As filed with the Securities and Exchange Commission on December 9, 1998
Securities Act Registration No. 333-65829
Investment Company Act Registration No. 811-9067
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. __
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
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 December 9, 1998
Prospectus
dated December _____, 1998
Kirr, Marbach Partners Funds, Inc.
KIRR, MARBACH PARTNERS VALUE FUND
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-870-8039
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 OBJECTIVE 3
HOW THE FUND INVESTS 3
FUND MANAGEMENT 5
HOW TO PURCHASE SHARES 6
HOW TO REDEEM SHARES 8
VALUATION OF FUND SHARES 10
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN 10
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT 10
YEAR 2000 ISSUE 11
_____________________________
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 Objective" and "How the Fund Invests."
What will the Fund invest in?
The Fund invests primarily in common stocks. The
Fund may also invest in preferred stocks and foreign
securities in pursuing its investment objective. In
trying to achieve its goal, the stocks selected for the
Fund will be those the Adviser believes are currently
undervalued, i.e., those stocks trading at a discount
to intrinsic value. The Fund will normally invest at
least a majority of its assets in the common stocks of
medium capitalization companies. The Fund may also
invest in the common stocks of small capitalization and
large capitalization companies. For more information,
see "How the Fund Invests."
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.
Foreign Investment Risk: The Fund's foreign
investments may increase or decrease in value
depending on foreign exchange rates, foreign political
and economic developments and U.S. and foreign laws
relating to foreign investments. In addition, the
costs of foreign investing tend to be higher than the
costs of investing in domestic securities.
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;
<PAGE>
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.
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
investment)(1) None
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 exchange shares of the Fund for shares of
the Firstar Money Market Fund by telephone, you
will be charged a $5 service fee.
(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 January 1, 1999. Until December
31, 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, including
initial organization costs of the Fund, 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."
<PAGE>
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
$205 $634
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term
capital growth.
HOW THE FUND INVESTS
The Fund seeks to achieve its investment objective
by investing primarily in common stocks of companies
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
will consist of 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. 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.
The Adviser generally follows a value approach to
investing for the Fund. Accordingly, the Fund will
focus on 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 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. Because of
the Fund's focus on value investing, it may not be a
complete investment program for the equity portion of
your portfolio.
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
<PAGE>
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. Other equity securities will primarily be
preferred stocks and depositary receipts. 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.
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.
In pursuing its investment objective, the Fund may
invest up to 20% of its total 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.
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, defensive strategies are used, 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,
defensive strategy, the Fund may not achieve its
investment objective.
The Fund 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
<PAGE>
securities and cash. The Fund may also
invest a limited amount of assets in illiquid
securities. See the Fund's SAI for additional
information.
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. Until December 31, 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, including initial organization costs of
the Fund, 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.
<PAGE>
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").
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.
<PAGE>
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
Further Credit: Kirr, Marbach Partners Funds, Inc.
(shareholder account number)
(shareholder name/account registration)
Please call 1-800-870-8039 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
1-800-870-8039.
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.
<PAGE>
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 1-800-870-8039 for complete wiring
instructions.
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.
<PAGE>
Telephone Redemption
Shares of the Fund may also be redeemed by calling
the Transfer Agent at 1-800-870-8039. 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 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.
<PAGE>
VALUATION OF FUND SHARES
Net asset value for the Fund is calculated by
taking the 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. In
determining net asset value, expenses are accrued and
applied daily and investments for which market
quotations are readily available are valued at market
value. Any investments 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 Fund.
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 Fund 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
1-800-870-8039.
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.
<PAGE>
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.
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. However, there can be
no assurance that the computer systems of the companies
in which the Fund invests will be timely converted or
that the value of such investments will not be
adversely affected by the Year 2000 Issue.
<PAGE>
DIRECTORS
Mark D. Foster
Mickey Kim
Jeffrey N. Brown
Mark E. Chesnut
John F. Dorenbusch
PRINCIPAL OFFICERS
Mark D. Foster, President
Mickey Kim, Vice President,
Treasurer and Secretary
INVESTMENT ADVISER
Kirr, Marbach & Company, LLC
621 Washington Street
Columbus, Indiana 47201
DISTRIBUTOR
Rafferty Capital Markets, Inc.
550 Mamaroneck Avenue
Harrison, New York 10528
CUSTODIAN
Firstar Bank Milwaukee, N.A.
Third Floor
615 E. Michigan Street
Milwaukee, Wisconsin 53202
ADMINISTRATOR, TRANSFER AGENT
AND DIVIDEND-DISBURSING AGENT
Firstar Mutual Fund Services, LLC
Third Floor
615 E. Michigan Street
Milwaukee, Wisconsin 53202
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street
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 811-9067.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Kirr, Marbach Partners Funds, Inc.
KIRR, MARBACH PARTNERS VALUE FUND
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-870-8039
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 December __, 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 December __, 1998.
<PAGE>
TABLE OF CONTENTS
Page No.
FUND ORGANIZATION 3
INVESTMENT RESTRICTIONS 3
IMPLEMENTATION OF INVESTMENT OBJECTIVES 4
DIRECTORS AND OFFICERS 11
PRINCIPAL SHAREHOLDERS 13
INVESTMENT ADVISER 13
FUND TRANSACTIONS AND BROKERAGE 14
CUSTODIAN 15
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT 15
ADMINISTRATOR 16
DISTRIBUTOR AND PLAN OF DISTRIBUTION 16
PURCHASE, EXCHANGE AND PRICING OF SHARES 17
REDEMPTIONS IN KIND 20
TAXATION OF THE FUND 20
PERFORMANCE INFORMATION 21
INDEPENDENT ACCOUNTANTS 22
FINANCIAL STATEMENTS 22
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 Objective" and "How the Fund Invests."
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.
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
<PAGE>
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
Fixed income Securities in General. The Fund may
invest up to 25% of its 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.
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);
<PAGE>
Bank obligations, such as certificates of deposit,
banker's acceptances and time deposits of domestic and
foreign banks, domestic savings associations and their
subsidiaries and branches (in amounts in excess of the
current $100,000 per account insurance coverage
provided by the Federal Deposit Insurance Corporation); and
Repurchase agreements.
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 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
<PAGE>
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 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.
<PAGE>
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 objective.
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
<PAGE>
arrangements
with the issuer, including reliable financial
statements. Under the terms of most sponsored
arrangements, 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
<PAGE>
may withstand a prolonged
recession or economic downturn. Such conditions could
severely disrupt the market for and adversely affect
the value of such securities.
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
<PAGE>
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
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
<PAGE>
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.
*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 December __, 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 December 2, 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 December 2, 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 December __,
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 December __, 1998 and by the
initial shareholder of the Fund on December __, 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 until December 31,
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, including initial organization costs
of the Fund, 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 December __,
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, or any Recipient (as
defined below) 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 Corporation or the Distributor may 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 up to the maximum allowable fee.
If more money for services rendered 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 forms of Related
Agreements, 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 monthly. The Distributor and/or Recipients will
provide reports or invoices to the Corporation of all
amounts payable to them (and the purposes for which the
amounts were expended) 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 $50,000 and at least $250 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 1-800-870-8039.
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 1-800-870-8039. 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
KPMG Peat Marwick LLP, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, 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) Statement of Operations.
(d) Notes to the Financial Statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Kirr, Marbach Partners Value Fund:
We have audited the accompanying statement of
assets and liabilities of Kirr, Marbach Partners
Value Fund (the "Fund"), as of December 2, 1998,
and the related statement of operations for the
period September 23, 1998 (inception) through
December 2, 1998. These financial statements
are the responsibility of the Fund's management.
Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements are free of
material misstatements. An audit includes
examining, on a test basis, evidence supporting
the amounts and disclosures in the financial
statements. An audit also includes assessing
the accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the financial position of the
Fund as of December 2, 1998 and the results of
its operations for the period September 23, 1998
(inception) through December 2, 1998, in
conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Milwaukee, Wisconsin
December 8, 1998
<PAGE>
The Kirr, Marbach Partners Value Fund
Statement of Assets and Liabilities
December 2, 1998
ASSETS:
Cash $100,000
Receivable from Adviser 43,952
Prepaid Blue sky 10,415
Prepaid Insurance 32,050
Total Assets 186,417
LIABILITIES:
Payable to Adviser 86,417
Total Liabilities
NET ASSETS $100,000
Capital shares, $0.01 par value; 500,000,000
shares authorized 10,000
Net Asset value, offering and redemption price per
share (net assets/shares outstanding) $10.00
See accompanying notes to the financial statements
<PAGE>
The Kirr, Marbach Partners Value Fund
Statement of Operations
For the Period September 23, 1998 (Inception) through
December 2, 1998
EXPENSES:
Organization expenses $43,952
Less: Expenses waived by Adviser (43,952)
Net income/(loss) $0
See accompanying notes to the financial statements
<PAGE>
The Kirr, Marbach Partners Value Fund
Notes to the Financial Statements
For the Period September 23,1998 through December 2,
1998
1. Organization
The Kirr, Marbach Partners Funds, Inc. (the
"Corporation") was organized as a Maryland corporation on
September 23, 1998 and is registered under the Investment
Company Act of 1940, as amended (the "1940 act"), as an
open-end management investment company issuing its shares
in series, each series representing a distinct portfolio
with its own investment objectives and policies. The
series presently authorized is the Kirr, Marbach Partners
Value Fund (the "Fund"). Pursuant to the 1940 Act, the
Fund is a "diversified" series of the Corporation. The
Fund has had no operations other than those related to
organizational matters, including the sale of 10,000
shares for cash in the amount of $100,000 of the Fund to
capitalize the Fund, which was sold to Kirr, Marbach &
Company, LLC (the "Adviser") on December 2, 1998.
2. Significant Accounting Policies
(a) Organization and Prepaid Initial Registration Expense
Expenses incurred by the Corporation in connection with
the organization are expensed as incurred. These
expenses were advanced by the Adviser, and the Adviser
has agreed to reimburse the Fund for these expenses,
subject to potential recovery (see Note 3). Prepaid
initial state registration and prepaid insurance
expenses are deferred and amortized over the period of
benefit.
(b) Federal Income Taxes
The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a
regulated investment company and to make the requisite
distributions of income and capital gains to their
shareholders sufficient to relieve it from all or
substantially all Federal income taxes.
(c) Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
3. Investment Adviser
The Corporation has an Investment Advisory Agreement (the
"Agreement") with the Adviser, with whom certain Officers
and Directors of the Corporation are affiliated, to
furnish investment advisory services to the Fund. Under
the terms of the Agreement, the Corporation, on behalf of
the Fund,
<PAGE>
compensates the Adviser for its management
services at the annual rate of 1.00% of the Fund's
average daily assets.
The Adviser has agreed to waive, through December 31,
1999 its management fee and/or reimburse the Fund's other
expenses, including organization expenses, to the extent
necessary to ensure that the Fund's operating expenses,
do not exceed 1.50% of its average daily net assets. Any
such waiver or reimbursement is subject to later
adjustment to allow the Adviser to recoup amounts waived
or reimbursed to the extent actual fees and expense for a
period are less than the expense limitation cap of 1.50%,
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.
4. Distribution Plan
The Corporation, on behalf of the Fund, has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940
Act (the "12b-1 Plan"), which provides that the Fund will
pay distribution fees to Rafferty Capital Markets, Inc.
(the "Distributor") or others that provide distribution
or service assistance to the Fund at annual rates of up
to 0.25% of the average daily net assets attributable to
its shares. Payments under the distribution plan shall
be used to compensate or reimburse the Fund's distributor
for services provided and expenses incurred in connection
with the sales of shares.
<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(1)
(b) Registrant's By-Laws(1)
(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 KPMG Peat Marwick LLP
(k) None
(l) Subscription Agreement with Kirr, Marbach &
Company, LLC
(m) Rule 12b-1 Distribution and Shareholder
Servicing Plan
(n) Financial Data Schedule
(o) None
______________
(1) Incorporated by reference to Registrant's Form N-
1A as filed with the Commission on October 16, 1998.
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:
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)
<PAGE>
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.
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 Pre-Effective Amendment
No. 1 to the 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 8th day of December, 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 Pre-Effective Amendment No. 1 to the
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 December 8, 1998
- ------------------- President
Mark D. Foster
/s/ Mickey Kim Director, Vice President, December 8, 1998
- ------------------ Treasurer and Secretary
Mickey Kim
/s/ Jeffrey N. Brown Director December 8, 1998
- --------------------
Jeffrey N. Brown
/s/ Mark E. Chesnut Director December 8, 1998
- --------------------
Mark E. Chesnut
/s/ John F. Dorenbusch Director December 8, 1998
- ----------------------
John F. Dorenbusch
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(a) Registrant's Articles of Incorporation(1)
(b) Registrant's By-Laws(1)
(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 KPMG Peat Marwick LLP
(k) None
(l) Subscription Agreement with Kirr, Marbach & Company, LLC
(m) Rule 12b-1 Distribution and Shareholder Servicing Plan
(n) Financial Data Schedule
(o) None
___________________
(1) Incorporated by reference to Registrant's Form
N-1A as filed with the Commission on October 16, 1998.
KIRR, MARBACH PARTNERS FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is entered into as of the _____ day
of December, 1998, between Kirr, Marbach Partners
Funds, Inc., a Maryland corporation (the "Corporation")
and Kirr, Marbach & Company, LLC, an Indiana limited
liability company (the "Adviser").
W I T N E S S E T H
WHEREAS, the Corporation is an open-end investment
company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Corporation is
authorized to create separate series, each with its own
separate investment portfolio (the "Funds"), and the
beneficial interest in each such series will be
represented by a separate series of shares (the
"Shares").
WHEREAS, the Adviser is a registered investment
adviser, engaged in the business of rendering
investment advisory services.
WHEREAS, in managing the Corporation's assets, as
well as in the conduct of certain of its affairs, the
Corporation seeks the benefit of the Adviser's services
and its assistance in performing certain managerial
functions. The Adviser desires to furnish such
services and to perform the functions assigned to it
under this Agreement for the consideration provided for
herein.
