Registration No. 33-16812
Investment Company Act Registration No. 811-05308
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 13 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 15 |X|
(Check appropriate box or boxes.)
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
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(Exact name of Registrant as Specified in Charter)
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
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(Address of Principal Executive Offices) (Zip Code)
(312) 669-1650
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(Registrant's Telephone Number, including Area Code)
Gerald W. Perritt
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
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(Name and Address of Agent for Services)
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Copy to:
Phillip J. Hanrahan
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
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It is proposed that this filing will become effective (check appropriate box)
___ Immediately upon filing pursuant to paragraph (b) of Rule 485
X on March 1, 1999 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box: |_| this post-effective amendment
designates a new effective date for a previously filed post-effective amendment.
<PAGE>
PERRITT
MicroCap Opportunities Fund, Inc.
Prospectus
March 1, 1999
Perritt MicroCap Opportunities Fund, Inc. seeks long-term capital appreciation
by investing mainly in common stocks of rapidly growing companies. In view of
this, the Fund can be subject to above-average risk.
Please read this Prospectus and keep it for further reference. It contains
important information about the Fund, its investments and the services it offers
to shareholders.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Perritt MicroCap Opportunities Fund, Inc.
120 S. Riverside Plaza
Suite 1745
Chicago, Illinois 60606
(312) 669-1650
Table of Contents
QUESTIONS TO ASK BEFORE INVESTING IN THE PERRITT MICROCAP
OPPORTUNITIES FUND..........................................................4
FEES AND EXPENSES............................................................6
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS...................................7
MANAGEMENT OF THE FUND.......................................................9
YEAR 2000....................................................................9
DETERMINING NET ASSET VALUE..................................................9
HOW TO PURCHASE SHARES......................................................10
REDEEMING SHARES............................................................11
DISTRIBUTIONS AND TAXES.....................................................11
FINANCIAL HIGHLIGHTS........................................................12
SHARE PURCHASE APPLICATION..................................................15
FOR MORE INFORMATION..................................................Back Cover
<PAGE>
Questions to Ask Before Investing in the Perritt MicroCap Opportunities Fund
What is the Fund's goal?
The Perritt MicroCap Opportunities Fund seeks long-term capital appreciation.
What is the Fund's investment strategy?
Generally, the Fund invests in the stocks of United States companies that have
equity market values between $30 million and $300 million at the time of
purchase (so-called micro-cap companies). The Fund invests in both value-priced
and aggressive growth stocks. Generally, Fund management seeks to invest in
micro-cap companies that: (1) have demonstrated above-average growth in revenues
and/or earnings; (2) possess relatively low levels of long-term debt; and (3)
have a high percentage of their shares owned by company management. Fund
management also seeks to invest in the stocks of companies that possess modest
price-to-sales ratios and price-earnings ratios that are below the company's
long-term annual growth rate. At times, the Fund may invest in "special
situations" such as companies that possess valuable patents, companies
undergoing restructuring and companies involved in large share repurchase
programs. Although the Fund seeks long-term capital appreciation, stocks may be
sold in the short-term for several reasons. These include: a company's equity
market value grows beyond $500 million; a company's financial condition
deteriorates to the point management believes that its long-term growth
prospects may be impaired; the company receives an offer from another company;
or a company's price/sales ratio or price-earnings multiple expands to the point
that management believes the company's stock is significantly overvalued.
However, during the last five years, the Fund's annual portfolio turnover rate
has averaged 54.2%, which corresponds to an average holding period of about two
years. Generally the Fund's portfolio contains 40 to 60 stocks.
What are the principal risks of investing in the Fund?
The Fund mainly invests in common stocks. The prices of stocks may decline for a
number of reasons. The price declines may be steep, sudden and/or prolonged. As
a consequence, investors in the Fund may lose money. These are risks that are
faced by all equity mutual fund investors.
Stocks of small companies involve additional risks. Small capitalization
companies typically have relatively lower revenues, limited product lines, lack
of management depth and a smaller share of the market for their products or
services than larger capitalization companies. Generally, the share prices of
small company stocks are more volatile than those of larger companies. Thus, the
Fund's share price may increase and decline by a greater percentage than the
share prices of funds that invest in the stocks of large companies. Also, the
returns of small company stocks may vary, sometimes significantly, from the
returns of the overall market. Finally, relative to large company stocks, the
stocks of small firms are thinly traded, and purchases and sales may result in
higher transactions costs. For these reasons, the Fund is a suitable investment
for that part of an investor's capital that can be exposed to above-average
risk.
<PAGE>
How has the Fund performed?
The bar chart and table that follow provide some indication of the risks of
investing in the Fund by showing changes in the Fund's performance from year to
year and how its average annual returns over various periods compare to those of
the Russell 2000 Index.
Please remember that the Fund's past performance is not necessarily an
indication of its future performance. It may perform better or worse in the
future.
Total Return
(per calendar year)
[graphic to be included in final printed copy]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.0% -16.8% 38.8% 6.5% 5.3% -5.1% 30.7% 18.0% 22.1% -4.3%
</TABLE>
Note: During the 10-year period shown on the bar chart, the Fund's highest total
return for a quarter was 26.6% (quarter ended September 30, 1997) and the lowest
total return for a quarter was -19.2% (quarter ended September 30, 1990).
<TABLE>
<CAPTION>
Average Annual Total
Return Past One Year Past 5 years Past 10 Years
(periods ending 12/31/98)
<S> <C> <C> <C>
Perritt MicroCap
Opportunities Fund -4.3% 11.3% 8.5%
Russell 2000 Index* -3.5% 10.3% 11.1%
* The Russell 2000 Index is a popular measure of the stock performance of small
companies. It is a market-value-weighted index of the stocks of companies ranked
number 1,001 through 3,000 on the basis of market capitalization.
</TABLE>
Fees and Expenses
The table below describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
SHAREHOLDERS FEES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)............................... None
Maximum Deferred Sales Charge (Load)................................ None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
And Distributions................................................. None
Redemption Fee (for shares held less than 90 days)..................2.0%(a)(b)
Exchange Fee........................................................ None
<PAGE>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)(c)
Before Fee
Waivers(d)
Management Fees..................................................... 1.00%
Distribution and/or Service (12b-1) Fees............................ None
Other Expenses...................................................... 0.96%
Total Annual Fund Operating Expenses................................ 1.96%
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Fee Waiver.......................................................... .21%
Net Expenses:....................................................... 1.75%
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(a) A fee of $12.00 is charged for each wire redemption.
(b) These fees are paid to the Fund.
(c) The expense information has been restated to reflect current fees.
(d) The Adviser is required to waive its advisory fee to the extent necessary to
ensure that the Fund's Total Annual Fund Operating Expenses do not exceed 1.75%
of the Fund's average daily net assets. The Adviser must continue the waivers
unless the shareholders of the Fund approve its discontinuation.
EXAMPLE
This 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 these periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
$178 $562 $985 $2,242
Investment Objective, Strategies and Risks
The Fund's investment objective is long-term capital appreciation. The Fund may
change its investment objective without obtaining shareholder approval. Please
remember that an investment objective is not a guarantee. An investment in the
Fund might not appreciate and investors may lose money.
Small equity capitalization firms (micro-cap companies) typically have equity
market values (share price multiplied by number of shares outstanding) below
$300 million. At times the Fund may invest in other equity-type securities such
as convertible bonds, preferred stocks and warrants to purchase common stock.
The Fund invests in the stocks of companies listed on national or regional
securities exchanges and stocks listed for trading on Nasdaq. The current income
return of the Fund will be low (or non-existent) because small companies
frequently need to retain all or most of their profits to finance growth.
3
<PAGE>
When selecting stocks for the Fund's portfolio, management utilizes a computer
data base of approximately 7,500 nationally traded companies. This list is
initially narrowed to the stocks of companies with equity market values greater
than $30 million and less than $300 million. Stocks with current prices
substantially below $5 per share are eliminated. This process reduces the
investment universe to approximately 1,500 companies.
The Fund's portfolio generally contains both "growth" and "value" stocks. Growth
stocks are those of companies with annual revenue and earnings growth rates that
are more than twice that of the growth rate of the U.S. economy. These stocks
generally are priced at relatively high multiples of revenues, earnings, and
book values. Value stocks, on the other hand, are considered to be those that
possess price-earnings multiples below their expected annual growth rates and/or
a price to revenues ratio that is below 1.0.
Under normal circumstances the Fund seeks to keep its annual portfolio turnover
ratio under 50%. The annual portfolio turnover ratio indicates changes in the
Fund's portfolio. For instance, a rate of 100% would result if all the
securities in the portfolio at the beginning of an annual period had been
replaced by the end of the period. The Fund's average security holding period
can be approximated by taking the reciprocal of its turnover ratio. For example,
a portfolio turnover ratio of 50%, would indicate an approximate security
holding period of two years. During the last five years, the Fund's annual
portfolio turnover rate has averaged 54.2%.
The Fund diversifies its investments. It will normally own 40 to 60 stocks of
companies operating in a number of industries. At the time of purchase, an
investment in the stocks of a single company will rarely exceed 3% of the Fund's
assets. Stocks periodically will be sold for several reasons. These include: (1)
a company's equity market value grows beyond $500 million, and the company is no
longer considered to be a micro-cap firm; (2) a company's financial condition
deteriorates to the point management believes that its long-term growth
prospects may be impaired; (3) the company receives a purchase offer from
another company; or (4) a company's stock becomes significantly "over-valued"
given its long-term growth prospects.
