<PAGE>
SEC Filing Fees Account #0000803020
AS FILED WITH THE SECURITIES AND EXCHANGE 1933 ACT FILE NO. 33-9093
COMMISSION ON JULY 2, 1996 1940 ACT FILE NO. 811-4854
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.________ [_]
Post-Effective Amendment No. 13 [X]
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 [X]
THE OBERWEIS FUNDS
(Exact Name of Registrant as Specified in Charter)
c/o Oberweis Asset Management, Inc.
951 Ice Cream Drive, Suite 200
North Aurora, Illinois 60542
(Address of Principal Executive Offices, Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (800) 323-6166
Patrick B. Joyce
Oberweis Asset Management, Inc.
951 Ice Cream Drive
North Aurora, Illinois 60542
(Name and Address of Agent for Service)
Copies to:
Cathy G. O'Kelly
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has declared that an indefinite number or amount of Shares of beneficial
interest in the Fund has been registered under the Securities Act of 1933. The
Rule 24f-2 Notice for the year ended December 31, 1995 was filed with the
Securities and Exchange Commission on or about February 23, 1996. It is
proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment
<PAGE>
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM NUMBER LOCATION IN PROSPECTUS
- --------------------- ----------------------
<S> <C>
Part A--
Item 1. Cover page Cover Page
Item 2. Synopsis Cover Page, Synopsis of Fees
Item 3. Condensed Financial Information Financial Highlights; Performance Comparison
Item 4. General Description of Registrant Investment Objective, Policies and Risks; General Information
Item 5. Management of the Fund Management of the Portfolios; Expenses of the Fund; The
Advisory and Management Agreements
Item 5A. Management's Discussion of Fund Performance Not Applicable
Item 6. Capital Stock and Other Securities Distribution of Shares; Dividends, Distributions and Tax
Status; General Information
Item 7. Purchase of Securities Being Offered How to Purchase Shares; Shareholder Services
Item 8. Redemption or Repurchase How to Redeem Shares; Shareholder Services
Item 9. Pending Legal Proceedings Not Applicable
LOCATION IN
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
Item B--
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objective, Policies and Restrictions
Item 14. Management of the Fund Management of the Fund
Item 15. Control Persons and Principal Holders of Securities Management of the Fund
Item 16. Investment Advisory and Other Services Oberweis Asset Management, Inc.; The Chicago Corporation;
Distribution Plan and Agreement; Additional Information
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Securities Shareholder Voting Rights [See also Item 6]
Item 19. Purchase, Redemption and Pricing of Securities Redemption of Shares, Determination of Net Asset Value
Being Offered
Item 20. Tax Status Taxes
Item 21. Underwriters See Prospectus - How to Purchase Shares
Item 22. Calculations of Performance Data Calculation of Average Annual Total Return
Item 23. Financial Statements Financial Statements
Part C--
Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C of this
Registration Statement.
</TABLE>
ii
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 2, 1996
The Oberweis Funds
The Oberweis Funds (the "Fund") is a man-
aged, diversified, open-end mutual fund currently consisting of three portfo-
lios--the Oberweis Emerging Growth Portfolio (the "Emerging Growth Portfolio"),
the Oberweis Micro-Cap Portfolio (the "Micro-Cap Portfolio") and the Oberweis
Mid-Cap Portfolio (the "Mid-Cap Portfolio").
The Micro-Cap Portfolio commenced the public offering of shares on January 1,
1996 at $10 per share. Effective as of May 22, 1996, the Micro-Cap Portfolio
had net assets in excess of $50 million and in connection with the Fund's in-
tention to cap the Micro-Cap Portfolio's assets at $50 million, the Fund ceased
sales of shares of the Micro-Cap Portfolio to both new shareholders and exist-
ing shareholders. The Fund reserves the right to again offer shares of the
Micro-Cap Portfolio at a future date.
The Mid-Cap Portfolio commenced the public offering of shares on September 15,
1996 at $10 per share.
The investment objective of each Portfolio is to maximize capital appreciation.
Each Portfolio intends to achieve its objective through an investment program
emphasizing common stocks of companies that the investment adviser, Oberweis
Asset Management, Inc. ("OAM"), believes have the potential for above-average
long-term growth in market value. Each Portfolio's investment program may in-
volve a greater degree of risk than is customarily associated with more
conservative investment programs. This Prospectus, which should be read and re-
tained for future reference, sets forth concisely the information an investor
should know before investing in the Fund.
THE FUND MAY SELL AND PURCHASE OPTIONS WHICH ARE DERIVATIVE SECURITIES AND MAY
BE CONSIDERED SPECULATIVE. (SEE "OPTIONS" ON PAGE 9.)
A Statement of Additional Information for the Fund dated as may be
amended from time to time has been filed with the Securities and Exchange Com-
mission and may be obtained without charge by calling or writing the Fund at
the telephone number or address listed below. The Statement of Additional In-
formation is incorporated by reference into this Prospectus.
- --------------------------------------------------------------------------------
951 Ice Cream Drive, Suite 200
North Aurora, Illinois 60542
(800) 323-6166
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Synopsis of Fees............................................................ 2
Financial Highlights........................................................ 3
Performance Comparison...................................................... 5
Investment Objective, Policies and Risks.................................... 7
Management of the Portfolios................................................ 10
The Advisory and Management
Agreements................................................................. 10
Distribution of Shares...................................................... 11
Expenses of the Fund........................................................ 12
Portfolio Transactions...................................................... 12
How to Purchase Shares...................................................... 13
How to Redeem Shares........................................................ 13
Net Asset Value............................................................. 14
Shareholder Services........................................................ 15
Dividends, Distributions and Tax Status..................................... 16
The Custodian and Transfer Agent............................................ 17
General Information......................................................... 17
</TABLE>
The Fund's shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, nor are they federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. Investment in a
Portfolio's shares involves risk, including the possible loss of principal.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The date of this Prospectus is .
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
SYNOPSIS OF FEES
<TABLE>
<CAPTION>
PORTFOLIO
--------------------
EMERGING MICRO- MID-
SHAREHOLDER TRANSACTION EXPENSES GROWTH CAP CAP
- -------------------------------- -------- ------ ----
<S> <C> <C> <C>
Sales Charge Imposed on Purchases (as a percentage of
offering price)......................................... None None None
Sales Charge Imposed on Reinvested Dividends or Capital
Gain Distributions...................................... None None None
Redemption Fees.......................................... None .25% .25%
Exchange Fees............................................ None None None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Advisory and Management Fees............................. .82% 1.00% .80%
12b-1 Fees............................................... .25%(1) .25% .25%
Other Expenses........................................... .45% .75% .95%
Total Fund Operating Expenses*........................... 1.52%(1) 2.00% 2.00%
</TABLE>
- --------
(1) The figures have been restated for the reduction in 12b-1 Fees to
.25% effective January 1, 1996. Without such restatement, Total Fund
Operating Expenses for the period ended December 31, 1995 were 1.77%. The
Emerging Growth Portfolio's actual Advisory and Management Fees for the
period ended December 31, 1995, after reimbursement, were .78%. Such
reimbursement would not have been required if the 12b-1 Fee had been .25%.
See "Expenses of the Fund," for a discussion of the Fund's annual expense
limitation and reductions of the Management fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------- ----- ------ ------ -------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return and
redemption at the end of each time period:
Emerging Growth Portfolio......................... $15 $48 $83 $181
Micro-Cap Portfolio............................... $23 $65 -- --
Mid-Cap Portfolio................................. $23 $65 -- --
</TABLE>
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund may bear directly
or indirectly. Long-term shareholders may pay more in total sales charges than
the economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc. There is a .25% withdrawal
charge on the Micro-Cap and Mid-Cap Portfolios, which is deducted from the re-
demption proceeds and is used to reimburse the Portfolio for the expenses it
incurs in connection with the Shareholder's liquidation of shares. In addition,
for each Portfolio, there is a $6 fee for each wire redemption, which is de-
ducted from a Shareholder's redemption amount. Other Expenses for the Micro-Cap
and Mid-Cap Portfolios are based on estimates of expenses for the current fis-
cal year. The examples are based on the expenses in the table and a
hypothetical annual rate of return of 5%. The Micro-Cap Portfolio and the Mid-
Cap Portfolio commenced the public offering of shares on January 1, 1996 and
September 15, 1996, respectively, thus estimates of expenses in the example are
shown for only the one and three year periods. THE EXAMPLES SHOULD NOT BE CON-
SIDERED AN INDICATION OF ACTUAL OR EXPECTED PORTFOLIO PERFORMANCE OR EXPENSES,
BOTH OF WHICH MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete ex-
planation of the fees and expenses borne by each Portfolio, please see the
discussions under the Prospectus headings "The Advisory and Management Agree-
ments," "Distribution of Shares," "Expenses of the Fund," and "Portfolio
Transactions," as well as the Statement of Additional Information incorporated
by reference into this Prospectus.
*The Manager will reimburse each Portfolio for total operating expenses in ex-
cess of 2% of average daily net assets for the first $25,000,000; plus 1.8% of
the next $25,000,000; plus 1.6% of average daily net assets in excess of
$50,000,000.
2
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE EMERGING GROWTH PORTFOLIO
The following table shows important financial information for the Emerging
Growth Portfolio expressed in terms of one share outstanding throughout the pe-
riods. The per share data was determined using average shares outstanding
during the period. The information in the table has been audited by the Fund's
independent auditors except for the financial information as of June 30, 1996,
which is unaudited. The auditors' unqualified report, along with the complete
financial statements for the Emerging Growth Portfolio, is included in the
Emerging Growth Portfolio's Annual Report, which is incorporated by reference
into the Statement of Additional Information.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1996
-----------
(UNAUDITED)
-----------
<S> <C>
Net Asset Value,
Beginning of Period.....
Income from Investment
Operations:
Net investment loss.....
Net realized and
unrealized gain (loss)
on investments.........
------
Total from investment
operations.............
Less Distributions:
Net realized gain on
investments............
------
Net Asset Value, End of
Period.................
======
Total Return (%)(b).....
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands)..
Ratio of expenses to
average net assets (%).
Ratio of net investment
loss to average net
assets (%).............
Portfolio turnover rate
(%)....................
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987(D)
----------- -------- ----------- ---------- ---------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 21.41 $ 22.19 $ 20.90 $ 18.39 $ 12.11 $ 12.06 $ 9.65 $ 9.13 $ 10.04
Income from Investment
Operations:
Net investment loss..... (0.33) (0.22) (0.22) (0.21) (0.09) (0.24) (0.35) (0.20) (0.15)
Net realized and
unrealized gain (loss)
on investments......... 9.43 (0.56) 2.25 2.72 10.64 0.29 2.76 0.72 (0.76)
----------- -------- ----------- ---------- ---------- ---------- ---------- -------- -----------
Total from investment
operations............. 9.10 (0.78) 2.03 2.51 10.55 0.05 2.41 0.52 (0.91)
Less Distributions:
Net realized gain on
investments............ (1.42) -- (0.74) -- (4.27) -- -- -- --
----------- -------- ----------- ---------- ---------- ---------- ---------- -------- -----------
Net Asset Value, End of
Period................. $ 29.09 $ 21.41 $ 22.19 $ 20.90 $ 18.39 $ 12.11 $ 12.06 $ 9.65 $ 9.13
=========== ======== =========== ========== ========== ========== ========== ======== ===========
Total Return (%)(b)..... 42.6 (3.5) 9.7 13.7 87.1 0.4 25.0 5.7 (9.1)
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $134,663 $90,014 $104,324 $54,063 $19,730 $11,604 $12,940 $15,914 $16,856
Ratio of expenses to
average net assets (%). 1.73(a) 1.78 1.80(a) 1.99(a) 2.13(a) 2.15(a) 2.00(a) 2.46 1.99(c)
Ratio of net investment
loss to average net
assets (%)............. (1.24) (1.06) (1.04) (1.14) (1.27) (1.24) (1.19) (1.80) (1.48)(c)
Portfolio turnover rate
(%).................... 79 66 70 63 114 62 112 67 55
</TABLE>
- -------
(a) Net of expense reimbursement from related parties. Expense ratios would
have been 1.77% for 1995, 1.82% for 1993, 2.41% for 1992, 3.01% for 1991,
and 3.48% for both 1990 and 1989 before expense reimbursement.
(b) A sales load of 4% was charged until December 31, 1991 and is not reflected
in the above total return figures.
(c) Annualized.
(d) From inception of Portfolio, January 7, 1987.
3
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE MICRO-CAP PORTFOLIO
The following table shows important unaudited financial information for the
Micro-Cap Portfolio expressed in terms of one share outstanding, throughout the
period January 1, 1996 through June 30, 1996. The per share date was determined
using average shares outstanding during the period.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
30, 1996(B)
-----------
(UNAUDITED)
<S> <C>
Net Asset Value, Beginning of Period.............................. $
Income from Investment Operations:
Net investment loss..............................................
Net realized and unrealized gain (loss) on investments...........
---------
Total from investment operations.................................
Less Distributions:
Net realized gain on investments.................................
---------
Net Asset Value, End of Period................................... $
=========
Total Return (%)
Ratios/Supplemental Data:
Net assets, end of period (in thousands)......................... $
Ratio of expenses to average net assets (%)...................... (a)
Ratio of net investment loss to average net assets (%)...........
Portfolio turnover rate (%)......................................
</TABLE>
- --------
(a) Annualized.
(b) From inception of Portfolio, January 1, 1996.
4
<PAGE>
PERFORMANCE COMPARISON
The following table compares the Emerging Growth Portfolio's total return for
the one year periods ended December 31, 1995 and June 30, 1996 with the total
return of various indexes of unmanaged securities:
<TABLE>
<CAPTION>
ONE YEAR ONE YEAR
PERIOD ENDED PERIOD ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ------------
<S> <C> <C>
Oberweis Emerging Growth Portfolio.................... 42.6% %
Dow-Jones Industrial Average.......................... 33.5% %
S&P 500............................................... 37.6% %
NASDAQ National Composite............................. 39.9% %
Lipper Small Company Growth Index..................... 31.4% %
Russell 2000 Index.................................... 28.4% %
Wilshire 5000 Index................................... 36.4% %
</TABLE>
The Dow-Jones Industrial Average is a widely recognized stock market indicator
that consists of the price movements of 30 major industrial companies in the
United States. The Standard & Poor's 500 Stock Composite is widely regarded as
representative of general stock market activity. The NASDAQ National Composite,
Lipper Small Company Growth Index, Russell 2000 Index and the Wilshire 5000 In-
dex represent portfolios that are somewhat more representative of the
securities held by the Emerging Growth Portfolio.
Total return includes price level changes, dividends and capital gain distribu-
tions. As calculated in accordance with applicable regulations of the
Securities and Exchange Commission, the Emerging Growth Portfolio's average an-
nual total returns for the following periods ended December 31, 1995 are:
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAST PAST LIFE OF FUND
1 YEAR 5 YEARS (1/7/87)
------ ------- ------------
<S> <C> <C> <C>
Emerging Growth Portfolio..................... 42.6% 26.3% 16.3%
S&P 500....................................... 37.6% 16.6% 13.8%
Russell 2000 Index............................ 28.4% 21.0% 11.2%
</TABLE>
In advertising, sales literature and other publications, the Portfolios' per-
formance may be quoted in terms of total return or average annual total return,
which may be compared with various indices and investments, other performance
measures or rankings, or other mutual funds, or indices or averages of other
mutual funds.
5
<PAGE>
(GRAPH APPEARS HERE]
ASSUMED $10,000 INVESTMENT IN THE EMERGING GROWTH PORTFOLIO
FROM 1/07/87 THROUGH 12/31/95
<TABLE>
<CAPTION>
<S> <C> <C>
1/7/87 12/31/95
------ --------
Oberweis Emerging Growth Portfolio 10,000 $38,753
S & P 500 10,000 $31,927
Russell 2000 10,000 $38,753
</TABLE>
All data assumes reinvestment of dividends and capital gains. Results repre-
sent past performance and do not indicate future results. The value of an
investment in the Emerging Growth Portfolio and the return on the investment
both will fluctuate and redemption proceeds may be higher or lower than an
investor's original cost. When first organized in 1987, the Emerging Growth
Portfolio applied a sales charge to each share purchase. The Portfolio's
sales charge was eliminated on December 31, 1991. The performance graph and
the average annual return figures do not reflect the load.
Additional information concerning performance results of the Emerging Growth
Portfolio is contained in the Annual and Semi-Annual Reports which are
available upon request without cost from the Fund.
6
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISKS
INVESTMENT OBJECTIVE--The investment objective of each Portfolio is to maximize
capital appreciation. The realization of current income will not be a consider-
ation in the selection of securities for investment, and the Portfolios are not
designed for investors seeking income rather than capital appreciation. The in-
vestment objective of each Portfolio is a fundamental policy and may not be
changed without approval of the shareholders of that Portfolio, which is de-
scribed in the Statement of Additional Information.
INVESTMENT PROGRAM AND PHILOSOPHY--Each of the Portfolios is managed to seek
out companies that the Portfolio's investment adviser, OAM, believes have the
potential for above-average long-term growth in market value.
The Emerging Growth Portfolio may invest in companies of all size capitaliza-
tions, however, because it is believed that the potential for such growth may
tend to be found more often in relatively small capitalization companies, which
fall in the lowest 30% capitalization of the companies listed on the New York
Stock Exchange or companies of similar or smaller capitalization which are
listed on the American Stock Exchange or are traded over the counter (typically
with capitalization of less than $1 billion), it is anticipated that approxi-
mately 80% of the Portfolio's assets will be invested in the securities of such
smaller companies with the Portfolio's average market capitalization being $600
million. However, such percentage may vary greatly from time to time based on
OAM's analysis of economic and market conditions
The Micro-Cap Portfolio will generally invest in companies with a market capi-
talization of not more than $250 million at the time of acquisition, with the
Portfolio's average market capitalization being approximately $100 million. It
is anticipated that at least 80% of the companies that the Portfolio will in-
vest in will have a market capitalization of not more than $250 million at the
time of purchase and at least 50% of the companies will have market capitaliza-
tion of $100 million or less at the time of purchase.
The Mid-Cap Portfolio will generally invest in companies with a market capital-
ization of not more than $5 billion at the time of acquisition, and it is
anticipated that the Portfolio's average market capitalization will be approxi-
mately $3 billion.
Each Portfolio in particular seeks to invest in those companies which OAM con-
siders as having such above-average long-term growth potential based on its
analysis of eight factors, which the portfolio manager calls the "Oberweis Oc-
tagon." These factors are:
1. rapid growth in revenue, preferably generated by internal growth as op-
posed to acquisitions of other businesses, at least 30% in the latest quarter
for companies being considered for investment by the Emerging Growth and Mi-
cro-Cap Portfolios and at least 20% in the latest quarter for companies being
considered for investment by the Mid-Cap Portfolio;
2. rapid growth in pre-tax income (at least 30% in the latest quarter for
companies being considered for investment by the Emerging Growth and Micro-
Cap Portfolios and at least 20% in the latest quarter for companies being
considered for investment by the Mid-Cap Portfolio) and in earnings per
share;
3. reasonable price earnings ratio in relation to the company's underlying
growth rate, generally a price earnings ratio not more than 1/2 of the
company's growth rate for companies being considered for investment by the
Emerging Growth and Micro-Cap Portfolios and generally a price earnings ratio
of not more than the company's growth rate for companies being considered for
investment by the Mid-Cap Portfolio;
4. products or services that offer the opportunity for substantial future
growth;
5. favorable recent trends in revenue and earnings growth;
6. reasonable price-to-sales ratio based on the company's underlying growth
prospects and profit margins;
7. a review of the company's balance sheet, with particular attention to
footnotes, in order to identify unusual items which may indicate future prob-
lems; and
8. high relative strength in the market, in that the company's stock has
outperformed at least 75% of other stocks in the market over the preceding
twelve months.
OAM considers these eight factors as guidelines by which it may evaluate the
many companies it reviews, but such factors and the relative weight given to
each will vary with economic and market conditions and the type of company be-
ing evaluated. No one factor will justify, and any one factor may (but will not
necessarily) preclude, an investment in a particular company.
7
<PAGE>
Generally, at least seventy-five percent (75%) or more of each Portfolio's as-
sets will be invested in common stocks, but each Portfolio may also invest in
convertible securities, preferred stocks, securities of foreign issuers (most
of which are traded on United States stock exchanges or listed on NASDAQ), and
restricted securities. In addition, the Portfolios may establish and maintain
reserves for temporary defensive purposes or to enable it to take advantage of
buying opportunities. Each Portfolio's reserves may be held in cash or invested
in high quality money market instruments, including U.S. government obliga-
tions, certificates of deposit, bankers' acceptances, commercial paper (rated
prime 3 or better by Moody's Investors Service, Inc. or the equivalent), corpo-
rate debt securities (rated A or better by Moody's Investors Service, Inc. or
Standard & Poor's Corporation) and repurchase agreements. The Portfolios may
also lend its portfolio securities, write (sell) options against investment po-
sitions and purchase put and call options. See "Certain Other Investment
Practices and Risks Which You Should Consider," below.
To diversify the Portfolios and reduce investment risk, each Portfolio has
adopted certain fundamental policies, which restrict each from the following:
(1) purchasing the securities of any issuer if, as a result:
(a) it would own more than 10% of the outstanding securities of any class
of any issuer, or
(b) such holdings would amount to more than 5% of the Portfolio's total
assets;
(2) the borrowing of money, except for temporary or emergency purposes or as
necessary for the clearance of purchases and sales of securities, and then
only in amounts not exceeding 5% of the Portfolio's total assets;
(3) in any manner transferring as collateral any securities owned by the
Portfolio, except as may be necessary in connection with permissible borrow-
ings, which in no event will exceed 5% of its net assets valued at market;
(4) purchasing additional securities when money borrowed exceeds 5% of the
Portfolio's total assets; and
(5) purchasing securities of any one issuer if, as a result, 25% or more of
its total assets would be concentrated in any one industry.
Each Portfolio's investment program, discussed above, is subject to further re-
strictions, which are described elsewhere in this Prospectus and in the
Statement of Additional Information.
ARE THE PORTFOLIOS' INVESTMENT OBJECTIVE AND POLICIES APPROPRIATE FOR YOU?--The
Portfolios are designed for investors who can accept the risks involved in
seeking maximum capital appreciation. Although each Portfolio seeks to reduce
risk by investing in a diversified portfolio, investors should realize that the
very nature of investing in small, and often newer, companies involves greater
risk than is customarily associated with more established companies. Smaller
and newer companies often have limited product lines, markets, management per-
sonnel, research and/or financial resources. The securities of small companies,
which may be thinly capitalized, may have limited marketability and be subject
to more abrupt or erratic market movements than securities of larger companies
or the market averages in general. Because the Portfolios' investment policies
will be oriented to capital appreciation, as opposed to dividend income, each
Portfolio may be considered to be an investment of above average risk. Each
Portfolio is not intended to constitute a balanced investment program. Divi-
dends are expected to be minimal and there can be no assurance that a
Portfolio's objective will be met.
EACH PORTFOLIO IS INTENDED FOR LONG-TERM INVESTORS WHO CAN BEAR THE RISKS IN-
VOLVED IN THE PORTFOLIO'S INVESTMENTS. ACCORDINGLY, EACH PORTFOLIO DISCOURAGES
SHORT-TERM TRADING IN ITS SHARES.
CERTAIN OTHER INVESTMENT PRACTICES AND RISKS WHICH YOU SHOULD CONSIDER--Lending
of Portfolio Securities. For the purpose of realizing some income on its port-
folio securities, each Portfolio may make security loans of its portfolio
securities, of up to 30% of its total assets, to broker-dealers or institu-
tional investors. Any such loan will be continuously secured by collateral at
least equal to 100% of the value of the security loaned. While the securities
are being lent, the Portfolios will continue to receive the equivalent of any
dividends or interest paid by the issuer thereof, as well as interest on the
collateral. Any gain or loss in the market value of the securities loaned that
might occur during the term of the loan would be for the account of the Portfo-
lio. As with any extension of secured credit, portfolio security loans involve
certain risks in the event a borrower should fail financially, including delays
or inability to recover the loaned securities or foreclosure against the col-
lateral. Each Portfolio will consider on an ongoing basis the creditworthiness
of the borrowers to which it makes portfolio security loans.
