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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4854
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The Oberweis Funds
--------------------------------------------------------------
(Exact name of registrant as specified in charter)
951 Ice Cream Drive, Suite 200, North Aurora, IL 60542
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(Address of principal executive offices) (Zip code)
James D. Oberweis James A. Arpaia
The Oberweis Funds Vedder, Price, Kaufman, & Kammholtz
951 Ice Cream Drive, Suite 200 222 North LaSalle Street, Suite 2600
North Aurora, IL 60542 Chicago, IL 60601
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 323-6166
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2003
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. (S) 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Annual Report to Stockholders Follows.
PRESIDENT'S LETTER
Dear Oberweis Funds Shareholder:
I am pleased to report outstanding results for each of the three portfolios of
The Oberweis Funds. In 2003, the Oberweis Micro-Cap Portfolio appreciated
+108.93%, the Emerging Growth Portfolio appreciated +67.70%, and the Mid-Cap
Portfolio appreciated +55.97%. For comparison, the Russell 2000 Growth Index
appreciated +48.54% and the Russell Mid-Cap Growth Index appreciated +42.71%.
Looking back, we believe that 2003 will likely be remembered as a turning point
for investors in the stock market. After a challenging environment for equity
investors in 2000-2002, this past year was excellent in terms of absolute gains,
particularly for small-cap stocks. As investors became increasingly confident
that recession was giving way to growth, assets were shifted toward those
companies most likely to benefit from an increasingly positive economic outlook,
namely small-cap growth equities.
Investors are beginning 2004 with higher expectations than at the beginning of
2003. Few economists dispute that the economy is growing, but considerable
debate remains over the rate of such growth. Thus, the fundamental question for
2004 is whether we will see growth above and beyond that which is already
predicted by investors. In short, as of the end of 2003, we are finding more
companies exhibiting the high rates of growth required by our process, but the
valuations of such companies (as measured by price/earnings ratios) are
significantly higher than at the beginning of 2003. We remain optimistic that
small-cap growth stocks have the potential to outperform the broader market over
the next several years; however, we do not expect to see a repeat of the
spectacular results of 2003 anytime soon. It is important to note that the gains
of 2003 should not be viewed as typical. Short-term swings are difficult, if not
impossible, to predict in advance and it would be normal to expect some quarters
in which our portfolios decline in value. However, we do believe that investing
in a diversified portfolio of rapidly growing companies purchased at appropriate
valuations offers long-term investors the opportunity to achieve above-average
stock market returns over a 10 or 20 year period of time.
In investing the three portfolios, our strategy remains consistent. We seek to
attain excess return through superior individual stock selection. We strive to
identify high-growth companies which are under followed by institutional
investors and can be purchased at low valuations in relation to their expected
rates of growth. In 2004, as the economy continues to improve, we look forward
to the opportunity to select among an increasingly large universe of rapidly
growing companies with innovative products and services. The companies in each
portfolio have average growth rates in excess of 50%. The average P/E ratio as
of year end was 26 times next year's estimated earnings for the Micro-Cap
Portfolio and the Emerging Growth Portfolio, and 23 times next year's estimated
earnings for the Mid-Cap Portfolio. As of 12-31-03, the weighted average market
cap for the Micro-Cap, Emerging Growth, and Mid-Cap Portfolios, respectively,
was $232 million, $810 million, and $3.3 billion.
The Oberweis Funds experienced a significant increase in assets in 2003. As a
result of market appreciation and accelerating purchases, the Micro-Cap
Portfolio is now closed to new investors. The Micro-Cap Portfolio is also closed
to existing shareholders except for retirement accounts (qualified retirement
plans and IRA accounts). An increase in total assets in the Emerging Growth
Portfolio led to a reduction in the Portfolio's average expense ratio from 1.57%
in 2002 to 1.37% in 2003. The Emerging Growth Portfolio and the Mid-Cap
Portfolio remain open to new investors and shares may be purchased either
directly through the Fund or through one of our many brokerage firm partners.
Lastly, we would like to sincerely thank you for investing with us in The
Oberweis Funds. If you have any questions on your account or should you wish to
add to your Oberweis Funds account, please call our shareholder service
representatives at (800) 245-7311. You may also download a prospectus and
purchase shares online at www.oberweis.net. Best wishes for a prosperous 2004!
Sincerely,
/s/ James D. Oberweis /s/ James W. Oberweis
James D. Oberweis James W. Oberweis
President Senior Vice President
Portfolio Manager Portfolio Manager
1
THE OBERWEIS FUNDS
MANAGEMENT DISCUSSION AND ANALYSIS
The Oberweis Funds are positioned to take advantage of the long-term price
appreciation that occurs when the market places an appropriately high value on
fast growing, profitable companies. The three portfolios of The Oberweis Funds
have historically performed particularly well during periods of economic
recovery, as was the case in 2003. The Oberweis Micro-Cap Portfolio appreciated
+108.93% and the Emerging Growth Portfolio appreciated +67.70%. For comparison,
the benchmark Russell 2000 Growth Index appreciated +48.54%. The Oberweis
Mid-Cap Portfolio appreciated +55.97%. For comparison, the Russell Midcap Growth
Index appreciated +42.71%. All three portfolios returned positive gains for the
period and performed favorably relative to their benchmark indices.
The Micro-Cap Portfolio particularly benefited from investments in FARO
Technologies, Healthextras, Ultralife Batteries, ICOS Vision Systems and Central
European Distribution. Central European Distribution was also recognized as one
of last year's favorable investments. The Emerging Growth Portfolio derived
significant gains from investments in eResearch Technology, KOS Pharmaceuticals,
and Ceradyne. The Mid-Cap portfolio particularly benefited from investments in
Sandisk, AO VimpleCom, and Cognizant Technology Solutions.
The portfolio turnover rate was 87% for the Micro-Cap Portfolio, 56% for the
Emerging Growth portfolio, and an unusually low 29% for the Mid-Cap Portfolio.
The expense ratios of the three portfolios were 1.60% for Micro-Cap, 1.37% for
Emerging Growth and 2.00% for Mid-Cap. The average commission rate paid by each
portfolio for agency transactions was approximately two cents per share traded.
This rate compares quite favorably to most other mutual funds.
