-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GY1cUvXfkCXBwKk/nhB7+T5HsKn4rfgbbRrwadfkPY6kEDLI2vnShoFwV2BbVa0t Zosrpex+iCNnimHVzFTi4Q== 0000912147-97-000001.txt : 19970228 0000912147-97-000001.hdr.sgml : 19970228 ACCESSION NUMBER: 0000912147-97-000001 CONFORMED SUBMISSION TYPE: NSAR-B PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970227 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROYCE OTC MICRO CAP FUND INC CENTRAL INDEX KEY: 0000912147 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133739778 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: NSAR-B SEC ACT: 1940 Act SEC FILE NUMBER: 811-08030 FILM NUMBER: 97546165 BUSINESS ADDRESS: STREET 1: C/O MITCHELL HUTCHINS ASSET MANAGEMENT STREET 2: 1414 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127138392 MAIL ADDRESS: STREET 1: ROYCE OTC MICRO -CAP FUND INC STREET 2: 1285 AVE OF THE AMERICAS 16TH FLR CITY: NEW YORK STATE: NY ZIP: 10019 NSAR-B 1 N-SAR (2.2.A) PAGE 1 000 B000000 12/31/96 000 C000000 0000912147 000 D000000 N 000 E000000 NF 000 F000000 Y 000 G000000 N 000 H000000 N 000 I000000 2.2.a 000 J000000 A 001 A000000 ROYCE MICRO-CAP TRUST, INC. 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 004 000000 N 005 000000 N 006 000000 N 007 A000000 N 007 B000000 0 007 C010100 1 007 C010200 2 007 C010300 3 007 C010400 4 007 C010500 5 007 C010600 6 007 C010700 7 007 C010800 8 007 C010900 9 007 C011000 10 008 A000001 QUEST ADVISORY CORP. 008 B000001 A 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. 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B000000 N 088 C000000 N 088 D000000 N SIGNATURE BRIAN SHISSEL TITLE VICE PRESIDENT EX-27 2
6 YEAR DEC-31-1996 DEC-31-1996 92,179,579 113,452,141 565,677 97,960 0 114,115,778 42,921 0 119,835 162,756 0 88,123,175 12,153,511 11,258,010 0 152,608 4,709,893 0 21,272,562 113,953,022 1,347,077 511,796 0 911,121 947,752 12,128,883 2,989,227 16,065,862 0 1,125,801 7,880,607 0 0 0 6,828,202 13,887,656 25,441 461,617 0 0 499,869 0 911,121 107,132,811 8.89 .09 1.33 .10 .70 .13 9.38 .85 0 0
EX-99 3 BUSINESS ADDRESS: STREET 1: C/O MITCHELL HUTCHINS ASSET MANAGEMENT STREET 2: 1285 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127138392 MAIL ADDRESS: STREET 1: ROYCE OTC MICRO -CAP FUND INC STREET 2: 1285 AVE OF THE AMERICAS 15TH FLR CITY: NEW YORK STATE: NY ZIP: 10019 ROYCE MICRO-CAP TRUST, INC. 1414 Avenue of the Americas New York, New York 10019 1-800-221-4268 November 11, 1996 Dear Stockholder: Enclosed is a Proxy Statement describing the new Investment Advisory Agreement between the Fund and Quest Advisory Corp. to be voted on at the Special Meeting of Stockholders. The new Investment Advisory Agreement only changes the benchmark index, against which the Fund's performance is measured, from the Nasdaq Composite Index, which is heavily weighted to its many large capitalization stocks, to the Russell 2000 Index, which we believe is more appropriate for determining the Fund's relative performance. The new Agreement maintains the 1% basic advisory fee, the (+ or -) 0.5% performance adjustment feature and the trailing 36 month performance period, which will be re-started on January 1, 1997. At its inception in December 1993, the Fund chose the Nasdaq Composite Index for performance benchmarking because, at that time, (i) the Fund's focus was on over-the-counter micro-cap stocks traded on Nasdaq, (ii) the Fund's name, Royce OTC Micro Cap Fund, emphasized the Fund's focus on over -the-counter stocks and (iii) the Nasdaq Composite was a much more widely recognized index than the Russell 2000. Since 1993, the Fund's focus has broadened to include exchange-listed micro-cap stocks, the Fund has changed its name to reflect this new focus and the Russell 2000 has become a more widely recognized index. The Russell 2000 (weighted average market cap of $540 million) is also much more representative of the Fund's micro-cap area of investing (weighted average market cap of $155 million) than the Nasdaq Composite (weighted average market cap of $9.4 billion). In order to prevent any immediate benefit to Quest from the change, the fee paid over the first 18 months of the new Agreement will be the lower of the fee determined based on the new terms or the fee which would have been paid under the current Agreement. Your vote is very important! If the Fund does not receive a sufficient number of votes prior to the meeting date, it will have additional expenses for proxy solicitation and the meeting may have to be postponed. Please complete, sign and mail your proxy card as soon as possible. If you have any question regarding the proxy material, please call Investor Information at 1-800-221-4268. The Fund