As filed with the Securities and Exchange Commission on August 14, 2001
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X] Check the appropriate box:
Filed by a Party other than the Registrant [ ] [ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ROYCE VALUE TRUST, INC.
--------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SAME AS ABOVE
--------------------------------------------------------
(NAME OF PERSON FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1 (Set forth the amount on which
the filing fee is calculated and state how it was determined.)
-------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------
Dear Royce Value Trust Shareholder:
For the past year, we have been looking for the right corporate partner, one
that would allow us to manage The Royce Funds in the years ahead with the same
approach that shareholders have known for the past almost 30 years.
We are pleased to announce that we have found that partner in Legg Mason, Inc.,
a public company listed on the New York Stock Exchange (Symbol: LM). Legg Mason
has agreed to purchase the business of Royce & Associates, Inc. ("R&A"), the
Investment Adviser to The Royce Funds. R&A will become a wholly owned subsidiary
of Legg Mason and is expected to retain day-to-day operating autonomy.
Legg Mason, Inc., headquartered in Baltimore, is a holding company that provides
asset management, securities brokerage, investment banking and related financial
services through its subsidiaries. As of June 30, 2001, Legg Mason's asset
management subsidiaries had aggregate assets under management of $145.6 billion,
including approximately $29.5 billion in proprietary mutual funds.
Our partnership with Legg Mason offers important benefits for all shareholders
of The Royce Funds:
o We expect to retain full autonomy over our investment process and to
manage our portfolios in the same small-cap value style that you have
come to appreciate.
o Whitney George, Buzz Zaino, Charlie Dreifus and I will continue as
Senior Portfolio Managers of R&A, and there is great incentive for us
to provide high-quality investment management services to our client
accounts.
o The current Fund classes will retain their same management fee
structure upon completion of the transaction; no additional levels of
expenses will be added to the current Fund classes as a result of the
transaction.
As a result of the transaction, The Royce Funds must obtain approval by the
Funds' shareholders of new investment advisory agreements. Enclosed is a Proxy
Statement giving further details and asking for your approval. We hope that you
will read it carefully and vote promptly.
Please call Investor Services at 1-800-221-4268 with any questions.
As always, thank you for your continued support of our work. We look forward to
serving you for many years to come.
Sincerely,
/s/ Charles M. Royce
Charles M. Royce
This page intentionally left blank
IMPORTANT INFORMATION
For Royce Value Trust Shareholders
Enclosed is a Proxy Statement for an up-coming shareholder meeting. While
we encourage you to carefully read the full text of the enclosed Proxy
Statement, here is a brief overview of matters to be voted on:
Q What am I being asked to vote "FOR" on this proxy?
A This proxy has two proposals:
1. Approval of a new investment advisory agreement between the Fund and
Royce & Associates, Inc. ("R&A"), on substantially similar terms as the
current investment advisory agreement, but with R&A operating as a
wholly-owned subsidiary of Legg Mason, Inc. (NYSE: LM);
2. Election of Directors of the Fund.
Q Why are we being asked to vote on a new investment advisory agreement?
A R&A has agreed to be acquired by Legg Mason. That transaction will terminate
the current investment advisory agreement between the Fund and R&A. The
transaction cannot be completed unless a number of conditions are met. One
condition is that the shareholders of all but our smallest funds must approve
the proposed new investment advisory agreements. As a result, you are being
asked to vote on the new investment advisory agreement with R&A, operating under
its new ownership.
Q Why are you selling the firm?
A We wanted to ensure that R&A would be in a position to continue to provide
well into the future the same level of Fund investment management as it has for
the past almost 30 years.
Q Will this change the advisory fees on my fund?
A No. The new investment advisory agreement provides for advisory fees payable
to R&A at the same rates contained in the current advisory agreement.
Q Will the portfolio management team change as a result of the transaction?
A No. The current portfolio management team is expected to remain in place upon
completion of the transaction, and Chuck Royce, Whitney George and Buzz Zaino
have each signed a five-year employment agreement.
(i)
Q How does the Board of Directors recommend shareholders vote on these
proposals?
A The Board of Directors has unanimously recommended that shareholders vote
"FOR" each of the proposals. The Board believes that R&A's proposed acquisition
by Legg Mason is in the best interests of the Fund and its shareholders.
Q How can I vote my proxy?
A For your convenience, there are several ways you can vote:
o By mail: vote, sign and return the enclosed proxy card
o By telephone: 877-779-8683
o By internet: www.eproxyvote.com/rvt (for Common Stock)
www.eproxyvote.com/rvt.pr (for 7.80% Cumulative
Preferred Stock)
www.eproxyvote.com/rvt.pra (for 7.30% Tax-Advantaged
Cumulative Preferred Stock)
o In person: September 14, 2001, 2:00 p.m., 1414 Avenue of the Americas,
New York, NY 10019
See your proxy card for specific instructions on how to vote via telephone
or the internet.
It is important that you vote your proxy promptly.
(ii)
ROYCE VALUE TRUST, INC.
1414 Avenue of the Americas
New York, NY 10019
------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------
TO BE HELD ON SEPTEMBER 14, 2001
To the Stockholders of:
ROYCE VALUE TRUST, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of ROYCE VALUE TRUST, INC. (the "Fund") will be held at the offices
of the Fund, 1414 Avenue of the Americas, New York, New York 10019 on Friday,
September 14, 2001, at 2:00 p.m. (Eastern time) for the following purposes:
1. To consider and act upon the proposed Investment Advisory Agreement for
the Fund;
2. To elect a Board of eight Directors of the Fund to hold office until
the next Annual Meeting of Stockholders and until their successors have
been duly elected and qualified or until their earlier resignation or
removal:
(i) six Directors to be elected by the holders of the Fund's Common
Stock, its 7.80% Cumulative Preferred Stock and its 7.30%
Tax-Advantaged Cumulative Preferred Stock (the two series of
Cumulative Preferred Stock together will be referred to as the
"Preferred Stock") voting together as a single class, and
(ii) two Directors to be elected only by the holders of the Fund's
Preferred Stock voting as a separate class; and
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
If you have any questions regarding Proposal 1 or 2 or need assistance in
voting, please contact our proxy firm, Georgeson Shareholder Communications,
Inc., at 1-888-854-7805.
The Board of Directors of the Fund has set the close of business on August
3, 2001 as the record date for determining those stockholders entitled to vote
at the Meeting or any adjournment thereof, and only holders of record at the
close of business on that day will be entitled to vote.
A complete list of the stockholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any stockholder of the
Fund for any purpose relevant to the Meeting during ordinary business hours from
and after August 31, 2001, at the office of the Fund, 1414 Avenue of the
Americas, New York, New York.
The Fund's Annual Report to Stockholders for the year ended December 31,
2000 was previously mailed to its stockholders, and copies are available upon
request, without charge, by writing to the Fund at 1414 Avenue of the Americas,
New York, New York 10019 or calling toll free at 1-800-221-4268.
IMPORTANT
To save the Fund the expense of additional proxy solicitation, please mark
your instructions on the enclosed Proxy, date and sign it and return it in the
enclosed envelope (which requires no postage if mailed in the United States),
even if you expect to be present at the Meeting. You have been provided with the
opportunity on your proxy card or voting instruction form to give voting
instructions via telephone or the Internet, and you are encouraged to take
advantage of these prompt and efficient voting options. The accompanying Proxy
is solicited on behalf of the Board of Directors, is revocable and will not
affect your right to vote in person in the event that you attend the Meeting.
By order of the Board of Directors,
Andrew S. Novak
Secretary of Royce Value Trust, Inc.
August 8, 2001
PROXY STATEMENT
ROYCE VALUE TRUST, INC.
1414 Avenue of the Americas
New York, NY 10019
ANNUAL MEETING OF STOCKHOLDERS
September 14, 2001
INTRODUCTION
The enclosed Proxy is solicited on behalf of the Board of Directors for use
at the Annual Meeting of Stockholders (the "Meeting") of Royce Value Trust, Inc.
(the "Fund"), to be held at the offices of the Fund, 1414 Avenue of the
Americas, New York, New York 10019, on Friday, September 14, 2001, at 2:00 p.m.
(Eastern time) and at any adjournments thereof. The approximate mailing date of
this Proxy Statement is August 13, 2001.
All properly executed Proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, Proxies
will be voted:
1. "FOR" the approval of the proposed Investment Advisory Agreement for
the Fund; and
2. "FOR" the election of the Director nominees of the Fund.
You may revoke your Proxy at any time before it is exercised by sending
written instructions to the Secretary of the Fund at the Fund's address
indicated above or by filing a new Proxy with a later date, and any stockholder
attending the Meeting may vote in person, whether or not he or she has
previously filed a Proxy.
The Board of Directors of the Fund has set the close of business on August
3, 2001 as the record date (the "Record Date") for determining those
stockholders entitled to vote at the Meeting or any adjournment thereof, and
only holders of record at the close of business on that day will be entitled to
vote. Stockholders on the Record Date will be entitled to one vote for each
outstanding share of Common Stock, 7.80% Cumulative Preferred Stock and 7.30%
Tax-Advantage Cumulative Preferred Stock (the two series of Cumulative Preferred
Stock together will be referred to as the "Preferred Stock" and together with
the Common Stock, "Stock" or "shares") held (proportional voting rights for
fractional shares held), with no shares having cumulative voting rights.
As of the Record Date, there were 38,619,970 shares of Common Stock and
6,400,000 shares of Preferred Stock of the Fund outstanding. The following
persons were known to the Fund to be beneficial owners or owners of record of 5%
or more of its outstanding shares of Common Stock or Preferred Stock as of the
Record Date:
Class/Series Amount and Percent of
Name and Address of Owner of Stock Nature of Ownership Class/Series
- ------------------------- -------- ------------------- ------------
Yale University Common 6,567,212 17.00%
230 Prospect Street shares--Beneficial
New Haven, CT 06511-2107 (sole voting and
investment power)
Cede & Co.* Common 36,414,678 94.29%
Depository Trust Company shares--Record*
P.O. Box #20 7.80% Preferred 2,379,016 shares-- 99.13%
Bowling Green Station Record*
New York, NY 10028 7.30% Preferred 3,971,212 shares-- 99.28%
Record*
- -----------
* Shares held by brokerage firms, banks and other financial intermediaries on
behalf of beneficial owners are registered in the name of Cede & Co.
