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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
The Oberweis Funds
(Exact name of registrant as specified in charter)
951 Ice Cream Drive, Suite 200, North Aurora, IL 60542
(Address of principal executive offices) (Zip code)
James W. Oberweis Copy to: James A. Arpaia
The Oberweis Funds Vedder, Price, Kaufman, & Kammholz, P.C.
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
Date of fiscal year end: December 31
Date of reporting period: December 31, 2004
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 Fellow Oberweis Funds Shareholder:
I am pleased to report positive returns for all three Oberweis Funds portfolios
again in 2004. For the year, the Oberweis Micro-Cap Portfolio appreciated
+2.19%, the Emerging Growth Portfolio appreciated +6.29%, and the Mid-Cap
Portfolio appreciated +5.10%. These gains come on the heels of +108.93%,
+67.70%, and +55.97% returns, respectively, for the Micro-Cap, Emerging Growth,
and Mid-Cap Portfolios in 2003.
Although the funds delivered positive results in 2004, the returns were lower
than those of the Russell 2000 Growth Index, which appreciated +14.31%, and the
Russell 2500 Growth Index, which appreciated +14.59%. The Oberweis Funds invest
in companies with exceptionally high rates of growth. Within the Russell 2000
Growth universe, stocks of companies with particularly high rates of earnings
growth performed very well in 2003, but did not perform well during the first
nine months of 2004. In the final quarter of the year, however, high growth
small-cap equities resumed market leadership and all three Oberweis Funds
portfolios experienced significant appreciation. One should expect to see the
Funds' quarterly and even yearly results heavily influenced by the cycles of the
market. However, over time these cycles tend to average out and the ability of
the investment management team to add value becomes clearer. For example, the
Micro-Cap Portfolio returned an average of 14.98% annually after fees over the
last five years, compared to -3.57% annually for the Russell 2000 Growth Index
over the same period. Of course, past performance offers no guarantee of future
returns.
Our investment strategy remains steadfast in each of the three portfolios. We
seek to attain excess return through superior individual stock selection. We
strive to identify companies which have exceptionally high growth potential, are
not widely followed by institutional investors, and can be purchased at low
valuations in relation to their expected rates of growth. The companies in each
portfolio have average growth rates in excess of 50%. The average forward
12-month P/E ratio as of year-end was 26.3 times for the Micro-Cap Portfolio,
27.9 times for the Emerging Growth Portfolio, and 25.3 times for the Mid-Cap
Portfolio. At year-end, the weighted-average market cap for the Micro-Cap,
Emerging Growth, and Mid-Cap Portfolios was $262 million, $738 million, and $2.8
billion, respectively. All three portfolios are currently open to new investors
and shares may be purchased either directly through the Fund or through one of
our many brokerage firm partners.
Thank you for investing with us in The Oberweis Funds. If you have any questions
about your account, please call our shareholder service representatives at (800)
245-7311. You may also download a prospectus and purchase shares online at
www.oberweisfunds.com.
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 OF FUND PERFORMANCE
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 Oberweis Micro-Cap Portfolio appreciated
+2.19% and the Emerging Growth Portfolio appreciated +6.29%. For comparison, the
benchmark Russell 2000 Growth Index appreciated +14.31%. The Oberweis Mid-Cap
Portfolio appreciated +5.10%. For comparison, the Russell 2500 Growth Index
appreciated +14.59%. In most periods, investors are willing to pay a premium P/E
multiple to invest in companies with high growth potential. In 2003, that
premium expanded significantly and stocks in high growth companies performed
very well. In 2004, we observed the opposite effect and companies with
exceptionally high rates of earnings growth delivered smaller gains than the
Russell 2000 Growth Index overall. Because The Oberweis Funds specialize in
companies with exceptionally high rates of earnings growth, performance of the
Portfolios trailed that of their respective benchmarks for the year. However,
over longer periods of time, the Micro-Cap and Emerging Growth portfolios have
significantly outperformed their benchmarks. Specifically, over the last three
years, the Micro-Cap and Emerging Growth Portfolios achieved average annual
gains of 20.84% and 10.53%, respectively, versus an average annual gain of 5.79%
for the Russell 2000 Growth Index. The Mid-Cap Portfolio returned an average
annual gain of 3.33% over the same period, which was lower than the other
portfolios due to the poor performance of mid-cap technology shares in 2002. The
Russell 2500 Growth Index returned an average of 5.93% annually.
The Micro-Cap Portfolio particularly benefited from investments in Novatel,
Hurco Companies, Innodata Isogen, Palomar Medical Technology, and Somanetics.
The Emerging Growth Portfolio derived significant gains from investments in
Ceradyne, Tessera Technologies, SFBC International, Silicon Image, and Euronet
Worldwide. The Mid-Cap portfolio particularly benefited from investments in
Research In Motion, Autodesk, Cognizant Technology Solutions, Urban Outfitters,
and Intuitive Surgical.
The portfolio turnover rate was somewhat low in 2004 at 58% for the Micro-Cap
Portfolio, 55% for the Emerging Growth portfolio, and 86% for the Mid-Cap
Portfolio. The expense ratios of the three portfolios were 1.70% for Micro-Cap,
1.44% for Emerging Growth and 1.96% for Mid-Cap. The average commission rate
paid by each portfolio for agency transactions was low at approximately two
cents per share traded. This rate compares quite favorably to most other mutual
funds.
The SEC adopted a requirement that Funds present their portfolio holdings in a
table, chart or graph format in their annual and semi-annual reports to
shareholders, whether or not a schedule of investments is utilized. The
following tables, which present portfolio holdings as a percentage of net
assets, are provided in compliance with this requirement.
Oberweis Emerging Growth Portfolio
Asset Allocation
- --------------------------------------------------------------------------------
Common Stocks 98.3%
Commercial Paper 1.7%
Other Assets in excess of Liabilities 0.0%
-----
100.0%
Top Holdings
- --------------------------------------------------------------------------------
Tessera Technologies, Inc. 3.4%
Ceradyne, Inc. 3.0%
LCA-Vision, Inc. 2.9%
Silicon Image, Inc. 2.7%
Central European Distribution Corp. 2.7%
SFBC International, Inc. 2.5%
Altiris, Inc. 2.4%
aQuantive, Inc. 2.1%
Euronet Worldwide, Inc. 2.0%
Hansen Natural Corp. 1.8%
Other Holdings 74.5%
-----
100.0%
Top Industries
- --------------------------------------------------------------------------------
Computer Software & Services 11.1%
Drug & Pharmaceutical 9.5%
Electronics - Semiconductors 8.6%
Communication Technology 7.2%
Advertising Agency 6.3%
Service Commercial 4.6%
Biotechnology 4.5%
Healthcare Facilities 4.2%
Computer Technology 3.7%
Oil Crude Producer 3.4%
Other Industries 36.9%
-----
100.0%
2
THE OBERWEIS FUNDS
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
(cont'd.)
