<PAGE>
PRESIDENT'S LETTER
Dear Oberweis Funds Shareholder:
Good news! The second quarter seems to have confirmed a strong turnaround for
the stocks of extremely rapidly growing companies. The second quarter produced
gains of 21.6%, 13.1%, and 14.7% for the Mid-Cap, Emerging Growth, and Micro-Cap
Portfolios, respectively. That compares to 7.1% for the S&P 500 and 15.7% for
the small cap Russell 2000. The six month numbers are also very encouraging with
gains of 21.9%, 12.2%, and 0.1% for the three Portfolios compared to 12.4% for
the S&P 500 and 9.3% for the Russell 2000. No one can guarantee that the rapid
growth companies we invest in will be the stocks that outperform the market
going forward, but we believe that a widely diversified portfolio of these
stocks has the potential to outperform the S&P 500 or Russell 2000 over a long
period of time (five to ten years). In a few years when we look back on the
stock market experience of the late 1990s, I believe we will see a period of
exceptionally strong stock returns highlighted by excessive optimism on the
outlook for large cap leaders like Gillette and Coke as well as the Internet
stocks.
Many investors asked when that enthusiasm for large caps would change and what
would cause the change. I had to answer that I didn't know. Such changes are
usually the result of some unexpected event or a very quiet gradual change. The
change frequently goes unnoticed for quite a period of time before the news
media begin to write articles about the new story. When we look back at the late
1990s, we may well decide that small caps resumed their historical performance
leadership role on October 8, 1998, the bottom of last fall's stock market
setback. Since that time through June 30, 1999, the S&P 500 gained 44.4% but the
Mid-Cap, Emerging Growth, and Micro-Cap Portfolios gained 119.2%, 87.6%, and
73.8% respectively. Thus I don't believe that renewed market interest in these
stocks started in the second quarter, but rather resumed in the second quarter.
The five year average annual return for Emerging Growth through June 30, 1999
was 15.4% and the ten year or since inception returns for the Mid-Cap, Emerging
Growth, and Micro-Cap are 18.9%, 14.9%, and 10.5% (Mid-Cap and Micro-Cap are
only 2.8 and 3.5 years old, respectively). The one year return for the Mid-Cap,
Emerging Growth and Micro-Cap Portfolios through June 30 was 28.6%, 8.2% and
4.1%, respectively. Performance data represents past performance, which is no
guarantee of future results. Investment return and principal value will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
While some observers might conclude that those performance numbers would
indicate that the Mid-Cap Portfolio is the best to own, I would suggest owning
all three. When we look at the growth rates of the companies in the Portfolios,
we find that the most recently reported quarter showed average revenue and
earnings gains in excess of 80% for each of the three portfolios, yet the
average PE ratio is quite different for the three portfolios. According to
information provided by William O'Neil & Co., the average PE for the three
Portfolios was 59 for Mid-Cap, 51 for Emerging Growth, and 19 for Micro-Cap
based on this year's estimates and 43, 34, and 14 based on next year's
estimates. Those numbers compare to 27, 25, and 27 for the S&P 500, S&P Mid-Cap,
and Russell 2000 for this year, and 23, 19, and 22 for next year's estimates.
Our Portfolios have historically carried a substantially higher PE than the
market indices because of the much higher growth rates of the companies in the
Portfolios. Yet on June 30, the PE for the Micro-Cap Portfolio was well below
the market averages. This implies that the smallest company stocks are being
valued at the lowest relative prices and could mean they offer the best value at
this time. When investors may begin to appreciate these very small companies
again is, of course, uncertain. But like them again, investors surely will at
some point, in our opinion.
This very low PE relative to the market provides us with a great deal of
optimism. However, we must remember that PEs for the market as a whole are near
all time highs. Thus a substantial correction at some point in the future is a
reasonable expectation.
On May 25, 1999 the Fund's distributor changed its name to Oberweis.net to
reflect its new emphasis on providing low cost Internet trades. Portfolio shares
are now available both through our custodian bank and Oberweis.net with no
transaction fees (though Mid-Cap and Micro-Cap have a 0.25% redemption charge
which benefits the remaining fund shareholders, not the distributor). If you
have any questions about the fund's investment policies, please feel free to
call me or either of our two other portfolio managers, Jim Oberweis Jr. or
Martin Yokosawa. We're normally available from 7:30 AM until 6:00 PM central
time and from 9:30 until noon on Saturday at 800-323-6166 or 630-801-6000 in the
Chicago area. Please visit our website at www.oberweisfunds.com or our
distributor's website at www.oberweis.net.
