As filed with the Securities and Exchange Commission on
August 18, 2004
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 FOCUS 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:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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ROYCE FOCUS TRUST, INC.
1414 AVENUE OF THE AMERICAS
NEW YORK, NY 10019
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------
TO BE HELD ON SEPTEMBER 28, 2004
To the Stockholders of:
ROYCE FOCUS TRUST, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of ROYCE FOCUS TRUST, INC. (the "Fund") will be held at the offices
of the Fund, 1414 Avenue of the Americas, New York, New York 10019 on Tuesday,
September 28, 2004, at 4:00 p.m. (Eastern time), for the following purposes:
1. To elect five Directors to the Fund's Board:
(i) three Directors to be elected by the holders of the Fund's Common
Stock and its 6.00% Cumulative Preferred Stock (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
2. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors of the Fund has set the close of business on August
4, 2004 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.
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. IF YOU HAVE BEEN PROVIDED WITH
THE OPPORTUNITY ON YOUR PROXY CARD OR VOTING INSTRUCTION FORM TO PROVIDE VOTING
INSTRUCTIONS VIA TELEPHONE OR THE INTERNET, PLEASE 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,
John E. Denneen
Secretary
August 16, 2004
PROXY STATEMENT
ROYCE FOCUS TRUST, INC.
1414 AVENUE OF THE AMERICAS
NEW YORK, NY 10019
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 28, 2004
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 Focus Trust, Inc.
(the "Fund"), to be held at the offices of the Fund, 1414 Avenue of the
Americas, New York, New York 10019, on Tuesday, September 28, 2004, at 4:00 p.m.
(Eastern time) and at any adjournments thereof. The approximate mailing date of
this Proxy Statement is August 18, 2004.
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 "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
4, 2004 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 and 6.00% Cumulative Preferred Stock (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 9,828,628 shares of Common Stock and
1,000,000 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
------------------------- -------- ------------------- ------------
Charles M. Royce Common 1,130,741 shares-- 11.50%
c/o Royce & Associates, LLC Beneficial*
1414 Avenue of the Americas (sole voting and
New York, NY 10019 investment power)
W. Whitney George Common 668,376 shares-- 6.80%
c/o Royce & Associates, LLC Beneficial
1414 Avenue of the Americas (sole voting and
New York, NY 10019 investment power)
Cede & Co.** Common 9,185,916 shares-- 93.46%
Depository Trust Company Record**
P.O. Box #20 6.00% Preferred 1,000,000 shares-- 100%
Bowling Green Station Record**
New York, NY 10028
----------------
* Includes 277,336 shares held by Royce Family Fund, Inc., a charitable
foundation established by Mr. Royce and members of his family.
** 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 stated in
Proposal 1 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
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PROPOSAL COMMON STOCKHOLDERS PREFERRED STOCKHOLDERS
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ELECTION OF Common and Preferred Preferred
DIRECTORS Stockholders, voting Stockholders, voting
together as a single as a separate class,
class, elect three elect two additional
Directors Directors
-----------------------------------------------------------------------------
PROPOSAL 1: ELECTION OF DIRECTORS
At the Meeting, five members of the Board of Directors of the Fund will be
elected. The holders of both Common Stock and Preferred Stock, voting together
as a single class, are entitled to elect seven directors. These seven directors
are divided into three classes, each class having a term of three years. Each
year the term of office of one class will expire. Mark R. Fetting, Richard M.
Galkin and Arthur S. Mehlman have each been nominated by the Board of Directors
for a three-year term to expire at the Fund's 2007 Annual Meeting of
Stockholders or until their successors are duly elected and qualified. The
classes of Directors are indicated below:
2
CLASS II DIRECTOR NOMINEES TO SERVE UNTIL 2007 ANNUAL MEETING OF STOCKHOLDERS
-----------------------------------------------------------------------------
Mark R. Fetting
Richard M. Galkin
Arthur S. Mehlman
CLASS I DIRECTORS SERVING UNTIL 2006 ANNUAL MEETING OF STOCKHOLDERS
-------------------------------------------------------------------
Charles M. Royce
G. Peter O'Brien
CLASS III DIRECTORS SERVING UNTIL 2005 ANNUAL MEETING OF STOCKHOLDERS
---------------------------------------------------------------------
Donald R. Dwight
William L. Koke
The holders of Preferred Stock, voting as a separate class, are
entitled to elect two directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified or until
their earlier resignation or removal. The Board of Directors has nominated the
following two persons to continue as Directors of the Fund, to be elected by
holders of the Preferred Stock: Stephen L. Isaacs and David L. Meister.
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.
3
Certain biographical and other information concerning the existing
Directors and the nominees who are "interested persons" as defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"), of
the Fund, including their designated classes, is set forth below.
NUMBER
OF ROYCE OTHER
NAME, ADDRESS* AND POSITIONS LENGTH CURRENT FUNDS' PUBLIC
PRINCIPAL OCCUPATIONS WITH OF TIME TERM ELECTED PORTFOLIOS COMPANY
DURING PAST FIVE YEARS** AGE THE FUND SERVED EXPIRES BY OVERSEEN DIRECTORSHIP
---------------------- --- -------- ------ ------- ------- ------------ ------------
Charles M. Royce*** 64 Class I 1986 2006 Common 21 Director of
President, Chief Investment Director and Technology
Officer and Member of Board and Preferred Investment
of Managers of Royce & President+ Capital
Associates, LLC and its Corp.
predecessor, Royce &
Associates, Inc.
(collectively, "R&A"), the
Fund's investment adviser;
Director and President of
the Fund, Royce Micro-Cap
Trust, Inc. ("RMT") and
Royce Value Trust, Inc.
("RVT"), closed-end
diversified management
investment companies of
which R&A is the investment
adviser; Trustee, and
President of The Royce Fund
("TRF") and Royce Capital
Fund ("RCF"), open-end
diversified management
investment companies of
which R&A is the investment
adviser (the Fund, RMT, RVT,
TRF and RCF collectively,
"The Royce Funds"); Secretary
and sole director of Royce
Fund Services, Inc. ("RFS"),
a wholly-owned subsidiary of
R&A; and managing general
partner of Royce Management
Company ("RMC"), the general
partner of various private
investment limited partnerships
(until October 2001).