Oberweis Micro-Cap Portfolio
Asset Allocation
- --------------------------------------------------------------------------------
Common Stocks 96.8%
Commercial Paper 2.8%
Other Assets in excess of Liabilities 0.4%
-----
100.0%
Top Holdings
- --------------------------------------------------------------------------------
Palomar Medical Technologies, Inc. 3.9%
Central European Distribution Corp. 3.8%
Hurco Cos., Inc. 3.4%
Sonic Solutions, Inc. 3.4%
Mind CTI Ltd. 3.3%
Innodata Isogen, Inc. 3.2%
Somanetics Corp. 2.8%
International DisplayWorks, Inc. 2.8%
Novatel Wireless, Inc. 2.6%
Kensey Nash Corp. 2.4%
Other Holdings 68.4%
-----
100.0%
Top Industries
- --------------------------------------------------------------------------------
Computer Software & Services 18.7%
Electronics 7.0%
Communication 6.7%
Wholesale 5.6%
Electronics Semi-Conductors 5.0%
Health Care - Medical & Dental 4.9%
Electronic Medical Systems 4.7%
Control & Filter Devices 4.6%
Banks 4.4%
Technology - Electronics 3.6%
Other Industries 34.8%
-----
100.0%
Oberweis Mid-Cap Portfolio
Asset Allocation
- --------------------------------------------------------------------------------
Common Stocks 100.9%
Other Liabilities in excess of Assets (0.9%)
-----
100.0%
Top Holdings
- --------------------------------------------------------------------------------
Sigmatel, Inc. 3.7%
Urban Outfitters, Inc. 3.6%
PetroKazakhstan, Inc. 3.5%
Silicon Image, Inc. 3.2%
Desarrolladora Homex 2.9%
Intuitive Surgical, Inc. 2.9%
AutoDesk, Inc. 2.8%
L-3 Communications Holdings, Inc. 2.8%
Cognizant Technology Solutions Corp. 2.7%
Marvell Technology Group Ltd. 2.7%
Other Holdings 69.2%
-----
100.0%
Top Industries
- --------------------------------------------------------------------------------
Electronics Semi-Conductors 12.4%
Computer Software & Services 12.0%
Retail 7.6%
Communication Technology 7.2%
Drugs & Pharmaceuticals 6.7%
Electronic Medical Systems 5.0%
Textile 4.2%
Medical & Dental Instruments / Supplies 4.1%
Biotech Research 4.0%
Household Furnishings 3.6%
Other Industries 33.2%
-----
100.0%
3
THE OBERWEIS FUNDS
MANAGEMENT DISCUSSION OFFUND PERFORMANCE
- --------------------------------------------------------------------------------
Average Annual Total Returns /(1)/
Periods ended 12/31/04
Since
One Five Ten Inception
Year Years Years 1/7/87
------ ----- ------ ---------
OBEGX +6.29% +3.92% +11.11% +12.09%
Russell 2000 +18.33% +6.61% +11.53% +10.48%
Russell 2000 Growth +14.31% -3.57% +7.12% +7.76%
Growth of an Assumed $10,000 Investment
from January 7, 1987 to December 31, 2004
[CHART]
Line chart
Oberweis Emerging
Growth Portfolio (OBEGX) Russell 2000 Russell 2000 Growth
------------------------ ------------ -------------------
$10,000 $10,000 $10,000
1987 $ 9,094 $ 8,535 $ 8,953
1988 $ 9,612 $10,670 $10,776
1989 $12,012 $12,406 $12,950
1990 $12,062 $ 9,989 $10,695
1991 $22,573 $14,589 $16,170
1992 $25,653 $17,275 $17,426
1993 $28,147 $20,536 $19,757
1994 $27,157 $20,161 $19,276
1995 $38,716 $25,897 $25,260
1996 $47,413 $30,169 $28,105
1997 $43,340 $36,916 $31,744
1998 $42,009 $35,976 $32,134
1999 $64,348 $43,623 $45,981
2000 $57,469 $42,305 $35,668
2001 $57,740 $43,357 $32,300
2002 $43,746 $34,476 $22,579
2003 $73,362 $50,767 $33,539
2004 $77,975 $60,073 $38,337
- --------------------------------------------------------------------------------
Average Annual Total Returns /(1)/
Periods ended 12/31/04
Since
One Five Inception
Year Years 1/1/96
------ ------ ---------
OBMCX +2.19% +14.98% +14.59%
Russell 2000 +18.33% +6.61% +9.79%
Russell 2000 Growth +14.31% -3.57% +3.51%
Growth of an Assumed $10,000 Investment
from January 1, 1996 to December 31, 2004
[CHART]
Line chart
Oberweis Micro-Cap
Russell 2000 Portfolio (OBMCX) Russell 2000 Growth
------------ ------------------ -------------------
10,000.42 10,000.00 9,999.75
1996 11,649.91 12,280.00 11,126.00
1997 14,255.19 13,590.00 12,566.00
1998 13,892.36 14,180.00 12,271.00
1999 16,845.33 16,940.00 18,202.00
2000 16,336.43 15,585.47 14,120.00
2001 16,742.57 19,303.43 12,817.00
2002 13,313.09 15,953.82 8,938.00
2003 19,604.04 33,332.61 13,277.00
2004 23,197.34 34,061.84 15,177.00
- --------------------------------------------------------------------------------
Average Annual Total Returns /(1)/
Periods ended 12/31/04
Since
One Five Inception
Year Years 9/15/96
------ ----- ---------
OBMDX +5.10% -9.50% +6.71%
Russell 2500 Growth +14.59% -2.31% +6.56%
Russell 2000 Growth +14.31% -3.57% +4.18%
Growth of an Assumed $10,000 Investment
from September 15, 1996 to December 31, 2004
[CHART]
Line chart
Oberweis Mid-Cap
Portfolio (OBMDX) Russell 2000 Growth Russell 2500 Growth
----------------- ------------------- -------------------
10,000 10,000 10,000
1996 10,290 10,299 10,357
1997 10,846 11,632 11,886
1998 13,271 11,775 12,254
1999 28,230 16,849 19,052
2000 24,548 13,070 15,987
2001 15,529 11,864 14,255
2002 10,453 8,274 10,107
2003 16,303 12,290 14,789
2004 17,135 14,048 16,946
/(1)/Performance data represents past performance, which is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Returns are historical and include changes in share price and
reinvestment of dividends and capital gains. Investment return and principal
value will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. 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
2500 Growth Index measures the performance of Russell 2500 companies with lower
price-to-book ratios and lower 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.
4
OBERWEIS EMERGING GROWTH PORTFOLIO
Portfolio of Investments
December 31, 2004 (value in thousands)
Shares Company (Closing Price) Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 98.3%
Consumer Discretionary
Advertising Agency - 6.3%
405,600 aQuantive, Inc. @ 8.940 $ 3,626
105,607 Greenfield Online, Inc. @ 21.990 2,322
169,300 ValueClick, Inc. @ 13.330 2,257
136,450 Ventiv Health, Inc. @ 20.320 2,773
--------
10,978
--------
Consumer Discretionary
Commercial Information Service - 1.7%
36,100 Ask Jeeves, Inc. @ 26.750 966
77,871 Audible, Inc. @ 26.050 2,028
--------
2,994
--------
Consumer Discretionary
Consumer Electronics - 0.5%
45,948 Sohu.com, Inc. @ 17.710 814
--------
Consumer Discretionary - Consumer
Products - 1.0%
51,165 USANA Health Sciences, Inc. @ 34.200 1,750
--------
Consumer Discretionary - Retail - 2.2%
61,927 Build-A-Bear Workshop, Inc. @ 35.150 2,177
37,849 Chico's FAS, Inc. @ 45.530 1,723
--------
3,900
--------
Consumer Discretionary - Service
Commercial - 4.6%
66,988 China Finance Online Co. Ltd. @ 11.020 738
57,637 Ctrip.com International Ltd. @ 46.020 2,653
94,261 eLong, Inc. @ 18.650 1,758
30,000 /(a)/ Travelzoo, Inc. @ 95.430 2,863
--------
8,012
--------
Consumer Discretionary - Shoes - 1.1%
41,012 Deckers Outdoor Corp. @ 46.990 1,927
--------
Consumer Discretionary - Wholesale - 2.7%
160,840 Central European Distribution Corp.
@ 29.540 4,751
--------
Consumer Soft Drinks - 1.8%
86,869 Hansen Natural Corp. @ 36.410 3,163
--------
Financial Services - Diverse - 2.0%
134,368 Euronet Worldwide, Inc. @ 26.020 3,496
--------
Financial Services - Insurance - 0.5%
54,115 HealthExtras, Inc. @ 16.300 882
--------
Financial Services - Misc. - 1.6%
68,000 Portfolio Recovery Associates, Inc.