NOW THEREFORE, the parties mutually agree as
follows:
1. Appointment of the Adviser. The Corporation
hereby appoints the Adviser as investment adviser for
each of the Funds of the Corporation on whose behalf
the Corporation executes an Exhibit to this Agreement,
and the Adviser, by execution of each such Exhibit,
accepts the appointments. Subject to the direction of
the Board of Directors (the "Directors") of the
Corporation, the Adviser shall manage the investment
and reinvestment of the assets of each Fund in
accordance with the Fund's investment objective and
policies and limitations, for the period and upon the
terms herein set forth. The investment of funds shall
also be subject to all applicable restrictions of the
Articles of Incorporation and By-Laws of the
Corporation as may from time to time be in force.
2. Expenses Paid by the Adviser. In addition to the
expenses which the Adviser may incur in the performance
of its responsibilities under this Agreement, and the
expenses which it may expressly undertake to incur and
pay, the Adviser shall incur and pay all reasonable
compensation, fees and related expenses of the
Corporation's officers and its Directors, except for
such Directors who are not interested persons (as that
term is defined in Section 2(a)(19) of the 1940 Act) of
the Adviser, and all expenses related to the rental and
maintenance of the principal offices of the
Corporation.
3. Investment Advisory Functions. In its capacity as
investment adviser, the Adviser shall have the
following responsibilities:
(a) To furnish continuous advice and recommendations
to the Funds, as to the acquisition, holding or
disposition of any or all of the securities or other
assets which the Funds may own or contemplate acquiring
from time to time;
(b) To cause its officers to attend meetings and
furnish oral or written reports, as the Corporation may
reasonably require, in order to keep the Directors and
appropriate officers of the Corporation fully informed
as to the condition of the investments of the Funds,
the investment recommendations of the Adviser, and the
investment considerations which have given rise to
those recommendations; and
(c) To supervise the purchase and sale of securities
or other assets as directed by the appropriate officers
of the Corporation.
The services of the Adviser are not to be
deemed exclusive and the Adviser shall be free to
render similar services to others as long as its
services for others does not in any way
hinder, preclude or prevent the Adviser from performing
its duties and obligations under this Agreement. In
the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or
duties hereunder on the part of the Adviser, the
Adviser shall not be subject to liability to the
Corporation, the Funds, or to any shareholder for any
act or omission in the course of, or in connection
with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale
of any security.
4. Obligations of the Corporation. The Corporation
shall have the following obligations under this
Agreement:
(a) To keep the Adviser continuously and fully
informed as to the composition of the Funds'
investments and the nature of all of their respective
assets and liabilities;
(b) To furnish the Adviser with a copy of any
financial statement or report prepared for it by
certified or independent public accountants, and with
copies of any financial statements or reports made to
the Funds' shareholders or to any governmental body or
securities exchange;
(c) To furnish the Adviser with any further materials
or information which the Adviser may reasonably request
to enable it to perform its functions under this
Agreement; and
(d) To compensate the Adviser for its services in
accordance with the provisions of paragraph 5 hereof.
5. Compensation. The Corporation will pay the
Adviser a fee for its services with respect to each
Fund (the "Advisory Fee") at the annual rate set forth
on the Exhibit(s) hereto. The Advisory Fee shall be
accrued each calendar day during the term of this
Agreement and the sum of the daily fee accruals shall
be paid monthly as soon as practicable following the
last day of each month. The daily fee accruals will be
computed by multiplying 1/365 by the annual rate and
multiplying the product by the net asset value of the
Fund as determined in accordance with the Corporation's
registration statement as of the close of business on
the previous day on which the Fund was open for
business, or in such other manner as the parties agree.
The Adviser may from time to time and for such periods
as it deems appropriate or for such time and to the
extent agreed on Exhibit A for a Fund reduce its
compensation and/or assume expenses for one or more of
the Funds (including initial organization costs);
provided, however, that with respect to any agreement
set forth on Exhibit A the Adviser shall be entitled to
recoup such amounts for a period of up to three (3)
years from the date such amount was reduced or assumed.
6. Expenses Paid by Corporation.
(a) Except as provided in this paragraph, nothing in
this Agreement shall be construed to impose upon the
Adviser the obligation to incur, pay, or reimburse the
Corporation for any expenses not specifically assumed
by the Adviser under paragraph 2 above. Each Fund
shall pay or cause to be paid all of its expenses and
the Fund's allocable share of the Corporation's
expenses, including, but not limited to, investment
adviser fees; any compensation, fees, or reimbursements
which the Corporation pays to its Directors who are not
interested persons (as that phrase is defined in
Section 2(a)(19) of the 1940 Act) of the Adviser; fees
and expenses of the custodian, transfer agent,
registrar or dividend disbursing agent; current legal,
accounting and printing expenses; administrative,
clerical, recordkeeping and bookkeeping expenses;
brokerage commissions and all other expenses in
connection with the execution of Fund transactions;
interest; all federal, state and local taxes (including
stamp, excise, income and franchise taxes); expenses of
shareholders' meetings and of preparing, printing and
distributing proxy statements, notices and reports to
shareholders; expenses of preparing and filing reports
and tax returns with federal and state regulatory
authorities; and all expenses incurred in complying
with all federal and state laws and the laws of any
foreign country applicable to the issue, offer, or sale
of Shares of the Funds, including but not limited to,
all costs involved in the registration or qualification
of Shares of the Funds for sale in any jurisdiction and
all costs involved in preparing, printing and
distributing prospectuses and statements of additional
information to existing shareholders of the Funds.
(b) If expenses borne by a Fund in any fiscal year
(including the Adviser's fee, but excluding taxes,
interest, brokerage commissions, Rule 12b-1 expenses
and similar fees) exceed those set forth in any
statutory or regulatory formula applicable to a Fund,
the Adviser will reimburse the Fund for any excess.
7. Brokerage Commissions. For purposes of this
Agreement, brokerage commissions paid by a Fund upon
the purchase or sale of securities shall be considered
a cost of the securities of the Fund and shall be paid
by the respective Fund. The Adviser is authorized and
directed to place Fund transactions only with brokers
and dealers who render satisfactory service in the
execution of orders at the most favorable prices and at
reasonable commission rates; provided, however, that
the Adviser may pay a broker or dealer an amount of
commission for effecting a securities transaction in
excess of the amount of commission another broker or
dealer would have charged for effecting that
transaction, if the Adviser determines in good faith
that such amount of commission was reasonable in
relation to the value of the brokerage and research
services provided by such broker or dealer viewed in
terms of either that particular transaction or the
overall responsibilities of the Adviser. In placing
Fund business with such broker or dealers, the Adviser
shall seek the best execution of each transaction, and
all such brokerage placement shall be made in
compliance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, and other applicable
state and federal laws. Notwithstanding the foregoing,
the Corporation shall retain the right to direct the
placement of all Fund transactions, and the Directors
may establish policies or guidelines to be followed by
the Adviser in placing Fund transactions for the Funds
pursuant to the foregoing provisions.
8. Proprietary Rights. The Adviser has proprietary
rights in each Fund's name and the Corporation's name.
The Corporation acknowledges and agrees that the
Adviser may withdraw the use of such names from the
Funds or the Corporation should it cease to act as the
investment adviser to any Fund.
9. Termination. This Agreement may be terminated at
any time, without penalty, by the Directors of the
Corporation or by the shareholders of a Fund acting by
the vote of at least a majority of its outstanding
voting securities (as that phrase is defined in Section
2(a)(42) of the 1940 Act), provided in either case that
60 days' written notice of termination be given to the
Adviser at its principal place of business. This
Agreement may also be terminated by the Adviser at any
time by giving 60 days' written notice of termination
to the Corporation, addressed to its principal place of
business.
10. Assignment. This Agreement shall terminate
automatically in the event of any assignment (within
the meaning of Section 2(a)(4) of the 1940 Act) of this
Agreement.
11. Term. This Agreement shall begin for each Fund as
of the date of execution of the applicable Exhibit and
shall continue in effect with respect to each Fund (and
any subsequent Funds added pursuant to an Exhibit
during the initial term of this Agreement) for two
years from the date of this Agreement and thereafter
for successive periods of one year, subject to the
provisions for termination and all of the other terms
and conditions hereof if such continuation shall be
specifically approved at least annually (i) by the vote
of a majority of the Directors of the Corporation,
including a majority of the Directors who are not
parties to this Agreement or "interested persons" of
any such party (as defined in the 1940 Act), cast in
person at a meeting called for that purpose or (ii) by
the vote of a majority of the outstanding voting
securities (as that phrase is defined in Section
2(a)(42) of the 1940 Act) of each Fund. If a Fund is
added after the first approval by the Directors as
described above, this Agreement will be effective as to
that Fund upon execution of the applicable Exhibit and
will continue in effect until the next annual approval
of this Agreement by the Directors and thereafter for
successive periods of one year, subject to approval as
described above.
12. Amendments. This Agreement may be amended by the
mutual consent of the parties, provided that the terms
of each such amendment shall be approved by the
Directors or by the affirmative vote of a majority of
the outstanding voting securities (as that phrase is
defined in Section 2(a)(42) of the 1940 Act) of each
Fund.
13. Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws
of the State of Indiana, provided, however that nothing
herein shall be construed in a manner that is
inconsistent with the 1940 Act, the Investment Advisers
Act of 1940, as amended, or the rules and regulations
promulgated with respect to such respective Acts.
This Agreement will become binding on the parties
hereto upon their execution of the Exhibit(s) to this
Agreement.
EXHIBIT A
to the
Investment Advisory Agreement
KIRR, MARBACH PARTNERS VALUE FUND
For all services rendered by the Adviser
hereunder, the Corporation shall pay the Adviser, on
behalf of the above-named Fund, and the Adviser agrees
to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee
equal to 1.00% of the average daily net assets of the
Fund.
The Adviser hereby agrees that until December 31,
1999, the Adviser will waive its fees and/or reimburse
the Fund's operating expenses to the extent necessary
to ensure that the Fund's total operating expenses (on
an annual basis) do not exceed 1.50% of its average
daily net assets, subject to possible later recoupment
as provided in Section 5.
The annual investment advisory fee shall be
accrued daily at the rate of 1/365th of 1.00% applied
to the daily net assets of the Fund. The advisory fee
so accrued shall be paid by the Corporation to the
Adviser monthly.
Executed as of this ____ day of December, 1998.
The Adviser:
KIRR, MARBACH & COMPANY, LLC
By:______________________________
David M. Kirr, President
The Corporation:
KIRR, MARBACH PARTNERS FUNDS, INC.
By:_______________________________
Mark D. Foster, President
DISTRIBUTION AGREEMENT
between
KIRR, MARBACH PARTNERS FUNDS, INC.
and
RAFFERTY CAPITAL MARKETS, INC.
THIS AGREEMENT is made as of December ____, 1998,
between Kirr, Marbach Partners Funds, Inc. ("Fund"), a
corporation organized and existing under the laws of
Maryland, and Rafferty Capital Markets, Inc. ("RCM"), a
corporation organized and existing under the laws of
the State of New York.
WHEREAS, the Fund is registered under the
Investment Company Act of 1940, as amended ("1940
Act"), as an open-end management investment company,
and has registered one or more distinct series of
shares of common stock ("Shares") for sale to the
public under the Securities Act of 1933, as amended
("1933 Act"), and has qualified its shares for sale to
the public under various state securities laws; and
WHEREAS, the Fund desires to retain RCM as
principal underwriter in connection with the offering
and sale of the Shares of each series listed on
Schedule A (as amended from time to time) to this
Agreement; and
WHEREAS, this Agreement has been approved by a
vote of the Fund's board of directors ("Board") and its
disinterested directors in conformity with Section
15(c) under the 1940 Act; and
WHEREAS, RCM is willing to act as principal
underwriter for the Fund on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the promises
and mutual covenants herein contained, it is agreed
between the parties hereto as follows:
1. Appointment. The Fund hereby appoints
RCM as its agent to be the principal underwriter so as
to hold itself out as available to receive and accept
orders for the purchase and redemption of the Shares on
behalf of the Fund, subject to the terms and for the
period set forth in this Agreement. RCM hereby accepts
such appointment and agrees to act hereunder. The Fund
understands that any active solicitation activities
conducted on behalf of the Fund will be conducted
primarily, if not exclusively, by employees of the
Fund's sponsor who shall become registered
representatives of RCM.
2. Services and Duties of RCM.
(a) RCM agrees to sell Shares on a best
efforts basis from time to time during the term of this
Agreement as agent for the Fund and upon the terms
described in the Registration Statement. As used in
this Agreement, the term "Registration Statement" shall
mean the currently effective registration statement of
the Fund, and any supplements thereto, under the 1933
Act and the 1940 Act.
(b) RCM will hold itself available to
receive purchase and redemption orders satisfactory to
RCM for Shares and will accept such orders on behalf of
the Fund. Such purchase orders shall be deemed
effective at the time and in the manner set forth in
the Registration Statement.
(c) RCM, with the operational assistance of
the Fund's transfer agent, shall make Shares available
through the National Securities Clearing Corporation's
Fund/SERV System.
(d) RCM shall provide to investors and
potential investors only such information regarding the
Fund as the Fund shall provide or approve. RCM shall
review and file in a reasonably prompt manner all
proposed advertisements and sales literature with
appropriate regulators and consult with the Fund
regarding any comments provided by regulators with
respect to such materials. No employee of RCM shall
make any oral statements or representations regarding
the Fund, provided, however, that this provision shall
not apply to any registered representative who is an
employee of the Fund's sponsor.
(e) The offering price of the Shares shall
be the price determined in accordance with, and in the
manner set forth in, the most-current Prospectus. The
Fund shall make available to RCM a statement of each
computation of net asset value and the details of
entering into such computation.
(f) RCM at its sole discretion may
repurchase Shares offered for sale by the shareholders.
Repurchase of Shares by RCM shall be at the price
determined in accordance with, and in the manner set
forth in, the most-current Prospectus. At the end of
each business day, RCM shall notify, by any appropriate
means, the Fund and its transfer agent of the orders
for repurchase of Shares received by RCM since the last
such report, the amount to be paid for such Shares, and
the identity of the shareholders offering Shares for
repurchase. RCM reserves the right either to
repurchase such Shares or to act as agent for the Fund
to receive and transmit promptly to the Fund's transfer
agent shareholder requests for redemption of Shares.
(g) RCM shall not be obligated to sell any
certain number of Shares.
