SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. <^> 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. <^> 5 [X]
(Check appropriate box or boxes)
EAI SELECT MANAGERS EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
200 Connecticut Avenue, Suite 700
Norwalk, Connecticut 06854-1958
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (203) 855-2200
William C. Crerend copy to:
Senior Vice President and General Counsel Martin L. Budd
Evaluation Associates Capital Markets, Incorporated Day Berry & Howard
200 Connecticut Avenue, Suite 700 One Canterbury Green
Norwalk, Connecticut Stamford, Connecticut
06854-1958 06901-2047
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: (see below)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] <^> on September 30, 1996 pursuant to paragraph <^>(a)(3)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has elected to register an indefinite amount of shares of beneficial
interest. The Registrant did not file a Rule 24f-2 notice for its most
recently ended fiscal year pursuant to paragraph (b)(2) of such rule because it
did not sell any securities during its most recently ended fiscal year pursuant
to such election.
<PAGE>
EAI SELECT MANAGERS EQUITY FUND
REGISTRATION STATEMENT
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
Form N-1A Item Location
Part A - Prospectus
Item 1. Cover Page Cover Page
Item 2. Synopsis Introduction; Fund Expenses
Item 3. Condensed Financial Financial Highlights;
Information Performance Advertisements
Item 4. General Description of Organization of the Fund, Investment
Registrant Objectives and Policies;
Investment Techniques and
Associated Risks
Item 5. Management of the Fund Management of the Fund; Distribution of
the Fund's Shares; Portfolio Transactions
and Brokerage
Item 5A.Management's Discussion Performance Information
of Fund Performance
Item 6. Capital Stock and Description of Shares, Voting Rights
Other Securities and Liabilities; Dividends and
Distributions; Tax Information
Item 7. Purchase of Securities Purchase of Shares; Valuation of Shares
Being Offered
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings Pending Litigation
<PAGE>
Part B - Statement of Additional Information
Item 10.Cover Page Cover Page
Item 11.Table of Contents Table of Contents
Item 12.General Information Not Applicable
and History
Item 13.Investment Objectives Investment Restrictions and Operating
and Policies Policies; Portfolio
Turnover
Item 14.Management of the Fund Trustees and Officers
Item 15.Control Persons and Trustees and Officers; Control of the
Fund
Principal Holders of
Securities
Item 16.Investment Advisory and Investment Advisory and Other Services
Other Services
Item 17.Brokerage Allocation and Transactions in Portfolio Securities
Other Practices
Item 18.Capital Stock and Shares of the Fund
Other Securities
Item 19.Purchase, Redemption and Purchase and Pricing
Pricing of Securities
Being Offered
Item 20.Tax Status Federal Income Tax Status
Item 21.Underwriters Not Applicable
Item 22.Calculation of Performance Data
Performance Data
Item 23.Financial Statements Financial Statements
<PAGE>
Part C - Other Information
Item 24.Financial Statements Financial Statements and Exhibits
and Exhibits
Item 25.Persons Controlled by Persons Controlled by or Under Common
or Under Common Control Control with the Fund
with Registrant
Item 26.Number of Holders of Number of Holders of Securities
Securities
Item 27.Indemnification Indemnification
Item 28.Business and Other Business and Other Connections of
Connections of Investment Investment Advisers
Adviser
Item 29.Principal Underwriters Not Applicable
Item 30.Location of Accounts Location of Accounts and Records
and Records
Item 31.Management Services Management Services
Item 32.Undertakings Undertakings
<PAGE>
EAI SELECT MANAGERS EQUITY FUND
PROSPECTUS SEPTEMBER 30, 1996
The EAI Select Managers Equity Fund (the "Fund") is a diversified,
open-end management investment company with a diversified equity portfolio.
The primary investment objective of the Fund is to achieve long-term capital
appreciation. The assets of the Fund are invested primarily in common stocks,
but may also be invested in convertible securities and fixed income securities.
Fund assets are managed by multiple subadvisers, which provides for a
diversified approach to the management of those assets. There can be no
assurance that the Fund can achieve its investment objective.
The Fund is authorized to offer its common shares (the "Shares") which
may be purchased at a price equal to their net asset value per share on a
continuous basis. Each Share represents an identical interest in the
investment portfolio of the Fund and has the same rights.
This prospectus sets forth concisely the information concerning the
Fund that a prospective investor ought to know before investing. It should be
read and retained for future reference. The Fund has filed with the Securities
and Exchange Commission a Statement of Additional Information, dated September
30, 1996, which contains more detailed information about the Fund and is
incorporated into this Prospectus by reference. A copy of the Statement
of Additional Information may be obtained without charge by contacting EAI
Securities Inc. at 200 Connecticut Avenue, Suite 700, Norwalk, Connecticut
06854-1958. (203) 855-2200.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
EAI SECURITIES, INC.
[The text of this front cover, other than the heading and the line at
the bottom, is set forth on the right hand side of the page. On the left hand
side of the page there is a picture of a compass sitting on top of a group of
stock certificates. No issuer is disclosed on any of the stock certificates.]
<PAGE>
TABLE OF CONTENTS
INTRODUCTION ..............................................................1
FUND EXPENSES .............................................................3
FINANCIAL HIGHLIGHTS ......................................................5
PERFORMANCE ADVERTISEMENTS ................................................6
ORGANIZATION OF THE FUND ..................................................7
INVESTMENT OBJECTIVES AND POLICIES ........................................7
INVESTMENT TECHNIQUES AND ASSOCIATED RISKS ................................9
MANAGEMENT OF THE FUND ...................................................11
DISTRIBUTION OF THE FUND'S SHARES ........................................14
PORTFOLIO TRANSACTIONS AND BROKERAGE .....................................14
PERFORMANCE INFORMATION ..................................................15
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES .....................16
DIVIDENDS AND DISTRIBUTIONS ..............................................17
TAX INFORMATION ..........................................................17
PURCHASE OF SHARES .......................................................18
VALUATION OF SHARES ......................................................20
REDEMPTION OF SHARES .....................................................21
PENDING LITIGATION .......................................................22
OTHER INFORMATION ........................................................22
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and operations of the
Fund. The Fund is a diversified, open-end management investment company which
was established in 1995. This Prospectus offers Shares of the Fund. See
"Description of Shares, Voting Rights and Liabilities" on page 16.
Investment Objective
The primary investment objective of the Fund is to achieve long-term
capital appreciation. The Fund attempts to achieve this objective by utilizing
subadvisers (the "Subadvisers") which have investment philosophies consistent
with this basic objective. The Subadvisers invest the assets of the Fund
primarily in a variety of equity securities, including common stocks, but may
also invest in convertible securities and fixed income securities with
a maximum remaining maturity of 15 years. The principal risks associated with
an investment in the Fund relate to the risks associated generally with equity
securities. See "Investment Objectives and Policies" on page 7 and "Investment
Techniques and Associated Risks" on page 9.
The Investment Adviser
The Fund is managed by Evaluation Associates Capital Markets,
Incorporated (the "Manager"), a registered investment adviser, commodity pool
operator and commodity trading adviser located in Norwalk, Connecticut. For
its services to the Fund, the Manager is entitled to a fee, payable quarterly,
at the rate of 0.92% per annum of the average daily net asset values of the
Fund. See "Management of the Fund" on page 11 for a description of the
Management Agreement.
The Subadvisers
The Manager is responsible, subject to the oversight of the Fund's
Board of Trustees, for the selection and supervision of the Subadvisers. The
Manager has ultimate responsibility for the investment performance of the Fund
due to its responsibility to oversee the Subadvisers and to recommend their
hiring, termination and replacement. When originally selected by the
Manager, the Subadvisers are generally small (less than $750 million in total
assets under management) and have only one or two key investment professionals,
although the Subadvisers may grow beyond these parameters after their selection
by the Manager (as several of the current Subadvisers already have). The Fund
presently has five Subadvisers, which are listed in the remainder of this
paragraph. Dietche & Field Advisers, Inc. invests primarily in securities
issued by medium to large-sized companies and focuses on value and an
"eclectic" mix (i.e., a selection of securities that appear to be superior
using various methods). Liberty Investment Management invests primarily in
securities issued by medium-sized companies and focuses on growth and value.
Iridian Asset Management LLC invests primarily in securities issued by large-
sized companies and focuses on value. Bennett Lawrence Management, LLC
invests primarily in securities issued by medium-sized companies and focuses on
growth. Equinox Capital Management, Inc. invests primarily in securities issued
by large-sized companies and focuses on value.
The Subadvisers are each entitled to a fee, payable quarterly by the
Manager. See "Management of the Fund" on page 11 and the Statement of
Additional Information for a description of the Manager and the Subadvisers.
Currently, the Investment Company Act of 1940, as amended (the "1940
Act"), requires that the Shareholders of the Fund approve the sub-advisory
agreements between the Manager and the Subadvisers. The Fund has received an
exemptive order from the Securities and Exchange Commission exempting it from
the requirements that each sub-advisory agreement be approved by a majority
vote of the Shareholders of the Fund. As a result of that exemptive order, the
Manager is able, subject to the approval of the Trustees, to engage and to
terminate Subadvisers, to change the terms of specific sub-advisory agreements,
or to continue the engagement of particular Subadvisers after events which
would otherwise require their automatic termination under the 1940 Act. While
Shareholder approval is not required for the Manager to terminate a sub-
advisory agreement, the Shareholders still have the ability to terminate such
an agreement on their own at any time by a vote of a majority of the
outstanding Shares. Under the Securities and Exchange Commission*s exemptive
order, within 60 days of hiring a new Subadviser or implementing a material
change in a sub-advisory agreement, the Manager must furnish the Fund*s
Shareholders with an information statement including all of the information
about the new Subadviser or the sub-advisory agreement that would be included
in a proxy statement. In addition, that exemptive order requires that the Fund
hold itself out to the public as employing a multi-manager structure and
that the Fund*s sales literature prominently disclose that the Manager has
ultimate responsibility for the investment performance of the Fund due to its
responsibility to oversee the Subadvisers and to recommend their hiring,
termination and replacement.
The Distributor
EAI Securities Inc. (the "Distributor"), an affiliate of the Manager,
serves as distributor of the Fund's shares. See "Distribution of the Fund's
Shares" on page 14 and the Statement of Additional Information.
Offering and Redemption Price
Shares of the Fund may be purchased through the Distributor, which
offers the Fund's shares on a continuous basis. The Shares are sold at the net
asset value per share next computed after the purchase order is received by DST
Systems, Inc. (the "Transfer Agent"). The minimum initial investment is
$500,000, and the minimum subsequent investment is $1,000, which minimums may
be waived by the Fund or the Manager in certain circumstances. See "Purchase
of Shares" on page 18 and "Valuation of Shares" on page 20.
Shares of the Fund may be redeemed at any time at the net asset value
per share next computed after receipt of a redemption request in proper form by
the Transfer Agent. See "Redemption of Shares" on page 21.
Risk Factors
There can be no assurance that the Fund can achieve its investment
objective. The Fund invests primarily in a variety of equity securities, and
there are risks generally associated with such investments. These risks
include (i) ordinary market risks as a result of changing economic and market
conditions, (ii) the risks that result from investing in small to medium
sized companies, the securities of which (or the financial instruments related
to such securities) have a limited market, and (iii) the risk that during the
start-up phase of the Fund's operations, the Fund's expenses may constitute a
disproportionate percentage of the Fund's average net assets due to a
relatively low level of net assets. In addition, the specific types of
securities in which the Fund invests also present risks that are peculiar to
those securities. For example, investments in foreign securities are exposed
to political and economic risks not associated with domestic securities, as
well as the possibility of the imposition of withholding taxes and government
restrictions on the sales of such securities. Investments in illiquid
securities are subject to greater risk of loss because they are not readily
marketable. Repurchase agreements involve certain risks in the event of a
default or insolvency by the other party. Warrants are generally considered
more speculative investments and are therefore subject to a greater risk of
loss. Investments in other investment companies investing in the securities
described above are subject to the same risks as a direct investment in those
securities. See "Investment Techniques and Associated Risks" on page 9 for a
more detailed discussion of these risk factors.
FUND EXPENSES
The following table provides the investor with information concerning
annual operating expenses of the Fund. The expenses and fees set forth in the
table are projected for the Fund's initial fiscal year, on a pro forma basis.
The Fund commenced operations in January 1996 and therefore does not have a
sufficient operating history on which to base a historical disclosure
of fees:
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None
(as a percentage of offering price)
Deferred Sales Load None
(as a percentage of either original purchase
price or redemption proceeds)
Redemption Fee None
(as a percentage of amount received)
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.61%<^>
Other Expenses 0.54%
Total Fund Operating Expenses+ 1.15%
</TABLE>
_____________________
*The Management Fees reflect the aggregate fees paid to the Manager and
each Subadviser. For a description of such fees, see "Management of the Fund"
on page 11 and the Statement of Additional Information.