The Fund may take temporary defensive positions in response to adverse market,
economic, political or other conditions. This means the Fund will invest in
money market instruments (like U.S. Treasury Bills or commercial paper). When
the Fund is not taking a temporary defensive position, it still will hold from
1% to 5% of its assets in money market instruments so that it can pay its
expenses, satisfy redemption requests or take advantage of investment
opportunities.
Investments in the stocks of companies with small equity market values tend to
be speculative and involve greater risks than are customarily associated with
investments in the stocks of larger companies. Small companies may have limited
product lines and markets, may lack sufficient resources, may be unable to
generate sufficient cash from operations necessary for growth, and may find
external financing to be either unavailable or unavailable on favorable terms.
In addition, the frequency and volume of trading in small company securities is
4
<PAGE>
generally substantially less than is typical of larger companies. When making
larger sales, the Fund may have to sell securities at discounts from quoted
prices or may have to make a series of small sales over an extended period of
time. These transactions are accompanied by increased costs that may reduce net
investment returns. Finally, there are periods when investing in smaller
capitalization stocks fall out of favor with investors and smaller
capitalization stocks underperform.
The Fund is designed for investors with a long-term investment perspective and
is not suitable for investors who attempt to profit from short-term market
swings. In fact, the Fund assesses a 2% redemption fee for shares held 90 days
or less in an attempt to deter "market timing" investors from investing in the
Fund. The Fund is also not a suitable investment for investors who cannot accept
the relatively high portfolio volatility and other risks associated with
investing in small company stocks. Furthermore, there is no assurance that the
objective of the Fund will be realized or that any income will be earned. Since
the Fund's share price may fall below the initial purchase price, investors in
the Fund may lose a portion of their investment capital.
Management of the Fund
Perritt Capital Management, Inc. (the "Adviser") is the Fund's investment
adviser. The Adviser's address is:
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
The Adviser was incorporated as an Illinois corporation on July 8, 1987 and has
been the Fund's only investment adviser. The adviser is a wholly owned
subsidiary of Investment Information Services, Inc. ("IIS"). IIS was organized
in 1983 and is in the business of publishing Gerald Perritt's Mutual Fund Letter
(a monthly mutual fund advisory newsletter). At October 31, 1998, the Adviser
managed approximately $60 million in assets. As the investment adviser to the
Fund, the Adviser manages the investment portfolio for the Fund. It makes the
decisions as to which securities to buy and which to sell. The Fund pays the
Adviser an annual investment advisory fee equal to 1.0% of its average net
assets. Under the advisory agreement, the Adviser has agreed to reimburse the
Fund by foregoing a portion of its advisory fee if total Fund operating expenses
exceed 1.75% of average daily net assets.
Dr. Gerald W. Perritt is primarily responsible for the day-to-day management of
the Fund's portfolio and has been since the Fund's inception in August 1987. Dr.
Perritt is President and Chairman of IIS, President of the Adviser and President
and Treasurer of the Fund. He has authored several books on investing including
"Small Stocks, Big Profits," a book which discusses the benefits and risks of
investing in small firm stocks. Dr. Perritt received a doctorate in finance and
economics from the University of Kentucky in 1974. He has taught investments and
finance at a number of colleges and universities including: Babson College, the
University of Miami, Florida International University, Ball State University and
DePaul University in Chicago.
5
<PAGE>
Michael Corbett joined the Adviser in 1990 as a research analyst and is
currently vice-president of the Adviser. Mr. Corbett obtained a B.S. degree from
DePaul University. He was appointed co-portfolio manager of the Fund in 1996. He
has been a contributing columnist for Investment Horizons (a small company
advisory newsletter) and Gerald Perritt's Mutual Fund Letter, and is currently
working toward a Chartered Financial Analyst (CFA) designation.
Year 2000
The Fund is aware of the "Year 2000" issue. The AYear 2000" issue stems from the
use of a two-digit format to define the year in certain date-sensitive computer
application systems rather than the use of a four-digit format. As a result,
date-sensitive software programs could recognize the date using A00@ as the year
1900 rather than the year 2000. This could result in major systems or process
failures or the generation of erroneous data, which would lead to disruptions in
the Fund's business operations.
The Fund has no application systems of its own and is entirely dependent on its
service providers' systems and software. The Fund is working with its service
providers (including its investment adviser, administrator, transfer agent and
custodian) to identify and remedy any Year 2000 issues. However, the Fund cannot
guarantee that all Year 2000 issues will be identified and remedied, and the
failure to successfully identify and remedy all Year 2000 issues could result in
an adverse impact on the Fund.
Determining Net Asset Value
The price at which investors purchase and redeem shares of the Fund is called
its net asset value. The Fund calculates its net asset value as of the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time)
on each day the New York Stock Exchange is open for trading. The net asset value
per share is calculated by adding the value of all securities, cash or other
assets, subtracting liabilities, and dividing the remainder by the number of
shares outstanding.
Each security traded on a national stock exchange or the Nasdaq Stock Market is
valued at its last sale price on that exchange on the day of valuation.
Securities that have not traded on the day of valuation are valued at the mean
(average) of the then closing bid and ask prices. It values most money market
instruments it holds at their amortized cost. The Fund's net asset value can be
found daily in the mutual fund listings of many major newspapers under the
heading "Perritt MicroCap". The Fund's Nasdaq symbol is PRCGX.
The Fund will process purchase orders that it receives and accepts and
redemption orders that it receives prior to the close of regular trading on a
day in which the New York Stock Exchange is open at the net asset value
determined later that day. It will process purchase orders that it receives and
accepts and redemption orders that it receives after the close of regular
trading at the net asset value determined at the close of regular trading on the
next day the New York Stock Exchange is open.
6
<PAGE>
How to Purchase Shares
Minimum Investment Requirements
Initial purchase: $ 1000
Additional purchase: $ 50
Individual Retirement Account: $ 250
Tax deferred retirement account: $ 250
Uniform Gift to Minors Act: $ 250
Dividend reinvestment None
The Fund may change minimum investment requirements at any time.
How to Purchase Shares From the Fund
1. Read this Prospectus very carefully before you invest.
2. Complete the purchase application at the back of this Prospectus.
(Additional share purchase applications can be obtained by calling
1-800-331-8936.)
3. Make your check payable to "Perritt MicroCap Opportunities Fund." All
purchases must be made in U.S. dollars, and checks must be drawn on U.S.
banks. The Fund will not accept cash. Firstar Mutual Fund Services, LLC,
the Fund's transfer agent, will charge a $20 service fee when a check is
returned because of insufficient or uncollected funds or when payment is
stopped. The shareholder will also be responsible for any losses suffered
by the Fund as a result.
4. Mail the application and check to:
By First Class Mail
Perritt MicroCap Opportunities Fund
c/o Firstar Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53202-0701
By Overnight or Express Mail
Perritt MicroCap Opportunities Fund
c/o Firstar Mutual Fund Services
615 East Michigan Street
Milwaukee, WI 53202-5207
Please do not mail letters by overnight delivery service to the Post Office Box
address.
5. If you wish to open an account by wire, please call 1-800-332-3133 prior to
wiring funds in order to obtain a confirmation number and to ensure prompt
and accurate handling of funds. There is a $12 wire transfer fee. Funds
should be wired to:
Firstar Bank Milwaukee, N.A.
ABA #0750-00022
7
<PAGE>
Credit:
Firstar Mutual Fund Services
Account #112-950-027
For Further Credit:
(shareholder name)
(shareholder account number, if known)
You should then send a properly signed share purchase application marked
"FOLLOW-UP" to either of the addresses listed above. Please remember that
Firstar Bank Milwaukee, N.A. must receive your wired funds prior to the close of
regular trading on the New York Stock Exchange for you to receive same day
pricing. The Fund and Firstar Bank Milwaukee, N.A. are not responsible for the
consequences of delays resulting from the banking or Federal Reserve Wire
system, or from incomplete wiring instructions.
Purchases Through Financial Service Agents
Some broker-dealers may sell shares of the Fund. These broker-dealers may charge
investors a fee either at the time of purchase or redemption. The fee, if
charged, is retained by the broker-dealer and not remitted to the Fund or the
Adviser.
The Fund and/or the Adviser may enter into agreements with broker-dealers,
financial institutions or other service providers, such as Charles Schwab & Co.,
Inc., Waterhouse Securities or Jack White & Co. ("Servicing Agents") that may
include the Fund as an investment alternative in the programs they offer or
administer.
Servicing agents may:
1. Become shareholders of record of the Fund. This means all requests to
purchase additional shares and all redemption requests must be sent through the
Servicing Agent. This also means that purchases made through Servicing Agents
are not subject to the Fund's minimum purchase requirement.
2. Use procedures and impose restrictions that may be in addition to, or
different from, those applicable to investors purchasing shares directly from
the Fund.
3. Charge fees to their customers for the services they provide them. Also, the
Fund and/or the Adviser may pay fees to Servicing Agents to compensate them for
the services they provide their customers.
4. Be allowed to purchase shares by telephone with payment to follow the next
day. If the telephone purchase is made prior to the close of regular trading on
the New York Stock Exchange, it will receive the same day pricing.
