155,000 155,212
Consumers Funding LLC
Series 2001-1 Class A6
5.76%, due 10/20/16........... 235,000 245,931
Volkswagen Auto Loan Enhanced
Trust
Series 2003-2 Class A3
2.27%, due 10/22/07........... 315,000 315,138
-----------
716,281
-----------
CONSUMER LOANS (0.2%)
Atlantic City Electric
Transition Funding LLC
Series 2002-1 Class A4
5.55%, due 10/20/23........... 125,000 125,413
-----------
DIVERSIFIED FINANCIAL SERVICES (0.6%)
Capital One Master Trust Series
2001-5 Class A
5.30%, due 6/15/09............ 90,000 95,829
DaimlerChrysler Auto Trust
Series 2001-D Class A3
3.15%, due 11/6/05............ 202,076 203,475
-----------
299,304
-----------
MULTI-UTILITIES & UNREGULATED POWER (0.7%)
AES Eastern Energy L.P.
Pass-Through Certificates
Series 1999-A
9.00%, due 1/2/17............. 14,919 16,187
Series 1999-B
9.67%, due 1/2/29............. 55,000 59,675
Public Service of New Hampshire
Funding LLC
Pass-Through Certificates
Series 2002-1 Class A
4.58%, due 2/1/08............. 190,324 199,462
Tiverton/Rumford Power
Associates Ltd., L.P.
Pass-Through Certificates
9.00%, due 7/15/18 (c)........ 60,000 49,200
-----------
324,524
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------------
THRIFTS & MORTGAGE FINANCE (0.2%)
Vanderbilt Mortgage Finance
Series 1999-B Class 1A4
6.545%, due 4/7/18............ $ 100,000 $ 104,088
-----------
Total Asset-Backed Securities
(Cost $1,570,227)............. 1,594,576
-----------
CONVERTIBLE BONDS (0.5%)
COMMUNICATIONS EQUIPMENT (0.2%)
Nortel Networks Corp.
4.25%, due 9/1/08............. 85,000 80,538
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.3%)
Kulicke & Soffa Industries,
Inc.
4.75%, due 12/15/06........... 40,000 38,700
LSI Logic Corp.
4.00%, due 11/1/06............ 105,000 102,113
-----------
140,813
-----------
Total Convertible Bonds
(Cost $186,150)............... 221,351
-----------
CORPORATE BONDS (33.3%)
AEROSPACE & DEFENSE (0.6%)
BE Aerospace, Inc., Series B
8.00%, due 3/1/08............. 10,000 9,100
8.875%, due 5/1/11............ 30,000 27,000
General Dynamics Corp.
4.50%, due 8/15/10............ 120,000 121,650
Sequa Corp.
Series B
8.875%, due 4/1/08............ 55,000 60,019
9.00%, due 8/1/09............. 60,000 66,000
-----------
283,769
-----------
AIRLINES (0.3%)
Delta Air Lines, Inc.
Series C
6.65%, due 3/15/04............ 60,000 59,850
8.30%, due 12/15/29........... 70,000 46,375
Northwest Airlines, Inc.
8.52%, due 4/7/04............. 30,000 29,925
9.875%, due 3/15/07........... 35,000 31,238
-----------
167,388
-----------
AUTO COMPONENTS (0.3%)
ArvinMeritor, Inc.
6.625%, due 6/15/07........... 55,000 53,900
Dana Corp.
7.00%, due 3/1/29............. 40,000 35,500
Goodyear Tire & Rubber Co.
(The)
6.625%, due 12/1/06........... 45,000 43,200
-----------
132,600
-----------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
104
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
AUTO LEASES (0.1%)
Williams Scotsman, Inc.
10.00%, due 8/15/08 (c)....... $ 55,000 $ 60,500
-----------
AUTOMOBILES (0.6%)
DaimlerChrysler North America
Holdings, Inc.
6.50%, due 11/15/13........... 180,000 181,708
General Motors Corp.
8.375%, due 7/15/33........... 115,000 121,332
-----------
303,040
-----------
BEVERAGES (0.5%)
Anheuser-Busch Cos., Inc.
4.95%, due 1/15/14............ 65,000 65,259
Miller Brewing Co.
4.25%, due 8/15/08 (c)........ 160,000 161,576
-----------
226,835
-----------
BUILDING PRODUCTS (0.5%)
Dayton Superior Corp.
10.75%, due 9/15/08 (c)....... 30,000 31,275
Masco Corp.
6.50%, due 8/15/32............ 195,000 201,981
-----------
233,256
-----------
CAPITAL MARKETS (1.5%)
Bear Stearns Cos., Inc. (The)
4.00%, due 1/31/08............ 80,000 81,280
Goldman Sachs Group, Inc. (The)
4.75%, due 7/15/13............ 75,000 72,424
5.25%, due 10/15/13........... 490,000 490,926
Morgan Stanley & Co.
3.625%, due 4/1/08............ 110,000 109,638
-----------
754,268
-----------
CHEMICALS (0.7%)
Equistar Chemicals L.P.
7.55%, due 2/15/26............ 40,000 31,600
10.125%, due 9/1/08........... 10,000 10,500
10.625%, due 5/1/11 (c)....... 85,000 88,825
FMC Corp.
10.25%, due 11/1/09........... 30,000 35,100
Lyondell Chemical Co.
Series A
9.50%, due 12/15/08........... 35,000 35,000
9.625%, due 5/1/07............ 20,000 20,300
Millennium America, Inc.
7.625%, due 11/15/26.......... 30,000 25,650
Sovereign Specialty Chemicals,
Inc.
11.875%, due 3/15/10.......... 30,000 29,850
Terra Capital, Inc.
12.875%, due 10/15/08......... 60,000 69,600
-----------
346,425
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
COMMERCIAL BANKS (1.3%)
Bank of America Corp.
5.125%, due 11/15/14.......... $ 105,000 $ 104,820
BankBoston N.A.
7.00%, due 9/15/07............ 135,000 152,261
FleetBoston Financial Corp.
3.85%, due 2/15/08............ 160,000 161,955
PNC Funding Corp.
5.25%, due 11/15/15........... 200,000 198,719
-----------
617,755
-----------
COMMERCIAL SERVICES & SUPPLIES (0.1%)
Moore North America Finance,
Inc.
7.875%, due 1/15/11 (c)....... 35,000 37,800
Protection One Alarm
Monitoring, Inc.
7.375%, due 8/15/05........... 40,000 33,000
-----------
70,800
-----------
COMMUNICATIONS EQUIPMENT (0.4%)
Avaya, Inc.
11.125%, due 4/1/09........... 60,000 70,800
Lucent Technologies, Inc.
5.50%, due 11/15/08........... 30,000 27,900
6.45%, due 3/15/29............ 75,000 57,938
7.25%, due 7/15/06............ 25,000 25,500
-----------
182,138
-----------
CONSTRUCTION & ENGINEERING (0.2%)
Shaw Group, Inc. (The)
10.75%, due 3/15/10 (c)....... 20,000 21,100
URS Corp.
11.50%, due 9/15/09........... 50,000 56,750
-----------
77,850
-----------
CONSTRUCTION MATERIALS (0.3%)
CRH America, Inc.
5.30%, due 10/15/13........... 150,000 151,140
-----------
CONSUMER FINANCE (1.4%)
Capital One Bank
4.875%, due 5/15/08........... 115,000 117,926
5.75%, due 9/15/10............ 70,000 73,420
Deere (John) Capital Corp.
3.90%, due 1/15/08............ 65,000 65,810
Ford Motor Credit Co.
7.00%, due 10/1/13............ 245,000 240,845
General Motors Acceptance Corp.
6.875%, due 8/28/12........... 85,000 87,131
Household Finance Corp.
6.75%, due 5/15/11............ 115,000 128,695
-----------
713,827
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
105
CORE BOND PLUS FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
CONTAINERS & PACKAGING (0.7%)
Owens-Brockway Glass Container,
Inc.
7.75%, due 5/15/11............ $ 45,000 $ 47,475
8.25%, due 5/15/13............ 15,000 15,825
8.875%, due 2/15/09........... 30,000 32,550
Owens-Illinois, Inc.
7.80%, due 5/15/18............ 85,000 81,600
Rock-Tenn Co.
8.20%, due 8/15/11............ 85,000 99,906
Sealed Air Corp.
8.75%, due 7/1/08 (c)......... 40,000 47,102
-----------
324,458
-----------
DIVERSIFIED FINANCIAL SERVICES (0.9%)
Caithness Coso Funding Corp.
Series B
9.05%, due 12/15/09........... 62,411 66,780
Citigroup, Inc.
4.875%, due 5/7/15............ 55,000 53,295
ESI Tractebel Acquisition Corp.
Series B
7.99%, due 12/30/11........... 25,000 25,812
IPC Acquisition Corp.
11.50%, due 12/15/09.......... 45,000 47,081
J Paul Getty Trust
Series 2003
5.875%, due 10/1/33........... 95,000 93,313
NiSource Finance Corp.
5.40%, due 7/15/14............ 90,000 89,990
UCAR Finance, Inc.
10.25%, due 2/15/12........... 55,000 60,913
-----------
437,184
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (3.2%)
AT&T Corp.
6.00%, due 11/21/06 (c)....... E 10,000 12,410
Citizens Communications Co.
9.00%, due 8/15/31............ $ 325,000 420,375
9.25%, due 5/15/11............ 50,000 62,406
Intermedia Communications, Inc.
Series B
8.875%, due 11/1/07 (d)....... 65,000 60,287
11.25%, due 7/15/07 (d)....... 90,000 82,125
Qwest Capital Funding, Inc.
5.875%, due 8/3/04............ 555,000 552,919
Qwest Corp.
8.875%, due 3/15/12 (c)....... 40,000 45,200
Qwest Services Corp.
13.50%, due 12/15/10 (c)...... 41,000 47,867
14.00%, due 12/15/14 (c)...... 50,000 61,000
TSI Telecommunication Services,
Inc.
Series B
12.75%, due 2/1/09............ 25,000 25,750
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
U.S. West Communications, Inc.
7.50%, due 6/15/23............ $ 75,000 $ 72,000
8.875%, due 6/1/31............ 5,000 5,250
WorldCom, Inc.
8.25%, due 5/15/31 (d)........ 420,000 154,350
-----------
1,601,939
-----------
ELECTRIC UTILITIES (1.4%)
American Electric Power Co.,
Inc. Series C
5.375%, due 3/15/10........... 215,000 222,564
Cedar Brakes II LLC
9.875%, due 9/1/13............ 70,118 70,819
CenterPoint Energy, Inc.
7.25%, due 9/1/10 (c)......... 105,000 112,518
Mirant Americas Generation LLC
7.20%, due 10/1/08 (d)........ 25,000 20,750
8.50%, due 10/1/21 (d)........ 15,000 12,412
MSW Energy Holdings LLC
8.50%, due 9/1/10 (c)......... 40,000 42,800
Public Service Electric & Gas
Co.
Series C
5.375%, due 9/1/13............ 115,000 117,903
TECO Energy, Inc.
7.00%, due 5/1/12............. 50,000 49,375
7.20%, due 5/1/11............. 45,000 45,338
-----------
694,479
-----------
ELECTRICAL EQUIPMENT (0.1%)
Emerson Electric Co.
6.00%, due 8/15/32............ 65,000 65,618
-----------
ENERGY EQUIPMENT & SERVICES (0.8%)
El Paso Natural Gas Co.
7.50%, due 11/15/26........... 70,000 62,300
Series A
7.625%, due 8/1/10............ 45,000 44,550
8.375%, due 6/15/32........... 30,000 27,900
Entergy-Koch L.P.
3.65%, due 8/20/06 (c)........ 145,000 145,982
Grant Prideco, Inc.
Series B
9.625%, due 12/1/07........... 25,000 27,500
Halliburton Co.
8.75%, due 2/15/21............ 50,000 59,273
Parker Drilling Co.
Series B
10.125%, due 11/15/09......... 20,000 20,900
-----------
388,405
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
106
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
FOOD & STAPLES RETAILING (0.7%)
Fred Meyer, Inc.
7.375%, due 3/1/05............ $ 125,000 $ 133,515
Safeway, Inc.
4.125%, due 11/1/08........... 75,000 74,745
Wal-Mart Stores, Inc.
4.55%, due 5/1/13............. 130,000 127,691
-----------
335,951
-----------
FOOD PRODUCTS (0.1%)
Dole Food Co., Inc.
8.75%, due 7/15/13............ 20,000 21,850
Seminis, Inc.
10.25%, due 10/1/13 (c)....... 20,000 21,400
Swift & Co.
12.50%, due 1/1/10 (c)........ 15,000 17,025
-----------
60,275
-----------
GAS UTILITIES (0.4%)
ANR Pipeline, Inc.
7.00%, due 6/1/25............. 10,000 10,025
9.625%, due 11/1/21........... 60,000 67,800
Ferrellgas Partners L.P.
8.75%, due 6/15/12............ 60,000 65,400
Southern Natural Gas Co.
7.35%, due 2/15/31............ 30,000 28,350
Star Gas Partners L.P.
10.25%, due 2/15/13........... 40,000 43,000
-----------
214,575
-----------
HEALTH CARE EQUIPMENT & SUPPLIES (0.4%)
Apogent Technologies, Inc.
6.50%, due 5/15/13 (c)........ 35,000 36,138
dj Orthopedics LLC
12.625%, due 6/15/09.......... 55,000 61,050
Fisher Scientific
International, Inc.
8.125%, due 5/1/12............ 75,000 80,625
-----------
177,813
-----------
HEALTH CARE PROVIDERS & SERVICES (2.4%)
AmeriPath, Inc.
10.50%, due 4/1/13............ 25,000 26,375
Caremark Rx, Inc.
7.375%, due 10/1/06........... 100,000 107,250
Express Scripts, Inc.
9.625%, due 6/15/09........... 85,000 91,587
HCA, Inc.
7.50%, due 11/15/95........... 135,000 125,778
8.36%, due 4/15/24............ 100,000 107,118
Highmark, Inc.
6.80%, due 8/15/13 (c)........ 265,000 283,129
Manor Care, Inc.
8.00%, due 3/1/08............. 100,000 111,750
Medco Health Solutions, Inc.
7.25%, due 8/15/13............ 65,000 69,155
National Nephrology Associates,
Inc.
9.00%, due 11/1/11 (c)........ 30,000 30,975
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
QuadraMed Corp.
10.00%, due 4/1/08 (c)(e)..... $ 30,546 $ 26,270
Quintiles Transnational Corp.
10.00%, due 10/1/13 (c)....... 60,000 63,300
Service Corp. International
6.50%, due 3/15/08............ 30,000 30,075
6.875%, due 10/1/07........... 20,000 20,300
7.70%, due 4/15/09............ 35,000 36,312
Tenet Healthcare Corp.
6.875%, due 11/15/31.......... 70,000 61,600
-----------
1,190,974
-----------
HOTELS, RESTAURANTS & LEISURE (1.1%)
Chumash Casino & Resort
Enterprise
9.00%, due 7/15/10 (c)........ 20,000 21,900
Hilton Hotels Corp.
7.625%, due 5/15/08........... 70,000 77,088
Jacobs Entertainment, Inc.
11.875%, due 2/1/09........... 50,000 54,063
MGM Mirage, Inc.
8.375%, due 2/1/11............ 45,000 50,175
Park Place Entertainment Corp.
8.125%, due 5/15/11........... 20,000 21,850
8.875%, due 9/15/08........... 70,000 77,787
Prime Hospitality Corp.
Series B
8.375%, due 5/1/12............ 45,000 45,900
Starwood Hotels & Resorts
Worldwide, Inc.
7.375%, due 11/15/15.......... 70,000 74,200
7.75%, due 11/15/25........... 10,000 9,787
Station Casinos, Inc.
8.375%, due 2/15/08........... 50,000 54,375
Vail Resorts, Inc.
8.75%, due 5/15/09............ 40,000 42,050
Wheeling Island Gaming, Inc.
10.125%, due 12/15/09......... 35,000 36,050
-----------
565,225
-----------
HOUSEHOLD DURABLES (0.1%)
Foamex L.P.
10.75%, due 4/1/09............ 30,000 26,400
-----------
HOUSEHOLD PRODUCTS (0.0%) (b)
Fort James Corp.
6.625%, due 9/15/04........... 20,000 20,600
-----------
INSURANCE (0.6%)
Americo Life, Inc.
7.875%, due 5/1/13 (c)........ 65,000 64,350
Crum & Forster Holding Corp.
10.375%, due 6/15/13 (c)...... 50,000 53,750
Fund American Cos., Inc.
5.875%, due 5/15/13........... 170,000 169,793
-----------
287,893
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
107
CORE BOND PLUS FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
IT SERVICES (0.2%)
Unisys Corp.
6.875%, due 3/15/10........... $ 25,000 $ 26,563
7.25%, due 1/15/05............ 30,000 31,350
8.125%, due 6/1/06............ 25,000 27,375
-----------
85,288
-----------
MACHINERY (0.7%)
Cummins, Inc.
6.45%, due 3/1/05............. 35,000 36,269
Deere & Co.
7.85%, due 5/15/10............ 135,000 162,575
Dresser, Inc.
9.375%, due 4/15/11........... 25,000 25,687
JLG Industries, Inc.
8.25%, due 5/1/08............. 45,000 47,700
Mark IV Industries, Inc.
7.50%, due 9/1/07............. 70,000 59,500
-----------
331,731
-----------
MEDIA (3.3%)
Adelphia Communications Corp.
10.25%, due 11/1/06 (d)....... 25,000 20,125
10.25%, due 6/15/11 (d)....... 10,000 8,400
Comcast Cable Communications,
Inc.
8.875%, due 5/1/17............ 160,000 202,453
FrontierVision Holdings L.P.
11.875%, due 9/15/07 (d)...... 10,000 10,012
FrontierVision Operating
Partners L.P.
11.00%, due 10/15/06 (d)...... 55,000 56,719
Garden State Newspapers, Inc.
Series B
8.75%, due 10/1/09............ 45,000 46,406
Hollinger International
Publishing
9.00%, due 12/15/10........... 55,000 58,300
Hollinger Participation Trust
12.125%, due 11/15/10
(c)(f)........................ 25,442 29,513
Houghton Mifflin Co.
7.20%, due 3/15/11............ 35,000 36,925
Jones Intercable, Inc.
8.875%, due 4/1/07............ 40,000 42,151
Liberty Media Corp.
3.50%, due 9/25/06............ 50,000 49,379
Morris Publishing Group, Inc.
7.00%, due 8/1/13 (c)......... 50,000 51,000
Paxson Communications Corp.
(zero coupon), due 1/15/09
12.25%, beginning 1/15/06..... 75,000 63,000
Radio One, Inc.
Series B
8.875%, due 7/1/11............ 40,000 44,000
Tele-Communications, Inc.
9.80%, due 2/1/12............. 45,000 58,458
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
MEDIA (CONTINUED)
Time Warner Entertainment Co.
10.15%, due 5/1/12............ $ 420,000 $ 556,413
Time Warner, Inc.
6.875%, due 6/15/18........... 75,000 80,705
8.05%, due 1/15/16............ 95,000 111,290
Vertis, Inc.
9.75%, due 4/1/09 (c)......... 30,000 31,875
Young Broadcasting, Inc.
8.50%, due 12/15/08........... 20,000 21,550
Ziff Davis Media, Inc.
Series B
13.00%, due 8/12/09........... 23,728 21,355
-----------
1,600,029
-----------
METALS & MINING (0.4%)
AK Steel Corp.
7.75%, due 6/15/12............ 55,000 37,400
Allegheny Technologies, Inc.
8.375%, due 12/15/11.......... 20,000 16,400
Commonwealth Industries, Inc.
10.75%, due 10/1/06........... 45,000 45,450
Peabody Energy Corp.
Series B
6.875%, due 3/15/13........... 30,000 31,575
United States Steel LLC
10.75%, due 8/1/08............ 60,000 65,850
-----------
196,675
-----------
MULTILINE RETAIL (1.0%)
Target Corp.
6.35%, due 11/1/32............ 375,000 392,929
8.60%, due 1/15/12............ 75,000 93,444
-----------
486,373
-----------
MULTI-UTILITIES & UNREGULATED POWER (1.4%)
AES Corp. (The)
9.00%, due 5/15/15 (c)........ 75,000 80,250
Calpine Corp.
7.625%, due 4/15/06........... 40,000 32,400
7.875%, due 4/1/08............ 50,000 35,250
8.50%, due 7/15/10 (c)........ 85,000 77,775
Consumers Energy Co.
6.25%, due 9/15/06............ 35,000 38,108
PSE&G Power LLC
6.875%, due 4/15/06........... 260,000 284,678
Reliant Resources, Inc.
9.25%, due 7/15/10 (c)........ 15,000 13,425
Salton Sea Funding Corp.
Series B
7.37%, due 5/30/05............ 7,393 7,541
Westar Energy, Inc.
6.875%, due 8/1/04............ 50,000 51,687
7.125%, due 8/1/09............ 50,000 51,812
-----------
672,926
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
108
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
OIL & GAS (2.6%)
Comstock Resources, Inc.
11.25%, due 5/1/07............ $ 25,000 $ 27,125
Continental Resources, Inc.
10.25%, due 8/1/08............ 20,000 19,650
Dynegy Holdings, Inc.
9.875%, due 7/15/10 (c)....... 45,000 48,375
10.125%, due 7/15/13 (c)...... 20,000 21,700
El Paso Energy Partners L.P.
Series B
8.50%, due 6/1/11............. 100,000 109,000
El Paso Production Holding Co.
7.75%, due 6/1/13 (c)......... 70,000 67,200
Encore Acquisition Co.
8.375%, due 6/15/12........... 30,000 32,100
Gemstone Investors Ltd.
7.71%, due 10/31/04 (c)....... 70,000 70,087
Newfield Exploration Co.
7.625%, due 3/1/11............ 5,000 5,475
8.375%, due 8/15/12........... 5,000 5,525
Northwest Pipeline Corp.
7.125%, due 12/1/25........... 45,000 45,000
Plains Exploration & Production
Co.
Series B
8.75%, due 7/1/12............. 30,000 32,700
Tennessee Gas Pipeline Co.
7.00%, due 3/15/27............ 45,000 45,675
7.625%, due 4/1/37............ 15,000 14,025
8.375%, due 6/15/32........... 65,000 65,812
Tesoro Petroleum Corp.
8.00%, due 4/15/08............ 40,000 42,400
Tosco Corp.
8.125%, due 2/15/30........... 380,000 477,133
Vintage Petroleum, Inc.
7.875%, due 5/15/11........... 25,000 26,438
8.25%, due 5/1/12............. 70,000 76,650
Westport Resources Corp.
8.25%, due 11/1/11............ 60,000 66,150
-----------
1,298,220
-----------
PAPER & FOREST PRODUCTS (0.6%)
Bowater, Inc.
9.00%, due 8/1/09............. 45,000 48,678
Georgia-Pacific Corp.
7.25%, due 6/1/28............. 70,000 63,700
7.375%, due 12/1/25........... 5,000 4,563
7.75%, due 11/15/29........... 15,000 14,175
8.25%, due 3/1/23............. 15,000 14,700
8.875%, due 2/1/10............ 35,000 39,987
9.375%, due 2/1/13............ 20,000 23,000
Louisiana-Pacific Corp.
10.875%, due 11/15/08......... 40,000 47,000
Pope & Talbot, Inc.
8.375%, due 6/1/13............ 35,000 34,125
-----------
289,928
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
PERSONAL PRODUCTS (0.2%)
Estee Lauder Cos., Inc.
5.75%, due 10/15/33........... $ 80,000 $ 77,985
-----------
REAL ESTATE (0.5%)
CB Richard Ellis Services, Inc.
11.25%, due 6/15/11........... 35,000 39,244
CBRE Escrow, Inc.
9.75%, due 5/15/10 (c)........ 35,000 37,800
Crescent Real Estate Equities
L.P.
7.50%, due 9/15/07............ 45,000 46,125
9.25%, due 4/15/09............ 25,000 27,000
Healthcare Realty Trust, Inc.
8.125%, due 5/1/11............ 45,000 49,873
OMEGA Healthcare Investors,
Inc.
6.95%, due 8/1/07............. 45,000 43,425
-----------
243,467
-----------
SPECIALTY RETAIL (0.2%)
Gap, Inc. (The)
6.90%, due 9/15/07............ 40,000 43,500
Rent-Way, Inc.
11.875%, due 6/15/10 (c)...... 65,000 69,631
-----------
113,131
-----------
THRIFTS & MORTGAGE FINANCE (0.4%)
Washington Mutual, Inc.
4.00%, due 1/15/09............ 210,000 208,341
-----------
WIRELESS TELECOMMUNICATION SERVICES (0.1%)
AT&T Wireless Services, Inc.
8.75%, due 3/1/31............. 45,000 54,115
-----------
Total Corporate Bonds (Cost
$15,870,313).................. 16,371,589
-----------
FOREIGN CORPORATE BONDS (3.5%)
AUSTRALIA (0.5%)
BHP Finance USA Ltd.
4.80%, due 4/15/13............ 170,000 169,169
Burns Philip Capital Property
Ltd.
10.75%, due 2/15/11 (c)....... 50,000 52,750
-----------
221,919
-----------
BRAZIL (0.2%)
CIA Brasileira de Bebidas
10.50%, due 12/15/11.......... 105,000 118,912
-----------
CANADA (0.6%)
Inco Ltd.
5.70%, due 10/15/15........... 70,000 70,900
Norampac, Inc.
6.75%, due 6/1/13 (c)......... 75,000 78,000
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
109
CORE BOND PLUS FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
FOREIGN CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
CANADA (CONTINUED)
Norske Skog Canada Ltd.
Series D
8.625%, due 6/15/11........... $ 85,000 $ 87,125
Quebecor Media, Inc.
(zero coupon), due 7/15/11
13.75%, beginning 7/15/06..... 45,000 38,925
Sun Media Corp.
7.625%, due 2/15/13........... 40,000 42,800
-----------
317,750
-----------
CHILE (0.1%)
Empresa Nacional de Petroleo
6.75%, due 11/15/12 (c)....... 25,000 26,923
-----------
FRANCE (0.5%)
Crown Euro Holdings S.A.
9.50%, due 3/1/11............. 60,000 66,600
10.875%, due 3/1/13........... 25,000 28,500
Vivendi Universal S.A.
9.25%, due 4/15/10 (c)........ 115,000 133,688
-----------
228,788
-----------
LUXEMBURG (0.1%)
Millicom International Cellular
S.A.
11.00%, due 6/1/06 (c)........ 54,000 55,215
-----------
MAURITIUS (0.0%) (B)
MEI Euro Finance Ltd.
8.75%, due 5/22/10 (c)........ 10,000 10,150
-----------
MEXICO (0.2%)
Grupo Transportacion
Ferroviaria Mexicana, S.A. de
C.V.
12.50%, due 6/15/12........... 30,000 33,000
Telefonos de Mexico S.A. de
C.V.
8.25%, due 1/26/06............ 65,000 71,906
-----------
104,906
-----------
NETHERLANDS (0.1%)
Coca-Cola HBC Finance B.V.
5.125%, due 9/17/13 (c)....... 55,000 55,019
-----------
RUSSIA (0.0%) (B)
VimpelCom B.V.
10.45%, due 4/26/05 (c)....... 20,000 21,125
-----------
SINGAPORE (0.2%)
PSA Corp. Ltd.
7.125%, due 8/1/05 (c)........ 80,000 87,019
-----------
SUPRANATIONAL (0.1%)
Jafra Cosmetics International,
Inc.
10.75%, due 5/15/11........... 35,000 38,500
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
SWEDEN (0.1%)
Stena AB
9.625%, due 12/1/12........... $ 55,000 $ 59,950
-----------
UNITED KINGDOM (0.8%)
HSBC Holdings PLC
Tier II
5.25%, due 12/12/12........... 30,000 30,453
Marconi Corp. PLC
8.00%, due 4/30/08............ 4,103 4,001
10.00%, due 10/31/08.......... 1,576 1,694
Vodafone Group PLC
3.95%, due 1/30/08............ 115,000 116,441
5.00%, due 12/16/13........... 220,000 216,713
-----------
369,302
-----------
Total Foreign Corporate Bonds
(Cost $1,646,276)............. 1,715,478
-----------
FOREIGN GOVERNMENT BONDS (4.0%)
AUSTRALIA (0.4%)
Australian Government Series
808
8.75%, due 8/15/08 (g)........ A$ 270,000 215,833
-----------
BELGIUM (0.5%)
Kingdom of Belgium
Series 42
3.00%, due 9/28/08............ E 235,000 265,485
-----------
BULGARIA (0.1%)
Republic of Bulgaria
8.25%, due 1/15/15............ $ 23,000 26,163
-----------
CANADA (0.4%)
Canadian Government
5.25%, due 6/1/12 (g)......... C$ 55,000 43,221
5.75%, due 6/1/33............. 50,000 40,262
Province of Quebec
5.00%, due 7/17/09............ $ 100,000 105,270
-----------
188,753
-----------
GERMANY (1.0%)
Republic of Deutschland Series
99
3.75%, due 1/4/09 (g)......... E 415,000 484,716
Series 01
5.00%, due 7/4/11............. 15,000 18,439
-----------
503,155
-----------
MEXICO (0.1%)
United Mexican States
4.625%, due 10/8/08........... $ 15,000 15,037
6.625%, due 3/3/15............ 45,000 46,238
-----------
61,275
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
110
ECLIPSE FUNDS
<Table>
<Caption>
FOREIGN GOVERNMENT BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
RUSSIA (0.1%)
Russian Federation
5.00%, due 3/31/30............ $ 68,000 $ 63,478
-----------
SOUTH AFRICA (0.1%)
Republic of South Africa
5.25%, due 5/16/13............ E 20,000 22,146
-----------
SWEDEN (1.3%)
Swedish Government Series 1043
5.00%, due 1/28/09 (g)........ SK 4,900,000 644,091
-----------
Total Foreign Government Bonds
(Cost $1,977,928)............. 1,990,379
-----------
MORTGAGE-BACKED SECURITY (0.9%)
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATION) (0.9%)
Fannie Mae Grantor Trust Series
2000-T1 Class B
4.491%, due 11/25/12.......... $ 425,000 420,912
-----------
Total Mortgage-Backed Security
(Cost $419,046)............... 420,912
-----------
MUNICIPAL BONDS (0.1%)
NEW JERSEY (0.1%)
Tobacco Settlement
Financing Corp.
6.00%, due 6/1/37............. 5,000 4,102
6.75%, due 6/1/39............. 50,000 45,445
-----------
Total Municipal Bonds
(Cost $46,915)................ 49,547
-----------
U.S. GOVERNMENT & FEDERAL AGENCIES (48.5%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (1.7%)
3.875%, due 2/15/05........... 800,000 822,876
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (MORTGAGE
PASS-THROUGH SECURITIES) (2.2%)
5.00%, due 8/1/33............. 348,235 342,932
5.50%, due 2/1/33............. 721,144 727,556
-----------
1,070,488
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.3%)
4.625%, due 5/1/13............ 155,000 149,230
4.75%, due 1/2/07............. 565,000 592,807
5.25%, due 1/15/09-8/1/12..... 815,000 859,020
5.50%, due 5/2/06............. 185,000 197,928
6.25%, due 2/1/11............. 160,000 175,001
7.00%, due 7/15/05............ 85,000 92,205
7.125%, due 2/15/05........... 40,000 42,811
-----------
2,109,002
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE
PASS-THROUGH SECURITIES) (22.2%)
4.00%, due 9/1/18............. $ 317,894 $ 309,823
4.50%, due 7/1/18............. 567,326 567,203
4.50%, due 11/18/18 TBA (h)... 955,000 953,806
5.00%, due 9/1/17-10/1/33..... 1,599,305 1,617,478
5.50%, due 1/1/17............. 178,508 183,852
5.50%, due 11/13/33-1/14/34
TBA (h)..................... 3,450,000 3,468,332
6.00%, due 8/1/17-8/1/32...... 705,033 729,569
6.00%, due 11/13/33-1/14/34
TBA (h)..................... 1,740,000 1,784,601
6.50%, due 6/1/31-6/1/32...... 649,694 675,012
7.00%, due 2/1/32-4/1/32...... 378,790 398,824
7.50%, due 8/1/31............. 238,672 254,318
-----------
10,942,818
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (MORTGAGE
PASS-THROUGH SECURITIES) (2.3%)
6.00%, due 2/15/29-8/15/32.... 718,482 742,561
6.50%, due 5/15/29............ 191,617 200,830
7.50%, due 10/15/29........... 195,791 209,307
-----------
1,152,698
-----------
UNITED STATES TREASURY BONDS (3.0%)
5.375%, due 2/15/31........... 80,000 82,672
6.25%, due 8/15/23 (l)........ 40,000 45,144
6.875%, due 8/15/25 (l)....... 850,000 1,030,326
7.50%, due 11/15/16........... 225,000 284,563
8.75%, due 8/15/20............ 30,000 42,614
-----------
1,485,319
-----------
UNITED STATES TREASURY NOTES (12.8%)
3.00%, due 2/15/08 (l)........ 1,045,000 1,045,572
4.375%, due 5/15/07 (l)....... 705,000 745,923
4.875%, due 2/15/12........... 650,000 685,699
5.75%, due 11/15/05-8/15/10
(l)......................... 2,125,000 2,304,825
6.00%, due 8/15/09............ 210,000 237,448
6.75%, due 5/15/05 (l)........ 1,182,000 1,274,528
-----------
6,293,995
-----------
Total U.S. Government & Federal
Agencies
(Cost $23,699,275)............ 23,877,196
-----------
YANKEE BONDS (0.7%) (i)
ENERGY EQUIPMENT & SERVICES (0.0%) (b)
Petroleum Geo-Services ASA
6.25%, due 11/19/03 (d)....... 30,000 23,400
7.125%, due 3/30/28 (d)....... 5,000 3,900
-----------
27,300
-----------
INSURANCE (0.4%)
Fairfax Financial Holdings Ltd.
8.25%, due 10/1/15............ 10,000 9,600
Montpelier Re Holdings Ltd.
6.125%, due 8/15/13........... 175,000 176,783
-----------
186,383
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
111
CORE BOND PLUS FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
YANKEE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
MARINE (0.1%)
Sea Containers Ltd.
Series B
7.875%, due 2/15/08........... $ 35,000 $ 32,200
-----------
MEDIA (0.0%) (b)
Rogers Cablesystems Ltd.
11.00%, due 12/1/15........... 20,000 22,800
-----------
OIL & GAS (0.2%)
YPF Sociedad Anonima
9.125%, due 2/24/09........... 75,000 81,000
-----------
ROAD & RAIL (0.0%) (b)
Grupo Transportacion
Ferroviaria Mexicana, S.A. de
C.V.
11.75%, due 6/15/09........... 10,000 10,075
-----------
Total Yankee Bonds
(Cost $337,348)............... 359,758
-----------
Total Long-Term Bonds
(Cost $45,753,478)............ 46,600,786
-----------
<Caption>
COMMON STOCKS (0.0%) (b)
SHARES
------------
COMMUNICATIONS EQUIPMENT (0.0%) (b)
Marconi Corp. PLC
ADR (a)(j).................... 569 10,413
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.0%) (b)
Call-Net Enterprises, Inc.
(a)........................... 447 1,886
-----------
Total Common Stocks
(Cost $10,956)................ 12,299
-----------
<Caption>
PREFERRED STOCKS (0.2%)
MEDIA (0.0%) (b)
Ziff Davis Media, Inc.
10.00%, Series E-1 (a)(k)..... 6 51
-----------
REAL ESTATE (0.2%)
Sovereign Real Estate
Investment Corp.
12.00%, Series A (c).......... 55 81,950
-----------
Total Preferred Stocks (Cost
$49,625)...................... 82,001
-----------
WARRANTS (0.0%) (b)
HEALTH CARE PROVIDERS & SERVICES (0.0%) (b)
QuadraMed Corp.
Strike Price $0.01
Expire 4/1/08 (a)(c).......... 4,776 11,796
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
--------------------------
MEDIA (0.0%) (b)
Ono Finance PLC
Strike Price $0.01
Expire 2/15/11 (a)(c)(k)...... 60 $ 1
Ziff Davis Media, Inc.
Strike Price $0.001
Expire 8/12/12 (a)(c)......... 1,210 12
-----------
13
-----------
Total Warrants
(Cost $7,790)................. 11,809
-----------
<Caption>
SHORT-TERM INVESTMENTS (16.9%)
PRINCIPAL
AMOUNT
------------
COMMERCIAL PAPER (12.4%)
American Express Credit Corp.
1.02%, due 11/4/03............ $ 1,250,000 1,249,894
Federal Home Loan Bank
0.95%, due 11/6/03............ 500,000 499,934
Federal National Mortgage
Association
1.00%, due 11/5/03............ 625,000 624,930
Freddie Mac Discount Note
1.01%, due 11/6/03............ 170,000 169,976
General Electric Capital Corp.
1.04%, due 11/13/03........... 900,000 899,688
1.05%, due 12/16/03........... 1,000,000 998,687
UBS Finance Delaware LLC
1.03%, due 11/3/03............ 1,650,000 1,649,906
-----------
Total Commercial Paper
(Cost $6,093,015)............. 6,093,015
-----------
<Caption>
SHARES
------------
INVESTMENT COMPANY (4.5%)
Merrill Lynch Premier
Institutional Fund............ 2,220,110 2,220,110
-----------
Total Investment Company (Cost
$2,220,110)................... 2,220,110
-----------
Total Short-Term Investments
(Cost $8,313,125)............. 8,313,125
-----------
Total Investments (Cost
$54,134,974) (m).............. 111.8% 55,020,020(n)
Liabilities in Excess of Cash
and Other Assets.............. (11.8) (5,789,655)
------------ ----------
Net Assets..................... 100.0% $49,230,365
========= ==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
112
ECLIPSE FUNDS
- ------------
(a) Non-Income producing security.
(b) Less than one tenth of a percent.
(c) May be sold to institutional investors only.
(d) Issue in default.
(e) CIK ("Cash in Kind")--interest payment is made with cash or additional
securities.
(f) PIK ("Payment in Kind")--interest or dividend payment is made with
additional securities.
(g) Partially segregated or designated as collateral for foreign currency
forward contracts.
(h) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and maturity
date will be determined upon settlement. The market value of these
securities at October 31, 2003 is $6,206,739.
(i) Yankee bond-dollar-denominated bond issued in the United States by foreign
banks and corporations.
(j) ADR--American Depositary Receipt.
(k) Illiquid security.
(l) Partially segregated or designated as collateral for TBAs.
(m) The cost for federal income tax purposes is $54,198,121.
(n) At October 31, 2003 net unrealized appreciation was $821,899, based on cost
for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $1,233,344 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $411,445.
(o) The following abbreviations are used in the above portfolio:
A$ -Australian Dollar
C$ -Canadian Dollar
E -Euro
SK -Swedish Krona
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
113
CORE BOND PLUS FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $54,134,974)............................... $55,020,020
Cash denominated in foreign currencies (identified
cost $1,917).................................... 1,983
Cash.............................................. 6,522
Receivables:
Investment securities sold...................... 1,523,796
Dividends and interest.......................... 620,803
Fund shares sold................................ 45,022
Unrealized appreciation on foreign currency
forward contracts (Note 2(H))................... 21,721
Other assets...................................... 1,267
-----------
Total assets................................ 57,241,134
-----------
LIABILITIES:
Payables:
Investment securities purchased................. 7,835,383
Transfer agent.................................. 12,318
Manager......................................... 6,838
Custodian....................................... 4,422
Directors....................................... 820
Accrued expenses.................................. 36,056
Unrealized depreciation on foreign currency
forward contracts (Note 2(H))................... 25,572
Dividend payable.................................. 89,360
-----------
Total liabilities........................... 8,010,769
-----------
Net assets........................................ $49,230,365
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class................................... $ 4,730
Additional paid-in capital........................ 47,527,457
Accumulated undistributed net investment income... 96,419
Accumulated undistributed net realized gain on
investments..................................... 719,660
Net unrealized appreciation on investments........ 885,046
Net unrealized depreciation on translation of
other assets and liabilities in foreign
currencies and foreign currency forward
contracts....................................... (2,947)
-----------
Net assets........................................ $49,230,365
===========
No-Load Class
Net assets applicable to outstanding shares....... $49,230,365
===========
Shares of capital stock outstanding............... 4,729,840
===========
Net asset value per share outstanding............. $ 10.41
===========
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Interest......................................... $2,154,208
Dividends........................................ 24,469
----------
Total income................................. 2,178,677
----------
Expenses:
Manager.......................................... 253,322
Transfer agent................................... 82,825
Professional..................................... 37,662
Portfolio pricing................................ 36,840
Custodian........................................ 24,490
Registration..................................... 15,813
Directors........................................ 12,188
Shareholder communication........................ 5,020
Miscellaneous.................................... 17,191
----------
Total expenses before reimbursement.......... 485,351
Expense reimbursement from Manager............... (189,809)
----------
Net expenses................................. 295,542
----------
Net investment income.............................. 1,883,135
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Security transactions............................ 837,337
Foreign currency transactions.................... 18,901
----------
Net realized gain on investments and foreign
currency transactions............................ 856,238
----------
Net change in unrealized depreciation on
investments:
Security transactions............................ 1,385,875
Translation of other assets and liabilities in
foreign currencies and foreign currency forward
contracts...................................... 6,030
----------
Net unrealized gain on investments and foreign
currency transactions............................ 1,391,905
----------
Net realized and unrealized gain on investments and
foreign currency transactions.................... 2,248,143
----------
Net increase in net assets resulting from
operations....................................... $4,131,278
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
114
ECLIPSE FUNDS
CORE BOND PLUS FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
----------- -----------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 1,883,135 $ 1,594,733
Net realized gain (loss) on investments and foreign
currency transactions.................................. 856,238 (15,291)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions.......... 1,391,905 (998,109)
----------- -----------
Net increase in net assets resulting from operations.... 4,131,278 581,333
----------- -----------
Dividends and distributions to shareholders:
From net investment income:
No-Load Class......................................... (1,925,229) (2,333,537)
From net realized gain on investments and foreign
currency transactions:
No-Load Class......................................... -- (259,464)
----------- -----------
Total dividends and distributions to shareholders... (1,925,229) (2,593,001)
----------- -----------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 13,112,586 15,060,856
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
No-Load Class......................................... 801,742 255,649
----------- -----------
13,914,328 15,316,505
Cost of shares redeemed:
No-Load Class......................................... (3,204,402) (3,765,737)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 10,709,926 11,550,768
----------- -----------
Net increase in net assets............................ 12,915,975 9,539,100
NET ASSETS:
Beginning of year......................................... 36,314,390 26,775,290
----------- -----------
End of year............................................... $49,230,365 $36,314,390
=========== ===========
Accumulated undistributed net investment income (loss) at
end of year............................................. $ 96,419 $ (35,533)
=========== ===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
115
CORE BOND PLUS FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
------------------------------------------
YEAR ENDED OCTOBER 31 JANUARY 2, 2001*
----------------------- THROUGH
2003 2002 OCTOBER 31, 2001
------- ------- ----------------
Net asset value at beginning of period...................... $ 9.84 $ 10.60 $ 10.00
------- ------- -------
Net investment income....................................... 0.46 0.52 0.49
Net realized and unrealized gain (loss) on investments...... 0.57 (0.34) 0.30
Net realized and unrealized gain (loss) on foreign currency
transactions.............................................. 0.01 (0.03) 0.00(a)
------- ------- -------
Total from investment operations............................ 1.04 0.15 0.79
------- ------- -------
Less dividends and distributions:
From net investment income.................................. (0.47) (0.81) (0.19)
From net realized gain on investments....................... -- (0.10) --
------- ------- -------
Total dividends and distributions........................... (0.47) (0.91) (0.19)
------- ------- -------
Net asset value at end of period............................ $ 10.41 $ 9.84 $ 10.60
======= ======= =======
Total investment return..................................... 10.71% 1.65% 7.95%(b)
Ratios (to average net assets)/Supplemental Data:
Net investment income..................................... 4.46% 5.32% 5.84%+
Net expenses.............................................. 0.70% 0.70% 0.70%+
Expenses (before reimbursement)........................... 1.15% 0.96% 1.02%+
Portfolio turnover rate..................................... 133% 148% 205%
Net assets at end of period (in 000's)...................... $49,230 $36,314 $26,775
</Table>
- ------------
* Commencement of Operations.
+ Annualized.
(a) Less than one cent per share.
(b) Total return is not annualized.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
116
Eclipse Indexed Bond Fund
- --------------------------------------------------------------------------------
During the first part of the reporting period, Treasuries rallied significantly
as the threat of terrorism and uncertainty regarding a possible war in Iraq
caused investors to be drawn to the relative security offered by government
bonds. In conjunction with the Federal Reserve's accommodative monetary policy,
these factors contributed to five-year Treasuries reaching a low of
approximately 2.0% in June 2003. During the third quarter of 2003, however,
there was a dramatic reversal in bond yields. Positive economic data caused
five-year Treasury prices to fall sharply as yields rose to over 3.5%. (Bond
prices and yields tend to move in opposite directions.) Since then, Treasury
yields have remained volatile, driven by the latest economic-data releases and
the geopolitical situations in Iraq and elsewhere.
Over the 12-month reporting period, corporate bonds outperformed other asset
classes in the Citigroup Broad Investment Grade (BIG) Bond Index,(1) producing
an 11.25% return. Corporate securities with BBB ratings(2) led the way with a
return of 16.35%. In comparison, bonds with AAA ratings(3) returned 5.13%, bonds
rated AA returned 5.26%, and bonds rated A returned 8.54%.(4) This 12-month
performance represents a reversal of the previous year's results. During that
time, BBB-rated securities significantly underperformed higher-quality corporate
bonds or other investment-grade asset classes.
PERFORMANCE REVIEW
For the one-year period ended October 31, 2003, Eclipse Indexed Bond Fund
returned 3.97% for No-Load Class shares and 3.71% for Service Class shares. Both
share classes outperformed the 1.70% return of the average Lipper(5) general
U.S. government fund over the same period. Both share classes underperformed the
4.99% return of the Citigroup BIG Bond Index.
As of October 31, 2003, Morningstar(6) rated No-Load Class shares of Eclipse
Indexed Bond Fund four stars overall out of 626 intermediate-term bond funds.
The Fund's No-Load Class shares were rated three stars out of 626
intermediate-term bond funds for the three-year period then ended, three stars
out of 502 intermediate-term bond funds for the five-year period then ended, and
four stars out of 212 intermediate-term bond funds for the 10-year period ended
October 31, 2003.
STRATEGIC POSITIONING
As always, the Fund invests in a select group of securities that, in the
aggregate, seek to match the performance of the Citigroup BIG Bond Index. Since
the Fund doesn't hold
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Index funds generally seek to reflect the performance of an index or an
allocation among indices, unlike other funds, whose objectives may, in some
cases, involve seeking to outperform an index or other benchmark.
1. The Citigroup Broad Investment Grade (BIG) Bond Index--the Citigroup BIG Bond
Index--is an unmanaged index that is considered representative of the U.S.
investment-grade bond market. Results assume reinvestment of all income and
capital gains. An investment cannot be made directly into an index.
2. Debt rated BBB by Standard & Poor's is deemed by Standard & Poor's to exhibit
adequate protection parameters. It is the opinion of Standard & Poor's,
however, that adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation than would be the case for debt in higher-rated
categories. When applied to Fund holdings, ratings are based solely on the
creditworthiness of the bonds in the portfolio and are not meant to represent
the security or safety of the Fund.
3. Debt rated AAA has the highest rating assigned by Standard & Poor's, and in
the opinion of Standard & Poor's, the obligor's capacity to meet its
financial commitment on the obligation is extremely strong. Debt rated AA by
Standard & Poor's is deemed by Standard & Poor's to differ from the
highest-rated issues only in small degree. In the opinion of Standard &
Poor's, the obligor's capacity to meet its financial commitment on the
obligation is very strong. Debt rated A by Standard & Poor's is deemed by
Standard & Poor's to be somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories. In the opinion of Standard & Poor's, however, the obligor's
capacity to meet its financial commitment on the obligation is still strong.
When applied to Fund holdings, ratings are based solely on the
creditworthiness of the bonds in the portfolio and are not meant to represent
the security or safety of the Fund.
4. Source: Citigroup Total Rate-of-Return Indexes, October 2003 Performance
Report.
5. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
6. For each fund with at least a three-year history, Morningstar calculates a
Morningstar Rating(TM) based on a Morningstar Risk-Adjusted Return measure
that accounts for variation in a fund's monthly performance (including the
effects of sales charges, loads, and redemption fees), placing more emphasis
on downward variations and rewarding consistent performance. The top 10% of
funds in each category receive five stars, the next 22.5% receive four stars,
the middle 35% receive three stars, the next 22.5% receive two stars, and the
bottom 10% receive one star. The Overall Morningstar Rating(TM) for a fund is
derived from a weighted average of the performance figures associated with
its three-, five- and 10-year (if applicable) Morningstar Rating(TM) metrics.
117
every security in the Index, however, its performance can vary from that of the
Index. During the reporting period, the Fund's underperformance versus the Index
was due to sector and issuer selection, in particular in the BBB component of
the corporate-bond market.
Given the incremental risks associated with the BBB market, we attempt to
minimize overweighted positions among BBB issuers while maintaining a neutral
position in the sector relative to the Index. To implement this strategy, the
Fund has purchased small positions among some BBB issuers, but our ability to
exactly reflect Index weightings in this sector is limited. Given the number of
issuers with small Index weightings, some combination of BBB issuer
overweightings and an overall BBB sector underweighting is inevitable. The Fund
has focused on minimizing the BBB issuer overweighting, and as such, the Fund
was underweighted relative to the Index in the BBB sector as a whole. This
creates a situation where the Fund has lowered its exposure to underperformance
that can be attributed to issuer-specific events. Due to the BBB sector
underweighting, however, volatility in the BBB sector (which has been
significant) will result in some tracking error. The Fund has experienced this,
as it exhibited outperformance relative to the Citigroup BIG Bond Index in the
12-month reporting period ending October 31, 2002, and underperformance in the
period ending on the same date in 2003.
LOOKING AHEAD
According to advance estimates from the Bureau of Economic Analysis, real gross
domestic product grew at a seasonally adjusted annual rate of 8.2% in the third
quarter of 2003. While this clearly suggests that the economy is gaining
momentum, the labor picture remains critically important. For the economy to be
self-sustaining, increased consumer spending needs to be accompanied by more
corporate hiring and greater capital spending.
It is our expectation that corporate bond spreads will remain in a fairly tight
range during the coming months and that investors' appetite for risk may decline
somewhat. If the economy maintains its recent momentum, we would anticipate that
the corporate bonds may outperform other sectors of the market.
One of the indexing strategies that we will continue to utilize is
diversification among issuers in the corporate sector. Given the asymmetrical
return profile for investment grade corporates (more downside risk than upside
potential), any significant issuer overweights versus the Citigroup BIG Bond
Index can, in the worst case scenario, translate into significant relative
underperformance. As such, we will attempt to minimize issuer overweights, while
striving to achieve neutrality among industries, credit-rating categories
(especially the BBB sector), and the overall corporate sector.
Whatever the markets may bring, the Fund will continue to seek to provide
investment results that correspond to the total return performance of
fixed-income securities in the aggregate, as represented by the Citigroup BIG
Bond Index.
PAUL CUNNINGHAM
ERIC GREENMAN
Portfolio Managers
New York Life Investment Management LLC
118
$10,000 INVESTED IN
ECLIPSE INDEXED BOND FUND VERSUS
CITIGROUP BIG BOND INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE INDEXED BOND FUND CITIGROUP BIG BOND INDEX
------------------------- ------------------------
10/31/93 $10,000 $10,000
94 $9,561 $9,640
95 $11,029 $11,153
96 $11,558 $11,810
97 $12,526 $12,853
98 $13,624 $14,061
99 $13,518 $14,130
00 $14,500 $15,158
01 $16,449 $17,372
02 $17,423 $18,372
10/31/03 $18,115 $19,288
</Table>
[LEGEND GRAPH]
Source: Bloomberg, 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93.
$10,000 INVESTED IN
ECLIPSE INDEXED BOND FUND VERSUS
CITIGROUP BIG BOND INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE INDEXED BOND FUND CITIGROUP BIG BOND INDEX
------------------------- ------------------------
10/31/93 $10,000 $10,000
94 $9,536 $9,640
95 $11,002 $11,153
96 $11,490 $11,810
97 $12,427 $12,853
98 $13,472 $14,061
99 $13,347 $14,130
00 $14,263 $15,158
01 $16,147 $17,372
02 $17,053 $18,372
10/31/03 $17,686 $19,288
</Table>
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- -----------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------
Eclipse Indexed Bond Fund No-Load Class 3.97% 5.86% 6.12%
Eclipse Indexed Bond Fund Service Class(2) 3.71 5.59 5.87
Average Lipper general U.S. government
fund(3) 1.70 5.05 5.52
Citigroup BIG Bond Index(4) 4.99 6.53 6.79
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
Year ended December 31, 1994 -3.44
Year ended December 31, 1995 18.07
Year ended December 31, 1996 2.55
Year ended December 31, 1997 9.01
Year ended December 31, 1998 8.21
10 months ended October 31, 1999 -1.56
Year ended October 31, 2000 7.27
Year ended October 31, 2001 13.44
Year ended October 31, 2002 5.92
Year ended October 31, 2003 3.97
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all
dividend and capital gain distributions and, for the Service Class shares,
include the service fee of .25% on an annualized basis of the average
daily net asset value of the Service Class shares.
2. Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the No-Load Class from the
Fund's inception on 1/2/91 through 12/31/94. Performance figures for these
classes will vary after 12/31/94, based on differences in their expense
structures.
3. Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
4. The Citigroup Broad Investment Grade (BIG) Bond Index--the Citigroup BIG
Bond Index--is an unmanaged index that is considered representative of
the U.S. investment-grade bond market. Results assume reinvestment of
all income and capital gains. An investment cannot be made directly into
an index.
INFORMATION ABOUT ECLIPSE INDEXED BOND FUND ON THIS PAGE AND THE PRECEDING PAGES
HAS NOT BEEN AUDITED.
119
INDEXED BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
LONG-TERM BONDS (96.4%)+
ASSET-BACKED SECURITIES (1.0%)
PRINCIPAL
AMOUNT VALUE
-----------------------
CONSUMER FINANCE (0.5%)
MBNA Credit Card
Master Note Trust
Series 2002-A1 Class A1
4.95%, due 1/15/07................ $1,000,000 $ 1,065,202
------------
DIVERSIFIED FINANCIAL SERVICES (0.5%)
Bank One Issuance Trust
2002-A3 Class A3
3.59%, due 9/15/07................ 1,000,000 1,011,634
------------
Total Asset-Backed Securities
(Cost $2,041,413)................. 2,076,836
------------
<Caption>
CORPORATE BONDS (21.2%)
AEROSPACE & DEFENSE (0.7%)
Boeing Co. (The)
6.125%, due 2/15/33............... 250,000 243,505
Goodrich Corp.
6.45%, due 12/15/07............... 100,000 107,122
Honeywell International, Inc.
7.50%, due 3/1/10................. 100,000 117,482
Litton Industries, Inc.
8.00%, due 10/15/09............... 100,000 118,684
Lockheed Martin Corp.
7.65%, due 5/1/16................. 250,000 300,997
Northrop Grumman Corp.
7.125%, due 2/15/11............... 100,000 114,910
Raytheon Co.
5.50%, due 11/15/12............... 100,000 100,705
6.75%, due 8/15/07................ 150,000 164,356
United Technologies Corp.
6.35%, due 3/1/11................. 250,000 276,997
------------
1,544,758
------------
AUTO COMPONENTS (0.1%)
Delphi Corp.
6.50%, due 5/1/09................. 100,000 105,698
------------
AUTOMOBILES (0.6%)
DaimlerChrysler N.A.
Holdings Corp.
4.05%, due 6/4/08................. 250,000 241,666
6.40%, due 5/15/06................ 250,000 267,248
8.50%, due 1/18/31................ 250,000 280,370
General Motors Corp.
8.375%, due 7/15/33............... 500,000 527,530
------------
1,316,814
------------
BEVERAGES (0.4%)
Anheuser-Busch Cos., Inc.
5.95%, due 1/15/33................ 250,000 254,159
Coca-Cola Enterprises, Inc.
8.50%, due 2/1/22................. 252,000 324,224
Pepsi Bottling Holdings, Inc.
5.625%, due 2/17/09 (a)........... 250,000 271,363
------------
849,746
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------------
BUILDING PRODUCTS (0.1%)
Masco Corp.
6.75%, due 3/15/06................ $ 100,000 $ 109,472
------------
CAPITAL MARKETS (2.0%)
Bear Stearns Cos., Inc. (The)
5.70%, due 11/15/14............... 250,000 259,606
Credit Suisse FirstBoston USA, Inc.
4.625%, due 1/15/08............... 250,000 259,800
6.50%, due 1/15/12................ 250,000 276,080
FPL Group Capital, Inc.
7.375%, due 6/1/09................ 250,000 289,114
Goldman Sachs Group, Inc. (The)
5.70%, due 9/1/12................. 250,000 261,331
6.875%, due 1/15/11............... 250,000 282,735
J.P. Morgan Chase & Co.
6.75%, due 2/1/11................. 500,000 561,193
Lehman Brothers Holdings, Inc.
6.625%, due 2/5/06................ 250,000 272,275
7.00%, due 2/1/08................. 250,000 281,746
Merrill Lynch & Co., Inc.
6.00%, due 2/17/09................ 250,000 272,388
Morgan Stanley Dean Witter & Co.
3.625%, due 4/1/08................ 250,000 249,177
6.10%, due 4/15/06................ 250,000 270,941
6.60%, due 4/1/12................. 250,000 278,369
Salomon, Smith Barney Holdings,
Inc.
6.875%, due 6/15/05............... 504,000 542,628
------------
4,357,383
------------
CHEMICALS (0.3%)
Dow Chemical Co. (The)
6.00%, due 10/1/12................ 100,000 103,834
E.I. du Pont de Nemours & Co.
4.75%, due 11/15/12............... 250,000 251,639
Eastman Chemical Co.
7.25%, due 1/15/24................ 100,000 105,455
Rohm & Haas Co.
7.85%, due 7/15/29................ 100,000 121,798
------------
582,726
------------
COMMERCIAL BANKS (2.4%)
ABN-Amro Bank N.V.
7.55%, due 6/28/06................ 403,000 455,115
Bank of America Corp.
3.875%, due 1/15/08............... 250,000 253,594
7.40%, due 1/15/11................ 500,000 583,599
Bank One Corp.
5.90%, due 11/15/11............... 250,000 268,929
6.875%, due 8/1/06................ 250,000 277,603
Bankers Trust Corp.
8.25%, due 5/1/05................. 250,000 274,128
Fleet National Bank
5.75%, due 1/15/09................ 250,000 271,235
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
120
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-----------------------
COMMERCIAL BANKS (CONTINUED)
International Bank for
Reconstruction & Development
Series C
(zero coupon), due 3/11/31........ $ 504,000 $ 90,188
Key Bank National Association
5.00%, due 7/17/07................ 100,000 106,499
National City Bank of Pennsylvania
6.25%, due 3/15/11................ 250,000 278,097
PNC Funding Corp.
7.50%, due 11/1/09................ 100,000 117,249
SunTrust Banks, Inc.
5.05%, due 7/1/07................. 250,000 268,003
U.S. Bank National Association
6.375%, due 8/1/11................ 250,000 277,772
UFJ Bank Ltd.
7.40%, due 6/15/11................ 100,000 109,108
Union Bank of Switzerland N.Y.
7.25%, due 7/15/06................ 250,000 279,851
Wachovia Bank National Association
4.85%, due 7/30/07................ 500,000 535,097
Wells Fargo Bank N.A.
6.45%, due 2/1/11................. 500,000 558,819
------------
5,004,886
------------
COMMERCIAL SERVICES & SUPPLIES (0.2%)
Cendant Corp.
6.25%, due 1/15/08................ 200,000 217,068
Waste Management, Inc.
7.00%, due 10/15/06............... 100,000 110,760
7.125%, due 12/15/17.............. 100,000 111,614
------------
439,442
------------
COMMUNICATIONS EQUIPMENT (0.1%)
Motorola, Inc.
7.50%, due 5/15/25................ 100,000 106,966
7.60%, due 1/1/07................. 100,000 110,759
------------
217,725
------------
COMPUTERS & PERIPHERALS (0.2%)
Hewlett-Packard Co.
3.625%, due 3/15/08............... 250,000 249,442
International Business Machines
Corp.
4.25%, due 9/15/09................ 150,000 152,642
6.50%, due 1/15/28................ 100,000 107,667
------------
509,751
------------
CONSUMER FINANCE (2.1%)
American Express Credit Corp.
3.00%, due 5/16/08................ 250,000 243,858
Aristar, Inc.
6.875%, due 5/15/11............... 100,000 112,305
Capital One Bank
Series BNKT
6.875%, due 2/1/06................ 100,000 108,540
CitiFinancial Credit Co.
8.70%, due 6/15/10................ 227,000 277,332
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------------
CONSUMER FINANCE (CONTINUED)
Deere (John) Capital Corp.
7.00%, due 3/15/12................ $ 250,000 $ 286,290
Ford Motor Credit Co.
6.50%, due 1/25/07................ 250,000 257,947
7.25%, due 10/25/11............... 250,000 253,921
7.375%, due 2/1/11................ 500,000 509,077
7.875%, due 6/15/10............... 504,000 527,264
General Motors Acceptance Corp.
6.125%, due 9/15/06............... 250,000 264,265
6.75%, due 1/15/06................ 250,000 266,551
6.875%, due 8/28/12............... 250,000 256,268
Household Finance Corp.
5.75%, due 1/30/07................ 250,000 269,917
6.375%, due 10/15/11.............. 250,000 273,218
6.40%, due 6/17/08................ 250,000 277,468
MBNA America Bank
5.375%, due 1/15/08............... 300,000 318,711
SLM Corp.
5.625%, due 8/1/33................ 100,000 93,084
------------
4,596,016
------------
DIVERSIFIED FINANCIAL SERVICES (1.0%)
CIT Group, Inc.
7.75%, due 4/2/12................. 250,000 291,765
Citigroup, Inc.
5.00%, due 3/6/07................. 250,000 266,244
5.875%, due 2/22/33............... 250,000 245,349
Mellon Funding Corp.
5.00%, due 12/1/14................ 250,000 250,129
National Rural Utilities
Cooperative Finance Corp.
5.75%, due 8/28/09................ 250,000 269,242
NiSource Finance Corp.
7.625%, due 11/15/05.............. 100,000 109,645
Sears Roebuck Acceptance Corp.
6.70%, due 4/15/12................ 150,000 168,925
Verizon Global Funding Corp.
6.125%, due 6/15/07............... 250,000 273,250
7.75%, due 12/1/30................ 250,000 289,372
------------
2,163,921
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.0%)
ALLTEL Corp.
7.00%, due 7/1/12................. 250,000 284,384
AT&T Corp.
8.50%, due 11/15/31............... 250,000 283,489
BellSouth Corp.
6.875%, due 10/15/31.............. 250,000 273,502
CenturyTel, Inc.
Series H
8.375%, due 10/15/10.............. 100,000 121,039
Citizens Communications Co.
9.25%, due 5/15/11................ 100,000 124,813
SBC Communications, Inc.
6.25%, due 3/15/11................ 250,000 271,416
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
121
INDEXED BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
Sprint Capital Corp.
8.375%, due 3/15/12............... $ 500,000 $ 570,731
Verizon Pennsylvania
Series A
5.65%, due 11/15/11............... 250,000 261,120
------------
2,190,494
------------
ELECTRIC UTILITIES (1.0%)
American Electric Power Co., Inc.
5.375%, due 3/15/10............... 200,000 207,036
Arizona Public Service Co.
6.375%, due 10/15/11.............. 100,000 109,363
CenterPoint Energy Houston Electric
LLC
6.95%, due 3/15/33 (a)............ 100,000 109,782
Dominion Resources, Inc.
4.125%, due 2/15/08............... 300,000 305,023
5.00%, due 3/15/13................ 100,000 99,176
Series B
6.25%, due 6/30/12................ 100,000 108,313
DTE Energy Co.
7.05%, due 6/1/11................. 100,000 112,914
Exelon Corp.
6.75%, due 5/1/11................. 100,000 110,813
FirstEnergy Corp.
Series B
6.45%, due 11/15/11............... 200,000 212,447
MidAmerican Energy Holdings Co.
5.875%, due 10/1/12............... 100,000 103,468
Northern States Power Co.
6.875%, due 8/1/09................ 100,000 112,662
Oncor Electric Delivery Co.
6.375%, due 5/1/12................ 100,000 109,561
Progress Energy, Inc.
6.85%, due 4/15/12................ 250,000 278,056
TXU US Holdings Co.
8.25%, due 4/1/04................. 100,000 102,624
Wisconsin Energy Corp.
6.50%, due 4/1/11................. 100,000 109,177
------------
2,190,415
------------
ELECTRICAL EQUIPMENT (0.1%)
Emerson Electric Co.
7.125%, due 8/15/10............... 250,000 288,685
------------
FOOD & STAPLES RETAILING (0.4%)
Albertson's, Inc.
8.00%, due 5/1/31................. 100,000 116,372
Kroger Co. (The)
5.50%, due 2/1/13................. 250,000 253,593
Safeway, Inc.
5.80%, due 8/15/12................ 100,000 103,636
Wal-Mart Stores, Inc.
6.875%, due 8/10/09............... 250,000 286,860
7.55%, due 2/15/30................ 100,000 122,816
------------
883,277
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
FOOD PRODUCTS (1.0%)
Archer-Daniels-Midland Co.
8.125%, due 6/1/12................ $ 250,000 $ 305,870
ConAgra Foods, Inc.
6.00%, due 9/15/06................ 100,000 108,693
7.875%, due 9/15/10............... 100,000 119,881
General Mills, Inc.
5.125%, due 2/15/07............... 100,000 106,483
H.J. Heinz Finance Co.
6.625%, due 7/15/11............... 250,000 281,950
Kellogg Co.
Series B
6.00%, due 4/1/06................. 100,000 107,697
Kraft Foods, Inc.