+The Manager has committed to waive a portion of its fee for the first
year of operation of the Fund (which expires on January 2, 1997) to the extent
necessary to cap overall Fund expenses at 1.15%. Thereafter, the Manager's fee
may not be capped, and, if not, the Manager's fee will be 0.92% per annum of
the average daily net asset value of the Fund and the total Fund operating
expenses are expected to be approximately 1.46%, assuming a constant net asset
value for the Fund of at least $75 million. The table above reflects projected
fees after giving effect to the Manager's fee cap in the first year of the
Fund's operation.
<TABLE>
<CAPTION>
Example 1 year 3 years
<S> <C> <C>
Assuming a hypothetical $1,000 investment made at the
commencement of the Fund*s operations and assuming (1) a
5% annual rate of return and (2) redemption at the end of each
time period, an investor would pay the following expenses:
$12 $45
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of each
time period:
$12 $45
</TABLE>
The purpose of the table above is to help the investor understand the
various costs and expenses that the investor will bear directly or indirectly.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
expenses set forth in this table are based on total Fund operating expenses of
1.15% in the Fund's first year (as a result of the Manager's fee cap
described above) and total Fund operating expenses of 1.46% each year
thereafter, assuming a constant net asset value for the Fund of at least $75
million. For more complete descriptions of the various costs and expenses, see
"Management of the Fund" on page 11.
Payments of fees are stated as a percentage of net assets of the Fund.
"Other Expenses" is based on projected amounts for the initial fiscal year.
In certain instances, the Fund may enter into directed brokerage
arrangements in which it will direct the brokerage for certain securities
transactions to be entered into by its Subadvisers to a certain broker-dealer
in exchange for that broker-dealer's agreement to pay a portion of the
custodian, transfer agent or other administrative fees incurred by the Fund.
Such arrangements are discussed further herein. In addition, the Manager may
from time to time, but is not required to, waive all or a portion of the
management fee due to it under the Management Agreement. Any voluntary fee
waiver by the Manager may be terminated or reduced at any time in the sole
discretion of the Manager. Shareholders will be notified of any changes in
such fee waivers at the time they become effective. Directed brokerage
arrangements will not be effected at any time that the Manager has waived all
or a portion of the management fee due to it under the Management Agreement, in
accordance with the requirements of the 1940 Act and the rules thereunder.
The Manager has committed to waive a portion of its fee for the first
year of operation of the Fund to the extent necessary to cap overall Fund
expenses at 1.15% of the average of the daily net asset value of the Fund.
FINANCIAL HIGHLIGHTS
The following table sets forth certain financial information for the
Fund, including total net assets of the Fund and net asset value per Share of
the Fund at the beginning and end of the period, per share investment income
and capital gains (losses), and distributions thereof, distributions from
capital, total return performance, expenses and income ratios and portfolio
turnover. The Fund does not yet have audited financial statements for the
periods listed below, so the data set forth below is unaudited.
Financial statements and notes thereto are incorporated in the
Statement of Additional Information, which is available at no cost by calling
(203) 855-2200.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
For a share outstanding throughout the period.
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 (Losses) on Securities
(both realized and unrealized) 0.66
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 Income to Average Net Assets 0.79% (d)
Portfolio Turnover Rate 88%
Average Commission Rate Paid $0.0524
___________________________________________
(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.
*Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
PERFORMANCE ADVERTISEMENTS
From time to time, the Fund may include performance data in
advertisements, sales literature or reports to current or prospective
shareholders. Performance data about the Fund is based on the Fund's past
performance only and is not an indication of future performance. Performance
data may be expressed in various measures, including total return for the
Fund's Shares or as a statistical reference to the Fund's volatility. Average
annual total return figures as prescribed by the Securities and Exchange
Commission represent the average annual percentage change in value of a $1,000
investment in the Fund for one-, five-, and ten-year periods, or any portion
thereof, to the extent applicable, through the end of the most recent
fiscal quarter, assuming reinvestment of all distributions. The Fund may also
furnish total return quotations for other periods, or based on investments of
other amounts. For such purposes, total return equals the total of all income
and capital gains paid to holders of Shares of the Fund, assuming reinvestment
of all distributions, plus (or minus) the change in value of the original
investment, expressed as a percentage of the purchase price. Volatility will
be measured as the standard deviation of the Fund's past performance. The Fund
may also include in advertisements, sales literature or reports a comparison of
Fund performance to the performance of other mutual funds or various unmanaged
indices. Unmanaged indices may assume the reinvestment of dividends, but
generally do not reflect deductions for administrative and management costs and
expenses.
Advertisements, sales literature and communications may also contain
information about the Fund's, the Manager's or the Subadvisers' current
investment strategies and management style. Current strategies and style may
change to allow the Fund to respond quickly to a changing market and economic
environment. From time to time, the Fund may discuss specific portfolio
holdings or industries in such communications.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the shares of the Fund during the particular time
period on which the calculations are based. Performance information should be
considered in light of the Fund's investment objectives and policies,
characteristics and qualities of the Fund's portfolio, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future. For a description of the
methods used to determine total return and volatility, see the Statement of
Additional Information.
ORGANIZATION OF THE FUND
The Fund was organized on September 27, 1995 as a Massachusetts
business trust. The Fund is categorized as an open-end management company
under Sections 4 and 5 of the 1940 Act.
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund is to achieve long-term
capital appreciation. There can be no assurance that the Fund will achieve its
objective. The Fund's investment objective is a fundamental policy and may not
be changed without majority shareholder approval. In addition, the Fund's
policy is to invest at least 65% of its total assets in equity securities, and
this is also a fundamental policy that may not be changed without majority
shareholder approval; provided however that the Fund may at times for defensive
purposes temporarily place all or a portion of its assets in cash, short-term
commercial paper, U.S. government securities, high quality debt securities and
obligations of banks when, in the judgment of the Manager or a Subadviser, such
investments are appropriate in light of economic or market conditions.
The Fund attempts to achieve its investment objective by utilizing
Subadvisers which have investment philosophies consistent with this basic
objective. The Subadvisers invest the assets of the Fund primarily in a
variety of equity securities, including common stocks, but may also invest in
convertible securities and fixed income securities with a maximum remaining
maturity of fifteen years. The Fund presently has five Subadvisers. Dietche &
Field Advisers, Inc. invests primarily in securities issued by medium to large-
sized companies and focuses on value and an "eclectic" mix (i.e., a selection
of securities that appear to be superior using various methods). Liberty
Investment Management invests primarily in securities issued by medium-sized
companies and focuses on growth and value. Iridian Asset Management LLC
invests primarily in securities issued by large-sized companies and focuses
on value. Bennett Lawrence Management, LLC invests primarily in securities
issued by medium-sized companies and focuses on growth. Equinox Capital
Management, Inc. invests primarily in securities issued by large-sized
companies and focuses on value.
The Fund does not propose to concentrate 25% or more of its total
assets in a particular industry or group of industries.
The Fund is subject to certain investment restrictions which may not be
changed without majority shareholder approval.
The Fund pursues its investment objectives primarily by investing in
equity or equity-related securities, which consist primarily of common stock,
American Depositary Receipts and convertible securities (including bonds).
To the extent consistent with its investment objectives and policies,
the Fund may also invest in fixed income securities for current income and
capital preservation. Such fixed income securities will have a maximum
remaining maturity of 15 years. The Fund will invest in fixed income
securities issued by the U.S. government and certain of its agencies and
instrumentalities, or corporate bonds or debentures that are rated not less
than Aa by Moody's or AA by Standard and Poor's or, in the case of debt
securities not rated by Moody's or Standard and Poor's, of comparable quality
as determined by the appropriate Subadviser (provided that the rating of
certain convertible fixed income securities may be lower). The Fund may also
invest in fixed income securities for capital appreciation. Fixed income
securities may have fixed or variable rates. The Fund may at times for
defensive purposes temporarily place all or a portion of its assets in cash,
short-term commercial paper, U.S. government securities, high quality debt
securities and obligations of banks when, in the judgment of the Manager or a
Subadviser, such investments are appropriate in light of economic or market
conditions.
INVESTMENT TECHNIQUES AND ASSOCIATED RISKS
The following are descriptions of certain types of securities invested
in by the Fund, certain investment techniques employed by the Fund, and risks
associated with using either those securities or those investment techniques.
General Risks Associated with the Fund
The Fund is subject to ordinary market risks as a result of changing
economic and market conditions which might affect the profitability and
financial condition of the companies in whose securities the Fund*s assets are
invested. In an attempt to mitigate the risk of loss of principal due to
market fluctuation for individual securities, the Fund invests primarily in a
diversified portfolio of equity securities. Moreover, the use of several
Subadvisers provides further diversification in the investments of the Fund.
Such diversification does not eliminate all risks and investors should expect
the net asset value of their shares in the Fund to fluctuate based on market
conditions or a variety of other factors, as discussed herein.
The securities of small to medium-sized (by market capitalization)
companies, or financial instruments related to such securities, may have a more
limited market than the securities of larger companies. Accordingly, it may be
more difficult to effect sales of such securities at an advantageous time or
without a substantial drop in price than it would be with securities of a
company with a larger market capitalization and broader trading market. In
addition, securities of a small to medium-sized company may have greater price
volatility as they are generally more vulnerable to adverse market factors such
as unfavorable economic reports.
The Fund is still in its start-up phase, and during this start-up phase
Fund expenses may constitute a disproportionate percentage of average Fund net
assets due to a relatively low level of net assets.
Other Securities
In addition to the general risks associated with the Fund, certain
types of securities in which the Fund invests from time to time present more
specific risks.
Foreign Securities. While the Fund does not directly invest in foreign
securities, it may invest to a limited extent in sponsored or unsponsored
American Depository Receipts ("ADRs") or other investment companies that invest
in foreign securities, so the performance of these investments will depend upon
the performance of the underlying foreign securities. ADRs are dollar-
denominated receipts issued generally by U.S. banks and which represent a
deposit with the bank of a foreign company's securities. Unsponsored ADRs
differ from sponsored ADRs in that the establishment of unsponsored ADRs is not
approved by the issuer of the underlying foreign securities. Ownership of
unsponsored ADRs may not entitle the Fund to financial or other reports of the
issuer, to which it would be entitled as the owner of sponsored ADRs.
Investments in foreign securities involve risks that differ from investments
in securities of domestic issuers. Such risks may include political and
economic developments, the possible imposition of withholding taxes, possible
seizure or nationalization of assets, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which might
adversely affect the Fund's investments. In addition, foreign countries may
have less well-developed securities markets as well as less regulation of stock
exchanges and brokers and different auditing and financial reporting standards.
Not all foreign branches of United States banks are supervised or examined by
regulatory authorities as are United States banks, and such branches may not be
subject to reserve requirements. Investing in the fixed-income markets of
developing countries involves exposure to economies that are generally less
diverse and mature, and to political systems which may be less stable, than
those of developed countries. Foreign securities often trade with less
frequency and volume than domestic securities and therefore may exhibit greater
price volatility. Changes in foreign exchange rates will affect the value of
those securities which are denominated or quoted in currencies other than the
U.S. dollar.
Illiquid Securities. The Fund may invest up to 15% of its net assets
in securities that are not readily marketable ("illiquid securities"). These
securities, which may be subject to legal or contractual restrictions on their
resale, may involve a greater risk of loss. Securities that are not registered
for sale under the Securities Act of 1933, as amended (the "1933 Act"),
but are eligible for resale pursuant to Rule 144A under the 1933 Act, will not
be considered illiquid for purposes of this restriction if the appropriate
Subadviser determines, subject to the review of the Trustees, that such
securities have a readily available market.
Repurchase Agreements. In a repurchase transaction, the Fund purchases
a security from a bank or a broker-dealer and simultaneously agrees to resell
that security to the bank or broker-dealer at an agreed upon price on an
agreed-upon date. The resale price reflects the purchase price plus an agreed
upon rate of interest. In effect, the obligation of the seller to repay the
agreed-upon price is secured by the value of the underlying security.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities and the value
received upon disposal being less than the amounts due the Fund. The
Fund may not invest in repurchase agreements with a maturity of more than seven
days if the aggregate of such investments, along with other illiquid
securities, exceeds 15% of the value of the Fund's net assets.
Warrants. The holder of a warrant has the right to purchase a given
number of shares of a particular issuer at a specified price until expiration
of the warrant. Such investments can provide a greater potential for profit or
loss than an equivalent investment in the underlying security, and are
considered speculative investments. For example, if a warrant were not
exercised by the date of its expiration, the Fund would lose its entire
investment. The Fund's investments in warrants will not exceed 5% of the value
of its net assets (calculated at market value at the time of each investment),
and not more than 2% of its net assets will be invested in warrants or rights
not listed on the New York Stock Exchange.
