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000 C000000 0000912147
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000 F000000 Y
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000 J000000 A
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001 B000000 811-8030
001 C000000 2123557311
002 A000000 1414 AVENUE OF THE AMERICAS
002 B000000 NEW YORK
002 C000000 NY
002 D010000 10019
003 000000 N
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008 C000001 801-8268
008 D010001 NEW YORK
008 D020001 NY
008 D030001 10019
010 A000001 MITCHELL HUTCHINS ASSET MANAGEMENT INC.
010 B000001 801-13219
010 C010001 NEW YORK
010 C020001 NY
010 C030001 10019
012 A000001 STATE STREET BANK AND TRUST COMPANY
012 B000001 84-00896
012 C010001 N. QUINCY
012 C020001 MA
012 C030001 02171
013 A000001 ERNST & YOUNG LLP
013 B010001 NEW YORK
013 B020001 NY
<PAGE> PAGE 2
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015 E010001 X
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<PAGE> PAGE 3
020 A000006 FCS SECURITIES
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020 A000007 DILLON READ & CO., INC.
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<PAGE> PAGE 4
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SIGNATURE BRIAN SHISSEL
TITLE VICE PRESIDENT
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
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</TABLE>
ARTICLES SUPPLEMENTARY
CREATING AND FIXING THE RIGHTS OF
7.75% CUMULATIVE PREFERRED STOCK OF
ROYCE MICRO-CAP TRUST, INC.
ROYCE MICRO-CAP 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 FOURTH of the Charter of
the Corporation, the Board of Directors has reclassified 5,000,000
authorized and unissued shares of Common Stock of the Corporation,
par value $.001 per share, as shares of preferred stock, par value
$.001 per share, of the Corporation designated as the "7.75%
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:
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");
with respect to the issue size compliance, issuer diversification and
industry diversification calculations,
such calculations and the resulting Market Value of Moody's Eligible
Assets and Portfolio Calculation are numerically correct;
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;
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;
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);
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
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 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 Royce & Associates, Inc., a New York corporation.
"Asset Coverage" means, asset coverage, as defined in Section 18(h)
of the 1940 Act, of at least 225%, 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 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; (D) any current liabilities of the Corporation as of such
Valuation Date to the extent not reflected in any of (i)(A) through
(i)(C) (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)(D) and provided that in the event the Corporation has
repurchased Cumulative Preferred Stock at a price of less than the
Liquidation Preference thereof and irrevocably segregated or
deposited assets as described above with its custodian bank or the
Paying Agent for the payment of the repurchase price the
Corporation may deduct 100% of the Liquidation Preference of such
Cumulative Preferred Stock to be repurchased from (i) above.
"Basic Maintenance Amount 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 the
Corporation, the Market Value and Discounted Value thereof
(seriatim 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 Micro-Cap Trust, Inc., a Maryland
corporation.
"Cumulative Preferred Stock" means the 7.75% 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.
"Dividend Period" shall have the meaning set forth in paragraph 1(a)
of Article II hereof.
"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 electronically-reported bid price for
such day for exchange-listed securities and at the average of their
electronically-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:
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) 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;
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;
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;
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:
Type of Moody's Eligible Asset:Moody'sDiscount 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 assetsCommon stocks
3.00Preferred stocks: Auction rate preferred stocks
Other preferred stocks issued by issuers
in the financial and industrial industries
Other preferred stocks issued by issuers in the utilities industry
3.502.351.60U.S. Government Obligations (other than U.S. Treasury
Securities Strips set forth below) with remaining terms to maturity of:
1 year or less 2 years or less
3 years or less
4 years or less
5 years or less
7 years of less
10 years or less
15 years or less
20 years or less
30 years or less 1.081.151.201.261.311.401.481.541.611.63U.S.
