As filed with the Securities and Exchange Commission on October 16, 1998
Securities Act Registration No. 333-_____
Investment Company Act Registration No. 811-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. __ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. __ [ ]
KIRR, MARBACH PARTNERS FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
621 Washington Street
Columbus, Indiana 47201
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, including Area Code:
(812) 376-9444
Mark D. Foster
Kirr, Marbach & Company, LLC
621 Washington Street
Columbus, Indiana 47201
(Name and Address of Agent for Service)
Copies to:
Scott A. Moehrke
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Approximate date of proposed public offering: As soon
as practicable after the Registration Statement becomes
effective.
In accordance with Rule 24f-2 under the Investment
Company Act of 1940, Registrant declares that an
indefinite number of shares of its common stock, $.01
par value, is being registered by this Registration
Statement.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to
delay its effective date until the Registrant shall
file a further amendment which specifically states that
this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS
TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
Subject to completion, dated October 16, 1998
Prospectus
dated ____________, 1998
Kirr, Marbach Partners Funds, Inc.
KIRR, MARBACH PARTNERS VALUE FUND
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-______________
The investment objective of the Kirr, Marbach
Partners Value Fund (the "Fund") is long-term
capital growth. The Fund invests primarily in a
diversified portfolio of common stocks and other
equity securities of companies that the Fund's
investment adviser, Kirr, Marbach & Company, LLC
(the "Adviser") believes are currently trading at
a price that does not fully reflect the value of
the company.
This Prospectus contains information you
should consider before you invest in the Fund.
Please read it carefully and keep it for future
reference.
____________________
Neither the Securities and Exchange
Commission (the "SEC") nor any state securities
commission has approved or disapproved of the
securities offered by this Prospectus, nor has the
SEC or any state securities commission passed upon
the adequacy of this Prospectus. Any
representation to the contrary is a criminal
offense.
<PAGE>
TABLE OF CONTENTS
Page No.
HIGHLIGHTS 1
FEES AND EXPENSES OF THE FUND 2
INVESTMENT OBJECTIVES 3
IMPLEMENTATION OF INVESTMENT OBJECTIVES 3
FUND MANAGEMENT 6
HOW TO PURCHASE SHARES 7
HOW TO REDEEM SHARES 9
VALUATION OF FUND SHARES 10
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN 11
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT 11
YEAR 2000 ISSUE 12
_____________________________
In deciding whether to invest in the Fund, you
should rely only on information in this Prospectus or
the Statement of Additional Information (the "SAI").
The Fund has not authorized others to provide
additional information. The Fund does not authorize
the use of this Prospectus in any state or jurisdiction
in which such offering may not legally be made.
<PAGE>
HIGHLIGHTS
What are the goals of the Fund?
The Fund's goal is long-term capital growth. This
goal is sometimes referred to as the Fund's investment
objective. The Fund attempts to achieve this goal by
choosing investments that the Adviser believes will
increase in value. Current income from dividends or
interest is not an important factor in selecting
investments for the Fund. The Fund cannot guarantee
that it will achieve its goal. For more information,
see "Investment Objectives."
What will the Fund invest in?
The Fund invests primarily in common stocks. In
trying to achieve its goal, the common stocks selected
for the Fund will be those the Adviser believes are
currently undervalued, i.e., those common stocks
trading at a discount to intrinsic value. The Fund
will emphasize investments in the common stock of
medium capitalization companies, but will also invest
in the common stocks of small capitalization and large
capitalization companies. The Fund may also invest a
limited amount of assets in other equity securities,
fixed income securities, foreign securities and
illiquid securities. For more information, see
"Investment Objectives."
What are the main risks of investing in the Fund?
The main risks of investing in the Fund are:
Stock Market Risk: Equity funds like the Fund
are subject to stock market risks and significant
fluctuations in value. If the stock market declines in
value, the Fund is likely to decline in value.
Increases or decreases in value of stocks are
generally greater than for bonds or other debt
investments.
Mid-Cap/Small-Cap Risk: Medium capitalization
and small capitalization companies may not have the
size, resources or other assets of large capitalization
companies. These medium capitalization and small
capitalization companies may be subject to greater
market risks and fluctuations in value than large
capitalization companies and may not correspond to
changes in value of the stock market in general.
Stock Selection Risk: The stocks selected by the
Adviser may decline in value or not increase in
value when the stock market in general is rising. The
Adviser has not previously advised a mutual fund.
Liquidity Risk: The Adviser may not be able to
sell stocks at an optimal time or price.
You should be aware that you may lose money by
investing in the Fund. Because of the Fund's focus on
value investing, it may not be a complete investment
program for the equity portion of your portfolio.
Is the Fund an appropriate investment for me?
The Fund is suitable for long-term investors only.
The Fund is not a short-term investment vehicle. An
investment in the Fund may be appropriate if:
your goal is long-term capital growth;
you want to allocate some portion of your long-
term investments to value investing;
you do not require current income from this
investment; and
you are willing to accept short-term to
intermediate-term fluctuations in value to seek
possible higher long-term returns.
Because the Fund has been in operation for less than a
full calendar year, it has no annual return history.
<PAGE>
FEES AND EXPENSES OF THE FUND
The following table describes the fees and
expenses that you may pay if you buy and hold shares of
the Fund.
Shareholder Fees (fees paid directly from your None
investment)(1)
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets)(2)
Management Fees(3) 1.00%
Distribution and Service (12b-1) Fees(4) 0.25%
Other Expenses(3) 0.77%
Total Annual Fund Operating Expenses(3) 2.02%
____________
(1)If you redeem shares by wire, you will be charged a
$12 service fee. See "How to Redeem Shares."
(2)Fund operating expenses are deducted from Fund
assets before computing the daily share price or
making distributions. As a result, they will not
appear on your account statement, but instead
reduce the amount of total return you receive.
(3)"Other Expenses" have been estimated for the
current fiscal year since the Fund did not begin
operations until ________ __, 1998. For the fiscal
year ending _________ __, 1999, the Adviser has
agreed to waive its management fee and/or reimburse
the Fund's other expenses to the extent necessary
to ensure that the total annual operating expenses
do not exceed 1.50% of its average net assets.
After such date, the total operating expense
limitations may be terminated or revised at any
time. "Other expenses" are presented before any
such waivers or reimbursements. If such waivers
and reimbursements are included in the calculation
of "other expenses" (i.e., if actual "other
expenses" are shown), other expenses and total
annual operating expenses for the Fund are expected
to be 0.25% and 1.50%, respectively. Any waiver or
reimbursement is subject to later adjustment to
allow the Adviser to recoup amounts waived or
reimbursed to the extent actual fees and expenses
for a period are less than the expense limitation
caps, provided, however, that the Adviser shall
only be entitled to recoup such amounts for a
period of three years from the date such amount was
waived or reimbursed. For additional information,
see "Fund Management."
(4)Because Rule 12b-1 fees are paid out of the Fund's
assets on an on-going basis, over time these fees
will increase the cost of your investment and could
cost long-term investors of the Fund more than
other types of sales charges. For more
information, see "Distribution and Shareholder
Servicing Plan."
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower,
based on these assumptions your costs would be as
follows:
1 Year 3 Years
$153 $474
<PAGE>
INVESTMENT OBJECTIVES
The Fund's investment objective is long-term
capital growth. The Fund seeks to achieve its
investment objective by investing primarily in common
stocks and other equity securities of companies
primarily with medium market capitalizations. A medium-
cap company would typically have a market
capitalization of between $500 million to $5 billion.
Under normal circumstances, 50% or more of the Fund's
investments in common stocks will be common stocks of
medium capitalization companies. The Fund may also
invest in small capitalization companies with a market
capitalization of less than $500 million and, from time
to time, large capitalization companies with a market
capitalization of more than $5 billion.
The Adviser generally follows a value approach to
investing for the Fund. Accordingly, the Fund will
focus on equity securities of companies that the
Adviser believes are undervalued relative to their
intrinsic worth and possess certain characteristics
that the Adviser believes will lead to a higher market
price over time. In identifying equity securities for
the Fund, the Adviser uses a number of proprietary and
non-proprietary sources, including computerized
fundamental databases, brokerage and other industry
contacts and on-premise management interviews and site
visits. In the research process, the Adviser reviews
certain attributes that it believes a security should
have for the Fund to invest in it, such as:
Strong, shareholder-oriented management;
Strong balance sheet and financial
characteristics;
Low price to earnings ratio;
Low price to earnings growth (i.e., growth at
a reasonable current price);
Low price to free cash flow ratio;
Current price reflects substantial discount
from the liquidation or sale value of its
underlying assets;
Positive change in company and/or industry
fundamentals; and
Lack of following by a significant number of
analysts or out of favor.
The securities the Adviser selects typically possess
some but not all of the above attributes.
The Fund has no minimum holding period for its
investments and will sell securities whenever the
Adviser believes it is consistent with the Fund's
investment objective. The Fund typically sells a
security when the Adviser believes it has achieved its
target price, shows deteriorating fundamentals or falls
short of the Adviser's expectations. The Fund will
attempt to maximize investment returns. Potential tax
consequences to Fund shareholders will be a secondary
consideration when it sells securities. Investors may
realize taxable capital gains as a result of frequent
trading of the Fund's assets and the Fund incurs
transaction costs in connection with buying and selling
securities. Tax and transaction costs lower the Fund's
effective return for investors.
Under normal circumstances, the Fund expects to be
substantially fully invested in common stocks and other
equity securities and will invest at least 65% of its
total assets in common stocks and other equity
securities. The Fund, however, may invest up to 25% of
its total assets in fixed income securities and,
pending investment or to pay redemption requests and
expenses of the Fund, the Fund may hold a portion of
its assets in short-term money market securities and
cash. The Fund may also invest a limited amount of
assets in foreign securities and illiquid securities.
IMPLEMENTATION OF INVESTMENT OBJECTIVES
In implementing its investment objective, the Fund
may invest in the following securities and use the
following investment techniques. Some of these
securities and investment techniques involve special
risks, which are described below and in the Fund's SAI.
<PAGE>
Equity Securities
The Fund will invest in equity securities,
including common stocks, preferred stocks and other
equity securities. The Fund anticipates that its
equity securities will consist primarily of common
stocks. Other equity securities include depositary
receipts, warrants and other securities convertible or
exchangeable into common stock. Common stocks are
units of ownership of a corporation. Preferred stocks
are stocks that often pay dividends at a specified rate
and have preference over common stocks in dividend
payments and liquidation of assets. Some preferred
stocks may be convertible into common stock. Warrants
are options to purchase equity securities at a specific
price for a specific period of time. They do not
represent ownership of the securities but only the
right to buy them. Equity funds like the Fund are
subject to stock market risks and significant
fluctuations in value. If the stock market declines in
value, the Fund is likely to decline in value.
Increases or decreases in value of stocks are generally
greater than for bonds or other debt investments. In
addition, the stocks selected by the Adviser may
decline in value or not increase in value when the
stock market in general is rising.
The Fund's equity investments will tend to be
primarily of medium capitalization companies, but will
also be of small capitalization and large
capitalization companies. Medium-cap and small-cap
companies may not have the size, resources or other
assets of large capitalization companies and may not
correspond to the changes in value of the stock market
in general. Medium-cap and small-cap companies may be
subject to greater market risks and fluctuations in
value than large capitalization companies. Because of
the Fund's focus on value investing, it may not be a
complete investment program for the equity portion of
your portfolio.
Fixed Income Securities
Fixed Income Securities in General. The Fund may
invest up to 25% of its total assets in a wide variety
of fixed income securities, including bonds and other
debt securities and non-convertible preferred stocks.
Debt securities are obligations of the issuer to pay
interest and repay principal. Preferred stocks have
rights senior to a company's common stock, but junior
to a company's creditors and, if held by the Fund as a
fixed income security, will generally pay a dividend.
Changes in market interest rates affect the value
of fixed income securities. If interest rates
increase, the value of fixed income securities
generally decrease. Similarly, if interest rates
decrease, the value of fixed income securities
generally increase. Shares in the Fund are likely to
fluctuate in a similar manner. In general, the longer
the remaining maturity of a fixed income security, the
greater it will fluctuate in value based on interest
rate changes. Longer-term fixed income securities
generally pay a higher interest rate. The Fund invests
in fixed income securities of varying maturities.
Changes in the credit quality of the issuer also
affect the value of fixed income securities. Lower-
rated fixed income securities generally pay a higher
interest rate. Although the Fund only invests in
investment grade debt securities, the value of these
securities may decrease due to changes in ratings over
time. For additional information regarding securities
ratings, please see the SAI and the Appendix to the
SAI.
Types of Fixed Income Securities. The Fund may
invest in the following types of fixed income
securities:
Corporate debt securities, including bonds,
debentures and notes;
U.S. government securities;
Preferred stocks;
Convertible securities;
Commercial paper (including variable amount
master demand notes);
Bank obligations, such as certificates of
deposit, banker's acceptances and time
deposits of domestic and foreign banks,
domestic savings association and their
subsidiaries and branches (in amounts in
<PAGE>
excess of the current $100,000 per account
insurance coverage provided by the Federal
Deposit Insurance Corporation); and
Repurchase agreements.
Temporary Strategies
Prior to investing the proceeds from sales of Fund
shares, to meet ordinary daily cash needs or to respond
to adverse market, economic, political or other
conditions, the Adviser may hold cash and/or invest all
or a portion of the Fund's assets in money market
instruments, which are short-term fixed income
securities issued by private and governmental
institutions. Money market instruments include:
Commercial paper;
Short-term U.S. government securities;
Repurchase agreements;
Banker's acceptances;
Certificates of deposit;
Time deposits; and
Other short-term fixed-income securities.
If these temporary strategies are used for adverse
market, economic or political conditions, it is
impossible to predict when or for how long the Adviser
may employ these strategies for the Fund. To the
extent the Fund engages in this temporary strategy, the
Fund may not achieve its investment objectives.
Foreign Securities and ADRs
The Fund may invest up to 20% of its net assets in
American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") or other foreign
instruments. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the
underlying foreign security and denominated in U.S.
dollars. EDRs are European receipts evidencing a
similar arrangement. Investments in securities of
foreign issuers involve risks which are in addition to
the usual risks inherent in domestic investments.
Foreign economies may differ favorably or unfavorably
from the U.S. economy in various respects and many
foreign securities are less liquid and their prices are
more volatile than comparable U.S. securities. From
time to time foreign securities may be difficult to
liquidate rapidly without adverse price effects.
Certain costs attributable to foreign investing, such
as custody charges and brokerage costs, may be higher
than those attributable to domestic investment. The
value of the Fund's assets denominated in foreign
currencies will increase or decrease in response to
fluctuations in the value of those foreign currencies
relative to the U.S. dollar. In addition, a number of
European countries have entered into an economic and
monetary union which may have adverse effects on
foreign securities if the union does not take effect as
planned, if a country withdraws from the union or if
the accounting and trading systems used by the Fund do
not recognize the new currency adopted in the union.
Illiquid Securities
The Fund may invest up to 10% of its net assets in
illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction,
illiquid securities include, but are not limited to,
restricted securities (securities the disposition of
which is restricted under the federal securities laws),
repurchase agreements with maturities in excess of
seven days and other securities that are not readily
marketable.
<PAGE>
FUND MANAGEMENT
Adviser
The Fund has entered into an Investment Advisory
Agreement with the Adviser under which the Adviser
manages the Fund's investments and business affairs,
subject to the supervision of the Fund's Board of
Directors. The Adviser, 621 Washington Street,
Columbus, Indiana 47201, is an Indiana limited
liability company and has been serving clients since
1975. As of September 30, 1998, the Adviser managed
approximately $812 million for individual and
institutional clients. The Adviser is controlled by
David Kirr and Gregg Summerville. Under the Investment
Advisory Agreement, the Fund pays the Adviser an annual
management fee of 1.00% of the Fund's average daily net
assets. The advisory fee is accrued daily and paid
monthly. For the fiscal year ending ____________,
1999, the Adviser has agreed to waive its management
fee and/or reimburse the Fund's other expenses to the
extent necessary to ensure that the Fund's total annual
operating expenses do not exceed 1.50% of its average
daily net assets. After such time, the Adviser may
voluntarily waive all or a portion of its management
fee and/or reimburse all or a portion of Fund operating
expenses. The Adviser will waive fees and/or reimburse
expenses on a monthly basis and the Adviser will pay
the Fund by reducing its fee. Any waivers or
reimbursements will have the effect of lowering the
overall expense ratio for the Fund and increasing its
overall return to investors at the time any such
amounts were waived and/or reimbursed. Any such waiver
or reimbursement is subject to later adjustment during
the term of the Investment Advisory Agreement to allow
the Adviser to recoup amounts waived or reimbursed,
provided, however, that the Adviser shall only be
entitled to recoup such amounts for a period of three
years from the date such amount was waived or
reimbursed.
Under the Investment Advisory Agreement, not only
is the Adviser responsible for management of the Fund's
assets, but also for portfolio transactions and
brokerage. The Adviser has no prior experience
advising mutual funds.
Portfolio Managers. The Fund will be managed on a
team basis, with the following individuals acting as
leaders of the team:
Mark D. Foster. Chief Investment Officer of the
Adviser, Mr. Foster received a Bachelor of Science
degree in finance from Ball State University in 1979.
Prior to joining the Adviser, Mr. Foster managed equity
investments for Merchants Investment Counseling, Inc.
Mr. Foster joined the Adviser in 1987 as a portfolio
manager and has served in his current position since
1997. Mr. Foster is a Chartered Financial Analyst.
Gregg T. Summerville. Chief Investment Strategist
of the Adviser, Mr. Summerville earned a Bachelor of
Arts and Masters of Business Administration in finance
from Indiana University in 1969 and 1972, respectively.
Prior to joining the Adviser, Mr. Summerville was an
analyst and later a portfolio manager for Mellon Bank
and worked for Cummins Engine Company where he
researched securities for that company's pension fund.
Mr. Summerville joined the Adviser as a portfolio
manager in 1981 and has served in his present position
since 1990. Mr. Summerville is a Chartered Financial
Analyst.
Custodian
Firstar Bank Milwaukee, N.A. ("Firstar Bank"),
Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202 acts as custodian of the Fund's
assets.
Transfer Agent and Administrator
Firstar Mutual Fund Services, LLC ("Firstar"),
Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202 acts as transfer agent for the Fund
(the "Transfer Agent") and as the Fund's administrator.
Distributor
Rafferty Capital Markets, Inc., 550 Mamaroneck
Avenue, Harrison, New York 10528, a registered broker-
dealer and member of the National Association of
Securities Dealers, Inc., acts as distributor of the
Fund's shares (the "Distributor").
<PAGE>
HOW TO PURCHASE SHARES
Shares of the Fund may be purchased at net asset
value (as described below) through any dealer which has
entered into a sales agreement with the Distributor, in
its capacity as principal underwriter of shares of the
Fund, or through the Distributor directly. The
Transfer Agent may also accept purchase applications.
Payment for Fund shares should be made by check or
money order in U.S. dollars drawn on a U.S. bank,
savings and loan or credit union. The minimum initial
investment in the Fund is $25,000. Subsequent
investments of at least $1,000 may be made by mail or
by wire. For investors using the Automatic Investment
Plan, as described below, the minimum investment is
$25,000 with a minimum monthly investment of $250.
These minimums can be changed or waived by the Fund at
any time. Shareholders will be given at least 30 days'
notice of any increase in the minimum dollar amount of
subsequent investments.
Net Asset Value
Shares of the Fund are sold on a continual basis
at the net asset value per share next computed
following receipt of an order in proper form (as
described below under "Initial Investment" and
"Subsequent Investment") by a dealer, the Distributor
or the Transfer Agent, as the case may be. Net asset
value per share is calculated once daily as of the
close of trading (currently 4:00 p.m., Eastern Standard
Time) on each day the New York Stock Exchange (the
"NYSE") is open. See "Valuation of Fund Shares."
Initial Investment - Minimum $25,000
You may purchase Fund shares by completing the
enclosed shareholder application and mailing it and a
check or money order payable to "Kirr, Marbach Partners
Funds, Inc." to your securities dealer, the Distributor
or the Transfer Agent, as the case may be. The minimum
initial investment is $25,000. If mailing to the
Distributor or Transfer Agent, please send to the
following address: Firstar Mutual Fund Services, LLC,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. In
addition, overnight mail should be sent to the
following address: Kirr, Marbach Partners Funds, Inc.,
Firstar Mutual Fund Services, LLC, Third Floor, 615
East Michigan Street, Milwaukee, Wisconsin 53202. The
Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents.
Therefore, deposit in the mail or with such services,
or receipt at the Transfer Agent's post office box, of
purchase applications does not constitute receipt by
the Transfer Agent or the Fund. Do not mail letters by
overnight courier to the post office box.