may retain an outside firm that specializes in proxy solicitation to assist it with any necessary follow-up. If the Fund has not received your vote as the meeting date approaches, you may receive a telephone call from Shareholder Communications Corporation to ask for your vote. We hope that their telephone call does not inconvenience you. Sincerely, CHARLES M. ROYCE President NOTICE OF SPECIAL MEETING OF STOCKHOLDERS ROYCE MICRO-CAP TRUST, INC. To the Stockholders of Royce Micro-Cap Trust, Inc. Notice is hereby given that a Special Meeting of Stockholders of Royce Micro-Cap Trust, Inc. (the "Fund") will be held at the offices of the Fund, 1414 Avenue of the Americas, New York, New York, on December 3, 1996 at 11:00 a.m. (Eastern Time) for the following purposes: 1. To approve a new Investment Advisory Agreement between the Fund and Quest Advisory Corp. 2. 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 November 5, 1996 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, 1995 and Semi-Annual Report to Stockholders for the six months ended June 30, 1996 were previously mailed to stockholders, and copies of them are 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, please insert your instructions on the enclosed Proxy, date and sign it and return it in the enclosed envelope (which requires no postage if mailed in the United States), even if you expect to be present at the meeting. The 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, John E. Denneen Secretary November 11, 1996 SPECIAL MEETING OF STOCKHOLDERS OF ROYCE MICRO-CAP TRUST, INC. 1414 Avenue of the Americas New York, New York 10019 December 3, 1996 ----------------------------- P R O X Y S T A T E M E N T ----------------------------- Accompanying this Proxy Statement is a Notice of Special Meeting of Stockholders and a form of Proxy for the meeting, solicited on behalf of the directors of Royce Micro-Cap Trust, 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 or she 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 the Proxy with respect to Proposal 1 in the Notice of Special Meeting, his or her shares will be voted accordingly. If no direction is given, the stockholder's shares will be voted in favor of the Proposal. 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. In addition, the Fund may, if necessary, engage Shareholder Communications Corporation to solicit Proxies on its behalf at an estimated cost to the Fund of $5,000 plus out-of-pocket expenses. On November 5, 1996, the record date for the meeting, there were 11,258,010 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. Stockholders vote at the Special Meeting by casting ballots (in person or by proxy), which are tabulated by one or two persons appointed by the Board of 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 following persons were known to the Fund to be beneficial owners or owners of record of 5% or more of its outstanding shares of Common Stock as ofthe record date: Name and Address Amount and Nature Percentage of Owner of Ownership of Class -------- ------------ Depository Trust Company .............. 10,733,721 shares-Record 95.3% Cede & Co. P.O. Box 20, Bowling Green Station New York, NY 10274 1. APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT (Proposal 1) At the meeting, it is proposed to replace the present Investment Advisory Agreement between the Fund and Quest with a new Investment Advisory Agreement. The only material difference between the present and the proposed Investment Advisory Agreements is in the securities index against which the Fund's investment performance is measured. The present Agreement uses the Nasdaq Composite Index (the "Nasdaq Composite"); the proposed Agreement uses the Russell 2000 Index (the "Russell 2000"). In deciding to recommend to stockholders that they approve the proposed Investment Advisory Agreement with Quest, the Fund's Board of Directors considered (i) the investment performance of the Fund over various periods, both absolutely and in relation to the records of the Nasdaq Composite and the Russell 2000 and relative to that of other open and closed-end funds with similar investment objectives; (ii) Quest's approach to managing the Fund's assets; and (iii) the costs and expenses of the Fund, both absolutely and relative to these other funds. When addressing the changes made by the proposed Agreement, the directors considered other factors, including (iv) the differences between the Nasdaq Composite and the Russell 2000 and the relative appropriateness of each index for the Fund; and (v) the impact on the Fund of changing from the present to the proposed fee arrangement. The directors concluded, among