SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Perritt MicroCap Opportunities Fund, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and date of
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<PAGE>
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD April 20, 1998
To the Shareholders of Perritt MicroCap Opportunities Fund, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Perritt MicroCap Opportunities Fund, Inc. (the "Fund") will be held at the
Fund's principal offices located at 120 South Riverside Plaza, Conference
Room - 14th Floor, Chicago, Illinois on the 20th day of April, 1998 at
9:00 A.M. local time for the following purposes:
1. To consider and act upon a proposal to approve a new
investment advisory agreement between the Fund and Perritt Capital
Management, Inc.
2. To consider and act upon an amendment to the Fund's
Articles of Incorporation to increase the maximum amount of the fee
that the Fund could impose on share redemptions to not more than 2%.
Only shareholders of record of the Fund at the close of business
on February 27, 1998, the record date for this meeting, shall be entitled
to notice of and to vote at the meeting or any adjournments or
postponements thereof.
YOUR VOTE IS IMPORTANT AND ALL SHAREHOLDERS ARE ASKED TO BE
PRESENT IN PERSON OR BY PROXY. IF YOU ARE UNABLE TO ATTEND THE MEETING IN
PERSON, WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
AT YOUR EARLIEST CONVENIENCE USING THE STAMPED ENVELOPE PROVIDED. SENDING
IN YOUR PROXY WILL NOT PREVENT YOU FROM PERSONALLY VOTING YOUR SHARES AT
THE MEETING SINCE YOU MAY REVOKE YOUR PROXY BY ADVISING THE SECRETARY OF
THE FUND IN WRITING (BY SUBSEQUENT PROXY OR OTHERWISE) OF SUCH REVOCATION
AT ANY TIME BEFORE IT IS VOTED.
By Order of the Board of Directors
Allison B. Hearst
Secretary
Chicago, Illinois
March __, 1998
Perritt MicroCap Opportunities Fund, Inc.
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
PROXY STATEMENT
The enclosed proxy is being solicited by and on behalf of the
Board of Directors of Perritt MicroCap Opportunities Fund, Inc. (the
"Fund") for use at the Special Meeting of Shareholders to be held at the
Fund's principal offices located at 120 South Riverside Plaza, Suite 1745,
Chicago, Illinois on Monday, the 20th day of April, 1998 at 9:00 A.M.
local time and at any adjournments or postponements thereof (the
"Meeting"), for the purposes set forth in the attached Notice of Special
Meeting of Shareholders. The Meeting could be adjourned if a quorum does
not exist or the Meeting is disrupted by fire or other emergency. For
purposes of any adjournment, proxies will be voted "FOR" adjournment
unless otherwise directed. A shareholder may otherwise direct by writing
anywhere on the enclosed proxy that the shareholder will vote against any
adjournments.
Whether you expect to be personally present at the Meeting or
not, please complete, sign, date and return the accompanying form of
proxy. Timely executed proxies will be voted as you instruct. If no
choice is indicated, proxies will be voted "for" the proposed investment
advisory agreement (Proposal No. 1) and "for" the redemption fee increase
(Proposal No. 2). Any shareholder giving a proxy has the power to revoke
it at any time before it is exercised by giving notice thereof to the Fund
in writing (by subsequent proxy or otherwise), but if not so revoked, the
shares represented by the proxy will be voted at the Meeting. Presence at
the Meeting of a shareholder who has signed a proxy does not in itself
revoke a proxy.
Proxies will be solicited by mail. In addition to solicitation
by mail, certain officers and employees of the Fund may solicit by
telephone, telegraph and personally. Such officers and employees will not
be specifically paid for these services. The cost of solicitation
including preparing, assembling and mailing the proxy material will be
borne by the Fund. The Notice of Special Meeting of Shareholders, this
Proxy Statement and the accompanying form of proxy are first being mailed
to shareholders of the Fund beginning on or about March 17, 1998.