Restricted Securities. Each Portfolio may not invest more than 5% of its total
assets in securities that are
8
<PAGE>
not readily marketable, including repurchase agreements with maturities of
seven days or more, and securities of unseasoned issuers that have been in con-
tinuous operation for less than three years and may not invest more than 5% of
its total assets in securities where resale is legally or contractually re-
stricted (all of which are collectively referred to as "restricted
securities"). Restricted securities may be resold by the Portfolio to other in-
stitutions. Provided that a dealer or institutional trading market in such
securities exists, these restricted securities may be treated as exempt from
the Portfolio's limitation on illiquid securities. Because institutional trad-
ing in restricted securities is relatively new, it is not possible to predict
how these institutional markets will develop. If institutional trading in re-
stricted securities were at limited levels, the liquidity of each Portfolio's
investments could be adversely affected.
Options. Options are derivative securities. A "derivative" is any instrument
that is derived from combining, or splitting apart, other products, securities,
and indices. Each Portfolio may also write (sell) covered call options on its
portfolio securities, the aggregate market value of which underlying securities
is limited to 50% of the Portfolio's net assets. A call option gives the buyer
(holder) the right to purchase the underlying security at a specified price
(the "exercise price") within a certain time period. Where the writer (seller)
of the option, in this case the Portfolio, already owns the underlying securi-
ty, the call option is considered to be "covered." The Portfolio will receive a
premium, which is the market value of the option, when it writes (sells) a call
option. The premium provides a partial hedge (protection) against declining
prices and enables the Portfolio to generate a higher return during periods
when OAM does not expect the underlying security to make any major price moves
in the near future but still deems the underlying security to be, over the long
term, an attractive investment for the Portfolio. In determining whether to
write (sell) a covered call option on one of the Portfolio's securities, OAM
will consider the reasonableness of the anticipated premium in relation to the
anticipated increase in market value of the underlying security over the option
period. Although the writing (selling) of covered call options is believed by
OAM to be a conservative investment technique that involves relatively little
risk, risks involved in writing (selling) a covered call option include the
possible inability to effect closing transactions at favorable prices and the
inability to participate in any appreciation of the underlying security above
the exercise price plus premium. The Portfolio may also be exposed to a possi-
ble price decrease in the underlying security that might otherwise have been
sold while the Portfolio continues to hold such underlying security during the
option period, although any such loss during such period would be reduced by
the amount of the premium received. The Portfolios do not consider a security
covered by a call to be "pledged" as that term is used in each Portfolio's in-
vestment policy limiting the pledging or mortgaging of its assets. In addition,
each Portfolio may invest up to 5% of its assets in the purchase of put and
call options, primarily to minimize principal fluctuation. The risks involved
in purchasing put or call options include the possible loss of the entire pre-
mium. Each Portfolio may also purchase put and call options on stock indices
("stock index options"), for the purpose of partially hedging against the risk
of unfavorable price movements adversely affecting the Portfolio's securities
or securities the Portfolio intends to buy, and may sell stock index options in
related closing transactions.
Foreign Securities. Foreign securities involve currency risks. The U.S. Dollar
value of a foreign security tends to decrease when the value of the U.S. Dollar
rises against the foreign currency in which the security is denominated and
tends to increase when the value of the U.S. Dollar falls against such curren-
cy. Fluctuations in exchange rates may also affect the earning power and asset
value of the foreign entity issuing the security. Dividend and interest pay-
ments may be repatriated based upon the exchange rate at the time of
disbursement or payment, and restrictions on capital flows may be imposed.
Losses and other expenses may be incurred in converting between various curren-
cies.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political
or economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic secu-
rities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform ac-
counting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock ex-
changes, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of expropria-
tion or diplomatic developments that could affect investment in these
countries.
9
<PAGE>
Repurchase Agreements. Repurchase agreements involve the purchase of a security
by a Portfolio and a simultaneous agreement (with a qualified bank or securi-
ties dealer) to repurchase the security from the Portfolio at a certain date at
an agreed upon price, plus an agreed upon market rate of interest that is unre-
lated to the coupon rate or date of maturity of the security. This technique
offers a method of earning income on idle cash. In these transactions, the se-
curities purchased by the Portfolio have, at all times, a total value excess of
the value of the repurchase agreement and are held by the Fund's custodian bank
until repurchased. The transactions involve the risk that the Seller will fail
to repurchase the securities, as agreed. In that case, a Portfolio will bear
the risk of market value fluctuations until the security can be sold and may
encounter delays and incur costs in liquidating the security.
A more thorough description of certain of these investment practices and a dis-
cussion of their associated risks are contained in the Statement of Additional
Information.
MANAGEMENT OF THE PORTFOLIOS
The business and affairs of the Fund and each of the Portfolios are supervised
by the Fund's Board of Trustees (the "Trustees"). The Statement of Additional
Information contains general background information regarding each of the
Trustees and officers of the Fund. All of the Fund's officers and two of its
five Trustees are employees and/or officers of OAM and/or The Chicago Corpora-
tion ("TCC"). Each Portfolio's investment objective and policies were developed
by James D. Oberweis, the portfolio manager of each Portfolio since its incep-
tion. Mr. Oberweis is also a Trustee and President of the Fund, a Director and
the President of OAM, and, together with his family, the controlling share-
holder of OAM, and a Senior Vice President and shareholder of TCC. Mr. Oberweis
has an MBA from the University of Chicago and has in excess of 25 years of ex-
perience in selecting securities for investment for private clients. In
addition to the Fund, Mr. Oberweis manages segregated accounts for institu-
tional and individual investors.
Since January 1, 1996, OAM provides the Fund with investment advisory and man-
agement services and TCC is the Fund's principal distributor and shareholder
service agent. During the period October 1, 1994 through December 31, 1995, OAM
provided the Emerging Growth Portfolio investment advisory, management and
shareholder agent services and TCC was the Portfolio's principal distributor.
Prior to October 1, 1994, Hamilton Investments, Inc. acted as the Emerging
Growth Portfolio's manager, distributor and shareholder service agent; and Al-
pha Source Asset Management ("Alpha Source"), a subsidiary of Hamilton
Investments, Inc., served as the Emerging Growth Portfolio's investment advis-
er.
OAM is an investment adviser based in North Aurora, Illinois. OAM was incorpo-
rated in 1989 and has been registered with the Securities and Exchange
Commission ("SEC") since January 4, 1990. OAM had not served as the investment
adviser to a mutual fund prior to October 1994, although Mr. Oberweis and other
officers and employees of OAM have previously been associated with investment
advisers to the Fund and/or other mutual funds. OAM has published an investment
advisory newsletter since 1990 and beginning in October 1994, it has offered
advice to institutions and individual investors regarding a broad range of in-
vestment products.
Mr. Oberweis was formerly the principal executive officer of Oberweis Securi-
ties, Inc. ("OSI"), a former manager and distributor of the Emerging Growth
Portfolio, and of a former investment adviser to the Emerging Growth Portfolio,
from the Portfolio's inception in 1987 to 1988 when such entities ceased opera-
tions. OSI ceased executing securities transactions in November, 1988, because
it was no longer meeting regulatory capital requirements.
In a matter not involving his position with the Fund, Mr. Oberweis, without ad-
mitting or denying the allegations of the SEC, consented to a censure and a
one- year suspension ending July, 1993 from acting in a proprietary or supervi-
sory capacity for a broker-dealer. The SEC alleged that from February, 1988,
through October, 1988, Mr. Oberweis failed to adequately supervise or institute
adequate supervisory procedures with respect to an account executive of a firm
acquired in early 1988 by OSI, a former broker-dealer. The consent order did
not limit Mr. Oberweis' activities with, or responsibilities to, the Fund in
any manner.
THE ADVISORY AND MANAGEMENT AGREEMENTS
OAM provides each Portfolio with investment advisory services under a written
agreement with the Fund dated October 1, 1994 (the "Investment Advisory Agree-
ment"). James D. Oberweis personally supervises the management of the Fund's
portfolios.
OAM manages the investment operations of each Portfolio in accordance with the
investment objec-
10
<PAGE>
tives and policies of each of the respective Portfolios, subject to the general
supervision of the Trustees. As compensation for its investment advisory serv-
ices, OAM receives an annual fee which is computed and accrued daily and
payable monthly. OAM receives an annual fee of .45% of the average daily net
assets of the Emerging Growth Portfolio on the first $50 million and .40% on
amounts over $50 million. For the Portfolio, the average rate paid to OAM in
the aggregate for the year ended December 31, 1995 was .42%. OAM receives an
annual fee of .60% of the average daily net assets of the Micro-Cap Portfolio
and an annual fee of .40% of the average daily net assets of the Mid-Cap Port-
folio.
OAM also provides the Fund with non-investment advisory management and adminis-
trative services necessary for the conduct of the Fund's business. OAM prepares
and updates SEC and state registration statements and filings, shareholder re-
ports and other similar documents. In addition, OAM provides office space and
facilities for the management of the Fund and provides accounting, record-keep-
ing and data processing facilities and services. OAM also provides information
and certain administrative services for shareholders of the Portfolios. For
managing the business affairs and providing certain administrative services,
pursuant to a Management Agreement dated October 1, 1994, each Portfolio pays
OAM a management fee, payable monthly, at the annual rate of 0.40% of the aver-
age daily net assets of the Portfolio, subject to reduction because of each
Portfolio's annual expense limitation. (See "Expenses of the Fund.") OAM may
subcontract with other entities to provide certain shareholder servicing activ-
ities.
While the combined investment advisory fee and management fee paid to OAM is
higher than the total of such fees paid by most other investment companies, the
Fund's Trustees believe that each Portfolio's investment objective and the
"Oberweis Octagon" analysis require greater than average services from OAM,
which, together with the various management and administrative services pro-
vided by OAM, justifies the higher combined fees.
DISTRIBUTION OF SHARES
The Fund has appointed TCC to act as the principal distributor of the Fund's
shares and as the primary shareholder service agent but as noted below it is
anticipated that this arrangement will be terminated at some future date. The
Fund will finance certain expenses in connection with the distribution of
shares of each Portfolio under a "compensation type" Rule 12b-1 Plan as amended
January 1, 1996 and a Distribution and Shareholder Service Agreement dated Jan-
uary 1, 1996 (collectively called the "Plan and Agreement") adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940. As a compensation type
plan, TCC may receive compensation that is more or less than the actual expen-
ditures made. TCC is required to provide the Fund with a quarterly listing of
all expenditures under the Plan and Agreement. TCC is at risk with respect to a
portion of its expenses and fees not compensated by the Plan and Agreement if
the Plan and Agreement is modified or terminated by the Fund. No interest, car-
rying or other finance charges are paid under the Plan and Agreement.
Under the Plan and Agreement, the Fund pays to TCC a monthly fee at an annual
rate of .25% of each Portfolio's average daily net assets for distribution and
shareholder service provided to each Portfolio ("12b-1 fees") and will also re-
imburse certain out-of-pocket expenses of TCC. The Plan and Agreement provides
that the Fund's asset-based sales charges (as defined in the NASD's Rules of
Fair Practice) do not exceed those permitted by Article III, Section 26 of the
NASD's Rules of Fair Practice.
Pursuant to the Plan and Agreement, TCC, directly or through other firms, ad-
vertises and promotes the Fund and provides information and services to exist-
ing and potential shareholders. These services include, among other things,
processing new shareholder account applications, processing and transmitting
customer transactions to the Fund's transfer agent, and serving as the primary
source of information to customers. The Plan and Agreement provides that TCC
may appoint various broker-dealer firms to assist in providing distribution
services for the Fund and may appoint broker-dealers and other firms (including
depository institutions such as commercial banks and savings and loan associa-
tions) to provide administrative services for their clients as shareholders of
the Portfolios under related service agreements.
Pursuant to the Plan and Agreement, TCC may also be reimbursed monthly by each
Portfolio for certain out-of-pocket costs in connection with its services as
shareholder service agent, including such costs as postage, data entry, modifi-
cation and printout, stationery, tax forms and all other external forms or
printed material, but not including overhead. Although there is no limitation
on the amount of such costs that may be reimbursed under the Plan and Agree-
ment, such costs must be actual, out-of-pocket costs, and the to-
11
<PAGE>
tal amount of 12b-1 fees, including reimbursement of such costs, is included in
the total expenses of the Portfolio, subject to the expense limitation based on
average daily net assets of each Portfolio. (See "Expenses of the Fund," be-
low.) TCC will furnish with each monthly statement for such reimbursement a
written listing of the expenditures on behalf of each Portfolio and their pur-
pose.
On September 27, 1995, it was announced that ABN-AMRO North America, Inc., a
subsidiary of ABN-AMRO Bank, N.V. of the Netherlands, signed a letter of intent
to acquire ChiCorp, Inc., parent company of TCC, which is the Fund's Distribu-
tor and Shareholders' Service Agent. The acquisition will result in the merger
of ChiCorp, Inc. with a wholly-owned subsidiary of ABN-AMRO Bank, N.V. The ac-
quisition is contingent upon approval by the Federal Reserve Board. Upon
completion of the acquisition, it is anticipated that TCC will cease to be the
Fund's Distributor and Shareholders' Service Agent and that the Fund will need
to enter into agreements with a new Distributor and Shareholders' Service
Agent.
EXPENSES OF THE FUND
All expenses incurred in the operations of the Fund are borne by the respective
Portfolios, except to the extent specifically assumed by OAM. OAM is obligated
to reduce its management fee or reimburse the Portfolio to the extent that the
total ordinary operating expenses borne by a Portfolio on an accrual basis, in-
cluding all investment advisory, management and administrative fees, but
excluding taxes, brokerage, interest and other extraordinary expenses, exceed
in any one year either (i) the most restrictive expense limitation applicable
to the Portfolio imposed by the securities laws or regulations thereunder of
any state in which the Portfolio's shares are qualified for sale, as such limi-
tations may be raised or lowered from time to time, or (ii) the following
amounts expressed as a percentage of the Portfolio's average daily net assets:
2.0% of the first $25,000,000; plus 1.8% of the next $25,000,000; plus 1.6% of
average daily net assets in excess of $50,000,000. For the year ended December
31, 1995, total expenses incurred by the Emerging Growth Portfolio were
$2,051,585, and the ratio of such total expenses to the Portfolio's average
daily net assets was 1.77%. Pursuant to the expense limitation, OAM reimbursed
the Emerging Growth Portfolio during 1995 in the amount of $48,368, resulting
in net expenses of $2,003,217 and a net expense ratio of 1.73%.
PORTFOLIO TRANSACTIONS
Orders for securities are generally placed by OAM with a view to obtaining the
best combination of price and execution available. OAM attempts to evaluate the
overall quality and reliability of the broker-dealers and the services provid-
ed, including research services, general execution capability, reliability and
integrity, willingness to take a position in securities, general operational
capabilities and financial condition.
OAM is authorized to place orders with various broker-dealers, including TCC,
subject to all applicable legal requirements. The Fund has been advised by OAM
that it may place a significant portion of the Portfolios' agency transactions
with TCC when it believes that the combination of price and execution are com-
parable to that of other broker-dealers. OAM may also place orders with non-
affiliated broker-dealers that sell the Portfolios' shares, provided OAM
believes that price and execution are comparable to other non-affiliated bro-
ker-dealers. A greater spread, discount or commission may be paid to non-
affiliated broker-dealers that provide research services, which may be used by
OAM in managing assets of its clients, including each of the Portfolios. Al-
though it is believed that research services received directly or indirectly
benefit all of OAM's clients, the degree of benefit varies by account and is
not directly related to the commissions or remuneration paid by the account.
The frequency of portfolio transactions, the Portfolio's turnover rate, will
vary from year to year depending on market conditions. The Emerging Growth
Portfolio's turnover during the year ended December 31, 1995 was 79%. It is ex-
pected that the annual portfolio turnover rate for the Micro-Cap Portfolio and
the Mid-Cap Portfolio during each Portfolio's first year of operations will not
exceed 75%.
For the period January 1, 1995 through December 31, 1995, the total brokerage
commissions paid by the Emerging Growth Portfolio were $167,622, of which
$35,200 was paid to TCC, the Fund's distributor. The total amount of securities
transactions on which the Portfolio paid brokerage commissions during the pe-
riod January 1, 1995 through December 31, 1995 was $61,677,640. The total
amount of principal transactions of the Portfolio for such period, for which no
commission was incurred, was $134,221,527.
12
<PAGE>
HOW TO PURCHASE SHARES
GENERAL--The minimum initial investment for each Portfolio is $1,000. This min-
imum investment may be reduced pursuant to the Low Minimum Investment Plan.
(See "Shareholder Services.") Subsequent purchases for all accounts must be in
amounts of at least $100, except for reinvestment of dividends and capital
gains distributions. The Fund reserves the right, in its sole discretion, to
change at any time the initial or subsequent investment minimums, to withdraw
the offering or to refuse any purchase in whole or part.
You may purchase or redeem shares of the Portfolios through an investment deal-
er, bank or other institution having a sales agreement with TCC or by
contacting the Fund's Custodian and Transfer Agent, Investors Fiduciary Trust
Company ("IFTC"). However, any such purchase or redemption will not be effec-
tive until the order or request is received by IFTC. Some investment dealers,
banks or other institutions may charge for their services in purchasing or re-
deeming shares of the Portfolios.
Purchases may be made by check, wire or, if a subsequent purchase, through the
Automatic Investment Plan. All purchases made by check should be in U.S. dol-
lars. Third-party checks, except those payable to an existing shareholder who
is a natural person (as apposed to e.g. a corporation or partnership), credit
cards and cash will not be accepted. Shares of the Fund are offered on a con-
tinuous basis. The offering price per share will be the Net Asset Value per
share next determined after the purchase order is received in proper form by
IFTC. (See "Net Asset Value" for details on current Net Asset Value computa-
tion.)
PURCHASE BY MAIL--To make an initial purchase by mail, complete and sign the
Account Application and mail it along with a check made payable to The Oberweis
Funds to the following address:
The Oberweis Funds
c/o Investors Fiduciary Trust Company
P.O. Box 419042
Kansas City, MO 64141
Subsequent investments may be made by submitting to the same address a check
along with either the stub from your Portfolio account confirmation or a note
indicating the amount of the purchase, name of the Portfolio, your account num-
ber, and the name(s) in which your account is registered.
PURCHASE BY WIRE--You may also purchase shares by instructing your financial
institution to wire federal funds to the Fund's custodian bank. If you are
opening a new account by wire transfer, you must first call IFTC at 1-800-245-
7311 to request an account number and furnish the name(s) on the account
registration, address, and social security number or taxpayer identification
number. If you have an Account Application, you will be asked, if possible, to
transmit it via facsimile machine to IFTC (at 1-816-435-3209), or mail it imme-
diately. Otherwise, an Account Application will be mailed to you for you to
complete, sign and return immediately to IFTC. Federal funds shall be wired in
accordance with the following instructions:
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
ABA #101003621
The name of the Portfolio in which you wish to invest
The Oberweis Funds' Account No. 7500742
Further Credit to: (Your shareholder account number and the name(s) in which
your account is registered).
Subsequent investments may be made by wire by just contacting your financial
institution with the wire instructions. There is no need to contact IFTC first.
Your financial institution may charge you a fee for sending the wire. Neither
the Fund nor IFTC will be responsible for the consequences of delays, including
delays in the bank or Federal Reserve wire systems.
HOW TO REDEEM SHARES
IN GENERAL--You may redeem shares of the Portfolios by mail, by telephone (as
described below), or through your own investment dealer who is recorded for
such account, if any (see "How to Purchase Shares," above). The redemption
price per share is the Net Asset Value per share next determined after the re-
demption becomes effective. (See "Net Asset Value.") Because of fluctuations in
the value of each Portfolio, the Net Asset Value of shares redeemed may be more
or less than your cost.
Checks for redemption proceeds are normally sent on the business day following
the day the redemption request is received with all required documents in
proper form for redemption amounts of $100,000 or less. Payment by check of re-
demption proceeds in amounts greater than $100,000 is made within seven days
after the redemption request is received. However, if you bought your shares by
check, the Fund will delay sending you redemption proceeds until it has deter-
mined that your check has cleared, which may
13
<PAGE>
take up to 15 days from the purchase date. If a broker-dealer other than TCC is
used to redeem shares, an additional fee for such services may be imposed by
that broker-dealer.
Each Portfolio reserves the right to redeem the shares in a shareholder's ac-
count if the total value of the shareholder's account falls below $1,000 as a
result of a redemption, subject to allowing such shareholder 60 days to make
additional investments before the redemption is processed. Although it is each
Portfolio's policy to make payment of redemption proceeds in cash, if the
Fund's trustees determine it to be appropriate, and subject to certain limita-
tions, a Portfolio may redeem shares by a distribution in kind of securities
held by the Portfolio. See the Statement of Additional Information under the
heading "Redemption of Shares."
REDEMPTION BY MAIL--Shareholders may redeem shares by mailing a signed request
for redemption that includes the account name and number and the number of
shares or dollar amount to be redeemed, name of Portfolio, with signature(s)
guaranteed (if required as set forth below), to The Oberweis Funds, c/o Invest-
ors Fiduciary Trust Company, P.O. Box 419042, Kansas City, Missouri 64141. The
redemption request must be accompanied by share certificates, if any have been
issued. In the case of joint ownership, all signatures are required on the re-
demption request and on any endorsement of share certificates. Additional
documents may be required for redemption of shares held by estates, trusts,
guardianships, corporations, partnerships and other shareholders who are not
individuals. It is recommended that all mailed share certificates be sent by
registered or certified mail, return receipt requested.
REDEMPTION BY TELEPHONE--All shareholders who have elected the telephone re-
demption option on their account application may redeem their Portfolio shares
by telephoning the Transfer Agent at 1-800-245-7311. Pursuant to the telephone
redemption program, shareholders authorize the Transfer Agent to rely upon tel-
ephone instructions from anyone to redeem the specified number of shares or
dollar amount and to transfer the proceeds according to pre-designated instruc-
tions.
Redemption proceeds will be mailed to the shareholder of record in the form of
a check or transferred to the shareholder's designated bank using electronic
funds transferred via the Automated Clearing House (ACH), or, at the sharehold-
er's request, via wire transfer. Funds transferred via ACH will normally be
transmitted on the business day following the telephone redemption request for
redemption amounts of $100,000 or less. Transfers via ACH of redemption pro-
ceeds in amounts greater than $100,000 will be transmitted within seven days
following the telephone redemption request. There is no charge for transfers
via ACH.
Funds transferred via wire transfer will normally be transmitted on the next
business day following the request. There is a $6 fee for each wire redemption.
Your bank may also charge additional fees for receiving a wire transfer. Checks
issued by mail in response to a telephone redemption request can be issued only
up to $50,000 to the registered owner(s) (who must be individuals) at the ad-
dress of record which must have been on file for 60 days.
SIGNATURE GUARANTEES AND OTHER DOCUMENTATION--If redemption proceeds are
$50,000 or less and are to be paid to an individual shareholder of record at
the address of record, a signature guarantee is not required (unless there has
been an address change within 60 days). All other redemption requests and
changes in account application instructions must be guaranteed by a bank,
broker/dealer, municipal securities broker/dealer, government securities
broker/dealer, credit union, member firm of a national securities exchange,
registered securities association or clearing agency, and/or savings associa-
tion. The Transfer Agent may reject redemption instructions if the guarantor is
neither a member of nor a participant in a signature guarantee program (cur-
rently known as "STAMP"). A redemption request for shares held by a
corporation, trust, partnership, agent or fiduciary must be signed by an appro-
priately authorized person and include additional documents of a customary
nature to verify the authority of the person seeking redemption, such as a cer-
tified by-law provision or resolution of the board of directors or trustees of
the shareholder and/or a copy of the governing legal instrument. Any person re-
quiring information on redemption procedures may call the Transfer Agent at 1-
800-245-7311.