Treasury Securities Strips with remaining terms to maturity of:
1 year or less
2 years or less
3 years or less
4 years or less
5 years or less
7 years or less
10 years or less
15 years or less
20 years or less
30 years or less
1.081.161.231.301.371.511.691.992.282.56 Corporate bonds:Corporate bonds
rated Aaa with remaining terms to maturity of: 1 year or less
2 years or less 3 years or less 4 years or less
5 years or less 7 years or less 10 years or less
15 years or less 20 years or less
30 years or less 1.141.211.261.321.381.471.551.621.691.71
Corporate bonds rated Aa with remaining terms to maturity of:
1 year or less 2 years or less 3 years or less
4 years or less 5 years or less 7 years or less
10 years or less
15 years or less
20 years or less
30 years or less 1.191.261.321.381.441.541.631.691.771.79 Corporate
bonds rated A with remaining terms to maturity of: 1 year or less
2 years or less 3 years or less 4 years or less
5 years or less 7 years or less 10 years or less
15 years or less 20 years or less
30 years or less 1.241.321.381.451.511.611.701.771.851.87
Convertible corporate bonds with senior debt securities rated Aa
issued by the following type of issuers: Utility
Industrial
Financial
Transportation 1.802.972.924.27Convertible corporate bonds with
senior debt securities rated A issued by the following type of
issuers: Utility Industrial Financial
Transportation 1.853.022.974.32Convertible corporate bonds with
senior debt securities rated Baa issued by the following type
of issuers: Utility Industrial Financial
Transportation 2.013.183.134.48Convertible corporate bonds with
senior debt securities rated Ba issued by the following type
of issuers:
Utility
Industrial
Financial
Transportation 2.023.193.144.49 Convertible corporate bonds with
senior debt securities rated B1 or B2 issued by the following type
of issuers: Utility Industrial
Financial Transportation 2.123.293.244.59
"Moody's Eligible Assets"* means: 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 Moody's and payable within five
Business Days following such Valuation Date and dividends and
interest receivable within 70 days on investments);
Short-Term Money Market Instruments;
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;
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;
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 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;
U.S. Government Obligations;
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;
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-industry Categories) in order to be included in
Moody's Eligible Assets:
Issuer:Moody's Rating(1)(2)Non-UtilityMaximum Single Issuer(3)(4)Utility
Maximum Single Issuer(3)(4)"aaa", Aaa100%100%"aa", Aa20%20%"a",
A10%10%CS/CB, "Baa", Baa(5)6%4%Ba4%4%B1/B23%3%B3 (Caa subordinate)
2%2%Industry and State:Moody's Rating(1)
Non-Utility Maximum Single Industry(3)UtilityMaximum Single Sub-Industry
(3)(6)Utility Maximum Single State(3)"aaa", Aaa100%100%100%"aa",
Aa60%60%20%"a", A40%50%10%(7)CS/CB, "baa", Baa(5)20%50%7%(7)Ba12%12%N
/AB1/B2 8%8%N/AB3 (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, 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
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
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, 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.
"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 26,
1997.
"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:
U.S. Government Obligations;
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;
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 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);
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
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 Services 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 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
Dividends.
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 7.75% 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 quarterly on March 23,
June 23, September 23 and December 23 in each year (each, a
"Dividend Payment Date"), commencing September 23, 1997 (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 March 6, June 6, September 6
and 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 date on which
the first such shares of Cumulative Preferred Stock 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.
(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 Date 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.
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
shares of 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 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 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.
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.
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.
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 a regular quarterly 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.
Liquidation Rights.
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 participation in any distribution
or payment in connection with any such liquidation, dissolution or
winding up.
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.
Redemption.
Shares of the Cumulative Preferred Stock shall be redeemed or
redeemable by the Corporation as provided below:
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 and any agreement 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 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 250%.
Optional Redemptions.
Prior to July 1, 2002, 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 July 1, 2002 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 and
any agreement 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.
Procedures for Redemption.
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 accumulate 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 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.
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.
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.
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 the respective number of
shares held by each such holder on the record date for such redemption.
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.
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.
Voting Rights.
