UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21556
Perritt Funds, Inc.
(Exact name of registrant as specified in charter)
300 South Wacker Drive, Suite 2880, Chicago, IL 60606
(Address of principal executive offices) (Zip code)
Michael J. Corbett, 300 South Wacker Drive, Suite 2880, Chicago, IL 60606
(Name and address of agent for service)
1-312-669-1650
Registrant's telephone number, including area code
Date of fiscal year end: October 31, 2014
Date of reporting period: October 31, 2014
Item 1. Reports to Stockholders.
MicroCap Opportunities Fund
Ultra MicroCap Fund
Low Priced Stock Fund
Annual Report
October 31, 2014
The PERRITT MICROCAP OPPORTUNITIES FUND will, under normal circumstances, invest at least 80% of its net assets in a diversified portfolio of common stocks of United States companies that at the time of initial purchase have a market capitalization (equity market value) that is below $500 million (referred to as “microcap” companies). The Fund seeks to invest in microcap companies that have demonstrated above-average growth in revenues and/or earnings, possess relatively low levels of long-term debt, have a high percentage of their shares owned by company management, and possess modest price-to-sales ratios and price-to-earnings ratios that are below their long-term annual growth rate. At times, the Fund may also invest in “special situations” such as companies that possess valuable patents, companies undergoing restructuring, and companies involved in large share repurchase programs. Investors should expect the Fund to contain a mix of both value-priced and growth stocks.
The PERRITT ULTRA MICROCAP FUND will, under normal circumstances, invest at least 80% of its net assets in a diversified portfolio of common stocks of United States companies that at the time of initial purchase have a market capitalization (equity market value) that is below $300 million (referred to as “microcap” companies). The Fund seeks to invest in microcap companies that have a high percentage of their shares owned by company management, possess relatively low levels of long-term debt, have a potential for above average growth in revenues and/or earnings, and possess reasonable valuations based on the ratios of price-to-sales, price-to-earnings, and price-to-book values. The microcap companies in which the Fund may invest include “early stage” companies, which are companies that are in a relatively early stage of development with market capitalizations that are below $50 million. At times, the Fund may also invest in unseasoned companies, companies that are undergoing corporate restructuring, initial public offerings, and companies believed to possess undervalued assets.
The PERRITT LOW PRICED STOCK FUND will, under normal circumstances, invest at least 80% of its net assets in a diversified portfolio of low priced common stocks of United States companies that at the time of initial purchase have a market capitalization (equity market value) that is below $3 billion. Low priced stocks are those that are trading at or below $15 per share at the time of initial purchase. Subsequent to the initial purchase, the Fund may purchase such securities at a price above $15 per share. The Fund’s strategy is based on the premise that low priced stocks offer growth potential because these stocks have limited broker research coverage, the companies’ prospects are misunderstood by most investors, and some investors mistakenly believe stocks trading below $15 per share are more “speculative” than those trading at higher levels and therefore avoid low priced stocks. The Fund will invest in “growth” stocks, “value” stocks, or a combination of both. Given the market capitalization restrictions, the Fund will normally invest in securities issued by small-cap companies, including some microcap companies. However, microcap companies will only make up a small portion of the Fund’s portfolio. Microcap companies represent the smallest sector of public companies based on market capitalization. At times, the Fund’s portfolio may contain the shares of unseasoned companies, companies that are undergoing corporate restructuring, initial public offerings, and companies believed to possess undervalued assets.
Table of Contents |
Annual Report
October 31, 2014
From the Desk of Michael Corbett, President and CIO | 2 | |
Perritt MicroCap Opportunities Fund | ||
From the Portfolio Managers | 5 | |
Performance | 8 | |
Ten Largest Common Stock Holdings | 10 | |
Allocation of Portfolio Investments | 11 | |
Perritt Ultra MicroCap Fund | ||
From the Portfolio Managers | 12 | |
Performance | 16 | |
Ten Largest Common Stock Holdings | 18 | |
Allocation of Portfolio Investments | 19 | |
Perritt Low Priced Stock Fund | ||
From the Portfolio Managers | 20 | |
Performance | 24 | |
Ten Largest Common Stock Holdings | 26 | |
Allocation of Portfolio Investments | 27 | |
Perritt Funds | ||
Schedules of Investments | 28 | |
Statements of Assets and Liabilities | 39 | |
Statements of Operations | 40 | |
Statements of Changes in Net Assets | 41 | |
Financial Highlights | 42 | |
Notes to Financial Statements | 45 | |
Report of the Independent Registered Public Accounting Firm | 54 | |
Expense Example | 56 | |
Directors and Officers | 58 | |
Information | 61 |
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Perritt Funds, Inc.
From the Desk of Michael Corbett, President and CIO |
Michael Corbett,
President and CIO
It’s hard to believe I have spent nearly three decades in the financial services industry. During that time, I have experienced a wide range of economic environments and financial markets. There have been three recessions in the past three decades, and they have occurred, on average, about every eight years and there have been 47 recessions since 1790, which equates to one every 4.8 years. Given that the last recession ended more than five years ago, one might think that averages indicate that another recession could come soon. However, this past recession was very different than the average recession. First, the 2008-2009 recession was deeper and lasted longer than average. The average recession lasts about 12 months, while the 2008-2009 recession lasted 18 months. The economic recovery following this recent recession has also been very modest versus the average recovery. I think the most interesting point is that while the recession ended five years ago, the average person stills believes that we are in a recession. A recent poll conducted by The Washington Post found that more than 70 percent of people surveyed believe we are still in an economic recession.
As you might have guessed, recessions and bear markets occur around the same time. I have experienced some interesting bear markets in my career. As you may know, bear markets are defined as a 20 percent decline in an index or a group of stocks. During the past three decades, I have witnessed six different bear markets. The last recession ended in June 2009 just four months after the bear market which ended February 2009. Since World War II, the broader markets, as measured by the Dow Jones Industrial Average and the S&P 500 Index, have experienced thirteen bear markets.
While volatility has increased during the past year, the overall indexes have not experienced a bear market. However, a closer look shows that while the indexes have not shown a bear market, the average stock held in the indexes has, in fact, experienced a bear market. We would define this situation as a “stealth bear market”. A “stealth bear market” is a market where the average stock is down more than 20 percent, but the index is not down 20 percent. Today, the S&P 500 Index has been hitting record highs on nearly a daily basis, but 6 percent of the stocks in the Index are down more than 20 percent. While those results don’t show a stealth bear market, a look at smaller company performance tells a different story. The Russell 2000 Index hit a record of 1,208 on March 4, 2014, and closed 13.2 percent lower on October 13, 2014. While that performance does not meet the bear market definition, more than 40 percent of the stocks in the index were down more than 20 percent from their highs. In other words, nearly half of the stocks in the index were well into bear market territory. Finally, the Russell Microcap Index declined 16.7 percent. The Russell Microcap Index, which includes over 1,600 holdings, had more than 66 percent of its stocks drop into bear market territory. The Russell Microcap Index is most certainly in a stealth bear market! This recent performance reminds me of the late 1990’s. In that period, the indexes performed well and hit new highs regularly, but underneath the overall markets there was a stealth bear market.
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Perritt Funds, Inc.
There is a saying in the financial markets: history does not repeat, it rhymes. If the current period does rhyme with the 1990’s, we think the next few years could be positive for smaller company stocks.
When I review volatile stock performance, such as what is occurring in the markets today, I am often reminded of what the famous investor Sir John Templeton said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” Given the level of negative sentiment toward the economy and the weakness in smaller company stocks, we believe that the equity markets are not at the end of the bull market. This negative sentiment is one of the reasons we were confident in launching our third mutual fund earlier this year. We now offer investors three different investment options that cover the majority of the smaller company universe. Our Perritt Ultra MicroCap Fund invests in the smallest of companies, with a median market capitalization of $77 million as of 10/30/14. Our mandate with the Ultra MicroCap Fund is to invest in companies with market capitalizations below $300 million, but maintain a median market capitalization below $100 million. Our Perritt MicroCap Opportunities Fund is our legacy portfolio that invests in the next level of smaller companies. Investors should expect the MicroCap Opportunities Fund to have a median market capitalization between $200 and $500 million. Our newest Fund, The Perritt Low Priced Stock Fund, invests in companies with market capitalizations between $500 million to $3 billion and with stock prices below $15 at the time of initial purchase. We would expect the Low Priced Stock Fund’s median market cap to be $1 billion or less. As a shareholder in each of our mutual funds and with the majority of my personal liquid net worth committed to these portfolios, I have a great deal of confidence in these Funds’ future prosperity. Thank you for your investment. Please visit our website www.perrittcap.com for articles and further commentary about the smaller company universe.
Michael J Corbett
President and Chief Investment Officer
Past performance does not guarantee future results.
Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.
Dow Jones Industrial Average (DJIA) is defined as a price-weight average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.
S&P 500 Index is an index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
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Perritt Funds, Inc.
Russell Microcap Index is a capitalization weighted index of 2,000 small cap and micro cap stocks that captures the smallest 1,000 companies in the Russell 2000, plus 1,000 smaller U.S.-based listed stocks.
Russell 2000 Index is an index measuring the performance approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States.
Market Capitalization is defined as the total dollar market value of all of a company’s outstanding shares. Market capitalization is calculated by multiplying a company’s shares outstanding by the current market price of one share.
Price-to-Earnings ratio: Current share price divided by trailing twelve-month earnings.
Price-to-book ratio: A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share.
Price-to-sales ratio: A ratio for valuing a stock relative to its own past performance, other companies or the market itself. Price to sales is calculated by dividing a stock’s current price by its revenue per share for the trailing 12 months.
Diversification does not assure a profit or protect against a loss in a declining market.
Must be preceded or accompanied by a prospectus.
The Perritt Funds are distributed by Quasar Distributors, LLC.
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Perritt MicroCap Opportunities Fund
Portfolio Managers’ Message |
Michael Corbett, | George Metrou, |
Lead Portfolio Manager | Co-Portfolio Manager |
Since 1999 | Since 2014 |
The Perritt MicroCap Opportunities Fund completed a productive year of building and maintaining a portfolio of high quality micro-cap companies. We are proud of our firm’s 26 year track record, and dedication to micro-cap investing. The Fund and the advisor continue to remain independent and majority employee owned.
Though fiscal 2014 proved to be a significantly more volatile year than fiscal 2013, the Fund posted a positive return during the period. For the year ended October 31, 2014, the fund had a 6.17 percent gain, which was below that of the 7.34 percent gain for the Russell Microcap Index, and the 8.06 percent gain for the Russell 2000 Index. The Fund’s longer term results can be viewed on page 9. Anticipating a heightened level of volatility, the Fund carried a slightly larger than normal cash balance throughout most of the year. This cash balance partially explains our performance differential, but also afforded us opportunities to take advantage of market volatility. These opportunities continue to present themselves, and we look forward to improving our relative results.
During the past year, we liquidated twenty-four companies from the portfolio. Five companies were sold after receiving buyout offers: Costa, Inc. (ATX), Medical Action Industries, Inc. (MDCI), Nicholas Financial, Inc. (NICK), Official Payments Holdings, Inc. (OPAY), and Vitran Corp. (VTRN). Though the number of companies bought out during the year was below that of prior years, the premiums paid continued to be fairly robust. One transaction in particular, the buyout of Medical Action Industries, afforded shareholders a 93% premium. We believe this demonstrates the value of synergistic transactions, and speaks to the embedded value in many micro-cap companies. M&A activity in the micro-cap space continues, and we believe it will have a positive impact on our performance in the future.
Three companies were removed from the portfolio due to a combination of their market capitalization becoming too large, and our valuation hitting our targets: Hornbeck Offshore Services, Inc. (HOS), Rush Enterprises, Inc. (RUSH.B), and Virtusa Corp. (VRTU). Each of these companies reached market capitalizations in excess of a billion dollars. Four companies were profitably sold after reaching our targets for valuation: Anika Therapeutics, Inc. (ANIK), Douglas Dynamics, Inc. (PLOW), Ultra Clean Holdings, Inc. (UCTT), and Insteel Industries, Inc. (IIIN). The remaining twelve issues removed from the portfolio were positions we exited after materially downgrading our outlook for the company and their shares.
As of October 31, 2014 the Fund’s portfolio contained shares of common stock of 125 companies, twenty-nine of which were added during the past year. The Fund’s ten largest holdings, and their descriptions, can be found beginning on page 10 of this report. Based on our earnings estimates, the Fund’s portfolio is trading at nearly 15 times
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Perritt MicroCap Opportunities Fund
our 2015 earnings estimates. The portfolio has a median valuation of 1.0 times revenue, and a median price-to-book value of 1.6 times. Despite continued positive price performance over the past year for the portfolio, valuations have remained consistent, or have even improved, from the prior year as the underlying fundamentals of the companies we own have improved. The median market capitalization of the portfolio is currently $281 million.
Given the continued positive returns in 2014, and heightened volatility this past year, it is not surprising the Fund’s turnover ratio was again at the higher end of its historical range. In fiscal 2014, the Fund’s turnover ratio was 29.12%. We attribute this to our continued efforts to rotate the portfolio to securities which have significantly better prospects for forward returns. As indicated earlier, we sold numerous issues once they reached our price targets, or the forward returns were expected to be below that of new investment. The proceeds from these sales were reinvested in securities with more attractive estimated forward returns.
Much of the rotation within the portfolio was within the industrial sector. For example, we sold Insteel Industries, Inc. (IIIN) after the company achieved our price target, and initiated a position in Schnitzer Steel Industries, Inc. (SCHN). A number of technology-related companies, such as Virtusa Corp. (VRTU), SeaChange International, Inc. (SEAC), and Ultra Clean Holdings, Inc. (UCTT), were replaced with more promising investments found in Sizmek, Inc. (SZMK), DSP Group, Inc. (DSPG), and Dice Holdings, Inc. (DHX). Our Consumer Discretionary holdings saw rotation out of Body Central Corp. (BODY) and VOXX International Corp. (VOXX), with new investments made in Libbey, Inc. (LBY) and Liberty Tax, Inc. (TAX).
More notably, the Fund had a material increase in the number of holdings within the financial sector. The Fund has historically been underweighted this sector. However, due to a number of attractive factors, the Fund initiated positions in four community banks, three REITs, one investment bank, and one asset manager. These purchases doubled our position within Financials, from just under 8% at the end of fiscal year 2013, to just under 16% at the end of fiscal year 2014. The increased allocation to Financials came at the expense of capital allocated to Energy, Healthcare, and Industrials, as well as a reduction in our cash position.
On November 18th the Fund paid a capital gain distribution of $2.41959 per share. This is the second distribution made by the Fund in the previous seven years. We feel this reflects our commitment to managing the portfolio in the most tax efficient manner as possible. The capital gain distribution is not reflected in the financials of this annual report because it was completed in fiscal 2015, but distributed in calendar year 2014. Please review your statement for the full details of the capital gain distribution.
I would like to take this opportunity to thank the management team at Perritt Capital Management, my fellow team members, our Board of Directors, and most importantly, my fellow shareholders, for the support and confidence they have shown in my appointment to Co-Portfolio Manager of the Perritt MicroCap Opportunities Fund. I approach the position with a great deal of enthusiasm, but also with a great deal of humility regarding the task of being a prudent steward of your capital.
If you have any questions or comments about this report or your investment in the
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Perritt MicroCap Opportunities Fund
Perritt MicroCap Opportunities Fund, please call us toll-free at (800)331-8936 or visit our web site at www.perrittcap.com. Please refer to the prospectus for information about the Fund’s investment objectives and strategies.
Michael Corbett | George Metrou |
President and | Co-Portfolio Manager |
Portfolio Manager |
Russell 2000 Index An index measuring the performance of approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States.
Russell Microcap Index A capitalization weighted index of 2,000 small-cap and micro-cap stocks that captures the smallest 1,000 companies in the Russell 2000, plus 1,000 smaller U.S.-based listed stocks. The broad index is designed to present an unbiased collection of the smallest tradable securities that still meet exchange listing requirements, so over-the-counter (OTC) stocks and pink sheet securities are excluded. The Russell Microcap Index is recalculated annually to prevent growing stocks from distorting index performance, and to include new entrants.
One cannot invest directly in an index
Book Value The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation.
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Funds invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility than larger companies. The Funds invest in micro-cap companies which tend to perform poorly during times of economic stress.
The information provided herein represents the opinion of Perritt Capital Management and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.
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Perritt MicroCap Opportunities Fund
Performance* (Unaudited) | October 31, 2014 |
Perritt MicroCap Opportunities Fund versus
Russell 2000® Index and Russell MicroCap® Index
There are several ways to evaluate a fund’s historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund’s share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value).
Cumulative total returns reflect the Fund’s actual performance over a set period. For example, if you invested $1,000 in a fund that had a 5% return over one year, you would end up with $1,050. You can compare the Fund’s returns to the Russell 2000® Index, which reflects a popular measure of the stock performance of small companies, and the Russell MicroCap® Index, which measures the performance of the microcap segment of the U.S. equity market.
Average annual total returns take the Fund’s actual (or cumulative) return and show you what would have happened if the Fund had performed at a constant rate each year.
* | The graph illustrates the performance of a hypothetical $10,000 investment made in the Fund 10 years ago. Assumes reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charge or redemption fees or the deduction of taxes that a shareholder would pay on the Fund’s distributions or the redemption of the Fund shares. The graph does not imply any future performance. |
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Perritt MicroCap Opportunities Fund
Performance (Unaudited) (Continued) | October 31, 2014 |
Cumulative Total Returns* |
Periods ended October 31, 2014 (Unaudited) |
Past | Past | Past | Past | Past | Past | |
1 Year | 3 Years | 5 Years | 10 Years | 15 Years | 25 Years | |
Perritt MicroCap | ||||||
Opportunities Fund | 6.17% | 70.95% | 101.80% | 127.56% | 556.84% | 1,042.85% |
Russell 2000® Index | 8.06% | 65.07% | 122.95% | 129.62% | 233.38% | 904.24% |
(reflects no deduction | ||||||
for fees and expenses) | ||||||
Russell MicroCap® Index | 7.34% | 73.46% | 121.50% | 94.51% | N/A | N/A |
(reflects no deduction | ||||||
for fees and expenses) |
Average Annual Total Returns* |
Periods ended October 31, 2014 (Unaudited) |
Past | Past | Past | Past | Past | Past | |
1 Year | 3 Years | 5 Years | 10 Years | 15 Years | 25 Years | |
Perritt MicroCap | ||||||
Opportunities Fund | 6.17% | 19.57% | 15.08% | 8.57% | 13.37% | 10.23% |
Russell 2000® Index | 8.06% | 18.18% | 17.39% | 8.67% | 8.36% | 9.67% |
(reflects no deduction | ||||||
for fees and expenses) | ||||||
Russell MicroCap® Index | 7.34% | 20.15% | 17.24% | 6.88% | N/A | N/A |
(reflects no deduction | ||||||
for fees and expenses) |
The Perritt MicroCap Opportunities Fund’s annualized expense ratio for the year ended October 31, 2013, as stated in the statutory prospectus, was 1.24%. The Fund imposes a 2% redemption fee on shares held for 90 days or less. Performance data does not reflect the redemption fee. If reflected, total returns would be reduced.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end is available by calling 800-331-8936.
