<PAGE>
EAI Select Managers Equity Fund
Review of First Six Months of 1999
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
We are very pleased to present the first half of 1999 report on EAI Select
Managers Equity Fund. The first part of this review details the performance of
the Fund and the factors that influenced it, while the second part summarizes
the domestic equity market so far in 1999.
EAI Select Managers Equity Fund
The EAI Select Managers Equity Fund returned 13.6% in the first six months of
1999. This return compares favorably to the average Morningstar Growth Mutual
Fund Universe (+11.6%)**, the average Morningstar Domestic Equity Universe
(+10.4%)* and the S&P 500 (+12.4%).
Sector weightings were beneficial to the Fund. Consumer cyclical (+25.5%),
which comprised 25% to 28% in 1999, and technology (+24.3%), whose weighting
was increased to 23% from 15%, performed well.
Consumer cyclicals were led by media. Of particular note were AT&T Liberty
Media (+59.6%) and MediaOne Group Inc. (+58.2%), the two largest Fund holdings,
at 2.8% and 1.8%, respectively. The media industry is in the midst of
consolidation and growth of internet commerce.
Technology continued its dominance of the past 18 months. First Data Corp.
(+53.7%), a provider of electronic commerce solutions, Sun Microsystems Inc.
(+60.9%), Hewlett-Packard Co. (+47.7%) and IBM (+40.5%) all performed well;
earnings and revenue growth continued to accelerate for these companies.
A major disappointment was consumer noncyclical ( - 8.7%), which comprised 19%
to 22% in 1999. Pharmaceuticals experienced profit-taking as investors moved
money to more cyclically-oriented sectors. Particularly hard hit were Pfizer
Inc. ( - 12.5%) and Eli Lilly & Co. ( - 19.0%). An earnings disappointment by
Becton Dickinson & Co. ( - 29.4%), a medical supplier, also depressed the
sector.
Please keep in mind that this summary covers only a six-month period. We
encourage all of our shareholders to continue to maintain a longer-term view.
The Stock Market Review
In the first half of 1999, the S&P 500 rose 12.4%. The Index has now risen 17
out of the past 18 quarters. As has been true for the past five years, small
stocks (Russell 2000: +9.3%) lagged. However, their second quarter out-
performance of 850 basis points vs. the S&P 500 was the best since late 1992.
Improving fundamentals, due to robust domestic economic growth, have been the
catalyst for small stock resurgence.
So far in 1999, volatility, which has been high recently, rose to an extreme
level. Not only were there wild price swings, rotation of style (value and
growth) and market capitalization leadership was unprecedented.
For the first two months, the S&P 500 traded in a narrow range. Strong earnings
reports were offset by higher interest rates.
Slower than expected employment growth, and continued merger activity in
energy, banking and technology, took investors' attention away from the
relentless rise in interest rates; the market broke out of its two month
trading range. From March 2 until mid-May the S&P 500 rose 10.9%, led first by
a rebound in technology and later by a surge in cyclicals. This gain was
quickly reversed after the CPI rise of 0.7% (the fastest pace in nine years)
was announced. During the next two weeks, the loss totaled 6.3%.
For the next five weeks, price movements were more subdued, with a slight
upward bias. A calm CPI report released in mid-June helped sentiment. The
quarter ended with a robust 4.4% three day rally as the Federal Reserve raised
interest rates by 0.25% but signaled a more neutral stance going forward.
<PAGE>
EAI Select Managers Equity Fund
- -------------------------------------------------------------------------------
As was true in 1998, for the six months of 1999, market leadership was
dominated by technology (+26.0%). Earnings gains continue to surprise on the
upside and prospects remain bright.
Commodity-based energy (+20.4%) and basic industry (+19.0%) also performed
well. Improving global economies helped spark demand.
The only sector to decline was consumer noncyclical ( - 4.3%). Food companies
( - 8.6%), whose earnings will look anemic relative to the cyclicals if the
economy accelerates, were particularly weak. Pharmaceuticals ( - 2.0%) also
were hurt.
The attached report provides you with a listing of the investment portfolio,
performance results, and the financial statements as of June 30, 1999. As
always, should you have any questions, please feel free to contact us.
We thank you for your continued confidence in the EAI Select Managers Equity
Fund.
