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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
THE ROYCE FUND
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) 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 (Set forth the
amount on which the filing fee is calculated and state how it was
determined):
.................................................................
4) Proposed maximum aggregate value of transaction:
.................................................................
5) Total fee paid:
.................................................................
[X] Fee paid previously with preliminary materials.
[ ] 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:
.................................................................
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The Royce Funds
1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268
May 20, 1996
Dear Shareholder:
Enclosed is a Proxy Statement describing the items to be voted on at a
Special Meeting of Shareholders of The Royce Fund. Certain of the items apply to
only one or several Funds, while others apply to The Royce Fund overall. IN ALL
CASES, YOUR VOTE IS EXTREMELY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES THAT
YOU OWN.
The items include proposed changes to the investment policies of certain of
the Funds to bring them current with the other Funds and a proposed change for
all but one of the Funds to permit investment of up to 5% of a Fund's assets in
warrants, rights and options. This change will give these Funds the ability to
invest in, among other things, index options in order to be fully invested in
the market while holding cash for specific opportunities or for redemption
protection.
A change in the Trust's state of organization from Massachusetts to
Delaware is also proposed. This change, coupled with the planned merger of
Pennsylvania Mutual Fund into The Royce Fund (Delaware), should enhance the
Trust's operating abilities and present significant cost saving to the combined
entities.
I BELIEVE THAT EACH OF THE PROPOSALS IS IMPORTANT TO THE FUNDS' OPERATIONS
AND WILL BE BENEFICIAL TO THE SHAREHOLDERS. PLEASE VOTE YOUR SHARES PROMPTLY BY
USING THE ENCLOSED PROXY CARD AND POSTAGE-PAID ENVELOPE. Be sure to complete and
sign each proxy card. As the date of the meeting approaches, if we have not
received your vote, you may receive a call from Shareholder Communications
Corporation, which has been retained to assist shareholders in the voting
process.
Sincerely,
CHARLES M. ROYCE
President
PS: If you have any questions, please call Investor Information at
1-800-221-4268.
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
THE ROYCE FUND
- ----------------------------------------------------------
<TABLE>
<S> <C> <C>
ROYCE VALUE FUND ROYCE LOW-PRICED STOCK FUND ROYCE TOTAL RETURN FUND
ROYCE PREMIER FUND ROYCE MICRO-CAP FUND ROYCE GLOBAL SERVICES FUND
ROYCE EQUITY INCOME FUND ROYCE GIFTSHARES FUND THE REVEST GROWTH & INCOME FUND
</TABLE>
------------------------
To the Shareholders of
THE ROYCE FUND: ALL SERIES
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of all series
(the 'Funds' or 'series') of THE ROYCE FUND (the 'Trust') will be held at the
offices of the Trust, 1414 Avenue of the Americas, New York, New York, on
Wednesday, June 26, 1996, at 2:00 p.m., Eastern time. The purpose of the Special
Meeting is to consider and act on the following proposals, and to transact such
other business as may properly come before the meeting or any adjournments.
Unless otherwise specified, each proposal relates to all series of the Trust:
1. To permit Royce Value Fund to borrow money temporarily for certain
purposes (Royce Value Fund shareholders only);
2. To permit loans of portfolio securities (Royce Value, Premier and
Micro-Cap Fund shareholders);
3. To amend the investment restriction relating to warrants, rights
and options to permit investment of up to 5% of total assets in warrants,
rights and options (shareholders of all Funds except The REvest Growth &
Income Fund);
4. To approve the conversion of the Trust from a Massachusetts
business trust to a Delaware business trust (shareholders of all Funds);
5. To elect a board of seven trustees for the Trust (shareholders of
all Funds); and
6. To ratify the selection of Coopers & Lybrand LLP as independent
certified public accountants of the Trust (shareholders of all Funds).
Please note that the form of proxy provides a space on which you may grant
or withhold authority to vote in the election of trustees and act on each of the
other proposals.
PROXIES WHICH ARE PROPERLY EXECUTED BUT NOT OTHERWISE MARKED WILL BE VOTED
IN FAVOR OF THE ELECTION OF THE PROPOSED TRUSTEES AND IN FAVOR OF EACH OF THE
OTHER PROPOSALS.
The Board of Trustees has fixed the close of business on May 16, 1996 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Special Meeting and any adjournments.
The Funds' Annual Reports to Shareholders for the year ended December 31,
1995 were previously mailed to shareholders, and copies are available upon
request, without charge, by writing to The Royce Fund at 1414 Avenue of the
Americas, New York, New York 10019 or calling toll free at 1-800-221-4268.
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YOUR VOTE IS IMPORTANT
PLEASE SPARE THE TRUST AND YOUR FUND THE UNNECESSARY EXPENSE AND DELAY OF
ADDITIONAL PROXY SOLICITATIONS. IF YOU DO NOT NOW EXPECT TO ATTEND THE SPECIAL
MEETING, PLEASE INDICATE 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). THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IF YOU ATTEND THE MEETING.
By order of the Board of Trustees.
DANIEL A. O'BYRNE
Assistant Secretary
May 20, 1996
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SPECIAL MEETING OF SHAREHOLDERS
OF
THE ROYCE FUND
1414 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
---------------------------------
PROXY STATEMENT
---------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of The Royce Fund (the 'Trust'), to be used at
the Special Meeting of Shareholders of all of its series (the 'Funds' or
'series'). The meeting will be held at the offices of the Trust, 1414 Avenue of
the Americas, New York, New York 10019 on June 26, 1996 at 2:00 p.m., Eastern
time, for the purposes set forth in the Notice of Meeting.
The purpose of the meeting is to vote on certain proposed changes to be
made with respect to the Trust and its Funds. The Board asks that shareholders
approve changes to the investment policies of one or more of the Funds to permit
certain borrowings, securities lending and investment in warrants, rights and
options. In addition, shareholders of all of the Funds are being asked to
approve a change in the Trust's state of organization, using an Agreement and
Plan of Merger to convert the Trust to a Delaware business trust, which should
enhance the Trust's operating abilities. In connection with the merger, another
Quest Advisory Corp.-advised mutual fund, Pennsylvania Mutual Fund ('PMF'), will
merge into the new Delaware business trust and become a separate series of the
new trust. Finally, shareholders of all of the Funds will vote on seven nominees
for Trustees and to ratify the Board's selection of independent accountants for
the Funds.
