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EMPIRICAL GROWTH FUND
PROSPECTUS MAY 15, 1998
1521 Alton Rd., Suite 364
Miami Beach, Florida 33139
For Information, Shareholder Services and Requests:
(800) 446-2987
The Empirical Growth Fund (the "Fund") is a diversified series of Empirical
Investment Funds, (the "Trust") a no-load, open-end, management investment
company. The Empirical Growth Fund's investment objective is to achieve superior
risk-adjusted capital appreciation on long-term investment dollars.
The Fund is "no-load," which means that investors incur no sales charges,
commissions or deferred sales charges on the purchase or redemption of their
shares.
This Prospectus provides the information a prospective investor ought to know
before investing and should be retained for future reference. A Statement of
Additional Information dated May 15, 1988 has been filed with the Securities and
Exchange Commission (the "SEC"), is incorporated herein by reference, and
can be obtained without charge by calling the Fund at the phone number listed
above.
TABLE OF CONTENTS
SUMMARY OF FUND EXPENSES..................................................... 2
FUND ORGANIZATION............................................................ 3
OBJECTIVE AND POLICIES....................................................... 3
MANAGEMENT OF THE FUND....................................................... 8
HOW TO PURCHASE SHARES....................................................... 10
HOW TO REDEEM SHARES......................................................... 12
SHARE VALUATION.............................................................. 13
INVESTMENT PERFORMANCE....................................................... 14
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS...................................... 15
FUNDAMENTAL POLICIES......................................................... 15
SHAREHOLDER RIGHTS........................................................... 16
DISCLAIMER................................................................... 16
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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SUMMARY OF FUND EXPENSES
The following expense tables provided to assist an investor in understanding the
direct and indirect expenses that an investor may incur as a shareholder in the
Fund. The expense information is based on estimated amounts for the current
fiscal year. The expenses are expressed as a percentage of average net assets.
The Example should not be considered a representation of future Fund performance
or expenses, both of which may vary.
Shareholders should be aware that the Fund is a no-load fund and, accordingly, a
shareholder does not pay any sales charge or commission upon purchase or
redemption of shares of the Fund. In addition, the Fund does not have a 12b-1
Plan. Unlike most other mutual funds, the Fund does not pay directly for
transfer agency, pricing, custodial, auditing or legal services, nor does it pay
directly any general administrative or other significant operating expenses. The
Adviser pays all of the operating expenses of the Fund except brokerage, taxes,
interest and extraordinary expenses. The fund pays its organizational expenses.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases.............................................NONE
Sales Load Imposed on Reinvested Dividends..................................NONE
Deferred Sales Load.........................................................NONE
Redemption Fees1............................................................NONE
Exchange Fees...............................................................NONE
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Annual Fund Operating Expenses (as a percentage of average net assets)2
Management Fees............................................................1.70%
12b-1 Charges..............................................................0.00%
Other Expenses.............................................................0.25%
Total Fund Operating Expenses..............................................1.95%
1 The Fund's Custodian imposes a $13 charge for wire redemptions.
2 The Adviser's fee is equal to 1.95% of the Fund's average daily net assets up
to and including $200 million, minus the amount by which the Fund's total
expenses (including organizational expenses, but excluding brokerage, taxes,
interest and extraordinary expenses) exceeds 1.95 %. This means that the Fund's
total operating expenses will be 1.95%. Because other expenses are estimated to
be 0.25%, the management fee is estimated to be 1.70%.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Years
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$ 20 $ 61
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FUND ORGANIZATION
The Empirical Growth Fund ("Fund") was organized as a series of Empirical
Investment Funds (the "Trust") on September 29, 1997. This prospectus offers
shares of the Fund and each share represents an undivided, proportionate
interest in the Fund. The investment adviser to the Fund is Worldwide Financial
Management Associates, Inc. (the "Adviser").
OBJECTIVE AND POLICIES
Empirical Growth Fund seeks to achieve superior risk-adjusted capital
appreciation on long-term investment dollars. It is expected that the Fund will
generate current income in addition to long-term capital appreciation. The Fund
is intended to be a core equity portfolio designed for investors with a long
term wealth-building horizon.
The Fund seeks to accomplish its objective by creating a portfolio with
significantly less risk relative to other growth funds or investment strategies.
Exposure to risk could jeopardize and increase the level of erosion of the
Fund's assets with no guarantee of higher returns. Although risk-adjusted
returns tend to be more stable than raw returns, there is no guarantee that
funds that have done well in the past will continue to do well in the future. A
certain amount of risk is inherent with any investment strategy (see "Risk
Factors").
The Fund will attempt to maintain a lower level of risk than other growth funds.
The Adviser seeks to achieve this by monitoring and decreasing the Fund's
exposure to risks that are associated with the market (also known as a
sensitivity to market movements), particular industries and particular
companies. The Adviser may consider a number of factors in making its investment
decisions, including a company's relative price volatility, price to earnings
ratio, return on equity, return on assets, inventory turnover and cash flow
levels, financial leverage, stability of management and other factors which the
Adviser deems helpful in assessing risk. The Adviser seeks to further limit risk
by diversifying the Fund's investments across a broad range of industries and
companies.
The Adviser employs a bottom-up stock selection process that is based on
intensive fundamental and technical research. While the Fund may invest in
companies of any size, it will place emphasis on medium capitalized companies.
These companies may include those that can sustain above average and consistent
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earnings growth as well as companies that the Adviser believes have new or
innovative products, services or processes which can enhance prospects for
growth in future earnings. The Fund's strategy does not preclude investment in
large, seasoned companies, which, in the judgment of the Adviser, possess
superior potential returns similar to companies with formative growth profiles.
Under normal market conditions, the Fund expects to invest approximately 75% of
its net assets in equity securities, such as common stocks (including American
Depository Receipts) and securities that are convertible into common stocks. For
liquidity, diversity and flexibility, the Fund may invest the remainder of its
net assets in real estate investment trusts, short-term to intermediate-term
corporate and U.S. Government debt securities, cash, and money market
instruments. For temporary defensive purposes, the Fund may hold all or a
portion of its assets in money market instruments, securities of other no-load
registered investment companies or U.S. government repurchase agreements. The
Fund may also invest in such instruments at any time to maintain liquidity or
pending selection of investments in accordance with its policies. If the Fund
acquires securities of another investment company, the shareholders of the Fund
will be subject to duplicative management fees.