4
NUMBER
OF ROYCE OTHER
NAME, ADDRESS* AND POSITIONS LENGTH CURRENT FUNDS' PUBLIC
PRINCIPAL OCCUPATIONS WITH OF TIME TERM ELECTED PORTFOLIOS COMPANY
DURING PAST FIVE YEARS** AGE THE FUND SERVED EXPIRES BY OVERSEEN DIRECTORSHIP
---------------------- --- -------- ------ ------- ------- ------------ ------------
Mark R. Fetting*** 49 Class II 2001 2004 Common 21 Director/
Executive Vice President Director and Trustee of
of Legg Mason, Inc. ("Legg Preferred registered
Mason"); Member of Board investment
of Managers of R&A; and companies
Division President and constituting
Senior Officer, Prudential the 23
Financial Group, Inc. and Legg Mason
related companies, Funds
including Fund Boards and
consulting services to
subsidiary companies (from
1991 to 2000).
Mr. Fetting's prior
business experience
includes having served as
Partner, Greenwich
Associates, and Vice
President, T. Rowe Price
Group, Inc.
----------------
*Mr. Royce's address is c/o Royce & Associates, LLC, 1414 Avenue of the
Americas, New York, New York 10019. Mr. Fetting's address is c/o Legg Mason,
Inc., 100 Light Street, Baltimore, Maryland 21202.
**Each of the existing Directors or nominees is also a director/trustee of
certain other investment companies for which R&A acts as an investment
adviser.
***"Interested person," as defined in the Investment Company Act, of the Fund.
+ Elected by and serves at the pleasure of the Board of Directors.
INTERESTED PERSONS
Messrs. Royce and Fetting are "interested persons" of the Fund within the
meaning of Section 2(a)(19) of the Investment Company Act due to the positions
they hold with R&A and its affiliate Legg Mason, respectively, and their stock
ownership in Legg Mason. There are no family relationships between any of the
Fund's Directors and officers.
5
Certain biographical and other information concerning the existing
Directors and nominees who are not "interested persons," as defined in the
Investment Company Act, of the Fund, including their designated classes, is set
forth below.
NUMBER
OF ROYCE OTHER
NAME, ADDRESS* AND POSITIONS LENGTH CURRENT FUNDS' PUBLIC
PRINCIPAL OCCUPATIONS WITH OF TIME TERM ELECTED PORTFOLIOS COMPANY
DURING PAST FIVE YEARS** AGE THE FUND SERVED EXPIRES BY OVERSEEN DIRECTORSHIP
---------------------- --- -------- ------ ------- ------- ------------ ------------
Donald R. Dwight 72 Class III 1998 2005 Common 21 None
President of Dwight Director and
Partners, Inc., corporate Preferred
communications
consultants; Chairman
(from 1982 until March
1998) and Chairman
Emeritus (since March
1998) of Newspapers of New
England, Inc. Mr. Dwight's
prior experience includes
having served as
Lieutenant Governor of the
Commonwealth of
Massachusetts, President
and Publisher of
Minneapolis Star and
Tribune Company, and as
Trustee of the registered
investment companies
constituting the 94 Eaton
Vance Funds.
Richard M. Galkin 66 Class II 1986 2004 Common 21 None
Private investor; Director and
Mr. Galkin's prior Preferred
business experience
includes 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).
6
NUMBER
OF ROYCE OTHER
NAME, ADDRESS* AND POSITIONS LENGTH CURRENT FUNDS' PUBLIC
PRINCIPAL OCCUPATIONS WITH OF TIME TERM ELECTED PORTFOLIOS COMPANY
DURING PAST FIVE YEARS** AGE THE FUND SERVED EXPIRES BY OVERSEEN DIRECTORSHIP
---------------------- --- -------- ------ ------- ------- ------------ ------------
Stephen L. Isaacs 64 Director 1986 2004 Preferred 21 None
President of The Center only
for Health and Social
Policy (since September
1996); Attorney and
President of Health Policy
Associates, Inc.,
consultants. Mr. Isaacs'
prior experience includes
having served as Director
of Columbia University
Development Law and Policy
Program and Professor at
Columbia University.
William L. Koke 69 Class III 2001 2005 Common 21 None
Private investor. Director and
Mr. Koke's prior business Preferred
experience includes having
served as President of
Shoreline Financial
Consultants, Director of
Financial Relations of
SONAT, Inc., Treasurer of
Ward Foods, Inc. and
President of CFC, Inc.
Arthur S. Mehlman 62 Class II 2004 2004 Common 21 Director/
Director of The League Director and Trustee of
for People with Preferred the registered
Disabilities, Inc.; investment
Director of University of companies
Maryland Foundation and constituting
University of Maryland the 23
College Park Foundation Legg Mason
(non-profits). Partner, Funds
KPMG LLP (international
accounting firm)
(1972-2002).
7
NUMBER
OF ROYCE OTHER
NAME, ADDRESS* AND POSITIONS LENGTH CURRENT FUNDS' PUBLIC
PRINCIPAL OCCUPATIONS WITH OF TIME TERM ELECTED PORTFOLIOS COMPANY
DURING PAST FIVE YEARS** AGE THE FUND SERVED EXPIRES BY OVERSEEN DIRECTORSHIP
---------------------- --- -------- ------ ------- ------- ------------ ------------
David L. Meister 64 Director 1986 2004 Preferred 21 None
Chairman and Chief only
Executive Officer of The
Tennis Channel (since June
2000); and Chief Executive
Officer of Seniorlife.com
(from December 1999 to May
2000). Mr. Meister's prior
business experience
includes having served as
a consultant to the
communications industry,
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 58 Class I 2001 2006 Common 21 Director/
Trustee of Colgate Director and Trustee of
University, President of Preferred registered
Hill House, Inc. and investment
Managing Director/Equity companies
Capital Markets Group of constituting
Merrill Lynch & Co. (from the 23
1971 to 1999). Legg Mason
Funds;
Director of
Renaissance
Capital
Greenwich
Fund;
Director of
Technology
Investment
Capital
Corp.
