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As filed with the Securities and Exchange Commission on December 30, 1996
Securities Act Registration No. 33-70590
Investment Company Act Registration No. 811-8088
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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. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 6 [X]
O.R.I. FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
233 N. MICHIGAN AVENUE, SUITE 1807
CHICAGO, ILLINOIS 60601
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 616-1040
SAMUEL WEGBREIT
O.R.I. FUNDS, INC.
233 N. MICHIGAN AVENUE, SUITE 1807
CHICAGO, ILLINOIS 60601
(Name and Address of Agent for Service)
Copies to:
CAROL A. GEHL
GODFREY & KAHN, S.C.
780 NORTH WATER STREET
MILWAUKEE, WISCONSIN 53202
Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Securities Act of 1933; the Registrant's Rule 24f-2 Notice
for the year ending November 30, 1996 will be filed on or before January 30,
1997.
It is proposed that this filing will become effective (check appropriate
box).
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on March 1, 1997, pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
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Explanatory Note
This Post-Effective Amendment No. 5 to the Registrant's Registration
Statement on Form N-1A is being filed under Rule 485(a) of the Securities Act of
1933, as amended (the "Securities Act"), to become effective March 1, 1997, the
same date that the revised Investment Advisory Agreement between the Registrant
and Oak Ridge Investments, Inc. will become effective, assuming shareholder
approval is obtained, and the same date that the Rule 18f-3 Multiple Class Plan
adopted by the Registrant will become effective. This filing does not include
financial information for the year ended November 30, 1996 (although it is
drafted in anticipation of such information being included) because the
Registrant intends to file a Post-Effective Amendment No. 6 to its Registration
Statement on Form N-1A under Rule 485(b) of the Securities Act in early
February, 1997, to become effective March 1, 1997, which will include such
information. To comply with Rule 3-18(c) of Regulation S-X, however, the
Registrant has incorporated by reference into this filing its 1995 Annual Report
and its Semi-Annual Report for the period ended May 31, 1996.
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CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and the
Statement of Additional Information of the responses to the Items of Parts A
and B of Form N-1A).
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Caption or Subheading in
Prospectus or Statement
Item No. on Form N-1A of Additional Information
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PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary; Summary of Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Fund Organization; Investment
Objective and Policies; Investment
Techniques and Risks; Investment
Restrictions
5. Management of the Fund Management; Fund Expenses
5A. Management's Discussion of Fund Fund Performance
Performance
6. Capital Stock and Other Securities Income Dividends, Capital Gains
Distributions and Tax Status; Fund
Organization
7. Purchase of Securities Being Offered How to Purchase Fund Shares;
Determination of Net Asset Value;
Distribution Plan
8. Redemption or Repurchase How to Redeem Shares; Calculation
of Net Asset Value
9. Pending Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Included in Prospectus under the
heading Fund Organization
13. Investment Objectives and Policies Investment Restrictions; Investment
Techniques and Risks
</TABLE>
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<TABLE>
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14. Management of the Fund Directors and Officers
15. Control Persons and Principal Holders Principal Shareholders; Directors
of Securities and Officers; Investment Advisor
and Underwriter
16. Investment Advisory and Other Services Investment Advisor and Underwriter;
Distribution Plan; Management (in
Prospectus); Custodian; Transfer
Agent and Dividend-Disbursing
Agent; Independent Accountants
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities Included in Prospectus under the
heading Fund Organization
19. Purchase, Redemption and Pricing of Included in Prospectus under the
Securities Being Offered headings How to Purchase Fund
Shares; Determination of Net Asset
Value; How to Redeem Shares; and in
the Statement of Additional
Information under the heading
Investment Advisor and Underwriter
20. Tax Status Included in Prospectus under the
heading Income Dividends, Capital
Gains Distributions and Tax Status
21. Underwriters Investment Advisor and Underwriter
22. Calculations of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
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*Answer negative or inapplicable
MW1-3388-3
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PROSPECTUS
March 1, 1997
OAK RIDGE INVESTMENTS, INC.
Presents
O.R.I. GROWTH FUND
a Series of
O.R.I. FUNDS, INC.
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-407-7298
The O.R.I. Growth Fund (the "Fund") is a series of O.R.I. Funds, Inc. (the
"Corporation"), an open-end, diversified, management investment company
commonly referred to as a mutual fund. The investment objective of the Fund is
to seek capital appreciation. The Fund will seek, under normal market
conditions, to achieve its investment objective by investing its assets
primarily in equity securities of domestic companies. The Fund may invest in
all types of equity securities that, in the opinion of the Fund's manager, OAK
RIDGE INVESTMENTS, INC. ("Oak Ridge"), have the potential to appreciate faster
than the general market.
The Fund offers two classes of shares which may be purchased at a price equal
to their net asset value (i) plus an initial sales charge imposed at the time
of purchase (the "Class A shares"), or (ii) without any initial sales charge
(the "Class C shares"). Each class of shares of the Fund is subject to a
separate Rule 12b-1 Plan pursuant to which aggregate annual fees of 0.25% and
1.00% of the average net assets of the Fund attributable to the Class A and
Class C shares, respectively, are charged.
This Prospectus sets forth concisely the information that you should be aware
of prior to investing in the Fund's Class A or Class C shares. Please read
this Prospectus carefully and retain it for future reference. Additional
information regarding the Fund is included in the Statement of Additional
Information dated March 1, 1997, which has been filed with the Securities and
Exchange Commission and is incorporated in this Prospectus by reference. A
copy of the Fund's Statement of Additional Information is available without
charge by writing to the Fund at the address listed above or by calling
1-800-407-7298.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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Page
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SUMMARY..................................................................4
SUMMARY OF FUND EXPENSES.................................................5
Fee Table..........................................................5
Example............................................................6
FINANCIAL HIGHLIGHTS.....................................................6
FUND PERFORMANCE.........................................................7
INVESTMENT OBJECTIVE AND POLICIES........................................7
INVESTMENT RESTRICTIONS..................................................8
INVESTMENT TECHNIQUES AND RISKS..........................................8
In General.........................................................8
Short-Term Fixed Income Securities.................................8
Lending of Portfolio Securities....................................9
Portfolio Turnover.................................................9
MANAGEMENT...............................................................9
FUND EXPENSES...........................................................10
HOW TO PURCHASE SHARES..................................................10
Offering Price....................................................11
Purchases at Net Asset Value......................................11
Initial Investment - Minimum $2,000...............................12
Automatic Investment Plan - Minimum $100..........................12
Subsequent Investments............................................13
Share Certificates................................................13
DETERMINATION OF NET ASSET VALUE........................................13
</TABLE>
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<TABLE>
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HOW TO REDEEM SHARES....................................................14
In General........................................................14
Written Redemption................................................14
Telephone Redemption..............................................14
Systematic Withdrawal Plan........................................15
DISTRIBUTION PLANS......................................................15
TAX SHELTERED RETIREMENT PLANS..........................................16
Individual Retirement Account ("IRA").............................16
401(k) Plan.......................................................16
Defined Contribution Plan.........................................17
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT.........17
FUND ORGANIZATION.......................................................17
ADMINISTRATOR...........................................................18
CUSTODIAN, TRANSFER AGENT, AND DISTRIBUTOR..............................18
PORTFOLIO TRANSACTIONS..................................................19
COMPARISON OF INVESTMENT RESULTS........................................19
</TABLE>
____________________
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the Statement
of Additional Information, and if given or made, such information or
representations may not be relied upon as having been authorized by the Fund.
This Prospectus does not constitute an offer to sell securities in any state to
any person to whom it is unlawful to make such offer in such state.
____________________
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SUMMARY
Investment Objective
The investment objective of the Fund is to seek capital appreciation. The
Fund will seek to achieve its investment objective by investing its assets
primarily in equity securities of domestic companies that, in the opinion of
Oak Ridge, have the potential to appreciate faster than the general market.
The Fund's investments are subject to market risk and the value of its shares
will fluctuate with changing market valuations of its portfolio holdings. See
"INVESTMENT OBJECTIVE AND POLICIES" and "INVESTMENT TECHNIQUES AND RISKS."
Investment Advisor
Oak Ridge is the investment advisor to the Fund. Oak Ridge was organized
in 1989 and acts as the investment advisor to individual and institutional
clients with investment portfolios of approximately $95 million. See
"MANAGEMENT."
Purchase and Redemptions
Class A shares of the Fund are offered at net asset value per share plus a
maximum initial sales charge of 4.25% of the offering price. Persons who were
shareholders of the Fund as of December 31, 1995 are not subject to this
front-end sales load on additional purchases of Class A shares. Certain other
exceptions may also apply. In addition, the Fund has adopted a distribution
plan under Rule 12b-1 of the Investment Company Act of 1940, as amended (the
"1940 Act"), with respect to Class A shares sold on or after January 1, 1996
(the "Class A Plan"), which authorizes the Fund to pay a distribution fee of up
to 0.25% per annum of the average daily net assets of the Fund attributable to
the Class A shares.
Class C shares of the Fund are offered without the imposition of a sales
charge. Therefore, the entire amount of an investor's purchase is invested in
the shares. However, the Fund has adopted a distribution plan under Rule 12b-1
of the 1940 Act for the Class C shares (the "Class C Plan"), which authorizes
the Fund to pay a distribution fee of up to 0.75% and a service fee of up to
0.25% per annum of the average daily net assets of the Fund attributable to the
Class C shares. For additional information, see "HOW TO PURCHASE SHARES" and
"DISTRIBUTION PLANS."
The minimum initial investment required by the Fund is $2,000. The
minimum subsequent investment is $100, if made by mail, or $1,000, if made by
wire. The minimum initial investment for individual retirement accounts is
$1,000, and for investors using the Automatic Investment Plan, the minimum
initial investment is $100. These minimums may be changed or waived at any
time at the discretion of the Fund. See "HOW TO PURCHASE SHARES."
Shares may be redeemed using either written or telephone redemption
procedures at net asset value per share without the imposition of any
redemption charges. See "HOW TO REDEEM SHARES."
Shareholder Services
Questions regarding the Fund may be directed to the Fund at the address
and telephone number on the front page of this Prospectus.
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SUMMARY OF FUND EXPENSES
The purpose of the following table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly (shareholder transaction expenses) and indirectly (annual fund
operating expenses).
Fee Table
Class A Class C
-------- -------
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases 4.25%(2) NONE
(as a percentage of offering price)
Sales Load Imposed on Reinvested Dividends NONE NONE
Deferred Sales Load Imposed on Redemptions NONE NONE
Redemption Fees NONE NONE
ANNUAL FUND OPERATING EXPENSES (after waivers or reimbursements) (as a
percentage of average net assets)
Management Fee 1.00% 1.00%
Rule 12b-1 Distribution Fees 0.25%(3) 1.00%(3),(4)
Other Expenses (net of reimbursement) 0.75%(5) 0.75%(5)
-------- ------------
TOTAL FUND OPERATING EXPENSES 2.00%(5) 2.75%(5)
======== ============
(after waivers or reimbursements)
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(1) In addition to the shareholder transaction expenses listed below,
shareholders who choose to purchase and/or redeem shares by wire may be
charged a $10.00 service fee. See "HOW TO PURCHASE SHARES - Initial
Investment - Minimum $2,000" and "HOW TO REDEEM SHARES - Written
Redemption."
(2) The sales load illustrated is the maximum rate applicable to purchases of
Class A shares by new shareholders on or after January 1, 1996. Existing
shareholders as of December 31, 1995 as well as certain other investors
are exempt from having to pay this sales load, as described more fully
under "HOW TO PURCHASE SHARES."
(3) Consistent with the Rules of the National Association of Securities
Dealers, Inc. (the "NASD"), it is possible that the Rule 12b-1 fees could
cause long-term investors of the Fund to pay more than the economic
equivalent of the maximum front-end sales charges permitted under those
same Rules.
(4) The Rule 12b-1 distribution fee for the Class C shares consists of a
service fee not exceeding 0.25% of the average daily net assets of the
Fund attributable to the Class C shares and an asset-based sales charge
equal to 0.75%.
(5) The Fund's investment advisor, Oak Ridge, has voluntarily agreed to waive
its management fee and/or reimburse the Fund's operating expenses to the
extent necessary to ensure that the Total Operating Expenses for the Class
A shares do not exceed 2.00% of the class' average daily net assets and
that the Total Operating Expenses for the Class C shares do not exceed
2.75%. Other Expenses for the Class A shares are presented net of
reimbursement. Absent these reimbursements, Other Expenses and Total Fund
Operating Expenses for the period ended November 30, 1996 would have been
___% and ___%, respectively. Since the Class C shares were not offered
prior to March 1, 1997, Other Expenses for the
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Class C shares have been estimated and are presented net of
reimbursements. Absent these reimbursements, Other Expenses and Total
Fund Operating Expenses for the Class C shares are estimated to be ___%
and ___%, respectively. For additional information concerning management
fees and operating expenses, see "MANAGEMENT."
Example
You would pay the following expenses on a $1,000 investment, assuming (i) 5%
annual return, and (ii) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $63 $104 $148 $269
Class C -- --- --- ---
</TABLE>
The Example is based on the Total Operating Expenses specified in the
table above. In addition, the maximum front-end sales load is reflected in the
Class A Example. The amounts in the Example may increase absent the waivers or
reimbursements. PLEASE REMEMBER THAT THE EXAMPLE SHOULD NOT BE CONSIDERED
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND THAT ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN. The assumption in the Example of a 5%
annual rate of return is required by regulations of the Securities and Exchange
Commission ("SEC") applicable to all mutual funds. This return is hypothetical
and should not be considered representative of past or future performance of
the Fund.
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
Price Waterhouse LLP, independent accountants, for the periods indicated in
their report which appears in the Annual Report of the Fund for the period
ended November 30, 1996. The following information should be read in
conjunction with the financial statements and related notes included in the
Fund's 1996 Annual Report, a copy of which may be obtained without charge by
calling or writing to the Fund. Unaudited information for the semi-annual
period ended May 31, 1996 is contained in the Fund's Semi-Annual Report, which
is incorporated herein by reference and which may likewise be obtained without
charge by calling or writing to the Fund. The information below is for the
Fund's Class A shares only. The Fund's Class C shares were not offered until
March 1, 1997.
<TABLE>
<CAPTION>
January 3, 1994
Year Ended Year Ended (commencement of operations)
November 30, 1996* November 30, 1995 to November 30, 1994
------------------ ----------------- ----------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ----- $ 10.48 $ 10.00
---------- ----------
Income from investment operations:
Net investment (loss) income ----- (0.13) (0.07)
Net realized and unrealized gains on investments ----- 4.00 0.55
---------- ----------
Total from investment operations ----- 3.87 0.48
---------- ----------
Less distributions:
Dividends from capital gains ----- (0.03) -
---------- ----------
Net Asset value, end of period ----- $ 14.32 $ 10.48
========== ==========
TOTAL RETURN(1) ----- 37.0% 4.8%(2)
</TABLE>
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<TABLE>
<S> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period _____% $4,182,246 $2,708,546
Ratio of expenses to average net assets(3) _____% 2.0% 2.0% (4)
Ratio of net investment income (loss) to _____% (1.3%) (1.1%)(4)
average net assets(3)
Portfolio turnover rate _____% 109% 80%
Average commission rate paid _____%
</TABLE>
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* To be filed by amendment. See Explanatory Note.
(1) Does not reflect the effect of the 4.25% sales charge.
(2) Not annualized for the period from January 3, 1994 to November 30, 1994.
(3) Net of reimbursements and waivers. Without reimbursements and waivers,
the ratio of net expenses to average net assets would have been ___%,
6.5%, and 9.0%, and the ratio of net investment loss to average net assets
would have been (___%), (5.8%), and (8.1)% during the periods ended
November 30, 1996 and November 30, 1995, and from January 3, 1994 to
November 30, 1994, respectively.
(4) Annualized for the period ended November 30, 1994.
FUND PERFORMANCE
Information regarding the performance of the Fund's Class A shares is
contained in the Fund's 1996 Annual Report, a copy of which may be obtained
without charge by calling or writing to the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund is the first and presently, the only series of the Corporation,
an open-end, diversified management company. The Fund's investment objective
is to seek capital appreciation. The generation of investment income is not an
investment objective and, therefore, any income earned by the Fund will be
incidental to the Fund's objective. The Fund will seek, under normal market
conditions, to achieve its investment objective by investing its assets
primarily in equity securities of domestic companies, which include but are not
limited to common stocks; preferred stocks; warrants to purchase common stocks
or preferred stocks; and securities convertible into common or preferred
stocks, such as convertible bonds and debentures. The Fund will limit its
investment in each of the following to 5% of its net assets: preferred stock;
warrants to purchase common stocks or preferred stocks; and securities
convertible into common or preferred stocks. The Fund may invest in all types
of equity securities that, in the opinion of Oak Ridge, have the potential to
appreciate faster than the general market. In addition, the Fund may invest up
to 5% of its net assets in "Investment Grade Debt Securities," as defined
below. The Fund may, when Oak Ridge deems a more conservative approach is
warranted, invest up to 35% of its total assets in short-term, fixed income
securities (commonly referred to as cash equivalents) as a temporary defensive
measure or pending investment or reinvestment. Since the Fund's assets will,
under normal market conditions, consist primarily of equity securities, the
Fund's net asset value may be subject to greater principal fluctuation than a
portfolio containing a substantial amount of fixed income securities.
