<PAGE>
1933 Act Registration No. 33-98164
1940 Act Registration No. 811-9112
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 4 [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 7 [X]
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(Check appropriate box or boxes)
EAI SELECT MANAGERS EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
(Address of Principal Executive Offices) (Zip Code)
200 Connecticut Avenue, Suite 700
Norwalk, Connecticut 06854-1958
(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 06854-1958 Stamford, Connecticut 06901-2047
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1998 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
-
[_] 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.
Title of Securities Being Registered: Shares of Beneficial Interest,
of no par value.
<PAGE>
EAI SELECT MANAGERS EQUITY FUND
REGISTRATION STATEMENT
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
Form N-1A Item Location
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Part A - Prospectus
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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 Objective 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 and Voting
Other Securities Rights; Dividends and
Distributions; Tax Information
Item 7. Purchase of Securities Purchase of Shares; Valuation of
Being Offered Shares
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
-2-
Part B - Statement of Additional Information
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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
and Policies Operating Policies; Portfolio
Turnover
Item 14. Management of the Fund Trustees and Officers
Item 15. Control Persons and Trustees and Officers; Principal
Principal Holders of Shareholders of the Fund
Securities
Item 16. Investment Advisory and Investment Advisory and Other
Other Services 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>
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EAI SELECT MANAGERS EQUITY FUND
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PROSPECTUS MAY 1, 1998
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LOGO EAI
SELECT
EAI Select Managers Equity Fund
EAI Securities, Inc.
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
[GRAPHIC APPEARS HERE]
The EAI Select Managers Equity Fund (the "Fund") is a diversified, open-end
management investment company with a diversified equity portfolio. The
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 other securities such as 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 will achieve its investment objective.
The Fund's shares may be purchased at a price equal to their net asset
value per share on a continuous basis.
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 May 1,
1998, 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.
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EAI SECURITIES INC. (203) 855-2200
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION................................................................ 2
FUND EXPENSES............................................................... 4
FINANCIAL HIGHLIGHTS........................................................ 5
PERFORMANCE ADVERTISEMENTS.................................................. 6
ORGANIZATION OF THE FUND.................................................... 6
INVESTMENT OBJECTIVE AND POLICIES........................................... 6
INVESTMENT TECHNIQUES AND ASSOCIATED RISKS.................................. 7
MANAGEMENT OF THE FUND...................................................... 10
DISTRIBUTION OF THE FUND'S SHARES........................................... 12
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 12
PERFORMANCE INFORMATION..................................................... 13
DIVIDENDS AND DISTRIBUTIONS................................................. 14
TAX INFORMATION............................................................. 15
PURCHASE OF SHARES.......................................................... 16
VALUATION OF SHARES......................................................... 17
REDEMPTION OF SHARES........................................................ 18
DESCRIPTION OF SHARES AND VOTING RIGHTS..................................... 19
OTHER INFORMATION........................................................... 20
</TABLE>
1
<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. See "Description of Shares and Voting Rights" on page 19.
INVESTMENT OBJECTIVE
The investment objective of the Fund is to achieve long-term capital appre-
ciation. 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
other securities such as 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 Objective and Policies" on page 6 and "In-
vestment Techniques and Associated Risks" on page 7.
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. The Manager is re-
sponsible, subject to the oversight of the Fund's Board of Trustees, for the
selection and supervision of the Subadvisers. The Manager has ultimate respon-
sibility for the investment performance of the Fund due to its responsibility
to oversee the Subadvisers and to recommend their hiring, termination and re-
placement. For its services to the Fund, the Manager is entitled to a fee,
payable quarterly, at the annual rate of 0.92% of the average daily net asset
values of the Fund. See "Management of the Fund" on page 10.
THE SUBADVISERS
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 cur-
rent Subadvisers already have). The Fund presently has six Subadvisers.
Bennett Lawrence Management, LLC invests primarily in securities issued by me-
dium-sized companies and focuses on growth. Equinox Capital Management, Inc.
invests primarily in securities issued by large-sized companies and focuses on
value. Iridian Asset Management LLC invests primarily in securities issued by
large-sized companies and focuses on value. Liberty Investment Management in-
vests primarily in securities issued by medium-sized companies and focuses on
growth and value. Mastrapasqua & Associates, Inc. invests in companies of all
sizes and focuses on growth and value. Siphron Capital Management invests pri-
marily in large capitalization issues that have a valuable franchise or brand
name and focuses on growth.
The Subadvisers are each entitled to a fee, payable quarterly by the Manag-
er. See "Management of the Fund" on page 10 and "Investment Advisory and Other
Services" in the Statement of Additional Information.
2
<PAGE>
While the Investment Company Act of 1940, as amended (the "1940 Act"), re-
quires 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 this re-
quirement although 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. 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 en-
gagement of particular Subadvisers after events which would otherwise require
their automatic termination under the 1940 Act. However, 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 informa-
tion statement including all of the information about the new Subadviser or
the sub-advisory agreement that would be included in a proxy statement. In ad-
dition, 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 liter-
ature 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 12 and "Investment Advisory and Other Services" in the Statement of
Additional Information.
PURCHASE 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 Sys-
tems, Inc. (the "Transfer Agent"). The minimum initial investment is $50,000,
and the minimum subsequent investment is $1,000. These minimums may be waived
by the Fund or the Manager in certain circumstances. See "Purchase of Shares"
on page 16 and "Valuation of Shares" on page 17.
Shares of the Fund may be redeemed at any time at their 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 18.
RISK FACTORS
There can be no assurance that the Fund can achieve its investment objec-
tive. 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,
and (ii) the risks that result from investing in small to medium sized compa-
nies, the securities of which (or the financial instruments related to such
securities) have a limited market. In addition, the specific types of securi-
ties in which the Fund invests also presents risks that are peculiar to those
securities. Finally, there is a risk that during the early stages of the
Fund's operations, the Fund's expenses may constitute a disproportionate per-
centage of the Fund's average net assets due to a relatively low level of net
assets. Some securities which the Fund is authorized to invest in, but to date
has rarely done so, present other risks. See "Investment Techniques and Asso-
ciated Risks" on page 7.
3
<PAGE>
FUND EXPENSES
The following table is intended to provide the investor with information con-
cerning annual operating expenses of the Fund and to understand the various
other direct and indirect costs and expenses borne by an investor in the Fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load None
Redemption Fee None
ANNUAL FUND OPERATING EXPENSES+
Management Fees (after fee waiver)* 0.52%
Other Expenses 0.63%
Total Fund Operating Expenses (after fee waiver)+ 1.15%
</TABLE>
+ Expenses are stated as a percentage of average daily net assets of
the Fund.
* 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 10 and "Investment Advisory and Other Services"
in the Statement of Additional Information.
+ The Manager has committed to waive a portion of its fee for the first
three years of operation of the Fund (which expires on January 2,
1999) 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 1.63%, assuming a constant net asset value for
the Fund of $55 million. This table reflects projected fees after
giving effect to the Manager's fee cap in the first three years of
the Fund's operation. For more complete descriptions of the various
costs and expenses, see "Management of the Fund" on page 10.