----------------
* Messrs. Dwight, Galkin, Isaacs, Koke, Mehlman, Meister and O'Brien's address
is c/o Royce & Associates, LLC, 1414 Avenue of the Americas, New York, New
York 10019.
** Each of the Directors or nominees is a director/trustee of certain other
investment companies for which R&A acts as an investment adviser. Messrs.
Dwight, Galkin, Isaacs, Koke, Mehlman, Meister and O'Brien are each a member
of the Fund's Audit Committee and its Nominating Committee.
8
AUDIT COMMITTEE REPORT
The Board of Directors has a standing Audit Committee (the "Audit
Committee"), which consists of the Directors who are not "interested persons" of
the Fund within the meaning of Section 2(a)(19) of the Investment Company Act
and who are "independent" as defined in the listing standards of the New York
Stock Exchange (the "Independent Directors"). The current members of the Audit
Committee are Donald R. Dwight, Richard M. Galkin, Stephen L. Isaacs, William L.
Koke, Arthur S. Mehlman (since April 15, 2004), David L. Meister and G. Peter
O'Brien. Mr. Galkin serves as Chairman of the Audit Committee and Mr. Mehlman
has been designated as the Audit Committee Financial Expert, as defined under
Securities and Exchange Commission Regulations.
The principal purposes of the Audit Committee are to (i) oversee the
accounting and financial reporting processes of the Fund and the Fund's internal
control over financial reporting; (ii) oversee the integrity of the Fund's
financial statements and the independent audit thereof; (iii) oversee, or, as
appropriate, assist Board oversight of, the Fund's compliance with legal and
regulatory requirements that relate to the Fund's accounting and financial
reporting, internal control over financial reporting, and independent audits;
and (iv) be responsible for the appointment compensation, retention, and
oversight of the Fund's independent accountants, including the resolution of
disagreements regarding financial reporting between Fund management and such
independent accountants. The Board of Directors has adopted an Audit Committee
Charter for the Fund attached hereto as Exhibit A.
The Audit Committee also has (i) 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 (ii) discussed certain
matters required to be discussed by Statements on Auditing Standards No. 61 with
TW&B. The Audit Committee has considered whether the provision of non-audit
services by the Fund's independent auditors is compatible with maintaining their
independence.
At its meeting held on February 10, 2004, the Audit Committee reviewed and
discussed the audit of the Fund's financial statements as of December 31, 2003
and for the fiscal year then ended with Fund management and TW&B. Had any
material concerns arisen during the course of the audit and the preparation of
the audited financial statements mailed to stockholders and included in the
Fund's 2003 Annual Report to Stockholders, the Audit Committee would have been
notified by Fund management or TW&B. The Audit Committee received no such
notifications. At the same meeting, the Audit Committee recommended to the Board
of Directors that the Fund's audited financial statements be included in the
Fund's 2003 Annual Report to Stockholders.
9
NOMINATING COMMITTEE
The Board of Directors has a Nominating Committee composed of the seven
Independent Directors, namely Messrs. Dwight, Galkin, Isaacs, Koke, Mehlman
(since April 15, 2004), Meister and O'Brien. The Board of Directors has adopted
a Nominating Committee Charter for the Fund attached hereto as Exhibit B. The
Nominating Committee did not meet during the fiscal year ended December 31,
2003. As of the Record Date, the Nominating Committee has met three times during
2004 to consider potential Nominees to the Board. On April 14, 2004, the
Nominating Committee unanimously voted to recommend Arthur S. Mehlman for
election to the Fund's Board of Directors. Mr. Mehlman was unanimously elected a
Director by the Fund's full Board of Directors on April 15, 2004.
The Nominating Committee is responsible for identifying and recommending to
the Board of Directors individuals believed to be qualified to become Board
members in the event that a position is vacated or created. The Nominating
Committee will consider Director candidates recommended by stockholders. In
considering potential Nominees, the Nominating Committee will take into
consideration (i) the contribution which the person can make to the Board, with
consideration given to the person's business and professional experience,
education and such other factors as the Committee may consider relevant; (ii)
the character and integrity of the person; (iii) whether or not the person is an
"interested person" as defined in the Investment Company Act and whether the
person is otherwise qualified under applicable laws and regulations to serve as
a Director or Independent Director of the Fund; (iv) whether or not the person
has any relationships that might impair his independence, such as any business,
financial or family relationships with Fund management, the investment adviser
of the Fund, Fund service providers or their affiliates; (v) whether or not the
person is financially literate pursuant to the New York Stock Exchange's audit
committee membership standards; (vi) whether or not the person serves on boards
of, or is otherwise affiliated with, competing financial service organizations
or their related investment company complexes; (vii) whether or not the person
is willing to serve as, and willing and able to commit the time necessary for
the performance of the duties of, a Director of the Fund; and (viii) whether or
not the selection and nomination of the person would be consistent with the
requirements of the Fund's retirement policies.
To have a candidate considered by the Nominating Committee, a stockholder
must submit the recommendation in writing and must include biographical
information and set forth the qualifications of the proposed nominee. The
stockholder recommendation and information described above must be sent to the
Fund's Secretary, John E. Denneen, c/o Royce Focus Trust, Inc., 1414 Avenue of
the Americas, New York, NY 10019.
Although the Board of Directors does not have a standing compensation
committee, the Independent Directors review compensation annually.
10
COMMITTEE AND BOARD OF DIRECTORS MEETINGS
During the year ended December 31, 2003, the Board of Directors held seven
meetings and the Audit Committee held five meetings. Each Director then in
office attended 75% or more of the aggregate of the total number of meetings of
the Board of Directors held during that year and the total number of meetings of
the Audit Committee held during that year.
COMPENSATION OF DIRECTORS AND AFFILIATED PERSONS
Each Independent Director receives a base fee of $3,500 per year plus $250
for each meeting of the Board of Directors attended. No Director received
remuneration for services as a Director for the year ended December 31, 2003 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 of the
Fund for the year ended December 31, 2003.
