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OMB Number: 3235-0570
Expires: Nov. 30, 2005
Estimated average burden
hours per response: 5.0
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09112
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EAI Select Managers Equity Fund
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(Exact name of registrant as specified in charter)
200 Connecticut Ave., Suite 700, Norwalk CT 06854-1958
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(Address of principal executive offices) (Zip code)
Evaluation Associates Capital Markets Inc.
200 Connecticut Ave., Norwalk CT 06854-1958
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(Name and address of agent for service)
Registrant's telephone number, including area code: 203-855-2255 (call collect)
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Date of fiscal year end: December 31, 2003
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June 30, 2003
Date of reporting period:------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
EAI SELECT MANAGERS EQUITY FUND
REVIEW OF FIRST SIX MONTHS OF 2003
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
We would like to take this opportunity to present the report for the first half
of 2003 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 markets so far in 2003.
EAI SELECT MANAGERS EQUITY FUND
The EAI Select Managers Equity Fund gained 12.3% for the first six months of
2003, outperforming the S&P 500, which was up 11.8%. The Fund benefited from the
broad strength of the US equity markets, posting positive returns in each
economic sector.
Notable strengths within the Fund included gains in consumer discretionary
stocks, up 20.1%, and healthcare issues, up 17.7%. Both sectors outperformed the
S&P 500 and their comparable market sectors. The consumer discretionary sector
was led by media stocks, up 17.9%, and retail stocks, up 34.6%. Both groups were
buoyed by a reported rise in consumer confidence during the second quarter.
Among the best performing issues were the satellite TV provider, EchoStar
Communications, up 55.5%, and the home improvement retailer, Home Depot, up
38.5%. Within the healthcare sector, biotechnology, up 34.0%, was the clear
winner, and the Fund benefited from a relative overweighting compared to the S&P
500, 4% vs. 1%. One excellent performing biotech stock was Genentech, which
surged 117.5% on news that one of its cancer drugs exceeded expectations.
Another strong performing sector, the telecom services group, about 1% of the
fund, was up 103.9% for the first half of the year. Within the sector, Crown
Castle Int'l Corp, a communications equipment maker, rose 107.2% due to
increased demand.
The only laggards were financials, up only 9.7%, and materials, up a modest
3.8%. Financials, which comprise about 23% of the Fund, represent the largest
sector allocation, while materials, with a 3% allocation, are a significantly
smaller portion of the Fund. Among the financials, Freddie Mac, the Fund's
biggest detractor, fell 13.1% after the resignations of several key officers.
The materials sector was led lower by chemicals, down 2.4%. For example,
International Flavors lost 10.5% due to lackluster earnings.
PERCENT OF NET ASSETS AS OF 6/30/03: ECHOSTAR COMMUNICATIONS (0.8%), HOME DEPOT
INC. (1.2%), GENENTECH INC. (0.8%), CROWN CASTLE INT'L. CORP. (1.6%) AND FREDDIE
MAC (1.9%).
ECONOMIC REVIEW
A difficult winter and a drop in consumer confidence caused by the geo-political
events in the early part of the year left the U.S. economy on the verge of
falling into recession. With a quick end to the Iraqi regime in April,
confidence rebounded and signs of slow but stable growth appeared.
The Federal Reserve did its best to revive economic growth. Although leaving
interest rates unchanged early in the year, at the May 6th meeting there were
indications of a leaning toward easing. Especially eye catching were the
phrases, an "unwelcome substantial fall in inflation" may threaten economic
growth and "slow growth is now a greater risk than inflation". Easing came seven
weeks later. Policy makers reduced short-term interest rates by 0.25% at their
regularly scheduled June 24/25 meeting. Thirteen cuts since early 2001 brought
the cumulative reduction to 5.50% (Fed Funds: 6.5% down to 1.00%).
THE STOCK MARKET REVIEW
In the first six months, the S&P 500 rose 11.8%, marking the best first
half-year since 1999.
