Paradigm Funds

N-CSR 1 paradigmn-csrannual2015.htm Paradigm Funds

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 811-21233

PARADIGM FUNDS
(Exact name of registrant as specified in charter)

Nine Elk Street, Albany, NY 12207-1002
(Address of principal executive offices) (Zip code)

Robert A. Benton
Nine Elk Street, Albany, NY 12207-1002
(Name and address of agent for service)

Registrant's telephone number, including area code: (518) 431-3500

Date of fiscal year end: December 31

Date of reporting period: December 31, 2015

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.

Item 1. Reports to Stockholders.

Paradigm Funds

Paradigm Value Fund
Paradigm Select Fund
Paradigm Opportunity Fund
Paradigm Micro-Cap Fund
For Investors Seeking Long-Term Capital Appreciation

ANNUAL REPORT
December 31, 2015

Table of Contents



PARADIGM FUNDS
Letter to Shareholders	2
Sector Allocation	5
Performance Information	7
Schedules of Investments	11
Statements of Assets and Liabilities	21
Statements of Operations	21
Statements of Changes in Net Assets	23
Financial Highlights	25
NOTES TO FINANCIAL STATEMENTS	27
DISCLOSURE OF EXPENSES	33
ADDITIONAL INFORMATION	35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	37
TRUSTEES & OFFICERS	38

2015 Annual Report 1

Letter to Shareholders

Dear Fellow Shareholders:

Last year’s letter touched on falling energy prices, a trend that continued and accelerated in 2015, resulting in significant market dispersion and genuine geopolitical concerns on a global level. We are acutely cognizant of these risks and more focused than ever on smaller companies that we believe are poised to benefit from the resurgent American economy, minimizing exposure to the malaise of global markets.

Large-cap stocks materially outperformed small-cap stocks in 2015. Growth also significantly outperformed value. While that was challenging in the short term, our simple take-away from this continuation of a trend that carried over from 2014 is cautious optimism for 2016. Investing climates changes and two consecutive years of small-cap underperfor-mance contribute to our constructive outlook for small- to mid-sized companies, particularly those with value characteristics. The micro-cap sector in particular appears oversold. One of the advantages of investing in smaller, less complicated companies is the ability to identify and limit geographic exposures and other factors, which can be more challenging with highly diversified global giants.

In contrast to our conversations with company management teams a year ago, some now sound slightly more cautious about expectations for their businesses and their industries against an increasingly complex global economic environment. We believe that some management teams are dialing back expectations as a reflection of the fragile psychology of investors, and the markets appear more focused on investor sentiment than underlying fundamentals, which we believe to still be sound. Thus, despite the market turmoil we have seen in the early days of 2016, we remain optimistic and constructive about the longer-term prospects for well-managed, attractively valued micro- to mid-cap equities.

We believe that markets are discounting a lot right now, and with the insights we are able to achieve for our longer-term holdings and their business models, we find these times to be opportunities to selectively add to our positions, or revisit names that have retreated. This remains the hardest part of the investing process: knowing when to step up to the plate. We continue to adhere to our investment discipline day to day, recognizing that there is no guarantee of instant gratification.

Paradigm Value Fund

The Paradigm Value Fund (PVFAX) appreciated 1.35% in 2015, compared to a decline of 7.47% for the benchmark Russell 2000 Value.

Outperformance in 2015 was broad-based; the Fund’s portfolio holdings outperformed its benchmark in eight out of 10 sectors. The principal reason for such outperformance was stock selection.

Stock selection was most especially strong in the Industrials sector. Over the year, portfolio holdings in that sector appreciated 11.35%, while benchmark holdings in the same sector lost 10.39% .

Stock selection was also strong in the Information Technology sector. Over the year, portfolio holdings in that sector gained 3.55%, while benchmark holdings in the same sector lost 2.36% .

2015 Annual Report 2

Paradigm Select Fund

The Paradigm Select Fund (PFSLX) declined 1.26% in 2015, compared to a loss of 2.90% for the benchmark Russell 2500.

Strong stock selection in the Health Care sector was the top contributor to the Fund’s outperformance in 2015, with portfolio holdings’ 22.41% return more than double the benchmark sector’s 9.23% gain.

Materials holdings in the portfolio declined 4.63%, well ahead of the benchmark sector’s 11.68% drop.

The portfolio’s holdings in the Financials sector also outperformed the benchmark sector; however, this was offset by an underweight allocation to the sector.

The Industrials sector proved most challenging in the quarter due to setbacks in the Aerospace and Transportation industries.

Paradigm Opportunity Fund

The Paradigm Opportunity Fund (PFOPX) declined 4.76% in 2015, representing only a slight underperformance of the benchmark Russell 2000, which declined 4.41% over the same period.

Strong stock selection made the Financials sector the top contributor in 2015. Portfolio holdings appreciated 26.46%, compared to the benchmark sector’s 0.71% decline. However, an underweight allocation to the sector offset these gains.

The Fund’s concentration in the Information Technology sector again contributed most to relative performance in 2015, with the portfolio sector’s significant overweight to this outperforming sector contributing to relative performance.

The Consumer Discretionary sector was the largest detractor in the quarter due to a combination of slightly lower performance than the benchmark sector and an overweight allocation to this underperforming sector.

Paradigm Micro-Cap Fund

The Paradigm Micro-Cap Fund (PVIVX) declined 10.05% in 2015, compared to a loss of 5.16% for the benchmark Russell Microcap.

The Fund’s underperformance over the year resulted primarily from relative underperfor-mance in the Consumer Discretionary and Healthcare sectors.

The Fund’s overweight allocation to the Consumer Discretionary sector was the primary driver to underperformance in 2015, due in part to the portfolio’s focus on Specialty Retail, which sold off significantly over the period.

In the Healthcare sector, stock selection was the primary driver of underperformance. Over the year, portfolio holdings in that sector declined by 10.93%, while benchmark holdings in

2015 Annual Report 3

the same sector gained 1.60% . This discrepancy largely reflects the Fund’s avoidance of the Biotech sub-sector, which accounted for the majority of the benchmark sector’s positive performance.

In addition, the Fund’s avoidance of the Financials sector, which was the largest benchmark contributor over the year, adversely affected performance.

Sincerely,

Candace King Weir
President and Chief Investment Officer
Paradigm Funds Advisor LLC

Amelia F. Weir
Senior Vice President
Paradigm Funds Advisor LLC

2015 Annual Report 4

Paradigm Funds (Unaudited)

PARADIGM VALUE FUND
Sector Allocation as of December 31, 2015
(As a Percentage of Equity Securities Held)

PARADIGM SELECT FUND
Sector Allocation as of December 31, 2015
(As a Percentage of Equity Securities Held)

2015 Annual Report 5

Paradigm Funds (Unaudited)

PARADIGM OPPORTUNITY FUND
Sector Allocation as of December 31, 2015
(As a Percentage of Equity Securities Held)

PARADIGM MICRO-CAP FUND
Sector Allocation as of December 31, 2015
(As a Percentage of Equity Securities Held)

2015 Annual Report 6

Paradigm Value Fund (Unaudited)

PERFORMANCE INFORMATION

Average Annual Rate of Return (%) for The Periods Ended December 31, 2015.

December 31, 2015 NAV $43.02

	1 Year^(A)	3 Year^(A)	5 Year^(A)	10 Year^(A)
Paradigm Value Fund	1.35%	8.15%	5.73%	6.38%
Russell 2000® Value Index^(B)	-7.47%	9.06%	7.67%	5.58%

^(A)1 Year, 3 Year, 5 Year and 10 Year returns include change in share prices and in each case includes reinvestment of any dividends and capital gain distributions. The inception date of the Paradigm Value Fund was January 1, 2003.

^(B)The Russell 2000® Value Index (whose composition is different from the Fund) is an unmanaged index of small-capitalization stocks with lower price-to-book ratios and lower forecasted growth values than the total population of small-capitalization stocks.

For purposes of the graph and the accompanying table, it is assumed that all dividends and distributions were reinvested.

Per the Fund’s most recent prospectus, the Fund’s total annual operating expense ratio (before any fee waiver) is 1.97%, and 1.50% post waiver. The Advisor has contractually agreed to waive management fees and reimburse expenses to the extent necessary to maintain total annual operating expenses of the Fund (excluding brokerage fees and commissions, interest and other borrowing expenses, taxes, extraordinary expenses and the indirect costs of investing in Acquired Funds) at 1.50% of its average daily net assets through April 30, 2016.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAT THE PERFORMANCE DATA QUOTED. TO OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-239-0732 OR VISIT OUR WEBSITE AT www.paradigm-funds.com.

2015 Annual Report 7

Paradigm Select Fund (Unaudited)

PERFORMANCE INFORMATION

Average Annual Rate of Return (%) for The Periods Ended December 31, 2015.

December 31, 2015 NAV $29.09

	1 Year^(A)	3 Year^(A)	5 Year^(A)	10 Year^(A)
Paradigm Select Fund	-1.26%	11.12%	8.82%	7.69%
Russell 2500® Index^(B)	-2.90%	12.46%	10.32%	7.56%

^(B)The Russell 2500® Index (whose composition is different from the Fund) measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as “mid” cap. The Russell 2500 Index is a subset of the Russell 3000® Index. It includes approximately 2,500 of the smallest securities based on a combination of their market cap and current index membership.

For purposes of the graph and the accompanying table, it is assumed that all dividends and distributions were reinvested.

Per the Fund’s most recent prospectus, the Fund’s total annual operating expense ratio (before any fee waiver) is 1.50%, and 1.15% post waiver. The Advisor has contractually agreed to waive management fees and reimburse expenses to the extent necessary to maintain total annual operating expenses of the Fund (excluding brokerage fees and commissions, interest and other borrowing expenses, taxes, extraordinary expenses and the indirect costs of investing in Acquired Funds) at 1.15% of its average daily net assets through April 30, 2016.

2015 Annual Report 8

Paradigm Opportunity Fund (Unaudited)

PERFORMANCE INFORMATION

Average Annual Rate of Return (%) for The Periods Ended December 31, 2015.

December 31, 2015 NAV $31.14

	1 Year^(A)	3 Year^(A)	5 Year^(A)	10 Year^(A)
Paradigm Opportunity Fund	-4.76%	9.65%	6.78%	5.80%
Russell 2000® Index^(B)	-4.41%	11.65%	9.19%	6.80%

^(A)1 Year, 3 Year, 5 Year and 10 Year returns include change in share prices and in each case includes reinvestment of any dividends, capital gain distributions and return of capital. The inception date of the Paradigm Opportunity Fund was January 1, 2005.

^(B)The Russell 2000® Index (whose composition is different from the Fund) consists of the smallest 2,000 companies in the Russell 3000 Index (which represents approximately 98% of the investable U.S. equity market). The Index is an unmanaged index generally considered as the premier of small capitalization stocks.

