(Perritt MicroCap Opportunities Fund, Inc. Logo)
A no-load mutual fund that invests in stocks of rapidly growing companies that
at the time of purchase have equity market values below $300 million.
SEMI-ANNUAL REPORT
UNAUDITED
No Sales Charges
No Redemption Charges*<F1>
No 12b-1 Fees
Minimum Initial Investment $1,000
IRA Minimum Initial Investment $250
Dividend Reinvestment Plan
Systematic Withdrawal Plan
Automatic Investment Plan
Retirement Plans Including:
IRA o SIMPLE IRA
SEP IRA o Roth IRA
Education IRA o 401(K)
*<F1> 2% Redemption fee for shares held less than 90 days
The Fund can also he purchased
at the following brokerage firms:
Charles Schwab & Company
and TD Waterhouse
April 30, 2000
INVESTMENT PHILOSOPHY
The Perritt MicroCap Opportunities Fund invests in a diversified portfolio of
equity securities. At the time of purchase, companies have a market
capitalization of $300 million or less. The Fund seeks micro-cap companies that
management believes have the potential for long term capital appreciation based
on superior or niche products or services, operating characteristics, management
or other factors. Investors should expect the Fund to have a mix of both value
and growth stocks.
PRESIDENT'S MESSAGE
The Perritt MicroCap Opportunities Fund had a strong first half of fiscal year
2000, posting a gain of 36.8 percent. This return exceeds both the 18.1 percent
gain for the benchmark Russell 2000 Index and the 6.6 percent advance in the
Standard & Poor's 500 Index. Despite the stock market's decline in March and
April, the Fund's share price has risen 15.1 percent during calendar year 2000,
which compares favorably to the 0.3 percent gain in the Russell 2000 Index
during the same period.
Both recent purchases and longer term holdings contributed positively to the
Fund's robust performance during the last six months. The technology sector was
especially strong, but individual securities in the healthcare and business-to-
business Internet segments also made significant contributions. Integrated
Silicon Solutions was the Fund's leading performer during the last six months.
This SRAM manufacturer's share price rose 336 percent during that period. Other
companies whose shares posted substantial advances during the last six months
include: Westell Technologies, Excalibur Technologies, and LTX Corporation. (A
detailed description of the Fund's top 10 holdings can be found on page 8, and a
summary of the Fund's financial statistics appears on page 9.)
During the last 12 months, the Russell 2000 (small cap) Index returned 17.0
percent, 820 basis points more than the 8.8 percent S&P 500 (large cap) return.
This is the first time in several years that small cap stocks have outperformed
large cap stocks. History indicates that small cap stock performance tends to
run in streaks that can last several years (i.e., small caps tend to either
outperform or underperform large caps for several years in succession). Is this
the beginning of a lengthy streak of exceptional small cap returns. Of course,
no one knows for sure. However, small company stocks currently possess what we
believe are extremely attractive valuations. And every single lengthy small cap
overperformance streak began when small company stocks were selling at an
average price-earnings multiple that was well-below the average price-earnings
multiple of large cap stocks.
Despite the recent overperformance of small firm stocks and the modest advance
in their average price-earnings multiple, small cap stock valuations remain near
their 30-year lows. That has heightened our optimism regarding the continuation
of a small cap overperformance streak. Furthermore, we believe that today's
economic environment, strong earnings advances by small companies, and
attractive valuations in the small cap sector portend a continuation of strong
small cap returns.
As of this writing, the Federal Reserve has raised interest rates six times in
the past year. While some stock market experts argue that rising interest rates
are never good for common stocks, history has actually shown that small stocks
tend to perform better than large stocks during a period marked by rising
interest rates and expanding consumer prices. In fact, the most robust small
cap overperformance streak in history occurred during the late 1970s and the
early 1980s, when interest rates were rising sharply and the rate of inflation
reached a double digit annual rate.
According to Prudential Securities, small stocks as a group produced earnings
growth of nearly 23 percent in the first quarter of 2000, which matched the
earnings growth for large stocks. The significance of these numbers is that
this is the first time in nearly two years that small stocks as a group matched
or beat the earnings growth rate for large stocks. Should small firm stocks
deliver strong earnings growth in the second quarter, we believe that investor
interest in this sector will expand.
Small stocks have been reasonably-priced (I say cheap) for more than three
years. However, reasonable valuation has never proved to be the necessary
condition to ignite a strong bull market in small firm stocks. Investors need
something much more compelling to pique their interest. When the Internet IPO
bubble burst, we believe that investors found that catalyst. Add to that the
recent strong small cap earnings growth and you have all the ingredients for a
take-off in small cap stock prices.