* | The tables do not reflect the deduction of taxes that a shareholder would pay on the Fund’s distributions or the redemption of Fund shares. |
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Perritt MicroCap Opportunities Fund
Ten Largest Common Stock Holdings (Unaudited) |
John B. Sanfilippo & Son, Inc. (JBSS) engages in the processing and marketing of tree nuts and peanuts in the United States. It offers raw and processed nuts, including peanuts, almonds, Brazil nuts, pecans, pistachios, filberts, cashews, English walnuts, black walnuts, pine nuts, and macadamia nuts. The company provides its products under various private labels, as well as under the Fisher, Orchard Valley Harvest, and Sunshine Country brand names.
VASCO Data Security International, Inc. (VDSI) provides security software and services by designing, developing and marketing security systems to users of digital assets worldwide. VDSI retails its security systems through its direct sales force, distributors, resellers and systems integrators. VDSI’s strategy is to expand its markets and to offer additional products and services to the financial services sector.
GP Strategies Corp. (GPX) is a global performance improvement solutions and e-learning provider for companies in the field of electronics and semiconductor, healthcare, software, finance and accounting as well as government agencies. The company also provides consulting, engineering and technical services to companies in the automotive, steel, oil and gas, power, chemical and beverage industries.
Atlas Financial Holdings, Inc. (AFH) engages in the underwriting of commercial automobile insurance policies, focusing on the ‘light’ commercial automobile sector. Business sectors include taxi cabs, non-emergency para-transit, and limousine, livery and business auto.
Motorcar Parts of America, Inc. (MPAA) manufactures and distributes aftermarket automobile parts. It offers alternators, starters and wheel hub assembly products for import and domestic cars, light trucks, heavy duty, agriculture and industrial applications. The company sells its products to auto parts retail and traditional warehouse chains and to major automobile manufacturing for both their aftermarket programs and their warranty replacement programs.
United Insurance Holdings Corp. (UIHC) operates as a property and casualty insurance holding company. The company provides sourcing and writing services in Florida, Massachusetts, New Jersey, North Carolina, Rhode Island, South Carolina, and Texas. UIHC markets and distributes its policies to consumers through approximately 2,000 agents. The company’s target market consists of cases where the threat of natural disasters has caused large national insurance carriers to reduce their concentration of policies.
Hudson Technologies Inc. (HDSN) provides innovative services to the recurring problems within the refrigeration industry. Its products and services include refrigerant sales, refrigerant management services, reclamation of refrigerants and system decontamination to remove moisture, oils and other pollutants.
Hill International, Inc. (HIL) provides management and consulting services to transportation, environmental, energy and industrial markets. Clients include the United States and other national governments, foreign governments, and the private sector. Hill specifically focuses on two segments, Project Management and Construction Claims. The Project Management services provide a variety of construction management services and the Construction Claims advises clients to assist them in preventing or resolving claims and disputes.
PHI, Inc. (PHII.K) provides helicopter transportation services for companies,
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Perritt MicroCap Opportunities Fund
Ten Largest Common Stock Holdings (Unaudited) (Continued) |
hospitals, government agencies and other affiliated facilities within the oil and gas exploration, development, and production industry. PHIIK primarily operates in North America, West Africa and the Middle East. The company operates in three business segments: Oil and Gas, Air Medical, and Technical Services.
Penford Corp. (PENX) develops, manufactures and markets specialty natural based ingredient systems for food and industrial applications. The company has two main segments, Industrial Ingredients that supplies chemically modified specialty starches to the paper and packaging industries and Food Ingredients that supplies specialty starches and dextrin to the food service industries.
Fund holdings and/or sector allocations are subject to change at any time and
are not recommendations to buy or sell any security.
Please refer to the Schedule of Investments in this report for a complete list of Fund holdings.
Allocation of Portfolio Investments (Unaudited) | October 31, 2014 |
The sector classifications represented in the graph above and industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC. Percentages are based on total investments, at value.
Note: | For presentation purposes, the Fund has grouped some of the industry categories. For purposes of categorizing securities for compliance with section 8(b)(1) of the Investment Company Act of 1940, the Fund uses more specific industry classifications. |
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Perritt Ultra MicroCap Fund
Portfolio Managers’ Message |
Michael Corbett, | Matthew Brackmann, |
Lead Portfolio Manager | Co-Portfolio Manager |
Since 2004 | Since 2014 |
The Perritt Ultra MicroCap Fund posted a return of 5.96 percent for the fiscal year ending October 31, 2014. This compares to the 8.06 percent return for the Russell 2000 Index and 7.34 percent return for the Russell Microcap Index. We are proud to announce that in August, the Fund celebrated its ten-year anniversary. The complete performance for the Fund and its benchmarks can be found on page 17.
As we mentioned in our semiannual report from April 2014, the portfolio had seen strong performance from its investments in the financial, technology and consumer staples sectors. This held true throughout the fiscal year. An example in the financials sector is United Insurance Holdings Corp. (UIHC), which was up 122 percent. In the technology sector, Quadrant 4 Systems Corp. (QFOR) was up 43 percent and Wide Point Corp. (WYY) nearly doubled. Despite these strong investments, the underperformance of the fund relative to the Russell Microcap Index came mainly from the Fund’s investments in the healthcare sector, which is detailed below.
Our internal attribution analysis shows that the Fund performed poorly within the healthcare sector relative to that of the healthcare names within the Russell Microcap Index. This underperformance with healthcare was due to two issues. The first issue was what we believe is simply a consolidation phase experienced by stocks that have performed remarkably well during the past few years. For example, we purchased Addus Homecare Corp. (ADUS) and Trinity Biotech Plc (TRIB) several years ago, and each company’s stock appreciated between 400-500 percent. However, both stocks declined in the past year by more than 20 percent. We continue to see these companies as potentially strong performers in the long run.
The second issue related to relative underperformance was the strong performance of biotechnology investments in the index. The Fund’s minimal investments (less than one percent) in the biotechnology sector compares to a more than 10 percent investment by the Russell Microcap Index. Many of the biotechnology names contributed significantly to the Index’s return, despite not generating any revenue and losing cash in their operations. These types of companies can generate a lot of excitement in the short term but do not fit the investment criteria of the Ultra MicroCap Fund.
As of October 31, 2014, the Fund’s portfolio contained the common stock of 101 companies, down from 148 companies in April. During the period, the number of holdings were reduced to focus the portfolio into our highest-conviction investments. The Fund’s largest holdings and detailed description can be found beginning on page 18. Based on our earnings estimates, the Fund’s portfolio is trading at less than 15 times 2015 earnings. The median stock in the portfolio is priced at 1.1 times revenue and the median stock in the portfolio is priced at 1.6 times book value. Most distinctly, the median market capitalization is approximately $77 million. According to Morningstar, the Perritt Ultra MicroCap
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Perritt Ultra MicroCap Fund
Fund has the lowest average market capitalization of 8,335 domestic stock mutual funds as of October 30, 2014.
As we have mentioned in this report, over the years the Ultra MicroCap Fund tends to have investments that fly under the radar screen of most investors. The micro-cap universe, particularly stocks under $100 million market capitalization, are often ignored by investors for extended periods of time. Therefore, the potential rewards can take longer to achieve but can be swift. While we, as both managers and shareholders, note the Fund’s recent underperformance, we remain focused on the long term potential of our investments. We would like to remind investors that the rewards of micro-cap investing typically are never consistent in the short run, but can have the potential to be rewarding over a full market cycle.
On November 18th, 2014 the Perritt Ultra MicroCap Fund paid a capital gains distribution. The total capital gain distribution was $2.28554 per share. The capital gain distribution is not reflected in the financials of this annual report because it was completed in fiscal 2015, but distributed in calendar year 2014. Please review your statements for the full details of the capital gain distribution.
We want to thank our fellow shareholders for their continued support and confidence in the Perritt Capital Management team. We also would like to welcome the new investors to the Ultra MicroCap Fund. The Perritt Ultra MicroCap Fund is included on Charles Schwab’s Select List of recommended mutual funds. Each member of our investment committee as well as many other employees has made investments in this Fund since its inception. If you have any questions or comments about this report or your investment in the Perritt Ultra MicroCap Fund, please call us toll- free at (800)331-8936 or visit our web site at www.perrittcap.com. Please refer to the prospectus for information about the Fund’s investment objectives and strategies.
Michael Corbett | Matt Brackmann |
President and | Co-Portfolio Manager |
Portfolio Manager |
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Perritt Ultra MicroCap Fund
Russell 2000 Index An index measuring the performance of approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States.
Russell Microcap Index A capitalization weighted index of 2,000 small-cap and micro-cap stocks that captures the smallest 1,000 companies in the Russell 2000, plus 1,000 smaller U.S.-based listed stocks. The broad index is designed to present an unbiased collection of the smallest tradable securities that still meet exchange listing requirements, so over-the-counter (OTC) stocks and pink sheet securities are excluded. The Russell Microcap Index is recalculated annually to prevent growing stocks from distorting index performance, and to include new entrants. One cannot invest directly in an index
Book Value The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation.
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Funds invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility than larger companies. The Funds invest in micro-cap companies which tend to perform poorly during times of economic stress.
The information provided herein represents the opinion of Perritt Capital Management and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice. Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.
Schwab Select List Criteria: Actively Managed OneSource Funds, including Schwab Affiliate Funds, are evaluated by Charles Schwab Investment Advisory, Inc. (CSIA) based on a quantitative analysis of risk, performance, expenses, active share (when meaningful), assets under management and asset flows. CSIA also may apply additional qualitative factors to its analysis to enhance its overall evaluation of a fund, including, for example, changes in a fund’s investment strategy or management structure, portfolio manager tenure, whether a fund’s investment style and portfolio holdings are representative of its investment category, portfolio composition and turnover rates, consistency of a fund’s performance and CSIA’s evaluation of the fund over time, and other risk and diversification considerations. Additionally, funds selected must be: No-load and open to new investors at Schwab in all 50 states. Have a minimum three-year performance track record (except funds that are listed below the “Leading Schwab Affiliate Funds” sections of the lists, which are eligible if they have a minimum 12 months performance track record under their current management and/or current investment objectives and strategy). Have at least $40 million in assets (except for small-cap value, high yield, multisector bond, world bond, emerging market equity and bond, diversified Pacific Asia, Pacific Asia ex-Japan, Europe, Japan, Latin America, convertibles, retirement income, target date and specialty funds, which require at least $20 million in assets). To meet this requirement, assets in multiple share classes of the same fund may be aggregated. There are approximately 2,100 funds that participate in the Schwab Mutual Fund One Source service and are eligible for the OneSource Select List.
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15
Perritt Ultra MicroCap Fund
Performance* (Unaudited) | October 31, 2014 |
Perritt Ultra MicroCap Fund versus
Russell 2000® Index and Russell MicroCap® Index
There are several ways to evaluate a fund’s historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund’s share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value).
Cumulative total returns reflect the Fund’s actual performance over a set period. For example, if you invested $1,000 in a fund that had a 5% return over one year, you would end up with $1,050. You can compare the Fund’s returns to the Russell 2000® Index, which reflects a popular measure of the stock performance of small companies, and the Russell MicroCap® Index, which measures the performance of the microcap segment of the U.S. equity market.
Average annual total returns take the Fund’s actual (or cumulative) return and show you what would have happened if the Fund had performed at a constant rate each year.
* | The graph illustrates the performance of a hypothetical $10,000 investment made in the Fund 10 years ago. Assumes reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charge or redemption fees or the deduction of taxes that a shareholder would pay on the Fund’s distributions or the redemption of Fund shares. The graph does not imply any future performance. |
16
Perritt Ultra MicroCap Fund
Performance* (Unaudited) (Continued) | October 31, 2014 |
Cumulative Total Returns** |
Periods ended October 31, 2014 (Unaudited) |
Past | Past | Past | Past | Since | |
1 Year | 3 Years | 5 Years | 10 Years | Inception* | |
Perritt Ultra MicroCap Fund | 5.96% | 57.63% | 111.28% | 103.62% | 107.29% |
Russell 2000® Index | 8.06% | 65.07% | 122.95% | 129.62% | 146.65% |
(reflects no deduction | |||||
for fees and expenses) | |||||
Russell MicroCap® Index | 7.34% | 73.46% | 121.50% | 94.51% | 106.60% |
(reflects no deduction | |||||
for fees and expenses) |
Average Annual Total Returns** |
Periods ended October 31, 2014 (Unaudited) |
Past | Past | Past | Past | Since | |
1 Year | 3 Years | 5 Years | 10 Years | Inception* | |
Perritt Ultra MicroCap Fund | 5.96% | 16.38% | 16.14% | 7.37% | 7.43% |
Russell 2000® Index | 8.06% | 18.18% | 17.39% | 8.67% | 9.28% |
(reflects no deduction | |||||
for fees and expenses) | |||||
Russell MicroCap® Index | 7.34% | 20.15% | 17.24% | 6.88% | 7.40% |
(reflects no deduction | |||||
for fees and expenses) |
The Perritt Ultra MicroCap Fund’s annualized expense ratio for the year ended October 31, 2013, as stated in the statutory prospectus, was 1.76%. The Fund imposes a 2% redemption fee on shares held for 90 days or less. Performance data does not reflect the redemption fee. If reflected, total returns would be reduced.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end is available by calling 800-331-8936.
* | The since inception date is August 30, 2004. |
** | The tables do not reflect the deduction of taxes that a shareholder would pay on the Fund’s distributions or the redemption of Fund shares. |
17
Perritt Ultra MicroCap Fund
Ten Largest Common Stock Holdings (Unaudited) |
Cherokee Inc. (CHKE) is a global marketer and licensor of apparel, footwear, home and accessories brands. The company owns several Trademarks including Cherokee, Liz Lange, Completely Me by Liz Lange, Hawk, Tony Hawk, Sideout Sport and Carole Little and others.
John B. Sanfilippo & Son, Inc. (JBSS) engages in the processing and marketing of tree nuts and peanuts in the United States. It offers raw and processed nuts, including peanuts, almonds, Brazil nuts, pecans, pistachios, filberts, cashews, English walnuts, black walnuts, pine nuts, and macadamia nuts. The company provides its products under various private labels, as well as under the Fisher, Orchard Valley Harvest, and Sunshine Country brand names.
Kingstone Companies Inc. (KINS) a property and casualty insurance company that provides its products and services through its own subsidiary, Kingstone Insurance Company to small businesses and individuals mainly in New York State.
Quadrant 4 System Corporation (QFOR) provides consulting, technology services and outsourcing services through its direct sales approach. The company provides health care exchange platforms, innovative software products and propriety SMAC (social media, mobility, analytics and cloud computing) solutions to enterprise clients in the Retail and Manufacturing, Media and Publishing, Financial Services and Health Care sectors.
Century Casinos, Inc. (CNTY) an international casino entertainment company that owns and operates Century Casino & Hotels in Cripple Creek and Central City, Colorado, and in Edmonton, Alberta, Canada and the Century Casino in Calgary, Alberta, Canada. The Company also operates casinos aboard 14 luxury cruise vessels. Through its Austrian subsidiary, Century Casinos Europe GmbH, the Company holds a 66.6% ownership interest in Casinos Poland Ltd., the owner and operator of nine casinos in Poland. The Company is currently developing a project in the north metropolitan area of Calgary, Alberta, Canada that will include a horse race track and other gaming, restaurant and entertainment facilities.
Mobivity Holdings Corp (MFON) a technology company that provides mobile marketing solutions to resellers, brands and enterprises who want to conduct localized mobile campaigns. Mobivity generates revenue by charging a per-message transactional fee or a fixed or variable licensing fee.
Newtek Business Services (NEWT) provides financial and business services for small and medium size businesses. Newtek through its subsidiaries acts as a one-stop-shop, offers electronic payment processing, check approval, web hosting, data storage, back up services, cloud computing, and other similar services to more than 100,000 business accounts nationally and globally.
Hennessy Advisors, Inc. (HNNA) a publicly traded investment manager offering a broad range of domestic equity, specialty, balanced and fixed income mutual funds. Hennessy currently serves as the investment advisor to 16 open-ended mutual funds and primarily provides its services to investment companies.
BSquare Corporation (BSQR) provides software solutions and related engineering services to companies that develop smart, connected systems. Their customers include original equipment manufacturers, original design manufacturers and corporate enterprises, as well as silicon vendors and peripheral vendors.
18
Perritt Ultra MicroCap Fund
Ten Largest Common Stock Holdings (Unaudited) (Continued) |
Hudson Technologies Inc. (HDSN) provides innovative services to the recurring problems within the refrigeration industry. Its products and services include refrigerant sales, refrigerant management services, reclamation of refrigerants and system decontamination to remove moisture, oils and other pollutants.
Fund holdings and/or sector allocations are subject to change at any time and
are not recommendations to buy or sell any security.
Please refer to the Schedule of Investments in this report for a complete list of Fund holdings.
Allocation of Portfolio Investments (Unaudited) October 31, 2014 |
The sector classifications represented in the graph above and industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC. Percentages are based on total investments, at value.
Note: | For presentation purposes, the Fund has grouped some of the industry categories. For purposes of categorizing securities for compliance with section 8(b)(1) of the Investment Company Act of 1940, the Fund uses more specific industry classifications. |
19
Perritt Low Priced Stock Fund
Portfolio Managers’ Message |
Michael Corbett, | Brian Gillespie, |
Lead Portfolio Manager | Co-Portfolio Manager |
Since 2014 | Since 2014 |
We are excited to announce that earlier this year we launched our third mutual fund, the Perritt Low Priced Stock Fund. We launched the Fund to take our proven investment process (used since 1987) in micro-cap stocks and add small-cap stock opportunities to our fund family. As a reminder, our new fund generally seeks to invest in companies trading at $15 or below with a market cap below $3 Billion at the time of initial investment. The Fund uses the same investment and stock selection process and research that has been part of our firm’s twenty-five years of experience investing in smaller companies.