When making investment decisions, Oak Ridge utilizes information and
analyses from numerous sources regarding a company's sales and earnings growth;
earnings power, trends and predictability; industry, economic and political
trends; relative valuation; and liquidity, to determine whether the security
has the potential to appreciate faster than the general market. While the Fund
has no policy regarding market capitalizations of issuers of equity securities
in which it may invest, Oak Ridge believes that the Fund will generally invest
in medium capitalization growth companies. The Fund is only intended to be an
investment vehicle for that part of
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an investor's capital which can appropriately be exposed to above average risk
in anticipation of greater rewards. The Fund is not designed to offer a
balanced investment program suitable for all investors.
Except for the Fund's investment objective and the investment restrictions
contained in the Statement of Additional Information, some of which are set
forth below, the Fund's policies may be changed without a vote of the Fund's
shareholders.
INVESTMENT RESTRICTIONS
The Fund has adopted several restrictions on its investments and other
activities that may not be changed without shareholder approval. Specifically,
(1) With respect to 75% of its total assets, the Fund may not
purchase securities of any issuer (except securities of the U.S.
government or any agency or instrumentality thereof) if such action would
cause more than 5% of the Fund's total assets to be invested in
securities of any one issuer, or purchase more than 10% of the
outstanding voting securities of any one issuer;
(2) The Fund may not borrow money except from banks for temporary
or emergency purposes (but not for the purchase of investments) and then,
only in an amount not to exceed 33-1/3% of the value of the Fund's net
assets at the time the borrowing is incurred; provided however, the Fund
may engage in transactions in options, futures contracts and options on
futures contracts. The Fund may not purchase securities when borrowings
exceed 5% of its total assets; and
(3) The Fund may not pledge, mortgage, hypothecate, or otherwise
encumber any of its assets, except to secure permitted borrowings and
except that the Fund may invest in options, futures contracts and options
on futures contracts.
For additional investment restrictions, see the Fund's Statement of Additional
Information.
INVESTMENT TECHNIQUES AND RISKS
In General
The Fund will not invest more than 5% of its net assets in any one of the
following types of investments: investment grade debt securities; repurchase
agreements with member banks of the Federal Reserve System or certain non-bank
dealers; warrants; illiquid securities; unseasoned companies; securities
purchased on a when-issued or delayed delivery basis; and derivative
instruments, such as transactions in options, futures and options on futures
and swap agreements. The ability of the Fund to effectively use derivative
instruments is largely dependent upon Oak Ridge's ability to correctly use
these instruments, which may involve different skills than are associated with
securities generally. Investment grade debt securities are (i) bonds rated Baa
or higher by Moody's Investors Service ("Moody's"), BBB or higher by Standard &
Poor's Corporation ("S&P"), Duff & Phelps, Inc. ("D&P") or Fitch Investors
Service, Inc. ("Fitch"); or (ii) commercial paper rated A-1 or higher by S&P,
Prime-1 or higher by Moody's, Duff 2 or higher by D&P, or Fitch 2 or higher by
Fitch. Bonds rated BBB by S&P or Baa by Moody's, although considered
investment grade, have speculative characteristics and may be subject to
greater fluctuations in value than higher-rated bonds. For a more extensive
discussion of these investment techniques and risks associated therewith, see
the Fund's Statement of Additional Information.
Short-Term Fixed Income Securities
In times when Oak Ridge believes that adverse economic or market
conditions justify such action, up to 35% of the Fund's total assets may be
held temporarily in short-term fixed-income securities, including without
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limitation: U.S. government securities, including bills, notes and bonds,
differing as to maturity and rate of interest, which are either issued or
guaranteed by the U.S. Treasury or by U.S. governmental agencies or
instrumentalities; certificates of deposit issued against funds deposited in a
U.S. bank or savings and loan association; bank time deposits, which are monies
kept on deposit with U.S. banks or savings and loan associations for a stated
period of time at a fixed rate of interest; bankers' acceptances which are
short-term credit instruments used to finance commercial transactions;
repurchase agreements entered into only with respect to obligations of the U.S.
government, its agencies or instrumentalities; or commercial paper and
commercial paper master notes (which are demand instruments without a fixed
maturity bearing interest at rates which are fixed to known lending rates and
automatically adjusted when such lending rates change) rated A-1 or better by
S&P, Prime-1 or better by Moody's, Duff 2 or higher by D&P, or Fitch 2 or
higher by Fitch. The Fund may also invest up to 35% of its total assets in
such instruments in amounts as Oak Ridge believes are reasonable to satisfy
anticipated redemption requests.
Lending of Portfolio Securities
The Fund may lend its portfolio securities, up to 5% of its total assets,
to broker-dealers or institutional investors. The loans will be secured
continuously by collateral equal at least to the value of the securities lent
by "marking to market" daily. The collateral may consist of cash, government
securities, letters of credit, or other collateral permitted by regulatory
agencies. The Fund will continue to receive the equivalent of the interest or
dividends paid by the issuer of the securities lent. The Fund may also receive
interest on the investment of the collateral or a fee from the borrower as
compensation for the loan. The Fund may pay reasonable custodial and
administrative fees in connection with a loan. The Fund will retain the right
to call, upon notice, the lent securities. While there may be delays in
recovery or even loss of rights in the collateral should the borrower fail
financially, Oak Ridge will review the creditworthiness of the entities to
which loans are made to evaluate those risks.
Portfolio Turnover
The Fund's historical portfolio turnover rate is listed under "Financial
Highlights." The portfolio turnover rate indicates changes in the Fund's
investments. A turnover rate of 100% would occur, for example, if all of the
securities held by the Fund were replaced within one year. The turnover rate
may vary from year to year, as well as within a year. It may be affected by
sales of portfolio securities necessary to meet cash requirements for
redemption of shares. Under normal market conditions, the Fund anticipates
that its portfolio turnover rate will not exceed 100%. In the event the Fund
were to have a turnover rate of 100% or more in any year, it would result in
the payment by the Fund of above average transaction costs and could result in
the payment by shareholders of above average amounts of taxes on realized
investment gains.
MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors of the
Corporation is responsible for managing its business and affairs. The
Corporation, on behalf of the Fund, has entered into an investment advisory
agreement with Oak Ridge Investments, Inc. ("Oak Ridge") pursuant to which Oak
Ridge manages the Fund's investments and business affairs, subject to the
supervision of the Corporation's Board of Directors (the "Investment Advisory
Agreement"). The Board of Directors also oversees duties required by
applicable state and federal law.
Oak Ridge, a growth equity capital management firm, is the investment
advisor to the Fund. Oak Ridge was founded in 1989 and is located at 233 North
Michigan Avenue, Suite 1807, Chicago, IL 60601. Under the Investment Advisory
Agreement, the Corporation, on behalf of the Fund, compensates Oak Ridge for
its investment advisory services for each class of shares at the annual rate of
1.00% of the Fund's average daily net assets attributable to each such class of
shares. The Corporation's Board of Directors believes that this fee is
reasonable in light of the Fund's investment objective. Oak Ridge has
voluntarily agreed to waive its management
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<PAGE> 14
fee and/or reimburse the Fund's operating expenses to the extent necessary to
ensure that the total operating expenses for the Class A shares do not exceed
2.00% of the class' average daily net assets and the total operating expenses
for the Class C shares do not exceed 2.75% of the class' average daily net
assets. Any such waiver or reimbursement will have the effect of lowering the
overall expense ratio for the applicable class and increasing the overall
return to investors at the time any such amounts are waived and/or reimbursed.
The Fund is managed by David M. Klaskin, who has been the President,
Treasurer and Chief Investment Officer of Oak Ridge since its founding in
September 1989. From 1982 until founding Oak Ridge, Mr. Klaskin was a
financial consultant with Shearson/Lehman Bros.
Oak Ridge provides continuous advice and recommendations concerning the
Fund's investments, and is responsible for selecting the broker-dealers who
execute the portfolio transactions for the Fund. Oak Ridge provides office
space for the Corporation and pays the salaries, fees and expenses of all the
Corporation's officers and directors who are interested persons of Oak Ridge.
In addition to providing investment advice to the Fund, Oak Ridge serves as
investment advisor to pension and profit-sharing plans, and other institutional
and private investors. As of November 30, 1996, Oak Ridge had approximately
$95 million under management. Mr. David M. Klaskin and Mr. Samuel Wegbreit
each own shares representing more than 35% but less than 51% of the voting
rights of Oak Ridge.
FUND EXPENSES
The Corporation, on behalf of the Fund, is responsible for all of its
expenses, including: interest charges; taxes; brokerage commissions;
organizational expenses; expenses of registering or qualifying shares for sale
with the states and the SEC; expenses of issue, sale, repurchase or redemption
of shares; expenses of printing and distributing prospectuses to existing
shareholders; charges of custodians; expenses for accounting, administrative,
audit, and legal services; fees for directors who are not interested persons of
Oak Ridge; expenses of fidelity bond coverage and other insurance; expenses of
indemnification; extraordinary expenses; and costs of shareholder and director
meetings. For the period ended November 30, 1996, after waivers and
reimbursements, these expenses totaled 1.00% of the average net assets of the
Fund attributable to the Class A shares.
HOW TO PURCHASE SHARES
Shares of the Fund may be purchased through any dealer which has entered
into a sales agreement with Oak Ridge, in its capacity as principal underwriter
of shares of the Fund (the "Distributor"), or through the Distributor directly.
Firstar Trust Company, the Fund's transfer agent (the "Transfer Agent"), may
also accept purchase applications.
Applications will not be accepted unless they are accompanied by payment
in U.S. funds. Payment should be made by check or money order drawn on a U.S.
bank, savings and loan, or credit union. The minimum initial investment in the
Fund is $2,000. Subsequent investments may be made by mail ($100 minimum) or
by wire ($1,000 minimum). For individual retirement accounts ("IRAs"), the
minimum initial investment is $1,000. For investors using the Automatic
Investment Plan, as described below, the minimum investment is $100. Minimum
investments are waived for employee benefit plans qualified under Sections 401,
403(b)(7) or 457 of the Internal Revenue Code. These minimums can be changed
by the Fund at any time. Shareholders will be given at least 30 days' notice
of any increase in the minimum dollar amount of subsequent investments.
If you purchase shares of the Fund by check or the Automatic Investment
Plan and request the redemption of such shares within fifteen days of the
initial purchase, the redemption will not be effective, and the Fund will not
forward the redemption proceeds until the Fund is reasonably satisfied that
your check or purchase order has cleared. (This is a security precaution only
and does not affect your investment).
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<PAGE> 15
Offering Price - Class A Shares
Class A shares of the Fund are sold on a continual basis at the next
offering price (the "Offering Price"), which is the sum of the net asset value
per share (next computed following (i) receipt of an order in proper form by a
dealer, the Distributor or the Transfer Agent, as the case may be, and (ii)
acceptance of such order by the Fund) and the sales charge as set forth below.
Net asset value per share is calculated once daily as of the close of trading
on each day the New York Stock Exchange is open (currently 4:00 p.m., Eastern
Standard Time). See "DETERMINATION OF NET ASSET VALUE." The sales charge
imposed on purchases of Class A shares is as follows:
Total Sales Charge
<TABLE>
<CAPTION>
Amount of Sale As a Percentage of As a Percentage of Portion of Total
at Offering Offering Price of Net Asset Value of Offering Price
Price the Shares Purchased the Shares Purchased Retained by Dealers*
--------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
Less than $50,000 4.25% 4.44% 4.00%
$50,000 but less than $100,000 3.75% 3.90% 3.50%
$100,000 but less than $250,000 3.25% 3.36% 3.00%
$250,000 but less than $500,000 2.25% 2.30% 2.00%
$500,000 but less than $1,000,000 1.75% 1.78% 1.50%
$1,000,000 or more 1.00% 1.01% 0.90%
</TABLE>
- ---------------
* At the discretion of the Distributor, all sales charges may at times be
paid to the securities dealer, if any, involved in the trade. A
securities dealer which is paid all or substantially all of the sales
charges may be deemed an "underwriter" under the Securities Act of 1933,
as amended.
Investors described under "Purchases at Net Asset Value," below, may
purchase Class A shares without the imposition of a sales charge. In addition,
no sales charge is imposed on the reinvestment of dividends or capital gains.
A confirmation indicating the details of each purchase transaction will be sent
to you promptly following such transaction. If a purchase order is placed
through a dealer, the dealer must promptly forward the order, together with
payment, to the Transfer Agent.
Purchases at Net Asset Value - Class A and Class C Shares
Class A shares of the Fund may be purchased at net asset value without the
imposition of a sales charge, upon the written assurance that the purchase is
made for investment purposes and that the shares will not be transferred or
resold except through redemption or repurchase by or on behalf of the Fund, by
any of the following: (i) employee benefit plans qualified under Section
401(k) of the Internal Revenue Code of 1986, as amended, subject to minimum
requirements with respect to the number of employees or amount of purchase,
which may be established by the Distributor; currently, those criteria require
that the employer establishing the plan have 1,000 or more eligible employees;
(ii) directors, officers, and full-time employees of the Fund, the Distributor,
and affiliates of such companies, and by spouses and family members of such
persons; (iii) registered securities brokers and dealers which have entered
into a sales agreement with the Distributor, and their affiliates, for their
investment account only; (iv) registered personnel and employees of such
securities brokers and dealers referred to in (iii) above, and their spouses
and family members, in accordance with the internal policies and procedures of
the employing securities dealer; and (v) registered investment advisors
affiliated with the Distributor, by agreement or otherwise, on behalf of their
clients, who are participating in a comprehensive fee
11
<PAGE> 16
program (also known as a wrap fee program). Please call 1-800-407-7298 for
more information on purchases of Class A shares at net asset value.
Class C shares of the Fund may also be purchased at net asset value
without the imposition of a sales charge. Class C shares, however, are subject
to a higher Rule 12b-1 distribution fee than Class A shares, as discussed more
fully under "DISTRIBUTION PLANS."
Initial Investment - Minimum $2,000
You may purchase Class A or Class C shares by completing the enclosed
application form and mailing it along with a check or money order payable to
"O.R.I. Growth Fund" to your securities dealer, the Distributor or the Transfer
Agent, as the case may be. If mailing to the Distributor or Transfer Agent,
please send to the following address: Firstar Trust Company, Mutual Fund
Services, P. O. Box 701, Milwaukee, Wisconsin 53201-0701. In addition,
overnight mail should be sent to the following address: O.R.I. Growth Fund,
Firstar Trust Company, Mutual Fund Services, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. Do not mail letters by overnight courier
to the P.O. Box address listed above. You may also purchase Fund shares by
telephone. For information regarding this option, please call 1-800-407-7298.
If the securities dealer you have chosen to purchase Fund shares through
has not entered into a sales agreement with the Distributor, such dealer may,
nevertheless, offer to place your order for the purchase of Fund shares.
Purchases made through such dealers will be affected at the Offering Price for
Class A shares and at net asset value for Class C shares. Such dealers may
also charge a transaction fee, as determined by the dealer. With respect to
Class A shares, that fee will be in addition to the sales charge payable by you
upon purchase of such shares, and may be avoided if shares are purchased
through a dealer who has entered into a sales agreement with the Distributor or
through the Transfer Agent.
If your check does not clear, you will be charged a $20 service fee. You
will also be responsible for any losses suffered by the Fund as a result.
Neither cash nor third-party checks will be accepted. All applications to
purchase Fund shares are subject to acceptance by the Fund and are not binding
until so accepted. The Fund reserves the right to decline or accept a purchase
order application in whole or in part.
You may also purchase Fund shares by wire. The following instructions
should be followed when wiring funds to the Transfer Agent for the purchase of
Fund shares:
Wire to: Firstar Bank
ABA Number 075000022
Credit: Firstar Trust Company
Account 112-952-137
Further Credit: O.R.I. Growth Fund - Class A or Class C
(shareholder account number)
(shareholder name/account registration)
Please call 1-800-407-7298 prior to wiring any funds to notify the Transfer
Agent that the wire is coming and to verify the proper wire instructions so
that the wire is properly applied when received. The Transfer Agent may charge
a $10.00 service fee for wire transactions. The Fund is not responsible for
the consequences of delays resulting from the banking or Federal Reserve wire
system.
Automatic Investment Plan - Minimum $100
The Automatic Investment Plan ("AIP") allows you to make regular,
systematic investments in the Fund's Class A or Class C shares from your bank
checking or NOW account. The Fund will reduce the
12
<PAGE> 17
minimum initial investment to $100 for investors using the AIP. To establish
the AIP, complete the appropriate section in the Fund's application attached to
this Prospectus. Under certain circumstances (such as discontinuation of the
AIP before the Fund's minimum initial investment is reached, or, after reaching
the minimum initial investment, the account balance is reduced to less than
$500), the Fund reserves the right to close the investor's account. Prior to
closing any account for failure to reach the minimum initial investment, the
Fund will give the investor written notice and 60 days in which to reinstate
the AIP or otherwise reach the minimum initial investment. You should consider
your financial ability to continue in the AIP until the minimum initial
investment amount is met because the Fund has the right to close an investor's
account for failure to reach the minimum initial investment. Such closing may
occur in periods of declining share prices.