Your proxy is being solicited by the Board of Trustees of The Royce Fund,
and you are asked to vote on the following matters, depending on which Fund(s)
you own:
<TABLE>
<CAPTION>
ITEM PROPOSAL SHAREHOLDERS VOTING
- ---- -------------------------------------------------- --------------------------------------------------
<C> <S> <C>
1 Permit temporary borrowing for extraordinary or
emergency purposes.............................. Value Fund
2 Permit collateralized securities lending.......... Value, Premier and Micro-Cap Funds
3 Permit investment of 5% of assets in warrants,
rights and options.............................. All Fund except The REvest Growth & Income Fund
4 Conversion to Delaware business trust............. All Funds
5 Elect Board of Trustees........................... All Funds
6 Ratify selection of accountants................... All Funds
</TABLE>
Timely, properly-executed proxies will be voted as you instruct. If you
give no voting instructions, your shares will be voted for the election of all
the nominees named, and in favor of each of the proposals described, in this
Proxy Statement. Each proposal being considered at the Meeting will be approved
only if a sufficient number of votes are cast in favor of that proposal.
Accordingly, votes to abstain and votes against will have the same effect.
Please do not write on the proxy card except for voting, dating and
signing. A proxy may be revoked at any time prior to its exercise by written
notice to the Fund, by executing a subsequent proxy or by voting in
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person at the Meeting, whether or not a previous proxy has been filed. The
Meeting may be adjourned to a later date in the event a quorum or sufficient
votes have not been obtained by the date of the Meeting.
The costs of the Meeting, including the solicitation of proxies, will be
paid by the Funds. The Funds will reimburse brokerage firms, custodians,
nominees, fiduciaries and others, where applicable, for their expenses in
forwarding solicitation material to the beneficial owners of shares. The
principal solicitation of proxies will be by the mailing of this Proxy Statement
on or about May 22, 1996, but proxies may also be solicited by telephone and
personal contact by representatives of the Trust and by regular employees of
Quest Advisory Corp. The Trust may also engage the services of a professional
solicitor, such as Shareholder Communications Corporation, for help in securing
shareholder representation at the Meeting.
Shareholders of record at the close of business on May 16, 1996, will be
entitled to vote at the Meeting. Each shareholder will be entitled to one vote
for each share held on that date. The vote required for the approval of Items 1
through 3 (changes to fundamental investment policies) is a majority of each
affected Fund's outstanding voting securities, which is the lesser of (i) a
majority of the Fund's outstanding voting securities or (ii) 67% or more of
those represented if more than 50% of the Fund's shares are represented at the
meeting. Item 4 requires the affirmative vote of a majority of the issued and
outstanding shares of all of the Funds voting together as if the Trust had no
separate series. Items 5 and 6 require the affirmative vote of a majority of the
shares of all of the Funds so voting that are present in person or represented
by proxy at the Meeting.
INFORMATION ABOUT SHARE OWNERSHIP
On May 16, 1996, the Trust had 81,325,900 shares of beneficial interest of
all of the Funds issued and outstanding, and there were issued and outstanding
the following number of shares of beneficial interest for each of the Funds:
Value -- 14,970,343; Premier -- 38,758,488; Equity Income -- 6,265,424;
Low-Priced Stock -- 1,704,835; Micro-Cap -- 15,518,074; GiftShares -- 100,214;
Total Return -- 554,166; Global Services -- 318,108; and The REvest Growth &
Income -- 3,136,245.
As of the same date, the persons listed in Appendix 1 to this Proxy
Statement were known to the Trust to be the record or beneficial owners of 5% or
more of the outstanding shares of certain Funds.
As of May 16, 1996, all of the trustees, nominees and officers of the Trust
as a group beneficially owned less than 1% of the outstanding shares of each of
Royce Value, Equity Income, Premier and Micro-Cap Funds. The group beneficially
owned approximately 43.8% of the outstanding shares of Royce Low-Priced Stock,
12.5% of the outstanding shares of Total Return, 58.8% of the outstanding shares
of Global Services and 2.8% of the outstanding shares of The REvest Growth &
Income Fund. In addition, W. Whitney George, a Vice President of the Trust and
Quest Advisory Corp., owned as trustee for members of Charles M. Royce's
immediate family, 99.9% of the outstanding shares of Royce GiftShares Fund.
ITEM 1. TO PERMIT ROYCE VALUE FUND TO BORROW MONEY
TEMPORARILY FOR CERTAIN PURPOSES
VOTING FUND: VALUE
The Board recommends that the Fund's shareholders approve a change in the
fundamental investment policy of the Fund concerning the borrowing of money.
Specifically, Royce Value Fund, which is currently prohibited from borrowing
money for any purpose, would be permitted to 'borrow money from banks as a
2
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temporary measure for extraordinary or emergency purposes in an amount not
exceeding 5% of the Fund's total assets.'
This change would conform Royce Value Fund's policy on borrowing to the
standard for all of the other Funds. Having a uniform policy on borrowing would
aid management's administration of the Trust. In addition, the Board believes
this change is in the best interests of shareholders since it affords the Fund
greater flexibility to meet shareholder redemption requests should the need
arise. This flexibility would help the Fund avoid liquidating securities at
unfavorable prices or times in the unlikely event it were faced with substantial
shareholder redemptions. Adoption of the proposal is not expected to affect the
way in which the Fund is managed.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL.
ITEM 2. TO PERMIT LOANS OF PORTFOLIO SECURITIES
VOTING FUNDS: VALUE, PREMIER AND MICRO-CAP
Royce Value, Premier and Micro-Cap Funds are currently prohibited from
making 'loans, except for purchases of portions of issues of
publicly-distributed bonds, debentures and other securities, whether or not such
purchases are made upon the original issuance of such securities.' The Board
proposes to amend this investment restriction to enable the Funds to lend their
portfolio securities to brokers, dealers and other permissible institutions.
Such loans would be continuously secured by cash or other allowable forms of
collateral equal at all times to at least 100% of the value of the securities
loaned. No securities loans would be made if, as a result, the aggregate of such
loans would exceed 25% of the value of the Fund's total assets.
The purpose of lending portfolio securities would be to attempt to increase
a Fund's income. The advantage of such loans is that the Fund continues to
receive the equivalent of the interest earned or dividends paid by the issuers
on the loaned securities while at the same time earning interest on the cash or
equivalent collateral. Securities loans are usually made to broker-dealers and
other financial institutions to facilitate their delivery of such securities.