<TABLE>
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<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <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 $37 $74 $180
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
In certain instances, the Fund may enter into directed brokerage arrange-
ments in which it will direct the brokerage for certain securities transac-
tions to be entered into by its Subadvisers to a certain broker-dealer in ex-
change for that broker-dealer's agreement to pay a portion of the custodian,
transfer agent or other administrative fees incurred by the Fund. Such ar-
rangements are discussed in "Portfolio Transactions and Brokerage." 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.
4
<PAGE>
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 Financial Highlights presented have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon appears in the Fund's 1997 Annual
Report, which is incorporated by reference into the Statement of Additional In-
formation. This information should be read in conjunction with the financial
statements and related notes that also appear in the Fund's Annual Report.
Further information about the Fund's performance is contained in the Annual
Report to Shareholders. The Annual Report and the Statement of Additional In-
formation are available at no cost by calling (203) 855-2200.
For a share outstanding throughout the period.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED JANUARY 2, 1996 (a)
DECEMBER 31, TO DECEMBER 31,
1997 1996
------------ -------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.82 $ 10.00
------- -------
Income from Investment Operations
Net Investment Income 0.08 0.08
Net Gains on Investments (both realized
and unrealized) 3.04 1.35
------- -------
Total from Investment Operations 3.12 1.43
------- -------
Less Distribution from:
Net Investment Income (0.08) (0.08)
Net Realized Gain on Investments (4.43) (0.53)
------- -------
Total Distributions (4.51) (0.61)
------- -------
Net Asset Value, End of Period $ 9.43 $ 10.82
======= =======
Total Investment Return(b) 28.84% 14.30%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000) $52,344 $88,607
Ratio of Gross Expenses to Average Net
Assets 1.55% 1.50%(d)
Ratio of Net Expenses to Average Net
Assets 1.15% 1.15%(d)
Ratio of Net Investment Income to Average
Net Assets(c) 0.37% 0.73%(d)
Portfolio Turnover Rate 78% 174%
Average Commission Rate Paid $0.0539 $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, 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 period ended December 31, 1996 was not annualized.
(c) Ratios would have been (0.03%) and 0.38% respectively, had the Man-
ager not waived expenses.
(d) Annualized.
See Notes to Financial Statements.
5
<PAGE>
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 ref-
erence to the Fund's volatility. Average annual total return figures as pre-
scribed 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 distri-
butions. 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, recognized services which monitor and/or rank mutual fund
performance or various unmanaged indices. Unmanaged indices may assume the re-
investment of dividends, but generally do not reflect deductions for adminis-
trative and management costs and expenses.
Advertisements, sales literature and communications may also contain informa-
tion about the Fund's, the Manager's or the Subadvisers' current investment
strategies and management style. Current strategies and style may change to al-
low the Fund to respond quickly to a changing market and economic environment.
From time to time, the Fund may discuss specific portfolio holdings or indus-
tries in such communications.
For a description of the methods used to determine total return and volatili-
ty, see "Performance Data" in 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 investment company un-
der the 1940 Act.
INVESTMENT OBJECTIVEAND POLICIES
The investment objective of the Fund is to achieve long-term capital appreci-
ation. 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 in-
vest 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 approv-
al; provided however that the Fund may at times, for defensive purposes, tempo-
rarily place all or a portion of its assets in cash, short-term commercial pa-
per, U.S. Government securities, high quality debt securities and obligations
of banks when, in the judgment of the Manager or a Subadviser, such in-
6
<PAGE>
vestments 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 ob-
jective. The Subadvisers invest the assets of the Fund primarily in a variety
of equity securities, including common stocks, but may also invest in convert-
ible securities and fixed income securities with a maximum remaining maturity
of fifteen years. The Fund presently has six Subadvisers. Bennett Lawrence
Management, LLC invests primarily in securities issued by medium-sized compa-
nies and focuses on growth. Equinox Capital Management, Inc. invests primarily
in securities issued by large-sized companies and focuses on value. Iridian
Asset Management LLC invests primarily in securities issued by large-sized
companies and focuses on value. Liberty Investment Management invests primar-
ily in securities issued by medium-sized companies and focuses on growth and
value. Mastrapasqua & Associates, Inc. invests in companies of all sizes and
focuses on growth and value. Siphron Capital Management invests primarily in
large capitalization issues that have a valuable franchise or brand name and
focuses on growth.
The Fund pursues its investment objective primarily by investing in equity
or equity-related securities, which consist primarily of common stock, Ameri-
can Depositary Receipts and convertible securities (including bonds).
To the extent consistent with its investment objective 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 matu-
rity 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 cor-
porate bonds or debentures that are rated not less than Aa by Moody's Investor
Services, Inc. ("Moody's") or AA by Standard and Poor's Corporation ("S&P")
or, in the case of debt securities not rated by Moody's or S&P, 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 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. These investment restrictions
are set forth in the Statement of Additional Information.
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 asso-
ciated 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 eco-
nomic and market conditions which might affect the profitability and financial
condition of the companies in whose securities the Fund's assets are
7
<PAGE>
invested. In an attempt to mitigate the risk of loss of principal due to mar-
ket fluctuation for individual securities, the Fund invests primarily in a di-
versified 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) compa-
nies, 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 com-
pany with a larger market capitalization and broader trading market. In addi-
tion, 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 early stage and during this 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 secu-
rities, it may invest to a limited extent in sponsored or unsponsored American
Depositary Receipts ("ADRs") or other investment companies that invest in for-
eign 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 is-
suer 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 secu-
rities involve risks that differ from investments in securities of domestic
issuers. Such risks may include political and economic developments, the pos-
sible 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-devel-
oped securities markets as well as less regulation of stock exchanges and bro-
kers and different auditing and financial reporting standards. Not all foreign
branches of United States banks are supervised or examined by regulatory au-
thorities 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 de-
veloped countries. Foreign securities often trade with less frequency and vol-
ume than domestic securities and therefore may exhibit greater price volatili-
ty. Changes in foreign exchange rates will affect the value of those securi-
ties which are denominated or quoted in currencies other than the U.S. dollar.
8
<PAGE>
Illiquid Securities. The Fund may invest up to 15% of its net assets in se-
curities that are not readily marketable ("illiquid securities"). These secu-
rities, which may be subject to legal or contractual restrictions on their re-
sale, 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 secu-
rities have a readily available market.
Repurchase Agreements. In a repurchase transaction, the Fund purchases a se-
curity from a bank or 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 Fund's investments in
those other investment companies will be subject to the sorts of risks de-
scribed above. 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 imme-
diately after giving effect to such investment) in all of the investment com-
panies 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 portfolio securities trans-
actions, 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 transac-
9
<PAGE>
tion costs that are borne directly by the Fund. In addition, high portfolio
turnover may also result in increased short-term capital gains which when dis-
tributed to shareholders, are treated for Federal income tax purposes as ordi-
nary income. See "Portfolio Transactions and Brokerage" on page 12 and "Tax
Information" on page 15.