For purposes of the graph and the accompanying table, it is assumed that all dividends and distributions were reinvested.

Per the Fund’s most recent prospectus, the Fund’s total annual operating expense ratio (before any fee waiver) is 2.01%, and 1.26% post waiver. The Advisor has contractually agreed to waive management fees and reimburse expenses to the extent necessary to maintain total annual operating expenses of the Fund (excluding brokerage fees and commissions, interest and other borrowing expenses, taxes, extraordinary expenses and the indirect costs of investing in Acquired Funds) at 1.25% of its average daily net assets through April 30, 2016.

2015 Annual Report 9

Paradigm Micro-Cap Fund (Unaudited)

PERFORMANCE INFORMATION

Average Annual Rate of Return (%) for The Period Ended December 31, 2015.

December 31, 2015 NAV $24.32
				Since
	1 Year^(A)	3 Year^(A)	5 Year^(A)	Inception^(A)
Paradigm Micro-Cap Fund	-10.05%	9.00%	7.35%	5.44%
Russell Microcap® Index^(B)	-5.16%	12.70%	9.23%	5.53%

^(A)1 Year, 3 Year, 5 Year and Since Inception returns include change in share prices and in each case includes reinvestment of any dividends and capital gain distributions. The inception date of the Paradigm Micro-Cap Fund was January 1, 2008. Effective December 27, 2011, the name of the Paradigm Intrinsic Value Fund was changed to the Paradigm Micro-Cap Fund.

^(B)The Russell Microcap® Index measures the performance of the microcap segment of the U.S. equity market. Microcap stocks make up less than 3% of the U.S. equity market (by market cap) and consist of the smallest 1,000 securities in the small-cap Russell 2000® Index, plus the next smallest eligible securities by market cap. The Russell Microcap is completely reconstituted annually to ensure larger stocks do not distort performance and characteristics of the true microcap opportunity set. Effective December 27, 2011 the Fund changed its investment strategy. Under normal circumstances, the Micro-Cap Fund invests at least 80% of its net assets in common stocks of U.S. micro-cap companies. Therefore, the primary comparative index was changed from the S&P 500® Index to the Russell Microcap® Index.

For purposes of the graph and the accompanying table, it is assumed that all dividends and distributions were reinvested.

Per the Fund’s most recent prospectus, the Fund’s total annual operating expense ratio is 1.25% .

2015 Annual Report 10

Paradigm Value Fund
			Schedule of Investments
			December 31, 2015
Shares		Fair Value		% of Net Assets

COMMON STOCKS
Air Courier Services
178,500	Air Transport Services Group, Inc. *	$	1,799,280	2.69	%
Aircraft Parts & Auxiliary Equipment, NEC
50,000	Ducommun Incorporated *		811,000	1.21	%
Computer Communications Equipment
400,000	Extreme Networks, Inc. *		1,632,000
72,000	QLogic Corp. *		878,400
			2,510,400	3.75	%
Construction - Special Trade Contractors
74,800	Matrix Service Co. *		1,536,392	2.30	%
Deep Sea Foreign Transportation of Freight
112,100	Ardmore Shipping Corporation (Ireland)		1,425,912	2.13	%
Electrical Work
39,000	EMCOR Group Inc.		1,873,560	2.80	%
Guided Missiles & Space Vehicles & Parts
50,000	Kratos Defense & Security Solutions, Inc. *		205,000	0.31	%
Heavy Construction Other Than Building Construction - Contractors
35,500	Granite Construction Incorporated		1,523,305	2.28	%
Household Furniture
20,000	La-Z-Boy Incorporated		488,400	0.73	%
Industrial Organic Chemicals
23,400	Sensient Technologies Corp.		1,469,988	2.20	%
Instruments for Measuring & Testing of Electricity & Electric Signals
100,000	Xcerra Corporation *		605,000	0.90	%
Laboratory Analytical Instruments
32,400	PerkinElmer Inc.		1,735,668	2.59	%
Laboratory Apparatus & Furniture
20,800	Newport Corporation *		330,096	0.49	%
Metal Forgings & Stampings
14,300	Park-Ohio Holdings Corp.		525,954	0.79	%
Miscellaneous Electrical Machinery, Equipment & Supplies
149,600	Electro Scientific Industries, Inc. *		776,424	1.16	%
Motor Vehicles & Passenger Car Bodies
40,000	Federal Signal Corporation		634,000	0.95	%
Motor Vehicle Parts & Accessories
67,600	Tower International, Inc.		1,931,332	2.89	%
National Commercial Banks
51,700	First Merchants Corporation		1,314,214
43,436	National Bank Holdings Corporation - Class A		928,228
			2,242,442	3.35	%
Orthopedic, Prosthetic & Surgical Appliances & Supplies
80,000	RTI Surgical, Inc. *		317,600	0.47	%
Periodicals: Publishing or Publishing & Printing
32,000	Rovi Corporation *		533,120	0.80	%
Photographic Equipment & Supplies
30,000	Avid Technology, Inc. *		218,700	0.33	%
Radio & TV Broadcasting & Communications Equipment
120,000	Mitel Networks Corporation * (Canada)		922,800	1.38	%
Retail - Apparel & Accessory Stores
30,000	Citi Trends, Inc.		637,500
99,500	Express Inc. *		1,719,360
30,700	The Men's Wearhouse, Inc.		450,676
35,800	Tilly’s, Inc. - Class A *		237,354
			3,044,890	4.55	%

* Non-Income Producing Securities.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 11

Paradigm Value Fund
			Schedule of Investments
			December 31, 2015
Shares			Fair Value	% of Net Assets

COMMON STOCKS
Retail - Family Clothing Stores
113,200	American Eagle Outfitters, Inc.	$	1,754,600
50,000	Stein Mart, Inc.		336,500
			2,091,100	3.12	%
Retail - Retail Stores, NEC
25,400	IAC/InterActiveCorp.		1,525,270
50,000	Kirkland's, Inc.		725,000
			2,250,270	3.36	%
Retail - Shoe Stores
30,300	Foot Locker, Inc.		1,972,227	2.95	%
Retail - Women's Clothing Stores
340,000	New York & Company, Inc. *		778,600	1.16	%
Savings Institution, Federally Chartered
44,800	LegacyTexas Financial Group, Inc.		1,120,896
166,242	United Financial Bancorp		2,141,197
			3,262,093	4.87	%
Semiconductors & Related Devices
48,100	Kulicke & Soffa Industries Inc. * (Singapore)		561,327
160,000	Lattice Semiconductor Corporation *		1,035,200
54,600	Microsemi Corporation *		1,779,414
28,900	Qorvo, Inc. *		1,471,010
60,000	Ultra Clean Holdings, Inc. *		307,200
			5,154,151	7.70	%
Services - Business Services, NEC
33,500	Rightside Group, Ltd. *		278,050	0.41	%
Services - Computer Integrated Systems Design
100,000	Allscripts Healthcare Solutions, Inc. *		1,538,000
70,000	Convergys Corp.		1,742,300
			3,280,300	4.90	%
Services - Computer Processing & Data Preparation
33,000	Demand Media, Inc. *		181,500	0.27	%
Services - Equipment Rental & Leasing, NEC
50,000	Neff Corporation - Class A *		383,000	0.57	%
Services - Help Supply Services
66,100	Kforce Inc.		1,671,008	2.50	%
Services - Hospitals
25,900	Magellan Health Services Inc. *		1,596,994
25,600	MEDNAX, Inc. *		1,834,496
			3,431,490	5.13	%
Services - Motion Picture Theaters
71,400	Regal Entertainment Group Class A		1,347,318	2.01	%
Special Industry Machinery, NEC
150,600	Brooks Automation, Inc.		1,608,408
200,000	Mattson Technology, Inc. *		706,000
			2,314,408	3.46	%
State Commercial Banks
32,000	Banner Corporation		1,467,520
36,000	Renasant Corporation		1,238,760
			2,706,280	4.04	%
Telegraph & Other Message Communications
23,900	j2 Global, Inc.		1,967,448	2.94	%
Telephone & Telegraph Apparatus
48,500	Polycom, Inc. *		610,615	0.91	%
Transportation Services
20,200	GATX Corp.		859,510	1.28	%
Total for Common Stocks (Cost $45,082,576)		$	62,000,631	92.63	%

* Non-Income Producing Securities.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 12

Paradigm Value Fund
			Schedule of Investments
			December 31, 2015
Shares			Fair Value		% of Net Assets

REAL ESTATE INVESTMENT TRUSTS
51,300	Blackstone Mortgage Trust, Inc. - Class A	$	1,372,788
182,929	Gramercy Property Trust Inc.		1,412,209
21,700	Mid-America Apartment Communities Inc.		1,970,577
12,000	PennyMac Mortgage Investment Trust		183,120
Total for Real Estate Investment Trusts (Cost $3,553,711)			4,938,694		7.38	%
MONEY MARKET FUNDS
314,294	SEI Daily Income Treasury Government CL A 0.02% **		314,294		0.47	%
	(Cost $314,294)
Total Investment Securities			67,253,619		100.48	%
	(Cost $48,950,581)
Liabilities in Excess of Other Assets			(322,450	)	-0.48	%
Net Assets		$	66,931,169		100.00	%

* Non-Income Producing Securities.
** Variable Rate Security; the rate shown was the rate at
December 31, 2015.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 13

Paradigm Select Fund
			Schedule of Investments
			December 31, 2015
Shares		Fair Value		% of Net Assets

COMMON STOCKS
Air Transportation, Nonscheduled
600	Air Methods Corporation *	$	25,158	0.47	%
Aircraft & Parts
1,850	Triumph Group, Inc.		73,538	1.36	%
Chemical & Allied Products
500	Innospec Inc.		27,155
1,450	Olin Corp.		25,027
			52,182	0.97	%
Computer Communications Equipment
7,700	Brocade Communications Systems, Inc.		70,686	1.31	%
Construction - Special Trade Contractors
4,900	Matrix Service Co. *		100,646	1.86	%
Electrical Work
1,375	EMCOR Group Inc.		66,055	1.22	%
Electromedical & Electrotherapeutic Apparatus
4,000	Masimo Corporation *		166,040	3.08	%
Electronic Computers
3,500	Cray Inc. *		113,575
1,700	Omnicell, Inc. *		52,836
			166,411	3.08	%
Fire, Marine & Casualty Insurance
150	Alleghany Corporation *		71,689
1,100	American Financial Group Inc.		79,288
1,750	Aspen Insurance Holdings Limited (Bermuda)		84,525
608	Endurance Specialty Holdings Ltd. (Bermuda)		38,906
			274,408	5.08	%
Footwear (No Rubber)
3,000	Caleres, Inc.		80,460	1.49	%
Household Furniture
2,200	La-Z-Boy Incorporated		53,724	1.00	%
Industrial Organic Chemicals
1,200	Sensient Technologies Corporation		75,384
1,100	Westlake Chemical Corp.		59,752
			135,136	2.50	%
Instruments For Measurement & Testing of Electricity & Electric Signals
5,000	Teradyne, Inc.		103,350	1.91	%
Laboratory Analytical Instruments
2,650	PerkinElmer Inc.		141,961	2.63	%
Miscellaneous Business Credit Institution
1,450	PHH Corporation *		23,490	0.44	%
Miscellaneous Manufacturing Industries
2,350	Hillenbrand, Inc.		69,630	1.29	%
Mortgage Bankers & Loan Correspondents
2,150	Walter Investment Management Corp. *		30,573	0.57	%
Motor Vehicle Parts & Accessories
600	Visteon Corporation *		68,700	1.27	%
Periodicals: Publishing or Publishing & Printing
8,750	Rovi Corporation *		145,775	2.70	%
Petroleum Refining
2,150	Delek US Holdings, Inc.		52,890
1,750	Western Refining, Inc.		62,335
			115,225	2.13	%
Plastics Products
800	AptarGroup Inc.		58,120	1.08	%