The Board of Directors knows of no business other than that mentioned in
Proposals 1 and 2 of the Notice of Meeting that will be presented for
consideration at the Meeting. If any other matter is properly presented at the
Meeting or any adjournment thereof, it is the intention of the persons named on
the enclosed proxy card to vote in accordance with their best judgment.
SUMMARY OF VOTING RIGHTS ON PROXY PROPOSALS
-----------------------------------------------------------------------------
Proposal Common Stockholders Preferred Stockholders
-----------------------------------------------------------------------------
Proposal 1: Common and Preferred Common and Preferred
Approval or Stockholders, voting Stockholders, voting
Disapproval of New together as a single together as a single
Investment class class
Advisory Agreement
-----------------------------------------------------------------------------
Proposal 2: Common and Preferred Preferred Stockholders,
Election Stockholders, voting voting as a separate
of Directors together as a single class, elect two
class, elect six additional Directors
Directors
-----------------------------------------------------------------------------
2
PROPOSAL 1: APPROVAL OR DISAPPROVAL
OF THE NEW INVESTMENT ADVISORY AGREEMENT
On July 18, 2001, Royce & Associates, Inc. ("R&A"), the Fund's investment
adviser, and Legg Mason, Inc. ("Legg Mason") announced that they, R&A's
shareholders and Royce Management Company had entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement"), pursuant to which R&A will be
acquired by, and become a wholly-owned subsidiary of, Legg Mason (the
"Transaction"). Legg Mason is a publicly-held financial services company
primarily engaged in providing asset management, securities brokerage,
investment banking and related services through its subsidiaries. Under the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
completion of the Transaction will result in the automatic termination of the
current investment advisory agreement between R&A and the Fund (the "Current
Investment Advisory Agreement"). Additionally, a condition to the completion of
the Transaction is that the Fund approve a new investment advisory agreement to
become effective upon completion of the Transaction. This Proposal seeks the
approval of the Fund's stockholders of a new investment advisory agreement
between R&A and the Fund ( the "New Investment Advisory Agreement") to replace
the Current Investment Advisory Agreement.
R&A has served as the Fund's investment adviser since its inception and has
managed the investment policies and made investment decisions for the Fund
pursuant to the Current Investment Advisory Agreement. The Current Investment
Advisory Agreement, dated June 30, 1996, was last submitted for stockholder
approval on June 26, 1996 in order to change the benchmark index, against which
the Fund's performance is measured, from the Standard & Poor's 500 Composite
Stock Price Index to the Standard & Poor's 600 SmallCap Stock Price Index (the
"S&P 600") and to lengthen the performance measurement period from 3 to 5 years.
On April 11, 2000 and again on April 25, 2001, the Directors of the Fund
approved the continuance of the Current Investment Advisory Agreement for an
additional year.
Information Concerning R&A
R&A, a New York corporation, is an independent investment advisory firm
established in 1967. R&A is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. R&A's shareholders are Charles M.
Royce and trusts primarily for the benefit of his children. Mr. Royce owns all
of R&A's voting shares, and the trusts and Mr. Royce own all of its non-voting
shares. Mr. Royce is R&A's sole director, and his principal occupation is Chief
Executive Officer and Chief Investment Officer of R&A. As of June 30, 2001, R&A
managed approximately $5.3 billion in assets for the Fund and other registered
investment companies advised and sponsored by R&A (the "Royce Funds") and other
client accounts. Substantially all of R&A's client accounts are managed in
small- and micro-
3
cap investment products. R&A's and Mr. Royce's address is 1414 Avenue of the
Americas, New York, New York 10019.
Information Concerning Legg Mason
Tracing its roots to a predecessor company founded in 1899, Legg Mason,
through its subsidiaries, is principally engaged in providing asset management,
securities brokerage, investment banking and related financial services to
individuals, institutions, corporations and municipalities. Shares of Legg Mason
common stock are listed and traded on the New York Stock Exchange (symbol: LM).
As of June 30, 2001, Legg Mason's asset management subsidiaries had
approximately $145.6 billion in assets under management, including approximately
$29.5 billion in proprietary mutual funds and excluding $1.2 billion in
proprietary mutual funds sub-advised by third parties. For the fiscal year ended
March 31, 2001, investment advisory and related fees represented approximately
48.1% of the consolidated revenues of Legg Mason and its subsidiaries. Exhibit A
to this Proxy Statement sets forth the name, title and principal occupation of
each principal executive officer and each director of Legg Mason. Legg Mason's
principal office is located at 100 Light Street, Baltimore, Maryland 21202.
Additional information about Legg Mason, including a copy of its 2001 Annual
Report, is available on the firm's website: www.leggmason.com.
The Transaction
To effect the Transaction, R&A, Legg Mason, R&A's shareholders and Royce
Management Company entered into the Stock Purchase Agreement, pursuant to which
Legg Mason has agreed to purchase all of R&A's outstanding capital stock for a
total purchase price of up to $215 million, of which $115 million will be paid
to R&A's shareholders upon completion of the Transaction and up to $100 million
may be paid to them in the future based upon the level of the gross revenues of
R&A and its subsidiaries during the six years following the Transaction. Up to
50% of such consideration may be paid to R&A's shareholders in shares of Legg
Mason's common stock. The Transaction is anticipated to be completed on or about
October 1, 2001, and will result in the automatic termination of the Current
Investment Advisory Agreement pursuant to the Investment Company Act.
Completion of the Transaction is subject to the satisfaction (or waiver) of
a number of closing conditions, including (i) R&A having obtained Board of
Director approval of the New Investment Advisory Agreement, (ii) R&A having
obtained stockholder approval of the New Investment Advisory Agreement, (iii)
R&A having obtained client consents from investment company and other clients of
R&A representing specified percentages of R&A's total assets under management as
of a specified base date and (iv) the parties to the Transaction having obtained
any necessary consents of governmental authorities to the completion of the
Transaction.
4
Because of the condition relating to stockholder approval of the New
Investment Advisory Agreement, approval or disapproval by stockholders of a New
Investment Advisory Agreement for the Fund, both alone and taken together with
other clients' approvals or consents, could determine whether or not the
Transaction is completed. However, even in the event the Transaction is not
completed, the New Investment Advisory Agreement will nevertheless become
effective if it has been approved by the Fund's stockholders. In the event that
the Fund's stockholders do not approve the New Investment Advisory Agreement,
the Fund will continue to operate under its Current Investment Advisory
Agreement, and Fund management may adjourn the Fund's meeting with respect to
Proposal 1 to permit further solicitation of proxies in favor of approval of the
New Investment Advisory Agreement. In the event that Fund stockholders do not
approve the New Investment Advisory Agreement at an adjourned meeting, the
Fund's Board of Directors will consider the appropriate actions to take,
including the possibility of again soliciting approval of the New Investment
Advisory Agreement.
Effect of the Transaction on R&A and on the Current Investment Advisory
Agreement
Following completion of the Transaction and approval of the New Investment
Advisory Agreement, R&A will continue to serve as the Fund's investment adviser.
As described below, Charles M. Royce currently serves as the President and
Treasurer and a Director of the Fund, and is expected to continue to do so
following completion of the Transaction, and to continue as R&A's Chief
Executive Officer and/or Chief Investment Officer and as a member of its
reconstituted Board of Directors during the term of his employment agreement
described below. Legg Mason will control R&A and its subsidiaries following
completion of the Transaction, and will have the power to elect and remove R&A's
directors and officers (including Mr. Royce) in its sole discretion (subject to
the terms of a Revenue Sharing Agreement (the "Revenue Sharing Agreement")
entered into among Legg Mason, R&A, Mr. Royce and certain other R&A employees in
connection with the Transaction and to the terms of employment agreements
(collectively, the "Employment Agreements") described below). Notwithstanding
this power, Legg Mason has informed R&A and the Fund's Board of Directors that
Legg Mason expects R&A to continue its day-to-day operations with a substantial
degree of operational autonomy during the five-year period following completion
of the Transaction.
Legg Mason has advised the Board of Directors that the Transaction is not
expected to affect the portfolio management or day-to-day operation of the Fund.
However, the Transaction will constitute an "assignment" of the Current
Investment Advisory Agreement under the Investment Company Act, which will
result in the automatic termination of the Current Investment Advisory Agreement
upon completion of the Transaction. Accordingly, in order to ensure the
continuity of management and advisory services provided to the Fund, the New
Investment Advisory
5
Agreement has been proposed for approval by a majority of the voting securities
of the Fund (as defined in the Investment Company Act), cast at a meeting at
which a quorum is present, prior to completion of the Transaction.
The New Investment Advisory Agreement is substantially identical to the
Current Investment Advisory Agreement (except with respect to the elimination of
certain language relating to dual officers/employees, as described below). The
services provided to the Fund by R&A after the Transaction are expected to be
substantially similar to the services currently provided to the Fund by R&A.
Legg Mason and R&A have further advised the Board of Directors that they believe
that there will be no reduction in the quality of any of the services presently
furnished by R&A. As described below, the proposed New Investment Advisory
Agreement does not alter the rate of compensation presently payable to R&A by
the Fund.
Certain Relationships and Interests of Fund Officers
W. Whitney George and Jack E. Fockler, Jr., Vice Presidents of the Fund,
are officers and employees of R&A, and John D. Diederich, Vice President of the
Fund, will become an officer and employee of R&A upon completion of the
Transaction. Messrs. Royce, George, Fockler and Diederich have entered into
five-year Employment Agreements with R&A in connection with the Transaction, and
Messrs. Royce, George and Diederich have entered into a five to six year Revenue
Sharing Agreement with Legg Mason and R&A. The Employment Agreements will
generally restrict an employee from competing with Legg Mason and its affiliates
or soliciting clients or employees of Legg Mason and its affiliates for periods
specified in such agreements. Messrs. George, Fockler and Diederich will receive
substantial Transaction-based compensation from R&A upon completion of the
Transaction, and their Employment Agreements provide for additional substantial
Transaction-based compensation to be made to them if they remain employed by R&A
for up to six years (in addition to their regular salaries and bonus payments).