2
THE OBERWEIS FUNDS
MANAGEMENT DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Average Annual Total Returns /(1)/
Periods ended 12/31/03
Since
One Five Ten Inception
Year Years Years 1/7/87
------------------------------------
OBEGX 67.70% +11.80% +10.05% +12.44%
Russell 2000 +47.25% +7.13% +9.47% +10.03%
Russell 2000 Growth +48.54% +0.86% +5.43% +7.38%
Growth of an Assumed $10,000 Investment
from January 7, 1987 to December 31, 2003
Label A B C
- ----------------------------------------------------------
Oberweis
Emerging
Growth
Portfolio Russell 2000
Label (OBEGX) Russell 2000 Growth
- ----------------------------------------------------------
1 $ 10,000 $ 10,000 $ 10,000
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2 1987 $ 9,094 $ 8,535 $ 8,953
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3 1988 $ 9,612 $ 10,670 $ 10,776
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4 1989 $ 12,012 $ 12,406 $ 12,950
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5 1990 $ 12,062 $ 9,989 $ 10,695
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6 1991 $ 22,573 $ 14,589 $ 16,170
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7 1992 $ 25,653 $ 17,275 $ 17,426
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8 1993 $ 28,147 $ 20,536 $ 19,757
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9 1994 $ 27,157 $ 20,161 $ 19,276
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10 1995 $ 38,716 $ 25,897 $ 25,260
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11 1996 $ 47,413 $ 30,169 $ 28,105
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12 1997 $ 43,340 $ 36,916 $ 31,744
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13 1998 $ 42,009 $ 35,976 $ 32,134
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14 1999 $ 64,348 $ 43,623 $ 45,981
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15 2000 $ 57,469 $ 42,305 $ 35,668
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16 2001 $ 57,740 $ 43,357 $ 32,300
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17 2002 $ 43,746 $ 34,476 $ 22,579
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18 2003 $ 73,362 $ 50,767 $ 33,539
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- --------------------------------------------------------------------------------
Average Annual Total Returns /(1)/
Periods ended 12/31/03
Since
One Five Inception
Year Years 1/1/96
----------------------------
OBMCX +108.93% +18.63% +16.24%
Russell 2000 +47.25% +7.13% +8.77%
Russell 2000 Growth +48.54% +0.86% +3.60%
Growth of an Assumed $10,000 Investment
from January 1, 1996 to December 31, 2003
Label A B C
- ----------------------------------------------------------
Oberweis
Micro-Cap
Portfolio Russell 2000
Label Russell 2000 (OBMCX) Growth
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1 10,000.42 10,000.00 9,999.75
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2 1996 11,649.91 12,280.00 11,126.00
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3 1997 14,255.19 13,590.00 12,566.28
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4 1998 13,892.36 14,180.00 12,270.76
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5 1999 16,845.33 16,940.00 18,202.44
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6 2000 16,336.43 15,585.47 14,119.76
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7 2001 16,742.57 19,303.43 12,816.75
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8 2002 13,313.09 15,953.82 8,938.16
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9 2003 19,604.04 33,332.61 13,200.00
- ----------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns /(1)/
Periods ended 12/31/03
Since
One Five Inception
Year Years 9/15/96
---------------------------
OBMDX +55.97% +4.20% +6.93%
Russell Midcap Growth +42.71% +2.01% +7.43%
Russell 2000 Growth +48.54% +0.86% +2.86%
Growth of an Assumed $10,000 Investment
from September 15, 1996 to December 31, 2003
Label A B C
- --------------------------------------------------------
Oberweis
Mid-Cap Russell
Portfolio Midcap
Label (OBMDX) Russell 2000 Growth
- --------------------------------------------------------
1 9/15/96 10,000 10,000 10,000
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2 12/31/96 10,290 10,299 10,581
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3
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4
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5
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6 12/31/97 10,846 11,632 12,966
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7
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8
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9
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10 12/31/98 13,271 11,775 15,282
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11
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12
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13
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14 12/31/99 28,230 16,849 23,121
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15
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16
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17
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18 12/31/00 24,548 13,070 20,404
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19
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20
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21
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22 12/31/01 15,529 11,864 16,292
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23
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24
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25
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26 12/31/02 10,453 8,274 11,828
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27
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28
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29
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30 12/31/03 16,303 12,290 16,879
- --------------------------------------------------------
/(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 Russell 2000 Growth Index measures the
performance of those Russell 2000 companies with higher price-to-book ratios and
higher forecasted earnings growth rates. The Russell 2000 Index measures the
performance of 2000 companies with small-market capitalizations. The Russell
Midcap Growth Index measures those Russell Midcap companies with higher
price-to-book ratios and higher forecasted growth values. The Russell indices
are unmanaged and are not available for investment. A sales load of 4% was
charged on the Oberweis Emerging Growth Portfolio until December 31, 1991 and is
not reflected in the total return figures or graph above.
3
OBERWEIS EMERGING GROWTH PORTFOLIO
Portfolio of Investments
December 31, 2003 (value in thousands)
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------------
COMMON STOCKS - 100.4%
Air Transportation - 1.5%
290,185 Mesa Air Group, Inc. @ 12.570 $ 3,648
----------
Auto Parts - After Market - 0.8%
60,000 Starcraft Corp. @ 32.460 1,948
----------
Auto Trucks & Parts - 0.7%
4,400 A.S.V., Inc. @ 37.360 164
----------
Consumer Discretionary - Advertising Agency - 1.7%
399,200 aQuantive, Inc. @ 10.250 4,092
200,000 ValueClick, Inc. @ 9.070 1,814
----------
5,906
----------
Consumer Discretionary - Commercial
Information Service - 0.8%
100,000 Ask Jeeves, Inc. @ 18.120 1,812
----------
Consumer Discretionary - Consumer Electronics - 3.6%
100,000 Digital Theater Systems, Inc. @ 24.690 2,469
70,000 NetFlix, Inc. @ 54.690 3,828
82,100 Sohu.com, Inc. @ 29.910 2,456
----------
8,753
----------
Consumer Discretionary - Consumer Products - 2.5%
200,000 USANA Health Sciences, Inc. @ 30.600 6,120
----------
Consumer Discretionary - Photography - 0.8%
200,000 Concord Camera Corp. @ 9.250 1,850
----------
Consumer Discretionary - Restaurants - 0.5%
24,100 P.F. Chang's China Bistro, Inc. @ 50.880 1,226
----------
Consumer Discretionary - Retail - 1.5%
97,700 Chico's FAS, Inc. @ 36.950 3,610
----------
Consumer Discretionary - Service Commercial - 1.4%
*10,300 StarTek, Inc. @ 40.790 420
200,000 Wireless Facilities, Inc. @ 14.860 2,972
----------
3,392
----------
Consumer Discretionary - Shoes - 3.8%
130,300 The Finish Line, Inc. @ 29.970 3,905
*220,000 K-Swiss, Inc. @ 24.100 5,302
----------
9,207
----------
Consumer Discretionary - Wholesale - 1.9%
148,100 Central European Distribution Corp. @ 31.600 $ 4,680
----------
Financial Services - Banks - 1.0%
*67,800 Mercantile Bank Corp. @ 36.500 2,475
----------
Financial Services - Diverse - 2.4%
328,157 Euronet Worldwide, Inc. @ 18.039 5,920
----------
Financial Services - Insurance - 1.7%
300,000 HealthExtras, Inc. @ 13.400 4,020
----------
Financial Services - Misc. - 0.8%
70,000 Portfolio Recovery Associates, Inc. @ 26.550 1,858
----------
Financial Services - Savings & Loan - 0.5%
*100,000 NetBank, Inc. @ 13.350 1,335
----------
Health Care - Biotech Research & Production - 4.3%
10,407 ArthroCare Corp. @ 24.500 255
80,000 ICON plc Sponsored ADR @ 43.600 3,488
120,000 Kensey Nash Corp. @ 23.250 2,790
60,000 Martek Biosciences Corp. @ 65.090 3,905
----------
10,438
----------
Health Care - Drugs & Pharmaceuticals - 13.6%
80,055 Able Laboratories, Inc. @ 18.070 1,447
50,000(a) Able Laboratories, Inc. RS @ 18.070 903
80,000 American Pharmaceutical Partners, Inc. @ 33.600 2,688
140,000 Atix Laboratories, Inc. @ 24.040 3,366
150,000 Bradley Pharmaceuticals, Inc. @ 25.430 3,814
150,000 Bentley Pharmaceuticals, Inc. @ 13.300 1,995
100,000 Eon Labs, Inc. @ 50.950 5,095
500,000 InKine Pharmaceutical Corp. @ 4.830 2,415
160,000 Kos Pharmaceuticals, Inc. @ 43.010 6,882
100,000 SFBC International, Inc. @ 26.560 2,656
30,000 Taro Pharmaceutical Industries, Ltd. @ 64.500 1,935
----------
33,196
----------
Health Care - Electronic Medical Systems - 5.1%
180,000 Abaxis, Inc. @ 18.090 3,256
359,250 eResearch Technology, Inc. @ 25.420 9,132
----------
12,388
----------
See accompanying notes to financial statements.
4
OBERWEIS EMERGING GROWTH PORTFOLIO
Portfolio of Investments (cont'd.)
