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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):
[ X] No fee required.
[ ] 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:
[ ] 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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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
THE ROYCE FUND
To the Shareholders of
ROYCE SELECT FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of ROYCE
SELECT FUND (the "Fund"), a 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 April 21, 1999 at 2:00 p.m. (Eastern Time), for the following
purposes:
1. To approve an amendment to Paragraph 4 (Compensation of the Adviser)
of the Investment Advisory Agreement for the Fund, changing the
application of the high watermark test for the 12.5% performance fee
from quarter-end to daily after December 31, 1999.
2. To transact such other business as may come before the meeting or any
adjournments thereof.
IF YOU HAVE ANY QUESTIONS ON PROPOSAL 1, PLEASE CONTACT THE FUND AT 1-
800-221-4268.
The Board of Trustees has fixed the close of business on March 18, 1999
as the record date for the determination of those shareholders entitled to
vote at the meeting, and only holders of record at the close of business on
that day will be entitled to vote.
Royce Select Fund's Annual Report to Shareholders for the period ended
December 31, 1998 was previously mailed to shareholders, and copies of it are
available upon request, without charge, by writing to the Trust at 1414
Avenue of the Americas, New York, New York 10019 or calling toll free at 1-
800-221-4268.
IMPORTANT
To save the Trust the expense of additional proxy solicitation, please
insert 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. The Proxy
is solicited on behalf of the Board of Trustees, 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 Trustees,
John E. Denneen
Secretary
March 19, 1999
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PROXY STATEMENT FOR SPECIAL MEETING
OF SHAREHOLDERS OF THE ROYCE FUND
The enclosed Proxy is solicited on behalf of the Trustees of The Royce
Fund for use at the Special Meeting of Shareholders of Royce Select Fund, a
series of the Trust, to be held at the offices of the Trust, 1414 Avenue of
the Americas, New York, New York 10019 (10th Floor), at 2:00 p.m., Eastern
Time, on April 21, 1999 and at any adjournments thereof.
The purpose of the meeting is the approval of an amendment to the
Investment Advisory Agreement for the Fund to provide for a daily 12.5% total
return performance fee after December 31, 1999.
The Proxy may be revoked at any time before it is exercised by written
instructions to the Trust or by filing a new Proxy with a later date, and any
shareholder attending the meeting may vote in person, whether or not he or
she has previously filed a Proxy.
Shares represented by all properly executed proxies received in time for
the meeting will be voted. Where a shareholder has specified a choice on the
Proxy with respect to Proposal 1 in the Notice of Special Meeting, his or her
shares will be voted accordingly. If no directions are given, the
shareholder's shares will be voted in favor of this Proposal. The cost of
soliciting proxies will be borne by Royce & Associates, Inc. ("Royce"), the
Fund's investment adviser, which will reimburse brokerage firms, custodians,
nominees and fiduciaries for their expenses in forwarding proxy material to
the beneficial owners of the Fund's shares. Some officers and employees of
the Trust and/or Royce may solicit proxies personally and by telephone, if
deemed desirable. Shareholders vote at the Special Meeting by casting
ballots (in person or by proxy) which are tabulated by one or two persons,
appointed by the Board of Trustees before the meeting, who serve as
Inspectors and Judges of Voting at the meeting and who have executed an
Inspectors and Judges Oath. Neither abstentions nor broker non-votes are
counted in the tabulation of such votes.
On March 18, 1999, the record date for the meeting, there were 33,306
shares of the Fund outstanding. The shareholders entitled to vote are those
of record on that date. Each share is entitled to one vote on each item of
business at the meeting. The following persons were known to the Trust to be
beneficial owners or owners of record of 5% or more of the Fund's
outstanding shares of beneficial interest as of the record date.
Name and Address Amount and Nature Percentage
of Owner of Ownership of Class
- -------- ------------ --------
Irving W. Bailey II 11,719 shares 35%
205 Worth Ave., Ste 201 (Record and beneficial - sole
Palm Beach, FL 33480 investment and voting power)
Charles M. Royce 10,016 shares 30%
1414 Avenue of the Americas (Record and beneficial - sole
New York, NY 10019 investment and voting power)
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Name and Address Amount and Nature Percentage
of Owner of Ownership of Class
- -------- ------------ --------
Charles Schwab & Co., Inc. 4,950 shares 14%
Reinvest Account (Record only)
Attn: Mutual Fund Dept.