6.25%, due 6/1/12................. 250,000 269,392
Sara Lee Corp.
6.25%, due 9/15/11................ 250,000 275,971
Tyson Foods, Inc.
7.25%, due 10/1/06................ 140,000 154,617
Unilever Capital Corp.
6.875%, due 11/1/05............... 285,000 311,150
------------
2,041,704
------------
GAS UTILITIES (0.1%)
Kinder Morgan Energy Partners, L.P.
6.75%, due 3/15/11................ 100,000 112,559
7.125%, due 3/15/12............... 150,000 172,659
------------
285,218
------------
HEALTH CARE PROVIDERS & SERVICES (0.2%)
HCA, Inc.
7.125%, due 6/1/06................ 100,000 107,106
Lion Connecticut Holdings, Inc.
7.625%, due 8/15/26............... 254,000 287,683
------------
394,789
------------
HOUSEHOLD DURABLES (0.1%)
Pulte Homes, Inc.
7.875%, due 8/1/11................ 100,000 117,128
------------
HOUSEHOLD PRODUCTS (0.1%)
Procter & Gamble Co. (The)
6.875%, due 9/15/09............... 250,000 288,492
------------
INDUSTRIAL CONGLOMERATES (0.2%)
Textron, Inc.
6.375%, due 7/15/04............... 504,000 521,132
------------
INSURANCE (0.4%)
AIG Sunamer Global Financing VI
6.30%, due 5/10/11 (a)............ 250,000 275,052
Allstate Corp. (The)
7.20%, due 12/1/09................ 100,000 116,240
Hartford Financial Services Group,
Inc. (The)
7.90%, due 6/15/10................ 100,000 117,823
MetLife, Inc.
6.125%, due 12/1/11............... 100,000 108,070
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
122
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
INSURANCE (CONTINUED)
SAFECO Corp.
4.20%, due 2/1/08................. $ 100,000 $ 101,399
UnumProvident Corp.
7.625%, due 3/1/11................ 100,000 109,750
------------
828,334
------------
IT SERVICES (0.1%)
Electronic Data Systems Corp.
6.00%, due 8/1/13 (a)............. 100,000 94,690
------------
MACHINERY (0.1%)
Caterpillar, Inc.
8.00%, due 2/15/23................ 250,000 307,622
------------
MEDIA (1.3%)
Clear Channel Communications, Inc.
6.00%, due 11/1/06................ 100,000 107,873
7.65%, due 9/15/10................ 100,000 116,472
Comcast Cable Communications, Inc.
7.125%, due 6/15/13............... 250,000 280,570
Comcast Corp.
5.50%, due 3/15/11................ 250,000 258,053
7.05%, due 3/15/33................ 100,000 106,540
Cox Communications, Inc.
7.75%, due 8/15/06-11/1/10........ 200,000 230,481
Liberty Media Corp.
8.25%, due 2/1/30................. 100,000 114,174
News America, Inc.
6.55%, due 3/15/33................ 100,000 102,148
7.25%, due 5/18/18................ 100,000 112,444
Time Warner, Inc.
5.625%, due 5/1/05................ 250,000 262,369
6.625%, due 5/15/29............... 250,000 249,993
6.75%, due 4/15/11................ 250,000 276,238
Viacom, Inc.
5.625%, due 8/15/12............... 250,000 264,062
Walt Disney Co. (The)
6.375%, due 3/1/12................ 250,000 272,851
------------
2,754,268
------------
METALS & MINING (0.2%)
Alcoa, Inc.
6.00%, due 1/15/12................ 250,000 271,518
Phelps Dodge Corp.
8.75%, due 6/1/11................. 100,000 119,182
------------
390,700
------------
MULTILINE RETAIL (0.2%)
Federated Department Stores, Inc.
6.625%, due 9/1/08................ 100,000 111,170
May Department Stores Co. (The)
6.70%, due 9/15/28................ 100,000 102,454
Target Corp.
5.875%, due 3/1/12................ 150,000 162,192
7.00%, due 7/15/31................ 100,000 112,910
------------
488,726
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------------
MULTI-UTILITIES & UNREGULATED POWER (0.4%)
Consolidated Edison Co. of NY
Series 2002 A
5.625%, due 7/1/12................ $ 100,000 $ 105,442
Constellation Energy Group, Inc.
6.125%, due 9/1/09................ 100,000 109,407
Consumers Energy Co.
5.375%, due 4/15/13 (a)........... 100,000 99,243
Duke Energy Corp.
6.45%, due 10/15/32............... 250,000 253,446
PSE&G Power LLC
7.75%, due 4/15/11................ 100,000 116,909
Scana Corp.
6.25%, due 2/1/12................. 100,000 108,681
------------
793,128
------------
OIL & GAS (1.3%)
Amerada Hess Corp.
7.30%, due 8/15/31................ 100,000 100,459
Amoco Co.
6.50%, due 8/1/07................. 250,000 280,467
Anadarko Petroleum Corp.
5.375%, due 3/1/07................ 250,000 267,817
Burlington Resources, Inc.
7.375%, due 3/1/29................ 104,000 118,332
Conoco, Inc.
6.35%, due 4/15/09................ 250,000 278,357
ConocoPhillips
5.90%, due 10/15/32 (a)........... 250,000 247,592
Devon Financing Corp. ULC
6.875%, due 9/30/11............... 200,000 225,695
Enterprise Products Partners L.P.
Series B
6.875%, due 3/1/33................ 100,000 103,533
Kerr-McGee Corp.
6.625%, due 10/15/07.............. 100,000 109,931
Marathon Oil Corp.
6.80%, due 3/15/32................ 100,000 106,009
Occidental Petroleum Corp.
7.20%, due 4/1/28................. 100,000 113,864
Pemex Project Funding Master Trust
7.375%, due 12/15/14.............. 350,000 367,500
Texaco Capital, Inc.
9.75%, due 3/15/20................ 176,000 248,715
Union Oil Co. of California
7.35%, due 6/15/09................ 100,000 114,610
Valero Energy Corp.
7.50%, due 4/15/32................ 100,000 109,424
------------
2,792,305
------------
PAPER & FOREST PRODUCTS (0.3%)
International Paper Co.
5.85%, due 10/30/12............... 100,000 103,891
8.125%, due 7/8/05................ 100,000 109,551
MeadWestvaco Corp.
6.85%, due 4/1/12................. 100,000 110,083
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
123
INDEXED BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
PAPER & FOREST PRODUCTS (CONTINUED)
Weyerhaeuser Co.
6.75%, due 3/15/12................ $ 200,000 $ 216,507
7.375%, due 3/15/32............... 100,000 107,655
------------
647,687
------------
PHARMACEUTICALS (0.5%)
Bristol-Myers Squibb Co.
5.75%, due 10/1/11................ 250,000 267,399
Merck & Co., Inc.
4.375%, due 2/15/13............... 250,000 245,687
Pfizer, Inc.
4.65%, due 3/1/18................. 250,000 237,429
Wyeth
5.25%, due 3/15/13................ 250,000 253,677
------------
1,004,192
------------
REAL ESTATE (0.2%)
Boston Properties, Inc.
6.25%, due 1/15/13................ 100,000 106,452
EOP Operating LP
7.75%, due 11/15/07............... 175,000 200,446
ERP Operating LP
6.95%, due 3/2/11................. 100,000 113,177
Simon Property Group, L.P.
5.375%, due 8/28/08............... 100,000 104,907
------------
524,982
------------
ROAD & RAIL (0.4%)
Burlington Northern Santa Fe Corp.
6.75%, due 7/15/11................ 100,000 112,548
7.125%, due 12/15/10.............. 100,000 116,499
CSX Corp.
6.30%, due 3/15/12................ 100,000 108,788
7.95%, due 5/1/27................. 100,000 120,368
Norfolk Southern Corp.
7.80%, due 5/15/27................ 250,000 296,189
Union Pacific Corp.
6.125%, due 1/15/12............... 100,000 108,172
------------
862,564
------------
SPECIALTY RETAIL (0.1%)
Lowe's Cos., Inc.
6.875%, due 2/15/28............... 100,000 110,825
Toys "R" Us, Inc.
7.375%, due 10/15/18.............. 100,000 102,859
------------
213,684
------------
THRIFTS & MORTGAGE FINANCE (1.0%)
Countrywide Home Loans, Inc.
3.25%, due 5/21/08................ 250,000 243,695
5.625%, due 5/15/07............... 100,000 107,144
General Electric Capital Corp.
5.00%, due 6/15/07................ 250,000 265,038
6.00%, due 6/15/12................ 750,000 807,083
6.75%, due 3/15/32................ 250,000 277,216
Series A
6.80%, due 11/1/05................ 250,000 272,245
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------------
THRIFTS & MORTGAGE FINANCE (CONTINUED)
Washington Mutual, Inc.
7.50%, due 8/15/06................ $ 250,000 $ 280,354
------------
2,252,775
------------
TOBACCO (0.1%)
Altria Group, Inc.
7.65%, due 7/1/08................. 100,000 107,881
------------
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
AT&T Wireless Services, Inc.
7.35%, due 3/1/06................. 150,000 164,579
8.125%, due 5/1/12................ 100,000 115,987
8.75%, due 3/1/31................. 100,000 120,255
------------
400,821
------------
Total Corporate Bonds
(Cost $44,277,949)................ 45,464,031
------------
FOREIGN CORPORATE BONDS (3.9%)
BEVERAGES (0.1%)
Diageo Capital PLC
3.375%, due 3/20/08............... 250,000 247,954
------------
CAPITAL MARKETS (0.3%)
KfW Kreditanstalt fuer Wiederaufbau
3.375%, due 1/23/08............... 550,000 552,041
------------
COMMERCIAL BANKS (0.3%)
Bank of Tokyo-Mitsubishi
8.40%, due 4/15/10................ 100,000 120,975
HSBC Holding PLC
7.50%, due 7/15/09................ 250,000 290,408
Korea Development Bank
4.25%, due 11/13/07............... 100,000 101,323
Landwirtschaftliche Rentenbank
Series E
3.25%, due 6/16/08................ 250,000 246,336
------------
759,042
------------
CONSTRUCTION MATERIALS (0.1%)
Hanson Australia Funding
5.25%, due 3/15/13................ 100,000 99,257
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%)
British Telecommunications PLC
8.375%, due 12/15/10.............. 250,000 301,915
Deutsche Telekom
International Finance BV
5.25%, due 7/22/13................ 100,000 99,384
8.50%, due 6/15/10................ 250,000 300,877
France Telecom S.A.
10.00%, due 3/1/31................ 250,000 329,955
Koninklijke (Royal) KPN N.V.
8.00%, due 10/1/10................ 100,000 119,184
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
124
ECLIPSE FUNDS
<Table>
<Caption>
FOREIGN CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-----------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
Telefonica Europe B.V.
7.35%, due 9/15/05................ $ 150,000 $ 163,550
8.25%, due 9/15/30................ 100,000 124,251
------------
1,439,116
------------
FOREIGN GOVERNMENTS (2.1%)
Canadian Government
5.25%, due 11/5/08................ 500,000 542,756
Malaysian Government
7.50%, due 7/15/11................ 100,000 117,140
Province of British Columbia
5.375%, due 10/29/08.............. 250,000 269,876
Province of Nova Scotia
5.75%, due 2/27/12................ 250,000 270,173
Province of Ontario
6.00%, due 2/21/06................ 511,000 548,746
Republic of Finland
4.75%, due 3/6/07................. 250,000 266,253
Republic of Italy, Series DTC
4.375%, due 10/25/06.............. 250,000 262,188
5.625%, due 6/15/12............... 750,000 811,259
Republic of Korea
8.875%, due 4/15/08............... 250,000 300,750
Republic of South Africa
7.375%, due 4/25/12............... 100,000 112,000
United Mexican States
6.375%, due 1/16/13............... 450,000 463,050
7.50%, due 1/14/12................ 250,000 279,375
Series A
8.50%, due 2/1/06................. 250,000 281,250
------------
4,524,816
------------
INSURANCE (0.1%)
Axa
8.60%, due 12/15/30............... 105,000 129,390
------------
MULTI-UTILITIES & UNREGULATED POWER (0.1%)
Hydro-Quebec
Series JL
6.30%, due 5/11/11................ 250,000 280,442
------------
WIRELESS TELECOMMUNICATION SERVICES (0.1%)
Vodafone Group PLC
7.75%, due 2/15/10................ 250,000 295,677
------------
Total Foreign Corporate Bonds
(Cost $8,113,805)................. 8,327,735
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (69.0%)
FEDERAL HOME LOAN BANK (2.3%)
1.625%, due 4/15/05............... 4,000,000 3,999,080
2.875%, due 9/15/06............... 1,000,000 1,005,466
------------
5,004,546
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-----------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (4.1%)
1.50%, due 8/15/05................ $1,500,000 $ 1,486,613
2.75%, due 8/15/06................ 1,000,000 1,005,129
4.50%, due 7/15/13................ 1,000,000 978,098
5.25%, due 1/15/06................ 3,000,000 3,192,885
6.25%, due 7/15/32................ 2,000,000 2,157,290
------------
8,820,015
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (10.9%)
4.50%, due 8/1/33................. 500,001 477,016
4.50%, due 12/15/18 TBA (b)....... 1,500,000 1,491,093
5.00%, due 5/1/18-7/1/18.......... 2,396,442 2,435,204
5.00%, due 11/15/33 TBA (b)....... 1,500,000 1,476,093
5.50%, due 3/1/17-8/1/32.......... 1,981,851 2,034,448
5.50%, due 11/15/33 TBA (b)....... 6,000,000 6,048,750
6.00%, due 12/1/13-4/1/33......... 4,553,369 4,696,484
6.50%, due 4/1/11-7/1/32.......... 2,652,112 2,766,145
7.00%, due 11/1/04-3/1/32......... 1,333,296 1,403,024
7.50%, due 9/1/11-2/1/32.......... 511,074 545,715
8.00%, due 7/1/26................. 24,594 26,666
------------
23,400,638
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (6.6%)
1.875%, due 9/15/05............... 4,000,000 3,992,440
3.25%, due 8/15/08................ 2,000,000 1,975,422
3.50%, due 9/15/04................ 3,000,000 3,055,998
4.25%, due 7/15/07................ 3,000,000 3,125,553
5.00%, due 1/15/07................ 1,500,000 1,598,655
6.21%, due 8/6/38................. 475,000 509,908
------------
14,257,976
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (19.7%)
4.50%, due 11/15/18-11/15/33 TBA
(b)............................. 6,000,000 5,969,687
5.00%, due 10/1/17-8/1/18......... 3,671,888 3,731,884
5.00%, due 11/15/33 TBA (b)....... 6,500,000 6,411,719
5.50%, due 6/1/16-9/1/33.......... 6,505,673 6,591,697
5.50%, due 11/15/33 TBA (b)....... 1,000,000 1,009,062
6.00%, due 6/1/16-5/1/33.......... 6,554,713 6,745,523
6.00%, due 11/15/33 TBA (b)....... 1,000,000 1,026,562
6.50%, due 3/1/11-9/1/32.......... 6,850,590 7,128,310
7.00%, due 2/1/09-5/1/32.......... 2,388,806 2,520,887
7.50%, due 1/1/28-8/1/31.......... 505,174 538,433
8.00%, due 7/1/07-12/1/27......... 280,005 303,131
9.50%, due 3/1/16-9/1/19.......... 233,458 257,983
------------
42,234,878
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (4.7%)
5.00%, due 8/15/33................ 499,951 494,644
5.50%, due 3/15/33-9/15/33........ 1,983,794 2,011,092
6.00%, due 3/20/29-12/15/32....... 2,109,348 2,180,104
6.50%, due 2/15/29-10/15/32....... 2,436,129 2,550,602
7.00%, due 3/15/07-8/15/32........ 1,702,118 1,802,699
7.50%, due 8/15/08-3/15/32........ 695,626 744,192
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
125
INDEXED BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-----------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (MORTGAGE
PASS-THROUGH SECURITIES) (CONTINUED)
8.00%, due 6/15/26-11/15/30....... $ 263,493 $ 284,566
8.50%, due 7/15/26-11/15/26....... 30,094 32,794
------------
10,100,693
------------
UNITED STATES TREASURY BONDS (5.3%)
5.375%, due 2/15/31............... 3,500,000 3,616,893
6.00%, due 2/15/26................ 2,500,000 2,746,290
6.25%, due 5/15/30................ 1,007,000 1,151,402
7.50%, due 11/15/16............... 403,000 509,685
8.50%, due 2/15/20................ 201,000 278,919
8.75%, due 5/15/17-8/15/20........ 756,000 1,066,974
8.875%, due 2/15/19............... 302,000 429,312
9.875%, due 11/15/15.............. 302,000 448,505
10.375%, due 11/15/12............. 252,000 322,934
11.25%, due 2/15/15............... 201,000 320,925
11.875%, due 11/15/03............. 252,000 252,866
12.75%, due 11/15/10.............. 201,000 243,995
------------
11,388,700
------------
UNITED STATES TREASURY NOTES (15.4%)
1.125%, due 6/30/05............... 3,500,000 3,470,880
2.00%, due 5/15/06................ 5,000,000 4,987,890
2.125%, due 8/31/04............... 7,000,000 7,054,138
2.375%, due 8/15/06............... 5,000,000 5,015,624
2.875%, due 6/30/04............... 1,511,000 1,528,590
4.25%, due 8/15/13................ 6,250,000 6,224,613
4.75%, due 11/15/08............... 1,007,000 1,076,074
5.00%, due 2/15/11................ 648,000 693,689
6.00%, due 8/15/09................ 327,000 369,740
6.125%, due 8/15/07............... 705,000 790,095
6.75%, due 5/15/05................ 1,511,000 1,629,283
7.50%, due 2/15/05................ 302,000 325,323
------------
33,165,939
------------
Total U.S. Government & Federal
Agencies
(Cost $147,093,882)............... 148,373,385(d)
------------
YANKEE BONDS (1.3%) (f)
COMMERCIAL BANKS (0.5%)
Australia & New Zealand Banking
Group Ltd.
7.55%, due 9/15/06................ 353,000 397,138
Inter-American Development Bank
6.80%, due 10/15/25............... 604,000 710,397
Santander Financial Issuances
6.375%, due 2/15/11............... 250,000 277,666
------------
1,385,201
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.1%)
TELUS Corp.
7.50%, due 6/1/07................. 100,000 111,058
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------------
FOREIGN GOVERNMENTS (0.3%)
Province of Manitoba
5.50%, due 10/1/08................ $ 250,000 $ 270,045
Province of Quebec
Series NJ
7.50%, due 7/15/23................ 302,000 365,194
------------
635,239
------------
INDUSTRIAL CONGLOMERATES (0.1%)
Tyco International Group SA
6.375%, due 10/15/11.............. 150,000 156,000
------------
METALS & MINING (0.0%) (e)
Alcan, Inc.
6.45%, due 3/15/11................ 100,000 110,776
------------
OIL & GAS (0.2%)
Canadian National Resources Ltd.
5.45%, due 10/1/12................ 100,000 102,828
Norsk Hydro ASA
7.25%, due 9/23/27................ 250,000 286,750
Petro-Canada
4.00%, due 7/15/13................ 100,000 91,655
------------
481,233
------------
ROAD & RAIL (0.1%)
Canadian National Railway Co.
6.375%, due 10/15/11.............. 100,000 110,292
------------
Total Yankee Bonds
(Cost $2,785,301)................. 2,989,799
------------
Total Long-Term Bonds
(Cost $204,312,350)............... 207,231,786
------------
SHORT-TERM INVESTMENTS (13.6%)
COMMERCIAL PAPER (13.5%)
Citigroup Global Markets Holdings,
Inc.
1.031%, due 11/5/03 (c)........... 5,000,000 4,999,427
E.I. du Pont de Nemours & Co.
1.011%, due 11/19/03 (c).......... 5,000,000 4,997,473
San Paolo IMI U.S. Financial Co.
1.031%, due 11/24/03 (c).......... 5,000,000 4,996,709
Target Corp.
1.01%, due 11/12/03 (c)........... 5,000,000 4,998,457
UBS Finance Delaware LLC
1.03%, due 11/3/03 (c)............ 8,814,000 8,813,496
------------
Total Commercial Paper
(Cost $28,805,562)................ 28,805,562
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
126
ECLIPSE FUNDS
<Table>
<Caption>
SHORT-TERM INVESTMENTS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-----------------------
U.S. GOVERNMENT (0.1%)
United States Treasury Bill
1.04%, due 3/4/04 (c)............. $ 300,000 $ 299,020
------------
Total U.S. Government
(Cost $299,020)................... 299,020
------------
Total Short-Term Investments
(Cost $29,104,582)................ 29,104,582
------------
Total Investments
(Cost $233,416,932) (g)........... 110.0% 236,336,368(h)
Liabilities in Excess of
Cash and Other Assets............. (10.0) (21,470,030)
---------- ----------
Net Assets......................... 100.0% $214,866,338
========== ============
</Table>
<Table>
<Caption>
FUTURES CONTRACTS (0.0%) (e)
CONTRACTS UNREALIZED
LONG APPRECIATION(h)
---------------------------
United States Treasury Note
December 2003 (5 Year)...... 50 $32,203
-------
Total Future Contracts
(Settlement Value
$5,590,625) (d)............. $32,203
=======
</Table>
- ------------
(a) May be sold to institutional investors only.
(b) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and maturity
date will be determined upon settlement. The market value of these
securities at October 31, 2003 is $23,432,966.
(c) Segregated, partially segregated or designated as collateral for futures
contracts and TBAs.
(d) The combined market value of U.S. Government and Federal Agencies
investments and settlement value of U.S. Treasury Note futures contracts
represents 71.7% of net assets.
(e) Less than one tenth of a percent.
(f) Yankee bond-dollar-denominated bond issued in the United States by foreign
banks and corporations.
(g) The cost for federal income tax purposes is $233,564,066.
(h) At October 31, 2003 net unrealized appreciation was $2,772,302, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $4,169,531 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $1,397,229.
(i) Represents the difference between the value of the contracts at the time
they were opened and the value at October 31, 2003.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
127
INDEXED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
<Caption>
ASSETS:
Investment in securities, at value (identified
cost. $233,416,932) $236,336,368
Receivables:
Interest........................................ 1,814,340
Fund shares sold................................ 549,969
Variation margin on futures contracts........... 9,941
Other assets...................................... 5,389
-----------
Total assets................................ 238,716,007
-----------
LIABILITIES:
Payables:
Investment securities purchased................. 23,366,250
Fund shares redeemed............................ 306,116
Manager......................................... 61,144
Due to custodian................................ 26,744
Transfer agent.................................. 11,573
Custodian....................................... 9,764
Directors....................................... 1,413
Accrued expenses.................................. 65,949
Dividend payable.................................. 716
-----------
Total liabilities........................... 23,849,669
-----------
Net assets........................................ $214,866,338
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class................................... $ 16,908
Service Class................................... 2,832
Additional paid-in capital........................ 215,405,538
Accumulated undistributed net investment income... 327,233
Accumulated net realized loss on investments......
and futures contracts (3,837,812)
Net unrealized appreciation on investments........
and futures contracts 2,951,639
-----------
Net assets........................................ $214,866,338
===========
No-Load Class
Net assets applicable to outstanding shares....... $184,051,274
===========
Shares of capital stock outstanding............... 16,907,757
===========
Net asset value per share outstanding............. $ 10.89
===========
Service Class
Net assets applicable to outstanding shares....... $30,815,064
===========
Shares of capital stock outstanding............... 2,831,634
===========
Net asset value per share outstanding............. $ 10.88
===========
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
<Caption>
INVESTMENT INCOME:
Income:
Interest................................................. $ 6,694,551
-----------
Expenses:
Manager.................................................. 861,503
Professional............................................. 69,321
Transfer agent........................................... 67,328
Custodian................................................ 52,334
Service--Service Class................................... 50,955
Portfolio pricing........................................ 40,689
Shareholder communication................................ 22,882
Directors................................................ 18,837
Registration............................................. 3,924
Miscellaneous............................................ 41,750
-----------
Total expenses before................................
reimbursement 1,229,523
Expense reimbursement from Manager....................... (317,065)
-----------
Net expenses......................................... 912,458
-----------
Net investment income...................................... 5,782,093
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from:
Security transactions.................................... 885,767
Futures transactions..................................... 124,937
-----------
Net realized gain on investments........................... 1,010,704
-----------
Net change in unrealized appreciation
on investments:
Security transactions.................................... (1,643,615)
Futures transactions..................................... (8,233)
-----------
Net unrealized loss on investments......................... (1,651,848)
-----------
Net realized and unrealized loss on investments............ (641,144)
-----------
Net increase in net assets resulting from operations....... $ 5,140,949
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
128
ECLIPSE FUNDS
INDEXED BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 5,782,093 $ 4,875,375
Net realized gain on investments and futures
contracts.............................................. 1,010,704 1,556,615
Net change in unrealized appreciation (depreciation) on
investments and futures contracts...................... (1,651,848) (95,832)
------------ ------------
Net increase in net assets resulting from operations.... 5,140,949 6,336,158
------------ ------------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (5,405,294) (7,548,303)
Service Class......................................... (688,954) (984,765)
------------ ------------
Total dividends to shareholders..................... (6,094,248) (8,533,068)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 114,645,556 75,786,734
Service Class......................................... 27,017,252 10,302,630
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 5,371,984 7,005,420
Service Class......................................... 688,954 912,723
------------ ------------
147,723,746 94,007,507
Cost of shares redeemed:
No-Load Class......................................... (60,146,907) (37,335,728)
Service Class......................................... (14,596,471) (3,995,484)
------------ ------------
Increase in net assets derived from capital share
transactions......................................... 72,980,368 52,676,295
------------ ------------
Net increase in net assets............................ 72,027,069 50,479,385
NET ASSETS:
Beginning of year......................................... 142,839,269 92,359,884
------------ ------------
End of year............................................... $214,866,338 $142,839,269
============ ============
Accumulated undistributed net investment income (loss) at
end of year............................................. $ 327,233 $ (274,092)
============ ============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
129
INDEXED BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
-----------------------------------------------------------------------
YEAR ENDED OCTOBER 31
----------------------------------------------------------------
2003 2002 2001 2000
-------- -------- -------- --------
Net asset value at beginning of
period................................ $ 10.86 $ 11.21 $ 10.73 $ 10.76
-------- -------- -------- --------
Net investment income.................. 0.39 0.52(c) 0.65(c)(d) 0.72
Net realized and unrealized gain (loss)
on investments........................ 0.04 0.08 0.72(d) 0.00(b)
-------- -------- -------- --------
Total from investment operations....... 0.43 0.60 1.37 0.72
-------- -------- -------- --------
Less dividends:
From net investment income............. (0.40) (0.95) (0.89) (0.75)
-------- -------- -------- --------
Net asset value at end of period....... $ 10.89 $ 10.86 $ 11.21 $ 10.73
======== ======== ======== ========
Total investment return................ 3.97% 5.92% 13.44% 7.27%
Ratios (to average net assets)/
Supplemental Data:
Net investment income................. 3.39% 4.83% 6.00%(d) 6.63%
Net expenses.......................... 0.50% 0.50% 0.50% 0.50%
Expenses (before reimbursement)....... 0.68% 0.74% 0.71% 0.63%
Portfolio turnover rate................ 110% 56% 57% 20%
Net assets at end of period (in
000's)................................ $184,051 $125,169 $ 81,890 $136,033
<Caption>
NO-LOAD CLASS
---------------------------------
JANUARY 1
THROUGH YEAR ENDED
OCTOBER 31, DECEMBER 31,
1999* 1998
----------- ------------
Net asset value at beginning of
period................................ $ 10.93 $ 10.74
-------- --------
Net investment income.................. 0.62 0.69
Net realized and unrealized gain (loss)
on investments........................ (0.79) 0.19
-------- --------
Total from investment operations....... (0.17) 0.88
-------- --------
Less dividends:
From net investment income............. -- (0.69)
-------- --------
Net asset value at end of period....... $ 10.76 $ 10.93
======== ========
Total investment return................ (1.56%)(a) 8.21%
Ratios (to average net assets)/
Supplemental Data:
Net investment income................. 6.42%+ 6.37%
Net expenses.......................... 0.50%+ 0.50%
Expenses (before reimbursement)....... 0.62%+ 0.65%
Portfolio turnover rate................ 31% 14%
Net assets at end of period (in
000's)................................ $145,427 $156,244
</Table>
- ------------
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
(a) Total return is not annualized.
(b) Less than one cent per share.
(c) Per share data based on average shares outstanding during the period.
(d) As required, effective November 1, 2000, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
year ended October 31, 2001 is shown below. Per share ratios and
supplemental data for periods prior to November 1, 2000 have not been
restated to reflect this change in presentation.
<Table>
<Caption>
NO-LOAD SERVICE
CLASS CLASS
------- -------
Decrease net investment income.............................. ($0.02) ($0.02)
Increase net realized and unrealized gains and losses....... 0.02 0.02
Decrease ratio of net investment income..................... (0.16%) (0.15%)
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
130
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
-------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
-------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
-------- -------- -------- -------- ----------- ------------
$ 10.85 $ 11.19 $ 10.70 $ 10.74 $ 10.92 $ 10.74
-------- -------- -------- -------- -------- --------
0.36 0.49(c) 0.62(c)(d) 0.67 0.61 0.66
0.04 0.08 0.73(d) 0.01 (0.79) 0.18
-------- -------- -------- -------- -------- --------
0.40 0.57 1.35 0.68 (0.18) 0.84
-------- -------- -------- -------- -------- --------
(0.37) (0.91) (0.86) (0.72) -- (0.66)
-------- -------- -------- -------- -------- --------
$ 10.88 $ 10.85 $ 11.19 $ 10.70 $ 10.74 $ 10.92
======== ======== ======== ======== ======== ========
3.71% 5.61% 13.21% 6.87% (1.65%)(a) 7.86%
3.14% 4.58% 5.75%(d) 6.38% 6.17%+ 6.12%
0.75% 0.75% 0.75% 0.75% 0.75%+ 0.75%
0.93% 0.99% 0.96% 0.88% 0.87%+ 0.90%
110% 56% 57% 20% 31% 14%
$ 30,815 $ 17,670 $ 10,470 $ 3,634 $ 3,345 $ 3,881
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
131
Eclipse Money Market Fund
- --------------------------------------------------------------------------------
During the 12 months ended October 31, 2003, the markets felt the impact of a
war in Iraq, ongoing tensions in the Middle East, growing domestic budget
deficits, and high unemployment figures. In the money markets, however, the
primary influence was interest rates.
During the 12 months ended October 31, 2003, the Federal Reserve lowered the
targeted federal funds rate twice. On November 6, 2002, the Federal Open Market
Committee reduced the targeted federal funds rate 50 basis points to 1.25%. On
June 25, 2003, the FOMC lowered the targeted federal funds rate by another 25
basis points to a low 1.00%. The targeted federal funds rate remained unchanged
for the remainder of the reporting period.
Yields on most short-term debt instruments generally moved in line with the
Federal Reserve action and declined over the 12 months ended October 31, 2003.
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse Money Market Fund returned
0.83% for No-Load Class shares, 0.58% for Service Class shares, and 0.33% for
Sweep Shares Class shares. Both No-Load Class and Service Class shares
outperformed the 0.50% return of the average Lipper(1) money market fund over
the same period. Sweep Shares Class shares are measured against a different
benchmark, and they underperformed the 0.56% return of the iMoneyNet First Tier
Retail Fund Average(2) for the 12 months ended October 31, 2003.
STRATEGIES AND SECTORS
During the 12 months ended October 31, 2003, the Fund's duration strategy sought
to help the Fund benefit as short-term rates declined. Generally, when a Fund
has a longer duration, it is slower to react when interest rates decline, which
may strengthen relative performance. The maximum allowable duration for the Fund
is 90 days, and the Fund maintained its duration at the longer end of its
allowable range. At the end of the period, for example, the Fund's duration was
82 days, compared to 61 days on October 31, 2002.
There were two primary ways in which we added duration to the Fund. First, we
purchased corporate securities for the Fund's portfolio, including Citigroup
5.70% bonds of 2/6/04 and International Lease Finance 4.40% notes of 8/15/03.
Both of these issues were purchased in January of 2003. In June, we also
purchased a Diageo Capital 6.625% obligation of 6/24/04 and an Abbott
Laboratories 5.125% issue maturing on 7/1/04. Second, we purchased Yankee
certificates of deposit in the longer maturity range (four months or longer).
Some names included Barclays, Toronto Dominion Bank, HBOS Treasury Services,
Rabobank, and Lloyds TSB Bank.
We continue to see attractive yield potential in the asset-backed securities
sector. During the reporting period, some of the Fund's investments in
asset-backed securities included auto deals from Nissan, Regions Bank, World
Omni, USAA, and Capital One. The Fund also invested in equipment deals from John
Deere and CIT Equipment.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND YIELDS WILL FLUCTUATE. AN
INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
1. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
2. The iMoneyNet First Tier Retail Fund Average is unmanaged and includes only
nongovernment retail funds that are not holding any second-tier securities.
Portfolio holdings of first-tier funds include U.S. Treasury securities, U.S.
repurchase agreements, time deposits, domestic bank obligations, foreign bank
obligations, first-tier commercial paper, floating-rate notes, and
asset-backed commercial paper. Results assume reinvestment of all income and
capital gains. An investment cannot be made directly into an index or an
average.
132
We invested a portion of the Fund's assets in floating-rate securities. Some of
the names included General Electric, Lehman Brothers Holdings, American Honda
Finance, and Household Finance. The Fund was also active in the bank sector,
purchasing corporate bonds of Citicorp and Bank of America during the reporting
period. The Fund also purchased domestic certificates of deposit from State
Street Bank and bank notes of LaSalle Bank.
During the 12-month reporting period, significant weighting changes included an
increase in the Fund's exposure to floating-rate securities and a larger
commitment to asset-backed securities.
LOOKING AHEAD
In the coming quarter, we expect the Federal Reserve to remain on hold as it
reviews economic data in search of a clearer picture of the economy's future
potential. Whatever the markets or the economy may bring, the Fund will continue
to seek a high level of income while preserving capital and maintaining
liquidity.
MARK C. BOYCE
DAVID E. CLEMENT, CFA
Portfolio Managers
New York Life Investment Management LLC
133
$10,000 INVESTED IN
ECLIPSE MONEY MARKET FUND VERSUS
AVERAGE LIPPER MONEY MARKET FUND
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE MONEY MARKET FUND AVERAGE LIPPER MONEY MARKET FUND
------------------------- --------------------------------
10/31/93 $ 10,000 $ 10,000
94 10,349 10,326
95 10,925 10,872
96 11,491 11,400
97 12,092 11,953
98 12,734 12,539
99 13,346 13,090
00 14,145 13,811
01 14,806 14,385
02 15,049 14,550
10/31/03 15,174 14,623
</Table>
$10,000 INVESTED IN
ECLIPSE MONEY MARKET FUND VERSUS
AVERAGE LIPPER MONEY MARKET FUND
SERVICE CLASS SHARES
[SERVICE CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE MONEY MARKET FUND AVERAGE LIPPER MONEY MARKET FUND
------------------------- --------------------------------
10/31/93 $ 10,000.00 $ 10,000.00
94 10,324.00 10,326.00
95 10,881.00 10,872.00
96 11,416.00 11,400.00
97 11,983.00 11,953.00
98 12,587.00 12,539.00
99 13,160.00 13,090.00
00 13,913.00 13,811.00
01 14,527.00 14,385.00
02 14,729.00 14,550.00
10/31/03 14,814.00 14,623.00
</Table>
$10,000 INVESTED IN
ECLIPSE MONEY MARKET FUND VERSUS
IMONEYNET FIRST TIER RETAIL FUND AVERAGE
SWEEP SHARES CLASS SHARES
[SWEEP SHARES CLASS SHARES GRAPH]
<Table>
<Caption>
IMONEYNET FIRST TIER RETAIL FUND
ECLIPSE MONEY MARKET FUND AVERAGE
------------------------- --------------------------------
10/31/93 $ 10,000.00 $ 10,000.00
94 10,298.00 10,332.00
95 10,804.00 10,889.00
96 11,279.00 11,426.00
97 11,805.00 11,995.00
98 12,370.00 12,600.00
99 12,886.00 13,170.00
00 13,590.00 13,912.00
01 14,154.00 14,506.00
02 14,315.00 14,685.00
10/31/03 14,362.00 14,766.00
</Table>
[LEGEND:]
- --ECLIPSE MONEY MARKET FUND --Average Lipper money market fund
- --iMoneyNet First Tier Retail Fund Average
Source: Lipper Inc., 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- -------------------------------------------------------------------------------------------------------------------------
7-DAY
ONE YEAR FIVE YEARS 10 YEARS CURRENT YIELD(2)
- -------------------------------------------------------------------------------------------------------------------------
Eclipse Money Market Fund No-Load Class(3) 0.83% 3.57% 4.26% 0.60%
Eclipse Money Market Fund Service Class(3) 0.58 3.31 4.01 0.35
Eclipse Money Market Fund Sweep Shares
Class(3) 0.33 3.03 3.69 0.10
Average Lipper money market fund(4) 0.50 3.15 3.97 n/a
iMoneyNet First Tier Retail Fund Average(5) 0.56 3.25 3.99 n/a
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
Year ended December 31, 1994 3.88
Year ended December 31, 1995 5.63
Year ended December 31, 1996 5.11
Year ended December 31, 1997 5.27
Year ended December 31, 1998 5.25
10 months ended October 31, 1999 3.96
Year ended October 31, 2000 5.98
Year ended October 31, 2001 4.67
Year ended October 31, 2002 1.65
Year ended October 31, 2003 0.83
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
Performance tables and graphs do not reflect the
deduction of taxes that a shareholder would pay on distributions or Fund-share
redemptions.
1. Total returns reflect reinvestment of all dividend and capital gain
distributions and, for the Service Class shares, include the service fee of
.25% on an annualized basis of the average daily net asset value of the
Service Class shares.
2. As of 10/31/03, Eclipse Money Market Fund had an effective 7-day yield of
0.60% for the No-Load Class; 0.35% for the Service Class; and 0.10% for the
Sweep Shares Class. These yields reflect certain expense limitations. Had
these expense limitations not been in effect, the effective 7-day yield and
the current 7-day yield would have been 0.54% and 0.54% for the No-Load
Class; 0.29% and 0.29% for the Service Class; and 0.04% and 0.04% for the
Sweep Shares Class. These expense limitations are voluntary and may be
terminated or revised at any time. The current yield is more reflective of
the Fund's earnings than the total return.
3. Performance figures for the Sweep Shares Class, first offered to the public
on 12/8/98, include the historical performance of the Service Class from the
Service Class's inception on 1/1/95 through 12/7/98. Performance figures for
these classes will vary after 12/7/98, based on differences in their expense
134
structures. Performance figures for the Service Class, first offered to the
public on 1/1/95, include the historical performance of the No-Load Class
from the Fund's inception on 1/2/91 through 12/31/94. Performance figures for
these two classes will vary after 12/31/94, based on differences in their
expense structures.
4. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
5. The iMoneyNet First Tier Retail Fund Average is unmanaged and includes only
nongovernment retail funds that are not holding any second-tier securities.
Portfolio holdings of first-tier funds include U.S. Treasury securities, U.S.
repurchase agreements, time deposits, domestic bank obligations, foreign bank
obligations, first-tier commercial paper, floating-rate notes, and
asset-backed commercial paper. Results assume reinvestment of all income and
capital gains. An investment cannot be made directly into an index or an
average.
INFORMATION ABOUT ECLIPSE MONEY MARKET FUND ON THIS PAGE AND THE PRECEDING PAGES
HAS NOT BEEN AUDITED.
135
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
SHORT-TERM INVESTMENTS (99.9%)+
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------
ASSET-BACKED SECURITIES (7.9%)
Capital One Auto Finance Trust
Series 2003-A Class A1
1.251%, due 6/15/04 (c)....... $ 2,152,720 $ 2,152,720
Capital One Prime Auto
Receivables Trust
Series 2003-1 Class A1
1.259%, due 6/15/04 (c)....... 28,883 28,883
Carmax Auto Owner Trust
Series 2003-2 Class A1
1.13%, due 11/15/04 (c)....... 2,000,000 2,000,000
CIT Equipment Collateral
Series 2003-EF1 Class A1
1.139%, due 10/15/04 (c)...... 3,794,073 3,794,073
GE Commercial Equipment
Financing LLC
Series 2003-1 Class A1
1.08%, due 9/20/04 (b)(c)..... 11,112,766 11,112,766
John Deere Owner Trust
Series 2003-A Class A1
1.081%, due 8/15/04 (c)....... 2,056,637 2,056,637
Nissan Auto Lease Trust
Series 2002-A Class A1
1.166%, due 10/15/04 (c)...... 5,000,000 5,000,000
USAA Auto Owner Trust
Series 2003-1 Class A1
1.052%, due 7/15/04 (b)(c).... 2,637,167 2,637,167
Volkswagen Auto Loan Enhanced
Trust
Series 2003-1 Class A1
1.005%, due 7/20/04 (b)(c).... 2,577,455 2,577,455
Whole Auto Loan Trust
Series 2003-1 Class A1
1.10%, due 9/15/04 (c)........ 8,603,089 8,603,089
World Omni Auto Receivables
Trust, Series 2003-A Class A1
1.30%, due 3/15/04 (c)........ 334,667 334,667
------------
40,297,457
------------
CERTIFICATES OF DEPOSIT (12.1%)
Barclay's Bank PLC NY
1.32%, due 1/29/04 (c)(d)..... 7,000,000 7,000,000
BNP Paribas S.A.
1.345%, due 1/29/04 (c)(d).... 10,000,000 10,002,280
Lloyds Bank PLC NY
1.065%, due 12/15/03 (c)(e)... 10,000,000 10,000,061
Rabobank Nederland N.V. NY
1.18%, due 7/30/04 (c)(e)..... 25,000,000 25,001,867
State Street Bank & Trust
1.00%, due 11/10/03 (c)....... 10,000,000 10,000,000
------------
62,004,208
------------
COMMERCIAL PAPER (57.0%)
American Honda Finance Corp.
1.04%, due 11/5/03............ 6,000,000 5,999,307
Banco Santander Puerto Rico
1.07%, due 11/4/03............ 10,000,000 9,999,108
Barton Capital Corp.
1.05%, due 11/12/03 (a)....... 6,841,000 6,838,805
BP Capital Markets PLC
1.04%, due 12/19/03........... 4,229,000 4,223,136
Cafco LLC
1.05%, due 11/21/03 (a)....... 17,000,000 16,990,083
</Table>
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------
COMMERCIAL PAPER (CONTINUED)
Ciesco LP
1.05%, due 12/10/03........... $ 7,950,000 $ 7,940,957
1.07%, due 11/3/03 (a)........ 10,000,000 9,999,405
CIT Group, Inc.
1.15%, due 2/2/04............. 8,000,000 7,976,233
Credit Suisse First Boston USA
Inc.
1.05%, due 11/14/03 (a)....... 3,439,000 3,437,696
Danske Corp.
1.04%, due 12/11/03........... 3,800,000 3,795,609
1.06%, due 12/12/03........... 5,000,000 4,993,964
Delaware Funding Corp
1.04%, due 11/21/03 (a)....... 3,142,000 3,140,185
1.05%, due 12/1/03 (a)........ 6,000,000 5,994,750
1.08%, due 1/13/04 (a)........ 10,000,000 9,978,100
Diageo Capital PLC
1.07%, due 1/15/04 (a)........ 5,000,000 4,988,854
1.08%, due 1/21/04 (a)........ 8,894,000 8,872,388
Edison Asset Securitization LLC
1.05%, due 11/17/03 (a)....... 6,001,000 5,998,200
General Electric Capital Corp.
1.04%, due 12/17/03........... 2,328,000 2,324,906
1.07%, due 1/15/04............ 6,513,000 6,498,482
Goldman Sachs Group, Inc. (The)
0.95%, due 11/13/03........... 5,000,000 4,998,417
Govco, Inc.
1.07%, due 11/6/03-12/2/03
(a)........................... 15,052,000 15,046,218
HBOS Treasury Services
1.05%, due 11/20/03........... 3,300,000 3,298,172
1.06%, due 12/15/03........... 7,900,000 7,889,765
1.15%, due 11/19/03........... 1,817,000 1,815,955
Ing America Insurance Holdings
1.07%, due 1/22/04............ 9,751,000 9,727,235
KfW International Finance, Inc.
1.04%, due 11/13/03 (a)....... 10,000,000 9,996,533
Liberty Street Funding Co.
1.06%, due 12/9/03-12/18/03
(a)........................... 14,078,000 14,059,598
Market Street Funding Corp.
1.06%, due 11/7/03-11/18/03
(a)........................... 13,803,000 13,797,323
Marshall & Ilsley Corp.
1.07%, due 11/4/03............ 15,000,000 14,998,662
McGraw-Hill Companies, Inc.
1.00%, due 11/12/03........... 8,126,000 8,123,517
Morgan Stanley Dean Witter &
Co.
1.04%, due 11/4/03............ 10,000,000 9,999,133
Nordea North America, Inc.
1.07%, due 1/5/04............. 6,000,000 5,988,408
Park Avenue Receivables Corp.
1.05%, due 11/24/03 (a)....... 10,362,000 10,355,049
Quebec Province
1.06%, due 1/14/04............ 10,000,000 9,978,211
Sheffield Receivables Corp.
1.08%, due 2/25/04 (a)(b)(c).. 5,000,000 5,000,000
Three Pillars Funding Corp.
1.05%, due 11/26/03 (a)....... 11,219,000 11,210,819
Toronto Dominion Holdings
1.06%, due 12/22/03........... 5,251,000 5,243,115
------------
291,516,298
------------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
136
ECLIPSE FUNDS
<Table>
<Caption>
SHORT-TERM INVESTMENTS (CONTINUED)
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------
CORPORATE BONDS (9.6%)
Abbott Laboratories
5.13%, due 7/1/04............. $ 5,000,000 $ 5,130,637
Citigroup, Inc.
5.70%, due 2/6/04............. 20,000,000 20,226,000
Diageo Capital PLC
6.625%, due 6/24/04........... 3,000,000 3,104,194
LaSalle Bank NA
1.06%, due 12/3/03............ 10,000,000 10,000,000
Tennessee Valley Authority
4.75%, due 7/15/04............ 5,000,000 5,129,218
Wachovia Corp.
7.10%, due 8/15/04............ 5,000,000 5,228,637
------------
48,818,686
------------
FEDERAL AGENCIES (5.8%)
Federal Home Loan Mortgage
Corporation
5.00%, due 5/15/04............ 5,000,000 5,101,630
Federal Mortgage Corporation
1.10%, due 1/12/04............ 20,241,000 20,196,470
1.40%, due 9/21/04............ 4,000,000 4,000,000
Federal National Mortgage
Association
1.04%, due 12/3/03............ 370,000 369,658
------------
29,667,758
------------
MEDIUM-TERM NOTES (7.5%)
American Honda Finance Corp.
1.09%, due 9/16/04 (a)(b)(c).. 10,000,000 10,000,000
General Electric Capital Corp.
Series A
1.323%, due 9/24/04 (b)(c).... 5,000,000 5,007,656
Series E
5.75%, due 4/6/04 (c)(d)...... 2,500,000 2,549,957
Household Finance Corp.
1.13%, due 8/18/04 (b)(c)..... 10,000,000 10,000,000
Lehman Brothers Holdings, Inc.
Series G
1.513%, due 9/20/04
(a)(b)(c)..................... 5,000,000 5,016,117
Merrill Lynch & Co., Inc.
Series B
5.35%, due 6/15/04 (c)........ 5,800,000 5,948,002
------------
38,521,732
------------
Total Short-Term Investments
(Amortized Cost $510,826,139)
(f)........................... 99.9% 510,826,139
Cash and Other Assets,
Less Liabilities.............. 0.1 586,408
----------- ------------
Net Assets..................... 100.0% $511,412,547
=========== ============
</Table>
- ------------
<Table>
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at
October 31, 2003.
(c) Coupon interest bearing security.
(d) Eurodollar certificate of deposit (CD)--CD issued by
banks outside the United States, primarily in
Europe, with interest and principal paid in dollars.
(e) Yankee certificate of deposit
(CD)--dollar-denominated CD issued in the United
States by foreign banks and corporations.
(f) The cost stated also represents the aggregate cost
for federal income tax purposes.
</Table>
The table below sets forth the diversification of Money Market Fund investments
by industry.
INDUSTRY DIVERSIFICATION
<Table>
<Caption>
AMORTIZED
COST PERCENT +
-------------------------
Beverages--Wine/Spirits........... $ 16,965,436 3.3%
Commercial Banks--Central U.S..... 24,998,663 4.9
Commercial Banks--Eastern U.S..... 35,001,867 6.8
Commercial Banks--Non-U.S......... 27,021,096 5.3
Diversified Financial Services.... 36,607,000 7.2
Finance--Auto Loans............... 39,333,288 7.7
Finance--Commercial............... 7,976,233 1.6
Finance--Consumer Loans........... 10,000,000 2.0
Finance--Equipment Loans.......... 16,963,476 3.3
Finance--Financial Assets......... 11,210,819 2.2
Finance--Investment
Banker/Broker.................... 25,961,670 5.1
Finance--Investment Banks......... 9,727,235 1.9
Finance--Other Services........... 25,401,266 5.0
Finance--Receivables.............. 99,737,406 19.5
Investment Companies.............. 3,437,696 0.7
Medical--Drugs.................... 5,130,637 1.0
Money Center Banks................ 43,005,341 8.4
Multimedia........................ 8,123,517 1.6
Oil Companies Integrated.......... 4,223,136 0.8
Regional Authority................ 9,978,211 1.9
Sovereign Agency.................. 34,796,975 6.8
Special Purpose Banks............. 9,996,533 1.9
Super--Regional Banks--U.S........ 5,228,638 1.0
------------ ------
510,826,139 99.9
Cash and Other Assets,
Less Liabilities................. 586,408 0.1
------------ ------
Net Assets........................ $511,412,547 100.0%
============ ======
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
137
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
<Caption>
ASSETS:
Investment in securities, at value (amortized
cost $510,826,139)............................. $510,826,139
Cash............................................. 583
Receivables:
Fund shares sold............................... 2,290,696
Interest....................................... 1,265,574
Other assets..................................... 9,358
------------
Total assets............................... 514,392,350
------------
LIABILITIES:
Payables:
Fund shares redeemed........................... 2,488,030
Manager........................................ 199,230
NYLIFE Distributors............................ 120,542
Shareholder communication...................... 85,880
Transfer agent................................. 17,783
Directors...................................... 2,899
Custodian...................................... 8,816
Accrued expenses................................. 56,114
Dividend payable................................. 509
------------
Total liabilities.......................... 2,979,803
------------
Net assets....................................... $511,412,547
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
12 billion shares authorized
No-Load Class.................................. $ 221,068
Service Class.................................. 17,498
Sweep Shares Class............................. 272,836
Additional paid-in capital....................... 510,892,834
Accumulated undistributed net realized gain on
investments.................................... 8,311
------------
Net assets....................................... $511,412,547
============
No-Load Class
Net assets applicable to outstanding shares...... $221,058,320
============
Shares of capital stock outstanding.............. 221,067,728
============
Net asset value per share outstanding............ $ 1.00
============
Service Class
Net assets applicable to outstanding shares...... $ 17,498,100
============
Shares of capital stock outstanding.............. 17,498,068
============
Net asset value per share outstanding............ $ 1.00
============
Sweep Shares Class
Net assets applicable to outstanding shares...... $272,856,127
============
Shares of capital stock outstanding.............. 272,836,118
============
Net asset value per share outstanding............ $ 1.00
============
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
<Caption>
INVESTMENT INCOME:
Income:
Interest......................................... $7,561,013
----------
Expenses:
Manager.......................................... 2,839,248
Distribution--Sweep Shares Class................. 704,737
Service--Sweep Shares Class...................... 704,737
Service--Service Class........................... 38,677
Professional..................................... 170,314
Shareholder communication........................ 146,084
Transfer agent................................... 105,395
Custodian........................................ 55,207
Registration..................................... 46,023
Directors........................................ 41,711
Portfolio pricing................................ 3,676
Miscellaneous.................................... 18,601
----------
Total expenses before
reimbursement............................... 4,874,410
Expense reimbursement from Manager............... (587,013)
----------
Net expenses................................. 4,287,397
----------
Net investment income.............................. 3,273,616
----------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................... 8,311
----------
Net increase in net assets resulting from
operations....................................... $3,281,927
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
138
ECLIPSE FUNDS
MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................... $ 3,273,616 $ 6,696,979
Net realized gain on investments........................ 8,311 16,133
------------- -------------
Net increase in net assets resulting from operations.... 3,281,927 6,713,112
------------- -------------
Dividends and distributions to shareholders:
From net investment income:
No-Load Class......................................... (2,263,628) (3,332,227)
Service Class......................................... (85,667) (73,417)
Sweep Shares Class.................................... (924,321) (3,291,335)
From net realized gain on investments:
No-Load Class......................................... (8,060) (1,968)
Service Class......................................... (313) (29)
Sweep Shares Class.................................... (7,760) (3,166)
------------- -------------
Total dividends and distributions to shareholders... (3,289,749) (6,702,142)
------------- -------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 490,606,863 379,306,903
Service Class......................................... 29,010,391 11,910,019
Sweep Shares Class.................................... 97,731,999 130,385,632
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
No-Load Class......................................... 2,250,176 3,314,491
Service Class......................................... 84,448 73,360
Sweep Shares Class.................................... 932,002 3,294,182
------------- -------------
620,615,879 528,284,587
Cost of shares redeemed:
No-Load Class......................................... (601,715,257) (252,199,432)
Service Class......................................... (23,255,832) (2,009,283)
Sweep Shares Class.................................... (117,116,374) (127,408,801)
------------- -------------
Increase (decrease) in net assets derived from capital
share transactions................................... (121,471,584) 146,667,071
------------- -------------
Net increase (decrease) in net assets................. (121,479,406) 146,678,041
NET ASSETS:
Beginning of year......................................... 632,891,953 486,213,912
------------- -------------
End of year............................................... $ 511,412,547 $ 632,891,953
============= =============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
139
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
----------------------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
----------------------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
-------- -------- -------- -------- ----------- ------------
Net asset value at beginning of
period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Net investment income............ 0.01 0.02 0.04 0.06 0.04 0.05
Net realized gain on
investments..................... 0.00(a) 0.00(a) -- -- -- --
-------- -------- -------- -------- -------- --------
Total from investment
operations...................... 0.01 0.02 0.04 0.06 0.04 0.05
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income....... (0.01) (0.02) (0.04) (0.06) (0.04) (0.05)
From net realized gain on
investments..................... (0.00)(a) (0.00)(a) -- -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and
distributions................... (0.01) (0.02) (0.04) (0.06) (0.04) (0.05)
-------- -------- -------- -------- -------- --------
Net asset value at end of
period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total investment return.......... 0.83% 1.65% 4.67% 5.98% 3.96%(b) 5.25%
Ratios (to average net assets)/
Supplemental Data:
Net investment income........... 0.84% 1.61% 4.50% 5.81% 4.68%+ 5.12%
Net expenses.................... 0.50% 0.50% 0.50% 0.50% 0.50%+ 0.50%
Expenses (before
reimbursement)................ 0.60% 0.62% 0.61% 0.57% 0.62%+ 0.63%
Net assets at end of period (in
000's).......................... $221,058 $329,921 $199,495 $160,942 $246,713 $194,338
</Table>
- ------------
<Table>
* The Fund changed its fiscal year end from December 31 to
October 31.
+ Annualized.
(a) Less than one cent per share.
(b) Total return is not annualized.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
140
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
----------------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
----------------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
-------- -------- -------- -------- ----------- ------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
0.01 0.01 0.04 0.06 0.04 0.05
0.00(a) 0.00(a) -- -- -- --
-------- -------- -------- -------- -------- --------
0.01 0.01 0.04 0.06 0.04 0.05
-------- -------- -------- -------- -------- --------
(0.01) (0.01) (0.04) (0.06) (0.04) (0.05)
(0.00)(a) (0.00)(a) -- -- -- --
-------- -------- -------- -------- -------- --------
(0.01) (0.01) (0.04) (0.06) (0.04) (0.05)
-------- -------- -------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
0.58% 1.39% 4.41% 5.72% 3.74%(b) 4.99%
0.59% 1.36% 4.25% 5.56% 4.43%+ 4.87%
0.75% 0.75% 0.75% 0.75% 0.75%+ 0.75%
0.85% 0.87% 0.86% 0.82% 0.87%+ 0.88%
$ 17,498 $ 11,659 $ 1,685 $ 1,586 $ 5,630 $103,765
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
141
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
SWEEP SHARES CLASS
-------------------------------------------------------------------------------------------------
JANUARY 1 DECEMBER 8
YEAR ENDED OCTOBER 31 THROUGH THROUGH
-------------------------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998**
-------- -------- -------- -------- ----------- ------------
Net asset value at beginning
of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Net investment income......... 0.00(a) 0.01 0.04 0.05 0.04 0.00(a)
Net realized gain on
investments.................. 0.00(a) 0.00(a) -- -- -- --
-------- -------- -------- -------- -------- --------
Total from investment
operations................... 0.00(a) 0.01 0.04 0.05 0.04 0.00(a)
-------- -------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment income.... (0.00)(a) (0.01) (0.04) (0.05) (0.04) (0.00)(a)
From net realized gain on
investments.................. (0.00)(a) (0.00)(a) -- -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and
distributions................ (0.00)(a) (0.01) (0.04) (0.05) (0.04) (0.00)(a)
-------- -------- -------- -------- -------- --------
Net asset value at end of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total investment return....... 0.33% 1.14% 4.15% 5.46% 3.53%(b) 0.31%(b)
Ratios (to average net
assets)/
Supplemental Data:
Net investment income........ 0.34% 1.11% 4.00% 5.31% 4.18%+ 4.62%+
Net expenses................. 1.00% 1.00% 1.00% 1.00% 1.00%+ 1.00%+
Expenses (before
reimbursement)............. 1.10% 1.12% 1.11% 1.07% 1.12%+ 1.13%+
Net assets at end of period
(in 000's)................... $272,856 $291,312 $285,034 $221,935 $152,268 $ 6,957
</Table>
- ------------
<Table>
* The Fund changed its fiscal year end from December 31 to
October 31.
** Sweep Shares Class first offered on December 8, 1998.
+ Annualized.
(a) Less than one cent per share.
(b) Total return is not annualized.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
142
Eclipse Short Term Bond Fund
- --------------------------------------------------------------------------------
Since the end of the recession nearly two years ago, economic growth has been
fairly uneven. Measured in terms of the duration and decline in real gross
domestic product, the recession of 2001 was relatively modest. Even so,
corporate profits and business capital spending declined precipitously and
nonfarm payroll employment has fallen by approximately $2.8 million since the
beginning of the recession. In the absence of pricing power to drive increases
in revenue, companies have focused on cutting labor costs to improve
profitability. With productivity running at high levels, companies have been
able to meet demand without increasing their payrolls.
Despite the poor labor market, consumer spending remained strong during the 12
months ended October 31, 2003. This was due in large part to tax cuts and
mortgage refinancings, which provided many consumers with additional disposable
income. Job insecurity and the possibility of war in the Middle East, however,
did have an impact on consumer confidence and spending. The 2002 holiday season
was rather lackluster for retailers. In addition, the financial markets were
highly volatile during the first half of the reporting period due to
developments related to Iraq.
Financial conditions improved once major combat operations in Iraq came to an
end. Oil prices declined and consumer confidence rose sharply. In addition, the
equity markets rebounded from their March lows and corporate bonds, whose
fortunes are often closely tied to the economy, generated better returns than
Treasury bonds with similar maturities.
In response to the uncertain economic environment, the Federal Reserve lowered
the targeted federal funds rate twice during the reporting period. The first cut
of 50 basis points occurred in November 2002 and the second cut of 25 basis
points brought the targeted federal funds rate to a low 1.00% in June, where it
remains today. In May of 2003, the Federal Reserve adopted a new approach by
issuing separate assessments for the growth outlook and the inflation outlook.
Interest rates fell sharply following the release of the Fed's May statement,
which indicated that further drops in inflation would not be desirable. Rates
continued to fall through the middle of June as various Fed members spoke of the
need to act preemptively to prevent the economy from slipping into a
deflationary environment. The yield on the benchmark two-year Treasury note fell
to 1.08% in June.
The decline in interest rates sparked a significant increase in mortgage
refinancing over the spring and summer of 2003. The federal government also
passed additional fiscal stimulus in the form of tax cuts for individuals and
small businesses. By the end of the reporting period, it appeared that the
economy had turned the corner. According to preliminary estimates by the Bureau
of Economic Analysis, in the third quarter of 2003, real gross domestic product
grew at a seasonally adjusted annual rate of 8.2%--the fastest growth in nearly
20 years. Stronger economic data resulted in bond yields rising substantially
during July and August. The yield on the two-year Treasury note climbed to 2.04%
in early September before dipping back to 1.82% on October 31, 2003.
PERFORMANCE REVIEW
For the one-year period ended October 31, 2003, Eclipse Short Term Bond Fund
returned 1.94% for No-Load Class shares and 1.69% for Service Class shares. Both
share classes outperformed the 1.43% return of the average Lipper(1) short U.S.
government fund over the same period. Both share classes underperformed the
2.00% return of the Citigroup 1-3 Year Treasury Index(2) for the one-year period
ended October 31, 2003.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1. Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
2. The Citigroup 1-3 Year Treasury Index is an unmanaged index comprised of
U.S. Treasury notes and bonds with maturities of one year or greater, but
less than three years (minimum amount outstanding is $1 billion per issue).
Results assume reinvestment of all income and capital gains. An investment
cannot be made directly into an index.
143
POSITIONING THE PORTFOLIO
The Fund benefited from its allocation to corporate bonds during the reporting
period as corporate spreads narrowed significantly. With yields on Treasuries
reaching multidecade lows during the period, lower-rated credits outperformed
higher-rated credits as risk aversion declined and investors sought incremental
yield.
The Fund continues to invest in a wide range of securities, including
asset-backed securities, mortgage-backed securities, U.S. government securities,
federal agency obligations, and Yankee bonds.
We believe that the supply of Treasury securities is likely to expand, since the
federal deficit is expected to exceed $500 billion in fiscal 2004. With the Fed
on hold and Treasury supply increasing, we believe that agencies and corporate
bonds will continue to outperform Treasuries, as they have in recent months.
At the end of October 2003, the Fund was overweighted relative to its benchmark
in agencies and corporate obligations, and we intend to maintain overweighted
positions in these sectors going forward.
LOOKING AHEAD
The Federal Reserve continues to maintain that the risks of a further fall in
inflation outweigh the risks of faster economic growth. As a result, the Fed has
stated that monetary policy could remain accommodative for a considerable time.
We believe that the future path of the targeted fed funds rate is highly
dependent on whether recent momentum in growth can be sustained over the coming
months. Given the areas of slack in the economy, such as the weak labor market,
the Fed will likely tolerate several quarters of above-average growth before it
begins to raise the targeted federal funds rate.
Thanks to the federal tax cuts, disposable income has grown much faster than
personal income, helping to fuel strong consumer spending in the third quarter
of 2003. In our opinion, however, spending cannot outpace gains in personal
income for a sustained period. In the absence of further fiscal stimulus, we
believe that developments in the labor market will influence growth in personal
income. More specifically, we think that the economy will have to create more
than 100,000 jobs each month over the course of the next year for spending to
remain at current levels.
Whatever the markets or the economy may bring, the Fund will continue to seek to
maximize total return consistent with liquidity, preservation of capital, and
investment in short-term debt securities.
CLAUDE ATHAIDE, PH.D., CFA
GARY GOODENOUGH
Portfolio Managers
MacKay Shields LLC
144
$10,000 INVESTED IN
ECLIPSE SHORT TERM BOND FUND VERSUS
CITIGROUP 1-3 YEAR TREASURY INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE SHORT-TERM BOND FUND CITIGROUP 1-3 YEAR TREASURY INDEX
---------------------------- ---------------------------------
10/31/93 $ 10,000 $ 10,000
94 10,091 10,117
95 10,933 11,002
96 11,544 11,663
97 12,244 12,414
98 13,080 13,371
99 13,408 13,769
00 14,219 14,602
01 15,738 16,183
02 16,242 16,978
10/31/03 16,558 17,318
</Table>
[LEGEND GRAPH]
Source: Bloomberg, 10/31/03
These graphs assume a $10,000 investment made on 10/31/93.
$10,000 INVESTED IN
ECLIPSE SHORT TERM BOND FUND VERSUS
CITIGROUP 1-3 YEAR TREASURY INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE SHORT-TERM BOND FUND CITIGROUP 1-3 YEAR TREASURY INDEX
---------------------------- ---------------------------------
10/31/93 $ 10,000 $ 10,000
94 10,065 10,117
95 10,877 11,002
96 11,464 11,663
97 12,130 12,414
98 12,914 13,371
99 13,202 13,769
00 13,965 14,602
01 15,425 16,183
02 15,877 16,978
10/31/03 16,145 17,318
</Table>
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- -------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------
Eclipse Short Term Bond Fund No-Load Class 1.94% 4.83% 5.17%
Eclipse Short Term Bond Fund Service Class2 1.69 4.57 4.91
Average Lipper short U.S. government fund3 1.43 4.60 4.96
Citigroup 1-3 Year Treasury Index(4) 2.00 5.31 5.64
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
Year ended December 31, 1994 0.11
Year ended December 31, 1995 10.27
Year ended December 31, 1996 4.81
Year ended December 31, 1997 6.13
Year ended December 31, 1998 6.37
10 months ended October 31, 1999 2.12
Year ended October 31, 2000 6.05
Year ended October 31, 2001 10.68
Year ended October 31, 2002 3.21
Year ended October 31, 2003 1.94
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares.
2. Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the No-Load Class from the
Fund's inception on 1/2/91 through 12/31/94. Performance figures for these
classes will vary after 12/31/94, based on differences in their expense
structures.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. The Citigroup 1-3 Year Treasury Index is an unmanaged index comprised of U.S.
Treasury notes and bonds with maturities of one year or greater, but less
than three years (minimum amount outstanding is $1 billion per issue).