* Non-Income Producing Securities.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 14

Paradigm Select Fund
			Schedule of Investments
			December 31, 2015
Shares		Fair Value		% of Net Assets

COMMON STOCKS
Printed Circuit Boards
3,350	Jabil Circuit, Inc.	$	78,022
2,800	TTM Technologies, Inc. *		18,228
			96,250	1.78	%
Radio & TV Broadcasting & Communications Equipment
5,600	Mitel Networks Corporation * (Canada)		43,064	0.80	%
Retail - Apparel & Accessory Stores
4,600	Express Inc. *		79,488
1,750	The Men's Wearhouse, Inc.		25,690
			105,178	1.95	%
Retail - Family Clothing Stores
6,000	American Eagle Outfitters, Inc.		93,000	1.72	%
Retail - Radio, TV & Consumer Electronics Stores
2,800	Best Buy Co., Inc.		85,260	1.58	%
Retail - Retail Stores, NEC
1,550	IAC/InterActiveCorp.		93,077	1.72	%
Retail - Shoe Stores
2,000	Foot Locker, Inc.		130,180	2.41	%
Rolling Drawing & Extruding of Nonferrous Metals
12,991	Alcoa, Inc.		128,221	2.38	%
Rubber & Plastics Footwear
800	Deckers Outdoor Corporation *		37,760	0.70	%
Savings Institution, Federally Chartered
2,200	Capitol Federal Financial, Inc.		27,632	0.51	%
Search, Detection, Navigation, Guidance, Aeronautical Systems
1,200	Garmin Ltd. (Switzerland)		44,604	0.83	%
Semiconductors & Related Devices
3,350	Kulicke & Soffa Industries Inc. * (Singapore)		39,094
5,000	Marvell Technology Group Ltd. (Bermuda)		44,100
4,400	Microsemi Corporation *		143,396
2,100	Qorvo, Inc. *		106,890
1,550	Skyworks Solutions, Inc.		119,087
			452,567	8.39	%
Services - Auto Rental & Leasing
800	Ryder System, Inc.		45,464	0.84	%
Services - Computer Integrated Systems Design
6,600	Allscripts Healthcare Solutions, Inc. *		101,508
3,650	Convergys Corp.		90,849
6,800	Datalink Corporation *		46,240
			238,597	4.42	%
Services - Help Supply Services
3,550	Kelly Services, Inc. - Class A		57,332
3,800	Kforce Inc.		96,064
			153,396	2.84	%
Services - Hospitals
1,575	Magellan Health Services Inc. *		97,115
1,450	MEDNAX, Inc. *		103,907
			201,022	3.72	%
Services - Motion Picture Theaters
4,800	Regal Entertainment Group Class A		90,576	1.68	%
Services - Prepackaged Software
2,800	Imprivata, Inc. *		31,640
2,350	Progress Software Corporation *		56,400
			88,040	1.63	%

* Non-Income Producing Securities.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 15

Paradigm Select Fund
			Schedule of Investments
			December 31, 2015
Shares		Fair Value			% of Net Assets

COMMON STOCKS
Steel Pipe & Tubes
1,950	Allegheny Technologies Incorporated	$	21,937		0.41	%
Steel Works, Blast Furnaces & Rolling Mills (Coke Ovens)
600	Carpenter Technology Corporation		18,162
3,900	Commercial Metals Company		53,391
			71,553		1.33	%
Surgical & Medical Instruments & Apparatus
7,200	Globus Medical, Inc. - Class A *		200,304
900	NuVasive, Inc. *		48,699
			249,003		4.61	%
Telegraph & Other Message Communications
1,850	j2 Global, Inc.		152,292		2.82	%
Telephone & Telegraph Apparatus
2,800	Fabrinet * (Thailand)		66,696
7,750	Polycom, Inc. *		97,573
			164,269		3.04	%
Title Insurance
1,650	Fidelity National Financial, Inc.		57,205
600	Fidelity National Financial Ventures *		6,738
			63,943		1.18	%
Transportation Services
1,100	GATX Corporation		46,805		0.87	%
Wholesale - Computers & Peripheral Equipment & Software
800	SYNNEX Corporation		71,944		1.33	%
Wholesale - Electrical Apparatus & Equipment, Wiring Supplies
800	EnerSys		44,744		0.83	%
Wholesale - Lumber & Other Construction Materials
1,100	Boise Cascade Company *		28,083		0.52	%
Total for Common Stocks (Cost $3,720,456)		$	5,089,729		94.28	%
REAL ESTATE INVESTMENT TRUSTS
1,400	Mid-America Apartment Communities Inc.		127,134		2.35	%
Total for Real Estate Investment Trusts (Cost $73,803)
MONEY MARKET FUNDS
187,189	SEI Daily Income Treasury Government CL A 0.02% **		187,189		3.47	%
	(Cost $187,189)
Total Investment Securities			5,404,052		100.10	%
	(Cost $3,981,448)
Liabilities in Excess of Other Assets			(5,428	)	-0.10	%
Net Assets		$	5,398,624		100.00	%

* Non-Income Producing Securities.
** Variable Rate Security; the rate shown was the rate at
December 31, 2015.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 16

Paradigm Opportunity Fund
			Schedule of Investments
			December 31, 2015
Shares		Fair Value		% of Net Assets

COMMON STOCKS
Construction - Special Trade Contractors
8,600	Matrix Service Co. *	$	176,644	2.93	%
Electrical Work
2,825	EMCOR Group Inc.		135,713	2.25	%
Industrial Organic Chemicals
2,550	Sensient Technologies Corporation		160,191	2.66	%
Instruments For Measurement & Testing of Electricity & Electric Signals
7,075	Teradyne, Inc.		146,240	2.43	%
Laboratory Analytical Instruments
2,725	PerkinElmer Inc.		145,978	2.43	%
Miscellaneous Electrical Machinery, Equipment & Supplies
27,800	Electro Scientific Industries, Inc. *		144,282	2.40	%
Miscellaneous Manufacturing Industries
5,500	Hillenbrand, Inc.		162,965	2.71	%
Periodicals: Publishing or Publishing & Printing
15,800	Rovi Corporation *		263,228	4.37	%
Retail - Apparel & Accessory Stores
9,475	Express Inc. *		163,728
4,375	The Men's Wearhouse, Inc.		64,225
			227,953	3.79	%
Retail - Department Stores
1,400	Dillard's, Inc. - Class A		91,994	1.53	%
Retail - Family Clothing Stores
12,100	American Eagle Outfitters, Inc.		187,550	3.12	%
Retail - Retail Stores, NEC
3,250	IAC/InterActiveCorp.		195,163	3.24	%
Retail - Shoe Stores
1,200	DSW Inc. - Class A		28,632
4,325	Foot Locker, Inc.		281,514
			310,146	5.15	%
Rolling Drawing & Extruding of Nonferrous Metals
19,183	Alcoa, Inc.		189,336	3.15	%
Semiconductors & Related Devices
6,425	Kulicke & Soffa Industries Inc. * (Singapore)		74,980
8,300	Microsemi Corporation *		270,497
4,650	Qorvo, Inc. *		236,685
3,300	Skyworks Solutions, Inc.		253,539
			835,701	13.88	%
Services - Computer Integrated Systems Design
8,350	Convergys Corp.		207,832	3.45	%
Services - Help Supply Services
7,600	Kelly Services, Inc. - Class A		122,740	2.04	%
Services - Hospitals
3,150	Magellan Health Services Inc. *		194,229
1,975	MEDNAX, Inc. *		141,528
			335,757	5.58	%
Services - Motion Picture Theaters
11,475	Regal Entertainment Group Class A		216,533	3.60	%
Services - Prepackaged Software
6,700	Progress Software Corporation *		160,800	2.67	%
Special Industry Machinery (No Metalworking Machinery)
2,000	Kadant Inc.		81,220	1.35	%

* Non-Income Producing Securities.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 17

Paradigm Opportunity Fund
		Schedule of Investments
		December 31, 2015
Shares		Fair Value		% of Net Assets

COMMON STOCKS
Special Industry Machinery, NEC
17,625 Brooks Automation, Inc.	$	188,235		3.13	%
Surgical & Medical Instruments & Apparatus
10,125 AtriCure, Inc. *		227,205		3.77	%
Telegraph & Other Message Communications
3,775 j2 Global, Inc.		310,758		5.16	%
Telephone & Telegraph Apparatus
14,200 Polycom, Inc. *		178,778		2.97	%
Total for Common Stocks (Cost $3,616,405)	$	5,402,942		89.76	%
REAL ESTATE INVESTMENT TRUSTS
3,200 Mid-America Apartment Communities Inc.		290,592
Total for Real Estate Investment Trusts (Cost $138,916)		290,592		4.83	%
MONEY MARKET FUNDS
331,442 SEI Daily Income Treasury Government CL A 0.02% **		331,442		5.51	%
(Cost $331,442)
Total Investment Securities		6,024,976		100.09	%
(Cost $4,086,763)
Liabilities in Excess of Other Assets		(5,592	)	-0.09	%
Net Assets	$	6,019,384		100.00	%

* Non-Income Producing Securities.
** Variable Rate Security; the rate shown was the rate at
December 31, 2015.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 18

Paradigm Micro-Cap Fund
			Schedule of Investments
			December 31, 2015
Shares		Fair Value		% of Net Assets

