<PAGE>
SEC Filing Fees Account #0000803020
AS FILED WITH THE SECURITIES AND EXCHANGE 1933 ACT FILE NO. 33-9093
COMMISSION ON SEPTEMBER 12, 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. 14 [X]
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 [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, Suite 200
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)
[X] on September 15, 1996 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[ ] 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>
The Oberweis Funds
The Oberweis Funds (the "Fund") is a managed, diversified, open-end mutual fund
currently
consisting of three portfolios--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 September 15, 1996 as
may be amended from time to time has been filed with the Securities and Ex-
change Commission and may be obtained without charge by calling or writing the
Fund at the telephone number or address listed below. The Statement of Addi-
tional Information 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................................................................. 11
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 September 15, 1996
<PAGE>
SYNOPSIS OF FEES
<TABLE>
<CAPTION>
PORTFOLIO
---------------------
EMERGING MICRO- MID-
SHAREHOLDER TRANSACTION EXPENSES(1) 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% .25% .25%
Other Expenses........................................... .34% .50% .95%
Total Fund Operating Expenses(2)......................... 1.41% 1.75% 2.00%
</TABLE>
- --------
(1) Investment dealers and other firms may independently charge additional
fees for shareholder transactions or for advisory services; please see their
materials for details.
(2) The Manager will reimburse each Portfolio for total operating expenses in
excess 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. 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......................... $14 $45 $77 $169
Micro-Cap Portfolio............................... $20 $58 $98 $210
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 Mid-Cap
Portfolio are based on estimates of expenses for the current fiscal year. The
examples are based on the expenses in the table and a hypothetical annual rate
of return of 5%. The Mid-Cap Portfolio commenced the public offering of shares
on September 15, 1996, thus estimates of expenses in the example are shown for
only the one and three year periods. THE EXAMPLES SHOULD NOT BE CONSIDERED 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 explanation
of the fees and expenses borne by each Portfolio, please see the discussions
under the Prospectus headings "The Advisory and Management Agreements," "Dis-
tribution of Shares," "Expenses of the Fund," and "Portfolio Transactions," as
well as the Statement of Additional Information incorporated by reference into
this Prospectus.
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 YEARS ENDED DECEMBER 31,
----------- -------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
----------- ----------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 29.09 $ 21.41 $ 22.19 $ 20.90 $ 18.39 $ 12.11
Income from Investment
Operations:
Net investment loss..... (0.11) (0.33) (0.22) (0.22) (0.21) (0.09)
Net realized and
unrealized gain (loss)
on investments......... 6.28 9.43 (0.56) 2.25 2.72 10.64
-------- ----------- -------- ----------- ---------- ----------
Total from investment
operations............. 6.17 9.10 (0.78) 2.03 2.51 10.55
Less Distributions:
Net realized gain on
investments............ -- (1.42) -- (0.74) -- (4.27)
-------- ----------- -------- ----------- ---------- ----------
Net Asset Value, End of
Period................. $ 35.26 $ 29.09 $ 21.41 $ 22.19 $ 20.90 $ 18.39
======== =========== ======== =========== ========== ==========
Total Return (%)(b)..... 21.2(e) 42.6 (3.5) 9.7 13.7 87.1
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $207,450 $134,663 $90,014 $104,324 $54,063 $19,730
Ratio of expenses to
average net assets (%). 1.41(c) 1.73(a) 1.78 1.80(a) 1.99(a) 2.13(a)
Ratio of net investment
loss to average net
assets (%)............. 0.65(c) (1.24) (1.06) (1.04) (1.14) (1.27)
Portfolio turnover rate
(%).................... 61 79 66 70 63 114
Average commission rate
paid................... 0.0311 -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1990 1989 1988 1987(D)
---------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 12.06 $ 9.65 $ 9.13 $ 10.04
Income from Investment
Operations:
Net investment loss..... (0.24) (0.35) (0.20) (0.15)
Net realized and
unrealized gain (loss)
on investments......... 0.29 2.76 0.72 (0.76)
---------- ---------- -------- -----------
Total from investment
operations............. 0.05 2.41 0.52 (0.91)
Less Distributions:
Net realized gain on
investments............ -- -- -- --
---------- ---------- -------- -----------
Net Asset Value, End of
Period................. $ 12.11 $ 12.06 $ 9.65 $ 9.13
========== ========== ======== ===========
Total Return (%)(b)..... 0.4 25.0 5.7 (9.1)
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $11,604 $12,940 $15,914 $16,856
Ratio of expenses to
average net assets (%). 2.15(a) 2.00(a) 2.46 1.99(c)
Ratio of net investment
loss to average net
assets (%)............. (1.24) (1.19) (1.80) (1.48)(c)
Portfolio turnover rate
(%).................... 62 112 67 55
Average commission rate
paid................... -- -- -- --
</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.
(e) Total return has not been annualized.
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............................... $10.00
Income from Investment Operations:
Net investment loss............................................... --
Net realized and unrealized gain (loss) on investments............ 3.92
-------
Total from investment operations.................................. 3.92
Less Distributions:
Net realized gain on investments.................................. --
-------
Net Asset Value, End of Period.................................... $ 13.92
=======
Total Return (%) 39.2(c)
Ratios/Supplemental Data:
Net assets, end of period (in thousands).......................... $45,352
Ratio of expenses to average net assets (%)....................... 1.75(a)
Ratio of net investment loss to average net assets (%)............ (0.01)
Portfolio turnover rate (%)....................................... 40
Average commission rate paid...................................... 0.0300
</TABLE>
- --------
(a) Annualized.
(b) From inception of Portfolio, January 1, 1996.
(c) Total return has not been annualized.
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% 37.7%
Dow-Jones Industrial Average.......................... 33.5% 27.1%
S&P 500............................................... 37.6% 26.0%
NASDAQ National Composite............................. 39.9% 27.0%
Lipper Small Company Growth Index..................... 31.4% 30.3%
Russell 2000 Index.................................... 28.4% 23.9%
Wilshire 5000 Index................................... 36.4% 26.2%
</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 June 30, 1996 are:
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PAST PAST LIFE OF FUND
1 YEAR 5 YEARS (1/7/87)
------ ------- ------------
<S> <C> <C> <C>
Emerging Growth Portfolio..................... 37.7% 23.4% 17.7%
S&P 500....................................... 26.0% 13.7% 14.2%
Russell 2000 Index............................ 23.9% 17.5% 11.7%
</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>
ASSUMED $10,000 INVESTMENT IN THE EMERGING GROWTH PORTFOLIO
FROM 1/07/87 THROUGH 6/30/96
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM JANUARY 7, 1987 TO JUNE 30, 1996
LOGO
All data assumes reinvestment of dividends and capital gains. Results represent
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 ap-
plied 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 avail-
able 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 Mid-Cap Portfolio will generally invest in companies with market capital-
ization between $500 million and $5 billion at the time of acquisition.
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.
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. Although securi-
ties of a particular company may be eligible for purchase by more than one
Portfolio, OAM may determine that at any particular time it is appropriate to
purchase a security for one Portfolio but not another. In addition, transac-
tions in a particular security may not be accomplished for all Portfolios at
the same time or the same price.
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 invest-
ment program. Dividends 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.
8
<PAGE>
Restricted Securities. Each Portfolio may not invest more than 5% of its total
assets in securities that are not readily marketable, including repurchase
agreements with maturities of seven days or more, and securities of unseasoned
issuers that have been in continuous 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 restricted (all of which are collectively referred to
as "restricted securities"). Restricted securities may be resold by the Portfo-
lio to other institutions. 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 institu-
tional trading in restricted securities is relatively new, it is not possible
to predict how these institutional markets will develop. If institutional trad-
ing in restricted 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
9
<PAGE>
expropriation or diplomatic developments that could affect investment in these
countries.
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 ("Mr. Oberweis"), portfolio manager of both the Emerging
Growth and the Micro-Cap Portfolio since its inception. Mr. Oberweis and James
W. Oberweis are co-portfolio managers of the Mid-Cap Portfolio.
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 shareholder 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 experience
in selecting securities for investment for private clients. In addition to the
Fund, Mr. Oberweis manages segregated accounts for institutional and individual
investors. James W. Oberweis is a Vice President of the Fund and OAM and a reg-
istered representative of TCC. James W. Oberweis joined OAM in 1995 as a
Portfolio Manager. Prior to joining OAM, James W.
Oberweis was a student at the University of Illinois, where he earned a Bache-
lor of Science degree in Engineering.
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.
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<PAGE>
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 objectives and policies of each of the respective Portfolios, sub-
ject to the general supervision of the Trustees. As compensation for its
investment advisory services, 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 mil-
lion 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 Portfolio.
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 post-
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<PAGE>
age, data entry, modification 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 Agreement, such costs must be actual, out-of-pocket costs, and the to-
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. It is also anticipated that certain officers and/or trustees of the
Fund, who are also officers and/or directors of TCC, may have to alter their
affiliation with the Fund or TCC to satisfy regulatory requirements related to
such acquisition.
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.
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<PAGE>
HOW TO PURCHASE SHARES
GENERAL--The minimum initial investment for each Portfolio is $1,000. This
minimum 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
dealer, bank or other institution having a sales agreement with TCC or by con-
tacting 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
number, 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 im-
mediately. 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, includ-
ing 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
redemption 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 de-
termined that your check has cleared, which may 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.
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<PAGE>
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. The Transfer Agent employs procedures reasonably designed to confirm
that instructions communicated by telephone are genuine, including requiring
certain identifying information prior to acting upon instructions, recording
all telephone instructions and sending written confirmation of telephone in-
structions. Provided such procedures are reasonably followed, neither the Fund
nor the Transfer Agent would be liable for any losses from instructions commu-
nicated by telephone even if unauthorized or fraudulent.
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 na-
tional securities exchange, registered securities association or clearing
agency, and/or savings association. The Transfer Agent may reject redemption
instructions if the guarantor is neither a member of nor a participant in a
signature guarantee program (currently known as "STAMP"). A redemption request
for shares held by a corporation, trust, partnership, agent or fiduciary must
be signed by an appropriately authorized person and include additional docu-
ments of a customary nature to verify the authority of the person seeking
redemption, such as a certified 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 requiring 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
14
<PAGE>
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 regarding the methods
employed in valuing the Portfolios' investments, see the Statement of Addi-
tional 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 per-formed by the Fund's
Transfer Agent. (See "The Custodian and Transfer Agent.")
EXCHANGE PRIVILEGE--All or part of Portfolio shares owned by a shareholder may
be exchanged for shares of any other Portfolio in The Oberweis Funds offering
shares at that time or money market funds in the Cash Resource Trust--the Cash
Resource Money Market Fund, the Cash Resource U.S. Government Money Market
Fund, and the Cash Resource Tax-Exempt Money Market Fund (collectively the
"Cash Resource Trust"). Shareholders may subsequently exchange such shares pur-
chased and shares purchased with reinvested dividends for shares of the Fund.
Shares will be exchanged for each other based upon their relative net asset
values except that, the Micro-Cap and Mid-Cap Portfolios deduct a withdrawal
charge of .25% of the value of shares redeemed, which deduction also applies to
shares exchanged out of each of those Portfolios.
Cash Resource Trust Funds are described in a separate prospectus. Shareholders
may obtain a copy of the prospectus for any Cash Resource Trust Fund by calling
1-800-245-7311 or writing to 951 Ice Cream Drive, North Aurora, Illinois 60542,
and are advised to read it carefully before authorizing any investment in
shares of such fund. Exchange requests are subject to a $1,000 minimum.
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 ex-
change. Please remember that you cannot place any conditions 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.
Exchanging Shares is available only in states where shares of a particular
Portfolio being acquired may
15
<PAGE>
legally be sold. The exchange privilege is not a right and may be suspended,
terminated or modified at any time. Except as otherwise permitted by applicable
regulations, 60 days' prior written notice of any termination or material
change will be provided.
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 more.
Funds will be transferred from your designated bank, using electronic funds
transferred via ACH. Initial investments may not be made by the Automatic In-
vestment 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
16
<PAGE>
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.
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 Massachusetts law,
shareholders of a business trust may, under certain circumstances, be held per-
sonally liable for the obligations of the trust, which is not the case in a
corporation. The Trust Agreement provides that shareholders shall not be sub-
ject to any personal liability to any person extending credit to, contracting
with or having any claims against the Fund and that every written agreement,
obligation, instrument or undertaking made by the Fund shall contain a provi-
sion 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 obliga-
tions 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 liability 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
- -------------------------------------
September 15, 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>
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 September 15, 1996. A copy
of the Fund's Prospectus may be obtained by writing or calling the above
address or phone number.
----------------
The date of this Statement of Additional Information is September 15, 1996.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Objective, Policies and Restrictions............................. 2
Management of the Fund...................................................... 6
Oberweis Asset Management, Inc.............................................. 7
Distribution Plan and Agreement............................................. 9
Expenses Borne by the Portfolios............................................ 11
Portfolio Transactions...................................................... 12
Shareholder Voting Rights................................................... 14
Redemption of Shares........................................................ 15
Shareholder Services........................................................ 15
Determination of Net Asset Value............................................ 15
Taxes....................................................................... 16
Calculation of Average Annual Total Return.................................. 17
Additional Information...................................................... 17
Independent Auditors' Report
Financial Statements
</TABLE>
<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;
2
<PAGE>
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;
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
3
<PAGE>
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.
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.
4
<PAGE>
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.
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.
5
<PAGE>
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 to present.
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.
- --------
* "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.
6
<PAGE>
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.
JAMES W. OBERWEIS, Vice President (22)
951 Ice Cream Drive, North Aurora, Illinois 60542; Vice President--Oberweis
Asset Management, Inc., May, 1996 to present and Portfolio Manager from
December, 1995 to present; Registered Representative--The Chicago Corporation,
March, 1996 to present; Student--University of Illinois at Champaign-Urbana,
August, 1991 to December, 1995.
SALLY A. REEVES, Secretary (25)
951 Ice Cream Drive, North Aurora, Illinois 60542; Administrative Assistant--
The Chicago Corporation, June, 1996 to present; Office-Manager Home Re-
Creations Ltd., January, 1995 to June, 1996; Account Manager--Tek Electronics,
Inc., August, 1994 to January, 1995; Account Manager/Commercial Accounts--
Waste Management-West, November 1992 to August, 1994;
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.
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS ESTIMATED
COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS TOTAL
TRUSTEE FROM THE FUND FUND EXPENSES UPON 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 August 30, 1996, the officers and Trustees of the Fund as a group
owned of record or beneficially 1.1% and 2.8% 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
7
<PAGE>
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.")
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
8
<PAGE>
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.
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
9
<PAGE>
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.
10
<PAGE>
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 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.
11
<PAGE>
(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 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.
12
<PAGE>
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 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.