Under the AIP, you may choose to make investments on the fifth and/or
twentieth day of each month from your financial institution in amounts of $100
or more. There is no service fee for participating in the AIP. However, a
service fee of $20 will be deducted from your Fund account for any AIP purchase
that does not clear due to insufficient funds or, if prior to notifying the
Fund in writing or by telephone to terminate the plan, you close your bank
account or in any manner prevent withdrawal of funds from the designated
checking or NOW account. You can set up the AIP with any financial institution
that is a member of the Automated Clearing House.
The AIP is a method of using dollar cost averaging which is an investment
strategy that involves investing a fixed amount of money at regular time
intervals. However, a program of regular investment cannot ensure a profit or
protect against a loss from declining markets. By always investing the same
amount, you will be purchasing more shares when the price is low and fewer
shares when the price is high. Since such a program involves continuous
investment regardless of fluctuating share values, you should consider your
financial ability to continue the program through periods of low share price
levels.
Subsequent Investments
Additions to your account may be made by mail ($100 minimum) or by wire
($1,000 minimum). When making an additional purchase by mail, enclose a check
payable to "O.R.I. Growth Fund" along with the Additional Investment Form
provided on the lower portion of your account statement. To make an additional
purchase by wire, please call 1-800-407-7298 for complete wiring instructions.
You may also make additional purchases by telephone. Information regarding
this option can be obtained by calling 1-800-407-7298.
Share Certificates
Although share purchases are credited to your account, certificates will
not be issued. Nevertheless, you will have full shareholder rights.
DETERMINATION OF NET ASSET VALUE
The net asset value per share for each class of shares is determined as of
the close of trading (currently 4:00 p.m. Eastern Standard Time) on each day
the New York Stock Exchange ("NYSE") is open for business. Purchase orders
received or shares tendered for redemption on a day the NYSE is open for
trading, prior to the close of trading on that day, will be valued as of the
close of trading on that day. Applications for purchase of shares and requests
for redemption of shares received after the close of trading on the NYSE will
be valued as of the close of trading on the next day the NYSE is open. Net
asset value may not be calculated on days during which the Fund receives no
orders to purchase shares and no shares are tendered for redemption. Net asset
value per share for each class of shares is calculated by taking the fair value
of the total assets per class, including interest or dividends accrued, but not
yet collected, less all liabilities, and dividing by the total number of shares
outstanding. The result, rounded to the nearest cent, is the net asset value
per share. In determining net asset value, expenses are accrued and applied
daily and securities and other assets for which market quotations are available
are valued at market value. Common stocks and other equity-type securities are
valued at the last sales
13
<PAGE> 18
price on the national securities exchange or NASDAQ on which such securities
are primarily traded; provided, however, securities traded on an exchange or
NASDAQ for which there were no transactions on a given day, and securities not
listed on an exchange or NASDAQ, are valued at the most recent bid prices.
Debt securities are valued by a pricing service that utilizes electronic data
processing techniques to determine values for normal institutional sized
trading units of debt securities without regard to the existence of sale or bid
prices when such values are believed to more accurately reflect the fair market
value of such securities; otherwise, actual sale or bid prices are used. Any
securities or other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Directors. Debt securities having remaining maturities of 60 days or less when
purchased are valued by the amortized cost method when the Board of Directors
determines that the fair market value of such securities is their amortized
cost. Under this method of valuation, a security is initially valued at its
acquisition cost, and thereafter, amortization of any discount or premium is
assumed each day, regardless of the impact of fluctuating interest rates on the
market value of the security.
HOW TO REDEEM SHARES
In General
Investors may request redemption of part or all of their Fund shares at
any time at the next determined net asset value. See "DETERMINATION OF NET
ASSET VALUE." The Fund normally will mail your redemption proceeds the next
business day and, in any event, no later than seven business days after receipt
of a redemption request in good order. However, the Fund may hold payment
until investments which were made by check, telephone or the AIP have been
collected.
Redemptions may also be made through brokers or dealers. Such redemptions
will be effected at the net asset value next determined after receipt by the
Fund of the broker or dealer's instruction to redeem shares. In addition, some
brokers or dealers may charge a fee in connection with such redemptions.
Written Redemption
For most redemption requests, an investor need only furnish a written,
unconditional request to redeem his or her shares at net asset value to the
Fund's Transfer Agent: Firstar Trust Company, Mutual Fund Services, P. O. Box
701, Milwaukee, Wisconsin 53201-0701. Overnight mail should be sent to O.R.I.
Growth Fund, Firstar Trust Company, Mutual Fund Services, Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202. Do not mail letters by overnight
courier to the P.O. Box address listed above. Requests for redemption must be
signed exactly as the shares are registered, including the signature of each
joint owner. You must also specify the number of shares or dollar amount to be
redeemed. Redemption proceeds made by written redemption request may also be
wired to a commercial bank that you have authorized on your account
application. The Transfer Agent may charge a $10.00 service fee for wire
transactions. Additional documentation may be requested from corporations,
executors, administrators, trustees, guardians, agents, or attorneys-in-fact.
Telephone Redemption
You may redeem shares by telephone if you have checked the appropriate box
and supplied the necessary information on the Fund's Account Application.
Proceeds redeemed by telephone will be mailed or wired only to an investor's
address or bank of record as shown on the records of the Transfer Agent. To
effect a telephone redemption, you may call 1-800-407-7298. The Fund reserves
the right to refuse any request made by telephone and may limit the amount
involved or the number of telephone redemptions. Please call the Transfer
Agent at 1-800-407-7298 to obtain current instructions. Once you place a
telephone redemption request, it cannot be canceled or modified. Neither the
Fund nor its Transfer Agent will be responsible for the authenticity of
redemption instructions received by telephone. Accordingly, the investor bears
the risk of loss. The Fund will use reasonable procedures to ensure that
instructions received by telephone are genuine. These procedures may include
recording telephonic transactions and sending written confirmation of such
transactions. However, if the
14
<PAGE> 19
Fund or its Transfer Agent fails to employ such procedures, the Fund may be
liable for any losses due to unauthorized or fraudulent instructions.
Shareholders may experience difficulty in implementing a telephone redemption
during periods of drastic economic or market changes. If an investor is unable
to contact the Transfer Agent by telephone, shares may also be redeemed by
delivering the redemption request to the Transfer Agent in person or by mail.
If in person or by overnight mail, deliver such request to O.R.I. Growth Fund,
Firstar Trust Company, Mutual Fund Services, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202; if by regular mail, such request may be
sent to Firstar Trust Company, Mutual Fund Services, P. O. Box 701, Milwaukee,
Wisconsin 53201-0701. Do not mail letters by overnight courier to the P.O. Box
address listed above.
Systematic Withdrawal Plan
You may set up automatic withdrawals from your account with the Fund at
regular intervals. To begin distributions, you must have an initial balance of
$5,000 in your account and withdraw at least $50 per payment. To establish the
Systematic Withdrawal Plan, please call 1-800-407-7298. Depending upon the
size of the account and the withdrawals requested (and fluctuations in the net
asset value of the shares redeemed), redemptions for the purpose of satisfying
such withdrawals may reduce or even exhaust your account. If the amount
remaining in your account is not sufficient to meet a plan payment, the
remaining amount will be redeemed and the plan will be terminated.
In certain circumstances, such as when corporations, executors,
administrators, trustees, guardians, agents or attorneys-in-fact are involved
or when the proceeds of redemption are requested to be sent to other than the
address of record, additional documentation and signature guarantees may be
required. Questions regarding such circumstances may be directed to the
Transfer Agent by calling 1-800-407-7298. In addition, redemptions over
$25,000 must be made in writing and require a signature guarantee. A signature
guarantee may be obtained from any eligible guarantor institution, as defined
by the SEC. These institutions include banks, saving associations, credit
unions, brokerage firms, and others. Please note that a notary public stamp or
seal is not acceptable.
Shareholders who have an Individual Retirement Account ("IRA") or other
retirement plan must indicate on their redemption request whether or not to
withhold federal income tax. Redemption requests failing to indicate an
election not to have federal tax withheld will be subject to withholding.
Your account may be terminated by the Fund on not less than 30 days'
notice if, at the time of any redemption of shares in your account, the value
of the remaining shares in the account falls below $500. Upon any such
termination, a check for the proceeds of redemption will be sent to you within
seven days of the redemption.
DISTRIBUTION PLANS
The Fund has adopted a plan of distribution for each class of shares (the
"Class A Plan" and the "Class C Plan") in accordance with Rule 12b-1 under the
1940 Act pursuant to which certain distribution and/or service fees are paid.
Under the Class A Plan, the Fund is required to pay the Distributor a
distribution fee for the promotion and distribution of the Class A shares of up
to 0.25% of the average daily net assets of the Fund attributable to the Class
A shares, computed on an annual basis. The Class C Plan requires the Fund to
pay the Distributor (i) a distribution fee of up to 0.75% of the average daily
net assets of the Fund attributable to the Class C shares, computed on an
annual basis, and (ii) a service fee for personal services provided to
shareholders and/or the maintenance of shareholder accounts of up to 0.25% of
the average daily net assets of the Fund attributable to the Class C shares,
computed on an annual basis. Under both plans, the Distributor is authorized
to, in turn, pay all or a portion of the fee it receives from the Fund to any
securities dealer, financial institution or any other person (the "Recipient")
who renders assistance in distributing or promoting the sale of Fund shares or,
with respect to the Class C shares only, who provides certain shareholder
services to the holders of such class of shares, pursuant to a written
agreement (the "Rule 12b-1 Related Agreement"). To the extent such fee is not
paid
15
<PAGE> 20
to such persons, the Distributor may use the fee for its own distribution
expenses incurred in connection with the sale of the Fund's shares and, with
respect to the Class C shares only, for any of its shareholder servicing
expenses incurred in connection with servicing the holders of such class of
shares, although it is the Distributor's current intention to pay out all or
most of the fee under both plans. A form of the 12b-1 Related Agreement
referred to above has been approved by a majority of the Board of Directors,
and of the members of the Board who are not "interested persons" of the Fund as
defined in the 1940 Act and who have no direct or indirect financial interest
in the operation of the plans or any related agreements (the "Disinterested
Directors") voting separately. Accordingly, the Distributor may enter into
12b-1 Related Agreements with securities dealers, financial institutions or
other persons without further Board approval.
Payment of the distribution and/or service fee is to be made quarterly,
within 30 days after the close of the quarter for which the fee is payable,
upon the Distributor forwarding to the Board of Directors a written report of
all amounts expensed pursuant to the applicable plan; provided, however, that
the aggregate payments by the Fund under the Class A Plan to the Distributor
and all Recipients may not exceed 0.25% (on an annualized basis) of the Fund's
average net assets attributable to the Class A shares for that quarter, and the
aggregate payments by the Fund under the Class C Plan to the Distributor and
all Recipients may not exceed 1.00% (on an annualized basis) of the Fund's
average net assets attributable to the Class C shares for that quarter; and
provided further that no fee may be paid in excess of the expenses as set forth
in the quarterly written report. Thus, neither the Class A Plan nor the Class
C Plan provide for the payment of distribution and/or service fees in
subsequent quarters that relate to expenses incurred in prior quarters.
From time to time, the Distributor may engage in activities which jointly
promote the sale of shares of one or both classes of shares, the costs of which
may not be readily identifiable as related to any one class. Generally, the
expenses attributable to joint distribution activities will be allocated among
each class of shares on the basis of its respective net assets.
Each plan, and any Rule 12b-1 Related Agreement which is entered into,
will continue in effect for a period of more than one year only so long as its
continuance is specifically approved at least annually by a vote of a majority
of the Fund's Board of Directors, and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on the plan, or the Rule
12b-1 Related Agreement, as applicable. In addition, both plans, and any Rule
12b-1 Related Agreement, may be terminated at any time, without penalty, by
vote of a majority of the outstanding voting securities of the applicable class
of shares to which the plan relates, or by vote of a majority of Disinterested
Directors (on not more than sixty (60) days' written notice in the case of the
Rule 12b-1 Related Agreement only).
TAX SHELTERED RETIREMENT PLANS
The Fund offers, through Firstar Trust Company in its capacity as
custodian of Fund assets (the "Custodian"), several qualified retirement plans
for adoption by individuals and employers. Participants in these plans can
accumulate shares of the Fund on a tax deferred basis. Contributions to these
plans are generally tax deductible and earnings are tax deferred until
distributed.
Individual Retirement Account ("IRA"). Individuals under age 70 1/2 with
earned income, may contribute money to an IRA. You are allowed to contribute
up to the lesser of $2,000 or 100% of your earned income each year to an IRA.
Individuals who are covered by existing retirement plans, or have spouses
covered by such plans, and whose income exceed certain amounts, are not
permitted to deduct their IRA contributions for income tax purposes. However,
whether or not an individual's contributions are deductible, the earnings in
his or her IRA are not taxed until the account is distributed.
401(k) Plan. A 401(k) Plan is a type of profit sharing plan that allows
employees to have part of their salary contributed to a retirement plan which
will earn tax-deferred income. A 401(k) Plan is funded by employee
contributions, employer contributions, or a combination of both.
16
<PAGE> 21
Defined Contribution Plan. A Defined Contribution Plan, commonly referred to
as a Keogh Plan, allows self-employed individuals, partners, or a corporation
to provide retirement benefits for themselves and their employees. There are
three plan types: profit sharing, money purchase pension and a paired plan. A
paired plan is a combination of a profit sharing plan and a money purchase
plan.
A complete description of the various plans, as well as a description of
the applicable service fees are available from the Fund and may be obtained by
calling 1-800-407-7298 or writing to the Fund at P. O. Box 701, Milwaukee,
Wisconsin 53201-0701.
Please note that early withdrawals from a retirement plan may result in
adverse tax consequences.
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT
The Corporation intends to continue to qualify for treatment as a
"Regulated Investment Company" under Subchapter M of the Internal Revenue Code,
and, if so qualified, will not be liable for federal income taxes to the extent
earnings are distributed on a timely basis.
For federal income tax purposes, all dividends paid by the Corporation, on
behalf of the Fund, and net realized short-term capital gains are taxable as
ordinary income whether reinvested or received in cash unless you are exempt
from taxation or entitled to a tax deferral. Distributions paid by the
Corporation, on behalf of the Fund, from net realized long-term capital gains,
whether received in cash or reinvested in additional shares, are taxable as
such. The capital gain holding period is determined by the length of time the
Fund has held the security and not the length of time you have held shares in
the Fund. Investors are informed annually as to the amount and nature of all
dividends and capital gains paid during the prior year. Such gains and
dividends may also be subject to state or local taxes. If you are not required
to pay taxes on your income, you will not be required to pay federal income
taxes on the amounts distributed to you.
Dividends are usually paid, and capital gains, if any, are usually
distributed annually in December. When a dividend or capital gain is
distributed, the Fund's net asset value will decrease by the amount of the
payment. A dividend paid shortly after the purchase of shares will reduce the
net asset value of the shares purchased by the amount of the dividend. All
dividends or capital gains distributions will automatically be reinvested in
shares of the Fund at the then prevailing net asset value unless an investor
specifically requests that either dividends or capital gains or both be paid in
cash. The election to receive dividends or reinvest them may be changed by
writing to the Fund at P. O. Box 701, Milwaukee, Wisconsin 53201-0701. Such
notice must be received at least 10 days prior to the record date of any
dividend or capital gain distribution.
If you do not furnish the Fund with your correct social security number or
employer identification number, the Fund is required by federal law to withhold
federal income tax at a rate of 31% from your distributions and redemption
proceeds.
This section is not intended to be a full discussion of federal income tax
laws and the effect of such laws on you. There may be other federal, state, or
local tax considerations applicable to a particular investor. You are urged to
consult your own tax advisor.
FUND ORGANIZATION
The Corporation was organized as a Maryland corporation on October 15,
1993. The Corporation is authorized to issue 500,000,000 $.01 par value shares
of common stock and series and classes of series of shares of common stock. The
Fund, which has been allocated 100,000,000 of those shares, is the first and
presently, the only series of the Corporation. If the Corporation issues
additional series, the assets belonging to each series of
17
<PAGE> 22
shares will be held separately by the Custodian, and in effect each series will
be a separate fund. On December __, 1996, the Corporation amended its Articles
of Incorporation to provide for an additional class of shares. Each class of
shares of the Fund represents an interest in the Fund's assets and has
identical voting, dividend, liquidation and other rights on the same terms and
conditions, except that each class of shares bears differing class-specific
expenses, is subject to differing sales loads and has exclusive voting rights
on matters pertaining to the distribution plan for that class.
Each share, irrespective of series or class, is entitled to one vote on
all questions, except that certain matters must be voted on separately by the
series or class of shares affected, and matters affecting only one series or
class are voted upon only by that series or class. All shares have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of directors can elect all of the directors
if they choose to do so, and in such event, the holders of the remaining shares
will not be able to elect any person or persons to the board of directors.
