As filed with the Securities and Exchange Commission on August 22, 1997
Securities Act Registration No. 333-29687
Investment Company Act Registration No. 811-8267
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. ____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ ]
Amendment No. 1 [X]
KOPP FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7701 France Avenue South
Suite 500 55435
Edina, Minnesota (Zip Code)
(Address of Principal Executive
Offices)
Registrant's Telephone Number, including Area Code:
(612) 920-3322
Kathleen S. Tillotson
Kopp Funds, Inc.
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
(Name and Address of Agent for Service)
Copies to:
Carol A. Gehl
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Approximate date of proposed public offering: As soon
as practicable after the Registration Statement becomes
effective.
In accordance with Rule 24f-2 under the Investment
Company Act of 1940, Registrant declares that an
indefinite number of shares of its common stock, $.01
par value, is being registered by this Registration
Statement.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to
delay its effective date until the Registrant shall
file a further amendment which specifically states that
this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in
the Prospectus and the Statement of Additional
Information of the responses to the Items of Parts A
and B of Form N-1A).
Caption or Subheading in
Prospectus or Statement
Item No. on Form N-1A of Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Investor Expenses;
Highlights
3. Condensed Financial *
Information
4. General Description of Investment Strategy;
Registrant Implementation of
Policies and Risks; Investment
Objective and Restrictions;
Fund Organization and
Management
5. Management of the Fund Fund Organization and
Management
5A. Management's Discussion
of Fund Performance *
6. Capital Stock and Other Highlights; Fund
Securities Organization and
Management; Dividends, Capital
Gains Distributions and
Tax Treatment
7. Purchase of Securities Fund Organization and
Being Offered Management; Your Account;
Determination of Net Asset
Value; Distribution and
Shareholder Servicing Plan
8. Redemption or Repurchase Your Account;
Determination of Net Asset
Value
9. Pending Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information *
and History
<PAGE>
13. Investment Investment Objective and
Objectives and Policies Restrictions; Investment
Policies and Techniques; Fund
Transactions and Brokerage
14. Management of the Directors and Officers
Fund
15. Control Persons and Principal Shareholders;
Principal Holders of Directors and Officers
Securities
16. Investment Advisory Investment Advisor; Fund
and Other Services Organization and Management
(in Prospectus);
Distributor and Plan of
Distribution; Custodian,
Transfer Agent and Dividend-
Disbursing Agent; Independent
Accountants
17. Brokerage Allocation Fund Transactions and
and Other Practices Brokerage
18. Capital Stock and Included in Prospectus
Other Securities under the heading Fund
Organization and Management
19. Purchase, Redemption and Included in Prospectus
Pricing of Securities Being under the headings Your
Offered Account; Determination of Net
Asset Value; and in the
Statement of Additional
Information under the heading
Distributor and Plan of
Distribution
20. Tax Status Included in Prospectus
under the heading
Dividends, Capital Gains
Distributions and Tax
Treatment; and in the
Statement of Additional
Information under the heading
Taxes
21. Underwriters Distributor and Plan
of Distribution
22. Calculations of Performance Information
Performance Data
23. Financial Financial Statements
Statements
________________________
* Answer negative or inapplicable.
<PAGE>
PROSPECTUS
September __, 1997
[Logo]
Kopp Funds
Kopp Emerging Growth Fund
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Telephone: 1-888-533-KOPP
Facsimile: 1-612-841-0411
Website: www.koppfunds.com
Kopp Funds ("Corporation") is an open-end, non-
diversified management investment company, commonly
referred to as a mutual fund. The Corporation
currently comprises one portfolio: the Kopp Emerging
Growth Fund ("Fund"). The Fund's investment objective
is long-term capital appreciation. The Fund seeks to
achieve its investment objective by investing primarily
in common stocks of companies that Kopp Investment
Advisors ("Advisor") believes have the potential for
superior growth. When the Fund's assets total $1
billion, no new accounts, other than certain qualified
retirement plan accounts, will be accepted. If you are
a shareholder of record at that time, however, you will
be able to continue to add to your account through new
purchases, including purchases through reinvestment of
dividends or capital gains distributions.
You may invest in the Fund by purchasing either
Class A or Class I shares. Fund shares may be
purchased at a price equal to their net asset value (i)
plus an initial charge imposed at the time of purchase
("Class A shares") or (ii) without any initial sales
charge if the minimum investment is $5 million ("Class
I shares"). Certain purchasers of Class A shares may
have the initial sales charge waived but become subject
to a contingent deferred sales charge ("CDSC") on early
redemptions of the shares. The Class A shares are also
subject to a Rule 12b-1 plan pursuant to which an
aggregate annual fee of 0.35% is charged on the average
net assets of the Fund attributable to that class.
The Fund is a long-term investment, intended to
complement your other investments. Under federal
securities laws, the Fund is "not diversified." As a
result, it may be more vulnerable than a "diversified"
fund to fluctuations in the value of the companies in
the Fund's portfolio.
This Prospectus contains information you should
consider before you invest in the Fund. Please read it
carefully and keep it for future reference. A
Statement of Additional Information ("SAI") for the
Fund, dated September __, 1997, contains further
information, is incorporated by reference into this
Prospectus, and has been filed with the Securities and
Exchange Commission ("SEC"). The SAI, which may be
revised from time to time, is available without charge
upon request to the above-noted address, telephone
number, or website.
____________________
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.
<PAGE>
INVESTOR EXPENSES
The following information is provided to help you
understand the various costs and expenses that you, as
an investor in the Fund, will bear directly or
indirectly.
Class A Class I
($5,000 ($5 million
minimum) minimum)
Shareholder Transaction Expenses(1)
Maximum sales charge imposed on purchases
(as a percentage of offering price) 3.50%(2) None
Maximum sales charge imposed on reinvested
amounts None None
Deferred sales charge imposed on redemptions
(as a percentage of amount redeemed) 1.00%(3) None
Redemption fee None 1.00%(4)
Exchange fee None None
Annual Fund Operating Expenses (after waivers or
reimbursements)
(as a percentage of average net assets)
Management fee 1.00% 1.00%
Rule 12b-1 fees(5) 0.35% None
Other expenses (after waivers or
reimbursements)(6) 0.15% 0.15%
Total operating expenses(6) 1.50% 1.15%
____________
(1)In addition to these expenses, shareholders who
choose to redeem shares by wire will be charged a
$12 service fee. See "Your Account."
(2)This sales charge is the maximum applicable to
purchases of Class A shares. Certain investors may
not have to pay this sales charge, and reduced
sales charges are available under certain
circumstances. See "Your Account."
(3)A CDSC of 1% may be imposed on redemptions of
certain Class A shares which were purchased without
a sales charge and redeemed within 24 months of
purchase. See "Your Account."
(4)A redemption fee of 1% may be imposed on
redemptions of Class I shares made within 24 months
of purchase. This fee becomes the property of the
Fund. See "Your Account."
(5)See "Distribution and Shareholder Servicing Plan"
for detailed information relating to the Rule 12b-1
distribution and shareholder servicing plan
("Plan"). The Rule 12b-1 fee applicable to Class A
shares is currently set at 0.35% of the average
daily net asset value; however, the Plan allows the
Fund to pay up to 0.50% in such fees. Furthermore,
while the Fund currently has no intention of paying
any Rule 12b-1 fees in connection with the Class I
shares, the Plan allows the Fund to pay up to 0.50%
in such fees. Consistent with the National
Association of Securities Dealers, Inc.'s ("NASD")
rules, Rule 12b-1 fees could cause long-term
investors in the Fund to pay more than the economic
equivalent of the maximum front-end sales charges
permitted under those rules.
(6)For the fiscal year ending September 30, 1998,
Advisor has agreed to waive its management fee
and/or reimburse the Fund's operating expenses to
the extent necessary to ensure that (i) the total
operating expenses for the Class A shares do not
exceed 1.50% and (ii) the total operating expenses
for the Class I shares do not exceed 1.15%. "Other
expenses" have been estimated for the current
fiscal year since the Fund did not begin operations
until October 1 1997, and are presented net of
reimbursements. Absent these reimbursements, other
expenses and total operating expenses for the Class
A shares are estimated to be 0.40% and 1.75%,
respectively, and other expenses and total
operating expenses for the Class I shares are
estimated to be 0.40% and 1.40%, respectively. For
additional information, see "Fund Organization and
Management."
<PAGE>
Example
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return.
<TABLE>
<CAPTION>
Class A(1)+ Class A(2)+ Class A(1)++ Class A(2)++ Class I(3)+ Class I++
<S> <C> <C> <C> <C> <C> <C>
After 1 year $50 $26 $50 $15 $22 $12
After 3 years $81 $47 $81 $47 $37 $37
</TABLE>
__________
+ Assumes redemption at end of period.
++Assumes no redemption at end of period.
(1)Only the 3.50% maximum sales charge
imposed on purchases of Class A shares is
reflected in the Example.
(2)Only the 1% CDSC imposed on certain
redemptions of Class A shares is reflected in
the Example.
(3)The 1% redemption fee imposed on certain
redemptions of Class I shares is reflected in
the Example.
The Example is based on the above-described "Total
operating expenses." The amounts in the Example may
increase absent waivers or reimbursements. REMEMBER
THAT THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND THAT
ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE
SHOWN. The assumption in the Example of a 5% annual
return is required by SEC regulations. The assumed 5%
annual return is not a prediction of, and does not
represent, the projected or actual performance of the
Fund's shares.
<PAGE>
CONTENTS
INVESTOR EXPENSES inside front cover
HIGHLIGHTS 8
INVESTMENT STRATEGY 10
IMPLEMENTATION OF POLICIES AND RISKS 10
INVESTMENT OBJECTIVE AND RESTRICTIONS 12
PRIOR PERFORMANCE OF INVESTMENT ADVISOR 12
FUND ORGANIZATION AND MANAGEMENT 15
YOUR ACCOUNT 17
DETERMINATION OF NET ASSET VALUE 25
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN 25
TAX-SHELTERED RETIREMENT PLANS 26
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX
TREATMENT 27
FUND PERFORMANCE 28
ADDITIONAL INFORMATION outside back cover
No person has been authorized to give any
information or to make any representations other than
those contained in this Prospectus and the SAI, and if
given or made, such information or representations may
not be relied upon as having been authorized by the
Fund. This Prospectus does not constitute an offer to
sell securities in any state or jurisdiction in which
such offering may not lawfully be made.
<PAGE>
HIGHLIGHTS
What is the objective of the Fund?
The Fund's goal is long-term capital appreciation.
The Fund seeks to achieve its goal by investing
primarily in common stocks of companies that Advisor
believes have the potential for revenue and earnings
growth superior to that of companies with similar
market or business characteristics. Advisor will not
consider dividend or interest income in the selection
of investments. See "Investment Strategy" and
"Investment Objective and Restrictions."
In what types of companies/securities will the Fund
invest?
Advisor intends to invest primarily in emerging
and re-emerging growth companies with small-to-medium
market capitalizations and significant potential for
accelerating earnings growth. An emerging growth
company is a newer business organized to address an
industry niche, which may have unstable cash reserves,
but the potential to experience accelerating returns.
A re-emerging growth company is a more established firm
experiencing a potential resurgence in sales and
earnings due to new industry leadership, restructuring,
or both. Advisor believes that, as part of a complete
investment program, these types of companies may
present an opportunity for significant long-term
appreciation in an investor's wealth.
Under normal circumstances, the Fund will be fully
invested in common stocks, except that a small portion
of the Fund's assets may be held in short-term money
market securities and cash to pay redemption requests
and Fund expenses. Under unusual circumstances, as a
defensive technique, the Fund may retain a larger
portion of cash and/or invest more assets in money
market instruments deemed by Advisor to be consistent
with a temporary defensive posture. The Fund may but
does not intend to leverage its assets or invest in
options, futures, derivative contracts, or other exotic
securities or arrangements. See "Implementation of
Policies and Risks."
What are the potential risks of investing in the Fund?
Because the Fund will invest primarily in small-to-
medium capitalization stocks, which are more volatile
than investments in large companies, you should expect
that the value of the Fund's shares will be more
volatile than the shares of a fund that invests in
large capitalization stocks. Thus, especially in the
short term, the share price will fluctuate and may, at
redemption, be worth more, or less, than the initial
purchase price. In addition, because the Fund has
elected not to be subject to the diversification rules
of the Investment Company Act of 1940, as amended
("1940 Act"), a relatively larger percentage of the
Fund's assets may be invested in relatively fewer
companies than is typical of other mutual funds. This
concentration may increase volatility. Because the
Fund intends to qualify as a regulated investment
company under federal income tax laws, it will be
subject to the diversification requirements of the
Internal Revenue Code of 1986, as amended ("Code").
Other risks associated with investing in the Fund
include:
Liquidity Certain securities may be difficult or
Risk: impossible to sell at the time and price
that the Fund seeks.
Market The market value of a security will move
Risk: up and down, sometimes rapidly and
unpredictably due to sector rotation or
other market trends.
Opportunity An investment opportunity may be missed
Risk: because the assets necessary to take
advantage of it are tied up in less
advantageous investments.
Management A strategy used by Advisor may fail to
Risk: produce the intended result.
See "Implementation of Policies and Risks."
<PAGE>
Is an investment in the Fund appropriate for me?
The Fund is suitable for long-term investors only.
It is not a short-term investment vehicle. An
investment in the Fund may be appropriate if you:
seek long-term capital appreciation;
seek a mutual fund for the aggressive equity
portion of your portfolio;
have no immediate financial requirements for this
investment; and
are willing to accept a high degree of volatility.
The Fund is designed for investors who have the
financial ability to undertake greater risk in exchange
for the opportunity to realize greater financial gains
in the future. See "Investment Objective and
Restrictions."
Who will manage my investment?
Kopp Investment Advisors serves as investment
advisor to the Fund. As of August 8, 1997, Advisor
managed over $3.5 billion for individual and
institutional clients. See "Prior Performance of
Investment Advisor" and "Fund Organization and
Management."
How can I buy or redeem Fund shares?