Loans of portfolio securities by a Fund would be subject to certain
guidelines prescribed, and from time to time modified, by the staff of the
Securities and Exchange Commission. Under present guidelines, for example, the
borrower must provide the Fund with collateral equal at all times to at least
100% of the value of the securities loaned. If the market value of the loaned
securities increases beyond the value of the collateral, the borrower must
provide the Fund with additional collateral; if that value declines, the
borrower is entitled to the return of its collateral to the extent of the
decline. Under present guidelines, the types of collateral permitted are cash,
short-term Government securities, letters of credit and trust receipts.
A Fund could increase its income in connection with portfolio securities
loans in several ways. First, the Fund could receive a negotiated loan fee from
the borrower. The second method (not available when letters of credit and/or
trust receipts are used as collateral) is to invest cash collateral in certain
securities and receive interest on them or to receive interest on the securities
held as collateral; in either case, the interest received may be shared with the
borrower.
The Trust expects to enter into an agreement with State Street Bank and
Trust Company, the custodian of the Funds' assets, which will provide finders,
custodial and administrative services to the Funds in connection with securities
lending activities. For these services, State Street will be entitled to receive
reasonable fees which may include a portion of the loan fee paid by the borrower
and a portion of earnings from investments of cash collateral or earnings on the
securities held as collateral.
3
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The risks of lending portfolio securities, as with other extensions of
secured credit, consist of possible delays in receiving additional collateral or
in the recovery of the loaned securities or the possible loss of rights in the
collateral should the borrower fail financially. Loans of portfolio securities
would be made to firms deemed by Quest to be of good credit standing and would
not be made unless, in Quest's judgment, the earnings from such loans would
justify the risk.
Under the terms of the securities loans the Funds would make, each Fund
would have the right to call the loan at any time. At the present time, the
guidelines permit the voting rights attendant to the securities loaned to pass
to the borrower, although they require that such loans be called so that the
securities may be voted by the Fund if a material event affecting the investment
occurs.
The Board of Trustees believes that the authority to lend portfolio
securities may enhance each Fund's earnings potential and is, therefore, in the
best interests of the Funds and their shareholders. The Board therefore proposes
that the current investment restriction be revised, consistent with the
provisions for Royce Equity Income, Low-Priced Stock, GiftShares, Total Return
and Global Services Funds, to allow Royce Value, Premier and Micro-Cap Funds
each to 'loan up to 25% of their respective assets to qualified brokers, dealers
or institutions for their use relating to short sales or other securities
transactions, provided that such loans are fully collateralized at all times.'
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL.
ITEM 3. TO PERMIT INVESTMENT OF UP TO 5% OF ASSETS IN
WARRANTS, RIGHTS AND OPTIONS
VOTING FUNDS: ALL FUNDS EXCEPT THE REVEST GROWTH & INCOME FUND
The current investment restriction provides that the Funds may not purchase
'any warrants, rights or options, except that (i) all of the Funds other than
Royce Value Fund may, if no value is assigned thereto, acquire warrants in units
with or attached to debt securities or non-convertible preferred stock, and (ii)
Royce Low-Priced Stock, GiftShares, Total Return and Global Services Funds may
also invest up to 5% of their respective net assets in warrants, valued at the
lower of cost or market, provided that warrants that are not listed on the New
York or American Stock Exchanges shall not exceed 2% of such Funds' respective
net assets.'
The Board has determined that this policy unnecessarily restricts the Funds
from taking advantage of potential investment opportunities and risk management
techniques, and the change recommended below is designed to provide greater
flexibility to the Funds.
It is proposed that this restriction be revised uniformly to provide that
no Fund may 'invest more than 5% of its total assets in warrants, rights and
options.'
WARRANTS, RIGHTS AND OPTIONS
A warrant, right or call option entitles the holder to purchase a given
security within a specified period for a specified price and does not represent
an ownership interest. A put option gives the holder the right to sell a
particular security at a specified price during the term of the option. These
securities have no voting rights, pay no dividends and have no liquidation
rights. In addition, their market prices do not necessarily move parallel to the
market prices of the underlying securities.
The sale of warrants, rights or options held for more than one year
generally results in a long-term capital gain or loss to the Fund, and the sale
of warrants, rights or options held for less than one year
4
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generally results in a short-term capital gain or loss. The holding period for
securities acquired upon exercise of a warrant, right or call option, however,
generally begins on the day after the date of exercise, regardless of how long
the warrant, right or option was held. The securities underlying warrants,
rights and options could include shares of common stock of a single company or
securities market indices representing shares of the common stocks of a group of
companies, such as the S&P 600.
REASONS FOR PROPOSED CHANGES
The Board believes that having the ability to invest in warrants, rights
and call options on a given security would allow the Funds to hold an interest
in a security without having to commit assets equal to the market price of the
underlying security and, in the case of securities market indices, to
participate in a market without having to purchase all of the securities
comprising the index. Put options, whether on shares of common stock of a single
company or on a securities market index, would permit the Funds to protect the
value of a portfolio security against a decline in its market price and/or to
benefit from an anticipated decline in the market price of a given security or
of a market. Thus, investing in warrants, rights and options would permit the
Funds to incur additional risk and/or to hedge against risk and, therefore,
represents a useful investment technique. By limiting the amount of its total
assets that may be invested in warrants, rights and options to 5%, a Fund would
not put a substantial portion of its assets at risk in those cases where the
purpose of such investments is speculative rather than hedging.
Notwithstanding any approval granted by shareholders, the securities or
'Blue Sky' laws of several states may limit the extent to which the Funds may
invest in unlisted warrants and options, and the Funds may still be precluded
from taking maximum advantage of the techniques described above until such time
as the states remove any barriers that may now exist. The operating policies of
the Funds will reflect any such limitations on investment.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL.
ITEM 4. CONVERSION OF THE TRUST'S FORM OF ORGANIZATION
TO A DELAWARE BUSINESS TRUST
VOTING FUNDS: ALL
THE ROYCE FUND MERGER INTO A DELAWARE BUSINESS TRUST
The Board has approved a proposal to convert the Trust from a Massachusetts
business trust to a Delaware business trust. The purpose of the conversion is to
modernize the Trust's governing and operating structure and thereby to allow the
Trust to avail itself, for the benefit of its Funds and their shareholders, of
various provisions that either do not exist or are not explicit under the laws
governing Massachusetts business trusts. For example, while the risk of
shareholder liability is not great, Delaware law appears to provide shareholders
with greater protection from liabilities incurred by a business trust. In
addition, there are provisions of Delaware law that should serve to reduce costs
of operation as new technologies become available, such as electronic
communications. Other provisions include the ability of the Trust or its Fund
series to merge or consolidate with other entities and to deal with
noninvestment-related operational issues without a shareholder vote, which
affords enhanced flexibility and saves costs the Funds would otherwise incur.