Sincerely,
/s/ James D. Oberweis
---------------------
James D. Oberweis
President
1
<PAGE>
OBERWEIS EMERGING GROWTH PORTFOLIO
Portfolio of Investments
June 30, 1999 (value in thousands)
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 101.8%
CHEMICALS - SPECIALTY - 0.9%
23,000 Chirex, Inc. @ 32.125 $ 739
------
Commercial Services -
Business Services - 0.7%
60,000 First Consulting Group, Inc. @ 10.625 638
------
Commercial Services - Misc. - 5.1%
18,500 Abacus Direct Corp. @ 91.500 1,693
30,000 Medquist, Inc. @ 43.750 1,313
25,000 Memberworks, Inc. @ 29.000 725
20,000 Metzler Group, Inc. @ 27.625 552
------
4,283
------
Computer - Integrated Systems - 2.9%
200,000 Javelin Systems, Inc. @ 12.250 2,450
------
Computer - Memory Devices - 2.6%
40,000 Network Appliance, Inc. @ 55.875 2,235
------
Computer Peripherials - 1.0%
30,000 Cybex Computer Products @ 27.875 836
------
Computer Services - 2.0%
32,500 CGI Group, Inc. Class A @ 21.000 682
30,000 Cognizant Tech Solutions @ 26.062 782
* 10,000 IMRGlobal Corp. @ 19.250 193
------
1,657
------
Computer Software - Desktop - 1.3%
136,000 Made 2 Manage Systems, Inc. @ 8.062 1,096
------
Computer Software - Enterprise - 8.0%
30,000 Concord Communications, Inc. @ 45.000 1,350
* 15,000 Micromuse, Inc. @ 49.875 748
* 10,300 New Era of Networks, Inc. @ 43.937 453
20,000 Peregrine Systems @ 25.687 514
* 12,000 Sapient Corp. @ 56.625 679
40,000 Softworks, Inc. @ 11.000 440
75,000(a) Softworks, Inc. RS @ 8.880 666
* 20,000 Veritas Software Corp. @ 94.937 1,899
------
6,749
------
Computer Software - Internet - 13.3%
* 80,000 Broadvision, Inc. @ 73.750 5,900
*120,000 Mindspring Enterprises, Inc. @ 44.312 5,317
------
11,217
------
Cosmetics - Personal Care - 0.9%
25,400 Chattem, Inc. @ 31.812 808
------
Electronics - Components /
Semiconductors - 13.2%
* 17,000 Broadcom Corp. Class A @ 144.562 $ 2,458
65,000 Candela Corp. @ 14.250 926
20,000 QLogic Corp. @ 132.000 2,640
40,000 RF Micro Devices, Inc. @ 74.625 2,985
45,000 Transwitch Corp. @ 47.375 2,132
------
11,141
------
Food - Miscellaneous 1.2%
30,000 Hain Food Group, Inc. @ 20.625 619
10,000 Jutrzenka @ 8.277 83
50,000 Suprema Specialties, Inc. @ 6.937 347
------
1,049
------
Household Appliances - 5.9%
100,000 Salton - Maxim Housewares, Inc. @ 50.000 5,000
------
Internet - ISP - 2.1%
60,000 Open Text Corp. @ 30.000 1,800
------
Machinery - 1.1%
40,000 Xeikon N.V. @ 22.750 910
------
Medical - Biomed Genetics - 2.8%
34,500 Qiagen N.A. @ 68.000 2,346
------
Medical / Dental Services - 10.5%
*115,000 Advance Paradigm, Inc. @ 61.000 7,015
50,000 IMPATH, Inc. @ 27.000 1,350
10,000 The Laser Center @ 48.000 480
------
8,845
------
Medical - Ethical Drugs - 9.7%
80,000 Andrx Corp. @ 77.125 6,170
80,000 King Pharmaceuticals, Inc. @ 25.875 2,070
------
8,240
------
Medical - Instruments - 1.4%
25,000 Perclose, Inc. @ 48.062 1,202
------
Medical - Nursing Homes /
Outpatient Care - 0.8%
20,200 Sunrise Assisted Living @ 34.875 704
------
Medical - Products - 0.8%
25,000 Gliatech, Inc. @ 25.500 637
------
Metal Ores - Misc. - 0.4%
10,000 Stillwater Mining Company @ 32.687 327
------
Pollution Control - 0.8%
50,000 Stericycle, Inc. @ 13.562 678
------
</TABLE>
See notes to Portfolio of Investments.
2
<PAGE>
OBERWEIS EMERGING GROWTH PORTFOLIO
Portfolio of Investments (cont'd.)
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
- ---------------------------------------------------------------------------
<S> <C> <C>
Restaurants - 2.6%
45,000 Papa John's International, Inc. @ 44.687 $ 2,011
10,000 P.F. Chang's China Bistro @ 21.625 216
-------
2,227
-------
Retail - Apparel - 6.8%
60,000 American Eagle Outfitters @ 45.500 2,730
50,000 Chico's Fas, Inc. @ 23.500 1,175
46,000 Children's Place @ 40.500 1,863
-------
5,768
-------
Shoes & Related Apparel - 0.5%
**10,000 K-Swiss, Inc. @ 46.500 465
-------
Telecommunications - Equipment - 1.3%
12,000 Carrier Access Corp. @ 43.812 526
20,000 Catapult Communications @ 18.875 378
12,000 Microwave Power Devises @ 15.375 184
-------
1,088
-------
Telecommunications - Services - 0.5%
40,000 Tricom SA @ 11.062 442
-------
Textile - Manufacturing - 0.7%
20,000 Gildan Activewear, Inc. @ 16.875 337
10,000 Tarrant Apparel Group @ 22.750 228
-------
565
-------
Total Common Stocks
(Cost: $43,277,000) $86,142
-------
</TABLE>
<TABLE>
<CAPTION>
Contracts Value
- ---------------------------------------------------------------------------
<S> <C> <C>
COVERED CALL OPTIONS - (1.2%)
150 Advance Paradigm, Inc., July $60 $ (47)
170 Broadcom Corp. Class A, August $110 (623)
100 Broadvision, Inc., July $70 (62)
100 Broadvision, Inc., August $70 (97)
100 Broadvision, Inc., September $75 (98)
100 IMRGlobal Corp., August $30 (2)
20 Micromuse, Inc., July $60 (1)
200 Mindspring Enterprises, Inc., July $52.50 (17)
200 Mindspring Enterprises, Inc., July $57.50 (5)
100 Mindspring Enterprises, Inc., October $75 (21)
103 New Era of Networks, Inc., July $50 (12)
120 Sapient Corp., July $90 --
100 Veritas Software Corp., July $100 (30)
-------
Total Covered Call Options
(Premiums received : $528,000) (1,015)
Other Liabilities less Assets - (0.6%) (501)
-------
NET ASSETS - 100% $84,626
-------
</TABLE>
Notes to Portfolio of Investments
- ---------------------------------------------------------------------------
* All or a portion of these stocks were held in escrow at June 30, 1999 to
cover call options written. The aggregate market value was $10,174,000.