I would like to thank my fellow shareholders of the Perritt MicroCap
Opportunities Fund for their continued support. I am looking forward to what I
believe will be a dynamic and prosperous decade for small stocks.
Michael Corbett,
President
STATEMENT OF NET ASSETS
UNAUDITED
April 30, 2000
COMMON STOCKS - 99.5% (a)<F3>
Biotechnology - 4%
16,000 Cytoclonal Pharmaceuticals*<F2> $ 112,000
30,000 Lifecell Corp.*<F2> 174,375
23,000 Nabi*<F2> 110,687
----------
397,062
Building Materials - 1.3%
6,000 Oglebay Norton 130,500
Business Services - 5.7%
8,000 Euro99.Com A/S Spn Adr F*<F2> 77,000
15,000 IBS Interactive*<F2> 112,500
14,500 ICT Group, Inc*<F2> 83,375
5,000 Mobile Mini*<F2> 104,375
11,000 Pomeroy Computer Resources*<F2> 181,500
----------
558,750
Capital Goods - 1.0%
7,000 ASV, Inc.*<F2> 94,500
Chemicals & Related Products - 0.9%
4,000 AEP Industries*<F2> 84,000
Consumer Products - Distributing - 0.9%
5,000 Guest Supply Inc. 86,250
Consumer Products - Manufacturing - 1.4%
13,500 Boston Acoustics 142,805
Consumer Services - 3.7%
12,500 Lesco Inc. 200,000
30,000 TBC Corp.*<F2> 165,000
----------
365,000
Financial Services - 3.6%
12,000 Gabelli Asset Management*<F2> 239,250
20,000 Gilman & Ciocia*<F2> 120,000
----------
359,250
Food - 3.6%
12,000 J&J Snack Foods*<F2> 191,250
19,000 Suprema Specialities*<F2> 168,625
----------
359,875
Land Development - 1.1%
5,000 Tejon Ranch*<F2> 109,375
Leisure - 1.5%
9,000 Winnebago Industries 153,000
Medical Supplies & Services - 10.9%
16,000 Candela Corp.*<F2> 215,000
13,000 Exactech*<F2> 178,750
8,000 RehabCare Group*<F2> 238,500
28,000 US Physical Therapy*<F2> 266,000
48,000 Zila, Inc.*<F2> 180,000
----------
1,078,250
Military Equipment - 3.5%
16,000 Engineered Support Systems, Inc. 175,000
9,500 Herley Industries*<F2> 169,812
----------
344,812
Oil & Gas Related Services - 10.1%
14,500 Aztec Manufacturing 197,562
20,000 Bellwether Exploration*<F2> 116,250
18,000 Beta Oil & Gas Inc. *<F2> 141,750
2,000 Input/Output Inc.*<F2> 14,750
12,000 Petroleum Helicopters - Vtg 117,000
40,000 Remington Oil & Gas*<F2> 175,000
7,000 Saint Mary Land & Exploration 236,250
----------
998,562
Retail - 6.0%
6,000 Braun's Fashion Corp.*<F2> 137,250
8,000 Finlay Enterprises Inc.*<F2> 81,000
18,000 Marinemax Inc.*<F2> 175,500
16,000 Wilson's Leather Experts Inc.*<F2> 194,000
----------
587,750
Semi-Conductor Related Products - 11.7%
20,000 IKOS Systems Inc.*<F2> 220,000
9,000 Intergrated Silicon Solutions*<F2> 275,062
6,000 LTX Corp.*<F2> 274,500
16,000 Robotic Vision, Inc.*<F2> 239,000
14,500 SEMX Corp.*<F2> 145,000
----------
1,153,562
Software - 12.4%
6,000 Brooktrout, Inc.*<F2> 162,000
7,000 Excaliber Technologies*<F2> 248,500
6,500 Mapinfo Corp.*<F2> 192,562
25,000 Mathsoft Inc.*<F2> 75,000
20,000 PLATO Learning Inc.*<F2> 205,000
10,000 Prosoft Training.Com*<F2> 167,500
9,100 Tangram Enterprise Solutions*<F2> 50,050
30,000 Vtel Corp.*<F2> 125,625
----------
1,226,237
Speciality Manufacturing - 4.8%
24,000 Barringer Technologies*<F2> 154,500
19,000 Woodhead Industries 318,250
----------
472,750
Telecommunications - 11.3%
7,000 Com21 Inc.*<F2> 196,000
10,000 Corsair Communications*<F2> 181,250
8,000 Radyne Comstream*<F2> 151,000
6,100 Tut Systems, Inc.*<F2> 292,800
10,500 Westell Technologies Inc.*<F2> 298,594
----------
1,119,644
----------
Total Common Stocks (Cost $9,822,265) 9,821,936
Demand Notes - 0.2%
$22,823 Firstar Bank 5.91% due 12/31/2031 22,823
----------
Total Demand Notes (Cost $22,823) 22,823
----------
Total Investments (Cost $9,845,088) 9,844,759
----------
Cash & Receivables
Net of Liabilities - 0.3%(a)<F3> 31,119
----------
Total Net Assets - 100% $9,875,878
----------
----------
(Equivalent to $14.49 per share based on 681,400 shares of capital stocks
outstanding.)
