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<PAGE> PAGE 4
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SIGNATURE JOHN DENNEEN
TITLE SECRETARY
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000804116
<NAME> ROYCE VALUE TRUST, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 379972055
<INVESTMENTS-AT-VALUE> 404637698
<RECEIVABLES> 1835403
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<TOTAL-LIABILITIES> 39403464
<SENIOR-EQUITY> 2400
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</TABLE>
Board of Directors
Royce Value Trust, Inc.
In planning and performing our audit of the financial statements of
Royce Value Trust, Inc. for the year ended December 31, 1996,
we considered its internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide assurance on
the internal control structure.
The management of Royce Value Trust, Inc. is responsible for establishing
and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control
structure policies and procedures. Two of the objectives of an internal
control structure are to provide management with reasonable, but not
absolute, assurance that assets are safeguarded against loss from
unauthorized use or
disposition and that transactions are executed in accordance with
management's authorization and recorded properly to permit preparation of
financial statements in conformity with generally accepted accounting
principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute of
Certified Public Accountants. A material weakness is a condition in which
the design or operation of the specific internal control structure elements
does not reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation to the
financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their assigned
functions. However, we noted no matters involving the internal control
structure, including procedures for safeguarding securities, that we
consider to be material weaknesses as defined above as of December 31, 1996.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
ERNST & YOUNG LLP
February 25, 1997
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
ROYCE VALUE TRUST, INC.
A Maryland Corporation
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the
stockholders of Royce Value Trust, Inc. (the "Corporation") shall
be held on a date fixed from time to time by the Board of
Directors within the thirty-one (31) day period ending on April
30 of each calendar year. An annual meeting may be held at any
place in the United States, in or out of the State of Maryland,
as may be determined by the Board of Directors, and shall be
designated in the notice of the meeting, and at the time
specified by the Board of Directors. Unless otherwise provided
by statute, the Corporation's Articles of Incorporation or these
Bylaws, any business of the Corporation may be transacted at an
annual meeting without being specifically designated in the
notice.
SECTION 2. Special Meetings. Special meetings of the
stockholders for any purpose or purposes, unless otherwise
prescribed by statute or by the Corporation's Articles of
Incorporation, may be held at any place within the United States,
and may be called at any time by the Board of Directors or by the
President, and shall be called by the President or Secretary at
the request in writing of a majority of the Board of Directors or
at the request in writing of stockholders entitled to cast at
least a majority of the votes entitled to be cast at the meeting
upon payment by such stockholders to the Corporation of the
reasonably estimated cost of preparing and mailing a notice of
the meeting (which estimated cost shall be provided to such
stockholders by the Secretary of the Corporation).
SECTION 3. Notice of Meetings. Written or printed
notice of the purpose or purposes, in the case of a special
meeting, and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation
to each stockholder of record entitled to vote at the meeting, by
placing the notice in the mail at least ten (10) days, but not
more than ninety (90) days, prior to the date designated for the
meeting, addressed to each stockholder at his address appearing
on the books of the Corporation or supplied by the stockholder to
the Corporation for the purpose of notice. The notice of any
meeting of stockholders may be accompanied by a form of proxy
approved by the Board of Directors in favor of the actions or
persons as the Board of Directors may select. Notice of any
meeting of stockholders shall be deemed waived by any stockholder
who attends the meeting in person or by proxy, or who before or
after the meeting submits a signed waiver of notice that is filed
with the records of the meeting.
<PAGE>
SECTION 4. Quorum. The presence in person or by proxy
of stockholders of the Corporation entitled to cast at least a
majority of the votes entitled to be cast shall constitute a
quorum at each meeting of the stockholders, and all questions
shall be decided by a majority of the votes cast on the question
(except with respect to the election of directors, which shall be
by plurality of the votes cast), unless otherwise required by the
laws of the State of Maryland, the Investment Company Act of
1940, as amended, or the Corporation's Articles of Incorporation.
In the absence of a quorum, the stockholders present in person or
by proxy at the meeting, by majority vote and without notice
other than by announcement at the meeting, may adjourn the
meeting from time to time as provided in Section 5 of this
Article I until a quorum shall attend. The stockholders present
at any duly organized meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. The lack of presence
at any meeting in person or by proxy of holders of the number of
shares of stock of the Corporation of the proportion that may be
required by the laws of the State of Maryland, the Investment
Company Act of 1940, as amended, or other applicable statute, the
Corporation's Articles of Incorporation or these Bylaws, for
action upon any given matter shall not prevent action at the
meeting on any other matter or matters that may properly come
before the meeting, so long as there are present, in person or by
proxy, holders of the number of shares of stock of the
Corporation required for action upon the other matter or matters.
SECTION 5. Adjournment. Any meeting of the
stockholders may be adjourned from time to time, without notice
other than by announcement at the meeting at which the
adjournment is taken. At any adjourned meeting at which a quorum
shall be present, any action may be taken that could have been
taken at the meeting originally called. A meeting of the
stockholders may not be adjourned to a date more than one hundred
twenty (120) days after the original record date, unless a new
record date is set by the Board of Directors and further notice
is provided to the stockholders.
SECTION 6. Organization. At every meeting of the
stockholders, the President, or in his absence or inability to
act, a Vice President, or in the absence or inability to act of
the President and all the Vice Presidents, a chairman chosen by
the stockholders, shall act as chairman of the meeting. The
Secretary, or in his absence or inability to act, a person
appointed by the chairman of the meeting, shall act as secretary
of the meeting and keep the minutes of the meeting.
SECTION 7. Order of Business. The order of business
at all meetings of the stockholders shall be as determined by the
chairman of the meeting.
SECTION 8. Voting. Except as otherwise provided by
statute or the Corporation's Articles of Incorporation, each
holder of record of shares of stock of the Corporation having
voting power shall be entitled at each meeting of the
stockholders to one (1) vote for every full share of stock, and
proportional voting rights for fractional shares of stock,
standing in his name on the records of the Corporation as of the
record date determined pursuant to Section 9 of this Article I.
Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for
him by a proxy signed by the stockholder or his attorney-in-fact.
A stockholder may authorize another person or persons to act as
proxy by transmitting, or authorizing the transmission of, a
telegram, cablegram, datagram or other means of electronic
transmission to the person or persons authorized to act as proxy
or to a proxy solicitation firm, proxy support service
organization or other person authorized by the person or persons
who will act as proxy to receive the transmission. No proxy
<PAGE>
shall be valid after the expiration of eleven (11) months from
the date thereof, unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases in which the proxy states
that it is irrevocable and in which an irrevocable proxy is
permitted by law.
SECTION 9. Fixing of Record Date for Determining
Stockholders Entitled to Notice and to Vote at Meeting. The
Board of Directors may set a record date for the purpose of
determining stockholders entitled to notice of, and to vote at,
any meeting of the stockholders. The record date for a
particular meeting shall be not more than ninety (90) nor fewer
than ten (10) days before the date of the meeting. All persons
who were holders of record of shares as of the record date of a
meeting, and no others, shall be entitled to vote at such meeting
and any adjournment thereof.
SECTION 10. Inspectors. The Board of Directors may,
in advance of any meeting of stockholders, appoint one (1) or
more inspectors to act at the meeting or at any adjournment of
the meeting. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the
meeting may appoint inspectors. Each inspector, before entering
upon the discharge of his duties, shall, if required by the
chairman of the meeting, take and sign an oath to execute
faithfully the duties of inspector of the meeting with strict
impartiality and according to the best of his ability. The
inspectors shall determine the number of shares outstanding and
the voting power of each share, the number of shares represented
at the meeting, the existence of a quorum and the validity and
effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result and do those acts as
are proper to conduct the election or vote with fairness to all
stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote at the meeting, the inspectors shall
make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact
found by them. No director or candidate for the office of
director shall act as inspector of an election of directors.
Inspectors need not be stockholders of the Corporation.
SECTION 11. Consent of Stockholders in Lieu of
Meeting. Except as otherwise provided by statute or the
Corporation's Articles of Incorporation, any action required to
be taken at any annual or special meeting of stockholders, or any
action that may be taken at any annual or special meeting of the
stockholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the
records of stockholders' meetings: (a) a unanimous written
consent that sets forth the action and is signed by each
stockholder entitled to vote on the matter and (b) a written
waiver of any right to dissent signed by each stockholder
entitled to notice of the meeting but not entitled to vote at the
meeting.
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. Except as otherwise
provided in the Corporation's Articles of Incorporation, the
business and affairs of the Corporation shall be managed under
the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board
of Directors except as conferred on or reserved to the
stockholders by law, by the Corporation's Articles of
Incorporation or by these Bylaws.
SECTION 2. Number, Election and Term of Directors.
The number of directors shall be fixed from time to time by
resolution of the Board of Directors adopted by a majority of the
directors then in office; provided, however, that the number of
directors shall in no event be fewer than three (3) nor, subject
to the charter of the Corporation, more than eleven (11).
Directors shall hold office for one year or until the first
annual election following their election and until their
successors are duly elected and qualify. The directors shall be
elected at the annual meeting of the stockholders, except as
provided in Section 5 of this Article, and each director elected
shall hold office until his successor shall have been elected and
shall have qualified, until his death or until he shall have
resigned or have been removed as provided in these Bylaws, or as
otherwise provided by statute or the Corporation's Articles of
Incorporation. Any vacancy created by an increase in directors
may be filled in accordance with Section 5 of this Article II.
No reduction in the number of directors shall have the effect of
removing any director from office prior to the expiration of his
term unless the director is specifically removed pursuant to
Section 4 of this Article II at the time of the decrease. A
director need not be a stockholder of the Corporation, a citizen
of the United States or a resident of the State of Maryland.
SECTION 3. Resignation. A director of the Corporation
may resign at any time by giving written notice of his
resignation to the Board of Directors or to the President or the
Secretary of the Corporation. Any resignation shall take effect
at the time specified in it or, should the time when it is to
become effective not be specified in it, immediately upon its
receipt. Unless the resignation states otherwise, acceptance of
a resignation shall not be necessary to make it effective.
SECTION 4. Removal of Directors. Any director of the
Corporation may be removed by the stockholders, with or without
cause, by a vote of a majority of the votes entitled to be cast
for the election of directors.
SECTION 5. Vacancies. Subject to the provisions of
the Investment Company Act of 1940, as amended, any vacancies in
the Board of Directors, whether arising from death, resignation,
removal or any other cause except an increase in the number of
directors, shall be filled by a vote of the majority of the
directors then in office even though that majority is less than a
quorum, provided that no vacancy or vacancies shall be filled by
action of the remaining directors if, after the filling of the
vacancy or vacancies, fewer than two-thirds of the directors then
holding office shall have been elected by the stockholders of the
Corporation. A majority of the entire Board in office at the
time of the increase may fill a vacancy that results from an
increase in the number of directors. In the event that at any
time a vacancy exists in any office of a director that may not be
filled by the remaining directors, a special meeting of the
stockholders shall be held as promptly as possible and in any
event within sixty (60) days, for the purpose of filling the
vacancy or vacancies. Any director appointed by the Board of
<PAGE>
Directors to fill a vacancy shall hold office only until the next
annual meeting of stockholders of the Corporation and until a
successor has been elected and qualifies or until his earlier
death, resignation or removal.
SECTION 6. Place of Meetings. Meetings of the Board
of Directors may be held at any place that the Board of Directors
may from time to time determine or that is specified in the
notice of the meeting.
SECTION 7. Regular Meetings. Regular meetings of the
Board of Directors may be held without notice at the time and
place determined by the Board of Directors.
SECTION 8. Special Meetings. Special meetings of the
Board of Directors may be called by a majority of the directors
of the Corporation or by the President.
SECTION 9. Annual Meeting. The annual meeting of the
Board of Directors shall be held as soon as practicable after the
meeting of stockholders at which the directors were elected. No
notice of such annual meeting shall be necessary if held
immediately after the adjournment, and at the site, of the
meeting of stockholders. If not so held, notice shall be given
as hereinafter provided for special meetings of the Board of
Directors.
SECTION 10. Notice of Special Meetings. Notice of
each special meeting of the Board of Directors shall be given by
the Secretary or the President as hereinafter provided. Each
notice shall state the time and place of the meeting and shall be
delivered to each director, either personally or by telephone or
other standard form of telecommunication, at least twenty-four
(24) hours before the time at which the meeting is to be held, or
by first-class mail, postage prepaid, addressed to the director
at his residence or usual place of business, and mailed at least
three (3) days before the day on which the meeting is to be held.
SECTION 11. Waiver of Notice of Meetings. Notice of
any special meeting need not be given to any director who shall,
either before or after the meeting, sign a written waiver of
notice that is filed with the records of the meeting or who shall
attend the meeting.