NET ASSET VALUE
Net Asset Value per share is computed by dividing the value of the Portfolio's
net assets (i.e., the value of its assets less liabilities) by the total number
of shares then outstanding. Each Portfolio's investments are valued based on
market value or, where quotations are not readily available, on fair value as
determined in good faith by the Board of Trustees. For further information re-
garding the methods em-
14
<PAGE>
ployed in valuing the Portfolios' investments, see the Statement of Additional
Information under the heading "Determination of Net Asset Value."
If an order is received by the Transfer Agent or TCC by the close of trading on
the New York Stock Exchange on a given day (currently 3:00 p.m., Central Time),
or by an investment dealer, bank or other institution having a sales agreement
with TCC by the close of trading on the New York Stock Exchange and that order
is then received by TCC on that same day from the investment dealer, bank, or
financial institution by the end of TCC's business day, Portfolio shares will
be purchased at the next computed Net Asset Value. The Net Asset Value of the
shares of each Portfolio is computed once daily, as of the later of the close
of the New York Stock Exchange or the Chicago Board Options Exchange, on each
day the New York Stock Exchange is open for trading. For purposes of computing
the Net Asset Value, all securities in a Portfolio other than options are
priced as of the close of trading on the New York Stock Exchange. The options
in the Portfolios are priced as of the close of trading on the Chicago Board
Options Exchange.
SHAREHOLDER SERVICES
GENERAL INFORMATION--In addition to the purchase and redemption services de-
scribed above, the Fund offers its shareholders the special accounts and
services described below. Applications and information about any shareholder
services may be obtained by calling 1-800-245-7311.
When a shareholder makes an initial investment in a Portfolio, a shareholder
account is opened in accordance with the Portfolio's Account Application in-
structions. After each transaction for the account of a shareholder,
confirmation of all deposits, purchases, reinvestments, redemptions, withdrawal
payments, and other transactions in the shareholder's account will be forwarded
to the shareholder.
The Portfolios will generally not issue certificates for their shares, except
that certificates for full share amounts only will be issued upon a sharehold-
er's written request to the Transfer Agent. In all events fractional shares
will be carried on the books of a Portfolio without the issuance of certifi-
cates. The investor will be the record owner of all shares in his account with
full shareholder rights, irrespective of whether share certificates are issued
to him. Certain of the functions performed by the Fund in connection with the
operation of the accounts described above will be performed by the Fund's
Transfer Agent. (See "The Custodian and Transfer Agent.")
EXCHANGING SHARES--Simply send us a written request that includes your name,
your account number, the name of the Portfolio you currently own, the name of
the Portfolio you wish to exchange into and the dollar amount or number of
shares you wish to exchange. Please remember that you cannot place any condi-
tions on your request.
If you have any share certificates, you must include them with your request. A
signature guarantee is not required, except in some cases where shares are also
redeemed for cash at the same time. For certificate delivery instructions and
when you need a signature guarantee, please see "Redemption--By Mail."
You may also call us at 1-800-245-7311 unless you have previously notified the
Fund in writing not to effect telephone exchanges. Exchanges made over the
phone may be made by any person, not just the shareholder of record. Please re-
member that during unusual market conditions, we may have difficulty in
accepting telephone requests, in which case you should mail your request to our
address on page 13. In addition, exchanges may also be made through certain se-
curities dealers who may charge you a fee for effecting an exchange.
An exchange of shares is considered a sale for federal income tax purposes. A
shareholder may realize a gain or loss depending upon whether the value of the
shares being exchanged is more or less than the adjusted cost basis. As noted
above, the Micro-Cap and Mid-Cap Portfolios deduct a withdrawal charge of .25%
of the value of the shares redeemed, including shares exchanged out of each of
the Portfolios.
Exchanging Shares is available only in states where shares of a particular
Portfolio being acquired may legally be sold. The Fund reserves the right to
suspend, terminate or modify the exchange privilege at any time, but will nor-
mally give you advance notice.
LOW MINIMUM INITIAL INVESTMENT PLAN/AUTOMATIC INVESTMENT PLAN--By completing
the Automatic Investment Plan section of the Account Application, you may make
subsequent investments by authorizing the Fund and its Custodian to debit your
bank account to buy additional shares of the Portfolios. The minimum initial
investment in each Portfolio is $1,000. However, the Low Minimum Initial In-
vestment Plan allows an account to be opened with an initial investment of $100
and subsequent monthly investments of $100 or more for at least a one-year pe-
riod. Automatic Investments can occur either monthly or quarterly, on or about
the 5th or the 20th of the month, in pre-designated amounts of $100 or
15
<PAGE>
more. Funds will be transferred from your designated bank, using electronic
funds transferred via ACH. Initial investments may not be made by the Automatic
Investment Plan. The Plan is subject to the approval of the shareholder's bank.
You can stop investing through the Automatic Investment Plan by sending written
notice to the Fund's Custodian and Transfer Agent. The notice must be received
at least 5 business days prior to the date of your next scheduled automatic
purchase. The Plan is automatically terminated whenever a check is returned
unhonored by the shareholder's bank. The shareholder is responsible for any
charges incurred as a result of an unhonored transaction. If a shareholder can-
cels the Low Minimum Initial Investment Plan before a one-year period, the Fund
reserves the right to redeem the shareholder's account if the balance is below
the minimum investment level, currently $1,000. The Fund reserves the right to
terminate or modify the Automatic Investment Plan at any time. See the Account
Application for additional details. As stated on the Cover Page, the Fund
ceased sales of shares of the Micro-Cap Portfolio to both new shareholders and
existing Shareholders on May 22, 1996. As a result, the ability of shareholders
to make investments in the Micro-Cap Portfolio through the Automatic Investment
Plan was terminated at that time.
SYSTEMATIC WITHDRAWAL ACCOUNT--A shareholder who owns a Portfolio's shares with
a current Net Asset Value of at least $10,000 may establish a Systematic With-
drawal Account from which a fixed sum will be paid to him or a pre-designated
third party at regular intervals. A Systematic Withdrawal Account may not be
established for a shareholder who owns Portfolio shares for which certificates
are outstanding until all share certificates have been surrendered. See the Ac-
count Application for additional details.
INDIVIDUAL RETIREMENT ACCOUNTS--A Portfolio's shares may be purchased as in-
vestments in Individual Retirement Accounts ("IRAs") and other retirement
plans. Investment in a Portfolio's shares is subject to the conditions of the
IRA and/or other retirement plan agreements. Investors should contact their IRA
custodians to determine the eligibility of the Portfolio's shares as IRA or re-
tirement plan investments. Individuals wishing to establish IRAs with the
Fund's Custodian Bank may do so and purchase shares of a Portfolio with their
IRA funds. Further details, including fees and charges imposed by the Custodi-
an, are set forth in the IRA information material (account agreement,
application, and disclosure statement) which is available from the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The Portfolios may earn income from dividends and interest on their investments
and may also realize capital gains from the sale of their assets. Each Portfo-
lio's policy is to distribute annually within ninety (90) days following the
close of each fiscal year substantially all its net investment income and any
net realized taxable capital gains resulting from sales of the Portfolio's as-
sets during the year. Dividends and capital gains distributions are
automatically reinvested in additional shares of the Portfolio, unless the
shareholder elects to receive them in cash. A cash election remains in effect
until the shareholder notifies the Transfer Agent in writing to discontinue
such election.
Each Portfolio has elected to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code and thereby maintain exemption from
Federal income tax to the extent it distributes its earnings. Except for those
shareholders exempt from Federal income taxes, dividends and capital gain dis-
tributions will be taxable to shareholders, whether paid in cash or reinvested
in additional shares of the Portfolio. Shareholders will be notified annually
as to the Federal income tax status of dividends and capital gains distribu-
tions. Such dividends and distributions may also be subject to state and local
taxes. Long-term capital gain distributions are taxable as long-term capital
gain regardless of how long the shareholder has held shares of the Portfolio.
Long-term capital gain distributions are currently taxed at a maximum rate of
28% for individual shareholders. Dividends representing net investment income
and net realized short-term capital gains are taxed as ordinary income at rates
up to a maximum marginal rate of 39.6% for individuals. Dividends and distribu-
tions declared in October, November or December to shareholders of record as of
a date in one of those months and paid during the following January are treated
for federal income tax purposes as paid on December 31 of the calendar year in
which declared.
A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend and, although in effect a re-
turn of capital, will be taxable to the shareholder. If the net asset value of
shares were reduced below the shareholder's cost by dividends representing
gains realized on sales of securities, such dividends would be a return of in-
vestment, though taxable as stated above.
16
<PAGE>
Federal law requires each Portfolio to withhold 31% of dividends and/or redemp-
tion proceeds (including from exchanges) that occur in certain shareholder
accounts if the shareholder has not properly furnished a certified correct tax-
payer identification number (in the case of individuals, a social security
number) or has not certified that back-up withholding does not apply. Amounts
withheld are applied to the shareholder's Federal income tax liability and a
refund may be obtained from the Internal Revenue Service if withholding results
in overpayment of taxes. Federal law also requires the Fund to withhold the ap-
plicable tax treaty rate from dividends that are paid to certain nonresident
alien, foreign partnership and foreign corporation shareholder accounts.
Shareholders are advised to consult their own tax advisers as to the tax conse-
quences of owning shares of each Portfolio with respect to their respective
circumstances.
THE CUSTODIAN AND TRANSFER AGENT
All securities and cash of the Portfolios are held by the Fund's custodian, In-
vestors Fiduciary Trust Company, Kansas City, Missouri (the "Custodian"), and
sub-custodians selected by the Custodian and approved by the Trustees. The Cus-
todian is also the Fund's transfer agent (the "Transfer Agent"), which acts as
a shareholder servicing, dividend disbursing and redemption agent for the Fund.
GENERAL INFORMATION
The Fund is a diversified, open-end management investment company, organized as
a business trust under the laws of Massachusetts on July 7, 1986. Pursuant to
the Fund's Agreement and Declaration of Trust ("Trust Agreement"), the Fund may
issue an unlimited number of shares of beneficial interest in one or more se-
ries of "Portfolios," all having no par value. Shares of each Portfolio have
equal non-cumulative voting rights and equal rights with respect to dividends,
assets and liquidation of such Portfolio. Shares are fully paid and non-assess-
able by the Fund when issued, are transferable without restriction and have no
preemptive or conversion rights. As a Massachusetts business trust, the Fund is
not required to hold annual shareholders' meetings. It will, however, hold spe-
cial meetings as required or deemed desirable for such purposes as the election
of or removal of trustees, changing fundamental policies or approving an in-
vestment advisory contract. Special meetings of shareholders for actions
requiring shareholder vote may be requested in writing by holders of at least
twenty-five percent (25%) (or ten percent (10%) if the purpose of the meeting
is to determine if a Trustee is to be removed from office) of the outstanding
shares of the Fund or as may be required by applicable law.
Shareholders will vote in the aggregate, except when voting by individual Port-
folio is required under the Investment Company Act of 1940 or when the Board of
Trustees determines that voting by series is appropriate.
The Trust Agreement and the By-Laws of the Fund are designed to make the Fund
similar in many respects to a corporation. However, under Massachu-
setts law, shareholders of a business trust may, under certain circumstances,
be held personally liable for the obligations of the trust, which is not the
case in a corporation. The Trust Agreement provides that shareholders shall not
be subject to any personal liability to any person extending credit to, con-
tracting with or having any claims against the Fund and that every written
agreement, obligation, instrument or undertaking made by the Fund shall contain
a provision that the same is not binding upon the shareholders personally.
Moreover, the Trust Agreement provides for indemnification out of Fund property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Fund, and the Fund will be covered by insurance which the
Trustees believe to be adequate to cover foreseeable tort claims. Thus, the
risk of a shareholder incurring financial loss on account of shareholder lia-
bility is considered remote.
OAM, the Fund's investment adviser, deposited the initial $10,000 seed capital
in the Mid-Cap Portfolio on June 18, 1996. As of that date, OAM owned more than
25% of the Mid-Cap Portfolio, which constitutes "control" under the 1940 Act.
All inquiries regarding shareholder accounts may be directed to The Oberweis
Funds, c/o Investors Fiduciary Trust Company, P.O. Box 419042, Kansas City,
Missouri 64141 or (800) 245-7311. All other inquiries regarding the Fund and/or
either of the Portfolios should be directed to the Fund at 951 Ice Cream Drive,
Suite 200, North Aurora, Illinois 60542 or (800) 323-6166.
17
<PAGE>
- --------------------------------------------------------------------------------
LOGO THE
OBERWEIS
FUNDS
PROSPECTUS
- -------------------------------------
Preliminary Prospectus dated July 2, 1996
INVESTMENT ADVISER/MANAGER
Oberweis Asset Management, Inc.
951 Ice Cream Drive, Suite 200
North Aurora, Illinois 60542
1-800-323-6166
DISTRIBUTOR
The Chicago Corporation
208 South LaSalle Street
Chicago, Illinois 60604
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
1-800-245-7311
COUNSEL
Vedder, Price, Kaufman & Kammholz
INDEPENDENT AUDITORS
Ernst & Young LLP
For more information about this Fund
or any of its Portfolios, simply call
our toll-free number: 1-800-323-6166
For information about an existing account, call Shareholder Services at 1-800-
245-7311.
Please read the prospectus carefully before investing or sending money.
LOGO
<PAGE>
SUBJECT TO COMPLETION
Preliminary Statement of Additional Information
Dated July 2, 1996
STATEMENT OF ADDITIONAL INFORMATION
THE OBERWEIS FUNDS
951 ICE CREAM DRIVE, SUITE 200
NORTH AURORA, ILLINOIS 60542
(800) 323-6166
- -----------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Fund's Prospectus dated _______________. A copy of the
Fund's Prospectus may be obtained by writing or calling the above address or
phone number.
- -----------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS.. 2
MANAGEMENT OF THE FUND........................... 5
OBERWEIS ASSET MANAGEMENT, INC................... 7
DISTRIBUTION PLAN AND AGREEMENT.................. 8
EXPENSES BORNE BY THE PORTFOLIOS................. 10
PORTFOLIO TRANSACTIONS........................... 11
SHAREHOLDER VOTING RIGHTS........................ 12
REDEMPTION OF SHARES............................. 13
SHAREHOLDER SERVICES............................. 13
DETERMINATION OF NET ASSET VALUE................. 13
TAXES............................................ 14
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN....... 14
ADDITIONAL INFORMATION........................... 15
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
</TABLE>
1
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The following information supplements the discussion of each Portfolio's
investment objective and policies in the Fund's Prospectus under the heading
"Investment Objective, Policies and Risks."
Investment Objective
- --------------------
The investment objective of each Portfolio is to maximize capital appreciation.
Each Portfolio intends to achieve its objective through investing primarily in
common stocks of companies, which in the opinion of its investment adviser have
a potential for above-average long-term growth in market value. The investment
objective of each Portfolio is fundamental and, like all fundamental policies of
a Portfolio, cannot be changed without the affirmative vote of a majority of the
outstanding voting securities of that Portfolio. As used in this Statement of
Additional Information and in the Fund's Prospectus, "a majority of the
outstanding voting securities" of the Portfolio means the lesser of (1) the
holders of more than 50% of the outstanding shares of the Portfolio, or (2) the
holders of more than 67% of the shares of the Portfolio present if more than 50%
of the outstanding shares of the Portfolio are present at a meeting in person or
by proxy.
Investment Restrictions
- -----------------------
The policies set forth below are fundamental policies of each Portfolio and may
not be changed without approval of a majority of that Portfolio's outstanding
shares. A Portfolio individually may not:
1. purchase more than 10% of any class of securities of any one issuer
other than the United States government and its instrumentalities;
2. invest more than 5% of its total assets, at the time of the investment
in question, in the securities of any one issuer (other than the United States
government and its instrumentalities);
3. invest more than 5% of its total assets in securities that are not
readily marketable and securities of unseasoned issuers that have been in
continuous operation for less than three years, including operating periods of
their predecessors;
4. invest more than 5% of its total assets in securities of issuers which
the Fund is restricted from selling to the public without registration under the
Securities Act of 1933;
5. invest more than 5% of its total assets in warrants, and of this
amount, no more than 2% of total assets may be invested in warrants that are
listed on neither the New York Stock Exchange nor the American Stock Exchange;
6. purchase or retain the securities of any issuer if (i) one or more
officers or directors of the Fund or the investment adviser individually own or
would own, directly or beneficially, more than 1/2 of 1% of the securities of
such issuer, and (ii) in the aggregate, such persons own or would own, directly
or beneficially, more than 5% of such securities;
7. purchase, sell or invest in the securities of other investment
companies;
8. purchase, sell or invest in interests in oil, gas or other mineral
exploration or development programs;
9. purchase, sell or invest in commodities or commodity contracts;
10. purchase, sell or invest in real estate or interests in real estate,
except that the Portfolio may purchase, sell or invest in marketable securities
of companies holding real estate or interests in real estate, including real
estate investment trusts; provided such investments do not exceed 10% of the
Portfolio's total assets;
11. issue senior securities;
12. invest in companies for the purpose of exercising control or
management;
13. concentrate its investments in any one industry, except that the
Portfolio may invest up to 25% of its total assets in any one industry;
14. purchase securities on margin, except that the Portfolio may obtain
such short-term credits as may be necessary for the clearance of purchases and
sales of securities;
2
<PAGE>
15. make short sales of securities unless, at the time of each such sale
and thereafter while a short position exists, the Portfolio owns an equal amount
of securities of the same issue or owns securities which, without payment by the
Portfolio of any consideration, are convertible into, or are exchangeable for,
an equal amount of securities of the same issue;
16. participate on a joint or joint and several basis in any trading
account in any securities;
17. lend its funds to other persons, except through the purchase of a
portion of an issue of debt securities publicly distributed;
18. lend its portfolio securities, unless the borrower is a broker, dealer
or financial institution that pledges and maintains collateral with the
Portfolio consisting of cash or securities issued or guaranteed by the United
States government having a value at all times not less than 100% of the value of
the loaned securities, provided that the aggregate amount of such loans shall
not exceed 30% of the Fund's total assets;
19. borrow money except from banks as a temporary measure for
extraordinary or emergency purposes or as necessary for the clearance of
purchases and sales of securities, provided that the aggregate amount of such
borrowing shall not exceed 5% of the value of its total assets at the time of
any such borrowing, or mortgage, pledge or hypothecate its assets, except in an
amount not exceeding 5% of its total assets taken at cost to secure such
borrowing;
20. engage in the business of underwriting the securities of other
issuers; or
21. invest in puts, calls, straddles or any combination thereof, except
that the Portfolio may write covered call options on its Portfolio securities,
the aggregate market value of which is limited to 50% of the Portfolio's net
assets, and the Portfolio may invest up to 5% of its assets in the purchase of
put and call options including options on stock indices.
The policies set forth below may be changed by the Fund's Board of Trustees, all
such changes being subject to applicable law. A Portfolio individually may not:
1. purchase, sell or invest in interests in oil, gas or other
mineral leases; or
2. purchase, sell or invest in limited partnership interests in real
estate, except that the Portfolio may purchase, sell or invest in
marketable securities of companies holding real estate or
interests in real estate, including real estate investment
trusts; provided such investments do not exceed 10% of the
Portfolio's total assets.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of such restriction.
Other Restrictions
- ------------------
Other investment restrictions are set forth in the Fund's Prospectus and
elsewhere in this Statement of Additional Information. In addition, each
Portfolio will not invest more than 10% of its total assets in "restricted
securities" (meaning securities the resale of which is legally or contractually
restricted, including repurchase agreements with maturities of seven days or
more and securities that are not readily marketable).
Repurchase Agreements
- ---------------------
Each Portfolio may enter into so-called "repurchase agreements," whereby it
purchases a security and the seller (a qualified bank or securities dealer)
simultaneously commits to repurchase that security at a certain date at an
agreed upon price, plus an agreed upon market rate of interest that is unrelated
to the coupon rate or date of maturity of the security. In these transactions,
the securities purchased by the Portfolio have, at all times, a total value in
excess of the value of the repurchase agreement and are held by the Fund's
custodian bank until repurchased. Certain costs may be incurred by a Portfolio
in connection with the sale of the securities purchased by it if the seller does
not repurchase them in accordance with the repurchase agreement. The Portfolio
will consider on an ongoing basis the creditworthiness of the institutions with
which it enters into repurchase agreements and will monitor the value of the
underlying securities to ensure that additional securities are deposited by the
seller if the value of the securities purchased decreases below the resale price
at any time. Under the Investment Company Act of 1940, repurchase agreements
may be considered loans by the Portfolio. Each Portfolio is subject to
restrictions on entering into repurchase agreements in excess of 25% of the
total assets and on investing more than 10% of its total assets in restricted
securities, which includes repurchase agreements with maturities of seven days
or more.
3
<PAGE>
Purchasing Put and Call Options
- -------------------------------
Each Portfolio will commit no more than 5% of its assets to premiums when
purchasing put and call options. The Portfolios may enter into closing
transactions, exercise their options or permit them to expire.
The Portfolios may purchase put options on an underlying security owned by them.
As the holder of a put option, a Portfolio would have the right to sell the
underlying security at the exercise price at any time during the term of the
option. While a Portfolio will not purchase options for leverage purposes, it
may purchase put options for defensive purposes in order to protect against an
anticipated decline (usually short-term) in the value of its securities. Such
hedge protection is provided only during the life of the put option and only
when the Portfolio, as the holder of the put option, is able to sell the
underlying security at the put exercise price regardless of any additional
decline in the security's market price. For example, a put option may be
purchased in order to protect unrealized appreciation of a security where the
Portfolio deems it desirable to continue to hold the security. The premium paid
for the put option and any transaction costs would reduce any capital gain
otherwise available for distribution when the security is eventually sold.
Except as discussed below with respect to options on stock indices, each
Portfolio has no current intention of purchasing put options at a time when the
Portfolio does not own the underlying security; however, it reserves the right
to do so. By purchasing put options on a security it does not own, the Portfolio
would seek to benefit from a decline in the market price of the underlying
security. If such a put option is not sold when it has remaining value, and if
the market of the underlying security remains equal to or greater than the
exercise price during the life of the put option, the Portfolio would lose its
entire investment in the put option (i.e., the entire premium paid by the
Portfolio). In order for the purchase of a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs, unless the put option
is sold in a closing sale transaction.
The Portfolios may also repurchase call options previously written on underlying
securities they already own in order to preserve unrealized gains.
The Portfolios may also purchase call and put options on stock indices ("stock
index options") for the purpose, in part, of partially hedging against the risk
of unfavorable price movements adversely affecting a Portfolio's securities or
securities the Portfolio intends to buy and may sell stock index options in
related closing transactions.
The principal uses of stock index options would be to provide a partial hedge
for a portion of the Portfolios' investment securities, and to offer a cash
management tool. Purchasing stock index options could provide an efficient way
to implement a partial decrease in portfolio market exposure in response to
changing market conditions. Although techniques other than the purchase of
options could be used to hedge the Portfolios' investments, the Portfolios may
be able to hedge their exposure more effectively, and perhaps at a lower cost,
through the use of stock index options.
The Portfolios propose to invest only in stock index options for which the
underlying index is a broad market index such as the Standard & Poor's Index,
the Major Market Index, or the Russell 2000 Index. The Portfolios would propose
to purchase broad stock index options only if they are listed on a national
securities exchange and traded, in the opinion of the Fund's investment adviser,
with some significant volume.
The Portfolios will not enter into a stock index option if, as a result thereof,
more than five percent (5%) of the Fund's total assets (taken at market value at
the time of entering into the contract) would be committed to options, whether
options on individual securities or options on stock indices.
There are several risks in connection with the Portfolios' use of stock index
options as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the stock index options and
movements in the prices of securities held by the Portfolios. Successful use of
stock index options by the Portfolios for hedging purposes is also subject to
the Fund's adviser's ability to correctly predict movements in the direction of
the market. In addition, due to market distortions, the price movements of the
stock index options might not correlate perfectly with price movements in the
underlying stock index. Increased participation by speculators in the options
market might also cause temporary price distortions.