Results assume reinvestment of all income and capital gains. An investment
cannot be made directly into an index.
INFORMATION ABOUT ECLIPSE SHORT TERM BOND FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
145
SHORT TERM BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
LONG-TERM BONDS (94.4%)+
ASSET-BACKED SECURITIES (5.0%)
PRINCIPAL
AMOUNT VALUE
-----------------------
CONSUMER FINANCE (2.9%)
BMW Vehicle Owner Trust
Series 2003-A Class A3
1.94%, due 2/25/07.............. $ 190,000 $ 190,260
Harley-Davidson Motorcycle Trust
Series 2002-1 Class A2
4.50%, due 1/15/10.............. 500,000 518,132
Volkswagen Auto Loan
Enhanced Trust
Series 2003-2 Class A3
2.27%, due 10/22/07............. 310,000 310,136
-----------
1,018,528
-----------
DIVERSIFIED FINANCIAL SERVICES (1.1%)
Capital One Master Trust
Series 2001-5 Class A
5.30%, due 6/15/09.............. 110,000 117,124
DaimlerChrysler Auto Trust
Series 2001-D Class A3
3.15%, due 11/6/05.............. 286,274 288,256
-----------
405,380
-----------
THRIFTS & MORTGAGE FINANCE (1.0%)
Vanderbilt Mortgage Finance
Series 1999-B Class 1A4
6.545%, due 4/7/18.............. 350,000 364,307
-----------
Total Asset-Backed Securities
(Cost $1,772,162)............... 1,788,215
-----------
CORPORATE BONDS (17.2%)
AEROSPACE & DEFENSE (1.0%)
General Dynamics Corp.
2.125%, due 5/15/06............. 375,000 371,458
-----------
COMMERCIAL BANKS (4.8%)
Bank of America Corp.
7.50%, due 9/15/06.............. 460,000 519,907
Bank One Corp.
7.625%, due 8/1/05.............. 350,000 382,984
FleetBoston Financial Corp.
4.875%, due 12/1/06............. 315,000 333,424
Wachovia Corp.
6.80%, due 6/1/05............... 450,000 483,728
-----------
1,720,043
-----------
COMMERCIAL SERVICES & SUPPLIES (0.9%)
Waste Management, Inc.
7.00%, due 10/15/06............. 300,000 332,282
-----------
CONSUMER FINANCE (1.2%)
Household Finance Corp.
6.50%, due 1/24/06.............. 400,000 435,254
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.6%)
BellSouth Telecommunications,
Inc.
6.50%, due 6/15/05.............. $ 270,000 $ 288,992
Citizens Communications Co.
8.50%, due 5/15/06.............. 250,000 282,394
-----------
571,386
-----------
ELECTRIC UTILITIES (1.0%)
Alabama Power Co.
2.65%, due 2/15/06.............. 375,000 377,659
-----------
ELECTRICAL EQUIPMENT (0.9%)
Emerson Electric Co.
7.875%, due 6/1/05.............. 300,000 327,583
-----------
HEALTH CARE PROVIDERS & SERVICES (1.4%)
Quest Diagnostics, Inc.
6.75%, due 7/12/06.............. 475,000 521,154
-----------
MEDIA (1.4%)
Continental Cablevision, Inc.
8.875%, due 9/15/05............. 150,000 166,613
Lenfest Communications, Inc.
8.375%, due 11/1/05............. 130,000 144,037
Liberty Media Corp.
3.50%, due 9/25/06.............. 180,000 177,765
-----------
488,415
-----------
MULTI-UTILITIES & UNREGULATED POWER (1.0%)
Public Service Electric & Gas Co.
6.25%, due 1/1/07............... 315,000 344,211
-----------
PHARMACEUTICALS (1.1%)
Merck & Co., Inc.
4.125%, due 1/18/05............. 375,000 386,669
-----------
WIRELESS TELECOMMUNICATION SERVICES (0.9%)
AT&T Wireless Services, Inc.
7.50%, due 5/1/07............... 300,000 336,501
-----------
Total Corporate Bonds
(Cost $6,192,801)............... 6,212,615
-----------
FOREIGN BONDS (2.5%)
DIVERSIFIED TELECOMMUNICATION SERVICES (0.6%)
Telefonos de Mexico S.A.
8.25%, due 1/26/06.............. 200,000 221,250
-----------
OIL & GAS (1.0%)
Pemex Finance Ltd.
8.02%, due 5/15/07.............. 325,000 358,387
-----------
TRANSPORTATION INFRASTRUCTURE (0.9%)
PSA Corp. Ltd.
7.125%, due 8/1/05 (a).......... 300,000 326,321
-----------
Total Foreign Bonds
(Cost $896,861)................. 905,958
-----------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
146
ECLIPSE FUNDS
<Table>
<Caption>
U.S. GOVERNMENT & FEDERAL AGENCIES (69.7%)
PRINCIPAL
AMOUNT VALUE
-------------------------
FEDERAL HOME LOAN BANK (3.5%)
2.875%, due 9/15/06............. $1,275,000 $ 1,281,969
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (16.0%)
1.75%, due 6/16/06.............. 1,300,000 1,274,641
4.75%, due 1/2/07............... 1,090,000 1,143,646
5.25%, due 3/22/07.............. 1,600,000 1,625,046
5.50%, due 5/2/06............... 1,620,000 1,733,204
-----------
5,776,537
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH
SECURITIES) (3.4%)
4.50%, due 11/18/18 TBA (b)..... 925,000 923,844
7.50%, due 4/1/31............... 283,187 302,464
-----------
1,226,308
-----------
UNITED STATES TREASURY NOTES (46.8%)
3.50%, due 11/15/06............. 895,000 923,738
4.625%, due 5/15/06............. 1,120,000 1,188,644
5.75%, due 11/15/05 (c)......... 3,175,000 3,420,567
5.875%, due 11/15/04 (c)........ 5,865,000 6,139,693
6.75%, due 5/15/05.............. 4,820,000 5,197,314
-----------
16,869,956
-----------
Total U.S. Government &
Federal Agencies
(Cost $25,139,710).............. 25,154,770
-----------
Total Long-Term Bonds
(Cost $34,001,534).............. 34,061,558
-----------
SHORT-TERM INVESTMENTS (10.3%)
FEDERAL AGENCIES (5.7%)
Federal Mortgage Corporation
(Discount Note)
1.01%, due 11/12/03............. 1,000,000 999,691
Federal National Mortgage
Association
(Discount Notes)
0.95%, due 11/3/03.............. 445,000 444,976
1.00%, due 11/12/03............. 600,000 599,817
-----------
Total Federal Agencies
(Cost $2,044,484)............... $ 2,044,484
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
INVESTMENT COMPANY (0.7%)
AIM Institutional Funds Group
(d)............................. 272,541 $ 272,541
-----------
Total Investment Company
(Cost $272,541)................. 272,541
-----------
<Caption>
PRINCIPAL
AMOUNT
----------
MASTER NOTE (3.9%)
Banc of America LLC
1.19%, due 11/3/03 (d).......... $1,400,000 1,400,000
-----------
Total Master Note
(Cost $1,400,000)............... 1,400,000
-----------
Total Short-Term Investments
(Cost $3,717,025)............... 3,717,025
-----------
Total Investments
(Cost $37,718,559) (e).......... 104.7% 37,778,583(f)
Liabilities in Excess of Cash and
Other Assets.................... (4.7) (1,704,608)
---------- -----------
Net Assets....................... 100.0% $36,073,975
========== ===========
</Table>
- ------------
<Table>
(a) May be sold to institutional investors only.
(b) TBA: Securities purchased on a forward commitment
basis with an approximate principal amount and
maturity date. The actual principal amount and
maturity date will be determined upon settlement.
The market value of these securities at October 31,
2003 is $923,844.
(c) Represents securities out on loan or a portion which
is out on loan. (See Note 2(M))
(d) Represents security or a portion thereof, purchased
with cash collateral received for securities on
loan.
(e) The cost for federal income tax purposes is
$37,721,920.
(f) At October 31, 2003 net unrealized appreciation was
$56,663, based on cost for federal income tax
purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which
there was an excess of market value over cost of
$130,836 and aggregate gross unrealized depreciation
for all investments on which there was an excess of
cost over market value of $74,173.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
147
SHORT TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $37,718,559)--including $1,600,020 market
value of securities loaned...................... $37,778,583
Cash.............................................. 4,095
Receivables:
Investment securities sold...................... 1,368,341
Interest........................................ 648,802
Fund shares sold................................ 148,178
Other assets...................................... 4,881
-----------
Total assets................................ 39,952,880
-----------
LIABILITIES:
Securities lending collateral..................... 1,672,541
Payables:
Investment securities purchased................. 2,129,272
Fund shares redeemed............................ 24,131
Manager......................................... 8,191
Transfer agent.................................. 5,663
Custodian....................................... 1,471
Directors....................................... 779
Accrued expenses.................................. 36,768
Dividend payable.................................. 89
-----------
Total liabilities........................... 3,878,905
-----------
Net assets........................................ $36,073,975
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class................................... $ 3,815
Service Class................................... 58
Additional paid-in capital........................ 37,888,252
Accumulated net investment loss................... (89)
Accumulated net realized loss on investments...... (1,878,085)
Net unrealized appreciation on investments........ 60,024
-----------
Net assets........................................ $36,073,975
===========
No-Load Class
Net assets applicable to outstanding shares....... $35,531,991
===========
Shares of capital stock outstanding............... 3,814,606
===========
Net asset value per share outstanding............. $ 9.31
===========
Service Class
Net assets applicable to outstanding shares....... $ 541,984
===========
Shares of capital stock outstanding............... 58,317
===========
Net asset value per share outstanding............. $ 9.29
===========
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Interest.......................................... $ 970,938
Income from securities loaned--net................ 3,880
---------
Total income.................................. 974,818
---------
Expenses:
Manager........................................... 223,513
Transfer agent.................................... 34,099
Professional...................................... 32,773
Registration...................................... 26,724
Directors......................................... 11,964
Custodian......................................... 9,578
Portfolio pricing................................. 6,698
Shareholder communication......................... 5,450
Service--Service Class............................ 1,579
Miscellaneous..................................... 13,373
---------
Total expenses before
reimbursement................................ 365,751
Expense reimbursement from Manager................ (140,658)
---------
Net expenses.................................. 225,093
---------
Net investment income............................... 749,725
---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments.................... 502,623
Net change in unrealized appreciation on
investments....................................... (521,961)
---------
Net realized and unrealized loss on investments..... (19,338)
---------
Net increase in net assets resulting from
operations........................................ $ 730,387
=========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
148
ECLIPSE FUNDS
SHORT TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................... $ 749,725 $ 1,053,137
Net realized gain on investments........................ 502,623 135,028
Net change in unrealized appreciation (depreciation) on
investments............................................ (521,961) (62,252)
------------ ------------
Net increase in net assets resulting from operations.... 730,387 1,125,913
------------ ------------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (759,656) (1,780,783)
Service Class......................................... (11,669) (49,364)
Taxable distributions in excess of net investment
income:
No-Load Class......................................... (62,926) --
Service Class......................................... (967) --
------------ ------------
Total dividends and distributions to shareholders... (835,218) (1,830,147)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 16,685,453 21,422,857
Service Class......................................... 244,951 87,818
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
No-Load Class......................................... 821,284 1,689,447
Service Class......................................... 12,636 47,713
------------ ------------
17,764,324 23,247,835
Cost of shares redeemed:
No-Load Class......................................... (19,072,157) (15,300,169)
Service Class......................................... (447,045) (407,180)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions................................... (1,754,878) 7,540,486
------------ ------------
Net increase (decrease) in net assets................. (1,859,709) 6,836,252
NET ASSETS:
Beginning of year......................................... 37,933,684 31,097,432
------------ ------------
End of year............................................... $ 36,073,975 $ 37,933,684
============ ============
Accumulated undistributed net investment income (loss) at
end of year............................................. $ (89) $ 3,181
============ ============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
149
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
---------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
---------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
------- ------- ------- ------- ----------- ------------
Net asset value at beginning of period........ $ 9.34 $ 9.57 $ 9.36 $ 9.63 $ 9.43 $ 9.39
------- ------- ------- ------- ------- -------
Net investment income......................... 0.19 0.29(a) 0.47(e) 0.57(a) 0.47 0.56
Net realized and unrealized gain (loss) on
investments.................................. (0.01) 0.00(d) 0.48(e) (0.03) (0.27) 0.04
------- ------- ------- ------- ------- -------
Total from investment operations.............. 0.18 0.29 0.95 0.54 0.20 0.60
------- ------- ------- ------- ------- -------
Less dividends:
From net investment income.................... (0.21) (0.52) (0.74) (0.81) -- (0.56)
------- ------- ------- ------- ------- -------
Net asset value at end of period.............. $ 9.31 $ 9.34 $ 9.57 $ 9.36 $ 9.63 $ 9.43
======= ======= ======= ======= ======= =======
Total investment return....................... 1.94% 3.21% 10.68% 6.05% 2.12%(b) 6.37%
Ratios (to average net assets)/
Supplemental Data:
Net investment income........................ 2.02% 3.13% 4.93%(e) 6.20% 5.42%+ 5.95%
Net expenses................................. 0.60% 0.60% 0.60% 0.61%(c) 0.60%+ 0.60%
Expenses (before reimbursement).............. 0.98% 0.96% 1.03% 0.99% 0.85%+ 0.89%
Portfolio turnover rate....................... 173% 228% 149% 165% 105% 125%
Net assets at end of period (in 000's)........ $35,532 $37,201 $30,065 $31,146 $48,150 $42,219
</Table>
- ------------
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is not annualized.
(c) The effect of non-reimbursable interest expense on the expense ratio was
0.01%.
(d) Less than one cent per share.
(e) As required, effective November 1, 2000, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
year ended October 31, 2001 is shown below.
Per share ratios and supplemental data for periods prior to November 1, 2000
have not been restated to reflect this change in presentation.
<Table>
<Caption>
NO-LOAD SERVICE
CLASS CLASS
------- -------
Decrease net investment income.............................. ($0.12) ($0.11)
Increase net realized and unrealized gains and losses....... 0.12 0.11
Decrease ratio of net investment income..................... (1.26%) (1.20%)
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
150
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
------------------------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
------------------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
------- ------- ------- ------- ----------- ------------
$ 9.32 $ 9.54 $ 9.32 $ 9.59 $ 9.41 $ 9.38
------- ------- ------- ------- ------- -------
0.16 0.27(a) 0.45(e) 0.54(a) 0.45 0.53
(0.00)(d) 0.00(d) 0.48(e) (0.03) (0.27) 0.03
------- ------- ------- ------- ------- -------
0.16 0.27 0.93 0.51 0.18 0.56
------- ------- ------- ------- ------- -------
(0.19) (0.49) (0.71) (0.78) -- (0.53)
------- ------- ------- ------- ------- -------
$ 9.29 $ 9.32 $ 9.54 $ 9.32 $ 9.59 $ 9.41
======= ======= ======= ======= ======= =======
1.69% 2.93% 10.46% 5.78% 1.91%(b) 5.98%
1.77% 2.88% 4.68%(e) 5.95% 5.17%+ 5.70%
0.85% 0.85% 0.85% 0.86%(c) 0.85%+ 0.85%
1.23% 1.21% 1.28% 1.24% 1.10%+ 1.14%
173% 228% 149% 165% 105% 125%
$ 542 $ 733 $ 1,032 $1,061 $1,036 $ 1,273
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
151
Eclipse Ultra Short Duration Fund
- --------------------------------------------------------------------------------
Bond yields fell to 45-year lows in May 2003 and moved even lower as the Federal
Reserve continued to reduce the targeted federal funds rate in June. Even so,
the 10-year Treasury bond yield ended October 2003 slightly higher than where it
was at the end of October 2002. During the 12-month period, the yield curve
steepened as short-term rates continued to decline. The weak labor market and
lackluster consumer confidence continued to affect the bond market.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, Eclipse Ultra Short Duration
Fund returned 1.49% for No-Load Class shares and 1.25% for Service Class shares.
Both share classes underperformed the 1.82% return of the average Lipper(1)
ultra-short obligations fund over the same period. Both share classes also
underperformed the 1.57% return of the Citigroup 1-Year Treasury Benchmark
Index(2) for the 12 months ended October 31, 2003.
FUND STRATEGIES
As stated in the prospectus, the maximum duration of the Fund is 13 months.
Although this means that the Fund's total return will generally be lower than
that of a longer duration portfolio, the Fund typically carries less intrinsic
risk. Using bottom-up credit analysis, the Fund purchases investment-grade
securities based primarily on their credit quality and duration. We seek to
maintain a portfolio duration of approximately one year.
During the first half of the Fund's fiscal year, corporate bonds in the Fund
outperformed Treasury bonds. For the full 12-month period, however, government
bonds in the Fund's portfolio outperformed corporate bonds as concerns over
corporate quality led to an investor flight to quality.
PURCHASES AND SALES
In December 2002, the Fund purchased a Federal Farm Credit Bank bond that
offered an attractive yield spread relative to Treasuries. The bond has provided
a total return of 3% for the portion of the reporting period it was held in the
Fund.
In March 2003, the Fund purchased a John Deere Capital 5.52% obligation due
4/30/04. Once again, an attractive spread to Treasuries drew us to the
obligation, which returned 3% for the portion of the holding period it was held
in the Fund.
Although the Fund typically holds all of the securities it purchases until they
mature, during the fiscal year, we sold a bond issued by Altria Group prior to
its maturity date. In light of tobacco litigation cases, we were concerned about
the liquidity of the obligation and sold the Fund's entire position in April
2003 at a loss of 3% for the portion of the reporting period the obligation was
held in the Fund.
WEIGHTING CHANGES
During the reporting period, we purchased securities for the Fund based on
available inventory, always mindful of a maximum industry weighting of 25%.
Additional corporate bonds were purchased during the fiscal year as corporate
bonds became somewhat more attractive.
Since high-quality short-term corporate bonds were difficult to find, however,
the Fund held a larger-than-usual position in Treasury bills through much of the
fiscal year.
- -----------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy. These
risks are likely to be greater in emerging markets than in developed
markets. The Fund may invest in derivatives, which may increase the
volatility of the Fund's net asset value and may result in a loss to
the Fund.
1. Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
2. The Citigroup 1-Year Treasury Benchmark Index is an unmanaged index
consisting of a single one-year U.S. Treasury bond whose return is tracked
until its
maturity. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly into an index.
152
- --------------------------------------------------------------------------------
LOOKING AHEAD
We will continue to maintain the duration of the Fund at approximately one year
and will seek to purchase securities that will maintain the high quality of the
Fund's portfolio.
Whatever the markets or the economy may bring, the Fund will continue to seek a
high level of current income, capital preservation, and a relatively stable net
asset value.
WESLEY G. MCCAIN
JOAN M. SABELLA
Portfolio Managers
New York Life Investment Management LLC
153
$10,000 INVESTED IN
ECLIPSE ULTRA SHORT DURATION FUND VERSUS
CITIGROUP 1-YEAR TREASURY
BENCHMARK INDEX
NO-LOAD CLASS SHARES
[NO LOAD CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE ULTRA SHORT TERM INCOME CITIGROUP 1-YEAR TREASURY
FUND BENCHMARK INDEX
------------------------------- -------------------------
12/27/94 $10,000 $10,000
95 $10,659 $10,681
96 $11,277 $11,240
97 $11,972 $12,022
98 $12,755 $12,793
99 $13,280 $13,324
00 $14,033 $14,095
01 $15,163 $15,288
02 $15,578 $15,786
10/31/03 $15,810 $16,033
</Table>
$10,000 INVESTED IN
ECLIPSE ULTRA SHORT DURATION FUND VERSUS
CITIGROUP 1-YEAR TREASURY
BENCHMARK INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES GRAPH]
<Table>
<Caption>
ECLIPSE ULTRA SHORT TERM INCOME CITIGROUP 1-YEAR TREASURY
FUND BENCHMARK INDEX
------------------------------- -------------------------
12/27/94 $10,000 $10,000
95 $10,639 $10,681
96 $11,237 $11,240
97 $11,903 $12,022
98 $12,651 $12,793
99 $13,139 $13,324
00 $13,849 $14,095
01 $14,927 $15,288
02 $15,298 $15,786
10/31/03 $15,489 $16,033
</Table>
[LEGEND GRAPH]
Source: Bloomberg, 10/31/03
THIS GRAPH ASSUMES A $10,000 INVESTMENT MADE ON 12/27/94.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------------------------
SINCE
ONE YEAR FIVE YEARS INCEPTION(2)
- ------------------------------------------------------------------------------------------------------------------------
Eclipse Ultra Short Duration Fund No-Load Class 1.49% 4.39% 5.31%
Eclipse Ultra Short Duration Fund Service Class(2) 1.25 4.13 5.07
Average Lipper ultra-short obligations fund(3) 1.82 4.25 5.06
Citigroup 1-Year Treasury Benchmark Index(4) 1.57 4.62 5.49
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
1995 7.83
1996 5.48
Year ended December 31 1997 6.21
1998 6.27
1999 4.12
2000 6.59
10 months ended October 31 2001 6.42
Year ended October 31 2002 2.74
Six months ended April 30 2003 1.49
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares.
2. Performance figures for the Service Class, first offered to the public on
7/1/02, include the historical performance of the No-Load Class from the
Fund's inception on 12/27/94 through 6/30/02. Performance figures for these
classes will vary after 6/30/02, based on differences in their expense
structures.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. The Citigroup 1-Year Treasury Benchmark Index is an unmanaged index
consisting of a single one-year U.S. Treasury bond whose return is tracked
until its maturity. Results assume reinvestment of all income and capital
gains. An investment cannot be made directly into an index.
INFORMATION ABOUT ECLIPSE ULTRA SHORT DURATION FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
154
ECLIPSE FUNDS
ULTRA SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
LONG-TERM INVESTMENTS (56.1%)+
ASSET-BACKED SECURITIES (1.5%)
PRINCIPAL
AMOUNT VALUE
------------------------
CREDIT CARD RECEIVABLES (1.5%)
Discover Card Master Trust I
Series 1999-5 Class A
1.30%, due 12/18/06 (a)......... $ 415,000 $ 415,157
First USA Credit Card Master
Trust
Series 1997-2 Class A
1.25%, due 1/17/07 (a).......... 150,000 149,996
MBNA Master Credit Card Trust
Series 1997-C Class A
1.23%, due 8/15/06 (a).......... 275,000 275,010
Series 1997-J Class A
1.24%, due 2/15/07 (a).......... 400,000 400,141
-----------
Total Asset-Backed Securities
(Cost $1,240,924)............... 1,240,304
-----------
CORPORATE BONDS (44.0%)
AEROSPACE & DEFENSE (1.9%)
Honeywell International, Inc.
6.875%, due 10/3/05............. 1,000,000 1,092,592
United Technologies Corp.
6.625%, due 11/15/04............ 500,000 525,505
-----------
1,618,097
-----------
AUTO COMPONENTS (0.6%)
Johnson Controls, Inc.
5.00%, due 11/15/06............. 500,000 532,164
-----------
BEVERAGES (1.3%)
Coca-Cola Co. (The)
4.00%, due 6/1/05............... 630,000 651,688
PepsiCo, Inc.
4.50%, due 9/15/04.............. 390,000 400,425
-----------
1,052,113
-----------
CAPITAL MARKETS (3.8%)
Bank of New York Co., Inc. (The)
8.50%, due 12/15/04............. 100,000 107,618
Bear Stearns Cos., Inc. (The)
3.00%, due 3/30/06.............. 750,000 759,564
J.P. Morgan Chase & Co.
5.625%, due 8/15/06............. 300,000 322,855
Lehman Brothers Holdings, Inc.
7.75%, due 1/15/05.............. 500,000 538,627
Merrill Lynch & Co., Inc.
6.55%, due 8/1/04............... 750,000 778,264
Morgan Stanley
6.50%, due 11/1/05.............. 500,000 541,671
UBS Paine Webber Group, Inc.
6.50%, due 11/1/05.............. 140,000 153,331
-----------
3,201,930
-----------
CHEMICALS (1.8%)
E.I. du Pont de Nemours & Co.
6.75%, due 10/15/04............. 1,130,000 1,185,743
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
------------------------
<Caption>
ASSET-BACKED SECURITIES (1.5%)
CHEMICALS (CONTINUED)
Pharmacia Corp., Series D
6.11%, due 2/3/05............... $ 300,000 $ 315,406
-----------
1,501,149
-----------
COMMERCIAL BANKS (3.6%)
Bank of America Corp., Series I
1.45%, due 10/22/04 (a)......... 750,000 752,032
Bank One Corp.
7.625%, due 8/1/05.............. 500,000 547,120
FleetBoston Financial Corp.
7.25%, due 9/15/05.............. 500,000 546,280
U.S. Bancorp, Series N
2.75%, due 3/30/06.............. 400,000 403,094
Wachovia Corp.
6.70%, due 6/21/04.............. 250,000 258,492
Wells Fargo & Co.
4.80%, due 7/29/05.............. 250,000 262,154
6.625%, due 7/15/04............. 250,000 258,929
-----------
3,028,101
-----------
COMPUTERS & PERIPHERALS (1.4%)
Hewlett-Packard Co.
5.75%, due 12/15/06............. 300,000 324,047
International Business Machines
Corp.
4.125%, due 6/30/05............. 240,000 249,567
4.875%, due 10/1/06............. 350,000 371,318
5.10%, due 11/10/03............. 265,000 265,151
-----------
1,210,083
-----------
CONSUMER FINANCE (3.3%)
American Express Credit Corp.
3.00%, due 5/16/08.............. 500,000 487,716
American General Finance Corp.
5.875%, due 12/15/05............ 100,000 107,174
Caterpillar Financial Services
Corp.
4.875%, due 6/15/07............. 500,000 531,801
Household Finance Corp.
6.00%, due 5/1/04............... 103,000 105,371
John Deere Capital Corp.
Series D
5.52%, due 4/30/04.............. 500,000 510,167
Toyota Motor Credit Corp.
2.80%, due 1/18/06.............. 500,000 507,758
5.625%, due 11/13/03............ 525,000 525,527
-----------
2,775,514
-----------
DIVERSIFIED FINANCIAL SERVICES (1.8%)
Citigroup, Inc.
3.50%, due 2/1/08............... 500,000 499,619
Heller Financial, Inc.
6.00%, due 3/19/04.............. 495,000 503,735
Textron Financial Corp.
7.125%, due 12/9/04............. 500,000 526,011
-----------
1,529,365
-----------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
155
ULTRA SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%)
Ameritech Capital Funding
6.30%, due 10/15/04............. $ 250,000 $ 260,437
BellSouth Telecommunications,
Inc.
6.50%, due 6/15/05.............. 200,000 214,068
Southern New England Telephone,
Series C
6.125%, due 12/15/03............ 295,000 296,672
-----------
771,177
-----------
ELECTRIC UTILITIES (0.8%)
Alabama Power Co., Series N
4.875%, due 9/1/04.............. 500,000 514,253
Cincinnati Gas & Electric Co.
6.45%, due 2/15/04.............. 150,000 152,119
-----------
666,372
-----------
ELECTRICAL EQUIPMENT (0.5%)
Emerson Electric Co.
6.30%, due 11/1/05.............. 356,000 384,603
-----------
FOOD & STAPLES RETAILING (1.5%)
Sysco Corp.
6.50%, due 6/15/05.............. 405,000 434,133
Wal-Mart Stores, Inc.
5.45%, due 8/1/06............... 750,000 807,649
-----------
1,241,782
-----------
FOOD PRODUCTS (1.0%)
ConAgra Foods, Inc.
7.40%, due 9/15/04.............. 300,000 313,829
Sara Lee Corp., Series C
6.00%, due 12/5/05.............. 250,000 268,518
Unilever Capital Corp.
6.75%, due 11/1/03.............. 250,000 250,000
-----------
832,347
-----------
HEALTH CARE EQUIPMENT & SUPPLIES (0.6%)
SmithKline Beecham Corp. Series A
7.375%, due 4/15/05............. 500,000 539,174
-----------
HEALTH CARE PROVIDERS & SERVICES (1.1%)
Cardinal Health, Inc.
4.45%, due 6/30/05.............. 300,000 311,707
6.50%, due 2/15/04.............. 300,000 304,208
UnitedHealth Group, Inc.
6.60%, due 12/1/03.............. 300,000 301,139
-----------
917,054
-----------
HOTELS, RESTAURANTS & LEISURE (0.9%)
McDonald's Corp., Series G
4.15%, due 2/15/05.............. 500,000 513,515
5.15%, due 7/1/04............... 250,000 255,525
-----------
769,040
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
------------------------
HOUSEHOLD DURABLES (0.4%)
Stanley Works (The)
5.75%, due 3/1/04............... $ 300,000 $ 304,281
-----------
HOUSEHOLD PRODUCTS (2.8%)
Colgate-Palmolive Co.
Series C
5.27%, due 12/1/03.............. 1,000,000 1,003,013
Series D
5.34%, due 3/27/06.............. 500,000 535,597
Procter & Gamble Co. (The)
6.60%, due 12/15/04............. 750,000 792,318
-----------
2,330,928
-----------
INDUSTRIAL CONGLOMERATES (0.9%)
3M Co., Series C
4.25%, due 9/1/04............... 750,000 767,959
-----------
INSURANCE (0.6%)
Marsh & McLennan Cos., Inc.
5.375%, due 3/15/07............. 250,000 270,394
Progressive Corp. (The)
6.60%, due 1/15/04.............. 200,000 202,038
-----------
472,432
-----------
IT SERVICES (0.6%)
First Data Corp.
4.70%, due 11/1/06.............. 475,000 501,665
-----------
MACHINERY (0.8%)
Eaton Corp.
6.95%, due 11/15/04............. 600,000 631,622
-----------
MEDIA (0.8%)
Gannett Co., Inc.
4.95%, due 4/1/05............... 625,000 651,437
-----------
MULTILINE RETAIL (1.1%)
Target Corp.
5.50%, due 4/1/07............... 500,000 541,345
7.25%, due 9/1/04............... 360,000 374,198
-----------
915,543
-----------
OIL & GAS (2.1%)
Amoco Co.
6.25%, due 10/15/04............. 500,000 521,412
BP Canada Energy Co.
6.75%, due 2/15/05 (b).......... 200,000 211,949
ChevronTexaco Capital Co.
3.50%, due 9/17/07.............. 500,000 506,504
ChevronTexaco Corp.
6.625%, due 10/1/04............. 250,000 261,659
Texaco Capital, Inc.
6.00%, due 6/15/05.............. 250,000 266,957
-----------
1,768,481
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
156
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
------------------------
PERSONAL PRODUCTS (0.8%)
Gillette Co. (The)
3.50%, due 10/15/07............. $ 409,000 $ 409,411
5.75%, due 10/15/05............. 280,000 298,619
-----------
708,030
-----------
PHARMACEUTICALS (3.5%)
Bristol-Myers Squibb Co.
4.75%, due 10/1/06.............. 444,000 468,228
Lilly (Eli) & Co.
5.50%, due 7/15/06.............. 350,000 376,261
Merck & Co., Inc., Series E
4.125%, due 1/18/05............. 1,000,000 1,031,118
Pfizer, Inc.
3.625%, due 11/1/04............. 1,000,000 1,021,672
-----------
2,897,279
-----------
SPECIALTY RETAIL (0.9%)
Home Depot, Inc. (The)
5.375%, due 4/1/06.............. 205,000 219,498
6.50%, due 9/15/04.............. 525,000 548,010
-----------
767,508
-----------
THRIFTS & MORTGAGE FINANCE (1.7%)
Countrywide Home Loans, Inc.
Series J
5.25%, due 6/15/04.............. 350,000 357,907
General Electric Capital Corp.
Series A
4.25%, due 1/28/05.............. 800,000 825,480
5.375%, due 4/23/04............. 200,000 203,842
-----------
1,387,229
-----------
TRANSPORTATION INFRASTRUCTURE (0.2%)
International Lease Finance Corp.
Series M
5.50%, due 6/7/04............... 200,000 204,557
-----------
Total Corporate Bonds
(Cost $36,858,304).................... 36,879,016
-----------
FEDERAL AGENCIES (10.6%)
FEDERAL FARM CREDIT BANK (3.6%)
2.125%, due 8/15/05............. 1,000,000 1,002,192
2.25%, due 9/1/06............... 500,000 494,677
3.875%, due 12/15/04............ 1,000,000 1,026,271
4.00%, due 12/24/07............. 500,000 502,065
-----------
3,025,205
-----------
FEDERAL HOME LOAN BANK (3.6%)
2.30%, due 3/10/06.............. 500,000 499,788
2.50%, due 3/15/06.............. 750,000 753,459
3.50%, due 4/22/08.............. 500,000 499,812
3.625%, due 10/15/04............ 500,000 510,651
4.125%, due 11/15/04............ 500,000 513,829
4.625%, due 8/13/04............. 250,000 256,422
-----------
3,033,961
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (1.0%)
2.00%, due 11/25/05 (a)......... $ 500,000 $ 500,202
4.00%, due 8/2/06............... 350,000 356,844
-----------
857,046
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(COLLATERALIZED MORTGAGE OBLIGATION) (0.4%)
Series 1364 Class K
5.00%, due 9/15/07.............. 287,424 294,823
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITY) (0.2%)
5.00%, due 1/1/07............... 164,571 169,229
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.9%)
3.15%, due 5/28/08.............. 330,000 325,900
3.25%, due 11/15/07............. 400,000 400,814
-----------
726,714
-----------
STUDENT LOAN MORTGAGE ASSOCIATION (0.9%)
1.41%, due 8/27/04 (a).......... 800,000 802,427
-----------
Total Federal Agencies (Cost
$8,887,669)..................... 8,909,405
-----------
Total Long-Term Investments (Cost
$46,986,897).................... 47,028,725
-----------
SHORT-TERM INVESTMENTS (42.8%)
CORPORATE BONDS (6.5%)
BUILDING PRODUCTS (0.9%)
Masco Corp.
6.00%, due 5/3/04............... 750,000 765,536
-----------
COMMERCIAL SERVICES & SUPPLIES (1.3%)
Pitney Bowes, Inc.
5.50%, due 4/15/04.............. 1,033,000 1,052,062
-----------
CONSUMER FINANCE (0.6%)
Aristar, Inc.
5.85%, due 1/27/04.............. 500,000 505,239
-----------
INSURANCE (0.8%)
Marsh & McLennan Cos., Inc.
6.625%, due 6/15/04............. 630,000 649,793
-----------
MACHINERY (0.3%)
Deere & Co.
6.55%, due 7/15/04.............. 250,000 258,267
-----------
MEDIA (0.2%)
Tribune Co., Series D
6.50%, due 7/30/04.............. 149,000 154,540
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
157
ULTRA SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
------------------------
OIL & GAS (0.4%)
Conoco, Inc.
5.90%, due 4/15/04.............. $ 350,000 $ 357,140
-----------
PHARMACEUTICALS (1.1%)
Abbott Laboratories
5.125%, due 7/1/04.............. 595,000 609,557
Wyeth
5.875%, due 3/15/04............. 350,000 355,807
-----------
965,364
-----------
TRANSPORTATION INFRASTRUCTURE (0.9%)
International Lease Finance Corp.
6.75%, due 11/3/03.............. 750,000 750,000
-----------
Total Corporate Bonds (Cost
$5,445,917)..................... 5,457,941
-----------
U.S. GOVERNMENT (36.3%)
UNITED STATES TREASURY BILLS (36.3%)
0.85%, due 12/11/03............. 1,000,000 999,052
0.86%, due 12/18/03............. 1,000,000 998,874
0.87%, due 12/4/03.............. 1,000,000 999,200
0.91%, due 1/2/04-1/8/04........ 3,250,000 3,244,691
0.92%, due 12/26/03............. 2,000,000 1,997,180
0.93%, due 1/15/04-1/22/04...... 3,500,000 3,493,003
0.96%, due 3/25/04.............. 1,000,000 996,079
0.98%, due 11/28/03-4/8/04...... 6,500,000 6,478,280
1.00%, due 2/5/04-4/22/04....... 3,000,000 2,989,596
1.01%, due 1/29/04.............. 2,000,000 1,995,394
1.02%, due 2/12/04-3/4/04....... 3,500,000 3,489,720
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
------------------------
UNITED STATES TREASURY BILLS (CONTINUED)
1.06%, due 11/13/03-11/20/03.... $1,750,000 $ 1,749,172
1.09%, due 11/6/03.............. 1,000,000 999,848
-----------
Total U.S. Government (Cost
$30,428,439).................... 30,430,089
-----------
Total Short-Term Investments
(Cost $35,874,356).............. 35,888,030
-----------
Total Investments (Cost
$82,861,253) (c)................ 98.9% 82,916,755(d)
Cash and Other Assets,
Less Liabilities................ 1.1 897,849
---------- ----------
Net Assets....................... 100.0% $83,814,604
========== ===========
</Table>
- ------------
(a) Floating rate. Rate shown is the rate in effect at October 31, 2003.
(b) Yankee bond--dollar-denominated bond issued in the United States by foreign
banks and corporations.
(c) The cost stated also represents the aggregate cost for federal income tax
purposes
(d) At October 31, 2003 net unrealized appreciation was $55,502, based on cost
for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $295,309 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $239,807.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
158
ECLIPSE FUNDS
ULTRA SHORT DURATION FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
<Caption>
ASSETS:
Investment in securities, at value (identified
cost $82,861,253)............................... $82,916,755
Cash.............................................. 554,423
Receivables:
Investment securities sold...................... 2,006,940
Interest........................................ 635,615
Fund shares sold................................ 6,825
Other assets...................................... 7,726
-----------
Total assets................................ 86,128,284
-----------
LIABILITIES:
Payables:
Investment securities purchased................. 1,995,730
Fund shares redeemed............................ 257,521
Professional.................................... 20,571
Manager......................................... 7,139
Transfer agent.................................. 6,309
Shareholder communication....................... 6,188
Custodian....................................... 2,159
Trustees........................................ 1,313
NYLIFE Distributors............................. 50
Accrued expenses.................................. 16,700
-----------
Total liabilities........................... 2,313,680
-----------
Net assets........................................ $83,814,604
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share)
1 billion shares authorized
No-Load Class................................... $ 83,498
Service Class................................... 216
Additional paid-in capital........................ 84,003,631
Accumulated undistributed net investment income... 128,602
Accumulated net realized loss on investments...... (456,845)
Net unrealized appreciation on investments........ 55,502
-----------
Net assets........................................ $83,814,604
===========
No-Load Class
Net assets applicable to outstanding shares....... $83,598,143
===========
Shares of capital stock outstanding............... 8,349,772
===========
Net asset value per share outstanding............. $ 10.01
===========
Service Class
Net assets applicable to outstanding shares....... $ 216,461
===========
Shares of capital stock outstanding............... 21,616
===========
Net asset value per share outstanding............. $ 10.01
===========
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Interest......................................... $1,642,203
----------
Expenses:
Manager.......................................... 288,792
Registration..................................... 40,821
Professional..................................... 39,459
Transfer agent................................... 37,297
Trustees......................................... 19,086
Portfolio pricing................................ 18,569
Custodian........................................ 10,998
Shareholder communication........................ 9,468
Service--Service Class........................... 317
Miscellaneous.................................... 18,533
----------
Total expenses before
reimbursement............................... 483,340
Expense reimbursement from Manager............... (338,626)
----------
Net expenses................................. 144,714
----------
Net investment income.............................. 1,497,489
----------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments................... (32,544)
Net change in unrealized appreciation on
investments...................................... (428,214)
----------
Net realized and unrealized loss on investments.... (460,758)
----------
Net increase in net assets resulting from
operations....................................... $1,036,731
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
159
ULTRA SHORT DURATION FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 1,497,489 $ 1,375,685
Net realized loss on investments........................ (32,544) (149,986)
Net change in unrealized appreciation on investments.... (428,214) 339,112
------------ ------------
Net increase in net assets resulting from operations.... 1,036,731 1,564,811
------------ ------------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (1,738,554) (1,047,125)
Service Class......................................... (2,487) (1)
------------ ------------
Total dividends to shareholders..................... (1,741,041) (1,047,126)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 35,133,847 66,525,199
Service Class......................................... 250,750 13,675
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 416,011 210,606
Service Class......................................... 2,487 1
------------ ------------
35,803,095 66,749,481
Cost of shares redeemed:
No-Load Class......................................... (13,409,935) (24,150,139)
Service Class......................................... (47,968) (998)
------------ ------------
Increase in net assets derived from capital share
transactions......................................... 22,345,192 42,598,344
------------ ------------
Net increase in net assets............................ 21,640,882 43,116,029
NET ASSETS:
Beginning of year......................................... 62,173,722 19,057,693
------------ ------------
End of year............................................... $ 83,814,604 $ 62,173,722
============ ============
Accumulated undistributed net investment income at end of
year.................................................... $ 128,602 $ 370,088
============ ============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
160
(THIS PAGE INTENTIONALLY LEFT BLANK)
161
ULTRA SHORT DURATION FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
-----------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31 JANUARY 1, 2001 YEAR ENDED DECEMBER 31
--------------------- THROUGH -----------------------------------------
2003 2002 OCTOBER 31, 2001* 2000 1999 1998
-------- ------- ----------------- ------- ------- -------
Net asset value at beginning of
period......................... $ 10.11 $ 10.04 $ 9.81 $ 9.81 $ 10.03 $ 10.00
-------- ------- ------- ------- ------- -------
Net investment income........... 0.21(c) 0.24 0.43(b) 0.63 0.63 0.59
Net realized and unrealized gain
(loss) on investments.......... (0.06) 0.03 0.19(b) -- (0.22) 0.03
-------- ------- ------- ------- ------- -------
Total from investment
operations..................... 0.15 0.27 0.62 0.63 0.41 0.62
-------- ------- ------- ------- ------- -------
Less dividends:
From net investment income...... (0.25) (0.20) (0.39) (0.63) (0.63) (0.59)
-------- ------- ------- ------- ------- -------
Net asset value at end of
period......................... $ 10.01 $ 10.11 $ 10.04 $ 9.81 $ 9.81 $ 10.03
======== ======= ======= ======= ======= =======
Total investment return......... 1.49% 2.74% 6.42%(a) 6.59% 4.12% 6.27%
Ratios (to average net assets)/
Supplemental Data:
Net investment income.......... 2.08% 2.70% 5.38%+(b) 6.30% 6.11% 6.20%
Net expenses................... 0.20% 0.20% 0.20%+ 0.21%# 0.12%# 0.05%#
Expenses (before
reimbursement)............... 0.67% 0.69% 1.32%+ 0.72% 0.65% 0.90%
Portfolio turnover rate......... 56% 22% 49% 45% 44% 36%
Net assets at end of period (in
000's)......................... $ 83,598 $62,161 $19,058 $ 6,864 $ 7,693 $ 8,721
</Table>
- ------------
<Table>
* The Fund changed its fiscal year end from December 31 to
October 31.
** Commencement of Operations.
+ Annualized.
# Includes custodian fees paid indirectly which amounted to
0.01%, 0.00% and less than 0.01% of average net assets,
respectively.
(a) Total return is not annualized.
(b) As required, effective January 1, 2001, the Fund has adopted
the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium on debt
securities. The effect of this change for the ten months
ended October 31, 2001 is shown below. Per share ratios and
supplemental data for periods prior to January 1, 2001 have
not been restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
NO-LOAD
CLASS
-------
Decrease net investment income.............................. ($0.01)
Increase net realized and unrealized gains and losses....... 0.01
Decrease ratio of net investment income..................... (0.36%)
</Table>
<Table>
(c) Per share data based on average shares outstanding during
the period.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
162
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
------------------------------------
JULY 1, 2002**
YEAR ENDED THROUGH
OCTOBER 31, 2003 OCTOBER 31, 2002
----------------- ----------------
$ 10.11 $ 10.04
-------- --------
0.18(c) 0.05
(0.05) 0.06
-------- --------
0.13 0.11
-------- --------
(0.23) (0.04)
-------- --------
$ 10.01 $ 10.11
======== ========
1.25% 1.13%(a)
1.83% 2.45%+
0.45% 0.45%+
0.92% 0.94%+
56% 22%
$ 216 $ 13
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
163
Eclipse Asset Manager Fund
- --------------------------------------------------------------------------------
The U.S. equity market staged a dramatic comeback during the 12 months ended
October 31, 2003, with the S&P 500(R) Index(1) posting an impressive 20.80%
gain. Such gains, however, were not achieved on a consistent basis, since global
turbulence resulted in significant equity-market volatility.
The equity market was strong in November 2002, but it reversed course in
December when the economy remained sluggish. High unemployment continued and
consumer confidence faltered. Investors tried to respark a sustainable
equity-market rally at the start of 2003, but with a possible conflict in Iraq
looming on the horizon, stocks declined from mid-January through early March. As
coalition troops assembled in Kuwait in mid-March, the stock market finally
began to recover, but with stocks tracking news from the front, market dynamics
were largely disconnected from economic fundamentals.
A successful and reasonably quick end to major combat operations in Iraq
confirmed that high energy prices were unlikely to derail an economic recovery.
The U.S. equity markets responded favorably, and as the year progressed,
corporate profitability also improved. Still, economic indicators remained
mixed--with strong consumer confidence and a robust housing market but continued
weakness in manufacturing and employment. The equity market advanced in July and
August but lost ground in September. Optimism returned in October with the
release of positive economic data, including job growth, a drop in initial
unemployment claims, and evidence of expansion in the manufacturing sector.
According to preliminary estimates from the Bureau of Economic Analysis real
gross domestic product grew at a seasonally adjusted annual rate of 8.2% in the
third quarter, faster than any period since the first quarter of 1984.
International equity markets were subject to many of the same dynamics. During
the first half of the year, foreign markets declined on the possibility--and
then the eventuality--of a war in Iraq. Equity markets in Asia, particularly
Singapore and Hong Kong, suffered dramatically from the SARS outbreak early in
the year. With tourism virtually absent, the steep downturn in retail sales
crippled many Asian industries and economies.
In Europe, equity markets were weighed down by threats to the European Union.
Germany and Italy each reported unexpectedly contracting economies early in
2003. As the year progressed, however, international equity markets gained
ground, reinforcing investors' hopes that global economic growth was indeed
under way. European stocks lagged in the third quarter, but German stocks were
particularly strong in October as many German companies saw earnings rise,
despite weak local demand and a rising euro.
Japan's equity market recovered dramatically in the third calendar quarter,
supported by a stronger economy, increased industrial production, and heightened
exports that were driven primarily by unprecedented growth in China.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy. These risks
are likely to be greater in emerging markets than in developed markets. The Fund
may invest in derivatives, which may increase the volatility of the Fund's net
asset value and may result in a loss to the Fund.
1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. and has been
licensed for use. Standard & Poor's does not sponsor, endorse, sell, or
promote the Fund or represent the advisability of investing in the Fund. The
S&P 500 is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock-market performance. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
164
U.S. bond markets generally benefited from stock-market volatility. Demand for
fixed-income securities increased, pushing bond prices up dramatically and
driving yields down to levels not seen in more than 50 years. As an asset class,
fixed-income securities were viewed as a relatively safe haven during the
difficult first calendar quarter. From June through October, however, bond
yields rose as bond prices fell. The disparity of stocks and bonds was evident
from October's year-to-date returns of 21.21% for the S&P 500 Index and 2.87%
for the Citigroup BIG Bond Index.(2)
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse Asset Manager Fund returned
13.17% for No-Load Class shares and 12.92% for Service Class shares. Over the
same period, the Fund's L Class shares returned 12.12%, excluding all sales
charges. All share classes underperformed the 16.63% return of the average
Lipper(3) flexible portfolio fund over the same period. All share classes also
underperformed the 14.12% return of the Fund's composite benchmark(4) and the
20.80% return of the S&P 500 Index,(5) for the 12 months ended October 31, 2003.
The Fund outperformed the 4.99% return of the Citigroup BIG Bond Index over the
same period.
As of October 31, 2003, No-Load Class shares of Eclipse Asset Manager Fund were
rated four stars overall by Morningstar(6) out of 631 moderate allocation funds.
The Fund's No-Load Class shares were rated three stars out of 631 moderate
allocation funds for the three-year period then ended, three stars out of 499
moderate allocation funds for the five-year period then ended, and four stars
out of 154 moderate allocation funds for the 10-year period ended October 31,
2003.
ALLOCATION DECISIONS AND SECTOR SPECIFICS
During the 12-month reporting period, the Fund had an average allocation of
55.4% to equities, 34.6% to bonds, and 10% to cash investments. Within the
equity portion of the Fund's portfolio, as of October 31, 2003, U.S. equities
were underweighted relative to the Fund's composite benchmark at 46.0%, and
international equities were overweighted at 9.4%.
Among the asset classes in which the Fund is able to invest, the one with the
greatest positive return for the reporting period was real estate investment
trusts (REITs), which returned 33.9%.(7) The Fund's allocation to REITs,
although limited by the Fund's allocation parameters, had a positive impact on
the Fund's performance.
The Fund's decision to underweight U.S. large-cap stocks and to overweight
small-and mid-cap stocks also strengthened Fund performance, since the small-
and mid-cap companies in the respective indices in which the Fund invests
generally outpaced their large-cap counterparts during the reporting period.
The international equity markets in which the Fund could invest (through
investments in foreign futures) had mixed results. The best performers were Hong
Kong (+29.1%), Canada (+26.8%), and Japan (+22.4%), all in
- --------------------------------------------------------------------------------
2. The Citigroup Broad Investment Grade (BIG) Bond Index--the Citigroup BIG Bond
Index--is an unmanaged index that is considered representative of the
U.S. investment-grade bond market. Results assume reinvestment of all income
and capital gains. An investment cannot be made directly into an index.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. The Asset Manager Composite Index is an unmanaged index that is comprised of
the S&P 500(R) Index, the Citigroup BIG Bond Index, and the Citigroup
1-Month T-Bill Index weighted 60%/30%/10%, respectively. Results assume
reinvestment of all income and capital gains. For the 12-months ended
October 31, 2003, the S&P 500 Index returned 20.80%, the Citigroup BIG Bond
Index returned 4.99%, and the Citigroup 1-Month T-Bill Index returned
1.10%. An investment cannot be made directly into an index or composite.
5. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
6. For each fund with at least a three-year history, Morningstar calculates a
Morningstar Rating(TM) based on a Morningstar Risk-Adjusted Return measure
that accounts for variation in a fund's monthly performance (including the
effects of sales charges, loads, and redemption fees), placing more emphasis
on downward variations and rewarding consistent performance. The top 10% of
funds in each category receive five stars, the next 22.5% receive four stars,
the middle 35% receive three stars, the next 22.5% receive two stars, and the
bottom 10% receive one star. The Overall Morningstar Rating(TM) for a fund is
derived from a weighted average of the performance figures associated with
its three-, five-, and 10-year (if applicable) Morningstar Rating(TM)
metrics.
7. Returns for individual sectors and markets reflect major unmanaged indices
considered representative of the specific sectors or markets. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
165
local currency terms. Consequently, the Fund's overweighted positions in Hong
Kong and Canada benefited performance, while the lack of exposure to Japan
detracted from the Fund's performance. The worst-performing international
markets in which the Fund invested were Italy (+9.2%), Great Britain (+10.1%),
and France (+10.6%), also in local currency terms. The Fund's overweighted
positions in Italy and France therefore detracted from the Fund's relative per-
formance.
The Fund's underweighted position in large-cap equities versus fixed-income
investments also detracted from the Fund's returns during the reporting period,
since the Citigroup BIG Bond Index returned a relatively low 4.99% for the 12
months. The negative contribution of this asset-allocation decision was
mitigated somewhat by the Fund's actively managed large-cap U.S. equity assets.
Beginning on January 1, 2003, the Fund invested its large-cap stock allocation
in an actively managed enhanced index fund strategy, which slightly outperformed
the S&P 500 Index for the 12 months ended October 31, 2003. As a result, the
Fund's large-cap equity allocation made a modest positive contribution to the
overall return of the Fund for the fiscal year.
LOOKING AHEAD
The economic outlook for the U.S. and the world is still open to wide
interpretation. Although major combat operations in Iraq have ended, much work
still needs to be done to restore peaceful conditions in Iraq and elsewhere. The
United States still faces a major budget deficit. On the other hand, evidence
shows that business expenditures--viewed by many as key to a sustainable
economic turnaround--have risen by an impressive 11% in the third calendar
quarter, with investment in equipment and software increasing by 15%. Going
forward, this rise in business investment may also strengthen labor markets,
stimulate demand, and improve corporate profitability. Positive economic data is
emerging, and the Federal Reserve has suggested that its "accommodative policy"
could be maintained for a "considerable period." Internationally, most feel that
fundamental reforms in Japan's financial system are still needed to sustain the
Japanese economy's recent growth rates. Europe continues to contend with weak
growth, and some find it difficult to envision Europe as competitive in the
global markets while the euro continues to make exports increasingly expensive.
Whatever the global economy or the markets may bring, the Fund will continue to
seek to maximize total return, consistent with certain percentage constraints on
amounts allocated to each asset class, from a combination of common stocks,
fixed-income securities, and money-market instruments.
ELIAS BELESSAKOS, PH.D.
JEFFERSON C. BOYCE
Portfolio Managers
New York Life Investment Management LLC
166
$10,000 INVESTED IN
ECLIPSE ASSET MANAGER FUND VERSUS
ASSET MANAGER COMPOSITE INDEX,
S&P 500 INDEX, AND
CITIGROUP BIG BOND INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE ASSET MANAGER ASSET MANAGER CITIGROUP BIG BOND
FUND COMPOSITE INDEX INDEX S&P 500 INDEX
--------------------- --------------- ------------------ -------------
10/31/93 $ 10,000 $ 10,000 $ 10,000 $ 10,000
94 9,980 10,161 9,640 10,387
95 11,900 12,291 11,153 13,133
96 13,988 14,317 11,810 16,297
97 17,637 17,490 12,853 21,531
98 21,146 20,455 14,061 26,266
99 23,711 23,649 14,130 33,008
00 26,361 25,224 15,158 35,018
01 23,167 22,351 17,372 26,297
02 21,134 20,777 18,372 22,325
10/31/03 23,916 23,711 19,288 26,968
</Table>
$10,000 INVESTED IN
ECLIPSE ASSET MANAGER FUND VERSUS
ASSET MANAGER COMPOSITE INDEX,
S&P 500 INDEX, AND
CITIGROUP BIG BOND INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE ASSET MANAGER ASSET MANAGER CITIGROUP BIG BOND
FUND COMPOSITE INDEX INDEX S&P 500 INDEX
--------------------- --------------- ------------------ -------------
10/31/93 $ 10,000 $ 10,000 $ 10,000 $ 10,000
94 9,963 10,161 9,640 10,387
95 11,861 12,291 11,153 13,133
96 13,909 14,317 11,810 16,297
97 17,493 17,490 12,853 21,531
98 20,928 20,455 14,061 26,266
99 23,383 23,649 14,130 33,008
00 25,947 25,224 15,158 35,018
01 22,741 22,351 17,372 26,297
02 20,703 20,777 18,372 22,325
10/31/03 23,377 23,711 19,288 26,968
</Table>
$10,000 INVESTED IN
ECLIPSE ASSET MANAGER FUND VERSUS
ASSET MANAGER COMPOSITE INDEX,
S&P 500 INDEX, AND
CITIGROUP BIG BOND INDEX
CLASS L SHARES
[L CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE ASSET MANAGER ASSET MANAGER CITIGROUP BIG BOND
FUND COMPOSITE INDEX INDEX S&P 500 INDEX
--------------------- --------------- ------------------ -------------
YEAR END
10/31/93 $ 9,900 $ 10,000 $ 10,000 $ 10,000
94 9,783 10,161 9,640 10,387
95 11,556 12,291 11,153 13,133
96 13,473 14,317 11,810 16,297
97 16,821 17,490 12,853 21,531
98 19,987 20,455 14,061 26,266
99 22,221 23,649 14,130 33,008
00 24,473 25,224 15,158 35,018
01 21,316 22,351 17,372 26,297
02 19,259 20,777 18,372 22,325
10/31/03 21,592 23,711 19,288 26,968
</Table>
Source: Lipper Inc. and Bloomberg, 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93 AND, FOR CLASS L
SHARES, REFLECT THE DEDUCTION OF ALL SALES CHARGES THAT WOULD HAVE APPLIED FOR
THE PERIOD OF INVESTMENT.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- --------------------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
Eclipse Asset Manager Fund No-Load Class 13.17% 2.49% 9.11%
Eclipse Asset Manager Fund Service Class(2) 12.92 2.24 8.86
Eclipse Asset Manager Fund Class L (without sales
charges)(3) 12.12 1.56 8.11
Eclipse Asset Manager Fund Class L (with sales charges)(3) 10.00 1.35 8.00
Average Lipper flexible portfolio fund(4) 16.63 2.68 7.60
Citigroup Broad Investment Grade Bond Index(5) 4.99 6.53 6.79
Asset Manager Composite Index(6) 14.12 3.00 9.02
S&P 500 Index(7) 20.80 0.53 10.43
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
1994 -0.86
Year ended December 31 1995 26.81
1996 16.16
1997 26.69
1998 21.31
10 months ended October 31 1999 5.58
2000 11.18
2001 -12.12
2002 -8.78
2003 13.17
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares. Class L shares are subject to a 1% sales
charge and a
167
contingent deferred sales charge (CDSC) of 1% if redeemed within one year
of purchase. Performance figures for Class L shares reflect the .75%
distribution fee and .25% service fee.
2. Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the No-Load Class from the
Fund's inception on 1/2/91 through 12/31/94. Performance figures for these
classes will vary after 12/31/94, based on differences in their expense
structures.
3. Performance figures for Class L shares, first offered to the public on
12/30/02, include the historical performance of the No-Load Class shares
from the Fund's inception on 1/2/91 up to 12/30/02.
4. Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
5. The Citigroup Broad Investment Grade (BIG) Bond Index--the Citigroup BIG
Bond Index--is an unmanaged index that is considered representative of the
U.S. investment-grade bond market. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
6. The Asset Manager Composite Index is an unmanaged index that is comprised
of the S&P 500(R) Index, the Citigroup BIG Bond Index, and the Citigroup
1-Month T-Bill Index weighted 60%/30%/10%, respectively. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index or composite.
7. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. and has been
licensed for use. Standard & Poor's does not sponsor, endorse, sell, or
promote the Fund or represent the advisability of investing in the Fund.
The S&P 500 is an unmanaged index and is widely regarded as the standard
for measuring large-cap U.S. stock-market performance. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
INFORMATION ABOUT ECLIPSE ASSET MANAGER FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
168
ECLIPSE FUNDS
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
LONG-TERM BONDS (30.2%)+
ASSET-BACKED SECURITY (0.4%)
PRINCIPAL
AMOUNT VALUE
-------------------------
CONSUMER FINANCE (0.4%)
Citibank Credit Card Issuance
Trust Series 2003-A2 Class A2
2.70%, due 1/15/06............ $ 1,000,000 $ 1,007,464
------------
Total Asset-Backed Security
(Cost $1,011,184)............. 1,007,464
------------
CORPORATE BONDS (6.8%)
AEROSPACE & DEFENSE (0.3%)
Honeywell International, Inc.
7.50%, due 3/1/10............. 100,000 117,482
Lockheed Martin Corp.
8.20%, due 12/1/09............ 100,000 120,810
Northrop Grumman Corp.
7.125%, due 2/15/11........... 100,000 114,910
Raytheon Co.
6.75%, due 8/15/07............ 100,000 109,570
United Technologies Corp.
6.35%, due 3/1/11............. 250,000 276,997
------------
739,769
------------
AUTOMOBILES (0.2%)
DaimlerChrysler North America
Holdings, Inc.
7.30%, due 1/15/12............ 250,000 270,261
General Motors Corp.
8.375%, due 7/15/33........... 250,000 263,765
------------
534,026
------------
BEVERAGES (0.2%)
Anheuser-Busch Cos., Inc.
5.75%, due 4/1/10............. 100,000 109,369
Coca-Cola Enterprises, Inc.
7.00%, due 5/15/98............ 250,000 273,369
Pepsi Bottling Holdings, Inc.
5.625%, due 2/17/09 (c)....... 100,000 108,545
------------
491,283
------------
BUILDING PRODUCTS (0.0%) (b)
Masco Corp.
6.75%, due 3/15/06............ 100,000 109,472
------------
CAPITAL MARKETS (0.6%)
Bear Stearns Cos., Inc. (The)
5.70%, due 1/15/07............ 250,000 270,414
Credit Suisse FirstBoston USA,
Inc.
4.625%, due 1/15/08........... 250,000 259,800
Goldman Sachs Group, Inc. (The)
5.70%, due 9/1/12............. 150,000 156,799
6.125%, due 2/15/33........... 100,000 99,841
J.P. Morgan Chase & Co.
5.75%, due 1/2/13............. 250,000 262,402
Lehman Brothers Holdings, Inc.
7.00%, due 2/1/08............. 250,000 281,746
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
-------------------------
CAPITAL MARKETS (CONTINUED)
Merrill Lynch & Co., Inc.
Series B
4.00%, due 11/15/07........... $ 250,000 $ 255,557
Morgan Stanley
6.60%, due 4/1/12............. 250,000 278,369
------------
1,864,928
------------
CHEMICALS (0.1%)
Dow Chemical Co. (The)
5.75%, due 11/15/09........... 100,000 105,447
E.I. du Pont de Nemours & Co.
6.875%, due 10/15/09.......... 100,000 115,475
------------
220,922
------------
COMMERCIAL BANKS (0.6%)
Bank of America Corp.
3.875%, due 1/15/08........... 500,000 507,189
Bank One Corp., Series A
6.00%, due 2/17/09............ 250,000 273,182
FleetBoston Financial Corp.
3.85%, due 2/15/08............ 250,000 253,055
U.S. Bancorp, Series N
3.95%, due 8/23/07............ 250,000 255,311
Wachovia Bank National
Association
4.85%, due 7/30/07............ 250,000 267,548
Wells Fargo Bank NA, San
Francisco
6.45%, due 2/1/11............. 250,000 279,409
------------
1,835,694
------------
COMMERCIAL SERVICES & SUPPLIES (0.1%)
Cendant Corp.
6.25%, due 1/15/08............ 100,000 108,534
Waste Management, Inc.
7.375%, due 8/1/10............ 100,000 115,644
------------
224,178
------------
COMMUNICATIONS EQUIPMENT (0.0%) (b)
Motorola, Inc.
5.80%, due 10/15/08........... 100,000 105,716
------------
COMPUTERS & PERIPHERALS (0.1%)
International Business Machines
Corp.
4.25%, due 9/15/09............ 250,000 254,403
------------
CONSUMER FINANCE (0.8%)
American General Finance
Corp., Series H
4.50%, due 11/15/07........... 250,000 259,109
Ford Motor Credit Co.
6.50%, due 1/25/07............ 500,000 515,894
7.375%, due 2/1/11............ 250,000 254,539
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
169
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
CONSUMER FINANCE (CONTINUED)
General Motors Acceptance Corp.
6.125%, due 8/28/07........... $ 350,000 $ 368,706
Household Finance Corp.
5.75%, due 1/30/07............ 500,000 539,834
John Deere Capital Corp.
3.90%, due 1/15/08............ 250,000 253,113
MBNA Corp.
6.125%, due 3/1/13............ 100,000 104,205
------------
2,295,400
------------
DIVERSIFIED FINANCIAL SERVICES (0.6%)
Boeing Capital Corp.
5.75%, due 2/15/07............ 250,000 267,857
CIT Group, Inc.
5.50%, due 11/30/07........... 250,000 267,291
Citigroup, Inc.
3.50%, due 2/1/08............. 500,000 499,619
5.875%, due 2/22/33........... 250,000 245,349
National Rural Utilities
Cooperative Finance Corp.
5.75%, due 8/28/09............ 250,000 269,242
Sears Roebuck Acceptance Corp.
6.25%, due 5/1/09............. 100,000 111,093
UFJ Finance Aruba AEC
6.75%, due 7/15/13............ 100,000 104,695
Verizon Global Funding Corp.
7.75%, due 12/1/30............ 100,000 115,749
------------
1,880,895
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%)
Ameritech Capital Funding
6.55%, due 1/15/28............ 100,000 104,345
AT&T Corp.
7.30%, due 11/15/11........... 100,000 113,328
BellSouth Corp.
6.00%, due 10/15/11........... 250,000 269,939
Citizens Communications Co.
9.25%, due 5/15/11............ 100,000 124,813
GTE South, Inc., Series C
6.00%, due 2/15/08............ 300,000 325,168
SBC Communications, Inc.
5.75%, due 5/2/06............. 150,000 161,411
Sprint Capital Corp.
6.125%, due 11/15/08.......... 150,000 157,982
8.75%, due 3/15/32............ 100,000 113,741
------------
1,370,727
------------
ELECTRIC UTILITIES (0.3%)
American Electric Power Co.,
Inc.
5.375%, due 3/15/10........... 100,000 103,518
Dominion Resources, Inc.
4.125%, due 2/15/08........... 100,000 101,675
DTE Energy Co., Series A
6.65%, due 4/15/09............ 100,000 111,522
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
ELECTRIC UTILITIES (CONTINUED)
FirstEnergy Corp., Series A
5.50%, due 11/15/06........... $ 100,000 $ 105,086
Northern States Power Co.
6.875%, due 8/1/09............ 100,000 112,662
Peco Energy Co.
3.50%, due 5/1/08............. 100,000 99,261
Progress Energy, Inc.
7.10%, due 3/1/11............. 100,000 112,794
------------
746,518
------------
FOOD & STAPLES RETAILING (0.2%)
Albertson's, Inc.
7.50%, due 2/15/11............ 100,000 114,112
Kroger Co. (The)
8.05%, due 2/1/10............. 100,000 118,046
Safeway, Inc.
6.50%, due 3/1/11............. 100,000 109,104
Wal-Mart Stores, Inc.
4.55%, due 5/1/13............. 150,000 147,335
7.55%, due 2/15/30............ 100,000 122,816
------------
611,413
------------
FOOD PRODUCTS (0.2%)
Archer-Daniels-Midland Co.
8.125%, due 6/1/12............ 100,000 122,348
ConAgra Foods, Inc.
6.75%, due 9/15/11............ 100,000 112,553
General Mills, Inc.
