As filed with the Securities and Exchange Commission on August 11, 2000.
1933 Act Registration No. 33-43272
======================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
{ } Pre-Effective Amendment No. 1
{ } Post-Effective Amendment No. ___
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THE ROYCE FUND
Telephone Number: (212) 355-7311
1414 Avenue of the Americas, New York, N. Y. 10019
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Charles M. Royce, President
The Royce Fund
1414 Avenue of the Americas
New York, N. Y. 10019
(Agent for Service)
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Registrant has elected to register pursuant to Rule 24f-2 an indefinite
number of shares of beneficial interest. Accordingly, no fee is payable
herewith because of reliance upon Rule 24f-2. The Rule 24f-2 Notice for the
fiscal year ended December 31, 1999 was filed on March 16, 2000.
Page 1 of __ pages
The Exhibit Index is located on page __
Cross-Reference Sheet
Form N-14 Item Caption in Prospectus/Proxy Statement
- -------------- -------------------------------------
1
Beginning of Registration Statement Front Cover
and Outside Front Cover Page of
Prospectus
2
Outside Back Cover Page of Prospectus Back Cover
3
Fee Table, Synopsis Information, Background and Summary Fee Table; and
Risk Factors Risk Factors
4
Information about the Transaction Description of the Proposed
Reorganization; Comparison of the
Funds; Risk Factors; and Recommendation
of the Winter Harbor Board of Trustees.
See also Prospectus for Royce Total
Return Fund dated May 1, 2000
5, 6
Information about Registrant, Comparison of the Funds;
Information about Acquired Series Recommendation of the Winter Harbor
Board of Trustees; Further Information
About the Trust; and Financial
Highlights
7
Voting Information Shares and Voting; Vote Required; and
Shareholder Proposals
8
Interests of Certain Persons Not Applicable
Form N-14 Item Caption in Prospectus/Proxy Statement
- -------------- -------------------------------------
9
Additional Information For Reoffering Not applicable
by Persons Deemed to be Underwriters
10, 11
Cover Page; Table of Contents Cover Page; Back Cover
12, 13
Additional Information about Registrant Statement of Additional Information
and about Series being Acquired of The Royce Fund dated May 1, 2000;
Prospectus of Royce Total Return Fund
dated May 1, 2000
14
Financial Statements Statement of Additional Information
of The Royce Fund, dated August 11, 2000
REVEST VALUE FUND Ebright Investments, Inc.
Investment Advisor
511 Congress Street, 9th Floor
Portland, ME 04101-3428
(207) 774-7455 (800) 277-5573
Fax (207) 772-7370
September 11, 2000
Dear Friends and Fellow Shareholders:
As I informed you in an earlier letter, the Board of Trustees of The Winter
Harbor Fund (the "Board") recently approved and recommended shareholder
approval of a proposal for The REvest Value Fund ("REvest"), a series of The
Winter Harbor Fund, to be acquired by Royce Total Return Fund ("RTR"), a
series of The Royce Fund, and to liquidate REvest. Proxy materials relating
to your approval of this proposed transaction are enclosed.
The investment objectives, policies, strategies and restrictions of RTR are
substantially similar to those of REvest. The primary substantive change for
REvest shareholders would be Royce & Associates, Inc. replacing Ebright
Investments, Inc. as investment adviser. The total net asset value of the
RTR shares that you will receive as a result of this transaction will be
equal to the total net asset value of your shares in REvest on the closing
date. The transaction is anticipated to be tax-free for Federal income tax
purposes.
Royce & Associates, Inc., the investment adviser to RTR, has agreed to pay
up to $25,000 of the reorganization costs incurred by REvest, subject to
completion of the proposed reorganization.
On September 25, 1998, REvest was reorganized from a series of The Royce
Fund into an independent mutual fund with the goal of providing REvest with a
better opportunity to attract new investors, and thereby maintain and
possibly improve its expense ratio, as a separate fund independent of any
fund complex.
Unfortunately, the last two years have been particularly difficult for
small-cap value funds and their managers. Concurrent with REvest's
reorganization, the Asian crisis prompted a flight to large-cap blue chip
stocks. Then in 1999, once that threat had passed, investors became
infatuated with growth-oriented investments.
These phenomena inflicted a devastating impact on many small-cap value
funds' performance and asset levels. While REvest was somewhat more
insulated than some others due to the high level of loyalty displayed by its
shareholders, it was not immune. Asset size continued to decline through
1999, prompting the Board to question the viability of REvest and its
investment adviser.
After much deliberation and discussion, the Board approved the acquisition
of REvest by RTR, which offers a comparable vehicle for continued long-term
investing. RTR is managed by Chuck Royce, who has over twenty-five years of
experience investing in small-cap value companies. In addition, its 1.25%
expense ratio is lower than that of REvest and the industry average. The
Board believes that the proposed arrangement is in the best interests of
REvest and its shareholders, and asks you to approve the proposed
transaction.
Your vote is very important. Please read the enclosed materials carefully,
and then complete and return the enclosed proxy card in the postage-paid
envelope regardless of whether or not you plan on attending the meeting in
person.
As always, if you have any questions regarding the proxy materials, please
call me at (800) 277-5573 during regular business hours. Thank you in
advance for your attention to this important matter.
Sincerely,
Jennifer Ebright Goff, President
Ebright Investments, Inc., Adviser to The REvest Value Fund
THE REVEST VALUE FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
October 3, 2000
NOTICE IS HEREBY GIVEN that a special meeting (the "Meeting") of the
shareholders of The REvest Value Fund ("REvest"), a series of The Winter
Harbor Fund, will be held at the offices of The Winter Harbor Fund, located
at 511 Congress Street, Portland, Maine 04101, on October 3, 2000, at 2:00
p.m. Eastern time, for the following purposes:
1. To approve or disapprove the Agreement and Plan of Reorganization,
whereby REvest's assets and liabilities are acquired by Royce Total Return
Fund, a series of The Royce Fund, in exchange for shares of Royce Total
Return Fund and REvest is then liquidated.
2. To transact such other business as may properly come before the Meeting
or any adjournment(s) thereof.
The Trustees have fixed the close of business on August 18, 2000, as the
record date for the determination of shareholders entitled to receive notice
of, and to vote at, the Meeting or any adjournment(s) thereof.
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the Meeting,
the persons named as proxies may propose one or more adjournments of the
Meeting, in accordance with applicable law, to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of the
holders of a majority of the REvest shares present in person or by proxy at
the Meeting. The persons named as proxies will vote in favor of any such
adjournment those proxies which they are entitled to vote in favor and will
vote against any such adjournment those proxies to be voted against that
proposal.
By order of the Board of Trustees,
Tina Hosking
Secretary
Cincinnati, Ohio
September 11, 2000
IMPORTANT: You are cordially invited to attend the Meeting. Shareholders who
do not expect to attend the Meeting in person are requested to complete, date
and sign the enclosed form of proxy and return it promptly in the addressed
envelope, which requires no postage and is intended for your convenience.
Your prompt return of the enclosed proxy may save the necessity and expense
of further solicitations to assure a quorum at the Meeting. The enclosed
proxy is being solicited on behalf of the Board of Trustees of The Winter
Harbor Fund.
COMBINED PROSPECTUS/PROXY STATEMENT
Relating to the Acquisition and Assumption by
ROYCE TOTAL RETURN FUND
A Series of The Royce Fund
1414 Avenue of the Americas
New York, New York 10019
(800) 221-4268
of the Assets and substantially all of the Liabilities of
THE REVEST VALUE FUND
A Series of The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
(800) 277-5573
SOLICITATION OF PROXIES
This Combined Prospectus/Proxy Statement is furnished in connection with
the solicitation of proxies by the Board of Trustees of The Winter Harbor
Fund for use at a special meeting (the "Meeting") of shareholders of The
REvest Value Fund ("REvest"), a series of The Winter Harbor Fund, to be held
at the offices of The Winter Harbor Fund, located at 511 Congress Street,
Portland, Maine 04101, on October 3, 2000, at 2:00 p.m. Eastern time.
The purpose of the Meeting is to approve or disapprove the Agreement and
Plan of Reorganization (the "Reorganization Plan") between The Winter Harbor
Fund, on behalf of REvest, and The Royce Fund, on behalf of Royce Total
Return Fund ("RTR"). The Reorganization Plan includes (i) the transfer of all
or substantially all of the assets and liabilities of REvest to RTR in
exchange for shares of beneficial interest in RTR issued by The Royce Fund
(the "RTR Shares") of equivalent value to the assets and liabilities
transferred (the "Reorganization"), (ii) the pro rata distribution of such
RTR Shares to shareholders of record of REvest as of the closing date of the
Reorganization (the "Closing Date") in full liquidation of such shareholders'
shares in REvest and (iii) the immediate liquidation and termination of
REvest. As a result of the Reorganization, each shareholder of REvest would
receive a number of full and fractional RTR Shares having the same aggregate
net asset value on the Closing Date as the REvest shares held by the
shareholder immediately before consummation of the Reorganization. A copy of
the Reorganization Plan, which has been approved by the Boards of Trustees of
both The Winter Harbor Fund and The Royce Fund, is set forth in Appendix A to
this Combined Prospectus/Proxy Statement.
The Winter Harbor Fund and The Royce Fund must receive, as a condition to
the Reorganization, an opinion from Bernstein, Shur, Sawyer & Nelson, P.A.,
counsel to The Winter Harbor Fund and Ebright Investments, Inc., to the
effect that the proposed Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a) of the U.S. Internal
Revenue Code of 1986, as amended, so that no gain or loss would be recognized
by RTR, REvest or their respective shareholders as a result of the
Reorganization. For additional information regarding the Federal income tax
consequences of the proposed Reorganization, see - "Federal Income Tax
Consequences" below.
The Winter Harbor Fund and The Royce Fund are both registered open-end
diversified management investment companies, organized as business trusts
under the laws of the State of Delaware. Both The Winter Harbor Fund and The
Royce Fund offer their shares in separate series which operate as separate
mutual funds. REvest is the sole series of The Winter Harbor
Fund, and RTR
is one of nine series of The Royce Fund. The investment objectives, policies
and restrictions of REvest are substantially similar to those of RTR. Both
REvest and RTR primarily seek long-term growth and secondarily current income
by investing in diversified portfolios of common stocks and convertible
securities.
The Trustees of The Winter Harbor Fund approved the Reorganization Plan
because they believe it would benefit shareholders of REvest. The Trustees
considered a variety of factors, including the fact that the Reorganization
Plan would permit REvest shareholders to pursue substantially identical
investment goals in a larger fund. The fact that RTR is a larger fund should
result in a reduced expense ratio due to the spreading of certain operating
expenses over a larger asset base. The Trustees also considered the fact that
the investments of RTR are managed in a manner similar to REvest. See
"Recommendation of The Winter Harbor Fund Board of Trustees" below for other
considerations. As mutual funds investing in common stocks of small-cap
companies, both RTR and REvest are generally subject to the same investment
risks.
This Combined Prospectus/Proxy Statement sets forth concisely the
information that a shareholder of REvest should know before voting on the
Reorganization Plan. Please read and retain it for future reference.
For a more detailed discussion of the investment objectives, strategies and
risks of RTR, see the Prospectus for RTR dated May 1, 2000, as set forth in
Appendix B (the "RTR Prospectus"). For a more detailed discussion of the
investment objectives, strategies and risks of REvest, see the Prospectus and
Statement of Additional Information for REvest, each dated February 29, 2000.
These documents are incorporated herein by reference. Copies may be obtained
without charge by contacting Ebright Investments, Inc. ("EII") at 511
Congress Street, Portland, Maine 04101 or by telephoning EII at (800) 277-
5573.
A Statement of Additional Information regarding RTR dated May 1, 2000, has
been filed with the Securities and Exchange Commission (the "SEC"). Another
Statement of Additional Information dated September 11, 2000, relating to
the proposed transaction described in this Combined Prospectus/Proxy
Statement, including historical financial statements, has also been filed
with the SEC and is also incorporated by reference herein. Copies of these
documents may be obtained without charge by contacting The Royce Fund by mail
at 1414 Avenue of the Americas, New York, New York 10019, by telephone at
(800) 221-4268 or by e-mail at funds@roycenet.com.
The most recent Annual Report to Shareholders of REvest, including
financial statements, has been previously mailed to REvest's shareholders.
If you have not received this report or would like to receive additional
copies free of charge, please call or write to EII at 511 Congress Street,
Portland Maine 04101, Telephone: (800) 277-5573, and they will be sent
promptly by first-class mail.
_______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________________
The date of this Combined Prospectus/Proxy Statement is September 11, 2000.
TABLE OF CONTENTS
I. INTRODUCTION 1
A. BACKGROUND AND SUMMARY 1
B. THE PROPOSED REORGANIZATION 2
C. COMPARISON OF FEES AND EXPENSES 2
D. PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES 4
E. SHARES AND VOTING 4
II. RISK FACTORS 5
III. THE PROPOSAL: APPROVAL OF THE AGREEMENT AND
PLAN OF REORGANIZATION 6
A. DESCRIPTION OF THE PROPOSED REORGANIZATION 6
1. The Reorganization 6
2. Effect of the Reorganization 7
3. Federal Income Tax Consequences 8
4. Description of the RTR Shares 9
5. Pro Forma Capitalization 9
B. COMPARISON OF THE FUNDS 9
1. Investment Objectives, Policies and Restrictions 9
2. Investment Restrictions 10
3. Performance Information 10
4. Advisory Fees and Other Expenses 10
5. Other Information on Investment Advisory Agreements 11
6. Distribution Agreements 11
7. Transfer Agency and Service Agreements 11
8. Custody Agreements 11
9. Purchase Procedures 12
10. Redemption and Exchange Procedures 12
11. Dividends, Distributions and Taxes 13
12. Management of the Trusts 13
C. RECOMMENDATION OF THE WINTER HARBOR
BOARD OF TRUSTEES 14
D. DISSENTERS' RIGHTS OF APPRAISAL 14
E. FURTHER INFORMATION ABOUT THE TRUSTS 15
F. VOTE REQUIRED 15
IV. MISCELLANEOUS ISSUES 15
A. OTHER BUSINESS 15
B. SHAREHOLDER PROPOSALS 15
C. LEGAL MATTERS 16
D. FINANCIAL STATEMENTS 16
APPENDICES
Appendix A - Agreement and Plan of Reorganization
Appendix B - Prospectus of Royce Total Return Fund
I. INTRODUCTION
A. BACKGROUND AND SUMMARY
On September 25, 1998, REvest was reorganized from a separate series of The
Royce Fund managed by Ebright Investments, Inc. ("EII") into an independent
mutual fund with the goal of providing REvest with a better opportunity to
attract new investors, and thereby maintain and possibly improve its expense
ratio, as a separate entity.