The ability to establish and close out positions on options will be subject to
the liquidity of the index options market. Absence of a liquid market on an
exchange may be due to: (i) insufficient trading interest in certain options;
(ii) restrictions imposed by an exchange on opening transactions or closing
transactions, or both; (iii) trading halts, suspensions or other restrictions
imposed with respect to particular classes or series of options, or underlying
securities; (iv) unusual or unforeseen circumstances, such as severe stock
market fluctuations, interrupting normal exchange operations; (v) inadequacy of
an exchange's or a clearing corporation's facilities to handle increased trading
volume; or (vi) discontinuance of the trading of options (or a particular class
or series of options) by an exchange, for economic or other reasons. Higher than
anticipated trading activity or other unforeseen events also could cause an
exchange or clearing corporation to institute special procedures which may
interfere with the timely execution of customers' orders.
4
<PAGE>
Stock index options may be closed out only on an exchange which provides a
market for such options. For example, OEX stock index options currently can be
purchased or sold only on the CBOE. Although the Portfolios intend to purchase
or sell stock index options only on exchanges where there appear to be active
markets, there is no assurance that a liquid market will exist for any
particular options contract at any particular time. In such event, it might not
be possible to close a stock index option position.
Lending of Securities
- ---------------------
The Portfolios may lend their investment securities in an amount up to 30% of
its total assets to qualified institutional investors who need to borrow
securities in order to complete certain transactions. By lending its investments
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. A Portfolio may lend its portfolio securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms and the structure of such loans are not inconsistent with the
Investment Company Act of 1940, or the Rules and Regulations or interpretations
of the Securities and Exchange Commission (the "Commission") thereunder, which
currently require that (a) the borrower pledge and maintain with the Portfolio
collateral consisting of cash, an irrevocable letter of credit issued by a
domestic U.S. bank, or securities issued or guaranteed by the U.S. government
having a value at all times of not less than 100% of the value of the securities
loaned, (b) the borrower add to such collateral whenever the price of the
securities loaned rises (i.e., the borrower "marks to the market" on a daily
basis), (c) the loan be made subject to termination by the Portfolio at any
time, and (d) the Portfolio receives reasonable interest on the loan or its
collateral (which may include the Portfolio investing any cash collateral in
interest-bearing short-term investments), any dividends and distributions paid
on the loaned securities and any increase in their market value.
Arbitrage
- ---------
The Portfolios have no current intention to engage in arbitrage (meaning the
simultaneous purchase and sale of the same security in different markets but not
on the purchase of call and put options on stock indices).
MANAGEMENT OF THE FUND
All of the Fund officers and two of its Trustees are employees and/or officers
of Oberweis Asset Management, Inc. ("OAM"), the Fund's investment adviser and
manager, and/or The Chicago Corporation ("TCC"), the Fund's distributor and
shareholder service agent.
James D. Oberweis, a Trustee and President of the Fund, is the President and a
Director of OAM, and with his wife, Elaine M. Oberweis, and his children, is the
controlling shareholder of OAM. Mr. Oberweis is also a Senior Vice President of
TCC. Peter H. Wendell, a Trustee of the Fund, is an Executive Vice President and
a Director of TCC.
The Trustees and officers of the Fund, their ages and their principal
occupations during the past five (5) years are:
THOMAS J. BURKE, Trustee (64) **
143 South Lincoln Avenue, Aurora, Illinois 60505; President - Burke Medical
Associates, 1968 to present; retired medical physician, practicing medical
physician until November 1, 1995.
DOUGLAS P. HOFFMEYER, Trustee (48) **
620 Stetson, St. Charles, Illinois 60174; Vice President-Finance - Teltrend,
Inc. (manufacturer of telecommunications equipment), October, 1986 to present.
JAMES D. OBERWEIS, Trustee and President (50) *
951 Ice Cream Drive, North Aurora, Illinois 60542; President and Director -
Oberweis Asset Management, Inc., September, 1994 to present; Senior Vice
President - The Chicago Corporation, October, 1994 to present; Senior Vice
President - Alpha Source Asset Management, Inc., February, 1990 to October,
1994; Director of Fund Investments - Hamilton Investments, Inc., December, 1988
to October, 1994; President of the Fund, 1986 to present; Chairman of the Board
of Oberweis Dairy, Inc.
EDWARD F. STREIT, Trustee (60) **
2000 West Galena, Aurora, Illinois 60506; licensed attorney in private practice,
1962 - present.
5
<PAGE>
PETER H. WENDELL, Trustee (54) *
208 South LaSalle Street, Chicago, Illinois 60604; Executive Vice President and
Director - The Chicago Corporation, January 1988 to present.
PATRICK B. JOYCE, Executive Vice President and Treasurer (36)
951 Ice Cream Drive, North Aurora, Illinois 60542; Executive Vice President,
Secretary and Director - Oberweis Asset Management, Inc., September, 1994 to
present; Administrator - The Chicago Corporation, October, 1994 to present; Vice
President - Carr Asset Management, Inc./Indosuez Carr Futures, Inc., August,
1993 to September, 1994; Vice President of Operations and Assistant Treasurer -
Selected Financial Services, Inc., September, 1989 to August, 1993.
MARTIN L. YOKOSAWA, Vice President (36)
951 Ice Cream Drive, North Aurora, Illinois 60542; Vice President - The Chicago
Corporation - October, 1994 to present; Vice President - Oberweis Asset
Management, Inc., September, 1994 to present; Registered Representative -
Hamilton Investments, Inc., November, 1988 to October, 1994.
JAMES M. ROBERTS, Vice President (35)
951 Ice Cream Drive, North Aurora, Illinois 60542; Vice President - The Chicago
Corporation, October, 1994 to present; Vice President - Oberweis Asset
Management, Inc., September, 1995 to present; Registered Representative -
Hamilton Investments, Inc., January, 1990 to October, 1994.
ANITA I. MRAZ, Secretary (29)
951 Ice Cream Drive, North Aurora, Illinois 60542; Administrative Assistant -
The Chicago Corporation, October, 1994 to present; Administrative Assistant -
Alpha Source Asset Management, Inc., April, 1991 to October, 1994.
- ------------------
* "Interested person" of the Fund as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended.
** Member of audit committee and nominating committee.
NOTE: In some cases a trustee or officer may have held different positions
during the last five years with the employer or employers listed.
The Fund pays each Trustee of the Fund who is not also affiliated with OAM
and/or TCC for such services an annual fee of $1,000, plus $750 for each day or
part of a day in attendance at a meeting of the Board of Trustees or one of its
Committees.
The Fund reimburses travel and other expenses incurred by its non-interested
Trustees for each such meeting attended. Trustees and officers of the Fund who
are affiliated with OAM and/or TCC and officers of the Fund will receive no
compensation or reimbursement from the Fund for acting in those capacities.
However, Trustees and officers of the Fund who are affiliated with OAM and/or
TCC may directly or indirectly benefit from fees or other remuneration received
from the Fund by OAM and/or TCC. Regular meetings of the Board of Trustees are
held quarterly and the audit committee holds at least one meeting during each
year.
The following table sets forth the compensation received by all trustees of the
Fund for the fiscal year ended December 31, 1995.
6
<PAGE>
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED
BENEFITS ANNUAL
AGGREGATE ACCRUED AS BENEFITS
COMPENSATION PART OF UPON TOTAL
TRUSTEE FROM THE FUND FUND EXPENSES RETIREMENT COMPENSATION
------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Thomas J. Burke....... $3,000 0 0 $3,000
Douglas P. Hoffmeyer.. 2,500 0 0 2,500
James D. Oberweis..... 0 0 0 0
Edward F. Streit...... 3,000 0 0 3,000
Peter H. Wendell...... 0 0 0 0
</TABLE>
As of May 31, 1996, the officers and Trustees of the Fund as a group owned of
record or beneficially 0.7% and 2.0% of the then outstanding shares of the
Emerging Growth Portfolio and the Micro-Cap Portfolio, respectively.
OBERWEIS ASSET MANAGEMENT, INC.
The Fund's investment adviser, since October 1, 1994, is Oberweis Asset
Management, Inc. ("OAM"), an investment adviser based in North Aurora, Illinois.
For additional details concerning OAM, see the Fund's Prospectus under the
heading "Management of the Portfolios." Pursuant to a written contract between
the Fund and OAM (the "Investment Advisory Agreement"), OAM is responsible for
managing the investment and reinvestment of each Portfolio's assets, determining
in its discretion the securities to be purchased or sold and the portion of the
Portfolio's assets to be held uninvested, providing the Fund with records
concerning OAM's activities which the Fund is required to maintain under
applicable law, and rendering regular reports to the Fund's Trustees and
officers concerning Portfolio responsibilities. OAM's investment advisory
services to the Fund are all subject to the control of the Trustees, and must be
in compliance with the investment objective, policies and restrictions set forth
in the Fund's Prospectus and this Statement of Additional Information and with
applicable laws and regulations. In addition, OAM is authorized to select
broker-dealers, including TCC, that may execute purchases and sales of the
securities for the Portfolios. (See "Portfolio Transactions.")
The investment adviser is obligated to pay the salaries and fees of any officers
of the Fund as well as the Trustees of the Fund who are interested persons (as
defined in the Investment Company Act of 1940) of the Fund, who are employed
full time by the investment adviser to perform services for the Portfolio under
the Investment Advisory Agreement.
As compensation for its investment advisory services, the investment adviser
receives from the Emerging Growth Portfolio at the end of each month a fee at an
annual rate equal to .45% of the first $50 million of the average daily net
assets of the Portfolio and .40% of the average daily net assets of the
Portfolio in excess of $50 million, from the Micro-Cap Portfolio at the end
of each month a fee at the annual rate of .60% of the average daily net assets
of the Portfolio, and from the Mid-Cap Portfolio at the end of each month a fee
at the annual rate of .40% of the average daily net assets of the Portfolio.
For the year ended December 31, 1995, the advisory fees incurred by the Emerging
Growth Portfolio and payable to OAM were $487,816. The advisory fees incurred
and payable to OAM were $96,759 for the period October 1, 1994 through December
31, 1994, and the advisory fees incurred by the Emerging Growth Portfolio and
payable to Alpha Source were $297,924 for the period January 1, 1994 through
September 30, 1994. For the year ended December 31, 1993, the advisory fees
incurred by the Emerging Growth Portfolio and paid to Alpha Source were
$381,178. However, pursuant to the expense limitation provisions of the
Investment Advisory Agreement, Alpha Source was required to rebate $10,228 to
the Portfolio. (See also "Expenses Borne by the Fund.")
7
<PAGE>
OAM also provides the Fund with non-investment advisory, management and
administrative services pursuant to a written contract (the "Management
Agreement"). OAM is responsible under the Management Agreement for providing
the Fund with those management and administrative services which are reasonably
necessary for conducting the business affairs of the Fund, with the exception of
investment advisory services, and distribution of each Portfolio's shares and
shareholder services, which are subject to the Fund's Rule 12b-1 Plan. (See
"Rule 12b-1 Plan and Related Distribution and Shareholder Service Agreements.")
In addition, OAM provides the Fund with office space and basic facilities for
management of the Fund's affairs, and bookkeeping, accounting, record keeping
and data processing facilities and services. OAM is responsible for preparing
and updating the Fund's SEC and state registration statement and filings, tax
reports to shareholders and similar documents. OAM pays the compensation of all
officers and personnel of the Fund for their services to the Fund as well as the
Trustees of the Fund who are interested persons of the Fund. OAM also provides
information and certain administrative services to shareholders of each
Portfolio. These services include, among other things, transmitting redemption
requests to the Fund's Transfer Agent and transmitting the proceeds of
redemption of shares of the Fund pursuant to a shareholder's instructions when
such redemption is effected through OAM; providing telephone and written
communications with respect to its shareholders' account inquiries; assisting
its shareholders in altering privileges and ownership of their accounts; and
serving as a source of information for its existing shareholders in answering
questions concerning the Fund and their transactions with the Fund.
For its services under the Management Agreement, OAM is paid by the Portfolios
on a monthly basis an annual management fee equal to .40% of the average daily
net assets of each Portfolio. OAM will bear all expenses in connection with the
performance of its services to the Fund and each of the Portfolios under the
Management Agreement. The Fund is responsible for all other expenses. See the
Fund's Prospectus under the heading "Expenses of the Fund." However, the
Management Agreement provides that OAM is obligated to reimburse the Portfolios
for 100% of the amount by which the Portfolio's ordinary operating expenses
during any fiscal year, including the management and advisory fees, exceed
either (i) the most restrictive expense limitation applicable to the Portfolio
imposed by the securities laws or regulations thereunder of any state in which
the Portfolio's shares are qualified for sale, as such limitations may be raised
or lowered from time to time, or (ii) the following amounts expressed as a
percentage of the Portfolio's average daily net assets:
2.0% of the first $25,000,000; plus
1.8% of the next $25,000,000; plus
1.6% of average daily net assets in excess of $50,000,000.
Excluded from the calculation of ordinary operating expenses are expenses such
as interest, taxes and brokerage commissions and extraordinary items such as
litigation costs. There is no state expense limitation applicable to the
Portfolios which is currently more restrictive than that set forth above. Any
such reimbursement is computed and accrued on a daily and settled on a monthly
basis based upon the expenses and average net assets computed through the last
business day of the month. As of the end of the Fund's fiscal year, the
aggregate amounts of reimbursement, if any, by the Manager to a Portfolio in
excess of the amount necessary to limit the operating expenses on an annual
basis to said expense limitation shall be refunded to the Manager. In no event
will the Manager be required to reimburse a Portfolio in an amount exceeding its
management and investment advisory fees, except to the extent required by
applicable law. For the year ended December 31, 1995, the management fees
incurred by the Emerging Growth Portfolio and paid to OAM were $462,815 and
pursuant to the expense limitation provisions of the Management Agreement, OAM
during 1995 rebated $48,368 of such amount. For the period October 1, 1994
through December 31, 1994, the management fees incurred by the Emerging Growth
Portfolio and paid to OAM were $90,458. For the period January 1, 1994 through
September 30, 1994, the management fees incurred by the Emerging Growth
Portfolio and paid to Hamilton Investments were $279,225. Neither Hamilton
Investments nor OAM was required to reimburse the Emerging Growth Portfolio
pursuant to the expense limitation for the year ended December 31, 1994. (See
also "Expenses Borne by the Fund.") For the year ended December 31, 1993,
management fees incurred by the Emerging Growth Portfolio and paid to Hamilton
Investments were $356,178 and pursuant to the expense limitation provisions of
the then existing management agreement, Hamilton Investments was required to
rebate to the Portfolio $10,228 of such amount.
DISTRIBUTION PLAN AND AGREEMENT
As discussed in the Fund's Prospectus under the heading "Distribution of
Shares," the Fund has adopted a Plan of Distribution (the "Distribution Plan")
and a Distribution and Shareholder Service Agreement (the "Distribution
Agreement") pursuant to Rule 12b-1 under the Investment Company Act of 1940
(collectively the "Plan and Agreement") under which the Fund compensates TCC in
connection with the distribution of each Portfolio's shares. Reference should
be made to the Prospectus for details not provided below. TCC will act as the
primary distributor of each Portfolio's shares and as the primary shareholder
servicing agent for each Portfolio. The Fund pays TCC a monthly distribution
and shareholder servicing fee at an annual rate of .25% of each Portfolio's
average daily net assets and may also reimburse certain out of pocket costs
incurred by TCC for the Fund.
8
<PAGE>
Pursuant to the Plan and Agreement, TCC has agreed, directly or through other
firms, to advertise and promote the Fund and provide information and services to
existing and potential shareholders. These services include, among other
things, processing new shareholder account applications; converting funds into
or advancing federal funds for the purchase of shares of the Fund as well as
transmitting purchase orders to the Fund's Transfer Agent; transmitting
redemption requests to the Fund's Transfer Agent and transmitting the proceeds
of redemption of shares of the Fund pursuant to a shareholder's instructions;
providing telephone and written communications with respect to shareholder
account inquiries and serving as the primary source of information for existing
and potential shareholders in answering questions concerning the Fund and their
transactions with the Fund; and providing literature distribution, advertising
and promotion as is necessary or appropriate for providing information and
services to existing and potential shareholders.
TCC will be reimbursed by the Fund for certain out-of-pocket costs, if any, of
providing certain services contemplated by the Distribution Agreement, which
include the costs of postage, data entry, modification and printout, stationery,
tax forms, and all other external forms or printed material that may be required
for performance by TCC of the services contemplated in the Distribution
Agreement. TCC proposes to compensate its account executives annually for
servicing and administering a shareholder's account.
The Plan and Agreement provides that TCC may appoint various broker-dealer firms
to assist in providing distribution services for the Fund, including literature
distribution, advertising and promotion, and may appoint broker-dealers and
other firms (including depository institutions such as commercial banks and
savings and loan associations) to provide administrative services for their
clients as shareholders of the Fund under related service agreements. To
provide these services, these firms will furnish, among other things, office
space and equipment, telephone facilities, and personnel as is necessary or
beneficial for providing information and services related to the distribution of
the Portfolios' shares to TCC in servicing accounts of such firms' clients who
own shares of the Fund.
The Glass-Steagall Act generally prohibits federally chartered or supervised
banks from engaging in the business of underwriting, selling, or distributing
securities. Although the scope of this prohibition under the Glass-Steagall Act
has not been fully defined, in TCC's opinion it should not prohibit banks from
being paid for shareholder servicing and record-keeping. If, because of changes
in law or regulation, or because of new interpretations of existing law, a bank
or a fund were prevented from continuing these arrangements, it is expected that
other arrangements would be made for these services and that shareholders would
not suffer adverse financial consequences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein,
and banks and other financial institutions may be required to register as
dealers pursuant to state law.
The Plan provides that the Fund's asset-based sales charges (as defined in the
NASD's Rules of Fair Practice) shall not exceed those permitted by Article III,
Section 26 of the NASD's Rules of Fair Practice. Further, as permitted by the
NASD's Rules, the Emerging Growth Portfolio has elected to calculate its
permissible amount of asset-based sales charges on new gross sales of the
Portfolio since the Portfolio's inception.
The Board of Trustees has determined that, in its judgment, there is a
reasonable likelihood that the Plan and Agreement will benefit the Portfolios
and their shareholders. If the sizes of the Portfolios are increased rapidly,
fixed expenses will be reduced as a percentage of each shareholder's investment.
The 12b-1 expenses will also provide TCC and others an incentive to promote the
Portfolios and to offer individual shareholders prompt and efficient services.
As required by Rule 12b-1, the Plan, as amended, and Agreement was approved by
the Board of Trustees, including a majority of Trustees who are not interested
persons, as defined in the Investment Company Act of 1940, of the Fund, who are
not parties to the Distribution Agreement or Shareholder Service Agreement and
who have no direct or indirect financial interest in the operation of the Plan.
Unless terminated earlier as described below, the Plan and Agreement will
continue in effect from year to year if approved annually by the Board of
Trustees of the Fund, including a majority of the Trustees who are not parties
to the Plan and Agreement (or have a direct or indirect financial interest in
the operation thereof) and who are not interested persons of the Fund. The Plan
may be terminated with respect to the Fund or a Portfolio at any time by (1) a
vote of a majority of the Trustees who are not interested persons of the Fund,
who are not parties to the Distribution Agreement and who have no direct or
indirect financial interest therein, or (2) by the vote of a majority of
shareholders of that Portfolio. The Distribution Agreement may be terminated
similarly without penalty upon 60 days written notice by either party and will
automatically terminate if assigned, as defined in the 1940 Act.
For the year ended December 31, 1995, total 12b-1 fees paid by the Emerging
Growth Portfolio to TCC and OAM were $404,963 and $173,556, respectively. For
the period October 1, 1994 through December 31, 1994, total 12b-1 fees paid by
the Portfolio to TCC and OAM were $78,609 and $34,464, respectively. During the
above noted time periods, TCC was appointed by the Fund to act as the principal
distributor of the Emerging Growth Portfolio's shares pursuant to a Distribution
Agreement dated October 1, 1994 between the Fund and TCC and OAM was appointed
by the Fund to act as the Emerging Growth Portfolio's primary shareholder
service agent pursuant to a Shareholder Service Agreement dated October 1, 1994
between the Fund and OAM. During that period, the Fund was authorized to pay an
annual fee not to exceed .50% of the Emerging
9
<PAGE>
Growth Portfolio's average daily net assets for distribution and shareholder
services provided to the Portfolio and from the total 12b-1 fees, TCC was paid
fees for distribution services at an annual rate of .35% of the Portfolio's
average daily net assets and OAM was paid fees for shareholder services at an
annual rate of .15% of the Portfolio's average daily net assets. For the period
January 1, 1994 through September 30, 1994 (the day the Fund ceased 12b-1
payments to Hamilton Investments), total 12b-1 fees paid by the Portfolio to
Hamilton Investments were $349,031.
For the 12 month period ended December 31, 1995, the Emerging Growth Portfolio
paid the following amounts under the Rule 12b-1 Plan in the approximate amounts
noted: $33,470 in sales promotion and literature expenses, $215,031 in service
fees paid to brokers, $77,814 in salary expenses and employment services, $7,414
in telephone expenses, $24,773 in professional fees, and $733 in miscellaneous
operating expenses. There was no reimbursement of out-of-pocket expenses for
such period.
EXPENSES BORNE BY THE PORTFOLIOS
Other than those expenses payable by OAM and/or TCC, the Portfolios will pay all
of their expenses, including the following:
(a) Federal, state and local or other governmental agency taxes or fees levied
against the Fund.
(b) Costs, including the interest expense, of borrowing money.
(c) Brokerage fees and commissions and other transaction costs in connection
with the purchase or sale of portfolio securities for the Portfolios.
(d) Fees and expenses of the Trustees other than those who are "interested
persons" (as defined in the Investment Company Act of 1940) of the Fund.
(e) Expenses incident to holding meetings of the Fund's Shareholders,
including proxy solicitations of the Fund or its Board of Trustees therefor, and
meetings of the Board of Trustees and committees of the Board of Trustees.
(f) Fees and expenses in connection with legal services rendered to the Fund,
the Board of Trustees of the Fund and duly appointed committees of the Board of
Trustees of the Fund, including fees and expenses of special counsel to those
Trustees who are not interested persons of the Fund, and litigation.
(g) Audit and accounting expenses of the independent auditors.
(h) Custodian and transfer and dividend paying agent fees and expenses and
shareholder service expenses.
(i) Fees and expenses related to registering, qualifying and maintaining
registration and qualification of the Fund and its Shares for distribution under
federal, state and other laws.
(j) Fees and expenses incident to the preparation and filing of reports with
regulatory agencies.
(k) Expenses of preparing, printing (including typesetting) and mailing
prospectuses, shareholder reports, proxy materials and notices to shareholders
of the Fund.
(l) Premiums for trustee's and officer's liability insurance and insurance
carried by the Fund pursuant to the requirements of Section 17(g) of the
Investment Company Act of 1940, or otherwise required by law or deemed desirable
by the Board of Trustees.
(m) Fees and expenses incurred in connection with any investment company
organization or trade association of which the Fund may be a member.
(n) Costs and expenses incurred for promotion or advertising of the Fund's
Shares, but only pursuant to a Plan duly adopted in accordance with Rule 12b-1
under the Investment Company Act of 1940 and to the extent that such Plan may
from time to time provide.
(o) Expenses related to issuance or redemption of the Portfolios' shares.
For the fiscal year ended December 31, 1995, total expenses incurred by the
Emerging Growth Portfolio were $2,051,585 and the ratio of such total expenses
to the Portfolio's average net asset value was 1.77%. Pursuant to the
10
<PAGE>
expense limitation, OAM was required to reimburse the Emerging Growth Portfolio
in the amount of $48,368, resulting in net expenses of $2,003,217 and a net
expense ratio of 1.73%.