** Income producing security during the period ended June 30, 1999.
Based on the cost of investments of $43,277,000 for federal income tax purposes
at June 30, 1999, the aggregate gross unrealized appreciation was $45,353,000,
the aggregate gross unrealized depreciation was $2,975,000 and the net
unrealized appreciation of investments was $42,378,000.
/(a)/ The following security is subject to legal or contractual restrictions on
sale. It was valued at cost on the date of acquisition and at fair value as
determined by the board of trustees of the Fund as of June 30, 1999. The
aggregate value of the restricted security was $666,000 at June 30, 1999.
Softworks, Inc. 75,000 shares purchased in April, 1999 at a cost of
$675,000.
3
<PAGE>
OBERWEIS MICRO-CAP PORTFOLIO
Portfolio of Investments
June 30, 1999 (value in thousands)
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 103.6%
BEVERAGES - SOFT DRINKS - 0.4%
20,000 Vermont Pure Holdings Ltd. @ 3.562 $ 71
------
Building - A/C & Heating Products - 0.2%
4,300 AAON, Inc. @ 11.500 49
------
Building - Construction Products - 0.7%
**10,000 Craftmade International @ 13.000 130
------
Commercial Services - Advertising - 1.0%
50,000 HMG Worldwide Corp. @ 3.937 197
------
Commercial Services - Misc. - 5.0%
20,000 Analytical Surveys, Inc. @ 24.875 497
20,000 Innotrac Corp. @ 20.250 405
25,000 Mim Corp. @ 2.437 61
4,000 U.S. - China Industrial Exchange @ 6.625 27
------
990
------
Commercial Services - Schools - 1.8%
12,500 New Horizons Worldwide, Inc. @ 19.750 247
10,000 Quest Education Corp. @ 10.562 106
------
353
------
Commercial Services - Staffing - 2.0%
30,000 RCM Technologies, Inc. @ 13.250 397
------
Computer - Integrated Systems - 3.7%
60,000 Javelin Systems, Inc. @ 12.250 735
------
Computer Peripherials - 0.9%
60,000 Loronix Information System @ 8.250 49
20,000 Manatron, Inc. @ 6.375 128
------
177
------
Computer Software - Desktop - 13.7%
*50,000 Verity, Inc. @ 54.187 2,709
------
Computer Software - Enterprise - 7.7%
25,000 Catalyst International, Inc. @ 17.937 449
30,000 Cognicase, Inc. @ 16.375 491
50,000 Computer Concepts Corp. @ 1.468 73
30,000 Made 2 Manage Systems, Inc. @ 8.062 242
15,000 Talx Corp. @ 7.250 109
6,400 Wiztec Solutions, Ltd. @ 23.750 152
------
1,516
------
Computer Software - Medical - 4.0%
15,000 Infocure Corp. @ 52.937 794
------
Electrical - Control Instruments - 1.0%
25,000 Tava Technologies @ 7.687 192
------
Electrical - Equipment / Components - 0.7%
20,000 Questron Technology, Inc. @ 3.843 $ 77
20,000 Winland Electronics, Inc. @ 2.625 52
------
129
------
Electrical - Military Systems - 2.8%
40,000 Advanced Communication Systems @ 13.687 548
------
Electronics - Semiconductors /
Components - 9.4%
40,000 Candela Corp. @ 14.250 570
*50,000 Genesis Microchip, Inc. @ 23.625 1,181
13,900 Global Payment Tech, Inc. @ 7.968 111
------
1,862
------
Food - Misc. - 1.2%
34,000 Suprema Specialties, Inc. @ 6.937 236
------
Household / Office Furniture - 0.3%
20,000 Business Resource Group @ 3.312 66
------
Leisure - Toys / Games - 9.7%
20,000 Action Performance COS, Inc. @ 33.000 660
60,000 Creative Master International, Inc. @ 5.125 308
30,000 Four Media Co. @ 6.500 195
25,000 JAKKS Pacific, Inc. @ 29.812 745
------
1,908
------
Medical / Dental Services - 0.6%
15,000 American Healthcorp, Inc. @ 8.312 125
------
Medical / Dental Supplies - 0.7%
20,000 Dental / Medical Diagnostics, Inc. @ 6.625 133
------
Medical / Ethical Drugs - 2.0%
50,000 Akorn, Inc. @ 4.031 202
35,000 Synthetech, Inc. @ 5.347 190
------
392
------
Medical Instruments - 7.0%
60,000 Colorado MEDtech, Inc. @ 21.937 1,316
20,000 Rehabilicare, Inc. @ 3.312 66
------
1,382
------
Medical - Products - 0.4%
6,700 I-Flow Corp. @ 3.531 24
10,000 Seracare, Inc. @ 5.000 50
------
74
------
Pollution Control - 0.5%
50,000 Innovative Medical Services @ 1.968 98
------
Retail - Apparel - 1.9%
16,000 Chico's Fas, Inc. @ 23.500 376
------
</TABLE>
<PAGE>
OBERWEIS MICRO-CAP PORTFOLIO
Portfolio of Investments (cont'd.)