3.875%, due 11/30/07.......... 100,000 100,766
Kellogg Co., Series B
6.00%, due 4/1/06............. 100,000 107,697
Kraft Foods, Inc.
5.25%, due 6/1/07............. 100,000 106,117
Unilever Capital Corp.
7.125%, due 11/1/10........... 100,000 115,780
------------
665,261
------------
GAS UTILITIES (0.0%) (b)
Kinder Morgan Energy Partners,
L.P.
7.125%, due 3/15/12........... 100,000 115,106
------------
HEALTH CARE PROVIDERS & SERVICES (0.0%) (b)
HCA, Inc.
8.75%, due 9/1/10............. 100,000 115,102
------------
HOUSEHOLD PRODUCTS (0.0%) (b)
Procter & Gamble Co. (The)
4.75%, due 6/15/07............ 100,000 105,661
------------
INSURANCE (0.0%) (b)
Allstate Corp. (The)
7.20%, due 12/1/09............ 100,000 116,240
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
170
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------------------------
MACHINERY (0.0%) (b)
Caterpillar, Inc.
7.25%, due 9/15/09............ $ 100,000 $ 116,597
------------
MEDIA (0.5%)
Clear Channel Communications,
Inc.
4.25%, due 5/15/09............ 100,000 99,338
Comcast Cable Communications,
Inc.
6.75%, due 1/30/11............ 250,000 276,729
Cox Enterprises, Inc.
7.875%, due 9/15/10 (c)....... 100,000 115,785
Liberty Media Corp.
7.875%, due 7/15/09........... 100,000 113,007
News America Holdings
9.25%, due 2/1/13............. 100,000 128,776
Time Warner, Inc.
7.625%, due 4/15/31........... 250,000 279,354
Viacom, Inc.
7.70%, due 7/30/10............ 250,000 296,561
Walt Disney Co. (The), Series B
6.75%, due 3/30/06............ 100,000 109,118
------------
1,418,668
------------
METALS & MINING (0.1%)
Alcoa, Inc.
4.25%, due 8/15/07............ 250,000 259,859
------------
MULTILINE RETAIL (0.1%)
Federated Department Stores,
Inc.
7.00%, due 2/15/28............ 100,000 108,371
Target Corp.
7.00%, due 7/15/31............ 100,000 112,910
------------
221,281
------------
MULTI-UTILITIES & UNREGULATED POWER (0.1%)
Constellation Energy Group,
Inc.
6.35%, due 4/1/07............. 100,000 109,003
Consumers Energy Co.
5.375%, due 4/15/13 (c)....... 100,000 99,243
Duke Energy Corp.
6.25%, due 1/15/12............ 100,000 107,262
PSE&G Power LLC
7.75%, due 4/15/11............ 100,000 116,909
------------
432,417
------------
OIL & GAS (0.2%)
Amerada Hess Corp.
7.30%, due 8/15/31............ 100,000 100,459
Anadarko Petroleum Corp.
7.20%, due 3/15/29............ 100,000 111,860
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
OIL & GAS (CONTINUED)
Devon Financing Corp. ULC
6.875%, due 9/30/11........... $ 100,000 $ 112,847
Marathon Oil Corp.
6.85%, due 3/1/08............. 100,000 111,918
Occidental Petroleum Corp.
5.875%, due 1/15/07........... 100,000 108,777
Pemex Project Funding Master
Trust
7.375%, due 12/15/14.......... 100,000 105,000
Valero Energy Corp.
6.125%, due 4/15/07........... 100,000 109,396
------------
760,257
------------
PAPER & FOREST PRODUCTS (0.1%)
International Paper Co.
6.75%, due 9/1/11............. 100,000 110,448
Weyerhaeuser Co.
6.75%, due 3/15/12............ 100,000 108,253
------------
218,701
------------
PHARMACEUTICALS (0.2%)
Bristol-Myers Squibb Co.
4.00%, due 8/15/08 (c)........ 250,000 253,246
Pharmacia Corp.
6.60%, due 12/1/28............ 100,000 111,208
Wyeth
5.25%, due 3/15/13............ 100,000 101,471
------------
465,925
------------
REAL ESTATE (0.1%)
EOP Operating LP
7.00%, due 7/15/11............ 100,000 112,576
Simon Property Group, L.P.
6.375%, due 11/15/07.......... 100,000 109,578
------------
222,154
------------
ROAD & RAIL (0.2%)
Burlington Northern Santa Fe
Corp.
7.125%, due 12/15/10.......... 100,000 116,499
CSX Corp.
7.45%, due 5/1/07............. 100,000 114,459
Norfolk Southern Corp.
6.75%, due 2/15/11............ 100,000 112,360
Union Pacific Corp.
6.65%, due 1/15/11............ 100,000 111,631
------------
454,949
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
171
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-- -------------------------
THRIFTS & MORTGAGE FINANCE (0.4%)
Countrywide Home Loans, Inc.
5.625%, due 5/15/07........... $ 100,000 $ 107,144
General Electric Capital Corp.
6.00%, due 6/15/12............ 500,000 538,055
6.75%, due 3/15/32............ 250,000 277,216
Washington Mutual, Inc.
7.50%, due 8/15/06............ 250,000 280,354
------------
1,202,769
------------
TOBACCO (0.0%) (b)
Altria Group, Inc.
7.20%, due 2/1/07............. 100,000 106,108
------------
WIRELESS TELECOMMUNICATION SERVICES (0.1%)
AT&T Wireless Services, Inc.
7.875%, due 3/1/11............ 100,000 114,268
------------
Total Corporate Bonds (Cost
$20,244,023).................. 20,396,667
------------
<Caption>
FOREIGN BONDS (1.2%)
BEVERAGES (0.0%) (B)
Diageo Capital PLC
3.375%, due 3/20/08........... 100,000 99,181
------------
CAPITAL MARKETS (0.1%)
Kreditanstalt fuer Wiederaufbau
3.375%, due 1/23/08........... 250,000 250,928
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%)
British Telecommunications PLC
8.875%, due 12/15/30.......... 100,000 128,760
Deutsche Telekom International
Finance BV
8.50%, due 6/15/10............ 250,000 300,877
France Telecom S.A.
8.45%, due 3/1/06............. 150,000 167,987
9.75%, due 3/1/31............. 100,000 131,982
Koninklijke (Royal) KPN N.V.
8.00%, due 10/1/10............ 100,000 119,184
------------
848,790
------------
FOREIGN GOVERNMENTS (0.6%)
Malaysian Government
8.75%, due 6/1/09............. 100,000 122,440
Province of Ontario
5.50%, due 10/1/08............ 250,000 270,044
Province of Quebec
7.50%, due 9/15/29............ 250,000 307,519
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
---------------------------
FOREIGN GOVERNMENTS (CONTINUED)
Republic of Italy, Series DTC
5.625%, due 6/15/12........... $ 500,000 $ 540,840
United Mexican States
6.375%, due 1/16/13........... 500,000 514,500
------------
1,755,343
------------
INSURANCE (0.1%)
Axa
8.60%, due 12/15/30........... 100,000 123,229
------------
OIL & GAS (0.1%)
Conoco Funding Co.
6.35%, due 10/15/11........... 250,000 278,368
------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%) (b)
Vodafone Group PLC
7.75%, due 2/15/10............ 100,000 118,271
------------
Total Foreign Bonds (Cost
$3,460,824)................... 3,474,110
------------
<Caption>
U.S. GOVERNMENT & FEDERAL AGENCIES (21.7%)
FEDERAL HOME LOAN BANK (2.3%)
1.625%, due 4/15/05........... 4,000,000 3,999,080
2.75%, due 3/14/08............ 2,000,000 1,952,456
2.875%, due 9/15/06........... 1,000,000 1,005,466
------------
6,957,002
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (1.4%)
2.75%, due 8/15/06-3/15/08.... 3,000,000 2,987,442
6.25%, due 7/15/32............ 1,000,000 1,078,645
------------
4,066,087
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (3.1%)
4.50%, due 8/1/33............. 499,950 476,967
5.00%, due 11/15/33 TBA (e)... 500,000 492,031
5.50%, due 12/1/17-1/1/18..... 1,199,951 1,236,130
5.50%, due 11/13/33 TBA (e)... 1,500,000 1,512,188
6.00%, due 5/1/16-1/1/28...... 1,152,931 1,197,194
6.50%, due 11/1/16-6/1/32..... 2,485,449 2,589,917
7.00%, due 3/1/26-7/1/32...... 728,240 766,438
7.50%, due 7/1/11-5/1/32...... 680,492 726,470
7.75%, due 10/1/07............ 80,110 85,144
8.00%, due 10/1/11-11/1/11.... 103,002 111,282
------------
9,193,761
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.3%)
4.375%, due 3/15/13........... 1,000,000 975,317
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
172
ECLIPSE FUNDS
<Table>
<Caption>
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE
PASS-THROUGH SECURITIES) (6.1%)
4.50%, due 11/18/18 TBA (e)... $ 2,500,000 $ 2,496,875
5.00%, due 10/1/17-3/1/18..... 2,480,473 2,520,413
5.00%, due 11/15/33 TBA (e)... 3,000,000 2,959,844
5.50%, due 6/1/33-7/1/33...... 3,936,026 3,974,028
6.00%, due 4/1/19-4/1/33...... 3,630,338 3,731,064
6.50%, due 7/1/29-8/1/32...... 1,252,848 1,302,343
7.00%, due 5/1/26-7/1/30...... 487,324 513,435
7.50%, due 7/1/11-10/1/15..... 449,643 480,406
8.00%, due 7/1/09-11/1/11..... 165,937 177,876
8.50%, due 6/1/26-10/1/26..... 47,729 51,892
9.00%, due 6/1/26-9/1/26...... 66,214 73,203
------------
18,281,379
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (1.6%)
5.50%, due 8/15/33............ 998,867 1,012,612
6.00%, due 1/15/33............ 732,730 757,091
6.50%, due 4/15/29-7/15/32.... 1,126,999 1,180,425
7.00%, due 7/15/11-6/15/28.... 935,950 995,169
7.50%, due 3/15/26-10/15/30... 466,797 499,257
8.00%, due 8/15/26............ 107,483 116,467
8.50%, due 11/15/26........... 80,159 87,354
9.00%, due 11/15/26........... 9,168 10,084
------------
4,658,459
------------
UNITED STATES TREASURY BONDS (1.8%)
5.25%, due 2/15/29............ 2,650,000 2,647,204
5.375%, due 2/15/31........... 2,000,000 2,066,796
11.875%, due 11/15/03......... 700,000 702,407
------------
5,416,407
------------
UNITED STATES TREASURY NOTES (5.1%)
4.25%, due 8/15/13............ 3,000,000 2,987,814
4.625%, due 5/15/06 (f)....... 3,000,000 3,183,867
4.75%, due 11/15/08........... 2,000,000 2,137,188
6.00%, due 8/15/04............ 4,400,000 4,564,142
7.00%, due 7/15/06............ 2,100,000 2,360,696
------------
15,233,707
------------
Total U.S. Government & Federal
Agencies (Cost $63,415,322)... 64,782,119(g)
------------
YANKEE BONDS (0.1%) (d)
INDUSTRIAL CONGLOMERATES (0.0%) (b)
Tyco International Group S.A.
6.125%, due 1/15/09........... 100,000 105,125
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
OIL & GAS (0.1%)
Burlington Resources, Inc.
6.50%, due 12/1/11............ $ 100,000 $ 111,262
Norsk Hydro ASA
7.25%, due 9/23/27............ 100,000 114,700
------------
225,962
------------
Total Yankee Bonds (Cost
$319,882)..................... 331,087
------------
Total Long-Term Bonds (Cost
$88,451,235).................. 89,991,447
------------
COMMON STOCKS (62.0%)
SHARES
-----------
AEROSPACE & DEFENSE (0.4%)
AAR Corp. ..................... 582 6,344
Alliant Techsystems, Inc.
(a)........................... 705 36,491
Armor Holdings, Inc. (a)....... 506 9,867
Boeing Co. (The)............... 8,090 311,384
Cubic Corp. ................... 488 13,859
Curtiss-Wright Corp. .......... 189 13,986
DRS Technologies, Inc. (a)..... 410 9,865
EDO Corp. ..................... 360 8,028
Engineered Support Systems,
Inc. ......................... 295 19,945
Esterline Technologies Corp.
(a)........................... 383 8,483
GenCorp, Inc. ................. 799 7,567
General Dynamics Corp. ........ 297 24,859
Goodrich Corp. ................ 3,937 108,740
Honeywell International,
Inc. ......................... 3,449 105,574
InVision Technologies, Inc.
(a)........................... 316 8,586
Kaman Corp. Class A............ 413 5,039
Lockheed Martin Corp. ......... 1,948 90,309
Mercury Computer Systems, Inc.
(a)........................... 386 8,303
Precision Castparts Corp. ..... 2,362 97,149
Rockwell Collins, Inc. ........ 1,912 52,484
Teledyne Technologies, Inc.
(a)........................... 588 9,696
Triumph Group, Inc. (a)........ 290 9,468
United Technologies Corp. ..... 1,335 113,061
------------
1,079,087
------------
AIR FREIGHT & LOGISTICS (1.0%)
ABX Air, Inc. (a).............. 3,594 12,579
EGL, Inc. (a).................. 1,653 26,961
Expeditors International of
Washington, Inc. ............. 170 6,382
FedEx Corp. ................... 4,745 359,481
Forward Air Corp. (a).......... 389 11,312
J.B. Hunt Transport Services,
Inc. ......................... 7,832 198,776
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
173
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
AIR FREIGHT & LOGISTICS (CONTINUED)
Ryder System, Inc. ............ 3,046 $ 91,380
United Parcel Service, Inc.
Class B....................... 32,410 2,350,373
------------
3,057,244
------------
AIRLINES (0.1%)
Alaska Air Group, Inc. (a)..... 2,326 66,966
Atlantic Coast Airlines
Holdings, Inc. (a)............ 828 9,166
Delta Air Lines, Inc. ......... 1,922 25,024
Frontier Airlines, Inc. (a).... 716 11,506
JetBlue Airways Corp. (a)...... 2,523 145,527
Mesa Air Group, Inc. (a)....... 576 6,203
SkyWest, Inc. ................. 1,057 19,544
------------
283,936
------------
AUTO COMPONENTS (0.3%)
ArvinMeritor, Inc. ............ 1,902 31,935
Bandag, Inc. .................. 4 146
Bandag, Inc. Class A........... 1,969 63,599
BorgWarner, Inc. .............. 433 34,463
Cooper Tire & Rubber Co. ...... 1,970 38,730
Dana Corp. .................... 2,819 45,893
Delphi Corp. .................. 24,267 215,976
Goodyear Tire & Rubber Co.
(The)......................... 865 5,934
Intermet Corp. ................ 618 2,719
Johnson Controls, Inc. ........ 735 79,035
Lear Corp. (a)................. 3,910 227,132
Midas, Inc. ................... 361 4,845
Modine Manufacturing Co. ...... 1,575 40,304
Standard Motor Products,
Inc. ......................... 303 3,378
Tower Automotive, Inc. (a)..... 1,029 4,095
Visteon Corp. ................. 1,799 11,622
------------
809,806
------------
AUTOMOBILES (0.5%)
Coachmen Industries, Inc. ..... 382 5,955
Ford Motor Co. ................ 76,255 924,973
General Motors Corp. .......... 11,924 508,797
Monaco Coach Corp. (a)......... 531 12,792
Thor Industries, Inc. ......... 522 33,471
Winnebago Industries, Inc. .... 332 19,356
------------
1,505,344
------------
BEVERAGES (0.8%)
Adolph Coors Co. Class B....... 252 14,125
Anheuser-Busch Cos., Inc. ..... 36 1,773
Coca-Cola Co. (The)............ 18,159 842,577
Coca-Cola Enterprises, Inc. ... 15,660 315,705
Constellation Brands, Inc.
Class A (a)................... 1,637 51,353
Pepsi Bottling Group, Inc.
(The)......................... 5,376 119,831
PepsiAmericas, Inc. ........... 10,614 158,998
PepsiCo, Inc. ................. 15,851 757,995
------------
2,262,357
------------
</Table>
<Table>
<Caption>
SHARES VALUE
--------------------------
BIOTECHNOLOGY (0.8%)
Amgen, Inc. (a)................ 22,255 $ 1,374,469
ArQule, Inc. (a)............... 563 2,928
Cephalon, Inc. (a)............. 1,015 47,664
Charles River Laboratories
International, Inc. (a)....... 772 24,889
Chiron Corp. (a)............... 1,533 83,748
Enzo Biochem, Inc. (a)......... 546 10,101
Genzyme Corp. (a).............. 3,144 144,310
Gilead Sciences, Inc. (a)...... 7,835 427,634
IDEC Pharmaceuticals Corp.
(a)........................... 254 8,923
IDEXX Laboratories, Inc. (a)... 628 29,704
MedImmune, Inc. (a)............ 4,965 132,367
Millennium Pharmaceuticals,
Inc. (a)...................... 10,677 169,978
Regeneron Pharmaceuticals, Inc.
(a)........................... 952 13,176
Savient Pharmaceuticals, Inc.
(a)........................... 1,087 6,576
Techne Corp. (a)............... 745 25,948
------------
2,502,415
------------
BUILDING PRODUCTS (0.1%)
Apogee Enterprises, Inc. ...... 502 5,246
ElkCorp........................ 357 9,068
Griffon Corp. (a).............. 540 10,449
Lennox International, Inc. .... 1,071 17,714
Masco Corp. ................... 3,283 90,282
Simpson Manufacturing Co., Inc.
(a)........................... 450 20,138
Universal Forest Products,
Inc. ......................... 324 9,590
York International Corp. ...... 4,531 180,062
------------
342,549
------------
CAPITAL MARKETS (2.2%)
A.G. Edwards, Inc. ............ 5,779 234,050
Bank of New York Co., Inc.
(The)......................... 7,761 242,066
E*TRADE Financial Corp. (a).... 43,403 447,051
J.P. Morgan Chase & Co. ....... 49,577 1,779,814
Jefferies Group, Inc. ......... 1,002 31,062
LaBranche & Co., Inc. ......... 3,536 37,446
Legg Mason, Inc. .............. 4,222 351,482
Lehman Brothers Holdings,
Inc. ......................... 10,561 760,392
Merrill Lynch & Co., Inc. ..... 33,936 2,009,011
Morgan Stanley................. 4,097 224,802
Neuberger Berman, Inc. ........ 1,052 45,604
Raymond James Financial,
Inc. ......................... 889 36,262
S&P 500 Index-SPDR Trust,
Series 1 (h).................. 379 39,920
S&P MidCap 400 Index-MidCap
SPDR Trust, Series 1 (h)...... 2,200 221,100
SEI Investments Co. ........... 2,269 66,073
SWS Group, Inc. ............... 310 6,727
T.Rowe Price Group, Inc. ...... 654 26,912
------------
6,559,774
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
174
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
CHEMICALS (0.6%)
Airgas, Inc. .................. 3,630 $ 69,514
Arch Chemicals, Inc. .......... 410 9,094
Cabot Corp. ................... 1,049 29,267
Cambrex Corp. ................. 470 11,111
Crompton Corp. ................ 11,812 63,312
Cytec Industries, Inc. (a)..... 2,205 76,977
Dow Chemical Co. (The)......... 13,481 508,099
Eastman Chemical Co. .......... 809 26,260
Ecolab, Inc. .................. 1,364 36,678
Engelhard Corp. ............... 2,767 79,081
Ferro Corp. ................... 1,409 28,927
FMC Corp. (a).................. 496 13,893
Georgia Gulf Corp. ............ 593 15,952
H.B. Fuller Co. ............... 519 12,861
International Flavors &
Fragrances, Inc. ............. 1,410 46,671
MacDermid, Inc. ............... 566 16,912
Material Sciences Corp. (a).... 339 3,180
Minerals Technologies, Inc. ... 561 30,743
Monsanto Co. .................. 12,747 319,312
OM Group, Inc. ................ 518 9,272
Omnova Solutions, Inc. ........ 963 3,380
Penford Corp. ................. 205 2,868
PolyOne Corp. ................. 1,676 8,095
Quaker Chemical Corp. ......... 225 5,971
Rohm & Haas Co. ............... 1,189 46,728
Schulman (A.), Inc. ........... 539 10,236
Scotts Co. (The) Class A (a)... 578 33,379
Sigma-Aldrich Corp. ........... 1,977 103,694
Wellman, Inc. ................. 769 6,344
------------
1,627,811
------------
COMMERCIAL BANKS (2.0%)
Bank of America Corp. ......... 16,604 1,257,421
Bank of Hawaii Corp. .......... 1,387 54,648
Banknorth Group, Inc. ......... 4,778 149,647
BB&T Corp. .................... 27 1,044
Boston Private Financial
Holdings, Inc. ............... 415 10,570
Cathay Bancorp, Inc. .......... 19 954
Charter One Financial, Inc. ... 1,189 38,000
Chittenden Corp. .............. 667 21,464
Commerce Bancorp, Inc. ........ 2,932 141,733
Community First Bankshares,
Inc. ......................... 693 18,815
Compass Bancshares, Inc. ...... 2,589 97,812
East West Bancorp, Inc. ....... 440 21,600
First BanCorp.................. 731 24,342
First Midwest Bancorp, Inc. ... 850 26,265
First Republic Bank............ 266 9,523
First Tennessee National
Corp. ........................ 1,316 59,694
FirstMerit Corp. .............. 6,981 179,970
FleetBoston Financial Corp. ... 5,540 223,761
Greater Bay Bancorp............ 719 19,384
Hudson United Bancorp.......... 818 29,685
Huntington Bancshares, Inc. ... 1,249 27,053
Irwin Financial Corp. ......... 511 14,323
</Table>
<Table>
<Caption>
SHARES VALUE
--------------------------
COMMERCIAL BANKS (CONTINUED)
M&T Bank Corp. ................ 1,263 $ 118,596
Marshall & Ilsley Corp. ....... 1,426 51,079
National City Corp. ........... 6,488 211,898
National Commerce Financial
Corp. ........................ 6,250 171,688
PNC Financial Services Group,
Inc. (The).................... 6,163 330,152
Provident Bankshares Corp. .... 450 13,964
Provident Financial Group,
Inc. ......................... 3,238 95,359
Regions Financial Corp. ....... 1,170 42,998
Republic Bancorp, Inc. ........ 1,049 15,231
Riggs National Corp. .......... 522 8,618
Silicon Valley Bancshares
(a)........................... 1,860 65,286
South Financial Group, Inc.
(The)......................... 859 22,446
SouthTrust Corp. .............. 2,270 72,300
Southwest Bancorporation of
Texas, Inc. .................. 623 22,372
Sterling Bancshares, Inc. ..... 807 9,281
Susquehanna Bancshares, Inc. .. 727 18,211
TCF Financial Corp. ........... 1,485 77,487
TrustCo Bank Corp. of NY....... 1,357 17,709
U.S. Bancorp................... 8,777 238,910
UCBH Holdings, Inc. ........... 821 29,318
United Bankshares, Inc. ....... 756 22,869
Wachovia Corp. ................ 19,513 895,061
Wells Fargo & Co. ............. 15,892 895,037
Whitney Holding Corp. ......... 737 27,984
Wintrust Financial Corp. ...... 341 14,779
Zions Bancorp. ................ 1,244 76,245
------------
5,992,586
------------
COMMERCIAL SERVICES & SUPPLIES (1.6%)
ABM Industries, Inc. .......... 899 13,988
Administaff, Inc. (a).......... 487 5,640
Allied Waste Industries, Inc.
(a)........................... 9,770 110,206
Angelica Corp. ................ 210 4,326
Apollo Group, Inc. Class A
(a)........................... 3,652 232,012
Arbitron, Inc. (a)............. 551 21,765
Banta Corp. ................... 2,303 88,113
Bowne & Co., Inc. ............. 616 9,240
Brady Corp. Class A............ 424 14,967
Brink's Co. (The).............. 3,307 66,305
Career Education Corp. (a)..... 8,935 478,469
CDI Corp. ..................... 355 11,626
Cendant Corp. (a).............. 29,965 612,185
Central Parking Corp. ......... 660 7,966
Coinstar, Inc. (a)............. 393 5,757
Consolidated Graphics, Inc.
(a)........................... 245 6,774
Corinthian Colleges, Inc.
(a)........................... 1,501 92,942
CPI Corp. ..................... 194 3,824
D&B Corp. (a).................. 801 37,287
DeVry, Inc. (a)................ 3,945 95,745
Donnelley (R.R.) & Sons Co. ... 5,282 137,332
Education Management Corp.
(a)........................... 2,360 149,105
G&K Services, Inc. Class A..... 379 12,507
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
175
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
COMMERCIAL SERVICES & SUPPLIES (CONTINUED)
H&R Block, Inc. ............... 6,788 $ 319,647
Heidrick & Struggles
International, Inc. (a)....... 334 6,597
Herman Miller, Inc. ........... 4,461 102,469
HON INDUSTRIES, Inc. .......... 4,101 168,141
Imagistics International, Inc.
(a)........................... 310 9,966
Insurance Auto Auctions, Inc.
(a)........................... 279 3,652
Ionics, Inc. (a)............... 322 9,174
ITT Educational Services, Inc.
(a)........................... 820 40,836
John H. Harland Co. ........... 512 13,942
Kelly Services, Inc. Class A... 927 22,712
Kroll, Inc. (a)................ 762 17,724
Labor Ready, Inc. (a).......... 735 7,989
MemberWorks, Inc. (a).......... 220 6,354
Mobile Mini, Inc. (a).......... 261 5,505
Monster Worldwide, Inc. (a).... 2,290 58,326
NCO Group, Inc. (a)............ 473 11,257
New England Business Service,
Inc. (a)...................... 237 6,897
On Assignment, Inc. (a)........ 637 3,331
Pitney Bowes, Inc. ............ 1,890 77,679
Pre-Paid Legal Services, Inc.
(a)........................... 317 8,610
PRG-Schultz International,
Inc. ......................... 1,125 5,344
Republic Services, Inc. ....... 11,819 274,792
Rollins, Inc. ................. 3,180 64,618
Roto-Rooter, Inc. ............. 180 6,354
School Specialty, Inc. (a)..... 343 9,563
Sotheby's Holdings, Inc. Class
A (a)......................... 331 3,525
SOURCECORP, Inc. (a)........... 295 6,912
Spherion Corp. (a)............. 1,089 9,474
Standard Register Co. (The).... 517 9,099
Sylvan Learning Systems, Inc.
(a)........................... 2,094 59,260
Tetra Tech, Inc. (a)........... 984 22,120
United Rentals, Inc. (a)....... 8,951 155,926
United Stationers, Inc. ....... 606 22,549
Valassis Communications,
Inc. ......................... 1,471 38,099
Viad Corp. .................... 11,174 279,126
Volt Information Sciences, Inc.
(a)........................... 278 4,865
Waste Connections, Inc. (a).... 519 17,999
Waste Management, Inc. ........ 28,791 746,263
Watson Wyatt & Co. Holdings
(a)........................... 602 14,478
------------
4,869,255
------------
COMMUNICATIONS EQUIPMENT (1.6%)
Adaptec, Inc. (a).............. 1,977 16,824
ADC Telecommunications, Inc.
(a)........................... 5,480 13,974
ADTRAN, Inc. .................. 3,524 239,738
Advanced Fibre Communications,
Inc. (a)...................... 4,933 118,737
Andrew Corp. (a)............... 1,177 15,395
</Table>
<Table>
<Caption>
SHARES VALUE
--------------------------
COMMUNICATIONS EQUIPMENT (CONTINUED)
Audiovox Corp. Class A (a)..... 419 $ 5,028
Avaya, Inc. (a)................ 16,147 208,942
Avocent Corp. (a).............. 3,264 123,379
Bel Fuse, Inc. Class B......... 201 5,276
Black Box Corp. ............... 332 14,296
Brooktrout, Inc. .............. 295 4,242
Cable Design Technologies
Corp. ........................ 818 7,886
C-COR.net Corp. ............... 665 6,703
CIENA Corp. ................... 2,348 15,051
Cisco Systems, Inc. ........... 95,168 1,996,625
CommScope, Inc. (a)............ 6,365 98,594
Comverse Technology, Inc. ..... 4,677 84,373
Concerto Software, Inc. ....... 283 3,379
Corning, Inc. ................. 51,185 562,011
Digi International, Inc. ...... 512 4,711
Harmonic, Inc. ................ 1,105 8,575
Harris Corp. .................. 2,796 104,067
Inter-Tel, Inc. ............... 457 11,512
JDS Uniphase Corp. ............ 8,877 31,513
Lucent Technologies, Inc. ..... 17,251 55,203
McDATA Corp. Class A........... 5,234 54,067
Motorola, Inc. ................ 10,369 140,293
Network Equipment Technology,
Inc. ......................... 546 5,706
PC-Tel, Inc. (a)............... 480 4,862
Plantronics, Inc. ............. 1,987 55,259
Polycom, Inc. ................. 7,204 144,296
Powerwave Technologies, Inc. .. 3,185 20,734
QUALCOMM, Inc. ................ 7,869 373,778
Scientific-Atlanta, Inc. ...... 6,540 193,584
SCM Microsystems, Inc. (a)..... 379 3,153
Symmertricom, Inc. (a)......... 770 5,544
Tellabs, Inc. (a).............. 536 4,036
Tollgrade Communications, Inc.
(a)........................... 327 5,124
ViaSat, Inc. (a)............... 479 9,403
------------
4,775,873
------------
COMPUTERS & PERIPHERALS (2.2%)
Avid Technology, Inc. (a)...... 545 28,198
Dell, Inc. (a)................. 20,482 739,810
Diebold, Inc. ................. 2,825 161,195
EMC Corp. (a).................. 15,112 209,160
Gateway, Inc. (a).............. 2,281 11,496
Hewlett-Packard Co. ........... 54,413 1,213,954
Hutchinson Technology, Inc.
(a)........................... 473 15,850
Imation Corp. ................. 200 6,810
International Business Machines
Corp. ........................ 27,583 2,468,127
Lexmark International, Inc.
(a)........................... 5,504 405,150
NCR Corp. (a).................. 1,308 47,010
Network Appliance, Inc. (a).... 9,694 239,248
Pinnacle Systems, Inc. (a)..... 1,154 8,020
Quantum Corp. (a).............. 4,234 13,168
Rainbow Technologies, Inc.
(a)........................... 632 7,780
SanDisk Corp. (a).............. 6,859 552,835
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
176
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
COMPUTERS & PERIPHERALS (CONTINUED)
SBS Technologies, Inc. (a)..... 352 $ 4,829
Storage Technology Corp. (a)... 10,629 256,159
Sun Microsystems, Inc. (a)..... 19,341 76,590
------------
6,465,389
------------
CONSTRUCTION & ENGINEERING (0.1%)
Butler Manufacturing Co. ...... 152 2,698
Dycom Industries, Inc. (a)..... 1,587 34,295
EMCOR Group, Inc. (a).......... 274 10,327
Granite Construction, Inc.
(a)........................... 753 15,052
Insituform Technologies, Inc.
Class A (a)................... 483 6,907
Quanta Services, Inc. (a)...... 11,025 90,184
Shaw Group, Inc. (The) (a)..... 690 9,419
URS Corp. (a).................. 595 13,025
------------
181,907
------------
CONSTRUCTION MATERIALS (0.0%) (b)
Florida Rock Industries,
Inc. ......................... 524 29,999
Texas Industries, Inc. ........ 385 10,461
Vulcan Materials Co. .......... 797 35,315
------------
75,775
------------
CONSUMER FINANCE (0.6%)
American Express Co. .......... 580 27,219
AmeriCredit Corp. (a).......... 13,754 184,304
Capital One Financial Corp. ... 10,961 666,429
Cash America International,
Inc. ......................... 472 9,010
iDine Rewards Network, Inc. ... 415 4,532
MBNA Corp. .................... 32,999 816,725
Providian Financial Corp. ..... 12,661 140,664
------------
1,848,883
------------
CONTAINERS & PACKAGING (0.1%)
Aptargroup, Inc. .............. 661 23,664
Ball Corp. .................... 589 33,102
Caraustar Industries, Inc. .... 510 4,901
Chesapeake Corp. .............. 281 6,856
Longview Fibre Co. ............ 1,233 13,255
Myers Industries, Inc. ........ 550 6,710
Rock-Tenn Co. ................. 637 10,256
Sealed Air Corp. (a)........... 2,346 124,877
------------
223,621
------------
DISTRIBUTORS (0.0%) (b)
Advanced Marketing Services,
Inc. ......................... 460 5,267
------------
DIVERSIFIED FINANCIAL SERVICES (1.9%)
Citigroup, Inc. (f)............ 98,884 4,687,101
Financial Federal Corp. ....... 338 11,340
GATX Corp. .................... 5,343 120,164
Moody's Corp. ................. 6,508 376,358
Principal Financial Group,
Inc. ......................... 14,071 441,126
------------
5,636,089
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (2.2%)
ALLTEL Corp. .................. 1,552 73,363
AT&T Corp. .................... 8,511 158,219
</Table>
<Table>
<Caption>
SHARES VALUE
--------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
BellSouth Corp. ............... 60,880 $ 1,601,753
CenturyTel, Inc. .............. 3,581 128,021
Cincinnati Bell, Inc. ......... 23,090 117,990
Citizens Communications Co. ... 13,524 168,374
Commonwealth Telephone
Enterprises, Inc. ............ 434 17,690
General Communication, Inc.
Class A (a)................... 1,023 10,087
Qwest Communications
International, Inc. .......... 69,713 246,087
SBC Communications, Inc. ...... 64,119 1,537,573
Sprint Corp. (FON Group)....... 42,744 683,904
Verizon Communications, Inc. .. 51,189 1,719,950
------------
6,463,011
------------
ELECTRIC UTILITIES (1.5%)
Alliant Energy Corp. .......... 3,477 83,657
American Electric Power Co.,
Inc. ......................... 16,239 457,777
CenterPoint Energy, Inc. ...... 4,586 44,989
Central Vermont Public Service
Corp. ........................ 283 6,509
CH Energy Group, Inc. ......... 288 12,614
Cleco Corp. ................... 864 14,472
Dominion Resources, Inc. ...... 1,224 75,398
DPL, Inc. ..................... 6,117 111,452
Duquesne Light Holdings,
Inc. ......................... 794 12,760
Edison International........... 14,153 278,956
El Paso Electric Co. (a)....... 881 10,695
Entergy Corp. ................. 5,484 295,588
Exelon Corp. .................. 11,890 754,420
FPL Group, Inc. ............... 3,296 210,087
Great Plains Energy, Inc. ..... 8,768 279,524
Green Mountain Power Corp. .... 119 2,702
IDACORP, Inc. ................. 1,844 50,065
Northeast Utilities............ 3,528 66,468
NSTAR.......................... 190 8,873
OGE Energy Corp. .............. 4,540 103,557
Pepco Holdings, Inc. .......... 5,843 102,837
PG&E Corp. .................... 17,680 432,276
Pinnacle West Capital Corp. ... 992 36,268
Public Service Enterprise
Group, Inc. .................. 4,879 199,405
Puget Energy, Inc. ............ 6,322 143,699
Southern Co. (The)............. 4,669 139,136
TXU Corp. ..................... 10,575 241,321
UIL Holdings Corp. ............ 264 9,916
UniSource Energy Corp. ........ 615 11,869
Wisconsin Energy Corp. ........ 4,883 159,918
Xcel Energy, Inc. ............. 9,790 160,556
------------
4,517,764
------------
ELECTRICAL EQUIPMENT (0.2%)
A.O. Smith Corp. .............. 532 16,838
Acuity Brands, Inc. ........... 759 16,318
American Power Conversion
Corp. ........................ 2,049 41,451
AMETEK, Inc. .................. 733 34,488
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
177
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
ELECTRICAL EQUIPMENT (CONTINUED)
Baldor Electric Co. ........... 599 $ 12,759
Belden, Inc. .................. 464 8,700
C&D Technologies, Inc. ........ 467 9,307
Cooper Industries, Ltd. Class
A............................. 1,871 98,976
Hubbell, Inc. Class B.......... 1,547 66,273
Intermagnetics General Corp.
(a)........................... 303 7,133
MagneTek, Inc. (a)............. 568 3,459
Regal-Beloit Corp. ............ 457 9,300
Rockwell Automation, Inc. ..... 6,191 192,231
Roper Industries, Inc. ........ 576 28,466
Vicor Corp. (a)................ 764 7,747
Woodward Governor Co. ......... 203 9,391
------------
562,837
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.7%)
Aeroflex, Inc. ................ 1,205 11,182
Agilysys, Inc. ................ 587 6,034
Anixter International, Inc.
(a)........................... 662 15,809
Arrow Electronics, Inc. (a).... 5,566 118,834
Artesyn Technologies, Inc.
(a)........................... 707 5,819
Avnet, Inc. (a)................ 14,786 286,848
BEI Technologies, Inc. ........ 352 6,516
Bell Microproducts, Inc. (a)... 474 4,001
Benchmark Electronics, Inc.
(a)........................... 454 22,119
CDW Corp. ..................... 4,507 270,645
Checkpoint Systems, Inc. (a)... 599 11,285
Cognex Corp. .................. 790 21,211
Coherent, Inc. (a)............. 545 12,535
CTS Corp. ..................... 632 6,996
Electro Scientific Industries,
Inc. (a)...................... 509 12,501
FLIR Systems, Inc. (a)......... 605 18,912
Global Imaging Systems, Inc.
(a)........................... 392 11,388
Itron, Inc. (a)................ 374 7,663
Keithley Instruments, Inc. .... 373 6,016
KEMET Corp. (a)................ 743 9,845
Methode Electronics, Inc. Class
A............................. 651 7,753
Molex, Inc. ................... 22 691
Molex, Inc. Class A............ 9,318 247,020
Park Electrochemical Corp. .... 361 8,844
Paxar Corp. (a)................ 713 8,542
PerkinElmer, Inc. ............. 5,466 98,443
Photon Dynamics, Inc. (a)...... 295 11,157
Planar Systems, Inc. (a)....... 261 6,040
Plexus Corp. (a)............... 3,933 68,002
RadiSys Corp. (a).............. 326 6,373
Rogers Corp. (a)............... 295 11,794
Sanmina-SCI Corp. (a).......... 24,805 261,693
Solectron Corp. (a)............ 34,025 188,499
Symbol Technologies, Inc. ..... 2,820 35,222
Tech Data Corp. (a)............ 972 31,998
Technitrol, Inc. (a)........... 734 16,001
Thermo Electron Corp. (a)...... 2,676 58,818
Trimble Navigation Ltd. (a).... 596 16,479
</Table>
<Table>
<Caption>
SHARES VALUE
--------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (CONTINUED)
Varian, Inc. (a)............... 576 $ 20,627
Veeco Instruments, Inc. (a).... 535 13,557
Vishay Intertechnology, Inc.
(a)........................... 4,398 82,463
X-Rite, Inc. .................. 488 5,309
------------
2,071,484
------------
ENERGY EQUIPMENT & SERVICES (0.3%)
Atwood Oceanics, Inc. (a)...... 253 6,550
Cal Dive International, Inc.
(a)........................... 688 14,262
CARBO Ceramics, Inc. .......... 284 11,928
Cooper Cameron Corp. (a)....... 850 36,397
Dril-Quip, Inc. (a)............ 316 4,740
ENSCO International, Inc. ..... 160 4,216
FMC Technologies, Inc. (a)..... 208 4,177
Grant Prideco, Inc. (a)........ 236 2,676
Halliburton Co. ............... 11,640 277,963
Hanover Compressor Co. (a)..... 7,706 81,684
Helmerich & Payne, Inc. ....... 1,330 35,258
Hydril (a)..................... 416 9,755
Input/Output, Inc. (a)......... 1,233 5,068
Lone Star Technologies, Inc.
(a)........................... 520 7,238
Maverick Tube Corp. (a)........ 766 12,938
Oceaneering International, Inc.
(a)........................... 442 10,192
Offshore Logistics, Inc. (a)... 411 8,960
Patterson-UTI Energy, Inc.
(a)........................... 3,945 112,788
Schlumberger Ltd. ............. 3,084 144,855
SEACOR SMIT, Inc. (a).......... 343 13,144
Smith International, Inc.
(a)........................... 288 10,722
TETRA Technologies, Inc. (a)... 395 8,931
Unit Corp. (a)................. 795 15,415
Veritas DGC, Inc. (a).......... 612 5,422
Weatherford International Ltd.
(a)........................... 166 5,769
W-H Energy Services, Inc.
(a)........................... 498 7,809
------------
858,857
------------
FOOD & STAPLES RETAILING (1.9%)
Albertson's, Inc. ............. 17,977 364,753
BJ's Wholesale Club, Inc.
(a)........................... 2,389 61,373
Casey's General Stores,
Inc. ......................... 910 14,105
Costco Wholesale Corp. (a)..... 72 2,547
CVS Corp. ..................... 8,896 312,961
Duane Reade, Inc. (a).......... 439 6,036
Great Atlantic & Pacific Tea
Co., Inc. (The) (a)........... 704 4,400
Kroger Co. (The) (a)........... 36,599 640,117
Longs Drug Stores Corp. ....... 586 13,126
Nash Finch Co. ................ 288 4,536
Performance Food Group Co.
(a)........................... 833 31,029
Ruddick Corp. ................. 2,424 38,687
Safeway, Inc. (a).............. 18,749 395,604
SUPERVALU, Inc. ............... 6,481 163,451
Sysco Corp. ................... 8,913 300,012
United Natural Foods, Inc.
(a)........................... 356 13,770
Wal-Mart Stores, Inc. (a)(f)... 54,177 3,193,734
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
178
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
FOOD & STAPLES RETAILING (CONTINUED)
Whole Foods Market, Inc. (a)... 3,312 $ 196,203
Winn-Dixie Stores, Inc. ....... 3,762 30,435
------------
5,786,879
------------
FOOD PRODUCTS (1.1%)
American Italian Pasta Co.
Class A (a)................... 327 12,504
Archer-Daniels-Midland Co. .... 2,433 34,914
Campbell Soup Co. ............. 13,143 340,667
ConAgra Foods, Inc. ........... 19,168 456,965
Corn Products International,
Inc. ......................... 659 22,333
Dean Foods Co. (a)............. 14,788 447,337
Delta and Pine Land Co. ....... 696 15,911
H.J. Heinz Co. ................ 14,146 499,778
Hain Celestial Group, Inc.
(a)........................... 622 13,124
Hershey Foods Corp. ........... 5,734 442,091
Hormel Foods Corp. ............ 493 12,172
International Multifoods Corp.
(a)........................... 352 7,853
Interstate Bakeries Corp. ..... 2,917 42,822
J&J Snack Foods Corp. (a)...... 159 5,675
J.M. Smucker Co. (The)......... 754 33,003
Lancaster Colony Corp. ........ 1,590 63,139
Lance, Inc. ................... 532 6,889
Ralcorp Holdings, Inc. (a)..... 528 14,520
Sara Lee Corp. ................ 15,715 313,200
Sensient Technologies Corp. ... 269 5,165
Tootsie Roll Industries,
Inc. ......................... 1,665 54,928
Tyson Foods, Inc. Class A...... 23,342 333,090
------------
3,178,080
------------
GAS UTILITIES (0.3%)
AGL Resources, Inc. ........... 6,590 185,509
Atmos Energy Corp. ............ 916 22,442
Cascade Natural Gas Corp. ..... 267 5,207
Kinder Morgan, Inc. ........... 4,277 229,033
Laclede Group, Inc. (The)...... 349 9,894
New Jersey Resources Corp. .... 497 18,811
Nicor, Inc. ................... 966 33,105
NiSource, Inc. ................ 3,895 80,665
Northwest Natural Gas Co. ..... 470 13,630
NUI Corp. ..................... 293 5,002
Peoples Energy Corp. .......... 1,272 51,452
Piedmont Natural Gas Co.,
Inc. ......................... 611 24,275
Sempra Energy.................. 4,464 124,099
Southern Union Co. (a)......... 1,332 23,457
Southwest Gas Corp. ........... 618 13,954
Southwestern Energy Co. (a).... 650 12,610
UGI Corp. ..................... 780 24,024
WGL Holdings, Inc. ............ 1,774 49,051
------------
926,220
------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.2%)
Advanced Medical Optics, Inc.
(a)........................... 531 10,710
American Medical Systems
Holdings, Inc. (a)............ 602 12,040
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED)
Analogic Corp. ................ 245 $ 10,692
ArthroCare Corp. (a)........... 377 8,426
Bausch & Lomb, Inc. ........... 419 20,179
Beckman Coulter, Inc. ......... 6,349 315,228
Becton, Dickinson & Co. ....... 4,821 176,256
Biosite, Inc. (a).............. 283 7,301
Boston Scientific Corp. (a).... 8,277 560,518
C.R. Bard, Inc. ............... 1,113 89,096
CONMED Corp. (a)............... 530 10,786
Cooper Cos., Inc. ............. 575 24,984
Cytyc Corp. (a)................ 5,217 67,456
Datascope Corp. ............... 270 8,988
DENTSPLY International,
Inc. ......................... 447 19,753
Diagnostic Products Corp. ..... 525 21,431
Edwards Lifesciences Corp.
(a)........................... 2,401 69,629
Guidant Corp. ................. 11,313 577,076
Haemonetics Corp. (a).......... 440 10,146
Hillenbrand Industries,
Inc. ......................... 1,762 104,892
Hologic, Inc. (a).............. 362 4,923
ICU Medical, Inc. (a).......... 247 8,346
INAMED Corp. (a)............... 421 36,362
Integra LifeSciences Holdings
(a)........................... 488 16,465
Invacare Corp. ................ 565 23,176
Medtronic, Inc. ............... 624 28,436
Mentor Corp. (a)............... 848 17,172
Osteotech, Inc. (a)............ 410 3,317
PolyMedica Corp. .............. 454 13,393
Possis Medical, Inc. (a)....... 325 5,291
Resmed, Inc. (a)............... 607 25,354
Respironics, Inc. (a).......... 625 26,056
Sola International, Inc. (a)... 454 7,786
St. Jude Medical, Inc. (a)..... 3,768 219,147
STERIS Corp. (a)............... 3,500 72,870
Stryker Corp. ................. 5,821 472,141
SurModics, Inc. (a)............ 319 6,702
Sybron Dental Specialties, Inc.
(a)........................... 697 16,031
Theragenics Corp. (a).......... 718 3,195
Varian Medical Systems, Inc.
(a)........................... 4,662 298,088
Viasys Healthcare, Inc. (a).... 549 9,910
VISX, Inc. (a)................. 3,211 77,899
Vital Signs, Inc. ............. 236 7,158
Wilson Greatbatch Technologies,
Inc. (a)...................... 387 14,590
Zimmer Holdings, Inc. (a)...... 794 50,665
------------
3,590,060
------------
HEALTH CARE PROVIDERS & SERVICES (2.1%)
Accredo Health, Inc. (a)....... 873 27,901
AdvancePCS (a)................. 9,262 476,715
Aetna, Inc. ................... 6,243 358,411
American Healthways, Inc. (a).. 300 12,435
AMERIGROUP Corp. (a)........... 381 15,933
AmSurg Corp. (a)............... 364 13,100
Anthem, Inc. (a)............... 4,446 304,240
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
179
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
Apria Healthcare Group, Inc.
(a)........................... 6,509 $ 188,761
Cardinal Health, Inc. ......... 691 41,004
Centene Corp. (a).............. 396 12,122
Cerner Corp. (a)............... 645 27,329
CIGNA Corp. ................... 3,821 217,988
Community Health Systems, Inc.
(a)........................... 2,249 54,021
Covance, Inc. (a).............. 2,218 57,735
Coventry Health Care, Inc.
(a)........................... 5,655 309,611
Cross Country Healthcare,
Inc. ......................... 588 8,167
Cryolife, Inc. (a)............. 472 2,884
Curative Health Services, Inc.
(a)........................... 289 4,130
Dendrite International, Inc.
(a)........................... 739 11,159
Express Scripts, Inc. (a)...... 2,920 160,366
First Health Group Corp. (a)... 6,452 157,493
HCA, Inc. ..................... 7,413 283,547
Health Net, Inc. (a)........... 12,565 396,928
Hooper Holmes, Inc. ........... 1,184 6,169
Humana, Inc. (a)............... 5,310 107,740
IMS Health, Inc. .............. 1,528 35,954
Lincare Holdings, Inc. (a)..... 5,727 223,009
Manor Care, Inc. .............. 2,971 98,875
McKesson Corp. ................ 1,978 59,874
Medco Health Solutions, Inc.
(a)........................... 6,564 217,925
Mid Atlantic Medical Services,
Inc. (a)...................... 882 51,509
NDC Health Corp. .............. 638 16,837
Odyssey Healthcare, Inc. (a)... 656 18,211
Omnicare, Inc. ................ 814 31,209
Orthodontic Centers of America,
Inc. (a)...................... 918 8,115
Owens & Minor, Inc. ........... 617 12,550
Oxford Health Plans, Inc.
(a)........................... 5,422 219,591
PacifiCare Health Systems, Inc.
(a)........................... 3,484 207,298
PAREXEL International Corp.
(a)........................... 469 7,842
Patterson Dental Co. (a)....... 2,696 172,490
Pediatrix Medical Group, Inc.
(a)........................... 421 22,502
Pharmaceutical Product
Development, Inc. (a)......... 1,022 30,732
Priority Healthcare Corp.
(a)........................... 794 17,174
Province Healthcare Co. (a).... 890 11,428
RehabCare Group, Inc. (a)...... 294 4,592
Renal Care Group, Inc. (a)..... 899 33,721
Sierra Health Services, Inc.
(a)........................... 525 12,227
Sunrise Senior Living, Inc.
(a)........................... 387 11,184
Tenet Healthcare Corp. (a)..... 869 11,992
Triad Hospitals, Inc. (a)...... 1,393 42,807
UnitedHealth Group, Inc. ...... 16,945 862,162
Universal Health Services, Inc.
Class B (a)................... 6,010 282,770
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
US Oncology, Inc. (a).......... 1,572 $ 17,198
WellPoint Health Networks, Inc.
(a)........................... 2,753 244,742
------------
6,242,409
------------
HOTELS, RESTAURANTS & LEISURE (1.2%)
Applebee's International,
Inc. ......................... 2,829 106,116
Argosy Gaming Co. (a).......... 534 12,709
Aztar Corp. (a)................ 634 13,238
Bally Total Fitness Holding
Corp. (a)..................... 621 4,136
Bob Evans Farms, Inc. ......... 952 28,141
Brinker International, Inc.
(a)........................... 8,934 284,369
CBRL Group, Inc. .............. 3,861 149,614
CEC Entertainment, Inc. (a).... 470 22,983
Darden Restaurants, Inc. ...... 4,548 95,281
GTECH Holdings Corp. .......... 6,815 304,494
Harrah's Entertainment,
Inc. ......................... 1,885 81,997
IHOP Corp. .................... 395 14,653
International Game Technology.. 4,445 145,574
International Speedway Corp.
Class A....................... 1,249 53,132
Jack In The Box, Inc. (a)...... 658 11,969
Landry's Restaurants, Inc. .... 504 12,615
LoneStar Steakhouse & Saloon,
Inc. ......................... 379 8,289
Mandalay Resort Group.......... 4,297 168,657
Marcus Corp. (The)............. 539 8,058
McDonald's Corp. .............. 40,977 1,024,835
O'Charley's, Inc. (a).......... 380 6,403
Outback Steakhouse, Inc. ...... 1,610 67,620
P.F. Chang's China Bistro, Inc.
(a)........................... 463 22,567
Panera Bread Co. Class A (a)... 546 21,966
Papa John's International, Inc.
(a)........................... 328 8,630
Park Place Entertainment Corp.
(a)........................... 15,308 146,957
Pinnacle Entertainment, Inc.
(a)........................... 626 5,477
Prime Hospitality Corp. (a).... 818 7,444
RARE Hospitality International,
Inc. (a)...................... 612 15,178
Ruby Tuesday, Inc. ............ 3,150 86,152
Ryan's Family Steak Houses,
Inc. (a)...................... 770 10,734
Shuffle Master, Inc. (a)....... 304 9,254
Six Flags, Inc. (a)............ 5,324 31,518
Sonic Corp. (a)................ 712 19,801
Starbucks Corp. (a)............ 2,033 64,243
Starwood Hotels & Resorts
Worldwide, Inc. .............. 2,748 92,690
Steak n Shake Co. (The) (a).... 494 8,546
Triarc Cos., Inc. Class B
(a)........................... 982 10,468
Wendy's International, Inc. ... 733 27,158
WMS Industries, Inc. (a)....... 547 12,652
Yum! Brands, Inc. (a).......... 7,844 267,794
------------
3,494,112
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
180
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
HOUSEHOLD DURABLES (0.8%)
A.T. Cross Co. Class A (a)..... 368 $ 2,263
Applica, Inc. (a).............. 567 4,184
Bassett Furniture Industries,
Inc. ......................... 280 4,399
Black & Decker Corp. (The)..... 782 37,387
Blyth, Inc. ................... 261 7,303
Centex Corp. .................. 2,603 253,792
Champion Enterprises, Inc.
(a)........................... 1,048 7,441
D.R. Horton, Inc. ............. 7,972 317,286
Department 56, Inc. (a)........ 315 4,426
Enesco Group, Inc. (a)......... 335 3,286
Ethan Allen Interiors, Inc. ... 678 24,950
Fedders Corp. ................. 715 4,183
Fleetwood Enterprises, Inc.
(a)........................... 657 6,623
Fortune Brands, Inc. .......... 2,513 163,722
Harman International
Industries, Inc. ............. 588 75,382
Hovnanian Enterprises, Inc.
Class A (a)................... 504 40,965
Interface, Inc. Class A (a).... 937 5,200
KB HOME........................ 916 62,737
La-Z-Boy, Inc. ................ 999 20,180
Lennar Corp. .................. 2,769 254,333
Libbey, Inc. .................. 248 6,594
M.D.C. Holdings, Inc. ......... 530 35,680
Maytag Corp. .................. 1,904 48,362
Mohawk Industries, Inc. (a).... 5,550 411,366
National Presto Industries,
Inc. ......................... 165 5,725
Newell Rubbermaid, Inc. ....... 1,384 31,555
NVR, Inc. (a).................. 131 64,111
Pulte Homes, Inc. ............. 656 56,751
Russ Berrie & Co., Inc. ....... 377 13,515
Ryland Group, Inc. (The)....... 455 40,449
Salton, Inc. (a)............... 270 2,884
Skyline Corp. ................. 153 5,271
Snap-on, Inc. ................. 414 12,147
Standard Pacific Corp. ........ 595 28,471
Toll Brothers, Inc. (a)........ 402 14,810
Toro Co. (The)................. 449 22,315
Tupperware Corp. .............. 1,575 23,704
Whirlpool Corp. ............... 2,988 210,564
------------
2,334,316
------------
HOUSEHOLD PRODUCTS (1.3%)
Church & Dwight Co., Inc. ..... 234 8,721
Clorox Co. (The)............... 7,138 323,351
Colgate-Palmolive Co. ......... 3,210 170,740
Dial Corp. (The)............... 3,709 89,016
Energizer Holdings, Inc. (a)... 3,300 121,440
Kimberly-Clark Corp. .......... 4,733 249,950
Procter & Gamble Co. (The)..... 30,505 2,998,336
WD-40 Co. ..................... 304 9,865
------------
3,971,419
------------
INDUSTRIAL CONGLOMERATES (1.9%)
3M Co. ........................ 446 35,176
Carlisle Cos., Inc. ........... 1,868 107,130
General Electric Co. (f)....... 133,892 3,884,207
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
INDUSTRIAL CONGLOMERATES (CONTINUED)
Standex International Corp. ... 219 $ 5,573
Textron, Inc. ................. 1,665 82,734
Tredegar Corp. ................ 696 10,844
Tyco International Ltd. ....... 79,828 1,666,809
------------
5,792,473
------------
INSURANCE (4.8%)
ACE, Ltd. ..................... 13,114 472,104
AFLAC, Inc. ................... 24,527 894,745
Allmerica Financial Corp.
(a)........................... 3,053 81,301
Allstate Corp. (The)........... 20,607 813,976
Ambac Financial Group, Inc. ... 3,496 247,307
American Financial Group,
Inc. ......................... 4,393 97,832
American International Group,
Inc. ......................... 47,562 2,893,196
AmerUs Group Co. .............. 4,041 152,548
Aon Corp. ..................... 10,228 223,993
Brown & Brown.................. 1,162 35,383
Chubb Corp. (The).............. 7,770 519,114
Cincinnati Financial Corp. .... 3,093 126,565
Delphi Financial Group, Inc.
Class A....................... 375 18,889
Everest Re Group Ltd. ......... 5,924 491,396
Fidelity National Financial,
Inc. ......................... 13,199 408,113
First American Corp. .......... 9,188 263,236
Hartford Financial Services
Group, Inc. (The)............. 9,139 501,731
HCC Insurance Holdings,
Inc. ......................... 4,479 130,518
Hilb, Rogal and Hamilton Co. .. 622 18,672
Horace Mann Educators Corp. ... 359 4,757
John Hancock Financial
Services, Inc. ............... 10,956 387,295
LandAmerica Financial Group,
Inc. ......................... 340 17,003
Lincoln National Corp. ........ 4,863 194,180
Loews Corp. ................... 5,989 257,527
MBIA, Inc. .................... 1,562 93,111
MetLife, Inc. ................. 23,626 741,856
MONY Group, Inc. (The)......... 394 12,612
Ohio Casualty Corp. (a)........ 521 7,971
Old Republic International
Corp. ........................ 13,247 476,097
Philadelphia Consolidated
Holding Corp. ................ 400 18,860
Presidential Life Corp. ....... 536 8,233
Progressive Corp. (The)........ 6,250 461,250
Protective Life Corp. ......... 6,002 194,885
Prudential Financial, Inc.
(a)........................... 26,923 1,040,305
RLI Corp. ..................... 459 15,422
SAFECO Corp. .................. 5,594 205,300
SCPIE Holdings, Inc. .......... 237 3,188
Selective Insurance Group,
Inc. ......................... 494 15,166
StanCorp Financial Group,
Inc. ......................... 316 19,924
Stewart Information Services
Corp. (a)..................... 327 10,186
Torchmark Corp. ............... 2,533 111,148
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
181
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
INSURANCE (CONTINUED)
Travelers Property Casualty
Corp. Class B................. 44,103 $ 721,966
UICI (a)....................... 848 12,686
Unitrin, Inc. ................. 4,156 153,772
UnumProvident Corp. ........... 6,180 101,167
W.R. Berkley Corp. ............ 8,037 275,589
XL Capital Ltd. Class A........ 4,821 335,060
Zenith National Insurance
Corp. ........................ 343 10,530
------------
14,297,665
------------
INTERNET & CATALOG RETAIL (0.2%)
eBay, Inc. (a)................. 8,385 469,057
Insight Enterprises, Inc.
(a)........................... 844 14,196
J. Jill Group, Inc. (a)........ 470 5,720
------------
488,973
------------
INTERNET SOFTWARE & SERVICES (0.0%) (b)
j2 Global Communications, Inc.
(a)........................... 418 11,838
Netegrity, Inc. (a)............ 631 7,484
Retek, Inc. (a)................ 454 4,554
WebEx Communications, Inc.
(a)........................... 764 16,877
Websense, Inc. (a)............. 401 9,383
Yahoo!, Inc. (a)............... 1,979 86,482
Zix Corp. (a).................. 497 4,671
------------
141,289
------------
IT SERVICES (0.7%)
Acxiom Corp. (a)............... 7,067 112,365
Affiliated Computer Services,
Inc. Class A (a).............. 2,909 142,337
American Management Systems,
Inc. (a)...................... 774 11,455
CACI International, Inc. Class
A (a)......................... 525 26,003
Carreker Corp. (a)............. 568 5,538
Certegy, Inc. ................. 1,624 54,664
CheckFree Corp. (a)............ 6,074 167,217
CIBER, Inc. (a)................ 1,157 10,667
Computer Sciences Corp. (a).... 5,008 198,417
Concord EFS, Inc. (a).......... 7,875 84,184
Convergys Corp. (a)............ 7,509 120,595
CSG Systems International, Inc.
(a)........................... 2,111 24,255
DST Systems, Inc. (a).......... 9,323 352,596
eFunds Corp. (a)............... 855 13,689
Electronic Data Systems
Corp. ........................ 12,976 278,335
Gartner, Inc. Class B (a)...... 7,267 88,585
Global Payments, Inc. ......... 679 28,280
Keane, Inc. (a)................ 3,433 45,110
MAXIMUS, Inc. (a).............. 382 13,336
MPS Group, Inc. (a)............ 11,473 109,567
Pegasus Solutions, Inc. (a).... 457 4,990
StarTek, Inc. ................. 260 8,635
SunGard Data Systems, Inc.
(a)........................... 6,116 171,554
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
IT SERVICES (CONTINUED)
Titan Corp. (The) (a).......... 675 $ 14,256
Unisys Corp. (a)............... 2,731 41,948
------------
2,128,578
------------
LEISURE EQUIPMENT & PRODUCTS (0.3%)
Action Performance Cos.,
Inc........................... 327 6,697
Arctic Cat, Inc. .............. 399 8,986
Brunswick Corp. ............... 1,595 47,324
Callaway Golf Co. ............. 1,005 16,331
Concord Camera Corp. (a)....... 511 6,561
Eastman Kodak Co. ............. 8,539 208,608
Hasbro, Inc. .................. 7,567 164,961
Huffy Corp. (a)................ 354 2,106
JAKKS Pacific, Inc. (a)........ 449 5,837
K2, Inc. (a)................... 495 8,212
Mattel, Inc. .................. 19,551 378,507
Meade Instruments Corp. (a).... 477 1,789
Nautilus Group, Inc. (The)..... 595 9,288
Polaris Industries, Inc. ...... 397 33,983
SCP Pool Corp. (a)............. 646 22,610
Sturm, Ruger & Co., Inc. ...... 492 5,584
------------
927,384
------------
MACHINERY (0.7%)
Albany International Corp.
Class A....................... 597 18,447
Astec Industries, Inc. (a)..... 475 6,042
Barnes Group, Inc. ............ 412 12,022
Briggs & Stratton Corp. ....... 395 25,679
Caterpillar, Inc. ............. 9,222 675,788
CLARCOR, Inc. ................. 458 18,618
Crane Co. ..................... 424 11,914
Cummins, Inc. ................. 629 29,815
CUNO, Inc. (a)................. 305 12,169
Dionex Corp. (a)............... 382 16,250
Donaldson Co., Inc. ........... 3,074 175,894
Dover Corp. ................... 1,324 51,662
Eaton Corp. ................... 1,362 136,527
Flow International Corp. (a)... 826 2,569
Flowserve Corp. (a)............ 4,532 92,725
Gardner Denver, Inc. (a)....... 294 6,074
Harsco Corp. .................. 1,380 52,868
IDEX Corp. .................... 599 22,271
JLG Industries, Inc. .......... 786 9,385
Kaydon Corp. .................. 512 12,170
Kennametal, Inc. .............. 922 34,003
Lindsay Manufacturing Co. ..... 283 6,563
Lydall, Inc. (a)............... 386 4,590
Manitowoc Co., Inc. (The)...... 483 10,481
Milacron, Inc. ................ 814 1,945
Mueller Industries, Inc. (a)... 626 19,757
Navistar International Corp.
(a)........................... 280 11,320
Nordson Corp. ................. 2,636 73,044
Oshkosh Truck Corp. ........... 625 28,644
PACCAR, Inc. .................. 4,695 370,717
Pentair, Inc. ................. 269 11,029
Reliance Steel & Aluminum
Co. .......................... 581 16,675
Robbins & Myers, Inc. ......... 263 5,549
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
182
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
MACHINERY (CONTINUED)
SPS Technologies, Inc. (a)..... 236 $ 11,640
SPX Corp. (a).................. 816 39,266
Stewart & Stevenson Services,
Inc. ......................... 522 8,728
Tecumseh Products Co. Class A.. 412 16,884
Tecumseh Products Co. Class B.. 72 2,880
Thomas Industries, Inc. ....... 315 9,513
Timken Co. (The)............... 1,564 26,244
Trinity Industries, Inc. ...... 1,590 40,465
Valmont Industries, Inc. ...... 434 9,027
Wabash National Corp. (a)...... 471 10,866
Watts Water Technologies, Inc.
Class A....................... 498 8,844
Wolverine Tube, Inc. (a)....... 296 1,507
------------
2,169,070
------------
MARINE (0.0%) (b)
Kirby Corp. (a)................ 441 12,957
------------
MEDIA (1.1%)
4Kids Entertainment, Inc.
(a)........................... 304 7,433
Advo, Inc. .................... 365 16,363
Belo Corp. Class A............. 2,961 80,717
Catalina Marketing Corp. (a)... 1,568 27,675
Comcast Corp. Class A (a)...... 36,527 1,238,996
Dow Jones & Co., Inc. ......... 440 22,867
Information Holdings, Inc.
(a)........................... 381 8,542
Interpublic Group of Cos., Inc.
(The)......................... 6,698 99,666
McGraw-Hill Cos., Inc. (The)... 2,429 162,622
Omnicom Group, Inc. ........... 985 78,603
Thomas Nelson, Inc. ........... 347 5,500
Time Warner, Inc. (a).......... 49,936 763,521
Viacom, Inc. Class B........... 5,851 233,279
Washington Post Co. (The) Class
B............................. 671 494,802
------------
3,240,586
------------
METALS & MINING (0.3%)
Alcoa, Inc. ................... 6,996 220,864
Allegheny Technologies,
Inc. ......................... 493 3,771
Arch Coal, Inc. ............... 298 7,301
Brush Engineered Materials,
Inc. (a)...................... 401 5,105
Carpenter Technology Corp. .... 1,206 31,175
Castle (A.M.) & Co. (a)........ 381 1,981
Century Aluminum Co. (a)....... 496 8,164
Cleveland-Cliffs, Inc. (a)..... 189 5,670
Commercial Metals Co. ......... 511 12,612
Commonwealth Industries,
Inc. ......................... 386 2,644
Freeport-McMoRan Copper & Gold,
Inc. Class B.................. 7,423 287,641
IMCO Recycling, Inc. (a)....... 365 2,745
Massey Energy Co. ............. 1,376 19,126
Newmont Mining Corp. .......... 1,977 86,553
Peabody Energy Corp. .......... 608 20,265
Phelps Dodge Corp. (a)......... 735 45,379
Quanex Corp. .................. 294 11,775
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
METALS & MINING (CONTINUED)
RTI International Metals, Inc.