PENSION OR
RETIREMENT TOTAL
BENEFITS COMPENSATION
ACCRUED ESTIMATED FROM THE FUND
AGGREGATE AS PART ANNUAL AND OTHER
COMPENSATION OF FUND BENEFITS UPON ROYCE FUNDS
NAME FROM THE FUND EXPENSES RETIREMENT DIRECTORS
---- ------------- -------- ---------- ---------
Donald R. Dwight,
Director (1) $4,609 None None $66,500
Richard M. Galkin,
Director $4,609 None None $67,500
Stephen L. Isaacs,
Director $4,609 None None $67,500
William L. Koke,
Director $4,609 None None $66,500
Arthur S. Mehlman
Director (2) -0- None None -0-
David L. Meister,
Director $4,609 None None $67,500
G. Peter O'Brien,
Director $4,609 None None $66,500
----------------
(1)Includes $691 from the Fund ($9,679 from the Fund and other Royce Funds)
deferred during 2003 at the election of Mr. Dwight under The Royce Funds'
Deferred Compensation Plan for trustees/directors.
(2)Mr. Mehlman was elected as a Director on April 15, 2004.
11
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:
NAME, ADDRESS* AND PRINCIPAL OFFICER OF
OCCUPATIONS DURING PAST FIVE YEARS AGE OFFICE** FUND SINCE
---------------------------------- --- -------- ----------
Charles M. Royce 64 President 1986
President, Member of Board of
Managers and Chief Investment
Officer of R&A, the Fund's
investment adviser; Director and
President of the Fund, RMT and
RVT, closed-end diversified
management investment companies
of which R&A is the investment
adviser; Trustee and President
of TRF and RCF, open-end
diversified management
investment companies of which
R&A is the investment adviser;
Secretary and sole director of
RFS, a wholly-owned subsidiary
of R&A; managing general partner
of RMC, the general partner of
various private investment
limited partnerships (until
October 2001).
John D. Diederich 53 Vice 1997
Member of Board of Managers, President
Chief Operating Officer (since and
October 2001), Chief Financial Treasurer
Officer (since March 2002) and
Managing Director of R&A; Vice
President and Treasurer of the
Fund, RMT, RVT, TRF and RCF;
Director of Administration of
The Royce Funds; President of
RFS.
Jack E. Fockler, Jr. 44 Vice 1995
Director of Marketing, Managing President
Director and Vice President of
R&A; Vice President of the Fund,
RMT, RVT, TRF and RCF; Vice
President of RFS.
W. Whitney George 46 Vice 1995
Senior Portfolio Manager, President
Managing Director and Vice
President of R&A; Vice President
of the Fund, RMT, RVT, TRF and
RCF.
12
NAME, ADDRESS* AND PRINCIPAL OFFICER OF
OCCUPATIONS DURING PAST FIVE YEARS AGE OFFICE** FUND SINCE
---------------------------------- --- -------- ----------
Daniel A. O'Byrne 42 Vice 1994
Director of Administration, President
Principal and Vice President of
R&A; Vice President of the Fund,
RMT, RVT, TRF and RCF.
John E. Denneen 37 Secretary April 2002
General Counsel (Deputy General and 1996-2001
Counsel prior to 2003), Principal,
Chief Legal and Compliance Officer
and Secretary of R&A (since March
2002); Secretary of the Fund, RMT,
RVT, TRF and RCF (1996-2001 and
since April 2002); Associate
General Counsel, Principal and
Chief Compliance Officer of R&A
(1996-2001) and Principal of Credit
Suisse First Boston Private Equity
(2001-2002).
-----------------
* The address of each officer is c/o Royce & Associates, LLC, 1414 Avenue of
the Americas, New York, New York 10019.
** Elected by and serves at the pleasure of the Board of Directors.
STOCKHOLDER COMMUNICATIONS
Stockholders may send written communications to the Fund's Board of
Directors or to an individual Director by mailing such correspondence to the
Secretary of the Fund (addressed to 1414 Avenue of the Americas, New York, New
York 10019). Such communications must be signed by the stockholder and identify
the class and number of shares held by the stockholder. Properly submitted
stockholder communications will, as appropriate, be forwarded to the entire
Board or to the individual Director. Any stockholder proposal submitted pursuant
to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), must continue to meet all the requirements of Rule 14a-8. See
"Additional Information - Stockholder Proposals" herein.
DIRECTOR ATTENDANCE AT STOCKHOLDER MEETINGS
The Fund has no formal policy regarding Director attendance at stockholder
meetings. None of the Fund's Independent Directors attended the 2003 Annual
Meeting of Stockholders.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act of 1934, requires the officers and
Directors of the Fund and persons who own more than ten percent of a registered
class of the Fund's equity securities, to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the Securities and
13
Exchange Commission (the "SEC") and the New York Stock Exchange. Officers,
Directors and greater than ten percent stockholders are required by SEC
regulations to furnish the Fund with copies of all Forms 3, 4 and 5 they file.
Based solely on the Fund's review of the copies of such forms and
amendments thereto, furnished to it during or with respect to its most recent
fiscal year, and written representations from certain reporting persons that
they were not required to file Form 5 with respect to the most recent fiscal
year, the Fund believes that all of its officers, Directors, greater than ten
percent beneficial owners and other persons subject to Section 16 of the
Exchange Act due to the requirements of Section 30(h) of the Investment Company
Act (i.e., any investment adviser or affiliated person of the Fund's investment
adviser), have complied with all filing requirements applicable to them with
respect to transactions in the Fund's shares during the Fund's most recent
fiscal year.