1
EAI SELECT MANAGERS EQUITY FUND
- --------------------------------------------------------------------------------
The equity market began the year on an upbeat note, with the S&P 500 rising 6.0%
by January 14th. A stronger than expected manufacturing report, the unveiling of
the economic stimulus plan, and an upbeat forecast by European software provider
SAP, set the tone for a strong rebound from a dismal December.
As has been the case since the bear market began, the rally unraveled. For the
next eight weeks (thru 3/11), the market lost 13.8%. This time it was caused by
a combination of earnings malaise and geopolitical events, with the latter
overwhelming the former.
The U.S. pronouncement of a March 17 deadline for Iraq to disarm or face war
removed this uncertainty. The market rallied broadly, rising 11.9%, up to and
including the second day after first shots were fired on the 19th of March as
hopes of a quick resolution to the conflict took center stage. Some of those
gains evaporated as concerns mounted that the confrontation would be lengthy,
but when it became clear, with the fall of Baghdad on April 9th, that coalition
forces had secured the oil fields and controlled all key strategic positions,
the market rally resumed in earnest. As the geopolitical tensions eased,
attention shifted to economic and earnings news. The former was dismal but
discounted due to the gloomy winter, while the latter was surprisingly solid.
With little interruption, the advance was dramatic and broad based. From the
March 11 lows until June 17, gains ranged from 26.9% for the S&P 500 to 31.4%
for the NASDAQ; both reached levels last seen over 12 months ago.
Pre-announcements of second quarter earnings, some of which were less than
inspiring, and profit-taking cooled the rally somewhat in late June.
Within the S&P 500, strength was widespread; all sectors generated positive
returns. Information technology, up 17.7%, and consumer discretionary, up 17.5%,
led as prospects for economic growth improved. Consumer staples, 2002's leading
sector, gained only 2.1% as investors favored riskier sectors.
* * * * *
The attached report provides you with the performance results, schedule of
investments and the financial statements as of June 30, 2003. As always, should
you have any questions, please feel free to contact us at 203-855-2255 (call
collect), or visit the Fund's web site at: www.eaiselect.com.
We thank you for your continued confidence in the EAI Select Managers Equity
Fund.
Sincerely,
/s/Phillip Maisano
Phillip Maisano
President
July 30, 2003
The information in the shareholder letter represents the personal opinions of
the individual portfolio manager(s) and may differ from those of other portfolio
managers or of the firm as a whole. This information is not intended to be a
forecast of future events, a guarantee of future results or investment advice.
Also, please note that any discussion of the Fund's holdings, the Fund's
performance, and the views of the portfolio manager(s) are as of June 30, 2003,
and are subject to change.
2
EAI SELECT MANAGERS EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/03
- --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (1/2/96)
- --------------------------------------------------------------------------------
The Fund ............ 0.15 -11.88 -0.87 6.85
- --------------------------------------------------------------------------------
S&P Index ........... 0.25 -11.20 -1.62 7.98
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.
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 assumes
reinvestment of dividends. Unless otherwise indicated, performance figures are
for the month indicated (through the last trading date that month).