(h) In connection with the distribution
services provided hereunder and with respect to the
Rule 12b-1 Plan adopted by the Fund, RCM shall prepare
reports for the Board regarding its activities under
this Agreement as from time to time shall be reasonably
requested by the Board and conduct its activities in
accordance with such Plan.
(i) RCM shall in all material respects
conform its activities hereunder to the requirements of
applicable state and federal laws and all applicable
rules of the National Association of Securities
Dealers, Inc. ("NASD").
3. Duties of the Fund.
(a) The Fund shall keep RCM fully informed
of its affairs and shall provide to RCM from time to
time copies of all information, financial statements,
and other papers that RCM may reasonably request for
use in connection with the distribution of Shares,
including, without limitation, certified copies of any
financial statements prepared for the Fund by its
independent public accountant and such reasonable
number of copies of the most current Prospectus,
Statement of Additional Information ("SAI"), and annual
and interim reports as RCM may request, and the Fund
shall fully cooperate in the efforts of RCM to sell and
arrange for the sale of Shares.
(b) The Fund shall maintain a currently
effective Registration Statement on Form N-1A with the
Securities and Exchange Commission (the "SEC"),
maintain qualification with applicable states and file
such reports and other documents as may be required
under applicable federal and state laws. The Fund
shall notify RCM in writing of the states in which the
Shares may be sold and shall notify RCM in writing of
any changes to such information. The Fund (or its
sponsor) shall bear all expenses related to preparing
and typesetting such Prospectuses, SAI and other
materials required by law and such other expenses,
including printing and mailing expenses, related to the
Fund's communication with persons who are shareholders.
(c) The Fund shall not use any
advertisements or other sales materials that have not
been (i) submitted to RCM for its review and approval,
and (ii) filed with the appropriate regulators.
(d) The Fund represents and warrants that
its Registration Statement and any advertisements and
sales literature (excluding statements relating to RCM
and the services it provides that are based upon
written information furnished by RCM expressly for
inclusion therein) of the Fund shall not contain any
untrue statement of material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein not
misleading, and that all statements or information
furnished to RCM, pursuant to Section 3(a) hereof,
shall be true and correct in all material respects.
4. Other Broker-Dealers. RCM in its discretion
may enter into agreements to sell Shares to such
registered and qualified retail dealers, as reasonably
requested by the Fund. In making agreements with such
dealers, RCM shall act only as principal and not as
agent for the Fund and shall pay any compensation to
such persons. The form of any such dealer agreement
shall be mutually agreed upon and approved by the Fund
and RCM.
5. Withdrawal of Offering. The Fund reserves
the right at any time to withdraw all offerings of any
or all Shares by written notice to RCM at its principal
office. No Shares shall be offered by either RCM or
the Fund under any provisions of this Agreement and no
orders for the purchase or sale of Shares hereunder
shall be accepted by the Fund if and so long as
effectiveness of the Registration Statement then in
effect or any necessary amendments thereto shall be
suspended under any of the provisions of the 1933 Act,
or if and so long as a current prospectus as required
by Section 5(b)(2) of the 1933 Act is not on file with
the SEC.
6. Services Not Exclusive. The services
furnished by RCM hereunder are not to be deemed
exclusive and RCM shall be free to furnish similar
services to others so long as its services under this
Agreement are not impaired thereby.
7. Expenses of the Fund. The Fund (or its
sponsor) shall bear all costs and expenses of
registering the Shares with the SEC and state and other
regulatory bodies, and shall assume expenses related to
communications with shareholders of the Fund including,
but not limited to, (i) fees and disbursements of its
counsel and independent public accountant; (ii) the
preparation, filing, and printing of Registration
Statements and/or Prospectuses or SAIs; (iii) the
preparation and mailing of annual and interim reports,
Prospectuses, SAIs, and proxy materials to
shareholders; (iv) such other expenses related to the
communications with persons who are shareholders of the
Fund; and (v) the qualifications of Shares for sale
under the securities laws of such jurisdictions as
shall be selected by the Fund pursuant to Paragraph
3(b) hereof, and the costs and expenses payable to each
such jurisdiction for continuing qualification therein.
In addition, the Fund (or its sponsor) shall bear all
costs of preparing, printing, mailing and filing any
advertisements and sales literature. RCM does not
assume responsibility for any expenses not assumed in
this Agreement.
8. Compensation. As compensation for the
services performed and the expenses assumed by RCM
under this Agreement including, but not limited to, any
commissions paid for sales of Shares, the Fund shall
pay RCM, as promptly as possible within the timing
provided in the Fund's Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act, but no later than 30
days after the end of each quarter, a fee as set forth
in Schedule B to this Agreement.
9. Share Certificates. The Fund shall not issue
certificates representing Shares unless requested to do
so by a shareholder. If such request is transmitted
through RCM, the Fund will cause certificates
evidencing the Shares owned to be issued in such names
and denominations as RCM shall from time to time
direct.
10. Status of RCM. RCM is an independent
contractor and shall be agent of the Fund only with
respect to the sale and redemption of Shares. RCM is a
duly licensed broker-dealer with the SEC and all
applicable state securities commissions, a member of
the NASD and authorized to sell shares of open-end
investment companies. Neither RCM or any "affiliated
person" (as defined in the 1940 Act) is ineligible
pursuant to Section 9 of the 1940 Act to serve as an
underwriter to any registered investment company.
11. Indemnification.
(a) The Fund agrees to indemnify, defend,
and hold RCM, its officers and directors, and any
person who controls RCM within the meaning of Section
15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities, and expenses
(including the cost of investigating or defending such
claims, demands, or liabilities and any reasonable
counsel fees incurred in connection therewith) that
RCM, its officers, directors, or any such controlling
person may incur under the 1933 Act, or under common
law or otherwise, arising out of or based upon any (i)
alleged untrue statement of a material fact contained
in the Registration Statement, Prospectus, SAI or sales
literature, (ii) alleged omission to state a material
fact required to be stated in the Registration
Statement, Prospectus, SAI or sales literature or
necessary to make the statements therein not
misleading, or (iii) failure by the Fund to comply with
any material terms of the Agreement; provided, that in
no event shall anything contained herein be so
construed as to protect RCM against any liability to
the Fund or its shareholders to which RCM would
otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of
its duties or by reason of its reckless disregard of
its obligations under this Agreement.
(b) The Fund shall not be liable to RCM
under this Agreement with respect to any claim made
against RCM or any person indemnified unless RCM or
other such person shall have notified the Fund in
writing of the claim within a reasonable time after the
summons or other first written notification giving
information of the nature of the claim shall have been
served upon RCM or such other person (or after RCM or
the person shall have received notice of service on any
designated agent). However, failure to notify the Fund
of any claim shall not relieve the Fund from any
liability that it may have to RCM or any person against
whom such action is brought otherwise than on account
of this Agreement.
(c) The Fund shall be entitled to
participate at its own expense in the defense or, if it
so elects, to assume the defense of any suit brought to
enforce any claims subject to this Agreement. If the
Fund elects to assume the defense of any such claim,
the defense shall be conducted by counsel chosen by the
Fund and satisfactory to indemnified defendants in the
suit whose approval shall not be unreasonably withheld.
In the event that the Fund elects to assume the defense
of any suit and retain counsel, the indemnified
defendants shall bear the fees and expenses of any
additional counsel retained by them. If the Fund does
not elect to assume the defense of a suit, it will
reimburse the indemnified defendants for the reasonable
fees and expenses of any counsel retained by the
indemnified defendants. The Fund agrees to promptly
notify RCM of the commencement of any litigation or
proceedings against it or any of its officers or
directors in connection with the issuance or sale of
any of its Shares.
(d) RCM agrees to indemnify, defend, and
hold the Fund, its officers and directors, and any
person who controls the Fund within the meaning of
Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities, and
expenses (including the cost of investigating or
defending against such claims, demands, or liabilities
and any reasonable counsel fees incurred in connection
therewith) that the Fund, its directors or officers, or
any such controlling person may incur under the 1933
Act, or under common law or otherwise, resulting from
(i) RCM's willful misfeasance, bad faith or gross
negligence in the performance of its obligations and
duties under this Agreement, (ii) arising out of or
based upon any alleged untrue statement of a material
fact contained in information furnished in writing by
RCM to the Fund for use in the Registration Statement,
Prospectus or SAI arising out of or based upon any
alleged omission to state a material fact in connection
with such information required to be stated in either
thereof or necessary to make such information not
misleading, or (iii) failure by RCM to comply with any
material terms of this Agreement.
(e) RCM shall be entitled to participate, at
its own expense, in the defense or, if it so elects, to
assume the defense of any suit brought to enforce the
claim, but if RCM elects to assume the defense, the
defense shall be conducted by counsel chosen by RCM and
satisfactory to the indemnified defendants whose
approval shall not be unreasonably withheld. In the
event that RCM elects to assume the defense of any suit
and retain counsel, the defendants in the suit shall
bear the fees and expenses of any additional counsel
retained by them. If RCM does not elect to assume the
defense of any suit, it will reimburse the indemnified
defendants in the suit for the reasonable fees and
expenses of any counsel retained by them. RCM agrees
to promptly notify the Fund of (i) the commencement of
any litigation or proceedings against it or any of its
personnel regarding the issuance or sale of its shares
of the Fund, or (ii) any regulatory inspection,
examination or proceeding materially affecting RCM's
ability to act as principal underwriter under this
Agreement.
12. Duration and Termination.
(a) This Agreement shall become effective on
the date first written above or such later date as
indicated in Schedule A and, unless sooner terminated
as provided herein, will continue in effect for two
years from the above written date. Thereafter, if not
terminated this Agreement shall continue in effect for
successive annual periods, provided that such
continuance is specifically approved at least annually
(i) by a vote of a majority of the Fund's Board who are
neither interested persons (as defined in the 1940 Act)
of the Fund ("Independent directors") or RCM, cast in
person at a meeting called for the purpose of voting on
such approval, and (ii) by the Board or by vote of a
majority of the outstanding voting securities of the
Fund.
(b) Notwithstanding the foregoing, this
Agreement may be terminated in its entirety at any
time, without the payment of any penalty, by vote of
the Board, by vote of a majority of the Independent
directors, or by vote of a majority of the outstanding
voting securities of the Fund on sixty days' written
notice to RCM or by RCM at any time, without the
payment of any penalty, on sixty days' written notice
to the Fund. This Agreement will automatically
terminate in the event of its "assignment" (within the
meaning of the 1940 Act).
13. Amendment of this Agreement. No provision of
this Agreement may be changed, waived, discharged, or
terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the
change, waiver, discharge, or termination is sought.
This Agreement may be amended with the approval of the
Board or of a majority of the outstanding voting
securities of the Fund; provided, that in either case,
such amendment also shall be approved by a majority of
the Independent directors.
14. Notice. Any notice required or permitted to
be given by either party to the other shall be deemed
sufficient upon receipt in writing at the other party's
principal offices.
15. Miscellaneous. The captions in this
Agreement are included for convenience of reference
only and in no way define or delimit any of the
provisions hereof or otherwise affect their
construction or effect. If any provision of this
Agreement shall be held or made invalid by a court
decision, statute, rule, or otherwise, the remainder of
this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors. As used in this Agreement, the terms
"majority of the outstanding voting securities,"
"interested person," and "assignment" shall have the
same meaning as such terms have in the 1940 Act.
16. Governing Law. This Agreement shall be
construed in accordance with the laws of the State of
New York and the 1940 Act (without regard, however, to
the conflicts of law principles). To the extent that
the applicable laws of the State of New York conflict
with the applicable provisions of the 1940 Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their officers
designated as of the day and year first above written.
KIRR, MARBACH PARTNERS FUNDS, INC.
By:_________________________________
Its:________________________________
RAFFERTY CAPITAL MARKETS, INC.
By:_________________________________
Its:________________________________
SCHEDULE A
to the
DISTRIBUTION AGREEMENT
between
KIRR, MARBACH PARTNERS FUNDS, INC.
and
RAFFERTY CAPITAL MARKETS, INC.
Pursuant to section 1 of the Distribution
Agreement between Kirr, Marbach Partners Funds, Inc.
("Fund") and Rafferty Capital Markets, Inc. ("RCM"),
the Fund hereby appoints RCM as its agent to be the
principal underwriter of Fund with respect to its
following series:
Kirr, Marbach Partners Value Fund
Dated: December ____, 1998
SCHEDULE B
to the
DISTRIBUTION AGREEMENT
between
KIRR, MARBACH PARTNERS FUNDS, INC.
and
RAFFERTY CAPITAL MARKETS, INC.
As compensation pursuant to section 8 of the
Distribution Agreement between Kirr, Marbach Partners,
Inc. (the "Fund") and Rafferty Capital Markets, Inc.
("RCM"), the Fund shall pay to RCM the sum of:
1. an annual fee of $15,000 for the first series of
the Fund and $3,000 for each series thereafter or .01%
of the average daily net assets of each series,
computed daily and paid monthly, whichever is greater;
2. the ongoing licensing fees and incidental costs of
those employees of the Fund's sponsor who are
designated by the Fund's sponsor to become registered
representatives of RCM;
3. the compensation, if any, paid by RCM to such
registered representatives in accordance with
compensation schedules, as agreed upon by RCM and the
Fund's sponsor from time to time;
4. the reasonable fees associated with listing and
maintaining shares on the National Securities Clearing
Corporation's Fund/SERV System;
5. incidental expenses associated with printing and
distributing advertising and sales literature, such as
filings with the National Association of Securities
Dealers, Inc.; and
6. any reasonable out-of-pocket expenses, including
travel expenses and retention of records.
In no event shall fees payable by the Fund under this
Agreement exceed the permissible payments authorized
under the Fund's Distribution Plan pursuant to Rule 12b-1
under the 1940 Act.
Dated: December ____, 1998
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT made as of December 17, 1998,
between Kirr, Marbach Partners Funds, Inc., a Maryland
corporation (hereinafter called the "Company"), and
Firstar Bank Milwaukee, N.A., a Wisconsin corporation
(hereinafter called "Custodian").