The Fund has chosen not to invest in illiquid securities such as restricted
issues. For liquidity purposes, the Adviser will monitor the number of shares
traded for each issue to ensure that, if need be, a market would be available in
which it could sell out of the position in a timely fashion.
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, the Fund cannot give any assurance that its investment objective
will be achieved. It should be noted that the Adviser has not previously managed
assets organized as a mutual fund and the Fund has no operating history. In
addition, Kaye Anderson-Kerr, the Fund's portfolio manager, is the sole employee
of the Adviser and, as a result, the success of the Fund is entirely dependent
on her. Rates of total return quoted by the Fund may be higher or lower than
past quotations, and there can be no assurance that any rate of total return
will be maintained.
Types of securities in which the Fund may invest. In pursuit of its objectives
and policies, the Fund may employ one or more of the following investment
strategies in order to enhance investment results (See "Risk Factors"):
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Common stocks. Common stocks are ownership shares and represent a proportionate
interest in the issuing companies. They are sold initially by the corporation to
raise cash for business purposes and then traded among investors. Therefore, the
Fund participates in the success or failure of any company in which it holds
common stock.
Convertible Securities. Convertibility refers to the ability of the holder of
the security to exchange it for another security, usually debt exchanged for
equity. The Fund may invest in convertible securities (bonds, notes, preferred
stock and other securities convertible into common stocks) which may offer
higher income than the common stocks into which they are convertible. The
convertible securities which the Fund may invest include bonds, preferred stock,
and warrants which may be converted or exchanged at a stated or determinable
exchange ratio into underlying shares of common stock. Prior to their
conversion, convertible securities may have characteristics similar to both
nonconvertible debt securities and equity securities.
Corporate Debt Securities. Corporate debt securities are bonds or notes issued
by corporations and other business organizations, including business trusts, in
order to finance their credit needs. Corporate debt securities include
commercial paper which consist of short term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current obligations. The Fund will only invest in corporate debt securities
rated A or better by Standard & Poor's Corporation ("S&P") or Moody's Investors
Services, Inc. ("Moody's"), or if unrated, determined by the Adviser to be of
comparable quality.
U.S. Government Debt Securities. U.S. government obligations include a variety
of securities that are issued or guaranteed by the U.S. Treasury, by various
agencies of the U.S. government or by various instrumentalities that have been
established or sponsored by the U.S. government. U.S. government obligations may
be backed by the credit of the government as a whole or only by the issuing
agency. U.S. Treasury bonds, notes, and bills and some agency securities, such
as those issued by the Federal Housing Administration and the Government
National Mortgage Association (GNMA), are backed by the full faith and credit of
the U.S. government as to payment of principal and interest and are of the
highest quality in government securities. Other securities issued by U.S.
government agencies or instrumentalities, such as securities issued by the
Federal Home Loan Banks and the Federal Home Loan Mortgage Corporation, are
supported only by the credit of the agency that issued them, and not by the U.S.
government. Securities issued by the Federal Farm Credit System, the Federal
Land Banks, and the Federal National Mortgage Association (FNMA) are supported
by the agency's right to borrow money from the U.S. Treasury under certain
circumstances, but are not backed by the full faith and credit of the U.S.
government.
Repurchase Agreements. As a means of earning income for periods as short as
overnight the Fund may enter into repurchase agreements with selected banks and
broker/dealers. Under a repurchase agreement, the Fund acquires securities,
subject to the seller's agreement to repurchase them at a mutually agreed upon
time and price.
Real Estate Investment Trusts ("REITs"). REITs were created to give larger
numbers of Americans a means of investing in real estate projects that
previously were accessible to only the wealthy. REITs are designed to pass
through all income of the real estate properties and other assets managed by the
REIT to investors. Many REITs are common stocks.
American Depositary Receipts. The fund may also purchase U.S. denominated
American Depositary Receipts ("ADRs") for foreign securities, which are traded
in the U.S. on national securities exchanges or over-the-counter and are issued
by domestic banks.
Risk Factors. Risks associated with the Fund's performance will be those due to
broad market declines as well as business risks from difficulties which may
occur to particular companies while in the Fund's portfolio. As is true of
almost all securities, it must be realized that there can be no assurance that
the Fund will obtain its ongoing objective of superior risk-adjusted capital
appreciation. The following are descriptions of certain risks related to the
investments and techniques that the Fund may use from time to time. (See the
Statement of Additional Information for more information.)
Common Stocks. The market values of common stocks can fluctuate significantly,
reflecting the business performance of the issuing company, investor perception
and general economic or financial market movements. Despite the risk of price
volatility, however, common stocks have traditionally offered the greatest
potential for gain on investment, compared to other classes of financial assets
such as bonds or cash equivalents.
Convertible Securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stocks. Convertible
securities entail less credit risk than the issuer's common stock.
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Corporate Debt Securities. Corporate debt securities rated A or better by S&P
and Moody's generally have adequate to strong protection of principal and
interest payments. In the lower end of these categories, securities are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions. These changes could affect the ability of the issuer to make
payments of principal and interest. In addition to these credit risks,
corporate debt securities are sensitive to fluctuating interest rates. In
periods of rising interest rates, the value of a fixed rate security is likely
to fall. In periods of declining interest rates, issuers are more likely to
call bonds. If a bond is called, the Fund will receive its return of principal
earlier than expected and may reinvest the proceeds at a lower interest rate,
thus reducing income to the Fund.
U.S. Government Securities. In the case of securities not backed by the "full
faith and credit" of the U.S. government, the Fund must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment and may not
be able to assert a claim against the U.S. government itself in the event the
agency or instrumentality does not meet its commitments.
Real Estate Investment Trusts ("REITs"). Because the success of a REIT depends
on its management's ability to select potentially profitable assets and to
manage them well, the investment objective may or may not be reached. A risk
associated with certain mortgage-backed securities is the possibility that the
underlying borrowers will repay the mortgages faster than expected, thereby
depriving investors of the interest income they could have earned over a longer
repayment schedule.
American Depositary Receipts. While ADRs are not considered to be foreign
securities, they do not eliminate all the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs the Fund avoids
currency risks during the settlement period. Also, generally the information
available on ADRs is subject to the accounting, auditing and financial reporting
standards of the domestic market or exchange on which they are traded; these
standards are more uniform and more exacting than those to which many foreign
issuers may be subject.