Before we dive into the commentary, we would like to take this time to simply say “Thank You” for investing in our new fund and entrusting us to help you reach your investment goals. We are focused on the long term prospects of the stocks in our portfolio. As such, it is difficult to judge the performance of the fund over a very short time frame. While this fund is relatively new, we are confident the portfolio is well positioned today with our largest fund holdings in what we believe are high quality, attractively priced stocks. Our performance results, as well as the results for the Russell 2000 index can be viewed on page 25.
As of October 31, 2014, the Fund’s portfolio contained the common stocks of 68 companies. The Fund’s 10 largest holdings and detailed descriptions can be found beginning on page 26. Based on our earnings estimates, the Fund’s portfolio is trading at just above 15 times next year’s earnings. The median price/revenues for the portfolio is 1.1 times and the median market capitalization is approximately $460 million.
Because we invest from the “bottom-up,” meaning we build the portfolio on a stock-by-stock basis, sector weightings are a function of where we see the best valuations and growth prospects. Our largest sector weights are Information Technology and Industrials. Both of these sector weights are higher than the weightings in our benchmark, The Russell 2000 Index. Within the Technology sector, we found attractive opportunities in the semiconductor and semiconductor equipment space. In the industrials sector, machinery was an overweight for us as we anticipated an increase in industrial production within the United States as well as abroad. We are pleased with the results of the companies in each of these areas.
Where we differ the most from our benchmark is in the energy, financials and healthcare sectors. We had an overweight in energy based on the assumption that the economies outside of the United States would begin to see improvement. Unfortunately, the improvement in these economies has been slower than we anticipated. As a result, there has been a lack of strong demand for oil & gas, resulting in a decline in the price of West Texas Intermediate (WTI) crude from over $100 this past summer to the current level below $70. The decline certainly had an impact on the companies within our portfolio. Within financials we have an underweight in banks and real estate
20
Perritt Low Priced Stock Fund
investment trusts (REITs) relative to the index. The main reason for our underweight in these two areas is due to our concern about some of the valuations. Biotechnology companies in the healthcare sector have had a strong performance year-to-date. Biotechnology is an area we generally avoid because of typically high valuations and the uncertainties surrounding FDA approval. We do not expect to change our philosophy and make biotechnology an emphasis of the fund.
Turning to a few individual names, one of our best performing holdings was 1-800-Flowers.com, Inc. (FLWS). This company is a florist and gift shop operator. They have well-known brands such as Fannie May, The Popcorn Factory and recently acquired Harry & David Holdings, Inc. The recent acquisition should help push total revenues in fiscal 2015 to over $1 Billion. The company generates strong cash flow from operations and maintains a strong balance sheet. Both of these metrics are important to us as we look for new ideas to add to our portfolio. Another solid performer for us has been JetBlue Airways Corporation (JBLU). As we mentioned before, the price of oil has slumped some 30% from its peak this past summer. Like other airlines, JetBlue benefits from lower oil prices due to one of its main input costs of jet fuel. JetBlue is another company that generates strong cash flows from operations. We believe both of these companies still have upside potential from current levels.
We are confident in our current holdings and the opportunities our new fund presents. We believe valuations are still attractive and present upside potential. Perritt Capital Management and its employees provided more than $1 million of initial capital to launch the Perritt Low Priced Stock Fund. As part of our dedication, we have capped the Fund’s expense ratio at 1.50 percent for at least the first year, with a gross expense ratio of 2.50 percent, which means that Perritt Capital Management will be paying a great deal of the Perritt Low Priced Stock Fund’s expenses in order to ensure a cost-efficient experience for shareholders. If you have any questions or comments about this report or your investment in the Perritt Low Priced Stock Fund, please call us toll-free at (800)331-8936 or visit our website at www.perrittcap.com. Please refer to the prospectus for information about the Fund’s investment objectives and strategies.
Michael Corbett | Brian Gillespie |
President and | Co-Portfolio Manager |
Portfolio Manager |
21
Perritt Low Priced Stock Fund
The fund is the successor to a separately managed account. The investment policies, objectives, guidelines and restrictions of the fund are in all material respects equivalent to those of the predecessor, and the predecessor’s portfolio managers are the current portfolio managers of the fund. However, the predecessor was not a registered investment company. Had the predecessor been registered under the Investment Company Act and been subject to the provisions of the Investment Company Act and the Internal Revenue Code to which the fund is subject, its investment performance may have been adversely affected.
Cash Flow A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities – financing, operations or investing – although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments. This holds true for both business and personal finance.
Price/Revenues A valuation ratio that compares a company’ stock price to its revenues. The price-to-sales ratio is an indicator of the value placed on each dollar of a company’s sales or revenues. It can be calculates either by dividing the company’s market capitalization by its total sales over a 12-month period, or on a per-share basis by dividing the stock price by sales per share for a 12-month period.
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Funds invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility. The Funds invest in micro-cap companies which tent to perform poorly during times of economic stress. The Fund may invest in early stage companies which tend to be more volatile and somewhat more speculative than investments in more established companies. Low Priced stocks are generally more volatile than higher priced securities.
The investment adviser has contractually agreed to waive fees and/or reimburse operating expenses (other than interest, brokerage commissions, dividend expense on short sales, taxes, extraordinary expenses and acquired fund fees and expenses) so that total annual operating expenses are not expected to exceed 1.50% through February 28, 2015.
The information provided herein represents the opinion of Perritt Capital Management and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.
22
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23
Perritt Low Priced Stock Fund
Performance* (Unaudited) | October 31, 2014 |
Perritt Low Priced Stock Fund** versus
Russell 2000® Index and Russell MicroCap® Index
There are several ways to evaluate a fund’s historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund’s share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value).
Cumulative total returns reflect the Fund’s actual performance over a set period. For example, if you invested $1,000 in a fund that had a 5% return over one year, you would end up with $1,050. You can compare the Fund’s returns to the Russell 2000® Index, which reflects a popular measure of the stock performance of small companies, and the Russell MicroCap® Index, which measures the performance of the microcap segment of the U.S. equity market.
Average annual total returns take the Fund’s actual (or cumulative) return and show you what would have happened if the Fund had performed at a constant rate each year.
* | The graph illustrates the performance of a hypothetical $10,000 investment made in the Fund at inception (June 30, 2012) of the Fund’s predecessor account through October 31, 2014. Assumes reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charge or redemption fees or the deduction of taxes that a shareholder would pay on the Fund’s distributions or the redemption of Fund shares. The graph does not imply any future performance. |
** | June 30, 2012 is the inception date of the Fund’s predecessor account. The Fund commenced operations on February 28, 2014. The investment policies, objectives, guidelines and restrictions of the Fund are in all material respects equivalent to those of the predecessor account. |
24
Perritt Low Priced Stock Fund
Performance* (Unaudited) (Continued) | October 31, 2014 |
Cumulative Total Returns** |
Periods ended October 31, 2014 (Unaudited) |
Past | Past | Since | |
1 Year* | 2 Years* | Inception* | |
Perritt Low Priced Stock Fund | 5.24% | 48.17% | 50.87% |
Russell 2000® Index | 8.06% | 47.27% | 51.65% |
(reflects no deduction for fees and expenses) | |||
Russell MicroCap® Index | 7.34% | 48.90% | 52.82% |
(reflects no deduction for fees and expenses) |
Average Annual Total Returns** |
Periods ended October 31, 2014 (Unaudited) |
Past | Past | Since | |
1 Year* | 2 Years* | Inception* | |
Perritt Low Priced Stock Fund | 5.24% | 21.72% | 19.24% |
Russell 2000® Index | 8.06% | 21.36% | 19.50% |
(reflects no deduction for fees and expenses) | |||
Russell MicroCap® Index | 7.34% | 22.02% | 19.90% |
(reflects no deduction for fees and expenses) |
The Perritt Low Priced Stock Fund’s annualized net expense ratio, as stated in the statutory prospectus, dated February 28, 2014, was 1.50%. The Fund imposes a 2% redemption fee on shares held for 90 days or less. Performance data does not reflect the redemption fee. If reflected, total returns would be reduced.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end is available by calling 800-331-8936.
* | The Fund is the successor to a separately managed account. Immediately prior to the Fund commencing operations on February 28, 2014, the predecessor account transferred its assets to the Fund in exchange for the Fund’s shares. The investment policies, objectives, guidelines and restrictions of the Fund are in all material respects equivalent to those of the predecessor. In addition, the predecessor’s portfolio managers are the current portfolio managers of the Fund. As a mutual fund registered under the Investment Company Act of 1940, the Fund is subject to certain restrictions under the 1940 Act and the Internal Revenue Code to which the predecessor was not subject. Had the predecessor been registered under the 1940 Act and been subject to the provisions of the 1940 Act and the Code, its investment performance may have been adversely affected. The performance was achieved by the predecessor when Fund assets were relatively small; the same strategies may not be available, and similar performance may not be achieved, when the Fund’s assets are larger. The performance shown includes an annual management fee of 1.00% and does not include any expenses paid by the predecessor’s investment adviser. |
The since inception date is June 30, 2012, the date of inception of the Fund’s predecessor account. The past performance of the Fund and its predecessor account (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. | |
** | The tables do not reflect the deduction of taxes that a shareholder would pay on the Fund’s distributions or the redemption of Fund shares. |
25
Perritt Low Priced Stock Fund
Ten Largest Common Stock Holdings (Unaudited) |
Select Medical Holdings Corp. (SEM) operates in two segments, Specialty Hospitals and Outpatient Rehabilitation. The specialty segment focuses on long term inpatients and intensive care patients. SEM focuses on the need to improve inpatient services, commercial volume and expansion through joint ventures and acquisition. The outpatient rehabilitations segment engages in physical, occupational, and speech rehabilitation services.
Mitel Networks Corp. (MITL) provides business communication and collaboration software and services to small-to-medium sized enterprises nationally and internationally. Its products and services include IP telephony platforms, unified communication and collaboration solutions, subscription-based telecommunication solutions, cloud based applications, network services and connectivity.
Allied Motion Technologies, Inc. (AMOT) designs, manufactures and sells electromagnetic, mechanical and electronic motion controls, gearing and optical encoders for a wide range of motion applications such as medical and healthcare, automotive, aerospace and defense, electronics, industrials and commercial.
1-800 Flowers.Com, Inc. (FLWS) is the world’s leading online florist and gift shop. The company operates in three main segments: Customer Floral, Gourmet Food and Gift Baskets, and BloomNet Wire Service. Some of its offerings include fresh-cut flowers, fruit arrangements and plants, gifts, popcorn, gourmet foods and gift baskets, cookies, chocolates, candies and wine.
RF Micro Devices, Inc. (RFMD) designs, develops, manufactures, and markets radio frequency solutions for original equipment manufacturers and original design manufacturers in United States and internationally. Its products facilitate worldwide mobility and provide improved connectivity and support for mobile devices, wireless infrastructure, broadband, cable television, aerospace and defense markets.
Brocade Communications Systems, Inc. (BRCD) provides a comprehensive line of high-performance networking hardware and software products and services to organizations. Its offerings improve the reliability, efficiency and adaptability of data centers and help customers to deploy next generation data center architecture, virtualization, and cloud computing.
Mueller Water Products Inc. (MWA) manufactures and markets products and services used in the transmission and measurement of water in North America. They operate in two main segments; Mueller Co and Anvill. Mueller Co manufactures valves for water and gas systems while Anvill manufactures and sources fittings, couplings, hangers, valves and related products for use in nonresidential, industrial, power and oil and gas end markets.
Gencor Industries Inc. (GENC) designs, manufactures and sells heavy machinery used in the production of highway construction materials, synthetic fuels and environmental control equipment. Gencor sells its products through its own sales reps and independent dealers globally.
26
Perritt Low Priced Stock Fund
Ten Largest Common Stock Holdings (Unaudited) (Continued) |
Hawaiian Holdings Inc. (HA) engages in the transportation of passenger and cargo between Hawaiian Islands and North America, South Pacific, Australia, New Zealand and Asia. Hawaiian offers non-stop services to Hawaii from more U.S. gateway cities than any other airline, with approximately 160 daily flights.
JetBlue Airways Corp. (JBLU) is the fifth largest passenger carrier in the U.S. based on revenue passenger miles with average of 800 daily flights. JetBlue provides air transportation services in U.S., Caribbean and Latin America.
Fund holdings and/or sector allocations are subject to change at any time and
are not recommendations to buy or sell any security.
Please refer to the Schedule of Investments in this report for a complete list of Fund holdings.
Allocation of Portfolio Investments (Unaudited) | October 31, 2014 |
The sector classifications represented in the graph above and industry classifications represented in the Schedule of Investments are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC. Percentages are based on total investments, at value.
Note: | For presentation purposes, the Fund has grouped some of the industry categories. For purposes of categorizing securities for compliance with section 8(b)(1) of the Investment Company Act of 1940, the Fund uses more specific industry classifications. |
27
Perritt MicroCap Opportunities Fund
Schedule of Investments | October 31, 2014 |
Shares | COMMON STOCKS – 90.05% | Value | ||||||
Aerospace & Defense – 1.13% | ||||||||
182,400 | Air Industries | |||||||
Group, Inc. | $ | 2,152,320 | ||||||
322,405 | CPI Aerostructures, | |||||||
Inc.(a) | 3,078,968 | |||||||
5,231,288 | ||||||||
Auto Parts & Equipment – 3.39% | ||||||||
220,000 | Miller Industries, Inc. | 4,349,400 | ||||||
125,000 | Motorcar Parts | |||||||
of America, Inc. | ||||||||
(Acquired 4/24/2012, | ||||||||
Cost $968,750)(a)(b) | 3,630,000 | |||||||
104,361 | Motorcar Parts | |||||||
of America, Inc.(a) | 3,030,643 | |||||||
421,502 | SORL Auto | |||||||
Parts, Inc.(a) | 1,669,148 | |||||||
230,000 | Stoneridge, Inc.(a) | 2,987,700 | ||||||
15,666,891 | ||||||||
Building Materials – 1.56% | ||||||||
250,000 | Global Brass & Copper | |||||||
Holdings, Inc. | 3,500,000 | |||||||
300,000 | PGT, Inc.(a) | 2,821,500 | ||||||
37,400 | Schnitzer Steel | |||||||
Industries, Inc. | 880,770 | |||||||
7,202,270 | ||||||||
Business Services – 7.20% | ||||||||
79,150 | Barrett Business | |||||||
Services, Inc. | 1,860,816 | |||||||
230,800 | Datalink Corp.(a) | 2,919,620 | ||||||
300,000 | EPIQ Systems, Inc. | 4,812,000 | ||||||
209,000 | GP Strategies Corp.(a) | 6,930,440 | ||||||
980,085 | Innodata Isogen, Inc.(a) | 2,587,425 | ||||||
27,399 | Newtek Business | |||||||
Services, Inc.(a) | 386,326 | |||||||
384,486 | PCM, Inc.(a) | 3,714,135 | ||||||
450,000 | PRGX Global, Inc.(a) | 2,380,500 | ||||||
498,000 | RCM Technologies, | |||||||
Inc.(a) | 3,754,920 | |||||||
38,200 | Rentrak Corporation(a) | 2,936,434 | ||||||
175,000 | Sizmek, Inc.(a) | 1,002,750 | ||||||
33,285,366 | ||||||||
Chemical & Related Products – 4.10% | ||||||||
169,644 | Aceto Corporation | 3,857,704 | ||||||
158,000 | KMG Chemicals, Inc. | 2,796,600 | ||||||
207,000 | Northern Technologies | |||||||
International Corp.(a) | 3,875,040 | |||||||
403,017 | OMNOVA | |||||||
Solutions, Inc.(a) | 2,833,210 | |||||||
299,080 | Penford Corp.(a) | 5,637,658 | ||||||
19,000,212 | ||||||||
Commercial Banks – 2.86% | ||||||||
170,000 | Bankwell Financial | |||||||
Group, Inc.(a) | 3,230,000 | |||||||
130,000 | Berkshire Hills | |||||||
Bancorp, Inc. | 3,351,400 | |||||||
100,000 | Peoples Bancorp, Inc. | 2,465,000 | ||||||
325,000 | Tristate Capital | |||||||
Holdings, Inc.(a) | 3,168,750 | |||||||
74,000 | Veritex Holdings, Inc.(a) | 1,033,040 | ||||||
13,248,190 | ||||||||
Commercial Services & Supplies – 1.09% | ||||||||
200,000 | Courier Corp. | 2,714,000 | ||||||
81,100 | Libbey, Inc.(a) | 2,331,625 | ||||||
5,045,625 | ||||||||
Construction & Engineering – 4.88% | ||||||||
270,000 | Comfort Systems | |||||||
USA, Inc. | 4,147,200 | |||||||
440,000 | Furmanite Corp.(a) | 3,291,200 | ||||||
1,500,000 | Hill International, | |||||||
Inc.(a) | 5,820,000 | |||||||
250,000 | Layne Christensen | |||||||
Company(a) | 1,800,000 | |||||||
350,000 | MFRI, Inc.(a) | 3,192,000 | ||||||
488,555 | Sterling Construction | |||||||
Company, Inc.(a) | 4,309,055 | |||||||
22,559,455 | ||||||||
Consumer Products – Distributing – 0.53% | ||||||||
1,819,907 | LifeVantage Corp.(a) | 2,456,875 | ||||||
2,456,875 | ||||||||
Consumer Products – Manufacturing – 3.23% | ||||||||
91,402 | Delta Apparel, Inc.(a) | 959,721 | ||||||
124,740 | Flexsteel | |||||||
Industries, Inc. | 4,279,829 | |||||||
180,000 | Orchids Paper | |||||||
Products Co. | 5,176,800 | |||||||
80,000 | Universal Electronics, | |||||||
Inc.(a) | 4,551,200 | |||||||
14,967,550 |
The accompanying notes to financial statements are an integral part of this schedule.