SECTION 12. Quorum and Voting. One-third (1/3) of the
members of the entire Board of Directors shall be present in
person at any meeting of the Board so as to constitute a quorum
for the transaction of business at the meeting, and, except as
otherwise expressly required by statute, the Corporation's
Articles of Incorporation, these Bylaws, the Investment Company
Act of 1940, as amended, or any other applicable statute, the act
of a majority of the directors present at any meeting at which a
quorum is present shall be the act of the Board. In the absence
of a quorum at any meeting of the Board, a majority of the
directors present may adjourn the meeting to another time and
place, and notice of any adjourned meeting shall be given to the
directors who were not present at the time of the adjournment
and, unless the time and place were announced at the meeting at
which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may
be transacted that might have been transacted at the meeting as
originally called.
<PAGE>
SECTION 13. Organization. The President or, in his
absence or inability to act, another director chosen by a
majority of the directors present shall act as chairman of the
meeting and preside at the meeting. The Secretary (or, in his
absence or inability to act, any person appointed by the
chairman) shall act as secretary of the meeting and keep the
minutes of the meeting.
SECTION 14. Committees. The Board of Directors may
designate one (1) or more committees of the Board of Directors,
each consisting of one (1) or more directors. To the extent
provided in the resolution and permitted by law, the committee or
committees shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the
Corporation. Any committee or committees shall have the name or
names determined from time to time by resolution adopted by the
Board of Directors. Each committee shall keep regular minutes of
its meetings and provide those minutes to the Board of Directors
when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a
director to act in the place of an absent member.
SECTION 15. Written Consent of Directors in Lieu of a
Meeting. Subject to the provisions of the Investment Company Act
of 1940, as amended, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee of
the Board may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes
of the proceedings of the Board or committee.
SECTION 16. Telephone Conference. Members of the
Board of Directors or any committee of the Board may participate
in any Board or committee meeting by means of a conference
telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute
presence in person at the meeting.
SECTION 17. Compensation. Each director shall be
entitled to receive such compensation, if any, as may from time
to time be fixed by the Board of Directors, including a fee for
each meeting of the Board or any committee thereof, regular or
special, he attends. Directors may also be reimbursed by the
Corporation for all reasonable expenses incurred in traveling to
and from the place of a Board or committee meeting.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of
the Corporation shall be a President, a Secretary and a
Treasurer, each of whom shall be elected by the Board of
Directors. The Board of Directors may elect or appoint one (1)
or more Vice Presidents and may also appoint any other officers,
agents and employees it deems necessary or proper. Any two (2)
or more offices may be held by the same person, except the office
of President and Vice President, but no officer shall execute,
acknowledge or verify in more than one capacity any instrument
required by law to be executed, acknowledged or verified in more
than one capacity. Officers shall be elected by the Board of
<PAGE>
Directors each year at its first meeting held after the annual
meeting of stockholders, each to hold office until the meeting of
the Board following the next annual meeting of the stockholders
and until his successor shall have been duly elected and shall
have qualified, until his death or until he shall have resigned
or have been removed, as provided by these Bylaws. The Board of
Directors may from time to time elect such officers (including
one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and may
appoint, or delegate to the President the power to appoint, such
agents as may be necessary or desirable for the business of the
Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be
prescribed by the Board or by the appointing authority.
SECTION 2. Resignations. Any officer of the
Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the President or the
Secretary. Any resignation shall take effect at the time
specified therein or, if the time when it shall become effective
is not specified therein, immediately upon its receipt. Unless
otherwise stated in the resignation, the acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. Removal of Officer, Agent or Employee. Any
officer, agent or employee of the Corporation may be removed by
the Board of Directors, with or without cause, at any time if the
Board of Directors in its judgment finds that the best interests
of the Corporation will be served thereby, and the Board may
delegate the power of removal as to agents and employees not
elected or appointed by the Board of Directors. Removal shall be
without prejudice to the person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of
the Corporation shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office,
whether arising from death, resignation, removal or any other
cause, may be filled for the unexpired portion of the term of the
office that shall be vacant, in the manner prescribed in these
Bylaws for the regular election or appointment to the office.
SECTION 5. Compensation. The compensation of the
officers of the Corporation shall be fixed by the Board of
Directors, but this power may be delegated to any officer with
respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by
the Board, any officer, agent or employee of the Corporation
shall give a bond or other security for the faithful performance
of his duties, in an amount and with any surety or sureties as
the Board may require.
SECTION 7. President. The President shall be the
chief executive officer of the Corporation and shall preside at
all meetings of the stockholders and of the Board of Directors.
The President shall, subject to the control of the Board of
Directors, have general charge of the business and affairs of the
Corporation and may employ and discharge employees and agents of
the Corporation, except those elected or appointed by the Board,
and he may delegate these powers.
SECTION 8. Vice President. Each Vice President shall
have the powers and perform the duties that the Board of
Directors or the President may from time to time prescribe.
<PAGE>
SECTION 9. Treasurer. Subject to the provisions of
any contract that may be entered into with any custodian pursuant
to authority granted by the Board of Directors, the Treasurer
shall have charge of all receipts and disbursements of the
Corporation and shall have or provide for the custody of the
Corporation's funds and securities; he shall have full authority
to receive and give receipts for all money due and payable to the
Corporation, and to endorse checks, drafts and warrants, in its
name and on its behalf, and to give full discharge for the same;
he shall deposit all funds of the Corporation, except those that
may be required for current use, in such banks or other places of
deposit as the Board of Directors may from time to time
designate; and he shall, in general, perform all duties incident
to the office of Treasurer and such other duties as may from time
to time be assigned to him by the Board of Directors or the
President.
SECTION 10. Secretary. The Secretary shall:
(a) Keep or cause to be kept, in one or more
books provided for the purpose, the minutes of all meetings of
the Board of Directors, the committees of the Board and the
stockholders;
(b) See that all notices are duly given in
accordance with the provisions of these Bylaws and as required by
law;
(c) Be custodian of the records and the seal of
the Corporation and affix and attest the seal to all stock
certificates of the Corporation (unless the seal of the
Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its
seal;
(d) See that the books, reports, statements,
certificates and other documents and records required by law to
be kept and filed are properly kept and filed; and
(e) In general, perform all the duties incident
to the office of Secretary and such other duties as from time to
time may be assigned to him by the Board of Directors or the
President.
SECTION 11. Delegation of Duties. In case of the
absence of any officer of the Corporation, or for any other
reason that the Board of Directors may deem sufficient, the Board
may confer for the time being the powers or duties, or any of
them, of such officer upon any other officer or upon any
director.
ARTICLE IV
STOCK
SECTION 1. Stock Certificates. To the extent provided
by the Board of Directors, each holder of stock of the
Corporation shall be entitled to have a certificate or
certificates representing shares of stock of the Corporation
owned by him. Such certificates shall be in a form approved by
the Board, signed by or in the name of the Corporation by the
President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer
<PAGE>
and sealed with the seal of the Corporation. Any or all of the
signatures or the seal on the certificate may be facsimiles. In
case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar
before the certificate is issued, it may nevertheless be issued
by the Corporation with the same effect as if the officer,
transfer agent or registrar was still in office at the date of
issue.
SECTION 2. Stock Ledger. There shall be maintained a
stock ledger containing the name and address of each stockholder
and the number of shares of stock of each class the stockholder
holds. The stock ledger may be in written form or any other form
which can be converted within a reasonable time into written form
for visual inspection. The original or a duplicate of the stock
ledger shall be kept at the principal office of the Corporation,
at the office of the transfer agent for such shares or at any
other office or agency specified by the Board of Directors.
SECTION 3. Transfers of Shares. Transfers of shares
of stock of the Corporation shall be made on the stock records of
the Corporation only by the registered holder of the shares, or
by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or
certificates, if issued, for the shares properly endorsed or
accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the
record of stockholders as the owner of the share or shares for
all purposes, including, without limitation, the rights to
receive dividends or other distributions and to vote as the
owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or
shares on the part of any other person.
SECTION 4. Regulations. The Board of Directors may
authorize the issuance of uncertificated securities if permitted
by law. If stock certificates are issued, the Board of Directors
may make any additional rules and regulations, not inconsistent
with these Bylaws, as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of
the Corporation. The Board may appoint, or authorize any officer
or officers to appoint, one or more transfer agents or one or
more transfer clerks and one or more registrars and may require
all certificates for shares of stock to bear the signature or
signatures of any of them.
SECTION 5. Lost, Destroyed or Mutilated Certificates.
The holder of any certificate representing shares of stock of the
Corporation shall immediately notify the Corporation of its loss,
destruction or mutilation, and the Corporation may issue a new
certificate of stock in the place of any certificate issued by it
that has been alleged to have been lost or destroyed or that
shall have been mutilated. The Board may, in its absolute
discretion, require the owner (or his legal representative) of a
lost, destroyed or mutilated certificate to give to the
Corporation a bond in a sum, limited or unlimited, and form and
with any surety or sureties, as the Board in its absolute
discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged
loss or destruction of any such certificate or issuance of a new
certificate. Anything herein to the contrary notwithstanding,
the Board of Directors may, in its absolute discretion, refuse to
issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
<PAGE>
SECTION 6. Fixing of Record Date for Dividends,
Distributions, etc. The Board may fix, in advance, a date not
more than ninety (90) days preceding the date fixed for the
payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or
evidences of interests arising out of any change, conversion or
exchange of common stock or other securities, as the record date
for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and
in such case only the stockholders of record at the time so fixed
shall be entitled to receive such dividend, distribution,
allotment, rights or interests.
SECTION 7. Information to Stockholders and Others.
Any stockholder of the Corporation or his agent may, during the
Corporation's usual business hours, inspect and copy the
Corporation's Bylaws, minutes of the proceedings of its
stockholders, annual statements of its affairs and voting trust
agreements on file at its principal office.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification of Directors and Officers.
Any person who was or is a party or is threatened to be made a
party in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is a
current or former director or officer of the Corporation, or is
or was serving while a director or officer of the Corporation at
the request of the Corporation as a director, officer, partner,
trustee, employee, agent or fiduciary of another domestic or
foreign corporation, partnership, joint venture, trust,
enterprise or employee benefit plan shall be indemnified by the
Corporation against judgments, penalties, fines, excise taxes,
settlements and reasonable expenses (including attorneys' fees)
actually incurred by such person in connection with such action,
suit or proceeding to the fullest extent permissible under the
Maryland General Corporation Law and the Investment Company Act
of 1940, as amended, as those statutes are now or hereafter in
force, except that such indemnity shall not protect any such
person against any liability to the Corporation or any
stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
SECTION 2. Advances. Any current or former director
or officer of the Corporation claiming indemnification within the
scope of this Article V shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by
him in connection with proceedings to which he is a party in the
manner and to the fullest extent permissible under the Maryland
General Corporation Law and the Investment Company Act of 1940,
as amended, as those statutes are now or hereafter in force;
provided, however, that the person seeking indemnification shall
provide to the Corporation a written affirmation of his good
faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written
undertaking to repay any such advance, if it should ultimately be
determined that the standard of conduct has not been met, and
provided further that at least one (1) of the following
additional conditions is met: (a) the person seeking
indemnification shall provide a security in form and amount
acceptable to the Corporation for his undertaking; (b) the
Corporation is insured against losses arising by reason of the
<PAGE>
advance; or (c) a majority of a quorum of directors of the
Corporation who are neither "interested persons" as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion,
shall determine, based on a review of facts readily-available to
the Corporation at the time the advance is proposed to be made,
that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to
indemnification.
SECTION 3. Procedure. At the request of any current
or former director or officer, or any employee or agent whom the
Corporation proposes to indemnify, the Board of Directors shall
determine, or cause to be determined, in a manner consistent with
the Maryland General Corporation Law and the Investment Company
Act of 1940, as amended, as those statutes are now or hereafter
in force, whether the standards required by this Article V and
Section 2-418 of the Maryland General Corporation Law have been
met; provided, however, that indemnification shall be made only
following: (a) a final decision on the merits by a court or
other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct
or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person
to be indemnified was not liable by reason of disabling conduct,
by (i) the vote of a majority of a quorum of disinterested non-
party directors or (ii) an independent legal counsel in a written
opinion.
SECTION 4. Indemnification of Employees and Agents.
Employees and agents who are not officers or directors of the
Corporation may be indemnified, and reasonable expenses may be
advanced to such employees or agents, in accordance with the
procedures set forth in this Article V to the extent permissible
under the Maryland General Corporation Law and the Investment
Company Act of 1940, as amended, as those statutes are now or
hereafter in force, and to such further extent, consistent with
the foregoing, as may be provided by action of the Board of
Directors or by contract.
SECTION 5. Other Rights. The indemnification provided
by this Article V shall not be deemed exclusive of any other
right, with respect to indemnification or otherwise, to which
those seeking such indemnification may be entitled under any
insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a
director or officer of the Corporation in his capacity as such
and as to action by such person in another capacity while holding
such office or position, and shall continue as to a person who
has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a
person.
SECTION 6. Insurance. The Corporation shall have the
power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the
Corporation, or who, while a director, officer, employee or agent
of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another domestic or foreign corporation,
partnership, joint venture, trust, enterprise or employee benefit
plan, against any liability asserted against and incurred by him
in any such capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify
him against such liability.