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------
<S> <C> <C>
Retail - Mail Order - 2.1%
28,000 J. Jill Group, Inc. @ 14.625 $ 410
-------
Retail - Misc. / Diversified - 0.8%
30,000 Noodle Kidoodle, Inc. @ 5.312 159
-------
Shoes & Related Apparel - 2.4%
35,000 Steven Madden Ltd. @ 13.562 475
-------
Telecommunications - 8.0%
70,000 Gilat Communications Ltd. @ 16.000 1,120
50,000 International FiberCom, Inc. @ 9.093 455
-------
1,575
-------
Telecommunications - Equipment - 3.4%
100,000 Gentner Communications @ 5.125 513
30,000 Spectralink Corp. @ 5.312 159
-------
672
-------
Textile - Manufacturing - 6.6%
67,500 Cutter & Buck, Inc. @ 16.875 1,139
25,000 Frenchtex @ 0.250 6
19,000 Happy Kids, Inc. @ 8.687 165
-------
1,310
-------
Transportation - Rail - 1.0%
20,000 RailAmerica, Inc. @ 10.312 206
-------
Total Common Stocks
(Cost: $13,281,000) $20,446
-------
</TABLE>
<TABLE>
<CAPTION>
Contracts Value
- -------------------------------------------------------------------------
<S> <C> <C>
COVERED CALL OPTIONS - (0.8%)
50 Genesis Microchip, Inc., August $30 $ (5)
100 Genesis Microchip, Inc., September $35 (11)
200 Verity, Inc., July $50 (110)
100 Verity, Inc., July $55 (29)
-------
Total Covered Call Options
(Premiums received : $94,000) (155)
Other Liabilities less Assets - (2.8%) (558)
-------
NET ASSETS - 100% $19,733
-------
</TABLE>
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
* All or a portion of these stocks were held in escrow at June 30, 1999 to
cover call options written. The aggregate market value was $1,980,000.
** Income producing security during the period ended June 30, 1999.
Based on the cost of investments of $13,281,000 for federal income tax
purposes at June 30, 1999, the aggregate gross unrealized appreciation was
$8,030,000, the aggregate gross unrealized depreciation was $926,000 and
the net unrealized appreciation of investments was $7,104,000.
See notes to Portfolio of Investments.
5
<PAGE>
OBERWEIS MID-CAP PORTFOLIO
Portfolio of Investments
June 30, 1999 (value in thousands)
<TABLE>
<CAPTION>
Shares Company (Closing Price) Value
- --------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.4%
Commercial Peripherials - 2.0%
10,000 Ati Technologies, Inc. @ 16.281 $ 163
------
Computer Services - 3.5%
4,000 CSG Systems International, Inc. @ 26.187 105
4,500 International Network Services @ 40.375 181
------
286
------
Computer Software - Desktop - 4.0%
5,000 Gemstar International Group Ltd. @ 65.250 326
------
Computer Software - Enterprise - 19.7%
4,000 Citrix Systems, Inc. @ 56.500 226
4,000 Compuware Corp. @ 31.812 127
1,500 Legato Systems, Inc. @ 57.750 87
3,000 Lernout & Hauspie Speech @ 35.437 106
6,000 Mercury Interactive Corp. @ 35.375 212
6,000 Peregrine Systems @ 25.687 154
6,000 Siebel Systems, Inc. @ 66.375 398
3,000 Veritas Software Corp. @ 94.937 285
------
1,595
------
Computer Software - Finance - 1.7%
1,500 Intuit, Inc. @ 90.125 135
------
Computer Software - Internet - 3.3%
6,000 Mindspring Enterprises, Inc. @ 44.312 266
------
Computer Software - Security - 2.6%
4,000 Check Point Software Technologies, Ltd.