OAM may also enter into written agreements with non-affiliated broker-
dealers that provide it with research services or products whereby OAM agrees
to pay the broker-dealer a fixed dollar amount for such services or products
or, at the option of OAM, all or part of the fee may be offset by commissions
on securities orders placed by OAM for its advisory accounts, including the
Fund, with the broker-dealer at a pre-determined rate of commission dollars in
lieu of cash. To the extent the commissions are insufficient to pay the amount
owed to the broker-dealer, OAM would be obligated at the end of the contract
period to pay the balance owed in cash.
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.
13
<PAGE>
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 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.
14
<PAGE>
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
15
<PAGE>
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 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.
16
<PAGE>
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 June 30, 1996 were 37.7%
and 23.4%, respectively, and for the period from the commencement of
operations on January 7, 1987 through June 30, 1996 was 17.7%, as calculated
in accordance with the following formula pursuant to applicable regulations of
the Securities and Exchange Commission:
P(1+T)/n/ = ERV
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,
17
<PAGE>
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.
18
<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
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.
<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>
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.
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>
PRESIDENT'S LETTER JULY 15, 1996
Dear Oberweis Funds Shareholder:
I'm delighted to report another exceptionally strong six month's performance
for your fund portfolio. The Emerging Growth Portfolio gained 21.2% during the
first half of this year compared to 10.5% for the Dow Jones Industrial
Average, 10.1% for the S&P 500 total return index, 12.6% for the NASDAQ
Composite, and 10.4% for the Russell 2000. Thus, the Emerging Growth Portfolio
beat virtually every major market index. The new Micro-Cap Portfolio did even
better, gaining 39.2% for the same period. As I'm sure you are aware, not
every semi-annual report will be this exceptional!
The first half of this year was marked by growing investor confidence. Money
poured into the Emerging Growth Portfolio at a faster rate than we had ever
before experienced. In addition, we started the new Micro-Cap Portfolio on
January 1, stating that we intended to limit it to $50 million. We reached
that level on May 21st and closed the fund to new investments on May 22. Many
shareholders have asked us why we closed the fund at $50 million. We believe
that we can only invest a very limited sum in such small companies (the
average market cap is just over $100 million). So we had to limit the amount
of money we would manage in this area or limit the performance of the fund. We
chose to limit the amount of money.
We have more good news! The expense ratio of the Emerging Growth Portfolio
continued to fall this year, declining to 1.41%, primarily as a result of its
larger size and the January 1 reduction of 12b-1 fees to .25% from .50%
previously. The expense ratio of the Micro-Cap Portfolio was 1.75%.
And we have even more good news. We hope to have a third portfolio, the Mid-
Cap Portfolio, available approximately September 15th. This portfolio will
invest in the same type of rapid growth companies that the current portfolios
invest in, but will focus on somewhat larger companies, typically companies in
the $1 to $5 billion market cap range. You will be able to switch from the
Mid-Cap Portfolio to the Emerging Growth Portfolio with a phone call to your
brokerage firm or to our shareholder service center (800-245-7311) though a
one quarter of one percent redemption charge would apply to redemptions of the
Mid-Cap Portfolio only. In addition, in the near future we hope to be able to
provide a money market fund for you to switch into should you choose to do so.
We suggest that trying to trade between different portfolios is not a
particulary good idea, but diversifying your investments among the different
portfolios may be.
Finally, I would again like to sincerely thank you for investing with me in
our funds. 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 between 8:00 AM and 5:00 PM central time, Monday through Friday.
If you have any questions about the fund's portfolios or investment policies,
please feel free to call me or any of our three portfolio managers, Matin
Yokosawa, Chip Roberts, or my son Jim Oberweis. We're usually available from
7:30 AM until 6:00 PM during the week and from 9:30 until noon on Saturday. If
you are in the Chicago area, we would be glad to have you visit our new
offices at 951 Ice Cream Drive in North Aurora, Illinois. We're located on the
East-West Tollway (I-88) at Randall Road (take the Route 31 exit). You might
even get to try some of the world's best ice cream!
Sincerely,
LOGO
James D. Oberweis
President
1
<PAGE>
OBERWEIS EMERGING GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (Value in thousands)
Equity Securities - 96.8%
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
COMMERCIAL SERVICES--2.8%
30,000 Apac Teleservices, [email protected] $ 1,080
30,000 Employee Solutions, [email protected] 945
30,000 Investment Technology [email protected] 405
40,000 ITI Technologies, [email protected] 1,320
46,500 RTW, [email protected] 1,465
30,000 Sterling Healthcare [email protected] 600
5,815
COMPUTER--INTEGRATED SYSTEMS--2.5%
130,500 Brooktrout Technology, Inc. @28.000 3,654
10,000 Jack Henry & Associates @34.000 340
60,000 PC Docs Group International, [email protected] 1,192
5,186
COMPUTER--LOCAL NETWORKS--0.7%
20,000 Auspex Systems, Inc. @15.000 300
**6,000 Ascend Communications, Inc. @56.250 337
50,000 Vanstar Corp. @16.750 837
1,474
COMPUTER--MEMORY DEVICES--5.2%
40,000 Ciprico, Inc. @15.250 610
155,000 HMT Technology Corp. @15.750 2,441
20,000 Komag, Inc. @26.375 527
20,000 Network Appliance, Inc. @29.750 595
160,000 Silicon Storage Technology, Inc. @13.750 2,200
160,000 Smart Modular Technologies, Inc. @16.000 2,560
97,000 Stormedia, Inc. @10.875 1,055
20,000 Veritas Software Corp. @43.000 860
10,848
COMPUTER--MINI/MICRO--0.1%
22,000 *Scientific Technologies, Inc. @11.000 242
COMPUTER--OPTICAL RECOGNITION--0.5%
57,500 Robotic Vision Systems, [email protected] 1,028
COMPUTER PERIPHERALS--6.1%
40,000 Centennial Technologies, Inc. @29.875 1,195
30,000 Dialogic Corp. @59.625 1,789
110,000 Eltron International, [email protected] 2,998
**132,000 Mylex [email protected] 2,343
**50,000 *U.S. Robotics [email protected] 4,275
12,600
</TABLE>
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
COMPUTER SERVICES--1.0%
11,900 AmeriData Technologies, Inc.
Warrants @2.375 $ 28
50,000 Innodata Corp. @3.437 171
25,000 Renaissance Solutions, [email protected] 709
70,000 Ozemail, Ltd. [email protected] 901
34,500 Techforce Corp. @6.000 207
2,016
COMPUTER SOFTWARE--15.6%
**100,000 Applix, Inc. @28.750 2,875
30,000 Aspen Technology, Inc. @55.000 1,650
**28,000 Citrix Systems, Inc. @38.000 1,064
50,000 Datastream Systems, Inc. @35.250 1,762
140,000 Elcom International, Inc. @12.750 1,785
**40,000 Electronics for Imaging, Inc. @69.375 2,775
5,000 Enterprise Systems, Inc. @27.500 137
15,000 Gemstar International Group, Ltd. @30.000 450
60,000 Gensym Corp. @22.000 1,320
30,000 Hummingbird Communications, Ltd. @30.500 915
85,000 Isocor @15.250 1,296
20,000 Legato Systems, Inc. @55.000 1,100
10,000 Macromedia, Inc. @21.875 219
15,000 Mcaffee Associates, Inc. @49.00 735
30,000 MDL Information Sytems @29.750 892
25,000 Natural MicroSystems Corp. @35.000 875
20,000 Periphonics Computer Network @34.000 680
100,000 Physician Computer Network @11.562 1,156
25,000 Project Software & Development @46.875 1,172
26,250 Remedy Corp. @73.000 1,916
35,000 Saville Systems Ireland @27.625 967
22,500 Smith Micro Software, Inc. @12.000 270
30,000 Structural Dynamics Research @22.000 660
**55,000 Systemsoft Corp. @47.000 2,585
45,000 TCSI Corporation @24.125 1,086
85,000 Technomatix Technologies, Inc. @19.000 1,615
15,600 Unison Software, Inc. @25.250 394
32,351
CONSUMER PRODUCTS--0.2%
10,000 Blyth Industries, Inc. @45.375 454
</TABLE>
See notes to Portfolio of Investments.
2
<PAGE>
Equity Securities - continued
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
COSMETICS/PERSONAL CARE--0.3%
70,000 Parlux Frangrances, [email protected] $ 709
DRUGS--1.1%
**20,000 Dura Pharmaceuticals, Inc. @56.000 1,120
31,000 Watson Pharmaceuticals, [email protected] 1,174
2,294
ELECTRICAL & ELECTRONIC
EQUIPMENT--3.4%
45,000 Nu Horizons Electronics Corp. @11.062 498
47,500 Proxim, Inc. @40.250 1,912
35,000 *Robbins & Meyers, [email protected] 1,557
70,000 Zygo [email protected] 3,063
7,030
ELECTRONICS--COMPONENTS/
SEMICONDUCTORS--10.0%
10,000 ADE Corp. @14.250 142
50,000 Aetrium, Inc. @18.000 900
60,000 Atmel [email protected] 1,807
35,000 C.P. Clare Corp. @25.750 901
30,000 DSP Communications, Inc. @51.375 1,541
72,000 ESS Technology @18.500 1,332
60,000 ETEC Systems, Inc. @22.250 1,335
100,000 Flextronics International, Ltd. @26.250 2,625
112,000 IKOS Systems @21.125 2,366
175,000 Photon Dynamics, Inc. @9.500 1,662
50,000 Quickturn Design Systems @14.500 725
60,000 Ross Technology, Inc. @12.000 720
50,000 SDL Inc. @27.750 1,388
50,000 Speedfam International, Inc. @16.250 812
110,000 Supertex, Inc. @16.125 1,774
36,500 Zoran Corp. @19.250 702
20,732
ELECTRONICS--LASER SYSTEMS/
COMPONENTS--0.9%
10,000 Chicago Minature Lamp, Inc. @38.000 380
10,000 Coherent, [email protected] 520
50,000 Electro Scientific Industries, Inc. @21.000 1,050
1,950
ELECTRONICS--MEASURING
EQUIPMENT--0.8%
50,000 Integrated Measurement, Inc. @25.750 1,288
20,000 Thermospectra Corp. @15.750 315
1,603
</TABLE>
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
ELECTRONICS--MISCELLANEOUS
COMPONENTS--2.3%
50,000 Sawtech, Inc. @34.500 $ 1,725
20,000 Technitrol, Inc. @39.625 793
225,000 WPI Group, Inc. @9.750 2,193
4,711
FINANCIAL/BUSINESS SERVICES--0.3%
20,000 Nova Corp. @33.750 675
FINANCIAL--CONSUMER LOANS--0.6%
44,000 Olympic Financial, Ltd. @23.000 1,012
10,000 Southern Pacific Funding @17.500 175
1,187
FINANCIAL--INVESTMENT BANKERS--0.6%
15,000 Cityscape Financial Corp. @51.250 769
10,000 Waterhouse Investor Services @37.125 371
1,140
FOOD--MISCELLANEOUS--0.8%
95,000 Unimark Group, Inc. @16.625 1,579
HEALTH MAINTENANCE
ORGANIZATION--0.3%
15,000 Compdent Corp. @46.500 698
HOUSEHOLD--AUDIO/VIDEO--0.2%
30,000 Nimbus CD International @13.125 394
INSURANCE--0.6%
8,100 *Capmac Holdings, Inc. @28.500 231
58,000 Riscorp, Inc. CL A @18.250 1,059
1,290
LEISURE & RECREATION PRODUCTS--2.4%
50,000 IMAX Corp. @36.750 1,838
67,500 Regal Cinemas, Inc. @45.750 3,088
4,926
MACHINERY--6.6%
50,000 *Gleason Corp. @39.000 1,950
10,000 *Greenfield Industries, Inc. @33.000 330
**100,000 *JLG Industries, Inc. @74.250 7,425
20,000 PRI Automation, Inc. @30.500 610
100,000 Zoltek Companies, Inc. @34.250 3,425
13,740
MEDICAL EQUIPMENT & SUPPLIES--3.5%
45,000 ESC Medical Systems, Ltd. @28.250 1,271
100,000 Conmed Corp. @26.625 2,663
</TABLE>
See notes to Portfolio of Investments.
3
<PAGE>
Equity Securities - continued
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
40,000 Lumisys, Inc. @16.250 $ 650
50,000 Medicore, Inc. @4.250 213
24,100 Minimed, Inc. @29.750 717
30,000 Orthologic Corp. @12.750 383
52,500 Qiagen N.V. @15.125 794
10,000 Quintiles Transnational @65.750 658
7,349
MEDICAL--NURSING HOMES, OUTPATIENT HOMECARE--3.0%
25,000 American Homepatient, Inc. @44.250 1,106
10,000 American Medical Response @35.250 353
100,000 FPA Medical Management, Inc. @15.562 1,556
6,750 National Surgery Centers @26.500 179
100,000 Prime Medical Services, Inc. @17.375 1,738
21,000 Retirement Care Associates, Inc. @11.000 231
106,252(a) Retirement Care Associates, Inc. @8.580 912
10,000 Veterinary Centers of America @22.375 223
6,298
METAL PRODUCTS/FABRICATION--1.5%
60,000 Cedar Group, Inc. @3.156 189
20,000 *Kaydon Corp. @43.000 860
70,000 Oregon Metallurgical, Inc. @29.500 2,065
3,114
OIL & GAS--2.4%
60,000 Basic Petroleum Int'l Ltd. @26.750 1,605
20,000 Belco Oil & Gas Corp. @35.500 710
10,000 Chesapeake Energy Corp. @89.875 899
100,000 Marine Drilling Company, Inc. @10.125 1,012
20,000 Noble Affiliates, Inc. @37.750 755
4,981
PERSONNEL PLACEMENT--0.2%
10,000 Alternative Resources [email protected] 368
POLLUTION CONTROL--0.8%
50,000 U.S. Filter Corp. @34.750 1,737
RESTAURANTS--7.1%
255,000 Logan's Roadhouse, Inc. @18.750 4,781
120,000 Lone Star Steakhouse &
Saloon, [email protected] 4,530
50,000 Manhattan Bagel Company @14.750 737
30,000 Outback Steakhouse, [email protected] 1,035
30,000 Papa John's International, [email protected] 1,463
100,000 Pollo Tropical, [email protected] 425
40,000 Quality Dining, Inc. @32.750 1,310
</TABLE>
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
10,000 Rainforest Cafe, Inc. @50.000 $ 500
14,781
RETAIL--APPAREL--2.6%
117,000 Gadzooks, Inc. @32.250 3,773
**30,000 Just for Feet, Inc. @52.875 1,586
5,359
RETAIL--MISCELLANEOUS--1.1%
10,000 Global Directmail Corp. @39.500 395
35,000 The Maxim Group, Inc. @14.125 494
25,000 Officemax, Inc. @23.875 597
30,000 Sunglass Hut International @24.375 731
2,217
RETAIL--WHOLESALE--COMPUTERS--0.8%
91,100 En Pointe Technologies, Inc. @11.125 1,013
40,500 Pomeroy Computer Resources @15.000 608
1,621
SCHOOLS--0.1%
5,400 Youth Services International,
[email protected] 96
SOAP & CLEANING PREPARATIONS--0.6%
30,000 USA Detergents, Inc. @39.875 1,196
TELECOMMUNICATIONS--7.0%
50,000 Anicom, Inc. @15.750 788
102,500 Brightpoint, Inc. @21.500 2,204
19,000 Coherent Communication
Systems Corp. @21.250 404
40,000 Digital Systems International, Inc. @15.125 605
12,000 Excel Communications, [email protected] 324
10,000 I.C.T. Group, Inc. @19.250 193
45,000 MRV Communications, Inc. @42.750 1,924
80,000 Mastec, Inc. @25.250 2,020
35,000 P-COM, Inc. @31.500 1,103
30,000 Polycom, Inc. @7.000 210
2,200 Premiere Technologies, Inc.@ 31.500 69
**15,000 Premisys Communications, Inc. @ 61.000 915
30,000 STM Wireless, Inc. @10.000 300
60,000 Spectralink Corp. @9.625 578
40,000 Stratacom, Inc. @56.250 2,250
40,000 Teledata Communications, [email protected] 485
5000 Verilink Corp. @25.500 128
14,500
</TABLE>
See notes to Portfolio of Investments.