If the securities dealer you have chosen to
purchase Fund shares through has not entered into a
sales agreement with the Distributor, such dealer may,
nevertheless, offer to place your order for the
purchase of Fund shares. Purchases made through such
dealers will be effected at the Offering Price. Such
dealers may also charge a transaction fee, as
determined by the dealer. That fee may be avoided if
shares are purchased through a dealer who has entered
into a sales agreement with the Distributor or through
the Transfer Agent.
If your check does not clear, you will be charged
a $20 service fee. You will also be responsible for
any losses suffered by the Corporation as a result.
Neither cash nor third-party checks will be accepted.
All applications to purchase Fund shares are subject to
acceptance by the Fund and are not binding until so
accepted. The Fund reserves the right to decline or
accept a purchase order application in whole or in
part.
Wire Purchases
You may also purchase Fund shares by wire. The
following instructions should be followed when wiring
funds to the Transfer Agent for the purchase of Fund
shares:
Wire to: Firstar Bank Milwaukee, N.A.
ABA Number: 075000022
Credit: Firstar Mutual Fund Services, LLC
Account: 112-952-137
<PAGE>
Further Credit: Kirr, Marbach Partners Funds, Inc.
(shareholder account number)
(shareholder name/account registration)
Please call 1-___________________ prior to wiring
any funds to notify the Transfer Agent that the wire is
coming and to verify the proper wire instructions so
that the wire is properly applied when received. The
Corporation is not responsible for the consequences of
delays resulting from the banking or Federal Reserve
wire system.
Telephone Purchases
The telephone purchase option allows investors to
make subsequent investments directly from a bank
checking or savings account. To establish the
telephone purchase option on your account, complete the
appropriate section in the shareholder application.
Only bank accounts held at domestic financial
institutions that are Automated Clearing House ("ACH")
members may be used for telephone transactions. This
option will become effective approximately 15 business
days after the application form is received by the
Transfer Agent. Purchases must be in amounts of $1,000
or more and may not be used for initial purchases of a
Fund's shares. To have Fund shares purchased at the
offering price determined at the close of regular
trading on a given date, the Transfer Agent must
receive both your purchase order and payment by
Electronic Funds Transfer through the ACH system prior
to the close of regular trading on such date. Most
transfers are completed within one business day.
Subsequent investments may be made by calling
1-________________.
Purchasing Shares Through Financial Intermediaries
If you purchase shares through a financial
intermediary (such as a broker-dealer), certain
features of the Fund relating to such transactions may
not be available or may be modified. In addition,
certain operational policies of the Fund, including
those related to settlement and dividend accrual, may
vary from those applicable to direct shareholders of
the Fund and may vary among intermediaries. You should
consult your financial intermediary for more
information regarding these matters. Certain financial
intermediaries may charge you transaction fees for
their services. You will not be charged such fees
directly by the Fund if you purchase your Fund shares
directly from the Fund without the intervention of a
financial intermediary. The Fund may, however,
compensate financial intermediaries for assistance
under the Fund's Distribution and Shareholder Service
Plan (i.e., Rule 12b-1 plan) or otherwise.
Automatic Investment Plan - Minimum $25,000
The Automatic Investment Plan ("AIP") allows you
to make regular, systematic investments in the Fund
from your bank checking or NOW account. The minimum
initial investment for investors using the AIP is
$25,000 with a monthly minimum investment of $250. To
establish the AIP, complete the appropriate section in
the shareholder application. You should consider your
financial ability to continue in the AIP until the
minimum initial investment amount is met because the
Fund has the right to close an investor's account for
failure to reach the minimum initial investment. For
additional information on the AIP, please see the SAI.
Individual Retirement Accounts
You may invest in the Fund by establishing a tax-
sheltered individual retirement account ("IRA"). The
Fund offers the Traditional IRA and Roth IRA. For
additional information on IRA options, please see the
SAI.
Subsequent Investments - Minimum $1,000
Additions to your account may be made by mail or
by wire. Any subsequent investment must be for at
least $1,000. When making an additional purchase by
mail, enclose a check payable to "Kirr, Marbach
Partners Funds, Inc." and the Additional Investment
Form provided on the lower portion of your account
statement. To make an additional purchase by wire,
please call 1-____________________ for complete wiring
instructions.
<PAGE>
HOW TO REDEEM SHARES
In General
Investors may request redemption of part or all of
their Fund shares at any time at the next determined
net asset value. See "Valuation of Fund Shares." No
redemption request will become effective until a
redemption request is received in proper form (as
described below) by the Transfer Agent. An investor
should contact the Transfer Agent for further
information concerning redemption of Fund shares. The
Fund normally will mail your redemption proceeds the
next business day and, in any event, no later than
seven days after receipt of a redemption request in
good order. However, when a purchase has been made by
check, the Fund may hold payment on redemption proceeds
until it is reasonably satisfied that the check has
cleared, which may take up to 12 days. Redemptions may
be made by written request, telephone or wire. You may
also redeem Fund shares using the Fund's exchange
privilege, as discussed in the SAI.
Redemptions may also be made through brokers or
dealers. Such redemptions will be effected at the net
asset value next determined after receipt by the Fund
of the broker or dealer's instruction to redeem shares.
Some brokers or dealers may charge a fee in connection
with such redemptions.
Investors who have an Individual Retirement
Account must indicate on their redemption requests
whether or not federal income tax should be withheld.
Redemption requests failing to make an election will be
subject to withholding.
Your account may be terminated by the Fund on not
less than 30 days' notice if, at the time of any
redemption of shares in your account, the value of the
remaining shares in the account falls below $25,000.
Upon any such termination, a check for the proceeds of
redemption will be sent to you within seven days of the
redemption.
Written Redemption
For most redemption requests, an investor need
only furnish a written, unconditional request to redeem
his or her shares at net asset value to the Transfer
Agent: Firstar Mutual Fund Services, LLC, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. Overnight mail
should be sent to Kirr, Marbach Partners Funds, Inc.,
Firstar Mutual Fund Services, LLC, Third Floor, 615
East Michigan Street, Milwaukee, Wisconsin 53202.
Requests for redemption must (i) be signed exactly as
the shares are registered, including the signature of
each owner, and (ii) specify the number of shares or
dollar amount to be redeemed. Redemption proceeds made
by written redemption request may also be wired to a
commercial bank that you have authorized on your
account application. The Transfer Agent will charge a
$12 service fee for wire transactions. Additional
documentation may be requested from corporations,
executors, administrators, trustees, guardians, agents
or attorneys-in-fact. The Fund does not consider the
U.S. Postal Service or other independent delivery
services to be its agents. Therefore, deposit in the
mail or with such services, or receipt at the Transfer
Agent's post office box of redemption requests does not
constitute receipt by the Transfer Agent or the Fund.
Do not mail letters by overnight courier to the post
office box. Any written redemption requests received
within 15 days after an address change must be
accompanied by a signature guarantee.
Telephone Redemption
Shares of the Fund may also be redeemed by calling
the Transfer Agent at 1-___________________.
Redemption requests by telephone are available for
redemptions of $1,000 or more. Redemption requests for
less than $1,000 must be in writing. In order to
utilize this procedure, an investor must have
previously elected this option in writing, which
election will be reflected in the records of the
Transfer Agent, and the redemption proceeds must be
mailed directly to the investor or transmitted to the
investor's predesignated account via wire or ACH
transfer. Funds sent via ACH are automatically
credited to your account within three business days.
There is currently no charge for this service. To
change the designated account, send a written request
with signature(s) guaranteed to the Transfer Agent. To
change the address, call the Transfer Agent or send a
written request with signature(s) guaranteed to the
Transfer Agent. Additional documentation may be
requested from corporations, executors, administrators,
trustees, guardians, agents or attorneys-in-fact. No
telephone redemption requests will be allowed within 15
days of such a
<PAGE>
change. The Fund reserves the right to
limit the number of telephone redemptions by an
investor. Once made, telephone redemptions may not be
modified or canceled.
The Transfer Agent will use reasonable procedures
to ensure that instructions received by telephone are
genuine. These procedures may include requiring some
form of personal identification prior to acting upon
telephone instructions, recording telephonic
transactions and/or sending written confirmation of
such transactions to investors. Assuming procedures
such as the above have been followed, neither the Fund
nor the Transfer Agent will be liable for any loss,
cost, or expense for acting upon an investor's
instructions or for any unauthorized telephone
redemption. The Fund reserves the right to refuse a
telephone redemption request if so advised.
Redeeming Shares Through Financial Intermediaries
If you redeem shares through a financial
intermediary (such as a broker-dealer), such financial
intermediary may charge you transaction fees for their
services. You will not be charged such fees if you
redeem your Fund shares directly through the Fund
without the intervention of a financial intermediary.
Systematic Withdrawal Plan
The Systematic Withdrawal Plan ("SWP") allows you
to make automatic withdrawals from your account at
regular intervals. Redemptions for the purpose of
satisfying such withdrawals may reduce or even exhaust
your account. If the amount remaining in your account
is not sufficient to make a SWP payment, the remaining
amount will be redeemed and the SWP will be terminated.
Please see the SAI for more information.
Signature Guarantees
Signature guarantees are required for: (i)
redemption requests to be mailed or wired to a person
other than the registered owner(s) of the shares; (ii)
redemption requests to be mailed or wired to other than
the address that appears of record and (iii) any
redemption request if a change of address has been
received by the Fund or the Transfer Agent within the
last 15 days. A signature guarantee may be obtained
from any eligible guarantor institution, as defined by
the SEC. These institutions include banks, saving
associations, credit unions, brokerage firms, and
others. Please note that a notary public stamp or seal
is not acceptable.
Redemption in Kind
The Fund has reserved the right to redeem in kind
(i.e., in securities) any redemption request during any
90-day period in excess of the lesser of: (i) $250,000
or (ii) 1% of the Fund's net asset value being
redeemed. Please see the SAI for more information.
Money Market Exchange
The Fund has established a program which permits
Fund shareholders to exchange Fund shares for shares of
the Firstar Money Market Fund. This exchange privilege
is a convenient way to buy shares in a money market
fund in order to respond to changes in your goals or in
market conditions. Please see the SAI for more
information on the exchange privilege.
VALUATION OF FUND SHARES
Net asset value is calculated using the fair value
method of valuation, which takes the fair value of the
Fund's total assets, including interest or dividends
accrued, but not yet collected, less all liabilities,
and dividing by the total number of shares outstanding.
The result, rounded to the nearest cent, is the net
asset value per share. The net asset value per share
is determined as of the close of trading (generally
4:00 p.m. Eastern Standard Time) on each day the NYSE
is open for business. Net asset value is not
determined on days the NYSE is closed. The price at
which a purchase order or redemption request is
effected is based on the next calculation of net asset
value after the order is placed. The Fund's net asset
value may not be calculated on days during which the
Fund receives no orders to purchase shares and no
shares are tendered for redemption.
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
The Fund has adopted a plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended
(the "12b-1 Plan"), which authorizes it to pay the
Distributor and certain financial intermediaries (such
as broker-dealers) who assist in distributing Fund
shares or who provide shareholder services to Fund
shareholders a distribution and shareholder servicing
fee of up to 0.25% of its average daily net assets
(computed on an annual basis). To the extent expenses
are incurred under the 12b-1 Plan, the 12b-1 Plan has
the effect of increasing the Fund's expenses from what
they would otherwise be. Because Rule 12b-1 fees are
paid out of the Fund's net assets on an on-going basis,
over time these fees will increase the cost of your
investment and could cost long-term investors of the
Fund more than paying other types of sales charges.
For additional information on the 12b-1 Plan, please
see the SAI.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX
TREATMENT
For federal income tax purposes, all dividends
paid by the Funds and distributions of net realized
short-term capital gains are taxable as ordinary income
whether reinvested or received in cash unless you are
exempt from taxation or entitled to a tax deferral.
Distributions paid by a Fund from net realized long-
term capital gains, whether received in cash or
reinvested in additional shares, are taxable as a
capital gain. The capital gain holding period (and the
applicable tax rate) is determined by the length of
time the Fund has held the security and not the length
of time you have held shares in the Fund. The Fund
expects that, because of its investment objective, its
distributions will consist primarily of long- and short-
term capital gains. Investors are informed annually as
to the amount and nature of all dividends and capital
gains paid during the prior year. Such capital gains
and dividends may also be subject to state or local
taxes. If you are not required to pay taxes on your
income, you are generally not required to pay federal
income taxes on the amounts distributed to you.
The Fund intends to pay dividends and distribute
capital gains, if any, at least annually. When a
dividend or capital gain is distributed, the Fund's net
asset value decreases by the amount of the payment. If
you purchase shares shortly before a distribution, you
will be subject to income taxes on the distribution,
even though the value of your investment (plus cash
received, if any) remains the same. All dividends and
capital gains distributions will automatically be
reinvested in additional Fund shares at the then
prevailing net asset value unless an investor
specifically requests that either dividends or capital
gains or both be paid in cash. An investor may change
an election by telephone, subject to certain
limitations, by calling the Transfer Agent at
1-__________________.
Investors requesting to have dividends and/or
capital gains paid in cash may choose to have such
amounts mailed or sent via electronic funds transfer
("EFT"). Transfers via EFT generally take up to three
business days to reach the investor's bank account.
If an investor elects to receive distributions and
dividends by check and the post office cannot deliver
such check, or if such check remains uncashed for six
months, a Fund reserves the right to reinvest the
distribution check in the shareholder's account at the
Fund's then current net asset value per share and to
reinvest all subsequent distributions in shares of the
Fund.
If you do not furnish the Fund with your correct
social security number or taxpayer identification
number, the Fund is required by federal law to withhold
federal income tax from your distributions and
redemption proceeds at a rate of 31%.
An exchange of Fund shares for shares pursuant to
the Fund's exchange privilege is treated the same as an
ordinary sale and purchase for federal income tax
purposes and you will realize a capital gain or loss.
An exchange is not a tax-free transaction.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state,
or local tax considerations applicable to a particular
investor. You are urged to consult your own tax
advisor.
<PAGE>
YEAR 2000 ISSUE
The Fund's operations depend on the seamless
functioning of computer systems in the financial
service industry, including those of the Adviser,
Firstar and Firstar Bank. Many computer software
systems in use today cannot properly process date-
related information after December 31, 1999 because of
the method by which dates are encoded and calculated.
This failure, commonly referred to as the "Year 2000
Issue," could adversely affect the handling of security
trades, pricing and account servicing for the Fund.
The Adviser has made compliance with the Year 2000
Issue a high priority and is taking steps that it
believes are reasonably designed to address the Year
2000 Issue with respect to its computer systems. The
Adviser has also been informed that comparable steps
are being taken by the Fund's other major service
providers. The Adviser does not currently anticipate
that the Year 2000 Issue will have a material impact on
its ability to continue to fulfill its duties as
investment adviser to the Fund.
<PAGE>
DIRECTORS CUSTODIAN
Mark D. Foster Firstar Bank Milwaukee, N.A.
Mickey Kim Third Floor
Jeffrey N. Brown 615 E. Michigan Street
Mark E. Chesnut Milwaukee, Wisconsin 53202
John F. Dorenbusch
ADMINISTRATOR, TRANSFER AGENT
PRINCIPAL OFFICERS AND DIVIDEND-DISBURSING AGENT
Mark D. Foster, President Firstar Mutual Fund Services, LLC
Mickey Kim, Vice President, Third Floor
Treasurer and Secretary 615 E. Michigan Street
Milwaukee, Wisconsin 53202
INVESTMENT ADVISER INDEPENDENT ACCOUNTANTS
Kirr, Marbach & Company, LLC (Insert accountants & address)
621 Washington Street
Columbus, Indiana 47201
DISTRIBUTOR LEGAL COUNSEL
Rafferty Capital Markets, Inc. Godfrey & Kahn, S.C.
550 Mamaroneck Avenue 780 North Water Street
Harrison, New York 10528 Milwaukee, Wisconsin 53202
The SAI for the Fund contains additional
information about the Fund. The Fund's SAI, which is
incorporated by reference into this Prospectus, is
available without charge upon request to the address or
toll-free telephone number noted on the cover page of
this Prospectus. These documents may also be obtained
from certain financial intermediaries, including the
Fund's Distributor, who purchase and sell Fund shares.
General inquiries regarding the Fund can be directed to
the Fund at the address and toll-free telephone number
on the cover page of this Prospectus.
Information about the Fund (including the SAI) can
be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Please call the SEC at
1-800-SEC-0330 for information relating to the
operation of the Public Reference Room. Other
information about the Fund is available on the SEC's
Internet site at http://www.sec.gov or upon payment of
a duplicating fee, by writing the Public Reference Room
of the SEC, Washington, D.C. 20549-6009.
The Fund's 1940 Act File Number is 811-________.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Kirr, Marbach Partners Funds, Inc.
KIRR, MARBACH PARTNERS VALUE FUND
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-________________
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the
Prospectus of the Kirr, Marbach Partners Value Fund
(the "Fund"), dated _________ __, 1998. The Fund is a
series of Kirr, Marbach Partners Funds, Inc. (the
"Corporation").
A copy of the Prospectus is available without
charge upon request to the above-noted address or toll-
free telephone number.
This Statement of Additional Information is dated _________ __, 1998.
<PAGE>
TABLE OF CONTENTS
Page No.
FUND ORGANIZATION 3
INVESTMENT RESTRICTIONS 3
IMPLEMENTATION OF INVESTMENT OBJECTIVES 4
DIRECTORS AND OFFICERS 10
PRINCIPAL SHAREHOLDERS 12
INVESTMENT ADVISER 12
FUND TRANSACTIONS AND BROKERAGE 13
CUSTODIAN 14
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT 14
ADMINISTRATOR 15
DISTRIBUTOR AND PLAN OF DISTRIBUTION 15
PURCHASE, EXCHANGE AND PRICING OF SHARES 16
REDEMPTIONS IN KIND 19
TAXATION OF THE FUND 19
PERFORMANCE INFORMATION 20
INDEPENDENT ACCOUNTANTS 21
FINANCIAL STATEMENTS 21
APPENDIX A-1
In deciding whether to invest in the Fund, you
should rely on information in this Statement of
Additional Information and related Prospectus. The
Fund has not authorized others to provide additional
information. The Fund has not authorized the use of
this Statement of Additional Information in any state
or jurisdiction in which such offering may not legally
be made.
<PAGE>
FUND ORGANIZATION
The Corporation is an open-end, diversified,
management investment company, commonly referred to as
a mutual fund. The Fund is a series of common stock of
the Corporation, a Maryland company incorporated on
September 23, 1998. The Corporation is authorized to
issue shares of common stock in series and classes.
Each share of common stock of the Fund is entitled to
one vote, and each share is entitled to participate
equally in dividends and capital gain distributions and
in the assets of the Fund in the event of liquidation.
No certificates will be issued for shares held in your
account. You will, however, have full shareholder
rights. Generally, the Corporation will not hold
annual shareholders' meetings unless required by the
Investment Company Act of 1940, as amended (the "1940
Act") or Maryland law. Shareholders have certain
rights, including the right to call an annual meeting
upon a vote of 10% of the Corporation's outstanding
shares for the purpose of voting to remove one or more
directors or to transact any other business. The 1940
Act requires the Corporation to assist the shareholders
in calling such a meeting.
INVESTMENT RESTRICTIONS
The investment objective of the Fund is to seek
long-term capital growth. The following are the Fund's
fundamental investment restrictions which cannot be
changed without the approval of a majority of the
Fund's outstanding voting securities. As used herein,
a "majority of the Fund's outstanding voting
securities" means the lesser of (i) 67% of the shares
of common stock of the Fund represented at a meeting at
which more than 50% of the outstanding shares are
present, or (ii) more than 50% of the outstanding
shares of common stock of the Fund.
The Fund:
1. May not with respect to 75% of its total assets,
purchase the securities of any issuer (except
securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities)
if, as a result, (i) more than 5% of the Fund's
total assets would be invested in the securities
of that issuer, or (ii) the Fund would hold more
than 10% of the outstanding voting securities of
that issuer.
2. May (i) borrow money from banks for temporary or
emergency purposes (but not for leveraging or the
purchase of investments) and (ii) make other
investments or engage in other transactions
permissible under the Investment Company Act of
1940, as amended (the "1940 Act"), which may
involve a borrowing, including borrowing through
reverse repurchase agreements, provided that the
combination of (i) and (ii) shall not exceed 33
1/3% of the value of the Fund's total assets
(including the amount borrowed), less the Fund's
liabilities (other than borrowings). If the
amount borrowed at any time exceeds 33 1/3% of the
Fund's total assets, the Fund will, within three
days thereafter (not including Sundays, holidays
and any longer permissible period), reduce the
amount of the borrowings such that the borrowings
do not exceed 33 1/3% of the Fund's total assets.