*<F2> Non-income producing security
(a)<F3> Percentages for various classifications relate to total net assets.
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
UNAUDITED
NOVEMBER 1, 1999 TO APRIL 30, 2000
INCOME:
Dividends $14,089
Interest 12,698
Other income 156,310
----------
Total income 183,097
EXPENSES:
Advisory Fees 54,957
Legal Fees 2,992
Fund Accounting Expense 12,853
Transfer Agent Fees 11,617
State Registration Fees 8,476
Printing and Postage 2,992
Custodian Fees 6,483
Auditing & Tax Fees 5,984
Directors and Annual Meeting 2,493
Insurance 897
Other Expenses 998
----------
Total Expenses 110,742
Expense reimbursement by advisor 9,580
Total net expenses 101,162
Net investment gain 81,935
----------
Net Realized Gain on Investments 1,083,191
Net Decrease in Unrealized Depreciation
of Investments 2,179,982
----------
Net Gain on Investments 3,263,173
Net Increase in Net Assets Resulting
From Operations $3,345,108
----------
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENTS OF CHANGES IN NET ASSETS
UNAUDITED
NOVEMBER 1, 1999 TO APRIL 30, 2000
For the Six Months Ended For the Year Ended
April 30, 2000 October 31, 1999
OPERATIONS:
Net investment gain (loss) $81,935 $(123,051)
Net realized gain (loss) on investments 1,083,171 (36,067)
Net decrease (increase) in unrealized
depreciation of investments 2,179,982 (755,233)
---------- ----------
Increase (decrease) in net assets
resulting from operations 3,345,108 (914,351)
---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued 8,173,907 1,596,207
Cost of shares redeemed (10,142,487) (2,355,895)
Decrease in net assets derived from
capital share transactions (1,968,580) (759,688)
---------- ----------
Total increase (decrease) 1,376,528 (1,674,039)
NET ASSETS AT THE BEGINNING OF THE PERIOD 8,499,350 10,173,389
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $9,875,878 $8,499,350
(including undistributed net investment ---------- ----------
loss of ($437,298) and ($519,233), respectively)
The accompanying notes to financial statements are an integral part of this
statement.
FINANCIAL HIGHLIGHTS
6 Months Ended Years Ended October 31
April 30, 2000 1999 1998 1997
(Unaudited)
Selected Per-Share Data
Net asset value, beginning of period $10.59 $11.77 $17.75 $14.33
------ ------ ------ ------
Income from investment operations:
Net investment gain (loss) income 0.10a (0.15)a (0.17)a (0.05)
<F4> <F4> <F4>
Net realized and unrealized
(loss) gain on investments 3.80 (1.03) (3.55) 4.78
------ ------ ------ ------
Total from Investment Operations 3.90 (1.18) (3.72) 4.73
------ ------ ------ ------
Less Distributions:
From net investment income 0.00 0.00 (0.26) (0.04)
From net realized gains 0.00 0.00 (2.00) (1.27)
------ ------ ------ ------
Total Distributions 0.00 0.00 (2.26) (1.31)
------ ------ ------ ------
Net asset value, end of period $14.49 $10.59 $11.77 $17.75
------ ------ ------ ------
------ ------ ------ ------
Total Return 36.80%c (10.03%) (23.83%) 35.95%
<F6>
Ratios and Supplemental Data
Net assets, end of period
(in thousands) $9,876 $8,499 $10,173 $24,831
Ratio of expenses to average
net assets 1.75%b 1.72% 1.81% 1.52%
<F5>
Ratio of net investment income 1.48%b (1.2%) (1.1%) (0.6%)
<F5>
Portfolio turnover rate 60.8%c 53.4% 24.0% 83.1%
<F6>
The accompanying notes to financial statements are an integral part of this
statement.