@ 41.220 $2,803
--------
Health Care - Biotechnology - 4.5%
133,826 Anika Therapeutics, Inc. @ 9.150 1,224
52,481 ArthroCare Corp. @ 32.060 1,683
203,275 InKine Pharmaceutical Co. @ 5.430 1,104
57,089 Kensey Nash Corp. @ 34.530 1,971
171,222 Third Wave Technologies, Inc. @ 8.600 1,473
38,712 Vnus Medical Technologies, Inc. @ 13.520 523
--------
7,978
--------
Health Care - Drugs
& Pharmaceuticals - 9.5%
35,455 Able Laboratories, Inc. @ 22.750 807
91,861 Bone Care International, Inc. @ 27.850 2,558
103,595 Connetics Corp. @ 24.290 2,516
320,052 DRAXIS Health, Inc. @ 4.960 1,587
50,146 Kos Pharmaceuticals, Inc. @ 37.640 1,888
44,852 Salix Pharmaceuticals, Ltd. @ 17.590 789
110,400 SFBC International, Inc. @ 39.500 4,361
47,991 United Therapeutics Corp. @ 45.150 2,167
--------
16,673
--------
Health Care - Electronic Medical
Systems - 0.7%
78,808 eResearch Technology, Inc. @ 15.850 1,249
--------
Health Care - Facilities - 4.2%
67,325 American Healthways, Inc. @ 33.040 2,224
219,921 * LCA- Vision, Inc. @ 23.390 5,144
--------
7,368
--------
Health Care - Management Services - 1.0%
62,144 Centene Corp. @ 28.350 1,762
--------
Health Care - Medical & Dental
Services - 3.2%
14,523 Advanced Neuromodulation
Systems, Inc. @ 39.460 573
79,000 Kyphon, Inc. @ 25.760 2,035
58,800 Laserscope, Inc. @ 35.910 2,112
87,424 LifeCell Corp. @ 10.220 893
--------
5,613
--------
Material Products - Building
Materials - 1.0%
35,068 Trex Co., Inc. @ 52.440 1,839
--------
Materials & Production - Misc. Materials
& Commodity - 3.0%
91,500 Ceradyne, Inc. @ 57.210 5,235
--------
See accompanying notes to financial statements.
5
OBERWEIS EMERGING GROWTH PORTFOLIO
Portfolio of Investments (cont'd.)
Shares Company (Closing Price) Value
- --------------------------------------------------------------------------------
Material Products - Textile - 1.2%
100,136 DHB Industries, Inc. @ 19.040 $ 1,907
--------
Other Energy - Misc. - 1.1%
85,570 Veritas DGC, Inc. @ 22.410 1,918
--------
Other Energy - Oil Crude Producer - 3.4%
254,111 Carrizo Oil & Gas, Inc. @ 11.300 2,872
28,086 Petroleum Development Corp. @ 38.570 1,083
66,621 Whiting Petroleum Corp. @ 30.250 2,015
--------
5,970
--------
Producer Durables - Aerospace - 1.1%
56,222 MTC Technologies, Inc. @ 33.570 1,887
--------
Producer Durables - Control - and Filer Device - 0.9%
76,813 Veeco Instruments, Inc. @ 21.070 1,618
--------
Producer Durables - Homebuilding - 1.1%
84,184 Desarrolladora Homex S.A.
Development Corp. @ 23.650 1,991
--------
Producer Durables - Machinery
Agriculture - 0.5%
38,681 Gehl Co. @ 23.350 903
--------
Producer Durables - Machinery
Construction - 1.2%
44,067 A.S.V., Inc. @ 47.900 2,111
--------
Producer Durables - Machinery
Specialty - 0.2%
18,126 * JLG Industries, Inc. @ 19.630 356
--------
Producer Durables - Misc. - 1.5%
112,399 Turbochef Technologies, Inc. @ 22.880 2,572
--------
Producer Durables - Production
Tech Equipment - 0.5%
53,059 Rudolph Technologies, Inc. @ 17.170 911
--------
Producer Durables -
Telecommunications - 1.2%
61,726 * Applied Signal Technology, Inc. @ 35.250 2,176
--------
Technology - Communication -
Technology - 7.2%
134,848 Alvarion Ltd. @ 13.260 $ 1,788
127,650 Audiocodes Ltd. @ 16.610 2,120
29,325 Catapult Communications Corp. @ 24.160 708
133,494 Ixia @ 16.810 2,244
106,808 Sierra Wireless, Inc. @ 17.680 1,888
121,802 Ulticom, Inc. @ 16.030 1,953
80,490 ViaSat, Inc. @ 24.270 1,954
--------
12,655
--------
Technology - Computer Services
Software and Systems - 11.1%
118,821 Altiris, Inc. @ 35.430 4,210
167,373 Callwave, Inc. @ 15.440 2,584
60,568 Digital River, Inc. @ 41.610 2,520
49,503 Infocrossing, Inc. @ 16.930 838
108,313 Merge Technologies, Inc. @ 22.250 2,410
105,812 Radvision Ltd. @ 13.470 1,425
152,555 Rightnow Technologies, Inc. @ 16.150 2,464
84,446 SafeNet, Inc. @ 36.740 3,103
--------
19,554
--------
Technology - Computer
Technology - 3.7%
105,740 M-Systems Flash Disk @ 19.720 2,085
204,676 Mobility Electronics, Inc. @ 8.580 1,756
89,335 Synaptics, Inc. @ 30.580 2,732
--------
6,573
--------
Technology - Electronics - 0.4%
24,558 * BEI Technologies, Inc. @ 30.880 758
--------
Technology - Electronics
Semi-Conductors - 8.6%
157,038 Powerdsine Ltd. @ 13.710 2,153
58,589 Sigmatel, Inc. @ 35.530 2,081
293,000 Silicon Image, Inc. @ 16.460 4,823
160,300 Tessera Technologies, Inc. @ 37.210 5,965
--------
15,022
--------
Technology - Electronics Tech - 0.3%
14,961 Innovative Solutions and
Support, Inc. @ 33.360 499
--------
Total Common Stocks
(Cost: $119,899,000) $172,568
--------
See accompanying notes to financial statements.
6
OBERWEIS EMERGING GROWTH PORTFOLIO
Portfolio of Investments (cont'd.)
Face Amount Value
- --------------------------------------------------------------------------------
COMMERCIAL PAPER - 1.7%
$3,000,000 Sears Roebuck Acceptance Corp. 2.05%, due 01-05-05 $ 3,000
--------
Total Commercial Paper
(Cost: $3,000,000) 3,000
--------
Total Investments - 100.0%
(Cost: $122,899,000) 175,568
Other Assets less Liabilities - 0.0% 46
--------
NET ASSETS - 100% $175,614
========
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
* Income producing security during the year ended December 31, 2004.
Securities not indicated as income producing did not pay dividends for the
year ended December 31, 2004.
Based on the cost of investments of $122,899,000 for federal income tax purposes
at December 31, 2004, the aggregate gross unrealized appreciation was
$55,069,000, the aggregate gross unrealized depreciation was $2,400,000 and the
net unrealized appreciation of investments was $52,669,000.
/(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, 2004. The aggregate value of restricted securities was
$2,863,000 or 0.2% of net assets at December 31, 2004.
Travelzoo, Inc. 30,000 shares purchased in September, 2004 at a cost of
$1,200,000.
See accompanying notes to financial statements.