Investment Companies. The Fund may invest in other registered
investment companies which in turn invest in the types of securities discussed
in the preceding paragraphs. As such, the performance of the Funds's
investments in those other investment companies will be subject to the sorts of
risks described in the preceding paragraphs. Pursuant to the 1940 Act,
the Fund may acquire no more than 3% of the outstanding voting stock of any
single investment company, and it may invest no more than 5% of its assets in
any one investment company and no more than 10% of its assets (in each case
taken at market value and measured immediately after giving effect to such
investment) in all of the investment companies whose securities it owns. When
the Fund invests in the securities of other registered investment companies,
certain expenses, such as management fees, will be duplicated.
Portfolio Turnover
In carrying out the investment policies described in this Prospectus,
the Fund expects to engage in a substantial number of securities portfolio
transactions, and the rate of portfolio turnover will not be a limiting factor
when a Subadviser deems it appropriate to purchase or sell securities for the
Fund. The Fund estimates that its annual turnover rate will not exceed
200%. High portfolio turnover involves correspondingly greater brokerage
commissions for the Fund and other transaction costs that are borne directly by
the Fund. In addition, high portfolio turnover may also result in increased
short-term capital gains which, when distributed to shareholders, are treated
for federal income tax purposes as ordinary income. See "Portfolio
Transactions and Brokerage" on page 14 and "Tax Information" on page 17.
MANAGEMENT OF THE FUND
Board of Trustees
The Board of Trustees of the Fund (the "Trustees") is responsible for
the overall supervision of the operations of the Fund. The Trustees perform
the duties imposed on them by the 1940 Act and the Massachusetts General Laws.
In addition to their other duties, the Trustees appoint the officers of the
Fund annually and approve the selection and termination of the Subadvisers.
More information on the Trustees is set forth in the Statement of Additional
Information.
The Manager
Pursuant to a Management Agreement (the "Management Agreement"), the
Manager acts as investment adviser for the Fund. In this capacity, the
Manager, subject to the authority of the Trustees, is responsible for the
overall management of the Fund's business affairs. This responsibility
includes the selection and termination of the Subadvisers and the allocation of
portfolio assets among the Subadvisers, subject in each case to the oversight
of the Trustees. The Manager has ultimate responsibility for the investment
performance of the Fund due to its responsibility to oversee the Subadvisers
and to recommend their hiring, termination and replacement.
EAI Partners, L.P., the Manager's direct parent (the "Parent"), and its
predecessors together have more than 20 years of experience in the investment
consulting business. The Parent is presently owned by certain employees and
certain non-employee investors. Equity interests in the Parent are owned by a
total of 29 entities, and no single equity holder holds more than 25% of the
outstanding equity interests of the Parent. The Parent and its subsidiaries
together currently have more than 100 employees, approximately 55 of which are
professional staff. The Parent, directly and through the Manager, offers
services which are generally divided between investment consulting services,
including manager evaluation and performance evaluation services, and the
management of multi-adviser funds for a number of institutional and high net
worth individual clients. The Manager's address is 200 Connecticut Avenue,
Suite 700, Norwalk, Connecticut 06854-1958.
The Subadvisers
Dietche & Field Advisers, Inc. was formed in November, 1984 and is
currently owned by its employees. As of December 31, 1995, it had $4.7 billion
of assets under management. Its address is 437 Madison Avenue, New York, New
York 10022.
Liberty Investment Management (formerly Eagle Asset Management) was
originally formed in January, 1976 and is currently wholly owned by Herbert E.
Ehlers. As of December 31, 1995, it had $4.9 billion of assets under
management. Its address is 2502 Rocky Point Drive, Tampa, Florida 33607.
Iridian Asset Management LLC was formed in March, 1996 and is currently
owned by Harold Levy and David Cohen. Iridian Asset Management LLC is the
successor to Arnold and S. Bleichroeder Capital, a division of Arnold and S.
Bleichroeder, Inc. As of March 31, 1996, assets under management totaled
approximately $2.07 billion. Its address is 276 Post Road West, Westport,
Connecticut 06880-4704.
Bennett Lawrence Management, LLC was formed in September, 1995 by
former employees of Deutsche Morgan Grenfell/C.J. Lawrence, Inc. The firm is
owned by its employees and is controlled by S. Van Zandt Schreiber, its
majority owner. As of December 31, 1995, assets under management totaled $317
million. Its address is 757 Third Avenue, New York, New York 10017.
Equinox Capital Management, Inc. was formed in May, 1989. The firm is
owned by its employees and is controlled by Ronald J. Ulrich, its majority
owner. As of December 31, 1995, assets under management totaled $5.2 billion.
Its address is 399 Park Avenue, New York, New York 10022.
Compensation
As compensation for its services, the Manager is entitled to a fee,
payable quarterly, at the annual rate of 0.92% of the average of the daily net
asset value of the Fund. This fee is higher than the management fee paid by
most investment companies. The Management Agreement also provides that the
Fund will reimburse the Manager on a cost basis in the event that the Manager
provides any services involved in maintaining registrations of the Fund and
its shares with the Securities and Exchange Commission or involved in the
preparation of shareholder reports and further provides that the Manager will
reimburse the Fund for the amount, if any, of the expenses of the Fund
(including the Manager's compensation but excluding interest, brokerage costs,
taxes and extraordinary expenses) for any fiscal year which exceeds the level
of expenses which the Fund is permitted to bear under the most restrictive
expense limitation imposed (and not waived) on the Fund by any state in which
the shares of the Fund are then qualified for sale. The Manager has committed
to waive a portion of its fees for the first year of operation of the Fund
(which expires on January 2, 1997) to the extent necessary to cap overall Fund
expenses at 1.15%.
The Manager pays a portion of its management fees to the Subadvisers
pursuant to the Sub-advisory Agreements between the Manager and each
Subadviser. The following are the amounts paid to each Subadviser (expressed
as a per annum percentage of the average of the monthly net asset value of the
assets of the Fund managed by such Subadviser):
Dietche & Field Advisers, Inc. - .375%
Liberty Investment Management - .375%
Iridian Asset Management LLC - .375%
Bennett Lawrence Management, LLC - .375%
Equinox Capital Management, Inc. - .375%
The amount of the management fee that will be retained by the Manager
may vary according to the allocation of Fund assets among the Subadvisers. It
is presently estimated that, in the first fiscal year of the Fund, the Manager
will pay approximately 41% of the management fee it receives under the
Management Agreement to the Subadvisers and will retain approximately 59% of
that fee for itself, assuming the Manager's cap on its management fees in the
first year of the Fund's operation does not impact these percentages.
The Portfolio Manager
Mr. Keith Stransky serves as portfolio manager of the Fund. Mr.
Stransky is Senior Vice President and Director of Traditional Funds Management
and Research for the Manager, and he has held that position for the past five
years. In that position, Mr. Stransky manages and does research for the
Manager*s traditional investment vehicles. Mr. Stransky joined the Parent in
1983, and prior to that he was the Technical Director for Hamilton, Johnston &
Co., Inc. Mr. Stransky has 20 years of consulting-related investment
experience. Mr. Stransky is a Chartered Financial Analyst.
The Fund has retained Van Eck Associates Corporation to perform
administrative and accounting functions for it. These functions include
certain legal, accounting, regulatory and compliance services, state
registration services, corporate secretary and board of trustees
administration, tax compliance services and reporting. Van Eck Associates
Corporation receives an annual fee, payable monthly, at a per annum percentage
of the average daily net asset value of the assets of the Fund. The annual fee
is graduated, beginning at .20% of the average daily net assets of the Fund if
such assets during the month the fee is calculated are less than $100 million
and ending at .12% of the average daily net assets of the Fund if such
assets during the month the fee is calculated are equal to or more than $260
million. There is a minimum annual fee of $100,000 payable to Van Eck
Associates Corporation.
The Manager may compensate certain financial institutions that are not
affiliated with the Fund or the Distributor out of its own funds in connection
with certain sales to Shareholders.
The Custodian and the Transfer Agent
Boston Safe Deposit and Trust Company serves as the Fund's Custodian
pursuant to a Custody Agreement. Its address is One Boston Place, Boston,
Massachusetts 02108.
DST Systems, Inc. serves as the Fund's transfer, dividend disbursing
and shareholder servicing agent pursuant to an Agency Agreement. Its address
is 1004 Baltimore, Kansas City, Missouri 64105-1802.
DISTRIBUTION OF THE FUND'S SHARES
The Distributor
The Distributor serves as the distributor of the shares of the Fund.
Its address is 200 Connecticut Avenue, Norwalk, Connecticut 06854-1958. The
Distributor distributes the shares of the Fund solely on a subscription basis.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each Subadviser is responsible for decisions to buy and sell securities
using the Fund assets allocated to it, as well as for broker-dealer selection
in connection with the portfolio managed by such Subadviser. Each Subadviser
is to adhere to the Fund's policy of seeking the best execution and price
(which in some instances may include paying higher brokerage commissions for
brokerage and research services provided to the Fund and may include the
directed brokerage arrangements described in the next paragraph).
In certain instances, the Fund may enter into directed brokerage
arrangements in which it will direct the brokerage for certain securities
transactions to be entered into by its Subadvisers to a certain broker-dealer
in exchange for that broker-dealer's agreement to pay a portion of the
custodian, transfer agent or other administrative fees incurred by the Fund.
Directed brokerage transactions will only be executed if, in light of the
offsetting reduction in administrative fees to be incurred by the Fund, they
represent the best execution and price for that transaction or as good
execution and price as would otherwise be available to the Fund. As stated
above, directed brokerage arrangements will not be effected at any time that
the Manager has waived all or a portion of its management fee.
The Manager and/or one or more of the Subadvisers may use an affiliated
broker/dealer to execute transactions on behalf of the Fund. In addition, the
Manager may participate in the directed brokerage arrangement described above
with an affiliated broker/dealer.
PERFORMANCE INFORMATION
As stated above, the Manager, the Parent and their predecessors
together have more than 20 years of experience in the investment consulting and
management business. Among the assets under the management of the Parent and
the Manager at the end of 1995 were, respectively, The EAI Small Managers
Equity Fund Trust (the "SMEF Trust") and the W.R. Investment Partners Long
Equity Fund, L.P. (the "Long Fund" and, collectively with the SMEF Trust, the
"EAI Funds"), two collective investment funds with investment objectives,
policies and strategies substantially identical to those of the Fund. In
addition, several former investors in the SMEF Trust and the Long Fund
presently invest in the Fund, and much of the Fund*s assets are attributable to
the investments made by those investors. The former investors in the SMEF
Trust were required to withdraw their investments in the SMEF Trust in order to
comply with a recent release by the Staff of the Securities and Exchange
Commission regarding the treatment of investment vehicles used by certain
employee pension and benefit plans for purposes of the 1940 Act. The Long Fund
was terminated by the Manager on May 1, 1996.
The following table presents the average annual total return of the EAI
Funds for the periods shown and compares that return to the average annual
total return of the Standard & Poor's 500 Stock Index (the "S&P 500") for those
periods. The figures for the EAI Funds represent the average annual total
return of the two funds as if their assets were combined, and include the
impact of capital appreciation as well as the reinvestment of interest and
dividends. The Long Fund became operative on March 1, 1993, and the figures
set forth below include its performance since that time. THE FOLLOWING TABLE
REPRESENTS ONLY THE HISTORIC PERFORMANCE OF THE TWO FUNDS MENTIONED ABOVE, AND
SHOULD NOT BE CONSIDERED AS AN INDICATION OF THE FUTURE PERFORMANCE OF THE
FUND.
<TABLE>
<CAPTION>
Time Period EAI Funds(1) S&P 500(2)
<S> <C> <C>
10 years 1986-1995 15.96% 14.86%
5 years 1991-1995 18.74% 16.56%
3 years 1993-1995 14.70% 15.31%
1 year 1995 30.25% 37.56%
</TABLE>
(1) The EAI Funds each had a net asset value of more than $67,000,000 as of
December 31, 1995. The combined net asset value of the EAI Funds on
December 31, 1995 was approximately $284,000,000. The composite does
not reflect all of the assets under the management of the Manager, the
Parent and their affiliates and may not accurately reflect the
performance of all accounts managed by them.
(2) The S&P 500 is an unmanaged capitalization-weighted index of 500
commonly traded stocks designed to measure performance of the broad
domestic economy through changes in the aggregate market value of those
stocks. The index reflects the reinvestment of dividends.
The performance figures set forth above for the EAI Funds include fees
and expenses paid by the EAI Funds which, on a weighted net basis, were
approximately 1.03% to 1.20% per year, which is less than the estimated fees to
be incurred by the Fund when the cap on the management fee to be paid to the
Manager is no longer in effect. Those figures also reflect a rebate of
management fees paid to certain investors that are affiliated with the Parent
and the Manager.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund offers one class of Shares. The Shares have no par value, and
the Fund may increase the number of Shares without the approval of the existing
Shareholders, provided that any such increase may not decrease the net asset
value of the existing Shares. Shares of the Fund are entitled to one vote per
share. Shareholders have the right to vote on the election of the Trustees and
on all other matters on which, by law or by the Fund's Declaration of Trust,
they may be entitled to vote.