PORTFOLIO TRANSACTIONS
Decisions with respect to the purchase and sale of portfolio securities on
behalf of the Fund's Portfolios are made by OAM. Actual portfolio turnover may
vary considerably from year to year. However, in order to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code,
less than 30% of the Fund's gross income may be derived from the sale or other
disposition of stock or securities held for less than three months.
OAM is authorized to place orders for securities with various broker-dealers,
including TCC, subject to the requirements of applicable laws and regulations.
OAM may place a significant portion of the Portfolios' agency orders with TCC,
as it believes by so doing a Portfolio is able to achieve more control over and
better execution of its orders. Orders for securities transactions are placed
by OAM with a view to obtaining the best combination of price and execution
available. In seeking to achieve the best combination of price and execution,
OAM attempts to evaluate the overall quality and reliability of the broker-
dealers and the services provided, including research services, general
execution capability, reliability and integrity, willingness to take positions
in securities, general operational capabilities and financial condition.
However, the responsibility of OAM to attempt to obtain the best combination of
price and execution does not obligate it to solicit a competitive bid for each
transaction. Furthermore, under the Advisory Agreement, OAM is not obligated to
seek the lowest available cost to the Portfolio, so long as it determines in
good faith that the broker-dealer's commission, spread or discount is reasonable
in relation to the value of the execution and research services provided by such
a broker-dealer to the Portfolio, or OAM when viewed in terms of that particular
transaction or its overall responsibilities with respect to all of its clients,
including the Portfolio, as to which it offers advice or exercises investment
discretion.
OAM, with the prior consent of the Fund's Trustees, may place orders with
affiliated persons of OAM, TCC or the Fund subject to (i) the provisions of
Sections 10(f) and 17(e)(2) of the Investment Company Act of 1940 and Rules 10f-
3 and 17e-1 thereunder, Rule 206(3)-2 under the Investment Advisers Act of 1940,
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)(a)(2)
thereunder and any other applicable laws or regulations, and (ii) procedures
properly adopted by the Fund with respect thereto. The Fund has been advised by
OAM that it may place a significant portion of the Portfolios' orders for
securities with TCC, but only when it believes that the combination of price and
execution are comparable to that of other broker-dealers. OAM, with the prior
consent of the Fund's Trustees, may engage in agency cross transactions subject
to (i) the provisions of Section 17(a) of the Investment Company Act of 1940 and
Rule 17a-7 thereunder and other applicable laws or regulations, (ii) the
provisions of Section 206 of the Investment Advisers Act of 1940 and Rule
206(3)-2 thereunder, and (iii) procedures properly adopted by the Fund with
respect thereto.
OAM has agreed to furnish certain information quarterly to the Fund's Trustees
to enable them to evaluate the quality of execution and cost of all orders
executed by TCC. The Fund requires that OAM, as investment adviser, record and
furnish to the Fund quarterly the following information:
(A) Exchange Transactions
A listing showing for each transaction executed by TCC for the Portfolios
during the month, in time sequence, the date of the transaction, the price, the
commission, the exchange where executed, the security and the number of shares.
(B) Over-the-Counter Transactions
A listing showing for each transaction executed by TCC for the Portfolios
during the month, in time sequence, the date of execution, the price, the best
bid and ask at the time, the commission for the transaction, the security and
the number of shares.
(C) Transactions Through Other Brokers
A list of all transactions during each quarter through other brokers, showing
the price and commission for the transaction, and a summary of commission
charges by all other brokers executing transactions for the Portfolios.
A greater discount, spread or commission may be paid to non-affiliated broker-
dealers that provide research services, which research may be used by OAM in
managing assets of its clients, including the Portfolios. Research services may
include data or recommendations concerning particular securities as well as a
wide variety of information concerning companies, industries, investment
strategy and general economic, financial and political analysis and forecasting.
In some instances, OAM may receive research, statistical and/or pricing services
it might otherwise have had to perform itself. However, OAM cannot readily
determine the extent to which net prices or commission rates charged by most
broker-dealers reflect the value of its research, statistical and/or
11
<PAGE>
pricing services. As OAM is the principal source of information and advice to
the Fund and is responsible for managing the investment and reinvestment of the
Portfolios' assets and determining the securities to be purchased and sold, it
is believed by the Fund's management to be in the interests of the Fund for OAM,
in fulfilling its responsibilities to the Fund, to be authorized to receive and
evaluate the research and information provided by other securities brokers or
dealers, and to compensate such brokers or dealers for their research and
information services. Any such information received may be utilized by OAM for
the benefit of its other accounts as well, in the same manner that the Fund
might also benefit from information obtained by OAM in performing services for
its other accounts. Although it is believed that research services received
directly or indirectly benefit all of OAM's accounts, the degree of benefit
varies by account and is not directly related to the commissions or other
remuneration paid by such account.
Transactions of the Portfolios in the over-the-counter market and the third
market may be executed for the Portfolios by TCC as agent with primary market
makers acting as principal, except where OAM believes that better prices or
execution may be obtained otherwise. Transactions with primary market makers
reflect the spread between the bid and the ask prices. Occasionally, the
Portfolios may make purchases of underwritten issues at prices which include
underwriting discount fees.
OAM may place orders with broker-dealers other than TCC that sell shares of the
Fund, provided the price and execution are reasonably believed to be comparable
with other nonaffiliated broker-dealers.
OAM and the Fund's Board of Trustees review quarterly the Portfolios' brokerage
transactions for execution and services furnished. Such quarterly review may
from time to time result in changes of brokers being utilized to execute
transactions because of services furnished or to be furnished to OAM or the
Fund.
For the year ended December 31, 1995, the total brokerage commissions paid by
the Emerging Growth Portfolio was $167,622, of which 21% or $35,200, was paid to
TCC. The total amount of securities transactions on which the Portfolio paid
brokerage commissions during such period was $61,677,640. Thirty-one percent
(31%), or $19,217,364, of the securities transactions on which the Portfolio
paid brokerage commissions were effected through TCC. The total amount of
principal transactions of the Portfolio for the year ended December 31, 1995,
for which no commission was incurred, was $134,221,527.
For the period October 1, 1994 through December 31, 1994, the total brokerage
commissions paid by the Emerging Growth Portfolio was $17,248, of which 49%, or
$8,463, was paid to TCC. The total amount of securities transactions on which
the Portfolio paid brokerage commissions during such period was $10,765,934.
Forty-four percent (44%), or $4,718,944, of the securities transactions on which
the Portfolio paid brokerage commissions were effected through TCC. The total
amount of principal transactions of the Portfolio for the year ended December
31, 1994, for which no commission was incurred, was $95,896,610. For the period
January 1, 1994 through September 30, 1994, the total brokerage commissions paid
by the Emerging Growth Portfolio was $79,554, of which 35%, or $27,659, was paid
to Hamilton Investments. The total amount of securities transactions on which
the Portfolio paid brokerage commission during such period was $27,827,404.
Thirty-six percent (36%), or $10,032,294, of the securities transactions on
which the Portfolio paid brokerage commissions were effected through Hamilton
Investments.
For the year ended December 31, 1993 the total brokerage commissions paid by the
Emerging Growth Portfolio was $153,239, of which $130,033 was paid to Hamilton
Investments. The total amount of securities transactions on which the Portfolio
paid brokerage commissions during such periods was $65,833,808. The total
amount of principal transactions of the Portfolio for such period, for which no
commission was incurred, was $99,743,039.
SHAREHOLDER VOTING RIGHTS
Reference should be made to the Prospectus under the heading "General
Information" for a description of certain shareholder rights and information
concerning the shares of the Portfolios. As a general rule, the Fund is not
required to and will not hold annual or other meetings of the shareholders.
Special meetings of shareholders for actions requiring a shareholder vote may be
requested in writing by holders of at least twenty-five percent (25%) (or ten
percent (10%) if the purpose of the meeting is to determine if a Trustee is to
be removed from office) of the outstanding shares of the Fund or as may be
required by applicable law. Under the Declaration of Trust, shareholders are
entitled to vote in connection with following matters: (1) for the election or
removal of Trustees if a meeting is called for such purpose; (2) with respect to
the adoption of any contract for which approval is required by the Investment
Company Act of 1940; (3) with respect to any termination or reorganization of
the Portfolios to the extent and as provided in the Declaration of the Trust;
(4) with respect to any amendment of the Declaration of Trust (other than
amendments changing the name of the Fund or the Portfolios, supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision thereof); (5) as to whether or not a court
action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Fund or the shareholders, to
the same extent as the stockholders of a Massachusetts business corporation; and
(6) with respect to such additional matters relating to the Fund as may be
12
<PAGE>
required by law, the Declaration of Trust, the By-Laws of the Fund, or any
registration of the Fund with the Securities and Exchange Commission or any
state, or as the Trustees may consider necessary or desirable. The Declaration
of Trust specifically authorizes the Board of Trustees to terminate the Fund (or
any portfolio of the Fund) without shareholder approval by notice to the
shareholders. Each Trustee serves until the next meeting of shareholders, if
any, called for the purpose of electing Trustees and until the election and
qualification of his successor or until such Trustee sooner dies, resigns,
retires or is removed by the majority vote of the shareholders or by the
Trustees.
REDEMPTION OF SHARES
Reference should be made to the Fund's Prospectus under the heading "How to
Redeem Shares" for other information concerning redemption of the shares of a
Portfolio. The Fund may suspend the right to redeem shares or postpone the date
of payment for more than seven (7) days for any period during which: (a) the New
York Stock Exchange is closed, other than weekend and holiday closings, or the
Securities and Exchange Commission determines that trading on the New York Stock
Exchange is restricted; (b) the Securities and Exchange Commission determines
there is an emergency as a result of which it is not reasonably practical for a
Portfolio to sell the investment securities or to calculate their Net Asset
Value; or (c) the Securities and Exchange Commission permits such suspension for
the protection of Portfolio's shareholders. In the case of a suspension of the
right of redemption, a shareholder may either withdraw his request for
redemption or receive payment at the Net Asset Value of his shares existing
after termination of the suspension.
Although it is the Fund's present policy to make payment of redemption proceeds
in cash, if the Fund's Trustees determine it to be appropriate, redemption
proceeds may be paid in whole or in part by a distribution in kind of securities
held by the Portfolios, subject to the limitation that, pursuant to an election
under Rule 18f-1 under the Investment Company Act of 1940, each Portfolio is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of a Portfolio during any 90-day period for any one account.
The value of such securities shall be determined as of the close of trading of
the New York Stock Exchange on the business day on which the redemption is
effective. In such circumstances, a shareholder might be required to bear
transaction costs to dispose of such securities.
SHAREHOLDER SERVICES
The Fund's Prospectus under the headings "How to Purchase Shares," "How to
Redeem Shares" and "Shareholder Services" describes information in addition to
that set forth below. When a shareholder makes an initial investment in a
Portfolio, a shareholder account is opened in accordance with the Fund's Account
Application instructions. After each transaction for the account of a
shareholder, confirmation of all deposits, purchases, reinvestments,
redemptions, withdrawal payments, and other transactions in the shareholder's
account will be forwarded to the shareholder.
A Portfolio will generally not issue certificates for its shares, except that
certificates for full amounts will be issued upon a shareholder's written
request to the Transfer Agent. The investor will be the record owner of all
shares in his account with full shareholder rights, irrespective of whether
share certificates are issued. Certain of the functions performed by the Fund
in connection with the operation of the accounts described above have been
delegated by the Fund to its Transfer Agent.
In addition to the purchase and redemption services described above, the Fund
offers its shareholders the special accounts and services described in the
Fund's Prospectus. Applications and information about any shareholder services
may be obtained from OAM.
DETERMINATION OF NET ASSET VALUE
See the Fund's Prospectus under the headings "How to Purchase Shares" and "Net
Asset Value," for descriptions of certain details concerning the determination
of Net Asset Value. The Net Asset Value of the shares of the Portfolios are
computed once daily, as of the later of the close of the New York Stock Exchange
or the Chicago Board Options Exchange, on each day the New York Stock Exchange
is open for trading. All securities in the Portfolios other than options are
priced as of the close of trading on the New York Stock Exchange. The options
in the Portfolios are priced as of the close of trading on the Chicago Board
Options Exchange. The Net Asset Value per share is computed by dividing the
value of the Portfolio's securities plus all other assets minus all liabilities
by the total number of Portfolio shares outstanding. In valuing the Portfolio's
securities, each listed and unlisted security for which last sale information is
regularly reported is valued at the last reported sale price prior to the close
of the New York Stock Exchange, except for options which are based on the close
of the Chicago Board Options Exchange. If there has been no sale on such day,
the last reported bid price is used. Any unlisted security for which last sale
information is not regularly reported and any listed debt security which has an
inactive listed market for which over-the-counter market quotations are readily
available is valued at the highest bid price as of the close of the New York
Stock Exchange determined on the basis of reasonable inquiry. Restricted
securities and any other securities or other assets for which market quotations
are not readily available are valued by appraisal at their fair values as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Board of Trustees. Short-term debt
obligations, commercial paper and
13
<PAGE>
repurchase agreements are valued on the basis of quoted yields for securities of
comparable maturity, quality and type or on the basis of amortized cost.
TAXES
As stated in the Fund's Prospectus under the heading "Dividends, Distributions
and Tax Status" each of the Portfolios has elected to qualify under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"), so that the
Portfolio will not be liable for Federal income taxes to the extent that its net
investment income and net realized capital gains are currently distributed to
its shareholders. Each of the Portfolios will qualify for this status as long
as it: (a) derives at least 90% of its gross income from dividends, interest,
gains from the sale or other distribution of securities or foreign currencies,
and certain other investment income including gain from options, futures or
forward contracts; (b) derives less than 30% of its gross income from the sale
or other disposition of securities it has held for less than three months; (c)
invests in securities that satisfy certain diversification requirements; and (d)
distributes at least 90% of its net investment income and net short-term capital
gains to its shareholders each year. A Portfolio may be limited in its options
transactions in order to comply with these rules.
Except for those shareholders exempt from Federal income taxes, dividends and
capital gains distributions are taxable to shareholders for purposes of the
Federal income tax, whether paid in cash or reinvested in additional shares of
the Portfolio. Dividends from net investment income are taxable to non-exempt
shareholders as ordinary income for Federal income tax purposes. For corporate
shareholders, such income dividends may be eligible for the deduction for
dividends received from domestic corporations. Distribution of long-term
capital gains are taxable to non-exempt shareholders as long-term capital gains
regardless of the length of time that such shareholders have owned shares in a
Portfolio. Short-term capital gain distributions are taxable to non-exempt
shareholders as ordinary income. Losses incurred by such shareholders on the
redemption of shares of a Portfolio held six months or less will be treated as
long-term capital losses to the extent of any capital gains distributions made
by the Portfolio with respect to such shares. Shareholders will be notified
annually as to the Federal income tax status of dividends and capital gains
distributions. Such dividends and distributions may also be subject to state
and local taxes.
Income dividends are taxed as ordinary income at rates up to a maximum of 39.6%
for individuals. Long-term capital gain distributions are taxable at a maximum
rate of 28% for individual shareholders and at the same rate as ordinary income
for corporate shareholders.
In order to avoid an excise tax on undistributed amounts, each Portfolio must
declare, by the end of the calendar year, a dividend to shareholders of record
that represents 98% of its net investment income for the calendar year plus 98%
of its capital gain net income for the period from November 1 of the previous
year through October 31 of the current year plus any undistributed net
investment income from the prior calendar year, plus any undistributed capital
gain net income for the one-year period ended October 31 of the prior calendar
year, less any overdistribution in the prior calendar year. Each Portfolio
intends to declare or distribute dividends during the appropriate periods in an
amount sufficient to avoid the 4% excise tax.
Federal law requires the Fund to withhold 31% from dividends and/or redemption
proceeds (including from exchanges) that occur in certain shareholder accounts
if the shareholder has not properly furnished a certified correct Taxpayer
Identification Number (in the case of individuals, a social security number) or
has not certified that withholding does not apply. Amounts withheld are applied
to the shareholder's Federal income tax liability and a refund may be obtained
from the Internal Revenue Service if withholding results in overpayment of
taxes. Federal law also requires the Fund to withhold the applicable tax treaty
rate from dividends that are paid to certain nonresident alien, foreign
partnership and foreign corporation shareholder accounts.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and Treasury Regulations in effect on the date of the Fund's
Prospectus and this Statement of Additional Information, which provisions are
subject to change by legislative or administrative action. Investors are
advised to consult their own tax advisers regarding the tax consequences of an
investment in the Portfolios. Shareholders are likewise advised to consult
their own tax advisers regarding specific questions as to state or local taxes.
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average annual total return measures both the net investment income generated
by, and the effect of any realized and unrealized appreciation or depreciation
of, the underlying investments of a Portfolio. A Portfolio's average annual
total return quotation is computed in accordance with a standardized method
prescribed by the rules of the Securities and Exchange Commission. The Emerging
Growth Portfolio's average annual total return figures for the one-year and
five-year periods ended December 31, 1995 were 42.6% and 26.3%, respectively,
and for the period from the commencement of operations on January 7, 1987
through December 31, 1995 was 16.3%, as calculated in accordance with the
following formula pursuant to applicable regulations of the Securities and
Exchange Commission:
P(1+T)/n/ = ERV
14
<PAGE>
Where P = a hypothetical initial payment of $1,000
T = average annual total return
n = time period the Fund's registration statement has been in
effect expressed in years or portion thereof
ERV = the ending redeemable value of a hypothetical $1,000 payment
made at January 7, 1987 (the date the Fund commenced
operations)
A sales load of 4% was charged until December 31, 1991 which is not reflected in
these total return numbers.
ADDITIONAL INFORMATION
Custodian and Transfer Agent
- ----------------------------
The Custodian for the Fund is Investors Fiduciary Trust Company, P.O. Box
419042, Kansas City, Missouri 64141, a national bank organized under the laws of
the United States. The Fund has authorized the Custodian to deposit certain
securities of the Portfolios in central depository systems as permitted by
federal law. The Portfolios may invest in obligations of the Custodian and may
purchase or sell securities from or to the Custodian. The Custodian is also the
Fund's Transfer Agent and acts as dividend disbursing agent.
Independent Auditors and Reports to Shareholders
- ------------------------------------------------
Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606, audits and
reports on the Fund's annual financial statements, reviews certain regulatory
reports and prepares the Fund's income tax returns, and performs other
professional accounting, auditing and advisory services when engaged to do so by
the Fund. For the 1993 fiscal year and prior years, Checkers, Simon & Rosner
LLP, One South Wacker Drive, Chicago, Illinois 60606, served as the Fund's
independent auditors.
Shareholders will receive annual audited financial statements and semi-annual
unaudited financial statements.
Counsel
- -------
Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street, Chicago, Illinois
60601, is legal counsel to the Fund.
Other Information
- -----------------
The Fund's Prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement, which the Fund has filed
with the Securities and Exchange Commission under the Securities Act of 1933,
and reference is hereby made to the Registration Statement for further
information with respect to the Fund and the securities offered hereby. This
Registration Statement is available for inspection by the public at the
Securities and Exchange Commission in Washington, D.C.
15
<PAGE>
Oberweis Mid-Cap Portfolio
Statement of Assets and Liabilities
June 18, 1996
Assets: Cash $10,000
Deferred organizational costs 70,000
-------
$80,000
Liabilities: Organizational costs accrued 70,000
-------
Net Assets $10,000
=======
Shares outstanding (unlimited number of
shares authorized, no par value) 1,000
=======
Net asset value, offering price and
redemption price per share $10.00
=======
Notes:
==========
1. Organization. The Oberweis Funds (the "Trust") offers three portfolios,
currently consisting of the Oberweis Emerging Growth Portfolio, Oberweis Micro-
Cap Portfolio, and Oberweis Mid-Cap Portfolio. The Trust is registered under the
Investment Company Act of 1940 as a diversified open-end management investment
company. The Trust is authorized to operate numerous portfolios under various
trading strategies. The Trust commenced operations of the Oberweis Emerging
Growth Portfolio and the Oberweis Micro-Cap Portfolio on January 7, 1987 and
January 1, 1996, respectively. The Oberweis Mid-Cap Portfolio has had no
operations, other than those relating to organizational matters, including the
sale and issuance of 1,000 shares to Oberweis Asset Management, Inc. ("OAM") on
June 18, 1996 for $10,000.
2. Organization Costs. Costs incurred by the Oberweis Mid-Cap Portfolio in
connection with its organization, registration and the initial public offering
of shares have been deferred and will be amortized on a straight-line basis over
a period of five years from the date upon which the Portfolio commences its
investment activities. If any of the original shares of the Portfolio are
redeemed prior to the end of the amortization period, the redemption proceeds
will be reduced by the pro rata share of the unamortized organization costs as
of the date of redemption.
<PAGE>
OAM has advanced all of the organizational costs of the Oberweis Mid-Cap
Portfolio. The Portfolio will reimburse OAM for those costs upon the
commencement of operations.
3. The Advisory, Management, and Distribution Agreements. The Trust has
agreements with OAM to provide investment advisory and management services for
each Portfolio. Under the terms of these agreements, the Mid-Cap Portfolio will
pay OAM .40% and .40% of the average daily net assets for investment advisory
and management services, respectively. The Trust also has a rule 12b-1 Plan and
a Distribution and Shareholder Service Agreement (collectively, the "Plan and
Agreement") with The Chicago Corporation ("TCC"). Under the Plan and Agreement,
the Trust is to pay TCC a monthly fee at an annual rate of .25% of each
Portfolio's average daily net assets for distribution and shareholder services
and will reimburse TCC for certain out-of-pocket expenses.
4. Federal Income Taxes. The Mid-Cap Portfolio intends to comply with the
requirements of the Internal Revenue Code necessary to qualify as a regulated
investment company and to make the requisite distributions of the income to its
shareholders which will be sufficient to relieve it from all or substantially
all Federal income taxes.
5. Use of Estimates. The preparation of the statement of assets and liabilities
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that effect the amounts reported in the
statement of assets and liabilities and accompanying notes. Actual results may
differ from those estimates.
<PAGE>
Report of Independent Auditors
To the Board of Trustees
and Shareholder
We have audited the accompanying statement of assets and liabilities of Oberweis
Mid-Cap Portfolio as of June 18, 1996. This statement of assets and liabilities
is the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on this statement of assets and liabilities based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of
Oberweis Mid-Cap Portfolio at June 18, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Chicago, Illinois
June 18, 1996
<PAGE>
PRESIDENT'S LETTER FEBRUARY 14, 1996
Dear Emerging Growth Portfolio Shareholder:
The surprising returns of this past year underscore the old Wall Street adage
"the Market tends to do what we least expect". While the most optimistic money
managers felt that the returns in 1995 would possibly be in line with historic
average market returns, few guessed that the lowering of interest rates,
combined with the corporate leanness resulting from past restructuring, would
lead to the exceptional stock market gains actually experienced in 1995. This
surprisingly strong market reemphasizes the importance of long term investing
and staying fully invested at all times so as not to miss these big gains when
they occur. After the spectacular 87% gain in 1991, I did not expect to see
another 40+ percent gain in this decade. I certainly don't expect to see yet
another such gain this decade, but who knows? A friend once stated that those
who try to guess the direction of interest rates are former weathermen who were
not accurate enough at forecasting the weather to keep their jobs. Much the
same could be said of those trying to anticipate the direction of the stock
market.
Fortunately, our policy of generally remaining fully invested produced
excellent results in 1995. Not only did we experience a very substantial
increase in Net Asset Value (42.6% including the reinvestment of the $1.42 long
term capital gain distribution) compared to 37.6% for the total return S&P 500,
39.9% for the NASDAQ Composite, and 28.4% for the Russell 2000, a small-cap
stock index, but in addition your trustees voted to reduce the 12b-1 fee by 50%
to 25 basis points effective January 1st. This reduction means that your fund
now qualifies as a "no-load" fund. The expense ratio should also decline this
year as a result of that reduction. Your trustees felt that the fund has now
grown to a sufficient size that less incentives are needed to grow it further.