a:<F4> Net investment income per share has been calculated based on average
shares outstanding during the period.
b:<F5> Annualized
c:<F6> Not annualized
<TABLE>
Years Ended October 31
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of period $14.17 $11.89 $12.54 $11.43 $11.36 $ 8.17
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment (loss) income (0.16) (0.13) (0.13) (0.14) (0.12) (0.02)
Net realized and unrealized
(loss) gain on investments 2.42 3.01 0.02 1.61 0.31 3.27
------ ------ ------ ------ ------ ------
Total from Investment Operations 2.26 2.88 (0.11) 1.47 0.19 3.25
------ ------ ------ ------ ------ ------
Less Distributions:
From net investment income (0.90) -- -- (0.08) -- (0.06)
From net realized gains (1.20) (0.60) (0.54) (0.28) (0.12) --
------ ------ ------ ------ ------ ------
Total Distributions (2.10) (0.60) (0.54) (0.36) (0.12) (0.06)
------ ------ ------ ------ ------ ------
Net asset value, end of period $14.33 $14.17 $11.89 $12.54 $11.43 $11.36
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Total Return 18.56% 25.60% (1.05%) 12.97% 1.70% 40.06%
Ratios and Supplemental Data
Net assets, end of period
(in thousands) $8,130 $6,729 $6,279 $7,208 $6,942 $6,183
Ratio of expenses to average
net assets 1.92% 2.07% 2.00% 1.96% 2.30% 2.50%
Ratio of net investment income (1.2%) (1.0%) (1.0%) (1.1%) (1.1%) (0.2%)
Portfolio turnover rate 58.0% 67.4% 39.2% 34.6% 24.4% 37.4%
</TABLE>
10 LARGEST HOLDINGS (APRIL 30, 2000)
WOODHEAD INDUSTRIES (WDHD) is an integrated group of companies that operate in
two business segments: Industrial Communications/Connectivity and Electrical
Safety/Specialty Products. The Industrial Communications/Connectivity segment
provides system components to connect devices in open networks. The Electrical
Safety/Specialty Products segment manufactures highly customized products to
improve safety and productivity in the industrial workplace.
WESTELL TECHNOLOGIES (WSTL) supplies high-speed Internet access equipment, DSL
modems, Telephone Access Systems and maintenance equipment, to Regional Bell
Operators. Conference Plus, Westell's service business, is an Application
Service Provider, hosting and providing audio, video, IP conferencing and
support services.
TUT SYSTEMS (TUTS) is the market leader of broadband equipment for the multi-
tenant market. The company designs, develops and markets advanced
communications products that enable high-speed data access over the copper
infrastructure of telephone companies, as well as the copper telephone wires in
homes, businesses and other buildings.
INTEGRATED SILICON SOLUTIONS (ISSI) designs, develops and markets high
performance memory devices including static random access memory (SRAM), low and
medium density dynamic random access memory (DRAM), and nonvolatile memory
(NVM), as well as voice recording devices and certain microcontrollers and
embedded memories.
LTX CORPORATION (LTXX) is a manufacturer of semiconductor test equipment. The
company's new Fusion all-in-one system offers single platform systems for
testing analog, digital, mixed signal and system-on-a-chip integrated circuits.
U.S. PHYSICAL THERAPY (USPH) develops, owns and operates outpatient physical and
occupational therapy clinics. With 113 clinics operating in 29 states,
treatment focuses on worker's compensation, sports/recreational and post
surgical injuries.
EXCALIBUR TECHNOLOGIES (EXCA) designs, develops, markets and supports
enterprise-wide, accurate, scalable and secure knowledge-retrieval and digital
asset management software solutions. The company recently entered into an
agreement with Intel to merge Excalibur and a division of Intel together. The
combined companies will operate in a similar fashion as Excalibur's business,
but will also include a much broader scope of media services.
GABELLI ASSET MANAGEMENT (GBL) provides investment advisory and brokerage
services to mutual fund, institutional and high net worth investors, primarily
in the United States. The Company generally manages assets on a discretionary
basis and invests in a variety of United States and international securities
through various investment styles.
ROBOTIC VISION SYSTEMS (ROBV) designs, manufactures and sells products and
systems that automate the inspection of semiconductors. The company also sells
two-dimensional data collection and barcode reading systems.