If approved by shareholders, the conversion would be effected at the close
of business on June 28, 1996, through a merger of the Trust and its Funds with
and into a newly-organized Delaware business trust also
5
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named The Royce Fund (the 'New Trust') and having Fund series identical to and
having the same names as those of the Trust (each such Fund series of the New
Trust, a 'New Fund' and collectively, the 'New Funds'). The New Trust was formed
on April 12, 1996. The merger is described in an Agreement and Plan of Merger
(the 'Plan') in the form attached to this Proxy Statement as Exhibit A.
When the merger of the Trust with and into the New Trust becomes effective,
the assets and liabilities of each Fund will automatically be reallocated to its
respective New Fund counterpart, and the then outstanding shares of beneficial
interest of each Fund will automatically become identical shares of beneficial
interest of its respective New Fund counterpart. These mergers will be tax-free
reorganizations under Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended, so that neither the Funds nor their shareholders will recognize any
income, gain or loss as a result of the mergers, and the tax bases or costs of
the Funds' portfolio securities and other assets and of their shareholders'
shares will carry over unchanged. The mergers will not require action by any
shareholder, so that shareholder accounts in the Funds will automatically become
shareholder accounts in their respective New Fund counterparts, and certificates
representing shares of a Fund will automatically represent shares of its New
Fund counterpart.
Since the assets and liabilities of the Trust and of each Fund will be
automatically transferred to and assumed by, respectively, the New Trust and
each New Fund counterpart, the Funds' present investment advisory agreements and
distribution arrangements with their respective investment advisers and
distributor will continue in full force and effect, and the newly-elected
trustees of the Trust, who are also trustees of the New Trust and, except for
Thomas R. Ebright, PMF, will automatically become trustees of the New Trust. The
officers of the New Trust, who are also the officers of the Trust and PMF, will
also continue in office. Following these mergers, each New Fund will continue to
have the same stated investment objectives, policies and limitations as its Fund
counterpart currently has, subject to the changes in investment policy being
voted on in this Proxy Statement.
PENNSYLVANIA MUTUAL FUND MERGER AND COST SAVINGS
If the Trust's shareholders approve its conversion into a Delaware business
trust, PMF, an open-end management investment company that invests in the equity
securities of small and micro-cap companies and whose investment adviser is
Quest Advisory Corp., will concurrently merge with and into its own separate
counterpart series of the New Trust. PMF shareholders are not required to vote
on the merger.
As of March 31, 1996, PMF had net assets of approximately $581,000,000 and
more than 22,000 shareholders, and the Funds had aggregate net assets of
approximately $657,700,000 and more than 29,000 shareholders. It is expected
that both the Funds and PMF will together realize substantial cost savings as a
result of the mergers and be able to take advantage of greater economies of
scale in their operations.
The Funds and PMF will share the costs and expense of the mergers in
proportion to their respective net assets.
GENERAL INFORMATION ON DELAWARE BUSINESS TRUSTS
As a Massachusetts business trust, the Trust is governed by a Declaration
of Trust under Massachusetts law. Under Delaware law, a business trust has a
Trust Instrument as its governing document. New Trust and New Fund operations
will continue to be subject to the Investment Company Act of 1940 (the '1940
Act') and other laws and rules which the Securities and Exchange Commission has
been charged with overseeing for the benefit of public investors. The business
and affairs of the New Trust will, like those of the Trust, be managed by or
under the direction of the trustees, who serve indefinite terms and who have all
powers
6
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necessary to carry out that responsibility. The responsibilities, powers and
fiduciary duties of the trustees of the New Trust will be substantially the same
as those of the trustees of the Trust.
Delaware law appears to provide somewhat greater protection to shareholders
from personal liability for obligations of the New Trust and their respective
New Funds than does Massachusetts law. For example, although Massachusetts law
is silent on the subject, Delaware law states that a shareholder of a Delaware
business trust is entitled to the same limitation of personal liability that
accrues to stockholders of Delaware for-profit corporations. Because of this and
other safeguards, such as recognizing the efficacy of a statement in contracts
of a Delaware business trust that the trust's obligations under the contract may
be enforced only against the trust's assets and not its trustees, officers or
shareholders, the Board believes that Delaware law should make the risk of
personal liability to shareholders even more remote than it is under
Massachusetts law.
The Royce Fund as a Delaware business trust will not hold annual
shareholder meetings, just as it does not currently hold such meetings as a
Massachusetts business trust. Shareholders will have the power to vote only with
respect to the election or removal of trustees, the approval of any new or
amended investment advisory contract for their respective New Funds and on other
matters relating to the New Trust and/or their respective New Funds as may be
required or authorized by law, the Trust Instrument or the Bylaws or as
determined by the trustees, such as changes in a New Fund's fundamental
investment policies. Future transactions such as mergers of the New Trust or of
a New Fund may not require a shareholder vote.
The business and affairs of the New Trust will be managed under the
direction of the newly-elected trustees. The trustees of the New Trust will hold
office without limit in time except that: (i) any trustee may resign; (ii) any
trustee may be removed with or without cause at any time by written instrument
signed by at least two-thirds of the other trustees; (iii) any trustee who
requests to be retired, or who has become physically or mentally incapacitated
or is otherwise unable to serve, may be retired by written instrument signed by
a majority of the other trustees; and (iv) any trustee may be removed with or
without cause at any meeting of shareholders by a vote of two-thirds of the
outstanding shares of the New Trust at a meeting duly called for the purpose,
which meeting will be held upon the written request of the holders of at least
10% of the New Trust's outstanding shares. Whenever a vacancy shall exist among
the trustees, the remaining trustees may appoint any person as they determine in
their sole discretion to fill that vacancy, consistent with the limitations
under the 1940 Act. These procedures are similar (but not identical) to the
procedures for the Trust.
With respect to the removal of a trustee initiated by a shareholder, upon
the written request by 10 or more shareholders of the New Trust's series, who
have been shareholders for at least 6 months and who hold shares constituting at
least 1% of the outstanding shares of the New Trust's series, stating that such
shareholders wish to communicate with the New Trust's other shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
the removal of a trustee, the New Trust, like the Trust, is required to provide
a list of its shareholders or to disseminate appropriate materials (at the
expense of the requesting shareholders). Except as provided above, the trustees
may continue to hold office and appoint their successors.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL.
In the event the required vote is not achieved, the Trust will continue
operations as a Massachusetts business trust.