(a)........................... 501 $ 6,017
Ryerson Tull, Inc. ............ 599 4,828
Steel Dynamics, Inc. (a)....... 873 16,264
Steel Technologies, Inc. ...... 235 3,621
United States Steel Corp. ..... 1,415 33,465
------------
836,966
------------
MULTILINE RETAIL (0.6%)
Big Lots, Inc. (a)............. 3,813 57,233
Dillard's, Inc. Class A........ 685 11,076
Dollar General Corp. .......... 7,330 164,705
Dollar Tree Stores, Inc. (a)... 98 3,742
Family Dollar Stores, Inc. .... 685 29,873
Federated Department Stores,
Inc. ......................... 9,100 432,705
Fred's, Inc. .................. 712 26,828
J.C. Penney Co., Inc. Holding
Co............................ 8,553 202,278
May Department Stores Co.
(The)......................... 8,841 247,194
Neiman Marcus Group, Inc. (The)
Class A (a)................... 172 8,179
Neiman Marcus Group, Inc. (The)
Class B (a)................... 3,001 130,844
Nordstrom, Inc. ............... 630 19,209
Saks, Inc. (a)................. 15,586 216,645
Sears, Roebuck and Co. ........ 6,344 333,885
Shopko Stores, Inc. ........... 532 8,235
------------
1,892,631
------------
MULTI-UTILITIES & UNREGULATED POWER (0.6%)
AES Corp. (The) (a)............ 26,061 228,034
Avista Corp. .................. 882 14,994
Calpine Corp. (a).............. 5,155 23,765
Constellation Energy Group,
Inc. ......................... 1,897 68,994
Dynegy, Inc. Class A (a)....... 9,080 36,411
Energen Corp. ................. 658 24,261
Energy East Corp. ............. 1,009 22,652
Equitable Resources, Inc. ..... 1,800 74,160
MDU Resources Group, Inc. ..... 11,158 252,517
National Fuel Gas Co. ......... 7,521 168,094
ONEOK, Inc. ................... 7,081 140,841
Questar Corp. ................. 10,141 321,977
SCANA Corp. ................... 6,056 207,660
Sierra Pacific Resources (a)... 3,056 18,244
Vectren Corp. ................. 1,167 27,541
Westar Energy, Inc. ........... 6,694 133,746
Williams Cos., Inc. (The)...... 14,247 145,319
------------
1,909,210
------------
OFFICE ELECTRONICS (0.2%)
Gerber Scientific, Inc. (a).... 534 4,219
Xerox Corp. (a)................ 37,431 393,025
Zebra Technologies Corp. Class
A (a)......................... 863 49,148
------------
446,392
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
183
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
OIL & GAS (4.1%)
Amerada Hess Corp. ............ 2,936 $ 151,556
Anadarko Petroleum Corp. ...... 4,231 184,556
Apache Corp. .................. 841 58,635
Ashland, Inc. ................. 568 21,152
Burlington Resources, Inc. .... 5,376 261,489
Cabot Oil & Gas Corp. ......... 588 15,023
ChevronTexaco Corp. ........... 30,087 2,235,464
Cimarex Energy Co. (a)......... 760 15,542
ConocoPhillips................. 14,550 831,533
Cross Timbers Royalty Trust.... 108 2,700
Devon Energy Corp. ............ 3,914 189,829
EOG Resources, Inc. ........... 2,465 103,875
Evergreen Resources, Inc.
(a)........................... 714 19,578
ExxonMobil Corp. (f)........... 123,214 4,507,168
Forest Oil Corp. (a)........... 3,596 84,326
Frontier Oil Corp. ............ 478 7,648
Kerr-McGee Corp. .............. 4,889 202,894
Marathon Oil Corp. ............ 15,059 445,295
Murphy Oil Corp. .............. 6,973 411,268
Newfield Exploration Co. (a)... 1,020 40,525
Noble Energy, Inc. ............ 6,072 241,180
Nuevo Energy Co. (a)........... 354 6,967
Occidental Petroleum Corp. .... 14,443 509,260
Overseas Shipholding Group,
Inc. ......................... 2,300 62,698
Patina Oil & Gas Corp. ........ 618 26,067
Pioneer Natural Resources Co.
(a)........................... 6,443 170,417
Plains Resources, Inc. (a)..... 431 5,711
Pogo Producing Co. ............ 6,661 278,496
Prima Energy Corp. (a)......... 232 6,454
Remington Oil & Gas Corp. (a).. 489 8,729
Spinnaker Exploration Co.
(a)........................... 607 15,533
St. Mary Land & Exploration
Co. .......................... 514 13,415
Stone Energy Corp. (a)......... 482 17,419
Sunoco, Inc. .................. 2,377 104,018
Swift Energy Co. (a)........... 501 6,964
Tom Brown, Inc. (a)............ 865 23,372
Unocal Corp. .................. 8,299 262,912
Valero Energy Corp. ........... 7,973 340,447
Vintage Petroleum, Inc. ....... 1,174 13,560
Western Gas Resources, Inc. ... 237 10,073
XTO Energy, Inc. .............. 13,457 318,527
------------
12,232,275
------------
PAPER & FOREST PRODUCTS (0.2%)
Boise Cascade Corp. ........... 1,304 36,577
Buckeye Technologies, Inc.
(a)........................... 676 6,091
Deltic Timber Corp. ........... 217 6,213
Georgia-Pacific Corp. ......... 4,500 118,260
Louisiana-Pacific Corp. (a).... 2,665 50,688
Pope & Talbot, Inc. ........... 377 5,402
Potlatch Corp. ................ 3,315 103,627
Rayonier, Inc. ................ 5,097 214,329
Schweitzer-Mauduit
International, Inc. .......... 270 7,182
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
PAPER & FOREST PRODUCTS (CONTINUED)
Wausau-Mosinee Paper Corp. .... 293 $ 3,622
Weyerhaeuser Co. .............. 1,802 108,534
------------
660,525
------------
PERSONAL PRODUCTS (0.4%)
Alberto-Culver Co. Class B..... 891 56,489
Avon Products, Inc. ........... 3,740 254,171
Gillette Co. (The)............. 26,540 846,626
Nature's Sunshine Products,
Inc. ......................... 336 2,691
NBTY, Inc. (a)................. 1,215 33,109
------------
1,193,086
------------
PHARMACEUTICALS (3.3%)
Abbott Laboratories............ 25,036 1,067,034
Alpharma, Inc. ................ 945 17,199
Barr Laboratories, Inc. (a).... 661 50,745
Bristol-Myers Squibb Co. ...... 368 9,336
CIMA Labs, Inc. (a)............ 265 8,321
Forest Laboratories, Inc.
(a)........................... 3,862 193,139
ICN Pharmaceuticals, Inc. ..... 5,960 115,088
IVAX Corp. (a)................. 7,267 139,962
Johnson & Johnson.............. 29,492 1,484,332
King Pharmaceuticals, Inc.
(a)........................... 1,896 25,406
Lilly (Eli) & Co. ............. 3,564 237,434
Medicis Pharmaceutical Corp.
Class A....................... 496 31,422
Merck & Co., Inc. ............. 32,570 1,441,223
MGI Pharma, Inc. (a)........... 549 20,620
Mylan Laboratories, Inc. ...... 25,362 612,492
Noven Pharmaceuticals, Inc.
(a)........................... 411 4,147
Perrigo Co. ................... 6,005 80,767
Pfizer, Inc. (f)............... 118,248 3,736,637
Pharmaceutical Resources, Inc.
(a)........................... 2,219 160,389
Sepracor, Inc. (a)............. 3,428 91,288
Watson Pharmaceuticals, Inc.
(a)........................... 2,292 90,007
Wyeth.......................... 7,793 343,983
------------
9,960,971
------------
ROAD & RAIL (0.2%)
Arkansas Best Corp. ........... 453 14,999
Burlington Northern Santa Fe
Corp. ........................ 8,272 239,392
Heartland Express, Inc. ....... 914 22,704
Kansas City Southern........... 1,128 14,923
Knight Transportation, Inc.
(a)........................... 683 17,191
Landstar System, Inc. (a)...... 277 20,232
Roadway Corp. ................. 364 18,655
Swift Transportation Co., Inc.
(a)........................... 4,308 96,629
Union Pacific Corp. ........... 872 54,587
USF Corp. ..................... 498 15,896
Werner Enterprises, Inc. ...... 6,235 112,479
Yellow Corp. .................. 540 17,739
------------
645,426
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
184
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.5%)
Actel Corp. (a)................ 456 $ 12,303
Advanced Energy Industries,
Inc. (a)...................... 590 13,470
Advanced Micro Devices, Inc.
(a)........................... 2,870 43,624
Alliance Semiconductor Corp.
(a)........................... 864 6,653
Altera Corp. (a)............... 7,596 153,667
Applied Materials, Inc. (a).... 3,442 80,440
Atmel Corp. (a)................ 25,390 143,200
ATMI, Inc. (a)................. 564 12,966
Axcelis Technologies, Inc.
(a)........................... 1,807 19,118
Broadcom Corp. Class A (a)..... 7,057 225,471
Brooks Automation, Inc. (a).... 678 16,916
Cohu, Inc. .................... 388 7,787
Credence Systems Corp. (a)..... 539 8,791
Cree, Inc. (a)................. 3,304 58,679
Cymer, Inc. (a)................ 643 29,359
Cypress Semiconductor Corp.
(a)........................... 10,060 215,888
DSP Group, Inc. (a)............ 518 12,370
DuPont Photomasks, Inc. (a).... 330 7,649
ESS Technology, Inc. (a)....... 707 9,813
Exar Corp. (a)................. 740 11,907
Fairchild Semiconductor
International, Inc. (a)....... 3,217 72,704
FEI Co. (a).................... 601 14,274
Helix Technology Corp. ........ 477 8,562
Integrated Circuit Systems,
Inc. (a)...................... 1,775 59,587
Integrated Device Technology,
Inc. (a)...................... 2,714 42,610
Intel Corp. ................... 130,751 4,321,321
International Rectifier Corp.
(a)........................... 4,765 227,433
Kopin Corp. (a)................ 1,270 9,309
Kulicke & Soffa Industries,
Inc. (a)...................... 914 13,418
Lam Research Corp. (a)......... 7,119 204,600
Lattice Semiconductor Corp.
(a)........................... 4,491 35,030
LSI Logic Corp. (a)............ 8,302 76,710
LTX Corp. (a).................. 528 7,545
Micrel, Inc. (a)............... 1,626 26,829
Microchip Technology, Inc. .... 2,447 80,041
Microsemi Corp. (a)............ 530 10,971
National Semiconductor Corp.
(a)........................... 4,856 197,299
NVIDIA Corp. (a)............... 1,736 30,692
Pericom Semiconductor Corp.
(a)........................... 469 5,342
Phototronics, Inc. (a)......... 586 12,622
PMC-Sierra, Inc. (a)........... 2,566 46,624
Power Integrations, Inc. (a)... 541 18,838
RF Micro Devices, Inc. (a)..... 1,501 17,577
Rudolph Technologies, Inc.
(a)........................... 299 7,819
Silicon Laboratories, Inc.
(a)........................... 340 18,353
Skyworks Solutions, Inc. (a)... 2,706 23,217
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED)
Standard Microsystems Corp.
(a)........................... 307 $ 9,210
Supertex, Inc. (a)............. 305 5,719
Teradyne, Inc. (a)............. 1,562 35,582
Texas Instruments, Inc. ....... 24,599 711,403
Three-Five Systems, Inc. (a)... 517 2,399
Ultratech, Inc. (a)............ 418 13,046
Varian Semiconductor Equipment
Associates, Inc. (a).......... 629 30,412
Xilinx, Inc. (a)............... 3,545 112,377
------------
7,599,546
------------
SOFTWARE (2.9%)
Adobe Systems, Inc. ........... 2,800 122,752
Advent Software, Inc. (a)...... 565 10,345
ANSYS, Inc. (a)................ 275 9,801
Ascential Software Corp. (a)... 2,016 44,735
Autodesk, Inc. ................ 457 8,797
BARRA, Inc. (a)................ 352 13,376
BMC Software, Inc. (a)......... 6,270 108,973
Cadence Design Systems, Inc.
(a)........................... 16,619 255,766
Captaris, Inc. (a)............. 730 4,343
Catapult Communications Corp.
(a)........................... 315 4,293
Citrix Systems, Inc. (a)....... 6,854 173,269
Computer Associates
International, Inc. .......... 26,723 628,525
Compuware Corp. (a)............ 4,967 27,915
Concord Communications, Inc.
(a)........................... 413 7,397
Documentum, Inc. (a)........... 37,248 1,108,128
Electronic Arts, Inc. (a)...... 564 55,859
EPIQ Systems, Inc. (a)......... 324 5,476
FactSet Research Systems,
Inc. ......................... 613 26,751
Fair Isaac Corp. .............. 3,742 238,665
FileNET Corp. (a).............. 667 17,822
Hyperion Solutions Corp. (a)... 646 21,635
Intuit, Inc. (a)............... 2,872 143,543
Jack Henry & Associates,
Inc. ......................... 3,551 70,949
JDA Software Group, Inc. (a)... 522 11,176
Kronos, Inc. (a)............... 369 22,140
Macromedia, Inc. (a)........... 5,300 101,283
Macrovision Corp. (a).......... 1,185 26,034
Manhattan Associates, Inc.
(a)........................... 543 15,117
MapInfo Corp. (a).............. 366 3,334
Mentor Graphics Corp. (a)...... 3,581 59,982
Mercury Interactive Corp.
(a)........................... 445 20,666
MICROS Systems, Inc. (a)....... 317 12,835
Microsoft Corp. (f)............ 135,194 3,535,323
Midway Games, Inc. (a)......... 1,121 3,184
MRO Software, Inc. (a)......... 448 5,667
NYFIX, Inc. (a)................ 750 5,970
Oracle Corp. (a)............... 48,742 582,954
Phoenix Technologies Ltd.
(a)........................... 594 3,908
Progress Software Corp. (a).... 632 13,948
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
185
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
SOFTWARE (CONTINUED)
QRS Corp. (a).................. 381 $ 3,875
Radiant Systems, Inc. (a)...... 675 4,495
Reynolds & Reynolds Co. (The)
Class A....................... 1,174 31,886
Roxio, Inc. (a)................ 563 5,737
RSA Security, Inc. (a)......... 7,016 90,998
SERENA Software, Inc. (a)...... 738 12,731
SPSS, Inc. (a)................. 316 5,751
Sybase, Inc. (a)............... 6,451 115,473
Symantec Corp. (a)............. 1,963 130,834
Synopsys, Inc. (a)............. 4,030 127,832
Systems & Computer Technology
Corp. (a)..................... 618 9,085
Take-Two Interactive Software,
Inc. (a)...................... 762 30,137
TALX Corp. .................... 247 5,350
THQ, Inc. (a).................. 704 12,489
Transaction Systems Architects,
Inc. Class A (a).............. 3,560 71,200
VERITAS Software Corp. (a)..... 13,781 498,183
Verity, Inc. (a)............... 683 9,596
------------
8,698,288
------------
SPECIALTY RETAIL (1.8%)
Aaron Rents, Inc. ............. 598 13,096
Abercrombie & Fitch Co. Class A
(a)........................... 6,648 189,468
American Eagle Outfitters, Inc.
(a)........................... 1,659 26,527
AnnTaylor Stores Corp. (a)..... 809 28,962
AutoNation, Inc. (a)........... 6,075 113,603
AutoZone, Inc. (a)............. 1,366 131,273
Barnes & Noble, Inc. (a)....... 6,072 180,946
Best Buy Co., Inc. ............ 11,326 660,419
Borders Group, Inc. (a)........ 7,275 164,779
Building Materials Holding
Corp. ........................ 317 4,482
Burlington Coat Factory
Warehouse Corp. .............. 814 17,460
CarMax, Inc. (a)............... 1,519 47,864
Cato Corp. (The) Class A....... 371 7,828
Chico's FAS, Inc. (a).......... 5,586 209,698
Children's Place Retail Stores,
Inc. (The) (a)................ 486 14,629
Christopher & Banks Corp. ..... 683 19,944
Claire's Stores, Inc. ......... 5,852 226,472
Cost Plus, Inc. (a)............ 391 17,935
Dress Barn, Inc. (The) (a)..... 533 7,462
Electronics Boutique Holdings
Corp. (a)..................... 454 12,916
Footstar, Inc. (a)............. 486 3,038
Gap, Inc. (The)................ 23,125 441,225
Genesco, Inc. (a).............. 397 6,689
Goody's Family Clothing,
Inc. ......................... 595 6,271
Group 1 Automotive, Inc. (a)... 413 14,633
Gymboree Corp. (The) (a)....... 538 8,877
Hancock Fabrics, Inc. ......... 337 5,025
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
SPECIALTY RETAIL (CONTINUED)
Haverty Furniture Cos.,
Inc. ........................ 401 $ 8,321
Home Depot, Inc. (The)......... 27,527 1,020,426
Hot Topic, Inc. (a)............ 864 24,805
Jo-Ann Stores, Inc. Class A
(a)........................... 367 11,014
Limited Brands................. 6,580 115,808
Linens 'n Things, Inc. (a)..... 808 23,852
Lowe's Cos., Inc. ............. 2,564 151,097
Men's Wearhouse, Inc. (The)
(a)........................... 720 21,211
Movie Gallery, Inc. (a)........ 594 12,284
Office Depot, Inc. (a)......... 1,694 25,291
Pacific Sunwear of California,
Inc. (a)...................... 1,419 32,765
Payless ShoeSource, Inc. (a)... 1,493 19,752
Pep Boys-Manny, Moe & Jack
(The)......................... 985 18,942
PETsMART, Inc. ................ 3,140 80,415
RadioShack Corp. .............. 7,248 217,368
Regis Corp. ................... 792 30,112
Rent-A-Center, Inc. (a)........ 2,584 80,776
Ross Stores, Inc. ............. 1,610 80,516
Sherwin-Williams Co. (The)..... 438 14,691
Staples, Inc. (a).............. 9,143 245,215
Stein Mart, Inc. (a)........... 1,002 7,204
TBC Corp. (a).................. 397 10,794
Tiffany & Co. ................. 1,202 57,035
Too, Inc. (a).................. 627 10,345
Toys "R" Us, Inc. (a).......... 9,950 129,350
Tractor Supply Co. (a)......... 681 28,541
Ultimate Electronics, Inc.
(a)........................... 352 3,164
Urban Outfitters, Inc. (a)..... 356 11,876
Wet Seal, Inc. (The) Class A
(a)........................... 541 5,946
Williams-Sonoma, Inc. (a)...... 4,145 146,443
Zale Corp. (a)................. 499 25,828
------------
5,252,708
------------
TEXTILES, APPAREL & LUXURY GOODS (0.4%)
Ashworth, Inc. (a)............. 312 2,624
Brown Shoe Co., Inc. .......... 326 11,280
Coach, Inc. (a)................ 17,326 614,553
Fossil, Inc. (a)............... 852 23,004
Haggar Corp. .................. 155 2,465
Jones Apparel Group, Inc. ..... 2,391 82,490
Kellwood Co. .................. 485 18,124
K-Swiss, Inc. Class A.......... 322 14,149
Liz Claiborne, Inc. ........... 570 21,027
NIKE, Inc. Class B............. 3,502 223,778
Oshkosh B' Gosh, Inc. Class
A............................. 217 4,679
Oxford Industries, Inc. ....... 147 10,069
Phillips-Van Heusen Corp. ..... 554 9,496
Quiksilver, Inc. (a)........... 1,005 17,256
Reebok International Ltd. ..... 795 30,965
Russell Corp. ................. 593 10,840
Stride Rite Corp. (The)........ 721 8,688
Timberland Co. (The) Class A
(a)........................... 1,893 98,341
Unifi, Inc. (a)................ 3,835 19,137
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
186
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
TEXTILES, APPAREL & LUXURY GOODS (CONTINUED)
V.F. Corp. .................... 1,132 $ 48,053
Wolverine World Wide, Inc. .... 732 14,786
------------
1,285,804
------------
THRIFTS & MORTGAGE FINANCE (1.9%)
Anchor BanCorp Wisconsin,
Inc. ......................... 429 10,682
Astoria Financial Corp. ....... 2,095 72,571
BankUnited Financial Corp.
(a)........................... 541 11,961
Brookline Bancorp, Inc. ....... 1,053 15,605
Commercial Federal Corp. ...... 804 20,695
Countrywide Financial Corp. ... 2,021 212,447
Dime Community Bancshares...... 464 12,936
Downey Financial Corp. ........ 510 23,409
Fannie Mae..................... 25,188 1,805,728
FirstFed Financial Corp. (a)... 311 13,995
Flagstar Bancorp, Inc. ........ 1,099 24,508
Freddie Mac.................... 14,413 809,002
Fremont General Corp. ......... 1,385 23,033
Golden West Financial Corp. ... 5,140 516,210
GreenPoint Financial Corp. .... 6,857 213,596
Independence Community Bank
Corp. ........................ 3,835 140,936
MAF Bancorp, Inc. ............. 477 19,996
New Century Financial Corp. ... 632 23,435
New York Community Bancorp,
Inc. ......................... 12,652 458,002
PMI Group, Inc. (The).......... 742 28,367
Radian Group, Inc. ............ 3,822 202,184
Roslyn Bancorp, Inc. .......... 5,617 151,322
Seacoast Financial Services
Corp. ........................ 480 12,293
Sovereign Bancorp, Inc. ....... 19,679 409,520
Staten Island Bancorp, Inc. ... 1,070 21,325
Washington Mutual, Inc. ....... 5,964 260,925
Waypoint Financial Corp. ...... 616 12,825
------------
5,527,508
------------
TOBACCO (0.5%)
Altria Group, Inc. ............ 29,202 1,357,893
DIMON, Inc. ................... 818 5,890
R.J. Reynolds Tobacco Holdings,
Inc. ......................... 696 33,429
Universal Corp. ............... 855 37,261
UST, Inc. ..................... 1,756 59,739
------------
1,494,212
------------
TRADING COMPANIES & DISTRIBUTORS (0.0%) (b)
Applied Industrial
Technologies, Inc. ........... 347 7,825
Hughes Supply, Inc. ........... 429 16,581
Lawson Products, Inc. ......... 173 5,190
Watsco, Inc. .................. 476 10,191
------------
39,787
------------
WATER UTILITIES (0.0%) (b)
American States Water Co. ..... 278 6,811
------------
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.7%)
AT&T Wireless Services, Inc.
(a)........................... 111,560 $ 808,810
Boston Communications Group,
Inc. (a)...................... 419 3,947
Metro One Telecommunications,
Inc. (a)...................... 595 1,571
Nextel Communications, Inc.
Class A (a)................... 46,354 1,121,767
Sprint Corp. (PCS Group) (a)... 12,323 53,605
Telephone & Data Systems,
Inc. ......................... 1,897 118,752
------------
2,108,452
------------
Total Common Stocks (Cost
$135,981,070)................. 185,091,989(i)
------------
<Caption>
REAL ESTATE INVESTMENT TRUSTS (1.2%)
Acadia Realty Trust............ 406 4,604
Alexandria Real Estate
Equities, Inc. ............... 299 15,249
AMB Property Corp. ............ 1,594 47,804
American Land Lease, Inc. ..... 111 2,020
Amli Residential Properties
Trust......................... 300 7,632
Apartment Investment &
Management Co. ............... 1,470 60,123
Archstone-Smith Trust.......... 2,876 76,789
Arden Realty, Inc. ............ 1,001 27,998
Associated Estates Realty
Corp. ........................ 305 1,970
Avalonbay Communities, Inc. ... 1,060 48,410
Bedford Property Investors,
Inc. ......................... 263 6,906
Boston Properties, Inc. ....... 1,521 67,304
Boykin Lodging Co. ............ 273 2,260
Brandywine Realty Trust........ 586 14,849
BRE Properties, Inc. .......... 773 25,007
Camden Property Trust.......... 621 24,592
Capital Automotive REIT........ 1,075 33,443
CarrAmerica Realty Corp. ...... 818 24,597
CBL & Associates Properties,
Inc. ......................... 471 25,104
Centerpoint Properties
Corp. ........................ 365 24,802
Chelsea Property Group,
Inc. ......................... 675 33,210
Colonial Properties Trust...... 880 32,560
Commercial Net Lease Realty.... 727 12,504
Cornerstone Realty Income
Trust, Inc. .................. 868 7,178
Corporate Office Properties
Trust......................... 460 8,896
Correctional Properties
Trust......................... 173 4,687
Cousins Properties, Inc. ...... 762 21,907
Crescent Real Estate Equity
Co. .......................... 1,552 23,823
Crown American Realty Trust.... 507 6,074
Developers Diversified Realty
Corp. ........................ 1,349 38,986
Duke Realty Corp. ............. 2,137 62,571
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
187
ASSET MANAGER FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
SHARES VALUE
-------------------------
EastGroup Properties, Inc. .... 283 $ 8,249
Entertainment Properties
Trust......................... 311 10,008
Equity Inns, Inc. ............. 638 5,391
Equity Office Properties
Trust......................... 19,092 534,767
Equity One, Inc. .............. 997 16,700
Equity Residential............. 4,301 125,804
Essex Property Trust, Inc. .... 741 44,371
Federal Realty Investment
Trust......................... 771 29,259
FelCor Lodging Trust, Inc. .... 925 9,426
First Industrial Realty Trust,
Inc. ......................... 622 20,091
Gables Residential Trust....... 929 29,895
General Growth Properties,
Inc. ......................... 993 75,964
Getty Realty Corp. ............ 339 8,390
Glenborough Realty Trust,
Inc. ......................... 943 18,389
Glimcher Realty Trust.......... 548 11,607
Great Lakes REIT, Inc. ........ 254 4,072
Health Care Property Investors,
Inc. ......................... 994 46,350
Health Care REIT, Inc. ........ 691 22,907
Healthcare Realty Trust,
Inc. ......................... 662 22,343
Heritage Property Investment
Trust......................... 658 18,556
Highwoods Properties, Inc. .... 842 20,882
Home Properties, Inc. ......... 440 16,940
Hospitality Properties Trust... 982 36,010
Host Marriot Corp. ............ 4,618 48,258
HRPT Properties Trust.......... 2,242 20,985
Innkeepers USA Trust........... 593 5,159
Investors Real Estate Trust.... 562 5,581
Keystone Property Trust........ 344 6,880
Kilroy Realty Corp. ........... 938 27,108
Kimco Realty Corp. ............ 1,682 70,072
Koger Equity, Inc. ............ 338 6,547
Kramont Realty Trust........... 376 6,456
LaSalle Hotel Properties....... 330 5,561
Lexington Corporate Properties
Trust......................... 1,153 22,115
Liberty Property Trust......... 1,238 45,038
Macerich Co. (The)............. 830 33,366
Mack-Cali Realty Corp. ........ 2,515 94,790
Manufactured Home
Communities................... 351 13,338
Mid-America Apartment
Communities, Inc. ............ 282 8,855
Mills Corp. (The).............. 695 28,356
Mission West Properties,
Inc. ......................... 282 3,533
Monmouth Real Estate Investment
Corp. ........................ 229 1,947
Nationwide Health Properties,
Inc. ......................... 922 16,873
New Plan Excel Realty Trust.... 4,863 110,390
Parkway Properties, Inc. ...... 2,817 124,089
Pennsylvania Real Estate
Investment Trust.............. 354 11,824
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------------
Post Properties, Inc. ......... 590 $ 15,576
Prentiss Properties Trust...... 650 19,656
Prime Group Realty Trust....... 162 1,008
ProLogis....................... 630 18,610
PS Business Parks, Inc. ....... 338 12,743
Public Storage, Inc. .......... 1,976 79,040
Ramco-Gershenson Properties
Trust......................... 228 5,506
Realty Income Corp. ........... 554 21,828
Reckson Associates Realty
Corp. ........................ 914 20,309
Regency Centers Corp. ......... 950 35,226
Rouse Co. (The)................ 1,386 59,598
Saul Centers, Inc. ............ 245 6,664
Senior Housing Properties
Trust......................... 917 13,654
Shurgard Storage Centers,
Inc. ......................... 1,566 56,689
Simon Property Group, Inc. .... 4,910 221,343
Sizeler Property Investors,
Inc. ......................... 207 2,182
SL Green Realty Corp. ......... 564 20,389
Sovran Self Storage, Inc. ..... 204 6,905
Summit Properties, Inc. ....... 462 10,330
Sun Communities, Inc. ......... 287 10,461
Tanger Factory Outlet Centers,
Inc. ......................... 167 6,743
Taubman Centers, Inc. ......... 779 15,705
Town & Country Trust........... 258 5,993
Trizec Properties, Inc. ....... 2,334 31,159
U.S. Restaurant Properties,
Inc. ......................... 312 4,992
United Dominion Realty Trust,
Inc. ......................... 4,145 72,330
Universal Health Realty Income
Trust......................... 186 5,210
Urstadt Biddle Properties...... 292 3,957
Ventas, Inc. .................. 1,255 23,469
Vornado Realty Trust........... 1,754 88,665
Washington Real Estate
Investment Trust.............. 615 18,204
Weingarten Realty Investors.... 822 35,568
Winston Hotels, Inc. .......... 401 4,030
------------
Total Real Estate Investment
Trusts (Cost $2,863,633)...... 3,601,093
------------
<Caption>
SHORT-TERM INVESTMENTS (8.8%)
PRINCIPAL
AMOUNT
-----------
COMMERCIAL PAPER (2.9%)
Target Corp.
1.01%, due 11/12/03 (f)....... $ 4,000,000 3,998,765
UBS Finance Delaware LLC
1.04%, due 11/3/03 (f)........ 4,643,000 4,642,732
------------
Total Commercial Paper (Cost
$8,641,497)................... 8,641,497
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
188
ECLIPSE FUNDS
<Table>
<Caption>
SHORT-TERM INVESTMENTS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
U.S. GOVERNMENT (5.9%)
United States Treasury Bills
0.89%, due 12/4/03 (f)........ $ 6,800,000 $ 6,794,242
0.92%, due 11/20/03 (f)....... 10,700,000 10,694,878
------------
Total U.S. Government (Cost
$17,489,120).................. 17,489,120
------------
Total Short-Term Investments
(Cost $26,130,617)............ 26,130,617
------------
Total Investments (Cost
$253,426,555) (j)............. 102.2% 304,815,146(k)
Liabilities in Excess of Cash
and Other Assets.............. (2.2) (6,441,746)
----------- -----------
Net Assets..................... 100.0% $298,373,400
=========== ============
</Table>
<Table>
<Caption>
FUTURES CONTRACTS (-0.5%)
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION)(l)
---------------------------
CANADA (0.1%)
Standard & Poor's Toronto
Stock Exchange 60 Index
December 2003............... 134 $ 261,304
-----------
ITALY (0.0%) (B)
Milan MIB 30 Index December
2003........................ 98 27,078
-----------
SPAIN (0.0%) (B)
IBEX 35 Index November
2003........................ 144 132,403
-----------
UNITED STATES (0.1%)
United States Treasury Note
December 2003 (10 Year)..... 144 255,333
-----------
Total Contracts Long
(Settlement Value
$51,815,164)................ 676,118
-----------
</Table>
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION/
SHORT (DEPRECIATION)(l)
---------------------------
UNITED STATES (-0.7%)
Standard & Poor's 500 Index
December 2003............... 182 $(1,334,467)
Standard & Poor's MidCap 400
Index December 2003......... 56 (900,336)
-----------
Total Contracts Short
(Settlement Value
$63,108,850)................ (2,234,803)
-----------
Total Futures Contracts
(Settlement Value
$11,293,686) (g)(i)......... $(1,558,685)
===========
</Table>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) May be sold to institutional investors only.
(d) Yankee bond--dollar-denominated bond issued in the United States by foreign
banks and corporations.
(e) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and maturity
date will be determined upon settlement. The market value of these
securities at October 31, 2003 is $7,460,938.
(f) Segregated, partially segregated or designated as collateral for futures
contracts and TBAs.
(g) The combined market value of U.S. Government & Federal Agencies investments
and settlement value of U.S. Treasury Note futures contracts represents
27.1% of net assets.
(h) Exchange Traded Fund--represents a basket of securities that are traded on
an exchange.
(i) The combined market value of common stocks and settlement value of Index
futures contracts represents 40.9% of net assets.
(j) The cost for federal income tax purposes is $253,876,874.
(k) At October 31, 2003 net unrealized appreciation was $50,938,272, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $53,021,705 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $2,083,433.
(l) Represents the difference between the value of the contracts at the time
they were opened and the value at October 31, 2003.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
189
ASSET MANAGER FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $253,426,555)............................. $304,815,146
Cash............................................. 514,005
Receivables:
Investment securities sold..................... 7,478,805
Dividends and interest......................... 1,086,776
Fund shares sold............................... 336,632
Variation margin on futures contracts.......... 120,060
Other assets..................................... 8,849
------------
Total assets............................... 314,360,273
------------
LIABILITIES:
Payable due to broker for futures contracts...... 66,054
Payables:
Investment securities purchased................ 15,353,852
Fund shares redeemed........................... 228,593
Transfer agent................................. 113,691
Manager........................................ 104,307
Custodian...................................... 23,672
NYLIFE Distributors............................ 5,247
Directors...................................... 1,976
Accrued expenses................................. 89,481
------------
Total liabilities.......................... 15,986,873
------------
Net assets....................................... $298,373,400
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class.................................. $ 21,884
Service Class.................................. 3,007
L Class........................................ 4
Additional paid-in capital....................... 326,368,288
Accumulated undistributed net investment
income......................................... 5,852,466
Accumulated net realized loss on investments,
futures contracts and foreign currency
transactions................................... (83,702,599)
Net unrealized appreciation on investments and
futures contracts.............................. 49,829,906
Net unrealized appreciation on foreign currency
transactions................................... 444
------------
Net assets....................................... $298,373,400
============
No-Load Class
Net assets applicable to outstanding shares...... $262,438,207
============
Shares of capital stock outstanding.............. 21,884,045
============
Net asset value per share outstanding............ $ 11.99
============
Service Class
Net assets applicable to outstanding shares...... $ 35,889,406
============
Shares of capital stock outstanding.............. 3,007,050
============
Net asset value per share outstanding............ $ 11.94
============
L Class
Net assets applicable to outstanding shares...... $ 45,787
============
Shares of capital stock outstanding.............. 3,862
============
Net asset value per share outstanding............ $ 11.86
Maximum sales charge (1.00% of offering price)... 0.12
------------
Maximum offering price per share outstanding..... $ 11.98
============
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Interest....................................... $ 5,190,161
Dividends (a).................................. 3,761,254
------------
Total income............................... 8,951,415
------------
Expenses:
Manager........................................ 2,348,463
Transfer agent................................. 705,559
Professional................................... 198,572
Custodian...................................... 160,290
Interest....................................... 159,405
Shareholder communication...................... 70,571
Service--Service Class......................... 58,113
Service--L Class............................... 61
Registration................................... 38,910
Directors...................................... 31,186
Distribution--L Class.......................... 183
Miscellaneous.................................. 110,158
------------
Total expenses before
reimbursement............................. 3,881,471
Expense reimbursement from Manager............. (824,308)
------------
Net expenses............................... 3,057,163
------------
Net investment income............................ 5,894,252
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss from:
Security transactions.......................... (35,311,171)
Futures transactions........................... (4,753,093)
Foreign currency transactions.................. (142,163)
------------
Net realized loss on investments and foreign
currency transactions.......................... (40,206,427)
------------
Net change in unrealized depreciation on
investments:
Security transactions.......................... 75,780,594
Futures transactions........................... 510,706
Foreign currency transactions.................. 634
------------
Net unrealized gain on investments and foreign
currency transactions.......................... 76,291,934
------------
Net realized and unrealized gain on investments
and foreign currency transactions.............. 36,085,507
------------
Net increase in net assets resulting from
operations..................................... $ 41,979,759
============
</Table>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $46.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
190
ECLIPSE FUNDS
ASSET MANAGER FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------- ------------
DECREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 5,894,252 $ 8,535,366
Net realized loss on investments, futures contracts and
foreign currency transactions.......................... (40,206,427) (16,883,705)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions.......... 76,291,934 (32,726,422)
------------- ------------
Net increase (decrease) in net assets resulting from
operations............................................. 41,979,759 (41,074,761)
------------- ------------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (7,843,185) (10,030,374)
Service Class......................................... (396,933) (502,045)
------------- ------------
Total dividends to shareholders..................... (8,240,118) (10,532,419)
------------- ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 41,070,189 60,908,835
Service Class......................................... 14,487,283 5,357,038
L Class............................................... 41,320 --
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 5,250,193 6,802,154
Service Class......................................... 396,273 501,153
------------- ------------
61,245,258 73,569,180
Cost of shares redeemed:
No-Load Class......................................... (214,366,458) (72,085,088)
Service Class......................................... (4,423,693) (3,618,659)
L Class............................................... (90) --
------------- ------------
Decrease in net assets derived from capital share
transactions......................................... (157,544,983) (2,134,567)
------------- ------------
Net decrease in net assets............................ (123,805,342) (53,741,747)
NET ASSETS:
Beginning of year......................................... 422,178,742 475,920,489
------------- ------------
End of year............................................... $ 298,373,400 $422,178,742
============= ============
Accumulated undistributed net investment income at end of
year.................................................... $ 5,852,466 $ 7,832,913
============= ============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
191
ASSET MANAGER FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
--------------------------------------------------------------------
YEAR ENDED OCTOBER 31
--------------------------------------------------------------------
2003 2002 2001 2000
-------- -------- -------- --------
Net asset value at beginning of period...... $ 10.81 $ 12.11 $ 15.21 $ 14.57
-------- -------- -------- --------
Net investment income....................... 0.18(d) 0.22 0.37(c) 0.51
Net realized and unrealized gain (loss) on
investments................................ 1.22 (1.25) (2.09)(c) 1.08
Net realized and unrealized gain (loss) on
foreign currency transactions.............. (0.00)(a) (0.00)(a) (0.00)(a) (0.01)
-------- -------- -------- --------
Total from investment operations............ 1.40 (1.03) (1.72) 1.58
-------- -------- -------- --------
Less dividends and distributions:
From net investment income.................. (0.22) (0.27) (0.50) (0.50)
From net realized gain on investments....... -- -- (0.88) (0.44)
-------- -------- -------- --------
Total dividends and distributions........... (0.22) (0.27) (1.38) (0.94)
-------- -------- -------- --------
Net asset value at end of period............ $ 11.99 $ 10.81 $ 12.11 $ 15.21
======== ======== ======== ========
Total investment return..................... 13.17% (8.78%) (12.12%) 11.18%
Ratios (to average net assets)/
Supplemental Data:
Net investment income...................... 1.65% 1.84% 2.66%(c) 3.45%
Net expenses............................... 0.83% 0.83% 0.83% 0.83%
Expenses (before reimbursement)............ 1.06% 0.94% 0.87% 0.83%
Portfolio turnover rate..................... 113% 4% 15% 49%
Net assets at end of period (in 000's)...... $262,438 $399,199 $452,246 $561,329
<Caption>
NO-LOAD CLASS
--------------------------------
JANUARY 1
THROUGH YEAR ENDED
OCTOBER 31, DECEMBER 31,
1999* 1998
----------- ------------
Net asset value at beginning of period...... $ 15.36 $ 14.83
-------- --------
Net investment income....................... 0.41 0.43
Net realized and unrealized gain (loss) on
investments................................ 0.41 2.70
Net realized and unrealized gain (loss) on
foreign currency transactions.............. (0.03) 0.02
-------- --------
Total from investment operations............ 0.79 3.15
-------- --------
Less dividends and distributions:
From net investment income.................. (0.01) (0.43)
From net realized gain on investments....... (1.57) (2.19)
-------- --------
Total dividends and distributions........... (1.58) (2.62)
-------- --------
Net asset value at end of period............ $ 14.57 $ 15.36
======== ========
Total investment return..................... 5.58%(b) 21.31%
Ratios (to average net assets)/
Supplemental Data:
Net investment income...................... 3.40%+ 2.64%
Net expenses............................... 0.78%+ 0.80%
Expenses (before reimbursement)............ 0.78%+ 0.80%
Portfolio turnover rate..................... 18% 55%
Net assets at end of period (in 000's)...... $513,860 $500,449
</Table>
- ------------
<Table>
* The Fund changed its fiscal year end from December 31 to
October 31.
** Commencement of Operations.
+ Annualized.
(a) Less than one cent per share.
(b) Total return is not annualized.
(c) As required, effective November 1, 2000, the Fund has
adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began amortizing premium
on debt securities. The effect of this change for the year
ended October 31, 2001 is shown below. Per share ratios and
supplemental data for periods prior to November 1, 2000,
have not been restated to reflect this change in
presentation.
</Table>
<Table>
<Caption>
NO-LOAD SERVICE
CLASS CLASS
------- -------
Decrease net investment income.............................. ($0.01) ($0.01)
Increase net realized and unrealized gains and losses....... 0.01 0.01
Decrease ratio of net investment income..................... (0.06%) (0.06%)
</Table>
<Table>
(d) Per share data based on average shares outstanding during
the period.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
192
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS L CLASS
---------------------------------------------------------------------------------------- -------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED DECEMBER 30, 2002**
-------------------------------------------------------- OCTOBER 31, DECEMBER 31, THROUGH
2003 2002 2001 2000 1999* 1998 OCTOBER 31, 2003
-------- -------- -------- -------- ----------- ------------ -------------------
$ 10.76 $ 12.05 $ 15.14 $ 14.50 $ 15.33 $ 14.81 $ 10.64
-------- -------- -------- -------- -------- -------- --------
0.15(d) 0.18 0.33(c) 0.50 0.39 0.39 0.06(d)
1.22 (1.23) (2.08)(c) 1.05 0.38 2.69 1.16
(0.00)(a) (0.00)(a) (0.00)(a) (0.01) (0.03) 0.02 (0.00)(a)
-------- -------- -------- -------- -------- -------- --------
1.37 (1.05) (1.75) 1.54 0.74 3.10 1.22
-------- -------- -------- -------- -------- -------- --------
(0.19) (0.24) (0.46) (0.46) (0.00)(a) (0.39) --
-- -- (0.88) (0.44) (1.57) (2.19) --
-------- -------- -------- -------- -------- -------- --------
(0.19) (0.24) (1.34) (0.90) (1.57) (2.58) --
-------- -------- -------- -------- -------- -------- --------
$ 11.94 $ 10.76 $ 12.05 $ 15.14 $ 14.50 $ 15.33 $ 11.86
======== ======== ======== ======== ======== ======== ========
12.92% (8.96%) (12.36%) 10.96% 5.31%(b) 21.00% 11.47%(b)
1.40% 1.59% 2.41%(c) 3.20% 3.15%+ 2.39% 0.65%+
1.08% 1.08% 1.08% 1.08% 1.03%+ 1.05% 1.83%+
1.31% 1.19% 1.12% 1.08% 1.03%+ 1.05% 2.06%+
113% 4% 15% 49% 18% 55% 113%
$ 35,889 $ 22,980 $ 23,675 $ 27,978 $ 29,087 $ 16,853 $ 46
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
193
Eclipse Balanced Fund
- --------------------------------------------------------------------------------
All broadly watched equity indices provided positive performance for the 12
months ended October 31, 2003. Small-capitalization stocks showed the strongest
relative performance, followed by mid-capitalization and then
large-capitalization stocks. The market favored the growth style over the value
style of investing in the small- and mid-capitalization sectors, while value
stocks outperformed growth stocks in the large-capitalization sector.
For most of the first quarter of 2003, the market remained uncertain because of
political conflicts in the Middle East. As coalition troops assembled in Kuwait
in mid-March, the stock market began to rise. Investors tended to react
positively from the time coalition forces approached Baghdad until President
Bush announced that major combat operations had concluded. From May through
October, sentiments remained positive, and the domestic equity market continued
to rise. Low interest rates and indications of rebounding economic activity
helped to fuel an optimistic outlook. Consumer confidence, which rose sharply in
April, has been relatively stagnant since then and could continue in a holding
pattern if the labor market fails to improve.
Bond yields fell to 45-year lows in May 2003 and moved even lower as the Federal
Reserve continued to reduce the targeted federal funds rate in June. Even so,
the 10-year Treasury bond yield ended the 12-month reporting period slightly
higher than where it began. The yield curve steepened as short-term rates
continued to decline. The weak labor market and lackluster consumer confidence
continued to affect the bond market.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, Eclipse Balanced Fund returned
20.13% for No-Load Class shares and 19.93% for Service Class shares. Over the
same period, L Class shares returned 19.03% excluding all sales charges. All
share classes outperformed the 15.23% return of the average Lipper(1) balanced
fund over the same period. All share classes underperformed the 21.75% return of
the Fund's Balanced Composite Index,(2) the 20.80% return of the S&P 500
Index,(3) and the 35.88% return of the Russell Midcap Index,(4) for the 12
months ended October 31, 2003. All share classes outperformed the 5.18% return
of the Merrill Lynch Corporate & Government 1-10 Years Bond Index(5) for the
same 12-month period.
No-Load Class shares of Eclipse Balanced Fund were rated five stars overall out
of 631 moderate allocation funds by Morningstar(6) as of October 31, 2003. The
Fund's No-Load Class shares were rated five stars out of 631 moderate allocation
funds for the three-year period then ended, five stars out of 499 moderate
allocation funds for the five-year period then ended, and four stars out of 212
moderate allocation funds for the 10-year period ended October 31, 2003.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1. Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
2. The Fund's Balanced Composite Index is comprised of the Russell Midcap(R)
Value Index and the Merrill Lynch Corporate and Government 1-10 Years Bond
Index weighted 60%/40%, respectively. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an index
or a composite.
3. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
4. The Russell Midcap(R) Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000(R) Index, which
in turn is an unmanaged index that measures the performance of the 1,000
largest U.S. companies based on total market capitalization. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
5. The Merrill Lynch Corporate & Government 1-10 Years Bond Index is a market
capitalization-weighted index including U.S. government and fixed-coupon
domestic investment grade corporate bonds. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly in an index.
6. For each fund with at least a three-year history, Morningstar calculates a
Morningstar Rating(TM) based on a Morningstar Risk-Adjusted Return measure
that accounts for variation in a fund's monthly performance (including the
effects of sales charges, loads, and redemption fees), placing more emphasis
on downward variations and rewarding consistent performance. The top 10% of
funds in each category receive five stars, the next 22.5% receive four stars,
the middle 35% receive three stars, the next 22.5% receive two stars, and the
bottom 10% receive one star. The Overall Morningstar Rating(TM) for a fund is
derived from a weighted average of the performance figures associated with
its three-, five- and 10-year (if applicable) Morningstar Rating(TM) metrics.
194
INVESTMENT PROCESS
The Fund maintains a targeted allocation of 60% equities and 40% fixed-income
securities and cash equivalents. Equities are limited to a broad array of
mid-cap stocks, and the fixed-income portion of the portfolio is focused on
short- to intermediate-duration, government securities and high-quality
corporate bonds.
In the equity portion of its portfolio, the Fund selects stocks based on a
quantitative approach that focuses on relative valuation and strong current
operating results. Using three years of publicly available annual and quarterly
financial statistical data, our proprietary models seek to identify companies
that have healthy financial positions today and may have solid potential for the
future. Since "we visit the data rather than the company," a corporation's
quantitative history is the only relevant consideration in the Fund's equity
investment process.
STRONG AND WEAK PERFORMERS
During the reporting period, stocks from various industries made positive
contributions to the Fund's performance. The Fund's five best-performing stocks
for the Fund's fiscal year included Hovnanian Enterprises (+115%),(7) a leading
national homebuilder; J.B. Hunt Transport Services (+84%), the third-largest
U.S. trucking company; PacifiCare Health Systems (+86%), the biggest publicly
traded operator of Medicare Health Plans; AutoNation (+76%), America's largest
retailer of new and used vehicles; and GTECH Holdings (+72%), which operates
computer online lottery systems.
The Fund's five worst-performing stocks were all sold during the reporting
period. We sold all of the Fund's shares of specialty-retail chain Michaels
Stores (-46%) in February 2003. The Fund also sold its entire position in
independent power company Calpine (-33%) in October. Saks (-30%) is a U.S.
department store company that was eliminated from the Fund's portfolio in March
2003. Adolph Coors (-28%) is the third largest U.S. brewer, and the Fund sold
its position in the company in April 2003. The Fund's holdings in power-tool
manufacturer Black & Decker (-25%) were sold during February and March of 2003.
PURCHASES AND SALES
The Fund purchases stocks that have relatively improving operating
characteristics and are relatively undervalued based on our proprietary model.
Maxtor, ADTRAN, and Doral Financial were among the securities that fit the
Fund's purchase criteria during the reporting period.
Maxtor (+104%) produces hard disk-drive storage products for desktop systems.
Strong second- and third-quarter 2003 financials have been helped by the
company's focus on cost and expense controls. The Fund purchased the company's
shares in May 2003 and continues to hold them.
ADTRAN (+97%) designs, develops, manufacturers, markets, and services a variety
of high-speed digital transmission products. The company reported strong second-
and third-quarter 2003 financials and has introduced new products. The stock,
which was purchased in February 2003, is still part of the portfolio.
Doral Financial (+93%) is a diversified financial holding company. The low
interest-rate environment and the continued strength of the Puerto Rican
residential mortgage market helped the company report good earnings in 2003. The
Fund purchased this holding in November 2002, and it has been a strong performer
for the portfolio.
The Fund sells stocks that exhibit deteriorating operating results and/or are
relatively overvalued. Three stocks sold during the fiscal year were Rational
Software, Rent-a-Center and Neiman Marcus Group.
- --------------------------------------------------------------------------------
7. Performance percentages reflect total returns of Fund holdings in the
securities mentioned, including purchases and sales, for the 12 months
ended 10/31/03, or for the portion of the reporting period such securities
were held in the Fund, if shorter.
195
Rational Software (+58%) is a computer software developer that was acquired by
International Business Machines in an all-cash transaction in February 2003. For
the portion of the reporting period the stock was held in the Fund, it provided
strong positive results.
Rent-a-Center (+72%) offers home electronics, appliances, furniture, and
accessories under flexible rental/purchase agreements. The company exhibited
strong revenue and earnings growth for the first three quarters of 2003. The
entire position was sold in August 2003.
Neiman Marcus Group (+72%) is a high-end specialty retailer that reported strong
revenues while reducing costs for its fiscal year. We sold the Fund's position
in the stock in August 2003.
WEIGHTING CHANGES
In the equity portion of the Fund's portfolio, a significant weighting change
was an increase in the technology hardware & equipment industry group from 7.10%
on October 31, 2002, to 11.65% on October 31, 2003. The shift in weight resulted
from new purchases and improved performance of technology hardware & equipment
stocks relative to other industry groups.
Another significant change in the equity portion of the Fund's portfolio was a
decrease in retailing industry group holdings from 13.22% at the beginning of
the reporting period to 5.24% at the end. The decline in weight resulted from
position sales and weak performance of retailers relative to other industry
groups.
As of October 31, 2003, the equity portion of the Fund's portfolio was
overweighted relative to the Russell Midcap(R) Value Index in the consumer
durables & apparel, technology hardware & equipment, and health care equipment &
services industry groups. The Fund's performance benefited from the relative
overweightings in health care equipment & services and consumer durables &
apparel. Although the Fund's technology hardware & equipment holdings showed
positive performance, the results were weaker than the industry group's
performance in the Russell Midcap Value Index.
At the end of the Fund's fiscal year, the equity portion of the Fund's portfolio
was underweighted relative to the Russell Midcap Value Index in the utilities,
materials, and insurance industry groups. The Fund benefited from the relative
underweighting in the insurance and materials industry groups. Although the Fund
was underweighted in utilities, its performance in this industry group was
weaker than that of related stocks held in the Russell Midcap Value Index.
BOND INVESTMENTS
The bond portion of the Fund's portfolio invests in U.S. government securities
and investment-grade bonds issued by U.S. corporations. Investments are selected
based on credit quality and duration. The Fund maintains an intermediate-term
duration, which ranges from three to five years, and has a laddered maturity
schedule. For the 12 months ended October 31, 2003, the Fund's bond investments
performed roughly in line with their benchmark index.
LOOKING AHEAD
We will continue to utilize the Fund's proprietary quantitative methodologies to
select mid-capitalization stocks of companies that our model indicates are
relatively undervalued and have strong operating characteristics. We will
maintain our allocation to high-quality bonds with a duration appropriate to the
Fund's objective.
Whatever the markets or the economy may bring, the Fund will continue to seek
high total return.
WESLEY G. MCCAIN
JOAN M. SABELLA
Portfolio Managers
New York Life Investment Management LLC
196
$10,000 INVESTED IN
ECLIPSE BALANCED FUND VERSUS
LIPPER BALANCED FUND INDEX,
BALANCED COMPOSITE INDEX,
S&P 500 INDEX, RUSSELL MIDCAP INDEX,
AND MERRILL LYNCH CORPORATE &
GOVERNMENT 1-10 YEARS BOND INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE BALANCED FUND LIPPER BALANCED FUND INDEX BALANCED COMPOSITE INDEX
--------------------- -------------------------- ------------------------
10/31/93 $ 10,000 $ 10,000 $ 10,000
94 10,243 10,469 10,060
95 11,839 11,401 11,918
96 13,140 13,565 13,688
97 16,447 15,421 16,716
98 17,324 19,479 18,005
99 17,792 21,647 18,720
00 19,405 22,727 20,592
01 20,477 22,782 21,606
02 20,923 21,870 21,835
10/31/03 25,134 21,201 26,584
</Table>
$10,000 INVESTED IN
ECLIPSE BALANCED FUND VERSUS
LIPPER BALANCED FUND INDEX,
BALANCED COMPOSITE INDEX,
S&P 500 INDEX, RUSSELL MIDCAP INDEX,
AND MERRILL LYNCH CORPORATE &
GOVERNMENT 1-10 YEARS BOND INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
LIPPER BALANCED FUND BALANCED COMPOSITE
ECLIPSE BALANCED FUND INDEX INDEX RUSSELL MIDCAP INDEX
--------------------- -------------------- ------------------ --------------------
10/31/93 $ 10,000 $ 10,000 $ 10,000 $ 10,000
94 10,216 10,469 10,060 10,235
95 11,781 11,401 11,918 12,620
96 13,045 13,565 13,688 15,100
97 16,290 15,421 16,716 19,444
98 17,161 19,479 18,005 20,311
99 17,533 21,647 18,720 23,789
00 19,082 22,727 20,592 29,434
01 20,087 22,782 21,606 24,130
02 20,475 21,870 21,835 22,194
10/31/03 24,556 21,201 26,584 30,157
</Table>
$10,000 INVESTED IN
ECLIPSE BALANCED FUND VERSUS
LIPPER BALANCED FUND INDEX,
BALANCED COMPOSITE INDEX,
S&P 500 INDEX, RUSSELL MIDCAP INDEX,
AND MERRILL LYNCH CORPORATE &
GOVERNMENT 1-10 YEARS BOND INDEX
CLASS L SHARES
[L CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE BALANCED FUND LIPPER BALANCED FUND INDEX BALANCED COMPOSITE INDEX
--------------------- -------------------------- ------------------------
10/31/93 $ 9,900 $ 10,000 $ 10,000
94 10,043 10,469 10,060
95 11,492 11,401 11,918
96 12,630 13,565 13,688
97 15,659 15,421 16,716
98 16,735 19,479 18,005
99 16,619 21,647 18,720
00 17,948 22,727 20,592
01 18,748 22,782 21,606
02 18,963 21,870 21,835
10/31/03 22,571 21,201 26,584
</Table>
[LEGEND FOR GRAPHS]
Source: Lipper Inc., 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93 AND, FOR CLASS L
SHARES, REFLECT THE DEDUCTION OF ALL SALES CHARGES THAT WOULD HAVE APPLIED FOR
THE PERIOD OF INVESTMENT.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------
Eclipse Balanced Fund No-Load Class 20.13% 7.21% 9.65%
Eclipse Balanced Fund Service Class(2) 19.93 6.97 9.40
Eclipse Balanced Fund Class L (without sales charges)(3) 19.03 6.17 8.59
Eclipse Balanced Fund Class L (with sales charges)(3) 16.84 5.95 8.48
Average Lipper balanced fund(4) 15.23 2.88 7.69
Lipper Balanced Fund Index(5) 16.21 3.53 7.80
Balanced Composite Index(6) 21.75 8.10 10.27
S&P 500 Index(7) 20.80 0.53 10.43
Russell Midcap Index(8) 35.88 8.23 11.67
Merrill Lynch Corporate & Government 1-10 Years Bond
Index(9) 5.18 6.47 6.52
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
<Caption>
YEAR YEAR YEAR YEAR YEAR YEAR 10 MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
YEAR ENDED DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER OCTOBER OCTOBER
31, 1994 31, 1995 31, 1996 31, 1997 31, 1998 31, 1999 31, 2000 31, 2001 31, 2002
- ------------------- -------- -------- -------- -------- -------- -------- --------- --------
0.01 22.99 12.91 23.40 8.03 -0.36 9.64 1.80 2.18
<Caption>
YEAR
ENDED
YEAR ENDED DECEMBER OCTOBER
31, 1994 31, 2003
- ------------------- --------
0.01 20.13
</Table>
197
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include
the service fee of .25% on an annualized basis of the average daily net
asset value of the Service Class shares. Class L shares are subject to a 1%
sales charge and a contingent deferred sales charge (CDSC) of 1% if redeemed
within one year of purchase. Performance figures for Class L shares reflect
the .75% distribution fee and .25% service fee.
2. Performance figures for the Service Class, first offered to the public on
7/1/02, include the historical performance of the No-Load Class from the
Fund's inception on 5/1/89 through 6/30/02. Performance figures for these
classes will vary after 6/30/02, based on differences in their expense
structures.
3. Performance figures for Class L shares, first offered to the public on
12/30/02, include the historical performance of the No-Load Class shares
from the Fund's inception on 5/1/89 up to 12/30/02.
4. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
5. The Lipper Balanced Fund Index is an unmanaged equally weighted index of the
30 largest funds in the Lipper balanced fund universe. Lipper Inc. is an
independent fund performance monitor. Results are based on total returns
with all dividend and capital gain distributions reinvested. An investment
cannot be made directly into an index.
6. The Fund's Balanced Composite Index is comprised of the Russell Midcap(R)
Value Index and the Merrill Lynch Corporate and Government 1-10 Years Bond
Index weighted 60%/40%. Results assume reinvestment of all income and
capital gains. An investment cannot be made directly into an index or a
composite.
7. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
8. The Russell Midcap(R) Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000(R) Index,
which in turn is an unmanaged index that measures the performance of the
1,000 largest U.S. companies based on total market capitalization. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly into an index.
9. The Merrill Lynch Corporate & Government 1-10 Years Bond Index is a market
capitalization-weighted index including U.S. government and fixed-coupon
domestic investment grade corporate bonds. Results assume reinvestment of
all income and capital gains. An investment cannot be made directly in an
index.
INFORMATION ABOUT ECLIPSE BALANCED FUND ON THIS PAGE AND THE PRECEDING PAGES HAS
NOT BEEN AUDITED.
198
ECLIPSE FUNDS
BALANCED FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
LONG-TERM BONDS (38.2%)+
CORPORATE BONDS (29.3%)
PRINCIPAL
AMOUNT VALUE
--------------------------
AEROSPACE & DEFENSE (0.7%)
Honeywell, Inc.
7.125%, due 4/15/08............ $ 150,000 $ 169,169
Rockwell International Corp.
6.625%, due 6/1/05............. 200,000 213,151
United Technology Corp.
6.50%, due 6/1/09.............. 750,000 851,161
------------
1,233,481
------------
BEVERAGES (1.2%)
Anheuser-Busch Cos., Inc.
5.375%, due 9/15/08............ 530,000 570,362
5.75%, due 4/1/10.............. 225,000 246,080
Coca-Cola Co. (The)
4.00%, due 6/1/05.............. 500,000 517,213
Coca-Cola Enterprises, Inc.
6.625%, due 8/1/04............. 100,000 103,581
PepsiCo, Inc.
5.75%, due 1/15/08............. 500,000 544,523
------------
1,981,759
------------
CAPITAL MARKETS (2.0%)
Bear Stearns Cos., Inc. (The)
4.00%, due 1/31/08............. 750,000 762,002
J.P. Morgan & Co., Inc.
6.25%, due 2/15/11............. 300,000 327,666
J.P. Morgan Chase & Co.
5.35%, due 3/1/07.............. 500,000 536,777
Lehman Brothers Holdings, Inc.
6.625%, due 2/5/06............. 573,000 624,054
Lehman Brothers, Inc.
7.625%, due 6/1/06............. 350,000 393,844
Merrill Lynch & Co., Inc.
7.00%, due 1/15/07............. 700,000 775,268
------------
3,419,611
------------
CHEMICALS (0.6%)
E.I. Du Pont de Nemours & Co.
3.375%, due 11/15/07........... 921,000 924,961
------------
COMMERCIAL BANKS (1.5%)
BankAmerica Corp.
7.125%, due 3/1/09............. 900,000 1,028,924
U.S. Bancorp
3.125%, due 3/15/08............ 500,000 491,027
Wachovia Corp.
4.95%, due 11/1/06............. 500,000 530,555
Wells Fargo & Co.
3.50%, due 4/4/08.............. 500,000 499,360
------------
2,549,866
------------
COMMERCIAL SERVICES & SUPPLIES (0.1%)
Pitney Bowes, Inc.
5.50%, due 4/15/04............. 100,000 101,845
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
COMPUTERS & PERIPHERALS (1.1%)
Hewlett-Packard Co.
5.75%, due 12/15/06............ $ 750,000 $ 810,118
International Business Machines
Corp.
4.875%, due 10/1/06............ 500,000 530,454
5.50%, due 1/15/09............. 535,000 575,678
------------
1,916,250
------------
CONSUMER FINANCE (2.5%)
American Express Credit Corp.
3.00%, due 5/16/08............. 1,000,000 975,432
Caterpillar Financial Services
Corp.
4.875%, due 6/15/07............ 830,000 882,790
Household Finance Corp.
6.375%, due 8/1/10............. 500,000 550,567
John Deere Capital Corp.
3.125%, due 12/15/05........... 500,000 510,736
3.90%, due 1/5/08.............. 250,000 253,113
4.50%, due 8/22/07............. 500,000 520,523
SLM Corp.
3.625%, due 3/17/08............ 500,000 499,755
------------
4,192,916
------------
DIVERSIFIED FINANCIAL SERVICES (1.6%)
Citigroup, Inc.
5.00%, due 3/6/07.............. 750,000 798,732
Heller Financial, Inc.
6.375%, due 3/15/06............ 250,000 272,816
Pitney Bowes Credit Corp.
5.75%, due 8/15/08............. 1,000,000 1,091,267
Wells Fargo Financial, Inc.
5.45%, due 5/3/04.............. 350,000 356,989
6.85%, due 7/15/09............. 125,000 143,675
------------
2,663,479
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.7%)
Bell Atlantic West Virginia,
Inc.
7.00%, due 8/15/04............. 100,000 103,987
BellSouth Telecommunications,
Inc.
5.875%, due 1/15/09............ 300,000 326,700
GTE North, Inc., Series F
6.375%, due 2/15/10............ 500,000 545,112
New York Telephone Co.
6.125%, due 1/15/10............ 1,000,000 1,074,116
6.25%, due 2/15/04............. 150,000 152,037
Pacific Bell
6.875%, due 8/15/06............ 500,000 555,449
Southwestern Bell Telephone Co.
6.375%, due 11/15/07........... 100,000 110,114
------------
2,867,515
------------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
199
BALANCED FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
ELECTRIC UTILITIES (0.1%)
Potomac Electric Power Co.
6.50%, due 3/15/08............. $ 100,000 $ 110,630
------------
ELECTRICAL EQUIPMENT (0.2%)
Emerson Electric Co.
5.00%, due 10/15/08............ 300,000 318,164
------------
FOOD & STAPLES RETAILING (0.6%)
Sysco Corp.
6.50%, due 6/15/05............. 500,000 535,967
Wal-Mart Stores, Inc.
7.25%, due 6/1/13.............. 400,000 471,424
------------
1,007,391
------------
FOOD PRODUCTS (3.1%)
Campbell Soup Co.
5.50%, due 3/15/07............. 750,000 811,048
ConAgra Foods, Inc.
7.40%, due 9/15/04............. 650,000 679,964
General Mills, Inc.
5.125%, due 2/15/07............ 500,000 532,412
Kellogg Co.
4.875%, due 10/15/05........... 645,000 678,852
Sara Lee Corp., Series C
6.00%, due 1/15/08............. 1,200,000 1,301,833
Unilever Capital Corp.
6.875%, due 11/1/05............ 1,100,000 1,200,930
------------
5,205,039
------------
HEALTH CARE PROVIDERS & SERVICES (0.7%)
Cardinal Health, Inc.
4.45%, due 6/30/05............. 580,000 602,634
6.00%, due 1/15/06............. 450,000 485,343
------------
1,087,977
------------
HOTELS, RESTAURANTS & LEISURE (0.2%)
McDonald's Corp., Series G
4.15%, due 2/15/05............. 250,000 256,758
------------
HOUSEHOLD PRODUCTS (0.8%)
Colgate-Palmolive Co., Series E
3.98%, due 4/29/05............. 500,000 517,695
Procter & Gamble Co. (The)
4.00%, due 4/30/05............. 500,000 517,709
4.75%, due 6/15/07............. 250,000 264,152
------------
1,299,556
------------
INDUSTRIAL CONGLOMERATES (0.3%)
3M Co., Series C
4.15%, due 6/30/05............. 500,000 519,607
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
INSURANCE (1.0%)
Loews Corp.
6.75%, due 12/15/06............ $ 500,000 $ 541,047
Marsh & McLennan Cos., Inc.
6.625%, due 6/15/04............ 1,000,000 1,031,417
Progressive Corp.