Sincerely,
/s/ Phillip Maisano
Phillip Maisano
President
July 1999
Average Annual Total Returns as of 6/30/99
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
Inception
YTD 1 Year 3 Years (1/2/96)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund 13.61% 20.74% 24.66% 23.16%
- ------------------------------------------------------------------------------------------------
Morningstar
Domestic* 10.42% 13.10% 18.07% N/A
Growth** 11.63% 16.99% 21.18% N/A
</TABLE>
* Morningstar Domestic Equity Universe contained 5,089 funds for the year to
date period, 4,779 funds for the one-year period and 3,061 funds for the
three-year period ending 6/30/99.
** Morningstar Growth Universe contained 1,915 funds for the year to date
period, 1,687 funds for the one-year period and 981 funds for the three-
year period ending 6/30/99.
The performance data represents past performance and is not indicative of
future results. Investment return and principal value of an investment in the
Fund will vary so that shares, when redeemed, may be worth more or less than
their original cost.
The Manager is currently waiving certain or all expenses on the fund. Had the
Fund incurred all expenses, investment returns would have been reduced.
This report must be accompanied or preceeded by an effective prospectus which
includes more complete information such as charges and expenses. For a
prospectus and additional information about EAI Select Managers Equity Fund,
please call the number listed below.
EAI Select Managers Equity Fund
EAI Securities Inc.--Distributor
200 Connecticut Avenue, Suite 700
Norwalk, CT 06854-1958
(203) 855-2200
<PAGE>
EAI Select Managers Equity Fund
Schedule of Investments June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
Aerospace: 1.2%
8,300 General Motors Corp. (Class
H)......................... $ 257,025
6,900 Lockheed Martin Corp. ...... 466,875
-----------
723,900
-----------
Airlines: 0.4%
2,000 AMR Corp. (DE).............. 136,500
3,500 Southwest Airlines Co. ..... 108,938
-----------
245,438
-----------
Autos: 1.1%
5,700 Dana Corp. ................. 262,556
5,800 General Motors Co. ......... 382,815
-----------
645,371
-----------
Banks: 5.7%
3,450 AmSouth Bancorporation...... 79,997
7,700 BankBoston Corp. ........... 393,663
4,500 Chase Manhattan Corp. ...... 389,813
4,500 Citigroup Inc. ............. 213,750
3,600 Commerce Bancshares, Inc. .. 144,900
9,200 Mellon Bank Corp. .......... 334,650
7,700 State Street Corp. ......... 657,388
2,500 SunTrust Bank, Inc. ........ 173,594
9,300 U.S. Bancorp................ 316,200
15,100 Wells Fargo & Co. .......... 645,525
-----------
3,349,480
-----------
Beverages: 1.2%
2,000 Anheuser-Busch Companies,
Inc. ..................... 141,875
9,500 Coca-Cola Co. .............. 593,750
-----------
735,625
-----------
Chemicals: 0.2%
2,700 Monsanto Co. ............... 106,481
-----------
Computer Services/Office Equipment: 12.9%
1,200 America Online, Inc. ....... 132,600
4,400 Apple Computer, Inc. ....... 203,775
2,883 At Home Corp. .............. 155,502
1,000 Clarent Corp. .............. 15,000
13,400 Compaq Computers Corp. ..... 317,413
10,600 Compuware Corp. ............ 337,213
2,100 Earthlink Network, Inc. .... 129,019
12,800 Electronic Data Systems
Corp. ..................... 724,000
8,000 EMC Corp. .................. 440,000
</TABLE>
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
Computer Services/Office Equipment: (continued)
17,300 First Data Corp. ........... $ 846,619
3,800 Hewlett-Packard Co. ........ 381,900
5,200 International Business
Machines Corp. ............ 672,100
4,000 Lexmark International
Group, Inc. ............... 264,250
10,600 Microsoft Corp. ............ 955,988
3,400 MindSpring Enterprises,
Inc. ...................... 150,663
20,000 Novell, Inc. ............... 530,000
12,000 Oracle Corp. ............... 445,500
5,000 Sabre Group Holdings,
Inc. ...................... 343,750
8,200 Sun Microsystems, Inc. ..... 564,775
-----------
7,610,067
-----------
Electric Utilities: 1.8 %
11,400 AES Corp. .................. 662,625
