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As filed with the Securities and Exchange Commission on February 26, 1997
Securities Act Registration No. 33-70590
Investment Company Act Registration No. 811-8088
================================================================================
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. 6 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 7 [x]
O.R.I. FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
10 SOUTH LASALLE, 60603
----------------- -----
SUITE 1050 (Zip Code)
CHICAGO, ILLINOIS
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 857-1040
SAMUEL WEGBREIT
O.R.I. FUNDS, INC.
10 SOUTH LASALLE, SUITE 1050
CHICAGO, ILLINOIS 60603
(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 was filed on January 21, 1997.
It is proposed that this filing will become effective (check appropriate
box).
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on March 1, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] 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
<PAGE> 2
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and the
Statement of Additional Information of the responses to the Items of Parts A
and B of Form N-1A).
Caption or Subheading in
Prospectus or Statement
Item No. on Form N-1A of Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis 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
5A. Management's Discussion of Fund Management; Fund Expenses
Performance Fund 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 *
<PAGE> 3
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
14. Management of the Fund Directors and Officers
Principal Shareholders; Directors
15. Control Persons and Principal Holders and Officers; Investment Advisor
of Securities 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
Included in Prospectus under the
headings How to Purchase Fund
Shares; Determination of Net
Asset Value; How to Redeem
Shares; and in the Statement of
Additional
19. Purchase, Redemption and Pricing of Information under the heading
Securities Being Offered 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
- --------------------------------
*Answer negative or inapplicable
<PAGE> 4
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.
<PAGE> 5
TABLE OF CONTENTS
Page
<TABLE>
<S> <C>
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 9
Lending of Portfolio Securities 9
Portfolio Turnover 9
MANAGEMENT 9
FUND EXPENSES 10
HOW TO PURCHASE SHARES 10
Offering Price - Class A Shares 11
Purchases at Net Asset Value - Class A and Class C Shares 11
Initial Investment - Minimum $2,000 12
Automatic Investment Plan - Minimum $100 13
Subsequent Investments 13
Share Certificates 14
DETERMINATION OF NET ASSET VALUE 14
</TABLE>
2
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<TABLE>
<S> <C>
HOW TO REDEEM SHARES 14
In General 14
Written Redemption 14
Telephone Redemption 15
Systematic Withdrawal Plan 15
DISTRIBUTION PLANS 16
TAX SHELTERED RETIREMENT PLANS 17
Individual Retirement Account ("IRA") 17
401(k) Plan 17
Defined Contribution Plan 17
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT 17
FUND ORGANIZATION 18
ADMINISTRATOR 18
CUSTODIAN, TRANSFER AGENT, AND DISTRIBUTOR 19
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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<PAGE> 8
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
<TABLE>
Class A Class C
------- -------
<S> <C> <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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (after waivers or reimbursements) (as a
percentage of average net assets)
<TABLE>
<S> <C> <C>
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) ==== ====
</TABLE>
_________________________
(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 $12.00 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) For the fiscal year ending November 30, 1997, 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 (i) the Total Operating Expenses for the Class A shares do not
exceed 2.00% of the class' average daily net assets and (ii) the Total
Operating Expenses for the Class C shares do not exceed 2.75% of the class'
average daily net assets. Other Expenses for the Class A shares are
presented net of reimbursement. Absent these reimbursements, Other
Expenses and Total Fund
5
<PAGE> 9
Operating Expenses for the period ended November 30, 1996 would have been
2.27% and 3.52% for the Class A shares, respectively. Since the Class C
shares were not offered prior to March 1, 1997, Other Expenses for the
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 2.27% and 4.27%,
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 $28 $85 $145 $308
</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 year 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. 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 $14.32 $10.48 $10.00
Income from investment operations:
Net investment (loss) income (0.16)(2) (0.13) (0.07)
Net realized and unrealized gains on investments 3.01 4.00 0.55
Total from investment operations 2.85 3.87 0.48
Less distributions:
Dividends from capital gains (0.60) (0.03) -
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
Net Asset value, end of period $16.57 $14.32 $10.48
TOTAL RETURN(1) 20.9% 37.0% 4.8%(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $7,725,072 $4,182,246 $2,708,546
Ratio of expenses to average net assets(4) 2.0% 2.0% 2.0%(5)
Ratio of net investment income (loss) to (1.2%) (1.3%) (1.1%)(5)
average net assets(4)
Portfolio turnover rate 71% 109% 80%
Average commission rate paid $0.0512
</TABLE>
________________________
(1) Does not reflect the effect of the 4.25% sales charge.
(2) Net investment (loss) per share is calculated using the ending balance
prior to consideration of adjustments for permanent book and tax
differences.
(3) Not annualized for the period ended November 30, 1994.
(4) Net of reimbursements and waivers. Without reimbursements and waivers,
the ratio of net expenses to average net assets would have been 3.5%,
6.5%, and 9.0%, and the ratio of net investment loss to average net assets
would have been (2.7%), (5.8%), and (8.1%) for the periods ended November
30, 1996, November 30, 1995, and November 30, 1994, respectively.
(5) 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
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<PAGE> 11
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 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.
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 &
8
<PAGE> 12
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 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
9
<PAGE> 13
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 10 South
LaSalle, Suite 1050, Chicago, IL 60603. 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 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.
10
<PAGE> 14
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).
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.
11
<PAGE> 15
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 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. 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:
<TABLE>
<S> <C>
Wire to: Firstar Bank
ABA Number 075000022
</TABLE>
12
<PAGE> 16
<TABLE>
<S> <C>
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)
</TABLE>
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
$12.00 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 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.
13
<PAGE> 17
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 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,
14
<PAGE> 18
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 $12.00 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 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.
15
<PAGE> 19
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 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
16
<PAGE> 20
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.
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.
17
<PAGE> 21
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 shares will be held
separately by the Custodian, and in effect each series will be a separate fund.
Effective March 1, 1997, 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
18
<PAGE> 22
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 $35,000 for
the fiscal year ending November 30, 1997 and $45,000 for succeeding years, plus
out of pocket expenses; and (b) pursuant to the Accounting Service Agreement,
the Administrator receives an aggregate fee of (i) $25,000 for the first $40
million of average net assets for the fiscal year ending November 30, 1997 and
$27,500 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.
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.
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<PAGE> 23
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.
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<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.
10 South LaSalle, Suite 1050
Chicago, IL 60603
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
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<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............................................................ 13
When-Issued Securities.............................................. 14
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................................................. 23
FINANCIAL STATEMENTS.................................................... 24
APPENDIX................................................................ 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
5
<PAGE> 30
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
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
6
<PAGE> 31
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 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
7
<PAGE> 32
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.
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
8
<PAGE> 33
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 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.
9
<PAGE> 34
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 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
by reference to the nature of the exposure arising from the assets set aside in
the segregated account.
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
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<PAGE> 35
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.
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
11
<PAGE> 36
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 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.
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<PAGE> 37
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
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.
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<PAGE> 38
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
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
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<PAGE> 39
an "interested person," as defined in the 1940 Act, is indicated by an
asterisk.
*David M. Klaskin, President and a Director of the Corporation (DOB 8/6/60).
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.
*Samuel Wegbreit, Chairman of the Board, Treasurer, Assistant Secretary and a
Director of the Corporation (DOB 9/28/57).
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 4/5/60).
Mr. Kaplan is a certified public accountant and the President of Loft
Development Corporation. Mr. Kaplan has been employed by Loft
Development Corporation since 1986.
Mark C. Pappas, Secretary of the Corporation (DOB 5/16/68).
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 1/21/49).
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 9/5/54).
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., 10 South LaSalle, Suite 1050,
Chicago, Illinois 60603. 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 21,087 shares of common stock of the Fund's Class A shares,
which was 4.52% 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.
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<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 $ 750 $0 $ 750
A. Charlene Sullivan $1,000 $0 $1,000
Martin Z. Craig $ 250 $0 $ 250
------ -- ------
All directors as a
group (5 persons) $2,000 $0 $2,000
====== == ======
</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 4 meetings during fiscal 1996.
PRINCIPAL SHAREHOLDERS
As of November 30, 1996, no 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. Accordingly, 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,
16
<PAGE> 41
1997. The Advisory Agreement is terminable without penalty, on 60
days' written notice by the Board of Directors 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. 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 $62,131
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
17
<PAGE> 42
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 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 out $5,220 under the
Class A Plan. Of this amount, $4,448 was spent on printing and mailing
prospectuses to other than current shareholders, $504 was spent on advertising
and $268 was spent on dealer compensation. Oak Ridge did not retain any of the
amounts expensed under the Class A Plan. 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.
18
<PAGE> 43
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 providing Recipients with incentives to promote the sale of Fund
shares, which in turn has resulted in an increase in assets under management.
This increase has benefited the Fund and its shareholders by providing the Fund
with a larger asset base over which to spread expenses.
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.
19
<PAGE> 44
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 $14,333,
respectively. Of these total brokerage commissions, Oak Ridge received $1,678,
$2,058 and $6,352 in 1994, 1995 and 1996, respectively. Accordingly, for the
period ended November 30, 1996, 44% of the aggregate brokerage commissions paid
by the Fund were paid to Oak Ridge, and 53% of the aggregate dollar amount of
Fund transactions involving the payment of commissions were effected through
Oak Ridge.
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. In addition, such higher commissions will not be paid
by the Fund to Oak Ridge with respect to portfolio transactions in which Oak
Ridge is serving as broker to the Fund. 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 71%, 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
20
<PAGE> 45
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 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 $16
for Class A shares and $14 for Class C shares, 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 $16 for Class A
shares and $14 for Class C shares.
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.
21
<PAGE> 46
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.
PERFORMANCE INFORMATION
As described under the heading "COMPARISON OF INVESTMENT RESULTS" 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.
22
<PAGE> 47
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.
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.
23
<PAGE> 48
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.
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.
(b) Statement of Assets and Liabilities at November
30, 1996.
24
<PAGE> 49
(c) Statement of Operations for the year ended
November 30, 1996.
(d) Statement of Changes in Net Assets for the years
ended November 30, 1995 and November 30, 1996.
(e) 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.
(f) Notes to Financial Statements.
(g) Report of Independent Accountants.