4
<PAGE>
Equity Securities - continued
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
TRUCKING--0.2%
25,000 Knight Transportation, [email protected] $ 513
TOTAL EQUITY SECURITIES 200,802
(COST: $139,327,000)
Convertible Debt Obligations - 3.0%
<CAPTION>
Face
Amount Value
<C> <S> <C>
MEDICAL--NURSING HOMES--1.2%
$1,500,000 *GranCare, Inc.
6.50% due 1-15-03 @95.500 $ 1,432
1,000,000 *Theratx, Inc.
8.00% due [email protected] 1,020
2,452
OIL & GAS--0.2%
500,000 *Snyder Oil Corp.
7.00% due [email protected] 457
POLLUTION CONTROL--0.0%
580,000(a) Growth Environmental, Inc.
9.00% due [email protected] --
RESTAURANTS 0.7%
1,250,000 *Hometown Buffet, Inc.
7.00% due 12-1-02 @121.250 1,516
RETAIL--0.0%
600,000(a) Zam's, Inc.
7.50% due 10-31-00 @0.000 --
SCHOOLS--0.9%
1,250,000 *Youth Services International, Inc.
7.00% due 2-01-06 @142.455 1,781
TOTAL CONVERTIBLE DEBT OBLIGATIONS
(COST $7,721,000) 6,206
Commercial Paper - 2.3%
<CAPTION>
Face
Amount Value
<C> <S> <C>
$4,792,000 American Express Corp.
5.39%, due 7-1-96 $ 4,792
TOTAL COMMERCIAL PAPER
(COST: $4,792,000) 4,792
--------
TOTAL INVESTMENTS--102.1%
(COST: $151,840,000) 211,800
</TABLE>
Covered Call Options - (0.7%)
<TABLE>
<CAPTION>
Contracts Value
<S> <C> <C>
100 Applix, Inc. July $45 $ --
60 Ascend Communications, Inc. July $70 (4)
100 Citrix Sysytems, Inc. July $40 (22)
40 Dura Pharmaceuticals, Inc. July $55 (14)
160 Dura Pharmaceuticals, Inc. July $65 (18)
250 Electronics for Imaging, Inc. October $70 (256)
200 JLG Industries, Inc. July $85 (55)
25 JLG Industries, Inc. July $90 (6)
150 Just For Feet, Inc. September $55 (60)
40 Mylex Corp. August $30 --
150 Premisys Communications, Inc. July $65 (32)
65 Systemsoft Corp. July $65 (4)
450 Systemsoft Corp. August $65 (110)
100 U.S. Robotics Corp. August $70 (194)
300 U.S. Robotics Corp. November $70 (701)
--------
Total Covered Call Options (1,476)
(Premium received: $1,727,000)
LIABILITIES LESS OTHER ASSETS--(1.4)% (2,874)
--------
NET ASSETS--100.0% $207,450
========
</TABLE>
Notes to Portfolio of Investments
* Income producing security during the period ended June 30, 1996.
**The aggregate market value of stocks held in escrow at June 30, 1996
covering open covered call options written was $13,150,000.
Based on the cost of investments of $151,840,000 for federal income tax
purposes at June 30, 1996, the aggregate gross unrealized appreciation was
$70,315,000, the aggregate gross unrealized depreciation was $10,355,000 and
the net unrealized appreciation of investments was $59,560,000.
(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 June 30, 1996.
The aggregate value of restricted securities was $912,000, or 0.4% of net
assets, at June 30, 1996.
Retirement Care Associates, Inc. 88,888 shares purchased in July, 1995 at a
cost of $683,000 and 17,364 shares purchased in August, 1995 at a cost of
$133,000.
Growth Environmental, Inc. $580,000 face amount convertible debt purchased
in May, 1994 at a cost of $580,000.
Zam's, Inc. $600,000 face amount convertible debt purchased in November,
1993 at a cost of $600,000.
See notes to Portfolio of Investments.
5
<PAGE>
OBERWEIS MICRO-CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (Value in thousands)
Equity Securities - 85.6%
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
AIRLINES--1.3%
60,000 Frontier [email protected] $ 578
CHEMICALS--0.4%
10,000 CFC International [email protected] 163
COMMERCIAL--LEASING--0.9%
22,000 Rockford Industries, [email protected] 393
COMMERCIAL SERVICES--3.3%
28,000 ATC [email protected] 368
15,000 Analytical Surveys, [email protected] 334
20,000 Automobile Protection [email protected] 79
5,000 Clinitrials Research, [email protected] 208
20,000 Digital Solutions, [email protected] 99
5,000 ITI Technologies, [email protected] 165
26,000 RCM Technologies, [email protected] 234
1,487
COMMUNICATIONS--1.6%
40,000 Technology Service Units @11.125 445
30,000 World Access, [email protected] 285
730
COMPUTER--EQUIPMENT/HARDWARE--0.6%
9,000 Brooktrout Technology [email protected] 252
COMPUTER MEMORY DEVICES--6.2%
30,000 Ciprico, [email protected] 458
70,000 Interpoint [email protected] 980
35,000 Intevac, [email protected] 516
35,000 Silicon Storage [email protected] 481
25,000 Smart Modular [email protected] 400
2,835
COMPUTER--OPTICAL RECOGNITION--0.5%
15,000 Percon, [email protected] 210
COMPUTER PERIPHERALS--0.8%
35,000 Alpharel, [email protected] 212
7,000 Trident International, [email protected] 152
364
COMPUTER SERVICES--0.8%
10,000 Innodata [email protected] 34
15,000 Metatec Corporation--CL [email protected] 154
15,000 TechForce [email protected] 90
2,000 Whitmann-Hart, [email protected] 72
350
COMPUTER SOFTWARE--1.6%
25,000 [email protected] 381
</TABLE>
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
30,000 Mathsoft, [email protected] $ 176
2,000 Project Software & [email protected] 94
8,000 Smith Micro Software, [email protected] 96
747
CONSUMER PODUCTS--
MISCELLANEOUS--0.8%
25,000 Platinum Entertainment, [email protected] 387
COSMETICS--0.7%
15,000 Amrion, [email protected] 233
10,000 Parlux Fragrances, [email protected] 101
334
DIRECT MARKETING--2.3%
80,000 Multiple Zones Int'l, [email protected] 1,060
DIVERSIFIED OPERATIONS--0.8%
4,000 Lynch [email protected] 352
ELECTRICAL--CONTROL INSTRUMENTS--0.8%
26,000 Unit Instruments, [email protected] 361
ELECTRICAL EQUIPMENT--2.1%
100,000 WPI Group, [email protected] 975
ELECTRONICS--COMPONENTS/
SEMICONDUCTORS--9.9%
60,000 CFM [email protected] 600
60,000 Ferrofluids [email protected] 810
30,000 JPM [email protected] 251
50,000 Photon Dynamics, [email protected] 475
37,500 Praegitzer Industries, [email protected] 645
120,000 R F Power [email protected] 758
19,000 Ross Technology, [email protected] 228
30,000 Smartflex [email protected] 450
10,000 Vitesse Semiconductor [email protected] 240
20,000 Vitronics [email protected] 40
4,497
ELECTRONICS--LASER SYSTEM/
COMPONENTS--1.9%
60,000 Excel Technology @9.250 555
15,000 Electro Scientific [email protected] 315
870
ELECTRONICS--MEASURING
INSTRUMENTS--1.8%
40,000 KVH Industries, [email protected] 365
10,000 Thermo Voltek [email protected] 193
3,000 Thermospectra [email protected] 47
5,000 Zygo [email protected] 219
824
</TABLE>
See notes to Portfolio of Investments.
6
<PAGE>
Equity Securities - continued
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
ELECTRONICS--MILITARY SYSTEMS--1.4%
20,000 Computer Research, [email protected] $ 25
30,200 Diagnostic/Retrieval [email protected] 332
5,000 Nu Horizons [email protected] 55
4,000 Stanford [email protected] 225
637
ELECTRONICS--MISCELLANEOUS--1.6%
25,000 Nice Systems, Ltd [email protected] 475
6,000 Proxim, [email protected] 242
717
ELECTRONICS--PARTS DISTRIBUTOR--0.3%
10,000 Sterling [email protected] 135
ENERGY DEVELOPMENT--0.7%
10,000 York [email protected] 319
FINANCE--CONSUMER LOANS--0.9%
55,000 ACC Consumer Finance [email protected] 413
FOOD--MISCELLANEOUS--2.2%
60,000 Unimark Group [email protected] 998
HOUSEHOLD APPLIANCE--0.6%
40,000 Iona Appliance, [email protected] 255
LEISURE--0.8%
6,250 CPAC [email protected] 64
5,000 Golf Enterprises, [email protected] 59
10,000 NTN Canada, [email protected] 73
10,000 *Todd AO [email protected] 165
361
MACHINERY--MISCELLANEOUS--3.9%
25,000 A.S.V. [email protected] 469
100,000 Impact [email protected] 306
60,000 PPT Vision, [email protected] 743
20,000 Schmitt Industries, [email protected] 253
1,771
MEDIA--BOOKS--2.1%
37,000 Advanced Marketing [email protected] 476
6,000 Educational Development [email protected] 53
45,000 Individual Investor [email protected] 405
934
MEDICAL/DENTAL SUPPLIES--4.1%
50,000 Cohr [email protected] 1,187
8,000 Conmed [email protected] 213
85,000 Contour Medical, [email protected] 446
</TABLE>
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
5,000 Medicore [email protected] $ 21
1,867
MEDICAL--DRUGS--1.4%
15,000 Medicis [email protected] 619
MEDICAL--OUTPATIENT CARE--4.9%
135,000 Diagnostic Health [email protected] 911
97,900 *Health [email protected] 1,138
10,000 Housecall Medical [email protected] 191
2,240
MEDICAL--PRODUCTS--2.6%
52,500 Biosource International, [email protected] 474
10,000 Capstone Pharmacy [email protected] 129
10,000 Cedar Group, [email protected] 31
70,000 Exactech, [email protected] 560
1,194
METAL--PRODUCTION/FABRICATION--0.5%
50,000 Dynamic Materials [email protected] 237
PAPER & PAPER PRODUCTS--0.2%
5,000 *Republic Group, [email protected] 71
PHARMACEUTICAL PRODUCTS--0.1%
1,412 Polfa [email protected] 29
POLLUTION CONTROL/EQUIPMENT--1.9%
40,000 American ECO [email protected] 340
37,500 CET Enviromental [email protected] 361
10,000 United Air [email protected] 41
45,000 Waste Technology [email protected] 110
852
RESTAURANTS--3.2%
28,000 Blimpie International, [email protected] 409
55,000 Logan's Roadhouse, [email protected] 1,031
1,440
RETAIL--MISCELLANEOUS--2.7%
15,000 Gadzooks, [email protected] 484
10,000 Maxim Group, [email protected] 141
10,000 Alrenco, [email protected] 180
30,000 Rent-Way, [email protected] 409
1,214
RETAIL--WHOLESALE COMPUTERS--1.7%
70,000 En Pointe Technologies, [email protected] 779
</TABLE>
See notes to Portfolio of Investments.
7
<PAGE>
Equity Securities - continued
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
<C> <S> <C>
TELECOMMUNICATIONS--5.9%
40,000 AML Communications, [email protected] $ 910
10,000 Anicom, [email protected] 157
5,000 Computer Telephone [email protected] 65
25,000 Osicom Technologies, [email protected] 409
40,000 Spectralink [email protected] 385
8,000 Tollgrade Communications, [email protected] 184
44,000 Vaughn Communications, [email protected] 561
2,671
TEXTILE APPAREL--2.5%
60,000 Sport-Haley, [email protected] 877
200,000 U S Transportation [email protected] 244
1,121
TRANSPORTATION--SERVICES--0.3%
40,000 Golden Eagle [email protected] 158
TOTAL EQUITY SECURITIES
(COST: $35,906,000) 38,801
Commercial Paper--22.8%
<CAPTION>
Face Amount Value
<C> <S> <C>
$2,231,000 American Express Corp. $ 2,231
5.39% due 7-1-96
2,200,000 Associated Corp. 2,200
5.37% due 7-2-96
2,200,000 Cigna Corp. 2,200
5.10% due 7-1-96
2,200,000 Ford Motor Credit 2,199
5.37% due 7-3-96
1,520,000 General Electric Corp. 1,520
5.35% due 7-3-96
TOTAL COMMERCIAL PAPER
(COST: $10,350,000) 10,350
-------
TOTAL INVESTMENTS--108.4%
(COST: $46,256,000) 49,151
LIABILITIES LESS OTHER ASSETS--(8.4%) (3,799)
-------
NET ASSETS $45,352
=======
</TABLE>
Notes to Portfolio of Investments
* Income producing security during the period ended June 30, 1996.
Based on the cost of investments of $46,256,000 for federal income tax
purposes at June 30, 1996, the aggregate gross unrealized appreciation was
$4,516,000 the aggregate gross unrealized depreciation was $1,621,000 and the
net unrealized appreciation of investments was $2,895,000.
See notes to Portfolio of Investments.