3,500 Montana Power Co. .......... 246,750
5,000 Potomac Electric Power
Co. ....................... 147,188
-----------
1,056,563
-----------
Electronics: 3.3%
6,500 Applied Materials, Inc. .... 480,188
13,000 Intel Corp. ................ 773,500
5,300 KLA-Tencor Corp. ........... 343,838
4,200 LSI Logic Corp. ............ 193,725
10,000 Smart Modular Technologies,
Inc. ...................... 173,750
-----------
1,965,001
-----------
Financial Services: 7.4%
5,600 American Express Co. ....... 728,700
8,000 Associates First Capital
Corp. (Class A)............ 354,500
7,000 Charles Schwab Co. ......... 769,125
6,500 Concord EFS, Inc. .......... 275,031
6,700 Equifax, Inc. .............. 239,106
9,500 Federal Home Loan
Mortgage Corp. ............ 551,000
6,800 Federal National Mortgage
Association................ 464,950
7,100 Household International,
Inc. ...................... 336,363
2,500 Lehman Brothers Holding
Co. ....................... 155,625
10,925 MBNA Corp. ................. 334,578
1,000 Morgan Stanley, Dean
Witter, Discover and Co. .. 102,500
800 Providian Financial Corp. .. 74,800
-----------
4,386,278
-----------
</TABLE>
See Notes to Financial Statements
<PAGE>
EAI Select Managers Equity Fund
Schedule of Investments June 30, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Footwear: 0.9%
8,000 Nike, Inc. (Class B)........ $ 506,500
-----------
Healthcare: 0.8%
9,100 McKesson HBOC, Inc. ........ 292,338
2,100 Medtronic, Inc. ............ 163,538
-----------
455,876
-----------
Hospital Supply: 0.9%
3,300 Baxter International,
Inc. ...................... 200,063
10,700 Becton, Dickinson & Co. .... 321,000
-----------
521,063
-----------
Hotels: 0.2%
3,800 Marriot International, Inc.
(Class A).................. 142,025
-----------
Insurance: 5.7%
2,600 AFLAC, Inc. ................ 124,475
4,400 Ambac, Inc. ................ 251,350
3,000 American International
Group, Inc. ............... 351,188
4,700 AON Corp. .................. 193,875
4,700 Chubb Corp. ................ 326,650
4,300 CIGNA Corp. ................ 382,700
4,800 Equitable Companies, Inc. .. 321,600
5,100 Hartford Financial Services
Group, Inc. ............... 297,394
6,500 Nationwide Financial
Services Group, Inc. ...... 276,025
11,200 Provident Companies, Inc. .. 448,000
10,000 Travelers Property Casualty
Corp. (Class A)............ 391,250
-----------
3,364,507
-----------
Leisure: 0.7%
2,000 Carnival Corp. ............. 97,000
6,000 Galileo International,
Inc. ...................... 320,625
-----------
417,625
-----------
Media: 15.4%
44,450 AT&T Corp. - Liberty Media
Group...................... 1,633,538
9,300 Belo (A.H.) Corp. (Series
A)......................... 183,094
10,5000 Cablevision Systems Corp. .. 735,000
8,300 CBS Corp. .................. 360,531
12,300 Central Newspapers, Inc.
(Class A).................. 462,788
6,300 Chancellor Media Corp. ..... 347,288
11,920 Clear Channel
Communications, Inc. ...... 821,735
</TABLE>
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Media (continued)
2,400 Cox Communications, Inc.
(Class A).................. $ 88,350
4,000 Gannett Company, Inc. ...... 285,500
6,000 Infinity Broadcasting
Corp. ..................... 178,500
14,300 MediaOne Group, Inc. ....... 1,063,563
16,200 New York Times Co. (Class
A)......................... 596,363
14,7000 News Corp. Ltd. (ADR)....... 463,969
2,200 Omnicom Group, Inc. ........ 176,000
2,600 Outdoor Systems, Inc. ...... 94,900
13000 Time Warner, Inc. .......... 955,500
13,800 Valassis Communications,
Inc. ...................... 505,425
3,900 Westwood One, Inc. ......... 139,181
-----------
9,091,225
-----------
Motorcycles: 0.1%
1,300 Harley-Davidson, Inc. ...... 70,688
-----------
Multi-Industry: 2.6%
2,500 General Electric Co. ....... 282,500
5,500 Minnesota Mining and
Manufacturing Co. ......... 478,156
4,700 Seagrams Co. Ltd. .......... 236,763
5,325 Tyco International Ltd. .... 514,019
-----------
1,511,438
-----------
Oil International: 2.0%
4,100 Atlantic Richfield Co. ..... 342,606
5,500 ELF Aquitaine S.A.