MANAGEMENT OF THE FUND
THE 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 under "Trustees and Officers" 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, sub-
ject to the authority of the Trustees, is responsible for the overall manage-
ment of the Fund's business affairs. This responsibility includes the selec-
tion 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 34 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 serv-
ices which are generally divided between investment consulting services, in-
cluding manager evaluation and performance evaluation services, and the man-
agement of multi-adviser funds for a number of institutional and high net
worth individual clients. The Parent, directly and through the Manager, had
approximately $1.9 billion in assets under management as of March 31, 1998.
The Manager's address is 200 Connecticut Avenue, Suite 700, Norwalk, Connecti-
cut 06854-1958.
The Fund has made inquiries of the Manager, the Subadvisers, Van Eck Associ-
ates Corporation, the Distributor, the Custodian and the Transfer Agent re-
garding whether they expect to have their computer systems adjusted for the
year 2000 transition. The Fund was informed that all of these service provid-
ers expected their systems would be compliant with the year 2000 issue prior
to that time. There can be no assurance that these steps will be sufficient to
avoid any adverse impact to the Fund.
THE SUBADVISERS
Bennett Lawrence Management, LLC was formed in September, 1995 by former em-
ployees of Deutsche Morgan Grenfell/C.J. Lawrence, Inc. The firm is owned by
its employees and is controlled by S. Van Zandt Schreiber, its
10
<PAGE>
majority owner. As of March 31, 1998, assets under management totaled approxi-
mately $920 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
March 31, 1998, assets under management totaled approximately $10.5 billion.
Its address is 399 Park Avenue, New York, New York 10022.
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 Arnhold and S. Bleichroeder Capital, a division of Arnhold and S.
Bleichroeder, Inc. As of March 31, 1998, assets under management totaled ap-
proximately $5.3 billion. Its address is 276 Post Road West, Westport, Connect-
icut 06880-4704.
Liberty Investment Management was originally formed in January 1976 and is a
division of Goldman Sachs Asset Management, a separate operating division of
Goldman, Sachs & Co. As of March 31, 1998, assets under management totaled ap-
proximately $9.3 billion. Its address is 2502 Rocky Point Drive, Tampa, Florida
33607.
Mastrapasqua & Associates, Inc. was formed in 1993 and is currently wholly
owned by Frank Mastrapasqua. As of March 31, 1998, assets under management to-
taled approximately $425 million. Its address is 814 Church Street, Nashville,
Tennessee 37203.
Siphron Capital Management was formed in 1991 and is currently wholly owned
by David Siphron. As of March 31, 1998, assets under management totaled approx-
imately $769 million. Its address is 280 South Beverly Drive, Suite 412, Bev-
erly Hills, California 90212.
COMPENSATION AND OTHER EXPENSES
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 in-
vestment 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. Organizational expenses have been capitalized by the Fund
and are being amortized over 60 months, beginning on January 2, 1996.
The Manager has committed to waive a portion of its fees for the first three
years of operation of the Fund (which expires on January 2, 1999) to the extent
necessary to cap overall Fund expenses at 1.15% of the average of the daily net
asset value of the Fund. Any voluntary fee waiver by the Manager may be termi-
nated or reduced at any time in the sole discretion of the Manager. Sharehold-
ers will be notified of any changes in such fee waivers at the time they become
effective.
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):
<TABLE>
<S> <C>
Bennett Lawrence Management, LLC .375%
Equinox Capital Management, Inc. .375%
Iridian Asset Management LLC .375%
Liberty Investment Management .375%
Mastrapasqua & Associates, Inc. .375%
Siphron Capital Management .375%
</TABLE>
11
<PAGE>
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 if the
Subadvisers are not paid the same fee.
THE PORTFOLIO MANAGER
Mr. Keith Stransky serves as portfolio manager of the Fund. Mr. Stransky is
Executive Vice President of the Manager. He is also Director of Traditional
Funds Management and Research for the Manager, and he has held that position
for the past eight years. In that position, Mr. Stransky manages and does re-
search for the Manager's traditional investment vehicles. Mr. Stransky joined
the Parent in 1983, and prior to that he was the Technical Director for Hamil-
ton, Johnston & Co., Inc. Mr. Stransky has 22 years of consulting-related in-
vestment experience. Mr. Stransky is a Chartered Financial Analyst.
THE ADMINISTRATOR
Pursuant to a portfolio accounting and administrative services agreement,
Van Eck Associates Corporation is responsible for providing administrative and
accounting functions to the Fund. These functions include certain legal, ac-
counting, regulatory and compliance services, state registration services,
corporate secretary and board of trustees administration, tax compliance serv-
ices and reporting. Van Eck Associates Corporation receives an annual fee,
payable monthly, which 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 CUSTODIAN AND THE TRANSFER AGENT
Boston Safe Deposit and Trust Company serves as the Fund's Custodian pursu-
ant to a Custody Agreement. Its address is One Boston Place, Boston, Massachu-
setts 02108.
DST Systems, Inc. serves as the Fund's transfer, dividend disbursing and
shareholder servicing agent pursuant to an Agency Agreement. Its address is
210 W. 10th Street, 8th Floor, Kansas City, Missouri 64105.
DISTRIBUTION OF THE FUND'S SHARES
The Distributor serves as the distributor of the shares of the Fund. Its ad-
dress is 200 Connecticut Avenue, Norwalk, Connecticut 06854-1958. The Distrib-
utor distributes the shares of the Fund solely on a subscription basis.
The Manager may compensate certain financial institutions that are not af-
filiated with the Fund or the Distributor out of its own funds in connection
with certain sales to shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each Subadviser is responsible for decisions to buy and sell securities us-
ing the Fund assets allocated to it, as well as for broker-dealer selection in
connection with the portfolio managed by that Subadviser. Each Subadviser must
adhere to the Fund's policy of
12
<PAGE>
seeking the best execution and price (which in some instances may include pay-
ing higher brokerage commissions to firms providing certain brokerage and re-
search services and may include the directed brokerage arrangements described
in the next paragraph).
In certain instances, the Fund may enter into directed brokerage arrange-
ments in which it will direct the brokerage for certain securities transac-
tions to a particular broker-dealer in exchange for that broker-dealer's
agreement to pay a portion of the custodian, transfer agent or other adminis-
trative 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. 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 manage-
ment business. Among the assets under the management of the Parent and the
Manager through all or a portion of 1996 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"), collectively the "EAI Funds", two
collective investment funds with investment objectives, policies and strate-
gies substantially identical to those of the Fund. In addition, several former
investors in the EAI Funds 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 who now invest in the Fund were required to
withdraw their investments in the SMEF Trust in order to comply with a 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 SMEF Trust is still being operated. The Long
Fund was terminated by the Manager on April 30, 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 to-
tal 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 re-
turn 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 be-
low include its performance since that time until its termination on April 30,
1996. The figures for the SMEF Trust are through December 31, 1997. The EAI
Funds are private accounts not subject to the investment limitations, diversi-
fication requirements and other restrictions imposed upon mutual funds by the
1940 Act and the Internal Revenue Code and those re -
13
<PAGE>
strictions could adversely impact their performance. THE FOLLOWING GRAPH AND
TABLE REPRESENT 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.