25
<PAGE> 50
<TABLE>
<CAPTION>
O.R.I. GROWTH FUND
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1996
NUMBER OF
SHARES VALUE
- ----------- -----
<S> <C> <C>
COMMON STOCK 96.37%
AUTOMOTIVE & RELATED
PRODUCTS 0.30%
580 Borg-Warner Automotive, Inc. $ 23,200
--------
BANKING 5.83%
3,300 Bank of Boston Corporation 230,587
10,000 Greater New York Savings Bank 132,500
3,500 Kankakee Bancorp, Inc. 87,063
--------
450,150
--------
CHEMICALS 5.10%
4,500 Cambrex Corporation 142,875
10,000 Crompton & Knowles Corporation 183,750
10,000 Environmental Technologies
Corporation* 67,500
--------
394,125
--------
COMMUNICATIONS 10.29%
6,000 Comsat Corporation 157,500
7,000 Digital Systems International, Inc.* 107,625
6,000 Frontier Corporation 157,500
3,000 GST Telecommunications, Inc.* 28,500
6,500 IPC Information Systems, Inc.* 104,000
20,000 Interactive Multimedia Publishers,
Inc.* 8,200
10,000 Worldcom, Inc.* 231,250
--------
794,575
--------
COMPUTERS - NETWORKING 5.26%
10,000 Data Systems Network Corporation* 93,750
5,500 Microtouch Systems, Inc.* 137,500
3,000 Sun Microsystems, Inc.* 174,750
--------
406,000
--------
COMPUTERS - SOFTWARE 10.27%
3,200 BMC Software, Inc.* $139,200
7,000 Control Data Systems, Inc.* 139,125
10,000 Globalink, Inc.* 30,000
2,500 Hyperion Software Corporation* 54,062
4,777 Sterling Commerce, Inc.* 150,476
3,000 Sterling Software, Inc.* 99,375
9,000 TRO Learning, Inc.* 181,125
--------
793,363
--------
DEFENSE ELECTRONICS 1.42%
5,000 Tracor, Inc.* 110,000
--------
DISTRIBUTION 0.61%
1,100 Hughes Supply, Inc. 47,300
--------
DRUGS & MEDICAL 1.26%
2,500 Watson Pharmaceuticals, Inc.* 97,500
--------
ELECTRONICS 4.63%
7,500 BE Aerospace, Inc. 172,969
3,500 SCI Systems, Inc.* 184,625
--------
357,594
--------
ENTERTAINMENT & LEISURE 4.18%
4,000 Hasbro, Inc. 164,500
6,000 Scientific Games Holdings Corp.* 158,250
--------
322,750
--------
See Notes to the Financial Statements.
</TABLE>
25
<PAGE> 51
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -------
<S> <C> <C>
ENVIRONMENTAL SERVICES/
POLLUTION CONTROL 10.65%
4,000 Culligan Water Technologies, Inc.* $149,000
9,000 ERD Waste Corp.* 24,750
1,500 Newpark Resources, Inc.* 52,500
5,000 United States Filter Corporation* 171,250
5,000 United Waste Systems, Inc.* 167,500
8,000 U.S.A. Waste Services, Inc.* 258,000
--------
823,000
--------
FINANCIAL SERVICES 3.59%
4,000 IMC Mortgage Company* 130,000
12,000 Jayhawk Acceptance Corporation* 147,000
--------
277,000
GOLD & PRECIOUS METALS 0.39%
10,000 First Dynasty Mines Ltd.* 30,000
--------
HEALTH CARE EQUIPMENT
& SUPPLIES 4.88%
4,000 Coherent, Inc.* 173,500
1,700 Maxxim Medical, Inc.* 21,675
8,000 Medpartners/Mullikin, Inc.* 182,000
--------
377,175
--------
HOSPITALS & HEALTH CARE 5.42%
3,420 Healthsouth Corporation* 128,677
5,000 The Multicare Companies, Inc.* 98,750
5,000 OrNda HealthCorp.* 145,625
2,400 Pediatric Services of America, Inc.* 45,600
--------
418,652
--------
HOUSEHOLD PRODUCTS 1.23%
4,350 Triangle Pacific Corp.* 94,884
--------
INSURANCE 2.46%
9,500 USF&G Corporation $ 190,000
--------
MISCELLANEOUS 4.33%
6,000 Personnel Group of America, Inc.* 135,750
6,600 Service Corporation International 198,825
--------
334,575
--------
OFFICE EQUIPMENT 0.52%
5,400 Cantel Industries, Inc.* 40,500
--------
OIL & GAS 5.17%
15,000 Magnum Petroleum, Inc.* 72,187
7,500 Oceaneering International, Inc.* 124,688
5,000 Seitel, Inc.* 202,500
--------
399,375
--------
RESTAURANTS 0.37%
6,000 Woodroast Systems, Inc.* 28,500
--------
RETAIL 1.54%
6,000 Zale Corporation* 119,250
--------
RETAIL - GROCERY 2.18%
8,000 Dominick's Supermarkets, Inc.* 168,000
--------
TRAVEL & RECREATION 2.56%
7,500 CUC International, Inc.* 197,813
--------
UTILITIES 1.93%
5,000 Calenergy Company, Inc.* 149,375
--------
Total Common Stock
(cost $5,899,531) 7,444,656
---------
</TABLE>
See Notes to the Financial Statements.
26
<PAGE> 52
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------
<S> <C> <C>
SHORT-TERM INVESTMENTS 8.04%
VARIABLE RATE DEMAND NOTES 8.04%
$327,815 Johnson Controls, Inc. $ 327,815
293,487 American Family Financial
Services, Inc. 293,487
--------
Total Short-Term Investments
(cost $621,302) 621,302
--------
Total Investments 104.41%
(cost $6,520,833) 8,065,958
---------
Liabilities, less Other Assets
(4.41%) (340,886)
---------
NET ASSETS 100.00% $ 7,725,072
==========
* Non-income producing security
</TABLE>
See Notes to the Financial Statements.
27
<PAGE> 53
<TABLE>
<CAPTION>
O.R.I. GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<S> <C>
ASSETS:
Investments at market value (cost $6,520,833).............................................. $ 8,065,958
Receivable for investments sold............................................................ 116,535
Receivable from Adviser.................................................................... 25,907
Capital shares sold........................................................................ 4,549
Organizational expenses, net of accumulated amortization................................... 18,201
Prepaid expenses........................................................................... 153
Interest and dividends receivable.......................................................... 4,116
-------------
Total Assets............................................................................... 8,235,419
-------------
LIABILITIES:
Payable for securities purchased........................................................... 458,975
Accrued other expenses..................................................................... 51,372
-------------
Total Liabilities.......................................................................... 510,347
-------------
NET ASSETS................................................................................. $ 7,725,072
=============
NET ASSETS CONSIST OF:
Capital stock.............................................................................. $ 4,662
Paid-in-capital in excess of par........................................................... 5,665,659
Undistributed net realized gain on investments............................................. 509,626
Net unrealized appreciation on investments................................................. 1,545,125
-------------
Net Assets................................................................................. $ 7,725,072
=============
CAPITAL STOCK, $.01 par value
Authorized................................................................................. 100,000,000
Issued and outstanding..................................................................... 466,202
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE............................................. $ 16.57
=============
MAXIMUM OFFERING PRICE PER SHARE........................................................... $ 17.31
=============
</TABLE>
See Notes to the Financial Statements.
28
<PAGE> 54
<TABLE>
<CAPTION>
O.R.I. GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1996
<S> <C>
INVESTMENT INCOME:
Interest................................................................................... $ 23,097
Dividends.................................................................................. 25,633
----------
48,730
----------
EXPENSES:
Fund administration and accounting fees.................................................... 45,469
Investment advisory fees .................................................................. 62,131
Professional fees.......................................................................... 22,838
Shareholder servicing fees and expenses.................................................... 29,482
Reports to shareholders.................................................................... 11,280
Federal and state registration fees........................................................ 13,394
Amortization of organizational expenses.................................................... 8,824
Directors' fees............................................................................ 2,762
Custody fees............................................................................... 4,070
12b-1 fees................................................................................. 14,545
Other...................................................................................... 3,774
----------
Total expenses before waiver and reimbursement............................................. 218,569
Less: Waiver and reimbursement of expenses by Adviser...................................... (94,306)
----------
Net expenses............................................................................... 124,263
----------
NET INVESTMENT (LOSS)...................................................................... (75,533)
----------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investment transactions............................................... 579,775
Change in unrealized appreciation on investments........................................... 615,635
----------
Net gain on investments.................................................................... 1,195,410
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................................... $1,119,877
==========
</TABLE>
See Notes to the Financial Statements.
29
<PAGE> 55
O.R.I. GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
NOVEMBER 30, 1996 NOVEMBER 30, 1995
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment (loss)..................................... $ (75,533) $ (42,658)
Net realized gain on investments.......................... 579,775 204,643
Change in unrealized appreciation on investments.......... 615,635 939,317
---------- ----------
Net increase in net assets resulting from operations...... 1,119,877 1,101,302
---------- ----------
DIVIDENDS PAID FROM:
Net realized gains........................................ (178,056) (7,454)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................... 2,818,792 1,049,419
Shares issued to holders in reinvestment of dividends..... 164,945 6,813
Shares redeemed........................................... (382,732) (676,380)
---------- ----------
Net increase.............................................. 2,601,005 379,852
---------- ----------
TOTAL INCREASE IN NET ASSETS.............................. 3,542,826 1,473,700
NET ASSETS:
Beginning of year......................................... 4,182,246 2,708,546
---------- ----------
End of year............................................... $7,725,072 $4,182,246
========== ==========
</TABLE>
See Notes to the Financial Statements.
30
<PAGE> 56
<TABLE>
<CAPTION>
O.R.I. GROWTH FUND
FINANCIAL HIGHLIGHTS
YEAR YEAR JANUARY 3, 1994(1)
ENDED ENDED TO
NOVEMBER 30, 1996 NOVEMBER 30, 1995 NOVEMBER 30, 1994
---------------- ------------------ -------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $14.32 $10.48 $10.00
Income from investment operations:
Net investment (loss)............................. (0.16)(2) (0.13) (0.07)
Net realized and unrealized gains on
investments..................................... 3.01 4.00 0.55
------ ------ ------
Total from investment operations.................. 2.85 3.87 0.48
------ ------ ------
Less distributions:
Dividends from capital gains...................... (0.60) (0.03) --
------ ------ ------
Net asset value, end of period.................... $16.57 $14.32 $10.48
====== ====== ======
Total return (3) (4).............................. 20.9% 37.0% 4.8%
Supplemental data and ratios:
Net assets, end of period......................... $7,725,072 $4,182,246 $2,708,546
Ratio of expenses to average net assets (5) (6)... 2.0% 2.0% 2.0%
Ratio of net investment (loss) to average
net assets (5) (6) ............................ (1.2)% (1.3)% (1.1)%
Portfolio turnover rate........................... 71% 109% 80%
Average commission rate paid...................... $0.0512
</TABLE>
(1) Commencement of operations.
(2) Net investment (loss) per share is calculated using the ending balance
prior to consideration of adjustments for permanent book and tax
differences.
(3) Not annualized for the period ended November 30, 1994.
(4) The total return calculation does not reflect the 4.25% front end sales
load.
(5) Net of reimbursements and waivers. Absent reimbursements and waivers of
expenses by Adviser, the ratios of expenses to average net assets would have
been 3.5%, 6.5% and 9.0%, for the periods ended November 30, 1996, November
30, 1995 and November 30, 1994, respectively and net investment (loss) to
average net assets would have been (2.7)%, (5.8)% and (8.1)%, for the
periods ended November 30, 1996, November 30, 1995 and November 30, 1994,
respectively. (6) Annualized for the period ended November 30, 1994.
See Notes to the Financial Statements.
31
<PAGE> 57
O.R.I. GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
The O.R.I. Growth Fund, Inc. (the "Fund") was incorporated on October 15, 1993
as a Maryland corporation and is registered as an open-end diversified
management investment company under the Investment Company Act of 1940
("1940 Act"). The Fund's investment objective is capital appreciation.
