<PAGE>
EAI Select Managers Equity Fund
Review of First Six Months of 1997
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
EAI SELECT MANAGERS EQUITY FUND
The EAI Select Managers Equity Fund returned 16.1% in the first six months; the
second quarter return was an impressive 17.1%. Both the year-to-date and second
quarter results ranked well above the average Morningstar growth fund (13.6%
and 15.6%, respectively). The manager changes made in the third quarter of 1996
and the first quarter of 1997 appear to have worked very well for the Fund.
The sector shifts so far this year have been beneficial to results. Consumer
noncyclicals (1st half: +23.2%; 2nd quarter: +21.4%), whose weighting rose to
22.0% from 10.9%, added considerable value; Pfizer Inc. (+45.0%; +42.5%) led
the sector. Financial (+21.7%; +18.2%), the second largest sector, also at
22.0%, continued the strong performance of the past couple of years. Strong
demand for services/financial planning helped Travelers Group (+39.8%; +31.7%)
and American Express (+32.3%; +24.9%).
The only major laggards were utilities (-1.1%; +9.9%), energy (+3.9%; +8.2%),
and basic industry (+6.4%; +6.8%), which in aggregate comprised just 10.4% of
the portfolio. Low inflation and soft commodity prices, which translate into
lack of earnings visibility, have caused investors to shy away from these
issues.
Please keep in mind that this summary covers only a six-month period. We
encourage all of our shareholders to continue to maintain a longer-term view.
ECONOMIC REVIEW
In the first half of 1997, the S&P 500 rose 20.6%. The index has risen for 10
quarters in a row and the second quarter gain (+17.5%) was the best since the
first quarter of 1987.
Despite showing relative strength in May, small cap stocks lagged large cap
stocks; so far in 1997, the cumulative lag is 1040 basis points. Liquidity,
global reach, and predictability of earnings in an uncertain economic
environment continued to favor the largest companies.
The most significant event of the first half of 1997 occurred in the last week
of March. The Federal Reserve's much-anticipated and long-debated interest rate
hike finally occurred on March 25. In an attempt to slow the economy, and as a
pre-emptive move against inflation, the federal funds rate was raised 0.25% to
5.50%. It was the first change since a 0.25% cut on January 31, 1996 and the
first increase since a 0.50% boost on February 1, 1995. Money center banks
promptly raised their prime lending rate to 8.5% from 8.25%.
Soon after the markets settled down following the March move, speculation began
about the Federal Reserve's May 20th meeting. A surprise to some, the Fed left
rates unchanged. Investors spent the balance of May and June analyzing the
impact of this "non-action" and the probabilities of a move at the next Fed
meeting on July 1 and 2.
Given the sharp rallies in both stocks and bonds, the consensus seemed to
indicate another "no-action" meeting.
Stocks began the year with a strong rally as investors predicted that the
strong earnings gains over the past two years would continue under a scenario
of moderately robust economic growth. Successive all-time records were set with
the S&P 500 crossing the 800 mark and the Dow Jones Industrials surpassing 7000
for the first time. The year-to-date rise of over 10% by mid-February
(revisited in early March), combined with rising interest rates and increased
uncertainty about 1997 earnings, finally encouraged profit-taking which shaved
9.1 percentage points off the gain in just five weeks.
Benign inflation reports, higher bond prices, and better than expected earnings
from Microsoft, 3M, IBM, and the pharmaceuticals helped reverse the
<PAGE>
EAI Select Managers Equity Fund
- --------------------------------------------------------------------------------
damage. Also helping to boost stocks was the prospect of moderate economic
growth, which, when taken together with productivity gains, enhance the ability
of companies to continue to grow earnings over the next few years.
With the exception of a few one to two day declines, the markets surged 22.3%
from April 11th until June 20th, setting 15 new all-time highs along the way;
this was the best 10-week period since 1982. A bout of profit-taking finally
set in as the Fed's early July meeting approached.
For the six months, consumer noncyclical (+28.2%), financial (+23.9%), and
technology (+22.9%) led the advance. Consistency and growth in earnings were
the overriding concern of investors. On the other hand, utilities (+7.0%),
basic industry (+12.1%), and consumer cyclicals (+16.2%) rose less on concerns
that earnings in these more cyclical businesses would not meet expectations.
