<PAGE>
EAI Select Managers Equity Fund
Review of First Six Months of 1998
- -------------------------------------------------------------------------------
Dear Fellow Shareholder:
We are very pleased to present the first half of 1998 report on EAI Select
Managers Equity Fund. The first part of this review details the performance of
the Fund and the factors that influenced it, while the second part summarizes
the domestic equity market so far in 1998.
EAI SELECT MANAGERS EQUITY FUND
The EAI Select Managers Equity Fund returned 16.5% in the first six months of
1998. As was true in 1997, this return far outperformed the average
Morningstar growth fund (+13.5%), the average equity mutual fund (+11.6%) and
the DJIA (+14.1%). Taken individually, both the first and second quarter
returns exceeded these benchmarks as well. The manager changes made in the
third quarter of 1996 and the first quarter of 1997 continue to work very well
for the Fund.
Sector weightings were extremely beneficial to the Fund as the three largest,
consumer noncyclical (+23.6%), cyclical (+25.7%) and financial (+17.4%), were
among the best performers.
Consumer noncyclicals were led by companies with the most consistent earnings
growth, namely the pharmaceuticals. Examples included Warner-Lambert Co.
(+68.2%), Becton Dickinson & Co. (+55.9%) and Schering-Plough (+48.3%), the
Fund's largest issue.
Consumer cyclicals were led by media issues such as MediaOne Group Inc.
(+52.2%) and Tele-Comm. TCI Group (+37.6%), while the Fund's best performer,
Capital One Financial Corp. (+129.7%), led financial.
The Asian slowdown and pricing pressures hurt energy (-7.1%) and industrials
(+6.3%). Drillers, aerospace and semiconductor equipment manufacturers were
weakest.
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.
THE STOCK MARKET REVIEW
In the first half of 1998, the S&P 500 rose 17.7%. The index has risen for 14
quarters in a row. Small stocks (Russell 2000: +5.0%) lagged significantly. In
fact, in the second quarter, the spread (i.e., large over small) of 790 basis
points was the widest since June 1992. If the domestic economy slows, smaller
companies, which rely on domestic sales, may experience earnings deceleration.
Early year sell-offs in Asia caused a rather large ripple effect in the U.S.
By January 9th, the market had fallen 4.3%. Benign inflation news and some
early indications that Japan and Korea were serious about turning around their
economies reversed the U.S. market literally overnight. Over the next six
trading days, a 5.5% rally more than offset the decline.
Warnings by some bellwethers such as IBM and Microsoft that earnings in 1998
may be clouded by a slowdown in overseas sales, confirmed investors fears, and
stocks reversed course (-2.2%) once again.
From that low point on January 26 until April 22, the market surged 18.6%
virtually in a straight line, setting 32 new highs along the way; the largest
correction was limited to 1.9%. The catalysts for this latest rally included
strong money flows into stocks, increased merger activity across sectors,
limited earnings warnings and continued low interest rates.
In all, nine mega-mergers (totaling $395 billion) were announced during the
quarter, the largest of which was the $85 billion Travelers Group/Citicorp
combination. These transactions had less impact later in the quarter since
most were done with virtually no stock price premium.
Deepening economic problems in Asia began to erode investor enthusiasm for
stocks. From their highs reached in late April, the S&P 500 and the Russell
2000 had fallen 4.5% and 11.6%, respectively, by mid-June.
<PAGE>
EAI Select Managers Equity Fund
- -------------------------------------------------------------------------------
A concerted effort by the U.S. and Japan to prop up the yen helped sentiment
late in the quarter. A rally ensued, led by a surge in the largest, most
liquid stocks, which helped propel the S&P 500 to all-time highs; the broader
market rebound was not as robust.
For the six months, market leadership was dominated by technology (+31.5%) and
consumer cyclical (+29.8%). Record levels of consumer confidence kept demand
strong in these sectors.
Weak commodity prices and the Asian slowdown took their toll on energy (+5.4%)
and basic industry (+7.2%). Earnings visibility in these sectors remains
clouded.
The attached report provides you with a listing of the investment portfolio,
performance results, and the financial statements as of June 30, 1998. 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 1998
PERFORMANCE RECORD AS OF 6/30/98
- -------------------------------------------------------------------------------
Average Annual Total Returns
<TABLE>
- ---------------------------------
<S> <C>
1 Year 29.4%
Since Inception (1/2/96) 24.1%
</TABLE>
The performance data represents past performance and is not indicative of
future results. Investment return and principal value of an investment in the
Fund will vary so that shares, when redeemed, may be worth more or less than
their original cost.
