<PAGE>
EAI Select Managers Equity Fund
Review of First Six Months of 2000
--------------------------------------------------------------------------------
Dear Fellow Shareholder:
We are very pleased to present the first half of 2000 report on the EAI Select
Managers Equity Fund ("the 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 in 2000.
Eai Select Managers Equity Fund
The EAI Select Managers Equity Fund returned +0.7% the first six months of
2000. This return compares favorably to the average of the Morningstar Large
Blend Mutual Fund Universe* (+0.5%) , and the S&P 500 (-0.4%).
Despite a difficult second quarter, technology (+5.8%) was a clear leader for
the first six months; its weighting in the Fund has fluctuated from 29% to 35%,
and is currently at 30%. The larger more established companies have held up
well, withstanding the extreme volatility experienced so far this year.
Examples include EMC Corp. (+40.8%), Hewlett-Packard Co. (+38.5%), Oracle Corp.
(+50.0%) and Intel Corp. (+62.5%).
Another positive was financial (+5.1%). This sector benefited from relatively
modest valuations and the prospect of lower interest rates. Cigna Corp.
(+17.0%), Merrill Lynch & Co. (+38.9%) and State Street Corp. (+45.6%) were
particularly strong.
Offsetting these results to some degree was consumer cyclical (-8.8%), the
second largest sector, averaging 22%. The stellar performance by Central
Newspapers (+61.3%), which agreed to a merger with Gannett Co., was negated by
profit-taking in other media issues. EchoStar Communications Corp (-32.1%), the
second largest holding at the beginning of the year, fell dramatically.
Although the satellite-T.V. provider's subscriber growth is soaring, higher
marketing expenses are causing wider losses. Also, AT&T Liberty Media (-14.6%),
the Fund's largest holding, fell in sympathy with other entertainment
companies.
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 2000, the S&P 500 fell a modest 0.4%. The big story,
however, was the swings in the NASDAQ, which had five of its worst and best
days, and its best (+19.0%) and worst week (-25.3%) in history (29 years); for
the six months, it lost 2.5%
The year 2000 got off to a shaky start. Higher interest rates and oil prices,
and anxiety over fourth quarter earnings reports, hurt the market. By February
25, the S&P 500 had lost 9.1%. Technology was the one sector that seemed
immune; the NASDAQ rose 12.8% over this period.
After a week of stabilization, the market rebounded, led by "old economy"
sectors. Valuations suddenly mattered. By March 24th, the S&P 500 had rebounded
an impressive 14.8% off the February lows.
A relatively calm two weeks ensued. The markets unraveled during the second
week of the second quarter, as inflation fears heated up and concerns about
valuations gripped investors. The S&P 500 dropped 10.5%, while the NASDAQ
suffered its largest weekly loss ever (-25.3%).
A sharp reflex rally set in during the early part of the following week (4/17-
4/18: S&P 500: +6.3%; NASDAQ: +14.2%); some follow-through lasted until the end
of April.
Movements were volatile but little changed leading up to the Fed's May meeting.
The hawkish comments following the aggressive move by the Fed on the 16th
caused a brief selloff; the market finally found a cyclical bottom one week
later. Losses from the highs reached in mid-to-late March were hefty: S&P 500
(-9.9%), Russell 2000 (-23.8%) and NASDAQ (-37.3%).
<PAGE>
EAI Select Managers Equity Fund
--------------------------------------------------------------------------------
For the balance of the quarter, encouraging signs of slower economic growth,
benign inflation and a sense that the Fed is well along in its tightening mode,
led to a fairly broad-based recovery with the NASDAQ in the forefront. In one
week alone (5/29-6/2), this index gained 19.0%.
In a rebound from poor 1999 results, consumer noncyclicals (+10.3%) were the
leaders so far this year. Pharmaceuticals (+25.7%) performed well in this
uncertain environment for earnings. Higher oil prices helped energy (+8.2%),
the second best performer.
The biggest loser so far this year was basic industry (-24.1%). The prospect of
a slowing economy led to a broad-based selloff. Of the 51 issues, 43 lagged the
S&P 500: paper (-28.2%) and chemical (-25.6%) companies were particularly weak.
