<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
----------------------------------------------------------------------
NOVEMBER 15, 1999
Dear Fellow Shareholder:
The Kirr, Marbach Partners Value Fund ("Fund") commenced
operations on December 31, 1998. Though September 30, 1999
marked the end of the Fund's third operating quarter, the
Fund has a September 30 fiscal year end. Thus, this is the
inaugural annual report for the Fund. We remain quite
pleased with the Fund's performance and growth in assets
during its first three quarters of operations and at the end
of its first fiscal year. For the record, the Fund completed
the quarter ending September 30, 1999 with a year to date
(calendar) return of -0.9% (1). This compared to year to
date (calendar) returns of +5.3% for the S&P 500 Index (2),
-3.4% for the Value Line Index (3) and -2.1% for the S&P 400
Midcap Index (4). While the Fund completed the third quarter
ending September 30, 1999 with a small loss, the Fund
experienced a high degree of volatility of returns during
the first three quarters of 1999, as illustrated below:
<TABLE>
<CAPTION>
S&P 500 VALUE LINE S&P 400 MIDCAP
FUND INDEX INDEX INDEX
-------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
1/1/99-3/31/99 +0.4% +5.0% -6.0% -6.4%
4/1/99-6/30/99 +15.2% +7.0% +14.2% +14.2%
YTD 6/30/99 +15.7% +12.4% +7.3% +6.9%
7/1/99-9/30/99 -14.4% -6.3% -10.0% -8.4%
YTD 9/30/99 -0.9% +5.3% -3.4% -2.1%
</TABLE>
<TABLE>
<C> <S>
(1) Past performance does not reflect how the Fund may perform
in the future.
(2) The S&P 500 Index is an unmanaged, capitalization-weighted
index generally representative of the U.S. market for large
capitalization stocks.
(3) The Value Line Index is an unmanaged, equally-weighted index
which includes 1700 U.S. stocks.
(4) The S&P 400 Midcap Index is an unmanaged,
capitalization-weighted index generally representative of
the U.S. market for medium capitalization stocks.
</TABLE>
As you can see from the above chart, the positive shift
towards value (relative to growth) that we alluded to in the
Fund's semi-annual report dated May 6, 1999 continued
through the second quarter (ending June 30, 1999). The
"broadening" of the market's advance had a significant
positive impact on the Fund in the second quarter and gave
us hope that our value investing style was coming back in
style. However, as we will discuss below, the market
reversed course and "narrowed" dramatically in the third
quarter (ending September 30, 1999), causing the Fund to
surrender all of its hard fought year to date gains and then
some.
- --------------------------------------------------------------------------------
1
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
THE STOCK MARKET
The strength of a small group of ten mega-capitalization,
primarily high P/E technology stocks accounted for
essentially the entire year to date (through September 30,
1999) gain for "the market" and masked the bear market
impacting the vast majority of stocks (see Table courtesy of
Salomon Smith Barney Equity Strategy). The investment firm
Sanford C. Bernstein calculated that the performance of
these ten stocks accounted for 96.5% of the year to date
gain for the S&P 500. This level of dominance of the top 10
impact stocks is unprecedented in the last 20 years, at more
than twice the degree of "narrowness" of 1998 and almost
three times the degree averaged over the entire period.
Given this historical perspective, can Microsoft (market
capitalization $478 billion, 1999 P/E 67.2X, YTD gain
36.3%), Cisco Systems ($234B, 95.9X, +47.7%), General
Electric ($406B, 38.4X, +17.3%), IBM ($216B, 30.5X, +31.7%),
Intel ($254B, 33.5X, +25.5%), Citigroup ($157B, 16.7X,
+34.0%), Sun Microsystems ($76B, 68.9X, +117.2%), Nortel
Networks ($71B, 46.8X, +104.7%), Wal*Mart ($229B, 41.4X,
+17.2%) and Texas Instruments ($73B, 54.9X, +92.6%) continue
to single-handedly carry the market?
TABLE--THE AVERAGE STOCK HAS DECLINED SIGNIFICANTLY!