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------------
Health Care - Facilities - 0.6%
60,000 American Healthways, Inc. @ 23.870 $ 1,432
----------
Health Care - Management Services - 3.0%
110,000 Centene Corp. @ 28.010 3,081
263,037 Omnicell, Inc. @ 16.200 4,262
----------
7,343
----------
Health Care - Services - 1.6%
70,000 Odyssey Healthcare, Inc. @ 29.460 2,062
50,000 VistaCare, Inc. @ 34.940 1,747
----------
3,809
----------
Health Care - Medical & Dental
Instruments / Supplies - 6.5%
70,000 Advanced Neuromodulation Systems @ 45.980 3,219
73,100 Closure Medical Corp. @ 34.090 2,492
102,800 Gen-Probe, Inc. @ 36.470 3,749
110,000 Kyphon, Inc. @ 24.830 2,731
180,000 Therasense, Inc. @ 20.180 3,632
----------
15,823
----------
Health Care - Medical & Dental Services - 0.4%
51,478 LCA-Vision, Inc. @ 21.170 1,090
----------
Materials & Production - Misc.
Materials & Commodity - 2.0%
140,000 Ceradyne, Inc. @ 34.060 4,768
----------
Other Energy - Oil Crude Producer - 1.2%
400,000 Carrizo Oil & Gas, Inc. @ 7.201 2,880
----------
Producer Durables - Aerospace - 1.6%
120,000 MTC Technologies, Inc. @ 32.230 3,868
----------
Producer Durables - Electronics - Instruments - 3.2%
200,000 August Technology Corp. @ 18.600 3,720
136,100 Innovative Solutions and Support, Inc. @ 16.230 2,209
120,000 Sensytech, Inc. @ 14.000 1,680
----------
7,609
----------
Producer Durables - Machinery - 2.2%
160,000 Applied Films Corp. @ 33.020 5,283
----------
Producer Durables - Office Furniture
& Business Equipment - 1.3%
*110,000 Nam Tai Electronics, Inc. @ 28.080 3,089
----------
Technology - Communication - 5.0%
300,000 Carrier Access Corp. @ 12.540 $ 3,762
140,000 Comtech Telecommunications Corp. @ 28.790 4,031
60,000 j2 Global Communications, Inc. @ 24.790 1,487
80,000 Secure Computing Corp. @ 17.910 1,433
79,100 Sierra Wireless @ 15.380 1,217
----------
11,930
----------
Technology - Computer Service Software &
Systems - 6.7%
120,000 Altiris, Inc. @ 36.480 4,378
60,000 Magma Design Automation, Inc. @ 23.340 1,400
200,000 Merge Technologies, Inc. @ 17.640 3,528
66,700 Netease.com, Inc. @ 36.920 2,463
140,000 SafeNet, Inc. @ 30.670 4,294
----------
16,063
----------
Technology - Computer - Technology - 5.5%
350,000 Cray, Inc. @ 9.930 3,475
200,000 Dot Hill Systems Corp. @ 15.150 3,030
230,200 Lexar Media, Inc. @ 17.420 4,010
200,000 Synaptics, Inc. @ 14.980 2,996
----------
13,511
----------
Technology - Electronics Semi-Conductor - 5.0%
150,000 Artisan Components, Inc. @ 20.500 3,075
110,000 OmniVision Technologies, Inc. @ 55.250 6,078
200,000 Silicon Image, Inc. @ 7.160 1,432
90,000 Tessera Technologies, Inc. @ 18.810 1,693
----------
12,278
----------
Utilities - Telecommunications - 2.5%
114,014 Golden Telecom, Inc. @ 27.850 3,175
40,000 Vimpel Communications @ 73.500 2,940
----------
6,115
----------
Veterinary Products - 1.2%
400,000 PetMed Express, Inc. @ 7.200 2,880
----------
Total Common Stocks
(Cost: $181,024) $ 243,717
----------
Total Investments - 100.4%
(Cost : $181,024) $ 243,717
----------
Other Liabilities less Assets - (0.4%) (1,022)
----------
NET ASSETS - 100% $ 242,695
==========
See accompanying notes to financial statements.
5
OBERWEIS EMERGING GROWTH PORTFOLIO
Portfolio of Investments (cont'd.)
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
* Income producing security during the year ended December 31, 2003.
Securities not indicated as income producing did not pay dividends for the
year ended December 31, 2003.
Based on the cost of investments of $181,024,000 for federal income tax purposes
at December 31, 2003, the aggregate gross unrealized appreciation was
$67,736,000, the aggregate gross unrealized depreciation was $5,043,000 and the
net unrealized appreciation of investments was $62,693,000.
/(a)/ The following security is subject to legal or contractual
restrictions on sale. It was valued at cost on the date of acquisition and
at fair value as determined by the board of trustees of the Fund as of
December 31, 2003. The aggregate value of restricted securities was
$903,000 or 0.4% of net assets at December 31, 2003.
Able Laboratories, Inc. 50,000 shares purchased in June, 2003 at a cost of
$950,000.
See accompanying notes to financial statements.
6
OBERWEIS MICRO-CAP PORTFOLIO
Portfolio of Investments
December 31, 2003 (value in thousands)
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------------
COMMON STOCKS - 97.9%
Auto & Transportation - 1.9%
60,000 Starcraft Corp. @ 32.460 $ 1,948
----------
Consumer Discretionary - Consumer Electronics - 1.0%
55,000 FindWhat.com @ 18.750 1,031
----------
Consumer Discretionary - Service Commercial - 3.8%
150,000 Greg Manning Auctions, Inc. @ 11.839 1,776
19,500 4Kids Entertainment, Inc. @ 26.020 507
125,000 SM&A @ 11.700 1,463
----------
3,746
----------
Consumer Discretionary - Wholesale - 2.0%
64,500 Central European Distribution Corp. @ 31.600 2,038
----------
Consumer Staples - Foods - 1.1%
120,000 SunOpta, Inc. @ 9.230 1,108
----------
Financial Services - Banks - 0.3%
20,000 Florida Banks, Inc. @ 14.000 280
----------
Financial Services - Data - 1.8%
200,000 Tradestation Group, Inc. @ 8.860 1,772
----------
Financial Services - Insurance - 3.0%
220,000 HealthExtras, Inc. @ 13.400 2,948
----------
Health Care - Biotech Production - 3.0%
80,000 Kensey Nash Corp. @ 23.250 1,860
200,000 Trinity Biotech plc @ 5.580 1,116
----------
2,976
----------
Health Care - Drugs & Pharmaceuticals - 7.8%
80,000 Able Laboratories, Inc. @ 18.070 1,446
60,000 Bradley Pharmaceuticals, Inc. @ 25.430 1,526
60,000 Bentley Pharmaceuticals, Inc. @ 13.300 798
100,000 Carrington Laboratories, Inc. @ 4.120 412
119,400 Caraco Pharmaceutical Laboratories, Ltd. @ 7.480 893
150,000 Matrixx Initiatives, Inc. @ 17.739 2,661
----------
7,736
----------
Health Care - Electronic Medical Systems - 6.3%
100,000 Candela Corp. @ 18.180 $ 1,818
225,000 Palomar Medical Technologies, Inc. @ 10.520 2,367
25,000 Quality Systems, Inc. @ 44.590 1,115
150,000 Somanetics Corp. @ 6.750 1,013
----------
6,313
----------
Health Care - Facilities - 2.7%
240,000 PainCare Holdings, Inc. @ 3.200 768
90,000 Psychiatric Solutions, Inc. @ 20.900 1,881
----------
2,649
----------
Health Care - Management Services - 3.0%
60,000 IMPAC Medical Systems, Inc. @ 25.560 1,534
80,000 Vital Images, Inc. @ 17.860 1,429
----------
2,963
----------
Health Care - Medical & Dental - 2.7%
35,300 Bio-Imaging Technologies, Inc. @ 6.230 220
40,000 BioLase Technology, Inc. @ 16.600 664
40,000 Inverness Medical Innovations, Inc. @ 21.780 871
46,500 Synovis Life Technologies, Inc. @ 20.250 942
----------
2,697
----------
Medical - Biomedical / Gene - 0.7%
150,000 Lark Technologies @ 4.800 720
----------
Other Energy - Oil Crude Producer - 0.6%
100,000 Exploration Company of Delaware, Inc. @ 6.100 610
----------
Producer Durables - Control & Filter Device - 1.0%
190,000 Mikron Infrared, Inc. @ 5.300 1,007
----------
Producer Durables - Electrical Equipment - 4.1%
90,000 Sonic Solutions @ 15.300 1,377
*150,000 Technology Research Corp. @ 17.920 2,688
----------
4,065
----------
Producer Durables - Electronics Instruments - 9.9%
309,700 FARO Technologies, Inc. @ 24.980 7,736
120,000 NovAtel, Inc. @ 8.270 992
80,000 Sensytech, Inc. @ 14.000 1,120
----------
9,848
----------
Producer Durables - Machinery - 2.2%
120,000 ICOS Vision Systems Corp. N.V. @ 18.300 2,196
----------
Producer Durables - Misc. Durables - 2.5%
30,000 Taser International, Inc. @ 82.370 2,471
----------
See accompanying notes to financial statements.