The Fund is not required, and does not intend, to hold annual meetings
of Shareholders under normal circumstances. The Trustees or the Shareholders
may call special meetings of the Shareholders for action by Shareholder vote,
including the removal of any or all of the Trustees. Trustees will call a
special meeting of Shareholders of the Fund upon written request of the holders
of at least 10% of the outstanding Shares.
Under Massachusetts law, the shareholders and trustees of a business
trust like the Fund may, in certain circumstances, be personally liable for the
trust's obligations to third parties. However, the Fund's Declaration of Trust
provides, in substance, that no Shareholder or Trustee shall be personally
liable for the Fund's obligations to third parties and that every written
contract made by the Fund shall contain a provision to that effect. The Fund's
Declaration of Trust also requires the Fund to indemnify Trustees against such
liabilities and any related claims and expenses. The Fund will not indemnify a
Trustee when the loss is due to willful misconduct, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the Trustee's
office.
As of July 15, 1996, the following persons or entities beneficially
owned, directly or indirectly or through one or more controlled companies, more
than 25 percent of the Fund*s outstanding Shares or otherwise controlled the
Fund: Covington & Burling Retirement Savings Plan.
Organization expenses have been capitalized by the Fund and are being
amortized over 60 months, beginning on January 2, 1996.
Shareholder inquiries should be made to the Fund at 200 Connecticut
Avenue, Suite 700, Norwalk, Connecticut 06854-1958, (203) 855-2200.
DIVIDENDS AND DISTRIBUTIONS
Income dividends will normally be paid by the Fund on at least an
annual basis. Income dividends will normally be declared on the fourth
business day prior to the end of the dividend period, payable on the following
business day, to Shareholders of record on the day prior to the declaration
date. Distributions of any capital gains are normally paid at least
annually. Unless a Shareholder has elected to receive dividends and
distributions in cash, all dividends and distributions will be reinvested in
additional shares of the Fund (at net asset value at the time of reinvestment).
Any election may be changed at any time by delivering written notice to the
Fund at least ten business days prior to the payment date.
TAX INFORMATION
The Fund intends to qualify as a regulated investment company ("RIC")
under the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), that relieve such investment companies which distribute substantially
all of their net income (both net investment income and net capital gains) from
Federal income tax on the amounts distributed.
All income dividends, including distributions designated as capital
gain dividends, are generally taxable to Shareholders for Federal income tax
purposes whether received in cash or in additional Shares. Shareholders exempt
from or otherwise not required to pay Federal income tax will not ordinarily be
required to pay that tax on such amounts distributed to them except to the
extent that the Shares with respect to which such amounts were distributed were
acquired with outstanding debt. The Fund will inform Shareholders of the
amount and nature of all dividend distributions.
For any taxable year in which the Fund qualifies as a RIC it will be
subject to Federal income tax, but in computing the amount subject to tax it
will be allowed a deduction for dividend distributions made by it to
Shareholders. If the Fund should fail to qualify as a RIC for any taxable
year, it would be subject to Federal income tax as a corporation computed
without benefit of such a deduction.
In addition, if at any time during the last half (July 1 through
December 31) of a taxable year of the Fund more than 50 percent of the Fund*s
outstanding Shares are owned, directly or indirectly, by or for not more than
five individuals (which, for this purpose, includes employee pension and
benefit plans under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and certain other entities), the Fund will be a personal
holding company under the Code for that taxable year. For any taxable year in
which the Fund is a personal holding company and qualifies as a RIC, the
Federal income tax rate to which the Fund would be subject on any amount by
which it failed or was unable to make distributions to Shareholders sufficient
to avoid that tax entirely would be the maximum rate applicable to
corporations. In addition, it would result in the Fund being subject to
personal holding company tax, at the rate of 39.6%, on any amount by which the
Fund failed or was unable to make distributions to Shareholders sufficient to
avoid personal holding company tax entirely. Based on the holdings of the
Shares of the Fund since June 30, 1996, the Fund will be treated as a personal
holding company for its 1996 taxable year.
Shareholders should consult with their own tax advisers for more
information regarding the Federal, foreign, state and local tax rules
applicable to ownership and disposition of Shares of the Fund by them. See
"Federal Income Tax Status" in the Statement of Additional Information.
PURCHASE OF SHARES
The Shares are offered on a continuous basis and are sold at the net
asset value per share next computed after the purchase order is received by the
Fund's Transfer Agent. The Shares are sold without any sales loads or charges.
There is a minimum purchase requirement of $500,000 for initial purchases of
the Shares and of $1,000 for additional purchases of the Shares, which minimums
may be waived by the Fund or the Manager in certain circumstances. It is
contemplated that employees of the Parent and its affiliates may purchase
Shares, and such minimums may be waived for such purchases.
Purchases of Shares directly from the Trust may be made by check by
sending an account application and a check (payable to EAI Select Managers
Equity Fund) to EAI Select Managers Equity Fund, c/o DST Systems, Inc., P.O.
Box 419563, Kansas City, Missouri 64141-9563. Overnight deliveries may be sent
to 1004 Baltimore, Kansas City, Missouri 64105-1802. Purchases may also be
made directly by Federal Funds or bank wire; please call the Transfer Agent at
800-798-8055 to obtain an account number and bank wire instructions in
advance of purchase.
Certain states may require registered investment advisers that purchase
Shares for customers in those states to register as broker-dealers. From time
to time the Distributor may supply material to registered investment advisers,
other investment professionals or other parties to assist them in formulating
an investment program using the Fund for their clients. Such materials are
designed to be used and evaluated by investment professionals, do not
contain investment advice and are not available for distribution to the general
public.
Certain investors may purchase or sell Shares through broker-dealers or
through other processing organizations that may impose transaction fees or
other charges in connection with providing this service, which fees and charges
the Fund believes will be disclosed to such investors. Shares purchased in
this manner may be treated by the Fund as a single account for purposes of the
minimum initial investment. Investors are not required to utilize the services
of a broker-dealer or other processing organization and may purchase Shares
directly from the Fund.
Shares are offered and orders accepted on each business day (i.e. a day
on which the New York Stock Exchange ("NYSE") is open for trading). The Fund
may limit or suspend the offering of Shares at any time and may refuse, in
whole or in part, any order for the purchase of Shares. Orders received by the
Fund or the Transfer Agent prior to 4:00 p.m. New York time on any business day
will receive the offering price computed for that day. Orders received after
4:00 p.m. New York time shall receive the offering price for the next
business day.
Wire transfers of funds used to pay for purchases of Shares must be
received by 3:00 p.m. New York time on the business day following the purchase.
Purchases paid for by check are effected when the check is received but are
subject to collection at full face value in U.S. funds and must be drawn in
U.S. dollars on a bank chartered by the United States or a state thereof. If a
check used to purchase Shares does not clear, the transaction will be canceled
and the investor will be responsible for any loss the Fund incurs. In
addition, the Fund may prohibit the future purchase of Shares by any investor
that fails to pay for a purchase of Shares. To ensure that checks are
collected by the Trust, redemptions of Shares purchased by check will not be
effected until the check clears, which could take as long as 15 days after the
date of purchase.
Shares of the Fund may also be purchased in exchange for securities
held by an investor which are acceptable to the Fund. Investors interested in
exchanging securities must first telephone the Manager at (203) 855-2200 for
instructions regarding submission of a written description of the securities
the investor wishes to exchange. Within five business days of the receipt of
the written description, the Manager will advise the investor by telephone
whether the securities to be exchanged are acceptable to the Fund and will
instruct the investor regarding delivery of the securities. There is no charge
for this review by the Manager.
Securities accepted by the Fund are valued in the manner and on the
days described in the section entitled "Valuation of Shares" as of the close of
business on the NYSE, generally 4:00 p.m. New York time. Acceptance may occur
on any day during the five-day period afforded the Manager to review the
acceptability of the securities. Securities which have been accepted by the
Fund must be delivered within five days following acceptance. Delivery
instructions will be provided at the time of acceptance.
The value of the securities to be exchanged and of the Shares of the
Fund may be higher or lower on the day Fund Shares are offered than on the date
of receipt by the Manager of the written description of the securities to be
exchanged. The number of Shares of the Fund received in exchange for such
securities will depend on the value of the securities and the net asset value
of Fund Shares next determined following acceptance on the day Fund Shares are
offered. Securities to be exchanged must be accompanied by a transmittal form
which is available from the Manager.
A gain or loss for federal income tax purposes may be realized by the
investor upon the securities exchange, computed by reference to the tax basis
of the securities tendered, depending upon various factors relating to the
timing of other such in-kind purchases of the Fund's Shares and the make-up of
the securities exchanged therefor. (See "Federal Income Tax Status" in the
Statement of Additional Information.) All interest, dividends, and
subscription or other rights with respect to accepted securities which go "ex"
after the time of valuation become the property of the Fund and must be
delivered to the Fund by the investor forthwith upon receipt from the issuer.
Further, the investor may be required to represent and agree that all
securities offered to the Fund are not subject to any restrictions upon their
sale by the Fund under the 1933 Act, or otherwise.
In order to avoid unnecessary expenses and administrative
complications, certificates for the Shares will not be issued. All share
purchases will be confirmed to the record holder and credited to such holder's
account on the Fund's books maintained by the Transfer Agent.
VALUATION OF SHARES
As stated above, the Shares are sold at net asset value per share for
the date of determination. Net asset value per share is determined as of the
close of business on the NYSE, generally 4:00 p.m. New York time, on each
business day. Net asset value per share is equal to the net worth of the Fund
(assets minus liabilities) divided by the number of shares outstanding. Assets
and liabilities are determined in accordance with generally accepted
accounting principles and applicable rules and regulations of the Securities
and Exchange Commission.
Securities held by the Fund which are traded on a national exchange are
valued based on the last quoted sales price on such exchange on or recently
before the valuation date (or if the securities are traded on more than one
exchange on or recently before the valuation date, the principal exchange that
such securities are traded on, as determined by the appropriate Subadviser) or,
if there has been no recent sale of securities, at the last bid price. Over-
the-counter securities for which market quotations are readily available are
valued on the basis of the last sale price or, lacking any sales, at the last
quoted bid price. Securities and other investments for which market quotations
are not readily available are valued at fair value, as determined in good faith
and pursuant to procedures established by the Trustees.
REDEMPTION OF SHARES
Any Shareholder may require the Fund to redeem its Shares at any time
at their net asset value next computed after receipt of the redemption order by
the Transfer Agent. The Fund may, however, refuse to effect such a redemption
within seven days after receipt of the redemption order (i) for any period
during which (a) the NYSE is closed other than customary weekend and holiday
closings, (b) trading on the NYSE is restricted, or (c) an emergency
exists as a result of which disposal by the Fund of securities is not
reasonably practicable or it is not reasonably practicable for the Fund to
determine fairly the value of its net assets, or (ii) for such other periods as
the Securities and Exchange Commission may by order permit for the protection
of Shareholders of the Fund. In addition, redemption of purchases made by
check are restricted as described above.
Any redemption orders received as indicated below before the close of
trading on the NYSE (generally 4:00 p.m. New York time) on a day when the
Transfer Agent is open for business will receive the net asset value determined
on that date. Any redemption orders received after such time will receive the
net asset value determined on the following business day. The Fund cannot
accept redemption orders transmitted to it at the address indicated on
the cover page of the Prospectus, but will use its best efforts to promptly
forward such orders to the Transfer Agent for receipt by the next business day.
An investor's investment professional is responsible for promptly transmitting
orders. There is no redemption charge.
Due to the relatively high cost of maintaining small accounts, the Fund
reserves the right to redeem a Shareholder account (after 60 days' notice) when
the value of the Shares in that account falls below $500,000 due to
redemptions. Whether the Fund will exercise its right to redeem a specific
Shareholder account in these circumstances will be determined by the Fund on a
case-by-case basis.
Redemption orders should be mailed or telephoned to the Transfer Agent.
The Transfer Agent's mailing address is P.O. Box 419563, Kansas City, Missouri
64141-9563. Overnight deliveries may be sent to 1004 Baltimore, Kansas City,
Missouri 64105-1802. The Transfer Agent's telephone number is 800-798-8055. A
redemption order should include the name of the Fund, the Shareholder's account
name and number, and the number of Shares to be redeemed. In addition,
redemption orders which are submitted in writing must be signed by the
Shareholder. For telephone redemption orders, address and bank account
information will be verified, telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to the
Shareholder. If there has been a change of address in the past 60 days, a
telephone redemption will not be authorized. The Fund and the Transfer Agent
will employ reasonable procedures to confirm that redemption orders placed by
telephone are genuine, and failure to do so or to follow such procedures could
result in the Fund and/or the Transfer Agent being held liable for losses
resulting from unauthorized or fraudulent instructions. Telephone redemption
orders must be received by the close of trading on the NYSE on a day when the
Transfer Agent is open for business.