7
OBERWEIS MICRO-CAPPORTFOLIO
Portfolio of Investments
December 31, 2004 (value in thousands)
Shares Company (Closing Price) Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 96.8%
Automotive Transportation - Auto Parts - 0.8%
48,496 IMPCO Technologies, Inc. @ 7.550 $ 366
------
Automotive Transportation - Automobiles - 0.7%
49,196 Cycle Country Accessories Corp. @ 6.300 310
------
Consumer Discretionary - Consumer Electronics - 0.8%
20,528 FindWhat.com @ 17.730 364
------
Consumer Discretionary - Education Services - 0.7%
28,908 Competitive Technology, Inc. @ 11.090 321
------
Consumer Discretionary - Leisure Time - 1.5%
44,915 * Aldila, Inc. @ 15.250 685
------
Consumer Discretionary - Misc. - 1.0%
33,404 Barrett Business Services, Inc. @ 13.820 462
------
Consumer Discretionary - Restaurants - 0.9%
64,190 Granite City Food & Brewery Ltd. @ 4.900 315
9,751 Mexican Restaurants, Inc. @ 8.960 87
------
402
------
Consumer Discretionary - Retail - 1.2%
30,283 Celebrate Express, Inc. @ 19.000 575
------
Consumer Discretionary - Service Commercial - 2.6%
121,064 Health Grades, Inc. @ 2.900 351
30,913 First Advantage Corp. @ 20.400 631
17,400 Greg Manning Auctions, Inc. @ 12.370 215
1,499 Total Logistics, Inc. @ 26.960 40
------
1,237
------
Consumer Discretionary - Wholesale - 5.6%
59,381 Central European Distribution Corp. @ 29.540 1,754
58,672 * Programmer's Paradise, Inc. @ 14.780 867
------
2,621
------
Consumer Staples - Food - 0.6%
37,625 SunOpta, Inc. @ 7.180 270
------
Financial Services - Banks - 4.4%
13,335 Dearborn Bankcorp. Inc. @ 29.160 $ 389
7,964 First Regional Bankcorp, Inc. @ 54.000 430
44,468 Pinnacle Financial Partners, Inc. @ 22.620 1,006
6,970 Silver State Bancorp, Inc. @ 29.950 209
------
2,034
------
Financial Services - Insurance - 0.5%
15,659 HealthExtras, Inc. @ 16.300 255
------
Financial Services - REITS - 0.5%
20,888 WebSideStory, Inc. @ 12.430 260
------
Health Care - Biotechnology - 3.6%
62,560 Anika Therapeutics, Inc. @ 9.150 572
32,197 Kensey Nash Corp. @ 34.530 1,112
------
1,684
------
Health Care - Drugs and Pharmaceuticals - 1.4%
28,600 Able Laboratories, Inc. @ 22.750 651
------
Health Care - Electronic Medical Systems - 4.7%
25,317 Candela Corp. @ 11.360 288
10,000 Quality Systems, Inc. @ 59.800 598
85,622 Somanetics Corp. @ 15.410 1,319
------
2,205
------
Health Care - Facilities - 3.1%
133,211 PainCare Holdings, Inc. @ 3.050 406
28,400 Psychiatric Solutions, Inc. @ 36.560 1,039
------
1,445
------
Health Care - Medical & Dental - 4.9%
18,534 Abiomed, Inc. @ 15.440 286
70,000 Palomar Medical Technologies, Inc. @ 26.070 1,825
17,082 Vascular Solutions, Inc. @ 10.020 171
------
2,282
------
Medical - Vitamins & Nutritional Products - 0.4%
47,700 Advanced Nutraceuticals, Inc. @ 4.000 191
------
Medical Products - Chemicals - 0.8%
52,719 * Northern Technology International Corp. @ 6.850 361
------
Medical Products - Engineering & Contracting Services - 1.0%
18,410 * VSE Corp. @ 25.170 463
------
See accompanying notes to financial statements.
8
OBERWEIS MICRO-CAP PORTFOLIO
Portfolio of Investments (cont'd.)
Shares Company (Closing Price) Value
- --------------------------------------------------------------------------------
Other Energy - Oil Crude Producer - 1.8%
26,290 Dawson Geophysical Co. @ 21.720 $ 571
20,200 Edge Petroleum Corp. @ 14.580 295
-------
866
-------
Producer Durables - Control and Filter Devices - 4.6%
78,678 Allied Motion Technologies, Inc. @ 7.220 568
95,300 Hurco Cos., Inc. @ 16.500 1,572
-------
2,140
-------
Producer Durables - Electrical Equipment - 3.4%
70,000 Sonic Solutions, Inc. @ 22.440 1,571
-------
Producer Durables - Electronics - 7.0%
24,608 FARO Technologies, Inc. @ 31.180 767
31,845 I.D. Systems, Inc. @ 18.660 594
28,439 Imaging Sensing Systems, Inc. @ 16.900 481
61,323 IRIS International @ 9.750 598
19,195 NovAtel, Inc. @ 44.390 852
-------
3,292
-------
Producer Durables - Machinery - 1.7%
28,437 ICOS Vision Systems Corp. N.V. @ 28.060 798
-------
Producer Durables - Office - 1.2%
45,797 Optimal Group, Inc. @ 11.780 539
-------
Technology - Communication - 6.7%
238,255 RELM Wireless Corp. @ 2.250 536
104,721 Ceragon Networks Ltd. @ 6.730 705
62,558 Novatel Wireless, Inc. @ 19.410 1,214
99,394 Socket Communications, Inc. @ 2.000 199
27,868 Sunair Electronics, Inc. @ 16.510 460
-------
3,114
-------
Technology - Computer Service
Software & Systems - 18.7%
36,966 Astea International, Inc. @ 6.750 249
252,281 Communication Intelligence Corp. @ 0.595 150
53,940 Citadel Security Software, Inc. @ 2.600 140
26,836 Datatrak International, Inc. @ 10.950 294
150,377 Innodata Isogen, Inc. @ 9.840 1,480
41,918 Merge Technologies, Inc. @ 22.250 933
268,100 Mind CTI Ltd. @ 5.820 1,560
32,545 Moldflow Corp. @ 15.900 517
19,100 SafeNet, Inc. @ 36.740 702
15,024 SI International, Inc. @ 30.760 462
100,115 Smith Micro Software, Inc. @ 8.950 896
127,008 VASCO Data Security International, Inc. @ 6.620 841
103,693 Youbet.com, Inc. @ 5.060 525
-------
8,749
-------
Technology - Computer Technology - 1.4%
62,994 CyberGuard Corp. @ 6.300 $ 397
68,032 Visual Networks, Inc. @ 3.480 237
-------
634
-------
Technology - Electronics - 3.6%
356,096 Arotech Corp. @ 1.620 577
50,346 * Frequency Electronics Corp. @ 14.850 748
52,542 Spectrum Control, Inc. @ 7.260 381
-------
1,706
-------
Technology - Electronics
Semi - Conductors - 5.0%
142,900 International Display Works, Inc. @ 9.150 1,307
31,505 AMX Corp. @ 16.470 519
52,200 Mips Technologies, Inc. @ 9.850 514
-------
2,340
-------
Total Common Stocks
(Cost: $28,638,000) $45,193
-------
Rights - 0.0%
Computers - 0.0%
145,500 /(a)/ Miltope Group, Inc. @ 0.000 --
-------
Total Rights
(Cost: $0) $ --
-------
See accompanying notes to financial statements.
9
OBERWEIS MICRO-CAP PORTFOLIO
Portfolio of Investments (cont'd.)
Face Amount Value
- --------------------------------------------------------------------------------
COMMERCIAL PAPER- 2.8%
$1,300,000 Sears Roebuck Acceptance Corp.
2.10%, due 01-04-05 $ 1,300
-------
Total Commercial Paper
(Cost: $1,300,000) 1,300
-------
Total Investments - 99.6%
(Cost: $29,938,000) 46,493
Other Assets less Liabilities - 0.4% 183
-------
NET ASSETS - 100% $46,676
=======
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
* Income producing security during the year ended December 31, 2004.
Securities not indicated as income producing did not pay dividends for the
year ended December 31, 2004.
Based on the cost of investments of $29,938,000 for federal income tax purposes
at December 31, 2004, the aggregate gross unrealized appreciation was
$17,698,000, the aggregate gross unrealized depreciation was $1,143,000 and the
net unrealized appreciation of investments was $16,555,000.
/(a)/ The security is valued in good faith by the board of trustees of the
Fund as of December 31, 2004.
See accompanying notes to financial statements.