5. Be authorized to accept purchase orders on the Fund's behalf. This means that
the Fund will process the purchase order at the net asset value which is
determined following the Servicing Agent's acceptance of the customer's order.
8
<PAGE>
If you decide to purchase shares through Servicing Agents, please carefully
review the program materials provided to you by the Servicing Agent. When you
purchase shares of the Fund through a Servicing Agent, it is the responsibility
of the Servicing Agent to place your order with the Fund on a timely basis. If
the Servicing Agent does not, or if it does not pay the purchase price to the
Fund within the period specified in its agreement with the Fund, it may be held
liable for any resulting fees or losses.
Other Information about Purchasing Shares of the Fund
The Fund may reject any share purchase application for any reason. The Fund will
not accept purchase orders made by telephone, unless they are from a Servicing
Agent which has an agreement with the Fund.
The Fund will not issue certificates evidencing shares purchased. The Fund will
send investors a written confirmation for all purchases of shares.
The Fund offers an automatic investment plan allowing shareholders to make
purchases on a regular and convenient basis. The Fund also offers the following
retirement plans:
Traditional IRA
Roth IRA
Education IRA
SEP-IRA
SIMPLE IRA
Defined Contribution Retirement Plan
Investors can obtain further information about the automatic investment plan and
the retirement plans by calling the Fund at 1-800-331-8936. The Fund recommends
that investors consult with a competent financial and tax advisor regarding the
retirement plans before investing through these plans.
Redeeming Shares
Shareholders may sell (redeem) their shares at any time. The redemption price
you receive will be equal to the net asset value next determined after the
Fund's transfer agent receives a request for redemption in proper form. The
value of your shares on redemption may be more or less than their original cost.
A liquidation charge of 2% of the amount of the redemption is applicable for
shares held less than 90 days. Requests for redemption by telephone or telegram
will not be honored. Questions regarding the proper form of redemption requests
should be directed to the Transfer Agent at 1-800-332-3133.
How to Redeem (Sell) Shares From the Fund
1. Prepare a letter of instructions containing: account number(s), the amount of
money or number of shares being redeemed, the names on the account, daytime
telephone number and additional information the Fund may require for redemptions
by corporations, executors,
9
<PAGE>
administrators, trustees, guardians, or others who hold shares in a fiduciary or
representative capacity.
2. Sign the letter of instructions exactly as the shares are registered. Joint
ownership accounts must be signed by all owners.
3. Have the signature(s) guaranteed in the following situations: (1) the
redemption involves more than $10,000, (2) the proceeds are to be paid to
someone other than the account holder(s), (3) the proceeds are to be sent to an
address other than the address of record, or (4) the Fund receives the request
within 15 days of an address change. The guarantor of a signature must be a
national bank or trust company, a member of the Federal Reserve System or a
member firm of a national securities exchange or any other financial institution
authorized to guarantee signatures. A notarized signature is not an acceptable
substitute for a signature guarantee.
4. Redemption requests from shareholders in an individual retirement account or
defined contribution retirement plan must include instructions regarding federal
income tax withholding. Redemption requests will be subject to withholding
unless the shareholder makes an election not to have federal income tax
withheld.
5. Send the letter containing redemption instructions to:
By First Class Mail
Perritt MicroCap Opportunities Fund
c/o Firstar Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53202-0701
By Overnight or Express Mail
Perritt MicroCap Opportunities Fund
c/o Firstar Mutual Fund Services
615 East Michigan Street
Milwaukee, WI 53202-5207
How to Redeem (Sell) Shares Through Servicing Agents
If your shares are held by a Servicing Agent (such as Charles Schwab & Co. Inc.,
Waterhouse Securities, or Jack White & Co.), you must redeem your shares through
the Servicing Agent. Contact the Servicing Agent for instructions on how to do
so.
Payment of Redemption Proceeds
1. If you redeem shares by mail, Firstar Mutual Fund Services will mail a check
in the amount of the redemption proceeds no later than the seventh day after it
receives the written request in proper form with all required information.
2. If you redeem shares through a Servicing Agent, you will receive the
redemption proceeds in accordance with the procedures established by the
Servicing Agent.
10
<PAGE>
Distributions and Taxes
The Fund distributes substantially all of its net investment income and capital
gains annually. Distributions are generally made in December. The Fund will
automatically reinvest on your behalf all dividends and distributions in
additional shares of the Fund unless you have elected to receive dividends and
distributions in cash. You may make this election on the share purchase
application or by writing to Firstar Mutual Fund Services, LLC.
The Fund's distributions, whether received in cash or additional shares of the
Fund, may be subject to federal and state income tax. These distributions may be
taxed as ordinary income and capital gains (which may be taxed at different
rates depending on the length of time the Fund holds the assets generating the
capital gains).
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate than an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). The information
has been audited by Checkers, Simon & Rosner LLP, whose report, along with the
Fund's financial statements, are included in the Annual Report, which is
available on request.
11
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Years Ended October 31
1998 1997 1996 1995 1994
Selected Per-Share Data
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.75 $14.33 $14.17 $11.89 $12.54
------ ------ ------ ------ ------
Income from investment operations:
Net Investment Income (loss) (0.17)a (0.05) (0.16) (0.13) (0.13)
Net realized and unrealized
(loss) gain on investments (3.55) 4.78 2.42 3.01 0.02
------ ---- ---- ---- ----
Total from Investment Operations (3.72) 4.73 2.26 2.88 (0.11)
------ ---- ---- ---- ------
Less Distributions
From net investment income (0.26) (0.04) (0.90) -- --
From net realized gains (2.00) (1.27) (1.20) (0.60) (0.54)
------ ------ ------ ------ ------
Total Distributions (2.26) (1.31) (2.10) (0.60) (0.54)
------ ------ ------ ------ ------
Net asset value, end of period $11.77 $17.75 $14.33 $14.17 $11.89
====== ====== ====== ====== ======
Total Return (23.83%) 35.95% 18.56% 25.60% (1.05%)
Ratios and Supplemental data
Net assets, end of period
(in thousands) $10,173 $24,831 $8,130 $6,729 $6,279
Ratio of expenses to average
net assets 1.81% 1.52% 1.92% 2.07% 2.00%
Ratio of net investment income (1.1%) (0.6%) (1.2%) (1.0%) (1.0%)
Portfolio turnover rate 24.0% 83.1% 58.0% 67.4% 39.2%
a: Net investment income per share has been calculated based on average shares outstanding during the period.
</TABLE>
12
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Perritt MicroCap Opportunities Fund, Inc. (Share Purchase Application)
Mail to:
Perritt MicroCap Opportunities Fund
c/o Firstar Bank Milwaukee, N.A.
P. O. Box 701
Milwaukee, WI 53201-0701
1. Registration of Shares
Owner (Individual, Corporation, Trustee or Custodian) Joint Owner
Social Security Number Phone Number
Address City State Zip
If more than one owner is listed above, then shares will be registered as joint
tenants with rights of survivorship and not as tenants in common, unless
otherwise instructed. UGMA accounts please list the custodian as owner, the
minor as joint owner; put the minor's Social Security Number in the space above.
2. Investment Information
This investment represents an:
___ Initial Purchase payable to: Perritt MicroCap Opportunities Fund $_____
___ Investment wired to Account #___________
3. Dividend Option
All income dividends and capital gains distributions will be reinvested in
additional shares as stated in the prospectus unless the item below is checked.
___ Please pay all income dividends and capital gains distributions in cash.
I (We) understand that certificates for shares purchased
(either initial or reinvested) will be issued only upon
request
4. Automatic Investment Plan
Please start my Automatic Investment Plan as described in the prospectus
beginning: Month _____ Year _____. I hereby instruct Firstar Mutual Fund
Services, LLC, Transfer Agent for Perritt MicroCap Opportunities Fund, to
automatically transfer $_____ (minimum $50) directly from my checking, NOW, or
savings account named below on the _____ (st/th/nd/rd) of each month or the
first business day thereafter. I understand that I will be assessed a $20 fee if
the automatic purchase cannot be made due to insufficient funds, stop payment,
or any other reason.
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Name(s) on Bank Account Bank Name
Bank Address Account Number
Signature of Signature of
Bank Account Owner Joint Owner
5. Systematic Withdrawals
___ I would like to withdraw from Perritt MicroCap Opportunities Fund
$_____ ($200 minimum) as follows: I would like to have payments made to
me on or about the ____ day of each month (circle ALL) or the months
that I have circled:
January February March April May June July August September
October November December
___ I would like to have payments automatically deposited to my bank
account. Complete bank account information below. (A check will be
mailed to the above address if this box is not checked.) To ensure
proper crediting of your bank account, please attach a voided check or
deposit slip. Name(s) on
Bank Account Bank Name
Bank Address Account Number
6. Signature and Certification by the Internal Revenue Service
I (We), the undersigned, have received a copy of the current prospectus of the
Perritt MicroCap Opportunities Fund and are purchasing Fund shares in accordance
with its provisions. I (We) further certify that the undersigned is of legal age
and has full legal capacity to make this purchase. The purchase price shall be
the net asset value next determined following receipt of the application by the
Fund, if the application is accepted. This application cannot be processed
unless accompanied by payment.