The attached report provides you with a listing of the investment portfolio,
performance results, and the financial statements as of June 30, 2000. 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 2000
Average Annual Total Returns as of 6/30/00
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
1 Inception
Year 3 Years (1/2/96)
---------------------------------------
<S> <C> <C> <C>
The Fund 15.89% 21.87% 21.50%
---------------------------------------
Peer Group* 8.93% 17.29% 19.68%
</TABLE>
*Morningstar Large Blend Equity Universe contained 954 funds as of 6/30/00.
The performance data represents past performance and is not indicative of
future results. Investment return and principal value of an investment in the
Fund will vary so that shares, when redeemed, may be worth more or less than
their original cost.
The Manager is currently waiving certain or all expenses on the Fund. Had the
Fund incurred all expenses, investment returns would have been reduced.
<PAGE>
EAI Select Managers Equity Fund
Schedule of Investments June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
-------------------------------------------------------------------------------------------
<C> <S> <C>
Aerospace: 2.4%
7,100 Boeing Co. ................. $ 296,869
2,000 General Dynamics Corp. ..... 104,500
10,568 General Motors Corp. (Class
H)......................... 927,342
5,800 United Technologies Corp. .. 341,475
-----------
1,670,186
-----------
Autos: 0.3%
3,839 General Motors Co. ......... 222,902
-----------
Banks: 4.7%
3,450 AmSouth Bancorporation...... 54,338
13,800 Chase Manhattan Corp. ...... 635,663
4,500 Citigroup, Inc. ............ 271,125
3,780 Commerce Bancshares, Inc. .. 112,455
18,000 First Union Corp. .......... 446,625
7,900 FleetBoston Financial
Corp. ..................... 268,600
11,600 Mellon Financial Corp. ..... 422,675
7,700 State Street Corp. ......... 816,681
6,500 Wells Fargo & Co. .......... 251,875
-----------
3,280,037
-----------
Beverages: 2.1%
12,000 Coca-Cola Co. .............. 689,250
17,800 PepsiCo, Inc. .............. 790,988
-----------
1,480,238
-----------
Chemicals: 0.3%
4,000 Air Products & Chemicals,
Inc. ...................... 123,250
2,000 Eastman Chemical Co. ....... 95,500
-----------
218,750
-----------
Computer Services/Office Equipment: 17.6%
4,200 Advanced Micro Devices,
Inc. ...................... 324,450
2,400 America Online, Inc. ....... 126,600
2,000 Analog Devices, Inc. ....... 152,000
8,200 Apple Computer, Inc. ....... 429,475
2,000 Autodesk, Inc. ............. 69,375
2,400 Broadcom Corp. (Class A).... 525,450
3,400 Checkfree Holdings Corp. ... 175,313
1,200 CMGI, Inc. ................. 54,975
3,000 CNET Networks, Inc. ........ 73,688
5,600 Cisco Systems, Inc. ........ 355,950
9,800 Compaq Computer Corp. ...... 250,513
16,300 Dell Computer Corp. ........ 803,794
6,791 Earthlink Network, Inc. .... 104,836
</TABLE>
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
-------------------------------------------------------------------------------------------
<C> <S> <C>
Computer Services/Office Equipment: (continued)
7,300 Electronic Data Systems
Corp. ..................... $ 301,125
19,400 EMC Corp. .................. 1,492,588
14,400 First Data Corp. ........... 714,600
5,500 Hewlett-Packard Co. ........ 686,813
4,300 International Business
Machines Corp. ............ 471,119
4,300 Lexmark International
Group, Inc. (Class A)...... 289,175
10,300 Microsoft Corp. ............ 824,000
22,300 Motorola, Inc. ............. 648,094
17,500 Novell, Inc. ............... 161,875
9,300 Oracle Corp. ............... 781,781
5,100 Pitney Bowes, Inc. ......... 204,000
7,600 Sun Microsystems, Inc. ..... 691,125
2,800 Travelocity.com, Inc. ...... 45,850
3,440 VeriSign, Inc. ............. 607,160
4,500 Veritas Software Corp. ..... 508,570
20,100 Xerox Corp. ................ 417,075
-----------
12,291,369
-----------
Cosmetics & Toiletries: 1.5%