Only shareholders of record of the Fund at the close of business
on February 27, 1998, will be entitled to notice of and to vote at the
Meeting. On that date, there were 995,166 issued and outstanding shares
of the Fund. The record holder of each outstanding share of the Fund is
entitled to one vote on all matters submitted to shareholders of the Fund.
See "Vote Required" under each Proposal for information as to the required
vote on it.
THE FUND WILL FURNISH, WITHOUT CHARGE, ITS ANNUAL REPORT FOR THE
FISCAL YEAR ENDED OCTOBER 31, 1997 TO ANY SHAREHOLDER UPON REQUEST.
REQUESTS FOR SUCH REPORT SHOULD BE DIRECTED TO ALLISON B. HEARST AT 120
SOUTH RIVERSIDE PLAZA, SUITE 1745. CHICAGO, ILLINOIS 60606 OR BY CALLING
1-800-331-8936.
1. PROPOSAL TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT FOR THE FUND
Introduction
The Fund presently has an investment advisory agreement (the
"Current Advisory Agreement") with Perritt Capital Management, Inc., 120
South Riverside Plaza, Suite 1745, Chicago, IL 60606 (the "Adviser"),
pursuant to which the Adviser furnishes continuous investment advisory
services to the Fund. The Current Advisory Agreement was entered into on
April 12, 1988. Proposal 1 asks the shareholders to approve a new
Advisory Agreement (the "Proposed Advisory Agreement") with the Adviser.
The Proposed Advisory Agreement will take effect on May 1, 1998 assuming
it is approved by the shareholders of the Fund at the Meeting and at least
a majority of the Fund's directors who are not "interested persons" of the
Fund at a meeting of the Board of Directors to be held on or before such
date.
Description of Current and Proposed Advisory Agreements
The terms of the Current Advisory Agreement and the Proposed
Advisory Agreement are substantially identical except for the fees payable
to the Adviser and the expense reimbursement provision. Under the Current
Advisory Agreement, the Fund pays the Adviser a monthly fee of 1/12 of .7%
(.7% per annum) of the average daily net asset value of the Fund. The
Proposed Advisory Agreement provides for an increase in the monthly
advisory fee payable to the Adviser for the services it provides to the
Fund to 1/12 of 1% (1% per annum) of the average daily net asset value of
the Fund. Under the Current Advisory Agreement, the Adviser will waive
its advisory fee to the extent that the Fund's total operating expenses
exceed 2% of the Fund's average net assets. The Proposed Advisory
Agreement provides for a decrease in the expense limitation to 1.75%
pursuant to which the Adviser will waive its advisory fee to the extent
that total operating expenses exceed 1.75% of the Fund's average net
assets.
Pursuant to the Current Advisory Agreement, the Adviser
supervises and manages the investment portfolio of the Fund and subject to
such policies as the Board of Directors of the Fund may determine, directs
the purchase or sale of investment securities in the day to day management
of the Fund's investment portfolio. Under the Current Advisory Agreement,
the Adviser, at its own expense and without reimbursement from the Fund,
furnishes office space, and all necessary office facilities, equipment and
executive personnel for managing the Fund's investments, and pays the
salaries and fees of all officers of the Fund and of directors of the Fund
who are "interested persons" of the Adviser and pays for all clerical
services relating to research, statistical and investment work.
Pursuant to the Current Advisory Agreement, the Adviser has
agreed to reimburse the Fund to limit the total operating expenses of the
Fund, including the investment advisory fee but excluding interest, taxes,
brokerage commissions and similar fees, to an annual rate of 2.0% of the
Fund's average daily net assets. The Fund monitors its expense ratio on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the limitation, the Fund creates an account receivable from the Adviser
for the amount of such excess. In such a situation the monthly payment of
the Adviser's fee will be reduced by the amount of such excess, subject to
adjustment month by month during the balance of the Fund's fiscal year if
accrued expenses thereafter fall below this limit. The Proposed Advisory
Agreement contains a substantially identical expense reimbursement
provision, but the Proposed Advisory Agreement provides that the total
operating expenses are to be limited to an annual rate of 1.75%.