28
Perritt MicroCap Opportunities Fund
Schedule of Investments (Continued) | October 31, 2014 |
Shares | Value | |||||||
Consumer Services – 0.93% | ||||||||
430,000 | Dice Holdings, Inc.(a) | $ | 4,287,100 | |||||
4,287,100 | ||||||||
Energy & Related Services – 6.44% | ||||||||
2,750,000 | Cal Dive International, | |||||||
Inc.(a) | 275,000 | |||||||
473,000 | DHT Holdings, Inc. | 3,150,180 | ||||||
140,000 | Matrix Service Co.(a) | 3,508,400 | ||||||
146,900 | Mitcham Industries, | |||||||
Inc.(a) | 1,498,380 | |||||||
325,000 | Newpark Resources, | |||||||
Inc.(a) | 3,714,750 | |||||||
130,000 | PHI, Inc.(a) | 5,816,200 | ||||||
250,000 | Renewable Energy | |||||||
Group, Inc.(a) | 2,632,500 | |||||||
272,040 | SAExploration | |||||||
Holdings, Inc.(a) | 1,901,560 | |||||||
300,000 | Scorpio Tankers, Inc. | 2,619,000 | ||||||
325,000 | StealthGas, Inc.(a) | 2,730,000 | ||||||
622,800 | TGC Industries, Inc.(a) | 1,955,592 | ||||||
29,801,562 | ||||||||
Financial Services – 6.86% | ||||||||
994,454 | Cowen Group, Inc.(a) | 4,017,594 | ||||||
160,000 | FBR & Co.(a) | 3,862,400 | ||||||
600,000 | Global Cash Access | |||||||
Holdings, Inc.(a) | 4,374,000 | |||||||
152,776 | Hennessy Advisors, Inc. | 2,814,134 | ||||||
100,000 | Liberty Tax, Inc.(a) | 3,789,000 | ||||||
225,814 | Oppenheimer | |||||||
Holdings, Inc. | 5,543,734 | |||||||
250,924 | Silvercrest Asset | |||||||
Management Group, | ||||||||
Inc. – Class A | 3,746,295 | |||||||
487,247 | SWS Group, Inc.(a) | 3,600,755 | ||||||
31,747,912 | ||||||||
Food – 5.40% | ||||||||
350,000 | Crimson Wine | |||||||
Group Ltd.(a) | 3,185,000 | |||||||
350,000 | Diversified Restaurant | |||||||
Holdings, Inc.(a) | 1,813,000 | |||||||
142,955 | Farmer Brothers Co.(a) | 4,168,568 | ||||||
255,000 | John B. Sanfilippo | |||||||
& Son, Inc. | 9,473,250 | |||||||
300,000 | Landec Corp.(a) | 3,777,000 | ||||||
175,000 | Omega Protein Corp.(a) | 2,528,750 | ||||||
24,945,568 | ||||||||
Health Care Providers & Services – 2.34% | ||||||||
500,000 | Five Star Quality | |||||||
Care, Inc.(a) | 2,065,000 | |||||||
649,800 | Skilled Healthcare | |||||||
Group, Inc. – Class A(a) | 4,503,114 | |||||||
110,000 | The Ensign Group, Inc. | 4,259,200 | ||||||
10,827,314 | ||||||||
Industrial Goods – 1.35% | ||||||||
1,400,000 | Hudson Technologies, | |||||||
Inc.(a) | 6,244,000 | |||||||
6,244,000 | ||||||||
Insurance – 3.72% | ||||||||
452,800 | Atlas Financial | |||||||
Holdings, Inc.(a) | 6,715,024 | |||||||
128,405 | EMC Insurance | |||||||
Group, Inc. | 4,114,096 | |||||||
325,000 | United Insurance | |||||||
Holdings Corp. | 6,370,000 | |||||||
17,199,120 | ||||||||
Leisure – 2.14% | ||||||||
900,000 | Century Casinos, Inc.(a) | 4,896,000 | ||||||
988,473 | Full House Resorts, | |||||||
Inc.(a)(c) | 1,275,130 | |||||||
230,000 | Monarch Casino & | |||||||
Resort, Inc.(a) | 3,742,100 | |||||||
9,913,230 | ||||||||
Medical Supplies & Services – 4.50% | ||||||||
219,037 | Addus Homecare | |||||||
Corp.(a) | 4,352,265 | |||||||
542,292 | BioScrip, Inc.(a) | 3,503,207 | ||||||
169,940 | Cryolife, Inc. | 1,743,584 | ||||||
200,000 | Exactech, Inc.(a) | 4,260,000 | ||||||
1,106,000 | Liberator Medical | |||||||
Holdings, Inc. | 3,185,280 | |||||||
400,000 | Syneron Medical Ltd.(a) | 3,744,000 | ||||||
20,788,336 | ||||||||
Oil & Gas – 4.01% | ||||||||
680,000 | Abraxas Petroleum | |||||||
Corp.(a) | 2,808,400 | |||||||
275,000 | Hallador Energy Co. | 3,300,000 | ||||||
375,000 | Synergy Resources | |||||||
Corp.(a) | 4,571,250 | |||||||
250,000 | Triangle Petroleum | |||||||
Corp.(a) | 1,937,500 | |||||||
550,000 | Vaalco Energy, Inc.(a) | 4,081,000 |
The accompanying notes to financial statements are an integral part of this schedule.
29
Perritt MicroCap Opportunities Fund
Schedule of Investments (Continued) | October 31, 2014 |
Shares | Value | |||||||
Oil & Gas (Continued) | ||||||||
539,138 | Warren Resources, | |||||||
Inc.(a) | $ | 1,865,417 | ||||||
18,563,567 | ||||||||
Retail – 3.84% | ||||||||
133,200 | Big 5 Sporting | |||||||
Goods Corp. | 1,639,692 | |||||||
561,600 | CafePress, Inc.(a) | 1,735,344 | ||||||
475,000 | Christopher & | |||||||
Banks Corp.(a) | 3,101,750 | |||||||
198,050 | Kirklands, Inc.(a) | 3,525,290 | ||||||
307,100 | Systemax, Inc.(a) | 4,698,630 | ||||||
98,000 | Weyco Group, Inc. | 3,052,700 | ||||||
17,753,406 | ||||||||
Semiconductor Related Products – 4.88% | ||||||||
1,497,584 | AXT, Inc.(a) | 3,534,298 | ||||||
252,969 | CyberOptics Corp.(a) | 2,314,667 | ||||||
350,000 | DSP Group, Inc.(a) | 3,391,500 | ||||||
300,000 | Integrated Silicon | |||||||
Solution, Inc. | 4,074,000 | |||||||
600,000 | Photronics, Inc.(a) | 5,394,000 | ||||||
440,000 | Rudolph Technologies, | |||||||
Inc.(a) | 3,863,200 | |||||||
22,571,665 | ||||||||
Software – 3.65% | ||||||||
440,000 | American Software, | |||||||
Inc. – Class A | 4,250,400 | |||||||
2,259,733 | iPass, Inc.(a) | 3,028,042 | ||||||
150,000 | Qumu Corp.(a) | 2,244,000 | ||||||
290,000 | VASCO Data Security | |||||||
International, Inc.(a) | 7,342,800 | |||||||
16,865,242 | ||||||||
Specialty Manufacturing – 6.85% | ||||||||
55,000 | AEP Industries, Inc.(a) | 2,529,450 | ||||||
286,500 | Core Molding | |||||||
Technologies, Inc.(a) | 3,810,450 | |||||||
150,000 | Federal Signal Corp. | 2,130,000 | ||||||
262,800 | KVH Industries, Inc.(a) | 3,395,376 | ||||||
77,200 | L.B. Foster Co. | 4,175,748 | ||||||
532,300 | LSI Industries, Inc. | 3,811,268 | ||||||
375,000 | Manitex International, | |||||||
Inc.(a) | 4,286,250 | |||||||
115,122 | Northwest Pipe Co.(a) | 4,119,065 | ||||||
130,400 | Sparton Corp.(a) | 3,533,840 | ||||||
31,791,447 | ||||||||
Telecommunications – 2.95% | ||||||||
70,852 | Bel Fuse, Inc. | 2,004,403 | ||||||
2,077,000 | Ceragon Networks | |||||||
Ltd.(a) | 2,617,020 | |||||||
250,000 | Oplink Communications, | |||||||
Inc. | 5,212,500 | |||||||
500,000 | PC-Tel, Inc. | 3,850,000 | ||||||
13,683,923 | ||||||||
Transportation – 0.22% | ||||||||
50,000 | Covenant Transportation | |||||||
Group, Inc. – Class A(a) | 1,037,000 | |||||||
1,037,000 | ||||||||
TOTAL COMMON | ||||||||
STOCKS | ||||||||
(Cost $320,607,929) | $ | 416,684,114 | ||||||
REAL ESTATE | ||||||||
INVESTMENT TRUSTS – 4.14% | ||||||||
110,000 | Caretrust Real Estate | |||||||
Investment Trust, Inc. | $ | 1,708,300 | ||||||
310,000 | City Office Real Estate | |||||||
Investment Trust, Inc. | 4,088,900 | |||||||
375,895 | Monmouth Real Estate | |||||||
Investment Corp. – | ||||||||
Class A | 4,210,024 | |||||||
365,812 | Physicians Realty Trust | 5,611,556 | ||||||
234,000 | Whitestone Real Estate | |||||||
Investment Trust | 3,510,000 | |||||||
TOTAL REAL ESTATE | ||||||||
INVESTMENT TRUSTS | ||||||||
(Cost $14,032,745) | $ | 19,128,780 | ||||||
Contracts | WARRANTS – 0.00% | Value | ||||||
Insurance – 0.00% | ||||||||
38,106 | Imperial Holdings | |||||||
Warrant | ||||||||
Expiration: 10/06/2019, | ||||||||
Exercise Price | ||||||||
$10.75(a)(e) | $ | — | ||||||
TOTAL WARRANTS | ||||||||
(Cost $0) | $ | — |
The accompanying notes to financial statements are an integral part of this schedule.
30
Perritt MicroCap Opportunities Fund
Schedule of Investments (Continued) | October 31, 2014 |
Shares | SHORT TERM | Value | |||||
INVESTMENTS – 6.14% | |||||||
5,757,686 | Alpine Municipal Money | ||||||
Market Fund – Investor | |||||||
Class, 0.02%(d) | $ | 5,757,686 | |||||
22,650,000 | Fidelity Institutional | ||||||
Money Market Funds – | |||||||
Prime Money Market | |||||||
Portfolio – Class I, 0.01%(d) | 22,650,000 | ||||||
TOTAL SHORT TERM | |||||||
INVESTMENTS | |||||||
(Cost $28,407,686) | $ | 28,407,686 | |||||
Total Investments | |||||||
(Cost $363,048,360) – 100.33% | $ | 464,220,580 | |||||
Liabilities in Excess | |||||||
of Other Assets – (0.33)% | (1,504,470 | ) | |||||
TOTAL NET ASSETS – 100.00% | $ | 462,716,110 |
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. | |
(b) | Security was purchased in a transaction exempt from registration in the U.S. under the Securities Act of 1933 (the “Act”) and, unless registered under the Act, may only be sold pursuant to an exemption from registration and, in the case of a Rule 144A offering under the Act, may only be sold to “qualified institutional buyers”. The market value of this security is $3,630,000 or 0.78% of the Fund’s net assets. This security is deemed to be liquid. | |
(c) | Affiliated issuer. See Note 11 of the Notes to Financial Statements. | |
(d) | Variable rate security; the rate shown is the effective rate as of October 31, 2014. | |
(e) | The price for this security was derived from an estimate of fair market value using methods approved by the Fund’s Board of Directors. This security represents $0.00 or 0.00% of the Fund’s Net Assets. |
The industry classifications listed above are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”).
The accompanying notes to financial statements are an integral part of this schedule.
31
Perritt Ultra MicroCap Fund
Schedule of Investments | October 31, 2014 |
Shares | COMMON STOCKS – 96.63% | Value | ||||||
Aerospace & Defense – 1.23% | ||||||||
40,000 | CPI Aerostructures, | |||||||
Inc.(a) | $ | 382,000 | ||||||
65,000 | Kratos Defense & Security | |||||||
Solutions, Inc.(a) | 453,050 | |||||||
835,050 | ||||||||
Air Transport – 0.74% | ||||||||
45,000 | AeroCentury Corp.(a) | 500,400 | ||||||
500,400 | ||||||||
Auto Parts & Equipment – 1.18% | ||||||||
120,000 | Supreme Industries, | |||||||
Inc. | 798,000 | |||||||
798,000 | ||||||||
Biotechnology – 0.91% | ||||||||
35,500 | Trinity Biotech | |||||||
Plc – ADR | 617,700 | |||||||
617,700 | ||||||||
Business Services – 14.24% | ||||||||
537,600 | Auxilio, Inc.(a) | 553,728 | ||||||
192,983 | DLH Holdings Corp.(a) | 553,861 | ||||||
79,000 | Edgewater Technology, | |||||||
Inc.(a) | 557,740 | |||||||
167,000 | Information Services | |||||||
Group, Inc.(a) | 706,410 | |||||||
216,000 | Innodata Isogen, Inc.(a) | 570,240 | ||||||
259,400 | Intrusion, Inc.(a) | 752,260 | ||||||
70,200 | Newtek Business | |||||||
Services, Inc.(a) | 989,820 | |||||||
175,742 | Professional Diversity | |||||||
Network, Inc.(a) | 790,839 | |||||||
2,100,000 | Quadrant 4 | |||||||
Systems Corp.(a) | 1,050,000 | |||||||
70,000 | RCM Technologies, | |||||||
Inc.(a) | 527,800 | |||||||
195,000 | SmartPros Ltd. | 327,600 | ||||||
212,444 | Sysorex Global | |||||||
Holdings Corp.(a) | 507,741 | |||||||
51,953 | Transcat, Inc.(a) | 546,026 | ||||||
523,000 | USA Technologies, | |||||||
Inc.(a) | 910,020 | |||||||
180,000 | WidePoint Corp.(a) | 280,800 | ||||||
9,624,885 | ||||||||
Chemical & Related Products – 2.37% | ||||||||
389,510 | Flexible Solutions | |||||||
International, Inc.(a) | 444,041 | |||||||
36,000 | Northern Technologies | |||||||
International Corp.(a) | 673,920 | |||||||
61,300 | TOR Minerals | |||||||
International, Inc.(a) | 481,205 | |||||||
1,599,166 | ||||||||
Commercial Services & Supplies – 1.47% | ||||||||
74,913 | Empire Resources, Inc. | 391,046 | ||||||
70,000 | General Finance | |||||||
Corp.(a) | 603,400 | |||||||
994,446 | ||||||||
Computers & Electronics – 3.73% | ||||||||
256,293 | ADDvantage Technologies | |||||||
Group, Inc.(a) | 617,666 | |||||||
95,000 | Concurrent Computer | |||||||
Corporation | 674,500 | |||||||
160,000 | Dot Hill | |||||||
Systems Corp.(a) | 632,000 | |||||||
140,000 | NAPCO Security | |||||||
Technologies, Inc.(a) | 599,200 | |||||||
2,523,366 | ||||||||
Construction & Engineering – 3.26% | ||||||||
81,400 | Gencor Industries, | |||||||
Inc.(a) | 788,766 | |||||||
196,000 | Hill International, | |||||||
Inc.(a) | 760,480 | |||||||
50,000 | Willdan Group, Inc.(a) | 656,000 | ||||||
2,205,246 | ||||||||
Consumer Products – Distributing – 1.74% | ||||||||
248,399 | FitLife Brands, Inc.(a) | 633,418 | ||||||
200,000 | US Auto Parts | |||||||
Network, Inc.(a) | 540,000 | |||||||
1,173,418 | ||||||||
Consumer Products – Manufacturing – 2.48% | ||||||||
70,000 | Cherokee, Inc. | 1,223,600 | ||||||
61,100 | Crown Crafts, Inc. | 449,085 | ||||||
1,672,685 | ||||||||
Electronic Equipment & Instruments – 4.19% | ||||||||
409,708 | AG&E Holdings, Inc.(a) | 462,970 | ||||||
58,100 | Allied Motion | |||||||
Technologies, Inc. | 852,908 | |||||||
360,000 | Iteris, Inc.(a) | 626,400 | ||||||
50,000 | Richardson | |||||||
Electronics Ltd. | 500,500 |
The accompanying notes to financial statements are an integral part of this schedule.
32
Perritt Ultra MicroCap Fund
Schedule of Investments (Continued) | October 31, 2014 |
Shares | Value | |||||||
Electronic Equipment & Instruments (Continued) | ||||||||
123,178 | Ultralife Corp.(a) | $ | 390,474 | |||||
2,833,252 | ||||||||
Energy & Related Services – 1.75% | ||||||||
60,000 | DHT Holdings, Inc. | |||||||
(Acquired 11/25/2013, | ||||||||
Cost $267,000)(a)(b) | 399,600 | |||||||
38,500 | DHT Holdings, Inc. | 256,410 | ||||||
460,000 | Uranium Energy | |||||||
Corp.(a) | 529,000 | |||||||
1,185,010 | ||||||||
Environmental Services – 1.20% | ||||||||
22,287 | Fuel Tech, Inc.(a) | 90,262 | ||||||
1,166,600 | Metalico, Inc.(a) | 723,292 | ||||||
813,554 | ||||||||
Financial Services – 8.59% | ||||||||
65,443 | 1347 Property Insurance | |||||||
Holdings, Inc.(a) | 509,801 | |||||||
100,882 | AMREP Corp.(a) | 392,431 | ||||||
28,000 | First Internet Bancorp | 509,320 | ||||||
53,449 | Hennessy Advisors, Inc. | 984,531 | ||||||
50,000 | HopFed Bancorp, Inc. | 572,000 | ||||||
19,000 | Liberty Tax, Inc.(a) | 719,910 | ||||||
92,500 | MicroFinancial, Inc. | 776,075 | ||||||
55,000 | Pacific Premier | |||||||
Bancorp(a) | 890,450 | |||||||
69,000 | Xenith Bankshares, | |||||||
Inc.(a) | 447,810 | |||||||
5,802,328 | ||||||||
Food – 4.21% | ||||||||
162,000 | Diversified Restaurant | |||||||
Holdings, Inc.(a) | 839,160 | |||||||
700,000 | Hot Mama’s Foods, Inc. | |||||||
(Acquired 1/28/2014, | ||||||||
Cost $560,000)(a)(b)(c) | 35,000 | |||||||
32,000 | John B. Sanfilippo & | |||||||
Son, Inc. | 1,188,800 | |||||||
141,627 | Willamette Valley | |||||||
Vineyards, Inc.(a) | 778,949 | |||||||
2,841,909 | ||||||||
Health Care Providers & Services – 0.58% | ||||||||
142,100 | Celsion Corporation(a) | 389,354 | ||||||
389,354 | ||||||||
Industrial Goods – 1.45% | ||||||||
219,900 | Hudson Technologies, | |||||||
Inc.(a) | 980,754 | |||||||
980,754 | ||||||||
Insurance – 4.34% | ||||||||
59,500 | Atlas Financial Holdings, | |||||||
Inc.(a) | 882,385 | |||||||
131,834 | Kingstone Companies, | |||||||
Inc. | 1,067,855 | |||||||
50,000 | United Insurance | |||||||
Holdings Corp. | 980,000 | |||||||
2,930,240 | ||||||||
Leisure – 5.07% | ||||||||
190,000 | Century Casinos, Inc.(a) | 1,033,600 | ||||||
322,000 | Full House | |||||||
Resorts, Inc.(a) | 415,380 | |||||||
1,534,825 | Galaxy Gaming, Inc.(a) | 644,627 | ||||||
60,000 | Gaming Partners | |||||||
International Corp.(a) | 503,400 | |||||||
400,000 | Nevada Gold & | |||||||
Casinos, Inc.(a) | 476,000 | |||||||
950,000 | NTN Buzztime, Inc.(a) | 353,970 | ||||||
3,426,977 | ||||||||
Medical Supplies & Services – 3.58% | ||||||||
28,500 | Addus Homecare | |||||||
Corp.(a) | 566,295 | |||||||
240,000 | Allied Healthcare | |||||||
Products(a) | 451,200 | |||||||
48,000 | Birner Dental | |||||||
Management | ||||||||
Services, Inc. | 753,600 | |||||||
1,180,000 | Hooper Holmes, Inc.(a) | 649,000 | ||||||
2,420,095 | ||||||||
Motion Pictures – 1.39% | ||||||||
208,785 | Ballantyne Strong, | |||||||
Inc.(a) | 937,445 | |||||||
937,445 | ||||||||
Oil & Gas – 2.78% | ||||||||
466,927 | Deep Down, Inc.(a) | 490,273 | ||||||
139,400 | Enservco Corp.(a) | 401,472 | ||||||
40,000 | Hallador Energy Co. | 480,000 | ||||||
80,000 | Vertex Energy, Inc.(a) | 505,600 | ||||||
1,877,345 |
The accompanying notes to financial statements are an integral part of this schedule.