- ---------------------------------------
EAI Funds S&P 500
- ---------------------------------------
Dec-87 10000 10000
Dec-88 12059 11661
Dec-89 15628 15356
Dec-90 14641 14879
Dec-91 19901 19412
Dec-92 22906 20892
Dec-93 27057 22997
Dec-94 26535 23301
Dec-95 34561 32058
Dec-96 39538 39418
Dec-97 51574 52568
- ---------------------------------------
EAI
TIME PERIOD FUNDS(2)(3) S&P 500(4)
- ----------- ----------- ----------
10 years 1988-1997 17.8% 18.1%
5 years 1993-1997 17.6% 20.3%
1 year 1997(1) 30.4% 33.4%
(1) The Fund's total return for the year 1997 was 28.8%. For a discussion of,
and a graph showing, the Fund's performance, see the Fund's 1997 Annual Re-
port.
(2) The net asset value of the SMEF Trust on December 31, 1997 was approxi-
mately $166 million. 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.
(3) 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 approx-
imately 1.03% to 1.20% per year, which is less than the estimated fees to
be incurred by the Fund when the management fee cap expires. Those figures
also reflect a rebate of management fees paid to certain investors in the
SMEF Trust that are affiliated with the Parent and the Manager.
(4) 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.
DIVIDENDS AND DISTRIBUTIONS
Distributions to shareholders of net investment income and short-term capital
gain, if any, will be in the form of an income dividend. Long-term and middle-
term capital gains, if any, will retain their character upon distribution to
shareholders as capital gains. Such dividends and distributions will normally
be made by the Fund on at least an annual basis, usually in December. Dividends
and distributions declared in December but paid in January will be includible
in a shareholder's income as of the record date (usually in December) of such
dividends and distributions. The amount of the Fund's dividends and/or distri-
butions will change from year to year as a result of such factors as the in-
vestments made and sold for the Fund and the fluctuation of the number of Fund
shares outstanding. The fiscal year of the Fund ends on December 31.
14
<PAGE>
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
All income dividends, including distributions designated as short-term capi-
tal gain dividends, and distributions 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 distributions.
The Fund has qualified and intends to continue to qualify as a regulated in-
vestment company ("RIC") under the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), which relieves an investment
company that distributes substantially all of its net income (both net invest-
ment income and net capital gains) from Federal income tax on the amounts so
distributed. 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 a deduction for distributions.
In addition, if 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 individ-
uals (which, for this purpose, includes employee pension and benefit plans un-
der the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and certain other entities), the Fund will be a personal holding company under
Subchapter G of 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 Fund would
be subject to the maximum Federal income tax rate applicable to corporations on
any amount required to be distributed to shareholders to avoid Federal income
tax that is not so distributed. In addition, the Fund would be subject to per-
sonal holding company tax, at the rate of 39.6%, on any amount required to be
distributed to shareholders to avoid personal holding company tax that is not
so distributed. Based on the holdings of the shares of the Fund from July 1
through December 31, 1997, the Fund will be treated as a personal holding com-
pany for its 1997 taxable year. The Fund believes it has distributed the
amounts required to avoid the taxation described above.
Gains realized during the year are credited only to the Fund's shareholders
at the end of the year and not to shareholders who redeem all of their shares
in the Fund during the course of that year. Thus, although distributions equal
to those gains are made to the holders of the Fund's shares at the end of the
year, those shareholders may be taxed on a disproportionate amount of the en-
tire gains realized by the Fund during the year.
Shareholders should consult with their own tax advisors for more infor-
15
<PAGE>
mation regarding the Federal, foreign, state and local tax rules applicable to
their ownership and disposition of shares of the Fund. See "Federal Income Tax
Status" in the Statement of Additional Information.
PURCHASE OF
SHARES
Shares of the Fund 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 $50,000 for initial pur-
chases and $1,000 for additional purchases of Fund shares. These minimums may
be waived by the Fund or the Manager in certain circumstances. It is contem-
plated that employees of the Parent and its affiliates may purchase shares,
and the minimums may be waived for such purchases.
Purchases of shares directly from the Fund 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
210 W. 10th Street, 8th Floor, Kansas City, Missouri 64105. 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 ad-
vance of purchase.
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 pur-
chased in this manner may be treated by the Fund as a single account for pur-
poses of the minimum initial invest- ment. Investors are not required to uti-
lize 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. Eastern time on any business day will
receive the offering price computed for that day. Orders received after 4:00
p.m. Eastern time will 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. Eastern time on the business day following the purchase. Pur-
chases paid for by check are effected when the check is received but are sub-
ject 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 addi-
tion, 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 Fund, 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 pur-
chase.
In order to avoid unnecessary expenses and administrative complications,
certificates for Fund shares will not be issued. All share purchases will be
con-
16
<PAGE>
firmed to the record holder and credited to the holder's account on the Fund's
books maintained by the Transfer Agent.
IN-KIND PURCHASES
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 exchang-
ing securities must first telephone the Manager at (203) 855-2200 for instruc-
tions regarding submission of a written description of the securities the in-
vestor 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 de-
scribed in the section entitled "Valuation of Shares" as of the close of regu-
lar trading on the NYSE, generally 4:00 p.m. Eastern time. Acceptance may oc-
cur 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 three days following acceptance. Delivery in-
structions will be provided at the time of acceptance.
The value of the securities to be exchanged and of the shares of the Fund so
purchased 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 securi-
ties 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 as-
set value of Fund shares 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 in-
vestor 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 State-
ment 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 Federal
securities laws, or otherwise.
VALUATION OF
SHARES
As stated above, Fund shares are sold at net asset value per share. Net as-
set value per share is determined as of the close of business on the NYSE,
generally 4:00 p.m. Eastern 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 ac counting 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 val-
ued based on the last quoted sale price on such exchange on or recently
17
<PAGE>
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 quo-
tations 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 as indicated below. 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 week-
end 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 protec-
tion of shareholders of the Fund. In addition, redemption of purchases made by
check are restricted as described in "Purchase of Shares," above.
Any redemption orders received as indicated below before the close of trad-
ing on the NYSE (generally 4:00 p.m. Eastern 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 as-
set value determined on the following business day. The Fund cannot accept re-
demption 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 or-
ders 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 re-
serves the right to redeem a shareholder account (after 60 days written no-
tice) when the value of the shares in that account falls below $50,000 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 210 W. 10th Street, 8th Floor,
Kansas City, Missouri 64105. The Transfer Agent's telephone number is 800-798-
8055. A redemption order should include the name of the Fund, the sharehold-
er's account name and number, and the number of shares or the amount to be re-
deemed. 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,
18
<PAGE>
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 pro-
cedures to confirm that re
demption 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 be-
ing held liable for losses resulting from unauthorized or fraudulent instruc-
tions. 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 re-
demption 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 redemp-
tion of shares purchased by check will not be effected until as long as 15
days after the date of purchase.