<PAGE>
ARTICLE VI
SEAL
The seal of the Corporation shall be circular in form and
shall bear the name of the Corporation, the year of its
incorporation, the words "Corporate Seal" and "Maryland" and any
emblem or device approved by the Board of Directors. The seal
may be used by causing it or a facsimile to be impressed or
affixed or in any other manner reproduced, or by placing the word
"(Seal)" adjacent to the signature of the authorized officer of
the Corporation.
ARTICLE VII
FISCAL YEAR
SECTION 1. Fiscal Year. The Corporation's fiscal year
shall be fixed by the Board of Directors.
SECTION 2. Accountant.
(a) The Corporation shall employ an independent
public accountant or a nationally-recognized firm of independent
public accountants as its Accountant to examine the accounts of
the Corporation and to certify financial statements of the
Corporation. The Accountant's certificates and reports shall be
addressed both to the Board of Directors and to the stockholders.
The employment of the Accountant shall be conditioned upon the
right of the Corporation to terminate the employment forthwith
without any penalty by vote of a majority of the outstanding
voting securities at any stockholders' meeting called for that
purpose.
(b) A majority of the members of the Board of
Directors who are not "interested persons" (as such term is
defined in the Investment Company Act of 1940, as amended) of the
Corporation shall select the Accountant at any meeting held
within thirty (30) days before or after the beginning of the
fiscal year of the Corporation or before the annual stockholders'
meeting in that year. Such selection shall be submitted for
ratification or rejection at the next succeeding annual
stockholders' meeting. If such meeting shall reject such
selection, the Accountant shall be selected by majority vote of
the Corporation's outstanding voting securities, either at the
meeting at which the rejection occurred or at a subsequent
meeting of stockholders called for that purpose.
(c) Any vacancy occurring between annual
meetings, due to the resignation of the Accountant, may be filled
by the vote of a majority of the members of the Board of
Directors who are not "interested persons" of the Corporation, as
that term is defined in the Investment Company Act of 1940, at a
meeting called for the purpose of voting on such action.
<PAGE>
ARTICLE VIII
CUSTODY OF SECURITIES
SECTION 1. Employment of a Custodian. The Corporation
shall place and at all times maintain in the Custodian (including
any sub-custodian for the Custodian) all funds, securities and
similar investments owned by the Corporation. The Custodian (and
any sub-custodian) shall be an institution conforming to the
requirements of Section 17(f) of the Investment Company Act of
1940, as amended, and the rules of the Securities and Exchange
Commission thereunder. The Custodian shall be appointed from
time to time by the Board of Directors, which shall fix its
remuneration.
Subject to such rules, regulations and orders as the
Securities and Exchange Commission may adopt, the Corporation may
direct the Custodian to deposit all or any part of the securities
owned by the Corporation in a system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Securities
and Exchange Commission, or otherwise in accordance with the
Investment Company Act of 1940, as amended, pursuant to which
system all securities of any particular class of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical
delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the
Corporation or the Custodian.
SECTION 2. Termination of Custodian Agreement. Upon
termination of the Custodian Agreement or inability of the
Custodian to continue to serve, the Board of Directors shall
promptly appoint a successor Custodian, but in the event that no
successor Custodian can be found who has the required
qualifications and is willing to serve, the Board of Directors
shall call as promptly as possible a special meeting of the
stockholders to determine whether the Corporation shall function
without a Custodian or shall be liquidated. If so directed by
vote of the holders of a majority of the outstanding shares of
stock entitled to vote of the Corporation, the Custodian shall
deliver and pay over all property of the Corporation held by it
as specified in such vote.
ARTICLE IX
AMENDMENTS
These Bylaws may be amended or repealed by the
affirmative vote of a majority of the Board of Directors at any
regular or special meeting of the Board of Directors, subject to
the requirements of the Investment Company Act of 1940, as
amended.
Dated: December 18, 1996
<PAGE>
ARTICLES SUPPLEMENTARY
CREATING AND FIXING THE RIGHTS OF
8% CUMULATIVE PREFERRED STOCK OF
ROYCE VALUE TRUST, INC.
ROYCE VALUE TRUST, INC., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called
the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board
of Directors of the Corporation by Article FIFTH of the Charter
of the Corporation, the Board of Directors has authorized the
issuance of a series of 2,400,000 shares of preferred stock, par
value $.001 per share, of the Corporation designated as the 8%
Cumulative Preferred Stock" (the "Cumulative Preferred Stock")
and has provided for the issuance of shares of such series.
SECOND: The preferences, voting powers, rights,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of shares of the Cumulative
Preferred Stock of the Corporation, as set by the Board of
Directors, are as follows:
ARTICLE I
DEFINITIONS
Unless the context or use indicates another or different
meaning or intent, the following terms when used in these
Articles Supplementary shall have the meanings set forth below,
whether such terms are used in the singular or plural and
regardless of their tense:
"Accountant's Confirmation"* means a letter from an
Independent Accountant delivered to Moody's with respect to
certain Basic Maintenance Reports substantially to the effect
that:
(i) the Independent Accountant has read the Basic Maintenance
Report for the current Quarterly Valuation Date and a randomly
selected Basic Maintenance Report prepared by the Corporation
during the quarter ending on such Quarterly Valuation Date (the
"Reports");
(ii) with respect to the issue size compliance, issuer
diversification and industry diversification calculations, such
calculations and the resulting Market Value of Moody's Eligible
<PAGE>
Assets and Portfolio Calculation are numerically correct;
(iii) with respect to the calculation of the Basic
Maintenance Amount, such calculation has been compared with the
definition of Basic Maintenance Amount in these Articles
Supplementary and is calculated in accordance with such
definition and the results of such calculation have been
recalculated and are numerically correct;
(iv) with respect to the excess or deficiency of the Portfolio
Calculation when compared to the Basic Maintenance Amount
calculated for Moody's, the results of the calculation set forth
in the Reports have been recalculated and are numerically
correct;
(v) with respect to the Moody's and S&P ratings on corporate
bonds, convertible corporate bonds and preferred stock, issuer
name, issue size and coupon or dividend rate listed in the
Reports, that information has been traced and agrees with the
information listed in the applicable guides of the respective
rating agencies (in the event such information does not agree or
such information is not listed in the applicable guides of the
respective rating agencies, the Independent Accountant will
inquire of the rating agencies what such information is, and
provide a listing in its letter of such differences, if any);
(vi) with respect to the lower of two bid prices (or
alternative permissible factors used in calculating the Market
Value as provided by these Articles Supplementary) provided by
the custodian of the Corporation's assets for purposes of valuing
securities in the portfolio, the Independent Accountant has
traced the price used in the Reports to the lower of the two bid
prices listed in the report provided by such custodian and
verified that such information agrees (in the event such
information does not agree, the Independent Accountant will
provide a listing in its letter of such differences); and
(vii) with respect to the description of each security
included in the Reports, the description of Moody's Eligible
Assets has been compared to the definition of Moody's Eligible
Assets contained in these Articles Supplementary, and the
description as appearing in the Reports agrees with the
definition of Moody's Eligible Assets as described in these
Articles Supplementary.
Each such letter may state: such Independent Accountant has
made no independent verification of the accuracy of the
description of the investment securities listed in the Reports or
the Market Value of those securities nor have they performed any
<PAGE>
procedures other than those specifically outlined above for the
purposes of issuing such letter; unless otherwise stated in the
letter, the procedures specified therein were limited to a
comparison of numbers or a verification of specified computations
applicable to numbers appearing in the Reports and the
schedule(s) thereto; the foregoing procedures do not constitute
an examination in accordance with generally accepted auditing
standards and the Reports discussed in the letter do not extend
to any of the Corporation's financial statements taken as a
whole; such Independent Accountant does not express an opinion as
to whether such procedures would enable such Independent
Accountant to determine that the methods followed in the
preparation of the Reports would correctly determine the Market
Value or Discounted Value of the investment portfolio;
accordingly, such Independent Accountant expresses no opinion as
to the information set forth in the Reports or in the schedule(s)
thereto and make no representation as to the sufficiency of the
procedures performed for the purposes of these Articles
Supplementary.
Such letter shall also state that the Independent Accountant
is a "independent accountant" with respect to the Corporation
within the meaning of the Securities Act of 1933, as amended, and
the related published rules and regulations thereunder.
"Adviser" means Quest Advisory Corp., a New York
corporation.
"Asset Coverage" means, asset coverage, as defined in
Section 18(h) of the 1940 Act, of at least 250%, or such higher
percentage as may be required under the 1940 Act, with respect to
all outstanding senior securities of the Corporation which are
stock, including all outstanding shares of Cumulative Preferred
Stock.
"Asset Coverage Cure Date" means, with respect to the
failure by the Corporation to maintain the Asset Coverage (as
required by paragraph 5(a)(i) of Article II hereof) as of the
last Business Day of each March, June, September and December of
each year, 60 days following such Business Day.
"Basic Maintenance Amount"* means, as of any Valuation Date,
the dollar amount equal to (i) the sum of (A) the product of the
number of shares of Cumulative Preferred Stock outstanding on
such Valuation Date multiplied by the Liquidation Preference; (B)
to the extent not included in (A), the aggregate amount of cash
dividends (whether or not earned or declared) that will have
accumulated for each outstanding share of Cumulative Preferred
Stock from the most recent Dividend Payment Date to which
dividends have been paid or duly provided for (or, in the event
the Basic Maintenance Amount is calculated on a date prior to the
initial Dividend Payment Date with respect to the Cumulative
<PAGE>
Preferred Stock, then from the Date of Original Issue) through
the Valuation Date plus all dividends to accumulate on the
Cumulative Preferred Stock then outstanding during the 70 days
following such Valuation Date; (C) the Corporation's other
liabilities due and payable as of such Valuation Date (except
that dividends and other distributions payable by the Corporation
by the issuance of Common Stock shall not be included as a
liability) and such liabilities projected to become due and
payable by the Corporation during the 90 days following such
Valuation Date (excluding liabilities for investments to be
purchased and for dividends and other distributions not declared
as of such Valuation Date but including accrued interest on the
Notes); (D) the aggregate outstanding principal amount of Notes;
(E) any current liabilities of the Corporation as of such
Valuation Date to the extent not reflected in any of (i)(A)
through (i)(D) (including, without limitation, and immediately
upon determination, any amounts due and payable by the
Corporation pursuant to reverse repurchase agreements and any
payables for assets purchased as of such Valuation Date) less
(ii) (A) the Discounted Value of any of the Corporation's assets
and/or (B) the face value of any of the Corporation's assets if,
in the case of both (ii)(A) and (ii)(B), such assets are either
cash or securities which mature prior to or on the date of
redemption or repurchase of Cumulative Preferred Stock or payment
of another liability and are either U.S. Government Obligations
or securities which have a rating assigned by Moody's of at least
Aaa, P-1, VMIG-1 or MIG-1 or by S&P of at least AAA, SP-1+ or A-
1+, in both cases irrevocably held by the Corporation's custodian
bank in a segregated account or deposited by the Corporation with
the Paying Agent for the payment of the amounts needed to redeem
or repurchase Cumulative Preferred Stock subject to redemption or
repurchase or any of (i)(B) through (i)(E) and provided that in
the event the Corporation has repurchased Cumulative Preferred
Stock at a price of less than the Liquidation Preference thereof
and/or Notes at a price of less than the principal amount thereof
plus accrued but unpaid interest thereon and irrevocably
segregated or deposited assets as described above with its
custodian bank or the Paying Agent or the Indenture trustee in
the case of the Notes for the payment of the repurchase price the
Corporation may deduct 100% of the Liquidation Preference of such
Cumulative Preferred Stock to be repurchased and/or 100% of the
aggregate principal amount and accrued but unpaid interest on the
Notes to be repurchased from (i) above.
"Basic Maintenance Cure Date"* means 14 calendar days
following a Valuation Date, such date being the last day upon
which the Corporation's failure to comply with paragraph
5(a)(ii)(A) of Article II hereof could be cured.
"Basic Maintenance Report"* means a report signed by the
President, the Treasurer or any Vice President of the Corporation
which sets forth, as of the related Valuation Date, the assets of
<PAGE>
the Corporation, the Market Value and Discounted Value thereof
(seriatum and in the aggregate), and the Basic Maintenance
Amount.
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means a day on which the New York Stock
Exchange is open for trading and that is neither a Saturday,
Sunday nor any other day on which banks in the City of New York
are authorized by law to close.
"Charter" means the Articles of Incorporation, as amended
and supplemented (including these Articles Supplementary), of the
Corporation on file in the State Department of Assessments and
Taxation of Maryland.
"Common Stock" means the Common Stock, par value $.001 per
share, of the Corporation.
"Corporation" shall mean Royce Value Trust, Inc., a Maryland
corporation.
"Cumulative Preferred Stock" means the 8% Cumulative
Preferred Stock, par value $.001 per share, of the Corporation.
"Date of Original Issue" shall have the meaning set forth in
paragraph 1(a) of Article II hereof.