3
EAI SELECT MANAGERS EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2003 (UNAUDITED)
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE: 2.83%
1,600 General Dynamics Corp. .............................. $ 116,000
3,585 L-3 Communications Holdings, Inc. ................... 155,912
5,300 Lockheed Martin Corp. ............................... 252,121
3,100 Northrop Grumman Corp. .............................. 267,499
3,800 United Technologies Corp. ........................... 269,154
------------
1,060,686
------------
AIR FREIGHT & LOGISTICS: 1.11%
3,500 Expeditors International of
Washington, Inc. .................................. 121,240
3,100 FedEx Corp. ......................................... 192,293
4,000 Ryder System, Inc. .................................. 102,480
------------
416,013
------------
BEVERAGES: 3.05%
1,805 Anheuser-Busch Co., Inc. ............................ 92,145
6,300 Coca-Cola Co. ....................................... 292,383
17,000 PepsiCo, Inc. ....................................... 756,500
------------
1,141,028
------------
BIOTECHNOLOGY: 3.88%
3,700 Amgen, Inc. ......................................... 247,826
3,500 Biogen, Inc. ........................................ 133,000
4,285 Genentech, Inc. ..................................... 309,034
8,500 Genzyme Corp.--General Division ..................... 355,300
4,000 IDEC Pharmaceuticals Corp. .......................... 136,000
3,100 Invitrogen Corp. .................................... 118,947
4,200 MedImmune, Inc. ..................................... 152,754
------------
1,452,861
------------
CAPITAL MARKETS: 6.75%
2,300 Bear Stearns Companies, Inc. ........................ 166,566
33,900 Charles Schwab Co. .................................. 342,051
4,300 Franklin Recourses, Inc. ............................ 168,001
3,500 Goldman Sachs Group, Inc. ........................... 293,125
8,900 J.P. Morgan Chase & Co. ............................. 304,202
4,300 Lehman Brothers Holdings, Inc. ...................... 285,864
7,500 Mellon Financial Corp. .............................. 208,125
7,585 Merrill Lynch and Co., Inc. ......................... 354,068
8,485 Morgan Stanley ...................................... 362,734
530 Neuberger Berman, Inc. .............................. 21,152
580 State Street Corp. .................................. 22,852
------------
2,528,740
------------
CHEMICALS: 1.20%
5,300 Dow Chemical Co. .................................... $ 164,088
5,400 E.I. Du Pont de Nemours & Co. ....................... 224,856
990 Praxair, Inc. ....................................... 59,499
------------
448,443
------------
COMMERCIAL BANKS: 3.14%
3,000 Bank of America Corp. ............................... 237,090
7,300 FleetBoston Financial Corp. ......................... 216,883
3,000 HSBC Holdings PLC (ADR) ............................. 177,330
9,500 U.S. Bancorp ........................................ 232,750
6,205 Wells Fargo & Co. ................................... 312,732
------------
1,176,785
------------
COMMERCIAL SERVICES & SUPPLIES: 4.06%
34,900 Cendant Corp. ....................................... 639,368
550 ChoicePoint, Inc. ................................... 18,986
11,000 H&R Block, Inc. ..................................... 475,750
430 Pitney Bowes, Inc. .................................. 16,516
4,000 Valassis Communications, Inc. ....................... 102,880
11,100 Waste Management, Inc. .............................. 267,399
------------
1,520,899
------------
COMMUNICATIONS EQUIPMENT: 0.69%
8,100 Cisco Systems, Inc. ................................. 134,379
1,320 Nokia Oyj (ADR) ..................................... 21,688
2,900 QUALCOMM, Inc. ...................................... 103,675
------------
259,742
------------
COMPUTERS & PERIPHERALS: 2.88%
15,600 Dell Computer Corp. ................................. 498,576
515 Diebold, Inc. ....................................... 22,274
15,300 EMC Corp. ........................................... 160,191
1,630 Hewlett Packard Co. ................................. 34,719
2,855 International Business Machines Corp. ............... 235,538
27,620 Sun Microsystems, Inc. .............................. 127,052
------------
1,078,350
------------
CONSUMER FINANCE: 1.97%
5,800 American Express Co. ................................ 242,498