Unfortunately, the ensuing two years have been particularly difficult for
many small-cap value funds and their managers. Concurrent with the Fund's
reorganization, the Asian crisis prompted a flight to large-cap blue chip
stocks. Then in 1999, once that threat had passed, investors became
infatuated with growth oriented investments.
The result was poor relative fund performance, a higher expense ratio and a
steadily declining asset base as investors favored other sectors. For the
same reasons, marketing REvest proved ineffective, providing no means to
offset redemptions. As asset levels declined, the advisory fee paid to EII
declined as well, causing operations to approach breakeven. This situation
prompted the Board of Trustees of The Winter Harbor Fund to question the
viability of both REvest and EII. Both subsequently decided that some form
of exit strategy was in order.
The Board considered both liquidating REvest and merging it with another
small-cap value fund. The latter was more appealing as it provided a vehicle
for continued long-term investing. The Board considered numerous funds and
ultimately chose RTR. The decision was based upon a review of factors,
including, but not limited to, investment objectives and policies, size,
performance, risk profile, portfolio turnover and expense ratio. A more
thorough discussion of these factors can be found below in "Recommendation of
The Winter Harbor Fund Board of Trustees".
In this Combined Prospectus/Proxy Statement, the Winter Harbor Board is
seeking REvest shareholder approval of the Agreement and Plan of
Reorganization, whereby REvest's assets and liabilities would be acquired by
RTR, and REvest would then be liquidated. Following the acquisition, the
shareholders of REvest would become shareholders of RTR. This acquisition of
REvest's assets and liabilities by RTR and the subsequent liquidation of
REvest is called the "Reorganization".
The Reorganization Plan provides that Royce & Associates, Inc. ("Royce")
will pay up to $25,000 of REvest's expenses attributable to the
Reorganization, including the costs and expenses incurred in the preparation
and mailing of the notice, the Combined Prospectus/Proxy Statement and the
proxy, and the solicitation of proxies, provided that RTR becomes obligated
to consummate the Reorganization. REvest will pay costs and expenses in
excess of $25,000, if any, or all costs and expenses if RTR does not become
so obligated. REvest will reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation material to the
beneficial owners of the shares of REvest.
In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview
conducted by, among others, officers and employees of EII.
B. THE PROPOSED REORGANIZATION
At the Meeting, REvest shareholders will vote to approve or disapprove the
Reorganization Plan, a copy of which is attached as Appendix A to this
Combined Prospectus/Proxy Statement. The Reorganization Plan includes the
transfer of all or substantially all of the assets and liabilities of REvest
to RTR in exchange for the RTR Shares, the pro rata distribution of the RTR
Shares to REvest shareholders in full liquidation of such shareholders'
beneficial interest in REvest, and the immediate liquidation and termination
of REvest. The Reorganization is anticipated to be tax-free for Federal
income tax purposes. See "Federal Income Tax Consequences" below.
The investment objectives and strategies of RTR are substantially similar
to those of REvest. Both REvest and RTR primarily seek long-term growth and
secondarily current income by investing in a diversified portfolio of common
stocks and convertible securities. The investment restrictions of RTR are
substantially identical to those of REvest, except as described in
"Comparison of the Funds" below. The differences described are not expected
to meaningfully affect the manner in which the assets are managed.
The Winter Harbor Board believes that the proposed Reorganization is in the
best interests of REvest and its shareholders, and that the interest of
existing shareholders will not be diluted as a result of the proposed
Reorganization.
C. COMPARISON OF FEES AND EXPENSES
The tables below set forth transaction expense information with respect to
REvest and RTR, as well as pro forma information for RTR after giving effect
to the Reorganization. The tables were prepared based on the net asset, fee
and expense levels of REvest and RTR as of December 31, 1999.
Comparative Shareholder Transaction Expenses
The REvest Royce Total
Value Fund Return Fund
---------- ------------
Sales Load Imposed on Purchases None None
Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees -
1 Year or More After Account Opened None N/A
Early Redemption Fees -
Less Than 1 Year After Account Opened 1.00%(a) N/A
On purchases held for less than six months N/A 1.00%(a)
On purchases held for six months or more N/A None
Exchange Fees None None
_____________________
(a) The early redemption fee will not apply to the redemption of RTR shares
received in exchange for REvest shares in connection with the
Reorganization.
Comparative Annual Fund Operating Expenses
(as a percentage of average net assets)
Pro Forma
Combined
The REvest Royce Total (i.e.-RTR following
Value Fund Return Fund the Reorganization)
---------- ----------- -------------------
Management Fees 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.00% 0.00% 0.00%
Other Expenses 0.59% 0.31% 0.31%
Total Annual Fund Operating
Expenses 1.59% 1.31% 1.31%
Fee Waiver (0.30)% (0.06)% (0.06)%
Net Annual Fund Operating Expenses 1.29%(a) 1.25%(b) 1.25%(b)
__________________
(a) EII voluntarily limited total fund operating expenses to 1.30% through
December 31, 1999 and to 1.50% through June 30, 2000. Since June 30,
2000 no expense limitation has been in effect.
(b) Royce has contractually agreed to limit total fund operating expenses
to 1.25% through December 31, 2000.
The above table is to assist you in understanding the
various relative costs and expenses that are borne by shareholders of REvest
and RTR. It is based on expenses for the fiscal year ended December 31, 1999.
Expense Example
This example is intended to help you compare the cost of investing in the
Funds. The example assumes that you invest $10,000 in each Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year, you reinvest all dividends and capital gains distributions, and that
the Fund's total operating expenses (net of fee waiver for year one) remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
The REvest Value Fund $169 $502 $866 $1,899
Royce Total Return Fund $127 $409 $712 $1,574
These examples should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
D. PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
REvest and RTR have substantially identical minimum purchase
requirements and other purchase and redemption policies and procedures.
Currently, REvest shareholders may not exchange their shares for shares of
other funds. Shares of RTR, however, may be exchanged for shares of certain
other funds in The Royce Fund family at net asset value. The Royce Fund
reserves the right to revise or suspend the exchange privilege at any time.
E. SHARES AND VOTING
The Winter Harbor Fund and The Royce Fund are both registered open-end
diversified management investment companies organized as business trusts
under the laws of the State of Delaware. Both The Winter Harbor Fund and The
Royce Fund offer their shares in separate series, which operate as separate
mutual funds. REvest is the sole series of The Winter Harbor Fund, and RTR
is one of nine series of The Royce Fund. REvest's shareholders will receive
shares of RTR in exchange for their REvest shares if the Reorganization is
approved and consummated.
The Board of Trustees of The Winter Harbor Fund has fixed the close of
business on [RECORD DATE] as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting and at any
adjournments thereof. Shareholders on the record date will be entitled to
one vote for each share held. As of August 18, 2000, REvest had 1,349,279
shares outstanding.
All properly executed proxies received in time for the Meeting will be
voted as specified in the proxy, or if no specification is made, in favor of
the proposal. Any shareholder giving a proxy has the power to revoke it at
any time prior to its use by mail (addressed to the Secretary at The Winter
Harbor Fund, 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202) or in
person at the Meeting by executing a superseding proxy, or by submitting a
notice of revocation to REvest. If any other matters come before the
Meeting, proxies will be voted by the persons named therein as proxies in
accordance with such persons' best judgment.
Approval of the Agreement and Plan of Reorganization will require the
affirmative vote of a "majority of the outstanding voting securities" of
REvest. The term "majority of the outstanding voting securities", as defined
in the 1940 Act and as used in this Combined Prospectus/Proxy Statement,
means: the affirmative vote by the holders of the lesser of (1) 67% or more
of the shares of REvest present at the Meeting if more than 50% of the
outstanding shares of REvest are present in person or by proxy or (2) more
than 50% of the outstanding shares of REvest. The Meeting may be adjourned
from time to time by a majority of the votes properly cast upon the question
of adjourning a Meeting to another date and time, whether or not a quorum is
present, and the Meeting may be held as adjourned without further notice.
The persons named in the proxy will vote in favor of such adjournment those
shares which they are entitled to vote if such adjournment is necessary to
obtain a quorum or to obtain a favorable vote on any proposal.
Abstentions will have the effect of a "no" vote. Broker non-votes will
have the effect of a "no" vote if such vote is determined on the basis of
obtaining the affirmative vote of more than 50% of the outstanding shares of
REvest. Broker non-votes will not constitute "yes" or "no" votes and will be
disregarded in determining the REvest shares "present" if such vote is
determined on the basis of the affirmative vote of 67% of the REvest shares
present at the Meeting with respect to the proposal.
As of the Record Date, the following persons or groups owned beneficially
or of record 5% or more of the outstanding shares of beneficial interest of
REvest:
Name and Address Number of Shares Percentage Owned Type of Ownership
- ---------------- ---------------- ---------------- -----------------
The Carlisle Companies Beneficial
Defined Benefit Plan
250 South Clinton Street
Suite 201
Syracuse, NY 13202
Joyce M. Ebright Beneficial
P.O. Box 39
Mt. Gretna, PA 17064
The Board of Trustees of The Winter Harbor Fund, including all of the
Trustees who are not "interested persons" as that term is defined in Section
2(a)(19) of the 1940 Act ("Independent Trustees"), approved the
Reorganization Plan, which is subject to approval by the shareholders of
REvest. The Board of Trustees of The Royce Fund, including all of its
Independent Trustees, unanimously approved the Reorganization Plan.
II. RISK FACTORS
Because the investment objectives and strategies of REvest are
substantially similar to those of RTR, the risks associated with them also
are similar.
As mutual funds investing primarily in common stocks and/or securities
convertible into common stocks, both RTR and REvest are subject to market risk,
that is, the possibility that common stock prices
will decline over short or even extended periods. RTR and REvest may invest
in securities of companies that are not well-known
to the investing public, may not have significant institutional ownership and
may have cyclical, static or only moderate growth prospects. The
such companies may be more volatile in price and have lower trading volumes
than larger capitalization stocks.
For additional information regarding the principal risk factors of
investing in RTR, see "Primary Risks for Fund Investors" in the Prospectus
attached to this Combined Prospectus/Proxy Statement as Appendix B.
III. THE PROPOSAL:
APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION
A. DESCRIPTION OF THE PROPOSED REORGANIZATION
1. The Reorganization
If the Reorganization is approved, each shareholder of REvest will become a
shareholder of RTR. On the closing date of the Reorganization, RTR will
acquire all or substantially all the assets and liabilities of REvest, and
will issue to REvest the number of RTR Shares determined by dividing the
value of REvest's assets and liabilities so transferred by the net asset
value of one RTR Share. The assets and liabilities of REvest and the net
asset value of RTR will be calculated at the close of business on the closing
date according to RTR's valuation procedures described in its Prospectus
dated May 1, 2000.
Immediately following that asset transfer, REvest will distribute the RTR
Shares it receives pro rata to each remaining shareholder of REvest based on
the percentage of the outstanding shares of REvest held of record by that
shareholder on the closing date of the Reorganization.
This distribution of RTR Shares by REvest to its shareholders in full
liquidation of their shares of REvest will be accomplished by the
establishment of book accounts on the share records of RTR in the name of the
respective shareholders of REvest, representing the pro rata numbers of RTR
Shares deliverable to each shareholder of REvest. Fractional shares will be
carried to the third decimal place. Certificates evidencing the RTR Shares
will not be issued.
Immediately following REvest's pro rata liquidating distribution of the RTR
Shares to its shareholders, REvest will liquidate and terminate.
Consummation of the Reorganization is subject to the satisfaction of a
number of conditions set forth in the Reorganization Plan, some of which may
be waived by The Winter Harbor Fund. Among the significant conditions which
may not be waived are (i) the receipt by The Winter Harbor Fund and The Royce
Fund of an opinion of counsel as to certain Federal income tax aspects of the
Reorganization (see "Federal Income Tax Consequences" below) and (ii) the
approval of the Reorganization Plan by the affirmative vote of the holders of
at least a majority of the outstanding shares of REvest, as defined in the
1940 Act.
Royce has agreed that, if RTR becomes obligated to complete the
transactions contemplated by the Reorganization Plan, it will pay up to
$25,000 of REvest's costs and expenses related to the Reorganization. REvest
will pay any costs above that amount and will have to pay all
Reorganization-
related costs and expenses if RTR does not become obligated to consummate the
Reorganization transactions.
The above is a summary of the Reorganization. The summary is not a
complete description of the terms of the Reorganization, which are set forth
in the Agreement and Plan of Reorganization attached to this Combined
Prospectus/Proxy Statement as Appendix A.
2. Effect of the Reorganization
If the Reorganization is approved and completed, shareholders of REvest as
of the closing date of the Reorganization will become shareholders of RTR,
which will acquire the net assets of REvest. The net asset value of the RTR
Shares held by each shareholder of REvest immediately after consummation of
the Reorganization will be equivalent to the net asset value of the REvest
shares held by that shareholder immediately before consummation of the
Reorganization.
RTR will establish an account for each REvest shareholder containing the
appropriate number of RTR Shares. Receipt of RTR Shares by a REvest
shareholder will be deemed to authorize RTR and its agents to establish for
the REvest shareholder, with respect to RTR, all of the same (i) account
options, including telephone redemptions, if any, (ii) dividend and
distribution options and (iii) options for payment that the REvest
shareholder had elected previously with respect to REvest that are available
to shareholders of RTR. Similarly, no further action will be necessary in
order to continue, with respect to RTR Shares, any retirement plan currently
maintained by a REvest shareholder.
Following the Reorganization, RTR is expected to operate in a manner that
is substantially similar to the current operation of REvest. The
responsibilities, powers and duties of the Trustees of The Royce Fund are
substantially similar to those of the Trustees of The Winter Harbor Fund.
The Royce Fund's Trustees supervise the business affairs of RTR, whose
investments are managed by Royce, The Royce Fund's investment adviser.
Background information with respect to The Royce Fund's Trustees and officers
is set forth in The Royce Fund's Statement of Additional Information, which
is available without charge from The Royce Fund upon request.
Charles M. Royce, Royce's Chief Investment Officer, is and will continue to
be responsible for the day-to-day management of RTR's portfolio. Jennifer
E. Goff, REvest's portfolio manager, will join the investment staff of Royce
following the Reorganization, and is initially expected, as a staff member,
to among other duties, assist Mr. Royce in his day-to-day management of RTR's
portfolio. Ms. Goff will be an at will employee, and her base compensation
and discretionary bonus from Royce are not expected to exceed $100,000 per
annum for the two years following the Reorganization.