"Deposit Securities" means cash, Short-Term Money Market
Instruments and U.S. Government Obligations. Except for
determining whether the Corporation has a Portfolio Calculation
equal to or greater than the Basic Maintenance Amount, each
Deposit Security shall be deemed to have a value equal to its
principal or face amount payable at maturity plus any interest
payable thereon after delivery of such Deposit Security but only
if payable on or prior to the applicable payment date in advance
of which the relevant deposit is made.
"Discounted Value"* means, with respect to a Moody's
Eligible Asset, the quotient of (A) in the case of non-
convertible fixed income securities, the lower of the principal
amount and the Market Value thereof or (B) in the case of any
other Moody's Eligible Asset, the Market Value thereof, divided
by the applicable Moody's Discount Factor.
"Dividend Payment Date" with respect to the Cumulative
Preferred Stock, means any date on which dividends are payable
thereon pursuant to the provisions of paragraph 1(a) of Article
II hereof.
<PAGE>
"Dividend Period" shall have the meaning set forth in
paragraph 1(a) of Article II hereof.
"Indenture" means the Indenture, dated June 15, 1994,
between the Corporation and the United States Trust Company of
New York, as trustee, relating to the Notes, as supplemented or
otherwise amended from time to time.
"Independent Accountant"* means a nationally recognized
accountant, or firm of accountants, that is with respect to the
Corporation an independent public accountant or firm of
independent public accountants under the Securities Act of 1933,
as amended.
"Liquidation Preference" shall have the meaning set forth in
paragraph 2(a) of Article II hereof.
"Market Value"* means the amount determined by State Street
Bank and Trust Company (so long as prices are provided to it by
Telekurs N.A., Inc. or another pricing service approved by
Moody's in writing), or, if Moody's agrees in writing, the then
bank custodian of the Corporation's assets or such other party
approved by Moody's in writing, with respect to specific Moody's
Eligible Assets of the Corporation, as follows: Securities
listed on an exchange or on the NASDAQ System shall be valued on
the basis of the last reported sale on the Valuation Date or, if
no sale is reported for such Valuation Date, then at their last
reported bid price for such day for exchange-listed securities
and at the average of their last reported bid and asked prices
for such Valuation Date for NASDAQ System securities. Quotations
shall be taken from the market where the security is primarily
traded. Bonds and other fixed income securities may be valued by
reference to other securities with comparable ratings, interest
rates and maturities, using established independent pricing
services.
Notwithstanding the foregoing, "Market Value" may, at the
option of the Corporation, mean the amount determined with
respect to specific Moody's Eligible Assets of the Corporation in
the manner set forth below:
(a) as to any corporate bond or convertible corporate bond
which is a Moody's Eligible Asset, (i) the product of (A) the
unpaid principal balance of such bond as of the Valuation Date
and (B)(1) if the bond is traded on a national securities
exchange or quoted on the NASDAQ System, the last sales price
reported on the Valuation Date or (2) if there was no reported
sales price on the Valuation Date or if the bond is not traded on
a national securities exchange or quoted on the NASDAQ System,
the lower of two bid prices for such bond provided by two
recognized securities dealers with a minimum capitalization of
$25,000,000 (or otherwise approved for such purpose by Moody's)
<PAGE>
or by one such securities dealer and any other source (provided
that the utilization of such source would not adversely affect
Moody's then-current rating of the Cumulative Preferred Stock) to
the custodian of the Corporation's assets, at least one of which
shall be provided in writing or by telecopy, telex, other
electronic transcription, computer obtained quotation reducible
to written form or similar means, and in turn provided to the
Corporation by any such means by such custodian, plus (ii)
accrued interest on such bond or, if two bid prices cannot be
obtained, such Moody's Eligible Asset shall have a Market Value
of zero;
(b) as to any common or preferred stock which is a Moody's
Eligible Asset, (i) if the stock is traded on a national
securities exchange or quoted on the NASDAQ System, the last
sales price reported on the Valuation Date or (ii) if there was
no reported sales price on the Valuation Date, the lower of two
bid prices for such stock provided by two recognized securities
dealers with a minimum capitalization of $25,000,000 (or
otherwise approved for such purpose by Moody's) or by one such
securities dealer and any other source (provided that the
utilization of such source would not adversely affect Moody's
then-current rating of the Cumulative Preferred Stock) to the
custodian of the Corporation's assets, at least one of which
shall be provided in writing or by telecopy, telex, other
electronic transcription, computer obtained quotation reducible
to written form or similar means, and in turn provided to the
Corporation by any such means by such custodian, or, if two bid
prices cannot be obtained, such Moody's Eligible Asset shall have
a Market Value of zero;
(c) the product of (i) as to U.S. Government Obligations,
Short Term Money Market Instruments (other than demand deposits,
federal funds, bankers' acceptances and next Business Day's
repurchase agreements) and commercial paper, the face amount or
aggregate principal amount of such U.S. Government Obligations or
Short Term Money Market Instruments, as the case may be, and (ii)
the lower of the bid prices for the same kind of securities or
instruments, as the case may be, having, as nearly as
practicable, comparable interest rates and maturities provided by
two recognized securities dealers having minimum capitalization
of $25,000,000 (or otherwise approved for such purpose by
Moody's) or by one such securities dealer and any other source
(provided that the utilization of such source would not adversely
affect Moody's then-current rating of the Cumulative Preferred
Stock) to the custodian of the Corporation's assets, at least one
of which shall be provided in writing or by telecopy, telex,
other electronic transcription, computer obtained quotation
reducible to written form or similar means, and in turn provided
to the Corporation by any such means by such custodian, or, if
two bid prices cannot be obtained, such Moody's Eligible Asset
will have a Market Value of zero;
<PAGE>
(d) as to cash, demand deposits, federal funds, bankers'
acceptances and next Business Day's repurchase agreements
included in Short Term Money Market Instruments, the face value
thereof.
"Moody's" means Moody's Investors Service, Inc., or its
successor.
"Moody's Discount Factor"* means, with respect to a Moody's
Eligible Asset specified below, the following applicable number:
Moody's
Type of Moody's Eligible Asset: Discount Factor:
Moody's Short Term Money Market Instruments
(other than U.S. Government Obligations
set forth below) and other commercial
paper:
Demand or time deposits,
certificates of deposit and bankers'
acceptances includible in Moody's Short
Term Money Market Instruments 1.00
Commercial paper rated P-1 by Moody's
maturing in 30 days or less 1.00
Commercial paper rated P-1 by Moody's
maturing in more than 30 days but in 270
days or less 1.15
Commercial paper rated A-1+ by S&P
maturing in 270 days or less 1.25
Repurchase obligations includible in Moody's
Short Term Money Market Instruments if
term is less than 30 days and
counterparty is rated at least A2 1.00
Other repurchase obligations Discount Factor
applicable to
underlying
assets
Common stocks 3.00
<PAGE>
Moody's
Type of Moody's Eligible Assets Discount Factor:
Preferred stocks:
Auction rate preferred stocks 3.50
Other preferred stocks issued by issuers
in the financial and industrial ind
ustries 2.35
Other preferred stocks issued by issuers
in the utilities industry 1.60
U.S. Government Obligations (other than U.S.
Treasury Securities Strips set forth
below) with remaining terms to maturity
of:
1 year or less 1.08
2 years or less 1.15
3 years or less 1.20
4 years or less 1.26
5 years or less 1.31
7 years of less 1.40
10 years or less 1.48
15 years or less 1.54
20 years or less 1.61
30 years or less 1.63
U.S. Treasury Securities Strips with
remaining terms to maturity of:
1 year or less 1.08
2 years or less 1.16
3 years or less 1.23
4 years or less 1.30
5 years or less 1.37
7 years or less 1.51
10 years or less 1.69
15 years or less 1.99
20 years or less 2.28
30 years or less 2.56
<PAGE>
Moody's
Type of Moody's Eligible Assets Discount Factor:
Corporate bonds:
Corporate bonds rated Aaa with remaining
terms to maturity of:
1 year or less 1.14
2 years or less 1.21
3 years or less 1.26
4 years or less 1.32
5 years or less 1.38
7 years or less 1.47
10 years or less 1.55
15 years or less 1.62
20 years or less 1.69
30 years or less 1.71
Corporate bonds rated Aa with remaining
terms to maturity of:
1 year or less 1.19
2 years or less 1.26
3 years or less 1.32
4 years or less 1.38
5 years or less 1.44
7 years or less 1.54
10 years or less 1.63
15 years or less 1.69
20 years or less 1.77
30 years or less 1.79
Corporate bonds rated A with remaining terms
to maturity of:
1 year or less 1.24
2 years or less 1.32
3 years or less 1.38
4 years or less 1.45
5 years or less 1.51
7 years or less 1.61
10 years or less 1.70
15 years or less 1.77
20 years or less 1.85
30 years or less 1.87
<PAGE>
Moody's
Type of Moody's Eligible Assets Discount Factor:
Convertible corporate bonds with senior debt
securities rated Aa issued by the
following type of issuers:
Utility 1.80
Industrial 2.97
Financial 2.92
Transportation 4.27
Convertible corporate bonds with senior debt
securities rated A issued by the
following type of issuers:
Utility 1.85
Industrial 3.02
Financial 2.97
Transportation 4.32
Convertible corporate bonds with senior debt
securities rated Baa issued by the
following type of issuers:
Utility 2.01
Industrial 3.18
Financial 3.13
Transportation 4.48
Convertible corporate bonds with senior debt
securities rated Ba issued by the
following type of issuers:
Utility 2.02
Industrial 3.19
Financial 3.14
Transportation 4.49
Convertible corporate bonds with senior debt
securities rated B1 or B2 issued by the
following type of issuers:
Utility 2.12
Industrial 3.29
Financial 3.24
Transportation 4.59
"Moody's Eligible Assets"* means:
(i) cash (including, for this purpose, receivables for
investments sold to a counterparty whose senior debt securities
are rated at least Baa3 by Moody's or a counterparty approved by
<PAGE>
Moody's and payable within five Business Days following such
Valuation Date and dividends and interest receivable within 70
days on investments);
(ii) Short-Term Money Market Instruments;
(iii) commercial paper that is not includible as a Short-Term
Money Market Instrument having on the Valuation Date a rating
from Moody's of at least P-1 and maturing within 270 days;
(iv) preferred stocks (A) which either (1) are issued by issuers
whose senior debt securities are rated at least Baa1 by Moody's
or (2) are rated at least "baa3" by Moody's (or in the event an
issuer's senior debt securities or preferred stock is not rated
by Moody's, which either (1) are issued by an issuer whose senior
debt securities are rated at least A by S&P or (2) are rated at
least A by S&P and for this purpose have been assigned a Moody's
equivalent rating of at least "baa3"), (B) of issuers which have
(or, in the case of issuers which are special purpose
corporations, whose parent companies have) common stock listed on
the New York Stock Exchange or the American Stock Exchange, (C)
which have a minimum issue size (when taken together with other
of the issuer's issues of similar tenor) of $50,000,000, (D)
which have paid cash dividends consistently during the preceding
three-year period (or, in the case of new issues without a
dividend history, are rated at least "a1" by Moody's or, if not
rated by Moody's, are rated at least AA by S&P), (E) which pay
cumulative cash dividends in U.S. dollars, (F) which are not
convertible into any other class of stock and do not have
warrants attached, (G) which are not issued by issuers in the
transportation industry and (H) in the case of auction rate
preferred stocks, which are rated at least "aa" by Moody's, or if
not rated by Moody's, AAA by S&P or are otherwise approved in
writing by Moody's and have never had a failed auction; provided,
however, that for this purpose the aggregate Market Value of the
Company's holdings of any issue of preferred stock shall not be
less than $500,000 nor more than $5,000,000;
(v) common stocks (A) which are traded on the New York Stock
Exchange, the American Stock Exchange or in the over-the-counter
market, (B) which, if cash dividend paying, pay cash dividends in
U.S. dollars, and (C) which are not privately placed; provided,
however, that (1) common stock which, while a Moody's Eligible
Asset owned by the Corporation, ceases paying any regular cash
dividend will no longer be considered a Moody's Eligible Asset
until 71 days after the date of the announcement of such
cessation, unless the issuer of the common stock has senior debt
<PAGE>
securities rated at least A3 by Moody's and (2) the aggregate
Market Value of the Corporation's holdings of the common stock of
any issuer shall not exceed 4% in the case of utility common
stock and 6% in the case of non-utility common stock of the
number of outstanding shares times the Market Value of such
common stock;
(vi) U.S. Government Obligations;
(vii) corporate bonds (A) which are not privately placed,
rated at least B3 (Caa subordinate) by Moody's (or, in the event
the bond is not rated by Moody's, the bond is rated at least BB-
by S&P and which for this purpose is assigned a Moody's
equivalent rating of one full rating category lower), with such
rating confirmed on each Valuation Date, (B) which have a minimum
issue size of at least (x) $100,000,000 if rated at least Baa3 or
(y) $50,000,000 if rated B or Ba3, (C) which are U.S. dollar
denominated and pay interest in cash in U.S. dollars, (D) which
are not convertible or exchangeable into equity of the issuing
corporation and have a maturity of not more than 30 years, (E)
for which, if rated below Baa3, the aggregate Market Value of the
Company's holdings do not exceed 10% of the aggregate Market
Value of any individual issue of corporate bonds calculated at
the time of original issuance, (F) the cash flow from which must
be controlled by an indenture trustee and (G) which are not
issued in connection with a reorganization under any bankruptcy
law;
(viii) convertible corporate bonds (A) which are issued by
issuers whose senior debt securities are rated at least B2 by
Moody's (or, in the event an issuer's senior debt securities are
not rated by Moody's, which are issued by issuers whose senior
debt securities are rated at least BB by S&P and which for this
purpose is assigned a Moody's equivalent rating of one full
rating category lower), (B) which are convertible into common
stocks which are traded on the New York Stock Exchange or the
American Stock Exchange or are quoted on the NASDAQ National
Market System and (C) which, if cash dividend paying, pay cash
dividends in U.S. dollars; provided, however, that once
convertible corporate bonds have been converted into common
stock, the common stock issued upon conversion must satisfy the
criteria set forth in clause (v) above and other relevant
criteria set forth in this definition in order to be a Moody's
Eligible Asset;
provided, however, that the Corporation's investment in preferred
stock, common stock, corporate bonds and convertible corporate
bonds described above must be within the following
diversification requirements (utilizing Moody's Industry and Sub-
<PAGE>
industry Categories) in order to be included in Moody's Eligible
Assets:
Issuer:
Non-Utility Utility Maximum
Moody's Rating Maximum Single Issuer Single Issuer
(1)(2) (3)(4) (3)(4)
"aaa", Aaa 100% 100%
"aa", Aa 20% 20%
"a", A 10% 10%
CS/CB, "Baa", Baa(5) 6% 4%
Ba 4% 4%
B1/B2 3% 3%
B3 (Caa subordinate) 2% 2%
Industry and State:
Utility
Non-Utility Utility Maximum
Maximum Single Maximum Single Sub- Single
Moody's Rating(1) Industry(3) Industry(3)(6) State(3)
"aaa", Aaa 100% 100% 100%
"aa", Aa 60% 60% 20%
"a", A 40% 50% 10%(7)
CS/CB, "baa", Baa(5) 20% 50% 7%(7)
Ba 12% 12% N/A
B1/B2 8% 8% N/A
B3 (Caa subordinate) 5% 5% N/A
(1) The equivalent Moody's rating must be lowered one full
rating category for preferred stocks, corporate bonds and
convertible corporate bonds rated by S&P but not by Moody's.