During the fiscal year ended October 31, 1997, the Adviser
received $83,934 in advisory fees. Had the Proposed Advisory Agreement
been in effect during that year, the Adviser would have received
$111,512.00 in fees (an increase of 32.9%) from the Fund but would have
reimbursed the Fund $8,393.00.
The Fund does not pay brokerage commissions to any broker
affiliated with the Fund, the Adviser or any affiliated person thereof.
The following table shows the actual operating expenses
expressed as a percentage of average net assets incurred by the Fund
during the fiscal year ended October 31, 1997 and the expenses expressed
as a percentage of average net assets that would have been incurred had
the Proposed Advisory Agreement been in effect for such period:
Actual Pro Forma
Management Fees 0.70% 1.00%
12b-1 Fees 0.00% 0.00%
Other Expenses 0.82% 0.75%*
---- ----
Total Fund Operating Expenses 1.52% 1.75%*
==== ====
___________________
* Absent reimbursement, Other Expenses would have been .82% (pro forma)
and Total Fund Operating Expenses would have been 1.82% (pro forma).
Example
The following example illustrates the expenses on a $1,000
investment in the Fund under both the Current Advisory Agreement and the
Proposed Advisory Agreement assuming (i) a 5% annual return and (ii)
redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
Current Advisory Agreement $15 $47 $81 $178
Proposed Advisory Agreement $18 $54 $93 $202
The purpose of the above example and table is to assist you in
understanding how the various costs and expenses of the Fund will change
as a result of the Proposed Advisory Agreement. The example should not be
considered a representation of past or future expenses. The Fund's actual
expenses and investment performance vary from year to year and will result
in expenses that may be higher or lower than those shown above.
If approved by the requisite shareholder vote, the Proposed
Advisory Agreement will become effective on May 1, 1998. The Proposed
Advisory Agreement provides that it will continue in effect as long as its
continuance is specifically approved at least annually by (i) the Fund's
Board of Directors, or by the vote of a majority (as defined in the 1940
Act) of the outstanding shares of the Fund; and (ii) by the vote of a
majority of the directors of the Fund who are not interested persons, cast
in person at a meeting called for the purpose of voting on such approval.
The Proposed Advisory Agreement provides that it may be terminated at any
time without the payment of any penalty by the Board of Directors of the
Fund or by a vote of a majority of the outstanding shares of the Fund on
sixty days written notice to the Adviser, and by the Adviser on the same
notice to the Fund, and that it shall be automatically terminated if it is
assigned.
Description of Perritt Capital Management, Inc.
Perritt Capital Management, Inc. (the "Adviser") is a registered
investment adviser organized in 1987. Its address is 120 South Riverside
Plaza, Suite 1745, Chicago, Illinois 60606. The Adviser is a wholly-owned
subsidiary of Investment Information Services, Inc. ("IIS"), an Illinois
corporation. Dr. Gerald W. Perritt, President of the Adviser, owns 60% of
the outstanding stock of IIS and controls both IIS and the Adviser. Dr.
Perritt is the President and Chairman of IIS and the President and
Treasurer of the Fund. Since its inception, the Adviser's principal
business has been providing continuous investment supervision for
individuals and institutional accounts such as the Fund.
Set forth below are the names and addresses of the principal
executive officers and directors of the Adviser. The principal occupation
of each such person is his or her position with the Adviser.
Position with Perritt Capital
Name and Address Management, Inc.
Gerald W. Perritt President and Director
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
Michael J. Corbett Vice President
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
Robert Laatz Vice President
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
Allison Hearst Secretary
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
David Maglich Director
4734 Acorn Circle
Sarasota, FL 34233
Dianne Click Director
514 North Montana Avenue
Bozeman, MT 59715
The Evaluation by the Board of Directors and Directors' Recommendation
The Fund's Board of Directors has determined that approving the
Proposed Advisory Agreement with Perritt Capital Management, Inc. will
enable the Fund to obtain services of high quality at costs deemed
appropriate, reasonable and in the best interests of the Fund and its
shareholders.