6,500 Colgate-Palmolive Co. ...... 389,188
19,000 Gillette Co. ............... 663,813
-----------
1,053,001
-----------
Electric Utilities: 1.5%
18,100 AES Corp. .................. 825,813
3,000 Pinnacle West Capital
Corp. ..................... 101,625
4,000 PPL Corp. .................. 87,750
-----------
1,015,188
-----------
Electronics: 7.6%
6,597 Agilent Technologies,
Inc. ...................... 486,529
7,400 Applied Materials, Inc. .... 670,625
18,300 Energizer Holdings, Inc. ... 333,975
1,000 Integrated Device
Technology, Inc. .......... 59,875
6,600 Intel Corp. ................ 882,338
5,500 KLA-Tenor Corp. ............ 322,094
2,500 LSI Logic Corp. ............ 135,313
5,000 Micron Technology, Inc. .... 440,313
3,300 Novellus Systems, Inc. ..... 186,656
5,200 PE Corp.--PE Biosystems
Group...................... 342,550
1,600 PMC-Sierra, Inc. ........... 284,300
5,000 Teradyne, Inc. ............. 367,500
11,000 Texas Instruments, Inc. .... 755,563
-----------
5,267,631
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund
Schedule of Investments June 30, 2000 (unaudited)(continued)
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
-------------------------------------------------------------------------------------------
<C> <S> <C>
Energy: 1.5%
7,000 Phillips Petroleum Co. ..... $ 354,813
3,000 Tosco Corp. ................ 84,938
4,422 Total Fina S.A. (ADR)....... 339,665
6,100 Williams Companies, Inc. ... 254,294
-----------
1,033,710
-----------
Financial Services: 8.9%
9,500 American Express Co. ....... 495,188
18,000 Associates First Capital
Corp. (Class A)............ 401,625
4,400 Capital One Financial
Corp. ..................... 196,350
22,500 Charles Schwab Co. ......... 756,563
9,500 Federal Home Loan Mortgage
Corp. ..................... 384,750
6,800 Federal National Mortgage
Association................ 354,875
5,500 Goldman Sachs Group, Inc. .. 521,813
12,900 Household International,
Inc. ...................... 536,156
6,000 Knight Trading Group,
Inc. ...................... 178,875
10,925 MBNA Corp. ................. 296,341
9,500 Merrill Lynch and Co.,
Inc. ...................... 1,092,500
7,500 Morgan Stanley Dean
Witter..................... 624,375
2,000 Providian Financial Corp. .. 180,000
6,300 S1 Corp. ................... 146,869
-----------
6,166,280
-----------
Footwear: 0.5%
9,000 Nike, Inc. (Class B)........ 358,313
-----------
Healthcare: 1.1%
8,200 HCA-The Healthcare
Corporation................ 249,075
5,000 Tenet Healthcare Corp. ..... 135,000
3,000 UnitedHealth Group, Inc. ... 257,250
2,300 Universal Health Services,
Inc. ...................... 150,650
-----------
791,975
-----------
Hospital Supply: 1.7%
7,800 Baxter International,
Inc. ...................... 548,438
21,200 Becton, Dickinson & Co. .... 608,175
-----------
1,156,613
-----------
Hotels: 0.6%
13,200 Starwood Hotels and Resorts
Worldwide, Inc. ........... 429,825
-----------
Instruments: 0.5%
2,700 Waters Corp. ............... 336,994
-----------
</TABLE>
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
-------------------------------------------------------------------------------------------
<C> <S> <C>
Insurance: 3.1%
4,400 Ambac Financial Group,
Inc. ...................... $ 241,175
1,100 AON Corp. .................. 34,169
13,100 AXA Financial, Inc. ........ 445,400
2,600 Chubb Corp. ................ 159,900
7,500 CIGNA Corp. ................ 701,250
10,400 Hartford Financial Services
Group, Inc. ............... 581,750
-----------
2,163,644
-----------
Leisure: 0.9%
29,900 Harrah's Entertainment,
Inc. ...................... 626,031
-----------
Machinery: 0.3%
4,000 Deere & Co. ................ 148,000
1,500 Dover Corp. ................ 60,844
-----------
208,844
-----------
Media: 13.0%
83,300 AT&T Corp.--Liberty Media
Group...................... 2,020,025
9,300 Belo (A.H.) Corp. (Series
A)......................... 161,006
10,900 Cablevision Systems Corp.