(2) Corporate bonds from issues ranging $50,000,000 to
$100,000,000 are limited to 20% of Moody's Eligible Assets.
(3) The referenced percentages represent maximum cumulative
totals only for the related Moody's rating category and each
lower Moody's rating category.
(4) Issuers subject to common ownership of 25% or more are
considered as one name.
(5) CS/CB refers to common stock and convertible corporate
bonds, which are diversified independently from the rating
level.
(6) In the case of utility common stock, utility preferred
stock, utility bonds and utility convertible bonds, the
definition of industry refers to sub-industries (electric,
<PAGE>
water, hydro power, gas, diversified). Investments in other
sub-industries are eligible only to the extent that the
combined sum represents a percentage position of the Moody's
Eligible Assets less than or equal to the percentage limits
in the diversification tables above.
(7) Such percentage shall be 15% in the case of utilities
regulated by California, New York and Texas.
; and provided, further, that the Corporation's investments in
auction rate preferred stocks described in clause (iv) above
shall be included in Moody's Eligible Assets only to the extent
that the aggregate Market Value of such stocks does not exceed
10% of the aggregate Market Value of all of the Corporation's
investments meeting the criteria set forth in clauses (i) through
(viii) above less the aggregate Market Value of those investments
excluded from Moody's Eligible Assets pursuant to the immediately
preceding proviso; and
(ix) no assets which are subject to any lien or irrevocably
deposited by the Corporation for the payment of amounts needed to
meet the obligations described in clauses (i)(A) through (i)(E)
of the definition of "Basic Maintenance Amount" may be includible
in Moody's Eligible Assets.
"Moody's Industry and Sub-Industry Categories"* means as set
forth below:
Aerospace and Defense: Major Contractor, Subsystems,
Research, Aircraft Manufacturing, Arms, Ammunition
Automobile: Automotive Equipment, Auto-Manufacturing, Auto
Parts Manufacturing, Personal Use Trailers, Motor Homes,
Dealers
Banking: Bank Holding, Savings and Loans, Consumer Credit,
Small Loan, Agency, Factoring, Receivables
Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines
and Liquors, Distributors, Soft Drink Syrup, Bottlers,
Bakery, Mill Sugar, Canned Foods, Corn Refiners, Dairy
Products, Meat Products, Poultry Products, Snacks, Packaged
Foods, Distributors, Candy, Gum, Seafood, Frozen Food,
Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil
Buildings and Real Estate: Brick, Cement, Climate Controls,
Contracting, Engineering, Construction, Hardware, Forest
Products (building-related only), Plumbing, Roofing,
Wallboard, Real Estate, Real Estate Development, REITs, Land
Development
<PAGE>
Chemicals, Plastics and Rubber: Chemicals (non-
agriculture), Industrial Gases, Sulphur, Plastics, Plastic
Products, Abrasives, Coatings, Paints, Varnish, Fabricating
Containers, Packaging and Glass: Glass, Fiberglass,
Containers made of: Glass, Metal, Paper, Plastic, Wood, or
Fiberglass
Personal and Non Durable Consumer Products (Manufacturing
Only): Soaps, Perfumes, Cosmetics, Toiletries, Cleaning
Supplies, School Supplies
Diversified/Conglomerate Manufacturing
Diversified/Conglomerate Service
Diversified Natural Resources, Precious Metals and Minerals:
Fabricating Distribution
Ecological: Pollution Control, Waste Removal, Waste
Treatment, Waste Disposal
Electronics: Computer Hardware, Electric Equipment,
Components, Controllers, Motors, Household Appliances,
Information Service Communication Systems, Radios, TVs, Tape
Machines, Speakers, Printers, Drivers, Technology
Finance: Investment Brokerage, Leasing, Syndication,
Securities
Farming and Agriculture: Livestock, Grains, Produce;
Agricultural Chemicals, Agricultural Equipment, Fertilizers
Grocery: Grocery Stores, Convenience Food Stores
Healthcare, Education and Childcare: Ethical Drugs,
Proprietary Drugs, Research, Health Care Centers, Nursing
Homes, HMOs, Hospitals, Hospital Supplies, Medical Equipment
Home and Office Furnishings, Housewares, and Durable
Consumer Products: Carpets, Floor Coverings, Furniture,
Cooking, Ranges
Hotels, Motels, Inns and Gaming
Insurance: Life, Property and Casualty, Broker, Agent,
Surety
Leisure, Amusement, Motion Pictures, Entertainment:
Boating, Bowling, Billiards, Musical Instruments, Fishing,
Photo Equipment, Records, Tapes, Sports, Outdoor Equipment
(Camping), Tourism, Resorts, Games, Toy Manufacturing,
<PAGE>
Motion Picture Production Theaters, Motion Picture
Distribution
Machinery (Non-Agriculture, Non-Construction, Non-
Electronic): Industrial, Machine Tools, Steam Generators
Mining, Steel, Iron and Non Precious Metals: Coal, Copper,
Lead, Uranium, Zinc, Aluminum, Stainless Steel, Integrated
Steel, Ore Production, Refractories, Steel Mill Machinery,
Mini-Mills, Fabricating, Distribution and Sales
Oil and Gas: Crude Producer, Retailer, Well Supply, Service
and Drilling
Personal, Food and Miscellaneous Services
Printing, Publishing and Broadcasting: Graphic Arts, Paper,
Paper Products, Business Forms, Magazines, Books,
Periodicals, Newspapers, Textbooks, Radio, T.V., Cable
Broadcasting Equipment
Cargo Transport: Rail, Shipping, Railroads, Rail-Car
Builders, Ship Builders, Containers, Container Builders,
Parts, Overnight Mail, Trucking, Truck Manufacturing,
Trailer Manufacturing, Air Cargo, Transport
Retail Stores: Apparel, Toy, Variety, Drugs, Department,
Mail Order Catalog, Showroom
Telecommunications: Local, Long Distance, Independent,
Telephone, Telegraph, Satellite, Equipment, Research,
Cellular
Textiles and Leather: Producer, Synthetic Fiber, Apparel
Manufacturer, Leather Shoes
Personal Transportation: Air, Bus, Rail, Car Rental
Utilities: Electric, Water, Hydro Power, Gas, Diversified
Sovereigns: Semi-sovereigns, Canadian Provinces, Supra-
national agencies
"1940 Act" means the Investment Company Act of 1940, as
amended.
"Notes" means the Corporation's $40,000,000 aggregate
principal amount of 5-3/4% Investment Company Convertible Notes
due June 30, 2004, as the same may be modified pursuant to the
terms of the Indenture.
<PAGE>
"Notice of Redemption" has the meaning set forth in
paragraph 3(c)(i) of Article II hereof.
"Officers' Certificate" means a certificate signed by any
two of the President, a Vice President, the Treasurer or the
Secretary of the Corporation or by any one of the foregoing and
an Assistant Treasurer or Assistant Secretary of the Corporation.
"Paying Agent" means State Street Bank and Trust Company and
its successors or any other paying agent appointed by the
Corporation.
"Portfolio Calculation"* means the aggregate Discounted
Value of all Moody's Eligible Assets.
"Preferred Stock" means the preferred stock, par value $.001
per share, of the Corporation, and includes the Cumulative
Preferred Stock.
"Quarterly Valuation Date"* means the last Valuation Date in
March, June, September and December of each year, commencing
September 27, 1996.
"Redemption Price" has the meaning set forth in paragraph
3(a) of Article II hereof.
"Short-Term Money Market Instruments" means the following
types of instruments if, on the date of purchase or other
acquisition thereof by the Corporation (or, in the case of an
instrument specified by clauses (i) and (ii) below, on the
Valuation Date), the remaining terms to maturity thereof are not
in excess of 90 days:
(i) U.S. Government Obligations;
(ii) commercial paper that is rated at the time of
purchase or acquisition and the Valuation Date at least P-1 by
Moody's and is issued by an issuer (or guaranteed or supported by
a person or entity other than the issuer) whose long-term
unsecured debt obligations are rated at least Aa by Moody's;
(iii) demand or time deposits in, or certificates of
deposit of, or banker's acceptances issued by (A) a depository
institution or trust company incorporated under the laws of the
United States of America or any state thereof or the District of
Columbia or (B) a United States branch office or agency of a
foreign depository institution (provided that such branch office
or agency is subject to banking regulation under the laws of the
United States, any state thereof or the District of Columbia) if,
in each case, the commercial paper, if any, and the long-term
<PAGE>
unsecured debt obligations (other than such obligations the
ratings of which are based on the credit of a person or entity
other than such depository institution or trust company) of such
depository institution or trust company at the time of purchase
or acquisition and the Valuation Date, have (1) credit ratings
from Moody's of at least P-1 in the case of commercial paper and
(2) credit ratings from Moody's of at least Aa in the case of
long-term unsecured debt obligations; provided, however, that in
the case of any such investment that matures in no more than one
Business Day from the date of purchase or other acquisition by
the Corporation, all of the foregoing requirements shall be
applicable except that the required long-term unsecured debt
credit rating of such depository institution or trust company
from Moody's shall be at least A2; and provided, further,
however, that the foregoing credit rating requirements shall be
deemed to be met with respect to a depository institution or
trust company if (1) such depository institution or trust company
is the principal depository institution in a holding company
system, (2) the commercial paper, if any, of such depository
institution or trust company is not rated below P-1 by Moody's
and (3) the holding company shall meet all of the foregoing
credit rating requirements (including the preceding proviso in
the case of investments that mature in no more than one Business
Day from the date of purchase or other acquisition by the
Corporation);
(iv) repurchase obligations with respect to any U.S.
Government Obligation entered into with a depository institution,
trust company or securities dealer (acting as principal) which is
rated (A) at least Aa3 if the maturity is three months or less,
(B) at least A1 if the maturity is two months or less and (C) at
least A2 if the maturity is one month or less; and
(v) Eurodollar demand or time deposits in, or
certificates of deposit of, the head office or the London branch
office of a depository institution or trust company meeting the
credit rating requirements of commercial paper and long-term
unsecured debt obligations specified in clause (iii) above,
provided that the interest receivable by the Corporation shall be
payable in U.S. dollars and shall not be subject to any
withholding or similar taxes.
"S&P" means Standard & Poor's Ratings Group or its
successors.
"U.S. Government Obligations" means direct non-callable
obligations of the United States, provided that such direct
obligations are entitled to the full faith and credit of the
United States and that any such obligations, other than United
<PAGE>
States Treasury Bills and U.S. Treasury Securities Strips,
provide for the periodic payment of interest and the full payment
of principal at maturity.
"Valuation Date"* means every Friday or, if such day is not
a Business Day, the immediately preceding Business Day.
"Voting Period" shall have the meaning set forth in
paragraph 4(b) of Article II hereof.