In making its determinations, the Fund's Board of Directors took
into consideration the fact that the Adviser has demonstrated its
abilities as an investment adviser while serving as the investment adviser
to the Fund and that the terms of the Current Advisory Agreement are
identical to the terms of the Proposed Advisory Agreement except for the
fees payable to the Adviser and the expenses reimbursement limitation.
The total return of the Fund for the fiscal year ended October 31, 1997
was 36.0%. In considering the fee increase contemplated by the Proposed
Advisory Agreement, the Board of Directors considered that management of
the Fund is labor intensive. The Fund is actively managed. The net
assets of the Fund were $24,831,000 at October 31, 1997 compared to
$8,130,000 at October 31, 1996, an increase of 205%. Additionally the
Fund invests in relatively small companies which tend not to be widely
followed by third party research analysts requiring the Adviser to utilize
its own resources in evaluating such companies. In weighing the factors
discussed above, the Board of Directors assigned the greatest weight to
the fact that management of the Fund is labor intensive. The Board of
Directors considered the other factors discussed above to be of secondary
importance.
Based upon its review, the Fund's Board of Directors concluded
that the Proposed Advisory Agreement with the Adviser is reasonable, fair
and in the best interests of the Fund and its shareholders, and the fees
provided in the Proposed Advisory Agreement are fair and reasonable. A 1%
fee for the Adviser is consistent with (i) the amounts customers are
willing to pay for the advisory and management services the Adviser
provides; (ii) the fee charged by funds of a comparable size and type; and
(iii) with the increased responsibility of the management of greater
amount of money. In the Board's view, retaining the Adviser to serve as
investment adviser of the Fund, under the terms of the Proposed Advisory
Agreement, is desirable and in the best interests of the Fund and its
shareholders. Accordingly, after consideration of the above factors, and
such other facts and information as it deemed relevant, the Fund's Board
of Directors voted to recommend approval of the Proposed Advisory
Agreement by the shareholders of the Fund.
Vote Required
The favorable vote of the holders of a "majority" (as defined in
the 1940 Act) of the outstanding shares of the Fund is required for the
approval of the Proposed Advisory Agreement. Under the 1940 Act, the vote
of the holders of a "majority" of the outstanding shares of a Fund means
the vote of the holders of the lesser of (a) 67% or more of its shares
present at the Meeting or represented by proxy if the holders of 50% or
more of its shares are so present or represented; or (b) more than 50% of
its outstanding shares. Abstentions and broker non-votes will not be
counted for or against the proposal but will be counted as votes present
for purposes of determining whether or not more than 50% of the
outstanding shares are present or represented at the Meeting. The failure
to vote (whether by broker non-vote, abstention or otherwise), assuming
more than 50% of the outstanding shares of the Fund are present, has no
effect if (a) above is applicable and has the same effect as a vote
against the proposal if (b) above is applicable. If the Proposed Advisory
Agreement is not approved at the Meeting, the Current Advisory Agreement
will continue until its scheduled termination date.
2. PROPOSAL TO AMEND ARTICLES OF INCORPORATION TO INCREASE PERMISSIBLE
REDEMPTION FEE
Description of Amendment
The Fund's Board of Directors has unanimously approved and
recommends that the shareholders approve an amendment to the Articles of
Incorporation that would increase the permissible redemption fee from 1%
to 2% of the proceeds of a redemption. The provisions of Article IV.D. of
the Fund's Articles of Incorporation as proposed to be amended are set
forth in Appendix A to this proxy statement.
The Fund's Articles of Incorporation presently permit the Board
of Directors to impose a fee for the privilege of redeeming shares, such
fee not to exceed 1% of the proceeds of any such redemption. The Fund
does not currently impose any fee when shares are redeemed. The Board of
Directors, however, has determined that a fee should be imposed in limited
circumstances. To discourage short-term trading, the Board of Directors
has approved a 2% redemption fee on shares that are repurchased or
redeemed before they have been held for 90 days, subject to shareholder
approval of Proposal 2. The fee would be paid to the Fund, not the
Adviser. The Board of Directors believes that the fee is needed to reduce
the high number of share liquidations experienced during the last fiscal
year. The Board of Directors believes that the proposed increase in the
permissible redemption fee will provide the Adviser greater flexibility in
managing the Fund and is necessary to discouraging practices that may be
detrimental to the Fund and its shareholders. The Board of Directors has
determined that the amendment is reasonable, fair and in the best
interests of the Fund and its shareholders.