8
<PAGE>
THE OBERWEIS FUNDS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
EMERGING GROWTH MICRO-CAP
PORTFOLIO PORTFOLIO
--------------- ---------
<S> <C> <C>
ASSETS:
Investments securities at market value
(Cost: $151,840,000 and $46,256,000 respectively) $211,800 $49,151
Cash -- 251
Receivable from fund shares sold 1,423 --
Receivable from securities sold 2,398 364
Dividends and interest receivable 132 --
Deferred organization expense -- 56
Prepaid expenses 26 3
-------- -------
Total Assets 215,779 49,825
LIABILITIES:
Cash overdraft 1,032 --
Options written, at value (Premiums received:
$1,727,000) 1,476 --
Payable for fund shares repurchased 2,834 1,623
Payable for securities purchased 2,754 2,773
Payable to adviser 156 49
Payable to distributor 48 11
Accrued expenses 29 17
-------- -------
Total Liabilities 8,329 4,473
-------- -------
NET ASSETS $207,450 $45,352
======== =======
ANALYSIS OF NET ASSETS:
Aggregate paid in capital $131,829 $41,625
Accumulated net realized gain from investment
transactions 15,410 832
Net unrealized appreciation of investments 60,211 2,895
-------- -------
Net assets $207,450 $45,352
======== =======
THE PRICING OF SHARES:
Net asset value and offering price per share
EMERGING GROWTH PORTFOLIO:
($207,449,692 divided by 5,883,684 shares
outstanding) $ 35.26
========
MICRO-CAP PORTFOLIO:
($45,352,154 divided by 3,257,523 shares
outstanding) $ 13.92
=======
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE OBERWEIS FUNDS
STATEMENT OF OPERATIONS
Six months ended June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
EMERGING GROWTH MICRO-CAP
PORTFOLIO PORTFOLIO
--------------- ---------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 30 $ 2
Interest 628 200
------- ------
Total Investment Income 658 202
EXPENSES:
Advisory fees 362 69
Management fees 349 46
Distribution fees 218 29
Transfer agent fees 116 28
Custodian fees 74 16
Professional fees 53 5
Shareholder reports 31 2
Registration fees 12 1
Insurance 8 --
Organization expenses -- 6
Trustee fees 5 1
Other 2 --
------- ------
Total Expenses 1,230 203
------- ------
NET INVESTMENT LOSS (572) (1)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain from investment transactions 9,911 832
Net realized loss from covered call options
written (662) --
------- ------
Total net realized gain on investments 9,249 832
Increase in net unrealized appreciation of
investments 17,562 2,895
------- ------
Net realized and unrealized gain on investments 26,811 3,727
------- ------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $26,239 $3,726
======= ======
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE OBERWEIS FUNDS
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO MICRO-CAP PORTFOLIO
------------------------------- -------------------
PERIOD ENDED YEAR ENDED JANUARY 1, 1996-
JUNE 30, 1996 DECEMBER 31, 1995 JUNE 30, 1996
------------- ----------------- -------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment loss $ (572) $ (1,441) $ (1)
Net realized gain (loss) from investment transactions 9,249 12,380 832
Increase (decrease) in unrealized appreciation of investments 17,562 27,643 2,895
-------- -------- -------
Net increase (decrease) in net assets resulting from operations 26,239 38,582 3,726
-------- -------- -------
FROM DISTRIBUTIONS:
Distributions from net realized gains on investments -- (6,202) --
-------- -------- -------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 131,317 54,110 50,948
Shares issued in reinvestment of distribution -- 5,983 --
Redemption of shares (84,769) (47,824) (9,422)
-------- -------- -------
Net increase (decrease) from capital share transactions 46,548 12,269 41,526
-------- -------- -------
Total increase (decrease) in net assets 72,787 44,649 45,252
NET ASSETS:
Beginning of period 134,663 90,014 100
-------- -------- -------
End of period $207,450 $134,663 $45,352
======== ======== =======
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 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 (collectively, the Funds).
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 realized 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 Funds so that its market
value exceeds the carrying value of the repurchase agreement.
Federal income taxes and dividends to shareholders. The Funds have 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. The Oberweis Emerging Growth Portfolio paid a dividend
consisting of net long term realized gains from the sale of securities of
$6,202,000 in 1995 to shareholders of record on November 27, 1995.
12
<PAGE>
Organizational Expenses. Organizational expenses of the Oberweis Micro-Cap
Portfolio have been capitalized and are being amortized on a daily basis using
the straight line method over five years.
Use of Estimates. The presentation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ slightly from those
estimates.
2. TRANSACTIONS WITH AFFILIATES
The Funds have written agreements with Oberweis Asset Management, Inc. ("OAM")
as the Funds' investment adviser and manager, and The Chicago Corporation
("TCC") as the Fund's principal distributor.
Advisory agreement. During the period ended June 30, 1996, the Emerging Growth
Portfolio 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. The Micro-Cap Portfolio paid
monthly investment advisory fees at an annual rate equal to .60% of average
daily net assets. For the period ended June 30, 1996, the Emerging Growth
Portfolio and Micro-Cap Portfolio incurred advisory fees totalling $362,000
and $69,000, respectively.
Management agreement. During the period ended June 30, 1996, for management
services and facilities furnished, the Emerging Growth Portfolio and Micro-Cap
Portfolio each paid a monthly fee at an annual rate equal to .40% of average
daily net assets. For the period ended June 30, 1996, the Emerging Growth
Portfolio and Micro-Cap Portfolio incurred a management fees totalling
$349,000 and $46,000, respectively.
Expense Reimbursement. OAM is obligated to reduce its management fees or
reimburse the Funds to the extent that total ordinary operating expense, as
defined, exceed in any one year the following amounts expressed as a
percentage of each 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 each Fund's shares are registered. For the period ended
June 30, 1996 no reimbursement was required.
Officers and trustees. Certain officers or trustees of the Funds are also
officers or directors of OAM. During the period ended June 30, 1996. The Funds
made no direct payments to its officers and paid $6,000 to its unaffiliated
trustees. James D. Oberweis, the Fund's portfolio manager, is employed by OAM
and TCC.
Distribution and shareholder service expense. The Funds have a distribution
and shareholder services agreement with The Chicago Corporation (TCC). For
services under the distribution and shareholder servicing agreement, each 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 June
30, 1996, the Emerging Growth Portfolio and Micro-Cap Portfolio incurred
distribution fees totalling $218,000 and $29,000, respectively.
13
<PAGE>
Commissions. The Funds pay TCC for executing some of the Funds' agency
security transactions at competitive rates, typically $.03 per share for both
portfolios. For the period ended June 30, 1996, the Emerging Growth Portfolio
and Micro-Cap Portfolio paid commissions of $11,733 and $1,095, respectively
to TCC.
3. INVESTMENT TRANSACTIONS
The cost of securities purchased and proceeds from securities sold during the
period ended June 30, 1996, other than options written and money market
investments, aggregated $94,386,468 and $49,950,186, respectively for the
Emerging Growth Portfolio and $38,438,087 and $3,363,913, respectively for the
Micro-Cap Portfolio.
Transactions in options written for the period ended June 30, 1996 in the
Emerging Growth Portfolio were as follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Options outstanding at
beginning of period 3,870 $ 1,493,000
Options written 8,410 2,762,000
Options expired (6,315) (121,000)
Options closed (3,385) (899,000)
Options assigned (390) (1,508,000)
------ -----------
Options outstanding at end of
period 2,190 $ 1,727,000
</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 each Fund:
<TABLE>
<CAPTION>
EMERGING GROWTH EMERGING GROWTH
PORTFOLIO PORTFOLIO MICRO-CAP PORTFOLIO
SIX MONTHS ENDED JUNE YEAR ENDED DECEMBER 31, PERIOD ENDED JUNE 30,
30, 1996 1995 1996
------------------------ ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 3,681,000 $131,317,000 2,039,000 $ 54,110,000 3,922,000 $50,948,000
Shares issued in
reinvestment of
dividends -- -- 208,000 5,983,000 -- --
Less shares redeemed (2,427,000) (84,769,000) (1,820,000) (47,824,000) (674,000) (9,422,000)
---------- ------------ ---------- ------------ --------- -----------
Net increase (decrease)
from capital share
transactions 1,254,000 $ 46,548,000 427,000 $ 12,269,000 3,248,000 $41,526,000
</TABLE>
A .25% redemption fee is charged on the Micro-Cap Portfolio fund share
redemptions. The redemption proceeds are used to reimburse the Fund for
expenses it incurs in connection with shareholder redemptions.
14
<PAGE>
FINANCIAL HIGHLIGHTS
EMERGING GROWTH PORTFOLIO
Per share income and capital changes for a share outstanding throughout the
period is as follows (c):
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED ---------------------------------------------------
JUNE 30, 1996 1995 1994 1993 1992 1991
------------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 29.09 $ 21.41 $ 22.19 $ 20.90 $ 18.39 $ 12.11
Income from investment
operations:
Net investment loss (.11) (.33) (.22) (.22) (.21) (.09)
Net realized and
unrealized gain (loss)
on investments 6.28 9.43 (.56) 2.25 2.72 10.64
-------- -------- ------- -------- ------- -------
Total from investment
operations 6.17 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 period $ 35.26 $ 29.09 $ 21.41 $ 22.19 $ 20.90 $ 18.39
======== ======== ======= ======== ======= =======
Total Return (%) 21.2(e) 42.6 (3.5) 9.7 13.7 87.1(b)
Ratio/Supplemental Data
Net Assets at end of
period (in thousands) $207,450 $134,663 $90,014 $104,324 $54,063 $19,730
Ratio of expenses to
average net assets (%) 1.41(d) 1.73(a) 1.78 1.80(a) 1.99(a) 2.13(a)
Ratio of net investment
loss to average net
assets (%) 0.65(d) (1.24) (1.06) (1.04) (1.14) (1.27)
Portfolio turnover rate
(%) 61 79 66 70 63 114
Average commission rate
paid 0.0311 -- -- -- -- --
</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.
(d) Annualized
(e) Total return has not been annualized.
15
<PAGE>
FINANCIAL HIGHLIGHTS
MICRO-CAP PORTFOLIO
Per share income and capital changes for a share outstanding throughout the
period is as follows (a):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
----------------
<S> <C>
Net asset value at beginning of period $ 10.00
Income from investment operations:
Net investment loss --
Net realized and unrealized gain (loss) on investments 3.92
-------
Total from investment operations 3.92
Less Distributions:
Distribution from net realized gains on investments --
-------
Net asset value at end of period $ 13.92
=======
Total Return (%) 39.2(c)
Ratio/Supplemental Data
Net Assets at end of period (in thousands) $45,352
Ratio of expenses to average net assets (%) (b) 1.75
Ratio of net investment loss to average net assets (%) (b) (0.01)
Portfolio turnover rate (%) 40
Average commission rate paid 0.0300
</TABLE>
- --------
Notes:
(a) The per share data was determined using average shares outstanding during
the period.
(b) Annualized.
(c) Total return has not been annualized.
16
<PAGE>
LOGO THE
OBERWEIS FUNDS
- --------------------------------------------------------------------------------
James D. Oberweis Thomas J. Burke
Trustee and President Trustee
Douglas P. Hoffmeyer Edward F. Streit
Trustee Trustee
Patrick B. Joyce Martin L. Yokosawa
Executive Vice President Vice President
Treasurer
James M. Roberts Anita I. Mraz
Vice President Secretary
MANAGER AND INVESTMENT ADVISOR
Oberweis Asset Management, Inc.
951 Ice Cream Dr., North Aurora, IL 60542
1-800-323-6166
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
1-800-245-7311
COUNSEL
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Chicago, Illinois 60601
SEMI-ANNUAL REPORT
---------------------------------------
UNAUDITED
LOGO THE OBERWEIS FUNDS
EMERGING GROWTH PORTFOLIO JUNE 30, 1996
MICRO-CAP PORTFOLIO
951 ICE CREAM DR.
NORTH AURORA, IL 60542
(800) 323-6166
<PAGE>
OBERWEIS MICRO-CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 2, 1995
<TABLE>
<S> <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>
OBERWEIS MID-CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 18, 1996
<TABLE>
<S> <C>
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
=======
</TABLE>
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. 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>
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
The Oberweis Fund's Semi-Annual Report
(a) Portfolio of Investments as of June 30, 1996 (unaudited)
(b) Statements of Assets and Liabilities as of June 30, 1996
(unaudited)
(c) Statement of Operations for the six months ended June 30, 1996
(unaudited)
(d) Statement of Changes in Net Assets for the period ended June 30,
1996 and year ended December 31, 1995 for the Emerging Growth
Portfolio and for the period from January 1, 1996 to June 30, 1996
for the Micro-Cap Portfolio (unaudited)
(e) Notes to Financial Statements (unaudited)
Oberweis Micro-Cap Portfolio
(a) Statements of Assets and Liabilities as of October 2, 1995
(audited)
(b) 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/
*5.2.4 Written Notification required under Investment Advisory Agreement dated
October 1, 1994 regarding the rendering of advisory services to the
Mid-Cap Portfolio.
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/
*10.1.2 Consent and Opinion of Vedder, Price, Kaufman & Kammholz
10.2 Form of Opinion of Ropes & Gray/1A/
10.2.1 Opinion and Consent of Ropes & Gray/13/
*10.2.2 Opinion and Consent of Ropes & Gray
*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
*14.2 Individual Retirement Custodial Account Agreement, Individual Retirement
Account Application and IRA Transfer and Invest Rollover Request Form.
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 August 30, 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 9,035
Oberweis Micro-Cap
Portfolio 3,126
</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
William Bischof,
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
Steven Mortai,
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, Dennis J. Powell,
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 certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 9th day of
September, 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 September 9, 1996
- -------------------------- Officer) and Trustee
James D. Oberweis
Trustee
- --------------------------
Thomas J. Burke
/s/ Douglas P. Hoffmeyer Trustee September 9, 1996
- --------------------------
Douglas P. Hoffmeyer
/s/ Edward F. Streit Trustee September 9, 1996
- --------------------------
Edward F. Streit
/s/ Peter H. Wendell Trustee September 9, 1996
- --------------------------
Peter H. Wendell
/s/ Patrick B. Joyce Executive Vice President and September 9, 1996
- -------------------------- Treasurer (Principal Financial
Patrick B. Joyce and Accounting Officer)
</TABLE>
C-7
<PAGE>
Exhibit 5.2.4
August 22, 1996
Oberweis Asset Management, Inc.
951 Ice Cream Drive, Suite 200
North Aurora, Illinois 60542
Ladies and Gentlemen:
The Oberweis Funds (the "Fund") intends to establish an additional
portfolio, the Oberwies Mid-Cap Portfolio (the "Mid-Cap Portfolio"). This
letter serves to notify Oberweis Asset Management, Inc. ("OAM") that the Fund
desires to retain OAM to render investment advisory services for the Mid-Cap
Portfolio, effective as of September 15, 1996, pursuant to the Investment
Advisory Agreement dated October 1, 1994 between the Fund and OAM (the
"Agreement"). For the services provided to the Mid-Cap Portfolio pursuant to
the Agreement, the Fund will pay OAM on a monthly basis, an investment advisory
fee at the annual rate of .40% of the average daily net assets of the Mid-Cap
Portfolio.
