<PAGE>
EAI Select Managers Equity Fund
Review of First Six Months of 1996
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
Unlike 1995, when both stocks and bonds rose in tandem, the first six months of
1996 saw a decoupling of the two markets: stocks rose, while bonds fell.
Investors began the year expecting the slow economic growth of late 1995 to
continue into the first half of 1996, followed by more rapid growth as the
Presidential election neared.
The Federal Reserve agreed with this assessment. Despite the lack of fresh
economic data (the first report was not released until mid-January after a five
week absence due to the government shutdown), on January 31 the Federal Reserve
lowered the Fed Funds and Discount rates by 0.25% to 5.25% and 5%,
respectively; major banks lowered the prime rate to 8.25% from 8.50%.
A surprisingly strong set of economic reports beginning in mid-February spooked
the bond market. Concerns mounted that this easing (the third in seven months)
would revive an already improving economy and risk an increase in inflation.
Each economic report released since then was scrutinized in an attempt to
anticipate the next move by the Federal Reserve. Investors, who began the year
expecting the Federal Reserve to continue lowering short-term interest rates in
1996, now were anticipating a possible rise.
Strong employment growth, hints of wage pressure and an unexpectedly robust
(2.3%) first quarter GDP unsettled bonds, which fell in each of the first five
months of the year; June posted a modest recovery. Over the six months, yields
rose (prices fell) across the maturity spectrum. Only shortest term (90-Day)
yields were stable.
Stock prices, on the other hand, were volatile, but for the most part higher,
as prospects for profit growth improved, partially offsetting the competition
from higher bond yields.
Stocks, as represented by the S&P 500, rose in each month of 1996, posting a
cumulative gain of 10.1%. It should be noted that the market has now risen in 18
of the past 19 months. Small stocks performed in line with their larger
counterparts on the strength of the February to May period.
For the six months, technology (+14.9%) led the advance, despite some recent
weakness. Strong earnings growth, new products and a rebounding economy helped
propel these issues. In a turnaround from the past couple of years, consumer
cyclical (+12.9%) was also sharply higher. A rebound in consumer confidence
sparked a rally in retailers.
The laggards were utilities (-0.2%), which reacted negatively to higher
interest rates and increased competition, and basic industry (+7.0%), which
gave back strong first quarter gains as commodity prices weakened.
The EAI Select Managers Equity Fund lagged the market during the first six
months. The bulk of the underperformance occurred in the last two weeks of June
as market leadership narrowed considerably. The Fund's overweighting in
consumer cyclicals (+14.8%) benefited results, while poor technology selection
(+3.4%) was the largest detractor. Cash reserves, which averaged 5%-10%, also
caused some reduction in the first half returns.
Please keep in mind that this summary covers only a six month period. We
encourage all of our shareholders to maintain a longer term view. The attached
report provides you with a listing of the investment portfolio, performance
results, and the financial statements as of June 30, 1996. As always, should
you have any questions, please feel free to contact us.
We thank you for your continued investment in the EAI Select Managers Equity
Fund.
Sincerely,
Phillip Maisano
President
<PAGE>
EAI Select Managers Equity Fund Investment Portfolio June 30, 1996 (Unaudited)
See Notes to Financial Statements.