other things, (i) that because of the Fund's concentration in micro-cap stocks, the Russell 2000, which is comprised of small capitalization stocks, was a more appropriate index for the Fund than the Nasdaq Composite, which is heavily weighted to large capitalization stocks, and (ii) that the proposed Investment Advisory Agreement would not result in excessive compensation to Quest or be unfair to the Fund. Present Investment Advisory Agreement The present Investment Advisory Agreement between the Fund and Quest is dated, and has been in effect since the Fund commenced operations on December 14, 1993, and was approved by vote of the Fund's then sole stockholder prior to that date. Continuance of the present Investment Advisory Agreement was approved by the Fund's Board of Directors on April 18, 1996, and it will remain in effect until April 30, 1997, unless it is terminated sooner or is replaced by the proposed Agreement. Under the present Agreement, Quest determines the composition of the Fund's portfolio, the nature and timing of the changes in it and the manner of implementing the changes; provides the Fund with investment advisory, research and related services for the investment of its assets; furnishes, without expense to the Fund, the services of those of its executive officers and full-time employees who may be duly elected directors or executive officers of the Fund and pays their compensation and expenses; and pays all expenses incurred in performing its investment advisory duties under the Agreement. The Fund pays all of its own administrative and other expenses (except those set forth above), and Quest does not incur substantial fixed expenses. There are no applicable state limitations on the Fund's operating expenses. Present Advisory Fee As compensation for its services under the present Investment Advisory Agreement, Quest receives a fee comprised of a basic fee (the "Basic Fee") and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the Nasdaq Composite for certain prescribed performance periods, as described below. The Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the net assets of the Fund at the end of each month included in the applicable performance period. The performance period is a rolling 2 period of up to 36 months, ending with the most recent month. The Basic Fee for each month in the performance period is subject to increase or decrease, depending on the extent, if any, by which the investment performance of the Fund exceeds by more than two percentage points, or is exceeded by more than two percentage points by, the percentage change in the investment record of the Nasdaq Composite for the performance period. For each percentage point in excess of two that the investment performance of the Fund exceeds the percentage change in the investment record of the Nasdaq Composite, the Basic Fee is increased at the rate of 1/12 of .05%. For each percentage point in excess of two that the percentage change in the investment record of the Nasdaq Composite exceeds the investment performance of the Fund, the Basic Fee is decreased at the rate of 1/12 of .05%. The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the Nasdaq Composite by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the Nasdaq Composite exceeds the investment performance of the Fund by 12 or more percentage points for the performance period. In calculating the investment performance of the Fund and the percentage change in the investment record of the Nasdaq Composite, all dividends and other distributions during the performance period are treated as having been reinvested. For the year ended December 31, 1995, the 1% Basic Fee of $794,814 was subject to a downward adjustment of approximately 10% ($78,903) based on the sum of the months' separate performance calculations, with Quest earning a fee of $715,911 or .78% of the Fund's average net assets for the year (before giving effect to a voluntary fee waiver of $2,878). (The fee rate is applied to the Fund's average net assets of $83,792,627 for the rolling 24 month performance period ended December 31, 1995.) To the extent that Quest receives a fee in excess of .75% per annum of the Fund's average net assets, its compensation may be higher than that paid by many other mutual funds with a similar investment objective. Proposed Investment Advisory Agreement It is proposed to replace the present Investment Advisory Agreement with the new one in order to change the securities index against which the Fund's investment performance is measured. Except for this change, the method for determining the compensation payable by the Fund to Quest will remain as is. New Advisory Fee As