7
OBERWEIS MICRO-CAP PORTFOLIO
Portfolio of Investments (cont'd.)
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------------
Technology - Communication - 5.8%
69,600 California Amplifier, Inc. @ 14.070 $ 979
80,000 Comtech Telecommunications Corp. @ 28.790 2,303
75,000 NICE Systems, Ltd. @ 25.350 1,901
85,900 Sunair Electronics, Inc. @ 7.150 614
----------
5,797
----------
Technology - Computer Service Software &
Systems - 13.1%
550,000 ClickSoftware Technologies @ 4.080 2,244
190,350 Innodata Corp. @ 4.000 761
505,000 Island Pacific, Inc. @ 1.840 929
250,000 MIND C.T.I., Ltd. @ 6.000 1,500
100,000 Merge Technologies, Inc. @ 17.640 1,764
100,000 The SCO Group, Inc. @ 17.000 1,700
60,000 SafeNet, Inc. @ 30.670 1,840
167,376 Smith Micro Software, Inc. @ 1.990 333
100,000 SupportSoft, Inc. @ 13.160 1,316
300,000 VASCO Data Security International, Inc. @ 2.340 702
----------
13,089
----------
Technology - Computer Technology - 8.1%
350,000 Arel Communications and Software, Ltd @ 2.820 987
40,000 CyberGuard Corp. @ 8.720 349
400,000 ICAD, Inc. @ 5.280 2,112
70,000 Interphase Corp. @ 12.950 907
80,000 Neoware Systems, Inc. @ 13.740 1,099
75,000 Stratasys, Inc. @ 27.050 2,029
135,900 The Extended Systems, Inc. @ 4.330 588
----------
8,071
----------
Technology - Electrical - 1.0%
250,000 EXX, Inc. @ 3.950 988
----------
Technology - Electronics - 4.8%
200,000 Ultralife Batteries, Inc. @ 12.380 2,476
25,888 California Micro Devices Corp. @ 9.130 236
80,000 Sigmatron International, Inc. @ 26.130 2,090
----------
4,802
----------
Utilities - Misc. - 1.7%
80,000 Bennett Environmental, Inc. @ 20.660 1,653
----------
Utilities - Telecommunications - 2.0%
101,300 Yak Communications, Inc. @ 19.310 1,956
----------
Rights Company (Closing Price) Value
- -------------------------------------------------------------------------------
Total Common Stocks
(Cost: $52,697) $ 97,478
----------
Rights - 0.0%
Computers - 0.0%
145,500/(a)/ Vision Technology @ 0.000 --
----------
Total Rights
(Cost : $0) $ --
----------
Total Investments - 97.9%
(Cost : $52,697) $ 97,478
Other Assets less Liabilities - 2.1% 2,068
----------
NET ASSETS - 100% $ 99,546
==========
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
* Income producing security during the year ended December 31, 2003.
Securities not indicated as income producing did not pay dividends for the
year ended December 31, 2003.
Based on the cost of investments of $52,697,000 for federal income tax purposes
at December 31, 2003, the aggregate gross unrealized appreciation was
$45,761,000, the aggregate gross unrealized depreciation was $980,000 and the
net unrealized appreciation of investments was $44,781,000.
/(a)/ The security is valued in good faith by the board of trustees of the
Fund as of December 31, 2003.
See accompanying notes to financial statements.
8
OBERWEIS MID-CAP PORTFOLIO
Portfolio of Investments
December 31, 2003 (value in thousands)
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------------
COMMON STOCKS - 98.4%
Consumer Discretionary - Education Services - 4.4%
6,000 Career Education Corp. @ 40.250 $ 241
3,400 University of Phoenix Online @ 68.930 234
----------
475
----------
Consumer Discretionary - Restaurants - 1.1%
3,000 Panera Bread Company @ 39.520 119
----------
Consumer Discretionary - Retail - 3.4%
10,000 Chico's FAS, Inc. @ 36.950 369
----------
Consumer Discretionary - Service Commercial - 2.1%
3,000 FTI Consulting, Inc. @ 23.370 70
6,000 Kroll, Inc. @ 26.000 156
----------
226
----------
Consumer Discretionary - Textile - Apparel
Manufacturers - 2.5%
4,000 Coach, Inc. @ 37.750 151
7,000 Quicksilver, Inc. @ 17.730 124
----------
275
----------
Consumer Staples - Foods - 0.7%
2,000 Performance Food Group Company @ 36.170 72
----------
Financial Services - Financial Data Provider
Services - 1.0%
2,000 Affiliated Computer Services, Inc. @ 54.460 109
----------
Financial Services- Misc. - 0.9%
*3,000 Brown & Brown, Inc. @ 32.610 98
----------
Financial Services - Insurance - 1.6%
5,000 Endurance Specialty Holdings, Ltd. @ 33.550 168
----------
Health Care - Biotech Research & Production - 3.6%
3,000 Celgene Corp. @ 44.880 135
1,200 Cephalon, Inc. @ 48.410 58
3,000 Martek Biosciences Corp. @ 65.090 195
----------
388
----------
Health Care- Drugs - Pharmaceuticals - 11.0%
10,000 Andrx Corp. @ 24.040 $ 240
6,000 American Pharmaceutical Partners, Inc. @ 33.600 202
3,000 Barr Laboratories, Inc. @ 76.950 231
4,000 Eon Labs, Inc. @ 50.950 204
10,000 QLT, Inc. @ 18.850 189
2,000 Taro Pharmaceutical Industries, Ltd. @ 64.500 129
----------
1,195
----------
Health Care- Electrical Medical Systems - 0.6%
3,900 CTI Molecular Imaging @ 16.910 66
----------
Health Care - Facilities - 1.0%
4,000 Pharmaceutical Product Development @ 26.970 108
----------
Health Care - Management Services - 5.5%
4,000 AdvancePCS @ 52.790 211
15,000 Caremark Rx, Inc. @ 25.330 380
----------
591
----------
Health Care - Services - 0.8%
3,000 Odyssey Healthcare, Inc. @ 29.460 88
----------
Health Care - Medical & Dental Instruments - 3.5%
15,000 Cytyc Corp. @ 13.840 208
2,000 Respironics, Inc. @ 45.210 90
2,000 ResMed, Inc. @ 41.540 83
----------
381
----------
Other Energy - Crude Oil Producer - 2.7%
*6,000 Pogo Producing Company @ 48.300 290
----------
Producer Durables - Electronics - Instruments - 2.0%
*4,000 Garmin, Ltd. @ 54.480 218
----------
Producer Durables - Machinery - 2.3%
*4,500 Engineered Support Systems, Inc. @ 55.060 248
----------
Producer Durables - Production Technology
Equipment - 1.6%
*6,000 Cognex Corp. @ 28.290 170
----------
Producer Durables - Telecommunications - 0.6%
3,000 InterDigital Communications Corp. @ 20.600 62
----------
See accompanying notes to financial statements.
9
OBERWEIS MID-CAP PORTFOLIO
Portfolio of Investments (cont'd.)