(Sponsored ADR)............ 404,594
1,900 Phillips Petroleum Co. ..... 95,594
1,300 Royal Dutch Petroleum Co.
(NY Reg. Shares)........... 78,325
2,300 Texaco, Inc. ............... 143,750
2,500 Unocal Corp. ............... 99,063
-----------
1,163,932
-----------
Packaged Food: 3.5%
4,000 Campbell Soup Co. .......... 185,500
7,000 Hershey Foods Corp. ........ 415,625
6,000 Quaker Oats Co. ............ 398,250
6,376 Ralston Purina Co. ......... 439,147
7,100 Wrigley (Wm.) Jr. Co. ...... 639,000
-----------
2,077,522
-----------
Paper: 1.1%
5,600 Fort James Corp. ........... 212,100
8,100 Kimberly-Clark Corp. ....... 461,700
-----------
673,800
-----------
</TABLE>
See Notes to Financial Statements
<PAGE>
EAI Select Managers Equity Fund
Schedule of Investments June 30, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
Personal Services: 0.9%
27,600 Service Corp. .............. $ 531,300
-----------
Pharmaceutical: 10.5%
9,000 Abbott Laboratories......... 409,500
9,300 American Home Products
Corp. ..................... 534,750
10,000 Amgen, Inc. ................ 608,750
11,000 Bristol-Myers Squibb Co. ... 774,813
5,600 Eli Lilly and Co. .......... 401,100
6,400 Johnson & Johnson........... 627,200
9,000 Merck & Co. ................ 666,000
6,900 Pfizer, Inc. ............... 757,275
7,800 Pharmacia & Upjohn, Inc. ... 443,138
13,400 Schering-Plough Corp. ...... 710,200
3,700 Warner-Lambert Co. ......... 256,688
-----------
6,189,414
-----------
Photo Equipment/Supplies: 0.3%
2,500 Eastman Kodak Co. .......... 169,375
-----------
Restaurants: 1.0%
14,500 McDonald's Corp. ........... 599,031
-----------
Retail--General Merchandise: 1.9%
4,500 Federated Department
Stores, Inc. .............. 238,219
5,200 J.C. Penney Co. ............ 252,525
13,500 Wal-Mart Stores, Inc. ...... 651,375
-----------
1,142,119
-----------
Retail--Specialty: 2.2%
4,000 Abercrombie & Fitch Co.
(Class A).................. 192,000
3,000 Bed, Bath & Beyond, Inc. ... 115,500
3,000 Best Buy Co., Inc. ......... 202,500
4,000 CVS Corp. .................. 203,000
3,000 Gap, Inc. .................. 151,125
2,500 Home Depot, Inc. ........... 161,094
5,800 Tandy Corp. ................ 283,475
-----------
1,308,694
-----------
Soap and Cosmetics: 2.2%
4,600 Avon Products, Inc. ........ 255,300
5,800 Clorox Co. ................. 619,513
10,500 Gillette Co. ............... 430,500
-----------
1,305,313
-----------
Telephone/Communications: 8.0%
4,700 Ameritech Corp. ............ 345,450
3,600 CenturyTel, Inc. ........... 143,100
</TABLE>
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
- -------------------------------------------------------------------------------------------
<C> <S> <C>
Telephone/Communications: (continued)
3,500 EchoStar Communications
Corp. ..................... $ 537,031
8,500 General Instrument Corp. ... 361,250
9,100 GTE Corp. .................. 689,325
1,100 JDS Uniphase Corp. ......... 182,600
2,800 Lucent Technologies, Inc. .. 188,825
4,300 MCI WorldCom, Inc. ......... 370,875
15,900 Nextel Communications, Inc.
