As filed with the Securities and Exchange Commission on January 27, 2000
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. __ [ ]
Post-Effective Amendment No. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2 [X]
KIRR, MARBACH PARTNERS FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
621 Washington Street
Columbus, Indiana 47201
(Address of Principal Executive Offices) (Zip Code)
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
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 31, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] on 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
Prospectus
dated January 31, 2000
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 AND RISKS 1
PERFORMANCE INFORMATION 2
FEES AND EXPENSES OF THE FUND 3
INVESTMENT OBJECTIVE 4
HOW THE FUND INVESTS 4
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
FINANCIAL HIGHLIGHTS 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 AND RISKS
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. 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. The
costs of foreign investing also tend to be
higher than the costs of investing in
domestic securities. 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.
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.
<PAGE>
Is the Fund an appropriate investment for me?
The Fund is suitable for long-term investors only. The Fund
is not a short-term investment vehicle. An investment in the
Fund may be appropriate if:
* your goal is long-term capital growth;
* you want to allocate some portion of your long-term
investments to value investing;
* you do not require current income from this investment; and
* you are willing to accept short-term to intermediate-term
fluctuations in value to seek possible higher long-term returns.
PERFORMANCE INFORMATION
The performance information that follows gives some
indication of the risks of an investment in the Fund by comparing
the Fund's performance with a broad measure of market
performance. Please remember that the Fund's past performance
does not reflect how the Fund may perform in the future.
1999 Calendar Year Total Return
0.23%
Best and Worst Quarterly Returns
BEST WORST
15.24% (14.35)%
(2nd quarter, 1999) (3rd quarter, 1999)
Total Returns as of 12/31/99
1 Year
Fund 0.23%
S&P 500 Index(1) 21.04%
Value Line Index(2) 0.22%
S&P 400 Midcap Index(3) 14.72%
(1) The S&P 500 Index is an unmanaged, capitalization-
weighted index generally representative of the U.S. market for
large capitalization stocks.
(2) The Value Line Index is an unmanaged, equally-
weighted index which includes 1700 U.S. stocks.
<PAGE>
(3) The S&P 400 Midcap Index is an unmanaged,
capitalization-weighted index generally representative of the
U.S. market for medium capitalization stocks.
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)
Exchange Fee (1) $5.00
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) 1.76%
Total Annual Fund Operating Expenses(3) 3.01%
Fee Waiver/Expense Reimbursement(3) 1.51%
Net Expenses 1.50%
____________
(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)Until February 28, 2001, the Adviser has contractually 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. 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 cap, provided, however, that the
Adviser shall only be entitled to recoup such amounts for a
period of three years from the date such amount was waived or
reimbursed. For additional information, see "Fund
Management."
(4)Because Rule 12b-1 fees are paid out of the Fund's assets on
an on-going basis, over time these fees will increase the
cost of your investment and could cost long-term investors of
the Fund more than other types of sales charges. For more
information, see "Distribution and Shareholder Servicing
Plan."
Example
The following Example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other
mutual funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Please note that the
one-year number is based on the Fund's net expenses resulting
from the expense cap agreement described above. The three-,
five- and ten-year numbers are based on the Fund's expenses
before any waiver or reimbursements. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be as follows:
1 Year 3 Years 5 Years 10 Years
$153 $798 $1,489 $3,439
<PAGE>
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 capitalization 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.
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 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.
<PAGE>
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.
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 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 December
31, 1999, the Adviser managed approximately $485.8 million for
individual and institutional clients. 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 waived its management fee and
reimbursed the Fund's other expenses so that the Fund's total
operating expenses (on an annual basis) did not exceed 1.50% of
its average daily net assets. 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.
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.
<PAGE>
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, N.A. ("Firstar Bank"), Third Floor,
615 East Michigan Street, Milwaukee, Wisconsin 53202, acts
as custodian of the Fund's assets.