In addition, Messrs. Royce, George and Fockler and certain other R&A
employees are also partners of Royce Management Company ("RMC"), a Connecticut
general partnership and registered investment adviser that is the general
partner of four private limited partnerships and the manager of a private
limited liability company. These private funds had net assets of approximately
$55.5 million as of June 30, 2001. As part of the Transaction, RMC will transfer
substantially all of its assets and certain of its liabilities to a
newly-organized limited liability company ("New RMC") that will be a subsidiary
of R&A and continue RMC's business following the Transaction. Certain employees
of R&A, including Messrs. Royce, George and Fockler, may be granted non-voting
membership interests in New RMC pursuant to which they would participate in
"carried interest" profit participations that New RMC may derive from such
private funds following completion of the Transaction, with Messrs. Royce and
George also potentially having the right
6
to acquire New RMC's general partnership/manager interest in certain of such
private funds upon the termination of their employment with R&A.
Directors' Consideration and Recommendation
The Directors determined at meetings held on July 16 and 17, 2001 to
approve the New Investment Advisory Agreement and recommend that the Fund's
stockholders vote to approve it. In making their determination, the Directors
considered a wide range of information of the type they regularly consider when
determining whether to continue the Fund's advisory arrangements as in effect
from year to year. In addition, the Directors gave particular consideration to
matters relating to the possible effects of the Transaction on R&A and the Fund.
In its consideration of the New Investment Advisory Agreement, the Board of
Directors focused on information it had received relating to, among other
things: (a) the nature, quality and extent of the advisory and other services to
be provided to the Fund by R&A, (b) comparative data with respect to the
advisory fees paid by other funds with similar investment objectives, (c) the
operating expenses and expense ratio of the Fund compared to funds with similar
investment objectives, (d) the performance of the Fund as compared to such
comparable funds, (e) the relative profitability of the present arrangements and
the proposed arrangements to R&A, (f) information about the services to be
performed and the personnel performing such services under the Current
Investment Advisory Agreement and the New Investment Advisory Agreement, (g) the
general reputation and financial resources of Legg Mason, (h) compensation
payable by the Fund to affiliates of R&A for other services, (i) R&A's practices
regarding the selection and compensation of brokers that execute portfolio
transactions for the Fund, and the brokers' provision of brokerage and research
services to R&A, (j) the ability of R&A to continue providing investment
advisory services of the same character and at least the same quality as
provided prior to the Transaction, (k) assurances from R&A that it has no plans
to change or discontinue existing arrangements under which it waives fees or
bears expenses of the Fund, (l) potential effect on portfolio management or
other Fund services due to new affiliations and (m) potential effect on Fund
performance. The Board of Directors was advised by separate legal counsel in
connection with its review of the investment advisory arrangements of the Fund.
In addition, the Directors considered that the Stock Purchase Agreement
provides that Legg Mason will (subject to certain qualifications) use its
reasonable best efforts to assure compliance with the safe-harbor provided by
Section 15(f) of the Investment Company Act. Section 15(f) provides that a
registered investment company's investment adviser or its affiliates can receive
benefit or compensation in connection with a change of control of the investment
adviser (e.g., the change of control of R&A as a result of the Transaction) if
two conditions are satisfied. First, for three years after the change of
control, at least 75% of the members of the board of any registered investment
company advised by the adviser must consist of persons who are
7
not "interested persons," as defined in the Investment Company Act, of the
adviser. (The Director nominees, who, if elected, will assume office upon
completion of the Transaction, will satisfy this condition.) Second, no "unfair
burden" may be imposed on any such registered investment company as a result of
the change of control transaction or any express or implied terms, conditions or
understandings applicable to the transaction. "Unfair burden" means any
arrangement, during the two years after the transaction, by which the investment
adviser or any "interested person" of the adviser receives or is entitled to
receive any compensation, directly or indirectly, from such investment company
or its security holders (other than fees for bona fide investment advisory or
other services) or from any other person in connection with the purchase or sale
of securities or other property to, from or on behalf of such investment
company.
After considering the factors stated above, the Board of Directors,
including all of the Directors who are not "interested persons" of the Fund (the
"Independent Directors") within the meaning of Section 2(a)(19) of the
Investment Company Act, by unanimous vote, approved the New Investment Advisory
Agreement. Further, the Board of Directors recommends that the Fund's
stockholders vote to approve the New Investment Advisory Agreement.
Terms of the New Investment Advisory Agreement
A form of the New Investment Advisory Agreement is set forth as Exhibit B.
The New Investment Advisory Agreement contains substantially identical
provisions as the Current Investment Advisory Agreement (except with respect to
the elimination of certain language relating to dual officers/employees, as
described below), and are summarized below. The fee rates under the New
Investment Advisory Agreement are identical to the fee rates under the Current
Investment Advisory Agreement.
Under the New Investment Advisory Agreement (as is the case under the
Current Investment Advisory Agreement), R&A (i) determines the composition of
the Fund's portfolio, the nature and timing of the changes in it and the manner
of implementing such changes, subject to any directions it may receive from the
Board of Directors; (ii) provides the Fund with investment advisory, research
and related services for the investment of its assets; and (iii) pays expenses
incurred in performing its investment advisory duties under the New Investment
Advisory Agreement.
Under the New Investment Advisory Agreement (as is the case under the
Current Investment Advisory Agreement), the Fund is responsible for determining
the net asset value of its shares and for all of its other operations. The Fund
pays all administrative and other costs and expenses attributable to its
operations and transactions, including, without limitation, registrar, transfer
agent and custodian fees; legal, administrative and clerical services; rent for
office space and facilities; auditing; preparation, printing and distribution of
its proxy statements, stockholders' reports and notices; supplies and postage;
8
Federal and state registration fees; NASD and securities exchange listing fees
and expenses; Federal, state and local taxes; non-affiliated Directors' fees;
interest on its borrowings; brokerage commissions; and the cost of issue, sale
and repurchase of its shares.
Under the Current Investment Advisory Agreement, R&A is required to
furnish, without expense to the Fund, the services of those of its executive
officers and full-time employees who may be duly elected executive officers or
Directors of the Fund and to pay the compensation and expenses of such persons.
(Only a president, a treasurer or a vice president in charge of a principal
business function is deemed to be an executive officer.) This provision has
prevented one or more employees of the Fund, who perform Fund-related
administrative services (for which the Fund is responsible under the Current
Investment Advisory Agreement) and who are compensated by the Fund, from
becoming officers/employees of R&A and from performing other services for R&A
for which they would be compensated by R&A. Elimination of this language will
allow such individuals to become such dual officers/employees without imposing
any additional cost or expense on the Fund and without diminishing the services
provided to the Fund.
Compensation and Expenses
As described above, the rate of investment advisory compensation presently
payable by the Fund under the Current Investment Advisory Agreement will remain
the same under the proposed New Investment Advisory Agreement.
As compensation for its services under the New Investment Advisory
Agreement, R&A will continue to be entitled to receive a fee comprised of a
Basic Fee (the "Basic Fee") at the rate of 1% per annum of the Fund's average
net assets and an adjustment to the Basic Fee based on the investment
performance of the Fund in relation to the investment record of the S&P 600. A
rolling period of 60 months ending with the most recent calendar month is
utilized for measuring performance and average net assets.
The Basic Fee for each such month will be increased or decreased at the
rate of 1/12 of .05% per percentage point, depending on the extent, if any, by
which the investment performance of the Fund exceeds by more than two percentage
points, or is exceeded by more than two percentage points by, the percentage
change in the investment record of the S&P 600 for the performance period. The
maximum increase or decrease in the Basic Fee for any month is 1/12 of 0.50%.
Accordingly, for each month the maximum monthly fee rate as adjusted for
performance will be 1/12 of 1.50% and will be payable if the investment
performance of the Fund exceeds the percentage change in the investment record
of the S&P 600 by 12 or more percentage points for the performance period, and
the minimum monthly fee rate as adjusted for performance will be 1/12 of 0.50%
and will be payable if the percentage change in the investment record of the S&P
600 exceeds the
9
investment performance of the Fund by 12 or more percentage points for the
performance period.
Notwithstanding the foregoing, R&A will not be entitled to receive any fee
for any month when the investment performance of the Fund for the rolling
36-month period ending with such month is negative on an absolute basis. In the
event that the Fund's investment performance for such a performance period is
less than zero, R&A will not be required to refund to the Fund any fee earned in
respect of any prior performance period.
Because the fee is a function of the Fund's net assets and not of its total
assets, R&A will not receive any fee in respect of those assets of the Fund
equal to the aggregate unpaid amount of any indebtedness of the Fund. R&A will
receive a fee in respect of any assets of the Fund equal to the liquidation
preferences of and any potential redemption premiums for the outstanding
Preferred Stock. The investment advisory fee is payable monthly.
R&A has committed to voluntarily waive the portion of its investment
advisory fee attributable to a series of Cumulative Preferred Stock for any
month when the Fund's average annual net asset value total return since issuance
of the Cumulative Preferred Stock fails to exceed the applicable Cumulative
Preferred Stock's dividend rate.
For the fiscal year ended December 31, 2000, R&A received $7,342,211 in
investment advisory fees from the Fund (net of any amounts waived by R&A) and
waived $505,624 in investment advisory fees payable to it.
Payments to R&A, Legg Mason and their Affiliates
For the year ended December 31, 2000, the Fund paid $694,788 in brokerage
commissions, including $18,442 in brokerage commissions (2.65% of total
brokerage commissions) paid to Legg Mason Wood Walker, Incorporated ("Legg Mason
Wood Walker"), a subsidiary of Legg Mason. R&A and its affiliates received no
commissions on execution of such portfolio security transactions.
During the year ended December 31, 2000, the Fund engaged in an aggregate
of $252,500 in principal transactions with Legg Mason Wood Walker. After the
Transaction, the Fund will not effect any principal transactions with Legg Mason
Wood Walker and may engage in brokerage transactions with it only as permitted
by Securities and Exchange Commission rules.