Under the penalty of perjury, I (we) certify that (1) the Social Security Number
of Taxpayer Identification Number shown on this form is my (our) correct
Taxpayer Identification Number, and (2) I am (we are) not subject to backup
withholding either because I (we) have not been not been notified by the
Internal Revenue Service (IRS) that I am (we are) subject to backup withholding
as a result of failure to report all interest or dividends, or that IRS has not
notified me (us) that I am (we are) no longer subject to backup withholding. The
IRS does not require your consent to any of this provision of the document other
than the certifications required to avoid backup withholding.
Signature of Owner Date Signature of Joint Owner (if any) Date
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FOR MORE INFORMATION
You can learn more about the Perritt MicroCap Opportunities Fund in the
following documents:
Statement of Additional Information (SAI).
The SAI contains more detailed information about the Fund. The Fund has filed a
current SAI with the Securities and Exchange Commission. The SAI is incorporated
by reference into (is legally a part of) this Prospectus.
Annual and Semi-Annual Reports to Shareholders.
These reports include a discussion of the market conditions and investment
strategies that significantly affected the performance of the Fund during its
last fiscal year.
To request a free copy of the current SAI or annual and semi-annual reports,
call the Fund, toll-free, at 1-800-331-8936 or 1-312-669-1650 or write to the
Fund at 120 S. Riverside Plaza, Suite 1745, Chicago, Illinois 60606.
Prospective investors and shareholders with questions about the Fund also may
call the above number or write to the above address.
You can review and copy information about Perritt MicroCap Opportunities Fund
(including the SAI) at the Securities and Exchange Commission's Public Reference
Room in Washington, D. C. (Please call 1-800-SEC-0330 for information on the
operation of the Public Reference Room). Reports and other information about the
Fund are also available at the Securities and Exchange Commission's Internet
site at http:/www.sec.gov, and copies of this information may be obtained
(duplicating fee required) by writing to:
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
Please refer to the Perritt MicroCap Opportunities Fund's Investment Company Act
File No., 811-05308, when seeking information about the Fund from the Securities
and Exchange Commission.
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======================================================================
STATEMENT OF ADDITIONAL INFORMATION
Dated March 1, 1999
======================================================================
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
Toll Free: (800) 332-3133
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of Perritt MicroCap Opportunities
Fund, Inc. dated March 1, 1999 and any supplement thereto. A copy of the
Prospectus may be obtained without charge from Perritt MicroCap Opportunities
Fund, Inc. at the address and telephone number set forth above.
The following financial statements are incorporated by reference to the
Annual Report, dated October 31, 1998, of Perritt MicroCap Opportunities Fund,
Inc. (File No. 811-05308) as filed with the Securities and Exchange Commission
on December 28, 1998.
Statement of Net Assets
Statement of Changes in Net Assets
Financial Highlights
Statement of Operations
Notes to Financial Statements
Independent Auditor's Report
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
TABLE OF CONTENTS
Page
FUND HISTORY AND CLASSIFICATION.............................................4
INVESTMENT OBJECTIVE........................................................4
INVESTMENT CONSIDERATIONS...................................................4
INVESTMENT RESTRICTIONS.....................................................5
RETIREMENT PLANS............................................................7
Individual Retirement Accounts.....................................7
Simplified Employee Pension Plan...................................8
SIMPLE IRA.........................................................8
Defined Contribution Plans.........................................9
OTHER SHAREHOLDER PLANS.....................................................9
Automatic Investment Plan..........................................9
Dividend Reinvestment Plan.........................................9
Systematic Withdrawal Plan........................................10
DIRECTORS AND OFFICERS.....................................................10
PRINCIPAL SHAREHOLDERS.....................................................12
INVESTMENT ADVISER.........................................................12
ALLOCATION OF PORTFOLIO BROKERAGE..........................................13
CUSTODIAN..................................................................15
DETERMINATION OF NET ASSET VALUE...........................................15
TAXES......................................................................16
STOCKHOLDER MEETINGS.......................................................17
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CAPITAL STOCK..............................................................18
MISCELLANEOUS..............................................................18
PERFORMANCE INFORMATION....................................................18
INDEPENDENT PUBLIC ACCOUNTANTS.............................................20
OTHER INFORMATION..........................................................20
EXHIBIT INDEX..............................................................25
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus dated March 1, 1999 and, if given or made, such
information or representations may not be relied upon as having been authorized
by Perritt MicroCap Opportunities Fund, Inc.
This Statement of Additional Information does not constitute an offer to sell
securities.
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FUND HISTORY AND CLASSIFICATION
Perritt MicroCap Opportunities Fund, Inc. (the "Fund") is an open-end,
diversified management investment company registered under the Investment
Company Act of 1940. The Fund was organized as a Maryland corporation on August
24, 1987. On February 2, 1998, the Fund changed its corporate name from Perritt
Capital Growth Fund, Inc. to Perritt MicroCap Opportunities Fund, Inc.
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital appreciation which
it seeks by investing primarily in a diversified portfolio of common stocks of
small, rapidly growing companies. The Fund will, under normal market conditions,
invest at least 80% of its assets in common stocks, securities convertible into
common stocks and other equity-type securities of firms whose equity market
value at the time of purchase is less than $300 million. The Fund may invest in
securities not listed on a national or regional securities exchange, but such
securities typically will have an established over-the-counter market. The Fund
does not intend to invest in any security which, at the time of purchase, is not
readily marketable. The Fund may, for temporary defensive purposes, invest
greater than 20% of its assets in money market securities, including U.S.
government obligations, certificates of deposit, bankers' acceptances,
commercial paper or cash and cash equivalents. Except for temporary defensive
purposes, the Fund will retain cash and cash equivalents only in amounts deemed
adequate for current needs and to permit the Fund to take advantage of
investment opportunities.
INVESTMENT CONSIDERATIONS
Because the Fund intends to invest to a substantial degree in common
stocks of smaller companies which are, in the opinion of Perritt Capital
Management, Inc., the Fund's investment adviser ("Adviser"), rapidly growing, an
investment in the Fund is subject to greater risks than those involved with
funds that invest in larger companies.
Investments in relatively small companies tend to be speculative and
volatile. Relatively small companies may lack depth in management on which to
rely should loss of key personnel occur. Relatively small companies also may be
involved in the development or marketing of new products or services, the market
for which may not have been established. Such companies could sustain
significant losses when projected markets do not materialize. Further, such
companies may have, or may develop, only a regional market for products or
services and may be adversely affected by purely local events. Moreover, such
companies may be insignificant factors in their industries and may become
subject to intense competition from larger companies.
Equity securities of relatively small companies frequently will be traded
only in the over-the-counter market or on regional stock exchanges and often
will be closely held with only a small proportion of the outstanding securities
held by the general public. In view of such factors, the Fund may assume
positions in securities with limited trading markets which
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are subject to wide price fluctuations. Therefore, the current net asset value
of the Fund may fluctuate significantly. Accordingly, the Fund should not be
considered suitable for investors who are unable or unwilling to assume the
risks of loss inherent in such a program, nor should an investment in the Fund,
by itself, be considered a balanced or complete investment program.
INVESTMENT RESTRICTIONS
In seeking to achieve its investment objectives, the Fund has adopted the
following restrictions which are matters of fundamental policy and cannot be
changed without approval by the holders of the lesser of:
(i) 67% of the Fund's shares present or represented at a meeting
of shareholders at which the holders of more than 50% of such shares are
present or represented; or
(ii) more than 50% of the outstanding shares of the Fund.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of assets
will not constitute a violation of that restriction.
The Fund may not:
1. Purchase the securities of any issuer if such purchase would
cause more than 5% of the value of the Fund's total assets to be invested
in securities of any one issuer (except securities of the United States
Government or any agency or instrumentality thereof), or purchase more
than 10% of the outstanding securities of any class or more than 10% of
the outstanding voting securities of any one issuer.
2. Purchase securities of any other investment company, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
3. Purchase or retain the securities of any issuer if those
officers or directors of the Fund or its investment adviser owning
individually more than 2 of 1% of the securities of such issuer together
own more than 5% of the securities of such issuer.
4. Borrow money except from banks for temporary or emergency
purposes (but not for the purpose of purchase of investments) and then
only in an amount not to exceed 5% of the value of a Fund's net assets at
the time the borrowing is incurred.
5. Invest in real estate (although the Fund may purchase
securities secured by real estate or interests therein, or securities
issued by companies which invest in real estate or interests therein),
commodities, commodities contracts or interests in oil, gas and/or
mineral exploration or development programs.
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6. Act as an underwriter of securities or participate on a joint
or joint and several basis in any trading account in any securities.
7. Invest in companies for the primary purpose of acquiring
control or management thereof.
8. Purchase securities on margin, except such short-term credits
as are necessary for the clearance of transactions and make short sales
of securities (except short sales against the box).
9. Pledge, mortgage, hypothecate or otherwise encumber any of its
assets, except as a temporary measure for extraordinary or emergency
purposes, and then not in excess of 15% of its assets taken as cost.
10. Concentrate more than 25% of the value of its total assets
(taken at market value at the time of each investment) in securities of
non-governmental issuers whose principal business activities are in the
same industry.
11. Invest in restricted securities or illiquid or other
securities without readily available market quotations, including
repurchase agreements.
12. Make loans, except that this restriction shall not prohibit
the purchase and holding of a portion of an issue of publicly distributed
debt securities.
13. Engage in the purchase and sale of put and call options on
portfolio securities or stock indexes except that the Fund may, subject
to the restrictions in Item 14 below, (i) write covered call options and
purchase covered put options on securities with respect to all of its
portfolio securities; (ii) purchase stock index put options for hedging
purposes; and (iii) enter into closing transactions with respect to such
options.