In fact, there is a practical limit as to how large we would like to see this
portfolio become since it can be difficult to purchase large positions of
small-cap stocks. While the Emerging Growth Portfolio can purchase companies of
any market-cap size, it aims to purchase companies with market-caps of between
$100 million and $1 billion, generally considered to be "small-cap".
We have also added a second portfolio this year, the Micro-Cap Portfolio, which
invests in the smallest companies which meet our "octagon" investment criteria.
The Micro-Cap Portfolio focuses on companies with market-caps below $100
million, through some small-cap companies of somewhat larger size may be
included. You can switch from one portfolio to the other with a phone call to
our shareholder service center (800-245-7311) though a one quarter of one
percent redemption charge would apply to redemptions of the Micro-Cap Portfolio
only. That redemption charge does not go to the distributor or investment
advisor, but rather accrues to the benefit of the remaining Micro-Cap
shareholders. We suggest that trying to trade between the portfolios is not a
prudent idea, but diversifying your investments between the two portfolios may
be.
As we look forward to 1996, though the year started with some pressure on
NASDAQ stocks, especially "technology" stocks, we believe that smaller, rapidly
growing companies represent the best investment opportunity in the market
today.
Finally, I would like to thank you for investing in our fund. Share prices can
be quite volatile on a day-to-day basis, but over the long run, accepting that
volatility should produce reasonable rewards. If you have any questions about
your account, please call shareholder services at 800-245-7311 during normal
business hours. If you have any questions about the fund's portfolio or
investment policy, please feel free to call me or either of our assistant
portfolio managers, Martin Yokosawa or Chip Roberts, at 800-323-6166. We're
usually in the office from 7:30 A.M. until 6:00 P.M. central time during the
week, and from 10:00 until noon on Saturday. If you're in the Chicago area, we
would be glad to have you visit us. We anticipate an early April move into new
offices at 951 Ice Cream Drive, North Aurora, Illinois, just off the I-88
Tollway.
/s/ James D. Oberweis
James D. Oberweis
President
1
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
The Oberweis Emerging Growth Portfolio is positioned to take advantage of the
long-term price appreciation that occurs when the market places an
appropriately high value on the fastest-growing companies. The market for such
companies (and most other investments) was particularly strong in 1995, causing
the Portfolio to have a return substantially above the NASDAQ Composite and the
Russell 2000 indices. The after-cost return of the Portfolio was 42.6%,
somewhat better than the 39.9% gain in the NASDAQ Composite and far ahead of
the 28.4% gain in the small-cap oriented Russell 2000 Index. The Portfolio's
one year, five-year, and life-of-Portfolio returns are all substantially above
the S&P 500 Index, the Russell 2000 Index, the NASDAQ Composite, and most other
broad stock market averages. We continue to believe that investing in rapidly
growing companies using our "octagon" criteria will produce above average long
term investment results, though, of course, there are no guarantees. The
decline in interest rates in 1995 tended to cause investors to increase the
price they were willing to pay for each $1 of corporate earnings. At the same
time, total corporate earnings were rising rapidly, helping to push stock
prices sharply higher. The relatively strong performance of the stocks of fast-
growing companies in 1995 enabled the Portfolio to achieve extraordinary
returns. The Portfolio's performance was helped by a continuing reduction in
expenses. In 1995, the Portfolio's expense ratio declined to 1.73% from 1.78%
in 1994, and from 1.80% in 1993. The Portfolio is not specifically committed
either to investing in small companies or to a "Growth" style of investing,
where stocks are purchased (regardless of their price) based on the manager's
expectation of growing earnings. Nor is the Portfolio subject to a "momentum"
style of investing where stocks are purchased solely because they are moving up
in price. Typically, the Portfolio seeks to buy companies whose revenues and
earnings are growing at a rate in excess of 30% per annum, and whose shares
sell at a P.E. not greater than one-half of the company's rate of growth. This
strategy combines the best features of growth and value investing.
Historically, most of the companies identified by this strategy are smaller
than the median New York Stock Exchange-listed company, although there are
notable exceptions. A majority of portfolio companies have generally been
traded over-the-counter. Portfolio turnover in 1995 was a moderate 79%, up
slightly from 1994's 66%.
2
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
AVERAGE ANNUAL RETURNS (1)
PERIODS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1 5 LIFE OF FUND
YEAR YEAR (1/7/87)
- ------------------------------------------------------------
<S> <C> <C> <C>
Oberweis Emerging Growth Portfolio 42.6% 26.3% 16.3%
S&P 500 37.6% 16.6% 13.8%
Russell 2000 28.4% 21.0% 11.2%
</TABLE>
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM JANUARY 7, 1987 TO DECEMBER 31, 1995
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1/7/87 12/31/95
- ----------------------------------------------------------
<S> <C> <C>
Oberweis Emerging Growth Portfolio $10,000 $38,753
- ----------------------------------------------------------
S&P 500 $10,000 $31,927
- ----------------------------------------------------------
Russell 2000 $10,000 $25,902
- ----------------------------------------------------------
</TABLE>
(1) Performance is historical and does not represent future results. Investment
returns and principal value vary, and you may have a gain or loss when you sell
shares. Results include the reinvestment of all dividends and capital gains
distributions. The Standard and Poor's Stock Index is an unmanaged index
generally representative of the U.S. stock market. The Russell 2000 Index is an
unmanaged index consisting of 2000 small cap securities with an average market
capitalization of approximately $255 million. A sales load of 4% was charged
until December 31, 1991 and is not reflected in the total return figures or
graph above.
3
<PAGE>
OBERWEIS EMERGING GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995 (Value in thousands)
Equity Securities - 96.7%
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
AIRLINES--2.2%
**120,000 ValuJet Airlines, [email protected] $ 2,970
APPAREL--0.6%
40,000 Kenneth Cole Productions, [email protected] 750
COMMERCIAL SERVICES--4.4%
15,000 Apac Teleservices, [email protected] 501
20,000 Central Sprinkler [email protected] 710
70,000 Employee Solutions, [email protected] 2,380
15,000 ITI Technologies, [email protected] 446
31,000 RTW, [email protected] 814
25,000 Sheridan Healthcare, [email protected] 303
30,000 Sterling Healthcare [email protected] 319
10,000 Sylvan Learning [email protected] 298
15,000 Vista 2000, [email protected] 148
5,919
COMPUTER GRAPHICS--0.6%
**10,000 Diamond Multimedia Systems, [email protected] 359
20,000 Pinnacle Systems, [email protected] 495
854
COMPUTER--INTEGRATED SYSTEMS--3.7%
58,000 Brooktrout Technology, [email protected] 1,653
20,000 Data Research Associates, [email protected] 375
20,000 HCIA, [email protected] 935
20,000 Kronos, [email protected] 950
60,000 PC Docs Group International, Inc. @17.875 1,073
4,986
COMPUTER--LOCAL NETWORKS--3.9%
20,000 Auspex Systems, [email protected] 365
**80,000 Madge Networks [email protected] 3,580
80,000 Microdyne [email protected] 1,360
5,305
COMPUTER--MEMORY DEVICES--2.0%
**58,500 Alliance Semiconductor [email protected] 680
1,000 Network Appliance, [email protected] 40
20,000 Sandisk [email protected] 300
70,000 Silicon Storage Technology, [email protected] 928
20,000 Veritas Software [email protected] 760
2,708
COMPUTER--MINI/MICRO--0.8%
40,000 Micron Electronics, [email protected] 430
52,000 *Scientific Technologies, Inc. @11.500 598
1,028
</TABLE>
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
COMPUTER--OPTICAL RECOGNITION--0.5%
30,000 Robotic Vision Systems, [email protected] $ 724
COMPUTER PERIPHERALS--6.1%
110,000 Eltron International, [email protected] 3,905
**132,000 Mylex [email protected] 2,525
**20,000 *U.S. Robotics [email protected] 1,755
8,185
COMPUTER SERVICES--2.7%
11,900 AmeriData Technologies, Inc. [email protected] --
100,000 CIBER, [email protected] 2,337
55,000 Innodata [email protected] 241
25,000 Renaissance Solutions, [email protected] 356
75,000 Techforce [email protected] 656
3,590
COMPUTER SOFTWARE--15.8%
900 Advent Software, [email protected] 16
100,000 Applix, [email protected] 2,725
10,500 Astea International, [email protected] 240
14,000 Citrix Systems, [email protected] 455
10,000 Computron Software, [email protected] 180
50,000 Datastream Systems, [email protected] 950
**50,000 Electronics for Imaging, [email protected] 2,187
30,000 Firefox Communications, [email protected] 705
25,000 Gemstar International Group [email protected] 709
2,000 GT Interactive [email protected] 28
30,000 Hummingbird Communications [email protected] 1,215
20,000 Insignia Solutions, [email protected] 235
20,000 Legato Systems, [email protected] 620
**10,000 Macromedia, [email protected] 523
30,000 MDL Information [email protected] 690
60,000 Natural MicroSystems [email protected] 1,830
**40,000 NetManage, [email protected] 930
41,000 On Technology [email protected] 533
20,000 Periphonics [email protected] 555
100,000 Physician Computer [email protected] 900
30,000 Platinum Technology, [email protected] 551
25,000 Project Software & [email protected] 872
17,500 Remedy [email protected] 1,037
10,000 Seer Technologies, [email protected] 125
22,500 Smith Micro Software, [email protected] 152
20,000 Software Artistry, [email protected] 300
55,000 Systemsoft [email protected] 619
</TABLE>
See notes to Portfolio of Investments.
4
<PAGE>
Equity Securities - continued
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
70,000 Tecnomatix [email protected] $ 875
50,000 Touchstone Software [email protected] 200
15,600 Unison Software, [email protected] 269
21,226
CONSUMER PRODUCTS--0.2%
10,000 Blyth Industries, [email protected] 295
COSMETICS/PERSONAL CARE--0.4%
64,000 Parlux Fragrances, [email protected] 568
DRUGS--2.5%
40,000 Chantal [email protected] 1,090
20,000 Dura Pharmaceuticals, [email protected] 695
31,000 Watson Pharmaceuticals, [email protected] 1,519
3,304
ELECTRICAL & ELECTRONIC EQUIPMENT--3.4%
35,000 Nu Horizons Electronics [email protected] 621
20,000 Proxim, [email protected] 355
35,000 *Robbins & Meyers, [email protected] 1,050
56,250 Symetrics Industries, [email protected] 436
20,000 Thermospectra [email protected] 313
12,500 Zing Technologies, [email protected] 122
70,000 Zygo [email protected] 1,759
4,656
ELECTRONICS--COMPONENTS/ SEMICONDUCTORS--9.6%
10,000 ADE [email protected] 145
37,000 Advanced Energy [email protected] 333
**60,000 Atmel [email protected] 1,342
20,000 Brooks Automation, [email protected] 265
35,000 C.P. Clare [email protected] 717
60,000 ESS [email protected] 1,380
100,000 Flextronics International [email protected] 3,000
100,000 Genus, [email protected] 750
25,000 Integrated Device Technology, [email protected] 322
20,000 Integrated Silicon [email protected] 335
50,000 Mattson Technology, [email protected] 750
20,000 Micro Linear [email protected] 205
**50,000 Oak Technology, [email protected] 2,113
80,000 Photon Dynamics, [email protected] 640
50,000 Quickturn Design [email protected] 500
20,000 Telcom Semiconductor, [email protected] 145
12,942
</TABLE>
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
ELECTRONICS-LASER SYSTEMS/
COMPONENTS--2.3%
126,000 II-VI, [email protected] $ 1,354
20,000 Charter Power [email protected] 575
10,000 Chicago Miniature Lamp, [email protected] 230
30,000 Electro Scientific Industries, [email protected] 877
3,036
FINANCIAL/BUSINESS SERVICES--0.9%
20,000 First Merchants [email protected] 370
40,000 Mercer International, [email protected] 820
1,190
FOOD--MISCELLANEOUS--0.3%
25,000 Odwalla, [email protected] 412
HEALTH MAINTENANCE ORGANIZATION--0.5%
15,000 Compdent [email protected] 622
INSURANCE--0.3%
10,000 HCC Insurance Holdings, [email protected] 370
LEISURE & RECREATION PRODUCTS--3.8%
10,000 Morrow Snowboards, [email protected] 163
67,500 Regal Cinemas, [email protected] 2,008
**70,000 Ride, [email protected] 2,284
20,000 West Marine, [email protected] 625
5,080
MACHINERY--5.4%
15,000 3D Systems [email protected] 356
40,000 Gleason [email protected] 1,300
25,000 Global Industrial Technologies, [email protected] 472
10,000 Greenfield Industries, [email protected] 312
116,000 *JLG Industries, [email protected] 3,451
1,500 PRI Automation, [email protected] 53
80,000 Zoltek Companies, [email protected] 1,340
7,284
MEDICAL EQUIPMENT & SUPPLIES--1.3%
31,500 Chad Therapeutics, [email protected] 492
90,000 FluroScan Imaging Systems, [email protected] 585
50,000 Medicore, [email protected] 238
10,000 Quintiles Transnational [email protected] 410
1,725
MEDICAL--NURSING HOMES, OUTPATIENT HOMECARE--2.3%
10,000 American Homepatient, [email protected] 295
</TABLE>
See notes to Portfolio of Investments.
5
<PAGE>
Equity Securities - continued
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
10,000 American Medical [email protected] $ 325
35,000 Apogee, [email protected] 324
30,000 Horizon Mental [email protected] 499
5,000 Physician Reliance Network, [email protected] 199
39,066 Retirement Care Associates, [email protected] 396
101,193(a) Retirement Care Associates, [email protected] 684
45,000 Transworld Healthcare, [email protected] 405
3,127
METAL PRODUCTS--0.2%
60,000 Cedar Group, [email protected] 330
PERSONNEL PLACEMENT--0.2%
10,000 Alternative Resources [email protected] 302
POLLUTION CONTROL--0.6%
30,000 U.S. Filter [email protected] 799
RESTAURANTS--5.5%
75,000 Logan's Roadhouse, [email protected] 1,294
100,000 Lone Star Steakhouse & Saloon, [email protected] 3,837
30,000 Outback Steakhouse, [email protected] 1,076
20,000 Papa John's International, [email protected] 824
100,000 Pollo Tropical, [email protected] 412
7,443
RETAIL--APPAREL--2.3%
70,000 Gadzooks, [email protected] 1,767
10,000 Gymboree [email protected] 206
30,000 Just for Feet, [email protected] 1,073
3,046
RETAIL--MISCELLANEOUS--1.4%
10,000 Global Directmail [email protected] 275
35,000 The Maxim Group, [email protected] 473
25,000 Officemax, [email protected] 559
30,000 The Sports Authority, [email protected] 611
1,918
RETAIL/WHOLESALE COMPUTERS--0.4%
40,500 Pomeroy Computer [email protected] 547
SCHOOLS--0.9%
80,000 Youth Services International, [email protected] 1,240
SOAP & CLEANING PREPARATIONS--0.3%
20,000 USA Detergents, [email protected] 470
</TABLE>
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
TELECOMMUNICATIONS--6.8%
50,000 Anicom [email protected] $ 531
35,000 Blonder Tongue [email protected] 341
102,500 Brightpoint, [email protected] 1,448
60,000 Coherent Communication Systems [email protected] 1,155
25,000 Gilat Satellite Networks [email protected] 631
30,000 MRV Communications, [email protected] 761
30,000 Satelite Technology Management @19.250 578
50,000 Saville Systems [email protected] 712
**29,000 Pairgain Technologies, [email protected] 1,588
20,000 Stratacom, [email protected] 1,470
9,215
TEXTILE PRODUCTS--1.3%
20,000 *St. John Knits, [email protected] 1,062
39,900 Supreme International [email protected] 638
1,700
TRUCKING--0.3%
25,000 Knight Transportation, [email protected] 344
TOTAL EQUITY SECURITIES
(COST: $87,073,000) 130,210
Convertible Debt Obligations-3.4%
<CAPTION>
Face
Amount Value
<C> <S> <C>
COMPUTER MEMORY DEVICES--0.5%
$ 600,000 *Seagate Technology
6.75% due [email protected] $ 678
MEDICAL--NURSING HOMES--1.6%
1,500,000 *GranCare, Inc.
6.50% due 1-15-03 @86.250 1,294
1,000,000 *Theratx, Inc.
8.00% due [email protected] 918
2,212
OIL & GAS--0.4%
500,000 *Snyder Oil Corp.
7.00% due [email protected] 464
POLLUTION CONTROL--0.0%
580,000(a) *Growth Environmental, Inc.
9.00% due [email protected] 1
RESTAURANTS 0.9%
1,250,000 Hometown Buffet, Inc.
7.00% due 12-1-02 @100.250 1,253
</TABLE>
See notes to Portfolio of Investments.
6
<PAGE>
Convertible Debt Obligations - continued
<TABLE>
<CAPTION>
Face
Amount Value
<C> <S> <C>
RETAIL--0.0%
600,000(a) *Zam's, Inc.
7.50% due [email protected] $ --
TOTAL CONVERTIBLE DEBT
OBLIGATIONS (COST:
$5,754,000) 4,608
TOTAL INVESTMENTS--
100.1% 134,818
--------
(COST: $92,827,000)
Covered Call Options-(0.6%)
<CAPTION>
Contracts Value
<C> <S> <C>
585 Alliance Semiconductor
Corp.,
January $50 $ --
600 Atmel Corp., February
$35 (11)
100 Diamond Multimedia
Systems,
January $40 (13)
500 Electronics for Imaging,
Inc., January $40 (225)
10 Macromedia, Inc.,
January $50 (5)
20 Macromedia, Inc.,
January $55 (5)
20 Macromedia, Inc.,
February $65 (4)
10 Madge Networks NV,
January $50 --
150 Madge Networks NV,
February $40 (86)
100 Madge Networks NV,
February $45 (28)
50 Mylex Corp., February
$22 (4)
200 NetManage, Inc., January
$30 (1)
300 Oak Technology, Inc.,
January $55 (8)
75 Pairgain Technologies,
Inc., January $45 (79)
200 Pairgain Technologies,
Inc., January $55 (60)
150 Ride, Inc., January $30 (51)
200 U.S. Robotics Corp.,
February $100 (85)
400 ValuJet Airlines, Inc.,
March $25 (125)
200 ValuJet Airlines, Inc.,
March $27 (45)
--------
Total Covered Call
Options (835)
(Premium received:
$1,493,000)
OTHER ASSETS LESS
LIABILITIES--0.5% 680
--------
NET ASSETS--100.0% $134,663
========
</TABLE>
Notes to Portfolio of Investments
* Income producing security during the year ended December 31, 1995.
**The aggregate market value of stocks held in escrow at December 31, 1995
covering open covered call options written was $13,057,000.
Based on the cost of investments of $92,827,000 for federal income tax
purposes at December 31, 1995, the aggregate gross unrealized appreciation was
$49,605,000, the aggregate gross unrealized depreciation was $7,614,000 and
the net unrealized appreciation of investments was $41,991,000.
(a) The following securities are subject to legal or contractual restrictions
on sale. They were valued at cost on the dates of acquisition and at fair
value as determined by the board of trustees of the Fund as of December 31,
1995. The aggregate value of restricted securities was $685,000, or 0.5% of
net assets, at December 31, 1995.
Growth Environmental, Inc. $580,000 face amount convertible debt purchased
in May, 1994 at a cost of $580,000.
Retirement Care Associates, Inc. 84,656 shares purchased in July, 1995 at a
cost of $683,000 and 16,537 shares purchased in August, 1995 at a cost of
$133,000.
Zam's, Inc. $600,000 face amount convertible debt purchased in November,
1993 at a cost of $600,000.
7
See accompanying notes to financial statements.
<PAGE>
OBERWEIS EMERGING GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
(in thousands)
<TABLE>
<S> <C> <C> <C>
ASSETS:
Investment securities at market value (Cost: $92,827) $134,818
Receivables:
Fund shares sold 79
Securities sold 1,176
Dividends and interest 100
-----
Total Receivables 1,355
Prepaid expenses 27
--------
Total Assets 136,200
LIABILITIES:
Cash overdraft 61
Options written, at value (Premiums received: $1,493) 835
Payables:
Fund shares redeemed 181
Securities purchased 260
Payable to adviser 112
Payable to distributor 40
-----
Total Payables 593
Accrued expenses 48
--------
Total Liabilities 1,537
NET ASSETS $134,663
========
ANALYSIS OF NET ASSETS:
Aggregate paid in capital $ 85,853
Accumulated net realized gain from investment transactions 6,161
Net unrealized appreciation of investments 42,649
--------
Net assets $134,663
========
THE PRICING OF SHARES:
Net asset value, offering and redemption price per share
($134,663 divided by 4,630 shares outstanding) $ 29.09
========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
OBERWEIS EMERGING GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
Year ended December 31, 1995
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $114
Interest 448
----
Total Investment Income $ 562
EXPENSES:
Advisory fees 488
Management fees 463
Distribution fees 405
Custodian fees 182
Shareholder servicing fees 174
Transfer agent fees 151
Professional fees 103
Shareholder reports 35
Registration fees 29
Insurance 9
Trustee fees 9
Other 4
----
Total Expenses 2,052
-------
NET INVESTMENT LOSS BEFORE EXPENSE REIMBURSEMENT (1,490)
Expense reimbursement 49
-------
NET INVESTMENT LOSS (1,441)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions 13,550
Net realized loss from covered call options written (1,170)
-------
Total net realized gain on investments 12,380
Increase in unrealized appreciation of investments 27,643
-------
Net realized and unrealized gain on investments 40,023
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $38,582
=======
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
OBERWEIS EMERGING GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (1,441) $ (979)
Net realized gain (loss) from investment transactions 12,380 (17)
Increase (decrease) in unrealized appreciation of
investments 27,643 (3,046)
-------- --------
Net increase (decrease) in net assets resulting from
operations 38,582 (4,042)
-------- --------
FROM DISTRIBUTIONS:
Distributions from net realized gains on investments (6,202) --
-------- --------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 54,110 26,882
Shares issued in reinvestment of distribution 5,983 --
Redemption of shares (47,824) (37,150)
-------- --------
Net increase (decrease) from capital share transactions 12,269 (10,268)
-------- --------
Total increase (decrease) in net assets 44,649 (14,310)
NET ASSETS:
Beginning of year 90,014 104,324
-------- --------
End of year $134,663 $ 90,014
======== ========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Description of Business. The Oberweis Funds (the "Trust") is registered under
the Investment Company Act of 1940 as a diversified open-end management
investment company. The Trust is authorized to operate numerous portfolios
under various trading strategies. Effective January 1, 1996, the Trust consists
of two portfolios: the Oberweis Emerging Growth Portfolio (the "Fund"), which
prior to January 1, 1996 was known as the Oberweis Emerging Growth Fund, and
the Oberweis Micro-Cap Portfolio.
Investment valuation. Investments are stated at value. Each listed and unlisted
security for which last sale information is regularly reported is valued at the
last reported sales price on that day. If there has been no sale on such day,
then such security is valued at the current day's bid price. Any unlisted
security for which last sale information is not regularly reported and any
listed debt security which has an inactive listed market for which over-the-
counter market quotations are readily available is valued at the highest
closing bid price determined on the basis of reasonable inquiry. Restricted
securities and any other securities or other assets for which market quotations
are not readily available are valued by appraisal at their fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Board of Trustees. Short-term debt
obligations, commercial paper and repurchase agreements are valued on the basis
of quoted yields for securities of comparable maturity, quality and type or on
the basis of amortized costs.
Fund share valuation. Fund shares are sold and redeemed on a continuous basis
at net asset value. On each day the New York Stock Exchange is open for
trading, the net asset value per share is determined as of the later of the
close of the New York Stock Exchange or the Chicago Board Options Exchange by
dividing the total value of the Fund's investments and other assets, less
liabilities, by the number of Fund shares outstanding.
Investment transactions and investment income. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date, and interest income is
recorded on the accrual basis and includes amortization of premium and
discount. Realized gains and losses from investment transactions are reported
on an identified cost basis. Gains and losses on premiums from expired options
are recognized on date of expiration.
Repurchase agreements. Repurchase agreements are fully collateralized by U.S.