COMMON STOCKS
Aircraft Parts & Auxiliary Equipment, NEC
80,000	Ducommun Incorporated *	$	1,297,600
120,000	LMI Aerospace, Inc. *		1,208,400
			2,506,000	5.91	%
Computer Communications Equipment
280,000	Extreme Networks, Inc. *		1,142,400	2.69	%
Construction - Special Trade Contractors
160,000	Furmanite Corporation *		1,065,600	2.51	%
Electronic Computers
60,000	Omnicell, Inc. *		1,864,800
80,000	Silicon Graphics International Corp. *		472,000
			2,336,800	5.51	%
Footwear (No Rubber)
70,000	Caleres, Inc.		1,877,400	4.43	%
Guided Missiles & Space Vehicles & Parts
260,000	Kratos Defense & Security Solutions, Inc. *		1,066,000	2.51	%
In Vitro & In Vivo Diagnostic Substances
50,000	Trinity Biotech plc **		588,000	1.39	%
Millwood, Veneer, Plywood, & Structural Wood Members
140,000	Ply Gem Holdings, Inc. *		1,755,600	4.14	%
Miscellaneous Manufacturing Industries
200,000	Summer Infant, Inc. *		446,000	1.05	%
Motor Vehicles & Passenger Car Bodies
60,000	Federal Signal Corporation		951,000	2.24	%
Orthopedic, Prosthetic & Surgical Appliances & Supplies
360,000	RTI Surgical, Inc. *		1,429,200	3.37	%
Paper Mills
30,000	KapStone Paper and Packaging Corporation		677,700	1.60	%
Pharmaceutical Preparations
90,000	Nature's Sunshine Products		910,800	2.15	%
Photographic Equipment & Supplies
120,000	Avid Technology, Inc. *		874,800	2.06	%
Printed Circuit Boards
180,000	TTM Technologies, Inc. *		1,171,800	2.76	%
Radio & TV Broadcasting & Communications Equipment
140,000	Mitel Networks Corporation * (Canada)		1,076,600	2.54	%
Retail - Apparel & Accessory Stores
60,000	Citi Trends, Inc.		1,275,000
90,000	Francesca’s Holdings Corporation *		1,566,900
27,400	Gordmans Stores, Inc. *		86,310
85,800	Tilly’s, Inc. - Class A *		568,854
			3,497,064	8.25	%
Retail - Catalog & Mail-Order Houses
50,000	PC Connection, Inc.		1,132,000	2.67	%
Retail - Family Clothing Stores
60,000	Stage Stores, Inc.		546,600
100,000	Stein Mart, Inc.		673,000
			1,219,600	2.88	%
Retail - Retail Stores, NEC
80,000	Kirkland's, Inc.		1,160,000	2.74	%
Retail - Women's Clothing Stores
400,000	New York & Company, Inc. *		916,000	2.16	%

* Non-Income Producing Securities.
The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 19

Paradigm Micro-Cap Fund
			Schedule of Investments
			December 31, 2015
Shares		Fair Value		% of Net Assets

COMMON STOCKS
Semiconductors & Related Devices
300,000	Lattice Semiconductors Corporation *	$	1,941,000
100,000	MaxLinear, Inc. - Class A *		1,473,000
			3,414,000	8.05	%
Services - Computer Integrated Systems Design
80,000	Allscripts Healthcare Solutions, Inc. *		1,230,400
160,000	Datalink Corporation *		1,088,000
			2,318,400	5.47	%
Services - Computer Processing & Data Preparation
50,200	Brightcove Inc. *		311,240	0.73	%
Services - Equipment Rental & Leasing, NEC
100,000	Neff Corporation - Class A *		766,000	1.81	%
Services - Prepackaged Software
120,000	Imprivata, Inc. *		1,356,000	3.20	%
Special Industry Machinery (No Metalworking Machinery)
15,000	Kadant Inc.		609,150	1.44	%
Special Industry Machinery, NEC
340,000	Mattson Technology, Inc. *		1,200,200	2.83	%
Steel Works, Blast Furnaces & Rolling & Finishing Materials
40,000	Insteel Industries, Inc.		836,800	1.98	%
Surgical & Medical Instruments & Apparatus
50,000	Globus Medical, Inc. - Class A *		1,391,000	3.28	%
Telephone & Telegraph Apparatus
120,000	Shoretel, Inc. *		1,062,000	2.51	%
Total for Common Stocks (Cost $41,957,393)		$	41,065,154	96.86	%
CONTINGENT VALUE RIGHTS
50,000	Synergetics USA, Inc. * +		-	0.00	%
	(Cost $0)
MONEY MARKET FUNDS
652,748	SEI Daily Income Treasury Government CL A 0.02% ***		652,748	1.54	%
	(Cost $652,748)
Total Investment Securities			41,717,902	98.40	%
	(Cost $42,610,141)
Other Assets in Excess of Liabilities			676,993	1.60	%

Net Assets		$	42,394,895	100.00	%

* Non-Income Producing Securities.
** Variable Rate Security; the rate shown was the rate at December 31, 2015.
+ Under the terms of the Contingent Value Rights (“CVR”), the holder has the right to
receive cash payments of between $0.50 and $1.00 if Synergetic’s ophthalmology busi-
ness achieves certain revenue performance milestones.

The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 20

Paradigm Funds

Statements of Assets and Liabilities		Value			Select
December 31, 2015		Fund			Fund

Assets:
Investment Securities at Fair Value*	$	67,253,619		$	5,404,052
Receivable for Fund Shares Sold		366			-
Dividends Receivable		60,939			848
Interest Receivable		54			4
Total Assets		67,314,978			5,404,904
Liabilities:
Payable for Fund Shares Redeemed		236,518			1,000
Payable for Securities Purchased		58,267			-
Payable to Advisor		89,024			5,280
Total Liabilities		383,809			6,280
Net Assets	$	66,931,169		$	5,398,624
Net Assets Consist of:
Paid In Capital	$	48,649,527		$	4,010,209
Accumulated Undistributed Net Investment Income		3,078			3,421
Accumulated Undistributed Realized Loss on Investments - Net		(24,474	)		(37,610	)
Unrealized Appreciation in Value of Investment Securities - Net		18,303,038			1,422,604
Net Assets	$	66,931,169		$	5,398,624

Net Asset Value, Offering and Redemption Price (Note 2)	$	43.02		$	29.09

* Investments at Identified Cost	$	48,950,581		$	3,981,448

Shares Outstanding (Unlimited number of shares		1,555,990			185,567
authorized without par value)

Statements of Operations
For the fiscal year ended December 31, 2015

Investment Income:
Dividends (Net of foreign withholding taxes of $0 and $0, respectively)	$	1,142,375		$	81,617
Interest		339			35
Total Investment Income		1,142,714			81,652
Expenses:
Investment Advisor Fees		1,571,864			90,323
Total Expenses		1,571,864			90,323
Less: Expenses Waived		(392,966	)		(21,075	)
Net Expenses		1,178,898			69,248


Net Investment Income (Loss)		(36,184	)		12,404

Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain on Investments		10,102,364			455,515
Net Change in Unrealized Appreciation on Investments		(8,943,339	)		(502,967	)
Net Realized and Unrealized Gain (Loss) on Investments		1,159,025			(47,452	)

Net Increase (Decrease) in Net Assets from Operations	$	1,122,841		$	(35,048	)

The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 21

Paradigm Funds

Statements of Assets and Liabilities		Opportunity			Micro-Cap
December 31, 2015		Fund			Fund

Assets:
Investment Securities at Fair Value*	$	6,024,976		$	41,717,902
Cash		-			189,581
Receivable for Fund Shares Sold		-			594,151
Dividends Receivable		766			75,400
Interest Receivable		6			27
Total Assets		6,025,748			42,577,061
Liabilities:
Payable for Fund Shares Redeemed		-			49
Payable for Securities Purchased		-			137,909
Payable to Advisor		6,364			44,208
Total Liabilities		6,364			182,166
Net Assets	$	6,019,384		$	42,394,895
Net Assets Consist of:
Paid In Capital	$	4,322,666		$	43,473,865
Accumulated Realized Loss on Investments - Net		(241,495	)		(186,731	)
Unrealized Appreciation (Depreciation) in Value of Investment Securities - Net		1,938,213			(892,239	)
Net Assets	$	6,019,384		$	42,394,895

Net Asset Value, Offering and Redemption Price (Note 2)	$	31.14		$	24.32

* Investments at Identified Cost	$	4,086,763		$	42,610,141

Shares Outstanding (Unlimited number of shares		193,314			1,743,038
authorized without par value)

Statements of Operations
For the fiscal year ended December 31, 2015

Investment Income:
Dividends (Net of foreign withholding taxes of $0 and $0, respectively)	$	71,312		$	299,130
Interest		62			320
Total Investment Income		71,374			299,450
Expenses:
Investment Advisor Fees		134,081			448,155
Total Expenses		134,081			448,155
Less: Expenses Waived		(50,280	)		-
Net Expenses		83,801			448,155


Net Investment Loss		(12,427	)		(148,705	)

Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain (Loss) on Investments		(201,820	)		395,501
Net Change in Unrealized Appreciation (Depreciation) on Investments		(86,400	)		(5,063,818	)
Net Realized and Unrealized Loss on Investments		(288,220	)		(4,668,317	)

Net Decrease in Net Assets from Operations	$	(300,647	)	$	(4,817,022	)

The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 22

Paradigm Funds

Statements of Changes in Net Assets	Value Fund						Select Fund


		1/1/2015			1/1/2014			1/1/2015			1/1/2014
		to			to			to			to
		12/31/2015			12/31/2014			12/31/2015			12/31/2014
From Operations:
Net Investment Income (Loss)	$	(36,184	)	$	(107,161	)	$	12,404		$	137
Net Realized Gain on Investments		10,102,364			18,526,403			455,515			1,307,264
Change in Net Unrealized Appreciation		(8,943,339	)		(15,116,940	)		(502,967	)		(774,706	)
Increase (Decrease) in Net Assets from Operations		1,122,841			3,302,302			(35,048	)		532,695
From Distributions to Shareholders:
Net Investment Income		-			-			(9,124	)		-
Net Realized Gain from Security Transactions		(8,355,645	)		(16,140,005	)		(456,985	)		(1,288,457	)
Total Distributions to Shareholders		(8,355,645	)		(16,140,005	)		(466,109	)		(1,288,457	)
From Capital Share Transactions:
Proceeds From Sale of Shares		3,224,508			5,191,517			485,080			263,258
Proceeds from Redemption Fees (Note 2)		2,584			2,317			500			-
Shares Issued on Reinvestment of Dividends		8,044,376			15,495,221			446,727			1,239,535
Cost of Shares Redeemed		(33,269,143	)		(44,803,134	)		(1,569,443	)		(2,391,358	)
Net Decrease from Shareholder Activity		(21,997,675	)		(24,114,079	)		(637,136	)		(888,565	)
Net Decrease in Net Assets		(29,230,479	)		(36,951,782	)		(1,138,293	)		(1,644,327	)