14. Purchase, sell or write options on portfolio securities or
stock indexes if, as a result thereof, (i) the aggregate market value of
all portfolio securities covering such options exceeds 25% of the Fund's
net assets; or (ii) the aggregate premiums paid for all options held
exceeds 5% of the Fund's net assets.
15. Purchase securities of any company having less than three
years continuous operation (including operations of any predecessors) if
such purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its assets.
16. Invest more than 5% of its total assets in warrants, whether
or not the warrants are listed on the New York or American Stock
Exchange, or more than 2% of the value of the assets of the Fund in
warrants which are not listed on those exchanges. Warrants acquired in
units or attached to securities are not included in this restriction.
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RETIREMENT PLANS
Shares of the Fund may be purchased in connection with many types of
tax-deferred retirement plans. Initial purchase payments in connection with
tax-deferred retirement plans must be $250. It is advisable for an individual
considering the establishment of a retirement plan to consult with an attorney
and/or an accountant with respect to the terms and tax aspects of the plan.
Additional details about these plans, application forms and plan documents may
be obtained by contacting the Fund.
Individual Retirement Accounts
Individual shareholders may establish their own tax-sheltered Individual
Retirement Accounts ("IRA"). The Fund offers three 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
shareholder is an "active participant" in an employer-sponsored retirement plan
and the shareholder's income. Distributions from a Traditional IRA will be taxed
at distribution except to the extent that the distribution represents a return
of the shareholder's own contributions for which the shareholder did not claim
(or was not eligible to claim) a deduction. Distributions prior to age 59 1/2
may be subject to an additional 10% tax applicable to certain premature
distributions. Distributions must commence by April 1 following the calendar
year in which the shareholder attains age 70 1/2. Failure to begin distributions
by this date (or distributions that do not equal certain minimum thresholds) may
result in adverse tax consequences.
Roth IRA. In a Roth IRA (sometimes known as an American Dream IRA),
amounts contributed to the IRA are taxed at the time of contribution, but
distributions from the IRA are not subject to tax if the shareholder has held
the IRA for certain minimum periods of time (generally, until age 59 1/2).
Shareholders whose incomes exceed 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 shareholder's contributions to the IRA.
The minimum distribution rules applicable to Traditional IRAs do not apply
during the lifetime of the shareholder. Following the death of the shareholder,
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 shareholder'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 contribution under a Roth IRA, and contributions to a Roth IRA reduce
the allowable contribution to a Traditional IRA.
Education IRA. In an Education IRA, contributions are made to an IRA
maintained on behalf of a beneficiary under age 18. The maximum annual
contribution is $500 per beneficiary. The contributions are not tax deductible
when made. However, if
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amounts are used for certain educational purposes, neither the contributor nor
the beneficiary of the IRA are taxed upon distribution. The beneficiary is
subject to income (and possible penalty taxes) on amounts withdrawn from an
Education IRA that are not used for qualified educational purposes. Shareholders
whose income exceeds certain limits are ineligible to contribute to an Education
IRA.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS. The applicant
generally has the right to revoke his account within seven days after receiving
the disclosure statement and obtain a full refund of his contributions. The
custodian may, in its discretion, hold the initial contribution uninvested until
the expiration of the seven-day revocation period. The custodian does not
anticipate that it will exercise its discretion but reserves the right to do so.
Simplified Employee Pension Plan
A Traditional IRA may also be used in conjunction with a Simplified
Employee Pension Plan ("SEP-IRA"). A SEP-IRA is established through execution of
Form 5305-SEP together with a Traditional IRA established for each eligible
employee. Generally, a SEP-IRA allows an employer (including a self-employed
individual) to purchase shares with tax deductible contributions not exceeding
annually for any one participant 15% of compensation (disregarding for this
purpose compensation in excess of $160,000 per year). The $160,000 compensation
limit applies for 1999 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 shareholder'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 shareholder
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 1999 and is
adjusted periodically for cost of living increases. In addition, the employer
will contribute certain amounts to the shareholder'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
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established by executing Form 5304-SIMPLE together with an IRA established for
each eligible employee.
Defined Contribution Plans
A prototype defined contribution retirement plan is available for
employers, including self-employed individuals, who wish to purchase shares of
the Fund with tax-deductible contributions not exceeding annually for any one
participant the lesser of $30,000 or 25% of earned income.
The defined contribution plan also contains a cash or deferred
arrangement which the employer may adopt. The cash or deferred arrangement is
intended to satisfy the requirements of Section 401(k) of the Internal Revenue
Code and allows eligible employees to reduce their compensation and have such
amount contributed to the plan on their behalf. An employer may also make
matching contributions on behalf of participating employees.
OTHER SHAREHOLDER PLANS
Automatic Investment Plan
The Fund offers an Automatic Investment Plan, which may be established at
any time. By participating in the Automatic Investment Plan, shareholders may
automatically make purchases of shares of the Fund on a regular, convenient
basis. A shareholder may elect to make automatic deposits on any date specified
by the shareholder each month. There is a $50 minimum for each automatic
transaction.
Under the Automatic Investment Plan, shareholders' banks or other
financial institutions debit pre-authorized amounts drawn on their accounts each
month and apply such amounts to the purchase of shares of the Fund. The
Automatic Investment Plan can be implemented with any financial institution that
is a member of the Automated Clearing House. No service fee is charged to
shareholders for participating in the Automatic Investment Plan. An application
to establish the Automatic Investment Plan may be obtained from the Fund. The
Fund reserves the right to suspend, modify or terminate the Automatic Investment
Plan, without notice.
Dividend Reinvestment Plan
Unless a shareholder elects otherwise by written notice to the Fund, all
income dividends and all capital gains distributions payable on shares of the
Fund will be reinvested in additional shares of the Fund at the net asset value
in effect on the dividend or distribution payment date. The Fund acts as the
shareholder's agent to reinvest dividends and distributions in additional shares
and hold for his/her account the additional full and fractional shares so
acquired. A shareholder may at any time change his/her election as to whether to
receive his/her dividends and distribution in cash or have them reinvested by
giving written notice of such change of election to the Fund. Such change of
election applies to dividends and
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distributions the record dates of which fall on or after the date that the Fund
receives the written notice.
Systematic Withdrawal Plan
A shareholder who owns Fund shares worth at least $10,000 at the current
net asset value may, by completing an Application which may be obtained from the
Fund, create a Systematic Withdrawal Plan from which a fixed sum will be paid to
him at regular intervals. To establish the Systematic Withdrawal Plan, the
shareholder deposits his Fund shares with the Fund and appoints it as his agent
to effect redemptions of Fund shares held in his account for the purpose of
making monthly or quarterly withdrawal payments of a fixed amount to him out of
his account. Fund shares deposited by the investor in his account need not be
endorsed or accompanied by a stock power if registered in the same name as his
account; otherwise, a properly executed endorsement or stock power, obtained
from any bank, broker-dealer or the Fund is required. The investor's signature
should be guaranteed by a bank or a member firm of a national stock exchange.
The minimum amount of a withdrawal payment is $200. These payments will
be made out of the proceeds of periodic redemption of shares in the account at
net asset value. Redemptions will be made on the fifth business day of each
month or, if that day is a holiday, on the next preceding business day.
Establishment of a Systematic Withdrawal Plan constitutes an election by the
shareholder to reinvest in additional Fund shares, at net asset value, all
income dividends and capital gains distributions payable by the Fund on the
shares held in such Account, and shares so acquired will be added to such
account. The shareholder may deposit additional Fund shares in his account at
any time.
Withdrawal payments cannot be considered to be yield or income on the
shareholder's investment, since portions of each payment will normally consist
of a return of capital. Depending on the size or the frequency of the
disbursements requested and the fluctuation in the value of the Fund's
portfolio, redemptions for the purpose of making such disbursements may reduce
or even exhaust the shareholder's account.
DIRECTORS AND OFFICERS
The directors and officers of the Fund together with information as to
their principal business occupations during the last five years and other
information are shown below. The address of Dr. Perritt, Mr. Corbett and Mr.
Laatz is 120 South Riverside Plaza, Suite 1745, Chicago, Illinois 60606. The
address of David S. Maglich is c/o Fergeson, Skipper et. al., 1515 Ringling
Blvd., Suite 1000, Sarasota, Florida 34236. The address of Dianne C. Click is
514 North Montana Avenue, Bozeman, Montana 59715. In the list below, the Fund's
directors who are considered "interested persons" as defined in Section 2(a)(19)
of the Investment Company Act of 1940 are noted with an asterisk(*). These
directors are referred to as inside directors by virtue of their position as an
officer and director of the Fund's investment adviser or their being a member of
the immediate family of an affiliate of the Fund. Dr. Perritt and Mr. Maglich
have served as directors since the Fund's inception. Ms. Dianne Click has served
as a director since February 1995.
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*Gerald W. Perritt, President, Treasurer and Director of the Fund
Dr. Perritt, age 57, has been President and a director of the Fund since
its inception in August 1987. Dr. Perritt is also the President of Perritt
Capital Management, Inc., the investment adviser to the Fund, and Chairman of
Investment Information Services, Inc., a publisher of financial newsletters and
other financial publications. Dr. Perritt founded Investment Information
Services, Inc. in 1983. Prior thereto, he was Executive Director of the American
Association of Individual Investors, a not-for-profit organization formed to
educate the public about the financial and investment marketplace.