The Fund may also borrow money from other persons
to the extent permitted by applicable law.
3. May not issue senior securities, except as
permitted under the 1940 Act.
4. May not act as an underwriter of another issuer's
securities, except to the extent that the Fund may
be deemed to be an underwriter within the meaning
of the Securities Act of 1933, as amended (the
"Securities Act"), in connection with the purchase
and sale of portfolio securities.
5. May not purchase or sell physical commodities
unless acquired as a result of ownership of
securities or other instruments (but this shall
not prevent the Fund from purchasing or selling
options, futures contracts, or other derivative
instruments, or from investing in securities or
other instruments backed by physical commodities).
6. May not make loans if, as a result, more than 33
1/3% of the Fund's total assets would be lent to
other persons, except through (i) purchases of
debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.
7. May not purchase the securities of any issuer if,
as a result, more than 25% of the Fund's total
assets would be invested in the securities of
issuers, the principal business activities of
which are in the same industry.
<PAGE>
8. May not purchase or sell real estate unless
acquired as a result of ownership of securities or
other instruments (but this shall not prohibit the
Fund from purchasing or selling securities or
other instruments backed by real estate or of
issuers engaged in real estate activities).
The following are the Fund's non-fundamental
investment policies which may be changed by the Board
of Directors without shareholder approval.
The Fund may not:
1. Sell securities short, unless the Fund owns or has
the right to obtain securities equivalent in kind
and amount to the securities sold short, or unless
it covers such short sale as required by the
current rules and positions of the Securities and
Exchange Commission (the "SEC") or its staff.
2. Purchase securities on margin, except that the
Fund may obtain such short-term credits as are
necessary for the clearance of transactions.
3. Invest in illiquid securities if, as a result of
such investment, more than 10% of its net assets
would be invested in illiquid securities.
4. Purchase securities of other investment companies
except in compliance with the 1940 Act.
5. Engage in futures or options on futures
transactions.
6. Make any loans, except through (i) purchases of
debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.
7. Borrow money except from banks or through reverse
repurchase agreements, and will not purchase
securities when bank borrowings exceed 5% of its
total assets.
Except for the fundamental investment limitations
listed above and the Fund's investment objective, the
Fund's other investment policies are not fundamental
and may be changed with approval of the Corporation's
Board of Directors. Unless noted otherwise, if a
percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage
resulting from a change in the Fund's assets (i.e., due
to cash inflows or redemptions) or in market value of
the investment or the Fund's assets will not constitute
a violation of that restriction.
IMPLEMENTATION OF INVESTMENT OBJECTIVES
The following information supplements the
discussion of the Fund's investment objectives and
strategy described in the Prospectus under the captions
"Investment Objectives" and "Implementation of
Investment Objectives."
Illiquid Securities
The Fund may invest up to 10% of its net assets in
illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction,
illiquid securities include, but are not limited to,
restricted securities (securities the disposition of
which is restricted under the federal securities laws),
repurchase agreements with maturities in excess of
seven days and other securities that are not readily
marketable. The Board of Directors of the Corporation,
or its delegate, has the ultimate authority to
determine, to the extent permissible under the federal
securities laws, which securities are liquid or
illiquid for purposes of this 10% limitation. Certain
securities exempt from registration or issued in
transactions exempt from registration under the
Securities Act, such as securities that may be resold
to institutional investors under Rule 144A under the
Securities Act, may be considered liquid under
guidelines adopted by the Board of Directors. However,
investing in securities which may be resold pursuant to
Rule 144A under the Securities Act could have the
effect of increasing the level of the Fund's
illiquidity to the extent that institutional investors
become, for a time, uninterested in purchasing such
securities.
<PAGE>
The Board of Directors has delegated to the
Adviser the day-to-day determination of the liquidity
of any security, although it has retained oversight and
ultimate responsibility for such determinations.
Although no definitive liquidity criteria are used, the
Board of Directors has directed the Adviser to look to
such factors as (i) the nature of the market for a
security (including the institutional private resale
market), (ii) the terms of certain securities or other
instruments allowing for the disposition to a third
party or the issuer thereof (e.g., certain repurchase
obligations and demand instruments), (iii) the
availability of market quotations (e.g., for securities
quoted in the PORTAL system), and (iv) other
permissible relevant factors.
Restricted securities may be sold only in
privately negotiated transactions or in a public
offering with respect to which a registration statement
is in effect under the Securities Act. Where
registration is required, the Fund may be obligated to
pay all or part of the registration expenses and a
considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted
to sell a security under an effective registration
statement. If, during such a period, adverse market
conditions were to develop, the Fund might obtain a
less favorable price than that which prevailed when it
decided to sell. Restricted securities will be priced
at fair value as determined in good faith by the Board
of Directors. If, through the appreciation of
restricted securities or the depreciation of
unrestricted securities, the Fund should be in a
position where more than 10% of the value of its net
assets are invested in illiquid securities, including
restricted securities which are not readily marketable
(except for Rule 144A securities deemed to be liquid by
the Adviser), the Fund will take such steps as is
deemed advisable, if any, to protect liquidity.
Warrants
The Fund may invest up to 10% of its net assets in
warrants. Warrants are options to purchase equity
securities at a specific price for a specific period of
time. They do not represent ownership of the
securities but only the right to buy them. Investing
in warrants is purely speculative in that they have no
voting rights, pay no dividends and have no rights with
respect to the assets of the issuer of the underlying
securities. In addition, the value of a warrant does
not necessarily change with the value of the underlying
securities, and a warrant must be exercised prior to
its expiration date or it ceases to have value.
Fixed Income Securities
Ratings. The Fund will limit investments in fixed
income securities to those that are rated at the time
of purchase as at least investment grade by at least
one national rating organization, such as S&P or
Moody's, or, if unrated, are determined to be of
equivalent quality by the Adviser. Investment grade
fixed income securities include:
U.S. government securities;
Bonds or bank obligations rated in one of the
four highest categories (e.g., BBB- or higher
by S&P);
Short-term notes rated in one of the two
highest categories (e.g., SP-2 or higher by
S&P);
Commercial paper or short-term bank
obligations rated in one of the three highest
categories (e.g., A-3 or higher by S&P); and
Repurchase agreements involving investment
grade fixed income securities.
Investment grade fixed income securities are generally
believed to have a lower degree of credit risk. If a
security's rating falls below the above criteria, the
Adviser will determine what action, if any, should be
taken to ensure compliance with the Fund's investment
objective and to ensure that the Fund will at no time
have 5% or more of its net assets invested in non-
investment grade debt securities. Additional
information concerning securities ratings is contained
in the Appendix.
Government Securities. U.S. government securities
are issued or guaranteed by the U.S. government or its
agencies or instrumentalities. These securities may
have different levels of government backing. U.S.
Treasury obligations, such as Treasury bills, notes,
and bonds are backed by the full faith and credit of
the U.S. Treasury. Some U.S. government agency
securities are also backed by the full faith and credit
of the U.S. Treasury, such as securities issued by the
Government National Mortgage Association (GNMA). Other
U.S. government securities may be backed
<PAGE>
by the right
of the agency to borrow from the U.S. Treasury, such as
securities issued by the Federal Home Loan Bank, or may
be backed only by the credit of the agency. The U.S.
government and its agencies and instrumentalities only
guarantee the payment of principal and interest and not
the market value of the securities. The market value
of U.S. government securities will fluctuate based on
interest rate changes and other market factors.
Convertible Securities. Convertible securities
are bonds, debentures, notes, preferred stocks or other
securities that may be converted into or exchanged for
a specified amount of common stock of the same or a
different issuer within a particular period of time at
a specified price or formula. A convertible security
entitles the holder to receive interest normally paid
or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is
redeemed, converted, or exchanged. Convertible
securities have unique investment characteristics in
that they generally (i) have higher yields than common
stocks, but lower yields than comparable non-
convertible securities, (ii) are less subject to
fluctuation in value than the underlying stock since
they have fixed income characteristics, and (iii)
provide the potential for capital appreciation if the
market price of the underlying common stock increases.
A convertible security may be subject to redemption at
the option of the issuer at a price established in the
convertible security's governing instrument. If a
convertible security held by the Fund is called for
redemption, the Fund will be required to permit the
issuer to redeem the security, convert it into the
underlying common stock, or sell it to a third party.
The Adviser will limit investments in convertible debt
securities to those that are rated at the time of
purchase as investment grade by at least one national
rating organization, such as S&P or Moody's, or, if
unrated, are determined to be of equivalent quality by
the Adviser.
Variable- or Floating-Rate Securities. Variable-
rate securities provide for automatic establishment of
a new interest rate at fixed intervals (e.g., daily,
monthly, semi-annually, etc.). Floating-rate
securities generally provide for automatic adjustment
of the interest rate whenever some specified interest
rate index changes. The interest rate on variable- or
floating-rate securities is ordinarily determined by
reference to or is a percentage of a bank's prime rate,
the 90-day U.S. Treasury bill rate, the rate of return
on commercial paper or bank certificates of deposit, an
index of short-term interest rates, or some other
objective measure.
Variable- or floating-rate securities frequently
include a demand feature entitling the holder to sell
the securities to the issuer at par. In many cases,
the demand feature can be exercised at any time on
seven days notice, in other cases, the demand feature
is exercisable at any time on 30 days notice or on
similar notice at intervals of not more than one year.
Some securities which do not have variable or floating
interest rates may be accompanied by puts producing
similar results and price characteristics.
Variable-rate demand notes include master demand
notes which are obligations that permit the Fund to
invest fluctuating amounts, which may change daily
without penalty, pursuant to direct arrangements
between the Fund, as lender, and the borrower. The
interest rates on these notes fluctuate from time to
time. The issuer of such obligations normally has a
corresponding right, after a given period, to prepay in
its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified
number of days' notice to the holders of such
obligations. The interest rate on a floating-rate
demand obligation is based on a known lending rate,
such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The
interest rate on a variable-rate demand obligation is
adjusted automatically at specified intervals.
Frequently, such obligations are secured by letters of
credit or other credit support arrangements provided by
banks. Because these obligations are direct lending
arrangements between the lender and borrower, it is not
contemplated that such instruments will generally be
traded. There generally is not an established
secondary market for these obligations, although they
are redeemable at face value. Accordingly, where the
obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to
pay principal and interest on demand. Such obligations
frequently are not rated by credit rating agencies and,
if not so rated, the Fund may invest in them only if
the Adviser determines that at the time of investment
other obligations are of comparable quality to the
other obligations in which the Fund may invest.
The Fund will not invest more than 10% of its net
assets in variable- and floating-rate demand
obligations that are not readily marketable (a variable-
or floating-rate demand obligation that may be disposed
of on not more than seven days notice will be deemed
readily marketable and will not be subject to this
limitation). See "Implementation of Investment
Objectives -- Illiquid Securities." In addition, each
variable- and floating-rate obligation must meet the
credit quality requirements applicable to all the
Fund's investments at the time of purchase. When
determining whether
<PAGE>
such an obligation meets the Fund's
credit quality requirements, the Fund may look to the
credit quality of the financial guarantor providing a
letter of credit or other credit support arrangement.
Repurchase Agreements. The Fund may enter into
repurchase agreements with certain banks or non-bank
dealers. In a repurchase agreement, the Fund buys a
security at one price, and at the time of sale, the
seller agrees to repurchase the obligation at a
mutually agreed upon time and price (usually within
seven days). The repurchase agreement, thereby,
determines the yield during the purchaser's holding
period, while the seller's obligation to repurchase is
secured by the value of the underlying security. The
Adviser will monitor, on an ongoing basis, the value of
the underlying securities to ensure that the value
always equals or exceeds the repurchase price plus
accrued interest. Repurchase agreements could involve
certain risks in the event of a default or insolvency
of the other party to the agreement, including possible
delays or restrictions upon the Fund's ability to
dispose of the underlying securities. Although no
definitive creditworthiness criteria are used, the
Adviser reviews the creditworthiness of the banks and
non-bank dealers with which the Fund enters into
repurchase agreements to evaluate those risks.
Reverse Repurchase Agreements
The Fund may, with respect to up to 5% of its net
assets, engage in reverse repurchase agreements. In a
reverse repurchase agreement, the Fund would sell a
security and enter into an agreement to repurchase the
security at a specified future date and price. The
Fund generally retains the right to interest and
principal payments on the security. Since the Fund
receives cash upon entering into a reverse repurchase
agreement, it may be considered a borrowing. When
required by guidelines of the SEC, the Fund will set
aside permissible liquid assets in a segregated account
to secure its obligations to repurchase the security.
Foreign Currencies
The Fund may purchase and sell foreign currency on
a spot or forward basis to facilitate the purchase of
foreign securities. Because most foreign securities
are denominated in non-U.S. currencies, the Fund may be
required to purchase and sell foreign currencies to
engage in transactions in a foreign security.
Purchasing and selling foreign currency on a spot
(cash) basis involves converting U.S. dollars into the
applicable foreign currency or converting the foreign
currency into U.S. dollars for purposes of short-term
settlement of the foreign security transaction.
Purchasing and selling foreign currency on a forward
basis involves converting U.S. dollars into the
applicable foreign currency or converting the foreign
currency into U.S. dollars for purposes of settling a
foreign security transaction at some date in the future
(i.e., when the Fund is obligated to purchase or sell a
foreign security at a specified future date at a
specified price). In general, if the currency in which
a Fund investment is denominated appreciates against
the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate
of the currency would adversely affect the value of the
Fund investment expressed in U.S. dollars.
Depositary Receipts and Foreign Securities
The Fund may invest up to 20% of its net assets in
foreign securities directly or by purchasing depositary
receipts, including American Depositary Receipts
("ADRs") and European Depositary Receipts ("EDRs") or
other securities convertible into securities or issuers
based in foreign countries. These securities may not
necessarily be denominated in the same currency as the
securities into which they may be converted.
Generally, ADRs, in registered form, are denominated in
U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs, in bearer form, may be
denominated in other currencies and are designed for
use in European securities markets. ADRs are receipts
typically issued by a U.S. Bank or trust company
evidencing ownership of the underlying securities.
EDRs are European receipts evidencing a similar
arrangement. For purposes of the Fund's investment
objectives, ADRs and EDRs are deemed to have the same
classification as the underlying securities they
represent. Thus, an ADR or EDR representing ownership
of common stock will be treated as common stock.
ADR facilities may be established as either
"unsponsored" or "sponsored." While ADRs issued under
these two types of facilities are in some respects
similar, there are distinctions between them relating
to the rights and obligations of ADR holders and the
practices of market participants. For example, a non-
sponsored depositary may not provide the same
shareholder information that a sponsored depositary is
required to provide under its contractual arrangements
with the issuer, including reliable financial
statements. Under the terms of most sponsored
arrangements,
<PAGE>
depositories agree to distribute notices
of shareholder meetings and voting instructions, and to
provide shareholder communications and other
information to the ADR holders at the request of the
issuer of the deposited securities.
Investments in securities of foreign issuers
involve risks which are in addition to the usual risks
inherent in domestic investments. In many countries
there is less publicly available information about
issuers than is available in the reports and ratings
published about companies in the United States.
Additionally, foreign countries are not subject to
uniform accounting, auditing and financial reporting
standards. Other risks inherent in foreign investments
include expropriation; confiscatory taxation;
withholding taxes on dividends or interest; less
extensive regulation of foreign brokers, securities
markets, and issuers; costs incurred in conversions
between currencies; possible delays in settlement in
foreign securities markets; limitations on the use or
transfer of assets (including suspension of the ability
to transfer currency from a given country); the
difficulty of enforcing obligations in other countries;
diplomatic developments; and political or social
instability. Foreign economies may differ favorably or
unfavorably from the U.S. economy in various respects
and many foreign securities are less liquid and their
prices are more volatile than comparable U.S.
securities. From time to time foreign securities may
be difficult to liquidate rapidly without adverse price
effects. Certain costs attributable to foreign
investing, such as custody charges and brokerage costs,
may be higher than those attributable to domestic
investment. The value of the Fund's assets denominated
in foreign currencies will increase or decrease in
response to fluctuations in the value of those foreign
currencies relative to the U.S. dollar. Currency
exchange rates can be volatile at times in response to
supply and demand in the currency exchange markets,
international balances of payments, governmental
intervention, speculation and other political and
economic conditions. In addition, a number of European
countries have entered into the European Monetary Union
("EMU"), an economic and monetary union which will
result in a single currency and a single monetary
policy for all EMU countries beginning January 1, 1999.
The EMU may have adverse effects on foreign securities
if it is not implemented as planned or if one or more
countries withdraws from the EMU. The EMU may also
have adverse effects on foreign securities if portfolio
management software used by the Adviser or the
accounting and trading systems used by the Fund do not
recognize the Euro, the new currency adopted by the
EMU. In the Euro's infancy, investment advisers, like
the Adviser, will be unfamiliar with new indices and
benchmarks for EMU countries and companies.
Investment Companies
The Fund may invest, to a limited extent, in
investment companies, including open-end and closed-end
mutual funds and money market funds. Under the 1940
Act, the Fund may invest up to 10% of its total assets
in shares of other investment companies and up to 5% of
its total assets in any one investment company as long
as the investment does not represent more than 3% of
the voting stock of the acquired investment company.
The Fund does not intend to invest in such investment
companies unless, in the judgment of the Adviser, the
potential benefits of such investments justify the
payment of any associated fees and expenses.
High-Yield (High-Risk) Securities
In General. The Fund will invest in fixed income
securities rated at the time of purchase as at least
investment grade by at least one nationally recognized
statistical rating organization ("NRSROs"), such as S&P
or Moody's. If a security's rating falls below the
ratings criteria set forth in the Prospectus, the
Adviser will determine what action, if any, should be
taken to ensure compliance with the Fund's investment
objective and to ensure that the Fund will at no time
have 5% or more of its net assets invested in non-
investment grade debt securities. Non-investment grade
debt obligations ("lower-quality securities") include
(1) bonds rated as low as C by S&P, Moody's and
comparable ratings of other NRSROs; (2) commercial
paper rated as low as C by S&P, Not Prime by Moody's
and comparable ratings of other NRSROs; and (3) unrated
debt obligations of comparable quality. Lower-quality
securities, while generally offering higher yields than
investment grade securities with similar maturities,
involve greater risks, including the possibility of
default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal. The
special risk considerations in connection with
investments in these securities are discussed below.
Refer to the Appendix for a description of the
securities ratings.
Effect of Interest Rates and Economic Changes.
The lower-quality and comparable unrated security
market is relatively new and its growth has paralleled
a long economic expansion. As a result, it is not
clear how this market may withstand a prolonged
recession or economic downturn. Such conditions could
severely disrupt the market for and adversely affect
the value of such securities.
<PAGE>
All interest-bearing securities typically
experience appreciation when interest rates decline and
depreciation when interest rates rise. The market
value of lower-quality and comparable unrated
securities tend to reflect individual corporate
developments to a greater extent than do higher rated
securities. As a result, they generally involve more
credit risks than securities in the higher-rated
categories. During an economic downturn or a sustained
period of rising interest rates, highly leveraged
issuers of lower-quality and comparable unrated
securities may experience financial stress and may not
have sufficient revenues to meet their payment
obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific
corporate developments, the issuer's inability to meet
specific projected business forecasts or the
unavailability of additional financing. The risk of
loss due to default by an issuer of these securities is
significantly greater than issuers of higher-rated
securities because such securities are generally
unsecured and are often subordinated to other
creditors. Further, if the issuer of a lower-quality
or comparable unrated security defaulted, the Fund
might incur additional expenses to seek recovery.
Periods of economic uncertainty and changes would also
generally result in increased volatility in the market
prices of these securities and thus in the Fund's net
asset value.
As previously stated, the value of a lower-quality
or comparable unrated security will decrease in a
rising interest rate market and accordingly, so will
the Fund's net asset value. If the Fund experiences
unexpected net redemptions in such a market, it may be
forced to liquidate a portion of its portfolio
securities without regard to their investment merits.
Due to the limited liquidity of lower-quality and
comparable unrated securities (discussed below), the
Fund may be forced to liquidate these securities as a
substantial discount. Any such liquidation would force
the Fund to sell the more liquid portion of its
portfolio.
Payment Expectations. Lower-quality and
comparable unrated securities typically contain
redemption, call or prepayment provisions which permit
the issuer of such securities containing such
provisions to, at its discretion, redeem the
securities. During periods of falling interest rates,
issuers of these securities are likely to redeem or
prepay the securities and refinance them with debt
securities with a lower interest rate. To the extent
an issuer is able to refinance the securities, or
otherwise redeem them, the Fund may have to replace the
securities with a lower yielding security, which would
result in a lower return for the Fund.