Transfer Agent and Administrator
Firstar Mutual Fund Services, LLC ("Firstar"), Third Floor,
615 East Michigan Street, Milwaukee, Wisconsin 53202 acts as
transfer agent for the Fund (the "Transfer Agent") and as the
Fund's administrator.
Distributor
Rafferty Capital Markets, Inc., 1311 Mamaroneck Avenue,
White Plains, New York 10605, 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 $5,000 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."
<PAGE>
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 net asset value next
determined after receipt by the Fund of the dealer's order to
purchase shares. 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 Fund as a result. Neither cash nor third-party
checks will be accepted. All applications to purchase Fund
shares are subject to acceptance by the Fund and are not binding
until so accepted. The Fund reserves the right to decline or
accept a purchase order application in whole or in part.
Wire Purchases
You may also purchase Fund shares by wire. The following
instructions should be followed when wiring funds to the Transfer
Agent for the purchase of Fund shares:
Wire to: Firstar Bank, 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 Fund 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 the 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.
<PAGE>
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 $5,000
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 $5,000 with a monthly minimum
investment of $250. To establish the AIP, complete the
appropriate section in the shareholder application. You should
consider your financial ability to continue in the AIP until the
minimum initial investment amount is met because the Fund has the
right to close an investor's account for failure to reach the
minimum initial investment. For additional information on the
AIP, please see the SAI.
Individual Retirement Accounts
You may invest in the Fund by establishing a tax-sheltered
individual retirement account ("IRA"). The Fund offers the
Traditional IRA and Roth IRA. For additional information on IRA
options, please see the SAI.
Subsequent Investments - Minimum $1,000
Additions to your account may be made by mail or by wire.
Any subsequent investment must be for at least $1,000. When
making an additional purchase by mail, enclose a check payable to
"Kirr, Marbach Partners Funds, Inc." and the Additional
Investment Form provided on the lower portion of your account
statement. To make an additional purchase by wire, please call
1-800-870-8039 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.
<PAGE>
Your account may be terminated by the Fund on not less than
30 days' notice if, at the time of any redemption of shares in
your account, the value of the remaining shares in the account
falls below $25,000. Upon any such termination, a check for the
proceeds of redemption will be sent to you within seven days of
the redemption.
Written Redemption
For most redemption requests, an investor need only furnish
a written, unconditional request to redeem his or her shares at
net asset value to the Transfer Agent: Firstar Mutual Fund
Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
Overnight mail should be sent to Kirr, Marbach Partners Funds,
Inc., Firstar Mutual Fund Services, LLC, Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202. Requests for
redemption must (i) be signed exactly as the shares are
registered, including the signature of each owner, and (ii)
specify the number of shares or dollar amount to be redeemed.
Redemption proceeds made by written redemption request may also
be wired to a commercial bank that you have authorized on your
account application. The Transfer Agent will charge a $12
service fee for wire transactions. Additional documentation may
be requested from corporations, executors, administrators,
trustees, guardians, agents or attorneys-in-fact. The Fund does
not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the
mail or with such services, or receipt at the Transfer Agent's
post office box of redemption requests does not constitute
receipt by the Transfer Agent or the Fund. Do not mail letters
by overnight courier to the post office box. Any written
redemption requests received within 15 days after an address
change must be accompanied by a signature guarantee.
Telephone Redemption
Shares of the Fund may also be redeemed by calling the
Transfer Agent at 1-800-870-8039. 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.
<PAGE>
Signature Guarantees
Signature guarantees are required for: (i) redemption
requests to be mailed or wired to a person other than the
registered owner(s) of the shares; (ii) redemption requests to be
mailed or wired to other than the address that appears of record
and (iii) any redemption request if a change of address has been
received by the Fund or the Transfer Agent within the last 15
days. A signature guarantee may be obtained from any eligible
guarantor institution, as defined by the SEC. These institutions
include banks, saving associations, credit unions, brokerage
firms and others. Please note that a notary public stamp or seal
is not acceptable.