Class A shares are offered at net asset value plus
a maximum initial sales charge of 3.50% of the offering
price. The sales charge may be waived and/or reduced
under certain circumstances. If purchased with a sales
load, Class A shares may be redeemed at net asset value
without the payment of a redemption charge. A CDSC of
1% may be imposed upon redemptions of Class A shares
made within 24 months of purchase if the purchase was
exempt from the initial sales charge because the amount
of the purchase was between $1 and $5 million. For
minimum investments of $5 million, Class I shares of
the Fund are offered without a sales charge. However,
a 1% redemption fee may be imposed upon Class I shares
sold within 24 months of purchase. In addition, the
Fund has adopted a distribution and shareholder
servicing plan under Rule 12b-1 of the 1940 Act, which
authorizes the Fund to pay a yearly distribution fee of
up to 0.25% and a yearly shareholder servicing fee of
up to 0.25% of the average daily net assets of the Fund
attributable to each class. For the foreseeable
future, the Fund (i) intends to pay distribution fees
of 0.10% and servicing fees of 0.25% of the average
daily net assets attributable to the Class A shares and
(ii) intends to pay no Rule 12b-1 fees with respect to
the Class I shares. See "Your Account" and
"Distribution and Shareholder Servicing Plan."
The minimum initial investment in Class A shares
is $5,000 ($2,000 for retirement accounts), with a
minimum subsequent investment of $100. The minimum
initial investment in Class I shares is $5 million,
with no minimum subsequent investment requirement. The
minimum initial investment using the Automatic
Investment Plan, which is only available for purchases
of Class A shares, is $3,000 with a minimum automatic
monthly investment of $50. These minimums may be
changed or waived at any time by the Fund. See "Your
Account."
What is the policy regarding dividends and other
distributions?
You should not expect income from this Fund.
However, as required by law, to avoid double taxation,
the Fund will distribute substantially all of its net
realized capital gains and net investment income, if
any, to shareholders annually in the form of a
distribution and/or dividend, taxable to you as capital
gain or ordinary income. In the absence of specific
instructions to the contrary, distributions and
dividends will be reinvested in additional Fund shares
and will not be available for the payment of taxes. To
the extent possible, Advisor intends to minimize tax
consequences to investors by minimizing portfolio
turnover. See "Implementation of Policies and Risks"
and "Dividends, Capital Gains Distributions and Tax
Treatment."
<PAGE>
Who should I contact if I have questions?
Any communications regarding a shareholder account
should be directed to your registered representative at
your broker-dealer. General inquiries regarding the
Fund can be addressed to either your investment
professional or the Fund at the address, telephone
number, or website listed on the cover page of this
Prospectus.
INVESTMENT STRATEGY
Advisor seeks investments in high-growth companies
that have a small-to-medium market capitalization. A
small-cap company would typically have a market
capitalization of up to $1 billion, while a medium-cap
company would have a market capitalization of up to $3
billion. Advisor's general strategy is to be fully
invested, holding securities for their long-term growth
potential over a three- to five-year time frame.
Although Advisor's investment strategy is based on
company fundamentals, companies considered by Advisor
to be "high growth" are often in the same or related
market sectors. Thus, the Fund may be heavily invested
in a single sector. One sector, however, like
technology, may include numerous subsectors or
industries, like networking, telecommunications,
software, semiconductors, or voice-processing. The
Fund may be concentrated in one sector, while being
diversified among several industries. In addition, the
Fund may take relatively large positions in a single
issuer. To the extent the Fund is concentrated, it
will be susceptible to adverse economic, political,
regulatory, or market developments affecting a single
sector, industry, or issuer.
When making purchase decisions for the Fund,
Advisor uses a "buy discipline" that involves three key
components: research, fundamentals, and valuation.
Advisor gathers research on potential investment
candidates from a wide variety of sources. To further
qualify prospective investments, it analyzes
information from corporate contacts, industry
conferences, and visits with company management. Once
the research phase is complete, Advisor reviews certain
fundamental attributes that it believes a "buy"
candidate should possess, including (i) management
excellence, (ii) leading industry position or product,
(iii) projected annual revenue or sales growth of 15%
or more and projected earnings growth of 20% or more,
(iv) significant investment in research and
development, and (v) strong financial position
including a low debt to total capital ratio. Finally,
Advisor values companies by considering price to sales
ratios and price to earnings ratios within a peer
group. For companies with earnings, the price to
earnings ratio relative to a company's forecasted
growth rate is the most important measure in Advisor's
quantitative analytical process. Advisor then
constructs a list of securities for the Fund and
purchases them when their prices are within a pre-
determined range. Companies are monitored continually
for variations from expectations.
Advisor makes sell decisions for the Fund based on
a number of factors, including significant
deterioration in a company's underlying fundamentals,
strong price appreciation suggesting an overweighted
position or overvalued security, change in theme or
sector orientation, or better relative value in other
securities.
IMPLEMENTATION OF POLICIES AND RISKS
In implementing its investment strategy, the Fund
may use the following securities and investment
techniques. Some of these securities and investment
techniques involve special risks, which are described
below, elsewhere in this Prospectus, and in the Fund's
SAI.
Common Stocks and Other Equity Securities
The Fund will invest in common stocks and other
equity securities. Other equity securities may include
depositary receipts and warrants and other securities
convertible or exchangeable into common stock. Common
stocks and other equity securities generally increase
or decrease in value based on the earnings of a company
and on general industry and market conditions. A fund
that invests a significant amount of its assets in
common stocks and other equity securities is likely to
have greater fluctuations in share price than a fund
that invests a significant portion of its assets in
fixed-income securities.
<PAGE>
Small Capitalization Companies
Not only will the Fund invest in common stocks,
but it will invest a substantial portion of its assets
in the common stocks of small companies. While
companies with a smaller market capitalization have the
potential for significant capital appreciation, the
equity securities of these companies also involve
greater risks than larger, more established companies.
Small-cap companies may lack the management experience
or depth, financial resources, product diversification,
and competitive strength of large-cap companies. The
market for small-cap securities is generally less
liquid and subject to greater price volatility than the
market for large-cap securities.
Non-Diversification and Sector Concentration
As a "non-diversified" fund, the Fund is permitted
to invest its assets in a more limited number of
issuers than other investment companies. Under the
Code, however, for income tax purposes, the Fund (i)
may not invest more than 25% of its assets in the
securities of any one company or in the securities of
any two or more companies controlled by the Fund which,
pursuant to regulations under the Code, may be deemed
to be engaged in the same, similar, or related trades
or businesses and (ii) with respect to 50% of its
assets, may not invest more than 5% of its assets in
the securities of any one company and may not own more
than 10% of the outstanding voting securities of a
single company. Thus, as a "non-diversified" fund
under the 1940 Act, the Fund may invest up to 50% of
its assets in the securities of as few as two
companies, up to 25% each, so long as the Fund does not
control the two companies or so long as the two
companies are engaged in different businesses, and up
to 50% of its assets in the securities of as few as ten
companies, up to 5% each, provided that, in any event,
the Fund does not own in excess of 10% of any company's
outstanding voting stock. This practice involves an
increased risk of loss to the Fund if the market value
of a security should decline or its issuer were
otherwise unable to meet its obligations.
The Fund intends to invest more than 25% of its
assets in securities of companies in one or more market
sectors, such as the technology or health-care sector.
A market sector may be made up of companies in a number
of different industries. The Fund will only
concentrate its investments in a particular market
sector if Advisor believes that the potential
investment return justifies the additional risk
associated with concentration in that sector.
Portfolio Turnover
A change in the investments held by the Fund is
known as "portfolio turnover." Portfolio turnover
generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and
reinvestment in other securities. Such sales may
result in realization of taxable capital gains. Under
normal market conditions, the anticipated portfolio
turnover rate for the Fund is expected to be under 50%
annually.
Temporary Strategies
Prior to investing the proceeds from sales of Fund
shares, to meet ordinary daily cash needs, and to
retain the flexibility to respond promptly to changes
in market and economic conditions, Advisor may hold
cash and/or invest all or a portion of the Fund's
assets in money market instruments, which are short-
term fixed-income securities issued by private and
governmental institutions. It is impossible to predict
when or for how long Advisor may employ such
strategies. Money market instruments in which the Fund
may invest include securities issued or guaranteed by
the U.S. government or its agencies (Treasury bills,
notes, and bonds); obligations of banks subject to
regulation by the U.S. government; obligations of
savings banks and savings and loan associations; fully
insured certificates of deposit; commercial paper rated
within the two highest grades by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P") or, if not rated, issued by a
company having an outstanding debt issue rated Aaa by
Moody's or AAA by S&P; and securities issued by
registered investment companies holding themselves out
as money market funds. See the SAI for a more detailed
description of the money market instruments in which
the Fund may invest.
<PAGE>
INVESTMENT OBJECTIVE AND RESTRICTIONS
The Fund's investment objective is to seek long-
term capital appreciation. This investment objective
is fundamental and cannot be changed without
shareholder approval. Under normal market conditions,
the Fund will attempt to achieve this objective by
investing at least 65% of its assets in common stocks
of emerging and re-emerging growth companies. In
general, investments in these types of companies
involve greater risks than investments in more
established companies. Because of the risks inherent
in this investment strategy, there can be no assurance
that the Fund will meet its investment objective or
that shares in the Fund will be worth more at
redemption than at acquisition. The Fund may also hold
cash and money market instruments to provide the Fund
with liquidity and flexibility.
In addition, the Fund has adopted certain
fundamental investment restrictions on its investments
and other activities that, like the Fund's investment
objective, may not be changed without shareholder
approval.
Limitation on Industry Concentration: The Fund
may not invest more than 25% of its assets in
securities of companies in any one industry. This
restriction does not apply to obligations issued or
guaranteed by the U.S. government, its agencies, or
instrumentalities.
Limitation on "Senior Securities": The Fund may
not issue senior securities, except as permitted under
the 1940 Act.
These fundamental investment restrictions,
together with all of the Fund's fundamental investment
restrictions and non-fundamental investment policies,
are described in greater detail in the Fund's SAI.
PRIOR PERFORMANCE OF INVESTMENT ADVISOR
The following table shows Advisor's historical
composite performance data for all actual, fee paying,
discretionary private accounts managed by Advisor, for
the periods indicated, that have investment objectives,
policies, strategies, and risks substantially similar
to those of the Fund. Since inception of Advisor
through 1996, these accounts have shown an annual
return of approximately 36%. The private accounts that
are included in Advisor's composite are not subject to
the same types of expenses to which the Fund is subject
nor to the specific tax restrictions and investment
limitations imposed on the Fund by the Code and the
1940 Act. Consequently, the performance results for
Advisor's composite could have been adversely affected
if the private accounts included in the composite had
been regulated as investment companies under the
federal tax and securities laws. The data is provided
to illustrate the past performance of Advisor in
managing substantially similar accounts as measured
against specified market indices and does not represent
the performance of the Fund. Investors should not
consider this performance data as an indication of the
future performance of the Fund or Advisor.
Advisor's performance information has been
calculated in accordance with recommended standards of
the Association for Investment Management and Research
("AIMR"), retroactively applied to all time periods.
All returns presented were calculated on a total return
basis and include all dividends and interest, if any,
accrued income, if any, and realized and unrealized
gains and losses. Cash and equivalents are included in
performance returns. Total return is calculated
monthly in accordance with the "time-weighted" rate of
return method provided for by the AIMR standards,
accounted for on a trade-date and accrual basis. No
leveraged positions were utilized. Principal additions
and withdrawals are weighted in computing the monthly
returns based on the timing of these transactions. The
monthly returns are geometrically linked to derive
annual total returns.
Advisor's performance information does not reflect
any fees or expenses actually incurred by the private
accounts, but has been reduced by the projected annual
operating expenses (after waivers or reimbursements for
the Fund's first year) for the Fund's Class A shares as
set forth under "Investor Expenses" on the inside cover
page of the Prospectus. The performance results would
be different for a comparable Class I investment.
<PAGE>
Private Account Performance History
Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Annual
Return
1990 * * -27.06% 28.68% *
1991 32.76% 4.27% 10.61% 31.50% 102.38%
1992 -10.88% -4.27% 17.45% 33.80% 34.48%
1993 -2.46% 30.37% 21.20% 2.70% 58.90%
1994 -10.59% -6.71% 22.21% 23.46% 26.16%
1995 5.38% 17.07% 14.00% -7.15% 30.93%
1996 -0.36% 9.47% 1.17% 0.23% 10.73%
1 Year Rate of Return (12/31/95 - 10.73%
12/31/96)
3 Year Rate of Return - Annualized 22.30%
(12/31/93 - 12/31/96)
5 Year Rate of Return - Annualized 31.35%
(12/31/91 - 12/31/96)
* Not applicable
<PAGE>
Growth of a Unit Value
December 31, 1991 - December 31, 1996
The graphic on page 11 of the Prospectus contains
a chart which plots the 5 year growth of $10,000
invested on December 31, 1991. The graphic compares
the Advisor's composite performance of this investment
to the Russell 2000. In addition, the information
presented assumes payment of the maximum Class A sales
charge of 3.50% at the time of initial investment The
plot points for the graphic are as follows (numbers are
in thousands):
Time Period Advisor Russell 2000
12-31-91 $9.65 $10.00
12-31-91 to 03-31-92 8.64 10.73
03-31-92 to 06-30-92 8.30 9.93
06-30-92 to 09-30-92 9.78 10.16
09-30-92 to 12-31-92 13.12 11.64
12-31-92 to 03-31-93 12.85 12.07
03-31-93 to 06-30-93 16.80 12.29
06-30-93 to 09-30-93 20.42 13.32
09-30-93 to 12-31-93 21.05 13.61
12-31-93 to 03-31-94 18.90 13.22
03-31-94 to 06-30-94 17.70 12.65
06-30-94 to 09-30-94 21.70 13.49
09-30-94 to 12-31-94 26.87 13.18
12-31-94 to 03-31-95 28.42 13.73
03-31-95 to 06-30-95 33.37 14.93
06-30-95 to 09-30-95 38.17 16.34
09-30-95 to 12-31-95 35.59 16.64
12-31-95 to 03-31-96 35.59 17.42
03-31-96 to 06-30-96 39.09 18.25
06-30-96 to 09-30-96 39.70 18.24
09-30-96 to 12-31-96 39.93 19.09
Advisor Composite Performance (US$)
RUSSELL 2000 (US$)
<PAGE>
Average Annualized Return in Percent
Period Ending
December 31, 1996 Advisor Composite Russell 2000
Performance
1 Year 10.73% 14.76%
2 Years 20.41% 20.35%
3 Years 22.30% 11.93%
4 Years 28.74% 13.18%
5 Years 31.35% 13.81%
6 Years 41.18% 18.32%
Annualized Rate of Return
December 31, 1991, through December 31, 1996
The graphic on page 12 of the Prospectus contains
a bar chart which shows the annualized rate of return
from December 31, 1991 through December 31, 1996 for
the Advisor composite versus the NASDAQ OTC Index, the
Russell 2000 and the S&P 500 Index. The annualized
rate of return for the Advisor composite was 31.35%
versus 17.10%, 13.18% and 15.20% for the NASDAQ OTC
Index, the Russell 2000 Index and the S&P 500 Index,
respectively.