Oak Ridge Investments, Inc. (the "Adviser") is the Fund's investment adviser.
The Fund commenced operations on January 3, 1994.
Costs incurred in connection with the organization, initial registration and
public offering of shares aggregated $44,002. These costs are being amortized
over a period of not more than five years from the Fund's commencement of
operations. The proceeds of any redemption of the initial shares by the
original shareholders or any transferee will be reduced by a pro rata portion
of any then unamortized organizational expenses in the same proportion as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of such redemption.
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 or 4.44% of the net asset
value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
a) Investment Valuation - Common stocks and other equity-type securities are
valued at the last sales price on a national securities exchange or Nasdaq on
which 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 price. Debt securities (other than short-term instruments) are valued at
prices furnished by a pricing service, subject to review by the Adviser and
determination of the appropriate price whenever a furnished price is
significantly different from the previous day's furnished price. Debt
securities having remaining maturities of 60 days or less when purchased are
valued by the amortized cost method. 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.
b) Federal Income Taxes - It is the Fund's policy to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and the
Fund intends to distribute investment company net taxable income and net capital
gains to shareholders. Therefore, no federal income tax provision is required.
32
<PAGE> 58
O.R.I. GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
c) Distribution to Shareholders - The Fund pays dividends of net investment
income annually. Distributions of net realized capital gains, if any, will be
declared at least annually. Distributions to shareholders are recorded on the
ex-dividend date.
d) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
e) Other - Investment and shareholder transactions are recorded no later than
the first business day after the trade date. The Fund determines the gain or
loss realized from investment transactions by comparing the original cost of
the security lot sold with the net sale proceeds. The Fund's basis in
investments is the same for income tax and financial reporting purposes.
Dividend income is recognized on the ex-dividend date and interest income is
recognized on an accrual basis. Generally accepted accounting principles
require that permanent financial reporting and tax differences be reclassified
to capital stock.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
November 30, 1996 November 30, 1995
----------------- -----------------
<S> <C> <C>
Shares sold 186,455 90,685
Shares issued to holders in
reinvestment of dividends 12,356 662
Shares redeemed (24,753) (57,549)
Net increase 174,058 33,798
======= =======
</TABLE>
33
<PAGE> 59
0.R.I. GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an agreement with the Adviser, with whom certain
officers and directors of the Fund are affiliated, to furnish investment
advisory services to the Fund. Under the terms of this agreement, the Fund
will pay the Adviser a monthly fee at the annual rate of 1.00% on average
daily net assets.
The Adviser agrees to reimburse its management fee and other expenses to the
extent that total operating expenses (exclusive of interest, taxes, brokerage
commissions and other costs incurred in connection with the purchase or sale
of portfolio securities, and extraordinary items) exceed the annual rate of
2.00% of the net assets of the Fund, computed on a daily basis.
For the year ended November 30, 1996, the Fund paid the Adviser $6,352 of
brokerage commissions.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments for the Fund for the year ended November 30, 1996 were $6,561,665
and $4,098,759, respectively. There were no purchases or sales of long-term
U.S. government securities.
At November 30, 1996, gross unrealized appreciation and depreciation of
investments were as follows:
Appreciation..................................... $1,846,495
Depreciation..................................... (301,370)
----------
Net appreciation on investments.................. $1,545,125
==========
34
<PAGE> 60
O.R.I. GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6. DISTRIBUTION PLAN
Effective January 1, 1996, the Fund adopted a plan pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), which requires it to pay Oak Ridge
Investments, Inc. (the "Distributor") a distribution fee of up to 0.25% of its
average daily net assets computed on an annual basis. Under the terms of the
Plan, the Distributor is authorized to, in turn, pay all or a portion of this
fee to any securities dealer, financial institution or any other person (the
"Recipient") who renders assistance in distributing or promoting the sale of
Fund shares pursuant to a written agreement (the "Rule 12b-1 Related
Agreement"). To the extent such fee is not paid to such persons, the
Distributor may use the fee for its own distribution expenses incurred in
connection with the sale of the Fund's shares. The Fund incurred fees of
$14,545 for the year ended November 30, 1996, pursuant to the Plan.
7. DISTRIBUTION
On December 31, 1996 a distribution of $1.08714 per share (including $0.56762
taxable to shareholders as ordinary income dividends and $0.51952 applicable
to long-term capital gains), aggregating $509,740, was paid to the
shareholders of record on December 30, 1996.
35
<PAGE> 61
O.R.I. GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
O.R.I. Growth Fund
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of O.R.I. Growth Fund
(the "Fund") at November 30, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for the year then ended, and
for each of the other periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at November 30, 1996 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
December 16, 1996
36
<PAGE> 62
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:
<TABLE>
<S> <C>
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.
</TABLE>
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> 63
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.
A-2
<PAGE> 64
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.
<TABLE>
<S> <C>
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.
</TABLE>
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.
A-3
<PAGE> 65
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.
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.
A-4
<PAGE> 66
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
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.
A-5
<PAGE> 67
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.
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.
A-6
<PAGE> 68
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.
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.
A-7
<PAGE> 69
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.
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.
<TABLE>
<S> <C>
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.
</TABLE>
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.
A-8
<PAGE> 70
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.
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
BBB sufficient for prudent investment. Considerable variability
BBB- in risk during economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when
BB 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.
A-9
<PAGE> 71
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
A-10
<PAGE> 72
PART C
OTHER INFORMATION
<TABLE>
<S><C>
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 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(2)
(3) None
(4) None
(5) Amended and Restated Investment Advisory Agreement
(6.1) Distribution Agreement(1)
(6.2) Form of Dealer Agreement(4)
(7) None
(8) Custodian Agreement with Firstar Trust Company(4)
(9.1) Transfer Agency Agreement with Firstar Trust Company(4)
(9.2) Administration Agreement with Firstar Trust Company(4)
(9.3) Accounting Agreement with Firstar Trust Company(4)
</TABLE>
C-1
<PAGE> 73
<TABLE>
<S><C>
(10) Opinion and Consent of Godfrey & Kahn, S.C. (1)
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreements(1)
(14) (a) Prototype Defined Contribution Retirement
Plan with Standardized Adoption Agreements(1)
(b) Individual Retirement Custodial
Account(1)
(15.1) Class A Rule 12b-1 Distribution Plan(3)
(15.2) Class C Rule 12b-1 Distribution and Servicing Plan
(16) Schedule for Computations of Performance Quotations
(17) Financial Data Schedule(5)
(18) Rule 18f-3 Multiple Class Plan
</TABLE>
_______________
(1) Incorporated by reference from 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.
(2) Incorporated by reference from 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.
(3) Incorporated by reference from 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.
(4) Incorporated by reference from 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.
(5) Incorporated by reference from Registrant's N-SAR as filed with the
Securities and Exchange Commission on January 29, 1997.
C-2
<PAGE> 74
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant neither controls any person nor is under common control
with any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Securities as of November 30, 1996
---------------------------- ------------------------
Common Stock, $.01 par value 486
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> 75
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> 76
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. 6 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 26th day of February, 1997.
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. 6 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, February 26, 1997
- ----------------------------
Samuel Wegbreit Treasurer and Assistant Secretary
(principal financial and accounting officer)
/s/ David M. Klaskin Director and President February 26, 1997
- ----------------------------
David M. Klaskin (principal executive officer)
/s/ Daniel A. Kaplan Director February 26, 1997
- ----------------------------
Daniel A. Kaplan
/s/ Dr. A. Charlene Sullivan Director February 26, 1997
- ----------------------------
Dr. A. Charlene Sullivan
/s/ Martin Z. Craig Director February 26, 1997
- ----------------------------
Martin Z. Craig
</TABLE>
<PAGE> 77
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> 78
(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 Computations of Performance Quotations ______
(17) Financial Data Schedule (previously filed
in response to question 77Q1 of Registrant's
N-SAR, as filed with the Securities and Exchange
Commission on January 29, 1997)
(18) Rule 18f-3 Multiple Class Plan ______
<PAGE> 1
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
O.R.I. FUNDS, INC.
ARTICLE I
INCORPORATOR
THE UNDERSIGNED, Carol A. Gehl, whose-post office address is Godfrey &
Kahn, S.C., 780 North Water Street, Milwaukee, Wisconsin 53202, being at least
eighteen (18) years of age, does hereby act as incorporator to form a
corporation under and by virtue of the Maryland General Corporation Law.
ARTICLE II
NAME
2.1. Name. The name of the corporation is O.R.I. Funds, Inc. (the
"Corporation").
2.2. Name Reservation. The Corporation acknowledges that it uses the
initials "O.R.I." in its corporate name and in the name of any series
designated pursuant to Article V hereof only with the permission of Oak Ridge
Investments, Inc., ("Oak Ridge") the Corporation's investment adviser, and
agrees that Oak Ridge shall control the use of the initials "O.R.I." by the
Corporation. The Corporation further agrees that if Oak Ridge, its successors
or assigns should at any time cease to be the investment adviser to the
Corporation, the Corporation shall, at the written request of Oak Ridge or its
successors or assigns eliminate the initials "O.R.I." from its corporate name
and any materials or documents referring to the Corporation, and will not
henceforth use the initials "O.R.I." in the conduct of the Corporation's
business, except to any extent specifically agreed to by Oak Ridge. The
Corporation further acknowledges that Oak Ridge reserves the right to grant the
non-exclusive right to use the initials "O.R.I." to any other persons or
entities, including other investment companies, whether now in existence or
hereafter created. The provisions of this paragraph are binding on the
Corporation, its successors and assigns and on its directors, officers,
stockholders, creditors and all other persons claiming under or through it.
ARTICLE III
CORPORATE PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed is to act as
an investment company under the federal Investment Company Act of 1940, and to
exercise and enjoy all the
<PAGE> 2
powers, rights and privileges granted to, or conferred upon, corporations by
the General Laws of the State of Maryland. The Corporation shall exercise and
enjoy all such powers, rights and privileges to the extent not inconsistent
with these Articles of Incorporation.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202-3242. The name of the Corporation's resident agent
in the State of Maryland is The Corporation Trust Incorporated, a corporation
of the State of Maryland, and the post office address of the resident agent is
32 South Street, Baltimore, Maryland 21202-3242.
ARTICLE V
CAPITAL STOCK
5.1. Authorized Shares. The total number of shares of capital stock
which the Corporation shall have authority to issue is Five Hundred Million
(500,000,000) shares of the par value of one cent ($0.01) per share and of the
aggregate par value of Five Million Dollars ($5,000,000), all of which shares
are designated Common Stock.
5.2. Authorization of Stock Issuance. The Board of Directors may
authorize the issuance and sale of capital stock of the Corporation, including
stock of any class or series, from time to time in such amounts and on such
terms and conditions, for such purposes and for such amount or kind of
consideration as the Board of Directors shall determine, subject to any limits
required by then applicable law. All shares shall be issued on a fully paid
and non-assessable basis.
5.3. Fractional Shares. The Corporation may issue fractional shares.
Any fractional share shall carry proportionately the rights of a whole share,
excepting the right to receive a certificate evidencing such fractional share,
but including, without limitation, the right to vote and the right to receive
dividends.