REHABCARE GROUP (RHB) is a major U.S. provider of contract rehabilitation
services, serving hospitals, long-term care units and outpatient facilities in
all 50 states. The company manages and provides staff for medical
rehabilitation, skilled nursing and therapy operations primarily at acute-care
hospitals.
COMPARATIVE VALUATIONS
PERRITT MICROCAP RUSSELL 2000 S&P 500
Average Price/Earnings Ratio 21.9 26.9 37.0
Average Price/Book Ratio 4.9 5.3 10.5
Median Market Cap. $143 Mil. $858 Mil. $95.6 Bil.
ANNUAL TOTAL RETURN
6 MOS. 1 YEAR 5 YEARS 10 YEARS
Perritt MicroCap 36.8% 19.5% 11.6% 9.7%
Russell 2000 18.1 17.0 13.7 12.3
S&P 500 6.6 8.8 23.1 15.9
FUND FACTS
Growth of $10,000
Five Years $17,310
Ten Years 25,239
Net Assets $9.9 Mil.
Number of Holdings 59
Ticker Symbol PRCGX
Expense Ratio (1999) 1.72%
Turnover Ratio (1999) 53%
FIVE LARGEST INDUSTRIES
Software 12.4%
Semiconductor 11.7
Telecommunication 11.3
Medical 10.9
Oil & Gas 10.1
NOTES TO FINANCIAL STATEMENTS
April 30, 2000
1. Listed securities are valued at the last sale price reported by the
principal security Exchange on which the issue is traded, or if no sale is
reported, the mean between the latest bid and ask price. Securities that
are traded over-the-counter are valued at the mean between the latest bid
and ask price if no sale was effected. Demand notes and commercial paper
are valued at amortized cost, which approximates fair value.
2. The Fund has an investment advisory agreement with Perritt Capital
Management, Inc. ("PCM"), with whom certain officers of the Fund are
affiliated. Under the terms of the agreement, the Fund pays PCM a monthly
advisory fee at the annual rate of 1.0% of the daily net assets of the Fund.
The investment advisory agreement requires PCM to reimburse the Fund in the
event that the Fund's expenses, as a percentage of the average net asset
value, exceeds the most restrictive percentage as these terms are defined.
The most restrictive percentage is 1.75%.
3. Provision has not been made for federal income tax since the Fund will elect
to be taxed as a "regulated investment company" and intends to distribute
substantially all income to its shareholders and otherwise comply with the
Internal Revenue Code applicable to regulated investment companies.
4. Net realized gains and losses on securities are computed using the first-in,
first-out method.
5. Other assets and liabilities: Other assets consist of dividends receivable
of $276, expenses to be reimbursed by PCM of $7,083 and receivables for
investments sold of $41,937; other liabilities consist of accrued operating
expenses of $18,177.
6. Sources of net assets: The April 30, 2000 total net assets consist of fund
shares issued and outstanding $9,276,721, unrealized depreciation on
investments ($329), accumulated net realized gain on investments $1,036,784
and undistributed net investment loss ($437,298).
(Perritt MicroCap Opportunities Fund, Inc. Logo)
10 S. Riverside Plaza o Suite 1520 o Chicago, IL 60606-3911
Tel 312-669-1650 o 800-331-8936 o Fax 312-669-1235
E-mail: [email protected] o Web Site: www.PerrittCap.com
For assistance with your existing account, call
our Shareholder Service Center at 1-800-332-3133
BOARD OF DIRECTORS
David Maglich
Gerald W. Perritt
Dianne C. Click
INVESTMENT ADVISOR
Perritt Capital Management, Inc.
10 S. Riverside Plaza, Suite 1520, Chicago, IL 60606-3911
800-331-8936
OFFICERS OF THE FUND
Michael J. Corbett - President/Treasurer
Gerald W. Perritt - Vice President
Robert A. Laatz - Vice President/Secretary
INDEPENDENT ACCOUNTANTS
Altschuler, Melvoin and Glasser LLP
Thirty South Wacker Drive, Chicago, IL 60606
LEGAL COUNSEL
Foley & Lardner
777 East Wisconsin Avenue, Milwaukee, WI 53202
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Firstar Trust Company
P.O. Box 701, Milwaukee, WI 53201-0701
(Perritt MicroCap Opportunities Fund, Inc. Logo)
This report is authorized for distribution only to shareholders and others who
have received a copy of the prospectus of the Perritt MicroCap Opportunities
Fund, Inc.