FUND ORGANIZATION AND MANAGEMENT
Organization
The Fund is a series of common stock of a
corporation, Kopp Funds, Inc. ("Corporation"), a
Minnesota company incorporated on June 12, 1997. The
Corporation is authorized to issue shares of common
stock in series and classes. Each share of common
stock of each class of shares of the Fund is entitled
to one vote, and each share is entitled to participate
equally in dividends and capital gains distributions by
the respective class of shares and in the residual
assets of the respective class of shares in the event
of liquidation. However, each class of shares bears
its own expenses, is subject to its own sales charges,
if any, and has exclusive voting rights on matters
pertaining to the Rule 12b-1 plan as it relates to that
class. No certificates will be issued for shares held
in your account. You will, however, have full
shareholder rights. Generally, the Fund will not hold
annual shareholders' meetings unless required by the
1940 Act or Minnesota Law. As of September 30, 1997,
Advisor owned a controlling interest in the Fund.
Management
Under the laws of the State of Minnesota, the
Board of Directors of the Corporation is responsible
for managing its business and affairs. The Corporation
has entered into an Investment Advisory Agreement with
Advisor under which Advisor manages the Fund's
investments and business affairs, subject to the
supervision of the Corporation's Board of Directors.
Kopp Holding Company ("KHC"), which is wholly-owned by
LeRoy C. Kopp, provides office space for the
Corporation and pays the salaries, fees, and expenses
of all the Corporation's officers and interested
directors.
Advisor. Advisor is a Minnesota corporation
organized in March 1990. Advisor is a wholly-owned
subsidiary of KHC and controlled by LeRoy C. Kopp, the
President and Chief Investment Officer of Advisor and
the sole shareholder of KHC. Under the Investment
Advisory Agreement, the Corporation pays Advisor an
annual management fee of 1.00% of the Fund's average
daily net assets attributable to each class of shares.
The advisory fee is accrued daily and paid monthly.
For the fiscal year ending September 30, 1998, Advisor
has agreed to waive
<PAGE>
its management fee and/or reimburse
Fund operating expenses to the extent necessary to
ensure that (i) the total operating expenses for the
Class A shares do not exceed 1.50% of average daily net
assets and (ii) the total operating expenses for the
Class I shares do not exceed 1.15% of average daily net
assets. Total operating expenses exclude taxes,
interest, and extraordinary expenses. After fiscal
1998, Advisor may from time to time voluntarily (but is
not required to) waive all or a portion of its fee
and/or reimburse all or a portion of class operating
expenses. Any waivers or reimbursements will have the
effect of lowering the overall expense ratio for the
applicable class and increasing its overall return to
investors at the time any such amounts were waived
and/or reimbursed.
Under the Investment Advisory Agreement, not only
is Advisor responsible for management of the Fund's
assets, but also for portfolio transactions and
brokerage. Advisor may consider sales of shares of the
Fund as a factor in the selection of broker-dealers to
execute portfolio transactions for the Fund, subject to
the requirements of best execution. Please refer to
the SAI for more details. The Fund is the first, and
currently the only, mutual fund for which Advisor
serves as investment advisor.
Portfolio Managers. The following individuals are
co-managers of the Fund:
President and Chief Investment Officer of Advisor,
LeRoy C. Kopp, is a graduate of the University of
Minnesota, where he received a Bachelor's Degree with
Distinction in Business Administration. Prior to
founding Advisor in 1990, Mr. Kopp spent 30 years with
Dain Bosworth Inc., where he was the manager of the
Edina, Minnesota, branch and a Senior Vice President.
Mr. Kopp has received a number of business and
community honors and awards, including Upper Midwest
Entrepreneur of the Year for Emerging Companies.
Senior Vice President of Advisor, Sally A.
Anderson, graduated from Northwestern University with a
B.S. in Business Administration/Finance. Prior to
joining Advisor in 1991, Ms. Anderson served as
Assistant Director of Research for Dain Bosworth Inc.,
with whom she was associated for 26 years. Ms.
Anderson is a Chartered Financial Analyst and a member
of the Twin Cities Society of Security Analysts, where
she served as President in 1997.
Vice President of Advisor, Steven F. Crowley, is a
graduate of the University of Chicago, where he earned
a B.A. in Economics. Before joining Advisor in 1994,
Mr. Crowley was Executive Vice President and Director
of Research at Summit Investment Corporation in
Minneapolis, Minnesota, a position he held for one
year, where he served as the Senior Analyst covering
emerging growth companies in the health care,
environmental, and technology sectors. For four years
before that, Mr. Crowley was a Vice President of
Research at Craig Hallum, Inc., in Minneapolis. He has
also been associated with J.P. Morgan Investment
Management and Market Guide, Inc. in an investment
research capacity. Mr. Crowley is a Chartered
Financial Analyst and a member of the Twin Cities
Society of Security Analysts.
Custodian and Transfer Agent
Firstar Trust Company ("Firstar") acts as
custodian of the Fund's assets ("Custodian") and as
transfer agent for the Fund ("Transfer Agent").
Firstar serves as custodian, transfer agent, or both,
to over 250 registered investment companies,
representing approximately $68 billion in total assets.
Administrator
Pursuant to an Administration Servicing Agreement,
Firstar also performs certain compliance and tax
reporting functions for the Fund. For these services,
Firstar receives from the Fund a fee, computed daily
and payable monthly, based on the Fund's average net
assets at the annual rate of .06 of 1% on the first
$100 million, .05 of 1% on the next $100 million, and
.03 of 1% on average net assets in excess of $400
million, subject to an annual minimum of $50,000, plus
out-of-pocket expenses.
<PAGE>
Distributor
Centennial Lakes Capital, Inc., a registered
broker-dealer and member of the NASD, acts as
distributor of the Fund's shares ("Distributor"). As
compensation for its services, the Distributor may
retain a portion of (i) the initial sales charge from
purchases of Class A shares, (ii) the CDSC from
redemptions of Class A shares, if applicable, and (iii)
the Rule 12b-1 fees payable with respect to Class A
shares.
From time to time, the Distributor may implement
programs to promote the sale of Class A shares under
which a sales force may be eligible to win nominal
awards for certain sales efforts or under which the
Distributor will reallow to sponsors of or participants
in sales contests or recognition programs all or a
portion of the total applicable sales charges on the
sales generated at the public offering price during
such programs. Also, in its discretion, the
Distributor may from time to time, pursuant to
objective criteria it establishes, pay fees to, and
sponsor business seminars for, qualifying brokers for
certain services or activities that are primarily
intended to result in sales of Class A shares. Fees
may include payment for travel expenses, including
lodging, incurred in connection with trips taken by
invited registered representatives and members of their
families to locations within or outside the United
States for meetings or seminars of a business nature.
All of the foregoing payments are made by the
Distributor out of its own assets. These programs will
not change the price you will pay for shares or the
amount that the Fund will receive from such a sale. No
such programs or additional compensation will be
offered to the extent that they are prohibited by the
laws of any state or any self-regulatory agency with
jurisdiction over the Distributor, such as the NASD.
The Distributor is an affiliate of Advisor.
Fund Expenses
The Fund is responsible for its own expenses,
including interest charges; taxes; brokerage
commissions; organizational expenses; expenses of
registering or qualifying shares for sale with the
states and the SEC; expenses of issue, sale,
repurchase, or redemption of shares; expenses of
printing and distributing reports and prospectuses to
existing shareholders; charges of custodians; expenses
for accounting, administrative, audit, and legal
services; fees for outside directors; expenses of
fidelity bond coverage and other insurance; expenses of
indemnification; extraordinary expenses; and costs of
shareholder and director meetings.
YOUR ACCOUNT
Choosing a Class
The Fund offers two classes of shares: Class A
and Class I. Class A shares are designed for "retail"
investors, with a minimum initial investment of $5,000
($2,000 for retirement accounts). Class I shares are
designed for "institutional" investors, with a minimum
initial investment of $5 million. Each class has its
own cost structure.
Class A Class I
Front-end sales No front-end sales
charges with break charges.
points and certain
exceptions. Redemption fee
payable on certain
Contingent redemptions.
deferred sales charge
imposed on certain No current Rule
redemptions. 12b-1 expenses.
Current Rule 12b-1
expenses, 0.35% of
average net assets.
<PAGE>
Class A Shares
Class A shares are offered and sold on a continual
basis at the next offering price ("Offering Price"),
which is the sum of the net asset value per share and
the sales charge indicated below:
Total Sales Charge
Portion of
As a Percentage As a Percentage Offering Price
Your Investment of Offering of Your Retained by
Price Investment Broker-Dealers*
Up to $100,000 3.50% 3.63% 3.00%
$100,001 - $250,000 3.00% 3.09% 2.50%
$250,001 - $500,000 2.00% 2.04% 1.50%
$500,001 - $1,000,000 1.00% 1.01% 0.50%
$1,000,001 - $5,000,000** None None None***
____________
*At the discretion of the Distributor, all sales
charges may at times be paid to the broker-dealer, if
any, involved in the trade. A broker-dealer paid all
or substantially all of the sales charges may be deemed
an "underwriter" under the Securities Act of 1933, as
amended.
**A 1% CDSC may be imposed on redemptions of all or
part of an investment of $1 million or more in Class A
shares redeemed within 24 months of purchase.
***The Distributor may, in its discretion, pay a 1%
commission to broker-dealers who initiate and are
responsible for purchases of Class A shares between $1
- - $5 million.
No sales charge is imposed on the reinvestment of
dividends or capital gains or on certain exchange
transactions. For information on how to reduce the
sales charge payable upon the purchase of Fund shares
or whether you qualify to purchase shares at net asset
value, see "Class A Front-End Sales Charge Waivers and
Reductions." Class A shares are also currently subject
to Rule 12b-1 fees in an aggregate amount of 0.35% of
the average daily net assets attributable to such
shares, although the Plan, which is described in more
detail under "Distribution and Shareholder Servicing
Plan," permits the payment of up to 0.50% in such fees.
Investments in Class A shares above $1 million are
not assessed an initial sales load. However, you will
be charged a 1% CDSC on shares redeemed within 24
months of purchase. For purposes of the CDSC, all
purchases made during a calendar month are counted as
having been made on the last day of that month. The
CDSC is based on the lesser of the current market value
or the actual purchase price of the shares being sold,
and is not imposed on shares acquired by reinvesting
dividends or capital gains. To avoid the imposition of
the CDSC, the Fund will first sell any shares held in
your account that are not subject to the CDSC. The
imposition of the CDSC may be waived by the
Distributor. See "Class A CDSC Waivers."
Class I Shares
Class I shares are offered and sold on a continual
basis at their net asset value without any initial
sales charge. However, you may be charged a redemption
fee of 1% of the value of the shares redeemed on
redemptions made within 24 months of purchase. In
addition, as described in more detail under
"Distribution and Shareholder Servicing Plan," the Fund
has adopted a Rule 12b-1 plan with respect to the Class
I shares which permits the payment of up to 0.50% in
Rule 12b-1 fees. For the foreseeable future, however,
the Fund has no intention of paying any distribution or
servicing fees in connection with the Class I shares.
Class A Front-End Sales Charge Waivers and Reductions
Waivers for Certain Investors. Class A shares are
offered at net asset value to the following individuals
and institutions due to anticipated economies of scale
in sales efforts and expense:
<PAGE>
certain retirement plans, such as profit-sharing,
pension, 401(k), and simplified employee pension plans
(SEP's and SIMPLE's), subject to minimum requirements
with respect to the number of employees or amount of
purchase, which may be established by the Distributor
(currently, those criteria require that the employer
establishing the plan have 200 or more eligible
employees or that the amount invested total at least $1
million within 13 months of the initial investment);
persons who have taken a distribution from a
retirement plan invested in Class A or Class I shares
of the Fund, to the extent of the distribution,
provided that, the distribution is reinvested within 90
days of the payment date;
government entities that are prohibited from
paying mutual fund sales charges;
registered broker-dealers who have entered into a
selling or service agreement with the Distributor and
who have achieved certain sales objectives of the Fund,
for their investment accounts only, and certain
employees of such broker-dealers, and their spouses,
children, grandchildren, and parents, in accordance
with the internal policies and procedures of the
employing broker-dealer;
owners of private accounts managed by Advisor who
either purchase Fund shares within one year of the
Fund's inception or who, within the Advisor's sole
discretion, are no longer eligible for separate account
management by Advisor and who in either case liquidate
their private account and purchase Fund shares with the
proceeds within 90 days of the liquidation;
trust companies investing $1 million or more for
common trust or collective investment funds;
registered investment companies;
any person who purchases shares of the Fund with
redemption proceeds from a money market fund; provided,
however, that the sales charge waiver provided by this
exception shall only be available (i) for one such
purchase within 12 months of the redemption, (ii) to
persons who immediately prior to their investment in
the money market fund were shareholders of the Fund,
and (iii) to the extent of the investment in the money
market fund being redeemed;
"wrap accounts" for the benefit of clients of
registered broker-dealers having a selling or service
agreement with the Distributor; and
any person who purchases shares of the Fund with
redemption proceeds from a registered investment
company other than the Fund and on which the investor
paid either a front-end sales charge or a contingent
deferred sales charge; provided that the proceeds are
invested in the Fund within 10 days of the redemption.