The attached report provides you with a listing of the investment portfolio,
performance results, and the financial statements as of June 30, 1997. As
always, should you have any questions, please feel free to contact us.
We thank you for your continued confidence in the EAI Select Managers Equity
Fund.
Sincerely,
/s/Phillip Maisano
Phillip Maisano
President
July 25, 1997
<PAGE>
EAI Select Managers Equity Fund Schedule of Investments June 30, 1997
(unaudited)
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
AEROSPACE: 4.7%
1,700 Boeing Co. $ 90,206
7,500 General Dynamics
Corporation 562,500
5,800 General Motors Corp. "H" 334,950
12,300 Lockheed Martin Corp. 1,273,819
7,400 McDonnell Douglas
Corporation 506,900
7,100 Textron Inc. 471,263
7,200 United Technologies Corp. 597,600
-----------
3,837,238
-----------
AIRLINES: 0.2%
1,700 AMR Corp. (DE) 157,250
-----------
AUTOS: 0.9%
6,900 Ford Motor Company 260,475
8,000 General Motors Corp. 445,500
-----------
705,975
-----------
BANKS: 7.7%
3,090 Banc One Corp. 149,672
8,500 BankAmerica Corp. 548,781
10,300 Bank of Boston Corp. 742,244
20,600 Bank of New York Co. Inc. 896,100
1,300 Barnett Banks Inc. 68,250
2,000 Centura Banks Inc. 91,750
3,988 Chase Manhattan Corp. 387,085
6,300 Citicorp 759,544
1,600 First Chicago NBD Corp. 96,800
12,500 MBNA Corp. 457,813
15,100 NationsBank Corp. 973,950
4,500 Wells Fargo & Company 1,212,750
-----------
6,384,739
-----------
BEVERAGES: 1.7%
7,000 Anheuser-Busch Companies,
Inc. 293,563
7,000 Coca-Cola Company 472,500
16,500 Pepsico Inc. 619,781
-----------
1,385,844
-----------
BUILDING/HEAVY CONSTRUCTION: 0.2%
4,000 Foster Wheeler Corp. 162,000
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
CHEMICALS: 2.1%
10,600 Du Pont (E.I.) De Nemours $ 666,475
11,500 PPG Industries, Inc. 668,438
7,900 Union Carbide Corporation
Hldg. Co. 371,794
-----------
1,706,707
-----------
COMPUTER SERVICES/OFFICE EQUIPMENT: 8.4%
7,400 Aspen Technology Inc. 278,425
3,050 CBT Group Plc (ADR) 192,531
1,800 Compaq Computer Corp. 178,650
12,600 First Data Corp. 553,613
9,500 Hewlett-Packard Co. 532,000
22,800 International Business
Machines Corp. 2,056,256
4,000 Microsoft Corp. 505,500
10,000 Novell Inc. 69,375
6,000 Oracle Corp. 302,250
6,500 Saville Systems Ireland
Plc. (ADR) 338,000
2,800 Seagate Technologies Inc. 98,525
6,000 Security Dynamics
Technologies, Inc. 221,250
1,800 Sterling Commerce Inc. 59,175
7,400 Sun Microsystems Inc. 275,419
8,000 Western Digital Corp. 253,000
11,900 Xerox Corp. 938,613
-----------
6,852,582
-----------
DRUGS: 6.7%
8,000 Abbott Laboratories 534,000
4,000 American Home Products
Corp. 306,000
8,900 Bristol-Myers Squibb 720,900
8,000 Johnson & Johnson 515,000
4,000 Lilly (Eli) & Co. 437,250
4,500 Merck & Co. 465,750
9,100 Pfizer Inc. 1,087,450
20,600 Schering-Plough 986,225
2,500 Teva Pharmaceutical 161,875
2,000 Warner-Lambert Co. 248,500
-----------
5,462,950
-----------
ELECTRIC UTILITIES: 1.3%
7,600 AES Corp. 537,700
5,800 Edison International 144,275
4,900 Entergy Corporation 134,138
4,400 Potomac Electric Power
Company 101,750
10,700 Wheelabrator Technologies,
Inc. 165,181
-----------
1,083,044
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Schedule of Investments June 30, 1997
(continued)
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT: 1.1%
18,700 Cooper Industries Inc. $ 930,325
-----------
ELECTRONICS: 3.1%
4,000 Applied Materials Inc. 283,250
6,500 Honeywell Inc. 493,188
4,200 Intel Corp. 595,613
6,000 LSI Logic Corp. 192,000