If the amount of a redemption is greater than $1,000, the proceeds will
be wired to a designated U.S. commercial bank account. If the amount of the
redemption is less than $1,000, the proceeds will be sent via U.S. Mail to the
address of record on the Shareholder's account. As stated above, any
redemption of Shares purchased by check will not be effected until 15 days
after the date of purchase.
To the extent consistent with state and Federal law, the Fund may make
payment of the redemption price either in cash or in kind. However, the Fund
has elected, pursuant to Rule 18f-1 under the 1940 Act, to pay in cash all
redemptions requested by any Shareholder of record, limited in amount with
respect to each Shareholder during any 90-day period to the lesser of (i)
$250,000 or (ii) 1% of the net asset value of the Fund at the beginning of such
period. This election is irrevocable while Rule 18f-1 is in effect unless the
Securities and Exchange Commission, by order, permits the withdrawal thereof.
In the case of a redemption in kind, securities delivered in payment for Shares
would be valued at the same value assigned to them in computing the net asset
value of the Fund. A Shareholder receiving such securities would incur
brokerage costs when he sold the securities.
A complete description of redemption procedures is included in the
Statement of Additional Information.
PENDING LITIGATION
On October 11, 1995, the Parent brought a declaratory judgment action
against First Commercial Trust Company, N.A., in United States District Court
for the District of Connecticut. On October 26, 1995, First Commercial Trust
Company, N.A., brought an action against The Managers Funds, The Managers
Funds, L.P., Piper Jaffray Companies, Inc., TCW Funds Management Inc.,
Standish, Ayer & Wood, Inc., the Parent, and certain affiliates of the above
parties. Both actions relate primarily to the 1994 performance of and
investment techniques employed in certain fixed income mutual funds offered by
The Managers Funds. The Parent served as a consultant to The Managers Funds,
L.P., the investment adviser to The Managers Funds.
OTHER INFORMATION
Inquiries and requests for the Statement of Additional Information
should be directed to EAI Securities Inc., 200 Connecticut Avenue, Suite 700,
Norwalk, Connecticut 06854-1958 or (203) 855-2200.
<PAGE>
[BACK COVER OF PROSPECTUS]
[COMPASS GRAPHIC] EAI SELECT
EAI Select Managers Equity Fund
EAI Securities Inc.
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
[The text of this back cover is set forth in the bottom left hand corner of the
page. On the right hand side of the page there is a picture of a compass
sitting on a group of stock certificates. No issuer is disclosed on any of the
stock certificates.]
<PAGE>
-1-
EAI SELECT MANAGERS EQUITY FUND
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 30, 1996
200 Connecticut Avenue, Suite 700, Norwalk, Connecticut 06854- 1958
(203) 855-2200
Shareholder Services (800) 798-8055
This Statement of Additional Information relates to the EAI Select
Managers Equity Fund (the "Fund"). This Statement of Additional Information is
not a prospectus; it should be read in conjunction with the Prospectus of the
Fund dated September 30, 1996, copies of which may be obtained without charge
by contacting EAI Securities Inc. at 200 Connecticut Avenue, Suite 700,
Norwalk, Connecticut 06854-1958, (203) 855-2200.
This Statement of Additional Information is authorized for distribution
to prospective investors only if preceded or accompanied by an effective
prospectus.
<PAGE>
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS AND OPERATING POLICIES ...............1
PORTFOLIO TURNOVER ...........................................3
TRUSTEES AND OFFICERS ........................................3
CONTROL OF THE FUND ..........................................6
INVESTMENT ADVISORY AND OTHER SERVICES .......................7
TRANSACTIONS IN PORTFOLIO SECURITIES ........................11
SHARES OF THE FUND ..........................................13
PURCHASE AND PRICING ........................................13
FEDERAL INCOME TAX STATUS ...................................14
PERFORMANCE DATA ............................................17
FINANCIAL STATEMENTS ........................................17
<PAGE>
-1-
INVESTMENT RESTRICTIONS AND OPERATING POLICIES
Except as described below, the following investment restrictions are
fundamental and may not be changed without the approval of a majority of the
outstanding voting securities of the Fund, as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund may not:
1. Invest in securities of any one issuer (other than securities
issued by the U.S. Government, its agencies and instrumentalities), if
immediately after and as a result of such investment the current market value
of the holdings of its securities of such issuer exceeds 5% of its total
assets.
2. Invest more than 25% of the value of its total assets in the
securities of companies primarily engaged in any one industry (other than the
United States Government, its agencies and instrumentalities). Such
concentration may occur incidentally as a result of changes in the market value
of portfolio securities, but such concentration may not result from investment.
Neither finance companies as a group nor utility companies as a group are
considered a single industry for purposes of this restriction. (Unless
otherwise provided, for purposes of this restriction, the term "industry" shall
be defined by reference to the Securities and Exchange Commission ("SEC")
Industry Codes set forth in the Directory of Companies Required to File Annual
Reports with the Securities and Exchange Commission.)
3. Acquire more than 10% of the outstanding voting securities of
any one issuer.
4. Borrow amounts in excess of 33 1/3% of its total assets taken at
cost or at market value, whichever is lower. It may borrow only from banks as
a temporary measure for extraordinary or emergency purposes. It will not
mortgage, pledge or in any other manner transfer any of its assets as security
for any indebtedness.
5. Invest more than 15% of the value of its net assets in illiquid
instruments including, but not limited to, securities for which there are no
readily available market quotations, dealer (OTC) options, assets used to cover
dealer options written by it, repurchase agreements which mature in more than 7
days, variable rate industrial development bonds which are not redeemable on 7
days demand and investments in time deposits which are non-negotiable and/or
which impose a penalty for early withdrawal.
6. Invest in companies for the purpose of exercising control or
management.
7. Purchase or sell real estate; provided, however, that it may
invest in securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein.
8. Purchase or sell physical commodities, except that the Fund may
purchase or sell options and futures contracts thereon (subject to Board of
Trustees approval).
9. Engage in the business of underwriting securities issued by
others.
10. Participate on a joint or a joint and several basis in any
trading account in securities. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under the
management of any Subadviser in order to save brokerage costs or to average
prices shall not be considered a joint securities trading account.
11. Make loans to any person or firm; provided, however, that the
making of a loan shall not be construed to include (i) the acquisition for
investment of bonds, debentures, notes or other evidences or indebtedness of
any corporation or government entity which are publicly distributed or of a
type customarily purchased by institutional investors (which are debt
securities, generally rated not less than Baa by Moody's or BBB by Standard and
Poor's (although convertible securities may have lower ratings), privately
issued and purchased by such entities as banks, insurance companies and
investment companies), or (ii) the entry into "repurchase agreements."
12. Purchase the securities of other investment companies except
where no underwriter or dealer's commission or profit, other than customary
broker's commission, is involved and only if immediately thereafter not more
than (a) 3% of such company's total outstanding voting stock is owned by the
Fund, (b) 5% of the Fund's total assets, taken at market value, would be
invested in any one such company or (c) 10% of the Fund's total assets, taken
at market value, would be invested in all such securities (except for mergers
of investment companies).
13. Purchase from or sell portfolio securities to its officers,
Trustees or other "interested persons" (as defined in the 1940 Act) of the
Fund, including the Subadvisers and their affiliates, except as permitted by
the 1940 Act and except for the purchase of the Fund's initial assets from
certain investors in The EAI Small Managers Equity Fund Trust.
14. Purchase or retain the securities of an issuer if, to the Fund's
knowledge, one or more of the Trustees or officers of the Fund, or the Manager
or a Subadviser or their directors or officers, individually own beneficially
more than 1/2 of 1% of the securities of such issuer and together own
beneficially more than 5% of such securities.
15. Issue senior securities.
16. Invest more than 35% of its total assets in securities which are
not equity securities; provided, however, that the Fund may at times for
defensive purposes temporarily place all or a portion of its assets in cash,
short-term commercial paper, U.S. government securities, high quality debt
securities and obligations of banks when, in the judgment of the Manager or a
Subadviser, such investments are appropriate in light of economic or market
conditions.
In addition to the foregoing investment restrictions which may not be
changed without Shareholder approval, the Fund is subject to the following
operating policies which may be amended by the Fund's Board of Trustees (the
"Trustees"). Pursuant to these operating policies, the Fund may not:
1. Invest in real estate limited partnership interests.
2. Invest in oil, gas or mineral leases.
3. Invest more than 5% of its net assets in warrants or rights,
valued at the lower of cost or market, or invest more than 2% of its net assets
in warrants or rights (valued on the same basis) which are not listed on the
New York or American Stock Exchanges.
4. Purchase or sell a futures contract or an option thereon.
5. Purchase securities on margin, except for such short-term
credits as are necessary for clearance of portfolio transactions.
6. Effect short sales of securities.
7. Purchase or sell put or call options.
8. Purchase or sell mortgage-backed debt securities.
9. Borrow cash in amounts in excess of 5% of its total assets taken
at cost or at market value, whichever is lower, except for temporary purposes.
PORTFOLIO TURNOVER
Generally, the Fund purchases securities for investment purposes and
not for short-term trading profits. However, the Fund expects to engage in a
substantial number of portfolio transactions and may dispose of securities
without regard to the timing of such a disposition if, for defensive or other
purposes, such a disposition is, in the opinion of the Subadvisers, in the
best interest of the Fund. It is estimated that the Fund's portfolio turnover
rate will not exceed 200% in any year.
TRUSTEES AND OFFICERS
The Fund is governed by the Trustees, who make broad policy decisions
and exercise general supervision over the operation of the Fund. The Trustees
and officers of the Fund are listed below, together with any family
relationships between such Trustees and officers (Trustees and officers who are
"interested" persons of the Fund are indicated by an asterisk (*); Trustees who
are members of the Fund*s Executive Committee, which, under the Fund*s
bylaws, has the authority to conduct the current and ordinary business of the
Fund while the Board of Trustees is not in session, are indicated by a cross
(+)):
<TABLE>
<CAPTION>
(1) (2) (3)
Name, Address Position with Principal Occupation During
and Age Fund Past Five Years
<S> <C> <C>
Phillip N. Maisano*+ Trustee and Chief Executive Officer and President,
200 Connecticut Avenue, President Evaluation Associates, Inc., an investment
Suite 700 consulting and management company (1990-
Norwalk, CT 06854-1958 1991); Chief Executive Officer,
49 years of age President and Director of Evaluation
Associates Holding Corporation
("Holding"), which is the general partner of
EAI Partners, L.P., an investment consulting
and management company and
parent of the Manager, as defined below (the
"Parent"); Vice Chairman, Chief
Executive Officer and Director of Evaluation
Associates Capital Markets,
Incorporated (the "Manager"), an investment
management and consulting
company and investment adviser to the Fund;
Chairman and Director of EAI
Securities Inc. (the "Distributor"), a
registered broker/dealer and the distributor
for the Fund.
Keith Stransky* Trustee and Senior Vice President, Evaluation Associates,
200 Connecticut Avenue, Senior Vice Inc. (1990-1991); Senior Vice
Suite 700 President President of Holding; Senior Vice President
Norwalk, CT 06854-1958 of the Manager.
45 years of age
Neal Jewell Trustee Director of Overseas Pensions, AIG, a global
355 Thornridge Drive financial services company (1990-1991);
Stamford, CT 06903 Executive Vice President, AIGAM, a division
61 years of age of AIG and a registered
investment advisor (1991-1994);
retired/part-time independent consultant.
James Schuppenhauer+ Trustee Associate Vice President Auxiliary Services,
Belmont Abbey College Old Dominion University (1978-
100 Belmont Mt. Holly Road 1992); Vice President Administration and
Belmont, NC 28012 Finance, Belmont Abbey College.
53 years of age
Charles Collard Trustee Vice President, Associated Aviation
51 JFK Parkway Underwriters, an aviation insurance company.
Short Hills, NJ 07078
63 years of age
Peter Gwiazdowski* Treasurer Employed in Corporate Treasury and Corporate
200 Connecticut Avenue Accounting by FKI Industries,
Suite 700 Inc. (1978-1993); Self-employed as Certified
Norwalk, CT 06854-1958 Public Accountant (1993-1994);
42 years of age Employed in Corporate Treasury by Dunhill
Temporary Systems (1994); Vice
President and Treasurer of the Manager.
William C. Crerend* Vice President Lawyer with Hughes Hubbard & Reed (1988-
200 Connecticut Avenue 1993); Self-employed as Consultant (1993-
Suite 700 1994); Consultant for the Manager (1994);
Norwalk, CT 06854-1958 Senior Vice President and General Counsel of
34 years of age the Manager; Vice President
and General Counsel of the Parent; Senior
Vice President and General Counsel of and
Agent for the Distributor.
Elke Bartel* Secretary Secretary of the Manager and the Distributor;
200 Connecticut Avenue Senior Vice President,
Suite 700 Secretary and Treasurer of the Parent.