Please contact your investment professional, the
Distributor, or the Transfer Agent for more information
on purchases at net asset value.
Reducing Sales Charges. If you are not eligible
for a waiver, there are two ways that you can combine
multiple purchases of Class A shares to take advantage
of the breakpoints in the sales charge schedule
including:
Rights of Accumulation. The Fund offers a Right
of Accumulation ("ROA") allowing you to purchase Class
A shares at the sales charge applicable to the sum of
(a) the dollar amount then being purchased, plus (b)
the higher of either (i) the current market value
(calculated at the applicable Offering Price) or (ii)
the actual purchase price of all Fund shares already
held by you and your spouse and minor children or you
and members of a qualified group. A "qualified group"
is one that was formed at least one year prior to the
ROA purchase, has a purpose other than buying Fund
shares at a discount, has more than 10 members, can
arrange meetings between the Distributor and group
members, agrees to include Fund literature in mailings
to its members, agrees to arrange for payroll
deductions or other bulk
<PAGE>
transmissions of investments
to the Fund, and meets other uniform criteria that
allow the Distributor to achieve cost savings in
distributing shares of the Fund. To receive an ROA, at
the time of purchase, you must give your investment
professional, the Distributor, or the Transfer Agent
sufficient information to determine whether the
purchase will qualify for the reduced sales charge.
Letter of Intent. You may also immediately
qualify for a reduced sales charge on the purchase of
Class A shares by completing the Letter of Intent
section of the account application ( "LOI"). By
completing the LOI, you express an intention to invest
during the next 13-month period a specified amount
(minimum of at least $100,001) which, if made at one
time, would qualify for a reduced sales charge. Any
shares you own on the date you execute the LOI may be
used as a credit toward the completion of the LOI.
However, the reduced sales charge will only be applied
to new purchases. Any redemptions made during the
13-month period will be subtracted from the amount of
the purchases for purposes of determining whether the
terms of the LOI have been satisfied. If, at the end
of the 13-month period covered by the LOI, the total
amount of purchases (less redemptions) does not equal
the amount indicated, you will be required to pay the
difference between the sales charge paid at the reduced
rate and the sales charge applicable to the purchases
actually made. Shares equal to 5% of the amount
specified in the LOI will be held in escrow during the
13-month period and are subject to involuntary
redemption to assure any payment of a higher applicable
sales charge. Signing a LOI does not bind you to
purchase the full amount indicated, but you must
complete the intended purchase in accordance with the
terms of the LOI to obtain the reduced sales charge.
For more information on the LOI, please contact your
investment professional, the Distributor, or the
Transfer Agent.
Class A CDSC Waivers
The primary purpose of the CDSC is to encourage
long-term investing in the Fund. Accordingly, the CDSC
on Class A shares may be waived if:
the redemption results from the death or a total
and permanent disability (as defined in Section 72 of
the Code) of the shareholder occurring after the
purchase of the shares being redeemed;
the selling broker-dealer elects to waive receipt
of the commission normally paid at the time of sale; or
the Distributor, in its sole discretion, deems the
application of the CDSC inequitable under the
circumstances of the redemption.
Investing in the Fund
Before opening an account and investing in Fund
shares, you should contact your investment
professional. Then, you should:
(1) Read this Prospectus carefully.
(2) Determine how much you would like to invest.
The minimum initial investment requirements
are:
(a) Class A shares:
Non-retirement account: $5,000
Retirement account: $2,000
Automatic Investment Plan ("AIP"): $3,000
(to maintain the plan, you must invest
at least $50 per month)
Subsequent investments: $100 or more
<PAGE>
(b) Class I shares:
All accounts: $5 million
Subsequent investments: No minimum
The Fund may change or waive these minimums
at any time; you will be given at least 30
days' notice of any increase in the minimum
dollar amount of purchases.
(3) Complete the appropriate parts of the account
application, carefully following the
instructions. If you have questions, please
contact your investment professional or the
Fund at 1-888-533-KOPP. Account applications
will be accepted by the Distributor, the
Transfer Agent, or investment professionals
who have entered into a selling or service
agreement with the Distributor.
(4) Make your initial investment, and any
subsequent investments, following the
instructions set forth below.
Buying Shares
Opening an Account. You may open an account by
completing an account application and paying for your
shares by check, exchange, or wire. All new account
applications should be given to your investment
professional or forwarded to the Distributor or the
Transfer Agent, whose addresses appear on the inside
back cover page of this Prospectus. The price per
share will be the net asset value (plus applicable
sales charge in the case of Class A shares) next
computed after the time the application and funds are
received in proper order by the Transfer Agent. See
"Determination of Net Asset Value." The Fund does not
consider the U.S. Postal Service or other independent
delivery services to be its agents; therefore, deposit
in the mail or with such services, or receipt at the
Transfer Agent's post office box, of purchase
applications does not constitute receipt by the
Transfer Agent. A confirmation indicating the details
of each purchase transaction will be sent to you
promptly. The Fund may refuse any purchase order it if
believes a previous pattern of excessive purchases and
redemptions or exchanges has been established by an
account. Excessive trading (including market timing)
can hurt a shareholder's and the Fund's performance.
Accounts under common ownership or control will be
considered one account for this purpose.
By check
Make out a check for the investment amount,
payable to "Kopp Emerging Growth Fund." Payment should
be made in U.S. funds by check drawn on a U.S. bank,
savings and loan, or credit union. Neither cash nor
third-party checks will be accepted.
You may be charged a transaction fee in addition
to the sales charge with respect to Class A shares sold
by certain broker-dealers.
If your check does not clear, you will be charged
a $20 service fee. You will also be responsible for
any losses suffered by the Fund as a result.
All applications to purchase Fund shares are
subject to acceptance by the Fund and are not binding
until so accepted. The Fund reserves the right to
decline or accept a purchase application in whole or in
part.
By exchange
You may exchange Class A shares for Class I shares
at any time if you meet the Class I minimum initial
investment requirement. The value of the shares to be
<PAGE>
exchanged will be the net asset value (less the CDSC,
if applicable) after receipt of instructions for
exchange. Likewise, the price of the shares being
purchased will be the net asset value after receipt of
instructions for exchange.
You may also exchange shares of the Fund for
shares of the Portico Money Market Fund, a no-load
money market fund managed by an affiliate of Firstar.
The Portico Money Market Fund is unrelated to the
Corporation or the Fund. This exchange privilege is a
convenient way to buy shares in a money market fund in
order to respond to changes in your goals or market
conditions. The value of the shares to be exchanged
will be the net asset value (less the redemption fee,
if applicable, with respect to Class I shares or the
CDSC, if applicable, with respect to Class A shares)
after receipt of instructions for exchange. The price
of the shares being purchased will be at net asset
value. Before exchanging into the Portico Money Market
Fund, please read the applicable prospectus, which may
be obtained by calling 1-888-533-KOPP, and open an
account in the Portico Money Market Fund.
The Fund reserves the right to modify or terminate
the exchange privilege at any time.
Call the Transfer Agent at 1-888-533-KOPP to
request instructions for an exchange.
An exchange is not a tax-free transaction.
By wire
Instruct your bank to follow the following
instructions when wiring funds:
Wire to: Firstar Bank Milwaukee, N.A.
ABA Number 075000022
Credit: Firstar Trust Company
Account 112-952-137
Further credit: Kopp Emerging Growth Fund
(class of shares being purchased)
(shareholder account number)
(shareholder name/account
registration)
Please call 1-888-533-KOPP prior to wiring any
funds to notify the Transfer Agent that the wire is
coming and to verify the proper wire instructions.
The Fund is not responsible for the consequences
of delays resulting from the banking or Federal Reserve
wire system.
Adding to an Account. You may add to your account
by check, exchange, or wire. A confirmation indicating
the details of each subsequent purchase transaction
will be sent to you promptly. Obtain your account
number by reviewing your account statement or by
calling your investment professional, the Distributor,
or the Transfer Agent.
By check
Make out a check for the investment amount,
payable to "Kopp Emerging Growth Fund." Neither cash
nor third-party checks will be accepted.
Fill out the detachable investment slip from an
account statement. If no slip is available, include a
note specifying your account number and the name(s) in
which the account is registered.
Deliver the check and your investment slip or note
to your investment professional, the Distributor, or
the Transfer Agent.
By exchange
Call the Transfer Agent at 1-888-533-KOPP to
request instructions for an exchange.
By wire
Follow the wire instructions used to open an
account.
<PAGE>
Automatic Investment Plan. The Automatic
Investment Plan ("AIP") is a method of using dollar
cost averaging, which is an investment strategy that
involves investing a fixed amount of money at a regular
time interval. By always investing the same amount,
you will be purchasing more shares when the price is
low and fewer shares when the price is high. Since
such a program involves continuous investment
regardless of fluctuating share values, you should
consider your financial ability to continue the program
through periods of low share price levels. A program
of regular investment cannot ensure a profit or protect
against a loss from declining markets.
The AIP allows you to make regular, systematic
investments in Class A shares of the Fund from your
bank checking account. The minimum initial investment
for investors using the AIP is $3,000. If you elect
this option, all dividends and capital gains
distributions will be automatically reinvested in Fund
shares. The sales charge on future purchases may be
reduced using the Fund's ROA or LOI. See "Class A
Front-End Sales Charge Waivers and Reductions." To
establish the AIP, complete the appropriate section in
the account application. Under certain circumstances
(such as discontinuation of the AIP before the minimum
initial investment is reached), the Fund reserves the
right to close your account. Prior to closing any
account for failure to reach the minimum initial
investment, the Fund will give you written notice and
60 days in which to reinstate the AIP or otherwise
reach the minimum initial investment. Your account may
be closed in periods of declining share prices.
Under the AIP, you may choose to make investments
on certain days of each month (at least seven days
apart) in amounts of $50 or more. There is no service
fee charged by the Fund for participating in the AIP.
However, a service fee of $20 will be deducted from
your Fund account for any AIP purchase that does not
clear due to insufficient funds or, if prior to
notifying the Fund in writing or by telephone of your
intention to terminate the plan, you close your bank
account or in any manner prevent withdrawal of funds
from the designated checking account. You can set up
the AIP with most financial institutions.
Special Note on Investing in the Fund. When the
Fund's assets total $1 billion, no new accounts, other
than certain qualified retirement plans, will be
accepted. If you are a shareholder of record at that
time, however, you will be able to continue to add to
your account through new purchases, including purchases
through reinvestment of dividends or capital gains
distributions.
Redeeming Shares
To Redeem Some or All of Your Shares. You may
request redemption of part or all of your Fund shares
at any time. The price per share will be the net asset
value next computed (less the redemption fee or CDSC,
if applicable) after the time the redemption request is
received in proper form by the Transfer Agent. See
"Determination of Net Asset Value." The Fund does not
consider the U.S. Postal Service or other independent
delivery services to be its agents; therefore, deposit
in the mail or with such services, or receipt at the
Transfer Agent's post office box, of redemption
requests does not constitute receipt by the Transfer
Agent. The Fund normally will mail your redemption
proceeds within one or two business days and, in any
event, no later than seven business days after receipt
by the Transfer Agent of a redemption request in good
order. However, the Fund may hold payment until
investments which were made by check, telephone, or
pursuant to the AIP have been collected (which may take
up to 15 days from the initial investment date). What
follows is a listing of the various options for
redemptions. Redemptions may be made by written
request, telephone, wire, or exchange.
By written request
Write a letter of instruction indicating the Fund
name, your share class, your account number, the
name(s) in which the account is registered, and the
dollar value or number of shares you wish to sell.
Include all signatures and any additional
documents that may be required. See "Special
Situations," below.
Forward the materials to the Transfer Agent.
A check will be mailed to the name(s) and address
in which the account is registered, or otherwise
according to your letter of instruction.
<PAGE>
By telephone
Fill out the "Telephone Redemption" section of
your new account application.
To place your redemption order, you may call
1-888-533-KOPP.
Redemption requests by telephone are available for
redemptions of $1,000 to $75,000. Redemption requests
for less than $1,000 or more than $75,000 must be in
writing.
Proceeds redeemed by telephone will be mailed or
wired only to your address or bank of record as shown
on the records of the Transfer Agent.
In order to arrange for telephone redemptions
after an account has been opened or to change the bank,
account, or address designated to receive redemption
proceeds, a written request must be sent to the
Transfer Agent. The request must be signed by each
shareholder of the account, with the signatures
guaranteed. Further documentation may be requested
from corporations, executors, administrators, trustees,
and guardians. See "Special Situations."
The Fund reserves the right to refuse any request
made by telephone and may limit the amount involved or
the number of telephone redemptions.
Once you place a telephone redemption request, it
cannot be canceled or modified.
Neither the Fund nor the Transfer Agent will be
responsible for the authenticity of redemption
instructions received by telephone. Accordingly, you
bear the risk of loss. However, the Fund will use
reasonable procedures to ensure that instructions
received by telephone are genuine, including recording
telephonic transactions and sending written
confirmation of such transactions to investors.
You may experience difficulty in implementing a
telephone redemption during periods of drastic economic
or market changes. If you are unable to contact the
Transfer Agent by telephone, you may also redeem shares
by written request, as noted above.
By wire
Fill out the "Telephone Redemption" section of
your new account application.
To verify that the telephone redemption privilege
is in place on an account, or to request the forms to
add it to an existing account, call the Transfer Agent.
Redemption requests by telephone which are to be
transmitted via wire transfer are available for
redemptions of $75,000 or less. Redemption requests
for more than $75,000 must be in writing.
Funds will be wired on the next business day. A
$12 fee will be deducted from your account.