compensation for its services under the proposed Investment Advisory Agreement, Quest would receive a fee comprised of a basic fee (the "Basic Fee") and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the Russell 2000 for certain prescribed performance periods, as described below. Beginning with the month of January 1997 and for each succeeding month, the Basic Fee would, as in the present Agreement, continue to be a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the net assets of the Fund at the end of each month included in a period consisting of the rolling 36 months ending with such month. The performance adjustment for each such month would be computed on the basis of a performance period commencing on January 1, 1997 to the end of such month, until the proposed Investment Advisory Agreement had been in effect for 36 months, when the performance period would become a rolling 36 month period ending with such month. 3 The Basic Fee for each such month would be increased or decreased at the rate of 1/12 of .05% per percentage point, depending on the extent, if any, by which the investment performance of the Fund exceeds by more than two percentage points, or is exceeded by more than two percentage points by, the percentage change in the investment record of the Russell 2000 for the performance period. The maximum increase or decrease in the Basic Fee for any month could not exceed 1/12 of .5%. Accordingly, for each month, commencing with the month of January 1997, the maximum monthly fee rate as adjusted for performance would be 1/12 of 1.5% and would be payable if the investment performance of the Fund exceeded the percentage change in the investment record of the Russell 2000 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance would be 1/12 of .5% and would be payable if the percentage change in the investment record of the Russell 2000 exceeded the investment performance of the Fund by 12 or more percentage points for the performance period. In order to avoid the impact of short-term differences between the investment performance of the Fund and the record of the Russell 2000, Quest will not collect any accrued portion of the Basic Fee in excess of .5% until January 1998. Because the Basic Fee is and would remain a function of the Fund's net assets and not of its total assets, Quest does not now and would not receive any fee in respect of those assets of the Fund equal to the aggregate unpaid principal amount of any indebtedness hereafter incurred by the Fund. However, because preferred stock is a form of equity, Quest would receive a fee in respect of any assets of the Fund equal to the liquidation preference of and any potential redemption premium for any preferred stock that may hereafter be issued and sold by the Fund, and the proposed Investment Advisory Agreement, unlike the present one, specifically addresses this issue. If the proposed Investment Advisory Agreement had been in effect for the rolling 24 month performance period ended December 31, 1995, the 1% Basic Fee of $794,814 would have been subject to an upward adjustment of $173,418, and Quest would have earned a fee of $968,232 for the year ended December 31, 1995, thereby increasing its compensation for the year by $252,321 or 35% (before giving effect to Quest's voluntary fee waiver). In order to avoid unfairness to the Fund, the proposed Investment Advisory Agreement provides that, for the 18 month period from January 1, 1997 to June 30, 1998, the monthly fee payable to Quest will be the lower of the fee calculated under such agreement or the fee that would have been payable to Quest for the month involved under the present Investment Advisory Agreement. Quest is also the investment adviser of other registered investment companies. These funds or series have assets ranging from approximately $650,000 to $506,128,000 (as of September 30, 1996) and compensate Quest at rates of up to 1.5% of their respective average net assets. Quest has generally voluntarily reduced its compensation under its contracts with these funds or series to the extent necessary to maintain expenses, other than interest expense, at or below 1.99% of average net assets. Appendix 1 to this Proxy Statement contains cumulative total return data for the Fund (at net asset values), the Nasdaq Composite and the Russell 2000 for the year ended December 31, 1994, the two years ended December 31, 1995 and the two years and nine months ended September 30, 1996. Appendix 2 to this Proxy Statement contains certain information about Quest's officers, directors and shareholders. The proposed Investment Advisory Agreement between the Fund and Quest would become effective on January 1, 1997, following its approval by the Fund's stockholders. The text of the proposed Investment Advisory Agreement is set forth in Exhibit A to this Proxy Statement. 