5.4. Power to Classify. The Board of Directors of the Corporation may
classify and reclassify any unissued shares of capital stock into one or more
additional or other classes or series as may be established from time to time
by setting or changing in any one or more respects the designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms of such shares of stock
and pursuant to such classification or reclassification to increase or decrease
the number of authorized shares of stock, or shares of any existing class or
series of stock. Except as otherwise provided herein, all references herein to
capital stock shall apply without discrimination to the shares of each class or
series of stock. Pursuant to such power, the Board of Directors has initially
designated 100,000,000 shares of its
2
<PAGE> 3
capital stock into one series of shares of capital stock of the Corporation,
the names of which and the number of shares allocated to each are as follows:
Name of Series Number of Shares Initially
------------------ --------------------------
Allocated
--------------------------
O.R.I. Growth Fund 100,000,000
5.5. Classes and Series - General. The relative preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of each class or series
of stock of the Corporation shall be as follows, unless otherwise provided in
Articles Supplementary hereto:
(a) Assets Belonging to Class or Series. All consideration
received by the Corporation for the issue or sale of stock of a
particular class or series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits
and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to that class or series for all purposes,
subject only to the rights of creditors, and shall be so recorded on the
books of account of the Corporation. Any assets, income, earnings,
profits or proceeds thereof, funds or payments which are not readily
attributable to a particular class or series shall be allocated to and
among any one or more series or classes in such manner and on such basis
as the Board of Directors, in its sole discretion, shall deem fair and
equitable, and items so allocated to a particular series or class shall
belong to that series or class. Each such allocation shall be conclusive
and binding upon the stockholders of all classes and series for all
purposes.
(b) Liabilities Belonging to Class or Series. The assets belonging
to each class or series shall be charged with the liabilities of the
Corporation in respect of that class or series and with all expenses,
costs, charges and reserves attributable to that class or series and
shall be so recorded on the books of account of the Corporation. Any
general liabilities, expenses, costs, charges or reserves of the
Corporation which are not readily identifiable as belonging to any
particular class or series shall be allocated and charged to and among
any one or more of the classes or series in such manner and on such basis
as the Board of Directors in its sole discretion deems fair and
equitable, and any items so allocated to a particular class or series
shall be charged to, and shall be a liability belonging to, that class or
series. Each such allocation shall be conclusive and binding upon the
stockholders of all classes and series for all purposes.
(c) Income. The Board of Directors shall have full discretion, to
the extent not inconsistent with the General Laws of the State of
Maryland and the Investment Company Act of 1940, to determine which items
shall be treated as income and which
3
<PAGE> 4
items shall be treated as capital. Each such determination shall be
conclusive and binding.
(d) Dividends and Distributions. The holders of each class or
series of capital stock of record as of a date determined by the Board of
Directors from time to time shall be entitled, from funds or other assets
legally available therefor, to dividends and distributions, including
distributions of capital gains, in such amounts and at such times as may
be determined by the Board of Directors. Any such dividends or
distributions may be declared payable in cash, property or shares of the
class or series, as determined by the Board of Directors or pursuant to a
standing resolution or program adopted or approved by the Board of
Directors. Dividends and distributions may be declared with such
frequency, including daily, as the Board of Directors may determine and
in any reasonable manner, including by standing resolution, by
resolutions adopted only once or with such frequency as the Board of
Directors may determine, or by formula or other similar method of
determination, whether or not the amount of the dividend or distribution
so declared can be calculated at the time of such declaration. The Board
of Directors may establish payment dates for such dividends and
distributions on any basis, including payment that is less frequent than
the effectiveness of such declarations. The Board of Directors shall
have the discretion to designate for such dividends and distributions
amounts sufficient to enable the Corporation or any class or series
thereof to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986 or any successor or comparable statute, and
regulations promulgated thereunder (collectively, the "IRC"), and to
avoid liability of the Corporation or any class or series for Federal
income tax in respect of a given year and to make other appropriate
adjustments in connection therewith. Nothing in the foregoing sentence
shall limit the authority of the Board of Directors to designate greater
or lesser amounts for such dividends or distributions. The amounts of
dividends and distributions declared and paid with respect to the various
classes or series of capital stock and the timing of declaration and
payment of such dividends and distributions may vary among such classes
and series.
(e) Tax Elections. The Board of Directors shall have the power, in
its discretion, to make such elections as to the tax status of the
Corporation or any series or class of the Corporation as may be permitted
or required by the IRC without the vote of stockholders of the
Corporation or any series or class.
(f) Liquidation. At any time there are no shares outstanding for a
particular class or series, the Board of Directors may liquidate such
class or series in accordance with applicable law. In the event of the
liquidation or dissolution of the Corporation, or of a class or series
thereof when there are shares outstanding of the Corporation or of such
class or series, as applicable, the stockholders of such, or of each,
class or series, as applicable, shall be entitled to receive, when and as
declared by the Board of Directors, the excess of the assets of that
class or series over the liabilities of that class or series, determined
as provided herein and including assets and liabilities allocated
pursuant to sections (a) and (b) of this Article 5.5. Any such excess
amounts will be distributed to
4
<PAGE> 5
each stockholder of the applicable class or series in proportion to the
number of outstanding shares of that class or series held by that
stockholder and recorded on the books of the Corporation. Subject to the
requirements of applicable law, dissolution of a class or series may be
accomplished by distribution of assets to stockholders of that class or
series as provided herein, by the transfer of assets of that class or
series to another class or series of the Corporation, by the exchange of
shares of that class or series for shares of another class or series of
the Corporation, or in any other legal manner.
(g) Voting Rights. On each matter submitted to a vote of
stockholders, each holder of a share of capital stock of the Corporation
shall be entitled to one vote for each full share, and a fractional vote
for each fractional share of stock standing in such holder's name on the
books of the Corporation, irrespective of the class or series thereof,
and all shares of all classes and series shall vote together as a single
class, provided that (a) when the Maryland General Corporation Law or the
Investment Company Act of 1940 requires that a class or series vote
separately with respect to a given matter, the separate voting
requirements of the applicable law shall govern with respect to the
affected class[es] and/or series and other classes and series shall vote
as a single class and (b) unless otherwise required by those laws, no
class or series shall vote on any matter which does not affect the
interest of that class or series.
(h) Quorum. The presence in person or by proxy of the holders of
one-third of the shares of stock of the Corporation entitled to vote
thereat, without regard to class or series, shall constitute a quorum at
any meeting of the stockholders, except with respect to any matter which,
under applicable statutes or regulatory requirements, requires approval
by a separate vote of one or more classes or series of stock, in which
case the presence in person or by proxy of the holders of one-third of
the shares of stock of each class or series required to vote as a class
on the matter shall constitute a quorum. If at any meeting of the
stockholders there shall be less than a quorum present, the stockholders
present at such meeting may, without further notice, adjourn the same
from time to time until a quorum shall be present.
(i) Equality. Each share of each series or class shall be equal to
each other share of that class or series and shall represent an equal
proportionate interest in the assets belonging to that series or class,
subject to the liabilities belonging to that series or class. The Board
of Directors may from time to time divide or combine the shares of any
particular series or class into a greater or lesser number of shares of
that series or class without thereby changing the proportionate
beneficial interest in the assets belonging to that series or class or in
any way affecting the rights of shares of any other series or class.
(j) Conversion or Exchange Rights. Subject to compliance with the
requirements of the Investment Company Act of 1940, the Board of
Directors shall have the authority to provide that holders of shares of
any series or class shall have the right to convert or exchange such
shares into shares of one or more other series or classes in accordance
with such requirements and procedures as may be established by the Board
of Directors.
5
<PAGE> 6
(k) Change of Name. The Board of Directors shall have the
authority to change part or all of the name of any series created herein
or hereafter.
5.6. Authorizing Vote. Notwithstanding any provision of the General Laws
of the State of Maryland requiring for any purpose a proportion greater than a
majority of the votes of all classes or series, the affirmative vote of the
holders of a majority of the total number of shares of the Corporation, or of a
class or series of the Corporation, as applicable, outstanding and entitled to
vote under such circumstances pursuant to these Articles of Incorporation and
the By-Laws of the Corporation shall be effective for such purpose, except to
the extent otherwise required by the Investment Company Act of 1940 and rules
thereunder; provided that, to the extent consistent with the General Laws of
the State of Maryland and other applicable law, the By-Laws may provide for
authorization to be by the vote of a proportion less than a majority of the
votes of the Corporation, or of a class or series.
5.7. Preemptive Rights. No stockholder of the Corporation shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any
shares of any classes or series, or any other securities of the Corporation
which the Corporation proposes to issue or sell, and any or all of such shares
or securities of the Corporation, whether now or hereafter authorized or
created, may be issued, or may be reissued or transferred if the same have been
reacquired, and sold to such persons, firms, corporations and associations, and
for such lawful consideration, and on such terms as the Board of Directors in
its discretion may determine, without first offering the same, or any thereof,
to any said stockholder.
5.8. Redemption.
(a) The Board of Directors shall authorize the Corporation, to the
extent it has funds or other property legally available therefor and
subject to such reasonable conditions as the directors may determine, to
permit each holder of shares of capital stock of the Corporation, or of
any class or series, to require the Corporation to redeem all or any part
of the shares standing in the name of such holder on the books of the
Corporation, at the applicable redemption price of such shares (which may
reflect such fees and charges as the Board of Directors may establish
from time to time) determined in accordance with procedures established
by the Board of Directors of the Corporation from time to time in
accordance with applicable law.
(b) Without limiting the generality of the foregoing, the Board of
Directors may authorize the Corporation, at its option and to the extent
permitted by and in accordance with the conditions of applicable law, to
redeem stock of the Corporation, or of any class or series, owned by any
stockholder under circumstances deemed appropriate by the Board of
Directors in its sole discretion from time to time, such circumstances
including but not limited to (1) failure to provide the Corporation with
a tax identification number and (2) failure to maintain ownership of a
specified minimum number or value of shares of any class or series of
stock of the Corporation, such redemption to be effected at such
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price, at such time and subject to such conditions as may be required or
permitted by applicable law.
(c) Payment for redeemed stock shall be made in cash unless, in the
opinion of the Board of Directors, which shall be conclusive, conditions
exist which make it advisable for the Corporation to make payment wholly
or partially in securities or other property or assets of the class or
series of the shares being redeemed. Payment made wholly or partially in
securities or other property or assets may be delayed to such reasonable
extent, not inconsistent with applicable law, as is reasonably necessary
under the circumstances. No stockholder shall have the right, except as
determined by the Board of Directors, to have his shares redeemed in such
securities, property or other assets.
(d) All rights of a stockholder with respect to a share redeemed,
including the right to receive dividends and distributions with respect
to such share, shall cease and determine as of the time as of which the
redemption price to be paid for such shares shall be fixed, in accordance
with applicable law, except the right of such stockholder to receive
payment for such shares as provided herein.
(e) Notwithstanding any other provision of this Article 5.8, the
Board of Directors may suspend the right of stockholders of any or all
classes or series of shares to require the Corporation to redeem shares
held by them for such periods and to the extent permitted by, or in
accordance with, the Investment Company Act of 1940. The Board of
Directors may, in the absence of a ruling by a responsible regulatory
official, terminate such suspension at such time as the Board of
Directors, in its discretion, shall deem reasonable, such determination
to be conclusive.