Portfolio Turnover Policy. The Fund will attempt to avoid incurring high
transaction costs (which can diminish assets and returns) by implementing a long
term investment strategy. Although the Fund generally seeks to invest for the
long-term, it retains the right to sell securities regardless of how long they
have been held when such action appears advisable to management. High portfolio
turnover may involve greater brokerage commissions and other transaction costs
which will be born directly by the Fund. In addition, high portfolio turnover
may result in increased short-term capital gains which, when distributed to
shareholders, are treated as ordinary income. The Fund's portfolio turnover rate
is not expected to exceed 100%.
MANAGEMENT OF THE FUND
The overall management and responsibility of the business and affairs of the
Fund is vested in the Trust's Board of Trustees. The Board of Trustees approves
all significant agreements between the Trust, on behalf of the Fund, and persons
or companies furnishing services to the Fund.
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Investment Adviser. The Fund retains Worldwide Financial Management Associates,
Inc., 1521 Alton Rd., Suite 364, Miami Beach, Florida 33139 (the "Adviser") to
manage the Fund's investments. The Fund's portfolio manager is Kaye
Anderson-Kerr. Ms. Anderson-Kerr, who is responsible for the day to day
management of the fund, is the Managing Director and President of the Adviser,
which she established in October 1996. Ms. Anderson-Kerr began her career as an
account executive with R.J. Steichen & Co. in Feb. 1994. In May of that year,
Ms. Anderson-Kerr went to Tuschner & Company where she became a Vice President.
From December, 1995 until June, 1996, she was a credit representative with
Dayton Hudson Corporation, and from June, 1996 until January, 1997, she worked
closley with the managed asset group of Dain Bosworth, Inc., an investment
banker/brokerage firm. She also served as a financial adviser and consultant
to many established and ongoing business operations.
Prior to her employment with R.J. Steichen & Co., Ms. Anderson-Kerr was an
associate with Jubilee Investment Corp., a business development company. In
addition, she obtained NASD licenses for the Series 7 - General Securities,
Series 63 - Uniform Blue Sky, Series 24 - General Principal, and the Series
65 - Registered Investment Advisors. Ms. Anderson-Kerr is also a level I
candidate for the Chartered Financial Analyst (CFA) designation.
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The Fund is authorized to pay the Adviser a fee equal to an annual average rate
of 1.95% of its average daily net assets up to and including $200 million, 1.90%
of its average daily net assets from $200 million up to and including $500
million, 1.85% of its average daily net assets from $500 million up to and
including $1 billion, and 1.80% of its average daily net assets in excess of $1
billion, minus the amount by which the Fund's total expenses (including
organizational expenses, but excluding brokerage, taxes, interest and
extraordinary expenses) exceeds 1.95 %. The Adviser pays all of the operating
expenses of the Fund except brokerage, taxes, interest and extraordinary
expenses. The Fund pays its organizational expenses. In this regard, it should
be noted that most investment companies pay their own operating expenses
directly, while the Fund's expenses, except those specified above, are paid by
the Adviser.
In order to increase the return to investors, the Adviser may voluntarily from
time to time, waive or reduce its fees on assets held by the Fund, which would
have the effect of lowering the Fund's overall expense ratio and increasing
yield to investors during the time such fees are waived or reduced. Fee waivers
or reductions, other than those set forth in the Management Agreement or
otherwise described in this Prospectus, may be rescinded at any time without
further notice to investors.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions. The Adviser (not the Fund) may pay certain financial
institutions (which may include banks, brokers, securities dealers and other
industry professionals) a "servicing fee" for performing certain administrative
functions for Fund shareholders to the extent these institutions are allowed to
do so by applicable statute, rule or regulation.
Transfer Agent. Maxus Information Systems, Inc. (d.b.a. Mutual Shareholder
Services), 1301 East 9th Street, Suite 3600, Cleveland, Ohio 44114 (the
"Transfer Agent") will serve as the transfer agent and dividend disbursing agent
pursuant to the terms of the Transfer Agency Agreement. Services provided will
include (but are not limited to): maintaining records of shareholders; providing
confirmations of purchases and sales; aggregating, processing and recording
purchases and redemptions of shares; processing dividend and distribution
payments; and forwarding shareholder communications such as proxies, shareholder
reports and dividend notices.
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Administration. The Trust and Mutual Shareholder Services have entered into an
Accounting Services and Administration Agreement pursuant to which Mutual
Shareholder Services provides accounting and administrative services to the
Fund. Services furnished by Mutual Shareholder Services include, among others:
maintaining and preserving the records of the Fund, including financial and
corporate reports; computing net asset value, dividends, performance data and
financial information regarding the Fund; preparing reports; assisting with the
preparation and filing with the SEC and state securities regulators of
registration statements, notices, reports and other material required to be
filed under applicable laws; preparing compliance reports; providing routine
accounting services; and providing office facilities and clerical support as
well as providing general oversight of other service providers. For its
administrative services, Mutual Shareholder Services receives from the Adviser a
monthly fee of approximately $225.
Custodian. Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202 (the
"Custodian"), is custodian of the Fund's investments. As custodian, Star Bank,
N.A. acts as the Fund's depository, safekeeps its portfolio securities, collects
all income and other payments with respect thereto, disburses funds at the
Fund's request and maintains records in connection with its duties.
Distributor. The Trust retains Maxus Securities Corporation, The Tower at
Erieview, 36th Floor, 1301 East Ninth Street, Cleveland, Ohio 44114, to act as
the distributor of the Fund's shares in certain states.
HOW TO PURCHASE SHARES
The Fund is "no-load" and shares of the Fund are sold directly to investors on a
continuous basis, subject to a minimum initial investment of $5,000 ($2,000 for
IRAs and custodial accounts) and minimum subsequent investments of $500. These
minimums may be waived at the discretion of the Fund.
Initial Purchase.
By Mail - You may purchase shares of the Fund by completing and signing the
investment application form which accompanies this Prospectus and mailing it, in
proper form, together with a check (subject to the above minimum amounts) made
payable to Empirical Growth Fund, and mailed to: Mutual Shareholder Services,
The Tower at Erieview, 36th floor, 1301 East Ninth St., Cleveland, OH 44114.
Your purchase of shares of the Fund will be effected at the next share price
calculated after receipt of your investment.