By exchange
See "Buying Shares - By exchange."
Special Situations. If you are acting as an
attorney-in-fact for another person, or as a trustee or
on behalf of a corporation, additional documentation
may be required in order to effect a redemption.
Questions regarding such circumstances may be directed
to your investment professional, or the Transfer Agent
by calling 1-888-533-KOPP. In addition, the Fund
requires a signature guarantee for all authorized
owners of an account: (i) when you submit a written
redemption request for more than $75,000, (ii) when you
add the telephone redemption option to your existing
account, (iii) if you transfer ownership of your
account to another individual or entity, or (iv) if you
request redemption proceeds to be sent to an address
other than the address that appears on your account. A
signature guarantee may be obtained from any eligible
guarantor institution, as defined by the SEC. These
institutions include banks, saving associations, credit
unions, brokerage firms, and others. A notary public
stamp or seal is not acceptable.
Redemption in Kind. The Fund has filed a
Notification under Rule 18f-1 under the 1940 Act,
pursuant to which it has undertaken to pay in cash all
requests for redemption by any shareholder of record,
limited in amount with respect to each shareholder
during any 90-day period to the lesser amount of (i)
$250,000, or (ii) 1% of the net asset value of the
class of shares of the Fund being redeemed, valued at
the beginning of such election period. The Fund
<PAGE>
intends to also pay redemption proceeds in excess of
such lesser amount in cash, but reserves the right to
pay such excess amount in kind, if it is deemed to be
in the best interest of the Fund to do so. In making a
redemption in kind, the Fund reserves the right to
select from each securities holding a number of shares
which will reflect the Fund's portfolio make-up and the
value of which will approximate as closely as possible
the value of the Fund shares being redeemed, or to
select from one or more securities holdings, shares
equal in value to the total value of the Fund shares
being redeemed; any shortfall will be made up in cash.
Investors receiving an in kind distribution are advised
that they will likely incur a brokerage charge on the
disposition of such securities through a securities
dealer. The values of securities distributed in kind
will be the values used for the purpose of calculating
the per share net asset value used in valuing the Fund
shares tendered for redemption.
IRAs. Shareholders who have an Individual
Retirement Account ("IRA") or other retirement plan
must indicate on their redemption requests whether or
not to withhold federal income taxes. Redemption
requests failing to indicate an election will be
subject to withholding.
Termination of Accounts. Your account may be
terminated by the Fund if, at the time of any
redemption of shares in your account, the value of the
remaining shares in the account falls below $1,000. A
check for the proceeds of redemption will be sent to
you within seven days of the redemption.
DETERMINATION OF NET ASSET VALUE
The net asset value per share for each class is
determined as of the close of trading (generally
4:00 p.m. Eastern Standard Time) on each day the New
York Stock Exchange ("NYSE") is open for business.
Purchase orders received or shares tendered for
redemption on a day the NYSE is open for trading, prior
to the close of trading on that day, will be valued as
of the close of trading on that day. Applications for
purchase of shares and requests for redemption of
shares received after the close of trading on the NYSE
will be valued as of the close of trading on the next
day the NYSE is open. The Fund is not required to
calculate its net asset value on days during which the
Fund receives no orders to purchase shares and no
shares are tendered for redemption. Net asset value
per share for each class of shares is calculated by
taking the fair value of the total assets per class,
including interest or dividends accrued, but not yet
collected, less all liabilities, and dividing by the
total number of shares outstanding in that class. The
result, rounded to the nearest cent, is the net asset
value per share.
In determining net asset value, expenses are
accrued and applied daily and securities and other
assets for which market quotations are available are
valued at fair value. Common stocks and other equity-
type securities are valued at the last sales price on
the national securities exchange or NASDAQ on which
such securities are primarily traded; however,
securities traded on a national securities exchange or
NASDAQ for which there were no transactions on a given
day, and securities not listed on a national securities
exchange or NASDAQ, are valued at the average of the
most recent bid and asked prices. Any securities or
other assets for which market quotations are not
readily available are valued at fair value as
determined in good faith by the Board of Directors of
the Corporation or its delegate. The Board of
Directors may approve the use of pricing services to
assist the Fund in the determination of net asset
value. All money market instruments held by the Fund
will be valued on an amortized cost basis.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
The Fund has adopted a plan pursuant to Rule 12b-1
under the 1940 Act ( "Plan") with respect to each class
of shares pursuant to which certain distribution and
shareholder servicing fees may be paid to the
Distributor. Under the terms of the Plan, each class
of shares may be required to pay the Distributor (i) a
distribution fee for the promotion and distribution of
shares of up to 0.25% of the average daily net assets
of the Fund attributable to each class (computed on an
annual basis) and (ii) a shareholder servicing fee for
personal service provided to shareholders of up to
0.25% of the average daily net assets of the Fund
attributable to each class (computed on an annual
basis). Payments under the Plan with respect to Class
A shares are currently limited to 0.35%, which
represents a 0.10% distribution fee and a 0.25%
shareholder servicing fee; the Fund currently has no
intention of paying any Rule 12b-1
<PAGE>
fees in connection
with the Class I shares. The Distributor is authorized
to, in turn, pay all or a portion of these fees to any
registered securities dealer, financial institution, or
other person ("Recipient") who renders assistance in
distributing or promoting the sale of Fund shares, or
who provides certain shareholder services to Fund
shareholders, pursuant to a written agreement ("Rule
12b-1 Related Agreement"). To the extent such fee is
not paid to such persons, the Distributor may use the
fee for its own distribution expenses incurred in
connection with the sale of Fund shares, or for any of
its shareholder servicing expenses. The Plan is a
"reimbursement" plan, which means that the fees paid by
the Fund under the Plan are intended to reimburse the
Distributor for services rendered and commission fees
borne up to the maximum allowable distribution and
shareholder servicing fees. If the Distributor is due
more money for its services rendered and commission
fees borne than are immediately payable because of the
expense limitation under the Plan, the unpaid amount is
carried forward from period to period while the Plan is
in effect until such time as it may be paid. No
interest, carrying, or other finance charges will be
borne by the Fund with respect to unpaid amounts
carried forward.
Payment of the distribution and servicing fees is
to be made quarterly, within 30 days after the close of
the quarter for which the fee is payable, after the
Distributor forwards to the Board of Directors of the
Corporation a written report of all amounts expensed
pursuant to the Plan; provided, however, that the
aggregate payments by the Fund with respect to the
Class A shares under the Plan to the Distributor and
all Recipients may not exceed 0.35% (on an annualized
basis) of the Fund's average net assets attributable to
such class of shares for that quarter.
From time to time, the Distributor may engage in
activities which jointly promote the sale of shares of
one or both classes, the costs of which may not be
readily identifiable as related to any one class.
Generally, the distribution expenses attributable to
such joint distribution activities will be allocated
among each class of shares on the basis of its
respective net assets, although the Board of Directors
may allocate such expenses in any other manner it deems
fair and equitable.
The Plan, including a form of the 12b-1 Related
Agreement, has been unanimously approved by the Board
of Directors of the Corporation, including all of the
members of the Board who are not "interested persons"
of the Corporation as defined in the 1940 Act and who
have no direct or indirect financial interest in the
operation of the Plan or any related agreements
("Disinterested Directors") voting separately.
The Plan, and any Rule 12b-1 Related Agreement
which is entered into, will continue in effect for a
period of more than one year only so long as its
continuance is specifically approved at least annually
by a vote of a majority of the Corporation's Board of
Directors, and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on
the Plan, or the Rule 12b-1 Related Agreement, as
applicable. In addition, the Plan, and any Rule 12b-1
Related Agreement, may be terminated with respect to
either or both classes at any time, without penalty, by
vote of a majority of the outstanding voting securities
of the applicable class, or by vote of a majority of
Disinterested Directors (on not more than sixty (60)
days' written notice in the case of the Rule 12b-1
Related Agreement only).
TAX-SHELTERED RETIREMENT PLANS
The Fund offers through Firstar, in its capacity
as Custodian, certain qualified retirement plans for
adoption by individuals and employers. Participants in
these plans can accumulate shares of the Fund on a tax-
deferred basis. Contributions to these plans are tax-
deductible as provided by law and earnings are tax-
deferred until distributed.
Individual Retirement Accounts
Individuals under age 70 1/2 who receive
compensation or earned income, even if they are active
participants in a qualified retirement plan (or certain
similar retirement plans), may contribute money to an
IRA. For taxable years beginning after 1996, in the
case of a married couple filing a joint return, up to
$2,000 can be contributed to each spouse's IRA, even if
one spouse has little or no compensation or earned
income. The Fund offers a prototype IRA plan which may
be adopted by individuals to establish a new IRA or to
rollover funds from an existing IRA.
<PAGE>
Earnings on amounts held in an IRA are not taxed
until withdrawn. However, the amount of the deduction,
if any, allowed for IRA contributions is limited for an
individual who is, or whose spouse is, an active
participant in an employer-sponsored retirement plan
and whose income exceeds specific limits.
Simplified Employee Pension Plan
The Fund also offers a simplified employee pension
("SEP") plan for employers, including self-employed
individuals who wish to purchase Fund shares with tax-
deductible contributions. Under the SEP plan, employer
contributions are made directly to the IRA accounts of
eligible participants.
Savings Incentive Match Plan for Employees of Small
Employers
The Savings Incentive Match Plan for Employees of
Small Employers ("SIMPLE Plan") is a written
arrangement established under Section 408(p) of the
Code which provides a simplified tax-favored retirement
plan for small employers. In a SIMPLE Plan, each
employee may choose whether to have the employer make
payments as contributions under the plan or to receive
these payments directly as cash. A small employer that
chooses to establish a SIMPLE Plan must make either
matching contributions or non-elective contributions.
All contributions made under a SIMPLE Plan are made to
SIMPLE IRAs. A SIMPLE IRA is an IRA to which the only
contributions that can be made are contributions under
a SIMPLE Plan.
A complete description of the above plans, as well
as a description of the applicable service fees, may be
obtained by calling 1-888-533-KOPP or writing to the
Fund at Kopp Funds, Inc., c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. Please
note that early withdrawals from a retirement plan may
result in adverse tax consequences.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX
TREATMENT
The Fund intends to qualify for treatment as a
"Regulated Investment Company" under Subchapter M of
the Code and, if so qualified, will not be liable for
federal income taxes to the extent earnings are
distributed to shareholders on a timely basis.
However, for federal income tax purposes, all dividends
and distributions of net realized short-term capital
gains you receive from the Fund are taxable as ordinary
income, whether reinvested in additional shares or
received in cash, unless you are exempt from taxation
or entitled to a tax deferral. Distributions of net
realized long-term capital gains you receive from the
Fund, whether reinvested in additional shares or
received in cash, are taxable as a capital gain. The
capital gain holding period is determined by the length
of time the Fund has held the security and not the
length of time you have held shares in the Fund. You
will be informed annually as to the amount and nature
of all dividends and capital gains paid during the
prior year. Such capital gains and dividends may also
be subject to state or local taxes. If you are not
required to pay taxes on your income, you are generally
not required to pay federal income taxes on the amounts
distributed to you.
Dividends and capital gains, if any, will be
distributed at least annually in December. Please
note, however, that the objective of the Fund is
capital appreciation, not the production of
distributions. You should measure the success of your
investment by the value of your investment at any given
time and not by the distributions you receive.
When a dividend or capital gain is distributed,
the Fund's net asset value decreases by the amount of
the payment. If you purchase shares shortly before a
distribution, you will be subject to income taxes on
the distribution, even though the value of your
investment (plus cash received, if any) remains the
same. All dividends and capital gains distributions
will automatically be reinvested in additional Fund
shares at the then prevailing net asset value unless
you specifically request that dividends or capital
gains or both be paid in cash. The election to receive
dividends or reinvest them may be changed by writing to
the Fund at Kopp Funds, Inc., c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
Such notice must be received at least 10 days prior to
the record date of any dividend or capital gain
distribution.
<PAGE>
If you do not furnish the Fund with your correct
social security number or taxpayer identification
number, the Fund is required by current federal law to
withhold federal income tax from your distributions
(including applicable Fund share reinvestments) and
redemption proceeds at a rate of 31%.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state,
or local tax considerations applicable to a particular
investor. You are urged to consult your own tax
advisor.
FUND PERFORMANCE
Each class of shares may from time to time compare
its investment results to various passive indices or
other mutual funds and cite such comparisons in reports
to shareholders, sales literature, and advertisements.
The results may be calculated on several bases,
including average annual total return, total return,
and cumulative total return.
Average annual total return and total return
figures measure both the net investment income
generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the
underlying investments in a class of shares over a
specified period of time, assuming the reinvestment of
all dividends and distributions. Average annual total
return figures are annualized and therefore represent
the average annual percentage change over the specified
period. Total return figures are not annualized and
represent the aggregate percentage or dollar value
change over the period. Cumulative total return simply
reflects the applicable class' performance over a
stated period of time. All performance figures for
Class A shares reflect the deduction of the 3.50%
maximum initial sales charge. All performance figures
for Class I shares reflect the deduction of the 1%
redemption fee.
<PAGE>
ADDITIONAL INFORMATION
DIRECTORS
LeRoy C. Kopp
_____________
_____________
OFFICERS
LeRoy C. Kopp, Chief Executive Officer and President
Donald B. Cornelius, Chief Financial Officer and Treasurer
Kathleen S. Tillotson, Secretary
INVESTMENT ADVISOR
Kopp Investment Advisors, Inc.
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
CUSTODIAN, ADMINISTRATOR, AND
TRANSFER AGENT
Firstar Trust Company
For overnight deliveries, use: For regular
mail deliveries, use:
Kopp Funds, Inc. Kopp Funds, Inc.
c/o Firstar Trust Company c/o Firstar Trust Company
Mutual Fund Services P.O. Box 701
Third Floor Milwaukee, Wisconsin 53201-0701
615 E. Michigan Street
Milwaukee, WI 53202
DISTRIBUTOR
Centennial Lakes Capital, Inc.