6.60%, due 1/15/04............. 150,000 151,528
------------
1,723,992
------------
IT SERVICES (0.3%)
First Data Corp., Series D
5.80%, due 12/15/08............ 525,000 577,044
------------
MACHINERY (0.5%)
Illinois Tool Works, Inc.
5.75%, due 3/1/09.............. 820,000 898,413
------------
MEDIA (0.6%)
Gannett Co., Inc.
4.95%, due 4/1/05.............. 500,000 521,150
5.50%, due 4/1/07.............. 500,000 541,682
------------
1,062,832
------------
MULTILINE RETAIL (0.7%)
Target Corp.
5.375%, due 6/15/09............ 350,000 377,201
5.50%, due 4/1/07.............. 350,000 378,941
5.95%, due 5/15/06............. 350,000 380,223
------------
1,136,365
------------
MULTI-UTILITIES & UNREGULATED POWER (1.0%)
IES Utilities, Inc., Series A
6.625%, due 8/1/09............. 1,500,000 1,661,254
------------
OIL & GAS (0.5%)
ChevronTexaco Capital Co.
3.50%, due 9/17/07............. 808,000 818,510
------------
PERSONAL PRODUCTS (0.6%)
Gillette Co. (The)
2.875%, due 3/15/08............ 500,000 491,422
3.50%, due 10/15/07............ 500,000 500,502
------------
991,924
------------
PHARMACEUTICALS (3.0%)
Abbott Laboratories
5.125%, due 7/1/04............. 500,000 512,232
5.625%, due 7/1/06............. 500,000 541,765
Bristol-Myers Squibb Co.
4.75%, due 10/1/06............. 500,000 527,284
Lilly (Eli) & Co.
5.50%, due 7/15/06............. 750,000 806,273
Merck & Co., Inc., Series E
4.125%, due 1/18/05............ 750,000 773,339
Pfizer, Inc.
3.625%, due 11/1/04............ 1,000,000 1,021,672
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
200
ECLIPSE FUNDS
<Table>
<Caption>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
PHARMACEUTICALS (CONTINUED)
Pharmacia Corp.
5.875%, due 12/1/08............ $ 500,000 $ 552,514
Warner-Lambert Co.
6.00%, due 1/15/08............. 250,000 276,122
------------
5,011,201
------------
SPECIALTY RETAIL (1.0%)
Home Depot, Inc. (The)
5.375%, due 4/1/06............. 1,280,000 1,370,524
Sherwin-Williams Co. (The)
6.85%, due 2/1/07.............. 200,000 223,808
------------
1,594,332
------------
THRIFTS & MORTGAGE FINANCE (0.3%)
General Electric Capital Corp.
Series A
4.25%, due 1/15/08............. 500,000 514,828
------------
TRANSPORTATION INFRASTRUCTURE (0.8%)
International Lease Finance
Corp.
4.50%, due 5/1/08.............. 500,000 513,269
5.625%, due 6/1/07............. 750,000 806,878
------------
1,320,147
------------
Total Corporate Bonds
(Cost $47,755,097)............. 48,967,647
------------
FEDERAL AGENCIES (8.9%)
FEDERAL FARM CREDIT BANK (1.4%)
2.25%, due 9/1/06.............. 500,000 494,677
3.47%, due 10/3/07............. 500,000 505,017
3.80%, due 9/4/07.............. 500,000 512,240
3.875%, due 5/7/10............. 750,000 737,928
------------
2,249,862
------------
FEDERAL HOME LOAN BANK (4.3%)
2.50%, due 3/15/06............. 1,000,000 1,004,612
3.00%, due 10/30/08............ 1,000,000 999,703
3.375%, due 2/15/08............ 500,000 500,032
3.50%, due 2/11/08............. 1,000,000 1,003,380
3.625%, due 11/14/06........... 750,000 758,215
3.75%, due 4/1/10.............. 750,000 734,024
3.80%, due 2/12/08............. 440,000 442,438
3.875%, due 2/12/10............ 250,000 246,999
4.42%, due 3/4/10.............. 1,000,000 997,741
6.21%, due 12/3/07............. 500,000 555,109
------------
7,242,253
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (0.6%)
3.25%, due 3/14/08............. 500,000 498,414
3.50%, due 1/7/08.............. 500,000 501,539
------------
999,953
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(COLLATERALIZED MORTGAGE OBLIGATIONS) (1.4%)
Series 2579 Class PG
4.00%, due 3/15/27............. $ 500,000 $ 481,322
Series 2589 Class GD
5.00%, due 9/15/28............. 500,000 500,147
Series 2600 Class MJ
5.00%, due 9/15/29............. 500,000 491,342
Series 1982 Class VC
6.50%, due 1/15/12............. 750,000 782,607
------------
2,255,418
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.6%)
5.75%, due 6/15/05............. 1,000,000 1,062,276
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATIONS) (0.3%)
Series 2003-32 Class PG
5.00%, due 10/25/27............ 500,000 503,070
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATIONS) (0.3%)
Series 2003-19 Class BE
4.50%, due 11/20/28............ 500,000 483,217
------------
Total Federal Agencies
(Cost $14,820,929)............. 14,796,049
------------
Total Long-Term Bonds
(Cost $62,576,026)............. 63,763,696
------------
<Caption>
COMMON STOCKS (60.1%)
SHARES
--------
AIR FREIGHT & LOGISTICS (1.1%)
J.B. Hunt Transport Services,
Inc. (a)....................... 70,900 1,799,442
------------
CAPITAL MARKETS (0.9%)
Bear Stearns Cos., Inc. (The)... 2,702 206,027
Federated Investors, Inc. Class
B.............................. 16,500 456,225
Lehman Brothers Holdings,
Inc. .......................... 10,800 777,600
------------
1,439,852
------------
COMMERCIAL BANKS (2.1%)
International Bancshares
Corp. ......................... 32,100 1,474,032
Silicon Valley Bancshares (a)... 56,000 1,965,600
------------
3,439,632
------------
COMMERCIAL SERVICES & SUPPLIES (0.8%)
Deluxe Corp. ................... 32,800 1,324,136
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
201
BALANCED FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------
COMMUNICATIONS EQUIPMENT (1.4%)
ADTRAN, Inc. ................... 13,300 $ 904,799
JDS Uniphase Corp. (a).......... 404,700 1,436,685
------------
2,341,484
------------
COMPUTERS & PERIPHERALS (3.0%)
Dell, Inc. (a).................. 25,700 928,284
InFocus Corp. (a)............... 204,500 1,347,655
Maxtor Corp. (a)................ 154,100 2,106,547
Sun Microsystems, Inc. (a)...... 152,800 605,088
------------
4,987,574
------------
CONSTRUCTION & ENGINEERING (1.9%)
Jacobs Engineering Group, Inc.
(a)............................ 23,800 1,102,416
Quanta Services, Inc. (a)....... 256,900 2,101,442
------------
3,203,858
------------
CONSUMER FINANCE (1.8%)
AmeriCredit Corp. (a)........... 61,100 818,740
SLM Corp. ...................... 22,500 881,100
Student Loan Corp. (The)........ 4,100 531,032
WFS Financial, Inc. (a)......... 18,700 815,507
------------
3,046,379
------------
DIVERSIFIED FINANCIAL SERVICES (0.7%)
Moody's Corp. .................. 19,100 1,104,553
------------
ELECTRIC UTILITIES (0.6%)
Edison International (a)........ 48,300 951,993
------------
ELECTRICAL EQUIPMENT (0.9%)
American Power Conversion
Corp. ......................... 73,700 1,490,951
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (2.8%)
Avnet, Inc. (a)................. 39,800 772,120
Sanmina-SCI Corp. (a)........... 104,100 1,098,255
Solectron Corp. (a)............. 222,800 1,234,312
Tektronix, Inc. ................ 58,700 1,506,829
------------
4,611,516
------------
ENERGY EQUIPMENT & SERVICES (0.4%)
Helmerich & Payne, Inc. ........ 26,200 694,562
------------
FOOD PRODUCTS (1.5%)
Dean Foods Co. (a).............. 46,350 1,402,088
Hormel Foods Corp. ............. 42,500 1,049,325
------------
2,451,413
------------
GAS UTILITIES (0.4%)
UGI Corp. ...................... 23,000 708,400
------------
HEALTH CARE PROVIDERS & SERVICES (4.4%)
AdvancePCS (a).................. 19,200 988,224
Coventry Health Care, Inc.
(a)............................ 11,300 618,675
Health Net, Inc. (a)............ 37,000 1,168,830
Humana, Inc. (a)................ 51,300 1,040,877
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
Manor Care, Inc. ............... 53,400 $ 1,777,152
PacifiCare Health Systems, Inc.
(a)............................ 29,600 1,761,200
------------
7,354,958
------------
HOTELS, RESTAURANTS & LEISURE (2.3%)
CBRL Group, Inc. ............... 21,500 833,125
GTECH Holdings Corp. ........... 22,900 1,023,172
Mandalay Resort Group........... 16,000 628,000
Outback Steakhouse, Inc. ....... 33,500 1,407,000
------------
3,891,297
------------
HOUSEHOLD DURABLES (4.6%)
Centex Corp. ................... 7,900 770,250
Hovnanian Enterprises, Inc.
Class A (a).................... 9,000 731,520
KB HOME......................... 7,200 493,128
La-Z-Boy, Inc. ................. 59,600 1,203,920
M.D.C. Holdings, Inc. .......... 35,100 2,362,932
NVR, Inc. (a)................... 2,800 1,370,320
Ryland Group, Inc. (The)........ 8,500 755,650
------------
7,687,720
------------
HOUSEHOLD PRODUCTS (1.3%)
Clorox Co. (The)................ 17,000 770,100
Energizer Holdings, Inc. (a).... 37,600 1,383,680
------------
2,153,780
------------
INDUSTRIAL CONGLOMERATES (0.7%)
Alleghany Corp. (a)............. 5,800 1,168,468
------------
INSURANCE (1.8%)
Ambac Financial Group, Inc. .... 6,000 424,440
Jefferson-Pilot Corp. .......... 8,500 405,790
MBIA, Inc. ..................... 25,800 1,537,938
Torchmark Corp. ................ 13,600 596,768
------------
2,964,936
------------
LEISURE EQUIPMENT & PRODUCTS (1.7%)
Callaway Golf Co. .............. 83,700 1,360,125
Hasbro, Inc. ................... 67,500 1,471,500
------------
2,831,625
------------
MULTILINE RETAIL (1.3%)
Federated Department Stores,
Inc. .......................... 15,700 746,535
Kmart Holding Corp. (a)......... 21,500 623,285
Sears, Roebuck and Co. ......... 16,700 878,921
------------
2,248,741
------------
MULTI-UTILITIES & UNREGULATED POWER (1.1%)
Williams Cos., Inc. (The)....... 186,900 1,906,380
------------
OIL & GAS (1.2%)
Overseas Shipholding Group,
Inc. .......................... 73,200 1,995,432
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
202
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------
PERSONAL PRODUCTS (0.7%)
Estee Lauder Cos., Inc. (The)
Class A........................ 33,100 $ 1,237,609
------------
PHARMACEUTICALS (2.1%)
Medicis Pharmaceutical Corp.
Class A........................ 12,400 785,540
Mylan Laboratories, Inc. ....... 52,200 1,260,630
Perrigo Co. .................... 109,800 1,476,810
------------
3,522,980
------------
REAL ESTATE (4.2%)
AMB Property Corp. ............. 27,200 815,728
Cousins Properties, Inc. ....... 45,500 1,308,125
Equity Office Properties
Trust.......................... 45,600 1,277,256
Hospitality Properties Trust.... 25,000 916,750
HRPT Properties Trust........... 116,100 1,086,696
LNR Property Corp. ............. 13,300 543,970
Reckson Associates Realty
Corp. ......................... 51,500 1,144,330
------------
7,092,855
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.9%)
Advanced Micro Devices, Inc.
(a)............................ 46,800 711,360
Novellus Systems, Inc. (a)...... 18,900 780,381
------------
1,491,741
------------
SOFTWARE (2.4%)
Ascential Software Corp. (a).... 36,200 803,278
Autodesk, Inc. ................. 73,800 1,420,650
Citrix Systems, Inc. (a)........ 68,000 1,719,040
------------
3,942,968
------------
SPECIALTY RETAIL (1.7%)
American Eagle Outfitters, Inc.
(a)............................ 32,400 518,076
AutoNation, Inc. (a)............ 21,000 392,700
CarMax, Inc. (a)................ 15,971 503,246
Sherwin-Williams Co. (The)...... 9,400 315,276
Talbots, Inc. (The)............. 14,400 473,328
Zale Corp. (a).................. 13,200 683,232
------------
2,885,858
------------
TEXTILES, APPAREL, & LUXURY GOODS (0.2%)
Reebok International Ltd. (a)... 8,800 342,760
------------
THRIFTS & MORTGAGE FINANCE (4.9%)
Countrywide Financial Corp. .... 18,300 1,923,696
Doral Financial Corp. .......... 12,000 606,000
Freddie Mac..................... 17,800 999,114
GreenPoint Financial Corp. ..... 39,000 1,214,850
IndyMac Bancorp, Inc. .......... 51,100 1,502,340
MGIC Investment Corp. .......... 23,900 1,226,309
Radian Group, Inc. ............. 14,500 767,050
------------
8,239,359
------------
</Table>
<Table>
<Caption>
SHARES VALUE
-------------------
TOBACCO (1.1%)
R.J. Reynolds Tobacco Holdings,
Inc. .......................... 38,700 $ 1,858,761
------------
WIRELESS TELECOMMUNICATIONS SERVICES (1.2%)
Crown Castle International Corp.
(a)............................ 163,800 2,073,708
------------
Total Common Stocks
(Cost $79,192,076)............. 100,487,681
------------
<Caption>
SHORT-TERM INVESTMENT (1.0%)
PRINCIPAL
---------
REPURCHASE AGREEMENT (1.0%)
Bank of New York (The)
0.85%, dated 10/31/03
due 11/3/03
Proceeds at Maturity $1,590,113
(Collateralized by
U.S. Treasury Note
3.625%, due 3/31/04
with a Principal Amount of
$1,600,000 and a
Market Value of $1,621,413
including accrued interest).... $1,590,000 1,590,000
------------
Total Short-Term Investment
(Cost $1,590,000).............. 1,590,000
------------
Total Investments
(Cost $143,358,102) (b)........ 99.3% 165,841,377(c)
Cash and Other Assets,
Less Liabilities............... 0.7 1,232,755
---------- ------------
Net Assets...................... 100.0% $167,074,132
========== ============
</Table>
- ------------
(a) Non-income producing security.
(b) The cost for federal income tax purposes is $143,396,678.
(c) At October 31, 2003 net unrealized appreciation was $22,444,699, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $23,329,428 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $884,729.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
203
BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
<Caption>
ASSETS:
Investment in securities, at value (identified
cost $143,358,102)............................. $165,841,377
Cash............................................. 19,798
Receivables:
Dividends and interest......................... 855,451
Fund shares sold............................... 623,541
Other assets..................................... 11,892
------------
Total assets............................... 167,352,059
------------
LIABILITIES:
Payables:
Manager........................................ 114,806
Fund shares redeemed........................... 88,367
Transfer agent................................. 10,125
NYLIFE Distributors............................ 4,426
Custodian...................................... 3,414
Trustees....................................... 1,878
Accrued expenses................................. 54,911
------------
Total liabilities.......................... 277,927
------------
Net assets....................................... $167,074,132
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share)
1 billion shares authorized
No-Load Class.................................. $ 61,278
Service Class.................................. 7,964
L Class........................................ 155
Additional paid-in capital....................... 141,912,386
Accumulated undistributed net investment
income......................................... 263,044
Accumulated undistributed net realized gain on
investments.................................... 2,346,030
Net unrealized appreciation on investments....... 22,483,275
------------
Net assets....................................... $167,074,132
============
No-Load Class
Net assets applicable to outstanding shares...... $147,518,548
============
Shares of capital stock outstanding.............. 6,127,826
============
Net asset value per share outstanding............ $ 24.07
============
Service Class
Net assets applicable to outstanding shares...... $ 19,183,323
============
Shares of capital stock outstanding.............. 796,368
============
Net asset value per share outstanding............ $ 24.09
============
L Class
Net assets applicable to outstanding shares...... $ 372,261
============
Shares of capital stock outstanding.............. 15,459
============
Net asset value per share outstanding............ $ 24.08
Maximum sales charge (1.00% of offering price)... 0.24
------------
Maximum offering price per share outstanding..... $ 24.32
============
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
<Caption>
INVESTMENT INCOME:
Income:
Interest........................................ $ 2,032,960
Dividends (a)................................... 1,193,541
-----------
Total income................................ 3,226,501
-----------
Expenses:
Manager......................................... 888,860
Transfer agent.................................. 112,622
Professional.................................... 68,569
Registration.................................... 49,575
Shareholder communication....................... 27,176
Trustees........................................ 24,266
Custodian....................................... 18,540
Portfolio pricing............................... 15,865
Service--Service Class.......................... 7,869
Service--L Class................................ 273
Distribution--L Class........................... 817
Miscellaneous................................... 20,655
-----------
Total expenses before reimbursement......... 1,235,087
Expense reimbursement from Manager.............. (51,032)
Fees paid indirectly (See Note 2(D))............ (61,058)
-----------
Net expenses................................ 1,122,997
-----------
Net investment income............................. 2,103,504
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................. 2,537,414
Net change in unrealized appreciation on
investments..................................... 20,612,974
-----------
Net realized and unrealized gain on investments... 23,150,388
-----------
Net increase in net assets resulting from
operations...................................... $25,253,892
===========
</Table>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $1,136.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
204
ECLIPSE FUNDS
BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 2,103,504 $ 1,669,645
Net realized gain (loss) on investments................. 2,537,414 (157,626)
Net change in unrealized appreciation on investments.... 20,612,974 (860,452)
------------ ------------
Net increase in net assets resulting from operations.... 25,253,892 651,567
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
No-Load Class......................................... (1,999,587) (1,495,731)
Service Class......................................... (77,541) (1)
L Class............................................... (1,122) --
From net realized gain on investments:
No-Load Class......................................... -- (1,253,176)
------------ ------------
Total dividends and distributions to shareholders... (2,078,250) (2,748,908)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 86,550,426 33,093,518
Service Class......................................... 22,832,286 4,475
L Class............................................... 353,212 --
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
No-Load Class......................................... 1,990,309 2,738,564
Service Class......................................... 77,104 1
L Class............................................... 1,122 --
------------ ------------
111,804,459 35,836,558
Cost of shares redeemed:
No-Load Class......................................... (46,945,723) (13,914,555)
Service Class......................................... (4,863,174) --
L Class............................................... (8,013) --
------------ ------------
Increase in net assets derived from capital share
transactions......................................... 59,987,549 21,922,003
------------ ------------
Net increase in net assets............................ 83,163,191 19,824,662
NET ASSETS:
Beginning of year......................................... 83,910,941 64,086,279
------------ ------------
End of year............................................... $167,074,132 $ 83,910,941
============ ============
Accumulated undistributed net investment income at end of
year.................................................... $ 263,044 $ 242,623
============ ============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
205
BALANCED FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
----------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31 JANUARY 1, 2001 YEAR ENDED DECEMBER 31
---------------------- THROUGH -------------------------------------
2003 2002 OCTOBER 31, 2001* 2000 1999 1998
-------- -------- ----------------- -------- -------- --------
Net asset value at beginning of period....... $ 20.41 $ 20.78 $ 20.82 $ 19.53 $ 21.37 $ 22.15
-------- -------- -------- -------- -------- --------
Net investment income........................ 0.38(e) 0.48 0.45(d) 0.55 0.58 0.61
Net realized and unrealized gain (loss) on
investments................................. 3.67 0.00(b) (0.08)(d) 1.29 (0.68) 1.14
-------- -------- -------- -------- -------- --------
Total from investment operations............. 4.05 0.48 0.37 1.84 (0.10) 1.75
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income................... (0.39) (0.44) (0.41) (0.55) (0.58) (0.61)
From net realized gain on investments........ -- (0.41) -- -- (1.16) (1.92)
-------- -------- -------- -------- -------- --------
Total dividends and distributions............ (0.39) (0.85) (0.41) (0.55) (1.74) (2.53)
-------- -------- -------- -------- -------- --------
Net asset value at end of period............. $ 24.07 $ 20.41 $ 20.78 $ 20.82 $ 19.53 $ 21.37
======== ======== ======== ======== ======== ========
Total investment return...................... 20.13% 2.18% 1.80%(a) 9.64% (0.36%) 8.03%
Ratios (to average net assets)/ Supplemental
Data:
Net investment income....................... 1.78% 2.30% 2.59%+(d) 2.77% 2.61% 2.76%
Net expenses................................ 0.99%# 0.96%# 1.03%+#(c) 0.95%# 0.94% 0.87%
Expenses (before reimbursement)............. 1.03%# 1.02%# 1.05%+#(c) 0.95%# 0.94% 0.97%
Portfolio turnover rate...................... 51% 62% 48% 73% 33% 70%
Net assets at end of period (in 000's)....... $147,519 $ 83,906 $ 64,086 $ 65,309 $ 77,169 $128,865
</Table>
- ------------
<Table>
* The Fund changed its fiscal year end from December 31 to
October 31.
** Commencement of Operations.
# Includes transfer agent fees paid indirectly which amounted
to 0.05%, 0.02% and 0.09% of average net assets for the
years ended October 31, 2003 and October 31, 2002 and the
ten months ended October 31, 2001, respectively, and
custodian fees and other expenses paid indirectly which
amounted to 0.01% of average net assets for the year ended
December 31, 2000.
+ Annualized.
(a) Total return is not annualized.
(b) Less than one cent per share.
(c) Restated.
(d) As required, effective January 1, 2001, the Fund has adopted
the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium on debt
securities. The effect of this change for the ten months
ended October 31, 2001 is shown below. Per share ratios and
supplemental data for periods prior to January 1, 2001 have
not been restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
NO-LOAD
CLASS
-------
Decrease net investment income.............................. ($0.02)
Increase net realized and unrealized gains and losses....... 0.02
Decrease ratio of net investment income..................... (0.09%)
</Table>
<Table>
(e) Per share data based on average shares outstanding during
the period.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
206
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS L CLASS
------------------------------------------ -------------------
JULY 1, 2002** DECEMBER 30, 2002**
YEAR ENDED THROUGH THROUGH
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003
---------------- ---------------- -------------------
$ 20.41 $ 21.41 $ 20.27
-------- -------- --------
0.34(e) 0.11 0.15(e)
3.68 (1.03) 3.76
-------- -------- --------
4.02 (0.92) 3.91
-------- -------- --------
(0.34) (0.08) (0.10)
-- -- --
-------- -------- --------
(0.34) (0.08) (0.10)
-------- -------- --------
$ 24.09 $ 20.41 $ 24.08
======== ======== ========
19.93% (4.30%)(a) 19.32%(a)
1.53% 2.05%+ 0.78%+
1.24%# 1.21%+# 1.99%+#
1.28%# 1.27%+# 2.03%+#
51% 62% 51%
$ 19,183 $ 5 $ 372
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
207
Eclipse International Broad Market Fund
- --------------------------------------------------------------------------------
After a generally strong fourth quarter of 2002, the global equity markets were
weak for much of the first quarter of 2003. During this time, investors became
increasingly risk averse, largely as a result of economic uncertainty and the
potential for a war in Iraq. The SARS outbreak contributed to declines in
several Asian equity markets. European stocks also fell. Germany and Italy
reported unexpected economic contraction during the first three months of 2003.
As the year progressed, most global markets rebounded sharply. From mid-March
through the end of October, stocks tended to rise in anticipation of stronger
economic growth. Japan was the front-runner from July through September as the
country posted an annualized growth rate of 3.9% for the previous quarter, the
economy's sharpest rise in over two and a half years. In spite of the Japanese
yen's strength, unprecedented growth in China fueled higher Japanese export
activity. Hong Kong markets also surged as higher levels of business investment
led to increased demand for information technology.
Europe was unable to keep pace with many other equity markets, as the Dow Jones
Euro Stoxx 50 Index,(1) a barometer of European blue chips, rose only 2.3%
during the third quarter of 2003. The region continues to be plagued by weak
growth, and the steady rise in the euro relative to the U.S. dollar has severely
diminished the region's export activity. The ongoing strength of the euro has
soured many investors' interest in European equities, since some find it
difficult to envision Europe as competitive in the global markets while the euro
continues to make exports increasingly expensive.
In October, the situation in Europe appeared to be improving. Despite weak local
demand and the surging euro, German corporate earnings began to increase. Many
investors were optimistic about the steps Germany's Chancellor Schroeder took to
improve the country's competitive position by adopting much-needed pension and
welfare reforms.
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse International Broad Market
Fund returned 20.35% for No-Load Class shares and 19.93% for Service Class
shares. Both share classes underperformed the 24.51% return of the average
Lipper(2) international fund over the same period. Both share classes also
underperformed the 27.03% return of the Morgan Stanley Capital International
EAFE Index(3) for the 12 months ended October 31, 2003.
ALLOCATION DECISIONS AND SECTOR SPECIFICS
Since the Fund's portfolio is rebalanced monthly, it's helpful to examine its
performance on that basis. In November 2002, the first month of the reporting
period, the Fund was hurt by its overweighted position in Japanese banks and its
underweighted position in British telecommunication services stocks. During the
month, the telecommunication services industry group recovered from earlier
weakness and staged an impressive rally.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
The Fund may invest in derivatives, which may increase the volatility of the
Fund's net asset value and may result in a loss to the Fund. Foreign securities
may be subject to greater risks than U.S. investments, including currency
fluctuations, less-liquid trading markets, greater price volatility, political
and economic instability, less publicly available information, and changes in
tax or currency laws or monetary policy. These risks are likely to be greater in
emerging markets than in developed markets.
(1.) The Dow Jones Euro Stoxx 50 Index measures the performance of the top 50
blue-chip stocks from the twelve countries participating in the European
Monetary Union. The Index is weighted according to the free-float market
capitalization of each component stock and its value. An investment cannot
be made directly into an index.
(2.) Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
(3.) The Morgan Stanley Capital International Europe, Australasia, and Far East
Index--the MSCI EAFE Index--is an unmanaged index generally considered to
be representative of the international stock market. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
208
The Fund outperformed its benchmark in December 2002 when its Spanish food,
beverage, & tobacco holdings rebounded and Altadis proved to be the largest
positive contributor to the Fund's return for the month. The Fund's overweighted
position in the French household & personal products industry group boosted
returns. The Fund's holdings in British energy companies and Japan's automobile
& components industry group also enhanced performance during the month.
In January 2003, the Fund's underweighted position in such British oil concerns
as BP, Shell Transport and Trading, and BG Group was beneficial, as stocks of
these companies faltered. Our decision to underweight such weak-performing
Japanese automotive firms as Bridgestone, Honda, Nissan Motor, and Toyota Motor
also contributed positively to the Fund's relative results.
February 2003 proved to be a difficult month for the Fund, as its overweighted
position in the French retailing and household & personal products industry
groups detracted from returns. The Fund's investment in L'Oreal, the world's
largest cosmetics company, hurt performance as the company's sales declined in
the first quarter.
The Fund fell short of its benchmark in April 2003. In a sharp reversal, from
the previous month, the Fund's position in the Spanish real estate industry,
specifically Sacyr Vallehermoso took the largest toll on performance. The Fund's
underweighted position in the British telecommunication services sector also
proved to be costly, as this segment rallied in April.
The portfolio rebounded in March 2003, however, with an overweighted position in
Sacyr Vallehermoso making the largest contribution to monthly returns. The
Fund's underweighted position in the weak Japanese capital goods industry group
also helped relative results during the month.
The Fund outperformed its benchmark in May 2003, primarily as a result of its
positions in the Dutch food & staples retailing, the French retailing, and the
German telecommunication services industry groups. Specifically, the Fund's
overweighted position in Dutch supermarket company Koninklijke Ahold
strengthened results, as upbeat earnings helped the company's stock advance,
despite allegations of accounting irregularities. The Fund's overweighted
position in Pinault-Printemps-Redoute, a diversified French retail company,
benefited the Fund as the company and the stock experienced a strong quarter.
The Fund's overweighted position in Deutsche Telekom, a German telecommunication
services firm, contributed positively to returns as well.
June 2003 proved to be a difficult month, as the Fund's positions in the
Japanese utilities, technology hardware & equipment, and capital goods companies
all detracted from the Fund's results. In particular, Kyushu Electrical Power
and Tokyo Gas hurt performance as investors abandoned more stable holdings for
higher-risk issues. Within the capital goods industry group, the Fund's
underweighted position in Mitsubishi Heavy Industries was detrimental when the
company's stock price rose during the month.
The Fund lost ground relative to its benchmark in July and August, but added
value in September 2003. In July, the Fund's overweighted position in French
pharmaceutical companies hurt results, since the industry underperformed. The
Fund's underweighted position in Japanese technology hardware & equipment stocks
also detracted from performance as these stocks appreciated. In August, the
Fund's overweighted position in the poor-performing Italian insurance industry
had a negative impact on performance. The Fund's overweighted position in Dutch
banks also hurt the Fund, since the industry did not fare well during the month.
The Fund added value in September when its substantial overweighted position in
the Spanish real estate industry group was the largest contributor to returns.
Real estate holdings--including Bami, TESTA, Metrovacesa, Sacyr Vallehermoso,
and others--rose sharply during the month. The Fund's overweighted position in
German pharmaceutical & biotechnology companies also generated strong results.
The Fund concluded its fiscal year by falling slightly short of its benchmark in
October
209
2003. The Fund's overweighted position in the Dutch food & staples retailing
industry group was the largest detractor from returns during the month. An
underweighted position in Japanese technology hardware & equipment stocks also
hurt performance when the technology sector continued to rebound as demand
increased around the globe. At the same time, the Fund's overweighted positions
in strong industry groups such as Spanish real estate, Australian retailing, and
French banks benefited the Fund.
LOOKING AHEAD
We will continue to employ our disciplined investment approach, which uses
proprietary quantitative analysis to construct a diversified portfolio of mid-
and large-capitalization stocks. As always, we will focus on those industries
that we believe have the potential for above-average growth or on those that
appear to be undervalued. We will continue to employ our factor-based
quantitative model.
Whatever the markets or the economy may bring, the Fund will continue to seek
long-term growth of capital by investing in a widely diversified portfolio of
non-U.S. equities.
ELIAS BELESSAKOS, PH.D.
DEVON MCCORMICK, CFA
Portfolio Managers
New York Life Investment Management LLC
210
$10,000 INVESTED IN
ECLIPSE INTERNATIONAL BROAD MARKET FUND
VERSUS MSCI EAFE INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE INTERNATIONAL BROAD MARKET
FUND MSCI EAFE INDEX
---------------------------------- ---------------
10/31/93 $10,000.00 $10,000.00
94 $10,918.00 $11,009.00
95 $10,631.00 $10,968.00
96 $11,775.00 $12,117.00
97 $12,244.00 $12,678.00
98 $13,229.00 $13,901.00
99 $16,229.00 $17,103.00
00 $15,657.00 $16,607.00
01 $11,611.00 $12,467.00
02 $ 9,704.00 $10,820.00
10/31/03 $11,679.00 $13,745.00
</Table>
Source: Lipper, Inc., 10/31/03
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93.
$10,000 INVESTED IN
ECLIPSE INTERNATIONAL BROAD MARKET FUND
VERSUS MSCI EAFE INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE INTERNATIONAL BROAD MARKET
FUND MSCI EAFE INDEX
---------------------------------- ---------------
10/31/93 $10,000.00 $10,000.00
94 $10,885.00 $11,009.00
95 $10,572.00 $10,968.00
96 $11,671.00 $12,117.00
97 $12,117.00 $12,678.00
98 $13,056.00 $13,901.00
99 $15,978.00 $17,103.00
00 $15,398.00 $16,607.00
01 $11,363.00 $12,467.00
02 $ 9,535.00 $10,820.00
10/31/03 $11,435.00 $13,745.00
</Table>
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1)
PERFORMANCE AS OF OCTOBER 31, 2003
- --------------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------
Eclipse International Broad Market Fund No-Load Class 20.35% -2.46% 1.56%
Eclipse International Broad Market Fund Service
Class(2) 19.93 -2.62 1.35
Average Lipper international fund(3) 24.51 0.91 4.19
MSCI EAFE Index(4) 27.03 -0.22 3.23
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
Year ended December 31, 1994 6.83
Year ended December 31, 1995 9.03
Year ended December 31, 1996 6.45
Year ended December 31, 1997 0.4
Year ended December 31, 1998 19.15
10 months ended October 31, 1999 12.31
Year ended October 31, 2000 -3.52
Year ended October 31, 2001 -25.84
Year ended October 31, 2002 -16.43
Year ended October 31, 2003 20.35
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares.
2. Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the No-Load Class from the
Fund's inception on 1/2/91 through 12/31/94. Performance figures for these
classes will vary after 12/31/94, based on differences in their expense
structures.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. The Morgan Stanley Capital International Europe, Australasia, and Far East
Index--the MSCI EAFE Index--is an unmanaged index that is considered to be
representative of the international stock market. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
INFORMATION ABOUT ECLIPSE INTERNATIONAL BROAD MARKET FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
211
INTERNATIONAL BROAD MARKET FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (92.1%)+
SHARES VALUE
-----------------------
AUSTRALIA (6.7%)
Alumina, Ltd.
(metals-non ferrous).......... 6,170 $ 26,092
Amcor, Ltd. (miscellaneous
materials & commodities)...... 7,488 45,161
Australia & New Zealand Banking
Group, Ltd. (banking)......... 165 2,084
Australian Gas Light Co., Ltd.
(energy sources).............. 1,941 14,736
Australian Stock Exchange, Ltd.
(financial services).......... 982 11,148
BHP Billiton, Ltd.
(energy sources).............. 13,391 111,359
Boral, Ltd. (building materials
&
components)................... 3,996 15,595
Brambles Industries, Ltd.
(business & public
services)..................... 4,035 13,370
Centro Properties Group
(financial services).......... 2,567 6,903
CFS Gandel Retail Trust
(real estate)................. 7,540 6,902
Coca-Cola Amatil, Ltd.
(beverages & tobacco)......... 2,113 8,831
Cochlear, Ltd.
(health & personal care)...... 361 8,069
Coles Myer, Ltd.
(merchandising)............... 11,273 62,150
Commonwealth Bank of Australia
(banking)..................... 4,779 93,251
CSL, Ltd. (health &
personal care)................ 700 8,444
CSR, Ltd. (building materials &
components)................... 3,922 5,900
Deutsche Office Trust
(real estate)................. 4,719 3,717
Foster's Group, Ltd.
(beverages & tobacco)......... 6,279 20,361
Futuris Corp., Ltd.
(business & public
services)..................... 1,977 2,118
General Property Trust
(real estate)................. 8,012 15,861
Harvey Norman Holdings, Ltd.
(merchandising)............... 275,156 655,996
Iluka Resources, Ltd.
(metals-non ferrous).......... 1,188 3,937
Investa Property Group
(real estate)................. 5,617 7,692
James Hardie Industries N.V.
(building materials &
components)................... 3,623 18,432
John Fairfax Holdings, Ltd.
(broadcasting & publishing)... 12,987 33,358
Lend Lease Corp., Ltd.
(real estate)................. 1,739 13,832
Lion Nathan, Ltd.
(beverages & tobacco)......... 3,903 15,287
Macquarie Bank, Ltd.
(banking)..................... 397 9,814
Macquarie Goodman Industrial
Trust (real estate)........... 5,650 6,174
Macquarie Infrastructure Group
(financial services).......... 7,815 17,578
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
AUSTRALIA (CONTINUED)
Mayne Group, Ltd.
(health & personal care)...... 2,188 $ 5,651
Mirvac Group (real estate)..... 2,784 8,415
National Australia Bank, Ltd.
(banking)..................... 11,518 250,000
Newcrest Mining, Ltd.
(gold mines).................. 2,586 22,166
News Corp., Ltd. (The)
(broadcasting & publishing)... 4,138 36,848
OneSteel, Ltd.
(metals-steel)................ 3,829 6,031
Orica, Ltd.
(chemicals)................... 1,657 15,531
Origin Energy, Ltd.
(energy sources).............. 12,691 38,721
PaperlinX, Ltd.
(forest products & paper)..... 2,563 9,220
Publishing & Broadcasting, Ltd.
(media)....................... 2,780 23,769
Rio Tinto, Ltd.
(metals-non ferrous).......... 1,689 42,724
Sonic Healthcare, Ltd.
(health & personal care)...... 1,764 8,586
Southcorp, Ltd.
(beverages & tobacco)......... 2,256 4,962
Stockland (real estate)........ 4,614 15,878
Suncorp-Metway, Ltd.
(banking)..................... 3,028 27,866
TAB, Ltd. (leisure &
tourism)...................... 2,034 5,123
TABCORP Holdings, Ltd. (leisure
& tourism).................... 1,685 13,857
Telstra Corp., Ltd.
(telecommunications).......... 9,580 32,220
Toll Holdings, Ltd.
(transportation-shipping)..... 647 3,838
Transurban Group (construction
& housing).................... 5,185 15,305
Westfield Holdings, Ltd.
(real estate)................. 2,323 23,422
Westfield Trust (real
estate)....................... 8,859 20,932
Westpac Banking Corp.
(banking)..................... 6,578 75,379
Woolworths, Ltd. (food &
household products)........... 259 2,044
-----------
1,972,640
-----------
AUSTRIA (0.2%)
Boehler-Uddeholm AG
(metals-steel)................ 65 3,737
Erste Bank der
oesterreichischen Sparkassen
AG (banking).................. 175 19,349
Flughafen Wien AG (business &
public services).............. 67 2,731
Generali Holding Vienna AG
(insurance)................... 267 6,689
Immofinanz Immobilien Anlagen
AG (real estate).............. 703 5,083
Mayr-Melnhof Karton AG (forest
products & paper)............. 44 4,397
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
212
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
AUSTRIA (CONTINUED)
Oesterreichische
Elektrizitaetswirtschafts AG
Class A (energy sources)...... 19 $ 1,789
OMV AG (energy sources)........ 57 7,289
Telekom Austria AG
(telecommunications) (a)...... 839 8,914
Wienerberger AG (building
materials & components)....... 197 4,191
-----------
64,169
-----------
BELGIUM (1.0%)
Agfa Gevaert N.V.
(textiles & apparel).......... 455 11,293
Barco N.V.
(electrical & electronics).... 47 3,469
Bekaert N.V.
(multi-industry).............. 70 3,478
Cofinimmo (real estate)........ 21 2,617
Colruyt N.V.
(multi-industry).............. 86 7,798
Compagnie Maritime Belge, S.A.
(transportation-shipping)..... 29 1,469
Delhaize-Le Lion, S.A.
(merchandising)............... 296 14,056
Dexia (financial services)..... 204 3,213
Electrabel, S.A.
(utilities-electric & gas).... 132 36,506
Fortis (financial services).... 3,639 64,893
Groupe Bruxelles Lambert, S.A.
(utilities-electric & gas).... 608 29,368
Interbrew (beverages &
tobacco)...................... 627 14,680
KBC Bankverzekeringsholding
(banking)..................... 1,393 59,091
Mobistar, S.A.
(telecommunications) (a)...... 96 4,821
Omega Pharma, S.A.
(health & personal care)...... 105 3,233
S.A. D'Ieteren N.V.
(automobiles)................. 12 2,232
Solvay, S.A. (chemicals)....... 293 21,816
UCB, S.A. (health & personal
care)......................... 376 11,859
Umicore (metals-non ferrous)... 47 2,860
-----------
298,752
-----------
DENMARK (0.8%)
A P Moller--Maersk A/S
(transportation-shipping)..... 5 39,252
Carlsberg A/S Class B
(beverages & tobacco)......... 300 12,456
Coloplast A/S Class B
(health & personal care)...... 50 4,207
Danisco A/S (food &
household products)........... 100 3,847
Danske Bank A/S (banking)...... 2,190 44,180
FLS Industries A/S Class B
(machinery & engineering)
(a)........................... 335 3,588
Group 4 Falck A/S
(business & public
services)..................... 100 2,244
ISS A/S
(business & public
services)..................... 300 14,309
Novo Nordisk A/S
(health & personal care)...... 1,233 44,349
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
DENMARK (CONTINUED)
Novozymes A/S Class B (food &
household products)........... 265 $ 8,537
TDC A/S (telecommunications)... 600 19,282
Topdanmark A/S
(insurance) (a)............... 100 4,973
Vestas Wind Systems A/S (energy
equipment & services)......... 400 8,413
William Demant Holding A/S
(health & personal care)
(a)........................... 300 10,204
-----------
219,841
-----------
FINLAND (1.7%)
Amer Group, Ltd. (recreation &
other consumer goods)......... 100 3,807
Instrumentarium Oyj
(health & personal care)...... 200 8,393
Kesko Oyj Class B (wholesale &
international trade).......... 300 4,666
Kone Oyj Class B
(machinery & engineering)..... 366 19,125
Nokia Oyj
(electrical & electronics).... 20,996 356,599
Nokian Renkaat Oyj
(automobiles)................. 50 3,735
Orion-Yhtyma Oyj Class B
(health & personal care)...... 200 3,848
Outokumpu Oyj
(metals-non ferrous).......... 800 9,681
Pohjola Group PLC Class D
(insurance)................... 229 5,162
Rautaruukki Oyj
(metals-steel) (a)............ 2,060 14,321
Sampo Oyj Class A
(financial services).......... 900 7,575
Stora Enso Oyj Class R
(forest products & paper)..... 2,000 27,202
TietoEnator Oyj
(telecommunications).......... 400 10,602
UPM-Kymmene Oyj
(forest products & paper)..... 1,900 35,561
-----------
510,277
-----------
FRANCE (5.2%)
Atos Origin, S.A. (business &
public services) (a).......... 20 1,335
Autoroutes du Sud de la France
(transportation-road &
rail)......................... 470 14,479
Aventis, S.A.
(health & personal care)...... 21 1,112
BNP Paribas, S.A. (banking).... 7,328 385,050
Bouygues, S.A.
(construction & housing)...... 1,237 33,650
Cap Gemini, S.A. (business &
public services) (a).......... 552 27,818
CNP Assurances (insurance)..... 215 9,805
Credit Agricole, S.A.
(banking)..................... 20,071 426,286
Dassault Systemes, S.A.
(business & public
services)..................... 687 29,150
France Telecom, S.A.
(telecommunications) (a)...... 3,027 73,263
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
213
INTERNATIONAL BROAD MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
FRANCE (CONTINUED)
Groupe Danone (food & household
products)..................... 520 $ 78,464
Pernod-Ricard, S.A.
(beverages & tobacco)......... 268 25,858
Sanofi-Synthelabo, S.A. (health
& personal care).............. 19 1,176
Societe Generale (banking)..... 5,601 416,063
Total, S.A. (energy sources)... 9 1,399
-----------
1,524,908
-----------
GERMANY (10.5%)
Adidas-Salomon AG (recreation &
other consumer goods)......... 100 9,230
Altana AG (health & personal
care)......................... 315 19,847
Bayerische Hypo-und Vereinsbank
AG (banking) (a).............. 64 1,397
Beiersdorf AG
(health & personal care)...... 1,827 206,867
Buderus AG (building materials
& components)................. 200 7,347
Deutsche Bank AG (banking)..... 900 59,322
Deutsche Boerse AG
(financial services).......... 2,345 130,442
Douglas Holding AG
(merchandising)............... 8,600 249,937
Epcos AG (electronic components
& instruments) (a)............ 100 2,040
Fresenius Medical Care AG
(health & personal care)...... 300 17,089
Henkel KGaA (chemicals)........ 11,365 780,950
Hugo Boss AG (merchandising)... 66 1,327
Hypo Real Estate Holding AG
(financial services) (a)...... 16 276
Infineon Technologies AG
(electronic components &
instruments) (a).............. 166 2,451
Kamps AG (food &
household products) (a)....... 300 4,314
KarstadtQuelle AG
(merchandising)............... 30,300 750,266
Linde AG (machinery &
engineering).................. 400 18,251
MAN AG
(industrial components)....... 500 13,747
Merck KGaA (health & personal
care)......................... 100 3,546
Metro AG (merchandising)....... 7,700 312,399
MLP AG (financial services)
(a)........................... 2,279 43,396
SAP AG (business &
public services).............. 900 130,467
Schering AG (health & personal
care)......................... 900 42,321
Siemens AG (electrical &
electronics).................. 3,100 208,297
Suedzucker AG (food & household
products)..................... 1,426 24,170
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
GERMANY (CONTINUED)
TUI AG (multi-industry)........ 550 $ 9,623
WCM Beteiligungs-und
Grundbesitz AG
(financial services) (a)...... 7,000 14,485
-----------
3,063,804
-----------
GREECE (0.4%)
Alpha Bank A.E. (banking)...... 400 9,039
Aluminium of Greece S.A.I.C.
(metals-non ferrous).......... 100 1,976
Bank of Piraeus (banking)...... 1,800 16,824
Coca-Cola Hellenic Bottling
Co., S.A. (beverages &
tobacco)...................... 300 5,810
Commercial Bank of Greece
(banking)..................... 200 4,236
EFG Eurobank Ergasias
(banking)..................... 1,400 23,957
Folli-Follie, S.A. Registered
(merchandising)............... 100 2,344
Hellenic Duty Free Shops, S.A.
(merchandising)............... 100 1,679
Hellenic Petroleum, S.A.
(energy sources).............. 400 3,246
Hellenic Technodomiki Tev, S.A.
(construction & housing)...... 200 1,055
Hellenic Telecommunications
Organization, S.A.
(telecommunications).......... 1,500 16,810
Intracom, S.A.
(telecommunications).......... 400 2,753
M.J. Maillis, S.A.
(miscellaneous materials &
commodities).................. 400 1,344
National Bank of Greece, S.A.
(banking)..................... 10 209
Papastratos Cigarettes Co.
(beverages & tobacco)......... 100 2,095
Public Power Corp.
(utilities-electric & gas).... 300 6,466
Technical Olympic, S.A.
(construction & housing)...... 500 2,464
Viohalco, Hellenic Copper and
Aluminum Industry, S.A.
(building materials &
components)................... 800 3,850
-----------
106,157
-----------
HONG KONG (1.7%)
Cathay Pacific Airways, Ltd.
(transportation-airlines)..... 11,409 21,817
Cheung Kong Infrastructure
Holdings, Ltd. (building
materials & components)....... 2,000 4,340
Chi Cheung Investment Co., Ltd.
(real estate) (a)............. 1,477 333
Chinese Estates Holdings, Ltd.
(real estate) (a)............. 12,854 4,759
CLP Holdings, Ltd.
(utilities-electric & gas).... 9,818 44,376
Esprit Holdings, Ltd.
(wholesale & international
trade)........................ 4,000 12,568
Hang Seng Bank, Ltd.
(banking)..................... 5,930 74,071
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
214
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
HONG KONG (CONTINUED)
Henderson Land Development Co.,
Ltd. (real estate)............ 4,000 $ 16,792
Hong Kong & China Gas Co., Ltd.
(utilities-electric & gas).... 27,038 37,428
Hopewell Holdings, Ltd.
(multi-industry).............. 706 1,173
Hutchison Whampoa, Ltd.
(multi-industry).............. 10,419 80,836
Li & Fung, Ltd. (wholesale &
international trade).......... 6,000 10,083
New World Development Co., Ltd.
(multi-industry).............. 13,772 8,823
PCCW, Ltd. (telecommunications)
(a)........................... 16,192 11,572
Shangri-La Asia, Ltd.
(leisure & tourism)........... 3,464 3,323
Sino Land Co., Ltd. (real
estate)....................... 24,000 12,517
Sun Hung Kai Properties, Ltd.
(real estate)................. 11,000 93,134
Swire Pacific, Ltd.
(multi-industry).............. 7,885 48,128
Television Broadcasts, Ltd.
(broadcasting & publishing)... 2,000 9,477
Yue Yuen Industrial Holdings,
Ltd. (recreation &
other consumer goods)......... 4,500 12,748
-----------
508,298
-----------
IRELAND (0.8%)
Allied Irish Banks PLC
(banking)..................... 1,506 22,024
Allied Irish Banks PLC
(banking) (e)................. 5,773 84,493
CRH PLC (building materials &
components)................... 1,705 30,663
CRH PLC (building materials &
components) (e)............... 591 10,546
DCC PLC (multi-industry)....... 751 10,084
Elan Corp. (health &
personal care) (a)............ 2,595 12,821
Elan Corp. PLC (health &
personal care) (a)(e)......... 835 2,815
Grafton Group PLC (building
materials & components)....... 74 311
Independent News & Media PLC
(broadcasting & publishing)... 2,259 4,937
Irish Life & Permanent PLC
(financial services).......... 113 1,583
Irish Life & Permanent PLC
(financial services) (e)...... 1,041 14,582
Kerry Group PLC
(food & household products)... 1,596 27,830
Ryanair Holdings PLC
(transportation-airlines)
(a)........................... 724 6,144
Waterford Wedgwood PLC
(merchandising) (e)........... 1,279 286
-----------
229,119
-----------
ITALY (1.9%)
Alleanza Assicurazioni S.p.A.
(insurance)................... 13,211 132,230
Assicurazioni Generali S.p.A.
(insurance)................... 325 7,481
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
ITALY (CONTINUED)
Autogrill S.p.A. (food &
household products) (a)....... 500 $ 6,330
Banca Fideuram S.p.A.
(banking)..................... 605 3,798
Banca Intesa S.p.A.
(banking)..................... 17,736 59,792
Banca Intesa S.p.A.-RNC
(banking)..................... 7,750 19,460
Banca Monte dei Paschi di Siena
S.p.A. (banking).............. 10,401 31,014
Banca Nazionale del Lavoro
S.p.A. (banking) (a).......... 4,622 10,531
Banca Popolare di Milano Scrl
(banking)..................... 800 4,083
Banco Popolare di Verona e
Novara Scrl (banking)......... 782 12,091
Capitalia S.p.A. (banking)
(a)........................... 4,625 12,904
FinecoGroup S.p.A. (banking)
(a)........................... 9,000 6,351
Gruppo Editoriale L'Espresso
S.p.A. (broadcasting &
publishing)................... 800 4,287
Luxottica Group S.p.A.
(health & personal care)...... 178 2,839
Mediaset S.p.A. (broadcasting &
publishing)................... 4,002 40,429
Mediobanca S.p.A. (banking).... 1,650 16,592
Mediolanum S.p.A. (insurance).. 4,688 32,753
Mondadori (Arnoldo) Editore
S.p.A. (broadcasting &
publishing)................... 100 767
Sanpaolo IMI S.p.A. (banking).. 3,050 34,322
Telecom Italia Media S.p.A.
(data processing &
reproduction) (a)............. 7,566 3,281
Tiscali S.p.A.
(telecommunications) (a)...... 1,305 8,677
UniCredito Italiano S.p.A.
(banking)..................... 18,366 90,526
-----------
540,538
-----------
JAPAN (23.5%)
77 Bank, Ltd. (The)
(banking)..................... 1,000 5,239
ADERANS Co., Ltd.
(health & personal care)...... 300 5,458
All Nippon Airways Co., Ltd.
(transportation-airlines)
(a)........................... 4,000 10,297
Amada Co., Ltd.
(metals-steel)................ 1,000 4,321
AOYAMA TRADING Co., Ltd.
(merchandising)............... 100 1,856
Asahi Breweries, Ltd.
(beverages & tobacco)......... 1,098 9,169
Asahi Glass Co., Ltd.
(miscellaneous materials &
commodities).................. 3,000 23,687
Asahi Kasei Corp.
(chemicals)................... 2,000 9,533
Asatsu-DK, Inc.
(telecommunications).......... 100 2,388
Ashikaga Financial Group, Inc.
(banking) (a)................. 3,000 3,002
Autobacs Seven Co., Ltd.
(automobiles)................. 100 2,183
Avex, Inc. (recreation &
other consumer goods)......... 100 1,992
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
215
INTERNATIONAL BROAD MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
JAPAN (CONTINUED)
Bank of Fukuoka, Ltd. (The)
(banking)..................... 2,000 $ 8,350
Bank of Yokohama, Ltd. (The)
(banking)..................... 3,000 12,962
Benesse Corp. (business &
public services).............. 100 2,456
Bridgestone Corp.
(industrial components)....... 9,935 130,135
Capcom Co., Ltd. (recreation &
other consumer goods)......... 2,400 31,000
Central Japan Railway Co.
(transportation-road &
rail)......................... 1 8,751
Chiba Bank, Ltd. (The)
(banking)..................... 3,000 12,908
Chubu Electric Power Co., Inc.
(utilities-electric & gas).... 2,500 50,143
Chugai Pharmaceutical Co., Ltd.
(health & personal care)...... 3,000 42,734
Coca-Cola West Japan Co., Ltd.
(beverages & tobacco)......... 400 7,404
CSK Corp. (business &
public services).............. 2,000 75,681
Daicel Chemical Industries,
Ltd. (chemicals).............. 3,000 12,717
Daido Life Insurance Co.
(insurance)................... 2 5,949
Daiichi Pharmaceutical Co.,
Ltd. (health & personal
care)......................... 1,000 15,282
Dainippon Ink & Chemicals, Inc.
(chemicals)................... 2,000 3,984
Daito Trust Construction Co.,
Ltd. (real estate)............ 700 21,649
Denki Kagaku Kogyo Kabushiki
Kaisha (chemicals)............ 4,000 12,153
Denso Corp.
(industrial components)....... 1,500 28,449
Dowa Mining Co., Ltd.
(metals-non ferrous).......... 2,000 10,806
East Japan Railway Co.
(transportation-road &
rail)......................... 2 9,060
Ebara Corp.
(machinery & engineering)..... 1,000 4,011
Eisai Co., Ltd.
(health & personal care)...... 1,000 23,468
FamilyMart Co., Ltd.
(merchandising)............... 2,200 47,828
FANUC, Ltd. (electronic
components & instruments)..... 200 12,025
Fast Retailing Co., Ltd.
(merchandising)............... 200 12,153
Fuji Electric Holdings Co.,
Ltd. (electronic components &
instruments).................. 4,000 9,860
Fuji Photo Film Co., Ltd.
(recreation & other consumer
goods)........................ 1,000 29,472
Fuji Television Network, Inc.
(broadcasting & publishing)... 2 10,643
Fujikura, Ltd. (electronic
components & instruments)..... 2,000 12,025
Fujisawa Pharmaceutical Co.,
Ltd. (health & personal
care)......................... 1,000 20,649
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
JAPAN (CONTINUED)
Furukawa Electric Co., Ltd.
(The) (industrial
components)................... 4,000 $ 15,136
Gunma Bank, Ltd. (The)
(banking)..................... 2,000 8,587
Gunze, Ltd. (textiles &
apparel)...................... 2,000 9,078
Hitachi Cable, Ltd. (electronic
components & instruments)..... 1,000 3,975
Hitachi Chemical Co., Ltd.
(chemicals)................... 1,400 22,617
Honda Motor Co., Ltd.
(automobiles)................. 1,900 75,008
Ishihara Sangyo Kaisha, Ltd.
(chemicals)................... 1,000 2,056
Ishikawajima-Harima Heavy
Industries Co., Ltd.
(aerospace &
military technology).......... 5,000 6,822
Ito En, Ltd.
(beverages & tobacco)......... 200 8,096
ITOCHU Corp. (wholesale &
international trade).......... 7,000 23,623
Ito-Yokado Co., Ltd.
(merchandising)............... 1,000 36,749
Japan Airlines System Corp.
(transportation-airlines)..... 9,138 26,266
Japan Real Estate Investment
Corp. (real estate)........... 17 99,431
Japan Tobacco, Inc.
(beverages & tobacco)......... 10 66,767
Joyo Bank, Ltd. (The)
(banking)..................... 3,000 9,606
JSR Corp. (miscellaneous
materials & commodities)...... 2,000 42,389
Kajima Corp.
(construction & housing)...... 3,000 11,243
Kamigumi Co., Ltd. (business &
public services).............. 456 2,970
Kanebo, Ltd. (health & personal
care)......................... 1,000 1,055
Kansai Electric Power Co., Inc.
(The) (utilities-electric &
gas).......................... 628 10,854
Kao Corp. (food &
household products)........... 2,000 41,115
Katokichi Co., Ltd. (food &
household products)........... 300 4,789
Kawasaki Heavy Industries, Ltd.
(machinery & engineering)..... 3,000 3,793
Kawasaki Kisen Kaisha, Ltd.
(transportation-shipping)..... 4,000 16,046
Keihin Electric Express Railway
Co., Ltd.
(transportation-road &
rail)......................... 4,000 23,396
Keio Electric Railway Co., Ltd.
(transportation-road &
rail)......................... 4,000 21,140
Kikkoman Corp.
(food & household products)... 1,000 6,513
Kinden Corp. (energy equipment
& services)................... 1,000 4,357
Kinki Nippon Railway Co., Ltd.
(transportation-road & rail)
(a)........................... 4,307 12,968
Kirin Brewery Co., Ltd.
(beverages & tobacco)......... 1,154 9,227
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
216
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
JAPAN (CONTINUED)
Komatsu, Ltd. (machinery &
engineering).................. 5,000 $ 27,061
KONAMI Corp. (recreation &
other consumer goods)......... 4,500 137,126
Konica Minolta Holdings, Inc.
(recreation & other consumer
goods)........................ 1,000 13,144
Kubota Corp.
(machinery & engineering)..... 5,000 18,011
Kuraray Co., Ltd.
(textiles & apparel).......... 3,000 22,595
Kyowa Hakko Kogyo Co., Ltd.
(health & personal care)...... 4,000 23,578
Kyushu Electric Power Co., Inc.
(utilities-electric & gas).... 23,300 384,889
Lawson, Inc. (merchandising)... 1,300 49,666
Marubeni Corp. (wholesale &
international trade).......... 4,000 7,204
Marui Co., Ltd.
(merchandising)............... 1,000 12,698
Meiji Dairies Corp.
(food & household products)... 1,000 3,748
Meiji Seika Kaisha, Ltd. (food
& household products)......... 1,000 3,857
Meitec Corp.
(business & public
services)..................... 700 25,024
Millea Holdings, Inc.
(insurance)................... 3 35,748
Minebea Co., Ltd. (electronic
components & instruments)..... 1,000 5,694
Mitsubishi Chemical Corp.
(chemicals)................... 4,000 10,479
Mitsubishi Corp. (wholesale &
international trade).......... 3,000 31,137
Mitsubishi Electric Corp.
(electrical & electronics).... 10,000 44,663
Mitsubishi Estate Co., Ltd.
(real estate)................. 36,191 346,981
Mitsubishi Gas Chemical Co.,
Inc. (chemicals).............. 1,000 2,829
Mitsubishi Heavy Industries,
Ltd. (machinery &
engineering).................. 9,000 24,724
Mitsubishi Logistics Corp.
(business & public
services)..................... 1,000 8,705
Mitsubishi Materials Corp.
(metals-non ferrous) (a)...... 5,000 8,050
Mitsubishi Rayon Co., Ltd.
(textiles & apparel).......... 2,000 7,423
Mitsubishi Tokyo Financial
Group, Inc. (banking)......... 19 136,535
Mitsui & Co., Ltd. (wholesale &
international trade).......... 10,000 72,770
Mitsui Chemicals, Inc.
(chemicals)................... 6,000 35,039
Mitsui Engineering &
Shipbuilding Co., Ltd.
(transportation-shipping)..... 3,000 4,612
Mitsui Fudosan Co., Ltd.
(real estate)................. 37,129 345,504
Mitsui Mining & Smelting Co.,
Ltd. (metals-non ferrous)..... 1,000 4,002
Mitsui O.S.K. Lines, Ltd.
(transportation-shipping)..... 1,266 5,148
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
JAPAN (CONTINUED)
Mitsui Sumitomo Insurance Co.,
Ltd. (insurance).............. 1,000 $ 8,241
Mitsui Trust Holdings, Inc.
(banking) (a)................. 2,000 10,643
Mizuho Financial Group, Inc.
(banking) (a)................. 33 80,748
Net One Systems Co., Ltd.
(electronic components &
instruments).................. 9 67,458
NGK Insulators, Ltd.
(industrial components)....... 1,000 6,831
Nippon Building Fund, Inc.
(real estate)................. 16 98,531
Nippon Express Co., Ltd.
(transportation-road &
rail)......................... 2,446 11,036
Nippon Kayaku Co., Ltd.
(chemicals)................... 1,000 5,067
Nippon Meat Packers, Inc. (food
& household products)......... 357 3,562
Nippon Sheet Glass Co., Ltd.
(building materials &
components)................... 1,000 3,074
Nippon Steel Corp.
(metals-steel)................ 26,000 53,450
Nippon Telegraph & Telephone
Corp. (telecommunications).... 29 129,522
Nippon Unipac Holding
(forest products & paper)..... 9 42,407
Nippon Yusen Kabushiki Kaisha
(transportation-shipping)..... 5,000 21,285
Nishimatsu Construction Co.,
Ltd. (construction &
housing)...................... 2,000 8,350
Nissan Chemical Industries,
Ltd. (chemicals).............. 1,000 8,714
Nissan Motor Co., Ltd.
(automobiles)................. 9,000 100,860
Nisshin Seifun Group, Inc.
(food & household products)... 2,000 16,391
Nisshinbo Industries, Inc.
(textiles & apparel).......... 1,000 4,994
Nitto Denko Corp. (chemicals).. 1,000 52,486
NSK, Ltd. (machinery &
engineering).................. 1,000 4,121
NTT Data Corp. (business &
public services).............. 18 79,738
NTT DoCoMo, Inc.
(telecommunications).......... 67 145,049
Obayashi Corp. (construction &
housing)...................... 1,000 4,557
OBIC Co., Ltd.
(telecommunications).......... 400 88,052
Oji Paper Co., Ltd.
(forest products & paper)..... 3,000 15,964
Okumura Corp. (building
materials & components)....... 1,000 4,084
Olympus Corp. (electronic
components & instruments)..... 1,000 21,922
ONWARD KASHIYAMA Co., Ltd.
(textiles & apparel).......... 1,000 11,225
Orient Corp.
(financial services) (a)...... 483 1,094
Pioneer Corp. (appliances &
household durables)........... 100 2,492
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
217
INTERNATIONAL BROAD MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
JAPAN (CONTINUED)
Q.P. Corp. (food &
household products)........... 800 $ 6,477
Resona Holdings, Inc. (banking)
(a)........................... 33,000 48,329
Sankyo Co., Ltd.
(health & personal care)...... 2,000 32,019
Sankyo Co., Ltd. Gunma
(recreation & other consumer
goods)........................ 300 10,015
Sanyo Electric Co., Ltd.
(appliances & household
durables)..................... 3,000 13,754
Sega Corp. (recreation &
other consumer goods) (a)..... 600 6,642
Seino Transportation Co., Ltd.
(transportation-road &
rail)......................... 1,000 7,050
Seven-Eleven Japan Co., Ltd.
(recreation & other consumer
goods)........................ 2,000 63,310
Shimachu Co., Ltd. (building
materials & components)....... 100 1,956
Shimamura Co., Ltd.
(merchandising)............... 300 20,849
Shimizu Corp. (construction &
housing)...................... 1,000 3,866
Shin-Etsu Chemical Co., Ltd.
(chemicals)................... 400 14,881
Shionogi & Co., Ltd.
(health & personal care)...... 1,000 16,783
Shizuoka Bank, Ltd. (The)
(banking)..................... 2,000 14,117
Showa Denko K.K. (chemicals)
(a)........................... 3,000 5,812
SMC Corp. (machinery &
engineering).................. 300 36,103
Snow Brand Milk Products Co.,
Ltd. (food &
household products) (a)....... 2,000 6,149
Softbank Corp. (business &
public services).............. 3,500 179,879
Sony Corp. (appliances &
household durables)........... 500 17,419
Sumitomo Bakelite Co., Ltd.
(chemicals)................... 1,000 6,140
Sumitomo Chemcial Co., Ltd.
(chemicals)................... 11,000 41,024
Sumitomo Corp. (wholesale &
international trade).......... 7,000 48,583
Sumitomo Electric Industries,
Ltd. (industrial components).. 3,000 25,788
Sumitomo Heavy Industries, Ltd.
(machinery & engineering)
(a)........................... 1,000 2,210
Sumitomo Metal Industries, Ltd.
(metals-steel)................ 31,000 28,762
Sumitomo Metal Mining Co., Ltd.
(metals-non ferrous).......... 4,000 27,434
Sumitomo Mitsui Financial
Group, Inc. (banking)......... 17 85,514
Sumitomo Osaka Cement Co., Ltd.
(building materials &
components)................... 4,000 7,386
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
JAPAN (CONTINUED)
Sumitomo Realty & Development
Co., Ltd.
(real estate)................. 38,000 $ 352,572
Suruga Bank, Ltd. (The)
(banking)..................... 1,000 6,267
Taiheiyo Cement Corp. (building
materials & components)....... 6,000 14,845
Taisei Corp. (construction &
housing)...................... 1,000 3,475
Taisho Pharmaceutical Co., Ltd.
(health & personal care)...... 1,066 18,395
Takara Holdings, Inc.
(beverages & tobacco)......... 1,000 7,859
Takeda Chemical Industries,
Ltd. (health & personal
care)......................... 3,000 106,154
Teijin Ltd. (textiles &
apparel)...................... 1,000 2,965
Terumo Corp. (health & personal
care)......................... 1,000 19,011
THK Co., Ltd.
(machinery & engineering)..... 500 10,142
TIS, Inc. (multi-industry)..... 1,900 66,885
Tobu Railway Co., Ltd.
(transportation-road &
rail)......................... 3,000 10,506
Toda Corp.
(construction & housing)...... 1,000 2,793
Toho Co., Ltd.
(broadcasting & publishing)... 100 1,232
Tohoku Electric Power Co., Inc.
(utilities-electric & gas).... 3,800 61,596
Tokyo Electric Power Co., Inc.
(The) (utilities-electric &
gas).......................... 3,651 77,879
Tokyo Gas Co., Ltd.
(utilities-electric & gas).... 119,091 408,399
Tokyu Corp.
(transportation-road &
rail)......................... 5,451 27,023
Toppan Printing Co., Ltd.
(business & public
services)..................... 1,000 9,169
Toray Industries, Inc.