7
<PAGE>
<PAGE>
ITEM 5. ELECTION OF TRUSTEES
VOTING FUNDS: ALL
Seven individuals have been nominated for election as trustees of the
Trust. Each nominee has consented to serve if elected at the Special Meeting.
If elected, the trustees will hold office for an unlimited period of time.
However, any trustee may resign, and any trustee may be removed with or without
cause at any time by a written instrument signed by at least two-thirds of the
other trustees. In case of a vacancy on the Board, the remaining trustees may,
in their discretion, appoint any person to fill the vacancy. If at any time less
than a majority of the trustees have been elected by shareholders, the trustees
then in office will promptly call a meeting of shareholders for the purpose of
electing trustees. Other than when that situation occurs, no shareholder
meetings will be held for the purpose of electing trustees unless otherwise
required.
BUSINESS EXPERIENCE
Each of the nominees for trustee is listed below. Messrs. Royce, Galkin,
Isaacs and Meister currently serve as trustees to the Trust. An asterisk (*)
next to a name indicates that the nominee is an 'interested person' of the Trust
and/or Quest, as defined in the 1940 Act.
Charles M. Royce* (age 56), is the President, Secretary, Treasurer and sole
director and sole voting shareholder of Quest, the Trust's principal investment
adviser. He became affiliated with Quest in June 1972, and has served as its
President and Treasurer since November 1972. Mr. Royce also manages three
private investment partnerships through Quest Management Company ('QMC'), a
registered investment adviser, of which he is the managing general partner.
Thomas R. Ebright* (age 51), has been a Vice President of Quest since
September 1981. He has also been President, Treasurer, a director and principal
shareholder of Royce, Ebright & Associates, Inc., the investment adviser to a
series of The Royce Fund, since June 1994. He was a general partner of QMC and
its predecessor until June 1994. Mr. Ebright is also a director of Atlantic Pro
Sports, Inc. and of the Strasburg Rail Road Co. since March 1993 and was the
President and principal owner of Baltimore Professional Hockey, Inc. until May
1993.
Hubert L. Cafritz (age 72) is a financial consultant.
Richard M. Galkin (age 57) is a private investor and President of Richard
M. Galkin Associates, Inc., tele-communications consultants.
Stephen L. Isaacs (age 56) is an attorney, Director of Columbia University
Development Law and Policy Program, a Professor at Columbia University and
President of Stephen L. Isaacs Associates, Consultants.
William L. Koke (age 61) is a registered investment adviser and financial
planner with Shoreline Financial Consultants.
David L. Meister (age 56) has been consultant to the communications
industry since January 1993 and an executive officer of Digital Planet Inc. from
April 1991 to December 1992.
All of the nominees are also trustees of PMF and, except for Messrs.
Cafritz and Koke, directors of Royce Value Trust, Inc. and Royce Micro-Cap
Trust, Inc. Mr. Royce is also President and Treasurer of Royce Micro-Cap Trust,
Inc. ('RMT'), Pennsylvania Mutual Fund ('PMF') and The Royce Fund ('TRF'),
registered management investment companies. Mr. Ebright is also a Vice President
of TRF and a Vice President and Treasurer, and Mr. Royce is also the sole
shareholder and director and Secretary, of Quest Distributors, Inc., the
distributor of TRF's shares.
8
<PAGE>
<PAGE>
The Board of Trustees has an Audit Committee to review the scope and
results of each Fund's annual audit with the Trust's independent accountants.
The Audit Committee is also responsible for recommending the selection and
nomination of independent auditors for the Funds. Messrs. Galkin, Isaacs and
Meister serve on the Audit Committee.
The Board met five times during the year ended December 31, 1995, and each
trustee attended all of the meetings.
For the year ended December 31, 1995, the following trustees received
compensation from the Trust and the three other funds in the group of registered
investment companies comprising The Royce Funds for services as a
trustee/director on the funds' Boards:
<TABLE>
<CAPTION>
TOTAL COMPENSATION
COMPENSATION FROM THE ROYCE
NAME FROM TRUST FUNDS
- -------------------------------------------------------------------------- ------------ ------------------
<S> <C> <C>
Richard M. Galkin......................................................... $ 17,500 $ 60,000
Stephen L. Isaacs......................................................... 17,500 60,000
David L. Meister.......................................................... 17,500 60,000
</TABLE>
It is intended that the enclosed proxy will be voted in favor of the
election as trustees of the nominees listed above, unless such authority has
been withheld on the proxy. Shareholders may withhold authority on any of the
nominees by striking through his name on the proxy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR ALL NOMINEES.
ITEM 6. RATIFICATION OF INDEPENDENT ACCOUNTANTS
VOTING FUNDS: ALL
At the meeting, the shareholders will be asked to ratify the selection by
the Board of Trustees, including a majority of the trustees who are not
'interested persons' (as such term is defined in the 1940 Act), of Coopers &
Lybrand LLP, independent certified public accountants, to serve as the Funds'
auditors for the year ending December 31, 1996.
Coopers & Lybrand LLP has informed the Trust that neither Coopers & Lybrand
LLP nor any of its partners has any direct or indirect financial interest in any
of the Funds except as auditors and independent public accountants. Coopers &
Lybrand LLP has served as the Funds' independent public accountants since the
Funds commenced operations. Representatives of Coopers & Lybrand LLP are not
expected to be present at the meeting, but have been given an opportunity to
make a statement if they so desire, and will be available should any matter
arise requiring their participation.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL.
OTHER MATTERS
The trustees do not know of any other matters to be brought before the
meeting. If any matters not referred to in the Notice of Meeting should be
presented for consideration and/or action, the persons named in the proxy intend
to take such action in regard to such matters as in their judgment seems
advisable.
SHAREHOLDER PROPOSALS
The Trust does do not hold annual shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a subsequent
shareholder meeting should send their written proposals to the Secretary of the
Trust, 1414 Avenue of the Americas, New York, New York 10019.