By Wire - You may also purchase shares of the Fund by wiring federal funds from
your bank, which may charge you a fee for doing so. If money is to be wired, you
must call the Transfer Agent at (800) 446-2987 to set up your account and obtain
an account number. You should be prepared at that time to provide the
information requested on the application. Then, provide your bank with the
following information for purposes of wiring your investment:
Star Bank, N.A. Cinti/Trust
ABA #0420-0001-3
Attn: Empirical Growth Fund
D.D.A. #[488-919549]
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Account Name _________________ (write in shareholder name)
For the Account # ______________ (write in account number)
You are required to mail a signed application to the Transfer Agent at the above
address in order to complete your initial wire purchase. Wire orders will be
accepted only on a day on which the Fund, Custodian and Transfer Agent are open
for business. A wire purchase will not be considered completed until the wired
money is received and the purchase is accepted by the Fund. Any delays which may
occur when wiring money, including delays, which may occur during the processing
by the banks, are not the responsibility of the Fund or the Transfer Agent. The
investor's bank may charge a fee for the wire transfer of funds.
Subsequent Purchases. Investors may make additional purchases in the following
manner:
By Check. Checks made payable to the Fund should be sent, along with the stub
from a previous purchase or sale confirmation, to Mutual Shareholder Services,
The Tower at Erieview, 36th Floor, 1301 East Ninth Street, Cleveland, Ohio
44114.
By Wire. Funds may be wired by following the previously discussed wire
instructions for an initial purchase.
By Telephone. Investors may purchase additional shares up to an amount equal
to 3 times the market value of shares held in the shareholder's account in a
Fund on the preceding day for which payment has been received, by telephoning
the Transfer Agent, Inc., at 800 446-2987 and identifying their account by
number. Shareholders wishing to use this privilege must complete a Telephone
Purchase Authorization Form which is available from the Transfer Agent. A
confirmation will be mailed and payment must be received within 3 business days
of date of purchase. This telephone purchase option may be discontinued without
notice.
Systematic Investment Plan. The Systematic Investment Plan permits investors to
purchase shares of the Fund at monthly intervals ($100 minimum per month).
Provided the investor's bank or other financial institution allows automatic
withdrawals, shares may be purchased by transferring funds from the account
designated by the investor. At the investor's option, the account designated
will be debited in the specified amount, and shares will be purchased once a
month, on or about the 15th day. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. Investors desiring to participate in the Systematic Investment Plan
should call the Transfer Agent at 800 446-2987 to obtain the appropriate forms.
The Systematic Investment Plan does not assure a profit and does not protect
the investor against loss in declining markets.
Other Purchase Information. Dividends begin to accrue after you become a
shareholder. The Fund does not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Fund's Transfer
Agent for the account of the shareholder. The rights to limit the amount of
purchases and to refuse to sell to any person are reserved by the Fund. If your
check or wire does not clear, you will be responsible for any loss incurred by
the Fund. If you are already a shareholder, the Fund can redeem shares from any
identically registered account in the Fund as reimbursement for any loss
incurred. You may be prohibited or restricted from making future purchases in
the Fund.
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HOW TO REDEEM SHARES
All redemptions will be made at the net asset value next determined after the
redemption request has been received by the Transfer Agent in proper order.
Shareholders may receive redemption payments in the form of a check or federal
wire transfer. The proceeds of the redemption may be more or less than the
purchase price of your shares, depending on the market value of the Fund's
securities at the time of your redemption. The Fund's Custodian presently
charges $13 for each wire redemption. Any charges for wire redemptions will be
deducted from the shareholder's Fund account by redemption of shares. Investors
choosing to purchase or redeem their shares through a securities dealer may be
charged a fee by that institution.
By Mail. You may redeem any part of your account in the Fund at no charge by
mail. Your request should be addressed to: Empirical Investment Funds, c/o
Mutual Shareholder Services, The Tower at Erieview, 36th Floor, 1301 East Ninth
Street, Cleveland, Ohio 44114.
"Proper order" means your request for a redemption must include your letter of
instruction, including the Fund name, account number, account name(s), the
address and the dollar amount or number of shares you wish to redeem. This
request must be signed by all registered share owner(s) in the exact name(s) and
any special capacity in which they are registered. At the discretion of the Fund
or Mutual Shareholder Services, a shareholder, prior to redemption, may be
required to furnish additional legal documents to insure proper authorization.
By Telephone. You may redeem any part of your account in the Fund by calling the
Transfer Agent at (800) 446-2987. You must first complete the Optional Telephone
Redemption and Exchange section of the investment application to institute this
option. The Fund, the Transfer Agent and the Custodian are not liable for
following redemption or exchange instructions communicated by telephone that
they reasonably believe to be genuine. However, if they do not employ reasonable
procedures to confirm that telephone instructions are genuine, they may be
liable for any losses due to unauthorized or fraudulent instructions. Procedures
employed may include recording telephone instructions and requiring a form of
personal identification from the caller.
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The telephone redemption and exchange procedures may be terminated at any time
by the Fund or the Transfer Agent. During periods of extreme market activity it
is possible that shareholders may encounter some difficulty in telephoning the
Fund, although neither the Fund nor the Transfer Agent has ever experienced
difficulties in receiving and in a timely fashion responding to telephone
requests for redemptions or exchanges. If you are unable to reach the Fund by
telephone, you may request a redemption or exchange by mail.
Additional Information. If you are not certain of the requirements for a
redemption please call the Transfer Agent at (800) 446-2987. Redemptions
specifying a certain date or share price cannot be accepted and will be
returned. You will be mailed the proceeds on or before the fifth business day
following the redemption. However, payment for redemption made against shares
purchased by check will be made only after the check has been collected, which
normally may take up to fifteen days. Also, when the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than its customary
weekend or holiday closing or under any emergency circumstances, as determined
by the Securities and Exchange Commission, the Fund may suspend redemptions or
postpone payment dates.
Because the Fund incurs certain fixed costs in maintaining shareholder accounts,
the Fund reserves the right to require any shareholder to redeem all of his or
her shares in the Fund on 30 days' written notice if the value of his or her
shares in the Fund is less than $5,000 due to redemption, or such other minimum
amount as the Fund may determine from time to time. An involuntary redemption
constitutes a sale. You should consult your tax advisor concerning the tax
consequences of involuntary redemptions. A shareholder may increase the value of
his or her shares in the Fund to the minimum amount within the 30 day period.