The Oberweis Funds
/s/ Patrick B. Joyce
------------------------------------------
Patrick B. Joyce, Executive Vice President
Accepted and Agreed this
22nd day of August, 1996.
- ----
Oberweis Asset Management, Inc.
/s/ James D. Oberweis
- -------------------------------
By: James D. Oberweis
Its: President
<PAGE>
Exhibit 10.1.2
[LETTERHEAD OF VEDDER PRICE]
September 6, 1996
The Oberweis Funds
951 Ice Cream Drive
North Aurora, Illinois 60542
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 14 to the Registration
Statement on Form N-1A under the Securities Act of 1933 being filed by The
Oberweis Funds (the "Fund") in connection with the proposed registration of
units of beneficial interest, no par value ("Shares"), in the Oberweis Mid-Cap
Portfolio (the "Portfolio").
We are counsel to the Fund and in such capacity are familiar with the
Fund's organization and have counseled the Fund regarding various legal matters.
We have examined such Fund records and other documents and certificates as we
have considered necessary or appropriate for the purpose of this opinion. As to
various questions of fact material to our opinion, we have relied upon
statements and certificates of officers and representatives of the Fund. In our
examination of such materials, we have assumed the genuineness of all signatures
and the conformity to original documents of all copies submitted to us.
Based upon the foregoing and upon the opinion dated September 6, 1996 by
Ropes & Gray of Boston, Massachusetts, we advise you and opine that (a) the Fund
is a duly authorized and validly existing voluntary association with
transferrable shares under the laws of the Commonwealth of Massachusetts and is
authorized to issue an unlimited number of Shares in the Portfolio; and (b) upon
the issuance of the Shares in accordance with the Fund's Agreement and
Declaration of Trust and the receipt by the Fund of a purchase price not less
than the net asset value per Share, the Shares will be legally issued and
outstanding, fully paid and non-assessable (although shareholders of the Fund
may be subject to liability under certain circumstances as described in the
opinion from Ropes & Gray).
We hereby consent to the use of this opinion and to the use of our name as
referenced under Additional Information in connection with said Post-Effective
Amendment.
Very truly yours,
/s/ VEDDER, PRICE, KAUFMAN & KAMMHOLZ
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
COK:dfd
<PAGE>
Exhibit 10.2.2
[LETTERHEAD OF ROPES & GRAY]
September 6, 1996
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601
Ladies and Gentlemen:
We are furnishing this opinion in connection with the proposed offer and
sale from time to time by Oberweis Mid-Cap Portfolio, a series of The Oberweis
Funds (the "Trust"), of an indefinite number of shares of beneficial interest,
without par value (the "Shares"), pursuant to a post-effective amendment to the
Trust's Registration Statement on Form N-1A (Nos. 33-9093, 811-4854) under the
Securities Act of 1933, as amended.
We are familiar with the action taken by the Trustees of the Trust to
authorize the issuance of the Shares. We have examined the Trust's records of
Trustee action, its By-Laws and its Agreement and Declaration of Trust, as
amended to date. We have examined such other documents as we deem necessary for
the purposes of this opinion.
We assume that, upon sale of the Shares, the Trust will receive the net
asset value thereof.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that, when the Shares are
issued and sold after the post-effective amendment to the Registration Statement
has been declared effective and the authorized consideration therefor is
received by the Trust, they will be validly issued, fully paid and nonassessable
by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust or any
series of the Trust (a "Series"). However, the Agreement and Declaration of
Trust disclaims shareholder liability for acts or obligations of the Trust or
any Series and requires that notice of such disclaimer be given in every note,
bond, contract, instrument, certificate or undertaking issued by or on behalf of
the Trust. The Agreement and Declaration of Trust provides for indemnification
out of property
<PAGE>
Ropes & Gray
Vedder, Price, Kaufman & Kammholz -2- September 6, 1996
of a particular Series for all loss and expense of any shareholder held
personally liable solely by reason of his or her having been a record owner of
the Shares. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Trust or the
particular Series itself would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<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. 14 to the Registration
Statement under Securities Act of 1933 (Registration No. 33-9093) and in this
Amendment No. 16 to the Registration Statement under the Investment Company Act
of 1940 (Registration No. 811-4854).
/s/ ERNST & YOUNG LLP
Chicago, Illinois
September 6, 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
September 6, 1996
<PAGE>
EXHIBIT 14.2
[LOGO OF THE OBERWEIS FUNDS]
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT AGREEMENT
Investors Fiduciary Trust Company
Under Section 408(a) of the Internal
Revenue Code KEEP FOR YOUR RECORDS.
DO NOT FILE WITH
INTERNAL REVENUE SERVICE
FORM 5305-A
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT (REV. OCTOBER 1992)
DEPARTMENT OF THE TREASURY - INTERNAL REVENUE SERVICE
State of______________________________________________________}ss [_] Amendment
County of_____________________________________________________
Depositor's name__________________Depositor's date of birth____________________
Depositor's address__________________Depositor's social security number________
Custodial name___________________INVESTORS FIDUCIARY TRUST COMPANY_____________
Custodial address or principal place of business_______________________________
KANSAS CITY, MISSOURI__________________________________________________________
The Depositor whose name appears above is establishing an Individual Retirement
Account (under section 408(a) of the Internal Revenue Code) to provide for his
or her retirement and for the support of his or her beneficiaries after death.
The Custodian named above has given the Depositor the disclosure statement
required under the Income Tax Regulations under section 408(i) of the Code. The
Depositor has assigned the Custodial account________dollars ($_______) in cash.
The Depositor and the Custodian made the following agreement.
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 403(d)(3), or an employer
contribution to a simplified employee pension plan as described in
section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectables (within the
meaning of section 408(m) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins issued under the
laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section 1.401(a)(9)-
2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositors required beginning date, (April 1 following
the calendar year end in which the Depositor reaches age 70 1/2). By that date,
the Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the custodial account distributed in:
a. A single sum payment.
b. An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
c. An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
d. Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
e. Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of
the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
a. If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
b. If the Depositor dies before distribution of his or her interest has
begin, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of the beneficiary
or beneficiaries, either
i. Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
ii. Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries
starting by December 31 of the year following the year of the Depositor's
death. If, however, the beneficiary is the Depositor's surviving spouse,
then this distribution is not required to begin before December 31 of the
year in which the Depositor would have turned age 70 1/2.
c. Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually have
been made before that date.
d. If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account .
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designated
beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2.
In the case of a distribution in accordance with paragraph 4(b)(ii), determine
life expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements above. This method permits an individual to
satisfy these requirements by taking from one individual retirement account the
amount required to satisfy the requirement from another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed in the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
1. DEFINITIONS. The following definitions shall apply to terms used in this
Article VIII:
a. "Application" shall mean the IRA Application submitted by the Depositor
to the Custodian.
b. "Code" shall mean the Internal Revenue Code of 1986, as amended,
including any regulations, procedures, rulings, or notices issued
thereunder.
c. "Company" shall mean The Oberweis Funds, Cash Resources Trust money
market funds, and/or any other permitted mutual funds.
d. "Custodial Account" shall mean the custodial account established under
this agreement.
2. INVESTMENT OF CONTRIBUTIONS. Contributions shall be invested in shares of
the Company in accordance with the Depositor's written instructions in the
Application, and with subsequent written instructions of the Depositor (or,
following the death of the Depositor, his or her beneficiary) in a form
acceptable to and filed with the Custodian. By giving such instructions, the
Depositor (or beneficiary, where applicable) will be deemed to have acknowledged
receipt of the then current prospectus for any shares in which the Depositor (or
beneficiary) directs the Custodian to invest contributions. The Depositor, by
making a rollover contribution, as described in Article I, hereby certifies that
the contribution meets all requirements for rollover contributions. The amount
of each contribution shall be applied to the purchase of such shares at the
price and in the manner in which such shares are then being publicly offered by
the Company in accordance
<PAGE>
with the then current prospectus, and such shares shall be credited to the
Custodial Account. All dividends and capital gain distributions received on the
shares of the fund held in each Custodial Account shall (unless received in
additional shares of such fund) to be reinvested in such shares which shall be
credited to such Custodial Account. If any distribution on shares of the fund
may be received at the election of the shareholder in additional shares or in
cash or other property, the Custodian shall elect to receive such distribution
in additional shares. The Custodian shall not be liable for interest on any cash
balance in the Custodial Account. All Company shares acquired by the Custodian
shall be registered in the name of the Custodian or its registered nominee.
3. VOTING WITH RESPECT TO SHARES. The Custodian shall not vote any of the
shares of the Company held in the Custodial Account except in accordance with
written instructions of the Depositor, timely received, in a form acceptable to
the Custodian.
4. ALTERNATIVE DISTRIBUTION METHODS: Notwithstanding Article IV, a Depositor
may elect in writing in a form acceptable to and filed with the Custodian, to
have the balance in the Custodial Account distributed only in a lump sum or in
substantially equal payments over a period that does not exceed the Depositor's
life expectancy or the joint and last survivor life expectancy of the Depositor
and his or her designated beneficiary. For this purpose, life expectancies must
be determined by using applicable Internal Revenue Service tables.
Notwithstanding paragraph 2 of Article IV, unless an election to have life
expectancies recalculated annually is made by the time distributions are
required to begin to the Depositor under paragraph 3, or to the surviving spouse
under paragraph 4, of Article IV, life expectancies shall not be recalculated.
Such election shall be irrevocable as to the Depositor and the surviving spouse
and shall apply to all subsequent years. The life expectancy of a nonspouse
beneficiary may not be recalculated. To receive an annuity distribution, a
Depositor may roll over a lump sum distribution to purchase an individual
retirement annuity payable in equal or substantially equal payments over the
Depositor's life expectancy or the joint and last survivor life expectancy of
the Depositor and his or her designated beneficiary. The distribution option
should be reviewed in the year the Depositor reaches age 70 1/2 to make sure the
requirements of Code Section 408(a)(6) have been met. Consistent with paragraph
6 of Article IV, the Custodian is not obligated to make any distribution absent
a specific written direction, in a form acceptable to and filed with the
Custodian, from the Depositor or designated beneficiary to do so.
5. AMENDMENT AND TERMINATION. The Depositor may at any time and from time to
time terminate this Agreement in whole or in part by delivering to the Custodian
a signed written notice of such termination, in a form acceptable to the
Custodian. The Depositor and the Custodian delegate to the Company the right to
amend this Agreement (including retroactive amendments) by written notice to the
Custodian and the Depositor. The Depositor shall be deemed to have consented to
any such amendment, provided that (a) no amendment shall cause or permit any
part of the assets of the Custodial Account to be diverted to purposes other
than for the exclusive benefit of the Depositor or his or her beneficiaries; (b)
any amendment which affects the rights, duties or responsibilities of the
Custodian may only be made with the Custodian's consent; and (c) no amendment
shall be made except in accordance with any applicable laws and regulations
affecting this Agreement and the Custodial Account.
6. RESIGNATION OR REMOVAL OF CUSTODIAN. The Custodian may resign at any time
upon thirty (30) days notice in writing to the Depositor and the Company. Upon
such resignation, the Depositor delegates to the Company the responsibility to
appoint a successor custodian under this Agreement. The Depositor or the Company
at any time may remove the Custodian upon 30 days written notice to that effect
in a form acceptable to and filed with the Custodian. Such notice must include
designation of a successor custodian. The successor custodian shall satisfy the
requirements of section 408(h) of the Code. Upon receipt by the Custodian of
written acceptance of such appointment by the successor custodian, the Custodian
shall transfer and pay over to such successor the assets of and records relating
to the Custodial Account. The Custodian is authorized, however, to reserve such
sum of money as it may deem advisable for payment of all its fees, compensation,
costs and expenses, or for payment of any other liability constituting a charge
on or against the assets of the Custodial Account or on or against the
Custodian, and where necessary may liquidate shares in the Custodial Account for
such payments. Any balance of such reserve remaining after the payment of all
such items shall be paid over to the successor Custodian. The Custodian shall
not be liable for the acts or omissions of any successor custodian.
7. CUSTODIAN'S ANNUAL FEES: The Depositor shall be charged by the Custodian for
its services under this Agreement in such amount as the Custodian shall
establish from time to time. Sufficient shares may be liquidated from the
Custodial Account to pay the fee. The annual fee in effect on the date of this
Agreement is set forth in the Application. A different fee may be substituted at
any time upon written notice to the Depositor. A Depositor who does not consent
to such new fee should terminate this Agreement pursuant to paragraph 5 of
Article VIII within 30 days of the notice of the new fee. If no such termination
is made within 30 days of the notice of the new fee, the Depositor will be
deemed to have consented to the new fee.
8. OTHER FEES AND EXPENSES. Any income or other taxes of any kind whatsoever
that may be levied or assessed upon or with respect to the Custodial Account or
the income thereof, any transfer taxes incurred in connection with the
investment and reinvestment of the assets of the Custodial Account, all other
reasonable administrative expenses incurred by the Custodian with respect to any
such taxes, or with respect to any controversies concerning the Custodial
Account, including, but not limited to, fees for legal services rendered to the
Custodian and related costs, and such reasonable compensation to the Custodian
for acting in that capacity with respect to any such taxes or controversies,
may, in the discretion of the Custodian, be charged against and paid from the
assets of the Custodial Account. Sufficient shares may be liquidated from the
Custodial Account to pay any such taxes, expenses and compensation.
9. INALIENABILITY OF ASSETS: No interest, right or claim in or to any part of
the Custodial Account, nor any assets held therein or benefits provided
hereunder shall be subject to alienation, assignment, garnishment, attachment,
execution of levy of any kind, and any attempt to cause any such interest,
right, claim, assets or benefits to be so subjected shall not be recognized,
except to the extent as may be required by law.
10. EXCHANGE PRIVILEGE: With respect to any Company shares held in the
Custodial Account, the Depositor (or beneficiary, where applicable) may, upon
submission of written instructions in a form acceptable to and filed with the
Custodian, cause shares of any fund to be exchanged for shares of any other fund
of the Company meeting the requirements of this Agreement, upon the terms and
within the limitations imposed by the then current prospectus of the fund of the
Company which are acquired in the exchange. By giving such instructions, the
Depositor (or beneficiary) will be deemed to have acknowledged receipt of such
prospectus.