WHEREAS, the Company is an open-end management
investment company which is registered under the
Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create
separate series, each with its own separate investment
portfolio; and
WHEREAS, the Company desires that the securities
and cash of the Kirr, Marbach Partners Value Fund and
each additional series of the Company listed on
Exhibit A attached hereto (each, a "Fund"), as may be
amended from time to time, shall be hereafter held and
administered by Custodian pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Custodian agree
as follows:
1. Definitions
The word "securities" as used herein includes
stocks, shares, bonds, debentures, notes, mortgages or
other obligations, and any certificates, receipts,
warrants or other instruments representing rights to
receive, purchase or subscribe for the same, or
evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a
request or direction or certification in writing signed
in the name of the Company by any two of the President,
a Vice President, the Secretary and the Treasurer of
the Company, or any other persons duly authorized to
sign by the Board of Directors.
The word "Board" shall mean the Board of Directors
of the Company.
2. Names, Titles, and Signatures of the Company's
Officers
An officer of the Company will certify to
Custodian the names and signatures of those persons
authorized to sign the officers' certificates described
in Section 1 hereof, and the names of the members of
the Board of Directors, together with any changes which
may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate
account or accounts in the name of the Company, subject
only to draft or order by Custodian acting pursuant to
the terms of this Agreement. Custodian shall hold in
such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account
of the Company. Custodian shall make payments of cash
to, or for the account of, the Company from such cash
only:
(a)for the purchase of securities for the
portfolio of the Fund upon the delivery
of such securities to Custodian,
registered in the name of the Company or
of the nominee of Custodian referred to
in Section 7 or in proper form for
transfer;
(b)for the purchase or redemption of shares
of the common stock of the Fund upon
delivery thereof to Custodian, or upon
proper instructions from the Company;
(c)for the payment of interest, dividends,
taxes, investment adviser's fees or
operating expenses (including, without
limitation thereto, fees for legal,
accounting, auditing and custodian
services, expenses for printing and
postage and payments under any Rule 12b-
1 plan);
(d)for payments in connection with the
conversion, exchange or surrender of
securities owned or subscribed to by the
Fund held by or to be delivered to
Custodian; or
(e)for other proper corporate purposes
certified by resolution of the Board of
Directors of the Company.
Before making any such payment, Custodian shall
receive (and may rely upon) an officers' certificate
requesting such payment and stating that it is for a
purpose permitted under the terms of items (a), (b),
(c), or (d) of this Subsection A, and also, in respect
of item (e), upon receipt of an officers' certificate
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such
payment is to be made, provided, however, that an
officers' certificate need not precede the disbursement
of cash for the purpose of purchasing a money market
instrument, or any other security with same or next-day
settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Company issues
appropriate oral or facsimile instructions to Custodian
and an appropriate officers' certificate is received by
Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and
collect all checks, drafts or other orders for the
payment of money received by Custodian for the account
of the Company.
C. Custodian shall, upon receipt of proper
instructions, make federal funds available to the
Company as of specified times agreed upon from time to
time by the Company and the Custodian in the amount of
checks received in payment for shares of the Fund which
are deposited into the Fund's account.
D. If so directed by the Company, Custodian will
invest any and all available cash in overnight cash-
equivalent investments as specified by the investment
manager.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian
shall establish and maintain a segregated account(s)
for and on behalf of the Fund, into which account(s)
may be transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or
deliver any securities of the Company held by it
pursuant to this Agreement. Custodian agrees to
transfer, exchange or deliver securities held by it
hereunder only:
(a)for sales of such securities for the account of
the Fund upon receipt by Custodian of payment
therefore;
(b)when such securities are called, redeemed or
retired or otherwise become payable;
(c)for examination by any broker selling any such
securities in accordance with "street
delivery" custom;
(d)in exchange for, or upon conversion into, other
securities alone or other securities and cash
whether pursuant to any plan of merger,
consolidation, reorganization,
recapitalization or readjustment, or
otherwise;
(e)upon conversion of such securities pursuant to
their terms into other securities;
(f)upon exercise of subscription, purchase or
other similar rights represented by such
securities;
(g)for the purpose of exchanging interim receipts
or temporary securities for definitive
securities;
(h)for the purpose of redeeming in kind shares of
common stock of the Fund upon delivery
thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to
items (a), (b), (d), (e), (f), and (g), securities or
cash receivable in exchange therefor shall be
deliverable to Custodian.
Before making any such transfer, exchange or
delivery, Custodian shall receive (and may rely upon)
an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a
purpose permitted under the terms of items (a), (b),
(c), (d), (e), (f), (g), or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an
officers' certificate specifying the securities to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be
made, provided, however, that an officers' certificate
need not precede any such transfer, exchange or
delivery of a money market instrument, or any other
security with same or next-day settlement, if the
President, a Vice President, the Secretary or the
Treasurer of the Company issues appropriate oral or
facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within
two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers'
certificate to the contrary, Custodian shall: (a)
present for payment all coupons and other income items
held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by
it upon such payment for the account of the Fund; (b)
collect interest and cash dividends received, with
notice to the Company, for the account of the Fund; (c)
hold for the account of the Fund hereunder all stock
dividends, rights and similar securities issued with
respect to any securities held by it hereunder; and (d)
execute, as agent on behalf of the Company, all
necessary ownership certificates required by the
Internal Revenue Code of 1986, as amended (the "Code")
or the Income Tax Regulations (the "Regulations") of
the United States Treasury Department (the "Treasury
Department") or under the laws of any state now or
hereafter in effect, inserting the Company's name on
such certificates as the owner of the securities
covered thereby, to the extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers'
certificate, Custodian shall register all securities,
except such as are in bearer form, in the name of a
registered nominee of Custodian as defined in the Code
and any Regulations of the Treasury Department issued
thereunder or in any provision of any subsequent
federal tax law exempting such transaction from
liability for stock transfer taxes, and shall execute
and deliver all such certificates in connection
therewith as may be required by such laws or
regulations or under the laws of any state. All
securities held by Custodian hereunder shall be at all
times identifiable in its records as being held in an
account or accounts of Custodian containing only the
assets of the Company.
The Company shall from time to time furnish to
Custodian appropriate instruments to enable Custodian
to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any
securities which it may hold for the account of the
Company and which may from time to time be registered
in the name of the Company.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian
shall vote any of the securities held hereunder by or
for the account of the Fund, except in accordance with
the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and
delivered, to the Company all notices, proxies and
proxy soliciting materials with respect to such
securities, such proxies to be executed by the
registered holder of such securities (if registered
otherwise than in the name of the Company), but without
indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Company shall pay or reimburse Custodian from
time to time for any transfer taxes payable upon
transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses
made or incurred by Custodian in the performance of
this Agreement.
Custodian shall execute and deliver such
certificates in connection with securities delivered to
it or by it under this Agreement as may be required
under the provisions of the Code and any Regulations of
the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exempt
transfers and/or deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its
services pursuant to this Agreement such compensation
as may from time to time be agreed upon in writing
between the two parties. Until modified in writing,
such compensation shall be as set forth in Exhibit A
attached hereto.
Custodian shall not be liable for any action taken
in good faith upon any certificate herein described or
certified copy of any resolution of the Board, and may
rely on the genuineness of any such document which it
may in good faith believe to have been validly
executed.
The Company agrees to indemnify and hold harmless
Custodian and its nominee from all taxes, charges,
expenses, assessments, claims and liabilities
(including reasonable counsel fees) incurred or
assessed against it or by its nominee in connection
with the performance of this Agreement, except such as
may arise from its or its nominee's own bad faith,
negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any
account of the Fund for such items. In the event of
any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Company,
or in the event that Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may
arise from its or its nominee's own bad faith,
negligent action, negligent failure to act or willful
misconduct, any property at any time held for the
account of the Company shall be security therefor.
Custodian agrees to indemnify and hold harmless
the Company from all charges, expenses, assessments,
and claims/liabilities (including reasonable counsel
fees) incurred or assessed against it in connection
with the performance of this Agreement, except such as
may arise from the Fund's own bad faith, negligent
action, negligent failure to act, or willful
misconduct.
11. Subcustodians
Custodian is hereby authorized to engage another
bank or trust company as a subcustodian for all or any
part of the Company's assets, so long as any such bank
or trust company is itself qualified under the 1940 Act
and the rules and regulations thereunder and provided
further that, if the Custodian utilizes the services of
a subcustodian, the Custodian shall remain fully liable
and responsible for any losses caused to the Company by
the subcustodian as fully as if the Custodian was
directly responsible for any such losses under the
terms of this Agreement.
Notwithstanding anything contained herein, if the
Company requires the Custodian to engage specific
subcustodians for the safekeeping and/or clearing of
assets, the Company agrees to indemnify and hold
harmless Custodian from all claims, expenses and
liabilities incurred or assessed against it in
connection with the use of such subcustodian in regard
to the Company's assets, except as may arise from
Custodian's own bad faith, negligent action, negligent
failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Company periodically
as agreed upon with a statement summarizing all
transactions and entries for the account of Company.
Custodian shall furnish to the Company, at the end of
every month, a list of the portfolio securities for the
Fund showing the aggregate cost of each issue. The
books and records of Custodian pertaining to its
actions under this Agreement shall be open to
inspection and audit at reasonable times by officers
of, and by auditors employed by, the Company.
13. Termination or Assignment
This Agreement may be terminated by the Company,
or by Custodian, on ninety (90) days notice, given in
writing and sent by registered mail to:
Firstar Bank Milwaukee, N.A.
615 East Michigan Street
Milwaukee, WI 53202
or to the Company at:
Kirr, Marbach Partners Funds, Inc.
621 Washington Street
Columbus, Indiana 47201
Attn: Corporate Secretary
as the case may be. Upon any termination of this
Agreement, pending appointment of a successor to
Custodian or a vote of the shareholders of the Fund to
dissolve or to function without a custodian of its
cash, securities and other property, Custodian shall
not deliver cash, securities or other property of the
Fund to the Company, but may deliver them to a bank or
trust company of its own selection that meets the
requirements of the 1940 Act as a Custodian for the
Company to be held under terms similar to those of this
Agreement, provided, however, that Custodian shall not
be required to make any such delivery or payment until
full payment shall have been made by the Company of all
liabilities constituting a charge on or against the
properties then held by Custodian or on or against
Custodian, and until full payment shall have been made
to Custodian of all its fees, compensation, costs and
expenses, subject to the provisions of Section 10 of
this Agreement.
This Agreement may not be assigned by Custodian
without the consent of the Company, authorized or
approved by a resolution of its Board of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to
prevent the use by Custodian of a central securities
clearing agency or securities depository, provided,
however, that Custodian and the central securities
clearing agency or securities depository meet all
applicable federal and state laws and regulations, and
the Board of Directors of the Company approves by
resolution the use of such central securities clearing
agency or securities depository.
15. Records
Custodian shall keep records relating to its
services to be performed hereunder, in the form and
manner, and for such period, as it may deem advisable
and is agreeable to the Company but not inconsistent
with the rules and regulations of appropriate
government authorities, in particular Section 31 of the
1940 Act and the rules thereunder. Custodian agrees
that all such records prepared or maintained by the
Custodian relating to the services performed by
Custodian hereunder are the property of the Company and
will be preserved, maintained, and made available in
accordance with such section and rules of the 1940 Act
and will be promptly surrendered to the Company on and
in accordance with its request.
16. Governing Law
This Agreement shall be governed by Wisconsin law.
However, nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and Exchange
Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
KIRR, MARBACH PARTNERS FIRSTAR BANK MILWAUKEE, N.A.
FUNDS, INC.
By:_____________________ By:________________________
Its:____________________ Its:_______________________
Custody Services
Annual Fee Schedule - Domestic Funds
Exhibit A
Separate Series of Kirr, Marbach Partners Funds, Inc.
Name of Series Date Added
Kirr, Marbach Partners Value Fund December 17, 1998
Annual fee based upon market value
2 basis points per year
Minimum annual fee per fund - $3,000
Investment transactions (purchase, sale, exchange,
tender, redemption, maturity, receipt, delivery):
$12.00 per book entry security (depository or Federal Reserve system)
$25.00 per definitive security (physical)
$25.00 per mutual fund trade
$75.00 per Euroclear
$ 8.00 per principal reduction on pass-through certificates
$35.00 per option/futures contract
$15.00 per variation margin
$15.00 per Fed wire deposit or withdrawal
Variable Amount Demand Notes: Used as a short-term
investment, variable amount notes offer safety and
prevailing high interest rates. Our charge, which is
1/4 of 1%, is deducted from the variable amount note
income at the time it is credited to your account.
Plus out-of-pocket expenses. Foreign securities
custody services quoted separately.
Fees and out-of-pocket expenses are billed to the Fund
monthly, based upon market value at the beginning of
the month.
TRANSFER AGENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
17th day of December, 1998, by and between Kirr,
Marbach Partners Funds, Inc., a Maryland corporation
(hereinafter referred to as the "Company"), and Firstar
Mutual Fund Services, LLC, a Wisconsin limited
liability company (hereinafter referred to as the
"Firstar").
WHEREAS, the Company is an open-end management
investment company which is registered under the
Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create
separate series, each with its own separate investment
portfolio;
WHEREAS, Firstar is in the business of
administering transfer and dividend disbursing agent
functions for investment companies; and
WHEREAS, the Company desires to retain Firstar to
provide transfer and dividend disbursing agent services
to the Kirr, Marbach Partners Value Fund and each
additional series of the Company listed on Exhibit A
attached hereto (each, a "Fund"), as may be amended
from time to time.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Firstar agree
as follows:
1. Appointment of Transfer Agent
The Company hereby appoints Firstar as Transfer
Agent of the Company on the terms and conditions set
forth in this Agreement, and Firstar hereby accepts
such appointment and agrees to perform the services and
duties set forth in this Agreement in consideration of
the compensation provided for herein.