Norwalk, CT 06854-1958
53 years of age
Thaddeus M. Leszcynski Assistant Vice President and Secretary of investment
99 Park Avenue Secretary companies advised by Van Eck Associates
New York, NY 10016 Corporation and Vice President and General
48 years of age Counsel of Van Eck Associates
Corporation and Van Eck Securities
Corporation.
</TABLE>
As indicated above, certain of the Trustees and officers of the Fund hold
positions with the Distributor, the Manager and the Parent, the direct parent
of the Manager. All Trustees and officers as a group own less than 1% of the
outstanding shares of the Fund on the date of this Statement of Additional
Information.
The Trustees of the Fund who are not "interested" persons of the Fund
(as defined in the 1940 Act) each receive an annual retainer of $5,000. No
Trustee or executive officer of the Fund or any affiliated person of the Fund
will receive annual compensation from the Fund in excess of $60,000.
<TABLE>
<CAPTION>
| (1) | (2) | (3) | (4) | (5) |
| Name of Person, |Aggregate Compensation |Pension or Retirement | Estimated Annual |Total Compensation From |
| Position | From the Fund | Benefits Accrued as | Benefits Upon |the Fund and Fund Complex|
| | |Part of Fund Expenses | Retirement | Paid |
| | | | | to Trustees |
<S> <C> <C> <C> <C>
|P.N. Maisano Trustee | $0 | $0 | $0 | $0 |
|and | | | | |
|President | | | | |
|K. Stransky Trustee | $0 | $0 | $0 | $0 |
|and | | | | |
|Senior Vice President | | | | |
|Neal Jewell Trustee | $5,000 | $0 | $0 | $5,000 |
|James Schuppenhauer | $5,000 | $0 | $0 | $5,000 |
|Trustee | | | | |
|Charles Collard | $5,000 | $0 | $0 | $5,000 |
|Trustee | | | | |
</TABLE>
The information set forth in the above table is estimated for the
current fiscal year, which is the Fund's first year of operation.
CONTROL OF THE FUND
As of July 15, 1996, the following persons or entities beneficially
owned, directly or indirectly, or through one or more controlled companies,
more than 25 percent of the Fund*s outstanding Shares or otherwise controlled
the Fund:
<TABLE>
<CAPTION>
Percentage of
Name and Fund's Shares State of Parent of
Address Owned Organization Entity
<C> <C> <C> <C>
Covington & Burling Retirement 39% DC N/A
Savings Plan
1201 Pennsylvania Avenue NW
P.O. Box 7566
Washington, DC 20044-7566
</TABLE>
As a result of their ownership of the Fund*s Shares, the Shareholders
listed above could effectively control the outcome of a Shareholder vote for
the Fund. The impact of this control is significantly lessened, however,
because the Fund does not expect to hold annual Shareholders* meetings and
because the Manager, subject to the oversight of the Trustees, and not the
Shareholders, is responsible for the selection and supervision of the Fund*s
Subadvisers (as defined below). As noted in the Prospectus, however, the
Trustees of the Fund are required to call a special meeting of the Shareholders
of the Fund upon written request of the holders of at least 10% of the
outstanding Shares of the Fund, and the Shareholders may terminate the Manager
or any Subadviser at such a meeting.
As of July 15, 1996, the following persons or entities owned,
beneficially or of record, 5 percent or more the Fund*s outstanding Shares:
<TABLE>
<CAPTION>
| | PERCENTAGE | |
| | FUND*S | OWNED OF RECORD, |
| NAME & ADDRESS | SHARES OWNED |BENEFICIALLY OR BOTH |
<S> <C> <C>
|Covington & Burling Retirement Savings Plan | 39% |Owned of Record and Beneficially|
|1201 Pennsylvania Avenue NW | | |
|P.O. Box 7566 | | |
|Washington, DC 20044-7566 | | |
|Retirement Plan for Partners and Employees of | 9% |Owned of Record and Beneficially|
|Day, Berry & Howard | | |
|CityPlace | | |
|Hartford, CT 06103 | | |
|Marine Midland Bank, Trustee for | 7% |Owned of Record |
|Genesee Corp Profit Sharing Plan | |(MMB) and |
|P.O. Box 1329 | |Beneficially (GCPSP) |
|Buffalo, NY 14240-1329 | | |
|Friendly Ice Cream Corp Employee Savings & | 7% |Owned of Record and Beneficially|
|Investment Plan | | |
|1855 Boston Rd. | | |
|Wilbraham, MA 01095-1002 | | |
|Evaluation Associates 401K Plan | 6% |Owned of Record and Beneficially|
|200 Connecticut Avenue | | |
|Norwalk, CT 06854-1940 | | |
|Harding Service Corporation et al Profit | 6% |Owned of Record and Beneficially|
|Sharing Plan & Trust | | |
|330 South Street | | |
|P.O. Box 1975 | | |
|Morristown, NJ 07962-1975 | | |
</TABLE>
All Trustees and officers as a group owned less than 1% of the
outstanding Shares of the Fund on the date of this Statement of Additional
Information.
INVESTMENT ADVISORY AND OTHER SERVICES
Background
The Fund is governed by the Trustees, who are generally responsible for
the broad supervision and overall direction of the Fund. The Fund has engaged
the Manager, as the investment adviser and administrative manager of the Fund.
The assets of the Fund are managed by asset managers (the "Subadvisers"), who
are selected by the Manager, subject to the oversight of the Trustees. The
Manager also handles the day-to-day administration of the Fund, which function
has, in part, been contracted out to a third party administrator, as
discussed herein.
The Manager selects the Subadvisers and allocates assets of the Fund to
the Subadvisers based on its continuing qualitative and quantitative assessment
of the Subadvisers' skills in managing assets. Unlike many other mutual funds,
the Fund does not depend upon the talents of one investment advisor. Rather,
the Manager selects multiple portfolio managers to manage the assets of the
Fund and allocates the assets among those managers, thereby achieving a
diversity in expertise and investment style that would not be possible if the
Fund had only one investment manager.
The Manager, the Parent and their predecessors together have more than
twenty years of experience in evaluating investment advisers for individual and
institutional investors.
The Manager allocates the assets of the Fund to the specific
Subadvisers. Each Subadviser has discretion, subject to oversight by the Board
of Trustees and the Manager, to purchase and sell portfolio assets consistent
with the objectives and policies set forth in its particular sub-advisory
agreement and established for it by the Manager. The Manager is paid
a management fee by the Fund for its services, and a certain portion of that
management fee (as set forth below) is forwarded to the Subadvisers as
compensation for their services.
While the Subadvisers are required to make investment decisions for the
Fund independent of any decisions being made for their other clients, those
Subadvisers are likely at times to make similar investment decisions for both
the Fund and their other clients. When a Subadviser makes simultaneous
purchases or sales of securities for both the Fund and one or more of its other
clients, the transactions are, to the extent practicable, averaged as to price
and allocated as to amount between the Fund and the other clients. In some
cases, this averaging and allocation could have a detrimental effect on the
price or volume of a security in a particular transaction as far as the Fund is
concerned, but the Trustees believe that, over time, the ability of the Fund to
participate in large volume transactions should be advantageous to the Fund.
None of the Subadvisers provide any services to the Fund other than
pursuant to their sub-advisory agreements and except that a Subadviser or its
affiliated broker-dealer may execute transactions for the Fund and receive a
brokerage commission in connection therewith. In addition, a Subadviser may
serve as a discretionary or non-discretionary investment adviser to one or more
clients of the Manager and its affiliates and to accounts that are not related
to the Manager or its affiliates. Each sub-advisory agreement requires the
Subadviser to act fairly and equitably in selecting investments and allocating
investment opportunities, but no Subadviser is required to provide the Fund
with preferential treatment.
The Manager and the Subadvisers
The Manager is a wholly owned subsidiary of the Parent, which in turn
is owned by its employees and certain non-employee investors. Holding is the
general partner of the Parent. No entity owns more than 25% of the equity in
the Parent. As a whole, the employees of the Parent and its subsidiaries own
in excess of 25% of the equity in the Parent. The following persons are
affiliated with both the Manager and the Fund: Messrs. Maisano, Stransky,
Crerend and Gwiazdowski and Ms. Bartel.
Dietche & Field Advisers, Inc. is currently owned by its employees,
none of whom exercises control over that firm.
Liberty Investment Management (formerly Eagle Asset Management) is
currently controlled by Herbert E. Ehlers, the owner of that firm.
Iridian Asset Management LLC is controlled by Harold Levy and David
Cohen.
Bennett Lawrence Management, LLC is controlled by S. Van Zandt
Schreiber, the majority owner of that firm.
Equinox Capital Management, Inc. is controlled by Ronald J. Ulrich, the
majority owner of that firm.
The Management Agreement
The Fund has entered into a Management Agreement (the "Management
Agreement") with the Manager, and the Manager has entered into Sub-advisory
Agreements with each of the Subadvisers. Under the Management Agreement, the
Manager (i) selects, evaluates and terminates the Subadvisers and allocates the
assets of the Fund among the Subadvisers, (ii) supervises the general
investment of Fund assets, (iii) establishes the broad investment strategies
for the Fund and (iv) provides the Fund with certain financial, accounting and
statistical information for the Fund's prospectuses and registration
statements.
Under the Management Agreement, the Manager receives 0.92% per annum of
the average of the daily net asset value of the Fund. From this amount, the
Manager pays the following amounts to each of the Subadvisers (expressed as a
per annum percentage of the average of the monthly net asset value of the
assets of the Fund managed by such Subadvisor):
Dietche & Field Advisers, Inc. - .375%
Liberty Investment Management - .375%
Iridian Asset Management LLC - .375%
Bennett Lawrence Management, LLC - .375%
Equinox Capital Management, Inc. - .375%
The amount of the management fee that will be retained by the Manager
may vary according to the allocation of Fund assets among the Subadvisers. It
is presently estimated that, in the first fiscal year of the Fund, the Manager
will pay approximately 41% of the management fee it receives under the
Management Agreement to the Subadvisers and will retain approximately 59% of
that fee for itself, assuming the Manager's cap on its management fee in the
first year of the Fund's operations does not impact these percentages.
The Management Agreement has a one-year term, with successive one-year
extensions if approved by the Trustees or the holders of a majority of the
outstanding Shares and by a majority of the Trustees who are not "interested
persons" of the Manager under the 1940 Act. Any amendment to the Management
Agreement requires the approval of the holders of a majority of the outstanding
Shares and of the Trustees. The Management Agreement may be terminated at any
time, without penalty, by the Trustees or the holders of a majority of the
outstanding Shares upon not more than 60 days written notice to the Manager.
The Management Agreement will terminate automatically if it is assigned by the
Manager.
Each Sub-advisory Agreement also has a one-year term, with successive
one-year extensions if approved by the Manager, the Trustees, and a majority of
the Trustees who are not "interested persons" of the appropriate Subadviser.
Any amendment to a Sub-advisory Agreement requires the approval of the Manager
and the Trustees. The Manager may terminate any Sub-advisory Agreement without
penalty at any time, subject to the approval of the Trustees. Each Sub-
advisory Agreement will also terminate automatically if it is assigned
unless the Manager and the Trustees agree to continue such agreement.
Voluntary Fee Waivers and Expense Limitations
The Manager may from time to time, but is not required to, waive all or
a portion of the management fee due to it under the Management Agreement. Any
voluntary fee waiver by the Manager may be terminated or reduced at any time in
the sole discretion of the Manager. Shareholders will be notified of any
changes in such fee waivers at the time they become effective. The Manager has
committed to waive a portion of its fee for the first year of operation of the
Fund (which ends on January 2, 1997) to the extent necessary to cap overall
annual Fund expenses at 1.15% of the average of the daily net asset value of
the Fund.
Administrative Services and Distribution Arrangements
The Fund has retained Van Eck Associates Corporation to perform
administrative and accounting functions for it. These functions will include
certain legal, accounting, regulatory and compliance services, state
registration services, corporate secretary and board of trustees
administration, tax compliance services and reporting. Van Eck Associates
Corporation receives an annual fee, payable monthly, at a per annum percentage
of the average daily net asset value of the assets of the Fund. The annual fee
is graduated, beginning at .20% of the average daily net assets of the Fund if
such assets during the month the fee is calculated are less than $100 million
and ending at .12% of the average daily net assets of the Fund if such
assets during the month the fee is calculated are equal to or more than $260
million. There is a minimum annual fee of $100,000 payable to Van Eck
Associates Corporation.
The Distributor, a wholly owned subsidiary of the Parent, serves as
distributor in connection with the offering of the Shares and acts as agent in
arranging the sale of the Shares. The Distributor or its affiliates (other than
the Fund) bear the expenses associated with the distribution of the Shares,
including all advertising and promotion expenses.
Custodian, Transfer Agent, Independent Accountants and Counsel.