Following the Reorganization, State Street Bank and Trust Company will
become custodian for any IRA or 403(b) plan assets currently invested in
REvest for which Firstar Bank N.A. currently serves as custodian.
3. Federal Income Tax Consequences
The Winter Harbor Fund and The Royce Fund must receive, as a condition to
the closing of the Reorganization, an opinion from Bernstein, Shur, Sawyer &
Nelson, P.A., counsel to The Winter Harbor Fund and EII, to the effect that,
based on the facts, assumptions and representations of the parties, for
Federal income tax purposes:
(i) The transfer by REvest of all or substantially all of its assets to RTR
in exchange for the RTR Shares and the assumption by RTR of substantially all
of the liabilities of REvest, followed by the distribution of the RTR Shares
to REvest shareholders in dissolution and liquidation of REvest, will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of
the Code, and RTR and REvest will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by RTR upon the receipt of the
assets and the assumption of substantially all of the liabilities of REvest
solely in exchange for the RTR Shares;
(iii) no gain or loss will be recognized by REvest upon the transfer of its
assets to RTR in exchange for the RTR Shares and the assumption by RTR of
substantially all of the liabilities of REvest or upon the distribution
(whether actual or constructive) of the RTR Shares to the shareholders of
REvest in exchange for their shares of REvest;
(iv) no gain or loss will be recognized by REvest shareholders upon the
exchange of their REvest shares for the RTR Shares in liquidation of REvest;
(v) the aggregate tax basis of the RTR Shares received by each REvest
shareholder will be the same as the aggregate tax basis of the REvest shares
held by such shareholder immediately prior to the Reorganization;
(vi) the holding period of the RTR Shares received by each REvest
shareholder will include the holding period during which the REvest shares
surrendered and exchanged therefor were held, provided that the REvest shares
were held as capital assets in the hands of the REvest shareholders on the
date of the Reorganization;
(vii) the tax basis of the REvest assets acquired by RTR will be the same
as the tax basis of such assets to REvest immediately prior to the
Reorganization; and
(viii) the holding period of the REvest assets in the hands of RTR will
include the period during which those assets were held by REvest.
The foregoing is only intended to be a summary of the principal Federal
income tax consequences of the Reorganization and should not be considered to
be tax advice. In addition, while it is believed that the foregoing is
correct, it is not certain that the U.S. Internal Revenue Service will agree
with the conclusions stated above. Shareholders of REvest should consult
their own tax advisers regarding the Federal, state, local and foreign tax
consequences with respect to the foregoing matters and any other
considerations which may be applicable to them.
4. Description of the RTR Shares
Each RTR Share received by REvest shareholders pursuant to the
Reorganization will be duly authorized, validly issued, fully paid and
nonassessable when issued, will be transferable without restriction and will
have no preemptive or conversion rights. Each RTR Share will represent an
equal interest in the assets of RTR. RTR shares are sold and redeemed based
upon the net asset value of RTR next determined after receipt of the purchase
or redemption request, as described in the RTR Prospectus.
5. Pro Forma Capitalization
The following table shows the capitalization of the Funds separately as of
June 30, 2000 (unaudited), and combined in the aggregate on a pro forma basis
(unaudited) as of that date, giving effect to the Reorganization:
The REvest Royce Total Pro Forma
Value Fund Return Fund Combined
---------- ----------- ---------
Net Assets $15,480,452 $222,706,035 $238,186,487
Shares Outstanding 1,465,883 30,488,576 31,954,459
Net Asset Value Per Share $10.56 $7.30 $7.30
B. COMPARISON OF THE FUNDS
1. Investment Objectives, Policies and Restrictions
The investment policies and restrictions of REvest are substantially
similar to those of RTR. Both REvest and RTR primarily seek long-term growth
and secondarily current income by investing in a diversified portfolio of
common stocks and convertible securities. Prospective portfolio investments
for each Fund are selected on a value basis and are primarily limited to
small companies viewed by the Funds' respective investment advisers as having
attractive financial characteristics and trading below the investment
adviser's estimate of the companies' current worth, with the expectation that
the market price of the securities should increase in time, resulting in
capital appreciation for Fund investors.
To achieve this objective, REvest normally invests at least 90% (65% for
RTR) of its assets in common stocks and convertible securities. At least 80%
(90% for RTR) of these securities should produce dividend or interest income
to the Fund, and at least 80% (65% for RTR) should be issued by companies
with stock market capitalizations between $200 million and $2 billion (of
less than $1.5 billion for RTR) at the time of investment. Royce expects RTR
to have a median market cap below $1 billion (above $500 million for REvest).
As of June 30, 2000, the median market capitalization of the portfolios of
REvest and RTR were $515 million and $376 million, respectively. The
remainder of each Fund's assets may be invested in securities with lower or
higher market capitalizations, non-dividend paying common stocks and non-
convertible fixed income securities.
The fundamental investment restrictions of the Funds are substantially
identical, except as noted below, and cannot be changed without the
affirmative vote of a majority of each Fund's outstanding voting securities
as defined in the 1940 Act.
2. Investment Restrictions
Both the Funds have substantially identical fundamental investment
restrictions, which may not be changed without shareholder approval. An
outline of the substantive differences follows:
REvest
------
Cannot invest more than 5% of its total assets in the securities of foreign
issuers
May loan up to 5% of its assets to qualified brokers, dealers or institutions
for their use relating to short sales or other securities transactions
(provided that such loans are fully collateralized at all times)
Cannot purchase any warrants, rights or options, except that REvest may, if
no value is assigned thereto, acquire warrants in units with or attached to
debt securities or non-convertible preferred stock
RTR
---
Cannot invest more than 10% of its total assets in the securities of foreign
issuers
May loan up to 25% of its assets to qualified brokers, dealers or
institutions for their use relating to short sales or other securities
transactions (provided that such loans are fully collateralized at all times)
Cannot invest more than 5% of its total assets in warrants, rights and
options
3. Performance Information
In approving the Reorganization, the Winter Harbor Board considered RTR's
long-term performance record. Set forth below is total return information
for periods ended June 30, 2000.
Three Year Five Year Average Annual Total
One Year Average Annual Average Annual Return Since REvest
Total Return Total Return Total Return Total Return Inception (August 1, 1994)
- ------------ ------------ -------------- -------------- --------------------------
Revest -2.44% 3.29% 9.22% 8.97%
RTR 2.89% 6.43% 13.61% 14.55%
Total returns are historical measures of past performance and are not
intended to indicate future performance. They assume the reinvestment of all
net investment income dividends and capital gains distributions.
4. Advisory Fees and Other Expenses
The initial fee rates payable for investment advisory services by REvest
and RTR are identical at 1.00% per annum of the Fund's average daily net
assets. However, REvest has a breakpoint in its fee structure, paying 0.75%
per annum of its average daily net assets in excess of $50 million. As of
June 30, 2000, REvest had $15 million in net assets. RTR's investment
advisory fee rate is not reduced for assets in excess of $50 million.
Royce has voluntarily agreed to limit RTR's total fund operating expenses
(excluding interest, taxes, brokerage and extraordinary expenses) to an
annual rate of 1.25% of RTR's average net assets through December 31, 2000.
Total fund operating expenses paid by REvest shareholders for the year ended
December 31, 1999 amounted to 1.29% of REvest's average net assets. EII had
voluntarily agreed to limit REvest's total fund operating expenses (excluding
interest, taxes, brokerage and extraordinary expenses) to an annual rate of
1.30% through December 31, 1999 and 1.50% through June 30, 2000.
5. Other Information on the Investment Advisory Agreements
EII is REvest's investment adviser and Royce is RTR's investment adviser
(together, the "Advisers"). The duties and obligations of the adviser
outlined in the RTR Investment Advisory Agreement are substantially similar
to those in the Investment Advisory Agreement currently in effect for REvest.
Under the Investment Advisory Agreements currently in place, the Advisers (i)
determine the composition of their Fund's portfolio, the nature and timing of
the changes in it and the manner of implementing such changes; and (ii)
provide their respective Fund with such investment advisory, research and
related services as it may, from time to time, reasonably require for the
investment of its funds.
6. Distribution Agreements
Royce Fund Services, Inc., 1414 Avenue of the Americas, New York, New York
10019, a wholly-owned subsidiary of Royce, distributes RTR's shares under a
Distribution Agreement with The Royce Fund, on behalf of RTR. The Royce
Fund's Distribution Agreement relating to RTR's shares is substantially
similar in all material respects to The Winter Harbor Fund's Underwriting
Agreement with Integrated Fund Distributors, Inc. for REvest. Neither REvest
nor RTR pay any fees for services under such Agreements.
7. Transfer Agency and Service Agreements
National Financial Data Services ("NFDS"), 1004 Baltimore, Kansas City, MO
64105, serves as the transfer agent and dividend disbursing agent for RTR
pursuant to a Transfer Agency and Service Agreement with The Royce Fund, on
behalf of RTR, which is substantially similar in all material respects to the
current Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement between The Winter Harbor Fund, on behalf of REvest, and Integrated
Fund Services, Inc. ("IFS").
Royce provides certain administrative services to, and assists in managing
and supervising all aspects of, RTR's general day-to-day business activities
and operations, including oversight of custodial, transfer agency, dividend
disbursing, accounting, auditing, compliance and related services.
Currently, REvest has an Administration Agreement with IFS, under which it
pays a fee of $2,000 per month.
8. Custody Agreements
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02107, serves as the custodian for RTR under a Custody Contract
with The Royce Fund, on
behalf of RTR. The Custody Contract with State
Street is substantially similar in all material respects to The Winter Harbor
Fund's Custody Agreement with Firstar Bank, N.A.
9. Purchase Procedures
REvest generally requires a minimum initial investment of $2,000 for
regular accounts or $500 for IRAs, and minimum subsequent investments of $50
or more. RTR has identical minimum purchase requirements.
Shares of both Funds may be purchased at their respective net asset values
next determined after receipt by their respective transfer agents of a
shareholder's request in Good Order. The Funds' net asset values per share
are calculated at the close of regular trading on the New York Stock Exchange
(currently 4:00 pm Eastern time) and are determined every day that the
Exchange is open. In the interest of economy and convenience, physical
certificates representing RTR Shares will not be issued.
Both Funds have automatic investment and direct deposit plans under which
selected amounts are electronically withdrawn from shareholders' accounts
with banks or from payroll or government checks and are applied to purchase
shares of the Funds.
10. Redemption and Exchange Procedures
Shareholders of both Funds may redeem their shares at their respective net
asset values next determined after receipt by their respective transfer
agents of a written or telephone redemption request in Good Order.
Each Fund may suspend the right of redemption or postpone payment at times
when the New York Stock Exchange is closed or during what the Securities and
Exchange Commission determines are emergency conditions. While both Funds
normally make redemptions in cash, they reserve the right to satisfy a
shareholder's redemption request by delivering selected shares or units of
portfolio securities (redemptions in kind) under certain circumstances.
Each Fund reserves the right to involuntarily redeem shares in any
shareholder account that falls below the minimum initial investment due to
redemptions by the shareholder. If, at any time, the balance in an account
does not have a value at least equal to the minimum initial investment, the
shareholder may be notified that the value of such an account is below the
Fund's minimum account balance requirement. The shareholder would then have
60 days to increase the account balance before the account is liquidated.
Proceeds would be promptly paid to the shareholder.
Currently, REvest shareholders may not exchange their shares for shares of
other funds. Shares of RTR, however, may be exchanged for shares of certain
other funds in The Royce Fund family at net asset value, as set forth in
RTR's Prospectus dated May 1, 2000. The Royce Fund reserves the right to
revise or suspend the exchange privilege at any time.
11. Dividends, Distributions and Taxes
The Funds pay dividends from net investment income quarterly and distribute
net realized capital gains annually in December. Dividends and distributions
are automatically reinvested in additional shares of the Fund unless the
shareholder chooses otherwise.
Each year, shareholders receive information as to the tax status of
distributions made by the Funds for the prior calendar year. Unless the
account is an IRA or is otherwise exempt from taxation, all distributions by
the Funds are subject to Federal income tax regardless of whether they were
received in cash or reinvested in additional shares. Distributions paid from
the Funds' net investment income and short-term capital gains are taxable as
ordinary income dividends. Distributions paid from long-term capital gains
of the Funds are taxable as capital gains, regardless of how long the shares
were held.
12. Management of the Trusts
General. Both The Winter Harbor Fund and The Royce Fund are Delaware
business trusts. The Winter Harbor Fund is governed by its Trust Instrument
dated June 26, 1997 (as amended), and applicable Delaware law. The Royce
Fund is governed by its Trust Instrument dated April 12, 1996 (as amended),
and applicable Delaware law. The business affairs of both REvest and RTR are
managed under the direction of the respective Boards of Trustees of The
Winter Harbor Fund and The Royce Fund.
Shares. The number of authorized shares of beneficial interest of both The
Winter Harbor Fund and The Royce Fund is unlimited. Under the Trust
Instruments of both The Winter Harbor Fund and The Royce Fund, the Board of
Trustees may, without shareholder approval, provide for the issuance of
additional classes or series of shares of beneficial interest with such
preferences, conversion or other rights and characteristics as shall be
determined by resolution of the Board of Trustees.
Shareholder Meetings. Neither The Winter Harbor Fund nor The Royce Fund is
required to hold annual meetings of shareholders, but are required to hold
meetings of shareholders for purposes of voting on certain matters as
required under the 1940 Act.
Liability and Indemnification of Trustees and Officers. Both The Winter
Harbor Fund and The Royce Fund provide for the indemnification of their
Trustees and officers to the full extent permitted by Delaware law. Under
the Reorganization Plan, neither The Royce Fund nor RTR will assume any
obligation that The Winter Harbor Fund or REvest may have to indemnify The
Winter Harbor Fund's Trustees and officers.
Removal of Trustees. Both The Winter Harbor Fund and The Royce Fund may,
subject to the limits of the 1940 Act, remove a Trustee with or without
cause, by the affirmative vote of (i) two-thirds of the Board of Trustees or
(ii) the shareholders owning at least two-thirds of the outstanding shares of
the Trust.
The foregoing is only a summary of certain characteristics of the
operations of The Winter Harbor Fund and The Royce Fund, their Trust
Instruments and Delaware law. The foregoing is not a complete description of
the documents cited.
C. RECOMMENDATION OF THE WINTER HARBOR BOARD OF TRUSTEES
After due consideration, the Board of Trustees of The Winter Harbor Fund,
including all of the Independent Trustees, has concluded that the
Reorganization is in the best interest of REvest and its shareholders, and
that the interests of the existing REvest shareholders would not be diluted
as a result of the transactions contemplated by the Reorganization. The
Board, therefore, has submitted the Reorganization Plan effecting the
Reorganization for approval by REvest shareholders at the Meeting, and
recommends that REvest shareholders approve the Reorganization Plan. Pending
the approval of REvest's shareholders, the Reorganization is anticipated to
occur on October 8, 2000, or such later date prior to December 30, 2000
as the parties may agree.