The Manager is currently waiving certain or all expenses on the Fund. Had the
Fund incurred all expenses, investment returns would have been reduced.
<PAGE>
EAI Select Managers Equity Fund Schedule of Investments June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
AEROSPACE: 2.7%
4,520 Boeing Co................... $ 201,423
7,600 General Dynamics
Corporation................ 353,400
3,900 General Motors Corp. "H".... 260,569
1,600 Lockheed Martin Corp. ...... 169,400
3,900 Textron Inc................. 279,581
3,800 United Technologies Corp.... 351,500
-----------
1,615,873
-----------
AIRLINES: 0.8%
1,800 AMR Corp. (DE).............. 149,850
2,600 Delta Air Lines Inc......... 336,050
-----------
485,900
-----------
AUTOS: 0.4%
3,800 Ford Motor Company.......... 224,200
-----------
BANKS: 7.9%
7,000 BankAmerica Corp............ 605,063
10,600 Bank of Boston Corp. ....... 589,625
5,000 Bank of New York Co. Inc.... 303,438
600 Bankers Trust Co............ 69,638
7,376 Chase Manhattan Corp. ...... 556,888
2,500 CitiCorp.................... 373,125
4,100 First Chicago NBD Corp...... 363,363
2,100 Fleet Financial............. 175,350
12,150 MBNA Corp. ................. 400,950
2,868 NationsBank Corp............ 219,402
6,300 State Street Corp........... 437,850
5,700 Washington Mutual, Inc...... 247,594
1,000 Wells Fargo & Company....... 369,000
-----------
4,711,286
-----------
BEVERAGES: 2.6%
2,600 Anheuser-Busch Companies,
Inc........................ 122,688
5,500 Coca-Cola Company........... 470,250
19,100 Pepsico Inc................. 786,681
4,200 Seagrams Co. LTD. .......... 171,938
-----------
1,551,557
-----------
BUILDING/HEAVY CONSTRUCTION: 0.5%
2,300 Foster Wheeler Corp......... 49,306
7,612 Halter Marine Group Inc..... 114,656
4,500 Lennar Corp................. 132,750
-----------
296,712
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- ----------------------------------------------------------------------------------------
<C> <S> <C>
CHEMICALS: 0.9%
5,800 Du Pont (E.I.) De Nemours... $ 432,825
700 Eastman Chemicals........... 43,575
900 FMC Corp.................... 61,369
-----------
537,769
-----------
COMPUTER SERVICES/OFFICE EQUIPMENT: 7.2%
4,100 CBT Group Plc. (ADR)
(Ireland).................. 219,350
7,800 Compaq Computers Corp....... 221,325
5,000 Compuware Corp. ............ 255,625
4,140 Electronic Data Systems
Corp....................... 165,600
6,000 EMC Corp.................... 268,875
7,000 First Data Corp............. 233,188
3,000 Fiserv, Inc. ............... 127,406
5,100 Hewlett-Packard Co.......... 305,363
5,800 International Business
Machines Corp.............. 665,913
5,000 Keane, Inc. ................ 280,000
4,000 Microsoft Corp.............. 433,500
20,000 Novell Inc. ................ 255,000
8,000 Oracle Corp. ............... 196,500
5,000 Sanmina Corp................ 216,875
3,000 Saville Systems Ireland
Plc. (ADR) (Ireland)....... 150,375
1,800 Xerox Corp.................. 182,925
4,000 Xilinx, Inc................. 136,000
-----------
4,313,820
-----------
CONSUMER PRODUCTS: 0.3%
5,000 Rubbermaid, Inc............. 165,938
-----------
DRUGS: 9.0%
10,000 Abbott Laboratories......... 408,750
2,000 Allegiance Corp............. 102,500
5,600 American Home Products
Corp....................... 289,800
2,000 Amgen Inc................... 130,750
7,200 Bristol-Myers Squibb Co..... 827,550
6,000 Johnson & Johnson........... 442,500
3,500 Merck & Co.................. 468,125
7,100 Pfizer Inc.................. 771,681
4,500 Pharmacia & Upjohn Inc. .... 207,563
14,600 Schering-Plough Corp. ...... 1,337,725