(Class A).................. 739,838
11,500 Clear Channel
Communications, Inc. ...... 862,500
2,500 Comcast Corp. (Class A)..... 101,250
4,000 Disney (Walt) Co. .......... 155,250
2,700 Gemstar-TV Guide
International, Inc......... 165,923
18,100 Infinity Broadcasting
Corp. ..................... 659,519
1,000 Knight-Ridder, Inc. ........ 53,188
11,700 New York Times Co. (Class
A)......................... 462,150
10,200 News Corp. Ltd. (ADR)....... 484,500
8,200 Time Warner, Inc. .......... 623,200
41,600 USA Networks, Inc. ......... 899,600
10,600 Valassis Communications,
Inc. ...................... 404,125
9,005 Viacom, Inc. ............... 614,028
4,000 Viacom, Inc. (Class A)...... 273,500
10,800 Westwood One, Inc. ......... 368,550
-----------
9,048,152
-----------
Multi-Industry: 3.3%
40,000 Cendant Corp. .............. 560,000
7,500 General Electric Co. ....... 397,500
4,600 Honeywell International,
Inc. ...................... 154,963
6,500 Minnesota Mining and
Manufacturing Co. ......... 536,250
13,050 Tyco International Ltd. .... 618,244
-----------
2,266,957
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
EAI Select Managers Equity Fund
Schedule of Investments June 30, 2000 (unaudited)(continued)
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C>
Packaged Food: 2.3%
11,300 Hershey Foods Corp. ........ $ 548,050
1,800 Quaker Oats Co. ............ 135,225
2,000 Ralston Purina Co. ......... 39,875
11,300 Wrigley (Wm.) Jr. Co. ...... 906,119
-----------
1,629,269
-----------
Paper: 0.7%
8,600 Kimberly-Clark Corp. ....... 493,425
-----------
Pharmaceutical: 7.7%
2,900 American Home Products
Corp. ..................... 170,375
8,000 Amgen, Inc. ................ 562,000
14,900 Bristol-Myers Squibb Co. ... 867,925
7,700 Elan Corp PLC (ADR)........... 372,969
2,800 Genentech, Inc. ............ 481,600
3,400 IDEC Pharmaceuticals
Corp. ..................... 398,863
4,200 MedImmune, Inc. ............ 310,800
8,600 Merck & Co. ................ 658,975
600 PE Corp.--PE Cellera
Genomics
Group...................... 56,100
20,375 Pfizer, Inc. ............... 978,000
9,282 Pharmacia Corp. ............ 479,763
-----------
5,337,370
-----------
Photo Equipment/Supplies: 1.1%
12,400 Eastman Kodak Co. .......... 737,800
-----------
Publishing: 0.2%
2,000 Dow Jones & Co., Inc. ...... 146,500
-----------
Retail--General Merchandise: 0.3%
3,000 Safeway, Inc. .............. 135,375
1,700 Wal-Mart Stores, Inc. ...... 97,963
-----------
233,338
-----------
Retail--Specialty: 1.4%
24,900 Kroger Co. ................. 549,356
5,500 RadioShack Corp. ........... 260,563
4,000 Zale Corp. ................. 146,000
-----------
955,919
-----------
Telephone/Communications: 8.3%
8,052 AT&T Corp. ................. 254,660
7,500 BellSouth Corp. ............ 319,688
10,000 Broadwing, Inc. ............ 259,375
3,000 CommScope, Inc. ............ 123,000
</TABLE>
<TABLE>
<CAPTION>
No. of
Common
Shares Securities Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C>
Telephone/Communications: (continued)
17,900 Crown Castle International
Corp. ..................... $ 653,350
24,800 EchoStar Communications
Corp. ..................... 821,113
11,600 Global Crossing Ltd. ....... 305,225
8,400 GTE Corp. .................. 522,900
5,300 JDS Uniphase Corp. ......... 635,338
7,000 Nortel Networks Corp. ...... 477,750
1,800 QUALCOMM, Inc. ............. 108,000
12,780 SBC Communications, Inc. ... 552,735
4,600 Sprint Corp. ............... 234,600
7,800 Sprint Corp. (PCS Group)...... 464,100
1,700 Vodafone Airtouch PLC (ADR)... 70,427
-----------
5,802,261
-----------
Wholesale Distributor: 0.1%
3,000 Arrow Electronic, Inc. ..... 93,000
-----------
Total Common Stocks: 95.5% (cost: $53,684,112)...
