TOP 10 REASONS TO ALLOCATE
TO MICROCAP IN PORTFOLIOS
REASON #10

MICROCAPS USE DISCLOSURES

Disclosure
The Fund’s investment objectives, risks, charges and expenses must be co...
REASON #9 MICROCAPS HAVE HISTORICALLY PERFORMED WELL
			FOLLOWING RATE HIKES
RUSSELL 2000 INDEX RETURNS FOLLOWING FED FUND...
REASON #8

MICROCAPS CAN LOWER CORRELATION
CORRELATIONS OF ANNUAL RETURNS 1926-2013

Category
		

Large Company

Small Com...
REASON #7
			

MICRO-CAPS HAVE HISTORICALLY DONE WELL IN
LOW-GROWTH ENVIRONMENTS

Decade
2000's
1930's
1970's
1980's
1990'...
REASON #6 MICRO-CAPS HAVE HISTORICALLY HAD LOWER FIXED COSTS
Fixed Costs as % of Sales by Market Cap Group
10%
9%
8%
7%
6%...
REASON #5 SINCE 1993, OVER 50% OF ALL PUBLIC M&A
	
			
TRANSACTIONS OCURRED AT THE MICRO-CAP LEVEL
Percent of U.S. Public ...
REASON #4 MICRO-CAPS HAVE HISTORICALLY HAD A HIGH DEGREE OF INSIDER 		
		
OWNERSHIP, WHICH ALIGN MANAGEMENT AND INVESTOR I...
REASON #3
			

WE BELIEVE MICRO-CAPS REMAIN THE LAST INEFFICIENT
CUSTOM RESEARCH
MARKET CAP CLASS
FUREY RESEARCH PARTNERS
...
REASON #2 MICRO-CAPS ARE UNDER-COVERED IN OUR VIEW

Average Analyst Coverage, by Market Cap Group
25

20

15

10

5

0
>$1...
REASON #1 MICRO-CAPS HAVE HISTORICALLY POSTED THE BEST
			LONG-TERM RETURNS
$1.00 Invested from 12/31/25 to 12/31/12

Sour...
300 S. Wacker, Suite 2880, Chicago, IL 60606
(800) 331-8936 perrittcap • com

Distributed by Quasar Distributors, LLC
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Top 10 Reasons to Allocate to Microcap In Portfolios

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Top 10 Reasons to Allocate to Microcap In Portfolios