Information Relating to Other R&A-Advised Funds
Exhibit C to this Proxy Statement sets forth information relating to the
other registered investment companies for which R&A acts as investment adviser
or investment sub-adviser.
10
Duration and Termination of the New Investment Advisory Agreement
The New Investment Advisory Agreement will remain in effect until June 30,
2003, and from year to year thereafter if approved annually by (a) the vote of
the Board of Directors, including a majority of Directors who are not parties to
such contract or "interested persons" (as defined in the Investment Company Act)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval, or (b) the vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Fund. The contract
is not assignable, and may be terminated without penalty on 60 days' written
notice by the vote of a majority of the shares of the Fund or by the vote of a
majority of the Board of Directors or by R&A.
Vote Required
A quorum consists of stockholders representing a majority of the shares of
the Fund, entitled to vote, who are present in person or by proxy, and approval
of the New Investment Advisory Agreement requires the approval of a majority of
the outstanding voting securities of the Fund, which, under the Investment
Company Act, is the vote of (i) 67% or more of the shares of the Fund present at
the Meeting if more than 50% of the Fund's shares are present or represented by
proxy, or (ii) more than 50% of the Fund's outstanding shares, whichever is
less.
Charles M. Royce has advised the Fund that he expects to vote the shares
that he beneficially owns for approval of the New Investment Advisory Agreement.
The Board of Directors recommends that the Fund's stockholders vote FOR
approval of the New Investment Advisory Agreement.
PROPOSAL 2: ELECTION OF DIRECTORS
Effective upon the completion of the Transaction described in Proposal 1
above, at the Meeting it is proposed that the Fund's stockholders elect eight
Directors to hold office until the next Annual Meeting of Stockholders and until
their successors are duly elected and qualified or until their earlier
resignation or removal. The holders of both Common Stock and Preferred Stock,
voting together as a single class, are entitled to elect six directors. The
holders of Preferred Stock, voting as a separate class, are entitled to elect
the remaining two directors. The Board of Directors has nominated the following
eight persons to continue as or become Directors of the Fund (as applicable)
upon completion of the Transaction. Certain information concerning the Director
nominees is set forth below. Each of these persons has agreed to serve if
elected, and the Fund's management has no reason to believe that any of them
will be unavailable for service as a Director. However, if any of them become
unwilling or unable to serve, the persons named in the accompanying Proxy will
vote for the election of such other persons, if any, as the Board of Directors
may nominate. Notwithstanding the vote on the Director nominees
11
named below, in the event that the Transaction is not completed, the vote of
stockholders will count only for the re-election of the six individuals named
below who are currently serving as Directors of the Fund.
Name, Address, Principal Occupations Positions Director
During Past Five Years and With of the To Be
Public Directorships of Nominee* Age the Fund Fund Since Elected By
- -------------------------------- -------- ---------- ---------- ----------
Charles M. Royce** 61 Director, 1986 Common
President, Managing Director President and and
(since April 1997), Secretary, Treasurer Preferred
Treasurer, sole director and
sole voting shareholder of R&A;
Director, President and
Treasurer of the Fund; Trustee,
President and Treasurer of The
Royce Fund ("TRF") (since 1982);
Director, President and
Treasurer of Royce Micro-Cap
Trust, Inc. ("OTCM") (since
September 1993) and Royce Focus
Trust, Inc. ("RFT") (since
October 1996); Trustee,
President and Treasurer of Royce
Capital Fund ("RCF") (since
December 1996); Secretary and
sole director of Royce Fund
Services, Inc. ("RFS"), a
wholly-owned subsidiary of R&A
and the distributor of TRF's
shares; and managing general
partner of RMC, a registered
investment adviser.
Donald R. Dwight 70 Director 1998 Common
President of Dwight Partners, and
Inc., corporate communications Preferred
consultants; Chairman of
Newspapers of New England, Inc.
(from 1982 until March 1998),
and now its Chairman Emeritus;
Trustee of the registered
investment companies
constituting the Eaton Vance
funds; prior experience includes
having served as Lieutenant
Governor of the Commonwealth of
Massachusetts and as President
and Publisher of Minneapolis
Star and Tribune Company.
12
Name, Address, Principal Occupations Positions Director
During Past Five Years and With of the To Be
Public Directorships of Nominee* Age the Fund Fund Since Elected By
- -------------------------------- -------- ---------- ---------- ----------
Mark R. Fetting** 46 Director N/A Common
Executive Vice President of Nominee and
Legg Mason; Division President Preferred
and Senior Officer, Prudential
Financial Group, Inc. and
related companies, including
Fund Boards and consulting
services to subsidiary
companies (1991 to 2000); prior
business experience includes
Partner, Greenwich Associates
and Vice President, T. Rowe
Price Group, Inc.
Richard M. Galkin 63 Director 1986 Common
Private investor; prior and
business experience includes Preferred
having served as President of
Richard M. Galkin Associates,
Inc., telecommunications
consultants, President of
Manhattan Cable Television (a
subsidiary of Time Inc.),
President of Haverhills Inc.
(another Time Inc. subsidiary),
President of Rhode Island Cable
Television and Senior Vice
President of Satellite
Television Corp. (a subsidiary
of Comsat).
Stephen L. Isaacs 61 Director 1986 Common
President of The Center for and
Health and Social Policy (since Preferred
September 1996) and President
of Health Policy Associates,
consultants; Director of
Columbia University Development
Law and Policy Program and a
Professor at Columbia
University until August 1996.
William L. Koke 66 Director 2001 Preferred
Financial planner with only
Shoreline
Financial Consultants; prior
business experience includes
having served as Director of
Financial Relations of SONAT,
Inc., Treasurer of Ward Foods,
Inc. and President of CFC, Inc.
13
Name, Address, Principal Occupations Positions Director
During Past Five Years and With of the To Be
Public Directorships of Nominee* Age the Fund Fund Since Elected By
- -------------------------------- -------- ---------- ---------- ----------
David L. Meister 61 Director 1986 Preferred
Chairman and Chief Executive only
Officer of The Tennis Channel
since June 2000; Chief
Executive Officer of
Seniorlife.com (from December
1999 to May 2000); for seven
years prior thereto, consultant
to the communications industry;
prior business experience
includes having served as
President of Financial News
Network, Senior Vice President
of HBO, President
of Time-Life Films and Head of
Broadcasting for Major League
Baseball.
G. Peter O'Brien 55 Director N/A Common
Trustee of Colgate University; Nominee and
Director of Pinnacle Holdings, Preferred
Inc.; Director of Renaissance
Capital Greenwich Funds; Vice
President
of Hill House, Inc.; Director/
Trustee of certain Legg Mason
retail funds; Managing Director/
Equity Capital Markets Group of
Merrill Lynch & Co. (from 1971
to 1999).
- ----------------
* The address of Messrs. Royce, Dwight, Galkin, Isaacs, Koke, Meister and
O'Brien is c/o Royce & Associates, Inc., 1414 Avenue of the Americas, New
York, New York 10019. The address of Mr. Fetting is c/o Legg Mason, Inc.,
100 Light Street, Baltimore, Maryland 21202.
** Is, or will become, an "interested person," as defined in the Investment
Company Act, of the Fund.
Committee and Board of Directors Meetings
During the year ended December 31, 2000, the Board of Directors held six
meetings and the Audit Committee held two meetings. Each Director then in office
attended 75% or more of the total number of meetings of the Board of Directors
held during that year and, if a member, of the total number of meetings of the
Audit Committee held during the period for which he served.
There are no family relationships between any of the Fund's nominees or
continuing Directors and officers.
14
The Board of Directors has an Audit Committee, which consists of the
Independent Directors. The current members of the Audit Committee are Donald R.
Dwight, Richard M. Galkin, Stephen L. Isaacs, William L. Koke and David L.
Meister. Mr. Galkin serves as Chairman of the Audit Committee. Although the
Board of Directors does not have a standing compensation committee or a
nominating committee, the Independent Directors review and nominate candidates
to serve as Independent Directors. The Independent Directors generally will not
consider nominees recommended by stockholders of the Fund. If elected at the
Meeting, G. Peter O'Brien will become a member of the Audit Committee.
The principal purposes of the Audit Committee are to: (i) recommend to the
Board of Directors the selection, retention or termination of the Fund's
independent auditors; (ii) review with the independent auditors the scope,
performance and anticipated cost of their audit; (iii) discuss with the
independent auditors certain matters relating to the Fund's financial
statements, including any adjustment to such financial statements recommended by
such independent auditors, or any other results of any audit; (iv) ensure that
the independent auditors submit on a periodic basis a formal written statement
with respect to their independence, discuss with the independent auditors any
relationships or services disclosed in the statement that may impact their
objectivity and independence and recommend that the Board of Directors take
appropriate action in response thereto to satisfy itself of the auditors'
independence; and (v) consider the comments of the independent auditors and
management's responses thereto with respect to the quality and adequacy of the
Fund's accounting and financial reporting policies and practices and internal
controls. The Board of Directors adopted an Audit Committee Charter for the
Fund, attached as Exhibit D to this Proxy Statement, at a meeting held on April
11, 2000. The Committee also has (a) received written disclosures and the letter
required by Independence Standards Board Standard No. 1 from Tait, Weller &
Baker ("TW&B"), independent auditors for the Fund, and (b) discussed certain
matters required to be discussed by Statements on Auditing Standards No. 61 with
TW&B. The Committee has considered whether the provision of non-audit services
by the Fund's independent auditors is compatible with maintaining the
independence of those auditors.
At its meeting held on February 12, 2001, the Audit Committee reviewed and
discussed the audit of the Fund's financial statements with Fund management and
TW&B. If any material concerns had arisen during the course of the audit and the
preparation of the audited financial statements included in the Fund's Annual
Report to Stockholders, the Audit Committee would have been notified by Fund
management or TW&B. The Committee received no such notifications. Based on the
foregoing, the Audit Committee recommended to the Board of Directors that the
Fund's audited financial statements be included in the Fund's Annual Report to
Stockholders for the year ended December 31, 2000.