To the extent consistent with state and Federal law, the Fund may make pay-
ment 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 redemp-
tions 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 Securi-
ties and Exchange Commission, by order, permits the withdrawal thereof. In the
case of a redemption in kind, securities delivered in payment for Fund 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 broker-
age costs when selling the securities.
DESCRIPTION
OF SHARES AND VOTING RIGHTS
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 existing share-
holders, 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 shareholder may
call special meetings of the shareholders for action by shareholder vote, in-
cluding the removal of any or all of the Trustees. Trustees will call a spe-
cial 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 li-
able for the Fund's obligations to third parties and that every written con-
tract made by the Fund shall contain a provi-
19
<PAGE>
sion to that effect. The Fund's Declaration of Trust also requires the Fund to
indemnify Trustees against such lia bilities and any related claims and ex
penses. 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 in-
volved in the conduct of the Trustee's office.
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.
20
<PAGE>
EAI SELECT MANAGERS EQUITY FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
200 CONNECTICUT AVENUE, SUITE 700, NORWALK, CONNECTICUT 06854-1958
(203) 855-2200
Shareholder Services (800) 798-8055
This Statement of Additional Information relates to 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 May 1, 1998, 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT RESTRICTIONS AND OPERATING POLICIES.......................................................... 1
PORTFOLIO TURNOVER...................................................................................... 3
TRUSTEES AND OFFICERS................................................................................... 3
PRINCIPAL SHAREHOLDERS OF THE FUND...................................................................... 7
INVESTMENT ADVISORY AND OTHER SERVICES.................................................................. 8
TRANSACTIONS IN PORTFOLIO SECURITIES.................................................................... 13
SHARES OF THE FUND...................................................................................... 14
PURCHASE AND PRICING.................................................................................... 15
FEDERAL INCOME TAX STATUS............................................................................... 15
PERFORMANCE DATA........................................................................................ 18
FINANCIAL STATEMENTS.................................................................................... 19
</TABLE>
<PAGE>
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.
<PAGE>
-2-
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 of 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.
<PAGE>
-3-
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, their addresses, positions with the Fund, ages and
principal occupations during the past five years are listed below.
<PAGE>
-4-
<TABLE>
<CAPTION>
Name, Address Position with Principal Occupation During
and Age Fund Past Five Years
- ------------------------- ------------------------ ---------------------------------------
<S> <C> <C>
Phillip N. Maisano*+# Trustee, Chief Executive Chief Executive Officer and President,
200 Connecticut Avenue, Officer and President Evaluation Associates, Inc., an invest-
Suite 700 ment consulting and management
Norwalk, CT 06854-1958 company (1990-1991); Chief
50 years of age Executive
Officer, 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");
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
200 Connecticut Avenue, Senior Vice Associates, Inc. (1990-1991); Senior
Suite 700 President Vice President of Holding; Executive
Norwalk, CT 06854-1958 Vice President of the Manager.
46 years of age
Charles E. Collard@+ Trustee Vice President, Airline Claim,
106 Stoneridge Road Associated Aviation Underwriters,
New Providence, NJ 07974 an aviation insurance company.
64 years of age
Neal Jewell@+ Trustee Director of Overseas Pensions, AIG,
355 Thornridge Drive a global financial services company
Stamford, CT 06903 (1990-1991); Executive Vice President,
63 years of age AIGAM, a division of AIG and
a registered investment advisor (1991-
Investment Portfolios.
</TABLE>
<PAGE>
-5-
<TABLE>
<S> <C> <C>
James Schuppenhauer++@ Trustee Vice President, Administration
Belmont Abbey College and Finance, Belmont Abbey
College.
100 Belmont Mt. Holly Road
Belmont, NC 28012
54 years of age
William C. Crerend Vice President Lawyer with Hughes Hubbard & Reed
200 Connecticut Avenue (1988-1993); Self-employed as Consultant
Suite 700 (1993-1994); Consultant for the Manager
Norwalk, CT 06854-1958 (1994); Senior Vice President and General
35 years of age Counsel of the Manager (1993-1997);
Executive Vice President, Chief Operating
Officer and General Counsel of the Manager;
Senior Vice President and General Counsel
of the Parent; Senior Vice President and
Agent for the Distributor.
Peter Gwiazdowski Treasurer Employed in Corporate Treasury and
200 Connecticut Avenue Corporate Accounting by FKI Industries,
Suite 700 Inc. (1978-1993); Self-employed as Cer-
Norwalk, CT 06854-1958 tified Public Accountant (1993-1994);
44 years of age Employed in Corporate Treasury by
Dunhill Temporary Systems (1994); Vice
President and Treasurer of the Manager.
Elke Bartel Secretary Secretary of the Manager and the
200 Connecticut Avenue Distributor; Senior Vice President,
Suite 700 Secretary and Treasurer of the
Norwalk, CT 06854-1958 Parent.
55 years of age
Thaddeus M. Leszczynski Assistant Vice President and Secretary of funds
99 Park Avenue Secretary advised by Van Eck Associates Corpora-
New York, NY 10016 tion and officer of funds distributed and
51 years of age administered by Van Eck Associates
Corporation; Vice President and/or
General Counsel of Van Eck Associates
Corporation and other affiliated
companies.
</TABLE>
<PAGE>
-6-
- ----------
* An "interested person" as defined in the 1940 Act.
+ Member of the Executive Committee - under the Fund's By-laws, has the
authority to conduct the current and ordinary business of the Fund while
the Board of Trustees is not in session.
# Member of the Nominating Committee for interested Trustees.
+ Member of the Nominating Committee for non-interested Trustees.
@ Member of the Audit Committee - reviews fees, services, procedures,
conclusions and recommendations of independent auditors.
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. During the
year ended December 31, 1997, no Trustee or executive officer of the Fund or any
affiliated person of the Fund received annual compensation from the Fund in
excess of $60,000.