STOCK OWNERSHIP
Information relating to each Director's ownership as of August 4, 2004 in
the Fund and in all registered Royce Funds overseen or to be overseen by each
Director is set forth below:
--------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
SECURITIES IN ALL ROYCE
FUNDS
AGGREGATE DOLLAR OVERSEEN BY EACH DIRECTOR
RANGE OF EQUITY IN THE
NAME IN THE FUND ROYCE FAMILY OF FUNDS
--------------------------------------------------------------------------------
Interested Director:
--------------------------------------------------------------------------------
Charles M. Royce over $100,000 over $100,000
--------------------------------------------------------------------------------
Mark R. Fetting $10,001--$50,000 over $100,000
--------------------------------------------------------------------------------
Non-Interested Directors:
--------------------------------------------------------------------------------
Donald R. Dwight $1--$10,000 over $100,000
--------------------------------------------------------------------------------
Richard M. Galkin $10,001--$50,000 over $100,000
--------------------------------------------------------------------------------
Stephen L. Isaacs $1--$10,000 over $100,000
--------------------------------------------------------------------------------
William L. Koke $1--$10,000 over $100,000
--------------------------------------------------------------------------------
Arthur S. Mehlman $10,001--$50,000 over $100,000
--------------------------------------------------------------------------------
David L. Meister None over $100,000
--------------------------------------------------------------------------------
G. Peter O'Brien $10,001--$50,000 over $100,000
--------------------------------------------------------------------------------
As of August 4, 2004, no Independent Director or any of his immediate
family members directly or indirectly owned any securities issued by Legg Mason
or any of its affiliates (other than registered investment companies).
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 (14 persons) beneficially owned 1,826,741
14
shares of the Fund's Common Stock, constituting 18.58% of the outstanding
shares, and no shares of its Preferred Stock.
INFORMATION ABOUT THE FUND'S INVESTMENT ADVISER
On October 1, 2001, Royce & Associates, Inc., the Fund's investment
adviser, became an indirect wholly-owned subsidiary of Legg Mason, Inc. ("Legg
Mason"). On March 31, 2003, Royce & Associates, Inc. was merged into Royce
Holdings, LLC (a wholly-owned subsidiary of Legg Mason), which then changed its
name to Royce & Associates, LLC. As a result of this merger, Royce & Associates,
LLC became the Fund's investment adviser and a direct wholly-owned subsidiary of
Legg Mason.
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.
FEES PAID TO INDEPENDENT AUDITORS
AUDIT FEES
The aggregate fees paid to TW&B in connection with the annual audit of the
Fund's financial statements and for services normally provided by TW&B in
connection with the statutory and regulatory filings of the Fund for the fiscal
years ended December 31, 2002 and December 31, 2003 were $19,100 and $20,200,
respectively, including out of pocket expenses.
AUDIT RELATED FEES
The aggregate fees paid to TW&B in connection with assurance and related
services related to the annual audit of the Fund and for review of the Fund's
financial statements, other than the Audit Fees described above, for the fiscal
years ended December 31, 2002 and December 31, 2003 were $6,000 and $6,000,
respectively. The audit-related services rendered by TW&B to the Fund consisted
of the preparation of reports to a rating agency for the Preferred Stock.
TAX FEES
The aggregate fees paid for tax-related services, including preparation of
tax returns, tax compliance and tax advice, rendered by TW&B to the Fund
15
for the fiscal years ended December 31, 2002 and December 31, 2003 were $2,500
and $2,500, respectively.
ALL OTHER FEES
The aggregate fees billed for all other non-audit services rendered by TW&B
to the Fund for the fiscal years ended December 31, 2002 and December 31, 2003
were $0 and $7,500, respectively. The non-audit services rendered by TW&B to the
Fund during 2003 were in connection with the Fund's Registration Statement on
Form N-2 relating to its offering of newly-issued Preferred Stock. No non-audit
fees were billed by TW&B for services rendered to R&A and any entity
controlling, controlled by, or under common control with R&A that provides
ongoing services to the Fund for the fiscal years ended December 31, 2002 and
December 31, 2003.
The Audit Committee has determined that the preparation of the rating
agency reports and services rendered with respect to the above-referenced
Registration Statement is compatible with maintaining TW&B's independence. TW&B
did not provide any other professional services to the Fund or R&A for the year
ended December 31, 2003. No representatives of TW&B will be present at the
Meeting.
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee of the Fund has adopted policies and procedures with
regard to the pre-approval of audit and non-audit services. On an annual basis,
at the Fund's December Audit Committee meeting, TW&B will submit a schedule of
proposed audit, audit-related, tax and other non-audit services to be rendered
to the Fund and/or R&A for the following year that require pre-approval by the
Audit Committee. Such schedule will include the maximum fees that can be paid
for such services without further Audit Committee approval. Any subsequent
revision to pre-approved services or fees will be considered at the next
regularly scheduled Audit Committee meeting. Services not presented for
pre-approval at the December Audit Committee meeting will be submitted to the
Chief Financial Officer of the Fund for a determination that the proposed
services fit within the independence guidelines and then considered for
pre-approval at the next regularly scheduled Audit Committee meeting. A proposal
to commence an engagement involving audit, audit-related or tax services prior
to the next regularly scheduled Audit Committee meeting shall be made in writing
by the Chief Financial Officer to all Audit Committee members and include a
summary of the engagement, estimated maximum cost, the category of services and
the rationale for engaging the Fund's independent auditor. Such proposed
engagement can be pre-approved by any Audit Committee member who is an
Independent Director. Pre-approval by the Chairman of the Audit Committee is
required for a proposed engagement involving non-audit services other than
audit-related or tax.
16
ADDITIONAL INFORMATION
ADJOURNMENT OF MEETING; OTHER MATTERS
In the event that sufficient votes in favor of Proposal 1 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 business other than the matter
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.
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 the
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 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 matters 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 matter 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.
17
ADDRESS OF INVESTMENT ADVISER
R&A's principal office is located at 1414 Avenue of the Americas, New York,
New York 10019.
ANNUAL REPORT DELIVERY
THE FUND'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31,
2003 WAS PREVIOUSLY MAILED TO ITS STOCKHOLDERS AND THE SEMI-ANNUAL REPORT TO
STOCKHOLDERS FOR THE SIX MONTHS ENDED JUNE 30, 2004 WILL BE MAILED TO
STOCKHOLDERS IN LATE AUGUST 2004. COPIES OF THE ANNUAL REPORT ARE AVAILABLE, AND
COPIES OF THE SEMI-ANNUAL REPORT WILL BE AVAILABLE IN LATE AUGUST, 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.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Fund's 2005
Annual Meeting of Stockholders must be received by the Fund by April 21, 2005
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 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 intended to be
presented and the Fund's 2005 Annual Meeting of Stockholders must be in writing
and received at the Fund's principal executive office between April 21, 2005 and
May 21, 2005. 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,
John E. Denneen
Secretary
Dated: August 16, 2004
18
EXHIBIT A
Charter of the Audit Committee
of the Board of Directors/Trustees
For The Royce Funds Listed In Appendix A Hereto
I. COMPOSITION OF THE AUDIT COMMITTEE
----------------------------------
The Audit Committee shall be composed of at least three Directors/Trustees,
each of whom:
(a) 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 (the "1940
Act");
(b) shall not accept directly or indirectly any consulting, advisory, or
other compensatory fee from the Fund (other than fees for serving on
the Board of Directors/Trustees or any committee thereof); and
(c) shall be financially literate at the time of his or her appointment to
the Audit Committee, as such qualification is interpreted by the Board
of Directors/Trustees in its business judgment, or shall become
financially literate within a reasonable period of time after his or
her appointment to the Audit Committee.