5,100 Warner-Lambert Co. ......... 353,813
-----------
5,340,757
-----------
ELECTRIC UTILITIES: 1.5%
7,100 AES Corp.................... 373,194
2,200 Consolidated Edison Inc..... 101,338
2,400 Edison International........ 70,950
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Schedule of Investments June 30, 1998
(Unaudited/Continued)
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
ELECTRIC UTILITIES (CONTINUED)
1,200 FPL Group, Inc. ............ $ 75,600
4,200 PacificCorp................. 95,025
5,446 PG&E Corporation............ 171,889
-----------
887,996
-----------
ELECTRICAL EQUIPMENT: 0.6%
6,300 Cooper Industries Inc....... 346,106
-----------
ELECTRONICS: 2.3%
3,000 Applied Materials Inc....... 88,500
2,000 Honeywell Inc............... 167,125
4,000 Intel Corp.................. 296,500
4,000 Qlogic Corp. ............... 142,750
5,876 Raytheon Company............ 338,605
10,000 Semtech Corp................ 176,875
10,000 Smart Modular Technologies
Inc. ...................... 146,250
-----------
1,356,605
-----------
ENERGY--OIL & GAS: 1.8%
3,000 Anadarko Petroleum Corp. ... 201,563
463 Ashland Inc................. 23,902
1,200 Coastal Corp................ 83,775
1,000 Noble Drilling.............. 24,063
6,700 Schlumberger Ltd............ 457,694
3,000 Tuboscope Inc............... 59,250
6,000 Williams Co. Inc............ 202,500
-----------
1,052,747
-----------
FABRICATING COMPONENTS: 0.4%
6,300 Libbey Inc.................. 241,369
-----------
FINANCIAL SERVICES: 6.2%
1,800 Ahmanson (H.F.) & Company... 127,800
7,000 American Express Company.... 798,000
943 Associates First Capital
Corp. Class A.............. 72,493
2,000 Capital One Financial
Corp. ..................... 248,375
7,000 Charles Schwab Co........... 227,500
6,500 Concord EFS, Inc. .......... 169,813
11,300 Federal Home Loan Mortgage
Corp....................... 531,806
10,400 Federal National Mortgage
Assoc. .................... 631,800
7,700 Household International,
Inc........................ 383,075
5,700 Morgan Stanley, Dean
Witter, Discover and Co.... 520,838
-----------
3,711,500
-----------
FOOTWEAR: 0.5%
6,000 Nike Inc.................... 292,125
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
HOSPITAL SUPPLY: 2.1%
1,900 Baxter International, Inc... $ 102,244
10,400 Becton Dickinson & Company.. 807,300
7,900 U.S. Surgical Corp.......... 360,438
-----------
1,269,982
-----------
HOTELS AND RESTAURANTS: 1.6%
7,400 Host Marriott Corp.......... 131,813
20,200 Marriott International
Inc........................ 653,975
3,818 Promus Hotel Corp........... 146,993
-----------
932,781
-----------
INSURANCE: 5.0%
2,000 Aetna Inc................... 152,250
4,600 Allstate Corp............... 421,188
5,100 AMBAC Inc................... 298,350
5,400 CIGNA Corp.................. 372,600
3,200 Hartford Finl. Svcs. Group
Inc........................ 366,000
7,200 Nationwide Finl. Svcs.
Group Inc. ................ 367,200
1,000 Progressive Corp. .......... 141,000
3,800 TransAmerica Corp........... 437,475
7,481 Travelers Group Inc......... 453,536
-----------
3,009,599
-----------
LEISURE: 0.8%
5,400 Carnival Corp. "A".......... 213,975
5,400 Galileo International Inc... 243,338
-----------
457,313
-----------
MACHINERY--AUTO/CONSTRUCTION: 0.5%
700 Caterpillar Inc. ........... 37,013
7,000 McDermott Int'l Inc......... 241,063
-----------
278,076
-----------
MEDIA: 13.4%
5,450 American Tower Corp. "A".... 135,909
10,800 Belo (A.H.) Corp. Series A.. 263,250
7,500 Central Newspapers, Inc.
"A"........................ 523,125
8,400 Comcast Corp. "A"........... 340,988
4,300 Cox Communication Inc. Cl.