<TABLE>
<CAPTION>
Pension or Retire- Estimated Total
ment Benefits Annual Compensation
Aggregate Accrued as Part Benefits From the Fund
Name of Person, Compensation of Fund Expenses Upon and Fund
Position From the Fund to Trustees Retirement Complex Paid
- ----------------- ------------- ------------------ ---------- -------------
<S> <C> <C> <C> <C>
P.N. Maisano $ 0 $0 $0 $ 0
Trustee and
President
K. Stransky $ 0 $0 $0 $ 0
Trustee and
Senior Vice
President
Charles Collard $5,000 $0 $0 $5,000
Trustee
Neal Jewell $5,000 $0 $0 $5,000
Trustee
James $5,000 $0 $0 $5,000
Schuppenhauer
Trustee
</TABLE>
<PAGE>
-7-
PRINCIPAL SHAREHOLDERS OF THE FUND
As of March 31, 1998, the following persons or entities owned, beneficially or
of record, 5 percent or more the Fund's outstanding shares:
<TABLE>
<CAPTION>
Percentage Fund Owned of Record,
Name & Address Shares Owned Beneficially Or Both
- ----------------------------------------------- ----------------- --------------------
<S> <C> <C>
Retirement Plan for Partners and Employees of 24.7% Owned of Record and
Day, Berry & Howard Beneficially
CityPlace
Hartford, CT 06103
Harding Service Corporation et al Profit 15.1% Owned of Record and
Sharing Plan & Trust Beneficially
330 South Street, P.O. Box 1975
Morristown, NJ 07962-1975
Evaluation Associates 401K Plan 15.0% Owned of Record and
200 Connecticut Avenue Beneficially
Norwalk, CT 06854-1940
Marine Midland Bank Trustees Genesee Corp. 8.1% Owned of Record and
Profit Sharing and Beneficially
P.O. Box 1329
Buffalo, NY 14240
Petersmeyer Family Foundation, Inc. 5.6% Owned of Record
201 Turtle Way
Vero Beach, FL 32963
Carmen M. Nevares 5.5% Owned Beneficially
Green Valley K-3
Garden Hills, Guaynabo, PR 00966
</TABLE>
All Trustees and officers as a group owned less than 1% of the outstanding
shares of the Fund as of March 31, 1998. Keith Stransky, a Trustee and officer
of the Fund, is Chairman of the Evaluation Associates, Inc. 401(k) Plan and Elke
Bartel, an officer of the Fund, is a trustee of the Plan.
<PAGE>
-8-
INVESTMENT ADVISORY AND OTHER SERVICES
General
- --------
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, Evaluation Associates Capital Markets, Incorporated, 200 Connecticut
Avenue, Suite 700, Norwalk, Connecticut 06854, 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 adviser. 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 (the "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, the 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.
<PAGE>
-9-
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.
Ownership information as to each of the Subadvisers is as follows:
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.
Iridian Asset Management LLC is controlled by Harold Levy and David Cohen.
Liberty Investment Management (formerly Eagle Asset Management) is a division
of Goldman Sachs Asset Management, which in turn is a separate operating
division of Goldman, Sachs & Co.
Mastrapasqua & Associates, Inc. is wholly owned by Frank Mastrapasqua.
Siphron Capital Management is wholly owned by David Siphron.
The Management Agreement and The Subadvisory Agreements
- -------------------------------------------------------
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.
<PAGE>
-10-
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 Subadviser):
Bennett Lawrence Management, LLC - .375%
Equinox Capital Management, Inc. - .375%
Iridian Asset Management LLC - .375%
Liberty Investment Management - .375%
Mastrapasqua & Associates, Inc. - .375%
Siphron Capital Management - .375%
For the year ended December 31, 1997 and for the period from January 2, 1996
(commencement of operations) through December 31, 1996, the Manager received
management fees from the Fund totalling $400,402 and $504,328, respectively, net
of $309,371 and $303,122, respectively, in management fees waived in connection
with a self-imposed fee waiver. (See "Voluntary Fee Waivers and Expenses
Limitations" below.) Of the amounts received by the Manager, the Manager paid
the then-existing sub-advisers as follows:
<TABLE>
<CAPTION>
Amount of Sub-Advisory Fees Received
Year Ended Period From January 2, 19961
Sub-Adviser December 31, 1997 Through December 31, 1996
- ----------- ------------------------------------ ----------------------------
<S> <C> <C>
Bennett Lawrence Mgmt. LLC $ 19,462 $10,3032
Dietche & Field Advisers Inc. $14,2833 $ 98,194
Equinox Capital Mgmt., Inc. $ 45,989 $ 54,670
Hudson Capital Advisors N/A $55,7964
Iridian Asset Mgmt.. LLC $ 91,141 $43,0862
Liberty Investment Mgmt. $ 51,572 $ 52,080
Mastrapasqua & Associates Inc. $25,5585 N/A
Siphron Capital Mgmt. $35,6135 N/A
Stonehill Capital Mgmt., Inc. N/A $17,2344
</TABLE>
- ----------
1 Commencement of operations.
2 For the period August 1 through December 31, 1996.
3 For the period January 1 through February 28, 1997.
4 For the period January 2 through July 31, 1996.
5 For the period March 1 through December 31, 1997.
<PAGE>
-11-
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 if the
Subadvisers are not paid the same fee.
The Management Agreement with the Manager has been approved by the Trustees,
including the Trustees who are not "interested persons" of the Manager under the
1940 Act. The Sub-advisory Agreements with the Subadvisers have been approved by
the Trustees, including the Trustees who are not "interested persons" of the
appropriate Subadviser. The Management Agreement and each of the Sub-advisory
Agreements by the Trustees at a meeting held on May 20, 1997. The Management
Agreement and each Sub-Advisory Agreement provide that they shall continue in
effect from year to year with respect to the Fund as long as it is approved at
least annually both (i) by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) or by the Trustees of the
Fund, and (ii) in either event, by a vote of a majority of the Trustees who are
not "interested persons" of the Manager or the respective Sub-Adviser.
Any amendment to the Management Agreement requires the approval of the
holders of a majority of the Fund's 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 Fund's 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.
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 auto-matically 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 three years of operation
of the Fund (which ends on January 2, 1999) 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
- -----------------------------------------------------
Pursuant to a portfolio accounting and administrative services agreement, Van
Eck Associates Corporation, 99 Park Avenue, New York, New York 10016, is
responsible for providing administrative and accounting functions to the Fund.
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
<PAGE>
-12-
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. For the year ended December 31, 1997 and the period from January 2,
1996 (commencement of operations) through December 31, 1996, Van Eck Associates
Corporation received fees of $154,298 and $175,533, respectively.
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 promotional 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,
(iii) 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., 210 W. 10th Street, 8th Floor, Kansas City, Missouri 64105,
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 LLP, One Canterbury Green, Stamford, Connecticut 06854, as
counsel to the Fund, has rendered opinions on the validity of the shares which
were 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
LLP, of which certain members of Day, Berry & Howard LLP are beneficiaries, held
over 5% of the Fund as of March 31, 1998. (See "Principal Shareholders of the
Fund.")
<PAGE>
-13-
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 which proceeds or accompanies 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. No directed brokerage arrangement
will 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.
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. For the year ended December 31, 1997
and the period from January 2, 1996 (commencement of operations) through
December 31, 1996, the Fund paid brokerage commissions totalling $176,563 and
$383,941, respectively on purchases and sales of portfolio securities, of which
amount, $52,901 (30.0%) and $57,826 (15.1%) was paid to broker-dealers providing
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.