(f) Shares of any class or series which have been redeemed shall
constitute authorized but unissued shares subject to classification and
reclassification as provided in these Articles of Incorporation.
5.9. Repurchase of Shares. The Board of Directors may by resolution from
time to time authorize the Corporation to purchase or otherwise acquire,
directly or through an agent, shares of any class or series of its outstanding
stock upon such terms and conditions and for such consideration as permitted by
applicable law and determined to be reasonable by the Board of Directors and to
take all other steps deemed necessary in connection therewith. Shares so
purchased or acquired shall have the status of authorized but unissued shares.
5.10. Valuation. Subject to the requirements of applicable law, the
Board of Directors may, in its absolute discretion, establish the basis or
method, timing and frequency for determining the value of assets belonging to
each class or series and for determining the net asset value of each share of
each class or series for purposes of sales, redemptions, repurchases or
otherwise. Without limiting the foregoing, the Board of Directors may
determine that the net asset value per share of any class or series should be
maintained at a designated constant value
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and may establish procedures, not inconsistent with applicable law, to
accomplish that result. Such procedures may include a requirement, in the
event of a net loss with respect to the particular class or series from time to
time, for automatic pro rata capital contributions from each stockholder of
that class or series in amounts sufficient to maintain the designated constant
share value.
5.11. Certificates. Subject to the requirements of the Maryland General
Corporation Law, the Board of Directors may authorize the issuance of some or
all of the shares of any or all classes or series without certificates and may
establish such conditions as it may determine in connection with the issuance
of certificates.
5.12. Shares Subject to Articles and By-laws. All persons who shall
acquire shares of capital stock in the Corporation shall acquire the same
subject to the provisions of these Articles of Incorporation and the By-Laws of
the Corporation, as each may be amended, supplemented and/or restated from time
to time.
ARTICLE VI
BOARD OF DIRECTORS
6.1. Number of Directors. The number of directors of the Corporation
shall be as provided in the By-Laws and subject to the limitations of the
Maryland General Corporation Law, may fix a different number of directors and
may authorize a majority of the directors to increase or decrease the number of
directors set by these Articles or the By-Laws within limits set by the By-Laws
and to fill vacancies created by an increase in the number of directors.
Unless otherwise provided by the By-Laws, the directors of the Corporation need
not be stockholders of the Corporation. The names of the directors who will
serve until the first annual meeting and until their successors are elected and
qualify are:
Samuel Wegbreit
David M. Klaskin
Daniel A. Kaplan
6.2. Removal of Directors. Subject to the limits of the Investment
Company Act of 1940 and unless otherwise provided by the By-Laws, a director
may be removed, with or without cause, by the affirmative vote of a majority of
(a) the Board of Directors, (b) a committee of the Board of Directors appointed
for such purpose, or (c) the stockholders by vote of a majority of the
outstanding shares of the Corporation.
6.3. Liability of Directors and Officers.
(a) To the fullest extent permitted by the Maryland General
Corporation Law and the Investment Company Act of 1940, no director or
officer of the Corporation shall be liable to the Corporation or to its
stockholders for money damages. No amendment to
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these Articles of Incorporation or repeal of any of its provisions shall
limit or eliminate the benefits provided to directors and officers under
this provision with respect to any act or omission which occurred prior
to such amendment or repeal.
(b) In performance of his duties, a director is entitled to rely on
any information, opinion, report, or statement, including any financial
statement or other financial data, prepared by others, to the extent not
inconsistent with the General Laws of the State of Maryland. A person
who performs his duties in accordance with the standards of Article
2-405.1 of the Maryland General Corporation Law or otherwise in
accordance with applicable law shall have no liability by reason of being
or having been a director of the Corporation.
6.4. Powers of Directors. In addition to any powers conferred herein or
in the By-Laws, the Board of Directors may, subject to any express limitations
contained in these Articles of Incorporation or in the By-Laws, exercise the
full extent of powers conferred by the General Laws of the State of Maryland or
other applicable law upon corporations or directors thereof and the enumeration
and definition of particular powers herein or in the By-Laws shall in no way be
deemed to restrict or otherwise limit those lawfully conferred powers. In
furtherance and without limitation of the foregoing, the Board of Directors
shall have power:
(a) to make, alter, amend or repeal from time to time the By-Laws
of the Corporation except as otherwise provided by the By-Laws;
(b) subject to requirements of the Investment Company Act of 1940
and the General Laws of the State of Maryland, to authorize the
Corporation to enter into contracts with any person, including any firm,
corporation, trust or association in which a director, officer, employee
or stockholder of the Corporation may be interested. Such contracts may
be for any lawful purpose, whether or not such purpose involves
delegating functions normally performed by the board of directors or
officers of a corporation, including, but not limited to, the provision
of investment management for the Corporation's investment portfolio, the
distribution of securities issued by the Corporation, the administration
of the Corporation's affairs, the provision of transfer agent services
with respect to the Corporation's shares of capital stock, and the
custody of the Corporation's assets. Any person (including its
affiliates) may be retained in multiple capacities pursuant to one or
more contracts and may also perform services, including similar or
identical services, for others, including other investment companies.
Subject to the requirements of applicable law, such contracts may provide
for compensation to be paid by the Corporation in such amounts, including
payments of multiple amounts for persons (including their affiliates)
acting in multiple capacities, as the Board of Directors shall determine
in its discretion to be proper and reasonable.
(c) to authorize from time to time the payment of compensation to
the Directors for services to the Corporation, including fees for
attendance at meetings of the Board of Directors and committees thereof.
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6.5. Determinations by Board of Directors. Any determination made by or
pursuant to the direction of the Board of Directors and in accordance with the
standards set by the General Laws of the State of Maryland shall be final and
conclusive and shall be binding upon the Corporation and upon all stockholders,
past, present and future, of each class and series.
ARTICLE VII
PROVISIONS FOR DEFINING, LIMITING AND REGULATING THE POWERS
OF THE CORPORATION AND THE: DIRECTORS AND STOCKHOLDERS
7.1. Location of Meetings, Offices and Books. Both directors and
stockholders may hold meetings within or without the State of Maryland and
abroad, and the Corporation may have one or more offices and may keep its books
within or without the State of Maryland and abroad at such places as the
directors shall determine.
7.2. Meetings of Shareholders. Except as otherwise provided in the
By-Laws, in accordance with applicable law, the Corporation shall not be
required to hold an annual meeting of shareholders in any year unless required
by applicable law. Election of directors, whether by the directors or by
stockholders, need not be by ballot unless the By-Laws so provide.
7.3. Inspection of Records. Stockholders of the Corporation shall have
only such rights to inspect and copy the records, documents, accounts and books
of the Corporation and to request statements regarding its affairs as are
provided by the Maryland General Corporation Law, subject to such reasonable
regulations, not contrary to the General Laws of the State of Maryland, as the
Board of Directors may from time to time adopt regarding the conditions and
limits of such rights.
7.4. Indemnification. The Corporation, including its successors and
assigns, shall indemnify its directors and officers and make advance payment of
related expenses to the fullest extent permitted, and in accordance with the
procedures required, by the General Laws of the State of Maryland and the
Investment Company Act of 1940. The By-Laws may provide that the Corporation
shall indemnify its employees and/or agents in any manner and within such
limits as permitted by applicable law. Such indemnification shall be in
addition to any other right or claim to which any director, officer, employee
or agent may otherwise be entitled. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise or employee benefit plan, against any liability (including,
with respect to employee benefit plans, excise taxes) asserted against and
incurred by such person in any such capacity or arising out of such person's
position, whether or not the Corporation would have had the power to indemnify
against such liability. The rights provided to any person by this Article 7.4
shall be enforceable against the Corporation by such person who shall be
presumed to have relied upon such rights in serving or
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continuing to serve in the capacities indicated herein. No amendment of these
Articles of Incorporation shall impair the rights of any person arising at any
time with respect to events occurring prior to such amendment.
7.5. Wholly-Owned Subsidiaries. The Corporation may own all or any
portion of the securities of, make loans to, or contribute to the costs or
other financial requirements of any company which is wholly owned by the
Corporation or by the Corporation and by one or more other investment companies
and is primarily engaged in the business of providing, at cost, management,
administrative or related services to the Corporation or to the Corporation and
other investment companies.
7.6. Amendments. The Corporation reserves the right to amend, alter,
change or repeal any provision of these Articles of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
7.7. References to Statutes, Articles and By-Laws. All references herein
to statutes, to these Articles of Incorporation or to the By-Laws shall be
deemed to refer to those statutes, Articles or By-Laws as they are amended and
in effect from time to time.
7.8. Specific Powers and Purposes. Without limiting the foregoing, the
Corporation shall have the following specific powers:
(a) To hold, invest and reinvest its funds, and in connection
therewith, to hold part or all of its funds in cash, and to purchase,
subscribe for or otherwise acquire, hold for investment or otherwise, to
trade and deal in, write, sell, assign, negotiate, transfer, exchange,
lend, pledge or otherwise dispose of or turn to account or realize upon,
securities (which term "securities" shall, for the purposes of these
Articles of Incorporation, without limiting the generality thereof, be
deemed to include any stocks, shares, bonds, debentures, bills, notes,
mortgages or other obligations or evidences of indebtedness, and any
options, certificates, receipts, warrants, futures contracts or other
instruments representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests
therein, or in any property or assets; and any negotiable or
non-negotiable instruments and money market instruments, including bank
certificates of deposit, finance paper, commercial paper, bankers'
acceptances and all kinds of repurchase and reverse repurchase
agreements) created or issued by any United States or foreign issuer
(which term "issuer" shall, for the purpose of these Articles of
Incorporation, without limiting the generality thereof, be deemed to
include any persons, firms, associations, partnerships, corporations,
syndicates, combinations, organizations, governments or subdivisions,
agencies or instrumentalities of any government); and to exercise, as
owner or holder of any securities, all rights, powers and privileges in
respect thereof, including the right to vote thereon and otherwise act
with respect thereto and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value of any and
all such securities.
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(b) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes and for such
amount or kind of consideration (including, without limitation,
securities) now or hereafter permitted by the laws of the State of
Maryland.
(c) To the extent not inconsistent with applicable law, to acquire
all or any part of the goodwill, rights, property and business of any
person, firm, association or corporation and to hold, utilize, enjoy and
in any manner dispose of the whole or any part of the rights, property
and business so acquired, and to assume in connection therewith any
liabilities of any such person, firm, association or corporation.
(d) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property,
real or personal, and any interest therein.
(e) To borrow money and, in this connection, to issue notes or
other evidence of indebtedness.
(f) To buy, hold, sell, and otherwise deal in and with foreign
exchange.
(g) To apply for, obtain, purchase or otherwise acquire, any
patents, copyrights, licenses, trademarks, trade names and the like and
to use, exercise, develop, grant licenses in respect of, sell and
otherwise turn to account, the same.