The Corporation will not hold annual shareholders' meetings except when
required by the 1940 Act. The Corporation has adopted procedures in its Bylaws
for the removal of directors by the shareholders. As of November 30, 1996,[ no
person] owned a controlling interest in the Fund.
ADMINISTRATOR
Pursuant to Administration and Accounting Service Agreements, Firstar
Trust Company (the "Administrator"), Mutual Fund Services, Third Floor, 615
East Michigan Street, Milwaukee, Wisconsin 53202, calculates the daily net
asset value of each class of shares, prepares and files all federal and state
tax returns, oversees the Fund's insurance relationships, participates in the
preparation of the registration statement, proxy statements and reports,
prepares compliance filings relating to the registration of the securities of
the Fund pursuant to state securities laws, compiles data for and prepares
notices to the SEC, prepares the financial statements for the annual and
semi-annual reports to the SEC and current investors, monitors the Fund's
expense accruals and performs securities valuations, monitors the Corporation's
status as a registered investment company under Subchapter M of the Internal
Revenue Code and monitors compliance with the Fund's investment policies and
restrictions, from time to time, and generally assists in the Fund's
administrative operations. The Administrator, at its own expense and without
reimbursement from the Fund, furnishes office space and all necessary office
facilities, equipment, supplies and clerical and executive personnel for
performing the services required to be performed by it under the Administration
and Accounting Service Agreements. For the foregoing services and until the
Fund's net assets total $25 million, the Administrator receives from the Fund
the following aggregate fees, computed daily and payable monthly based on the
Fund's aggregate average net assets: (a) pursuant to the Administration
Agreement, the Administrator receives an aggregate fee at the annual rate of
.05 of 1% on the first $100 million of average net assets, .04 of 1% on the
next $400 million of average net assets, and .03 of 1% on average net assets in
excess of $500 million, subject to an annual aggregate minimum of $25,000 for
the fiscal year ended November 30, 1997 and $30,000 for succeeding years, plus
out of pocket expenses; and (b) pursuant to the Accounting Service Agreement,
the Administrator receives an aggregate fee of (i) $20,000 for the first $40
million of average net assets for the fiscal year ended November 30, 1997 and
$22,000 for the first $40 million of average net assets for succeeding years,
and (ii) .01 of 1% on the next $200 million of average net assets and .005 of
1% on the balance, plus out of pocket expenses.
CUSTODIAN, TRANSFER AGENT, AND DISTRIBUTOR
Firstar Trust Company, Mutual Fund Services, Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202, acts as custodian of the Fund's
assets and as dividend-disbursing and transfer agent for the Fund's shares.
Oak Ridge acts as the principal distributor of the Fund's shares.
18
<PAGE> 23
PORTFOLIO TRANSACTIONS
As provided in the Investment Advisory Agreement, Oak Ridge is responsible
for the Fund's portfolio decisions and the placing of portfolio transactions.
In executing such transactions, Oak Ridge seeks to obtain the best net results
for the Fund. Pursuant to guidelines adopted by the Corporation's Board of
Directors, on behalf of the Fund, and in accordance with Rules of the SEC, Oak
Ridge may serve as a broker for the Fund; however, in order for Oak Ridge to
effect any portfolio transactions for the Fund, the commissions, fees or other
remuneration received by Oak Ridge must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on any exchange during a comparable period of time. This standard allows
Oak Ridge to receive no more than the remuneration which would be expected to
be received by an unaffiliated broker in a commensurate arm's-length
transaction.
COMPARISON OF INVESTMENT RESULTS
Each class may from time to time compare its investment results to various
passive indices or other mutual funds and cite such comparisons in reports to
shareholders, sales literature and advertisements. The results may be
calculated on the basis of average annual total return, total return or
cumulative total return.
Average annual total return and total return figures assume the
reinvestment of all dividends and measure the net investment income generated
by, and the effect of, any realized and unrealized appreciation or depreciation
of the underlying investments in the Fund over a specified period of time.
Average annual total return figures are annualized and therefore represent the
average annual percentage change over the specified period. Total return
figures are not annualized and represent the aggregate percentage or dollar
value change over the period. Cumulative total return simply reflects the
applicable class' performance over a stated period of time. All performance
figures for Class A shares reflect the deduction of the 4.25% maximum initial
sales charge.
Average annual total return, total return and cumulative total return are
based upon the historical results of the Fund and are not necessarily
representative of the future performance of the Fund. Additional information
concerning the Fund's performance appears in the Statement of Additional
Information.
_________________________________
THE FUND RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF
ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE
INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
19
<PAGE> 24
DIRECTORS
David M. Klaskin
Samuel Wegbreit
Daniel A. Kaplan
Dr. A. Charlene Sullivan
Martin Z. Craig
OFFICERS
David M. Klaskin
President
Samuel Wegbreit
Chairman of the Board
Mark C. Pappas
Secretary
INVESTMENT ADVISOR
Oak Ridge Investments, Inc.
233 North Michigan Avenue, Suite 1807
Chicago, IL 60601
CUSTODIAN, ADMINISTRATOR, TRANSFER AGENT
AND DIVIDEND-DISBURSING AGENT
Firstar Trust Company
Mutual Fund Services
Third Floor
615 East Michigan Street
Milwaukee, WI 53202
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
100 East Wisconsin Avenue
Milwaukee, WI 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
MW1-33881-4
20
<PAGE> 25
STATEMENT OF ADDITIONAL INFORMATION
O.R.I. GROWTH FUND
A SERIES OF
O.R.I. FUNDS, INC.
SPONSORED BY
OAK RIDGE INVESTMENTS, INC.
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-407-7298
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of the O.R.I. Growth Fund (the "Fund"),
a series of O.R.I. Funds, Inc. (the "Corporation") dated March 1, 1997.
Requests for copies of the Prospectus should be made by writing to the Fund at
the address listed above or by calling 1-800-407-7298.
This Statement of Additional Information is dated March 1, 1997.
<PAGE> 26
O.R.I. GROWTH FUND
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
INVESTMENT RESTRICTIONS...................................................4
INVESTMENT POLICIES AND TECHNIQUES........................................5
Illiquid Securities................................................5
Short-Term Fixed Income Securities.................................6
Derivative Instruments.............................................7
Warrants...........................................................3
When-Issued Securities............................................13
Repurchase Obligations............................................14
Unseasoned Companies..............................................14
DIRECTORS AND OFFICERS OF THE CORPORATION................................14
PRINCIPAL SHAREHOLDERS...................................................16
INVESTMENT ADVISOR AND UNDERWRITER.......................................16
DISTRIBUTION PLANS.......................................................17
Description of Plans..............................................17
Amounts Expensed Under the Plans..................................18
Interests of Certain Persons......................................18
Benefits to the Fund..............................................18
PORTFOLIO TRANSACTIONS AND BROKERAGE.....................................19
CUSTODIAN................................................................20
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT.............................21
TAXES....................................................................21
DETERMINATION OF NET ASSET VALUE.........................................21
</TABLE>
2
<PAGE> 27
<TABLE>
<S> <C>
SHAREHOLDER MEETINGS.....................................................21
PERFORMANCE INFORMATION..................................................22
INDEPENDENT ACCOUNTANTS..................................................24
FINANCIAL STATEMENTS.....................................................24
APPENDIX................................................................A-1
</TABLE>
________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS STATEMENT OF ADDITIONAL
INFORMATION AND THE PROSPECTUS DATED MARCH 1, 1997, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND.
________________
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFER TO
SELL SECURITIES.
________________
3
<PAGE> 28
INVESTMENT RESTRICTIONS
The investment objective of the O.R.I. Growth Fund (the "Fund") is to seek
capital appreciation. The Fund's investment objective and policies are
described in detail in the Prospectus under the caption "INVESTMENT OBJECTIVE
AND POLICIES." The following is a complete list of the Fund's fundamental
investment limitations which cannot be changed without shareholder approval.
The Fund may not:
1. With respect to 75% of its total assets, purchase securities of
any issuer (except securities of the U.S. government or any agency or
instrumentality thereof) if such action would cause more than 5% of the
Fund's total assets to be invested in securities of any one issuer, or
purchase more than 10% of the outstanding voting securities of any one
issuer.
2. Borrow money except from banks for temporary or emergency
purposes (but not for the purpose of purchase of investments) and then,
only in an amount not to exceed 33 1/3% of the value of the Fund's net
assets at the time the borrowing is incurred; provided however, the Fund
may engage in transactions in options, futures contracts and options on
futures contracts. The Fund may not purchase securities when borrowings
exceed 5% of its total assets.
3. Act as an underwriter of another issuer's securities except for
the sale of restricted securities.
4. Pledge, mortgage, hypothecate, or otherwise encumber any of its
assets, except to secure permitted borrowings and except that the Fund
may invest in options, futures contracts and options on futures
contracts.
5. Make loans, except through (i) the purchase of investments
permissible under the Fund's investment policies, or (ii) the lending of
portfolio securities provided that no such loan of portfolio securities
may be made by it if, as a result, the aggregate of such loans would
exceed 5% of the value of the Fund's total assets.
6. Purchase any securities on margin, except for the use of
short-term credit necessary for clearance of purchases of portfolio
securities, the payment of initial and variation margin deposits in
connection with futures contracts and options thereon, and the purchase
and sale of options.
7. Purchase, hold, or deal in commodities or commodity contracts
(except that the Fund may engage in futures and options on futures), or
purchase or sell real estate including real estate limited partnerships,
other than, to the extent permitted under the Fund's investment policies,
instruments secured by real estate or interests therein or instruments
issued by entities that invest in real estate or interests therein.
8. Issue senior securities. For purposes of this investment
restriction, the futures, options and borrowing actions permitted under
the Fund's investment policies are not deemed to be the issuance of
senior securities.
9. Concentrate more than 25% of the value of its total assets
(taken at market value at the time of each investment) in securities of
issuers whose principal business activities are in the same industry or
group of industries.
With the exception of the investment restriction set out in item 2 above,
if a percentage restriction is adhered to at the time of investment, a later
increase in percentage resulting from a change in market value of the
investment or the total assets will not constitute a violation of that
restriction.
4
<PAGE> 29
The following investment limitations may be changed by the Corporation's
Board of Directors without shareholder approval.
The Fund may not:
1. Purchase securities of issuers having less than three years
continuous operation (including operations of any predecessors), if such
purchase would cause the value of the Fund's investments in all such
issuers to exceed 5% of the value of its net assets.
2. Invest in illiquid securities (i.e., securities that are not
readily marketable) if, as a result of such investments, more than 5% of
the Fund's net assets (taken at market value at the time of each
investment) would be invested in illiquid securities.
3. Invest in any investment company.
4. Enter into futures contracts or related options if more than 5%
of the Fund's net assets would be represented by futures contracts or
more than 5% of the Fund's net assets would be committed to initial
margin and premiums on futures contracts and related options.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Fund's
investment objective, policies, and techniques that are described in the
Prospectus under the captions "INVESTMENT OBJECTIVE AND POLICIES" and
"INVESTMENT TECHNIQUES AND RISKS."
ILLIQUID SECURITIES
The Fund may invest up to 5% of its net assets in illiquid securities
(i.e., securities that are not readily marketable). For purposes of this
restriction, illiquid securities include, but are not limited to, restricted
securities (i.e., securities the disposition of which is restricted under the
federal securities laws), securities which may only be resold pursuant to Rule
144A under the Securities Act of 1933, as amended (the "Securities Act"),
repurchase agreements with maturities in excess of seven days and other
securities that are not readily marketable. The Board of Directors or its
delegate has the ultimate authority to determine, to the extent permissible
under the federal securities laws, which securities are liquid or illiquid for
purposes of this 5% limitation. Certain securities exempt from registration or
issued in transactions exempt from registration under the Securities Act,
including securities that may be resold to institutional investors pursuant to
Rule 144A under the Securities Act, may be considered liquid under guidelines
adopted by the Board.
The Board of Directors of the Corporation has delegated to Oak Ridge
Investments, Inc. ("Oak Ridge"), the Fund's investment advisor, the day-to-day
determination of the liquidity of any security, although it has retained
oversight and ultimate responsibility for such determinations. Although no
definitive liquidity criteria are used, the Board of Directors has directed Oak
Ridge to look to such factors as (i) the nature of the market for a security
(including the institutional private resale market), (ii) the terms of certain
securities or other instruments allowing for the disposition to a third party
or the issuer thereof (e.g., certain repurchase obligations and demand
instruments), (iii) the availability of market quotations (e.g., for securities
quoted in the PORTAL system), and (iv) other permissible relevant factors.
Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act. Where registration is
required, the Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, the Fund might obtain a less favorable price
5
<PAGE> 30
than prevailed when it decided to sell. Restricted securities will be priced
at fair value as determined in good faith by the Board of Directors of the
Corporation. If, through the appreciation of restricted securities or the
depreciation of unrestricted securities, the Fund should be in a position where
more than 5% of the value of its net assets are invested in illiquid
securities, including restricted securities which are not readily marketable,
the Fund will take such steps as is deemed advisable, if any, to protect
liquidity.
SHORT-TERM FIXED INCOME SECURITIES
The Fund may invest, for defensive, temporary purposes, in short-term
fixed income securities, including without limitation, the following:
1. U.S. government securities, including bills, notes and bonds
differing as to maturity and rates of interest, which are either issued
or guaranteed by the U.S. Treasury or by U.S. government agencies or
instrumentalities. U.S. government agency securities include securities
issued by (a) the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, and the Government National Mortgage Association, whose
securities are supported by the full faith and credit of the United
States; (b) the Federal Home Loan Banks, Federal Intermediate Credit
Banks, and the Tennessee Valley Authority, whose securities are supported
by the right of the agency to borrow from the U.S. Treasury; (c) the
Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and (d) the Student Loan
Marketing Association, the Interamerican Development Bank, and the
International Bank for Reconstruction and Development, whose securities
are supported only by the credit of such agencies. While the U.S.
government provides financial support to such U.S. government-sponsored
agencies or instrumentalities, no assurance can be given that it always
will do so since it is not so obligated by law. The U.S. government, its
agencies, and instrumentalities do not guarantee the market value of
their securities, and consequently, the value of such securities may
fluctuate.
2. Certificates of Deposit issued against funds deposited in a bank
or savings and loan association. Such certificates are for a definite
period of time, earn a specified rate of return, and are normally
negotiable. If such certificates of deposit are non-negotiable, they
will be considered illiquid securities and be subject to the Fund's 5%
restriction on investments in illiquid securities. Pursuant to the
certificate of deposit, the issuer agrees to pay the amount deposited
plus interest to the bearer of the certificate on the date specified
thereon. Under current FDIC regulations, the maximum insurance payable
as to any one certificate of deposit is $100,000; therefore, certificates
of deposit purchased by the Fund will not generally be fully insured.
3. Bankers' acceptances which are short-term credit instruments
used to finance commercial transactions. Generally, an acceptance is a
time draft drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to
pay the face value of the instrument on its maturity date. The
acceptance may then be held by the accepting bank as an asset or it may
be sold in the secondary market at the going rate of interest for a
specific maturity.
4. Repurchase agreements which involve purchases of debt
securities. In such a transaction, at the time the Fund purchases the
security, it simultaneously agrees to resell and redeliver the security
to the seller, who also simultaneously agrees to buy back the security at
a fixed price and time. This assures a predetermined yield for the Fund
during its holding period since the resale price is always greater than
the purchase price and reflects an agreed-upon market rate. Such
transactions afford an opportunity for the Fund to invest temporarily
available cash. The Fund may enter into repurchase agreements only with
respect to obligations of the U.S. government, its agencies or
instrumentalities; certificates of deposit; or bankers acceptances in
which the Fund may invest. Repurchase agreements may be considered loans
to the seller, collateralized by the underlying securities. The risk to
the Fund is limited to the ability of the seller to pay the agreed-upon
sum on the repurchase date; in the event of default, the repurchase
agreement
6
<PAGE> 31
provides that the Fund is entitled to sell the underlying collateral. If
the value of the collateral declines after the agreement is entered into,
however, and if the seller defaults under a repurchase agreement when the
value of the underlying collateral is less than the repurchase price, the
Fund could incur a loss of both principal and interest. Oak Ridge
monitors the value of the collateral at the time the transaction is
entered into and at all times during the term of the repurchase
agreement. Oak Ridge does so in an effort to determine that the value of
the collateral always equals or exceeds the agreed-upon repurchase price
to be paid to the Fund. If the seller were to be subject to a federal
bankruptcy proceeding, the ability of the Fund to liquidate the
collateral could be delayed or impaired because of certain provisions of
the bankruptcy laws.
5. Bank time deposits, which are monies kept on deposit with banks
or savings and loan associations for a stated period of time at a fixed
rate of interest. There may be penalties for the early withdrawal of
such time deposits, in which case the yields of these investments will be
reduced.
6. Commercial paper, which are short-term unsecured promissory
notes, including variable rate master demand notes issued by corporations
to finance their current operations. Master demand notes are direct
lending arrangements between the Fund and the corporation. There is no
secondary market for the notes. However, they are redeemable by the Fund
at any time. Oak Ridge will consider the financial condition of the
corporation (e.g., earning power, cash flow, and other liquidity ratios)
and will continuously monitor the corporation's ability to meet all of
its financial obligations, because the Fund's liquidity might be impaired
if the corporation were unable to pay principal and interest on demand.