In the event Fund shares are or become listed on a national securities
exchange or are or become quoted on a national market quotation system, the
additional qualification requirements set forth below also shall apply:
(d) each Director/Trustee who is a member of the Audit Committee shall
satisfy the applicable independence requirements for any such national
securities exchange or national market quotation system; and
(e) at least one Director/Trustee who is a member of the Audit Committee
shall have accounting or related financial management expertise as the
Board of Directors/Trustees interprets such qualification in its
business judgment.
The Board of Directors/Trustees shall determine annually: (i) whether at
least one of the members of the Audit Committee is an "audit committee financial
expert," as defined in Item 3 of Form N-CSR and (ii) whether simultaneous
service on more than three public company audit committees by
a member of the Audit Committee would not impair the ability of such member to
serve on the Audit Committee.
II. PURPOSES OF THE AUDIT COMMITTEE
-------------------------------
The Audit Committee, in its capacity as a committee of the Board of
Directors/Trustees, shall:
(a) oversee the accounting and financial reporting processes of the Fund
and each of its series (if applicable) and the Fund's internal control
over financial reporting;
(b) oversee the integrity of the Fund's financial statements and the
independent audit thereof;
(c) oversee, or, as appropriate, assist Board oversight of, the Fund's
compliance with legal and regulatory requirements that relate to the
Fund's accounting and financial reporting, internal control over
financial reporting, and independent audits; and
(d) be responsible for the appointment, compensation, retention, and
oversight of the Fund's independent accountants, including the
resolution of disagreements regarding financial reporting between Fund
management and such independent accountants.
The Audit Committee shall report regularly to the Board of
Directors/Trustees with respect to the matters described in this Audit Committee
Charter and shall make such recommendations to the Board of Directors/Trustees
relating thereto as the Audit Committee deems necessary or appropriate. The
Fund's independent accountants shall report directly to the Audit Committee.
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
authority, responsibilities and duties:
(a) upon submission of an application form by the Fund's independent
accountants to the Public Company Accounting Oversight Board, to
request copies of: (i) such application form; (ii) any material
amendments to such application form; and (ii) the written findings of
2
the Public Company Accounting Oversight Board in connection with that
Board's inspection of the Fund's independent accountants;
(b) to (i) select an accounting firm to (1) serve as the Fund's independent
accountants, (2) audit the Fund's financial statements on an annual
basis, and (3) provide an opinion on an annual basis with respect to
the Fund's financial statements, and (ii) recommend that the members of
the Board of Directors/Trustees who are not "interested persons" of the
Fund, as defined in Section 2(a)(19) of the 1940 Act, ratify such
selection;
(c) to approve, prior to appointment, the engagement of the Fund's
independent accountants to provide other audit services to the Fund or
non-audit services to the Fund, the Fund's investment adviser or any
entity controlling, controlled by, or under common control with the
investment adviser ("adviser affiliate") that provides ongoing services
to the Fund, if the engagement by the adviser affiliate relates
directly to the operations and financial reporting of the Fund;
(d) to develop policies and procedures for pre-approval of the engagement
of the Fund's independent accountants to provide any of the audit or
non-audit services described in Section III(c) above;
(e) to consider whether: (i) the provision of each non-audit service to the
Fund by the Fund's independent accountants is compatible with
maintaining the independence of such independent accountants and (ii)
the provision of each non-audit service to the Fund's investment
adviser or any adviser affiliate that provides ongoing services to the
Fund is compatible with maintaining the independence of such
independent accountants;
(f) to ensure that the Fund's independent accountants 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 No. 1, to
actively engage in a dialogue with, and receive and consider specific
representations from, the Fund's independent accountants with respect
to any disclosed relationships or services that may affect the
objectivity and independence of such independent accountants and, if
deemed appropriate by the Audit Committee, to recommend that the Board
of Directors/Trustees take appropriate action in response to the report
of such independent accountants to satisfy itself of the independence
of such independent accountants;
3
(g) to receive and consider specific representations from the Fund's
independent accountants with respect to audit partner rotation and
conflicts of interest as described in Section 10A(l) of the 1934 Act;
(h) to review the arrangements for annual and special audits and the scope
of such audits with the Fund's independent accountants;
(i) to review and discuss the Fund's audited financial statements and, to
the extent required by applicable law or regulations, the Fund's
semi-annual financial statements with Fund management and the Fund's
independent accountants;
(j) to review and approve the fees proposed to be charged to the Fund by
the Fund's independent accountants for each audit and non-audit
service;
(k) to discuss with the Fund's independent accountants those matters
required by Statement on Auditing Standards Nos. 61 and 90 relating to
the Fund's financial statements and the audit thereof by the
independent accountants, including, without limitation, any adjustment
to such financial statements recommended by such independent
accountants, or any other results of any audit;
(l) to cause to be prepared and to review and submit any report, including
any recommendation of the Audit Committee, required under rules
promulgated by the Securities and Exchange Commission to be included in
any proxy statement used by the Fund;
(m) to review legal and regulatory matters presented by counsel and the
Fund's independent accountants that may have a material impact on the
Fund's financial statements;
(n) to establish and administer policies and procedures relating to: (i)
the hiring by the Fund, its investment adviser, or any administrator
that is an adviser affiliate of employees or former employees of the
Fund's independent accountants; and (ii) the resolution of any
disagreements between Fund management and the Fund's independent
accountants regarding accounting and/or financial reporting policies
and procedures;
(o) to consider information and comments from the Fund's independent
accountants with respect to the Fund's accounting and financial
reporting policies, procedures and internal control over financial
reporting (including the Fund's critical accounting policies and
practices) and management's responses to any such comments;
4
(p) to consider information and comments from the Fund's independent