Shares Company (Closing Price) Value
- -------------------------------------------------------------------------------
Technology - Communication - Technology - 14.0%
10,000 Foundry Networks, Inc. @ 27.330 273
4,000 L-3 Communications Holdings, Inc. @ 51.360 205
6,000 Research In Motion, Ltd. @ 66.830 401
30,000 Sonus Networks, Inc. @ 7.540 226
11,000 UTStarcom, Inc. @ 37.070 408
----------
1,513
----------
Technology - Computer Service Software &
Systems - 11.2%
18,000 Ascential Software Corp. @ 25.750 467
6,000 Cognizant Technology Solutions Corp. @ 45.640 274
10,000 iPass, Inc. @ 16.010 160
8,000 NetScreen Technologies, Inc. @ 24.750 198
3,000 Netease,com, Inc. @ 36.920 110
----------
1,209
----------
Technology - Computer Technology - 7.7%
10,000 AU Optronics Corp. @ 11.920 119
8,000 SanDisk Corp. @ 61.200 490
4,000 Synopsys, Inc. @ 33.860 135
8,000 Western Digital Corp. @ 11.790 94
----------
838
----------
Technology - Electronics Semi - Conductors - 8.5%
15,000 Globespan Virata, Inc. @ 5.850 88
2,500 Jabil Circuit, Inc. @ 28.300 71
4,000 Marvell Technology Group, Ltd. @ 37.930 152
4,000 OmniVision Technologies, Inc. @ 55.250 221
3,000 Silicon Laboratories, Inc. @ 43.280 130
40,000 Siliconware Precision Industries Company @ 5.150 206
6,000 MEMC Electronic Materials, Inc. @ 9.620 58
----------
926
----------
Utilities - Telecommunications - 4.1%
6,000 Vimpel Communications @ 73.500 441
----------
Total Common Stocks
(Cost: $7,522) $ 10,643
----------
Total Investments - 98.4%
(Cost: $7,522) $ 10,643
Other Assets less Liabilities - 1.6% 177
----------
NET ASSETS - 100% $ 10,820
==========
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
* Income producing security during the year ended December 31, 2003.
Securities not indicated as income producing did not pay dividends for the
year ended December 31, 2003.
Based on the cost of investments of $7,522,000 for federal income tax purposes
at December 31, 2003, the aggregate gross unrealized appreciation was
$3,441,000, the aggregate gross unrealized depreciation was $320,000 and the net
unrealized appreciation of investments was $3,121,000.
See accompanying notes to financial statements.
10
THE OBERWEIS FUNDS
Statement of Assets and Liabilities
December 31, 2003 (in thousands, except pricing of shares)
Emerging
Growth Micro-Cap Mid-Cap
Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------
Assets:
Investment securities at value $ 243,717 $ 97,478 $ 10,643
(Cost: $181,024, $52,697 and
$7,522, respectively)
Cash -- 2,888 197
Receivable from securities sold 6,416 1,056 --
Dividends and interest receivable 8 2 1
Prepaid expenses 28 24 5
------------ ------------ ------------
Total Assets 250,169 101,448 10,846
------------ ------------ ------------
Liabilities:
Payable to custodian bank 1,154 -- --
Payable for fund shares redeemed 2,555 237 --
Payable for securities purchased 3,483 1,528 --
Payable to advisor (see note 2) 176 87 7
Payable to distributor 54 22 2
Accrued expenses 52 28 17
------------ ------------ ------------
Total Liabilities 7,474 1,902 26
------------ ------------ ------------
Net Assets $ 242,695 $ 99,546 $ 10,820
============ ============ ============
Analysis of net assets:
Aggregate paid in capital $ 186,936 $ 48,981 $ 11,538
Accumulated net realized gain(loss)
on investments (6,934) 5,784 (3,839)
Net unrealized appreciation of
investments 62,693 44,781 3,121
------------ ------------ ------------
Net Assets $ 242,695 $ 99,546 $ 10,820
============ ============ ============
The Pricing of Shares:
Net asset value and offering price
per share
Emerging Growth Portfolio:
($242,694,862 divided by 8,972,870
shares outstanding) $ 27.05
============
Micro-Cap Portfolio:
($99,545,951 divided by 3,791,344
shares outstanding) $ 26.26
============
Mid-Cap Portfolio:
($10,820,185 divided by 951,372
shares outstanding) $ 11.37
============
See accompanying notes to financial statements.
11
THE OBERWEIS FUNDS
Statement of Operations
Year Ended December 31, 2003 (in thousands)
Emerging
Growth Micro-Cap Mid-Cap
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------
Investment Income:
Interest $ 115 $ 58 $ --
Dividends 138 36 6
----------- ----------- -----------
Total Investment Income 253 94 6
----------- ----------- -----------
Expenses:
Investment advisory fees 573 443 28
Management fees 548 295 28
Distribution fees (see note 2) 343 185 17
Transfer agent fees and expenses 167 89 33
Custodian fees and expenses 84 62 30
Professional fees 81 44 5
Federal and state registration fees 31 35 13
Shareholder reports 27 16 4
Trustees' fees 14 10 1
Insurance 13 5 1
Miscellaneous 2 1 --
----------- ----------- -----------
Total Expenses 1,883 1,185 160
----------- ----------- -----------
Net Investment Loss Before Expense
Reimbursement (1,630) (1,091) (154)
Expense Reimbursement and Earnings
Credits (see note 2) 8 6 21
----------- ----------- -----------
Net Investment Loss (1,622) (1,085) (133)
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) on investments 1,759 16,818 (505)
Net realized gain from covered call
options written 349 159 8
Net realized loss from put options -- (640) (38)
----------- ----------- -----------
Total net realized gain (loss) 2,108 16,337 (535)
Increase in net unrealized appreciation
of investments 55,324 40,899 3,473
----------- ----------- -----------
Net realized and unrealized gain on
investments 57,432 57,236 2,938
----------- ----------- -----------
Net increase in net assets resulting
from operations $ 55,810 $ 56,151 $ 2,805
=========== =========== ===========
See accompanying notes to financial statements.
12
THE OBERWEIS FUNDS
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
Emerging Growth Portfolio
----------------------------
Years ended December 31,
2003 2002
----------------------------
From Operations:
Net investment loss $ (1,622) $ (927)
Net realized gain (loss) on investments 2,108 (461)
Increase (decrease) in net unrealized
appreciation (depreciation) of investments 55,324 (17,586)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 55,810 (18,974)
------------ ------------
From Capital Share Transactions:
Net proceeds from sale of shares 310,899 33,257
Redemption of shares (185,306) (32,005)
------------ ------------
Net increase from capital share transactions 125,593 1,252
------------ ------------
Total increase (decrease) in net assets 181,403 (17,722)
Net Assets:
Beginning of year 61,292 79,014
------------ ------------
End of year $ 242,695 $ 61,292
============ ============
Transactions in Shares:
Shares sold 13,107 1,918
Less shares redeemed (7,934) (1,830)
------------ ------------
Net increase from capital share transactions 5,173 88
============ ============
See accompanying notes to financial statements.
13
THE OBERWEIS FUNDS
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
Micro-Cap Portfolio
----------------------------
Years ended December 31,
2003 2002
----------------------------
From Operations:
Net investment loss $ (1,085) $ (399)
Net realized gain on investments 16,337 1,828
Increase (decrease) in net unrealized
appreciation (depreciation) of investments 40,899 (6,781)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 56,151 (5,352)
------------ ------------
From Distributions:
Distributions from net realized gains on
investments (9,965) --
------------ ------------
From Capital Share Transactions:
Net proceeds from sale of shares 98,526 25,626
Proceeds from reinvestment of distributions 8,993 --
Redemption of shares (76,137) (46,113)
------------ ------------
Net increase (decrease) from capital share
transactions 31,382 (20,487)
------------ ------------
Total increase (decrease) in net assets 77,568 (25,839)
Net Assets:
Beginning of year 21,978 47,817
------------ ------------
End of year $ 99,546 $ 21,978
============ ============
Transactions in Shares:
Shares sold 5,713 1,766
Shares issued in reinvestment of dividends 342 --
Less shares redeemed (3,850) (3,032)
------------ ------------
Net increase (decrease) from capital share
transactions 2,205 (1,266)
============ ============
See accompanying notes to financial statements.