Each share of the Fund is subject to redemption at any time if the Board of
Trustees determines in its sole discretion that failure to so redeem may have
materially adverse consequences to all or any of the shareholders of the Fund.
SHARE VALUATION
The net asset value of the Fund's shares is determined as of the close of
business of the New York Stock Exchange on each business day of which that
Exchange is open (presently 4:00 p.m. EST) Monday through Friday exclusive of
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, Christmas & New Year's Day. The value
of an individual share in the Fund (the net asset value) is calculated by
dividing the total value of the Fund's investments and other assets (including
accrued income), less any liabilities (including estimated accrued expenses), by
the number of shares outstanding, rounded to the nearest cent. The net asset
value per share of the Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price. Lacking a last sale price, a
security is valued at its last bid price except when, in the Adviser's opinion,
the last bid price does not accurately reflect the current value of the
security. All other securities for which over-the-counter market quotations are
readily available are valued at their last bid price. When market quotations are
not readily available, when the Adviser determines the last bid price does not
accurately reflect the current value or when restricted securities are being
valued, such securities are valued as determined in good faith by the Adviser,
subject to review of the Board of Trustees of the Trust.
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Fixed income securities generally are valued by using market quotations, but may
be valued on the basis of prices furnished by a pricing service when the Adviser
believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. When prices are not readily available from
a pricing service, or when restricted or illiquid securities are being valued,
securities are valued at fair value as determined in good faith by the Adviser,
subject to review of the Board of Trustees. Short-term investments in fixed
income securities with maturities of less than 60 days when acquired, or which
subsequently are within 60 days of maturity, are valued by using the amortized
cost method of valuation, which the Board has determined will represent fair
value.
INVESTMENT PERFORMANCE
The Fund may periodically advertise "average annual total return." The "average
annual total return" of the Fund refers to the average annual compounded rate of
return over the stated period that would equate an initial amount invested at
the beginning of a stated period to the ending redeemable value of the
investment. The calculation of "average annual total return" assumes the
reinvestment of all dividends and distributions.
The Fund may also periodically advertise its total return over various periods
in addition to the value of a $10,000 investment (made on the date of the
initial public offering of the Fund's shares) as of the end of a specified
period. The "total return" for the Fund refers to the percentage change in the
value of an account between the beginning and end of the stated period, assuming
no activity in the account other than reinvestment of dividends and capital
gains distributions.
<PAGE>
The Fund may also include in advertisements data comparing performance with
other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Fortune or
Barron's). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the Russell
Mid-Cap Index and the S&P 500 Index.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The policy of the Fund is to pay dividends from net investment income and
distributions of realized capital gains, if any, annually. However, provisions
in the Internal Revenue Code of 1986, as amended (the "Code"), may result in
additional net investment income and capital gains distributions by the Fund.
When you open your account, you should specify on your application how you want
to receive your distributions.
Under the provisions of Sub-Chapter M of the Internal Revenue Code of 1986 as
amended, the Fund intends to pay out substantially all of its investment income
and realized capital gains, and intends to be relieved of federal income tax on
the amounts distributed to shareholders. Distribution of any net long-term
capital gains realized by the Fund will be taxable to the shareholder as long
term capital gains, regardless of the length of time Fund shares have been held
by the investor. All income realized by the Fund, including short-term capital
gains, will be taxable to the shareholder as ordinary income. Dividends from net
income will be made annually or more frequently at the discretion of the Fund's
Board of Trustees.
Dividends received shortly after purchase of shares by an investor will have the
effect of reducing the per share net asset value of his shares by the amount of
such dividends or distributions and, although in effect a return of capital, are
subject to federal income taxes.
The Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains, distributions and redemptions) paid
to shareholders who have not complied with IRS regulations. In order to avoid
this withholding requirement, you must certify on a W-9 tax form supplied by the
Fund that your Social Security or Taxpayer Identification Number provided is
correct and that you are not currently subject to back-up withholding, or that
you are exempt from back-up withholding.
<PAGE>
FUNDAMENTAL POLICIES
The investment limitations set forth in the Statement of Additional Information
as fundamental policies may not be changed without the affirmative vote of the
majority of the outstanding shares of the Fund. The investment objective of the
Fund may be changed without the affirmative vote of a majority of the
outstanding shares of the Fund. Any such change may result in the Fund having an
investment objective different from the objective which the shareholders
considered appropriate at the time of investment in the Fund.
<PAGE>
SHAREHOLDER RIGHTS
Any Trustee of the Trust may be removed by vote of the shareholders holding not
less than two-thirds of the outstanding shares of the Trust. The Trust does not
hold annual meetings of shareholders. When matters are submitted to shareholders
for a vote, each shareholder is entitled to one vote for each whole share he
owns and fractional votes for fractional shares he owns. All shares of the Fund
have equal voting rights and liquidation rights. The Adviser, as of the date of
this Prospectus, owns all outstanding shares of the Fund. As a result, the
Adviser (and Kaye Anderson-Kerr, because she controls the Adviser) may be deemed
to control the Fund.
DISCLAIMER
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and in the Fund's
official sales literature in connection with the offer of the Fund's shares, and
if given or made, such other information or representation must not be relied
upon as having been authorized by the Fund. This Prospectus does not constitute
an offer in any state in which, or to any person to whom, such offering may not
lawfully be made.
BOARD OF TRUSTEES
Kaye Anderson-Kerr
David Shea
Reza Jalali
OFFICERS
Kaye Anderson-Kerr, President
Diana Sosa-Gonzalez, Secretary
INDEPENDENT AUDITORS
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, OH 44145
COUNSEL
Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower
441 Vine Street
Cincinnati, OH 45202
CUSTODIAN
Star Bank
425 Walnut St., ML 6118
Cincinnati, OH 45202
TRANSFER AGENT,
ADMINISTRATOR, & DISTRIBUTOR
Maxus Investment Group
1301 East Ninth St.
Cleveland OH 44114
<PAGE>
The Empirical Growth Fund
1521 Alton Rd., Suite 364
Miami Beach, FL 33139
800-446-2987
STATEMENT OF ADDITIONAL INFORMATION
This Statement is not a prospectus, but should be read in conjunction with the
Fund's current prospectus dated May 15, 1998. To obtain the Prospectus, please
write the Fund or call the telephone number that is shown above.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
Fund Organization..............................................................1
Capital Stock..................................................................1
Additional Information About Fund Investments and Risk Considerations..........2
Investment Limitations.........................................................4
Management of the Fund.........................................................4
Investment Adviser.............................................................6
Trustees & Officers............................................................7
Portfolio Transactions and Brokerage...........................................7
Custodian.....................................................................10
Distributor...................................................................10
Investment Performance........................................................10
Independent Accountants and Financial Statements..............................11
Auditor's Report..............................................................12
<PAGE>
FUND ORGANIZATION
The Fund is a diversified series of Empirical Investment Funds (the "Trust") a
no-load, open-end, diversified, management investment company registered under
the Investment Company Act of 1940 (the "1940 Act") and organized under Delaware
law as a business trust under a Declaration of Trust dated September 29, 1997.