<TABLE>
<CAPTION>
NO. OF SHARES SECURITIES (a) VALUE (NOTE 1)
- --------------------------------------------------------------------------------------
<C> <S> <C>
BASE METALS: 1.8%
3,000 Aluminum Company of America $ 172,125
7,100 Minerals Technologies Inc. 243,175
2,000 Reynolds Metals Co. 104,250
47,000 Titanium Metals Corp. 1,216,125
-----------
1,735,675
-----------
CAPITAL GOODS: 4.0%
1,000 Aetrium Inc. 18,000
1,250 Agco Corp. 34,688
44,100 Anixter International Inc. 655,988
15,100 Biolase Technology Inc. 67,950
9,500 Boeing Co. 827,688
9,200 Duracell International,
Inc. 396,750
3,300 Electrostar, Inc. 36,300
6,030 Lockheed Martin Corp. 506,520
3,000 Raytheon Company 154,875
52,500 Turbochef, Inc. 774,375
4,900 Ucar International, Inc. 203,963
-----------
3,677,097
-----------
CHEMICALS: 2.4%
3,700 Dow Chemical Company 281,200
8,500 FMC Corp. 554,625
6,000 Goodrich (B.F.) Company 224,250
3,900 Great Lakes Chemical Corp. 242,775
2,700 Olin Corp. 240,975
7,800 Schulman (A.), Inc. 191,100
16,500 Witco Corp. 567,188
-----------
2,302,113
-----------
CONSUMER GOODS: 17.2%
4,000 American Stores Company 165,000
2,100 Anheuser-Busch Companies,
Inc. 157,500
15,700 Archer-Daniels Midland Co. 300,263
7,400 Avon Products Inc. 333,925
12,500 Best Buy Company, Inc. 285,938
6,000 Biochem Pharma Inc. 225,000
4,100 Bristol-Myers Squibb 369,000
2,800 Campbell Soup Company 197,400
12,700 Consolidated Stores Corp. 466,725
2,200 Dayton Hudson Corp. 226,875
26,700 Federated Department
Stores, Inc. 911,138
36,200 Foodbrands America, Inc. 466,075
2,100 Friedman's Inc. (Class A) 53,550
3,200 Gucci Group N.V.--NY Reg.
Shares 206,400
4,600 Hasbro, Inc. 164,450
12,400 Home Depot, Inc. 669,600
8,600 Johnson & Johnson 425,700
9,300 Libbey, Inc. 258,075
</TABLE>
<TABLE>
<CAPTION>
NO. OF SHARES SECURITIES (a) VALUE (NOTE 1)
- ---------------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER GOODS--(CONTINUED)
20,000 Melville Corp. $ 810,000
4,500 Mercantile Stores Co., Inc. 263,813
8,000 Micro Warehouse, Inc. 160,000
1,000 Mothers Work, Inc. 25,500
4,000 Nabisco Holdings Corp. 141,500
600 Neurocrine Biosciences,
Inc. 5,325
12,200 Office Depot, Inc. 248,575
4,300 Officemax, Inc. 102,663
34,600 Ornda Healthcorp 830,400
16,000 Pep Boys--Manny, Moe & Jack 544,000
16,700 Perrigo Company 187,875
3,000 Pfizer Inc. 214,125
31,600 Pharmacia & Upjohn, Inc. 1,402,250
3,600 Philip Morris Companies,
Inc. 374,400
8,100 Premark International, Inc. 149,850
17,500 Quiksilver, Inc. 525,000
4,400 R.P. Scherer Corp. 199,650
6,550 Renters Choice, Inc. 167,025
6,000 Sara Lee Corp. 194,250
11,100 Schering-Plough 696,525
4,100 Sears, Roebuck and Company 199,363
8,600 SmithKline Beecham PLC (ADR) 467,625
5,400 St. Jude Medical Inc. 180,900
13,355 Staples, Inc. 260,423
9,900 Tommy Hilfiger Corp. 530,888
5,200 Toys "R" Us, Inc. 148,200
8,100 Tupperware Corporation 342,225
8,000 Wal-Mart Stores, Inc. 203,000
5,400 Whirlpool Corp. 267,975
3,400 Woolworth Corp. 76,500
3,000 Wrigley (Wm.) Jr. Company 151,500
-----------
15,953,939
-----------
CONSUMER NON-CYCLICAL: 0.3%
840 Fila Holdings S.p.A. (ADR) 72,450
1,000 Mariner Health Group, Inc. 18,375
3,560 Safeskin Corp. 147,740
-----------
238,565
-----------
CONSUMER NON-DURABLES: 1.2%