@ 53.625 214
------
Electronics - Components /
Semiconductors - 19.0%
3,000 QLogic Corp. @ 132.000 396
4,000 RF Micro Devices, Inc. @ 74.625 299
4,000 Transwitch Corp. @ 47.375 190
1,000 Uniphase Corp. @ 166.000 166
2,000 VISX, Inc. @ 79.187 158
5,000 Vitesse Semiconductor @ 67.437 337
------
1,546
------
Financial Services - Miscellaneous - 3.1%
6,000 Concord EFS, Inc. @ 42.312 254
------
Internet - E*Commerce - 1.8%
4,000 Sterling Commerce, Inc. @ 36.500 146
------
Medical - Biomed Genetics - 4.0%
5,000 Biogen, Inc. @ 64.312 322
------
Medical - Ethical Drugs - 10.0%
8,000 Andrx Corp. @ 77.125 617
8,000 Roberts Pharmaceutical @ 24.250 194
------
811
------
Medical - Products - 2.8%
3,000 Minimed, Inc. @ 76.937 231
------
Medical - Wholesale Drug - 1.5%
2,000 Express Scripts, Inc. @ 60.187 120
------
Retail - 10.8%
10,000 Abercrombie & Fitch Co. @ 48.000 480
6,000 American Eagle Outfitters @ 45.500 273
3,000 Children's Place @ 40.500 122
------
875
------
Telecommunications -
Equipment - 8.6%
4,000 Carrier Access Corp. @ 43.812 175
7,000 Excel Switching Corp. @ 29.937 210
6,000 Polycom, Inc. @ 39.000 234
4,000 Research In Motion @ 20.250 81
------
700
------
Total Common Stocks
(Cost: $4,433,000) $7,990
------
</TABLE>
<TABLE>
<CAPTION>
Face Amount Value
- --------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT- 1.7%
$134,000 State Street Bank and Trust Co.
Dated 12/31/98, Collateralized by
U.S. Treasury Bonds 8.125%, due 05/15/21 $ 134
------
Total Repurchase Agreement
(Cost: $ 134,000) 134
------
Total Investments - 100.1%
(COST: $4,567,000) 8,124
------
Other Liabilities Less Assets - (0.1%) (7)
------
NET ASSETS - 100% $8,117
------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
- ---------------------------------
Based on the cost of investments of $4,567,000 for federal income tax purposes
at June 30, 1999, the aggregate gross unrealized appreciation was $3,612,000,
the aggregate gross unrealized depreciation was $55,000 and the net unrealized
appreciation of investments was $3,557,000.
6
<PAGE>
THE OBERWEIS FUNDS
Statement of Assets and Liabilities
June 30, 1999 (in thousands, except pricing of shares)
<TABLE>
<CAPTION>
Emerging Growth Micro-Cap Mid-Cap
Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investment securities at market value $86,142 $20,446 $8,124
(Cost: $43,277, $13,281 and $4,567, respectively)
Cash -- -- 2
Receivable from fund shares sold 11 47 375
Receivable from securities sold 23 386 --
Deferred organizational expense -- 19 25
Prepaid expenses 22 8 4
------- ------- ------
Total Assets 86,198 20,906 8,530
------- ------- ------
Liabilities:
Due from Custodian Bank 108 798 --
Options written at value
(Premiums received: $528, and $94, respectively) 1,015 155 --
Payable for fund shares redeemed 235 162 8
Payable for securities purchased -- -- 387
Payable to advisor 54 17 5
Payable to distributor 16 4 1
Accrued expenses 144 37 12
------- ------- ------
Total Liabilities 1,572 1,173 413
------- ------- ------
Net Assets $84,626 $19,733 $8,117
======= ======= ======
Analysis of net assets:
Aggregate paid in capital $52,247 $17,020 $5,033
Accumulated net realized loss on investments (9,999) (4,391) (473)
Net unrealized appreciation of investments 42,378 7,104 3,557
------- ------- ------
Net Assets $84,626 $19,733 $8,117
======= ======= ======
The Pricing of Shares:
Net asset value and offering price per share
Emerging Growth Portfolio:
($84,626,425 divided by 3,195,290 shares outstanding) $26.48
=======
Micro-Cap Portfolio:
($19,733,458 divided by 1,390,091 shares outstanding) $14.20
=======
Mid-Cap Portfolio:
($8,116,888 divided by 517,838 shares outstanding) $15.67
=======
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE OBERWEIS FUNDS
Statement of Operations
Six Months Ended June 30, 1999 (in thousands)
<TABLE>
<CAPTION>
Emerging Growth Micro-Cap Mid-Cap
Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest $ -- $ 3 $ 1
Dividends 3 1 --
--------- --------- ---------
Total Investment Income 3 4 1
--------- --------- ---------
Expenses:
Investment advisory fees 176 64 12
Management fees 164 42 12
Distribution fees 102 26 8
Custodian fees and expenses 99 40 21
Transfer agent fees and expenses 92 35 14
Professional fees 35 10 2
Shareholder reports 18 7 2
Federal and state registration fees 13 6 5
Insurance 5 1 --
Organizational expenses -- 6 6
Trustees' fees 4 1 1
Miscellaneous 2 1 --
--------- --------- ---------
Total Expenses 710 239 83
--------- --------- ---------
Net Investment Loss Before Expense Reimbursement (707) (235) (82)
Expense Reimbursement -- 27 21
--------- --------- ---------
Net Investment Loss (707) (208) (61)
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 1,651 2,584 (9)
Net realized gain (loss) from covered call options written 413 168 (30)
--------- --------- ---------
Total net realized gain (loss) 2,064 2,752 (39)
Increase (decrease) in net unrealized appreciation of investments 7,897 (2,883) 1,422
--------- --------- ---------
Net realized and unrealized gain (loss) on investments 9,961 (131) 1,383
--------- --------- ---------
Net increase (decrease) in net assets resulting from operations $ 9,254 $ (339) $ 1,322
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
THE OBERWEIS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Growth Portfolio
---------------------------------------
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
---------------------------------------
<S> <C> <C>
From Operations:
Net investment loss $ (707) $ (1,510)
Net realized gain (loss) on investments 2,064 (11,356)