Redemption in Kind
The Fund has reserved the right to redeem in kind (i.e., in
securities) any redemption request during any 90-day period in
excess of the lesser of: (i) $250,000 or (ii) 1% of the Fund's
net asset value being redeemed. Please see the SAI for more
information.
Money Market Exchange
The Fund has established a program which permits Fund
shareholders to exchange Fund shares for shares of the Firstar
Money Market Fund. This exchange privilege is a convenient way
to buy shares in a money market fund in order to respond to
changes in your goals or in market conditions. Please see the
SAI for more information on the exchange privilege.
VALUATION OF FUND SHARES
Net asset value 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
regular 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
<PAGE>
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, the Fund reserves the
right to reinvest the distribution check in the shareholder's
account at the Fund's then current net asset value per share and
to reinvest all subsequent distributions in shares of the Fund.
If you do not furnish the Fund with your correct social
security number or taxpayer identification number, the Fund is
required by federal law to withhold federal income tax from your
distributions and redemption proceeds at a rate of 31%.
An exchange of Fund shares for shares pursuant to the Fund's
exchange privilege is treated the same as an ordinary sale and
purchase for federal income tax purposes and you will realize a
capital gain or loss. An exchange is not a tax-free transaction.
This section is not intended to be a full discussion of
federal income tax laws and the effect of such laws on you.
There may be other federal, state or local tax considerations
applicable to a particular investor. You are urged to consult
your own tax advisor.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you
understand the Fund's financial performance for the period from
December 31, 1998 (commencement of operations) to September 30,
1999. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the
rate that an investor would have earned on an investment in the
Fund for the stated period (assuming reinvestment of all
dividends and distributions). This information has been audited
by KPMG LLP, whose report, along with the Fund's financial
statements, are included in the Fund's annual report, which is
available upon request.
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)%(1)
<PAGE>
Supplemental data and ratios:
Net assets, end of period $18,172,971
Ratio of expenses to average net assets:
Before expense reimbursement 3.01%(2)
After expense reimbursement 1.50%(2)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement (0.76)%(2)
After expense reimbursement 0.75%(2)
Portfolio turnover rate 77.79%
____________
(1) Not annualized.
(2) Annualized.
<PAGE>
DIRECTORS CUSTODIAN
Mark D. Foster Firstar Bank, N.A.
Mickey Kim Third Floor, 615 E. Michigan Street
Jeffrey N. Brown Milwaukee, Wisconsin 53202
Mark E. Chesnut
John F. Dorenbusch ADMINISTRATOR, TRANSFER AGENT
AND DIVIDEND-DISBURSING AGENT
PRINCIPAL OFFICERS
Firstar Mutual Fund Services, LLC
Mark D. Foster, President Third Floor
Mickey Kim, Vice President, 615 E. Michigan Street
Treasurer and Secretary Milwaukee, Wisconsin 53202
INVESTMENT ADVISER INDEPENDENT ACCOUNTANTS
Kirr, Marbach & Company, LLC KPMG LLP
621 Washington Street 303 East Wacker Drive
Columbus, Indiana 47201 Chicago, Illinois 60601
DISTRIBUTOR LEGAL COUNSEL
Rafferty Capital Markets, Inc. Godfrey & Kahn, S.C.
1311 Mamaroneck Avenue 780 N. Water Street
White Plains, New York 10605 Milwaukee, Wisconsin 53202
The SAI for the Fund contains additional information about
the Fund. Additional information about the Fund's investments is
contained in the Fund's annual and semi-annual reports to
shareholders. The Fund's annual report provides a discussion of
the market conditions and investment strategies that
significantly affected the Fund's performance during the last
fiscal year. The Fund's SAI, which is incorporated by reference
into this Prospectus, annual reports and semi-annual reports are
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. Shareholder inquiries and requests for
other information about 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 1-202-942-8090 for
information relating to the operation of the Public Reference
Room. Reports and other information about the Fund are available
on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov or upon payment of a duplicating fee, by
emailing or writing the Public Reference Room of the SEC at
[email protected] or Washington, D.C. 20549-0102.