(Class A).................. 797,981
33,000 Paging Network, Inc. ....... 158,813
2,700 QUALCOMM, Inc. ............. 387,450
10,800 Sprint Corp. ............... 570,375
-----------
4,733,075
-----------
Toys: 0.1%
2,250 Hasbro, Inc. ............... 62,859
-----------
Transportation: 0.3%
4,500 MotivePower Industries
Inc. ...................... 79,875
2,700 Norfolk Southern Corp. ..... 81,323
-----------
161,198
-----------
Waste Management: 0.3%
3,200 Waste Management, Inc. ..... 172,000
-----------
Total Common Stocks: 96.8%
(cost: $42,467,430)............................. 57,194,783
-----------
</TABLE>
<TABLE>
<CAPTION>
Annualized
Yield at
Date of Time of Value
Short-Term Obligation Maturity Purchase (Note 1)
- ------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreement
(Note 4): Purchased
on 6/30/99; maturity
value--$1,483,000
(with Boston Safe
Deposit and Trust
Co., collateralized
by $1,580,000 U.S.
Treasury Bill due
9/23/99 with a yield
of 4.60% valued at
$1,563,115) 7/01/99 4.05%
Total Short-Term
Obligation: 2.5%
(cost: $1,483,000) 1,483,000
-----------
Total Investments:
99.3%
(cost: $43,950,430) 58,677,783
Other assets less
liabilities: 0.7% 397,944
-----------
Net Assets: 100% $59,075,727
===========
</TABLE>
- -------
Glossary:
ADR--American Depositary Receipt
See Notes to Financial Statements
<PAGE>
EAI Select Managers Equity Fund Financial Statements
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
<TABLE>
<S> <C>
Assets:
Investments at value (cost, $43,950,430)(Note 1) $58,677,783
Cash 22,103
Receivables:
Securities sold 420,955
Dividends and interest 37,960
Capital shares sold 168
Deferred organization costs (Note 1) 62,216
-----------
Total assets 59,221,185
-----------
Liabilities:
Payables:
Securities purchased 15,000
Management fee 63,257
Accounts payable 67,201
-----------
Total liabilities 145,458
-----------
Net Assets $59,075,727
===========
Net asset value, maximum offering price and redemption price per
share ($59,075,727/5,051,433 shares of beneficial interest
outstanding with an unlimited number of no par value shares
authorized) $ 11.69
===========
Composition of net assets:
Aggregate paid in capital $35,853,799
Net unrealized appreciation of investments 14,727,353
Accumulated net investment loss (32,981)
Undistributed net realized gain 8,527,556
-----------
$59,075,727
===========
</TABLE>
- --------------------------------------------------------------------------------
Statement of Operations
Six Months Ended June 30, 1999 (Unaudited)
<TABLE>
<S> <C> <C>
Income:
Dividends $ 263,724
Interest 30,128
-----------
Total income 293,852
Expenses:
Management (Note 2) $261,466
Administrative (Note 2) 56,841
Professional 29,258
Custodian 22,478
Amortization of deferred organization costs (Note 1) 20,440
Transfer agent 15,788
Shareholder reports 14,490
Trustees 7,438
Registration 6,823
Other 28,762
--------
463,784
Fees waived by the Manager (Note 2) (136,951)
--------
Total expenses 326,833
-----------
Net investment loss (32,981)
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
(Note 3)
Net realized gain from investments 8,640,260
Net change in unrealized appreciation of investments (1,177,729)
-----------
Net gain on investments 7,462,531
-----------
Net Increase in Net Assets Resulting from Operations $ 7,429,550
===========
</TABLE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
June 30,1999 Year Ended
(Unaudited) December 31, 1998
------------ -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss) $ (32,981) $ 50,501
Net realized gain from Investments 8,640,260 6,560,106
Net change in unrealized appreciation of
investments (1,177,729) 4,537,618
----------- ------------
Net increase in net assets resulting from
operations 7,429,550 11,148,225
----------- ------------
Dividends and distributions to shareholders
from: (Note 1)
Net investment income -- (95,169)
Net realized gain from investments -- (6,519,108)
----------- ------------
-- (6,614,277)
----------- ------------
Capital share transactions*:
Net proceeds from sales of Shares 3,959,258 4,079,264
Reinvestment of dividends -- 6,466,639
----------- ------------
3,959,258 10,545,903
Cost of shares redeemed (7,762,265) (11,975,132)
----------- ------------
Decrease in net assets resulting from capital
share transactions (3,803,007) (1,429,229)
----------- ------------
Total increase in net assets 3,626,543 3,104,719
Net Assets:
Beginning of period 55,449,184 52,344,465
----------- ------------
End of period $59,075,727 $ 55,449,184
=========== ============
*Shares of Beneficial Interest Issued and
Redeemed:
Shares sold 366,850 395,252
Reinvestment of dividends -- 628,439
----------- ------------