23,720 MBNA Corp. .......................................... 494,325
------------
736,823
------------
CONTAINERS & PACKAGING: 0.08%
1,450 Pactiv Corp. ........................................ 28,580
------------
See Notes to Financial Statements
4
EAI SELECT MANAGERS EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2003 (UNAUDITED)(continued)
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES: 2.87%
515 CIT Group, Inc. ..................................... $ 12,695
13,085 Citigroup, Inc. ..................................... 560,038
9,500 Moody's Corp. ....................................... 500,745
------------
1,073,478
------------
DIVERSIFIED TELECOMM SERVICES: 0.11%
840 ALLTEL Corp. ........................................ 40,505
------------
ELECTRIC UTILITIES: 0.16%
1,015 Exelon Corp. ........................................ 60,707
------------
ELECTRICAL EQUIPMENT: 0.04%
900 American Power Conversion Corp. ..................... 14,031
------------
ELECTRONIC EQUIPMENT &
INSTRUMENTATION: 1.26%
6,000 Agilent Technologies, Inc. .......................... 117,300
775 CDW Corp. ........................................... 35,495
7,285 Jabil Circuit, Inc. ................................. 160,999
5,400 Waters Corp. ........................................ 157,302
------------
471,096
------------
ENERGY EQUIPMENT & SERVICES: 0.38%
3,000 Schlumberger Ltd. ................................... 142,710
------------
FOOD & STAPLES RETAILING: 1.78%
6,900 Costco Wholesale Corp. .............................. 252,540
5,700 Sysco Corp. ......................................... 171,228
4,500 Wal-Mart Stores, Inc. ............................... 241,515
------------
665,283
------------
FOOD PRODUCTS: 1.92%
4,100 Hershey Foods Corp. ................................. 285,606
7,700 Wrigley (Wm.) Jr. Co. ............................... 432,971
------------
718,577
------------
HEALTHCARE EQUIPMENT & SUPPLIES: 1.85%
985 Alcon, Inc. ......................................... 45,015
9,000 Baxter International, Inc. .......................... 234,000
9,300 Guidant Corp. ....................................... 412,827
------------
691,842
------------
HEALTHCARE PROVIDERS & SERVICES: 2.06%
810 AdvancePCS .......................................... 30,966
1,225 Caremark Rx, Inc. ................................... 31,458
410 Express Scripts, Inc. ............................... 27,966
HEALTHCARE PROVIDERS & SERVICES: (CONTINUED)
900 First Health Group Corp. ............................ $ 24,840
7,985 HCA, Inc. ........................................... 255,839
8,450 Tenet Healthcare Corp. .............................. 98,443
3,600 Wellpoint Health Networks, Inc. ..................... 303,480
------------
772,992
------------
HOTELS, RESTAURANTS & LEISURE: 2.78%
4,290 Brinker International, Inc. ......................... 154,526
13,600 Harrah's Entertainment, Inc. ........................ 547,264
12,500 McDonalds Corp. ..................................... 275,750
650 Ruby Tuesday, Inc. .................................. 16,075
1,700 Starwood Hotels and Resorts
Worldwide, Inc. ................................... 48,603
------------
1,042,218
------------
HOUSEHOLD PRODUCTS: 0.89%
1,700 Colgate-Palmolive Co. ............................... 98,515
1,800 Energizer Holdings, Inc. ............................ 56,520
2,000 Proctor & Gamble Co. ................................ 178,360
------------
333,395
------------
INDUSTRIAL CONGLOMERATES: 1.39%
4,320 General Electric Co. ................................ 123,898
290 Teleflex, Inc. ...................................... 12,340
20,300 Tyco International Ltd. ............................. 385,294
------------
521,532
------------
INFORMATION TECHNOLOGY SERVICES: 3.58%
3,180 Accenture Ltd. (Class A) ............................ 57,526
4,500 Automatic Data Processing, Inc. ..................... 152,370
2,900 Concord EFS, Inc. ................................... 42,688
16,800 First Data Corp. .................................... 696,192
400 Fiserv, Inc. ........................................ 14,244
10,900 Sabre Holdings Corp. ................................ 268,685
4,210 Sungard Data Systems, Inc. .......................... 109,081
------------
1,340,786
------------
INSURANCE: 4.68%
9,100 Ace Ltd. ............................................ 312,039
1,700 Ambac Financial Group, Inc. ......................... 112,625