11. DESIGNATION OF BENEFICIARY. The Depositor may designate a beneficiary or
change or revoke the designation of a beneficiary, by written notice in a form
acceptable to and filed with the Custodian, prior to the complete distribution
of the balance in the Custodial Account. If the Depositor has not by the date of
his or her death properly designated a beneficiary in accordance with the
preceding sentence, or if no designated beneficiary survives the Depositor, the
Depositor's beneficiary shall be his or her estate. If a beneficiary dies before
receiving his or her entire interest in the Custodial Account, his or her
remaining interest in the Custodial Account shall be paid to the beneficiary's
estate.
12. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS. The Custodian will not
under any circumstances be responsible for the timing, purpose or propriety of
any contribution for of any distribution made hereunder, nor shall the Custodian
incur any liability or responsibility for any tax imposed on account of any such
contribution or distribution.
13. OTHER LIMITS ON RESPONSIBILITY OF THE CUSTODIAN. The Custodian shall not
incur any liability or responsibility in taking or omitting to take any action
based on any notice, election, or instruction or any written instrument believed
by the Custodian to be genuine and to have been properly executed. The Custodian
shall be under no duty of inquiry with respect to any such notice, election,
instruction, or written instrument, but in its discretion may request any tax
waivers, proof of signatures or other evidence which it reasonably deems
necessary for its protection. The Depositor and the successors of the Depositor
including any executor or administrator of the Depositor shall, to the extent
permitted by law, indemnify the Custodian and its successors and assigns against
any and all claims, actions or liabilities of the Custodian to the Depositor or
the successors or beneficiaries of the Depositor whatsoever (including without
limitation all reasonable expenses incurred in defending against or settlement
of such claims actions or liabilities) which may arise in connection with this
Agreement or the Custodial Account, except those due to the Custodian's own bad
faith, gross negligence or willful misconduct. The Custodian shall not be under
any duty to take any action not specified in this Agreement, unless the
Depositor shall furnish it with instructions in proper form and such
instructions shall have been specifically agreed to by the Custodian, or to
defend or engage in any suit with respect hereto unless it shall have first
agreed in writing to do so and shall have been fully indemnified to its
satisfaction.
14. NOTICES. All written notices required or permitted to be given by the
Custodian shall be deemed to have been given when sent by mail to the Depositor
at the Depositor's last address of record provided to the Custodian. All written
notices required or permitted to be given to the Custodian shall be deemed to
have been given when received by the Custodian if mailed to the Custodian at 127
West 10th Street, Box 419042, Kansas City, Missouri 64105 or such other address
as the Custodian shall provide to the Depositor from time to time.
15. TIMING OF CONTRIBUTIONS. A contribution is deemed to have been made on the
last day of the preceding taxable year if the contribution is made by the
deadline for filing the Depositor's income tax return (not including extensions)
and if the Depositor designates the contribution as a contribution for the
preceding taxable year in a manner acceptable to the Custodian. The Custodian
will not be liable or responsible for any consequences of postal delays or
delays resulting from an incomplete Application or a designation made in an
unacceptable form. Applications received by IFTC postmarked after the deadline
will be treated as a contribution for the Depositor's current tax year.
Improperly completed applications will be returned to the sender.
16. GOVERNING LAW. This Agreement and the Custodial Account shall be construed,
administered and enforced according to the laws of the State of Missouri.
17. WHEN EFFECTIVE. This Agreement shall not become effective until acceptance
of the Application by the Custodian at its principal offices, as evidenced by a
written confirmation to the Depositor.
================================================================================
Depositor's Signature_______________________________ Date______________________
Custodian's Signature_______________________________ Date______________________
Witness_________________________________________________________________________
(Use only if signature of the Depositor or the Custodian is required to be
witnessed)
<PAGE>
EXHIBIT 14.2
RETAIN FOR YOUR RECORDS
INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
The following information is provided to you in accordance with the
requirements of the Internal Revenue Code (the "Code") and Treasury regulations
and should be reviewed in conjunction with the Individual Retirement Custodial
Account Agreement (the "Custodial Agreement"), the Application for your IRA (the
"Application"), and the prospectus for the mutual portfolio's The Oberweis Funds
that are allowable investments for your IRA. The provisions of the Custodial
Agreement, Application and prospectus govern in any instance where the
Disclosure Statement is incomplete or appears to conflict. This Disclosure
Statement reflects the provisions of the Internal Revenue Code in effect on
January 1, 1993. This Disclosure Statement provides a nontechnical summary of
the law. Please consult with your tax advisor for more complete information and
refer to IRS Publication 590.
I. IRA STATUTORY REQUIREMENTS
An IRA is a trust or custodial account established for the exclusive benefit of
you and your beneficiaries. Current law requires that your IRA agreement be in
writing and that it meet the following requirements:
1. All contributions must be in cash and, for any taxable year, cannot exceed
100% of your compensation or $2,000, whichever is less, unless the contribution
is a rollover contribution or an employer contribution to a simplified employee
pension plan ("SEP").
2. The custodian or trustee must be a bank or other institution or person that
is approved by the Internal Revenue Service to administer your IRA in accordance
with current tax laws.
3. None of your IRA assets may be invested in life insurance contracts or
commingled with the assets of other people except in a common trust fund or
common investment fund.
4. Your interest in your IRA account is nonforfeitable.
5. Distribution from your IRA must be in accordance with certain minimum
distribution rules, which are explained in Section VII below.
II. RIGHT TO REVOKE
You may revoke your IRA at any time within seven days of the time your
Application is signed. To revoke your IRA, mail or deliver a written notice
stating "I hereby elect to revoke my Oberweis Funds IRA." Sign your name
exactly as it appears on your Application, include your social security number,
and mail the notice to:
P.O. Box 419042 Kansas City, MO 64141
210 W. 10th St. Kansas City, MO 64105 (For overnights)
Your notice will be considered mailed on the date of postmark, or the date of
certification or registration if it is sent by certified or registered mail.
When IFTC receives the proper notice of revocation, you will be entitled to a
refund of your full IRA contribution, without any adjustment for expenses or
market fluctuations. If you have any questions concerning your right of
revocation, please call 1-800-245-7311 during regular business hours.
III. ELIGIBILITY
You may make regular contributions to an IRA if you receive compensation from
employment, earnings from self-employment, or alimony, and you have not reached
age 70 1/2 by the end of the tax year for which the contribution is made. In
addition, if you are married and file a joint tax return, you may make
contributions to an IRA for your spouse whether or not your spouse receives
compensation. You may make a rollover contribution to an IRA if you have
received an eligible rollover distribution from a qualified retirement plan or
tax-sheltered annuity or an eligible distribution from another IRA and elect
rollover treatment within 60 days. You may also make a trustee-to-trustee
transfer from another IRA. Finally, your employer may contribute to your IRA,
and if your employer sponsors a simplified employee pension ("SEP"), your
employer can make contributions to a SEP/IRA on your behalf.
IV. CONTRIBUTIONS
A. REGULAR CONTRIBUTIONS
You may contribute each year up to $2,000 or 100% of your compensation,
whichever is less, to your IRA. If you also establish a spousal IRA for your
spouse, you may contribute up to $2,250 or 100% of your compensation, if less,
which may be split between the two IRA's as you choose, provided that no more
than $2,000 may be contributed to either your IRA or the spousal IRA. If your
spouse has compensation in excess of $250, you and your spouse can make a larger
total contribution if you each contribute to a regular IRA. If your employer
contributes to your IRA, the contribution is treated as compensation paid to
you, whether or not the contribution is deductible, unless the contribution is
made under a SEP (see below). Compensation for these purposes means wages,
salaries, professional fees, or other amounts derived from or received for
personal services actually rendered. It includes earned income from self
employment and alimony or separate maintenance payments includable in income.
It does not include pension or annuity payments or deferred compensation.
B. TIME FOR MAKING REGULAR CONTRIBUTIONS
You may make regular contributions to your IRA and/or your spousal IRA anytime
during a year, up to and including the due date for filing your tax return for
the year (without extensions). No regular contributions may be made to an IRA
for the calendar year in which you reach age 70 1/2 or later years. No regular
contributions to a spousal IRA may be made for years in which your spouse is age
70 1/2 or older.
C. DEDUCTIBILITY
Regular IRA contributions are fully deductible unless you or your spouse are
active participants in a tax-qualified plan of an employer. If you or your
spouse are active participants in such a plan, then your allowable deduction
for regular IRA contributions is reduced or eliminated if your Adjusted Gross
Income ("AGI") exceeds certain levels. (If you file separately and are married
but live apart from your spouse at all times during the year, you will be
considered to be single when applying the following rules regarding deduction
limitations.) The deductible amount is determined as follows:
1. If you (and your spouse) are not active participants in a tax-qualified
plan, any contribution up to the maximum amount is deductible.
2. If you (or your spouse) are an active participant in a tax-qualified plan,
AND
(a) your AGI is $25,000 or less ($40,000 for a married couple filing a joint
return and $0 for a married person filing separately), any contribution up to
the maximum amount is deductible;
(b) your AGI is $35,000 or more ($50,000 for a married couple filing a joint
return and $10,000 for a married person filing separately), no IRA contribution
is deductible;
(c) your AGI is between $25,000 and $35,000 ($40,000 and $50,000 for a married
couple filing a joint return and $0 to $10,000 for a married person filing
separately), the deductible amount is reduced. In the case of a regular IRA, the
reduction is $0.20 for each $1.00 of AGI over $25,000 ($40,000 for a married
couple filing a joint return and $0 for a married person filing separately). For
a spousal IRA, the reduction is $0.225 for each $1.00 of AGI over $40,000 if
filing jointly. The limit will not be reduced below $200 unless it is eliminated
entirely.
To the extent that the deductibility of IRA contributions is reduced or
eliminated, then nondeductible contributions may be made to your IRA. Earnings
on all IRA contributions, whether or not the contributions themselves are
deductible, are tax-deferred until receipt. You must designate the amount of
nondeductible IRA contributions when filing your tax return for the year. If
you overstate the amount of your nondeductible contributions you must pay a $100
penalty, unless you can show that such overstatement was due to reasonable
cause. If you fail to report nondeductible IRA contributions you will be
subject to a $50 penalty, unless your failure was due to reasonable cause.
D. ROLLOVER CONTRIBUTIONS
1. AMOUNTS ELIGIBLE FOR ROLLOVER FROM PLANS AND TAX-SHELTERED ANNUITIES
You may make a rollover contribution to your IRA of an "eligible rollover
distribution" from an employer tax-qualified plan (an "employer plan") or a tax-
sheltered annuity (including a 403(b)(7) account). The administrator of the
employer plan or the payor of a distribution from the tax-sheltered annuity
should be able to tell you what portion of your payment is an eligible rollover
distribution. The following types of payments cannot be rolled over:
NON-TAXABLE PAYMENTS. In general, only the "taxable portion" of your payment
is an eligible rollover distribution. If you have made "after-tax" employee
contributions to the plan or annuity, these contributions will be non-taxable
when they are paid to you, and they cannot be rolled over. (After-tax employee
contributions generally are contributions you made from your own pay that were
already taxed.)
PAYMENTS SPREAD OVER LONG PERIODS. You cannot roll over a payment if it is
part of a series of equal (or almost equal) payments that are made at least once
a year and that will last for
. your lifetime (or your life expectancy), or
. your lifetime and your beneficiary's lifetime (or life expectancies), or
. a period of ten years or more.
REQUIRED MINIMUM PAYMENTS. Beginning in the year you reach age 70-1/2, a
certain portion of your payment cannot be rolled (or transferred) over because
it is a "required minimum payment" that must be paid to you.
2. DIRECT ROLLOVER
You can choose a direct rollover of all or any portion of your payment from an
employer plan or a tax-sheltered annuity that is an "eligible rollover
distribution," as described above. In a direct rollover, the eligible rollover
distribution is paid directly from the plan or tax-sheltered annuity to your
IRA. If you choose a direct rollover, you are not taxed on a payment until you
later take it out of the IRA.
3. ROLLOVER OF PLAN PAYMENTS PAID TO YOU
A payment to you of an eligible rollover distribution from an employer plan or
tax-sheltered annuity is taxed in the year you receive it unless, within 60
days, you roll it over to an IRA (or another plan that accepts rollovers). If
you do not roll it over, special tax rules may apply. If any portion of the
payment to you is an eligible rollover distribution, the payor is required by
law to withhold 20% of that amount. This amount is sent to the IRS as income
tax withholding.
SIXTY-DAY ROLLOVER OPTION. If you have an eligible rollover distribution paid
to you, you can still decide to roll over all or part of it to an IRA (or
another employer plan that accepts rollovers). If you decide to roll over, YOU
MUST MAKE THE ROLLOVER WITHIN 60 DAYS AFTER YOU RECEIVE THE PAYMENT. The
portion of your payment that is rolled over will not be taxed until you take it
out of the IRA (or the employer plan).
You can roll over up to 100% of the eligible rollover distribution, including
an amount equal to the 20% that was withheld. If you choose to roll over 100%,
you must find other money within the 60-day period to contribute to the IRA or
the employer plan to replace the 20% that was withheld. (On the other hand, if
you roll over only the 80% that you received, you will be taxed on the 20% that
was withheld.)
See the Special Tax Notice Regarding Plan Payments, that must be provided by
the plan administrator or payor of your employer plan or tax-sheltered annuity,
for additional information on the rules governing rollover and taxation of plan
distributions, or consult your tax advisor for more details.
You should maintain a separate IRA account for any rollovers of funds from an
employer plan if you want to preserve your ability to later roll over these
funds and earnings into another employer plan. Similarly, you should maintain a
separate account for any rollover of funds from a tax-sheltered annuity.
You can make a rollover from a tax-qualified plan of your spouse's employer if
you received all or a part of your spouse's share as a result of his or her
death. A spouse or former spouse who is a recipient of a distribution made
under a qualified domestic relations order may roll over all or part of the
distribution.
Because complex rules apply to distributions and rollovers of payments from
employer plans and tax-sheltered annuities, you should seek competent tax advice
whenever you contemplate receiving a distribution from a qualified plan or tax-
sheltered annuity or an IRA funded by a rollover from a qualified plan or tax-
sheltered annuity.
4. ROLLOVERS FROM OTHER IRAS
You may also make a rollover contribution of amounts held in another IRA.
There are no limits on the amount of rollover contributions made to an IRA from
another IRA, except you may not roll over (or transfer) the required minimum
amount (described in VII.D.). However, the distribution from the first IRA must
be rolled over within 60 days of receipt and no more than one distribution per
year from an IRA may be rolled over into another IRA.
5. TAX-DEFERRAL ON IRA ROLLOVER OR TRUSTEE-TO-TRUSTEE TRANSFER
An effective rollover allows you to postpone paying taxes on the amount
distributed from an employer plan, tax-sheltered annuity or IRA until it is
withdrawn from the recipient IRA. You do not report the distribution as income
and you do not take a deduction for the rollover contribution. Earnings on your
rollover IRA are tax-deferred until receipt. (Similarly, a trustee-to-trustee
transfer is not treated as a distribution and the amount transferred and
earnings are tax-deferred until receipt.)