13,600 Chrysler Corp. 843,200
5,400 General Motors Corp. 282,825
-----------
1,126,025
-----------
ENERGY: 5.6%
3,600 Amoco Corp. 260,550
6,700 Anadarko Petroleum Corp. 388,600
13,400 Benton Oil & Gas Company 294,800
2,300 British Petroleum PLC (ADR) 245,813
</TABLE>
<PAGE>
EAI Select Managers Equity Fund Investment Portfolio June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NO. OF SHARES SECURITIES (A) VALUE (NOTE 1)
- --------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY--(CONTINUED)
7,600 Burlington Resources Inc. $ 326,800
4,500 Digicon, Inc. 75,375
14,200 Enron Corporation 580,425
1,900 Mobil Corp. 213,038
5,800 Oryx Energy Company 94,250
1,800 Royal Dutch Petroleum Co.--
NY Reg. Shares 276,750
31,800 Santa Fe Energy Resources
Inc. 377,625
1,000 Swift Energy Company 18,000
3,500 Texaco Inc. 293,563
7,900 Total S.A. (ADR) 293,288
17,200 Triton Energy Ltd. 836,350
2,200 UGI Corp. 48,400
25,000 Union Texas Petroleum
Holdings, Inc. 487,500
3,500 Unocal Corp. 118,125
-----------
5,229,252
-----------
FINANCE: 13.3%
7,000 Advanta Corp. 316,750
12,300 AFLAC Inc. 367,463
6,600 Allstate Corp. 301,125
8,700 Ambac Inc. 453,488
1,000 Americredit Corporation 15,625
8,390 Banc One Corp. 285,260
9,000 Bank of Boston Corp. 445,500
4,000 Bank of New York
(Warrants Expiring
11/29/98
@ $31) 165,500
3,900 BankAmerica Corp. 295,425
2,400 Barnett Banks Inc. 146,400
500 Capital One Financial
Corporation 14,250
7,300 Charter One Financial, Inc. 254,588
10,388 Chase Manhattan Corp. 733,653
6,200 Chubb Corp. 309,225
6,200 Citicorp 512,275
15,900 Countrywide Credit
Industries, Inc. 393,525
2,400 Crestar Financial Corp. 128,100
5,300 Dean Witter Discover and
Company 303,425
22,900 Equitable Companies Inc. 569,638
5,000 Federal Home Loan Mortgage
Corp. 427,500
24,300 Federal National Mortgage
Assoc. 814,050
3,500 First Chicago NBD Corp. 136,938
1,900 MBIA, Inc. 147,963
9,300 MBNA Corp. 265,050
2,500 Mercury Finance Company 31,875
13,000 NationsBank Corp. 1,074,125
17,200 Signet Banking Corp. 399,900
9,800 Summit Bancorp 344,225
13,900 Travelers/Aetna Property
Casualty Corp. (Class A) 394,413
29,400 Travelers Group, Inc. 1,341,375
8,682 Value Health, Inc. 205,112
</TABLE>
<TABLE>
<CAPTION>
NO. OF SHARES SECURITIES (A) VALUE (NOTE 1)
- --------------------------------------------------------------------------------------
<C> <S> <C>
FINANCE--(CONTINUED)
25 Westcorp, Inc. $ 444
25,600 Western National Corp. 470,400
11,800 Western Ohio Financial
Corp. 265,500
-----------
12,330,085
-----------
FOREST PRODUCTS/PAPER: 0.7%
5,600 Avery Dennison Corp. 307,300
15,500 Geographics, Inc. 88,156
9,200 James River Corp. of
Virginia 242,650
-----------
638,106
-----------
MATERIALS: 0.3%
3,900 Texas Industries, Inc. 267,638
-----------
MISCELLANEOUS: 2.4%
15,000 Bausch & Lomb, Inc. 637,500
6,200 Baxter International, Inc. 292,950
4,600 Columbia/HCA Heathcare
Corp. 245,525
1,000 K & G Men's Center Inc. 21,000
8,100 Tenet Healthcare Corp. 173,138
2,600 Transcend Services, Inc. 27,625
8,100 U.S. Surgical Corp. 251,100
6,500 U.S. Healthcare, Inc. 357,500
5,803 Wellpoint Health Networks 181,341
-----------
2,187,679
-----------
MULTI-INDUSTRY: 1.5%
3,900 General Electric Co. 337,350
59,400 Hanson PLC (ADR) 846,450
4,800 Tenneco, Inc. 245,400