COMMON EQUITY DECLINE FROM 52-WEEK HIGH (AS OF
SEPTEMBER 30, 1999)
<TABLE>
<CAPTION>
AVERAGE % DOWN % DOWN % DOWN
DECLINE 10% + 20% + 30% +
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NASDAQ 34.7% 88.4% 70.3% 52.1%
NYSE 27.0% 84.2% 59.7% 36.3%
S&P 500 24.1% 83.8% 58.2% 31.2%
</TABLE>
Mega-cap technology has obviously been the place to be in
1999. Earnings growth has been impressive as the internet
infrastructure build-out and general mania over e-commerce
picked up steam. Technology investors are anticipating
record earnings growth and are willing to pay a huge premium
multiple of earnings based on these heroic assumptions. The
net impact of this is technology made up a whopping 25.1% of
the S&P 500 as of September 30, 1999 (Microsoft, Intel and
Cisco Systems alone accounted for just under 25% of the
entire NASDAQ Index!), which is up from 13% as recently as
1997 and 7% in 1990. Investors should note the following: 1)
the only other time in the last 20 years when a group so
dominated the market was 1980 when energy was 27% of the S&P
500 (and oil was $40/barrel, "surely" headed to $100 and
beyond), 2) technology company earnings are both cyclical in
nature and prone to stumbles and 3) technology stocks have
had a number of periods when they
- --------------------------------------------------------------------------------
2
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
have been alternatively wildly in favor (like today) and
widely shunned (1995-96).
The point we are trying to make is the market moves in
cycles and to extremes. Just as the technology sector has
moved from being out of favor to in favor, value and growth
have both had periods of being in fashion or out of fashion.
We are frustrated the current cycle has carried this to
EXTREME levels for technology and growth. Similarly, in
August of 1982 (when this greatest bull market in U.S.
history began), you couldn't give stocks away, no matter how
attractive the valuation. Few knew what an index fund was
and even fewer cared. The economy was in recession,
inflation was high (stagflation) and long-term Treasuries
were yielding 14%. Investors were extremely risk averse and
happy to have their funds earning high nominal returns in
money market funds and certificates of deposit. In contrast
to 1982, in 1999 our economy is in its longest expansion
ever, inflation is low and long-term Treasuries recently
yielded less than 5% (fall of 1998). Investors aggressively
seek risk as "Risk/ Return Boulevard" has been a strictly
one-way street and the war cry of "buy the dips" greets
every drop as a buying opportunity. We're afraid many of
these investors believe the recently published book that
says the Dow Jones Industrial Average should be at 36,000
TODAY and they're going to ride this wave to financial
nirvana.
Unfortunately, this just isn't so. We can assure you that
back in 1982 no one in his or her wildest dreams could have
envisioned what would unfold over the next 17 years.
Similarly, the conditions that existed in 1982 are totally
unfathomable today. As we said above, the market moves in
cycles and to extremes. We believe wealth in the stock
market is created s-l-o-w-l-y, by adhering to a sound and
disciplined investment approach. This is how we have been
managing the Fund and will continue to do so.
Finally, we want our fellow shareholders to know that the
partners, staff and family members of Kirr, Marbach &
Company, LLC (the Fund's adviser) continue to have a
SIGNIFICANT ownership stake (approximately 48% of the total
dollars invested in the Fund as of September 30, 1999)
alongside you. We are in this for the long haul and truly
appreciate your investment in the Kirr, Marbach Partners
Value Fund.
Regards,
<TABLE>
<S> <C>
[MARK D. FOSTER SIGNATURE] [MICKEY KIM SIGNATURE]
Mark D. Foster, CFA Mickey Kim, CFA
President Vice President, Treasurer and Secretary
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1/1/99 3/31/99 6/30/99 9/30/99
<S> <C> <C> <C> <C>
Kirr Marbach Partners Value Fund $10,000 $10,040 $11,570 $9,910
S&P 500 $10,000 $10,500 $11,235 $10,527
Value Line Index $10,000 $9,400 $10,735 $9,661
S&P 400 Midcap Index $10,000 $9,360 $10,689 $9,791
</TABLE>
THIS CHART ASSUMES AN INITIAL INVESTMENT OF $10,000. PERFORMANCE REFLECTS FEE
WAIVERS IN EFFECT. IN THE ABSENCE OF FEE WAIVERS, TOTAL RETURN WOULD BE REDUCED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
AS OF THE FISCAL PERIOD ENDED SEPTEMBER 30, 1999 THE FUND HAS CHOSEN TO USE THE
S&P 500 INDEX, THE S&P 400 MIDCAP INDEX, AND THE VALUE LINE INDEX AS IT'S
COMPARISON BENCHMARKS.