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 January 31,
2000. 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.
The Fund's audited financial statements for the period
December 31, 1998 to September 30, 1999, are incorporated herein
by reference to the Fund's Annual Report, which is available
without charge upon request to the above-noted address or toll-
free telephone number.
This Statement of Additional Information is dated January 31, 2000.
<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 18
REDEMPTIONS IN KIND 21
TAXATION OF THE FUND 21
PERFORMANCE INFORMATION 21
ADDITIONAL INFORMATION 22
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 liquidity criteria are
used, the Board of Directors has directed the Adviser to look to
such factors as (i) the nature of the
<PAGE>
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 automatic
adjustment of the interest rate whenever some specified interest
rate index changes. The interest rate on
<PAGE>
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 under "Implementation of
Investment Objectives Fixed Income Securities," 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 bids of such dealers or prices for
actual sales. During periods of thin trading, the spread between
bid and asked prices is
<PAGE>
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 principal
business occupations during the last five years, and other
information, are shown below. Each director who is deemed an
"interested person," as defined in the 1940 Act, is indicated by
an asterisk.
<PAGE>
*Mark D. Foster, a Director, Chairman and President of the
Corporation.
Mr. Foster, 41 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, 41 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, 40 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, 52 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, 62 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 31, 1999, officers and directors of the
Corporation beneficially owned 5.6% of the shares of common stock
of the Fund's then outstanding 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
compensation paid to directors of the Corporation for their
services as such for the period December 31, 1998 to September 30, 1999:
<PAGE>
Cash Other
Name Compensation(1) Compensation Total
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 as $6,000 $0 $6,000
a group (5 persons)
____________________
(1) Each director who is not deemed an "interested person" as
defined in the 1940 Act, receives $500 for each Board of
Directors meeting attended by such person and reasonable expenses
incurred in connection therewith. The Board held four meetings
during fiscal 1999.
PRINCIPAL SHAREHOLDERS
As of December 31, 1999, 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
Aegis Women's Healthcare P.C. Retirement Plan 119,393.667 6.5%
421 West 1st Street
Bloomington, Indiana 47403
David M. Kirr 356,897.121 19.3%
3665 Woodside Drive
Columbus, Indiana 47201
Terry B. Marbach 106,397.563 5.7%
9704 West Raintree Drive
Columbus, Indiana 47201
Based on the foregoing, as of December 31, 1999, no person
owned a controlling interest in 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 31, 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 17, 1998 and by the initial shareholder of
the Fund on December 17, 1998. The Advisory Agreement was
reapproved by the Board of Directors, including a majority of the
disinterested directors, on November 15, 1999. The Advisory
Agreement is terminable without penalty, on 60 days' written
notice by the Board
<PAGE>
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.
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.
For the fiscal year ended September 30, 1999, the Adviser
waived its management fee and reimbursed the Fund's other
expenses so that the Fund's total operating expenses (on an
annual basis) did not exceed 1.50% of its average daily net
assets. The Adviser has contractually agreed that until February
28, 2001, the Adviser will continue to 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.
For the period December 31, 1998 to September 30, 1999, the Fund
paid the Adviser $25,093 for its investment advisory services.
If the Adviser had not agreed to waive its management fee, the
Adviser would have received an additional $72,486 from the Fund
for its investment advisory services.
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.
<PAGE>
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 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 aggregate amount of brokerage commissions paid by the
Fund for the period December 31, 1998 to September 30, 1999 was
$60,475. For the period December 31, 1998 to September 30, 1999,
the Fund paid $26,051 in brokerage commissions with respect to
$13,676,180 in transactions for which research services were
provided. During the period December 31, 1998 to September 30,
1999, the Fund did not acquire any stock of its regular brokers
or dealers.