  1. 1. TOP 10 REASONS TO ALLOCATE TO MICROCAP IN PORTFOLIOS
  2. 2. REASON #10 MICROCAPS USE DISCLOSURES Disclosure The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The Summary Prospectus and Statutory Prospectus contain this and other important information about the investment company, and it may be obtained by calling (800) 331-8936 or by visiting perrittcap.com. Read it carefully before investing. Mutual fund investing involves risk. Principal loss is possible. The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility. The Fund invests in micro-cap companies which tend 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. Index performance is not indicative of fund’s performance. Past performance does not guarantee future results. Current performance can be obtained by calling 1-800-331-8936. The 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. It is not possible to invest directly in an index. The Fund is distributed by Quasar Distributors, LLC. 1 | perrittcap • com
  3. 3. REASON #9 MICROCAPS HAVE HISTORICALLY PERFORMED WELL FOLLOWING RATE HIKES RUSSELL 2000 INDEX RETURNS FOLLOWING FED FUNDS RATE INCREASE Hike Date 3 months after 6 months 12 months after 8/7/80 13.9% 12.7% 2/1/83 16.6% 27.8% 10/1/86 -0.5% 22.9% 2/4/94 -2.6% -5.4% 6/30/99 -8.3% 6.4% 6/30/04 -4.1% 9.5% Averages 2.5% 12.3% after 27.0% 13.0% 17.6% after 18 months 3.3% 28.9% 7.3% -2.7% 16.5% 13.4% 3.8% 9.4% 16.4% 15.6% 10.0% Source: Capital IQ The Russell 2,000 Index consists of the smallest 2,000 companies in a group of 3,000 U.S. companies in the Russell 3000 Index, as ranked by market capitalization. The 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. You cannot invest directly in an index. 2 | perrittcap • com
  4. 4. REASON #8 MICROCAPS CAN LOWER CORRELATION CORRELATIONS OF ANNUAL RETURNS 1926-2013 Category Large Company Small Company L-T Government Treasury Stocks Stocks Bonds Bills Large Company 1.00 Small Company 0.79 1.00 Long-Term Gov’t Bonds 0.01 -0.08 1.00 -0.01 -0.09 0.18 Treasury Bills 1.00 Source: Ibbotson Classic Yearbook, 2013 Small company stocks defined as the bottom quintile of securities ranked by market capitalization from 1926-2012. Large company stocks are represented by the S&P 500 index. Long-term Government Bonds are constructed with data from The Wall Street Journal. To the greatest extent possible, a one-bond portfolio with a term of approximately 20 years and a reasonable coupon was used each year. For the U.S. Treasury Bill index, data from The Wall Street Journal are used. Each month a one-bill portfolio containing the shortest-term bill having not less than one month to maturity is constructed. The Consumer Price Index for All Urban Consumers is used to measure inflation Source: Ibbotson & Associates Stocks, Bonds, Bills and Inflation Yearbook, 2013. Correlation is a statistical measure of how two securities move in relation to each other. 3 | perrittcap • com
  5. 5. REASON #7 MICRO-CAPS HAVE HISTORICALLY DONE WELL IN LOW-GROWTH ENVIRONMENTS Decade 2000's 1930's 1970's 1980's 1990's 1950's 1960's 1940's Large-cap 1.8% 1.9% 8.2% 13.1% 17.7% 15.4% 7.5% 12.4% Annualized Change (%) Small-cap Micro-cap 6.3% 7.4% 8.0% 12.5% 15.1% 14.1% 8.5% 5.7% 15.5% 17.3% 14.2% 14.0% 11.0% 12.2% 19.3% 26.7% GDP 1.5% 2.7% 3.2% 3.2% 3.4% 3.5% 4.2% 5.6% Source: Furey Research Partners December 2013 Small company stocks defined as the bottom quintile of securities ranked by market capitalization from 1926-2012. Microcap stocks defined as the bottom two deciles of securities ranked by market capitalization from 1926-2012. Large company stocks are represented by the S&P 500 index. Source: Ibbotson & Associates Stocks, Bonds, Bills and Inflation Yearbook, 2013 Past performance does not guarantee future results 4 | perrittcap • com
  6. 6. REASON #6 MICRO-CAPS HAVE HISTORICALLY HAD LOWER FIXED COSTS Fixed Costs as % of Sales by Market Cap Group 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% >$12b Source: Furey Research Partners December 2013 5 | perrittcap • com $6-12b $3-6b Market Cap Group $300m-$3b <$300m
  7. 7. REASON #5 SINCE 1993, OVER 50% OF ALL PUBLIC M&A TRANSACTIONS OCURRED AT THE MICRO-CAP LEVEL Percent of U.S. Public M&A Deals, by Market Cap Group (1993-2013) 60% 50% 40% 30% 20% 10% 0% >$12b $6b-$12b Source: Furey Research Partners, January 2014 6 | perrittcap • com $3b-$6b $300m-$3b <=$300m
  8. 8. REASON #4 MICRO-CAPS HAVE HISTORICALLY HAD A HIGH DEGREE OF INSIDER OWNERSHIP, WHICH ALIGN MANAGEMENT AND INVESTOR INTERESTS Average Insider Ownership, by Market Cap Group 30% 25% 20% 15% 10% 5% 0% >$12b Source: Furey Research Partners January 2014 7 | perrittcap • com $6b-$12b $3b-$6b $300m-$3b <=$300m
  9. 9. REASON #3 WE BELIEVE MICRO-CAPS REMAIN THE LAST INEFFICIENT CUSTOM RESEARCH MARKET CAP CLASS FUREY RESEARCH PARTNERS ‘ FUREY RESEARCH PARTNERS -- CUSTOM RESEARCH & ANALYSIS Percent of Stocks with No Analyst Coverage, by Market Cap Group 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% >$12b $6b-$12b Source: Furey Research Partners and FactSet Source: Furey Research Partners As of January 2014 8 | perrittcap • com $3b-$6b $300m-$3b <=$300m
  10. 10. REASON #2 MICRO-CAPS ARE UNDER-COVERED IN OUR VIEW Average Analyst Coverage, by Market Cap Group 25 20 15 10 5 0 >$12b Source: Furey Research Partner As of January 2014 9 | perrittcap • com $6b-$12b $3b-$6b $300m-$3b <=$300m
  11. 11. REASON #1 MICRO-CAPS HAVE HISTORICALLY POSTED THE BEST LONG-TERM RETURNS $1.00 Invested from 12/31/25 to 12/31/12 Source: Ibbotson Classic Yearbook, 2013 This chart illustrates the performance of a hypothetical $1 investment made on December 31, 1925. It assumes the reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charges or redemption fees. The chart does not imply any future performance Small company stocks defined as the bottom quintile of securities ranked by market capitalization from 1926-2012. Microcap stocks defined as the bottom two deciles of securities ranked by market capitalization from 1926-2012. Mid cap stocks are defined as deciles 5-6. Large company stocks are represented by the S&P 500 index. Source: Ibbotson & Associates Stocks, Bonds, Bills and Inflation Yearbook, 2013 10 | perrittcap • com
  12. 12. 300 S. Wacker, Suite 2880, Chicago, IL 60606 (800) 331-8936 perrittcap • com Distributed by Quasar Distributors, LLC

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