(h) To aid by further investment any issuer, any obligation of or
interest in which is held by the Corporation or in the affairs of which
the Corporation has any direct or indirect interest; to do all acts and
things designed to protect, preserve, improve or enhance the value of
such obligation or interest; to guarantee or become surety on any or all
of the contracts, stocks, bonds, notes, debentures and other obligations
of any corporation, company, trust, association or firm.
(i) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock in any
manner and to the extent now or hereafter permitted by applicable law and
by these Articles of Incorporation.
(j) To carry out all or any of the foregoing objects and purposes
as principal or agent, and alone or with associates or, to the extent now
or hereafter permitted by the General Laws of the State of Maryland, as a
member of, or as the owner or holder of any security of, or interest in,
any firm, association, corporation, partnership, trust or syndicate; and
in connection therewith to make or enter into such deeds or contracts
with any persons, firms, associations, corporations, partnerships,
syndicates, governments or political subdivisions or agencies or
instrumentalities thereof and to do such acts and
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things and to exercise such powers, as a natural person could lawfully
make, enter into, do or exercise.
(k) In general to carry on any other business in connection with or
incidental to any of the foregoing objects and purposes; to have and
exercise all the powers conferred upon corporations by the General Laws
of the State of Maryland as in force from time to time; to do everything
necessary, suitable or proper for the accomplishment of any purpose or
the attainment of any object or the furtherance of any power set forth
herein, either alone or in association with others; and to do every other
act or thing incidental or appurtenant to or growing out of or connected
with the aforesaid business or purposes, objects or powers.
(l) To conduct and carry on its business, or any part thereof, and
to exercise and enjoy, in Maryland and anywhere else in the world, all of
the powers, rights and privileges granted to, or conferred upon,
corporations by the General Laws of the State of Maryland now or
hereafter in force and by the laws of any other such location applicable
to the Corporation, and the enumeration of the foregoing powers shall not
be deemed to exclude any powers, rights or privileges so granted or
conferred.
(m) The foregoing objects and-purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to,
or inference from, the terms of any other clause of this or any other
Article of these Articles of Incorporation, and shall each be regarded as
independent and construed as a power as well as an object and a purpose,
and the enumeration of specific purposes, objects and powers shall not be
construed to limit or restrict in any manner the meaning of general terms
or the general powers of the Corporation now or hereafter conferred by
the General Laws of the State of Maryland, nor shall the expression of
one thing be deemed to exclude another, though it be of like nature, not
expressed; provided, however, that the Corporation shall not have power
to carry on within the State of Maryland any business whatsoever the
carrying on of which would preclude it from being classified as an
ordinary business corporation under the laws of said State; nor shall it
carry on any business, or exercise any powers, in any other state,
territory, district or country except to the extent that the same may
lawfully be carried on or exercised under the laws thereof.
7.9. Merger or Consolidation. In connection with the acquisition of all
or substantially all the assets or stock of another investment company or
investment trust, the Board of Directors may issue or cause to be issued shares
of capital stock of the Corporation and accept in payment therefor, in lieu of
cash, such assets at their market value, or such stock at the market value of
the assets held by such investment company or investment trust, either with or
without adjustment for contingent costs or liabilities, provided such assets
are of the character in which the Corporation is permitted to invest.
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7.10. Liability of Stockholders. The stockholders of the Corporation
shall not be liable for, and their private property shall not be subject to,
claim, levy or other encumbrance on account of debts or liabilities of the
Corporation, to any extent whatsoever.
7.11. Owner of Shares. The Corporation shall be entitled to treat the
person in whose name any share of the capital stock of the Corporation is
registered as the owner thereof for purposes of dividends and other
distributions in the course of business or in the course of recapitalization,
consolidation, merger, reorganization, liquidation, sale of the property and
assets of the Corporation, or otherwise, and for the purpose of votes,
approvals and consents by stockholders, and for the purpose of notices to
stockholders, and for all other purposes whatever; and the Corporation shall
not be bound to recognize any equitable or other claim to or interest in such
share, on the part of any other person, whether or not the Corporation shall
have notice thereof, save as expressly required by law.
IN WITNESS WHEREOF, the undersigned incorporator of O.R.I. Funds, Inc.
hereby executes the foregoing Articles of Incorporation and acknowledges the
same to be her act.
Dated this 15th day of October, 1993.
/s/ Carol A. Gehl
--------------------
Carol A. Gehl
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O.R.I. FUNDS, INC.
Articles of Amendment
O.R.I. Funds, Inc., a Maryland corporation having its principal office in
Maryland in Baltimore City (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation are amended by redesignating all of
the One Hundred Million (100,000,000) issued and unissued shares of capital
stock of the Corporation currently designated as O.R.I. Growth Fund series
stock as Class A stock of the O.R.I. Growth Fund series.
SECOND: The foregoing amendment to the charter of the Corporation was
unanimously approved by the entire Board of Directors of the Corporation
pursuant to a consent action effective December 27, 1996.
THIRD: The charter amendment is limited to a change expressly permitted by
Section 2-605 of Title II of the Maryland General Corporation Law to be made
without action by the stockholders of the Corporation.
FOURTH: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
FIFTH: The Articles of Amendment will become effective at 12:00 a.m. on
March 1, 1997.
IN WITNESS WHEREOF, O.R.I. Funds, Inc. has caused these Articles of
Amendment to be signed as of the 26th day of February, 1997 in its name and on
its behalf by its duly undersigned authorized officers, who acknowledge that
these Articles of Amendment are the act of the Corporation and that, to the
best of their knowledge, information and belief, all matters and facts set
forth herein relating to the authorization and approval of the Articles of
Amendment are true in all material respects and that this statement is made
under penalties of perjury.
Witness: O.R.I. Funds, Inc.
/s/ Mark C. Pappas By: /s/ Samuel Wegbreit
- ------------------ ------------------------
Mark C. Pappas Samuel Wegbreit
Secretary Chairman of the Board
<PAGE> 16
O.R.I. FUNDS, INC.
Articles Supplementary
O.R.I. Funds, Inc., a Maryland corporation having its principal office in
Maryland in Baltimore City (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation by consent action
effective on December 27, 1996, unanimously approved the adoption of a
resolution reclassifying Fifty Million (50,000,000) shares of the One Hundred
Million (100,000,000) shares of Class A stock of the O.R.I. Growth Fund series
as Fifty Million (50,000,000) shares of Class C stock of the O.R.I. Growth Fund
series.
SECOND: The Class C shares of the O.R.I. Growth Fund series as so
classified by the Board of Directors of the Corporation shall have the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as set forth in Article V, Section 5.5 of the Articles of
Incorporation of the Corporation, and shall be subject to all of the provisions
of the Articles of Incorporation of the Corporation relating to the stock of
the Corporation generally, and to the following: The Class C shares of the
O.R.I. Growth Fund series shall be invested in a common investment portfolio
with the Class A shares of the O.R.I. Growth Fund series and with the shares of
any other class of the O.R.I. Growth Fund series hereafter established, and the
assets, liabilities, income, expenses, dividends and related liquidation rights
of the various classes of the shares of the O.R.I. Growth Fund series shall be
allocated among the various classes of the series in such manner as shall be
determined by the Board of Directors of the Corporation in accordance with law.
THIRD: The Class C shares of the O.R.I. Growth Fund series aforesaid have
been duly classified by the Board of Directors pursuant to authority and power
contained in the Articles of Incorporation of the Corporation.
FOURTH: These Articles Supplementary will become effective at 12:01 a.m.
on March 1, 1997.
IN WITNESS WHEREOF, O.R.I. Funds, Inc. has caused these Articles
Supplementary to be signed as of the 26th day of February, 1997 in its name and
on its behalf by its duly undersigned authorized officers, who acknowledge that
these Articles Supplementary are the act of the Corporation and that, to the
best of their knowledge, information and belief, all matters and facts set
forth herein relating to the authorization and approval of these Articles
Supplementary are true in all material respects and that this statement is made
under penalties of perjury.
<PAGE> 17
Witness: O.R.I. Funds, Inc.
/s/ Mark C. Pappas By: /s/ Samuel Wegbreit
- ------------------ ------------------------
Mark C. Pappas Samuel Wegbreit
Secretary Chairman of the Board
2
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EXHIBIT 5
O.R.I. GROWTH FUND
AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT
This Agreement, entered into as of March 1, 1997, is between O.R.I. FUNDS,
INC., a Maryland corporation (the "Corporation"), and OAK RIDGE INVESTMENTS,
INC., an Illinois corporation ("Oak Ridge").
WITNESSETH:
WHEREAS, the Corporation is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Corporation is authorized to create separate series, and classes of shares,
each with its own separate investment portfolio, and the beneficial interest in
each such series or class will be represented by a separate series or class of
shares. The first such series created by the Corporation has been designated
as the O.R.I. GROWTH FUND (the "Fund").
WHEREAS, Oak Ridge is a registered investment adviser, engaged in the
business of rendering investment advisory services.
WHEREAS, in managing the Corporation's assets, as well as in the conduct
of certain of its affairs, the Corporation seeks the benefit of the services of
Oak Ridge and its assistance in performing certain managerial functions. Oak
Ridge desires to furnish such services and to perform the functions assigned to
it under this Agreement for the consideration provided for herein.
NOW, THEREFORE, the parties have agreed as follows:
1. Appointment of Oak Ridge. The Corporation hereby appoints Oak Ridge
as investment adviser for the Fund, and Oak Ridge accepts the appointment.
Subject to the direction of the Board of Directors (the "Directors") of the
Corporation, Oak Ridge shall manage the investment and reinvestment of the
assets of the Fund in accordance with the Fund's investment objective and
policies and limitations, for the period and upon the terms herein set forth.
The investment of funds shall also be subject to all applicable restrictions of
the Articles of Incorporation and Bylaws of the Corporation as may from time to
time be in force.
2. Expenses Paid by Oak Ridge. In addition to the expenses which Oak
Ridge may incur in the performance of its responsibilities under this
Agreement, and the expenses which it may expressly undertake to incur and pay,
Oak Ridge shall incur and pay the following expenses relating to the Fund's
operations:
<PAGE> 2
(a) Reasonable compensation, fees and related expenses of the
Corporation's officers and Directors, except for such Directors who are
not interested persons (as that term is defined in Section 2(a)(19) of
the 1940 Act) of Oak Ridge; and
(b) Rental of offices of the Corporation.
3. Investment Advisory Functions. In its capacity as investment adviser
to the Fund, Oak Ridge shall have the following responsibilities:
(a) To furnish continuous advice and recommendations to the Fund,
as to the acquisition, holding or disposition of any or all of the
securities or other assets which the Fund may own or contemplate
acquiring from time to time;
(b) To cause its officers to attend meetings and furnish oral or
written reports, as the Corporation may reasonably require, in order to
keep the Board of Directors and appropriate officers of the Corporation
fully informed as to the condition of the investment portfolio of the
Fund, the investment recommendations of Oak Ridge, and the investment
considerations which have given rise to those recommendations; and
(c) To supervise the purchase and sale of securities or other
assets as directed by the appropriate officers of the Corporation.