-----------
1,429,200
-----------
REAL ESTATE: 0.3%
5,900 Manufactured Home
Communities, Inc. 113,575
6,700 Rouse Company 173,363
-----------
286,938
-----------
SERVICES: 20.5%
600 Amre, Inc. 13,125
5,000 Apple South Inc. 133,750
5,900 Applebees International,
Inc. 189,538
4,500 Bacou U.S.A., Inc. 79,875
13,700 Bell Calbemedia PLC (ADR) 229,475
4,000 Belo (A.H.) Corp. 149,000
5,300 Beverly Enterprises 63,600
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Investment Portfolio June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NO. OF SHARES SECURITIES (A) VALUE (NOTE 1)
- --------------------------------------------------------------------------------------
<C> <S> <C>
SERVICES--(CONTINUED)
9,600 Boston Chicken Inc. $ 312,000
8,300 Brinker International, Inc. 124,500
19,500 Brunswick Corp. 390,000
18,400 Canadian Pacific, Ltd. 404,800
700 Carnival Corp. (Class A) 20,213
16,000 Chart House Enterprises,
Inc. 114,000
5,000 Circus Circus Enterprises,
Inc. 205,000
500 CKE Restaurants, Inc. 12,750
24,300 Comcast Corp. (Special
Class A) 449,550
6,600 Comcast UK Cable Partners
Ltd. 84,150
1,500 Cooker Restaurant Corp. 20,063
15,600 CUC International, Inc. 553,800
9,244 Daka International, Inc. 217,234
2,000 Dave & Buster's, Inc. 53,500
19,200 Dial Corp. 549,600
2,700 Disney (Walt) Co. (The) 169,763
7,800 Eastman Kodak Company 606,450
6,500 Federal Express Corp. 533,000
9,000 Figgie International, Inc.
(Class B) 128,250
1,000 Fusion Systems Corporation 24,750
4,900 Gannett Company, Inc. 346,675
22,575 Gaylord Entertainment
Company 637,744
12,000 Golden Books Family
Entertainment Inc. 144,000
11,000 Harrah's Entertainment,
Inc. 310,750
60,000 Home Shopping Network, Inc. 720,000
1,000 Hometown Buffet Inc. 14,125
8,400 IHOP Corp. 226,800
13,825 Infinity Broadcasting Corp. 414,750
15,650 Landry's Seafood
Restraurants, Inc. 387,338
5,170 Lone Star Steakhouse &
Saloon 195,168
3,800 Manhattan Bagel Company,
Inc. 56,050
5,500 Manpower, Inc. 215,875
8,000 Marriot International Inc. 430,000
10,200 MCI Communications 261,375
16,900 Metromedia International
Group Inc. 207,025
1,900 Mirage Resorts, Inc. 102,600
9,200 New York Times (Class A) 300,150
27,000 Payless Shoesource, Inc. 857,250
8,300 Personnel Group of America,
Inc. 204,388
7,500 Promus Hotel Corp. 222,188
23,100 Quintel Entertainment, Inc. 242,550
7,600 R.R. Donnelley & Sons
Company 265,050
6,000 Reebok International Ltd. 201,750
1,000 Rent-Way, Inc. 13,625
3,600 Reuters Holdings PLC (ADR) 261,000
10,900 Ryder System Inc. 306,563
8,000 Service Corp. 460,000
8,500 Starsight Telecast, Inc. 77,563
4,000 Team Rental Group Inc. 56,000
65,200 Tele-Communcations Group
(Class A) 1,181,750
29,950 Tele-Communications, Inc. 793,675
18,100 Time Warner, Inc. 710,425
11,800 Tribune Company 856,975
</TABLE>
<TABLE>
<CAPTION>
NO. OF SHARES SECURITIES (A) VALUE (NOTE 1)
- --------------------------------------------------------------------------------------
<C> <S> <C>
SERVICES--(CONTINUED)
4,300 Trump Hotels & Casino
Resort $ 122,550
2,560 USA Waste Services, Inc. 75,840
36,300 U.S. West, Inc. 662,475
8,900 United Waste Systems, Inc. 287,025
16,000 Valassis Communications,
Inc. 296,000
9,400 Wheelabrator Technologies,
Inc. 143,350
1,000 World Color Press Inc. 25,375
