[Cover Page]
Empirical Growth Fund
Annual Report
to Shareholders
May 31, 1999
Empirical Growth Fund
1521 Alton Road, Suite 364
Miami Beach, FL 33139
(305) 535-1006
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Dear Shareholder:
During the past year we attempted to provide a focused growth strategy while
maintaining a conservative investment portfolio to ensure safety of principal
during a very volatile year. Due to a few of our key holdings releasing sales
and earnings that did not meet up with analysts expectations, the Empirical
Growth Fund turned in a -2.1% return for the fiscal year ending May 31st, 1999,
which trailed the return of the S&P 500. The funds strategy of building its'
portfolio stock by stock focusing on individual corporate success will continue.
We would like to thank you for your support and look forward to servicing and
expanding upon your investment needs for years to come.
Sincerely,
Kaye R. Kerr
President
Empirical Growth Fund
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Growth of $10,000 - June 1, 1998 to May 31, 1999
Empirical Growth Frund vs. S&P 500
[GRAPH]
Returns for the Period 6/01/98 (fund inception) through 5/31/99
Fund/Index One Year
Empirical Growth Fund -2.10%
S&P 500 Index 16.32%
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. This chart assumes
an initial investment of $10,000 in the Fund and the S&P 500 Index on June 1,
1998 and held through May 31, 1999. The S&P 500 Index is a widely recognized
unmanaged Index of common stock prices. Performance figures include the
change in value of the stocks in the Index and reinvestment of dividends, and
are not annualized. The Index returns do not reflect expenses, which have
been deducted from the Fund's return.
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Empirical Growth Fund
Schedule of Investments
May 31, 1999
Shares/Principal Amount Market Value % of Assets
Asphalt Felts and Coatings
50 Elcor Corp 2,019
40 Fastenal Co. 2,050
4,069 3.37%
Catalog and Mail-Order Houses
55 Tech Data Corp. * 2,023 1.67%
Computer Peripheral Equipment
70 Lexmark International Group * 9,529
125 Symbol Technologies Inc. 6,250
15,779 5.93%
Department Stores
175 Ames Department Stores, Inc. * 7,175 5.93%
Drugs/Druggists'
140 AmeriSource Healthcare Corp. * 4,139 3.42%
Electric Lamp Bulbs and Tubes
65 SLI Inc * 2,104 1.74%
Games, Toys, and Children's Vehicles
70 JAKKS Pacific Inc * 1,937 1.60%
Help Supply Services
55 Labor Ready Inc * 1,966 1.63%
Misc. Apparel and Accessory Stores
100 Ross Stores, Inc. 4,594 3.80%
Offices and Clinics of Doctors of Medicine
35 Laser Vision * 1,995 1.65%
Ophthalmic Goods
65 Ocular Sciences Inc * 1,983
65 Wesley Jessen Visioncare Inc * 2,023
4,006 3.31%
Orthopedic, Prosthetic, and Surgical Appliances
70 Resmed Inc * 1,964 1.62%
Overhead Traveling Cranes
65 Terex Corp * 2,011 1.66%
Prefabricated Wood Buildings and Components
175 Champion Enterprises, Inc. * 3,577 2.96%
* Non- Income producing securities.
The accompanying notes are an integral part of the financial statements.
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Shares/Principal Amount Market Value % of Assets
Security Brokers, Dealers
30 Southwest Securities Group 2,003 1.66%
Tour Operators
205 Dial Corp. 6,406 5.30%
Women's Specialty Stores
180 Goody's Family Clothing, Inc. * 1,957 1.62%
Cash and Equivalents
77,346 Star Bank Treasury 77,346 63.97%
Total Investments (cost $140,636) 145,051 119.97%
Other Assets Less Liabilities (24,140) -19.97%
Net Assets - Equivalent to $9.79 per share 120,911 100.00%
based on 12,353 shares of capital
stock outstanding (Note 4)
* Non-Income producing securities.
The accompanying notes are an integral part of the financial statements.
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Statement of Assets and Liabilities
May 31, 1999
Assets:
Investment Securities at Market Value $145,051
(Identified Cost - 140,636)
Cash -
Receivables:
Advisor -
Dividends and Interest 215
Organization Costs, net 35,691
Total Assets 180,957
Liabilities
Payables:
Investment Securities Purchased 24,430
Shareholder Distributions -
Accrued Expenses 35,616
Total Liabilities 60,046
Net Assets $120,911
Net Assets Consist of:
Capital Paid In 122,743
Undistributed Net Investment Income 954
Accumulated Realized Gain (Loss) on Investments - Net (7,201)
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 4,415
Net Assets, for 12,353 Shares Outstanding $120,911
Net Asset Value and Redemption Price
Per Share ($120,911/12,353 shares) 9.79
Offering Price Per Share 9.79
The accompanying notes are an integral part of thr financial statements.