Credit Ratings. Credit ratings issued by credit
rating agencies are designed to evaluate the safety of
principal and interest payments of rated securities.
They do not, however, evaluate the market value risk of
lower-quality securities and, therefore, may not fully
reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely
changes in a rating to reflect changes in the economy
or in the condition of the issuer that affect the
market value of the security. Consequently, credit
ratings are used only as a preliminary indicator of
investment quality. Investments in lower-quality and
comparable unrated obligations will be more dependent
on the Adviser's credit analysis than would be the case
with investments in investment-grade debt obligations.
The Adviser employs its own credit research and
analysis, which includes a study of existing debt,
capital structure, ability to service debt and to pay
dividends, the issuer's sensitivity to economic
conditions, its operating history and the current trend
of earnings. The Adviser continually monitors the
investments in the Fund's portfolio and carefully
evaluates whether to dispose of or to retain lower-
quality and comparable unrated securities whose credit
ratings or credit quality may have changed.
Liquidity and Valuation. The Fund may have
difficulty disposing of certain lower-quality and
comparable unrated securities because there may be a
thin trading market for such securities. Because not
all dealers maintain markets in all lower-quality and
comparable unrated securities, there is no established
retail secondary market for many of these securities.
The Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional
investors. To the extent a secondary trading market
does exist, it is generally not as liquid as the
secondary market for higher-rated securities. The lack
of a liquid secondary market may have an adverse impact
on the market price of the security. As a result, the
Fund's asset value and ability to dispose of particular
securities, when necessary to meet the Fund's liquidity
needs or in response to a specific economic event, may
be impacted. The lack of a liquid secondary market for
certain securities may also make it more difficult for
the Fund to obtain accurate market quotations for
purposes of valuing the Fund's portfolio. Market
quotations are generally available on many lower-
quality and comparable unrated issues only from a
limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for
actual sales. During periods of thin trading, the
spread between bid and asked prices is likely to
increase significantly. In addition, adverse publicity
and investor perceptions, whether or not based on
<PAGE>
fundamental analysis, may decrease the values and
liquidity of lower-quality and comparable unrated
securities, especially in a thinly traded market.
Legislation. Legislation may be adopted, from
time to time, designed to limit the use of certain
lower-quality and comparable unrated securities by
certain issuers. It is anticipated that if additional
legislation is enacted or proposed, it could have a
material affect on the value of these securities and
the existence of a secondary trading market for the
securities.
When-Issued Securities
The Fund may from time to time invest up to 5% of
its net assets in securities purchased on a "when-
issued" basis. The price of securities purchased on a
when-issued basis is fixed at the time the commitment
to purchase is made, but delivery and payment for the
securities take place at a later date. Normally, the
settlement date occurs within 45 days of the purchase.
During the period between the purchase and settlement,
no payment is made by the Fund to the issuer, no
interest is accrued on debt securities and no dividend
income is earned on equity securities. Forward
commitments involve a risk of loss if the value of the
security to be purchased declines prior to the
settlement date, which risk is in addition to the risk
of decline in value of the Fund's other assets. While
when-issued securities may be sold prior to the
settlement date, the Fund intends to purchase such
securities with the purpose of actually acquiring them.
At the time the Fund makes the commitment to purchase a
security on a when-issued basis, it will record the
transaction and reflect the value of the security in
determining its net asset value. The Fund does not
believe that its net asset value will be adversely
affected by its purchases of securities on a when-
issued basis.
The Fund will maintain cash and marketable
securities equal in value to commitments for when-
issued securities. Such segregated securities either
will mature or, if necessary, be sold on or before the
settlement date. When the time comes to pay for when-
issued securities, the Fund will meet its obligations
from then available cash flow, sale of the securities
held in the separate account, described above, sale of
other securities or, although it would not normally
expect to do so, from the sale of the when-issued
securities themselves (which may have a market value
greater or less than the Fund's payment obligation).
Unseasoned Companies
The Fund may invest up to 5% of its total assets
in unseasoned companies, which are companies with less
than three years of continuous operation. While
smaller companies generally have potential for rapid
growth, they often involve higher risks because they
lack the management experience, financial resources,
product diversification and competitive strengths of
larger corporations. In addition, in many instances,
the securities of smaller companies are traded only
over-the-counter or on regional securities exchanges,
and the frequency and volume of their trading is
substantially less than is typical of larger companies.
Therefore, the securities of these companies may be
subject to wider price fluctuations. When making large
sales, the Fund may have to sell portfolio holdings of
these companies at discounts from quoted prices or may
have to make a series of smaller sales over an extended
period of time due to the trading volume in smaller
company securities.
Short Sales Against the Box
The Fund may sell securities short against the box
to hedge unrealized gains on portfolio securities.
Selling securities short against the box involves
selling a security that the Fund owns or has the right
to acquire, for delivery at a specified date in the
future. If the Fund sells securities short against the
box, it may protect unrealized gains, but will lose the
opportunity to profit on such securities if the price
rises.
DIRECTORS AND OFFICERS
Under the laws of the State of Maryland, the Board
of Directors of the Corporation is responsible for
managing its business and affairs. The directors and
officers of the Corporation, together with information
as to their principal business occupations during the
last five years, and other information, are shown
below. Each director who is deemed an "interested
person," as defined in the 1940 Act, is indicated by an
asterisk.
<PAGE>
*Mark D. Foster, a Director, Chairman and
President of the Corporation.
Mr. Foster, 40 years old, received a Bachelor of
Science degree in finance from Ball State University in
1979. Prior to joining the Adviser, Mr. Foster managed
equity investments for Merchants Investment Counseling,
Inc. Mr. Foster joined the Adviser in 1987 as a
portfolio manager. Mr. Foster has been the Adviser's
chief investment officer since 1997. Mr. Foster is a
Chartered Financial Analyst.
*Mickey Kim, a Director, Vice President, Secretary
and Treasurer of the Corporation.
Mr. Kim, 40 years old, earned a Bachelor of
Science degree in finance from the University of
Illinois in 1980 and a Masters of Business
Administration in finance from the University of
Chicago in 1982. Prior to joining the Adviser, Mr. Kim
was an analyst with Driehaus Capital Management. Mr.
Kim joined the Adviser in 1986 as a portfolio manager.
Since 1996, Mr. Kim has been the chief operating
officer of the Adviser. Mr. Kim is a Chartered
Financial Analyst.
Jeffrey N. Brown, a Director of the Corporation.
Mr. Brown, 39 years old, is currently the
President of Home News Enterprises, a publishing
company. From 1992 to 1997, Mr. Brown served as Vice
President for that company.
Mark E. Chesnut, a Director of the Corporation.
Mr. Chesnut, 51 years old, worked at Cummins
Engine Co., a manufacturer of diesel engines, from 1966
to 1998. Mr. Chesnut's most recent position with
Cummins Engine Co. was Vice President of Public
Affairs. Mr. Chesnut is currently self-employed as a
health care and education consultant. Since 1990,
Mr. Chesnut has served as a director and chairman of
the Southeastern Indiana Health Organization.
John F. Dorenbusch, a Director of the Corporation.
Mr. Dorenbusch, 60 years old, is retired. Prior
to retiring, Mr. Dorenbusch was President and a
director of Tipton Lakes Company, a real estate
development company, from 1981 to 1996. Mr. Dorenbusch
was also President and a director of Irwin Management
Company, an investment, financial and tax management
company, from 1990 to 1994 and 1981-1996, respectively.
Mr. Dorenbusch served as a director of Irwin-Sweeney-
Miller Foundation, a private foundation from 1987 to
1996.
The address for Messrs. Foster and Kim is Kirr,
Marbach & Company, LLC, 621 Washington Street,
Columbus, Indiana 47201. The address for Mr. Brown is
333 Second Street, Columbus, Indiana 47201. The
address for Mr. Chesnut is 9567 West Kelly Court,
Columbus, Indiana 47201. The address for Mr.
Dorenbusch is 4115 North Riverside Drive, Columbus,
Indiana 47203.
As of _________ __, 1998, officers and directors
of the Corporation did not beneficially own any of the
shares of common stock of the Fund's then outstanding
shares; however, the Adviser owned 100% of such shares.
Directors and officers of the Corporation who are also
officers, directors, employees or shareholders of the
Adviser do not receive any remuneration from the Fund
for serving as directors or officers.
The following table provides information relating
to annual compensation to be paid to directors of the
Corporation for their services as such (1):
<PAGE>
Name Cash Other Total
Compensation(2) Compensation
Mark D. Foster $ 0 $0 $ 0
Mickey Kim $ 0 $0 $ 0
Jeffrey N. Brown $2,000 $0 $2,000
Mark E. Chesnut $2,000 $0 $2,000
John F. Dorenbusch $2,000 $0 $2,000
All directors $6,000 $0 $6,000
as a group
(5 persons)
____________________
(1) The amounts indicated are estimates of amounts to
be paid by the Corporation.
(2) Each director who is not deemed an "interested
person" as defined in the 1940 Act, will receive $500
for each Board of Directors meeting attended by such
person and reasonable expenses incurred in connection
therewith. The Board anticipates holding four meetings
during fiscal 1999. Thus, each disinterested director
is entitled to up to $2,000 during such time period
from the Corporation, plus reasonable expenses.
PRINCIPAL SHAREHOLDERS
As of _________ __, 1998, the following person
owned of record or is known by the Corporation to own
of record or beneficially 5% or more of the outstanding
shares of the Fund:
Name and Address No. Shares Percentage
Kirr, Marbach & Company, LLC 10,000 100%
Based on the foregoing, as of ___________, 1998,
the Adviser owned a controlling interest in the
Corporation. Shareholders with a controlling interest
could effect the outcome of proxy voting or the
direction of management of the Corporation.
INVESTMENT ADVISER
Kirr, Marbach & Company, LLC (the "Adviser") is
the investment adviser to the Fund. The Adviser is
controlled by David Kirr and Gregg Summerville.
The investment advisory agreement between the
Corporation and the Adviser dated as of _________ __,
1998 (the "Advisory Agreement") has an initial term of
two years and thereafter is required to be approved
annually by the Board of Directors of the Corporation
or by vote of a majority of the Fund's outstanding
voting securities. Each annual renewal must also be
approved by the vote of a majority of the Corporation's
directors who are not parties to the Advisory Agreement
or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such
approval. The Advisory Agreement was approved by the
Board of Directors, including a majority of the
disinterested directors on _________ __, 1998 and by
the initial shareholders of the Fund on _________ __,
1998. The Advisory Agreement is terminable without
penalty, on 60 days' written notice by the Board of
Directors of the Corporation, by vote of a majority of
the Fund's outstanding voting securities or by the
Adviser, and will terminate automatically in the event
of its assignment.
<PAGE>
Under the terms of the Advisory Agreement, the
Adviser manages the Fund's investments and business
affairs, subject to the supervision of the
Corporation's Board of Directors. At its expense, the
Adviser provides office space and all necessary office
facilities, equipment and personnel for managing the
investments of the Fund. As compensation for its
services, the Fund pays the Adviser an annual
management fee of 1.00% of its average daily net
assets. The advisory fee is accrued daily and paid
monthly.
The Adviser has agreed that for the fiscal year
ending _________ __, 1999, the Adviser will waive its
management fee and/or reimburse the Fund's operating
expenses to the extent necessary to ensure that the
total operating expenses (on an annual basis) for the
Fund do not exceed 1.50% of average daily net assets.
After such date, the Adviser may from time to time
voluntarily waive all or a portion of its fee and/or
absorb expenses for the Fund. Any waiver of fees or
absorption of expenses will be made on a monthly basis
and, with respect to the latter, will be paid to the
Fund by reduction of the Adviser's fee. Any such
waiver/absorption is subject to later adjustment during
the term of the Advisory Agreement to allow Adviser to
recoup amounts waived/absorbed, provided, however,
that, the Adviser shall only be entitled to recoup such
amounts for a maximum period of three years from the
date such amount was waived or reimbursed.
FUND TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Adviser, in its
capacity as portfolio manager, is responsible for
decisions to buy and sell securities for the Fund and
for the placement of the Fund's securities business,
the negotiation of the commissions to be paid on such
transactions and the allocation of portfolio brokerage
business. The Adviser seeks to obtain the best
execution at the best security price available with
respect to each transaction. The best price to the
Fund means the best net price without regard to the mix
between purchase or sale price and commission, if any.
While the Adviser seeks reasonably competitive
commission rates, the Fund does not necessarily pay the
lowest available commission. Brokerage will not be
allocated based on the sale of the Fund's shares.
When the Adviser buys or sells the same security
for two or more advisory accounts, including the Fund,
the Adviser may place concurrent orders with a single
broker to be executed as a single, aggregated block in
order to facilitate orderly and efficient execution.
Whenever the Adviser does so, each advisory account on
whose behalf an order was placed will receive the
average price at which the block was executed and will
bear a proportionate share of all transaction costs,
based on the size of the advisory account's order.
While the Adviser believes combining orders for
advisory accounts will, over time, be advantageous to
all participants, in particular cases the average price
at which the block was executed could be less
advantageous to one particular advisory account than if
the advisory account had been the only account
effecting the transaction or had completed its
transaction before the other participants.
Section 28(e) of the Securities Exchange Act of
1934, as amended, ("Section 28(e)"), permits an
investment adviser, under certain circumstances, to
cause an account to pay a broker or dealer who supplies
brokerage and research services a commission for
effecting a transaction in excess of the amount of
commission another broker or dealer would have charged
for effecting the transaction. Brokerage and research
services include (a) furnishing advice as to the value
of securities, the advisability of investing,
purchasing or selling securities and the availability
of securities or purchasers or sellers of securities;
(b) furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; and
(c) effecting securities transactions and performing
functions incidental thereto (such as clearance,
settlement, and custody).
In selecting brokers or dealers, the Adviser
considers investment and market information and other
research, such as economic, securities and performance
measurement research provided by such brokers or
dealers and the quality and reliability of brokerage
services, including execution capability, performance
and financial responsibility. Accordingly, the
commissions charged by any such broker or dealer may be
greater than the amount another firm might charge if
the Adviser determines in good faith that the amount of
such commissions is reasonable in relation to the value
of the research information and brokerage services
provided by such broker or dealer to the Fund. The
Adviser believes that the research information received
in this manner provides the Fund with benefits by
supplementing the research otherwise available to the
Fund. Such higher commissions will not be paid by the
Fund unless (a) the Adviser determines in good faith
that the amount is reasonable in relation to the
services in terms of the particular transaction or in
terms of the Adviser's overall responsibilities with
respect to the accounts, including the Fund, as to
which it exercises investment discretion; (b) such
payment is made in compliance with the provisions of
Section 28(e) and other
<PAGE>
applicable state and federal
laws; and (c) in the opinion of the Adviser, the total
commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long
term.
The Adviser may, from time to time, cause advisory
accounts, including the Fund, to participate in initial
public offerings ("IPOs"). The Adviser's policy is to
allocate, to the extent operationally and otherwise
practical, IPOs, including those IPOs where the Adviser
anticipates the security will initially trade in the
market at a premium ("hot issues"), to each advisory
account without regard to the size or fee structure of
the advisory account. The Adviser allocates IPOs to
advisory accounts based on numerous issues, including
cash availability, the time advisory account funds have
been available for investment or have had investments
available for sale, investment objectives and
restrictions, an advisory account's participation in
other IPOs and relative size of portfolio holdings of
the same or comparable securities. An additional
consideration used in the Adviser's allocation of "hot
issues" is the relative investment performance of an
advisory account versus the index benchmarks and/or the
average of all of the Adviser's advisory accounts.
From time to time, the Adviser may allocate "hot
issues" to enhance the performance of advisory accounts
that the Adviser believes have lagged relative to the
performance of other accounts. The Adviser's
participation in and allocation of "hot issues" is
extremely limited.
The Adviser places portfolio transactions for
other advisory accounts managed by the Adviser.
Research services furnished by firms through which the
Fund effects its securities transactions may be used by
the Adviser in servicing all of its accounts; not all
of such services may be used by the Adviser in
connection with the Fund. The Adviser believes it is
not possible to measure separately the benefits from
research services to each of the accounts (including
the Fund) managed by it. Because the volume and nature
of the trading activities of the accounts are not
uniform, the amount of commissions in excess of those
charged by another broker paid by each account for
brokerage and research services will vary. However,
the Adviser believes such costs to the Fund will not be
disproportionate to the benefits received by the Fund
on a continuing basis. The Adviser seeks to allocate
portfolio transactions equitably whenever concurrent
decisions are made to purchase or sell securities by
the Fund and another advisory account. In some cases,
this procedure could have an adverse effect on the
price or the amount of securities available to the
Fund. In making such allocations between the Fund and
other advisory accounts, the main factors considered by
the Adviser are the respective investment objectives,
the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for
investment and the size of investment commitments
generally held.
CUSTODIAN
As custodian of the Fund's assets, Firstar Bank
Milwaukee, N.A. ("Firstar Bank"), Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202, has
custody of all securities and cash of the Fund,
delivers and receives payment for portfolio securities
sold, receives and pays for portfolio securities
purchased, collects income from investments and
performs other duties, all as directed by the officers
of the Corporation.
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Firstar Mutual Fund Services, LLC ("Firstar"),
Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as transfer agent and dividend-
disbursing agent for the Fund. Firstar is compensated
based on an annual fee per open account of $14 (subject
to a minimum annual fee of $22,500) plus out-of-pocket
expenses, such as postage and printing expenses in
connection with shareholder communications. Firstar
also receives an annual fee per closed account of $14.
From time to time, the Corporation, on behalf of
the Fund, directly or indirectly through arrangements
with the Adviser, the Distributor (as defined below) or
Firstar, may pay amounts to third parties that provide
transfer agent type services and other administrative
services relating to the Fund to persons who
beneficially have interests in a Fund, such as
participants in 401(k) plans. These services may
include, among other things, sub-accounting services,
transfer agent type activities, answering inquiries
relating to the Fund, transmitting proxy statements,
annual reports, updated prospectuses, other
communications regarding the Fund and related services
as the Fund or beneficial owners may reasonably
request. In such cases, the Fund will not pay fees
based on the number of beneficial owners at a rate that
is greater than the rate the Fund is currently paying
Firstar for providing these services to the Fund's
shareholders (i.e., $14 per account plus expenses).
<PAGE>
ADMINISTRATOR
Pursuant to a Fund Administration Servicing
Agreement and a Fund Accounting Servicing Agreement,
Firstar also performs accounting and certain compliance
and tax reporting functions for the Corporation. For
these services, Firstar receives from the Corporation
out-of-pocket expenses plus the following aggregate
annual fees, computed daily and payable monthly, based
on the Fund's aggregate average net assets:
Administrative Services Fees
First $200 million of average net .06 of 1%*
assets
Next $500 million of average net .05 of 1%
assets
Average net assets in excess of .03 of 1%
$700 million
_____________________________
* Subject to a minimum fee of
$35,000.
Accounting Services Fees
First $40 million of average net $22,000
assets
Next $200 million of average net .01 of 1%
assets
Average net assets in excess of .005 of 1%
$240 million
DISTRIBUTOR AND PLAN OF DISTRIBUTION
Distributor
Under a distribution agreement dated _________ __,
1998 (the "Distribution Agreement"), Rafferty Capital
Markets, Inc. (the "Distributor"), 550 Mamaroneck
Avenue, Harrison, New York 10528, acts as principal
distributor of the Fund's shares. The Distribution
Agreement provides that the Distributor will use its
best efforts to distribute the Fund's shares, which
shares are offered for sale by the Fund continuously at
net asset value per share without the imposition of a
sales charge. Pursuant to the terms of the
Distribution Agreement, the Distributor bears the costs
of printing prospectuses and shareholder reports which
are used for selling purposes, as well as advertising
and any other costs attributable to the distribution of
Fund shares. All or a portion of the distribution and
shareholder servicing fee may be used by the
Distributor to pay such expenses under the distribution
and shareholder servicing plan discussed below.