The Declaration of Trust permits the Trust to offer separate series ("Series")
of shares. All consideration received by the Trust for shares of any Series and
all assets of such Series belong to that portfolio and would be subject to
liabilities related thereto. There is currently one Series of the Trust: The
Empirical Growth Fund (the "Fund").
CAPITAL STOCK
The Trust has authorized capital of an indefinite number of shares of $.001 par
value common stock of all Series in the aggregate. The shares of each Series
have equal rights and privileges with all other shares of the Trust. The Board
of Trustees is authorized to classify un-issued shares of the Trust by assigning
them to a Series for issuance. Additional Series may be offered in the future,
but such additional offerings would not affect the interests of current
shareholders in the existing Series.
<PAGE>
The assets received by each Series on the sale of shares of such Series and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are allocated to such Series, and constitute assets of such Series.
The assets of each Series are required to be segregated on the Series' books of
account.
Each share of a Series represents an equal proportionate interest in that Series
with each other share and is entitled to its proportionate share of such
dividends and distributions out of the income or assets belonging to such Series
as are declared by the Board of Trustees. Upon liquidation of any Series, Series
shareholders are entitled to share pro rata in the net assets belonging to that
Series available for distribution.
Shares of the Fund are fully paid, non-assessable, redeemable and fully
transferable. Shares do not have preemptive rights or subscription rights. Each
shareholder has one vote for each share held. Voting rights are non-cumulative,
which means that holders of a majority of shares can elect all Trustees of the
Trust if they so choose.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the investments the
Fund may make and some of the techniques it may use, as described in the
Prospectus (see "Objective and Policies").
A.Repurchase Agreements. A repurchase agreement is a short-term investment
in which the purchaser (i.e., the Fund) acquires ownership of a U.S. Government
obligation (which may be of any maturity) and the seller agrees to repurchase
the obligation at a future time at a set price, thereby determining the yield
during the purchaser's holding period (usually not more than seven days from the
date of purchase). Any repurchase transaction in which the Fund engages will
require full collateralization of the seller's obligation during the entire term
of the repurchase agreement. In the event of a bankruptcy or other default of
the seller, the Fund could experience both delays in liquidating the underlying
security and losses in value. However, the Fund intends to enter into repurchase
agreements only with the Custodian, other banks with assets of $1 billion or
more and registered securities dealers determined by the Adviser (subject to
review by the Board of Trustees) to be creditworthy. The Adviser monitors the
creditworthiness of the banks and securities dealers with which the Fund engages
in repurchase transactions.
B.American Depository Receipts. American Depository Receipts are
dollar-denominated receipts that are generally issued in registered form by
domestic banks, and represent the deposit with the bank of a security of a
foreign issuer. To the extent that the Fund invests in foreign securities, such
investments may be subject to special risks. For example, there may be less
information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to those in the U.S.
Other risks associated with investments in foreign securities include changes in
restrictions on foreign currency transactions and rates of exchanges, changes in
the administrations or economic and monetary policies of foreign governments,
the imposition of exchange control regulations, the possibility of expropriation
decrees and other adverse foreign governmental action, the imposition of foreign
taxes, less liquid markets, less government supervision of exchanges, brokers
and issuers, difficulty in enforcing contractual obligations, delays in
settlement of securities transactions and greater price volatility. In addition,
investing in foreign securities will generally result in higher commissions than
investing in similar domestic securities.
<PAGE>
INVESTMENT LIMITATIONS
Fundamental. The investment limitations described below have been adopted by the
Trust with respect to the Fund and are fundamental ("Fundamental"), i.e., they
may not be changed without the affirmative vote of a majority of the outstanding
shares of the Fund. As used in the Prospectus and the Statement of Additional
Information, the term "majority" of the outstanding shares of the Fund means the
lesser of (1) 67% or more of the outstanding shares of the Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented at such meeting; or (2) more than 50% of the
outstanding shares of the Fund. Other investment practices which may be changed
by the Board of Trustees without the approval of shareholders to the extent
permitted by applicable law, regulation or regulatory policy are considered
non-fundamental ("Non-Fundamental").
<PAGE>
1. Borrowing Money. The Fund will not borrow money, except (a) from a bank,
provided that immediately after such borrowing there is an asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. Underwriting. The Fund will not act as underwriter of securities issued
by other persons. This limitation is not applicable to the extent that, in
connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
<PAGE>
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. The Fund will not invest 25% or more of its total assets
in a particular industry. This limitation is not applicable to investments in
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities or repurchase agreements with respect thereto.
<PAGE>
With respect to the percentages adopted by the Trust as maximum limitations
on its investment policies and limitations, an excess above the fixed percentage
will not be a violation of the policy or limitation unless the excess results
immediately and directly from the acquisition of any security or the action
taken. This paragraph does not apply to the borrowing policy set forth in
paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment company,
whether organized as a trust, association or corporation, or a personal holding
company, may be merged or consolidated with or acquired by the Trust, provided
that if such merger, consolidation or acquisition results in an investment in
the securities of any issuer prohibited by said paragraphs, the Trust shall,
within ninety days after the consummation of such merger, consolidation or
acquisition, dispose of all of the securities of such issuer so acquired or such
portion thereof as shall bring the total investment therein within the
limitations imposed by said paragraphs above as of the date of consummation.
Non-Fundamental. The following limitations have been adopted by the Trust
with respect to the Fund and are Non-Fundamental (see "Investment Restrictions"
above).
i. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
ii. Borrowing. The Fund will not borrow money or enter into reverse
repurchase agreements.