4 Vote Required The proposed Investment Advisory Agreement between the Fund and Quest requires the approval of the lesser of (i) 67% of the shares of the Fund's Common Stock present or represented at the meeting (assuming that more than 50% of such shares are present or represented) or (ii) more than 50% of the outstanding shares of the Fund's Common Stock. The Board of Directors recommends a vote FOR Proposal 1. 2. OTHER BUSINESS Management knows of no business to be brought before the meeting other than Proposal 1 in the Notice of Special 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. ADDITIONAL INFORMATION Quest Advisory Corp., the Fund's investment adviser, is located at 1414 Avenue of the Americas, New York, New York 10019. Mitchell Hutchins Asset Management Inc., the Fund's administrator, is located at 1285 Avenue of the Americas, New York, New York 10019. STOCKHOLDER PROPOSALS Proposals of stockholders intended to be presented at the Fund's 1997 Annual Meeting of Stockholders must be received by the Fund by January 31, 1997, 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 5 Appendix 1 Cumulative Total Return --------------------------------- Nasdaq Period Fund Composite Russell 2000 ------ ---- --------- ------------ January 1, 1994 to December 31, 1994 ......... 6.0% 3.2% 1.8% January 1, 1994 to December 31, 1995 ......... 30.3% 35.4% 26.1% January 1, 1994 to September 30, 1996 ........ 40.4% 57.9% 39.6% The Fund's total returns are presented on a net asset value basis and assume reinvestment of dividend and capital gains distributions and primary participation in the Fund's 1994 rights offering. Nasdaq Composite and Russell 2000 total returns are computed with all dividends and other distributions reinvested. 6
Appendix 2 Principal Occupations and Other Affiliations Name and Address Position(s) with the Fund During the Last Five Years - - ---------------- ------------------------- ---------------- Charles M. Royce (57) Director, President President, Secretary, Treasurer and sole 1414 Avenue of the Americas and Treasurer director and sole voting shareholder of New York, NY 10019 Quest; Trustee, President and Treasurer of The Royce Fund ("TRF"), an open-end diversified management investment company of which Quest is the principal investment adviser, and its predecessors; Director, President and Treasurer of the Fund since September 1993 and of Royce Value Trust , Inc. ("RVT"), a closed -end diversified management investment company of which Quest is the investment adviser (the Fund, TRF and RVT collectively, "The Royce Funds"); Secretary and sole director and sole shareholder of Quest Distributors, Inc. ("QDI), the distributor ofTRF's shares; and managing general partner of Quest Management Company ("QMC"), a registered investment adviser, and its predecessor. Thomas R. Ebright (52) Director Vice President of Quest; Trustee of TRF and 50 Portland Pier one of its predecessors; Director of the Fund Portland, ME 04101 since September 1993 and of RVT; Vice President since November 1995 (President until October 1995) of QDI; general partner of QMC and its predecessor until June 1994; President, Treasurer, director and principal shareholder of Royce, Ebright & Associates, Inc., investment adviser to a series of TRF, since June 1994; director of Atlantic Pro Sports, Inc. and of the Strasburg Rail Road Co. since March 1993; and President and principal owner of Baltimore Professional Hockey, Inc. until May 1993. Jack. E. Fockler, Jr. (37) Vice President Vice President of Quest (since August 1993) 1414 Avenue of the Americas and senior associate of Quest, having been New York, NY 10019 employed by Quest since October 1989; Vice President of The Royce Funds since April 1995; and general partner of QMC since July 1993. W. Whitney George (38) Vice President Vice President of Quest (since August 1993) 1414 Avenue of the Americas and senior analyst of Quest, having been New York, NY 10019 employed by Quest since October 1991; Vice President of The Royce Funds since April 1995; and general partner of QMC and its predecessor since January 1992.
7
Principal Occupations and Other Affiliations Name and Address Position(s) with the Fund During the Last Five Years - - ---------------- ------------------------- --------------- Daniel A. O'Byrne (34) Vice President Vice President of Quest since May 1994, 1414 Avenue of the Americas having been employed by Quest since October New York, NY 10019 1986; and Vice President of The Royce Funds since July 1994.