Increase in net unrealized appreciation of investments 7,897 9,514
--------- ---------
Net increase (decrease) in net assets resulting from operations 9,254 (3,352)
--------- ---------
From Distributions:
Distributions from net realized gains on investments -- (4,764)
--------- ---------
From Capital Share Transactions:
Net proceeds from sale of shares 11,084 52,192
Shares issued in reinvestment of distribution -- 4,426
Redemption of shares (28,827) (95,370)
--------- ---------
Net decrease from capital share transactions (17,743) (38,752)
--------- ---------
Total decrease in net assets (8,489) (46,868)
Net Assets:
Beginning of period 93,115 139,983
--------- ---------
End of period $ 84,626 $ 93,115
========= =========
Transactions in Shares:
Shares sold 469 2,120
Shares issued in reinvestment of dividends -- 213
Less shares redeemed (1,220) (3,831)
--------- ---------
Net decrease from capital share transactions (751) (1,498)
========= =========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE OBERWEIS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Micro-Cap Portfolio
---------------------------------------
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
---------------------------------------
<S> <C> <C>
From Operations:
Net investment loss $ (208) $ (486)
Net realized gain (loss) on investments 2,752 (2,976)
Increase (decrease) in net unrealized appreciation of investments (2,883) 4,769
--------- ---------
Net increase (decrease) in net assets resulting from operations (339) 1,307
--------- ---------
From Capital Share Transactions:
Net proceeds from sale of shares 5,331 10,556
Redemption of shares (13,549) (20,410)
--------- ---------
Net decrease from capital share transactions (8,218) (9,854)
--------- ---------
Total decrease in net assets (8,557) (8,547)
Net Assets:
Beginning of period 28,290 36,837
--------- ---------
End of period $ 19,733 $ 28,290
========= =========
Transactions in Shares:
Shares sold 392 868
Less shares redeemed (997) (1,583)
--------- ---------
Net decrease from capital share transactions (605) (715)
========= =========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE OBERWEIS FUNDS
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Micro-Cap Portfolio
---------------------------------------
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
---------------------------------------
<S> <C> <C>
From Operations:
Net investment loss $ (61) $ (119)
Net realized loss on investments (39) (165)
Increase in net unrealized appreciation of investments 1,422 1,554
--------- ---------
Net increase in net assets resulting from operations 1,322 1,270
--------- ---------
From Capital Share Transactions:
Net proceeds from sale of shares 1,534 2,053
Redemption of shares (1,655) (2,754)
--------- ---------
Net decrease from capital share transactions (121) (701)
--------- ---------
Total increase in net assets 1,201 569
Net Assets:
Beginning of period 6,916 6,347
--------- ---------
End of period $ 8,117 $ 6,916
========= =========
Transactions in Shares:
Shares sold 110 184
Less shares redeemed (130) (250)
--------- ---------
Net decrease from capital share transactions (20) (66)
========= =========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
THE OBERWEIS FUNDS
Notes to Financial Statements
June 30, 1999
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. The Trust consists of three portfolios: the Oberweis
Emerging Growth Portfolio, the Oberweis Micro-Cap Portfolio, and the Oberweis
Mid-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 are valued at the 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 each Fund's investments and other assets, less liabilities, by
the number of each Fund's 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 the date of expiration.
Repurchase agreements. Repurchase agreements are fully collateralized by U.S.
Treasury and Government agency securities. All collateral is held through the
Funds' custodian bank and is monitored daily by each Fund 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 each Fund on the ex-dividend date.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles. The Emerging Growth Portfolio, Micro-Cap Portfolio and Mid-Cap
Portfolio have capital loss carryforwards of $11,356,000, $6,935,000 and
$374,000, respectively, which if not used to offset future net realized capital
gains will expire in 2004, 2005 or 2006.
Organizational costs. Organizational costs of the Micro-Cap Portfolio and Mid-
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 preparation 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 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 Oberweis.net, Inc.
("Oberweis.net"), formerly Oberweis Brokerage, Inc., an affiliate of OAM, is the
Funds' principal distributor.
Investment advisory agreement. For investment advisory services, 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
12
<PAGE>
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. The Mid-Cap
Portfolio paid monthly investment advisory fees at an annual rate equal to .40%
of average daily net assets. For the period ended June 30, 1999, the Emerging
Growth Portfolio, Micro-Cap Portfolio, and Mid-Cap Portfolio incurred investment
advisory fees totaling $176,000, $64,000, and $12,000, respectively.
Management agreement. For management services and facilities furnished, the
Emerging Growth Portfolio, Micro-Cap Portfolio, and Mid-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, 1999, the Emerging Growth Portfolio, Micro-Cap
Portfolio, and Mid-Cap Portfolio incurred management fees totaling $164,000,
$42,000 and $12,000, respectively.