7,500 Qlogic Corp. 191,250
5,100 Rockwell International
Corp. 300,900
7,500 Semtech Corp. 273,750
5,000 Smart Modular Technologies
Inc. 168,750
-----------
2,498,701
-----------
FABRICATING COMPONENTS: 0.4%
10,000 Libbey Inc. 350,000
-----------
FINANCIAL SERVICES: 6.3%
4,200 Ahmanson (HF) & Co. 180,600
17,800 American Express Company 1,326,100
3,700 Capital One Financial Corp. 139,675
17,000 Federal Home Loan Mortgage
Corp. 584,375
17,400 Federal National Mortgage
Assoc. 759,075
3,900 Household International
Inc. 458,006
24,900 Morgan Stanley, Dean
Witter, Discover and Co. 1,072,256
3,100 Salomon, Inc 172,438
10,000 Schwab (Charles) Corp. 406,875
-----------
5,099,400
-----------
FOOTWEAR: 0.6%
9,000 Nike Inc. 525,375
-----------
HOSPITAL SUPPLY: 2.0%
5,500 Baxter International, Inc. 287,375
27,300 Becton Dickinson & Company 1,382,063
-----------
1,669,438
-----------
HOTELS AND RESTAURANTS: 3.0%
3,500 Brinker International, Inc. 49,875
17,400 HFS Inc. 1,009,200
7,400 Host Marriott Corp. 131,813
16,300 Marriott International Inc. 1,000,413
6,750 Promus Hotel Corp. 261,563
-----------
2,452,864
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
INSTRUMENTATION: 0.3%
3,000 Perkin-Elmer Corp. $ 238,688
-----------
INSURANCE: 7.2%
4,000 Ace Limited 295,500
2,100 Aetna Inc. 214,988
14,600 Allstate Corp. 1,065,800
4,200 AMBAC Inc. 320,775
7,200 Chubb Corp. 481,500
5,100 General Re Corporation 928,200
4,900 Hartford Finl. Svcs. Group
Inc. 405,475
4,000 Healthcare Comp. Corp. 209,500
10,900 Nationwide Finl. Svcs.
Group Inc. 289,531
2,400 SunAmerica Corp. 117,000
6,200 TransAmerica Corp. 580,088
16,800 Travelers Group Inc. 1,059,450
-----------
5,967,807
-----------
LEISURE: 0.6%
4,000 Carnival Corp. "A" 165,000
5,000 Circus Circus Enterprises,
Inc. 123,125
7,000 Westwood One Inc. 225,750
-----------
513,875
-----------
MACHINERY--AUTO/CONSTRUCTION: 0.5%
1,700 Caterpillar Inc. 182,538
7,000 McDermott Int'l Inc. 204,313
-----------
386,851
-----------
MEDIA: 8.3%
6,000 Belo (A.H.) Corp. Series A 249,750
2,000 Central Newspapers 143,250
7,900 Disney (Walt) Co. 633,975
6,000 Gannett Company Inc. 592,500
18,075 Gaylord Entertainment
Company "A" 416,855
12,000 Golden Books Family
Entertainment Inc. 150,000
20,750 Jacor Communications 793,688
18,000 New York Times-Class "A" 891,000
22,000 Tele-Communications TCI
Group "A" 327,250
32,250 Tele-Comm. Liberty Media
Group 765,938
9,500 Time Warner Inc. 458,375
12,300 Tribune Company 591,169
27,600 U.S. West Media Group 558,900
10,700 Valassis Communications,
Inc. 256,800
-----------
6,829,450
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Schedule of Investments June 30, 1997
(continued)
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
MEDICAL SERVICES: 2.7%
11,000 Beverly Enterprises $ 178,750
13,800 Columbia/HCA Healthcare
Corp. 542,513
15,000 Health Management
Associates, Inc. 427,500
8,000 HealthSouth Corp. 199,500
5,000 Manor Care Inc. 163,125
4,000 Quorum Health Group Inc. 143,000
5,000 Sybron International Corp. 199,375
6,000 Tenet Healthcare Corp. 177,375
4,400 Vencor Inc. 185,900
-----------
2,217,038
-----------
METALS: 0.2%
2,100 Reynolds Metals Co. 149,625
-----------
MULTI-INDUSTRY: 1.2%
8,700 Allied-Signal Inc. 730,800
3,400 General Electric Co. 222,275
-----------
953,075
-----------
OIL INTERNATIONAL: 2.7%
3,300 Amerada Hess Corp. 183,356
1,600 Amoco Corp. 139,100
2,500 Atlantic Richfield Company 176,250
4,400 Baker Hughes Inc. 170,225
2,300 British Petroleum Plc.