Treasury and Government agency securities. All collateral is held through the
Fund's custodian bank and is monitored daily by the Fund so that its market
value exceeds the carrying value of the repurchase agreement.
Federal income taxes and dividends to shareholders. The Fund has complied with
the special provisions of the Internal Revenue Code available to investment
companies and therefore no federal income tax provision is required. Dividends
payable to its shareholders are recorded by the Fund on the ex-dividend date. A
dividend consisting of net long term realized gains from the sale of securities
of $6,202,000 in 1995 was paid to shareholders of record on November 27, 1995.
11
<PAGE>
2. TRANSACTIONS WITH AFFILIATES
The Fund has written agreements with Oberweis Asset Management, Inc. ("OAM") as
the Fund's investment adviser, manager and primary shareholder service agent;
and The Chicago Corporation ("TCC") as the Fund's principal distributor.
Advisory agreement. During the year ended December 31, 1995, the Fund paid
monthly investment advisory fees at an annual rate equal to .45% of the first
$50,000,000 of average daily net assets and .40% of average daily net assets in
excess of $50,000,000. For the year ended December 31, 1995, the Fund incurred
an advisory fee totalling $488,000.
Management agreement. During the year ended December 31, 1995, for management
services and facilities furnished, the Fund paid a monthly fee at an annual
rate equal to .40% of average daily net assets. For the year ended December 31,
1995, the Fund incurred a management fee totalling $463,000.
Expense Reimbursement. OAM is obligated to reduce its management fees or
reimburse the Fund to the extent that total ordinary operating expense, as
defined, exceed in any one year the following amounts expressed as a percentage
of the Fund's average daily net assets: 2% of the first $25,000,000; plus 1.8%
of the next $25,000,000; plus 1.6% of average daily net assets in excess of
$50,000,000; or such lower percentage as may be required by any state where the
Fund's shares are registered. For the year ended December 31, 1995, OAM
reimbursed the Fund $49,000.
Officers and trustees. Certain officers or trustees of the Fund are also
officers or directors of OAM. During the year ended December 31, 1995, the fund
made no direct payments to its officers and paid $9,000 to its unaffiliated
trustees. James D. Oberweis, the Fund's portfolio manager, is employed by OAM
and TCC.
Distribution and shareholder service expense. The Fund has a distribution
agreement with TCC. For services under the distribution agreement, the Fund
pays TCC a fee at the annual rate of .35% of the average daily net assets and
reimbursement for certain out-of-pocket expenses. For the year ended December
31, 1995, the Fund incurred a distibution fee totalling $405,000. The Fund has
a shareholder service agreement with OAM. For services under the shareholder
service agreement, the Fund pays OAM a fee at the annual rate of .15% of the
average daily net assets and reimbursement for certain out-of-pocket expenses.
For the year ended December 31, 1995, the Fund incurred a shareholder service
fee totalling $174,000.
Commissions. The Fund pays TCC for executing some of the Fund's agency security
transactions at competitive rates, typically $.03 to $.05 per share. For the
year ended December 31, 1995, the Fund paid commissions of $35,000 to TCC.
12
<PAGE>
3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold during the
year ended December 31, 1995, other than options written and money market
investments, aggregated $92,742,000 and $91,551,000, respectively.
Transactions in options written for the year ended December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Options outstanding at beginning
of year 245 $ 53,000
Options written 27,988 4,908,000
Options expired (13,655) (1,812,000)
Options closed (6,600) (1,112,000)
Options assigned (4,108) (544,000)
------- ----------
Options outstanding at end of
year 3,870 $1,493,000
</TABLE>
The premiums received provide a partial hedge (protection) against declining
prices and enables the Fund to generate a higher return during periods when OAM
does not expect the underlying security to make any major price moves in the
near future but still deems the underlying security to be, over the long term,
an attractive investment for the Fund.
4. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1995 1994
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,039,000 $54,110,000 1,272,000 $ 26,882,000
Shares issued in
reinvestment of dividends 208,000 5,983,000 -- --
Less shares redeemed (1,820,000) (47,824,000) (1,771,000) (37,150,000)
---------- ----------- ---------- ------------
Net increase (decrease)
from capital share
transactions 427,000 $12,269,000 (499,000) $(10,268,000)
</TABLE>
13
<PAGE>
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
year is as follows (c):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1995 1994 1993 1992 1991
-------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of year $ 21.41 $ 22.19 $ 20.90 $ 18.39 $ 12.11
Income from investment
operations:
Net investment loss (.33) (.22) (.22) (.21) (.09)
Net realized and
unrealized gain (loss)
on investments 9.43 (.56) 2.25 2.72 10.64
-------- ------- -------- ------- -------
Total from investment
operations 9.10 (.78) 2.03 2.51 10.55
Less Distributions:
Distribution from net
realized gains on
investments (1.42) -- (.74) -- (4.27)
-------- ------- -------- ------- -------
Net asset value at end
of year $ 29.09 $ 21.41 $ 22.19 $ 20.90 $ 18.39
======== ======= ======== ======= =======
Total Return (%) (b) 42.6 (3.5) 9.7 13.7 87.1
Ratio/Supplemental Data
Net Assets at end of
year (in thousands) $134,663 $90,014 $104,324 $54,063 $19,730
Ratio of expenses to
average net assets (%) 1.73 (a) 1.78 1.80 (a) 1.99 (a) 2.13 (a)
Ratio of net investment
loss to average net
assets (%) (1.24) (1.06) (1.04) (1.14) (1.27)
Portfolio turnover rate
(%) 79 66 70 63 114
</TABLE>
- --------
Notes:
(a) Net of expense reimbursement from related parties. Expense ratios would
have been 1.77%, 1.82%, 2.41%, and 3.01% for 1995, 1993, 1992, and 1991,
respectively before expense reimbursement.
(b) A sales load of 4% was charged until December 31, 1991 and is not reflected
in the total return figures above.
(c) The per share data was determined using average shares outstanding during
the year.
14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders Oberweis Emerging Growth Portfolio
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Oberweis Emerging Growth Portfolio (formerly
known as Oberweis Emerging Growth Fund), a series of The Oberweis Funds, as of
December 31, 1995, the related statements of operations for the year then ended
and changes in net assets and the financial highlights for each of the two
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the years prior to
1994 were audited by other auditors whose report dated February 6, 1994
expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oberweis Emerging Growth Portfolio at December 31, 1995, the results of its
operations for the year then ended, the changes in net assets and the financial
highlights for each of the two years in the period then ended in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Chicago, Illinois
January 30, 1996
15
<PAGE>
LOGO OBERWEIS
EMERGING GROWTH
PORTFOLIO
- --------------------------------------------------------------------------------
James D. Oberweis Peter H. Wendell
Trustee and President Trustee
Douglas P. Hoffmeyer Thomas J. Burke
Trustee Trustee
Patrick B. Joyce Edward F. Streit
Executive Vice President Trustee
Treasurer
Martin L. Yokosawa
James M. Roberts Vice President
Vice President
Anita I. Mraz
Mary Jane Murphy Secretary
Assistant Secretary
MANAGER AND INVESTMENT ADVISOR
Oberweis Asset Management, Inc.
One Constitution Drive, Aurora,
Illinois 60506
(800) 323-6166
DISTRIBUTOR
The Chicago Corporation
208 South LaSalle, Chicago, Illinois 60604
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
P.O. Box 419042, Kansas City, Missouri 64141
(800) 245-7311
COUNSEL
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Chicago, Illinois 60601
INDEPENDENT AUDITORS
Ernst & Young LLP
233 South Wacker Drive, Chicago, Illinois 60606
ANNUAL REPORT
LOGO --------------------------------------
OBERWEIS DECEMBER 31, 1995
EMERGING GROWTH
PORTFOLIO
ONE CONSTITUTION DRIVE
AURORA, IL 60506
(800) 323-6166
<PAGE>
OBERWEIS
MICRO-CAP
PORTFOLIO
- --------------------------------------------------------------------------------
James D. Oberweis Peter H. Wendell
Trustee and President Trustee
Douglas P. Hoffmeyer Thomas J. Burke
Trustee Trustee
Patrick B. Joyce Edward F. Streit
Executive Vice President Trustee
Treasurer
James M. Roberts Martin L. Yokosawa
Vice President Vice President
Mary Jane Murphy Anita I. Mraz
Assistant Secretary Secretary
MANAGER AND INVESTMENT ADVISOR
Oberweis Asset Management, Inc.
One Constitution Drive, Aurora, Illinois 60506
(800)323-6166
DISTRIBUTOR
The Chicago Corporation
208 South LaSalle, Chicago, Illinois 60604
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
P.O. Box 419042, Kansas City, Missouri 64141
(800)245-7311
COUNSEL
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Chicago, Illinois 60601
OBERWEIS
MICRO-CAP -------------------------------------------
PORTFOLIO UNAUDITED
FEBRUARY 29, 1996
ONE CONSTITUTION DRIVE
AURORA, ILLINOIS 60506
(800)323-6166
<PAGE>
OBERWEIS MICRO-CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS
February 29, 1996 (Value in thousands)
Equity Securities - 89.4%
<TABLE>
<CAPTION>
Shares Company Value
<S> <C> <C>
CHEMICALS - 3.3%
10,000 CFC International Inc. $ 108
2,000 Calnetics Corp. 10
8,000 Zoltek Companies Inc. 196
314
COMMERCIAL SERVICES - 13.3%
20,000 Automobile Protection Corp. 83
5,000 Central Sprinkler Corp. 191
5,000 Clinitrials Research Inc. 147
40,000 Digital Solutions Inc. 151
5,000 ITI Technologies Inc. 125
15,000* LCS Industries Inc. 308
20,000 NRP Inc. 160
10,000 Vista 2000 Inc. 119
1,284
COMPUTER-INTEGRATED SYSTEMS - 2.0%
6,000 TCSI Corp. 196
COMPUTER - OPTICAL RECOGNITION - 1.9%
10,000 Percon Inc. 187
COMPUTER - EQUIPMENT/HARDWARD - 1.5%
6,000 Brooktrout Technology Inc. 147
COMPUTER MEMORY DEVICES - 3.0%
5,000 Silicon Storage Technology 61
15,000 Smart Modular Technologies 227
288
COMPUTER PERIPHERALS - 3.0%
5,000 Trident International Inc. 90
15,000 Voice Control Systems Inc. 196
286
COMPUTER SERVICES - 2.5%
4,000 Computer Horizons Corp. 115
10,000 Innodata Corp. 42
8,000 TechForce Corp. 86
243
COMPUTER SOFTWARE - 5.8%
5,000 Aladdin Knowledge Systems 44
1,000 Clarify Inc. 29
20,000 Computer Research Inc. 38
4,000 Insignia Solutions Inc. 23
10,000 Mathsoft Inc. 69
2,000 Project Software & Development 73
5,000 Raptor Systems Inc. 159
8,000 Smith Micro Software Inc. 66
4,000 Software Artistry Inc. 57
558
ELECTRICAL - CONTROL INSTRUMENTS - 0.5%
3,000 Unit Instruments Inc. 43
ELECTRICAL EQUIPMENT - 0.8%
12,500 WPI Group Inc. 82
ELECTRONICS - COMPONENTS/
SEMICONDUCTORS - 9.2%
5,000 Advanced Energy Industries 41
10,000 Photon Dynamics Inc. 95
20,000 R F Power Products 102
10,000 Ross Technology Inc. 127
12,000 Sigma Circuits Inc. 149
10,000 Smartflex Systems 133
10,000 Vitesse Semiconductor Corp. 193
20,000 Vitronics Corp. 51
891
ELECTRONICS - MEASURING INSTRUMENTS - 3.5%
6,000 Thermo Voltek Corp. 114
3,000 Thermospectra Corp. 50
5,000 Zygo Corp. 168
332
ELECTRONICS - MILITARY SYSTEMS - 2.0%
5,000 Nu Horizons Electronics 78
4,000 Stanford Telecommunications 114
192
ELECTRONICS - MISCELLANEOUS - 1.9%
1,000 Chicago Miniature Lamp Inc. 28
2,000 Electro Scientific Industries Inc. 43
6,000 Proxim Inc. 112
183
ELECTRONCS - PARTS DISTRIBUTER - 0.8%
5,000 Sterling Electronics 79
ENERGY DEVELOPMENT - 0.7%
10,000 York Research 64
</TABLE>
See notes to Portfolio of Investments
<PAGE>
<TABLE>
<CAPTION>
Shares Company Value
<S> <C> <C>
FOOD - MISCELLANEOUS - 1.5%
10,000 Unimark Group Inc. $ 143
LEISURE - 2.4%
5,000 CPAC Inc. 69
10,000 NTN Canada Inc. 71
10,000 Todd AO Corp. 93
233
MEDIA - BOOKS - 0.8%
3,000 Educational Development Corp. 75
MEDICAL/DENTAL SUPPLIES - 4.4%
20,000 Cohr Inc. 280
5,000 Conmed Corp. 106
5,000 Medicore Inc. 42
428
MEDICAL INSTRUMENTS - 1.7%
5,000 ESC Medical Systems Ltd 165
METAL PRODUCTS - 2.1%
10,000 Biosource International Inc. 58
10,000 Cedar Group Inc. 58
10,000 Capstone Pharmacy Services 87
203
MEDICAL - OUTPATIENT CARE - 1.0%
5,000 Horizon Mental Health Management 94
PACKAGING - 2.0%
20,000 Integrated Packaging Assemblies 195
PAPER & PAPER PRODUCTS - 0.7%
5,000* Republic Group Inc. 68
PHARMACEUTICAL - 0.5%
6,000 Hi-Tech Pharmacal Co. Inc. 50
POLLUTION CONTROL - 0.1%
2,375 United Air Specialists 11
RESTAURANTS - 2.5%
10,000 Logan's Roadhouse, Inc. 240
RETAIL - MISCELLANEOUS - 4.2%
5,000 Gadzooks Inc. 136
10,000 Maxim Group Inc. 120
10,000 Alrenco Inc. 148
404
SHOES - 0.8%
10,000 Steven Madden Ltd 78
TELECOMMUNICATIONS - 8.4%
15,000 AML Communications Inc. 167
10,000 Anicom Inc. 119
10,000 Blonder Tongue Laboratories 122
5,000 Computer Telephone Corp. 64
15,000 Restor Industries 126
2,000 Tel-Save Holdings Inc. 35
8,000 Tollgrade Communications Inc. 134
5,000 Wegener Corp. 47
814
TEXTILE APPAREL - 0.6%
5,000 Sport-Haley Inc. 54
TOTAL EQUITY SECURITIES
(COST: $7,460,000) 8,624
Commercial Paper - 9.0%
Face Amount Value
872,000 Cigna Corp.
5.37%, due 3/4/96 872
TOTAL COMMERCIAL PAPER 872
(Cost: $872,000)
Repurchase Agreement - 3.7%
359,000 State Street Bank and Trust Co.
Dated 2/29/96, collateralized by
U.S. Treasury Bills
4.00%, 3/1/96 359
TOTAL REPURCHASE AGREEMENT 359
(Cost: $359,000) ------
TOTAL INVESTMENTS - 102.1% 9,855
(COST: $8,691,000)
LIABILITIES LESS OTHER ASSETS - (2.1%) (203)
------
NET ASSETS - 100.0% $9,652
======
</TABLE>
See notes to Portfolio of Investments
Notes to Portfolio of Investments
*Income producing security.
Based on the cost of investments of $8,691,000 for federal income tax purposes
at February 29, 1996, the aggregate gross unrealized appreciation was $1,266,000
the aggregate gross unrealized depreciation was $102,000 and the net unrealized
appreciation of investments was $1,164,000.
<PAGE>
<TABLE>
<CAPTION>
OBERWEIS MICRO-CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996
(in thousands)
<S> <C> <C>
ASSETS:
Investments securities at market value
(Cost: $8,691) $ 9,855
Cash 188
Receivables:
Fund shares sold 153
Dividends and interest 1
---
Total Receivables 154
Prepaid expenses 60
-------
Total Assets 10,257
LIABILITIES:
Payables:
Securities purchased 587
Payable to adviser 4
Payable to distributor 2
---
Total Payables 593
Accrued expenses 12
-------
Total Liabilities 605
NET ASSETS $ 9,652
=======
ANALYSIS OF NET ASSETS:
Aggregate paid in capital $ 8,515
Accumulated net realized loss from investment
transactions (27)
Net unrealized appreciation of investments 1,164
-------
Net assets $ 9,652
=======
THE PRICING OF SHARES:
Net asset value, offering and redemption price per share
($9,652 divided by 830 shares outstanding) $ 11.62
=======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
OBERWEIS MICRO-CAP PORTFOLIO
STATEMENT OF OPERATIONS
For the period from January 1, 1996 (commencement of operations)
to February 29, 1996
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 1
Interest 12
---
Total Investment Income $ 13
EXPENSES:
Advisory fees 6
Custodian fees 5
Transfer agent fees 4
Management fees 4
Distribution fees 3
Organization Expense 2
Professional fees 2
Other 2
---
Total Expenses 28
------
NET INVESTMENT LOSS BEFORE EXPENSE REIMBURSEMENT (15)
Expense reimbursement 7
------
NET INVESTMENT LOSS (8)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from investment transactions (27)
------
Total net realized loss (27)
Increase in net unrealized appreciation of investments 1,164
------
Net realized and unrealized gain on investments 1,137
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,129
======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
OBERWEIS MICRO-CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the period from January 1, 1996 (commencement of operations)
to February 29, 1996
(in thousands)
<S> <C>
FROM OPERATIONS:
Net investment loss $ (8)
Net realized loss from investment transactions (27)
Increase in net unrealized appreciation of investments 1,164
------
Net increase in net assets resulting from operations 1,129
------
FROM CAPITAL SHARE TRANSACTIONS:
Shares sold 8,496
Shares redeemed 73
------
Net increase from capital share transactions 8,423
------
Total increase in net assets 9,552
NET ASSETS:
Beginning of period 100
------
End of period $9,652
======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Description of Business. The Oberweis Funds (the "Trust") is registered under
the Investment Company Act of 1940 as a diversified open-end management
investment company. The Trust is authorized to operate numerous portfolios under
various trading strategies. Effective January 1, 1996, the Trust consists of two
portfolios: the Oberweis Emerging Growth Portfolio, which prior to January 1,
1996 was known as the Oberweis Emerging Growth Fund and the Oberweis Micro-Cap
Portfolio (the Fund).
Organization Costs. The Fund has incurred costs associated with the organization
of the Fund which have been capitalized and are being amortized over a 60 month
period.
Investment valuation. Investments are stated at value. Each listed and unlisted
security for which last sale information is regularly reported is valued at the
last reported sales price on that day. If there has been no sale on such day,
then such security is valued at the current day's bid price. Any unlisted
security for which last sale information is not regularly reported and any
listed debt security which has an inactive listed market for which
over-the-counter market quotations are readily available is valued at the
highest closing bid price determined on the basis of reasonable inquiry.
Restricted securities and any other securities or other assets for which market
quotations are not readily available are valued by appraisal at their fair value
as determined in good faith under procedures established by and under the
general supervision and responsibility of the Board of Trustees. Short-term debt
obligations, commercial paper and repurchase agreements are valued on the basis
of quoted yields for securities of comparable maturity, quality and type or on
the basis of amortized costs.
Fund share valuation. Fund shares are sold and redeemed on a continuous basis at
net asset value. On each day the New York Stock Exchange is open for trading,
the net asset value per share is determined as of the later of the close of the
New York Stock Exchange or the Chicago Board Options Exchange by dividing the
total value of the Fund's investments and other assets, less liabilities, by the
number of Fund shares outstanding.
Investment transactions and investment income. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed).
Divided income is recorded on the ex-dividend date, and interest income is
recorded on the accrual basis and includes amortization of premium and discount.
Realized gains and losses from investment transactions are reported on an
identified cost basis. Gains and losses on premiums from expired options are
recognized on date of expiration.
Repurchase agreements. Repurchase agreements are fully collateralized by U.S.
Treasury and Government agency securities. All collateral is held through the
Fund's custodian bank and is monitored daily by the Fund so that its market
value exceeds the carrying value of the repurchase agreement.
Federal income taxes and dividends to shareholders. The Fund has complied with
the special provisions of the Internal Revenue Code available to investment
companies and therefore no federal income tax provision is required. Dividends
payable to its shareholders are recorded by the Fund on the ex-dividend date.
2. TRANSACTIONS WITH AFFILIATES
The Trust has written agreements with Oberweis Asset Management, Inc. ("OAM") as
the Fund's investment adviser and manager; and The Chicago Corporation ("TCC")
as the Fund's principal distributor.
Advisory agreement. During the period ended February 29, 1996, the Fund paid
monthly investment advisory fees at an annual rate equal to .60% of average
daily net assets. For the period ended February 29, 1996, the Fund incurred an
advisory fee totalling $6,000.
Management agreement. During the period ended February 29, 1996, for management
services and facilities furnished, the Fund paid a monthly fee at an annual rate
equal to .40% of average daily net assets. For the period ended February 29,
1996, the Fund incurred a management fee totalling $4,000.
<PAGE>
Expense Reimbursement. OAM has agreed to reduce its management fees or reimburse
the Fund for total operating expenses in excess of 2.0% of average net assets
for the first 12 months of operations. For the period ended February 29, 1996,
OAM reimbursed the Fund $7,000.
Officers and trustees. Certain officers or trustees of the Fund are also
officers or directors of OAM. During the period ended February 29, 1996, the
fund made no direct payments to its officers or trustees. James D. Oberweis, the
Fund's portfolio manager, is employed by OAM and TCC.
Distribution and shareholder service expense. The Fund has a distribution
agreement with The Chicago Corporation (TCC). For services under the
distribution agreement, the Fund pays TCC a fee at the annual rate of .25% of
the average daily net assets and reimbursement for certain out-of-pocket
expenses. For the period ended February 29, 1996, the Fund incurred a
distribution fee totalling $3,000.
Commissions. The Fund pays TCC for executing some of the Fund's agency security
transactions at competitive rates, typically $.03 to $.05 per share. For the
period ended February 29, 1995, the Fund paid commissions of $300 to TCC.
3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold during the
period ended February 29, 1996, other than options written and money market
investments, aggregated $7,596,000 and $109,000, respectively.
4. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund:
<TABLE>
<CAPTION>
January 1, 1996 - February 29, 1996
-----------------------------------
Shares Amount
------- ----------
<S> <C> <C>
Shares sold 827,000 $8,496,000
Less shares redeemed (7,000) (73,000)
Net increase (decrease) from
capital share transactions 820,000 $8,423,000
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period is as follows (c):
<TABLE>
<CAPTION>
January 1, 1996 to
February 29, 1996
------------------
<S> <C>
Net asset value at beginning of period $10.00
Income from investment operations:
Net investment loss on investments (.01)
Net realized and unrealized gain (loss) on investments 1.63
------
Total from investment operations 1.62
Net asset value at end of period $11.62
======
Total Return (%)(not annualized) 16.2
Ratio/Supplemental Data
Net Assets at end of period (in thousands) $9,652
Ratio of expenses to average net assets (%) 2.00(a,b)
Ratio of net investment loss to average net assets (%) .76(b)
Portfolio turnover rate (%) 12(b)
Average commission rate .03
</TABLE>
Notes:
(a) Net of expense reimbursement from related party. Expense ratio would have
been 2.58% before expense reimbursement.
(b) Annualized.
(c) The per share data was determined using average shares outstanding during
the period. These short-term results may not be indicative of long-term
results.
<PAGE>
OBERWEIS MICRO-CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 2, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS: Cash $100,000
Deferred organizational costs 55,000
--------
$155,000
LIABILITIES: Organizational costs accrued 55,000
--------
NET ASSETS $100,000
========
Shares outstanding (unlimited number of
shares authorized, no par value) 10,000
======
Net asset value, offering price and
redemption price per share $ 10.00
=======
</TABLE>
NOTES:
========
1. Organization. The Oberweis Funds (the "Fund") offers two portfolios,
currently consisting of the Oberweis Emerging Growth and Oberweis Micro-Cap
Portfolios. The Fund is registered under the Investment Company Act of
1940 as a diversified open-end management investment company. The Fund is
authorized to operate numerous portfolios under various trading strategies.