In reaching this conclusion, the Board of Trustees of The Winter Harbor
Fund specifically considered the following factors:
(i) the continuity of the investment objectives, policies and restrictions,
as well as the service features available to shareholders, of REvest and RTR;
(ii) the capabilities and resources of Royce and the other RTR service
providers in the areas of investment management, administration, fund
accounting, transfer agency, custody, marketing and shareholder servicing, as
applicable;
(iii) the lower expense ratio of RTR relative to REvest;
(iv) the long-term performance record of RTR;
(v) the terms and conditions of the Reorganization Plan and whether the
Reorganization would result in a dilution of shareholder interests;
(vi) Royce's undertaking to pay up to $25,000 of the costs of the
Reorganization;
(vii) the Federal income tax consequences of the Reorganization;
(viii) possible alternatives to the Reorganization; and
(ix) the current asset levels of REvest and RTR.
The Trustees of the Winter Harbor Fund recommend that shareholders of
REvest vote in favor of the transaction.
D. DISSENTERS' RIGHTS OF APPRAISAL
Shareholders of REvest who object to the proposed Reorganization will not
be entitled to any "dissenters' rights of appraisal" under Delaware law.
However, those shareholders have the right at any time up to the closing date
of the Reorganization to redeem their REvest shares at their then current net
asset value. After the Reorganization, such shareholders will hold shares of
RTR, which may also be redeemed at their then current net asset value in
accordance with the procedures described in RTR's Prospectus dated May 1,
2000.
E. FURTHER INFORMATION ABOUT THE FUNDS
For a more detailed discussion of the investment objectives, strategies and
risks of RTR, see the prospectus for RTR dated May 1, 2000, as set forth in
Appendix B. For a more detailed discussion of the investment objectives,
strategies and risks of REvest, see the prospectus and statement of
additional information for REvest, each dated February 29, 2000. These
documents are incorporated herein by reference. Copies may be obtained
without charge by contacting Ebright Investments, Inc. ("EII") at 511
Congress Street, Portland, Maine 04101 or by telephoning EII at (800) 277-
5573.
Both The Winter Harbor Fund and The Royce Fund are subject to the
informational requirement of the 1940 Act, and in accordance therewith, each
files reports, proxy materials and other information with the Securities and
Exchange Commission (the "SEC"). Such reports, proxy materials and other
information may be inspected and copied at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material also may be obtained at prescribed rates from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C.
20549.
F. VOTE REQUIRED
Approval of the Agreement and Plan of Reorganization will require the
affirmative vote of a "majority of the outstanding voting securities" of
REvest. The term "majority of the outstanding voting securities", as defined
in the 1940 Act and as used in this Combined Prospectus/Proxy Statement,
means: the affirmative vote by the holders of the lesser of (1) 67% or more
of the shares of REvest present at the Meeting if more than 50% of the
outstanding shares of REvest are present in person or by proxy or (2) more
than 50% of the outstanding shares of REvest. If the shareholders of REvest
do not approve the proposed Reorganization, or if the Reorganization is not
consummated for any other reason, then the Board will consider liquidating
the Fund.
IV. MISCELLANEOUS
A. OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
However, if any other matters come before the Meeting, it is the Board's
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
B. SHAREHOLDER PROPOSALS
The Trust is not required and does not intend to hold annual or other
periodic meetings of shareholders except as required by the 1940 Act. If the
Reorganization is not consummated, the next meeting of REvest shareholders
will be held at such time as the Board may determine or at such time as may
be legally required. Any shareholder proposal intended to be presented at
such meeting must be received by the Trust at its office at a reasonable time
before the meeting, as determined by the Board, to be included in the Trust's
proxy statement and form of proxy
relating to such meeting, and must satisfy
all other legal requirements.
C. LEGAL MATTERS
Certain legal matters in connection with the Reorganization will be passed
upon by Bernstein, Shur, Sawyer & Nelson, P.A., 100 Middle Street, Portland,
Maine 04101. Bernstein, Shur, counsel to The Winter Harbor Fund, REvest and
EII, will render the opinion as to certain Federal income tax consequences of
the Reorganization.
D. FINANCIAL STATEMENTS
The audited financial statements of REvest incorporated by reference in the
Statement of Additional Information related to this Combined Prospectus/Proxy
Statement (the "SAI") have been audited by PricewaterhouseCoopers LLP,
independent auditors, for the periods indicated in their reports thereon.
Copies of these financial statements may be obtained without charge by
contacting EII at 511 Congress Street, Portland, Maine 04101 or by
telephoning EII at (800) 277-5573.
The audited financial statements of RTR incorporated by reference in the
SAI have been audited by PricewaterhouseCoopers LLP, independent auditors,
for the periods indicated in their reports thereon. Copies of these
financial statements may be obtained without charge by contacting Royce at
1414 Avenue of the Americas, New York, New York 10019 or by telephoning Royce
at (800) 221-4268.
Please complete, date and sign the enclosed proxy and
return it promptly in the enclosed envelope.
APPENDIX A
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 4th day of August, 2000, by and between The Royce Fund ("TRF"), a
Delaware business trust, with respect to its Royce Total Return Fund series
("RTR"), with its principal place of business at 1414 Avenue of the Americas,
New York, New York 10019, and The Winter Harbor Fund ("WHF"), a Delaware
business trust, with respect to its The REvest Value Fund series ("REvest"),
with its principal place of business at 511 Congress Street, Portland, Maine
04101.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368 (a)(1)(C) of
the United States Internal Revenue Code of 1986 (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all or
substantially all of the assets of REvest to RTR in exchange solely for
shares of beneficial interest of RTR (the "RTR Shares") and the assumption by
RTR of substantially all of the liabilities of REvest and the distribution,
after the Closing Date hereinafter referred to, of the RTR Shares to the
shareholders of REvest in liquidation of REvest as provided herein, all upon
the terms and conditions hereinafter set forth in this Agreement;
WHEREAS, RTR is a separate investment series of TRF, a registered open-
end management investment company, REvest is a separate investment series of
WHF, a registered open-end management investment company, and REvest owns
securities which are assets of the character in which RTR is permitted to
invest;
WHEREAS, both RTR and REvest are authorized to issue their shares of
beneficial interest;
WHEREAS, the Trustees of TRF have determined that the exchange of all or
substantially all of the assets of REvest for RTR Shares and the assumption
of substantially all of the liabilities of REvest by RTR on the terms and
conditions hereinafter set forth is in the best interests of RTR; and
WHEREAS, the Trustees of WHF have determined that REvest should exchange
all or substantially all of its assets and substantially all of its
liabilities for RTR Shares, and that the interests of the existing
shareholders of REvest will not be diluted as a result of the transactions
contemplated herein.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree
as follows:
APPENDIX A
- -------------------------------------------------------------------------------
ARTICLE I
TRANSFER OF ASSETS OF REVEST IN EXCHANGE FOR RTR SHARES AND ASSUMPTION OF
REVEST'S LIABILITIES AND LIQUIDATION OF REVEST
1.1 The Exchange. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein,
REvest agrees to transfer its assets, as set forth in paragraph 1.2 to RTR,
and RTR agrees in exchange therefor (i) to deliver to REvest the RTR Shares,
including fractional RTR Shares, equal in aggregate value to the aggregate
value of shares of beneficial interest of REvest ("REvest Shares"), including
fractional REvest Shares, that are issued and outstanding as of the time and
date set forth in paragraph 2.1, and (ii) to assume substantially all of the
liabilities of REvest, as set forth in paragraph 1.3. Such transactions will
take place at the closing provided for in paragraph 3.1 (the "Closing Date").
1.2 Assets to be Acquired. The assets of REvest to be acquired by RTR
will include all property, including without limitation all cash, securities
and dividends or interest receivable, which is owned by REvest and any
deferred or prepaid expenses shown as an asset on the books of the REvest on
the Closing Date.
1.3 Liabilities to be Assumed. REvest will use its best efforts to
discharge all of its known liabilities and obligations that are then due and
payable prior to the Closing Date. RTR will assume (i) all of the
liabilities, expenses, costs, charges and reserves reflected on an unaudited
Statement of Assets and Liabilities of REvest, prepared by WHF as of the
Valuation Date (as defined in paragraph 2.1) in accordance with generally
accepted accounting principles consistently applied from the prior audited
period, and (ii) any other liabilities, whether absolute or contingent,
accrued or unaccrued, of REvest that are disclosed to and accepted by TRF in
writing at or before the Closing Date. In no event will TRF or RTR assume
any liability or obligation of WHF or REvest based upon, arising out of or in
any way involving (a) any actual or alleged act or failure to act by WHF,
REvest, Ebright Investments, Inc., REvest's investment adviser, and/or any
trustee, director, officer, employee or other representative or agent of any
of such entities, constituting or otherwise involving any actual or alleged
violation of any Federal, state or other law, rule or regulation, breach of
fiduciary duty or error, misstatement, misleading statement or other neglect
or breach of duty or (b) any contract or other undertaking to which WHF or
REvest is a party or otherwise bound except to the extent that such
contractual or other liability or obligation is reflected in such Statement
of Assets and Liabilities of REvest.
1.4 Liquidation and Distribution. Immediately after the closing on the
Closing Date (the "Liquidation Date"), (i) REvest will liquidate and
distribute pro rata to REvest's shareholders of record, determined as of the
close of business on the Closing Date (the "REvest Shareholders"), the RTR
Shares received by REvest pursuant to paragraph 1.1, and (ii) REvest will
thereupon proceed to dissolve as set forth in paragraph 1.8 below. Such
liquidation and distribution will be accomplished by the transfer of the RTR
Shares then credited to the account of REvest on the books of REvest, to open
accounts on the share records of RTR in the names of the REvest Shareholders
and representing the respective pro rata number of the RTR Shares due such
shareholders. All issued and outstanding shares of REvest will simultaneously
be canceled on the books of REvest. Issued and outstanding share
certificates of REvest will be deemed to have been automatically cancelled on
the Closing Date. In the interest of economy and convenience, certificates
representing the RTR Shares will not be physically issued.
APPENDIX A
- -------------------------------------------------------------------------------
1.5 Ownership of Shares. Ownership of the RTR Shares will be shown on
the books of RTR's transfer agent. Shares of RTR will be issued in the
manner described in the combined Prospectus and Proxy Statement on Form N-14
to be distributed to shareholders of REvest, as described in paragraph 5.7.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the
RTR Shares in a name other than the registered holder of the REvest shares on
the books of REvest as of that time will, as a condition of such issuance and
transfer, be paid by the person to whom such RTR Shares are to be issued and
transferred.
1.7 Reporting Responsibility. WHF and REvest are and will remain
responsible for preparing, distributing and filing any shareholder reports
and regulatory or tax filings as required by Federal or state law relating to
REvest, whether they arise before or after the Closing Date.
1.8 Termination. REvest will be terminated as of the Closing Date upon
the making of all distributions pursuant to paragraph 1.4.
ARTICLE II
VALUATION
2.1 Valuation of Assets. The value of REvest's assets to be acquired
by RTR hereunder will be the value of such assets computed as of the close of
regular trading at 4:00 p.m. (E.T.) on the New York Stock Exchange on the
Closing Date (such time and date being hereinafter called the "Valuation
Date"), after giving effect to the declaration and/or payment of any net
investment income dividends and/or capital gain distributions, using the
valuation procedures set forth in TRF's Trust Instrument and RTR's then
current prospectus and statement of additional information or such other
valuation procedures as will be mutually agreed upon in writing by the
parties.
2.2 Valuation of Shares. The net asset value of each RTR Share to be
issued to REvest at the Closing on the Closing Date will be computed as of
the close of regular trading at 4:00 p.m. (E.T.) on the New York Stock
Exchange on the Valuation Date, after giving effect to the declaration and/or
payment of any net investment dividends and/or capital gain distributions,
using the valuation procedures set forth in TRF's Trust Instrument and RTR's
then current prospectus and statement of additional information.
2.3 Shares to be Issued. The number of RTR Shares to be issued (including
fractional shares, if any) in exchange for REvest's net assets will be equal
in aggregate value to the aggregate value of REvest Shares (including
fractional shares, if any) that are issued and outstanding immediately prior
to the Closing on the Closing Date.
2.4 Determination of Value. All computations of value will be made by
State Street Bank and Trust Company ("State Street"), the custodian for RTR,
in accordance with its regular practice in pricing the shares and valuing the
net assets of RTR.
APPENDIX A
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ARTICLE III
CLOSING AND CLOSING DATE
3.1 Closing Date. The Closing Date will be September 22, 2000 or such
later date prior to December 30, 2000 as the parties may agree to in writing.
All acts taking place at the Closing will be deemed to take place
simultaneously as of the close of business on the Closing Date unless
otherwise provided. The Closing will be held as of 5:00 p.m. (E.T.) at TRF's
principal place of business in New York, New York, or at such other time
and/or place as the parties may agree.
3.2 Custodian's Certificate. State Street will deliver to TRF at the
Closing a certificate of an authorized officer or employee stating that: (i)
REvest's portfolio securities, cash and any other assets have been received
by it in proper form from Firstar Bank, N.A., as custodian for REvest, on the
Closing Date and (ii) all necessary taxes, including all applicable Federal
and state stock transfer stamps, if any, have been paid, or provision for
payment has been made, in conjunction with its receipt of such portfolio
securities.
3.3 Effect of Suspension in Trading. In the event that on the Valuation
Date (i) the New York Stock Exchange or another primary trading market for
portfolio securities of REvest will be closed to trading or trading thereon
will be restricted or (ii) trading or the reporting of trading on such
Exchange or elsewhere will be disrupted so that accurate appraisal of the
value of the net assets of REvest is impracticable, the Closing Date will be
postponed until the first business day prior to December 30, 2000 after the
day when trading will have been fully resumed and reporting will have been
restored.