9
<PAGE>
<PAGE>
APPENDIX 1
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER TYPE OF OUTSTANDING
FUND OF SHARES OWNERSHIP SHARES
- ----------------------------------------------------------------------- ---------- --------------- -------------
<S> <C> <C> <C>
Royce Premier Fund
Charles Schwab & Co., Inc. ......................................... 14,762,041 Record 38.1%
101 Montgomery Street
San Francisco, CA 94104
Royce Equity Income Fund
Charles Schwab & Co., Inc. ......................................... 2,260,699 Record 36.0%
101 Montgomery Street
San Francisco, CA 94104
Royce Low-Priced Stock Fund
Andrews & Company ................................................... 105,361 Record 6.2%
c/o Chase Manhattan Bank NA
1211 Avenue of the Americas
New York, NY 10036
Charles Schwab & Co., Inc. ......................................... 395,917 Record 23.3%
101 Montgomery Street
San Francisco, CA 94104
Charles M. Royce .................................................... 504,745 Beneficial 43.2%
1414 Avenue of the Americas
New York, NY 10019
National Financial Services Corp. .................................. 189,607 Record 11.1%
One World Financial Center
200 Liberty Street
New York, NY 10281
Charles M. Royce, Trustee ........................................... 126,805 Beneficial 7.4%
Quest Advisory Corp. (Voting Power)
Money Purchase Pension Plan
1414 Avenue of the Americas
New York, NY 10019
Royce Micro-Cap Fund
Charles Schwab & Co., Inc. ......................................... 3,967,177 Record 25.6%
101 Montgomery Street
San Francisco, CA 94104
Donaldson, Lufkin Jenrette Securities Corp. ........................ 1,445,836 Record 9.3%
P.O. Box 2052
Jersey City, NJ 07303
Fleet National Bank, Custodian ...................................... 191,615 Record 11.3%
FBO Brown University
One East Avenue
Rochester, NY 14638
National Financial Services Corp. ................................... 1,200,355 Record 7.7%
One World Financial Center
200 Liberty Street
New York, NY 10281
</TABLE>
(table continued on next page)
10
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER TYPE OF OUTSTANDING
FUND OF SHARES OWNERSHIP SHARES
- ----------------------------------------------------------------------- ---------- --------------- -------------
<S> <C> <C> <C>
Royce GiftShares Fund
W. Whitney George, Trustee .......................................... 100,200 Record 99.9%
Royce 1992 GST Trust
1414 Avenue of the Americas
New York, New York 10019
Royce Total Return Fund
Delaware Charter Guarantee & Trust .................................. 27,996 Record 5.0%
FBO Daniel W. Smith -- IRA
RRI Box 250
Mifflinburg, PA 17844
Fleet National Bank, Custodian ...................................... 63,980 Record 11.5%
FBO Brown University
One East Avenue
Rochester, NY 14638
James M. Novak ...................................................... 83,827 Record 15.1%
Mark Stadler Trustees
Cindrich & Titus Profit Sharing Plan
FBO Thomas O. Arbogast
200 Gateway Center
Pittsburgh, PA 15222
State Street Bank & Trust Co. ...................................... 80,798 Record 14.5%
Custodian for IRA of
Becky L. O'Connor
10 St. James Place
Pittsburgh, PA 15215
Charles M. Royce, Trustee ........................................... 49,555 Record 8.9%
N. Holmes Clare Trust
FBO Barbara K. Clare
1414 Avenue of the Americas
New York, NY 10019
National City Bank .................................................. 118,649 Record 21.4%
FBO Scott F. Zimmerman
PO Box 94777
Cleveland, OH 44101
Harold Reed, Trustee ................................................ 35,320 Record 6.3%
Reed Luce Tosh & McGregor
Salary Red. Profit Sharing Plan
804 Turnpike Street
Beaver, PA 15009
</TABLE>
(table continued on next page)
11
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER TYPE OF OUTSTANDING
FUND OF SHARES OWNERSHIP SHARES
- ----------------------------------------------------------------------- ---------- --------------- -------------
<S> <C> <C> <C>
Royce Global Services Fund
Charles M. Royce .................................................... 80,233 Beneficial 25.2%
Quest Advisory Corp. (Voting Power)
Money Purchase Pension Plan
1414 Avenue of the Americas
New York, NY 10019
Charles M. Royce .................................................... 185,071 Beneficial 58.4%
1414 Avenue of the Americas
New York, NY 10019
Integra Trust Company National Assn. ............................... 47,391 Beneficial 14.8%
300 Fourth Avenue
Pittsburgh, PA 15278
Bruce Museum Inc. .................................................. 43,213 Beneficial 13.5%
Special Program Fund
Museum Drive
Greenwich, CT 06830
The REvest Growth & Income Fund
Bankers Trust Co. TTEE .............................................. 379,400 Record 12.0%
FBO Carlisle Companies, Inc.
Master Retirement Trust
34 Exchange Place
Jersey City, NJ 07302
Jackson Clinic PA ................................................... 167,966 Beneficial 5.3%
Restated Money Purchase Plan
111 Highway 70 East
Dickson, TN 30755
National Financial Services Corp. .................................. 276,929 Record 8.7%
One World Financial Center
200 Liberty Street
New York, NY 10281
AZ Ritzman Associates ............................................... 289,828 Beneficial 9.2%
Profit Sharing Trust
1714 North Second Street
Harrisburg, PA 17102
Charles Schwab & Co., Inc. ......................................... 453,518 Record 14.4%
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
12
<PAGE>
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
Agreement and plan of merger (this 'Plan') dated as of April 16, 1996 by
and among THE ROYCE FUND, a Massachusetts business trust ('TRF'), PENNSYLVANIA
MUTUAL FUND, a Delaware business trust ('PMF'), and THE ROYCE FUND, a Delaware
business trust (the 'New Trust'). The principal business address of all parties
is 1414 Avenue of the Americas, New York, New York 10019.
1. Purpose and Terms of the Mergers. This Plan is intended (i) to effect
the merger of TRF with and into the New Trust, with the New Trust being the
surviving entity, and (ii) to effect the merger of PMF with and into a separate
series of the New Trust, with such series surviving the merger. In order to
effect the mergers, the New Trust has established separate series, each of which
has the same name, investment objectives, policies and restrictions as a
corresponding series of TRF and PMF (the 'New Fund' or collectively, the 'New
Funds'). Upon and in connection with the consummation of the mergers, the assets
and liabilities of each series of TRF shall automatically be reallocated to its
respective New Fund counterpart, and those of PMF shall automatically be
reallocated to its New Fund counterpart. The then outstanding shares of
beneficial interest of each series of TRF and of PMF shall automatically be
converted into and become identical shares of beneficial interest of its
respective New Fund counterpart, and shall have the same designations, relative
rights and preferences as the shares of each series of TRF and of PMF prior to
the mergers.