33
Perritt Ultra MicroCap Fund
Schedule of Investments (Continued) | October 31, 2014 |
Shares | Value | |||||||
Pharmaceuticals – 1.28% | ||||||||
140,000 | Columbia Laboratories, | |||||||
Inc.(a) | $ | 865,200 | ||||||
865,200 | ||||||||
Semiconductor Related Products – 6.26% | ||||||||
375,000 | AXT, Inc.(a) | 885,000 | ||||||
76,100 | CyberOptics Corp.(a) | 696,315 | ||||||
99,700 | DSP Group, Inc.(a) | 966,093 | ||||||
172,000 | inTEST Corp.(a) | 749,920 | ||||||
175,000 | On Track | |||||||
Innovations Ltd.(a) | 414,750 | |||||||
130,000 | Sigma Designs, Inc.(a) | 518,700 | ||||||
4,230,778 | ||||||||
Software – 8.29% | ||||||||
162,400 | ARI Network | |||||||
Services, Inc.(a) | 561,904 | |||||||
125,000 | Asure Software, Inc.(a) | 651,250 | ||||||
251,630 | Bsquare Corp.(a) | 983,873 | ||||||
100,000 | Cimatron Ltd.(a) | 554,000 | ||||||
75,000 | Evolving Systems, Inc. | 817,500 | ||||||
290,000 | GlobalSCAPE, Inc. | 719,200 | ||||||
600,000 | iPass, Inc.(a) | 804,000 | ||||||
170,700 | Speed Commerce, | |||||||
Inc.(a) | 506,979 | |||||||
5,598,706 | ||||||||
Specialty Manufacturing – 6.85% | ||||||||
40,000 | CECO Environmental | |||||||
Corp. | 572,800 | |||||||
172,000 | CTI Industries Corp.(a)(d) | 696,600 | ||||||
62,500 | Friedman Industries | 477,500 | ||||||
25,000 | Hurco Companies, Inc. | 963,250 | ||||||
44,000 | KVH Industries, Inc.(a) | 568,480 | ||||||
226,000 | Orbit International | |||||||
Corp.(a)(d) | 565,000 | |||||||
98,900 | Pioneer Power | |||||||
Solutions, Inc.(a) | 787,244 | |||||||
166,667 | Worldwide Energy & | |||||||
Manufacturing USA, Inc. | ||||||||
(Acquired 1/26/2010, | ||||||||
Cost $749,997)(a)(b)(c) | — | |||||||
46,183 | Worldwide Energy & | |||||||
Manufacturing USA, | ||||||||
Inc.(a)(c) | — | |||||||
4,630,874 | ||||||||
Telecommunications – 1.47% | ||||||||
660,000 | Mobivity | |||||||
Holdings Corp. | ||||||||
(Acquired 3/11/2014, | ||||||||
Cost $660,000(a)(b) | 990,000 | |||||||
990,000 | ||||||||
TOTAL COMMON | ||||||||
STOCKS | ||||||||
(Cost $56,957,097) | $ | 65,298,183 | ||||||
REAL ESTATE | ||||||||
INVESTMENT TRUSTS – 0.63% | ||||||||
50,000 | Preferred Apartment | |||||||
Communities, Inc. | $ | 425,000 | ||||||
TOTAL REAL ESTATE | ||||||||
INVESTMENT TRUSTS | ||||||||
(Cost $396,349) | $ | 425,000 | ||||||
Contracts | WARRANTS – 0.08% | Value | ||||||
Electronic Equipment & Instruments | ||||||||
249,000 | The LGL Group, Inc. Warrant | |||||||
Expiration: 8/6/2018, | ||||||||
Exercise Price: $7.50(a) | $ | 4,955 | ||||||
Food | ||||||||
350,000 | Hot Mama’s Foods, Inc. | |||||||
Warrant (Acquired | ||||||||
1/28/2014, Cost $0) | ||||||||
Expiration: 1/27/2017, | ||||||||
Exercise Price: | ||||||||
$2.00(a)(b)(c) | — | |||||||
Specialty Manufacturing | ||||||||
418,518 | Worldwide Energy & | |||||||
Manufacturing USA, Inc. | ||||||||
Warrant (Acquired | ||||||||
1/26/2010, Cost $0) | ||||||||
Expiration: 1/26/2015, | ||||||||
Exercise Price: | ||||||||
$5.65(a)(b)(c) | — | |||||||
Telecommunications | ||||||||
165,000 | Mobivity Holdings | |||||||
Corp. Warrant | ||||||||
(Acquired 3/11/2014, | ||||||||
Cost $0) | ||||||||
Expiration: 3/12/2019, | ||||||||
Exercise Price | ||||||||
$1.20(a)(b)(c) | 49,500 |
The accompanying notes to financial statements are an integral part of this schedule.
34
Perritt Ultra MicroCap Fund
Schedule of Investments (Continued) | October 31, 2014 |
Contracts | Value | ||||||
Oil & Gas | |||||||
35,625 | American Standard Energy | ||||||
Corp. Warrant A | |||||||
(Acquired 2/24/2011, | |||||||
Cost $0) | |||||||
Expiration: 2/1/2016, | |||||||
Exercise Price: | |||||||
$5.00(a)(b)(c) | $ | — | |||||
35,625 | American Standard | ||||||
Energy Corp. Warrant B | |||||||
(Acquired 2/24/2011, | |||||||
Cost $0) | |||||||
Expiration: 2/1/2016, | |||||||
Exercise Price: $6.50(a)(b)(c) | — | ||||||
TOTAL WARRANTS | |||||||
(Cost $346,104) | $ | 54,455 | |||||
Shares | SHORT TERM | Value | |||||
INVESTMENTS – 3.24% | |||||||
2,187,890 | Fidelity Institutional | ||||||
Money Market Funds – | |||||||
Prime Money Market | |||||||
Portfolio – Class I, | |||||||
0.01%(e) | $ | 2,187,890 | |||||
TOTAL SHORT TERM | |||||||
INVESTMENTS | |||||||
(Cost $2,187,890) | $ | 2,187,890 | |||||
Total Investments | |||||||
(Cost $59,887,440) – | $ | 67,965,528 | |||||
100.58% | |||||||
Liabilities in Excess | |||||||
of Other Assets – | |||||||
(0.58)% | (394,953 | ) | |||||
TOTAL NET ASSETS – 100.00% | $ | 67,570,575 |
Percentages are stated as a percent of net assets.
ADR American Depository Receipt
(a) | Non-income producing security. |
(b) | Security was purchased in a transaction exempt from registration in the U.S. under the Securities Act of 1933 (the “Act”) and, unless registered under the Act, may only be sold pursuant to an exemption from registration and, in the case of a Rule 144A offering under the Act, may only be sold to “qualified institutional buyers”. The market value of these securities totals $1,474,100 or 2.18% of the Fund’s Net Assets. Of these securities, $35,000 or 0.05% of the Fund’s Net Assets were deemed to be illiquid. |
(c) | The price for this security was derived from an estimate of fair market value using methods approved by the Fund’s Board of Directors. These securities represent $84,500 or 0.13% of the Fund’s Net Assets. With the exception of Worldwide Energy & Manufacturing USA, Inc. (“WEMU”), WEMU warrants, Hot Mama’s Foods, Inc. (“HOTF”), and HOTF warrants, these securities were classified as Level 2. WEMU, WEMU warrants, HOTF and HOTF warrants were classified as Level 3 securities. |
(d) | Affiliated issuer: See Note 11 of the Notes to Financial Statements. |
(e) | Variable rate security; the rate shown is the effective rate as of October 31, 2014. |
The industry classifications listed above are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”).
The accompanying notes to financial statements are an integral part of this schedule.
35
Perritt Low Priced Stock Fund
Schedule of Investments | October 31, 2014 |
Shares | COMMON STOCKS – 88.78% | Value | ||||||
Aerospace & Defense – 1.69% | ||||||||
3,000 | Air Industries | |||||||
Group, Inc. | $ | 35,400 | ||||||
35,400 | ||||||||
Air Transport – 3.98% | ||||||||
2,400 | Hawaiian Holdings, | |||||||
Inc.(a) | 41,616 | |||||||
3,600 | JetBlue Airways Corp.(a) | 41,544 | ||||||
83,160 | ||||||||
Business Services – 4.20% | ||||||||
1,600 | Graphic Packaging | |||||||
Holding Co.(a) | 19,408 | |||||||
5,500 | Information Services | |||||||
Group, Inc.(a) | 23,265 | |||||||
3,400 | RCM Technologies, | |||||||
Inc.(a) | 25,636 | |||||||
1,100 | Steelcase, Inc. | 19,492 | ||||||
87,801 | ||||||||
Commercial Banks – 1.00% | ||||||||
1,500 | Veritex Holdings, Inc.(a) | 20,940 | ||||||
20,940 | ||||||||
Commercial Services & Supplies – 1.06% | ||||||||
2,700 | ACCO Brands Corp.(a) | 22,221 | ||||||
22,221 | ||||||||
Communications Equipment – 3.80% | ||||||||
2,200 | ClearOne, Inc.(a) | 21,516 | ||||||
6,200 | Mitel Networks Corp.(a) | 57,908 | ||||||
79,424 | ||||||||
Computers & Electronics – 2.11% | ||||||||
4,100 | Brocade Communications | |||||||
Systems, Inc. | 43,993 | |||||||
43,993 | ||||||||
Construction & Engineering – 3.21% | ||||||||
4,300 | Gencor Industries, | |||||||
Inc.(a) | 41,667 | |||||||
3,500 | TRC Companies, Inc.(a) | 25,480 | ||||||
67,147 | ||||||||
Consumer Products – Manufacturing – 1.06% | ||||||||
3,000 | Crown Crafts, Inc. | 22,050 | ||||||
22,050 | ||||||||
Electronic Equipment & Instruments – 6.11% | ||||||||
3,700 | Allied Motion | |||||||
Technologies, Inc. | 54,316 | |||||||
3,100 | Daktronics, Inc. | 41,261 | ||||||
2,000 | Orbotech Ltd.(a) | 32,080 | ||||||
127,657 | ||||||||
Energy & Related Services – 3.56% | ||||||||
2,300 | Newpark | |||||||
Resources, Inc.(a) | 26,289 | |||||||
1,000 | Renewable Energy | |||||||
Group, Inc.(a) | 10,530 | |||||||
4,300 | Scorpio Tankers, Inc. | 37,539 | ||||||
74,358 | ||||||||
Financial Services – 4.57% | ||||||||
1,800 | Hallmark Financial | |||||||
Services, Inc.(a) | 20,988 | |||||||
1,900 | Janus Capital | |||||||
Group, Inc. | 28,481 | |||||||
4,900 | Ladenburg Thalmann | |||||||
Financial Services(a) | 20,923 | |||||||
2,500 | Pzena Investment | |||||||
Management, Inc. | 25,125 | |||||||
95,517 | ||||||||
Health Care Providers & Services – 4.24% | ||||||||
6,400 | InfuSystem | |||||||
Holdings, Inc.(a) | 25,216 | |||||||
4,400 | Select Medical | |||||||
Holdings Corp. | 63,448 | |||||||
88,664 | ||||||||
Insurance – 3.09% | ||||||||
2,400 | Atlas Financial | |||||||
Holdings, Inc.(a) | 35,592 | |||||||
1,600 | CNO Financial | |||||||
Group, Inc. | 29,008 | |||||||
64,600 | ||||||||
Leisure – 2.74% | ||||||||
2,200 | Century Casinos, Inc.(a) | 11,968 | ||||||
1,600 | Nautilus, Inc.(a) | 21,408 | ||||||
2,400 | Reading International, | |||||||
Inc.(a) | 23,928 | |||||||
57,304 | ||||||||
Medical Supplies & Services – 5.44% | ||||||||
2,000 | AMN Healthcare | |||||||
Services, Inc.(a) | 34,300 | |||||||
4,900 | Digirad Corp. | 21,070 | ||||||
23,000 | Hooper Holmes, Inc.(a) | 12,650 |
The accompanying notes to financial statements are an integral part of this schedule.
36
Perritt Low Priced Stock Fund
Schedule of Investments (Continued) | October 31, 2014 |
Shares | Value | |||||||
Medical Supplies & Services (Continued) | ||||||||
1,700 | Merit Medical | |||||||
Systems, Inc.(a) | $ | 25,755 | ||||||
2,000 | Symmetry Medical, | |||||||
Inc.(a) | 19,800 | |||||||
113,575 | ||||||||
Minerals & Resources – 1.06% | ||||||||
3,000 | Sibanye Gold | |||||||
Ltd. – ADR | 22,050 | |||||||
22,050 | ||||||||
Oil & Gas – 4.23% | ||||||||
5,700 | Enservco Corp.(a) | 16,416 | ||||||
1,700 | Kodiak Oil & | |||||||
Gas Corp.(a) | 18,343 | |||||||
4,800 | Star Gas Partners LP | 29,952 | ||||||
1,800 | Trecora Resources(a) | 23,670 | ||||||
88,381 | ||||||||
Pharmaceuticals – 4.06% | ||||||||
1,500 | Cambrex Corp.(a) | 31,620 | ||||||
4,500 | Columbia | |||||||
Laboratories, Inc.(a) | 27,810 | |||||||
2,600 | Pernix Therapeutics | |||||||
Holdings, Inc.(a) | 25,350 | |||||||
84,780 | ||||||||
Retail – 4.00% | ||||||||
6,400 | 1-800-Flowers.com, | |||||||
Inc.(a) | 51,392 | |||||||
2,400 | Stein Mart, Inc. | 32,112 | ||||||
83,504 | ||||||||
Semiconductor Related Products – 7.98% | ||||||||
1,500 | Cascade Microtech, | |||||||
Inc.(a) | 16,110 | |||||||
2,300 | Entegris, Inc.(a) | 31,234 | ||||||
5,300 | inTEST Corp.(a) | 23,108 | ||||||
2,500 | Photronics, Inc.(a) | 22,475 | ||||||
3,800 | RF Micro Devices, | |||||||
Inc.(a) | 49,438 | |||||||
1,800 | Vishay Intertechnology, | |||||||
Inc. | 24,318 | |||||||
166,683 | ||||||||
Software – 3.84% | ||||||||
3,000 | American Software, | |||||||
Inc. | 28,980 | |||||||
7,300 | ChyronHego Corp.(a) | 20,878 | ||||||
1,800 | Lifelock, Inc.(a) | 30,438 | ||||||
80,296 | ||||||||
Specialty Manufacturing – 8.65% | ||||||||
2,000 | CECO Environmental | |||||||
Corp. | 28,640 | |||||||
1,300 | Core Molding | |||||||
Technologies, Inc.(a) | 17,290 | |||||||
1,300 | Federal Signal Corp. | 18,460 | ||||||
4,400 | Mueller Water | |||||||
Products, Inc. | 43,428 | |||||||
900 | NN, Inc. | 22,500 | ||||||
800 | Sparton Corp.(a) | 21,680 | ||||||
2,800 | Wabash National | |||||||
Corp.(a) | 28,840 | |||||||
180,838 | ||||||||
Telecommunications – 1.58% | ||||||||
1,947 | Harmonic, Inc.(a) | 12,986 | ||||||
2,700 | RRSat Global | |||||||
Communications | ||||||||
Network Ltd. | 20,007 | |||||||
32,993 | ||||||||
Transportation – 1.52% | ||||||||
8,200 | Radiant Logistics, Inc.(a) | 31,734 | ||||||
31,734 | ||||||||
TOTAL COMMON | ||||||||
STOCKS | ||||||||
(Cost $1,805,631) | $ | 1,855,070 | ||||||
REAL ESTATE | ||||||||
INVESTMENT TRUSTS – 2.45% | ||||||||
1,600 | Diamondrock | |||||||
Hospitality Co. | $ | 22,960 | ||||||
2,100 | Medical Properties | |||||||
Trust, Inc. | 28,329 | |||||||
TOTAL REAL ESTATE | ||||||||
INVESTMENT TRUSTS | ||||||||
(Cost $47,644) | $ | 51,289 |
The accompanying notes to financial statements are an integral part of this schedule.
37
Perritt Low Priced Stock Fund
Schedule of Investments (Continued) | October 31, 2014 |
Shares | SHORT TERM | Value | ||||||
INVESTMENTS – 14.85% | ||||||||
310,288 | Fidelity Institutional | |||||||
Money Market Funds – | ||||||||
Money Market Portfolio, | ||||||||
0.04%(b) | $ | 310,288 | ||||||
TOTAL SHORT TERM | ||||||||
INVESTMENTS | ||||||||
(Cost $310,288) | $ | 310,288 | ||||||
Total Investments | ||||||||
(Cost $2,163,563) – | ||||||||
106.08% | $ | 2,216,647 | ||||||
Liabilities in Excess | ||||||||
of Other Assets – | ||||||||
(6.08)% | (127,095 | ) | ||||||
TOTAL NET ASSETS – | ||||||||
100.00% | $ | 2,089,552 |
Percentages are stated as a percent of net assets.
ADR American Depository Receipt
(a) | Non-income producing security. |
(b) | Variable rate security; the rate shown is the effective rate as of October 31, 2014. |
The industry classifications listed above are in accordance with Global Industry Classification Standard (GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”).
The accompanying notes to financial statements are an integral part of this schedule.
38
Perritt Funds, Inc.