2. Duties and Responsibilities of Firstar
Firstar shall perform all of the customary
services of a transfer agent and dividend disbursing
agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including
without limitation any periodic investment plan or
periodic withdrawal program), including but not limited
to:
A.Receive orders for the purchase of shares;
B.Process purchase orders with prompt delivery,
where appropriate, of payment and supporting
documentation to the Company's custodian, and
issue the appropriate number of
uncertificated shares with such
uncertificated shares being held in the
appropriate shareholder account;
C.Process redemption requests received in good
order and, where relevant, deliver
appropriate documentation to the Company's
custodian;
D.Pay monies upon receipt from the Company's
custodian, where relevant, in accordance with
the instructions of redeeming shareholders;
E.Process transfers of shares in accordance with
the shareholder's instructions;
F.Process exchanges between funds and/or classes
of shares of funds both within the same
family of funds and with the Firstar Money
Market Funds, if applicable;
G.Prepare and transmit payments for dividends and
distributions declared by the Company with
respect to the Fund;
H.Make changes to shareholder records, including,
but not limited to, address changes in plans
(i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
I.Record the issuance of shares of the Fund and
maintain, pursuant to Rule 17ad-10(e)
promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), a
record of the total number of shares of the
Fund which are authorized, issued and
outstanding;
J.Prepare shareholder meeting lists and, if
applicable, mail, receive and tabulate
proxies;
K.Mail shareholder reports and prospectuses to
current shareholders;
L.Prepare and file U.S. Treasury Department Forms
1099 and other appropriate information
returns required with respect to dividends
and distributions for all shareholders;
M.Provide shareholder account information upon
request and prepare and mail confirmations
and statements of account to shareholders for
all purchases, redemptions and other
confirmable transactions as agreed upon with
the Company;
N.Provide a Blue Sky System which will enable the
Company to monitor the total number of shares
of the Fund sold in each state. In addition,
the Company or its agent, including Firstar,
shall identify to Firstar in writing those
transactions and assets to be treated as
exempt from the Blue Sky reporting for each
state. The responsibility of Firstar for the
Company's Blue Sky state registration status
under this Agreement is solely limited to the
initial compliance by the Company and the
reporting of such transactions to the Company
or its agent.
O.Answer telephone calls and correspondence from
shareholders relating to their accounts
during Firstar's normal business hours.
Firstar shall strive to promptly respond to
all such telephone or written inquiries from
shareholders. Copies of all correspondence
from shareholders involving complaints about
the management of the Company, services
provided by or for the Company, Firstar or
others, shall be promptly forwarded to the
Company. Firstar shall keep records of
substantive shareholder telephone calls and
correspondence and replies thereto, and of
the lapse of time between receipt of such
calls and correspondence and replies.
P.Prepare such reports as may be reasonably
requested from time to time by the Company or
its Board of Directors relating to fees paid
out under a Fund's Rule 12b-1 plan.
3. Compensation
The Company agrees to pay Firstar for the
performance of the duties listed in this Agreement as
set forth on Exhibit A attached hereto; the fees and
out-of-pocket expenses include, but are not limited to
the following: printing, postage, forms, stationery,
record retention (if requested by the Company),
mailing, insertion, programming (if requested by the
Company), labels, shareholder lists and proxy expenses.
These fees and reimbursable expenses may be
changed from time to time subject to mutual written
agreement between the Company and Firstar.
The Company agrees to pay all fees and
reimbursable expenses within ten (10) business days
following the receipt of the billing notice.
4. Representations of Firstar
Firstar represents and warrants to the Company
that:
A.It is a limited liability company duly
organized, existing and in good standing
under the laws of Wisconsin;
B.It is a registered transfer agent under the
Exchange Act.
C.It is duly qualified to carry on its business in
the State of Wisconsin;
D.It is empowered under applicable laws and by its
charter and bylaws to enter into and perform
this Agreement;
E.All requisite corporate proceedings have been
taken to authorize it to enter and perform
this Agreement;
F.It has and will continue to have access to the
necessary facilities, equipment and personnel
to perform its duties and obligations under
this Agreement; and
G.It will comply with all applicable requirements
of the Securities Act of 1933, as amended
(the "Securities Act"), and the Exchange Act,
the 1940 Act, and any laws, rules, and
regulations of governmental authorities
having jurisdiction.
5. Representations of the Company
The Company represents and warrants to Firstar
that:
A.The Company is an open-end diversified
investment company under the 1940 Act;
B.The Company is a corporation organized,
existing, and in good standing under the laws
of Maryland;
C.The Company is empowered under applicable laws
and by its Articles of Incorporation and
Bylaws to enter into and perform this
Agreement;
D.All necessary proceedings required by the
Articles of Incorporation have been taken to
authorize it to enter into and perform this
Agreement;
E.The Company will comply with all applicable
requirements of the Securities Act, the
Exchange Act, the 1940 Act, and any laws,
rules and regulations of governmental
authorities having jurisdiction; and
F.A registration statement under the Securities
Act will be made effective and will remain
effective, and appropriate state securities
law filings have been made and will continue
to be made, with respect to all shares of the
Company being offered for sale.
6. Covenants of the Company and Firstar
The Company shall furnish Firstar a certified copy
of the resolution of the Board of Directors of the
Fund authorizing the appointment of Firstar and the
execution of this Agreement. The Company shall provide
to Firstar a copy of its Articles of Incorporation and
Bylaws, and all amendments thereto.
Firstar shall keep records relating to the
services to be performed hereunder, in the form and
manner as it may deem advisable and as required under
the Exchange Act. To the extent required by Section 31
of the 1940 Act, and the rules thereunder, Firstar
agrees that all such records prepared or maintained by
Firstar relating to the services to be performed by
Firstar hereunder are the property of the Company and
will be preserved, maintained and made available in
accordance with such section and rules and will be
surrendered to the Company on and in accordance with
its request.
7. Performance of Service; Limitation of Liability
Firstar shall exercise reasonable care in the
performance of its duties under this Agreement.
Firstar shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Company in connection with matters to which this
Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication
or power supplies beyond Firstar's control, except a
loss resulting from Firstar's refusal or failure to
comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in
the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement,
the Company shall indemnify and hold harmless Firstar
from and against any and all claims, demands, losses,
expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which Firstar
may sustain or incur or which may be asserted against
Firstar by any person arising out of any action taken
or omitted to be taken by it in performing the services
hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral
instruction provided to Firstar by any duly authorized
officer of the Company, such duly authorized officer to
be included in a list of authorized officers furnished
to Firstar and as amended from time to time in writing
by resolution of the Board of Directors of the Company.
Firstar shall indemnify and hold the Company
harmless from and against any and all claims, demands,
losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which the
Company may sustain or incur or which may be asserted
against the Company by any person arising out of any
action taken or omitted to be taken by Firstar as a
result of Firstar's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence,
or willful misconduct.
In the event of a mechanical breakdown or failure
of communication or power supplies beyond its control,
Firstar shall take all reasonable steps to minimize
service interruptions for any period that such
interruption continues beyond Firstar's control.
Firstar will make every reasonable effort to restore
any lost or damaged data and correct any errors
resulting from such a breakdown at the expense of
Firstar. Firstar agrees that it shall, at all times,
have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use
of electrical data processing equipment to the extent
appropriate equipment is available. Representatives of
the Company shall be entitled to inspect Firstar's
premises and operating capabilities at any time during
regular business hours of Firstar, upon reasonable
notice to Firstar.
Regardless of the above, Firstar reserves the
right to reprocess and correct administrative errors at
its own expense.
In order that the indemnification provisions
contained in this section shall apply, it is understood
that if in any case the indemnitor may be asked to
indemnify or hold the indemnitee harmless, the
indemnitor shall be fully and promptly advised of all
pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will
use all reasonable care to notify the indemnitor
promptly concerning any situation which presents or
appears likely to present the probability of a claim
for indemnification. The indemnitor shall have the
option to defend the indemnitee against any claim which
may be the subject of this indemnification. In the
event that the indemnitor so elects, it will so notify
the indemnitee and thereupon the indemnitor shall take
over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification
under this section. The indemnitee shall in no case
confess any claim or make any compromise in any case in
which the indemnitor will be asked to indemnify the
indemnitee except with the indemnitor's prior written
consent.
8. Proprietary and Confidential Information
Firstar agrees on behalf of itself and its
directors, officers, and employees to treat
confidentially and as proprietary information of the
Company all records and other information relative to
the Company and prior, present, or potential
shareholders (and clients of said shareholders) and not
to use such records and information for any purpose
other than the performance of its responsibilities and
duties hereunder, except after prior notification to
and approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be
withheld where Firstar may be exposed to civil or
criminal contempt proceedings for failure to comply
after being requested to divulge such information by
duly constituted authorities, or when so requested by
the Company.
9. Term of Agreement; Amendment
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. The Agreement may be
terminated by either party upon giving ninety (90) days
prior written notice to the other party or such shorter
period as is mutually agreed upon by the parties. This
Agreement may be amended only by mutual written consent
of the parties.
10. Notices
Notices of any kind to be given by either party to
the other party shall be in writing and shall be duly
given if mailed or delivered as follows: Notice to
Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
Kirr, Marbach Partners Funds, Inc.
621 Washington Street
Columbus, IN 47201
Attention: Corporate Secretary
11. Duties in the Event of Termination
In the event that, in connection with termination,
a successor to any of Firstar's duties or
responsibilities hereunder is designated by the Company
by written notice to Firstar, Firstar will promptly,
upon such termination and at the expense of the
Company, transfer to such successor all relevant books,
records, correspondence, and other data established or
maintained by Firstar under this Agreement in a form
reasonably acceptable to the Company (if such form
differs from the form in which Firstar has maintained,
the Company shall pay any expenses associated with
transferring the data to such form), and will cooperate
in the transfer of such duties and responsibilities,
including provision for assistance from Firstar's
personnel in the establishment of books, records, and
other data by such successor.
12. Governing Law
This Agreement shall be construed and the
provisions thereof interpreted under and in accordance
with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and Exchange
Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
KIRR, MARBACH PARTNERS FIRSTAR MUTUAL FUND
FUNDS, INC. SERVICES, LLC
By:______________________ By:_____________________
Its:_____________________ Its:____________________
Transfer Agent and Shareholder Servicing
Annual Fee Schedule
Exhibit A
Separate Series of Kirr, Marbach Partners Funds, Inc.
Name of Series Date Added
Kirr, Marbach Partners Value Fund December 17, 1998
Annual Fee
$14.00 per shareholder account
Minimum annual fees of $22,500 for the first
Fund, $10,000 for additional funds or classes
Plus Out-of-Pocket Expenses, including but not limited
to:
Telephone - toll-free lines Proxies
Postage Retention of records (with prior approval)
Programming (with prior approval) Microfilm/fiche of records
Stationery/envelopes Special reports
Mailing ACH fees
Insurance NSCC charges
ACH Shareholder Services
$125.00 per month per Fund group
$ .50 per account setup and/or change
$ .50 per ACH item
$ 3.50 per correction, reversal, return item
Qualified Plan Fees (Billed to Investors)
Annual maintenance fee per account $12.50 / acct. (Cap at $25.00 per SSN)
Transfer to successor trustee $15.00 / trans.
Distribution to participant $15.00 / trans. (Exclusive of SWP)
Refund of excess contribution $15.00 / trans.
Additional Shareholder Fees (Billed to Investors)
Any outgoing wire transfer $12.00 / wire
Telephone Exchange $ 5.00 / exchange transaction
Return check fee $20.00 / item
Stop payment $20.00 / stop
(Liquidation, dividend, draft check)
Research fee $ 5.00 / item
(For requested items of the second calendar
year [or previous] to the request)(Cap at
$25.00)
NSCC and DAZL
Out-of-Pocket Charges
NSCC Interfaces
Setup
Fund/SERV, Networking ACATS,
Exchanges DCCS, RAT $5,000setup (one time)
Commissions $5,000 setup (one time)
Processing
Fund/SERV $ 50 / month
Networking $ 250 / month
CPU Access $ 40 / month
Fund/SERV Transactions $.350 / trade
Networking - per item $.025 /monthly dividend fund
Networking - per item $.015 /non-mo. dividend fund
First Data $.100 / next-day Fund/SERV trade
First Data $.150 / same-day Fund/SERV trade
NSCC Implementation
8 to 10 weeks lead time
Fees and out-of-pocket expenses are billed to the Fund monthly.
FUND ADMINISTRATION SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
17th day of December, 1998, by and between Kirr,
Marbach Partners Funds, Inc., a Maryland corporation
(hereinafter referred to as the "Company"), and Firstar
Mutual Fund Services, LLC, a Wisconsin limited
liability company (hereinafter referred to as
"Firstar").
WHEREAS, the Company is an open-end management
investment company which is registered under the
Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create
separate series, each with its own separate investment
portfolio;
WHEREAS, Firstar is in the business of providing,
among other things, fund administration services to
investment companies; and
WHEREAS, the Company desires to retain Firstar to
act as Administrator for the Kirr, Marbach Partners
Value Fund and for each additional series of the
Company listed on Exhibit A attached hereto (each, a
"Fund"), as may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Firstar agree
as follows:
1. Appointment of Administrator
The Company hereby appoints Firstar as
Administrator of the Company on the terms and
conditions set forth in this Agreement, and Firstar
hereby accepts such appointment and agrees to perform
the services and duties set forth in this Agreement in
consideration of the compensation provided for herein.