2. Consummation of the Mergers.
a. The mergers contemplated by Section 1 shall be consummated at the
Effective Time according to the terms and subject to the conditions stated
in this Plan. Upon and in connection with the consummation of the mergers,
the assets and liabilities of TRF and of each series of TRF and of PMF
shall automatically be transferred to and assumed by, respectively, the New
Trust and each New Fund counterpart, and each of TRF and PMF shall
thereupon cease to exist.
b. Following consummation of the mergers, the names of the New Trust
and of each New Fund will continue unchanged; the Certificate of Trust,
Trust Instrument and Bylaws of the New Trust will continue in full force
and effect; the trustees and officers of the New Trust shall continue in
their respective positions; and the New Trust will continue to have its
principal place of business in New York, New York.
c. The trustees and/or officers of the New Trust shall take all such
actions as may be necessary or appropriate to consummate the mergers and
the other matters and transactions contemplated by this Plan, so that TRF's
and PMF's investment company and related operations may continue without
interruption.
3. Effective Time of Mergers.
a. The mergers have been approved by the Boards of Trustees of TRF,
PMF and the New Trust. In the case of TRF, the merger is subject to
approval by the shareholders of TRF at a special meeting of shareholders
being called for this and other purposes.
b. If approved by the shareholders of TRF, the mergers shall be
consummated at the Effective Time upon and by the filing of a Certificate
of Merger covering the mergers of TRF and PMF with and into the New Trust
in the State of Delaware, as provided by Section 3815 of the Delaware
Business Trust Act. A Certificate of Cancellation will be filed on behalf
of PMF pursuant to the Delaware Business Trust
A-1
<PAGE>
<PAGE>
Act, and a Certificate of Termination will be filed in the Commonwealth of
Massachusetts on behalf of TRF as provided by Massachusetts law.
c. The 'Effective Time' shall be the close of business on June 28,
1996 or on such later date as may be established by the parties.
4. Representations and Warranties.
a. TRF represents and warrants with respect to itself and, where
applicable, with respect to each of its series, and PMF represents and
warrants with respect to itself, as follows:
i. TRF is a business trust duly organized, and has it legal
existence as such, under the laws of the Commonwealth of Massachusetts;
ii. PMF is a business trust duly organized, validly existing and
in good standing under the laws of the State of Delaware;
iii. TRF and PMF are each duly registered with the Securities and
Exchange Commission ('the SEC') as a diversified open-end management
investment company under the Investment Company Act of 1940 ('1940
Act'), and such registration is in full force and effect;
iv. TRF has created several series, each of which is treated as a
separate entity taxable as a corporation for Federal income tax
purposes. Each series offers and sells redeemable shares of beneficial
interest to investors as part of its ordinary business operations;
v. All liabilities incurred by TRF's series and by PMF have been
incurred in the course of their respective businesses;
vi. Each series of TRF and PMF has qualified for treatment as a
regulated investment company ('RIC') under Subchapter M of the Internal
Revenue Code of 1986, as amended (the 'Code'), for each past year since
it commenced operations, and will continue to meet all the requirements
for such qualification for its current taxable year;
vii. Each series of TRF and PMF, respectively, satisfies the
diversification test of Section 368(a)(1)(F)(ii) of the Code;
viii. Neither TRF nor PMF are under the jurisdiction of a court in
a proceeding under Title 11 of the United States Code or similar case
within the meaning of Section 368(a)(3)(A) of the Code;
ix. To the best of TRF's knowledge, each of its series is in
compliance with its stated investment objective, policies and
restrictions, and will continue to be in compliance through the
Effective Time;
x. To the best of PMF's knowledge, it is in compliance with its
stated investment objective, policies and restrictions, and will
continue to be in compliance through the Effective Time; and
xi. Neither TRF nor PMF have outstanding warrants, options,
convertible securities or other types of rights pursuant to which any
person could acquire shares of TRF or PMF, and neither TRF nor PMF have
any plan or intention to issue additional shares prior to the Effective
Time, except for shares issued in the ordinary course of its business as
an open-end management investment company.
b. The New Trust represents and warrants as follows:
i. The New Trust is a business trust duly organized, validly
existing and in good standing under the laws of the State of Delaware;
its Certificate of Trust is on file with the Secretary of State
A-2
<PAGE>
<PAGE>
of Delaware; and copies of its Certificates of Trust and Trust
Instrument are available with the New Trust's records;
ii. The New Trust, as successor to the registrations of TRF and
PMF, will, at the Effective Time, become and thereafter be duly
registered with the SEC as a diversified open-end management investment
company under the 1940 Act;
iii. The New Trust has created New Fund counterparts for each
series of TRF and for PMF. Each such New Fund will be treated as a
separate entity taxable as a corporation for Federal income tax
purposes. From and after the Effective Time, each such New Fund will
offer and sell redeemable shares of beneficial interest to investors as
part of its ordinary business operations;
iv. Each such New Fund will meet all the requirements necessary to
qualify as a RIC under Subchapter M of the Code for its current tax
year;
v. No New Fund will issue shares or otherwise commence operations
until after the Effective Time;
vi. The New Trust does not have any plan or intention to issue
additional shares following the Effective Time, except for shares issued
in the ordinary course of business; nor does the New Trust have any plan
or intention to redeem or otherwise reacquire any shares issued to
shareholders of TRF or PMF prior to the Effective Time, other than
through redemptions arising in the ordinary course of business;
vii. The New Trust will actively continue TRF's and PMF's historic
businesses in substantially the same manner that TRF and PMF conducted
them before the Effective Time. The New Trust has no plan or intention
to sell or otherwise dispose of any of the assets which it will acquire
upon the mergers except for dispositions to be made in the ordinary
course of its business and dispositions necessary to maintain the New
Funds' status as RICs under Subchapter M of the Code; and
viii. There is no plan or intention for the New Trust or any New
Fund to be dissolved following the Effective Time; however, neither the
New Trust nor any New Fund shall be precluded from merging with any
other entity or series subsequent to the Effective Time.
c. TRF, PMF and the New Trust each represents and warrants as to
itself and, where applicable, as to each of its series, as follows:
i. The respective net asset values of the shares to which the New
Funds will succeed as issuers will be equal to the respective net asset
values of the shares of the corresponding series of TRF and of PMF
immediately prior to the Effective Time;
ii. Its management is (a) unaware of any plan or intention of TRF
or of PMF to redeem or otherwise dispose of any portion of its shares,
(b) does not anticipate dispositions at the time of or soon after the
Effective Time to exceed the usual rate and frequency of redemptions of
its shares and (c) expects that the percentage of its shares that will
be redeemed as a result of the mergers or at the Effective Time will be
de minimus;
iii. Immediately following the Effective Time, the shareholders of
each series of TRF and PMF's shareholders will collectively own all of
the New Trust's shares, and will own such shares solely by reason of
their beneficial ownership of shares of the series of TRF and of PMF
immediately prior to the Effective Time;
iv. Immediately following the Effective Time, each New Fund will
hold the same assets and be subject to the same liabilities that each
series of TRF and PMF held or was subject to immediately
A-3
<PAGE>
<PAGE>
prior to the Effective Time, plus any liabilities or expenses incurred
in connection with the mergers. The total amount of the liabilities and
expenses to be incurred in connection with the mergers that will be
assumed by the New Trust and the New Funds will be less than 1% of the
net assets of TRF and its series and PMF immediately prior to the
Effective Time; and
v. There is no inter-company indebtedness between or among TRF,
PMF and the New Trust that was issued or acquired, or will be settled,
at a discount.