Michael J. Corbett, Vice President of the Fund
Mr. Corbett, age 34, has been a Vice President of the Fund since March
1991, Vice President of the Adviser since February 1997 and the Senior
Securities Analyst of the Adviser since October 1989. He is currently working
for his CFA (chartered financial analyst), and has a Bachelor's of Science
degree from DePaul University in Chicago, Illinois. Prior to October, 1989, Mr.
Corbett worked in the Options Department at Charles Schwab & Co. and was a
student at DePaul University in Chicago, Illinois, where he received a Bachelor
of Science degree in finance.
Robert A. Laatz, Vice President and Secretary of the Fund
Mr. Laatz, age 54, has been a Vice President of the Fund since November
1997, Secretary since November, 1998 and an associate since May 1997. He holds a
series 7, 63 and 24 license. Prior to May 1997, he was a financial and
operations principal for J.B. Richards Securities Corp., a position he had held
since July 1980. Mr. Laatz attended the University of Illinois, Urbana.
David S. Maglich, Director
Mr. Maglich, age 42, has been a director of the Fund since its inception
in August 1987. Mr. Maglich is a Shareholder with the law firm of Fergeson,
Skipper et. al. and has been employed with such firm since April 1989. He holds
a Bachelor's of Science degree from Florida State University and a law degree
from Stetson College of Law.
Dianne Chaykin Click, Director
Ms. Click, age 36, has been the sole proprietor of The Marketing Arm., a
direct mail marketing consulting firm to financial institutions, since 1990. She
is also a realtor in Bozeman, Montana with the firm of Gallatin River Realty.
She holds a Bachelor of Science degree in Marketing from the University of
Miami, Florida.
The following table provides information concerning the compensation paid
to directors of the Fund for the fiscal year ended October 31, 1998.
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<TABLE>
<CAPTION>
Total
Compensation
Aggregate Pension or Retirement Estimated Annual from Fund and
Compensation Benefits Accrued as Benefits Upon Fund Complex
Name of Person from Fund Part of Fund Expenses Retirement Paid to Directors
-------------- --------- --------------------- ---------- -----------------
<S> <C> <C> <C> <C>
Dianne Chaykin Click -0- -0- -0- -0-
David S. Maglich $2,500 -0- -0- $2,500
Gerald W. Perritt -0- -0- -0- -0-
</TABLE>
As of February 1, 1999, all officers and directors of the Fund owned in
the aggregate 5,981 shares of the Fund representing 0.70% of the Fund's then
issued and outstanding shares.
PRINCIPAL SHAREHOLDERS
At February 1, 1999, John W. Galbraith, 360 Central Avenue, Suite 1300,
St. Petersburg, Florida 33701, owned of record and beneficially 95,502 shares of
the Fund or 11.1% of the then outstanding shares. Other than the foregoing, the
Fund was not aware of any person who, as of February 1, 1999, owned of record or
beneficially 5% or more of the shares of the Fund.
INVESTMENT ADVISER
Perritt Capital Management, Inc., 120 South Riverside Plaza, Suite 1745,
Chicago, Illinois (the "Adviser"), currently serves as investment adviser to the
Fund pursuant to an investment advisory agreement dated May 1, 1998 (the
"Advisory Agreement"). The Adviser is a wholly owned subsidiary of Investment
Information Services, Inc., an Illinois corporation ("IIS"). Dr. Gerald W.
Perritt, President of the Adviser, owns 60% of the outstanding common stock of
IIS and controls both IIS and the Adviser.
The Advisory Agreement is required to be approved annually by the Board
of Directors of the Fund or by vote of a majority of the Fund's outstanding
voting securities. In addition, in either case, each annual renewal must be
approved by the vote of a majority of the Fund'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 is terminable without penalty, on 60 days' written notice, by
the Board of Directors of the Fund, 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. The Advisory Agreement was last
approved by the shareholders of the Fund on April 20, 1998 and by the Board of
Directors on November 14, 1998.
Under the terms of the Advisory Agreement, the Adviser manages the Fund's
investments subject to the supervision of the Fund's Board of Directors. The
Adviser
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<PAGE>
is responsible for investment decisions and supplies investment research and
portfolio management. At its expense, the Adviser provides office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Fund. The Adviser, at its expense, places all orders for the
purchase and sale of the Fund's portfolio securities.
Except for expenses assumed by the Adviser as set forth above, the Fund
is responsible for all its other expenses including, without limitation,
interest charges, taxes, brokerage commissions and similar expenses, expenses of
issue, sale, repurchase or redemption of shares, expenses of registering or
qualifying shares for sale, the expenses for printing and distribution costs of
prospectuses and quarterly financial statements mailed to existing shareholders,
charges of custodians, transfer agent fees (including the printing and mailing
of reports and notices to shareholders), fees of registrars, fees for auditing
and legal services, fees for clerical services related to recordkeeping and
shareholder relations (including determination of net asset value), the cost of
stock certificates and fees for directors who are not "interested persons" of
the Adviser.
As compensation for its services, the Fund pays to the Adviser a monthly
advisory fee at the annual rate of 1.0% of the average daily net asset value of
the Fund. Prior to May 1, 1998, the annual rate was 0.70% of the average daily
net asset value of the Fund. The Adviser received $53,327, $83,934 and $115,147
in management fees for fiscal years 1996, 1997 and 1998, respectively.
The Advisory Agreement requires the Adviser to reimburse the Fund in the
event that the expenses and charges payable by the Fund in any fiscal year,
including the advisory fee but excluding taxes, interest, brokerage commissions
and similar fees, exceed that percentage of the average net asset value of the
Fund for such year, as determined by valuations made as of the close of each
business day of the year, which is the most restrictive percentage provided by
the state laws of the various states in which the Fund's common stock is
qualified for sale. If the states in which the Fund's common stock is qualified
for sale impose no restrictions, the Adviser will waive its advisory fee to the
extent that the Fund's total operating expenses exceed 1.75% of the Fund's
average net assets. As of the date of this Statement of Additional Information,
no such state law provision was applicable to the Fund. Reimbursement of
expenses in excess of the applicable limitation will be made on a monthly basis
and will be paid to the Fund by reduction of the Adviser's fee, subject to later
adjustment month by month for the remainder of the Fund's fiscal year. The
Adviser may from time to time, at its sole discretion, reimburse the Fund for
expenses incurred in addition to the reimbursement of expenses in excess of
applicable limitations. During the fiscal year ended October 31, 1998, the
Adviser did not reimburse the Fund for any expenses.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made by the Adviser
subject to review by the Fund's Board of Directors. In placing purchase and sale
orders for portfolio securities for the Fund, it is the policy of the Adviser to
seek the best execution of orders at the most favorable price in light of the
overall quality of brokerage and research services provided, as described in
this and the following paragraph. In selecting brokers to
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<PAGE>
effect portfolio transactions, the determination of what is expected to result
in best execution at the most favorable price involves a number of largely
judgmental considerations. Among these are the Adviser's evaluation of the
broker's efficiency in executing and clearing transactions, block trading
capability (including the broker's willingness to position securities) and the
broker's financial strength and stability. The most favorable price to the Fund
means the best net price without regard to the mix between purchase or sale
price and commission, if any. Over-the-counter securities are generally
purchased and sold directly with principal market makers who retain the
difference in their cost in the security and its selling price. In some
instances, better prices may be available from non-principal market makers who
are paid commissions directly. While some brokers with whom the Fund effects
portfolio transactions may recommend the purchase of the Fund's shares, the Fund
may not allocate portfolio brokerage on the basis of recommendations to purchase
shares of the Fund.
In allocating brokerage business for the Fund, the Adviser may take into
consideration the research, analytical, statistical and other information and
services provided by the broker, such as general economic reports and
information, reports or analyses of particular companies or industry groups,
market timing and technical information, and the availability of the brokerage
firm's analysts for consultation. While the Adviser believes these services have
substantial value, they are considered supplemental to the Adviser's own efforts
in the performance of its duties under the Advisory Agreement. Other clients of
the Adviser may indirectly benefit from the availability of these services to
the Adviser, and the Fund may indirectly benefit from services available to the
Adviser as a result of transactions for other clients.
Section 28(e) of the Securities Exchange Act of 1934 ("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).
The Agreement provides that the Adviser may cause the Fund to pay a
broker which provides brokerage and research services to the Adviser a
commission for effecting a securities transaction in excess of the amount
another broker would have charged for effecting the transaction, if (a) the
Adviser determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker viewed in terms of either the particular transaction or the
Adviser's overall responsibilities with respect to the Fund and the other
accounts as to which he exercises investment discretion, (b) such payment is
made in compliance with the provisions of Section 28(e), other applicable state
and federal laws, and the Advisory Agreement 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 investment advisory fee paid
by the Fund
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<PAGE>
under the Advisory Agreement is not reduced as a result of the Adviser's receipt
of research services.
The Adviser places portfolio transactions for other advisory accounts.
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. In the opinion of the Adviser, it is not possible to measure
separately the benefits from research services to each of the accounts
(including the Fund) managed by the Adviser. 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, in the opinion of the
Adviser, 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, the size of investment commitments
generally held, and opinions of the persons responsible for recommending the
investment.