3.4 Transfer Agent's Certificate. Integrated Fund Services, Inc., as
transfer agent for REvest, will deliver to TRF at the Closing, a certificate
of an authorized officer or employee stating that its records contain the
names and addresses of REvest's Shareholders and the number and percentage
ownership of outstanding shares owned by each such shareholder immediately
prior to the Closing. State Street, as transfer agent for RTR, will issue and
deliver to TRF at the Closing a confirmation evidencing the RTR Shares
credited to REvest's account on the books and records of RTR on the Closing
Date or provide evidence satisfactory to WHF that such RTR Shares have been
so credited. At the Closing, each party will deliver to the other such
checks, assignments, share certificates, if any, receipts and other documents
as such other party or its counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations of WHF. WHF represents and warrants to TRF and RTR
as follows:
(a) REvest is a separate investment series of WHF, a
business trust that is duly organized, validly existing and in good
standing under the laws of the State of Delaware;
(b) WHF is a registered investment company classified as a
management company of the open-end type, and WHF's registration with the
Securities and Exchange
APPENDIX A
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Commission (the "Commission") as an investment
company under the Investment Company Act of 1940 (the "1940 Act") is in
full force and effect;
(c) The current prospectus and statement of additional information of
REvest conform in all material respects to the applicable requirements of
the Securities Act of 1933 (the "1933 Act") and the 1940 Act and the rules
and regulations of the Commission thereunder and, to the knowledge of WHF,
does not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not materially misleading;
(d) WHF is not, and the execution, delivery and performance of this
Agreement (subject to REvest shareholder approval) will not result, in
violation of any provision of WHF's Trust Instrument or By-laws or, to its
knowledge, of any agreement, indenture, instrument, contract, lease or
other undertaking to which WHF is a party or by which REvest is bound;
(e) No litigation, administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to WHF's
knowledge, threatened against REvest or any of its properties or assets
which, if adversely determined, could materially and adversely affect its
financial condition, the conduct of its business or the ability of REvest
to carry out the transactions contemplated by this Agreement. WHF is not a
party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects
REvest's business or its ability to consummate the transactions herein
contemplated. WHF knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which adversely affects REvest's business or its ability to consummate
the transactions contemplated herein;
(f) All Federal and other tax returns and reports of REvest required
by law to have been filed have been filed and are correct in all material
respects, and all Federal and other taxes shown as due or required to be
shown as due have been paid or provision has been made for the payment
thereof, and, to WHF's knowledge, no such return is currently under audit
and no assessment has been asserted with respect to such returns;
(g) All issued and outstanding shares of REvest are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by REvest (except that, under non-Delaware law, REvest
Shareholders could, under certain circumstances, be held personally liable
for obligations of REvest). All of the issued and outstanding shares of
REvest will, at the time of the Closing Date, be held by the persons and in
the amounts set forth in the records of the transfer agent, as provided in
paragraph 3.4;
(h) At the Closing Date, REvest will own the assets to be transferred
by it to RTR pursuant to paragraph 1.2 and have full right, power and
authority to sell, assign, transfer and deliver such assets hereunder, and
upon delivery and payment for such assets, RTR will become the owner
thereof, subject to no restrictions on the full transfer thereof created by
WHF, other than as disclosed to and accepted by TRF in writing at or before
the Closing Date;
APPENDIX A
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(i) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of WHF and REvest
and, subject to approval by REvest's shareholders, this Agreement
constitutes a valid and binding obligation of REvest, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(j) The information to be furnished by WHF about REvest and its
investment adviser and other affiliates for use in registration statements,
proxy materials and other documents which may be necessary in connection
with the transactions contemplated hereby will be accurate and complete in
all material respects and will comply in all material respects with Federal
securities and other laws and regulations thereunder applicable thereto;
(k) The proxy statement of REvest to be included in the Registration
Statement referred to in paragraph 5.7 (other than information therein that
relates to TRF, RTR, Royce & Associates, Inc. or any of their respective
affiliates) will not, on the effective date of the Registration Statement
(the "Effective Date") and on the Closing Date, to WHF's knowledge, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading;
(l) The Statement of Assets and Liabilities of REvest at December 31,
1999 has been audited by PricewaterhouseCoopers LLP, independent certified
public accountants, and is in accordance with generally accepted accounting
principles ("GAAP") consistently applied, and such statement (a copy of
which has been furnished to RTR) presents fairly, in all material respects,
the financial position of REvest as of such date in accordance with GAAP,
and there are no known contingent liabilities of RTR required to be
reflected on a balance sheet (including notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(m) Since December 31, 1999, to WHF's knowledge, there has not been
any material adverse change in REvest's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by REvest of indebtedness, except as
otherwise disclosed to and accepted in writing by TRF. For the purposes of
this subparagraph (m), a decline in net asset value per share of REvest due
to declines in the values of securities in REvest's portfolio, the
discharge of REvest liabilities or the redemption of REvest shares by
REvest's shareholders will not constitute a material adverse change; and
(n) For each taxable year of its operation (including the taxable
year including the Closing Date), REvest has elected to be treated as a
regulated investment company under Subchapter M of the Code, has computed
and will compute its Federal income tax under Section 852 of the Code and
will have distributed all of its investment company taxable income and net
capital gain (as defined in the Code) that has accrued through the Closing
Date.
4.2 Representations of TRF. TRF represents and warrants to, and covenants
with, WHF and REvest as follows:
APPENDIX A
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(a) TRF is a business trust duly organized, validly existing and in
good standing under the laws of the State of Delaware;
(b) TRF is registered as an investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect;
(c) The current prospectus and statement of additional information of
RTR (the "RTR Prospectus") conforms in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and, to the knowledge of TRF, does
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not materially misleading, except that TRF makes no representation
regarding the accuracy or completeness of information furnished, or
representations made, by WHF pursuant to subparagraphs 4.1 (j) and (k)
above;
(d) TRF is not, and the execution, delivery and performance of this
Agreement will not result, in any violation of TRF's Trust Instrument or By-
laws or of any agreement, indenture, instrument, contract, lease or other
undertaking to which TRF is a party or by which RTR is bound;
(e) No litigation, administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to TRF's
knowledge, threatened against RTR or any of its properties or assets which,
if adversely determined, would adversely affect its financial condition and
the conduct of its business or its ability to carry out the transactions
contemplated by this Agreement. TRF knows of no facts which might form the
basis for the institution of such proceedings and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which adversely affects RTR's business or RTR's ability
to consummate the transactions contemplated herein;
(f) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of RTR, and this
Agreement constitutes a valid and binding obligation of RTR enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(g) The RTR Shares to be issued and delivered to REvest, for the
account of the REvest Shareholders, pursuant to the terms of this Agreement
will at the Closing Date have been duly authorized and, when so issued and
delivered, will be duly and validly issued RTR Shares and will be fully
paid and non-assessable (except that, under non-Delaware law, shareholders
of RTR could, under certain circumstances, be held personally liable for
obligations of RTR);
(h) The information to be furnished by TRF about RTR and its
investment adviser and other affiliates for use in registration statements,
proxy materials and other documents which may be necessary in connection
with the transactions contemplated hereby will be accurate and complete in
all material respects and will comply in all material respects with Federal
securities and other laws and regulations applicable thereto;
APPENDIX A
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(i) The Prospectus and Proxy Statement to be included in the
Registration Statement (insofar as it relates to TRF, RTR, Royce &
Associates, Inc. or any of their respective affiliates) will not, on the
Effective Date and on the Closing Date, to RTR's knowledge, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading;
(j) There is no plan or intention to sell or dispose of any assets
acquired from REvest other than in the ordinary course of business; and
(k) There is no plan or intention to make redemptions of any RTR
Shares other than in the ordinary course of business.
ARTICLE V
COVENANTS OF WHF AND TRF
5.1 Operation in Ordinary Course. REvest will operate its business in the
ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and distributions.
5.2 Approval of Shareholders. WHF will call a meeting of the shareholders
of REvest to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Investment Representation. WHF covenants that the RTR Shares to be
issued hereunder are not being acquired by REvest for the purpose of making
any distribution thereof other than in accordance with the terms of this
Agreement.
5.4 Additional Information. WHF will assist TRF in obtaining such
information as TRF reasonably requests concerning the beneficial ownership of
REvest shares.
5.5 Further Action. Subject to the provisions of this Agreement, TRF and
WHF will each take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement, including any
actions required to be taken after the Closing Date.
5.6 Statement of Earnings and Profits. As promptly as practicable, but in
any case within 60 days after the Closing Date, WHF will furnish TRF, in such
form as is reasonably satisfactory to TRF, a statement of the earnings and
profits of REvest for Federal income tax purposes, which will be carried over
by RTR as a result of Section 381 of the Code, and which will be certified by
WHF's President and Treasurer.
5.7 Preparation of Form N-14 Registration Statement. WHF will provide TRF
with information reasonably necessary for the preparation by TRF of a
prospectus (the "Prospectus and Proxy Statement"), which will include the
proxy statement referred to in paragraph 4.1(k), all to be included in a
Registration Statement on Form N-14 of TRF for RTR (the "Registration
Statement"), in compliance with the 1933 Act, the Securities Exchange Act of
1934 (the "1934
APPENDIX A
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Act") and the 1940 Act in connection with the meeting of the
shareholders of REvest to consider approval of this Agreement and the
transactions contemplated herein.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF WHF
The obligations of WHF to complete the transactions provided for herein
will be subject, at its election, to the performance by TRF and RTR of all
the obligations to be performed by them hereunder on or before the Closing
Date and, in addition thereto, the following further conditions:
6.1 All representations, warranties and covenants of TRF and RTR
contained in this Agreement will be true and correct as of the date hereof
and as of the Closing Date, with the same force and effect as if made on and
as of the Closing Date, and TRF will have delivered to WHF a certificate
executed in its name by its President and its Treasurer, in a form reasonably
satisfactory to WHF and dated as of the Closing Date, to such effect and as
to such other matters as WHF will reasonably request; and
6.2 WHF will have received on the Closing Date an opinion from Howard
J. Kashner, Esq. or John E. Denneen, Esq., in-house counsel to TRF, addressed
to WHF and dated as of the Closing Date, in a form reasonably satisfactory to
WHF, to the following effect:
That (i) RTR is a separate series of a Delaware business trust duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the power to own all of its properties and
assets and to carry on its business; (ii) this Agreement has been duly
authorized, executed and delivered by TRF for RTR and is a valid and
binding obligation of RTR enforceable against RTR in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general equity principles; (iii) the
RTR Shares to be issued and delivered to REvest on behalf of REvest
Shareholders as provided by this Agreement are duly authorized and upon
such delivery will be legally issued and outstanding and fully paid and
non-assessable (except that, under non-Delaware law, shareholders of RTR
could, under certain circumstances, be held personally liable for
obligations of RTR); (iv) the execution and delivery of the Agreement
did not, and the consummation of the transactions contemplated hereby
will not, result in a violation of TRF's Trust Instrument or By-laws or
any provision of any material agreement, indenture, instrument,
contract, lease or other undertaking (in each case known to such
counsel) to which RTR is a party or by which it or any of its properties
may be bound; (v) to the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for the
consummation by TRF of the transactions contemplated herein, except such
as have been obtained under the 1933 Act, the l934 Act and the 1940 Act;
(vi) insofar as they relate to TRF and RTR, the descriptions in the
Prospectus and Proxy Statement of statutes, legal and governmental
proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown; (vii) such counsel does
not know of any legal or governmental proceedings, insofar as they
relate to RTR, existing on or before the effective date of the
Registration Statement or the Closing Date, required to be described in
the Registration Statement,
APPENDIX A
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which are not described as required; (viii)
TRF is registered with the Commission as an investment company under the
1940 Act and, to such counsel's knowledge, such registration is in full
force and effect; and (ix) to the knowledge of such counsel, no
litigation or administrative proceeding or investigation of or before
any court or governmental body is presently pending or threatened as to
RTR. Such opinion may state that such counsel does not express any
opinion or belief as to the financial statements or any financial or
statistical data, or to the information relating to WHF or REvest,
contained in the Prospectus and Proxy Statement, the Registration
Statement or the RTR Prospectus, and that such opinion is solely for the
benefit of WHF and REvest. Such opinion may contain such other
assumptions and limitations as will, in the opinion of Howard J.
Kashner, Esq. or John E. Denneen, Esq., be appropriate to render the
opinions expressed.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF TRF
The obligations of TRF to complete the transactions provided for herein
will be subject, at its election, to the performance by WHF and REvest of all
the obligations to be performed by them hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
7.1 All representations, warranties and covenants of WHF and REvest
contained in this Agreement will be true and correct as of the date hereof
and as of the Closing Date, with the same force and effect as if made on and
as of the Closing Date, and WHF will have delivered to TRF on the Closing
Date a certificate executed in its name by WHF's President and Treasurer, in
form and substance satisfactory to TRF and dated as of the Closing Date, to
such effect and as to such other matters as TRF will reasonably request;
7.2 WHF will have delivered to TRF an unaudited Statement of the Assets
and Liabilities of REvest, together with a list of REvest's portfolio
securities showing the tax costs of such securities by lot and the holding
periods of such securities, as of the Closing Date, certified by the
Treasurer of WHF;
7.3 WHF will have delivered to TRF a letter addressed to TRF and dated
as of the Closing Date, signed by each of the directors and shareholders of
Ebright Investments, Inc., consenting to all of the transactions contemplated
by this Agreement and/or described in the Prospectus and Proxy Statement and
waiving any present and future claims they and Ebright Investments, Inc. may
have and/or may acquire against TRF, RTR, Royce & Associates, Inc., any of
its affiliated persons and Jennifer E. Goff relating to such transactions;
and
7.4 TRF will have received on the Closing Date an opinion of
Bernstein, Shur, Sawyer & Nelson, P.A. ("Bernstein"), counsel to WHF,
addressed to TRF and dated the Closing Date, in a form satisfactory to TRF,
to the following effect:
That (i) REvest is a separate investment series of a Delaware business
trust that is duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted;
(ii) this Agreement has been duly authorized, executed and delivered by WHF
for REvest and is a valid and binding obligation of REvest enforceable
against REvest
APPENDIX A
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in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights generally and to general equity
principles; (iii) the execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result
in a violation of WHF's Trust Instrument or By-laws or any provision of any
material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which REvest is a party
or by which it or any of its properties may be bound; (iv) to the knowledge
of such counsel, no consent, approval, authorization or order of any court
or governmental authority of the United States or the State of Delaware is
required for the consummation by REvest of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act
and the 1940 Act; (v) insofar as they relate to REvest, the descriptions
in the Prospectus and Proxy Statement of statutes, legal and governmental
proceedings and material contracts, if any, are accurate and fairly present
the information required to be shown; (vi) such counsel does not know of
any legal or governmental proceedings, insofar as they relate to REvest,
existing on or before the date of mailing of the Prospectus and Proxy
Statement and on the Closing Date, required to be described in the
Prospectus and Proxy Statement, which are not described as required; (vii)
WHF is registered with the Commission as an investment company under the
1940 Act and, to such counsel's knowledge, such registration is in full
force and effect; and (viii) to the knowledge of such counsel, no
litigation or administrative proceeding or investigation of or before any
court or governmental body is presently pending or threatened as to REvest
or any of its properties or assets, and REvest is neither a party to nor
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business.