101 Montgomery Street
San Francisco, CA 94104
Cuthbert P. Gorman Jr. 4,042 shares 12%
9545 Tamarack Dr. (Beneficial - sole investment and
Indianapolis, IN 46260 voting power)
As of such date, no other Trustee or officer of the Trust owned shares of the
Fund.
Approval or Disapproval of
Amendment to the Fund's
Investment Advisory Agreement
(Proposal 1)
Under the existing Investment Advisory Agreement, Royce, the Fund's
investment adviser, is entitled to receive from the Fund, as compensation for
its services to the Fund and for paying the Fund's other ordinary operating
expenses, a performance fee of 12.5% of the Fund's pre-fee total return. The
proposed amendment to the Investment Advisory Agreement leaves this fee
percentage unchanged. It also leaves unchanged the initial period for
measuring performance - from November 18, 1998, the date on which the Fund
commenced operations, to December 31, 1999. Rather, the proposed amendment
seeks to change only the post-December 31, 1999 high watermark testing
periods from quarter-end to daily.
Set forth below is information about the Fund's existing compensation-
operating expense arrangement with Royce and the proposed amendment.
Existing Fee - Expense Arrangement
As compensation for its services to the Fund and for paying the Fund's
other operating expenses as set forth below, Royce is entitled to receive
from the Fund a performance fee of 12.5% of the Fund's pre-fee total return.
This fee is calculated and accrued daily, based on the value of the Fund's
then current net assets. The fee for the period from November 18, 1998, the
date on which the Fund commenced operations, through December 31, 1999 is
payable at December 31, 1999. Fees for each calendar quarter ending after
December 31, 1999 are payable at the end of the quarter.
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Fees are payable to Royce in respect of any Fund share outstanding at
any time during the applicable period. Royce will not reimburse fees to the
Fund because of negative total returns occurring after the date on which they
are payable. Fees are, however, subject to a high watermark test - Fund
shares will not bear a fee during any period when the Fund's pre-fee
cumulative total return from November 18, 1998 to the end of the period does
not exceed its pre-fee cumulative total return to the date as of which a
performance fee was last paid.
Royce is responsible for paying all of the Fund's other operating
expenses, except for brokerage commissions, taxes, interest, litigation
expenses and other extraordinary expenses not incurred in the ordinary course
of the Fund's business.
Proposed Amendment
As stated above, the proposed amendment would retain a high watermark
test subsequent to December 31, 1999. It would, however, switch the post-
December 31, 1999 testing periods from calendar quarter-end to daily and have
any and all performance fees accrued during a calendar month payable at the
end of that month. Royce believes that this change will better align the fee
measurement periods with the way investors should view a fund manager's
performance - that is, using peak-to-peak full market cycles, rather than
calendar periods.
The proposed amendment would benefit Royce by allowing Royce to receive
fees for positive total return performance within a calendar quarter without
requiring, as under the existing arrangement, the reversal of those fees for
any negative total return performance occurring later in that quarter. When
the Trustees considered and approved the existing Investment Advisory
Agreement in September 1998, neither they nor Royce focused on the impact on
Fund shareholders or Royce of using post-December 31, 1999 calendar quarter-
end testing periods versus daily ones. Having done so now, the Trustees
share Royce's views that the quarterly approach may inadvertently penalize
Royce and give some Fund shareholders making purchases during negative
performance periods an unbargained for fee credit, at Royce's expense,
arising from the reversal of fees previously accrued. Under the daily high
watermark test, this reversal would not occur. The Trustees believe the
revised high watermark test should be sufficient to penalize Royce for
negative performance.
A copy of the proposed amendment to Paragraph 4 of the Investment
Advisory Agreement is attached as Exhibit A to this Proxy Statement.