Investments in commercial paper will be limited to commercial paper rated
in the two highest categories by a major rating agency or unrated
commercial paper which is, in the opinion of Oak Ridge, of comparable
quality.
DERIVATIVE INSTRUMENTS
IN GENERAL. The Fund may use derivative instruments for any lawful
purpose consistent with the Fund's investment objective such as hedging or
managing risk, but not for speculation. Derivative instruments are commonly
defined to include securities or contracts whose value depend on (or "derive"
from) the value of one or more other assets, such as securities, currencies, or
commodities. These "other assets" are commonly referred to as "underlying
assets."
A derivative instrument generally consists of, is based upon, or exhibits
characteristics similar to options or forward contracts. Options and forward
contracts are considered to be the basic "building blocks" of derivatives. For
example, forward-based derivatives include forward contracts, swap contracts,
as well as exchange-traded futures. Option-based derivatives include privately
negotiated, over-the-counter (OTC) options (including caps, floors, collars,
and options on forward and swap contracts) and exchange-traded options on
futures. Diverse types of derivatives may be created by combining options or
forward contracts in different ways, and by applying these structures to a wide
range of underlying assets.
An option is a contract in which the "holder" (the buyer) pays a certain
amount (the "premium") to the "writer" (the seller) to obtain the right, but
not the obligation, to buy from the writer (in a "call") or sell to the writer
(in a "put") a specific asset at an agreed upon price at or before a certain
time. The holder pays the premium at inception and has no further financial
obligation. The holder of an option-based derivative generally will benefit
from favorable movements in the price of the underlying asset but is not
exposed to corresponding losses due to adverse movements in the value of the
underlying asset. The writer of an option-based derivative generally will
receive fees or premiums but generally is exposed to losses due to changes in
the value of the underlying asset.
A forward is a sales contract between a buyer (holding the "long"
position) and a seller (holding the "short" position) for an asset with
delivery deferred until a future date. The buyer agrees to pay a fixed price
at the agreed future date and the seller agrees to deliver the asset. The
seller hopes that the market price on the delivery date is less than the agreed
upon price, while the buyer hopes for the contrary. The change in value of a
forward-based derivative generally is roughly proportional to the change in
value of the underlying asset.
7
<PAGE> 32
HEDGING. The Fund may use derivative instruments to protect against
possible adverse changes in the market value of securities held in, or are
anticipated to be held in, the Fund's portfolio. Derivatives may also be used
by the Fund to "lock-in" its realized but unrecognized gains in the value of
its portfolio securities. Hedging strategies, if successful, can reduce the
risk of loss by wholly or partially offsetting the negative effect of
unfavorable price movements in the investments being hedged. However, hedging
strategies can also reduce the opportunity for gain by offsetting the positive
effect of favorable price movements in the hedged investments.
MANAGING RISK. The Fund may also use derivative instruments to manage the
risks of the Fund's portfolio. Risk management strategies include, but are not
limited to, facilitating the sale of portfolio securities, managing the
effective maturity or duration of debt obligations in the Fund's portfolio,
establishing a position in the derivatives markets as a substitute for buying
or selling certain securities, or creating or altering exposure to certain
asset classes, such as equity, debt, and foreign securities. The use of
derivative instruments may provide a less expensive, more expedient or more
specifically focused way for the Fund to invest than "traditional" securities
(i.e., stocks or bonds) would.
EXCHANGE OR OTC DERIVATIVES. Derivative instruments may be
exchange-traded or traded in OTC transactions between private parties.
Exchange-traded derivatives are standardized options and futures contracts
traded in an auction on the floor of a regulated exchange. Exchange contracts
are generally liquid. The exchange clearinghouse is the counterparty of every
contract. Thus, each holder of an exchange contract bears the credit risk of
the clearinghouse (and has the benefit of its financial strength) rather than
that of a particular counterparty. Over-the-counter transactions are subject
to additional risks, such as the credit risk of the counterparty to the
instrument, and are less liquid than exchange-traded derivatives since they
often can only be closed out with the other party to the transaction.
RISKS AND SPECIAL CONSIDERATIONS. The use of derivative instruments
involves risks and special considerations as described below. Risks pertaining
to particular derivative instruments are described in the sections that follow.
(1) MARKET RISK. The primary risk of derivatives is the same as the risk
of the underlying assets; namely, that the value of the underlying asset may go
up or down. Adverse movements in the value of an underlying asset can expose
the Fund to losses. Derivative instruments may include elements of leverage
and, accordingly, the fluctuation of the value of the derivative instrument in
relation to the underlying asset may be magnified. The successful use of
derivative instruments depends upon a variety of factors, particularly Oak
Ridge's ability to predict movements of the securities, currencies, and
commodities markets, which requires different skills than predicting changes in
the prices of individual securities. There can be no assurance that any
particular strategy adopted will succeed. A decision to engage in a derivative
transaction will reflect Oak Ridge's judgment that the derivative transaction
will provide value to the Fund and its shareholders and is consistent with the
Fund's objectives, investment limitations, and operating policies. In making
such a judgment, Oak Ridge will analyze the benefits and risks of the
derivative transaction and weigh them in the context of the Fund's entire
portfolio and investment objective.
(2) CREDIT RISK. The Fund will be subject to the risk that a loss may be
sustained as a result of the failure of a counterparty to comply with the terms
of a derivative instrument. The counterparty risk for exchange-traded
derivative instruments is generally less than for privately-negotiated or OTC
derivative instruments, since generally a clearing agency, which is the issuer
or counterparty to each exchange-traded instrument, provides a guarantee of
performance. For privately-negotiated instruments, there is no similar
clearing agency guarantee. In all transactions, the Fund will bear the risk
that the counterparty will default, and this could result in a loss of the
expected benefit of the derivative transaction and possibly other losses to the
Fund. The Fund will enter into transactions in derivative instruments only
with counterparties that Oak Ridge reasonably believes are capable of
performing under the contract.
(3) CORRELATION RISK. When a derivative transaction is used to completely
hedge another position, changes in the market value of the combined position
(the derivative instrument plus the position being hedged) result
8
<PAGE> 33
from an imperfect correlation between the price movements of the two
instruments. With a perfect hedge, the value of the combined position remains
unchanged for any change in the price of the underlying asset. With an
imperfect hedge, the value of the derivative instrument and its hedge are not
perfectly correlated. Correlation risk is the risk that there might be
imperfect correlation, or even no correlation, between price movements of an
instrument and price movements of investments being hedged. For example, if
the value of a derivative instrument used in a short hedge (such as writing a
call option, buying a put option, or selling a futures contract) increased by
less than the decline in value of the hedged investments, the hedge would not
be perfectly correlated. Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such as speculative or
other pressures on the markets in which these instruments are traded. The
effectiveness of hedges using instruments on indices will depend, in part, on
the degree of correlation between price movements in the index and price
movements in the investments being hedged.
(4) LIQUIDITY RISK. Derivatives are also subject to liquidity risk.
Liquidity risk is the risk that a derivative instrument cannot be sold, closed
out, or replaced quickly at or very close to its fundamental value. Generally,
exchange contracts are very liquid because the exchange clearinghouse is the
counterparty of every contract. OTC transactions are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction. The Fund might be required by applicable
regulatory requirements to maintain assets as "cover," maintain segregated
accounts, and/or make margin payments when it takes positions in derivative
instruments involving obligations to third parties (i.e., instruments other
than purchased options). If the Fund is unable to close out its positions in
such instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired, matured, or is
closed out. The requirements might impair the Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to sell or close out a position in an
instrument prior to expiration or maturity depends on the existence of a liquid
secondary market or, in the absence of such a market, the ability and
willingness of the counterparty to enter into a transaction closing out the
position. Therefore, there is no assurance that any derivatives position can
be sold or closed out at a time and price that is favorable to the Fund.
(5) LEGAL RISK. Legal risk is the risk of loss caused by the legal
unenforceability of a party's obligations under the derivative. While a party
seeking price certainty agrees to surrender the potential upside in exchange
for downside protection, the party taking the risk is looking for a positive
payoff. Despite this voluntary assumption of risk, a counterparty that has
lost money in a derivative transaction may try to avoid payment by exploiting
various legal uncertainties about certain derivative products.
(6) SYSTEMIC OR "INTERCONNECTION" RISK. Interconnection risk is the risk
that a disruption in the financial markets will cause difficulties for all
market participants. In other words, a disruption in one market will spill
over into other markets, perhaps creating a chain reaction. Much of the OTC
derivatives market takes place among the OTC dealers themselves, thus creating
a large interconnected web of financial obligations. This interconnectedness
raises the possibility that a default by one large dealer could create losses
for other dealers and destabilize the entire market for OTC derivative
instruments.
GENERAL LIMITATIONS. The use of derivative instruments is subject to
applicable regulations of the Securities and Exchange Commission (the "SEC"),
the several options and futures exchanges upon which they may be traded, the
Commodity Futures Trading Commission ("CFTC"), and various state regulatory
authorities.
The Corporation has filed a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the CFTC and the National
Futures Association, which regulate trading in the futures markets. In
accordance with Rule 4.5 of the regulations under the Commodities Exchange Act
(the "CEA"), the notice of eligibility for the Fund includes representations
that the Fund will use futures contracts and related options solely for bona
fide hedging purposes within the meaning of CFTC regulations, provided that the
Fund may hold other positions in futures contracts and related options that do
not qualify as a bona fide hedging position if the aggregate initial margin
deposits and premiums required to establish these positions, less the amount by
which any such futures
9
<PAGE> 34
contracts and related options positions are "in the money," do not exceed 5% of
the Fund's net assets. Adherence to these guidelines does not, however, limit
the Fund's risk to 5% of the Fund's assets.
The SEC has identified certain trading practices involving derivative
instruments that involve the potential for leveraging the Fund's assets in a
manner that raises issues under the Investment Company Act of 1940, as amended
(the "1940 Act"). In order to limit the potential for the leveraging of the
Fund's assets, as defined under the 1940 Act, the SEC has stated that the Fund
may use coverage or the segregation of the Fund's assets. The Fund will also
set aside permissible liquid assets in a segregated custodial account if
required to do so by SEC and CFTC regulations. Assets used as cover or held in
a segregated account cannot be sold while the derivative position is open,
unless they are replaced with similar assets. As a result, the commitment of a
large portion of the Fund's assets to segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
In some cases the Fund may be required to maintain or limit exposure to a
specified percentage of its assets to a particular asset class. In such cases,
when the Fund uses a derivative instrument to increase or decrease exposure to
an asset class and is required by applicable SEC guidelines to set aside liquid
assets in a segregated account to secure its obligations under the derivative
instruments, Oak Ridge may, where reasonable in light of the circumstances,
measure compliance with the applicable percentage by reference to the nature of
the economic exposure created through the use of the derivative instrument and
not by reference to the nature of the exposure arising from the assets set
aside in the segregated account (unless another interpretation is specified by
applicable regulatory requirements).
OPTIONS. The Fund may use options for any lawful purpose consistent with
the Fund's investment objective such as hedging or managing risk but not for
speculation. An option is a contract in which the "holder" (the buyer) pays a
certain amount (the "premium") to the "writer" (the seller) to obtain the
right, but not the obligation, to buy from the writer (in a "call") or sell to
the writer (in a "put") a specific asset at an agreed upon price (the "strike
price" or "exercise price") at or before a certain time (the "expiration
date"). The holder pays the premium at inception and has no further financial
obligation. The holder of an option will benefit from favorable movements in
the price of the underlying asset but is not exposed to corresponding losses
due to adverse movements in the value of the underlying asset. The writer of
an option will receive fees or premiums but is exposed to losses due to changes
in the value of the underlying asset. The Fund may purchase (buy) or write
(sell) put and call options on assets, such as securities, currencies,
commodities, and indices of debt and equity securities ("underlying assets")
and enter into closing transactions with respect to such options to terminate
an existing position. Options used by the Fund may include European, American,
and Bermuda style options. If an option is exercisable only at maturity, it is
a "European" option; if it is also exercisable prior to maturity, it is an
"American" option. If it is exercisable only at certain times, it is a
"Bermuda" option.
The Fund may purchase (buy) and write (sell) put and call options and
enter into closing transactions with respect to such options to terminate an
existing position. The purchase of call options serves as a long hedge, and
the purchase of put options serves as a short hedge. Writing put or call
options can enable the Fund to enhance income by reason of the premiums paid by
the purchaser of such options. Writing call options serves as a limited short
hedge because declines in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the
security appreciates to a price higher than the exercise price of the call
option, it can be expected that the option will be exercised and the Fund will
be obligated to sell the security at less than its market value or will be
obligated to purchase the security at a price greater than that at which the
security must be sold under the option. All or a portion of any assets used as
cover for OTC options written by the Fund would be considered illiquid to the
extent described under "INVESTMENT POLICIES AND TECHNIQUES A Illiquid
Securities." Writing put options serves as a limited long hedge because
increases in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the security
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be
obligated to purchase the security at more than its market value.
10
<PAGE> 35
The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions.
The Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, the Fund may terminate
its obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a
closing sale transaction. Closing transactions permit the Fund to realize the
profit or limit the loss on an option position prior to its exercise or
expiration.
The Fund may purchase or write both exchange-traded and OTC options.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed that, in effect, guarantees
completion of every exchange-traded option transaction. In contrast, OTC
options are contracts between the Fund and the other party to the transaction
("counter party") (usually a securities dealer or a bank) with no clearing
organization guarantee. Thus, when the Fund purchases or writes an OTC option,
it relies on the counter party to make or take delivery of the underlying
investment upon exercise of the option. Failure by the counter party to do so
would result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund intends to
purchase or write only those exchange-traded options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counter party, or by a
transaction in the secondary market if any such market exists. Although the
Fund will enter into OTC options only with counter parties that are expected to
be capable of entering into closing transactions with the Fund, there is no
assurance that the Fund will in fact be able to close out an OTC option at a
favorable price prior to expiration. In the event of insolvency of the counter
party, the Fund might be unable to close out an OTC option position at any time
prior to its expiration. If the Fund were unable to effect a closing
transaction for an option it had purchased, it would have to exercise the
option to realize any profit.
The Fund may engage in options transactions on indices in much the same
manner as the options on securities discussed above, except the index options
may serve as a hedge against overall fluctuations in the securities market in
general.
The writing and purchasing of options is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. Imperfect correlation between
the options and securities markets may detract from the effectiveness of
attempted hedging.
SPREAD TRANSACTIONS. The Fund may use spread transactions for any lawful
purpose consistent with the Fund's investment objective such as hedging or
managing risk, but not for speculation. The Fund may purchase covered spread
options from securities dealers. Such covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives the
Fund the right to put, or sell, a security that it owns at a fixed dollar
spread or fixed yield spread in relationship to another security that the Fund
does not own, but which is used as a benchmark. The risk to the Fund in
purchasing covered spread options is the cost of the premium paid for the
spread option and any transaction costs. In addition, there is no assurance
that closing transactions will be available. The purchase of spread options
will be used to protect the Fund against adverse changes in prevailing credit
quality spreads, i.e., the yield spread between high quality and lower quality
securities. Such protection is only provided during the life of the spread
option.
FUTURES CONTRACTS. The Fund may use futures contracts for any lawful
purpose consistent with the Fund's investment objective such as hedging and
managing risk but not for speculation. The Fund may enter into futures
contracts, including interest rate, index, and currency futures. The Fund may
also purchase put and call options, and
11
<PAGE> 36
write covered put and call options, on futures in which it is allowed to
invest. The purchase of futures or call options thereon can serve as a long
hedge, and the sale of futures or the purchase of put options thereon can serve
as a short hedge. Writing covered call options on futures contracts can serve
as a limited short hedge, and writing covered put options on futures contracts
can serve as a limited long hedge, using a strategy similar to that used for
writing covered options in securities. The Fund's hedging may include
purchases of futures as an offset against the effect of expected increases in
currency exchange rates and securities prices and sales of futures as an offset
against the effect of expected declines in currency exchange rates and
securities prices. The Fund may also write put options on futures contracts
while at the same time purchasing call options on the same futures contracts in
order to create synthetically a long futures contract position. Such options
would have the same strike prices and expiration dates. The Funds will engage
in this strategy only when Oak Ridge believes it is more advantageous to the
Fund than is purchasing the futures contract.
To the extent required by regulatory authorities, the Fund may enter into
futures contracts that are traded on national futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading are regulated under the CEA by the CFTC. Although
techniques other than sales and purchases of futures contracts could be used to
reduce the Fund's exposure to market, currency, or interest rate fluctuations,
the Fund may be able to hedge its exposure more effectively and perhaps at a
lower cost through using futures contracts.
An interest rate futures contract provides for the future sale by one
party and purchase by another party of a specified amount of a specific
financial instrument (e.g., debt security) or currency for a specified price at
a designated date, time, and place. An index futures contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index futures
contract was originally written. Transaction costs are incurred when a futures
contract is bought or sold and margin deposits must be maintained. A futures
contract may be satisfied by delivery or purchase, as the case may be, of the
instrument or the currency or by payment of the change in the cash value of the
index. More commonly, futures contracts are closed out prior to delivery by
entering into an offsetting transaction in a matching futures contract.