Statements of Assets and Liabilities |
October 31, 2014
Perritt MicroCap | Perritt Ultra | Perritt Low | ||||||||||
Opportunities Fund | MicroCap Fund | Priced Stock Fund | ||||||||||
Assets: | ||||||||||||
Investments at value | ||||||||||||
Unaffiliated issuers | $ | 462,945,450 | $ | 66,703,928 | $ | 2,216,647 | ||||||
Affiliated issuers | 1,275,130 | 1,261,600 | — | |||||||||
Receivable for investments sold | 2,454,524 | 55,740 | — | |||||||||
Receivable for fund shares issued | 79,743 | 14,289 | 6,400 | |||||||||
Dividends and interest receivable | 75,862 | 10,257 | 462 | |||||||||
Prepaid expenses | 19,252 | 17,172 | 8,696 | |||||||||
Due from Advisor | — | — | 11,222 | |||||||||
Total Assets | 466,849,961 | 68,062,986 | 2,243,427 | |||||||||
Liabilities: | ||||||||||||
Payable for investments purchased | 3,480,691 | 347,396 | 130,182 | |||||||||
Payable for fund shares purchased | 138,452 | 10,918 | — | |||||||||
Payable to Officers & Directors | 17,306 | 17,306 | — | |||||||||
Payable to Advisor | 373,366 | 69,141 | — | |||||||||
Accrued expenses & other liabilities | 124,036 | 47,650 | 23,693 | |||||||||
Total Liabilities | 4,133,851 | 492,411 | 153,875 | |||||||||
Net Assets | $ | 462,716,110 | $ | 67,570,575 | $ | 2,089,552 | ||||||
Net Assets Consist of: | ||||||||||||
Capital Stock | $ | 332,989,823 | $ | 51,325,474 | $ | 2,138,214 | ||||||
Accumulated undistributed | ||||||||||||
net investment loss | (2,427,532 | ) | (1,015,771 | ) | — | |||||||
Accumulated undistributed net realized | ||||||||||||
income (loss) on investments sold | 30,981,599 | 9,182,784 | (101,746 | ) | ||||||||
Net unrealized appreciation | ||||||||||||
on investments | 101,172,220 | 8,078,088 | 53,084 | |||||||||
Total Net Assets | $ | 462,716,110 | $ | 67,570,575 | $ | 2,089,552 | ||||||
Capital Stock, $0.0001 par value | ||||||||||||
Authorized | 100,000,000 | 100,000,000 | 100,000,000 | |||||||||
Outstanding | 12,852,715 | 4,025,046 | 147,652 | |||||||||
Net Assets | $ | 462,716,110 | $ | 67,570,575 | $ | 2,089,552 | ||||||
Net asset value and | ||||||||||||
offering price per share | $ | 36.00 | $ | 16.79 | $ | 14.15 | ||||||
Cost of Investments | ||||||||||||
Unaffiliated issuers | $ | 359,866,803 | $ | 58,158,150 | $ | 2,163,563 | ||||||
Affiliated issuers | 3,181,557 | 1,729,290 | — |
The accompanying notes to financial statements are an integral part of these statements.
39
Perritt Funds, Inc.
Statements of Operations |
For the Periods Ended October 31, 2014
Perritt | ||||||||||||
Perritt MicroCap | Perritt Ultra | Low Priced | ||||||||||
Opportunities Fund | MicroCap Fund | Stock Fund(1) | ||||||||||
Investment Income: | ||||||||||||
Dividend income | $ | 3,188,671 | $ | 522,278 | $ | 10,783 | ||||||
Less: Foreign taxes withheld | ||||||||||||
and issuance fees | — | — | (301 | ) | ||||||||
Interest income | 6,308 | 3,167 | 60 | |||||||||
Total investment income | 3,194,979 | 525,445 | 10,542 | |||||||||
Expenses: | ||||||||||||
Investment advisory fee | 4,692,367 | 1,278,626 | 12,715 | |||||||||
Shareholder servicing | 372,356 | 109,040 | 12,105 | |||||||||
Administration fee | 171,797 | 38,741 | 459 | |||||||||
Fund accounting expenses | 97,774 | 27,101 | 2,819 | |||||||||
Officer & directors’ fees & expenses | 74,084 | 74,084 | — | |||||||||
Federal & state registration fees | 51,414 | 41,113 | 17,864 | |||||||||
Printing & Mailing fees | 43,139 | 13,218 | 6,293 | |||||||||
Professional fees | 38,061 | 35,423 | 34,859 | |||||||||
Custodian fees | 27,775 | 17,255 | 2,110 | |||||||||
Other expense | 15,940 | 5,575 | 1,708 | |||||||||
Interest Expense | — | 4,532 | — | |||||||||
Total expenses | 5,584,707 | 1,644,708 | 90,932 | |||||||||
Less waiver | — | — | (71,859 | ) | ||||||||
Total expenses net of waiver | 5,584,707 | 1,644,708 | 19,073 | |||||||||
Net investment loss | (2,389,728 | ) | (1,119,263 | ) | (8,531 | ) | ||||||
Realized and Unrealized | ||||||||||||
Gain/(Loss) on Investments: | ||||||||||||
Net realized gain/(loss) on | ||||||||||||
investments from sales of: | ||||||||||||
Unaffiliated issuers | 30,967,849 | 9,752,324 | (144,117 | ) | ||||||||
Affiliated issuers | — | (23,979 | ) | — | ||||||||
Change in unrealized appreciation/ | ||||||||||||
(depreciation) on investments | (928,749 | ) | (4,289,335 | ) | 53,084 | |||||||
Net realized and unrealized | ||||||||||||
gain/(loss) on investments | 30,039,100 | 5,439,010 | (91,033 | ) | ||||||||
Net Increase/(Decrease) in Net Assets | ||||||||||||
Resulting From Operations | $ | 27,649,372 | $ | 4,319,747 | $ | (99,564 | ) |
(1) | The Low Priced Stock Fund commenced operations on February 28, 2014. |
The accompanying notes to financial statements are an integral part of these statements.
40
Perritt Funds, Inc.
Statements of Changes in Net Assets |
Perritt Low | ||||||||||||||||||||
Perritt MicroCap | Perritt Ultra | Priced Stock | ||||||||||||||||||
Opportunities Fund | MicroCap Fund | Fund | ||||||||||||||||||
For the Period | ||||||||||||||||||||
February 28, | ||||||||||||||||||||
For the | For the | For the | For the | 2014(1) | ||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | through | ||||||||||||||||
October 31, | October 31, | October 31, | October 31, | October 31, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | ||||||||||||||||
Operations: | ||||||||||||||||||||
Net investment loss | $ | (2,389,728 | ) | $ | (728,345 | ) | $ | (1,119,263 | ) | $ | (632,694 | ) | $ | (8,531 | ) | |||||
Net realized gain/(loss) | ||||||||||||||||||||
on investments | 30,967,849 | 44,768,270 | 9,728,345 | 3,093,467 | (144,117 | ) | ||||||||||||||
Change in unrealized | ||||||||||||||||||||
appreciation/(depreciation) | ||||||||||||||||||||
on investments | (928,749 | ) | 84,142,856 | (4,289,335 | ) | 16,880,044 | 53,084 | |||||||||||||
Net increase/(decrease) in | ||||||||||||||||||||
net assets resulting | ||||||||||||||||||||
from operations | 27,649,372 | 128,182,781 | 4,319,747 | 19,340,817 | (99,564 | ) | ||||||||||||||
Dividends and Distributions | ||||||||||||||||||||
to Shareholders: | ||||||||||||||||||||
Net investment income | — | (2,669,596 | ) | — | — | — | ||||||||||||||
Net realized gains | (43,420,318 | ) | — | (2,070,525 | ) | — | — | |||||||||||||
Total dividends | ||||||||||||||||||||
and distributions | (43,420,318 | ) | (2,669,596 | ) | (2,070,525 | ) | — | — | ||||||||||||
Capital Share Transactions: | ||||||||||||||||||||
Proceeds from shares issued | 84,350,465 | 107,694,894 | 81,046,493 | 41,811,416 | 2,147,565 | |||||||||||||||
Proceeds from shares | ||||||||||||||||||||
issued from transfer | ||||||||||||||||||||
in-kind (Note 12) | — | — | — | — | 161,915 | |||||||||||||||
Reinvestment | ||||||||||||||||||||
of distributions | 40,439,455 | 2,464,206 | 1,974,026 | — | — | |||||||||||||||
Cost of shares redeemed | (109,819,002 | ) | (80,483,998 | ) | (99,831,983 | ) | (27,747,260 | ) | (120,393 | ) | ||||||||||
Redemption fees | 46,675 | 39,936 | 133,121 | 18,027 | 29 | |||||||||||||||
Net increase/(decrease) in | ||||||||||||||||||||
net assets from capital | ||||||||||||||||||||
share transactions | 15,017,593 | 29,715,038 | (16,678,343 | ) | 14,082,183 | 2,189,116 | ||||||||||||||
Total Increase/(Decrease) | ||||||||||||||||||||
in Net Assets | (753,353 | ) | 155,228,223 | (14,429,121 | ) | 33,423,000 | 2,089,552 | |||||||||||||
Net Assets | ||||||||||||||||||||
Beginning of the year | 463,469,463 | 308,241,240 | 81,999,696 | 48,576,696 | — | |||||||||||||||
End of the year | $ | 462,716,110 | $ | 463,469,463 | $ | 67,570,575 | $ | 81,999,696 | $ | 2,089,552 | ||||||||||
Accumulated undistributed | ||||||||||||||||||||
net investment loss | $ | (2,427,532 | ) | $ | (2,139,898 | ) | $ | (1,015,771 | ) | $ | (837,584 | ) | $ | — | ||||||
Capital Share Transactions: | ||||||||||||||||||||
Shares sold | 2,340,033 | 3,346,610 | 4,586,672 | 3,031,237 | 145,161 | |||||||||||||||
Shares issued from transfer | ||||||||||||||||||||
in-kind (Note 12) | — | — | — | — | 10,794 | |||||||||||||||
Shares issued on reinvestment | ||||||||||||||||||||
of distributions | 1,185,213 | 89,154 | 122,080 | — | — | |||||||||||||||
Shares redeemed | (3,071,883 | ) | (2,683,208 | ) | (5,736,409 | ) | (2,202,381 | ) | (8,303 | ) | ||||||||||
Net increase/(decrease) from | ||||||||||||||||||||
capital share transactions | 453,363 | 752,556 | (1,027,657 | ) | 828,856 | 147,652 |
(1) | Commencement of operations. |
The accompanying notes to financial statements are an integral part of these statements.
41
Perritt MicroCap Opportunities Fund
Financial Highlights |
For a Fund share outstanding throughout the period
For the Years Ended October 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 37.38 | $ | 26.47 | $ | 23.43 | $ | 24.52 | $ | 19.83 | ||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||
Net investment income/(loss)2 | (0.18 | ) | (0.06 | ) | 0.10 | (0.11 | ) | (0.15 | ) | |||||||||||
Net realized and unrealized | ||||||||||||||||||||
gain/(loss) on investments | 2.29 | 11.21 | 2.94 | (0.98 | ) | 4.84 | ||||||||||||||
Total from investment operations | 2.11 | 11.15 | 3.04 | (1.09 | ) | 4.69 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | — | (0.24 | ) | — | — | — | ||||||||||||||
Distributions from net realized gains | (3.49 | ) | — | — | — | — | ||||||||||||||
Total dividends and distributions | (3.49 | ) | (0.24 | ) | — | — | — | |||||||||||||
Redemption fees2 | — | 3 | — | 3 | — | 3 | — | 3 | — | 3 | ||||||||||
Net asset value, end of period | $ | 36.00 | $ | 37.38 | $ | 26.47 | $ | 23.43 | $ | 24.52 | ||||||||||
Total return1 | 6.17 | % | 42.46 | % | 12.97 | % | (4.45 | %) | 23.59 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 462,716 | $ | 463,469 | $ | 308,241 | $ | 337,975 | $ | 371,998 | ||||||||||
Ratio of net expenses to average net assets | 1.19 | % | 1.22 | % | 1.26 | % | 1.22 | % | 1.27 | % | ||||||||||
Ratio of net investment income/(loss) | ||||||||||||||||||||
to average net assets | (0.51 | %) | (0.20 | %) | 0.38 | % | (0.42 | %) | (0.67 | %) | ||||||||||
Portfolio turnover rate | 29.1 | % | 41.4 | % | 14.0 | % | 25.4 | % | 41.5 | % |
1 | Total return reflects reinvested dividends but does not reflect the impact of taxes. |
2 | Net investment income (loss) and redemption fees per share has been calculated based on average shares outstanding during the period. |
3 | Amount is less than $0.01 per share. |
The accompanying notes to financial statements are an integral part of this schedule.
42
Perritt Ultra MicroCap Fund
Financial Highlights |
For a Fund share outstanding throughout the period
For the Years Ended October 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 16.23 | $ | 11.50 | $ | 10.90 | $ | 11.10 | $ | 8.14 | ||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||
Net investment loss2 | (0.19 | ) | (0.15 | ) | (0.06 | ) | (0.15 | ) | (0.06 | ) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gain/(loss) on investments | 1.12 | 4.88 | 0.66 | (0.06 | ) | 3.02 | ||||||||||||||
Total from investment operations | 0.93 | 4.73 | 0.60 | (0.21 | ) | 2.96 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
Distributions from net realized gains | (0.39 | ) | — | — | — | — | ||||||||||||||
Total dividends and distributions | (0.39 | ) | — | — | — | — | ||||||||||||||
Redemption fees2 | 0.02 | — | 3 | — | 3 | 0.01 | — | 3 | ||||||||||||
Net asset value, end of period | $ | 16.79 | $ | 16.23 | $ | 11.50 | $ | 10.90 | $ | 11.10 | ||||||||||
Total return1 | 5.96 | % | 41.13 | % | 5.50 | % | (1.80 | %) | 36.36 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 67,571 | $ | 82,000 | $ | 48,577 | $ | 63,290 | $ | 96,532 | ||||||||||
Ratio of net expenses to average net assets | 1.56 | % | 1.75 | % | 1.85 | % | 1.65 | % | 1.72 | % | ||||||||||
Ratio of net investment loss to average net assets | (1.06 | %) | (1.14 | %) | (0.56 | %) | (1.11 | %) | (0.57 | %) | ||||||||||
Portfolio turnover rate | 64.2 | % | 33.9 | % | 14.6 | % | 17.9 | % | 29.0 | % |
1 | Total return reflects reinvested dividends but does not reflect the impact of taxes. |
2 | Net investment income (loss) and redemption fees per share has been calculated based on average shares outstanding during the period. |
3 | Amount is less than $0.01 per share. |
The accompanying notes to financial statements are an integral part of this schedule.
43
Perritt Low Priced Stock Fund
Financial Highlights |
For a Fund share outstanding throughout the period
For the | ||||
Period From | ||||
February 28, 20144 | ||||
to | ||||
October 31, | ||||
2014 | ||||
Net asset value, beginning of period | $ | 15.00 | ||
Income/(loss) from investment operations: | ||||
Net investment loss2 | (0.06 | ) | ||
Net realized and unrealized loss on investments | (0.79 | ) | ||
Total from investment operations | (0.85 | ) | ||
Redemption fees2 | — | 3 | ||
Net asset value, end of period | $ | 14.15 | ||
Total return1,5,7 | (5.67 | %) | ||
Supplemental data and ratios: | ||||
Net assets, end of period (in thousands) | $ | 2,090 | ||
Ratio of net expenses to average net assets6 | 1.50 | % | ||
Ratio of net investment loss to average net assets6 | (0.67 | %) | ||
Ratio of expenses (prior to reimbursement) to average net assets6 | 7.15 | % | ||
Ratio of net investment loss (prior to reimbursement) to average net assets6 | (6.32 | %) | ||
Portfolio turnover rate7 | 49.0 | % |
1 | Total return reflects reinvested dividends but does not reflect the impact of taxes. |
2 | Net investment income (loss) and redemption fees per share has been calculated based on average shares outstanding during the period. |
3 | Amount is less than $0.01 per share. |
4 | Commencement of operations. |
5 | The total return figure is the since inception return for the Fund which commenced operations on February 28, 2014. |
6 | Annualized for periods less than one year. |
7 | Not annualized for periods less than one year. |
The accompanying notes to financial statements are an integral part of this schedule.
44
Perritt Funds, Inc.
Notes to Financial Statements |
October 31, 2014
1. | Organization |
Perritt Funds, Inc. (the “Corporation”) was organized on March 19, 2004 as a Maryland corporation and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end investment company, with each series below being a diversified fund. The Corporation currently consists of the following series: Perritt MicroCap Opportunities Fund (“MicroCap Fund”), Perritt Ultra MicroCap Fund (“Ultra MicroCap Fund”) and Perritt Low Priced Stock Fund (“Low Priced Stock Fund”) (each, a “Fund,” and collectively, the “Funds”). Perritt MicroCap Opportunities Fund, Inc., the predecessor to the MicroCap Fund, commenced operations on April 11, 1988. As part of a plan of reorganization, on February 28, 2013, Perritt MicroCap Opportunities Fund, Inc. merged into the MicroCap Fund, a series within the Corporation. The Perritt Low Priced Stock Fund commenced operations on February 28, 2014. | |
2. | Summary of Significant Accounting Policies |
a. | Exchange-listed securities are generally valued at the last sales price reported by the principal security exchange on which the security is traded, or if no sale is reported, the mean between the latest bid and ask price unless the Funds’ investment advisor believes that the mean does not represent a fair value, in which case the securities are fair valued as set forth below. Securities listed on NASDAQ are valued at the NASDAQ Official Closing Price. Demand notes, commercial paper, U.S. Treasury Bills and warrants are stated at fair value using market prices if available, or a pricing service when such prices are believed to reflect fair value. Securities for which market quotations are not readily available are valued at their fair value as determined in good faith by the Funds’ advisor under procedures established by and under the supervision of the Board of Directors of the Funds. The Funds’ fair value procedures allow for the use of certain methods performed by the Funds’ advisor to value those securities for which market quotations are not readily available, at a price that a Fund might reasonably expect to receive upon a sale of such securities. For example, these methods may be based on a multiple of earnings, or a discount from market of a similar freely traded security, or a yield to maturity with respect to debt issues, or a combination of these and other methods. | |
b. | Net realized gains and losses on securities are computed using the first-in, first-out method. | |
c. | Dividend income is recognized on the ex-dividend date, and interest income is recognized on the accrual basis. Withholding taxes on foreign dividends and capital gains, which are included as a component of net investment income and realized gain (loss) on investments, respectively, have been provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Distributions received from real estate investment trusts (“REITs”) are classified as investment income or realized gains based on the U.S. income tax characteristics of the distribution. Return of capital distributions received from REIT securities are recorded as an adjustment to the cost of the security and thus may impact unrealized or realized gains or losses on the security. Investment and shareholder transactions are recorded on the trade date. |
45
Perritt Funds, Inc.