Boston Safe Deposit and Trust Company, One Boston Place, Boston,
Massachusetts 02108, (the "Custodian") acts as custodian for the Fund and is
responsible for (i) holding all cash assets and portfolio securities of the
Fund, (ii) releasing and delivering the Fund's securities as directed by the
Fund or the Subadvisers, (ii) collecting all dividends, distributions
and other payments due to the Fund, and (iv) making all payments due from the
Fund. The Custodian is authorized to deposit securities in securities
depositories or to use the services of sub-custodians to the extent permitted
by and subject to the regulations of the Securities and Exchange Commission.
DST Systems, Inc., 1004 Baltimore, Kansas City, Missouri 64105-1802,
serves as transfer, dividend disbursing and shareholder servicing agent for the
Fund.
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, are the independent accountants for the Fund.
Day, Berry & Howard, as counsel to the Fund, has rendered an opinion on
the validity of the Shares which was filed with the Securities and Exchange
Commission as an exhibit to the Fund's registration statement. Day, Berry &
Howard represents the Parent, the Manager and certain of their affiliates in
matters not related to the Fund. In addition, the Retirement Plan for Partners
and Employees of Day, Berry & Howard, of which certain members of Day, Berry &
Howard are beneficiaries, had invested approximately $8.5 million in the Fund
as of June 30, 1996.
As stated in the Prospectus, the Fund may from time to time enter into
directed brokerage arrangements in which it will direct the brokerage for
certain securities transactions to be entered into by its Subadvisers to a
certain broker-dealer in exchange for that broker-dealer's agreement to pay a
portion of the custodian, transfer agent or other administrative fees
incurred by the Fund. Such directed brokerage arrangements shall not be
effected at any time that the Manager has waived all or a portion of its
management fee under the Management Agreement, in accordance with the
requirements of the 1940 Act and the rules thereunder.
TRANSACTIONS IN PORTFOLIO SECURITIES
Each Sub-advisory Agreement provides that the principal objective of
each Subadviser in executing portfolio transactions is to achieve the best
price and execution available. Most portfolio transactions are expected to be
effected in the primary markets, and in assessing best price and execution, the
Subadvisers are expected to evaluate a number of considerations, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer selected to execute
the transaction and the reasonableness of any commission paid to that broker or
dealer.
As stated in the Prospectus accompanying this Statement of Additional
Information, in certain instances, the Fund may enter into directed brokerage
arrangements in which it will direct the brokerage for certain securities
transactions to be entered into by its Subadvisers to a certain broker-dealer
in exchange for that broker-dealer's agreement to pay a portion of the
custodian, transfer agent or other administrative fees incurred by the Fund.
Directed brokerage transactions will only be executed if, in light of the
offsetting reduction in administrative fees to be incurred by the Fund, they
represent the best execution and price for that transaction or as good
execution and price as would otherwise be available. As stated above, no
directed brokerage arrangement will be effected at any time that the Manager
has waived all or a portion of its management fee.
In addition to the directed brokerage arrangements described above, the
Subadvisers, in assessing best price and execution, are authorized to consider
the "brokerage and research services" (as defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended), statistical quotations
(particularly the quotations necessary to calculate the Fund's net asset
value) and other information provided to the Fund, the Manager or a Subadviser
by a specific broker-dealer. Moreover, the Subadvisers are authorized to
direct the Fund to pay a commission to a broker-dealer that is greater than the
commission which would be paid to another dealer executing the same portfolio
transaction if the Trustees, the Manager or such Subadviser determines in good
faith that the higher commission is reasonable in light of the brokerage and
research services provided by that broker-dealer. It is estimated that in the
first year of the Fund*s operations, 80% to 85% of portfolio transactions for
the Fund (with an aggregate value of $75,000,000) will be directed to broker-
dealers providing research services and that $300,000 in brokerage commissions
shall be paid as a result of those transactions. Approximately 15% to 20% of
portfolio transactions for the Fund in its first year are expected to be
directed to brokers who do not provide research services.
The Trustees from time to time review the brokerage commissions paid by
the Fund to determine whether such commissions are reasonable in light of the
directed brokerage arrangements described above or in light of the brokerage
and research services provided to the Fund by the applicable broker-dealers.
The Subadvisers may receive brokerage and research services from
broker-dealers executing Fund portfolio transactions which primarily benefit
one or more other accounts for which the Subadviser exercises investment
discretion. The fees of the Subadvisers are not reduced by reason of their
receipt of those services.
The Subadvisers generally do not provide services other than investment
management services to the Fund. However, a Subadviser or its affiliated
broker-dealer may execute portfolio transactions for the Fund (either for
transactions managed by it or for transactions managed by another Subadviser)
and may receive a brokerage commission for such transactions in accordance with
Section 17(e) of the 1940 Act and procedures adopted for such transactions by
the Trustees pursuant to rules thereunder. Neither a Subadviser nor its
affiliated broker-dealer may act as a principal in a transaction involving the
Fund.
In allocating portfolio transactions among broker-dealers, a Subadviser
may, but is not required to, consider any sales of Shares of the Fund by a
particular broker-dealer or its affiliate.
For the first six months of the Fund*s operation (through June 30,
1996), brokerage commissions totaled $186,444.
The Fund may purchase securities of its regular broker-dealers or their
parents.
SHARES OF THE FUND
The Fund offers one class of shares of Common Shares (the "Shares").
The Fund does not have any securities other than its Common Shares.
Income dividends will normally be paid on the Shares on an annual basis
in each December. Income dividends will normally be declared on the fourth
business day prior to the end of the dividend period, payable on the following
business day, to Shareholders of record on the day prior to the declaration
date. Distributions of any capital gains are normally paid annually in
December. Unless a Shareholder has elected to receive dividends and
distributions in cash, all dividends and distributions will be reinvested in
additional shares of the Fund (at net asset value at the time of reinvestment).
Any election may be changed at any time by delivering written notice to the Fund
at least ten business days prior to the payment date.
Shares of the Fund are entitled to one vote per share. Shareholders
have the right to vote on the election of the Trustees and on all other matters
on which, by law or by the Fund's Declaration of Trust, they may be entitled to
vote. There are no cumulative voting rights; accordingly, the holders of more
than 50% of the outstanding Shares could elect all of the Trustees. The Fund
is not required, and does not intend, to hold annual meetings of Shareholders
under normal circumstances. The Trustees or the Shareholders may call special
meetings of the Shareholders for action by Shareholder vote, including the
removal of any or all of the Trustees. Trustees will call a special meeting of
Shareholders of the Fund upon written request of the holders of at least 10% of
the outstanding Shares.
The Shares do not have liquidation rights, preemptive rights or the
right to convert to another security. The Shares are not subject to further
calls or to assessments by the Fund.
PURCHASE AND PRICING
Shares in the Fund are offered through the Distributor on a continuous
basis with a minimum initial investment in the Fund of $500,000 and a minimum
additional investment of $1,000, which minimums may be waived by the Fund or
the Manager in certain circumstances. The Shares in the Fund are sold at the
net asset value per share next computed after the purchase order is received in
proper form by the Transfer Agent.
As stated above, the Shares are sold at net asset value per Share for
the date of determination. Net asset value per share is determined as of the
close of business on the New York Stock Exchange, generally 4:00 p.m. New York
time, on each business day. Net asset value per share is equal to the net
worth of the Fund (assets minus liabilities) divided by the number of shares
outstanding. Assets and liabilities are determined in accordance with
generally accepted accounting principles and applicable rules and regulations
of the Securities and Exchange Commission.
Securities held by the Fund which are traded on a national exchange are
valued based on the last quoted sales price on such exchange on or recently
before the valuation date (or if the securities are traded on more than one
exchange on or recently before the valuation date, the principal exchange that
such securities are traded on, as determined by the appropriate Subadviser) or,
if there has been no recent sale of securities, at the last bid price. Over-
the-counter securities for which market quotations are readily available are
valued on the basis of the last sale price or, lacking any sales, at the last
quoted bid price. Securities and other investments for which market quotations
are not readily available are valued at fair value, as determined in good faith
by the appropriate Subadviser and pursuant to procedures established
by the Trustees.
FEDERAL INCOME TAX STATUS
The Fund intends to elect and to qualify each year to be treated as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). In order to qualify as a RIC for any
taxable year, the Code requires that, for that taxable year: (i) at least 90%
of the Fund's gross income be derived from dividends, interest, payments with
respect to securities loans, gains from the disposition of stock, securities
and foreign currencies and other income derived from the Fund's business of
investing in stock, securities and currencies; (ii) less than 30% of the Fund's
gross income be derived from gains from the disposition of stock, securities,
options, futures, forward contracts and certain investments in foreign
currencies held by the Fund for less than three months; (iii) the Fund
distribute at least 90% of its dividend, interest and certain other taxable
income ("Investment Company Taxable Income") and 90% of its net tax-exempt
interest income; (iv) at the end of each fiscal quarter, at least 50% of the
value of the Fund's total assets be maintained in cash, Government securities,
securities of other regulated investment companies and stock or other
securities that represent, with respect to any one issuer, no more than 5% of
the value of the Fund's total assets or 10% of the outstanding voting
securities of such issuer; and (v) at the end of each fiscal quarter, no more
than 25% of the value of the Fund's total assets be invested in the securities
(other than those of the Government or other RICs) of any one issuer, or of two
or more issuers which the Fund controls and which are engaged in the
same, similar or related trades and businesses.
The Fund is subject to Federal income tax as a corporation, but for any
year in which the Fund qualifies as a RIC, it is allowed a deduction based on
dividends paid to Shareholders (other than exempt-interest dividends). If for
any year the Fund does not qualify as a RIC, all of its taxable income for the
year will be subject to Federal income tax without a deduction for dividends
paid to Shareholders, and such distributions will be includable in gross income
by the Shareholders entitled to payment thereof to the extent of the Fund's
current and accumulated earnings and profits. The Fund intends to pay
sufficient dividends to avoid liability for Federal income tax and accordingly
does not expect to incur Federal income tax. It may not, however, be possible
for the Fund to avoid this tax for all taxable years.
If at any time during the last half (July 1 through December 31) of a
taxable year of the Fund more than 50 percent of the Fund*s outstanding Shares
are owned, directly or indirectly, by or for not more than five individuals
(which for purposes of this analysis includes employee pension and benefit
plans like those presently investing in the Fund and certain other entities),
the Fund would be a personal holding company ("PHC") under Subchapter G of the
Code for such taxable year. For any year that the Fund is a PHC and incurs
federal income tax, the Fund will be liable for federal income tax at the
highest rate applicable to corporations. For any year that the Fund is a PHC,
it will also be subject to a 39.6% personal holding company tax (in addition to
any Federal income tax or other taxes to which it may be subject) on any
undistributed personal holding company income. The Fund will be a PHC for its
1996 taxable year. The Fund intends to make sufficient distributions to avoid
liability for personal holding company tax and accordingly does not expect to
incur this tax. It may not, however, be possible for the Fund to avoid this
tax for all taxable years in which it may be a PHC.
If the Fund qualifies as a RIC but does not meet certain distribution
requirements, the Fund will be liable for a 4% non-deductible excise tax on
certain undistributed amounts. The Fund intends to comply with those
distribution requirements and accordingly does not expect to incur this excise
tax. It may not, however, be possible for the Fund to avoid this tax in all
instances.
The Fund may invest in obligations (such as zero coupon bonds) that are
issued with original issue discount ("OID"). OID income is accrued and
included in Investment Company Taxable Income even if the Fund does not receive
any cash from such obligations. Accordingly, the Fund may need to sell some of
its assets in order to satisfy the distribution requirements applicable to
RICs. The Fund may also invest in other investment vehicles, including other
RICs, that in turn invest in stock and other securities issued by foreign
issuers. Dividends and other income derived from such foreign issuers may be
subject to withholding of foreign taxes, which would reduce the amount
ultimately received by the Fund.
Dividends (other than capital gain dividends and exempt-interest
dividends) by the Fund, including those distributing any net short-term capital
gains, to Shareholders subject to Federal income tax thereon will be taxable as
ordinary dividend income. Capital gain dividends (distributed from a year*s
excess of net long-term capital gains over net short-term capital losses) to
Shareholders subject to Federal income tax thereon will be taxable as long-
term capital gains regardless of how long such Shareholders have held their
Shares. These provisions apply regardless of whether dividends are distributed
in cash or Shares. Any loss realized upon the redemption of Shares not more
than six months from the date of acquisition will be treated as a long-term
capital loss to the extent of any capital gain dividends during such six-month
period. No loss will be allowed on the sale or exchange of Shares of the Fund
to the extent the Shareholder acquires (including through an automatic
reinvestment of dividends), or enters into a contract or option to acquire,
other Shares or substantially identical stock or securities within the 61-day
period starting 30 days before the sale or exchange of the loss Shares.
If for any taxable year the Fund complies with certain requirements,
corporate Shareholders may be entitled to a dividends-received deduction for
all, or a portion of, dividends paid by the Fund (other than capital gain
dividends) that are attributable to dividends received by the Fund from
domestic corporations.