14
THE OBERWEIS FUNDS
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
Mid-Cap Portfolio
----------------------------
Years ended December 31,
2003 2002
----------------------------
From Operations:
Net investment loss $ (133) $ (99)
Net realized loss on investments (535) (985)
Increase (decrease) in net unrealized
appreciation (depreciation) of investments 3,473 (1,108)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 2,805 (2,192)
------------ ------------
From Capital Share Transactions:
Net proceeds from sale of shares 7,421 759
Redemption of shares (3,776) (646)
------------ ------------
Net increase from capital share transactions 3,645 113
------------ ------------
Total increase (decrease) in net assets 6,450 (2,079)
Net Assets:
Beginning of year 4,370 6,449
------------ ------------
End of year $ 10,820 $ 4,370
============ ============
Transactions in Shares:
Shares sold 735 84
Less shares redeemed (383) (80)
------------ ------------
Net increase from capital share transactions 352 4
============ ============
See accompanying notes to financial statements.
15
THE OBERWEIS FUNDS
Notes to Financial Statements
December 31, 2003
1. Significant Accounting Policies
Description of business. The Oberweis Funds (the "Trust") is registered under
the Investment Company Act of 1940 as a diversified open-end management
investment company. The Trust is authorized to operate numerous portfolios under
various trading strategies. The Trust consists of three portfolios: the Oberweis
Emerging Growth Portfolio, the Oberweis Micro-Cap Portfolio, and the Oberweis
Mid-Cap Portfolio (collectively, the Funds).
Investment valuation. Investments in securities are stated at value as of the
close of the regular trading session on the New York Stock Exchange (generally 3
p.m., Central Standard Time). 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 closing bid price determined on the basis of
reasonable inquiry. Options are valued at the last reported bid price on the
primary exchange as of the close of the regular trading session of the Chicago
Board Options Exchange (CBOE). 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 instruments maturing within 60 days are valued by
the amortized cost method, which approximates fair value.
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 CBOE by dividing the total value of each Fund's
investments and other assets, less liabilities, by the number of each Fund's
shares outstanding.
Investment transactions and investment income. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date, and interest income is
recorded on the accrual basis and includes amortization of premium and discount.
Realized gains and losses from investment transactions are reported on an
identified cost basis. Gains and losses on premiums from expired options are
recognized on the date of expiration.
Federal income taxes and dividends to shareholders. It is the Fund's policy and
it intends to comply with the special provisions of the Internal Revenue Code
available to investment companies and therefore no federal income tax provision
is required. Dividends payable to its shareholders are recorded by each Fund on
the ex-dividend date. Dividends are determined in accordance with income tax
principles which may treat certain transactions differently from generally
accepted accounting principles. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
considered permanent in nature, such amounts are reclassified within the
composition of net assets based on their federal tax basis treatment; temporary
differences do not require a reclassification. As of December 31, 2003 the Fund
had unused capital loss carryforwards available for federal income tax purposes
to be applied against future capital gains, if any. If not applied the capital
loss carryforward will expire as follows:
Oberweis Oberweis
Expiration Year Emerging Growth Mid-Cap
- --------------- --------------- -------------
2009 $ 6,668,291 $ 2,042,858
2010 $ 0 $ 1,086,764
2011 $ 266,675 $ 709,055
There is no difference between the book basis and tax basis of accumulated net
realized loss on investments. The Emerging Growth Portfolio and Mid-Cap
Portfolio made no tax based distributions and had no undistributed tax ordinary
income as of December 31, 2003. The Oberweis Micro-Cap Portfolio paid net long
term realized gains from the sale of securities of $4,281,428 and distributions
of ordinary income (which includes short term capital gains from the sale of
securities) of $5,683,965 in 2003 to shareholders of record on November 6, 2003.
There were no distributions in 2002.
Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
16
2. Transactions with affiliates
The Funds have written agreements with Oberweis Asset Management, Inc. ("OAM")
as the Funds' investment adviser and manager. Oberweis Securities, Inc.
("Oberweis Securities"), the Funds' principal distributor is an affiliate of
OAM.
Investment advisory agreement. For investment advisory services, the Emerging
Growth Portfolio paid monthly investment advisory fees at an annual rate equal
to .45% of the first $50,000,000 of average daily net assets and .40% of average
daily net assets in excess of $50 million. The Micro-Cap Portfolio paid monthly
investment advisory fees at an annual rate equal to .60% of average daily net
assets. The Mid-Cap Portfolio paid monthly investment advisory fees at an annual
rate equal to .40% of average daily net assets. For the year ended December 31,
2003, the Emerging Growth Portfolio, Micro-Cap Portfolio, and Mid-Cap Portfolio
incurred investment advisory fees totaling $573,000, $443,000, and $28,000,
respectively.
Management agreement. For management services and facilities furnished, the
Emerging Growth Portfolio, Micro-Cap Portfolio, and Mid-Cap Portfolio each paid
a monthly fee at an annual rate equal to .40% of average daily net assets. For
the year ended December 31, 2003, the Emerging Growth Portfolio, Micro-Cap
Portfolio, and Mid-Cap Portfolio incurred management fees totaling $548,000,
$295,000 and $28,000, respectively.
Expense reimbursement. OAM is contractually obligated to reduce its management
fees or reimburse the Funds to the extent that total ordinary operating
expenses, as defined, exceed in any one year the following amounts expressed as
a percentage of each Fund's average daily net assets: 2% of the first
$25,000,000; plus 1.8% of the next $25,000,000; plus 1.6% of average daily net
assets in excess of $50,000,000. OAM reimbursed the Mid-Cap Portfolio $20,000
for the year ended December 31, 2003.
Officers and trustees. Certain officers or trustees of the Funds are also
officers or directors of OAM and Oberweis Securities. During the year ended
December 31, 2003, the Funds made no direct payments to its officers and paid
$25,000 to its unaffiliated trustees.
Distribution and shareholder service expense. The Funds have a distribution and
shareholder services agreement with Oberweis Securities. For services under the
distribution and shareholder servicing agreement, the Funds pay Oberweis
Securities a fee at the annual rate of .25% of the average daily net assets as
compensation for services. For the year ended December 31, 2003, the Emerging
Growth Portfolio, Micro-Cap Portfolio and Mid-Cap Portfolio incurred
distribution fees totaling $343,000, $185,000 and $17,000, respectively.
Commissions. The Funds pay Oberweis Securities for executing some of each Fund's
agency security transactions at competitive rates, typically $.02-.03 per share.
For the year ended December 31, 2003, the Emerging Growth Portfolio, Micro-Cap
Portfolio and Mid-Cap Portfolio paid commissions of $12,000, $20,000 and $1,000,
respectively to Oberweis Securities.
3. Investment transactions
The cost of securities purchased and proceeds from securities sold during the
year ended December 31, 2003, other than options written and money market
investments, aggregated $196,520,000 and $72,631,000, respectively, for the
Emerging Growth Portfolio, $78,177,000 and $60,143,000, respectively, for the
Micro-Cap Portfolio, and $5,284,000 and $1,971,000, respectively, for the
Mid-Cap Portfolio. The Funds did not hold government securities during 2003.
