November 30, 1998
Dear Shareholder:
It is a pleasure to bring you the Empirical Investment Funds' semi-annual report
for the period ending November 30, 1998.
Although it is important to understand the reasons for short-term performance,
progress is measured over long periods of time. Good sustainable performance is
the key to every investment success.
The ride has been bumpy for the market as a whole; however, the Empirical Growth
Fund fared well during the third quarter sell-off. This was due in part to the
avoidance of high flying speculative stocks. Our Growth Fund's focus is to
reduce our exposure to risk without jeopardizing capital return potential. Even
though the third quarter was a disappointing quarter for mid-cap stocks, our
Growth Fund continued to stay ahead of our benchmarks and slightly ahead of the
market indices.
Consistent with our objective of low portfolio turnover, no significant changes
to the Fund's weightings were made since the end of the third quarter. This may
have affected our performance somewhat in the fourth quarter; however, we
anticipate seeing these returns increase at a greater pace in the near future.
On another note, the increased technological boom has added an element of
excitement to the investment arena and has changed the way many investors view
investing. A substantial number of investors have decided to jump into this
arena. We hope that it continues to thrive. Due to the rapid changes, we are
going to explore ways to adapt our fund company to the current market
environment by researching ways to offer alternative investment vehicles (i.e.
an internet/technology stock fund).
We are looking forward to having a few additional investment options available
to our shareholders within the coming year. As we continue to expand, we will
focus on having each new fund managed in the same dedicated spirit but with
differing focus points.
As always, we appreciate your support, welcome your questions and look forward
to serving your investment needs in the years to come.
Sincerely,
Kaye R. Kerr
President
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Empirical Investment Fund
Schedule of Investments
November 30,1998 (unaudited)
Shares/Principal Amount Cost Market Value % of Assets
----------------------- ---- ------------ -----------
Aircraft Parts
225 Ducommun Inc. * 5,056 3,755 3.59%
Bakery Products
150 Interstate Bakeries Corp. 4,727 3,937 3.76%
Computer Peripheral Equipment
70 Lexmark International Group * 4,746 5,346
125 Symbol Technologies Inc. 4,991 6,094
------- -------
9,737 11,440 10.93%
Department Stores
175 Ames Department Stores, Inc. * 4,821 4,156 3.97%
Drugs/Druggists'
70 AmeriSource Healthcare Corp. * 4,785 4,480 4.28%
Household Furniture
160 Furniture Brands, Intl. * 4,700 4,070 3.89%
Misc. Apparel and Accessory Stores
100 Ross Stores, Inc. 4,967 3,638 3.48%
Prefabricated Wood Buildings and Components
175 Champion Enterprises, Inc. * 4,832 3,905 3.73%
Tour Operators
205 Dial Corp. 4,873 5,381 5.14%
Values and Pipe Fittings
142 Crane Co. 4,994 4,588 4.38%
Women's Specialty Stores
180 Goody's Family Clothing, Inc. * 4,845 2,025 1.93%
Cash and Equivalents
53,950 Star Treasury 53,950 53,950 51.54%
--------- --------
Total Investments 112,287 105,325 100.63%
Other Assets Less Liabilities (656) -0.63%
Net Assets - Equivalent to $9.42 per share on 104,669 100.00%
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Assets and Liabilities
November 30, 1998 (unaudited)
Assets:
Investment Securities at Market Value $105,325
(Identified Cost - 112,287)
Cash -
Receivables:
Dividends and Interest 382
Other Assets 39,865
---------
Total Assets 145,572
Liabilities
Payables:
Investment Securities Purchased -
Accrued Trustee Fees 1,000
Accrued Expenses 39,903
---------
Total Liabilities 40,903
Net Assets $104,669
Net Assets Consist of:
Capital Paid In 110,743
Undistributed Net Investment Income 892
Accumulated Realized Gain (Loss)
on Investments - Net (4)
Unrealized Appreciation in Value
of Investments Based on Identified
Cost - Net (6,962)
---------
Net Assets, for 11,109 Shares Outstanding $104,669
Net Asset Value and Redemption Price
Per Share ($101,020/11,109 shares) 9.42
Offering Price Per Share 9.42
Statement of Operations
May 22 to November 30, 1998
Investment Income:
Dividends 49
Interest 1,881
---------
Total Investment Income 1,930
Expenses
Management Fees (Note 2) -
Trustee Fees 1,261
Accrued Trustee Fees 1,000
Organizational Costs 4,687
---------
Total Expenses 6,948
Reimbursed Expenses (5,910)
---------
Total Expenses after Reimbursements 1,038
Net Investment Income 892
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments (4)
Distribution of Realized
Capital Gains from other Investment Companies -
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments (6,962)
---------
Net Realized and Unrealized Gain (Loss) on
Investments (6,966)
Net Increase (Decrease) in Net
Assets from Operations (6,074)
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets
(unaudited) 5/22/98
to
11/30/98
--------
From Operations:
Net Investment Income 892
Net Realized Gain (Loss) on Investments (4)
Net Unrealized Appreciation (Depreciation) (6,962)
---------
Increase (Decrease) in Net Assets from Operations (6,074)