The services of Oak Ridge are not to be deemed exclusive and Oak Ridge shall be
free to render similar services to others as long as its services for others
does not in any way hinder, preclude or prevent Oak Ridge from performing its
duties and obligations under this Agreement. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
or duties hereunder on the part of Oak Ridge, Oak Ridge shall not be subject to
liability to the Corporation, the Fund or to any shareholder of the Fund for
any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
4. Obligations of the Corporation. The Corporation shall have the
following obligations under this Agreement:
(a) To keep Oak Ridge continuously and fully informed as to the
composition of the Fund's investments and the nature of all of its assets
and liabilities;
(b) To furnish Oak Ridge with a copy of any financial statement or
report prepared for it by certified or independent public accountants,
and with copies of any financial statements or reports made to the Fund's
shareholders or to any governmental body or securities exchange;
(c) To furnish Oak Ridge with any further materials or information
which Oak Ridge may reasonably request to enable it to perform its
functions under this Agreement; and
2
<PAGE> 3
(d) To compensate Oak Ridge for its services in accordance with the
provisions of paragraph 5 hereof.
5. Compensation. The Corporation will pay to Oak Ridge for its services
to the Fund a monthly fee, payable on the last day of each month during which
or during part of which this Agreement is in effect, of 1/12 of 1% (.0008333)
of the average daily closing net asset value of the Fund for each month. For
the month during which this Agreement becomes effective and any month during
which it terminates, however, there shall be an appropriate proration of the
fee payable for such month based on the number of calendar days of such month
during which this Agreement is effective. Oak Ridge may from time to time and
for such periods as it deems appropriate voluntarily reduce its compensation
hereunder (and/or voluntarily assume expenses) for the Fund.
6. Expenses Paid by Corporation.
(a) Except as provided in this paragraph, nothing in this Agreement
shall be construed to impose upon Oak Ridge the obligation to incur, pay,
or reimburse the Corporation for any expenses not specifically assumed by
Oak Ridge under paragraph 2 above. The Fund shall pay or cause to be
paid all of its expenses including, but not limited to, investment
adviser fees; any compensation, fees, or reimbursements which the
Corporation pays to its Directors who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of Oak Ridge; fees
and expenses of the custodian, transfer agent, registrar or dividend
disbursing agent; current legal, accounting and printing expenses;
administrative, clerical, recordkeeping and bookkeeping expenses;
brokerage commissions and all other expenses in connection with the
execution of Fund transactions; interest; all federal, state and local
taxes (including stamp, excise, income and franchise taxes); expenses of
shareholders' meetings and of preparing, printing and distributing proxy
statements, notices and reports to shareholders; expenses of preparing
and filing reports and tax returns with federal and state regulatory
authorities; and all expenses incurred in complying with all federal and
state laws and the laws of any foreign country applicable to the issue,
offer, or sale of shares of the Fund, including but not limited to, all
costs involved in the registration or qualification of shares of the Fund
for sale in any jurisdiction and all costs involved in preparing,
printing and distributing prospectuses and statements of additional
information to existing shareholders of the Fund.
(b) If expenses borne by the Fund in any fiscal year exceed those
set forth in any statutory or regulatory formula applicable to the Fund,
Oak Ridge will reimburse the Fund for any excess in accordance with the
applicable statutory or regulatory formula. In addition, Oak Ridge may,
in its discretion, waive its fees and/or reimburse the Fund's operating
expenses from time to time and for such periods as it deems appropriate.
Any reimbursement of expenses will be made on a monthly basis and will be
paid to the Fund by reduction of Oak Ridge's fee hereunder, subject to
later adjustment, month by month for the remainder of the Fund's fiscal
year.
3
<PAGE> 4
7. Brokerage Commissions. For purposes of this Agreement, brokerage
commissions paid by the Corporation upon the purchase or sale of the securities
for the Fund shall be considered a cost of the securities of the Fund and shall
be paid by the Corporation. Oak Ridge is authorized and directed to place Fund
transactions only with brokers and dealers who render satisfactory service in
the execution of orders at the most favorable prices and at reasonable
commission rates; provided, however, that Oak Ridge may pay a broker or dealer
an amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if Oak Ridge determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer viewed in terms of either
that particular transaction or the overall responsibilities of Oak Ridge. In
placing Fund business with such brokers or dealers, Oak Ridge shall seek the
best execution of each transaction, and all such brokerage placement shall be
made in compliance with Section 28(e) of the Securities Exchange Act of 1934,
as amended, and other applicable state and federal laws. Notwithstanding the
foregoing, the Corporation shall retain the right to direct the placement of
all Fund transactions, and the Directors may establish policies or guidelines
to be followed by Oak Ridge in placing Fund transactions pursuant to the
foregoing provisions.
8. Purchases by Affiliates. Except for an initial investment in shares
of the Corporation, neither Oak Ridge nor any officer or director thereof shall
take a long or short position in the shares of the Corporation. This
prohibition, however, shall not prevent the purchase from the Fund of shares of
the Fund by the officers or directors of Oak Ridge at the current price
available to the public.
9. Termination. This Agreement may be terminated at any time, without
penalty, by the Directors or by the shareholders of the Fund acting by vote of
at least a majority of its outstanding voting securities (as that phrase is
defined in Section 2(a)(42) of the 1940 Act), provided in either case that 60
days' written notice of termination be given to Oak Ridge at its principal
place of business. This Agreement may also be terminated by Oak Ridge at any
time by giving 60 days' written notice of termination to the Corporation,
addressed to its principal place of business.
10. Assignment. This Agreement shall terminate automatically in the
event of any assignment (as the term is defined in Section 2(a)(4) of the 1940
Act) of this Agreement.
11. Term. This Agreement shall begin on March 1, 1997 and shall continue
in effect until March 1, 1999 and thereafter for successive periods of one
year, subject to the provisions for termination and all of the other terms and
conditions hereof if such continuation shall be specifically approved at least
annually thereafter by either (i) the vote of a majority of the Directors who
are not parties to this Agreement or "interested persons" of any such party (as
that term is defined in Section 2(a)(19) of the 1940 Act), cast in person at a
meeting called for that purpose, or (ii) the vote of a majority of the
outstanding voting securities (as that phrase is defined in Section 2(a)(42) of
the 1940 Act) of the Fund.
4
<PAGE> 5
12. Amendments. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by
the Directors or by the vote of a majority of the outstanding voting securities
(as that phrase is defined in Section 2(a)(42) of the 1940 Act) of the Fund.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois; provided, however,
that nothing herein shall be construed in a manner that is inconsistent with
the 1940 Act, the Investment Advisers Act of 1940, as amended, or the rules and
regulations promulgated with respect to such respective Acts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on one
or more counterparts as of this 1st day of March, 1997.
O.R.I. FUNDS, INC. OAK RIDGE INVESTMENTS, INC.
By: /s/ Samuel Wegbreit By: /s/ David M. Klaskin
-------------------- ---------------------
Samuel Wegbreit David M. Klaskin
Chairman President
5
<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. 6 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated December 16, 1996, relating to the financial
statements and financial highlights appearing in the November 30, 1996 Annual
Report to Shareholders of O.R.I. Growth Fund, which are included in 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
February 25, 1997
<PAGE> 1
EXHIBIT 15.2
O.R.I. FUNDS, INC.
RULE 12B-1 DISTRIBUTION AND SERVICING PLAN
CLASS C SHARES OF O.R.I. GROWTH FUND
The following Rule 12b-1 Distribution and Servicing Plan (the "Plan") has
been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended (the "Act"), by O.R.I. Funds, Inc. (the "Company"), a Maryland
Corporation, on behalf of the Class C shares of the O.R.I. Growth Fund (the
"Fund"), a series of the Company. The Plan has been approved by a majority of
the Company's Board of Directors, including a majority of the directors who are
not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan (the "Disinterested
Directors"), cast in person at a meeting called for the purpose of voting on
such plan.
In approving the Plan, the Board of Directors determined, in the exercise
of its reasonable business judgment and in light of its fiduciary duties, that
adoption of the Plan would be prudent and in the best interests of the
shareholders of the Class C shares and that, as a result, there is a reasonable
likelihood that the Plan will benefit such shareholders.
The provisions of the Plan are as follows:
1. PAYMENTS BY THE COMPANY TO PROMOTE THE SALE OF, AND TO SERVICE, THE CLASS
C SHARES
(a) The Company, on behalf of the Class C shares of the Fund, will
pay Oak Ridge Investments, Inc. (the "Distributor"), as a principal
underwriter of the Fund's shares, a distribution fee for the promotion
and distribution of the Class C shares of up to 0.75% per annum of the
average daily net assets of the Class C shares. The Company will also
pay the Distributor 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 Class C shares.
The Distributor may pay all or a portion of the distribution and/or
service fee to any securities dealer, financial institution or any other
person (the "Recipient") who renders assistance in promoting or
distributing the sale of the Class C shares or who provides certain
shareholder services to Class C shareholders pursuant to a written
agreement (the "Rule 12b-1 Related Agreement"), a form of which is
attached hereto as Appendix A. To the extent such distribution and/or
service fee is not paid to such persons, the Distributor may use the fee
for its distribution expenses incurred in connection with the sale of
Class C shares and for any of its shareholder servicing expenses incurred
in connection with servicing the holders of the Class C shares. Payment
of the distribution and service fee shall be made quarterly, within 30
days after
<PAGE> 2
the close of the quarter for which the fee is payable, upon the
Distributor forwarding to the Board of Directors of the Company the
written report required by Section 2 of this Plan; provided that the
aggregate payments by the Company, on behalf of the Fund's Class C
shares, under the Plan to the Distributor and all Recipients shall not
exceed 1.00% (on an annualized basis) of the average net assets of the
Class C shares for that quarter; and provided further that no fee shall
be paid in excess of the distribution and servicing expenses verified in
a written report and submitted by the Distributor to the Board of
Directors of the Company as required under Section 2 of this Plan.
(b) No Rule 12b-1 Related Agreement shall be entered into, and no
payments shall be made pursuant to any Rule 12b-1 Related Agreement,
unless such Rule 12b-1 Related Agreement is in writing and has first been
delivered to and approved by a vote of a majority of the Board of
Directors of the Company, and of a majority of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting
on such Rule 12b-1 Related Agreement. The form of the Rule 12b-1 Related
Agreement attached hereto as Appendix A has been approved by the
Company's Board of Directors as specified above.
(c) Any Rule 12b-1 Related Agreement shall describe the services to
be performed by the Recipient and shall specify the amount of, or the
method for determining, the compensation to the Recipient.
(d) No Rule 12b-1 Related Agreement may be entered into unless it
provides (i) that it may be terminated at any time, without the payment
of any penalty, by vote of a majority of the Disinterested Directors or
by vote of a majority of the outstanding voting securities of the Class C
shares of the Fund on not more than 60 days' written notice to the other
party to the Rule 12b-1 Related Agreement, and (ii) that it shall
automatically terminate in the event of its assignment.
(e) Any Rule 12b-1 Related Agreement shall continue in effect for a
period of more than one year from the date of its execution only if such
continuance is specifically approved at least annually by a vote of a
majority of the Board of Directors of the Company, and of the
Disinterested Directors, cast in person at a meeting called for the
purpose of voting on such Rule 12b-1 Related Agreement.