Net Assets at Beginning of Period		96,161,648			133,113,430			6,536,917			8,181,244

Net Assets at End of Period	$	66,931,169		$	96,161,648		$	5,398,624		$	6,536,917

Accumulated Undistributed Net Investment Income	$	3,078		$	-		$	3,421		$	137


Share Transactions:
Issued		65,850			89,913			14,617			6,963
Reinvested		184,886			318,308			15,195			38,175
Redeemed		(684,272	)		(780,306	)		(47,255	)		(62,920	)
Net Decrease in Shares		(433,536	)		(372,085	)		(17,443	)		(17,782	)
Shares Outstanding Beginning of Period		1,989,526			2,361,611			203,010			220,792
Shares Outstanding End of Period		1,555,990			1,989,526			185,567			203,010

The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 23

Paradigm Funds

Statements of Changes in Net Assets		Opportunity Fund					Micro-Cap Fund


		1/1/2015			1/1/2014			1/1/2015			1/1/2014
		to			to			to			to
		12/31/2015			12/31/2014			12/31/2015			12/31/2014
From Operations:
Net Investment Loss	$	(12,427	)	$	(9,308	)	$	(148,705	)	$	(139,881	)
Net Realized Gain (Loss) on Investments		(201,820	)		351,681			395,501			3,112,369
Change in Net Unrealized Appreciation (Depreciation)		(86,400	)		269,876			(5,063,818	)		(2,502,304	)
Increase (Decrease) in Net Assets from Operations		(300,647	)		612,249			(4,817,022	)		470,184
From Distributions to Shareholders:
Net Investment Income		-			-			-			-
Net Realized Gain from Security Transactions		(872	)		(344,703	)		(543,398	)		(2,982,290	)
Total Distributions to Shareholders		(872	)		(344,703	)		(543,398	)		(2,982,290	)
From Capital Share Transactions:
Proceeds From Sale of Shares		394,205			180,230			23,904,401			584,411
Proceeds from Redemption Fees (Note 2)		556			17			-			-
Shares Issued on Reinvestment of Dividends		870			344,703			543,357			2,981,619
Cost of Shares Redeemed		(768,997	)		(134,699	)		(2,792,347	)		(2,163,948	)
Net Increase (Decrease) from Shareholder Activity		(373,366	)		390,251			21,655,411			1,402,082
Net Increase (Decrease) in Net Assets		(674,885	)		657,797			16,294,991			(1,110,024	)

Net Assets at Beginning of Period		6,694,269			6,036,472			26,099,904			27,209,928

Net Assets at End of Period	$	6,019,384		$	6,694,269		$	42,394,895		$	26,099,904

Accumulated Undistributed Net Investment Income	$	-		$	-		$	-		$	-


Share Transactions:
Issued		11,226			5,362			881,559			20,394
Reinvested		28			10,468			22,115			108,344
Redeemed		(22,648	)		(4,276	)		(113,529	)		(72,446	)
Net Increase (Decrease) in Shares		(11,394	)		11,554			790,145			56,292
Shares Outstanding Beginning of Period		204,708			193,154			952,893			896,601
Shares Outstanding End of Period		193,314			204,708			1,743,038			952,893

The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 24

Paradigm Value Fund

Financial Highlights - Paradigm Value Fund

Selected data for a share outstanding		1/1/2015				1/1/2014				1/1/2013			1/1/2012				1/1/2011
throughout the period:		to				to				to			to				to
		12/31/2015				12/31/2014				12/31/2013			12/31/2012				12/31/2011
Net Asset Value - Beginning of Period	$	48.33			$	56.37			$	56.47		$	52.54			$	55.09
Net Investment Income (Loss) (a)		(0.02	)			(0.05	)			(0.19	)		0.15				(0.15	)
Net Gain (Loss) on Securities (Realized and Unrealized)		0.74				1.50				12.45			4.01				(1.64	)
Total from Investment Operations		0.72				1.45				12.26			4.16				(1.79	)
Distributions (From Net Investment Income)		-				-				-			(0.16	)			-
Distributions (From Capital Gains)		(6.03	)			(9.49	)			(12.37	)		-				(0.78	)
Distributions (From Return of Capital)		-				-				-			(0.07	)			-
Total Distributions		(6.03	)			(9.49	)			(12.37	)		(0.23	)			(0.78	)
Proceeds from Redemption Fee (Note 2)		-		+		-		+		0.01			-		+		0.02
Net Asset Value - End of Period	$	43.02			$	48.33			$	56.37		$	56.47			$	52.54
Total Return (b)		1.35	%			2.44	%			21.82	%		7.93	%			(3.22	)%

Ratios/Supplemental Data
Net Assets - End of Period (Thousands)	$	66,931			$	96,162			$	133,113		$	244,606			$	234,849
Before Reimbursement
Ratio of Expenses to Average Net Assets		2.00	%			1.97	%			1.91	%		1.84	%			1.83	%
After Reimbursement
Ratio of Expenses to Average Net Assets ++		1.50	%			1.50	%			1.50	%		1.50	%			1.50	%
Ratio of Net Investment Income (Loss) to Average
Net Assets ++		(0.05	)%			(0.09	)%			(0.31	)%		0.26	%			(0.26	)%
Portfolio Turnover Rate		14.35	%			31.47	%			48.01	%		62.22	%			83.95	%

Paradigm Select Fund

Financial Highlights - Paradigm Select Fund

Selected data for a share outstanding throughout the period:		1/1/2015				1/1/2014				1/1/2013				1/1/2012				1/1/2011
		to				to				to				to				to
		12/31/2015				12/31/2014				12/31/2013				12/31/2012				12/31/2011
Net Asset Value - Beginning of Period	$	32.20			$	37.05			$	32.50			$	30.24			$	29.71
Net Investment Income (a)		0.07				-		+		0.06				0.24				0.06
Net Gain (Loss) on Securities (Realized and Unrealized)		(0.45	)			2.98				9.29				2.49				0.52
Total from Investment Operations		(0.38	)			2.98				9.35				2.73				0.58
Distributions (From Net Investment Income)		(0.05	)			-				(0.05	)			(0.28	)			(0.05	)
Distributions (From Capital Gains)		(2.68	)			(7.83	)			(4.75	)			(0.19	)			-
Total Distributions		(2.73	)			(7.83	)			(4.80	)			(0.47	)			(0.05	)
Proceeds from Redemption Fee (Note 2)		-		+		-				-		+		-		+		-		+

Net Asset Value - End of Period	$	29.09			$	32.20			$	37.05			$	32.50			$	30.24
Total Return (b)		(1.26	)%			7.86	%			28.83	%			9.07	%			1.97	%
Ratios/Supplemental Data
Net Assets - End of Period (Thousands)	$	5,399			$	6,537			$	8,181			$	9,462			$	7,930
Before Reimbursement
Ratio of Expenses to Average Net Assets		1.50	%			1.50	%			1.50	%			1.50	%			1.50	%
After Reimbursement
Ratio of Expenses to Average Net Assets ++		1.15	%			1.15	%			1.15	%			1.15	%			1.20	%
Ratio of Net Investment Income to Average
Net Assets ++		0.21	%			0.00	%	+		0.16	%			0.73	%			0.21	%
Portfolio Turnover Rate		19.57	%			36.25	%			46.80	%			86.71	%			58.40	%

(a) Per share amount calculated using the average shares method.
(b) Total return in the above table represents the rate that the investor would have earned or lost on an investment in the Fund
assuming reinvestment of dividends. Returns do not reflect the deduction of taxes a shareholder would pay on Fund
distributions or redemption of Fund shares.
+ Amount calculated is less than $0.005/0.005% .
++ Such percentages reflect an expense waiver by the Advisor (for Value since 2010 and for Select since 2011). See Note 4.

The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 25

Paradigm Opportunity Fund

Financial Highlights - Paradigm Opportunity Fund

Selected data for a share outstanding throughout the period:		1/1/2015				1/1/2014				1/1/2013			1/1/2012				1/1/2011
		to				to				to			to				to
		12/31/2015				12/31/2014				12/31/2013			12/31/2012				12/31/2011
Net Asset Value - Beginning of Period	$	32.70			$	31.25			$	26.44		$	25.04			$	25.59
Net Investment Loss (a)		(0.06	)			(0.05	)			(0.08	)		(0.03	)			(0.20	)
Net Gain (Loss) on Securities (Realized and Unrealized)		(1.50	)			3.27				6.82			1.71				(0.14	)
Total from Investment Operations		(1.56	)			3.22				6.74			1.68				(0.34	)
Distributions (From Net Investment Income)		-				-				-			-				-
Distributions (From Capital Gains)		-		+		(1.77	)			(1.93	)		(0.28	)			(0.21	)
Distributions (From Return of Capital)		-				-				-			-		+		-
Total Distributions		-				(1.77	)			(1.93	)		(0.28	)			(0.21	)
Proceeds from Redemption Fee (Note 2)		-		+		-		+		-			-				-
Net Asset Value - End of Period	$	31.14			$	32.70			$	31.25		$	26.44			$	25.04
Total Return (b)		(4.76	)%			10.28	%			25.54	%		6.72	%			(1.34	)%

Ratios/Supplemental Data
Net Assets - End of Period (Thousands)	$	6,019			$	6,694			$	6,036		$	4,807			$	4,491
Before Reimbursement
Ratio of Expenses to Average Net Assets		2.00	%			2.00	%			2.00	%		2.00	%			2.00	%
After Reimbursement
Ratio of Expenses to Average Net Assets (c)		1.25	%			1.25	%			1.25	%		1.33	%			1.50	%
Ratio of Net Investment Loss to Average
Net Assets (c)		(0.19	)%			(0.15	)%			(0.28	)%		(0.10	)%			(0.76	)%
Portfolio Turnover Rate		16.21	%			7.59	%			44.00	%		61.11	%			65.44	%

Paradigm Micro-Cap Fund

Financial Highlights - Paradigm Micro-Cap Fund

Selected data for a share outstanding throughout the period:		1/1/2015			1/1/2014			1/1/2013			1/1/2012				1/1/2011
		to			to			to			to				to
		12/31/2015			12/31/2014			12/31/2013			12/31/2012				12/31/2011
Net Asset Value - Beginning of Period	$	27.39		$	30.35		$	23.24		$	21.01			$	21.20
Net Investment Income (Loss) (a)		(0.11	)		(0.17	)		(0.06	)		0.09				(0.04	)
Net Gain (Loss) on Securities (Realized and Unrealized)		(2.64	)		0.74			9.69			2.23				(0.15	)
Total from Investment Operations		(2.75	)		0.57			9.63			2.32				(0.19	)
Distributions (From Net Investment Income)		-			-			-			(0.09	)			-
Distributions (From Capital Gains)		(0.32	)		(3.53	)		(2.52	)		-				-
Total Distributions		(0.32	)		(3.53	)		(2.52	)		(0.09	)			-
Proceeds from Redemption Fee (Note 2)		-			-			-			-		+		-
Net Asset Value - End of Period	$	24.32		$	27.39		$	30.35		$	23.24			$	21.01
Total Return (b)		(10.05	)%		1.81	%		41.41	%		11.06	%			(0.90	)%

Ratios/Supplemental Data
Net Assets - End of Period (Thousands)	$	42,395		$	26,100		$	27,210		$	17,598			$	7,026
Ratio of Expenses to Average Net Assets		1.25	%		1.25	%		1.25	%		1.25	%			1.25	%
Ratio of Net Investment Income (Loss) to Average
Net Assets		(0.41	)%		(0.58	)%		(0.21	)%		0.38	%			(0.20	)%
Portfolio Turnover Rate		70.95	%		101.19	%		70.07	%		60.47	%			126.43	%	++

(a) Per share amount calculated using the average shares method.
(b) Total return in the above table represents the rate that the investor would have earned or lost on an investment in the Fund
assuming reinvestment of dividends. Returns do not reflect the deduction of taxes a shareholder would pay on Fund
distributions or redemption of Fund shares.
(c) Such percentages reflect an expense waiver by the Advisor. See Note 4.
+ Amount calculated is less than $0.005.
++ The Fund's portfolio turnover rate increased due to the change in the Fund's principal investment strategy to invest
(under normal circumstances) at least 80% of its net assets in the common stocks of U.S. micro-cap companies effective
December 27, 2011.