From Distributions to Shareholders
Net Investment Income 0
Net Realized Gain (Loss) from Security Transactions 0
---------
Net Increase (Decrease) from Distributions 0
From Capital Share Transactions:
Proceeds From Sale of 11,109 Shares 110,743
Net Asset Value of 0 Shares Issued on
Reinvestment of Dividends 0
Cost of 0 Shares Redeemed 0
---------
110,743
Net Increase in Net Assets 104,669
Net Assets at Beginning of Period 0
Net Assets at End of Period 104,669
Financial Highlights (unaudited)
Selected data for a share of common
stock outstanding throughout the period: 5/22/98
to
11/30/98
Net Asset Value - --------
Beginning of Period 10.00
Net Investment Income 0.08
Net Gains or Losses on Securities
(realized and unrealized) (0.66)
--------
Total from Investment Operations (0.58)
Dividends
(from net investment income) 0.00
Distributions (from capital gains) 0.00
Return of Capital 0.00
--------
Total Distributions 0.00
Net Asset Value -
End of Period 9.42
Total Return -5.80%
Ratios/Supplemental Data
Net Assets - End of Period (Thousands) 105
Before reimbursments
Ratio of Expenses to Average Net Assets* 13.11%
Ratio of Net Income to Average Net Assets* (9.47)%
After reimbursments
Ratio of Expenses to Average Net Assets* 1.95%
Ratio of Net Income to Average Net Assets* 1.68 %
Portfolio Turnover Rate 0.00%
Average commission per share 0.20273
*Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE>
Empirical Investment Fund
Notes to Financial Statements
November 30, 1998 (unaudited)
1.) SIGNIFICANT ACCOUNTING POLICIES
The Fund is a open-end management investment company, organized as a
Trust under the laws of the State of Delaware by a Declaration of Trust
in September 1997. The 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. Significant accounting policies of the Fund are presented
below:
SECURITY VALUATION:
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.
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.
SECURITY TRANSACTION TIMING:
Security transactions are recorded on the dates transactions are entered
into (the trade dates). Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is
recorded as earned. The Fund uses the identified cost basis in
computing gain or loss on sale of investment securities. Discounts and
premiums on securities purchased are amortized over the life of the
respective securities.
INCOME TAXES:
It is the Fund's policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements
of the Internal Revenue Service. This Internal Revenue Service
requirement may cause an excess of distributions over the book year-end
accumulated income. In addition, it is the Fund's policy to distribute
annually, after the end of the fiscal year, any remaining net investment
income and net realized capital gains.
EXPENSES:
Organizational costs represent costs incurred in connection with the
organization and the initial public offering of the Fund.
Organizational costs are deferred and will be amortized on a straight-
line basis over five years. In the event that the original shareholder
(or and subsequent transferee) redeems any of its original capital (seed
capital) prior to these organizational costs being fully amortized, the
redemption proceeds will be reduced by a pro-rata portion of any then
unamortized organizational costs. At November 30, 1998, the unamortized
balance was $39,865.
<PAGE>
Empirical Investment Fund - (continued)
Notes to Financial Statements
November 30, 1998 (unaudited)
ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2.) MANAGEMENT AGREEMENT
The Fund has entered into a Management Agreement with Worldwide
Financial Management Associates, Inc. (the "Adviser"). 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, fees and expenses of the non-interested
person trustees and extraordinary expenses. The Fund pays its
organizational expenses. During the period ending November 30, 1998 the
Adviser received no management fees and reimbursed $5,910 of Fund
expenses.
3.) CAPITAL STOCK AND DISTRIBUTIONS
At November 30, 1998 an indefinite number of shares of capital stock
($.10 par value) were authorized, and paid-in capital amounted to
$110,743. Transactions in common stock were as follows:
Shares sold 11,109
Shares issued to shareholders in
reinvestment of dividends 0
11,109
Shares redeemed
0
Net Increase 11,109
Shares Outstanding:
Beginning of Period
0
End of Period
11,109
4.) PURCHASES AND SALES OF SECURITIES
During the period from inception to November 30, 1998, purchases and
sales of investment securities other than U.S. Government obligations
and short-term investments aggregated $58,354 and $0 respectively.
Purchases and sales of U.S. Government obligations aggregated $0 and $0
respectively.
5.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments that have any off-balance
sheet risk as of November 30, 1998.
8.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at
November 30, 1998 was the same as identified cost.
At November 30, 1998, the composition of unrealized appreciation (the
excess of value over tax cost) and depreciation (the excess of tax cost
over value) was as follows:
Appreciation (Depreciation) Net Appreciation
(Depreciation)
2,211 (9,173) (6,962)
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