(ADR) 172,213
3,400 Exxon Corp. 209,100
1,800 Mobil Corp. 125,775
4,000 Nuevo Energy Co. 164,000
9,000 Pride Petroleum Svcs. Inc. 216,000
7,300 Seagull Energy Group 127,750
4,000 St. Mary Land & Explor. Co. 140,500
7,300 Stone Energy Group 199,838
1,600 Texaco Inc. 174,000
-----------
2,198,107
-----------
PACKAGED FOOD: 3.1%
9,000 Campbell Soup Company 450,000
10,000 Hershey Foods Corp. 553,125
7,000 Quaker Oats Company 314,125
3,100 Sara Lee Corp. 129,038
16,500 Wrigley (Wm.) Jr. Company 1,105,500
-----------
2,551,788
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
PAPER: 1.7%
4,900 James River Corp. of
Virginia $ 181,300
22,300 Kimberly-Clark Corp. 1,109,425
1,400 Mead Corp. 87,150
-----------
1,377,875
-----------
PERSONAL SERVICES: 1.4%
6,600 Apollo Group Inc. "A" 232,650
8,000 Robert Half International,
Inc. 376,500
15,800 Service Corp. 519,425
-----------
1,128,575
-----------
PHOTO EQUIPMENT/SUPPLIES: 0.5%
5,800 Eastman Kodak Company 445,150
-----------
PRINTING/PAPER PRODUCTS: 0.3%
5,200 Avery Dennison Corp. 208,650
-----------
REAL ESTATE: 0.2%
5,900 Manufactured Home
Communities, Inc. 136,069
-----------
RETAIL--GENERAL MERCHANDISE: 1.1%
3,700 Dayton Hudson Corp. 196,794
4,000 Kohl's Corp. 211,750
2,000 Sears Roebuck & Company 107,500
10,700 Wal-Mart Stores 361,794
-----------
877,838
-----------
RETAIL--SPECIALTY: 1.9%
5,785 Archer-Daniels Midland Co. 135,948
7,000 Bed Bath & Beyond, Inc. 212,625
10,000 Friedman's Inc. 228,750
5,000 OfficeMax Inc. 72,188
3,700 Safeway Inc. 170,663
4,000 Tiffany & Co. 184,750
6,100 Walgreen Co. 327,113
3,500 Whirlpool Corp. 190,969
-----------
1,523,006
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Schedule of Investments June 30, 1997
(continued)
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
SOAP AND COSMETICS: 2.6%
6,700 Avon Products Inc. $ 472,769
4,000 Clorox Co. 528,000
11,500 Gillette Co. 1,089,625
-----------
2,090,394
-----------
TELEPHONE/COMMUNICATIONS: 3.2%
4,450 Advanced Fibre Comm. Inc. 268,669
8,300 Airtouch Communications
Inc. 227,213
4,300 AT&T Corp. 150,769
2,000 Bell Atlantic Corp. 151,750
400 BellSouth Corp. 18,550
5,200 MCI Communications 199,063
8,000 Newbridge Networks Corp. 348,000
2,500 SBC Communications Inc. 154,688
10,600 Sprint Corp. 557,825
7,400 Symmetricom Inc. 106,375
7,200 Telephone & Data Systems,
Inc. 273,600
5,700 WorldCom Inc. 182,400
-----------
2,638,902
-----------
TOBACCO: 0.9%
16,200 Philip Morris Companies,
Inc. 718,875
-----------
TRANSPORTATION: 2.6%
8,900 Burlington Northern Santa
Fe 799,889
7,400 Heartland Express 173,900
4,000 Ryder Systems Inc. 132,000
10,000 Simon Transport Services
Inc. 198,750
11,300 Union Pacific Corp. 796,650
-----------
2,101,189
-----------
TOTAL COMMON STOCKS: 93.6%
(cost: $63,012,292) 76,517,259
-----------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM VALUE
PRINCIPAL AMOUNT OBLIGATIONS: 6.1% (NOTE 1)
- -------------------------------------------------------------
<S> <C> <C>
$5,014,000 U.S. Treasury Bill due
7/01/97 Yield of 4.90%
(Amortized Cost: $ 5,014,000
$5,014,000) -----------
TOTAL INVESTMENTS: 99.7%
(Cost: $68,026,292) 81,531,259
OTHER ASSETS LESS
LIABILITIES: 0.3% 257,268
-----------
NET ASSETS: 100.0% $81,788,527
===========
</TABLE>
- -------
Glossary:
ADR--American Depositary Receipt
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments at value (cost $68,026,292)(Note 1) $81,531,259