The accompanying notes are an integral part of these
financial statements.

2015 Annual Report 26

NOTES TO FINANCIAL STATEMENTS
PARADIGM FUNDS
December 31, 2015

1.) ORGANIZATION
Paradigm Funds (the “Trust”) is an open-end management investment company that was organized in Ohio as a business trust on September 13, 2002 that may offer shares of beneficial interest in a number of separate series, each series representing a distinct fund with its own investment objectives and policies. The Paradigm Value Fund (“Value”) commenced operations on January 1, 2003. The Paradigm Value Fund’s investment objective is long-term capital appreciation. The Paradigm Select Fund (“Select”) and Paradigm Opportunity Fund (“Opportunity”) both commenced operations on January 1, 2005 with long-term capital appreciation as their objective. The Paradigm Micro-Cap Fund (“Micro-Cap”) commenced operations on January 1, 2008. The Paradigm Micro-Cap Fund’s investment objective is long-term capital appreciation. Under normal circumstances, the Micro-Cap Fund invests at least 80% of its net assets in the common stocks of U.S. micro-cap companies. Prior to December 27, 2011, the principal investment strategy of the Fund was to invest primarily in the common stocks of small, mid or large capitalization companies that the Advisor believed had the potential for capital appreciation. Value, Select, Opportunity and Micro-Cap are all diversified funds. The advisor to Value, Select, Opportunity and Micro-Cap (each a “Fund” and collectively the “Funds”) is Paradigm Funds Advisor LLC (the “Advisor”).

2.) SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION: The Funds are investment companies and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services - Investment Companies. All investments in securities are recorded at their estimated fair value, as described in Note 3.

SECURITY TRANSACTIONS AND OTHER: Security transactions are recorded based on a trade date for financial statement reporting purposes. Dividend income is recognized on the ex-dividend date. Interest income is recognized on an accrual basis. The Funds use the highest cost basis in computing gain or loss on sale of investment securities. Discounts and premiums on fixed income securities purchased are amortized over the lives of the respective securities. Withholding taxes on foreign dividends have been provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates. The Funds may invest in real estate investment trusts (“REITs”) that pay distributions to their shareholders based on available funds from operations. It is common for these distributions to exceed the REITs taxable earnings and profits resulting in the excess portion of such distribution to be designated as return of capital. Distributions received from REITs are generally recorded as dividend income and, if necessary, are reclassified annually in accordance with tax information provided by the underlying REITs.

The Funds may hold investments in master limited partnerships (“MLPs”). It is common for distributions from MLPs to exceed taxable earnings and profits resulting in the excess portion of such dividend to be designated as return of capital. Annually, income or loss from MLPs is reclassified upon receipt of the MLPs K-1. For financial reporting purpose management does not estimate the tax character of MLP distributions for which actual information has not been reported.

SHARE VALUATION: The net asset value (the “NAV”) is calculated as of the close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) every day the Exchange is open. The NAV for each Fund is calculated by taking the total value of the Fund’s assets, subtracting its liabilities, and then dividing by the total number of shares outstanding, rounded to the nearest cent. The offering price and redemption price per share is equal to the net asset value per share, except that shares of each Fund are subject to a redemption fee of 2% if redeemed within 90 days of purchase. During the fiscal year ended December 31, 2015 proceeds from redemption fees were $2,584, $500, $556 and $0 for Value, Select, Opportunity and Micro-Cap, respectively.

SHORT SALES: A Fund may sell a security it does not own in anticipation of a decline in the fair value of the security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. A gain, limited to the price at which a Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale.

INCOME TAXES: The Funds’ policy is to continue to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all of their taxable income to shareholders. Therefore, no federal income tax provision is required. It is the Funds’ policy to distribute annually, prior to the end of the calendar year, dividends sufficient to satisfy excise tax requirements of the Internal Revenue Code. This Internal Revenue Code requirement may cause an excess of distributions over

2015 Annual Report 27

Notes to Financial Statements - continued

the book year-end accumulated income. In addition, it is the Funds’ policy to distribute annually, after the end of the fiscal year, any remaining net investment income and net realized capital gains.

The Funds recognize the tax benefits of certain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Funds’ tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2012-2014), or expected to be taken on the Funds’ 2015 tax return. The Funds identify their major tax jurisdictions as U.S. Federal and New York State tax authorities; the Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statements of Operations. During the fiscal year ended December 31, 2015, the Funds did not incur any interest or penalties.

ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. The Funds may utilize earnings and profits distributed to shareholders on redemptions of shares as part of the dividends paid deduction. The treatment for financial reporting purposes of distributions made to shareholders during the year from net investment income or net realized capital gains may differ from their ultimate treatment for federal income tax purposes. These differences are caused primarily by differences in the timing of recognition of certain components of income, expense or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassification will have no effect on net assets, results of operations or net asset values per share of any Fund. At December 31, 2015, the following permanent adjustments were recorded. Such adjustments were attributed to the reclassification of net investment loss, distribution adjustments and the usage of equalization for tax purposes.

Value
Paid In Capital	$1,106,713
Accumulated Undistributed Net Investment Income	$39,262
Accumulated Realized Loss on Investments - Net	($1,145,975	)

Opportunity
Paid In Capital	($12,427	)
Accumulated Undistributed Net Investment Income	$12,427

Micro-Cap
Paid In Capital	($112,723	)
Accumulated Undistributed Net Investment Income	$148,705
Accumulated Realized Loss on Investments - Net	($35,982	)

3.) SECURITIES VALUATIONS

The Funds utilize various methods to measure the fair value of their investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

Level 3 - Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Funds’ best information about the assumptions a market participant would use in valuing the assets or liabilities.

The availability of inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is

2015 Annual Report 28

Notes to Financial Statements - continued

based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

FAIR VALUE MEASUREMENTS
A description of the valuation techniques applied to the Funds’ major categories of assets measured at fair value on a recurring basis follows.

Equity securities (common stocks, real estate investment trusts and contingent value rights).Equity securities that are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a long security is valued at its last bid price except when, in the Advisor’s opinion, the last bid price does not accurately reflect the current value of the long security. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in level 1 of the fair value hierarchy. When market quotations are not readily available, when the Advisor determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board of Trustees (the “Trustees” or the “Board”) and are categorized in level 2 or level 3, when appropriate.

Money market funds. Money market funds are valued at net asset value and are classified in level 1 of the fair value hierarchy.

Fixed income securities. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices accurately reflect the fair value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Advisor, subject to review of the Trustees. Short-term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation. Generally, fixed income securities are categorized as level 2.

In accordance with the Trust’s good faith pricing guidelines, the Advisor is required to consider all appropriate factors relevant to the value of securities for which it has determined other pricing sources are not available or reliable as described above. There is no single standard for determining fair value, since fair value depends upon the circumstances of each individual case. As a general principle, the current fair value of an issue of securities being valued by the Advisor would appear to be the amount which the owner might reasonably expect to receive for them upon their current sale. Methods which are in accordance with this principle may, for example, be based on (i) a multiple of earnings; (ii) a discount from market of a similar freely traded security (including a derivative security or a basket of securities traded on other markets, exchanges or among dealers); or (iii) yield to maturity with respect to debt issues, or a combination of these and other methods.

The following tables summarize the inputs used to value the Funds’ assets measured at fair value as of December 31, 2015:

Value:
Valuation Inputs of Assets	Level 1	Level 2	Level 3	Total
Common Stocks	$62,000,631	$ -	$ -	$62,000,631
Real Estate Investment Trusts	4,938,694	-	-	4,938,694
Money Market Funds	314,294	-	-	314,294
Total	$67,253,619	$ -	$ -	$67,253,619

Select:
Valuation Inputs of Assets	Level 1	Level 2	Level 3	Total
Common Stocks	$5,089,729	$ -	$ -	$5,089,729
Real Estate Investment Trusts	127,134	-	-	127,134
Money Market Funds	187,189	-	-	187,189
Total	$5,404,052	$ -	$ -	$5,404,052

2015 Annual Report 29

Notes to Financial Statements - continued

Opportunity:
Valuation Inputs of Assets	Level 1	Level 2	Level 3	Total
Common Stocks	$5,402,942	$ -	$ -	$5,402,942
Real Estate Investment Trusts	290,592	-	-	290,592
Money Market Funds	331,442	-	-	331,442
Total	$6,024,976	$ -	$ -	$6,024,976

Micro-Cap:
Valuation Inputs of Assets	Level 1	Level 2	Level 3	Total
Common Stocks	$41,065,154	$ -	$ -	$41,065,154
Contingent Value Rights	-	-	-	-
Money Market Funds	652,748	-	-	652,748
Total	$41,717,902	$ -	$ -	$41,717,902

Refer to each Fund’s Schedule of Investments for a listing of securities by industry. The Funds did not hold any level 3 assets during the fiscal year ended December 31, 2015. There were no transfers into or out of the levels during the fiscal year ended December 31, 2015. It is the Funds’ policy to consider transfers into or out of the levels as of the end of the reporting period.

The Funds did not invest in derivative instruments during the fiscal year ended December 31, 2015.