(textiles & apparel).......... 11,000 45,727
Tosoh Corp. (chemicals)........ 1,000 2,793
Tostem Inax Holding Corp.
(building materials &
components)................... 1,000 17,820
Toto, Ltd. (building materials
& components)................. 2,000 16,646
Toyo Seikan Kaisha, Ltd.
(miscellaneous materials &
commodities).................. 1,000 11,689
Toyobo Co., Ltd.
(textiles & apparel).......... 2,000 4,039
Toyoda Gosei Co., Ltd.
(automobiles)................. 400 11,825
Toyota Industries Corp.
(machinery & engineering)..... 700 12,926
Toyota Motor Corp.
(automobiles)................. 6,200 176,522
Trend Micro, Inc. (business &
public services) (a).......... 3,000 82,685
Ube Industries, Ltd.
(miscellaneous materials &
commodities).................. 3,000 6,440
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
218
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
JAPAN (CONTINUED)
Uni-Charm Corp.
(health & personal care)...... 600 $ 27,998
USS Co., Ltd. (automobiles).... 40 2,842
Wacoal Corp.
(textiles & apparel).......... 1,000 8,269
West Japan Railway Co.
(transportation-road &
rail)......................... 10 37,204
Yakult Honsha Co., Ltd.
(food & household products)... 1,000 15,555
Yamada Denki Co., Ltd.
(electronic components &
instruments).................. 100 3,184
Yamanouchi Pharmaceutical Co.,
Ltd. (health & personal
care)......................... 1,000 25,106
Yamato Transport Co., Ltd.
(transportation-road &
rail)......................... 3,000 39,869
-----------
6,894,653
-----------
NETHERLANDS (4.2%)
ABN AMRO Holding N.V.
(banking)..................... 12,751 267,556
Corio N.V. (real estate)....... 182 6,070
Koninklijke Ahold N.V.
(real estate) (a)............. 89,260 755,408
Koninklijke (Royal) KPN N.V.
(food & household products)
(a)........................... 4,601 34,980
Koninklijke (Royal) Philips
Electronics N.V.
(multi-industry).............. 5,764 155,388
Koninklijke Vendex KBB N.V.
(merchandising)............... 335 4,124
Qiagen N.V. (health & personal
care)......................... 200 2,330
Rodamco Europe N.V.
(real estate)................. 243 12,401
Wereldhave N.V. (real
estate)....................... 53 3,333
-----------
1,241,590
-----------
NEW ZEALAND (0.2%)
Auckland International Airport,
Ltd.
(transportation-airlines)..... 988 4,013
Carter Holt Harvey, Ltd.
(forest products & paper)..... 9,113 10,247
Contact Energy, Ltd.
(utilities-electric & gas).... 1,566 4,859
Fisher & Paykel Healthcare
Corp., Ltd. (health & personal
care)......................... 294 2,186
Independent Newspapers, Ltd.
(broadcasting & publishing)... 1,060 3,094
Sky City Entertainment Group,
Ltd. (leisure & tourism)...... 920 5,060
Telecom Corp. of New Zealand,
Ltd. (telecommunications)..... 8,322 24,749
Tower, Ltd.
(financial services) (a)...... 632 497
Warehouse Group, Ltd. (The)
(merchandising)............... 582 2,038
-----------
56,743
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
NORWAY (0.5%)
DnB Holding ASA (banking)...... 3,400 $ 19,855
Norsk Hydro ASA
(energy sources).............. 79 4,446
Orkla ASA (multi-industry)..... 850 17,818
Petroleum Geo-Services ASA
(energy sources) (a).......... 7,300 9,909
Schibsted ASA
(broadcasting & publishing)... 200 3,521
Smedvig ASA Class A
(energy sources).............. 4,400 30,486
Smedvig ASA Class B
(energy sources).............. 700 4,009
Statoil ASA (energy sources)... 1,800 16,926
Storebrand ASA (insurance)
(a)........................... 700 3,900
Tandberg ASA
(telecommunications) (a)...... 500 3,521
Telenor ASA
(telecommunications).......... 3,200 17,421
-----------
131,812
-----------
PORTUGAL (0.3%)
Banco Comercial Portugues, S.A.
Registered (banking).......... 14,392 27,773
Brisa-Auto Estradas de
Portugal, S.A.
(transportation-road &
rail)......................... 1,148 7,180
Cimentos de Portugal SGPS, S.A.
(building materials &
components)................... 672 2,969
Electricidade de Portugal, S.A
(utilities-electric & gas).... 7,742 17,550
Jeronimo Martins SGPS, S.A.
(multi-industry) (a).......... 116 1,092
Portugal Telecom SGPS, S.A.
Registered
(telecommunications).......... 4,166 35,015
PT Multimedia-Servicos de
Telecomunicacoes e Multimedia
SGPS, S.A.
(telecommunications) (a)...... 193 3,307
Sonae SGPS, S.A.
(merchandising) (a)........... 6,095 4,180
-----------
99,066
-----------
SINGAPORE (0.9%)
Capitaland, Ltd. (real
estate)....................... 2,000 1,873
Chartered Semiconductor
Manufacturing, Ltd.
(electronic components &
instruments) (a).............. 4,000 3,929
City Developments, Ltd.
(real estate)................. 4,348 15,110
DBS Group Holdings, Ltd.
(banking)..................... 5,224 42,909
Fraser & Neave, Ltd.
(beverages & tobacco)......... 900 6,359
Haw Par Corp., Ltd.
(financial services).......... 1,182 2,974
Keppel Corp., Ltd.
(financial services).......... 1,000 3,418
NatSteel, Ltd.
(metals-steel)................ 1,000 1,183
Neptune Orient Lines, Ltd.
(transportation-shipping)
(a)........................... 3,000 3,826
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
219
INTERNATIONAL BROAD MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
SINGAPORE (CONTINUED)
Oversea-Chinese Banking Corp.,
Ltd. (banking)................ 5,000 $ 34,751
Parkway Holdings, Ltd.
(health & personal care)...... 3,000 1,715
SembCorp Industries, Ltd.
(multi-industry).............. 20,512 15,552
Singapore Airlines, Ltd.
(transportation-airlines)..... 3,273 22,748
Singapore Exchange, Ltd.
(financial services).......... 1,000 953
Singapore Press Holdings, Ltd.
(broadcasting & publishing)... 2,000 22,631
Singapore Telecommunications,
Ltd. (telecommunications)..... 27,258 26,930
SMRT Corp., Ltd.
(transportation-road &
rail)......................... 5,000 1,766
ST Assembly Test Services, Ltd.
(electronic components &
instruments) (a).............. 8,000 10,477
United Overseas Bank, Ltd.
(banking)..................... 4,452 34,778
United Overseas Land, Ltd.
(multi-industry).............. 1,000 1,103
-----------
254,985
-----------
SPAIN (12.5%)
Abertis Infraestructuras, S.A.
(transportation-road &
rail)......................... 387 5,219
Acerinox, S.A.
(metals-steel)................ 211 9,186
Altadis, S.A.
(beverages & tobacco)......... 6,191 150,130
Bami, S.A., Inmobiliaria de
Construcciones y Terrenos
(real estate)................. 40,057 173,692
Corporacion Mapfre, S.A.
(insurance)................... 37,127 462,677
Iberia Lineas Aereas de Espana,
S.A.
(transportation-airlines)..... 37,243 90,920
Industria de Diseno Textil,
S.A. (merchandising).......... 955 19,728
Inmobiliaria Colonial, S.A.
(real estate)................. 45,038 876,974
Inmobiliaria Urbis, S.A.
(real estate)................. 51,766 433,281
Metrovacesa, S.A. (real
estate)....................... 11,330 322,166
NH Hoteles, S.A.
(leisure & tourism) (a)....... 366 4,208
Promotora de Informaciones,
S.A. (broadcasting &
publishing)................... 376 4,170
Sacyr Vallehermoso, S.A.
(real estate)................. 80,823 1,076,744
Telefonica Publicidad e
Informacion, S.A.
(broadcasting & publishing)... 633 3,186
Terra Networks, S.A.
(telecommunications) (a)...... 2,236 13,153
TESTA, Inmuebles en Renta, S.A.
(real estate)................. 1,021 12,997
Zeltia, S.A. (health &
personal care) (a)............ 718 5,100
-----------
3,663,531
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
SWEDEN (2.2%)
Assa Abloy AB Series B
(machinery & engineering)..... 400 $ 3,948
Atlas Copco AB Series A
(construction & housing)...... 100 3,512
Axfood AB (food &
household products)........... 100 2,000
Castellum AB (real estate)..... 100 1,993
Drott AB Series B (real
estate)....................... 300 4,865
Electrolux AB Series B
(appliances &
household durables)........... 1,300 26,664
Eniro AB (broadcasting &
publishing)................... 600 4,807
Gambro AB Series A
(health & personal care)...... 2,000 14,870
Gambro AB Series B
(health & personal care)...... 800 5,999
Hennes & Mauritz AB Series B
(merchandising)............... 2,100 44,553
Modern Times Group AB Series B
(broadcasting & publishing)
(a)........................... 300 5,634
Nordea AB (financial
services)..................... 12,000 74,453
OMHEX AB (financial services).. 300 3,077
Sandvik AB (machinery &
engineering).................. 600 17,844
SAS AB
(transportation-airlines)
(a)........................... 400 3,512
Securitas AB Series B
(business & public
services)..................... 1,300 15,998
Skandia Forsakrings AB
(insurance)................... 3,300 12,099
Skandinaviska Enskilda Banken
AB Series A (banking)......... 2,600 31,330
Skanska AB Series B
(construction & housing)...... 4,600 31,843
SKF AB Series A
(machinery & engineering)..... 100 3,538
Svenska Cellulosa AB Series B
(forest products & paper)..... 1,350 50,966
Svenska Handelsbanken AB Series
A (banking)................... 1,600 28,202
Swedish Match AB
(beverages & tobacco)......... 1,483 12,072
Tele2 AB Series B
(telecommunications) (a)...... 200 10,063
Telefonaktiebolaget LM Ericsson
Series B
(electrical & electronics)
(a)........................... 64,436 110,686
TeliaSonera AB
(telecommunications).......... 9,203 40,229
Trelleborg AB Series B
(industrial components)....... 400 5,846
Volvo AB Series A
(automobiles)................. 100 2,686
Volvo AB Series B
(automobiles)................. 2,625 73,357
WM-data AB Series B
(telecommunications) (a)...... 1,000 1,949
-----------
648,595
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
220
ECLIPSE FUNDS
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
SWITZERLAND (0.2%)
Kudelski, S.A. Bearer
(telecommunications).......... 285 $ 8,302
Kuoni Reisen Holding AG
(leisure & tourism)........... 13 4,055
Logitech International, S.A.
Registered
(telecommunications) (a)...... 36 1,442
Phonak Holding AG
(health & personal care)...... 98 1,861
STMicroelectronics N.V.
(electronic components &
instruments).................. 44 1,171
Swisscom AG Registered
(telecommunications).......... 116 33,749
Synthes-Stratec, Inc.
(health & personal care)...... 17 15,608
Tecan AG
(health & personal care)...... 35 1,258
Unaxis Holding AG Registered
(electrical & electronics).... 40 5,227
-----------
72,673
-----------
UNITED KINGDOM (16.7%)
Alliance Unichem PLC
(health & personal care)...... 439 3,993
Amersham PLC
(health & personal care)...... 2,491 31,006
AstraZeneca PLC
(health & personal care)...... 133 6,258
Barclays PLC (banking)......... 34,411 290,509
Barratt Developments PLC
(construction & housing)...... 709 5,865
Berkeley Group (The) PLC
(construction & housing)...... 380 4,920
BG Group PLC (energy sources).. 15,299 69,966
Boots Group PLC
(health & personal care)...... 3,383 40,817
BP PLC (energy sources)........ 15,659 108,615
BT Group PLC
(telecommunications).......... 41,111 129,411
Cable & Wireless PLC
(telecommunication)........... 129,435 299,266
Carnival PLC (leisure &
tourism)...................... 8,097 279,750
Compass Group PLC
(business & public
services)..................... 26,605 153,727
Debenhams PLC
(merchandising)............... 1,079 8,542
Enterprise Inns PLC
(beverages & tobacco)......... 508 7,289
George Wimpey PLC (construction
& housing).................... 1,138 6,286
GlaxoSmithKline PLC
(health & personal care)...... 468 10,022
Great Portland Estates PLC
(real estate)................. 1,787 7,141
Hammerson PLC (real estate).... 2,228 22,477
HBOS PLC (banking)............. 25,880 300,832
Hilton Group PLC
(leisure & tourism)........... 59,336 196,094
</Table>
<Table>
<Caption>
SHARES VALUE
-----------------------
UNITED KINGDOM (CONTINUED)
HSBC Holdings PLC (banking).... 27,569 $ 414,265
Liberty International PLC
(real estate)................. 6,123 66,031
Lloyds TSB Group PLC
(banking)..................... 25,252 175,262
LogicaCMG PLC
(business & public
services)..................... 2,862 14,874
MFI Furniture Group PLC
(food & household products)... 1,788 4,938
Misys PLC (business &
public services).............. 394 2,011
MyTravel Group PLC
(leisure & tourism) (a)....... 28,742 8,901
Persimmon PLC
(construction & housing)...... 839 6,585
Rank Group PLC
(leisure & tourism)........... 73,823 350,767
Reckitt Benckiser PLC (food &
household products)........... 2,626 55,168
Royal Bank of Scotland Group
PLC (banking)................. 16,421 440,555
RT Group PLC (business & public
services) (a)(d).............. 3,665 591
Safeway PLC
(food & household products)... 4,527 22,316
Sage Group PLC (The)
(business & public
services)..................... 9,089 28,726
Sainsbury (J.) PLC
(merchandising)............... 8,286 39,792
Shell Transport & Trading Co.
PLC (energy sources).......... 56,554 352,687
Smith & Nephew PLC
(health & personal care)...... 5,447 43,351
SSL International PLC
(health & personal care)...... 1,110 5,557
Taylor Woodrow PLC
(construction & housing)...... 1,650 6,265
Tesco PLC (merchandising)...... 30,128 120,784
Vodafone Group PLC
(telecommunications).......... 181,336 380,801
Whitbread PLC
(leisure & tourism)........... 18,740 238,506
William Hill PLC
(leisure & tourism)........... 26,215 150,139
-----------
4,911,658
-----------
Total Common Stocks
(Cost $25,342,738)............ 27,013,809(f)
-----------
PREFERRED STOCKS (0.7%)
AUSTRALIA (0.2%)
News Corp., Ltd. (The)
A$0.075
(broadcasting & publishing)
(k)........................... 6,376 46,915
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
221
INTERNATIONAL BROAD MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
PREFERRED STOCKS (CONTINUED)
SHARES VALUE
-----------------------
GERMANY (0.5%)
Henkel KGaA
E1.12 (chemicals) (j)......... 1,878 $ 137,562
ProSiebenSat.1 Media AG
E0.02 (broadcasting &
publishing) (k)............... 300 4,569
-----------
142,131
-----------
Total Preferred Stocks
(Cost $171,107)............... 189,046
-----------
RIGHTS (0.0%) (b)
AUSTRALIA (0.0%) (b)
Australia & New Zealand Banking
Group, Ltd.
Expire 11/24/03 (banking)
(a)(g)........................ 30 92
-----------
Total Rights
(Cost $0)..................... 92
-----------
WARRANTS (0.0%) (b)
HONG KONG (0.0%) (b)
Hopewell Highway
Infrastructure, Ltd. Strike
Price HK$4.18
Expire 8/5/06
(transportation-road & rail)
(a)(k)........................ 870 179
-----------
Total Warrants
(Cost $0)..................... 179
-----------
SHORT-TERM INVESTMENTS (6.1%)
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT
----------
U.S. GOVERNMENT (6.1%)
United States Treasury Bills
1.10%, due 11/20/03........... $1,500,000 1,499,345
1.145%, due 12/4/03 (c)....... 300,000 299,757
-----------
Total Short-Term Investments
(Cost $1,799,102)............. 1,799,102
-----------
Total Investments
(Cost $27,312,947) (h)........ 98.9% 29,002,228(i)
Cash and Other Assets, Less
Liabilities................... 1.1 325,225
---------- -----------
Net Assets..................... 100.0% $29,327,453
========== ===========
</Table>
FUTURES CONTRACTS (0.0%) (b)
<Table>
<Caption>
CONTRACTS UNREALIZED
LONG APPRECIATION(J)(J)
-------------------------------
FRANCE (0.0%) (b)
Euro, CAC 40 Index,
November 2003............... 26 $ 8,499
-----------
GERMANY (0.0%) (b)
Euro, IBEX 35 Index, November
2003........................ 4 5,032
-----------
Total Futures Contracts
(Settlement Value
$1,352,906) (e)............. $ 13,531
===========
</Table>
- ------------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Segregated or partially segregated as collateral for futures contracts.
(d) Fair valued security.
(e) Security primarily trades on the London Exchange.
(f) The combined market value of common stocks and settlement value of Index
futures contracts represents 96.7% of net assets.
(g) Each right entitles the holder to purchase one share of Australia & New
Zealand Banking Group, Ltd. common stock at an exercise price of A$13.00.
(h) The cost for federal income tax purposes is $27,369,187.
(i) At October 31, 2003 net unrealized appreciation for securities was
$1,633,041, based on cost for federal income tax purposes. This consisted of
aggregate gross unrealized appreciation for all investments on which there
was an excess of market value over cost of $3,219,553 and aggregate gross
unrealized depreciation for all investments on which there was an excess of
cost over market value of $1,586,512.
(j) Represents the difference between the value of the contracts at the time
they were opened and the value at October 31, 2003.
(k) The following abbreviations are used in the above portfolio:
A$ -Australian Dollar
E -Euro
HK$-Hong Kong Dollar
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
222
ECLIPSE FUNDS
The table below sets forth the diversification of International Broad Market
Fund investments by industry.
INDUSTRY DIVERSIFICATION
<Table>
<Caption>
VALUE PERCENT +
-----------------------
Aerospace & Military
Technology................. $ 6,822 0.0%*
Appliances & Household
Durables................... 60,329 0.2
Automobiles.................. 451,250 1.5
Banking...................... 4,956,925 16.9
Beverages & Tobacco.......... 394,712 1.4
Broadcasting & Publishing.... 264,274 0.9
Building Materials &
Components................. 169,955 0.6
Business & Public Services... 905,776 3.1
Chemicals.................... 1,204,183 4.1
Construction & Housing....... 152,034 0.5
Data Processing &
Reproduction............... 3,281 0.0*
Electrical & Electronics..... 728,941 2.5
Electronic Components &
Instruments................ 156,211 0.5
Energy Equipment & Services.. 12,770 0.0*
Energy Sources............... 775,583 2.6
Financial Services........... 402,540 1.4
Food & Household Products.... 383,094 1.3
Forest Products & Paper...... 195,964 0.7
Gold Mines................... 22,166 0.1
Health & Personal Care....... 996,897 3.4
Industrial Components........ 225,932 0.8
Insurance.................... 727,707 2.5
Leisure & Tourism............ 1,259,783 4.3
Machinery & Engineering...... 209,396 0.7
Merchandising................ 2,475,980 8.5
Metals-Non Ferrous........... 137,562 0.5
Metals-Steel................. 120,991 0.4
Miscellaneous-Materials &
Commodities................ 130,710 0.5
Multi-Industry............... 427,781 1.5
Real Estate.................. 5,315,284 18.1
Recreation & Other Consumer
Goods...................... 318,486 1.1
Telecommunications........... 1,583,233 5.4
Textiles & Apparel........... 127,608 0.4
Transportation-Airlines...... 185,717 0.6
Transportation-Road & Rail... 236,826 0.8
Transportation-Shipping...... 95,476 0.3
U.S. Government.............. 1,799,102 6.1
Utilities-Electric & Gas..... 1,170,313 4.0
Wholesale & International
Trade...................... 210,634 0.7
----------- -------
29,002,228 98.9
Cash and Other Assets,
Less Liabilities........... 325,225 1.1
----------- -----
Net Assets................... $29,327,453 100.0%
=========== =====
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
* Less than one tenth of a percent.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
223
INTERNATIONAL BROAD MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
ASSETS:
Investment in securities, at value (identified
cost $27,312,947)............................... $29,002,228
Cash denominated in foreign currencies (identified
cost $39,470)................................... 39,580
Cash.............................................. 183,388
Deposit with broker for futures contracts......... 36,108
Receivables:
Dividends and interest.......................... 122,826
Fund shares sold................................ 14,660
Manager......................................... 7,304
Other assets...................................... 5,467
-----------
Total assets................................ 29,411,561
-----------
LIABILITIES:
Payables:
Custodian....................................... 38,628
Professional.................................... 24,785
Transfer agent.................................. 5,084
Variation margin on futures contracts........... 3,356
Directors....................................... 745
Accrued expenses.................................. 11,510
-----------
Total liabilities........................... 84,108
-----------
Net assets........................................ $29,327,453
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class................................... $ 3,656
Service Class................................... 49
Additional paid-in capital........................ 36,043,656
Accumulated undistributed net investment income... 360,454
Accumulated net realized loss on investments,
futures contracts and foreign currency
transactions.................................... (8,798,860)
Net unrealized appreciation on investments and
futures contracts............................... 1,702,812
Net unrealized appreciation on translation of
other assets and liabilities in foreign
currencies...................................... 15,686
-----------
Net assets........................................ $29,327,453
===========
No-Load Class
Net assets applicable to outstanding shares....... $28,940,693
===========
Shares of capital stock outstanding............... 3,655,981
===========
Net asset value per share outstanding............. $ 7.92
===========
Service Class
Net assets applicable to outstanding shares....... $ 386,760
===========
Shares of capital stock outstanding............... 49,092
===========
Net asset value per share outstanding............. $ 7.88
===========
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
INVESTMENT INCOME:
Income:
Dividends (a).................................... $ 586,476
Interest......................................... 22,790
-----------
Total income................................. 609,266
-----------
Expenses:
Manager.......................................... 248,698
Custodian........................................ 205,054
Professional..................................... 35,341
Portfolio pricing................................ 33,998
Transfer agent................................... 32,160
Registration..................................... 30,827
Directors........................................ 12,622
Shareholder communication........................ 3,675
Service--Service Class........................... 1,099
Miscellaneous.................................... 19,777
-----------
Total expenses before reimbursement.......... 623,251
Expense reimbursement from Manager............... (376,069)
-----------
Net expenses................................. 247,182
-----------
Net investment income.............................. 362,084
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss from:
Security transactions............................ (4,098,478)
Futures transactions............................. (138,234)
Foreign currency transactions.................... (188,897)
-----------
Net realized loss on investments and foreign
currency transactions............................ (4,425,609)
-----------
Net change in unrealized appreciation
(depreciation) on investments:
Security transactions............................ 8,952,938
Futures transactions............................. 13,478
Translation of other assets and liabilities in
foreign currencies............................. 38,127
-----------
Net unrealized gain on investments and foreign
currency transactions............................ 9,004,543
-----------
Net realized and unrealized gain on investments and
foreign currency transactions.................... 4,578,934
-----------
Net increase in net assets resulting from
operations....................................... $ 4,941,018
===========
</Table>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of
$70,790.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
224
ECLIPSE FUNDS
INTERNATIONAL BROAD MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................... $ 362,084 $ 295,867
Net realized loss on investments, futures contracts and
foreign currency transactions.......................... (4,425,609) (4,321,134)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions.......... 9,004,543 (271,628)
------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................. 4,941,018 (4,296,895)
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
No-Load Class......................................... (189,840) (196,509)
Service Class......................................... (1,671) (1,510)
From net realized gain on investments and foreign
currency transactions:
No-Load Class......................................... -- (65,502)
Service Class......................................... -- (908)
------------ ------------
Total dividends and distributions to shareholders... (191,511) (264,429)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 53,732,966 92,311,313
Service Class......................................... 1,732,363 1,848,491
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
No-Load Class......................................... 128,123 174,832
Service Class......................................... 1,671 2,415
------------ ------------
55,595,123 94,337,051
Cost of shares redeemed*:
No-Load Class......................................... (54,529,746) (94,318,273)
Service Class......................................... (2,107,675) (1,514,509)
------------ ------------
Decrease in net assets derived from capital share
transactions......................................... (1,042,298) (1,495,731)
------------ ------------
Net increase (decrease) in net assets................. 3,707,209 (6,057,055)
NET ASSETS:
Beginning of year......................................... 25,620,244 31,677,299
------------ ------------
End of year............................................... $ 29,327,453 $ 25,620,244
============ ============
Accumulated undistributed net investment income at end of
year.................................................... $ 360,454 $ 171,698
============ ============
</Table>
- ------------
* Cost of shares redeemed net of redemption fee in the amount of $138,409 for
the year ended October 31, 2003.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
225
INTERNATIONAL BROAD MARKET FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
----------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
------- ------- ------- ------- ----------- ------------
Net asset value at beginning of
period........................... $ 6.63 $ 8.00 $ 11.22 $ 12.59 $ 11.27 $ 10.24
------- ------- ------- ------- ------- -------
Net investment income............. 0.09(a) 0.08(a) 0.08(a) 0.11 0.11 0.11
Net realized and unrealized gain
(loss) on investments............ 1.25 (1.37) (2.87) (0.37) 1.39 1.84
Net realized and unrealized gain
(loss) on foreign currency
transactions..................... (0.04) (0.01) (0.01) (0.05) (0.11) 0.00(b)
------- ------- ------- ------- ------- -------
Total from investment
operations....................... 1.30 (1.30) (2.80) (0.31) 1.39 1.95
------- ------- ------- ------- ------- -------
Less dividends and distributions:
From net investment income........ (0.05) (0.05) (0.02) -- (0.01) (0.20)
From net realized gain on
investments and foreign currency
transactions..................... -- (0.02) (0.40) (1.06) (0.06) (0.72)
------- ------- ------- ------- ------- -------
Total dividends and
distributions.................... (0.05) (0.07) (0.42) (1.06) (0.07) (0.92)
------- ------- ------- ------- ------- -------
Redemption fee (a)................ 0.04 -- -- -- -- --
------- ------- ------- ------- ------- -------
Net asset value at end of
period........................... $ 7.92 $ 6.63 $ 8.00 $ 11.22 $ 12.59 $ 11.27
======= ======= ======= ======= ======= =======
Total investment return........... 20.35% (16.43%) (25.84%) (3.52%) 12.31%(c) 19.15%
Ratios (to average net assets)/
Supplemental Data:
Net investment income............ 1.39% 0.96% 0.79% 0.78% 1.14%+ 0.90%
Net expenses..................... 0.94% 0.94% 0.94% 0.95%(d) 0.94%+ 0.94%
Expenses (before
reimbursement)................. 2.38% 1.71% 1.44% 1.29% 1.32%+ 1.38%
Portfolio turnover rate........... 301% 47% 1% 11% 19% 24%
Net assets at end of period (in
000's)........................... $28,941 $24,925 $31,254 $68,513 $67,582 $65,087
</Table>
- ------------
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Less than one cent per share.
(c) Total return is not annualized.
(d) The effect of non-reimbursable interest expense on the expense ratio was
0.01%.
(e) Performance results include gains from capital share transactions.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
226
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
---------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
---------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
------- ------- ------- ------- ----------- ------------
$ 6.60 $ 7.91 $ 11.13 $ 12.51 $ 11.22 $ 10.20
------- ------- ------- ------- ------- -------
0.07(a) 0.05(a) 0.05(a) 0.09 0.09 0.08
1.24 (1.30) (2.86) (0.36) 1.38 1.83
(0.04) (0.01) (0.01) (0.05) (0.11) 0.00(b)
------- ------- ------- ------- ------- -------
1.27 (1.26) (2.82) (0.32) 1.36 1.91
------- ------- ------- ------- ------- -------
(0.03) (0.03) -- -- (0.01) (0.17)
-- (0.02) (0.40) (1.06) (0.06) (0.72)
------- ------- ------- ------- ------- -------
(0.03) (0.05) (0.40) (1.06) (0.07) (0.89)
------- ------- ------- ------- ------- -------
0.04 -- -- -- -- --
------- ------- ------- ------- ------- -------
$ 7.88 $ 6.60 $ 7.91 $ 11.13 $ 12.51 $ 11.22
======= ======= ======= ======= ======= =======
19.93% (16.09%)(e) (26.20%) (3.63%) 12.08%(c) 18.83%
1.14% 0.71% 0.54% 0.53% 0.89%+ 0.65%
1.19% 1.19% 1.19% 1.20%(d) 1.19%+ 1.19%
2.63% 1.96% 1.69% 1.54% 1.57%+ 1.63%
301% 47% 1% 11% 19% 24%
$ 387 $ 695 $ 423 $ 576 $ 549 $ 499
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
227
Eclipse International Equity Fund
- --------------------------------------------------------------------------------
For the year ended October 31, 2003, international stock markets generally
showed strong performance both in U.S. dollars and local currency terms.
Overall, the global markets have surged in tandem since March of 2003 as some
economic data has suggested that the worst is over and that recovery is just
around the corner. In Europe, business expectations are improving, but activity
and demand provide no discernible signs of recovery. Business-sentiment
indicators are rising moderately. Consumer confidence remains stuck at low
levels. Foreign currencies gained considerably against the U.S. dollar,
particularly the euro and Japanese yen.
PERFORMANCE REVIEW
For the 12 months ended October 31, 2003, Eclipse International Equity Fund
returned 20.05% for No-Load Class shares and 19.72% for Service Class shares.
Both share classes underperformed the 24.51% return of the average Lipper(1)
international fund over the same period. Both share classes also underperformed
the 27.03% return of the Morgan Stanley Capital International EAFE Index(2) for
the 12 months ended October 31, 2003.
The Fund's underperformance resulted from its being underweighted in high-beta
market segments such as information technology and insurance. Although high-beta
companies were particularly strong in the 12 months ended October 31, 2003, all
the companies in the Fund's portfolio continue to perform well operationally.
STRATEGIC POSITIONING
The Fund uses a bottom-up stock-by-stock selection process to select securities
for the portfolio. This process often leads us to out-of-favor companies with
quality brands. The Fund's country, sector, and market capitalization weightings
were the result of individual stock selection and do not reflect predetermined
target allocations. The Fund's bottom-up selection process has resulted in
overweighted positions in the consumer staples and utilities sectors and
underweighted positions in telecom services, health care, energy, and basic
materials. Generally speaking, we found more compelling investment potential in
Europe. As a result the portfolio was underweighted in Japanese stocks relative
to the MSCI EAFE Index at the end of the reporting period. The Fund continued to
seek profit from new technologies, from trends among affluent consumers, and
from corporate restructurings and turnovers.
STRONG AND WEAK PERFORMERS
Among the leading contributors to performance in the year ended October 31,
2003, was Deutsche Boerse. This company provides a securities-exchange platform
through the German Exchange, derivatives trading on the Eurex, and clearing
services through its subsidiary Clearstream. As the markets have risen and
volume has increased in the equity and derivatives markets, Deutsche Boerse
continued to surprise the market operationally. Despite some uncertainty
surrounding debate over a new European Union investment directive, we believe
the new directive will not adversely affect the company.
Another positive contributor was Iberdrola, a Spanish utility. The company is in
the middle of a five-year investment plan that involves divesting noncore assets
and reinvesting in cleaner, more efficient electricity generation to satisfy
faster-than-average growth in demand. Midway through the refocus, the company
appears to be well on its way
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
The Fund may invest in derivatives, which may increase the volatility of the
Fund's net asset value and may result in a loss to the Fund. Foreign securities
may be subject to greater risks than U.S. investments, including currency
fluctuations, less-liquid trading markets, greater price volatility, political
and economic instability, less publicly available information, and changes in
tax or currency laws or monetary policy. These risks are likely to be greater in
emerging markets than in developed markets.
1. Lipper Inc. is an independent fund performance monitor. Results are based
on total returns with all dividend and capital gain distributions
reinvested.
2. The Morgan Stanley Capital International Europe, Australasia, and Far East
Index--the MSCI EAFE Index--is an unmanaged index generally considered to
be representative of the international stock market. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
228
toward becoming the most profitable utility in Europe. Due to its superior
performance, the company increased its dividend more than expected.
A third positive contributor, Synthes-Stratec develops, manufactures and sells
products used in orthopedic trauma surgery. In August 2003, the company
announced an acquisition of closely held Mathys. A new-product rollout cycle
should allow the company to grow earnings at a high double-digit rate in the
foreseeable future.
Another large holding, Canon, the well-known copier and printer company, has
surprised analysts by continuing to perform well in a relatively challenging
environment.
One stock that detracted substantially from performance for the Fund's fiscal
year was Rentokil Initial, which offers services such as hygiene, security, and
pest control. Fundamentally the firm continues to do well. The stock
underperformed as investors rotated out of defensive issues. Earnings rose 7.6%
in the first half of 2003, and Rentokil Initial stated that it expects good
underlying organic growth in sales and profits to allow the company to continue
its share-buyback program.
Another stock that detracted from performance during the reporting period was
Hongkong Electric, the generator and supplier of electricity in Hong Kong. The
company is a fully regulated monopoly with a 5.5% dividend yield. The
underperformance resulted from uncertainty regarding tariffs in an upcoming
regulatory review. We believe the risk-adjusted returns remain attractive and
the Fund continues to own the stock.
We initiated a new position in Man Group, a United Kingdom financial-services
firm.
We reduced the Fund's position in Nintendo, a manufacturer and marketer of
home-use games, including Gamecube and Gameboy systems. The company failed to
meet sales expectations for the current generation of the in-home game system
Gamecube.
LOOKING AHEAD
While the world economy has improved, we believe that a large portion of the
market already reflects the change. We remain concerned that valuations in a
number of industries may have surpassed what is justified by the magnitude of
the recovery in earnings or in the world economy. We take a cautious view and
remain underweighted in high-beta sectors such as media and technology.
As always, we remain alert for selective opportunities in stocks and will
continue to take advantage of sell-offs to accumulate positions in solid
franchises that are undergoing temporary difficulty.
Whatever the markets or the world economy may bring, the Fund will continue to
seek long-term growth of capital by investing in a portfolio consisting
primarily of non-U.S. equity securities.
RUPAL BHANSALI
Portfolio Manager
MacKay Shields LLC
229
$10,000 INVESTED IN
ECLIPSE INTERNATIONAL EQUITY FUND VERSUS
MSCI EAFE INDEX
NO-LOAD CLASS SHARES
[NO-LOAD CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE INTERNATIONAL EQUITY FUND MSCI EAFE INDEX
--------------------------------- ---------------
10/31/93 $10,000 $10,000
94 $10,607 $11,009
95 $10,337 $10,968
96 $11,978 $12,117
97 $13,037 $12,678
98 $14,676 $13,901
99 $17,988 $17,103
00 $16,290 $16,607
01 $13,603 $12,467
02 $13,667 $10,820
10/31/03 $16,407 $13,745
</Table>
$10,000 INVESTED IN
ECLIPSE INTERNATIONAL EQUITY FUND VERSUS
MSCI EAFE INDEX
SERVICE CLASS SHARES
[SERVICE CLASS SHARES LINE GRAPH]
<Table>
<Caption>
ECLIPSE INTERNATIONAL EQUITY FUND MSCI EAFE INDEX
--------------------------------- ---------------
10/31/93 $10,000 $10,000
94 $10,575 $11,009
95 $10,273 $10,968
96 $11,863 $12,117
97 $12,832 $12,678
98 $14,416 $13,901
99 $17,632 $17,103
00 $15,935 $16,607
01 $13,288 $12,467
02 $13,319 $10,820
10/31/03 $15,946 $13,745
</Table>
THESE GRAPHS ASSUME A $10,000 INVESTMENT MADE ON 10/31/93.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS(1,2)
PERFORMANCE AS OF OCTOBER 31, 2003
- ----------------------------------------------------------------------------------------------------------
ONE YEAR FIVE YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------------
Eclipse International Equity Fund No-Load
Class(1) 20.05% 2.25% 5.08%
Eclipse International Equity Fund Service
Class(1,2) 19.72 2.04 4.78
Average Lipper international fund(3) 24.51 0.91 4.19
MSCI EAFE Index(4) 27.03 -0.22 3.23
</Table>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
NO-LOAD CLASS SHARES
[PERFORMANCE BAR CHART]
<Table>
Year ended December 31, 1994 8.36
Year ended December 31, 1995 7.17
Year ended December 31, 1996 12.09
Year ended December 31, 1997 5.44
Year ended December 31, 1998 22.41
10 months ended October 31, 1999 11.23
Year ended October 31, 2000 -9.44
Year ended October 31, 2001 -16.49
Year ended October 31, 2002 0.47
Year ended October 31, 2003 20.05
</Table>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions.
1. Shares of the Fund were first offered on 1/1/95. Performance includes the
historical performance of the Fund's predecessor separate account from its
inception on 7/31/92 through 12/31/94. Performance for the period prior to
1/1/95 was calculated using the separate account's expense structure, which
was generally higher than the expense structure of the Fund.
2. Total returns reflect change in share price and reinvestment of all dividend
and capital gain distributions and, for the Service Class shares, include the
service fee of .25% on an annualized basis of the average daily net asset
value of the Service Class shares.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital gain distributions reinvested.
4. The Morgan Stanley Capital International Europe, Australasia, and Far East
Index--the MSCI EAFE Index--is an unmanaged index that is considered to be
representative of the international stock market. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
INFORMATION ABOUT ECLIPSE INTERNATIONAL EQUITY FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
230
ECLIPSE FUNDS
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (93.6%)+
SHARES VALUE
-----------------------
AUSTRALIA (0.6%)
Australian Gas Light Co., Ltd.
(energy sources)............. 6,400 $ 48,590
Cochlear Ltd. (health &
personal care)............... 8,100 181,042
-----------
229,632
-----------
BELGIUM (2.8%)
Electrabel, S.A.
(utilities-electrical &
gas)......................... 3,546 980,677
-----------
BERMUDA (0.5%)
XL Capital Ltd. Class A
(insurance).................. 2,500 173,750
-----------
DENMARK (1.9%)
Danske Bank A/S (banking)..... 33,462 675,043
-----------
FRANCE (1.7%)
BNP Paribas, S.A. (banking)... 10,093 530,337
Dexia, S.A. (business & public
services).................... 5,300 83,423
-----------
613,760
-----------
GERMANY (9.5%)
BASF AG (chemicals)........... 2,100 96,429
Bayerische Motoren Werke AG
(automobiles)................ 31,234 1,252,679
Deutsche Boerse AG (financial
services).................... 23,085 1,284,118
Schering AG (health & personal
care)........................ 15,655 736,147
-----------
3,369,373
-----------
HONG KONG (3.0%)
Hongkong Electric Holdings,
Ltd. (utilities-electrical &
gas)......................... 278,400 1,086,254
-----------
INDIA (1.3%)
HDFC Bank Ltd. ADR (banking)
(b).......................... 6,715 173,851
ITC, Ltd. GDR (beverages &
tobacco) (a)(c).............. 15,500 297,106
-----------
470,957
-----------
IRELAND (3.9%)
Anglo Irish Bank Corp. PLC
(banking).................... 10,900 130,894
Bank of Ireland (banking)..... 79,372 978,984
iShares DJ Euro STOXX 50
(financial services) (d)..... 8,800 264,446
-----------
1,374,324
-----------
ITALY (4.5%)
Eni S.p.A. (energy sources)... 26,600 422,401
Eni S.p.A. ADR (energy
sources) (b)................. 800 63,600
</Table>
<Table>
SHARES VALUE
-----------------------
<Caption>
ITALY (CONTINUED)
Riunione Adriatica di Sicurta
S.p.A. (insurance)........... 5,600 $ 87,495
Snam Rete Gas S.p.A.
(utilities-electric & gas)... 271,216 1,021,535
-----------
1,595,031
-----------
JAPAN (9.6%)
Canon, Inc. (data processing &
reproduction)................ 11,000 532,315
Canon, Inc. ADR (data
processing & reproduction)
(b).......................... 12,811 627,098
FANUC, Ltd. (electronic
components & instruments).... 1,900 114,240
Murata Manufacturing Co., Ltd.
(electronic components &
instruments)................. 4,200 238,777
Nintendo Co., Ltd. (recreation
& other consumer goods)...... 8,500 656,433
Nitto Denko Corp.
(chemicals).................. 4,300 225,688
Nomura Research Institute,
Ltd. (business & public
services).................... 1,200 120,617
Secom Co., Ltd. (business &
public services)............. 2,200 86,051
Takeda Chemical Industries,
Ltd. (health & personal
care)........................ 23,700 838,614
-----------
3,439,833
-----------
NETHERLANDS (11.1%)
Euronext N.V. (financial
services).................... 40,937 1,001,754
Reed Elsevier N.V.
(broadcasting & publishing).. 64,961 723,455
Royal Dutch Petroleum Co.
(utilities electrical &
gas)......................... 15,600 692,328
TPG N.V. (business & public
services).................... 71,906 1,550,608
-----------
3,968,145
-----------
SINGAPORE (0.7%)
Venture Corp. Ltd. (electrical
& electronics)............... 23,900 259,462
-----------
SPAIN (5.5%)
Banco Popular Espanol, S.A.
(banking).................... 23,505 1,222,228
Iberdrola, S.A.
(utilities-electric & gas)... 31,064 518,206
Indra Sistemas, S.A. (business
& public services)........... 18,100 203,679
-----------
1,944,113
-----------
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
231
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 2003
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-----------------------
SWEDEN (1.7%)
Autoliv, Inc. (automobiles)... 5,300 $ 175,536
Hennes & Mauritz AB
(merchandising).............. 4,200 89,105
Sandvik AB (machinery &
engineering)................. 8,816 262,191
Svenska Handelsbanken AB Class
A (banking).................. 4,900 86,369
-----------
613,201
-----------
SWITZERLAND (10.8%)
Credit Suisse Group ADR
(banking) (b)................ 7,700 271,656
Nestle, S.A. Registered (food
& household products)........ 5,414 1,191,984
Novartis AG ADR (health &
personal care) (b)........... 13,700 525,669
Novartis AG Registered (health
& personal care)............. 4,952 188,757
Syngenta AG (chemicals)....... 4,900 262,549
Synthes-Stratec, Inc. (health
& personal care)............. 300 275,434
UBS AG Registered (banking)... 16,244 997,497
UBS AG Registered (banking)
(e).......................... 2,303 141,266
-----------
3,854,812
-----------
UNITED KINGDOM (22.4%)
BP PLC ADR (utilities-electric
& gas) (b)................... 1,500 63,570
Capita Group PLC (business &
public services)............. 7,900 33,146
Diageo PLC (beverages &
tobacco)..................... 96,775 1,138,881
Diageo PLC ADR (beverages &
tobacco) (b)................. 3,086 147,542
Exel PLC
(transportation-shipping).... 51,181 657,900
Lloyds TSB Group PLC
(banking).................... 118,156 820,064
Lloyds TSB Group PLC ADR
(banking) (b)................ 8,745 246,784
Man Group PLC (financial
services).................... 12,500 307,784
Provident Financial PLC
(financial services)......... 24,200 265,493
Reckitt Benckiser PLC (food &
household products).......... 57,182 1,201,292
Rentokil Initial PLC (business
& public services)........... 365,890 1,390,808
Royal Bank of Scotland Group
PLC (banking)................ 1 27
Scottish & Southern Energy PLC
(utilities-electric & gas)... 21,890 228,449
Tesco PLC (merchandising)..... 366,157 1,467,939
-----------
7,969,679
-----------
</Table>
<Table>
SHARES VALUE
-----------------------
<Caption>
UNITED STATES (2.1%)
AFLAC, Inc. (insurance)....... 5,390 $ 196,627
iShares MSCI United Kingdom
Index Fund (financial
services) (d)................ 38,000 549,860
-----------
746,487
-----------
Total Common Stocks
(Cost $30,089,424)........... 33,364,533
-----------
PREFERRED STOCK (3.1%)
GERMANY (3.1%)
Porsche AG
E1.53 (automobiles) (i)...... 2,265 1,111,152
-----------
Total Preferred Stock
(Cost $873,731).............. 1,111,152
-----------
WARRANTS (0.9%)
IRELAND (0.9%)
Ryanair Holdings PLC
Strike Price E0.000001
Expire 3/21/08
(transportation-airlines)
(f)(i)....................... 35,952 311,283
-----------
Total Warrants
(Cost $252,297).............. 311,283
-----------
</Table>
<Table>
<Caption>
SHORT-TERM INVESTMENT (2.8%)
PRINCIPAL
AMOUNT
----------
COMMERCIAL PAPER (2.8%)
UNITED STATES (2.8%)
UBS Finance Delaware LLC
1.03%, due 11/3/03
(financial services)......... $1,005,000 1,004,943
-----------
Total Short-Term Investment
(Cost $1,004,943)............ 1,004,943
-----------
Total Investments
(Cost $32,220,395) (g)....... 100.4% 35,791,911(h)
Liabilities in Excess of
Cash and Other Assets........ (0.4) (140,061)
---------- -----------
Net Assets.................... 100.0% $35,651,850
========== ===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
232
ECLIPSE FUNDS
- ------------
(a) May be sold to institutional investors only.
(b) ADR--American Depositary Receipt.
(c) GDR--Global Depositary Receipt.
(d) Exchange Traded Fund--represents a basket of securities that are traded on
an exchange.
(e) Security primarily trades on the New York Stock Exchange.
(f) Non-income producing security.
(g) The cost for federal income tax purposes is $32,341,684.
(h) At October 31, 2003 net unrealized appreciation for securities was
$3,450,227, based on cost for federal income tax purposes. This consisted of
aggregate gross unrealized appreciation for all investments on which there
was an excess of market value over cost of $3,907,193 and aggregate gross
unrealized depreciation for all investments on which there was an excess of
cost over market value of $456,966.
(i) The following abbreviation is used in the above portfolio:
E-Euro
The table below sets forth the diversification of International Equity Fund
investments by industry.
INDUSTRY DIVERSIFICATION
<Table>
<Caption>
VALUE PERCENT +
-----------------------
Automobiles.................. $ 2,539,367 7.1%
Banking...................... 6,275,000 17.6
Beverages & Tobacco.......... 1,583,529 4.5
Broadcasting & Publishing.... 723,455 2.0
Business & Public Services... 3,468,332 9.7
Chemicals.................... 584,666 1.6
Data Processing &
Reproduction............... 1,159,413 3.3
Electrical & Electronics..... 259,462 0.7
Electronic Components &
Instruments................ 353,017 1.0
Energy Sources............... 534,591 1.5
Financial Services........... 4,678,398 13.1
Food & Household Products.... 2,393,276 6.7
Health & Personal Care....... 2,745,663 7.7
Insurance.................... 457,872 1.3
Machinery & Engineering...... 262,191 0.7
Merchandising................ 1,557,044 4.4
Recreation & Other Consumer
Goods...................... 656,433 1.8
Transportation-Airlines...... 311,283 0.9
Transportation-Shipping...... 657,900 1.9
Utilities-Electric & Gas..... 4,591,019 12.9
----------- -------
35,791,911 100.4
Liabilities in Excess of
Cash and Other Assets...... (140,061) (0.4)
----------- -------
Net Assets................... $35,651,850 100.0%
=========== =====
</Table>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
233
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 2003
<Table>
<Caption>
ASSETS:
Investment in securities, at value (identified
cost $32,220,395)............................... $35,791,911
Cash denominated in foreign currencies (identified
cost $45,602)................................... 45,044
Cash.............................................. 436
Receivables:
Investment securities sold...................... 225,840
Dividends and interest.......................... 168,323
Fund shares sold................................ 149,139
Unrealized appreciation on foreign currency
forward contracts............................... 110,558
Other assets...................................... 4,157
-----------
Total assets................................ 36,495,408
-----------
LIABILITIES:
Payables:
Investment securities purchased................. 762,661
Manager......................................... 17,169
Custodian....................................... 10,289
Transfer agent.................................. 5,417
Fund shares redeemed............................ 1,438
Directors....................................... 764
Accrued expenses.................................. 34,523
Unrealized depreciation on foreign currency
forward contracts............................... 11,297
-----------
Total liabilities........................... 843,558
-----------
Net assets........................................ $35,651,850
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
No-Load Class................................... $ 2,828
Service Class................................... 748
Additional paid-in capital........................ 38,084,312
Accumulated undistributed net investment income... 464,673
Accumulated net realized loss on investments and
foreign currency transactions................... (6,587,315)
Net unrealized appreciation on investments........ 3,571,516
Net unrealized appreciation on translation of
other assets and liabilities in foreign
currencies and foreign currency forward
contracts....................................... 115,088
-----------
Net assets........................................ $35,651,850
===========
No-Load Class
Net assets applicable to outstanding shares....... $28,276,550
===========
Shares of capital stock outstanding............... 2,827,588
===========
Net asset value per share outstanding............. $ 10.00
===========
Service Class
Net assets applicable to outstanding shares....... $ 7,375,300
===========
Shares of capital stock outstanding............... 748,014
===========
Net asset value per share outstanding............. $ 9.86
===========
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
<Table>
<Caption>
INVESTMENT INCOME:
Income:
Dividends (a).................................... $ 636,534
Interest......................................... 11,322
----------
Total income................................. 647,856
----------
Expenses:
Manager.......................................... 208,012
Custodian........................................ 58,191
Registration..................................... 34,266
Transfer agent................................... 34,042
Professional..................................... 32,290
Portfolio pricing................................ 24,971
Directors........................................ 11,227
Service--Service Class........................... 7,476
Shareholder communication........................ 3,615
Miscellaneous.................................... 15,892
----------
Total expenses before
reimbursement............................... 429,982
Expense reimbursement from Manager............... (170,444)
----------
Net expenses................................. 259,538
----------
Net investment income.............................. 388,318
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Security transactions............................ 1,024,793
Foreign currency transactions.................... 76,141
----------
Net realized gain on investments and foreign
currency transactions............................ 1,100,934
----------
Net change in unrealized appreciation on
investments:
Security transactions............................ 3,269,100
Translation of other assets and liabilities in
foreign currencies and foreign currency forward
contracts...................................... 99,733
----------
Net unrealized gain on investments and foreign
currency transactions............................ 3,368,833
----------
Net realized and unrealized gain on investments and
foreign currency transactions.................... 4,469,767
----------
Net increase in net assets resulting from
operations....................................... $4,858,085
==========
</Table>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of
$71,160.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
234
ECLIPSE FUNDS
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and October 31, 2002
<Table>
<Caption>
2003 2002
------------ ------------
INCREASE IN NET ASSETS:
Operations:
Net investment income................................... $ 388,318 $ 271,948
Net realized gain (loss) on investments and foreign
currency transactions.................................. 1,100,934 (1,609,868)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions.......... 3,368,833 1,799,246
------------ ------------
Net increase in net assets resulting from operations.... 4,858,085 461,326
------------ ------------
Dividends to shareholders:
From net investment income:
No-Load Class......................................... (311,093) (522,419)
Service Class......................................... (3,935) (6,826)
------------ ------------
Total dividends to shareholders..................... (315,028) (529,245)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
No-Load Class......................................... 41,955,566 65,771,617
Service Class......................................... 7,063,780 1,729,409
Net asset value of shares issued to shareholders in
reinvestment of dividends:
No-Load Class......................................... 298,706 522,419
Service Class......................................... 3,935 6,826
------------ ------------
49,321,987 68,030,271
Cost of shares redeemed*:
No-Load Class......................................... (39,471,080) (64,736,044)
Service Class......................................... (931,300) (1,802,152)
------------ ------------
Increase in net assets derived from capital share
transactions......................................... 8,919,607 1,492,075
------------ ------------
Net increase in net assets............................ 13,462,664 1,424,156
NET ASSETS:
Beginning of year......................................... 22,189,186 20,765,030
------------ ------------
End of year............................................... $ 35,651,850 $ 22,189,186
============ ============
Accumulated undistributed net investment income at end of
year.................................................... $ 464,673 $ 314,996
============ ============
</Table>
- ------------
* Cost of shares redeemed net of redemption fee in the amount of $104,394 for
the year ended October 31, 2003.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
235
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<Table>
<Caption>
NO-LOAD CLASS
--------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
-------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
----------- -------- -------- -------- ------------ ------------
Net asset value at beginning of
period................................. $ 8.48 $ 8.65 $ 11.44 $ 13.10 $ 11.81 $ 9.93
-------- -------- -------- -------- -------- --------
Net investment income................... 0.14(a) 0.11(a) 0.07(a) 0.05 0.10 0.13
Net realized and unrealized gain (loss)
on investments......................... 1.44 (0.03) (1.85) (0.81) 1.30 2.12
Net realized and unrealized gain (loss)
on foreign currency transactions....... 0.05 (0.03) 0.09 (0.37) (0.08) (0.03)
-------- -------- -------- -------- -------- --------
Total from investment operations........ 1.63 0.05 (1.69) (1.13) 1.32 2.22
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income and net
realized gain on foreign currency
transactions........................... (0.15) (0.22) -- -- (0.03) (0.34)
From net realized gain on investments... -- -- (1.10) (0.53) -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions....... (0.15) (0.22) (1.10) (0.53) (0.03) (0.34)
-------- -------- -------- -------- -------- --------
Redemption fee (a)...................... 0.04 -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net asset value at end of period........ $ 10.00 $ 8.48 $ 8.65 $ 11.44 $ 13.10 $ 11.81
======== ======== ======== ======== ======== ========
Total investment return................. 20.05% 0.47% (16.49%) (9.44%) 11.23%(b) 22.41%
Ratios (to average net assets)/
Supplemental Data:
Net investment income.................. 1.62% 1.19% 0.67% 0.38% 1.00%+ 1.14%
Net expenses........................... 1.03% 1.03% 1.03% 1.03% 1.01%+ 1.00%
Expenses (before reimbursement)........ 1.73% 1.68% 1.20% 1.03% 1.01%+ 1.03%
Portfolio turnover rate................. 109% 119% 55% 39% 35% 51%
Net assets at end of period (in
000's)................................. $ 28,277 $ 21,919 $ 20,445 $141,316 $152,928 $140,630
</Table>
- ------------
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is not annualized.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
236
ECLIPSE FUNDS
<Table>
<Caption>
SERVICE CLASS
----------------------------------------------------------------------------------
JANUARY 1
YEAR ENDED OCTOBER 31 THROUGH YEAR ENDED
----------------------------------------------- OCTOBER 31, DECEMBER 31,
2003 2002 2001 2000 1999* 1998
-------- -------- -------- -------- ----------- ------------
$ 8.36 $ 8.52 $ 11.30 $ 12.97 $ 11.72 $ 9.85
-------- -------- -------- -------- -------- --------
0.11(a) 0.07(a) 0.07(a) 0.02 0.05 0.11
1.42 (0.02) (1.84) (0.79) 1.31 2.11
0.05 (0.02) 0.09 (0.37) (0.08) (0.03)
-------- -------- -------- -------- -------- --------
1.58 0.03 (1.68) (1.14) 1.28 2.19
-------- -------- -------- -------- -------- --------
(0.12) (0.19) -- -- (0.03) (0.32)
-- -- (1.10) (0.53) -- --
-------- -------- -------- -------- -------- --------
(0.12) (0.19) (1.10) (0.53) (0.03) (0.32)
-------- -------- -------- -------- -------- --------
0.04 -- -- -- -- --
-------- -------- -------- -------- -------- --------
$ 9.86 $ 8.36 $ 8.52 $ 11.30 $ 12.97 $ 11.72
======== ======== ======== ======== ======== ========
19.72% 0.24% (16.61%) (9.62%) 10.96%(b) 22.20%
1.37% 0.94% 0.42% 0.13% 0.75%+ 0.89%
1.28% 1.28% 1.28% 1.28% 1.26%+ 1.25%
1.98% 1.93% 1.45% 1.28% 1.26%+ 1.28%
109% 119% 55% 39% 35% 51%
$ 7,375 $ 270 $ 320 $ 486 $ 671 $ 675
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
237
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--Organization and Business:
- --------------------------------------------------------------------------------
Eclipse Funds Inc. (the "Company"), was incorporated in the state of Maryland on
September 21, 1990. Eclipse Funds (the "Trust"), a Massachusetts business trust,
was established on July 30, 1986. The Company and the Trust (collectively the
"Funds") are registered as open-end management investment companies under the
Investment Company Act of 1940, as amended, ("Investment Company Act") and are
comprised of seventeen separate investment portfolios (individually referred to
as a "Fund").
The Funds commenced operations on the dates indicated below:
<Table>
<Caption>
COMMENCEMENT OF
OPERATIONS FUNDS (THE COMPANY)
- ----------------- -------------------
January 2, 1991 Growth Equity, Indexed
Equity, Value Equity,
Bond, Indexed Bond, Money
Market, Short Term Bond,
Asset Manager and
International Broad
Market (formerly EAFE
Index) Funds
January 1, 1995 International Equity Fund
January 2, 2001 Mid Cap Core and Core
Bond Plus Funds
April 19, 2002 Tax-Managed Equity Fund
</Table>
<Table>
<Caption>
COMMENCEMENT OF
OPERATIONS FUNDS (THE TRUST)
- ----------------- -----------------
January 12, 1987 Small Cap Value Fund
May 1, 1989 Balanced Fund
December 27, 1994 Mid Cap Value and Ultra
Short Duration (formerly
Ultra Short Term Income)
Funds
</Table>
On December 29, 2000, the Mid Cap Core and Core Bond Plus Funds sold shares to
NYLIFE Distributors LLC ("NYLIFE Distributors"), an indirect wholly-owned
subsidiary of New York Life Insurance Company ("New York Life"), at a net asset
value of $10.00. These Funds commenced investment operations the following
business day on January 2, 2001.
On April 18, 2002, the Tax-Managed Equity Fund sold shares to NYLIFE
Distributors at a net asset value of $10.00. This Fund commenced investment
operations the following business day on April 19, 2002.
On October 28, 2003, the Tax Free Bond Fund, formerly a portfolio of the
Company, ceased operations.
Each Fund currently offers two classes of shares as follows: No-Load Class
shares and Service Class shares, except the Mid Cap Core and Core Bond Plus
Funds only offer No-Load Class shares. In addition, the Mid Cap Value, Small Cap
Value, Tax-Managed Equity, Asset Manager and Balanced Funds offer a third class
of shares, the L Class shares, and the Money Market Fund offers another class of
shares, the Money Market Fund Sweep Shares Class. The L Class shares are offered
at net asset value plus a front-end sales charge and a contingent deferred sales
charge is imposed on certain redemptions of L Class shares within one year of
purchase. The other classes of shares are offered at net asset value without
imposition of a front-end sales charge or a contingent deferred sales charge.
The share classes bear the same voting (except for issues that relate solely to
one class), dividend, liquidation and other rights and conditions except that
(i) the Service Class shares and the Money Market Fund Sweep Shares Class each
bear the fees payable under a Shareholder Services Plan adopted for that class
at an annual rate of 0.25% of the average daily net assets of the outstanding
shares of the class and (ii) the L Class shares and Money Market Fund Sweep
Shares Class each also bear the payment of fees at an annual rate of 0.75% and
0.25% of the average daily net assets of the outstanding L Class shares for
distribution fees and service fees, respectively, and at an annual rate of 0.25%
of the average daily net assets of the outstanding Sweep Shares Class for
distribution fees under separate distribution plans adopted pursuant to Rule
12b-1 under the Investment Company Act (each a "Distribution Plan").
238
ECLIPSE FUNDS
The distribution of the Service Class shares commenced on January 1, 1995 for
the Growth Equity, Indexed Equity, Value Equity, Bond, Indexed Bond, Money
Market, Short Term Bond, Asset Manager, International Broad Market and
International Equity Funds, on April 19, 2002 for the Tax-Managed Equity Fund
and on July 1, 2002 for the Mid Cap Value, Small Cap Value, Ultra Short Duration
and Balanced Funds. The distribution of the Money Market Fund Sweep Shares Class
commenced on December 8, 1998. The distribution of the L Class shares commenced
on December 30, 2002 for the Mid Cap Value, Small Cap Value, Tax-Managed Equity,
Asset Manager and Balanced Funds.
The investment objectives for each of the Funds are as follows:
The GROWTH EQUITY FUND seeks long-term growth of capital. Dividend income, if
any, is a consideration incidental to the Fund's objective of growth of capital.
The INDEXED EQUITY FUND seeks to provide investment results that correspond to
the total return performance (reflecting reinvestment of dividends) of common
stocks in the aggregate, as represented by the S&P 500(R) Index.
The MID CAP CORE FUND seeks long-term growth of capital.
The MID CAP VALUE FUND seeks high total return.
The SMALL CAP VALUE FUND seeks high total return.
The TAX-MANAGED EQUITY FUND provides enhanced after-tax total return relative to
the return of the S&P 500(R) Index.
The VALUE EQUITY FUND seeks maximum long-term total return from a combination of
capital growth and income.
The BOND FUND seeks to maximize total return, consistent with liquidity, low
risk to principal and investment in debt securities.
The CORE BOND PLUS FUND seeks to maximize total return consistent with the
preservation of capital.
The INDEXED BOND FUND seeks to provide investment results that correspond to the
total return performance of fixed income securities in the aggregate, as
represented by the Citigroup Broad Investment Grade ("BIG") Bond Index.
The MONEY MARKET FUND seeks a high level of current income while preserving
capital and maintaining liquidity.
The SHORT TERM BOND FUND seeks to maximize total return, consistent with
liquidity, preservation of capital and investment in short-term debt securities.
The ULTRA SHORT DURATION FUND seeks a high level of current income, capital
preservation, and a relatively stable net asset value.
The ASSET MANAGER FUND seeks to maximize total return, consistent with certain
percentage constraints on amounts allocated to each asset class, from a
combination of common stocks, fixed income securities, and money market
investments.
The BALANCED FUND seeks high total return.
239
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The INTERNATIONAL BROAD MARKET FUND seeks long-term growth of capital by
investing in a widely diversified portfolio of non-U.S. equity securities.
The INTERNATIONAL EQUITY FUND seeks long-term growth of capital by investing in
a portfolio consisting primarily of non-U.S. equity securities. Current income
is a secondary objective.
The ability of issuers of debt securities held by the Funds to meet their
obligations may be affected by economic developments in a specific industry or
region.
There are certain risks involved in investing in foreign securities that are in
addition to the usual risks inherent in domestic instruments. These risks
include those resulting from future adverse political and economic developments
and possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions. Foreign securities may also be less liquid
and more volatile than U.S. securities. There may also be difficulty in invoking
legal protections across borders. In addition, investment in emerging market
countries presents risks in greater degree than those presented by investment in
foreign issuers in countries with developed securities markets and more advanced
regulatory systems.
- --------------------------------------------------------------------------------
NOTE 2--Significant Accounting Policies:
- --------------------------------------------------------------------------------
The Funds prepare their financial statements in accordance with generally
accepted accounting principles and follow the significant accounting policies
described below:
(A)
SECURITIES VALUATION. Portfolio securities of each Fund, other than the Money
Market Fund, are stated at value determined (a) by appraising common and
preferred stocks which are traded on the Exchange at the last sale price on that
day or, if no sale occurs, at the mean between the closing bid price and asked
price; (b) by appraising common and preferred stocks traded on other United
States national securities exchanges or foreign securities exchanges as nearly
as possible in the manner described in (a) by reference to their principal
exchange, including the National Association of Securities Dealers National
Market System; (c) by appraising over-the-counter securities quoted on the
National Association of Securities Dealers ("NASDAQ") system (but not listed on
the National Market System) at the closing bid price supplied through such
system; (d) by appraising over-the-counter securities not quoted on the NASDAQ
system and securities listed or traded on certain foreign exchanges whose
operations are similar to the U.S. over-the-counter market at prices supplied by
a pricing agent selected by a Fund's Manager or Subadvisor if such prices are
deemed to be representative of market values at the regular close of business of
the Exchange; (e) by appraising debt securities at prices supplied by a pricing
agent selected by a Fund's Manager or Subadvisor, whose prices reflect
broker/dealer supplied valuations and electronic data processing techniques if
those prices are deemed by a Fund's Manager or Subadvisor to be representative
of market values at the regular close of business of the Exchange; (f) by
appraising options and futures contracts at the last posted settlement price on
the market where any such option or futures contracts are principally traded;
and (g) by appraising all other securities and other assets, including over-
the-counter common and preferred stocks not quoted on the NASDAQ system,
securities not listed or traded on foreign exchanges whose operations are
similar to the U.S. over-the-counter market and debt securities for which prices
are supplied by a pricing agent but are not deemed by a Fund's Manager or
Subadvisor to be representative of market values, but excluding money market
instruments with a remaining maturity of 60 days or less and including
restricted securities and securities for which no market quotations are
available, at fair value in accordance with procedures approved by the Company's
Board of Directors and/or the Trust's Board of Trustees. Short-term securities
which mature in more than 60 days are valued at current market quotations.
Short-term securities which mature in 60 days or less are valued at amortized
cost if their term to maturity at purchase was 60 days or less, or by amortizing
the difference between market value on the 61st day prior to maturity and value
on maturity date if their original term to maturity at purchase exceeded 60
days. Foreign currency forward contracts are valued at their fair market values
determined on the basis of the mean between the last bid and asked prices based
on dealer or exchange quotations.
240
ECLIPSE FUNDS
Portfolio securities of the Money Market Fund are valued at their amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between such cost and the
value on maturity date.
Certain events may occur between the time that domestic and local foreign
markets close, on which securities held by the Funds principally trade, and the
time at which the Funds' NAVs are calculated. Should the Manager or Subadvisor
conclude that such events may have affected the accuracy of the last price
reported on the domestic or local foreign markets, the Manager or Subadvisor
may, pursuant to procedures adopted by the Company's Board of Directors and/or
the Trust's Board of Trustees, adjust the value of the price to reflect the
impact on the price of such securities as a result of such events.
(B)
FEDERAL INCOME TAXES. Each of the Funds is treated as a separate entity for
federal income tax purposes. The Funds' policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income to the shareholders of
each Fund within the allowable time limits. Therefore, no federal income or
excise tax provision is required.
Investment income received by a Fund from foreign sources may be subject to
foreign income taxes. These foreign income taxes are withheld at the source.