Cash 562
Receivables:
Securities sold 253,032
Dividends and interest 87,220
Capital shares sold 24,855
Deferred organization costs (Note 1) 154,279
-----------
Total assets 82,051,207
-----------
LIABILITIES:
Payables:
Management fee 125,246
Securities purchased 34,385
Capital shares redeemed 32,030
Accounts payable 71,019
-----------
Total liabilities 262,680
-----------
NET ASSETS $81,788,527
===========
Net asset value, maximum offering price and redemption price per
share ($81,788,527/6,513,075 shares of beneficial interest
outstanding with an unlimited number of no par value shares
authorized) $12.56
===========
Composition of net assets:
Aggregate paid in capital $61,502,949
Net unrealized appreciation of investments 13,504,967
Undistributed net investment income 196,808
Undistributed net realized gains 6,583,803
-----------
$81,788,527
===========
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INCOME:
Dividends $ 602,681
Interest 88,926
-----------
Total income 691,607
EXPENSES:
Management (Note 2) $ 395,841
Administrative (Note 2) 86,052
Professional 38,121
Custodian 34,020
Amortization of deferred organization costs (Note 1) 21,798
Transfer agent 18,826
Trustees 7,500
Other 42,744
---------
644,902
Fees waived by the Manager (Note 2) (150,103)
---------
Total expenses 494,799
-----------
Net investment income 196,808
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: (NOTE
3)
Net realized gain from investments 6,807,492
Net unrealized appreciation of
investments 6,297,999
-----------
Net gain on investments 13,105,491
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,302,299
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE PERIOD
JUNE 30, JANUARY 2, 1996+
1997 THROUGH
(UNAUDITED) DECEMBER 31, 1996
----------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 196,808 $ 636,451
Net realized gain from
investments 6,807,492 3,873,251
Net unrealized appreciation
of investments 6,297,999 7,206,968
----------- -----------
Net increase in net assets
resulting from operations 13,302,299 11,716,670
----------- -----------
Dividends to shareholders from:
Net investment income -- (636,451)
Net realized gain from investments (Note 1) -- (4,140,898)
----------- -----------
-- (4,777,349)
----------- -----------
Capital share transactions*:
Net proceeds from sales of shares 4,840,125 17,868,048
Net asset value of shares issued in exchange
for assets (Note 4) -- 86,821,580
Reinvestment of dividends -- 4,485,469
----------- -----------
109,175,097
Cost of shares redeemed (24,961,255) (27,607,060)
----------- -----------
Increase (decrease) in net assets resulting
from capital share transactions (20,121,130) 81,568,037
----------- -----------
Total increase in net assets (6,818,831) 88,507,358
NET ASSETS:
Beginning of period 88,607,358 100,000
----------- -----------
End of period (including undistributed net
investment income of $196,808 and $0) $81,788,527 $88,607,358
=========== ===========
*SHARES OF BENEFICIAL INTEREST ISSUED
AND REDEEMED:
Shares sold 425,263 1,736,140
Shares issued in connection with an exchange of
assets (Note 4) -- 8,588,497
Reinvestment of dividends -- 414,553
----------- -----------
10,739,190
Shares redeemed (2,102,809) (2,558,569)
----------- -----------
Net increase (decrease) (1,677,546) 8,180,621
=========== ===========
</TABLE>
+ Commencement of Operations.