4.) INVESTMENT ADVISORY AGREEMENTS
The Trust, with respect to each of the Funds, has an investment advisory agreement (collectively the “Management Agreements”) with the Advisor. Under the terms of the Management Agreements, the Advisor manages the investment portfolios of the Funds, subject to policies adopted by the Trustees. Under the Management Agreements, the Advisor, at its own expense and without reimbursement from the Trust, furnishes office space and all necessary office facilities, equipment and executive personnel necessary for managing the assets of the Funds. The Advisor pays all operating expenses of the Funds with the exception of taxes, brokerage fees and commissions, borrowing costs (such as interest and dividend expenses on securities sold short) and such extraordinary or non-recurring expenses as may arise, including litigation to which the Fund may be a party and indemnification of the Trust’s Trustees and officers with respect thereto. The Funds will also pay expenses that they are authorized to pay pursuant to Rule 12b-1 under the Investment Company Act of 1940 (none are currently authorized). The Advisor also pays the salaries and fees of all of its officers and employees that serve as officers and trustees of the Trust. For its services and payment of certain Fund expenses as described below, the Advisor receives an annual investment management fee of 1.50% of the average daily net assets from Select; 2.00% of the average daily net assets from Opportunity; and 1.25% of the average daily net assets from Micro-Cap. Value pays the Advisor an annual investment management fee of 2.00% of the average daily net assets on assets up to and including $100 million and 1.75% of the average daily net assets over $100 million. As a result of the above calculations, for the fiscal year ended December 31, 2015, the Advisor earned management fees (before the waivers described below) totaling $1,571,864, $90,323, $134,081 and $448,155 for Value, Select, Opportunity, and Micro-Cap, respectively. At December 31, 2015, $89,024, $5,280, $6,364 and $44,208 was due to the Advisor from Value, Select, Opportunity and Micro-Cap, respectively. The Advisor has contractually agreed to waive management fees and/or reimburse Value, Select and Opportunity to the extent necessary to maintain total annual operating expenses of the Funds (excluding brokerage fees and commissions, interest and other borrowing expenses, taxes, extraordinary expenses and indirect costs of investing in acquired funds) at 1.50%, 1.15% and 1.25%, respectively, of daily net assets through April 30, 2016. The Advisor waived $392,966, $21,075 and $50,280 for the fiscal year ended December 31, 2015 for Value, Select and Opportunity, respectively. There is no recapture provision to these waivers.

5.) RELATED PARTY TRANSACTIONS
Certain officers and shareholders of the Advisor are also officers and/or a Trustee of the Trust. These individuals may receive benefits from the Advisor resulting from management fees paid to the Advisor from the Funds.

The Trustees who are not interested persons of the Funds were each paid $8,000, for a total of $24,000, in Trustees fees for the fiscal year ended December 31, 2015 for the Trust. Under the Management Agreements, the Advisor pays these fees.

6.) INVESTMENTS
For the fiscal year ended December 31, 2015, purchases and sales of investment securities other than U.S. Government obligations and short-term investments were as follows:

2015 Annual Report 30

Notes to Financial Statements - continued

	Value	Select	Opportunity	Micro-Cap
Purchases	$11,046,113	$1,144,649	$1,025,780	$44,330,629
Sales	$41,277,342	$2,246,576	$1,178,549	$24,375,695

There were no purchases or sales of U.S. Government obligations.

7.) CAPITAL SHARES
At December 31, 2015, the Trust was authorized to issue an unlimited number of shares of beneficial interest. The following are the shares issued and paid in capital outstanding for the Funds at December 31, 2015:

	Value	Select	Opportunity	Micro-Cap
Shares Issued
and Outstanding	1,555,990	185,567	193,314	1,743,038
Paid in Capital	$48,649,527	$4,010,209	$4,322,666	$43,473,865

8.) CONTROL OWNERSHIP
The beneficial ownership, either directly or indirectly, of more than 25% of the voting shares of a fund creates a presumption of control of the fund, under section 2(a)(9) of the Investment Company Act of 1940. At December 31, 2015, National Financial Services, LLC, located at 200 Liberty Street, New York, New York, for the benefit of its customers, held, in aggregate, 40.39% of Value, and therefore also may be deemed to control Value. Candace King Weir, beneficial owner located at 9 Elk Street, Albany, New York 12207, held, in aggregate, 30.48%, of Select, and therefore may be deemed to control Select. Candace King Weir, beneficial owner located at 9 Elk Street, Albany, New York 12207, held, in aggregate, 91.73%, of Opportunity, and therefore may be deemed to control Opportunity. Candace King Weir, beneficial owner located at 9 Elk Street, Albany, New York 12207, held, in aggregate, 58.07% of Micro-Cap, and therefore may be deemed to control Micro-Cap.

9.) TAX MATTERS
For federal income tax purposes, at December 31, 2015 the cost of securities on a tax basis and the composition of gross unrealized appreciation (the excess of value over tax cost) and depreciation (the excess of tax cost over value) were as follows:

	Value		Select		Opportunity		Micro-Cap
Cost of Investments	$49,041,940		$4,019,058		$4,109,112		$42,796,872

Gross Unrealized Appreciation	$21,627,524		$1,675,626		$2,137,722		$4,240,339
Gross Unrealized Depreciation	($3,415,845	)	($290,632	)	($221,858	)	($5,319,309	)
Net Unrealized Appreciation
(Depreciation) on Investments	$18,211,679		$1,384,994		$1,915,864		($1,078,970	)

The tax character of distributions paid during the fiscal years ended December 31, 2015 and 2014 were as follows:

	Fiscal Year Ended	Fiscal Year Ended
	December 31, 2015	December 31, 2014
PARADIGM VALUE FUND
Ordinary Income	$ 351,550	$ 55,448
Long-term Capital Gain	8,004,095	16,084,557
	$8,355,645	$16,140,005

PARADIGM SELECT FUND
Ordinary Income	$ 71,087	$ 62,206
Long-term Capital Gain	395,022	1,226,251
	$ 466,109	$ 1,288,457

PARADIGM OPPORTUNITY FUND
Ordinary Income	$ 872	$ 20,137
Long-term Capital Gain	-	324,566
	$ 872	$ 344,703
PARADIGM MICRO-CAP FUND
Ordinary Income	$ 11,095	$ 14,267
Long-term Capital Gain	532,303	2,968,023
	$ 543,398	$ 2,982,290

2015 Annual Report 31

Notes to Financial Statements - continued

As of December 31, 2015, the components of distributable earnings on a tax basis were as follows:

	Value	Select
Undistributed ordinary income	$ 3,426	$ 3,421
Undistributed capital gain	66,537	-
Unrealized appreciation	18,211,679	1,384,994
	$ 18,281,642	$ 1,388,415

	Opportunity	Micro-Cap
Undistributed capital loss	$ (219,146)	$ -
Unrealized appreciation (depreciation)	1,915,864	(1,078,970)
	$ 1,696,718	$ (1,078,970)

The difference between book basis and tax basis unrealized appreciation/(depreciation) is attributable to the tax deferral of losses on wash sales.

10.) CAPITAL LOSS CARRYFORWARDS
As of December 31, 2015, Opportunity had available for federal tax purposes an unused capital loss carry-forward of $219,146, of which $121,751 is short-term with no expiration and $97,395 is long-term with no expiration.

11.) SUBSEQUENT EVENTS
Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has concluded that there is no impact requiring adjustment or disclosure in the financial statements.

2015 Annual Report 32

DISCLOSURE OF EXPENSES
(Unaudited)

The ongoing costs to shareholders associated with the Paradigm Value Fund, Paradigm Select Fund, Paradigm Opportunity Fund and Paradigm Micro-Cap Fund consist solely of management fees. Although the Funds charge no sales loads or transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by Mutual Shareholder Services, LLC, the Funds’ transfer agent. IRA accounts will be charged an $8.00 annual maintenance fee. If shares are redeemed within 90 days of purchase from the Funds, the shares are subject to a 2% redemption fee. The following example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with similar costs of investing in other mutual funds. The example is based on an investment of $1,000 invested in the Funds on July 1, 2015 and held through December 31, 2015.

The first line of the table below provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6) and then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period.”

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid by a shareholder for the period. Shareholders may use this information to compare the ongoing costs of investing in the Funds and other funds. In order to do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in other funds’ shareholder reports.

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 the annual maintenance fee charged to IRA accounts, redemption fees, or exchange fees. Therefore, the second line of 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.

PARADIGM VALUE FUND
			Expenses Paid
	Beginning	Ending	During the Period*
	Account Value	Account Value	July 1, 2015 to
	July 1, 2015	December 31, 2015	December 31, 2015

Actual	$1,000.00	$962.48	$7.42

Hypothetical	$1,000.00	$1,017.64	$7.63
(5% annual return
before expenses)

* Expenses are equal to the Fund’s annualized expense ratio of 1.50%, multiplied by the average
account value over the period, multiplied by 184/365 (to reflect the one-half year period).

PARADIGM SELECT FUND
			Expenses Paid
	Beginning	Ending	During the Period*
	Account Value	Account Value	July 1, 2015 to
	July 1, 2015	December 31, 2015	December 31, 2015

Actual	$1,000.00	$933.77	$5.61

Hypothetical	$1,000.00	$1,019.41	$5.85
(5% annual return
before expenses)

* Expenses are equal to the Fund’s annualized expense ratio of 1.15%, multiplied by the average
account value over the period, multiplied by 184/365 (to reflect the one-half year period).

2015 Annual Report 33

Disclosure of Expenses (Unaudited) - continued

PARADIGM OPPORTUNITY FUND
			Expenses Paid
	Beginning	Ending	During the Period*
	Account Value	Account Value	July 1, 2015 to
	July 1, 2015	December 31, 2015	December 31, 2015

Actual	$1,000.00	$889.33	$5.95

Hypothetical	$1,000.00	$1,018.90	$6.36
(5% annual return
before expenses)

* Expenses are equal to the Fund’s annualized expense ratio of 1.25%, multiplied by the average
account value over the period, multiplied by 184/365 (to reflect the one-half year period).

PARADIGM MICRO-CAP FUND
			Expenses Paid
	Beginning	Ending	During the Period*
	Account Value	Account Value	July 1, 2015 to
	July 1, 2015	December 31, 2015	December 31, 2015

Actual	$1,000.00	$892.38	$5.96

Hypothetical	$1,000.00	$1,018.90	$6.36
(5% annual return
before expenses)

* Expenses are equal to the Fund’s annualized expense ratio of 1.25%, multiplied by the average
account value over the period, multiplied by 184/365 (to reflect the one-half year period).