10
OBERWEIS MID-CAP PORTFOLIO
Portfolio of Investments
December 31, 2004 (value in thousands)
Shares Company (Closing Price) Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 100.9%
Automotive Transportation - Auto Trucks & Parts - 1.6%
5,009 * Modine Manufacturing Co. @ 33.770 $169
----
Consumer Discretionary - Commercial Information Service - 3.1%
6,627 Ask Jeeves, Inc. @ 26.750 177
5,481 Audible, Inc. @ 26.050 143
----
320
----
Consumer Discretionary - Consumer Electronics - 2.3%
5,000 InfoSpace, Inc. @ 47.550 238
----
Consumer Discretionary - Education Services - 2.3%
6,000 Career Education Corp. @ 40.000 240
----
Consumer Discretionary - Household Furnishings - 3.6%
6,084 Dorel Industries, Inc. @ 34.490 210
8,097 Tempur Pedic International, Inc. @ 21.200 171
----
381
----
Consumer Discretionary - Retail - 7.6%
6,995 Build-A-Bear Workshop, Inc. @ 35.150 246
3,820 Chico's FAS, Inc. @ 45.530 174
8,396 Urban Outfitters, Inc. @ 44.400 373
----
793
----
Consumer Discretionary - Textile - 4.2%
4,000 Coach, Inc. @ 56.400 226
7,000 Quicksilver, Inc. @ 29.790 208
----
434
----
Finanical Services - Insurance - Property & Casualty - 1.6%
5,000 * Endurance Specialty Holdings, Ltd. @ 34.200 171
----
Health Care - Biotech Research & Production - 4.0%
6,000 Celgene Corp. @ 26.520 159
5,000 Cephalon, Inc. @ 50.880 255
----
414
----
Health Care - Drugs - Pharmaceuticals - 6.7%
2,500 Barr Laboratories, Inc. @ 45.540 $114
5,677 Connetics Corp. @ 24.290 138
3,601 Kos Pharmaceuticals, Inc. @ 37.640 136
12,246 QLT, Inc. @ 16.080 197
3,864 The Medicines Co. @ 28.800 111
----
696
----
Health Care - Electrical Medical Systems - 5.0%
6,000 Given Imaging, Ltd. @ 35.970 216
7,577 Intuitive Surgical, Inc. @ 40.020 303
----
519
----
Health Care - Medical & Dental Instruments / Supplies - 4.1%
7,000 CYTYC Corp. @ 27.570 193
4,500 ResMed, Inc. @ 51.100 230
----
423
----
Material Producers - Metal Fabricating - 2.0%
7,000 Maverick Tube Corp. @ 30.300 212
----
Material Producers - Misc.
Materials & Commodities - 2.1%
3,919 Ceradyne, Inc. @ 57.210 224
----
Other Energy - Crude Oil Producer - 3.4%
9,766 * PetroKazakhstan, Inc. @ 37.100 362
----
Other Energy - Machine Oilwell - 2.0%
3,000 * CARBO Ceramics, Inc. @ 69.000 207
----
Other Energy - Misc. - 0.9%
4,074 Veritas DGC, Inc. @ 22.410 91
----
Producer Durables - Homebuilding - 2.9%
13,000 Desarrolladora Homex @ 23.650 307
----
Producer Durables - Machinery - 2.6%
4,500 * Engineered Support Systems, Inc. @ 59.220 266
----
Producer Durables - Production Technology Equipment - 1.3%
5,000 * Cognex Corp. @ 27.900 140
----
See accompanying notes to financial statements.
11
OBERWEIS MID-CAP PORTFOLIO
Portfolio of Investments (cont'd.)
Shares Company (Closing Price) Value
- --------------------------------------------------------------------------------
Technology - Communication - Technology - 7.2%
4,000 * L-3 Communications Holdings, Inc. @ 73.240 $ 293
7,500 Sierra Wireless, Inc. @ 17.680 133
6,368 Tekelec @ 20.440 130
14,341 TIBCO Software, Inc. @ 13.340 191
-------
747
-------
Technology - Computer Service Software & Systems - 12.0%
7,323 Akamai Technologies, Inc. @ 13.030 96
7,756 * AutoDesk, Inc. @ 37.950 294
6,715 Cognizant Technology Solutions Corp. @ 42.330 284
3,655 F5 Networks, Inc. @ 48.720 178
3,818 MicroStrategy, Inc. @ 60.250 230
8,000 Red Hat, Inc. @ 13.350 107
1,000 SRA International, Inc. @ 64.200 64
-------
1,253
-------
Technology - Computer Technology - 3.4%
6,908 Cogent, Inc. @ 33.000 228
4,000 PalmOne, Inc. @ 31.550 126
-------
354
-------
Technology - Electronics - 2.5%
21,500 Aeroflex, Inc. @ 12.120 261
-------
Technology - Electronics Semi-Conductors - 12.4%
8,000 Marvell Technology Group, Ltd. @ 35.470 284
10,756 Sigmatel, Inc. @ 35.530 382
20,000 Silicon Image, Inc. @ 16.460 329
3,238 Silicon Laboratories, Inc. @ 35.310 115
44,000 * Siliconware Precision Industries, Co. @ 4.100 180
-------
1,290
-------
Utilities - Telecommunications - 0.1%
615 Telesystems International Wireless, Inc. @ 11.190 7
-------
Total Common Stocks
(Cost: $8,471,000) $10,519
-------
Total Investments - 100.9%
(Cost: $8,471,000) 10,519
Other Liabilities less Assets - (0.9)% (93)
-------
NET ASSETS - 100% $10,426
=======
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
* Income producing security during the year ended December 31, 2004.
Securities not indicated as income producing did not pay dividends for the
year ended December 31, 2004.
Based on the cost of investments of $8,471,000 for federal income tax purposes
at December 31, 2004, the aggregate gross unrealized appreciation was
$2,548,000, the aggregate gross unrealized depreciation was $500,000 and the net
unrealized appreciation of investments was $2,048,000.
See accompanying notes to financial statements.
12
THE OBERWEIS FUNDS
Statement of Assets and Liabilities
December 31, 2004 (in thousands, except pricing of shares)
Emerging Growth Micro-Cap Mid-Cap
Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------
Assets:
Investment securities at value $175,568 $46,493 $10,519
(Cost: $122,899, $29,938 and $8,471, respectively)
Cash -- 244 --
Receivable from fund shares sold 95 197 17
Receivable from securities sold 1,237 801 --
Dividends and interest receivable 1 7 1
Prepaid expenses 49 22 10
-------- ------- -------
Total Assets 176,950 47,764 10,547
-------- ------- -------
Liabilities:
Payable to custodian bank 799 -- 91
Payable for fund shares redeemed 144 201 5
Payable for securities purchased 139 766 --
Payable to advisor (see note 2) 120 37 7
Payable to distributor 37 9 2
Accrued expenses 97 75 16
-------- ------- -------
Total Liabilities 1,336 1,088 121
-------- ------- -------
Net Assets $175,614 $46,676 $10,426
======== ======= =======
Analysis of net assets:
Aggregate paid in capital $119,854 $27,625 $10,743
Accumulated net realized gain (loss) on investments 3,091 2,496 (2,365)
Net unrealized appreciation of investments 52,669 16,555 2,048
-------- ------- -------
Net Assets $175,614 $46,676 $10,426
======== ======= =======
The Pricing of Shares:
Net asset value and offering price per share
Emerging Growth Portfolio:
($175,613,701 divided by 6,286,765 shares outstanding) $ 27.93
========
Micro-Cap Portfolio:
($46,676,234 divided by 2,667,795 shares outstanding) $ 17.50
=======
Mid-Cap Portfolio:
($10,426,492 divided by 872,224 shares outstanding) $ 11.95
=======
See accompanying notes to financial statements.
13
THE OBERWEIS FUNDS
Statement of Operations
Year Ended December 31, 2004 (in thousands)
Emerging Growth Micro-Cap Mid-Cap
Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------
Investment Income:
Interest $ 19 $ 16 $ --
Dividends 101 76 47
-------- -------- -------
Total Investment Income 120 92 47
-------- -------- -------
Expenses:
Investment advisory fees 762 361 44
Management fees 737 241 44
Distribution fees (see note 2) 461 151 27
Transfer agent fees and expenses 279 78 38
Custodian fees and expenses 118 54 32
Professional fees 109 60 6
Shareholder reports 85 39 6
Federal and state registration fees 72 26 15
Trustees' fees 18 7 1
Insurance 17 7 1
Miscellaneous 3 1 --
-------- -------- -------
Total Expenses 2,661 1,025 214
-------- -------- -------
Net Investment Loss Before Expense Reimbursement (2,541) (933) (167)
Expense Reimbursement and Earnings Credits (see note 2) 4 4 1
-------- -------- -------
Net Investment Loss (2,537) (929) (166)
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 18,642 27,145 1,472
Net realized gain from covered call options written 57 25 2
-------- -------- -------
Total net realized gain 18,699 27,170 1,474
Decrease in net unrealized appreciation of investments (10,025) (28,225) (1,073)
-------- -------- -------
Net realized and unrealized gain (loss) on investments 8,674 (1,055) 401
-------- -------- -------
Net increase (decrease) in net assets resulting from operations $ 6,137 $ (1,984) $ 235
======== ======== =======
See accompanying notes to financial statements.