<PAGE>
iii. Margin Purchases. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short-term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
iv. Short Sales. The Fund will not effect short sales of securities.
v. Options. The Fund will not purchase or sell puts, calls, options or
straddles.
<PAGE>
vi. Illiquid Investments. The Fund will not invest in securities for which
there are legal or contractual restrictions on resale and other illiquid
securities.
MANAGEMENT OF THE FUND
The overall management and responsibility of the business and affairs of
the Fund is vested in the Trust's Board of Trustees. The Board of Trustees
approves all significant agreements between the Trust, on behalf of the Fund,
and persons or companies furnishing services to the Fund, including the
Management Agreement. The Trust is not required to hold and has no current
intentions of holding annual shareholders meetings, although special meetings
may be called for purposes such as changing fundamental policies.
INVESTMENT ADVISER
Responsibility for overall management of the Fund rests with its Board of
Trustees in accordance with Delaware law. Professional investment supervision is
provided by the Investment Adviser, Worldwide Financial Management Associates,
Inc., 300 South Pointe Drive, Suite 4306, Miami Beach, FL 33139.
Under the terms of the Management Agreement (the "Agreement"), the Adviser
manages the Fund's investments subject to approval of the Board of Trustees and
pays all of the operating expenses of the Fund except brokerage, taxes, interest
and extraordinary expenses. The Fund pays its organizational expenses. As
compensation for its management services and agreement to pay the Fund's
expenses, the Fund is obligated to pay the Adviser a fee, payable monthly, equal
to an annual average rate of 1.95% of its average daily net assets up to and
including $200 million, 1.90% of its average daily net assets from $200 million
up to and including $500 million, 1.85% of its average daily net assets from
$500 million up to and including $1 billion, and 1.80% of its average daily net
assets in excess of $1 billion, minus the amount by which the Fund's total
expenses (including organizational expenses, but excluding brokerage, taxes,
interest and extraordinary expenses) exceeds 1.95%. The Adviser may waive all
or part of its fee, at any time, and at its sole discretion, but such action
shall not obligate the Adviser to waive any fees in the future.
The Adviser retains the right to use the name "Empirical" in connection with
another investment company or business enterprise with which the Adviser is or
may become associated. The Trust's right to use the name "Empirical"
automatically ceases ninety days after termination of the Agreement and may be
withdrawn by the Adviser on ninety days written notice.
<PAGE>
The Adviser may make payments to banks or other financial institutions that
provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Fund believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
<PAGE>
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown below.
Each Trustee who is an "interested person" of the Trust, a defined in the
Investment Company Act of 1940, is indicated by an asterisk.
<PAGE>
- --------------------------------------------------------------------------------
Name, Age & Address Position Principal Occupations During Past 5 Years
- --------------------------------------------------------------------------------
*Kaye Anderson-Kerr President, President and Trustee of Worldwide
Age: 27 Treasurer, Financial Management Associates, Inc.,
1521 Alton Rd., Suite 364 Trustee the Fund's Advisor; Managed Asset Group
Miami Beach, FL 33139 Assistant at Dain Bosworth, Inc.,
an investment banker/brokerage firm, from
1996 to 1997; Credit Representative at
Dayton Hudson Corp., a retail operator,
from 1995 to 1996; Vice President and
Account Executive at Tuschner & Company,
Inc., an investment banker/brokerage
firm, from 1994 to 1995; Account
Executive at R.J. Steichen & Co., an
investment banker/brokerage firm,
from February, 1994 to June,
1994; New Business Development
Associate at Jubilee Investment
Corp., a business development
company, from 1993 to 1994.
<PAGE>
Reza Jalali Bidgoli Trustee President of Sabet Investment Corp., a
Age: 34 real estate holding company, since 1987.
7213 NW 12th Street
Miami, FL 33126
David A. Shea III Trustee President of Shea Architects since 1978;
Age: 51 Partner of Genesis Architects from 1995
100 N. Sixth St., Suite 650C to 1998.
Minneapolis, MN 55403
Diana Sosa-Gonzalez Secretary Vice President of Hotels Ocean Drive,
Age: 34 Inc., a development corporation;
436 Ocean Drive Department Manager with the Federal
Miami Beach, FL 33139 Reserve Bank of Atlanta.
Trustee fees are Trust expenses and each series of the Trust is responsible
for a portion of the Trustee fees. The following table estimates the Trustees'
compensation for the first fiscal year of the Trust ending January 31, 1999.
Name Total Compensation from Trust
(the Trust is not in a Fund Complex)
Kaye Anderson-Kerr $0
Reza Jalali Bidgoli $2,000
David A. Shea III $2,000
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, the
Adviser is responsible for the Fund's portfolio decisions and the placing of the
Fund's portfolio transactions. In placing portfolio transactions, the Adviser
seeks the best qualitative execution for the Fund, taking into account such
factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
The Adviser is specifically authorized to select brokers or dealers who also
provide brokerage and research services to the Fund and/or the other accounts
over which the Adviser exercises investment discretion and to pay such brokers
or dealers a commission in excess of the commission another broker or dealer
would charge if the Adviser determines in good faith that the commission is
reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and economic
analyses, statistical services and information with respect to the availability
of securities or purchasers or sellers of securities and analyses of reports
concerning performance of accounts. The research services and other information
furnished by brokers through whom the Fund effects securities transactions may
also be used by the Adviser in servicing all of its accounts. Similarly,
research and information provided by brokers or dealers serving other clients
may be useful to the Adviser in connection with its services to the Fund.
Although research services and other information are useful to the Fund and the
Adviser, it is not possible to place a dollar value on the research and other
information received. It is the opinion of the Board of Trustees and the Adviser
that the review and study of the research and other information will not reduce
the overall cost to the Adviser of performing its duties to the Fund under the
Agreement.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers, if the same or a better price, including
commissions and executions, is available. Fixed income securities are normally
purchased directly from the issuer, an underwriter or a market maker. Purchases
include a concession paid by the issuer to the underwriter and the purchase
price paid to a market maker may include the spread between the bid and asked
prices.