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, 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
<PAGE>
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 the 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).
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 assets .06 of 1%*
Next $500 million of average net assets .05 of 1%
Average net assets in excess of $700 million .03 of 1%
_____________________________
* Subject to a minimum fee of $35,000.
Accounting Services Fees
First $40 million of average net assets $22,000
Next $200 million of average net assets .01 of 1%
Average net assets in excess of $240 million .005 of 1%
For the period December 31, 1998 to September 30, 1999,
Firstar received $50,850 from the Fund under the Fund
Administration Servicing Agreement and $15,597 from the Fund
under the Fund Accounting Servicing Agreement.
DISTRIBUTOR AND PLAN OF DISTRIBUTION
Distributor
Under a distribution agreement dated December 31, 1998 (the
"Distribution Agreement"), Rafferty Capital Markets, Inc. (the
"Distributor"), 1311 Mamaroneck Avenue, White Plains, New York
10605, 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 receives
from the Corporation out-of-pocket expenses plus an annual fee
equal to the greater of (i) $15,000 or (ii) .01% of the Fund's
net assets, computed daily and payable monthly. As compensation
for its services under the Distribution Agreement, the
Distributor may retain all or a portion of the distribution and
shareholder servicing fees payable under the 12b-1 Plan (as
defined below). 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.
<PAGE>
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 and reapproved 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 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 continue the 12b-1 Plan,
including: (a) the nature and causes of the circumstances which
make continuation of the 12b-1 Plan necessary and appropriate;
(b) the way in which the 12b-1 Plan addresses 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
<PAGE>
course, benefit such shareholders. Finally, the continuation 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.
Amounts Paid under the Plan
For the period December 31, 1998 to September 30, 1999,
pursuant to the terms of the 12b-1 Plan, the Fund paid $10,897.
Of this amount, $2,912 was spent on printing of annual reports
for other than current shareholders. The Distributor received
$7,985 of the amounts paid under 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 $5,000. 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
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
<PAGE>
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, 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 $170,000 per year). The $170,000
compensation limit applies for 2000 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 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 2000 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
<PAGE>
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.
Pricing of Shares
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 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 at the close of regular trading 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.
<PAGE>
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
indirectly in such securities through the Fund.
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.
The total return for the Fund for the period December 31,
1998 to September 30, 1999 was (0.90)%.
<PAGE>
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 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.
ADDITIONAL INFORMATION
From time to time, in marketing and other Fund literature,
the Adviser may discuss the benefits of investing in mutual funds
in general and compare mutual funds to other investment products,
such as separate account management or bank common or collective
funds and particularly with respect to changes in the retirement
plan market. The Fund believes that mutual funds offer certain
advantages over such other investment products, including daily
pricing, daily liquidity and, with respect to IRA plans, being a
permissive investment. While the Fund believes that certain of
such advantages exist, the Adviser anticipates that it will
continue to offer separate account management.
INDEPENDENT ACCOUNTANTS
KPMG LLP, 303 East Wacker Drive, Chicago, Illinois 60601,
independent accountants for the Fund, audit and report on the
Fund's financial statements.
FINANCIAL STATEMENTS
The following audited financial statements of the Fund are
incorporated herein by reference to the Fund's Annual Report for
the period December 31, 1998 to September 30, 1999, as filed with
the Securities and Exchange Commission on December 8, 1999:
(a) Report of Independent Accountants.
(b) Schedule of Investments as of September 30, 1999.
(c) Statement of Assets and Liabilities as of
September 30, 1999.
(d) Statement of Operations for the period December 31, 1998 to
September 30, 1999.
(e) Statement of Changes in Net Assets for the period December
31, 1998 to September 30, 1999.
<PAGE>
(f) Financial Highlights for the period December 31, 1998
to September 30, 1999.