A.......................... 208,281
4,000 Gannett Company Inc. ....... 284,250
14,450 Jacor Communications Inc.... 852,550
18,500 MediaOne Group Inc.......... 812,844
9,900 New York Times-Class "A".... 784,575
22,524 Tele-Communications TCI
Group "A".................. 865,766
32,025 Tele-Comm. Liberty Media
Group...................... 1,242,970
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Schedule of Investments June 30, 1998
(Unaudited/Continued)
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
MEDIA (CONTINUED)
9,300 Time Warner Inc............. $ 794,569
7,300 Tribune Company............. 502,331
10,900 Valassis Communications,
Inc........................ 420,367
-----------
8,031,775
-----------
MEDICAL SERVICES: 2.3%
11,000 Beverly Enterprises Inc..... 151,938
17,500 Columbia/HCA Healthcare
Corp....................... 509,688
8,500 Health Management
Associates, Inc............ 284,219
3,000 Integrated Health Services,
Inc. ...................... 112,500
8,006 Pharmerica Inc.............. 96,572
3,000 United HealthCare Corp...... 190,500
-----------
1,345,417
-----------
METALS: 0.1%
1,300 Reynolds Metals Co.......... 72,719
-----------
MULTI-INDUSTRY: 1.4%
9,200 Allied-Signal Inc........... 408,250
1,500 General Electric Co......... 136,500
3,500 Minnesota Mining and
Manufacturing Co........... 287,656
-----------
832,406
-----------
OIL INTERNATIONAL: 2.0%
2,200 Amerada Hess Corp. ......... 108,625
1,100 Atlantic Richfield Company.. 85,938
4,400 Baker Hughes Inc............ 152,075
2,900 Exxon Corp.................. 206,806
1,100 Mobil Corp.................. 84,288
9,000 Pride International Inc..... 152,438
7,300 Stone Energy Corp........... 259,606
2,000 Texaco Inc. ................ 119,375
-----------
1,169,151
-----------
PACKAGED FOOD: 3.9%
5,000 Campbell Soup Company....... 265,625
3,900 ConAgra, Inc. .............. 123,581
6,000 Hershey Foods Corp.......... 414,000
5,000 Quaker Oats Company......... 274,688
3,800 Ralston-Ralston Purina
Group...................... 443,887
8,400 Wrigley (Wm.) Jr. Company... 823,200
-----------
2,344,981
-----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
PAPER: 0.7%
1,900 International Paper
Company.................... $ 81,700
7,300 Kimberly-Clark Corp......... 334,888
-----------
416,588
-----------
PERSONAL SERVICES: 2.0%
5,600 H&R Block Inc............... 235,900
4,000 Robert Half International,
Inc........................ 223,500
12,700 Service Corp................ 544,513
5,000 Sunrise Assisted Living,
Inc........................ 171,875
-----------
1,175,788
-----------
PHOTO EQUIPMENT/SUPPLIES: 0.7%
5,697 Eastman Kodak Company....... 416,237
-----------
REAL ESTATE: 0.6%
3,700 Manufactured Home
Communities, Inc........... 89,263
5,900 Starwood Hotel & Resorts.... 285,044
-----------
374,307
-----------
RESTAURANTS: 1.1%
8,000 McDonald's Corp. ........... 552,000
4,000 Tricon Global Restaurants,
Inc. ...................... 126,750
-----------
678,750
-----------
RETAIL--GENERAL MERCHANDISE: 2.0%
4,500 Costco Companies............ 283,781
2,400 Federated Dept. Stores,
Inc........................ 129,150
2,200 Penney J.C. Co.............. 159,088
4,800 Sears Roebuck & Company..... 293,100
5,000 Wal-Mart Stores Inc......... 303,750
-----------
1,168,869
-----------
RETAIL--SPECIALTY: 2.7%
4,650 Borders Group Inc. ......... 172,050
4,500 Consolidated Stores Corp.... 163,125
6,000 Dollar Tree Stores, Inc..... 243,750
8,000 Staples, Inc................ 231,500
9,000 Walgreen Co................. 371,813
2,300 Whirlpool Corp.............. 158,125
5,200 Tandy Corp.................. 275,925
-----------
1,616,288
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund Schedule of Investments June 30, 1998
(Unaudited/Continued)
<TABLE>
<CAPTION>
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
SOAP AND COSMETICS: 1.9%
4,300 Avon Products Inc. $ 333,250
4,500 Clorox Co. 429,188
6,000 Gillette Co. 340,125
-----------
1,102,563
-----------
TELEPHONE/COMMUNICATIONS: 4.9%
3,000 Advanced Fibre Comm. Inc. 120,188
6,900 Airtouch Communications
Inc. 403,219
3,700 AT&T Corp. 211,363
4,586 Bell Atlantic Corp. 209,236
2,402 GTE Corp. 133,611
3,200 Intermedia Communications
Inc. 134,200
4,300 Loral Space &
Communications Ltd. 121,475
6,800 MCI Communications Corp. 395,250
1,500 Nokia Corp. "A" (ADR) 108,844
3,200 SBC Communications Inc. 128,000
7,800 Sprint Corp. 549,900
4,400 Telephone and Data Systems,