Although the value of an index might be a function of the value of certain
specified securities, no physical delivery of those securities is made. If the
offsetting purchase price is less than the original sale price, the Fund
realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction
costs must also be included in these calculations. There can be no assurance,
however, that the Fund will be able to enter into an offsetting transaction
with respect to a particular futures contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will
continue to be required to maintain the margin deposits on the futures
contract.
No price is paid by the Fund upon entering into a futures contract.
Instead, at the inception of a futures contract, the Fund is required to
deposit in a segregated account with its custodian, in the name of the futures
broker through whom the transaction was effected, "initial margin," consisting
of cash, U.S. government securities or other liquid, high-grade debt
obligations, in an amount generally equal to 10% or less of the contract value.
Margin must also be deposited when writing a call or put option on a futures
contract, in accordance with applicable exchange rules. Unlike margin in
securities transaction, initial margin on futures contracts does not represent
a borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction if
all contractual obligations have been satisfied. Under certain circumstances,
such as periods of high volatility, the Fund may be required by an exchange to
increase the level of its initial margin payment, and initial margin
requirements might be increased generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking to market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call or put option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Fund has insufficient cash to meet daily
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<PAGE> 37
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous. Purchasers and sellers of futures positions
and options on futures can enter into offsetting closing transactions by
selling or purchasing, respectively, an instrument identical to the instrument
held or written. Positions in futures and options on futures may be closed
only on an exchange or board of trade that provides a secondary market. The
Fund intends to enter into futures transactions only on exchanges or boards of
trade where there appears to be a liquid secondary market. However, there can
be no assurance that such a market will exist for a particular contract at a
particular time.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a future or option on a futures contract can
vary from the previous day's settlement price; once that limit is reached, no
trades may be made that day at a price beyond the limit. Daily price limits do
not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or option on a futures
contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue to
be required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
certain liquid securities in a segregated account.
Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or options on futures contracts
might not correlate perfectly with movements in the prices of the investments
being hedged. For example, all participants in the futures and options on
futures contracts markets are subject to daily variation margin calls and might
be compelled to liquidate futures or options on futures contracts positions
whose prices are moving unfavorably to avoid being subject to further calls.
These liquidations could increase the price volatility of the instruments and
distort the normal price relationship between the futures or options and the
investments being hedged. Also, because initial margin deposit requirements in
the futures markets are less onerous than margin requirements in the securities
markets, there might be increased participation by speculators in the future
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
might result in temporary price distortions.
WARRANTS
The Fund may invest in warrants, valued at the lower of cost or market,
if, after giving effect thereto, not more than 5% of its net assets will be
invested in warrants other than warrants acquired in units or attached to other
securities. Warrants are options to purchase equity securities at a specific
price for a specific period of time. They do not represent ownership of the
securities but only the right to buy them. Investing in warrants is purely
speculative in that they have no voting rights, pay no dividends, and have no
rights with respect to the assets of the corporation issuing them. In
addition, the value of the warrant does not necessarily change with the value
of the underlying securities, and a warrant ceases to have value if it is not
exercised prior to its expiration date.
WHEN-ISSUED SECURITIES
The Fund may from time to time purchase securities on a "when-issued"
basis up to 5% of its net assets. The price of securities purchased on a
when-issued basis is fixed at the time the commitment to purchase is made, with
delivery and payment for the securities occurring at a later date. Normally,
the settlement date occurs within 45 days of the purchase. During the period
between the purchase and settlement, no payment is made by the Fund to the
issuer, and no interest is accrued on debt securities or dividend income is
earned on equity securities. Forward commitments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the Fund's other
assets. While when-issued securities may be sold prior to the settlement date,
the Fund intends to purchase such securities with the purpose of actually
13
<PAGE> 38
acquiring them. At the time the Fund makes the commitment to purchase a
security on a when-issued basis, it will record the transaction and reflect the
value of the security in determining its net asset value.
The Fund will maintain liquid securities equal in value to commitments for
when-issued securities. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date. When the time comes to
pay for when-issued securities, the Fund will meet its obligations from then
available cash flow, sale of the securities held in the separate account,
described above, sale of other securities or, although it would not normally
expect to do so, from the sale of the when-issued securities themselves (which
may have a market value greater or less than the Fund's payment obligation).
REPURCHASE OBLIGATIONS
The Fund may enter into repurchase agreements with respect to no more than
5% of its net assets with certain banks and certain non-bank dealers. In a
repurchase agreement, the Fund buys a security at one price and, at the time of
the sale, the seller agrees to repurchase the obligation at a mutually agreed
upon time and price (usually within seven days). The repurchase agreement,
thereby, determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Oak Ridge will monitor, on an ongoing basis, the value of the
underlying securities to ensure that the value always equals or exceeds the
repurchase price plus accrued interest. Repurchase agreements could involve
certain risks in the event of a default or insolvency of the other party to the
agreement, including possible delays or restrictions upon the Fund's ability to
dispose of the underlying securities. Although no definitive creditworthiness
criteria are used, Oak Ridge reviews the creditworthiness of the banks and
non-bank dealers with which the Fund enters into repurchase agreements to
evaluate those risks.
UNSEASONED COMPANIES
The Fund may invest not more than 5% of its net assets in unseasoned
companies, which are companies with less than three years of continuous
operation. While smaller companies generally have potential for rapid growth,
they often involve higher risks because they lack the management experience,
financial resources, product diversification, and competitive strengths of
larger corporations. In addition, in many instances, the securities of smaller
companies are traded only over-the-counter or on regional securities exchanges,
and the frequency and volume of their trading is substantially less than is
typical of larger companies. Therefore, the securities of smaller companies
may be subject to wider price fluctuations. When making large sales, the Fund
may have to sell portfolio holdings of these companies at discounts from quoted
prices or may have to make a series of smaller sales over an extended period of
time due to the trading volume in smaller company securities.
DIRECTORS AND OFFICERS OF THE CORPORATION
Directors and officers of the Corporation, together with information as to
their principal business occupations during at least the last five years, and
other information, are shown below. Each director who is deemed an "interested
person," as defined in the Investment Company Act of 1940 ("Investment Company
Act"), is indicated by an asterisk.
*David M. Klaskin, President and a Director of the Corporation (DOB __________).
Mr. Klaskin has been the President and Chief Investment Officer of Oak
Ridge since its founding in 1989. For the eight years prior to founding
Oak Ridge, Mr. Klaskin was a financial consultant with Shearson/Lehman
Bros. responsible for managing funds for both individual and
institutional clients. Mr. Klaskin graduated from Indiana University
with a B.S. in Finance.
14
<PAGE> 39
*Samuel Wegbreit, Chairman of the Board, Treasurer, Assistant Secretary and a
Director of the Corporation (DOB ____________).
Mr. Wegbreit has been the Chairman of Oak Ridge since its founding in
September, 1989. From April 1988 until founding Oak Ridge, Mr. Wegbreit
was a securities trader. From 1983 to 1988 Mr. Wegbreit was a securities
trader and Vice-President with Morgan Stanley & Co. Mr. Wegbreit
graduated from Brown University with a B.S. in Applied Mathematics.
Daniel A. Kaplan, a Director of the Corporation (DOB ____________).
Mr. Kaplan is a certified public accountant and the Chief Financial
Officer of Loft Development Corporation. Mr. Kaplan has been employed by
Loft Development Corporation since 1986.
Mark C. Pappas, Secretary of the Corporation (DOB ____________).
Mr. Pappas joined Oak Ridge as Senior Vice President in 1993. From 1992
until 1993, Mr. Pappas was the Senior Portfolio Analyst for the General
Board of Pensions of the United Methodist Church. From 1990-1992, Mr.
Pappas was a Consultant with Oak Ridge. From 1986-1991, Mr. Pappas
attended Purdue University where he received his B.S. in
Economics/Finance.
A. Charlene Sullivan, Ph.D., a Director of the Corporation (DOB ____________).
Dr. Sullivan has been an Associate Professor of Finance at Purdue
University since 1978. In addition, Dr. Sullivan has been a member of
the board of directors of the Federal Reserve Bank in Chicago since 1990.
Martin Z. Craig, a Director of the Corporation (DOB ____________).
Mr. Craig has been the principal of Craig Capital Investments since
January, 1991. From 1988 through 1990 Mr. Craig was the Executive Vice
President and a Director of HHL Financial Services, Inc.
Except for Mr. Kaplan, Dr. Sullivan and Mr. Craig, the address of all of
the above persons is Oak Ridge Investments, Inc., 233 N. Michigan Ave., Suite
1807, Chicago, Illinois 60601. Mr. Kaplan's address is 641 W. Lake Street,
Chicago, Illinois 60661; Dr. Sullivan's address is Purdue University, Krannert
Center, #217, West Lafayette, Indiana 47907; and Mr. Craig's address is 854
Bluff Street, Glencoe, Illinois 60022.
As of November 30, 1996, officers and directors of the Corporation
beneficially owned ______ shares of common stock of the Fund's Class A shares,
which was ____% of the Fund's then outstanding shares. Directors and officers
of the Corporation who are officers, directors, employees, or shareholders of
Oak Ridge do not receive any remuneration from the Corporation or the Fund for
serving as directors or officers.
15
<PAGE> 40
The following table provides information relating to compensation paid to
directors of the Corporation for their services as such for the fiscal year
ended November 30, 1996:
<TABLE>
<CAPTION>
Name Cash Compensation(1) Other Compensation Total
- ---- -------------------- ------------------ ------
<S> <C> <C> <C>
David M. Klaskin $0 $0 $0
Samuel Wegbreit $0 $0 $0
Daniel A. Kaplan $_____ $0 $_____
A. Charlene Sullivan $_____ $0 $_____
Martin Z. Craig $_____ $0 $_____
------ -- -----
All directors as a
group (5 persons) $ $0 $
====== == ======
</TABLE>
(1) Each director who is not deemed an "interested person," as defined in the
Investment Company Act, receives $250 for each board of directors meeting
attended by such person. The board held __ meetings during fiscal 1996.
PRINCIPAL SHAREHOLDERS
As of November 30, 1996, the following persons owned of record or are
known by the Corporation to own of record or beneficially 5% or more of the
Fund's outstanding shares:
<TABLE>
<S> <C> <C> <C>
Name and Address Class of Shares Number of Shares Percentage
- ---------------- --------------- ---------------- ----------
__ _______ ____%
</TABLE>
As of November 30, 1996 [no person] owned a controlling interest in the
Fund.
INVESTMENT ADVISOR AND UNDERWRITER
Oak Ridge is the investment advisor to the Fund. Mr. Klaskin is the
President, Treasurer and a director of Oak Ridge. Mr. Wegbreit is the
Chairman, Secretary and a director of Oak Ridge. Mr. Pappas is the Senior Vice
President of Oak Ridge. Neither Mr. Klaskin nor Mr. Wegbreit own more than 50%
of Oak Ridge, but each such person owns shares representing more than 35% of
Oak Ridge. A brief description of the Fund's investment advisory agreement is
set forth in the Prospectus under "MANAGEMENT."
The Fund's Advisory Agreement is dated March 1, 1997 (the "Advisory
Agreement"). The Advisory Agreement has an initial term of two years and
thereafter is required to be approved annually by the Board of Directors of the
Corporation or by vote of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). Each annual renewal must also be
approved by the vote of a majority of the Corporation's directors who are not
parties to the Advisory Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement was approved by the directors, including a majority of the
disinterested directors, on January 9, 1997, and by the shareholders of the
Fund on February 26, 1997. The Advisory Agreement is terminable without
penalty, on 60 days' written notice by the Board of Directors
16
<PAGE> 41
of the Corporation, by vote of a majority of the Corporation's outstanding
voting securities, or by Oak Ridge, and will terminate automatically in the
event of its assignment.
Under the terms of the Advisory Agreement, Oak Ridge manages the Fund's
investments subject to the supervision of the Corporation's Board of Directors.
Oak Ridge is responsible for investment decisions and supplies investment
research and portfolio management. At its expense, Oak Ridge provides office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Fund.
As compensation for its services, the Corporation, on behalf of the Fund,
pays to Oak Ridge a monthly advisory fee at the annual rate of 1.00% of the
average daily net assets of the Fund. See "DETERMINATION OF NET ASSET VALUE"
in the Prospectus. From time to time, Oak Ridge may voluntarily waive all or a
portion of its management fee or absorb expenses for one or both classes of
shares of the Fund. For the periods ended November 30, 1994, 1995 and 1996,
the Fund did not pay an advisory fee to Oak Ridge because Oak Ridge waived its
entire advisory fee. If Oak Ridge had not agreed to waive the advisory fee,
Oak Ridge would have received $15,506, $33,642, and $________ in 1994, 1995 and
1996, respectively. The organizational expenses of the Fund were advanced by
Oak Ridge and will be reimbursed by the Fund over a period of not more than 60
months. The organizational expenses for the Fund were approximately $44,002.
Under a Distribution Agreement dated January 3, 1994 (the "Distribution
Agreement"), Oak Ridge also acts as underwriter of the Fund's shares. The
Distribution Agreement provides that Oak Ridge will use its best efforts to
distribute the Fund's shares. The Fund's Class A shares are offered for sale
by the Fund continuously at net asset value per share plus a maximum initial
sales charge of 4.25% of the offering price. The Fund's Class C shares are
offered continuously at net asset value. Existing shareholders of the Fund's
Class A shares as of December 31, 1995 are not subject to the sales charge on
additional purchases of Fund shares. In addition, no sales charge is imposed
on the reinvestment of dividends or capital gains. Certain other exceptions to
the imposition of the sales charge apply, as discussed more fully in the
Prospectus under the caption "HOW TO PURCHASE SHARES -- Purchases at Net Asset
Value -- Class A and Class C Shares." These exceptions are made available
because minimal or no sales effort is required with respect to the categories
of investors so excepted. Pursuant to the terms of the Distribution Agreement,
Oak Ridge bears the costs of printing prospectuses and shareholder reports
which are used for selling purposes, as well as advertising and any other costs
attributable to the distribution of Fund shares. [For the periods ended
November 30, 1994, 1995 and 1996, Oak Ridge did not receive any compensation
for its services as underwriter.]
The Distribution Agreement is subject to the same termination and renewal
provisions as are described above with respect to the Advisory Agreement,
except that the Distribution Agreement need not be approved by the Fund's
shareholders.
DISTRIBUTION PLANS
DESCRIPTION OF PLANS
The Fund has adopted a plan of distribution for each class of shares (the
"Class A Plan" and the "Class C Plan") pursuant to Rule 12b-1 under the 1940
Act, which requires it to pay Oak Ridge, in its capacity as the principal
underwriter of Fund shares, certain distribution and/or service fees. Under
the Class A Plan, the Fund is required to pay Oak Ridge a distribution fee for
the promotion and distribution of the Class A shares of up to 0.25% per annum
of the average daily net assets of the Fund attributable to the Class A shares.
The Class C Plan requires the Fund to pay Oak Ridge (i) a distribution fee of
up to 0.75% per annum of the average daily net assets of the Fund attributable
to the Class C shares, and (ii) a service fee for personal services provided
to shareholders and/or the maintenance of shareholder accounts of up to 0.25%
per annum of the average daily net assets of the Fund attributable to the Class
C shares. Under both plans, Oak Ridge is authorized to, in turn, pay all or a
portion of the fee it receives from the Fund to any securities dealer,
financial institution or any other person (the "Recipient") who renders
assistance in distributing or promoting the sale of Fund shares or, with
respect to the Class C shares only, who provide certain shareholder services to
the holders of such class of shares, pursuant to a written agreement (the "Rule
12b-1 Related
17
<PAGE> 42
Agreement"). To the extent such fee is not paid to such persons, Oak Ridge may
use the fee for its own distribution expenses incurred in connection with the
sale of the Fund's shares and, with respect to the Class C shares only, for any
of its shareholder servicing expenses incurred in connection with servicing the
holders of such class of shares, although it is Oak Ridge's current intention
to pay out all or most of the fee under both plans. A form of the 12b-1
Related Agreement referred to above has been approved by a majority of the
Board of Directors, and of the members of the Board who are not "interested
persons" of the Fund as defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of the plans or any related
agreements (the "Disinterested Directors") voting separately. Accordingly, Oak
Ridge may enter into 12b-1 Related Agreements with securities dealers,
financial institutions or other persons without further Board approval.
Payment of the distribution and/or service fee is to be made quarterly,
within 30 days after the close of the quarter for which the fee is payable,
upon Oak Ridge forwarding to the Board of Directors a written report of all
amounts expensed pursuant to the applicable plan; provided, however, that the
aggregate payments by the Fund under the Class A Plan to Oak Ridge and all
Recipients may not exceed 0.25% (on an annualized basis) of the Fund's average
net assets attributable to the Class A shares for that quarter, and the
aggregate payments by the Fund under the Class C Plan to Oak Ridge and all
Recipients may not exceed 1.00% (on an annualized basis) of the Fund's average
net assets attributable to the Class C shares for that quarter; and provided
further that no fee may be paid in excess of the expenses as set forth in the
quarterly written report. Thus, neither the Class A Plan nor the Class C Plan
provide for the payment of distribution and/or service fees in subsequent
periods that relate to expenses incurred in prior periods.