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE PERIOD
ENDED JANUARY 2, 1996(A)
JUNE 30, 1997 TO
(UNAUDITED) DECEMBER 31, 1996
------------- ------------------
<S> <C> <C>
Net Asset Value, Beginning of Period.......... $10.82 $10.00
------ ------
Income From Investment Operations:
Net Investment Income........................ 0.03 0.08
Net Gain on Investments (both realized and 1.71 1.35
unrealized)................................. ------ ------
Total From Investment Operations.............. 1.74 1.43
------ ------
Less Distributions from:
Net Investment Income........................ -- (0.08)
Net Realized Gain on Investments............. -- (0.53)
------ ------
Total Distributions........................... -- (0.61)
------ ------
Net Asset Value, End of Period................ $12.56 $10.82
====== ======
Total Investment Return(b).................... 16.08% 14.30%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period (000)............... $81,789 $88,607
Ratio of Gross Expenses to Average Net
Assets(d) ................................... 1.50% 1.50%
Ratio of Net Expenses to Average Net
Assets(d).................................... 1.15% 1.15%
Ratio of Net Investment Income to Average Net
Assets(c)(d)................................. 0.46% 0.73%
Portfolio Turnover Rate....................... 52% 174%
Average Commission Rate Paid.................. $0.0497 $0.0508
</TABLE>
- -------
(a) Commencement of operations.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period and a redemption on the last
day of the period. Total return for the period ended December 31, 1996 was
not annualized.
(c) Ratios would have been 0.11% and 0.38%, respectively, had the Manager not
waived expenses.
(d) Annualized.
See Notes to Financial Statements.
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
EAI Select Managers Equity Fund (the "Fund"), organized as a Massachusetts
business trust on September 27, 1995, is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The primary investment objective of the Fund is to achieve long-term capital
appreciation. The Fund had no operations prior to January 2, 1996 except for
the sale to Evaluation Associates Capital Markets, Inc. (the "Manager") of
10,000 shares for $100,000.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
financial statements are presented in conformity with generally accepted
accounting principles. The preparation of financial statements in conformity
with generally accepted accounting principles requires the use of management's
estimates and the actual results could differ.
A. SECURITY VALUATION--Securities traded on national exchanges and traded in
the NASDAQ National Market System are valued at the last sales prices
reported at the close of business on the principal markets for such
securities on the last business day of the period. Over-the-counter
securities not included in the NASDAQ National Market System and listed
securities for which no sale was reported are valued at the last bid price.
Short-term obligations purchased with more than sixty days remaining to
maturity are valued at market. Short-term obligations purchased with sixty
days or less to maturity are valued at cost, which, with accrued interest,
approximates value. Securities for which quotations are not readily
available are stated at fair value as determined by the Board of Trustees.
B. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the provisions
of Subchapter M of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
C. DIVIDENDS AND DISTRIBUTIONS--Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
For the period ended December 31, 1996, net realized gain on investments
for book purposes was less than those for tax purposes, primarily due to
the deferral of $214,281 in realized losses due to wash sales.
<PAGE>
EAI Select Managers Equity Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
D. OTHER--Interest income is accrued as earned. Security transactions are
accounted for on the date the securities are purchased or sold. Realized
gains and losses on securities are determined on the specific identified
cost method.
E. ORGANIZATION COSTS--Deferred organization costs of $220,035 will be
amortized over a period not to exceed five years from the commencement of
operations. In the event that, at any time during the five year period
beginning with the date of commencement of operations, the initial shares
acquired by the Manager prior to such date are redeemed by any holder
thereof, the redemption proceeds payable in respect of such shares will be
reduced by the pro rata share (based on the proportionate share of the
initial shares redeemed to the total number of original shares outstanding
at the time of redemption) of the then unamortized deferred organization
costs as of the date of such redemption. In the event that the Fund
liquidates before the deferred organization costs are fully amortized, the
Manager shall bear such unamortized deferred organization costs.
NOTE 2--AGREEMENTS AND TRANSACTIONS OF RELATED PARTIES--The Manager, a wholly
owned subsidiary of EAI Partners, L.P. (the "Parent"), earned fees of $395,841
for the six months ended June 30, 1997 for management of the Fund. The fee is
based on an annual rate of 0.92% of average daily net assets. For the six
months ended June 30, 1997, the Manager agreed to waive management fees in the
amount of $150,103 which represents the amount exceeding a self imposed expense
limitation of 1.15% of average daily net assets. Such limitation will be in
effect until December 31, 1997.
Certain of the officers and trustees of the Fund are officers, directors, or
partners of the Manager or Parent.