366,850 1,023,691
Shares redeemed (702,774) (1,188,023)
----------- ------------
Net decrease (335,924) (164,332)
=========== ============
</TABLE>
See Notes to Financial Statements
<PAGE>
EAI Select Managers Equity Fund
- -------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Six Months Year Ended For the Period
Ending June 30, December 31, January 2, 1996(a)
1999 ---------------- To
(Unaudited) 1998 1997 December 31, 1996
--------------- ------- ------- ------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 10.29 $ 9.43 $ 10.82 $ 10.00
--------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income
(Loss)................. (0.07) 0.01 0.08 0.08
Net Gain on Investments
(both realized and
unrealized)............ 1.47 2.24 3.04 1.35
--------- ------- ------- -------
Total From Investment
Operations.............. 1.40 2.25 3.12 1.43
--------- ------- ------- -------
Less Distributions from:
Net Investment Income... -- (0.02) (0.08) (0.08)
Net Realized Gain on
Investments............ -- (1.37) (4.43) (0.53)
--------- ------- ------- -------
Total Distributions...... -- (1.39) (4.51) (0.61)
--------- ------- ------- -------
Net Asset Value, End of
Period.................. $ 11.69 $ 10.29 $ 9.43 $ 10.82
========= ======= ======= =======
Total Investment
Return(b)............... 13.61% 23.86% 28.84% 14.30%
- -------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of Period
(000)................... $ 59,076 $55,449 $52,344 $88,607
Ratio of Gross Expenses
to Average Net Assets... 1.63%(d) 1.66% 1.55% 1.50%(d)
Ratio of Net Expenses to
Average Net Assets...... 1.15%(d) 1.15% 1.15% 1.15%(d)
Ratio of Net Investment
Income (Loss) to Average
Net Assets(c)............. (0.12%)(d) 0.09% 0.37% 0.73%(d)
Portfolio Turnover Rate.. 48% 63% 78% 174%
</TABLE>
- -------
(a) Commencement of operations.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of distributions
at net asset value on the payable date and a redemption on the last day of
the period. Total return for the periods less than one year are not
annualized.
(c) Ratios would have been (0.60%), (0.42%), (0.03%) and 0.38%, respectively,
had the Manager not waived expenses.
(d) Annualized.
See Notes to Financial Statements.
- -----------------------------------------------------------------------------
Notes To Financial Statements (Unaudited)
Note 1--Significant Accounting Policies:
EAI Select Managers Equity Fund (the "Fund"), organized as a Massachusetts
business trust on September 27, 1995, is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The primary investment objective of the Fund is to achieve long-term capital
appreciation.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
financial statements are presented in conformity with generally accepted
accounting principles. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts in the financial
statements. Actual results could differ from these estimates.
A. Security Valuation--Securities traded on national exchanges or traded in
the NASDAQ National Market System are valued at the last sales prices
reported at the close of business on the principal markets for such
securities on the last business day of the period. Over-the-counter
securities not included in the NASDAQ National Market System and listed
securities for which no sale was reported are valued at the last bid price.
Short-term obligations purchased with more than sixty days remaining to
maturity are valued at market. Short-term obligations purchased with sixty
days or less to maturity are valued at cost, which, with accrued interest,
approximates value. Securities for which quotations are not readily
available are stated at fair value as determined by the Board of Trustees.
B. Federal Income Taxes--It is the Fund's policy to comply with the provisions
of Subchapter M of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
C. Dividends and Distributions--Dividend income and distributions to
shareholders are recorded on the ex-
<PAGE>
EAI Select Managers Equity Fund
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Notes to Financial Statements (continued)
dividend date. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
such amounts reported in accordance with generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their
Federal tax basis treatment; temporary differences do not require
reclassification.
Temporary book/tax differences are primarily related to wash sale loss
deferrals.
D. Other--Interest income is accrued as earned. Security transactions are
accounted for on the date the securities are purchased or sold. Realized
gains and losses on securities are determined on the specific identified
cost method.