<TABLE>
<CAPTION>
RATE OF RETURN (%)
SINCE INCEPTION* TO
SEPTEMBER 30, 1999
-------------------
<S> <C>
Kirr Marbarch Partners Value Fund -0.90%
S&P 500** 5.27%
Value Line Index*** -3.39%
S&P 400 Midcap Index**** -2.09%
</TABLE>
* January 1, 1999.
** The Standard & Poor's 500 Index (S&P 500) is an unmanaged,
capitalization-weighted index generally representative of the U.S. market
for large capitalization stocks.
*** The Value Line Index is an unmanaged, equally-weighted index which includes
1700 U.S. stocks.
**** The S&P 400 Midcap Index is an unmanaged, capitalization-weighted index
generally representative of the U.S. market for medium capitalization
stocks.
- --------------------------------------------------------------------------------
4
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at current value
(cost $18,506,028) $18,196,899
Prepaid expenses 12,652
Dividends receivable 10,387
Interest receivable 16,148
-----------
Total Assets 18,236,086
-----------
LIABILITIES:
Payable to Adviser 5,038
Accrued liabilities 58,077
-----------
Total Liabilities 63,115
-----------
NET ASSETS $18,172,971
===========
NET ASSETS CONSIST OF:
Capital stock $19,060,387
Undistributed net investment
income 53,763
Undistributed net realized
loss on investments (632,050)
Net unrealized depreciation on
investments (309,129)
-----------
Total Net Assets $18,172,971
===========
Shares outstanding (500,000,000
shares of $0.01 par value
authorized) 1,833,533
Net asset value, redemption
price and offering price per
share $ 9.91
===========
</TABLE>
STATEMENT OF OPERATIONS
DECEMBER 31, 1998(1) THROUGH SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income $ 111,672
Interest income 63,902
---------
Total Investment Income 175,574
---------
EXPENSES:
Investment Adviser fee 97,579
Organization costs 43,952
Shareholder servicing and
accounting costs 41,998
Administration fee 29,165
Professional fees 11,601
Federal and state registration 13,730
Custody fee 8,397
Distribution fees 24,395
Reports to shareholders 13,902
Directors fees 4,711
Other 5,684
---------
Total expenses before
reimbursement 295,114
Less: Reimbursement from
Investment Adviser (148,745)
---------
Net Expenses 146,369
---------
NET INVESTMENT INCOME 29,205
---------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net realized loss on investments (632,050)
Change in unrealized
depreciation on investments (309,129)
---------
Net realized and unrealized loss
on investments (941,179)
---------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(911,974)
=========
</TABLE>
<TABLE>
<C> <S>
(1) Commencement of operations.
</TABLE>
See notes to the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
DECEMBER 31, 1998(1) THROUGH SEPTEMBER 30, 1999
<TABLE>
<S> <C>
OPERATIONS:
Net investment income $ 29,205
Net realized loss on investments (632,050)
Change in unrealized depreciation on investments (309,129)
-----------
Net decrease in net assets resulting from operations (911,974)
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 19,310,833
Cost of shares redeemed (225,888)
-----------
Net increase in net assets from capital share transactions 19,084,945
-----------
TOTAL INCREASE IN NET ASSETS 18,172,971
-----------
NET ASSETS:
Beginning of period --
-----------
End of period $18,172,971
===========
CHANGES IN SHARES OUTSTANDING:
Shares sold 1,854,244
Shares redeemed (20,711)
-----------
Net increase 1,833,533
===========
</TABLE>
<TABLE>
<C> <S>
(1) Commencement of operations.