66,515,522
-----------
</TABLE>
<TABLE>
<CAPTION>
Date of Interest Value (Note
Short-Term Obligation Maturity Rate 1)
----------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreement
(Note 4): Purchased
on 6/30/00; maturity
value--$2,256,000
(with Boston Safe
Deposit and Trust
Co., collateralized
by $2,339,131 U.S.
Treasury Bill due
10/05/00 with an
interest yield of
5.91% valued at
$2,304,074) 7/03/00 4.05%
Total Short-Term Obligation:
3.3%
(cost: $2,256,000) 2,256,000
-----------
Total Investments:
98.8%
(cost: $55,940,112) 68,771,522
Other assets less liabilities:
1.2% 869,607
-----------
Net Assets: 100% $69,641,129
===========
</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, 2000 (Unaudited)
<TABLE>
<S> <C>
Assets:
Investments, at value (cost: $55,940,112)(Note 1) $68,771,522
Cash 128
Receivables:
Securities sold 1,896,367
Dividends and interest 95,292
Capital shares sold 7,765
Deferred organization costs (Note 1) 20,884
-----------
Total assets 70,791,958
-----------
Liabilities:
Payables:
Securities purchased 1,038,294
Management fee 81,554
Administration fee 11,126
Accrued expenses and other liabilities 19,855
-----------
Total liabilities 1,150,829
-----------
Net Assets $69,641,129
===========
Net asset value, maximum offering price and redemption price per
share ($69,641,129 / 6,211,881 shares of beneficial interest
outstanding with an unlimited number of no par value shares
authorized) $ 11.21
===========
Composition of net assets:
Aggregate paid in capital $48,745,573
Net unrealized appreciation of investments 12,831,410
Accumulated net investment loss (50,333)
Undistributed net realized gains 8,114,479
-----------
$69,641,129
===========
</TABLE>
--------------------------------------------------------------------------------
Statement of Operations
Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C> <C>
Income:
Dividends $ 292,346
Interest 44,175
-----------
Total income 336,521
Expenses:
Management (Note 2) $ 309,485
Administrative (Note 2) 67,279
Professional 33,366
Custodian 27,270
Amortization of deferred organization costs (Note 1) 20,554
Transfer agent 15,877
Registration 8,948
Shareholder reports 8,528
Trustees 7,500
Other 27,838
---------
Total expenses 526,645
Fees waived by the Manager (Note 2) (139,791)
---------
Net expenses 386,854
-----------
Net investment loss (50,333)
-----------
Net Realized and Unrealized Gain (Loss) on
Investments: (Note 3)
Net realized gain from investments 8,257,465
Net change in unrealized appreciation of investments (7,806,471)
-----------
Net gain on investments 450,994
-----------
Net Increase in Net Assets Resulting from Operations $ 400,661
===========
</TABLE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
------------- -----------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment loss $ (50,333) $ (111,903)
Net realized gain from investments 8,257,465 11,500,400
Net change in unrealized appreciation of
investments (7,806,471) 4,732,799
----------- -----------
Net increase in net assets resulting from
operations 400,661 16,121,296
----------- -----------
Distributions to shareholders from: (Note 1)
Net realized gain from investments -- (11,467,181)
----------- -----------
Capital share transactions*:
Net proceeds from sales of shares 6,342,490 5,170,246
Reinvestment of distributions -- 10,461,268
----------- -----------
6,342,490 15,631,514
Cost of shares redeemed (2,646,987) (10,189,848)
----------- -----------
Increase in net assets resulting from capital
share transactions 3,695,503 5,441,666
----------- -----------
Total increase in net assets 4,096,164 10,095,781
Net Assets:
Beginning of period 65,544,965 55,449,184
----------- -----------
End of period $69,641,129 $65,544,965
=========== ===========
*Shares of Beneficial Interest Issued and
Redeemed:
Shares sold 560,393 471,772
Reinvestment of dividends -- 939,916
----------- -----------
560,393 1,411,688
Shares redeemed (237,805) (909,752)
----------- -----------
Net increase 322,588 501,936
=========== ===========
</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 For the Period
Ended Year Ended December 31, January 2, 1996(a)
June 30, 2000 -------------------------- To
(Unaudited) 1999 1998 1997 December 31, 1996
------------- ------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 11.13 $ 10.29 $ 9.43 $ 10.82 $ 10.00
------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income
(Loss)................ (0.01) (0.02) 0.01 0.08 0.08
Net Gain on Investments
(both realized and
unrealized)........... 0.09 3.18 2.24 3.04 1.35
------- ------- ------- ------- -------
Total From Investment
Operations............. 0.08 3.16 2.25 3.12 1.43