For the one year periods ended October 31, 1996, 1997, and 1998, the Fund
paid brokerage commissions in the amounts of $20,352, $47,032, and $26,321,
respectively.
CUSTODIAN
Firstar Bank Milwaukee, N.A., 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, acts as custodian for the Fund. As such, Firstar Bank
Milwaukee, N.A. holds all securities and cash of the Fund, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as directed by
officers of the Fund. Firstar Bank Milwaukee, N.A. does not exercise any
supervisory function over the management of the Fund, the purchase and sale of
securities or the payment of distributions to stockholders. Firstar Mutual Fund
Services, LLC, an affiliate of Firstar Bank Milwaukee, N.A., acts as the Fund's
transfer agent and dividend disbursing agent.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund is determined as of the close of trading
on each day the New York Stock Exchange is open for trading. The Fund does not
determine net asset value on days the New York Stock Exchange is closed and at
other times described in the Prospectus. The New York Stock Exchange is closed
on New Year's Day, Dr. Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Additionally, if any of the aforementioned holidays
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<PAGE>
falls on a Sunday, the New York Stock Exchange will not be open for trading on
the succeeding Monday, unless unusual business conditions exist, such as the
ending of a monthly or the yearly accounting period. If any of the
aforementioned holidays falls on a Saturday, the Exchange will not be open for
trading on the preceding Friday. The New York Stock Exchange also may be closed
on national days of mourning.
The net asset value per share is calculated by adding the value of all
securities, cash or other assets, subtracting liabilities, and dividing the
remainder by the number of shares outstanding. Each security traded on a
national stock exchange is valued at its last sale price on that exchange on the
day of valuation or, if there are no sales that day, at the mean between the
then current closing bid and asked prices. Each over-the-counter security for
which the last sale price on the day of valuation is available from the Nasdaq
Stock Market is valued at that price. All other over-the counter securities for
which quotations are available are valued at the mean between the then closing
bid and asked prices. Other assets and securities are valued at a fair value
determined in good faith by the Board of Directors. High quality debt securities
having maturities of less than 60 days will be valued by the amortized cost
method.
TAXES
The Fund annually will endeavor to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code, as amended. The Fund
has so qualified in each of the fiscal years. If the Fund fails to qualify as a
regulated investment company under Subchapter M in any fiscal year, it will be
treated as a corporation for federal income tax purposes. As such the Fund would
be required to pay income taxes on its net investment income and net realized
capital gains, if any, at the rates generally applicable to corporations.
Shareholders of the Fund would not be liable for income tax on the Fund's net
investment income or net realized capital gains in their individual capacities.
Distributions to shareholders, whether from the Fund's net investment income or
net realized capital gains, would be treated as taxable dividends to the extent
of current or accumulated earnings and profits of the Fund.
Dividends from the Fund's net investment income and distributions from
the Fund's net realized short-term capital gains are taxable to shareholders as
ordinary income, whether received in cash or in additional Fund shares. The 70%
dividends-received deduction for corporations will apply to dividends from the
Fund's net investment income, subject to proportionate reductions if the
aggregate dividends received by the Fund from domestic corporations in any year
are less than 100% of the Fund's net investment company taxable distributions.
Any dividend or capital gains distribution paid shortly after a purchase
of Fund shares will have the effect of reducing the per share net asset value of
such shares by the amount of the dividend or distribution. Furthermore, if the
net asset value of the Fund shares immediately after a dividend or distribution
is less than the cost of such shares to the shareholder, the dividend or
distribution will be taxable to the shareholder even though it results in a
return of capital to him.
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<PAGE>
The Fund may be required to withhold Federal income tax at a rate of 31%
("backup withholding") from dividend payments and redemption proceeds if a
shareholder fails to furnish the Fund with his social security or other tax
identification number and certify under penalty of perjury that such number is
correct and that he is not subject to backup withholding due to the
underreporting of income. The certification form is included as part of the
share purchase application and should be completed when the account is opened.
This section is not intended to be a full discussion of present or
proposed federal income tax laws and the effects of such laws on an investor.
Investors are urged to consult their own tax advisers for a complete review of
the tax ramifications of an investment in the Fund.
STOCKHOLDER MEETINGS
The Maryland General Corporation Law permits registered investment
companies, such as the Fund, to operate without an annual meeting of
stockholders under specified circumstances if an annual meeting is not required
by the Investment Company Act of 1940. The Fund has adopted the appropriate
provisions in its Bylaws and may, at its discretion, not hold an annual meeting
in any year in which the election of directors is not required to be acted on by
stockholders under the Investment Company Act of 1940.
The Fund's Bylaws also contain procedures for the removal of directors by
its stockholders. At any meeting of stockholders, duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the holders
of a majority of the votes entitled to be cast thereon, remove any director or
directors from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed directors.
Upon the written request of the holders of shares entitled to not less
than ten percent (10%) of all the votes entitled to be cast at such meeting, the
Secretary of the Fund shall promptly call a special meeting of stockholders for
the purpose of voting upon the question of removal of any director. Whenever ten
or more stockholders of record who have been such for at least six months
preceding the date of application, and who hold in the aggregate either shares
having a net asset value of at least $25,000 or at least one percent (1%) of the
total outstanding shares, whichever is less, shall apply to the corporation's
Secretary in writing, stating that they wish to communicate with other
stockholders with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request which
they wish to transmit, the Secretary shall within five business days after such
application either: (1) afford to such applicants access to a list of the names
and addresses of all stockholders as recorded on the books of the Fund; or (2)
inform such applicants as to the approximate number of stockholders of record
and the approximate cost of mailing to them the proposed communication and form
of request.
If the Secretary elects to follow the course specified in clause (2) of
the last sentence of the preceding paragraph, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be mailed
and of the reasonable expenses of mailing, shall, with reasonable promptness,
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<PAGE>
mail such material to all stockholders of record at their addresses as recorded
on the books unless within five business days after such tender the Secretary
shall mail to such applicants and file with the Securities and Exchange
Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Board of Directors to the effect
that in their opinion either such material contains untrue statements of fact or
omits to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the Securities and Exchange Commission may, and if
demanded by the Board of Directors or by such applicants shall, enter an order
either sustaining one or more of such objections or refusing to sustain any of
them. If the Securities and Exchange Commission shall enter an order refusing to
sustain any of such objections, or if, after the entry of an order sustaining
one or more of such objections, the Securities and Exchange Commission shall
find, after notice and opportunity for hearing, that all objections so sustained
have been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness after the
entry of such order and the renewal of such tender.
CAPITAL STOCK
The Fund is a corporation organized under the laws of the State of
Maryland and was incorporated on August 24, 1987. The Fund has 20,000,000 shares
of authorized capital stock, $.01 par value per share. Each share has one vote
and all shares participate equally in dividends and other distributions by the
Fund and in the residual assets of the Fund in the event of liquidation.
Fractional shares have the same rights proportionately as do full shares. Shares
of the Fund have no preemptive rights and no conversion or subscription rights.
Stockholders are entitled to redeem shares.
Certificates for shares held in an investor's account will be issued only
upon written request, but the investor will be the record owner of all shares in
his account with full stockholder rights.
MISCELLANEOUS
A stockholder's account with the Fund may be terminated by the Fund on
not less than 30 days' notice if, at the time of any transfer or redemption of
shares in the account, the value of the remaining shares in the account, at the
current offering price, falls below $500. Upon any such termination, the shares
will be redeemed at the then current net asset value and a check for the
proceeds of redemption sent within seven days of such redemption.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders, the
Fund may compare its performance to that of other mutual funds including funds
with similar
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<PAGE>
investment objectives and to other relevant indices published by recognized
mutual fund statistical rating services or publications of general interest such
as "Forbes" or "Money". For example, the Fund may compare its performance to
that of other growth or aggressive growth mutual funds and to the mutual fund
industry as a whole (excluding money market funds), as compiled by Lipper
Analytical Services, Inc. In addition, the Fund may compare its performance to
that of recognized stock market indicators including, but not limited to, the
Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average. The Fund
may also compare its performance to the AMEX Market Value Index and the Nasdaq
Composite Index. Performance comparisons should not be considered as
representative of the future performance of the Fund.
The Fund may cite its performance in the form of a total return over
specified periods. The Fund's total return for any specified period of time is
calculated by assuming the purchase of shares of the Fund at the offering price
at the beginning of the period. Each dividend or other distribution paid by the
Fund during the period is assumed to have been reinvested in additional shares
of the Fund at net asset value on the reinvestment date. The number of shares
thereby accumulated are valued at the end of the period.
The percentage increase is determined by subtracting the initial value of
the investment from the ending value and dividing the remainder by the initial
value.
The Fund may also cite its performance in the form of an average
annualized compounded return for a specified period of time. The average annual
compounded return for the Fund is the return which, if applied to an initial
investment and compounded over the given period, would result in the value of
the investment at the end of the period.
The average annual return is computed by finding the average annual
compounded rates of return over specified 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 $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1000 payment made at the beginning of the
stated periods at the end of the stated
periods.
The Fund's average annual compounded returns for the one, three and five year
periods ended October 31, 1998 and for the period April 11, 1988 (inception of
the Fund) to October 31, 1998 were (23.83%), 7.08%, 8.82% and 7.23%,
respectively. These figures are historical. An investor may have a gain or loss
when his/her shares are sold.