2. Duties and Responsibilities of Firstar
A. General Fund Management
1.Act as liaison among all Fund service
providers
2.Coordinate board communication by:
a.Assisting Company counsel in
establishing meeting agendas
b.Preparing board reports based on
financial and administrative data
c.Evaluating independent auditor
d.Securing and monitoring fidelity bond
and director and officer liability
coverage, and making the necessary
SEC filings relating thereto
e.Preparing minutes of meetings of the
board and shareholders
3.Audits
a.Prepare appropriate schedules and
assist independent auditors
b.Provide information to SEC and
facilitate audit process
c.Provide office facilities
4.Assist in overall operations of the Fund
5.Pay Fund expenses upon written
authorization from the Company
B. Compliance
1.Regulatory Compliance
a.Monitor compliance with 1940 Act
requirements, including:
1)Asset diversification tests
2)Total return and SEC yield
calculations
3)Maintenance of books and records
under Rule 31a-3
4)Code of Ethics for the
disinterested directors of the
Fund
b.Monitor Fund's compliance with the
policies and investment limitations
of the Company as set forth in its
Prospectus and Statement of
Additional Information
2.Blue Sky Compliance
a.Prepare and file with the appropriate
state securities authorities any
and all required compliance filings
relating to the registration of the
securities of the Company so as to
enable the Company to make a
continuous offering of its shares
in all states
b.Monitor status and maintain
registrations in each state
3.SEC Registration and Reporting
a.Assist Company counsel in updating
Prospectus and Statement of
Additional Information and in
preparing proxy statements and
Rule 24f-2 notices
b.Prepare annual and semiannual reports
c.Coordinate the printing of publicly
disseminated Prospectuses and
reports
d.File fidelity bond under Rule 17g-1
e.File shareholder reports under Rule
30b2-1
4.IRS Compliance
a.Monitor Company's status as a
regulated investment company under
Subchapter M through review of the
following:
1)Asset diversification
requirements
2)Qualifying income requirements
3)Distribution requirements
b.Calculate required distributions
(including excise tax
distributions)
C. Financial Reporting
1.Provide financial data required by Fund's
Prospectus and Statement of Additional
Information
2.Prepare financial reports for shareholders,
the board, the SEC, and independent
auditors
3.Supervise the Company's Custodian and
Company Accountants in the maintenance
of the Company's general ledger and in
the preparation of the Fund's financial
statements, including oversight of
expense accruals and payments, of the
determination of net asset value of the
Company's net assets and of the
Company's shares, and of the declaration
and payment of dividends and other
distributions to shareholders
D. Tax Reporting
1.Prepare and file on a timely basis
appropriate federal and state tax
returns including Forms 1120/8610 with
any necessary schedules
2.Prepare state income breakdowns where
relevant
3.File Form 1099 Miscellaneous for payments
to directors and other service providers
4.Monitor wash losses
5.Calculate eligible dividend income for
corporate shareholders
3. Compensation
The Company, on behalf of the Fund, agrees to pay
Firstar for the performance of the duties listed in
this Agreement, the fees and out-of-pocket expenses as
set forth in the attached Exhibit A.
These fees may be changed from time to time,
subject to mutual written Agreement between the Company
and Firstar.
The Company agrees to pay all fees and
reimbursable expenses within ten (10) business days
following the receipt of the billing notice.
4. Performance of Service; Limitation of Liability
A. Firstar shall exercise reasonable care in the
performance of its duties under this Agreement.
Firstar shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Company in connection with matters to which this
Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication
or power supplies beyond Firstar's control, except a
loss resulting from Firstar's refusal or failure to
comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in
the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement,
the Company shall indemnify and hold harmless Firstar
from and against any and all claims, demands, losses,
expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which Firstar
may sustain or incur or which may be asserted against
Firstar by any person arising out of any action taken
or omitted to be taken by it in performing the services
hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral
instruction provided to Firstar by any duly authorized
officer of the Company, such duly authorized officer to
be included in a list of authorized officers furnished
to Firstar and as amended from time to time in writing
by resolution of the Board of Directors of the Company.
Firstar shall indemnify and hold the Company
harmless from and against any and all claims, demands,
losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which the
Company may sustain or incur or which may be asserted
against the Company by any person arising out of any
action taken or omitted to be taken by Firstar as a
result of Firstar's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence,
or willful misconduct.
In the event of a mechanical breakdown or
failure of communication or power supplies beyond its
control, Firstar shall take all reasonable steps to
minimize service interruptions for any period that such
interruption continues beyond Firstar's control.
Firstar will make every reasonable effort to restore
any lost or damaged data and correct any errors
resulting from such a breakdown at the expense of
Firstar. Firstar agrees that it shall, at all times,
have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use
of electrical data processing equipment to the extent
appropriate equipment is available. Representatives of
the Company shall be entitled to inspect Firstar's
premises and operating capabilities at any time during
regular business hours of Firstar, upon reasonable
notice to Firstar.
Regardless of the above, Firstar reserves the
right to reprocess and correct administrative errors at
its own expense.
B. In order that the indemnification provisions
contained in this section shall apply, it is understood
that if in any case the indemnitor may be asked to
indemnify or hold the indemnitee harmless, the
indemnitor shall be fully and promptly advised of all
pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will
use all reasonable care to notify the indemnitor
promptly concerning any situation which presents or
appears likely to present the probability of a claim
for indemnification. The indemnitor shall have the
option to defend the indemnitee against any claim which
may be the subject of this indemnification. In the
event that the indemnitor so elects, it will so notify
the indemnitee and thereupon the indemnitor shall take
over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification
under this section. The indemnitee shall in no case
confess any claim or make any compromise in any case in
which the indemnitor will be asked to indemnify the
indemnitee except with the indemnitor's prior written
consent.
5. Proprietary and Confidential Information
Firstar agrees on behalf of itself and its
directors, officers, and employees to treat
confidentially and as proprietary information of the
Company all records and other information relative to
the Company and prior, present, or potential
shareholders of the Company (and clients of said
shareholders), and not to use such records and
information for any purpose other than the performance
of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably
withheld and may not be withheld where Firstar may be
exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such
information by duly constituted authorities, or when so
requested by the Company.
6. Data Necessary to Perform Services
The Company or its agent, which may be Firstar,
shall furnish to Firstar the data necessary to perform
the services described herein at times and in such form
as mutually agreed upon.
7. Term of Agreement
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. The Agreement may be
terminated by either party upon giving ninety (90) days
prior written notice to the other party or such shorter
period as is mutually agreed upon by the parties.
However, this Agreement may be amended by mutual
written consent of the parties.
8. Notices
Notices of any kind to be given by either party to
the other party shall be in writing and shall be duly
given if mailed or delivered as follows: Notice to
Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
Kirr, Marbach Partners Funds, Inc.
621 Washington Street
Columbus, Indiana 47201
Attn: Corporate Secretary
9. Duties in the Event of Termination
In the event that, in connection with termination,
a successor to any of Firstar's duties or
responsibilities hereunder is designated by the Company
by written notice to Firstar, Firstar will promptly,
upon such termination and at the expense of the
Company, transfer to such successor all relevant books,
records, correspondence, and other data established or
maintained by Firstar under this Agreement in a form
reasonably acceptable to the Company (if such form
differs from the form in which Firstar has maintained,
the Company shall pay any expenses associated with
transferring the data to such form), and will cooperate
in the transfer of such duties and responsibilities,
including provision for assistance from Firstar's
personnel in the establishment of books, records, and
other data by such successor.
10. Governing Law
This Agreement shall be construed and the
provisions thereof interpreted under and in accordance
with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and Exchange
Commission thereunder.
11. Records
Firstar shall keep records relating to the
services to be performed hereunder, in the form and
manner, and for such period as it may deem advisable
and is agreeable to the Company but not inconsistent
with the rules and regulations of appropriate
government authorities, in particular, Section 31 of
the 1940 Act and the rules thereunder. Firstar agrees
that all such records prepared or maintained by Firstar
relating to the services to be performed by Firstar
hereunder are the property of the Company and will be
preserved, maintained, and made available in accordance
with such section and rules of the 1940 Act and will be
promptly surrendered to the Company on and in
accordance with its request.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
KIRR, MARBACH PARTNERS FIRSTAR MUTUAL FUND
FUNDS, INC. SERVICES, LLC
By:____________________ By:_____________________
Its:___________________ Its:____________________
Fund Administration and Compliance
Annual Fee Schedule - Domestic Funds
Exhibit A
Separate Series of Kirr, Marbach Partners Funds, Inc.
Name of Series Date Added
Kirr, Marbach Partners Value Fund December 17, 1998
Annual fee based upon average assets per Fund
6 basis points on the first $200 million
5 basis points on the next $500 million
3 basis points on the balance
Minimum annual fee: $35,000 per Fund
Plus out-of-pocket expense reimbursements, including
but not limited to:
Postage
Programming
Stationery
Proxies
Retention of records
Special reports
Federal and state regulatory filing fees
Certain insurance premiums
Expenses from board of directors meetings
Auditing and legal expenses
Fees and out-of-pocket expense reimbursements are
billed to the Fund monthly.
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
17th day of December, 1998, by and between Kirr,
Marbach Partners Funds, Inc., a Maryland corporation
(hereinafter referred to as the "Company") and Firstar
Mutual Fund Services, LLC, a Wisconsin limited
liability company (hereinafter referred to as
"Firstar").
WHEREAS, the Company is an open-end management
investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company is authorized to create
separate series, each with its own separate investment
portfolio;
WHEREAS, Firstar is in the business of providing,
among other things, mutual fund accounting services to
investment companies; and
WHEREAS, the Company desires to retain Firstar to
provide accounting services to the Kirr, Marbach
Partners Value Fund and each additional series of the
Company listed on Exhibit A attached hereto (each, a
"Fund"), as it may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Firstar agree
as follows:
1. Appointment of Fund Accountant
The Company hereby appoints Firstar as Fund
Accountant of the Company on the terms and conditions
set forth in this Agreement, and Firstar hereby accepts
such appointment and agrees to perform the services and
duties set forth in this Agreement in consideration of
the compensation provided for herein.
2. Duties and Responsibilities of Firstar
A.Portfolio Accounting Services:
(1) Maintain portfolio records on a trade
date +1 basis using security trade information
communicated from the investment manager.
(2) For each valuation date, obtain prices
from a pricing source approved by the Board of
Directors of the Company and apply those prices to
the portfolio positions. For those securities
where market quotations are not readily available,
the Board of Directors of the Company shall
approve, in good faith, the method for determining
the fair value for such securities.
(3) Identify interest and dividend accrual
balances as of each valuation date and calculate
gross earnings on investments for the accounting
period.
(4) Determine gain/loss on security sales
and identify them as, short-term or long-term;
account for periodic distributions of gains or
losses to shareholders and maintain undistributed
gain or loss balances as of each valuation date.
B.Expense Accrual and Payment Services:
(1) For each valuation date, calculate the
expense accrual amounts as directed by the Company
as to methodology, rate or dollar amount.
(2) Record payments for Fund expenses upon
receipt of written authorization from the Company.
(3) Account for Fund expenditures and
maintain expense accrual balances at the level of
accounting detail, as agreed upon by Firstar and
the Company.
(4) Provide expense accrual and payment
reporting.
C.Fund Valuation and Financial Reporting Services:
(1) Account for Fund share purchases, sales,
exchanges, transfers, dividend reinvestments, and
other Fund share activity as reported by the
transfer agent on a timely basis.
(2) Apply equalization accounting as
directed by the Company.
(3) Determine net investment income
(earnings) for the Fund as of each valuation date.
Account for periodic distributions of earnings to
shareholders and maintain undistributed net
investment income balances as of each valuation
date.
(4) Maintain a general ledger and other
accounts, books, and financial records for the
Fund in the form as agreed upon.
(5) Determine the net asset value of the
Fund according to the accounting policies and
procedures set forth in the Fund's Prospectus.
(6) Calculate per share net asset value, per
share net earnings, and other per share amounts
reflective of Fund operations at such time as
required by the nature and characteristics of the
Fund.
(7) Communicate, at an agreed upon time, the
per share price for each valuation date to parties
as agreed upon from time to time.
(8) Prepare monthly reports which document
the adequacy of accounting detail to support month-
end ledger balances.
D.Tax Accounting Services:
(1) Maintain accounting records for the
investment portfolio of the Fund to support the
tax reporting required for IRS-defined regulated
investment companies.
(2) Maintain tax lot detail for the
investment portfolio.
(3) Calculate taxable gain/loss on security
sales using the tax lot relief method designated
by the Company.
(4) Provide the necessary financial
information to support the taxable components of
income and capital gains distributions to the
transfer agent to support tax reporting to the
shareholders.
E.Compliance Control Services:
(1) Support reporting to regulatory bodies
and support financial statement preparation by
making the Fund's accounting records available to
the Company, the Securities and Exchange
Commission, and the outside auditors.
(2) Maintain accounting records according to
the 1940 Act and regulations provided thereunder.
3. Pricing of Securities
For each valuation date, obtain prices from a
pricing source selected by Firstar but approved by the
Company's Board of Directors and apply those prices to
the portfolio positions of the Fund. For those
securities where market quotations are not readily
available, the Company's Board of Directors shall
approve, in good faith, the method for determining the
fair value for such securities.
If the Company desires to provide a price which
varies from the pricing source, the Company shall
promptly notify and supply Firstar with the valuation
of any such security on each valuation date. All
pricing changes made by the Company will be in writing
and must specifically identify the securities to be
changed by CUSIP, name of security, new price or rate
to be applied, and, if applicable, the time period for
which the new price(s) is/are effective.
4. Changes in Accounting Procedures
Any resolution passed by the Board of Directors of
the Company that affects accounting practices and
procedures under this Agreement shall be effective upon
written receipt and acceptance by the Firstar.
5. Changes in Equipment, Systems, Service, Etc.
Firstar reserves the right to make changes from
time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules
and equipment, so long as such changes do not adversely
affect the service provided to the Company under this
Agreement.
6. Compensation
Firstar shall be compensated for providing the
services set forth in this Agreement in accordance with
the Fee Schedule attached hereto as Exhibit A and as
mutually agreed upon and amended from time to time.
The Company agrees to pay all fees and reimbursable
expenses within ten (10) business days following the
receipt of the billing notice.
7. Performance of Service; Limitation of Liability
A. Firstar shall exercise reasonable care
in the performance of its duties under this
Agreement. Firstar shall not be liable for any
error of judgment or mistake of law or for any
loss suffered by the Company in connection with
matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the
failure of communication or power supplies beyond
Firstar's control, except a loss resulting from
Firstar's refusal or failure to comply with the
terms of this Agreement or from bad faith,
negligence, or willful misconduct on its part in
the performance of its duties under this
Agreement. Notwithstanding any other provision of
this Agreement, the Company shall indemnify and
hold harmless Firstar from and against any and all
claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which Firstar may sustain or
incur or which may be asserted against Firstar by
any person arising out of any action taken or
omitted to be taken by it in performing the
services hereunder (i) in accordance with the
foregoing standards, or (ii) in reliance upon any
written or oral instruction provided to Firstar by
any duly authorized officer of the Company, such
duly authorized officer to be included in a list
of authorized officers furnished to Firstar and as
amended from time to time in writing by resolution
of the Board of Directors of the Company.
Firstar shall indemnify and hold the Company
harmless from and against any and all claims,
demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which the Company may sustain or
incur or which may be asserted against the Company
by any person arising out of any action taken or
omitted to be taken by Firstar as a result of
Firstar's refusal or failure to comply with the
terms of this Agreement, its bad faith,
negligence, or willful misconduct.