accountants with respect to, and meet with such independent accountants
to discuss any matters of concern relating to, the Fund's financial
statements, including any adjustments to such statements recommended by
such independent accountants, and to review the independent
accountants' opinion on the Fund's financial statements;
(q) at least annually, to obtain and review a report by the Fund's
independent accountants describing: (i) such independent accountants'
internal quality-control procedures; (ii) any material issues raised by
the most recent internal quality-control review, or peer review, of
such independent accountants, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by such
firm, and any steps taken to deal with any such issues; and (iii) all
relationships between the Fund's independent accountants and the Fund,
the investment adviser and adviser affiliates (to assess the
independence of the Fund's independent accountants);
(r) to receive and consider reports from the Fund's independent accountants
regarding: (i) all critical accounting policies and practices to be
used; (ii) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
Fund management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent accountants; and (iii) other material written
communications between the independent accountants and Fund management,
such as any management letter or schedule of unadjusted differences;
(s) to receive reports from the Fund's principal executive officer and
principal financial officer, or persons performing similar functions,
regarding: (i) all significant deficiencies in the design or operation
of the Fund's internal controls that could adversely affect the Fund's
ability to record, process, summarize, or report financial data and the
identification for the Fund's independent accountants any material
weaknesses in internal controls; (ii) any fraud, whether or not
material, that involves Fund management or other employees or employees
of the investment adviser who have a significant role in the Fund's
internal controls; and (iii) whether or not there were significant
changes in the Fund's internal controls or in other factors that could
significantly affect the Fund's internal controls subsequent to the
date of their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses;
5
(t) to establish procedures for: (i) the receipt, retention, and treatment
of complaints received by the Fund regarding accounting, internal
accounting controls, or auditing matters; and (ii) the confidential,
anonymous submission of concerns by employees of the Fund's investment
adviser, manager, administrator, principal underwriter, or any other
provider of accounting related services for the Fund regarding
questionable accounting or auditing matters;
(u) to address reports received from attorneys relating to the possible
violation of federal or state law or fiduciary duty;
(v) to address reports received from the Fund's independent accountants
relating to the possible violation of federal or state law and to
investigate or initiate an investigation of reports of improprieties or
suspected improprieties in connection with the Fund's accounting or
financial reporting;
(w) to discuss with Fund management and the Fund's independent accountants
policies with respect to risk assessment and risk management;
(x) to review and reassess the adequacy of this Audit Committee Charter on
an annual basis and recommend any changes to the Board of
Directors/Trustees and, to the extent required by applicable law or
regulations, to evaluate the performance of the Audit Committee on an
annual basis; and
(y) to perform such other functions and to have such other powers
consistent with this Audit Committee Charter, the Fund's Articles of
Incorporation or Declaration of Trust, as amended and supplemented, the
Fund's By-laws, as amended, and applicable law, as the Audit Committee
or the Board of Directors/Trustees deems necessary or appropriate.
In the event Fund shares are or become listed on a national securities
exchange or are or become quoted on a national market quotation system, the
Audit Committee also shall be responsible for assisting the Fund, if necessary,
in preparing any written affirmation or written certification required to be
filed with any such national securities exchange or national market quotation
system.
The Audit Committee may delegate any portion of its authority, including
the authority to grant preapprovals of audit related services and permitted
non-audit services, to a subcommittee of one or more members of the Audit
Committee pursuant to preapproval policies and procedures established by the
Audit Committee; provided, however, that the Audit Committee may not
6
delegate approval of the audit required by the Securities Exchange Act of 1934,
as amended. Any decision of such subcommittee of the Audit Committee to grant
preapprovals shall be presented to the full Audit Committee at its next
regularly scheduled meeting.
The function of the Audit Committee is only oversight; it remains the
responsibility of Fund management to maintain appropriate systems for accounting
and internal control over financial reporting, and the responsibility of the
Fund's independent accountants to plan and carry out a proper audit.
Specifically, Fund management is responsible for: (1) the preparation,
presentation and integrity of the Fund's financial statements; (2) the
maintenance of appropriate accounting and financial reporting principles and
policies; and (3) the maintenance of internal control over financial reporting
and other procedures designed to assure compliance with accounting standards and
related laws and regulations. The Fund's independent accountants are responsible
for planning and carrying out an audit consistent with applicable legal and
professional standards and the terms of their engagement letter. Nothing in this
Audit Committee Charter shall be construed to reduce the responsibilities or
liabilities of the Fund's service providers, including the Fund's independent
accountants.
Although the Audit Committee is expected to review appropriately the
matters that come before it, such review of a Fund's financial statements by the
Audit Committee is not an audit, nor does the Committee's review substitute for
the responsibilities of the Fund's management for preparing, or the Fund's
independent accountants for auditing, the financial statements. Members of the
Audit Committee are not employees of the Fund and, in serving on the Audit
Committee, are not, and do not hold themselves out to be, acting as accountants
or auditors. 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.
In discharging their duties, the members of the Audit Committee are
entitled to rely on oral or written information, opinions, reports or
statements, including financial statements and other financial data, if prepared
or presented by: (1) one or more officers of the Fund whom the
Directors/Trustees reasonably believe to be reliable and competent in the
matters presented; (2) legal counsel, public accountants, or other persons as to
matters the Directors/Trustees reasonably believe are within the person's
professional or expert competence; or (3) a Board committee of which the
Directors/Trustees are not members.
