OBERWEIS FUNDS - By -Laws . 11

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NX1WZVtlFwt+XzKL9lLGV3n6HaJzizoM2cRU2mW6hU4Ktl80c4MzeCdbNXvcMcYT 5dLH8ofiT3P+p/gX/BKzOw== 0000950131-95-002874.txt : 19951019 0000950131-95-002874.hdr.sgml : 19951019 ACCESSION NUMBER: 0000950131-95-002874 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 21 FILED AS OF DATE: 19951018 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OBERWEIS EMERGING GROWTH FUND /IL/ CENTRAL INDEX KEY: 0000803020 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-09093 FILM NUMBER: 95581342 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04854 FILM NUMBER: 95581343 BUSINESS ADDRESS: STREET 1: ONE CONSTITUTION DRIVE CITY: AURORA STATE: IL ZIP: 60506 BUSINESS PHONE: 7088977100 MAIL ADDRESS: STREET 1: ONE CONSTITUTION DRIVE CITY: AURORA STATE: IL ZIP: 60506 485APOS 1 REGISTRATION STATEMENT SEC Filing Fees Account #0000803020 AS FILED WITH THE SECURITIES AND 1933 ACT FILE NO. 33-9093 EXCHANGE COMMISSION ON OCTOBER 18, 1995 1940 ACT FILE NO. 811-4854 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No.__ [_] Post-Effective Amendment No. 10 [X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 12 [X] OBERWEIS EMERGING GROWTH FUND (to be renamed The Oberweis Funds) (Exact Name of Registrant as Specified in Charter) c/o Oberweis Asset Management, Inc. One Constitution Drive Aurora, Illinois 60506 (Address of Principal Executive Offices, Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (800) 323-6166 Patrick B. Joyce Oberweis Asset Management, Inc. One Constitution Drive Aurora, Illinois 60506 (Name and Address of Agent for Service) Copies to: CATHY G. O'KELLY VEDDER, PRICE, KAUFMAN & KAMMHOLZ 222 NORTH LASALLE STREET, SUITE 2600 CHICAGO, ILLINOIS 60601 DECLARATION PURSUANT TO RULE 24f-2 Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant has declared that an indefinite number or amount of Shares of beneficial interest in the Fund has been registered under the Securities Act of 1933. The Rule 24f-2 Notice for the year ended December 31, 1994 was filed with the Securities and Exchange Commission on or about February 27, 1995. It is proposed that this filing will become effective (check appropriate box) [_] immediately upon filing pursuant to paragraph (b) [_] on (date) pursuant to paragraph (b) [_] 60 days after filing pursuant to paragraph (a)(1) [_] on (date) pursuant to paragraph (a)(1) [X] 75 days after filing pursuant to paragraph (a)(2) [_] on (date) pursuant to paragraph (a)(2) of Rule 485 If appropriate, check the following box: [_] This post-effective amendment designates a new effective date for a previously filed post-effective amendment CROSS REFERENCE SHEET

Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C of this Registration Statement. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED OCTOBER 18, 1995 The Oberweis Funds The Oberweis Funds (the "Fund") is a fully-managed, diversified, open-end mu- tual fund currently consisting of two portfolios--the Oberweis Emerging Growth Portfolio, which prior to January 1, 1996, was known as the Oberweis Emerging Growth Fund (the "Emerging Growth Portfolio"), and the Oberweis Micro-Cap Port- folio (the "Micro-Cap Portfolio"). Shares of the Micro-Cap Portfolio were first offered to the public on January 1, 1996 at $10 per share. The Fund anticipates ceasing sales of the Micro-Cap Portfolio to both new shareholders and existing shareholders when that Portfolio reaches $50 million in net assets. Prior to January 1, 1996, the Fund was named the Oberweis Emerging Growth Fund and con- sisted of the one portfolio, which was known by the same name. The investment objective of each Portfolio is to maximize capital appreciation. Each Portfolio intends to achieve its objective through an investment program emphasizing common stocks of companies that the investment adviser, Oberweis Asset Management, Inc. ("OAM"), believes have the potential for above-average long-term growth in market value. Each Portfolio's investment program may in- volve a greater degree of risk than is customarily associated with more conservative investment programs. This Prospectus, which should be read and re- tained for future reference, sets forth concisely the information an investor should know before investing in the Fund. A Statement of Additional Information for the Fund dated has been filed with the Securities and Exchange Commission and may be obtained without charge by calling or writing the Fund at the telephone number or address listed below. The Statement of Additional Information is incorporated by reference into this Prospectus. - -------------------------------------------------------------------------------- One Constitution Drive Aurora, Illinois 60506 (800) 323-6166 Table of Contents - -------------------------------------------------------------------------------- Synopsis of Fees............................................................ 2 Financial Highlights........................................................ 3 Performance Comparison...................................................... 4 Investment Objective, Policies and Risks.................................... 6 Management of the Portfolios................................................ 8 The Advisory and Management Agreements................................................................. 9 Distribution of Shares...................................................... 10 Expenses of the Fund........................................................ 10 Portfolio Transactions...................................................... 11 How to Purchase Shares...................................................... 11 How to Redeem Shares........................................................ 12 Net Asset Value............................................................. 13 Shareholder Services........................................................ 13 Dividends, Distributions and Tax Status..................................... 14 The Custodian and Transfer Agent............................................ 15 General Information......................................................... 15

- -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH COMMIS- SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- The date of this Prospectus is . INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGIS- TRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLIC- ITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SYNOPSIS OF FEES
PORTFOLIO --------------- EMERGING MICRO- SHAREHOLDER TRANSACTION EXPENSES GROWTH CAP - -------------------------------- -------- ------ Sales Charge Imposed on Purchases (as a percentage of offering price)........................................................ None None Sales Charge Imposed on Reinvested Dividends or Capital Gain Distributions................................................. None None Redemption Fees................................................ None None* Exchange Fees.................................................. None None *The Micro-Cap Portfolio imposes a withdrawal charge of .25% on redemption proceeds ANNUAL FUND OPERATING EXPENSES - ------------------------------ (as a percentage of average net assets) Advisory and Management Fees................................... .82% 1.00% 12b-1 Fees..................................................... .25% .25% Other Expenses................................................. .46% .75% Total Fund Operating Expenses.................................. 1.53% 2.00%*