Such opinion may contain such other assumptions and limitations as will be,
in the opinion of Bernstein, appropriate to render the opinions expressed
therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF TRF AND WHF
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to REvest or RTR, the other party to this Agreement
will, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein will have
been approved by the requisite vote of the holders of the outstanding shares
of REvest in accordance with the provisions of WHF's Trust Instrument and By-
laws, and certified copies of the resolutions evidencing such approval will
have been delivered to RTR. Notwithstanding anything herein to the contrary,
neither TRF nor WHF may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, the Commission will not have issued an
unfavorable report under Section 25(b) of the 1940 Act or instituted any
proceeding seeking to enjoin the consummation of the transactions
contemplated by this Agreement under Section 25(c) of the 1940 Act, and no
action, suit or other proceeding will be threatened or pending before any
court or governmental agency in which it is sought to restrain or prohibit,
or obtain damages or other relief in connection with, this Agreement or the
transactions contemplated herein;
8.3 All required consents of other parties and any other consents,
orders and permits
APPENDIX A
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of Federal and state regulatory authorities (including
those of the Commission) to permit consummation of the transactions
contemplated hereby will have been obtained, except where failure to obtain
any such consent, order or permit would not involve a risk of a material
adverse effect on the assets or properties of RTR or REvest, provided that
either party hereto may for itself waive any of such conditions;
8.4 The Registration Statement will have become effective under the
1933 Act and no stop order suspending the effectiveness thereof will have
been issued and, to the knowledge of the parties hereto, no investigation or
proceeding for that purpose will have been instituted or be pending,
threatened or contemplated under the 1933 Act;
8.5 REvest will have declared a dividend or dividends which, together
with all previous such dividends, will have the effect of distributing to the
shareholders of REvest all of REvest's investment company taxable income for
all taxable years ending on or prior to the Closing Date (computed without
regard to any deduction for dividends paid) and all of its net capital gain
realized in all taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carryforward);
8.6 The parties will have received a favorable opinion of Bernstein,
addressed to WHF and TRF and dated the Closing Date, satisfactory to both
parties, substantially to the effect that, for Federal income tax purposes:
(i) The transfer of all or substantially all of REvest assets to
RTR in exchange for RTR Shares and the assumption by RTR of
substantially all of the liabilities of REvest, followed by the
distribution of RTR Shares to REvest Shareholders in dissolution and
liquidation of REvest, will constitute a "reorganization" within the
meaning of Section 368(a)(l)(C) of the Code, and RTR and REvest will
each be a "party to a reorganization" within the meaning of Section
368(b) of the Code; (ii) no gain or loss will be recognized by RTR upon
the receipt of the assets of REvest solely in exchange for RTR Shares
and the assumption by RTR of substantially all of the liabilities of
REvest ; (iii) no gain or loss will be recognized by REvest upon the
transfer of REvest assets to RTR in exchange for RTR Shares and the
assumption by RTR of substantially all of the liabilities of REvest or
upon the distribution (whether actual or constructive) of RTR Shares to
REvest Shareholders in exchange for their shares of REvest; (iv) no gain
or loss will be recognized by REvest Shareholders upon the exchange of
their REvest shares for RTR Shares in liquidation of REvest; (v) the
aggregate tax basis for RTR Shares received by each REvest Shareholder
pursuant to the Reorganization will be the same as the aggregate tax
basis of REvest shares held by such shareholder immediately prior to the
Reorganization, and the holding period of RTR Shares to be received by
each REvest Shareholder will include the period during which REvest
shares exchanged therefor were held by such shareholder (provided the
REvest Shares were held as capital assets on the date of the
Reorganization); and (vi) the tax basis of REvest assets acquired by RTR
will be the same as the tax basis of such assets to REvest immediately
prior to the Reorganization, and the holding period of the assets of
REvest in the hands of RTR will include the period during which those
assets were held by REvest.
Notwithstanding anything herein to the contrary, neither RTR nor REvest may
waive the condition set forth in this paragraph 8.6.
APPENDIX A
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ARTICLE IX
EXPENSES
9.1 If TRF becomes obligated to complete the transactions provided for
herein, then the first $25,000 of expenses of the transactions contemplated
by this Agreement incurred by WHF and/or REvest, excluding expenses incurred
by WHF and/or REvest for in-house personnel, will be borne by Royce &
Associates, Inc. Subject to the preceding sentence, all expenses of the
transactions contemplated by this Agreement incurred by WHF and/or REvest
will be borne by REvest and/or Ebright Investments, Inc. Such expenses
include, without limitation, (i) expenses incurred in connection with the
entering into and the carrying out of the provisions of this Agreement; (ii)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the RTR Shares to be issued pursuant to
the provisions of this Agreement; (iii) fees and expenses of preparing and
filing such forms as are necessary under applicable state securities laws in
respect of the RTR Shares to be issued in connection herewith in each state
in which the shareholders of REvest are resident as of the date of the
mailing of the Prospectus and Proxy Statement to such shareholders; (iv)
postage; (v) printing; (vi) accounting fees; (vii) legal fees; and (viii)
solicitation cost of the transactions; provided, however, that neither WHF,
REvest or Ebright Investments, Inc. will be responsible for in-house
personnel costs of TRF, Royce & Associates, Inc. or their respective
affiliates.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 Neither party has made any representation, warranty or covenant not
set forth herein, and this Agreement constitutes the entire agreement between
the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith will survive the consummation of the transactions contemplated
hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of TRF and
WHF. In addition, either TRF or WHF may, at its option, terminate this
Agreement at or prior to the Closing Date, notwithstanding approval of this
Agreement by REvest's Shareholders, because:
(a) of a breach by the other of any representation, warranty or
covenant contained herein to be performed at or prior to the Closing
Date, if not cured within 15 days, or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably
appears that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there will
APPENDIX A
- -------------------------------------------------------------------------------
be no liability for damages on the part of RTR, REvest or
TRF or WHF or their respective trustees or officers, to the other party or
its trustees or officers, but WHF and/or REvest will bear the expenses
incurred by TRF, WHF, RTR and/or by REvest incidental to the preparation and
carrying out of this Agreement, as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of WHF
and TRF; provided, however, that following the meeting of the shareholders of
REvest called by WHF pursuant to paragraph 5.2 of this Agreement, no such
amendment may have the effect of changing the provisions for determining the
number of the RTR Shares to be issued to the REvest Shareholders under this
Agreement to the detriment of such shareholders without their further
approval.
ARTICLE XIII
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement will be in writing and will be given by prepaid
telegraph, telecopy, overnight courier or certified mail, addressed to
if to WHF:
The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Attn: Jennifer E. Goff,
President
if to TRF:
The Royce Fund
1414 Avenue of the Americas
New York, New York 10019
Attn: John D. Diederich,
Director of Administration
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which will
APPENDIX A
- -------------------------------------------------------------------------------
be deemed an original.
14.3 This Agreement will be governed by and construed in accordance
with the laws of the State of New York.
14.4 This Agreement will bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder will be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or will be construed to confer upon or give
anyone, other than the parties hereto and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
14.5 It is expressly agreed to that the obligations of RTR and of REvest
hereunder will not be binding upon any of the Trustees, shareholders,
officers, employees or other agents of TRF or WHF, as such, but bind only the
trust properties of RTR and of REvest, as provided in their respective Trust
Instruments. The execution and delivery of this Agreement have been
authorized by the Trustees of TRF and WHF on behalf of RTR and REvest,
respectively, and signed by authorized officers of TRF and WHF, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officers will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will
bind only the respective trust properties of RTR and REvest as provided in
TRF's and WHF's respective Trust Instruments.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
THE ROYCE FUND, THE WINTER HARBOR FUND,
on behalf of Royce Total Return Fund on behalf of The REvest Value Fund
By: /s/ Charles M. Royce By: /s/ Jennifer E. Goff
Charles M. Royce, President Jennifer E. Goff, President
As to the first sentence of Article IX only:
ROYCE & ASSOCIATES, INC.
By: /s/ Charles M. Royce
Charles M. Royce, President
In order to induce The Royce Fund ("TRF") to enter into and perform the
foregoing Agreement and Plan of Reorganization, Ebright Investments, Inc. and
Jennifer E. Goff hereby jointly and severally personally guaranty to TRF, for
the benefit of its Royce Total Return Fund series, the
APPENDIX A
- -------------------------------------------------------------------------------
accuracy of the
representations and warranties of The Winter Harbor Fund as set forth in such
Agreement and Plan of Reorganization and the full and timely payment and
performance when due of all of the obligations of The REvest Value Fund
thereunder, as such representations, warranties and obligations may be
changed or otherwise modified from time to time; provided, however, that the
personal liability of Jennifer E. Goff under this guaranty is limited to a
maximum of $50,000.
/s/ Jennifer E. Goff
Jennifer E. Goff, as President
of Ebright Investments, Inc.
/s/ Jennifer E. Goff
Jennifer E. Goff, individually
APPENDIX B
- -------------------------------------------------------------------------------
The Royce Fund
Value Investing in Small Companies for More Than 25 Years
Royce Total Return Fund
Investment Class Shares
Prospectus
May 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved of these securities, or determined that the
information in this prospectus is accurate or complete. It is a crime to
represent otherwise.
APPENDIX B
- -------------------------------------------------------------------------------
Table of Contents
Overview 1
Royce Total Return Fund 2
Investing in Small-Company Stocks 4
Management of the Fund 6
General Shareholder Information 7
APPENDIX B
- -------------------------------------------------------------------------------
Overview
"At Royce & Associates, Inc. ("Royce"), the Funds' investment adviser,
we attempt to invest in equity securities of small- and micro-cap companies
that are trading significantly below our assessment of their current worth.
We base our assessment on either what we believe a knowledgeable buyer might
pay to acquire the entire company, or what we think the value of the company
should be in the stock market. This analysis takes into consideration a
number of relevant factors, including the company's future growth prospects.
We select securities using a risk-averse value approach, with the expectation
that their market prices should increase toward our estimate of their current
worth, resulting in capital appreciation for Fund investors.
"Our Funds' ability to achieve their goals will depend largely on our
skill in selecting their portfolio companies using our risk-averse value
approach. It will also rest on the degree to which the markets eventually
recognize our assessment of the current worth of these companies."
- Chuck Royce
This Prospectus relates only to the Investment Class of shares of the
Fund, which are offered by The Royce Funds without sales charges or
commissions.
The information on page 2 about the Fund's investment goals and
principal strategies and about the primary risks for the Fund's investors is
based on, and should be read in conjunction with, the information on pages 4-
6 of this Prospectus. This section includes information about the investment
and risk characteristics of small- and micro-cap companies, the market for
their securities and Royce's risk-averse value approach to investing.
The performance information presented in this Prospectus is current to
December 31, 1999. For more recent information, please visit our website at
www.roycefunds.com or contact The Royce Fund through any of the methods
listed on the back cover of this Prospectus.
The Fund may be a suitable investment as part of your overall investment
plan if you want to include a fund (or funds) that focuses on small- and/or
micro-cap companies.
APPENDIX B
- -------------------------------------------------------------------------------
Investment Goals and Principal Strategies
- -------------------------------------------------------------------------------
The investment goals of Royce Total Return Fund are both long-term
growth of capital and current income. Royce invests the Fund's assets
primarily in a diversified portfolio of dividend-paying securities issued by
small- and micro-cap companies. Of the more than 8,000 small- and micro-cap
companies, approximately 2,100 currently pay common stock dividends.
Investing in such securities may tend to stabilize the volatility inherent in
the prices of small-cap securities.
Normally, the Fund will invest at least 65% of its assets in common
stocks and convertible securities. At least 90% of these securities will
produce dividend or interest income to the Fund, and at least 65% will be
issued by companies with stock market capitalizations of less than $1.5
billion at the time of investment. Royce expects the Fund's portfolio to have
a median market cap below $1 billion. It may also invest up to 35% of the
Fund's assets in non-convertible debt securities.
Primary Risks for Fund Investors
- -------------------------------------------------------------------------------
As with any mutual fund that invests in common stocks, Royce Total
Return Fund is subject to market risk - the possibility that common stock
prices will decline over short or extended periods of time. As a result, the
value of your investment in the Fund will fluctuate with the market, and you
could lose money over short or even long periods of time.
The prices of small- and micro-cap securities are generally more
volatile and their markets are less liquid relative to larger-cap securities.
Therefore, the Fund may involve more risk of loss and its returns may differ
significantly from funds investing in larger-cap companies or other asset
classes.
- -------------------------------------------------------------------------------
The following information provides some indication of the past rewards
and risks of investing in the Fund by showing its performance from year to
year since its inception, and by showing how the Fund's average annual total
returns for various periods compare with those of the Russell 2000, the
Fund's benchmark index. Past performance does not indicate how the Fund will
perform in the future.
Portfolio Diagnostics
(12/31/99)
Number of Securities 143
Median Market Capitalization $362 Million
APPENDIX B
- -------------------------------------------------------------------------------
[BAR CHART]
CALENDAR YEAR RETURNS - In Percentages (%)
1999 1.55%
1998 4.75%
1997 23.69%
1996 25.48%
1995 26.85%
1994 5.13%
[END BAR CHART]
Annualized Returns - in Percentages (%)
From Inception
1 Year 3 Year 5 Year 12/15/93
-----------------------------------------------------
RTR 1.55 9.58 15.93 13.95
Russell 2000 21.26 13.08 16.69 13.92
During the period shown in the bar chart, the highest return for a
calendar quarter was 12.33% (quarter ended 6/30/99) and the lowest return for
a calendar quarter was -10.53% (quarter ended 9/30/98).
Fees and Expenses of the Fund
- -------------------------------------------------------------------------------
The following table presents the fees and expenses that you may pay if
you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchase None
Maximum deferred sales charge None
Maximum sales charge (load) imposed on reinvested dividends None
Early redemption fee
On purchases held for six months or more None
On purchases held for less than six months 1.00%
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management fees 1.00%
Distribution (12b-1) fees None
Other expenses 0.31%
-----
Total Annual Fund Operating Expenses 1.31%
Fee Waiver (0.06)%
-----
Net Annual Fund Operating Expenses 1.25%
-----
Example:
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year
APPENDIX B
- -------------------------------------------------------------------------------
and that the Fund's total operating expenses (net of fee waiver in year
1) remain the same. Although your actual costs may be higher or lower, based
on the assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
$127 $409 $712 $1,574
Financial Highlights Information
- -------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years and reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned each year on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the Fund's 1999
Annual Report to Shareholders, which is available upon request.