To the extent that the Trust and another of the Adviser's clients seek to
acquire the same security at about the same time, the Trust may not be able to
acquire as large a position in such security as it desires or it may have to pay
a higher price for the security. Similarly, the Trust may not be able to obtain
as large an execution of an order to sell or as high a price for any particular
portfolio security if the other client desires to sell the same portfolio
security at the same time. On the other hand, if the same securities are bought
or sold at the same time by more than one client, the resulting participation in
volume transactions could produce better executions for the Trust. In the event
that more than one client wants to purchase or sell the same security on a given
date, the purchases and sales will normally be made by random client selection.
<PAGE>
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is Custodian of the
Fund's investments. As Custodian, Star Bank, N.A. acts as the Fund's depository,
safekeeps its portfolio securities, collects all income and other payments with
respect thereof, disburses funds at the Fund's request and maintains records in
connection with its duties.
<PAGE>
DISTRIBUTOR
Maxus Securities Corporation, 1301 East 9th Street, Suite 3600, Cleveland, Ohio
44114, is an agent for distribution of shares of the Fund in certain states. The
distributor is obligated to sell the shares of the Fund on a best efforts basis
only against purchase orders for the shares. Shares of the Fund are offered to
the public on a continuous basis.
<PAGE>
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and Exchange
Commission, is computed by finding the average annual compounded rates of return
(over the one and five year periods and the period from initial public offering
through the end of the Fund's most recent fiscal year) that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable
period of the hypothetical $1,000 investment made at the
beginning of the applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
The Fund's investment performance will vary depending upon market conditions,
the composition of the Fund's portfolio and operating expenses of the Fund.
These factors and possible differences in the methods and time periods used in
calculating non-standardized investment performance should be considered when
comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information furnished
to present or prospective shareholders, the performance of the Fund may be
compared to indices of broad groups of unmanaged securities considered to be
representative of or similar to the portfolio holdings of the Fund or considered
to be representative of the stock market in general. The Fund may use the
Russell Midcap Index.
In addition, the performance of the Fund may be compared to other groups of
mutual funds tracked by any widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, such as
Lipper Analytical Services, Inc. or Morningstar, Inc. The objectives, policies,
limitations and expenses of other mutual funds in a group may not be the same as
those of the Fund. Performance rankings and ratings reported periodically in
national financial publications such as Barron's and Fortune also may be used.
<PAGE>
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
McCurdy & Associates C.P.A's, Inc. serves as the Trust's independent
accountants. The Trust's statement of assets and liabilities as of April 22,
1998, have been audited by McCurdy & Associates CPA's, Inc., whose address is
27955 Clemens Road Westlake, Ohio 44145. Such statement and accompanying notes
are set forth below.
<PAGE>
[Letterhead-McCurdy & Associates CPA's, Inc.]
To The Shareholders and Trustees
The Empirical Investment Funds
We have audited the accompanying statement of assets and liabilities of the
Empirical Investment Funds (comprised of the Empirical Growth Fund) as of April
22, 1998. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. Our procedures included
confirmation of cash held by the custodian as of April 22, 1998, by
correspondence with the custodian. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Empirical Growth Fund as of April 22, 1998, in conformity with generally
accepted accounting principles.
/s/
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
April 22, 1998
<PAGE>
EMPIRICAL INVESTMENT FUNDS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 22, 1998
Empirical
Growth Fund
ASSETS:
Cash in Bank $100,000
Organization Costs 44,552
--------
Total Assets 144,552
--------
LIABILITIES:
Note Payable 44,552
--------
Total Liabilities 44,552
--------
NET ASSETS $100,000
--------
NET ASSETS CONSIST OF:
Capital Paid In $100,000
--------
OUTSTANDING SHARES
Unlimited Number of Shares
Authorized Without Par Value 10,000
NET ASSET VALUE PER SHARE $10
OFFERING PRICE PER SHARE $10
See Accountants' Audit Report
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EMPIRICAL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS
April 22, 1998
1. ORGANIZATION
Empirical Investment Funds (the "Trust") is an open-end management
investment company organized as a business trust under the laws of the State
of Delaware by a Declaration of Trust dated September 29, 1997. The
Declaration of Trust provides for an unlimited number of authorized shares
of beneficial interest, which may, without shareholder approval, be divided
into an unlimited number of series of such shares, and which presently
consist of one series of shares for the Empirical Growth Fund.
The Fund uses an independent custodian and transfer agent. No transactions
other than those relating to organizational matters and the sale of 10,000
Shares of the Empirical Growth Fund have taken place to date.
2. RELATED PARTY TRANSACTIONS
As of April 22, 1998, all of the outstanding shares of the Fund were owned
by Worldwide Financial Management Associates, Inc. A shareholder who
beneficially owns, directly or indirectly, more than 25% of the Fund's
voting securities may be deemed a "control person" (as defined in the 1940
Act) of the Fund. Worldwide Financial Management Associates, Inc. is
controlled by Kaye Anderson-Kerr the President and Treasurer of the Fund.
Worldwide Financial Management Associates, Inc., the Fund's investment
adviser, is registered as an investment adviser under the Investment
Advisers Act of 1940.
As compensation for Worldwide Financial Management Associates, Inc.'s
services rendered to the Fund, such Fund pays a fee, computed and paid
monthly, at an annual rate of 1.95% on up to and including $200 million of
assets; 1.90% from $200 million to $500 million of assets; 1.85% from $500
million to $1 billion of assets; and 1.80% on all assets in excess of $1
billion minus the amount by which the Fund's total expenses (excluding
brokerage, taxes, interest, and extraordinary expenses) exceeds 1.95%.
3. CAPITAL STOCK AND DISTRIBUTION
At April 22, 1998, an unlimited number of shares were authorized and paid in
capital amounted to $100,000 for the Empirical Growth Fund. Transactions in
capital stock were as follows:
Shares Sold:
The Empirical Growth Fund 10,000
Shares Redeemed:
The Empirical Growth Fund 0
Net Increase:
The Empirical Growth Fund 10,000
Shares Outstanding:
The Empirical Growth Fund 10,000
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4. NOTE PAYABLE
The note payable consists of a 6% demand note payable to Worldwide Financial
Management Associates, Inc.
This note is stated at cost. The Fund does not believe it is practicable to
estimate fair value as the cost to provide such value would exceed the
benefit.
5. ORGANIZATION COSTS
Organization costs are being amortized on a straight line basis over a
five-year period.
In the event the initial shareholders redeem their funds prior to the time
that the organization costs have been fully amortized, the redemptions will
be reduced by an amount equal to the unamortized portion of the organization
costs.
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