The Fund commenced operations of the Oberweis Emerging Growth Portfolio on
January 7, 1987. The Oberweis Micro-Cap Portfolio has had no operations,
other than those relating to organizational matters, including the sale and
issuance of 10,000 shares to Oberweis Asset Management, Inc. ("OAM") on
October 2, 1995 for $100,000.
2. Organization costs. Costs incurred by the Oberweis Micro-Cap Portfolio in
connection with their organization, registration and the initial public
offering of shares have been deferred and will be amortized on a straight-
line basis over a period of five years from the date upon which the
Portfolio commences their investment activities. If any of the original
shares of the Portfolio are redeemed by any holder prior to the end of the
amortization period, the redemption proceeds will be reduced by the pro
rata share of the unamortized organization costs as of the date of
redemption.
OAM has advanced all of the organizational costs of the Oberweis
Micro-Cap Portfolio. The Portfolio will reimburse OAM for those costs upon
the commencement of operations.
3. The Advisory, Management, and Distribution Agreements. The Fund has
agreements with OAM to provide investment advisory and management services
for each Portfolio. Under the terms of these agreements, the Micro-Cap
Portfolio will pay OAM .60% and .40% of the average daily net assets for
investment advisory and management services, respectively. The Fund also
has a rule 12b-1 Plan and a Distribution and Shareholder Service Agreement
(collectively, the "Plan and Agreement") with The Chicago Corporation
("TCC"). Under the Plan and Agreement, the Fund is to pay TCC a monthly
fee at an annual rate of .25% of each Portfolio's average daily net assets
for distribution and shareholder services and will reimburse TCC for
certain out-of-pocket expenses.
4. Federal Income Taxes. The Micro-Cap Portfolio intends to comply with the
requirements of the Internal Revenue Code necessary to qualify as a
regulated investment company and to make the requisite distributions of the
income to its shareholders which will be sufficient to relieve it from all
or substantially all Federal income taxes.
<PAGE>
Report of Independent Auditors
To the Board of Trustees and Shareholder
We have audited the accompanying statement of assets and liabilities of Oberweis
Micro-Cap Portfolio as of October 2, 1995. This statement of assets and
liabilities is the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Oberweis
Micro-Cap Portfolio at October 2, 1995, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Chicago, Illinois
October 2, 1995
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS-INCLUDED IN STATEMENT OF ADDITIONAL INFORMATION (PART
B).
Oberweis Emerging Growth Fund Financial Statements and Independent
Auditors' Report thereon
(a) Portfolio of Investments as of December 31, 1995.
(b) Statement of Assets and Liabilities as of December 31, 1995.
(c) Statement of Operations for the Year Ended December 31, 1995.
(d) Statement of Changes in Net Assets for the Years Ended December
31, 1995 and 1994.
(e) Notes to Financial Statements
Oberweis Micro-Cap Portfolio
(a) Portfolio of Investments as of February 29, 1996 (unaudited)
(b) Statements of Assets and Liabilities as of February 29, 1996
(unaudited)
(c) Statement of Operations for the period from January 1, 1996
(commencement of operations) to February 29, 1996 (unaudited)
(d) Statement of Changes in Net Assets for the period from January 1,
1996 (commencement of operations) to February 29, 1996
(unaudited)
(e) Notes to Financial Statements (unaudited)
(f) Statements of Assets and Liabilities as of October 2, 1995
(audited)
(g) Notes to Financial Statements
Oberweis Mid-Cap Portfolio
(a) Statement of Assets and Liabilities as of June 18, 1996.
(b) Notes to Financial Statements.
Schedules II, III, IV, V, VI and VII are omitted and the required
information is not presented.
Schedule I has been omitted and the required information is presented in
the portfolio of investments.
(B) EXHIBITS.
1. Agreement and Declaration of Trust dated July 7, 1986/11/
1.1 First Amendment to Agreement and Declaration of Trust, dated
November 17, 1986/11/
2. By-Laws/11/
3. None
4. Form of Specimen Certificates of Shares of Beneficial Interest/11/
4.1 Specimen Certificates of Shares of Beneficial Interest/2/
5.1 Management Agreement/5/
5.1.1 Amendment to Management Agreement as of February 16, 1994/9/
5.1.2 Management Agreement dated October 1, 1994/11/
5.2 Investment Advisory Agreement/5/
5.2.1 Investment Advisory Agreement dated October 1, 1994/11/
5.2.2 Transfer and Guaranty Agreement/7/
C-1
<PAGE>
5.2.3 Written Notification required under Investment Advisory Agreement dated
October 1, 1994 regarding the rendering of advisory services to the
Micro-Cap Portfolio./12/
6. None
7. None
8. Custodian Agreement/1/
8.1 Letter Agreements renewing Custodian Agreement dated February 24,
1988,/3/ February 21, 1989,/4/ February 7, 1990,/5/ February 15,
1991,/6/ and February 13, 1992,/7/ respectively
8.2 Letter Agreement dated January 27, 1993, renewing Custodian Agreement/8/
8.3 Custodian Agreement dated August 3, 1993/11/
9. Transfer Agency Agreement/1/
9.1 Letter Agreements renewing Transfer Agency Agreement dated February 24,
1988,/3/ February 21, 1989,/4/ February 7, 1990,/5/ February 15, 1991,/6/
and February 13, 1992,/7/ respectively
9.2 Letter Agreement dated January 27, 1993, renewing Transfer Agency
Agreement/8/
9.3 Transfer Agent Agreement dated August 3, 1993/11/
10.1 Form of Opinion and Consent of Lawrence, Kamin, Saunders & Uhlenhop/1A/
10.1.1 Consent and Opinion of Vedder, Price, Kaufman & Kammholz/13/
10.2 Form of Opinion of Ropes & Gray/1A/
10.2.1 Opinion and Consent of Ropes & Gray/13/
*11.1 Consent of Ernst & Young LLP
*11.2 Consent of Checkers, Simon & Rosner LLP
12. Not applicable
13. Form of Contribution Agreement with Initial Shareholders/1/
13.1 Contribution Agreement dated December 8, 1986, from James D. Oberweis
with respect to the purchase of an aggregate of 5,500 shares as
custodian for two minor children for $10.00 each (a total of $55,000)/2/
13.2 Contribution Agreement dated December 8, 1986, from Lora J. Oberweis
with respect to the purchase of 2,000 shares for $10.00 each (a total
of $20,000)/2/
13.3 Contribution Agreement dated December 8, 1986, from Helen Cisek with
respect to the purchase of 1,500 shares for $10.00 each (a total of
$15,000)/2/
13.4 Contribution Agreement dated December 8, 1986, from Tedd Determan with
respect to the purchase of an aggregate of 1,000 shares for $10.00 each
(a total of $10,000)/2/
14.1 Individual Retirement Custodial Account Agreement, Disclosure Statement,
Form of Account Application, Request Form/11/ and Transfer
15.1 Plan of Distribution pursuant to Rule 12b-1/4/
15.2 Distribution and Shareholder Service Agreement/5/
15.3 Amendment to Plan of Distribution pursuant to Rule 12b-1 and
Distribution and Shareholder Service Agreement/8/
C-2
<PAGE>
15.4 Plan of Distribution pursuant to Rule 12b-1 as amended October 1, 1994
/11/
15.4.1 Form of Plan of Distribution pursuant to Rule 12b-1 as amended January
1, 1996/11/
15.5 Distribution Agreement dated October 1, 1994/11/
15.5.1 Form of Distribution and Shareholder Service Agreement dated January 1,
1996/11/
15.6 Shareholder Service Agreement dated October 1, 1994/11/
16. Calculation of Performance Data/11/
*27. Financial Data Schedule
_________
/*/ Filed herewith.
/1/ Previously filed with the Registration Statement and incorporated herein by
reference.
/1A/ Previously filed with the Registration Statement.
/2/ Previously filed with Pre-Effective Amendment No. 2 (Amendment No. 2) dated
January 14, 1987 and incorporated herein by reference.
/2A/ Previously filed with Pre-Effective Amendment No. 2.
/3/ Previously filed with Post-Effective Amendment No. 2 (Amendment No. 4)
dated February 28, 1988.
/4/ Previously filed with Post-Effective Amendment No. 3 (Amendment No. 5)
dated March 2, 1989 and incorporated herein by reference.
/5/ Previously filed with Post-Effective Amendment No. 4 (Amendment No. 6)
dated February 28, 1990 and incorporated herein by reference.
/6/ Previously filed with Post-Effective Amendment No. 5 (Amendment No. 7)
dated March 1, 1991 and incorporated herein by reference.
/7/ Previously filed with Post-Effective Amendment No. 6 (Amendment No. 8)
dated March 2, 1992 and incorporated herein by reference.
/8/ Previously filed with Post-Effective Amendment No. 7 (Amendment No. 9)
dated March 1, 1993 and incorporated herein by reference.
/9/ Previously filed with Post-Effective Amendment No. 8 (Amendment No. 10)
dated April 29, 1994 and incorporated herein by reference.
/10/ Previously filed with Post-Effective Amendment No. 9 (Amendment No. 11)
dated February 28, 1995 and incorporated herein by reference.
/11/ Previously filed via EDGAR with Post-Effective Amendment No. 10 (Amendment
No. 12) dated October 18, 1995 and incorporated herein by reference.
/12/ Previously filed with Post-Effective Amendment No. 11 (Amendment No. 13)
dated December 21, 1995 and incorporated herein by reference.
/13/ Previously filed with Post-Effective Amendment No. 11 (Amendment No. 13)
dated December 21, 1995
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of May 31, 1996, the number of record holders of each class of shares of
the Registrant were as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
- -------------------- --------------
<S> <C>
Oberweis Emerging
Growth Portfolio 8,562
Oberweis Micro-Cap
Portfolio 2,846
</TABLE>
ITEM 27. INDEMNIFICATION
A response has been previously filed with Pre-Effective Amendment No. 2
(Amendment No. 2) dated January 14, 1987 and is incorporated herein by
reference. The Fund has also purchased a liability policy which indemnifies the
Fund's officers and trustees against loss arising from claims by reason of their
legal liability for acts as officers and trustees, subject to limitations and
conditions as set forth in such policy.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to trustees, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has
C-3
<PAGE>
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, and the Commission remains of the same opinion, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTION OF INVESTMENT ADVISER.
(a) Oberweis Asset Management, Inc.
Oberweis Asset Management, Inc. ("OAM") was organized in 1989. Its
activities are limited to acting as an investment adviser.
(b) Set forth below are the names of the directors and officers of OAM (other
than those officers who are also officers of the Registrant) and any other
business, profession, vocation or employment of a substantial nature in which
such directors and officers have been involved an any time during the past two
fiscal years.
<TABLE>
<CAPTION>
NAME AND
POSITIONS WITH OAM NAME OF COMPANY POSITION
- -------------------- ----------------------------- -----------------------
<S> <C> <C>
Elaine M. Oberweis Oberweis Dairy, Inc. Chief Executive Officer
Director 951 Ice Cream Drive
North Aurora, Illinois 60542
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) None.
(b) Set forth below are the names of the directors and officers of The Chicago
Corporation.
<TABLE>
<CAPTION>
<S> <C>
John A. Wing, Wilbert A. Thiel,
Chairman of the Board of Directors Director, President, Treasurer and
and Chief Executive Officer Chief Operating Officer
Robert T. Brehm, Faris F. Chesley,
Director, Executive Vice Vice Chairman of the Board of
President, President-Asset Directors
Management Group
Richard W. Durkes, Jon T. Ender,
Director, Executive Vice President Director, Executive Vice President
John C. Harris, Timothy O'Gorman,
Director, Executive Vice President Director, Executive Vice President
Paul W. Oliver, Jr., Perry L. Taylor, Jr.,
Director, Executive Vice President Director, Executive Vice President,
General Counsel, Secretary
Peter H. Wendell, David K. Beecken,
Director, Executive Vice President Director, Senior Vice President
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Patrick K. Blackburn, Jack W. Blumenstein,
Director, Senior Vice President Director, Executive Vice President
Jay K. Buck, John T. Coyne,
Director, Senior Vice President Director, Senior Vice President
Victor Elting III,
Director, Senior Vice President
Walter D. Fitzgerald, Frederic D. Floberg,
Director, Senior Vice President Director, Senior Vice President
James M. Florsheim Brian F. Foley,
Director, Senior Vice President Director, Senior Vice President
Thomas G. Hallal, Lawrence J. Hanson,
Director, Senior Vice President Director, Senior Vice President
Jeffrey M. Herr, Jack W. Kindegran
Director, Senior Vice President Director, Senior Vice President
Charles R. Klimkowski, Barbara L. Lamb
Director, Senior Vice President Director, Senior Vice President
Edward J. Laux
Director, Senior Vice President
James D. McDonald Kenneth H. McLellan, Jr.,
Director, Senior Vice President Director, Senior Vice President, Assistant Secretary
Charles J. Moore, Thomas A. Mueller,
Director, Senior Vice President Director, Senior Vice President
Leonard O'Driscoll Joseph A. Oliva,
Director, Senior Vice President Director, Senior Vice President
Willard J. Peterson,
Director, Senior Vice President
Richard M. Schaeffer, Ronald M. Schutz,
Director, Senior Vice President Director, Senior Vice President
William C. Steinmetz, Gordon L. Teach
Director, Senior Vice President Director, Senior Adviser to the
Chairman
William A. Trader, Ralph Collins Walter III,
Director, Senior Vice President Director, Senior Vice President,
Chief Administrative Officer
W. Peter Williams, Edward Stuart Winter,
Director, Senior Vice President Director, Senior Vice President
Ben A. Witt, Michael Woodhead
Director, Senior Vice President Director, Senior Vice President
</TABLE>
C-5
<PAGE>
The principal business address of all such persons is 208 South LaSalle Street,
Chicago, Illinois 60604. Other than Mr. Wendell, a Trustee of the Fund, no
listed person holds a position or office with the Registrant.
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of Oberweis Asset Management, Inc.
at its offices at 951 Ice Cream Drive, North Aurora, Illinois 60542, except
those books, records and other documents maintained by the custodian, transfer
agent and registrar, Investors Fiduciary Trust Company, which are located at its
offices at 127 West 10th Street, 16th Floor, Kansas City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Registrant hereby undertakes to file a Post-Effective Amendment to this
Registration Statement, containing reasonably current financial statements
for the Mid-Cap Portfolio that need not be certified, within four to six
months after the effective date of this registration statement.
(c) The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest Annual
Report to Shareholders upon request and without charge.
C-6
<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 Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of North Aurora, State of Illinois, on the 28th day of
June, 1996.
THE OBERWEIS FUNDS
By:/s/James D. Oberweis
- -------------------------------
James D. Oberweis, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ James D. Oberweis President (Principal Executive June 28, 1996
- -------------------------- Officer) and Trustee
James D. Oberweis
/s/ Thomas J. Burke Trustee June 28, 1996
- --------------------------
Thomas J. Burke
Trustee
- --------------------------
Douglas P. Hoffmeyer
/s/ Edward F. Streit Trustee June 28, 1996
- --------------------------
Edward F. Streit
/s/ Peter H. Wendell Trustee June 28, 1996
- --------------------------
Peter H. Wendell
/s/ Patrick B. Joyce Executive Vice President and June 28, 1996
- -------------------------- Treasurer (Principal Financial
Patrick B. Joyce and Accounting Officer)
</TABLE>
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
1. Agreement and Declaration of Trust dated July 7, 1986/11/
1.1 First Amendment to Agreement and Declaration of Trust, dated November
17, 1986/11/
2. By-Laws/11/
3. None
4. Form of Specimen Certificates of Shares of Beneficial Interest/11/
4.1 Specimen Certificates of Shares of Beneficial Interest/2/
5.1 Management Agreement/5/
5.1.1 Amendment to Management Agreement as of February 16, 1994/9/
5.1.2 Management Agreement dated October 1, 1994/11/
5.2 Investment Advisory Agreement/5/
5.2.1 Investment Advisory Agreement dated October 1, 1994/11/
5.2.2 Transfer and Guaranty Agreement/7/
5.2.3 Written Notification required under Investment Advisory Agreement dated
October 1, 1994 regarding the rendering of advisory services to the
Micro-Cap Portfolio/12/
6. None
7. None
8. Custodian Agreement/1/
8.1 Letter Agreements renewing Custodian Agreement dated February 24, 1988,
/3/ February 21, 1989,/4/ February 7, 1990,/5/ February 15, 1991,/6/,
and February 13, 1992,/7/ respectively
8.2 Letter Agreement dated January 27, 1993, renewing Custodian Agreement
/8/
8.3 Custodian Agreement dated August 3, 1993/11/
9. Transfer Agency Agreement/1/
9.1 Letter Agreements renewing Transfer Agency Agreement dated February 24,
1988,/3/ February 21, 1989,/4/ February 7, 1990,/5/ February 15, 1991,
/6/ and February 13, 1992,/7/ respectively
9.2 Letter Agreement dated January 27, 1993, renewing Transfer Agency
Agreement/8/ 9.3 Transfer Agent Agreement dated August 3, 1993/11/
10.1 Form of Opinion and Consent of Lawrence, Kamin, Saunders & Uhlenhop/1A/
10.1.1 Consent and Opinion of Vedder, Price, Kaufman & Kammholz/13/
10.2 Form of Opinion of Ropes & Gray/1A/
10.2.1 Opinion and Consent of Ropes & Gray/13/
*11.1 Consent of Ernst & Young LLP
*11.2 Consent of Checkers, Simon & Rosner LLP
</TABLE>
C-8
<PAGE>
<TABLE>
<C> <S>
12. Not applicable
13. Form of Contribution Agreement with Initial Shareholders/1/
13.1 Contribution Agreement dated December 8, 1986, from James D. Oberweis
with respect to the purchase of an aggregate of 5,500 shares as
custodian for two minor children for $10.00 each (a total of
$55,000)/2/
13.2 Contribution Agreement dated December 8, 1986, from Lora J. Oberweis
with respect to the purchase of 2,000 shares for $10.00 each (a total
of $20,000)/2/
13.3 Contribution Agreement dated December 8, 1986, from Helen Cisek with
respect to the purchase of 1,500 shares for $10.00 each (a total of
$15,000)/2/
13.4 Contribution Agreement dated December 8, 1986, from Tedd Determan with
respect to the purchase of an aggregate of 1,000 shares for $10.00 each
(a total of $10,000)/2/
14.1 Individual Retirement Custodial Account Agreement, Disclosure
Statement, Form of Account Application, and Transfer Request Form/11/
15.1 Plan of Distribution pursuant to Rule 12b-1/4/
15.2 Distribution and Shareholder Service Agreement/5/
15.3 Amendment to Plan of Distribution pursuant to Rule 12b-1 and
Distribution and Shareholder Service Agreement/8/
15.4 Plan of Distribution pursuant to Rule 12b-1 as amended October 1, 1994
/11/
15.4.1 Form of Plan of Distribution pursuant to Rule 12b-1 as amended January
1, 1996./11/
15.5 Distribution Agreement dated October 1, 1994./11/
15.5.1 Form of Distribution and Shareholder Service Agreement dated January
1, 1996./11/
15.6 Shareholder Service Agreement dated October 1, 1994./11/
16. Calculation of Performance Data/11/
*27. Financial Data Schedule
</TABLE>
/*/ Filed herewith.
/1/ Previously filed with the Registration Statement and incorporated herein by
reference.
/1A/ Previously filed with the Registration Statement.
/2/ Previously filed with Pre-Effective Amendment No. 2 (Amendment No. 2) dated
January 14, 1987 and incorporated herein by reference.
/2A/ Previously filed with Pre-Effective Amendment No. 2.
/3/ Previously filed with Post-Effective Amendment No. 2 (Amendment No. 4)
dated February 28, 1988.
/4/ Previously filed with Post-Effective Amendment No. 3 (Amendment No. 5)
dated March 2, 1989 and incorporated herein by reference.
/5/ Previously filed with Post-Effective Amendment No. 4 (Amendment No. 6)
dated February 28, 1990 and incorporated herein by reference.
/6/ Previously filed with Post-Effective Amendment No. 5 (Amendment No. 7)
dated March 1, 1991 and incorporated herein by reference.
/7/ Previously filed with Post-Effective Amendment No. 6 (Amendment No. 8)
dated March 2, 1992 and incorporated herein by reference.
/8/ Previously filed with Post-Effective Amendment No. 7 (Amendment No. 9)
dated March 1, 1993 and incorporated herein by reference.
/9/ Previously filed with Post-Effective Amendment No. 8 (Amendment No. 10)
dated April 29, 1994 and incorporated herein by reference.
/10/ Previously filed with Post-Effective Amendment No. 9 (Amendment No. 11)
dated February 28, 1995 and incorporated herein by reference.
/11/ Previously filed via EDGAR with Post-Effective Amendment No. 10 (Amendment
No. 12) dated October 18, 1995 and incorporated herein by reference.
/12/ Previously filed with Post-Effective Amendment No. 11 (Amendment No. 13)
dated December 21, 1995 and incorporated herein by reference.
/13/ Previously filed with Post-Effective Amendment No. 11 (Amendment No. 13)
dated December 21, 1995.
C-9
<PAGE>
EXHIBIT 11.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our reports dated January 30, 1996, October 2, 1995 and June 18, 1996 for
the Oberweis Emerging Growth Portfolio, the Oberweis Micro-Cap Portfolio and the
Oberweis Mid-Cap Portfolio, respectively, in the Registration Statement (Form N-
1A) and related Prospectus of The Oberweis Funds, filed with the Securities and
Exchange Commission in this Post-Effective Amendment No. 13 to the Registration
Statement under Securities Act of 1933 (Registration No. 33-9093) and in this
Amendment No. 15 to the Registration Statement under the Investment Company Act
of 1940 (Registration No. 811-4854).
/s/ ERNST & YOUNG LLP
Chicago, Illinois
June 26, 1996
ERNST & YOUNG LLP
<PAGE>
EXHIBIT 11.2
[LOGO OF CHECKERS SIMON & ROSNER]
Consent of Checkers, Simon & Rosner LLP
We have issued our report dated February 6, 1994, accompanying the financial
statements of Oberweis Emerging Growth Fund, not contained in this Registration
Statement and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus and to the use of our name as
referenced under Additional Information.
/s/ CHECKERS SIMON & ROSNER LLP
Chicago, Illinois
July 1, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Dec. 31,
1995 Annual Report and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 92,827
<INVESTMENTS-AT-VALUE> 134,818
<RECEIVABLES> 1,355
<ASSETS-OTHER> 27
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 136,200
<PAYABLE-FOR-SECURITIES> 260
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,277
<TOTAL-LIABILITIES> 1,537
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85,853
<SHARES-COMMON-STOCK> 4,630
<SHARES-COMMON-PRIOR> 4,203
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,161
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,649
<NET-ASSETS> 134,663
<DIVIDEND-INCOME> 114
<INTEREST-INCOME> 448
<OTHER-INCOME> 0
<EXPENSES-NET> 2,003
<NET-INVESTMENT-INCOME> (1,441)
<REALIZED-GAINS-CURRENT> 12,380
<APPREC-INCREASE-CURRENT> 27,643
<NET-CHANGE-FROM-OPS> 38,582
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (6,202)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,039
<NUMBER-OF-SHARES-REDEEMED> (1,820)
<SHARES-REINVESTED> 208
<NET-CHANGE-IN-ASSETS> 44,649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (17)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 488
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,052
<AVERAGE-NET-ASSETS> 115,826
<PER-SHARE-NAV-BEGIN> 21.41
<PER-SHARE-NII> (.33)
<PER-SHARE-GAIN-APPREC> 9.43
<PER-SHARE-DIVIDEND> .0
<PER-SHARE-DISTRIBUTIONS> (1.42)
<RETURNS-OF-CAPITAL> .0
<PER-SHARE-NAV-END> 29.09
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