E. SEP CONTRIBUTIONS
If your employer has established a simplified employee pension ("SEP"), your
employer may make contributions to your SEP/IRA. If the SEP contains a salary
reduction arrangement, you may elect to reduce your salary by up to the lesser
of 15% of compensation or $7,000 (indexed annually); and have that amount
contributed to your SEP/IRA. The maximum SEP contribution, including salary
reduction amounts and employer contributions, is the lesser of 15% of eligible
compensation or $30,000. SEP contributions are not included in your taxable
income.
V. EXCESS CONTRIBUTIONS
Amounts contributed to an IRA which exceed the maximum allowable contribution
are treated as "excess contributions" and are subject to a nondeductible 6%
penalty tax for each year in which the excess remains in the IRA. Excess
contributions may be corrected and the 6% penalty tax avoided by withdrawal of
the excess and any earnings thereon BEFORE THE DUE DATE (including extensions)
of the tax return for the tax year for which the excess contribution was made.
No deduction may be taken for the excess contributions and the earnings must be
included in taxable income for the year the contribution was made. The earnings
withdrawn may be subject to a 10% premature distribution tax if you are under
age 59 1/2. See Section VII.B.
An excess contribution may be withdrawn AFTER THE DUE DATE of the tax return
(including extensions) with the following consequences:
(a) If your total contribution for the tax year the excess contribution was
made is $2,250 or less (or below the limit of your employer's SEP contribution),
the excess contribution may be withdrawn without being included in income or
being subject to the 10% premature distribution tax. No deduction may be taken
for the excess contribution. Any earnings withdrawn will be included in income
and may be subject to the premature distribution tax.
(b) If your total contribution for the tax year in which the excess
contribution was made exceeds $2,250 (or, if higher, the limit of your
employer's SEP contribution), any excess contribution and any earnings
<PAGE>
on the excess withdrawn after the due date for tax filing (including
extensions), will be includable in income in the year received and will be
subject to any 10% premature distribution tax that may apply. Additionally, no
deduction may be taken for the excess contribution for the year in which it is
made.
(c) Any excess contribution withdrawn after the due date for the tax filing
(including extensions) for the year for which the contribution was made is
subject to the 6% penalty tax on the amount of the excess contribution for the
taxable year in which made and each tax year that it is still in your IRA at the
end of the year.
You may also correct an excess contribution to your IRA by treating the excess
amount as contributed to your IRA in a subsequent year to the extent that the
excess, when aggregated with your IRA contribution (if any) for the subsequent
year, does not exceed the maximum amount for that year. You may be entitled to
a deduction for the amount of the excess contribution that is applied in the
subsequent year.
VI. INVESTMENT OF ACCOUNT AND FINANCIAL DISCLOSURE
The assets in your IRA will be invested by IFTC in mutual fund shares of The
Oberweis Funds, Cash Resources Trust money market funds, and/or any other
permitted mutual funds in accordance with your instructions in Article VIII,
paragraphs [2] and [10] of the Custodial Agreement.
Growth in the value of your IRA cannot be guaranteed or projected. However,
the income and operating expenses of each allowable investment that you select
for your IRA will affect the value of its shares and, therefore, the value of
your IRA. The Oberweis Funds prospectus for such shares contains information
regarding current income and expenses of each of these investments. Reasonable
fees and other expenses of maintaining your IRA may be charged to you or your
IRA. The current annual Custodian's fee is set forth in the Application. A
new fee may be substituted from time to time as provided in paragraph [7] of
Article VIII of the Custodial Agreement.
VII. DISTRIBUTIONS
A. TAXATION OF DISTRIBUTION AS ORDINARY INCOME
In general, you must include distributions from your IRA in your gross income
for the year in which the distributions are received. There is a 10% additional
income tax assessed against premature distributions to the extent such
distributions are includable in income, as described in B. below.
You may exclude from your income that portion of a distribution that
constitutes a return of your properly reported nondeductible contributions. The
amount of the distribution excludable from income is the portion that bears the
same ratio to the total distribution that your aggregate nondeductible
contributions (not distributed in prior years) bear to the balance at the end of
the year (calculated after adding back distributions made during the year) of
your IRA. For this purpose, all of your IRAs are treated as a single IRA, and
all distributions from an IRA during a taxable year are to be treated as one
distribution.
In addition, your gross income does not include any distribution from an IRA
that is properly rolled over. Except as provided in D. below, you may roll over
all or any part of property received in a distribution of assets, within 60
days of receipt, into another IRA or individual retirement annuity, and maintain
the tax-deferred status of such assets. A rollover from one IRA to another may
be made once every twelve months. Also, certain qualifying distributions which
were rolled over into an IRA from employer tax-qualified plans may be rolled
over into another employer tax-qualified plan. (You should seek competent tax
advice regarding these rollovers.)
As explained in Section V, certain distributions of excess contributions are
not included in income. In addition, IRA contributions for a taxable year which
do not exceed the contribution limits for such year may also be withdrawn
without being included in income or being subject to a 10% premature
distribution tax, as long as such contributions and earnings thereon are
withdrawn prior to the due date (including extensions) of your federal income
tax return for the tax year for which the contribution was made. The earnings
withdrawn must be included in taxable income for the year in which the
contribution was made and may be subject to the 10% premature distribution tax.
B. TAX ON PREMATURE DISTRIBUTIONS
To the extent they are included in income, distributions from your IRA made
before you reach age 59 1/2 will be subject to a 10% nondeductible penalty tax
(in addition to being taxable as ordinary income) unless the distribution is
made on account of your death or disability, or the distribution is one of a
scheduled series of payments over your life expectancy or the joint life
expectancies of you and your beneficiary.
C. TAX ON EXCESS DISTRIBUTIONS
There is a 15% excise tax assessed against annual distributions from tax-
favored retirement plans, including IRAs, which exceed the greater of $150,000
or $112,500 (indexed annually). To determine whether you have distributions in
excess of this limit, you must aggregate the amounts of all distributions
received by you during the calendar year from all retirement plans, including
IRAs. If you have account balances or accrued benefits equal to at least
$562,500 as of August 1, 1986, you may have a portion of the excess
distributions exempted from the 15% additional tax. Please consult with your
tax advisor for more complete information, including the availability of
favorable elections.
D. REQUIRED MINIMUM DISTRIBUTIONS
1. DURING YOUR LIFE
The minimum distribution rules require that for your "70-1/2 year," and each
year thereafter, you must make withdrawals from your IRA accounts that are at
least equal to the "minimum distribution." Your 70-1/2 year is the calendar
year that contains the date six months after your 70th birthday.
Generally, you must withdraw an amount at least equal to the minimum
distribution by December 31 of each year. However, for your 70-1/2 year, you
may wait to withdraw the minimum distribution until April 1 of the following
year. (This means that if you wait to make your withdrawal for the 70-1/2 year
until April 1 of the following year, your total withdrawal in that year must
equal the minimum distributions for two years - a withdrawal by April 1 that is
equal to the minimum distribution for the 70-1/2 year and a second withdrawal by
December 31 that is equal to the minimum distribution for that year. In each
year thereafter, you must withdraw the minimum distribution for the year by
December 31.)
The amount of the minimum distribution is usually determined by dividing the
account balance of your IRA, as of December 31 of the prior year, by a divisor
(determined by Internal Revenue Service actuarial tables) that is based on your
life expectancy or the joint life and last survivor expectancy for you and your
beneficiary. See Article IV of the Custodial Agreement for a more detailed
explanation of how to calculate the minimum distribution. The distributions
must also satisfy the minimum distribution incidental benefit rule, which
generally will require distributions over a period less than the joint and last
survivor expectancy of you and your designated beneficiary unless your
beneficiary is your spouse or is no more than ten years younger than you. The
IRS provides tables for determining the distribution needed to satisfy
incidental benefit requirements.
The minimum distribution required must be calculated separately for each IRA
you own, but the amounts so determined may be totalled and taken from any one or
more of your IRAs.
You will be subject to a 50% excise tax on the amount by which the
distribution you actually received in any year falls short of the minimum
distribution required for the year.
You may take your distribution in:
-a lump sum;
-equal or substantially equal payments over a specified period no longer than
your life expectancy or the joint life and last survivor expectancy of you and
your designated beneficiary.
Also, as described in Section VII.A., you may roll over your lump sum
distribution to purchase an individual retirement annuity payable in equal or
substantially equal payments over your life or the joint and last survivor lives
of you and your designated beneficiary. (See Article IV and Article VIII,
paragraph 4, of the Custodial Agreement and IRS Publication 590 for a full
description of permissible distribution methods.)
2. AFTER YOUR DEATH
If you die before you reach age 70 1/2, distribution must be made to your
beneficiary by December 31 of the fifth year following the year of your death
unless, by December 31 of the year following your death, your beneficiary begins
receiving distributions over a period not extending beyond your beneficiary's
life expectancy. When your beneficiary is your spouse, however, distributions
can be postponed until December 31 of the year in which you would have reached
age 70 1/2, at which time your spouse must take them over a period not extending
beyond his or her life expectancy. See Article IV of the Custodial Agreement
and IRA Publication 590 for a more detailed explanation of how to calculate the
minimum distribution.
If you die after your required beginning date, the balance in the Custodial
Account must continue to be paid at least as rapidly as under the method of
payment being used prior to your death.
If your beneficiary is your spouse, your beneficiary can elect to treat your
IRA as his or her own IRA.
The minimum distribution required must be calculated separately for each IRA,
but the amounts so determined may be totalled and taken from any one or more
IRAs.
A payee is subject to a 50% excise tax on the amount by which a
distribution for the year falls short of the minimum distribution required.
Your beneficiary may take his or her distribution in:
-a lump sum;
-equal or substantially equal payments over a specified period no longer than
his or her life expectancy.
Also, as described in Section VII.A., a spousal beneficiary may roll over a
lump sum distribution to purchase an individual retirement annuity payable in
equal or substantially equal payments over his or her life expectancy. (See
Article IV and Article VIII, paragraph 4, of the Custodial Agreement and IRS
Publication 590 for a full description of permissible distribution methods.)
3. FURTHER INFORMATION. This explanation only summarizes the minimum
distribution rules. Other rules and exceptions may apply to you that are not
discussed in this summary, including rules which, in some cases, would prevent
you from using certain options described above. You should consult your
personal tax advisor or IRS Publication 590 for more detailed information.
VIII. LOSS OF TAX-EXEMPT STATUS OF IRA
If you engage in any of the prohibited transactions listed in Section 4975 of
the Code (such as any sale, exchange, or leasing of any property between you and
your IRA) or if you take a loan from your IRA, your account will be disqualified
and the entire balance of your account will be treated as if it had been
distributed to you as of the first day of the year in which the prohibited
transaction occurred. The fair market value of your IRA will be included in
income in the year the prohibited transaction takes place and, if you are under
age 59 1/2 at the time, you may be subject to the 10% penalty tax on premature
distributions. Should you or your beneficiary pledge all or any portion of your
IRA as security for a loan, the portion so pledged will be treated as if
distributed to you, will be included in your income, and may be subject to the
10% premature distribution penalty during the year in which the pledge occurred.
IX. OTHER TAX CONSIDERATIONS
A. FEDERAL INCOME TAX WITHHOLDING
Federal income tax will be withheld on amounts distributed from your IRA
unless you elect not to have withholding apply. Generally, tax will be withheld
at a 10% rate. At the time of distribution from your IRA, you will be notified
of your right to elect not to have withholding apply and will be provided with
the appropriate election form. If your IRA distribution is to be delivered
outside of the U.S., you may elect not to have withholding apply only if you
certify to the Custodian that you are not a U.S. citizen residing overseas or a
"tax avoidance expatriate" as described in Section 877 of the Internal Revenue
Code. (The distribution may also be subject to state withholding laws.)
B. DISTRIBUTION NOT ELIGIBLE FOR LUMP-SUM AVERAGING OR CAPITAL GAINS TREATMENT
No distribution to you or anyone else from your account can qualify for
capital gains treatment under the federal income tax laws or for the five- or
ten-year averaging available with respect to certain lump sum distributions from
other types of retirement plans. The distribution is taxed to the person
receiving it as ordinary income.
C. GIFT TAX
If you elect during your lifetime to have all or any part of your account
payable to a beneficiary at or after your death, the election will not subject
you to any gift tax liability.
D. REPORTING FOR TAX PURPOSES
You must report deductible IRA contributions and distributions on your tax
Form 1040 or 1040A for the taxable year in which the contributions or
distributions were made. If you make any nondeductible contributions, you must
include the amount of such nondeductible contributions and the aggregate account
balance of all your IRAs as of the end of the calendar year on Form 8606.
Additional reporting is required in the event that special taxes or penalties
described herein are due. You must file Form 5329 with the IRS for each taxable
year in which the contribution limits are exceeded, a premature distribution
takes place, less than the required minimum amount is distributed from your IRA,
or excess distributions are made.
X. IRS APPROVAL & INFORMATION
This IRA has not been submitted to the IRS for approval as to form because it
incorporates Form 5305-A issued by the IRS. This Disclosure Statement provides
only a summary of the laws governing IRAs. You should consult your personal tax
advisor or IRS Publication 590, Individual Retirement Arrangements, for more
detailed information. This publication is available from your local IRS office
or by calling 1-800-TAX-FORMS.
[LOGO OF THE OBERWEIS FUNDS]
951 Ice Cream Drive
Suite 200
North Aurora, Illinois 60542
<PAGE>
[LOGO] EXHIBIT 14.2
Mailing Address:
The Oberweis Funds The Oberweis Funds
Emerging Growth P.O. Box 419042
Micro-Cap Portfolio Kansas City, MO 64141
Mid-Cap Portfolio
For assistance in completing
this application, please call
1-800-245-7311
- --------------------------------------------------------------------------------
IRA Transfer and Direct Rollover Request Form
- --------------------------------------------------------------------------------
Investors Fiduciary Trust Company, as Custodian
To transfer assets from an existing IRA or to complete a direct rollover from a
qualified employer plan, 403(b) account or Keogh to an Oberweis Funds IRA,
complete this form and attach a copy of a current statement from your existing
IRA or qualified retirement plan. If you are opening a new IRA, also attach
your completed IRA application to this form. Return this form and the
applicable attachments to Investors Fiduciary Trust Company (IFTC), c/o The
Oberweis Funds, 210 West 10th Street, Box 419042, Kansas City, MO 64141.
- --------------------------------------------------------------------------------
1. Custodian of Existing Account
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------
Custodian Name
- ----------------------------------------------------------------
Custodian Address
- ----------------------------------------------------------------
City State Zip
- ----------------------------------------------------------------
Custodian Phone Number
- --------------------------------------------------------------------------------
2. Instructions to Custodian of Existing Account
- --------------------------------------------------------------------------------
Instructions to Custodian of Existing Account, Acct. No.