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick L.L.P.
4200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 N. Water Street
Milwaukee, WI 53202
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[Logo]
Kopp Funds, Inc.
Kopp Emerging Growth Fund
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Telephone: 1-888-533-KOPP
Facsimile: 1-612-841-0411
Website: www.koppfunds.com
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the
Prospectus of the Kopp Emerging Growth Fund ("Fund"),
dated September ___, 1997. The Prospectus, which may
be revised from time to time, is available without
charge upon request to the above-noted address,
telephone number, or website.
This Statement of Additional Information is dated September ___, 1997.
<PAGE>
CONTENTS
INVESTMENT OBJECTIVE AND RESTRICTIONS 3
INVESTMENT POLICIES AND TECHNIQUES 4
DIRECTORS AND OFFICERS 6
PRINCIPAL SHAREHOLDERS 8
INVESTMENT ADVISOR 8
FUND TRANSACTIONS AND BROKERAGE 8
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT 10
DISTRIBUTOR AND PLAN OF DISTRIBUTION 10
TAXES 11
DETERMINATION OF NET ASSET VALUE 11
SHAREHOLDER MEETINGS 12
PERFORMANCE INFORMATION 12
INDEPENDENT ACCOUNTANTS 14
FINANCIAL STATEMENTS 14
No person has been authorized to give any
information or to make any representations other than
those contained in this Statement of Additional
Information ("SAI") and the Prospectus dated September
__, 1997, and if given or made, such information or
representations may not be relied upon as having been
authorized by the Fund. This SAI does not constitute
an offer to sell securities in any state or
jurisdiction in which such offering may not lawfully be
made.
<PAGE>
INVESTMENT OBJECTIVE AND RESTRICTIONS
The Fund's investment objective is to seek long-
term capital appreciation. The Fund's investment
objective and policies are described in detail in the
Prospectus under the captions "Investment Objective and
Restrictions" and "Implementation of Policies and
Risks." The following are the Fund's fundamental
investment restrictions which cannot be changed without
shareholder approval.
The Fund:
1. May not issue senior securities, except as
permitted under the 1940 Act;
2. May not act as an underwriter of another company's
securities, except to the extent that the Fund may
be deemed to be an underwriter within the meaning
of the Securities Act of 1933, as amended ("1933
Act"), in connection with the purchase and sale of
portfolio securities;
3. May not purchase or sell physical commodities
unless acquired as a result of ownership of
securities or other instruments (but this shall
not prevent the Fund from purchasing or selling
options, futures contracts, or other derivative
instruments, or from investing in securities or
other instruments backed by physical commodities);
4. May not make loans if, as a result, more than 33
1/3% of the Fund's assets would be lent to other
persons, except through purchases of debt
securities or other debt instruments or engaging
in repurchase agreements;
5. May not invest more than 25% of its assets in
securities of companies in any one industry. This
restriction does not apply to obligations issued
or guaranteed by the U.S. government, its
agencies, or instrumentalities;
6. May not purchase or sell real estate unless
acquired as a result of ownership of securities or
other instruments (but this shall not prohibit the
Fund from purchasing or selling securities or
other instruments backed by real estate or of
issuers engaged in real estate activities);
7. May (i) borrow money from banks, and (ii) make
other investments or engage in other transactions
permissible under the Investment Company Act of
1940, as amended ("1940 Act"), which may involve a
borrowing, provided that the combination of (i)
and (ii) shall not exceed 33 1/3% of the value of
the Fund's assets (including the amount borrowed),
less the Fund's liabilities (other than
borrowings), except that the Fund may borrow up to
an additional 5% of its assets (not including the
amount borrowed) from a bank for temporary or
emergency purposes (but not for leverage or the
purchase of investments). The Fund may also
borrow money from other persons to the extent
permitted by applicable law;
8. Notwithstanding any other fundamental investment
policy or restriction, may invest all of its
assets in the securities of a single open-end
management investment company with substantially
the same fundamental investment objective,
policies, and restrictions as the Fund.
In addition to the non-fundamental operating
policies set forth in the Prospectus, the following non-
fundamental operating policies may be changed by the
Board of Directors without shareholder approval.
The Fund may not:
1. Sell securities short, unless the Fund owns or has
the right to obtain securities equivalent in kind
and amount to the securities sold short, or unless
it covers such short sale as required by the
current rules and positions of the Securities and
Exchange Commission ("SEC") or its staff, and
provided that transactions in options, futures
contracts, options on futures contracts, or other
derivative instruments are not deemed to
constitute selling securities short.
<PAGE>
2. Purchase securities on margin, except that the
Fund may obtain such short-term credits as are
necessary for the clearance of transactions; and
provided that margin deposits in connection with
futures contracts, options on futures contracts,
or other derivative instruments shall not
constitute purchasing securities on margin.
3. Invest in illiquid securities if, as a result of
such investment, more than 15% of its net assets
would be invested in illiquid securities, or such
other amounts as may be permitted under the 1940
Act.
4. Purchase securities of other investment companies
except in compliance with the 1940 Act.
5. Engage in futures or options on futures
transactions which are impermissible pursuant to
Rule 4.5 under the Commodity Exchange Act ("CEA")
and, in accordance with Rule 4.5, will use futures
or options on futures transactions solely for bona
fide hedging transactions (within the meaning of
the CEA); provided, however, that the Fund may,
in addition to bona fide hedging transactions, use
futures and options on futures transactions if the
aggregate initial margin and premiums required to
establish such positions, less the amount by which
any such options positions are in the money
(within the meaning of the CEA), do not exceed 5%
of the Fund's net assets.
6. Make any loans other than loans of portfolio
securities, except through purchases of debt
securities or other debt instruments or engaging
in repurchase agreements with respect to portfolio
securities.
7. Borrow money except from banks or through reverse
repurchase agreements or mortgage dollar rolls,
and will not purchase securities when bank
borrowings exceed 5% of its assets.
Except for the fundamental investment restrictions
listed above and the Fund's investment objective, the
other investment policies described in the Prospectus
and this SAI are not fundamental and may be changed
with approval of the Fund's Board of Directors. Unless
noted otherwise, if a percentage restriction is adhered
to at the time of investment, a later increase or
decrease in percentage resulting from a change in the
Fund's assets (i.e., due to cash inflows or
redemptions) or in market value of the investment or
the Fund's assets will not constitute a violation of
that restriction.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the
discussion of the Fund's investment objective,
strategy, and policies that are described in the
Prospectus under the captions "Investment Strategy,"
"Implementation of Policies and Risks," and "Investment
Objective and Restrictions."
Depositary Receipts
The Fund may invest in foreign securities by
purchasing depositary receipts, including American
Depositary Receipts ("ADRs") and European Depositary
Receipts ("EDRs") or other securities convertible into
securities of companies based in foreign countries.
These securities may not necessarily be denominated in
the same currency as the securities into which they may
be converted. Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in
the U.S. securities markets, while EDRs, in bearer
form, may be denominated in other currencies and are
designed for use in European securities markets. ADRs
are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a
similar arrangement. For purposes of the Fund's
investment policies, ADRs and EDRs are deemed to have
the same classification as the underlying securities
they represent. Thus, an ADR or EDR representing
ownership of common stock will be treated as common
stock.
ADR facilities may be established as either
"unsponsored" or "sponsored." While ADRs issued under
these two types of facilities are in some respects
similar, there are distinctions between them relating
to the rights and
<PAGE>
obligations of ADR holders and the
practices of market participants. For example, a non-
sponsored depositary may not provide the same
shareholder information that a sponsored depositary is
required to provide under its contractual arrangements
with the issuer, including reliable financial
statements. Under the terms of most sponsored
arrangements, depositaries agree to distribute notices
of shareholder meetings and voting instructions, and to
provide shareholder communications and other
information to the ADR holders at the request of the
issuer of the deposited securities.
Convertible Securities
The Fund may invest in convertible securities,
which are bonds, debentures, notes, preferred stocks,
or other securities that may be converted into or
exchanged for a specified amount of common stock or
warrants of the same or a different company within a
particular period of time at a specified price or
formula. A convertible security entitles the holder to
receive interest normally paid or accrued on debt or
the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted,
or exchanged. Convertible securities have unique
investment characteristics in that they generally (i)
have higher yields than common stocks, but lower yields
than comparable non-convertible securities, (ii) are
less subject to fluctuation in value than the
underlying stock (or warrant) since they have fixed
income characteristics, and (iii) provide the potential
for capital appreciation if the market price of the
underlying common stock (or warrant) increases. A
convertible security may be subject to redemption at
the option of the issuer at a price established in the
convertible security's governing instrument. If a
convertible security held by the Fund is called for
redemption, the Fund will be required to permit the
issuer to redeem the security, convert it into the
underlying common stock (or warrant), or sell it to a
third party.
Concentration
While the Fund is "non-diversified," which means
that it is permitted to invest its assets in a more
limited number of issuers than other investment
companies, the Fund intends to diversify its assets to
qualify for tax treatment as a regulated investment
company under the Internal Revenue Code of 1986, as
amended (the "Code"). To so qualify (i) not more than
25% of the total value of the Fund's assets may be
invested in securities of any one issuer (other than
U.S. Government securities and the securities of other
regulated investment companies under the Code) or of
any two or more issuers controlled by the Fund, which,
pursuant to the regulations under the Code, may be
deemed to be engaged in the same, similar, or related
trades or businesses, and (ii) with respect to 50% of
the total value of the Fund's assets (a) not more than
5% of its total assets may be invested in the
securities of any one issuer (other than U.S.
Government securities and the securities of other
regulated investment companies under the Code) and (b)
the Fund may not own more than 10% of the outstanding
voting securities of any one issuer (other than U.S.
Government securities and the securities of other
regulated investment companies under the Code).
In addition, the Fund has adopted a fundamental
investment restriction which prohibits the Fund from
investing more than 25% of its assets in securities of
companies in any one industry. An industry is defined
as a business-line subsector of a stock-market sector.
While the Fund may be heavily invested in a single
market sector like technology or health care, for
example, it will not invest more than 25% of its assets
in securities of companies in any one industry or
subsector of technology or health care. Technology
subsectors or industries would include networking,
telecommunications, software, semiconductors, and voice-
processing business lines. Health care industries
would include medical devices and information systems
business lines. The Fund is not a technology or
"sector" mutual fund. While Advisor may be heavily
invested in technology or any other market sector from
time to time, rotation in asset management may be
experienced.
To the extent that a relatively high percentage of
the Fund's assets may be invested in the securities of
a limited number of companies, the Fund's portfolio
securities may be more susceptible to any single
economic, political, or regulatory occurrence than the
portfolio securities of a diversified investment
company.
<PAGE>
Temporary Strategies
As described in the Prospectus under the heading
"Implementation of Policies and Risks," prior to
investing proceeds from sales of Fund shares, to meet
ordinary daily cash needs, and to retain the
flexibility to respond promptly to changes in market
and economic conditions, the Fund may hold cash and/or
invest all or a portion of its assets in money market
instruments. The money market instruments which the
Fund may purchase include U.S. Government securities,
bank obligations, obligations of savings institutions,
fully insured certificates of deposit, commercial
paper, and securities issued by registered investment
companies holding themselves out as money market funds.
Such securities are limited to:
U.S. Government Securities. Obligations issued or
guaranteed as to principal and interest by the United
States or its agencies (such as the Export-Import Bank
of the United States, Federal Housing Administration
and Government National Mortgage Association) or its
instrumentalities (such as the Federal Home Loan Bank),
including Treasury bills, notes, and bonds;
Bank Obligations. Obligations (including
certificates of deposit, bankers' acceptances,
commercial paper (see below) and other debt
obligations) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or
more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic
banks;
Obligations of Savings Institutions. Certificates
of deposit of savings banks and savings and loan
associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit.
Certificates of deposit of banks and savings
institutions, having total assets of less than $1
billion, if the principal amount of the obligation is
insured by the Bank Insurance Fund or the Savings
Association Insurance Fund (each of which is
administered by the Federal Deposit Insurance
Corporation), limited to $100,000 principal amount per
certificate and to 15% or less of the Fund's total
assets in all such obligations and in all illiquid
assets, in the aggregate;
Commercial Paper. Commercial paper rated within
the two highest grades by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Corporation
("S&P") or, if not rated, issued by a company having an
outstanding debt issue rated at least Aaa by Moody's or
AAA by S&P; and
Money Market Funds. Securities issued by
registered investment companies holding themselves out
as money market funds which attempt to maintain a
stable net asset value of $1.00 per share.
DIRECTORS AND OFFICERS
The directors and officers of the Kopp Funds, Inc.
("Corporation"), of which the Fund is a series,
together with information as to their principal
business occupations during the last five years, and
other information, are shown below. Each director who
is deemed an "interested person" as defined in the 1940
Act is indicated by an asterisk. The directors and
officers listed below have served as such since
inception of the Corporation on June 12, 1997, except
as otherwise noted.
*LeRoy C. Kopp, Chief Executive Officer,
President, and a Director of the Corporation.
Mr. Kopp, 63 years old, received a Bachelor's
Degree with Distinction in Business Administration from
the University of Minnesota in 1956. Prior to founding
Kopp Investment Advisors ("Advisor") in 1990, Mr. Kopp
spent 30 years with Dain Bosworth Inc., where he was
the Manager of the Edina, Minnesota branch and a Senior
Vice President. Mr. Kopp has received a number of
business and community honors and awards, including
Upper Midwest Entrepreneur of the Year for Emerging
Companies.
<PAGE>
*Donald B. Cornelius, Chief Financial Officer and
Treasurer of the Corporation.
Mr. Cornelius, 65 years old, has served as Chief
Financial Officer, Chief Compliance Officer, and
Secretary of Advisor since its inception in 1990.
Before joining Advisor, Mr. Cornelius worked for more
than 30 years at Dain Bosworth Inc.
*Kathleen S. Tillotson, Secretary of the
Corporation.