Those of the foregoing definitions which are marked with an
asterisk have been adopted by the Board of Directors of the
Corporation in order to obtain a "aaa" rating from Moody's on the
shares of Cumulative Preferred Stock on their Date of Original
Issue; and the Board of Directors of the Corporation shall have
the authority, without stockholder approval, to amend, alter or
repeal from time to time the foregoing definitions and the
restrictions and guidelines set forth thereunder if Moody's
advises the Corporation in writing that such amendment,
alteration or repeal will not adversely affect their then current
rating on the Cumulative Preferred Stock. Furthermore, if the
Board of Directors determines not to continue to comply with the
provisions of paragraphs 5(a)(ii), 5(c) and 6 of Article II
hereof as provided in paragraph 7 of Article II hereof, then such
definitions marked with an asterisk, unless the context otherwise
requires, shall have no meaning for these Articles Supplementary.
ARTICLE II
CUMULATIVE PREFERRED STOCK
1. Dividends.
(a) Holders of shares of Cumulative Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor, cumulative
cash dividends at the annual rate of 8% per share (computed on
the basis of a 360-day year consisting of twelve 30-day months)
of the initial Liquidation Preference of $25.00 per share on the
Cumulative Preferred Stock and no more, payable annually on
December 23 in each year (each a "Dividend Payment Date")
commencing December 23, 1996 (or, if any such day is not a
Business Day, then on the next succeeding Business Day) to
holders of record of Cumulative Preferred Stock as they appear on
the stock register of the Corporation at the close of business on
the preceding December 6 (or, if any such day is not a Business
Day, then on the next succeeding Business Day), as the case may
be, in preference to dividends on shares of Common Stock and any
other capital stock of the Corporation ranking junior to the
Cumulative Preferred Stock in payment of dividends. Dividends on
shares of Cumulative Preferred Stock shall accumulate from the
<PAGE>
date on which such shares are originally issued ("Date of
Original Issue"). Each period beginning on and including a
Dividend Payment Date (or the Date of Original Issue, in the case
of the first dividend period after issuance of such shares) and
ending on but excluding the next succeeding Dividend Payment Date
is referred to herein as a "Dividend Period." Dividends on
account of arrears for any past Dividend Period may be declared
and paid at any time, without reference to any Dividend Payment
Date, to holders of record on such date, not exceeding 30 days
preceding the payment date thereof, as shall be fixed by the
Board of Directors.
(b)(i) No dividends shall be declared or paid or set apart
for payment on any shares of Cumulative Preferred Stock for any
Dividend Period or part thereof unless full cumulative dividends
have been or contemporaneously are declared and paid on all
outstanding shares of Cumulative Preferred Stock through the most
recent Dividend Payment Dates therefor. If full cumulative
dividends are not declared and paid on the shares of Cumulative
Preferred Stock, any dividends on the shares of Cumulative
Preferred Stock shall be declared and paid pro rata on all
outstanding shares of Cumulative Preferred Stock. No holders of
shares of Cumulative Preferred Stock shall be entitled to any
dividends, whether payable in cash, property or stock, in excess
of full cumulative dividends as provided in this paragraph
1(b)(i) on shares of Cumulative Preferred Stock. No interest or
sum of money in lieu of interest shall be payable in respect of
any dividend payments on any shares of Cumulative Preferred Stock
that may be in arrears.
(ii) For so long as shares of Cumulative Preferred Stock
are outstanding, the Corporation shall not declare, pay or set
apart for payment any dividend or other distribution (other than
a dividend or distribution paid in shares of, or options,
warrants or rights to subscribe for or purchase, Common Stock or
other stock, if any, ranking junior to the Cumulative Preferred
Stock as to dividends or upon liquidation) in respect of the
Common Stock or any other stock of the Corporation ranking junior
to or on parity with the Cumulative Preferred Stock as to
dividends or upon liquidation, or call for redemption, redeem,
purchase or otherwise acquire for consideration any shares of
Common Stock or any other stock of the Corporation ranking junior
to or on parity with the Cumulative Preferred Stock as to
dividends or upon liquidation (except by conversion into or
exchange for stock of the Corporation ranking junior to or on
parity with the Cumulative Preferred Stock as to dividends and
upon liquidation), unless, in each case, (A) immediately
thereafter, the Corporation shall have a Portfolio Calculation at
least equal to the Basic Maintenance Amount and the Corporation
shall maintain the Asset Coverage, (B) full cumulative dividends
on all shares of Cumulative Preferred Stock due on or prior to
the date of the transaction have been declared and paid (or shall
<PAGE>
have been declared and sufficient funds for the payment thereof
deposited with the Paying Agent) and (C) the Corporation has
redeemed the full number of shares of Cumulative Preferred Stock
required to be redeemed by any provision contained herein for
mandatory redemption.
(iii) Any dividend payment made on the shares of Cumulative
Preferred Stock shall first be credited against the dividends
accumulated with respect to the earliest Dividend Period for
which dividends have not been paid.
(c) Not later than the Business Day next preceding each
Dividend Payment Date, the Corporation shall deposit with the
Paying Agent Deposit Securities having an initial combined value
sufficient to pay the dividends that are payable on such Dividend
Payment Date, which Deposit Securities shall mature on or prior
to such Dividend Payment Date. The Corporation may direct the
Paying Agent with respect to the investment of any such Deposit
Securities, provided that such investment consists exclusively of
Deposit Securities and provided further that the proceeds of any
such investment will be available at the opening of business on
such Dividend Payment Date.
(d) The Board of Directors may declare an additional
dividend on the Cumulative Preferred Stock each year in order to
permit the Corporation to distribute its income in accordance
with Section 855 (or any successor provision) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the other
rules and regulations under Subchapter M of the Code. Any such
additional dividend shall be payable to holders of the Cumulative
Preferred Stock on the next Dividend Payment Date, shall be part
of the annual dividend for the year of declaration payable to
holders of record pursuant to paragraph 1(a) hereof and shall not
result in any increase in the amount of cash dividends payable
for such year pursuant to paragraph 1(a) hereof.
2. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding
up of the affairs of the Corporation, whether voluntary or
involuntary, the holders of shares of Cumulative Preferred Stock
shall be entitled to receive out of the assets of the Corporation
available for distribution to stockholders, after claims of
creditors but before any distribution or payment shall be made in
respect of the Common Stock or any other stock of the Corporation
ranking junior to the Cumulative Preferred Stock as to
liquidation payments, a liquidation distribution in the amount of
$25.00 per share plus an amount equal to all unpaid dividends
thereon accumulated to and including the date fixed for such
distribution or payment (whether or not earned or declared by the
Corporation, but excluding interest thereon) (the "Liquidation
Preference"), and such holders shall be entitled to no further
<PAGE>
participation in any distribution or payment in connection with
any such liquidation, dissolution or winding up.
(b) If, upon any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary,
the assets of the Corporation available for distribution among
the holders of all outstanding shares of Cumulative Preferred
Stock, and any other outstanding class or series of Preferred
Stock of the Corporation ranking on a parity with the Cumulative
Preferred Stock as to payment upon liquidation, shall be
insufficient to permit the payment in full to such holders of
Cumulative Preferred Stock of the Liquidation Preference and the
amounts due upon liquidation with respect to such other
Preferred Stock, then such available assets shall be distributed
among the holders of shares of Cumulative Preferred Stock and
such other Preferred Stock ratably in proportion to the
respective preferential amounts to which they are entitled.
Unless and until the Liquidation Preference has been paid in full
to the holders of shares of Cumulative Preferred Stock, no
dividends or distributions shall be made to holders of the Common
Stock or any other stock of the Corporation ranking junior to the
Cumulative Preferred Stock as to liquidation.
3. Redemption.
Shares of the Cumulative Preferred Stock shall be redeemed
by the Corporation as provided below:
(a) Mandatory Redemptions.
If the Corporation is required to redeem any shares of
Cumulative Preferred Stock pursuant to paragraphs 5(b) or 5(c) of
Article II hereof, then the Corporation shall, to the extent
permitted by the 1940 Act, Maryland law, the Indenture and any
other agreements in respect of indebtedness of the Corporation to
which it may be a party or by which it may be bound, by the close
of business on such Asset Coverage Cure Date or Basic Maintenance
Amount Cure Date (herein collectively referred to as a "Cure
Date"), as the case may be, fix a redemption date and proceed to
redeem shares as set forth in paragraph 3(c) hereof. On such
redemption date, the Corporation shall redeem, out of funds
legally available therefor, the number of shares of Cumulative
Preferred Stock equal to the minimum number of shares the
redemption of which, if such redemption had occurred immediately
prior to the opening of business on such Cure Date, would have
resulted in the Asset Coverage having been satisfied or the
Corporation having a Portfolio Calculation equal to or greater
than the Basic Maintenance Amount, as the case may be,
immediately prior to the opening of business on such Cure Date
or, if the Asset Coverage or a Portfolio Calculation equal to or
greater than the Basic Maintenance Amount, as the case may be,
cannot be so restored, all of the shares of Cumulative Preferred
<PAGE>
Stock, at a price equal to $25.00 per share plus accumulated but
unpaid dividends thereon (whether or not earned or declared by
the Corporation) through the date of redemption (the "Redemption
Price"). In the event that shares of Cumulative Preferred Stock
are redeemed pursuant to paragraph 5(b) of Article II hereof, the
Corporation may, but shall not be required to, redeem a
sufficient number of shares of Cumulative Preferred Stock
pursuant to this paragraph 3(a) in order that the "asset
coverage" of a class of senior security which is stock, as
defined in Section 18(h) of the 1940 Act, of the remaining
outstanding shares of Cumulative Preferred Stock and any other
Preferred Stock after redemption is up to 275%.
(b) Optional Redemptions.
Prior to August 15, 2001, the Corporation may, at its
option, redeem shares of Cumulative Preferred Stock at the
Redemption Price per share only if and to the extent that any
such redemption is necessary, in the judgment of the Corporation,
to maintain the Corporation's status as a regulated investment
company under Subchapter M of the Code. Commencing August 15,
2001 and at any time and from time to time thereafter, the
Corporation may, at its option, to the extent permitted by the
1940 Act, Maryland law, the Indenture and any other agreements in
respect of indebtedness of the Corporation to which it may be a
party or by which it may be bound, redeem the Cumulative
Preferred Stock in whole or in part at the Redemption Price per
share.
(c) Procedures for Redemption.
(i) If the Corporation shall determine or be required to
redeem shares of Cumulative Preferred Stock pursuant to this
paragraph 3, it shall mail a written notice of redemption
("Notice of Redemption") with respect to such redemption by first
class mail, postage prepaid, to each holder of the shares to be
redeemed at such holder's address as the same appears on the
stock books of the Corporation on the record date in respect of
such redemption established by the Board of Directors. Each such
Notice of Redemption shall state: (A) the redemption date, which
shall be not fewer than 30 days nor more than 45 days after the
date of such notice; (B) the number of shares of Cumulative
Preferred Stock to be redeemed; (C) the CUSIP number(s) of such
shares; (D) the Redemption Price; (E) the place or places where
the certificate(s) for such shares (properly endorsed or assigned
for transfer, if the Board of Directors shall so require and the
Notice of Redemption shall so state) are to be surrendered for
payment in respect of such redemption; (F) that dividends on the
shares to be redeemed will cease to accrue on such redemption
date; and (G) the provisions of this paragraph 3 under which such
redemption is made. If fewer than all shares of Cumulative
Preferred Stock held by any holder are to be redeemed, the Notice
<PAGE>
of Redemption mailed to such holder also shall specify the number
of shares to be redeemed from such holder. No defect in the
Notice of Redemption or the mailing thereof shall affect the
validity of the redemption proceedings, except as required by
applicable law.
(ii) If the Corporation shall give a Notice of Redemption,
then by the close of business on the Business Day preceding the
redemption date specified in the Notice of Redemption the
Corporation shall (A) deposit with the Paying Agent Deposit
Securities having an initial combined value sufficient to effect
the redemption of the shares of Cumulative Preferred Stock to be
redeemed, which Deposit Securities shall mature on or prior to
such redemption date, and (B) give the Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the
holders of the shares of Cumulative Preferred Stock called for
redemption on the redemption date. The Corporation may direct
the Paying Agent with respect to the investment of any Deposit
Securities so deposited, provided that the proceeds of any such
investment will be available at the opening of business on such
redemption date. Upon the date of such deposit (unless the
Corporation shall default in making payment of the Redemption
Price), all rights of the holders of the shares of Cumulative
Preferred Stock so called for redemption shall cease and
terminate except the right of the holders thereof to receive the
Redemption Price thereof and such shares shall no longer be
deemed outstanding for any purpose. The Corporation shall be
entitled to receive, promptly after the date fixed for redemption
any cash in excess of the aggregate Redemption Price of the
shares of Cumulative Preferred Stock called for redemption on
such date and any remaining Deposit Securities. Any assets so
deposited that are unclaimed at the end of two years from such
redemption date shall, to the extent permitted by law, be repaid
to the Corporation, after which the holders of the shares of
Cumulative Preferred Stock so called for redemption shall look
only to the Corporation for payment thereof. The Corporation
shall be entitled to receive, from time to time after the date
fixed for redemption, any interest on the Deposit Securities so
deposited.