15
Independent Auditors' Fees
The Fund paid aggregate fees of $29,000 to TW&B for the year ended December
31, 2000 for professional services rendered for the audit of the Fund's annual
financial statements, the review of financial statements included in the Fund's
report to stockholders and the preparation of tax returns. The Fund paid
aggregate fees of $6,000 to TW&B for professional services rendered for the
preparation of reports to the rating agency that provides ratings for the
Cumulative Preferred Stock. TW&B did not provide any other professional services
to the Fund, R&A or any entities affiliated with R&A for the year ended December
31, 2000. No representatives of TW&B will be present at the Meeting.
Compensation of Directors and Affiliated Persons
Each Independent Director receives a base fee of $10,000 per year plus
$1,000 for each meeting of the Board of Directors attended. No Director received
remuneration for services as a Director for the year ended December 31, 2000 in
addition to or in lieu of this standard arrangement.
Set forth below is the aggregate compensation paid by the Fund and the
total compensation paid by the Royce Funds to each Independent Director and
affiliated person of the Fund for the year ended December 31, 2000.
Pension or Total
Retirement Compensation
Aggregate Benefits From the Fund and
Compensation Accrued as Part Other Royce Funds
Name From the Fund of Fund Expenses Paid to Directors
- ---- ------------- ---------------- -----------------
Donald R. Dwight, Director $15,000(1) None $61,750(1)
Richard M. Galkin, Director 15,000 None 61,750
Stephen L. Isaacs, Director 15,000 None 61,750
William L. Koke, Director(2) None None 38,750
David L. Meister, Director 15,000 None 61,750
John D. Diederich, Vice
President(3) 64,881 $4,467 None
- ----------------
1 Includes $2,250 from the Fund ($9,187 from the Fund and other Royce Funds)
deferred during 2000 at the election of Mr. Dwight under the Royce Funds'
Deferred Compensation Plan for trustees/directors.
2 Mr. Koke was elected as a Director of the Fund on July 16, 2001.
3 Mr. Diederich resigned as a Director of the Fund on July 11, 2001. The
amounts shown represent compensation paid to and benefits accrued by Mr.
Diederich as an employee of the Fund and not for his services as Director.
16
Officers of the Fund
Officers of the Fund are elected each year by the Fund's Board of
Directors. The following sets forth information concerning the Fund's officers:
Officer of
Name and Principal Occupation Age Office Fund Since
- ----------------------------- --- ------ ----------
Charles M. Royce 61 President 1986
President, Managing Director and
(since April 1997), Secretary, Treasurer
Treasurer, sole director and sole
voting shareholder of R&A;
Director, President and Treasurer
of the Fund; Trustee, President
and Treasurer of TRF (since 1982);
Director, President and Treasurer
of OTCM (since September 1993) and
RFT (since October 1996); Trustee,
President and Treasurer of RCF
(since December 1996); Secretary
and sole director of RFS; and
managing general partner of RMC.
John D. Diederich 50 Vice 1997
Director (from June 1997 to July President
2001) and Vice President of the
Fund; Vice President of RCF (since
February 1996), of OTCM (since
March 1997), and of RFT (since
March 1997); Director of
Administration of TRF (since April
1993); and President of RFS (since
November 1995).
Jack E. Fockler, Jr. 42 Vice 1995
Managing Director (since April President
1997) and Vice President of R&A,
having been employed by R&A since
October 1989; Vice President of
RFT (since October 1996), of RCF
(since December 1996) and of the
Fund, TRF and OTCM; Vice President
of RFS; and general partner of RMC.
17
Officer of
Name and Principal Occupation Age Office Fund Since
- ----------------------------- --- ------ ----------
W. Whitney George 42 Vice 1995
Managing Director (since April President
1997) and Vice President of R&A,
having been employed by R&A since
October 1991; Vice President of
RCF (since December 1996), of
RFT (since October 1996) and
of the Fund, TRF and OTCM; and
general partner of RMC.
Daniel A. O'Byrne 38 Vice 1994
Vice President of R&A, having been President
employed by R&A since October and
1986; and Vice President of RFT Assistant
(since October 1996), of RCF Secretary
(since December 1996) and of the
Fund, TRF and OTCM.
Andrew S. Novak 33 Secretary 2001
Secretary (since July 2001),
Associate General Counsel and
Chief Compliance Officer (since
May 2001) of the Royce Funds and
R&A; Vice President of Mitchell
Hutchins Asset Management Inc.
from August 1997 to August 2000;
attorney in private practice prior
thereto.
Interested Persons
Mr. Royce is an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Investment Company Act due to the positions he holds
with R&A and its affiliates and/or due to his ownership of R&A's securities. If
the Transaction is completed, Mr. Fetting will become an "interested person" due
to the position he holds with Legg Mason.
Security Ownership
As of the record date, the Fund's Directors, Director Nominees and officers
beneficially owned no shares of Preferred Stock, and the following individuals
owned shares of Common Stock:
18
Number of Percent of
Name Shares Common Stock
---- ------ ------------
Charles M. Royce 313,901 *
Donald R. Dwight 347 *
Richard M. Galkin 488 *
Stephen L. Isaacs 411 *
John D. Diederich 434 *
- ----------------
*Less than 1%.
Mr. Royce has sole voting power and sole investment power as to the shares
beneficially owned by him. As of the record date, all Directors and officers of
the Fund as a group (11 persons) beneficially owned 315,581 shares of the Fund's
Common Stock, constituting 0.82% of the outstanding shares, and no shares of its
Preferred Stock.
Vote Required
A quorum consists of stockholders representing a majority of the
outstanding shares of the Fund's Common Stock and/or Preferred Stock, as the
case may be, entitled to vote, who are present in person or by proxy, and a
plurality of all of the votes cast at a meeting at which a quorum is present is
sufficient to elect a Director.
The Board of Directors recommends that all stockholders vote FOR all
Director nominees.
ADDITIONAL INFORMATION
Adjournment of Meeting; Other Matters
In the event that sufficient votes in favor of either Proposal 1 or
Proposal 2 in the Notice of Annual Meeting of Stockholders are not received by
the time scheduled for the Meeting, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies
for such Proposal. Any such adjournment will require the affirmative vote of a
majority of the shares present in person or by proxy at the session of the
Meeting to be adjourned. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
Proposal. They will vote against any such adjournment those proxies required to
be voted against the Proposal.
While the Meeting has been called to transact any business that may
properly come before it, the Directors know of no other business than the
matters stated in the Notice of Annual Meeting of Stockholders. However, if any
additional matter properly comes before the Meeting and on all matters
incidental to the conduct of the Meeting, it is the intention of the persons
named in the enclosed Proxy to vote the Proxy in accordance with their judgment
on such matters.
19
The Fund has retained Georgeson Shareholder Communications, Inc., 17 State
Street, New York, New York 10004, to aid in the solicitation of Proxies, at a
cost of approximately $2,000 (plus reimbursement of out-of-pocket expenses), to
be shared equally between R&A and Legg Mason in the event the Transaction is
completed and to be borne solely by R&A in the event the Transaction is not
completed. R&A and, if the Transaction is completed, Legg Mason will reimburse
brokerage firms, custodians, nominees and fiduciaries for their expenses in
forwarding Proxy material to the beneficial owners of the Fund's shares. Some
officers and employees of the Fund, R&A and Georgeson Shareholder
Communications, Inc. may solicit Proxies personally and by telephone, if deemed
desirable. Stockholders vote at the Meeting by casting ballots (in person or by
proxy) which are tabulated by one or two persons, appointed by the Board of
Directors before the Meeting, who serve as Inspectors and Judges of Voting at
the Meeting and who have executed an Inspectors and Judges Oath.
The Fund expects that broker-dealer firms holding shares of the Fund in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on each
proposal before the Meeting. The Fund understands that, under the rules of the
New York Stock Exchange, such broker-dealers may, without instructions from such
customers and clients, grant authority to the proxies designated by the Fund to
vote on the approval of the New Investment Advisory Agreement and the election
of Directors if no instructions have been received prior to the date specified
in the broker-dealer firm's request for voting instructions. Certain
broker-dealer firms may exercise discretion over shares held in their name for
which no instructions are received by voting such shares in the same proportion
as they have voted shares for which they have received instructions.
The shares as to which the Proxies so designated are granted authority by
broker-dealer firms to vote on the items to be considered at the Meeting, the
shares as to which broker-dealer firms have declined to vote ("broker
non-votes") and the shares as to which Proxies are returned by record
stockholders but which are marked "abstain" on any item will be included in the
Fund's tabulation of the total number of votes present for purposes of
determining whether the necessary quorum of stockholders exists. However,
abstentions and broker non-votes will not be counted as votes cast. Therefore,
abstentions and broker non-votes will not have an effect on the election of
Directors. Abstentions and broker non-votes will have the same effect as a vote
against the approval of the New Investment Advisory Agreement.
Stockholder Proposals
Proposals of stockholders intended to be presented at the Fund's 2002
Annual Meeting of Stockholders must be received by the Fund by April 15, 2002
for inclusion in the Fund's Proxy Statement and form of Proxy for that meeting.
The Fund's By-laws generally require advance notice be given to the
20
Fund in the event a stockholder desires to nominate a person for election to the
Board of Directors or to transact any other business from the floor at an annual
meeting of stockholders. Notice of any such nomination or other business must be
in writing and received at the Fund's principal executive office not less than
15 calendar days before the annual meeting. Written proposals should be sent to
the Secretary of the Fund, 1414 Avenue of the Americas, New York, New York
10019.
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ACCOMPANYING POSTAGE-PAID ENVELOPE.
By order of the Board of Directors,
Andrew S. Novak
Secretary of Royce Value Trust, Inc.
21
This page intentionally left blank
EXHIBIT A
INFORMATION RELATING TO LEGG MASON
Set forth below is the name, title and principal occupation of each
principal executive officer and each director of Legg Mason:
Present Principal
Name* Title Occupation
- ----- ------ ----------
Harold L. Adams Director Chairman, RTKL Associates, Inc.