Year Ended on December 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $7.56 $7.52 $6.29 $5.76 $5.12
----- ----- ----- ----- -----
Income from Investment Operations
Net investment income 0.17 0.15 0.11 0.14 0.13
Net gains (losses) on securities
(both realized and unrealized) (0.07) 0.20 1.38 1.28 1.24
----- ----- ----- ----- -----
Total from Investment Operations 0.10 0.35 1.49 1.42 1.37
----- ----- ----- ----- -----
Less Distributions
Dividends from net investment income (0.16) (0.15) (0.11) (0.16) (0.13)
Distributions from capital gains (0.35) (0.16) (0.15) (0.73) (0.60)
----- ----- ----- ----- -----
Total Distributions (0.51) (0.31) (0.26) (0.89) (0.73)
----- ----- ----- ----- -----
Net Asset Value, End of Period $7.15 $7.56 $7.52 $6.29 $5.76
Total Return 1.6% 4.8% 23.7% 25.5% 26.9%
Ratios/Supplemental Data
Net Assets, End of Period (millions) $248 $245 $120 $6 $3
Ration of Expenses to Average Net Assets* 1.25% 1.25% 1.25% 1.25% 1.67%
Ratio of Net Investment Income to Average
Net Assets 2.32% 2.75% 3.15% 2.50% 2.42%
Portfolio Turnover Rate 39% 66% 26% 111% 68%
*For 1999, 1998, 1997, 1996 and 1995, these ratios would have been 1.31%,
1.35%, 1.67%, 2.23% and 2.38%, respectively, before fee waivers by Royce.
Investing in Small-Company Stocks
- -------------------------------------------------------------------------------
Small- and Micro-Cap Stocks
Royce views the large and diverse universe of small-cap companies as
having two investment segments or tiers. While small-caps are generally
defined as those companies with market capitalizations of less than $1.5
billion, Royce refers to the segment of small-cap companies with market
capitalizations below $300 million as micro-cap.
APPENDIX B
- -------------------------------------------------------------------------------
Small-and micro-cap companies offer investment opportunities and
additional risks. They may not be well known to the investing public, may
not be significantly owned by institutional investors and may not have steady
earnings growth. In addition, the securities of such companies may be more
volatile in price, have wider spreads between their bid and ask prices and
have significantly lower trading volumes than larger capitalization stocks.
As a result, the purchase or sale of more than a limited number of shares of
a small- or micro-cap security may affect its market price. Royce may need a
considerable amount of time to purchase or sell its positions in these
securities, particularly when other Royce-managed accounts or other investors
are also seeking to purchase or sell them. Accordingly, Royce's investment
focus on small- and micro-cap securities generally requires it to have a long-
term (at least three years) investment outlook for a portfolio security.
The micro-cap segment consists of more than 6,200 companies with market
caps below $300 million. These companies are followed by relatively few, if
any, securities analysts, and there tends to be less publicly available
information about them. Their securities generally have even more limited
trading volumes and are subject to even more abrupt or erratic market price
movements than are the securities in the upper tier, and Royce may be able to
deal with only a few market-makers when purchasing and selling these
securities. Such companies may also have limited product lines, markets or
financial resources, may lack management depth and may be more vulnerable to
adverse business or market developments. These conditions, which create
greater opportunities to find securities trading well below Royce's estimate
of the company's current worth but also involve increased risk, lead Royce to
more broadly diversify most of the Funds investing in the micro-cap tier by
holding proportionately smaller positions in more companies.
The upper tier of the small-cap universe of securities consists of
approximately 1,700 companies with market caps between $300 million and $1.5
billion. In this segment, there is a relatively higher level of ownership by
institutional investors and more research coverage by brokers than generally
exists for micro-cap companies. This greater attention makes the market for
these securities more efficient compared to micro-cap securities in that they
have somewhat greater trading volumes and narrower bid/ask spreads. As a
result, Royce normally employs a more concentrated approach when investing in
the upper tier of small-caps, holding proportionately larger positions in a
relatively limited number of securities (generally fewer than 60).
Value Investing
Royce uses a "value" method in managing the Fund's assets. In selecting
securities for the Fund, Royce evaluates the quality of a company's balance
sheet, the level of its cash flows and various measures of a company's
profitability. Royce then uses these factors to assess the company's current
worth. Royce bases this assessment on either what it believes a knowledgeable
buyer might pay to acquire the entire company or what it thinks the value of
the company should be in the stock market, taking into consideration a number
of relevant factors, including the company's future growth prospects.
Royce attempts to identify and invest in securities of companies that
are trading significantly below its estimate of the company's current worth,
with the expectation that the market price of its securities should increase
over a three- to five-year period towards this estimate, resulting in capital
appreciation for Fund investors.
Royce's value approach strives to reduce some of the risks of investing
in small- and micro-cap securities for the Fund's portfolio taken as a whole.
In addition to focusing on companies trading significantly below its estimate
of their current worth to reduce valuation risk, Royce
APPENDIX B
- -------------------------------------------------------------------------------
evaluates various
other risk factors in selecting securities for the Fund. Royce attempts to
lessen financial risk by buying companies that combine strong balance sheets
with low leverage. Royce attempts to decrease portfolio risk in the micro-cap
segment of the small-cap universe by broadly diversifying portfolio holdings.
While there can be no assurance that this risk-averse value approach
will be successful, Royce believes that it can reduce some of the risks of
investing in small- and micro-cap companies, which are inherently fragile in
nature and whose securities have substantially greater market price
volatility.
Additionally, although Royce's approach to security selection seeks to
reduce downside risk to Fund portfolios during periods of broad small-cap
market declines, it may also reduce gains in strong small-cap up markets.
Temporary Investments
The Fund may invest in short-term fixed income securities for temporary
defensive purposes, to invest uncommitted cash balances or to maintain
liquidity to meet shareholder redemptions. If a Fund should implement a
temporary investment policy, it may not achieve its investment goal while
that policy is in effect.
Management of the Fund
- -------------------------------------------------------------------------------
Royce & Associates Inc. is the Fund's investment adviser and is
responsible for the management of its assets. Royce has been investing in
small-cap securities with a value approach for more than 25 years. Its
offices are located at 1414 Avenue of the Americas, New York, NY 10019.
Charles M. Royce has been the firm's President and Chief Investment Officer
since 1973. He is also the primary portfolio manager of the Fund's portfolio.
Mr. Royce is assisted by Royce's investment staff, which includes W.
Whitney George, Managing Director, Vice President and Senior Portfolio
Manager; Boniface A. Zaino, Managing Director and Senior Portfolio Manager;
and Charles R. Dreifus, Principal and Senior Portfolio Manager; and by Jack
E. Fockler, Jr., Managing Director and Vice President. Mr. George has been
employed by Royce since 1991. Mr. Zaino joined Royce in April 1998 and
previously was Group Managing Director at Trust Company of the West (since
1984). Mr. Dreifus joined Royce in February 1998 and previously was Managing
Director (since June 1995) and General Partner (from 1983 until June 1995) of
Lazard Freres & Co. LLC. Mr. Fockler has been employed by Royce since 1989.
Royce Fund Services, Inc. ("RFS") distributes the Fund's shares. State
Street Bank & Trust Company is the custodian of the Fund's securities, cash
and other assets. State Street's agent, National Financial Data Services
("NFDS"), is the Fund's transfer agent.
Royce receives advisory fees monthly as compensation for its services to
the Fund. The annual rate of this fee, before any waiver to cap the expense
ratio at 1.25% as shown in the Fees and Expenses tables, is 1% of the average
net assets of the Fund.
For 1999, the actual net fee, after waiver, paid to Royce on average net
assets was 0.94% for the Fund.
APPENDIX B
- -------------------------------------------------------------------------------
General Shareholder Information
- -------------------------------------------------------------------------------
For more detailed discussion of The Royce Fund policies regarding direct
ownership of Fund shares, including information on opening accounts, buying,
redeeming, exchanging and transferring ownership of Fund shares, please refer
to The Royce Fund's Shareholder Guide dated May 1, 2000.
Purchasing Shares
The Fund is no-load, meaning that you pay no sales fees or commissions
to buy shares directly from The Royce Fund. The Fund does pay its own
management fees and other operating expenses as outlined in this Prospectus.
If you purchase Fund shares through a third party, such as a discount or
full-service broker-dealer, bank or other financial intermediary, investment
minimums, commissions, fees, policies and procedures may differ from those
described in this Prospectus. If you purchase Fund shares through a third
party, the shares may be held in the name of the third party on the Fund's
books. RFS, Royce and/or the Funds may compensate broker-dealers, financial
intermediaries and other service providers who introduce investors to the
Funds and/or provide certain administrative services to their customers who
own Fund shares.
Minimum initial investments for shares purchased directly from The Royce Fund:
- -------------------------------------------------------------------------------
Account Type Minimum
- ------------------------------------
Regular Account $2,000
IRA 500
Automatic Investment or
Direct Deposit Plan Accounts 500
403(b)(7) or 401(k) Accounts None
The subsequent investment minimum is $50, regardless of account type.
The Royce Fund reserves the right both to suspend the offering of the Fund's
shares to new investors and to reject any specific purchase request.
Redeeming Shares
Early Redemption Fee
You may redeem shares in your account at any time. In order to
discourage short-term trading, The Royce Fund assesses an early redemption
fee of 1% on redemptions of shares that you held for less than six months.
The fee is payable to the Fund out of the proceeds otherwise payable to you.
The "first-in, first-out" method is used to determine the holding period
by comparing the date of the redemption with the earliest dates of the share
purchases in an account. For accounts registered on the books of the Fund's
transfer agent, the anniversary month of an account determines the six-month
holding period, so that if you purchased a Fund's shares in June 2000, these
shares would be subject to the fee if you were to redeem them prior to
December 2000. If you were to redeem the shares on or after December 1,
2000, they would not be subject to the fee.
APPENDIX B
- -------------------------------------------------------------------------------
You will incur no fee on shares that you acquire through distribution
reinvestment or that you exchange into another Royce Fund. The following
types of shareholders and accounts are exempt from the early redemption fee:
employees of The Royce Fund, Royce or RFS or members of their immediate
families or employee benefit plans for them; participants in an Automatic
Investment or Withdrawal Plan; certain pre-approved group investment plans
and charitable organizations; profit-sharing trusts, corporations or other
institutional investors who are investment advisory clients of Royce; and
omnibus or similar account customers of certain pre-approved broker-dealers
and other institutions.
Other Redemption Information
The Royce Fund may suspend redemption privileges or postpone payment for
the Fund when the New York Stock Exchange is closed or during what the
Securities and Exchange Commission determines are emergency circumstances.
The Fund will normally make redemptions in cash, but The Royce Fund
reserves the right to satisfy a Fund shareholder's redemption request by
delivering selected shares or units of portfolio securities - redemption in
kind - under certain circumstances.
The Royce Fund reserves the right to involuntarily redeem Fund shares in
any account that falls below the minimum initial investment due to
redemptions by the shareholder. If at any time the balance in an account does
not have a value at least equal to the minimum initial investment, you may be
notified that the value of your account is below the Fund's minimum account
balance requirement. You would have 60 days to increase your account balance
before the account is closed. Proceeds would be paid promptly to the
shareholder.
The Royce Fund also reserves the right to revise or suspend the exchange
privilege at any time.
Net Asset Value per Share
The price of shares that you purchase or redeem will be at their net
asset value. The net asset value per share (NAV) for the Fund is calculated
at the close of regular trading on the New York Stock Exchange (generally 4
p.m. Eastern Time) and is determined every day that the Exchange is open. Net
asset value per share is calculated by dividing the value of the Fund's net
assets by the number of its outstanding shares. The Fund's investments are
valued based on market value or, if market quotations are not readily
available, at their fair value as determined in good faith under procedures
established by The Royce Fund's Board of Trustees.
The date on which your purchase, redemption or exchange of shares is
processed is the trade date, and the price used for the transaction is based
on the next calculation of net asset value after the order is processed.
Reports
The Royce Fund mails shareholder reports semi-annually and, to reduce
expenses, may mail only one copy to shareholders with the same last name and
sharing the same address. You can choose to receive separate report copies
for accounts registered to different members of the same household by calling
Investor Services at (800) 221-4268. Please allow 30 days for your request to
be processed. Please call Investor Services if you need additional report
copies.
Dividends, Distributions and Taxes
Royce Total Return Fund pays dividends from its net investment income on
a quarterly basis and makes any distributions from net realized capital gains
annually in December. Unless the
APPENDIX B
- -------------------------------------------------------------------------------
shareholder chooses otherwise, dividends
and distributions will be reinvested automatically in additional shares of
the Fund.
Selling or exchanging shares is a taxable event, and a shareholder may
realize a taxable gain or loss. The Fund will report to shareholders the
proceeds of their redemption(s). The tax consequences of a redemption also
depend on the shareholder's cost basis, so shareholders should retain all
account statements for use in determining the tax consequences of
redemptions.
The Internal Revenue Service will treat any loss you may have on the
redemption of a Fund's shares held for six months or less as a long-term
capital loss, up to the amount of any capital gain distributions you received
from the Fund during the time you held the shares.
You should carefully consider the tax implications of purchasing shares
shortly prior to a distribution. At the time of purchase, the Fund's net
asset value may include undistributed income or capital gains. When the Fund
subsequently distributes these amounts, they are taxable to the shareholder,
even though the distribution is economically a return of part of the
shareholder's investment.
The IRS requires that the Fund withhold 31% of taxable dividends,
capital gain distributions and redemptions paid to non-corporate shareholders
who have not complied with IRS regulations regarding taxpayer identification.
The above is only a summary of certain Federal income tax consequences
of investing in the Fund. Always consult a tax advisor with questions about
Federal, state or local tax consequences. The Statement of Additional
Information includes a more detailed discussion of Federal tax matters that
may be relevant to a shareholder.
Taxation of Distributions
Each year, shareholders receive important tax information about the
distributions received in their account(s) for the prior calendar year.
Unless your account is an IRA or is otherwise exempt from taxation, all Fund
distributions are subject to Federal income tax regardless of whether you
receive them in cash or reinvest them in additional shares.
The taxation of distributions is not related to how long you have owned
the Fund's shares. The following table describes in general how distributions
are taxed at the Federal level:
Rate for 15% Rate for 28% and
tax bracket higher tax bracket
Distribution investors investors
- ----------------------------------------------------------------
Income dividend Ordinary Ordinary
income rate income rate
Short-term Ordinary Ordinary
capital gains income rate income rate
Long-term
capital gains 10% 20%
APPENDIX B
- -------------------------------------------------------------------------------
More information on The Royce Fund is available free upon request, including
the following:
Annual/Semi-annual Reports
Additional information about the Fund's investments, together with a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance, is available in the Fund's annual and semi-
annual reports to shareholders.