14
THE OBERWEIS FUNDS
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
Emerging Growth Portfolio
-------------------------
Years ended December 31,
-------------------------
2004 2003
--------- ---------
From Operations:
Net investment loss $ (2,537) $ (1,622)
Net realized gain on investments 18,699 2,108
Increase (decrease) in net unrealized
appreciation (depreciation) of investments (10,025) 55,324
--------- ---------
Net increase in net assets resulting from operations 6,137 55,810
--------- ---------
From Distributions:
Distributions from net realized gains on investments (4,683) --
--------- ---------
From Capital Share Transactions:
Net proceeds from sale of shares 86,918 310,899
Proceeds from reinvestment of distributions 4,473 --
Redemption of shares (159,926) (185,306)
--------- ---------
Net increase (decrease) from capital share transactions (68,535) 125,593
--------- ---------
Total increase (decrease) in net assets (67,081) 181,403
Net Assets:
Beginning of year 242,695 61,292
--------- ---------
End of year $ 175,614 $ 242,695
========= =========
Transactions in Shares:
Shares sold 3,276 13,107
Shares issued in reinvestment of dividends 174 --
Less shares redeemed (6,136) (7,934)
--------- ---------
Net increase (decrease) from capital share transactions (2,686) 5,173
========= =========
See accompanying notes to financial statements.
15
THE OBERWEIS FUNDS
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
Micro-Cap Portfolio
------------------------
Years ended December 31,
------------------------
2004 2003
-------- --------
From Operations:
Net investment loss $ (929) $ (1,085)
Net realized gain on investments 27,170 16,337
Increase (decrease) in net unrealized
appreciation (depreciation) of investments (28,225) 40,899
-------- --------
Net increase (decrease) in net assets resulting from operations (1,984) 56,151
-------- --------
From Distributions:
Distributions from net realized gains on investments (13,764) (9,965)
-------- --------
From Capital Share Transactions:
Net proceeds from sale of shares 15,331 98,526
Proceeds from reinvestment of distributions 12,993 8,993
Redemption of shares (65,446) (76,137)
-------- --------
Net increase (decrease) from capital share transactions (37,122) 31,382
-------- --------
Total increase (decrease) in net assets (52,870) 77,568
Net Assets:
Beginning of year 99,546 21,978
-------- --------
End of year $ 46,676 $ 99,546
======== ========
Transactions in Shares:
Shares sold 716 5,713
Shares issued in reinvestment of dividends 877 342
Less shares redeemed (2,716) (3,850)
-------- --------
Net increase (decrease) from capital share transactions (1,123) 2,205
======== ========
See accompanying notes to financial statements.
16
THE OBERWEIS FUNDS
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
Mid-Cap Portfolio
------------------------
Years ended December 31,
------------------------
2004 2003
-------- --------
From Operations:
Net investment loss $ (166) $ (133)
Net realized gain (loss) on investments 1,474 (535)
Increase (decrease) in net unrealized
appreciation (depreciation) of investments (1,073) 3,473
------- -------
Net increase in net assets resulting from operations 235 2,805
------- -------
From Capital Share Transactions:
Net proceeds from sale of shares 4,520 7,421
Redemption of shares (5,149) (3,776)
------- -------
Net increase (decrease)from capital share transactions (629) 3,645
------- -------
Total increase (decrease) in net assets (394) 6,450
Net Assets:
Beginning of year 10,820 4,370
------- -------
End of year $10,426 $10,820
======= =======
Transactions in Shares:
Shares sold 381 735
Less shares redeemed (460) (383)
------- -------
Net increase (decrease) from capital share transactions (79) 352
======= =======
See accompanying notes to financial statements.
17
THE OBERWEIS FUNDS
Notes to Financial Statements
December 31, 2004
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 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 reclassification. The tax character of distributions
paid during the fiscal year ended December 31, 2004, to shareholders of record
on November 11, 2004, were as follows (amounts in thousands):
Distributions Distributions
Paid From Paid From Total
Ordinary Net Long-Term Distributions
Income Capital Gains Paid
------------- ------------- -------------
Emerging Growth Portfolio $-- $ 4,683 $ 4,683
Micro-Cap Portfolio -- 13,764 13,764
No distributions were required for the Mid-Cap Portfolio. The Funds designate
the following amounts as long-term capital gain distributions. The amounts
designated may not agree with the long-term capital gains in the tax character
of distribution table due to utilization of earnings and profits distributed to
shareholders on redemption of shares (amounts in thousands):
Amount
-------
Emerging Growth Portfolio $ 8,565
Micro-Cap Portfolio 16,410
18
THE OBERWEIS FUNDS
Notes to Financial Statements
December 31, 2004
The tax character of distributions paid during the fiscal year ended December
31, 2003, to shareholders of record on November 6, 2003, were as follows
(amounts in thousands):
Distributions Distributions
Paid From Paid From Total
Ordinary Net Long-Term Distributions
Income Capital Gains Paid
------------- ------------- -------------
Micro-Cap Portfolio $5,684 $4,281 $9,965
No distributions were required for the Emerging Growth Portfolio and Mid-Cap
Portfolio. The Funds designate the following amounts as long-term capital gain
distributions. The amounts designated may not agree with the long-term capital
gains in the tax character of distribution table due to utilization of earnings
and profits distributed to shareholders on redemption of shares (amounts in
thousands):
Amount
-------
Micro-Cap Portfolio $5,333
The tax components of undistributed net investment income and net realized gains
at December 31, 2004 were as follows (amounts in thousands):
Undistributed Undistributed
Ordinary Net Long-Term
Income Capital Gains
------------- -------------
Emerging Growth Portfolio $-- $3,118
Micro-Cap Portfolio -- 2,496
As of December 31, 2004, the following Fund has net capital loss carryforwards
to offset future net capital gains, if any, to the extent provided by treasury
regulations (amounts in thousands):
2009 2010 2011
---- ------ ----
Mid-Cap Portfolio $569 $1,087 $709
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.
Indemnifications. Under the Funds' organizational documents, its present and
former Officers and Trustees are indemnified against certain liabilities arising
out of the performance of their duties to the Funds. In addition, in the normal
course of business, the Fund enters into contracts that provide general
indemnifications to other parties. The Funds' maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. However, the Fund has not had prior
claims or losses pursuant to these contracts and expects the risk of loss to be
remote.
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,
2004, the Emerging Growth Portfolio, Micro-Cap Portfolio, and Mid-Cap Portfolio
incurred investment advisory fees totaling $762,000, $361,000, and $44,000,
respectively.
19
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, 2004, the Emerging Growth Portfolio, Micro-Cap
Portfolio, and Mid-Cap Portfolio incurred management fees totaling $737,000,
$241,000 and $44,000, 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. No expense reimbursement were required for the
year ended December 31, 2004.
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, 2004, the Funds made no direct payments to its officers and paid
$26,000 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, 2004, the Emerging
Growth Portfolio, Micro-Cap Portfolio and Mid-Cap Portfolio incurred
distribution fees totaling $461,000, $151,000 and $27,000, respectively.
Commissions. The Funds pay Oberweis Securities for executing some of each Fund's
agency security transactions at competitive rates, typically $.02 per share. For
the year ended December 31, 2004, the Emerging Growth Portfolio, Micro-Cap
Portfolio and Mid-Cap Portfolio paid commissions of $1,250, $550 and $75,
respectively to Oberweis Securities.