In the event of a mechanical breakdown or
failure of communication or power supplies beyond
its control, Firstar shall take all reasonable
steps to minimize service interruptions for any
period that such interruption continues beyond
Firstar's control. Firstar will make every
reasonable effort to restore any lost or damaged
data and correct any errors resulting from such a
breakdown at the expense of Firstar. Firstar
agrees that it shall, at all times, have
reasonable contingency plans with appropriate
parties, making reasonable provision for emergency
use of electrical data processing equipment to the
extent appropriate equipment is available.
Representatives of the Company shall be entitled
to inspect Firstar's premises and operating
capabilities at any time during regular business
hours of Firstar, upon reasonable notice to
Firstar.
Regardless of the above, Firstar reserves the
right to reprocess and correct administrative
errors at its own expense.
B. In order that the indemnification
provisions contained in this section shall apply,
it is understood that if in any case the
indemnitor may be asked to indemnify or hold the
indemnitee harmless, the indemnitor shall be fully
and promptly advised of all pertinent facts
concerning the situation in question, and it is
further understood that the indemnitee will use
all reasonable care to notify the indemnitor
promptly concerning any situation which presents
or appears likely to present the probability of a
claim for indemnification. The indemnitor shall
have the option to defend the indemnitee against
any claim which may be the subject of this
indemnification. In the event that the indemnitor
so elects, it will so notify the indemnitee and
thereupon the indemnitor shall take over complete
defense of the claim, and the indemnitee shall in
such situation initiate no further legal or other
expenses for which it shall seek indemnification
under this section. Indemnitee shall in no case
confess any claim or make any compromise in any
case in which the indemnitor will be asked to
indemnify the indemnitee except with the
indemnitor's prior written consent.
8. No Agency Relationship
Nothing herein contained shall be deemed to
authorize or empower Firstar to act as agent for the
other party to this Agreement, or to conduct business
in the name of, or for the account of the other party
to this Agreement.
9. Records
Firstar shall keep records relating to the
services to be performed hereunder, in the form and
manner, and for such period as it may deem advisable
and is agreeable to the Company but not inconsistent
with the rules and regulations of appropriate
government authorities, in particular, Section 31 of
the 1940 Act, and the rules thereunder. Firstar agrees
that all such records prepared or maintained by Firstar
relating to the services to be performed by Firstar
hereunder are the property of the Company and will be
preserved, maintained, and made available in accordance
with such section and rules of the 1940 Act and will be
promptly surrendered to the Company on and in
accordance with its request.
10. Data Necessary to Perform Services
The Company or its agent, which may be Firstar,
shall furnish to Firstar the data necessary to perform
the services described herein at such times and in such
form as mutually agreed upon. If Firstar is also
acting as the transfer agent for the Company, nothing
herein shall be deemed to relieve Firstar of any of its
obligations under the Transfer Agent Servicing
Agreement.
11. Notification of Error
The Company will notify Firstar of any balancing
or control error caused by Firstar within three (3)
business days after receipt of any reports rendered by
Firstar to the Company, or within three (3) business
days after discovery of any error or omission not
covered in the balancing or control procedure, or
within three (3) business days of receiving notice from
any shareholder.
12. Proprietary and Confidential Information
Firstar agrees on behalf of itself and its
directors, officers, and employees to treat
confidentially and as proprietary information of the
Company all records and other information relative to
the Company and prior, present, or potential
shareholders of the Company (and clients of said
shareholders), and not to use such records and
information for any purpose other than the performance
of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably
withheld and may not be withheld where Firstar may be
exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such
information by duly constituted authorities, or when so
requested by the Company.
13. Term of Agreement
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. This Agreement may be
terminated by either party upon giving ninety (90) days
prior written notice to the other party or such shorter
period as is mutually agreed upon by the parties.
However, this Agreement may be replaced or modified by
a subsequent agreement between the parties.
14. Notices
Notices of any kind to be given by either party to
the other party shall be in writing and shall be duly
given if mailed or delivered as follows: Notice to
Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
Kirr, Marbach Partners Funds, Inc.
621 Washington Street
Columbus, Indiana 47201
Attn: Corporate Secretary
15. Duties in the Event of Termination
In the event that in connection with termination,
a successor to any of Firstar's duties or
responsibilities hereunder is designated by the Company
by written notice to Firstar, Firstar will promptly,
upon such termination and at the expense of the Company
transfer to such successor all relevant books, records,
correspondence and other data established or maintained
by Firstar under this Agreement in a form reasonably
acceptable to the Company (if such form differs from
the form in which Firstar has maintained the same, the
Company shall pay any expenses associated with
transferring the same to such form), and will cooperate
in the transfer of such duties and responsibilities,
including provision for assistance from Firstar's
personnel in the establishment of books, records and
other data by such successor.
16. Governing Law
This Agreement shall be construed in accordance
with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the SEC thereunder.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
KIRR, MARBACH PARTNERS FIRSTAR MUTUAL FUND
Funds, INC. SERVICES, LLC
By:______________________ By:______________________
Its:_____________________ Its:_____________________
Fund Accounting Services
Annual Fee Schedule
Exhibit A
Separate Series of Kirr, Marbach Partners Funds, Inc.
Name of Series Date Added
Kirr, Marbach Partners Value Fund December 17, 1998
Domestic Equity Funds
$22,000 for the first $40 million
.01 of 1% (1 basis point) on the next $200 million
.005 of 1% (0.5 basis point) on average net assets
exceeding $240 million
Fees and out-of-pocket expenses are billed to the Fund
monthly.
FULFILLMENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
17th day of December, 1998, by and between Kirr,
Marbach Partners Funds, Inc., a Maryland corporation
(hereinafter referred to as the "Company"), Firstar
Mutual Fund Services, LLC, a Wisconsin limited
liability company (hereinafter referred to as
"Firstar"), Kirr, Marbach & Company, LLC, an Indiana
limited liability company (hereinafter referred to as
the "Adviser"), and Rafferty Capital Markets, Inc., a
New York corporation (hereinafter referred to as the
"Distributor").
WHEREAS, the Adviser is a registered investment
adviser under the Investment Advisers Act of 1940, as
amended;
WHEREAS, the Adviser serves as investment adviser
to the Company, a registered investment company under
the Investment Company Act of 1940, as amended, which
is authorized to create separate series of funds;
WHEREAS, the Distributor is a registered broker-
dealer under the Securities Exchange Act of 1934, as
amended, and serves as principal distributor of Company
shares;
WHEREAS, Firstar provides fulfillment services to
mutual funds;
WHEREAS, the Adviser, the Distributor, and the
Company desire to retain Firstar to provide fulfillment
services for the Kirr, Marbach Partners Value Fund and
each additional series of the Company listed on
Exhibit A attached hereto (each, a "Fund"), as may be
amended from time to time.
NOW, THEREFORE, the parties agree as follows:
1. Duties and Responsibilities of Firstar
1.Answer all prospective shareholder calls
concerning the Fund.
2.Send all available Fund material requested by
the prospect within 24 hours from time of
call.
3.Receive and update all Fund fulfillment
literature so that the most current
information is sent and quoted.
4.Provide 24-hour answering service to record
prospect calls made after hours (7 p.m. to
8 a.m. CT).
5.Maintain and store Fund fulfillment inventory.
6.Send periodic fulfillment reports to the Company
as agreed upon between the parties.
2. Duties and Responsibilities of the Company
1.Provide Fund fulfillment literature updates to
Firstar as necessary.
2.Coordinate with the Distributor the filing with
the NASD, SEC and State Regulatory Agencies,
as appropriate, all fulfillment literature
that the Fund requests Firstar send to
prospective shareholders.
3.Supply Firstar with sufficient inventory of
fulfillment materials as requested from time
to time by Firstar.
4.Provide Firstar with any sundry information
about the Fund in order to answer prospect
questions.
3. Indemnification
The Company agrees to indemnify Firstar from any
liability arising out of the distribution of
fulfillment literature which has not been approved by
the appropriate Federal and State Regulatory Agencies.
Firstar agrees to indemnify the Company from any
liability arising from the improper use of fulfillment
literature during the performance of duties and
responsibilities identified in this agreement.
4. Compensation
The Company, if permissible under any Rule 12b-1
plan in effect from time to time for the benefit of the
Fund and only to the extent consistent with the terms
of such plan, or the Adviser, or the Distributor,
agrees to compensate Firstar for the services performed
under this Agreement in accordance with the attached
Exhibit A. All invoices shall be paid within ten days
of receipt.
5. Proprietary and Confidential Information
Firstar agrees on behalf of itself and its
directors, officers, and employees to treat
confidentially and as proprietary information of the
Company all records and other information relative to
the Company and prior, present, or potential
shareholders of the Company (and clients of said
shareholders), and not to use such records and
information for any purpose other than the performance
of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably
withheld and may not be withheld where Firstar may be
exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such
information by duly constituted authorities, or when so
requested by the Company.
6. Termination
This Agreement may be terminated by any party upon
30 days written notice.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by a duly
authorized officer in one or more counterparts as of
the day and year first written above.
KIRR, MARBACH PARTNERS FIRSTAR MUTUAL FUND
FUNDS, INC. SERVICES, LLC
By:___________________ By:____________________
Its:__________________ Its:___________________
KIRR, MARBACH & COMPANY RAFFERTY CAPITAL MARKETS, INC.
By:____________________ By:______________________
Its:___________________ Its:_____________________
Literature Fulfillment Services
Annual Fee Schedule
Exhibit A
Separate Series of Kirr, Marbach Partners Funds, Inc.
Name of Series Date Added
Kirr, Marbach Partners Value Fund December 17, 1998
Base Fee $100.00 per month
Customer Service
State registration compliance edits
Literature database
Record prospect request and profile
Prospect servicing 8:00 am to 7:00 pm CT
Recording and transcription of requests
received off-hours
Periodic reporting of leads to client
Service Fee: $.99/ minute
Assembly and Distribution of Literature Requests
Generate customized prospect letters
Assembly and insertion of literature items
Inventory tracking
Inventory storage, reporting
Periodic reporting of leads by state, items
requested, market source
Service Fee: $.45/ lead - insertion of up to 4 items/lead
$.15/ additional inserts
Fees and out-of-pocket expenses are billed to the Fund
monthly.
Godfrey & Kahn, S.C.
Attorneys-At-Law
780 North Water Street
Milwaukee, Wisconsin 53202
Tel: (414) 273-3500
December 8, 1998
Kirr, Marbach Partners Funds, Inc.
621 Washington Street
Columbus, Indiana 47202
Gentlemen:
We have acted as your counsel in connection with
the preparation of a Registration Statement on Form N-
1A (Registration Nos. 333-65829 and 811-9067) (the
"Registration Statement") relating to the sale by you
of up to that number of shares of Kirr, Marbach
Partners Funds, Inc. (the "Company") common stock,
$0.01 par value (the "Shares") as now or hereafter
authorized pursuant to the Company's Articles of
Incorporation as may be amended from time to time, in
the manner set forth in the Registration Statement (and
the Prospectus included therein).
We have examined: (a) the Registration Statement
(and the Prospectus included therein), (b) the
Company's Articles of Incorporation and By-Laws, (c)
certain resolutions of the Company's Board of
Directors, and (d) such other proceedings, documents
and records as we have deemed necessary to enable us to
render this opinion.
Based upon the foregoing, we are of the opinion
that the Shares, when sold as contemplated in the
Registration Statement, will be duly authorized and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an
exhibit to the Registration Statement. In giving this
consent, however, we do not admit that we are "experts"
within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
/s/ Godfrey & Kahn, S.C.
GODFREY & KAHN, S.C.
CONSENT OF INDEPENDENT ACCOUNTANTS
The Shareholder and Board of Directors
Kirr, Marbach Partners Value Fund:
We consent to the use of our report and the
reference to our firm under the heading
"Independent Accountants" in the Statement of
Additional Information.
/s/ KPMG Peat Marwick LLP
Milwaukee, Wisconsin
December 8, 1998
SUBSCRIPTION AGREEMENT
Kirr, Marbach Partners Funds, Inc.
621 Washington Street
Columbus, Indiana 47201
Gentlemen:
The undersigned purchaser (the "Purchaser") hereby
subscribes to the number of shares (the "Shares") of
common stock of Kirr, Marbach Partners Funds, Inc. (the
"Company") as follows:
Aggregate
Series Number of Per Share Purchase Price
Shares Price
Kirr, Marbach
Partners Value $ 10,000 $10 $ 100,000
Fund
It is understood that a certificate representing
the Shares shall not be issued to the undersigned, but
such ownership shall be recorded on the books and
records of the Company's transfer agent.
Notwithstanding the fact that a certificate
representing ownership will not be issued, the Shares
will be deemed fully paid and nonassessable.
The Purchaser agrees that the Shares are being
purchased for investment with no present intention to
resell or redeem the Shares.
Dated and effective as of the 7th day of December,
1998.
Purchaser:
KIRR, MARBACH & COMPANY, LLC
/s/ David M. Kirr
By: David M. Kirr, President
ACCEPTANCE
The foregoing subscription is hereby accepted.
Dated and effective as of the 7th day of December,
1998.
KIRR, MARBACH PARTNERS FUNDS, INC.
/s/ Mark D. Foster
By: Mark D. Foster, President
KIRR, MARBACH PARTNERS FUNDS, INC.
KIRR, MARBACH PARTNERS VALUE FUND
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
The following Distribution and Shareholder
Servicing Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940,
as amended (the "Act"), by Kirr, Marbach Partners
Funds, Inc. (the "Corporation"), a Maryland
corporation, on behalf of the Kirr, Marbach Partners
Value Fund (the "Fund"). The Plan has been approved by
a majority of the Corporation's Board of Directors,
including a majority of the directors who are not
interested persons of the Corporation and who have no
direct or indirect financial interest in the operation
of the Plan or in any Rule 12b-1 Related Agreement (as
defined below) (the "Disinterested Directors"), cast in
person at a meeting called for the purpose of voting on
the Plan.