Inc. 173,250
4,600 WorldCom Inc. 222,813
-----------
2,911,349
-----------
TOYS: 0.4%
6,000 Hasbro Inc. 235,875
-----------
TRANSPORTATION: 0.2%
3,000 MotivePower Indus. Inc. 73,500
2,200 Ryder Systems Inc. 69,420
-----------
142,920
-----------
TOTAL COMMON STOCKS: 95.9%
(cost: $41,884,050) 57,115,994
-----------
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED
YIELD AT
DATE OF TIME OF VALUE
SHORT-TERM OBLIGATIONS MATURITY PURCHASE (NOTE 1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT (NOTE 4): PURCHASED ON
6/30/98; MATURITY VALUE--$2,182,000 (WITH
BOSTON SAFE DEPOSIT AND TRUST CO.,
COLLATERALIZED BY $2,295,00 U.S. TREASURY BILL
DUE 9/10/98 WITH A YIELD OF 5.02% VALUED AT
$2,272,821) 7/01/98 4.90% $ 2,182,000
-----------
TOTAL SHORT-TERM OBLIGATIONS: 3.7% (cost:
$2,182,000) 2,182,000
-----------
TOTAL INVESTMENTS: 99.6%
(cost: $44,066,050) 59,297,994
OTHER ASSETS LESS LIABILITIES: 0.4% 267,909
-----------
NET ASSETS: 100% $59,565,903
===========
</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, 1998 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments at value (cost $44,066,050) (Note 1) $59,297,994
Cash 970
Receivables:
Securities sold 296,544
Dividends and interest 51,250
Deferred organization costs (Note 1) 106,631
-----------
Total assets 59,753,389
-----------
LIABILITIES:
Payables:
Management fee 69,943
Accounts payable 117,543
-----------
Total liabilities 187,486
-----------
NET ASSETS $59,565,903
===========
Net asset value, maximum offering price and redemption price per
share ($59,565,903/5,418,655 shares of beneficial interest
outstanding with an unlimited number of no par value shares
authorized) $10.99
===========
Composition of net assets:
Aggregate paid in capital 40,055,468
Net unrealized appreciation of investments 15,231,944
Undistributed net investment income 23,048
Undistributed net realized gain 4,255,443
-----------
$59,565,903
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (unaudited)
<TABLE>
<S> <C> <C>
INCOME:
Dividends $ 280,182
Interest 59,248
-----------
Total income 339,430
EXPENSES:
Management (Note 2) $ 253,106
Administrative (Note 2) 55,023
Professional 36,522
Custodian 32,697
Amortization of deferred organization costs (Note 1) 19,018
Transfer agent 13,000
Shareholder reports 9,000
Trustees 7,500
Registration 3,250
Other 21,750
---------
450,866
Fees waived by the Manager (Note 2) (134,484)
---------
Total expenses 316,382
-----------
Net investment income 23,048
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: (NOTE
3)
Net realized gain from investments 4,441,636
Net change in unrealized appreciation of Investments 3,864,480
-----------
Net gain on investments 8,306,116
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,329,164
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 23,048 $ 281,662
Net realized gain from investments 4,441,636 16,811,492
Net change in unrealized appreciation of
investments 3,864,480 4,160,496
----------- ------------
Net increase in net assets resulting from
operations 8,329,164 21,253,650
----------- ------------
Dividends to shareholders from:
Net investment income -- (303,171)
Net realized gain from investments (Note 1) -- (16,788,108)
----------- ------------
-- (17,091,279)
----------- ------------
Capital share transactions*:
Net proceeds from sales of Shares 3,238,772 7,740,702
Reinvestment of dividends -- 16,614,680
----------- ------------
3,238,772 24,355,382
Cost of shares redeemed (4,346,498) (64,780,647)
----------- ------------
Decrease in net assets resulting from
capital share transactions (1,107,726) (40,425,265)
----------- ------------
Total increase (decrease) in net assets 7,221,438 (36,262,893)
NET ASSETS:
Beginning of period 52,344,465 88,607,358
----------- ------------
End of period (including undistributed net
investment income of $23,048 and $0) $59,565,903 $ 52,344,465
=========== ============
*SHARES OF BENEFICIAL INTEREST ISSUED AND
REDEEMED:
Shares sold 312,203 642,486
Reinvestment of dividends -- 1,761,896
----------- ------------
312,203 2,404,382
Shares redeemed (445,237) (5,043,314)
----------- ------------
Net decrease (133,034) (2,638,932)
=========== ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FOR THE PERIOD
MONTHS ENDED, YEAR JANUARY 2, 1996(A)
JUNE 30, 1998 ENDED TO
(UNAUDITED) DECEMBER 31, 1997 DECEMBER 31,1996
------------- ----------------- ------------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 9.43 $10.82 $10.00