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. Notwithstanding the foregoing, and except as
otherwise required by the 1940 Act, (i) the holders of outstanding
shares of Cumulative Preferred Stock shall be entitled as a class,
to the exclusion of the holders of all other securities, including
other Preferred Stock and classes of capital stock of the
Corporation, to vote on matters affecting the Cumulative Preferred
Stock that do not adversely affect other securities, including other
Preferred Stock and classes of capital stock, and (ii) holders of
other outstanding shares of Preferred Stock shall be entitled, as a
class to the exclusion of the holders of Cumulative Preferred Stock,
to vote on matters affecting such other Preferred Stock that do not
adversely affect the holders of the Cumulative Preferred Stock.
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:
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
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).
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 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.
Voting Procedures.
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.
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.
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.
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).
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.
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.
Coverage Tests.
Determination of Compliance.
For so long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation shall make the following determinations:
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.
Basic Maintenance Amount Requirement.
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.
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.
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 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 paragraph
5(a)(ii)(A) 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.
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.
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).
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 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 250%, 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.
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.
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.
Certain Other Restrictions.
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 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.
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, 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.
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.
Termination of Rating Agency Provisions.
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 American 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 .375% per annum.
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.
Limitation on Issuance of Additional Preferred Stock.
So long as any shares of Cumulative Preferred Stock are outstanding,
the Corporation may issue and sell additional shares of Cumulative
Preferred Stock authorized hereby and/or 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) immediately after giving effect to the
issuance and sale of such additional Preferred Stock and to the
Corporation's receipt and application of the proceeds thereof, the
Corporation will maintain the Asset Coverage of the shares of
Cumulative Preferred Stock and all other Preferred Stock of the
Corporation then outstanding, and (ii) 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.
ARTICLE III
ABILITY OF BOARD OF DIRECTORS TO MODIFY THE ARTICLES SUPPLEMENTARY
To the extent permitted by law, the Board of Directors, without the
vote of the holders of the Cumulative Preferred Stock or any other
capital stock of the Corporation, may amend the provisions of these
Articles Supplementary to resolve any inconsistency or ambiguity or
to remedy any formal defect so long as the amendment does not
materially adversely affect any of the contract rights of holders
of shares of the Cumulative Preferred Stock or any other capital
stock of the Corporation or, if the Corporation has not previously
terminated compliance with the provisions hereof with respect to
Moody's pursuant to paragraph 7 of Article II hereof, adversely
affect the then current rating on the Cumulative Preferred Stock
by Moody's.
IN WITNESS WHEREOF, ROYCE MICRO-CAP 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 June , 1997.
ROYCE MICRO-CAP TRUST, INC.
By
Name: Charles M. Royce
Title: President
Attest:
John E. Denneen
Secretary
??(..continued)
N-SAR ATTACHMENT
Item 77(C)
At the 1997 Annual Meeting of Stockholders of the Registrant held
on April 29, 1997, the stockholders approved:
(i) the election of directors, consisting of (a) Charles M. Royce,
(b) Thomas R. Ebright, (c) Richard M. Galkin, (d) Stephen L. Isaacs,
and (e) David L. Meister; (ii) a change in the Registrant's
fundamental investment policies; and (iii) the selection of
accountants.
Votes Cast ForVotes Cast AgainstVotes Abstained
(i) (a) 7,307,536.200 N/A 176,377.443
(b) 7,267,131.294 N/A 216,782.349
(c) 7,268,523.692 N/A 215,389.951
(d) 7,265,181.692 N/A 218,731.951
(e) 7,266,433.692 N/A 217,479.951
(ii) 5,311,945.211 377,521.618 188,610.814
(iii) 7,318,681.734 46,819.000 118,412.909
??
On July 2, 1997, the Fund issued 1,600,000 shares of 7.75% Cumulative
Preferred Stock at $25 per
share. The shares are listed on
the American Stock Exchange and began trading on July 10, 1997.