- ---------------------------------------------------------------:
I have established an Oberweis Funds Individual Retirement Account with
Investors Fiduciary Trust Company (IFTC) as Custodian. Please withdraw assets
from my account in your custody in the following manner and send a check payable
to IFTC Cust IRA FBO (your name).
- ---------------------------------------------------------------,
c/o The Oberweis Funds, 210 West 10th Street, Box 419042, Kansas City, MO 64141.
You will be receiving a letter of acceptance from Investors Fiduciary Trust
Company (IFTC).
Type of account to be transferred (check one):
[_] IRA
[_] SEP-IRA
[_] Conduit IRA previously rolled over from a qualified plan or 403(b)
[_] Direct rollover from a qualified employer plan or Keogh
[_] 403(b) Custodial Account or Annuity
[_] Other (list type) _____________________________________
Portion of account to be transferred (check one): (Note: if you are age 70 1/2
or older, you must take out your minimum required distribution from your IRA
before completing a transfer or direct rollover.)
_____ 1. All of the assets in my account.
_____ 2. $_______ in my account.
If you are transferring a certificate of deposit IRA choose one of the options
below:
_____ 1. Liquidate prior to maturity date. I am aware of and acknowledge the
penalty I will incur from an early withdrawal.
_____ 2. Liquidate at maturity. (Maturity date must be within 60 days. If the
maturity date is less than 15 days from the date of this request, you
may want to contact your custodian bank to prevent automatic
reinvestment of the account.)
<PAGE>
- --------------------------------------------------------------------------------
3. Accountholder Information
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------
Today's Date Your Social Security Number
- ----------------------------------------------------------------
Your Name
- ----------------------------------------------------------------
Your Address
- ----------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
4. Authorizations
- --------------------------------------------------------------------------------
Shareholder Authorization: I hereby authorize Investors Fiduciary Trust Company
(IFTC) to deposit the assets in my existing IRA, qualified employer plan or
Section 403(b) account according to the terms stated in this IRA Transfer
Request Form. I hereby acknowledge that strict requirements must be met to
qualify for tax-free rollover or transfer treatment; I hereby certify that the
source of the transfer or rollover contribution qualifies the contribution as
such.
- ----------------------------------------------------------------
Signature
- ----------------------------------------------------------------
Date
Signature Guarantee: Your Current Trustee or Custodian may require your
signature to be Guaranteed. Call them for requirements.
- ----------------------------------------------------------------
Name of Bank or Firm Guaranteeing Signature
- ----------------------------------------------------------------
Signature of Officer & Title
Custodian Authorization: Investors Fiduciary Trust Company hereby accepts its
appointments as Custodian of the above IRA account and, upon receipt of assets,
will deposit such assets in an Oberweis Funds IRA on behalf of the Depositor
authorizing this transfer or direct rollover.
Investors Fiduciary Trust Company
<PAGE>
<TABLE>
<S> <C> <C>
Exhibit 14.2
[LOGO] THE OBERWEIS FUNDS Mailing Address:
Emerging Growth Portfolio For assistance in completing The Oberweis Funds
Micro-Cap Portfolio this application, please call P.O. Box 419042
Mid-Cap Portfolio 1-800-245-7311 Kansas City, MO 64141
</TABLE>
- --------------------------------------------------------------------------------
INDIVIDUAL RETIREMENT ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Account Registration
- --------------------------------------------------------------------------------
Name of Custodian:
Investors Fiduciary Trust Company (IFTC)
- --------------------------------------------------------------------------------
Name (One Only)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Social Security # Date of Birth
- --------------------------------------------------------------------------------
Daytime Phone # Evening Phone #
- --------------------------------------------------------------------------------
2. Designation of Beneficiary
- --------------------------------------------------------------------------------
Primary Beneficiary: (If no percentage is specified, primary beneficiaries will
share the account balance equally.)
- --------------------------------------------------------------------------------
Relationship % of Account
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Social Security # Date of Birth
- --------------------------------------------------------------------------------
Relationship % of Account
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Social Security # Date of Birth
Secondary Beneficiary: (A secondary beneficiary will receive account proceeds
only if all primary beneficiaries predecease the accountholder.)
- --------------------------------------------------------------------------------
Relationship
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Social Security # Date of Birth
(If more space is needed for beneficiaries please provide above information on
each on a separate sheet of paper.)
- --------------------------------------------------------------------------------
3. Type of IRA (check only one)
- --------------------------------------------------------------------------------
Indicate contribution amount and year
[ ]Regular [ ]Transfer of Assets [ ]SEP [ ]Rollover
$ ______________ ______________
Amount For Tax Year
3b. IRA Funded By:
[ ] Contribution
[ ] Direct Transfer of Assets from another IRA
[ ] Direct Rollover from Employer "Qualified Plan" (401k, 403b, Money Purchase
Pension Plan, Profit Sharing Plan, etc.)
[ ] Rollover from:
[ ] Another IRA
[ ] Qualified Retirement Plan or 403(b) Plan
- --------------------------------------------------------------------------------
4. Choose Your Investment
- --------------------------------------------------------------------------------
I have the right to direct the investments. I understand, however, that
investment options available to me are limited to those shown below:
($1000 minimum for each Portfolio to establish an IRA)
[ ] Oberweis Emerging Growth Portfolio $ ____________
CLOSED
[ ] Oberweis Micro-Cap Portfolio $ ____________
[ ] Oberweis Mid-Cap Portfolio $ ____________
[ ] Cash Resource U.S. Government
Money Market Fund $ ____________
[ ] Cash Resource Money Market Fund $ ____________
- --------------------------------------------------------------------------------
5. Annual Administrative Fee
- --------------------------------------------------------------------------------
An annual administrative fee of $12.00 per account, in each portfolio, will be
automatically deducted from your account if not submitted separately. The
custodian may change this fee from time to time.
- --------------------------------------------------------------------------------
6. Telephone Transaction Option
- --------------------------------------------------------------------------------
Unless you indicate otherwise by checking the box below, you may effect
telephone exchanges between portfolios by calling 1-800-245-7311.
[ ] I do not want telephone exchanges between portfolios.
If you effect an exchange between portfolios, the beneficiary information will
be copied for the new account unless you provide us with an additional
beneficiary designation form.
<PAGE>
- -------------------------------------------------------------------------------
7. Automatic Investing (The Oberweis Funds Only)
- -------------------------------------------------------------------------------
Please enclose a voided, unsigned check for the bank account to be debited (or
deposit slip if debiting savings account).
You may invest in any of the Oberweis Funds automatically each month by
completing the following information, attaching a voided unsigned check and
returning it to the Oberweis Funds (c/o IFTC). You will receive a confirmation
of each transaction. The deduction from your bank account will appear on your
monthly bank statement.
Please invest the amount indicated (minimum $100 per portfolio) in the following
portfolio(s) on or about the
[ ] 5th day [ ] 20th day
(20th will be selected if no box is checked)
[ ] of each month [ ] of each quarter
This bank account is a
[ ] Checking [ ] Savings
Your first automatic monthly investment will occur no sooner than two weeks
after the receipt of your application.
[ ] Oberweis Emerging Growth Portfolio
$_________________________________
[ ] Oberweis Micro-Cap Portfolio
CLOSED
$_________________________________
[ ] Oberweis Mid-Cap Portfolio
$_________________________________
- -------------------------------------------------------------------------------
Check here if this is an amendment to an existing IRA.
[ ] Amendment
Account # _________________________________________________________
- -------------------------------------------------------------------------------
8. Dealer Information
- -------------------------------------------------------------------------------
For Dealer Only
We hereby authorize The Chicago Corporation to act as agent in connection with
transactions under this authorization form. We guarantee the shareholder's
signature.
- -------------------------------------------------------------------------------
Firm Name
- -------------------------------------------------------------------------------
Representative First/Last Name
- -------------------------------------------------------------------------------
Representative's Number
- -------------------------------------------------------------------------------
Branch Address
- -------------------------------------------------------------------------------
City State Zip
- -------------------------------------------------------------------------------
9. Signatures (Important: Please read before signing)
- -------------------------------------------------------------------------------
Spousal Consent
(For use in community or marital property states)
(This section should be reviewed if the accountholder is married and is
designating a beneficiary other than the spouse. It is the accountholder's
responsibility to determine if this section applies. The accountholder may need
to consult with legal counsel. Neither the Custodian or the Sponsor will be
liable for any consequences resulting from a failure of the accountholder to
provide proper spousal consent.)
I am the spouse of the above-named accountholder. I acknowledge that I have
received a full and reasonable disclosure of my spouse's property and
financial obligations. Due to any possible consequences of giving up my
community property interest in this IRA. I have been advised to see a tax
professional or legal advisor.
I hereby consent to the beneficiary designation(s) indicated above. I assume
full responsibility for any adverse consequences that may result. No tax or
legal advice was given to me by the Custodian or Sponsor.
- -------------------------------------------------------------------------------
Signature of Spouse Date
- -------------------------------------------------------------------------------
Signature of Witness for Spouse Date
We cannot process this application if section below is not signed.
By signing the Application establishing an IRA, the undersigned: (1) establishes
an Individual Retirement Account pursuant to the Internal Revenue Code of 1986,
as amended, and in accordance with all the terms of the Form 5305A Individual
Retirement Custodial Account together with the Custodial Agreement incorporated
therein, (2) appoints Investors Fiduciary Trust Company (IFTC), or its
successors, as Custodian of the Account, (3) states that he or she has received,
read, accepts and specifically incorporates herein the Custodial Agreement on
Form 5305A and Disclosure Statement, (4) agrees to promptly give instructions to
the Custodian necessary to enable the Custodian to carry out its duties under
the Custodial Agreement, (5) agrees that he or she has received and read the
Prospectus for the investment(s) selected and that this account will be subject
to the Custodial Agreement as amended from time to time, (6) has the authority
and legal capacity to purchase mutual fund shares, is of legal age in his/her
state and believes each investment is suitable for him/her and (7) hereby
ratifies any instructions given on this account and any account into which
he/she exchanges related to the above items and agrees that neither The Oberweis
Funds nor IFTC will be liable for any loss, cost or expense for acting upon such
instructions (by telephone or writing) believed to be genuine and in accordance
with the procedures described in the Prospectus.
Under penalties of perjury, I certify that the number shown on this form is my
correct social security number.
- -------------------------------------------------------------------------------
Signature of Depositor Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the December
31, 1995 Annual Report, the June 30, 1996 Semi-Annual Report and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<INVESTMENTS-AT-COST> 92,827 151,840
<INVESTMENTS-AT-VALUE> 134,818 211,800
<RECEIVABLES> 1,355 3,953
<ASSETS-OTHER> 27 26
<OTHER-ITEMS-ASSETS> 0 0
<TOTAL-ASSETS> 136,200 215,779
<PAYABLE-FOR-SECURITIES> 260 2,754
<SENIOR-LONG-TERM-DEBT> 0 0
<OTHER-ITEMS-LIABILITIES> 1,277 5,575
<TOTAL-LIABILITIES> 1,537 8,329
<SENIOR-EQUITY> 0 0
<PAID-IN-CAPITAL-COMMON> 85,853 131,829
<SHARES-COMMON-STOCK> 4,630 5,884
<SHARES-COMMON-PRIOR> 4,203 4,630
<ACCUMULATED-NII-CURRENT> 0 0
<OVERDISTRIBUTION-NII> 0 0
<ACCUMULATED-NET-GAINS> 6,161 15,410
<OVERDISTRIBUTION-GAINS> 0 0
<ACCUM-APPREC-OR-DEPREC> 42,649 60,211
<NET-ASSETS> 134,663 207,450
<DIVIDEND-INCOME> 114 30
<INTEREST-INCOME> 448 628
<OTHER-INCOME> 0 0
<EXPENSES-NET> 2,003 1,230
<NET-INVESTMENT-INCOME> (1,441) (572)
<REALIZED-GAINS-CURRENT> 12,380 9,249
<APPREC-INCREASE-CURRENT> 27,643 17,562
<NET-CHANGE-FROM-OPS> 38,582 26,239
<EQUALIZATION> 0 0
<DISTRIBUTIONS-OF-INCOME> 0 0
<DISTRIBUTIONS-OF-GAINS> (6,202) 0
<DISTRIBUTIONS-OTHER> 0 0
<NUMBER-OF-SHARES-SOLD> 2,039 3,681
<NUMBER-OF-SHARES-REDEEMED> (1,820) (2,427)
<SHARES-REINVESTED> 208 0
<NET-CHANGE-IN-ASSETS> 44,649 72,787
<ACCUMULATED-NII-PRIOR> 0 0
<ACCUMULATED-GAINS-PRIOR> (17) 6,161
<OVERDISTRIB-NII-PRIOR> 0 0
<OVERDIST-NET-GAINS-PRIOR> 0 0
<GROSS-ADVISORY-FEES> 488 362
<INTEREST-EXPENSE> 0 0
<GROSS-EXPENSE> 2,052 1,230
<AVERAGE-NET-ASSETS> 115,826 175,473
<PER-SHARE-NAV-BEGIN> 21.41 29.09
<PER-SHARE-NII> (.33) (.11)
<PER-SHARE-GAIN-APPREC> 9.43 6.28
<PER-SHARE-DIVIDEND> .0 0
<PER-SHARE-DISTRIBUTIONS> (1.42) 0
<RETURNS-OF-CAPITAL> .0 0
<PER-SHARE-NAV-END> 29.09 35.26
<EXPENSE-RATIO> 1.73 1.41
<AVG-DEBT-OUTSTANDING> 0 0
<AVG-DEBT-PER-SHARE> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from
June 30, 1996 Semi-Annual Report and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> Oberweis Micro Cap Portfolio
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 46,256
<INVESTMENTS-AT-VALUE> 49,151
<RECEIVABLES> 364
<ASSETS-OTHER> 310
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 49,825
<PAYABLE-FOR-SECURITIES> 2,773
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,700
<TOTAL-LIABILITIES> 4,473
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,625
<SHARES-COMMON-STOCK> 3,258
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 832
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,895
<NET-ASSETS> 45,352
<DIVIDEND-INCOME> 2
<INTEREST-INCOME> 200
<OTHER-INCOME> 0
<EXPENSES-NET> 203
<NET-INVESTMENT-INCOME> (1)
<REALIZED-GAINS-CURRENT> 832
<APPREC-INCREASE-CURRENT> 2,895
<NET-CHANGE-FROM-OPS> 3,727
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,922
<NUMBER-OF-SHARES-REDEEMED> (674)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 45,252
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 203
<AVERAGE-NET-ASSETS> 23,225
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 3.92
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.92
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