925 American International Group, Inc. .................. 51,042
150 Berkshire Hathaway, Inc. (Class B) .................. 364,500
1,195 Lincoln National Corp. .............................. 42,578
9,930 Marsh & McLennan Cos., Inc. ......................... 507,125
9,900 St. Paul Cos., Inc. ................................. 361,449
------------
1,751,358
------------
See Notes to Financial Statements
5
EAI SELECT MANAGERS EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2003 (UNAUDITED)(continued)
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL: 0.26%
2,500 InterActiveCorp ..................................... $ 98,925
------------
LEISURE EQUIPMENT & PRODUCTS: 0.05%
325 Polaris Industries, Inc. ............................ 19,955
------------
MACHINERY: 0.67%
575 Danaher Corp. ....................................... 39,129
4,100 Deere & Co. ......................................... 187,370
555 SPX Corp. ........................................... 24,453
------------
250,952
------------
MEDIA: 13.06%
8,200 AOL Time Warner, Inc. ............................... 131,938
16,451 Cablevision Systems Corp.-
New York Group (Class A) .......................... 341,523
6,600 Clear Channel Communications, Inc. .................. 279,774
3,600 Comcast Corp. (Special Class A) ..................... 103,788
8,200 EchoStar Communications Corp. ....................... 283,884
26,000 Entravision Communications
Corp. (Class A) ................................... 295,100
3,600 Fox Entertainment
Group, Inc. (Class A) ............................. 103,608
3,600 Gannett Co., Inc. ................................... 276,516
10,900 General Motors Corp. (Class H) ...................... 139,629
12,800 Liberty Media Corp. ................................. 147,968
5,500 McGraw-Hill Companies, Inc. ......................... 341,000
16,600 Metro-Goldwyn-Mayer Inc. ............................ 206,172
4,000 New York Times Co. (Class A) ........................ 182,000
9,800 News Corp. Ltd. (ADR) ............................... 245,490
2,605 Omnicon Group, Inc. ................................. 186,779
2,700 Scripps Co. (E.W.) Class A .......................... 239,544
10,600 Univision Communications,
Inc. (Class A) .................................... 322,240
14,878 Viacom, Inc. (Class B) .............................. 649,573
4,300 Walt Disney Co. ..................................... 84,925
3,400 Westwood One, Inc. .................................. 115,362
5,300 WPP Group PLC (ADR) ................................. 212,371
------------
4,889,184
------------
MULTILINE RETAIL: 2.71%
5,800 Dollar Tree Stores, Inc. ............................ 184,034
9,900 Family Dollar Stores, Inc. .......................... 377,685
5,300 Federated Department Stores, Inc. ................... 195,305
250 Kohl's Corp. ........................................ 12,845
6,440 Target Corp. ........................................ 243,690
------------
1,013,559
------------
OIL & GAS: 1.76%
3,600 Anadarko Petroleum Corp. ............................ $ 160,092
3,534 ChevronTexaco Corp. ................................. 255,155
3,300 ConocoPhillips ...................................... 180,840
1,725 Exxon Mobil Corp. ................................... 61,945
------------
658,032
------------
PAPER & FOREST PRODUCTS: 1.33%
4,700 International Paper Co. ............................. 167,931
6,100 Weyerhaeuser Co. .................................... 329,400
------------
497,331
------------
PERSONAL PRODUCTS: 1.08%
1,870 Avon Products, Inc. ................................. 116,314
9,000 Gillette Co. ........................................ 286,740
------------
403,054
------------
PHARMACEUTICALS: 4.97%
6,055 Abbott Laboratories ................................. 264,967
3,700 Biovail Corp. ....................................... 174,122
3,000 Eli Lilly & Co. ..................................... 206,910
4,600 Johnson & Johnson ................................... 237,820
4,800 Merck & Co., Inc. ................................... 290,640
20,165 Pfizer, Inc. ........................................ 688,635
------------
1,863,094
------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT: 1.93%
4,200 Analog Devices, Inc. ................................ 146,244
11,200 Applied Materials, Inc. ............................. 177,632
6,700 Intel Corp. ......................................... 139,253