3. Investment transactions
The cost of securities purchased and proceeds from securities sold during the
year ended December 31, 2004, other than options written and money market
investments, aggregated $111,218,000 and $203,408,000, respectively, for the
Emerging Growth Portfolio, $37,251,000 and $89,494,000, respectively, for the
Micro-Cap Portfolio, and $10,159,000 and $10,858,000, respectively, for the
Mid-Cap Portfolio. The Funds did not hold government securities during 2004.
Transactions in options written for the year ended December 31, 2004 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 -- $ -- -- $ -- -- $ --
Options written 700 57,000 220 25,000 30 2,000
Options expired (700) (57,000) (220) (25,000) (30) (2,000)
Options closed -- -- -- -- -- --
Options assigned -- -- -- -- -- --
---- -------- ----- -------- --- -------
Options outstanding at end of year -- $ -- -- $ -- -- $ --
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 and is recorded when received.
4. Redemption fee
The Oberweis Funds are designed for long-term investors. To discourage market
timers, effective January 1, 2004, redemptions of shares of a Portfolio within
90 days of purchase were 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 do not apply to exchanges. The 1.00% redemption fee is
deducted from the redemption proceeds and is retained by the Portfolio.
20
The redemption fee is retained by the Funds for the expense they incur in
connection with shareholder redemptions. Redemption fees received by the
Emerging Growth, Micro-Cap and Mid-Cap Portfolios were $106,000, $110,000 and
$9,000, respectively, for the year ended December 31, 2004, and were recorded as
a reduction of the cost of shares redeemed in the statements of changes in net
assets.
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, 2004, the Emerging Growth Portfolio, Micro-Cap Portfolio and the
Mid-Cap Portfolio received credits of $4,000, $4,000 and $1,000, respectively.
During the year ended December 31, 2004, the Emerging Growth Portfolio,
Micro-Cap Portfolio and the Mid-Cap Portfolio incurred interest charges of
$20,000, $7,000 and $1,000, respectively, which is included in custodian fees
and expenses in the statement of operations.
21
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,
-----------------------------------------------------
2004 2003 2002 2001 2000
-----------------------------------------------------
Net asset value at beginning of year $ 27.05 $ 16.13 $ 21.29 $ 21.19 $ 36.15
Income (loss) from investment operations:
Net investment loss /(a)/ (.36) (.27) (.26) (.31) (. 48)
Net realized and unrealized gain (loss) on investments 2.00/(b)/ 11.19 (4.90) .41 (1.37)
-------- -------- ------- ------- -------
Total from investment operations 1.64 10.92 (5.16) .10 (1.85)
Less distributions:
Distribution from net realized gains on investments (.76) -- -- -- (13.11)
-------- -------- ------- ------- -------
Net asset value at end of year $ 27.93 $ 27.05 $ 16.13 $ 21.29 $ 21.19
======== ======== ======= ======= =======
Total Return (%) 6.3 67.7 (24.2) 0.5 (10.7)
Ratio/Supplemental Data
Net Assets at end of year (in thousands) $175,614 $242,695 $61,292 $79,014 $83,643
Ratio of expenses to average net assets (%) 1.44 1.37 1.57 1.65 1.42
Ratio of net investment loss to average net assets (%) (1.38) (1.18) (1.48) (1.51) (1.27)
Portfolio turnover rate (%) 55 56 66 66 73
Average commission rate paid $ .0199 $ .0206 $ .0265 $ .0336 $ .0342
- ----------
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 $0.02.
22
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,
------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
Net asset value at beginning of year $ 26.26 $ 13.86 $ 16.77 $ 13.54 $ 16.94
Income (loss) from investment operations:
Net investment loss/(a)/ (.36) (.31) (.24) (.24) (.33)
Net realized and unrealized gain (loss) on investments (.50)/(b)/ 15.41/(b)/ (2.67) 3.47 (.74)
------- ------- ------- ------- -------
Total from investment operations (.86) 15.10 (2.91) 3.23 (1.07)
Less distributions:
Distributions from net realized gains on investments (7.90) (2.70) -- -- (2.33)
------- ------- ------- ------- -------
Net asset value at end of year $ 17.50 $ 26.26 $ 13.86 $ 16.77 $ 13.54
======= ======= ======= ======= =======
Total Return (%) 2.2 108.9 (17.3) 23.9 (8.0)
Ratio/Supplemental Data
Net Assets at end of year (in thousands) $46,676 $99,546 $21,978 $47,817 $20,491
Ratio of expenses to average net assets (%) 1.70 1.60 1.93 1.98 1.96
Ratio of net investment loss to average net assets (%) (1.54) (1.47) (1.64) (1.59) (1.79)
Portfolio turnover rate (%) 58 87 81 82 79
Average commission rate paid $ .0195 $ .0200 $ .0256 $ .0307 $ .0271
- ----------
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 $0.04 and $0.05 for 2004 and 2003, respectively.
23
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,
---------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------ ------ -------
Net asset value at beginning of year 11.37 $ 7.29 $10.83 $17.12 $ 24.29
Income (loss) from investment operations:
Net investment loss/(a)/ (.17) (.18) (.17) (.21) (.46)
Net realized and unrealized gain (loss) on investments .75/(b)/ 4.26/(b)/ (3.37) (6.08) (2.27)
------- ------- ------ ------ -------
Total from investment operations .58 4.08 (3.54) (6.29) (2.73)
Less distributions:
Distributions from net realized gains on investments -- -- -- -- (4.44)
------- ------- ------ ------ -------
Net asset value at end of year $ 11.95 $ 11.37 $ 7.29 $10.83 $ 17.12
======= ======= ====== ====== =======
Total Return (%) 5.1 56.0 (32.7) (36.7) (13.1)
Ratio/Supplemental Data
Net Assets at end of year (in thousands) $10,426 $10,820 $4,370 $6,449 $12,308
Ratio of expenses to average net assets (%) 1.96 2.00/(c)/ 2.00/(c)/ 2.00/(c)/ 1.86
Ratio of net investment loss to average net assets (%) (1.52) (1.91) (1.91) (1.75) (1.78)
Portfolio turnover rate (%) 86 29 66 115 97
Average commission rate paid $ .0196 $ .0200 $.0256 $.0312 $ .0269
- ----------
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 and $0.01 for 2004 and 2003, respectively.
/(c)/ Net of expense reimbursement from related parties. The expense ratios
would have been 2.31%, 2.66%, and 2.60%, for 2003, 2002, and 2001 respectively,
before expense reimbursement and earnings credits.
24
REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
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, 2004, the
results of each of their operations for the year then ended, the changes in each
of their net assets for the two years then ended and the financial highlights
for each of the three years in the period 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, 2004 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion. The financial highlights
for each of the two 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
February 16, 2005
Chicago, Illinois
25
Trustees and Officers of The Oberweis Funds
NUMBER OF
PORTFOLIOS
POSITION HELD TERM OF OFFICE AND LENGTH PRINCIPAL OCCUPATION OVERSEEN OTHER
NAME, ADDRESS AND AGE WITH FUND OF TIME SERVED LAST FIVE YEARS BY TRUSTEE DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Smith Dedrick (47) Trustee Trustee since Attorney - Levenfeld 3 None
951 Ice Cream Dr. November, 2004/(1)/ Pearlstein, LLC, January
North Aurora, IL 60542 2005 to present; Attorney -
Hinshaw & Culbertson 1985
to January 2005.
Gary D. McDaniel (56) Trustee Trustee since Vice President/General 3 None
951 Ice Cream Dr. May, 2004/(1)/ Manager of the Flexible
North Aurora, IL 60542 Packaging Group - Smurfit
Stone Container, March 1988
to present.
James G. Schmidt (57) 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 (58) Trustee/ Trustee and Officer Director - Oberweis Asset 3 None
951 Ice Cream Dr. President/(2)/ since July, 1986/(1)//(3)/ Management, Inc. September,
North Aurora, IL 60542 1994 to present. Chairman -
September 2001 to present.
President - September, 1989
to August, 2001.