EXAMPLE 1 YR. 3 YRS. 5 YRS. 10 YRS. - ------- ----- ------ ------ ------- You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and redemption at the end of each time period: Emerging Growth Portfolio......................... $16 $48 $83 $182 Micro-Cap Portfolio............................... $20 $63 -- --
The purpose of the foregoing table is to assist an investor in understanding the various costs and expenses that an investor in the Fund may bear directly or indirectly. Long-term shareholders may pay more in total sales charges than the economic equivalent of the maximum front-end sales charge permitted by the National Association of Securities Dealers, Inc. There is a .25% withdrawal charge on the Micro-Cap Portfolio, which is deducted from the redemption amount and is used to reimburse the Portfolio for the expenses it incurs in connection with the Shareholder's liquidation of shares. In addition, for each Portfolio, there is a $6 fee for each wire redemption, which is deducted from a Sharehold- er's redemption amount. Annual Fund Operating Expenses for the Emerging Growth Portfolio are based on the Portfolio's expenses for the fiscal year ended De- cember 31, 1994 except that the figures have been restated for the reduction in 12b-1 Fees to .25% effective January 1, 1996. Annual Fund Operating Expenses for the Micro-Cap Portfolio are based on estimates of expenses for the current fiscal year. The hypothetical examples are based on the expenses in the table and an assumed annual rate of return of 5%. The Micro-Cap Portfolio commenced the public offering of shares on January 1, 1996, thus estimates of expenses in the example are shown for only the one and three year periods. THE EXAMPLES SHOULD NOT BE CONSIDERED AN INDICATION OF ACTUAL OR EXPECTED PORTFOLIO PERFOR- MANCE OR EXPENSES, BOTH OF WHICH MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete explanation of the fees and expenses borne by each Portfolio, please see the discussions under the Prospectus headings "The Advisory and Man- agement Agreements," "Distribution of Shares," "Expenses of the Fund," and "Portfolio Transactions," as well as the Statement of Additional Information incorporated by reference into this Prospectus. *The Manager will reimburse the Micro-Cap Portfolio for total operating ex- penses in excess of 2% of average net assets for the first 12 months of operations. 2 FINANCIAL HIGHLIGHTS The following table shows important financial information for the Emerging Growth Portfolio expressed in terms of one share outstanding throughout the pe- riods. The per share data was determined using average shares outstanding during the period. The information in the table has been audited by the Fund's independent auditors except for the financial information as of June 30, 1995, which is unaudited. The auditors' unqualified report, along with the complete financial statements for the Emerging Growth Portfolio, is included in the Emerging Growth Portfolio's Annual Report, which is incorporated by reference into the Statement of Additional Information.
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED) ----------- Net Asset Value, Beginning of Period..... $ 21.41 Income from Investment Operations: Net investment loss..... (0.13) Net realized and unrealized gain (loss) on investments......... 5.59 -------- Total from investment operations............. 5.46 Less Distributions: Net realized gain on investments............ -- -------- Net Asset Value, End of Period................. $ 26.87 ======== Total Return (%)(b)..... 25.5 Ratios/Supplemental Data: Net assets, end of period (in thousands).. $116,924 Ratio of expenses to average net assets (%). 1.75(a,c) Ratio of net investment loss to average net assets (%)............. (1.26)(a,c) Portfolio turnover rate (%).................... 75 YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------------------------ 1994 1993 1992 1991 1990 1989 1988 1987(D) -------- ------------ ----------- ----------- ----------- ----------- -------- ----------- Net Asset Value, Beginning of Period..... $ 22.19 $ 20.90 $ 18.39 $ 12.11 $ 12.06 $ 9.65 $ 9.13 $ 10.04 Income from Investment Operations: Net investment loss..... (0.22) (0.22) (0.21) (0.09) (0.24) (0.35) (0.20) (0.15) Net realized and unrealized gain (loss) on investments......... (0.56) 2.25 2.72 10.64 0.29 2.76 0.72 (0.76) -------- ------------ ----------- ----------- ----------- ----------- -------- ----------- Total from investment operations............. (0.78) 2.03 2.51 10.55 0.05 2.41 0.52 (0.91) Less Distributions: Net realized gain on investments............ -- (0.74) -- (4.27) -- -- -- -- -------- ------------ ----------- ----------- ----------- ----------- -------- ----------- Net Asset Value, End of Period................. $ 21.41 $ 22.19 $ 20.90 $ 18.39 $ 12.11 $ 12.06 $ 9.65 $ 9.13 ======== ============ =========== =========== =========== =========== ======== =========== Total Return (%)(b)..... (3.5) 9.7 13.7 87.1 0.4 25.0 5.7 (9.1) Ratios/Supplemental Data: Net assets, end of period (in thousands).. $90,014 $104,324 $54,063 $19,730 $11,604 $12,940 $15,914 $16,856 Ratio of expenses to average net assets (%). 1.78 1.80(a) 1.99(a) 2.13(a) 2.15(a) 2.00(a) 2.46 1.99(c) Ratio of net investment loss to average net assets (%)............. (1.06) (1.04)(a) (1.14)(a) (1.27)(a) (1.24)(a) (1.19)(a) (1.80) (1.48)(c) Portfolio turnover rate (%).................... 66 70 63 114 62 112 67 55
- ------- (a) Net of expense reimbursement from related parties. Expense ratios would have been 1.83% for 1995, 1.82% for 1993, 2.41% for 1992, 3.01% for 1991, and 3.48% for both 1990 and 1989 before expense reimbursement. (b) A sales load of 4% was charged until December 31, 1991 and is not reflected in the above total return figures. (c) Annualized. (d) From inception of Fund, January 7, 1987. 3 PERFORMANCE COMPARISON The following table compares the Emerging Growth Portfolio's total return for the nine-month period ended September 30, 1995 and the one year period ended June 30, 1995 with the total return of various indexes of unmanaged securities:
NINE MONTHS ONE YEAR ENDED PERIOD ENDED SEPTEMBER 30, 1995 JUNE 30, 1995 ------------------ ------------- Oberweis Emerging Growth Portfolio...... 39.6% 48.0% Dow-Jones Industrial Average............ 24.9% 25.7% S&P 500................................. 29.8% 26.1% NASDAQ National Composite............... 38.8% 32.2% Lipper Small Company Growth Index....... 28.4% 26.0% Russell 2000 Index...................... 25.7% 20.1% Wilshire 5000 Index..................... 30.1% 24.7%
The Dow-Jones Industrial Average is a widely recognized stock market indicator that consists of the price movements of 30 major industrial companies in the United States. The Standard & Poor's 500 Stock Composite is widely regarded as representative of general stock market activity. The NASDAQ National Composite, Lipper Small Company Growth Index, Russell 2000 Index and the Wilshire 5000 In- dex represent portfolios that are somewhat more representative of the securities held by the Emerging Growth Portfolio. Total return includes price level changes, dividends and capital gain distribu- tions. As calculated in accordance with applicable regulations of the Securities and Exchange Commission, the Emerging Growth Portfolio's average an- nual total returns for the following periods ended June 30, 1995 are: AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JUNE 30, 1995
PAST PAST LIFE OF FUND 1 YEAR 5 YEARS (1/7/87) ------ ------- ------------ Emerging Growth Portfolio..................... 48.0% 17.6% 15.6% S&P 500....................................... 26.1% 12.1% 11.9% Russell 2000 Index............................ 20.1% 12.9% 10.2%
4 ASSUMED $10,000 INVESTMENT IN THE EMERGING GROWTH PORTFOLIO FROM 1/07/87 THROUGH 9/30/95
Russell Oberweis S&P 500 2000 $10,000 $10,000 $10,000 1987 $ 9,094 $ 9,948 $ 8,537 1988 $ 9,612 $11,598 $10,664 1989 $12,012 $15,267 $12,395 1990 $12,062 $14,822 $ 9,977 1991 $22,573 $19,345 $14,571 1992 $25,653 $20,822 $17,254 1993 $28,147 $22,909 $20,515 1994 $27,157 $23,206 $20,166 1995 $37,911 $30,115 $25,351
All data assumes reinvestment of dividends and capital gains. Results represent past performance and do not indicate future results. The value of an investment in the Emerging Growth Portfolio and the return on the investment both will fluctuate and redemption proceeds may be higher or lower than an investor's original cost. When first organized in 1987, the Emerging Growth Portfolio ap- plied a sales charge to each share purchase. The Portfolio's sales charge was eliminated on December 31, 1991. The performance graph and the average annual return figures do not reflect the load. Additional information concerning performance results of the Emerging Growth Portfolio is contained in the Annual and Semi-Annual Reports which are avail- able upon request without cost from the Fund. 5 INVESTMENT OBJECTIVE, POLICIES AND RISKS INVESTMENT OBJECTIVE--The investment objective of each Portfolio is to maximize capital appreciation. The realization of current income will not be a consider- ation in the selection of securities for investment, and the Portfolios are not designed for investors seeking income rather than capital appreciation. The in- vestment objective of each Portfolio is a fundamental policy and may not be changed without approval of the shareholders of that Portfolio, which is de- scribed in the Statement of Additional Information. INVESTMENT PROGRAM AND PHILOSOPHY--The Emerging Growth Portfolio is managed to seek out companies that the Portfolio's investment adviser, OAM, believes have the potential for above-average long-term growth in market value. The Portfolio may invest in companies of all size capitalizations, however, because it is be- lieved that the potential for such growth may tend to be found more often in relatively small capitalization companies, which fall in the lowest 20% capi- talization of the companies listed on the New York Stock Exchange or companies of similar or smaller capitalization which are listed on the American Stock Ex- change or are traded over the counter (typically with capitalization of less than $600,000,000), it is anticipated that approximately 80% of the Portfolio's assets will be invested in the securities of such smaller companies with the Portfo lio's average market capitalization being approximately $500,000,000. However, such percentage may vary greatly from time to time based on OAM's analysis of economic and market conditions The Micro-Cap Portfolio is managed to seek out companies that OAM believes have the potential for above-average long-term growth in market value. The Portfolio will generally invest in companies with a market capitalization of not more than $250,000,000 at the time of acquisition, with the Portfolio's average mar- ket capitalization being approximately $100,000,000. It is anticipated that at least 80% of the companies that the Portfolio will invest in will have a market capitalization of not more than $250,000,000 at time of purchase and at least 50% of the companies will have market capitalization of $100,000,000 or less at the time of purchase. Each Portfolio in particular seeks to invest in those companies which OAM con- siders as having such above-average long-term growth potential based on its analysis of eight factors, which the portfolio manager calls the "Oberweis Oc- tagon." These factors are: 1. rapid growth in revenue, preferably generated by internal growth as op- posed to acquisitions of other businesses, at least 30% in the latest quarter; 2. rapid growth in pre-tax income (at least 30% in the latest quarter) and in earnings per share; 3. reasonable price earnings ratio in relation to the company's underlying growth rate, generally a price earnings ratio not more than 1/2 of the company's growth rate; 4. products or services that offer the opportunity for substantial future growth; 5. favorable recent trends in revenue and earnings growth; 6. reasonable price-to-sales ratio based on the company's underlying growth prospects and profit margins; 7. a review of the company's balance sheet, with particular attention to footnotes, in order to identify unusual items which may indicate future prob- lems; and 8. high relative strength in the market, in that the company's stock has outperformed at least 75% of other stocks in the market over the preceding twelve months. OAM considers these eight factors as guidelines by which it may evaluate the many companies it reviews, but such factors and the relative weight given to each will vary with economic and market conditions and the type of company be- ing evaluated. No one factor will justify, and any one factor may (but will not necessarily) preclude, an investment in a particular company. Generally, at least seventy-five percent (75%) or more of each Portfolio's as- sets will be invested in common stocks, but each Portfolio may also invest in convertible securities, preferred stocks, securities of foreign issuers (most of which are traded on United States stock exchanges or listed on NASDAQ), and restricted securities. In addition, the Portfolios may establish and maintain reserves for temporary defensive purposes or to enable it to take advantage of buying opportunities. Each Portfolio's reserves may be held in cash or invested in high quality money market instruments, including U.S. government obliga 6 tions, certificates of deposit, bankers' acceptances, commercial paper (rated prime 3 or better by Moody's Investors Service, Inc. or the equivalent), corpo- rate debt securities (rated A or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation) and repurchase agreements. The Portfolios may also lend its portfolio securities, write (sell) options against investment po- sitions and purchase put and call options. See "Certain Other Investment Practices and Risks Which You Should Consider," below. To diversify the Portfolios and reduce investment risk, each Portfolio has adopted certain fundamental policies, which restrict each from the following: (1) purchasing the securities of any issuer if, as a result: (a) it would own more than 10% of the outstanding securities of any class of any issuer, (b) such holdings would amount to more than 5% of the Portfolio's total assets, or (c) more than 25% of its total assets would be concentrated in any one in- dustry; (2) the borrowing of money, except for temporary or emergency purposes or as necessary for the clearance of purchases and sales of securities, and then only in amounts not exceeding 5% of the Portfolio's total assets; (3) in any manner transferring as collateral any securities owned by the Portfolio, except as may be necessary in connection with permissible borrow- ings, which in no event will exceed 5% of its net assets valued at market; and (4) purchasing additional securities when money borrowed exceeds 5% of the Portfolio's total assets. Each Portfolio's investment program, discussed above, is subject to further re- strictions, which are described elsewhere in this Prospectus and in the Statement of Additional Information. ARE THE PORTFOLIOS' INVESTMENT OBJECTIVE AND POLICIES APPROPRIATE FOR YOU?--The Portfolios are designed for investors who can accept the risks involved in seeking maximum capital appreciation. Although each Portfolio seeks to reduce risk by investing in a diversified portfolio, investors should realize that the very nature of investing in small, and often newer, companies involves greater risk than is customarily associated with more established companies. Smaller and newer companies often have limited product lines, markets, management per- sonnel, research and/or financial resources. The securities of small companies, which may be thinly capitalized, may have limited marketability and be subject to more abrupt or erratic market movements than securities of larger companies or the market averages in general. Because the Portfolios' investment policies will be oriented to capital appreciation, as opposed to dividend income, each Portfolio may be considered to be an investment of above average risk. Each Portfolio is not intended to constitute a balanced investment program. Divi- dends are expected to be minimal and there can be no assurance that a Portfolio's objective will be met. EACH PORTFOLIO IS INTENDED FOR LONG-TERM INVESTORS WHO CAN BEAR THE RISKS IN- VOLVED IN THE PORTFOLIO'S INVESTMENTS. ACCORDINGLY, EACH PORTFOLIO DISCOURAGES SHORT-TERM TRADING IN ITS SHARES. CERTAIN OTHER INVESTMENT PRACTICES AND RISKS WHICH YOU SHOULD CONSIDER--Lending of Portfolio Securities. For the purpose of realizing some income on its port- folio securities, each Portfolio may make security loans of its portfolio securities, of up to 30% of its total assets, to broker-dealers or institu- tional investors. Any such loan will be continuously secured by collateral at least equal to 100% of the value of the security loaned. While the securities are being lent, the Portfolios will continue to receive the equivalent of any dividends or interest paid by the issuer thereof, as well as interest on the collateral. Any gain or loss in the market value of the securities loaned that might occur during the term of the loan would be for the account of the Portfo- lio. As with any extension of secured credit, portfolio security loans involve certain risks in the event a borrower should fail financially, including delays or inability to recover the loaned securities or foreclosure against the col- lateral. Each Portfolio will consider on an ongoing basis the creditworthiness of the borrowers to which it makes portfolio security loans. Restricted Securities. Each Portfolio may not invest more than 5% of its total assets in securities that are not readily marketable, including repurchase agreements with maturities of seven days or more, and securities of unseasoned issuers that have been in continuous operation for less than three years and may not invest more than 5% of its total assets in securities where resale is legally or contractually restricted (all of which are collectively referred to as "restricted securities"). Restricted securities may be resold by the Portfo- lio to other institutions. Provided that a dealer or institutional trading market in such securities exists, these restricted securities may be treated as exempt from the Portfolio's limitation on illiquid secu 7 rities. Because institutional trading in restricted securities is relatively new, it is not possible to predict how these institutional markets will develop. If institutional trading in restricted securities were at limited lev- els, the liquidity of each Portfolio's investments could be adversely affected. Options. Each Portfolio may also write (sell) covered call options on its port- folio securities, the aggregate market value of which underlying securities is limited to 50% of the Portfolio's net assets. A call option gives the buyer (holder) the right to purchase the underlying security at a specified price (the "exercise price") within a certain time period. Where the writer (seller) of the option, in this case the Portfolio, already owns the underlying securi- ty, the call option is considered to be "covered." The Portfolio will receive a premium, which is the market value of the option, when it writes (sells) a call option. The premium provides a partial hedge (protection) against declining prices and enables the Portfolio to generate a higher return during periods when OAM does not expect the underlying security to make any major price moves in the near future but still deems the underlying security to be, over the long term, an attractive investment for the Portfolio. In determining whether to write (sell) a covered call option on one of the Portfolio's securities, OAM will consider the reasonableness of the anticipated premium in relation to the anticipated increase in market value of the underlying security over the option period. Although the writing (selling) of covered call options is believed by OAM to be a conservative investment technique that involves relatively little risk, risks involved in writing (selling) a covered call option include the possible inability to effect closing transactions at favorable prices and the inability to participate in any appreciation of the underlying security above the exercise price plus premium. The Portfolio may also be exposed to a possi- ble price decrease in the underlying security that might otherwise have been sold while the Portfolio continues to hold such underlying security during the option period, although any such loss during such period would be reduced by the amount of the premium received. The Portfolios do not consider a security covered by a call to be "pledged" as that term is used in each Portfolio's in- vestment policy limiting the pledging or mortgaging of its assets. In addition, each Portfolio may invest up to 5% of its assets in the purchase of put and call options, primarily to minimize principal fluctuation. The risks involved in purchasing put or call options include the possible loss of the entire pre- mium. Each Portfolio may also purchase put and call options on stock indices ("stock index options"), for the purpose of partially hedging against the risk of unfavorable price movements adversely affecting the Portfolio's securities or securities the Portfolio intends to buy, and may sell stock index options in related closing transactions. Foreign Securities. Foreign securities involve currency risks. The U.S. Dollar value of a foreign security tends to decrease when the value of the U.S. Dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the U.S. Dollar falls against such curren- cy. Fluctuations in exchange rates may also affect the earning power and asset value of the foreign entity issuing the security. Dividend and interest pay- ments may be repatriated based upon the exchange rate at the time of disbursement or payment, and restrictions on capital flows may be imposed. Losses and other expenses may be incurred in converting between various curren- cies. Foreign securities may be subject to foreign government taxes that reduce their attractiveness. Other risks of investing in such securities include political or economic instability in the country involved, the difficulty of predicting international trade patterns and the possible imposition of exchange controls. The prices of such securities may be more volatile than those of domestic secu- rities and the markets for such securities may be less liquid. In addition, there may be less publicly available information about foreign issuers than about domestic issuers. Many foreign issuers are not subject to uniform ac- counting, auditing and financial reporting standards comparable to those applicable to domestic issuers. There is generally less regulation of stock ex- changes, brokers, banks and listed companies abroad than in the United States. With respect to certain foreign countries, there is a possibility of expropria- tion or diplomatic developments that could affect investment in these countries. A more thorough description of certain of these investment practices and a dis- cussion of their associated risks are contained in the Statement of Additional Information. MANAGEMENT OF THE PORTFOLIOS The business and affairs of the Fund and each of the Portfolios are supervised by the Fund's Board of Trustees (the "Trustees"). The Statement of Additional Information contains general background information regarding each of the Trustees and officers of the Fund. All of the Fund's officers and two of its five Trustees are employees and/or officers of OAM and/or The Chicago Corpora- tion ("TCC"). 8 Each Portfolio's investment objective and policies were developed by James D. Oberweis, the portfolio manager of each Portfolio since its inception. Mr. Oberweis is also a Trustee and President of the Fund, a Director and the Presi- dent of OAM, and, together with his family, the controlling shareholder of OAM, and a Senior Vice President and shareholder of TCC. Mr. Oberweis has an MBA from the University of Chicago and has in excess of 25 years of experience in selecting securities for investment for private clients. In addition to the Fund, Mr. Oberweis manages segregated accounts for institutional and individual investors. Beginning January 1, 1996, OAM provides each Portfolio investment advisory and management services and TCC is the Fund's principal distributor and shareholder service agent. During the period October 1, 1994 through December 31, 1995, OAM provided the Emerging Growth Portfolio investment advisory, management and shareholder agent services and TCC was the Portfolio's principal distributor. Prior to October 1, 1994, Hamilton Investments, Inc. acted as the Emerging Growth Portfolio's manager, distributor and shareholder service agent; and Al- pha Source Asset Management ("Alpha Source"), a subsidiary of Hamilton Investments, Inc., served as the Emerging Growth Portfolio's investment advis- er. OAM is an investment adviser based in Aurora, Illinois. OAM was incorporated in 1989 and has been registered with the Securities and Exchange Commission ("SEC") since January 4, 1990. OAM had not served as the investment adviser to a mutual fund prior to October 1994, although Mr. Oberweis and other officers and employees of OAM have previously been associated with investment advisers to the Fund and/or other mutual funds. OAM has published an investment advisory newsletter since 1990 and beginning in October 1994, it has offered advice to institutions and individual investors regarding a broad range of investment products. Mr. Oberweis was formerly the principal executive officer of Oberweis Securi- ties, Inc. ("OSI"), a former manager and distributor of the Emerging Growth Portfolio, and of a former investment adviser to the Emerging Growth Portfolio, from the Portfolio's inception in 1987 to 1988 when such entities ceased opera- tions. OSI ceased executing securities transactions in November, 1988, because it was no longer meeting regulatory capital requirements. In a matter not involving his position with the Fund, Mr. Oberweis, without ad- mitting or denying the allegations of the SEC, consented to a censure and a one- year suspension ending July, 1993 from acting in a proprietary or supervi- sory capacity for a broker-dealer. The SEC alleged that from February, 1988, through October, 1988, Mr. Oberweis failed to adequately supervise or institute adequate supervisory procedures with respect to an account executive of a firm acquired in early 1988 by OSI, a former broker-dealer. The consent order did not limit Mr. Oberweis' activities with, or responsibilities to, the Fund in any manner. THE ADVISORY AND MANAGEMENT AGREEMENTS OAM provides each Portfolio with investment advisory services under a written agreement with the Fund dated October 1, 1994 and as amended January, 1996 (the "Investment Advisory Agreement"). James D. Oberweis personally supervises the management of the Fund's portfolios. OAM manages the investment operations of each Portfolio in accordance with the investment objectives and policies of each of the respective Portfolios, sub- ject to the general supervision of the Trustees. As compensation for its investment advisory services, OAM receives an annual fee which is computed and accrued daily and payable monthly. OAM receives an annual fee of .45% of the average daily net assets of the Emerging Growth Portfolio on the first $50 mil- lion and .40% on amounts over $50 million and receives an annual fee of .60% of the average daily net assets of the Micro-Cap Portfolio. For the Emerging Growth Portfolio, the average rate paid to OAM for the period October 1, 1994 through December 31, 1994 was .42%, and the average rate paid to Alpha Source for the period January 1, 1994 through September 30, 1994 was .43%. The average rate paid in the aggregate for the year ended December 31, 1994 was .43%. OAM also provides the Fund with non-investment advisory management and adminis- trative services necessary for the conduct of the Fund's business. OAM prepares and updates SEC and state registration statements and filings, shareholder re- ports and other similar documents. In addition, OAM provides office space and facilities for the management of the Fund and provides accounting, record-keep- ing and data processing facilities and services. OAM also provides information and certain administrative services for shareholders of the Portfolios. For managing the business affairs and providing certain administrative services, pursuant to a Management Agreement dated 9 October 1, 1994, each Portfolio pays OAM a management fee, payable monthly, at the annual rate of 0.40% of the average daily net assets of the Portfolio, sub- ject to reduction because of each Portfolio's annual expense limitation. (See "Expenses of the Fund.") OAM may subcontract with other entities to provide certain shareholder servicing activities. While the combined investment advisory fee and management fee paid to OAM is higher than the total of such fees paid by most other investment companies, the Fund's Trustees believe that each Portfolio's investment objective and the "Oberweis Octagon" analysis require greater than average services from OAM, which, together with the various management and administrative services pro- vided by OAM, justifies the higher combined fees. DISTRIBUTION OF SHARES The Fund has appointed TCC to act as the principal distributor of the Fund's shares and as the primary shareholder service agent. The Fund will finance cer- tain expenses in connection with the distribution of shares of each Portfolio under a "compensation type" Rule 12b-1 Plan as amended January 1, 1996 and a Distribution and Shareholder Service Agreement dated January 1, 1996 (collec- tively called the "Plan and Agreement") adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940. As a compensation type plan, TCC may re- ceive compensation that is more or less than the actual expenditures made. TCC is required to provide the Fund with a quarterly listing of all expenditures under the Plan and Agreement. TCC is at risk with respect to a portion of its expenses and fees not compensated by the Plan and Agreement if the Plan and Agreement is modified or terminated by the Fund. No interest, carrying or other finance charges are paid under the Plan and Agreement. Under the Plan and Agreement, the Fund pays to TCC a monthly fee at an annual rate of .25% of each Portfolio's average daily net assets for distribution and shareholder service provided to each Portfolio ("12b-1 fees") and will also re- imburse certain out-of-pocket expenses of TCC. The Plan and Agreement provides that the Fund's asset-based sales charges (as defined in the NASD's Rules of Fair Practice) do not exceed those permitted by Article III, Section 26 of the NASD's Rules of Fair Practice. As permitted by NASD's Rules, the Emerging Growth Portfolio has elected to calculate its permissible amount of asset- based sales charges on new gross sales of the Portfolio since the Portfolio's inception. Pursuant to the Plan and Agreement, TCC, directly or through other firms, ad- vertises and promotes the Fund and provides information and services to exist- ing and potential shareholders. These services include, among other things, processing new shareholder account applications, processing and transmitting customer transactions to the Fund's transfer agent, and serving as the primary source of information to customers. The Plan and Agreement provides that TCC may appoint various broker-dealer firms to assist in providing distribution services for the Fund and may appoint broker-dealers and other firms (including depository institutions such as commercial banks and savings and loan associa- tions) to provide administrative services for their clients as shareholders of the Portfolios under related service agreements. Pursuant to the Plan and Agreement, TCC may also be reimbursed monthly by each Portfolio for certain out-of-pocket costs in connection with its services as shareholder service agent, including such costs as postage, data entry, modifi- cation and printout, stationery, tax forms and all other external forms or printed material, but not including overhead. Although there is no limitation on the amount of such costs that may be reimbursed under the Plan and Agree- ment, such costs must be actual, out-of-pocket costs, and the total amount of 12b-1 fees, including reimbursement of such costs, is included in the total ex- penses of the Portfolio, subject to the expense limitation based on average daily net assets of each Portfolio. (See "Expenses of the Fund," below.) TCC will furnish with each monthly statement for such reimbursement a written list- ing of the expenditures on behalf of each Portfolio and their purpose. On September 27, 1995, it was announced that ABN AMRO North America, Inc., a subsidiary of ABN AMRO Bank, N.V. of the Netherlands, signed a letter of intent to acquire Chi Corp., Inc., parent company of TCC, which is the Funds' Distrib- utor and Shareholders Service Agent. The acquisition will result in the merger of TCC with ABN AMRO Securities (USA) Inc., a registered securities broker that is a wholly-owned subsidiary of ABN AMRO North America, Inc. and ABN AMRO Bank, N.V. The acquisition is expected to close in the second quarter of 1996. EXPENSES OF THE FUND All expenses incurred in the operations of the Fund are borne by the respective Portfolios, except to the extent specifically assumed by OAM. OAM is obli 10 gated to reduce its management fee or reimburse the Portfolio to the extent that the total ordinary operating expenses borne by a Portfolio on an accrual basis, including all investment advisory, management and administrative fees, but excluding taxes, brokerage, interest and other extraordinary expenses, ex- ceed in any one year either (i) the most restrictive expense limitation applicable to the Portfolio imposed by the securities laws or regulations thereunder of any state in which the Portfolio's shares are qualified for sale, as such limitations may be raised or lowered from time to time, or (ii) the following amounts expressed as a percentage of the Portfolio's average daily net assets: 2.0% of the first $25,000,000; plus 1.8% of the next $25,000,000; plus 1.6% of average daily net assets in excess of $50,000,000. For the year ended December 31, 1994, total expenses incurred by the Emerging Growth Portfo- lio were $1,647,254, and the ratio of such total expenses to the Portfolio's average daily net assets was 1.78%. PORTFOLIO TRANSACTIONS Orders for securities are generally placed by OAM with a view to obtaining the best combination of price and execution available. OAM attempts to evaluate the overall quality and reliability of the broker-dealers and the services provid- ed, including research services, general execution capability, reliability and integrity, willingness to take a position in securities, general operational capabilities and financial condition. OAM is authorized to place orders with various broker-dealers, including TCC, subject to all applicable legal requirements. The Fund has been advised by OAM that it may place a significant portion of the Portfolios' agency transactions with TCC when it believes that the combination of price and execution are com- parable to that of other broker-dealers. OAM may also place orders with non- affiliated broker-dealers that sell the Portfolios' shares, provided OAM believes that price and execution are comparable to other non-affiliated bro- ker-dealers. A greater spread, discount or commission may be paid to non- affiliated broker-dealers that provide research services, which may be used by OAM in managing assets of its clients, including each of the Portfolios. Al- though it is believed that research services received directly or indirectly benefit all of OAM's clients, the degree of benefit varies by account and is not directly related to the commissions or remuneration paid by the account. The frequency of portfolio transactions, the Portfolio's turnover rate, will vary from year to year depending on market conditions. The Emerging Growth Portfolio's turnover during the year ended December 31, 1994 was 66%. For the period January 1, 1994 through December 31, 1994, the total brokerage commissions paid by the Emerging Growth Portfolio were $96,802, of which $27,659 was paid to Hamilton Investments, the Fund's distributor and manager through September 30, 1994, and $8,463 to TCC, the Fund's current distributor, for the period October 1, 1994 through December 31, 1994. The total amount of securities transactions on which the Portfolio paid brokerage commissions dur- ing the period January 1, 1994 through December 31, 1994 was $38,593,338. The total amount of principal transactions of the Portfolio for such periods, for which no commission was incurred, was $95,896,610. HOW TO PURCHASE SHARES GENERAL--The minimum initial investment for each Portfolio is $1,000. This min- imum investment may be reduced pursuant to the Low Minimum Investment Plan. (See "Shareholder Services.") Subsequent purchases for all accounts must be in amounts of at least $100, except for reinvestment of dividends and capital gains distributions. The Fund reserves the right, in its sole discretion, to change at any time the initial or subsequent investment minimums, to withdraw the offering or to refuse any purchase in whole or part. You may purchase or redeem shares of the Portfolios through an investment deal- er, bank or other institution having a sales agreement with TCC or by contacting the Fund's Custodian and Transfer Agent, Investors Fiduciary Trust Company ("IFTC"). However, any such purchase or redemption will not be effec- tive until the order or request is received by IFTC. Some investment dealers, banks or other institutions may charge for their services in purchasing or re- deeming shares of the Portfolios. Purchases may be made by check, wire or, if a subsequent purchase, through the Automatic Investment Plan. All purchases made by check should be in U.S. dol- lars. Third-party checks, except those payable to an existing shareholder who is a natural person (as apposed to e.g. a corporation or partnership), credit cards and cash will not be accepted. Shares of the Fund are offered on a con- tinuous basis. The offering price per share will be the Net Asset Value per share next determined after the purchase order is received 11 in proper form by IFTC. (See "Net Asset Value" for details on current Net Asset Value computation.) PURCHASE BY MAIL--To make an initial purchase by mail, complete and sign the Account Application and mail it along with a check made payable to The Oberweis Funds to the following address: The Oberweis Funds c/o Investors Fiduciary Trust Company P.O. Box 419042 Kansas City, MO 64141 Subsequent investments may be made by submitting to the same address a check along with either the stub from your Portfolio account confirmation or a note indicating the amount of the purchase, name of the Portfolio, your account num- ber, and the name(s) in which your account is registered. PURCHASE BY WIRE--You may also purchase shares by instructing your financial institution to wire federal funds to the Fund's custodian bank. If you are opening a new account by wire transfer, you must first call IFTC at 1-800-245- 7311 to request an account number and furnish the name(s) on the account registration, address, and social security number or taxpayer identification number. If you have an Account Application, you will be asked, if possible, to transmit it via facsimile machine to IFTC (at 1-816-435-3209), or mail it imme- diately. Otherwise, an Account Application will be mailed to you for you to complete, sign and return immediately to IFTC. Federal funds shall be wired in accordance with the following instructions: Investors Fiduciary Trust Company 127 West 10th Street Kansas City, MO 64105 ABA #101003621 The name of the Portfolio in which you wish to invest The Oberweis Funds' Account No. 7500742 Further Credit to: (Your shareholder account number and the name(s) in which your account is registered). Subsequent investments may be made by wire by just contacting your financial institution with the wire instructions. There is no need to contact IFTC first. Your financial institution may charge you a fee for sending the wire. Neither the Fund nor IFTC will be responsible for the consequences of delays, including delays in the bank or Federal Reserve wire systems. HOW TO REDEEM SHARES IN GENERAL--You may redeem shares of the Portfolios by mail, by telephone (as described below), or through your own investment dealer who is recorded for such account, if any (see "How to Purchase Shares," above). The redemption price per share is the Net Asset Value per share next determined after the re- demption becomes effective. (See "Net Asset Value.") Because of fluctuations in the value of each Portfolio, the Net Asset Value of shares redeemed may be more or less than your cost. Checks for redemption proceeds are normally sent on the business day following the day the redemption request is received with all required documents in proper form for redemption amounts of $100,000 or less. Payment by check of re- demption proceeds in amounts greater than $100,000 is made within five business days after the redemption request is received. However, if you bought your shares by check, the Fund will delay sending you redemption proceeds until it has determined that your check has cleared, which may take up to 15 days from the purchase date. If a broker-dealer other than TCC is used to redeem shares, an additional fee for such services may be imposed by that broker-dealer. Each Portfolio reserves the right to redeem the shares in a shareholder's ac- count if the total value of the shareholder's account falls below $1,000 as a result of a redemption, subject to allowing such shareholder 60 days to make additional investments before the redemption is processed. Although it is each Portfolio's policy to make payment of redemption proceeds in cash, if the Fund's trustees determine it to be appropriate, and subject to certain limita- tions, a Portfolio may redeem shares by a distribution in kind of securities held by the Portfolio. See the Statement of Additional Information under the heading "Redemption of Shares." REDEMPTION BY MAIL--Shareholders may redeem shares by mailing a signed request for redemption that includes the account name and number and the number of shares or dollar amount to be redeemed, name of Portfolio, with signature(s) guaranteed (if required as set forth below), to The Oberweis Funds, c/o Invest- ors Fiduciary Trust Company, P.O. Box 419042, Kansas City, Missouri 64141. The redemption request must be accompanied by share certificates, if any have been issued. In the case of joint ownership, all signatures are required on the re- demption request and on any endorsement of share certificates. Additional documents may be required 12 for redemption of shares held by estates, trusts, guardianships, corporations, partnerships and other shareholders who are not individuals. It is recommended that all mailed share certificates be sent by registered or certified mail, re- turn receipt requested. REDEMPTION BY TELEPHONE--All shareholders who have elected the telephone re- demption option on their account application may redeem their Portfolio shares by telephoning the Transfer Agent at 1-800-245-7311. Pursuant to the telephone redemption program, shareholders authorize the Transfer Agent to rely upon tel- ephone instructions from anyone to redeem the specified number of shares or dollar amount and to transfer the proceeds according to pre-designated instruc- tions. Redemption proceeds will be mailed to the shareholder of record in the form of a check or transferred to the shareholder's designated bank using electronic funds transferred via the Automated Clearing House (ACH), or, at the sharehold- er's request, via wire transfer. Funds transferred via ACH will normally be transmitted on the business day following the telephone redemption request for redemption amounts of $100,000 or less. Transfers via ACH of redemption pro- ceeds in amounts greater than $100,000 will be transmitted within five business days following the telephone redemption request. There is no charge for trans- fers via ACH. Funds transferred via wire transfer will normally be transmitted on the next business day following the request. There is a $6 fee for each wire redemption. Your bank may also charge additional fees for receiving a wire transfer. Checks issued by mail in response to a telephone redemption request can be issued only up to $50,000 to the registered owner(s) (who must be individuals) at the ad- dress of record which must have been on file for 60 days. SIGNATURE GUARANTEES AND OTHER DOCUMENTATION--If redemption proceeds are $50,000 or less and are to be paid to an individual shareholder of record at the address of record, a signature guarantee is not required (unless there has been an address change within 60 days). All other redemption requests and changes in account application instructions must be guaranteed by a bank, broker/dealer, municipal securities broker/dealer, government securities broker/dealer, credit union, member firm of a national securities exchange, registered securities association or clearing agency, and/or savings associa- tion. The Transfer Agent may reject redemption instructions if the guarantor is neither a member of nor a participant in a signature guarantee program (cur- rently known as "STAMP"). A redemption request for shares held by a corporation, trust, partnership, agent or fiduciary must be signed by an appro- priately authorized person and include additional documents of a customary nature to verify the authority of the person seeking redemption, such as a cer- tified by-law provision or resolution of the board of directors or trustees of the shareholder and/or a copy of the governing legal instrument. Any person re- quiring information on redemption procedures may call the Transfer Agent at 1- 800-245-7311. NET ASSET VALUE Net Asset Value per share is computed by dividing the value of the Portfolio's net assets (i.e., the value of its assets less liabilities) by the total number of shares then outstanding. Each Portfolio's investments are valued based on market value or, where quotations are not readily available, on fair value as determined in good faith by the Board of Trustees. For further information re- garding the methods employed in valuing the Portfolios' investments, see the Statement of Additional Information under the heading "Determination of Net As- set Value." If an order is received by the Transfer Agent or TCC by the close of trading on the New York Stock Exchange on a given day (currently 3:00 p.m., Central Time), or by an investment dealer, bank or other institution having a sales agreement with TCC by the close of trading on the New York Stock Exchange and that order is then received by TCC on that same day from the investment dealer, bank, or financial institution by the end of TCC's business day, Portfolio shares will be purchased at the next computed Net Asset Value. The Net Asset Value of the shares of each Portfolio is computed once daily, as of the later of the close of the New York Stock Exchange or the Chicago Board Options Exchange, on each day the New York Stock Exchange is open for trading (except the Net Asset Value for the Micro-Cap Portfolio was computed on January 1, 1996, the New Year's Day Holiday, which was the first day shares of the Portfolio were offered to the public). For purposes of computing the Net Asset Value, all securities in a Portfolio other than options are priced as of the close of trading on the New York Stock Exchange. The options in the Portfolios are priced as of the close of trading on the Chicago Board Options Exchange. SHAREHOLDER SERVICES GENERAL INFORMATION--In addition to the purchase and redemption services de- scribed above, the Fund 13 offers its shareholders the special accounts and services described below. Ap- plications and information about any shareholder services may be obtained by calling 1-800-245-7311. When a shareholder makes an initial investment in a Portfolio, a shareholder account is opened in accordance with the Portfolio's Account Application in- structions. After each transaction for the account of a shareholder, confirmation of all deposits, purchases, reinvestments, redemptions, withdrawal payments, and other transactions in the shareholder's account will be forwarded to the shareholder. The Portfolios will generally not issue certificates for their shares, except that certificates for full share amounts only will be issued upon a sharehold- er's written request to the Transfer Agent. In all events fractional shares will be carried on the books of a Portfolio without the issuance of certifi- cates. The investor will be the record owner of all shares in his account with full shareholder rights, irrespective of whether share certificates are issued to him. Certain of the functions performed by the Fund in connection with the operation of the accounts described above will be performed by the Fund's Transfer Agent. (See "The Custodian and Transfer Agent.") LOW MINIMUM INITIAL INVESTMENT PLAN/AUTOMATIC INVESTMENT PLAN--By completing the Automatic Investment Plan section of the Account Application, you may make subsequent investments by authorizing the Fund and its Custodian to debit your bank account to buy additional shares of the Portfolios. The minimum initial investment in each Portfolio is $1,000. However, the Low Minimum Initial In- vestment Plan allows an account to be opened with an initial investment of $100 and subsequent monthly investments of $100 or more for at least a one-year pe- riod. Automatic Investments can occur either monthly or quarterly, on or about the 5th or the 20th of the month, in pre-designated amounts of $100 or more. Funds will be transferred from your designated bank, using electronic funds transferred via ACH. Initial investments may not be made by the Automatic In- vestment Plan. The Plan is subject to the approval of the shareholder's bank. You can stop investing through the Automatic Investment Plan by sending written notice to the Fund's Custodian and Transfer Agent. The notice must be received at least 5 business days prior to the date of your next scheduled automatic purchase. The Plan is automatically terminated whenever a check is returned unhonored by the shareholder's bank. The shareholder is responsible for any charges incurred as a result of an unhonored transaction. If a shareholder can- cels the Low Minimum Initial Investment Plan before a one-year period, the Fund reserves the right to redeem the shareholder's account if the balance is below the minimum investment level, currently $1,000. The Fund reserves the right to terminate or modify the Automatic Investment Plan at any time. See the Account Application for additional details. The Fund anticipates ceasing sales of the Micro-Cap Portfolio when that Portfolio reaches $50 million in net assets, and as a result, the ability of shareholders to make investments in the Micro-Cap Portfolio through the Automatic Investment Plan would terminate at that time. SYSTEMATIC WITHDRAWAL ACCOUNT--A shareholder who owns a Portfolio's shares with a current Net Asset Value of at least $10,000 may establish a Systematic With- drawal Account from which a fixed sum will be paid to him or a pre-designated third party at regular intervals. A Systematic Withdrawal Account may not be established for a shareholder who owns Portfolio shares for which certificates are outstanding until all share certificates have been surrendered. See the Ac- count Application for additional details. INDIVIDUAL RETIREMENT ACCOUNTS--A Portfolio's shares may be purchased as in- vestments in Individual Retirement Accounts ("IRAs") and other retirement plans. Investment in a Portfolio's shares is subject to the conditions of the IRA and/or other retirement plan agreements. Investors should contact their IRA custodians to determine the eligibility of the Portfolio's shares as IRA or re- tirement plan investments. Individuals wishing to establish IRAs with the Fund's Custodian Bank may do so and purchase shares of a Portfolio with their IRA funds. Further details, including fees and charges imposed by the Custodi- an, are set forth in the IRA information material (account agreement, application, and disclosure statement) which is available from the Fund. DIVIDENDS, DISTRIBUTIONS AND TAX STATUS The Portfolios may earn income from dividends and interest on their investments and may also realize capital gains from the sale of their assets. Each Portfo- lio's policy is to distribute annually within ninety (90) days following the close of each fiscal year substantially all its net investment income and any net realized taxable capital gains resulting from sales of the Portfolio's as- sets during the year. Dividends and capital gains distributions are automatically reinvested in additional shares of the Portfolio, unless the shareholder elects to receive them in cash. A cash elec 14 tion remains in effect until the shareholder notifies the Transfer Agent in writing to discontinue such election. Each Portfolio has elected to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code and thereby maintain exemption from Federal income tax to the extent it distributes its earnings. Except for those shareholders exempt from Federal income taxes, dividends and capital gain dis- tributions will be taxable to shareholders, whether paid in cash or reinvested in additional shares of the Portfolio. Shareholders will be notified annually as to the Federal income tax status of dividends and capital gains distribu- tions. Such dividends and distributions may also be subject to state and local taxes. Long-term capital gain distributions are taxable as long-term capital gain regardless of how long the shareholder has held shares of the Portfolio. Long-term capital gain distributions are currently taxed at a maximum rate of 28% for individual shareholders. Dividends representing net investment income and net realized short-term capital gains are taxed as ordinary income at rates up to a maximum marginal rate of 39.6% for individuals. Dividends and distribu- tions declared in October, November or December to shareholders of record as of a date in one of those months and paid during the following January are treated for federal income tax purposes as paid on December 31 of the calendar year in which declared. A dividend received shortly after the purchase of shares reduces the net asset value of the shares by the amount of the dividend and, although in effect a re- turn of capital, will be taxable to the shareholder. If the net asset value of shares were reduced below the shareholder's cost by dividends representing gains realized on sales of securities, such dividends would be a return of in- vestment, though taxable as stated above. Federal law requires each Portfolio to withhold 31% of dividends and/or redemp- tion proceeds (including from exchanges) that occur in certain shareholder accounts if the shareholder has not properly furnished a certified correct tax- payer identification number (in the case of individuals, a social security number) or has not certified that back-up withholding does not apply. Amounts withheld are applied to the shareholder's Federal income tax liability and a refund may be obtained from the Internal Revenue Service if withholding results in overpayment of taxes. Federal law also requires the Fund to withhold the ap- plicable tax treaty rate from dividends that are paid to certain nonresident alien, foreign partnership and foreign corporation shareholder accounts. Shareholders are advised to consult their own tax advisers as to the tax conse- quences of owning shares of each Portfolio with respect to their respective circumstances. THE CUSTODIAN AND TRANSFER AGENT All securities and cash of the Portfolios are held by the Fund's custodian, In- vestors Fiduciary Trust Company, Kansas City, Missouri (the "Custodian"), and sub-custodians selected by the Custodian and approved by the Trustees. The Cus- todian is also the Fund's transfer agent (the "Transfer Agent"), which acts as a shareholder servicing, dividend disbursing and redemption agent for the Fund. GENERAL INFORMATION The Fund is a diversified, open-end management investment company, organized as a business trust under the laws of Massachusetts on July 7, 1986. Pursuant to the Fund's Agreement and Declaration of Trust ("Trust Agreement"), the Fund may issue an unlimited number of shares of beneficial interest in one or more se- ries of "Portfolios," all having no par value. Shares of each Portfolio have equal non-cumulative voting rights and equal rights with respect to dividends, assets and liquidation of such Portfolio. Shares are fully paid and non-assess- able by the Fund when issued, are transferable without restriction and have no preemptive or conversion rights. As a Massachusetts business trust, the Fund is not required to hold annual shareholders' meetings. It will, however, hold spe- cial meetings as required or deemed desirable for such purposes as the election of or removal of trustees, changing fundamental policies or approving an in- vestment advisory contract. Special meetings of shareholders for actions requiring shareholder vote may be requested in writing by holders of at least twenty-five percent (25%) (or ten percent (10%) if the purpose of the meeting is to determine if a Trustee is to be removed from office) of the outstanding shares of the Fund or as may be required by applicable law. Shareholders will vote in the aggregate, except when voting by individual Port- folio is required under the Investment Company Act of 1940 or when the Board of Trustees determines that voting by series is appropriate. The Trust Agreement and the By-Laws of the Fund are designed to make the Fund similar in many respects to a corporation. However, under Massachu- 15 setts law, shareholders of a business trust may, under certain circumstances, be held personally liable for the obligations of the trust, which is not the case in a corporation. The Trust Agreement provides that shareholders shall not be subject to any personal liability to any person extending credit to, con- tracting with or having any claims against the Fund and that every written agreement, obligation, instrument or undertaking made by the Fund shall contain a provision that the same is not binding upon the shareholders personally. Moreover, the Trust Agreement provides for indemnification out of Fund property for all losses and expenses of any shareholder held personally liable for the obligations of the Fund, and the Fund will be covered by insurance which the Trustees believe to be adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder lia- bility is considered remote. All inquiries regarding shareholder accounts may be directed to The Oberweis Funds, c/o Investors Fiduciary Trust Company, P.O. Box 419042, Kansas City, Missouri 64141 or (800) 245-7311. All other inquiries regarding the Fund and/or either of the Portfolios should be directed to the Fund at One Constitution Drive, Aurora, Illinois 60506 or (800) 323-6166. 16 - -------------------------------------------------------------------------------- LOGO THE OBERWEIS FUNDS PROSPECTUS - ------------------------------------- Preliminary Prospectus dated October 18, 1995 INVESTMENT ADVISER/MANAGER Oberweis Asset Management, Inc. One Constitution Drive Aurora, Illinois 60506 1-800-323-6166 DISTRIBUTOR The Chicago Corporation 208 South LaSalle Street Chicago, Illinois 60604 CUSTODIAN AND TRANSFER AGENT Investors Fiduciary Trust Company 1-800-245-7311 COUNSEL Vedder, Price, Kaufman & Kammholz INDEPENDENT AUDITORS Ernst & Young LLP For more information about this Fund or either of its Portfolios, simply call our toll-free number: _______________________________________1-800-323-6166 Please read the prospectus carefully before investing or sending money. LOGO SUBJECT TO COMPLETION Preliminary Statement Of Additional Information Dated October 18, 1995 STATEMENT OF ADDITIONAL INFORMATION THE OBERWEIS FUNDS ONE CONSTITUTION DRIVE AURORA, ILLINOIS 60506 (800) 323-6166 ___________________________________ This Statement of Additional Information is not a prospectus and should be read in conjunction with the Fund's Prospectus dated _________________. A copy of the Fund's Prospectus may be obtained by writing or calling the above address or phone number. ____________________________________ Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to time the registration statement becomes effective. This Statement of Additional Information does not constitute a prospectus. TABLE OF CONTENTS
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS............................ 2 MANAGEMENT OF THE FUND..................................................... 5 OBERWEIS ASSET MANAGEMENT, INC. ........................................... 7 DISTRIBUTION PLAN AND AGREEMENT............................................ 8 EXPENSES BORNE BY THE PORTFOLIOS........................................... 9 PORTFOLIO TRANSACTIONS..................................................... 10 SHAREHOLDER VOTING RIGHTS.................................................. 12 REDEMPTION OF SHARES....................................................... 12 SHAREHOLDER SERVICES....................................................... 13 DETERMINATION OF NET ASSET VALUE........................................... 13 TAXES...................................................................... 13 CALCULATION OF AVERAGE ANNUAL TOTAL RETURN................................. 14 ADDITIONAL INFORMATION..................................................... 14
INDEPENDENT AUDITORS' REPORT FINANCIAL STATEMENTS 1 INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS The following information supplements the discussion of each Portfolio's investment objective and policies in the Fund's Prospectus under the heading "Investment Objective, Policies and Risks." Investment Objective - -------------------- The investment objective of each Portfolio is to maximize capital appreciation. Each Portfolio intends to achieve its objective through investing primarily in common stocks of companies, which in the opinion of its investment adviser have a potential for above-average long-term growth in market value. The investment objective of each Portfolio is fundamental and, like all fundamental policies of a Portfolio, cannot be changed without the affirmative vote of a majority of the outstanding voting securities of that Portfolio. As used in this Statement of Additional Information and in the Fund's Prospectus, "a majority of the outstanding voting securities" of the Portfolio means the lesser of (1) the holders of more than 50% of the outstanding shares of the Portfolio, or (2) the holders of more than 67% of the shares of the Portfolio present if more than 50% of the outstanding shares of the Portfolio are present at a meeting in person or by proxy. Investment Restrictions - ----------------------- The policies set forth below are fundamental policies of each Portfolio and may not be changed without approval of a majority of that Portfolio's outstanding shares. A Portfolio individually may not: 1. purchase more than 10% of any class of securities of any one issuer other than the United States government and its instrumentalities; 2. invest more than 5% of its total assets, at the time of the investment in question, in the securities of any one issuer (other than the United States government and its instrumentalities); 3. invest more than 5% of its total assets in securities that are not readily marketable and securities of unseasoned issuers that have been in continuous operation for less than three years, including operating periods of their predecessors; 4. invest more than 5% of its total assets in securities of issuers which the Fund is restricted from selling to the public without registration under the Securities Act of 1933; 5. invest more than 5% of its total assets in warrants, and of this amount, no more than 2% of total assets may be invested in warrants that are listed on neither the New York Stock Exchange nor the American Stock Exchange; 6. purchase or retain the securities of any issuer if (i) one or more officers or directors of the Fund or the investment adviser individually own or would own, directly or beneficially, more than 1/2 of 1% of the securities of such issuer, and (ii) in the aggregate, such persons own or would own, directly or beneficially, more than 5% of such securities; 7. purchase, sell or invest in the securities of other investment companies; 8. purchase, sell or invest in interests in oil, gas or other mineral exploration or development programs; 9. purchase, sell or invest in commodities or commodity contracts; 10. purchase, sell or invest in real estate or interests in real estate, except that the Portfolio may purchase, sell or invest in marketable securities of companies holding real estate or interests in real estate, including real estate investment trusts; provided such investments do not exceed 10% of the Portfolio's total assets; 11. issue senior securities; 12. invest in companies for the purpose of exercising control or management; 13. concentrate its investments in any one industry, except that the Portfolio may invest up to 25% of its total assets in any one industry; 14. purchase securities on margin, except that the Portfolio may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities; 2 15. make short sales of securities unless, at the time of each such sale and thereafter while a short position exists, the Portfolio owns an equal amount of securities of the same issue or owns securities which, without payment by the Portfolio of any consideration, are convertible into, or are exchangeable for, an equal amount of securities of the same issue; 16. participate on a joint or joint and several basis in any trading account in any securities; 17. lend its funds to other persons, except through the purchase of a portion of an issue of debt securities publicly distributed; 18. lend its portfolio securities, unless the borrower is a broker, dealer or financial institution that pledges and maintains collateral with the Portfolio consisting of cash or securities issued or guaranteed by the United States government having a value at all times not less than 100% of the value of the loaned securities, provided that the aggregate amount of such loans shall not exceed 30% of the Fund's total assets; 19. borrow money except from banks as a temporary measure for extraordinary or emergency purposes or as necessary for the clearance of purchases and sales of securities, provided that the aggregate amount of such borrowing shall not exceed 5% of the value of its total assets at the time of any such borrowing, or mortgage, pledge or hypothecate its assets, except in an amount not exceeding 5% of its total assets taken at cost to secure such borrowing; 20. engage in the business of underwriting the securities of other issuers; or 21. invest in puts, calls, straddles or any combination thereof, except that the Portfolio may write covered call options on its Portfolio securities, the aggregate market value of which is limited to 50% of the Portfolio's net assets, and the Portfolio may invest up to 5% of its assets in the purchase of put and call options including options on stock indices. If a percentage restriction is adhered to at the time of investment, a later change in percentage resulting from changes in values or assets will not be considered a violation of such restriction. Other Restrictions - ------------------ Other investment restrictions are set forth in the Fund's Prospectus and elsewhere in this Statement of Additional Information. In addition, each Portfolio will not invest more than 10% of its total assets in "restricted securities" (meaning securities the resale of which is legally or contractually restricted, including repurchase agreements with maturities of seven days or more and securities that are not readily marketable). Repurchase Agreements - --------------------- Each Portfolio may enter into so-called "repurchase agreements," whereby it purchases a security and the seller (a qualified bank or securities dealer) simultaneously commits to repurchase that security at a certain date at an agreed upon price, plus an agreed upon market rate of interest that is unrelated to the coupon rate or date of maturity of the security. In these transactions, the securities purchased by the Portfolio have, at all times, a total value in excess of the value of the repurchase agreement and are held by the Fund's custodian bank until repurchased. Certain costs may be incurred by a Portfolio in connection with the sale of the securities purchased by it if the seller does not repurchase them in accordance with the repurchase agreement. The Portfolio will consider on an ongoing basis the creditworthiness of the institutions with which it enters into repurchase agreements and will monitor the value of the underlying securities to ensure that additional securities are deposited by the seller if the value of the securities purchased decreases below the resale price at any time. Under the Investment Company Act of 1940, repurchase agreements may be considered loans by the Portfolio. Each Portfolio is subject to restrictions on entering into repurchase agreements in excess of 25% of the total assets and on investing more than 10% of its total assets in restricted securities, which includes repurchase agreements with maturities of seven days or more. Purchasing Put and Call Options - ------------------------------- Each Portfolio will commit no more than 5% of its assets to premiums when purchasing put and call options. The Portfolios may enter into closing transactions, exercise their options or permit them to expire. The Portfolios may purchase put options on an underlying security owned by them. As the holder of a put option, a Portfolio would have the right to sell the underlying security at the exercise price at any time during the term of the option. While a Portfolio will not purchase options for leverage purposes, it may purchase put options for defensive purposes in order to protect against an anticipated decline (usually short-term) in the value of its securities. Such hedge protection is provided only during the life of the put option and only when the Portfolio, as the holder of the put option, is able to sell the underlying security at the put exercise price regardless of any additional decline in the security's market price. For example, a put option may be purchased in 3 order to protect unrealized appreciation of a security where the Portfolio deems it desirable to continue to hold the security. The premium paid for the put option and any transaction costs would reduce any capital gain otherwise available for distribution when the security is eventually sold. Except as discussed below with respect to options on stock indices, each Portfolio has no current intention of purchasing put options at a time when the Portfolio does not own the underlying security; however, it reserves the right to do so. By purchasing put options on a security it does not own, the Portfolio would seek to benefit from a decline in the market price of the underlying security. If such a put option is not sold when it has remaining value, and if the market of the underlying security remains equal to or greater than the exercise price during the life of the put option, the Portfolio would lose its entire investment in the put option (i.e., the entire premium paid by the Portfolio). In order for the purchase of a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs, unless the put option is sold in a closing sale transaction. The Portfolios may also repurchase call options previously written on underlying securities they already own in order to preserve unrealized gains. The Portfolios may also purchase call and put options on stock indices ("stock index options") for the purpose, in part, of partially hedging against the risk of unfavorable price movements adversely affecting a Portfolio's securities or securities the Portfolio intends to buy and may sell stock index options in related closing transactions. The principal uses of stock index options would be to provide a partial hedge for a portion of the Portfolios' investment securities, and to offer a cash management tool. Purchasing stock index options could provide an efficient way to implement a partial decrease in portfolio market exposure in response to changing market conditions. Although techniques other than the purchase of options could be used to hedge the Portfolios' investments, the Portfolios may be able to hedge their exposure more effectively, and perhaps at a lower cost, through the use of stock index options. The Portfolios propose to invest only in stock index options for which the underlying index is a broad market index such as the Standard & Poor's Index, the Major Market Index, or the Russell 2000 Index. The Portfolios would propose to purchase broad stock index options only if they are listed on a national securities exchange and traded, in the opinion of the Fund's investment adviser, with some significant volume. The Portfolios will not enter into a stock index option if, as a result thereof, more than five percent (5%) of the Fund's total assets (taken at market value at the time of entering into the contract) would be committed to options, whether options on individual securities or options on stock indices. There are several risks in connection with the Portfolios' use of stock index options as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the stock index options and movements in the prices of securities held by the Portfolios. Successful use of stock index options by the Portfolios for hedging purposes is also subject to the Fund's adviser's ability to correctly predict movements in the direction of the market. In addition, due to market distortions, the price movements of the stock index options might not correlate perfectly with price movements in the underlying stock index. Increased participation by speculators in the options market might also cause temporary price distortions. The ability to establish and close out positions on options will be subject to the liquidity of the index options market. Absence of a liquid market on an exchange may be due to: (i) insufficient trading interest in certain options; (ii) restrictions imposed by an exchange on opening transactions or closing transactions, or both; (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options, or underlying securities; (iv) unusual or unforeseen circumstances, such as severe stock market fluctuations, interrupting normal exchange operations; (v) inadequacy of an exchange's or a clearing corporation's facilities to handle increased trading volume; or (vi) discontinuance of the trading of options (or a particular class or series of options) by an exchange, for economic or other reasons. Higher than anticipated trading activity or other unforeseen events also could cause an exchange or clearing corporation to institute special procedures which may interfere with the timely execution of customers' orders. Stock index options may be closed out only on an exchange which provides a market for such options. For example, OEX stock index options currently can be purchased or sold only on the CBOE. Although the Portfolios intend to purchase or sell stock index options only on exchanges where there appear to be active markets, there is no assurance that a liquid market will exist for any particular options contract at any particular time. In such event, it might not be possible to close a stock index option position. 4 Lending of Securities - --------------------- The Portfolios may lend their investment securities in an amount up to 30% of its total assets to qualified institutional investors who need to borrow securities in order to complete certain transactions. By lending its investments securities, a Portfolio attempts to increase its income through the receipt of interest on the loan. Any gain or loss in the market price of the securities loaned that might occur during the term of the loan would be for the account of the Portfolio. A Portfolio may lend its portfolio securities to qualified brokers, dealers, domestic and foreign banks or other financial institutions, so long as the terms and the structure of such loans are not inconsistent with the Investment Company Act of 1940, or the Rules and Regulations or interpretations of the Securities and Exchange Commission (the "Commission") thereunder, which currently require that (a) the borrower pledge and maintain with the Portfolio collateral consisting of cash, an irrevocable letter of credit issued by a domestic U.S. bank, or securities issued or guaranteed by the U.S. government having a value at all times of not less than 100% of the value of the securities loaned, (b) the borrower add to such collateral whenever the price of the securities loaned rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan be made subject to termination by the Portfolio at any time, and (d) the Portfolio receives reasonable interest on the loan or its collateral (which may include the Portfolio investing any cash collateral in interest-bearing short-term investments), any dividends and distributions paid on the loaned securities and any increase in their market value. Arbitrage - --------- The Portfolios have no current intention to engage in arbitrage (meaning the simultaneous purchase and sale of the same security in different markets but not on the purchase of call and put options on stock indices). MANAGEMENT OF THE FUND All of the Fund officers and two of its Trustees are employees and/or officers of Oberweis Asset Management, Inc. ("OAM"), the Fund's investment adviser, manager and shareholder service agent, and/or The Chicago Corporation ("TCC"), the Fund's distributor. James D. Oberweis, a Trustee and President of the Fund, is the President and a Director of OAM, and with his wife, Elaine M. Oberweis, and his children, is the controlling shareholder of OAM. Mr. Oberweis is also a Senior Vice President of TCC. Peter H. Wendell, a Trustee of the Fund, is an Executive Vice President and a Director of TCC. The Trustees and officers of the Fund and their principal occupations during the past five (5) years are: THOMAS J. BURKE, Trustee ** 143 South Lincoln Avenue, Aurora, Illinois 60505; medical physician and President - Burke Medical Associates, 1968 to present. DOUGLAS P. HOFFMEYER, Trustee ** 620 Stetson, St. Charles, Illinois 60174; Vice President-Finance - Teltrend, Inc. (manufacturer of telecommunications equipment), October, 1986 to present. JAMES D. OBERWEIS, Trustee and President * One Constitution Drive, Aurora, Illinois 60506; President and Director - Oberweis Asset Management, Inc., September, 1994 to present; Senior Vice President - The Chicago Corporation, October, 1994 to present; Senior Vice President - Alpha Source Asset Management, Inc., February, 1990 to October, 1994; Director of Fund Investments - Hamilton Investments, Inc., December, 1988 to October, 1994; President of the Fund, 1986 to present; Chairman of the Board of Oberweis Dairy, Inc. EDWARD F. STREIT, Trustee ** 2000 West Galena, Aurora, Illinois 60506; licensed attorney in private practice, 1962 - present. PETER H. WENDELL, Trustee* 208 South LaSalle Street, Chicago, Illinois 60604; Executive Vice President and Director - The Chicago Corporation, January 1988 to present. 5 PATRICK B. JOYCE, Executive Vice President and Treasurer One Constitution Drive, Aurora, Illinois 60506; Executive Vice President, Secretary and Director - Oberweis Asset Management, Inc., September, 1994 to present; Administrator - The Chicago Corporation, October, 1994 to present; Vice President - Carr Asset Management, Inc./Indosuez Carr Futures, Inc., August, 1993 to September, 1994; Vice President of Operations and Assistant Treasurer - Selected Financial Services, Inc., September, 1989 to August, 1993. MARTIN L. YOKOSAWA, Vice President One Constitution Drive, Aurora, Illinois 60506; Vice President - The Chicago Corporation - October, 1994 to present; Vice President - Oberweis Asset Management, Inc., September, 1994 to present; Registered Representative - Hamilton Investments, Inc., November, 1988 to October, 1994. JAMES M. ROBERTS, Vice President One Constitution Drive, Aurora, Illinois 60506; Vice President - The Chicago Corporation, October, 1994 to present; Vice President - Oberweis Asset Management, Inc., September, 1995 to present; Registered Representative - Hamilton Investments, Inc., January, 1990 to October, 1994. ANITA I. MRAZ, Secretary One Constitution Drive, Aurora, Illinois 60506; Administrative Assistant - The Chicago Corporation, October, 1994 to present; Administrative Assistant - Alpha Source Asset Management, Inc., April, 1991 to October, 1994; Manager - Glenn's Steak House, January, 1990 to April, 1991. MARY JANE MURPHY, Assistant Secretary One Constitution Drive, Aurora, Illinois 60506; Fund Administrator - Oberweis Asset Management, Inc., October 1994 to Present; Fund Administrator - Alpha Source Asset Management, Inc., November, 1990 to October, 1994. __________________ * "Interested person" of the Fund as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended. ** Member of audit committee and nominating committee. NOTE: In some cases a trustee or officer may have held different positions during the last five years with the employer or employers listed. The Fund pays each Trustee of the Fund who is not also affiliated with OAM and/or TCC for such services an annual fee of $1,000, plus $500 for each day or part of a day in attendance at a meeting of the Board of Trustees or one of its Committees. The Fund reimburses travel and other expenses incurred by its non-interested Trustees for each such meeting attended. Trustees and officers of the Fund who are affiliated with OAM and/or TCC and officers of the Fund will receive no compensation or reimbursement from the Fund for acting in those capacities. However, Trustees and officers of the Fund who are affiliated with OAM and/or TCC may directly or indirectly benefit from fees or other remuneration received from the Fund by OAM and/or TCC. Regular meetings of the Board of Trustees are held quarterly and the audit committee usually holds two regular meetings during each year. The following table sets forth the compensation received by all trustees of the Fund for the fiscal year ended December 31, 1994. 6
PENSION OR RETIREMENT ESTIMATED BENEFITS ANNUAL AGGREGATE ACCRUED AS BENEFITS COMPENSATION PART OF UPON TOTAL TRUSTEE FROM THE FUND FUND EXPENSES RETIREMENT COMPENSATION ------- ------------- ------------- ----------- ------------ Robert A. Ebersole(1).. $ 0 0 0 $ 0 Thomas J. Burke........ 3,500 0 0 3,500 Douglas P. Hoffmeyer... 3,000 0 0 3,000 James D. Oberweis...... 0 0 0 0 Edward F. Streit....... 3,500 0 0 3,500 Laurence B. Siegel(1).. 1,750 0 0 1,750 Peter H. Wendell(2).... 0 0 0 0
- ------------------- (1) Served on the Board through September 1994. (2) Elected to serve on the Board in January 1995. As of September 30, 1995, the officers and Trustees of the Fund as a group owned of record or beneficially 1.1% of the outstanding shares of the Emerging Growth Portfolio. OBERWEIS ASSET MANAGEMENT, INC. The Fund's investment adviser, since October 1, 1994, is Oberweis Asset Management, Inc. ("OAM"), an investment adviser based in Aurora, Illinois. For additional details concerning OAM, see the Fund's Prospectus under the heading "Management of the Portfolios." Pursuant to a written contract between the Fund and OAM (the "Investment Advisory Agreement"), OAM is responsible for managing the investment and reinvestment of each Portfolio's assets, determining in its discretion the securities to be purchased or sold and the portion of the Portfolio's assets to be held uninvested, providing the Fund with records concerning OAM's activities which the Fund is required to maintain under applicable law, and rendering regular reports to the Fund's Trustees and officers concerning Portfolio responsibilities. OAM's investment advisory services to the Fund are all subject to the control of the Trustees, and must be in compliance with the investment objective, policies and restrictions set forth in the Fund's Prospectus and this Statement of Additional Information and with applicable laws and regulations. In addition, OAM is authorized to select broker-dealers, including TCC, that may execute purchases and sales of the securities for the Portfolios. (See "Portfolio Transactions.") The investment adviser is obligated to pay the salaries and fees of any officers of the Fund as well as the Trustees of the Fund who are interested persons (as defined in the Investment Company Act of 1940) of the Fund, who are employed full time by the investment adviser to perform services for the Portfolio under the Investment Advisory Agreement. As compensation for its investment advisory services, the investment adviser receives from the Emerging Growth Portfolio at the end of each month a fee at an annual rate equal to .45% of the first $50 million of the average daily net assets of the Portfolio and .40% of the average daily net assets of the Portfolio in excess of $50 million, and from the Micro-Cap Portfolio at the end of each month a fee at the annual rate of .60% of the average daily net assets of the Portfolio. For the year ended December 31, 1994, the advisory fees incurred by the Emerging Growth Portfolio and payable to Alpha Source were $297,924 for the period January 1, 1994 through September 30, 1994, and advisory fees incurred and payable to OAM were $96,759 for the period October 1, 1994 through December 31, 1994. For the year ended December 31, 1993, the advisory fees incurred by the Emerging Growth Portfolio and paid to Alpha Source were $381,178. However, pursuant to the expense limitation provisions of the Investment Advisory Agreement, Alpha Source was required to rebate $10,228 to the Portfolio. (See also "Expenses Borne by the Fund.") For the year ended December 31, 1992, the advisory fees incurred by the Emerging Growth Portfolio and payable to Hamilton Investments (the Fund's investment adviser through April 30, 1992) were $44,113 and those payable to Alpha Source were $115,208. Pursuant to the expense limitations of the Investment Advisory Agreement, Hamilton Investments and Alpha Source were required to rebate $96,497 and $50,661, respectively, to the Emerging Growth Portfolio. 7 OAM also provides the Fund with non-investment advisory, management and administrative services pursuant to a written contract (the "Management Agreement"). OAM is responsible under the Management Agreement for providing the Fund with those management and administrative services which are reasonably necessary for conducting the business affairs of the Fund, with the exception of investment advisory services, and distribution of each Portfolio's shares and shareholder services, which are subject to the Fund's Rule 12b-1 Plan. (See "Rule 12b-1 Plan and Related Distribution and Shareholder Service Agreements.") In addition, OAM provides the Fund with office space and basic facilities for management of the Fund's affairs, and bookkeeping, accounting, record keeping and data processing facilities and services. OAM is responsible for preparing and updating the Fund's SEC and state registration statement and filings, tax reports to shareholders and similar documents. OAM pays the compensation of all officers and personnel of the Fund for their services to the Fund as well as the Trustees of the Fund who are interested persons of the Fund. OAM also provides information and certain administrative services to shareholders of each Portfolio. These services include, among other things, transmitting redemption requests to the Fund's Transfer Agent and transmitting the proceeds of redemption of shares of the Fund pursuant to a shareholder's instructions when such redemption is effected through OAM; providing telephone and written communications with respect to its shareholders' account inquiries; assisting its shareholders in altering privileges and ownership of their accounts; and serving as a source of information for its existing shareholders in answering questions concerning the Fund and their transactions with the Fund. For its services under the Management Agreement, OAM is paid by the Portfolios on a monthly basis an annual management fee equal to .40% of the average daily net assets of each Portfolio. OAM will bear all expenses in connection with the performance of its services to the Fund and each of the Portfolios under the Management Agreement. The Fund is responsible for all other expenses. See the Fund's Prospectus under the heading "Expenses of the Fund." However, the Management Agreement provides that OAM is obligated to reimburse the Portfolios for 100% of the amount by which the Portfolio's ordinary operating expenses during any fiscal year, including the management and advisory fees, exceed either (i) the most restrictive expense limitation applicable to the Portfolio imposed by the securities laws or regulations thereunder of any state in which the Portfolio's shares are qualified for sale, as such limitations may be raised or lowered from time to time, or (ii) the following amounts expressed as a percentage of the Portfolio's average daily net assets: 2.0% of the first $25,000,000; plus 1.8% of the next $25,000,000; plus 1.6% of average daily net assets in excess of $50,000,000. Excluded from the calculation of ordinary operating expenses are expenses such as interest, taxes and brokerage commissions and extraordinary items such as litigation costs. There is no state expense limitation applicable to the Portfolios which is currently more restrictive than that set forth above. Any such reimbursement is computed and accrued on a daily and settled on a monthly basis based upon the expenses and average net assets computed through the last business day of the month. As of the end of the Fund's fiscal year, the aggregate amounts of reimbursement, if any, by the Manager to a Portfolio in excess of the amount necessary to limit the operating expenses on an annual basis to said expense limitation shall be refunded to the Manager. In no event will the Manager be required to reimburse a Portfolio in an amount exceeding its management and investment advisory fees, except to the extent required by applicable law. For the period January 1, 1994 through September 30, 1994, the management fees incurred by the Emerging Growth Portfolio and paid to Hamilton Investments were $279,225. For the periods October 1, 1994 through December 31, 1994, the management fees incurred by the Emerging Growth Portfolio and paid to OAM were $90,458. Neither Hamilton Investments nor OAM was required to reimburse the Emerging Growth Portfolio pursuant to the expense limitation for the year ended December 31, 1994. (See also "Expenses Borne by the Fund.") For the years ended December 31, 1993 and 1992, management fees incurred by the Emerging Growth Portfolio and paid to Hamilton Investments were $356,178 and $141,760, respectively, and pursuant to the expense limitation provisions of the then existing management agreement, Hamilton Investments was required to rebate to the Portfolio $10,228 and $73,579, respectively, of such amounts. DISTRIBUTION PLAN AND AGREEMENT As discussed in the Fund's Prospectus under the heading "Distribution of Shares," the Fund has adopted a Plan of Distribution (the "Distribution Plan") and a Distribution and Shareholder Service Agreement (the "Distribution Agreement") pursuant to Rule 12b-1 under the Investment Company Act of 1940 8 (collectively the "Plan and Agreement") under which the Fund compensates TCC in connection with the distribution of each Portfolio's shares. Reference should be made to the Prospectus for details not provided below. TCC will act as the primary distributor of each Portfolio's shares and as the primary shareholder servicing agent for each Portfolio. The Fund pays TCC a monthly distribution and shareholder servicing fee at an annual rate of .25% of each Portfolio's average daily net assets and may also reimburse certain out of pocket costs incurred by TCC for the Fund. Pursuant to the Plan and Agreement, TCC has agreed, directly or through other firms, to advertise and promote the Fund and provide information and services to existing and potential shareholders. These services include, among other things, processing new shareholder account applications; converting funds into or advancing federal funds for the purchase of shares of the Fund as well as transmitting purchase orders to the Fund's Transfer Agent; transmitting redemption requests to the Fund's Transfer Agent and transmitting the proceeds of redemption of shares of the Fund pursuant to a shareholder's instructions; providing telephone and written communications with respect to shareholder account inquiries and serving as the primary source of information for existing and potential shareholders in answering questions concerning the Fund and their transactions with the Fund; and providing literature distribution, advertising and promotion as is necessary or appropriate for providing information and services to existing and potential shareholders. TCC will be reimbursed by the Fund for certain out-of-pocket costs, if any, of providing certain services contemplated by the Distribution Agreement, which include the costs of postage, data entry, modification and printout, stationery, tax forms, and all other external forms or printed material that may be required for performance by TCC of the services contemplated in the Distribution Agreement. TCC proposes to compensate its account executives annually for servicing and administering a shareholder's account. The Plan and Agreement provides that TCC may appoint various broker-dealer firms to assist in providing distribution services for the Fund, including literature distribution, advertising and promotion, and may appoint broker-dealers and other firms (including depository institutions such as commercial banks and savings and loan associations) to provide administrative services for their clients as shareholders of the Fund under related service agreements. To provide these services, these firms will furnish, among other things, office space and equipment, telephone facilities, and personnel as is necessary or beneficial for providing information and services related to the distribution of the Portfolios' shares to TCC in servicing accounts of such firms' clients who own shares of the Fund. 9 The Glass-Steagall Act generally prohibits federally chartered or supervised banks from engaging in the business of underwriting, selling, or distributing securities. Although the scope of this prohibition under the Glass-Steagall Act has not been fully defined, in TCC's opinion it should not prohibit banks from being paid for shareholder servicing and record-keeping. If, because of changes in law or regulation, or because of new interpretations of existing law, a bank or a fund were prevented from continuing these arrangements, it is expected that other arrangements would be made for these services and that shareholders would not suffer adverse financial consequences. In addition, state securities laws on this issue may differ from the interpretations of federal law expressed herein, and banks and other financial institutions may be required to register as dealers pursuant to state law. The Plan provides that the Fund's asset-based sales charges (as defined in the NASD's Rules of Fair Practice) shall not exceed those permitted by Article III, Section 26 of the NASD's Rules of Fair Practice. Further, as permitted by the NASD's Rules, the Emerging Growth Portfolio has elected to calculate its permissible amount of asset-based sales charges on new gross sales of the Portfolio since the Portfolio's inception. The Board of Trustees has determined that, in its judgment, there is a reasonable likelihood that the Plan and Agreement will benefit the Portfolios and their shareholders. If the sizes of the Portfolios are increased rapidly, fixed expenses will be reduced as a percentage of each shareholder's investment. The 12b-1 expenses will also provide TCC and others an incentive to promote the Portfolios and to offer individual shareholders prompt and efficient services. As required by Rule 12b-1, the Plan, as amended, and Agreement was approved by the Board of Trustees, including a majority of Trustees who are not interested persons, as defined in the Investment Company Act of 1940, of the Fund, who are not parties to the Distribution Agreement or Shareholder Service Agreement and who have no direct or indirect financial interest in the operation of the Plan. Unless terminated earlier as described below, the Plan and Agreement will continue in effect from year to year if approved annually by the Board of Trustees of the Fund, including a majority of the Trustees who are not parties to the Plan and Agreement (or have a direct or indirect financial interest in the operation thereof) and who are not interested persons of the Fund. The Plan may be terminated with respect to the Fund or a Portfolio at any time by (1) a vote of a majority of the Trustees who are not interested persons of the Fund, who are not parties to the Distribution Agreement and who have no direct or indirect financial interest therein, or (2) by the vote of a majority of shareholders of that Portfolio. The Distribution Agreement may be terminated similarly without penalty upon 60 days written notice by either party and will automatically terminate if assigned, as defined in the 1940 Act. For the period January 1, 1994 through September 30, 1994 (the day the Fund ceased 12b-1 payments to Hamilton Investments), total 12b-1 fees paid by the Emerging Growth Portfolio to Hamilton Investments were $349,031. For the period October 1, 1994 through December 31, 1994, total 12b-1 fees paid by the Portfolio to TCC and OAM were $78,609 and $34,464, respectively. During that time period, TCC was appointed by the Fund to act as the principal distributor of the Emerging Growth Portfolio's shares pursuant to a Distribution Agreement dated October 1, 1994 between the Fund and TCC and OAM was appointed by the Fund to act as the Emerging Growth Portfolio's primary shareholder service agent pursuant to a Shareholder Service Agreement dated October 1, 1994 between the Fund and OAM. During that period, the Fund was authorized to pay an annual fee not to exceed .50% the Emerging Growth Portfolio's average daily net assets for distribution and shareholder services provided to the Portfolio and from the total 12b-1 fees, TCC was paid fees for distribution services at an annual rate of .35% of the Portfolio's average daily net assets and OAM was paid fees for shareholder services at an annual rate of .15% of the Portfolio's average daily net assets. For the 12 month period ended December 31, 1994, the Emerging Growth Portfolio paid the following amounts under the Rule 12b-1 Plan in the approximate amounts noted: $27,120 in sales promotion and literature expenses, $247,389 in service fees paid to brokers, $90,476 in salary expenses and employment services, $12,132 in telephone expenses, $41,280 in professional fees, and $529 in miscellaneous operating expenses. There was no reimbursement of out-of-pocket expenses for such period. EXPENSES BORNE BY THE PORTFOLIOS Other than those expenses payable by OAM and/or TCC, the Portfolios will pay all of their expenses, including the following: (a) Federal, state and local or other governmental agency taxes or fees levied against the Fund. (b) Costs, including the interest expense, of borrowing money. 10 (c) Brokerage fees and commissions and other transaction costs in connection with the purchase or sale of portfolio securities for the Portfolios. (d) Fees and expenses of the Trustees other than those who are "interested persons" (as defined in the Investment Company Act of 1940) of the Fund. (e) Expenses incident to holding meetings of the Fund's Shareholders, including proxy solicitations of the Fund or its Board of Trustees therefor, and meetings of the Board of Trustees and committees of the Board of Trustees. (f) Fees and expenses in connection with legal services rendered to the Fund, the Board of Trustees of the Fund and duly appointed committees of the Board of Trustees of the Fund, including fees and expenses of special counsel to those Trustees who are not interested persons of the Fund, and litigation. (g) Audit and accounting expenses of the independent auditors. (h) Custodian and transfer and dividend paying agent fees and expenses and shareholder service expenses. (i) Fees and expenses related to registering, qualifying and maintaining registration and qualification of the Fund and its Shares for distribution under federal, state and other laws. (j) Fees and expenses incident to the preparation and filing of reports with regulatory agencies. (k) Expenses of preparing, printing (including typesetting) and mailing prospectuses, shareholder reports, proxy materials and notices to shareholders of the Fund. (l) Premiums for trustee's and officer's liability insurance and insurance carried by the Fund pursuant to the requirements of Section 17(g) of the Investment Company Act of 1940, or otherwise required by law or deemed desirable by the Board of Trustees. (m) Fees and expenses incurred in connection with any investment company organization or trade association of which the Fund may be a member. (n) Costs and expenses incurred for promotion or advertising of the Fund's Shares, but only pursuant to a Plan duly adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940 and to the extent that such Plan may from time to time provide. (o) Expenses related to issuance or redemption of the Portfolios' shares. For the fiscal year ended December 31, 1994, total expenses incurred by the Emerging Growth Portfolio were $1,647,254 and the ratio of such total expenses to the Portfolio's average net asset value was 1.78%. PORTFOLIO TRANSACTIONS Effective October 1, 1994, decisions with respect to the purchase and sale of portfolio securities on behalf of the Fund's Portfolios are made by OAM. Prior to October 1, 1994, decisions with respect to the purchase and sale of portfolio securities on behalf of the Emerging Growth Portfolio were made by Alpha Source. Actual portfolio turnover may vary considerably from year to year. However, in order to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code, less than 30% of the Fund's gross income may be derived from the sale or other disposition of stock or securities held for less than three months. OAM is authorized to place orders for securities with various broker-dealers, including TCC, subject to the requirements of applicable laws and regulations. OAM may place a significant portion of the Portfolios' agency orders with TCC, as it believes by so doing a Portfolio is able to achieve more control over and better execution of its orders. Orders for securities transactions are placed by OAM with a view to obtaining the best combination of price and execution available. In seeking to achieve the best combination of price and execution, OAM attempts to evaluate the overall quality and reliability of the broker- dealers and the services provided, including research services, general execution capability, reliability and integrity, willingness to take positions in securities, general operational capabilities and financial condition. However, the responsibility of OAM to attempt to obtain the best combination of price and execution does not obligate it to solicit a competitive bid for each transaction. Furthermore, under the Advisory Agreement, OAM is not obligated to seek the lowest available cost to the Portfolio, so long as it determines in good faith that the broker-dealer's commission, spread or discount is reasonable in relation to the value of the execution and research services provided by such a broker-dealer to the Portfolio, or OAM when viewed in terms of that 11 particular transaction or its overall responsibilities with respect to all of its clients, including the Portfolio, as to which it offers advice or exercises investment discretion. OAM, with the prior consent of the Fund's Trustees, may place orders with affiliated persons of OAM, TCC or the Fund subject to (i) the provisions of Sections 10(f) and 17(e)(2) of the Investment Company Act of 1940 and Rules 10f- 3 and 17e-1 thereunder, Rule 206(3)-2 under the Investment Advisers Act of 1940, Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)(a)(2) thereunder and any other applicable laws or regulations, and (ii) procedures properly adopted by the Fund with respect thereto. The Fund has been advised by OAM that it may place a significant portion of the Portfolios' orders for securities with TCC, but only when it believes that the combination of price and execution are comparable to that of other broker-dealers. OAM, with the prior consent of the Fund's Trustees, may engage in agency cross transactions subject to (i) the provisions of Section 17(a) of the Investment Company Act of 1940 and Rule 17a-7 thereunder and other applicable laws or regulations, (ii) the provisions of Section 206 of the Investment Advisers Act of 1940 and Rule 206(3)-2 thereunder, and (iii) procedures properly adopted by the Fund with respect thereto. OAM has agreed to furnish certain information quarterly to the Fund's Trustees to enable them to evaluate the quality of execution and cost of all orders executed by TCC. The Fund requires that OAM, as investment adviser, record and furnish to the Fund quarterly the following information: (A) Exchange Transactions A listing showing for each transaction executed by TCC for the Portfolios during the month, in time sequence, the date of the transaction, the price, the commission, the exchange where executed, the security and the number of shares. (B) Over-the-Counter Transactions A listing showing for each transaction executed by TCC for the Portfolios during the month, in time sequence, the date of execution, the price, the best bid and ask at the time, the commission for the transaction, the security and the number of shares. (C) Transactions Through Other Brokers A list of all transactions during each quarter through other brokers, showing the price and commission for the transaction, and a summary of commission charges by all other brokers executing transactions for the Portfolios. A greater discount, spread or commission may be paid to non-affiliated broker- dealers that provide research services, which research may be used by OAM in managing assets of its clients, including the Portfolios. Research services may include data or recommendations concerning particular securities as well as a wide variety of information concerning companies, industries, investment strategy and general economic, financial and political analysis and forecasting. In some instances, OAM may receive research, statistical and/or pricing services it might otherwise have had to perform itself. However, OAM cannot readily determine the extent to which net prices or commission rates charged by most broker-dealers reflect the value of its research, statistical and/or pricing services. As OAM is the principal source of information and advice to the Fund and is responsible for managing the investment and reinvestment of the Portfolios' assets and determining the securities to be purchased and sold, it is believed by the Fund's management to be in the interests of the Fund for OAM, in fulfilling its responsibilities to the Fund, to be authorized to receive and evaluate the research and information provided by other securities brokers or dealers, and to compensate such brokers or dealers for their research and information services. Any such information received may be utilized by OAM for the benefit of its other accounts as well, in the same manner that the Fund might also benefit from information obtained by OAM in performing services for its other accounts. Although it is believed that research services received directly or indirectly benefit all of OAM's accounts, the degree of benefit varies by account and is not directly related to the commissions or other remuneration paid by such account. Transactions of the Portfolios in the over-the-counter market and the third market may be executed for the Portfolios by TCC as agent with primary market makers acting as principal, except where OAM believes that better prices or execution may be obtained otherwise. Transactions with primary market makers reflect the spread between the bid and the ask prices. Occasionally, the Portfolios may make purchases of underwritten issues at prices which include underwriting discount fees. OAM may place orders with broker-dealers other than TCC that sell shares of the Fund, provided the price and execution are reasonably believed to be comparable with other nonaffiliated broker dealers. OAM and the Fund's Board of Trustees review quarterly the Portfolios' brokerage transactions for execution and services furnished. Such quarterly review may from time to time result in changes of brokers being utilized to execute transactions because of services furnished or to be furnished to OAM or the Fund. 12 For the period January 1, 1994 through September 30, 1994, the total brokerage commissions paid by the Emerging Growth Portfolio was $79,554, of which 35%, or $27,659, was paid to Hamilton Investments. The total amount of securities transactions on which the Portfolio paid brokerage commission during such period was $27,827,404. Thirty-six percent (36%), or $10,032,294, of the securities transactions on which the Portfolio paid brokerage commissions were effected through Hamilton Investments. For the period October 1, 1994 through December 31, 1994, the total brokerage commissions paid by the Emerging Growth Portfolio was $17,248, of which 49%, or $8,463, was paid to TCC. The total amount of securities transactions on which the Portfolio paid brokerage commissions during such period was $10,765,934. Forty-four percent (44%), or $4,718,944, of the securities transactions on which the Portfolio paid brokerage commissions were effected through TCC. The total amount of principal transactions of the Portfolio for the year ended December 31, 1994, for which no commission was incurred, was $95,896,610. For the years ended December 31, 1993 and 1992, the total brokerage commissions paid by the Emerging Growth Portfolio were $153,239 and $127,450, respectively, of which $130,033 and $120,370, respectively, was paid to Hamilton Investments. The total amount of securities transactions on which the Portfolio paid brokerage commissions during such periods was $65,833,808 and $34,900,116, respectively. The total amount of principal transactions of the Portfolio for such period, for which no commission was incurred, was $99,743,039 and 36,146,491, respectively. SHAREHOLDER VOTING RIGHTS Reference should be made to the Prospectus under the heading "General Information" for a description of certain shareholder rights and information concerning the shares of the Portfolios. As a general rule, the Fund is not required to and will not hold annual or other meetings of the shareholders. Special meetings of shareholders for actions requiring a shareholder vote may be requested in writing by holders of at least twenty-five percent (25%) (or ten percent (10%) if the purpose of the meeting is to determine if a Trustee is to be removed from office) of the outstanding shares of the Fund or as may be required by applicable law. Under the Declaration of Trust, shareholders are entitled to vote in connection with following matters: (1) for the election or removal of Trustees if a meeting is called for such purpose; (2) with respect to the adoption of any contract for which approval is required by the Investment Company Act of 1940; (3) with respect to any termination or reorganization of the Portfolios to the extent and as provided in the Declaration of the Trust; (4) with respect to any amendment of the Declaration of Trust (other than amendments changing the name of the Fund or the Portfolios, supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision thereof); (5) as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Fund or the shareholders, to the same extent as the stockholders of a Massachusetts business corporation; and (6) with respect to such additional matters relating to the Fund as may be required by law, the Declaration of Trust, the By-Laws of the Fund, or any registration of the Fund with the Securities and Exchange Commission or any state, or as the Trustees may consider necessary or desirable. The Declaration of Trust specifically authorizes the Board of Trustees to terminate the Fund (or any portfolio of the Fund) without shareholder approval by notice to the shareholders. Each Trustee serves until the next meeting of shareholders, if any, called for the purpose of electing Trustees and until the election and qualification of his successor or until such Trustee sooner dies, resigns, retires or is removed by the majority vote of the shareholders or by the Trustees. REDEMPTION OF SHARES Reference should be made to the Fund's Prospectus under the heading "How to Redeem Shares" for other information concerning redemption of the shares of a Portfolio. The Fund may suspend the right to redeem shares or postpone the date of payment for more than seven (7) days for any period during which: (a) the New York Stock Exchange is closed, other than weekend and holiday closings, or the Securities and Exchange Commission determines that trading on the New York Stock Exchange is restricted; (b) the Securities and Exchange Commission determines there is an emergency as a result of which it is not reasonably practical for a Portfolio to sell the investment securities or to calculate their Net Asset Value; or (c) the Securities and Exchange Commission permits such suspension for the protection of Portfolio's shareholders. In the case of a suspension of the right of redemption, a shareholder may either withdraw his request for redemption or receive payment at the Net Asset Value of his shares existing after termination of the suspension. Although it is the Fund's present policy to make payment of redemption proceeds in cash, if the Fund's Trustees determine it to be appropriate, redemption proceeds may be paid in whole or in part by a distribution in kind of securities held by the Portfolios, subject to the limitation that, pursuant to an election under Rule 18f-1 under the Investment Company Act of 1940, each Portfolio is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of a Portfolio during any 90-day period for any one account. The value of such securities shall be determined as of the close of trading of the New York Stock Exchange on the business day on which the redemption is effective. In such circumstances, a shareholder might be required to bear transaction costs to dispose of such securities. 13 SHAREHOLDER SERVICES The Fund's Prospectus under the headings "How to Purchase Shares," "How to Redeem Shares" and "Shareholder Services" describes information in addition to that set forth below. When a shareholder makes an initial investment in a Portfolio, a shareholder account is opened in accordance with the Fund's Account Application instructions. After each transaction for the account of a shareholder, confirmation of all deposits, purchases, reinvestments, redemptions, withdrawal payments, and other transactions in the shareholder's account will be forwarded to the shareholder. A Portfolio will generally not issue certificates for its shares, except that certificates for full amounts will be issued upon a shareholder's written request to the Transfer Agent. The investor will be the record owner of all shares in his account with full shareholder rights, irrespective of whether share certificates are issued. Certain of the functions performed by the Fund in connection with the operation of the accounts described above have been delegated by the Fund to its Transfer Agent. In addition to the purchase and redemption services described above, the Fund offers its shareholders the special accounts and services described in the Fund's Prospectus. Applications and information about any shareholder services may be obtained from OAM. DETERMINATION OF NET ASSET VALUE See the Fund's Prospectus under the headings "How to Purchase Shares" and "Net Asset Value," for descriptions of certain details concerning the determination of Net Asset Value. The Net Asset Value of the shares of the Portfolios are computed once daily, as of the later of the close of the New York Stock Exchange or the Chicago Board Options Exchange, on each day the New York Stock Exchange is open for trading (except the Net Asset Value for the Micro-Cap Portfolio was computed on January 1, 1996, the New Year's Day Holiday, which was the first day shares of the Portfolio were offered to the public). All securities in the Portfolios other than options are priced as of the close of trading on the New York Stock Exchange. The options in the Portfolios are priced as of the close of trading on the Chicago Board Options Exchange. The Net Asset Value per share is computed by dividing the value of the Portfolio's securities plus all other assets minus all liabilities by the total number of Portfolio shares outstanding. In valuing the Portfolio's securities, each listed and unlisted security for which last sale information is regularly reported is valued at the last reported sale price prior to the close of the New York Stock Exchange, except for options which are based on the close of the Chicago Board Options Exchange. If there has been no sale on such day, the last reported bid price is used. Any unlisted security for which last sale information is not regularly reported and any listed debt security which has an inactive listed market for which over-the-counter market quotations are readily available is valued at the highest bid price as of the close of the New York Stock Exchange determined on the basis of reasonable inquiry. Restricted securities and any other securities or other assets for which market quotations are not readily available are valued by appraisal at their fair values as determined in good faith under procedures established by and under the general supervision and responsibility of the Board of Trustees. Short-term debt obligations, commercial paper and repurchase agreements are valued on the basis of quoted yields for securities of comparable maturity, quality and type or on the basis of amortized cost. TAXES As stated in the Fund's Prospectus under the heading "Dividends, Distributions and Tax Status" each of the Portfolios has elected to qualify under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), so that the Portfolio will not be liable for Federal income taxes to the extent that its net investment income and net realized capital gains are currently distributed to its shareholders. Each of the Portfolios will qualify for this status as long as it: (a) derives at least 90% of its gross income from dividends, interest, gains from the sale or other distribution of securities or foreign currencies, and certain other investment income including gain from options, futures or forward contracts; (b) derives less than 30% of its gross income from the sale or other disposition of securities it has held for less than three months; (c) invests in securities that satisfy certain diversification requirements; and (d) distributes at least 90% of its net investment income and net short-term capital gains to its shareholders each year. A Portfolio may be limited in its options transactions in order to comply with these rules. Except for those shareholders exempt from Federal income taxes, dividends and capital gains distributions are taxable to shareholders for purposes of the Federal income tax, whether paid in cash or reinvested in additional shares of the Portfolio. Dividends from net investment income are taxable to non-exempt shareholders as ordinary income for Federal income tax purposes. For corporate shareholders, such income dividends may be eligible for the deduction for dividends received from domestic corporations. Distribution of long-term capital gains are taxable to non-exempt shareholders as long-term capital gains regardless of the length of time that such shareholders have owned shares in a Portfolio. Short-term capital gain distributions are taxable to non-exempt shareholders as ordinary income. Losses incurred by such shareholders on the redemption of shares of a Portfolio held six months or less will be treated as long-term capital losses to the extent of any capital gains distributions made by the Portfolio with respect to such shares. Shareholders will be notified annually as to the Federal income tax status of dividends and capital gains distributions. Such dividends and distributions may also be subject to state and local taxes. 14 Income dividends are taxed as ordinary income at rates up to a maximum of 39.6% for individuals. Long-term capital gain distributions are taxable at a maximum rate of 28% for individual shareholders and at the same rate as ordinary income for corporate shareholders. In order to avoid an excise tax on undistributed amounts, each Portfolio must declare, by the end of the calendar year, a dividend to shareholders of record that represents 98% of its net investment income for the calendar year plus 98% of its capital gain net income for the period from November 1 of the previous year through October 31 of the current year plus any undistributed net investment income from the prior calendar year, plus any undistributed capital gain net income for the one-year period ended October 31 of the prior calendar year, less any overdistribution in the prior calendar year. Each Portfolio intends to declare or distribute dividends during the appropriate periods in an amount sufficient to avoid the 4% excise tax. Federal law requires the Fund to withhold 31% from dividends and/or redemption proceeds (including from exchanges) that occur in certain shareholder accounts if the shareholder has not properly furnished a certified correct Taxpayer Identification Number (in the case of individuals, a social security number) or has not certified that withholding does not apply. Amounts withheld are applied to the shareholder's Federal income tax liability and a refund may be obtained from the Internal Revenue Service if withholding results in overpayment of taxes. Federal law also requires the Fund to withhold the applicable tax treaty rate from dividends that are paid to certain nonresident alien, foreign partnership and foreign corporation shareholder accounts. The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations in effect on the date of the Fund's Prospectus and this Statement of Additional Information, which provisions are subject to change by legislative or administrative action. Investors are advised to consult their own tax advisers regarding the tax consequences of an investment in the Portfolios. Shareholders are likewise advised to consult their own tax advisers regarding specific questions as to state or local taxes. CALCULATION OF AVERAGE ANNUAL TOTAL RETURN Average annual total return measures both the net investment income generated by, and the effect of any realized and unrealized appreciation or depreciation of, the underlying investments of a Portfolio. A Portfolio's average annual total return quotation is computed in accordance with a standardized method prescribed by the rules of the Securities and Exchange Commission. The Emerging Growth Portfolio's average annual total return figures for the one-year and five-year periods ended June 30, 1995 were 48.0% and 17.8 %, respectively, and for the period from the commencement of operations on January 7, 1987 through June 30, 1995 was 15.6%, as calculated in accordance with the following formula pursuant to applicable regulations of the Securities and Exchange Commission: P(1+T)/n/ = ERV Where P = a hypothetical initial payment of $1,000 T = average annual total return n = time period the Fund's registration statement has been in effect expressed in years or portion thereof ERV = the ending redeemable value of a hypothetical $1,000 payment made at January 7, 1987 (the date the Fund commenced operations) A sales load of 4% was charged until December 31, 1991 which is not reflected in these total return numbers. ADDITIONAL INFORMATION Custodian and Transfer Agent - ---------------------------- The Custodian for the Fund is Investors Fiduciary Trust Company, P.O. Box 419042, Kansas City, Missouri 64141, a national bank organized under the laws of the United States. The Fund has authorized the Custodian to deposit certain securities of the Portfolios in central depository systems as permitted by federal law. The Portfolios may invest in obligations of the Custodian and may purchase or sell securities from or to the Custodian. The Custodian is also the Fund's Transfer Agent and acts as dividend disbursing agent. 15 Independent Auditors and Reports to Shareholders - ------------------------------------------------ The Fund's Independent Auditors audit and report on the Fund's annual financial statements, review certain regulatory reports and prepare the Fund's federal income tax return, and perform other professional accounting, auditing and advisory services when engaged to do so by the Fund. Beginning with the 1994 fiscal year, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606, serves as the Fund's independent auditors. For the 1993 fiscal year and prior years, Checkers, Simon & Rosner LLP, One South Wacker Drive, Chicago, Illinois 60606, served as the Fund's independent auditors. Shareholders will receive annual audited financial statements and semi-annual unaudited financial statements. Counsel - ------- Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street, Chicago, Illinois 60601, is legal counsel to the Fund. Other Information - ----------------- The Fund's Prospectus and this Statement of Additional Information omit certain information contained in the Registration Statement, which the Fund has filed with the Securities and Exchange Commission under the Securities Act of 1933, and reference is hereby made to the Registration Statement for further information with respect to the Fund and the securities offered hereby. This Registration Statement is available for inspection by the public at the Securities and Exchange Commission in Washington, D.C. 16 Report of Independent Auditors To the Board of Trustees and Shareholder We have audited the accompanying statement of assets and liabilities of Oberweis Micro-Cap Portfolio as of October 2, 1995. This statement of assets and liabilities is the responsibility of the Portfolio's management. Our responsibility is to express an opinion on this statement of assets and liabilities based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of assets and liabilities is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of assets and liabilities. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of assets and liabilities presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the statement of assets and liabilities referred to above presents fairly, in all material respects, the financial position of Oberweis Micro-Cap Portfolio at October 2, 1995, in conformity with generally accepted accounting principles. /S/ ERNST & YOUNG LLP ----------------- Ernst & Young LLP Chicago, Illinois October 2, 1995 Oberweis Micro-Cap Portfolio Statement of Assets and Liabilities October 2, 1995
Assets: Cash $100,000 Deferred organizational costs 55,000 ---------- 155,000 Liabilities: Organizational costs accrued 55,000 ---------- Net Assets $100,000 ========== Shares outstanding (unlimited number of shares authorized, no par value) 10,000 ========== Net asset value, offering price and redemption price per share $10.00 ==========
Notes: - --------- The Oberweis Funds (the "Fund") offers two Portfolios, currently consisting of the Oberweis Emerging Growth and Oberweis Micro-Cap Portfolios. The Fund is registered under the Investment Company Act of 1940 as a diversified open-end management investment company. The Fund is authorized to operate numerous portfolios under various trading strategies. The Fund commenced operations of the Oberweis Emerging Growth Portfolio on January 7, 1987. The investment advisor has advanced all of the organizational costs of the Oberweis Micro-Cap Portfolio. The Portfolio will reimburse the advisor those costs immediately on the commencement of operations. Costs incurred by the Oberweis Micro-Cap Portfolio in connection with their organization, registration and the initial public offering of shares have been deferred and will be amortized on a straight-line basis over a period of five years from the date upon which the Portfolio commences their investment activities. If any of the original shares of the Portfolio are redeemed prior to the end of the amortization period, the redemption proceeds will be reduced by the pro rata share of the unamortized organization costs as of the date of redemption. PRESIDENT'S LETTER FEBRUARY 9, 1995 Dear Emerging Growth Fund Shareholder: For the first time in the history of your fund I must report to you that we experienced a loss for a full calendar year. Even in 1990, a year during which the NASDAQ Composite and Russell 2000 indices were each down by double digit amounts, we were able to achieve a small positive return. Unfortunately, in 1994 fund shares declined by 3.5%, similar to the 3.2% decline in the NASDAQ Composite and the 1.7% decline in the Russell 2000 index. At the beginning of last year, price/earnings ratios were quite high by historical standards. The entire year seemed to be a battle to lower those P.E. ratios through higher earnings before they would be reduced by a significant stock market decline. The battle ended in a draw. Higher earnings did reduce P.E. ratios, but not fast enough to allow stocks to gain ground. The outlook for this year appears more favorable since P.E.s are significantly lower than a year ago and earnings continue to expand. However, since interest rates are considerably higher than last year, fixed income investments offer more attractive alternatives than they did a year ago. Thus investors have much more attractive alternatives than they did a year ago. Unless interest rates rise another 200 basis points this year, I believe that the opportunities for stock market investors are significantly better than a year ago. While no investment strategy works perfectly every year, we believe our method of identifying some of the fastest growing companies in the world, selling at reasonable prices in relation to their growth rates and prospects, will produce above average investment results over longer periods of time. As you can see from the graph on the next page, this has generally been true over the eight- year life of the fund. A $10,000 investment in the fund at its January 7, 1987 inception would have grown to $27,157 at the end of last year, assuming reinvestment of capital gains distributions and no tax liability, for a 13.3% average annual return. Our latest five-year average annual return is an even higher 17.7%. We believe that the long term growth prospects for the type of stocks owned by the fund are excellent. We expect average gains in the S&P 500 this year, and we hope that emerging growth stocks will do even better. In my opinion, small company stocks, especially emerging growth companies, represent better value today than large company shares. Any significant reduction in capital gains taxes should benefit growth stocks more than larger, dividend paying company shares. Finally, I would like to thank all of you for investing in our fund. Share prices can be quite volatile on a day-to-day basis but over the long run, accepting that volatility should produce reasonable rewards. I would like to remind you that that very volatility makes this fund a good candidate for periodic additional investments (dollar-cost averaging), which is a recommended strategy for long term investors. I realize it's hard to invest more in a fund after it had a loss for the year, but that may in fact be an excellent time to do so. Fund shareholders with 2000 shares or more held at our custodian bank should be receiving complimentary copies of The Oberweis Report, our monthly investment advisory letter. If you have any questions about your account, please call shareholder services at 1-800-245-7311 during normal business hours. If you have any questions about the fund's portfolio or investment policy, please feel free to call me or either of our assistant portfolio managers, Martin Yokosawa and Chip Roberts, at 1-800-323-6166. We're usually in the office from 7:30 A.M. until 6:00 P.M. central time during the week, and from 9:00 until noon on Saturday. We would like to hear from you! Sincerely, Jim Oberweis 1 MANAGEMENT DISCUSSION AND ANALYSIS The Oberweis Emerging Growth Fund is positioned to take advantage of the long- term price appreciation that occurs when the market places an appropriately high value on the fastest-growing companies. The market for such companies (and most other investments) was not particularly strong in 1994, causing the fund to have a return similar to the NASDAQ Composite and the Russell 2000 indices. (The before-cost return of the Fund was -1.7%, the same as the Russell 2000, and somewhat better than the 3.2% decline in the NASDAQ Composite; after deducting costs, the Fund lost 3.5%.) The steep rise in interest rates in 1994 tended to cause investors to lower the price they were willing to pay for each $1 of corporate earnings. At the same time, total corporate earnings were rising rapidly, helping to hold stock prices up. The relatively weak performance of the stocks of fast-growing companies in 1994 enabled the Fund to accumulate such stocks at reasonable prices, laying the groundwork for higher returns in the future. The Fund's performance was helped by a continuing reduction in expenses. In 1994, the Fund's expense ratio declined to 1.78% from 1.80% in 1993, and from almost 2% in 1992. The fund is not specifically committed either to investing in small companies or to a "growth" style of investing, where stocks are purchased (regardless of their price) based on the manager's expectation of growing earnings. Nor is the fund subject to a "momentum" style of investing where stocks are purchased solely because they are moving up in price. Rather, the Fund identifies and purchases the stocks of fast-growing companies that are attractively priced. Typically, the Fund seeks to buy companies whose revenues and earnings are growing at a rate in excess of 30% per annum, and whose shares sell at a P.E. not greater than one-half of the company's rate of growth. This strategy combines the best features of growth and value investing. Historically, most of the companies identified by this strategy are smaller than the median New York Stock Exchange-listed company, although there are notable exceptions. A majority of portfolio companies have generally been traded over-the-counter. Portfolio turnover in 1994 was a moderate 66%, down slightly from 1993's 70%. 2 MANAGEMENT DISCUSSION AND ANALYSIS AVERAGE ANNUAL RETURNS (1) PERIODS ENDED DECEMBER 31, 1994
5 LIFE OF FUND 1 YEAR YEAR (1/7/87) - -------------------------------------------------------- ~~Oberweis Emerging Growth Fund (3.5)% 17.7% 13.3% S&P 500 1.3 % 8.7% 11.1% Russell 2000 (1.7)% 10.2% 9.2%~~
GROWTH OF AN ASSUMED $10,000 INVESTMENT FROM 1/7/87 TO 12/31/94 [GRAPH APPEARS HERE]
Measurement Period (Fiscal Year Covered) OBERWEIS S&P 500 RUSSELL 2000 - ------------------- -------- ------- ------------ Measurement Pt- $10,000 $10,000 $10,000 1987 $ 9,094 $ 9,948 $ 8,537 1988 $ 9,612 $11,598 $10,664 1989 $12,012 $15,267 $12,395 1990 $12,062 $14,822 $ 9,977 1991 $22,573 $19,345 $14,571 1992 $25,653 $20,822 $17,254 1993 $28,147 $22,909 $20,515 1994 $27,157 $23,206 $20,166
(1) Performance is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Results include the reinvestment of all dividends and capital gains distributions. The Standard & Poor's Stock Index is an unmanaged index generally representative of the U.S. stock market. The Russell 2000 Index is an unmanaged index consisting of 2000 small cap securities with an average market capitalization of approximately $255 million. A sales load of 4% was charged until December 31, 1991 and is not reflected in the total return figures or graph above. 3 OBERWEIS EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (Market Value in thousands) Equity Securities - 92.5%
Shares Company (Closing Price) Value AIRLINES--2.1% 90,000 ValuJet Airlines, Inc.@21.25 $ 1,913 APPAREL--0.5% 20,000 Kenneth Cole Productions@21.00 420 AUDIO/VIDEO HOME PRODUCTS--0.9% 90,000 HTP International, Inc.@4.593 414 65,000 Curtis Mathes Holding Corp.@2.187 142 15,000 Recoton Corp.@18.75 281 SUBTOTAL 837 AUTO/TRUCK EQUIPMENT--1.0% 11,500 *ABS Industries, Inc.@11.75 135 **12,000 *Breed Technologies, Inc.@28.375 341 120,000 Williams Controls, Inc.@3.50 420 SUBTOTAL 896 BUILDING AND BUILDING PRODUCTS--0.3% 20,000 *Slocan Forest Products, Ltd.@11.412 228 BUILDING--MOBILE HOMES & RV--2.5% 52,400 *Cavalier Homes, Inc.@10.875 570 69,200 *Decorator Industries, Inc.@7.25 502 105,000 *Shelter Components Corp.@11.375 1,194 SUBTOTAL 2,266 CHEMICALS--0.4% 30,000 Methanex Corp.@13.00 390 COMPUTER GRAPHICS--0.3% 15,000 Pinnacle Systems, Inc.@15.00 225 COMPUTER--LOCAL NETWORKS--8.3% 10,000 Alantec Corp.@32.25 323 105,000 Apertus Technologies, Inc.@10.00 1,050 20,500 Ascend Communications, Inc.@40.75 835 15,000 Chipcom Corp.@50.00 750 175,000 Madge N.V.@11.812 2,067 30,000 Network Peripherals, Inc.@27.25 818 20,000 Standard Microsystems Corp.@30.00 600 57,500 Xircom, Inc.@17.75 1,021 SUBTOTAL 7,464 COMPUTER--MEMORY DEVICES--0.9% 26,000 Alliance Semiconductor Corp.@31.25 813 COMPUTER--MINI/MICRO--1.2% 10,000 Compaq Computer Corp.@39.50 395 22,000 Pyxis Corp.@19.00 418 26,000 *Scientific Technologies, Inc.@8.50 221 SUBTOTAL 1,034

Shares Company (Closing Price) Value COMPUTER PERIPHERALS--14.3% 40,000 Cornerstone Imaging, Inc.@15.25 $ 610 60,000 Eltron International, Inc.@19.75 1,185 100,000 Encad, Inc.@12.375 1,237 60,000 Microtouch Systems, Inc.@45.00 2,700 112,000 Mylex Corp.@11.187 1,253 75,000 PC Service Source, Inc.@9.00 675 40,000 Proxima Corp.@28.875 1,155 12,000 Sonic Solutions, Inc.@15.75 189 90,000 U.S. Robotics, Inc.@43.25 3,892 SUBTOTAL 12,896 COMPUTER SERVICES--4.4% 50,000 AmeriData Technologies, Inc.@10.00 500 119,000(a) AmeriData Technologies, Inc. Common Stock and Warrants@10.00 1,190 100,000 CIBER, Inc.@10.00 1,000 10,000 *Keane, Inc.@23.75 238 25,000 Network Six, Inc.@10.50 262 100,000 Quality Systems, Inc.@3.25 325 10,000 Quick Response Services, Inc.@12.625 126 50,000 Wave Technologies International@6.375 319 SUBTOTAL 3,960 COMPUTER SOFTWARE--5.7% 40,000 BTG, Inc.@8.25 330 5,000 Cambridge Technology Partners@22.25 111 25,500 Hummingbird Communications Ltd.@20.375 520 10,000 Infosoft International, Inc.@35.125 351 10,000 MapInfo Corp.@25.75 257 4,000 Mercury Interactive Corp.@13.25 53 27,000 Natural MicroSystems Corp.@13.25 358 20,000 NetManage, Inc.@40.50 810 21,000 Platinum Technology, Inc.@22.625 475 15,000 Softdesk, Inc.@19.375 291 55,000 Systemsoft Corp.@9.00 495 60,000 VMark Software, Inc.@17.75 1,065 SUBTOTAL 5,116 CONSUMER PRODUCTS--1.1% 39,060 Celex Group, Inc.@18.25 713 57,000 Creative Technology Ltd.@4.875 278 SUBTOTAL 991 DRUGS--4.8% 35,000 Barr Laboratories, Inc.@25.25 884 100,000 Future HealthCare, Inc.@20.625 2,063 **10,000 Roberts Pharmaceuticals, Inc.@31.75 318 41,000 Watson Pharmaceuticals, Inc.@26.25 1,076 SUBTOTAL 4,341
4 See accompanying notes to financial statements. Equity Securities - continued
Shares Company (Closing Price) Value ELECTRICAL & ELECTRONIC EQUIPMENT--0.7% 15,000 Datamarine International, Inc.@11.75 $ 176 37,500 Symetrics Industries, Inc.@12.75 478 SUBTOTAL 654 ELECTRONICS--COMPONENTS/ SEMICONDUCTORS--5.8% 34,400 Atmel Corp.@33.50 1,152 27,500 *Cerprobe Corp.@5.50 151 45,000 Flextronics International Ltd.@15.25 686 10,000 Fusion Systems Corp.@25.50 255 30,000 Integrated Device Technology, Inc.@29.50 885 30,000 Level One Communications, Inc@15.50 465 20,000 Mattson Technology, Inc.@19.25 385 15,000 Micrel Semiconductor, Inc.@14.50 217 60,000 Micrion Corp.@11.75 705 10,000 Quality Semiconductor, Inc.@12.50 125 40,000 Submicron System Corp.@4.937 198 SUBTOTAL 5,224 ELECTRONICS--PARTS DISTRIBUTOR--0.9% 150,000 All American Semiconductor, Inc.@1.875 281 50,000 Bell Microproducts, Inc.@10.75 537 SUBTOTAL 818 FARM MACHINERY--1.4% 22,500 *AGCO Corp.@30.375 684 10,000 *AGCO Corp. Convertible Preferred@59.50 595 SUBTOTAL 1,279 FINANCIAL/BUSINESS SERVICES--2.2% 20,000 Express Scripts, Inc. Class A@36.75 735 100,000 Leasing Solutions, Inc.@6.875 688 15,000 *The Money Store, Inc.@18.50 278 58,000 Sherwood Group, Inc.@5.375 312 SUBTOTAL 2,013 HEALTH MAINTENANCE ORGANIZATION--4.0% 30,600 Coventry Corp.@24.50 750 **28,000 PacifiCare Health Systems, Inc.@66.00 1,848 40,000 Wellcare Management Group, Inc.@24.50 980 SUBTOTAL 3,578 HOUSEHOLD APPLIANCES--0.4% 10,000 Duracraft Corp.@31.875 319 LEISURE & RECREATION PRODUCTS--1.5% 45,000 Regal Cinemas, Inc.@25.50 1,148 20,000 Ride Snowboard Company@10.375 208 SUBTOTAL 1,356