Peter L. Bain Executive Vice Executive Vice President, Legg
President Mason, Inc.
F. Barry Bilson Senior Vice President Senior Vice President, Legg Mason,
Inc.
James W. Brinkley Senior Executive Senior Executive Vice President,
Vice President and Legg Mason, Inc. and President, Legg
Director Mason Wood Walker, Incorporated
Edmund J. Senior Executive Senior Executive Vice President,
Cashman, Jr. Vice President and Legg Mason, Inc. and Legg Mason Wood
Director Walker, Incorporated
Charles J. Daley, Jr. Vice President and Vice President and Controller, Legg
Controller Mason, Inc. and Legg Mason Wood
Walker, Incorporated
Mark R. Fetting Executive Executive Vice President, Legg
Vice President Mason, Inc.
Harry M. Ford, Jr. Director Financial Advisor and Senior Vice
President, Legg Mason Wood Walker,
Incorporated
Richard J. Himelfarb Senior Executive Senior Executive Vice President,
Vice President and Legg Mason, Inc. and Legg Mason Wood
Director Walker, Incorporated
John E. Koerner III Director President, Koerner Capital Corp.
Raymond A. Mason Chairman, President, Chairman, President and Chief
Chief Executive Executive Officer, Legg Mason, Inc.
Officer and Director
Thomas P. Mulroy Senior Vice President Senior Vice President, Legg Mason,
Inc. and Executive Vice President,
Legg Mason Wood Walker, Incorporated
Edward I. O'Brien Director Private Investor; Retired President,
Securities Industry Association
A-1
Present Principal
Name* Title Occupation
- ----- ------ ----------
Peter F. O'Malley Director Of Counsel, O'Malley, Miles, Nylen &
Gilmore, P.A.
Robert F. Price Senior Vice Senior Vice President, Secretary
President, Secretary and General Counsel, Legg Mason,
and General Counsel Inc. and Legg Mason Wood Walker,
Incorporated
Robert G. Sabelhaus Executive Vice Senior Vice President, Legg Mason,
President Inc. and Executive Vice President,
Legg Mason Wood Walker, Incorporated
Timothy C. Scheve Senior Executive Senior Executive Vice President,
Vice President Legg Mason, Inc. and Legg Mason Wood
Walker, Incorporated
Roger W. Schipke Director Private Investor
Thomas L. Souders Senior Vice Senior Vice President and Treasurer,
President Legg Mason, Inc. and Senior Vice
and Treasurer President, Treasurer and Chief
Financial Officer, Legg Mason Wood
Walker, Incorporated
Elisabeth N. Spector Senior Vice President Senior Vice President, Legg Mason,
Inc.
Joseph A. Sullivan Senior Vice President Senior Vice President, Legg Mason,
Inc. and Legg Mason Wood Walker,
Incorporated
Nicholas J. St. George Director Private Investor
Edward A. Taber III Senior Executive Senior Executive Vice President,
Vice President Legg Mason, Inc.
James E. Ukrop Director President, Ukrop Supermarkets, Inc.
- ----------------
* The address of each principal executive officer and each director is
100 Light Street, Baltimore, Maryland 21202.
A-2
EXHIBIT B
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
BETWEEN
ROYCE VALUE TRUST, INC.
AND
ROYCE & ASSOCIATES, INC.
Agreement made this ____ day of ____ 2001, by and between ROYCE VALUE
TRUST, INC., a Maryland corporation (the "Fund"), and ROYCE & ASSOCIATES, INC.,
a New York corporation (the "Adviser").
The Fund and the Adviser hereby agree as follows:
1. Duties of the Adviser. The Adviser shall, during the term and subject to
the provisions of this Agreement, (a) determine the composition of the portfolio
of the Fund, the nature and timing of the changes therein and the manner of
implementing such changes, and (b) provide the Fund with such investment
advisory, research and related services as the Fund may, from time to time,
reasonably require for the investment of its assets. The Adviser shall perform
such duties in accordance with the applicable provisions of the Fund's Articles
of Incorporation, By-laws and stated investment objectives, policies and
restrictions and any directions it may receive from the Fund's Board of
Directors.
2. Expenses Payable by the Fund. Except as otherwise provided in Paragraphs
1 and 3 hereof, the Fund shall be responsible for determining the net asset
value of its shares and for all of its other operations and shall pay all
administrative and other costs and expenses attributable to its operations and
transactions, including, without limitation, registrar, transfer agent and
custodian fees; legal, administrative and clerical services; rent for its office
space and facilities; auditing; preparation, printing and distribution of its
proxy statements, stockholders' reports and notices; supplies and postage;
Federal and state registration fees; NASD and securities exchange listing fees
and expenses; Federal, state and local taxes; non-affiliated directors' fees;
interest on its borrowings; brokerage commissions; and the cost of issue, sale
and repurchase of its shares.
3. Expenses Payable by the Adviser. The Adviser shall pay all expenses
which it may incur in performing its duties under Paragraph 1 hereof and shall
reimburse the Fund for any space leased by the Fund and occupied by the Adviser.
B-1
4. Compensation of the Adviser.
(a) The Fund agrees to pay to the Adviser, and the Adviser agrees to accept,
as compensation for the services provided by the Adviser hereunder, a fee
comprised of a basic fee (the "Basic Fee") and an adjustment to the Basic
Fee based on the investment performance of the Fund in relation to the
investment record of the Standard & Poor's SmallCap 600 Stock Price Index
(as the same may be constituted from time to time, the "Index"). Such fee
shall be calculated and payable as follows:
For each month, the Basic Fee shall be a monthly fee equal to 1/12 of 1%
(1% on an annualized basis) of the average of the net assets of the Fund
at the end of each month included in the applicable performance period.
(The net assets of the Fund shall be computed by subtracting the amount
of any indebtedness and other liabilities of the Fund from the value of
the total assets of the Fund, and the liquidation preference of and any
redemption premium for any Preferred Stock of the Fund that may be issued
and outstanding shall not be treated as an indebtedness or other
liability of the Fund for this purpose.) The performance period for each
such month shall be a rolling sixty (60) month period ending with the
most recent calendar month.
The Basic Fee rate for each such month shall be increased at the rate of
1/12 of .05% for each percentage point in excess of two (2), rounded to
the nearer point (the higher point if exactly one-half a point), that the
investment performance of the Fund for the performance period then ended
exceeds the percentage change in the investment record of the Index for
such performance period (subject to a maximum of twelve (12) percentage
points). If, however, the investment performance of the Fund for such
performance period shall be exceeded by the percentage change in the
investment record of the Index for such performance period, then such
Basic Fee rate shall be decreased by 1/12 of .05% for each percentage
point in excess of two (2), rounded to the nearer point (the higher point
if exactly one-half a point), that the percentage change in the
investment record of the Index exceeds the investment performance of the
Fund for such performance period (subject to a maximum of twelve (12)
percentage points).
The maximum increase or decrease in the Basic Fee for any month may not
exceed .50%, and the Fund shall pay such Basic Fee, as so adjusted, to
the Adviser at the end of each performance period.
(b) Notwithstanding the provisions of subparagraph (a) above to the contrary,
the Adviser shall not be entitled to receive any monthly fee in respect
of any performance period consisting of a rolling thirty-six (36) month
period ending with the most recent calendar month for which the
B-2
investment performance of the Fund shall be negative on an absolute basis
(i.e., the investment performance of the Fund, rounded to the nearer
whole point, is less than zero).
(c) The investment performance of the Fund for any period shall be expressed
as a percentage of the Fund's net asset value per share of Common Stock
at the beginning of such period and shall mean and be the sum of: (i) the
change in the Fund's net asset value per share of Common Stock during
such period; (ii) the value of the Fund's cash distributions per share of
Common Stock accumulated to the end of such period; and (iii) the value
of capital gains taxes per share of Common Stock paid or payable on
undistributed realized long-term capital gains accumulated to the end of
such period. For this purpose, the value of distributions per share of
Common Stock of realized capital gains, of dividends per share of Common
Stock paid from investment income and the capital gains taxes per share
of Common Stock paid or payable on undistributed realized long-term
capital gains shall be treated as reinvested in shares of Common Stock of
the Fund at the net asset value per share of Common Stock in effect at
the close of business on the record date for the payment of such
distributions and dividends and the date on which provision is made for
such taxes, after giving effect to such distributions, dividends and
taxes. Notwithstanding any provisions of this subparagraph (c) or of the
other subparagraphs of Paragraph 4 hereof to the contrary, the investment
performance of the Fund for any period shall not include, and there shall
be excluded from the change in the Fund's net asset value per share of
Common Stock during such period and the value of the Fund's cash
distributions per share of Common Stock accumulated to the end of such
period shall be adjusted for, any increase or decrease in the investment
performance of the Fund for such period computed as set forth in the
preceding two sentences and resulting from the Fund's capital stock
transactions.
(d) The investment record of the Index for any period, expressed as a
percentage of the Index level at the beginning of such period, shall mean
and be the sum of (i) the change in the level of the Index during such
period; and (ii) the value, computed consistently with the Index, of cash
distributions made by companies whose securities comprise the Index
accumulated to the end of such period. For this purpose, cash
distributions on the securities which comprise the Index shall be treated
as reinvested in the Index at the end of each calendar month following
the payment of the dividend.
(e) Any calculation of the investment performance of the Fund and the
investment record of the Index shall be in accordance with any then
applicable rules of the Securities and Exchange Commission.
B-3
(f) In the event of any termination of this Agreement, the fee provided for
in this Paragraph 4 shall be calculated on the basis of a period ending
on the last day on which this Agreement is in effect, subject to a pro
rata adjustment based on the number of days elapsed in the current period
as a percentage of the total number of days in such period.
5. Excess Brokerage Commissions. The Adviser is hereby authorized, to the
fullest extent now or hereafter permitted by law, to cause the Fund to pay a
member of a national securities exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of such exchange, broker or dealer would have charged
for effecting that transaction, if the Adviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and/or research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or its overall
responsibilities with respect to the Fund and its other accounts.