5. Covenants of TRF, PMF and the New Trust.
a. TRF covenants to call a special meeting of its shareholders to
consider and act on this Plan, to prepare a proxy statement in compliance
with the Securities Exchange Act of 1934 and the 1940 Act in connection
with the special meeting of its shareholders and to take all other action
necessary to obtain shareholder approval of the transactions contemplated
by this Plan;
b. TRF and PMF severally covenant that they will assist the New Trust
in obtaining such information as the New Trust reasonably requests
concerning the beneficial ownership of their shares;
c. Each of TRF and PMF will share the costs and expenses of this Plan
and of the transactions contemplated by it in proportion to its respective
net assets; and
d. Each party will, from time to time, as and when requested by the
other party or parties, execute and deliver or cause to be delivered all
such assignments, certificates and other instruments, and will take or
cause to be taken such further actions, as the other party or parties may
deem necessary or desirable in order to consummate the transactions
contemplated by this Plan.
6. Termination. This Plan may be terminated at any time prior to the
Effective Time by mutual consent of the parties. In addition, any party may
terminate this Plan by written notice to the other parties in either of the
following events:
a. if the shareholders of TRF do not approve this Plan; or
b. if any other event occurs which, in the judgment of such party,
makes consummation of the mergers inadvisable.
7. Amendment. This Plan may be amended, modified or supplemented at any
time, notwithstanding approval of this Plan by TRF's shareholders, in such
manner as may be mutually agreed on in writing by the parties; provided,
however, that following the special meeting of TRF's shareholders, no such
amendment may have a material adverse effect on the interests of the
shareholders of any of its series.
8. Miscellaneous.
a. This Plan will be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be
performed wholly within that State; provided that in the case of any
conflict between the 1940 Act and the laws of Delaware, the 1940 Act will
govern;
b. Nothing expressed or implied in this Plan is intended or will be
construed to confer on or give anyone other than the parties and their
respective successors and assigns any rights or remedies under or by reason
of this Plan;
c. The parties recognize that each is a business trust, that this Plan
is executed by their officers on their behalfs solely in their capacities
as such, and not individually, and that their obligations under this
instrument are not binding on or enforceable against any of their
respective trustees, officers or shareholders, but are binding on and
enforceable against only their respective assets and property; and
d. A copy of this Plan will be furnished by the New Trust, on request
and without cost, to any beneficial owner of shares of PMF or any series of
TRF.
A-4
<PAGE>
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Plan to be executed
by its duly authorized officer.
<TABLE>
<S> <C>
ATTEST: THE ROYCE FUND
a Massachusetts business trust
.......................................................... By:
Assistant Secretary ...........................................................
President
ATTEST: PENNSYLVANIA MUTUAL FUND
a Delaware business trust
.......................................................... By:
Assistant Secretary ...........................................................
President
ATTEST: THE ROYCE FUND
a Delaware business trust
.......................................................... By:
Assistant Secretary ...........................................................
President
</TABLE>
A-5
<PAGE>
<PAGE>
APPENDIX 1
PROXY CARD
PROXY SERVICES
POST OFFICE BOX 9154
FARMINGDALE, NY 11735-9815
THE ROYCE FUND
1414 AVENUE OF THE AMERICAS
NEW YORK, NY 10019
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF TRUSTEES
THE UNDERSIGNED HEREBY APPOINTS CHARLES M. ROYCE AND STEPHEN L. ISAACS, OR
EITHER OF THEM ACTING IN THE 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 BELOW, ALL SHARES OF THE TRUST HELD OF RECORD BY THE
UNDERSIGNED ON MAY 16, 1996, AT THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
ON JUNE 26, 1996, OR AT ANY ADJOURNMENT THEREOF.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 THROUGH 6, AND FOR ANY OTHER MATTER PROPERLY COMING BEFORE THE
MEETING.
PLEASE VOTE, DATE AND SIGN BELOW AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
ROYCE1 KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
<PAGE>
THE ROYCE FUND DETACH AND RETURN THIS PORTION ONLY
VOTE ON DIRECTORS
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
[ ] [ ] [ ]
5. ELECTION OF TRUSTEES (PAGE 8). THE NOMINEES ARE: CHARLES M. ROYCE, THOMAS R.
EBRIGHT HUBERT L. CAFRITZ, RICHARD M. GALKIN, STEPHEN L. ISAACS, WILLIAM L.
KOKE, AND DAVID L. MEISTER.
- ------------------------------------------------------------
USE ONLY TO WITHHOLD AUTHORITY TO VOTE ON INDIVIDUAL NOMINEES
VOTE ON PROPOSALS
FOR AGN ABS
[ ] [ ] [ ]
1. PROPOSAL TO PERMIT TEMPORARY BORROWING OF MONEY (PAGE 2).
FOR AGN ABS
[ ] [ ] [ ]
2. PROPOSAL TO PERMIT LOANS OF PORTFOLIO SECURITIES (PAGE 3).
FOR AGN ABS
[ ] [ ] [ ]
3. PROPOSAL TO PERMIT INVESTMENT OF UP TO 5% OF TOTAL ASSETS IN WARRANTS, RIGHTS
AND OPTIONS (PAGE 4).
FOR AGN ABS
[ ] [ ] [ ]
4. PROPOSAL TO APPROVE CONVERSION OF THE TRUST TO A DELAWARE BUSINESS TRUST
(PAGE 5).
FOR AGN ABS
[ ] [ ] [ ]
6. PROPOSAL TO RATIFY THE SELECTION OF COOPERS & LYBRAND LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS (PAGE 8).
PLEASE SIGN EXACTLY AS NAME APPEARS ON TOP 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.
- -------------------------------------------------
SIGNATURE
- -------------------------------------------------
SIGNATURE (JOINT OWNERS)
- -------------------------------------------------
DATE