Affiliates of the Manager or Parent and counsel to the Fund hold 1,100,264
shares (16.9%) and 889,276 shares (13.7%), respectively, of the outstanding
shares of the Fund. Additionally, 2,734,841 outstanding shares are held by 3
shareholders. One of these 3 shareholders intends to redeem 1,657,798 shares on
or before September 30, 1997. Such redemption may result in the realization of
capital gains which may increase the year end capital gain distribution, if
any.
The Manager pays from its management fees each Subadviser a fee at the annual
rate of .375 of 1% of the average monthly assets of the Fund managed by that
Subadviser. As of June 30, 1997, the Subadvisers are Liberty Investment
Management, Bennett Lawrence Management LLC, Iridian Asset Management LLC,
Inc., Equinox Capital Management, Inc., Mastrapasgua & Associates, Inc. and
Siphron Capital Management.
In accordance with a Portfolio Accounting and Administration Agreement with Van
Eck Associates Corporation ("Van Eck"), the Fund paid Van Eck $86,052 for the
six months ended June 30, 1997. The annual fee is graduated, beginning at .20
of 1% of monthly average net assets of less than $100 million to .12 of 1% of
monthly average net assets in excess of $260 million.
The Fund accrued $24,000 in legal fees payable to Day, Berry and Howard,
counsel to the Fund and affiliate of the Fund, for the six months ended June
30, 1997 for legal services in conjunction with the Fund's ongoing operations.
DISTRIBUTION AGREEMENT--Under the terms of a Distribution Agreement with the
Fund, EAI Securities Inc. serves as the Distributor of the Fund Shares. EAI
Securities Inc. does not receive any additional fees for services provided
pursuant to this agreement.
NOTE 3--PURCHASES AND SALES--Purchases and sales of securities, other than
short-term obligations, aggregated $42,621,544 and $63,650,303, respectively,
for the six months ended June 30, 1997. For federal income tax purposes the
cost of investments owned at June 30, 1997 was $68,026,292.
As of June 30, 1997, net unrealized appreciation for federal income tax
purposes aggregated $13,504,967 of which $13,875,648 related to appreciated
securities and $370,681 related to depreciated securities.
NOTE 4--CAPITAL SHARES--Capital shares of the Fund were issued in connection
with exchanges of capital shares for assets as follows:
<TABLE>
<CAPTION>
WR
THE EAI INVESTMENT
SMALL PARTNERS
MANAGERS LONG EQUITY
EQUITY FUND FUND L.P. TOTAL
------------ ------------ -----------
<S> <C> <C> <C>
Fund Issued:
Date...................................... 1/02/96 5/01/96
Shares.................................... 7,250,470 1,338,027 8,588,497
Net Asset Value........................... $ 10.00 $ 10.70
Fund Received as Payment:
Securities at value....................... $66,925,766 $13,594,809 $80,520,575
Cash...................................... 5,578,930 722,075 6,301,005
----------- ----------- -----------
Total Value............................... $72,504,696 $14,316,884 $86,821,580
=========== =========== ===========
</TABLE>
The aggregate net assets of the Fund immediately before the exchanges were
$100,000 on January 2, 1996 and $81,893,509 on May 1, 1996.
NOTE 5--COLLATERAL--Collateral for repurchase agreements is held by the Fund's
custodian, the value of which must be at least 102% of the underlying debt
obligation. In the remote chance the counterparty should fail to complete the
repurchase agreement, realization and retention of the collateral may be
subject to legal proceedings and the Fund would become exposed to market
fluctuation on the collateral.
<PAGE>
INVESTMENT MANAGER
Evaluation Associates Capital Markets, Inc.
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
ADMINISTRATOR
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Day, Berry & Howard
CityPlace
Hartford, CT 06103
TRANSFER AGENT
DST Systems, Inc.
1004 Baltimore
Kansas City, MO 64105-1802
CUSTODIAN
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108
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This report must be accompanied or preceded by an effective prospectus which
includes more complete information such as charges and expenses. For a
prospectus and additional information about EAI Select Managers Equity Fund,
please call the number listed below.
[LOGO] EAI SELECT
EAI Select Managers Equity Fund
EAI Securities Inc. -- DISTRIBUTOR
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
(203) 855-2200
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FR1997-0804-19
EAI SELECT
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MANAGERS
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EQUITY FUND
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SEMI-ANNUAL
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REPORT
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June 30, 1997
[LOGO] EAI SELECT