Shares Company (Closing Price) Value MACHINERY--0.3% 8,000 *JLG Industries, Inc.@36.50 $ 292 MEDIA--RADIO/TV--2.3% 85,000 United Video Satellite Group, Inc.@24.00 2,040 MEDICAL EQUIPMENT & SUPPLIES--2.7% 21,000 Chad Therapeutics, Inc.@7.875 165 105,000 FluoroScan Imaging Systems, Inc.@6.125 643 32,000 Medplus, Inc.@7.75 248 7,000 *Omnicare, Inc.@43.75 306 65,000 Safeskin Corp.@14.25 926 5,000 Ventritex, Inc.@27.00 135 SUBTOTAL 2,423 MEDICAL--HOSPITALS--0.7% 35,000 Quorum Health Group, Inc.@19.00 665 MEDICAL--NURSING HOMES, OUTPATIENT HOMECARE--1.3% 20,000 Lincare Holdings, Inc.@29.00 580 40,000 *Retirement Care Associates, Inc.@7.312 293 12,800 Sun Healthcare Group, Inc.@25.375 323 SUBTOTAL 1,196 METAL ORES--GOLD--0.3% 20,000 *Santa Fe Pacific Gold Corp.@13.00 260 OIL & GAS--1.1% 40,000 *International Colin Energy Corp.@6.875 275 40,000 *Smith International, Inc.@12.344 494 10,000 *Snyder Oil Corp. Convertible Preferred @20.125 201 SUBTOTAL 970 PERSONNEL PLACEMENT--0.9% 5,000 Alternative Resources Corp.@31.50 157 22,000 On Assignment, Inc.@16.00 352 15,000 Right Management Consultants, Inc.@20.25 304 SUBTOTAL 813 POLLUTION CONTROL--1.5% 20,000 *Peerless Manufacturing Company@11.00 220 43,000 United Waste Systems, Inc.@25.00 1,075 SUBTOTAL 1,295 RESTAURANTS--5.0% 135,000 Checkers Drive-In Restaurants@2.281 308 20,000 Landry's Seafood Restaurants, Inc.@28.50 570 100,000 Lone Star Steakhouse & Saloon@20.00 2,000
5 See accompanying notes to financial statements. Equity Securities - continued Convertible Debt Obligations-6.5%
Face Amount Value COMPUTER MEMORY DEVICES--0.5% $ 600,000 *Seagate Technology 6.75% due 5-01-12 @83.00 $ 498 COMPUTER PERIPHERALS--2.6% 600,000 *SCI Systems, Inc. 5.625% due 3-01-12 @96.50 579 1,500,000 *Western Digital Corp. 9.00% due 6-01-14 @120.25 1,804 SUBTOTAL 2,383 EYECARE SERVICES--0.6% 500,000 *Benson Eyecare Corp. 8.00% due 5-15-01 @101.25 506 FERTILIZERS--0.3% 300,000 *Freeport-McMoran 6.55% due 1-15-01 @90.75 272 MEDICAL EQUIPMENT & SUPPLIES--0.2% 100,000 *Omnicare, Inc. 5.75% due 10-01-03 @143.00 143 MEDICAL-NURSING HOMES--1.4% 1,500,000 *GranCare, Inc. 6.50% due 1-15-03 @84.00 1,260 POLLUTION CONTROL--0.7% 580,000(a) *Growth Environmental, Inc. 9.00% due 4-30-97 @102.767 596 RETAIL--0.2% 200,000 *Proffitts, Inc. 4.75% due 11-01-03 @75.25 151 600,000(a) *Zam's, Inc. 7.50% due 10-31-00 @6.875 41 SUBTOTAL 192 TOTAL CONVERTIBLE DEBT OBLIGATIONS (COST: $6,141,000) 5,850 Short-Term Investments-0.9% 812,294 United Missouri Bank 4.7182% due 1-03-95@100.00 $ 812 TOTAL INVESTMENT--99.9% (COST: $74,948,000) 89,911 -------

Shares Company (Closing Price) Value 30,000 Outback Steakhouse, Inc.@23.50 $ 705 20,000 Papa John's International, Inc.@28.75 575 35,000 Pollo Tropical, Inc.@9.625 337 SUBTOTAL 4,495 RETAIL--CONSUMER ELECTRONICS--0.1% 10,000 Campo Electronics, Appliances and Computers Inc.@10.75 108 RETAIL/WHOLESALE COMPUTERS--1.0% 7,000 Micro Warehouse, Inc.@35.00 245 40,000 Tech Data Corp.@17.00 680 SUBTOTAL 925 RUBBER--0.2% 40,000 American United Global, Inc.@3.437 138 SCHOOLS--0.5% 80,000 Youth Services International, Inc.@6.00 480 SECURITY/SAFETY EQUIPMENT--0.5% 20,000 First Alert, Inc.@14.625 292 5,000 Safety 1st, Inc.@29.25 146 SUBTOTAL 438 TELECOMMUNICATIONS--7.4% 20,000 Applied Digital Access, Inc.@25.375 507 22,000 Cidco, Inc.@29.00 638 25,000 Gilat Satellite Networks Ltd.@12.00 300 8,000 Glenayre Technologies, Inc.@57.75 462 80,000 Incomnet, Inc.@13.312 1,065 2,000 IPC Information Systems, Inc.@11.25 22 20,000 Qualcomm, Inc.@24.00 480 40,000 Spectrian Corp.@28.125 1,125 55,000 Transaction Network Services, Inc.@14.50 798 80,000 Wholesale Cellular USA, Inc.@15.50 1,240 SUBTOTAL 6,637 TEXTILE PRODUCTS--0.6% 20,000 *St. John Knits, Inc.@28.625 573 TOYS & SPORTING GOODS--0.1% 10,000 Lewis Galoob Toys, Inc. Convertible Preferred @11.375 114 TRUCKING--0.4% 25,000 Knight Transportation, Inc.@14.25 356 TOTAL EQUITY SECURITIES (COST: $67,995,000) 83,249
6 See accompanying notes to financial statements. Covered Call Options-(0.0%)
Contracts Value 120 Breed Technologies, Inc., January $40 $ (1) 25 PacifiCare Health Systems, Inc. February $75 (2) 100 Roberts Pharmaceutical, January $35 (7) ------- Total Covered Call Options (Premiums received: $53,000) (10) OTHER ASSETS LESS LIABILITIES--0.1% 113 ------- NET ASSETS--100.0% $90,014 =======
Notes to Portfolio of Investments * Income producing security during the year ended December 31, 1994. **The aggregate market value of stocks held in escrow at December 31, 1994 covering open covered call options written was $2,507,000. Based on the cost of investments of $74,948,000 for federal income tax purposes at December 31, 1994, the aggregate gross unrealized appreciation was $23,123,000, the aggregate gross unrealized depreciation was $8,160,000, and the net unrealized appreciation of investments was $14,963,000. (a) The following securities are subject to legal or contractual restrictions on sale. They were valued at cost on the dates of acquisition and at fair value as determined by the board of trustees of the Fund as of December 31, 1994. The aggregate value of restricted securities was $1,827,000, or 2.0% of net assets, at year end. AmeriData Technologies, Inc. 119,000 common stock and warrants purchased in March, 1994 at a cost of $1,309,000. Growth Environmental, Inc. $580,000 face amount convertible debt purchased in May, 1994 at a cost of $580,000. Zam's, Inc. $600,000 face amount convertible debt purchased in November, 1993 at a cost of $600,000. 7 See accompanying notes to financial statements. OBERWEIS EMERGING GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES December 31, 1994 (in thousands) ASSETS: Investment securities at market value (Cost: $74,948,000) $89,911 Cash 9 Receivables: Fund shares sold 59 Securities sold 239 Dividends and interest 114 ---- Total receivables 412 Prepaid expenses 26 ------- Total Assets 90,358 LIABILITIES: Options written, at value (Premiums received: $53,000) 10 Payables: Fund shares repurchased $142 Securities purchased 88 Payable to adviser 72 Payable to distributor 26 ---- Total Payables 328 Accrued expenses 6 ------- Total Liabilities 344 NET ASSETS $90,014 ======= ANALYSIS OF NET ASSETS: Aggregate paid in capital $75,025 Accumulated net realized loss from investment transactions (17) Net unrealized appreciation of investments 15,006 ------- Net assets $90,014 ======= THE PRICING OF SHARES: Net asset value, offering and redemption price per share ($90,014,406 divided by 4,203,507 shares outstanding) $ 21.41 =======

See accompanying notes to financial statements. 8 OBERWEIS EMERGING GROWTH FUND STATEMENT OF OPERATIONS Year ended December 31, 1994 (in thousands) INVESTMENT INCOME: Dividends $142 Interest 526 ---- Total Investment Income $ 668 EXPENSES: Distribution fees 428 Advisory fees 395 Management fees 370 Custodian fees 149 Transfer agent fees 130 Professional fees 81 Shareholder servicing fees 34 Shareholder reports 19 Insurance 14 Trustee fees 13 Registration fees 12 Other 2 ---- Total Expenses 1,647 ------- NET INVESTMENT LOSS (979) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss from investment transactions (783) Net realized gain from covered call options written 766 ------- Total net realized loss (17) Decrease in unrealized appreciation of investments (3,046) ------- Net realized and unrealized loss on investments (3,063) ------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(4,042) -------

See accompanying notes to financial statements. 9 OBERWEIS EMERGING GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS (in thousands)
YEARS ENDED DECEMBER 31, ------------------ 1994 1993 -------- -------- FROM OPERATIONS: Net investment loss $ (979) $ (931) Net realized gain (loss) from investment transactions (17) 5,623 Increase (decrease) in unrealized appreciation of investments (3,046) 5,625 -------- -------- Net increase (decrease) in net assets resulting from operations (4,042) 10,317 -------- -------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net realized gains on investments -- (3,381) -------- -------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 26,882 83,936 Redemption of shares (37,150) (43,816) Shares issued in reinvestment of distribution -- 3,205 -------- -------- Net increase (decrease) from capital share transactions (10,268) 43,325 -------- -------- Total increase (decrease) in net assets (14,310) 50,261 NET ASSETS: Beginning of year 104,324 54,063 -------- -------- End of year $ 90,014 $104,324 ======== ========
See accompanying notes to financial statements. 10 NOTES TO FINANCIAL STATEMENTS December 31, 1994 1. SIGNIFICANT ACCOUNTING POLICIES Description of Business. Oberweis Emerging Growth Fund (the "Fund") is registered under the Investment Company Act of 1940 as a diversified open-end management investment company. The Fund is authorized to operate numerous portfolios under various trading strategies. The Fund commenced operations of one portfolio on January 7, 1987. Investment valuation. Investments are stated at value. Each listed and unlisted security for which last sale information is regularly reported is valued at the last reported sales price on that day. If there has been no sale on such day, then such security is valued at the current day's bid price. Any unlisted security for which last sale information is not regularly reported and any listed debt security which has an inactive listed market for which over-the- counter market quotations are readily available is valued at the highest closing bid price determined on the basis of reasonable inquiry. Restricted securities and any other securities or other assets for which market quotations are not readily available are valued by appraisal at their fair value as determined in good faith under procedures established by and under the general supervision and responsibility of the Board of Trustees. Short-term debt obligations, commercial paper and repurchase agreements are valued on the basis of quoted yields for securities of comparable maturity, quality and type or on the basis of amortized costs. Fund share valuation. Fund shares are sold and redeemed on a continuous basis at net asset value. On each day the New York Stock Exchange is open for trading, the net asset value per share is determined as of the later of the close of the New York Stock Exchange or the Chicago Board Options Exchange by dividing the total value of the Fund's investments and other assets, less liabilities, by the number of Fund shares outstanding. Investment transactions and investment income. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed). Dividend income is recorded on the ex-dividend date, and interest income is recorded on the accrual basis and includes amortization of money market instrument premium and discount. Realized gains and losses from investment transactions are reported on an identified cost basis. Gains and losses on premiums from expired options are recognized on date of expiration. Change in Accounting for Distributions to Shareholders. During the year ended December 31, 1994, the Fund adopted AICPA Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. The statement requires that the classification of distributions to shareholders be changed in the financial statements to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, the Fund reclassified $3,408,000 of net operating losses incurred by the Fund since 1987 and which cannot be utilized to paid in capital. Federal income taxes and dividends to shareholders. The Fund has complied with the special provisions of the Internal Revenue Code available to investment companies and therefore no federal income tax provision is required. Dividends payable to its shareholders are recorded by the Fund on the ex-dividend date. The accumulated net realized loss from investment transactions for federal income tax purposes at December 31, 1994, amounting to approximately $17,000, is available to offset future taxable gains. If not applied, the loss carryforward expires during the year in 2002. 11 2. TRANSACTIONS WITH AFFILIATES Effective October 1, 1994 Oberweis Asset Management, Inc. ("OAM") became the Fund's investment adviser, manager and primary shareholder service agent; and The Chicago Corporation ("TCC") became the Fund's principal distributor. Prior to October 1, 1994, Hamilton Investments, Inc. acted as the fund's manager, distributor and shareholder service agent; and Alpha Source Asset Management, a subsidiary of Hamilton Investments, Inc., served as the Fund's investment adviser. Advisory agreement. During 1994, pursuant to written agreements, the Fund paid monthly investment advisory fees at an annual rate equal to .45% of the first $50,000,000 of average daily net assets and .40% of average daily net assets in excess of $50,000,000. Management agreement. During 1994, for management services and facilities furnished, the Fund paid a monthly fee at an annual rate equal to .40% of average daily net assets. Expense Reimbursement. The manager and investment adviser are obligated to reduce their investment advisory and management fees or reimburse the Fund to the extent that total ordinary operating expense, as defined, exceed in any one year the following amounts expressed as a percentage of the Fund's average daily net assets: 2% of the first $25,000,000; plus 1.8% of the next $25,000,000; plus 1.6% of average daily net assets in excess of $50,000,000; or such lower percentage as may be required by any state where the Fund's shares are registered. For the year ended December 31, 1994, Hamilton Investments, Inc., Alpha Source Asset Management, Inc. and OAM were not required to rebate any of the investment adviser or management fees to the Fund. Officers and trustees. Certain officers or trustees of the Fund are also officers or directors of OAM. During the year ended December 31, 1994, the fund made no direct payments to its officers and paid $12,560 to its unaffiliated trustees. James D. Oberweis, the Fund's portfolio manager, is employed by OAM and TCC. Distribution and shareholder service expense. Effective October 1, 1994, the Fund pays The Chicago Corporation a monthly distribution fee at the annual rate of .35% of the average daily net assets and reimbursement for certain out-of- pocket expenses. The Fund also pays OAM a monthly shareholder service expense equal to .15% of average daily net assets and reimbursement for out-of-pocket expenses. Prior to this agreement, the Fund paid Hamilton Investments, Inc. a monthly fee at an annual rate equal to .50% of average daily net assets for its distribution service. Commissions. During 1994, the Fund paid Hamilton Investments, Inc. and TCC for executing some of the Fund's agency security transactions at competitive rates, typically $.03 to $.05 per share. 12 The following summarizes fees incurred by the Fund for the services provided by Hamilton Investments, Inc. and Alpha Source Asset Management, Inc. for the nine months ended September 30, 1994, and OAM and TCC for the three months ended December 31, 1994:
ALPHA HAMILTON SOURCE OAM TCC -------- -------- ------- ------- Advisory fees -- $298,000 $97,000 -- Management fees $279,000 -- $91,000 -- Distribution fees $349,000 -- -- $79,000 Shareholder service fees -- -- $34,000 -- Commissions $ 28,000 -- -- $ 9,000
3. INVESTMENT TRANSACTIONS The cost of securities purchased and proceeds from securities sold during 1994, other than options written and money market investments, aggregated $61,146,000 and $71,457,000, respectively. Transactions in options written for the year ended December 31, 1994 were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- ----------- Options outstanding at beginning of year 700 $ 104,000 Options written 12,938 1,681,000 Options expired (9,356) (1,034,000) Options closed (1,543) (206,000) Options assigned (2,494) (492,000) ------ ----------- Options outstanding at end of year 245 $ 53,000
The premiums received provide a partial hedge (protection) against declining prices and enables the Fund to generate a higher return during periods when OAM does not expect the underlying security to make any major price moves in the near future but still deems the underlying security to be, over the long term, an attractive investment for the Fund. 4. CAPITAL SHARE TRANSACTIONS The following table summarizes the activity in capital shares of the Fund:
YEARS ENDED DECEMBER 31, ------------------------------------------------- 1994 1993 ------------------------ ----------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ----------- Shares sold 1,272,000 $ 26,882,000 4,069,000 $83,936,000 Shares issued in reinvestment of dividends -- -- 144,000 3,205,000 Less shares redeemed (1,771,000) (37,150,000) (2,098,000) (43,816,000) ---------- ------------ ---------- ----------- Net increase (decrease) from capital share transactions (499,000) $(10,268,000) 2,115,000 $43,325,000
13 FINANCIAL HIGHLIGHTS Per share income and capital changes for a share outstanding throughout the year is as follows (c):
YEARS ENDED DECEMBER 31, ------------------------------------------------- 1994 1993 1992 1991 1990 ------- ---------- ---------- -------- ---------- Net asset value at beginning of year $ 22.19 $ 20.90 $ 18.39 $ 12.11 $ 12.06 Income from investment operations: Net investment loss (.22) (.22) (.21) (.09) (.24) Net realized and unrealized gain (loss) on investments (.56) 2.25 2.72 10.64 .29 ------- ---------- ---------- -------- ---------- Total from investment operations (.78) 2.03 2.51 10.55 .05 Less Distributions: Distribution from net realized gains on investments -- (.74) -- (4.27) -- ------- ---------- ---------- -------- ---------- Net asset value at end of year $ 21.41 $ 22.19 $ 20.90 $ 18.39 $ 12.11 ======= ========== ========== ======== ========== Total Return(b) (3.5%) 9.7% 13.7% 87.1% 0.4% Ratio/Supplemental Data Net Assets at end of year (in thousands) $90,014 $104,324 $54,063 $19,730 $11,604 Ratio of expenses to average daily net assets 1.78% 1.80%(a) 1.99%(a) 2.13%(a) 2.15%(a) Ratio of net investment loss to average net assets (1.06%) (1.04%)(a) (1.14%)(a) (1.27%) (1.24%)(a) Portfolio turnover rate 66% 70% 63% 114% 62%
- -------- Notes: (a) Net of expense reimbursement from related parties. Expense ratios would have been 1.82%, 2.41%, 3.01%, and 3.48% for 1993, 1992, 1991 and 1990, respectively before expense reimbursement. (b) A sales load of 4% was charged until December 31, 1991 and is not reflected in the total return figures above. (c) The per share data was determined using average shares outstanding during the year. 14 REPORT OF INDEPENDENT AUDITORS The Board of Trustees and Shareholders Oberweis Emerging Growth Fund We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Oberweis Emerging Growth Fund as of December 31, 1994, the related statements of operations and changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statement of changes in net assets for the year ended December 31, 1993 and the financial highlights for each of the years prior to 1994 were audited by other auditors whose report dated February 6, 1994 expressed an unqualified opinion. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of December 31, 1994, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oberweis Emerging Growth Fund at December 31, 1994, the results of its operations, the changes in its net assets and the financial highlights for the year ended December 31, 1994, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Ernst & Young LLP Chicago, Illinois January 27, 1995 15 [LOGO] Oberweis Emerging Growth Fund - -------------------------------------------------------------------------------- James D. Oberweis Thomas J. Burke Trustee and President Trustee Douglas P. Hoffmeyer Edward F. Streit Trustee Trustee Patrick B. Joyce Martin L. Yokosawa Executive Vice President Vice President Treasurer Anita I. Mraz James M. Roberts Secretary Vice President Mary Jane Murphy Assistant Secretary MANAGER AND INVESTMENT ADVISOR Oberweis Asset Management, Inc. One Constitution Drive, Aurora, Illinois 60506 DISTRIBUTOR The Chicago Corporation 208 South LaSalle, Chicago, Illinois 60604 CUSTODIAN AND TRANSFER AGENT Investors Fiduciary Trust Company P.O. Box 419042, Kansas City, Missouri 64141 COUNSEL Vedder, Price, Kaufman & Kammholz 222 North LaSalle Street, Chicago, Illinois 60601 INDEPENDENT PUBLIC ACCOUNTANTS Ernst & Young LLP 233 South Wacker Drive, Chicago, Illinois 60606 ANNUAL REPORT --------------------------------------- DECEMBER 31, 1994 [LOGO] Oberweis Emerging Growth Fund One Constitution Drive Aurora, IL 60506 (800) 323-6166 PRESIDENT'S LETTER JULY 24, 1995 Dear Emerging Growth Fund Shareholder: What a difference a year makes! I'm pleased to report that your fund had an exceptionally strong first half with the net asset value rising 25.5%. That performance is better than almost all broad market averages and significantly better than the average mutual fund, which underperformed the S&P 500 for the first half of this year. For the first six months of 1995, the S&P 500 total return index gained 20.1%, the NASDAQ Composite gained 24.1%, and the smaller company oriented Russell 2000 gained 14.4%. Our first half performance looks particularly favorable when compared to the Russell 2000. The Russell 2000 is an unmanaged index consisting of 2,000 small cap securities with an average market capitalization of approximately $255 million. This year has been an excellent reminder of the pitfalls of market timing. After a very difficult 1994, it was not easy to be bullish. After a strong first quarter this year, many market timers locked in their profits by selling stocks and mutual fund shares. It is very difficult emotionally for an investor who sold shares at the end of the first quarter at $23.52, up 10% in just three months, to now buy them back at $26.87 at the end of June. Unfortunately, I have seen some of our shareholders sell shares after a rise, believing they are catching a temporary top. Sometimes they are lucky enough to buy them back 5% cheaper, feeling quite proud of their success. But if the market keeps going up, they refuse to buy them back, so as to not have to admit a mistake. As a result, they may miss a 100% or greater profit over a period of time. Shares of this fund can be quite volatile over the short run. However, for investors with a longer term time horizon, those ups and downs tend to get averaged out, and we hope the performance will continue to provide investors with above market returns. For the last five years, the fund has provided an average annual return of almost 18%, compared to 15% for the NASDAQ Composite and 13% for the Russell 2000. Since the fund's inception on January 7, 1987 the average annual return has been almost 16%. Technology stocks have been particularly strong during the first half of the year. We attempt to diversify the fund's investments over as many different industries as possible. We don't try to buy technology stocks when we think they're attractive or medical stocks when we think they're attractive. Like market timing, industry timing can also be a very dangerous game. Many professional and individual investors were selling their technology stocks in May after nice gains because they "knew" that technology stocks are "always" weak during the summer months. We follow a much simpler approach of just trying to identify the companies that are most successful in the real world and invest in them. If you and I are buying 50% or 100% more each year of whatever a company produces and the company's profits are rising at a similar rate, and if we can buy those companies at a P.E. ratio of less than half their growth rate, I believe we should be able to achieve above average returns over a long period of time. Thanks for having the confidence to invest your money with us. If you have any questions about your account, please call shareholder services at 1-800-245- 7311 during normal business hours. If you have any questions about the fund's portfolio or investment policy, please feel free to call me or either of our assistant portfolio managers, Martin Yokosawa and Chip Roberts, at 1-800-323- 6166. We're usually in the office from 7:30 A.M. until 6:00 P.M. central time during the week, and from 9:30 until noon on Saturday. We would like to hear from you! Sincerely, Jim Oberweis 1 OBERWEIS EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (Market Value in thousands) Equity Securities - 93.9%
Shares Company (Closing Price) Value AIRLINES--5.1% **180,000 ValuJet Airlines, Inc.@32.875 $ 5,917 APPAREL--0.6% 20,000 Kenneth Cole Productions, Inc.@33.375 667 AUTO/TRUCK EQUIPMENT--0.6% 12,000 *Breed Technologies, Inc.@24.0 288 120,000 Williams Controls, Inc.@3.25 390 678 BUILDING AND BUILDING PRODUCTS--0.1% 15,056 *Slocan Forest Products, Ltd.@8.929 134 BUILDING--MOBILE HOMES & RV--1.2% 24,900 *Cavalier Homes, Inc.@11.75 293 92,800 *Shelter Components Corp.@11.75 1,090 1,383 CHEMICALS--1.1% 60,000 Applied Extrusion Technologies@14.875 893 10,000 *Borden Chemical & Plastic Co.@18.25 183 30,000 Methanex Corp.@8.375 251 1,327 COMMERCIAL SERVICES--1.2% 10,000 American Oncology Resources@27.75 278 14,000 Central Sprinkler Corp.@24.50 343 25,000 Luminart, Inc.@3.280 82 31,000 RTW, Inc.@18.25 566 12,100 Sterling Healthcare Group@15.00 182 1,451 COMPUTER GRAPHICS--0.5% 10,000 Diamond Multimedia Systems, Inc.@20.50 205 15,000 Pinnacle Systems, Inc.@22.50 338 543 COMPUTER--INTEGRATED SYSTEMS--0.9% 20,000 Data Research Associates, Inc.@13.00 260 20,000 Kronos, Inc.@37.125 742 1,002 COMPUTER--LOCAL NETWORKS--4.6% 10,000 Alantec Corp.@34.25 342 180,000 Apertus Technologies, Inc.@8.75 1,575 **100,000 Madge N.V.@28.00 2,800 30,000 Network Peripherals, Inc.@21.812 654 5,371

Shares Company (Closing Price) Value COMPUTER--MEMORY DEVICES--3.8% **39,000 Alliance Semiconductor Corp.@49.00 $ 1,911 **25,000 C-Cube Microsystems, Inc.@27.25 681 103,806 Western Digital Corp.@17.375 1,804 4,396 COMPUTER--MINI/MICRO--1.6% 20,000 Compaq Computer Corp.@45.375 908 26,000 *Scientific Technologies, Inc.@36.00 936 1,844 COMPUTER--OPTICAL RECOGNITION--0.4% 30,000 Robotic Vision Systems, Inc.@14.50 435 COMPUTER PERIPHERALS--11.0% 1,000 Discreet Logic, Inc.@33.00 33 120,000 Eltron International, Inc.@20.25 2,430 100,000 Encad, Inc.@27.00 2,700 **40,000 Microtouch Systems, Inc.@20.562 822 132,000 Mylex Corp.@13.25 1,749 30,000 Proxima Corp.@23.875 716 10,000 Scansource, Inc.@9.50 95 **40,000 U.S. Robotics Corp.@109.00 4,360 12,905 COMPUTER SERVICES--3.1% 100,000 AmeriData Technologies, Inc.@9.25 925 11,900 AmeriData Technologies, Inc. Warrants@0.00 0 20,000 AmeriData Technoligies, Inc. Convertible Preferred @29.25 585 100,000 CIBER, Inc.@17.75 1,775 25,000 Renaissance Solutions, Inc.@13.75 344 3,629 COMPUTER SOFTWARE--10.4% 40,000 BTG, Inc.@9.125 365 30,000 Firefox Communications, Inc.@25.75 772 25,000 Datastream Systems, Inc.@23.75 594 25,000 Electronics For Imaging, Inc.@52.25 1,306 10,000 Epic Design Technology, Inc.@35.50 355 1,000 HNC Software@21.25 21 35,000 Hummingbird Communications Ltd.@29.25 1,024 10,000 MapInfo Corp.@35.50 355 60,000 Natural MicroSystems Corp.@18.50 1,110 40,000 NetManage, Inc.@17.00 680 100,000 Number Nine Visual Technology@20.75 2,075 21,000 Platinum Technology, Inc.@18.12 381 15,000 Remedy Corp.@36.25 544
See notes to Portfolio of Investments. 2 Equity Securities - continued
Shares Company (Closing Price) Value 10,000 Seer Technologies, Inc.@20.75 $ 208 500 Software Artistry, Inc.@22.25 11 10,000 Spyglass, Inc.@28.625 286 55,000 Systemsoft Corp.@14.50 797 30,000 Tecnomatix Technologies@7.375 221 60,000 VMark Software, Inc.@17.75 1,065 12,170 COSMETICS/PERSONAL CARE--0.4% 32,000 Parlux Frangrances, Inc.@14.625 468 DIVERSIFIED OPERATIONS--0.1% 4,000 ACX Technologies, Inc.@41.75 167 DRUGS--3.0% 40,000 Barr Laboratories, Inc.@21.625 865 21,800 K V Pharmaceutical Co. Class A@8.25 180 30,000 *Mylan Laboratories, Inc.@30.75 923 **40,000 Watson Pharmaceuticals, Inc.@39.00 1,560 3,528 ELECTRICAL & ELECTRONIC EQUIPMENT--2.3% 30,000 Datamarine International, Inc.@9.00 270 5,000 Itron, Inc.@31.25 156 15,000 *Robbins & Meyers, Inc.@27.50 413 56,250 Symetrics Industries, Inc.@10.75 605 35,000 Zygo Corp.@33.75 1,181 2,625 ELECTRONICS--COMPONENTS/ SEMICONDUCTORS--8.4% 25,000 AG Associates, Inc.@17.50 438 **34,400 Atmel Corp.@55.375 1,905 60,000 Flextronics International Ltd.@21.875 1,312 10,000 Fusion Systems Corp.@34.25 343 143,061 Genus, Inc.@13.562 1,940 20,000 Information Storage Devices, Inc.@25.00 500 12,500 Integrated Device Technology, Inc.@46.25 578 **5,000 Integrated Silicon Solution@52.25 261 25,000 Mattson Technology, Inc.@47.00 1,175 **35,500 Oak Technology, Inc.@36.75 1,305 9,757 ELECTRONICS--LASER SYSTEMS/ COMPONENTS--2.6% 63,000 II-VI, Inc.@27.75 1,748 10,000 Cyberoptics Corp.@25.375 254 **30,000 Electro Scientific Industries, Inc.@33.25 998 3,000

Shares Company (Closing Price) Value FARM MACHINERY--0.7% 22,500 *AGCO Corp.@37.50 $ 844 FINANCIAL/BUSINESS SERVICES--1.7% 20,000 Express Scripts, Inc. Class A@35.25 705 15,000 Mercer International, Inc.@21.00 315 **15,000 *The Money Store, Inc.@35.812 537 58,000 Sherwood Group, Inc.@8.25 479 2,036 FOOD--MISCELLANEOUS--0.4% 25,000 Odwalla, Inc.@20.25 506 HEALTH MAINTENANCE ORGANIZATION--1.5% 23,000 Coventry Corp.@14.125 325 **28,000 PacifiCare Health Systems, Inc.@51.00 1,428 1,753 INSURANCE--0.2% 10,000 HCC Insurance Holdings, Inc.@26.00 260 LEISURE & RECREATION PRODUCTS--2.6% 45,000 Regal Cinemas, Inc.@32.00 1,440 40,000 Ride Snowboard Company@27.25 1,090 20,000 West Marine, Inc.@25.625 512 3,042 MACHINERY--1.7% 5,000 3D Systems Corp.@18.50 92 10,000 Gleason Corp.@22.125 221 10,000 Indresco, Inc.@15.50 155 58,000 *JLG Industries, Inc.@26.50 1,537 2,005 MEDIA--RADIO/TV--2.1% 85,000 United Video Satellite Group, Inc.@29.25 2,486 MEDICAL EQUIPMENT & SUPPLIES--0.9% 21,000 Chad Therapeutics, Inc.@14.875 312 100,000 FluoroScan Imaging Systems, Inc.@7.75 775 1,087 MEDICAL--NURSING HOMES, OUTPATIENT HOMECARE--2.6% 10,000 American Homepatient, Inc.@29.75 298 10,000 American Medical Response@28.00 280 10,000 Medpartners, Inc.@19.25 193 5,000 Physician Reliance Network, Inc.@19.50 97 127,816(a) Retirement Care Associates, Inc.@11.952 1,528 35,000 Transworld Healthcare, Inc.@16.75 586 2,982
See notes to Portfolio of Investments. 3 Equity Securities - continued
Shares Company (Closing Price) Value TRUCKING--0.3% 25,000 Knight Transportation, Inc.@13.50 $ 338 TOTAL EQUITY SECURITIES (COST: $70,762,549) 109,824 Convertible Debt Obligations-5.0% Face Amount Value COMPUTER MEMORY DEVICES--0.5% $600,000 *Seagate Technology 6.75% due 5-01-12 @105.00 $ 630 COMPUTER PERIPHERALS--0.6% 600,000 *SCI Systems, Inc. 5.625% due 3-01-12 @118.50 711 EYECARE SERVICES--0.5% 500,000 *Benson Eyecare Corp. 8.00% due 5-15-01 @125.50 627 FARM MACHINERY--0.6% 250,000 *Agco Corp. 6.50% due 6-1-08@296.052 740 MEDICAL--NURSING HOMES--1.9% 1,500,000 *GranCare, Inc. 6.50% due 1-15-03 @86.00 1,290 1,000,000 *Theratx, Inc. 8.00% due 2-1-02@92.5 925 2,215 OIL & GAS--0.4% 500,000 *Snyder Oil Corp. 7.00% due 5-15-01@89.00 445 POLLUTION CONTROL--0.3% 580,000(a) *Growth Environmental, Inc. 9.00% due 4-30-97 @58.049 337 RETAIL--0.2% 200,000 *Proffitts, Inc. 4.75% due 11-01-03 @89.00 178 600,000(a) *Zam's, Inc. 7.50% due 10-31-00 @1.146 7 185 TOTAL CONVERTIBLE DEBT OBLIGATIONS (COST: $6,155,260) 5,890

Shares Company (Closing Price) Value OIL & GAS--0.8% 40,000 International Colin Energy Corp.@5.25 $ 210 40,000 Smith International, Inc.@16.75 670 880 PERSONNEL PLACEMENT--0.7% 10,000 Alternative Resources Corp.@26.50 265 30,000 On Assignment, Inc.@19.00 570 835 RESTAURANTS--4.6% 100,000 Lone Star Steakhouse & Saloon, Inc.@30.312 3,031 30,000 Outback Steakhouse, Inc.@28.875 866 20,000 Papa John's International, Inc.@35.00 700 100,000 Pollo Tropical, Inc.@8.00 800 5,397 RETAIL/WHOLESALE COMPUTERS--0.6% 40,500 Pomeroy Computer Resources@18.25 739 SCHOOLS--0.7% 80,000 Youth Services International, Inc.@10.625 850 TELECOMMUNICATIONS--7.8% 20,000 ACT Networks, Inc.@17.25 345 20,000 Applied Innovation, Inc.@47.75 955 **16,300 Cidco, Inc.@31.375 511 60,000 Coherent Communication Systems Corp.@16.75 1,005 25,000 Gilat Satellite Networks Ltd.@22.75 569 20,000 Pairgain Technologies, Inc.@19.125 383 **20,000 Qualcomm, Inc.@34.562 691 39,000 Spectrian Corp.@39.75 1,550 5,000 STM Wireless, Inc.@12.75 64 **20,000 Stratacom, Inc.@48.75 975 29,500 Unitech Industries, Inc.@10.75 317 82,000 Wholesale Cellular USA, Inc.@21.50 1,763 9,128 TEXTILE PRODUCTS--0.9% 20,000 *St. John Knits, Inc.@44.875 897 11,000 Supreme International Co.@17.00 187 1,084 TOYS & SPORTING GOODS--0.1% 10,000 Lewis Galoob Toys, Inc. Convertible Preferred @17.5 175
See notes to Portfolio of Investments 4 Long Put Options-1.3%
Contracts Value 1,000 S&P 100 Stock Index Sep $520 $ 938 1,000 S&P 100 Stock Index Aug $510 512 1,000 S&P 100 Stock Index Jul $500 100 Total Put Options 1,550 (Cost: $2,318,500) Repurchase Agreement--1.8% 2,095,716 State Street Bank and Trust Co. Dated 6/30/95, collateralized by U.S. Treasury Notes 4.90%, 7/03/95 $ 2,096 TOTAL INVESTMENT - 102.0% 119,360 (COST: $81,332,025) Covered Call Options-(1.8%) Contracts Value 390 Alliance Semiconductor Corp. Jul $55 $ (39) 344 Atmel Corp. Aug $55 (133) 100 C-Cube Microsystems, Inc. Aug $22 (58) 150 C-Cube Microsystems, Inc. Nov $30 (47) 60 Cidco, Inc. Jul $35 (2) 90 Electro Scientific Inds. Jul $35 (8) 50 Electro Scientific Inds. Aug $35 (10) 160 Electro Scientific Inds. Sep $35 (45) 50 Integrated Silicon Solution Jul $55 (8) 200 Madge N.V. Aug $25 (85) 750 Madge N.V. Aug $30 (122) 270 Microtouch Systems, Inc. Sep $40 (3) 150 The Money Store, Inc. Jul $35 (30) 150 Oak Technology, Inc. Jul $35 (40) 100 Oak Technology, Inc. Sep $35 (48) 50 PacifiCare Health Systems, Inc. Aug $75 (0) 100 PacifiCare Health Systems, Inc. Aug $80 (0) 100 Qualcomm, Inc. Jul $40 (5) 100 Qualcomm, Inc. Oct $40 (25) 5 Stratacom, Inc. Aug $50 (2) 300 U.S. Robotics Corp. Aug $75 (1,035) 100 U.S. Robotics Corp. Aug $80 (298) 100 ValuJet Airlines, Inc. Jul $35 (10) 100 ValuJet Airlines, Inc. Aug $40 (5) 600 ValuJet Airlines, Inc. Sep $40 (56) 100 Watson Pharmaceuticals, Inc. Jul $40 (6)

Contracts Value 90 Watson Pharmaceuticals, Inc. Aug $35 $ (33) Total Covered Call Options (2,153) (Premium received: $899,000) OTHER ASSETS LESS LIABILITIES--(0.2%) (283) NET ASSETS--100.0% $116,924
Notes to Portfolio of Investments * Income producing security during the period ended June 30, 1995. **The aggregate market value of stocks held in escrow at June 30, 1995 covering open covered call options written was $19,862,869. Based on the cost of investments of $81,332,025 for federal income tax purposes at June 30, 1995, the aggregate gross unrealized appreciation was $41,786,382, the aggregate gross unrealized depreciation was $3,758,120, and the net unrealized appreciation of investments was $38,028,262. (a) The following securities are subject to legal or contractual restrictions on sale. They were valued at cost on the dates of acquisition and at fair value as determined by the board of trustees of the Fund as of June 30, 1995. The aggregate value of restricted securities was $926,223 or 0.8% of net assets, at June 30, 1995. Growth Environmental, Inc. $580,000 face amount convertible debt purchased in May, 1994 at a cost of $580,000. Retirement Care Associates, Inc. 23,625 shares purchased in February, 1995 at a cost of $168,328 and 25,441 shares purchased in June, 1995 at a cost of $225,789. Zam's, Inc. $600,000 face amount convertible debt purchased in November, 1993 at a cost of $600,000. See notes to Portfolio of Investments. 5 OBERWEIS EMERGING GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES June 30, 1995 (in thousands) ASSETS: Investment securities at market value (Cost: $76,917,809) $115,714 Options purchased, at value (Cost: $2,318,500) 1,550 Repurchase agreement 2,096 Cash 395 Receivables: Fund shares sold $892 Securities sold 258 Dividends and interest 126 ---- Total receivables 1,276 Prepaid expenses 20 -------- Total Assets 121,051 LIABILITIES: Options written, at value (Premiums received: $899,000) 2,153 Payables: Fund shares repurchased $874 Securities purchased 978 Payable to adviser 80 Payable to distributor 31 ---- Total Payables 1,963 Accrued expenses 11 -------- Total Liabilities 4,127 NET ASSETS $116,924 ======== ANALYSIS OF NET ASSETS: Aggregate paid in capital $ 78,213 Accumulated net realized gain from investment transactions 1,937 Net unrealized appreciation of investments 36,774 -------- Net assets $116,924 ======== THE PRICING OF SHARES: Net asset value, offering and redemption price per share ($116,923,548 divided by 4,350,806 shares outstanding) $ 26.87 ========

See accompanying notes to financial statements. 6 OBERWEIS EMERGING GROWTH FUND STATEMENT OF OPERATIONS Six months ended June 30, 1995 (in thousands) INVESTMENT INCOME: Dividends $ 61 Interest 257 ---- Total Investment Income $ 318 EXPENSES: Advisory fees 212 Management fees 200 Distribution fees 175 Shareholder servicing fees 75 Custodian fees 80 Transfer agent fees 71 Professional fees 57 Registration fees 16 Shareholder reports 15 Insurance 6 Trustee fees 5 Other 3 ---- Total Expenses 915 ------- NET INVESTMENT LOSS BEFORE EXPENSE REIMBURSEMENT (597) Expense reimbursement 39 ------- NET INVESTMENT LOSS (558) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investment transactions 2,932 Net realized loss from covered call options written (979) ------- Total net realized gain 1,953 Increase in unrealized appreciation of investments 21,769 ------- Net realized and unrealized gain on investments 23,722 ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,164 =======