Each plan, and any Rule 12b-1 Related Agreement which is entered into,
will continue in effect for a period of more than one year only so long as its
continuance is specifically approved at least annually by a vote of a majority
of the Fund's Board of Directors, and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on the plan, or the Rule
12b-1 Related Agreement, as applicable. In addition, both plans, and any Rule
12b-1 Related Agreement, may be terminated at any time, without penalty, by
vote of a majority of the outstanding voting securities of the applicable class
of shares to which the plan relates, or by vote of a majority of Disinterested
Directors (on not more than sixty (60) days' written notice in the case of the
Rule 12b-1 Related Agreement only).
AMOUNTS EXPENSED UNDER THE PLANS
For the year ended November 30, 1996, the Fund paid $________ to Oak Ridge
and all Recipients under the Class A Plan. Of this amount, $______ was spent
on advertising, $______ was spent on printing and mailing prospectuses to other
than current shareholders, $______ was retained by Oak Ridge (therefore,
$______ was paid to Recipients) and $______ was spent on interest or other
financing charges. Since the Class C Plan did not become effective until
March 1, 1997, no amounts were paid by the Fund under the Class C Plan for the
year ended November 30, 1996.
INTERESTS OF CERTAIN PERSONS
With the exception of Oak Ridge, in its capacity as investment advisor and
principal underwriter of Fund shares, no "interested person" of the Fund, as
defined in the 1940 Act, and no director of the Fund who is not an "interested
person" has or had a direct or indirect financial interest in either the Class
A or the Class C Plan or any Rule 12b-1 Related Agreement.
BENEFITS TO THE FUND
CLASS A PLAN. The Class A Plan has been in effect since January 1, 1996.
The benefits to the Fund resulting from the implementation of the Class A Plan
include the following: ________________________________.
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<PAGE> 43
CLASS C PLAN. The Board of Directors of the Corporation has determined,
in the exercise of its business judgment, that the Class C Plan, which became
effective March 1, 1997, is reasonably likely to benefit the Fund and the Class
C shareholders in at least one or more ways.
Specifically, the Board has concluded that Oak Ridge and any Recipients
operating under Rule 12b-1 Related Agreements would have little or no incentive
to incur promotional expenses on behalf of the Class C shares if a Rule 12b-1
Plan were not in place to reimburse them, thus making the adoption of the Class
C Plan important to the viability of the Class C shares. In addition, the
Board determined that the payment of service fees to these persons should
motivate them to provide an enhanced level of personal services to holders of
the Class C shares, which would, of course, benefit such shareholders.
Finally, the adoption of the Class C Plan would likely lead to an increase in
net assets under management, given the enhanced marketing efforts on the part
of Oak Ridge and Recipients to sell Class C shares. While the Board of
Directors recognized that Oak Ridge, in its capacity as the Fund's investment
advisor, would benefit from such an increase since its fees are based upon a
percentage of net assets of the Fund's Class C shares, the increase in net
assets would also benefit both the Fund and the Class C shareholders by
reducing the per share operating expenses of the Fund which would result since
the Fund's fixed expenses would be spread over a larger asset base.
While there is no assurance that the expenditure of Fund assets to finance
the distribution of the Class C shares will have the anticipated results, the
Board of Directors believes there is a reasonable likelihood that one or more
of such benefits will result, and since the Board will be in a position to
monitor the distribution expenses of the Fund, it will be able to evaluate the
benefit of such expenditures in deciding whether to continue the Class C Plan.
PORTFOLIO TRANSACTIONS AND BROKERAGE
As investment advisor to the Fund, Oak Ridge is responsible for decisions
to buy and sell securities for the Fund and for the placement of the Fund's
portfolio business, the negotiation of the commissions to be paid on such
transactions and the allocation of portfolio brokerage and principal business.
It is the policy of Oak Ridge to seek the best execution at the best security
price available with respect to each transaction, in light of the overall
quality of brokerage and research services provided to Oak Ridge or the Fund.
The best price to the Fund means the best net price without regard to the mix
between purchase or sale price and commission, if any. Purchases may be made
from underwriters, dealers, and, on occasion, the issuers. Commissions will be
paid on the Fund's futures and options transactions, if any. The purchase
price of portfolio securities purchased from an underwriter or dealer may
include underwriting commissions and dealer spreads. The Fund may pay mark-ups
on principal transactions. In selecting broker-dealers and in negotiating
commissions, Oak Ridge considers the firm's reliability, the quality of its
execution services on a continuing basis and its financial condition.
Brokerage will not be allocated based on the sale of the Fund's shares. As
noted in the Prospectus under the caption "PORTFOLIO TRANSACTIONS," pursuant to
guidelines adopted by the Corporation's Board of Directors and in accordance
with the Rules of the SEC, Oak Ridge may serve as a broker to the Fund;
however, in order for Oak Ridge to effect any portfolio transactions for the
Fund on an exchange, the commissions, fees or other remuneration received by
Oak Ridge must be reasonable and fair compared to the commissions, fees or
other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on any
exchange during a comparable period of time. This standard allows Oak Ridge to
receive no more than the remuneration which would be expected to be received by
an unaffiliated broker in a commensurate arm's-length transaction.
The aggregate amount of brokerage commissions paid by the Fund for the
periods ended November 30, 1994, 1995 and 1996 was $2,409, $4,635 and
$________, respectively. Of these total brokerage commissions, Oak Ridge
received $1,678, $2,058 and $________ in 1994, 1995 and 1996, respectively.
Accordingly, for the period ended November 30, 1996, ____% of the aggregate
brokerage commissions paid by the Fund were paid to Oak Ridge, and ____% of the
aggregate dollar amount of Fund transactions involving the payment of
commissions were effected through Oak Ridge.
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<PAGE> 44
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment advisor, under certain circumstances, to cause an account
to pay a broker or dealer who supplies brokerage and research services a
commission for effecting a transaction in excess of the amount of commission
another broker or dealer would have charged for effecting the transaction.
Brokerage and research services include (a) furnishing advice as to the value
of securities, the advisability of investing, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement, and custody).
Oak Ridge is responsible for selecting brokers in connection with
securities transactions. In selecting such brokers, Oak Ridge considers
investment and market information and other research, such as economic,
securities and performance measurement research provided by such brokers and
the quality and reliability of brokerage services, including execution
capability, performance, and financial responsibility. Accordingly, the
commissions charged by any such broker may be greater than the amount another
firm might charge if Oak Ridge determines in good faith that the amount of such
commissions is reasonable in relation to the value of the research information
and brokerage services provided by such broker to the Fund. Oak Ridge believes
that the research information received in this manner provides the Fund with
benefits by supplementing the research otherwise available to the Fund. The
Advisory Agreement provides that such higher commissions will not be paid by
the Fund unless (a) Oak Ridge determines in good faith that the amount is
reasonable in relation to the services in terms of the particular transaction
or in terms of Oak Ridge's overall responsibilities; and (b) such payment is
made in compliance with the provisions of Section 28(e) and other applicable
state and federal laws. The investment advisory fees paid by the Fund under
the Advisory Agreement are not reduced as a result of Oak Ridge's receipt of
research services. [The Fund did not pay brokerage commissions for the periods
ended November 30, 1994, 1995 and 1996 for transactions for which research
services were provided.]
Oak Ridge places portfolio transactions for other advisory accounts
managed by Oak Ridge. Research services furnished by firms through which the
Fund effects its securities transactions may be used by Oak Ridge in servicing
all of its accounts; not all of such services may be used by Oak Ridge in
connection with the Fund. Oak Ridge believes it is not possible to measure
separately the benefits from research services to each of the accounts
(including the Fund) managed by it. Because the volume and nature of the
trading activities of the accounts are not uniform, the amount of commissions
in excess of those charged by another broker paid by each account for brokerage
and research services will vary. However, Oak Ridge believes such costs to the
Fund will not be disproportionate to the benefits received by the Fund on a
continuing basis. Oak Ridge seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by the
Fund and another advisory account. In some cases, this procedure could have an
adverse effect on the price or the amount of securities available to the Fund.
In making such allocations between the Fund and other advisory accounts, the
main factors considered by Oak Ridge are the respective investment objectives,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment and the size of investment commitments
generally held.
The Fund's portfolio turnover rate for the periods ended November 30,
1994, 1995 and 1996 was 80%, 109% and ___%, respectively. The Fund anticipates
that its portfolio turnover rate may continue to exceed 50%, although such rate
is not expected to exceed 100%. The annual portfolio turnover rate indicates
changes in the Fund's portfolio; for instance, a rate of 100% would result if
all the securities in the portfolio (excluding securities whose maturities at
acquisition were one year or less) at the beginning of an annual period had
been replaced by the end of the period. The turnover rate may vary from year
to year, as well as within a year, and may be affected by portfolio sales
necessary to meet cash requirements for redemptions of the Fund's shares.
CUSTODIAN
As custodian of the Fund's assets, Firstar Trust Company ("Firstar") has
custody of all securities and cash of the Fund, delivers and receives payment
for securities sold, receives and pays for securities purchased, collects
income from investments and performs other duties, all as directed by the
officers of the Corporation. The custodian
20
<PAGE> 45
is in no way responsible for any of the investment policies or decisions of the
Fund. The principal business address of Firstar is 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Firstar also acts as transfer agent and dividend-disbursing agent for the
Fund. Firstar is compensated based on an annual fee per open account of $14,
plus out-of-pocket expenses such as postage and printing expenses in connection
with shareholder communications. Firstar also receives an annual fee per
closed account of $14.
TAXES
As indicated under "INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAX
STATUS" in the Prospectus, it is the Corporation's intent to continue to
qualify annually as a "regulated investment company" under the Code. This
qualification does not involve government supervision of the Fund's management
practices or policies.
A dividend or capital gains distribution received shortly after the
purchase of shares reduces the net asset value of shares by the amount of the
dividend or distribution and, although in effect a return of capital, will be
subject to income taxes. Net gains on sales of securities when realized and
distributed are taxable as capital gains. If the net asset value of shares
were reduced below a shareholder's cost by distribution of gains realized on
sales of securities, such distribution would be a return of investment although
taxable as stated above.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the same caption, the net asset value
of each class of shares of the Fund will be determined as of the close of
trading on each day the New York Stock Exchange is open for trading. The Fund
does not determine net asset value on days the New York Stock Exchange is
closed and at other times described in the Prospectus. The New York Stock
Exchange is closed on New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a Saturday, the
New York Stock Exchange will not be open for trading on the preceding Friday
and when such holiday falls on a Sunday, the New York Stock Exchange will not
be open for trading on the succeeding Monday, unless unusual business
conditions exist, such as the ending of a monthly or the yearly accounting
period.
SHAREHOLDER MEETINGS
Maryland law permits registered investment companies, such as the
Corporation, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the Investment
Company Act. The Corporation has adopted the appropriate provisions in its
Bylaws and may, at its discretion, not hold an annual meeting in any year in
which the election of directors is not required to be acted on by shareholders
under the Investment Company Act.
The Corporation's Bylaws also contain procedures for the removal of
directors by shareholders. At any meeting of shareholders, duly called and at
which a quorum is present, the shareholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors to
fill any resulting vacancies for the unexpired terms of removed directors.
Upon the written request of the holders of shares entitled to not less
than ten percent (10%) of all the votes entitled to be cast at such meeting,
the Secretary of the Corporation shall promptly call a special meeting of
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<PAGE> 46
shareholders for the purpose of voting upon the question of removal of any
director. Whenever ten or more shareholders of record who have been such for
at least six months preceding the date of application, and who hold in the
aggregate either shares having a net asset value of at least $25,000 or at
least one percent (1%) of the total outstanding shares, whichever is less,
shall apply to the Corporation's Secretary in writing, stating that they wish
to communicate with other shareholders with a view to obtaining signatures to a
request for a meeting as described above and accompanied by a form of
communication and request which they wish to transmit, the Secretary shall
within five business days after such application either: (1) afford to such
applicants access to a list of the names and addresses of all shareholders as
recorded on the books of the Corporation; or (2) inform such applicants as to
the approximate number of shareholders of record and the approximate cost of
mailing to them the proposed communication and form of request.
If the Secretary elects to follow the course specified in clause (2) of
the last sentence of the preceding paragraph, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record at their addresses
as recorded on the books unless within five business days after such tender the
Secretary shall mail to such applicants and file with the SEC, together with a
copy of the material to be mailed, a written statement signed by at least a
majority of the Board of Directors to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion.
After opportunity for hearing upon the objections specified in the written
statement so filed, the SEC may, and if demanded by the Board of Directors or
by such applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the SEC shall enter an order
refusing to sustain any of such objections, or if, after the entry of an order
sustaining one or more of such objections, the SEC shall find, after notice and
opportunity for hearing, that all objections so sustained have been met, and
shall enter an order so declaring, the Secretary shall mail copies of such
material to all shareholders with reasonable promptness after the entry of such
order and the renewal of such tender.
PERFORMANCE INFORMATION
As described under the heading "PERFORMANCE" in the Fund's Prospectus, the
historical performance or return of both classes of shares of the Fund may be
shown in the form of various performance figures. The Fund may occasionally
cite statistics to reflect the volatility or risk of one or both classes of
shares. These performance figures are based upon historical results and are
not necessarily representative of future performance. Factors affecting
performance include general market conditions, operating expenses, the
imposition of sales charges and investment management. Any additional fees
charged by a dealer or other financial services firm would reduce the returns
described in this section.
TOTAL RETURN
The average annual total return of each class of shares of the Fund is
computed by finding the average annual compounded rates of return over the
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
n
P(1+T) = ERV
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
stated periods at the end of the stated periods.
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<PAGE> 47
Calculation of total return is not subject to a standardized formula.
Total return performance for a specific period is calculated by first taking an
investment (assumed to be $1,000) ("initial investment") in a class of shares
on the first day of the period and computing the "ending value" of that
investment at the end of the period. The total return percentage is then
determined by subtracting the initial investment from the ending value and
dividing the remainder by the initial investment and expressing the result as a
percentage. With respect to the Class A shares only, this calculation reflects
the deduction of the maximum initial sales charge. In addition, the
calculation assumes that all income and capital gains dividends paid by the
Fund have been reinvested at the net asset value of the applicable class of
shares on the reinvestment dates during the period. Total return may also be
shown as the increased dollar value of the hypothetical investment over the
period.
Cumulative total return represents the simple change in value of an
investment over a stated period and may be quoted as a percentage or as a
dollar amount. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in
order to illustrate the relationship between these factors and their
contributions to total return.
Performance figures for the Class A shares for the periods ended November
30, 1994, 1995 and 1996 may be found in the Fund's 1996 Annual Report, which
may be obtained free of charge by calling or writing to the Fund.
VOLATILITY
Occasionally statistics may be used to specify volatility or risk of one
or both classes of shares of the Fund. Measures of volatility or risk are
generally used to compare the net asset value or performance of a class of
shares relative to a market index. One measure of volatility is beta. Beta is
the volatility of a fund relative to the total market as represented by the
Standard & Poor's 500 Stock Index. A beta of more than 1.00 indicates
volatility greater than the market, and a beta of less than 1.00 indicates
volatility less than the market. Another measure of volatility or risk is
standard deviation. Standard deviation is used to measure variability of net
asset value or total return around an average, over a specified period of time.
The premise is that greater volatility connotes greater risk undertaken in
achieving performance.
COMPARISONS
The Fund may compare the performance of one or both classes of shares to
that of United States treasury bills, notes or bonds. Treasury obligations are
issued in selected denominations. Rates of treasury obligations are fixed at
the time of issuance and payment of principal and interest is backed by the
full faith and credit of the United States Treasury. The market value of such
instruments will generally fluctuate inversely with interest rates prior to
maturity and will equal par value at maturity. Generally, the values of
obligations with shorter maturities will fluctuate less than those with longer
maturities.
From time to time, in marketing and other fund literature, the performance
of one or both classes of shares of the Fund may be compared to the performance
of other mutual funds in general or to the performance of particular types of
mutual funds with similar investment goals, as tracked by independent
organizations. Among these organizations, Lipper Analytical Services, Inc.
("Lipper"), a widely used independent research firm which ranks mutual funds by
overall performance, investment objectives, and assets, may be cited. Lipper
performance figures are based on changes in net asset value, with all income
and capital gains dividends reinvested. Such calculations do not include the
effect of any sales charges. Each class of shares of the Fund will be compared
to Lipper's appropriate fund category, that is, by fund objective and portfolio
holdings.
The performance of the Fund's classes of shares may also be compared to
the performance of other mutual funds by Morningstar, Inc. ("Morningstar"),
which rates funds on the basis of historical risk and total return.
Morningstar's ratings range from five stars (highest) to one star (lowest) and
represent Morningstar's assessment of the historical risk level and total
return of a fund as a weighted average for 3, 5, and 10 year periods. Ratings
are not absolute or necessarily predictive of future performance.