Expense reimbursement. OAM is obligated to reduce its management fees or
reimburse the Funds to the extent that total ordinary operating expenses, 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. OAM reimbursed the Micro-Cap Portfolio and Mid-Cap Portfolio
$27,000 and $21,000, respectively, for the period ended June 30, 1999.
Officers and trustees. Certain officers or trustees of the Funds are also
officers or directors of OAM and Oberweis.net. During the period ended June 30,
1999, the Funds made no direct payments to its officers and paid $6,000 to its
unaffiliated trustees.
Distribution and shareholder service expense. The Funds have a distribution and
shareholder services agreement with Oberweis.net. For services under the
distribution and shareholder servicing agreement, the Funds pay Oberweis.net 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, 1999, the
Emerging Growth Portfolio, Micro-Cap Portfolio, and Mid-Cap Portfolio incurred
distribution fees totaling $102,000, $26,000 and $8,000, respectively.
Commissions. The Funds pay Oberweis.net for executing some of each Fund's agency
security transactions at competitive rates, typically $.03 per share. For the
period ended June 30, 1999, the Emerging Growth Portfolio paid commissions of
$2,000 to Oberweis.net.
3. Investment Transactions
The cost of securities purchased and proceeds from securities sold during the
period ended June 30, 1999, other than options written and money market
investments, aggregated $19,237,000 and $39,147,000, respectively, for the
Emerging Growth Portfolio, $4,479,000 and $11,634,000, respectively, for the
Micro-Cap Portfolio, and $2,870,000 and $3,052,000, respectively, for the Mid-
Cap Portfolio.
Transactions in options written for the period ended June 30, 1999 were as
follows:
<TABLE>
<CAPTION>
Emerging Growth Micro-Cap Mid-Cap
Portfolio Portfolio Portfolio
---------------------- --------------------- ---------------------
Number Number Number
of Premiums of Premiums of Premiums
Contracts Received Contracts Received Contracts Received
---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of period 3,347 $ 716,000 460 $ 69,000 142 $ 28,000
Options written 9,626 3,687,000 1,870 351,000 342 120,000
Options expired (7,326) (2,389,000) (1,380) (238,000) (292) (95,000)
Options closed (3,095) (1,236,000) (350) (64,000) (167) (39,000)
Options assigned (989) (250,000) (150) (24,000) (25) (14,000)
---------------------- --------------------- ---------------------
Options outstanding at end of period 1,563 $ 528,000 450 $ 94,000 0 $ 0
</TABLE>
The premiums received provide a partial hedge (protection) against declining
prices and enables each 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 each Fund.
13
<PAGE>
4. Redemption fee
A .25% redemption fee is charged on redemptions from the Micro-Cap and Mid-Cap
Portfolios. The redemption fee is retained by the Funds and is intended to
reimburse the Funds for the expense they incur in connection with shareholder
redemptions. Redemption fees received by the Micro-Cap and Mid-Cap Portfolios
were $34,000 and $4,000, respectively, for the period ended June 30, 1999, and
were recorded as a reduction of shares redeemed in the statements of changes in
net assets.
5. Due to custodian bank
The Trust as part of the agreement with the Custodian, is allowed to borrow for
temporary purposes. Such borrowings are not to exceed 5% of the value of each
Funds total assets at the time of any such borrowing. Interest on amounts
borrowed is calculated at the prime rate and is payable monthly. During the
period ended June 30, 1999, the Emerging Growth Portfolio and Micro-Cap
Portfolios incurred interest charges of $24,000 and $9,000, respectively, which
is included in custodian fees and expenses in the statement of operations. At
June 30, 1999, the Emerging Growth and Micro-Cap Portfolios had borrowings of
$108,000 and $798,000, respectively, at an interest rate of 7.75%.
14
<PAGE>
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Emerging Growth Portfolio
-------------------------------------------------------------------
Six Months Ended Years ended December 31,
June 30, 1999 1998 1997 1996 1995
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 23.60 $ 25.71 $ 32.86 $ 29.09 $ 21.41
Income (loss) from investment operations:
Net investment loss /(a)/ (.20) (.33) (.37) (.32) (.33)
Net realized and unrealized gain (loss) on investments 3.08 (.63) (2.14) 6.73 9.43
------- ------- -------- -------- --------
Total from investment operations 2.88 (.96) (2.51) 6.41 9.10
Less distributions:
Distribution from net realized gains on investments -- (1.15) (4.64) (2.64) (1.42)
------- ------- -------- -------- --------
Net asset value at end of period $ 26.48 $ 23.60 $ 25.71 $ 32.86 $ 29.09
======= ======= ======== ======== ========
Total Return (%) 12.2/(d)/ (3.1) (8.6) 22.5 42.6
Ratio/Supplemental Data
Net Assets at end of period (in thousands) $84,626 $93,115 $139,983 $185,595 $134,663
Ratio of expenses to average net assets (%) 1.73/(c)/ 1.55 1.44 1.48 1.73/(b)/
Ratio of net investment loss to average net assets (%) (1.73)/(c)/ (1.37) (1.18) (0.97) (1.24)
Portfolio turnover rate (%)/(c)/ 34 49 75 64 79
Average commission rate paid $ .0294 $ .0280 $ .0337 $ .0413 --
</TABLE>
- -------------
Notes:
/(a)/ The net investment loss per share data was determined using average shares
outstanding during the period.