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<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Checkers, Simon & Rosner LLP, Chicago, Illinois, audited the Fund's
financial statements for the fiscal year ended October 31, 1998 and have been
selected as the Fund's accountants for fiscal year 1999.
OTHER INFORMATION
Item 23. Exhibits
(a) Registrant's Articles of Incorporation, as amended. (1)
(b) Registrant's By-Laws, as amended. (1)
(c) None
(d) Investment Advisory Agreement. (1)
(e) None
(f) None
(g) Custodian Agreement with Firstar Bank Milwaukee, N.A. (sucessor to
Firstar Trust Company) (1)
(h) Shareholder Servicing Agent Agreement (1)
(i) Opinion of Foley & Lardner, counsel for Registrant
(j) Consent of Checkers, Simon & Rosner LLP
(k) None
(l) Subscription Agreement of Gerald W. Perritt (1)
(m) None
(n) Financial Data Schedule
(o) None
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(1) Previously filed as an exhibit to Post-Effective Amendment No. 11 to the
Registration Statement and incorporated by reference thereto.
Post-Effective Amendment No. 11 was filed on February 27, 1998 and its
accession number is 0000897069-98-000117.
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<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant
Registrant neither controls any person nor is under common control with
any other person.
Item 25. Indemnification
Pursuant to the authority of the Maryland General Corporation Law,
particularly Section 2-418 thereof, Registrant's Board of Directors has adopted
the following By-Law which is in full force and effect and has not been modified
or cancelled:
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate representatives
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by them in connection with the
defense of any action, suit or proceeding, or threat or claim of such action,
suit or proceeding, whether civil, criminal, administrative, or legislative, no
matter by whom brought, or in any appeal in which they or any of them are made
parties or a party by reason of being or having been a corporate representative,
if the corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation and
with respect to any criminal proceeding, if he had no reasonable cause to
believe his conduct was unlawful provided that the corporation shall not
indemnify corporate representatives in relation to matters as to which any such
corporate representative shall be adjudged in such action, suit or proceeding to
be liable for gross negligence, willful misfeasance, bad faith, reckless
disregard of the duties and obligations involved in the conduct of his office,
or when indemnification is otherwise not permitted by the Maryland General
Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that indemnification of
the corporate representative is proper because he has met the applicable
standard of conduct set forth in paragraph A. Such determination shall be made:
(i) by the board of directors, by a majority vote of a quorum which consists of
directors who were not parties to the action, suit or proceeding, or if such a
quorum cannot be obtained, then by a majority vote of a committee of the board
consisting solely of two or more directors, not, at the time, parties to the
action, suit or proceeding and who were duly designated to act in the matter by
the full board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel selected by
the board of directors or a committee of the board by vote as set forth in (i)
of this paragraph, or, if the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be established, by a majority vote of
the full board in which directors who are parties to the action, suit or
proceeding may participate.
C. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall create a rebuttable presumption that the person was guilty of willful
misfeasance, bad faith, gross
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<PAGE>
negligence or reckless disregard to the duties and obligations involved in the
conduct of his or her office, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation of
and/or presentation of the defense of a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized in the manner provided in Section
2-418(F) of the Maryland General Corporation Law upon receipt of: (i) an
undertaking by or on behalf of the corporate representative to repay such amount
unless it shall ultimately be determined that he or she is entitled to be
indemnified by the corporation as authorized in this bylaw; and (ii) a written
affirmation by the corporate representative of the corporate representative's
good faith belief that the standard of conduct necessary for indemnification by
the corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
these bylaws, any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person subject
to the limitations imposed from time to time by the Investment Company Act of
1940, as amended.
F. This corporation shall have power to purchase and maintain insurance
on behalf of any corporate representative against any liability asserted against
him or her and incurred by him or her in such capacity or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under this bylaw provided that no
insurance may be purchased or maintained to protect any corporate representative
against liability for gross negligence, willful misfeasance, bad faith or
reckless disregard of the duties and obligations involved in the conduct of his
or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or served
another corporation, partnership, joint venture, trust or other enterprise in
one of these capacities at the request of the corporation and who, by reason of
his or her position, is, was, or is threatened to be made, a party to a
proceeding described herein.
Insofar as indemnification for and with respect to liabilities arising
under the Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or controlling
person or Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Registrant will, unless in
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<PAGE>
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
Incorporated by reference to the information contained under "MANAGEMENT
OF THE FUND" in the Prospectus and under "DIRECTORS AND OFFICERS OF THE FUND" in
the Statement of Additional Information, all pursuant to Rule 411 under the
Securities Act of 1933.
Item 27. Principal Underwriters
Registrant has no principal underwriters.
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 and the rules promulgated
thereunder are in the physical possession of Registrant's Treasurer, Gerald W.
Perritt, at Registrant's corporate offices, 120 S. Riverside Plaza, Suite 1745,
Chicago, Illinois 60606.
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
The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
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<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 of this Amended Registration Statement under
Rule 485(b) under the Securities Act and has duly caused this Amended
Registration Statement to be signed on its behalf by the undersigned, duly
authorized, in the City of Chicago and State of Illinois on the 25th day of
February, 1999.
PERRITT MICROCAP OPPORTUNITIES
FUND, INC.
By:/s/ Gerald W. Perritt
Gerald W. Perritt
President
Pursuant to the requirements of the Securities Act of 1933, this Amended
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the dates indicated.
Name Title Date
/s/ Gerald W. Perritt Principal Executive February 25, 1999
- -------------------------
Gerald W. Perritt Officer and Director
/s/ Robert A. Laatz Principal Financial
- ------------------------- and Accounting
Robert A. Laatz Officer February 25, 1999
/s/ David S. Maglich Director February 25, 1999
- -------------------------
David S. Maglich
/s/ Dianne C. Click Director February 25, 1999
- -------------------------
Dianne C. Click
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<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(a) Registrant's Articles of Incorporation, as amended*
(b) Registrant's By-Laws, as amended*
(c) None
(d) Investment Advisory Agreement*
(e) None
(f) None
(g) Custodian Agreement with Firstar Bank Milwaukee, N.A. (successor
to Firstar Trust Company)*
(h) Shareholder Servicing Agent Agreement*
(i) Opinion of Foley & Lardner, counsel for Registrant
(j) Consent of Checkers, Simon & Rosner LLP
(k) None
(l) Subscription Agreement of Gerald W. Perritt*
(m) None
(n) Financial Data Schedule
(o) None
- ---------------
* Previously filed and incorporated herein by reference.
Exhibit (i)
F O L E Y & L A R D N E R
CHICAGO FIRSTAR CENTER SACRAMENTO
DENVER 777 EAST WISCONSIN AVENUE SAN DIEGO
JACKSONVILLE MILWAUKEE, WISCONSIN 53202-5367 SAN FRANCISCO
LOS ANGELES TELEPHONE (414) 271-2400 TALLAHASSEE
MADISON FACSIMILE (414) 297-4900 TAMPA
MILWAUKEE WASHINGTON, D.C.
ORLANDO WEST PALM BEACH
February 22, 1999
Perritt MicroCap Opportunities Fund, Inc.
120 South Riverside Plaza, Suite 1745
Chicago, IL 60606
Ladies & Gentlemen:
We have acted as counsel for you in connection with the preparation of an
Amended Registration Statement on Form N-1A relating to the sale by you of an
indefinite amount of Perritt MicroCap Opportunities Fund, Inc. Common Stock
(such Common Stock being hereinafter referred to as the "Stock") in the manner
set forth in the Amended Registration Statement to which reference is made. In
this connection we have examined: (a) the Amended Registration Statement on Form
N-1A; (b) your Articles of Incorporation and Bylaws, as amended to date; (c)
corporate proceedings relative to the authorization for issuance of the Stock;
and (d) such other proceedings, documents and records as we have deemed
necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the shares of Stock
when sold as contemplated in the Amended Registration Statement will be legally
issued, fully paid and nonassessable
We hereby consent to the use of this opinion as an exhibit to the Amended
Registration Statement on Form N-1A. In giving this consent, we do not admit
that we are experts within the meaning of Section 11 of the Securities Act of
1933, as amended, or within the category of persons whose consent is required by
Section 7 of said Act.
Very truly yours,
/S/ FOLEY & LARDNER
Foley & Lardner
Exhibit (j)
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 13 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 10, 1998, relating the financial
statements and financial highlights appearing in the October 31, 1998 Annual
Report to shareholders of Perritt MicroCap Opportunities Fund, Inc., portions of
which are incorporated by reference into the Registration Statement. We also
consent to the reference to us under the heading "Independent Public
Accountants" in the Statement of Additional Information.
/s/ Checkers, Simon & Rosner LLP
CHECKERS, SIMON & ROSNER LLP
Chicago, Illinois
February 24, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
FINANCIAL STATEMENTS OF PERRITT MICROCAP OPPORTUNITIES FUND, INC. AS OF AND FOR
THE YEAR ENDED OCTOBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 11622
<INVESTMENTS-AT-VALUE> 10197
<RECEIVABLES> 218
<ASSETS-OTHER> 4
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<TOTAL-ASSETS> 10419
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<NET-ASSETS> 10173
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<SHARES-REINVESTED> 141068
<NET-CHANGE-IN-ASSETS> 14657
<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-END> 11.77
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<AVG-DEBT-OUTSTANDING> 766
<AVG-DEBT-PER-SHARE> 0.79
</TABLE>