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<PAGE> 48
Evaluations of performance of the Fund's classes of shares made by
independent sources may also be used in advertisements concerning the Fund,
including reprints of or selections from, editorials or articles about the
Fund. Sources for Fund performance and articles about the Fund may include
publications such as Money, Forbes, Kiplinger's, Financial World, Business
Week, U.S. News and World Report, the Wall Street Journal, Barron's and a
variety of investment newsletters.
The Fund may compare the performance of one or both classes of shares to a
wide variety of indices and measures of inflation including the Russell 2000
Stock Index. There are differences and similarities between the investments
that the Fund may purchase and the investments measured by these indices.
Investors may want to compare the performance of one or both classes of
shares of the Fund to that of certificates of deposit offered by banks and
other depository institutions. Certificates of deposit may offer fixed or
variable interest rates and principal is guaranteed and may be insured.
Withdrawal of the deposits prior to maturity normally will be subject to a
penalty. Rates offered by banks and other depository institutions are subject
to change at any time specified by the issuing institution.
Investors may also want to compare performance of one or both classes of
shares of the Fund to that of money market funds. Money market fund yields
will fluctuate and shares are not insured, but share values usually remain
stable.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, have been selected as the independent accountants for the Fund.
FINANCIAL STATEMENTS
The following Financial Statements of the Fund are contained herein:
(a) Schedule of Investments at November 30, 1996.(1)
(b) Statement of Assets and Liabilities at November
30, 1996.(1)
(c) Statement of Operations for the year ended
November 30, 1996.(1)
(d) Statement of Changes in Net Assets for the period
January 3, 1994 (commencement of operations) to November 30,
1994, (2) and for the years ended November 30, 1995(2) and
November 30, 1996.(1)
(e) Financial Highlights for the period January 3,
1994 (commencement of operations) to November 30, 1994, (2)
and for the years ended November 30, 1995(2) and November 30,
1996.(1)
(f) Notes to Financial Statements.(1)
(g) Report of Independent Accountants.(1)
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<PAGE> 49
In addition, the financial statements and related notes contained in the
Annual Report of the Fund for the period ended November 30, 1995, including the
auditors' report on the financial statements, and the financial statements and
related notes contained in the Fund's Semi-Annual Report for the period ended
May 31, 1996, both of which may be obtained without charge by calling or
writing to the Fund, are incorporated herein by reference.
__________________
(1) To be filed by amendment. See Explanatory Note.
(2) Incorporated by reference.
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<PAGE> 50
APPENDIX
SHORT-TERM RATINGS
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.
Ratings graded into several categories, ranging from 'A-1' for the highest
quality obligations to 'D' for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issues designated 'A-1'.
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B Issues rated 'B' are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.
D Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
STANDARD & POOR'S NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in three years or less normally
receive a note rating. Notes maturing beyond three years normally receive a
bond rating, although the following criteria are used in making such an
assessment: (i) the amortization schedule (the larger the final maturity
relative to the other maturities, the more likely the issue will be rated as a
note), and (ii) the source of payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be rated as a note).
SP-1 notes have very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics are designated as SP-1+.
SP-2 notes have satisfactory capacity to pay principal and interest.
SP-3 notes have speculative capacity to pay principal and interest.
MOODY'S COMMERCIAL PAPER RATINGS
The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act of 1933, as amended.
A-1
<PAGE> 51
Moody's commercial paper ratings are opinions on the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's makes no representation that such obligations
are exempt from registration under the Securities Act of 1933, nor does it
represent that any specific note is a valid obligation of a rated issuer or
issued in conformity with any applicable law. Moody's employs the following
three designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: (i)
leading market positions in well established industries, (ii) high rates of
return on funds employed, (iii) conservative capitalization structures with
moderate reliance on debt and ample asset protection, (iv) broad margins in
earnings coverage of fixed financial charges and high internal cash generation,
and (v) well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
MOODY'S NOTE RATINGS
MIG-1 notes are the best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated broad-based
access to the market for refinancing.
MIG-2 notes are high quality. Margins of protection are ample although
not so large as in the preceding group.
MIG-3 notes are favorable quality. All security elements are accounted
for but there is lacking the undeniable strength of the preceding grades.
Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG-4 notes are adequate quality. Protection commonly regarded as
required of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
S.G. notes are speculative quality. Debt instruments in this category
lack margins of protection.
FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
A-2
<PAGE> 52
F-1+ EXCEPTIONALLY STRONG CREDIT QUALITY Issues assigned this rating are
regarded as having the strongest degree of assurance for timely
payment.
F-1 VERY STRONG CREDIT QUALITY Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated "F-1+".
F-2 GOOD CREDIT QUALITY Issues assigned this rating have a satisfactory
degree of assurance for timely payment but the margin of safety
is not as great as for issues assigned "F-1+" and "F-1" ratings.
F-3 FAIR CREDIT QUALITY Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
F-S WEAK CREDIT QUALITY Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
D DEFAULT Issues assigned this rating are in actual or imminent
payment default.
LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
DUFF & PHELPS, INC. SHORT-TERM RATINGS
Duff & Phelps' short-term ratings are consistent with the rating criteria
used by money market participants. The ratings apply to all obligations with
maturities of under one year, including commercial paper, the uninsured portion
of certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit Ratings' short-term
ratings is the refinement of the traditional '1' category. The majority of
short-term debt issuers carry the highest rating, yet quality differences exist
within that tier. As a consequence, Duff & Phelps Credit Rating has
incorporated gradations of '1+' (one plus) and '1-' (one minus) to assist
investors in recognizing those differences.
These ratings are recognized by the SEC for broker-dealer requirements,
specifically capital computation guidelines. These ratings meet Department of
Labor ERISA guidelines governing pension and profit sharing investments. State
regulators also recognize the ratings of Duff & Phelps Credit Rating for
insurance company investment portfolios.
Rating Scale: Definition
High Grade
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
A-3
<PAGE> 53
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
Good Grade
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets
is good. Risk factors are small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection factors qualify issue
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
Non-investment Grade
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
Default
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
BOND RATINGS
STANDARD & POOR'S LONG-TERM DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default -- capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation; and
A-4
<PAGE> 54
3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.
INVESTMENT GRADE
AAA Debt rated "AAA" has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
BB Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The 'BB' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BBB-' rating.
B Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The 'B' rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a currently identifiable vulnerability
to default, and is dependent upon favorable business, financial,
and economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'B' or 'B-' rating.
CC Debt rated 'CC' typically is applied to debt subordinated to
senior debt that is assigned an actual or implied 'CCC' rating.
C Debt rated 'C' typically is applied to debt subordinated to
senior debt which is assigned an actual or implied 'CCC-' debt
rating. The 'C' rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are
continued.
A-5
<PAGE> 55
CI The rating 'CI' is reserved for income bonds on which no interest
is being paid.
D Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The 'D' rating also will be used upon the filing
of a bankruptcy petition if debt service payments are
jeopardized.
MOODY'S LONG-TERM DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edged". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than
in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such Bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
Bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
A-6
<PAGE> 56
FITCH INVESTORS SERVICE, INC. BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided
by insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated 'AAA'. Because bonds rated in the 'AAA' and 'AA'
categories are not significantly vulnerable to foreseeable future
developments, short-term debt of the issuers is generally rated
'F-1+'.
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely
to have adverse impact on these bonds and, therefore, impair
timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for bonds with
higher ratings.
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
('BB' to 'C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ('DDD' to 'D') is an
assessment of the ultimate recovery value through reorganization or
liquidation.
A-7
<PAGE> 57
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives
can be identified which could assist the obligor in satisfying
its debt service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of
the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD,
DD
and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization
of the obligor. 'DDD' represents the highest potential for
recovery of these bonds, and 'D' represents the lowest potential
for recovery.
DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and
expertise. The projected viability of the obligor at the trough of the cycle
is a critical determination.
Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security classes
in the capital structure, the overall credit strength of the issuer, and the
nature of covenant protection.
The Credit Rating Committee formally reviews all ratings once per quarter
(more frequently, if necessary). Ratings of 'BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities. Structured finance issues, including real estate,
asset-backed and mortgage-backed financings, use this same rating scale. Duff
& Phelps Credit Rating claims paying ability ratings of insurance companies use
the same scale with minor modification in the definitions. Thus, an investor
can compare the credit quality of investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for specific ratings)
addresses the likelihood that aggregate principal and interest will equal or
exceed the rated amount under appropriate stress conditions.
A-8
<PAGE> 58
RATING SCALE DEFINITION
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest, but may vary slightly from time to time because of
AA- economic conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic
A- stress.
BBB+ Below average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investment grade but deemed likely to meet obligations
BB when due. Present or prospective financial protection factors
BB- fluctuate according to industry conditions or company fortunes.
Overall quality may move up or down frequently within this
category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating
grade.
CCC Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
DP Preferred stock with dividend arrearages.
MW1-33882-3
A-9
<PAGE> 59
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements (All included in Parts A and B)
Schedule of Investments at November 30, 1996
Statement of Assets and Liabilities at November 30, 1996
Statement of Operations for the year ended November 30, 1996
Statement of Changes in Net Assets for the period January 3,
1994 (commencement of operations) to November 30, 1994, and
for the years ended November 30, 1995 and November 30, 1996
Financial Highlights for the period January 3, 1994
(commencement of operations) to November 30, 1994, and for
the years ended November 30, 1995 and November 30, 1996
Notes to Financial Statements
Report of Independent Accountants
(b) Exhibits
(1) Registrant's Articles of Incorporation, as
amended*
(2) Registrant's By-Laws, as amended(3)
(3) None
(4) None
(5) Amended and Restated Investment Advisory
Agreement*
(6.1) Distribution Agreement(2)
(6.2) Form of Dealer Agreement(5)
(7) None
(8) Custodian Agreement with Firstar Trust Company(5)
(9.1) Transfer Agency Agreement with Firstar Trust Company(5)
(9.2) Administration Agreement with Firstar Trust Company(5)
(9.3) Accounting Agreement with Firstar Trust Company(5)
C-1
<PAGE> 60
(10) Opinion and Consent of Godfrey & Kahn, S.C.(2)
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreements(2)
(14) (a) Prototype Defined Contribution Retirement
Plan with Standardized Adoption Agreements(2)
(b) Individual Retirement Custodial
Account(2)
(15.1) Class A Rule 12b-1 Distribution Plan(4)
(15.2) Class C Rule 12b-1 Distribution and Servicing Plan*
(16) Schedule for Computations of Performance
Quotations*
(17) Financial Data Schedule*
(18) Rule 18f-3 Multiple Class Plan*
- ---------------
(1) Incorporated by reference to Registrant's Registration Statement on Form
N-1A as filed with the Securities and Exchange Commission on October 20,
1993.
(2) Incorporated by reference to Registrant's Pre-Effective Amendment No. 1
to its Registration Statement on Form N-1A as filed with the Securities
and Exchange Commission on December 17, 1993.
(3) Incorporated by reference to Registrant's Post-Effective Amendment No. 1
to its Registration Statement on Form N-1A as filed with the Securities
and Exchange Commission on June 28, 1994.
(4) Incorporated by reference to Registrant's Post-Effective Amendment No. 3
to its Registration Statement on Form N-1A as filed with the Securities
and Exchange Commission on October 31, 1995.
(5) Incorporated by reference to Registrant's Post-Effective Amendment No. 4
to its Registration Statement on Form N-1A as filed with the Securities
and Exchange Commission on December 26, 1995.
* To be filed by Amendment.
C-2
<PAGE> 61
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant neither controls any person nor is under common control
with any other person.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Securities as of November 30, 1996
------------------- ------------------------
<S> <C>
Common Stock, $.01 par value _____
</TABLE>
Item 27. Indemnification
Pursuant to the authority of the Maryland General Corporation Law,
Article VI of Registrant's By-Laws provides as follows:
ARTICLE VI INDEMNIFICATION
The Corporation shall indemnify (a) its Directors and officers,
whether serving the Corporation or at its request any other entity, to
the full extent required or permitted by (i) Maryland law now or
hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law, and (ii) the
Investment Company Act of 1940, as amended, and (b) other employees
and agents to such extent as shall be authorized by the Board of
Directors and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which
those seeking indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such resolutions or contracts
implementing such provisions or such further indemnification
arrangements as may be permitted by law.
Item 28. Business and Other Connections of Investment Advisor
None.
Item 29. Principal Underwriters
(a) None
(b) Incorporated by reference to the information contained under
"MANAGEMENT" in the Prospectus and under "DIRECTORS AND OFFICERS
OF THE CORPORATION" and "INVESTMENT ADVISOR AND UNDERWRITER" in
the Statement of Additional Information, all pursuant to Rule 411
under the Securities Act of 1993.
(c) None
Item 30. Location of Accounts and Records
All accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are in the possession of Oak Ridge Investments, Inc., Registrant's
investment advisor, at Registrant's corporate offices, except records held and
maintained by Firstar Trust Company, Mutual Fund Services, Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202, relating to its function as
custodian, transfer agent, and administrator.
C-3
<PAGE> 62
Item 31. Management Services
All management-related service contracts entered into by Registrant
are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of its 1996 Annual Report to Shareholders, upon request
and without charge.
C-4
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Chicago and State of Illinois on the 27th day of December, 1996.
O.R.I. FUNDS, INC. (Registrant)
By: /s/ Samuel Wegbreit
---------------------
Samuel Wegbreit
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date(s)
indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Samuel Wegbreit Chairman of the Board, a Director, December 27, 1996
- ---------------------------- Treasurer and Assistant Secretary
Samuel Wegbreit (principal financial and accounting officer)
/s/ David M. Klaskin Director and President December 27, 1996
- ---------------------------- (principal executive officer)
David M. Klaskin
/s/ Daniel A. Kaplan Director December 27, 1996
- ----------------------------
Daniel A. Kaplan
/s/ Dr. A. Charlene Sullivan Director December 27, 1996
- ----------------------------
Dr. A. Charlene Sullivan
/s/ Martin Z. Craig Director December 27, 1996
- ----------------------------
Martin Z. Craig
</TABLE>
<PAGE> 64
EXHIBIT INDEX
Exhibit No. Exhibit
(1) Registrant's Articles of Incorporation, as
amended*
(2) Registrant's By-Laws, as amended
(previously filed as Exhibit 2 to the
Registrant's Post-Effective Amendment No. 1 to
Registration Statement on Form N-1A, File Nos.
811-8088 and 33-70590)
(3) None
(4) None
(5) Amended and Restated Investment Advisory
Agreement*
(6.1) Distribution Agreement (previously filed
as Exhibit 6 to Registrant's Pre-Effective
Amendment No. 1 to Registration Statement on Form
N-1A, File Nos. 811-8088 and 33-70590)
(6.2) Form of Dealer Agreement (previously
filed as Exhibit 6.2 to Registrant's
Post-Effective Amendment No. 4 to Registration
Statement on Form N-1A, File Nos. 811-8088 and
33-70590)
(7) None
(8) Custodian Agreement with Firstar Trust
Company (previously filed as Exhibit 8 to
Registrant's Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A, File Nos.
811-8088 and 33-70590)
(9.1) Transfer Agency Agreement with Firstar
Trust Company (previously filed as Exhibit 9.1 to
Registrant's Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A, File Nos.
811-8088 and 33-70590)
(9.2) Administration Agreement with Firstar
Trust Company (previously filed as Exhibit 9.2 to
Registrant's Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A, File Nos.
811-8088 and 33-70590)
(9.3) Accounting Agreement with Firstar Trust
Company (previously filed as Exhibit 9.3 to
Registrant's Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A, File Nos.
811-8088 and 33-70590)
(10) Opinion and Consent of Godfrey & Kahn,
S.C., counsel for Registrant (previously filed as
Exhibit 10 to Registrant's Pre-Effective
Amendment No. 1 to Registration Statement on Form
N-1A, File Nos. 811-8088 and 33-70590)
<PAGE> 65
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreements (previously filed as Exhibit 13
to Registrant's Pre-Effective Amendment No. 1 to
Registration Statement on Form N-1A, File Nos. 811-8088 and
33-70590)
(14) (a) Prototype Defined Contribution Retirement Plan with
Standardized Adoption Agreements (previously filed as
Exhibit 14(a) to Registrant's Pre-Effective Amendment No. 1
to Registration Statement on Form N-1A, File Nos. 811-8088
and 33-70590)
(b) Individual Retirement Custodial Account (previously filed as
Exhibit 14(b) to Registrant's Pre-Effective Amendment No. 1
to Registration Statement on Form N-1A, File Nos. 811-8088
and 33-70590)
(15.1) Class A Rule 12b-1 Distribution Plan (previously filed as
Exhibit 15 to Registrant's Post-Effective Amendment No. 3 to
Registration Statement on Form N-1A, File Nos. 811-8088 and
33-70590)
(15.2) Class C Rule 12b-1 Distribution and Servicing Plan*
(16) Schedule for Computation of Performance Quotations*
(17) Financial Data Schedule*
(18) Rule 18f-3 Multiple Class Plan*
- ---------------
* To be filed by Amendment.
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 5 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated December 15, 1995, relating to the financial
statements and financial highlights appearing in the November 30, 1995 Annual
Report to Shareholders of O.R.I. Growth Fund, which are also incorporated by
reference into the Registration Statement. We also consent to the reference to
us under the heading "Independent Accountants" in the Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in the Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 27, 1996