</TABLE>
See notes to the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
FINANCIAL HIGHLIGHTS
DECEMBER 31, 1998(1) THROUGH SEPTEMBER 30, 1999
<TABLE>
<S> <C>
For a Fund share outstanding throughout the period
Per Share Data:
Net asset value, beginning of period $10.00
-----------
Income from investment operations:
Net investment income 0.04
Net realized and unrealized gain on investments (0.13)
-----------
Total from investment operations (0.09)
-----------
Net asset value, end of period $9.91
===========
Total return (0.90)%(2)
Supplemental Data and Ratios:
Net assets, end of period $18,172,971
Ratios of expenses to average net assets
Before expense reimbursement 3.01%(3)
After expense reimbursement 1.50%(3)
Ratio of net investment income/(loss) to average net
assets
Before expense reimbursement (0.76)%(3)
After expense reimbursement 0.75%
Portfolio turnover rate 77.79%
</TABLE>
<TABLE>
<C> <S>
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
</TABLE>
See notes to the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------- -----------
<C> <S> <C>
COMMON STOCKS - 80.2%
AUTO & TRANSPORTATION - 6.3%
28,200 Automatic Com*** $ 363,075
10,400 Autonation, Inc.* 130,650
10,800 Autozone, Inc.* 303,075
16,400 Midas, Inc. 338,250
-----------
1,135,050
-----------
CAPITAL GOODS/BASIC INDUSTRY - 14.1%
23,100 Emcor Group, Inc.* 444,675
28,900 Englehard Corp. 525,619
13,200 Great Lakes Chemical Corp. 502,425
12,800 Precision Castparts Corp. 390,400
17,000 Solutia, Inc. 303,875
27,600 WESCO International Inc.* 389,850
-----------
2,556,844
-----------
COMMUNICATIONS - 7.2%
9,800 Century Communications* 447,125
7,700 Knight Ridder, Inc. 422,538
6,300 Mediaone Group* 430,369
-----------
1,300,032
-----------
CONSUMER NON-DURABLE - 15.1%
34,500 Allied Waste Industries,
Inc.* 403,219
9,300 H&R Block, Inc. 403,969
28,200 International Home Foods,
Inc.* 493,500
21,100 Jostens, Inc. 403,537
22,300 Pittston Brink's Group 517,081
33,700 U S Industries, Inc. 530,775
-----------
2,752,081
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------- -----------
ENERGY/NATURAL RESOURCES - 10.0%
<C> <S> <C>
14,600 Santa Fe Intl Corp. $ 314,813
70,000 Santa Fe Synder Corp.* 630,000
8,100 BJ Services* 257,681
18,600 Azurix Corp.* 319,688
13,800 Barrick Gold Corp. 300,150
-----------
1,822,332
-----------
FINANCIAL SERVICES - 8.2%
27,800 Allied Capital Corp. 623,762
26,200 Commercial Federal Corp. 514,175
20,700 HCC Insurance Holdings,
Inc. 348,019
-----------
1,485,956
-----------
MEDICAL - 4.3%
11,500 McKesson HBOC, Inc. 333,500
14,300 St. Jude Medical* 450,450
-----------
783,950
-----------
TECHNOLOGY - 2.1%
4,500 First Data Corp. 197,437
6,900 Newbridge Networks Corp.* 179,831
-----------
377,268
-----------
UTILITIES & RELATED - 12.9%
8,000 Calpine Corp.* 680,500
11,500 Cinergy Corp. 325,594
60,000 Citizens Utilities CO CL
B* 678,750
30,000 K N Energy, Inc.* 673,125
-----------
2,357,969
-----------
Total common stocks
(cost $14,880,611) $14,571,482
===========
</TABLE>
See notes to the financial statements.