Statement of Additional Information ("SAI")
Provides more details about The Royce Fund and its policies. A current
SAI is on file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
To obtain more information:
By telephone
Call (800) 221-4268
By mail
Write to:
The Royce Funds
1414 Avenue of the Americas
New York, NY 10019
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Send your request to:
funds@roycenet.com
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Prospectuses, applications, IRA forms and additional information are
available through our website at http://www.roycefunds.com
Text only versions of the Fund's prospectus, SAI and other documents filed
with the SEC can be viewed online or downloaded from: http://www.sec.gov
You can also obtain copies of documents filed with the SEC by visiting the
SEC's Public Reference Room in Washington, DC (telephone (800) SEC-0330) or
by sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, DC 20549-6009.
A separate Shareholder Guide has been prepared for direct shareholders and is
available free upon request. The Guide contains important shareholder
information, including how to purchase and redeem shares of the Fund.
SEC File # 811-03599
PROXY
PROXY THE REVEST VALUE FUND PROXY
1414 Avenue of the Americas
New York, NY 10019
This Proxy is Solicited on Behalf of the Board of Trustees
The undersigned hereby appoints Jennifer E. Goff and Tina Hosking, or either
of them, acting in absence of the other, as Proxies, each with the power to
appoint his substitute, and hereby authorizes them to represent and to vote,
as designated on the reverse, all shares of the Fund held of record by the
undersigned on August 18, 2000, at the Special Meeting of Shareholders to be
held on October 3, 2000, or at any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. If no direction is made, this Proxy will be
voted FOR Proposal 1.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) on reverse. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
- -----------------------------------
THE REVEST VALUE FUND
- -----------------------------------
For Against Abstain
/ / / / / /
1. TO APPROVE OR DISAPPROVE THE
AGREEMENT AND PLAN OF REORGANI-
ZATION, WHEREBY THE REVEST VALUE
FUND'S ASSETS AND LIABILITIES ARE
ACQUIRED BY ROYCE TOTAL RETURN
FUND, A SERIES OF THE ROYCE FUND, IN
EXCHANGE FOR SHARES OF ROYCE TOTAL
RETURN FUND AND THE REVEST VALUE
FUND IS THEN LIQUIDATED
2. THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
Please be sure to sign and date this Proxy. Date:
Mark box at the right if an address change
or comment has been noted on the reverse
side of this card.
Stockholder sign here Co-owner sign here RECORD DATE SHARES:
THE ROYCE FUND
Statement of Additional Information
September 11, 2000
This Statement of Additional Information contains material which may be
of interest to investors in connection with the proposed transfer of assets
and liabilities of The REvest Value Fund to Royce Total Return Fund in
exchange for shares of Royce Total Return Fund. This Statement is not a
Prospectus and is authorized for distribution only when it accompanies or
follows delivery of the Prospectus/Proxy Statement of the Trust dated ____
__, 2000. This Statement consists of this cover page and the documents
described in the following Table of Contents. Copies of the 1999 Annual and
Semi-Annual Reports to Shareholders and Schedule of Investments of Royce
Total Return Fund referred to in I below can be obtained by writing to the
The Royce Fund at 1414 Avenue of the Americas, New York, New York 10019 or by
calling toll-free at (800) 221-4268. Copies of the 1999 Annual and Semi-
Annual Reports to Shareholders and Schedule of Investments of The REvest
Value Fund referred to in II below can be obtained by writing The REvest
Value Fund, 511 Congress Street, 9th Floor, Portland, ME 04101 or by calling
toll-free at (800) 277-5573.
Table of Contents
I. Financial Statements and accompanying Schedule of Investments of Royce
Total Return Fund as of and for the year ended December 31, 1999, with
Report of Independent Accountants.
II. Financial Statements and accompanying Schedule of Investments of Royce
Total Return Fund as of and for the six-months ended June 30, 2000.
III. Financial Statements and accompanying Schedule of Investments of The
REvest Value Fund as of and for the year ended December 31, 1999, with
Report of Independent Accountants.
IV. Financial Statements and accompanying Schedule of Investments of The
REvest Value Fund as of and for the six-months ended June 30, 2000.
V. Statement of Additional Information of The Royce Fund dated May 1, 2000.
I. The financial statements and schedule of investments of Royce Total
Return Fund as of and for the year ended December 31, 1999, with Report of
Independent Accountants, are included in Royce Total Return Fund's 1999
Annual Report to Shareholders. Such Annual Report has been filed with the
Securities and Exchange Commission pursuant to Rule 30a-1 under the
Investment Company Act of 1940, as amended, and such financial statements and
schedule of investments are incorporated herein by reference.
II. The financial statements and schedule of investments of Royce Total
Return Fund as of and for the six-months ended June 30, 2000s, are included
in Royce Total Return Fund's 2000 Semi-Annual Report to Shareholders. Such
Semi-Annual Report has been filed with the Securities and Exchange Commission
pursuant to Rule 30b1-1 under the Investment Company Act of 1940, as amended,
and such financial statements and schedule of investments are incorporated
herein by reference.
III. The financial statements and schedule of investments of The REvest
Value Fund as of and for the year ended December 31, 1999, with Report of
Independent Accountants, are included in The REvest Value Fund's 1999 Annual
Report to Shareholders. Such Annual Report has been filed with the
Securities and Exchange Commission pursuant to Rule 30a-1 under the
Investment Company Act of 1940, as amended, and such financial statements and
schedule of investments are incorporated herein by reference.
IV. The financial statements and schedule of investments of The REvest Value
Fund as of and for the six-months ended June 30, 2000, are included in The
REvest Value Fund's 2000 Semi-Annual Report to Shareholders. Such Annual
Report has been filed with the Securities and Exchange Commission pursuant to
Rule 30b1-1 under the Investment Company Act of 1940, as amended, and such
financial statements and schedule of investments are incorporated herein by
reference.
V. The Statement of Additional Information of The Royce Fund dated May 1,
2000, has been filed with the Securities and Exchange Commission as part of
Post-Effective Amendment No. 52 to The Royce Fund's Registration Statement on
Form N-1A and is incorporated herein by reference.
PART C -- OTHER INFORMATION
Item 15. Indemnification
(a) Article XI of the Declaration of Trust of the Registrant provides
as follows:
"ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section l. Provided they have exercised reasonable care
and have acted under the belief that their actions are in the best
interest of the Trust, the Trustees shall not be responsible for or
liable in any event for neglect or wrongdoing of any other Trustee
or any officer, employee, agent or Investment Adviser, Principal
Underwriter, transfer agent, custodian or other independent
contractor of the Trust, but nothing contained herein shall protect
any Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of his duties or reckless disregard
of the obligations and duties involved in the conduct of his
office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been
executed or done only in or with respect to their or his capacity
as Trustees or Trustee, and such Trustees or Trustee shall not be
personally liable thereon.
INDEMNIFICATION
Section 2.
(a) Subject to the exceptions and limitations contained
in Section 2(b) below:
(i) Every person who is, or has been, a Trustee or
officer of the Trust (including persons who serve at the Trust's
request as directors, officers or trustees of another entity in
which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person") shall be
indemnified by the appropriate Fund to the fullest extent not
prohibited by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party
or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the
settlement thereof; and
(ii) The words "claim", "action", "suit" or
"proceeding" shall apply to all claims, actions, suits or proceedings (civil,
criminal, administrative, investigatory or other, including appeals), actual
or threatened, while in office or thereafter, and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a
Covered Person:
(i) Who shall, in respect of the matter or matters
involved, have been adjudicated by a court or body before which the
proceeding
was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence in the
performance of his duties or reckless disregard of the obligations
and duties involved in the conduct of his office or (B) not to have
acted in the belief that his action was in the best interest of the
Trust; or
(ii) In the event of a settlement, unless there has
been a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office,
(A) By the court or other body approving the
settlement;
(B) By a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the
matter, based upon a review of readily available facts (as opposed
to a full trial-type inquiry); or
(C) By written opinion of independent legal
counsel, based upon a review of readily available facts (as opposed
to a full trial-type inquiry).
(c) The rights of indemnification herein provided may
be insured against by policies maintained by the Trust, shall be
severable, shall not be exclusive of or affect any other rights to
which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall
affect any rights to indemnification to which Trust personnel,
other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law.
(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of the
type described in subsection (a) of this Section 2 may be paid by the
applicable Fund from time to time prior to final disposition thereof upon
receipt of an undertaking by or on behalf of such Covered Person that such
amount will be paid over by him to the applicable Fund if and when it is
ultimately determined that he is not
entitled to indemnification under this Section 2; provided, however, that
either (i) such Covered Person shall have provided appropriate security for
such undertaking, (ii) the Trust is insured against losses arising out of any
such advance payments or (iii) either a majority of the Trustees who are
neither Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a trial-type inquiry
or full investigation), that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Section 2."
(b)(1) Paragraph 8 of the Investment Advisory Agreements by
and between the Registrant and Royce & Associates, Inc. provides as follows:
"8. Protection of the Adviser. The Adviser shall not be
liable to the Trust or to any portfolio series thereof for any
action taken or omitted to be taken by the Adviser in connection
with the performance of any of its duties or obligations under this
Agreement or otherwise as an investment adviser of the Trust or
such series, and the Trust or each portfolio series thereof
involved, as the case may be, shall indemnify the Adviser and hold
it harmless from and against all damages, liabilities, costs and
expenses (including reasonable attorneys' fees and amounts
reasonably paid in settlement) incurred by the Adviser in or by
reason of any pending, threatened or completed action, suit,
investigation or other proceeding (including an action or suit by
or in the right of the Trust or any portfolio series thereof or its
security holders) arising out of or otherwise based upon any action
actually or allegedly taken or omitted to be taken by the Adviser
in connection with the performance of any of its duties or
obligations under this Agreement or otherwise as an investment
adviser of the Trust or such series. Notwithstanding the preceding
sentence of this Paragraph 8 to the contrary, nothing contained
herein shall protect or be deemed to protect the Adviser against or
entitle or be deemed to entitle the Adviser to indemnification in
respect of, any liability to the Trust or to any portfolio series
thereof or its security holders to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of
its reckless disregard of its duties and obligations under this
Agreement.
Determinations of whether and the extent to which the Adviser is
entitled to indemnification hereunder shall be made by reasonable and
fair means, including (a) a final decision on the merits by a court or
other body before whom the action, suit or other proceeding was brought
that the Adviser was not liable by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties or (b) in
the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the Adviser was not liable by reason of such
misconduct by (i) the vote of a majority of a quorum of the Trustees of
the Trust who are neither "interested persons" of the Trust (as defined
in Section 2(a)(19) of the Investment Company Act of 1940) nor parties
to the action, suit or other proceeding or (ii) an independent legal
counsel in a written opinion."
(c) Paragraph 9 of the Distribution Agreement made October 31,
1985 by and between the Registrant and Royce & Associates, Inc. provides as
follows:
"9. Protection of the Distributor. The Distributor
shall not be liable to the Trust or to any series thereof for any
action taken or omitted to be taken by the Distributor in
connection with the performance of any of its duties or obligations
under this Agreement or otherwise as an underwriter of the Shares,
and the Trust or each portfolio series thereof involved, as the
case may be, shall indemnify the Distributor and hold it harmless
from and against all damages, liabilities, costs and expenses
(including reasonable attorneys' fees and amounts reasonably paid
in settlement) incurred by the Distributor in or by reason of any
pending, threatened or completed action, suit, investigation or
other proceeding (including an action or suit by or in the right of
the Trust or any series thereof or
its security holders) arising out of or otherwise based upon any
action actually or allegedly taken or omitted to be taken by the
Distributor in connection with the performance of any of its duties
or obligations under this Agreement or otherwise as an underwriter
of the Shares. Notwithstanding the preceding sentences of this
Paragraph 9 to the contrary, nothing contained herein shall protect
or be deemed to protect the Distributor against, or entitle or be
deemed to entitle the Distributor to indemnification in respect of,
any liability to the Trust or to any portfolio series thereof or
its security holders to which the Distributor would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its
reckless disregard of its duties and obligations under this
Agreement.
Determinations of whether and to the extent to which the
Distributor is entitled to indemnification hereunder shall be made by
reasonable and fair means, including (a) a final decision on the merits
by a court or other body before whom the action, suit or other
proceeding was brought that the Distributor was not liable by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its duties or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the Distributor
was not liable by reason of such misconduct by (a) the vote of a
majority of a quorum of the Trustees of the Trust who are neither
"interested persons" of the Trust (as defined in Section 2(a)(19) of the
1940 Act) nor parties to the action, suit or other proceeding or (b) an
independent legal counsel in a written opinion."
Item 16. Exhibits:
The Exhibits required by Item 16(1) through (4), (5), (7),
(8), (10), (13), (16) and (17), to the extent applicable to the
Registrant, have been filed with Registrant's initial Registration
Statement on Form N-1A (No. 2-80348) and Post-Effective Amendment
Nos. 4, 5, 6, 8, 9, 11, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24,
26, 27, 28, 29, 30, 31, 32, 33, 34 and 35 thereto and with
Registrant's Registration Statement (No. 333-23641), and are
incorporated by reference herein.
* To be filed by amendment.
(14) Consents of PricewaterhouseCoopers LLP relating to The REvest
Value Fund and Royce Total Return Fund.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c], the
reoffering prospectus will contain the information called for by
the applicable registration form for the reofferings by persons who
may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
(3) The undersigned Registrant agrees that an opinion as to the tax
consequences of the reorganization will be filed as part of a post-
effective amendment once the reorganization has been completed.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on
the 11th day of September, 2000.
THE ROYCE FUND
By: /s/ Charles M. Royce
Charles M. Royce, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Charles M. Royce President, Treasurer and September 11, 2000
Charles M. Royce Trustee
(Principal Executive,
Financial and Accounting
Officer)
/s/ Donald R. Dwight Trustee September 11, 2000
Donald R. Dwight
/s/ Hubert L. Cafritz Trustee September 11, 2000
Hubert L. Cafritz
/s/ Richard M. Galkin Trustee September 11, 2000
Richard M. Galkin
/s/ Stephen L. Isaacs Trustee September 11, 2000
Stephen L. Isaacs
/s/ William L. Koke Trustee September 11, 2000
William L. Koke
/s/ David L. Meister Trustee September 11, 2000
David L. Meister
NOTICE
A copy of the Trust Instrument of The Royce Fund is available for
inspection at the office of the Registrant, and notice is hereby given that
this instrument is executed on behalf of the Registrant by an officer of the
Registrant as an officer and not individually and that the obligations of or
arising out of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property
of the Registrant.