------- ------- ------- ------- -------
Less Distributions from:
Net Investment Income.. -- -- (0.02) (0.08) (0.08)
Net Realized Gain on
Investments........... -- (2.32) (1.37) (4.43) (0.53)
------- ------- ------- ------- -------
Total Distributions..... -- (2.32) (1.39) (4.51) (0.61)
------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 11.21 $ 11.13 $ 10.29 $ 9.43 $ 10.82
======= ======= ======= ======= =======
Total Investment
Return(b).............. 0.72% 30.71% 23.86% 28.84% 14.30%
----------------------------------------------------------------------------------------
Ratios/Supplementary
Data
Net Assets, End of
Period (000)........... $69,641 $65,545 $55,449 $52,344 $88,607
Ratio of Gross Expenses
to Average Net Assets.. 1.57% (d) 1.60% 1.66% 1.55% 1.50%(d)
Ratio of Net Expenses to
Average Net Assets..... 1.15% (d) 1.15% 1.15% 1.15% 1.15%(d)
Ratio of Net Investment
Income (Loss) to
Average Net Assets(c).. (0.15%)(d) (0.19%) 0.09% 0.37% 0.73%(d)
Portfolio Turnover Rate. 45% 82% 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 returns for periods less than one year are not
annualized.
(c) Ratios would have been (0.57%), (0.64%), (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--Organization and 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 in the United States. The preparation of financial
statements in conformity with generally accepted accounting principles in the
United States 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 with more than sixty days remaining to
maturity are valued at market. Short-term obligations with sixty days or
less to maturity are valued at amortized 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
<PAGE>
EAI Select Managers Equity Fund
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
taxable income to its shareholders. Therefore, no federal income tax
provision is required.
C. Dividends and Distributions to Shareholders--Distributions to shareholders
are recorded on the ex-dividend date. Income distributions and capital gain
distributions are determined in accordance with income tax regulations,
which may differ from 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.
D. Security Transactions and Investment Income--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
identification cost method. Dividend income is recorded on ex-dividend
date. Interest income is accrued as earned.
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 $309,485 for the six months ended
June 30, 2000 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, 2000, the
Manager agreed to waive management fees in the amount of $139,791 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,
2000.
Certain 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 1,857,947
shares (29.9%) and 2,003,611 shares (32.3%), respectively, of the outstanding
shares of the Fund. Additionally, 865,311 shares are owned by two other
shareholders, each of whom owns 6.9% and 7.0% of the outstanding shares of the
Fund, respectively.
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, 2000, the Subadvisers are Iridian Asset Management LLC,
Goldman Sachs Asset Management, Mastrapasqua & Associates, Inc., Peachtree
Asset Management, and Siphron Capital Management.
In accordance with a Portfolio Accounting and Administration Agreement with Van
Eck Associates Corporation, the Fund accrued $67,279 in administration fees for
the six months ended June 30, 2000. The annual fee is graduated, beginning at
0.20 of 1% of the average daily net assets of less than $100 million to 0.12 of
1% of the average daily net assets in excess of $260 million.
The Fund accrued $19,116 of legal fees payable to Day, Berry & Howard LLP,
counsel to the Fund, for the six months ended June 30, 2000 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 $31,841,472 and $29,889,656, respectively,
for the six months ended June 30, 2000. For federal income tax purposes the
cost of investments owned at June 30, 2000 was $56,116,491.
As of June 30, 2000, net unrealized appreciation for federal income tax
purposes aggregated $12,655,031 of which $16,797,775 related to appreciated
securities and $4,142,744 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
Independant Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Day, Berry & Howard LLP
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 OF EAI SELECT]
EAI Select Managers Equity Fund
EAI Securities Inc. - Distributor
200 Connecticut Avenue
Suite 700
Norwalk, CT 06854-1958
(203) 855-2255 (call collect)
www.eaiselect.com
=================================================
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, 2000
[LOGO OF EAI SELECT]