- --------------------------------------------------------------------------------
8
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------------- -----------
<C> <S> <C>
SHORT-TERM INVESTMENTS - 19.9%
VARIABLE RATE DEMAND NOTES**
$591,017 American Family, 5.0234% $ 591,017
813,167 Firstar Bank, 5.1300% 813,167
483,262 Pitney Bowes, 4.9850% 483,262
430,771 Sara Lee, 4.9800% 430,771
651,896 Warner Lambert, 5.0230% 651,896
126,685 Wisc Corporate Central
Credit Union, 5.0500% 126,685
528,619 Wisconsin Electric, 5.0234% 528,619
-----------
Total short-term investments
(cost $3,625,417) 3,625,417
-----------
Total investments - 100.1%
(cost $18,506,028) 18,196,899
Liabilities in excess of
other assets - (0.1)% (23,928)
-----------
TOTAL NET ASSETS - 100.0% $18,172,971
===========
</TABLE>
<TABLE>
<C> <S>
* Non-income producing security.
** Variable rate security. The rates listed are as of
September 30, 1999.
*** Convertible Security
</TABLE>
See notes to the financial statements.
- --------------------------------------------------------------------------------
9
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Kirr Marbach Partners Fund, 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 diversified
management investment company issuing its shares in series,
each series representing a distinct portfolio with its own
investment objective and policies. The one series presently
authorized is the Kirr, Marbach Partners Value Fund (the
"Fund"). The investment objective of the Fund is to seek
long-term capital growth. The Fund commenced operations on
December 31, 1998.
The following is a summary of significant accounting
policies consistently followed by the Fund.
a) Investment Valuation - Common stocks and other
equity-type securities that are listed on a securities
exchange are valued at the last quoted sales price at the
close of regular trading on the day the valuation is made.
Price information, on listed stocks, is taken from the
exchange where the security is primarily traded. Securities
which are listed on an exchange but which are not traded on
the valuation date are valued at the mean of the most recent
bid and asked prices. Unlisted securities for which market
quotations are readily available are valued at the latest
quoted bid price. Debt securities are valued at the latest
bid prices furnished by independent pricing services. Other
assets and securities for which no quotations are readily
available are valued at fair value as determined in good
faith under the supervision of the Board of Directors of the
Corporation. Short-term instruments (those with remaining
maturities of 60 days or less) are valued at amortized cost,
which approximates market.
b) Federal Income Taxes - A provision, for federal income
taxes or excise taxes, has not been made since the Fund has
elected to be taxed as a "regulated investment company" and
intends to distribute substantially all taxable income to
its shareholders and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment
companies.
c) Income and Expense - The Fund is charged for those
expenses that are directly attributable to the Fund, such as
advisory, administration and certain shareholder service
fees.
d) Distributions to Shareholders - Dividends from net
investment income and distributions of net realized capital
gains, if any, will be declared and paid at least annually.
- --------------------------------------------------------------------------------
10
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
e) 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.
f) Repurchase Agreements - The Fund may enter into
repurchase agreements with certain banks or non-bank
dealers. 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.
g) Other - Investment and shareholder transactions are
recorded on the trade date. The Fund determines the gain or
loss realized from the investment transactions by comparing
the original cost of the security lot sold with the net
sales proceeds. Dividend income is recognized on the
ex-dividend date or as soon as information is available to
the Fund and interest income is recognized on an accrual
basis. Generally accepted accounting principles require that
permanent financial reporting and tax differences be
reclassified to capital stock. As a result of permanent
book-to-tax differences, ($24,558) has been reclassified
from undistributed net investment income to capital stock
due to nondeductible expenses. At September 30, 1999 the
Fund deferred post-October losses of $632,050. This amount
may be used to offset future capital gains.
Net investment income and realized gains and losses for
federal income tax purposes may differ from that reported on
the financial statements because of temporary book and tax
basis differences. Temporary differences are primarily the
result of post-October losses and amortization of
organization costs.
2. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding
short-term investments, by the Fund for the period
December 31, 1998 to September 30, 1999, were as follows:
<TABLE>
<CAPTION>
PURCHASE SALES
----------- ----------
<S> <C> <C>
U.S. Government.................... $ -- $ --
Other.............................. $23,135,871 $7,623,211
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
At September 30, 1999, gross unrealized appreciation and
depreciation of investments for tax purposes were as
follows:
<TABLE>
<S> <C>
Appreciation $ 1,273,367
(Depreciation) (1,582,496)
-----------
Net appreciation on investments $ (309,129)
===========
</TABLE>
At September 30, 1999, the cost of investments for federal
income tax purposes was $18,506,028.