(C)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. For the Money Market Fund, dividends are
declared daily and paid monthly and capital gain distributions, if any, are
declared and paid annually. For the Bond, Core Bond Plus, Indexed Bond and Short
Term Bond Funds, income dividends are declared and paid monthly and capital gain
distributions, if any, are declared and paid annually. For the Ultra Short
Duration and Balanced Funds, income dividends are declared and paid quarterly
and capital gain distributions, if any, are declared and paid annually. Each of
the other Funds intends to declare and pay, as a dividend, substantially all of
their net investment income and net realized capital gains no less frequently
than once a year. Income dividends and capital gain distributions are determined
in accordance with federal income tax regulations, which may differ from
generally accepted accounting principles. These "book/tax differences" are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax basis treatment; temporary
differences do not require reclassification.
241
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (CONTINUED)
The following table discloses the current year reclassifications between
accumulated undistributed net investment income (loss), accumulated
undistributed net realized gain (loss) on investments and accumulated
undistributed net realized gain (loss) on foreign currency transactions and
paid-in capital arising from permanent differences; net assets at October 31,
2003, are not effected.
<Table>
<Caption>
ACCUMULATED
UNDISTRIBUTED
ACCUMULATED NET REALIZED
ACCUMULATED UNDISTRIBUTED GAIN (LOSS) ON
UNDISTRIBUTED NET REALIZED FOREIGN ADDITIONAL
NET INVESTMENT GAIN (LOSS) ON CURRENCY PAID-IN
INCOME (LOSS) INVESTMENTS TRANSACTIONS CAPITAL
-------------- -------------- -------------- -----------
Growth Equity Fund............................. $142,962 $ -- $ -- $ (142,962)
Indexed Equity Fund............................ (12,537) 12,537 -- --
Mid Cap Core Fund.............................. (2,700) 2,700 -- --
Mid Cap Value Fund............................. (154,006) (9,982,343) -- 10,136,349
Small Cap Value Fund........................... (32,223) 32,223 -- --
Tax-Managed Equity Fund........................ 61,250 -- -- (61,250)
Bond Fund...................................... 252,244 (252,244) -- --
Core Bond Plus Fund............................ 174,046 (155,145) (18,901) --
Indexed Bond Fund.............................. 913,480 (913,480) -- --
Short Term Bond Fund........................... 82,223 1,264,441 -- (1,346,664)
Ultra Short Duration Fund...................... 2,066 (2,066) -- --
Asset Manager Fund............................. 439,621 (581,784) 142,163 --
Balanced Fund.................................. 14,448 (14,448) -- --
International Broad Market Fund................ 18,183 (209,161) 188,897 2,081
International Equity Fund...................... 76,387 (246) (76,141) --
</Table>
The reclassifications for the Funds are primarily due to foreign currency gain
(loss), reclassification of distributions, gain (loss) on sales of passive
foreign investment companies, paydown gain (loss), real estate investment trusts
gain (loss), non-deductible expenses (offering costs), expiration of capital
loss carryforwards, premium amortization adjustments, excise liability payment,
redemption in kind, distributions paid in connection with the redemption of Fund
shares and net operating losses.
FOREIGN TAX CREDIT PASS-THROUGH
International Broad Market Fund and International Equity Fund paid foreign taxes
of $70,790 and $71,160, respectively, and recognized foreign source income of
$657,266 and $704,573, respectively. Pursuant to IRC Section 853, International
Broad Market Fund and International Equity Fund elect to pass-through the
character of foreign source income and foreign withholding taxes paid the
taxable year ended October 31, 2003 to their shareholders.
(D)
SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Funds record security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned.
Discounts and premiums on securities, other than short-term securities,
purchased for all Funds are accreted and amortized, respectively, on the
constant yield method over the life of the respective securities or, in the case
of a callable security, over the period to the first date of call. Discounts and
premiums on short-term securities are accreted and amortized, respectively, on
the straight line method.
The investment income and realized and unrealized gains and losses on
investments of a Fund are allocated to separate classes of shares based upon
their relative net assets on the date the income is earned or realized and
unrealized gains and losses are incurred.
New York Life Investment Management LLC ("NYLIM") has directed certain portfolio
trades to brokers who paid a portion of the expenses for the Mid Cap Value,
Small Cap Value and Balanced Funds. For the year ended October 31, 2003, the
Funds' expenses (transfer agent fees and expenses) were reduced by $41,364,
$94,194 and $61,058, respectively, under this agreement.
242
ECLIPSE FUNDS
(E)
EXPENSES. Expenses with respect to the Funds are allocated to the individual
Funds in proportion to the net assets of the respective Funds when the expenses
are incurred except where direct allocations of expenses can be made. Expenses
(other than expenses incurred under the Shareholder Services Plans and the
Distribution Plans) are allocated to separate classes of shares based upon their
relative net assets on the date the expenses are incurred. The expenses borne by
each Fund, including those of related parties to the Funds, are shown on each
Fund's Statement of Operations.
(F)
USE OF ESTIMATES. The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G)
FOREIGN CURRENCY TRANSACTIONS. The books and records of the Funds are kept in
U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the
mean between the buying and selling rates last quoted by any major U.S. bank at
the following dates:
(i) market value of investment securities, other assets and
liabilities--at the valuation date,
(ii) purchases and sales of investment securities, income and
expenses--at the date of such transactions.
The assets and liabilities are presented at the exchange rates and market values
at the close of the year. The realized and unrealized changes in net assets
arising from fluctuations in exchange rates and market prices of securities are
not separately presented. Accordingly, gains and losses from foreign currency
transactions are included in the reported net realized gain (loss) on investment
transactions.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on foreign currency forward contracts, net currency gains and losses
realized as a result of differences between the amounts of securities sale
proceeds or purchase cost, dividends, interest and withholding taxes as recorded
on the Funds' books, and the U.S. dollar equivalent amount actually received or
paid. Net currency gains or losses from valuing foreign currency denominated
assets and liabilities, other than investments, at year-end exchange rates are
reflected in unrealized foreign exchange gains or losses.
CORE BOND PLUS FUND
Foreign currency held at October 31, 2003:
<Table>
<Caption>
CURRENCY COST VALUE
- ----------------------------------------- -------- --------
Australian Dollar A$ 86 $ 57 $ 61
Canadian Dollar C$ 10 7 7
Swedish Krona SK 14,936 1,853 1,915
------- -------
$ 1,917 $ 1,983
======= =======
</Table>
243
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOREIGN CURRENCY TRANSACTIONS (CONTINUED)
INTERNATIONAL BROAD MARKET FUND
Foreign currency held at October 31, 2003:
<Table>
<Caption>
CURRENCY COST VALUE
- ----------------------------------------- -------- --------
Australian Dollar A$ 10,142 $ 7,070 $ 7,196
Danish Krone DK 2,000 302 313
Euro E 16,606 19,384 19,305
Hong Kong Dollar HK$ 1,496 193 193
Japanese Yen Y 109,540 1,008 996
New Zealand Dollar N$ 1 1 1
Norwegian Krone NK 358 51 51
Pound Sterling L 4,470 7,488 7,586
Singapore Dollar SG$ 1,217 705 707
Swedish Krona SK 6,555 847 840
Swiss Franc CF 3,194 2,421 2,392
------- -------
$39,470 $39,580
======= =======
</Table>
INTERNATIONAL EQUITY FUND
Foreign currency held at October 31, 2003:
<Table>
<Caption>
CURRENCY COST VALUE
- ----------------------------------------- -------- --------
Euro E 28,822 $34,078 $33,506
Pound Sterling L 6,799 11,524 11,538
------- -------
$45,602 $45,044
======= =======
</Table>
(H)
FOREIGN CURRENCY FORWARD CONTRACTS. A foreign currency forward contract is an
agreement to buy or sell currencies of different countries on a specified future
date at a specified rate. During the period the forward contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" such contract on a daily basis to reflect the
market value of the contract at the end of each day's trading. When the forward
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Fund's basis in the contract. Foreign currency forward contracts are used
for hedging purposes or to seek to enhance investment returns (see Note 5).
The use of foreign currency forward contracts involves, to varying degrees,
elements of market risk in excess of the amount recognized in the Statement of
Assets and Liabilities. The contract amount reflects the extent of the Fund's
involvement in these financial instruments. Risks arise from the possible
movements in the foreign exchange rates underlying these instruments. The
unrealized appreciation on forward contracts reflects the Fund's exposure at
year-end to credit loss in the event of a counterparty's failure to perform its
obligations.
244
ECLIPSE FUNDS
CORE BOND PLUS FUND
Foreign currency forward contracts open at October 31, 2003:
<Table>
<Caption>
UNREALIZED
CONTRACT AMOUNT CONTRACT AMOUNT APPRECIATION/
SOLD PURCHASED (DEPRECIATION)
--------------- --------------- --------------
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------------------------------
Australian Dollar vs. U.S. Dollar, expiring 11/17/03... A$ 161,000 $ 109,802 $ (4,103)
Canadian Dollar vs. U.S. Dollar, expiring 1/8/04....... C$ 110,000 $ 79,641 (3,447)
Euro vs. U.S. Dollar, expiring 12/16/03................ E 17,000 $ 19,809 77
Euro vs. U.S. Dollar, expiring 12/16/03................ E 50,000 $ 54,740 (3,295)
Euro vs. U.S. Dollar, expiring 12/19/03................ E 63,000 $ 73,584 466
Euro vs. U.S. Dollar, expiring 12/19/03................ E 898,371 $ 1,028,090 (14,561)
Swedish Krona vs. U.S. Dollar, expiring 1/9/04......... SK 5,333,000 $ 693,129 11,719
</Table>
<Table>
<Caption>
CONTRACT AMOUNT CONTRACT AMOUNT
PURCHASED SOLD
--------------- ---------------
FOREIGN CURRENCY BUY CONTRACTS
- -------------------------------------------------------
Euro vs. U.S. Dollar, expiring 12/16/03................ E 264,810 $ 298,405 8,962
Euro vs. U.S. Dollar, expiring 12/16/03................ E 17,088 $ 20,000 (166)
Euro vs. U.S. Dollar, expiring 12/19/03................ E 38,200 $ 43,838 497
---------
Net unrealized depreciation on foreign currency forward contracts: $ (3,851)
=========
</Table>
INTERNATIONAL EQUITY FUND
Foreign currency forward contracts open at October 31, 2003:
<Table>
<Caption>
UNREALIZED
CONTRACT AMOUNT CONTRACT AMOUNT APPRECIATION/
SOLD PURCHASED (DEPRECIATION)
--------------- --------------- --------------
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------------------------------
Euro vs. U.S. Dollar, expiring 12/12/03................ E 332,753 $ 390,000 $ 3,725
Hong Kong Dollar vs. U.S. Dollar, expiring 12/12/03.... HK$ 5,344,439 $ 685,000 (3,635)
Hong Kong Dollar vs. U.S. Dollar, expiring 12/12/03.... HK$ 6,444,900 $ 825,000 (5,430)
</Table>
<Table>
<Caption>
CONTRACT AMOUNT CONTRACT AMOUNT
PURCHASED SOLD
--------------- ---------------
FOREIGN CURRENCY BUY CONTRACTS
- -------------------------------------------------------
Euro vs. U.S. Dollar, expiring 12/12/03................ E 782,398 $ 825,000 83,244
Euro vs. U.S. Dollar, expiring 12/12/03................ E 610,408 $ 685,000 23,589
Hong Kong Dollar vs. U.S. Dollar, expiring 12/12/03.... HK$ 3,010,000 $ 390,073 (2,232)
---------
Net unrealized appreciation on foreign currency forward contracts: $ 99,261
=========
</Table>
(I)
PURCHASED AND WRITTEN OPTIONS. Certain Funds may write covered call and put
options on their portfolio securities or foreign currencies. Premiums are
received and are recorded as liabilities. The liabilities are subsequently
adjusted to reflect the current value of the options written. Premiums received
from writing options which expire are treated as realized gains. Premiums
received from writing options which are exercised or are canceled in closing
purchase transactions are added to the proceeds or netted against the amount
paid on the transaction to determine the realized gain or loss. By writing a
covered call option, a Fund foregoes in exchange for the premium the opportunity
for capital appreciation above the exercise price should the market price of the
underlying security or foreign currency increase. By writing a covered put
option, a Fund, in exchange for the premium, accepts the risk of a decline in
the market value of the underlying security or foreign currency below the
exercise price. A call option may be covered by the call writer's owning the
underlying security throughout the option period. A call option may also be
covered
245
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PURCHASED AND WRITTEN OPTIONS (CONTINUED)
by the call writer's maintaining liquid assets valued at greater than the
exercise price of the call written, in a segregated account with its custodian.
Certain Funds may purchase call and put options on their portfolio securities or
foreign currencies. A Fund may purchase call options to protect against an
increase in the price of the security or foreign currency it anticipates
purchasing. A Fund may purchase put options on its securities or foreign
currencies to protect against a decline in the value of the security or foreign
currency or to close out covered written put positions. A Fund may also purchase
options to seek to enhance returns. Risks may arise from an imperfect
correlation between the change in market value of the securities or foreign
currencies held by the Fund and the prices of options relating to the securities
or foreign currencies purchased or sold by the Fund and from the possible lack
of a liquid secondary market for an option. The maximum exposure to loss for any
purchased option is limited to the premium initially paid for the option.
GROWTH EQUITY FUND
Written option activity for the year ended October 31, 2003 was as follows:
<Table>
<Caption>
NUMBER
OF
CONTRACTS PREMIUM
--------- ----------
Options outstanding at October 31, 2002..................... (832) $ (125,071)
Options--written............................................ (140) (10,920)
Options--buybacks........................................... 467 83,776
Options--exercised.......................................... 505 52,215
------- ----------
Options outstanding at October 31, 2003..................... 0 $ 0
======= ==========
</Table>
VALUE EQUITY FUND
Written option activity for the year ended October 31, 2003 was as follows:
<Table>
<Caption>
NUMBER
OF
CONTRACTS PREMIUM
--------- ----------
Options outstanding at October 31, 2002..................... (1,134) $ (128,212)
Options--written............................................ (3,002) (500,431)
Options--buybacks........................................... 3,139 478,884
Options--expired............................................ 197 38,398
Options--exercised.......................................... 800 111,361
------- ----------
Options outstanding at October 31, 2003..................... 0 $ 0
======= ==========
</Table>
(J)
FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an underlying instrument at a specified future date and
price, or to make or receive a cash payment based on the value of a securities
index foreign currency or interest rate. During the period the futures contract
is open, changes in the value of the contract are recognized as unrealized gains
or losses by "marking to market" such contract on a daily basis to reflect the
market value of the contract at the end of each day's trading. A Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin". When the futures contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Fund's basis in the contract. Futures
contracts are used for hedging purposes or to seek to enhance returns (see Note
5).
(K)
REPURCHASE AGREEMENTS. The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to
246
ECLIPSE FUNDS
determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
(L)
MORTGAGE DOLLAR ROLLS. A mortgage dollar roll ("MDR") is a transaction in which
a Fund sells mortgage-backed securities ("MBS") from its portfolio to a
counterparty from whom it simultaneously agrees to buy a similar security on a
delayed delivery basis. The MDR transactions of a Fund are classified as
purchase and sale transactions. The securities sold in connection with the MDRs
are removed from the portfolio and a realized gain or loss is recognized. The
securities the Funds have agreed to acquire are included at market value in the
Portfolio of Investments and liabilities for such purchase commitments are
included as payables for investments purchased. The Fund maintains a segregated
account with its custodian containing securities from its portfolio having a
value not less than the repurchase price, including accrued interest. MDR
transactions involve certain risks, including the risk that the MBS returned to
the Fund at the end of the roll, while substantially similar, could be inferior
to what was initially sold to the counterparty.
(M)
SECURITIES LENDING. Each Fund may lend its securities to broker-dealers and
financial institutions. The loans are collateralized by cash or securities at
least equal at all times to the market value of the securities loaned. The Fund
may bear the risk of delay in recovery of, or loss of rights in, the securities
loaned should the borrower of the securities experience financial difficulty.
The Fund receives compensation for lending its securities in the form of fees or
it retains a portion of interest on the investment of any cash received as
collateral. The Fund also continues to receive interest and dividends on the
securities loaned, and any gain or loss in the market price of the securities
loaned that may occur during the term of the loan will be for the account of the
Fund.
Net income earned on securities lending amounted to $40,133 and $3,880, net of
broker fees and rebates, for the Bond and Short Term Bond Funds, respectively,
for the year ended October 31, 2003, and is included as interest income on the
Statement of Operations.
(N)
REDEMPTION FEE. Effective December 8, 2002, the International Broad Market and
International Equity Funds (the "Funds") imposed a 2.00% redemption fee on
redemptions (including exchanges) of each Fund's shares in amounts of $50,000 or
more made within 60 days of their date of purchase. The redemption fee is
designed to offset brokerage commissions and other costs associated with
short-term trading and is not assessed on shares acquired through the
reinvestment of dividends or distributions paid by the Funds. The redemption fee
may not apply to redemptions of certain benefit plan accounts such as 401(k)
plans, section 529 qualified tuition plans, or on redemptions of shares held at
the time of death or the initial determination of a permanent disability of a
shareholder. The redemption fees are included in the Statement of Changes in Net
Assets' shares redeemed amount and also as part of additional paid-in capital on
the Statement of Assets and Liabilities. The redemption fees paid to the Funds
for the year ended October 31, 2003 totaled $138,409 and $104,394 for the
International Broad Market and International Equity Funds, respectively.
(O)
OFFERING COSTS. Costs incurred in connection with the initial offering of
Tax-Managed Equity Fund, in the amount of $132,052, were amortized over a period
of 12 months beginning with the commencement of operations on April 19, 2002 and
were fully amortized as of October 31, 2003. In addition, organizational costs
of $20,186 were expensed on that date.
247
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 3--Fees and Related Party Transactions:
- --------------------------------------------------------------------------------
(A)
MANAGER AND SUBADVISOR. NYLIM (or the "Manager"), an indirect wholly-owned
subsidiary of New York Life, serves as manager and provides management services
to the Funds under Management Agreements. MacKay Shields LLC ("MacKay Shields"),
a registered investment adviser and an indirect wholly-owned subsidiary of New
York Life, serves as subadvisor to the Growth Equity, Value Equity, Bond, Core
Bond Plus, Short Term Bond and International Equity Funds under a Sub-Advisory
Agreement with the Manager. The Indexed Equity, Mid Cap Core, Mid Cap Value,
Small Cap Value, Tax-Managed Equity, Indexed Bond, Money Market, Ultra Short
Duration, Asset Manager, Balanced and International Broad Market Funds are
advised by NYLIM directly, without a subadvisor.
The Funds pay the Manager a monthly fee for the services performed and
facilities furnished at an annual rate of average daily net assets of that Fund
as follows:
<Table>
Growth Equity Fund............. .85%
Indexed Equity Fund............ .50%
Mid Cap Core Fund.............. .85%
Mid Cap Value Fund............. .90%
Small Cap Value Fund........... 1.00%
Tax-Managed Equity Fund........ .70%
Value Equity Fund.............. .85%
Bond Fund...................... .75%
Core Bond Plus Fund............ .60%
Indexed Bond Fund.............. .50%
Money Market Fund.............. .50%
Short Term Bond Fund........... .60%
Ultra Short Duration Fund...... .40%
Asset Manager Fund............. .65%
Balanced Fund.................. .75%
International Broad Market
Fund......................... .95%
International Equity Fund...... .85%
</Table>
Pursuant to the terms of the Sub-Advisory Agreement between the Manager and the
Subadvisor, the Manager pays the Subadvisor a monthly fee at an annual rate of
average daily net assets of the Company's Funds as follows:
<Table>
Growth Equity Fund............. .25%
Value Equity Fund.............. .25%
Bond Fund...................... .20%
Core Bond Plus Fund............ .30%
Short Term Bond Fund........... .15%
International Equity Fund...... .35%
</Table>
The Manager voluntarily agreed to assume a portion of the Fund's operating
expenses for the following Funds to the extent the total expenses (excluding
service fees and distribution fees) on an annualized basis exceed the indicated
percentages:
<Table>
Growth Equity Fund............. .93%
Indexed Equity Fund............ .30%
Mid Cap Core Fund.............. 1.00%
Mid Cap Value Fund............. 1.04%
Small Cap Value Fund........... 1.19%
Tax-Managed Equity Fund........ .95%
Value Equity Fund.............. .94%
Bond Fund...................... .75%
Core Bond Plus Fund............ .70%
Indexed Bond Fund.............. .50%
Money Market Fund.............. .50%
Short Term Bond Fund........... .60%
Ultra Short Duration Fund...... .20%
Asset Manager Fund............. .83%
Balanced Fund.................. .94%
International Broad Market
Fund......................... .94%
International Equity Fund...... 1.03%
</Table>
248
ECLIPSE FUNDS
In connection with the voluntary expense limitations, the Manager assumed the
following expenses, which are shown on each Fund's Statement of Operations, for
the year ended October 31, 2003:
<Table>
Growth Equity Fund.......... $ 308,733
Indexed Equity Fund......... 2,414,940
Mid Cap Core Fund........... 100,657
Mid Cap Value Fund.......... 115,167
Small Cap Value Fund........ 90,559
Tax-Managed Equity Fund..... 104,406
Value Equity Fund........... 261,135
Bond Fund................... 211,423
Core Bond Plus Fund......... 189,809
Indexed Bond Fund........... $ 317,065
Money Market Fund........... 587,013
Short Term Bond Fund........ 140,658
Ultra Short Duration Fund... 338,626
Asset Manager Fund.......... 824,308
Balanced Fund............... 51,032
International Broad Market
Fund...................... 376,069
International Equity Fund... 170,444
</Table>
These voluntary expense limitations may be terminated or revised at any time.
(B)
DISTRIBUTOR. NYLIFE Distributors serves as the Funds' distributor and principal
underwriter (the "Distributor") pursuant to a Distribution Agreement.
(C)
SERVICE AND DISTRIBUTION FEES. In accordance with the Shareholder Services
Plans for the Service Class shares and the Money Market Fund Sweep Shares Class
shares, the Manager has agreed to provide, through its affiliates or independent
third parties, various shareholder and administrative support services to
Service Class shareholders and to Money Market Fund Sweep Shares Class
shareholders, respectively. For its services, the Manager is entitled to a
Shareholder Service Fee accrued daily and paid monthly at an annual rate of
0.25% of the average daily net assets attributable to the Service Class of each
Fund and the Sweep Shares Class of the Money Market Fund.
The Company, with respect to the L Class shares and the Money Market Fund Sweep
Shares Class, and the Trust, with respect to the L Class shares, have each
adopted separate Distribution Plans in accordance with the provisions of Rule
12b-1 under the Investment Company Act. Pursuant to the Distribution Plan for
the Money Market Fund Sweep Shares Class, NYLIFE Securities Inc. ("NYLIFE
Securities"), an indirect wholly-owned subsidiary of New York Life, NYLIFE
Distributors, or any other broker-dealer or other financial institution is
entitled to receive a monthly service fee from the Money Market Fund at an
annual rate of 0.25% of the average daily net assets of the Fund's Sweep Shares
Class for services in support of distribution activities. Pursuant to the
Distribution Plan for the L Class shares, NYLIFE Securities, NYLIFE
Distributors, or any other broker-dealer or other financial institution is
entitled to receive a monthly distribution fee from the applicable Fund at an
annual rate of 0.75% of the average daily net assets of the Fund's L Class.
Pursuant to the Distribution Plan for the L Class shares, the L Class shares
also pay a monthly service fee at an annual rate of 0.25% of the average daily
net assets for service activities rendered to shareholders of the L Class shares
of each Fund.
(D)
TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. Eclipse
Shareholder Services ("ESS"), a division of NYLIM Service Company LLC, an
affiliate of NYLIM and an indirect wholly-owned subsidiary of New York Life,
serves as the Funds' transfer, dividend disbursing and shareholder servicing
agent. ESS has entered into an agreement with Boston Financial Data Services
("BFDS"), by which BFDS will perform
249
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT (CONTINUED)
certain of the services for which ESS is responsible. Transfer agent expenses
shown on each Fund's Statement of Operations, for the year ended October 31,
2003 were as follows:
<Table>
Growth Equity Fund.................. $313,745
Indexed Equity Fund................. 324,811
Mid Cap Core Fund................... 15,504
Mid Cap Value Fund.................. 63,895
Small Cap Value Fund................ 148,203
Tax-Managed Equity Fund............. 13,144
Value Equity Fund................... 227,179
Bond Fund........................... 35,932
Core Bond Plus Fund................. 82,825
Indexed Bond Fund................... $ 67,328
Money Market Fund................... 105,395
Short Term Bond Fund................ 34,099
Ultra Short Duration Fund........... 37,297
Asset Manager Fund.................. 705,559
Balanced Fund....................... 112,622
International Broad Market Fund..... 32,160
International Equity Fund........... 34,042
</Table>
(E)
DIRECTORS AND TRUSTEES FEES. Directors and Trustees, other than those
affiliated with the Manager, New York Life, MacKay Shields or NYLIFE
Distributors, are paid an annual retainer of $32,000, and $1,350 for each Board
of Directors/Trustees meeting and each Committee meeting attended plus
reimbursement for travel and out-of-pocket expenses. The retainer is paid in the
aggregate for the Company and the Trust.
(F)
CAPITAL. The Funds have been advised that at October 31, 2003 affiliates of New
York Life owned a significant number of shares of the Funds with the following
values and percentages of net assets as follows:
<Table>
Growth Equity Fund......... $310,971,840 88.0%
Indexed Equity Fund........ 844,180,304 86.6
Mid Cap Core Fund.......... 25,300,102 85.1
Mid Cap Value Fund......... 2,791 0.0*
Small Cap Value Fund....... 41,320,735 25.1
Tax-Managed Equity Fund.... 44,152,349 100.0
Value Equity Fund.......... 117,444,343 69.5
Bond Fund.................. 113,802,637 82.0
Core Bond Plus Fund........ 26,025,121 52.9
Indexed Bond Fund.......... $178,638,374 83.1%
Money Market Fund.......... 180,024,241 35.2
Short Term Bond Fund....... 23,500,378 65.1
Ultra Short Duration
Fund..................... 49,964,226 59.6
Asset Manager Fund......... 232,977,151 78.1
Balanced Fund.............. 63,936,851 38.3
International Broad Market
Fund..................... 17,092,073 58.3
International Equity
Fund..................... 26,684,627 74.8
</Table>
* Less than one tenth of a percent.
From time to time, a Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund.
(G)
OTHER. Fees for the cost of legal services provided to the Funds by the Office
of the General Counsel of NYLIM are charged to the Funds. For the year ended
October 31, 2003, these fees, which are included in Professional fees shown on
the Statement of Operations, were as follows:
<Table>
Growth Equity Fund................... $22,892
Indexed Equity Fund.................. 55,630
Mid Cap Core Fund.................... 1,726
Mid Cap Value Fund................... 3,687
Small Cap Value Fund................. 8,416
Tax-Managed Equity Fund.............. 2,925
Value Equity Fund.................... 11,020
Bond Fund............................ 9,649
Core Bond Plus Fund.................. 3,055
Indexed Bond Fund.................... $12,663
Money Market Fund.................... 38,190
Short Term Bond Fund................. 2,549
Ultra Short Duration Fund............ 5,244
Asset Manager Fund................... 23,360
Balanced Fund........................ 8,963
International Broad Market Fund...... 1,848
International Equity Fund............ 1,924
</Table>
250
ECLIPSE FUNDS
- --------------------------------------------------------------------------------
NOTE 4--Federal Income Tax:
- --------------------------------------------------------------------------------
As of October 31, 2003, the components of accumulated gain/(loss) on a tax basis
were as follows:
<Table>
<Caption>
UNREALIZED
ORDINARY ACCUMULATED CAPITAL APPRECIATION TOTAL ACCUMULATED
INCOME AND OTHER LOSSES (DEPRECIATION) GAIN (LOSS)
---------- ------------------- -------------- -----------------
Growth Equity Fund......................... $ -- $(44,536,137) $24,293,687 $(20,242,450)
Indexed Equity Fund........................ 9,123,203 (37,601,445) (7,282,358) (35,760,600)
Mid Cap Core Fund.......................... 75,077 (4,548,169) 5,129,694 656,602
Mid Cap Value Fund......................... -- 109,310 2,835,196 2,944,506
Small Cap Value Fund....................... 216,019 8,784,157 36,665,115 45,665,291
Tax-Managed Equity Fund.................... 519,616 (5,385,831) (831,434) (5,697,649)
Value Equity Fund.......................... 1,909,734 (32,877,833) 14,181,694 (16,786,405)
Bond Fund.................................. 146,111 (10,847,509) 1,654,728 (9,046,670)
Core Bond Plus Fund........................ 189,054 775,681 821,899 1,786,634
Indexed Bond Fund.......................... 470,834 (3,801,360) 2,772,302 (558,224)
Money Market Fund.......................... 509 8,311 -- 8,820
Short Term Bond Fund....................... -- (1,874,724) 56,663 (1,818,061)
Ultra Short Duration Fund.................. 128,602 (456,845) 55,502 (272,741)
Asset Manager Fund......................... 6,001,550 (84,960,049) 50,938,272 (28,020,227)
Balanced Fund.............................. 305,578 2,342,072 22,444,699 25,092,349
International Broad Market Fund............ 412,117 (8,780,752) 1,633,041 (6,735,594)
International Equity Fund.................. 563,934 (6,466,026) 3,450,227 (2,451,865)
</Table>
The difference between book basis and tax basis unrealized appreciation
(depreciation) is primarily due to wash sale loss deferrals, premium
amortization, real estate investment trusts basis adjustments and mark-
to-market of futures contracts.
At October 31, 2003, for federal income tax purposes, capital loss
carryforwards, as shown in the table below, were available to the extent
provided by regulations to offset future realized gains of each respective Fund
through the years indicated. To the extent that these loss carryforwards are
used to offset future capital gains, it is probable that the capital gains
offset will not be distributed to shareholders.
<Table>
<Caption>
CAPITAL LOSS
AVAILABLE THROUGH AMOUNT (000'S)
----------------- --------------
Growth Equity Fund................................... 2009 $24,144
2010 17,488
2011 2,904
-------
$44,536
=======
Indexed Equity Fund.................................. 2010 $37,601
=======
Mid Cap Core Fund.................................... 2009 $ 2,648
2010 1,900
-------
$ 4,548
=======
Tax-Managed Equity Fund.............................. 2010 $ 2,884
2011 2,502
-------
$ 5,386
=======
Value Equity Fund.................................... 2010 $26,006
2011 6,872
-------
$32,878
=======
</Table>
251
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEDERAL INCOME TAX (CONTINUED)
<Table>
<Caption>
CAPITAL LOSS
AVAILABLE THROUGH AMOUNT (000'S)
----------------- --------------
Bond Fund............................................ 2007 $ 6,289
2008 3,661
2010 898
-------
$10,848
=======
Indexed Bond Fund.................................... 2004 $ 20
2005 44
2006 112
2007 1,728
2008 1,793
2009 105
-------
$ 3,802
=======
Short Term Bond Fund................................. 2004 $ 485
2005 173
2007 473
2008 744
-------
$ 1,875
=======
Ultra Short Duration Fund............................ 2004 $ 37
2005 31
2006 20
2007 63
2008 99
2009 14
2010 158
2011 35
-------
$ 457
=======
Asset Manager Fund................................... 2009 $24,684
2010 15,722
2011 44,554
-------
$84,960
=======
International Broad Market Fund...................... 2010 $ 4,093
2011 4,688
-------
$ 8,781
=======
International Equity Fund............................ 2009 $ 4,842
2010 1,624
-------
$ 6,466
=======
</Table>
The Indexed Equity, Mid Cap Core, Mid Cap Value, Small Cap Value, Bond, Indexed
Bond, Short Term Bond, Asset Manager, Balanced and International Equity Funds
utilized $2,205,464, $483,802, $410,608, $6,310,892, $2,228,126, $93,241,
$484,384, $41,059, $196,218 and $1,028,452, respectively, of capital loss
carryforwards during the year ended October 31, 2003. In addition, the Short
Term Bond Fund had $1,286,041 of capital loss carryforwards that expired.
Dividends to shareholders from net investment income and distributions to
shareholders from net realized gains shown in the Statement of Changes in Net
Assets for the year ended October 31, 2003 represent tax-based distributions of
ordinary income and net long-term capital gain, respectively, except for the
Funds for which the tax components of the distributions are shown below.
<Table>
<Caption>
TAX-BASED
DISTRIBUTIONS FROM
ORDINARY INCOME
------------------
Money Market Fund........................................... $3,289,749
</Table>
252
ECLIPSE FUNDS
- --------------------------------------------------------------------------------
NOTE 5--Financial Investments:
- --------------------------------------------------------------------------------
The Core Bond Plus Fund's, Asset Manager Fund's, International Broad Market
Fund's and International Equity Fund's use of foreign currency forward contracts
involves, to varying degrees, elements of market risk in excess of the related
amount recognized in the Statement of Assets and Liabilities. The contract
amount reflects the extent of each Fund's involvement in these financial
instruments. Risks arise from the possible movements in the foreign exchange
rates underlying these instruments. The unrealized appreciation on foreign
currency forward contracts reflects each Fund's exposure at year-end to credit
loss in the event of a counterparty's failure to perform its obligations.
The Core Bond Plus Fund, Asset Manager Fund and International Broad Market Fund
use foreign currency forward contracts to minimize the risk of loss to the Fund
from adverse changes in the relationship between the U.S. dollar and foreign
currencies.
The International Equity Fund enters into foreign currency forward contracts in
order to protect against uncertainty in the level of future foreign currency
exchange rates, or to seek to enhance the Fund's investment returns.
The Indexed Equity Fund's, Indexed Bond Fund's, Asset Manager Fund's and
International Broad Market Fund's use of futures contracts involves, to varying
degrees, elements of market risk in excess of the amount recognized in the
Statement of Assets and Liabilities. The contract or notional amounts and
variation margin reflect the extent of the Fund's involvement in open futures
positions. Risks arise from the possible imperfect correlation in movements in
the price of futures contracts, interest rates and the underlying hedged assets,
and the possible inability of counterparties to meet the terms of their
contracts. However, the Fund's activities in futures contracts are conducted
through regulated exchanges which minimize counterparty credit risks.
The Indexed Equity Fund and International Broad Market Fund invest in stock
index futures contracts to maintain cash reserves while remaining fully
invested, to facilitate trading, or to reduce transaction costs. The Indexed
Bond Fund invests in contracts for the future delivery of debt securities in
order to attempt to maintain cash reserves while remaining fully invested, to
facilitate trading, or to reduce transaction costs. The Asset Manager Fund has
entered into contracts for the future delivery of debt securities and invests in
stock index futures contracts to rebalance the Fund's portfolio composition and
risk profile to meet asset class constraints.
- --------------------------------------------------------------------------------
NOTE 6--Line of Credit:
- --------------------------------------------------------------------------------
The Funds, and certain affiliated funds, with the exception of the Money Market
Fund, maintain a line of credit of $160,000,000 with a syndicate of banks in
order to secure a source of funds for temporary purposes to meet unanticipated
or excessive shareholder redemption requests. The Funds pay a commitment fee, at
an annual rate of .075% of the average commitment amount, regardless of usage,
to The Bank of New York, which acts as agent to the syndicate. Such commitment
fees are allocated among the Funds based upon net assets and other factors.
Interest on any revolving credit loan is charged based upon the Federal Funds
Advances rate. There were no borrowings on the line of credit during the year
ended October 31, 2003.
- --------------------------------------------------------------------------------
NOTE 7--Subsequent Events:
- --------------------------------------------------------------------------------
On September 24, 2003, the Board of Directors approved the liquidation of the
International Equity Fund which is expected to occur on January 26, 2004. On
December 16, 2003, the Board of Directors approved the liquidation of the
Tax-Managed Equity Fund and the International Broad Market Fund, which is
expected to occur on December 29, 2003 and January 29, 2004, respectively.
Additionally, on December 3, 2003, the shareholders approved the mergers of the
Ultra Short Duration and Short Term Bond Funds and the Core Bond Plus and Bond
Funds, which took place on December 11, 2003.
253
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 8--Purchases and Sales of Securities (in 000's):
- --------------------------------------------------------------------------------
During the year ended October 31, 2003, purchases and sales of securities, other
than securities subject to repurchase transactions and short-term securities,
were as follows:
<Table>
<Caption>
Growth Equity Indexed Equity Mid Cap Core Mid Cap Value
Fund Fund Fund Fund
Purchases Sales Purchases Sales Purchases Sales Purchases Sales
--------------------------------------------------------------------------------------------
U.S. Government
securities $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
All others 111,250 130,247 223,554 20,150 37,570 36,345 42,593 90,233
--------------------------------------------------------------------------------------------
Total $111,250 $130,247 $223,554 $20,150 $37,570 $36,345 $42,593 $90,233(a)
============================================================================================
<Caption>
Small Cap Tax-Managed Value Equity Bond
Value Fund Equity Fund Fund Fund
Purchases Sales Purchases Sales Purchases Sales Purchases Sales
---------------------------------------------------------------------------------------
U.S. Government
securities $ -- $ -- $ -- $ -- $ -- $ -- $166,813 $136,331
All others 157,069 156,231 19,111 18,724 94,132 96,601 71,236 62,632
---------------------------------------------------------------------------------------
Total $157,069 $156,231 $19,111 $18,724 $94,132 $96,601 $238,049 $198,963
=======================================================================================
</Table>
- ------------
<Table>
(a) Included in the sales proceeds is $44,966,605 representing
the value of securities disposed of in payment of a
redemption-in-kind. This redemption was made by a related
party of the Fund.
</Table>
- --------------------------------------------------------------------------------
NOTE 9--Capital Share Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in capital shares were as follows:
<Table>
<Caption>
Growth Equity Fund Indexed Equity Fund
------------------------------------- -------------------------------------
No-Load Service No-Load Service No-Load Service No-Load Service
Class Class Class Class Class Class Class Class
------- ------- ------- ------- ------- ------- ------- -------
Year ended Year ended Year ended Year ended
October 31, 2003 October 31, 2002 October 31, 2003 October 31, 2002
-----------------------------------------------------------------------------
Shares sold 3,014 228 2,947 316 13,440 4,927 5,362 4,148
Shares issued in
reinvestment of
dividends and
distributions -- -- -- -- 384 83 1,514 285
-----------------------------------------------------------------------------
3,014 228 2,947 316 13,824 5,010 6,876 4,433
Shares redeemed (4,625) (305) (4,896) (413) (7,611) (3,195) (4,967) (1,647)
-----------------------------------------------------------------------------
Net increase
(decrease) (1,611) (77) (1,949) (97) 6,213 1,815 1,909 2,786
=============================================================================
<Caption>
Mid Cap Core Fund
------------------------------------
No-Load No-Load
Class Class
---------------- -----------------
Year ended Year ended
October 31, 2003 October 31, 2002
Shares sold 262 500
Shares issued in
reinvestment of
dividends and
distributions 1 1
------------------------------------
263 501
Shares redeemed (133) (208)
------------------------------------
Net increase
(decrease) 130 293
====================================
<Caption>
Mid Cap Value Fund
-------------------------------------------------------------------------------------------------
No-Load Service No-Load Service
Class Class L Class Class Class
---------------- ---------------- ------------------ ------------------ -----------------
December 30, 2002* July 1, 2002*
Year ended through Year ended through
October 31, 2003 October 31, 2003 October 31, 2002 October 31, 2002
Shares sold 373 --(a) --(a) 1,492 --(a)
Shares issued in
reinvestment of
dividends and
distributions 14 --(a) --(a) 16 --
-------------------------------------------------------------------------------------------------
387 --(a) --(a) 1,508 --(a)
Shares redeemed (2,909) (--) (--) (1,831) (--)
-------------------------------------------------------------------------------------------------
Net increase
(decrease) (2,522) --(a) --(a) (323) --(a)
=================================================================================================
</Table>
<Table>
<Caption>
Money Market Fund
------------------------------------------------------
No-Load Service Sweep Shares No-Load Service
Class Class Class Class Class
-------- ------- ------------ -------- -------
Year ended Year ended
October 31, 2003 October 31, 2002
------------------------------------------------------
Shares sold 490,605 29,010 97,732 379,307 11,910
Shares issued in
reinvestment of
dividends and
distributions 2,250 85 932 3,314 73
------------------------------------------------------
492,855 29,095 98,664 382,621 11,983
Shares redeemed (601,715) (23,256) (117,116) (252,199) (2,009)
------------------------------------------------------
Net increase
(decrease) (108,860) 5,839 (18,452) 130,422 9,974
======================================================
<Caption>
Money Market Fund Short Term Bond Fund
------------ ---------------------------
Sweep Shares No-Load Service No-Load
Class Class Class Class
------------ ------- ------- -------
Year
ended
October
Year ended 31,
October 31, 2003 2002
Shares sold 130,386 1,782 26 2,302
Shares issued in
reinvestment of
dividends and
distributions 3,294 88 2 182
------------------------------------------
133,680 1,870 28 2,484
Shares redeemed (127,409) (2,037) (48) (1,644)
------------------------------------------
Net increase
(decrease) 6,271 (167) (20) 840
==========================================
<Caption>
Short Term Bond Fund Ultra Short Duration Fund
------- ----------------------------------------------------------------------------
Service No-Load Service No-Load Service
Class Class Class Class Class
------- ---------------- ---------------- ------------------ -----------------
July 1, 2002*
Year ended Year ended through
October 31, 2003 October 31, 2002 October 31, 2002
Shares sold 9 3,490 26 6,639 2
Shares issued in
reinvestment of
dividends and
distributions 5 42 --(a) 21 --(a)
--------------------------------------------------------------------------------------
14 3,532 26 6,660 2
Shares redeemed (43) (1,333) (5) (2,408) (1)
--------------------------------------------------------------------------------------
Net increase
(decrease) (29) 2,199 21 4,252 1
======================================================================================
</Table>
- ------------
<Table>
* Commencement of Operations.
(a) Less than one thousand shares.
</Table>
254
ECLIPSE FUNDS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Core Bond Indexed Bond Short Term Ultra Short
Plus Fund Fund Bond Fund Duration Fund
Purchases Sales Purchases Sales Purchases Sales Purchases Sales
- -------------------------------------------------------------------------------------------
$44,223 $31,225 $251,152 $164,089 $42,082 $37,707 $15,378 $11,966
24,857 21,094 34,362 12,145 20,433 24,397 24,890 12,883
- -------------------------------------------------------------------------------------------
$69,080 $52,319 $285,514 $176,234 $62,515 $62,104 $40,268 $24,849
===========================================================================================
<Caption>
International
Asset Manager Balanced Broad Market International
Fund Fund Fund Equity Fund
Purchases Sales Purchases Sales Purchases Sales Purchases Sales
- ----------------------------------------------------------------------------------------------
$ 81,233 $ 77,550 $ 10,822 $ 995 $ -- $ -- $ -- $ --
254,995 305,961 109,653 57,395 72,335 75,417 33,630 25,082
- ----------------------------------------------------------------------------------------------
$336,228 $383,511 $120,475 $58,390 $72,335 $75,417 $33,630 $25,082
==============================================================================================
</Table>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
Small Cap Value Fund Tax-Managed Equity Fund
------------------------------------------------------------------------------ --------------------------------------
No-Load Service No-Load Service No-Load Service
Class Class L Class Class Class Class Class L Class
------- ------- ------------------ ------------------ ---------------- ------- ------- ------------------
December 30, 2002* July 1, 2002* December 30, 2002*
Year ended through Year ended through Year ended through
October 31, 2003 October 31, 2003 October 31, 2002 October 31, 2002 October 31, 2003 October 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------
9,363 59 --(a) 10,035 8 -- --(a) --(a)
108 --(a) -- 83 -- --(a) --(a) --
- ---------------------------------------------------------------------------------------------------------------------------
9,471 59 --(a) 10,118 8 --(a) --(a) --(a)
(9,026) (1) (--)(a) (10,307) (--) (--)(a) (--)(a) (--)(a)
- ---------------------------------------------------------------------------------------------------------------------------
445 58 --(a) (189) 8 --(a) --(a) --(a)
===========================================================================================================================
<Caption>
Tax-Managed Equity Fund Value Equity Fund Bond Fund
-------------------- ------------------------------------- -------------------------------------
No-Load Service No-Load Service No-Load Service No-Load Service No-Load Service
Class Class Class Class Class Class Class Class Class Class
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
April 19, 2002*
through Year ended Year ended Year ended Year ended
October 31, 2002 October 31, 2003 October 31, 2002 October 31, 2003 October 31, 2002
- --------------------------------------------------------------------------------------------------------------
5,000 --(a) 3,321 123 5,780 71 2,538 244 3,497 426
-- -- 169 4 1,378 47 502 22 920 35
- --------------------------------------------------------------------------------------------------------------
5,000 --(a) 3,490 127 7,158 118 3,040 266 4,417 461
(--) (--) (3,578) (106) (3,777) (76) (3,041) (289) (2,159) (335)
- --------------------------------------------------------------------------------------------------------------
5,000 --(a) (88) 21 3,381 42 (1) (23) 2,258 126
==============================================================================================================
<Caption>
Core Bond Plus Fund Indexed Bond Fund
------------------------------------ -------------------------------------
No-Load No-Load No-Load Service No-Load Service
Class Class Class Class Class Class
---------------- ----------------- ------- ------- ------- -------
Year ended Year ended Year ended Year ended
October 31, 2003 October 31, 2002 October 31, 2003 October 31, 2002
- ---------------------------------------------------------------------------------
1,274 1,517 10,323 2,464 7,024 975
78 26 540 70 663 86
- ---------------------------------------------------------------------------------
1,352 1,543 10,863 2,534 7,687 1,061
(314) (377) (5,482) (1,330) (3,466) (369)
- ---------------------------------------------------------------------------------
1,038 1,166 5,381 1,204 4,221 692
=================================================================================
</Table>
<Table>
<Caption>
Asset Manager Fund Balanced Fund
---------------------------------------------------------- ---------------------------------------------------------
No-Load Service No-Load Service No-Load Service No-Load
Class Class L Class Class Class Class Class L Class Class
------- ------- ------------------ ------- ------- ------- ------- ------------------ ----------------
December 30, 2002* December 30, 2002*
Year ended through Year ended Year ended through Year ended
October 31, 2003 October 31, 2003 October 31, 2002 October 31, 2003 October 31, 2003 October 31, 2002
- --------------------------------------------------------------------------------------------------------------------------
3,718 1,233 4 5,201 445 4,059 1,003 15 1,564
493 37 -- 550 40 93 3 --(a) 129
- --------------------------------------------------------------------------------------------------------------------------
4,211 1,270 4 5,751 485 4,152 1,006 15 1,693
(19,261) (399) (--) (6,165) (313) (2,134) (210) (--)(a) (667)
- --------------------------------------------------------------------------------------------------------------------------
(15,050) 871 4 (414) 172 2,018 796 15 1,026
==========================================================================================================================
<Caption>
International Broad
Balanced Fund Market Fund International Equity Fund
---------------- ------------------------------------- -------------------------------------
Service No-Load Service No-Load Service No-Load Service No-Load Service
Class Class Class Class Class Class Class Class Class
---------------- ------- ------- ------- ------- ------- ------- ------- -------
July 1, 2002*
through Year ended Year ended Year ended Year ended
October 31, 2002 October 31, 2003 October 31, 2002 October 31, 2003 October 31, 2002
- -----------------------------------------------------------------------------------------------------
--(a) 8,153 258 12,469 243 4,813 822 7,493 198
--(a) 20 -- 21 --(a) 37 1 59 1
- -----------------------------------------------------------------------------------------------------
--(a) 8,173 258 12,490 243 4,850 823 7,552 199
(--) (8,275) (314) (12,639) (191) (4,608) (107) (7,330) (204)
- -----------------------------------------------------------------------------------------------------
--(a) (102) (56) (149) 52 242 716 222 (5)
=====================================================================================================
</Table>
255
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 10--Other Matters--Unaudited:
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION--UNAUDITED
With respect to dividends paid from investment company taxable income during the
ten month period ended October 31, 2003, the Fund designates the maximum amount
allowable paid from investment company taxable income, as finally determined, as
Qualified Dividend Income in accordance with the Internal Revenue Code. Complete
2003 year-end tax information will be reported to you on your 2003 Form
1099-DIV, which shall be provided to you in early 2004.
In addition, for the Balanced Fund, 25.2% of the ordinary income dividends paid
during the fiscal year ended October 31, 2003 qualify for the corporate dividend
deduction under section 243 of the Internal Revenue Code.
CHANGE IN INDEPENDENT AUDITOR--UNAUDITED
On August 27, 2003 KPMG LLP (KPMG) was selected to replace the predecessor
independent auditor as the Company's and the Trust's independent auditor for the
2003 fiscal year. The selection of KPMG as its independent auditor was
recommended by the Company's and the Trust's audit committee, comprised of all
independent Directors/Trustees, and was approved by the Company's Board of
Directors and the Trust's Board of Trustees.
The predecessor independent auditor's reports on the Company's and the Trust's
financial statements for the years ended October 31, 2002 and 2001 did not
contain an adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles. During such
fiscal years, and through the date of engagement of KPMG, there were no
disagreements between the Company and the Trust and the predecessor independent
auditor on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which such disagreements, if not
resolved to the satisfaction of the predecessor independent auditor, would have
caused them to make reference to the subject matter of the disagreement in
connection with their reports on the financial statements for such years.
OTHER MATTERS--UNAUDITED
New York Life Investment Management LLC (NYLIM) and mutual funds that NYLIM
advises, including Eclipse Funds Inc. and Eclipse Funds, have received requests
for information from various government authorities and regulatory bodies
regarding market timing, late trading and other matters. We are cooperating
fully in responding to these requests. We have no reason to believe that NYLIM
or any of the mutual funds NYLIM advises has been targeted as the subject of any
governmental or regulatory enforcement action.
256
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Eclipse Funds Inc. and the Shareholders and Board of Trustees of Eclipse Funds:
We have audited the accompanying statements of assets and liabilities of Eclipse
Funds Inc., which are comprised of the Asset Manager, International Broad
Market, Growth Equity, Indexed Equity, International Equity, Value Equity, Bond,
Indexed Bond, Short Term Bond, Money Market, Core Bond Plus, Mid Cap Core, and
Tax-Managed Equity Funds and Eclipse Funds, which are comprised of the Balanced,
Ultra Short Duration Income, Mid Cap Value and Small Cap Value Funds,
(collectively, the "Funds") including the portfolios of investments as of
October 31, 2003, and the related statements of operations, statements of
changes in net assets and the financial highlights for the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
statements of changes in net assets of the Funds for the year ended October 31,
2002, the financial highlights of Eclipse Funds Inc. for the periods presented
through October 31, 2002, and the financial highlights of Eclipse Funds for the
periods ended December 31, 1999 through October 31, 2002 were audited by other
auditors, whose report dated December 17, 2002 expressed an unqualified opinion
thereon. The financial highlights of Eclipse Funds for the year ended December
31,1998 were audited by other auditors, whose report dated January 28, 1999
expressed an unqualified opinion thereon.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned as of October 31, 2003 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios constituting Eclipse Funds Inc. and Eclipse Funds as of
October 31, 2003, the results of their operations, changes in their net assets
and their financial highlights for the period then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
Philadelphia, Pennsylvania
December 17, 2003
257
SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of Eclipse Ultra Short Duration Fund ("Ultra
Short Duration Fund") was held on December 3, 2003, to approve an Agreement and
Plan of Reorganization providing for (i) the acquisition of all of the assets of
the Ultra Short Duration Fund by Eclipse Short Term Bond Fund ("Short Term Bond
Fund"), a series of Eclipse Funds Inc., (the "Company") in exchange for shares
of the Short Term Bond Fund and the assumption of all liabilities of the Ultra
Short Duration Fund by the Short Term Bond Fund and (ii) the subsequent
liquidation of the Ultra Short Duration Fund.
Ultra Short Duration Fund shareholders voted as follows: 6,481,247 in favor;
215,478 against; and 43,820 abstained. This resulted in approval of the
proposal.
A Special Meeting of Shareholders of Eclipse Core Bond Plus Fund ("Core Bond
Plus Fund") was held on December 3, 2003, to approve an Agreement and Plan of
Reorganization providing for (i) the acquisition of all of the assets of the
Core Bond Plus Fund by the Eclipse Bond Fund ("Bond Fund"), a series of the
Company, in exchange for shares of the Bond Fund and the assumption of all
liabilities of the Core Bond Plus Fund by the Bond Fund and (ii) the subsequent
liquidation of the Core Bond Plus Fund.
Core Bond Plus Fund shareholders voted as follows: 4,555,513 in favor; 0
against; and 0 abstained. This resulted in approval of the proposal.
258
(THIS PAGE INTENTIONALLY LEFT BLANK)
259
BOARD MEMBERS AND OFFICERS
The Board Members oversee the Funds, the Manager and the Subadvisor. Information
pertaining to the Board Members and officers is set forth below. Each Board
Member serves until his/her successor is elected and qualified or until his/her
resignation, death, or removal. Officers serve a term of one year and are
elected annually by the Board Members. The business address of each Board Member
and officer listed below is 51 Madison Avenue, New York, New York 10010.
<Table>
<Caption>
NUMBER OF
FUNDS IN FUND
COMPLEX
POSITION(S) LENGTH PRINCIPAL OVERSEEN
NAME, ADDRESS WITH COMPANY OF TIME OCCUPATION(S) BY OFFICER/
AND DATE OF BIRTH & TRUST SERVED DURING PAST 5 YEARS BOARD MEMBER
- --------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS OF THE COMPANY AND TRUST
- --------------------------------------------------------------------------------------------------------------------
Stephen C. Roussin Chairman, 6 Years President, Chief Operating Officer, and 41
Date of Birth: 7/12/63 Director, Trustee, (Company) Manager, New York Life Investment
and President Management LLC (including predecessor
3 Years advisory organizations) and New York Life
(Trust) Investment Management Holdings LLC; Senior
Vice President, New York Life Insurance
Company; Director, NYLIFE Securities,
Inc.; Chairman and Director, NYLIFE
Distributors LLC; Manager, McMorgan &
Company LLC; President, Chief Executive
Officer, and Trustee, The MainStay Funds
(23 portfolios); Senior Vice President,
Smith Barney, 1994 to 1997.
- --------------------------------------------------------------------------------------------------------------------
NON-INTERESTED BOARD MEMBERS OF THE COMPANY AND TRUST
- --------------------------------------------------------------------------------------------------------------------
Lawrence Glacken Director 12 Years Retired. 17
Date of Birth: 10/22/27 Trustee (Company)
3 Years
(Trust)
- --------------------------------------------------------------------------------------------------------------------
Robert P. Mulhearn Director 12 Years Retired. 17
Date of Birth: 3/11/47 Trustee (Company)
3 Years
(Trust)
- --------------------------------------------------------------------------------------------------------------------
Susan B. Kerley Director 12 Years President, Global Research Associates. 17
Date of Birth: 8/12/51 Trustee (Company)
3 Years
(Trust)
- --------------------------------------------------------------------------------------------------------------------
Peter Meenan Director 1.5 Years President & Chief Executive Officer of 17
Date of Birth: 12/5/41 Trustee (Company Babson-United, Inc. since 2000; Head of
& Trust) Global Funds, Citicorp, 1995-1999.
- --------------------------------------------------------------------------------------------------------------------
* These Board Members are considered to be "interested persons" of the Company within the meaning of the 1940 Act
because of their affiliation with the New York Life Insurance Company, New York Life Investment Management LLC,
MacKay Shields LLC, McMorgan & Company LLC, Eclipse Funds Inc., Eclipse Funds, The MainStay Funds, MainStay VP
Series Fund, Inc., NYLIFE Securities Inc., and/or NYLIFE Distributors LLC, as described in detail in the column
captioned "Principal Occupation(s) During Past 5 Years."
<Caption>
OTHER
DIRECTORSHIPS
HELD
NAME, ADDRESS BY OFFICER/
AND DATE OF BIRTH BOARD MEMBER
- ----------------------- ---------------
INTERESTED BOARD MEMBER
- --------------------------------------------------------------------------------------------------------------------
Stephen C. Roussin New York Life
Date of Birth: 7/12/63 Trust Company,
FSB
- --------------------------------------------------------------------------------------------------------------------
NON-INTERESTED BOARD MEMBERS OF THE COMPANY AND TRUST
- --------------------------------------------------------------------------------------------------------------------
Lawrence Glacken None
Date of Birth: 10/22/27
- --------------------------------------------------------------------------------------------------------------------
Robert P. Mulhearn None
Date of Birth: 3/11/47
- --------------------------------------------------------------------------------------------------------------------
Susan B. Kerley Director,
Date of Birth: 8/12/51 SSB/Citi Mutual
Funds.
- --------------------------------------------------------------------------------------------------------------------
Peter Meenan Trustee,
Date of Birth: 12/5/41 Vantagepoint
Funds
- --------------------------------------------------------------------------------------------------------------------
</Table>
260
<Table>
<Caption>
NUMBER OF
FUNDS IN FUND
COMPLEX
POSITION(S) LENGTH PRINCIPAL OVERSEEN
NAME, ADDRESS WITH COMPANY OF TIME OCCUPATION(S) BY OFFICER/
AND DATE OF BIRTH & TRUST SERVED DURING PAST 5 YEARS BOARD MEMBER
- --------------------------------------------------------------------------------------------------------------------
OFFICERS (WHO ARE NOT BOARD MEMBERS) OF THE COMPANY AND TRUST
- --------------------------------------------------------------------------------------------------------------------
Patrick G. Boyle Executive Vice 11 Years Senior Managing Director, New York Life 17
Date of Birth: 11/24/53 President (Company) Investment Management LLC, (including
One Year predecessor advisory organizations);
(Trust) Senior Vice President, Pension Department,
New York Life Insurance Company.
- --------------------------------------------------------------------------------------------------------------------
Marc J. Brookman Date Executive Vice 4 Years Vice President, New York Life Insurance 17
of Birth: 11/21/63 President (Company) Company; Senior Managing Director, New
3 Years York Life Investment Management LLC
(Trust) (including predecessor advisory
organizations); Senior Vice President,
Product Development, MainStay
Institutional Funds Inc. and Retirement
Plans, 1998 to 2000; National Sales
Director, Vice President, United Asset
Management Retirement Plan Services, from
1996 to 1998.
- --------------------------------------------------------------------------------------------------------------------
Jefferson C. Boyce Senior Vice 7 Years Senior Managing Director, New York Life 41
Date of Birth: 9/17/57 President (Company) Investment Management LLC (including
3 Years predecessor advisory organizations);
(Trust) Senior Vice President, New York Life
Insurance Company; Senior Vice President,
The MainStay Funds; Director, NYLIFE
Distributors LLC.
- --------------------------------------------------------------------------------------------------------------------
Patrick J. Farrell Treasurer and 7 Years Managing Director, New York Life 66
Date of Birth: 9/27/59 Chief Financial (Company) Investment Management, LLC (including
and Accounting 3 Years predecessor advisory organizations);
Officer (Trust) Treasurer, Chief Financial and Accounting
Officer, The MainStay Funds and MainStay
VP Series Fund; Assistant Treasurer,
McMorgan Fund (formerly McM Funds).
- --------------------------------------------------------------------------------------------------------------------
Robert A. Anselmi Secretary 2 Years Senior Managing Director, General Counsel, 60
Date of Birth: 10/19/46 (Company) and Secretary, New York Life Investment
3 Years Management LLC (including predecessor
(Trust) advisory organizations); Secretary, New
York Life Investment Management Holdings
LLC; Senior Vice President, New York Life
Insurance Company; Vice President and
Secretary, McMorgan & Company LLC;
Secretary, NYLIFE Distributors LLC;
Secretary, MainStay VP Series Fund, Inc.
and The MainStay Funds; Managing Director
and Senior Counsel, Lehman Brothers Inc.
(October 1998 to December 1999); General
Counsel and Managing Director, JP Morgan
Investment Management Inc. (1986 to 1998).
- --------------------------------------------------------------------------------------------------------------------
Richard W. Zuccaro Tax Vice President 6 Years Vice President, New York Life Insurance 60
Date of Birth: 12/12/49 (Company) Company; Tax Vice President, NYLIFE
3 Years Securities Inc.; Vice President, New York
(Trust) Life Insurance and Annuity Corporation,
NYLIFE Insurance Company of Arizona,
NYLIFE LLC, NYLIFE Securities, Inc., and
NYLIFE Distributors LLC; Tax Vice
President, New York Life International,
Inc.; Tax Vice President, MainStay VP
Series Fund, Inc. and The MainStay Funds.
- --------------------------------------------------------------------------------------------------------------------
* The officers listed are considered to be "interested persons" of the Company within the meaning of the 1940 Act
because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
Shields LLC, McMorgan & Company LLC, Eclipse Funds Inc., Eclipse Funds, The MainStay Funds, MainStay VP Series
Fund, Inc., NYLIFE Securities Inc., and/or NYLIFE Distributors LLC, as described in detail in the column captioned
"Principal Occupation(s) During Past 5 Years."
<Caption>
OTHER
DIRECTORSHIPS
HELD
NAME, ADDRESS BY OFFICER/
AND DATE OF BIRTH BOARD MEMBER
- ----------------------- ---------------
OFFICERS (WHO ARE NOT BOARD MEMBERS) OF THE COMPANY AND TRUST
- --------------------------------------------------------------------------------------------------------------------
Patrick G. Boyle New York Life
Date of Birth: 11/24/53 Trust Company;
Madison Capital
Funding LLC
- --------------------------------------------------------------------------------------------------------------------
Marc J. Brookman None
Date of Birth: 11/21/63
- --------------------------------------------------------------------------------------------------------------------
Jefferson C. Boyce None
Date of Birth: 9/17/57
- --------------------------------------------------------------------------------------------------------------------
Patrick J. Farrell None
Date of Birth: 9/27/59
- --------------------------------------------------------------------------------------------------------------------
Robert A. Anselmi None
Date of Birth: 10/19/46
- --------------------------------------------------------------------------------------------------------------------
Richard W. Zuccaro None
Date of Birth: 12/12/49
- --------------------------------------------------------------------------------------------------------------------
</Table>
261
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
<Table>
INVESTMENT ADVISOR OFFICERS AND DIRECTORS--ECLIPSE FUNDS INC.
New York Life Investment Management LLC STEPHEN C. ROUSSIN
SUBADVISOR Chairman, President, and Director
MacKay Shields LLC LAWRENCE GLACKEN
DISTRIBUTOR Director
NYLIFE Distributors LLC SUSAN B. KERLEY
TRANSFER AGENT Director
NYLIM Service Company LLC PETER MEENAN
CUSTODIAN Director
The Bank of New York ROBERT P. MULHEARN
INDEPENDENT ACCOUNTANTS Director
KPMG LLP PATRICK G. BOYLE
LEGAL COUNSEL Executive Vice President
Dechert LLP MARC J. BROOKMAN
Executive Vice President Executive Vice President
JEFFERSON C. BOYCE
Senior Vice President
RICHARD W. ZUCCARO
Tax Vice President
PATRICK J. FARRELL
Treasurer and Chief Financial and
Accounting
Officer
ROBERT ANSELMI
Secretary
OFFICERS AND TRUSTEES--ECLIPSE FUNDS
STEPHEN C. ROUSSIN
Chairman, President, and Trustee
LAWRENCE GLACKEN
Trustee
SUSAN B. KERLEY
Trustee
PETER MEENAN
Trustee
ROBERT P. MULHEARN
Trustee
PATRICK G. BOYLE
Executive Vice President
JEFFERSON C. BOYCE
Senior Vice President
MARC J. BROOKMAN
Executive Vice President
RICHARD W. ZUCCARO
Tax Vice President
PATRICK J. FARRELL
Treasurer and Chief Financial and
Accounting Officer
ROBERT ANSELMI
Secretary
</Table>
- --------------------------------------------------------------------------------
This is a copy of a report to shareholders of one or more of the series mutual
funds of Eclipse Funds. Distribution of this report to persons other than these
shareholders is authorized only when preceded or accompanied by a current
Eclipse Funds prospectus. This report does not represent an offer to sell or a
solicitation to buy any securities.
[NEW YORK LIFE
INVESTMENT
MANAGEMENT LLC
LOGO]
Distributed by NYLIFE Distributors LCC
169 Lackawanna Avenue, Parsippany, New Jersey 07054
- --------------------------------------------------------------------------------
EC11-12/03 NYLIM-AO4442
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, Registrant had
adopted a code of ethics (the "Code") that applies to the Registrant's principal
executive office ("PEO") and principal financial officer ("PFO"). There were no
amendments to the Code during the period covered by the report. The Registrant
did not grant any waivers, including implicit waivers, from any provisions of
the Code to the PEO or PFO during the period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that the registrant has at least
one audit committee financial expert serving on its Audit Committee. The Audit
Committee financial expert is Peter Meenan. Mr. Meenan is "independent" within
the meaning of that term under the Investment Company Act of 1940.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the Disclosure Controls and Procedures (as
defined in Rule 30a-2(c) under the Investment Company Act of 1940, the
"Disclosure Controls") as of a date within 90 days prior to the filing date (the
"Filing Date") of this Form N-CSR (the "Report"), the Disclosure Controls are
reasonably designed to ensure that information required to be disclosed by the
Registrant in the Report is recorded, processed, summarized and reported by the
Filing Date, including ensuring that information required to be disclosed in the
Report is accumulated and communicated to the Registrant's management, including
the Registrant's principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, and there were no corrective actions with regard
to significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a) Code of Ethics.
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of 1940.
(b)(2) Certifications of principal executive officer and principal financial
officer as required by Section 906 of the Sarbanes-Oxley Act of 202.
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ECLIPSE FUNDS
By: /s/ Stephen C. Roussin
STEPHEN C. ROUSSIN
PRESIDENT
Date: January 6, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Stephen C. Roussin
STEPHEN C. ROUSSIN
PRESIDENT
Date: January 6, 2004
By: /s/Patrick J. Farrell
PATRICK J. FARRELL
TREASURER AND
CHIEF FINANCIAL AND ACCOUNTING OFFICER
Date: January 6, 2004
EXHIBIT INDEX
(a) Code of Ethics
(b)(1) Certifications of principal executive officer and
principal financial officer as required by Rule 30a-2 under
the Investment Company Act of 1940.
(b)(2) Certification of principal executive officer and
principal financial officer as required by Section 906 of the
Sarbanes-Oxley Act of 2002.
4