<PAGE>
-14-
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. For the year ended December 31, 1997,
the Fund paid $407 in commissions to Goldman Sachs & Co., a broker-dealer
affiliated with one of the Fund's Subadvisers, Liberty Investment Management.
This represented 0.23% of total commissions paid by the Fund and 0.12% of the
aggregate dollar amount of commission transactions effected by the Fund for the
period. No affiliated brokerage transactions were effected during the period
from January 2 through December 31, 1996. 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.
The Fund may purchase securities of its regular broker-dealers or their
parents. At December 31, 1997, the Fund owned shares of Travelers Group Inc.,
the parent company of Salomon Smith Barney, one of the Fund's "regular broker-
dealers" (as defined in Rule 10b-1 under the Act), having a value of $720,901.
SHARES OF THE FUND
The Fund offers one class of Common Shares. The Fund does not have any
securities other than its Common Shares.
Income dividends will normally be paid on Fund shares on an annual basis in
each December or January. Distributions of any capital gains are normally paid
annually in December or January. 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
<PAGE>
-15-
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 Fund's 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 $50,000 and a minimum
additional investment of $1,000. These 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. Net asset
value per share is determined as of the close of regular trading on the New York
Stock Exchange, generally 4:00 p.m. Eastern 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 sale 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 has elected and qualified and intends 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 or other income derived from the Fund's
business of investing in stock, securities and currencies; (ii) 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-
<PAGE>
-16-
exempt interest income; (iii) at the end of each fiscal quarter, at least 50% of
the value of the Fund's total assets be maintained in cash, U.S. Government
securities, securities of other RICs 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 (iv) 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 U.S.
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 on its Investment
Company Taxable Income, but, for any year in which the Fund qualifies as a RIC,
it is allowed a deduction based on dividends paid to shareholders in computing
such amount. 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 entirely 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 liability for
Federal income tax, the amount of that liability will be computed 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 was a PHC for its 1997
taxable year, but it made sufficient distributions to avoid liability for
personal holding company tax. It may not, however, be possible for the Fund to
avoid this tax entirely 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. The Fund was a RIC for its 1997 taxable year, but it made sufficient
distributions to avoid liability for this excise tax. It may not, however, be
possible for the Fund to avoid this tax entirely in all years.
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
<PAGE>
-17-
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)
paid 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 shareholders have held their shares. In
the case of a shareholder other than a corporation, a portion of any capital
gain dividend distributed by the Fund may qualify for Federal income taxation at
a maximum rate of 20% and any amount of such a capital gain dividend not so
qualifying will qualify for Federal income taxation at a maximum rate of 28%.
These rules 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 that 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 shares sold or exchanged.
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, including
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 a 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.
<PAGE>
-18-
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 the 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
year ended December 31, 1997 and the period beginning with the commencement of
the Fund's operations on January 2, 1996 (commencement of operations) and ended
on December 31, 1996, the Fund's average total return was 28.8% and 14.3%,
respectively.
Average annual total return is computed by finding the average annual
compounded rates of return over the periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)/to the nth power/=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year periods at
the end of the year or period;
<PAGE>
-19-
The calculation assumes all dividends and distributions by the Fund are
reinvested at the price stated in the prospectus on the reinvestment dates
during the period, and includes all recurring fees that are charged to all
shareholder accounts.
The Fund may also advertise performance in terms of aggregate total return.
Aggregate total return for a specified period of time is determined by
ascertaining the percentage change in the net asset value of shares of the Fund
initially acquired assuming reinvestment of dividends and distributions and
without giving effect to the length of time of the investment according to the
following formula:
[(B-A)/A](100)=ATR
Where: A = initial investment
B = value at end of period
ATR = aggregate total return
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
year ended December 31, 1997, the Fund's standard deviation was 16.47%. For the
period from January 2, 1996 (commencement of operations) through December 31,
1996, the Fund's standard deviation was 12.15.
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 financial statements for the Fund for the year ended December 31, 1997,
with related footnotes, are included in the Fund's 1997 Annual Report to
Shareholders, which was filed with the Securities and Exchange Commission and
are incorporated herein by reference.
<PAGE>
EAI SELECT MANAGERS EQUITY FUND
PART C
OTHER INFORMATION
Item 24 Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements
Part A:
Financial Highlights Table for the period from January 2,
1996 (commencement of operations) to December 31, 1996 and
for the year ended December 31, 1997 (audited)
Part B:
The following audited financial statements of the Fund are
included in the Fund's Annual Report to Shareholders for
the year ended December 31, 1997, 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. Schedule of Investments at December 31, 1997;
2. Statement of Assets and Liabilities for the Fund as of
December 31, 1997 and related notes thereto;
3. Statement of Operations for the Fund for the year ended
December 31, 1997, and related notes thereto;
4. Statement of Changes in Net Assets for the Fund for the
period from January 2, 1996 (commencement of operations)
through December 31, 1996 and for the year ended
December 31, 1997, and related notes thereto;
5. Financial Highlights for the period January 2, 1996
(commencement of operations) through December 31, 1996
and for the year ended December 31, 1997.
6. Report of Independent Accountants.
(b) Exhibits
1. Declaration of Trust of the Fund dated September 27,
1995 (Incorporated by reference to the Registration
Statement No. 33-98164)
a. First Amendment to Declaration of Trust dated
December 11, 1995 (Incorporated by reference to
Post-Effective Amendment No. 1 to the Registration
Statement).
<PAGE>
-2-
2. By-Laws of the Fund (Incorporated by reference to the
Registration Statement No. 33-98164)
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") (Incorporated by reference
to Pre-Effective Amendment No. 1)
b. Form of Sub-Advisory Agreement among the Fund, the
Manager and each of Liberty Investment Management and
Equinox Capital Management, Inc. (Incorporated by
reference to Pre-Effective Amendment No. 1)
c. Form of Sub-Advisory Agreement among the Fund, the
Manager and Iridian Asset Management LLC.
(Incorporated by reference to Post-Effective
Amendment No. 1)
d. Form of Sub-Advisory Agreement among the Fund, the
Manager and Bennett Lawrence Management, LLC.
(Incorporated by reference to Post-Effective
Amendment No. 1)
e. Form of Sub-Advisory Agreement among the Fund, the
Manager and Mastrapasqua & Associates, Inc.
(Incorporated by reference to Post-Effective
Amendment No. 3).
f. Form of Sub-Advisory Agreement among the Fund, the
Manager and Siphron Capital Management (Incorporated
by reference to Post-Effective Amendment No. 3).