Patrick B. Joyce (45) 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 (44) Senior Vice Officer since Senior Vice President - Not Applicable None
951 Ice Cream Dr. President 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 (30) Senior Vice Officer since President - Oberweis Asset Not Applicable None
951 Ice Cream Dr. President August, 1996/(3)/ Management, Inc.,
North Aurora, IL 60542 September, 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.
/(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.
26
Trustees and Officers of The Oberweis Funds (cont'd.)
NUMBER OF
PORTFOLIOS
POSITION HELD TERM OF OFFICE AND LENGTH PRINCIPAL OCCUPATION OVERSEEN OTHER
NAME, ADDRESS AND AGE WITH FUND OF TIME SERVED LAST FIVE YEARS BY TRUSTEE DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
Steven J. LeMire (35) Vice President Officer since Vice President, Operations Not Applicable None
951 Ice Cream Dr. and Secretary August, 1996 /(3)/ - Oberweis Asset
North Aurora, IL 60542 Management, Inc., June,
2000 to present; Compliance
Manager - Oberweis
Securities, Inc., March
1997 to June, 2000.
David I. Covas (30) Vice President Officer since Vice President - Oberweis Not Applicable None
951 Ice Cream Dr. August, 2004/(3)/ Asset Management, Inc.,
North Aurora, IL 60542 September, 2003 to present;
Research Analyst June, 1997
to August, 2003.
/(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.
27
THE OBERWEIS FUNDS
Supplemental Information
Proxy Voting:
The Oberweis Funds has delegated authority to vote proxies related to the Funds'
(the Oberweis Emerging Growth Portfolio, the Oberweis Micro-Cap Portfolio, and
the Oberweis Mid-Cap Portfolio) portfolio securities to the Funds' investment
adviser, Oberweis Asset Management, Inc. ("OAM"). A description of the policies
and procedures that OAM uses in fulfilling this responsibility is available,
without charge upon request, by calling 1-800-323-6166. It also appears on
www.oberweisfunds.com and in the Funds' Statement of Additional Information,
which can be found on the Securities and Exchange Commission's ("SEC") web-site
at http://www.sec.gov. Information on how the Funds voted proxies relating to
portfolio securities during the most recent 12 month period ended June 30 is
available (1) without charge, upon request, by calling 1-800-323-6166, and (2)
on the SEC's web-site at http://www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Funds file their complete schedule of portfolio investments with the SEC for
the first and third quarter of each fiscal year (March 31 and September 30) on
Form NQ. The Funds' Forms NQ are available, without charge, on the SEC's website
at http://www.sec.gov and may be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
Expense Examples:
As a shareholder of The Oberweis Funds, you may incur two types of costs: (1)
transaction costs, including redemption fees and (2) ongoing costs, including
management fees; distribution (and/or service) 12b-1 fees; and other Fund
expenses. This example is intended to help you understand your ongoing costs (in
dollars) of investing in The Oberweis Funds and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 investment at the beginning of
the period and held for the entire period from July 1, 2004 through December 31,
2004.
Actual Expenses:
The first line for each Portfolio in the table below provides information about
actual account values and actual expenses. You may use the information below,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000=8.6), then multiply the result by the
number in the table under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each Portfolio in the table below provides information about
hypothetical account values and hypothetical expenses based on each Portfolio's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Portfolio's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees. Therefore, the second line for each Portfolio in the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
28
THE OBERWEIS FUNDS
Supplemental Information - continued
Beginning Ending Expense Paid Expense Ratio
Account Value Account Value During Period* During Period
7/1/04 12/31/04 7/1/04-12/31/04 7/1/04-12-31/04
------------- ------------- --------------- ---------------
Emerging Growth Portfolio
Actual .................. $1,000.00 $1,073.20 $10.27 1.48%
Hypothetical (5% return
before expenses) ........ $1,000.00 $1,023.56 $10.02 1.48%
Micro-Cap Portfolio
Actual .................. $1,000.00 $1,058.10 $12.12 1.76%
Hypothetical (5% return
before expenses) ........ $1,000.00 $1,021.69 $11.91 1.76%
Mid-Cap Portfolio
Actual .................. $1,000.00 $1,019.60 $13.59 2.01%
Hypothetical (5% return
before expenses) ........ $1,000.00 $1,020.02 $13.59 2.01%
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
29
Trustees and Officers
James D. Oberweis Katherine Smith Dedrick
Trustee and President Trustee
Gary D. McDaniel James G. Schmidt
Trustee Trustee
Patrick B. Joyce Martin L. Yokosawa
Executive Vice President Senior Vice President
Treasurer
James W. Oberweis Steven J. LeMire
Senior Vice President Vice President
Secretary
David I. Covas
Vice President
Manager and Investment Advisor
Oberweis Asset Management, Inc.
951 Ice Cream Dr., North Aurora, IL 60542
1-800-323-6166
www.oberweisfunds.com
Distributor
Oberweis Securities, Inc.
951 Ice Cream Dr., North Aurora, IL 60542
1-630-801-6000
www.oberweisfunds.com
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
Registered Independent Public Accounting Firm
PricewaterhouseCoopers LLP
One North Wacker Drive, Chicago, IL 60606
[LOGO] The Oberweis Funds
Emerging Growth Portfolio
Micro-Cap Portfolio
Mid-Cap Portfolio
[LOGO] The Oberweis Funds
Annual Report
Audited
December 31, 2004
ITEM 2. CODE OF ETHICS.
(a) As of December 31, 2004, 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 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.
(a)-(d)
2003 2004
------------------------------------
Audit fees 37,100 31,750
------------------------------------
Audit-Related Fees N/A --
------------------------------------
Tax Fees 7,750 17,750
------------------------------------
All Other Fees N/A --
------------------------------------
Audit Fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
principal accountant in connection with statutory and regulatory
filings. Tax Fees principally include tax compliance, tax advice, tax
planning and preparation of tax returns.
(e)(1) The registrant's audit committee pre-approves all audit
services provided by the registrant's principal accountant for the
registrant and all non-audit services provided by the registrant's
principal accountant for the registrant, its investment adviser and
any entity controlling, controlled by, or under common
control with the investment adviser ("Adviser Affiliate") that
provides ongoing services to the registrant, if the engagement by the
investment adviser or Adviser Affiliate relates directly to the
operations and financial reporting of the registrant.
(e)(2) No services included in (b) - (d) above were approved pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g) The aggregate fees billed for the most recent fiscal year and the
preceding fiscal year by the registrant's principal accountant for
non-audit services rendered to the registrant, its investment, and
Adviser Affiliate that provides ongoing services to the registrant for
2004 and 2003 were $17,750 and 7,750, respectively.
(h) Non-audit services rendered to the registrant's investment adviser
and any Adviser Affiliate that were not pre-approved pursuant to
Paragraph (c) (7) (ii) of Rule 2-01 of Regulation S-X were considered
by the registrant's audit committee as to whether they were compatible
with maintaining the principal account's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Schedule I in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which
shareholders may recommend nominees to the registrant's board of
trustees since registrant last disclosed such procedures in its proxy
statement dated April 16, 2004.
ITEM 11. 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 second
fiscal quarter of the period covered by the report that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Code of Ethics applicable to its Principal Executive and
Principal Accounting Officers pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit
99.406. Code of Ethics.
(a) (2) Certifications pursuant to Rule 30a-2 under the Investment
Company Act of 1940 (17CFR 270.30a-2) attached hereto as
Exhibit 99.CERT.
(a) (3) Any written solicitation to purchase securities under Rule
23 c-1 under the Investment Company Act of 1940 (17 CFR
270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more
persons. Not Applicable to the registrant.
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 W. Oberweis
------------------------------------------
James W. Oberweis
President, The Oberweis Funds
Date 02/25/2005
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 W. Oberweis
------------------------------------------
James W. Oberweis
President, The Oberweis Funds
Date 02/25/20054
By (Signature and Title*) /s/ Patrick B. Joyce
------------------------------------------
Patrick B. Joyce
Executive Vice President and Treasurer,
The Oberweis Funds
Date 02/25/2005
/*/ Print the name and title of each signing officer under his or her
signature.