Distribution and Shareholder Servicing Plan
The Corporation, on behalf of the Fund, has
adopted a plan pursuant to Rule 12b-1 under the 1940
Act (the "12b-1 Plan"), which authorizes it to pay the
Distributor, in its capacity as the principal
distributor of Fund shares, a distribution and
shareholder servicing fee of up to 0.25% per annum of
the Fund's average daily net assets. Under the terms
of the 12b-1 Plan, the Distributor is authorized to, in
turn, pay all or a portion of this fee to any
securities dealer, financial institution or any other
person (the "Recipient") who renders assistance in
distributing or promoting the sale of Fund shares, or
who provides certain shareholder services to Fund
shareholders, pursuant to a written agreement (the
"Related Agreement"). The 12b-1 Plan is a
"reimbursement" plan, which means that the fees paid by
the Fund are intended as reimbursement for services
rendered and commission fees borne up to the maximum
allowable fee. If more money for services rendered and
commission fees is due than is immediately payable
because of the expense limitation under the 12b-1 Plan,
the unpaid amount is carried forward from period to
period while the 12b-1 Plan is in effect until such
time as it may be paid. No interest, carrying or other
forward charge will be borne by the Fund with respect
to unpaid amounts carried forward. The 12b-1 Plan has
the effect of increasing the Fund's expenses from what
they would otherwise be. The Board of Directors
reviews the Fund's distribution and shareholder
servicing fee payments in connection with its
determination as to the continuance of the 12b-1 Plan.
The 12b-1 Plan, including a form of the Related
Agreement, has been unanimously approved by a majority
of the Board of Directors of the Corporation, and of
the members of the Board who are not "interested
persons" of the Corporation as defined in the 1940 Act
and who have no direct or indirect financial interest
in the operation of the
<PAGE>
12b-1 Plan or any related
agreements (the "Disinterested Directors") voting
separately. The 12b-1 Plan, and any Related Agreement
which is entered into, will continue in effect for a
period of more than one year only so long as its
continuance is specifically approved at least annually
by a vote of a majority of the Corporation's Board of
Directors and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on
the 12b-1 Plan or the Related Agreement, as applicable.
In addition, the 12b-1 Plan and any Related Agreement
may be terminated at any time, without penalty, by vote
of a majority of the outstanding voting securities of
the Fund, or by vote of a majority of Disinterested
Directors (on not more than 60 days' written notice in
the case of the Related Agreement only). Payment of the
distribution and shareholder servicing fee is to be
made at least quarterly. The Distributor will provide
reports to the Board of Directors of the Corporation of
all recipients of payments made (and the purposes for
which amounts were paid) pursuant to the 12b-1 Plan.
Interests of Certain Persons
With the exception of the Adviser, in its capacity
as the Fund's investment adviser, and the Distributor,
in its capacity as principal distributor of Fund
shares, no "interested person" of the Fund, as defined
in the 1940 Act, and no director of the Fund who is not
an "interested person" has or had a direct or indirect
financial interest in the 12b-1 Plan or any Related
Agreement.
Anticipated Benefits to the Fund
The Board of Directors considered various factors
in connection with its decision to approve the 12b-1
Plan, including: (a) the nature and causes of the
circumstances which make implementation of the 12b-1
Plan necessary and appropriate; (b) the way in which
the 12b-1 Plan would address those circumstances,
including the nature and potential amount of
expenditures; (c) the nature of the anticipated
benefits; (d) the merits of possible alternative plans
or pricing structures; (e) the relationship of the
12b-1 Plan to other distribution efforts of the Fund;
and (f) the possible benefits of the 12b-1 Plan to any
other person relative to those of the Fund.
Based upon its review of the foregoing factors and
the material presented to it, and in light of its
fiduciary duties under relevant state law and the 1940
Act, the Board of Directors determined, in the exercise
of its business judgment, that the 12b-1 Plan was
reasonably likely to benefit the Fund and its
shareholders in at least one or several potential ways.
Specifically, the Board concluded that the Distributor
and any Recipients operating under Related Agreements
would have little or no incentive to incur promotional
expenses on behalf of the Fund if a 12b-1 Plan were not
in place to reimburse them, thus making the adoption of
such 12b-1 Plan important to the initial success and
thereafter, continued viability of the Fund. In
addition, the Board determined that the payment of
distribution fees to these persons should motivate them
to provide an enhanced level of service to Fund
shareholders, which would, of course, benefit such
shareholders. Finally, the adoption of the 12b-1 Plan
would help to increase net assets under management in a
relatively short amount of time, given the marketing
efforts on the part of the Distributor and Recipients
to sell Fund shares, which should result in certain
economies of scale.
While there is no assurance that the expenditure
of Fund assets to finance distribution of Fund shares
will have the anticipated results, the Board of
Directors believes there is a reasonable likelihood
that one or more of such benefits will result, and
since the Board will be in a position to monitor the
distribution and shareholder servicing expenses of the
Fund, it will be able to evaluate the benefit of such
expenditures in deciding whether to continue the 12b-1
Plan.
PURCHASE, EXCHANGE AND PRICING OF SHARES
Automatic Investment Plan
The Automatic Investment Plan ("AIP") allows you
to make regular, systematic investments in the Fund
from your bank checking or NOW account. The minimum
initial investment for investors using the AIP is
$25,000. To establish the AIP, complete the
appropriate section in the shareholder application.
Under certain circumstances (such as discontinuation of
the AIP before the Fund's minimum initial investment is
reached), the Fund reserves the right to close the
investor's account. Prior to closing any account for
failure to reach the minimum initial investment, the
Fund will give the investor written notice and 60 days
in which to reinstate the AIP or otherwise reach the
minimum initial investment. You should consider your
financial ability to continue in the AIP until the
minimum initial investment
<PAGE>
amount is met because the
Fund has the right to close an investor's account for
failure to reach the minimum initial investment. Such
closing may occur in periods of declining share prices.
Under the AIP, you may choose to make monthly
investments on the days of your choosing (or the next
business day thereafter) from your financial
institution in amounts of $250 or more. There is no
service fee for participating in the AIP. However, a
service fee of $20 will be deducted from your Fund
account for any AIP purchase that does not clear due to
insufficient funds or, if prior to notifying the Fund
in writing or by telephone of your intention to
terminate the plan, you close your bank account or in
any manner prevent withdrawal of funds from the
designated checking or NOW account. You can set up the
AIP with any financial institution that is a member of
Automated Clearing House.
The AIP is a method of using dollar cost averaging
which is an investment strategy that involves investing
a fixed amount of money at a regular time interval.
However, a program of regular investment cannot ensure
a profit or protect against a loss from declining
markets. By always investing the same amount, you will
be purchasing more shares when the price is low and
fewer shares when the price is high. Since such a
program involves continuous investment regardless of
fluctuating share values, you should consider your
financial ability to continue the program through
periods of low share price levels.
Individual Retirement Accounts
In addition to purchasing Fund shares as described
in the Prospectus under "How to Purchase Shares,"
individuals may establish their own tax-sheltered
individual retirement accounts (" IRAs.") The Fund
offers two types of IRAs, including the Traditional
IRA, that can be adopted by executing the appropriate
Internal Revenue Service ("IRS") Form.
Traditional IRA. In a Traditional IRA, amounts
contributed to the IRA may be tax deductible at the
time of contribution depending on whether the investor
is an "active participant" in an employer-sponsored
retirement plan and the investor's income.
Distributions from a Traditional IRA will be taxed at
distribution except to the extent that the distribution
represents a return of the investor's own contributions
for which the investor did not claim (or was not
eligible to claim) a deduction. Distributions prior to
age 59-1/2 may be subject to an additional 10% tax
applicable to certain premature distributions.
Distributions must commence by April 1 following the
calendar year in which the investor attains age 70-1/2.
Failure to begin distributions by this date (or
distributions that do not equal certain minimum
thresholds) may result in adverse tax consequences.
Roth IRA. In a Roth IRA (sometimes known as the
American Dream IRA), amounts contributed to the IRA are
taxed at the time of contribution, but distributions
from the IRA are not subject to tax if the investor has
held the IRA for certain minimum periods of time
(generally, until age 59-1/2). Investors whose income
exceeds certain limits are ineligible to contribute to
a Roth IRA. Distributions that do not satisfy the
requirements for tax-free withdrawal are subject to
income taxes (and possibly penalty taxes) to the extent
that the distribution exceeds the investor's
contributions to the IRA. The minimum distribution
rules applicable to Traditional IRAs do not apply
during the lifetime of the investor. Following the
death of the investor, certain minimum distribution
rules apply.
For Traditional and Roth IRAs, the maximum annual
contribution generally is equal to the lesser of $2,000
or 100% of the investor's compensation (earned income).
An individual may also contribute to a Traditional IRA
or Roth IRA on behalf of his or her spouse provided
that the individual has sufficient compensation (earned
income). Contributions to a Traditional IRA reduce the
allowable contributions under a Roth IRA, and
contributions to a Roth IRA reduce the allowable
contribution to a Traditional IRA.
Simplified Employee Pension Plan. A Traditional
IRA may also be used in conjunction with a Simplified
Employee Pension Plan ("SEP-IRA"). A SEP-IRA is
established through execution of Form 5305-SEP together
with a Traditional IRA established for each eligible
employee. Generally, a SEP-IRA allows an employer
(including a self-employed individual) to purchase
shares with tax deductible contributions not exceeding
annually for any one participant 15% of compensation
(disregarding for this purpose compensation in excess
of $160,000 per year). The $160,000 compensation limit
applies for 1998 and is adjusted periodically for cost
of living increases. A number of special rules apply
to SEP Plans, including a requirement that
contributions generally be made on behalf
<PAGE>
of all
employees of the employer (including for this purpose a
sole proprietorship or partnership) who satisfy certain
minimum participation requirements.
SIMPLE IRA. An IRA may also be used in connection
with a SIMPLE Plan established by the investor's
employer (or by a self-employed individual). When this
is done, the IRA is known as a SIMPLE IRA, although it
is similar to a Traditional IRA with the exceptions
described below. Under a SIMPLE Plan, the investor may
elect to have his or her employer make salary reduction
contributions of up to $6,000 per year to the SIMPLE
IRA. The $6,000 limit applies for 1998 and is adjusted
periodically for cost of living increases. In
addition, the employer will contribute certain amounts
to the investor's SIMPLE IRA, either as a matching
contribution to those participants who make salary
reduction contributions or as a non-elective
contribution to all eligible participants whether or
not making salary reduction contributions. A number of
special rules apply to SIMPLE Plans, including (1) a
SIMPLE Plan generally is available only to employers
with fewer than 100 employees; (2) contributions must
be made on behalf of all employees of the employer
(other than bargaining unit employees) who satisfy
certain minimum participation requirements; (3)
contributions are made to a special SIMPLE IRA that is
separate and apart from the other IRAs of employees;
(4) the distribution excise tax (if otherwise
applicable) is increased to 25% on withdrawals during
the first two years of participation in a SIMPLE IRA;
and (5) amounts withdrawn during the first two years of
participation may be rolled over tax-free only into
another SIMPLE IRA (and not to a Traditional IRA or to
a Roth IRA). A SIMPLE IRA is established by executing
Form 5304-SIMPLE together with an IRA established for
each eligible employee.
Under current IRS regulations, all IRA applicants
must be furnished a disclosure statement containing
information specified by the IRS. Applicants generally
have the right to revoke their account within seven
days after receiving the disclosure statement and
obtain a full refund of their contributions. Firstar,
the Fund's custodian, may, in its discretion, hold the
initial contribution uninvested until the expiration of
the seven-day revocation period. Firstar does not
anticipate that it will exercise its discretion but
reserves the right to do so.
Systematic Withdrawal Plan
Shareholders may set up automatic withdrawals from
their Fund accounts at regular intervals. To begin
distributions, a shareholder's account must have an
initial balance of $25,000 and at least $100 per
payment must be withdrawn. To establish the systematic
withdrawal plan ("SWP"), the appropriate section in the
shareholder application must be completed. Redemptions
will take place on a monthly, quarterly, semi-annual or
annual basis (or the following business day) as
indicated on the shareholder application. The amount
or frequency of withdrawal payments may be varied or
temporarily discontinued by calling __________________.
Depending upon the size of the account and the
withdrawals requested (and fluctuations in the net
asset value of the shares redeemed), redemptions for
the purpose of satisfying such withdrawals may reduce
or even exhaust a shareholder's account. If the amount
remaining in a shareholder's account is not sufficient
to meet a plan payment, the remaining amount will be
redeemed and the SWP will be terminated.
Money Market Exchange
As a service to our shareholders, the Fund has
established a program whereby our shareholders can
exchange shares of the Fund for shares of the Firstar
Money Market Fund (the "Firstar Fund"). Exchange
requests are available for exchanges of $1,000 or more.
The Firstar Fund is a no-load money market fund managed
by an affiliate of Firstar. The Firstar Fund is
unrelated to the Corporation or the Fund. However, the
Distributor may be compensated by the Firstar Fund for
servicing and related services provided in connection
with exchanges made by shareholders of the Fund. This
exchange privilege is a convenient way to buy shares in
a money market fund in order to respond to changes in
your goals or in market conditions. Before exchanging
into the Firstar Fund, please read the prospectus,
which may be obtained by calling __________________.
There is no charge for written exchange requests.
Firstar will, however, charge a $5 fee for each
exchange transaction that is executed via the
telephone.
An exchange from the Fund to the Firstar Fund is
treated the same as an ordinary sale and purchase for
federal income tax purposes and you will realize a
capital gain or loss. An exchange is not a tax-free
transaction.
<PAGE>
Pricing of Shares
Shares of the Fund are sold on a continual basis
at the next offering price, which is the net asset
value per share next computed following receipt of an
order in proper form by a dealer, the Distributor or
Firstar, the fund's transfer agent.
The net asset value per share is determined as of
the close of trading (generally 4:00 p.m. Eastern
Standard Time) on each day the New York Stock Exchange
(the "NYSE") is open for business. Purchase orders
received or shares tendered for redemption on a day the
NYSE is open for trading, prior to the close of trading
on that day, will be valued as of the close of trading
on that day. Applications for purchase of shares and
requests for redemption of shares received after the
close of trading on the NYSE will be valued as of the
close of trading on the next day the NYSE is open. The
Fund's net asset value may not be calculated on days
during which the Fund receives no orders to purchase
shares and no shares are tendered for redemption. Net
asset value is calculated by taking the fair value of
the Fund's total assets, including interest or
dividends accrued, but not yet collected, less all
liabilities, and dividing by the total number of shares
outstanding. The result, rounded to the nearest cent,
is the net asset value per share.
In determining net asset value, expenses are
accrued and applied daily and securities and other
assets for which market quotations are available are
valued at market value. Common stocks and other equity-
type securities are valued at the last sales price on
the national securities exchange or NASDAQ on which
such securities are primarily traded; however,
securities traded on a national securities exchange or
NASDAQ for which there were no transactions on a given
day, and securities not listed on a national securities
exchange or NASDAQ, are valued at the average of the
most recent bid and asked prices. Fixed income
securities are valued by a pricing service that
utilizes electronic data processing techniques to
determine values for normal institutional-sized trading
units of fixed income securities without regard to sale
or bid prices when such values are believed to more
accurately reflect the fair market value of such
securities; otherwise, actual sale or bid prices are
used. Any securities or other assets for which market
quotations are not readily available are valued at fair
value as determined in good faith by the Board of
Directors of the Corporation. The Board of Directors
may approve the use of pricing services to assist the
Fund in the determination of net asset value. Fixed
income securities having remaining maturities of 60
days or less when purchased are generally valued by the
amortized cost method. Under this method of valuation,
a security is initially valued at its acquisition cost
and, thereafter, amortization of any discount or
premium is assumed each day, regardless of the impact
of fluctuating interest rates on the market value of
the security.
REDEMPTIONS IN KIND
The Fund has filed a Notification under Rule 18f-1
of the 1940 Act, pursuant to which it has agreed to pay
in cash all requests for redemption by any shareholder
of record, limited in amount with respect to each
shareholder during any 90-day period to the lesser
amount of (i) $250,000 or (ii) 1% of the Fund's net
asset value, valued at the beginning of the election
period. The Fund intends also to pay redemption
proceeds in excess of such lesser amount in cash, but
reserves the right to pay such excess amount in kind,
if it is deemed to be in the best interest of the Fund
to do so. If you receive an in kind distribution, you
will likely incur a brokerage charge on the disposition
of such securities through a securities dealer.
TAXATION OF THE FUND
The Fund intends to qualify annually as a
"regulated investment company" under Subchapter M of
the Code, and, if so qualified, will not be liable for
federal income taxes to the extent earnings are
distributed to shareholders on a timely basis. In the
event the Fund fails to qualify as a "regulated
investment company," it will be treated as a regular
corporation for federal income tax purposes.
Accordingly, the Fund would be subject to federal
income taxes and any distributions that it makes would
be taxable and non-deductible by the Fund. This would
increase the cost of investing in the Fund for
shareholders and would make it more economical for
shareholders to invest directly in securities held by
the Fund instead of investing directly in such
securities through the Fund.
<PAGE>
PERFORMANCE INFORMATION
The Fund's historical performance or return may be
shown in the form of various performance figures. The
Fund's performance figures are based upon historical
results and are not necessarily representative of
future performance. Factors affecting the Fund's
performance include general market conditions,
operating expenses and investment management.
Total Return
The average annual total return of the Fund is
computed by finding the average annual compounded rates
of return over the periods that would equate the
initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a
hypothetical $1,000 payment made at
the beginning of the stated periods
at the end of the stated periods.
Performance for a specific period is calculated by
first taking an investment (assumed to be $1,000)
("initial investment") in the Fund's shares on the
first day of the period and computing the "ending
value" of that investment at the end of the period.
The total return percentage is then determined by
subtracting the initial investment from the ending
value and dividing the remainder by the initial
investment and expressing the result as a percentage.
The calculation assumes that all income and capital
gains dividends paid by the Fund have been reinvested
at the net asset value of the Fund on the reinvestment
dates during the period. Total return may also be
shown as the increased dollar value of the hypothetical
investment over the period.
Cumulative total return represents the simple
change in value of an investment over a stated period
and may be quoted as a percentage or as a dollar
amount. Total returns may be broken down into their
components of income and capital (including capital
gains and changes in share price) in order to
illustrate the relationship between these factors and
their contributions to total return.
Comparisons
From time to time, in marketing and other Fund
literature, the Fund's performance may be compared to
the performance of other mutual funds in general or to
the performance of particular types of mutual funds
with similar investment goals, as tracked by
independent organizations. Among these organizations,
Lipper Analytical Services, Inc. ("Lipper"), a widely
used independent research firm which ranks mutual funds
by overall performance, investment objectives and
assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income
and capital gains dividends reinvested. Such
calculations do not include the effect of any sales
charges imposed by other funds. The Fund will be
compared to Lipper's appropriate fund category, that
is, by fund objective and portfolio holdings.
The Fund's performance may also be compared to the
performance of other mutual funds by Morningstar, Inc.
("Morningstar"), which ranks funds on the basis of
historical risk and total return. Morningstar's
rankings range from five stars (highest) to one star
(lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a
weighted average for 3, 5 and 10 year periods.
Rankings are not absolute or necessarily predictive of
future performance.
Evaluations of Fund performance made by
independent sources may also be used in advertisements
concerning the Fund, including reprints of or
selections from, editorials or articles about the Fund.
Sources for Fund performance and articles about the
Fund may include publications such as Money, Forbes,
Kiplinger's, Financial
<PAGE>
World, Business Week, U.S. News
and World Report, the Wall Street Journal, Barron's and
a variety of investment newsletters.
The Fund may compare its performance to a wide
variety of indices and measures of inflation including
the Standard & Poor's Index of 500 Stocks, the NASDAQ
Over-the-Counter Composite Index and the Russell 2000
Index. There are differences and similarities between
the investments that the Fund may purchase for its
portfolio and the investments measured by these
indices.
INDEPENDENT ACCOUNTANTS
[Insert name and address of accountants]
independent accountants for the Fund, audit and report
on the Fund's financial statements.
FINANCIAL STATEMENTS
The following financial statements of the Fund are
contained herein:
(a) Report of Independent Accountants.
(b) Statement of Assets and Liabilities.
(c) Notes to the Financial Statement.
<PAGE>
APPENDIX
SHORT-TERM RATINGS
Standard & Poor's Short-Term Debt Credit Ratings
A Standard & Poor's credit rating is a current
opinion of the creditworthiness of an obligor with
respect to a specific financial obligation, a specific
class of financial obligations or a specific financial
program. It takes into consideration the
creditworthiness of guarantors, insurers or other forms
of credit enhancement on the obligation and takes into
account the currency in which the obligation is
denominated. The credit rating is not a recommendation
to purchase, sell or hold a financial obligation,
inasmuch as it does not comment as to market price or
suitability for a particular investor.
Credit ratings are based on current information
furnished by the obligors or obtained by Standard &
Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in
connection with any credit rating and may, on occasion,
rely on unaudited financial information. Credit
ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such
information, or based on other circumstances.
Short-term ratings are generally assigned to those
obligations considered short-term in the relevant
market. In the U.S., for example, that means
obligations with an original maturity of no more than
365 days_including commercial paper. Short-term
ratings are also used to indicate the creditworthiness
of an obligor with respect to put features on long-term
obligations. The result is a dual rating, in which the
short-term rating addresses the put feature, in
addition to the usual long-term rating.