Notes to Financial Statements (Continued) |
d. | Each Fund is charged for those expenses that are directly attributable to it. Expenses that are not readily identifiable to a specific Fund are generally allocated among the Funds in proportion to the relative net assets of the Funds. | |
e. | Provision has not been made for federal income tax since the Funds have each elected to be taxed as a “regulated investment company” and intend to distribute substantially all income to their shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. | |
f. | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. | |
In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. | ||
g. | Dividends from net investment income and net realized capital gains, if any, are declared and paid annually. Distributions to shareholders are recorded on the ex-dividend date. The Funds may periodically make reclassifications among certain of their capital accounts as a result of the timing and characterization of certain income and realized gain distributions determined annually in accordance with federal tax regulations which may differ from GAAP. The MicroCap Fund has reclassified the components of its capital accounts for the year ended October 31, 2014 by decreasing paid-in capital by $2,118,042, decreasing accumulated net investment loss by $2,102,094 and increasing accumulated net realized gain by $15,948. The Ultra MicroCap Fund has reclassified the components of its capital accounts for the year ended October 31, 2014 by decreasing paid-in capital by $414,198, decreasing accumulated net investment loss by $941,076 and decreasing accumulated net realized gain by $526,878. The Low Priced Stock Fund has reclassified the components of its capital accounts for the period ended October 31, 2014 by decreasing paid-in capital by $50,902, decreasing accumulated net investment loss by $8,531 and decreasing accumulated net realized loss by $42,371. | |
h. | As of and during the period ended October 31, 2014, the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the Statements of Operations. During the period ended October 31, 2014, the Funds did not incur any interest or penalties. The Funds are not subject to examination by U.S. federal tax authorities for any tax years before 2010. |
3. | Security Valuation |
GAAP establishes an authoritative definition of fair value and sets out a hierarchy for measuring fair value. GAAP also requires additional disclosures about the various inputs used to develop the measurements of fair value. These inputs are summarized in the three broad levels listed below: |
46
Perritt Funds, Inc.
Notes to Financial Statements (Continued) |
• Level 1 – | Quoted prices in active markets for identical securities. | |
• Level 2 – | Other significant observable inputs (including quoted prices for similar securities or the identical security on an inactive market, interest rates, prepayment speeds, credit risk, etc.). | |
• Level 3 – | Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Funds’ net assets as of October 31, 2014: |
Perritt MicroCap Opportunities Fund | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | $ | 60,647,687 | $ | — | $ | — | $ | 60,647,687 | ||||||||
Consumer Staples | 30,174,522 | — | — | 30,174,522 | ||||||||||||
Energy | 48,365,129 | — | — | 48,365,129 | ||||||||||||
Financial | 54,032,223 | — | — | 54,032,223 | ||||||||||||
Health Care | 28,430,370 | — | — | 28,430,370 | ||||||||||||
Industrials | 86,916,695 | — | — | 86,916,695 | ||||||||||||
Information Technology | 81,977,311 | — | — | 81,977,311 | ||||||||||||
Materials | 26,140,177 | — | — | 26,140,177 | ||||||||||||
Total Common Stocks | 416,684,114 | — | — | 416,684,114 | ||||||||||||
Real Estate Investment Trusts | 19,128,780 | — | — | 19,128,780 | ||||||||||||
Warrants | ||||||||||||||||
Financial | — | 0 | — | — | ||||||||||||
Total Warrants | — | — | — | — | ||||||||||||
Short Term Investments | 28,407,686 | — | — | 28,407,686 | ||||||||||||
Total Investments | ||||||||||||||||
in Securities | $ | 464,220,580 | $ | — | $ | — | $ | 464,220,580 |
47
Perritt Funds, Inc.
Notes to Financial Statements (Continued) |
Perritt Ultra MicroCap Fund | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | $ | 9,295,746 | $ | — | $ | — | $ | 9,295,746 | ||||||||
Consumer Staples | 2,601,166 | — | 35,000 | 2,636,166 | ||||||||||||
Energy | 3,062,355 | — | — | 3,062,355 | ||||||||||||
Financial | 7,620,227 | — | — | 7,620,227 | ||||||||||||
Health Care | 4,846,077 | — | — | 4,846,077 | ||||||||||||
Industrials | 13,606,845 | — | — | 13,606,845 | ||||||||||||
Information Technology | 22,154,101 | — | — | 22,154,101 | ||||||||||||
Materials | 2,076,666 | — | — | 2,076,666 | ||||||||||||
Total Common Stocks | 65,263,183 | — | 35,000 | 65,298,183 | ||||||||||||
Real Estate Investment Trusts | 425,000 | — | — | 425,000 | ||||||||||||
Warrants | ||||||||||||||||
Consumer Staples | — | — | 0 | — | ||||||||||||
Energy | — | 0 | 0 | — | ||||||||||||
Information Technology | 4,955 | 49,500 | — | 54,455 | ||||||||||||
Total Warrants | 4,955 | 49,500 | — | 54,455 | ||||||||||||
Short Term Investments | 2,187,890 | — | — | 2,187,890 | ||||||||||||
Total Investments | ||||||||||||||||
in Securities | $ | 67,881,028 | $ | 49,500 | $ | 35,000 | $ | 67,965,528 | ||||||||
Perritt Low Priced Stock Fund | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | $ | 213,303 | $ | — | $ | — | $ | 213,303 | ||||||||
Energy | 109,117 | — | — | 109,117 | ||||||||||||
Financial | 181,057 | — | — | 181,057 | ||||||||||||
Health Care | 287,019 | — | — | 287,019 | ||||||||||||
Industrials | 502,654 | — | — | 502,654 | ||||||||||||
Information Technology | 449,550 | — | — | 449,550 | ||||||||||||
Materials | 82,418 | — | — | 82,418 | ||||||||||||
Utilities | 29,952 | — | — | 29,952 | ||||||||||||
Total Common Stocks | 1,855,070 | — | — | 1,855,070 | ||||||||||||
Real Estate Investment Trusts | 51,289 | — | — | 51,289 | ||||||||||||
Short Term Investments | 310,288 | — | — | 310,288 | ||||||||||||
Total Investments | ||||||||||||||||
in Securities | $ | 2,216,647 | $ | — | $ | — | $ | 2,216,647 |
Please refer to the Schedule of Investments for additional information regarding the composition of the amounts listed above. | |
Below are the transfers into or out of Levels 1 and 2 for the Funds. It is the Funds’ policy to record transfers using fair values measured at the end of the reporting period. |
48
Perritt Funds, Inc.
Notes to Financial Statements (Continued) |
MicroCap | Ultra MicroCap | Low Priced | ||||||||||
Fund | Fund | Stock Fund | ||||||||||
Transfers into Level 1 | $ | — | $ | 2,222,975 | $ | — | ||||||
Transfers out of Level 1 | — | — | — | |||||||||
Net Transfers in/out of Level 1 | $ | — | $ | 2,222,975 | $ | — | ||||||
Transfers into Level 2 | $ | — | $ | — | $ | — | ||||||
Transfers out of Level 2 | — | 2,222,975 | — | |||||||||
Net Transfers in/out of Level 2 | $ | — | $ | (2,222,975 | ) | $ | — |
The securities transferred from Level 2 to Level 1 due to an increase of observable market data from an increase in market activity. | |
As of October 31, 2014, the MicroCap Fund and the Low Priced Stock Fund did not hold any Level 3 securities. As of October 31, 2014, the values of the Ultra MicroCap Fund’s Level 3 securities were $35,000. As there is no active market for these level 3 securities, the value is being derived from qualitative information. The fair value of the warrants is derived by calculating the difference between the underlying equity security’s price and the strike price of the warrant. An increase in the underlying equity security’s price will increase the fair value of the warrant security. Alternatively, a decrease in the underlying equity security’s price will decrease the fair value of the warrant security. An increase in the discount to book value will decrease the fair value of the equity security. Alternatively, a decrease in the discount to book value will increase the fair value of the equity security. | |
Below is a reconciliation that details the activity of the Level 3 securities held in the Ultra MicroCap Fund during the year ended October 31, 2014: |
Ultra MicroCap Fund | ||||
Beginning Balance – November 1, 2013 | $ | 0 | * | |
Purchases | 35,000 | |||
Sales | — | |||
Transfers into level 3 | — | |||
Transfers out of level 3 | — | |||
Realized losses | — | |||
Change in unrealized gains | — | |||
Ending Balance – October 31, 2014 | $ | 35,000 | ||
* Balance represents the fair value of Level 3 warrants held as of November 1, 2013. |
The following table presents information about unobservable inputs related to the Fund’s categories of Level 3 investments as of October 31, 2014. |
Fair Value at | Valuation | Unobservable | ||
10/31/14 | Techniques | Inputs | Ranges | |
Equity | — | Intrinsic Value | No Active Market | N/A |
Securities | $35,000 | Intrinsic Value | Discount to book value | 50% |
Warrants | — | Intrinsic | Warrant strike price and | N/A |
Value | underlying stock price |
49
Perritt Funds, Inc.
Notes to Financial Statements (Continued) |
4. | Investment Advisory Agreement |
For each Fund, the Corporation entered into an investment advisory agreement (collectively, the “Agreements”) with Perritt Capital Management, Inc. (the “Advisor”), with whom certain officers and directors of the Corporation are affiliated, to furnish investment advisory services to that Funds. Under the terms of the Agreements, the MicroCap Fund and the Low Priced Stock Fund pay the Advisor a monthly fee at the annual rate of 1% of the Fund’s daily average net assets, and the Ultra MicroCap Fund pays the Advisor a monthly fee equal to 1.25% of its daily average net assets less than or equal to $100 million; 1.00% with respect to daily average net assets in excess of $100 million and less than or equal to $200 million; and 0.50% with respect to daily average net assets in excess of $200 million. At October 31, 2014, the MicroCap Fund, Ultra MicroCap Fund and Low Priced Stock Fund had fees due to the Advisor of $373,366, $69,141 and $0, respectively. As of October 31, 2014, the Adviser had fees due to the Low Priced Stock Fund of $11,222. For the period ended October 31, 2014, the MicroCap Fund, Ultra MicroCap Fund and Low Priced Stock Fund had incurred advisory fees of $4,692,367, $1,278,626 and $12,715, respectively. | |
With regards to the Low Priced Stock Fund, the investment adviser has agreed to waive fees and/or reimburse operating expenses (other than interest, brokerage commissions, dividend expense on short sales, taxes, extraordinary expenses and acquired fund fees and expenses) so that total annual operating expenses are not expected to exceed 1.50%. This arrangement cannot be terminated prior to February 28, 2015 without the consent of the Board of Directors. The investment adviser is permitted to recapture amounts waived and/or reimbursed within three years after the fiscal year in which the adviser earned the fee or incurred the expense if the total annual operating expenses have fallen to a level below the limit described above. Additionally, the investment advisor has agreed to voluntarily waive any salaries and fees of all officers and directors of the Low Priced Stock Fund during its first year of operations. The salaries and fees waived by the investment advisor are not eligible for recapture. Voluntary expense waivers may be discontinued at any time. | |
For the period ended October 31, 2014, the Advisor waived expenses and/or reimbursed the Low Priced Stock Fund $71,859, which is eligible for recapture through October 31, 2017. | |
The Advisor manages the Funds’ investments subject to the supervision of the Funds’ Board of Directors. The Advisor is responsible for investment decisions and supplies investment research and portfolio management. Under the Agreements, the Advisor, at its own expense and without reimbursement from the Funds, will furnish office space and all necessary office facilities, equipment and personnel for making the investment decisions necessary for managing the Funds and maintaining their organization, will pay the salaries and fees of all officers and directors of the Funds (except the Chief Compliance Officer’s salary and the fees paid to disinterested directors) and will bear all sales and promotional expenses of the Funds. |
50
Perritt Funds, Inc.
Notes to Financial Statements (Continued) |
5. | Investment Transactions |
Purchases (including securities transferred in-kind) and sales of securities, excluding short-term investments, for the period ended October 31, 2014, were as follows: |
Purchases | Sales | |||||||||||||||
U.S. | U.S. | |||||||||||||||
Governments | Other | Governments | Other | |||||||||||||
MicroCap Fund | $ | — | $ | 125,672,095 | $ | — | $ | 133,090,364 | ||||||||
Ultra MicroCap Fund | $ | — | $ | 59,234,502 | $ | — | $ | 71,888,767 | ||||||||
Low Priced Stock Fund | $ | — | $ | 2,834,383 | $ | — | $ | 835,966 |
6. | Federal Income Tax Matters |
As of October 31, 2014, the components of distributable earnings on a tax basis were as follows: |
MicroCap | Ultra MicroCap | Low Priced | ||||||||||
Fund | Fund | Stock Fund | ||||||||||
Cost of investments for tax purposes | $ | 363,094,953 | $ | 59,905,334 | $ | 2,142,282 | ||||||
Gross tax unrealized appreciation | 133,371,335 | 16,215,761 | 158,709 | |||||||||
Gross tax unrealized depreciation | (32,245,707 | ) | (8,155,567 | ) | (84,344 | ) | ||||||
Net unrealized appreciation | ||||||||||||
on investments | 101,125,628 | 8,060,194 | 74,365 | |||||||||
Distributable ordinary income | — | — | — | |||||||||
Distributable long-term capital gains | 31,028,191 | 9,200,678 | — | |||||||||
Total distributable earnings | 31,028,191 | 9,200,678 | — | |||||||||
Other accumulated losses | (2,427,532 | ) | (1,015,771 | ) | (123,027 | ) | ||||||
Total accumulated earnings$129,726,287 | $ | 16,245,101 | $ | (48,662 | ) |
The difference between book and tax basis distributable earnings is primarily related to the deferral of losses on wash sales. | |
At October 31, 2014, the MicroCap Fund and Ultra MicroCap Fund deferred, on a tax basis, and late year ordinary losses of $2,427,532 and $1,015,771, respectively. | |
The tax composition of distributions paid during the periods ended October 31, 2014 and 2013 were as follows: |
Ordinary Income | Long-term Capital Gains | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
MicroCap Fund | $ | 1,411,878 | $ | 2,669,596 | $ | 42,008,440 | $ | — | ||||||||
Ultra MicroCap Fund | — | — | 2,070,525 | — | ||||||||||||
Low Priced Stock Fund | — | N/A | — | N/A |
On November 18, 2014, the MicroCap Fund paid long-term capital gains distributions of $2.41959 per share, and the Ultra MicroCap Fund paid long-term capital gains distributions of $2.28554 per share. The Low Priced Stock Fund did not have a distribution.
As of October 31, 2014, the Low Priced Stock Fund had short-term capital losses of $123,027, which have no expiration date.
51
Perritt Funds, Inc.
Notes to Financial Statements (Continued) |
7. | Restricted Securities |
The Funds may own investment securities which are unregistered and thus restricted as to resale. These securities are valued by each Fund after giving due consideration to pertinent factors including recent private sales, market conditions and the issuer’s financial performance. Where future disposition of these securities requires registration under the Securities Act of 1933, each Fund has the right to include these securities in such registration, generally without cost to the Fund. The Funds have no right to require registration of the unregistered securities they hold. At October 31, 2014, the MicroCap Fund and Ultra MicroCap Fund held restricted securities with an aggregate value of $3,630,000 and $1,474,100, which accounted for 0.78% and 2.18%, respectively, of each Fund’s net assets. During the period ended October 31, 2014, the Low Priced Stock Fund did not hold any restricted securities. | |
8. | Guarantees and Indemnifications |
Under the Funds’ organizational documents, their officers and directors are indemnified by the Funds against certain liabilities arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. Currently, the Funds expect the risk of loss to be remote. | |
9. | Line of Credit Arrangement |
The MicroCap Fund and Ultra MicroCap Fund are each party to an uncommitted line of credit arrangement with U.S. Bank, N.A. that may be renewed annually under which the MicroCap Fund may borrow up to $23,000,000 and the Ultra MicroCap Fund may borrow up to the lesser of $11,500,000 or 33.33% of the sum of the fair value of certain assets of the Fund. Interest is charged on borrowings at the prevailing Prime Rate. The Funds have borrowed under these arrangements from time to time to increase the efficiency of cash flow management. For the period from November 1, 2013 to October 31, 2014, the MicroCap Fund did not have any borrowings while the Ultra MicroCap Fund had average borrowings of $180,277 and the weighted average interest rate on the line of credit borrowings was 3.25%. The July 16, 2014, balance of $3,017,000 was the maximum borrowing for the Ultra MicroCap Fund during the year ended October 31, 2014. At October 31, 2014, the MicroCap Fund and Ultra MicroCap Fund had no outstanding borrowings on the line of credit. As of October 31, 2014, the Low Priced Stock Fund does not have a line of credit arrangement. | |
10. | Redemption Fee |
The Funds charge a 2% redemption fee to those who buy and sell shares within 90 calendar days or less. The redemption fee is retained for the benefit of long-term shareholders, and recorded as additional capital in the Statements of Changes in Net Assets. | |
11. | Transactions with Affiliates |
The following issuers were affiliated with the Funds, as the Funds held 5% or more of the outstanding voting securities of the issuer during the period from November 1, 2013 |
52
Perritt Funds, Inc.