-----------
19,125,528
-----------
TECHNOLOGY: 14.1%
3,100 A T & T Corp. 192,200
6,900 Acclaim Entertainment, Inc. 66,413
5,000 ACT Manufacturing Inc. 73,125
6,000 Advanced Technology
Materials, Inc. 81,000
14,600 Airtouch Communications
Inc. 412,450
1,100 Amati Communications Corp. 21,863
8,600 American Online Inc. 376,250
7,000 Artisoft Inc. 61,250
4,800 Autodesk, Inc. 143,400
18,600 Bay Networks Inc. 478,950
5,900 Bellsouth Corp. 250,013
4,000 Brite Voice Systems Inc. 86,000
13,350 Cadence Design Systems,
Inc. 450,563
500 Checkfree Corporation 9,938
5,800 Cisco Systems Inc. 328,425
4,100 Computer Associates
International, Inc. 292,125
6,400 Computer Sciences Corp. 478,400
3,000 Comsat Corp. 78,000
8,700 First Data Corp. 692,738
7,100 Frontier Corporation 217,438
2,500 Glenayre Technologies, Inc. 125,000
15,850 Graphix Zone, Inc. 106,988
4,500 GTE Corp. 201,375
2,300 Hewlett Packard Co. 229,138
23,400 Informix Corp. 526,500
4,700 Intel Corp. 345,156
6,800 Interlink Electronics, Inc. 45,050
3,100 International Business
Machines Corp. 306,900
4,000 Intuit, Inc. 189,000
10,100 KLA Instruments Corp. 234,825
1,600 Lasersight Corp. 17,400
500 Lexmark International
Group, Inc. 10,063
32,900 Loral Space &
Communications Ltd. 448,263
1,500 MEMC Electronic Materials,
Inc. 58,125
10,600 MFS Communications Company,
Inc. 398,825
15,900 Microfield Graphics, Inc. 69,563
8,700 Motorola, Inc. 547,013
1,000 Mylex Corporation 17,750
9,800 Octel Communications Corp. 193,550
8,700 Olympic Financial Ltd. 200,100
24,400 Paging Network, Inc. 585,600
8,000 Parametric Technology Corp. 347,000
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Investment Portfolio June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NO. OF SHARES SECURITIES (A) VALUE (NOTE 1)
- --------------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY--(CONTINUED)
5,000 Picturetel Corp. $ 196,875
2,500 Platinum Technology, Inc. 37,813
13,900 Seagate Technologies Inc. 625,500
15,500 Silicon Graphics, Inc. 372,000
17,700 Somatix Therapy Corp. 126,113
7,500 Sprint Corp. 315,000
11,000 Sunriver Corporation 86,625
23,400 Telefonaktiebolaget LM
Ericsson (ADR) 503,100
9,000 Telephone and Data Systems,
Inc. 405,000
2,800 Worldcom, Inc. 155,050
8,600 Xilinx, Inc. 273,050
-----------
13,089,851
-----------
TRANSPORTATION: 3.9%
3,300 AMR Corp. (DE) 300,300
4,400 Conrail, Inc. 292,050
12,000 Kansas City Southern
Industries, Inc. 514,500
11,500 Kirby Corp. 194,063
11,900 Lear Corp. 419,475
4,000 O'Reilly Automotive, Inc. 145,000
1,300 TRW, Inc. 116,838
33,300 Varity Corp. 1,602,563
-----------
3,584,789
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF SHARES SECURITIES (A) VALUE (NOTE 1)
- --------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES: 2.2%
12,000 AES Corp. $ 339,000
13,200 Cincinnati Bell Inc. 688,050
3,300 FPL Group, Inc. 151,800
11,400 Potomac Electric Power
Company 302,100
7,000 Texas Utilities Company 299,250
9,400 Unicom Corp. 261,997
-----------
2,042,197
-----------
TOTAL COMMON STOCKS AND WARRANTS: 91.7%
(cost: $83,118,833) 85,244,677
-----------
<CAPTION>
PRINCIPAL
AMOUNT SHORT-TERM OBLIGATIONS
- ---------------------------------------------------
<C> <S> <C>
$2,043,169 American Express Corp. C.P.