2. QUARTERLY REPORTS
The Distributor shall provide to the Board of Directors of the
Company, and the Board of Directors shall review, at least quarterly, a
written report of all amounts expended pursuant to the Plan. This report
shall include the identity of the Recipient of each payment and the
purpose for which the amounts were expended and such other information as
the Board of Directors may reasonably request.
2
<PAGE> 3
3. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective immediately upon approval by the
vote of a majority of the Board of Directors of the Company, and of the
Disinterested Directors, cast in person at a meeting called for the
purpose of voting on the approval of the Plan. The Plan shall continue
in effect for a period of one year from its effective date unless
terminated pursuant to its terms. Thereafter, the Plan shall continue
from year to year, provided that such continuance is approved at least
annually by a vote of a majority of the Board of Directors of the
Company, and of the Disinterested Directors, cast in person at a meeting
called for the purpose of voting on such continuance. The Plan may be
terminated at any time, without the payment of any penalty, by the vote
of (a) a majority of the Disinterested Directors, or (b) a majority of
the outstanding voting securities of the Class C shares of the Fund.
4. SELECTION OF DISINTERESTED DIRECTORS
During the period in which the Plan is effective, the selection and
nomination of those directors of the Company who are Disinterested
Directors of the Company shall be committed to the discretion of the
Disinterested Directors.
5. AMENDMENTS
All material amendments of the Plan shall be in writing and shall be
approved by a vote of a majority of the Board of Directors of the
Company, and of the Disinterested Directors, cast in person at a meeting
called for the purpose of voting on such amendment. In addition, the
Plan may not be amended to increase materially the amount to be spent by
the Company, on behalf of the Class C shares of the Fund, hereunder
without approval by a majority of the outstanding voting securities of
the Class C shares of the Fund.
3
<PAGE> 4
APPENDIX A
RULE 12b-1 RELATED AGREEMENT
Oak Ridge Investments, Inc.
233 North Michigan Avenue, Suite 1807
Chicago, Illinois 60601
____________, 199__
[Recipient's Name and Address]
______________________________
______________________________
Ladies and Gentlemen:
This letter will confirm our understanding and agreement with respect to
payments to be made to you pursuant to a distribution and servicing plan (the
"Plan") adopted by O.R.I. Funds, Inc. (the "Company") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Act"), with respect
to the Class C shares of the O.R.I. Growth Fund (the "Fund"), a series of the
Company. The Plan and this related agreement (the "Rule 12b-1 Related
Agreement") have been approved by a majority of the Board of Directors of the
Company, including a majority of the Board of Directors who are not "interested
persons" of the Company, as defined in the Act, and who have no direct or
indirect financial interest in the operation of the Plan or in this or any
other Rule 12b-1 Related Agreement (the "Disinterested Directors"), cast in
person at a meeting called for the purpose of voting thereon. Such approval
included a determination by the Board of Directors of the Company that, in the
exercise of its reasonable business judgment and in light of its fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Class C
shareholders of the Fund.
1(a). To the extent you provide distribution and marketing services in the
promotion of shares of the Fund's Class C shares, we shall pay a distribution
fee to you of up to 0.75% per annum of the average daily net assets of the
Fund's Class C shares which are owned of record by your firm as nominee for
your customers or which are owned by those customers of your firm whose
records, as maintained by the Company or its agent, designate your firm as the
customer's dealer of record. We reserve the right to increase, decrease or
discontinue the distribution fee at any time in our sole discretion upon
written notice to you.
(b). To the extent you provide personal services to holders of the Fund's
Class C shares, including furnishing services and assistance to your customers
who invest in and own
<PAGE> 5
____________, 199___
Page 2
shares of such class of shares, answering routine inquiries regarding the Fund
and the Class C shares and assisting in changing distribution options, account
designations and addresses, we shall pay to you a service fee of up to 0.25%
per annum of the average daily net assets of the Fund's Class C shares which
are owned of record by your firm as nominee for your customers or which are
owned by those customers of your firm whose records, as maintained by the
Company or its agent, designate your firm as the customer's dealer of record.
We reserve the right to increase, decrease or discontinue the service fee at
any time in our sole discretion upon written notice to you.
(c). We shall make the determination of the net asset value of the Class C
shares, which determination shall be made in the manner specified in the
current Prospectus relating to such shares, and pay to you quarterly, on the
basis of such determination, the fees specified above; provided that the
aggregate payments by us to you in any one quarter shall not exceed 1.00% (on
an annualized basis) of the average net assets of the Class C shares for such
quarter. No such quarterly fees will be paid to you with respect to shares
purchased by you and redeemed or repurchased by the Company, its agent or us
within seven (7) business days after the date of our confirmation of such
purchase. In addition, no such quarterly fees will be paid to you with respect
to any of your customers if the amount of such fees based upon the value of
such customer's Class C shares will be less than $1.00. Payment of such
quarterly fees shall be made within 45 days after the close of each quarter for
which such fees are payable.
2. You shall furnish us with such information as shall reasonably be
requested by the Board of Directors of the Company with respect to the fees
paid to you pursuant to this Rule 12b-1 Related Agreement.
3. We shall furnish to the Board of Directors of the Company, for its
review, on a quarterly basis, a written report of the amounts expended under
the Plan by us and the purposes for which such expenditures were made.
4. This Rule 12b-1 Related Agreement may be terminated (i) by the vote of
a majority of the Disinterested Directors of the Company or by a vote of
majority of the outstanding shares of the Class C shares of the Fund on sixty
(60) days' written notice, without payment of any penalty or (ii) by any act
which terminates the Distribution Agreement between the Company and us. In
addition, this Rule 12b-1 Related Agreement shall terminate immediately in the
event of its assignment. This Rule 12b-1 Related Agreement may be amended by
us upon written notice to you, and you shall be deemed to have consented to
such amendment upon effecting any purchases of shares for your own account or
on behalf of any of your customer's accounts following your receipt of such
notice.
5. The provisions of the Distribution Agreement between the Company and
us are incorporated herein by reference. This Rule 12b-1 Related Agreement
shall become effective on the date accepted by you and shall continue in full
force and effect so long as the continuance of
<PAGE> 6
_________________, 199__
Page 3
the Distribution Agreement, the Plan and this Rule 12b-1 Related Agreement
are approved at least annually by a vote of the Board of Directors of the
Company and of the Disinterested Directors, cast in person at a meeting called
for the purpose of voting thereon. All communications to us should be sent to
the above address. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below. This Rule 12b-1
Related Agreement shall be construed under the laws of the State of Illinois.
Oak Ridge Investments, Inc.
By: ______________________
(Authorized Signature)
Accepted:
___________________________
(Dealer's Name)
___________________________
(Street Address)
___________________________
(City) (State) (ZIP)
___________________________
(Telephone No.)
___________________________
(Facsimile No.)
By:______________________
(Authorized Signature of Dealer)
<PAGE> 1
EXHIBIT 16
SCHEDULE FOR COMPUTATIONS
OF PERFORMANCE QUOTATIONS
FOR THE ONE YEAR PERIOD ENDED NOVEMBER 30, 1996
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL VALUE) - 1
Total return = 20.9%
20.9% = ($17,358/$14,359) - 1
FOR THE PERIOD FROM JANUARY 3, 1994 (COMMENCEMENT OF OPERATIONS) TO
NOVEMBER 30, 1996
CUMULATIVE TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT) - 1
Cumulative total return = 73.6%
73.6% = ($17,358/$10,000) - 1
1/n
TOTAL RETURN = (ENDING REDEEMABLE VALUE/INITIAL PAYMENT - 1
Total return = 20.9%
1/2.9
20.9% = ($17,358/$10,000) - 1
MW1-64088-1
<PAGE> 1
EXHIBIT 18
O.R.I FUNDS, INC.
RULE 18F-3
MULTIPLE CLASS PLAN
O.R.I. Funds, Inc. (the "Company"), a registered investment company
currently consisting of the O.R.I. Growth Fund (the "Fund"), has elected to
rely on Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"), in offering multiple classes of shares of the Fund. The Board of
Directors of the Company has determined that the following plan (the "Plan") is
in the best interests of each class individually and the Company as a whole:
1. CLASS DESIGNATION. Fund shares will be designated either Class A or
Class C.
2. CLASS CHARACTERISTICS. Each class of shares will represent interests
in the same portfolio of investments and will be identical in all respects to
the other class, except as set forth below:
Class A: Class A shares will be sold subject to a maximum front-end sales
charge of 4.25%, subject to certain exceptions as set forth in
the current prospectus for the Class A shares. Class A shares
will also be subject to a distribution plan adopted pursuant to
Rule 12b-1 under the 1940 Act which provides for an annual
distribution fee of up to 0.25% of the average daily net assets
of Class A shares. The distribution plan fees for the Class A
shares will be used to reimburse the Fund's distributor for
distributing the Class A shares.
Class C: Class C shares will be offered for sale at net asset value per
share without the imposition of a sales charge. However, Class
C shares will be subject to a distribution plan adopted pursuant
to Rule 12b-1 under the 1940 Act which provides for an annual
distribution fee of up to 1.00% of the average daily net assets
of Class C shares. (0.25%) of this fee constitutes a service fee
which is used for personal service and/or the maintenance of
shareholder accounts). The distribution plan fees for the Class
C shares will be used to reimburse the Fund's distributor for
distributing the Class C shares.
3. EXPENSE ALLOCATIONS. The following expenses will be allocated on a
class-by-class basis, to the extent practicable: (i) fees under the
distribution plans; (ii) printing and postage expenses related to preparing and
distributing materials to existing shareholders of a particular class; (iii)
Securities and Exchange Commission and blue sky registration fees incurred on
behalf of the shareholders of a particular class; (iv) the expense of
administrative personnel
<PAGE> 2
and services required to support the shareholders of a particular
class; (v) accounting, auditor, litigation or other legal expenses relating
solely to a particular class; (vi) transfer agent fees identified by the
transfer agent as being attributable to a particular class; and (vii) expenses
incurred in connection with shareholder meetings as a result of issues relating
to a particular class. Income, realized and unrealized capital gains and
losses, and expenses of the Fund not allocated to a particular class will be
allocated on the basis of the net asset value of each class. Notwithstanding
the foregoing, a service provider for the Fund may waive or reimburse the
expenses of a specific class or classes to the extent permitted under Rule
18f-3 of the 1940 Act.
4. EXCHANGES AND CONVERSIONS. There are no exchange or conversion
features associated with the Class A or Class C shares.
5. GENERAL. Each class will vote exclusively with respect to any matter
related solely to that class. Each class will vote separately with respect to
any matter in which the interests of one class differ from the interests of the
other class. On an ongoing basis, the Board of Directors will monitor the Plan
for any material conflicts between the interests of the classes of shares. The
Board of Directors will take such action as is reasonably necessary to
eliminate any conflict that develops. The Fund's investment adviser and
distributor will be responsible for alerting the Board of Directors to any
material conflicts that may arise. Any material amendment to this Plan must be
approved by a majority of the Board of Directors, including a majority of the
directors who are not interested persons of the Company, as defined in the 1940
Act. This Plan is qualified by and subject to the then current prospectus for
the applicable class, which contains additional information about that class.
2