Ratings are graded into several categories,
ranging from `A-1' for the highest quality obligations
to `D' for the lowest. These categories are as
follows:
A-1 A short-term obligation rated `A-1' is rated
in the highest category by Standard & Poor's.
The obligor's capacity to meet its financial
commitment on the obligation is strong.
Within this category, certain obligations are
designated with a plus sign (+). This
indicates that the obligor's capacity to meet
its financial commitment on these obligations
is extremely strong.
A-2 A short-term obligation rated `A-2' is
somewhat more susceptible to the adverse
effects of changes in circumstances and
economic conditions than obligations in
higher rating categories. However, the
obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
A-3 A short-term obligation rated `A-3' exhibits
adequate protection parameters. However,
adverse economic conditions or changing
circumstances are more likely to lead to a
weakened capacity of the obligor to meet its
financial commitment on the obligation.
B A short-term obligation rated `B' is regarded
as having significant speculative
characteristics. The obligor currently has
the capacity to meet its financial commitment
on the obligation; however, it faces major
ongoing uncertainties which could lead to the
obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated `C' is
currently vulnerable to nonpayment and is
dependent upon favorable business, financial
and economic conditions for the obligor to
meet its financial commitment on the
obligation.
D A short-term obligation rated `D' is in
payment default. The `D' rating category is
used when payments on an obligation are not
made on the date due even if the applicable
grace period has not expired, unless Standard
& Poor's believes that such payments will be
made during such grace period. The `D'
rating also will be used upon the filing of a
bankruptcy petition or the taking of a
similar action if payments on an obligation
are jeopardized.
<PAGE>
Moody's Short-Term Debt Ratings
Moody's short-term debt ratings are opinions of
the ability of issuers to repay punctually senior debt
obligations. These obligations have an original
maturity not exceeding one year, unless explicitly
noted. Moody's ratings are opinions, not
recommendations to buy or sell, and their accuracy is
not guaranteed.
Moody's employs the following three designations,
all judged to be investment grade, to indicate the
relative repayment ability of rated issuers:
PRIME-1 Issuers rated `Prime-1' (or supporting
institutions) have a superior ability for
repayment of senior short-term debt
obligations. Prime-1 repaying ability will
often be evidenced by many of the following
characteristics:
Leading market positions in well-established
industries.
High rates of return on funds employed.
Conservative capitalization structure with
moderate reliance on debt and ample asset
protection.
Broad margins in earnings coverage of fixed
financial charges and high internal cash generation.
Well-established access to a range of financial
markets and assured sources of alternate liquidity.
PRIME-2 Issuers rated `Prime-2' (or supporting
institutions) have a strong ability for
repayment of senior short-term debt
obligations. This will normally be evidenced
by many of the characteristics cited above,
but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more
subject to variation. Capitalization
characteristics, while still appropriate, may
be more affected by external conditions.
Ample alternate liquidity is maintained.
PRIME-3 Issuers rated `Prime-3' (or supporting
institutions) have an acceptable ability for
repayment of senior short-term obligations.
The effect of industry characteristics and
market compositions may be more pronounced.
Variability in earnings and profitability may
result in changes in the level of debt
protection measurements and may require
relatively high financial leverage. Adequate
alternate liquidity is maintained.
NOT PRIME Issuers rated `Not Prime' do not fall within
any of the Prime rating categories.
Fitch IBCA International Short-Term Debt Credit Ratings
Fitch IBCA's international debt credit ratings are
applied to the spectrum of corporate, structured and
public finance. They cover sovereign (including
supranational and subnational), financial, bank,
insurance and other corporate entities and the
securities they issue, as well as municipal and other
public finance entities, securities backed by
receivables or other financial assets and
counterparties. When applied to an entity, these short-
term ratings assess its general creditworthiness on a
senior basis. When applied to specific issues and
programs, these ratings take into account the relative
preferential position of the holder of the security and
reflect the terms, conditions and covenants attaching
to that security.
International credit ratings assess the capacity
to meet foreign currency or local currency commitments.
Both "foreign currency" and "local currency" ratings
are internationally comparable assessments. The local
currency rating measures the probability of payment
within the relevant sovereign state's currency and
jurisdiction and therefore, unlike the foreign currency
rating, does not take account of the possibility of
foreign exchange controls limiting transfer into
foreign currency.
A short-term rating has a time horizon of less
than 12 months for most obligations, or up to three
years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to
meet financial commitments in a timely manner.
<PAGE>
F-1 Highest credit quality. Indicates the
strongest capacity for timely payment of
financial commitments; may have an added "+"
to denote any exceptionally strong credit
feature.
F-2 Good credit quality. A satisfactory capacity
for timely payment of financial commitments,
but the margin of safety is not as great as
in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely
payment of financial commitments is adequate;
however, near term adverse changes could
result in a reduction to non-investment
grade.
B Speculative. Minimal capacity for timely
payment of financial commitments, plus
vulnerability to near term adverse changes in
financial and economic conditions.
C High default risk. Default is a real
possibility. Capacity for meeting financial
commitments is solely reliant upon a
sustained, favorable business and economic
environment.
D Default. Denotes actual or imminent payment
default.
Duff & Phelps, Inc. Short-Term Debt Ratings
Duff & Phelps Credit Ratings' short-term debt
ratings are consistent with the rating criteria used by
money market participants. The ratings apply to all
obligations with maturities of under one year,
including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of
credit and current maturities of long-term debt. Asset-
backed commercial paper is also rated according to this
scale.
Emphasis is placed on liquidity which is defined
as not only cash from operations, but also access to
alternative sources of funds including trade credit,
bank lines and the capital markets. An important
consideration is the level of an obligor's reliance on
short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit
Ratings' short-term debt ratings is the refinement of
the traditional `1' category. The majority of short-
term debt issuers carry the highest rating, yet quality
differences exist within that tier. As a consequence,
Duff & Phelps Credit Rating has incorporated gradations
of `1+' (one plus) and `1-` (one minus) to assist
investors in recognizing those differences.
These ratings are recognized by the SEC for broker-
dealer requirements, specifically capital computation
guidelines. These ratings meet Department of Labor
ERISA guidelines governing pension and profit sharing
investments. State regulators also recognize the
ratings of Duff & Phelps Credit Rating for insurance
company investment portfolios.
Rating Scale: Definition
High Grade
D-1+ Highest certainty of timely payment. Short-
term liquidity, including internal operating
factors and/or access to alternative sources
of funds, is outstanding, and safety is just
below risk-free U.S. Treasury short-term
obligations.
D-1 Very high certainty of timely payment.
Liquidity factors are excellent and supported
by good fundamental protection factors. Risk
factors are minor.
D-1- High certainty of timely payment. Liquidity
factors are strong and supported by good
fundamental protection factors. Risk factors
are very small.
<PAGE>
Good Grade
D-2 Good certainty of timely payment. Liquidity
factors and company fundamentals are sound.
Although ongoing funding needs may enlarge
total financing requirements, access to
capital markets is good. Risk factors are
small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection
factors qualify issue as to investment grade.
Risk factors are larger and subject to more
variation. Nevertheless, timely payment is
expected.
Non-investment Grade
D-4 Speculative investment characteristics.
Liquidity is not sufficient to insure against
disruption in debt service. Operating
factors and market access may be subject to a
high degree of variation.
Default
D-5 Issuer failed to meet scheduled principal
and/or interest payments.
LONG-TERM RATINGS
Standard & Poor's Long-Term Debt Credit Ratings
A Standard & Poor's credit rating is a current
opinion of the creditworthiness of an obligor with
respect to a specific financial obligation, a specific
class of financial obligations or a specific financial
program. It takes into consideration the
creditworthiness of guarantors, insurers or other forms
of credit enhancement on the obligation and takes into
account the currency in which the obligation is
denominated. The credit rating is not a recommendation
to purchase, sell or hold a financial obligation,
inasmuch as it does not comment as to market price or
suitability for a particular investor.
Credit ratings are based on current information
furnished by the obligors or obtained by Standard &
Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in
connection with any credit rating and may, on occasion,
rely on unaudited financial information. Credit
ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such
information, or based on other circumstances.
Credit ratings are based, in varying degrees, on
the following considerations: (1) likelihood of
payment_capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance
with the terms of the obligation; (2) nature of and
provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
The rating definitions are expressed in terms of
default risk. As such, they pertain to senior
obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to
reflect the lower priority in bankruptcy. (Such
differentiation applies when an entity has both senior
and subordinated obligations, secured and unsecured
obligations, or operating company and holding company
obligations.) Accordingly, in the case of junior debt,
the rating may not conform exactly with the category
definition.
AAA An obligation rated `AAA' has the highest
rating assigned by Standard & Poor's. The
obligor's capacity to meet its financial
commitment on the obligation is EXTREMELY
STRONG.
AA An obligation rated `AA' differs from the
highest rated obligations only in small
degree. The obligor's capacity to meet its
financial commitment on the obligation is
VERY STRONG.
<PAGE>
A An obligation rated `A' is somewhat more
susceptible to the adverse effects of changes
in circumstances and economic conditions than
obligations in higher rated categories.
However, the obligor's capacity to meet its
financial commitment on the obligation is
still STRONG.
BBB An obligation rated `BBB' exhibits ADEQUATE
protection parameters. However, adverse
economic conditions or changing circumstances
are more likely to lead to a weakened
capacity of the obligor to meet its financial
commitment on the obligation.
Obligations rated `BB', `B', `CCC, `CC', and `C'
are regarded as having significant speculative
characteristics. `BB' indicates the least degree of
speculation and `C' the highest. While such
obligations will likely have some quality and
protective characteristics, these may be outweighed by
large uncertainties or major exposures to adverse
conditions.
BB An obligation rated `BB' is LESS VULNERABLE
to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties
or exposure to adverse business, financial or
economic conditions which could lead to the
obligor's inadequate capacity to meet its
financial commitment on the obligation.
B An obligation rated `B' is MORE VULNERABLE to
nonpayment than obligations rated `BB', but
the obligor currently has the capacity to
meet its financial commitment on the
obligation. Adverse business, financial or
economic conditions will likely impair the
obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC An obligation rated `CCC' is CURRENTLY
VULNERABLE to nonpayment, and is dependent
upon favorable business, financial and
economic conditions for the obligor to meet
its financial commitment on the obligation.
In the event of adverse business, financial
or economic conditions, the obligor is not
likely to have the capacity to meet its
financial commitment on the obligation.
CC An obligation rated `CC' is CURRENTLY HIGHLY
VULNERABLE to nonpayment.
C The `C' rating may be used to cover a
situation where a bankruptcy petition has
been filed or similar action has been taken,
but payments on this obligation are being
continued.
D An obligation rated `D' is in payment
default. The `D' rating category is used
when payments on an obligation are not made
on the date due even if the applicable grace
period has not expired, unless Standard &
Poor's believes that such payments will be
made during such grace period. The `D'
rating also will be used upon the filing of a
bankruptcy petition or the taking of a
similar action if payments on an obligation
are jeopardized.
Plus (+) or minus (_): The ratings from `AA' to
`CCC' may be modified by the addition of a plus or
minus sign to show relative standing within the major
rating categories.
Moody's Long-Term Debt Ratings
Aaa Bonds which are rated `Aaa' are judged to be
of the best quality. They carry the smallest
degree of investment risk and are generally
referred to as "gilt edged." Interest
payments are protected by a large or by an
exceptionally stable margin and principal is
secure. While the various protective
elements are likely to change, such changes
as can be visualized are most unlikely to
impair the fundamentally strong position of
such issues.
Aa Bonds which are rated `Aa' are judged to be
of high quality by all standards. Together
with the Aaa group they comprise what are
generally known as high-grade bonds. They
are rated lower than the best bonds because
margins of protection may not be as large as
in Aaa securities or fluctuation of
protective elements may be of greater
amplitude or there may be other elements
present which make the long-term risk appear
somewhat larger than Aaa securities.
<PAGE>
A Bonds which are rated `A' possess many
favorable investment attributes and are to be
considered as upper-medium-grade obligations.
Factors giving security to principal and
interest are considered adequate, but
elements may be present which suggest a
susceptibility to impairment some time in the
future.
Baa Bonds which are rated `Baa' are considered as
medium-grade obligations (i.e., they are
neither highly protected nor poorly secured).
Interest payments and principal security
appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great
length of time. Such bonds lack outstanding
investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated `Ba' are judged to have
speculative elements; their future cannot be
considered as well-assured. Often the
protection of interest and principal payments
may be very moderate, and thereby not well
safeguarded during both good and bad times
over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated `B' generally lack
characteristics of the desirable investment.
Assurance of interest and principal payments
or of maintenance of other terms of the
contract over any long period of time may be
small.
Caa Bonds which are rated `Caa' are of poor
standing. Such issues may be in default or
there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated `Ca' represent
obligations which are speculative in a high
degree. Such issues are often in default or
have other marked shortcomings.
C Bonds which are rated `C' are the lowest
rated class of bonds, and issues so rated can
be regarded as having extremely poor
prospects of ever attaining any real
investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in
each generic rating classification from `Aa' through
`B.' The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category;
the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of that
generic rating category.
Fitch IBCA International Long-Term Debt Credit Ratings
Fitch IBCA's international debt credit ratings are
applied to the spectrum of corporate, structured and
public finance. They cover sovereign (including
supranational and subnational), financial, bank,
insurance and other corporate entities and the
securities they issue, as well as municipal and other
public finance entities, securities backed by
receivables or other financial assets and
counterparties. When applied to an entity, these long-
term ratings assess its general creditworthiness on a
senior basis. When applied to specific issues and
programs, these ratings take into account the relative
preferential position of the holder of the security and
reflect the terms, conditions and covenants attaching
to that security.
International credit ratings assess the capacity
to meet foreign currency or local currency commitments.
Both "foreign currency" and "local currency" ratings
are internationally comparable assessments. The local
currency rating measures the probability of payment
within the relevant sovereign state's currency and
jurisdiction and therefore, unlike the foreign currency
rating, does not take account of the possibility of
foreign exchange controls limiting transfer into
foreign currency.
Investment Grade
AAA Highest credit quality. `AAA' ratings
denote the lowest expectation of credit
risk. They are assigned only in case of
exceptionally strong capacity for timely
payment of financial commitments. This
capacity is highly unlikely to be
adversely affected by foreseeable
events.
<PAGE>
AA Very high credit quality. `AA' ratings
denote a very low expectation of credit
risk. They indicate very strong
capacity for timely payment of financial
commitments. This capacity is not
significantly vulnerable to foreseeable
events.
A High credit quality. `A' ratings denote
a low expectation of credit risk. The
capacity for timely payment of financial
commitments is considered strong. This
capacity may, nevertheless, be more
vulnerable to changes in circumstances
or in economic conditions than is the
case for higher ratings.
BBB Good credit quality. `BBB' ratings
indicate that there is currently a low
expectation of credit risk. The
capacity for timely payment of financial
commitments is considered adequate, but
adverse changes in circumstances and in
economic conditions are more likely to
impair this capacity. This is the
lowest investment grade category.
Speculative Grade
BB Speculative. `BB' ratings indicate that
there is a possibility of credit risk
developing, particularly as the result
of adverse economic change over time;
however, business or financial
alternatives may be available to allow
financial commitments to be met.
B Highly speculative. `B' ratings
indicate that significant credit risk is
present, but a limited margin of safety
remains. Financial commitments are
currently being met; however, capacity
for continued payment is contingent upon
a sustained, favorable business and
economic environment.
CCC, CC, C High default risk. Default is a
real possibility. Capacity for meeting
financial commitments is solely reliant
upon sustained, favorable business or
economic developments. A `CC' rating
indicates that default of some kind
appears probable. `C' ratings signal
imminent default.
DDD, DD and D Default. Securities are not
meeting current obligations and are
extremely speculative. `DDD' designates
the highest potential for recovery of
amounts outstanding on any securities
involved. For U.S. corporates, for
example, `DD' indicates expected
recovery of 50% - 90% of such
outstandings, and `D' the lowest
recovery potential, i.e. below 50%.
Duff & Phelps, Inc. Long-Term Debt Ratings
These ratings represent a summary opinion of the
issuer's long-term fundamental quality. Rating
determination is based on qualitative and quantitative
factors which may vary according to the basic economic
and financial characteristics of each industry and each
issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such
factors as competition, government action, regulation,
technological obsolescence, demand shifts, cost
structure and management depth and expertise. The
projected viability of the obligor at the trough of the
cycle is a critical determination.
Each rating also takes into account the legal form
of the security (e.g., first mortgage bonds,
subordinated debt, preferred stock, etc.). The extent
of rating dispersion among the various classes of
securities is determined by several factors including
relative weightings of the different security classes
in the capital structure, the overall credit strength
of the issuer and the nature of covenant protection.
The Credit Rating Committee formally reviews all
ratings once per quarter (more frequently, if
necessary). Ratings of `BBB-` and higher fall within
the definition of investment grade securities, as
defined by bank and insurance supervisory authorities.
Structured finance issues, including real estate, asset-
backed and mortgage-backed financings, use this same
rating scale. Duff & Phelps Credit Rating claims
paying ability ratings of insurance companies use the
same scale with minor modification in the definitions.
Thus, an investor can compare the credit quality of
investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for
specific ratings) addresses the
<PAGE>
likelihood that
aggregate principal and interest will equal or exceed
the rated amount under appropriate stress conditions.
Rating Scale Definition
AAA Highest credit quality. The risk factors are
negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are
strong. Risk is modest but may
AA vary slightly from time to time because of
economic conditions.
AA-
A+ Protection factors are average but adequate.
However, risk factors are more
A variable and greater in periods of economic
stress.
A-
BBB+ Below-average protection factors but still
considered sufficient for prudent
BBB investment. Considerable variability in risk
during economic cycles.
BBB-
BB+ Below investment grade but deemed likely to
meet obligations when due.
BB Present or prospective financial protection
factors fluctuate according to
BB- industry conditions or company fortunes.
Overall quality may move up or
down frequently within this category.
B+ Below investment grade and possessing risk
that obligations will not be met
B when due. Financial protection factors will
fluctuate widely according to
B- economic cycles, industry conditions and/or
company fortunes. Potential
exists for frequent changes in the rating
within this category or into a higher
or lower rating grade.
CCC Well below investment grade securities.
Considerable uncertainty exists as to
timely payment of principal, interest or
preferred dividends.
Protection factors are narrow and risk can be
substantial with unfavorable
economic/industry conditions, and/or with
unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to
meet scheduled principal and/or
interest payments.
DP Preferred stock with dividend arrearages.
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Registrant's Articles of Incorporation
(b) Registrant's By-Laws
(c) None
(d) Investment Advisory Agreement*
(e) Distribution Agreement with Rafferty Capital
Markets, Inc.*
(f) None
(g) Custodian Servicing Agreement with Firstar
Bank Milwaukee, N.A.*
(h.1) Transfer Agent Servicing Agreement with
Firstar Mutual Fund Services, LLC*
(h.2) Fund Administration Servicing Agreement
with Firstar Mutual Fund Services, LLC*
(h.3) Fund Accounting Servicing Agreement with
Firstar Mutual Fund Services, LLC*
(h.4) Fulfillment Servicing Agreement with
Firstar Mutual Fund Services, LLC*
(i) Opinion and Consent of Godfrey & Kahn, S.C.*
(j) Consent of [Accountants]*
(k) None
(l) Subscription Agreement with Kirr, Marbach &
Company, LLC*
(m.1) Rule 12b-1 Distribution and Shareholder
Servicing Plan*
(m.2) Form of 12b-1 Related Agreement*
(n) Financial Data Schedule*
(o) None
______________
*To be filed by Amendment.
Item 24. Persons Controlled by or under Common Control
with Registrant
Registrant neither controls any person nor is
under common control with any other person.
Item 25. Indemnification
Article VI of Registrant's By-Laws provides as
follows:
<PAGE>
ARTICLE VI INDEMNIFICATION
The Corporation shall indemnify (a) its
directors and officers, whether serving the
Corporation or, at its request, any other entity,
to the full extent required or permitted by (i)
Maryland law now or hereafter in force, including
the advance of expenses under the procedures and
to the full extent permitted by law, and (ii) the
1940 Act and (b) other employees and agents to
such extent as shall be authorized by the Board of
Directors and be permitted by law. The foregoing
rights of indemnification shall not be exclusive
of any other rights to which those seeking
indemnification may be entitled. The Board of
Directors may take such action as is necessary to
carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend
from time to time such resolutions or contracts
implementing such provisions or such further
indemnification arrangements as may be permitted
by law.