(iii) On or after the redemption date, each holder of
shares of Cumulative Preferred Stock that are subject to
redemption shall surrender the certificate evidencing such shares
to the Corporation at the place designated in the Notice of
Redemption and shall then be entitled to receive the cash
Redemption Price, without interest.
(iv) In the case of any redemption of less than all of the
shares of Cumulative Preferred Stock pursuant to these Articles
Supplementary, such redemption shall be made pro rata from each
holder of shares of Cumulative Preferred Stock in accordance with
<PAGE>
the respective number of shares held by each such holder on the
record date for such redemption.
(v) Notwithstanding the other provisions of this paragraph
3, the Corporation shall not redeem shares of Cumulative
Preferred Stock unless all accumulated and unpaid dividends on
all outstanding shares of Cumulative Preferred Stock for all
applicable past Dividend Periods (whether or not earned or
declared by the Corporation) shall have been or are
contemporaneously paid or declared and Deposit Securities for the
payment of such dividends shall have been deposited with the
Paying Agent as set forth in paragraph 1(c) of Article II hereof.
(vi) If the Corporation shall not have funds legally
available for the redemption of, or is otherwise unable to
redeem, all the shares of the Cumulative Preferred Stock to be
redeemed on any redemption date, the Corporation shall redeem on
such redemption date the number of shares of Cumulative Preferred
Stock as it shall have legally available funds, or is otherwise
able, to redeem ratably from each holder whose shares are to be
redeemed, and the remainder of the shares of the Cumulative
Preferred Stock required to be redeemed shall be redeemed on the
earliest practicable date on which the Corporation shall have
funds legally available for the redemption of, or is otherwise
able to redeem, such shares.
4. Voting Rights.
(a) General.
Except as otherwise provided by law or as specified in the
Charter or By-Laws, each holder of shares of Cumulative Preferred
Stock shall be entitled to one vote for each share held on each
matter submitted to a vote of stockholders of the Corporation,
and the holders of outstanding shares of Preferred Stock,
including Cumulative Preferred Stock, and of shares of Common
Stock shall vote together as a single class; provided that, at
any meeting of the stockholders of the Corporation held for the
election of directors, the holders of outstanding shares of
Preferred Stock, including Cumulative Preferred Stock, shall be
entitled, as a class, to the exclusion of the holders of all
other securities and classes of capital stock of the Corporation,
to elect two directors of the Corporation. Subject to paragraph
4(b) of Article II hereof, the holders of outstanding shares of
capital stock of the Corporation, including the holders of
outstanding shares of Preferred Stock (including the Cumulative
Preferred Stock), voting as a single class, shall elect the
balance of the directors.
<PAGE>
(b) Right to Elect Majority of Board of Directors.
During any period in which any one or more of the conditions
described below shall exist (such period being referred to herein
as a "Voting Period"), the number of directors constituting the
Board of Directors shall be automatically increased by the
smallest number that, when added to the two directors elected
exclusively by the holders of shares of Preferred Stock, would
constitute a majority of the Board of Directors as so increased
by such smallest number; and the holders of shares of Preferred
Stock shall be entitled, voting separately as one class (to the
exclusion of the holders of all other securities and classes of
capital stock of the Corporation), to elect such smallest number
of additional directors, together with the two directors that
such holders are in any event entitled to elect. A Voting Period
shall commence:
(i) if at any time accumulated dividends (whether or not
earned or declared, and whether or not funds are then legally
available in an amount sufficient therefor) on the outstanding
shares of Cumulative Preferred Stock equal to at least two full
years' dividends shall be due and unpaid and sufficient Deposit
Securities shall not have been deposited with the Paying Agent
for the payment of such accumulated dividends; or
(ii) if at any time holders of any other shares of
Preferred Stock are entitled to elect a majority of the directors
of the Corporation under the 1940 Act.
Upon the termination of a Voting Period, the voting rights
described in this paragraph 4(b) shall cease, subject always,
however, to the reverting of such voting rights in the holders of
Preferred Stock upon the further occurrence of any of the events
described in this paragraph 4(b).
(c) Right to Vote with Respect to Certain Other Matters.
So long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation shall not, without the affirmative
vote of the holders of two-thirds of the shares of Cumulative
Preferred Stock outstanding at the time, voting separately as one
class, amend, alter or repeal the provisions of the Charter,
whether by merger, consolidation or otherwise, so as to
materially adversely affect any of the contract rights expressly
set forth in the Charter of holders of shares of Cumulative
Preferred Stock. The Corporation shall notify Moody's ten
Business Days prior to any such vote described above. Unless a
higher percentage is provided for under the Charter, the
affirmative vote of the holders of a majority of the outstanding
shares of Preferred Stock, including Cumulative Preferred Stock,
voting together as a single class, will be required to approve
<PAGE>
any plan of reorganization adversely affecting such shares or any
action requiring a vote of security holders under Section 13(a)
of the 1940 Act. For purposes of the preceding sentence, the
phrase "vote of the holders of a majority of the outstanding
shares of Preferred Stock" shall have the meaning set forth in
the 1940 Act. The class vote of holders of shares of Preferred
Stock, including Cumulative Preferred Stock, described above will
be in addition to a separate vote of the requisite percentage of
shares of Common Stock and shares of Preferred Stock, including
Cumulative Preferred Stock, voting together as a single class,
necessary to authorize the action in question. An increase in
the number of authorized shares of Preferred Stock pursuant to
the Charter or the issuance of additional shares of any series of
Preferred Stock (including Cumulative Preferred Stock) pursuant
to the Charter shall not in and of itself be considered to
adversely affect the contract rights of the holders of Cumulative
Preferred Stock.
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right of
the holders of shares of Preferred Stock to elect additional
directors as described in paragraph 4(b) above, the Corporation
shall call a special meeting of such holders and instruct the
Paying Agent to mail a notice of such special meeting to such
holders, such meeting to be held not less than 10 nor more than
20 days after the date of mailing of such notice. If the
Corporation fails to send such notice to the Paying Agent or if
the Corporation does not call such a special meeting, it may be
called by any such holder on like notice. The record date for
determining the holders entitled to notice of and to vote at such
special meeting shall be the close of business on the fifth
Business Day preceding the day on which such notice is mailed.
At any such special meeting and at each meeting held during a
Voting Period, such holders of Preferred Stock, voting together
as a class (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation),
shall be entitled to elect the number of directors prescribed in
paragraph 4(b) above. At any such meeting or adjournment thereof
in the absence of a quorum, a majority of such holders present in
person or by proxy shall have the power to adjourn the meeting
without notice, other than by an announcement at the meeting, to
a date not more than 120 days after the original record date.
(ii) For purposes of determining any rights of the holders of
Cumulative Preferred Stock to vote on any matter or the number of
shares required to constitute a quorum, whether such right is
created by these Articles Supplementary, by the other provisions
of the Charter, by statute or otherwise, a share of Cumulative
Preferred Stock which is not outstanding shall not be counted.
<PAGE>
(iii) The terms of office of all persons who are directors
of the Corporation at the time of a special meeting of holders of
Preferred Stock, including Cumulative Preferred Stock, to elect
directors shall continue, notwithstanding the election at such
meeting by such holders of the number of directors that they are
entitled to elect, and the persons so elected by such holders,
together with the two incumbent directors elected by the holders
of Preferred Stock, including Cumulative Preferred Stock, and the
remaining incumbent directors elected by the holders of the
Common Stock and Preferred Stock, shall constitute the duly
elected directors of the Corporation.
(iv) Simultaneously with the expiration of a Voting Period, the
terms of office of the additional directors elected by the
holders of Preferred Stock, including Cumulative Preferred Stock,
pursuant to paragraph 4(b) above shall terminate, the remaining
directors shall constitute the directors of the Corporation and
the voting rights of such holders of Preferred Stock, including
Cumulative Preferred Stock, to elect additional directors
pursuant to paragraph 4(b) above shall cease, subject to the
provisions of the last sentence of paragraph 4(b).
(e) Exclusive Remedy.
Unless otherwise required by law, the holders of shares of
Cumulative Preferred Stock shall not have any rights or
preferences other than those specifically set forth herein. The
holders of shares of Cumulative Preferred Stock shall have no
preemptive rights or rights to cumulative voting. In the event
that the Corporation fails to pay any dividends on the shares of
Cumulative Preferred Stock, the exclusive remedy of the holders
shall be the right to vote for directors pursuant to the
provisions of this paragraph 4.
(f) Notification to Moody's.
In the event a vote of holders of Cumulative Preferred Stock
is required pursuant to the provisions of Section 13(a) of the
1940 Act, as long as the Cumulative Preferred Stock is rated by
Moody's, the Corporation shall, not later than ten Business Days
prior to the date on which such vote is to be taken, notify
Moody's that such vote is to be taken and the nature of the
action with respect to which such vote is to be taken and, not
later than ten Business Days after the date on which such vote is
taken, notify Moody's of the result of such vote.
5. Coverage Tests.
(a) Determination of Compliance.
<PAGE>
For so long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation shall make the following
determinations:
(i) Asset Coverage. The Corporation shall maintain, as of
the last Business Day of each March, June, September and December
of each year in which any shares of Cumulative Preferred Stock
are outstanding, the Asset Coverage.
(ii) Basic Maintenance Amount Requirement.
(A) For so long as any shares of Cumulative Preferred Stock
are outstanding, the Corporation shall maintain, on each
Valuation Date, a Portfolio Calculation at least equal to the
Basic Maintenance Amount, each as of such Valuation Date. Upon
any failure to maintain the required Portfolio Calculation, the
Corporation shall use its best efforts to reattain a Portfolio
Calculation at least equal to the Basic Maintenance Amount on or
prior to the Basic Maintenance Amount Cure Date, by altering the
composition of its portfolio or otherwise.
(B) The Corporation shall prepare a Basic Maintenance Report
relating to each Valuation Date. On or before 5:00 P.M., New
York City time, on the third Business Day after the first
Valuation Date following the Date of Original Issue of the
Cumulative Preferred Stock and after each (A) Quarterly Valuation
Date, (B) Valuation Date on which the Corporation fails to
satisfy the requirements of paragraph 5(a)(ii)(A) above, (C)
Basic Maintenance Amount Cure Date following a Valuation Date on
which the Corporation fails to satisfy the requirements of
paragraph 5(a)(ii)(A) above and (D) Valuation Date and any
immediately succeeding Business Day on which the Portfolio
Calculation exceeds the Basic Maintenance Amount by 5% or less,
the Corporation shall complete and deliver to Moody's a Basic
Maintenance Report, which will be deemed to have been delivered
to Moody's if Moody's receives a copy or telecopy, telex or other
electronic transcription setting forth at least the Portfolio
Calculation and the Basic Maintenance Amount each as of the
relevant Valuation Date and on the same day the Corporation mails
to Moody's for delivery on the next Business Day the full Basic
Maintenance Report. The Corporation also shall provide Moody's
with a Basic Maintenance Report relating to any other Valuation
Date on Moody's specific request. A failure by the Corporation
to deliver a Basic Maintenance Report under this paragraph
5(a)(ii)(B) shall be deemed to be delivery of a Basic Maintenance
Report indicating a Portfolio Calculation less than the Basic
Maintenance Amount, as of the relevant Valuation Date.
(C) Within ten Business Days after the date of delivery to
Moody's of a Basic Maintenance Report in accordance with
paragraph 5(a)(ii)(B) above relating to a Quarterly Valuation
Date, the Corporation shall deliver to Moody's an Accountant's
<PAGE>
Confirmation relating to such Basic Maintenance Report and any
other Basic Maintenance Report, randomly selected by the
Independent Accountants, that was prepared by the Corporation
during the quarter ending on such Quarterly Valuation Date.
Also, within ten Business Days after the date of delivery to
Moody's of a Basic Maintenance Report in accordance with
paragraph 5(a)(ii)(B) above relating to a Valuation Date on which
the Corporation fails to satisfy the requirements of such
paragraph 5(a)(ii)(B) and any Basic Maintenance Amount Cure Date,
the Corporation shall deliver to Moody's an Accountant's
Confirmation relating to such Basic Maintenance Report. If any
Accountant's Confirmation delivered pursuant to this paragraph
5(a)(ii)(C) shows that an error was made in the Basic Maintenance
Report for such Quarterly Valuation Date, or shows that a lower
Portfolio Calculation was determined by the Independent
Accountants, the calculation or determination made by such
Independent Accountants shall be final and conclusive and shall
be binding on the Corporation, and the Corporation shall
accordingly amend the Basic Maintenance Report and deliver the
amended Basic Maintenance Report to Moody's promptly following
Moody's receipt of such Accountant's Confirmation.