3. AGREEMENTS
The Fund has entered into an Investment Advisory Agreement
with Kirr, Marbach & Company, LLC (the "Investment
Adviser"). Pursuant to its advisory agreement with the Fund,
the Investment Adviser is entitled to receive a fee,
calculated daily and payable monthly, at the annual rate of
1.00% as applied to the Fund's daily net assets.
Until December 31, 1999 the Adviser has agreed to waive its
advisory fee and/ or reimburse the Fund's other expenses,
including organization expenses, to the extent that total
operating expenses (exclusive of interest, taxes, brokerage
commissions and other costs incurred in connection with the
purchase or sale of portfolio securities, and extraordinary
items) exceed the annual rate of 1.50% of the net assets of
the Fund, computed on a daily basis. Accordingly, for the
period December 31, 1998 to September 30, 1999, the
Investment Adviser waived advisory fees and reimbursed the
Fund for other expenses in the amount of $148,745. Until
February 28, 2001, the Adviser has contractually agreed to
continue 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. The Adviser may
decide to continue the agreement, or revise the total annual
operating expense limitations after February 28, 2001. Any
waiver or reimbursement is subject to later adjustment to
allow the Investment Adviser to recoup amounts waived or
reimbursed to the extent actual fees and expenses for a
period are less than the expense limitation cap of 1.50%,
provided, however, that the Investment Adviser shall only be
entitled to recoup such amounts for a period of three years
from the date such amount was waived or reimbursed.
- --------------------------------------------------------------------------------
12
<PAGE>
KIRR, MARBACH PARTNERS
- --------------------------------------------------------------------------------
VALUE FUND
Rafferty Capital Markets, Inc., (the "Distributor") serves
as principal underwriter of the shares of the Fund pursuant
to a Distribution Agreement between the Distributor and the
Corporation. The Fund's shares are sold on a no-load basis
and, therefore, the Distributor receives no sales commission
or sales load for providing services to the Fund. The
Corporation has adopted a plan pursuant to Rule 12b-1 under
the 1940 Act (the "12b-1 Plan"), which authorizes the
Corporation to pay the Distributor a distribution and
shareholder servicing fee of up to 0.25% of the Fund's
average daily net assets (computed on an annual basis). All
or a portion of the fee may be used by the Fund or the
Distributor to pay its distribution fee and costs of
printing reports and prospectuses for potential investors
and the costs of other distribution and shareholder
servicing expenses. During the period ending September 30,
1999, the Fund incurred expenses of $24,395 pursuant to the
12b-1 Plan.
Firstar Mutual Fund Services, LLC serves as transfer agent,
administrator and accounting services agent for the Fund.
Firstar Bank Milwaukee, N.A. serves as custodian for the
Fund.
- --------------------------------------------------------------------------------
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF TRUSTEES
THE KIRR, MARBACH PARTNERS VALUE FUND:
We have audited the accompanying statement of assets and
liabilities of Kirr, Marbach Partners Value Fund (the
"Fund"), including the schedule of investments, as of
September 30, 1999, and the related statements of operations
and changes in net assets for the period December 31, 1998
(commencement of operations) through September 30, 1999 and
the financial highlights for the period presented herein.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and
financial highlights 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 and financial highlights
are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial
highlights. Our procedures included confirmation of
securities owned as of September 30, 1999, by correspondence
with the custodian. 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 and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of September
30, 1999 and the results of its operations and changes in
its net assets for the period December 31, 1998
(commencement of operations) through September 30, 1999 and
the financial highlights for the period presented herein, in
conformity with generally accepted accounting principles.
[/S/ KPMG LLP]
Chicago, Illinois
October 22, 1999
<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 LLP
303 E. WACKER DRIVE
CHICAGO, ILLINOIS 60601
LEGAL COUNSEL
GODFREY & KAHN, S.C.
780 N. WATER STREET
MILWAUKEE, WISCONSIN 53202
KIRR, MARBACH PARTNERS
VALUE FUND
[LOGO]
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ANNUAL REPORT
SEPTEMBER 30, 1999