IV. MEETINGS
--------
The Audit Committee shall meet regularly with the Fund's independent
accountants (outside the presence of Fund management) and Fund
7
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 at such times as the Audit
Committee believes appropriate. 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. ASSISTANCE FROM FUND MANAGEMENT; AUTHORITY TO ENGAGE ADVISERS; FUNDING
----------------------------------------------------------------------
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 power and authority to take all action it
believes necessary or appropriate to discharge its responsibilities, including
the power and authority to retain independent counsel and other advisers. The
Fund shall provide for appropriate funding, as determined by the Audit Committee
as a committee of the Board of Directors/Trustees, for payment of: (i)
compensation to the Fund's independent accountants or any other accounting firm
engaged for the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Fund, (ii) compensation to any
advisers employed by the Audit Committee under this Section V, and (iii)
ordinary administrative expenses of the Audit Committee that are necessary or
appropriate in carrying out its responsibilities.
DATED: APRIL 11, 2000
REVISED: JULY 29, 2004
APPENDIX A
Royce Capital Fund
Royce Focus Trust, Inc.
Royce Micro-Cap Trust, Inc.
Royce Value Trust, Inc.
The Royce Fund
8
EXHIBIT B
Charter of the Nominating Committee
of the Board of Directors/Trustees for
The Royce Funds Listed in Appendix A Hereto
ORGANIZATION
The Nominating Committee (the "Committee") of the Board of Directors/Trustees
for the registered investment companies (each, a "Fund") listed on Exhibit A
attached hereto shall be composed solely of Directors/Trustees who are not
"interested persons" of the Fund as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and who are
"independent" as defined in the applicable listing standards of the national
securities exchange or national market quotation system (each, an "Exchange") on
which a Fund is listed or quoted (the "Independent Directors"). The Board of
Directors/Trustees of the Fund (the "Board") shall appoint the members of the
Committee (which may or may not be all of the Independent Directors) and shall
designate the Chairman of the Committee. The Committee shall have authority to
retain its own counsel and other advisers the Committee deems appropriate and
shall have the sole authority to approve the compensation and other terms of
their retention.
RESPONSIBILITIES
The Committee shall identify individuals qualified to serve as Independent
Directors of the Fund and shall recommend its nominees for consideration by the
full Board.
IDENTIFICATION AND EVALUATION OF POTENTIAL NOMINEES
In identifying and evaluating a person as a potential nominee to serve as an
Independent Director of the Fund, the Committee should consider among other
factors it may deem relevant:
o the contribution which the person can make to the Board, with
consideration being given to the person's business and professional
experience, education and such other factors as the Committee may
consider relevant;
o the character and integrity of the person;
o whether or not the person is an "interested person" as defined in the
1940 Act and whether the person is otherwise qualified under applicable
laws and regulations to serve as a Director or Independent Director of
the Fund;
o whether or not the person has any relationships that might impair his
independence, such as any business, financial or family relationships
with Fund management, the investment adviser of the Fund, Fund service
providers or their affiliates;
o whether or not the person is financially literate pursuant to the
applicable Exchange's audit committee membership standards;
o whether or not the person serves on boards of, or is otherwise
affiliated with, competing financial service organizations or their
related investment company complexes;
o whether or not the person is willing to serve as, and willing and able
to commit the time necessary for the performance of the duties of a
Director of the Fund;
o whether or not the selection and nomination of the person would be
consistent with the requirements of the Fund's retirement policies.
While the Committee is solely responsible for the selection and nomination of
the Fund's Independent Directors, the Committee shall review and consider
nominations for the office of Director made by management and by Fund
stockholders as it deems appropriate. Stockholders who wish to recommend a
nominee should send nominations to the Secretary of the Fund which include
biographical information and set forth the qualifications of the proposed
nominee.
QUORUM
A majority of the members of the Committee shall constitute a quorum for the
transaction of business, and the act of a majority of the members of the
Committee present at any meeting at which there is quorum shall be the act of
the Committee.
NOMINATION OF DIRECTORS
After a determination by the Committee that a person should be selected and
nominated as an Independent Director of the Fund, the Committee shall present
its recommendation to the full Board for its consideration and, if necessary, to
the Independent Directors.
MEETINGS
The Committee may meet either on its own or in conjunction with meetings of the
Board. Meetings of the Committee may be held in person, by video conference or
by conference telephone. The Committee may take action by unanimous written
consent in lieu of a meeting.
Adopted: February 10, 2004
2
APPENDIX A
Royce Capital Fund
Royce Focus Trust, Inc.
Royce Micro-Cap Trust, Inc.
Royce Value Trust, Inc.
The Royce Fund
3
RFT-PS-04
ROYCE FOCUS TRUST, INC.
PROXY 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 Charles M. Royce and John E. Denneen, 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 4, 2004 at the Annual Meeting of Stockholders of
Royce Focus Trust, Inc. to be held on September 28, 2004, 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
Proposal 1.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) on other side. 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 FOCUS TRUST, INC.
---------------------------------------------
With- For All
For hold Except
/ / / / / /
1. ELECTION OF DIRECTORS
Mark R. Fetting, Richard M. Galkin
and Arthur S. Mehlman
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 nominee's name. Your
shares will be voted for the
remaining nominees.
2. THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
Please be sure to sign and date this Proxy. Date: Mark box at the right [ ]
if an address change
or comment has been
noted on the reverse
side of this card.
Stockholder sign here Co-owner sign here RECORD DATE SHARES:
--------------------- --------------------- ---------------------
CONTROL NUMBER:
---------------------
ROYCE FOCUS TRUST, INC.
PROXY PROXY
6.00% 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 Charles M. Royce and John E. Denneen, 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 6.00% Cumulative Preferred Stock of
the Fund held of record by the undersigned on August 4, 2004 at the Annual
Meeting of Stockholders of Royce Focus Trust, Inc. to be held on September 28,
2004, 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
Proposal 1.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) on other side. 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 FOCUS TRUST, INC.
---------------------------------------------
With- For All
For hold Except
/ / / / / /
1. ELECTION OF DIRECTORS
Mark R. Fetting, Richard M. Galkin,
Stephen L. Isaacs, David L. Meister
and Arthur S. Mehlman
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 nominee's name. Your
shares will be voted for the
remaining nominees.
2. THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
Please be sure to sign and date this Proxy. Date: Mark box at the right [ ]
if an address change
or comment has been
noted on the reverse
side of this card.
Stockholder sign here Co-owner sign here RECORD DATE SHARES:
--------------------- --------------------- ---------------------
CONTROL NUMBER:
---------------------