------ ------ ------
Income From Investment Op-
erations:
Net Investment Income..... -- 0.08 0.08
Net Gain on Investments
(both realized and
unrealized).............. 1.56 3.04 1.35
------ ------ ------
Total From Investment Oper-
ations.................... 1.56 3.12 1.43
------ ------ ------
Less Distributions from:
Net Investment Income..... -- (0.08) (0.08)
Net Realized Gain on In-
vestments................ -- (4.43) (0.53)
------ ------ ------
Total Distributions........ -- (4.51) (0.61)
------ ----- ------
Net Asset Value, End of Pe-
riod...................... $10.99 $ 9.43 $10.82
====== ====== ======
Total Investment Return(b). 16.54% 28.84% 14.30%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period
(000)..................... $59,566 $52,344 $88,607
Ratio of Gross Expenses to
Average Net Assets........ 1.64%(d) 1.55% 1.50%(d)
Ratio of Net Expenses to
Average Net Assets........ 1.15%(d) 1.15% 1.15%(d)
Ratio of Net Investment In-
come to Average Net
Assets(c)................. 0.08%(d) 0.37% 0.73%(d)
Portfolio Turnover Rate.... 30% 78% 174%
</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, reinvestment of dividends and
distributions at net asset value on the payable date and a redemption on
the last day of the period. Total return for the periods less then one
year are not annualized.
(c) Ratios would have been (0.41%), (0.03%) 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 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
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EAI Select Managers Equity Fund
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles.
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 $209,315 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--Evaluation Associates
Capital Markets, Inc. (the "Manager"), a wholly owned subsidiary of EAI
Partners, L.P. (the "Parent"), earned fees of $253,106 for the six months ended
June 30, 1998 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, 1998, the
Manager agreed to waive management fees in the amount of $134,484 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,
1998.
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 1,727,441
shares (31.9%) and 1,407,077 shares (26.0%), respectively, of the outstanding
shares of the Fund. Additionally 990,318 shares are owned by three other
shareholders, each of whom own more than 5% but less than 8% of the outstanding
shares of the Fund.
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. At June 30, 1998, 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.
At a meeting of the Board of Trustees of the Fund, held on May 21, 1998 the
Trustees agreed to terminate Bennett Lawrence Management LLC as one of the
Fund's Subadvisers, effective on the close of business on June 30, 1998. The
Manager intends to reallocate the Fund's assets under Bennett Lawarence's
management to one or more of the other Subadvisers.
In accordance with a Portfolio Accounting and Administration Agreement with Van
Eck Associates Corporation ("Van Eck"), the Fund paid Van Eck $55,023 for the
six months ended June 30, 1998. 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 $21,422 in legal fees payable to Day, Berry and Howard,
counsel to the Fund, for the six months ended June 30, 1998 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., a wholly owned subsidiary of the Parent, serves as
the Distributor of the Fund's Shares. EAI Securities Inc., does not receive any
fees for services provided pursuant to this agreement.
NOTE 3--PURCHASES AND SALES--Purchases and sales of securities, other than
short-term obligations, aggregated $16,290,406 and $18,581,198, respectively,
for the six months ended June 30, 1998. For federal income tax purposes the
cost of investments owned at June 30, 1998 was $41,844,050.
As of June 30, 1998, net unrealized appreciation for federal income tax
purposes aggregated $15,231,944 of which $16,022,489 related to appreciated
securities and $790,545 related to depreciated securities.
NOTE 4--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.
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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
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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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, 1998
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[LOGO] EAI
SELECT