Ms. Tillotson, 41 years old, joined Advisor in
March 1996 as Vice President and General Counsel. In
1981, Ms. Tillotson graduated from Tulane University
School of Law magna cum laude. Before joining Advisor
in 1996, Ms. Tillotson practiced law as an associate
and principal with law firms in Boston and Minneapolis.
____________________, a Director of the
Corporation. [add biography]
____________________, a Director of the
Corporation. [add biography]
The address of Messrs. Kopp and Cornelius, and Ms.
Tillotson, is 7701 France Avenue South, Suite 500,
Edina, Minnesota 55435.
As of September 30, 1997, officers and directors
of the Corporation did not beneficially own any of the
shares of common stock of the Fund's then outstanding
shares; however, Advisor, which is controlled by Mr.
Kopp, owned 100% of such shares. Directors and
officers of the Corporation who are also officers,
directors, employees, or shareholders of Advisor do not
receive any remuneration from the Fund for serving as
directors or officers.
The following table provides information relating
to annual compensation to be paid to directors of the
Corporation for their services as such(1):
Name Cash Other Total
Compensation(2) Compensation
LeRoy C. Kopp $0 $0 $0
______________ $15,000 $0 $15,000
______________ $15,000 $0 $15,000
All directors $30,000 $0 $30,000
as a group
(3 persons)
__________
(1)The amounts indicated are estimates of amounts to
be paid by the Corporation during its first fiscal
year.
(2)Each director who is not deemed an "interested
person" of the Corporation, as defined in the 1940
Act, will receive $3,500 for each Board of
Directors meeting attended by such person, a $1,000
per fiscal year stipend if all such meetings are
attended, and reimbursement of reasonable expenses
incurred in connection therewith. The Board
anticipates holding four meetings during fiscal
1998. Thus, each disinterested director is
entitled to up to $30,000 during such time period
from the Corporation, plus reasonable expenses.
Disinterested directors may elect to receive their
compensation in the form of cash, shares of the
Fund, or both.
<PAGE>
PRINCIPAL SHAREHOLDERS
As of September 30, 1997, the following persons
owned of record or are known by the Fund to own of
record or beneficially 5% or more of the outstanding
shares of the Fund:
Name and Address No. Shares Percentage
Kopp Investment Advisors 100 100%
7701 France Avenue South,
Suite 500
Edina, Minnesota 55435
Based on the foregoing, as of September 30, 1997,
Advisor owned a controlling interest in the Fund.
Shareholders with a controlling interest could effect
the outcome of proxy voting or the direction of
management of the Fund.
INVESTMENT ADVISOR
Kopp Investment Advisors ("Advisor") is the
investment advisor to the Fund. Advisor is a wholly-
owned subsidiary of Kopp Holding Company ("KHC") and is
controlled by LeRoy C. Kopp, the President and Chief
Investment Officer of Advisor and sole shareholder of
KHC.
The investment advisory agreement between the
Corporation and Advisor dated as of October 1, 1997
("Advisory Agreement") has an initial term of two years
and thereafter is required to be approved annually by
the Board of Directors of the Corporation or by vote of
a majority of the Fund's outstanding voting securities
(as defined in the 1940 Act). Each annual renewal must
also be approved by the vote of a majority of the
Corporation's directors who are not parties to the
Advisory Agreement or interested persons of any such
party, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory
Agreement was approved by the full Board of Directors
of the Corporation on September __, 1997 and by the
initial shareholders of the Fund on September __, 1997.
The Advisory Agreement is terminable without penalty on
60 days' written notice by the Board of Directors, by
vote of a majority of the Fund's outstanding voting
securities, or by Advisor, and will terminate
automatically in the event of its assignment.
Under the terms of the Advisory Agreement, Advisor
manages the Fund's investments and business affairs,
subject to the supervision of the Board of Directors.
At its expense, Advisor provides office space and all
necessary office facilities, equipment, and personnel
for managing the investments of the Fund. As
compensation for its services, the Corporation pays
Advisor an annual management fee of 1.00% of the Fund's
average daily net assets attributable to each class of
shares. The advisory fee is accrued daily and paid
monthly. The organizational expenses of the Fund were
advanced by Advisor and will be reimbursed by the Fund
over a period of not more than 60 months. The
organizational expenses were approximately
$____________.
Under the terms of the Advisory Agreement, Advisor
has agreed that for the fiscal year ending
September 30 , 1998, Advisor will waive its management
fees and/or reimburse the Fund's operating expenses to
the extent necessary to ensure that (i) the total
operating expenses for the Class A shares of the Fund
do not exceed 1.50% of average daily net assets, and
(ii) the total operating expenses for the Class I
shares do not exceed 1.15% of average net assets.
After fiscal 1998, Advisor may from time to time
voluntarily (but is not required or obligated to) waive
all or a portion of its fee and/or reimburse all or a
portion of class operating expenses. Any waiver of
fees or reimbursement of expenses will be made on a
monthly basis and, with respect to the latter, will be
paid to the Fund by reduction of Advisor's fee. Any
such waiver/reimbursement is subject to later
adjustment during the term of the Advisory Agreement to
allow Advisor to recoup amounts waived/reimbursed to
the extent actual fees and expenses for a specific
month are less than the expense limitation caps. In
the event, after fiscal 1998, Advisor decides to no
<PAGE>
longer voluntarily waive and/or reimburse fees and/or
expenses, any unrecovered amounts previously waived
and/or reimbursed will be permanently forgiven by
Advisor.
FUND TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, Advisor, in its
capacity as portfolio manager, is responsible for
decisions to buy and sell securities for the Fund and
for the placement of the Fund's securities business,
the negotiation of the commissions to be paid on such
transactions, and the allocation of portfolio brokerage
business. The Fund has no obligation to deal with any
particular broker or dealer; in executing transactions,
Advisor seeks to obtain the best execution at the best
security price available with respect to each
transaction. The best price to the Fund means the best
net price without regard to the mix between purchase or
sale price and commission, if any. While Advisor seeks
reasonably competitive commission rates, the Fund does
not necessarily pay the lowest available commission.
Brokerage may be allocated based on the sale of the
Fund's shares where best execution and price may be
obtained from more than one broker or dealer.
Section 28(e) of the Securities Exchange Act of
1934, as amended ("Section 28(e)"), permits an
investment advisor, under certain circumstances, to
cause an account to pay a broker or dealer who supplies
brokerage and research services a commission for
effecting a transaction in excess of the amount of
commission another broker or dealer would have charged
for effecting the transaction. Brokerage and research
services include (a) furnishing advice as to the value
of securities, the advisability of investing,
purchasing, or selling securities, and the availability
of securities or purchasers or sellers of securities;
(b) furnishing analyses and reports concerning issuers,
industries, sectors, securities, economic factors and
trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and
performing functions incidental thereto (such as
clearance, settlement, and custody).
In selecting brokers or dealers, Advisor considers
investment and market information and other research,
such as economic, securities, and performance
measurement research provided by such brokers or
dealers and the quality and reliability of brokerage
services, including execution capability, performance,
and financial responsibility. Accordingly, the
commissions charged by any such broker or dealer may be
greater than the amount another firm might charge if
Advisor determines in good faith that the amount of
such commissions is reasonable in relation to the value
of the research information and brokerage services
provided by such broker or dealer to the Fund. Advisor
believes that the research information received in this
manner provides the Fund with benefits by supplementing
the research otherwise available to the Fund. Such
higher commissions will not be paid by the Fund unless
(a) Advisor determines in good faith that the amount is
reasonable in relation to the services in terms of the
particular transaction or in terms of Advisor's overall
responsibilities with respect to the accounts,
including the Fund, as to which it exercises investment
discretion; (b) such payment is made in compliance with
the provisions of Section 28(e) and other applicable
state and federal laws; and (c) in the opinion of
Advisor, the total commissions paid by the Fund will be
reasonable in relation to the benefits to the Fund over
the long term.
Advisor places portfolio transactions for other
advisory accounts in addition to the Fund. Research
services furnished by firms through which the Fund
effects its securities transactions may be used by
Advisor in servicing all of its accounts; not all of
such services may be used by Advisor in connection with
the Fund. Advisor believes it is not possible to
measure separately the benefits from research services
to each of the accounts (including the Fund) managed by
it. Because the volume and nature of the trading
activities of the accounts are not uniform, the amount
of commissions in excess of those charged by another
broker or dealer paid by each account for brokerage and
research services will vary. However, Advisor believes
such costs to the Fund will not be disproportionate to
the benefits received by the Fund on a continuing
basis. Advisor seeks to allocate portfolio
transactions equitably whenever concurrent decisions
are made to purchase or sell securities by the Fund and
another advisory account. In some cases, this
procedure could have an adverse effect on the price or
the amount of securities available to the Fund. There
can be no assurance that a particular purchase or sale
opportunity will be allocated to the Fund. In making
such allocations between the Fund and other advisory
accounts, certain factors considered by Advisor are the
<PAGE>
respective investment objectives, the relative size of
portfolio holdings of the same or comparable
securities, the availability of cash for investment,
and the size of investment commitments generally held.
The Fund anticipates that its annual portfolio
turnover rate will be under 50%. The annual portfolio
turnover rate indicates changes in the Fund's
securities holdings; for instance, a rate of 100% would
result if all the securities in a portfolio (excluding
securities whose maturities at acquisition were one
year or less) at the beginning of an annual period had
been replaced by the end of the period. The turnover
rate may vary from year to year, as well as within a
year, and may be affected by portfolio sales necessary
to meet cash requirements for redemptions of the Fund's
shares.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
As custodian of the Fund's assets, Firstar Trust
Company ("Firstar"), 615 East Michigan Street,
Milwaukee, Wisconsin 53202, has custody of all
securities and cash of the Fund, delivers and receives
payment for portfolio securities sold, receives and
pays for portfolio securities purchased, collects
income from investments, if any, and performs other
duties, all as directed by the officers of the
Corporation. Firstar also acts as transfer agent and
dividend-disbursing agent for the Fund.
DISTRIBUTOR AND PLAN OF DISTRIBUTION
Distributor
Under a distribution agreement dated as of October
1, 1997 ("Distribution Agreement"), Centennial Lakes
Capital, Inc. ("Distributor") acts as principal
distributor of the Fund's shares. The Distribution
Agreement provides that the Distributor will use its
best efforts to distribute the Fund's shares, which
shares are offered for sale by the Fund continuously at
(i) net asset value per share plus a maximum initial
sales charge of 3.50% of the offering price, in the
case of Class A shares, and (ii) net asset value per
share without the imposition of a sales charge, in the
case of Class I shares. Investments in Class A shares
above $1 million are not assessed an initial sales
load. However, the Distributor may impose a 1%
contingent deferred sales charge ("CDSC") on such
shares redeemed within 24 months of purchase. In
addition, redemptions of Class I shares within 24
months of purchase are charged a 1% redemption fee.
Pursuant to the terms of the Distribution Agreement,
the Distributor bears the costs of printing
prospectuses and shareholder reports which are used for
selling purposes, as well as advertising and any other
costs attributable to the distribution of Fund shares.
Certain of theses expenses may be reimbursed pursuant
to the terms of the distribution and shareholder
servicing plan discussed below.
As compensation for its services under the
Distribution Agreement, the Distributor may retain a
portion of (i) the initial sales charge from purchases
of Class A shares, (ii) the CDSC from redemptions of
Class A shares, if applicable, and (iii) the Rule 12b-1
fees payable with respect to the Class A shares (as
described below).
Distribution and Shareholder Servicing Plan
As described more fully in the Prospectus under
the heading "Distribution and Shareholder Servicing
Plan," the Fund has adopted a plan pursuant to Rule 12b-
1 under the 1940 Act ("Plan") with respect to each
class of shares pursuant to which certain distribution
and shareholder servicing fees may be paid to the
Distributor. Under the terms of the Plan, each class
of shares may be required to pay the Distributor (i) a
distribution fee for the promotion and distribution of
shares of up to 0.25% of the average daily net assets
of the Fund attributable to each such class (computed
on an annual basis), and (ii) a shareholder servicing
fee for personal service provided to shareholders of up
to 0.25% of the average daily net assets of the Fund
attributable to each such class (computed on an annual
basis). Payments under the Plan with respect to Class
A shares are currently limited to 0.35%, which
represents a 0.10%
<PAGE>
distribution fee and a 0.25%
shareholder servicing fee; the Fund currently has no
intention of paying any Rule 12b-1 fees in connection
with the Class I shares. The Distributor is authorized
to pay all or a portion of these fees to any securities
dealer, financial institution or any other person
("Recipient") who renders assistance in distributing or
promoting the sale of Fund shares, or who provides
certain shareholder services to Fund shareholders,
pursuant to a written agreement ("Rule 12b-1 Related
Agreement"). To the extent such fee is not paid to
such persons, the Distributor may use the fee for its
own distribution expenses incurred in connection with
the sale of Fund shares, or for any of its shareholder
servicing expenses. The Plan is a "reimbursement"
plan, which means that the fees paid by the Fund under
the Plan are intended to reimburse the Distributor for
services rendered and commission fees borne up to the
maximum allowable distribution and shareholder
servicing fees. If the Distributor is due more money
for its services rendered and commission fees borne
than are immediately payable because of the expense
limitation under the Plan, the unpaid amount is carried
forward from period to period while the Plan is in
effect until such time as it may be paid. No interest,
carrying, or other finance charges will be borne by the
Fund with respect to unpaid amounts carried forward.
Anticipated Benefits to the Fund
The Board of Directors of the Corporation
considered various factors in connection with its
decision to approve the Plan, including: (a) the
nature and causes of the circumstances which make
implementation of the Plan necessary and appropriate;
(b) the way in which the Plan would address those
circumstances, including the nature and potential
amount of expenditures; (c) the nature of the
anticipated benefits; (d) the merits of possible
alternative plans or pricing structures; (e) the
relationship of the Plan to other distribution efforts
of the Fund, including the sales load on Class A
shares; and (f) the possible benefits of the Plan to
any other person relative to those of the Fund.