due 7/1/96 Interest Yield
of 5.39% 2,043,169
$4,200,000 General Electric Capital
Corp. C.P. due 7/1/96
Interest Yield of 5.20% 4,200,000
$1,454,600 U.S. Treasury Note due
11/30/96 Interest Rate of
5.48% 1,464,941
-----------
TOTAL SHORT-TERM OBLIGATIONS: 8.3%
(cost: $7,722,448) 7,708,110
-----------
TOTAL INVESTMENTS: 100%
(Cost: $90,841,281) $92,952,787
===========
</TABLE>
- -------
(a) Unless otherwise indicated, securities owned are shares of common stock.
Glossary:
ADR--American Depository Receipt
C.P.--Commercial Paper
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments at value (cost $90,841,281)(Note 1) $92,952,787
Receivables:
Securities sold 1,207,773
Dividends and interest 109,606
Capital shares sold 11,374
Deferred organization costs and other assets
(Note 1) 203,364
-----------
Total assets 94,484,904
===========
LIABILITIES:
Payables:
Securities purchased 785,463
Capital shares redeemed 3,272
Organization costs payable 21,783
Accounts payable 220,863
-----------
Total liabilities 1,031,381
-----------
NET ASSETS $93,453,523
===========
Net asset value, maximum offering price and redemption price
per share (8,736,951 shares of beneficial interest outstand-
ing with an unlimited number of no par value shares autho-
rized) $ 10.70
===========
Composition of net assets:
Aggregate paid in capital $88,045,845
Unrealized appreciation of investments 2,111,506
Undistributed net investment income 328,884
Undistributed realized gains 2,967,288
-----------
$93,453,523
===========
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Period from January 2, 1996 (commencement of operations) through June
30, 1996
INCOME:
Dividends $ 613,293
Interest 195,225
-----------
Total income 808,518
-----------
EXPENSES:
Management (Note 2) $383,561
Administrative (Note 2) 83,026
Professional 52,967
Custodian 39,926
Amortization of deferred organization costs (Note 1) 21,965
Transfer agent 9,859
Other 16,602
--------
607,906
Fees waived by the Manager (Note 2) (128,272)
--------
Total Expenses 479,634
-----------
Net investment income 328,884
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: (NOTE 3)
Realized gain from investments 2,967,288
Unrealized appreciation of investments 2,111,506
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,407,678
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Period from January 2, 1996 (commencement of operations) through June
30, 1996
<TABLE>
<S> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 328,884
Realized gain from investments 2,967,288
Unrealized appreciation of investments 2,111,506
-----------
Increase in net assets resulting from operations 5,407,678
-----------
Capital share transactions*:
Net proceeds from sales of shares 12,485,697
Net asset value of shares issued in exchange for assets (Note 4) 86,821,580
-----------
Cost of shares reacquired 99,307,277
(11,361,432)
-----------
Increase in net assets resulting in capital share transactions 87,945,845
-----------
Total increase in net assets 93,353,523
NET ASSETS:
Beginning of period 100,000
-----------
End of period $93,453,523
===========
*SHARES OF BENEFICIAL INTEREST ISSUED AND REDEEMED
Shares sold 1,219,910
Shares issued in connection with an exchange of assets (Note 4) 8,588,497
-----------
9,808,407
Shares reacquired (1,081,456)
-----------
Net increase 8,726,951
===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 2, 1996(a)
TO
JUNE 30,1996 (UNAUDITED)
------------------------
<S> <C>
Net Asset Value, Beginning of Period.................. $10.00
------
Income From Investment Operations:
Net Investment Income................................ 0.04