6. Limitations on the Employment of the Adviser. The services of the
Adviser to the Fund shall not be deemed exclusive, and the Adviser may engage in
any other business or render similar or different services to others so long as
its services to the Fund hereunder are not impaired thereby, and nothing in this
Agreement shall limit or restrict the right of any director, officer or employee
of the Adviser to engage in any other business or to devote his time and
attention in part to any other business, whether of a similar or dissimilar
nature. So long as this Agreement or any extension, renewal or amendment remains
in effect, the Adviser shall be the only investment adviser for the Fund,
subject to the Adviser's right to enter into sub-advisory agreements. The
Adviser assumes no responsibility under this Agreement other than to render the
services called for hereunder, and shall not be responsible for any action of or
directed by the Board of Directors of the Fund, or any committee thereof, unless
such action has been caused by the Adviser's gross negligence, willful
misfeasance, bad faith or reckless disregard of its obligations and duties under
this Agreement.
7. Responsibility of Dual Directors, Officers and/or Employees. If any
person who is a director, officer or employee of the Adviser is or becomes a
director, officer and/or employee of the Fund and acts as such in any business
of the Fund pursuant to this Agreement, then such director, officer and/or
employee of the Adviser shall be deemed to be acting in such capacity solely for
the Fund, and not as a director, officer or employee of the Adviser or under the
control or direction of the Adviser, although paid by the Adviser.
8. Protection of the Adviser. The Adviser shall not be liable to the Fund
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 Fund, and the Fund shall indemnify the
Adviser and hold it harmless from and against all damages, liabilities,
B-4
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 Fund 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 Fund. 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 Fund 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
directors of the Fund who are neither "interested persons" of the Fund (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.
9. Effectiveness, Duration and Termination of Agreement. The prior
Investment Advisory Agreement between the Fund and the Adviser, dated June 30,
1996 (other than the provisions of Paragraph 8 thereof, which shall remain in
full force and effect) shall terminate upon the effectiveness of this Agreement.
This Agreement shall become effective as of the date above written. This
Agreement shall remain in effect until June 30, 2003, and thereafter shall
continue automatically for successive annual periods, provided that such
continuance is specifically approved at least annually by (a) the vote of the
Fund's directors, including a majority of such directors who are not parties to
this Agreement or "interested persons" (as such term is defined in Section
2(a)(19) of the Investment Company Act of 1940) of any such party, cast in
person at a meeting called for the purpose of voting on such approval, or (b)
the vote of a majority of the outstanding voting securities of the Fund and the
vote of the Fund's directors, including a majority of such directors who are not
parties to this Agreement or "interested persons" (as so defined) of any such
party. This Agreement may be terminated at any time, without the payment of any
penalty, on 60 days' written notice by the vote of a majority of the outstanding
voting securities of the Fund or by the vote of a majority of
B-5
the Fund's directors or by the Adviser, and will automatically terminate in the
event of its "assignment" (as such term is defined for purposes of Section
15(a)(4) of the Investment Company Act of 1940); provided, however, that the
provisions of Paragraph 8 of this Agreement shall remain in full force and
effect, and the Adviser shall remain entitled to the benefits thereof,
notwithstanding any such termination.
The Fund may, so long as this Agreement remains in effect, use "Royce" as
part of its name. The Adviser may, upon termination of this Agreement, require
the Fund to refrain from using the name "Royce" in any form or combination in
its name or in its business, and the Fund shall, as soon as practicable
following its receipt of any such request from the Adviser, so refrain from
using such name.
Any notice under this Agreement shall be given in writing, addressed and
delivered or mailed, postage prepaid, to the other party at its principal
office.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date above written.
ROYCE VALUE TRUST, INC.
By:
------------------------------
Name:
Title:
ROYCE & ASSOCIATES, INC.
By:
------------------------------
Name:
Title:
B-6
EXHIBIT C
INFORMATION RELATING TO OTHER R&A-ADVISED FUNDS
Set forth below is information relating to the other registered investment
companies for which R&A acts as investment adviser or sub-investment adviser.
Advisory or
Annual Approximate Sub-Advisory Fees
Investment Net Assets at Waived by R&A for
Investment Advisory Advisory or June 30, 2001 the Year Ended
Company Relationship Sub-Advisory Fees (millions) December 31, 2000
- ------- ------------ ----------------- ---------- -----------------
The Royce Fund Investment
Adviser
Pennsylvania 1.00% per annum $568.0 --
Mutual Fund of first $50 million,
.875% per annum
of next $50 million
and .75% per
annum of any
additional average
net assets
Royce 1.50% per annum 609.1 $200,095
Low-Priced of average net
Stock Fund assets
Royce 1.50% per annum 189.2 421,471
Micro-Cap Fund of average net
assets
Royce 1.00% per annum 558.4 --
Opportunity of average net
Fund assets
Royce Premier 1.00% per annum 774.5 --
Fund of average net
assets
Royce Select 12.5% of pre-fee 16.5 --
Fund total return
Royce Special 1.00% per annum 8.1 21,443
Equity Fund of average net
assets
Royce Total 1.00% per annum 404.8 60,317
Return Fund of average net
assets
Royce Trust & 1.00% per annum 31.4 9,346
GiftShares of average net
Fund assets
C-1
Advisory or
Annual Approximate Sub-Advisory Fees
Investment Net Assets at Waived by R&A for
Investment Advisory Advisory or June 30, 2001 the Year Ended
Company Relationship Sub-Advisory Fees (millions) December 31, 2000
- ------- ------------ ----------------- ---------- -----------------
Royce Value 1.00% per annum 0.5 --
Fund of average net
assets
Royce Value 1.00% per annum 0.5 --
Plus Fund of average net
assets
Royce Capital Investment
Fund Adviser
Royce 1.00% per annum 5.0 7,765
Small-Cap of average net
Portfolio assets
1.25% per annum 70.6 45,601
Royce of average net
Micro-Cap assets
Portfolio
Royce Focus Investment 1.00% per annum 87.8 200,001
Trust, Inc. Adviser of average net
assets
Royce Micro-Cap Investment Ranges from 0.50% 238.9 --
Trust, Inc. Adviser to 1.50% per
annum of average
net assets,
depending on
performance
compared to
Russell 2000 Index
C-2
Advisory or
Annual Approximate Sub-Advisory Fees
Investment Net Assets at Waived by R&A for
Investment Advisory Advisory or June 30, 2001 the Year Ended
Company Relationship Sub-Advisory Fees (millions) December 31, 2000
- ------- ------------ ----------------- ---------- -----------------
AXP(R) Partners Sub-Adviser 0.80% per annum 5.7 --
Small Cap Value of first $50 million
Fund(1) of average net
assets; 0.75% per
annum of next $50
million of average
net assets; 0.70%
per annum of next
$50 million of
average net assets;
0.65% per annum
of next $50 million
of average net
assets; 0.50% per
annum of average
net assets in excess
of $200 million
Penn Series Sub-Adviser 0.70% per annum 82.1 --
Small of first $25 million
Cap Value Fund of average net
assets; 0.65% per
annum of next $75
million of average
net assets; 0.60%
per annum of
average net assets
in excess of $100
million
- ----------------
1 R&A is one of two sub-advisers of the Fund. The sub-advisory fee paid to R&A
applies to the portion of the Fund's assets sub-advised by R&A. The Fund's
approximate net assets at June 30, 2001 represents Fund assets sub-advised by
R&A.
C-3
This page intentionally left blank
EXHIBIT D
ROYCE VALUE TRUST, INC.
AUDIT COMMITTEE CHARTER
I. Composition of the Audit Committee
----------------------------------
The Audit Committee shall be composed of at least three Directors:
(a) each of whom shall not be an "interested person" of the Fund, as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended;
(b) each of whom shall not have any relationship to the Fund that may
interfere with the exercise of their independence from Fund management
and the Fund;
(c) each of whom shall otherwise satisfy the applicable independence
requirements for any stock exchange on which Fund shares are listed;
(d) each of whom shall be financially literate, as such qualification is
interpreted by the Board of Directors in its business judgment, or
shall become financially literate within a reasonable period of time
after his or her appointment to the Audit Committee; and
(e) at least one of whom shall have accounting or related financial
management expertise as the Board of Directors interprets such
qualification in its business judgment.
II. Purposes of the Audit Committee
-------------------------------
The purposes of the Audit Committee are to assist the Board of Directors:
(a) in its oversight of the Fund's accounting and financial reporting
policies and practices, its internal audit controls and procedures and,
as appropriate, the internal audit controls and procedures of certain
of its service providers;
(b) in its oversight of the Fund's financial statements and the independent
audit thereof; and
(c) in acting as a liaison between the Fund's independent accountants and
the Board of Directors.
The function of the Audit Committee is oversight. Fund management is
responsible for maintaining appropriate systems for accounting. The independent
accountants of the Fund are responsible for conducting a proper audit of the
Fund's financial statements.
D-1
III. Responsibilities and Duties of the Audit Committee
--------------------------------------------------
The policies and procedures of the Audit Committee shall remain flexible to
facilitate its ability to react to changing conditions and to generally
discharge its functions. The following listed responsibilities describe areas of
attention in broad terms.