6. Form of Distribution Agreement between the Fund and EAI
Securities Inc., as Distributor (Incorporated by
reference to Registation Statement No. 33-98164)
7. Not Applicable.
8. Form of Custody Agreement between the Fund and Boston
Safe Deposit and Trust Company, as Custodian
(Incorporated by reference to Pre-Effective Amendment
No. 1)
9. a. Form of Transfer Agency Agreement between the Fund
and DST Systems, Inc., as Transfer Agent
(Incorporated by reference to Pre-Effective Amendment
No. 1)
b. Form of Portfolio Accounting and Administrative
Services Agreement between the Fund and Van Eck
Associates Corporation. (Incorporated by reference to
Pre-Effective Amendment No. 1)
10. Opinion and Consent of Day, Berry & Howard (Incorporated
by reference to Pre-Effective Amendment No. 1)
11. Consent of Price Waterhouse LLP (to be filed herewith)
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Not Applicable
<PAGE>
-3-
16. Computation of Performance Quotations (to be filed
herewith)
17. Financial Data Schedule (to be filed herewith)
18. Powers of Attorney for:
Phillip N. Maisano
Keith Stransky
Neal Jewell
James Schuppenhauer
Charles Collard
Peter Gwiazdowski
(see signature page)
Item 25: Persons Controlled by or Under Common Control with the Fund
- -------- -----------------------------------------------------------
None
Item 26: Number of Holders of Securities
- -------- -------------------------------
As of March 31, 1998, 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
------------------------
38
Item 27: 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.
(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 Investment Company 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 Investment Company
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.
<PAGE>
-4-
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
Fund. 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.
Item 28: 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 Forms ADV as currently on file with the
Commission, the texts of which schedules are incorporated herein by
reference. The file numbers of the Manager and the Subadvisers are
as follows:
Evaluation Associates Capital Markets, Incorporated -- File No. 801-
41771
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
Mastrapasqua & Associates, Inc. -- File No. 801-43315
Siphron Capital Management -- File No. 801-37788
Item 29: Principal Underwriters
- -------- ----------------------
(a) Not Applicable
(b) The following persons are directors, officers or partners of
the Fund's principal underwriter, EAI Securities, Inc.:
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Robert A. Jaeger Director, President, None
200 Connecticut Ave. Chief Executive Officer
Norwalk, CT 06854 and Treasurer
Joseph P. McGowan Director and Executive None
200 Connecticut Ave. Vice President
Norwalk, CT 06854
Phillip N. Maisano Director President and
200 Connecticut Ave. Trustee
Norwalk, CT 06854
Larry Zielinski Executive Vice President None
200 Connecticut Ave.
Norwalk, CT 06854
Robert B. Mayerick Senior Vice President None
200 Connecticut Ave.
Norwalk, CT 06854
William C. Crerend Senior Vice President None
200 Connecticut Ave.
Norwalk, CT 06854
Patrick J. Moriarty Senior Vice President None
200 Connecticut Ave.
Norwalk, CT 06854
Elke Bartel Secretary Secretary
200 Connecticut Ave.
Norwalk, CT 06854
(c) Not Applicable
Item 30: Location of Accounts and Records
- -------- --------------------------------
All accounts and records required to be maintained under Section
31(a) of the Investment Company Act of 1940 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, the
Sub-Advisers at their respective addresses listed for them
in the Prospectus, and 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 or the Administrator
at 99 Park Avenue, 8th floor, New York, New York 10016.
(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
<PAGE>
-5-
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 and at the Administrator at 99 Park Avenue, 8th
floor, New York, New York 10016.
(5) The records of brokerage orders are kept at the principal
offices of the Subadvisers at the addresses listed for
them in the Prospectus and at the Administrator at 99 Park
Avenue, 8th floor, New York, New York 10016.
(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, at the Administrator at 99 Park Avenue, 8th
floor, New York, New York 10016, 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 and at
the Administrator at 99 Park Avenue, 8th floor, New York,
New York 10016.
(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 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, at the Administrator at 99 Park
Avenue, 8th floor, New York, New York 10016 or at the
offices of the Subadvisers at the addresses listed for
them in the Prospectus.
(c) Not applicable
(d) The Fund believes that the Distributor of the Fund maintains
the records required by Rule 31a-1(d) under the Investment
Company 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
Investment Company Act.
<PAGE>
Item 31: 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.
Item 32: Undertakings
- -------- ------------
(a) 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.
(b) The Fund will furnish each person to whom a prospectus is
delivered with a copy of the Fund's latest Annual Report to
Shareholders upon request and without charge.
<PAGE>
-7-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and 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 February, 1998.
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 February 26, 1998
- ---------------------
Phillip N. Maisano President
* Trustee and Senior February 26, 1998
- --------------------- Vice President
Keith Stransky
* Trustee February 26, 1998
- ---------------------
Neal Jewell
* Trustee February 26, 1998
- ---------------------
James Schuppenhauer
* Trustee February 26, 1998
- ---------------------
Charles Collard
* Treasurer February 26, 1998
- ---------------------
Peter Gwiazdowski
*By /s/ William C. Crerend
--------------------------------
Name: William C. Crerend
Title: Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibits
- --------
11 Consent of Price Waterhouse LLP
16 Computation of Performance Quotations
17 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> EAI Select Managers Equity Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 41,387,206
<INVESTMENTS-AT-VALUE> 52,754,670
<RECEIVABLES> 110,203
<ASSETS-OTHER> 126,167
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,991,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 117,900
<OTHER-ITEMS-LIABILITIES> 528,675
<TOTAL-LIABILITIES> 646,575
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,163,194
<SHARES-COMMON-STOCK> 5,551,689
<SHARES-COMMON-PRIOR> 8,190,621
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 186,193
<ACCUM-APPREC-OR-DEPREC> 11,367,464
<NET-ASSETS> 52,344,465
<DIVIDEND-INCOME> 998,269
<INTEREST-INCOME> 170,622
<OTHER-INCOME> 0
<EXPENSES-NET> 887,229
<NET-INVESTMENT-INCOME> 281,662
<REALIZED-GAINS-CURRENT> 16,811,492
<APPREC-INCREASE-CURRENT> 4,160,496
<NET-CHANGE-FROM-OPS> 21,253,650
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 303,171
<DISTRIBUTIONS-OF-GAINS> 16,788,108
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 642,486
<NUMBER-OF-SHARES-REDEEMED> 5,043,314
<SHARES-REINVESTED> 1,761,896
<NET-CHANGE-IN-ASSETS> (36,262,893)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 223,689
<GROSS-ADVISORY-FEES> 709,773
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,196,600
<AVERAGE-NET-ASSETS> 77,149,239
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.11
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 4 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated January 27, 1998, relating to the financial
statements and financial highlights appearing in the December 31, 1997 Annual
Report to Shareholders of EAI Select Managers Equity Fund, which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the Prospectus
and under the heading "Investment Advisory and other Services- Custodian,
Transfer Agent, Independent Accountants and Counsel" in the Statement of
Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
April 30, 1998
<PAGE>
1997 EXHIBIT 16
EAI
----------------------------------------------
NAV DIV CAP GAIN SHARES VALUE
--- ---- -------- ------ -----
12/31/95 10.02 100 $1,002
12/31/96 10.82 0.08 0.53 105.6377 $1,143
12/31/97 9.43 0.08 4.43 140.7821 $1,328
28.84%