Net Gains on Securities (both realized and 0.66
unrealized)......................................... ------
Total From Investment Operations...................... 0.70
------
Net Asset Value, End of Period........................ $10.70
======
Total Return (b)...................................... 7.00%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period (000)....................... $93,454
Ratio of Expenses to Average Net Assets............... 1.15%(c)(d)
Ratio of Net Investment Income to Average Net Assets.. 0.79%(d)
Portfolio Turnover Rate............................... 88%
Average Commission Rate Paid.......................... $0.0524
</TABLE>
- -------
(a) Commencement of operations.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, and a redemption on the last
day of the period. Total return for the period ended June 30, 1996 was not
annualized.
(c) Ratio would have been 1.46%, had the Manager not waived expenses.
(d) Annualized.
See Notes to Financial Statements.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
EAI Select Managers Equity Fund (the "Fund"), organized as a Massachusetts
business trust on September 27, 1995, is registered under the Investment
Company Act of 1940 as a diversified open-ended management investment company.
The Fund had no operations prior to January 2, 1996 except for the sale to
Evaluation Associates Capital Markets, Inc. of 10,000 shares for $100,000.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements, in conformity with generally accepted
accounting principles, requires the use of management's estimates and the
actual results could differ.
A. SECURITY VALUATION--Securities traded on national exchanges and traded in
the NASDAQ National Market System are valued at the last sales prices
reported at the close of business on the principal markets for such
securities on the last business day of the period. Over-the-counter
securities not included in the NASDAQ National Market System and listed
securities for which no sale was reported are valued at the last bid price.
Short-term obligations purchased with more than sixty days remaining to
maturity are valued at market. Short-term obligations purchased with sixty
days or less to maturity are valued at cost which with accrued interest
approximates value. Securities for which quotations are not available are
stated at fair value as determined by the Board of Trustees.
B. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Therefore,
no federal income tax provision is required.
C. DIVIDENDS AND DISTRIBUTIONS--Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
D. OTHER--Security transactions are accounted for on the date the securities
are purchased or sold. Interest income is accrued as earned.
E. Deferred organizational costs will be amortized over a period not to exceed
five years from the commencement of operations. In the event that, at any
time during the five year period beginning with the date of commencement of
operations, the initial shares acquired by the Manager prior to such date
are redeemed by any holder thereof, the redemption proceeds payable in
respect of such shares will be reduced by the pro rata share (based on the
proportionate share of the initial shares redeemed to the total number of
original shares outstanding at the time of redemption) of the then
unamortized deferred organizational costs as of the date of such
redemption. In the event that the Fund liquidates before the deferred
organizational costs are fully amortized, the Manager shall bear such
unamortized deferred organizational costs.