4,000 Novellus Systems, Inc. .............................. 146,484
6,500 Texas Instruments, Inc. ............................. 114,400
------------
724,013
------------
SOFTWARE: 4.95%
5,000 Adobe Systems, Inc. ................................. 160,350
385 Fair Isaac Corp. .................................... 19,808
2,300 Intuit, Inc. ........................................ 102,419
31,400 Microsoft Corp. ..................................... 804,154
33,200 Oracle Corp. ........................................ 399,064
4,500 Symantec Corp. ...................................... 197,370
6,000 Veritas Software Corp. .............................. 172,020
------------
1,855,185
------------
See Notes to Financial Statements
6
NO. OF
COMMON
SHARES SECURITIES VALUE (NOTE 1)
- --------------------------------------------------------------------------------
SPECIALTY RETAIL: 1.40%
3,000 Gap, Inc. ........................................... $ 56,280
14,100 Home Depot, Inc. .................................... 466,992
-----------
523,272
-----------
TEXTILE & APPAREL: 0.67%
4,700 Nike, Inc. (Class B) ................................ 251,403
-----------
THRIFTS & MORTGAGE FINANCE: 3.98%
13,700 Federal Home Loan Mortgage Corp. .................... 695,549
10,245 Federal National Mortgage Association ............... 690,923
1,300 Golden West Financial Corp. ......................... 104,013
-----------
1,490,485
-----------
TOBACCO: 0.08%
660 Altria Group, Inc. .................................. 29,990
-----------
WIRELESS TELECOM SERVICE: 1.63%
78,600 Crown Castle International Corp. .................... $ 610,716
-----------
TOTAL COMMON STOCKS: 97.92%
(cost: $36,007,915) ............................................ 36,668,610
-----------
SHORT-TERM INVESTMENT: 2.12%
792,048 Dreyfus Cash Management Fund
(Institutional Shares) ............................ 792,048
-----------
TOTAL SHORT-TERM INVESTMENT
(cost: $792,048) ............................................... 792,048
-----------
TOTAL INVESTMENTS: 100.04%
(cost: $36,799,963) ............................................ 37,460,658
OTHER ASSETS LESS LIABILITIES: (0.04)% ......................... (14,369)
-----------
NET ASSETS: 100% ............................................... $37,446,289
===========
- ----------
Glossary:
ADR--American Depository Receipt
See Notes to Financial Statements
7
EAI SELECT MANAGERS EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
ASSETS:
Investments, at value (cost: $36,799,963)(Note 1) $37,460,658
Receivables:
Dividends and interest 28,445
From Advisor 21,762
Capital shares sold 10,139
Securities sold 5,917
Prepaid insurance 39,340
-----------
Total assets 37,566,261
-----------
LIABILITIES:
Payables:
Securities purchased 54,231
Administration fee 7,918
Due to Custodian 363
Accrued expenses 57,460
-----------
Total liabilities 119,972
-----------
NET ASSETS $37,446,289
===========
Net asset value, maximum offering price and
redemption price per share
($37,446,289/5,698,543 shares of beneficial
interest outstanding with an unlimited number of
no par value shares authorized) $ 6.57
-----------
Composition of net assets:
Aggregate paid in capital 46,284,640
Net unrealized appreciation of investments 660,695
Accumulated net investment loss (5,125)
Accumulated net realized loss (9,493,921)
-----------
$37,446,289
===========
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
INCOME:
Dividends $ 189,893
Interest 5,574
-----------
Total income 195,467
EXPENSES:
Management (Note 2) $ 160,474
Administrative (Note 2) 49,589
Professional 44,985
Insurance 41,623
Custodian 32,269
Transfer agent 18,624
Trustees 15,000
Registration 11,054
Shareholder reports 9,002
Other 7,005
----------
Total expenses 389,625
----------
STATEMENT OF OPERATIONS (CONTINUED)
Fees waived by the Manager (Note 2) $ (189,033)
-----------
Net expenses 200,592
-----------
Net investment loss (5,125)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS: (NOTE 3)
Net realized loss from investments (3,113,625)
Net change in unrealized depreciation of investments 7,241,626
-----------
Net realized and unrealized gain on investments 4,128,001
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 4,122,876
===========
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
----------- -----------------
DECREASE IN NET ASSETS:
Operations:
Net investment loss $ (5,125) $ (53,425)
Net realized loss