(g) Notes to the Financial Statements.
<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.
AA Risk is modest but may vary slightly
AA- from time to time because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable
A- and greater in periods of economic stress.
BBB+ Below-average protection factors but still considered
BBB sufficient for prudent investment. Considerable
BBB- variability in risk during economic cycles.
BB+ Below investment grade but deemed likely to meet
BB obligations when due. Present or prospective
BB- financial protection factors fluctuate according to
industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that
B obligations will not be met when due. Financial
B- protection factors will fluctuate widely according to
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
(h.5) Expense Cap/Reimbursement Agreement
(i) Opinion and Consent of Godfrey & Kahn, S.C.(2)
(j) Consent of KPMG LLP
(k) None
(l) Subscription Agreement with Kirr, Marbach & Company, LLC(2)
(m) Rule 12b-1 Distribution and Shareholder Servicing Plan(2)
(n) None
(o) Reserved
(p) Code of Ethics(3)
______________
(1) Incorporated by reference to Registrant's Form N-1A as filed
with the Commission on October 16, 1998.
(2) Incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 as filed with the Commission on December 9, 1998.
(3) To be filed in the next post-effective amendment filed by
Registrant after March 1, 2000.
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.
<PAGE>
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) 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., Bearguard Funds, Inc., The Home
State Funds Group, Potomac Funds, Brazos Mutual Funds,
Bremer Investment Funds, Inc., IAI Investment Funds,
Ingenuity Capital Trust, Leuthold Funds, Inc. and Texas
Capital Value Funds, Inc.
(b) The principal business address of Rafferty Capital
Markets, Inc. ("Rafferty"), the Registrant's principal
underwriter, is 1311 Mamaroneck Avenue, White Plains,
New York 10605. The following information relates to
each director and officer of Rafferty:
Positions Positions
and Offices and Offices
Name With Underwriter 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, N.A., Third Floor,
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.
<PAGE>
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 certifies
that it meets all of the requirements for effectiveness under
Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-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 27th day of January, 2000.
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 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 Post-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 January 27, 2000
- ------------------ President
Mark D. Foster
/s/ Mickey Kim Director, Vice President, January 27, 2000
- ----------------- Treasurer and Secretary
Mickey Kim
/s/ Jeffrey N. Brown Director January 27, 2000
- --------------------
Jeffrey N. Brown
/s/ Mark E. Chesnut Director January 27, 2000
- --------------------
Mark E. Chesnut
/s/ John F. Dorenbusch Director January 27, 2000
- ----------------------
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
(h.5) Expense Cap/Reimbursement Agreement
(i) Opinion and Consent of Godfrey & Kahn, S.C.(2)
(j) Consent of KPMG LLP
(k) None
(l) Subscription Agreement with Kirr, Marbach & Company, LLC(2)
(m) Rule 12b-1 Distribution and Shareholder Servicing Plan(2)
(n) None
(o) Reserved
(p) Code of Ethics(3)
___________________
(1) Incorporated by reference to Registrant's Form N-1A as filed
with the Commission on October 16, 1998.
(2) Incorporated by reference to Registrant's Pre-Effective
Amendment No.1 as filed with the Commission on December 9, 1998.
(3) To be filed in the next post-effective amendment filed by
Registrant after March 1, 2000.
KIRR, MARBACH PARTNERS FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is entered into as of the 31st 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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 31st day of December, 1998.
The Adviser:
KIRR, MARBACH & COMPANY, LLC
By: /s/ Mickey Kim
-----------------------------------
Mickey Kim, Chief Operating Officer
The Corporation:
KIRR, MARBACH PARTNERS FUNDS, INC.
By: /s/ Mark D. Foster
-----------------------------------
Mark D. Foster, President
1
DISTRIBUTION AGREEMENT
between
KIRR, MARBACH PARTNERS FUNDS, INC.
and
RAFFERTY CAPITAL MARKETS, INC.