Notes to Financial Statements (Continued) |
through October 31, 2014. No issuers were affiliated with the Low Priced Stock Fund during the period ended October 31, 2014. See Section (2)(a)(3) of the Investment Company Act of 1940. |
Perritt MicroCap Opportunities Fund
Value At | ||||||||||||||||||||||||
Share Balance At | Share Balance At | Dividend | October 31, | |||||||||||||||||||||
Issuer Name | November 1, 2013 | Additions | Reductions | October 31, 2014 | Income | 2014 | ||||||||||||||||||
Atlas Financial | ||||||||||||||||||||||||
Holdings, Inc.1 | 452,800 | — | — | 452,800 | $ | — | $ | 6,715,024 | ||||||||||||||||
Full House | ||||||||||||||||||||||||
Resorts, Inc. | 988,173 | 300 | — | 988,473 | — | 1,275,130 | ||||||||||||||||||
$ | — | $ | 7,990,154 |
Perritt Ultra MicroCap Fund
Value At | ||||||||||||||||||||||||
Share Balance At | Share Balance At | Dividend | October 31, | |||||||||||||||||||||
Issuer Name | November 1, 2013 | Additions | Reductions | October 31, 2014 | Income | 2014 | ||||||||||||||||||
Allied | ||||||||||||||||||||||||
Healthcare | ||||||||||||||||||||||||
Products, Inc.1 | 166,982 | 283,018 | 210,000 | 240,000 | $ | — | $ | 451,200 | ||||||||||||||||
CTI Industries | ||||||||||||||||||||||||
Corp. | 150,300 | 27,800 | 6,100 | 172,000 | — | 696,600 | ||||||||||||||||||
1347 Property | ||||||||||||||||||||||||
Insurance | ||||||||||||||||||||||||
Holdings, Inc.1 | — | 201,300 | 135,857 | 65,443 | — | 509,801 | ||||||||||||||||||
Orbit | ||||||||||||||||||||||||
International | ||||||||||||||||||||||||
Corp. | 145,000 | 132,064 | 51,064 | 226,000 | — | 565,000 | ||||||||||||||||||
SmartPros LTD1 | 260,000 | 16,330 | 81,330 | 195,000 | 14,379 | 327,600 | ||||||||||||||||||
$ | 14,379 | $ | 2,550,201 |
1 | Issuer was not an affiliate as of October 31, 2014. |
12. | Transfer In-Kind |
Upon commencement of operations, the Low Priced Stock Fund accepted cash and cash equivalents and securities eligible for investment by the Fund as consideration for Fund shares issued at a value of $161,915. As a result of the in-kind contribution, the Low Priced Stock Fund issued 10,794 shares at net asset value of $15.00. | |
13. | Beneficial Ownership |
With the exception of the Perritt Low Priced Stock Fund, the Advisor and its affiliates do not beneficially own more than 25% of a Fund’s shares as of October 31, 2014. The Advisor and its affiliates own 49.80% of the Perritt Low Priced Stock Fund as of October 31, 2014. |
53
Perritt Funds, Inc.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and Board of Directors of
Perritt Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Perritt Funds, Inc., comprising Perritt Ultra MicroCap Fund, Perritt MicroCap Opportunities Fund, and Perritt Low Priced Stock Fund (the “Funds”), as of October 31, 2014, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended for Perritt MicroCap Opportunities Fund and Perritt Ultra MicroCap Fund, and the related statements of operations and changes in net assets, and financial highlights for the period February 28, 2014 (commencement of operations) through October 31, 2014, for Perritt Low Priced Stock Fund. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2014, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds constituting Perritt Funds, Inc. as of October 31, 2014, the results of their operations, changes in their net assets, and the financial highlights for the periods indicated above, in conformity with accounting principles generally accepted in the United States of America.
COHEN FUND AUDIT SERVICES, LTD.
Cleveland, Ohio
December 18, 2014
54
(This Page Intentionally Left Blank.)
55
Perritt Funds, Inc.
Expense Example (Unaudited) | October 31, 2014 |
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees (the Funds impose a 2.00% redemption fee on shares held for 90 calendar days or less after purchase); and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2014 – October 31, 2014).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. Although the Funds charge no sales load or transaction fees (other than a 2.00% redemption fee for shares held for 90 calendar days or less after purchase), you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds transfer agent. If you request that a redemption be made by wire transfer, currently a $15.00 fee is charged by the Funds transfer agent. You will be charged a transaction fee equal to 2.00% of the net amount of the redemption if you redeem your shares within 90 calendar days of purchase. IRA accounts will be charged a $15.00 annual maintenance fee. To the extent the Fund invests in shares of other investment companies as part of its investment strategy, you will indirectly bear your proportionate share of any fees and expenses charged by the underlying funds in which the Fund invests in addition to the expenses of the Fund. Actual expenses of the underlying funds are expected to vary among the various underlying funds. These expenses are not included in the example below. The example below includes, but is not limited to, management fees, shareholder servicing fees, fund accounting, custody and transfer agent fees. However, the example below does not include portfolio trading commissions and related expenses, interest expense and other extraordinary expenses as determined under accounting principles generally accepted in the United States of America. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
56
Perritt Funds, Inc.
Expense Example (Unaudited) (Continued) | October 31, 2014 |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||
Account Value | Account Value | During Period | ||
5/1/14 | 10/31/14 | 5/1/14 – 10/31/141 | ||
Actual | ||||
Perritt MicroCap Opportunities | $1,000.00 | $1,000.30 | $6.00 | |
Perritt Ultra MicroCap Fund | $1,000.00 | $ 944.30 | $8.33 | |
Perritt Low Priced Stock Fund | $1,000.00 | $ 985.40 | $7.51 | |
Hypothetical | ||||
Perritt MicroCap Opportunities | $1,000.00 | $1,019.21 | $6.06 | |
Perritt Ultra MicroCap Fund | $1,000.00 | $1,016.64 | $8.64 | |
Perritt Low Priced Stock Fund | $1,000.00 | $1,017.64 | $7.63 | |
1 | Expenses are equal to the Fund’s annualized expense ratio of 1.19% for the MicroCap Fund, 1.70% for the Ultra MicroCap Fund and 1.50% for the Low Priced Stock Fund for the six-month period, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
57
Perritt Funds, Inc.
Directors and Officers (Unaudited) |
The Funds are governed by a Board of Directors that meets regularly to review investments, performance, expenses, and other business matters, and is responsible for protecting the interests of shareholders. The majority of the Funds’ directors are independent of Perritt Capital Management, Inc. The Board of Directors elects the Funds’ officers. The name, address, age and principal occupations for the past five years of the directors and officers are listed below, along with the number of portfolios in the Fund complex overseen by each director. During the past five years none of the directors has served as a director of a public company or a mutual fund other than Perritt MicroCap Opportunities, Inc. and Perritt Funds, Inc. The business address of each director and officer is 300 South Wacker Drive, Suite 2880, Chicago, IL 60606. For additional information about the directors, please call 1-800-331-8936 and request a Statement of Additional Information (SAI). One will be mailed to you free of charge.
Position(s) Held | ||||
with Fund and | Other | |||
Number of | Directorships | |||
Portfolios in | Held by | |||
Name, | Fund Complex | Term of Office | Principal | Director |
Address, | Overseen | and Length of | Occupation(s) | during the |
and Age | by Director | Time Served | during Past 5 Years | Past 5 Years |
Independent Directors of the Fund | ||||
Dianne C. Click | Director | Indefinite, until | Ms. Click is a licensed Real | Perritt |
Age: 52 | successor | Estate Broker in the State | MicroCap | |
Portfolios in | elected; 18 years, | of Montana. She has been | Opportunities | |
Fund Complex | Perritt MicroCap | a partner and a principal | Fund, Inc. | |
Overseen: 3 | Opportunities | owner of a real estate sales | ||
Fund; 10 years, | company, Bozeman Broker | |||
Perritt Ultra | Group, since April 2004. | |||
MicroCap Fund; | She has been licensed | |||
and since | in the state of Montana | |||
inception, | since 1995. | |||
Perritt Low Priced | ||||
Stock Fund | ||||
David S. Maglich | Director | Indefinite, until | Mr. Maglich is a Shareholder | Perritt |
Age: 57 | successor | with the law firm of Fergeson, | MicroCap | |
Portfolios in | elected; 25 years, | Skipper, et. al. in Sarasota, | Opportunities | |
Fund Complex | Perritt MicroCap | Florida and has been | Fund, Inc. | |
Overseen: 3 | Opportunities | employed with such firm | ||
Fund; 10 years, | since April 1989. | |||
Perritt Ultra | ||||
MicroCap Fund; | ||||
and since | ||||
inception, | ||||
Perritt Low Priced | ||||
Stock Fund | ||||
58
Perritt Funds, Inc.
Directors and Officers (Unaudited) (Continued) |
Position(s) Held | ||||
with Fund and | Other | |||
Number of | Directorships | |||
Portfolios in | Held by | |||
Name, | Fund Complex | Term of Office | Principal | Director |
Address, | Overseen | and Length of | Occupation(s) | during the |
and Age | by Director | Time Served | during Past 5 Years | Past 5 Years |
Inside Director of the Fund | ||||
Michael J. | ||||
Corbett(1) | President | One-year term | Mr. Corbett has been | Perritt |
Age: 49 | as President; | President of the Perritt | MicroCap | |
MicroCap Opportunities | Opportunities | |||
Portfolios in | As Director, | Fund since November | Fund, Inc. | |
Fund Complex | indefinite until | 1999 and President of the | ||
Overseen: 3 | successor | Perritt Ultra MicroCap Fund | ||
elected; | since August 2004. He has | |||
Director since | served as President of the | |||
October 5, 2010; | Advisor since October 5, | |||
15 years as | 2010, and previously served | |||
President of | as Vice President of the | |||
Perritt MicroCap | Advisor from February | |||
Opportunities | 1997 until October 5, 2010. | |||
Fund; 10 years | Mr. Corbett began his | |||
as President of | tenure with Perritt Capital | |||
Perritt Ultra | Management in 1990 as a | |||
MicroCap Fund; | research analyst. He assumed | |||
and since | portfolio management | |||
inception, | responsibilities in 1996 | |||
Perritt Low Priced | and now serves as portfolio | |||
Stock Fund | manager for both funds. | |||
59
Perritt Funds, Inc.
Directors and Officers (Unaudited) (Continued) |
Position(s) Held | ||||
with Fund and | Other | |||
Number of | Directorships | |||
Portfolios in | Held by | |||
Name, | Fund Complex | Term of Office | Principal | Director |
Address, | Overseen | and Length of | Occupation(s) | during the |
and Age | by Director | Time Served | during Past 5 Years | Past 5 Years |
Officers of the Fund other than Mr. Corbett | ||||
Mark Buh | Vice President | One-year term | Mr. Buh has been Vice | N/A |
Age: 52 | and Treasurer | 2 years | President and Treasurer of the | |
Funds and Chief Financial | ||||
Officer of the Adviser since | ||||
February 2012. He has over | ||||
25 years of experience in | ||||
corporate accounting, | ||||
administration, tax analysis | ||||
and strategic planning for | ||||
growth and development. He | ||||
has a BS in accounting, an | ||||
MBA from DePaul University, | ||||
and is a CPA and CFA. | ||||
Allison B. Hearst | Secretary | One-year term | Mrs. Hearst has 17 years of | N/A |
Age: 51 | experience in the mutual fund | |||
4 years | industry, including a previous | |||
tenure at the Advisor beginning | ||||
in 1990. Mrs. Hearst returned | ||||
to the Advisor in 2007. | ||||
Lynn E. | ||||
Burmeister | Vice President | One-year term | Mrs. Burmeister has been the | N/A |
Age: 55 | and Chief | Chief Compliance Officer | ||
Compliance | 4 years | since May 1, 2010, and | ||
Officer | oversees all compliance | |||
matters for the funds and the | ||||
advisor. She also coordinates | ||||
the administration of the Funds | ||||
and is a liaison with the firm’s | ||||
corporate counsel. Mrs. | ||||
Burmeister has worked in the | ||||
financial industry since 1980. | ||||
Her previous experience | ||||
includes work at Harris | ||||
Associates, Gofen & Glossberg | ||||
and Optimum Investments. |
(1) | Mr. Corbett is an interested person of the Funds based upon his position with the Advisor. |
60
Perritt Funds
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Securities and Exchange Commission’s website at http://www.sec.gov and may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds’ latest Forms N-Q are also available without charge upon request by calling 1-800-331-8936.
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling the Advisor at 1-800-331-8936 and on the Securities and Exchange Commission’s website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 1-800-331-8936 and on the Securities and Exchange Commission’s website at http://www.sec.gov.
Household Delivery of Shareholder Documents: To reduce expenses, the Funds may mail only one copy of the Funds’ prospectus, SAI and each annual and semi-annual report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please call the Funds at 1-800-331-8936 or contact your financial institution. You will begin receiving individual copies thirty days after receiving your request.
Electronic Delivery of Shareholder Documents: You may choose to receive the Funds’ prospectus and annual and semi-annual reports electronically. To sign up for electronic delivery, visit www.icsdelivery.com and select the first letter of your brokerage firm’s name. Then, select your brokerage institution from the list that follows, fill out the appropriate information and provide an e-mail address where you would like your information sent. If your brokerage firm is not listed, electronic delivery may not be available. Please contact your brokerage firm or financial advisor.
Tax Notice
For the year end October 31, 2014, the Perritt MicroCap Opportunities Fund, the Perritt Ultra MicroCap Fund and the Low Priced Stock Fund did not pay any interest related dividends under the Internal Revenue Code Section 87(k)(1)(c). Additionally, for the year ended October 31, 2014, 100% and 0% of the distributions paid by the Perritt MicroCap Opportunities Fund and the Perritt Ultra MicroCap Fund were designated as short-term capital gain distributions designated under the Internal Revenue Code Section 871(k)(2)(c). The Perritt Low Priced Stock Fund did not have any short-term capital gain distributions during the period ended October 31, 2014.
The percentage of dividend income distributed for the year ended October 31, 2014, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003, is 100%, 0% and 0% for the Perritt MicroCap Opportunities Fund, the Perritt Ultra MicroCap Fund and the Low Priced Stock Fund, respectively. Of the dividends paid by the Perritt MicroCap Opportunities Fund, the Perritt Ultra MicroCap Fund and the Low Priced Stock Fund, 100%, 0% and 0%, respectively, qualify for the corporate dividends received deduction.
61
Privacy Policy
We collect the following nonpublic personal information about you:
• | Information we receive from you on or in applications or other forms, including but not limited to, your name, address, phone number, and social security number; and | |
• | Information about your transactions with us, our affiliates or others, including but not limited to, your account number and balance, parties to transactions, cost basis information and other financial information. |
We do not disclose any nonpublic personal information about our current or former shareholders to nonaffiliated third parties, except as permitted by law. For example, we are permitted by law to disclose all the information we collect to our transfer agent to process your transactions. Furthermore, we restrict access to your nonpublic personal information to those persons who require such information to provide products or services to you. We maintain physical, electronic, and procedural safeguards through our transfer agent, U.S. Bancorp Fund Services, LLC, that comply with federal standards to guard your nonpublic personal information.
In the event that you hold shares of the Funds through a financial intermediary, including, but not limited to, a broker-dealer, bank or trust company, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with nonaffiliated third parties.
62
Investment Advisor |
Perritt Capital Management, Inc. |
300 South Wacker Drive, Suite 2880 |
Chicago, IL 60606-6703 |
800-331-8936 |
Independent Registered |
Public Accounting Firm |
Cohen Fund Audit Services, Ltd. |
1350 Euclid Avenue, Suite 800 |
Cleveland, OH 44115 |
Legal Counsel |
Foley & Lardner LLP |
777 East Wisconsin Avenue |
Milwaukee, WI 53202 |
Custodian |
U.S. Bank, NA |
1555 North River Center Drive, Suite 302 |
Milwaukee, WI 53212 |
Transfer Agent |
and Dividend Disbursing Agent |
U.S. Bancorp Fund Services, LLC |
P.O. Box 701 |
Milwaukee, WI 53201-0701 |
Distributor |
Quasar Distributors, LLC |
615 East Michigan Street |
Milwaukee, WI 53202 |
For assistance with your existing account, call our Shareholder Service Center at 1-800-332-3133. |
The Funds’ Statements of Additional Information contain information about the Funds’ directors and are available without charge upon request by calling 1-800-332-3133. |
MicroCap Opportunities Fund
Ultra MicroCap Fund
Low Priced Stock Fund
Minimum Initial Investment $1,000
IRA Minimum Initial Investment $250
Dividend Reinvestment Plan
Systematic Withdrawal Plan
Automatic Investment Plan
Retirement Plans Including:
• IRA | • Roth IRA |
• SEP-IRA | • Coverdell Education |
• Simple IRA | Savings Account |
2% redemption fee imposed for shares
held ninety (90) calendar days or less.
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,
the Perritt Ultra MicroCap Fund and/or
the Perritt Low Priced Stock Fund.
300 S. Wacker Drive • Suite 2880 • Chicago, IL 60606-6703
Tel 312-669-1650 • 800-331-8936 • Fax: 312-669-1235
E-mail: PerrittCap@PerrittCap.com
Web Site: www.perrittmutualfunds.com
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. Incorporated by reference to the registrant’s Form N-CSR filed January 8, 2010.
Item 3. Audit Committee Financial Expert.
The registrant’s board of directors has determined that the registrant does not have an audit committee financial expert serving on its board of directors, which functions as the registrant’s audit committee since the registrant does not have a separate audit committee.
The board of directors has determined that the members of the board of directors have sufficient background, experience and financial knowledge to fulfill their responsibilities and obligations to the registrant and its shareholders. Accordingly, the board of directors has determined that the search for, and possible appointment of, a person who would satisfy the definition of an audit committee financial expert is not necessary.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant, Cohen Fund Audit Services, Ltd., to perform audit services, audit-related services, and tax services during the past fiscal year. “Audit services” refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
FYE 10/31/2014 | FYE 10/31/2013 | |
Audit Fees | $39,000 | $27,000 |
Audit-Related Fees | $0 | $0 |
Tax Fees | $9,000 | $6,000 |
All Other Fees | $0 | $0 |
The percentage of fees billed by Cohen Fund Audit Services, Ltd. for the fiscal years ended October 31, 2014 and October 31, 2013, respectively, applicable to non-audit services pursuant to a waiver of the pre-approval requirement was as follows:
FYE 10/31/2014 | FYE 10/31/2013 | |
Audit-Related Fees | 0% | 0% |
Tax Fees | 0% | 0% |
All Other Fees | 0% | 0% |
All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant. The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountants for services to the registrant and to the registrant’s investment adviser or Service Affiliates (as defined below) for the last two years.
Non-Audit Related Fees | FYE 10/31/2014 | FYE 10/31/2013 |
Registrant | $0 | $0 |
Registrant’s Investment Adviser | $0 | $0 |
Because the registrant’s accountants have not rendered any non-audit services during the last two fiscal years to the registrant’s investment adviser, or any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant (together with the registrant’s investment adviser, “Service Affiliates”) that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, the registrant’s board of directors has not considered whether the provision of such services to the registrant’s investment adviser or the Service Affiliates is compatible with maintaining the independence of the registrant’s accountant.
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
(a). Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
(b). Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.
Item 11. Controls and Procedures.
The Registrant’s President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.
There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Incorporated by reference to the registrant’s Form N-CSR filed January 8, 2010. |
(2) A separate certification for each principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Perritt Funds, Inc.
By (Signature and Title)* /s/ Michael J. Corbett
Michael J. Corbett, President
Date December 22, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ Michael J. Corbett
Michael J. Corbett, President
Date December 22, 2014
By (Signature and Title)* /s/ Mark J. Buh
Mark J. Buh, Treasurer
Date December 22, 2014
* Print the name and title of each signing officer under his or her signature.