/(b)/ Net of expense reimbursement from related parties. The expense ratio would
have been 1.77%, for 1995 before expense reimbursement.
/(c)/ Annualized
/(d)/ Not annualized
15
<PAGE>
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period is as follows:
<TABLE>
<CAPTION>
Micro-Cap Portfolio
-----------------------------------------------------------------------
Six Months Ended Years Ended December 31, *January 1, 1996-
June 30, 1999 1998 1997 December 31, 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 14.18 $ 13.59 $ 12.28 $ 10.00
Income (loss) from investment operations:
Net investment loss /(a)/ (.13) (.24) (.21) (.15)
Net realized and unrealized gain on investments .15 .83 1.52 2.43
------- ------- ------- --------
Total from investment operations .02 .59 1.31 2.28
------- ------- ------- --------
Net asset value at end of period $ 14.20 $ 14.18 $ 13.59 $ 12.28
======= ======= ======= =======
Total Return (%) 0.1/(d)/ 4.3 10.7 22.8
Ratio/Supplemental Data
Net Assets at end of period (in thousands) $19,733 $28,290 $36,837 $30,733
Ratio of expenses to average net assets (%) 2.00/(b)(c)/ 1.99/(b)/ 1.81 1.94
Ratio of net investment loss to average net assets (%) (1.96)/(c)/ (1.83) (1.52) (1.15)
Portfolio turnover rate (%)/(c)/ 41 41 89 70
Average commission rate paid $ .0319 $ .0288 $ .0343 $ .0371
</TABLE>
Notes:
/(a)/ The net investment loss per share data was
determined using average shares outstanding during the
period.
/(b)/ Net of expense reimbursement from related parties. The expense ratio would
have been 2.25%, and 2.06% for the period ended June 30, 1999, and December
31, 1998, respectively, before expense reimbursement.
/(c)/ Annualized.
/(d)/ Not annualized.
* Commencement of operations
<TABLE>
____________________________________________________________________________________________________________________________________
<CAPTION>
Micro-Cap Portfolio
-----------------------------------------------------------------------
Six Months Ended Years Ended December 31, *September 15, 1996-
June 30, 1999 1998 1997 December 31, 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $12.86 $10.51 $10.29 $10.00
Income (loss) from investment operations:
Net investment loss /(a)/ (.13) (.21) (.19) (.05)
Net realized and unrealized gain on investments 2.94 2.56 .76 .34
------ ------ ------ ------
Total from investment operations 2.81 2.35 .57 .29
Less distributions:
Distribution from net realized gains on investments -- -- (.35) --
------ ------ ------ ------
Net asset value at end of period $15.67 $12.86 $10.51 $10.29
====== ====== ====== ======
Total Return (%) 21.9/(d)/ 22.4 5.4 2.9/(d)/
Ratio/Supplemental Data
Net Assets at end of period (in thousands) $8,117 $6,916 $6,347 $7,295
Ratio of expenses to average net assets (%) 2.00/(b)(c)/ 2.00/(b)/ 2.00/(b)/ 2.00/(b)(c)/
Ratio of net investment loss to average net assets (%) (1.97)/(c)/ (1.94) (1.81) (1.62)/(c)/
Portfolio turnover rate (%)/(c)/ 89 72 106 21/(c)/
Average commission rate paid $.0342 $.0305 $.0318 $.0371
</TABLE>
Notes:
/(a)/ The net investment loss per share data was
determined using average shares outstanding during
the period.
/(b)/ Net of expense reimbursement from related parties. The expense ratios
would have been 2.67%, 2.61%, 2.46% and 3.42%, for the period ended June 30,
1999, December 31, 1998, 1997 and 1996, respectively, before expense
reimbursement.
/(c)/ Annualized.
/(d)/ Not annualized.
* Commencement of operations.
16
<PAGE>
Trustees and Officers
- ---------------------
James D. Oberweis
Trustee and President
Douglas P. Hoffmeyer
Trustee
Patrick B. Joyce
Executive Vice President
Treasurer
James W. Oberweis
Vice President
Margaret W. Unsworth
Assistant Secretary
Thomas J. Burke
Trustee
Edward F. Streit
Trustee
Martin L. Yokosawa
Vice President
Steven J. LeMire
Secretary
Manager and Investment Advisor
- ------------------------------
Oberweis Asset Management, Inc.
951 Ice Cream Dr., North Aurora, IL 60542
1-800-323-6166
www.oberweisfunds.com
Distributor
- -----------
Oberweis.net, Inc.
951 Ice Cream Dr., North Aurora, IL 60542
1-630-801-6000
www.oberweis.net
Custodian and Transfer Agent
- ----------------------------
Investors Fiduciary Trust Company
P.O. Box 419042, Kansas City, MO 64141
1-800-245-7311
Counsel
- -------
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Chicago, IL 60601
[LOGO]
The Oberweis Funds
Emerging Growth Portfolio
Micro-Cap Portfolio
Mid-Cap Portfolio
[LOGO]
The Oberweis Funds
Semi-Annual Report
- ------------------
Unaudited
June 30, 1999