E. Organization Costs--Deferred organization costs of $209,315 will be
amortized over a period not to exceed five years from the commencement of
operations. In the event that, at any time during the five year period
beginning with the date of commencement of operations, the initial shares
acquired by the Manager prior to such date are redeemed by any holder
thereof, the redemption proceeds payable in respect of such shares will be
reduced by the pro rata share (based on the proportionate share of the
initial shares redeemed to the total number of original shares outstanding
at the time of redemption) of the then unamortized deferred organization
costs as of the date of such redemption. In the event that the Fund
liquidates before the deferred organization costs are fully amortized, the
Manager shall bear such unamortized deferred organization costs.
Note 2--Agreements and Transactions of Related Parties--Evaluation Associates
Capital Markets, Inc. (the "Manager"), a wholly owned subsidiary of EAI
Partners, L.P. (the "Parent"), earned fees of $261,466 for the six months ended
June 30, 1999 for management of the Fund. The fee is based on an annual rate of
0.92% of average daily net assets. For the six months ended June 30, 1999, the
Manager agreed to waive management fees in the amount of $136,951 which
represents the amount exceeding a self imposed expense limitation of 1.15% of
average daily net assets. Such limitation will be in effect until December 31,
1999.
Certain of the officers and trustees of the Fund are officers, directors, or
partners of the Manager or Parent.
Affiliates of the Manager or Parent and counsel to the Fund hold 1,567,802
shares (31.0%) and 1,512,984 shares (30.0%), respectively, of the outstanding
shares of the Fund. Additionally, 806,672 shares are owned by two other
shareholders, each of whom own more than 5% but less than 8.5% of the
outstanding shares of the Fund.
The Manager pays from its management fees each Subadviser a fee at the annual
rate of 0.375 of 1% of the average monthly assets of the Fund managed by that
Subadviser. At June 30, 1999, the Subadvisers are Iridian Asset Management LLC,
Liberty Investment Management, Mastrapasgua & Associates, Inc., Peachtree Asset
Management, and Siphron Capital Management.
In accordance with a Portfolio Accounting and Administration Agreement with Van
Eck Associates Corporation ("Van Eck"), the Fund paid Van Eck $56,841 for the
six months ended June 30, 1999. The annual fee is graduated, beginning at 0.20
of 1% of monthly average net assets of less than $100 million to 0.12 of 1% of
monthly average net assets in excess of $260 million.
The Fund accrued $16,860 legal fees payable to Day, Berry and Howard, counsel
to the Fund, for the six months ended June 30, 1999 for legal services in
conjunction with the Fund's ongoing operations.
Distribution Agreement--Under the terms of a Distribution Agreement with the
Fund, EAI Securities Inc., a wholly owned subsidiary of the Parent, serves as
the Distributor of the Fund's shares. EAI Securities, Inc., does not receive
any fees for services provided pursuant to this agreement.
Note 3--Purchases and Sales--Purchases and sales of securities, other than
short-term obligations, aggregated $27,137,287 and $31,672,394, respectively,
for the six months ended June 30, 1999. For federal income tax purposes the
cost of investments owned at June 30, 1999 was $43,950,430.
As of June 30, 1999, net unrealized appreciation for federal income tax
purposes aggregated $15,792,377 of which $16,376,415 related to appreciated
securities and $584,038 related to depreciated securities.
Note 4--Collateral--Collateral for repurchase agreements is held by the Fund's
custodian, the value of which must be at least 102% of the underlying debt
obligation. In the remote chance the counterparty should fail to complete the
repurchase agreement, realization and retention of the collateral may be
subject to legal proceedings and the Fund would become exposed to market
fluctuation on the collateral.
<PAGE>
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Investment Manager
Evaluation Associates Capital Markets, Inc.
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
Administrator
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
Legal Counsel
Day, Berry & Howard
CityPlace
Hartford, CT 06103
Transfer Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105-1802
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108
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This report must be accompanied or preceded by an effective prospectus which
includes more complete information such as charges and expenses. For a
prospectus and additional information about EAI Select Managers Equity Fund,
please call the number listed below.
[LOGO] EAI
SELECT
EAI Select Managers Equity Fund
EAI Securities Inc. -- Distributor
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
(203) 855-2200
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EAI Select
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Managers
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Equity Fund
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Semi-Annual
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Report
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June 30, 1999
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[LOGO] EAI
SELECT