Recommendation of the Trustees; Required Votes
THE TRUSTEES RECOMMEND THAT THE FUND'S SHAREHOLDERS VOTE TO APPROVE THE
INVESTMENT ADVISORY AGREEMENT AMENDMENT. Such approval will require the
favorable vote of the lesser of (i) more than 50% of the Fund's outstanding
shares and (ii)
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67% or more of the Fund's shares present at the meeting, if
the holders of more than 50% of the Fund's shares are present or represented
by proxy.
Charles M. Royce, the owner of approximately 30% of the Fund's
outstanding shares, has advised the Trust the he expects to vote such shares
FOR the Proposal.
Adjournment of Meeting; Other Matters
In the event that sufficient votes in favor of Proposal 1 in the Notice
of Special Meeting 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
Proposal 1. They will vote against any such adjournment those proxies
required to be voted against Proposal 1.
While the meeting has been called to transact any business that may
properly come before it, the Trustees know of no other business than the
matter stated in the Notice of Special Meeting. 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.
Royce
Royce's principal office is located at 1414 Avenue of the Americas, New
York, New York 10019. Charles M. Royce is the President, Secretary,
Treasurer, sole director and sole voting shareholder of Royce. Mr. Royce is
also the President, Treasurer and a Trustee of the Trust.
Shareholder Proposals
The Trust does 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.
PLEASE FILL IN, DATE AND SIGN THE PROXY AND RETURN IT IN THE
ACCOMPANYING POSTAGE-PAID ENVELOPE.
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EXHIBIT A
"4. Compensation of the Adviser. As compensation for its services to
the Series and for agreeing to pay the Series' operating expenses as set
forth under Paragraph 3 hereof, the Fund agrees to cause the Series to pay to
the Adviser a performance fee of 12.5% of the Series' pre-fee total return.
Such fee shall be calculated daily, based on the value of the Series' then
current net assets. For the period from November 18, 1998, the date on which
the Series commenced operations, through December 31, 1999, such fee will be
based on the Series' cumulative pre-fee total return for that period, and the
accrued fee for that period will be payable as of December 31, 1999. Daily
fees accrued during each calendar month ending after December 31, 1999 will
be payable at the end of that month. After December 31, 1999, fees shall
become subject to a high watermark test, so that Series shares shall not bear
a fee for any day after December 31, 1999 on which the Series' pre-fee
cumulative total return from November 18, 1998 through that day does not
exceed its pre-fee cumulative total return since December 31, 1999, or
November 18, 1998 if the Fund's performance from that date to December 31,
1999 was negative. However, the Adviser shall not be obligated to reimburse
any fees accrued after December 31, 1999 because of any negative total
returns occurring after their accrual."
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PROXY
PROXY ROYCE SELECT FUND PROXY
1414 Avenue of the Americas
New York, NY 10019
This Proxy is Solicited on Behalf of the Board of Trustees
The undersigned hereby appoints 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 Fund held of record
by the undersigned on March 18, 1999 at the Special Meeting of Shareholders
to be held on April 21, 1999, or at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
PLEASE VOTE , DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) on reverse. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in partnership
name by authorized person.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_______________________________ _______________________________
_______________________________ ________________________________
_______________________________ ________________________________
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X PLEASE MARK VOTES
AS IN THIS EXAMPLE
_________________________________________________
ROYCE SELECT FUND
_________________________________________________
For Against Abstain
1.PROPOSAL TO APPROVE AN AMEND- / / / / / /
MENT TO PARAGRAPH 4 (COMPENSATION
OF THE ADVISER) OF THE INVESTMENT
ADVISORY AGREEMENT FOR ROYCE
SELECT FUND, CHANGING THE APPLICA-
TION OF THE HIGH WATERMARK TEST
FOR THE 12.5% PERFORMANCE FEE FROM
QUARTER-END TO DAILY AFTER DECEM-
BER 31, 1999.
2.THE PROXIES ARE AUTHORIZED TO VOTE / / / / / /
UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
Please be sure to sign and date this Proxy. Date:
Mark box at right if an address change / /
or comment has been noted on the
reverse side of this card.
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