(D) In the event the Portfolio Calculation shown in any Basic
Maintenance Report prepared pursuant to paragraph 5(a)(ii)(B)
above is less than the applicable Basic Maintenance Amount, the
Corporation shall have until the Basic Maintenance Amount Cure
Date to achieve a Portfolio Calculation at least equal to the
Basic Maintenance Amount, and upon such achievement (and not
later than such Basic Maintenance Amount Cure Date) the
Corporation shall inform Moody's of such achievement in writing
by delivery of a revised Basic Maintenance Report showing a
Portfolio Calculation at least equal to the Basic Maintenance
Amount as of the date of such revised Basic Maintenance Report,
together with an Officers' Certificate to such effect.
(E) On or before 5:00 P.M., New York City time, on the first
Business Day after shares of Common Stock are repurchased by the
Corporation, the Corporation shall complete and deliver to
Moody's a Basic Maintenance Report as of the close of business on
such date that Common Stock is repurchased. A Basic Maintenance
Report delivered as provided in paragraph 5(a)(ii)(B) above also
shall be deemed to have been delivered pursuant to this paragraph
5(a)(ii)(E).
(b) Failure to Meet Asset Coverage.
If the Asset Coverage is not satisfied as provided in
paragraph 5(a)(i) hereof and such failure is not cured as of the
related Asset Coverage Cure Date, the Corporation shall give a
Notice of Redemption as described in paragraph 3 of Article II
hereof with respect to the redemption of a sufficient number of
shares of Cumulative Preferred Stock to enable it to meet the
<PAGE>
requirements of paragraph 5(a)(i) above, and, at the
Corporation's discretion, such additional number of shares of
Cumulative Preferred Stock in order that the "asset coverage" of
a class of senior security which is stock, as defined in Section
18(h) of the 1940 Act, of the remaining outstanding shares of
Cumulative Preferred Stock and any other Preferred Stock is up to
275%, and deposit with the Paying Agent Deposit Securities having
an initial combined value sufficient to effect the redemption of
the shares of Cumulative Preferred Stock to be redeemed, as
contemplated by paragraph 3(a) of Article II hereof.
(c) Failure to Maintain a Portfolio Calculation At Least
Equal to the Basic Maintenance Amount.
If a Portfolio Calculation for Moody's at least equal to the
Basic Maintenance Amount is not maintained as provided in
paragraph 5(a)(ii)(A) above and such failure is not cured by the
related Basic Maintenance Amount Cure Date, the Corporation shall
give a Notice of Redemption as described in paragraph 3 of
Article II hereof with respect to the redemption of a sufficient
number of shares of Cumulative Preferred Stock to enable it to
meet the requirements of paragraph 5(a)(ii)(A) above, and, at the
Corporation's discretion, such additional number of shares of
Cumulative Preferred Stock in order that the Portfolio
Calculation exceeds the Basic Maintenance Amount of the remaining
outstanding shares of Cumulative Preferred Stock and any other
Preferred Stock by up to 10%, and deposit with the Paying Agent
Deposit Securities having an initial combined value sufficient to
effect the redemption of the shares of Cumulative Preferred Stock
to be redeemed, as contemplated by paragraph 3(a) of Article II
hereof.
(d) Status of Shares Called for Redemption.
For purposes of determining whether the requirements of
paragraphs 5(a)(i) and 5(a)(ii)(A) hereof are satisfied, (i) no
share of the Cumulative Preferred Stock shall be deemed to be
outstanding for purposes of any computation if, prior to or
concurrently with such determination, sufficient Deposit
Securities to pay the full Redemption Price for such share shall
have been deposited in trust with the Paying Agent and the
requisite Notice of Redemption shall have been given, and (ii)
such Deposit Securities deposited with the Paying Agent shall not
be included in determining whether the requirements of paragraphs
5(a)(i) and 5(a)(ii)(A) hereof are satisfied.
6. Certain Other Restrictions.
(a) For so long as the Cumulative Preferred Stock is rated
by Moody's, the Corporation will not, and will cause the Adviser
not to, (i) knowingly and willfully purchase or sell a portfolio
security for the specific purpose of causing, and with the actual
<PAGE>
knowledge that the effect of such purchase or sale will be to
cause, the Portfolio Calculation as of the date of the purchase
or sale to be less than the Basic Maintenance Amount as of such
date, (ii) in the event that, as of the immediately preceding
Valuation Date, the Portfolio Calculation exceeded the Basic
Maintenance Amount by 5% or less, alter the composition of the
Corporation's portfolio securities in a manner reasonably
expected to reduce the Portfolio Calculation, unless the
Corporation shall have confirmed that, after giving effect to
such alteration, the Portfolio Calculation exceeded the Basic
Maintenance Amount or (iii) declare or pay any dividend or other
distribution on any shares of Common Stock or repurchase any
shares of Common Stock, unless the Corporation shall have
confirmed that, after giving effect to such declaration, other
distribution or repurchase, the Corporation continues to satisfy
the requirements of paragraph 5(a)(ii)(A) of Article II hereof.
(b) For so long as the Cumulative Preferred Stock is rated
by Moody's, the Corporation shall not (a) acquire or otherwise
invest in (i) future contracts or (ii) options on futures
contracts, (b) engage in reverse repurchase agreements, (c)
engage in short sales, (d) overdraw any bank account, (e) write
options on portfolio securities other than call options on
securities held in the Corporation's portfolio or that the
Corporation has an immediate right to acquire through conversion
or exchange of securities held in its portfolio, or (f) borrow
money (other than the $40,000,000 aggregate principal amount of
Notes previously issued by the Corporation), except for the
purpose of clearing and/or settling transactions in portfolio
securities (which borrowings shall under any circumstances be
limited to the lesser of $10,000,000 and an amount equal to 5% of
the Market Value of the Corporation's assets at the time of such
borrowings and which borrowings shall be repaid within 60 days
and not be extended or renewed), unless in any such case, the
Corporation shall have received written confirmation from Moody's
that such investment activity will not adversely affect Moody's
then-current rating of the Cumulative Preferred Stock.
Furthermore, for so long as the Cumulative Preferred Stock is
rated by Moody's, unless the Corporation shall have received the
written confirmation from Moody's referred to in the preceding
sentence, the Corporation may engage in the lending of its
portfolio securities only in an amount of up to 5% of the
Corporation's total assets, provided that the Corporation
receives cash collateral for such loaned securities which is
maintained at all times in an amount equal to at least 100% of
the current market value of the loaned securities and, if
invested, is invested only in money market mutual funds meeting
the requirements of Rule 2a-7 under the 1940 Act that maintain a
constant $1.00 per share net asset value. In determining the
Portfolio Calculation, the Corporation shall use the Moody's
Discount Factor applicable to the loaned securities rather than
the Moody's Discount Factor applicable to the collateral.
<PAGE>
(c) For so long as the Cumulative Preferred Stock is rated
by Moody's, the Corporation shall not consolidate the Corporation
with, merge the Corporation into, sell or otherwise transfer all
or substantially all of the Corporation's assets to another
entity or adopt a plan of liquidation of the Corporation, in each
case without providing prior written notification to Moody's.
7. Termination of Rating Agency Provisions.
(a) The Board of Directors may determine that it is not in
the best interests of the Corporation to continue to comply with
the provisions of paragraphs 5(a)(ii), 5(c) and 6 of Article II
hereof with respect to Moody's, in which case the Corporation
will no longer be required to comply with any of the provisions
of paragraphs 5(a)(ii), 5(c) and 6 of Article II hereof with
respect to Moody's, provided that (i) the Corporation has given
the Paying Agent, Moody's and holders of the Cumulative Preferred
Stock at least 20 calendar days written notice of such
termination of compliance, (ii) the Corporation is in compliance
with the provisions of paragraphs 5(a)(i), 5(a)(ii), 5(c) and 6
of Article II hereof at the time the notice required in clause
(i) hereof is given and at the time of the termination of
compliance with the provisions of paragraphs 5(a)(ii), 5(c) and 6
of Article II hereof with respect to Moody's, (iii) at the time
the notice required in clause (i) hereof is given and at the time
of termination of compliance with the provisions of paragraphs
5(a)(ii), 5(c) and 6 of Article II hereof with respect to Moody's
the Cumulative Preferred Stock is listed on the New York Stock
Exchange or on another exchange registered with the Securities
and Exchange Commission as a national securities exchange and
(iv) at the time of termination of compliance with the provisions
of paragraphs 5(a)(ii), 5(c) and 6 of Article II hereof with
respect to Moody's, the cumulative cash dividend rate payable on
a share of the Cumulative Preferred Stock pursuant to paragraph
1(a) of Article II hereof shall be increased by .50% per annum.
(b) On the date that the notice is given in paragraph 7(a)
above and on the date that compliance with the provisions of
paragraphs 5(a)(ii), 5(c) and 6 of Article II hereof with respect
to Moody's is terminated, the Corporation shall provide the
Paying Agent and Moody's with an Officers' Certificate as to the
compliance with the provisions of paragraph 7(a) hereof, and the
provisions of paragraphs 5(a)(ii), 5(c) and 6 of Article II
hereof with respect to Moody's shall terminate on such later date
and thereafter have no force or effect.
8. Limitation on Incurrence of Additional Indebtedness and
Issuance of Additional Preferred Stock.
(a) So long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation may issue and sell one or more
series of a class of senior securities of the Corporation
<PAGE>
representing indebtedness under Section 18 of the 1940 Act and/or
otherwise create or incur indebtedness in addition to the Notes,
provided that (i) if the Corporation is using the proceeds (net
of all offering expenses payable by the Corporation) of such
additional indebtedness to purchase all or a portion of the Notes
or any shares of the Cumulative Preferred Stock or to repay,
redeem or otherwise refinance all or a portion of the Notes or
any shares of the Cumulative Preferred Stock and/or any other
indebtedness or Preferred Stock of the Corporation then
outstanding or if such indebtedness constitutes a temporary bank
borrowing (not in excess of 5% of the value of the Corporation's
total assets) for emergency or extraordinary purposes, then the
Corporation shall, immediately after giving effect to the
incurrence of such indebtedness and to its receipt and
application of the proceeds thereof, have an "asset coverage" for
all senior securities representing indebtedness, as defined in
Section 18(h) of the 1940 Act, of at least 300% of the amount of
all indebtedness of the Corporation then outstanding, or (ii) if
the Corporation is using the proceeds (net of all offering
expenses payable by the Corporation) of such additional
indebtedness for any other purpose, then the Corporation shall,
immediately after giving effect to the incurrence of such
indebtedness and to its receipt and application of the proceeds
thereof, have an "asset coverage" for all senior securities
representing indebtedness, as defined in Section 18(h) of the
1940 Act, of at least 500% of the amount of all indebtedness of
the Corporation then outstanding. Any possible liability
resulting from lending and/or borrowing portfolio securities,
entering into reverse repurchase agreements, entering into
futures contracts and writing options, to the extent such
transactions are made in accordance with the investment
restrictions of the Corporation then in effect, shall not be
considered to be indebtedness limited by this paragraph 8(a).
(b) So long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation may issue and sell shares of one or
more other series of Preferred Stock constituting a series of a
class of senior securities of the Corporation representing stock
under Section 18 of the 1940 Act in addition to the shares of
Cumulative Preferred Stock, provided that (i) if the Corporation
is using the proceeds (net of all offering expenses payable by
the Corporation) of such additional Preferred Stock to purchase
all or a portion of the shares of Cumulative Preferred Stock or
to redeem or otherwise refinance all or a portion of the shares
of Cumulative Preferred Stock, any other Preferred Stock and/or
any indebtedness of the Corporation then outstanding, then the
Corporation shall, immediately after giving effect to the
issuance of such additional Preferred Stock and to its receipt
and application of the proceeds thereof, have an "asset coverage"
for all senior securities which are stock, as defined in Section
18(h) of the 1940 Act, of at least 250% of the shares of
Cumulative Preferred Stock and all other Preferred Stock of the
<PAGE>
Corporation then outstanding, or (ii) if the Corporation is using
the proceeds (net of all offering expenses payable by the
Corporation) of such additional Preferred Stock for any other
purpose, then the Corporation shall, immediately after giving
effect to the issuance of such additional Preferred Stock and to
its receipt and application of the proceeds thereof, have an
"asset coverage" for all senior securities which are stock as
defined in Section 18(h) of the 1940 Act of at least 300% of the
shares of Cumulative Preferred Stock and all other Preferred
Stock of the Corporation then outstanding, and, in the case of
either (i) or (ii) above, (iii) no such additional Preferred
Stock shall have any preference or priority over any other
Preferred Stock of the Corporation upon the distribution of the
assets of the Corporation or in respect of the payment of
dividends.
<PAGE>
IN WITNESS WHEREOF, ROYCE VALUE TRUST, INC. has caused these
presents to be signed in its name and on its behalf by a duly
authorized officer, and its corporate seal to be hereunto affixed
and attested by its Secretary, and the said officers of the
Corporation further acknowledge said instrument to be the
corporate act of the Corporation, and state that to the best of
their knowledge, information and belief the matters and facts
herein set forth with respect to approval are true in all
material respects, all on August 19, 1996.
ROYCE VALUE TRUST, INC.
By /s/ Daniel O'Byrne
Daniel O'Byrne
Vice President
Attest:
/s/ John E. Denneen
John E. Denneen
Secretary