Based upon its review of the foregoing factors and
the material presented to it, and in light of its
fiduciary duties under relevant state law and the 1940
Act, the Board of Directors determined, in the exercise
of its business judgment, that the Plan was reasonably
likely to benefit the Fund and its shareholders in at
least one or several potential ways. Specifically, the
Board concluded that the Distributor and any Recipients
operating under Rule 12b-1 Related Agreements would
have little or no incentive to incur promotional
expenses on behalf of the Fund if a Rule 12b-1 plan
were not in place to reimburse them, thus making the
adoption of the Plan important to the initial success
and thereafter, continued viability of the Fund. In
addition, the Board determined that the payment of Rule
12b-1 fees to these persons should motivate them to
provide an enhanced level of service to Fund
shareholders, which would, of course, benefit such
shareholders. Finally, the adoption of the Plan would
help to increase net assets under management in a
relatively short amount of time, given the marketing
efforts on the part of the Distributor and Recipients
to sell Fund shares, which should result in certain
economies of scale.
While there is no assurance that the expenditure
of Fund assets to finance distribution of Fund shares
will have the anticipated results, the Board of
Directors believes there is a reasonable likelihood
that one or more of such benefits will result, and
since the Board will be in a position to monitor the
distribution and shareholder servicing expenses of the
Fund, it will be able to evaluate the benefit of such
expenditures in deciding whether to continue the Plan.
TAXES
As indicated under "Dividends, Capital Gains
Distributions, and Tax Treatment" in the Prospectus,
the Fund intends to qualify annually as a "regulated
investment company" under the Code. This qualification
does not require government supervision of the Fund's
management practices or policies.
A dividend or capital gains distribution received
shortly after the purchase of shares reduces the net
asset value of shares by the amount of the dividend or
distribution and, although in effect a return of
capital, will be subject to income taxes. Net gains on
sales of securities when realized and distributed are
taxable as capital gains. If the net
<PAGE>
asset value of
shares were reduced below a shareholder's cost by
distribution of gains realized on sales of securities,
such distribution would be a return of investment
although taxable as indicated above.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the same
heading, the net asset value of each class of shares of
the Fund will be determined as of the close of trading
on each day the New York Stock Exchange ("NYSE") is
open for trading. The Fund does not determine net
asset value on days the NYSE is closed and at other
times described in the Prospectus. The NYSE is closed
on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the NYSE
will not be open for trading on the preceding Friday
and when such holiday falls on a Sunday, the NYSE will
not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the
ending of a monthly or the yearly accounting period.
SHAREHOLDER MEETINGS
Minnesota law permits registered investment
companies, such as the Corporation, to operate without
an annual meeting of shareholders, unless an annual
meeting has not been held during the immediately
preceding 15 months and a shareholder or shareholders
holding 3% or more of the outstanding voting shares of
the Corporation demand such a meeting. In addition,
special meetings may be called at any time and for any
purpose by one or more shareholders holding 10% or more
of the outstanding voting shares of the Corporation,
except that a special meeting for the purpose of
considering any action to change or otherwise affect
the composition of the board of directors for that
purpose, must be called by 25% or more of the
outstanding voting shares of the Corporation.
PERFORMANCE INFORMATION
As described in the "Fund Performance" section of
the Fund's Prospectus, the Fund's historical
performance or return may be shown in the form of
various performance figures. The Fund's performance
figures are based upon historical results and are not
necessarily representative of future performance.
Factors affecting the Fund's performance include
general market conditions, operating expenses, and
investment management.
Total Return
The average annual total return of each class of
shares of the Fund is computed by finding the average
annual compounded rates of return over the periods that
would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
P = a hypothetical initial
payment of $1,000.
T = average annual total
return.
n = number of years.
ERV = ending redeemable value of
a hypothetical $1,000 payment made at
the beginning of the stated periods at
the end of the stated periods.
Performance for a specific period is calculated by
first taking an investment (assumed to be $1,000)
("initial investment") in a class of shares on the
first day of the period and computing the "ending
value" of that investment at
<PAGE>
the end of the period.
The total return percentage is then determined by
subtracting the initial investment from the ending
value and dividing the remainder by the initial
investment and expressing the result as a percentage.
With respect to the Class A shares, this calculation
reflects the deduction of the maximum 3.50% initial
sales charge and, with respect to the Class I shares,
this calculation reflects the deduction of the 1%
redemption fee. In addition, the calculation assumes
that all income and capital gains dividends paid by the
Fund have been reinvested at the net asset value of the
applicable class of shares on the reinvestment dates
during the period. Total return may also be shown as
the increased dollar value of the hypothetical
investment over the period.
Cumulative total return represents the simple
change in value of an investment over a stated period
and may be quoted as a percentage or as a dollar
amount. Total returns may be broken down into their
components of income and capital (including capital
gains and changes in share price) in order to
illustrate the relationship between
these factors and their contributions to total return.
Comparisons
From time to time, in marketing and other Fund
literature, the performance of one or both classes of
shares may be compared to the performance of other
mutual funds in general or to the performance of
particular types of mutual funds with similar
investment goals, as tracked by independent
organizations. Among these organizations, Lipper
Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by
overall performance, investment objectives, and assets,
may be cited. Lipper performance figures are based on
changes in net asset value, with all income and capital
gains dividends reinvested. Such calculations do not
include the effect of any sales charges imposed by
other funds. Each class of shares of the Fund will be
compared to Lipper's appropriate fund category, that
is, by fund objective and portfolio holdings.
The Fund's performance may also be compared to the
performance of other mutual funds by Morningstar, Inc.
("Morningstar"), which ranks funds on the basis of
historical risk and total return. Morningstar's
rankings range from five stars (highest) to one star
(lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a
weighted average for 3, 5, and 10 year periods.
Rankings are not absolute or necessarily predictive of
future performance.
Evaluations of the Fund's performance made by
independent sources may also be used in advertisements
concerning the Fund, including reprints of or
selections from, editorials or articles about the Fund.
Sources for Fund performance and articles about the
Fund may include publications such as Money, Forbes,
Kiplinger's, Financial World, Business Week, U.S. News
and World Report, the Wall Street Journal, Barron's,
and a variety of investment newsletters.
The Fund may compare the performance of one or
both classes of shares to a wide variety of indices and
measures of inflation. There are differences and
similarities between the investments that the Fund may
purchase and the investments measured by these indices.
Investors may want to compare the performance of
one or both classes of shares to that of certificates
of deposit offered by banks and other depository
institutions. Certificates of deposit may offer fixed
or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of the deposits prior
to maturity normally will be subject to a penalty.
Rates offered by banks and other depository
institutions are subject to change at any time
specified by the issuing institution.
Investors may also want to compare performance of
one or both classes of shares to that of money market
funds. Money market fund yields will fluctuate and
shares are not insured, but share values usually remain
stable.
<PAGE>
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick L.L.P., 4200 Norwest Center, 90
South Seventh Street, Minneapolis, Minnesota 55402,
have been selected as the independent accountants for
the Fund.
FINANCIAL STATEMENTS
The following financial statements of the Fund are
contained herein:
(a) Report of Independent Accountants.
(b) Statement of Assets and Liabilities.
(c) Notes to Statement of Assets and
Liabilities.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements (Included in Parts
A and B)
Report of Independent Accountants
Statement of Assets and Liabilities
Notes to Statement of Assets and
Liabilities
(b) Exhibits
(1) Registrant's Articles of Incorporation(1)
(2) Registrant's By-Laws(1)
(3) None
(4) None
(5) Investment Advisory Agreement*
(6.1) Distribution Agreement*
(6.2) Form of Selected Dealer Agreement*
(7) None
(8) Custodian Agreement*
(9.1) Transfer Agency Agreement*
(9.2) Administration Agreement*
(9.3) Fund Accounting Agreement*
(9.4) Fulfillment Servicing Agreement*
(10) Opinion and Consent of
Godfrey & Kahn, S.C.*
(11) Consent of KPMG Peat
Marwick L.L.P.*
(12) None
(13) Subscription Agreement*
(14) Individual Retirement Account
Disclosure Statement and Custodial Account*
<PAGE>
(15.1) Rule 12b-1 Distribution
and Shareholder Servicing Plan*
(15.2) Form of 12b-1 Related Agreement*
(16) None
(17) None
(18) Rule 18f-3 Multi-Class Plan*
(19) Powers of Attorney for Directors and
Officers (see signature page)
______________
* To be filed by amendment.
(1) Incorporated by reference to the Registrant's
Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission on June 20,
1997.
Item 25. Persons Controlled by or under Common Control
with Registrant
Registrant neither controls any person nor is
under common control with any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Securities as of September 30, 1997
Common Stock, $.01 par value 1
Item 27. Indemnification
Article VIII of Registrant's Articles of
Incorporation provides as follows:
(a) The Corporation shall indemnify such persons
for such expenses and liabilities, in such manner,
under such circumstances, and to the full extent
permitted by Section 302A.521 of the MBCA, as now
enacted or hereafter amended.
(b) A director of the Corporation shall not be
personally liable to the Corporation or its
shareholders for monetary damages for breach of
fiduciary duty as a director, except for (i)
liability based on a breach of duty of loyalty to
the Corporation or the shareholders; (ii)
liability for acts or omissions not in good faith
or that involve intentional misconduct or a
knowing violation of law; (iii) liability based on
the payment of an improper dividend or an improper
repurchase of the Corporation's stock under MBCA
Section 302A.559 or on the sale of unregistered
securities or securities fraud under MBCA 80A.23;
or (iv) liability for any transaction from which
the director derived an improper personal benefit.
If the MBCA is hereafter amended to authorize the
further elimination or limitation of the liability
of directors, then the liability of a director of
the Corporation, in addition to the limitation on
personal liability provided herein, shall be
limited to the fullest extent permitted by the
MBCA, as amended. Any repeal or modification of
this Article VIII by the shareholders of the
Corporation shall be prospective only and shall
not adversely affect any limitation on the
personal liability of a director of the
Corporation existing at the time of such repeal or
modification.
(c) Paragraphs (a) and (b) of this Article VIII
are qualified by Section 17(h) of the 1940 Act
which provides that neither the articles of
incorporation nor the bylaws of any registered
investment company may
<PAGE>
contain any provision which
protects or purports to protect any director or
officer of such company against any liability to
the company or its security holders to which such
officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Item 28. Business and Other Connections of Investment
Advisor
Besides serving as investment advisor to the
Registrant and other private accounts, Advisor is not
currently and has not during the past two fiscal years
engaged in any other business, profession, vocation, or
employment of a substantial nature. Information
regarding the business, profession, vocation, or
employment of a substantial nature of Advisor's
directors and officers is hereby incorporated by
reference from the information contained under "Fund
Organization and Management-Management" in the
Prospectus.
Item 29. Principal Underwriters
(a) None.
(b) The principal business address of
Centennial Lakes Capital, Inc.
("Centennial"), the Registrant's principal
underwriter, is 7701 France Avenue South,
Suite 500, Edina, Minnesota 55435. The
following information relates to each
director and officer of Centennial:
Positions
And Offices Positions and Offices
Name With Underwriter With Registrant
Donald James President None
Donald Cornelius Secretary and Treasurer Chief Financial Officer
and Treasurer
(c) None.
Item 30. Location of Accounts and Records
All accounts, books or other documents required to
be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules
promulgated thereunder are in the possession of Kopp
Investment Advisors, Registrant's investment advisor,
at Registrant's corporate offices, except records held
and maintained by Firstar Trust Company, 615 East
Michigan Street, Milwaukee, Wisconsin 53202, relating
to its function as custodian, transfer agent,
administrator, and fund accountant.
Item 31. Management Services
All management-related service contracts entered
into by Registrant are discussed in Parts A and B of
this Registration Statement.
<PAGE>
Item 32. Undertakings.
(a) Not Applicable.
(b) Registrant undertakes to file a post-
effective amendment to this Registration
Statement which will contain financial
statements (which need not be certified) no
later than 60 days after the end of the four
to six month period after effectiveness of
this Registration Statement.
(c) Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, the
Registrant has duly caused this Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Edina and State of Minnesota
on the 22nd day of August, 1997.
KOPP FUNDS,INC.
(Registrant)
By: /s/ LeRoy C. Kopp
---------------------
LeRoy C. Kopp
Chief Executive
Officer and President
Each person whose signature appears below
constitutes and appoints LeRoy C. Kopp his true and
lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
sign any and all amendments to this Registration
Statement and to file the same, with all exhibits
thereto, and any other documents in connection
therewith, with the Securities and Exchange Commission
and any other regulatory body, granting unto said
attorney-in-fact and agent, full power and authority to
do and perform each and every act and thing requisite
and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact
and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act
of 1933, this Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A has been signed
below by the following persons in the capacities and on
the date(s) indicated.
Name Title Date
/s/LeRoy C. Kopp Chief Executive Officer,
- ----------------- President and Director August 22, 1997
LeRoy C. Kopp
____________________ Director ___________, 1997
____________________ Director ___________, 1997
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(1) Registrant's Articles of Incorporation(1)
(2) Registrant's By-Laws(1)
(3) None
(4) None
(5) Investment Advisory Agreement*
(6.1) Distribution Agreement*
(6.2) Form of Selected Dealer Agreement*
(7) None
(8) Custodian Agreement*
(9.1) Transfer Agency Agreement*
(9.2) Administration Agreement*
(9.3) Fund Accounting Agreement*
(9.4) Fulfillment Servicing Agreement*
(10) Opinion and Consent of Godfrey & Kahn, S.C.*
(11) Consent of KPMG Peat Marwick L.L.P.*
(12) None
(13) Subscription Agreement*
(14) Individual Retirement
Account Disclosure Statement and Custodial
Account*
(15.1) Rule 12b-1 Distribution and Shareholder
Servicing Plan*
(15.2) Form of 12b-1 Related Agreement*
(16) None
(17) None
(18) Rule 18f-3 Multi-Class Plan*
(19) Powers of Attorney for Directors and
Officers (see signature page)
___________________
* To be filed by Amendment.
(1) Incorporated by reference to the
Registrant's Registration Statement on Form N-1A
as filed with the Securities and Exchange
Commission on June 20, 1997.