2015 Annual Report 34

ADDITIONAL INFORMATION
December 31, 2015

AVAILABILITY OF QUARTERLY SCHEDULE OF INVESTMENTS
(Unaudited)

The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s Web site at http://www.sec.gov. The Funds’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

PROXY VOTING GUIDELINES
(Unaudited)

Paradigm Funds Advisor LLC, the Funds’ Advisor, is responsible for exercising the voting rights associated with the securities held by the Funds. A description of the policies and procedures used by the Advisor in fulfilling this responsibility is available without charge on the Funds’ web site at www.paradigm-funds.com. It is also included in the Funds’ Statement of Additional Information, which is available on the Securities and Exchange Commission’s web site at http://www.sec.gov.

Information regarding how the Funds voted proxies, Form N-PX, relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling our toll free number(1-800-239-0732). This information is also available on the Securities and Exchange Commission’s web site at http://www.sec.gov.

ADDITIONAL INFORMATION

You will find more information about the Funds at www.paradigm-funds.com. For shareholder inquiries, please call toll-free in the U.S. at 1-800-239-0732.

2015 Annual Report 35

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2015 Annual Report 36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Trustees of
Paradigm Funds

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Paradigm Funds, comprising Paradigm Value Fund, Paradigm Select Fund, Paradigm Opportunity Fund and Paradigm Micro-Cap Fund (the "Funds") as of December 31, 2015 and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds constituting Paradigm Funds as of December 31, 2015, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

COHEN FUND AUDIT SERVICES, LTD.
Cleveland, Ohio
February 25, 2016

2015 Annual Report 37

TRUSTEES AND OFFICERS (Unaudited)

The Board of Trustees supervises the business activities of the Trust. Each Trustee serves as a trustee until the termination of the Trust unless the Trustee dies, resigns, retires or is removed.

The following table provides information regarding each Trustee who is an “interested person” of the Trust, as defined in the Investment Company Act of 1940, and each officer of the Trust as of December 31, 2015.

Interested Trustees and Officers

				Number of	Other
Name,	Position(s)	Term of	Principal	Portfolios	Directorships
Address¹,	Held with	Office and	Occupation(s)	Overseen	Held by Trustee
and Year of Birth	the Trust	Length of	During the	By	During the
		Time Served	Past 5 Years	Trustee	Past 5 Years

Candace King	President	Indefinite Term,	Co-portfolio Manager of Paradigm Micro-Cap Fund since	4	Director,
Weir², (1944)	and Trustee	Since 2002	December 2011; Director, President, Chief Investment		Nature's
			Officer, and Portfolio Manager of Paradigm Capital		Sunshine
			Management, Inc. since 1994; Director and President of		Products
			C.L. King & Associates, Inc. since 1972; Managing
			Member of PCM Ventures, LLC since 1996, PCM Ventures
			International LLC since 2001, PCM Ventures II, LLC since
			2003, and PCM Ventures III, LLC since 2010; Chief
			Executive Officer and Director of PCM Advisors LLC since
			2004, Paradigm Funds Advisors LLC since 2005, and
			Paradigm Capital Management Growth Advisors, Inc.
			since 2007.

Amelia F. Weir	Secretary	Indefinite Term,	Co-portfolio Manager of Paradigm Micro-Cap Fund since	N/A	N/A
(1975)		Since 2009	December 2011; Portfolio Manager and Director of
			Research Paradigm Capital Management (2008 - current),
			Portfolio Manager at William D. Witter, Inc. (2006 - 2008),
			Equity Analyst and Assistant Portfolio Manager at Tocqueville Asset Management (2005).

Carl A. Florio,	Trustee	Indefinite Term,	Director and Vice Chairman of Paradigm Funds Advisors	4	Director,
CPA³, (1948)		Since 2005	LLC and affiliated entities (2008 - current); Eastern		American Bio
			Regional President of First Niagara Bank (2005 - 2007);		Medical; Dir.,
			President and Chief Executive Officer of Hudson River		First Niagara
			Bank & Trust Company (1996 - 2005).		Financial Group

John V. Gulick	Chief	Indefinite Term,	VP and CCO of Paradigm Funds Advisor LLC and affiliat-	N/A	N/A
(1972)	Compliance	Since 2006	ed advisors (February 2007 - current), Compliance Officer
	Officer		of Paradigm Capital Management, Inc. (April 2005 - Feb.
			2007); Senior Compliance Analyst of GE Asset
			Management, Inc. (Feb. 2001 - March 2005).

Robert A.	Treasurer	Indefinite Term,	SVP and CFO of Paradigm Funds Advisor LLC and affili-	N/A	N/A
Benton, CPA	and Chief	Since 2002	ated advisors (May 2006 - current), SVP and CFO of C.L.
(1954)	Financial		King & Associates, a registered broker dealer (February
	Officer		2001 - current); SVP and CFO of Paradigm Capital
			Management, Inc. (February 2001 - March 2004); May 2006
			- current.

Independent Trustees

		Term of	Principal	Number of	Other
Name,	Position(s)	Office and	Occupation(s)	Portfolios	Directorships
Address¹,	Held with	Length of	During	Overseen	During the
and Year of Birth	the Trust	Time Served	Past 5 Years	By Trustee	Past 5 Years

Peter H.	Trustee	Indefinite Term,	Peter H. Heerwagen, Attorney at Law (2009 - current).	4	None
Heerwagen⁴		Since 2009	Executive Vice President of Ayco / Goldman Sachs
(1945)			(2003 - 2009).

Anthony J.	Trustee	Indefinite Term,	President and Chairman of the Board of Cool Insuring	4	None
Mashuta, (1956)		Since 2004	Agency, Inc. (1988 - current).

William P.	Trustee	Indefinite Term,	Chief Executive Officer of Bright Hub, Inc. (2006 - cur-	4	Director, MTI
Phelan⁵, (1956)		Since 2007	rent); Chief Executive Officer of OneMade, Inc. (1999 -		Corporation
			2004).

¹The address of each trustee and officer is c/o Paradigm Funds, Nine Elk Street, Albany, NY 12207.

2 Candace King Weir is considered an "interested person" as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, by virtue of her affiliation with the Trust's investment advisor, Paradigm Funds Advisor LLC.

3 Carl A. Florio is considered an "interested person" as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, because he is an officer of the Trust's investment advisor, Paradigm Funds Advisor LLC. Carl A. Florio is a member of the Board of Directors of a non-profit foundation that retains Paradigm Capital Management, Inc. to manage a portion of the foundation's assets. Candace King Weir is a Director and the President of Paradigm Capital Management, Inc.; and an interested Trustee of the Trust; and CEO of the Trust's investment advisor, Paradigm Funds Advisor LLC.

⁴Peter Heerwagen is a limited partner in PCM Partners, LP II. As of December 31, 2015 he owned 0.10% of the PCM Partners, LP II partnership, the value of which was $0.22 million. Candace King Weir is the general partner of PCM Partners, LP II; an interested Trustee of the Trust; and CEO of the Trust's investment advisor, Paradigm Funds Advisor LLC.

⁵William P. Phelan is a limited partner in PCM Partners, LP II. As of December 31, 2015 he owned 1.17% of the PCM Partners, LP II partnership, the value of which was $2.54 million. Candace King Weir is the general partner of PCM Partners, LP II; an interested Trustee of the Trust; and CEO of the Trust's investment advisor, Paradigm Funds Advisor LLC.

The Statement of Additional Information includes additional information about the Funds’ Trustees and may be obtained without charge by calling 1-800-239-0732.

2015 Annual Report 38

Board of Trustees
Carl A. Florio
Peter H. Heerwagen
Candace King Weir
Anthony Mashuta
William P. Phelan

Investment Advisor
Paradigm Funds Advisor LLC
Nine Elk Street
Albany, NY 12207-1002

Counsel
Thompson Hine LLP
41 South High Street, Suite 1700
Columbus, OH 43215

Custodian
U.S. Bank, NA
425 Walnut Street
P.O. Box 1118
Cincinnati, OH 45201

Dividend Paying Agent,
Shareholders' Servicing Agent,
Transfer Agent
Mutual Shareholder Services
8000 Town Centre Dr., Suite 400
Broadview Hts., OH 44147

Fund Administrator
Premier Fund Solutions, Inc.
1939 Friendship Drive, Suite C
El Cajon, CA 92020

Independent Registered Public Accounting Firm
Cohen Fund Audit Services, Ltd.
1350 Euclid Ave., Suite 800
Cleveland, OH 44115

This report is provided for the general information of the shareholders of the Paradigm
Funds. This report is not intended for distribution to prospective investors in the Funds,
unless preceded or accompanied by an effective prospectus.

Item 2. Code of Ethics.

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and the principal financial officer. The registrant has not made any amendments to its code of ethics during the covered period. The registrant has not granted any waivers from any provisions of the code of ethics during the covered period. A copy of the registrant’s Code of Ethics is filed herewith.

Item 3. Audit Committee Financial Expert.

The registrant’s Board of Trustees has determined that William P. Phalen is an audit committee financial expert. Mr. Phalen is independent for purposes of this Item 3.

Item 4. Principal Accountant Fees and Services.

(a-d) The following table details the aggregate fees billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant to the registrant. The principal accountant has provided no services to the adviser or any entity controlled by, or under common control with the adviser that provides ongoing services to the registrant.

	FYE 12/31/15	FYE 12/31/14
Audit Fees	$37,400	$37,530
Audit-Related Fees	$0	$0
Tax Fees	$11,000	$11,000
All Other Fees	$1,800	$2,000

Nature of Tax Fees: preparation of Excise Tax Statement and 1120 RIC.
Nature of All Other Fees: Review of Semi-Annual Report.

(e) (1) The audit committee approves all audit and non-audit related services and, therefore, has not adopted pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

(e) (2) None of the services described in paragraph (b) through (d) of this Item were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.

(g) The following table indicates the aggregate non-audit fees billed by the registrant’s principal accountant for services to the registrant , the registrant’s investment adviser (not sub-adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant, for the last two years.

Non-Audit Fees	FYE 12/31/15	FYE 12/31/14
Registrant	$12,800	$13,000
Registrant’s Investment Adviser	$0	$0

(h) The principal accountant provided no services to the investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant.

Item 5. Audit Committee of Listed Companies. Not applicable.

Item 6. Schedule of Investments. Schedule filed with Item 1.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable.

Item 8. Portfolio Managers of Closed End Management Investment Companies. Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant’s board of trustees.

Item 11. Controls and Procedures.

(a) The registrant’s president and chief financial officer concluded that the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) were effective as of a date within 90 days of the filing date of this report, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1) Code of Ethics. Filed herewith.

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

(a)(3) Not applicable.

(b) Certification pursuant to Section 906 Certification of the Sarbanes-Oxley Act of 2002. Filed herewith.

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.

Paradigm Funds

By: /s/Candace King Weir
Candace King Weir
President

Date: 2/26/16

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: /s/Candace King Weir
Candace King Weir
President

Date: 2/26/16

By: /s/Robert A. Benton
Robert A. Benton
Chief Financial Officer

Date: 2/26/16