In approving the Plan, the Board of Directors
determined that the Plan would be prudent and in the
best interests of the Fund and its shareholders. Such
approval by the Board of Directors included a
determination, in the exercise of its reasonable
business judgment and in light of its fiduciary duties,
that there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
The provisions of the Plan are as follows:
1. PAYMENTS BY THE CORPORATION
(a) The Corporation, on behalf of the Fund,
will reimburse Rafferty Capital Markets, Inc. (the
"Distributor"), as principal distributor of the
Fund's shares, and any Recipient (as defined
below) for expenses incurred in connection with
the promotion and distribution of Fund shares and
the provision of personal services to Fund
shareholders (the "distribution and shareholder
servicing fee"), including fees and costs provided
for in the Distribution Agreement between the
Corporation and the Distributor. The distribution
and shareholder servicing fee payable to the
Distributor and any Recipient shall not exceed, on
an aggregate basis, 0.25% of the average daily net
assets of the Fund. The Corporation or the
Distributor may pay all or a portion of these fees
to any registered 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 "Rule 12b-1
Related Agreement"), forms of which are attached
hereto as Appendix A and Appendix B. To the
extent that the Corporation or the Distributor
does not pay such fees to such persons, the
Distributor may use the fees for its distribution
expenses incurred in connection with the sale of
Fund shares or any of its shareholder servicing
expenses. Payment of these fees to the
Distributor and the Recipients shall be made
monthly promptly following the close of the month,
upon the Distributor and/or the Recipients
forwarding to the Corporation a written report or
invoice detailing all amounts payable to them
pursuant to the Plan and the purpose for which the
amounts were expended; provided that the aggregate
payments under the Plan to the Distributor and all
Recipients shall not exceed 0.25% (on an
annualized basis) of the average daily net assets
of the Fund. In addition, the Distributor and the
Recipients shall furnish the Corporation with such
other information as the Corporation's Board of
Directors may reasonably request in connection
with reimbursements made under the Plan and the
use of such payments by the Distributor and/or the
Recipients in order to enable the Board of
Directors to make an informed determination of
whether the Plan should be continued.
(b) If the Distributor and/or any Recipient
is due more monies for its services rendered than
are immediately payable because of the expense
limitation under Section 1 of this Plan, the
unpaid amount shall be carried forward from period
to period while the Plan is in effect until such
time as it is paid. The Distributor and/or any
Recipient shall not, however, be entitled to
charge the Fund any interest, carrying or finance
fees in connection with any such unpaid amounts
carried forward.
2. RULE 12B-1 RELATED AGREEMENTS
(a) No Rule 12b-1 Related Agreement shall be
entered into, and no payments shall be made
pursuant to any Rule 12b-1 Related Agreement,
unless such Rule 12b-1 Related Agreement is in
writing and has first been delivered to and
approved 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 such
Rule 12b-1 Related Agreement. The forms of Rule
12b-1 Related Agreements attached hereto as
Appendix A and Appendix B have been approved by
the Corporation's Board of Directors as specified
above.
(b) Any Rule 12b-1 Related Agreement shall
describe the services to be performed by the
Recipient and shall specify the amount of, or the
method for determining, the compensation to the
Recipient.
(c) No Rule 12b-1 Related Agreement may be
entered into unless it provides (i) that it may be
terminated at any time, without the payment of any
penalty, by vote of a majority of the shareholders
of the Fund, or by vote of a majority of the
Disinterested Directors, on not more than 60 days'
written notice to the other party to the Rule
12b-1 Related Agreement, and (ii) that it shall
automatically terminate in the event of its
assignment.
(d) Any Rule 12b-1 Related Agreement shall
continue in effect for a period of more than one
year from the date of its execution only if such
continuance is specifically approved at least
annually by a vote of a majority of the Board of
Directors, and of the Disinterested Directors,
cast in person at a meeting called for the purpose
of voting on such Rule 12b-1 Related Agreement.
3. QUARTERLY REPORTS
The officers of the Corporation, based on
information received from the Distributor and/or
the Recipients, shall provide to the Board of
Directors, and the Directors shall review, at
least quarterly, a written report of all amounts
expended pursuant to the Plan. This report shall
include the identity of the Recipient of each
payment and the purpose for which the amounts were
expended and such other information as the Board
of Directors may reasonably request.
4. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective immediately
upon approval by the vote of a majority of the
Board of Directors, and of the Disinterested
Directors, cast in person at a meeting called for
the purpose of voting on the approval of the Plan.
The Plan shall continue in effect for a period of
one year from its effective date unless terminated
pursuant to its terms. Thereafter, the Plan shall
continue from year to year, provided that such
continuance is approved at least annually by a
vote of a majority of the Board of Directors, and
of the Disinterested Directors, cast in person at
a meeting called for the purpose of voting on such
continuance. The Plan may be terminated with
respect at any time by a majority vote of the
shareholders of the Fund, or by vote of a majority
of the Disinterested Directors.
5. SELECTION OF DISINTERESTED DIRECTORS
During the period in which the Plan is
effective, the selection and nomination of those
Directors who are Disinterested Directors of the
Corporation shall be committed to the discretion
of the Disinterested Directors.
6. AMENDMENTS
All material amendments of the Plan shall be
in writing and shall be approved by a vote of a
majority of the Board of Directors, and of the
Disinterested Directors, cast in person at a
meeting called for the purpose of voting on such
amendment. In addition, the Plan may not be
amended to increase materially the amount to be
expended by the Fund hereunder without the
approval by a majority vote of the shareholders of
the Fund.
APPENDIX A
Rule 12b-1 Related Agreement
Rafferty Capital Markets, Inc.
550 Mamaroneck Avenue
Harrison, New York 10528
[date]
[Recipient's Name and Address]
Ladies and Gentlemen:
This letter will confirm our understanding and
agreement with respect to payments to be made to you
pursuant to a Distribution and Shareholder Servicing
Plan (the "Plan") adopted by Kirr, Marbach Partners
Funds, Inc. (the "Corporation"), on behalf of the Kirr,
Marbach Partners Value Fund (the "Fund"), a series of
the Corporation, pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act").
The Plan and this related agreement (the "Rule 12b-1
Related Agreement") have been approved by a majority of
the Board of Directors of the Corporation, including a
majority of the Board of Directors who are not
"interested persons" of the Corporation, as defined in
the Act, and who have no direct or indirect financial
interest in the operation of the Plan or in this or any
other Rule 12b-1 Related Agreement (the "Disinterested
Directors"), cast in person at a meeting called for the
purpose of voting thereon. Such approval included a
determination by the Board of Directors that, in the
exercise of its reasonable business judgment and in
light of its fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund's
shareholders.
1. To the extent you provide distribution and
marketing services in the promotion of the Fund's
shares, including furnishing services and assistance to
your customers who invest in and own shares, including,
but not limited to, answering routine inquiries
regarding the Fund and assisting in changing account
designations and addresses, we shall pay you a fee as
described on Schedule A which shall not exceed
(together with any other fees paid by the Fund under
the Plan) 0.25% of the average daily net assets of the
Fund (computed on an annual basis). We reserve the
right to increase, decrease or discontinue the fee at
any time in our sole discretion upon written notice to
you.
You agree that all activities conducted under this
Rule 12b-1 Related Agreement will be conducted in
accordance with the Plan, as well as all applicable
state and federal laws, including the Act, the
Securities Exchange Act of 1934, the Securities Act of
1933 and any applicable rules of the NASD.
2. At the end of each month, you shall furnish
us with a written report or invoice detailing all
amounts payable to you pursuant to this Rule 12b-1
Related Agreement and the purpose for which such
amounts were expended. In addition, you shall furnish
us with such other information as shall reasonably be
requested by the Board of Directors, on behalf of the
Fund, with respect to the fees paid to you pursuant to
this Rule 12b-1 Related Agreement.
3. We shall furnish to the Board of Directors,
for its review, on a quarterly basis, a written report
of the amounts expended under the Plan by us and the
purposes for which such expenditures were made.
4. This Rule 12b-1 Related Agreement may be
terminated by the vote of (a) a majority of
shareholders, or (b) a majority of the Disinterested
Directors, on 60 days' written notice, without payment
of any penalty. In addition, this Rule 12b-1 Related
Agreement will be terminated by any act which
terminates the Plan or the Distribution Agreement
between the Corporation and us and shall terminate
immediately in the event of its assignment. This Rule
12b-1 Related Agreement may be amended by us upon
written notice to you, and you shall be deemed to have
consented to such amendment upon effecting any
purchases of shares for your own account or on behalf
of any of your customer's accounts following your
receipt of such notice.
5. This Rule 12b-1 Related Agreement shall
become effective on the date accepted by you and shall
continue in full force and effect so long as the
continuance of the Plan and this Rule 12b-1 Related
Agreement are approved at least annually by a vote of
the Board of Directors of the Corporation and of the
Disinterested Directors, cast in person at a meeting
called for the purpose of voting thereon. All
communications to us should be sent to the above
address. Any notice to you shall be duly given if
mailed or telegraphed to you at the address specified
by you below.
RAFFERTY CAPITAL MARKETS, INC.,
on behalf of the Kirr, Marbach
Partners Value Fund
By:______________________________
(Name and Title)
Accepted:______________________________
_________________________________
(Dealer or Service Provider Name)
_________________________________
(Street Address)
__________________________________
(City) (State) (ZIP)
___________________________________
(Telephone No.)
___________________________________
(Facsimile No.)
By:________________________________
(Name and Title)
Schedule A
For all services rendered pursuant to the Rule 12b-
1 Related Agreement, we shall pay you a fee calculated
as follows:
[fee]
[We shall make the determination of the net asset
value, which determination shall be made in the manner
specified in the Fund's current prospectus, and pay to
you, on the basis of such determination, the fee
specified above, to the extent permitted under the
Plan.]
APPENDIX B
Rule 12b-1 Related Agreement
Kirr, Marbach Partners Funds, Inc.
621 Washington Street
Columbus, Indiana 47201
[date]
[Recipient's Name and Address]
Ladies and Gentlemen:
This letter will confirm our understanding and
agreement with respect to payments to be made to you
pursuant to a Distribution and Shareholder Servicing
Plan (the "Plan") adopted by Kirr, Marbach Partners
Funds, Inc. (the "Corporation"), on behalf of the Kirr,
Marbach Partners Value Fund (the "Fund"), a series of
the Corporation, pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act").
The Plan and this related agreement (the "Rule 12b-1
Related Agreement") have been approved by a majority of
the Board of Directors of the Corporation, including a
majority of the Board of Directors who are not
"interested persons" of the Corporation, as defined in
the Act, and who have no direct or indirect financial
interest in the operation of the Plan or in this or any
other Rule 12b-1 Related Agreement (the "Disinterested
Directors"), cast in person at a meeting called for the
purpose of voting thereon. Such approval included a
determination by the Board of Directors that, in the
exercise of its reasonable business judgment and in
light of its fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund's
shareholders.
1. To the extent you provide distribution and
marketing services in the promotion of the Fund's
shares, including furnishing services and assistance to
your customers who invest in and own shares, including,
but not limited to, answering routine inquiries
regarding the Fund and assisting in changing account
designations and addresses, we shall pay you a fee as
described on Schedule A which shall not exceed
(together with any other fees paid by the Fund under
the Plan) 0.25% of the average daily net assets of the
Fund (computed on an annual basis). We reserve the
right to increase, decrease or discontinue the fee at
any time in our sole discretion upon written notice to
you.
You agree that all activities conducted under this
Rule 12b-1 Related Agreement will be conducted in
accordance with the Plan, as well as all applicable
state and federal laws, including the Act, the
Securities Exchange Act of 1934, the Securities Act of
1933 and any applicable rules of the NASD.
2. At the end of each month, you shall furnish
us with a written report or invoice detailing all
amounts payable to you pursuant to this Rule 12b-1
Related Agreement and the purpose for which such
amounts were expended. In addition, you shall furnish
us with such other information as shall reasonably be
requested by the Board of Directors, on behalf of the
Fund, with respect to the fees paid to you pursuant to
this Rule 12b-1 Related Agreement.
3. We shall furnish to the Board of Directors,
for its review, on a quarterly basis, a written report
of the amounts expended under the Plan by us and the
purposes for which such expenditures were made.
4. This Rule 12b-1 Related Agreement may be
terminated by the vote of (a) a majority of
shareholders, or (b) a majority of the Disinterested
Directors, on 60 days' written notice, without payment
of any penalty. In addition, this Rule 12b-1 Related
Agreement will be terminated by any act which
terminates the Plan. This Rule 12b-1 Related Agreement
may be amended by us upon written notice to you, and
you shall be deemed to have consented to such amendment
upon effecting any purchases of shares for your own
account or on behalf of any of your customer's accounts
following your receipt of such notice.
5. This Rule 12b-1 Related Agreement shall
become effective on the date accepted by you and shall
continue in full force and effect so long as the
continuance of the Plan and this Rule 12b-1 Related
Agreement are approved at least annually by a vote of
the Board of Directors of the Corporation and of the
Disinterested Directors, cast in person at a meeting
called for the purpose of voting thereon. All
communications to us should be sent to the above
address. Any notice to you shall be duly given if
mailed or telegraphed to you at the address specified
by you below.
KIRR, MARBACH PARTNERS FUNDS, INC.,
on behalf of the Kirr, Marbach
Partners Value Fund
By:________________________________
(Name and Title)
Accepted:_________________________________
____________________________________
(Dealer or Service Provider Name)
_____________________________________
(Street Address)
_____________________________________
(City) (State) (ZIP)
_____________________________________
(Telephone No.)
_____________________________________
(Facsimile No.)
By:___________________________________
(Name and Title)
Schedule A
For all services rendered pursuant to the Rule 12b-
1 Related Agreement, we shall pay you a fee calculated
as follows:
[fee]
[We shall make the determination of the net asset
value, which determination shall be made in the manner
specified in the Fund's current prospectus, and pay to
you, on the basis of such determination, the fee
specified above, to the extent permitted under the
Plan.]
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] SEP-30-1999
[PERIOD-END] SEP-30-1999
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 186,417
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 186,417
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 86,417
[TOTAL-LIABILITIES] 86,417
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 100,000
[SHARES-COMMON-STOCK] 10,000
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 100,000
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 10,000
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 100,000
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 100,000
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 10.00
</TABLE>