STATEMENT OF CHANGES IN NET ASSETS Six months ended June 30, 1995 and the year ended December 31, 1994 (in thousands)
JUNE 30, DECEMBER 31, 1995 1994 -------- ------------ FROM OPERATIONS: Net investment loss $ (558) $ (979) Net realized gain (loss) from investment transactions 1,953 (17) Increase (decrease) in unrealized appreciation of investments 21,769 (3,046) -------- -------- Net increase (decrease) in net assets resulting from operations 23,164 (4,042) -------- -------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 24,701 26,882 Redemption of shares (20,955) (37,150) -------- -------- Net increase (decrease) from capital share transactions 3,746 (10,268) -------- -------- Total increase (decrease) in net assets 26,910 (14,310) NET ASSETS: Beginning of year 90,014 104,324 -------- -------- End of year $116,924 $ 90,014 ======== ========
See accompanying notes to financial statements. 7 NOTES TO FINANCIAL STATEMENTS June 30, 1995 1. SIGNIFICANT ACCOUNTING POLICIES Description of Business. Oberweis Emerging Growth Fund (the "Fund") is registered under the Investment Company Act of 1940 as a diversified open-end management investment company. The Fund is authorized to operate numerous portfolios under various trading strategies. The Fund commenced operations of one portfolio on January 7, 1987. Investment valuation. Investments are stated at value. Each listed and unlisted security for which last sale information is regularly reported is valued at the last reported sales price on that day. If there has been no sale on such day, then such security is valued at the current day's bid price. Any unlisted security for which last sale information is not regularly reported and any listed debt security which has an inactive listed market for which over-the- counter market quotations are readily available is valued at the highest closing bid price determined on the basis of reasonable inquiry. Restricted securities and any other securities or other assets for which market quotations are not readily available are valued by appraisal at their fair value as determined in good faith under procedures established by and under the general supervision and responsibility of the Board of Trustees. Short-term debt obligations, commercial paper and repurchase agreements are valued on the basis of quoted yields for securities of comparable maturity, quality and type or on the basis of amortized costs. Fund share valuation. Fund shares are sold and redeemed on a continuous basis at net asset value. On each day the New York Stock Exchange is open for trading, the net asset value per share is determined as of the later of the close of the New York Stock Exchange or the Chicago Board Options Exchange by dividing the total value of the Fund's investments and other assets, less liabilities, by the number of Fund shares outstanding. Investment transactions and investment income. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed). Dividend income is recorded on the ex-dividend date, and interest income is recorded on the accrual basis and includes amortization of money market instrument premium and discount. Realized gains and losses from investment transactions are reported on an identified cost basis. Gains and losses on premiums from expired options are recognized on date of expiration. Repurchase agreements. Repurchase agreements are fully collateralized by U.S. Treasury and Government agency securities. All collateral is held through the Fund's custodian bank and is monitored daily by the Fund so that its market value exceeds the carrying value of the repurchase agreement. Federal income taxes and dividends to shareholders. The Fund has complied with the special provisions of the Internal Revenue Code available to investment companies and therefore no federal income tax provision is required. Dividends payable to its shareholders are recorded by the Fund on the ex-dividend date. The accumulated net realized loss from investment transactions for federal income tax purposes at December 31, 1994, amounting to approximately $17,000, is available to offset future taxable gains. If not applied, the loss carryforward expires during the year in 2002. 8 2. TRANSACTIONS WITH AFFILIATES The Fund has written agreements with Oberweis Asset Management, Inc. ("OAM") as the Fund's investment adviser, manager and primary shareholder service agent; and The Chicago Corporation ("TCC") as the Fund's principal distributor. Advisory agreement. During the six months ended June 30, 1995, the Fund paid monthly investment advisory fees at an annual rate equal to .45% of the first $50,000,000 of average daily net assets and .40% of average daily net assets in excess of $50,000,000. For the six months ended June 30, 1995, the Fund incurred an advisory fee totalling $212,000. Management agreement. During the six months ended June 30, 1995, for management services and facilities furnished, the Fund paid a monthly fee at an annual rate equal to .40% of average daily net assets. For the six months ended June 30, 1995, the Fund incurred a management fee totalling $200,000. Expense Reimbursement. The manager and investment adviser are obligated to reduce their investment advisory and management fees or reimburse the Fund to the extent that total ordinary operating expense, as defined, exceed in any one year the following amounts expressed as a percentage of the Fund's average daily net assets: 2% of the first $25,000,000; plus 1.8% of the next $25,000,000; plus 1.6% of average daily net assets in excess of $50,000,000; or such lower percentage as may be required by any state where the Fund's shares are registered. For the six months ended June 30, 1995, OAM reimbursed the Fund $38,510. Officers and trustees. Certain officers or trustees of the Fund are also officers or directors of OAM. During the six months ended June 30, 1995, the fund made no direct payments to its officers and paid $4,818 to its unaffiliated trustees. James D. Oberweis, the Fund's portfolio manager, is employed by OAM and TCC. Distribution and shareholder service expense. The Fund has a distribution agreement with The Chicago Corporation (TCC). For services under the distribution agreement, the Fund pays TCC a fee at the annual rate of .35% of the average daily net assets and reimbursement for certain out-of-pocket expenses. For the six months ended June 30, 1995, the Fund incurred a distribution fee totalling $175,000. The Fund has a shareholder service agreement with OAM. For services under the shareholder service agreement, the Fund pays OAM a fee at the annual fate of .15% of the average daily net assets and reimbursement for certain out-of-pocket expenses. For the six months ended June 30, 1995, the Fund incurred a shareholder service fee totalling $75,000. Commissions. The Fund pays TCC for executing some of the Fund's agency security transactions at competitive rates, typically $.03 to $.05 per share. For the six months ended June 30, 1995, the Fund paid commissions of $13,000 to TCC. 9 3. INVESTMENT TRANSACTIONS The cost of securities purchased and proceeds from securities sold during the six months ended June 30, 1995, other than options written and money market investments, aggregated $37,653,902 and $37,802,561, respectively. Transactions in options written for the six months ended June 30, 1995, were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- ---------- Options outstanding at beginning of period 245 $ 53,000 Options written 12,604 1,752,000 Options expired (4,495) (482,000) Options closed (2,065) (253,000) Options assigned (1,530) (171,000) ------ ---------- Options outstanding at end of period 4,759 $ 899,000
The premiums received provide a partial hedge (protection) against declining prices and enables the Fund to generate a higher return during periods when OAM does not expect the underlying security to make any major price moves in the near future but still deems the underlying security to be, over the long term, an attractive investment for the Fund. 4. CAPITAL SHARE TRANSACTIONS The following table summarizes the activity in capital shares of the Fund:
SIX MONTHS ENDED JUNE YEAR ENDED DECEMBER 31, 30, 1995 1994 ---------------------- ------------------------ SHARES AMOUNT SHARES AMOUNT --------- ----------- ---------- ------------ Shares sold 1,031,000 $24,701,000 1,272,000 $26,882,000 Less shares redeemed (884,000) (20,955,000) (1,771,000) (37,150,000) --------- ----------- ---------- ------------ Net increase (decrease) from capital share transactions 147,000 $3,746,000 (499,000) $(10,268,000)
10 FINANCIAL HIGHLIGHTS Per share income and capital changes for a share outstanding throughout the period is as follows (c):
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED --------------------------------------- JUNE 30, 1995 1994 1993 1992 1991 ------------- -------- --------- --------- ------- Net asset value at beginning of period $ 21.41 $ 22.19 $ 20.90 $ 18.39 $ 12.11 Income from investment operations: Net investment loss (.13) (.22) (.22) (.21) (.09) Net realized and unrealized gain (loss) on investments 5.59 (.56) 2.25 2.72 10.64 ----------- -------- --------- --------- ------- Total from investment operations 5.46 (.78) 2.03 2.51 10.55 Less Distributions: Distribution from net realized gains on investments -- -- (.74) -- (4.27) ----------- -------- --------- --------- ------- Net asset value at end of period $ 26.87 $ 21.41 $ 22.19 $ 20.90 $ 18.39 =========== ======== ========= ========= ======= Total Return(%)(b) 25.5 (3.5) 9.7 13.7 87.1 Ratio/Supplemental Data Net Assets at end of period (in thousands) $116,924 $ 90,014 $104,324 $54,063 $19,730 Ratio of expenses to average daily net assets(%) 1.75(a,d) 1.78 1.80(a) 1.99(a) 2.13(a) Ratio of net investment loss to average net assets(%) (1.26)(a,d) (1.06) (1.04)(a) (1.14)(a) (1.27) Portfolio turnover rate(%) 75 66 70 63 114
- -------- Notes: (a) Net of expense reimbursement from related parties. Expense ratios would have been 1.83%, 1.82%, 2.41%, and 3.01% for 1995, 1993, 1992 and 1991, respectively before expense reimbursement. (b) A sales load of 4% was charged until December 31, 1991 and is not reflected in the total return figures above. (c) The per share data was determined using average shares outstanding during the year. (d) Annualized. 11 [LOGO] Oberweis Emerging Growth Fund - -------------------------------------------------------------------------------- James D. Oberweis Peter H. Wendell Trustee and President Trustee Douglas P. Hoffmeyer Thomas J. Burke Trustee Trustee Patrick B. Joyce Edward F. Streit Executive Vice President Trustee Treasurer Martin L. Yokosawa James M. Roberts Vice President Vice President Anita I. Mraz Mary Jane Murphy Secretary Assistant Secretary MANAGER AND INVESTMENT ADVISOR Oberweis Asset Management, Inc. One Constitution Drive, Aurora, Illinois 60506 DISTRIBUTOR The Chicago Corporation 208 South LaSalle, Chicago, Illinois 60604 CUSTODIAN AND TRANSFER AGENT Investors Fiduciary Trust Company P.O. Box 419042, Kansas City, Missouri 64141 COUNSEL Vedder, Price, Kaufman & Kammholz 222 North LaSalle Street, Chicago, Illinois 60601 [LOGO] Oberweis Emerging Growth Fund One Constitution Drive Aurora, IL 60506 (800) 323-6166 SEMI-ANNUAL REPORT --------------------------------------- UNAUDITED JUNE 30, 1995 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS. (A) FINANCIAL STATEMENTS-INCLUDED IN STATEMENT OF ADDITIONAL INFORMATION (PART B). Oberweis Emerging Growth Fund Financial Statements and Independent Auditors' Report thereon (a) Portfolio of Investments as of December 31, 1994. (b) Statement of Assets and Liabilities as of December 31, 1994. (c) Statement of Operations for the Year Ended December 31, 1994. (d) Statement of Changes in Net Assets for the Years Ended December 31, 1994 and 1993. Oberweis Emerging Growth Fund Financial Statements (a) Portfolio of Investments as of June 30, 1995 (Unaudited). (b) Statement of Assets and Liabilities as of June 30, 1995 (Unaudited). (c) Statement of Operations for the Six Months Ended June 30, 1995 (Unaudited). (d) Statement of Changes in Net Assets for the Six Months Ended June 30, 1995 (Unaudited) and the year ended December 31, 1994. Oberweis Micro-Cap Portfolio (a) Statements of Assets and Liabilities as of October 2, 1995 (b) Notes to Financial Statements Schedules II, III, IV, V, VI and VII are omitted and the required information is not presented. Schedule I has been omitted and the required information is presented in the portfolio of investments. (B) EXHIBITS. *1. Agreement and Declaration of Trust dated July 7, 1986 *1.1 First Amendment to Agreement and Declaration of Trust, dated November 17, 1986 *2. By-Laws 3. None *4. Form of Specimen Certificates of Shares of Beneficial Interest 4.1 Specimen Certificates of Shares of Beneficial Interest/2/ 5.1 Management Agreement/5/ 5.1.1 Amendment to Management Agreement as of February 16, 1994/9/ *5.1.2 Management Agreement dated October 1, 1994 5.2 Investment Advisory Agreement/5/ *5.2.1 Investment Advisory Agreement dated October 1, 1994 5.2.2 Transfer and Guaranty Agreement/7/ *5.2.3 Form of Investment Advisory Agreement dated October 1, 1994, and as amended January 1, 1996 6. None C-1 7. None 8. Custodian Agreement/1/ 8.1 Letter Agreements renewing Custodian Agreement dated February 24, 1988,/3/ February 21, 1989,/4/ February 7, 1990,/5/ February 15, 1991,/6/ and February 13, 1992,/7/ respectively 8.2 Letter Agreement dated January 27, 1993, renewing Custodian Agreement/8/ *8.3 Custodian Agreement dated August 3, 1993 9. Transfer Agency Agreement/1/ 9.1 Letter Agreements renewing Transfer Agency Agreement dated February 24, 1988,/3/ February 21, 1989,/4/ February 7, 1990,/5/ February 15, 1991,/6/ and February 13, 1992,/7/ respectively 9.2 Letter Agreement dated January 27, 1993, renewing Transfer Agency Agreement/8/ *9.3 Transfer Agent Agreement dated August 3, 1993 10.1 Form of Opinion and Consent of Lawrence, Kamin, Saunders & Uhlenhop/1A/ 10.1.1 Consent and Opinion of Vedder, Price, Kaufman & Kammholz/10/ 10.2 Form of Opinion of Ropes & Gray/1A/ 10.2.1 Opinion of Ropes & Gray/10/ *11.1 Consent of Ernst & Young LLP *11.2 Consent of Checkers, Simon & Rosner LLP 12. Not applicable 13. Form of Contribution Agreement with Initial Shareholders/1/ 13.1 Contribution Agreement dated December 8, 1986, from James D. Oberweis with respect to the purchase of an aggregate of 5,500 shares as custodian for two minor children for $10.00 each (a total of $55,000)/2/ 13.2 Contribution Agreement dated December 8, 1986, from Lora J. Oberweis with respect to the purchase of 2,000 shares for $10.00 each (a total of $20,000)/2/ 13.3 Contribution Agreement dated December 8, 1986, from Helen Cisek with respect to the purchase of 1,500 shares for $10.00 each (a total of $15,000)/2/ 13.4 Contribution Agreement dated December 8, 1986, from Tedd Determan with respect to the purchase of an aggregate of 1,000 shares for $10.00 each (a total of $10,000)/2/ *14.1 Individual Retirement Custodial Account Agreement, Disclosure Statement, Form of Account Application, and Transfer Request Form 15.1 Plan of Distribution pursuant to Rule 12b-1/4/ 15.2 Distribution and Shareholder Service Agreement/5/ 15.3 Amendment to Plan of Distribution pursuant to Rule 12b-1 and Distribution and Shareholder Service Agreement/8/ *15.4 Plan of Distribution pursuant to Rule 12b-1 as amended October 1, 1994 *15.4.1 Form of Plan of Distribution pursuant to Rule 12b-1 as amended January 1, 1996 C-2 *15.5 Distribution Agreement dated October 1, 1994 *15.5.1 Form of Distribution and Shareholder Service Agreement dated January 1, 1996 *15.6 Shareholder Service Agreement dated October 1, 1994 *16. Calculation of Performance Data *27. Financial Data Schedules - ----------------- /*/ Filed herewith. /1/ Previously filed with the Registration Statement and incorporated herein by reference. /1A/ Previously filed with the Registration Statement. /2/ Previously filed with Pre-Effective Amendment No. 2 (Amendment No. 2) dated January 14, 1987 and incorporated herein by reference. /2A/ Previously filed with Pre-Effective Amendment No. 2. /3/ Previously filed with Post-Effective Amendment No. 2 (Amendment No. 4) dated February 28, 1988. /4/ Previously filed with Post-Effective Amendment No. 3 (Amendment No. 5) dated March 2, 1989 and incorporated herein by reference. /5/ Previously filed with Post-Effective Amendment No. 4 (Amendment No. 6) dated February 28, 1990 and incorporated herein by reference. /6/ Previously filed with Post-Effective Amendment No. 5 (Amendment No. 7) dated March 1, 1991 and incorporated herein by reference. /7/ Previously filed with Post-Effective Amendment No. 6 (Amendment No. 8) dated March 2, 1992 and incorporated herein by reference. /8/ Previously filed with Post-Effective Amendment No. 7 (Amendment No. 9) dated March 1, 1993 and incorporated herein by reference. /9/ Previously filed with Post-Effective Amendment No. 8 (Amendment No. 10) dated April 29, 1994 and incorporated herein by reference. /10/ Previously filed with Post-Effective Amendment No. 9 (Amendment No. 11) dated February 28, 1995 and incorporated herein by reference. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. Inapplicable. ITEM 26. NUMBER OF HOLDERS OF SECURITIES Seven Thousand Seven Hundred Ten (7,710) as of September 30, 1995. ITEM 27. INDEMNIFICATION A response has been previously filed with Pre-Effective Amendment No. 2 (Amendment No. 2) dated January 14, 1987 and is incorporated herein by reference. The Fund has also purchased a liability policy which indemnifies the Fund's officers and trustees against loss arising from claims by reason of their legal liability for acts as officers and trustees, subject to limitations and conditions as set forth in such policy. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, and the Commission remains of the same opinion, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 28. BUSINESS AND OTHER CONNECTION OF INVESTMENT ADVISER. (a) Oberweis Asset Management, Inc. Oberweis Asset Management, Inc. ("OAM") was organized in 1989. Its activities are limited to acting as an investment adviser and shareholder servicing agent. C-3 (b) Set forth below are the names of the directors and officers of OAM (other than those officers who are also officers of the Registrant) and any other business, profession, vocation or employment of a substantial nature in which such directors and officers have been involved an any time during the past two fiscal years.
NAME AND POSITIONS WITH OAM NAME OF COMPANY POSITION - ------------------ --------------- -------- ~~Elaine M. Oberweis Oberweis Dairy, Inc. President Director 945 North Lake Street Aurora, Illinois 60506~~
ITEM 29. PRINCIPAL UNDERWRITERS (a) None. (b) Set forth below are the names of the directors and officers of The Chicago Corporation.
John A. Wing, Wilbert A. Thiel, Chairman of the Board of Directors Director, President, Treasurer and and Chief Executive Officer Chief Operating Officer Robert T. Brehm, Faris F. Chesley, Director, Executive Vice President, Vice Chairman of the Board of President-Asset Management Group Directors, Executive Vice President Richard W. Durkes, Jon T. Ender, Director, Executive Vice President Director, Executive Vice President John C. Harris, Timothy O'Gorman, Director, Executive Vice President Director, Executive Vice President Paul W. Oliver, Jr., Perry L. Taylor, Jr., Director, Executive Vice President Director, Executive Vice President, General Counsel, Secretary Peter H. Wendell, David K. Beecken, Director, Executive Vice President Director, Senior Vice President Patrick K. Blackburn, Jack W. Blumenstein, Director, Senior Vice President Director, Executive Vice President Jay K. Buck, John T. Coyne, Director, Senior Vice President Director, Senior Vice President Victor Elting III, Walter W. Filkin, Director, Senior Vice President Director, Senior Vice President Walter D. Fitzgerald, Frederic D. Floberg, Director, Senior Vice President Director, Senior Vice President James M. Florsheim Brian F. Foley,
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Director, Senior Vice President Director, Senior Vice President Thomas G. Hallal, Lawrence J. Hanson, Director, Senior Vice President Director, Senior Vice President Jeffrey M. Herr, Jack W. Kindegran Director, Senior Vice President Director, Senior Vice President Charles R. Klimkowski, Barbara L. Lamb Director, Senior Vice President Director, Senior Vice President Edward J. Laux Thomas J. McCausland, Director, Senior Vice President Director James D. McDonald Kenneth H. McLellan, Jr., Director, Senior Vice President Director, Senior Vice President Charles J. Moore, Thomas A. Mueller, Director, Senior Vice President Director, Senior Vice President Leonard O'Driscoll Joseph A. Oliva, Director, Senior Vice President Director, Senior Vice President Willard J. Peterson, Robert R. Rudolph, Director, Senior Vice President Director Richard M. Schaeffer, Ronald M. Schutz, Director, Senior Vice President Director, Senior Vice President William C. Steinmetz, Gordon L. Teach Director, Senior Vice President Director, Senior Adviser to the Chairman William A. Trader, Ralph Collins Walter III, Director, Senior Vice President Director, Senior Vice President, Chief Administrative Officer W. Peter Williams, Edward Stuart Winter, Director, Senior Vice President Director, Senior Vice President Ben A. Witt, Michael Woodhead Director, Senior Vice President Director, Senior Vice President
The principal business address of all such persons is 208 South LaSalle Street, Chicago, Illinois 60604. Other than Mr. Wendell, a Trustee of the Fund, no listed person holds a position or office with the Registrant. (c) None. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and rules promulgated thereunder are in the possession of Oberweis Asset Management, Inc. at its offices at One Constitution Drive, Aurora, Illinois 60506, except those books, records and other documents C-5 maintained by the custodian, transfer agent and registrar, Investors Fiduciary Trust Company, which are located at its offices at 127 West 10th Street, 16th Floor, Kansas City, Missouri 64105. ITEM 31. MANAGEMENT SERVICES Not applicable. ITEM 32. UNDERTAKINGS (a) Not applicable. (b) Not applicable. (c) The Registrant hereby undertakes to furnish each person to whom a Prospectus is delivered with a copy of the Registrant's latest Annual Report to Shareholders upon request and without charge. C-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Aurora, State of Illinois, on the 13th day of October, 1995. OBERWEIS EMERGING GROWTH FUND /s/ James D. Oberweis By:______________________________ James D. Oberweis, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
/s/ James D. Oberweis President (Principal Executive October 13, 1995 - ------------------------ Officer) and Trustee James D. Oberweis Trustee - ------------------------ Thomas J. Burke /s/ Douglas P. Hoffmeyer Trustee October 13, 1995 - ------------------------ Douglas P. Hoffmeyer /s/ Edward F. Streit Trustee October 13, 1995 - ------------------------ Edward F. Streit /s/ Peter H. Wendell Trustee October 13, 1995 - ------------------------ Peter H. Wendell /s/ Patrick B. Joyce Executive Vice President and October 13, 1995 - ------------------------ Treasurer (Principal Financial and Patrick B. Joyce Accounting Officer)
C-7 EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE - ------- ----------- ---- *1. Agreement and Declaration of Trust dated July 7, 1986 *1.1 First Amendment to Agreement and Declaration of Trust, dated November 17, 1986 *2. By-Laws 3. None *4. Form of Specimen Certificates of Shares of Beneficial Interest 4.1 Specimen Certificates of Shares of Beneficial Interest/2/ 5.1 Management Agreement/5/ 5.1.1 Amendment to Management Agreement as of February 16, 1994/9/ *5.1.2 Management Agreement dated October 1, 1994 5.2 Investment Advisory Agreement/5/ *5.2.1 Investment Advisory Agreement dated October 1, 1994 5.2.2 Transfer and Guaranty Agreement/7/ *5.2.3 Form of Investment Advisory Agreement dated October 1, 1994 and as amended January 1, 1996 6. None 7. None 8. Custodian Agreement/1/ 8.1 Letter Agreements renewing Custodian Agreement dated February 24, 1988,/3/ February 21, 1989,/4/ February 7, 1990,/5/ February 15, 1991,/6/, and February 13, 1992,/7/ respectively 8.2 Letter Agreement dated January 27, 1993, renewing Custodian Agreement/8/ *8.3 Custodian Agreement dated August 3, 1993 9. Transfer Agency Agreement/1/ 9.1 Letter Agreements renewing Transfer Agency Agreement dated February 24, 1988,/3/ February 21, 1989,/4/ February 7, 1990,/5/ February 15, 1991,/6/ and February 13, 1992,/7/ respectively 9.2 Letter Agreement dated January 27, 1993, renewing Transfer Agency Agreement/8/ *9.3 Transfer Agent Agreement dated August 3, 1993 10.1 Form of Opinion and Consent of Lawrence, Kamin, Saunders & Uhlenhop/1A/ 10.1.1 Consent and Opinion of Vedder, Price, Kaufman & Kammholz/10/ 10.2 Form of Opinion of Ropes & Gray/1A/ 10.2.1 Opinion of Ropes & Gray/10/ *11.1 Consent of Ernst & Young LLP *11.2 Consent of Checkers, Simon & Rosner LLP 12. Not applicable
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EXHIBIT DESCRIPTION PAGE - ------- ----------- ---- 13. Form of Contribution Agreement with Initial Shareholders/1/ 13.1 Contribution Agreement dated December 8, 1986, from James D. Oberweis with respect to the purchase of an aggregate of 5,500 shares as custodian for two minor children for $10.00 each (a total of $55,000)/2/ 13.2 Contribution Agreement dated December 8, 1986, from Lora J. Oberweis with respect to the purchase of 2,000 shares for $10.00 each (a total of $20,000)/2/ 13.3 Contribution Agreement dated December 8, 1986, from Helen Cisek with respect to the purchase of 1,500 shares for $10.00 each (a total of $15,000)/2/ 13.4 Contribution Agreement dated December 8, 1986, from Tedd Determan with respect to the purchase of an aggregate of 1,000 shares for $10.00 each (a total of $10,000)/2/ *14.1 Individual Retirement Custodial Account Agreement, Disclosure Statement, Form of Account Application, and Transfer Request Form 15.1 Plan of Distribution pursuant to Rule 12b-1/4/ 15.2 Distribution and Shareholder Service Agreement/5/ 15.3 Amendment to Plan of Distribution pursuant to Rule 12b-1 and Distribution and Shareholder Service Agreement/8/ *15.4 Plan of Distribution pursuant to Rule 12b-1 as amended October 1, 1994. *15.4.1 Form of Plan of Distribution pursuant to Rule 12b-1 as amended January 1, 1996. *15.5 Distribution Agreement dated October 1, 1994. *15.5.1 Form of Distribution and Shareholder Service Agreement dated January 1, 1996. *15.6 Shareholder Service Agreement dated October 1, 1994. *16. Calculation of Performance Data *27. Financial Data Schedules
- ------------------- /*/ Filed herewith. /1/ Previously filed with the Registration Statement and incorporated herein by reference. /1A/ Previously filed with the Registration Statement. /2/ Previously filed with Pre-Effective Amendment No. 2 (Amendment No. 2) dated January 14, 1987 and incorporated herein by reference. /2A/ Previously filed with Pre-Effective Amendment No. 2. /3/ Previously filed with Post-Effective Amendment No. 2 (Amendment No. 4) dated February 28, 1988. /4/ Previously filed with Post-Effective Amendment No. 3 (Amendment No. 5) dated March 2, 1989 and incorporated herein by reference. /5/ Previously filed with Post-Effective Amendment No. 4 (Amendment No. 6) dated February 28, 1990 and incorporated herein by reference. /6/ Previously filed with Post-Effective Amendment No. 5 (Amendment No. 7) dated March 1, 1991 and incorporated herein by reference. /7/ Previously filed with Post-Effective Amendment No. 6 (Amendment No. 8) dated March 2, 1992 and incorporated herein by reference. /8/ Previously filed with Post-Effective Amendment No. 7 (Amendment No. 9) dated March 1, 1993 and incorporated herein by reference. /9/ Previously filed with Post-Effective Amendment No. 8 (Amendment No. 10) dated April 29, 1994 and incorporated herein by reference. /10/ Previously filed with Post-Effective Amendment No. 9 (Amendment No. 11) dated February 28, 1995 and incorporated herein by reference. C-9 EX-99.1 2 DECLARATION OF TRUST OBERWEIS EMERGING GROWTH FUND ----------------------------- AGREEMENT AND DECLARATION OF TRUST ---------------------------------- AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts, this 7th day of July, 1986 by the Trustees hereunder, and by the holders of shares of beneficial interest to be issued hereunder as hereinafter provided; W I T N E S S E T H: ------------------- WHEREAS, the Trustees hereunder are desirous of forming a trust for the purposes of carrying on the business of a management investment company; and WHEREAS, in furtherance of such purposes, the Trustees are acquiring and may hereafter acquire assets and properties to hold and manage as trustees of a Massachusetts voluntary association with transferable shares in accordance with the provisions hereinafter set forth; NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities and other assets and properties which they may from time to time acquire in any manner as Trustees hereunder IN TRUST, to manage and dispose of the same upon the following terms and conditions for the prorata benefit of the holders from time to time of shares in this Trust as hereinafter set forth. ARTICLE I Name and Definitions -------------------- Name and Registered Agent - ------------------------- Section 1. This Trust shall be known as "Oberweis Emerging Growth Fund" and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine. The registered agent for the Trust in Massachusetts shall be CT Corporation System whose address is 2 Oliver Street, Boston, Massachusetts, or such other person as the Trustees may from time to time designate. Definitions - ----------- Section 2. Whenever used herein, unless otherwise required by the context or specifically provided: (a) The "Trust" refers to the Massachusetts voluntary association established by this Agreement and Declaration of Trust, as amended from time to time, pursuant to Massachusetts General Laws, Chapter 182. 1 (b) "Trustees" refers to the Trustees of the Trust named herein or elected in accordance with Article IV and then in office. (c) "Shares" mean the equal proportionate transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time, or if more than one series is authorized under or pursuant to Article III, the equal proportionate transferable units of interest into which each such series shall be divided from time to time. (d) "Shareholder" means a record owner of Shares. (e) The "1940 Act" refers to the Investment Company Act of 1940 (and any successor statute) and the Rules and Regulations thereunder, all as amended from time to time. (f) The terms "Affiliated Person", "Assignment", "Commission", "Interested Person", "Principal Underwriter", and "vote of a majority of the outstanding voting securities" shall have the meanings given them in the 1940 Act. (g) "Declaration of Trust" shall mean this Agreement and Declaration of Trust as amended or restated from time to time. (h) "By-Laws" shall mean the By-Laws of the Trust as amended from time to time. (i) "Net asset value" shall have the meaning set forth in Section 6 of Article VI hereof. ARTICLE II Nature and Purpose ------------------ The Trust is a voluntary association (commonly known as a business trust) of the type referred to in Chapter 182 of the General Laws of the Commonwealth of Massachusetts. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as, a general or a limited partnership, joint venture, corporation, or joint stock company, nor shall the Trustees or Shareholders or any of them, for any purpose, be deemed to be, or be treated in any way whatsoever as though they were, liable or responsible hereunder as partners or joint venturers. The purpose of the Trust is to engage in, operate and carry on the business of, an open-end management investment company, and to do any and all acts or things as are necessary, convenient, appropriate, incidental or customary in connection therewith. 2 ARTICLE III Shares ------ Division of Beneficial Interest - ------------------------------- Section 1. The Shares of the Trust shall be issued in one or more series as the Trustees may, without Shareholder approval, authorize from time to time. Each series shall be preferred over all other series in respect of the assets allocated to that series as hereinafter provided. The beneficial interest in each series shall at all times be divided into Shares (without par value) of such series, each of which shall represent an equal proportionate interest in such series with each other Share of the same series, none having priority or preference over another Share of the same series. The number of Shares authorized shall be unlimited, and the Shares so authorized may be represented in part by fractional Shares. The Trustees may from time to time divide or combine the Shares of any series into a greater or lesser number without thereby changing the proportionate beneficial interests in the series. Without limiting the authority of the Trustees set forth in this Section 1 to establish and designate any further series, the Trustees hereby establish and designate a single series of Shares to be known as the "Emerging Growth Portfolio" series. The establishment and designation of any series of Shares in addition to the foregoing shall be effective upon the execution by a majority of the then Trustees of an instrument setting forth such establishment and designation and the relative rights and preferences of such series. As provided in Article IX, Section 1 hereof, any series of Shares (whether or not there shall then be Shares outstanding of said series) may be terminated by the Trustees by written notice to the Shareholders of such series or by the vote of the Shareholders of such series entitled to vote more than fifty percent (50%) of the votes entitled to be cast on the matter. In the event of any such termination, a majority of the then Trustees shall execute an instrument setting forth the termination of such series. Ownership of Shares - ------------------- Section 2. The ownership and transfer of Shares shall be recorded on the books of the Trust or its transfer or similar agent. No certificates certifying the ownership of Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent of the Trust, as the case may be, shall be conclusive as to who are the Shareholders of each series and as to the number of Shares of each series held from time to time by each Shareholder. 3 Investments in the Trust; Assets of a Series - -------------------------------------------- Section 3. The Trustees may issue Shares of the Trust to such persons and on such terms and subject to any requirements of law for such consideration which may consist of cash, or tangible or intangible property or a combination thereof, as they may from time to time authorize. All consideration received by the Trust for the issue or sale of Shares of a particular series, together with all income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to such series of Shares for all purposes, subject only to the rights of creditors, and shall be so handled upon the books of account of the Trust and are herein referred to as "assets of" such series. Right to Refuse Orders - ---------------------- Section 4. The Trust, by action of its Trustees, shall have the right to refuse to accept any subscription for its Shares at any time without any cause or reason therefor whatsoever. Without limiting the foregoing, the Trust shall have the right not to accept subscriptions under circumstances or in amounts as the Trustees, in their sole discretion, consider to be disadvantageous to existing Shareholders, and the Trust may from time to time set minimum and/or maximum amounts which may be invested in Shares by a subscriber. Order in Proper Form - -------------------- Section 5. The criteria for determining what constitutes an order in proper form and the time of receipt of such an order by the trust shall be prescribed by resolution of the Trustees. When Shares Become Outstanding - ------------------------------ Section 6. Shares subscribed for and for which an order in proper form has been received shall be deemed to be outstanding as of the time of acceptance of the order therefore and the determination of the net price thereof, which price shall be then deemed to be an asset of the Trust. Merger or Consolidation - ----------------------- Section 7. In connection with the acquisition of all or substantially all the assets or stock of another investment company, investment trust, or of a company classified as a personal holding company under Federal Income Tax laws, the Trustees may issue or cause to be issued Shares of a series and accept in payment therefor, in lieu of cash, such assets at their 4 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. No Preemptive Rights, Etc. - -------------------------- Section 8. Shareholders shall have no preemptive or other right to receive, purchase or subscribe for any additional Shares or other securities issued by the Trust. The Shareholders shall have no appraisal rights with respect to their Shares, and except as otherwise determined by the Trustees, in their sole discretion, shall have no exchange or conversion rights with respect to their Shares. Status of Shares and Limitation of Personal Liability - ----------------------------------------------------- Section 9. Shares shall be deemed to be personal property, giving only rights provided in this instrument. Every Shareholder, by virtue of having become a Shareholder, shall be held to have expressly assented and agreed to the terms of the Declaration of Trust and to have become a party thereto. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the same, nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decedent under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust property, or right to call for a partition or division of the same, or for any accounting, nor shall the ownership of Shares constitute the Shareholders partners. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholder, nor, except as specifically provided herein, to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay. Shareholder Inspection Rights - ----------------------------- Section 10. Any Shareholder or his agent may inspect and copy, during normal business hours, any of the following documents of the Trust: By-Laws, minutes of the proceedings of the Shareholders and annual financial statements of the Trust, including a balance sheet and financial statements of operations. The foregoing rights of inspection of Shareholders of the Trust are the exclusive and sole rights of the Shareholders with respect thereto, and no Shareholder of the Trust shall have, as a Shareholder, the right to inspect or copy any of the books, records or other documents of the Trust except as specifically provided in this Section 10 of this Article III or except as otherwise determined by the Trustees. 5 ARTICLE IV The Trustees ------------ Number, Designation, Election, Term, Etc. - ----------------------------------------- Section 1. ---------- (a) Initial Trustee. Upon his execution of this Declaration of Trust or a counterpart thereof or some other writing in which he accepts such Trusteeship and agrees to the provisions hereof, James D. Oberweis shall become a Trustee hereof. (b) Number. The Trustees serving as such, whether named above or hereafter becoming Trustees, may increase or decrease the number of Trustees to a number other than the number theretofore determined, which number shall not be less than three nor more than fifteen except during the period that the initial Trustee named above is sole Trustee. No decrease in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term, but the number of Trustees may be decreased in conjunction with the removal of a Trustee pursuant to subsection (e) of this Section 1. (c) Term and Election. Each Trustee, whether named above or hereafter becoming a Trustee, shall serve as a Trustee until the next meeting of Shareholders, if any, called for the purpose of considering the election or reelection of such Trustee or of a successor to such Trustee, and until the election and qualification of his successor, if any, elected at such meeting, or until such Trustee sooner dies, resigns, retires or is removed. Upon the election and qualification of a new Trustee, the Trust estate shall vest in the new Trustee (together with the continuing or other new Trustees) without any further act or conveyance. Prior to any sale of Shares pursuant to any public offering, the initial Trustee named above shall have the right to appoint other persons as Trustees, each to serve with such initial Trustee as aforesaid until the first meeting of Shareholders called for the purpose of the election or reelection of such Trustee or of a successor to such Trustee. (d) Resignation and Retirement. Any Trustee may resign his trust or retire as a Trustee by written instrument signed by him and delivered to the other Trustees or to the Chairman of the Board, if any, the President, or the Secretary of the Trust, and such resignation or retirement shall take effect upon such delivery or upon such later date as is specified in such instrument. (e) Removal. Any Trustee may be removed for cause at any time by written instrument signed by at least a majority of the number of Trustees prior to such removal, specifying the date upon which such removal shall become effective. Any Trustee may 6 be removed with or without cause (i) by the vote of the Shareholders entitled to vote more than fifty percent (50%) of the votes entitled to be cast on the matter, voting together without regard to series at any meeting called for such purpose, or (ii) be a written consent filed with the custodian of the Trust's portfolio securities and executed by the Shareholders entitled to vote more than fifty percent (50%) of the votes entitled to be cast on the matter, voting together without regard to series. Whenever ten or more Shareholders of record who have been such for at least six months preceding the date of application, and who hold in the aggregate Shares constituting at least one percent (1%) of the outstanding Shares of the Trust, shall apply to the Trustees, in writing, stating that they wish to communicate with other Shareholders with a view to obtaining signatures to a request for a meeting to consider removal of a Trustee and accompanied by a form of communication and request that they wish to transmit, the Trustees shall, within five business days after receipt of such application, inform such applicants as to the approximate cost of mailing to the Shareholders of records the proposed communication and form of request. Upon the written request of such applicants, accompanied by a tender of the material to be mailed and of the reasonable expenses of mailing, the Trustees shall, within reasonable promptness, mail such material to all Shareholders of record at their addresses as recorded on the books of the Trust. Notwithstanding the foregoing, the Trustees may refuse to mail such material on the basis and in accordance with the procedures set forth in the last two paragraphs of Section 16(c) of the 1940 Act. (f) Vacancies. Any vacancy or anticipated vacancy resulting from any reason, including without limitation the death, resignation, retirement, removal or incapacity of any of the Trustees, or resulting from an increase in the number of Trustees by the other Trustees, may (but so long as there are at least three remaining Trustees, need not unless required by the 1940 Act) be filled either by a majority of the remaining Trustees, even if less than a quorum, through the appointment in writing of such other person as such remaining Trustees in their discretion shall determine, or whenever deemed appropriate by the remaining Trustees by the election by the Shareholders at a meeting called for such purpose of a person to fill such vacancy. Upon the appointment or election and qualification of a new Trustee as aforesaid, the Trust estate shall vest in the new Trustee, together with the continuing Trustees, without any further act or conveyance, except that any such appointment or election in anticipation of a vacancy to occur by reason of retirement, resignation, or increase in number of Trustees to be effective at a later date shall become effective only at or after the effective date of said retirement, resignation, or increase in number of Trustees. 7 (g) Mandatory Election by Shareholders. Notwithstanding the foregoing provisions of this Section 1, the Trustees shall call a meeting of the Shareholders for the election of one or more Trustees at such time or times as may be required in order that the provisions of the 1940 Act may be complied with, and the authority hereinabove provided for the Trustees to appoint any successor Trustee or Trustees shall be restricted if such appointment would result in failure of the Trust to comply with any provision of the 1940 Act. (h) Effect of Death, Resignation, Etc. The death, resignation, retirement, removal or incapacity of the Trustees, or any one of them, shall not operate to annul or terminate the Trust or to revoke or terminate any existing agency or contract created or entered into pursuant to the terms of this Declaration of Trust. (i) No Accounting. Except under circumstances which would justify his removal for cause, no person ceasing to be a Trustee as a result of his death, resignation, retirement, removal or incapacity (nor the estate of any such person), shall be required to make an accounting to the Shareholders or remaining Trustees upon such cessation. Powers - ------ Section 2. The Trustees, subject only to the specific limitations contained in this Declaration of Trust, or otherwise imposed by the 1940 Act or other applicable law, shall have, without further or other authorization and free from any power or control of the Shareholders, full, absolute and exclusive power, control and authority over the Trust assets and the business and affairs of the Trust to the same extent as if the Trustees were the sole and absolute owners thereof in their own right, and to do all such acts and things as in their sole judgment and discretion are necessary and incidental to, or desirable for, the carrying out of any of the purposes of the Trust or conducting the business of the Trust. Any determination made in good faith by the Trustees of the purposes of the Trust or the existence of any power or authority hereunder shall be conclusive. In construing the provisions of this Declaration of Trust, there shall be a presumption in favor of the grant of power and authority to the Trustees. Without limiting the foregoing, the Trustees may adopt By-Laws not inconsistent with this Declaration of Trust containing provisions relating to the business of the Trust, the conduct of its affairs, its rights or powers, and the rights or powers of its Shareholders, Trustees, officers, employees and other agents, and may amend and repeal them to the extent that such By-Laws do not reserve that right to the Shareholders; fill vacancies in their number, including vacancies resulting from increases in their number, unless a vote of the Trust's Shareholders is required to fill such vacancies pursuant to the 1940 Act; elect and remove such officers and appoint and terminate such agents as they consider appropriate; appoint from 8 their own number and terminate any one or more committees consisting of two or more Trustees, including an executive committee which may, when the Trustees are not in session, exercise some or all of the powers and authority of the Trustees as the Trustees may determine; appoint an advisory board, the members of which shall not be Trustees and need not be Shareholders; employ one or more investment advisers or managers as provided in Section 6 of this Article IV; employ one or more custodians of the assets of the Trust and authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities; retain a transfer agent or a Shareholder services agent or both; provide for the distribution of Shares by the Trust through one or more principal underwriters or otherwise; set record dates for the determination of Shareholders with respect to various matters; and in general delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees, and to any agent or employee of the Trust, or to any such custodian or underwriter. In furtherance of and not in limitation of the foregoing, the Trustees shall have power and authority: (a) To invest and reinvest in, to buy or otherwise acquire, to hold for investment or otherwise, to sell or otherwise dispose of, to lend or to pledge, to trade in or deal in securities or interests of all kinds, however evidenced, or obligations of all kinds, however evidenced, or rights, warrants, or contracts to sell or acquire such securities, interests, or obligations of any private or public company, corporation, association, general or limited partnership, trust or other enterprise or organization, foreign or domestic, or issued or guaranteed by any national state government, foreign or domestic, or their agencies, instrumentalities or subdivisions (including but not limited to bonds, debentures, bills, time notes and all other evidences of indebtedness); negotiable or non-negotiable instruments; and any and all future contracts and options thereon, government securities and money market instruments (including but not limited to bank certificates of deposit, finance paper, commercial paper, bankers acceptances, and all kinds of repurchase agreements). (b) To invest and reinvest in, to buy or otherwise acquire, to hold for investment or otherwise, to sell or otherwise dispose of, or to enter into leveraged or forward contracts with respect to foreign currencies and funds and exchanges, and make deposits in banks, savings banks, trust companies, and savings and loan associations, foreign or domestic. (c) 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. 9 (d) To sell, exchange, lend, pledge, mortgage, hypothecate, write options on, and lease any or all of the assets of the Trust. (e) To vote or give assent, or exercise any rights of ownership with respect to stock or other securities or property, and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper. (f) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities. (g) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in the name of the Trustees or of the Trust, or in the name of a custodian, subcustodian or other depositary, or a nominee or nominees, or otherwise. (h) To allocate assets, liabilities and expenses of the Trust to a particular series of Shares or to apportion the same among two or more series. (i) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security or property of which is or was held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer, and to pay calls or subscriptions with respect to any securities held in the Trust. (j) To join with other security holders in acting through a committee, depositary, voting trustee, or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper. (k) To compromise, arbitrate or otherwise adjust claims in favor of or against the Trust, or any matter in controversy, including but not limited to claims for taxes. (1) To enter into joint ventures, general or limited partnerships and any other combinations or associations. (m) To borrow funds. (n) To endorse or guarantee the payment of any notes or other obligations of any person; to make contracts of guaranty 10 or suretyship, or otherwise assume liability for payment thereof; and to mortgage and pledge the Trust property or any part thereof to secure any of or all such obligations. (o) To purchase and pay for, entirely out of Trust property, such insurance as they may deem necessary or appropriate for the conduct of the business, including without limitation insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers or managers, principal underwriters, or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held, any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as Shareholders, Trustee, officer, employee, agent, investment adviser or manager, principal underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability. (p) To pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust. The Trustees shall not in any way be bound or limited by any present or future law or custom in regard to investments by trustees of common law trusts. Except as otherwise provided herein or from time to time in the By-Laws, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of Trustees (if a quorum be present), within or without Massachusetts, including any meeting held by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can communicate with each other simultaneously, and participation by such means shall constitute presence in person at a meeting, or by written consents of a majority of the Trustees then in office. Payment of Expenses; Allocation of Liabilities - ---------------------------------------------- Section 3. The Trustees are authorized to pay, or to cause to be paid, out of the principal or income of the Trust, or partly out of principal and partly out of income as they deem fair, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust, or in connection with the management thereof, including but not limited to the Trustees' compensation, and such expenses and charges for the services of the Trust's officers, employees, investment adviser 11 or manager, principal underwriter, auditor, counsel, custodian, transfer agent, shareholder servicing agent, and such other agents or independent contractors, and such other expenses and charges as the Trustees may deem necessary or proper to incur. The assets of a particular series of Shares shall be charged with the liabilities (including, in the discretion of the Trustees or their delegate, accrued expenses and reserves) incurred in respect of such series (but not with liabilities incurred in respect of any other series) and such series shall also be charged with its share of any other liabilities. The determination of the Trustees shall be final and conclusive as to the amount of liabilities to be charged to one or more particular series. The Trustees may delegate from time to time the power to make such allocation to one or more Trustees or to an agent of the Trust appointed for such purpose. The liabilities with which a series is so charged are herein referred to as the "liabilities of" such series. Section 4. The Trustees shall have the power, as frequently as they may determine, to cause each Shareholder to pay directly, in advance or arrears, for charges of the Trust's custodian or transfer or shareholder service or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such Shareholder from declared but unpaid dividends owed such Shareholder, and/or by reducing the number of Shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder. Ownership of Assets of the Trust - -------------------------------- Section 5. Title to all of the assets of the Trust shall at al1 times be considered as vested in the Trustees. Advisory, Management and Distribution - ------------------------------------- Section 6. Subject to a favorable vote of a majority of the outstanding voting securities of a series of the Trust, the Trustees may, on behalf of such series, at any time and from time to time, contract for exclusive or nonexclusive advisory and/or management services for such series with a corporation, trust, association or other organization, every such contract to comply with such requirements and restrictions as may be set forth in the By- Laws, and any such contract may contain such other terms interpretive of or in addition to said requirements and restrictions as the Trustees may determine, including without limitation authority to determine from time to time what investments shall be purchased, held, sold or exchanged, and what portion, if any, of the assets of such series shall be held uninvested and to make changes in such series' investments. The Trustees may also, at any time and from time to time, contract with a corporation, trust, association or other organization, appointing it exclusive or nonexclusive distributor or principal 12 underwriter for the Shares, every such contract to comply with such requirements and restrictions as may be set forth in the By-Laws, and any such contract may contain such other terms interpretive of, or in addition to, said requirements and restrictions as the Trustees may determine. The fact that: (a) any of the Shareholders, Trustees or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, advisor, principal underwriter, or distributor or agent of or for any corporation, trust, association, or other organization, or of or for any parent or affiliate of any organization with which an advisory or management or principal underwriter's or distributor's contract, or transfer, shareholder services, or other agency contract may have been or may hereafter be made, or that any such organization, or any parent or affiliate thereof is a Shareholder or has an interest in the Trust, or that (b) any corporation, trust, association, or other organization with which an advisory or management or principal underwriter's or distributor's contract, or transfer, shareholder services, or other agency contract may have been or may hereafter be made also has an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, shareholder services, or other agency contract with one or more other corporations, trusts, associations, or other organizations, or has other businesses or interests shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same or create any liability or accountability to the Trust or its Shareholders. ARTICLE V Shareholders' Voting Powers and Meetings ---------------------------------------- Voting Powers - ------------- Section 1. The Shareholders shall have power to vote only: (a) for the election or removal of Trustees as provided in Article IV, Section 1; (b) with respect to any investment advisor or manager as provided in Article IV, Section 6; (c) with respect to any termination or reorganization of the Trust or any series thereof to the extent and as provided in Article IX, Section 1; (d) with respect to any amendment of this Declaration of Trust to the extent and as provided in Article IX, Section 4; (e) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders; and (f) with respect to such additional matters relating to the 13 Trust as may be required by law, the 1940 Act, this Declaration of Trust, the By-Laws, or any registration of the Trust with the Commission (or any successor agency), or any state, or as the Trustees may consider necessary or desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote, and each fractional Share shall be entitled to a proportionate fractional vote. On any matter submitted to a vote of Shareholders, all Shares of the Trust then entitled to vote shall be voted by individual series and not in the aggregate, except (a) when required by the 1940 Act, Shares shall be voted in the aggregate and not by individual series; and (b) when the Trustees have determined that the matter affects only the interests of one or more series, then only Shareholders of such series shall be entitled to vote thereon. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to the exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, this Declaration of Trust, or by the By-Laws to be taken by Shareholders. Shareholder Meetings - -------------------- Section 2. Meetings of Shareholders (including meetings involving only one or more, but less than all series) may be called and held from time to time for the purpose of taking action upon any matter requiring the vote or authority of the Shareholders as herein provided, or upon any other matter deemed by the Trustees to be necessary or desirable. Such meetings shall be held at the principal office of the Trust as set forth in the By-Laws of the Trust, or at any such other place within the United States as may be designated in the call thereof, which call shall be made by the Trustees or the President of the Trust. Meetings of Shareholders may be called by the Trustees or such other person or persons as may be specified in the By-Laws, and shall be called by the Trustees or such other person or persons as may be specified in the By-Laws upon written application by Shareholders holding at least twenty-five percent (25%) (or ten percent (10%) if the purpose of the meeting is to determine if a Trustee is to be removed from office) of the Shares then outstanding, requesting a meeting be called for a purpose requiring action by the Shareholders as provided herein or in the 14 By-Laws, which purpose shall be specified in any such written application. Shareholders shall be entitled to at least seven days written notice of any meeting of the Shareholders. Quorum and Required Vote - ------------------------ Section 3. The presence at a meeting of Shareholders in person or by proxy of Shareholders entitled to vote at least thirty percent (30%) of all votes entitled to be cast at the meeting of each series entitled to vote as a series shall be a quorum for the transaction of business at a Shareholders meeting, except that where any provision of law or of this Declaration of Trust permits or requires that the holders of Shares shall vote in the aggregate and not as a series, then the presence in person or by proxy of Shareholders entitled to vote at least thirty percent (30%) of all votes entitled to be cast at the meeting (without regard to series) shall constitute a quorum. Any lesser number, however, shall be sufficient for adjournments. Any adjourned session or sessions may be held within a reasonable time after the date set for the original meeting without the necessity of further notice. Except when a larger vote is required by any provisions of the 1940 Act, this Declaration of Trust, or the By-Laws, a majority of the Shares of each series voted on any matter shall decide such matter insofar as that series is concerned, provided that where any provision of law or of this Declaration of Trust permits or requires that the holders of Shares vote in the aggregate and not as a series, then a majority of the Shares voted on the matter (without regard to series) shall decide that matter and a plurality shall elect a Trustee. Action by Written Consent - ------------------------- Section 4. Any action taken by Shareholders may be taken without a meeting if Shareholders entitled to vote more than fifty percent (50%) of the votes entitled to be cast on the matter of each series, or where any provision of law or of this Declaration of Trust permits or requires that the holders of Shares vote in the aggregate and not as a series, if Shareholders entitled to vote more than fifty percent (50%) of the votes entitled to be cast thereon (without regard to series or in either case such larger vote as shall be required by any provision of this Declaration of Trust or the By-Laws) consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of shareholders. 15 Additional Provisions - --------------------- Section 5. The By-Laws may include further provisions for Shareholders votes and meetings and related matters not inconsistent with the provisions hereof. ARTICLE VI Distributions, Redemptions and Repurchases, and Determination of Net Asset Value ------------------------------------ Distributions - ------------- Section 1. The Trustees may, in their sole discretion from time to time, distribute to the Shareholders of any series such income and gains, accrued or realized, as the Trustees may determine, after providing for actual and accrued expenses and liabilities of such series (including such reserves as the Trustees may establish) determined in accordance with this Declaration of Trust and good accounting practices. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital, and their determination shall be binding upon the Shareholders. Distributions to any series, if any be made, shall be in Shares of such series, in cash or otherwise, and on a date or dates determined by the Trustees. At any time and from time to time in their discretion, the Trustees may distribute to the Shareholders of any series as of a record date or dates determined by the Trustees, in Shares of such series, in cash or otherwise, all or part of any gains realized on the sale or disposition of property of the Trust or otherwise, or all or part of any other principal of the Trust. Each distribution pursuant to this Section 1 shall be made ratably according to the number of Shares of the series held by the several Shareholders on the applicable record date thereof, provided that distributions from assets of a series may only be made to the holders of the Shares of such series and provided that no distributions need be made on Shares purchased pursuant to orders received or for which payment is made after such time or times as the Trustees may determine. Any distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with this Declaration of Trust. The Trustees have the power, in their discretion, to distribute for any year amounts sufficient to enable the Trust (or, if applicable, any series of the Trust) to qualify as a "regulated investment company" under the Internal Revenue Code of 1954 as amended (or any successor thereto) to avoid any liability for federal income tax in respect of that year. Redemption and Repurchases - -------------------------- Section 2. Any holder of Shares of the Trust may, by presentation of a request in proper form, together with his certificates, if any, for such Shares, in proper form for transfer to the Trust or duly authorized agent of the Trust, 16 request redemption of his shares for the net asset value thereof (less any redemption fee provided for hereunder, if such fee is then authorized) determined and computed in accordance with the provisions of this Section 2 and the provisions of Section 6 of this Article VI. Upon receipt by the Trust or its duly authorized agent, as the case may be, of such a request for redemption of Shares in proper form, such Shares shall be redeemed at the net asset value per share of the particular series next determined after such request is received or determined as of such other time fixed by the Trustees as may be permitted or required by the 1940 Act; provided that, the Trustees may authorize the imposition of a redemption fee, subject to such terms and conditions as they may determine and as are permitted by the 1940 Act, which redemption fee may not exceed two percent (2%) of the net asset value of such shares redeemed. The criteria for determining what constitutes a request for redemption in proper form and the time of receipt of such request shall be fixed by the Trustees. The obligation of the Trust to redeem its shares of each series as set forth above in this Section 2 shall be subject to the condition that such obligation may be suspended by the Trust by or under authority of the Trustees during any period or periods when and to the extent permissible under the 1940 Act. If there is such a suspension, any Shareholder may withdraw any request for redemption which has been received by the Trust during any such period and the applicable net asset value with respect to which would but for such suspension be calculated as of a time during such period. Upon such withdrawal, the Trust shall return to the Shareholder the certificates therefor, if any. The trust may also purchase, repurchase or redeem Shares in accordance with such other methods, upon such other terms, and subject to such other conditions as the Trustees may from time to time authorize, at a price not exceeding the net asset value of such Shares in effect when the purchase or repurchase or any contract to purchase or repurchase is made. Shares of any series redeemed or repurchased by the Trust hereunder shall be cancelled upon such redemption or repurchase without further action by the Trust or the Trustees, and the number of issued and outstanding Shares of such series shall thereupon be reduced by such amount. Payment for Shares Redeemed - --------------------------- Section 3. Payment of the redemption price for Shares redeemed pursuant to this Article VI shall be made by the Trust or its duly authorized agent after receipt by the Trust or its duly authorized agent of a request for redemption in proper form (together with any certificates for such Shares as provided in Section 2 above) in accordance with procedures and subject to conditions prescribed by the Trustees; provided, however, that payment may be postponed during the period in which the 17 redemption of Shares is suspended under Section 2 above. Subject to any generally applicable limitation imposed by the Trustees, any payment on redemption, purchase or repurchase by the Trust of Shares may, if authorized by the Trustees, be made wholly or partly in kind, instead of in cash. Such payment in kind shall be made by distributing securities or other property, constituting, in the opinion of the Trustees, a fair representation of the various types of securities and other property then held by the series of Shares being redeemed, purchased or repurchased (but not necessarily involving a portion of each of the series' holdings) and taken at their value used in determining the net asset value of the Shares in respect of which payment is made. Redemptions at the Option of the Trust - -------------------------------------- Section 4. The Trust shall have the right at its option and at any time and from time to time to redeem Shares of any Shareholder at the net asset value thereof as determined in accordance with Section 6 of this Article VI, if at such time such Shareholder owns fewer Shares of a series than, or Shares of a series having an aggregate net asset value of less than, an amount determined from time to time by the Trustees. Any such redemption at the option of the Trust shall be made in accordance with such other criteria and procedures for determining the Shares to be redeemed, the redemption date, and the means of effecting such redemption as the Trustees may from time to time authorize. Additional Provisions Relating to Redemptions and Repurchases - ------------------------------------------------------------- Section 5. The completion of redemption, purchase or repurchase of Shares shall constitute a full discharge of the Trust and the Trustees with respect to such Shares. Determination of Net Asset Value - -------------------------------- Section 6. The term "net asset value" of each Share of a series as of any particular time shall be the quotient obtained by dividing the value, as at such time, of the net assets of such series (i.e., the value of the assets of such series less the liabilities of such series, exclusive of liabilities represented by the Shares of such series) by the total number of Shares of such series outstanding at such time, all determined and computed as follows: (a) The assets of a series shall be deemed to include such of the following assets that are determined to be assets of such series as provided under Section 3 of Article III: (i) all cash on hand or on deposit, including any interest accrued thereon; (ii) all bills and demand notes and accounts receivable; (iii) all bonds, time notes, shares of stock, subscription rights, and other securities owned or contracted for by the Trust other than its own Shares; (iv) all stock and cash dividends and 18 cash distributions to be received by the Trust and not yet received by it when the net asset value is being determined as of the record date therefor or a date subsequent thereto; (v) all interest accrued on any interest bearing securities owned by the Trust (except interest accrued on securities which is included in the quoted price); (vi) all repurchase agreements; and (vii) all other property of every kind and nature, including prepaid expenses. The value of securities for which market quotations are readily available shall be valued at prices which, in the opinion of the Trustees or their delegate, most nearly represent the current market value of such securities which may, but need not, be the most recent bid price obtained from one or more of the market makers for such securities, and all other securities and assets shall be valued at fair value as determined in good faith by or pursuant to the direction of the Trustees. Notwithstanding the foregoing, short-term debt obligations, commercial paper and repurchase agreements may, but need not, be valued on the basis of quoted yields for securities of comparable maturity, quality and type, or on the basis of amortized cost. (b) The liabilities of a series shall be deemed to include such of the following liabilities that are determined to be liabilities of such series as provided under Section 3 of Article IV: (i) all bills and accounts payable; (ii) all administrative expenses payable and/or accrued; (iii) all contractual obligations for the payment of money or property, including the amount of any unpaid distributions upon the Shares of the Trust declared to Shareholders of record at or before the time as of which the net asset value is being determined; (iv) all reserves authorized or approved by the Trustees for taxes or contingencies; and (v) all other liabilities of the Trust of whatsoever kind and nature (except liabilities represented by outstanding Shares of the Trust). (c) Any determination of net asset value shall be made by appraisal or, when deemed appropriate by the Trustees, by calculation or estimate. Any such calculation or estimate shall be based on changes in the market value of representative or selected securities or based on changes in recognized market averages since the last appraisal or such other method as the Trustees shall determine in good faith accurately reflects fair value, and shall be made in a manner which in the opinion of the Trustees or their delegate will fairly reflect the changes in the net asset value. (d) Notwithstanding any of the foregoing provisions of this Section 6, the Trustees may prescribe such other bases for determining the per Share net asset value of the Shares of a series as they shall deem necessary or desirable to enable the Trust to comply with any provision of the 1940 Act. The Trustees, or any officer, or officers or agent of the Trust designated for the purpose by the Trustees, shall determine the net asset value of the Shares of each series, and the 19 Trustees shall fix the time or times as of which the net asset value of the Shares of each series shall be determined, and shall fix the periods during which any such net asset value shall be effective as to sales, redemptions and repurchases of, and other transactions in, the Shares of such series, except as such times and periods for any such transaction may be fixed by other provisions or this Declaration of Trust or by the By-Laws. Determinations in accordance with this Section 6 made in good faith shall be binding on all parties concerned. How Long Shares are Outstanding - ------------------------------- Section 7. Shares of the Trust surrendered to the Trust for redemption by it pursuant to the provisions of Section 2 of this Article VI shall be deemed to be outstanding until the redemption price thereof is determined pursuant to this Article VI, and thereupon and until paid, the redemption price thereof shall be deemed to be a liability of the Trust. Shares of the Trust purchased by the Trust in the open market shall be deemed to be outstanding until confirmation of purchase thereof by the Trust, and thereupon and until paid, the purchase price thereof shall be deemed to be a liability of the Trust. Shares of the Trust redeemed by the Trust pursuant to Section 4 of this Article VI shall be deemed to be outstanding until said Shares are deemed to be redeemed in accordance with procedures adopted by the Trustees pursuant to said Section 4. ARTICLE VII Compensation and Limitation of Liability of Trustees ---------------------------------------------------- Compensation - ------------ Section 1. The Trustees as such shall be entitled to reasonable compensation from the Trust if the rate thereof is prescribed by such Trustees. Nothing herein shall in any way prevent the employment of any Trustee for advisory, management, legal, accounting, investment banking, or other services and payment for the same by the Trust, it being recognized that such employment may result in such Trustee being considered an Affiliated Person or an Interested Person. Limitation of Liability - ----------------------- Section 2. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, investment advisor, or manager, principal underwriter, custodian or transfer agent of the Trust nor shall any Trustee be responsible for the act or omission of any other Trustee. Nothing in this Declaration of Trust shall protect any Trustee against any liability to which such Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross 20 negligence or reckless disregard of the duties involved in the conduct of his office as Trustee. Every note, bond, contract, instrument, certificate, Share or undertaking, and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in or with respect to their or his capacity as Trustees or Trustee, and neither such Trustees or Trustee nor the Shareholders shall be personally liable thereon. Every note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officers or officer shall give notice that this Declaration of Trust is on file with the Secretary of The Commonwealth of Massachusetts, and shall recite that the same was executed or made by or on behalf of the Trust by them as Trustees or Trustee or as officers or officer and not individually, and that the obligations of such instrument are not binding upon any of them or the Shareholders individually, but are binding only upon the assets and property of the Trust and may contain such further recital as he or they may deem appropriate, but the omission thereof shall not operate to bind any Trustees or Trustee or officers or officer of shareholders or Shareholder individually. All persons extending credit to, contracting with, or having any claim against the Trust shall look only to the assets of the Trust for payment under such credit, contract or claim, and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Trustees' Good Faith Action, Expert Advice, No Bond or Surety - ------------------------------------------------------------- Section 3. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon every one interested. A Trustee shall be liable only for his own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust and their duties as Trustees hereunder, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. In discharging their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the books of account of the Trust and upon written reports made to the Trustees by any officer appointed by them, any independent public accountant, and (with respect to the subject matter of the contract involved) any officer, partner or responsible employee of any other party to any contract entered into pursuant to Section 2 of Article IV. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. 21 Liability of Third Persons Dealing with Trustees - ------------------------------------------------ Section 4. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees, or to see to the application of any payments made or property transferred to the Trust or upon its order. ARTICLE VIII Indemnification --------------- Subject to the exceptions and limitations contained in this Article, every person who is, or has been, a Trustee or officer of the Trust (including persons who serve at the request of the Trust as directors, officers or trustees of another organization in which the Trust has an interest as a shareholder, creditor or otherwise) hereinafter referred to as a "Covered Person", shall be indemnified by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been such a Trustee, director or officer, and against amounts paid or incurred by him in settlement thereof. No indemnification shall be provided hereunder to a Covered Person: (a) against any liability to the Trust or its Shareholders by reason of a final adjudication by the court or other body before which the proceeding was brought that he engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (b) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust; or (c) in the event of a settlement or other disposition not involving a final adjudication (as provided in paragraph (a) or (b)) and resulting in a payment by a Covered Person, unless there has been either a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the court or other body approving the settlement or other disposition, or a reasonable determination based on a review of readily available facts (as opposed to a full trial-type inquiry) that he did not engage in such conduct: (i) by a vote of a majority of the Disinterested 22 Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or (ii) by written opinion of independent legal counsel. The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such a Covered Person, and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel other than Covered Persons may be entitled by contract or otherwise under law. Expenses of preparation and presentation of a defense to any claim, action, suit or proceeding subject to a claim for indemnification under this Article shall be advanced by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Article, provided that either: (a) such undertaking is secured by a surety bond or some other appropriate security, or the Trust shall be insured against losses arising out of any such advances; or (b) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or independent legal counsel in a written opinion shall determine, based upon a review of the readily available facts (as opposed to a full trial- type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification. As used in this Article, a "Disinterested Trustee" is one (a) who is not an "interested person" of the Trust, as defined in the 1940 Act (including anyone who has been exempted from being an "interested person" by any rule, regulation or order of the Commission), and (b) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending. As used in this Article, the words "claim", "action", "suit" or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened, and the words "liability" and "expenses" shall include without limitation attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. 23 In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators or other legal representatives, or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets of the Trust to be held harmless from and indemnified against all loss and expense arising from such liability; provided, however, there shall be no liability or obligation of the Trust arising hereunder to reimburse any Shareholder for taxes paid by reason of such Shareholder's ownership of Shares or for losses suffered by reason of any changes in value of any Trust assets. ARTICLE IX Miscellaneous ------------- Duration, Termination and Reorganization of Trust - ------------------------------------------------- Section 1. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by the Trustees by written notice to the Shareholders without a vote of the Shareholders of the Trust or by the vote of the Shareholders entitled to vote more than fifty percent (50%) of the votes entitled to be cast on the matter. Any series of Shares may be terminated at any time by the Trustees by written notice to the Shareholders of such series without a vote of the Shareholders of such series or by the vote of the Shareholders of such series entitled to vote more than fifty percent (50%) of the votes entitled to be cast on the matter. Upon termination of the Trust or of any one or more series of Shares, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated, of the particular series as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets of the particular series to distributable form in cash or other securities, or any combination thereof, and distribute the proceeds to the Shareholders of the series involved, ratably according to the number of Shares of such series held by the several Shareholders of such series on the date of termination. At any time by the affirmative vote of the Shareholders of the affected series entitled to vote more than fifty percent (50%) of the votes entitled to be cast on the matter, the Trustees may sell, convey and transfer the assets of the Trust, or the assets belonging to any one or more series, to another trust, partnership, association or corporation organized under the laws of any state of the United States, or to the Trust to be held as assets belonging to another series of the Trust, in 24 exchange for cash, shares or other securities (including, in the case of a transfer to another series of the Trust, Shares of such other series) with such transfer being made subject to, or with the assumption by the transferee of, the liabilities belonging to each series the assets of which are so distributed. Following such transfer, the Trustees shall distribute such cash, shares or other securities (giving due effect to the assets and liabilities belonging to, and any other differences among, the various series, the assets belonging to which have so been transferred) among the Shareholders of the series, the assets belonging to which have been so transferred, and if all of the assets of the Trust have been so distributed, the Trust shall be terminated. Filing of Copies, References, Headings - -------------------------------------- Section 2. The original or a copy of this instrument and of each amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk, as well as any other governmental office where such filing may from time to time be required. Any one dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such amendments have been made and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments. In this instrument and in any such amendment, references to this instrument, and all expressions like "herein", "hereof" and "hereunder" shall be deemed to refer to this instrument as amended from time to time. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. This instrument may be executed in any number of counterparts, each of which shall be deemed an original. Applicable Law - -------------- Section 3. This Declaration of Trust is made in The Commonwealth of Massachusetts, and it is created under, and is to be governed by and construed and administered according to, the laws of said Commonwealth. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust. Amendments - ---------- Section 4. This Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the then Trustees when authorized so to do by vote of Shareholders holding more than fifty percent (50%) of the Shares of each series 25 entitled to vote, except that an amendment which shall affect the holders of one or more series of Shares, but not the holders of all outstanding series, shall be authorized by vote of the Shareholders holding more than fifty percent (50%) of the Shares entitled to vote of each series affected, and no vote of Shareholders of a series not affected shall be required. Amendments having the purpose of changing the name of the Trust or of supplying any omission, curing any ambiguity, or curing, correcting or supplementing any provision which is defective or inconsistent with the 1940 Act or with the requirements of the Internal Revenue Code and the regulations thereunder for the Trust's obtaining the most favorable treatment thereunder available to regulated investment companies shall not require authorization by Shareholder vote. Use of the Name - --------------- Section 5. The Trust is using the service mark "Oberweis" in its trust name by permission of Oberweis Asset Management, Inc., an Illinois corporation ("OAM"), and the Trust's right to use the service mark "Oberweis" is subject to the right of OAM or its successors or assigns at any time to control the usage of the service mark "Oberweis" by the Trust, and to direct that the Trust stop using the service mark "Oberweis" in any form or combination as part of its name and service mark and in any literature or reference whatsoever. All proprietary interest in the service mark "Oberweis" shall remain exclusively the property of OAM and Oberweis Securities, Inc., an affiliate of OAM. At the written request of OAM, or its successors or assigns, delivered to the Trust at its registered office in Boston, Massachusetts, if any, and if none, at its principal office, the Trust shall forthwith stop using the service mark "Oberweis" in accordance with the provisions of such request. The Trust may enter into an agreement with OAM further setting forth the terms and conditions under which the Trust shall be entitled to use the service mark "Oberweis." The provisions of this Section 5 are binding upon the Trust, its Trustees, officers, Shareholders, creditors, successors or assigns, and all other persons claiming under or through it. The terms of this Section 5 do not preclude the use of the service mark "Oberweis" by any other person or organization, whether now existing or hereafter created, to which OAM, Oberweis Securities, Inc., or any other person or entity entitled thereto may grant the right to such service mark. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal for himself and his assigns as of the day and year first above written. /s/ James D. Oberweis ---------------------------- James D. Oberweis (Seal) 26 COMMONWEALTH OF MASSACHUSETTS ) ) SS. COUNTY OF SUFFOLK ) Then personally appeared the above named James D. Oberweis who acknowledged the foregoing instrument to be his free act and deed before me this 7th day of July, 1986. /s/ Annette M. Zola ----------------------------- Notary Public ANNETTE M. ZOLA My commission expires September 9, 1988 ----------------- 27 EX-99.1.1 3 AMEND TO DECLAR. OF TRUST OBERWEIS EMERGING GROWTH FUND ----------------------------- FIRST AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST ----------------------------------------------------- THIS FIRST AMENDMENT made this 17th day of November, 1986, by all of the Trustees under the Oberweis Emerging Growth Fund Agreement and Declaration of Trust dated July 7, 1986 (the "Declaration of Trust"); WITNESSETH: ----------- 1. Pursuant to the authority of and as directed by the sole shareholder of the Trust, the first two paragraphs of Section 2 of Article VI of the Declaration of Trust are hereby amended in their entirety to read as follows: "Section 2. Any holder of Shares of the Trust may, by presentation of a request in proper form, together with his certificates, if any, for such Shares, in proper form for transfer to the Trust or duly authorized agent of the Trust, request redemption of his shares for the net asset value thereof (less any discount from net asset value charged on redemption thereof as provided for hereunder, if such discount from net asset value is then authorized) determined and computed in accordance with the provisions of this Section 2 and the provisions of Section 6 of this Article VI. Upon receipt by the Trust or its duly authorized agent, as the case may be, of such a request for redemption of Shares in proper form, such Shares shall be redeemed at the net asset value per share of the particular series next determined after such request is received or determined as of such other time fixed by the Trustees as may be permitted or required by the 1940 Act; provided that, the Trustees may authorize that a discount from net asset value be charged on redemption, subject to such terms and conditions as they may determine and as are permitted by the 1940 Act, which discount from net asset value may not exceed two percent (2%) of the net asset value of such shares redeemed. The criteria for determining what constitutes a request for redemption in proper form and the time of receipt of such request shall be fixed by the Trustees." 2. All terms used herein which are defined in the Declaration of Trust shall have the respective meanings ascribed to them therein. IN WITNESS WHEREOF, the undersigned Trustees of Oberweis Emerging Growth Fund have executed this First Amendment to Agreement and Declaration of Trust as of the date and year first above written. /s/ JAMES D. OBERWEIS ---------------------------------- JAMES D. OBERWEIS /s/ DONALD E. PEARSON ---------------------------------- DONALD E. PEARSON /s/ DAVID N. GRIMES ---------------------------------- DAVID N. GRIMES /s/ GARY O. McDANIEL ---------------------------------- GARY O. McDANIEL /s/ RICHARD A. WAGNER ---------------------------------- RICHARD A. WAGNER -2- EX-99.2 4 BY-LAWS BY-LAWS OF OBERWEIS EMERGING GROWTH FUND ----------------------------- Section 1. Agreement and Declaration of Trust and Principal Office -------------------------- 1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to the Agreement and Declaration of Trust, as from time to time in effect (the "Declaration of Trust"), of OBERWEIS EMERGING GROWTH FUND, the Massachusetts business trust established by the Declaration of Trust (the "Trust"). 1.2 Principal Office of the Trust; Resident Agent. The principal office of the Trust shall be located in Aurora, Illinois. Its resident agent in Massachusetts shall be CT Corporation System, 2 Oliver Street, Boston, Massachusetts, or such other person as the Trustees may from time to time select. Section 2. Shareholders ----------------------- 2.1 Shareholder Meetings. Meetings of the shareholders may be called at any time by the Trustees, by the President, or if the Trustees and the President shall fail to call any meeting of shareholders for a period of 30 days after written application of one or more shareholders who hold at least twenty-five percent (25%) of all shares issued and outstanding and entitled to vote at the meeting (or 10% if the purpose of the meeting is to determine if a trustee shall be removed from office), then such shareholders may call such meeting. Each call of a meeting shall state the place, date, hour and purposes of the meeting. 2.2 Place of Meetings. All meetings of the shareholders shall be held at the principal office of the Trust, or to the extent permitted by the Declaration of Trust, at such other place within the United States as shall be designated by the Trustees or the President of the Trust. 2.3 Notice of Meetings. A written notice of each meeting of shareholders, stating the place, date and hour and the purposes of the meeting, shall be given at least seven days before the meeting to each shareholder entitled to vote thereat by leaving such notice with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to such shareholder at his address as it appears in the records of the Trust. Such notice shall be given by the Secretary or an Assistant Secretary or by an officer designated by the Trustees. No notice of any meeting of shareholders need be given to a shareholder if a written waiver of notice, executed before or after the meeting by such shareholder or his attorney thereunto duly authorized, is filed with the records of the meeting. 2.4 Ballots. No ballot shall be required for any election unless requested by a shareholder present or represented at the meeting and entitled to vote in the election. 2.5 Proxies and Voting. Shareholders entitled to vote may vote either in person or by proxy in writing dated not more than six months before the meeting named therein, which proxies shall be filed with the Secretary or other person responsible to record the proceedings of the meeting before being voted. Unless otherwise specifically limited by their terms, such proxies shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment of such meeting. At all meetings of shareholders, unless the voting is conducted by inspectors, all questions relating to the qualification of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by the chairman of the meeting. Section 3. Trustees ------------------- 3.1 Committees and Advisory Board. The Trustees may appoint from their number an executive committee and other committees. Any such committee may be abolished and reconstituted at any time and from time to time by the Trustees. Except as the Trustees may otherwise determine, any such committee may make rules for conduct of its business. The Trustees may appoint an advisory board to consist of not less than two nor more than five members. The members of the advisory board shall be compensated in such manner as the Trustees may determine and shall confer with and advise the Trustees regarding the investments and other affairs of the Trust. Each member of the advisory board shall hold office until the first meeting of the Trustees following the meeting of the shareholders, if any, next following his appointment and until his successor is appointed and qualified, or until he sooner dies, resigns, is removed, or becomes disqualified or until the advisory board is sooner abolished by the Trustees. 3.2 Regular Meetings. Regular meetings of the Trustees may be held without call or notice at such places and at such times as the Trustees may from time to time determine, provided that notice of the first regular meeting following any such determination shall be given to absent Trustees. A regular meeting or the Trustees may be held without call or notice immediately after and at the same place as any meeting of the shareholders. 3.3 Special Meetings. Special meetings of the Trustees may be held at any time and at any place designated in the call of the meeting when called by the Chairman of the Board or by two or more Trustees, sufficient notice thereof being given to each Trustee by the Secretary or an Assistant Secretary, or by the officer or one of the Trustees calling the meeting. 2 3.4 Notice. It shall be sufficient notice to a Trustee to send notice by mail at least three days or by telegram at least twenty-four hours before the meeting addressed to the Trustee at his or her usual or last known business or residence address, or to give notice to him or her in person or by telephone at least twenty-four hours before the meeting. Notice of a meeting need not be given to any Trustee if a written waiver of notice, executed by him or her before or after the meeting, is filed with the records of the meeting, or to any Trustee who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him or her. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting. 3.5 Quorum. At any meeting of the Trustees, one-third of the Trustees then in office shall constitute a quorum; provided, however, a quorum (unless the Board of Trustees consists of two or fewer persons) shall not be less than two. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. Section 4. Officers and Agents ------------------------------ 4.1 Enumeration; Qualification. The officers of the Trust shall be a President, a Treasurer, a Secretary, and such other officers, if any, as the Trustees from time to time may in their discretion elect or appoint. The Trust may also have such agents, if any, as the Trustees from time to time may in their discretion appoint. Any officer may be, but none need be, a Trustee or shareholder. Any two or more offices may be held by the same person. 4.2 Powers. Subject to the other provisions of these By-Laws, each officer shall have, in addition to the duties and powers herein and in the Declaration of Trust set forth, such duties and powers as are commonly incident to his or her office as if the Trust were organized as a Massachusetts business corporation, and such other duties and powers as the Trustees may from time to time designate. 4.3 Election. The President, Treasurer, and Secretary shall be elected annually by the Trustees at their first meeting in each calendar year or at such later meeting in such year as the Trustees shall determine. Other officers or agents, if any, may be elected or appointed by the Trustees at said meeting or at any other time. 4.4 Tenure. The President, Treasurer and Secretary shall hold office until the first meeting of Trustees in each calendar year and until their respective successors are chosen and qualified or in each case until he or she sooner dies, resigns, is removed, or becomes disqualified. Each other officer shall hold office 3 and each agent shall retain his or her authority at the pleasure of the Trustees. 4.5 Chairman of the Board. The Chairman of the Board of Trustees, if one is so appointed, shall be chosen from among the Trustees and may hold office only so long as he continues to be a Trustee. The Chairman of the Board, if any is so appointed, shall preside at all meetings of the shareholders and of the Trustees at which he is present, and shall have the such other duties and powers specified herein and as may be assigned to him by the Trustees. 4.6 President and Vice Presidents. The President shall be the chief executive officer of the Trust. The President shall, subject to the control of the Trustees, have general charge and supervision of the Trust, and shall perform such other duties and have such other powers as the Trustees shall prescribe from time to time. Any Vice President shall, at the request or in the absence or disability of the President, exercise the powers of the President and perform such other duties and have such other powers as shall be designated from time to time by the Trustees. 4.7 Treasurer and Controller. The Treasurer shall be the chief financial officer of the Trust and subject to any arrangement made by the Trustees with a bank or trust company or other organization as custodian or transfer or shareholder services agent, shall be in charge of its valuable papers, and shall have such other duties and powers as may be designated from time to time by the Trustees or by the President. If at any time there shall be no Controller, the Treasurer shall also be the chief accounting officer of the Trust and shall have the duties and power prescribed herein for the Controller. Any Assistant Treasurer shall have such duties and powers as shall be designated from time to time by the Trustees. The Controller, if any be elected, shall be the chief accounting officer of the Trust and shall be in charge of its books of account and accounting records. The Controller shall be responsible for preparation of financial statements of the Trust and shall have such other duties and powers as may be designated from time to time by the Trustees or the President. 4.8 Secretary and Assistant Secretaries. The Secretary shall record all proceedings of the shareholders and the Trustees in books to be kept therefor, which books shall be kept at the principal office of the Trust. In the absence of the Secretary from any meeting of shareholders or Trustees, an Assistant Secretary, or if there be none or he or she is absent, a temporary clerk chosen at the meeting shall record the proceedings thereof in the aforesaid books. 4 Section 5. Resignations and Removals ------------------------------------ Any Trustee may resign his trust or retire as a Trustee in accordance with procedures set forth in the Declaration of Trust. Any officer or advisory board member may resign at any time by delivering his or her resignation in writing to the Chairman of the Board; the President, or the Secretary, or to a meeting of the Trustees. The Trustees may remove any officer or advisory board member elected or appointed by them with or without cause by the vote of a majority of the Trustees then in office. Except to the extent expressly provided in a written agreement with the Trust, no Trustee, officer or advisory board member resigning, and no officer or advisory board member removed, shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages on account of such removal. Section 6. Vacancies --------------------- A vacancy in the office of the Trustee shall be filled in accordance with the Declaration of Trust. Vacancies resulting from the death, resignation, incapacity or removal of any officer may be filled by the Trustees. Each successor of any such officer shall hold office for the unexpired term, and in the case of the President, the Treasurer and the Secretary, until his or her successor is chosen and qualified, or in each case until he or she sooner dies, resigns, is removed, or becomes disqualified. Section 7. Shares of Beneficial Interest ---------------------------------------- 7.1 Share Certificates. No certificates certifying the ownership of shares shall be issued except as the Trustees may otherwise authorize. In the event that the Trustees authorize the issuance of share certificates, subject to the provisions of Section 7 3, each shareholder shall be entitled to a certificate stating the number of shares owned by him or her, in such form as shall be prescribed from time to time by the Trustees. Such certificate shall be signed by the President or a Vice President, and by the Treasurer or Assistant Treasurer, Secretary or Assistant Secretary. Such signatures may be facsimiles if the certificate is signed by a transfer or shareholder services agent or by a registrar, other than a Trustee, officer or employee of the Trust. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Trust with the same effect as if he or she were the officer at the time of its issue. In lieu of issuing certificates for shares, the Trustees, or the transfer or shareholder services agent, may either issue receipts therefor or may keep accounts upon the books of the Trust for the record holders of such shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of 5 certificates for such shares as if they had accepted such certificates and shall be held to have expressly assented and agreed to the terms hereof. 7.2 Loss of Certificates. In the case of the alleged loss or destruction or the mutilation of a share certificate, a duplicate certificate may be issued in place thereof, upon such terms as the Trustees may prescribe. 7.3 Discontinuance of Issuance of Certificates. The Trustees may at any time discontinue the issuance of share certificates, and may, by written notice to each shareholder, require the surrender of share certificates to the Trust for cancellation. Such surrender and cancellation shall not affect the ownership of shares in the Trust. Section 8. Record Date ---------------------- The Trustees may fix in advance a time, which shall not be more than 60 days before the date of any meeting of shareholders or the date for the payment of any dividend or making of any other distribution to shareholders as the record date for determining the shareholders having the right to notice and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution, and in such case only shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the Trust after the record date. Section 9. Seal --------------- The seal of the Trust shall, subject to alteration by the Trustees, consist of a flat-faced circular die with the word "Massachusetts", together with the name of the Trust and the year of its organization, cut or engraved thereon, but unless otherwise required by the Trustees, the seal shall not be necessary to be placed on, and its absence shall not impair the validity of, any document, instrument, or other paper executed and delivered by or on behalf of the Trust. Section 10. Execution of Papers ------------------------------- Except as the Trustees may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other obligations made, accepted or endorsed by the Trust shall be signed, and any transfers of securities standing in the name of the Trust shall be executed by the President or by one of the Vice Presidents or by the Treasurer, or by whomsoever else shall be designated for that purpose by the vote of the Trustees and need not bear the seal of the Trust. 6 Section 11. Fiscal Year ----------------------- The fiscal year of the Trust shall end on such date in each year as the Trustees shall from time to time determine. Section 12. Amendments ---------------------- These By-Laws may be amended or repealed, in whole or in part, by a majority of the Trustees then in office at any meeting of the Trustees, or by one or more writings signed by such majority. 7 EX-99.4 5 FORM OF CERTIFICATES NUMBER SHARES OBERWEIS FUNDS ------------------------------------------------------------- ORGANIZED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS THIS CERTIFIES THAT is the registered owner of CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS shares of beneficial interest, no par value, of the Oberweis Funds (hereinafter called the "Trust"), transferable on the books of the Owner in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be subject to the provisions of the Declaration of Trust and By-Laws of the Trust and all amendments thereto, copies of which are on file with the Transfer Agent and at the Office of the Trust, to all of which the holder, by acceptance hereof, assents. This Certificate is executed on behalf of the Trustees of the Trust as Trustees and not individually, and the obligations hereof are not binding upon any of the Trustees, officers or shareholders of the Trust, individually, but are binding only upon the assets and property of the Portfolio of the Trust. This Certificate is not valid unless countersigned by the Transfer Agent. WITNESS the facsimile seal of the Trust and the Facsimile signatures of its duly authorized officers. Dated: /s/ Patrick B. ?????? /s/ James D. Oberweis TREASURER PRESIDENT [SEAL] COUNTERSIGNED: INVESTORS FIDUCIARY TRUST COMPANY TRANSFER AGENT - ------------------------------------------------ AUTHORIZED SIGNATURE 100516 KC PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED CERTIFICATE NO. SHARES ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO. TRADE DATE CONFIRM DATE BATCH I.D. NO. CHANGE NOTICE: IF THE ABOVE INFORMATION IS INCORRECT OR MISSING. PLEASE PRINT THE CORRECT INFORMATION BELOW, AND RETURN TO: INVESTORS FIDUCIARY TRUST COMPANY The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT-_____Custodian_____ TEN ENT - as tenants by the entireties (Cust) (Minor) JT WROS - as joint tenants with right of survivorship and not as tenants under Uniform Gifts to Minors in common Act__________________________ (State) NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. Additional abbreviations may also be used though not in the above list. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Shares - ------------------------------------------------------------------------- of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint --------------------------------------------- - -------------------------------------------------------------------------------- Attorney to transfer the said stock on the books of the within-named Company with fully power of substitution in the premises. Dated, --------------------------- -------------------------------- EX-99.5.1.2 6 MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT -------------------- AGREEMENT made as of this 1st day of October, 1994 between OBERWEIS EMERGING GROWTH FUND, a Massachusetts business trust (hereinafter called the "Fund") and OBERWEIS ASSET MANAGEMENT, INC., an Illinois corporation (hereinafter called "Manager"). WHEREAS, the Fund is an open-end, diversified management investment company registered under the Investment Company Act of 1940 (the "1940 Act"), the units of beneficial interest ("Shares") of which are registered under the Securities Act of 1933; and WHEREAS, the Fund is authorized to issue Shares in separate series with each such series representing the interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund currently offers Shares in one portfolio, the Emerging Growth Portfolio (the "Initial Portfolio"), together with any other Fund portfolios which may be established later and served by Manager hereunder, being herein referred to collectively as the "Portfolios" and individually referred to as a "Portfolio"; and WHEREAS, the Fund desires at this time to retain Manager to provide the Fund and the Initial Portfolio with certain non-investment advisory management and administrative services (the "Services"), and Manager is willing to render such services; NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Initial Appointment of Manager. The Fund hereby appoints Manager as its Manager to provide it and the Initial Portfolio with the Services. In addition, it is understood that the persons employed by Manager to assist in the performance of its services and duties hereunder will not devote their full time to such services and nothing herein contained shall be deemed to limit or restrict the right of Manager to engage in and devote time and attention to other businesses or to render services of whichever kind or nature as long as the Services provided hereunder are not impaired thereby. 2. Subsequent Appointments of Manager. In the event that the Fund establishes one or more portfolios other than the Initial Portfolio with respect to which it desires to retain Manager to render the Services hereunder, it shall notify Manager in writing. If Manager is willing to render such Services, it shall notify the Fund in writing, whereupon such portfolio or portfolios shall become a Portfolio or Portfolios hereunder. 3. Delivery of Documents. The Fund has delivered (or will deliver as soon as is possible) to Manager copies of each of the following documents and will deliver to Manager all future amendments and supplements: (a) Agreement and Declaration of Trust of the Fund dated July 7, 1986 (such Agreement and Declaration of Trust, as presently in effect and as amended from time to time, is herein called the "Trust Agreement"), a copy of which also is on file with the Secretary of the Commonwealth of Massachusetts. (b) By-Laws of the Fund (such By-Laws, as presently in effect and as amended from time to time, are herein called the "By-Laws"). (c) Certified resolutions of the Trustees and Shareholders of the Fund authorizing the appointment of Manager as its Manager and approving this Agreement. (d) Registration Statement under the 1933 Act and under the 1940 Act on Form N-1A (the "Registration Statement") as filed with the Securities and Exchange Commission and all amendments thereto. (e) Current prospectus and statement of additional information of the Fund (such prospectus and statement of additional information as then in effect and as amended, supplemented and/or superseded from time to time, are herein collectively called the "Prospectus"). 4. Acceptance of Appointment. Manager hereby accepts such appointment and agrees to perform the services and duties as set forth in paragraph 5 below. 5. Services and Duties of Manager. As Manager, subject to the supervision and control of the Fund's Board of Trustees, Manager will provide the Fund with office space and facilities; accounting and bookkeeping, recordkeeping and data processing facilities and services; internal compliance services relating to accounting and legal matters; and personnel to carry out certain administrative services required for operation of the business and affairs of the Fund other than those investment advisory functions that are to be performed by the Fund's investment advisor pursuant to its agreement with the Fund, the services of the underwriter/distributor, those services to be performed by the Fund's custodian and transfer agent, those fund accounting services to be performed by one or more service providers under a fund accounting or similar agreement, and those services normally performed by the Fund's counsel and independent auditors. Manager's responsibilities include without limitation the following services: (a) Preparing and updating the Fund's SEC and state registration statements and filings, reports to shareholders, and other documents; (b) Paying the compensation of all officers and personnel of the Fund for their services to the Fund and the Trustees of the Fund who are interested persons of the Fund; (c) Overseeing the performance of the Fund's custodian, transfer agent and accounting agent; (d) Providing information and certain administrative services to shareholders of each Portfolio of the Fund, including but not limited to, transmitting redemption requests to the Fund's Transfer Agent and transmitting the proceeds of redemption of -2- shares of the Fund pursuant to a shareholder's instructions when such redemption is effected through Manager, providing telephone and written communications with respect to its shareholders account inquiries, assisting its shareholders in altering privileges and ownership of their accounts and serving as a source of information for its existing shareholders in answering questions concerning the Fund and their transactions with the Fund. (e) Manager shall oversee the maintenance by the Fund's custodian and transfer agent of the books and records of the Fund required under the 1940 Act, in connection with the performance of the Fund's agreement with such entities. (f) In providing the Services, Manager will act in conformity with the Trust Declaration, By-laws and Prospectus and with the instructions and directions of the Board of Trustees of the Fund and will conform to and comply with the requirements of the 1940 Act and all other applicable federal or state laws and regulations. 6. Books and Records. Manager agrees that all records that it maintains for the Fund are the property of the Fund and it will surrender promptly to the Fund any of such records upon the Fund's request. 7. Subcontractors. It is understood that Manager may from time to time employ or associate with itself such person or persons as Manager may believe to be particularly fitted to assist in the performance of this Agreement; provided, however, that the compensation of such person or persons shall be paid by Manager and that Manager shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions. 8. Compensation. For the services provided pursuant to this Agreement, the Fund will pay Manager at the end of each calendar month, a fee of .40% of the average daily net assets of each Portfolio plus out-of-pocket expenses in connection with its shareholder servicing activities, such as postage, data entry, stationery, tax forms and other printed material. For the month and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration on the basis of the number of days that the Agreement is in effect during the month and year, respectively. 9. Expenses. Except as otherwise stated in paragraph 8 and this paragraph 9, Manager shall pay all expenses incurred by it in providing the Services. All other expenses incurred in the operation of the Fund will be borne by the Fund, except to the extent specifically assumed by others. In addition to the management fee of Manager, the Fund shall assume and pay any fees and expenses incurred under an investment advisory agreement, any distribution fees incurred under a distribution agreement, any expenses for services rendered by a custodian for the safekeeping of the Fund's securities or other property, for keeping its books of account and for any other charges of the Custodian, as provided in the Prospectus of the Fund. Manager shall not be required to pay and the Fund shall assume and pay the charges and expenses of its operations, including compensation of the Trustees (other than those affiliated with Manager), charges and expenses of independent auditors, of legal counsel, of any transfer or dividend disbursing agent, and of any registrar of the Fund, costs of Fund accounting services, costs of acquiring and disposing of Portfolio securities, interest, if any, on obligations incurred by the -3- Fund, costs of share certificates and of reports, membership dues in the Investment Company Institute or any similar organization, costs of reports and notices to shareholders, stationery, printing, postage, other like miscellaneous expenses and all taxes and fees payable to federal, state or other governmental agencies on account of the registration of securities issued by the Fund, filing of trust documents or otherwise. The Fund shall not pay or incur any obligation for any expenses for which the Fund intends to seek reimbursement from Manager as herein provided without first obtaining the written approval of Manager. Manager shall arrange, if desired by the Fund, for officers and employees of Manager to serve, without compensation from the Fund, as trustees, officers or agents of the Fund if duly elected or appointed to such positions and subject to their consent and to any limitations imposed by law. In the event the operating expenses of a Portfolio on an accrual basis, including all investment advisory, management and administrative fees, for any fiscal year of the Fund during which this Agreement is in effect exceed either (i) the expense limitations applicable to the Fund imposed by the securities laws or regulations thereunder of any state in which the Fund's Shares are qualified for sale, as such limitations may be raised or lowered from time to time, or (ii) the following amounts expressed as a percentage of the Portfolio's average daily net assets: 2.0% of the first $25,000,000; plus 1.8% of the next $25,000,000; plus 1.6% average daily net assets in excess of $50,000,000, the Manager shall reimburse the Fund for 100% of such excess; provided, however, there shall be excluded from such expenses the amount of any interest, taxes, brokerage commissions, and extraordinary expenses (including but not limited to legal claims and liabilities and litigation costs and any indemnification related thereto) paid or payable by the Fund; provided further, however that fees and expenses relating to meetings of the Fund's shareholders and related proxy solicitation shall not be deemed to be extraordinary. Such reimbursement, if any, shall be computed and accrued daily, shall be settled on a monthly basis and shall be based upon the expenses and average net assets computed through the last business day of the month. As of the end of the Fund's fiscal year, however, the aggregate amount of reimbursements, if any, by the Manager to the Fund in excess of the amount necessary to limit the operating expenses on an annual basis to said expense limitation shall be refunded to the Manager. If this Agreement is in effect during only part of a fiscal year, the expenses of the Fund during such part of the year shall be annualized for purposes of applying the foregoing expense limitation. In the event that two or more Portfolios are subject to this Agreement, the expense limitation guarantee shall be allocated to each Portfolio upon a reimbursement based upon the relative average daily net assets of each such Portfolio. Should expense limitations applicable to the Fund be imposed by two or more states as of the end of the last business day of the month, that expense limitation which results in the larger reimbursement shall be applicable. The net asset value for each Portfolio shall be calculated in accordance with the provisions of the Fund's prospectus or at such other time or times as the Trustees may determine in accordance with the provisions of the 1940 Act. On each day when net asset value is not calculated, the net asset value of a share of a Portfolio shall be deemed to be the net asset value of such a share as of the close of business on the last day on which such calculation was made for the purpose of the foregoing computations. -4- Notwithstanding anything in the foregoing to the contrary, Manager shall not be obligated to reimburse the Fund in an amount exceeding the aggregate of its fee plus any fee paid to Manager for investment advisory services for the period, except to the extent required by applicable law. 10. Limitation of Liability. Neither Manager nor any of its agents or employees shall be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except liability to the Fund or its Shareholders to which Manager would otherwise be subject by reason of Manager's willful misfeasance, bad faith or gross negligence in the performance of its duties or by reasons of its reckless disregard of its obligations and duties under this Agreement. Any person, even though also an officer, employee or agent of Manager who may be or become an officer, Trustee, employee or agent of the Fund, shall be deemed, when rendering services to the Fund or to any Portfolio, or acting on any business of the Fund or of any Portfolio (other than services or business in connection with Manager's duties as hereunder) to be rendering such services to or acting solely for the Fund or Portfolio and not as an officer, director, employee or agent or one under the control or direction of Manager even though paid by Manager. 11. Indemnification. (a) Subject to the conditions set forth below, the Fund agrees to indemnify and hold harmless the Manager, its officers and employees, and each person, if any, who controls the Manager within the meaning of Section 15 of the Securities Act of 1933 and Section 20 of the Securities Exchange Act of 1934 against any and all loss, liability, claim, damage and expense whatsoever jointly and severally (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's Registraiton Statement or the prospectus or any amendment or supplement thereto, or any advertisement or sales literature authorized by the Fund, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon and in conformity with written information furnished to the Fund by or on behalf of the Manager expressly for use in the Fund's Registration Statement, prospectus, or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. If any action is brought against the Manager or any controlling person thereof in respect of which indemnity may be sought against the Fund pursuant to the foregoing, the Manager shall promptly notify the Fund in writing of the institution of such action and the Fund shall assume the defense of such action, including the employment of counsel selected by the Fund and payment of expenses. The Manager, or any such controlling person thereof, shall have the right to employ separate counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Manager or controlling person unless the employment of such counsel shall have been authorized in writing by the Fund in connection with the defense of such action or the Fund shall not have employed counsel to have charge of the defense of such action, in which event such fees and expenses shall be borne by the Fund. Anything in this subparagraph to the contrary notwithstanding, the Fund shall not be liable for any settlement of any such claim or action effected without its written consent. The Fund agrees promptly to notify the Manager of the commencement of any litigation or proceedings against -5- the Fund or any of its officers or directors or controlling persons in connection with the issue and sale of shares or in connection with the Fund's Registration Statement, prospectus or statement of additional information, or any advertisement or sales literature. (b) The Manager agrees to indemnify and hold harmless the Fund, each of its Trustees, each of its officers and each other person, if any, who controls the Fund within the meaning of Section 15 of the Securities Act of 1933, with respect to statements or omissions, if any, made in the Fund's Registraiton Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature in reliance upon and in conformity with information in writing furnished to the Fund with respect to the Manager by or on behalf of the Manager expressly for use in the Fund's Registration Statement, prospectus, or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature and in respect of which indemnity may be sought against the Manager, the Manager shall have the rights and duties given to the Fund and the Fund and each other person so indemnified shall have the rights and duties given to the Manager by the provisions of subparagraph (a) above. (c) Nothing herein contained shall be deemed to protect any person against liability to the Fund or its shareholders to which such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of the duties of such person or by reason of the reckless disregard by such person of the obligations and duties of such person under this Agreement. 12. Duration and Termination. This Agreement shall become effective as of the date hereof with respect to the Initial Portfolio, and with respect to any additional Portfolio, on the date of receipt by the Fund of notice from Manager in accordance with paragraph 2 hereof, provided that this Agreement (as supplemented by the terms specified in any notice and agreement pursuant to paragraph 2 hereof) shall have been approved by the shareholders of the Portfolios in accordance with the requirements of the 1940 Act and unless sooner terminated as provided herein, shall continue in effect until September 30, 1996. This Agreement shall continue in force from year to year thereafter with respect to each Portfolio, but only as long as such continuance is specifically approved for each Portfolio at least annually in the manner required by the 1940 Act and the rules and regulations thereunder; provided however, that if the continuation of this Agreement is not approved for a Portfolio, Manager may continue to serve in such capacity for such Portfolio in the manner and to the extent permitted by the 1940 Act and the rules and regulations thereunder. This Agreement may be terminated with respect to all or any of the Portfolios by the Fund at any time, without the payment of any penalty, by vote of a majority of the Trustees of the Fund or by vote of a majority of the outstanding Shares (as so defined) representing the interests in each Portfolio with respect to which this Agreement is to be terminated on sixty (60) days written notice to Manager, or by Manager at any time without the payment of any penalty on sixty (60) days written notice to the Fund. This Agreement may be terminated with respect to any Portfolio at any time without the payment of any penalty by the Board of Trustees or by vote of a majority of the outstanding voting securities of such Portfolio in the event that it shall have been established by a court of competent jurisdiction that Manager or any officer or director of Manager has taken any action which results in a breach of the covenants of Manager set forth herein. -6- 13. Assignment. This Agreement will automatically and immediately terminate in the event of its "assignment" (as defined in Section 2(a)(4) of the 1940 Act). Manager shall notify the Fund in writing sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, as will enable the Fund to consider whether an "assignment" will occur, and to take the steps necessary to enter into a new contract with Manager. 14. Status of Manager as Independent Contractor. Manager shall for all purposes herein be deemed to be an independent contractor, and shall, unless otherwise expressly provided herein or authorized by the Trustees of the Fund from time to time, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. 15. Affiliations. Subject to applicable statutes and regulations, it is understood that trustees, officers or agents of the Fund are or may be interested in Manager as officers, directors, agents, shareholders or otherwise, and that the officers, directors, shareholders and agents of Manager may be interested in the Fund otherwise than as a trustee, officer or agent. 16. Amendment of Agreement. This Agreement may be amended by mutual consent, but the consent of the Fund must be (a) by vote of a majority of those Trustees of the Fund who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party at a meeting called for the purpose of voting on such amendment, and (b) by vote of a majority of the outstanding Shares (as defined with respect to voting securities in the 1940 Act) representing the interests in each Portfolio affected by such amendment. 17. Limitation of Shareholder and Trustee Liability. This Agreement is executed by or on behalf of the Fund and Manager is hereby expressly put on notice of the limitation of Shareholder and trustee liability as set forth in the Trust Agreement, and agrees that the obligations assumed by the Fund pursuant to this Agreement shall be limited in all cases to the Fund and its assets, and Manager shall not seek satisfaction of any such obligations from the Shareholders or any Shareholder of the Fund. In addition, Manager shall not seek satisfaction of any such obligations from the trustees or officers of the Fund or any individual trustee or officer. 18. Arbitration. Any disputes or controversies between the parties to this Agreement involving the construction or application of any of the terms, provisions, or conditions of this Agreement shall be submitted to arbitration. The arbitration shall be conducted in Chicago, Illinois in accordance with the Rules of the American Arbitration Association. The parties shall each appoint one person to hear and determine the dispute and, if they are unable to agree, then the two persons so chosen shall select a third impartial arbitrator whose decision shall be final and conclusive upon both parties. The decision rendered in arbitration shall be borne by the losing party or in such proportions as the arbitrator shall decide. 19. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be construed in accordance with applicable federal law and (except as to paragraph 17 hereof which shall be construed in accordance with the laws of -7- the Commonwealth of Massachusetts) the laws of the State of Illinois, and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, subject to paragraph 13 hereof. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the day and year first above written. OBERWEIS EMERGING GROWTH FUND By: /s/ James D. Oberweis --------------------------------- Its: President ------------------------------- Attest: /s/ Anita I. Mraz - ------------------------------ Its: Secretary -------------------------- OBERWEIS ASSET MANAGEMENT, INC. By: /s/ Patrick B. Joyce --------------------------------- Its: Executive Vice President ------------------------------- Attest: /s/ Martin L. Yokosawa - ------------------------------ Its: Vice President -------------------------- -8- EX-99.5.2.1 7 INV. ADVISORY AGREEMENT INVESTMENT ADVISORY AGREEMENT ----------------------------- AGREEMENT made as of the 1st day of October, 1994 by and between OBERWEIS EMERGING GROWTH FUND, a Massachusetts business trust (the "Fund"), and OBERWEIS ASSET MANAGEMENT, INC., an Illinois corporation (the "Adviser"). WHEREAS, the Fund is an open-end, diversified management investment company registered under the Investment Company Act of 1940 (the "1940 Act"), the units of beneficial interest ("Shares") of which are registered under the Securities Act of 1933 (the "1933 Act"); and WHEREAS, the Fund is authorized to issue Shares in separate series with each such series representing the interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund currently offers Shares in one portfolio, the Emerging Growth Portfolio (the "Initial Portfolio"), together with any other Fund portfolios which may be established later and served by the Adviser hereunder, being herein referred to collectively as the "Portfolios" and individually referred to as a "Portfolio"; and WHEREAS, the Fund desires at this time to retain the Adviser to render investment advisory services to the Initial Portfolio of the Fund, and the Adviser is willing to render such services; NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Initial Appointment of Adviser. The Fund hereby appoints the Adviser to act as investment adviser to the Initial Portfolio of the Fund for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth for the compensation herein provided. 2. Subsequent Appointments of Adviser. In the event that the Fund establishes one or more portfolios other than the Initial Portfolio with respect to which it desires to retain the Adviser to render investment advisory services hereunder, it shall notify the Adviser in writing. If the Adviser is willing to render such services, it shall notify the Fund in writing, whereupon such portfolio or portfolios shall become a Portfolio or Portfolios hereunder. 3. Delivery of Documents. The Fund has delivered (or will deliver as soon as is possible) to the Adviser copies of each of the following documents and will deliver to the Adviser all future amendments and supplements: (a) Agreement and Declaration of Trust of the Fund dated July 7, 1986 (such Agreement and Declaration of Trust, as presently in effect and as amended from time to time, is herein called the "Trust Agreement"), a copy of which also is on file with the Secretary of the Commonwealth of Massachusetts. (b) By-Laws of the Fund (such By-Laws, as presently in effect and as amended from time to time, are herein called the "By-Laws"). (c) Certified resolutions of the Trustees and Shareholders of the Fund authorizing the appointment of the Adviser and approving this Agreement. (d) Registration Statement under the 1933 Act and under the 1940 Act on Form N-1A (the "Registration Statement") as filed with the Securities and Exchange Commission and all amendments thereto. (e) Current prospectus and statement of additional information of the Fund (such prospectus and statement of additional information as then in effect and as amended, supplemented and/or superseded from time to time, are herein collectively called the "Prospectus"). 4. Duties of the Adviser. Subject to the general supervision of the Trustees of the Fund, the Adviser shall manage the investment operations of any Portfolio and the composition of such Portfolio's assets, including the purchase, retention and disposition thereof, in accordance with the policies of the Fund as stated in the Prospectus and with the investment objective(s) of such Portfolio and subject to the following understandings: (a) The Adviser shall use the same skill and care in the management of the Portfolio as is required to be used in the discharge of fiduciary duties under the 1940 Act, the Investment Advisers Act of 1940 (the "1940 Advisers Act"), the 1933 Act and the Internal Revenue Code of 1986 (the "Code"). (b) The Adviser shall provide supervision of the Portfolio's assets; furnish a continuous investment program for such Portfolio; determine from time to time what investments or securities will be purchased, retained or sold by the Portfolio, and what portion of the assets will be invested or held uninvested as cash. (c) The Adviser, in the performance of its duties and obligations under this Agreement, shall act in conformity with the Trust Agreement, By-Laws, Registration Statement and Prospectus and with the instructions and directions of the Trustees of the Fund, and will comply with and conform to the requirements of the 1940 Act, the 1940 Advisers Act, the 1933 Act and the Code (applicable to the Fund as a regulated investment company or otherwise) as each may from time to time be amended, and all other applicable federal and state laws, regulations and rulings. (d) The Adviser shall determine the securities to be purchased or sold by the Portfolio and will place orders pursuant to its determinations either directly with the issuer or underwriter or with any broker-dealer (including, as set forth below, a broker-dealer which is an affiliated person of the Adviser) who deals in the securities in which the Portfolio is active. In placing orders with broker-dealers, the Adviser will attempt to obtain the best combination of price and execution. In seeking to achieve the best combination of price and execution, an effort shall be made to evaluate the overall quality and reliability of broker-dealers and the service they provide, including their general execution capability, reliability and integrity, willingness to take 2 positions in securities, general operational capabilities and financial condition. However, the responsibility of the Adviser to attempt to obtain the best combination of price and execution does not obligate it to solicit a competitive bid for each transaction, and the Adviser shall have no obligation to seek the lowest available commission cost to the Portfolio, so long as the Adviser determines in good faith that the commission paid to a broker-dealer is reasonable in relation to the value of the brokerage, research, statistical or other services provided by such broker-dealer to the Portfolio or the Adviser. The Adviser will not place orders with broker-dealers which are affiliated persons of the Adviser or the Fund without the prior written authorization of the Fund, and then will do so subject to (i) the provisions of Sections 17(e)(2) and Rule 17e-1 and Section 10(f) and Rule 10f-3 under the 1940 Act, Rule 206(3)- 2 under the 1940 Advisers Act, Section 11(a) under the Securities Exchange Act of 1934 (the "1934 Act") and any other applicable laws or regulations, and (ii) procedures properly adopted by the Fund with respect thereto. (e) On occasions when the Adviser deems the purchase or sale of a security to be in the best interest of a Portfolio as well as other clients, if any (including any other Portfolio), the Adviser, to the extent permitted by applicable laws and regulations, may aggregate the securities to be purchased or sold. In such event, allocation of the securities so purchased or sold will be made by the Adviser in a manner it considers to be equitable and consistent with its fiduciary obligations to each, and transaction costs will be allocated so that each receives, to the extent possible, the same price. (f) The Adviser shall render to the Trustees of the Fund such periodic and special reports as the Trustees may reasonably request. (g) The Adviser, and not the Fund, shall pay the salaries and fees of any officers or Trustees of the Fund who are "interested persons" (as defined in the 1940 Act) and who are employed by the Adviser to perform services relating to the Fund. (h) The services of the Adviser to a Portfolio under this Agreement are not to be deemed exclusive and the Adviser shall be free to render similar or other services in the future to the Fund or to others so long as its services under this Agreement are not impaired thereby. 5. Transaction Procedures. All transactions will be consummated by payment to or delivery by the Custodian, or such depositories or agents as may be designated by the Custodian in writing, as custodian for the Fund, of all cash and/or securities due to or from the Portfolio, and the Adviser shall not have possession or custody thereof or any responsibility or liability with respect thereto. The Adviser shall advise the Custodian of all investment orders at the time and in the manner as prescribed by the Fund. The Fund shall issue to the Custodian such instructions as may be appropriate in connection with the settlement of any transaction initiated by the Adviser. The Fund shall be responsible for all custodial arrangements and the payment of custodial charges and fees, and, upon giving proper instructions to the Custodian, the Adviser shall have no responsibility or liability with respect to custodial arrangements or the acts, omissions or other conduct of the Custodian. 6. Adoption of Ethics Code. The Adviser has or will adopt a written code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and has or will provide the Fund with a copy of such ethics code and evidence of its adoption. Upon written request of the 3 Fund, the Adviser shall permit the Fund, its employees or its agents to examine the reports required to be made by the Adviser under Rule 17j-1(c)(1). 7. Books and Records. The Adviser agrees that all records which it maintains for the Fund are the property of the Fund and it will surrender promptly to the Fund any of such records upon the Fund's request. The Adviser further agrees to maintain, keep current and preserve, on behalf of the Fund, in the manner required or permitted under the 1940 Act, the records relating to the activities performed by the Adviser under this Agreement as are required to be maintained under the 1940 Act. 8. Compensation. For the services provided pursuant to this Agreement, the Fund will pay to the Adviser at the end of each calendar month, an investment advisory fee computed at an annual rate of .45% of the first $50 million of the daily net assets of the Initial Portfolio, and .4% of the average daily net assets of such Portfolio over $50 million. For the month and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration on the basis of the number of days that the Agreement is in effect during the month and year, respectively. In addition to the compensation provided above, the Fund shall reimburse to the Adviser on a monthly basis those expenses which are to be borne by the Fund but, from time to time may be incurred by the Adviser for the benefit of the Fund in connection with the performance of the Adviser's duties. 9. Limitation of Liability. Subject to Section 36 of the 1940 Act, neither the Adviser nor any of its agents or employees shall be liable for any error of judgment, act or omission, or mistake of law or for any loss suffered by the Fund or its Shareholders in connection with the matters to which this Agreement relates, except liability to the Fund or the Shareholders to which the Adviser would otherwise be subject by reason of the Adviser's willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under this Agreement. 10. Indemnification. (a) Subject to the conditions set forth below, the Fund agrees to indemnify and hold harmless the Adviser, its officers and employees, and each person, if any, who controls the Adviser within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense whatsoever jointly and severally (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's Registration Statement or the Prospectus or any amendment or supplement thereto, or any advertisement or sales literature authorized by the Fund, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon and in conformity with written information furnished to the Fund by or on behalf of the Adviser expressly for use in the Fund's Registration Statement, prospectus, statement of additional information or any amendment or supplement thereof or any advertisement, or sales literature. If any action is brought against the Adviser or any controlling person thereof in respect of which indemnity may be sought against the Fund pursuant to the foregoing, the Adviser shall promptly 4 notify the Fund in writing of the institution of such action and the Fund shall assume the defense of such action, including the employment of counsel selected by the Fund and payment of expenses. The Adviser, or any such controlling person thereof, shall have the right to employ separate counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Adviser or such controlling person unless the employment of such counsel shall have been authorized in writing by the Fund in connection with the defense of such action or the Fund shall not have employed counsel to have charge of the defense of such action, in which event such fees and expenses shall be borne by the Fund. Anything in this subparagraph to the contrary notwithstanding, the Fund shall not be liable for any settlement of any such claim or action effected without its written consent. The Fund agrees promptly to notify the Adviser of the commencement of any litigation or proceedings against the Fund or any of its officers or directors or controlling persons in connection with the issue and sale of shares or in connection with the Fund's Registration Statement, prospectus or statement of additional information, or any advertisement or sales literature. (b) The Adviser agrees to indemnify and hold harmless the Fund, each of its Trustees, each of its officers and each other person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act, with respect to statements or omissions, if any, made in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature in reliance upon and in conformity with information in writing furnished to the Fund with respect to the Adviser by or on behalf of the Adviser expressly for use in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. In case any action shall be brought against the Fund or any other person so indemnified based on the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof and in respect of which indemnity may be sought against the Adviser, the Adviser shall have the rights and duties given to the Fund and the Fund and each other person so indemnified shall have the rights and duties given to the Adviser by the provisions of subparagraph (a) above. (c) Nothing herein contained shall be deemed to protect any person against liability to the Fund or its shareholders to which such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of the duties of such person or by reason of the reckless disregard by such person of the obligations and duties of such person under this Agreement. 11. Duration and Termination. Provided that agreement is approved by shareholders of Initial Portfolio within 120 days of effective date, this Agreement, unless sooner terminated as provided herein, shall remain in force until September 30, 1996, and thereafter, in the case of the Initial Portfolio and each other Portfolio to which this Agreement shall have become applicable, this Agreement shall continue in force from year to year, but only so long as such continuance is approved at least annually in the manner required by the 1940 Act and the rules and regulations thereunder; provided, however, that (i) the continuance of this Agreement insofar as it pertains to each of the Portfolios other than the Initial Portfolio, be subject to the approval of this Agreement by a majority of the outstanding Shares (as so defined) representing the interests in such Portfolios and (ii) if the continuation of this Agreement is not approved for a Portfolio, Adviser may continue to serve in such capacity for such Portfolio in the manner and 5 to the extent permitted by the 1940 Act and the rules and regulations thereunder. This Agreement may be terminated with respect to all or any of the Portfolios by the Fund at any time, without the payment of any penalty, by vote of a majority of the Trustees of the Fund or by vote of a majority of the outstanding Shares (as so defined), representing the interests in each Portfolio with respect to which this Agreement is to be terminated on sixty (60) days written notice to the Adviser, or by the Adviser at any time without the payment of the penalty on sixty (60) days written notice to the Fund. 12. Assignment. This Agreement will automatically and immediately terminate in the event of its "assignment" (as defined in Section 2(a)(4) of the 1940 Act). The Adviser shall notify the Fund in writing sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, as will enable the Fund to consider whether an "assignment" will occur, and to take the steps necessary to enter into a new contract with the Adviser. 13. Status of Adviser as Independent Contractor. The Adviser shall for all purposes herein be deemed to be an independent contractor, and shall, unless otherwise expressly provided herein or authorized by the Trustees of the Fund from time to time, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. 14. Affiliations. Subject to applicable statutes and regulations, it is understood that trustees, officers or agents of the Fund are or may be interested in the Adviser as officers, directors, agents, shareholders or otherwise, and that the officers, directors, shareholders and agents of the Adviser may be interested in the Fund otherwise than as a trustee, officer or agent. 15. Amendment of Agreement. This Agreement may be amended by mutual consent, but the consent of the Fund must be (a) by vote of a majority of those Trustees of the Fund who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party at a meeting called for the purpose of voting on such amendment, and (b) by vote of a majority of the outstanding Shares (as defined with respect to voting securities in the 1940 Act) representing the interests in each Portfolio affected by such amendment. 16. Limitation of Liability of Shareholders and Trustees. This Agreement is executed by or on behalf of the Fund and the Adviser is hereby expressly put on notice of the limitation of Shareholder and Trustee liability as set forth in the Trust Agreement, and agrees that the obligations assumed by the Fund pursuant to this Agreement shall be limited in all cases to the Fund and its assets, and the Adviser shall not seek satisfaction of any such obligations from the Shareholders or any Shareholder of the Fund. In addition, the Adviser shall not seek satisfaction of any such obligations from the trustees or officers of the Fund or any individual trustee or officer. 17. Arbitration. Any disputes or controversies between the parties to this Agreement involving the construction or application of any of the terms, provisions, or conditions of this Agreement shall be submitted to arbitration. The arbitration shall be conducted in Chicago, Illinois in accordance with the Rules of the American Arbitration Association. The parties shall each appoint one person to hear and determine the dispute and, if they are unable to agree, then the two persons so chosen shall select a third impartial arbitrator whose decision shall be final and 6 conclusive upon both parties. The decision rendered in arbitration shall be borne by the losing party or in such proportions as the arbitrator shall decide. 18. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be construed in accordance with applicable federal law and (except as to paragraph 16 hereof which shall be construed in accordance with the laws of the Commonwealth of Massachusetts) the laws of the State of Illinois, and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, subject to paragraph 12 hereof. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the day and year first above written. OBERWEIS EMERGING GROWTH FUND By: /s/ James D. Oberweis ------------------------------- Its: President --------------------------- Attest: /s/ Anita I. Mraz - -------------------------------- Its: Secretary ---------------------------- OBERWEIS ASSET MANAGEMENT, INC. By: /s/ Patrick B. Joyce ------------------------------- Its: Executive Vice President --------------------------- Attest: /s/ Martin L. Yokosawa - -------------------------------- Its: Vice President ---------------------------- 7 EX-99.5.2.3 8 FORM OF INV. ADV. AGREEMENT INVESTMENT ADVISORY AGREEMENT ----------------------------- AGREEMENT made as of October 1, 1994 and as amended January 1, 1996 by and between THE OBERWEIS FUNDS, a Massachusetts business trust (the "Fund"), and OBERWEIS ASSET MANAGEMENT, INC., an Illinois corporation (the "Adviser"). WHEREAS, the Fund is an open-end, diversified management investment company registered under the Investment Company Act of 1940 (the "1940 Act"), the units of beneficial interest ("Shares") of which are registered under the Securities Act of 1933 (the "1933 Act"); and WHEREAS, the Fund is authorized to issue Shares in separate series with each such series representing the interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund currently offers Shares in two portfolios, the Oberweis Emerging Growth Portfolio and the Oberweis Micro-Cap Portfolio (the "current Portfolios"), together with any other Fund portfolios which may be established later and served by the Adviser hereunder, being herein referred to collectively as the "Portfolios" and individually referred to as a "Portfolio"; and WHEREAS, the Fund desires at this time to retain the Adviser to render investment advisory services to the current Portfolios of the Fund, and the Adviser is willing to render such services; NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Initial Appointment of Adviser. The Fund hereby appoints the Adviser to act as investment adviser to the current Portfolios of the Fund for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth for the compensation herein provided. 2. Subsequent Appointments of Adviser. In the event that the Fund establishes one or more portfolios other than the current Portfolios with respect to which it desires to retain the Adviser to render investment advisory services hereunder, it shall notify the Adviser in writing. If the Adviser is willing to render such services, it shall notify the Fund in writing, whereupon such portfolio or portfolios shall become a Portfolio or Portfolios hereunder. 3. Delivery of Documents. The Fund has delivered (or will deliver as soon as is possible) to the Adviser copies of each of the following documents and will deliver to the Adviser all future amendments and supplements: (a) Agreement and Declaration of Trust of the Fund dated July 7, 1986 (such Agreement and Declaration of Trust, as presently in effect and as amended from time to time, is herein called the "Trust Agreement"), a copy of which also is on file with the Secretary of the Commonwealth of Massachusetts. (b) By-Laws of the Fund (such By-Laws, as presently in effect and as amended from time to time, are herein called the "By-Laws"). (c) Certified resolutions of the Trustees and Shareholders of the Fund authorizing the appointment of the Adviser and approving this Agreement. (d) Registration Statement under the 1933 Act and under the 1940 Act on Form N-1A (the "Registration Statement") as filed with the Securities and Exchange Commission and all amendments thereto. (e) Current prospectus and statement of additional information of the Fund (such prospectus and statement of additional information as then in effect and as amended, supplemented and/or superseded from time to time, are herein collectively called the "Prospectus"). 4. Duties of the Adviser. Subject to the general supervision of the Trustees of the Fund, the Adviser shall manage the investment operations of any Portfolio and the composition of such Portfolio's assets, including the purchase, retention and disposition thereof, in accordance with the policies of the Fund as stated in the Prospectus and with the investment objective(s) of such Portfolio and subject to the following understandings: (a) The Adviser shall use the same skill and care in the management of the Portfolio as is required to be used in the discharge of fiduciary duties under the 1940 Act, the Investment Advisers Act of 1940 (the "1940 Advisers Act"), the 1933 Act and the Internal Revenue Code of 1986 (the "Code"). (b) The Adviser shall provide supervision of the Portfolio's assets; furnish a continuous investment program for such Portfolio; determine from time to time what investments or securities will be purchased, retained or sold by the Portfolio, and what portion of the assets will be invested or held uninvested as cash. 2 (c) The Adviser, in the performance of its duties and obligations under this Agreement, shall act in conformity with the Trust Agreement, By-Laws, Registration Statement and Prospectus and with the instructions and directions of the Trustees of the Fund, and will comply with and conform to the requirements of the 1940 Act, the 1940 Advisers Act, the 1933 Act and the Code (applicable to the Fund as a regulated investment company or otherwise) as each may from time to time be amended, and all other applicable federal and state laws, regulations and rulings. (d) The Adviser shall determine the securities to be purchased or sold by the Portfolio and will place orders pursuant to its determinations either directly with the issuer or underwriter or with any broker-dealer (including, as set forth below, a broker-dealer which is an affiliated person of the Adviser) who deals in the securities in which the Portfolio is active. In placing orders with broker-dealers, the Adviser will attempt to obtain the best combination of price and execution. In seeking to achieve the best combination of price and execution, an effort shall be made to evaluate the overall quality and reliability of broker-dealers and the service they provide, including their general execution capability, reliability and integrity, willingness to take positions in securities, general operational capabilities and financial condition. However, the responsibility of the Adviser to attempt to obtain the best combination of price and execution does not obligate it to solicit a competitive bid for each transaction, and the Adviser shall have no obligation to seek the lowest available commission cost to the Portfolio, so long as the Adviser determines in good faith that the commission paid to a broker-dealer is reasonable in relation to the value of the brokerage, research, statistical or other services provided by such broker-dealer to the Portfolio or the Adviser. The Adviser will not place orders with broker-dealers which are affiliated persons of the Adviser or the Fund without the prior written authorization of the Fund, and then will do so subject to (i) the provisions of Sections 17(e)(2) and Rule 17e-1 and Section 10(f) and Rule 10f-3 under the 1940 Act, Rule 206(3)- 2 under the 1940 Advisers Act, Section 11(a) under the Securities Exchange Act of 1934 (the "1934 Act") and any other applicable laws or regulations, and (ii) procedures properly adopted by the Fund with respect thereto. (e) On occasions when the Adviser deems the purchase or sale of a security to be in the best interest of a Portfolio as well as other clients, if any (including any other Portfolio), the Adviser, to the extent permitted by applicable laws and regulations, may aggregate the securities to be purchased or sold. In such event, allocation of the securities so purchased or sold will be made by the Adviser in a manner it considers to be equitable and consistent with its fiduciary obligations to each, and transaction costs will be allocated so that each receives, to the extent possible, the same price. (f) The Adviser shall render to the Trustees of the Fund such periodic and special reports as the Trustees may reasonably request. 3 (g) The Adviser, and not the Fund, shall pay the salaries and fees of any officers or Trustees of the Fund who are "interested persons" (as defined in the 1940 Act) and who are employed by the Adviser to perform services relating to the Fund. (h) The services of the Adviser to a Portfolio under this Agreement are not to be deemed exclusive and the Adviser shall be free to render similar or other services in the future to the Fund or to others so long as its services under this Agreement are not impaired thereby. 5. Transaction Procedures. All transactions will be consummated by payment to or delivery by the Custodian, or such depositories or agents as may be designated by the Custodian in writing, as custodian for the Fund, of all cash and/or securities due to or from the Portfolio, and the Adviser shall not have possession or custody thereof or any responsibility or liability with respect thereto. The Adviser shall advise the Custodian of all investment orders at the time and in the manner as prescribed by the Fund. The Fund shall issue to the Custodian such instructions as may be appropriate in connection with the settlement of any transaction initiated by the Adviser. The Fund shall be responsible for all custodial arrangements and the payment of custodial charges and fees, and, upon giving proper instructions to the Custodian, the Adviser shall have no responsibility or liability with respect to custodial arrangements or the acts, omissions or other conduct of the Custodian. 6. Adoption of Ethics Code. The Adviser has or will adopt a written code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and has or will provide the Fund with a copy of such ethics code and evidence of its adoption. Upon written request of the Fund, the Adviser shall permit the Fund, its employees or its agents to examine the reports required to be made by the Adviser under Rule 17j-1(c)(1). 7. Books and Records. The Adviser agrees that all records which it maintains for the Fund are the property of the Fund and it will surrender promptly to the Fund any of such records upon the Fund's request. The Adviser further agrees to maintain, keep current and preserve, on behalf of the Fund, in the manner required or permitted under the 1940 Act, the records relating to the activities performed by the Adviser under this Agreement as are required to be maintained under the 1940 Act. 8. Compensation. For the services provided pursuant to this Agreement, the Fund will pay to the Adviser at the end of each calendar month, an investment advisory fee based on the average daily net assets of each Portfolio, computed at the following annual rates: (a) For the Oberweis Emerging Growth Portfolio: 4 .45% of the first $50 million of average daily net assets; plus .40% of the average daily net assets over $50 million. (b) For the Oberweis Micro-Cap Portfolio: .60% of average daily net assets. For the month and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration on the basis of the number of days that the Agreement is in effect during the month and year, respectively. In addition to the compensation provided above, the Fund shall reimburse to the Adviser on a monthly basis those expenses which are to be borne by the Fund but, from time to time may be incurred by the Adviser for the benefit of the Fund in connection with the performance of the Adviser's duties. 9. Limitation of Liability. Subject to Section 36 of the 1940 Act, neither the Adviser nor any of its agents or employees shall be liable for any error of judgment, act or omission, or mistake of law or for any loss suffered by the Fund or its Shareholders in connection with the matters to which this Agreement relates, except liability to the Fund or the Shareholders to which the Adviser would otherwise be subject by reason of the Adviser's willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under this Agreement. 10. Indemnification. (a) Subject to the conditions set forth below, the Fund agrees to indemnify and hold harmless the Adviser, its officers and employees, and each person, if any, who controls the Adviser within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense whatsoever jointly and severally (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's Registration Statement or the Prospectus or any amendment or supplement thereto, or any advertisement or sales literature authorized by the Fund, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon and in conformity with written information furnished to the Fund by or on behalf of the Adviser expressly for use in the Fund's Registration Statement, prospectus, statement of additional information or any amendment or supplement thereof or any advertisement, or sales literature. 5 If any action is brought against the Adviser or any controlling person thereof in respect of which indemnity may be sought against the Fund pursuant to the foregoing, the Adviser shall promptly notify the Fund in writing of the institution of such action and the Fund shall assume the defense of such action, including the employment of counsel selected by the Fund and payment of expenses. The Adviser, or any such controlling person thereof, shall have the right to employ separate counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Adviser or such controlling person unless the employment of such counsel shall have been authorized in writing by the Fund in connection with the defense of such action or the Fund shall not have employed counsel to have charge of the defense of such action, in which event such fees and expenses shall be borne by the Fund. Anything in this subparagraph to the contrary notwithstanding, the Fund shall not be liable for any settlement of any such claim or action effected without its written consent. The Fund agrees promptly to notify the Adviser of the commencement of any litigation or proceedings against the Fund or any of its officers or directors or controlling persons in connection with the issue and sale of shares or in connection with the Fund's Registration Statement, prospectus or statement of additional information, or any advertisement or sales literature. (b) The Adviser agrees to indemnify and hold harmless the Fund, each of its Trustees, each of its officers and each other person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act, with respect to statements or omissions, if any, made in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature in reliance upon and in conformity with information in writing furnished to the Fund with respect to the Adviser by or on behalf of the Adviser expressly for use in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. In case any action shall be brought against the Fund or any other person so indemnified based on the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof and in respect of which indemnity may be sought against the Adviser, the Adviser shall have the rights and duties given to the Fund and the Fund and each other person so indemnified shall have the rights and duties given to the Adviser by the provisions of subparagraph (a) above. (c) Nothing herein contained shall be deemed to protect any person against liability to the Fund or its shareholders to which such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of the duties of such person or by reason of the reckless disregard by such person of the obligations and duties of such person under this Agreement. 6 11. Duration and Termination. Provided that agreement is approved by shareholders of the current Portfolios within 120 days of the effective date, this Agreement, unless sooner terminated as provided herein, shall remain in force until __________________, 1997, and thereafter, in the case of the current Portfolios and each other Portfolio to which this Agreement shall have become applicable, this Agreement shall continue in force from year to year, but only so long as such continuance is approved at least annually in the manner required by the 1940 Act and the rules and regulations thereunder; provided, however, that (i) the continuance of this Agreement insofar as it pertains to each of the Portfolios other than the current Portfolios, be subject to the approval of this Agreement by a majority of the outstanding Shares (as so defined) representing the interests in such Portfolios and (ii) if the continuation of this Agreement is not approved for a Portfolio, Adviser may continue to serve in such capacity for such Portfolio in the manner and to the extent permitted by the 1940 Act and the rules and regulations thereunder. This Agreement may be terminated with respect to all or any of the Portfolios by the Fund at any time, without the payment of any penalty, by vote of a majority of the Trustees of the Fund or by vote of a majority of the outstanding Shares (as so defined), representing the interests in each Portfolio with respect to which this Agreement is to be terminated on sixty (60) days written notice to the Adviser, or by the Adviser at any time without the payment of the penalty on sixty (60) days written notice to the Fund. 12. Assignment. This Agreement will automatically and immediately terminate in the event of its "assignment" (as defined in Section 2(a)(4) of the 1940 Act). The Adviser shall notify the Fund in writing sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, as will enable the Fund to consider whether an "assignment" will occur, and to take the steps necessary to enter into a new contract with the Adviser. 13. Status of Adviser as Independent Contractor. The Adviser shall for all purposes herein be deemed to be an independent contractor, and shall, unless otherwise expressly provided herein or authorized by the Trustees of the Fund from time to time, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. 14. Affiliations. Subject to applicable statutes and regulations, it is understood that trustees, officers or agents of the Fund are or may be interested in the Adviser as officers, directors, agents, shareholders or otherwise, and that the officers, directors, shareholders and agents of the Adviser may be interested in the Fund otherwise than as a trustee, officer or agent. 15. Amendment of Agreement. This Agreement may be amended by mutual consent, but the consent of the Fund must be (a) by vote of a majority of those Trustees of the Fund who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party at a meeting called for the purpose of voting on such amendment, and (b) by vote of a 7 majority of the outstanding Shares (as defined with respect to voting securities in the 1940 Act) representing the interests in each Portfolio affected by such amendment. 16. Limitation of Liability of Shareholders and Trustees. This Agreement is executed by or on behalf of the Fund and the Adviser is hereby expressly put on notice of the limitation of Shareholder and Trustee liability as set forth in the Trust Agreement, and agrees that the obligations assumed by the Fund pursuant to this Agreement shall be limited in all cases to the Fund and its assets, and the Adviser shall not seek satisfaction of any such obligations from the Shareholders or any Shareholder of the Fund. In addition, the Adviser shall not seek satisfaction of any such obligations from the trustees or officers of the Fund or any individual trustee or officer. 17. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be construed in accordance with applicable federal law and (except as to paragraph 16 hereof which shall be construed in accordance with the laws of the Commonwealth of Massachusetts) the laws of the State of Illinois, and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, subject to paragraph 12 hereof. 8 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the day and year first above written. THE OBERWEIS FUNDS By:____________________________ Its:_______________________ Attest: Its:_____________________ OBERWEIS ASSET MANAGEMENT, INC. By:____________________________ Its:_______________________ Attest: Its:_____________________ 9 EX-99.8.3 9 CUSTODIAN AGREEMENT CUSTODY AGREEMENT ----------------- THIS AGREEMENT made as of the 3rd day of August, 1993, by and between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state of Missouri, having its trust office located at 127 West 10th Street, Kansas City, Missouri 64105 ("Custodian"), and OBERWEIS EMERGING GROWTH FUND, a Massachusetts business trust having its principal office and place of business at c/o Alpha Source Asset Management, Inc., 2 North LaSalle Street, Chicago, Illinois 60602 ("Fund"). WITNESSETH: WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as custodian of the securities and monies of Fund's investment portfolio; and WHEREAS, Investors Fiduciary Trust Company is willing to accept such appointment; NOW THEREFORE, for and in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, mutually covenant and agree as follows: 1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian as custodian of the Fund which is to include: A. Appointment as custodian of the securities and monies at any time owned by the Fund; and B. Appointment as agent to perform certain accounting and recordkeeping functions required of a duly registered investment company in compliance with applicable provisions of federal, state and local laws, rules and regulations including, as may be required: 1. Providing Fund the reports and performing the functions described on Exhibit A hereto and as otherwise agreed by Fund and Custodian, 2. Calculating daily net asset value of the Fund, and 3. Acting as liaison with independent auditors. 2. DELIVERY OF CORPORATE DOCUMENTS. Fund has delivered or will deliver to Custodian prior to the effective date of this Agreement, copies of the following 1 documents and all amendments or supplements thereto, properly certified or authenticated: A. Resolutions of the Board of Trustees of Fund appointing Custodian as custodian hereunder and approving the form of this Agreement; and B. Resolutions of the Board of Trustees of Fund designating certain persons to give instructions on behalf of Fund to Custodian and authorizing Custodian to rely upon written instructions over their signatures. 3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN. A. Delivery of Assets Fund will deliver or cause to be delivered to Custodian on the effective date of this Agreement, or as soon thereafter as practicable, and from time to time thereafter, all portfolio securities acquired by it and monies then owned by it except as permitted by the Investment Company Act of 1940 or from time to time coming into its possession during the time this Agreement shall continue in effect. Custodian shall have no responsibility or liability whatsoever for or on account of securities or monies not so delivered. All securities so delivered to Custodian (other than bearer securities) shall be registered in the name of Fund or its nominee, or of a nominee of Custodian, or shall be properly endorsed and in form for transfer satisfactory to Custodian. B. Delivery of Information Fund shall indemnify and hold Custodian harmless of and from any and all expenses, damages and losses whatsoever arising out of or in connection with the failure of Fund to provide Custodian any information needed by the Custodian knowledgeably to perform its functions hereunder. C. Delivery of Assets to Third Parties Custodian will receive delivery of and keep safely the assets of Fund delivered to it from time to time and the assets of each Portfolio segregated in a separate account. Custodian will not deliver, assign, pledge or hypothecate any such assets to any person except as perrnitted by the provisions of this Agreement or any agreement executed by it according to the terms of Section 2 3.S. of this Agreement. Upon delivery of any such assets to a subcustodian pursuant to Section 3.S. of this Agreement, Custodian will create and maintain records identifying those assets which have been delivered to the subcustodian as belonging to the applicable Portfolio of the Fund. The Custodian is responsible for the safekeeping of the securities and monies of Fund only until they have been transmitted to and received by other persons as permitted under the terms of this Agreement, except for securities and monies transmitted to subcustodians selected by Custodian (other than subcustodians appointed at the request of Fund pursuant to Section 3.S. of this Agreement), for which Custodian remains responsible. Custodian may participate directly or indirectly through a subcustodian in the Depository Trust Company, Treasury/Federal Reserve Book Entry System, Participant Trust Company or other depository approved by the Fund (as such entities are defined at 17 CFR Section 270.17f-4(b). D. Registration of Securities Custodian will hold stocks and other registerable portfolio securities of Fund registered in the name of Fund or in the name of any nominee of Custodian for whose fidelity and liability Custodian will be fully responsible, or in street certificate form, so-called, with or without any indication of fiduciary capacity. Unless otherwise instructed, Custodian will register all such portfolio securities in the name of its authorized nominee. All securities, and the ownership thereof by Fund, which are held by Custodian hereunder, however, shall at all times be identifiable on the records of the Custodian. The Fund agrees to hold Custodian and its nominee harmless for any liability as the shareholder of record of securities held in custody. E. Exchange of Securities Upon receipt of instructions as defined herein in Section 4.A, Custodian will exchange, or cause to be exchanged, portfolio securities held by it for the account of Fund for other securities or cash issued or paid in connection with any reorganization, recapitalization, merger, consolidation, split-up of shares, 3 change of par value, conversion or otherwise, and will deposit any such securities in accordance with the terms of any reorganization or protective plan. Without instructions, Custodian is authorized to exchange securities held by it in temporary form for securities in definitive form, to effect an exchange of shares when the par value of the stock is changed, and, upon receiving payment therefor, to surrender bonds or other securities held by it at maturity or when advised of earlier call for redemption, except that Custodian shall receive instructions prior to surrendering any convertible security. F. Purchases of Investments of the Fund Fund will, on each business day on which a purchase of securities shall be made by it, deliver to Custodian instructions which shall specify with respect to each such purchase: 1. The name of the Portfolio making such purchase; 2. The name of the issuer and description of the security; 3. The number of shares or the principal amount purchased, and accrued interest, if any; 4. The trade date; 5. The settlement date; 6. The purchase price per unit and the brokerage commission, taxes and other expenses payable in connection with the purchase; 7. The total amount payable upon such purchase; and 8. The name of the person from whom or the broker or dealer through whom the purchase was made. In accordance with such instructions, Custodian will pay for out of monies held for the account of Fund, but only insofar as monies are available therein for such purpose, and receive the portfolio securities so purchased by or for the account of Fund except that Custodian may in its sole discretion advance funds to the Fund which may result in an overdraft because the monies held by the Custodian on behalf of the Fund are insufficient to pay the total 4 amount payable upon such purchase. Such payment will be made only upon receipt by Custodian of the securities so purchased in form for transfer satisfactory to Custodian. G. Sales and Deliveries of Investments of the Fund -- Other than Options and Futures Fund will, on each business day on which a sale of investment securities of Fund has been made, deliver to Custodian instructions specifying with respect to each such sale: 1. The name of the Portfolio making such sale; 2. The name of the issuer and description of the securities; 3. The number of shares or principal amount sold, and accrued interest, if any; 4. The date on which the securities sold were purchased or other information identifying the securities sold and to be delivered; 5. The trade date; 6. The settlement date; 7. The sale price per unit and the brokerage commission, taxes or other expenses payable in connection with such sale; 8. The total amount to be received by Fund upon such sale; and 9. The name and address of the broker or dealer through whom or person to whom the sale was made. In accordance with such instructions, Custodian will deliver or cause to be delivered the securities thus designated as sold for the account of Fund to the broker or other person specified in the instructions relating to such sale, such delivery to be made only upon receipt of payment therefor in such form as is satisfactory to Custodian, with the understanding that Custodian may deliver or cause to be delivered securities for payment in accordance with the customs prevailing among dealers in securities. 5 H. Purchases or Sales of Security Options, Options on Indices and Security Index Futures Contracts Fund will, on each business day on which a purchase or sale of the following options and/or futures shall be made by it, deliver to Custodian instructions which shall specify with respect to each such purchase or sale: 1. The name of the Portfolio making such purchase or sale; 2. Security Options a. The underlying security; b. The price at which purchased or sold; c. The expiration date; d. The number of contracts; e. The exercise price; f. Whether the transaction is an opening, exercising, expiring or closing transaction; g. Whether the transaction involves a put or call; h. Whether the option is written or purchased; i. Market on which option traded; j. Name and address of the broker or dealer through whom the sale or purchase was made. 3. Options on Indices a. The index; b. The price at which purchased or sold; c. The exercise price; d. The premium; e. The multiple; f. The expiration date; g. Whether the transaction is an opening, exercising, expiring or closing transaction; h. Whether the transaction involves a put or call; i. Whether the option is written or purchased; 6 j. The name and address of the broker or dealer through whom the sale or purchase was made, or other applicable settlement instructions. 4. Security Index Futures Contracts a. The last trading date specified in the contract and, when available, the closing level, thereof; b. The index level on the date the contract is entered into; c. The multiple; d. Any margin requirements; e. The need for a segregated margin account (in addition to instructions, and if not already in the possession of Custodian, Fund shall deliver a substantially complete and executed custodial safekeeping account and procedural agreement which shall be incorporated by reference into this Custody Agreement); and f. The name and address of the futures commission merchant through whom the sale or purchase was made, or other applicable settlement instructions. 5. Options on Index Future Contracts a. The underlying index future contract; b. The premium; c. The expiration date; d. The number of options; e. The exercise price; f. Whether the transaction involves an opening, exercising, expiring or closing transaction; g. Whether the transaction involves a put or call; h. Whether the option is written or purchased; and i. The market on which the option is traded. 7 I. Securities Pledged or Loaned If specifically allowed for in the prospectus of Fund, and subject to the terms and conditions of a separate securities lending agreement between Fund and Custodian: 1. Upon receipt of instructions, Custodian will release or cause to be released securities held in custody to the pledgee designated in such instructions by way of pledge or hypothecation to secure any loan incurred by Fund; provided, however, that the securities shall be released only upon payment to Custodian of the monies borrowed, except that in cases where additional collateral is required to secure a borrowing already made, further securities may be released or caused to be released for that purpose upon receipt of instructions. Upon receipt of instructions, Custodian will pay, but only from funds available for such purpose, any such loan upon redelivery to it of the securities pledged or hypothecated therefor and upon surrender of the note or notes evidencing such loan. 2. Upon receipt of instructions, Custodian will release securities held in custody to the borrower designated in such instructions; provided, however, that the securities will be released only upon deposit with Custodian of full cash collateral as specified in such instructions, and that Fund will retain the right to any dividends, interest or distribution on such loaned securities. Upon receipt of instructions and the loaned securities, Custodian will release the cash collateral to the borrower. J. Routine Matters Custodian will, in general, attend to all routine and mechanical matters in connection with the sale, exchange, substitution, purchase, transfer, or other dealings with securities or other property of Fund except as may be otherwise provided in this Agreement or directed from time to time by the Board of Trustees of Fund. 8 K. Deposit Account Custodian will open and maintain a special purpose deposit account in the name of Custodian ("Account"), subject only to draft or order by Custodian upon receipt of instructions. All monies received by Custodian from or for the account of a Portfolio shall be deposited in said Account. Barring events not in the control of the Custodian such as strikes, lockouts or labor disputes, riots, war or equipment or transmission failure or damage, fire, flood, earthquake or other natural disaster, action or inaction of governmental authority or other causes beyond its control, at 9:00 a.m., Kansas City time, on the second business day after deposit of any check into the Account, Custodian agrees to make Fed Funds available to the Fund in the amount of the check. Deposits made by Federal Reserve wire will be available to the Fund immediately and ACH wires will be available to the Fund on the next business day. Income earned on the portfolio securities will be credited to the applicable portfolio of the Fund based on the schedule attached as Exhibit B. The Custodian will be entitled to reverse any credited amounts where credits have been made and monies are not finally collected. If monies are collected after such reversal, the Custodian will credit to applicable portfolio in that amount. Custodian may open and maintain Accounts in such other banks or trust companies as may be designated by written instructions from designated representatives of Fund, such Accounts, however, to be in the name of Custodian and subject only to its draft or order. L. Income and other Payments to Fund Custodian will: 1. Collect, claim and receive and deposit for the account of Fund all income and other payments which become due and payable on or after the effective date of this Agreement with respect to the securities deposited under this Agreement, and credit the account of Fund in accordance with the schedule attached hereto as Exhibit B. If, for any 9 reason, the Fund is credited with income that is not subsequently collected, Custodian may reverse that credited amount. 2. Execute ownership and other certificates and affidavits for all federal, state and local tax purposes in connection with the collection of bond and note coupons; and 3. Take such other action as may be necessary or proper in connection with: a. the collection, receipt and deposit of such income and other payments, including but not limited to the presentation for payment of: 1. all coupons and other income items requiring presentation; and 2. all other securities which may mature or be called, redeemed, retired or otherwise become payable and regarding which the Custodian has actual knowledge, or notice of which is contained in publications of the type to which it normally subscribes for such purpose; and b. the endorsement for collection, in the name of Fund, of all checks, drafts or other negotiable instruments. Custodian, however, will not be required to institute suit or take other extraordinary action to enforce collection except upon receipt of instructions and upon being indemnified to its satisfaction against the costs and expenses of such suit or other actions. Custodian will receive, claim and collect all stock dividends, rights and other similar items and will deal with the same pursuant to instructions. Unless prior instructions have been received to the contrary, Custodian will, without further instructions, sell any rights held for the account of Fund on the last trade date prior to the date of expiration of such rights. 10 M. Payment of Dividends and other Distributions On the declaration of any dividend or other distribution on the shares of beneficial interest of Fund ("Fund Shares") by the Board of Trustees of Fund, Fund shall deliver to Custodian instructions with respect thereto, including a copy of the resolution of said Board of Trustees certified by the Secretary or an Assistant Secretary of Fund wherein there shall be set forth the record date as of which shareholders entitled to receive such dividend or other distribution shall be determined, the date of payment of such dividend or distribution, and the amount payable per share on such dividend or distribution. Except if the ex-dividend date and the reinvestment date of any dividend are the same, in which case funds shall remain in the Account, on the date specified in such resolution for the payment of such dividend or other distribution, Custodian will pay out of the monies held for the account of Fund, insofar as the same shall be available for such purposes, and credit to the account of the Dividend Disbursing Agent for Fund, such amount as may be necessary to pay the amount per share payable in cash on Fund Shares issued and outstanding on the record date established by such resolution. N. Shares of Fund Purchased by Fund Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or its agent shall advise Custodian of the aggregate dollar amount to be paid for such shares and shall confirm such advice in writing. Upon receipt of such advice, Custodian shall charge such aggregate dollar amount to the account of Fund and either deposit the same in the account maintained for the purpose of paying for the repurchase or redemption of Fund Shares or deliver the same in accordance with such advice. Custodian shall not have any duty or responsibility to determine that Fund Shares have been removed from the proper shareholder account or accounts or that the proper number of such shares have been cancelled and removed from the shareholder records. 11 O. Shares of Fund Purchased from Fund Whenever Fund Shares are purchased from Fund, Fund will deposit or cause to be deposited with Custodian the amount received for such shares. Custodian shall not have any duty or responsibility to determine that Fund Shares purchased from Fund have been added to the proper shareholder account or accounts or that the proper number of such shares have been added to the shareholder records. P. Proxies and Notices Custodian will promptly deliver or mail or have delivered or mailed to Fund all proxies properly signed, all notices of meetings, all proxy statements and other notices, requests or announcements affecting or relating to securities held by Custodian for Fund and will, upon receipt of instructions, execute and deliver or cause its nominee to execute and deliver or mail or have delivered or mailed such proxies or other authorizations as may be required. Except as provided by this Agreement or pursuant to instructions hereafter received by Custodian, neither it nor its nominee will exercise any power inherent in any such securities, including any power to vote the same, or execute any proxy, power of attorney, or other similar instrument voting any of such securities, or give any consent, approval or waiver with respect thereto, or take any other similar action. Q. Disbursements Custodian will pay or cause to be paid insofar as funds are available for the purpose, bills, statements and other obligations of Fund (including but not limited to obligations in connection with the conversion, exchange or surrender of securities owned by Fund, interest charges, dividend disbursements, taxes, management fees, custodian fees, legal fees, auditors' fees, transfer agents' fees, brokerage commissions, compensation to personnel, and other operating expenses of Fund) pursuant to instructions of Fund setting forth the name of the person to whom payment is to be made, the amount of the payment, and the purpose of the payment. 12 R. Daily Statement of Accounts Custodian will render to Fund daily a detailed statement of the amounts received or paid and of securities received or delivered for the account of Fund during the previous business day. Custodian will monthly render a detailed statement of the securities and monies held for Fund under this Agreement, and Custodian will maintain such books and records as are necessary to enable it to do so and will permit such persons as are authorized by Fund, including Fund's independent public accountants, access to such records or confirmation of the contents of such records; and if demanded, will permit federal and state regulatory agencies to examine the securities, books and records. Upon the written instructions of Fund or as demanded by federal or state regulatory agencies, Custodian will use its best efforts to cause any subcustodian (except subcustodians appointed at the request of Fund pursuant to Section 3.S. of this Agreement) to permit such persons as are authorized by Fund, including Fund's independent public accountants, access to such records or confirmation of the contents of such records; and if demanded, to permit federal and state regulatory agencies to examine the books, records and securities held by such subcustodian which relate to Fund. S. Appointment of Subcustodians 1. Notwithstanding any other provisions of this Agreement, all or any of the monies or securities of Fund may be held in Custodian's own custody or in the custody of one or more other banks or trust companies acting as subcustodians as may be selected by Custodian. Any such subcustodian selected by the Custodian must have the qualifications required for custodian under the Investment Company Act of 1940, as amended. The Custodian may participate directly or indirectly in the Depository Trust Company, Treasury/Federal Reserve Book Entry System, Participant Trust Company (as such entities are defined at 17 CFR Sec. 270.17f-4(b)) or other depository approved by the Fund and with which Custodian has a satisfactory direct or indirect 13 contractual relationship. Custodian will appoint United Missouri Bank, N.A. ("UMB") and United Missouri Trust Company of New York ("UMTCNY") as subcustodians. Custodian shall be responsible for UMB, UMTCNY and any other subcustodians appointed by Custodian (except any subcustodians appointed at the request of Fund) to the same extent Custodian is responsible to the Fund under Section 5. of this Agreement. Custodian is not responsible for DTC, the Treasury/Federal Reserve Book Entry System, and PTC except to the extent such entities are responsible to Custodian. Upon request of the Fund, Custodian shall be willing to contract with other subcustodians reasonably acceptable to Custodian for purposes of (i) effecting third-party repurchase transactions with banks, brokers, dealers, or other entities through the use of a common custodian or subcustodian; or (ii) providing depository and clearing agency services with respect to certain variable rate demand note securities; provided, that Custodian will be responsible to the Fund for any loss, damage or expense suffered or incurred by Fund resulting from the actions or omissions of any such subcustodian only to the same extent such subcustodian is responsible to Custodian. The Fund shall be entitled to review Custodian's contracts with any such subcustodian. 2. Fund shall not deliver or cause to be delivered to Custodian or any subcustodian hereunder foreign securities (as defined in Rule 17f- S(c)(1) under the Investment Company Act of 1940) except as may be provided pursuant to a separate written agreement hereafter entered into by Fund and Custodian with respect thereto. T. Accounts and Records Custodian with the direction and as interpreted by the Fund, Fund's accountants and/or other tax advisors will prepare and maintain complete, accurate and current all accounts and records required to be maintained by Fund and under the general rules and regulations under the Investment 14 Company Act of 1940 ("Rules"), as amended, and under the Internal Revenue Code of 1986 ("Code"), as amended, as agreed upon between the parties and will preserve said records in the manner and for the periods prescribed in said Rules and Code, or for such longer period as is agreed upon by the parties. Custodian relies upon Fund to furnish, in writing, accurate and timely information to complete Fund's records and perform daily calculation of the Fund's net asset value, as provided in Section 3.W. below. Custodian shall incur no liability and Fund shall indemnify and hold harmless Custodian from and against any liability arising from any failure of Fund to furnish such information in a timely and accurate manner, even if Fund subsequently provides accurate but untimely information. It shall be the responsibility of Custodian to ascertain the declaration, record and payment dates and amounts of any dividends or income and any other special actions required concerning each of Funds securities, but if such information is not readily available from generally accepted securities industry services or publications, Fund shall be responsible for furnishing such information to Custodian. Custodian shall advise Fund when Custodian acquires actual knowledge that it is not, or will not be, able to ascertain any such information from such services or publications. U. Accounts and Records Property of Fund Custodian acknowledges that all of the accounts and records maintained by Custodian pursuant to this Agreement are the property of Fund, and will be made available to Fund for inspection and reproduction within a reasonable period of time, upon demand. Custodian will assist Fund's independent auditors, or upon approval of Fund, or upon demand, any regulatory body, having jurisdiction over the Fund or Custodian, in any requested review of Fund's accounts and records but shall be reimbursed for all expenses and employee time invested in any such review outside of routine and normal periodic reviews. Upon receipt from Fund of the necessary information, Custodian will supply necessary data for Fund's completion of any necessary 15 tax returns, questionnaires, periodic reports to shareholders and such other reports and information requests as Fund and Custodian shall agree upon from time to time. V. Adoption of Procedures Custodian and Fund may from time to time adopt procedures as they agree upon, and Custodian may conclusively assume that no procedure approved by Fund, or directed by Fund, conflicts with or violates any requirements of its prospectus, Declaration of Incorporation, Bylaws, or any rule or regulation of any regulatory body or governmental agency. Fund will be responsible to notify Custodian of the impact, if any, on Fund of any changes in statutes, regulations, rules or policies which might necessitate changes in Custodian's responsibilities or procedures. W. Calculation of Net Asset Value Custodian will calculate Fund's net asset value, in accordance with Fund's prospectus, once daily. Custodian will prepare and maintain a daily evaluation of securities for which market quotations are available by the use of outside services designated by Fund which are normally used and contracted with for this purpose; all other securities will be evaluated in accordance with Fund's instructions. Custodian will have no responsibility for the accuracy of the prices quoted by these outside services or for the information supplied by Fund or upon instructions. X. Overdrafts If Custodian shall in its sole discretion advance funds to the account of the Fund which results in an overdraft because the monies held by Custodian on behalf of the Fund are insufficient to pay the total amount payable upon a purchase of securities as specified in Fund's instructions or for some other reason, the amount of the overdraft shall be payable by the Fund to Custodian upon demand and shall bear the interest rate set forth on the Fee Schedule attached hereto as Exhibit C from the date advanced until the date 16 of payment. Custodian shall have a lien on the assets of the Fund in the amount of any outstanding overdraft. 4. INSTRUCTIONS. ------------- A. The term "instructions", as used herein, means written or oral instructions to Custodian from designated representatives of Fund. Certified copies of resolutions of the Board of Trustees of Fund naming one or more designated representatives to give instructions in the name and on behalf of Fund, may be received and accepted from time to time by Custodian as conclusive evidence of the authority of any designated representative to act for Fund and may be considered to be in full force and effect (and Custodian will be fully protected in acting in reliance thereon) until receipt by Custodian of notice to the contrary. Unless the resolution delegating authority to any person to give instructions specifically requires that the approval of anyone else will first have been obtained, Custodian will be under no obligation to inquire into the right of the person giving such instructions to do so. Notwithstanding any of the foregoing provisions of this Section 4., no authorizations or instructions received by Custodian from Fund, will be deemed to authorize or permit any director, trustee, officer, employee, or agent of Fund to withdraw any of the securities, cash or other assets of Fund upon the mere receipt of such authorization or instructions from such director, trustee, officer, employee or agent. Notwithstanding any other provision of this Agreement, Custodian, upon receipt (and acknowledgement if required at the discretion of Custodian) of instructions, will undertake to deliver for Fund's account monies, (provided such monies are on hand or available) in connection with Fund's transactions and to wire transfer such monies to such broker, dealer, subcustodian, bank or other agent specified in such instructions. B. No later than the next business day immediately following each oral instruction, Fund will send Custodian written confirmation of such oral instruction. At Custodian's sole discretion, Custodian may record on tape, or 17 otherwise, any oral instruction whether given in person or via telephone, each such recording identifying the parties, the date and the time of the beginning and ending of such oral instruction. 5. LIMITATION OF LIABILITY OF CUSTODIAN. ------------------------------------- A. Custodian shall hold harmless and indemnify Fund from and against any loss or liability arising out of Custodian's negligence or bad faith. Custodian may request and obtain the advice and opinion of counsel for Fund, or of its own counsel with respect to questions or matters of law, and it shall be without liability to Fund for any action taken or omitted by it in good faith, in conformity with such advice or opinion. If Custodian reasonably believes that it could not prudently act according to the instructions of the Fund or the Fund's counsel, it may in its discretion, with notice to the Fund, not act according to such instructions. B. Custodian may rely upon the advice and statements of Fund, Fund's public accountants and other persons to whom the designated representatives of Fund may refer Custodian for advice and/or information, and Custodian shall not be liable for any actions taken, in good faith, upon such advice and/or statements. C. If Fund requires Custodian in any capacity to take, with respect to any securities, any action which involves the payment of money by Custodian, or which in Custodian's opinion might make it or its nominee liable for payment of monies or in any other way, Custodian, upon notice to Fund given prior to such actions, shall be and be kept indemnified by Fund in an amount and form satisfactory to Custodian against any liability on account of such action. D. Custodian shall be entitled to receive, and Fund agrees to pay to Custodian, on demand, reimbursement for such cash disbursements, costs and expenses as may be agreed upon from time to time by Custodian and Fund. E. Custodian shall be protected in acting as custodian hereunder upon any instructions, advice, notice, request, consent, certificate or other instrument or paper reasonably appearing to it to be genuine and to have been properly 18 executed and shall, unless otherwise specifically provided herein, be entitled to receive as conclusive proof of any fact or matter required to be ascertained from Fund hereunder, a certificate signed by the Fund's President, or other officer specifically authorized for such purpose. F. Without limiting the generality of the foregoing, Custodian shall be under no duty or obligation to inquire into, and shall not be liable for: 1. The validity of the issue of any securities purchased by or for Fund, the legality of the purchase thereof or evidence of ownership required by Fund to be received by Custodian, or the propriety of the decision to purchase or amount paid therefor; 2. The legality of the sale of any securities by or for Fund, or the propriety of the amount for which the same are sold; 3. The legality of the issue or sale of any beneficial interest of Fund, or the sufficiency of the amount to be received therefor; 4. The legality of the repurchase or redemption of any shares of beneficial interest of, or the propriety of the amount to be paid therefor; or 5. The legality of the declaration of any dividend by Fund, or the legality of the issue of any shares of Beneficial Interest of Fund in payment of any stock dividend. G. Custodian shall not be liable for, or considered to be Custodian of, any money represented by any check, draft, wire transfer, clearinghouse funds, uncollected funds, or instrument for the payment of money received by it on behalf of Fund, until Custodian actually receives such money, provided only that it shall advise Fund promptly if it fails to receive any such money in the ordinary course of business, and use its best efforts and cooperate with Fund toward the end that such money shall be received. H. Except as provided in Section 3.S., Custodian shall not be responsible for loss occasioned by the acts, neglects, defaults or insolvency of any broker, bank, 19 trust company, or any other person with whom Custodian may deal in the absence of negligence, or bad faith on the part of Custodian. I. Custodian shall not be responsible or liable for the failure or delay in performance of its obligations under this Agreement, or those of any entity for which it is responsible hereunder, arising out of or caused, directly or indirectly, by circumstances beyond the affected entity's reasonable control, including, without limitation: any interruption, loss or malfunction of any utility, transportation, computer (hardware or software) or communication service; inability to obtain labor, material, equipment or transportation, or a delay in mails; governmental or exchange action, statute, ordinance, rulings, regulations or direction; war, strike, riot, emergency, civil disturbance, terrorism, vandalism, explosions, labor disputes, freezes, floods, fires, tornados, acts of God or public enemy, revolutions, or insurrection; or any other cause, contingency, circumstance or delay not subject to the control of or which prevents or hinders the performance hereunder of Custodian or any entity for which it is responsible hereunder. J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY, FOR CONSEQUENTIAL DAMAGES FOR ANY ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THE POSSIBILITY THEREOF. 6. COMPENSATION. ------------- A. Fund will pay to Custodian such compensation as is stated in the Fee Schedule attached hereto as Exhibit C. If Custodian desires to increase the fees or charges provided for in Exhibit C, it shall, at least sixty (60) days prior to the end of the second year of the initial two (2) year term (see Section 7) or of any subsequent annual term hereof, give the Fund written notice (the "Fee Increase Notice") of the proposed changes. If the Fund does not agree to the proposed revised fees and charges, the Fund shall notify Custodian 20 thereof in writing (the "Refusal Notice") within thirty (30) days of receipt of Custodian's notice. If the parties are unable to agree to a rate or manner within the next twenty-nine (29) days after Custodian's receipt of the Refusal Notice, this Agreement shall continue for an additional one hundred and twenty (120) days from the date on which the then current term expires, after which the Agreement shall terminate. Fees and charges shall be at the rate or manner in effect prior to the Fee Increase Notice for the first ninety (90) days and thereafter at that rate increased by the lesser of the proposed, revised fee increase or eight percent (8%) for the remaining thirty (30) days. B. Custodian may charge such compensation against monies held by it for the account of Fund. Custodian will also be entitled, notwithstanding the provisions of Sections 5.C. or 5.D. hereof, to charge against any monies held by it for the account of Fund the amount of any loss, damage, liability, advance, or expense for which it shall be entitled to reimbursement under the provisions of this Agreement including fees or expenses due to Custodian for other services provided to the Fund by Custodian. If Custodian charges any amounts against monies held by it for the account of the Fund and it is subsequently determined that Fund did not in fact owe such amount, or any portion thereof, to Custodian, Custodian shall promptly reimburse Fund the amount which was not owed with interest at the prime rate as reported in The Wall Street Journal (midwestern edition) plus three (3) percentage points from the date charged until the date repaid. 7. TERM AND TERMINATION. -------------------- A. This Agreement shall remain in force and effect for a period of two (2) years, the initial term of this Agreement. This Agreement shall automatically extend for additional, successive twelve (12) month terms upon the expiration of any term hereof, unless terminated as of the end of any term by either party on not less than one hundred and twenty (120) days prior written notice to the other party. Each additional twelve (12) month period shall be an additional term of this Agreement. 21 B. Upon termination of this Agreement, Fund will pay to Custodian such compensation for its reimbursable disbursements, costs and expenses paid or incurred to such date and Fund will use its best efforts to obtain a successor custodian. Unless the holders of a majority of the outstanding shares of beneficial interest of Fund vote to have the securities, funds and other properties held under this Agreement delivered and paid over to some other person, firm or corporation specified in the vote, having not less the Two Million Dollars ($2,000,000) aggregate capital, surplus and undivided profits, as shown by its last published report, and meeting such other qualifications for custodian as set forth in the Bylaws of Fund, the Board of Trustees of Fund will, forthwith upon giving or receiving notice of termination of this Agreement, appoint as successor custodian a bank or trust company having such qualifications. Custodian will, upon termination of this Agreement, deliver to the successor custodian so specified or appointed, at Custodian's office, all securities then held by Custodian hereunder, duly endorsed and in form for transfer, all funds and other properties of Fund deposited with or held by Custodian hereunder, or will co-operate in effecting changes in book-entries at the Depository Trust Company, Participants Trust Company or in the Treasury/Federal Reserve Book-Entry System pursuant to 31 CFR Sec. 306.118. In the event no such vote has been adopted by the shareholders of shares of beneficial interest of Fund and no written order designating a successor custodian has been delivered to Custodian on or before the date when such termination becomes effective, then Custodian may petition a court of competent jurisdiction for appointment of a successor custodian, which successor shall be a bank or trust company meeting the qualifications for custodian, if any, set forth in the Bylaws of Fund and having not less that Two Million Dollars ($2,000,000) aggregate capital, surplus and undivided profits, as shown by its last published report. Fund shall be responsible for the costs and expenses of Custodian (including reasonable attorneys' fees) incurred in seeking such judicial appointment. Upon delivery to a successor custodian, 22 Custodian will have no further obligations or liabilities under this Agreement. Thereafter such bank or trust company will be the successor custodian under this Agreement and will be entitled to reasonable compensation for its services. In the event that no such successor custodian can be found, Fund will submit to its shareholders, before permitting delivery of the cash and securities owned by Fund to anyone other than a successor custodian, the question of whether Fund will be liquidated or function without a custodian. Notwithstanding the foregoing requirement as to delivery upon termination of this Agreement, Custodian may make any other delivery of the securities, funds and property of Fund which is permitted by the Investment Company Act of 1940, Fund's Deed of Trust and Bylaws then in effect or apply to a court of competent jurisdiction for the appointment of a successor custodian. 8. NOTICES. Notices, requests, instructions and other writings addressed to Fund c/o Alpha Source Asset Management, Inc., 2 North LaSalle Street, Chicago, Illinois 60602 or at such other address as Fund may have designated to Custodian in writing, will be deemed to have been properly given to Fund hereunder; and notices, requests, instructions and other writings addressed to Custodian at its offices at 127 West 10th Street, Kansas City, Missouri 64105, Attention: Custody Department or to such other address as it may have designated to Fund in writing, will be deemed to have been properly given to Custodian hereunder. 9. MISCELLANEOUS. ------------- A. Except as provided in Section 9.K. below, this Agreement shall be construed according to, and the rights and liabilities of the parties hereto shall be governed by, the laws of the State of Missouri. B. All terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns. C. Subject to applicable statutes of limitations the representations and warranties, and the indemnifications extended hereunder, if any, are intended 23 to and shall continue after and survive the expiration, termination or cancellation of this Agreement. D. No provisions of the Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed each party hereto. E. The captions in the Agreement are included for convenience of reference only, and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. F. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. G. If any part, term or provision of this Agreement is by the courts held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. H. This Agreement may not be assigned by either party hereto without prior written consent of the other party. I. Neither the execution nor performance of this Agreement shall be deemed to create a partnership or joint venture by and between Custodian and Fund. J. Except as specifically provided herein, this Agreement does not in any way affect any other agreements entered into among the parties hereto and any actions taken or omitted by either party hereunder shall not affect any rights or obligations of the other party hereunder. K. Notice is hereby given that a copy of Funds declaration of trust and all amendments thereto is on file with the Secretary of the Commonwealth of Massachusetts; that this Agreement has been executed on behalf of Fund by the undersigned duly authorized representative of Fund in his/her capacity as such and not individually; and that the obligations of this Agreement shall 24 only be binding upon the assets and property of Fund and shall not be binding upon any trustee, officer or shareholder of Fund individually. The provisions of this Section 9.K. shall be construed according to the laws of the Commonwealth of Massachusetts. L. This Agreement cancels and supersedes that certain Custody Agreement dated December 31, 1986, by and between Fund and Custodian; provided, however, that all duties and liabilities of the parties thereunder with respect to any act, error or omission which occurred prior to the effective date hereof shall survive the execution hereof. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers, to be effective as of the date first above written. INVESTORS FIDUCIARY TRUST COMPANY By: /s/ ------------------------------ Title: Executive Vice President --------------------------- OBERWEIS EMERGING GROWTH FUND By: /s/ Gary R. Heller ------------------------------ Title: Executive Vice President --------------------------- 25 EXHIBIT A INVESTMENT ACCOUNTING AND CUSTODY Section I - --------- In its capacity as the Recordkeeping and Pricing Agent and Custodian for the Fund, Custodian shall perform the following responsibilities on a daily basis: 1. Prepare available cash forecasts and communicate balances to the Fund. 2. Review investment portfolio for cash and stock dividends and stock splits. 3. Review failed security transaction report; investigate failed transactions and report status to Fund. 4. Prepare overdraft report with explanation of overdraft. 5. Initiate wire movements. 6. Post Fund Capital to the Fund's general ledger. 7. Reconcile ending share balance from transfer agent reports to general ledger; report differences to Fund and resolve with the transfer agent. 8. Enter security transactions reported by the Fund. 9. Review trade affirmation and resolve discrepancies. 10. Post bank activity to general ledger; account for all items on bank statements, and prepare and complete daily bank reconciliations, including documentation of reconciling items. 11. Post manual journal entries to the general ledger. 12. Review current daily security transactions for dividends, splits and other corporate activity. 13. Prepare Net Asset Value rollforward. 14. Review individual components of the change in the Fund's Net Asset Value for accuracy and reasonableness. 15. Enter manual prices. 26 16. Review pricing stratification report for unusual price movements in individual securities; investigate and trace items to the particular pricing sources; and consult with Fund. Review pricing report for detection of stock splits and dividends, cash dividends and corporate action. 17. Review for ex-dividend items indicated by pricing sources. 18. Communicate required pricing information to Fund, quotation/ publication services and to transfer agent. Communicate NAV to newspapers and quotation services in time for publication and to the transfer agent in time to run the shareowner accounts by the beginning of the next day. Communicate the NAV and corresponding worksheet to the Fund. 19. Attend to routine matters in connection with the calculation of the net asset value and aggregate asset value of the Fund. 20. Maintain and preserve the books, records and accounts that provide the basis for the above noted items. 27 Section II - ---------- Information/Reports to be transmitted electronically to Fund:
========================================================================================== CATEGORY INFORMATION PROVIDED FREQUENCY* ========================================================================================== Pricing Reports Detail valuation data and the Net Daily Asset Value Calculation - ------------------------------------------------------------------------------------------ Position Reports Securities owned detailed by position Daily and/or or tax lot Monthly - ------------------------------------------------------------------------------------------ Transaction Reports Purchases, sales, maturities, opening Daily and/or or closing of positions for the time Monthly and/or frame specified Year to Date - ------------------------------------------------------------------------------------------ Income Reports Journal of interest, amortization or Daily and/or dividend accruals for the portfolios Monthly - ------------------------------------------------------------------------------------------ Trial Balance General ledger account activity Daily and/or Monthly - ------------------------------------------------------------------------------------------ Capital Activity List of fund share activity for the Monthly period ==========================================================================================
*Available at times specified at the option of the Fund. 28 EXHIBIT B --------- INVESTORS FIDUCIARY TRUST COMPANY AVAILABILITY SCHEDULE BY TRANSACTION TYPE
======================================================================================================================= TRANSACTION DTC PHYSICAL FED ----------- --- -------- --- TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE - ---- ----------- ---------- ----------- ---------- ----------- ---------- ======================================================================================================================= Calls Puts As Received C or F* As Received C or F* Maturities As Received C or F* Mat. Date C or F* Mat. Date F Tender Reorgs. As Received C As Received C N/A Dividends Paydate C Paydate C N/A Floating Rate Int. Paydate C Paydate C N/A Floating Rate Int. N/A As Rate Received C N/A (No Rate) Mtg. Backed P&I Paydate C Paydate + / Bus. C Paydate F Fixed Rate Int. Paydate C Paydate C Paydate F Euroclear N/A C Paydate C ====================================================================================================================
Legend - ------ C = Clearinghouse Funds F = Fed Funds N/A = Not Applicable * Availability based on how received. 29 Exhibit C - ---------- INVESTORS FIDUCIARY TRUST COMPANY OBERWEIS EMERGING GROWTH FUND FEE SCHEDULE I. INVESTMENT ACCOUNTING A. Monthly Base Fee Per Portfolio ------------------------------ $750 (not included in minimum monthly asset fee discussed in I.B. below.) B. Minimum Monthly Fee ------------------- There is a monthly minimum fee of $2,500 in aggregate. The monthly minimum fee does not apply to any portfolio if the asset based fee discussed in I.C. below produces greater revenue than the aggregate minimum. C. Asset Based Fee on a Total Relationship Basis --------------------------------------------- 3.5/100 of 1% (3.5 basis points) on the first $500 million in assets 2.5/100 of 1% (2.5 basis points) on the next $100 million in assets 1/100 of 1% (1 basis point) on all assets in excess of $600 million II. SECURITY CUSTODY A. Domestic Securities ------------------- Asset-Based Fee on a total relationship basis: 2.5/100 of 1% (2.5 basis points) on the first $500 million in assets 1.5/100 of 1% (1.5 basis points) on the next $500 million in assets 1/100 of 1% (1 basis point) on all assets in excess of $1 billion Transaction Fee, per transaction: Physical Delivery - $20.00 Depository Eligible - $10.00 Participant Trust Company (PTC) Eligible - $12.00 PTC Asset-backed Security Paydown - $8.00 Other Asset-backed Security Paydown - $10.00 Overnight Sweeps - $5.00 (buy-side only) Federal Funds Wire Received or Delivered - $6.00 September 2, 1993 Page 1 of 3 Oberweis Fee Schedule (Continued) B. Foreign Securities ------------------ Asset-Based Fee on a total relationship basis: 6/100 of 1% (6 basis points) on all assets held in Euroclear/CEDEL/First Chicago Clearing 16/100 of 1% (16 basis points) on all assets held in foreign securities 40/100 of 1% (40 basis points) on all assets held in emerging markets Transaction Fee, per transaction: Euroclear/CEDEL/First Chicago Clearing - $45.00 Emerging Markets - $120.00 C. Balance Credits --------------- IFTC will offset fees with balance credits calculated at 75% of the bank credit rate (see below) applied to average custody collected cash balances for the month. Balance credits can be used to offset fees. Any credits in excess of fees will be carried forward from month to month through the end of the calendar year. For calculation purposes, IFTC uses an actual/actual basis. Note: The bank credit rate is the equivalent to the lesser of: . The average 91-day Treasury Bill discount rate for the month or . The average Federal Funds rate for the month less 50 basis points. D. Overdraft Charges ----------------- Overdrafts will be calculated at the Prime rate (as published in the Wall Street Journal) and charged on a daily basis. September 2, 1993 Page 2 of 3 Oberweis Fee Schedule (Continued) III. NOTES TO THE ABOVE FEE SCHEDULE A. Asset based fees will be billed monthly at 1/12th of the annual stated rate based on monthly average net assets. B. Annual maintenance fees are payable monthly at 1/12th of the annual stated rate. C. The above schedule does not include out-of-pocket expenses that would be incurred by IFTC on the client's behalf. Examples of out-of-pocket expenses include but are not Limited to forms, postage, magnetic tapes, printing, proxy processing, microfilm, microfiche, back-up recovery, pricing services, overnight mailing services, FDIC insurance, foreign registration and script fees, etc. IFTC bills out-of-pocket expenses separately from service fees. D. The fees stated above are exclusive of terminal equipment required in the client's location(s) and communication line costs. E. Any fees or out-of-pocket expenses not paid within 30 days of the date of the original invoice will be charged a late payment fee of 1% per month until payment of the fees are received by IFTC. F. For the first six months of operations for each fund, the Investment Accounting minimums will be waived. The stated rates apply to all minimums after the initial six months. /s/ /s/ Gary R. Heller - ----------------------------------- ------------------------------- Investors Fiduciary Trust Company Oberweis Emerging Growth Fund 9/8/93 9/3/93 - ----------------------------------- ------------------------------- Date Date September 2, 1993 Page 3 of 3 EX-99.9.3 10 TRANSFER AGENT AGREEMENT TRANSFER AGENT AGREEMENT ------------------------ AGREEMENT, made as of the 3rd day of August, 1993, by and between OBERWEIS EMERGING GROWTH FUND, a Massachusetts business trust having its principal office and place of business at c/o Alpha Source Asset Management, Inc., 2 North LaSalle Street, Chicago, IL 60602 (the "Fund"), and INVESTORS FIDUCIARY TRUST COMPANY, a Missouri limited purpose trust company having its principal office and place of business at Kansas City, Missouri ("IFTC"). WHEREAS, the Fund desires to appoint IFTC as the transfer, dividend disbursing, shareholders' servicing and clearing and paying agent, and IFTC desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: Section 1. Terms of Appointment -------------------- 1.01 Subject to the conditions set forth in this Agreement, the Fund hereby employs, and appoints, IFTC to act as its transfer, dividend disbursing, shareholders' servicing and clearing and paying agent, such appointment to be effective as of the date hereof. 1.02 IFTC hereby accepts such employment and appointment and agrees that on and after the effective date of its appointments hereunder it will act as the transfer, dividend disbursing, shareholders' servicing and clearing and paying agent for the Fund. IFTC agrees that it will also act as agent in connection, and process transactions in accordance, with any exchange privilege, periodic investment plan, periodic withdrawal program or other accumulation, open-account or similar plans, programs or services currently utilized by the Fund or the Fund's shareholders as set out in the prospectus. IFTC will use reasonable efforts to provide, reasonably promptly under the circumstances, the same services with respect to any new, additional functions or features or any changes or improvements to existing functions or features as provided for in the prospectus as amended from time to time, for the Fund provided IFTC is advised in advance by the Fund of any changes therein and the mutual fund processing system utilized by IFTC (the "DST System") as then constituted supports such additional functions and features. If any addition to, improvement of or change in the features and functions currently provided by the DST System requested by the Fund requires an enhancement or modification to the DST System, IFTC shall not be liable therefore until such modification or enhancement is installed on the DST System. If any new, additional function or feature or change or improvement to existing functions or features or new service measurably increases IFTC's cost of performing the services required hereunder at the current level of service, IFTC shall advise the Fund of the amount of such increase and if the Fund elects to utilize such function, feature or service, IFTC shall be entitled to increase its fees by the amount of the increase in costs. 1.03 Subject to the fee and out-of-pocket expenses provisions set forth herein, IFTC agrees to provide, at its own expense, the necessary facilities, equipment and personnel to perform its duties and obligations hereunder. 1.04 IFTC agrees that it will perform all of the usual and ordinary services as transfer, dividend disbursing and shareholders' servicing agent for the Fund, and as agent of the Fund for shareholder accounts thereof, in a timely manner, including, but not limited to, issuing (including countersigning), transferring and cancelling share certificates; maintaining all shareholder accounts; providing transaction journals; preparing shareholder meeting lists, mailing proxies and proxy materials, receiving and tabulating proxies, certifying the shareholder votes in the Fund; mailing shareholder reports and prospectuses; withholding, as required by Federal law, taxes on shareholder accounts; disbursing income dividends and capital gains distributions to shareholders; preparing, and mailing and filing U.S. Treasury Department Forms 1099, W2-P, 1042S and 2 backup withholding as required for all shareholders; preparing and mailing confirmation forms to shareholders and dealers for all purchases and liquidations of shares of the Fund and other confirmable transactions in shareholders accounts; recording reinvestment of dividends and distributions in shares of the Fund; causing timely liquidation of shares; promptly providing or making available on-line daily and monthly reports as provided by the DST System and as requested by the Fund or its designated agent therefore; maintaining those records necessary to carry out IFTC's duties hereunder, including all information reasonably required by the Fund to account for all transactions in Fund shares, calculating the appropriate sales charge with respect to each purchase of Fund shares as set forth in the prospectus for the Fund, determining the portion of each sales charge payable to the dealer participating in a sale in accordance with schedules delivered to IFTC by the Fund's principal underwriter or distributor (hereinafter "principal underwriter") from time to time, disbursing dealer commissions collected to such dealers, determining the portion of each sales charge payable to such principal underwriter and disbursing such commissions to the principal underwriter; receiving correspondence pertaining to any former, existing or new shareholder account, processing such correspondence for proper recordkeeping, and responding promptly to shareholder correspondence; processing, generally on the date of receipt, purchases or redemptions or instructions to settle any wire order purchases or redemptions received in proper order as set forth in the prospectus, rejecting promptly any requests not received in proper order (as defined by the Fund or its agents), and causing exchanges of shares to be executed in accordance with the Fund's instructions and prospectus and the general exchange privilege application, as they may be amended from time to time; mailing to dealers confirmations of wire order trades; mailing copies of shareholder statements to shareholders and registered representatives of dealers in accordance with the Fund's instructions; and responding to phone inquiries concerning the foregoing. 3 1.05 IFTC shall offer to the Fund access to DST's Blue Sky System ("the BSS") which will enable the Fund to cause the input of thresholds on a state-by- state basis. Thereafter, the BSS will generate daily "soft", warning reports with respect to new accounts being set up, subsequent purchases or responses to fulfillment requests where a valid permit does not exist for any or, in the event of a new account, the number of shares being purchased. At that point, resolution or response will be handled in accordance with the then prevailing policies of the Fund agreed to by IFTC. 1.06 IFTC will provide the Fund, and, if so directed, its investment advisor, its sponsor, and its principal underwriter, with Fund data maintained by IFTC, reasonable access to data maintained on the System (except as provided in Section 5.04 hereof). 1.07 To provide a depository for the funds to be received and disbursed by IFTC in connection with performance by IFTC of its duties hereunder, the Fund will establish one or more special purpose deposit accounts with IFTC, and IFTC will provide for the timely deposit of funds received by it for the Fund in, and disbursement of funds from, such accounts in accordance with the instructions of the Fund. Section 2. Fees and Expenses ----------------- 2.01 For the facilities, equipment, and personnel to be provided, and the services to be rendered, by IFTC pursuant to Section 1, the Fund agrees to pay IFTC the fees and charges set out in Exhibit A hereto, as amended by mutual consent from time to time. 2.02 The Fund also agrees to reimburse IFTC in accordance with the requirements of Section 2.03 hereof for all reasonable out-of-pocket expenses or disbursements incurred by IFTC in connection with the performance of services under this Agreement 4 including, but not limited to, expenses for postage, express delivery services, freight charges, envelopes, checks, drafts, forms (continuous or otherwise), specially requested reports and statements, telephone calls, telegraphs, stationary supplies, counsel fees, outside mailing firms (including Support Resources, Inc.), magnetic tapes, reels or cartridges (if sent to a Fund or to third party at the Fund's request or direction) and magnetic tape handling charges, record storage and media for storage of records (e.g., microfilm, microfiche, optical platters, computer tapes), computer equipment installed at the Fund's request at the Fund's or third party's premises, telecommunications equipment and related telephone lines, proxy soliciting, processing and or tabulating costs, and NSCC transaction fees to the extent any of the foregoing are paid by IFTC. The Fund agrees to pay postage expenses at least one day in advance if so requested. In addition, any other expenses incurred by IFTC at the request or with the consent of the Fund will be promptly reimbursed by the Fund. 2.03 Amounts due hereunder shall be due and paid on or before the fifteenth (l5th) business day after receipt of the statement therefore by the Fund (the "Due Date"). The Fund is aware that its failure to pay all amounts in a timely fashion so that they will be received by IFTC on or before the Due Date will give rise to costs to IFTC not contemplated by this Agreement, including but not limited to carrying, processing and accounting charges. Accordingly, subject to Section 2.04, in the event that any amounts due hereunder are not received by IFTC by the Due Date, the Fund shall pay to IFTC a late charge equal to the lesser of the maximum amount permitted by applicable law or the product of that rate announced from time to time by the United Missouri Bank of Kansas City as its "Prime Rate" plus three (3) percentage points times the amount overdue, times the number of days from the Due Date up to and including the day on which payment is received by IFTC divided by 360. The parties hereby agree that such late charge or interest represents a fair and 5 reasonable computation of the costs incurred by reason of late payment or payment of amounts not properly due. Acceptance of such late charge or interest shall in no event constitute a waiver of the Fund's or IFTC's default or prevent the nondefaulting party from exercising any other rights and remedies available to it. 2.04 In the event that any charges are disputed, the Fund shall, on or before the Due Date, pay all undisputed amounts due hereunder and notify IFTC in writing of any disputed charges for out-of-pocket expenses which it is disputing in good faith. Payment for such disputed charges shall be due on or before the close of the fifth (5th) business day after the day on which IFTC provides to the Fund documentation reasonably supporting the disputed charges. 2.05 Except as is otherwise provided in Exhibit A, if IFTC desires to increase the fees or charges or to change the manner of payment provided for in Exhibit A, it shall, at least sixty (60) days prior to the end of the second year of the initial two (2) year term (see Section 7.01) or of any subsequent annual term hereof, give the Fund written notice (the "Fee Increase Notice") of the proposed changes. If the Fund does not agree to the proposed revised fees and charges or manner of payment, the Fund shall notify IFTC thereof in writing (the "Refusal Notice") within thirty (30) days of receipt of IFTC's notice. If the parties are unable to agree to a rate or manner within the next twenty-nine (29) days after IFTC's receipt of the Refusal Notice, this Agreement shall continue for an additional one hundred and twenty (120) days from the date on which the then current term expires, after which the Agreement shall terminate. Fees and charges shall be at the rate or manner in effect prior to the Fee Increase Notice for the first ninety (90) days and thereafter at that rate increased by the lesser of the proposed, revised fee increase or eight percent (8%) for the remaining thirty (30) days. 6 Section 3. Representations and Warranties of IFTC -------------------------------------- IFTC represents and warrants to the Fund that: 3.01 It is a limited purpose trust company duly organized and existing and in good standing under the laws of the State of Missouri; 3.02 It is empowered under applicable laws and by its Articles of Incorporation and Bylaws to enter into and perform the services contemplated in this Agreement; 3.03 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; and 3.04 It has and will continue to have and maintain the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement; and 3.05 It has obtained all federal and state regulatory approvals, authorizations and licenses required to perform its duties and obligations under this Agreement and will keep current such approvals, authorizations and licenses. Section 4. Representations and Warranties of the Fund ------------------------------------------ The Fund represents and warrants to IFTC that: 4.01 It is a Massachusetts business trust duly organized under the laws of the State of Massachusetts; 4.02 It is, and at all times relevant hereto will continue to be, an open- end management investment company registered under the Investment Company Act of 1940; 4.03 A registration statement under the Securities Act of 1933 has been declared effective by the Securities and Exchange Commission and will remain effective at all times relevant hereto, and appropriate state securities laws filings will have 7 been made and will continue to be made at all times relevant hereto, with respect to all shares of the Fund being offered for sale to the public; and 4.04 It is empowered under applicable laws and regulations and by its Declaration of Trust and Bylaws to enter into and perform this Agreement; and all requisite proceedings have been taken to authorize it to enter into and perform under this Agreement. Section 5. Indemnification --------------- 5.01 IFTC shall at all times use reasonable care, due diligence and act in good faith in performing its duties under this Agreement. IFTC shall not be responsible for, and the Fund shall indemnify and hold IFTC harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability which may be asserted against IFTC or for which IFTC may be held to be liable, arising out of or attributable to: (a) All actions of IFTC required to be taken by IFTC pursuant to this Agreement provided that IFTC has acted in good faith and with due diligence and reasonable care; (b) The Fund's refusal or failure to comply with the terms of this Agreement, the Fund's negligence or willful misconduct, or the breach of any representation or warranty of the Fund hereunder; (c) The good faith reliance on, or the carrying out of, any written or, after receipt of a resolution containing Board approval therefor, recorded oral instructions or requests of persons designated on Exhibit B hereof as officers or employees of the Fund who are authorized to give instruction on behalf of the Fund, or representatives of the Fund's investment advisor, sponsor or principal underwriter or IFTC's good faith reliance on, or use of, information, data, records and documents received from, or which have 8 been prepared and/or maintained by the Fund, its investment advisor, its sponsor or its principal underwriter; (d) Failures to pay by dealers or shareowners with respect to payment for share orders previously entered; (e) The offer or sale of the Fund's shares in violation of any requirement under federal securities laws or regulations or the securities laws or regulations of any state or in violation of any stop order or other determination or ruling by any federal agency or state with respect to the offer or sale of such shares in such state (unless such violation results from IFTC's failure to comply with written instructions of the Fund or of any officer of the Fund that no offers or sales be made in or to residents of such state); (f) The Fund's errors and mistakes in the use of the computerized shareholder record keeping system utilized by IFTC (the DST System), the data center, computer and related equipment used to access the DST System (the "DST Facilities"), and control procedures relating thereto in the verification of output and in the remote input of data as provided for in Section 6.05 hereof; and (g) Errors, inaccuracies, and omissions in, or errors, inaccuracies or omissions of IFTC arising out of or resulting from such errors, inaccuracies and omissions in, the Fund's records, shareholder and other records, delivered to IFTC hereunder by the Fund or its prior agent(s). 5.02 IFTC shall indemnify and hold the Fund harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of IFTC's failure to comply with the terms of this Agreement or arising out of or attributable to IFTC's negligence or willful misconduct or breach of any representation or warranty of IFTC hereunder. 5.03 At any time IFTC may apply to any person listed on Exhibit B hereto for instructions, and may, with the prior 9 consent of the Fund, consult with legal counsel for the Fund, its investment advisor, its sponsor or its principal underwriter, or with IFTC's own legal counsel, all at the expense of the Fund, with respect to any matter arising in connection with the services to be performed by IFTC under this Agreement and IFTC shall not be liable and shall be indemnified by the Fund for any action taken or omitted by it in good faith in reliance upon such instructions or upon the opinion of such counsel. IFTC shall be protected and indemnified in acting upon any paper or document reasonably believed by it to be genuine and to have been signed by any person or persons whom IFTC reasonably believes to have been authorized to represent the Fund and shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Fund. IFTC shall also be protected and indemnified in recognizing stock certificates which IFTC reasonably believes to bear the proper manual or facsimile signatures of the officers of the Fund, and proper counter signature of any former transfer agent or registrar, or of a co-transfer agent or co- registrar. 5.04 In the event that either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, failure or damage of primary and secondary equipment, utility or transmission facilities resulting from circumstances beyond the control of such party, or other causes reasonably beyond its control, such party shall not be liable for damages to the other resulting from such failure to perform, provided that each party shall in all cases fully cooperate with the other and take such measures as may be reasonably requested so as to enable the Fund to continue operations. 5.05 EXCEPT FOR VIOLATIONS OF SECTION 6.04 AND 6.05, IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY, FOR CONSEQUENTIAL DAMAGES FOR ANY ACT OR FAILURE 10 TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THE POSSIBILITY THEREOF. 5.06 Each party shall promptly notify the other in writing of any situation which presents or appears to involve a claim which may be subject of indemnification hereunder and the indemnifying party shall have the option to defend against any such claim. In the event the indemnifying party so elects, it will notify the indemnified party and shall assume the defense of such claim, and the indemnified party shall cooperate fully with the indemnifying party, at the indemnifying party's expense, in the defense of such claim. Notwithstanding the foregoing, the indemnified party shall be entitled to participate in the defense of such claim at its own expense through counsel of its own choosing. Neither party shall confess any claim nor make any compromise in any action or proceeding in which the other party shall be named or for which indemnification may be sought under this Agreement without the other party's prior written consent. Section 6. Covenants of IFTC or the Fund ----------------------------- 6.01 The Fund agrees to promptly furnish to IFTC, and thereafter promptly provide to IFTC any amendments or additions to, the following: (a) A certified copy of the resolution of the Board of Trustees of the Fund authorizing the appointment of IFTC and the execution and delivery of this Agreement. (b) Certified copy of the Declaration of Trust and Bylaws of the Fund and all amendments. (c) Specimens of share certificates in the forms approved from time to time by the Fund's Board of Trustees with a certificate of the Secretary of the Fund as to such approval. 6.02 IFTC hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms, and facsimile 11 signature imprinting devices, if any, and for the preparation or use, and for keeping account of such certificates, forms and devices. 6.03 As required by Section 31 of the Investment Company Act of 1940 and Rules thereunder, IFTC agrees that all records maintained by IFTC relating to the services to be performed by IFTC under this Agreement are the property of the Fund and will be preserved and will be surrendered promptly to the Fund or made available for inspection by persons designated by the Fund on request. 6.04 IFTC and the Fund agree that all books, records, information and data pertaining to the business of the other party or relating to the design, structure or operation of the IFTC System which are exchanged or received or disclosed pursuant to the negotiation of and the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person without the written consent of the other. Upon termination of the Agreement, each party shall return to the other all such books, records and written information and data pertaining to the business of the other. IFTC shall notify the Fund of any request or demand to inspect the records of the Fund and will act upon the instructions of the Fund as to permitting or refusing such inspection, except where otherwise required by law. 6.05 The Fund acknowledges that: (a) the software programs, supporting documentation, or procedures relating to or making up the DST System ("DST/IFTC Protected Information") are confidential and are proprietary to and a trade secret of DST and IFTC; and (b) any unauthorized use, misuse, disclosure or taking of DST/IFTC Protected Information residing or existing internal or external to a computer, computer system, or computer network, or the knowing and unauthorized accessing or causing to be accessed of any computer, computer system, or computer network, 12 may be subject to civil liabilities and criminal penalties under applicable state law. The Fund will, and will cause its investment advisor, or sponsor and principal underwriter to, advise each of their employees and agents who have access to any DST/IFTC Protected Information or to any computer equipment capable of accessing DST Facilities of the foregoing. 6.06 The Fund hereby agrees that it, its investment advisor, sponsor and principal underwriter will use and employ IFTC's System and Facilities in accordance with the procedures set forth in the reference manuals delivered thereto, each of the foregoing shall utilize the control procedures set forth and described therein, and each of the foregoing shall verify promptly reports received through use of the IFTC System and Facilities. IFTC shall promptly deliver updates or revisions to such manuals. The provision of an update on "QUEST" shall constitute delivery thereof for purposes of this Agreement. The Fund shall not be liable for errors resulting from its failure to comply with any procedure until a copy of such procedure has been delivered as herein provided. Section 7. Termination of Agreement ------------------------ 7.01 Subject to termination as hereinafter provided, this Agreement shall remain in force and effect for a period of two (2) years, the initial term of this Agreement. This Agreement shall automatically extend for additional, successive twelve (12) month terms upon the expiration of any term hereof, unless terminated as of the end of any term by either party on not less than one hundred and twenty (120) days prior written notice to the other party. Each additional twelve (12) month period shall be an additional term of this Agreement. 7.02 If either of the parties hereto shall breach this Agreement or be in default in the performance of any of its duties and obligations hereunder the non-defaulting party may give written notice thereof to the defaulting party and if such 13 default or breach shall not have been remedied within thirty (30) days after such written notice is given, then the party giving such written notice may terminate this Agreement at the end of such thirty (30) day period. Termination of this Agreement by one party by reason of default or breach of the other party shall not constitute a waiver by the terminating party of any other rights it might have under this Agreement against the other party, including without limitation rights with reference to services performed or not performed prior to such terminating or rights of IFTC to be reimbursed for out-of-pocket expenditures or equipment or communication circuit termination fees, if any. 7.03 Upon termination of this Agreement IFTC shall, if requested by the Fund, provide reasonable assistance to the Fund, including transferring all Fund records to such entity as shall be designated by the Fund, in converting the Fund's records to whatever system or service selected by the Fund, and IFTC shall be entitled to reimbursement for providing such assistance at rates and fees not in excess of those rates and fees IFTC charges similar clients, similarly situated for similar services. IFTC's present rates are: (i) for clerical assistance, thirty dollars ($30.00) per hour; (ii) for Supervisor/Manager assistance, fifty dollars ($50.00) per hour; and (iii) for programming assistance, to the extent IFTC agrees thereto, forty ($40.00), fifty ($50.00) and seventy-seven ($77.00) dollars per hour for non-technical, mainframe and work station personnel. 7.04 If the termination date set forth in the original termination notice is extended by the Fund (which extension shall require the agreement of IFTC), then the fees and charges payable under this Agreement shall be increased by twenty per cent (20%) during the period commencing with the original termination date set forth in the initial termination notice and concluding with the day upon which termination actually occurs. These provisions are in addition to any other contractual provision or 14 compensation agreements that may be in existence at the time of an actual transfer. 7.05 Nothing herein is intended to, nor does it, compel IFTC to disclose non-public information concerning its operations or operating systems or to provide programming assistance or information which might tend to improve, enhance or add functionality to anyone else's operating systems, respectively. Section 8. Changes and Modifications ------------------------- 8.01 During the term of this Agreement IFTC will use on behalf of the Fund without additional cost all modifications, enhancements, or changes which DST or IFTC may make to its shareholder/transfer agent processing system in the normal course of its business and which are applicable to functions and features offered by the Fund, unless substantially all DST or IFTC clients are charged separately for such modifications, enhancements or changes, including, without limitation, substantial system revisions or modifications necessitated by changes in existing laws, rules or regulations. The Fund agrees to pay IFTC promptly for modifications and improvements which are utilized by the Fund and which are charged for separately at the rate provided for in DST's or IFTC's standard pricing schedule which shall be identical for substantially all clients, if a standard pricing schedule shall exist. If there is no standard pricing schedule, the parties shall mutually agree upon the rates to be charged. 8.02 IFTC shall have the right, at any time and from time to time, to alter and modify any systems, programs, procedures or facilities used or employed in performing its duties and obligations hereunder; provided that the Fund will be notified as promptly as possible prior to implementation of such alterations and modifications and that no such alteration or modification or deletion shall materially adversely change or affect the operations and procedures of the Fund in using or employing the 15 DST System or DST Facilities hereunder or the reports to be generated by such system and facilities hereunder, unless the Fund is given thirty (30) days prior notice to allow the Fund to change its procedures and IFTC provides the Fund with revised operating procedures and controls. 8.03 All enhancements, improvements, changes, modifications or new features added to the DST System however developed or paid for shall be, and shall remain, the confidential and exclusive property of, and proprietary to, DST Systems, Inc. Notwithstanding the foregoing, at the request of the Fund, all enhancements, improvements, modifications or new features added to the DST System developed at the expense of the Fund, may be subject to a period of exclusivity as mutually agreed to by the Fund and IFTC, which period may not exceed six (6) months. Section 9. Subcontractors. --------------- The Fund acknowledges that IFTC intends to subcontract certain obligations hereunder and consents to such subcontract on condition that IFTC shall remain fully responsible and liable for the complete and proper performance of IFTC's obligations hereunder, that all acts and omissions of any such subcontractor hereunder shall for all purposes hereof be considered and deemed to be acts or omissions of IFTC and that the Fund shall be fully responsible and liable hereunder to IFTC as if no subcontract had occurred and such obligations had been performed by IFTC itself. Section 10. Miscellaneous ------------- 10.01 IFTC and the Fund agree that, promptly upon the execution of this Agreement, each shall take all reasonable actions to enable IFTC to assume its duties as contemplated hereunder in a timely fashion. 10.02 Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the prior written consent of the other. 16 10.03 This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns. 10.04 It is understood and agreed that all services performed hereunder by IFTC shall be as an independent contractor and not as an employee of the Fund. This Agreement is between IFTC and the Fund and neither this Agreement nor the performance of services under it shall create any rights in any third parties. 10.05 To the extent that any provision herein is inconsistent with or in violation of any applicable law, rule or regulation, that provision shall be deemed modified so as to comply with such law, rule or regulation, and shall not otherwise affect any other provisions of this Agreement. Any provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining provisions of this Agreement or effecting the validity or enforceability of that term or any of the provisions of this Agreement in any other jurisdiction. 10.06 The failure of either party to insist upon the performance of any terms or conditions of this Agreement or to enforce any rights resulting from any breach of any of the terms or conditions of this Agreement, including the payment of damages, shall not be construed as a continuing or permanent waiver of any such terms, conditions, rights or privileges, but the same shall continue, and remain in full force and effect as if no such forbearance or waiver had occurred. 10.07 This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. 17 10.08 The representations and warranties contained herein shall survive the execution and the representations and warranties contained herein and the provisions of Section 5, 6, 7.03-7.05 and 9 hereof shall survive the termination of the Agreement and the performance of services hereunder. 10.09 The validity, construction and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, excluding that body of law applicable to choice of law, and except that Section lO.ll hereof shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, excluding that body of law applicable to choice of law. 10.10 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof, whether oral or written, and this Agreement may not be modified except by written instrument executed by both parties. 10.11 Notice is hereby given that a copy of Fund's Declaration of Trust and all amendments thereto is on file with the Secretary of the Commonwealth of Massachusetts; that this Agreement has been executed on behalf of Fund by the undersigned duly authorized representative of Fund in his/her capacity as such and not individually; and that the obligations of this Agreement shall only be binding upon the assets and property of Fund and shall not be binding upon any trustee, officer or shareholder of Fund individually. 10.12 This Agreement cancels and supercedes that certain Agency Agreement dated December 31, 1986, by and between Fund and Custodian; provided, however, that all duties and liabilities of the parties thereunder with respect to any act, error or omission which occurred prior to the effective date hereof shall survive the execution hereof. 18 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by and through their duly authorized officers, to be effective as of the day and year first above written. OBERWEIS EMERGING GROWTH FUND By: /s/ Gary R. Heller ------------------------------ Title: Executive Vice President --------------------------- ATTEST: /s/ Allison Shank - ---------------------------------- Secretary INVESTORS FIDUCIARY TRUST COMPANY By: /s/ Frank ?????????????? ------------------------------ Title: Vice President --------------------------- ATTEST: /s/ ???????????? - ---------------------------------- Secretary 19 Exhibit A - --------- INVESTORS FIDUCIARY TRUST COMPANY OBERWEIS EMERGING GROWTH FUND FEE SCHEDULE I. TRANSFER AGENCY A. Base Fee -------- There is a monthly base fee of $500 per portfolio/CUSIP which is included in the minimum fee below. B. Minimum Fee ----------- There is an annual minimum fee per portfolio/CUSIP number. This minimum is billed monthly and supersedes items outlined in I.C. provided the total applicable charges per portfolio based on I.C. do not exceed the monthly minimum. Minimum fees are assessed as follows: First portfolio - $44,000 Second portfolio - $38,000 Third portfolio - $31,500 Fourth portfolio and each portfolio thereafter - $27,300 Integration with third party/private labeled funds is subject to negotiation. C. Account Maintenance and Processing Fees --------------------------------------- Open Accounts: Daily Accrual Portfolio(s) Non-Monthly Distribution - $9.25 per account per year Monthly Distribution - $11.55 per account per year Non-Daily Accrual Portfolio(s) Non-Monthly Distribution - $6.95 per account per year Monthly Distribution - $9.25 per account per year Fiduciary Accounting System Account Surcharge - $2.05 per account per year NOTE: Surcharge is waived when IFTC is custodian of fiduciary accounts. September 2, 1993 Page 1 of 3 Oberweis Fee Schedule (Continued) Closed Accounts - $2.95 per account per year Manual Transaction Fees (unless otherwise specified): New Account Set Up (Institutional) - $5.25 New Account Set Up (Retail) - $2.50 Financial Transactions - $1.25 Correspondence - $2.60 Maintenance Transaction - $1.15 Research Transaction - $1.15 Shareholder Calls (Customer) - $1.05 Confirmed Orders (wire orders) - $2.60 Omnibus Accounts Transaction - $2.60 IRS Compliance Transaction - $.40 Certificate Issuance - $4.25 Checkwriting Privileges (including signature verification) - $.25 per clearing ACH Transaction Clearing - $.15 per item D. Federal Funds Wire ------------------ There is a $6.00 fee for each federal funds wire received or delivered. E. Miscellaneous ------------- Fiduciary Trustee Fees: IRAs/SEPs - $12.00 per account per year Qualified Plans - $25.00 per social security number per plan F. Optional Services ----------------- NSCC - $100 per month/per applicable portfolio Dealer Maintenance - $2.60 per transaction Front End Load Fund - $1.40 per account 12b-1 processing will be charged at a rate of: Annual $.65 per account per year Semi-Annual $.85 per account per year Quarterly $1.05 per account per year Monthly $1.25 per account per year Contingent Deferred Sales Charge/Sharelot Accounting - $1.80 per account Sharelot Accounting - $1.80 per account per year Sales Reporting - $250 per month/per applicable portfolio Blue Sky Reporting - $100 per month/per applicable portfolio September 2, 1993 Page 2 of 3 Oberweis Fee Schedule (Continued) Investor Facility - $.95 per open account per year Automated Financial Transmission - $25.00 per transmission Escheatment Costs - as incurred Dedicated Programmer - $81,000 per year, or $58 per hour Business Analysis - $40 per staff hour Fund Set-up (one time charge) - $750 per fund Audio Response System - Attached Conversion Cost - as incurred II. NOTES TO THE ABOVE FEE SCHEDULE A. Asset based fees will be billed monthly at 1/12th of the annual stated rate based on monthly average net assets. B. Annual maintenance fees are payable monthly at 1/12th of the annual stated rate. C. The above schedule does not include out-of-pocket expenses that would be incurred by IFTC on the client's behalf. Examples of out-of-pocket expenses include but are not limited to forms, postage, magnetic tapes, printing, proxy processing, microfilm, microfiche, back-up recovery, pricing services, overnight mailing services, FDIC insurance, foreign registration and script fees, etc. IFTC bills out-of-pocket expenses separately from service fees. D. The fees stated above are exclusive of terminal equipment required in the client's location(s) and communication line costs. E. Any fees or out-of-pocket expenses not paid within 30 days of the date of the original invoice will be charged a late payment fee of 1% per month until payment of the fees are received by IFTC. /s/ Frank ???????????? /s/ Gary R. Heller, EVP - --------------------------------- -------------------------------- Investors Fiduciary Trust Company Oberweis Emerging Growth Fund Vice President 9/14/93 9/3/93 - --------------------------------- -------------------------------- Date Date September 2, 1993 Page 3 of 3 EX-99.11.1 11 CONSENT OF ERNST & YOUNG CONSENT OF INDEPENDENT AUDITORS We consent to the use of our reports dated January 27, 1995 and October 2, 1995 for the Oberweis Emerging Growth Portfolio and the Oberweis Micro-Cap Portfolio, respectively, in the Registration Statement (Form N-1A) and related Prospectus of the Oberweis Emerging Growth Fund (to be renamed The Oberweis Funds), filed with the Securities and Exchange Commission in this Post-Effective Amendment No. 10 to the Registration Statement under the Securities Act of 1933 (Registration No. 33-9093) and in this Amendment No. 12 to the Registration Statement under the Investment Company Act of 1940 (Registration No. 811-4854). /s/ ERNST & YOUNG LLP ----------------- ERNST & YOUNG LLP Chicago, Illinois October 11, 1995 EX-99.11.2 12 CONSENT OF CHECKERS SIMO Consent of Checkers, Simon & Rosner We have issued our report dated February 6, 1994, accompanying the financial statements of Oberweis Emerging Growth Fund, contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus and to the use of our name as referenced under Additional Information. /S/ CHECKERS, SIMON & ROSNER LLP Chicago, Illinois October 10, 1995 EX-99.14.1 13 IRA ACCOUNT AGREEMENT [LOGO -- OBERWEIS EMERGING GROWTH FUND] INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT AGREEMENT Investors Fiduciary Trust Company Form 5305-A Individual Retirement Custodial Account (Rev. October 1992) Department of the Treasury -- Internal Revenue Service (Under Section 408(a) of the Internal Revenue Code) Keep for your records. Do NOT File with Internal Revenue Service State of - ------------------------------------------------------------)ss [_] Amendment County of - ------------------------------------------------------------ Depositor's name Depositor's date of birth - -------------------------------------------------------------------------------- Depositor's address Depositor's social security number - -------------------------------------------------------------------------------- Custodial name INVESTORS FIDUCIARY TRUST COMPANY - -------------------------------------------------------------------------------- Custodial address or principal place of business KANSAS CITY, MISSOURI - -------------------------------------------------------------------------------- The Depositor whose name appears above is establishing an Individual Retirement Account (under section 408(a) of the Internal Revenue Code) to provide for his or her retirement and for the support of his or her beneficiaries after death. The Custodian named above has given the Depositor the disclosure statement required under the Income Tax Regulations under section 408(i) of the Code. The Depositor has assigned the Custodial account dollars ($ ) in cash. The Depositor and the Custodian made the following agreement. ARTICLE I The custodian may accept additional cash contributions on behalf of the Depositor for a tax year of the Depositor. The total cash contributions are limited to $2,000 for the tax year unless the contribution is a rollover contribution described in section 402(c) (but only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified employee pension plan as described in section 408(k). Rollover contributions before January 1, 1993, include rollovers described in section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified employee pension plan as described in section 408(k). ARTICLE II The Depositor's interest in the balance in the custodial account is nonforfeitable. ARTICLE III 1. No part of the custodial funds may be invested in life insurance contracts, nor may the assets of the custodial account be commingled with other property except in a common trust fund or common investment fund (within the meaning of section 408(a)(5)). 2. No part of the custodial funds may be invested in collectibles (within the meaning of section 408(m)) except as otherwise permitted by section 408(m)(3) which provides an exception for certain gold and silver coins and coins issued under the laws of any state. ARTICLE IV 1. Notwithstanding any provision of this agreement to the contrary, the distribution of the Depositor's interest in the custodial account shall be made in accordance with the following requirements and shall otherwise comply with section 408(a)(6) and Proposed Regulations section 1.408-8, including the incidental death benefit provisions of Proposed Regulations section 1.401(a)(9)-2, the provisions of which are incorporated by reference. 2. Unless otherwise elected by the time distributions are required to begin to the Depositor under paragraph 3, or to the surviving spouse under paragraph 4, other than in the case of a life annuity, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the Depositor and the surviving spouse and shall apply to all subsequent years. The life expectancy of a nonspouse beneficiary may not be recalculated. 3. The Depositor's entire interest in the custodial account must be, or begin to be, distributed by the Depositor's required beginning date, (April 1 following the calendar year end in which the Depositor reaches age 70 1/2). By that date, the Depositor may elect, in a manner acceptable to the Custodian, to have the balance in the custodial account distributed in: a. A single sum payment. b. An annuity contract that provides equal or substantially equal monthly, quarterly, or annual payments over the life of the Depositor. c. An annuity contract that provides equal or substantially equal monthly, quarterly, or annual payments over the joint and last survivor lives of the Depositor and his or her designated beneficiary. d. Equal or substantially equal annual payments over a specified period that may not be longer than the Depositor's life expectancy. e. Equal or substantially equal annual payments over a specified period that may not be longer than the joint life and last survivor expectancy of the Depositor and his or her designated beneficiary. 4. If the Depositor dies before his or her entire interest is distributed to him or her, the entire remaining interest will be distributed as follows: a. If the Depositor dies on or after distribution of his or her interest has begun, distribution must continue to be made in accordance with paragraph 3. b. If the Depositor dies before distribution of his or her interest has begun, the entire remaining interest will, at the election of the Depositor or, if the Depositor has not so elected, at the election of the beneficiary or beneficiaries, either i. Be distributed by the December 31 of the year containing the fifth anniversary of the Depositor's death, or ii. Be distributed in equal or substantially equal payments over the life or life expectancy of the designated beneficiary or beneficiaries starting by December 31 of the year following the year of the Depositor's death. If, however, the beneficiary is the Depositor's surviving spouse, then this distribution is not required to begin before December 31 of the year in which the Depositor would have turned age 70 1/2. c. Except where distribution in the form of an annuity meeting the requirements of section 408(b)(3) and its related regulations has irrevocably commenced, distributions are treated as having begun on the Depositor's required beginning date, even though payments may actually have been made before that date. d. If the Depositor dies before his or her entire interest has been distributed and if the beneficiary is other than the surviving spouse, no additional cash contributions or rollover contributions may be accepted in the account. 5. In the case of a distribution over life expectancy in equal or substantially equal annual payments, to determine the minimum annual payment for each year, divide the Depositor's entire interest in the Custodial account as of the close of business on December 31 of the preceding year by the life expectancy of the Depositor (or the joint life and last survivor expectancy of the Depositor and the Depositor's designated beneficiary, or the life expectancy of the designated beneficiary, whichever applies). In the case of distributions under paragraph 3, determine the initial life expectancy (or joint life and last survivor expectancy) using the attained ages of the Depositor and designated beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2. In the case of a distribution in accordance with paragraph 4(b)(ii), determine life expectancy using the attained age of the designated beneficiary as of the beneficiary's birthday in the year distributions are required to commence. 6. The owner of two or more individual retirement accounts may use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum distribution requirements described above. This method permits an individual to satisfy these requirements by taking from one individual retirement account the amount required to satisfy the requirement for another. ARTICLE V 1. The Depositor agrees to provide the Custodian with information necessary for the Custodian to prepare any reports required under section 408(i) and Regulations sections 1.408-5 and 1.408-6. 2. The Custodian agrees to submit reports to the Internal Revenue Service and the Depositor prescribed in the Internal Revenue Service. ARTICLE VI Notwithstanding any other articles which may be added or incorporated, the provisions of Articles I through III and this sentence will be controlling. Any additional articles that are not consistent with section 408(a) and the related regulations will be invalid. ARTICLE VII This agreement will be amended from time to time to comply with the provisions of the Code and related regulations. Other amendments may be made with the consent of the persons whose signatures appear below. ARTICLE VIII 1. Definitions. The following definitions shall apply to terms used in this Article VIII: a. "Application" shall mean the IRA Application submitted by the Depositor to the Custodian. b. "Code" shall mean the Internal Revenue Code of 1986, as amended, including any regulations, procedures, rulings, or notices issued thereunder. c. "Company" shall mean Oberweis Emerging Growth Fund. d. "Custodial Account" shall mean the custodial account established under this agreement. 2. Investment of Contributions. Contributions shall be invested in shares of the Company mutual funds in accordance with the Depositor's written instructions in the Application, and with subsequent written instructions of the Depositor (or, following the death of the Depositor, his or her beneficiary) in a form acceptable to and filed with the Custodian. By giving such instructions, the Depositor (or beneficiary, where applicable) will be deemed to have acknowledged receipt of the then current prospectus for any shares in which the Depositor (or beneficiary) directs the Custodian to invest contributions. The Depositor, by making a rollover contribution, as described in Article I, hereby certifies that the contribution meets all requirements for rollover contributions. The amount of each contribution shall be applied to the purchase of such shares at the price and in the manner in which such shares are then being publicly offered by the Company in accordance with the then current prospectus, and such shares shall be credited to the Custodial Account. All dividends and capital gain distributions received on the shares of the fund held in each Custodial Account shall (unless received in additional shares of such fund) be reinvested in such shares which shall be credited to such Custodial Account. If any distribution on shares of the fund may be received at the election of the shareholder in additional shares or in cash or other property, the Custodian shall elect to receive such distribution in additional shares. The Custodian shall not be liable for interest on any cash balance in the Custodial Account. All Company shares acquired by the Custodian shall be registered in the name of the Custodian or its required nominee. 3. Voting with respect to shares. The Custodian shall not vote any of the shares of a Company mutual fund held in the Custodial Account except in accordance with written instructions of the Depositor, timely received, in a form acceptable to the Custodian. 4. Alternative Distribution Methods: Notwithstanding Article IV, a Depositor may elect in writing in a form acceptable to and filed with the Custodian, to have the balance in the Custodial Account distributed only in a lump sum or insubstantially equal payments over a period that does not exceed the Depositor's life expectancy or the joint and last survivor life expectancy of the Depositor and his or her designated beneficiary. For this purpose, life expectancies must be determined by using applicable Internal Revenue Service tables. Notwithstanding paragraph 2 of Article IV, unless an election to have life expectancies recalculated annually is made by the time distributions are required to begin to the Depositor under paragraph 3, or to the surviving spouse under paragraph 4, of Article IV, life expectancies shall not be recalculated. Such election shall be irrevocable as to the Depositor and the surviving spouse and shall apply to all subsequent years. The life expectancy of a nonspouse beneficiary may not be recalculated. To receive an annuity distribution, a Depositor may roll over a lump sum distribution to purchase an individual retirement annuity payable in equal or substantially equal payments over the Depositor's life expectancy or the joint and last survivor life expectancy of the Depositor and his or her designated beneficiary. The distribution option should be reviewed in the year the Depositor reaches age 70-1/2 to make sure the requirements of Code Section 408(a)(6) have been met. Consistent with paragraph 6 of Article IV, the Custodian is not obligated to make any distribution absent a specific written direction, in a form acceptable to and filed with the Custodian, from the Depositor or designated beneficiary to do so. 5. Amendment and Termination. The Depositor may at any time and from time to time terminate this Agreement in whole or in part by delivering to the Custodian a signed written notice of such termination, in a form acceptable to the Custodian. The Depositor and the Custodian delegate to the Company the right to amend this Agreement (including retroactive amendments) by written notice to the Custodian and the Depositor. The Depositor shall be deemed to have consented to any such amendment, provided that (a) no amendment shall cause or permit any part of the assets of the Custodial Account to be delivered to purposes other than for the exclusive benefit of the Depositor or his or her beneficiaries; (b) any amendment which affects the rights, duties or responsibilities of the Custodian may only be made with the Custodian's consent; and (c) no amendment shall be made except in accordance with any applicable laws and regulations affecting this Agreement and the Custodial Account. 6. Resignation or Removal of Custodian. The Custodian may resign at any time upon thirty (30) days notice in writing to the Depositor and the Company. Upon such resignation, the Depositor delegates to the Company the responsibility to appoint a successor custodian under this Agreement. The Depositor or the Company at any time may remove the Custodian upon 30 days written notice to that effect in a form acceptable to and filed with the Custodian. Such notice must include designation of a successor custodian. The successor custodian shall satisfy the requirements of section 408(h) of the Code. Upon receipt by the Custodian of written acceptance of such appointment by the successor custodian, the Custodian shall transfer and pay over to such successor the assets of and records relating to the Custodial Account. The Custodian is authorized, however, to reserve such sum of money as it may deem advisable for payment of all its fees, compensation, costs and expenses, or for payment of any other liability constituting a charge on or against the assets of the Custodial Account or on or against the Custodian, and where necessary may liquidate shares in the Custodial Account for such payments. Any balance of such reserve remaining after the payment of all such items shall be paid over to the successor Custodian. The Custodian shall not be liable for the acts or omissions of any successor custodian. 7. Custodian's Annual Fees: The Depositor shall be charged by the Custodian for its services under this Agreement in such amount as the Custodian shall establish from time to time. Sufficient shares may be liquidated from the Custodial Account to pay the fee. The annual fee in effect on the date of this Agreement is set forth in the Application. A different fee may be substituted at any time upon written notice to the Depositor. A Depositor who does not consent to such new fee should terminate this Agreement pursuant to paragraph 5 of Article VIII within 30 days of the notice of the new fee. If no such termination is made within 30 days of the notice of the new fee, the Depositor will be deemed within 30 days of the notice of the new fee, the Depositor will be deemed to have consented to the new fee. 8. Other Fees and Expenses. Any income or other taxes of any kind whatsoever that may be levied or assessed upon or with respect to the Custodial Account or the income thereof, any transfer taxes incurred in connection with the investment and reinvestment of the assets of the Custodial Account, all other reasonable administrative expenses incurred by the Custodian with respect to any such taxes, or with respect to any controversies concerning the Custodial Account, including, but not limited to, fees for legal services rendered to the Custodian and related costs, and such reasonable compensation to the Custodian for acting in that capacity with respect to any such taxes or controversies, may, in the discretion of the Custodian, be charged against and paid from the assets of the Custodial Account. Sufficient shares may be liquidated from the Custodial Account to pay any such taxes, expenses and compensation. 9. Incapability of Assets: No interest, right or claim in or to any part of the Custodial Account, nor any assets held therein or benefits provided hereunder shall be subject to alienation, assignment, garnishment, attachment, execution or levy of any kind, and any attempt to cause any such interest, right, claim, assets or benefits to be so subjected shall not be recognized, except to the extent as may be required by law. 10. Exchange Privilege: With respect to any Company shares held in the Custodial Account, the Depositor (or beneficiary, where applicable) may, upon submission of written instructions in a form acceptable to and filed with the Custodian, cause shares of any fund to be exchanged for shares of any other fund of the Company meeting the requirements of this Agreement, upon the terms and within the limitations imposed by the then current prospectus of the fund of the Company which are acquired in the exchange. By giving such instructions, the Depositor (or beneficiary) will be deemed to have acknowledged receipt of such prospectus. 11. Designation of Beneficiary. The Depositor may designate a beneficiary or change or revoke the designation of a beneficiary, by written notice in a form acceptable to and filed with the Custodian, prior to the complete distribution of the balance in the Custodial Account. If the Depositor has not by the date of his or her death properly designated a beneficiary in accordance with the preceding sentence, or if no designated beneficiary survives the Depositor, the Depositor's beneficiary shall be his or her estate. If a beneficiary dies before receiving his or her entire interest in the Custodial Account, his or her remaining interest in the Custodial Account shall be paid to the beneficiary's estate. 12. Responsibility as to Contributions or Distributions. The Custodian will not under any circumstances be responsible for the timing, purpose or propriety of any contribution or of any distribution made hereunder, not shall the Custodian incur any liability or responsibility for any tax imposed on account of any such contribution or distribution. 13. Other Limits on Responsibilities of the Custodian. The Custodian shall not incur any liability or responsibility in taking or omitting to take any action based on any notice, election, or instruction or any written instrument believed by the Custodian to be genuine and to have been properly executed. The Custodian shall be under no duty of inquiry with respect to any such notice, election, instruction, or written instrument, but in its discretion may request any tax waivers, proof of signatures or other evidence which it reasonably deems necessary for its protection. The Depositor and the successors of the Depositor including any executor or administrator of the Depositor shall, to the extent permitted by law, indemnify the Custodian and its successors and assigns against any and all claims, actions or liabilities of the Custodian to the Depositor or the successors or beneficiaries of the Depositor whatsoever (including without limitation all reasonable expenses incurred in defending against or settlement of such claims actions or liabilities) which may arise in connection with this Agreement or the Custodial Account, except those due to the Custodian's own bad faith, gross negligence or willful misconduct. The Custodian shall not be under any duty to take any action not specified in this Agreement, unless the Depositor shall furnish it with instructions in proper form and such instructions shall have been specifically agreed to by the Custodian, or to defend or engage in any suit with respect hereto unless it shall have first agreed in writing to do so and shall have been fully indemnified to its satisfaction. 14. Notices. All written notices required or permitted to be given by the Custodian shall be deemed to have been given when sent by mail to the Depositor at the Depositor's last address of record provided to the Custodian. All written notices required or permitted to be given to the Custodian shall be deemed to have been given when received by the Custodian if mailed to the Custodian at 127 West 10th Street, Box 419042, Kansas City, Missouri 64105 or such other address as the Custodian shall provide to the Depositor from time to time. 15. Timing of Contributions. A contribution is deemed to have been made on the last day of the preceding taxable year if the contribution is made by the deadline for filing the Depositor's income tax return (not including extensions) and if the Depositor designates the contribution as a contribution for the preceding taxable year in a manner acceptable to the Custodian. The Custodian will not be liable or responsible for any consequences of postal delays or delays resulting from an incomplete Application or a designation made in an unacceptable form. Applications received by IFTC postmarked after the deadline will be treated as a contribution for the Depositor's current tax year. Improperly completed applications will be returned to the sender. 16. Governing Law. This Agreement and the Custodial Account shall be construed, administered and enforced according to the laws of the State of Missouri. 17. When Effective. This Agreement shall not become effective until acceptance of the Application by the Custodian at its principal offices, as evidenced by a written confirmation to the Depositor. - -------------------------------------------------------------------------------- Depositor's Signature_________________________________________ Date____________ Custodian's Signature_________________________________________ Date____________ Witness_________________________________________________________________________ (Use only if signature of the Depositor or the Custodian is required to be witnessed.) DISCLOSURE STATEMENT The following information is provided to you in accordance with the requirements of the Internal Revenue Code (the "Code") and Treasury regulations and should be reviewed in conjunction with the individual Retirement Custodial Account Agreement (the "Custodial Agreement"), the Application for your IRA (the "Application"), and the prospectus for the mutual funds of Oberweis Emerging Growth Fund that are allowable investments for your IRA. The provisions of the Custodial Agreement, Application and prospectus govern in any instance where the Disclosure Statement is incomplete or appears to conflict. This Disclosure Statement reflects the provisions of the Internal Revenue Code in effect on January 1, 1993. This Disclosure Statement provides a nontechnical summary of the law. Please consult with your tax advisor for more complete information and refer to IRS Publication 590. 1. IRA STATUTORY REQUIREMENTS An IRA is a trust or custodial account established for the exclusive benefit of you and your beneficiaries. Current law requires that your IRA agreement be in writing and that it meet the following requirements: 1. All contributions must be in cash and, for any taxable year, cannot exceed 100% of your compensation or $2,000, whichever is less, unless the contribution is a rollover contribution or an employer contribution to a simplified employee pension plan ("SEP"). 2. The custodian or trustee must be a bank or other institution or person that is approved by the Internal Revenue Service to administer your IRA in accordance with current tax laws. 3. None of your IRA assets may be invested in life insurance contracts or commingled with the assets of other people except in a common trust fund or common investment fund. 4. Your interest in your IRA account is nonforfeitable. 5. Distribution from your IRA must be in accordance with certain minimum distribution rules, which are explained in Section VII below. II. RIGHT TO REVOKE You may revoke your IRA at any time within seven days of the time your Application is signed. To revoke your IRA, mail or deliver a written notice stating "I hereby elect to revoke my Oberweis Emerging Growth Fund IRA." Sign your name exactly as it appears on your Application, include your social security number, and mail the notice to: Investors Fiduciary Trust Company 127 West 10th Street, Box 419042 Kansas City, Missouri 64105 Your notice will be considered mailed on the date of postmark, or the date of certification or registration if it is sent by certified or registered mail. When IFTC receives the proper notice of revocation, you will be entitled to a refund of your full IRA contribution, without any adjustment for expenses or market fluctuations. If you have any questions concerning your right of revocation, please call 1-800-245-7311 during regular business hours. III. ELIGIBILITY You may make regular contributions to an IRA if you receive compensation from employment, earnings from self-employment, or alimony, and you have not reached age 70 1/2 by the end of the tax year for which the contribution is made. In addition, if you are married and file a joint tax return, you may make contributions to an IRA for your spouse whether or not your spouse receives compensation. You may make a rollover contribution to an IRA if you have received an eligible rollover distribution from a qualified retirement plan or tax-sheltered annuity or an eligible distribution from another IRA and elect rollover treatment within 60 days. You may also make a trustee-to-trustee transfer from another IRA. Finally, your employer may contribute to your IRA and if your employer sponsors a simplified employee pension ("SEP"), your employer can make contributions to a SEP/IRA on your behalf. IV. CONTRIBUTIONS A. Regular Contributions You may contribute each year up to $2,000 or 100% of your compensation, whichever is less, to your IRA. If you also establish a spousal IRA for your spouse, you may contribute up to $2,250 or 100% of your compensation, if less, which may be split between the two IRA's as you choose, provided that no more than $2,000 may be contributed to either your IRA or the spousal IRA. If your spouse has compensation in excess of $250, you and your spouse can make a larger total contribution if you each contribute to a regular IRA. If your employer contributes to your IRA, the contribution is treated as compensation paid to you, whether or not the contribution is deductible, unless the contribution is made under a SEP (see below). Compensation for these purposes means wages, salaries, professional fees, or other amounts derived from or received for personal services actually rendered. It includes earned income from self employment and alimony or separate maintenance payments includable in income. It does not include pension or annuity payments or deferred compensation. B. Time for Making Regular Contributions You may make regular contributions to your IRA and/or your spousal IRA anytime during a year, up to and including the due date for filing your tax return for the year, up to and including the due date for filing your tax return for the year (without extensions). No regular contributions may be made to an IRA for the calendar year in which you reach age 70 1/2 or later years. No regular contributions to a spousal IRA may be made for years in which your spouse is age 70 1/2 or older. C. Deductibility Regular IRA contributions are fully deductible unless you or your spouse are active participants in a tax-qualified plan of an employer. If you or your spouse are active participants in such a plan, then your allowable deduction for regular IRA contributions is reduced or eliminated if your Adjusted Gross Income ("AGI") exceeds certain levels. (If you file separately and are married but live apart from your spouse at all times during the year, you will be considered to be single when applying the following rules regarding deduction limitations.) The deductible amount is determined as follows: 1. If you (and your spouse) are not active participants in a tax-qualified plan, any contribution up to the maximum amount is deductible. 2. If you (or your spouse) are an active participant in a tax-qualified plan, and (a) your AGI is $25,000 or less ($40,000 for a married couple filing a joint return and $0 for a married person filing separately), any contribution up to the maximum amount is deductible; (b) your AGI is $35,000 or more ($50,000 for a married couple filing a joint return and $10,000 for a married person filing separately), no IRA contribution is deductible; (c) your AGI is between $25,000 and $35,000 ($40,000 and $50,000 for a married couple filing a joint return and $0 to $10,000 for a married person filing separately), the deductible amount is reduced. In the case of a regular IRA, the reduction is $0.20 for each $1.00 of AGI over $25,000 ($40,000 for a married couple filing a joint return and $10,000 for a married person filing separately). For a spousal IRA, the reduction is $0.225 for each $1.00 of AGI over $40,000 if filing jointly. The limit will not be reduced below $200 unless it is eliminated entirely. To the extent that the deductibility of IRA contributions is reduced or eliminated, then nondeductible contributions may be made to your IRA. Earnings on all IRA contributions, whether or not the contributions themselves are deductible, are tax-deferred until receipt. You must designate the amount of nondeductible IRA contributions when filing your tax return for the year. If you overstate the amount of your nondeductible contributions you must pay a $100 penalty, unless you can show that such overstatement was due to reasonable cause. If you fail to report nondeductible IRA contributions you will be subject to a $50 penalty, unless your failure was due to reasonable cause. D. Rollover Contributions 1. Amounts Eligible for Rollover from Plans and Tax-Sheltered Annuities You may make a rollover contribution to your IRA of an "eligible rollover distribution" from an employer tax-qualified plan (an "employer plan") or a tax-sheltered annuity (including a 403(b)(7) account). The administrator of the employer plan or the payor of a distribution from the tax-sheltered annuity should be able to tell you what portion of your payment is an eligible rollover distribution. The following types of payments cannot be rolled over. Non-Taxable Payments. In general, only the "taxable portion" of your payment is an eligible rollover distribution. If you have made "after-tax" employee contributions to the plan or annuity, these contributions will be non-taxable when they are paid to you, and they cannot be rolled over. (After-tax employee contributions generally are contributions you made from your own pay that were already taxed.) Payments Spread Over Long Periods. You cannot roll over a payment if it is part of a series of equal (or almost equal) payments that are made at least once a year and that will last for . your lifetime (or your life expectancy), or . your lifetime and your beneficiary's lifetime (or life expectancies), or . a period of ten years or more. Required Minimum Payments. Beginning in the year you reach age 70 1/2, a certain portion of your payments cannot be rolled (or transferred) over because it is a "required minimum payment" that must be paid to you. 2. Direct Rollover You can choose a direct rollover of all or any portion of your payment from an employer plan or a tax-sheltered annuity that is an "eligible rollover distribution," as described above. In a direct rollover, the eligible rollover distribution is paid directly from the plan or tax-sheltered annuity to your IRA. If you choose a direct rollover, you are not taxed on a payment until you later take it out of the IRA. 3. Rollover of Plan Payments Paid To You A payment to you of an eligible rollover distribution from an employer plan or tax-sheltered annuity is taxed in the year you receive it unless, within 60 days, you roll it over to an IRA (or another plan that accepts rollovers). If you do not roll it over, special tax rules may apply. If any portion of the payment to you is an eligible rollover distribution, the payor is required by law to withhold 20% of that amount. This amount is sent to the IRS as income tax withholding. Sixty-Day Rollover Option. If you have an eligible rollover distribution paid to you, you can still decide to roll over all or part of it to an IRA (or another employer plan that accepts rollovers). If you decide to roll over, you must make the rollover within 60 days after you receive the payment. The portion of your payment that is rolled over will not be taxed until you take it out of the IRA (or the employer plan). You can roll over up to 100% of the eligible rollover distribution, including an amount equal to the 20% that was withheld. If you choose to roll over 100%, you must find other money within the 60-day period to contribute to the IRA or the employer plan to replace the 20% that was withheld. (On the other hand, if you roll over only the 80% that you received, you will be taxed on the 20% that was withheld.) See the Special Tax Notice Regarding Plan Payments, that must be provided by the plan administrator or payor of your employer plan or tax-sheltered annuity, for additional information on the rules governing rollover and taxation of plan distributions, or consult your tax advisor for more details. You should maintain a separate IRA account for any rollovers of funds from an employer plan if you want to preserve your ability to later roll over these funds and earnings into another employer plan. Similarly, you should maintain a separate account for any rollover of funds from a tax-sheltered annuity. You can make a rollover from a tax-qualified plan of your spouse's employer if you received all or a part of your spouse's share as a result of his or her death. A spouse or former spouse who is a recipient of a distribution made under a qualified domestic relations order may roll over all or part of the distribution. Because complex rules apply to distribution and rollovers of payments from employer plans and tax-sheltered annuities, you should seek competent tax advice whenever you contemplate receiving a distribution from a qualified plan or tax-sheltered annuity or an IRA funded by a rollover from a qualified plan or tax-sheltered annuity. 4. Rollovers from Other IRAs You may also make a rollover contribution of amounts held in another IRA. There are no limits on the amount of rollover contributions made to an IRA from another IRA, except you may not roll over (or transfer) the required minimum amount (described in VII.D.). However, the distribution from the first IRA must be rolled over within 60 days of receipt and no more than one distribution per year from an IRA may be rolled over into another IRA. 5. Tax-Deferral on IRA Rollover or Trustee-to-Trustee Transfer An effective rollover allows you to postpone paying taxes on the amount distributed from an employer plan, tax-sheltered annuity or IRA until it is withdrawn from the recipient IRA. You do not report the distribution as income and you do not take a deduction from the rollover contribution. Earnings on your rollover IRA are tax-deferred until receipt. (Similarly, a trustee-to-trustee transfer is not treated as a distribution and the amount transferred and earnings are tax-deferred until receipt.) E. SEP Contributions If your employer has established a simplified employee pension ("SEP"), your employer may make contributions to your SEP/IRA. If the SEP contains a salary reduction arrangement, you may elect to reduce your salary by up to the lesser of 15% of compensation or $7,000 (indexed); and have that amount contributed to your SEP/IRA. The maximum SEP contribution, including salary reduction amounts and employer contributions, is the lesser of 15% compensation or $30,000. SEP contributions are not included in your taxable income. V. Excess Contributions Amounts contributed to an IRA which exceed the maximum allowable contribution are treated as "excess contributors" and are subject to a nondeductible 6% penalty tax for each year in which the excess remains in the IRA. Excess contributions may be corrected and the 6% penalty tax avoided by withdrawal of the excess and any earnings thereon before the due date (including extensions) of the tax return for the tax year for which the excess contribution was made. No deduction may be taken for the excess contributors and the earnings must be included in taxable income for the year the contribution was made. The earnings withdrawn may be subject to a 10% premature distribution tax if you are under age 59 1/2. See Section VII.B. An excess contribution may be withdrawn after the due date of the tax return (including extensions) with the following consequences: (a) If your total contribution for the tax year the excess contribution was made is $2,250 or less (or below the limit of your employer's SEP contribution) the excess contribution may be withdrawn without being included in income or being subject to the 10% premature distribution tax. No deduction may be taken for the excess contribution. Any earnings withdrawn will be included in income and may be subject to the premature distribution tax. (b) If your total contribution for the tax year the excess contribution was made exceeds $2,250 (or, if higher, the limit of your employer's SEP contribution) any excess contribution and any earnings on the excess The Oberweis Funds The Oberweis Funds Emerging Growth Portfolio P.O. Box 419042 Micro-Cap Portfolio Kansas City, MO 64141 INDIVIDUAL RETIREMENT ACCOUNT APPLICATION 1. Account Registration Name of Custodian: Investors Fiduciary Trust Company, as Custodian 210 West 10th Street, Box 419042 Kansas City, MO 64141 ________________________________________________________ Name (One Only) ________________________________________________________ Address ________________________________________________________ City State Zip ________________________________________________________ Social Security # Date of Birth ________________________________________________________ Daytime Phone # Evening Phone # 2. Designation of Beneficiary Primary Beneficiary ________________________________________________________ Relationship ________________________________________________________ Name ________________________________________________________ Address ________________________________________________________ City State Zip ________________________________________________________ Social Security # Date of Birth ________________________________________________________ Relationship ________________________________________________________ Name ________________________________________________________ Address ________________________________________________________ City State Zip ________________________________________________________ Social Security # Date of Birth Secondary Beneficiary ________________________________________________________ Relationship ________________________________________________________ Name ________________________________________________________ Address ________________________________________________________ City State Zip ________________________________________________________ Social Security # Date of Birth ________________________________________________________ (If more space is needed for beneficiaries please provide above information on each, on a separate sheet of paper.) 3a. Type of IRA (check only one) Indicate contribution amount and year [_] Regular [_] Spousal [_] SEP [_] Rollover $___________________________ _____________________ Amount Year 3b. IRA Funded By: [_] Contribution [_] Direct Transfer of Assets from another IRA [_] Direct Rollover from Employer "Qualified Plan" (401k, 403b, Money Purchase Pension Plan, Profit Sharing Plan, etc.) [_] Rollover from: [_] Another IRA [_] Qualified Retirement Plan or 403(b) Plan 4. Choose Your Investment I have the right to direct the investments. I understand, however, that the investment options available to me are limited to those shown below: ($1,000 minimum for each Portfolio to establish an IRA) [_] Oberweis Emerging Growth Portfolio $_______________ [_] Oberweis Micro-Cap Portfolio $_______________ 5. Annual Administrative Fee An annual administrative fee of $12.00 per portfolio investment will be deducted from your account automatically if not submitted separately. The custodian may change this fee from time to time. 6. Telephone Transaction Option Unless you indicate otherwise by checking the box below, you may effect telephone exchanges between portfolios by calling 1-800-245-7311. [_] I do not want telephone exchanges between portfolios. 7. Automatic Investing Please enclose a voided, unsigned check for the bank account to be debited (or deposit slip if debiting savings account). You may invest in any of the Oberweis Funds automatically each month by completing the following information, attaching a voided unsigned check and returning it to the Oberweis Funds (c/o IFTC). You will receive a confirmation of each transaction and the deduction from your bank account will appear on your monthly bank statement. Please invest the amount indicated (minimum $100 per portfolio) in the following portfolio(s) on or about the [_] 5th day [_] 20th day (20th will be selected if no box is checked) [_] of each month [_] of each quarter This bank account is a [_] Checking [_] Savings Your first automatic monthly investment will occur no sooner than two weeks after the receipt of your application. [_] Oberweis Emerging Growth Portfolio $ ____________________________________ [_] Oberweis Micro-Cap Portfolio $ ____________________________________ 8. Signatures (Important: Please read before signing) Spousal Consent (For use in community or marital property states) (This section should be reviewed if either the trust or the residence of the accountholder is located in a community or marital property state and the accountholder is married and is designating a beneficiary other than the spouse. It is the accountholder's responsibility to determine if this section applies. The accountholder may need to consult with legal counsel. Neither the Custodian or the Sponsor will be liable for any consequences resulting from a failure of the accountholder to provide proper spousal consent.) I am the spouse of the above-named accountholder. I acknowledge that I have received a full and reasonable disclosure of my spouse's property and financial obligations. Due to any possible consequences of giving up my community property interest in this IRA, I have been advised to see a tax professional or legal advisor. I hereby give the accountholder any interest I have in the funds or property deposited in this IRA and consent to the beneficiary designation(s) indicated above. I assume full responsibility for any adverse consequences that may result. No tax or legal advice was given to me by the Custodian. ________________________________________________________________________________ Signature of Spouse Date ________________________________________________________________________________ Witness for Spouse Date We cannot process this application if section below is not signed. By signing the Application establishing an IRA, the undersigned: (1) established an Individual Retirement Account pursuant to the Internal Revenue Code of 1986, as amended, and in accordance with all the terms of the Form 5305A Individual Retirement Custodial Account, together, with the Custodial Agreement incorporated therein, (2) appoints Investors Fiduciary Trust Company (IFTC), or its successors, as Custodian on the Account, (3) states that he or she has received, read, accepts and specifically incorporated herein the Custodial Agreement on Form 5305A and Disclosure Statement, (4) agrees to promptly give instructions to the Custodian necessary to enable the Custodian to carry out its duties under the Custodial Agreement, (5) agrees that he or she has received and read the Prospectus for the investment(s) selected and that this account will be subject to the Custodial Agreement as amended from time to time, (6) has the authority and legal capacity to purchase mutual fund shares, is of legal age in his/her state and believes each investment is suitable for him/her and (7) hereby ratifies any instructions given on this account and any account into which he/she exchanges related to the above items and agrees that neither The Oberweis Funds nor IFTC will be liable for any loss, cost or expense for acting upon such instructions (by telephone or writing) believed to be genuine and in accordance with the procedures described in the Prospectus. Under penalties of perjury, I certify that the number shown on this form is my correct social security number. ________________________________________________________________________________ Signature of Depositor Date Mailing Address: The Oberweis Funds The Oberweis Funds Emerging Growth Portfolio P.O. Box 419042 Micro-Cap Portfolio Kansas City, MO 64141 In accordance with the terms and conditions set forth in this form the Fund's current Prospectus and my instructions below, I wish to establish a Shareholder Account in the Fund. 1. Account Registration a.) Individual: PLease print or type: _________________________________________________________ First Name Middle Name Last Name b.) Joint Owner _________________________________________________________ First Name Middle Name Last Name c.) Gift to Minor: Minor's Social Security Number must be indicated in Section 3. _____________________________________________________ as custodian for Custodian's Name (only one permitted) ____________________________________________________________ under the Minor's Name (only one permitted) __________________________________________ Uniform Gifts/Transfers to Minors Act Donor's State of Residence d.) A Trust (including Corporate Pension Plans) ____________________________________________________ as trustee(s) for Name of Trustee(s) ______________________________________________________________________ Name of Trust under agreement dated ________________________________________________ Date of Trust e.) A Corporation, Partnership, or other entity: Please include corporate resolution ______________________________________________________________________ Name of Corporation or other entity [_] Corporation [_] Partnership [_] Other __________________________ Please Specify 2. Mailing Address ______________________________________________________________________ Street Address Apt./Suite # ______________________________________________________________________ City State Zip ______________________________________________________________________ Daytime Phone Evening Phone 3. Social Security Number or Tax I.D. Number Your application will be returned if sections 3 and 5 are not completed and signed. _______________________________________________________________________ Social Security Number or Employer Tax Identification Number Check One: [_] U.S. Citizen [_] Resident Alien (must have US Tax ID Number and domestic address) [_] Non-Resident Alien of ________________________________________ Country of Tax Residency if different from mailing address 4. Choose Your Investment Please make my investment in the portfolio(s) below. Initial investment minimum $1000 per portfolio [_] Oberweis Emerging Growth Portfolio $________________ [_] Oberweis Micro-Cap Portfolio $________________ 5. Investment Method [_] By Check Amount enclosed $______________ [_] By Wire Amount of wire $______________ For wire investment, please call 1-800-245-7311 For your account number, Acct # ________________ For protection of our shareholders, there is a 15-day hold placed on your investment to ensure good funds. 6. Automatic Investing Method Please enclose a voided, unsigned check for the bank account to be debited (or deposit slip if debiting savings account). You may invest in any of the Oberweis Funds automatically each month or quarter by completing the following information, attaching a voided unsigned check and returning it to The Oberweis Funds (c/o IFTC). You will receive a confirmation of each transaction and the deduction from your bank account will appear on your monthly bank statement. Please invest the amount indicated (minimum $100 per portfolio) in the following portfolio(s) on or about the [_] 5th day [_] 20th day (20th will be selected if no box is checked) [_] of each month [_] of each quarter This bank account is a [_] Checking [_] Savings Your first automatic monthly investment will occur no sooner than two weeks after the receipt of your application. [_] Oberweis Emerging Growth Portfolio $ _________________ [_] Oberweis Micro-Cap Portfolio $ _________________ 7. Distribution Options All income dividends and capital gains distributions will be reinvested unless noted below: [_] Pay all income in cash [_] Pay all capital gains in cash If dividend or withdrawal checks are to be made payable to someone other than the registered owner complete the following. Make dividend [_] withdrawal [_] checks payable to: _________________________________________________________________ Name _________________________________________________________________ Address _________________________________________________________________ City State Zip 8. Telephone Transaction Options Unless you indicate otherwise by checking the appropriate box below, you may effect telephone transactions by calling 1-800-245-7311. [_] I do not want Telephone Exchanges between Funds [_] I do not want Telephone Redemption by Mail. Redemption check will be mailed only to the name and address in which your account is registered. [_] I do not want Telephone Redemption by Electronic Transfer* Allows you to make redemptions by telephone and have the amounts transferred electronically to your bank account. *Please enclose a voided, unsigned check (or deposit slip if savings account) to ensure accurate banking information. 9. Dealer Information For Dealer Only We hereby authorize The Chicago Corporation to act as agent in connection with transactions under this authorization form. We guarantee the shareholder's signature. _______________________________________________________________________________ Firm Name _______________________________________________________________________________ Representative's First/Last Name _______________________________________________________________________________ Representative's Number _______________________________________________________________________________ Branch Address _______________________________________________________________________________ City State Zip 10. Signatures All of the undersigned have the authority and legal capacity to purchase mutual fund shares, all are of legal age in their state and believe each investment is suitable for themselves. All of the undersigned have received and read the Prospectus for the investment selected, agree to its terms and understand that by signing below (a) when elected their account will have the Exchange privilege capability with other Oberweis Portfolios. All information provided in the above items will apply to any portfolio into which their shares may be exchanged; (b) they hereby ratify any instructions given on this account and any account into which they exchange related to the above items and agree that neither The Oberweis Funds nor ___________________________ will be liable for any loss, cost or expense for acting upon such instructions (by telephone or writing) believed to be genuine and in accordance with the procedures described in the Prospectus; and (c) their responsibility is to read the Prospectus of any Fund into which they exchange. Under penalties of perjury, I certify: (1) The number shown on this form is my correct social security or taxpayer identification number and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. [_] Check this box only if the IRS has notified you that you are subject to backup withholding. _______________________________________________________________________________ Signature of Owner, Trustee or Custodian Date _______________________________________________________________________________ Signature of Joint Owner (if any) Date Send this request to: The Oberweis Funds P.O. Box 419042 Kansas City, MO 64141 Terms and Conditions of Account Application Additional Investment After a Shareholder Account is established, additional investments in amounts of $100 or more may be made at any time. Such additional investments will be applied to the purchase of full and fractional shares of the Portfolio at the public offering price. These investments should be accompanied by an investment transmittal stub (attached to any previously received shareholder confirmation) and mailed directly to the Fund's Transfer Agent, Investors Fiduciary Trust Company. Systematic Withdrawal Plan A Systematic Withdrawal Plan is available for shareholders who wish to receive monthly or quarterly payments of $50 or more. Systematic withdrawals require the deposit of shares having a value of $10,000 or more based upon the current Net Asset Value per share. Withdrawal payments represent proceeds from redemption of shares held in the account. Redemptions are made at Net Asset Value, as determined at the close of business on the New York Stock Exchange five business days prior to the end of each month or the end of the last month of the quarter or year, whichever is applicable. If the date is one on which the NYSE is not open for business, shares will be redeemed at the close of business on the following day. Withdrawals concurrent with the purchase of additional shares may be inadvisable because of tax liabilities. (The Fund limits additional purchases in a withdrawal account to amounts equal to at least one year's scheduled withdrawals or $1,000, whichever is greater.) The shareholder may terminate his Systematic Withdrawal Plan at any time by giving written notice to the Fund's Custodian. His Systematic Withdrawal Plan may also be terminated at any time by the Fund, or the Distributor, by giving written notice to the shareholder. There is no charge or penalty upon termination of such an account. Dividends and capital gain distributions paid on shares held in a Systematic Withdrawal Account must be reinvested in full and fractional shares of the Portfolio (rather than received in cash) at the Net Asset Value per share at the close of business on the day of such payments. Automatic Investment Plan Shareholders who wish to make automatic subsequent investments into the Fund may do so through the Automatic Investment Plan. Automatic Investments of at least $100 can occur either monthly or quarterly, on or about the 5th or 20th of the month. The funds will be transferred from the shareholder's checking or savings account, using electronic funds transfer via the Automated Clearing House (ACH). Purchases are made at Net Asset Value, as determined at the close of business on the New York Stock Exchange on the day the funds are received at the Fund's Custodian and Transfer Agent. If the date is one in which the NYSE is not open for business, shares will be purchased at the close of business on the following business day. Initial investments may not be made through this Plan. The Plan is subject to the approval of the shareholder's bank. Your bank must be able to accept ACH transactions and/or be a member of an ACH association. We cannot guarantee acceptance by your bank. The Plan can be terminated by sending written notice to the Fund's Custodian. The notice must be received at least 5 business days prior to the date of the next scheduled automatic purchase. The Plan is automatically terminated whenever a check is returned unhonored by the shareholder's bank. The shareholder is responsible for any charges incurred as a result of an unhonored transaction. Additional Information Each time there is a transaction in a Shareholder Account, the shareholder will receive a confirmation statement showing the current transaction. Certificates can be issued for full shares only. These certificates will be sent to the shareholder only upon specific request. The method of delivery of share certificates is at the option and risk of the shareholder. If sent by mail, registered and insured mail is suggested. All correspondence regarding Shareholder Accounts should be addressed to The Oberweis Funds, c/o Investors Fiduciary Trust Company, P.O. Box 419042, Kansas City, Missouri 64141. This form is not authorized for distribution to prospective purchasers of shares of the Portfolio in states where such shares are not qualified for sale. [OBERWEIS LOGO] Emerging Growth Fund IRA TRANSFER REQUEST FORM Investors Fiduciary Trust Company, as Custodian To transfer assets from an existing IRA or to complete a rollover from a qualified employer plan, 403(b) account or Keogh to an Oberweis Emerging Growth Fund IRA, complete this form and attach a copy of a current statement from your existing IRA or qualified retirement plan. If you are opening a new IRA, also attach your completed IRA application to this form. Return this form and the applicable attachments to Investors Fiduciary Trust Company, 127 West 10th Street, Box 419042, Kansas City, MO 64105. =============================================================================== CUSTODIAN OF EXISTING ACCOUNT: - ------------------------------------- -------------------------------------- Today's Date - ------------------------------------- -------------------------------------- Custodian Name Your Social Security Number - ------------------------------------- -------------------------------------- Custodian Address Your Name - ------------------------------------- -------------------------------------- City State Zip Your Address - ------------------------------------- -------------------------------------- Custodian Phone Number City State Zip =============================================================================== INSTRUCTIONS TO CUSTODIAN OF EXISTING ACCOUNT, ACCT. NO. ______________________ I have established an Oberweis Emerging Growth Fund Individual Retirement Account with Investors Fiduciary Trust Company as Custodian. Please withdraw assets from my account in your custody in the following manner and send a check payable to Investors Fiduciary Trust Company Individual Retirement Account in the name of ________________________________________________________, 127 West 10th Street, Box 419042, Kansas City, MO 64105. You will be receiving a letter of acceptance from Investors Fiduciary Trust Company. Portion of account to be transferred (check one): (Note: if you are age 70 1/2 or older, you must take out your minimum required distribution from your IRA before completing a transfer.) _____ 1. All of the assets in my account. _____ 2. $__________________ in my account. If you are transferring a certificate of deposit IRA choose one of the options below: _____ 1. Liquidate prior to maturity date. I am aware of and acknowledge the penalty I will incur from an early withdrawal. _____ 2. Liquidate at maturity. (Maturity date must be within 60 days. If the mature date is less than 15 days from the date of this request, you may want to contact your custodian bank to prevent automatic reinvestment of the account.) =============================================================================== AUTHORIZATIONS: Shareholder Authorization: I hereby authorize Investors Fiduciary Company to deposit the assets in my existing IRA, qualified employer plan or Section 403(b) account according to the terms stated in this IRA Transfer Request Form. I hereby acknowledge that strict requirements must be met to qualify for tax-free rollover or transfer treatment; I hereby certify that the source of the transfer or rollover contribution qualifies the contribution as such. X____________________________________ ______________________ Signature Date Custodian Authorization: Investors Fiduciary Trust Company hereby accepts its appointment as Custodian of the above IRA account and upon receipt of assets, will deposit such assets in an Oberweis Emerging Growth Fund IRA on behalf of the Depositor authorizing this transfer or special rollover. X_______________________________________________________ INVESTORS FIDUCIARY TRUST COMPANY Authorized Signature Signature Guarantee: Your Current Trustee or Custodian may require your signature to be Guaranteed. Call them for requirements. Name of Bank or Firm Guaranteeing Signature: __________________________________ Signature of Officer & Title: _________________________________________________ EX-99.15.4 14 PLAN OF DISTRIBUTION Plan as amended Effective October 1, 1994 OBERWEIS EMERGING GROWTH FUND RULE 12B-1 PLAN --------------------------------------------- The plan ("Plan") described below is adopted pursuant to the provisions of Rule 12b-1 ("Rule 12b-1") under the Investment Company Act of 1940 (the "1940 Act") by the Board of Trustees ("Board") of Oberweis Emerging Growth Fund ("Fund"), including a majority of the members of the Board who are not "interested persons" (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the Plan or any agreement related thereto. The Board having determined that there is a reasonable likelihood that the following described Plan as amended will benefit the Fund and its shareholders and that said Plan is otherwise in the best interests of the Fund and its shareholders, hereby adopts and approves the Plan as amended and the related agreements described herein. 1. The Plan is adopted in order to induce other firms (including brokerage firms, depository institutions and other firms) to provide distribution and/or administrative services to the Fund and its shareholders and to enable the Fund to compensate such firms (including depository institutions and other firms) for certain expenses associated with the distribution services (in the case of broker-dealers and other firms) and administrative services (in the case of all firms) to be provided under the Plan. Pursuant to the Plan, asset-based sales charges imposed by the Fund, as defined in Article III, Section 26 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("Article III, Section 26"), shall not exceed (a) .50 of 1% of the average daily net assets of the Fund, and (b) those permitted by Article III, Section 26, and the Fund shall calculate its permissible amount of asset-based sales charges on new gross sales of the Fund since the Fund's inception. 2. Pursuant to a Distribution Agreement, the Fund shall pay the principal distributor (the "Principal Distributor") an annual fee for distribution services (the "Distribution Fee") at an annual rate that may range from .25 to .45 of 1% of the average daily net assets of the Fund in the manner set forth in said Distribution Agreement, with the specific amount to be set as the Board and the Principal Distributor shall mutually agree from time to time. The Principal Distributor is also authorized to pay participating broker-dealers and other firms any portion or all of the Distribution Fee pursuant to agreements between the Principal Distributor and said firms substantially in the form attached to the Distribution Agreement or in a form otherwise approved by the Board. Part or all of such fees may be utilized by the Principal Distributor and the participating broker-dealers or other firms to pay for certain expenses associated with the distribution services to be provided under said agreements. 3. Pursuant to a Shareholder Service Agreement (the "Service Agreement"), the Fund shall pay the primary shareholder service agent (the "Service Agent") an annual fee for administrative services (the "Service Fee") at an annual rate that may range from .05 to .25 of 1% of the average daily net assets of the Fund in the manner set forth in said Service Agreement, with the specific amount to be set as the Board and the Service Agent shall mutually agree from time to time. The Service Agent is also authorized to pay participating broker-dealers and other firms (including depository institutions) ("Firms") any portion or all of the Service Fee with respect to accounts serviced by such persons pursuant to the servicing agreements between the Service Agent and said Firms, substantially in the form attached to the Service Agreement or in a form otherwise approved by the Board. Part or all of such fees may be utilized by the Service Agent and the Firms to pay for certain expenses associated with the administrative services to be provided under said agreements. 4. The Board shall require that the Principal Distributor prepare reports for review of the Board on a quarterly basis which list the amounts expended by the Principal Distributor under the Distribution Agreement and the purposes for such expenditures, including amounts paid to participating broker-dealers or other firms, if any, and such other information as from time to time shall be reasonably requested by the Board. The Board shall require that the Service Agent prepare reports for review of the Board on a quarterly basis which list the amounts expended by the Service Agent under the Service Agreement and the purposes for such expenditures, including amounts paid to other Firms, if any, and such other information as from time to time shall be reasonably requested by the Board. Not less frequently than quarterly, the Board shall review said reports at a meeting of the Board. 5. The Plan first became effective upon its approval by the shareholders of the Fund at a special meeting of shareholders held on May 4, 1989 and amendments to the Plan were subsequently approved by the Board of Trustees (including a majority of the Trustees who are not interested persons of the Fund) effective as of May 17, 1994 and October 1, 1994. 6. The Plan (and related agreements) unless terminated earlier as hereinafter provided, shall continue in effect from year-to-year so long as each such continuance is approved at least annually by the vote of the Board, including a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto cast in person at a meeting called for the purpose of voting on such Plan (and related agreements). 7. The Plan may be terminated by the Fund at any time upon the vote of a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto or by the vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) and any related agreement may be terminated by the Fund in a similar manner without penalty upon at least 60 days written notice to the other party as provided in such agreements. The Distribution Agreement and the Service Agreement may each be terminated by the Principal Distributor and the Service Agent, respectively, without penalty upon at least 60 days written notice to the Fund. 8. All material amendments to the Plan must be approved by the vote of the Board, including a majority of the Trustees of the Fund who are not interested persons (as defined in the 2 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto, cast at a meeting called for the purpose of voting on such amendments, and in the case of any amendment materially increasing the amount of expenditures for distribution to be paid by the Fund, by the vote of the majority of the outstanding voting securities of the Fund (as defined in the 1940 Act). 9. So long as the Plan is in effect, the selection and nomination of Trustees who are not interested persons (as defined in the 1940 Act) of the Fund shall be committed to the discretion of those Trustees who are not interested persons of the Fund. 10. Any agreement with any person relating to the implementation of this Plan shall be subject to automatic termination upon its assignment (as defined in the 1940 Act). 3 EX-99.15.4.1 15 AMENT PLAN OF DISTRIBUTION Plan as amended January 1, 1996 THE OBERWEIS FUNDS RULE 12B-1 PLAN ---------------------------------- The plan ("Plan") described below is adopted pursuant to the provisions of Rule 12b-1 ("Rule 12b-1") under the Investment Company Act of 1940 (the "1940 Act") by the Board of Trustees ("Board") of The Oberweis Funds ("Fund"), including a majority of the members of the Board who are not "interested persons" (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the Plan or any agreement related thereto. The Fund currently issues units of beneficial interest ("Shares") in two portfolios, the Emerging Growth Portfolio and the Micro-Cap Portfolio (collectively referred to as the "Portfolios" and individually referred to as a "Portfolio") and the Fund desires to adopt the Plan with respect to Portfolios that are presently designated and such other series as may hereafter be designated by the Board of Trustees ("Additional Portfolio"). The Board having determined that there is a reasonable likelihood that the following described Plan as amended will benefit the Fund and its shareholders and that said Plan is otherwise in the best interests of the Fund and its shareholders, hereby adopts and approves the Plan as amended and the related agreements described herein. 1. The Plan is adopted in order to induce other firms (including brokerage firms, depository institutions and other firms) to provide distribution and administrative services to the Fund and its shareholders and to enable the Fund to compensate such firms (including depository institutions and other firms) for certain expenses associated with the distribution services (in the case of broker-dealers and other firms) and administrative services (in the case of all firms) to be provided under the Plan. Pursuant to the Plan, asset-based sales charges imposed by the Fund, as defined in Article III, Section 26 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("Article III, Section 26"), shall not exceed (a) .25 of 1% of the average daily net assets of each Portfolio and (b) those permitted by Article III, Section 26 and each Portfolio shall calculate its permissible amount of asset-based sales charges on new gross sales of the Portfolio since the Portfolio's inception. 2. Pursuant to an agreement (the "Agreement"), each Portfolio shall pay the principal distributor named therein from time to time (the "Principal Distributor") an annual fee for distribution and/or administrative services described therein at the aggregate annual rate of .25 of 1% of its average daily net assets in the manner set forth in said Agreement. The Principal Distributor is also authorized to pay participating broker-dealers and other firms (including depository institutions) any portion or all of the annual fee pursuant to services agreements ("Services Agreement") between the Principal Distributor and said firms. Part or all of such fees may be utilized by the Principal Distributor and the participating broker-dealers or other firms (including depository institutions) to pay for certain expenses associated with the distribution services (in the case of broker-dealers) and administrative services (in the case of all firms) to be provided under said agreements. 3. The Board shall require that the Principal Distributor prepare reports for review and approval of the Board on a quarterly basis which list the amounts expended by the Principal Distributor under the Agreement and the purposes for such expenditures, including amounts paid to participating broker-dealers or other firms, if any, under the Services Agreements and such other information as from time to time shall be reasonably requested by the Board. Not less frequently than quarterly, the Board shall review said report(s) at a meeting of the Board. 4. The Plan first became effective upon its approval by the shareholders of the Fund at a special meeting of shareholders held on May 4, 1989 and amendments to the Plan were subsequently approved by the Board of Trustees (including a majority of the Trustees who are not interested persons of the Fund) effective as of May 17, 1994, October 1, 1994 and January 1, 1996. 5. The Plan (and related agreements) unless terminated earlier as hereinafter provided, shall continue in effect from year-to-year as to each Portfolio so long as each such continuance is approved at least annually by the vote of the Board, including a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto cast in person at a meeting called for the purpose of voting on such Plan (and related agreements). This Plan (and related agreements) shall become effective as to each Additional Portfolio upon approval by the vote of the Board, including a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund, as well as the vote of any initial shareholder of the newly created and designated Additional Portfolio. 6. The Plan may be terminated by the Fund or a Portfolio at any time upon the vote of a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto or by the vote of a majority of the outstanding voting securities of that Portfolio (as defined in the 1940 Act) and any related agreement may be terminated by the Fund in a similar manner without penalty upon at least 60 days written notice to the Principal Distributor as provided in such agreements. The Agreement may be terminated by the Principal Distributor without penalty upon at least 60 days written notice to the Fund. 7. All material amendments to the Plan must be approved by the vote of the Board, including a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto, cast at a meeting called for the purpose of voting on such amendments, and in the case of any amendment materially increasing the amount of expenditures for distribution to be paid by a Portfolio, by the vote of the majority of the outstanding voting securities of the Portfolio (as defined in the 1940 Act). 8. So long as the Plan is in effect, the selection and nomination of Trustees who are not interested persons (as defined in the 1940 Act) of the Fund shall be committed to the discretion of those Trustees who are not interested persons of the Fund. 2 9. Any agreement with any person relating to the implementation of this Plan shall be subject to automatic termination upon its assignment (as defined in the 1940 Act). 3 EX-99.15.5 16 DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT ---------------------- AGREEMENT made as of the 1st day of October, 1994 between OBERWEIS EMERGING GROWTH FUND, a Massachusetts business trust (the "Fund"), and The Chicago Corporation, a Delaware corporation ("TCC"). WHEREAS, the Fund is an open-end, diversified management investment company registered under the Investment Company Act of 1940 (the "1940 Act"), the units of beneficial interest ("Units") of which are registered under the Securities Act of 1933, as amended; and WHEREAS, the Fund is authorized to issue Units in separate series with each such series representing the interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund has adopted a plan ("Plan") pursuant to Rule 12b-1 of the 1940 Act in order to provide for the payment of certain distribution costs by the Fund; and WHEREAS, the Fund, in accordance with the Plan, desires to retain TCC as the principal distributor for Units of the Fund and TCC is willing to act in such capacity; NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions hereinafter set forth, the parties hereto agree as follows: 1. Appointment of Distributor. The Fund hereby appoints TCC as the principal distributor of the Units of the Fund of such series of the Fund having approved this Agreement (the "Shares") upon the terms and for the periods set forth in this Agreement. TCC hereby accepts such appointment and agrees to render the services and perform the duties of distributor as set forth herein. 2. Duties of Distributor. The following provisions shall apply to the obligations of TCC as distributor under this Agreement: (a) The Fund agrees to sell Shares through TCC, as agent, from time to time during the term of this Agreement upon the terms and at the current offering price described in the Fund's prospectus. Such sales may, however, be suspended whenever in the judgment of the Fund it is in its best interests to do so. (b) TCC will hold itself available to receive or will arrange for the receipt of orders for the purchase of Shares and will (and shall have the authority to) receive and accept or reject or arrange for the receipt and acceptance or rejection of such orders on behalf of the Fund in accordance with the provisions of the Fund's prospectus. (c) TCC shall not be obligated to sell any certain number of Shares. (d) In performing its duties hereunder, TCC shall act in conformity with the Fund's Agreement and Declaration of Trust, By-Laws, Registration Statement and prospectus, and with the instructions and directions of the officers and Trustees of the Fund, and shall comply with and conform to the requirements of the 1940 Act, the Securities Act of 1933, the Securities Exchange Act of 1934, and all other applicable federal and state laws, regulations and rulings and Rules of Fair Practice of the National Association of Securities Dealers, Inc. (e) TCC shall be free to render to others services different from or similar to those rendered to the Fund hereunder so long as the services hereunder are not impaired thereby. It further is understood and agreed that by separate agreement with the Fund, TCC may also serve the Fund in other capacities; that officers or employees of TCC may serve as officers or Trustees of the Fund to the extent permitted by law; and that TCC or its officers or employees are not prohibited from engaging in any other business activity or from rendering services to any other entity, or from serving as officers, directors or trustees of any other organizations, including investment companies. 3. Unreimbursable Distribution Costs. During the term of this Agreement, TCC will pay from the fees provided under Section 7 of this Agreement without further reimbursement by the Fund the following costs related to the distribution of the Fund's Shares. (a) Costs of all sales presentations, mailing, advertising and any other distribution efforts which may be undertaken by TCC in its sole discretion with respect to the Shares. Such costs shall not be deemed to include the costs of preparing and setting in type prospectuses, statements of additional information, proxy materials, reports and notices or the costs of printing and distributing the same to existing shareholders and regulatory authorities. (b) Compensation of any personnel of TCC for activities in connection with the distribution or sale of the Shares. 4. Representations. Neither TCC nor any other person is authorized by the Fund to give any information or to make any representation relative to the Shares other than those contained in the Fund's Registration Statement, prospectus or statement of additional information filed with the Securities and Exchange Commission as either may be amended from time to time, or in any supplemental information to said prospectus or statement of additional information approved by the Fund. TCC agrees that any other information or representations other than those specified above which it or any dealer or other person who distributes Shares through TCC may make in connection with the offer or sale of Shares shall be made entirely without liability on the part of the Fund. TCC agrees that in offering or selling Shares as agent of the Fund, it will submit to the Fund's legal counsel or other representative, as may be designated by the Fund's Board of Trustees, copies of all sales literature and other similar materials before using the same, and will not use such sales literature if disapproved by the Fund. 5. Appointment of Firms. It is understood and agreed that TCC may in its discretion appoint broker-dealer and other firms (collectively "Firms") to assist TCC in providing distribution services to the Fund, including literature distribution, advertising and promotion. The agreements between TCC and such Firms shall be substantially in the form of the agreement 2 attached hereto as Exhibit A (broker-dealer) or in a form otherwise approved by the Board of Trustees of the Fund. 6. Records Retention and Confidentiality. TCC shall keep and maintain on behalf of the Fund all records which are required to be maintained pursuant to Rules 12b-1, 31a-1(d) and 31a-2(a)(3) under the 1940 Act as such rules pertain to the activities of TCC under this Agreement, and to preserve such records as required under the 1940 Act; provided, however, TCC shall not be required to maintain those records which would duplicate records required to be maintained pursuant to any other agreement entered into by the Fund. Notwithstanding the foregoing, TCC shall maintain, for a period of at least six (6) years, all records and documents which may be needed or required to support or document the entries made by TCC in its performance of services hereunder. TCC agrees that all records required to be maintained under this paragraph shall be the property of the Fund, shall be maintained in such fashion as to preserve the confidentiality thereof, and to comply with applicable rules and regulations of federal and/or state securities laws, and shall, in whole or any specified part, be available for inspection by or surrender to the Fund at any reasonable time after receipt of an appropriate written request. 7. Annual Fee. For all of the other services to be provided by TCC hereunder, the Fund shall pay TCC compensation (the "Distribution Fee") at an annual rate that may range from .25 to .45 of 1% of the Fund's average daily net assets, as the Fund's Board of Trustees (the "Board") and TCC shall mutually agree from time to time, computed and accrued daily and payable monthly, provided that the total of the Distribution Fee and Service Fee (as defined in the Shareholder Service Agreement, of even date herewith, between the Fund and Oberweis Management, Inc.) does not exceed .50 of 1% of the Fund's average daily net assets as provided in this Agreement and the said Shareholder Service Agreement. The initial Distribution Fee shall be at the annual rate of .35 of 1% of the Fund's average daily net assets. In the event that there is more than one series of Shares, the Distribution Fee shall be allocated to the various series in proportion to the relative average daily net assets of such series. 8. Fees to Firms. From the foregoing annual fee, TCC may pay compensation to the Firms, if any, who shall be assisting TCC in providing distribution services to the Fund. 9. Expenses. The Fund shall assume and pay all charges and expenses of its operations not specifically assumed or otherwise to be provided by TCC under this Agreement. 10. Reports. TCC shall prepare reports for the Trustees of the Fund on a quarterly basis showing amounts expended by TCC under this Agreement and the purposes for such expenditures, including amounts paid to the various Firms, if any, and such other information as from time to time shall be reasonably requested by the Trustees of the Fund. 11. Limitation of Liability. Neither TCC nor any of its agents or employees shall be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except liability to the Fund or its Shareholders to which TCC would otherwise be subject by reason of TCC's willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement. Any person, even though also an 3 officer, employee or agent of TCC who may be or become an officer, Trustee, employee or agent of the Fund shall be deemed, when rendering services to the Fund or to any series, or acting on any business of the Fund or of any series (other than services or business in connection with TCC's duties as hereunder) to be rendering such services to or acting solely for the Fund or series and not as an officer, director, employee or agent or one under the control or direction of TCC even though paid by TCC. 12. Indemnification. (a) Subject to the conditions set forth below, the Fund agrees to indemnify and hold harmless TCC, its officers and employees, and each person, if any, who controls TCC within the meaning of Section 15 of the Securities Act of 1933 and Section 20 of the Securities Exchange Act of 1934 against any and all loss, liability, claim, damage and expense whatsoever, jointly and severally, or otherwise (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever), arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's Registration Statement, the prospectus, or statement of additional information or any amendment or supplement thereof, or any advertisement or sales literature authorized by the Fund, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon and in conformity with written information with respect to TCC furnished to the Fund by or on behalf of TCC expressly for use in the Fund's Registration Statement, prospectus, statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. If any action is brought against TCC or any controlling person thereof in respect of which indemnity may be sought against the Fund pursuant to the foregoing, TCC shall promptly notify the Fund in writing of the institution of such action and the Fund shall assume the defense of such action, including the employment of counsel selected by the Fund and payment of expenses. TCC, or any such controlling person thereof, shall have the right to employ separate counsel in any such case, but the fees and expenses of such counsel shall be at the expense of TCC or such controlling person unless the employment of such counsel shall have been authorized in writing by the Fund in connection with the defense of such action or the Fund shall not have employed counsel to have charge of the defense of such action, in which event such fees and expenses shall be borne by the Fund. Anything in this subparagraph to the contrary notwithstanding, the Fund shall not be liable for any settlement of any such claim or action effected without its written consent. The Fund agrees promptly to notify TCC of the commencement of any litigation or proceedings against the Fund or any of its officers or directors or controlling persons in connection with the issue and sale of shares or in connection with the Fund's Registration Statement, prospectus or statement of additional information, or any advertisement or sales literature. (b) TCC agrees to indemnify and hold harmless the Fund, each of its Trustees, each of its officers and each other person, if any, who controls the Fund within the meaning of Section 15 of the Securities Act of 1933, with respect to statements or omissions, if any, made in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature in reliance upon and 4 in conformity with information with respect to TCC furnished in writing to the Fund by or on behalf of TCC expressly for use in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. In case any action shall be brought against the Fund or any other person so indemnified based on the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof and in respect of which indemnity may be sought against TCC, TCC shall have the rights and duties given to the Fund and the Fund and each other person so indemnified shall have the rights and duties given to TCC by the provisions of subparagraph (a) above. (c) Nothing herein contained shall be deemed to protect any person against liability to the Fund or its shareholders to which such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of the duties of such person or by reason of the reckless disregard by such person of the obligations and duties of such person under this Agreement. 13. Duration and Termination. This Agreement shall continue, unless sooner terminated as provided herein, until September 30, 1995, and shall thereafter continue in force from year to year so long as each such continuance is approved at least annually by the vote of the Board of Trustees of the Fund, including a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto. This Agreement may be terminated by the Fund at any time, without the payment of any penalty, upon the vote of a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto or by the vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) on 60 days written notice to TCC. This Agreement may be terminated by TCC at any time, without the payment of any penalty, on 60 days written notice to the Fund. This Agreement will automatically and immediately terminate in the event of its assignment (as defined in the 1940 Act). 14. Authority of TCC. TCC hereby represents and warrants to the Fund that no consent or approval of, or other action by, any United States federal or state regulatory authority or other person or entity, which has not been obtained or taken, is required for the execution, delivery or performance by TCC of this Agreement. 15. Amendment of Agreement. This Agreement may be amended by mutual consent of the parties hereto, but the consent of the Fund must be by the vote of the Board of Trustees of the Fund, including a majority of the Trustees who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto. 16. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected 5 thereby. This Agreement shall be construed in accordance with applicable federal law and (except as to Section 17 below which shall be construed in accordance with the laws of the Commonwealth of Massachusetts) the laws of the State of Illinois, and shall be binding upon and inure to the benefit of the parties hereto and their respective successors, subject to Section 13 above. 17. Limitation of Shareholder and Trustee Liability. All parties hereto are expressly put on notice of the Oberweis Emerging Growth Fund Agreement and Declaration of Trust dated July 7, 1986 and all amendments thereto, all of which are on file with the Secretary of the Commonwealth of Massachusetts, and the limitation of shareholder and trustee liability contained therein. This Agreement has been executed by and on behalf of the Fund by its representative as such representative and not individually, and the obligations of the Fund hereunder are not binding upon any of the trustees, officers or shareholders of the Fund individually, but are binding upon only the assets and property of the Fund. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. OBERWEIS EMERGING GROWTH FUND By: /s/ James D. Oberweis ------------------------------- Its: President ----------------------------- Attest: /s/ Patrick B. Joyce - ------------------------------- Its: Executive Vice President --------------------------- THE CHICAGO CORPORATION By: /s/ Peter H. Wendel ------------------------------- Its: Exec. V.P., Director ----------------------------- Attest: /s/ Perry L. Taylor, Jr. - ------------------------------- Its: Exec. V.P., Gen. Counsel, Secretary & Director --------------------------- 6 EXHIBIT A TO DISTRIBUTION AGREEMENT ----------------------------------- DISTRIBUTION SERVICES AGREEMENT ------------------------------- (Broker-Dealer) THIS AGREEMENT, made as of the ______ day of ____________, 1994, between The Chicago Corporation, a Delaware corporation ("TCC"), as principal distributor for the sole series of the Oberweis Emerging Growth Fund, a Massachusetts business trust (the "Fund"), pursuant to a Distribution Agreement ("Distribution Agreement"), dated October 1, 1994, and __________________ (the "Firm"); WHEREAS, simultaneously herewith, the Firm is entering into a certain Services Agreement (the "Services Agreement") with Oberweis Asset Management, Inc., an Illinois corporation ("OAM"), as primary shareholder service agent for the sole series of the Fund; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows: 1. TCC hereby appoints the Firm to assist TCC in providing distribution services to the Fund. The Firm shall provide such office space and equipment, telephone facilities, personnel, literature distribution, advertising and promotion as is necessary or beneficial for providing information and services related to the distribution of Fund shares. Such services and assistance may include, but not be limited to, processing purchase and redemption transactions, automatic investment in Fund shares of client account cash balances, answering routine client inquiries regarding the Fund, and such other distribution services as TCC may reasonably request. The Firm shall provide such security as is necessary to prevent unauthorized use of any on-line computer facilities. The Firm agrees to release, indemnify and hold harmless the Fund, TCC, OAM, and the Fund's investment adviser, custodian and transfer agent from any and all direct or indirect liabilities or losses resulting from requests, directions, actions or inactions of or by the Firm, its officers, employees or agents regarding the purchase, redemption, transfer or registration of Fund shares for accounts of the Firm, its clients and other shareholders of the Fund. Principals of the Firm will be available to consult from time to time with TCC concerning administration and performance of the services contemplated by this Agreement. The Firm accepts such appointment and agrees during such period to render such services and to assume the obligations herein set forth for the compensation herein provided. The Firm shall, for purposes herein provided, be deemed to be an independent contractor, and unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Fund or TCC in any way or otherwise be deemed an agent of the Fund or TCC. 2. For the services and facilities described in Section 1, TCC will pay a fee (the "Distribution Fee") to the Firm after the end of each quarter at the annual rate of ______ of 1% of the average aggregate net asset value of the Fund shares in those accounts for which the Firm provides distribution services at a level deemed by TCC to be satisfactory; provided that the aggregate Distribution Fee paid hereunder and Services Fee as defined in and paid under the Shareholder Services Agreement shall not exceed the total annual rate of ______ of 1% of the average aggregate net asset value of the Fund shares in those accounts for which the Firm provides such distribution services at such satisfactory level of performance. TCC may in its sole discretion pay such additional amounts to the Firm as shall be deemed appropriate by TCC. For the quarter and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration on the basis of the number of days that the Agreement is in effect during the quarter and year, respectively. 3. No person is authorized to make any representations concerning the Fund or shares of the Fund except in accordance with the terms of this Agreement. Neither the Firm nor its agents will use or distribute, or authorize the use or distribution of, any statements other than those contained in the Fund's current prospectus, statement of additional information or in such supplemental literature or advertising as may be authorized by the Fund or TCC. 4. The Firm shall prepare such quarterly reports for TCC as shall reasonably be requested by TCC. 5. This Agreement shall become effective on the date hereof and shall continue in effect until terminated. This Agreement shall automatically terminate in the event of its assignment, as defined in the Investment Company Act of 1940, and upon any termination of the Distribution Agreement. It may also be terminated at any time by the Firm or TCC on thirty (30) days' written notice. 6. The Firm acknowledges that TCC may enter into similar agreements with others without the consent of the Firm. 7. If any provision of this Agreement shall be held or made invalid by a court decision, rule, or otherwise, the remainder shall not be affected thereby. 8. All communications to TCC shall be mailed to 208 South LaSalle Street, Suite 200, Chicago, Illinois 60604-1003, Attention: Peter H. Wendell, Executive Vice President. Any notice to the Firm shall be duly given if mailed or telegraphed to the address specified below. This Agreement shall be construed in accordance with applicable federal law and the laws of Illinois. THE CHICAGO CORPORATION The "FIRM" Firm Name: _________________________________ By_____________________________ By_______________________________ Its____________________________ Its______________________________ Address__________________________ _________________________________ _________________________________ 2 EX-99.15.5.1 17 FORM OF DISTRIBUTION AGREEMENT DISTRIBUTION AND SHAREHOLDER SERVICE AGREEMENT THIS AGREEMENT made as of the 1st day of January, 1996 between The Oberweis Funds, a Massachusetts business trust (the "Fund"), and The Chicago Corporation, a Delaware corporation ("TCC"); WITNESSETH: WHEREAS, the Fund is an open-end, diversified management investment company registered under the Investment Company Act of 1940 (the "1940 Act"), the units of beneficial interest ("Units") of which are registered under the Securities Act of 1933, as amended; and WHEREAS, the Fund has adopted a plan ("Plan") pursuant to Rule 12b-1 of the 1940 Act in order to provide for the payment of certain distribution costs by the Fund; and WHEREAS, the Fund is authorized to issue Units in separate series with each such series representing the interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund currently issues Units in two portfolios ("Shares"), the Emerging Growth Portfolio and the Micro-Cap Portfolio (collectively referred to, together with such other series as may hereafter be designated by the Board of Trustees and as have approved the Plan, as the "Portfolios" and individually referred to as a "Portfolio"); and WHEREAS, the Fund, in accordance with the Plan, desires to retain TCC as the principal distributor for Shares of the Fund and the primary shareholder service agent for the Fund and TCC is willing to act in such capacities; NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions hereinafter set forth, the parties hereto agree as follows: ARTICLE I: DISTRIBUTION 1. Appointment of Distributor. The Fund hereby appoints TCC as the principal distributor of the Shares of the Fund upon the terms and for the periods set forth in this Agreement. TCC hereby accepts such appointment and agrees to render the services and perform the duties of distributor as set forth herein. 2. Duties of Distributor. The following provisions shall apply to the obligations of TCC as distributor under this Agreement: (a) The Fund agrees to sell Shares through TCC, as agent, from time to time during the term of this Agreement upon the terms and at the current offering price described in the Fund's prospectus. Such sales may, however, be suspended whenever in the judgment of the Fund it is in the best interests to do so. (b) TCC will hold itself available to receive or will arrange for the receipt of orders for the purchase of Shares and will (and shall have the authority to) receive and accept or reject or arrange for the receipt and acceptance or rejection of such orders on behalf of the Fund in accordance with the provisions of the Fund's prospectus. (c) TCC shall not be obligated to sell any certain number of Shares. (d) In performing its duties hereunder, TCC shall act in conformity with the Fund's Agreement and Declaration of Trust, By-Laws, Registration Statement and prospectus, and with the instructions and directions of the officers and Trustees of the Fund, and shall comply with and conform to the requirements of the 1940 Act, the Securities Act of 1933, the Securities Exchange Act of 1934, and all other applicable federal and state laws, regulations and rulings and Rules of Fair Practice of the National Association of Securities Dealers, Inc. (e) TCC shall be free to render to others services different from or similar to those rendered to the Fund hereunder so long as the services hereunder are not impaired thereby. It further is understood and agreed that by separate agreement with the Fund, TCC may also serve the Fund in other capacities; that officers or employees of TCC may serve as officers or Trustees of the Fund to the extent permitted by law; and TCC or its officers or employees are not prohibited from engaging in any other business activity or from rendering services to any other entity, or from serving as officers, directors or trustees of any other organizations, including investment companies. 3. Unreimbursable Distribution Costs. During the term of this Agreement, TCC will pay from the fees provided under paragraph 1 of Article IV of this Agreement without further reimbursement by the Fund the following costs related to the distribution of the Fund's Shares: (a) Costs of all sales presentations, mailing, advertising and any other distribution efforts which may be undertaken by TCC in its sole discretion with respect to the Shares. Such costs shall not be deemed to include the costs of preparing and setting in type prospectuses, statement of additional information, proxy materials, reports and notices or the costs of printing and distributing the same to existing shareholders an regulatory authorities. (b) Compensation of any personnel of TCC for activities in connection with the distribution or sale of the Shares. 4. Representations. Neither TCC nor any other person is authorized by the Fund to give any information or to make any representation relative to the Shares other than those contained in the Fund's Registration Statement, prospectus or statement of additional information 2 filed with the Securities and Exchange Commission as either may be amended from time to time, or in any supplemental information to said prospectus or statement of additional information approved by the Fund. TCC agrees that any other information or representations other than those specified above which it or any dealer or other person who distributes Shares through TCC may make in connection with the offer or sale of Shares shall be made entirely without liability on the part of the Fund. TCC agrees that in offering or selling Shares as agent of the Fund, it will submit to the Fund's legal counsel or other representative, as may be designated by the Fund's Board of Trustees, copies of all sales literature and other similar materials before using the same, and will not use such sales literature if disapproved by the Fund. ARTICLE II: SHAREHOLDER SERVICES 1. Appointment of Shareholder Service Agent. The Fund hereby appoints TCC as the primary shareholder service agent for the Fund upon the terms and for the periods set forth in this Agreement. TCC hereby accepts such appointment and agrees to render the services and perform the duties of shareholder service agent as set forth herein. 2. Services of Shareholder Service Agent. The services to be performed by TCC as shareholder service agent are set forth in Exhibit A hereto which may at any time or from time to time be modified or amended by agreement of the parties in the form of an amended or supplemental schedule initialed by their authorized representatives. TCC also agrees to perform such additional services within its capacity of shareholder service agent as may, from time to time, be requested by the Fund, provided that such additional services are the subject of a supplement to Schedule A hereto. 3. Costs and Expenses of Performance. The Fund will reimburse TCC for TCC's approximate out-of-pocket cost, if any, of providing certain of the services contemplated by this Agreement as set forth in Exhibit A, including the costs of postage, data entry, modification and printout, stationery, tax forms, and all other external forms or printed material which may be required for performance by TCC of the services contemplated by this Agreement ("Reimbursable Expenses"). TCC shall submit to the Fund a monthly report setting forth in reasonable detail and Reimbursable Expenses of TCC paid or incurred during such month. The Fund agrees to cause all such reports to be reviewed promptly (in no event less frequently than quarterly) after receipt. Immediately thereafter, TCC will be notified of any discernable errors, discrepancies or omissions. 4. Record Retention and Confidentiality. TCC shall keep and maintain on behalf of the Fund all records which are required to be maintained pursuant to Rule 12b-1 and Rule 31a-1 under the 1940 Act that pertain to the activities under this Agreement and to preserve such records for the time periods prescribed therein; provided, however, TCC shall not be required to maintain those records which would duplicate records required to be maintained pursuant to any other agreement entered into by the Fund. In addition, TCC will maintain all records it is 3 required to maintain pursuant to any applicable statutes, rules and regulations relating to the maintenance of records in connection with the services to be performed hereunder. Notwithstanding the foregoing, TCC shall maintain, for a period of at least six (6) years, all records and documents which may be needed or required to support or document the entries made by TCC in its performance of services hereunder. TCC agrees that all records required to be maintained under this paragraph shall be the property of the Fund, shall be maintained in such fashion as to preserve the confidentiality thereof, and to comply with applicable rules and regulations of federal and/or state securities laws, and shall, in whole or any specified part, be available for inspection by or surrender to the Fund at any reasonable time after receipt of an appropriate written request. ARTICLE III: APPOINTMENT OF FIRMS 1. Appointment of Firms. It is understood and agreed that TCC may in its discretion appoint broker-dealer and other firms to assist TCC in providing distribution services to the Fund, including literature distribution, advertising and promotion. TCC may also appoint broker-dealer and other firms (including depository institutions such as commercial banks and savings and loan associations) to provide administrative services for their clients as shareholders of the Fund. The agreements between TCC and such other firms are collectively referred to as "Service Agreements" and shall be substantially in the form of the agreement attached hereto as Exhibit B or in a form otherwise approved by the Board of Trustees of the Fund. Such firms shall not be representatives or agents of the Fund and shall have no direct contractual relationship with the Fund. 2. Services of Firms. The aforementioned broker-dealer and other firms (collectively "Firms") shall provide, among other things, office space and equipment, telephone facilities, personnel and assistance to TCC in servicing accounts of such Firm's clients who own Fund Shares. Such services and assistance may include, but not be limited to, establishment and maintenance of shareholder accounts and records; processing purchase and redemption transactions; automatic investment in Fund's Shares of client account cash balances; answering routine client inquiries regarding the Fund; assistance to clients in changing dividend options, account designations and addresses; and such other services as the Fund may reasonably request. ARTICLE IV: FEES, EXPENSES AND REPORTS 1. Annual Fee. For all the services to be provided by TCC hereunder, each Portfolio shall pay TCC compensation at the annual rate of .25 of 1% of its average daily net assets, computed and accrued daily and payable monthly. This compensation shall be in addition to certain expense reimbursements provided for under Article II, paragraph 3 hereof. 4 2. Fees to Firms. From the foregoing annual fee, TCC may pay compensation to the Firms, if any, who shall be providing services under the Service Agreements. 3. Expenses. The Fund shall assume and pay all charges and expenses of its operations not specifically assumed or otherwise to be provided by TCC under this Agreement. 4. Reports. TCC shall prepare reports for the Trustees of the Fund on a quarterly basis showing amounts expended by TCC under this Agreement and the purposes for such expenditures, including amounts paid to the various Firms, if any, and such other information as from time to time shall be reasonably requested by the Trustees of the Fund. ARTICLE V: GENERAL 1. Limitation of Liability. Neither TCC nor any of its agents or employees shall be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except liability to the Fund or its Shareholders to which TCC would otherwise be subject by reason of TCC's willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement. Any person, even though also an officer, employee or agent of TCC who may be or become an officer, Trustee, employee or agent of the Fund shall be deemed, when rendering services to the Fund or to any portfolio, or acting on any business of the Fund or of any portfolio (other than services or business in connection with TCC's duties as hereunder) to be rendering such services to or acting solely for the Fund or portfolio and not as an officer, director, employee or agent or one under the control or direction of TCC even though paid by TCC. 2. Indemnification. (a) Subject to the conditions set forth below, the Fund agrees to indemnify and hold harmless TCC, its officers and employees, and each person, if any, who controls TCC within the meaning of Section 15 of the Securities Act of 1933 and Section 20 of the Securities Exchange Act of 1934 against any and all loss, liability, claim, damage and expense whatsoever, jointly and severally, or otherwise (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever), arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's Registration Statement, the prospectus, or statement of additional information or any amendment or supplement thereof, or any advertisement or sales literature authorized by the Fund, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon and in conformity with written information with respect to TCC furnished to the Fund by or on behalf of TCC expressly for use in the Fund's Registration Statement, 5 prospectus, statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. If any action is brought against TCC or any controlling person thereof in respect of which indemnity may be sought against the Fund pursuant to the foregoing, TCC shall promptly notify the Fund in writing of the institution of such action and the Fund shall assume the defense of such action, including the employment of counsel selected by the Fund and payment of expenses. TCC, or any such controlling person thereof, shall have the right to employ separate counsel in any such case, but the fees and expenses of such counsel shall be at the expense of TCC or such controlling person unless the employment of such counsel shall have been authorized in writing by the Fund in connection with the defense of such action or the Fund shall not have employed counsel to have charge of the defense of such action, in which event such fees and expenses shall be borne by the Fund. Anything in this subparagraph to the contrary notwithstanding, the Fund shall not be liable for any settlement of any such claim or action effected without its written consent. The Fund agrees promptly to notify TCC of the commencement of any litigation or proceedings against the Fund or any of its officers or directors or controlling persons in connection with the issue and sale of shares or in connection with the Fund's Registration Statement, prospectus or statement of additional information, or any advertisement or sales literature. (b) TCC agrees to indemnify and hold harmless the Fund, each of its Trustees, each of its officers and each other person, if any, who controls the Fund within the meaning of Section 15 of the Securities Act of 1933, with respect to statements or omissions, if any, made in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature in reliance upon and in conformity with information with respect to TCC furnished in writing to the Fund by or on behalf of TCC expressly for use in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. In case any action shall be brought against the Fund or any other person so indemnified based on the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof and in respect of which indemnity may be sought against TCC, TCC shall have the rights and duties given to the Fund and the Fund and each other person so indemnified shall have the rights and duties given to TCC by the provisions of subparagraph (a) above. (c) Nothing herein contained shall be deemed to protect any person against liability to the Fund or its shareholders to which such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of the duties of such person or by reason of the reckless disregard by such person of the obligations and duties of such person under this Agreement. 3. Duration and Termination. This Agreement shall continue, unless sooner terminated as provided herein, until one year from the date hereof, and shall thereafter continue in force from year to year so long as each such continuance is approved at least annually by the vote of the Board of Trustees of the Fund, including a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or 6 indirect financial interest in the operation of the Plan or any agreement related thereto. This Agreement may be terminated by the Fund at any time, without the payment of any penalty, upon the vote of a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto or by the vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) on 60 days written notice to TCC. This Agreement may be terminated by TCC at any time, without the payment of any penalty, on 60 days written notice to the Fund. 4. Assignment. This Agreement will automatically and immediately terminate in the event of its "assignment" (as defined in Section 2(a)(4) of the 1940 Act). TCC shall notify the Fund in writing sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, as will enable the Fund to consider whether an "assignment" will occur, and to take the steps necessary to enter into a new contract with TCC. 5. Authority of TCC. TCC hereby represents and warrants to the Fund that no consent or approval of, or other action by, any United States federal or state regulatory authority or other person or entity, which has not been obtained or taken, is required for the execution, delivery or performance by TCC of this Agreement. 6. Amendment of Agreement. This Agreement may be amended by mutual consent of the parties hereto, but the consent of the Fund must be by the vote of the Board of Trustees of the Fund, including a majority of the Trustees who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto. 7. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be construed in accordance with applicable federal law and (except as to paragraph 8 of this Article below which shall be construed in accordance with the laws of The Commonwealth of Massachusetts) the laws of the State of Illinois, and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, subject to paragraph 3 of this Article. 8. Limitation of Shareholder and Trustee Liability. All parties hereto are expressly put on notice of The Oberweis Funds Agreement and Declaration of Trust dated July 7, 1986 and all amendments thereto, all of which are on file with the Secretary of the Commonwealth of Massachusetts, and the limitation of shareholder and trustee liability contained therein. This Agreement has been executed by and on behalf of the Fund by its representative as such representative and not individually, and the obligations of the Fund hereunder are not binding upon any of the trustees, officers or shareholders of the Fund individually, but are binding upon only the assets and property of the Fund. 7 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the day and year first above written. THE OBERWEIS FUNDS By -------------------------------- Its President -------------------------------- Attest: - -------------------------------- Its Executive Vice President -------------------------- THE CHICAGO CORPORATION By -------------------------------- Its -------------------------------- Attest: - -------------------------------- Its -------------------------- 8 EXHIBIT A TO DISTRIBUTION AND SHAREHOLDER SERVICE AGREEMENT
SERVICE TO BE RENDERED CHARGE TO FUND - ---------------------- I. SHAREHOLDER ACCOUNTS 1. Open accounts, as necessary, and assist in maintaining on the records of the Fund's transfer agent current records for Fund shareholder accounts showing as to each shareholder (to the extent such information is available or obtainable): A. Name(s) and address(es) with zip code(s) B. Type of account and taxpayer identification or social security number C. Number of Fund Shares currently owned D. Account transaction history, including records of initial and additional purchases, redemptions, dividends and other distributions, and related tax information.......................................... Annual Fee* 2. Maintain files of account applications, requests and correspondence from or on behalf of shareholders in relation to Fund Shares as well as copies of all written responses thereto.................... Annual Fee 3. Process with the Fund's transfer agent account records to show all changes or corrections to shareholders' registration and address records authorized in writing by or on behalf of the shareholder................................................ Annual Fee
- ------------ * Annual Fee as used in this Exhibit A refers to the fee set forth in Paragraph 2 of Article IV of the Agreement. ** The term "Cost" as used in this Exhibit A refers to approximate out-of- pocket tangible expenses such as postage and printing of forms. 9
SERVICE TO BE RENDERED CHARGE TO FUND - ---------------------- 4. Assist the Fund's transfer agent in maintaining records of shareholders' transactions in Fund Shares for federal and state tax and securities law purposes..................................................... Annual Fee II. PURCHASES AND REDEMPTIONS 1. Conversion of monies to Federal funds..................... Annual Fee 2. Prepare and transmit by mail to each shareholder, confirmations as may be required by law of all purchases and redemptions of Fund Shares Annual Fee effected through TCC...................................... plus Cost** 3. Assist the Fund's transfer agent to prepare and transmit by mail to each shareholder periodic statements reflecting all purchases, dividends and Annual Fee redemption of Fund Shares................................. plus Cost 4. Receive, ascertain the adequacy of, and transmit to the Fund's transfer agent all purchase orders or redemption requests received by TCC in accordance with the requirements set forth in the current prospectus of the Fund............................ Annual Fee 5. Requisition from the Fund's custodian and remit the proceeds of redemption as directed by the individual shareholder in accordance with the current prospectus of the Fund............................ Annual Fee III. SHAREHOLDER COMMUNICATIONS & SERVICES 1. Provide, maintain and man telephone communication systems for shareholder inquiries concerning the administration of their Fund account................................................... Annual Fee 2. Receive and answer promptly all correspondence or similar inquiries from or on behalf of shareholders concerning the administration of their Fund accounts....................................... Annual Fee 3. Refer to the Fund's investment adviser questions or matters related to its function........................ Annual Fee
10
SERVICE TO BE RENDERED CHARGE TO FUND - ---------------------- 4. Prepare such reports and summaries of shareholder communications as may be requested by the Fund's officers for the preparation of reports to the Fund's trustees and appropriate regulatory authorities..................................... Annual Fee 5. Provide and maintain a terminal with on-line facilities to provide information regarding Fund Annual Fee shareholder accounts....................................... plus Cost IV. PROXY MATERIALS, ANNUAL AND OTHER REPORTS 1. Transmit (but not prepare) notices of meetings and proxy statements, prospectuses, annual, semi- annual and quarterly reports as shall be requested by the Fund and coordinate such mailings to appropriate categories of Fund shareholders................ Cost 2. Assist the Fund's transfer agent to furnish to the Fund, by series if applicable, a list of Fund shareholders eligible to vote at shareholder meetings showing addresses of record and Shares held together with an affidavit or other appropriate certificate of the mailing of proxy materials.................................................. Annual Fee V. TAX MATTERS 1. Assist the Fund's transfer agent to prepare and transmit federal and state tax informational returns relating to Share transactions to Annual Fee shareholders and governmental agencies..................... plus Cost
11 EX-99.15.6 18 SHAREHOLDERS SERV. AGREEMENT SHAREHOLDER SERVICE AGREEMENT AGREEMENT made as of the 1st day of October, 1994 between OBERWEIS EMERGING GROWTH FUND, a Massachusetts business trust (the "Fund"), and OBERWEIS ASSET MANAGEMENT, INC., an Illinois corporation ("OAM"). WHEREAS, the Fund is an open-end, diversified management investment company registered under the Investment Company Act of 1940 (the "1940 Act"), the units of beneficial interest ("Units") of which are registered under the Securities Act of 1933, as amended; and WHEREAS, the Fund is authorized to issue Units in separate series with each such series representing the interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund has adopted a plan ("Plan") pursuant to Rule 12b-1 of the 1940 Act in order to provide for the payment of certain distribution and other costs by the Fund; and WHEREAS, the Fund, in accordance with the Plan, desires to retain OAM as the primary shareholder service agent for the Fund, and OAM is willing to act in such capacity: NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions hereinafter set forth, the parties hereto agree as follows: 1. Appointment of Shareholder Service Agent. The Fund hereby appoints OAM as the primary shareholder service agent for the Fund for such series of the Fund having approved this Agreement (the "Shares") upon the terms and for the periods set forth in this Agreement. OAM hereby accepts such appointment and agrees to render the services and perform the duties of shareholder service agent as to the Shares as set forth herein. 2. Services of Shareholder Service Agent. The services to be performed by OAM as shareholder service agent are set forth in Exhibit A hereto which may at any time or from time to time be modified or amended by agreement of the parties in the form of an amended or supplemental schedule initialed by their authorized representatives. OAM also agrees to perform such additional services within its capacity of shareholder service agent as may, from time to time, be requested by the Fund, provided that such additional services are the subject of a supplement to Exhibit A hereto. 3. Costs and Expenses of Performance. The Fund will reimburse OAM for OAM's approximate out-of-pocket cost, if any, of providing certain of the services contemplated by this Agreement as set forth in Exhibit A, including the costs of postage, data entry, modification and printout, stationery, tax forms, and all other external forms or printed material which may be required for performance by OAM of the services contemplated by this Agreement ("Reimbursable Expenses"). OAM shall submit to the Fund a monthly report setting forth in reasonable detail the Reimbursable Expenses of OAM paid or incurred during such month. The Fund agrees to cause all such reports to be reviewed promptly (in no event less frequently than quarterly) after receipt. Immediately thereafter, OAM will be notified of any discernable errors, discrepancies or omissions. 4. Record Retention and Confidentiality. OAM shall keep and maintain on behalf of the Fund all records which are required to be maintained pursuant to Rule 12b-1 and Rule 31a-1 under the 1940 Act that pertain to the activities under this Agreement and to preserve such records for the time periods prescribed under the 1940 Act; provided, however, OAM shall not be required to maintain those records which would duplicate records required to be maintained pursuant to any other agreement entered into by the Fund. In addition, OAM will maintain all records it is required to maintain pursuant to any applicable statutes, rules and regulations relating to the maintenance of records in connection with the services to be performed hereunder. Notwithstanding the foregoing, OAM shall maintain, for a period of at least six (6) years, all records and documents which may be needed or required to support or document the entries made by OAM in its performance of services hereunder. OAM agrees that all records required to be maintained under this paragraph shall be the property of the Fund, shall be maintained in such fashion as to preserve the confidentiality thereof, and to comply with applicable rules and regulations of federal and/or state securities laws, and shall, in whole or any specified part, be available for inspection by or surrender to the Fund at any reasonable time after receipt of an appropriate written request. 5. Appointment of Firms. OAM may also appoint broker-dealer and other firms (including depository institutions such as commercial banks and savings and loan associations) to provide administrative services for their clients as shareholders of the Fund. The agreements between OAM and such other firms are collectively referred to as "Service Agreements" and shall be substantially in the form of the agreement attached hereto as Exhibit B (Broker-Dealer) or in a form otherwise approved by the Board of Trustees of the Fund. Such firms shall not be representatives or agents of the Fund and shall have no direct contractual relationship with the Fund. 6. Services of Firms. The aforementioned broker-dealer and other firms (collectively "Firms") shall provide, among other things, office space and equipment, telephone facilities, personnel and assistance to OAM in servicing accounts of such Firm's clients who own Fund Shares. Such services and assistance may include, but not be limited to, establishment and maintenance of shareholder accounts and records; processing purchase and redemption transactions; automatic investment in Fund shares of client account cash balances; answering routine client inquiries regarding the Fund; assistance to clients in changing dividend options, account designations and addresses; and such other services as the Fund may reasonably request. 7. Annual Fee. For all of the other services to be provided by OAM hereunder, the Funds shall pay OAM compensation ("Service Fee") at an annual rate that may range from .05 to .25 of 1% of the Fund's average daily net assets, as the Fund's Board of Trustees (the "Board") and OAM shall mutually agree from time to time, computed and accrued daily and payable monthly, provided that the total of its Service Fee and Distribution Fee (as defined in the Distribution Agreement, of even date herewith, between the Fund and The Chicago Corporation does not exceed .50 of 1% of the Fund's average daily net assets as provided in this Agreement and in the said Distribution Agreement. The initial Service Fee shall be at the annual rate of .15 of 1% of the Fund's average daily net assets. This compensation shall be in addition to certain expense reimbursements provided for under Section 3 hereof. In the event that there is more than one series of Shares, this fee shall be allocated to the various series in proportion to the relative average daily net assets of such series. 2 8. Fees to Firms. From the foregoing annual fee, OAM may pay compensation to the Firms, if any, who shall be providing services under the Service Agreements at the maximum annual rate of .15 of 1% of the average daily net asset value of Fund Shares in those accounts that such Firms maintain and service at a level deemed to be satisfactory to OAM. 9. Expenses. The Fund shall assume and pay all charges and expenses of its operations not specifically assumed or otherwise to be provided by OAM under this Agreement. 10. Reports. OAM shall prepare reports for the Trustees of the Fund on a quarterly basis showing amounts expended by OAM under this Agreement and the purposes for such expenditures, including amounts paid to the various Firms, if any, and such other information as from time to time shall be reasonably requested by the Trustees of the Fund. 11. Limitation of Liability. Neither OAM nor any of its agents or employees shall be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except liability to the Fund or its Shareholders to which OAM would otherwise be subject by reason of OAM's willful misfeasance, bad faith or gross negligence in the performance of its duties or by reasons of its reckless disregard of its obligations and duties under this Agreement. Any person, even though also an officer, employee or agent of OAM who may be or become an officer, Trustee, employee or agent of the Fund shall be deemed, when rendering services to the Fund or to any series, or acting on any business of the Fund or of any series (other than services or business in connection with OAM's duties as hereunder) to be rendering such services to or acting solely for the Fund or series and not as an officer, director, employee or agent or one under the control or direction of OAM even though paid by OAM. 12. Indemnification. (a) Subject to the conditions set forth below, the Fund agrees to indemnify and hold harmless OAM, its officers and employees, and each person, if any, who controls OAM within the meaning of Section 15 of the Securities Act of 1933 and Section 20 of the Securities Exchange Act of 1934 against any and all loss, liability, claim, damage and expense whatsoever, jointly and severally, or otherwise (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever), arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's Registration Statement, the prospectus, or statement of additional information or any amendment or supplement thereof, or any advertisement or sales literature authorized by the Fund, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon and in conformity with written information with respect to OAM furnished to the Fund by or on behalf of OAM expressly for use in the Fund's Registration Statement, prospectus, statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. If any action is brought against OAM or any controlling person thereof in respect of which indemnity may be sought against the Fund pursuant to the foregoing, OAM shall promptly notify the Fund in writing of the institution of such action and the Fund shall assume the defense of such action, including the employment of counsel selected by the Fund and payment of 3 expenses. OAM, or any such controlling person thereof, shall have the right to employ separate counsel in any such case, but the fees and expenses of such counsel shall be at the expense of OAM or such controlling person unless the employment of such counsel shall have been authorized in writing by the Fund in connection with the defense of such action or the Fund shall not have employed counsel to have charge of the defense of such action, in which event such fees and expenses shall be borne by the Fund. Anything in this subparagraph to the contrary notwithstanding, the Fund shall not be liable for any settlement of any such claim or action effected without its written consent. The Fund agrees promptly to notify OAM of the commencement of any litigation or proceedings against the Fund or any of its officers or directors or controlling persons in connection with the issue and sale of shares or in connection with the Fund's Registration Statement, prospectus or statement of additional information, or any advertisement or sales literature. (b) OAM agrees to indemnify and hold harmless the Fund, each of its Trustees, each of its officers and each other person, if any, who controls the Fund within the meaning of Section 15 of the Securities Act of 1933, with respect to statements or omissions, if any, made in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature in reliance upon and in conformity with information with respect to OAM furnished in writing to the Fund by or on behalf of OAM expressly for use in the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof or any advertisement or sales literature. In case any action shall be brought against the Fund or any other person so indemnified based on the Fund's Registration Statement, prospectus or statement of additional information or any amendment or supplement thereof and in respect of which indemnity may be sought against OAM, OAM shall have the rights and duties given to the Fund and the Fund and each other person so indemnified shall have the rights and duties given to OAM by the provisions of subparagraph (a) above. (c) Nothing herein contained shall be deemed to protect any person against liability to the Fund or its shareholders to which such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of the duties of such person or by reason of the reckless disregard by such person of the obligations and duties of such person under this Agreement. 13. Duration and Termination. This Agreement shall continue, unless sooner terminated as provided herein, until September 30, 1995, and shall thereafter continue in force from year to year so long as each such continuance is approved at least annually by the vote of the Board of Trustees of the Fund, including a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto. This Agreement may be terminated by the Fund at any time, without the payment of any penalty, upon the vote of a majority of the Trustees of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto or by the vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) on 60 days written notice to OAM. This Agreement may be terminated by OAM at any time, without the payment of any penalty, on 60 days written 4 notice to the Fund. This Agreement will automatically and immediately terminate in the event of its assignment (as defined in the 1940 Act). 14. Assignment. This Agreement will automatically and immediately terminate in the event of its "assignment" (as defined in Section 2(a)(4) of the 1940 Act). OAM shall notify the Fund in writing sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, as will enable the Fund to consider whether an "assignment" will occur, and to take the steps necessary to enter into a new contract with OAM. 15. Status of OAM as Independent Contractor. OAM shall for all purposes herein be deemed to be an independent contractor, and shall, unless otherwise expressly provided herein or authorized by the Trustees of the Fund from time to time, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. 16. Affiliation. Subject to applicable statutes and regulations, it is understood that trustees, officers or agents of the Fund are or may be interested in OAM as officers, directors, agents, shareholders or otherwise, and that the officers, directors, shareholders and agents of OAM may be interested in the Fund otherwise than as a trustee, officer or agent. 17. Amendment of Agreement. This Agreement may be amended by mutual consent of the parties hereto, but the consent of the Fund must be by the vote of the Board of Trustees of the Fund, including a majority of the Trustees who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto. 18. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be construed in accordance with applicable federal law and (except as to Section 19 below which shall be construed in accordance with the laws of the Commonwealth of Massachusetts) the laws of the State of Illinois, and shall be binding upon and inure to the benefit of the parties hereto and their respective successors, subject to Section 13 above. 19. Limitation of Shareholder and Trustee Liability. This Agreement is executed by or on behalf of the Fund and OAM is hereby expressly put on notice of the limitation of Shareholder and Trustee liability as set forth in the Trust Agreement, and agrees that the obligations assumed by the Fund pursuant to this Agreement shall be limited in all cases to the Fund and its assets, and OAM shall not seek satisfaction of any such obligations from the Shareholders or any Shareholder of the Fund. In addition, OAM shall not seek satisfaction of any such obligations from the trustees or officers of the Fund or any individual trustee or officer. 20. Arbitration. Any disputes or controversies between the parties to this Agreement involving the construction or application of any of the terms, provisions, or conditions of this Agreement shall be submitted to arbitration. The arbitration shall be conducted in Chicago, Illinois in accordance with the Rules of the American Arbitration Association. The parties shall 5 each appoint one person to hear and determine the dispute and, if they are unable to agree, then the two persons so chosen shall select a third impartial arbitrator whose decision shall be final and conclusive upon both parties. The decision rendered in arbitration shall be borne by the losing party or in such proportions as the arbitrator shall decide. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. OBERWEIS EMERGING GROWTH FUND By: /s/ James D. Oberweis ------------------------------- Its: President ------------------------------ Attest: /s/ Anita I. Mraz - ----------------------------- Its: Secretary ------------------------- OBERWEIS ASSET MANAGEMENT, INC. By: /s/ Patrick B. Joyce ------------------------------- Its: Executive Vice President ------------------------------ Attest: /s/ Martin L. Yokosawa - ----------------------------- Its: Vice President ------------------------- 6 EXHIBIT A
SERVICE TO BE RENDERED CHARGE TO FUND - ---------------------- -------------- I. SHAREHOLDER ACCOUNTS -------------------- 1. Open accounts, as necessary, and assist in maintaining on the records of the Fund's transfer agent current records for Fund shareholder accounts showing as to each shareholder (to the extent such information is available or obtainable): A. Name(s) and address(es) with zip code(s) B. Type of account and taxpayer identification or social security number C. Number of Fund Shares currently owned D. Account transaction history, including records of initial and additional purchases, redemptions, dividends and other distributions, and related tax information................. Annual Fee* 2. Maintain files of account applications, requests and correspondence from or on behalf of shareholders in relation to Fund Shares as well as copies of all written responses thereto.............. Annual Fee 3. Process with the Fund's transfer agent account records to show all changes or corrections to shareholders' registration and address records authorized in writing by or on behalf of the shareholder................................................................. Annual Fee 4. Assist the Fund's transfer agent to prepare and transmit by mail to each shareholder periodic statements reflecting all purchases, dividends and redemptions of Fund Shares......................... Annual Fee plus Cost 5. Assist the Fund's transfer agent in maintaining records of shareholders' transactions in Fund Shares for federal and state tax and securities law purposes................................................. Annual Fee 6. Requisition from the Fund's custodian and remit the proceeds of redemption as directed by the individual shareholder in accordance with the current prospectus of the Fund.......................... Annual Fee
- -------------------- * Annual Fee as used in this Exhibit A refers to the fee set forth in Section 11 of the Agreement. A-1
SERVICE TO BE RENDERED CHARGE TO FUND - ---------------------- -------------- II. SHAREHOLDER COMMUNICATIONS & SERVICES ------------------------------------- 1. Provide, maintain and man telephone communication systems for shareholder inquiries concerning the administration of their Fund accounts......................................................... Annual Fee 2. Receive and answer promptly all correspondence or similar inquiries from or on behalf of shareholders concerning the administration of their Fund accounts....................................... Annual Fee 3. Refer to the Fund's investment adviser questions or matters related to its function............................................. Annual Fee 4. Prepare such reports and summaries of shareholder communications as may be requested by the Fund's officers for the preparation of reports to the Fund's trustees and appropriate regulatory authorities..................................................... Annual Fee 5. Provide and maintain a terminal with on-line facilities to provide information regarding Fund shareholder accounts.................... Annual Fee plus Cost III. PROXY MATERIALS, ANNUAL AND OTHER REPORTS ----------------------------------------- 1. Transmit (but not prepare) notices of meetings and proxy statements, prospectuses, annual, semi-annual and quarterly reports as shall be requested by the Fund and coordinate such mailings to appropriate categories of Fund shareholders................................. Cost 2. Assist the Fund's transfer agent to furnish to the Fund, by series if applicable, a list of Fund shareholders eligible to vote at shareholder meetings showing addresses of record and Shares held together with an affidavit or other appropriate certification of the mailing of proxy materials.............................................. Annual Fee IV. TAX MATTERS ----------- 1. Assist the Fund's transfer agent to prepare and transmit federal and state tax informational returns relating to Share transactions to shareholders and governmental agencies...................... Annual Fee plus Cost
A-2 EXHIBIT B TO SHAREHOLDER SERVICE AGREEMENT ------------------------------------------ SERVICES AGREEMENT ------------------ (Broker-Dealer) THIS AGREEMENT, made as of the ______ day of ____________, 1994, between Oberweis Asset Management, Inc., an Illinois corporation ("OAM"), as primary shareholder service agent for the sole series of the Oberweis Emerging Growth Fund, a Massachusetts business trust (the "Fund"), pursuant to a Shareholder Service Agreement ("Shareholder Service Agreement"), dated October 1, 1994, and __________________ (the "Firm"); WHEREAS, simultaneously herewith, the Firm is entering into a certain Distribution Services Agreement (the "Distribution Services Agreement") with The Chicago Corporation, a Delaware corporation ("TCC"), as principal distributor for the sole series of the Fund; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows: 1. OAM hereby appoints the Firm to assist OAM in providing shareholder services to the Fund. The Firm shall provide such office space and equipment, telephone facilities and personnel, as is necessary or beneficial for providing information and services to OAM in servicing accounts of the Firm's clients who own Fund Shares. Such services and assistance may include, but not be limited to, establishment and maintenance of shareholder accounts and records, assistance to clients in changing dividend options, account designations and addresses, and such other shareholder services as OAM may reasonably request. It is understood and acknowledged that OAM is not registered as a broker/dealer under the Securities and Exchange Act of 1934, as amended, or any state securities law or any regulations promulgated thereunder, and it is hereby agreed that, notwithstanding anything to the contrary contained herein, the Firm shall not be required by the terms of this Agreement to perform, and shall not perform under this Agreement, any services that OAM must be so registered as a broker/dealer to perform or for the performance of which OAM would be deemed to be acting as such a broker/dealer. The Firm shall provide such security as is necessary to prevent unauthorized use of any on-line computer facilities. The Firm agrees to release, indemnify and hold harmless the Fund, OAM, TCC, and the Fund's investment adviser, custodian and transfer agent from any and all direct or indirect liabilities or losses resulting from requests, directions, actions or inactions of or by the Firm, its officers, employees or agents in connection with the services to be provided by the Firm under this Agreement. Principals of the Firm will be available to consult from time to time with OAM concerning administration and performance of the services contemplated by this Agreement. The Firm accepts such appointment and agrees during such period to render such services and to assume the obligations herein set forth for the compensation herein provided. The Firm shall, for purposes herein provided, be deemed to be an independent contractor, and unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Fund or OAM in any way or otherwise be deemed an agent of the Fund or OAM. 2. For the services and facilities described in Section 1, OAM will pay a fee (the "Services Fee") to the Firm after the end of each quarter at the annual rate of ______ of 1% of the average aggregate net asset value of the Fund shares in those accounts for which the Firm provides shareholder services at a level deemed by OAM to be satisfactory; provided that the aggregate Services Fee paid hereunder and Distribution Fee as defined in and paid under the Distribution Services Agreement shall not exceed the total annual rate of ______ of 1% of the average aggregate net asset value of the Fund shares in those accounts for which the Firm provides such shareholder services at such satisfactory level of performance. OAM may in its sole discretion pay such additional amounts to the Firm as shall be deemed appropriate by OAM. For the quarter and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration on the basis of the number of days that the Agreement is in effect during the quarter and year, respectively. 3. No person is authorized to make any representations concerning the Fund or shares of the Fund except in accordance with the terms of this Agreement. Neither the Firm nor its agents will use or distribute, or authorize the use or distribution of, any statements other than those contained in the Fund's current prospectus, statement of additional information or in such supplemental literature or advertising as may be authorized by the Fund or OAM. 4. The Firm shall prepare such quarterly reports for OAM as shall reasonably be requested by OAM. 5. This Agreement shall become effective on the date hereof and shall continue in effect until terminated. This Agreement shall automatically terminate in the event of its assignment, as defined in the Investment Company Act of 1940, and upon any termination of the Shareholder Service Agreement. It may also be terminated at any time by the Firm or OAM on thirty (30) days' written notice. 6. The Firm acknowledges that OAM may enter into similar agreements with others without the consent of the Firm. 7. If any provision of this Agreement shall be held or made invalid by a court decision, rule, or otherwise, the remainder shall not be affected thereby. 8. All communications to OAM shall be mailed to One Constitution Drive, Aurora, Illinois 60506, Attention: Patrick B. Joyce. Any notice to the Firm shall be duly given if mailed or telegraphed to the address specified below. 2 This Agreement shall be construed in accordance with applicable federal law and the laws of Illinois. OBERWEIS ASSET MANAGEMENT, INC. The "FIRM" Firm Name: _________________________________ By_____________________________ By_______________________________ Its____________________________ Its______________________________ Address__________________________ _________________________________ _________________________________ 3 EX-99.16 19 CALC OF PERF DATA CALCULATION OF PERFORMANCE DATA AVERAGE ANNUAL TOTAL RETURN FOR THE YEAR ENDED DECEMBER 31, 1992 P = $1,000 (Hypothetical Initial Investment) T = .13648 (Average Annual Total Return) N = 1.0 (Number of Years) ERV = $1,136.48 (Ending Redeemable Value) CALCULATIONS: P - CONSTANT $1,000 N - NUMBER OF YEARS 1.0 ERV - --- Initial Investment $1,000.00 Divided by: Beginning net asset value 18.39 --------- Number of shares purchased 54.377 Multiplied by: Ending net asset value 20.90 --------- ERV = $1,136.48 ========= T P (1+T) = ERV 1000 (1+T) = 1,136.48 (1+T)/l/ = 1.13648 (1+T) = 1.13648/1/ T = .13648 CALCULATION OF PERFORMANCE DATA AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD FROM THE COMMENCEMENT OF OPERATIONS ON JANUARY 7, 1987 THROUGH DECEMBER 31, 1992 P = $1,000 (Hypothetical Initial Investment) T = .17053 (Average Annual Total Return) N = 5.98356 (Number of Years) ERV = $2,565.62 (Ending Redeemable Value) CALCULATIONS: P - CONSTANT $1,000 - - N - - Number of days in 1987 365 Less: Number of days Fund was not operating in 1987 6 --- 359 Divided by: Number of days in year 365 --- .98356 Plus: Five full years - 1988 through 1992 5.0 ------- N = 5.98356 ERV - --- Initial Investment $1,000.00 Divided by: Beginning net asset value 10.04 --------- Number of shares purchased 99.602 Plus: Number of shares acquired through reinvestment of capital gain distribution of $4.2728/share at $18.38 per share (payable date 1/1/92) 23.155 --------- Total Number of Shares 122.757 Multiplied by: Ending net asset value 20.90 --------- ERV $2,565.62 - --- ========= T P (1+T) /n/ = ERV _ 1000 (1+T) /5.98356/ = 2,565.62 (1+T) /5.98356/ = 2.56562 (1+T) = 2.56562 1 ------- 5.98356 (1+T) = 2.56562/.16712/ (1+T) = 1.17053 T = .17053 CALCULATION OF PERFORMANCE DATA TOTAL RETURN FOR THE YEAR ENDED DECEMBER 31, 1992 P = $1,000 (Hypothetical Initial Investment) T = .13648 (Average Annual Total Return) N = 1.0 (Number of Years) ERV = $1,136.48 (Ending Redeemable Value) CALCULATIONS: P - CONSTANT $1,000 N - NUMBER OF YEARS 1.0 ERV - --- Initial Investment $1,000.00 Divided by: Beginning net asset value 18.39 --------- Number of shares purchased 54.377 Multiplied by: Ending net asset value 20.90 --------- ERV = $1,136.48 ========= T P (1+T) = ERV - - 1000 (1+T) = 1,136.48 (1+T)/l/ = 1.13648 (1+T) = 1.13648/1/ T = .13648 CALCULATION OF PERFORMANCE DATA TOTAL RETURN FOR THE PERIOD FROM THE COMMENCEMENT OF OPERATIONS ON JANUARY 7, 1987 THROUGH DECEMBER 31, 1992 P = $1,000 (Hypothetical Initial Investment) T = 1.56562 (Average Annual Total Return) ERV = $2,565.62 (Ending Redeemable Value) CALCULATIONS: P - CONSTANT $1,000 - - ERV - --- Initial Investment $1,000.00 Divided by: Beginning net asset value 10.04 ---------- Number of shares purchased 99.602 Plus: Number of shares acquired through reinvestment of capital gain distribution of $4.2728/share at $18.38 per share (payable date 1/1/92) 23.155 ---------- Total Number of Shares 122.757 Multiplied by: Ending net asset value 20.90 ---------- ERV $2,565.62 ========== T P (1+T) = ERV - - 1000 (1+T) = 2,565.62 (1+T) = 2.56562 T = 1.56562 EX-27.1 20 FINANCIAL DATA SCHEDULE
6 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 74,948,000 89,911,000 412,000 26,000 9,000 90,358,000 88,000 0 256,000 344,000 0 75,025,000 4,203,507 0 0 0 (17,000) 0 15,006,000 90,014,000 142,000 526,000 0 1,647,000 (979,000) (17,000) (3,046,000) (4,042,000) 0 0 0 0 1,272,000 (1,771,000) 0 (499,000) 0 0 0 0 395,000 0 1,647,000 93,171,000 22.19 (.22) (.56) 0 0 0 21.41 1.78 0 0

EX-27.2 21 FINANCIAL DATA SCHEDULE
6 6-MOS DEC-31-1994 JAN-01-1995 JUN-30-1995 76,918,000 115,714,000 1,276,000 20,000 4,041,000 121,051,000 978,000 0 3,149,000 4,127,000 0 78,213,000 4,350,806 0 0 0 1,937,000 0 36,774,000 116,924,000 61,000 257,000 0 (876,000) (558,000) 1,953,000 21,769,000 23,164,000 0 0 0 0 1,031,000 (884,000) 0 147,000 0 0 0 0 212,000 0 915,000 100,848,000 21.41 (.13) 5.59 0 0 0 26.87 1.75 0 0

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