Vote Required
The affirmative vote of the holders of two-thirds of the shares
of the Fund outstanding and entitled to vote at the Meeting is required to
approve Proposal 2. The failure to vote (whether by broker non-vote,
abstention or otherwise), assuming more than 50% of the outstanding shares
of the Fund are present, has the same effect as a vote against the
proposal. If the amendment to the Articles of Incorporation is not
approved, the Board of Directors will impose a 1% fee on shares redeemed
within 90 days of purchase, as presently permitted by the Fund's Articles
of Incorporation.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's investment adviser is Perritt Capital Management,
Inc., 120 South Riverside Plaza, Suite 1745, Chicago, Illinois 60606. The
Fund has no principal underwriter.
RECEIPT OF SHAREHOLDER PROPOSALS
Under the proxy rules of the Securities and Exchange Commission,
shareholder proposals meeting tests contained in those rules may, under
certain conditions, be included in the Fund's proxy materials for a
particular meeting of shareholders. One of these conditions relates to
the timely receipt by the Fund of any such proposal. Since the Fund does
not have regular annual meetings of shareholders, under these rules,
proposals submitted for inclusion in the proxy materials for a particular
meeting must be received by the Fund a reasonable time before the
solicitation of proxies for the meeting is made. The fact that the Fund
receives a shareholder proposal in a timely manner does not insure its
inclusion in the Fund's proxy materials since there are other requirements
in the proxy rules relating to such inclusion.
OTHER MATTERS
The Fund's Board of Directors knows of no other matters that may
come before the Meeting.
By Order of the Board of Directors
Allison B. Hearst
Secretary
Chicago, Illinois
March __, 1998
<PAGE>
Appendix A
Article IV.D.
The Board of Directors of the Corporation may, upon reasonable
notice to shareholders of the Corporation, impose a fee for the privilege
of redeeming shares, such fee to be not in excess of two percent (2.0%) of
the proceeds of any such redemption. The Board shall have authority to
rescind the imposition of any such fee in its discretion and to reimpose
the redemption fee from time to time upon reasonable notice. Any fee so
imposed shall be uniform as to all shareholders.
<PAGE>
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
Perritt MicroCap Opportunities Fund, Inc.
April 20, 1998
The undersigned constitutes and appoints Gerald W. Perritt, Michael
J. Corbett and Allison B. Hearst, and each of them singly, with power of
substitution, attorneys and proxies for and in the name and place of the
undersigned to appear and vote with the same effect as the undersigned at
the Special Meeting of Shareholders of Perritt MicroCap Opportunities
Fund, Inc. (the "Fund"), to be held at 120 South Riverside Plaza,
Conference Room - 14th Floor, Chicago, Illinois, on Monday, April 20, 1998
at 9:00 a.m. local time, and at any adjournments or postponements thereof,
all shares of stock of the Fund which the undersigned is entitled to vote
as follows:
(1) To approve the Proposed Advisory Agreement.
FOR [_] AGAINST [_] ABSTAIN [_]
(2) To approve an amendment to the Fund's Articles of Incorporation
to increase the permissible redemption fee on shares of the
Fund.
FOR [_] AGAINST [_] ABSTAIN [_]
This proxy will be voted as specified.
IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH PROPOSAL.
The signature on this proxy should
correspond exactly with the name of
the shareholder as it appears on the
proxy. If stock is issued in the name
of two or more persons, each should
sign the proxy. If a proxy is signed
by an administrator, trustee,
guardian, attorney or other fiduciary,
please indicate full title as such.
Dated , 1998
Signed
Signed
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF PERRITT
MICROCAP OPPORTUNITIES FUND, INC.
[_] Please check here if you WILL be
attending the meeting.