Item 26. Business and Other Connections of the
Investment Adviser
Besides serving as investment adviser to private
accounts, the Adviser is not currently and has not
during the past two fiscal years engaged in any other
business, profession, vocation or employment of a
substantial nature. Information regarding the
business, profession, vocation or employment of a
substantial nature of each of the Adviser's directors
and officers is hereby incorporated by reference from
the information contained under "Directors and
Officers" in the SAI.
Item 27. Principal Underwriters
(a) The Distributor also acts as distributor for
the Badgley Funds, Inc. and The Home State
Funds Group.
(b) The principal business address of Rafferty
Capital Markets, Inc. ("Rafferty"), the
Registrant's principal underwriter, is 550
Mamaroneck Avenue, Harrison, New York 10528.
The following information relates to each
director and officer of Rafferty:
Positions
and Offices Positions and
Name With Underwriter Offices
With
Registrant
Thomas A. Mulrooney President None
Derek Park Vice President None
Stephen Sprague Chief Financial None
Officer and
Secretary
(c) None.
Item 28. Location of Accounts and Records
All accounts, books or other documents required to
be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules
promulgated thereunder are in the possession of Kirr,
Marbach & Company, LLC, Registrant's investment
adviser, at Registrant's corporate offices, except
records held and maintained by Firstar Bank Milwaukee,
N.A., 615 E. Michigan Street, Milwaukee, Wisconsin
53202, relating to its function as custodian, and
Firstar Mutual Fund Services, LLC, Third Floor, 615 E.
Michigan Street, Milwaukee, Wisconsin 53202, relating
to its function as transfer agent, administrator and
fund accountant.
Item 29. Management Services
All management-related service contracts entered
into by Registrant are discussed in Parts A and B of
this Registration Statement.
<PAGE>
Item 30. Undertakings
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement
on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Columbus and State of Indiana on the 16th day of
October, 1998.
KIRR, MARBACH PARTNERS
FUNDS, INC. (Registrant)
By: /s/ Mark D. Foster
----------------------
Mark D. Foster,
Chairman and President
Each person whose signature appears below
constitutes and appoints Mark D. Foster, his true and
lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
sign any and all pre-effective and post-effective
amendments to this Registration Statement and to file
the same, with all exhibits thereto, and any other
documents in connection therewith, with the Securities
and Exchange Commission and any other regulatory body,
granting unto said attorney-in-fact and agent, full
power and authority to do and perform each and every
act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act
of 1933, this Registration Statement on Form N-1A has
been signed below by the following persons in the
capacities and on the date(s) indicated.
Name Title Date
/s/ Mark D. Foster Director, Chairman and October 16, 1998
- ----------------- President
Mark D. Foster
/s/ Mickey Kim Director, Vice President, October 16, 1998
- ----------------- Treasurer and Secretary
Mickey Kim
/s/Jeffrey N. Brown Director October 16, 1998
- -------------------
Jeffrey N. Brown
/s/ Mark E. Chesnut Director October 16, 1998
- --------------------
Mark E. Chesnut
/s/ John F. Dorenbusch Director October 16, 1998
- ----------------------
John F. Dorenbusch
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(a) Registrant's Articles of Incorporation
(b) Registrant's By-Laws
(c) None
(d) Investment Advisory Agreement*
(e) Distribution Agreement with Rafferty Capital Markets, Inc.*
(f) None
(g) Custodian Servicing Agreement with Firstar Bank Milwaukee, N.A.*
(h.1) Transfer Agent Servicing Agreement with Firstar Mutual Fund
Services, LLC*
(h.2) Fund Administration Servicing Agreement with Firstar Mutual
Fund Services, LLC*
(h.3) Fund Accounting Servicing Agreement with Firstar Mutual Fund
Services, LLC*
(h.4) Fulfillment Servicing Agreement with Firstar Mutual Fund
Services, LLC*
(i) Opinion and Consent of Godfrey & Kahn, S.C.*
(j) Consent of [Accountants]*
(k) None
(l) Subscription Agreement with Kirr, Marbach & Company, LLC*
(m.1) Rule 12b-1 Distribution and Shareholder Servicing Plan*
(m.2) Form of 12b-1 Related Agreement*
(n) Financial Data Schedule*
(o) None
___________________
*To be filed by Amendment.
ARTICLES OF INCORPORATION
OF
KIRR, MARBACH PARTNERS FUNDS, INC.
ARTICLE I
Incorporator
1.1 Incorporator. The undersigned, Renee Hardt
Torr, whose post office address is Godfrey & Kahn,
S.C., 780 North Water Street, Milwaukee, Wisconsin
53202, being at least eighteen (18) years of age, does
hereby act as incorporator to form a corporation under
the general laws of the State of Maryland.
ARTICLE II
Name
2.1 Name. The name of the corporation is Kirr,
Marbach Partners Funds, Inc. (the "Corporation").
ARTICLE III
Corporate Purposes and Powers
3.1 Corporate Purposes and Powers. The purpose
for which the Corporation is formed is, without
limitation, to act as an investment company pursuant to
the Investment Company Act of 1940, as amended (the
"1940 Act"), and to exercise and enjoy all the powers,
rights and privileges granted to, or conferred upon,
corporations by the Maryland General Corporation Law,
as amended from time to time (the "MGCL").
ARTICLE IV
Principal Office and Resident Agent
4.1 Principal Office and Resident Agent. The
post office address of the principal office of the
Corporation in the State of Maryland is c/o The
Corporation Trust Incorporated, 300 East Lombard
Street, Baltimore, Maryland 21202. The name of the
Corporation's resident agent in the State of Maryland
is The Corporation Trust Incorporated, a corporation of
the State of Maryland, and the post office address of
the resident agent is 300 East Lombard Street,
Baltimore, Maryland 21202.
ARTICLE V
Capital Stock
5.1 Authorized Shares. The total number of
shares of capital stock which the Corporation shall
have authority to issue is Five Hundred Million
(500,000,000) shares of Common Stock with a par value
of one cent ($0.01) per share and with an aggregate par
value of Five Million Dollars ($5,000,000).
5.2 Power to Classify. The Board of Directors
may classify or reclassify (i.e., into classes and/or
series), from time to time, any unissued shares of
Common Stock of the Corporation, whether now or
hereafter authorized, by setting or changing the prefer
ences, conversion or other rights, voting powers,
restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of
such shares of stock and, pursuant to such
classification or reclassification, to increase or
decrease the number of authorized shares of Common
Stock, or the number of shares of any class or series
of Common Stock, that the Corporation has the authority
to issue. Except as otherwise provided herein, all
references to Common Stock shall apply without
discrimination to the shares of each class or series of
Common Stock. Pursuant to such power, the Board of
Directors has initially designated the authorized
shares of the Corporation into one series of shares of
Common Stock as follows:
Name of Series Number of Shares Initially Allocated
Kirr, Marbach Partners 50,000,000
Value Fund
The remaining Four Hundred Fifty Million (450,000,000)
shares of Common Stock shall remain unclassified until
action is taken by the Board of Directors pursuant to
this paragraph.
5.3 Classes and Series. Unless otherwise
provided by the Board of Directors prior to the
issuance of shares, the shares of any and all classes
and series of Common Stock shall be subject to the
following:
(a) Redesignation of Class or Series. The
Board may change the designation of a class or series,
whether or not shares of such class or series are
issued and outstanding, provided that such change does
not affect the preferences, conversion or other rights,
voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of
redemption of such class or series.
(b) Authorization of Stock Issuance. The
Board of Directors may authorize the issuance and sale
of any class or series of shares of Common Stock from
time to time in such amounts and on such terms and
conditions, for such purposes and for such amounts or
kind of consideration as the Board of Directors shall
determine, subject to any limits required by then
applicable law. Nothing in this paragraph shall be
construed in any way as limiting the Board of
Director's authority to issue shares of Common Stock in
connection with a share dividend under the MGCL.
(c) Assets, Liabilities, Income and Expenses
of Each Class or Series. The assets and liabilities
and the income and expenses for each class or series of
Common Stock shall be attributable to that class or
series. The income or gain and the expense or
liabilities of the Corporation shall be allocated to
each class or series as determined by or under the
direction of the Board of Directors.
(d) Dividends and Distributions. The
holders of each class or series of Common Stock of
record as of a date determined by the Board of
Directors from time to time shall be entitled, from
funds or other assets legally available therefor, to
dividends or distributions, payable in shares or in
cash or both, in such amounts and at such times as may
be determined by the Board of Directors. Dividends or
distributions shall be paid on shares of a class or
series only out of the assets belonging to that class
or series. The amounts of dividends or distributions
declared and paid with respect to the various classes
or series of Common Stock and the timing thereof may
vary among such classes and series.
(e) Liquidation. At any time there are no
shares outstanding for a particular class or series of
Common Stock, the Board of Directors may liquidate such
class or series in accordance with applicable law. In
the event of the liquidation or dissolution of the
Corporation, or of a class or series thereof when there
are shares outstanding of the Corporation or of such
class or series, as applicable, the stockholders of the
Corporation or of each class or series, as applicable,
shall be entitled to receive, as a class or series, out
of the assets of the Corporation available for
distribution to stockholders, the assets belonging to
that class or series less the liabilities allocated to
that class or series. The assets so distributed to the
holders of a class or series shall be distributed among
such holders in proportion to the number of shares of
that class or series held by them and recorded on the
books of the Corporation. In the event that there are
any assets available for distribution that are not
attributable to any particular class or series, such
assets shall be allocated to all classes or series in
proportion to the net asset value of the respective
class or series.
(f) Fractional Shares. The Corporation may
issue fractional shares. Any fractional shares shall
carry proportionately all the rights of whole shares,
including, without limitation, the right to vote and
the right to receive dividends and distributions.
(g) Voting Rights. On each matter submitted
to a vote of stockholders, each holder of a share of
Common Stock of the Corporation shall be entitled to
one vote for each full share, and a fractional vote for
each fractional share, of stock standing in such
holder's name on the books of the Corporation,
irrespective of the class or series thereof. In
addition, all shares of all classes and series shall
vote together as a single class; provided, however,
that (i) when the MGCL or the 1940 Act requires that a
class or series vote separately with respect to a given
matter, the separate voting requirements of the
applicable law shall govern with respect to the
affected class and/or series and other classes and
series shall vote as a single class, and (ii) unless
otherwise required by the MGCL or the 1940 Act, no
class or series shall have the right to vote on any
matter which does not affect the interest of that class
or series.
(h) Quorum. The presence in person or by
proxy of the holders of one-third of the shares of
Common Stock of the Corporation entitled to vote,
without regard to class or series, shall constitute a
quorum at any meeting of the stockholders, except with
respect to any matter which, under applicable statutes
or regulatory requirements, requires approval by a
separate vote of one or more classes or series of
Common Stock, in which case the presence in person or
by proxy of the holders of one-third of the shares of
each class or series of Common Stock required to vote
as a class or series on the matter shall constitute a
quorum. If, at any meeting of the stockholders, there
shall be less than a quorum present, the stockholders
present at such meeting may, without further notice,
adjourn the same from time to time until a quorum shall
be present.
(i) Authorizing Vote. Notwithstanding any
provision of the MGCL requiring for any purpose a
proportion greater than a majority of the votes of the
Corporation or of a class or series of Common Stock of
the Corporation, the affirmative vote of the holders of
a majority of the total number of shares of Common
Stock of the Corporation, or of a class or series of
Common Stock of the Corporation, as applicable,
outstanding and entitled to vote under such
circumstances pursuant to these Articles of
Incorporation and the By-Laws of the Corporation shall
be effective for such purpose, except to the extent
otherwise required by the 1940 Act and rules
thereunder; provided, however, that, to the extent
consistent with the MGCL and other applicable law, the
By-Laws may provide for authorization to be by the vote
of a proportion less than a majority of the votes of
the Corporation, or of a class or series of Common
Stock.
(j) Change of Name. The Board of Directors,
without action by the Corporation's stockholders, shall
have the authority to change the name of the
Corporation or of any class or series of its Common
Stock created herein or hereafter.
(k) Preemptive Rights. No holder of any
class or series of Common Stock of the Corporation
shall, as such holder, have any right to purchase or
subscribe for any shares of any class or series of
Common Stock which the Corporation may issue or sell
(whether out of the number of shares authorized by
these Articles of Incorporation, or out of any shares
of any class or series of Common Stock of the
Corporation acquired by it after the issue thereof, or
otherwise), other than such right, if any, as the Board
of Directors, in its sole discretion, may determine.
(l) Redemption.
(i) Subject to the suspension of the
right of redemption or postponement of the date of
payment or satisfaction upon redemption in
accordance with the 1940 Act, each holder of any
class or series of the Common Stock of the
Corporation, upon request and after complying with
the redemption procedures established by or under
the supervision of the Board of Directors, shall
be entitled to require the Corporation to redeem,
out of legally available funds, all or any part of
the Common Stock standing in the name of such
holder on the books of the Corporation at the net
asset value (as determined in accordance with the
1940 Act) of such shares (less any applicable
redemption fee).
(ii) The Board of Directors may
authorize the Corporation, at its option and to
the extent permitted by and in accordance with the
conditions of the 1940 Act, to redeem any shares
of any class or series of Common Stock of the
Corporation owned by any stockholder under
circumstances deemed appropriate by the Board of
Directors in its sole discretion from time to
time, including, without limitation, failure to
maintain ownership of a specified minimum number
or value of shares of any class or series of
Common Stock of the Corporation, at the net asset
value (as determined in accordance with the 1940
Act) of such shares (less any applicable
redemption fee).
(iii) Payment for redeemed stock shall be
made in cash unless, in the opinion of the Board of
Directors, which shall be conclusive, conditions exist
which make it advisable for the Corporation to make
payment wholly or partially in securities or other
property or assets of the class or series of Common
Stock being redeemed. Payment made wholly or partially
in securities or other property or assets may be delayed
to such reasonable extent, not inconsistent with applicable
law, as is reasonably necessary under the circumstances.
No stockholder shall have the right, except as determined
by the Board of Directors, to have his shares redeemed in
such securities, property or other assets.
(iv) The Board of Directors may, upon
reasonable notice to the holders of any class or
series of Common Stock of the Corporation, impose
a fee for the redemption of shares, such fee to be
not in excess of the amount set forth in the
Corporation's then existing By-Laws and to apply
in the case of such redemptions and under such
terms and conditions as the Board of Directors
shall determine. The Board of Directors shall
have the authority to rescind the imposition of
any such fee in its discretion and to reimpose the
redemption fee from time to time upon reasonable
notice.
(v) Any shares of Common Stock redeemed
by the Corporation shall be deemed to be canceled
and restored to the status of authorized but
unissued shares of the particular class or series.
(m) Valuation. With respect to any class or
series of Common Stock, the Board of Directors may
adopt provisions to seek to maintain a stable net asset
value per share. Without limiting the foregoing, the
Board of Directors may determine that the net asset
value per share of any class or series should be
maintained at a designated constant value and may
establish procedures, not inconsistent with applicable
law, to accomplish that result. Such procedures may
include a requirement, in the event of a net loss with
respect to the particular class or series from time to
time, for automatic pro rata capital contributions from
each stockholder of that class or series in amounts
sufficient to maintain the designated constant share
value.
ARTICLE VI
Board Of Directors
6.1 Number of Directors. The number of directors
of the Corporation shall be two (2), which may be
changed in accordance with the By-Laws and subject to
the limitations of the MGCL. The directors may fix a
different number of directors and may authorize a
majority of the directors to increase or decrease the
number of directors set by these Articles or the By-
Laws within limits set by the By-Laws. The directors
may also fill vacancies created by an increase in the
number of directors. Unless otherwise provided by the
By-Laws, the directors of the Corporation need not be
stockholders of the Corporation.
6.2 Names of Directors. The names of the
directors who will serve until the first annual meeting
and until their successors are elected and qualify are
as follows:
Mark D. Foster
Mickey Kim
6.3 Limits on Liability of Directors and
Officers. To the fullest extent that limitations on
the liability of directors and officers are permitted
by the MGCL, no director or officer of the Corporation
shall have any personal liability to the Corporation or
to its stockholders for monetary damages. No amendment
to these Articles of Incorporation or repeal of any of
its provisions shall limit or eliminate the benefits
provided to directors and officers under this provision
with respect to any act or omission which occurred
prior to such amendment or repeal.
6.4 Indemnification of Directors and Officers.
The Corporation shall indemnify its directors and
officers and make advance payment of related expenses
to the fullest extent permitted, and in accordance with
the procedures required, by the MGCL and the 1940 Act.
The By-Laws may provide that the Corporation shall
indemnify its employees and/or agents in any manner and
within such limits as permitted by applicable law.
Such indemnification shall be in addition to any other
right or claim to which any director, officer, employee
or agent may otherwise be entitled. The Corporation
may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or
agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer,
partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture,
trust or other enterprise or employee benefit plan,
against any liability (including, with respect to
employee benefit plans, excise taxes) asserted against
and incurred by such person in any such capacity or
arising out of such person's position, whether or not
the Corporation would have had the power to indemnify
against such liability. The rights provided to any
person by this Article 6.4 shall be enforceable against
the Corporation by such person who shall be presumed to
have relied upon such rights in serving or continuing
to serve in the capacities indicated herein. No
amendment of these Articles of Incorporation shall
impair the rights of any person arising at any time
with respect to events occurring prior to such
amendment.
6.5 Powers of Directors. In addition to any
powers conferred herein or in the By-Laws, the Board of
Directors may, subject to any express limitations
contained in these Articles of Incorporation or in the
By-Laws, exercise the full extent of powers conferred
by the MGCL, and the enumeration and definition of
particular powers herein or in the By-Laws shall in no
way be deemed to restrict or otherwise limit those
lawfully conferred powers. In furtherance and without
limitation of the foregoing, the Board of Directors
shall have power:
(a) To cause the Corporation to enter into,
from time to time, investment advisory agreements
providing for the management and supervision of the
investments of the Corporation and the furnishing of
advice to the Corporation with respect to the
desirability of investing in, purchasing or selling
securities or other assets. Such agreements shall
contain such terms, provisions and conditions as the
Board of Directors may deem advisable and as are
permitted by the 1940 Act.
(b) To designate, without limitation,
distributors, custodians, transfer agents,
administrators, account servicing and other agents for
the stock, assets and business of the Corporation and
employ and fix the powers, rights, duties,
responsibilities and compensation of each such
distributor, custodian, transfer agent, administrator,
account servicing and other agent.
ARTICLE VII
Amendments
7.1 Amendments. The Corporation reserves the
right from time to time to amend, alter, change or
repeal any provision of these Articles of
Incorporation, and all rights conferred upon
stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, the undersigned incorporator
of Kirr, Marbach Partners Funds, Inc. hereby executes
the foregoing Articles of Incorporation and
acknowledges the same to be her act.
Dated this 22nd day of September, 1998.
/s/ Renee Hardt Torr
-----------------------
Renee Hardt Torr
BY-LAWS
OF
KIRR, MARBACH PARTNERS FUNDS, INC.
ARTICLE I
Offices
1.1 Principal Office. The principal office of
Kirr, Marbach Partners Funds, Inc. ("the Corporation")
in the State of Maryland shall be in the City of
Baltimore.
1.2 Other Offices. The Corporation may have such
other offices in such places as the Board of Directors
may from time to time determine.
ARTICLE II
Meetings of Stockholders
2.1 Annual Meeting. Subject to this Article II,
an annual meeting of stockholders for the election of
directors and the transaction of such other business as
may properly come before the meeting shall be held at
such time and place as the Board of Directors shall
select. The Corporation shall not be required to hold
an annual meeting of its stockholders in any year in
which the election of directors is not required to be
acted upon under the Investment Company Act of 1940, as
amended (the "1940 Act").
2.2 Special Meetings. Special meetings of
stockholders may be called at any time by the
President, the Secretary, the Treasurer, or by a
majority of the Board of Directors and shall be held at
such time and place as may be stated in the notice of
the meeting. Special meetings of the stockholders
shall be called by the Secretary upon receipt of
written request of the holders of shares entitled to
cast not less than 10% of the votes entitled to be cast
at such meeting, provided that such request shall state
the purposes of such meeting and the matters proposed
to be acted on.
2.3 Place of Meetings. Meetings of stockholders
shall be held at such place within the United States as
the Board of Directors may from time to time determine.
2.4 Notice of Meetings; Waiver of Notice. Notice
of the place, date and time of the holding of each
stockholders' meeting and, if the meeting is a special
meeting, the purpose or purposes of the meeting, shall
be given personally or by mail, not less than ten nor
more than ninety days before the date of such meeting,
to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of the
meeting. Notice by mail shall be deemed to be duly
given when deposited in the United States mail
addressed to the stockholder at his or her address as
it appears on the records of the Corporation, with
postage prepaid. Notice of any meeting of stockholders
shall be deemed waived by any stockholder who attends
such meeting in person or by proxy, or who, either
before or after the meeting, submits a signed waiver of
notice which is filed with the records of the meeting.