Transactions in options written for the year ended December 31, 2003 were as
follows:
Emerging Growth Micro-Cap Mid-Cap
Portfolio Portfolio Portfolio
---------------------- ---------------------- --------------------
Number Number Number
of Premiums of Premiums of Premiums
Contracts Received Contracts Received Contracts Received
---------------------- ---------------------- --------------------
Options outstanding at beginning of year 725 $ 48,000 270 $ 17,000 80 $ 5,000
Options written 3,938 434,000 1,970 176,000 50 3,000
Options expired (3,228) (362,000) (1,392) (137,000) (130) (8,000)
Options closed (920) (74,000) (130) (7,000) -- --
Options assigned (515) (46,000) (718) (49,000) -- --
---------------------- ---------------------- --------------------
Options outstanding at end of year -- $ -- -- $ -- -- $ --
17
The premiums received provide a partial hedge (protection) against declining
prices and enables each Fund to generate a higher return during periods when OAM
does not expect the underlying security to make any major price moves in the
near future but still deems the underlying security to be, over the long term,
an attractive investment for each Fund. The Funds write covered call options for
which premiums received are recorded as liabilities and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options that expire are treated as realized gains. Premiums received
from writing options, which are either exercised or closed, are offset against
the proceeds received or amount paid on the transaction to determine realized
gains or losses. Amounts recovered for securities litigation are included in the
realized gains of the Fund.
4. Redemption fee
A .25% redemption fee is charged on redemptions from the Micro-Cap and Mid-Cap
Portfolios. The redemption fee is retained by the Funds and is intended to
reimburse the Funds for the expense they incur in connection with shareholder
redemptions. Redemption fees received by the Micro-Cap and Mid-Cap Portfolios
were $188,000 and $9,000, respectively, for the year ended December 31, 2003,
and were recorded as a reduction of the cost of shares redeemed in the
statements of changes in net assets. The amount of redemption fees received
increase paid-in capital.
The Oberweis Funds are designed for long-term investors. To discourage market
timers, effective January 1, 2004, redemptions of shares of a Portfolio within
180 days of purchase will be subject to a 1.00% redemption fee of the total
redemption amount. The redemption fee applies only to shares acquired on or
after January 1, 2004 and will not apply to exchanges. The 1.00% redemption fee
is deducted from the redemption proceeds and is retained by the Portfolio.
However, the Micro-Cap and Mid-Cap Portfolios will continue to assess the .25%
withdrawal charge on redemptions of shares of the Portfolios that were acquired
prior to January 1, 2004, but effective January 1, 2004, will no longer assess
the .25% withdrawal charge on exchanges. The Micro-Cap and Mid-Cap Portfolios
will no longer assess this .25% withdrawal charge on redemptions effective July
1, 2004.
5. Earnings credits and interest charges
The Trust, as part of the agreement with the Custodian, receives credits against
its custodian fees on its uninvested cash balances and is allowed to borrow for
temporary purposes. Borrowings are not to exceed 5% of the value of each Funds
total assets at the time of any such borrowing. Interest on amounts borrowed is
calculated at the prime rate and is payable monthly. During the year ended
December 31, 2003, the Emerging Growth Portfolio, Micro-Cap Portfolio and the
Mid-Cap Portfolio received credits of $8,000, $6,000 and $1,000, respectively.
During the year ended December 31, 2003, the Emerging Growth Portfolio,
Micro-Cap Portfolio and the Mid-Cap Portfolio incurred interest charges of
$4,000, $1,000 and $0, respectively, which is included in custodian fees and
expenses in the statement of operations.
6. Micro-Cap Portfolio Closing
The Oberweis Funds announced that the Oberweis Micro-Cap Portfolio was closed to
new investors at the close of business on May 30, 2003. The Oberweis Micro-Cap
Portfolio was also closed to existing shareholders except for retirement
accounts (qualified retirement plans and IRA accounts).
18
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout each
year is as follows :
Emerging Growth Portfolio
Years ended December 31,
--------------------------------------------------------------
2003 2002 2001 2000 1999
--------------------------------------------------------------
Net asset value at beginning of year $ 16.13 $ 21.29 $ 21.19 $ 36.15 $ 23.60
Income (loss) from investment operations:
Net investment loss /(a)/ (.27) (.26) (.31) (.48) (.41)
Net realized and unrealized gain (loss) on investments 11.19 (4.90) .41 (1.37) 12.96
---------- ---------- ---------- ---------- ----------
Total from investment operations 10.92 (5.16) .10 (1.85) 12.55
Less distributions:
Distribution from net realized gains on investments -- -- -- (13.11) --
---------- ---------- ---------- ---------- ----------
Net asset value at end of year $ 27.05 $ 16.13 $ 21.29 $ 21.19 $ 36.15
========== ========== ========== ========== ==========
Total Return (%) 67.7 (24.2) 0.5 (10.7) 53.2
Ratio/Supplemental Data
Net Assets at end of year (in thousands) $ 242,695 $ 61,292 $ 79,014 $ 83,643 $ 105,128
Ratio of expenses to average net assets (%) 1.37 1.57 1.65 1.42 1.59
Ratio of net investment loss to average net assets (%) (1.18) (1.48) (1.51) (1.27) (1.56)
Portfolio turnover rate (%) 56 66 66 73 63
Average commission rate paid $ .0206 $ .0265 $ .0336 $ .0342 $ .0305
- ----------
Notes:
/(a)/ The net investment loss per share data was determined using average shares
outstanding during the year.
19
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period is as follows:
Micro-Cap Portfolio
Years ended December 31,
--------------------------------------------------------------
2003 2002 2001 2000 1999
--------------------------------------------------------------
Net asset value at beginning of year $ 13.86 $ 16.77 $ 13.54 $ 16.94 $ 14.18
Income (loss) from investment operations:
Net investment loss /(a)/ (.31) (.24) (.24) (.33) (.28)
Net realized and unrealized gain (loss) on investments
/(b)/ 15.41 (2.67) 3.47 (.74) 3.04
---------- ---------- ---------- ---------- ----------
Total from investment operations 15.10 (2.91) 3.23 (1.07) 2.76
Less distributions:
Distributions from net realized gains on investments (2.70) -- -- (2.33) --
---------- ---------- ---------- ---------- ----------
Net asset value at end of year $ 26.26 $ 13.86 $ 16.77 $ 13.54 $ 16.94
========== ========== ========== ========== ==========
Total Return (%) 108.9 (17.3) 23.9 (8.0) 19.5
Ratio/Supplemental Data
Net Assets at end of year (in thousands) $ 99,546 $ 21,978 $ 47,817 $ 20,491 $ 21,301
Ratio of expenses to average net assets (%) 1.60 1.93 1.98 1.96 2.00/(c)/
Ratio of net investment loss to average net assets (%) (1.47) (1.64) (1.59) (1.79) (1.98)
Portfolio turnover rate (%) 87 81 82 79 46
Average commission rate paid $ .0200 $ .0256 $ .0307 $ .0271 $ .0328
- ----------
Notes:
/(a)/ The net investment loss per share data was determined using average shares
outstanding during the year.
/(b)/ The net realized and unrealized gain(loss) on investments include
redemption fees per share of $0.05.
/(c)/ Net of expense reimbursement from related parties. The expense ratios
would have been 2.17% for 1999 before expense reimbursement.
20
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period is as follows:
Mid-Cap Portfolio
Years ended December 31,
--------------------------------------------------------------------------
2003 2002 2001 2000 1999
--------------------------------------------------------------------------
Net asset value at beginning of year 7.29 $ 10.83 $ 17.12 $ 24.29 $ 12.86
Income (loss) from investment operations:
Net investment loss /(a)/ (.18) (.17) (.21) (.46) (.31)
Net realized and unrealized gain (loss) on
investments /(b)/ 4.26 (3.37) (6.08) (2.27) 14.22
---------- ---------- ---------- ---------- ----------
Total from investment operations 4.08 (3.54) (6.29) (2.73) 13.91
Less distributions:
Distributions from net realized gains on
investments -- -- -- (4.44) (2.48)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year $ 11.37 $ 7.29 $ 10.83 $ 17.12 $ 24.29
========== ========== ========== ========== ==========
Total Return (%) 56.0 (32.7) (36.7) (13.1) 112.7
Ratio/Supplemental Data
Net Assets at end of year (in thousands) $ 10,820 $ 4,370 $ 6,449 $ 12,308 $ 14,085
Ratio of expenses to average net assets (%) 2.00/(c)/ 2.00/(c)/ 2.00/(c)/ 1.86 2.00/(c)/
Ratio of net investment loss to average net
assets (%) (1.91) (1.91) (1.75) (1.78) (1.93)
Portfolio turnover rate (%) 29 66 115 97 153
Average commission rate paid $ .0200 $ .0256 $ .0312 $ .0269 $ .0345
- ----------
Notes:
/(a)/ The net investment loss per share data was determined using average shares
outstanding during the year.