from investments (3,113,625) (4,388,901)
Net change in unrealized
appreciation (depreciation)
of investments 7,241,626 (8,297,222)
----------- -----------
Net increase (decrease) in net assets
resulting from operations 4,122,876 (12,739,548)
----------- -----------
Capital share transactions*:
Net proceeds from sales of shares 2,848,913 3,289,749
Cost of shares redeemed (4,691,118) (5,521,602)
----------- -----------
Decrease in net assets
resulting from capital share
transactions (1,842,205) (2,231,853)
----------- -----------
Total increase (decrease) in net assets 2,280,671 (14,971,401)
NET ASSETS:
Beginning of period 35,165,618 50,137,019
----------- -----------
End of period $37,446,289 $35,165,618
=========== ===========
*SHARES OF BENEFICIAL INTEREST
ISSUED AND REDEEMED:
Shares sold 480,601 488,701
Shares redeemed (793,668) (906,681)
----------- -----------
Net decrease (313,067) (417,980)
=========== ===========
See Notes to Financial Statements
8
EAI SELECT MANAGERS EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year:
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 ---------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
----------- ---- ---- ---- ---- ----
Net Asset Value, Beginning of Period ........ $ 5.85 $ 7.80 $ 9.02 $11.13 $10.29 $ 9.43
------ ------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income (Loss) ................ 0.00 (0.01) (0.02) (0.02) (0.02) 0.01
Net Gain (Loss) on Investments
(both realized and unrealized) ............ 0.72 (1.94) (1.20) (0.58) 3.18 2.24
------ ------ ------ ------ ------ ------
Total From Investment Operations ............ 0.72 (1.95) (1.22) (0.60) 3.16 2.25
Less Distributions from:
Net Investment Income ..................... -- -- -- -- -- (0.02)
Net Realized Gain on Investments .......... -- -- -- (1.51) (2.32) (1.37)
------ ------ ------ ------ ------ ------
Total Distributions ......................... -- -- -- (1.51) (2.32) (1.39)
Net Asset Value, End of Period .............. $ 6.57 $ 5.85 $ 7.80 $ 9.02 $11.13 $10.29
====== ====== ====== ====== ====== ======
Total Investment Return(a) .................. 12.31% (25.00)% (13.53)% (5.39)% 30.71% 23.86%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period (000) ............. $37,446 $35,166 $50,137 $63,748 $65,545 $55,449
Ratio of Gross Expenses to Average Net Assets 2.23%(c) 1.85% 1.66% 1.56% 1.60% 1.66%
Ratio of Net Expenses to Average Net Assets . 1.15%(c) 1.15% 1.15% 1.15% 1.15% 1.15%
Ratio of Net Investment Income (Loss)
to Average Net Assets(b) .................. (0.03%)(c) (0.13%) (0.21%) (0.21%) (0.19%) 0.09%
Portfolio Turnover Rate ..................... 38% 50% 70% 93% 82% 63%
- ----------
(a) 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.
(b) Ratios would have been (1.11%), (0.83%), (0.72%), (0.62%), (0.64%) and
(0.42%), respectively, had the Manager not waived and assumed expenses.
(c) Annualized
See Notes to Financial Statements
9
EAI SELECT MANAGERS EQUITY FUND
- --------------------------------------------------------------------------------
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 an open-end diversified management 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 market 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 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 in the United States. 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.
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 $160,474 for the six months ended
June 30, 2003 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, 2003, the
Manager agreed to waive management fees and assumed expenses in the amount of
$189,033 which represents the amount exceeding a self imposed expense limitation
of 1.15% of average daily net assets per annum. Such limitation will be in
effect until December 31, 2003.
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 own 2,388,435 shares
(41.9%) and 1,827,409 shares (32.1%), respectively, of the outstanding shares of
the Fund. Additionally, 430,235 shares (7.6%) are owned by one other
shareholder.
The Manager pays from its management fee four Subadvisers a fee at the annual
rate of 0.375 of 1% and one Subadviser a fee at the annual rate of 0.25 of 1% of
the average monthly net asset value of the Fund managed by that Subadviser. One
of the Subadvisers reimbursed the Fund $4,688 for a trading loss incurred by the
Fund during the six months ended June 30, 2003.