THIS AGREEMENT is made as of December 31, 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
<PAGE>
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").
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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: /s/ Mark D. Foster
-------------------------------
Its: President
------------------------------
RAFFERTY CAPITAL MARKETS, INC.
By: /s/ Thomas A. Mulrooney
--------------------------------
Its: President
--------------------------------
<PAGE>
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 31, 1998
<PAGE>
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 31, 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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: /s/ Mark D. Foster By: /s/ Michael McVoy
--------------------- -------------------------
Its: President Its: Vice President
--------------------- -------------------------
<PAGE>
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
<PAGE>
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
<PAGE>
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;
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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: /s/ Mark D. Foster By: /s/ Joseph Neuberger
---------------------- ----------------------
Its: President Its: Vice President
---------------------- ----------------------
<PAGE>
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)
<PAGE>
NSCC and DAZL
Out-of-Pocket Charges
NSCC Interfaces
Setup
Fund/SERV, Networking ACATS, Exchanges $5,000 setup (one time)
DCCS, RAT
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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: /s/ Mark D. Foster By: /s/ Joseph Neuberger
---------------------- ------------------------
Its: President Its: Vice President
---------------------- ------------------------
<PAGE>
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.
<PAGE>
(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.
<PAGE>
(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.
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<PAGE>
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: /s/ Mark D. Foster By: /s/ Joseph Neuberger
--------------------- --------------------------
Its: President Its: Vice President
--------------------- --------------------------
<PAGE>
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.
<PAGE>
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.
<PAGE>
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: /s/ Mark D. Foster By: /s/ Joseph Neuberger
-------------------- -------------------------
Its: President Its: Vice President
-------------------- -------------------------
KIRR, MARBACH & COMPANY, LLC RAFFERTY CAPITAL MARKETS, INC.
By: Mickey Kim By: /s/ Thomas A. Mulrooney
------------------------ --------------------------
Its: Chief Operating Officer Its: President
------------------------ --------------------------
<PAGE>
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.
EXPENSE CAP/REIMBURSEMENT AGREEMENT
This Agreement is entered into as of November 15,
1999 between Kirr, Marbach & Company, LLC (the
"Adviser") and Kirr, Marbach Partners Funds, Inc. (the
"Company") on behalf of the Kirr, Marbach Partners
Value Fund (the "Fund").
WHEREAS, the Adviser desires to contractually
agree to waive a portion of its advisory fee or
reimburse certain of the Fund's operating expenses to
ensure that the Fund's total operating expenses do not
exceed the level described below.
NOW THEREFORE, the parties agree as follows:
The Adviser agrees that until February 28, 2001,
it will reduce its compensation as provided for in the
Investment Advisory Agreement between the Company and
the Adviser dated December 31, 1998, and/or assume
expenses for the Fund to the extent necessary to ensure
that the Fund's total operating expenses (on an annual
basis) do not exceed 1.50% of the Fund's average daily
net assets.
The Adviser shall be entitled to recoup such
amounts for a period of up to three (3) years following
the fiscal year in which the Adviser reduced its
compensation and/or assumed expenses for the Fund,
provided that the total operating expenses including
this recoupment do not exceed the established cap on
expenses for that year.
KIRR, MARBACH & COMPANY, LLC
By: /s/ Mickey Kim
------------------------
Mickey Kim
Its: Member
------------------------
KIRR, MARBACH PARTNERS FUNDS, INC.
By: /s/ Mark D. Foster
-----------------------------
Mark D. Foster, President
CONSENT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors
Kirr, Marbach Partners Value Fund:
We consent to the use of our report incorporated by
reference and the reference to our firm under the
headings "Financial Highlights" in the Prospectus and
"Independent Accountants" in the Statement of
Additional Information.
/s/ KPMG LLP
Chicago, Illinois
January 21, 2000