/(b)/ The net realized and unrealized gain(loss) on investments include
redemption fees per share of $0.01.
/(c)/ Net of expense reimbursement from related parties. The expense ratios
would have been 2.31%, 2.66%, 2.60%, and 2.43%, for 2003, 2002, 2001and 1999
respectively, before expense reimbursement and earnings credits.
21
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
The Oberweis Funds
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Emerging Growth Portfolio,
Micro-Cap Portfolio and Mid-Cap Portfolio (three portfolios constituting The
Oberweis Funds, hereafter referred to as the "Funds") at December 31, 2003, the
results of each of their operations for the year then ended, the changes in each
of their net assets and the financial highlights for the two years then ended,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion. The financial highlights for each of the three years in the period
ended December 31, 2001 were audited by other auditors, whose report dated
February 5, 2002, expressed an unqualified opinion on those financial
highlights.
PricewaterhouseCoopers LLP
January 29, 2004
Chicago, Illinois
22
Trustees and Officers of The Oberweis Funds
NUMBER OF
TERM OF OFFICE AND PORTFOLIOS
POSITION HELD LENGTH OF TIME PRINCIPAL OCCUPATION OVERSEEN OTHER
NAME, ADDRESS AND AGE WITH FUND SERVED LAST FIVE YEARS BY TRUSTEE DIRECTORSHIPS
Thomas J. Burke (72) Trustee Trustee since President - Burke Medical 3 None
951 Ice Cream Dr. May, 1991 /(1)/ Associates, 1968 to present;
North Aurora, IL 60542 retired medical physician,
practicing medical physician
until November 1, 1995.
James G. Schmidt (56) Trustee Trustee since Senior Vice President and 3 None
951 Ice Cream Dr. November, 2003 /(1)/ Chief Financial Officer -
North Aurora, IL 60542 Federal Heath Sign Co., May
2003 to present; Vice
President - Finance Federal
Sign division of Federal
Signal Corp. October, 1991 to
April, 2003.
James D. Oberweis (57) Trustee/ Trustee and Officer Chairman and Director - 3 None
951 Ice Cream Dr. President/(2)/ since Oberweis Asset Management,
North Aurora, IL 60542 July, 1986 /(1)(3)/ Inc. September, 2001 to
present. President -
September, 1989 to August,
2001.
Patrick B. Joyce (44) Executive Vice Officer since Executive Vice President, Not Applicable None
951 Ice Cream Dr. President and October, 1994 /(3)/ Secretary and Director -
North Aurora, IL 60542 Treasurer Oberweis Asset Management,
Inc., September, 1994 to
present; Executive Vice
President and Director -
Oberweis Securities, Inc.
September, 1996 to present.
Martin L. Yokosawa (43) Senior Vice President Officer since Senior Vice President - Not Applicable None
951 Ice Cream Dr. October, 1994 /(3)/ Oberweis Asset Management,
North Aurora, IL 60542 Inc., September, 1994 to
Present; Senior Vice President
- Oberweis Securities, Inc.,
January, 1997 to present.
James W. Oberweis (29) Senior Vice President Officer since President - Oberweis Asset Not Applicable None
951 Ice Cream Dr. August, 1996 /(3)/ Management, Inc., September,
North Aurora, IL 60542 2001 to present; Senior Vice
President May, 1996 to August,
2001; Portfolio Manager from
December, 1995 to present;
President and Director -
Oberweis Securities, Inc.,
September, 1996 to present.
Steven J. LeMire (34) Vice President and Officer since Vice President, Operations - Not Applicable None
951 Ice Cream Dr. Secretary August, 1998 /(3)/ Oberweis Asset Management,
North Aurora, IL 60542 Inc., June, 2000 to present;
Compliance Manager - Oberweis
Securities, Inc., March 1997
to June, 2000.
(1) - Unless otherwise noted, each trustee shall serve as a trustee of the Fund
until the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election 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.
(2) - James D. Oberweis is an interested trustee of the Fund by reasons of his
positions as the President of the Fund and the Chairman and a portfolio
manager of Oberweis Asset Management, Inc., the Fund's investment advisor.
(3) - Elected annually by board of trustees.
The Statement of Additional Information includes additional information about
Fund officers and trustees and is available upon request without charge, by
calling the Fund at 1-800-323-6166.
23
[LOGO]
The Oberweis Funds
Annual Report
Audited
December 31, 2003
Trustees and Officers
James D. Oberweis
Trustee and President
James G. Schmidt
Trustee
Patrick B. Joyce
Executive Vice President
Treasurer
James W. Oberweis
Senior Vice President
Thomas J. Burke
Trustee
Martin L. Yokosawa
Senior Vice President
Steven J. LeMire
Vice President
Secretary
Manager and Investment Advisor
Oberweis Asset Management, Inc.
951 Ice Cream Dr., North Aurora, IL 60542
1-800-323-6166
www.oberweis.net
Distributor
Oberweis Securities, Inc.
951 Ice Cream Dr., North Aurora, IL 60542
1-630-801-6000
www.oberweis.net
Custodian
UMB Bank, n.a.
928 Grand Blvd., Kansas City, MO 64106
Transfer Agent
UMB Fund Services, Inc.
P.O. Box 711 Milwaukee, WI 53201-0711
1-800-245-7311
Counsel
Vedder, Price, Kaufman & Kammholz, P.C.
222 North LaSalle Street, Chicago, IL 60601
Independent Auditors
PricewaterhouseCoopers LLP
One North Wacker Drive, Chicago, IL 60606
[LOGO]
The Oberweis Funds
Emerging Growth Portfolio
Micro-Cap Portfolio
Mid-Cap Portfolio
ITEM 2. CODE OF ETHICS.
(a) As of December 31, 2003, the registrant has
adopted a code of ethics that applies to
the registrant's principal executive
officer, principal financial officer,
principal accounting officer, or persons
performing and similar functions.
(b) A copy of the code of ethics may be
obtained upon request, without charge, by
contacting the registrant in writing at its
principal executive office.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
(a) (1) The registrant's board of trustees has
determined that the registrant has at least
one audit committee financial expert
serving on the audit committee.
(b) The audit committee financial expert is
James G. Schmidt. Mr. Schmidt is
independent as defined in Form N-CSR Item 3
(a) (2).
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
$40,000 2003
ITEMS 5-6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND
PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
Not Applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and
principal financial officers, or persons
performing similar functions, have
concluded that the registrant's disclosure
controls and procedures (as defined in Rule
30a-3 (c) under the Investment Company Act
of 1940, as amended (the "1940 Act") (17CFR
270.30a-3(c))) are effective, as of a date
within 90 days of the filing date of the
report that includes the disclosure
required by this paragraph, based on their
evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940
Act (17 CFR 270.30a-3(b)) and Rules
13a-15(b) or 15d-15(b) under the Exchange
Act (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There has been no change to the
registrant's internal control over
financial reporting (as defined in Rule
30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the
registrant's most recent fiscal half-year
that has materially affected, or is
reasonably likely to materially affect, the
registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a) (1) Not Applicable.
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 are attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Oberweis Funds
By (Signature and Title*) /s/ James D. Oberweis
---------------------------------------------------------
James D. Oberweis
President, The Oberweis Funds
Date 02/26/2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title*) /s/ James D. Oberweis
---------------------------------------------------------
James D. Oberweis
President, The Oberweis Funds
Date 02/26/2004
By (Signature and Title*) /s/ Patrick B. Joyce
---------------------------------------------------------
Patrick B. Joyce
Executive Vice President and Treasurer,
The Oberweis Funds
Date 02/26/2004
/*/ Print the name and title of each signing officer under his or her signature.