To carry out its purposes, the Audit Committee shall have the following
responsibilities and duties:
(a) to recommend the selection, retention or termination of the Fund's
independent accountants based on an evaluation of their independence
and the nature and performance of audit services and other services;
(b) to receive specific representations from the independent accountants
with respect to their independence;
(c) to review the fees charged by independent accountants for audit and
other services;
(d) to review with the independent accountants arrangements for and the
scope of annual audits and special audits;
(e) to discuss with the independent accountants any matters of concern
relating to the Fund's financial statements, including, without
limitation, any adjustment to such financial statements recommended by
such independent accountants, or any other results of any audit;
(f) to consider with the independent accountants their comments with
respect to the Fund's accounting and financial reporting policies,
practices and internal controls and management's responses thereto,
including, without limitation, the effect on the Fund of any
recommendation of changes in accounting principles or practices by
management or the independent accountants;
(g) to review with the independent accountants the form of opinion proposed
to be rendered to the Board of Directors and the stockholders;
(h) to investigate any improprieties or suspected improprieties in Fund
financial and accounting operations;
(i) to report to the Board of Directors regularly with respect to the Audit
Committee's activities and to make any necessary or appropriate
recommendations with respect to the Fund's accounting and financial
reporting policies, practices and the Fund's internal controls;
(j) to review and reassess the adequacy of this Charter on an annual basis
and recommend any changes to the Board of Directors;
D-2
(k) to review with counsel and the independent accountants for the Fund
legal and regulatory matters that may have a material impact on the
Fund's financial statements;
(l) to prepare any report, including any recommendation of the Audit
Committee, required to be included in the Fund's annual proxy statement
by the rules of the Securities and Exchange Commission;
(m) to assist the Fund, if necessary, in preparing any written affirmation
or written certification required to be filed with any stock exchange
on which Fund shares are listed; and
(n) to perform such other functions consistent with this Charter, the
Fund's By-laws and governing law, as the Audit Committee or the Board
of Directors deems necessary or appropriate.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Audit Committee are not full-time employees of the Fund and are
not, and do not represent themselves to be, accountants or auditors by
profession or experts in the field of accounting or auditing. As such, it is not
the duty or responsibility of the Audit Committee or its members to conduct
"field work" or other types of auditing or accounting reviews or procedures, and
each member of the Audit Committee shall be entitled to rely on (i) the
integrity of those persons and organizations within and outside the Fund from
which the Audit Committee receives information and (ii) the accuracy of the
financial and other information provided to the Audit Committee by such persons
or organizations absent actual knowledge to the contrary (which actual knowledge
shall be promptly reported to the Board of Directors).
The independent accountants for the Fund are ultimately accountable to the
Board of Directors and the Audit Committee. The Board of Directors and the Audit
Committee have the ultimate authority and responsibility to select, evaluate
and, where appropriate, replace the independent accountants for the Fund (or to
nominate the independent accountants to be proposed for shareholder approval in
the proxy statement).
The Audit Committee is responsible for ensuring that the independent
accountants for the Fund submit on a periodic basis to the Audit Committee a
formal written statement delineating all relationships between such independent
accountants and the Fund, consistent with Independence Standards Board Standard
1. The Audit Committee is responsible for actively engaging in a dialogue with
the independent accountants for the Fund with respect to any disclosed
relationships or services that may impact the objectivity and independence of
such independent accountants and for recommending that the Board of Directors
take appropriate action in response to the report of such independent
accountants to satisfy itself of the independence of such independent
accountants.
D-3
IV. Meetings
--------
The Audit Committee shall meet at least once annually with the independent
accountants (outside the presence of Fund management) and at least once annually
with the representatives of Fund management responsible for the financial and
accounting operations of the Fund. The Audit Committee shall hold special
meetings when and if circumstances require. Members of the Audit Committee may
participate in a meeting of the Audit Committee by means of conference call or
similar communications equipment by means of which all persons participating in
such meeting can hear each other.
V. Outside Resources and Assistance from Fund Management
-----------------------------------------------------
The appropriate officers of the Fund shall provide or arrange to provide
such information, data and services as the Audit Committee may request. The
Audit Committee shall have the authority to discharge its responsibility,
including the authority to retain at the expense of the Fund their own counsel
and other experts and consultants whose expertise would be considered helpful to
the Audit Committee.
Dated: April 11, 2000
D-4
This page intentionally left blank
This page intentionally left blank
PROXY ROYCE VALUE TRUST, INC. PROXY
Common Stock
1414 Avenue of the Americas
New York, NY 10019
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Jack E. Fockler, Jr. and Andrew S. Novak, 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 Common Stock of the Fund held of
record by the undersigned on August 3, 2001 at the Annual Meeting of
Stockholders of Royce Value Trust, Inc. to be held on September 14, 2001, and at
any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this Proxy will be voted FOR
Proposals 1 and 2.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
Please sign this proxy 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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
- -----------------------------------
ROYCE VALUE TRUST, INC.
- -----------------------------------
1. PROPOSAL TO APPROVE THE For Against Abstain
PROPOSED INVESTMENT [ ] [ ] [ ]
ADVISORY AGREEMENT
FOR THE FUND.
2. PROPOSAL TO ELECT For ALL NOMINEES Withhold For All Except
THE DIRECTOR NOMINEES [ ] [ ] [ ]
OF THE FUND.
Charles M. Royce, Donald R. Dwight,
Mark R. Fetting, Richard M. Galkin,
Stephen L. Isaacs, G. Peter O'Brien
Instruction: if you do not wish your shares
voted "For" a particular nominee, mark the "For
All Except" box and strike a line through the
name(s) of the nominee(s). Your shares will be
voted for the remaining nominee(s).
3. 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 right [ ]
if an address change
or comment has been
noted on the reverse
side of this card.
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
CONTROL NUMBER:
Vote by Telephone (it's fast, convenient and immediate! Call Toll-Free on a
Touch-Tone Phone)
1) Read the accompanying Proxy Statement and Proxy Card.
2) Call the toll-free number 1-877-PRX-VOTE (1-877-779-8683).
There is no charge for this call.
3) Enter your control number located on your Proxy Card. Follow the
recorded instructions.
Your vote is important! Call 1-877-PRX-VOTE anytime!
Vote by Internet (it's fast, convenient, and your vote is immediately
confirmed and posted.)
1) Read the accompanying Proxy Statement and Proxy Card.
2) Go to Website at http://www.eproxyvote.com/rvt
3) Enter your control number located on your Proxy Card. Follow the
instructions provided.
Your vote is important! Go to http://www.eproxyvote.com/rvt anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet
PROXY ROYCE VALUE TRUST, INC. PROXY
7.80% Cumulative Preferred Stock
1414 Avenue of the Americas
New York, NY 10019
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Jack E. Fockler, Jr. and Andrew S. Novak, 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 7.80% Cumulative Preferred Stock
of the Fund held of record by the undersigned on August 3, 2001 at the Annual
Meeting of Stockholders of Royce Value Trust, Inc. to be held on September 14,
2001, and at any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this Proxy will be voted FOR
Proposals 1 and 2.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
Please sign this proxy 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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
- -----------------------------------
ROYCE VALUE TRUST, INC.
- -----------------------------------
1. PROPOSAL TO APPROVE THE For Against Abstain
PROPOSED INVESTMENT [ ] [ ] [ ]
ADVISORY AGREEMENT
FOR THE FUND.
2. PROPOSAL TO ELECT For ALL NOMINEES Withhold For All Except
THE DIRECTOR NOMINEES [ ] [ ] [ ]
OF THE FUND.
Charles M. Royce, Donald R. Dwight,
Mark R. Fetting, Richard M. Galkin,
Stephen L. Isaacs, G. Peter O'Brien
Instruction: if you do not wish your shares
voted "For" a particular nominee, mark the "For
All Except" box and strike a line through the
name(s) of the nominee(s). Your shares will be
voted for the remaining nominee(s).
3. 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 right [ ]
if an address change
or comment has been
noted on the reverse
side of this card.
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
CONTROL NUMBER:
Vote by Telephone (it's fast, convenient and immediate! Call Toll-Free on a
Touch-Tone Phone)
1) Read the accompanying Proxy Statement and Proxy Card.
2) Call the toll-free number 1-877-PRX-VOTE (1-877-779-8683).
There is no charge for this call.
3) Enter your control number located on your Proxy Card. Follow the
recorded instructions.
Your vote is important! Call 1-877-PRX-VOTE anytime!
Vote by Internet (it's fast, convenient, and your vote is immediately
confirmed and posted.)
1) Read the accompanying Proxy Statement and Proxy Card.
2) Go to Website at http://www.eproxyvote.com/rvt.pr
3) Enter your control number located on your Proxy Card. Follow the
instructions provided.
Your vote is important! Go to http://www.eproxyvote.com/rvt.pr anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet
PROXY ROYCE VALUE TRUST, INC. PROXY
7.30% Tax-Advantaged Cumulative
Preferred Stock
1414 Avenue of the Americas
New York, NY 10019
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Jack E. Fockler, Jr. and Andrew S. Novak, 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 7.30% Tax-Advantaged Cumulative
Preferred Stock of the Fund held of record by the undersigned on August 3, 2001
at the Annual Meeting of Stockholders of Royce Value Trust, Inc. to be held on
September 14, 2001, and at any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this Proxy will be voted FOR
Proposals 1 and 2.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
Please sign this proxy 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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
- -----------------------------------
ROYCE VALUE TRUST, INC.
- -----------------------------------
1. PROPOSAL TO APPROVE THE For Against Abstain
PROPOSED INVESTMENT [ ] [ ] [ ]
ADVISORY AGREEMENT
FOR THE FUND.
2. PROPOSAL TO ELECT For ALL NOMINEES Withhold For All Except
THE DIRECTOR NOMINEES [ ] [ ] [ ]
OF THE FUND.
Charles M. Royce, Donald R. Dwight,
Mark R. Fetting, Richard M. Galkin,
Stephen L. Isaacs, G. Peter O'Brien
Instruction: if you do not wish your shares
voted "For" a particular nominee, mark the "For
All Except" box and strike a line through the
name(s) of the nominee(s). Your shares will be
voted for the remaining nominee(s).
3. 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 right [ ]
if an address change
or comment has been
noted on the reverse
side of this card.
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
CONTROL NUMBER:
Vote by Telephone (it's fast, convenient and immediate! Call Toll-Free on a
Touch-Tone Phone)
1) Read the accompanying Proxy Statement and Proxy Card.
2) Call the toll-free number 1-877-PRX-VOTE (1-877-779-8683).
There is no charge for this call.
3) Enter your control number located on your Proxy Card. Follow the
recorded instructions.
Your vote is important! Call 1-877-PRX-VOTE anytime!
Vote by Internet (it's fast, convenient, and your vote is immediately
confirmed and posted.)
1) Read the accompanying Proxy Statement and Proxy Card.
2) Go to Website at http://www.eproxyvote.com/rvt.pra
3) Enter your control number located on your Proxy Card. Follow the
instructions provided.
Your vote is important! Go to http://www.eproxyvote.com/rvt.pra anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet