ROYCE OTC MICRO-CAP FUND, INC.
_________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
_________________
To the Stockholders of
Royce OTC Micro-Cap Fund, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of ROYCE OTC MICRO-CAP FUND, INC. (the "Fund") will be held at the
offices of the Fund, 1414 Avenue of the Americas, New York, New
York, on June 28, 1995 at 3:30 p.m. (E.T.), for the following
purposes:
1. To elect a board of five directors.
2. To approve a change in the Fund's stated investment
objective by eliminating the requirement that the Fund invest at
least 65% of its assets in the securities of micro-cap companies
that are traded in the over-the-counter market.
3. To approve an amendment of the Fund's Articles of
Incorporation changing its name to Royce Micro-Cap Trust, Inc.
4. To ratify the selection of Ernst & Young LLP as
independent public accountants of the Fund for the year ending
December 31, 1995.
5. To transact such other business as may come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May
18, 1995 as the record date for the determination of those
stockholders entitled to vote at the meeting, and only holders of
record at the close of business on that day will be entitled to
vote.
The Fund's Annual Report to Stockholders for the year ended
December 31, 1994 was previously mailed to stockholders, and a copy
of it is available upon request, without charge, by writing to the
Fund at 1414 Avenue of the Americas, New York, New York 10019 or
calling toll-free at 1-800-221-4268.
IMPORTANT
To save the Fund the expense of additional proxy solicitation,
if you do not now expect to be present at the meeting, please
insert your instructions on the enclosed Proxy, date and sign it
<PAGE>
and return it in the enclosed envelope (which requires no postage
if mailed in the United States). The enclosed Proxy is solicited
on behalf of the Board of Directors, is revocable and will not
affect your right to vote in person in the event that you attend
the meeting.
By order of the Board of Directors
Susan I. Grant,
Secretary
May 22, 1995
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OF
ROYCE OTC MICRO-CAP FUND, INC.
1414 Avenue of the Americas
New York, New York 10019
Accompanying this Proxy Statement is a Notice of Annual
Meeting of Stockholders and a form of Proxy for such meeting
solicited on behalf of the directors of Royce OTC Micro-Cap Fund,
Inc. (the "Fund").
The Proxy may be revoked at any time before it is exercised by
written instructions to the Fund or by filing a new Proxy with a
later date, and any stockholder attending the meeting may vote in
person, whether or not he has previously filed a Proxy. The shares
represented by all properly executed Proxies received in time for
the meeting will be voted. Where a stockholder has specified a
choice on his Proxy with respect to Proposals 2, 3 and 4 in the
Notice of Annual Meeting, his shares will be voted accordingly. If
no directions are given, his shares will be voted in favor of such
Proposals. Unless authority to vote for all nominees or for an
individual nominee pursuant to Proposal 1 is specifically withheld,
the Proxy will be voted for the election of all of the persons
nominated by the Board of Directors to become directors. The cost
of soliciting Proxies will be borne by the Fund, which will
reimburse brokerage firms, custodians, nominees and fiduciaries for
their expenses in forwarding proxy material to the beneficial
owners of the Fund's shares. Some officers and employees of the
Fund and/or Quest Advisory Corp. ("Quest"), the Fund's investment
adviser, may solicit Proxies personally and by telephone, if deemed
desirable.
On May 18, 1995, the record date for the meeting, there were
shares of common stock of the Fund outstanding. The
stockholders entitled to vote are those of record on that date.
Each share is entitled to one vote on each item of business at the
meeting.
No person was known to the Fund to be the beneficial owner of
5% or more of its outstanding shares of common stock as of the
record date.
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As of the record date, the Fund's directors beneficially owned
the following shares of its common stock:
Name of Director Amount Percentage of Class
Charles M. Royce %
Thomas R. Ebright %
Richard M. Galkin None --
Stephen L. Isaacs None --
David L. Meister None --
Each of Messrs. Royce and Ebright has sole voting power and
sole investment power as to the shares shown as beneficially owned
by him. All directors and officers of the Fund as a group
(9 persons) beneficially owned shares of the Fund's common
stock, constituting % of the class.
1. ELECTION OF DIRECTORS (Proposal 1).
At the meeting, it is proposed to elect five directors, each
director to hold office until the next Annual Meeting of
Stockholders and until his successor shall have been elected and
qualifies. The Fund's Board of Directors has nominated the
following five persons to become directors of the Fund. Certain
information concerning such persons is set forth below. Each of
such persons has agreed to serve if elected, and the Fund's
management has no reason to believe that any of them will be
unavailable for election as a director. However, if any of such
persons become unwilling or unable to serve, the persons named in
the accompanying form of Proxy will vote for the election of such
other persons, if any, as the Board of Directors may nominate.
Name Age Positions and Served as
Offices with Director Since
the Fund
Charles M. Royce 55 Director,
Royce President and September 1993
Treasurer
Thomas R. Ebright 50 Director September 1993
Richard M. Galkin 57 Director September 1993
Stephen L. Isaacs 55 Director September 1993
David L. Meister 55 Director September 1993
A total of six meetings of the Board of Directors were held
during the year ended December 31, 1994, and each director attended
all of such meetings.
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The Board of Directors has an Audit Committee, comprised of
Richard M. Galkin, Stephen L. Isaacs and David L. Meister, which is
responsible for the selection and nomination of the independent
auditors of the Fund and for conducting post-audit reviews of the
Fund's financial condition with such auditors. The Audit Committee
held one meeting during the year ended December 31, 1994, and each
member of the Audit Committee attended the meeting. The Board of
Directors does not have any other standing committees.
There are no family relationships between any of the Fund's
directors and officers.
During the year ended December 31, 1994, each of Charles M.
Royce, W. Whitney George, a Vice President of the Fund and of
Quest, and Susan I. Grant, Secretary of the Fund, failed to file on
a timely basis reports required by Section 16(a) of the Securities
Exchange Act of 1934, with Mr. Royce filing two late reports
relating to three transactions, Mr. George filing two late reports
relating to two transactions, and Ms. Grant filing one late report.
Business Experience
Set forth below is certain information as to the principal
business experience during the past five years of the Fund's
directors:
Charles M. Royce is the President, Secretary, Treasurer and
sole director and sole voting shareholder of Quest, the investment
adviser to the Fund. He became affiliated with Quest in June 1972
and has served as its President and Treasurer since November 1972.
Mr. Royce also manages two private investment partnerships through
Quest Management Company ("QMC"), a registered investment adviser,
of which he is the managing general partner.
Thomas R. Ebright has been a Vice President of Quest since
September 1981. He has also been President, Treasurer and a
director and principal shareholder of Royce, Ebright & Associates,
Inc., investment adviser to a series of The Royce Fund, since June
1994. Mr. Ebright is also a director of Atlantic Pro Sports, Inc.
and of the Strasburg Rail Road Co. since March 1993 and was the
President and principal owner of Baltimore Professional Hockey,
Inc. until May 1993.
Richard M. Galkin is a private investor and the President of
Richard M. Galkin Associates, Inc., tele-communications
consultants.
Stephen L. Isaacs is an attorney, Director of the Columbia
University Development Law and Policy Program, a Professor at
Columbia University and President of Stephen L. Isaacs Associates,
consultants. He was counsel to Kaplan & Kilsheimer from January
1988 to February 1991.
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David L. Meister is a consultant in the communications
industry. He was an executive officer of Digital Planet Inc. from
April 1991 to December 1992, a consultant to the communications and
television industry from August 1990 to April 1991 and Executive
Vice President of Infotechnology, Inc. from December 1986 to July
1990.
Mr. Royce is also President and Treasurer of Royce Value
Trust, Inc. ("RVT"), Pennsylvania Mutual Fund ("PMF") and The Royce
Fund ("TRF"), registered management investment companies. Messrs.
Royce, Ebright, Galkin, Isaacs and Meister are also
directors/trustees of RVT and PMF, and Messrs. Royce, Galkin,
Isaacs, and Meister are also trustees of TRF. Mr. Ebright is also
President and Treasurer and Mr. Royce is also the sole shareholder
and director and the Secretary of Quest Distributors, Inc. ("QDI"),
the distributor of TRF's shares.
Messrs. Royce and Ebright are "interested persons" within the
meaning of Section 2(a)(19) of the Investment Company Act of 1940.
Remuneration of Directors and Officers
Set forth below is the compensation paid by the Fund and the
three other registered investment companies comprising The Royce
Funds to each Director for the year ended December 31, 1994.
Director Aggregate Total Compensation
Compensation From From the Fund and
the Fund The Royce Funds
Charles M. Royce 0 0
Thomas R. Ebright 0 0
Richard M. Galkin $8,000 $60,000
Stephen L. Isaacs $8,000 $60,000
David L. Meister $8,000 $60,000
The Fund paid $7,088 cash remuneration to all officers of the
Fund as a group for the year ended December 31, 1994.
Each of the Fund's non-affiliated directors receives a base
fee of $5,000 per year plus $500 for each meeting of the Board of
Directors attended. No director of the Fund received remuneration
for services as a director for the year ended December 31, 1994 in
addition to or in lieu of such standard arrangements.
Vote Required
A quorum consists of stockholders representing a majority of
the outstanding shares of the Fund's common stock entitled to vote
who are present in person or by proxy, and a plurality of all of
the votes cast at a meeting at which a quorum is present is
sufficient to elect a director. Stockholders vote at the Annual
Meeting by casting ballots (in person or by proxy) which are
tabulated by one or two persons, appointed by the Board of
Directors before the meeting, who serve as Inspectors and Judges of
Election at the meeting and who have executed an Inspectors and
Judges Oath. Neither abstentions nor broker non-votes are counted
in the tabulation of such votes.
The Board of Directors recommends a vote FOR all nominees.
2. CHANGE IN FUND'S STATED INVESTMENT OBJECTIVE (Proposal 2)
Present Stated Investment Objective
The Fund's present stated investment objective is to seek
long-term capital appreciation by investing primarily in equity
securities of micro-capitalization companies traded in the over-
the-counter market. Under normal market conditions, the Fund will,
in pursuit of this objective, invest at least 65% of its total
assets in the common stocks, convertible securities and warrants of
companies that have market capitalizations of $300 million or less
("micro-cap companies") and are traded in the over-the-counter
market. Such securities will not be listed for trading on the New
York or the American Stock Exchanges and may not be listed on
Nasdaq. For purposes of calculating this 65% minimum, securities
purchased before a company's market capitalization increases to
above $300 million will continue to be classified as securities of
a micro-cap company, and a security that was not listed for trading
on a securities exchange when the Fund purchased it will continue
to be classified as an over-the-counter security. Up to 35% of the
Fund's total assets may be invested in exchange-listed securities
of companies with market capitalization of $300 million or less,
over-the-counter and exchange-listed securities with market
capitalizations greater than $300 million, non-convertible debt and
securities of foreign issuers.
Proposed Stated Investment Objective
It is proposed to eliminate the requirement that the equity
securities of micro-cap companies in which the Fund will normally
invest up to 65% of its total assets be traded in the over-the-
counter market, thereby allowing the Fund to invest in micro-cap
companies without regard to the market in which their securities
are traded. Quest, the Fund's investment adviser, views such an
expansion of the markets in which the Fund may seek investment
<PAGE>
opportunities as important, particularly since there are many
micro-cap companies whose common stocks are listed for trading on
the New York or American Stock Exchanges. The Board of Directors
has concluded that limiting the Fund's primary source of micro-cap
stocks to the over-the-counter market is no longer in the best
interests of stockholders.
After giving effect to this change, the Fund would, under
normal market conditions, invest at least 65% of its total assets
in the common stocks, convertible securities and warrants of micro-
cap companies which are listed for trading on the New York,
American or other stock exchanges or traded in the over-the-counter
market. For purposes of calculating this 65% minimum, securities
purchased before a company's market capitalization increases to
above $300 million would continue to be classified as securities of
a micro-cap company. Up to 35% of the Fund's total assets could
then be invested in exchange-listed or over-the-counter securities
of companies with market capitalizations greater than $300 million,
non-convertible debt and securities of foreign issuers.
Vote Required
The investment objective of the Fund is deemed to be a
fundamental policy, which may not be changed without the approval
of a majority of the outstanding shares of the Fund. Accordingly,
for the proposed change to become effective, it must be adopted by
a vote of the lesser of (i) 67% of the shares of common stock of
the Fund present or represented at the meeting (assuming that more
than 50% of the shares are present or represented) or (ii) more
than 50% of the outstanding shares of common stock of the Fund.
The Board recommends a vote FOR the proposed change in the
stated investment objective of the Fund described above.
3. AMENDMENT OF THE FUND'S ARTICLES OF INCORPORATION CHANGING ITS
NAME TO ROYCE MICRO-CAP TRUST, INC. (Proposal 3)
The Board of Directors of the Fund has approved and declared
the advisability of a proposed amendment of the Articles of
Incorporation of the Fund changing the name of the Fund from "Royce
OTC Micro-Cap Fund, Inc." to "Royce Micro-Cap Trust, Inc." The text
of the proposed amendment is set forth in Exhibit A to this Proxy
Statement.
The proposed change of name reflects the elimination of the
Fund's over-the-counter market focus and is, therefore, conditioned
upon stockholder approval of Proposal 2.
<PAGE>
Vote Required
The proposed amendment of the Fund's Articles of Incorporation
requires the affirmative vote of the holders of a majority of the
issued and outstanding shares of the Fund's common stock.
4. RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT PUBLIC
ACCOUNTANTS (Proposal 4).
At the meeting, the stockholders will be asked to ratify the
selection by the Board of Directors, including a majority of such
directors who are not "interested persons" (as such term is defined
in the Investment Company Act of 1940), of Ernst & Young LLP,
independent public accountants, to serve as the Fund's auditors for
the year ending December 31, 1995.
The Board's selection of Ernst & Young LLP was based on
considerations of administrative convenience and cost efficiency,
and did not involve any dispute with Coopers & Lybrand L.L.P. or a
decision by Coopers & Lybrand L.L.P. not to stand for re-election
as auditors. The report of Coopers & Lybrand L.L.P. on the
financial statements of the Fund as of December 31, 1994 and for
the year then ended and for the period December 14, 1993
(commencement of operations) to December 31, 1993 did not contain
an adverse opinion or disclaimer of opinion and was not qualified
or modified as to audit scope or accounting principles.
Ernst & Young LLP has informed the Fund that neither Ernst &
Young LLP nor any of its partners has any direct or indirect
financial interest in the Fund except as auditors and independent
public accountants. Coopers & Lybrand L.L.P. served as the Fund's
independent public accountants since the Fund's inception.
Representatives of Ernst & Young LLP and Coopers & Lybrand L.L.P.
are not expected to be present at the meeting, but have been given
an opportunity to make a statement if they so desire, and will be
available should any matter arise requiring their participation.
Vote Required
The ratification of the selection of Ernst & Young LLP as the
independent public accountants of the Fund requires the affirmative
vote of a majority of the votes entitled to be cast at the meeting
by stockholders of the Fund.
The Board of Directors recommends a vote for Proposal 4.
5. OTHER BUSINESS.
Management knows of no other business to be brought before the
meeting other than Proposals 1, 2, 3 and 4 in the Notice of Annual
Meeting. If other matters do come before the meeting, it is
intended that the shares represented by Proxies will be voted in
accordance with the judgment of the person or persons exercising at
the meeting the authority conferred by the Proxies.
<PAGE>
ADDITIONAL INFORMATION
Quest Advisory Corp., located at 1414 Avenue of the Americas,
New York, New York 10019, serves as the Fund's investment adviser.
Mitchell Hutchins Asset Management Inc., located at 1285
Avenue of the Americas, New York, New York 10019, serves as the
Fund's Administrator.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the
Fund's 1996 Annual Meeting of Stockholders must be received by the
Fund by January 31, 1996, for inclusion in the Fund's Proxy
Statement and form of Proxy relating to that meeting.
PLEASE FILL IN, DATE AND SIGN THE PROXY AND RETURN IT IN THE
ACCOMPANYING POSTAGE-PAID ENVELOPE.
EXHIBIT A
ROYCE OTC MICRO-CAP FUND, INC.
ARTICLES OF AMENDMENT
Royce OTC Micro-Cap Fund, Inc., a Maryland corporation having
its principal office in the City of Baltimore, State of Maryland
(hereinafter called the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland:
FIRST: Article I of the Articles of Incorporation of the
Corporation is amended so as to read in its entirety as follows:
"ARTICLE I
NAME
The name of the Corporation is ROYCE MICRO-CAP TRUST, INC."
SECOND: The amendment of the Articles of Incorporation of
the Corporation as hereinabove set forth has been duly approved
and advised by a majority of the entire board of directors and
has received the affirmative vote of a majority of the issued and
outstanding capital stock of the Corporation.
IN WITNESS WHEREOF, Royce OTC Micro-Cap Fund, Inc. has
caused these Articles of Amendment to be signed in its name and
on its behalf by its _____________, _______________, and
witnessed by its [Assistant] Secretary, ___________________, on
________________ __, 1995.
The __________acknowledges these Articles of Amendment to be
the corporate act of the Corporation and states that to the best
of his knowledge, information and belief, the matters and facts
set forth in these Articles with respect to the authorization and
approval of the Amendment of the Corporation's Articles of
Incorporation are true in all material respects and that this
statement is made under penalties of perjury.
By:________________________________
________________,
__________
WITNESS:________________________
___________________,
[Assistant] Secretary
<PAGE>
Preliminary Proxy Material
ROYCE OTC MICRO-CAP FUND, INC.
1414 Avenue of the Americas
New York, NY 10019 PROXY
This Proxy is solicited on behalf of the Board of
Directors. The undersigned hereby appoints Stephen L. Isaacs and
Charles M. Royce, or either of them acting in the absence of the other, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of the
Fund held of record by the undersigned on May 18, 1995, at the Annual
Meeting of Stockholders to be held on June 28, 1995, or at any adjournment
thereof.
1. ELECTION OF DIRECTORS (PAGE ___).
[ ] FOR [ ] AGAINST [ ] FOR ALL EXCEPT
Charles M. Royce Thomas R. Ebright Richard M. Galkin
Stephen L. Isaacs David L. Meister
If you do not wish your shares voted for a particular nominee, mark the "For
All Except" box and strike a line through the nominee(s)' name. Your shares
will be voted for the remaining nominee(s).
2. PROPOSAL TO CHANGE THE FUND'S STATED INVESTMENT OBJECTIVE (PAGE ___).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO AMEND THE FUND'S ARTICLES OF INCORPORATION (PAGE ___).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO RATIFY SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS (PAGE ___).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY COME
BEFORE THE MEETING (PAGE___).
<PAGE>
This Proxy when properly executed will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this Proxy will be voted
for Proposals 1, 2, 3 and 4. Please sign exactly as name appears below.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
DATED: 1995
Signature
PLEASE MARK, SIGN AND RETURN THE PROXY CARD
PROMPTLY, USING THE ENCLOSED ENVELOPE Signature if held jointly