At June 30, 2003, the Subadvisers are Iridian Asset Management LLC, Goldman
Sachs Asset Management, L.P. Mastrapasqua Asset Management, Inc., Chartwell
Investment Partners., and Siphron Capital Management. On February 13, 2003 the
Board of Trustees met and terminated the subadvisory agreement of Cohen,
Klingenstein & Marks, Inc. and approved the subadvisory agreements of Chartwell
Investment Partners effective March 7, 2003.
10
EAI SELECT MANAGERS EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
In accordance with a Portfolio Accounting and Administration Agreement with Van
Eck Associates Corporation, the Fund accrued $49,589 in administration fees for
the six months ended June 30, 2003. 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. There is a minimum
annual fee of $100,000 payable to Van Eck Associates Corporation.
The Fund accrued $29,378 of legal fees payable to Day, Berry & Howard LLP,
counsel to the Fund, for the six months ended June 30, 2003 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 $12,913,294 and $14,564,238, respectively,
for the six months ended June 30, 2003. For federal income tax purposes the cost
of investments owned at June 30, 2003 was $36,799,963.
As of June 30, 2003, net unrealized appreciation for federal income tax purposes
aggregated $660,695 of which $3,472,946 related to appreciated securities and
$2,812,251 related to depreciated securities.
11
EAI SELECT
--------------
MANAGERS
--------------
EQUITY FUND
--------------
SEMI-ANNUAL
--------------
REPORT
--------------
JUNE 30, 2003
[LOGO OMITTED]
================================================================================
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 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
- --------------------------------------------------------------------------------
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 OMITTED]
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
================================================================================
ITEM 2. CODE OF ETHICS.
Due to early adoption of Form N-CSR, Item 2 Code of ethics is not required as of
this filing date, as per Securities and Exchange Commission [Release Nos.
34-47262; IC-25914; File Nos. S7-33-02; S7-40-02] RIN 3235-AI63; RIN 3235-AI66.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Due to early adoption of Form N-CSR, Item 3 Audit Committee Financial Expert
disclosure is not required as of this filing date as per Securities and Exchange
Commission [Release Nos. 34-47262; IC-25914; File Nos. S7-33-02; S7-40-02] RIN
3235-AI63; RIN 3235-AI66.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Due to early adoption of Form N-CSR, Item 4 is not required as of this filing
date, as per Securities and Exchange Commission [Release Nos. 34-47262;
IC-25914; File Nos. S7-33-02; S7-40-02] RIN 3235-AI63; RIN 3235-AI66.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Due to early adoption of Form N-CSR, Item 5 is not required as of this filing
date, as per Securities and Exchange Commission [Release Nos. 34-47262;
IC-25914; File Nos. S7-33-02; S7-40-02] RIN 3235-AI63; RIN 3235-AI66.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES Not applicable to this registrant
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Chief Executive Officer and the Chief Financial Officer have concluded
that the EAI Select Managers Equity Fund disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act) provide reasonable
assurances that material information relating to the EAI Select Managers Equity
Fund is made known to them by the appropriate persons, based on their evaluation
of these controls and procedures as of a date within 90 days of the filing date
of this report.
(b) There were no significant changes in EAI Select Managers Equity Fund
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation referenced in (a)(i) above.
ITEM 10. EXHIBITS.
(A) None.
(B) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act
(17 CFR 270.30a-2) is attached as Exhibit 99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) EAI Select Managers Equity Fund
--------------------------------------------------------------------
By /s/ Phillip N. Maisano
-----------------------------------------------------------------------------
Phillip N. Maisano
Chief Executive Officer
(Signature and Title)*
Date August 13, 2003
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Phillip N. Maisano
-----------------------------------------------------------------------------
Phillip N. Maisano
Chief Executive Officer
(Signature and Title)
Date August 13, 2003
----------------------------------------------------------------------------
By /s/ Peter P. Gwiazdowski
-----------------------------------------------------------------------------
Peter P. Gwiazdowski
Chief Financial Officer
(Signature and Title)*
Date August 13, 2003
----------------------------------------------------------------------------