Within 60 days of the end of the Fund's taxable year, the Fund will
notify Shareholders of the amounts and tax status of dividends and
distributions from the Fund. Under Federal income tax laws, the Fund must
report to the Internal Revenue Service (the "IRS") all distributions of taxable
income, capital gains and gross proceeds from redemptions received by
all Shareholders not exempt from that requirement. If a Shareholder required
to provide the Fund with its correct taxpayer identification number or required
certification does not do so, or if the IRS notifies the Fund that a
Shareholder may not be in compliance with the backup withholding rules, the
Fund will be required to withhold from such Shareholder's distributions
and redemption proceeds Federal income tax at a rate of 31%, and amounts paid
to the Shareholder will be reduced accordingly.
Dividends and other distributions from the Fund may also be subject to
state and local taxes. Shareholders should consult with their tax advisers
concerning the state and local tax consequences of investing in the Fund.
As stated in the Prospectus, Shares of the Fund may be acquired in
exchange for securities held by an investor which are acceptable to the Fund.
If one or more investors were to effect such an in-kind purchase in exchange
for 80% or more of the Fund's Shares, the Fund's basis for the securities it
accepts from an investor could be that investor's basis therefor, and the
investor's basis for the Fund's Shares acquired in the exchange could be the
investor's basis in the securities exchanged therefor. If that basis is less
than the fair market value of such securities at the time of the exchange, the
potential tax liability of the investor with respect to the sale or other
disposition of the Fund's Shares acquired in the exchange would be increased,
as would the potential tax liability of the Fund or, its Shareholders with
respect to capital gains realized by the Fund in connection with such
securities.
The foregoing is a general and abbreviated discussion of U.S. Federal
income tax consequences of investing in the Fund. Non-U.S. investors should
consult with their tax advisers concerning the tax consequences of owning
shares of the Fund, including the possibility that distributions may be subject
to withholding of Federal income tax at a rate of 30% (or a reduced rate if
provided by treaty). All investors, including any subject to special
income tax treatment applicable to entities of their type, are encouraged to
consult with their tax advisers for more information concerning the Federal,
foreign, state and local tax rules applicable to ownership and disposition of
Shares of the Fund by them.
PERFORMANCE DATA
Total Return Computations
The Fund may include in advertisements or sales literature certain
total return information. For such purposes, total return equals the total of
all income and capital gains paid to holders of Shares of the Fund, assuming
reinvestment of all distributions, plus (or minus) the change in value of the
original investment, expressed as a percentage of the purchase price. For the
period beginning with the commencement of the Fund*s operations on January 2,
1996 and ending on June 30, 1996, the Fund*s average total return was 7.00%.
Volatility Computations
As stated in the Prospectus, the Fund may include in advertisements and
sales literature certain quantifications of the historical volatility of the
performance of the Fund as the standard deviation of such performance.
Standard deviation is calculated using a typical standard deviation formula.
For the period beginning with the commencement of the Fund*s operations on
January 2, 1996 and ending on June 30, 1996, the Fund*s standard deviation was
36.3.
Performance Comparisons
As described in the Prospectus, the Fund may include in advertisements
or sales literature comparisons of Fund performance to the performance of other
mutual funds having similar structures and/or objectives. Such comparisons may
be expressed as a ranking prepared by independent services or publications. In
addition, the Fund's performance may be compared to that of various unmanaged
indices, including the S&P 500 and the NASDAQ Composite.
FINANCIAL STATEMENTS
The following unaudited financial statements for the Fund, each as of,
or for the six-month period ended on, June 30, 1996, each with related
footnotes, are included in the Fund*s Semi-Annual Report to Shareholders for
the six months ended June 30, 1996, filed with the Securities and Exchange
Commission under Section 30(b)(1) of the Investment Company Act of 1940, and
are incorporated herein by reference:
1. Statement of Assets and Liabilities (including specimen price
make-up sheet)
2. Statement of Operations
3. Statement of Cash Flows
4. Statement of Changes in Net Assets
<PAGE>
EAI SELECT MANAGERS EQUITY FUND
SEPTEMBER 30, 1996
200 Connecticut Avenue, Suite 700, Norwalk, Connecticut 06854
(203) 855-2200
PART C
OTHER INFORMATION
Financial Statements and Exhibits
(asterisked (*) items were filed with the original registration
statement; items marked with a cross (+) were filed with the first pre-
effective amendment to the registration statement; items marked with
two asterisks (**) were filed with the first post-effective amendment
to the registration statement.)
(a) Financial Statements
Part A:
Financial Highlights Table
The following unaudited financial statements of the Fund are included
in the Fund*s Semi-Annual Report to Shareholders for the six months
ended June 30, 1996, filed with the Securities and Exchange Commission
under section 30(b)(1) of the Investment Company Act of 1940, and have
been incorporated in Part B by reference:
1. Statement of Assets and Liabilities for the Fund as of June 30,
1996 and related footnotes thereto
2. Statement of Operations for the Fund for the six months ended
June 30, 1996 and related footnotes thereto
3. Statement of Cash Flows for the Fund for the six months ended
June 30, 1996 and related footnotes thereto
4. Statement of Changes in Net Assets for the Fund for the six
months ended June 30, 1996 and related footnotes thereto
(b) Exhibits
*1. Declaration of Trust of the Fund dated September 27, 1995
**a. First Amendment to Declaration of Trust dated December 11,
1995
*2. By-Laws of the Fund
3. Not Applicable
4. Not Applicable
5. +a. Form of Management Agreement between the Fund and
Evaluation Associates Capital Markets, Incorporated, as
Manager (the "Manager")
+b. Form of Sub-advisory Agreement among the Fund, the
Manager and each of Dietche & Field Advisers, Inc.,
Liberty Investment Management and Equinox Capital
Management, Inc.
** c. Form of Sub-advisory Agreement among the Fund, the
Manager and Iridian Asset Management LLC.
** d. Form of Sub-advisory Agreement among the Fund, the
Manager and Bennett Lawrence Management, LLC.
*6. Form of Distribution Agreement between the Fund and EAI
Securities Inc., as Distributor
7. Not Applicable.
+8. Form of Custody Agreement between the Fund and Boston Safe
Deposit and Trust Company, as Custodian
9. +a. Form of Transfer Agency Agreement between the Fund and
DST Systems, Inc., as Transfer Agent
+b. Form of Portfolio Accounting and Administrative Services
Agreement between the Fund and Van Eck Associates
Corporation.
+10. Opinion and Consent of Day, Berry & Howard
11. Not Applicable
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Not Applicable
** 16. Computation of Performance Quotations
** 17. Financial Data Schedule
18. Powers of Attorney for:
Phillip N. Maisano
Keith Stransky
Neal Jewell
James Schuppenhauer
Charles Collard
Peter Gwiazdowski
(see signature page)
Persons Controlled by or Under Common Control with the Fund
None
Number of Holders of Securities
As of June 30, 1996, the Shares of the Fund were held of record by the
number of holders indicated below:
(1)
Title of Class
EAI Select Managers Equity Fund Common Shares
(2)
Number of Record Holders
35
Indemnification
Under Section 4.3 of the Fund's Declaration of Trust, the Fund will
indemnify its Trustees and officers against and hold them harmless from all
liability and expenses reasonably incurred in connection with any claim,
action, suit or proceeding in which they became involved by virtue of having
been a Trustee or officer and all amounts paid or incurred in settlement
thereof. The Fund will not indemnify a Trustee or officer when the loss is due
to willful misconduct, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Trustee's or officer's office.
Under Section 4.3 of the Fund's Declaration of Trust, the Fund has the
power to purchase liability insurance for Shareholders, Trustees, officers,
employees, agents, investment advisers, distributors, selected dealers or
independent contractors of the Trust. The Fund and/or the Manager has
purchased such liability insurance for such persons.
Section 4.1 of the Fund's Declaration of Trust provides, in substance,
that no Shareholder or Trustee shall be personally liable for the Fund's
obligations to third parties.
Business and Other Connections of Investment Advisers
The business and other connections of the officers and directors of
Evaluation Associates Capital Markets, Incorporated (the Fund's Manager) and
each of the Subadvisers are listed in schedules A and D of their respective ADV
Forms as currently on file with the Commission, the texts of which schedules
are incorporated herein by reference. The file numbers of such ADV Forms are
as follows:
Evaluation Associates Capital Markets, Incorporated -- File No. 801-
41771
Dietche & Field Advisers, Inc. -- File No. 801-20033
Liberty Investment Management -- File No. 801-47681
Iridian Asset Management LLC -- File No. 801-50661
Bennett Lawrence Management, LLC -- File No. 801-49805
Equinox Capital Management, Inc. -- File No. 801-34524
Location of Accounts and Records
All accounts and records required to be maintained under Section 31(a)
of the 1940 Act and Rules 31a-1 to 31a-3 promulgated thereunder are maintained
in the following locations;
(a) Records forming the basis for financial statements of the Fund are kept
at the principal offices of the Manager at 200 Connecticut Avenue, Suite 700,
Norwalk, Connecticut 06854-1958.
(b) (1) Journals containing an itemized daily record of all securities
transactions, receipts and disbursements of cash and all other
debits and credits are kept at the principal offices of the
Manager at 200 Connecticut Avenue, Suite 700, Norwalk,
Connecticut 06854-1958 or at the principal offices of the
Custodian at One Boston Place, Boston, Massachusetts 02108.
(2) General and auxiliary ledgers are kept at the principal offices
of the Manager at 200 Connecticut Avenue, Suite 700, Norwalk,
Connecticut 06854-1958.
(3) A securities record or ledger reflecting separately for each
portfolio security as of trade date all "long" and "short"
positions carried by the Fund for its own account and showing
the location of all securities long and the off-setting position
to all securities short is kept at the principal offices of the
Manager at 200 Connecticut Avenue, Suite 700, Norwalk,
Connecticut 06854-1958 or at the principal offices of the
Custodian at One Boston Place, Boston, Massachusetts 02108.
(4) The Fund's Declaration of Trust, By-laws, and minute books are
kept at the principal offices of the Manager at 200 Connecticut
Avenue, Suite 700, Norwalk, Connecticut 06854-1958.
(5) The records of brokerage orders are kept at the principal
offices of the Subadvisers at the addresses listed for them in
the Prospectus.
(6) A record of all other portfolio purchases and sales is kept at
the principal offices of the Manager at 200 Connecticut Avenue,
Suite 700, Norwalk, Connecticut 06854-1958 or at the principal
offices of the Custodian at One Boston Place, Boston,
Massachusetts 02108.
(7) A record of the proof of money balances is kept at the principal
offices of the Manager at 200 Connecticut Avenue, Suite 700,
Norwalk, Connecticut 06854-1958.
(8) A record of the basis for the allocation of brokerage
transactions and brokerage commissions is kept at the principal
offices of the Manager at 200 Connecticut Avenue, Suite 700,
Norwalk, Connecticut 06854-1958 or at the offices of the
Subadvisers at the addresses listed for them in the Prospectus.
(9) A record of the persons authorizing the purchase or sale of
portfolio securities is kept at the principal offices of the
Subadvisers at the addresses listed for them in the Prospectus.
(10) Copies of all advisory materials received from the Manager and
the Subadvisers are kept at the principal offices of the Manager
at 200 Connecticut Avenue, Suite 700, Norwalk, Connecticut
06854-1958 or at the offices of the Subadvisers at the addresses
listed for them in the Prospectus.
(c) Not applicable
(d) The Fund believes that each depositor of the Fund maintains the records
required by Rule 31a-1(d) under the 1940 Act.
(e) Not applicable
(f) The Fund believes that the Manager and each Subadviser maintains the
records required by Rule 31a-1(f) under the 1940 Act.
Management Services
All management related service contracts entered into by or for the
Fund are described in Parts A and B of this Registration Statement.
Undertakings
(a) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue. In addition, no
indemnification shall occur as a result of actions which constitute willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
(b) The Fund will call a meeting of Shareholders, if requested to do so by
holders of at least 10% of the Fund's outstanding Shares, for the purpose of
voting upon the question of removal of a Trustee or Trustees and to assist in
communications with other Shareholders as required by Section 16(c) of the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Norwalk and State of Connecticut on the <^>
26th day of <^> September, 1996.
EAI SELECT MANAGERS EQUITY FUND
By: /s/ William C. Crerend
William C. Crerend
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby constitutes William C. Crerend such person's true and lawful
attorney, with full power to him to sign for such person and in such person's
name and capacity indicated below, and any and all amendments to this
Registration Statement, hereby ratifying and confirming such person's signature
as it may be signed by said attorney to any and all amendments.
* Trustee and <^> September 26, 1996
Phillip N. Maisano President
* Trustee and Senior <^> September 26, 1966
Keith Stransky Vice President
* Trustee <^> September 26, 1996
Neal Jewell
* Trustee <^> September 26, 1996
James Schuppenhauer
* Trustee <^> September 26, 1996
Charles Collard
* Treasurer <^> September 26, 1996
Peter Gwiazdowski
*<^> By /s/ William C. Crerend
Name: William C. Crerend
Title: Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibits
None <^>