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Statement of Operations
For period ending May 31, 1999
Investment Income:
Dividends 119
Interest 2,900
Total Investment Income 3,019
Expenses
Management Fees (Note 2) (6,796)
Amortization Organization Costs 8,861
Total Expenses 2,065
Net Investment Income 954
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments (7,201)
Unrealized Gain (Loss) from Appreciation (Depreciation) on
Investments 4,415
Net Realized and Unrealized Gain (Loss) on Investments (2,786)
Net Increase (Decrease) in Net Assets from Operations (1,832)
The accompanying notes are an integral part of the finaancial statements.
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Statement of Changes in Net Assets
6/1/98
to
5/31/99
From Operations:
Net Investment Income 954
Net Realized Gain (Loss) on Investments (7,201)
Net Unrealized Appreciation (Depreciation) 4,415
Increase (Decrease) in Net Assets from Operations (1,832)
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 2,353 Shares 22,743
Net Asset Value of 0 Shares Issued on Reinvestment of Dividends 0
Cost of 0 Shares Redeemed 0
22,743
Net Increase in Net Assets 20,911
Net Assets at Beginning of Period (including undistributed net
investment income of $0) 100,000
Net Assets at End of Period (including undistributed net investment
income of $834) 120,911
The accompanying notes are an integral part of the financial statements.
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Financial Highlights
Selected data for a share outstanding throughout the period: 6/1/98
to
5/31/99
Net Asset Value -
Beginning of Period 10.00
Net Investment Income 0.10
Net Gains or Losses on Securities
(realized and unrealized) (0.31)
Total from Investment Operations (0.21)
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 9.79
Total Return -2.10%
Ratios/Supplemental Data
Net Assets - End of Period (Thousands) 121
Ratio of Expenses to Average Net Assets 1.95%
Ratio of Net Income to Average Net Assets 2.85%
Portfolio Turnover Rate 27.57%
the accompanying notes are an integral part of the financial statements.
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Empirical Growth Fund
Notes to Financial Statements
May 31, 1999
1.) SIGNIFICANT ACCOUNTING POLICIES
The Fund is 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 and organized under Delaware law as a
business trust under a Declaration of Trust dated September 29, 1997. The
Fund's investment objective is to achieve superior risk-adjusted capital
appreciation on long-term investment dollars. Significant accounting policies
of the Fund are presented below:
SECURITY VALUATION:
The Fund intends to invest in a wide variety of equity and debt securities.
The investments in securities are carried at market value. The market
quotation used for common stocks, including those listed on the NASDAQ
National Market System, is the last sale price on the date on which the
valuation is made or, in the absence of sales, at the closing bid price.
Over-the-counter securities will be valued on the basis of the bid price at
the close of each business day. Short-term investments are valued at amortized
cost, which approximates market. Securities for which market quotations are
not readily available will be valued at fair value as determined in good faith
pursuant to procedures established by the Board of Directors.
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.
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.
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Empirical Growth Fund
Notes to Financial Statements
May 31, 1999
2.) INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory and administration agreement
with Worldwide Financial Management Associates, Inc. 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. As a result of the above calculation, for the year
ended May 31, 1999, the management fee amounted to $(6,796).
3.) RELATED PARTY TRANSACTIONS
The owner of Worldwide Financial Management Associates, Inc. is also an owner
and/or trustee of the Empirical Growth Fund. This individual may receive
benefits from any management fee paid to the Advisor. Trustees were paid
$2,000 by the Advisor pursuant to the Management Agreement.
4.) CAPITAL STOCK AND DISTRIBUTION
At May 31, 1999 an indefinite number of shares of capital stock ($.10 par
value) were authorized, and paid-in capital amounted to $122,743.
Transactions in common stock were as follows:
Shares sold 2,353
Shares issued to shareholders in
reinvestment of dividends 0
2,353
Shares redeemed
0
Net Increase 2,353
Shares Outstanding:
Beginning of Period
10,000
End of Period
12,353
5.) PURCHASES AND SALES OF SECURITIES
During the year ending May 31, 1999, purchases and sales of investment
securities other than U.S. Government obligations and short-term investments
aggregated $82,784 and $12,292 respectively. Purchases and sales of U.S.
Government obligations aggregated $0 and $0 respectively.
6.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments that have any off-balance sheet
risk as of May 31, 1999.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at May 31, 1999
was the same as identified cost.
At May 31, 1999, 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)
9,952 (5,537) 4,415
8.) ORGANIZATION COSTS
Organization costs are being amortized on a straight-line basis over a
five-year period. In the event the initial shareholder redeems its funds prior
to the time 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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INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees
Empirical Growth Fund:
We have audited the accompanying statement of assets and liabilities of the
Empirical Growth Fund, including the schedule of portfolio investments, as of
May 31, 1999,and the related statement of operations, the statement of changes
in net assets, and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held as
of May 31, 1999 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Empirical Growth Fund as of May 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the year then ended,
in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
June 18, 1999
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