2.5 Quorum, Adjournment of Meetings. The
presence at any stockholders' meeting, in person or by
proxy, of stockholders of one-third of the shares of
the Common Stock of the Corporation entitled to vote,
without regard to class or series, shall be necessary
and sufficient to constitute a quorum for the
transaction of business, except for any matter which,
under applicable statutes or regulatory requirements,
requires approval by a separate vote of one or more
classes or series of Common Stock, in which case the
presence in person or by proxy of holders of one-third
of the shares of each class or series of Common Stock
required to vote as a class or series on the matter
shall constitute a quorum. The holders of a majority
of shares of Common Stock entitled to vote at the
meeting and present in person or by proxy, whether or
not sufficient to constitute a quorum, or, any officer
present entitled to preside or act as Secretary of such
meeting may adjourn the meeting without determining the
date of the new meeting or from time to time without
further notice to a date not more than one hundred and
twenty days after the original record date. Any
business that might have been transacted at the meeting
originally called may be transacted at any such
adjourned meeting at which a quorum is present.
2.6 Organization. At each meeting of the
stockholders, the President, or in his or her absence
or inability to act, a Vice President, shall act as
chairman of the meeting; provided, however, that if no
such officer is present or able to act, a chairman of
the meeting shall be elected at the meeting. The
Secretary or, in his or her absence or inability to
act, any person appointed by the chairman of the
meeting, shall act as secretary of the meeting and keep
the minutes thereof.
2.7 Order of Business. The order of business at
all meetings of the stockholders shall be as determined
by the chairman of the meeting.
2.8 Voting. Except as otherwise provided by
statute or the Articles of Incorporation, each holder
of record of shares of Common Stock of the Corporation
shall be entitled at each meeting of the stockholders
to one vote for every full share of such stock, with a
fractional vote for any fractional shares, standing in
his or her name on the record of stockholders of the
Corporation, irrespective of the class or series
thereof, as of the record date determined pursuant to
Section 2.9 or if the record date has not been fixed,
then at the later of (i) the close of business on the
day on which notice of the meeting is mailed or (ii)
the thirtieth day before the meeting. Each stockholder
entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him or
her by a proxy signed by such stockholder or his or her
attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof,
unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy
states that it is irrevocable and where the proxy is
coupled with an interest in the stock to be voted under
the proxy or another general interest in the
Corporation or its assets or liabilities. Except as
otherwise provided by statute, the Articles of
Incorporation or these By-Laws, any corporate action to
be taken by vote of the stockholders shall be
authorized by the affirmative vote of the holders of a
majority of the total number of shares of Common Stock,
or of a class or series of Common Stock, as applicable,
outstanding and entitled to vote at a meeting of
stockholders at which a quorum is present. No votes
need to be taken by ballot other than the election of
directors, which shall be by written ballot, or unless
required by statute, these By-Laws, or determined by
the chairman of the meeting to be advisable. On a vote
by ballot, each ballot shall be signed by the
stockholder voting or by his or her proxy and shall
state the number of shares voted.
2.9 Fixing of Record Date. The Board of
Directors may fix a time not less than ten nor more
than ninety days prior to the date of any meeting of
stockholders or prior to the last day on which the
consent or dissent of stockholders may be effectively
expressed for any purpose without a meeting, as the
time as of which stockholders entitled to notice of and
to vote at such a meeting or whose consent or dissent
is required or may be expressed for any purpose, as the
case may be, shall be determined; and only persons who
were holders of record of Common Stock at such time and
no other shall be entitled to notice of and to vote at
such meeting or to express their consent or dissent, as
the case may be. If no record date has been fixed, the
record date for the determination of stockholders
entitled to notice of or to vote at a meeting of
stockholders shall be the later of the close of
business on the day on which notice of the meeting is
mailed or the thirtieth day before the meeting, or if
notice is waived by all stockholders, at the close of
business on the tenth day next preceding the day on
which the meeting is held. The Board of Directors may
fix a record date for determining stockholders entitled
to receive payment of a dividend or distribution, but
such date shall be not more than ninety days before the
date on which such payment is made. If no record date
has been fixed, the record date for determining
stockholders entitled to receive dividends or
distributions shall be the close of business on the day
on which the resolution of the Board of Directors
declaring the dividend or distribution is adopted, but
the payment shall not be made more than sixty days
after the date on which the resolution is adopted.
2.10 Consent of Stockholders in Lieu of Meeting.
Except as otherwise provided by statute or the Articles
of Incorporation, any action required to be taken at
any meeting of stockholders, or any action which may be
taken at any meeting of such stockholders, may be taken
without a meeting, without prior notice and without a
vote, if the following are filed with the records of
stockholders meetings: (i) a unanimous written consent
which sets forth the action and is signed by each stock
holder entitled to vote on the matter and (ii) a
written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not
entitled to vote thereat.
ARTICLE III
Board of Directors
3.1 General Powers. The business and affairs of
the Corporation shall be managed under the direction of
the Board of Directors and all powers of the
Corporation may be exercised by or under authority of
the Board of Directors.
3.2 Number of Directors. The number of directors
shall be fixed from time to time by resolution of the
Board of Directors adopted by a majority of the
Directors then in office; provided, however, that the
number of Directors shall in no event be less than
three nor more than fifteen except that the Corporation
may have less than three but no less than one director
if there is no stock outstanding, and may have a number
of directors no fewer than the number of stockholders
so long as there are fewer than three stockholders.
Any vacancy created by an increase in directors may be
filled in accordance with Section 3.6. No reduction in
the number of directors shall have the effect of
removing any director from office prior to the
expiration of his or her term unless such director is
specifically removed pursuant to Section 3.5 at the
time of such decrease. Directors need not be
stockholders.
3.3 Election and Term of Directors. Directors
shall be elected annually, by written ballot at the
annual meeting of stockholders or a special meeting
held for that purpose; provided, however, that if no
annual meeting of the stockholders of the Corporation
is required to be held in a particular year pursuant to
Section 2.1, directors shall be elected at the next
annual meeting held. The term of office of each
director shall be from the time of his or her election
and qualification until the election of directors next
succeeding his or her election and until his or her
successor shall have been elected and shall have
qualified.
3.4 Resignation. A director of the Corporation
may resign at any time by giving written notice of his
or her resignation to the Board of Directors, the
President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the
time when it shall become effective shall not be
specified therein, immediately upon its receipt.
Unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it
effective.
3.5 Removal of Directors. Any director of the
Corporation may be removed by the affirmative vote of a
majority of (a) the Board of Directors, (b) a committee
of the Board of Directors appointed for such purpose,
or (c) the stockholders by vote of a majority of the
outstanding shares of Common Stock of the Corporation.
3.6 Vacancies. If any vacancies occur in the
Board of Directors (i) by reason of death, resignation,
removal or otherwise, the remaining directors shall
continue to act, and subject to the provisions of the
1940 Act, such vacancies (if not previously filled by
the stockholders) may be filled by a majority of the
remaining directors and (ii) by reason of an increase
in the authorized number of directors, such vacancies
(if not previously filled by the stockholders) may be
filled by a majority vote of the entire Board of
Directors.
3.7 Place of Meeting. The directors may hold
their meetings, have one or more offices and keep the
books of the Corporation at any office or offices of
the Corporation or at any other place within or without
the State of Maryland as they may determine, or in the
case of meetings, as they may determine or as shall be
specified or fixed in the respective notices or waivers
of notice thereof.
3.8 Regular Meetings. The Board of Directors
from time to time may provide by resolution for the
holding of regular meetings and fix their time and
place as the Board of Directors may determine. Notice
of such regular meetings need not be in writing,
provided that notice of any change in the time or place
or such fixed regular meetings shall be communicated
promptly to each director not present at the meeting at
which such change was made in the manner provided in
Section 3.9 for notice of special meetings. Members of
the Board of Directors or any committee designated
thereby may participate in a meeting of such Board of
Directors or committee by means of a conference
telephone or similar communications equipment by means
of which all persons participating in the meeting can
hear each other at the same time, and participation by
such means shall constitute presence in person at a
meeting, except where meetings are required to be held
in person pursuant to the 1940 Act.
3.9 Special Meetings. Special meetings of the
Board of Directors may be held at any time or place and
for any purpose when called by the President, the
Secretary or two or more of the directors. Notice of
special meetings, stating the time and place, shall be
communicated to each director personally by telephone
or transmitted to him or her by telegraph, telefax,
telex, cable or wireless at least one day before the
meeting.
3.10 Waiver of Notice. No notice of any meeting
of the Board of Directors or a committee of the Board
of Directors need be given to any director who is
present at the meeting or who waives notice of such
meeting in writing (which waiver shall be filed with
the records of such meeting), either before or after
the time of the meeting.
3.11 Quorum and Voting. At all meetings of the
Board of Directors, the presence of one-third of the
entire Board of Directors shall constitute a quorum
unless there are only two or three Directors, in which
case two directors shall constitute a quorum. If there
is only one director, the sole director shall
constitute a quorum. At any adjourned meeting at which
a quorum is present, any business may be transacted
which might have been transacted at the meeting as
originally called.
3.12 Organization. The Board of Directors may, by
resolution adopted by a majority of the entire Board of
Directors, designate a chairman or co-chairmen who
shall preside at each meeting. In the absence or
inability of such persons to preside at a meeting, the
President, or in his or her absence or inability to
act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting
and preside thereat. The Secretary (or in his or her
absence or inability to act, any person appointed by
the chairmen) shall act as secretary of the meeting and
keep the minutes thereof.
3.13 Written Consent of Directors in Lieu of a
Meeting. Subject to the provisions of the 1940 Act,
any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if all members
of the Board of Directors or committee, as the case may
be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings.
3.14 Compensation. Directors may receive
compensation for services to the Corporation in their
capacities as directors or otherwise in such manner and
in such amounts as may be fixed from time to time by
the Board of Directors.
ARTICLE IV
Committees
4.1 Organization. By resolution adopted by the
Board of Directors, the Board may designate one or more
committees composed of two or more directors. The
Chairmen of such committees shall be elected by the
Board of Directors. The Board of Directors shall have
the power at any time to change the members of such
committees and to fill vacancies in the committees.
The Board of Directors may delegate to these committees
any of its powers, except the power to authorize the
issuance of stock, declare a dividend or distribution
on stock, recommend to stockholders any action
requiring stockholder approval, amend these By-Laws, or
approve any merger or share exchange which does not
require stockholder approval. If the Board of
Directors has given general authorization for the
issuance of stock, a committee of the Board, in
accordance with a general formula or method specified
by the Board by resolution or by adoption of a stock
option or other plan, may fix the terms of stock
subject to classification or reclassification and the
terms on which any stock may be issued, including all
terms and conditions required or permitted to be
established or authorized by the Board of Directors.
4.2 Proceedings and Quorum. In the absence of an
appropriate resolution of the Board of Directors, each
committee may adopt such rules and regulations
governing its proceedings, quorum and manner of acting
as it shall deem proper and desirable. In the event
any member of any committee is absent from any meeting,
the members thereof present at the meeting, whether or
not they constitute a quorum, may appoint a member of
the Board of Directors to act in the place of such
absent member.
ARTICLE V
Officers, Agents and Employees
5.1 General. The officers of the Corporation
shall be a President, Secretary and Treasurer, and may
include one or more additional Vice Presidents and/or
such other officers as may be appointed in accordance
with the provisions of Section 5.8.
5.2 Election, Tenure and Qualifications. The
officers of the Corporation, except those appointed as
provided in Section 5.8, shall be elected by the Board
of Directors at its first meeting and thereafter
annually at an annual meeting. If any officers are not
chosen at any annual meeting, such officers may be
chosen at any subsequent regular or special meeting of
the Board. Except as otherwise provided in this
Article V, each officer chosen by the Board of
Directors shall hold office until the next annual
meeting of the Board of Directors and until his or her
successor shall have been elected and qualified. Any
person may hold one or more offices of the Corporation
except the offices of President and Vice President.
5.3 Removal and Resignation. Whenever in the
judgment of the Board of Directors the best interest of
the Corporation will be served thereby, any officer may
be removed from office by the vote of a majority of the
members of the Board of Directors at any regular
meeting or at a special meeting called for such
purpose. Any officer may resign his office at any time
by delivering a written resignation to the Board of
Directors, the President or the Secretary. Unless
otherwise specified therein, such resignation shall
take effect upon delivery.
5.4 President. The President shall be the chief
executive officer of the Corporation, and shall have
general charge of the business, affairs and property of
the Corporation and general supervision over its
officers, employees and agents. Except as the Board of
Directors may otherwise order, he or she may sign in
the name and on behalf of the Corporation all deeds,
bonds, contracts, or agreements. He or she shall
exercise such other powers and perform such other
duties as from time to time may be assigned to him or
her by the Board of Directors.
5.5 Vice President. The Board of Directors may
from time to time elect one or more Vice Presidents who
shall have such powers and perform such duties as from
time to time may be assigned to them by the Board of
Directors or the President. At the request or in the
absence or disability of the President, the Vice
President (or if there are two or more Vice Presidents,
then the more senior of such officers present and able
to act) may perform all the duties of the President and
when so acting, shall have all the powers of and be
subject to all the restrictions upon the President.
Any Vice President may perform such duties as the Board
of Directors may assign.
5.6 Treasurer. The Treasurer shall be the
principal financial and accounting officer of the
Corporation and shall have general charge of the
finances and books of account of the Corporation.
Except as otherwise provided by the Board of Directors,
he or she shall have general supervision of the funds
and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto.
He or she shall render to the Board of Directors,
whenever directed, an account of the financial
condition of the Corporation and of all his or her
transactions as Treasurer; and as soon as possible
after the close of each fiscal year he or she shall
make and submit to the Board of Directors a like report
for such fiscal year.
5.7 Secretary. The Secretary shall attend to the
giving and serving of all notices of the Corporation
and shall record all proceedings of the meetings of the
stockholders and directors in books to be kept for that
purpose. He or she shall keep in safe custody the seal
of the Corporation, and shall have charge of the
records of the Corporation, including the stock books
and such other books and papers as the Board of
Directors may direct and such books, reports,
certificates and other documents required by law to be
kept, all of which shall at all reasonable times be
open to inspection by any director. He or she shall
perform such other duties as appertain to his or her
office or as may be required by the Board of Directors.
5.8 Subordinate Officers. The Board of Directors
from time to time may appoint such other officers or
agents as it may deem advisable, each of whom shall
have such title, hold office for such period, have such
authority and perform such duties as the Board of
Directors may determine. The Board of Directors from
time to time may delegate to one or more officers or
agents the power to appoint any such subordinate
officers or agents and to prescribe their rights, terms
of office, authorities and duties.
5.9 Remuneration. The salaries or other
compensation of the officers of the Corporation shall
be fixed from time to time by resolution of the Board
of Directors, except that the Board of Directors may by
resolution delegate to any person or group of persons
the power to fix the salaries or other compensation of
any subordinate officers or agents appointed in
accordance with the provisions of Section 5.8.
5.10 Surety Bonds. The Board of Directors may
require any officer or agent of the Corporation to
execute a bond (including, without limitation, any bond
required by the 1940 Act, and the rules and regulations
of the Securities and Exchange Commission) to the
Corporation in such sum and with such surety or
sureties as the Board of Directors may determine,
conditioned upon the faithful performance of his or her
duties to the Corporation, including responsibility for
negligence and for the accounting of any of the
Corporation's property, funds or securities that may
come into his or her hands.
ARTICLE VI
Indemnification
6.1 Indemnification. The Corporation shall
indemnify (a) its directors and officers, whether
serving the Corporation or, at its request, any other
entity, to the full extent required or permitted by (i)
Maryland law now or hereafter in force, including the
advance of expenses under the procedures and to the
full extent permitted by law, and (ii) the 1940 Act,
and (b) other employees and agents to such extent as
shall be authorized by the Board of Directors and be
permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be
entitled. The Board of Directors may take such action
as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve
and amend from time to time such resolutions or
contracts implementing such provisions or such further
indemnification arrangements as may be permitted by
law.
ARTICLE VII
Capital Stock
7.1 Uncertificated Shares. The interest of
stockholders of the Corporation will not be evidenced
by certificates.
7.2 Stock Ledgers. The stock ledgers of the
Corporation, containing the names and addresses of the
stockholders and the number of shares held by them
respectively, shall be kept at the principal offices of
the Corporation or, if the Corporation employs a
transfer agent, at the offices of the transfer agent of
the Corporation.
7.3 Transfers of Shares. Transfers of shares of
Common Stock of the Corporation shall be made on the
stock records of the Corporation only by the registered
holder thereof, or by his or her attorney thereunto
authorized by power of attorney duly executed and filed
with the Secretary or with a transfer agent or transfer
clerk, subject to the payment of all taxes due for such
shares. The transfer of shares is also subject to the
receipt by the Secretary, transfer agent or transfer
clerk of proper evidence of succession, assignment or
authority to transfer as the Corporation or its agents
may reasonably require. Except as otherwise provided
by law, the Corporation shall be entitled to recognize
the exclusive right of a person in whose name any share
or shares of Common Stock stand on the record of
stockholders as the owner of such share or shares for
all purposes, including, without limitation, the rights
to receive dividends or other distributions, and to
vote as such owner, and the Corporation shall not be
bound to recognize any equitable or legal claim to or
interest in any such share or shares of Common Stock on
the part of any other person. The Board of Directors
may make such additional rules and regulations, not
inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and
registration of shares of Common Stock of the
Corporation.
7.4 Transfer Agents and Registrars. The Board of
Directors may from time to time appoint or remove
transfer agents and/or registrars of transfers of
shares of Common Stock of the Corporation, and it may
appoint the same person as both transfer agent and
registrar.
ARTICLE VIII
Seal
8.1 Seal. The seal of the Corporation shall
bear, in addition to any other emblem or device
approved by the Board of Directors, the name of the
Corporation, the year of its incorporation and the
words "Corporate Seal" and "Maryland." The form of the
seal may be altered by the Board of Directors. Said
seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner repro
duced. Any officer or director of the Corporation
shall have the authority to affix the corporate seal of
the Corporation to any document requiring the same.
ARTICLE IX
Fiscal Year
9.1 Fiscal Year. The fiscal year of the Company
shall be fixed by resolution of the Board of Directors
adopted by a majority of the Directors then in office.
ARTICLE X
Depositories and Custodians
10.1 Depositories. The funds of the Corporation
shall be deposited with such banks or other
depositories as the Board of Directors may from time to
time determine.
10.2 Custodians. All securities and other
investments shall be deposited in the safe keeping of
such banks or other companies as the Board of Directors
may from time to time determine. Every arrangement
entered into with any bank or other company for the
safe keeping of the securities and investments of the
Corporation shall contain provisions complying with the
1940 Act and the general rules and regulations
thereunder.
ARTICLE XI
Execution of Instruments
11.1 Checks, Notes, Drafts, etc. Checks, notes,
drafts, acceptances, bills of exchange and other orders
obligations for the payment of money shall be signed by
such officer or officers or person or persons as the
Board of Directors by resolution shall from time to
time designate or as these By-Laws provide.
11.2 Sale or Transfer of Securities. Stock
certificates, bonds or other securities at any time
owned by the Corporation may be held on behalf of the
Corporation or sold, transferred or otherwise disposed
of subject to any limits imposed by these By-Laws and
pursuant to authorization by the Board of Directors
and, when so authorized to be held on behalf of the
Corporation or sold, transferred or otherwise disposed
of, may be transferred from the name of the Corporation
by the signature of the President, any Vice President
or the Treasurer or pursuant to any procedure approved
by the Board of Directors, subject to applicable law.
ARTICLE XII
Independent Public Accountants
12.1 Independent Public Accountants. The
Corporation shall employ an independent public
accountant or a firm of independent public accountants
as its accountants to examine the accounts of the
Corporation and to sign and certify financial
statements filed by the Corporation.
ARTICLE XIII
Amendments
13.1 Amendments. These By-Laws may be amended,
altered or repealed at any regular meeting of the
stockholders or at any special meeting of the
stockholders at which a quorum is present or
represented, provided that notice of the proposed
amendment, alteration or repeal be contained in the
notice of such special meeting. These By-Laws may also
be amended, altered or repealed by the affirmative vote
of a majority of the Board of Directors at any regular
or special meeting of the Board of Directors, except
any particular By-Law which is specified as not subject
to alteration or repeal by the Board of Directors,
subject to the requirements of the 1940 Act.