NOTE 2--Evaluation Associates Capital Markets, Inc. (the "Manager"), a wholly
owned subsidiary of EAI Partners, L.P. (the "Parent"), earned fees of $383,561
for the period ended June 30, 1996 for management fees. The fee is based on an
annual rate .92 of 1% of average daily net assets. For the period ended June
30, 1996, the Manager agreed to waive management fees in the amount of
$128,272 which represents the amount exceeding a self imposed expense
limitation of 1.15% of average daily net assets (such limitation will be in
effect until December 31, 1996). The Manager pays each Subadviser .375 of 1%
of the
<PAGE>
EAI Select Managers Equity Fund Financial Statements
- --------------------------------------------------------------------------------
average monthly net assets of the assets of the Fund managed by that Subadviser
from its management fees. The Subadvisers are Dietche & Field Advisers, Inc.,
Liberty Investment Management, Hudson Capital Advisors, Stonehill Capital
Management, Inc. and Equinox Capital Management, Inc. On July 25, 1996, the
Board of Trustees met and terminated the subadvisory agreements of Stonehill
Capital Management, Inc. and Hudson Capital Advisors and approved the
subadvisory agreements of Bennett Lawrence Management LLC and Iridian Asset
Management LLC effective July 31, 1996. Bennett Lawerence Management LLC and
Iridian Asset Management LLC will be paid of by the Manager a management fee
calculated under the same terms as the remaining subadvisers. In accordance
with Portfolio Accounting and Administration Agreement with Van Eck Associates
Corporation ("Van Eck"), the Fund paid Van Eck $83,026 for the period ended
June 30, 1996. The fee is graduated, beginning at .20 of 1% of monthly average
net assets of less than $100 million to .12 of 1% of monthly average net assets
in excess of $260 million. Certain of the officers and trustees of the Fund are
officers, directors, or partners of the Manager or Parent.
NOTE 3--Purchases and sales of securities, other than short-term obligations,
aggregated $147,859,704 and $67,708,159, respectively, for the period ended
June 30, 1996. For federal income tax purposes the identified cost of
investments owned at June 30, 1996 was $90,841,281. As of June 30, 1996, net
unrealized appreciation for federal income tax purposes aggregated $2,111,506
of which $5,124,425 related to appreciated securities and $3,012,919 related to
depreciated securities. The Fund paid brokerage commissions in the amount of
$858 to Fahnstock and Company, Inc., an affiliate of the Subadviser Hudson
Capital Advisors, for the period ended June 30, 1996.
NOTE 4--Capital shares of the Fund were issued in connection with exchanges of
capital shares for assets as follows:
<TABLE>
<CAPTION>
WR
THE EAI INVESTMENT
SMALL PARTNERS
MANAGERS LONG EQUITY
EQUITY TRUST FUND L.P. TOTAL
------------- ------------ -----------
<S> <C> <C> <C>
Fund Issued:
Date..................................... 1/2/96 5/1/96
Shares................................... 7,250,470 1,338,027 8,588,497
Net Asset Value.......................... $ 10.00 $ 10.70
Fund Received as Payment:
Securities at value...................... $66,925,766 $13,594,809 $80,520,575
Cash..................................... 5,578,930 722,075 6,301,005
----------- ----------- -----------
Total Value.............................. $72,504,696 $14,316,884 $86,821,580
=========== =========== ===========
</TABLE>
The aggregate net assets of the Fund immediately before the exchanges were
$100,000 on January 2, 1996 and $81,893,509 on May 1, 1996.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Evaluation Associates Capital Markets, Inc.
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
ADMINISTRATOR
Van Eck Global
99 Park Avenue
New York, NY 10016
TRANSFER
DST Systems, Inc.
1004 Baltimore
Kansas City, MO 64105-1802
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108
- --------------------------------------------------------------------------------
This report must be accompanied by an effective prospectus which includes more
complete information such as charges and expenses. For a prospectus and
additional information about the EAI Select Managers Equity Fund, please call
the number listed below.
[LOGO] EAI
SELECT
EAI Select Managers Equity Fund
EAI Securities Inc.
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
(203) 855-2200
* * *
THE
EAI SELECT
-------------------
MANAGERS
-------------------
EQUITY FUND
-------------------
SEMI-ANNUAL
-------------------
REPORT
-------------------
JUNE 30, 1996
[LOGO] EAI
SELECT