8 EXHIBIT A INVESTMENT ADVISORY AGREEMENT BETWEEN ROYCE MICRO-CAP TRUST, INC. AND QUEST ADVISORY CORP. Agreement dated as of December 31, 1996, by and between Royce Micro-Cap Trust, Inc., a Maryland corporation (the "Fund"), and Quest Advisory Corp., a New York corporation (the "Adviser"). The Fund and the Adviser hereby agree as follows: 1. Duties of the Adviser. The Adviser shall, during the term and subject to the provisions of this Agreement, (a) determine the composition of the portfolio of the Fund, the nature and timing of the changes therein and the manner of implementing such changes and (b) provide the Fund with such investment advisory, research and related services as the Fund may, from time to time, reasonably require for the investment of its assets. The Adviser shall perform such duties in accordance with the applicable provisions of the Fund's Articles of Incorporation, By-laws and stated investment objective(s), policies and restrictions and any directions it may receive from the Fund's Board of Directors. 2. Expenses Payable by the Fund. Except as otherwise provided in Paragraphs 1 and 3 hereof, the Fund shall be responsible for determining the net asset value of its shares and for all of its other operations and shall pay all administrative and other costs and expenses attributable to its operations and transactions, including, without limitation, registrar, transfer agent and custodian fees; legal, administrative and clerical services; rent for its office space and facilities; auditing; preparation, printing and distribution of its proxy statements, stockholders' reports and notices; supplies and postage; Federal and state registration fees; NASD listing fees and expenses; Federal, state and local taxes; non-affiliated directors' fees; interest on its borrowings; brokerage commissions; and the cost of issue, sale and repurchase of its shares. 3. Expenses Payable by the Adviser. The Adviser shall furnish, without expense to the Fund, the services of those of its executive officers and full-time employees who may be duly elected executive officers or directors of the Fund, subject to their individual consent to serve and to any limitations imposed by law, and shall pay all the compensation and expenses of such persons. For purposes of this Agreement, only a president, a treasurer or a vice president in charge of a principal business function shall be deemed to be an executive officer. The Adviser shall also pay all expenses which it may incur in performing its duties under Paragraph 1 hereof and shall reimburse the Fund for any space leased by the Fund and occupied by the Adviser. 4. Compensation of the Adviser. (a) The Fund agrees to pay to the Adviser, and the Adviser agrees to accept, as compensation for the services provided by the Adviser hereunder, a fee comprised of a basic fee (the "Basic Fee") and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the Russell 2000 Index (as the same may be constituted from time to time, the "Index"). Such fee shall be calculated and payable as follows: (1) Beginning with the month of January 1997 and for each succeeding month, the Basic Fee shall be a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the net assets of the Fund at the end of each month included in a period consisting of the rolling thirty-six (36) months ending with such A-1 month. (The net assets of the Fund shall be computed by subtracting the amount of any indebtedness and other liabilities of the Fund from the value of the total assets of the Fund, and the liquidation preference of and any potential redemption premium for any preferred stock of the Fund that may hereafter be issued and outstanding shall not be treated as an indebtedness or other liability of the Fund for this purpose.) The performance adjustment for each such month shall be computed on the basis of a performance period commencing on January 1, 1997 to the end of such month, until this Agreement has been in effect for thirty-six (36) months, when the performance period shall become a rolling thirty-six (36) month period ending with such month. The Basic Fee for each such month shall be increased at the rate of 1/12 of .05% for each percentage point in excess of two (2), rounded to the nearer point (the higher point if exactly one-half a point), that the investment performance of the Fund for the performance period then ended exceeds the percentage change in the investment record of the Index for such performance period (subject to a maximum of twelve (12) percentage points). If, however, the investment performance of the Fund for such performance period shall be exceeded by the percentage change in the investment record of the Index for such performance period, then such Basic Fee shall be decreased at the rate of 1/12 of .05% for each percentage point in excess of two (2), rounded to the nearer point (the higher point if exactly one-half a point), that the percentage change in the investment record of the Index exceeds the investment performance of the Fund for such performance period (subject to a maximum of twelve (12) percentage points). The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%; the maximum monthly fee, as adjusted, may not exceed 1/12 of 1.5%; and the minimum monthly fee, as adjusted, may not be less than 1/12 of .5% The Fund shall pay such Basic Fee, as so adjusted, to the Adviser at the end of each performance period. (2) The Advisor shall, for the year ending December 31, 1997, defer collection of any portion of the Basic Fee accrued in excess of .5% until January 1998. (3) Notwithstanding the preceding provisions of this subparagraph (a) to the contrary, for each of the eighteen (18) months ending June 30, 1998, the Basic Fee, as so adjusted, shall be reduced if and to the extent necessary so that such fee does not exceed the fee that would have been payable to the Adviser for such month under the Investment Advisory Agreement dated as of December 14, 1993 (the "Prior Agreement") by and between the Fund and the Adviser. (b) The investment performance of the Fund for any period shall be expressed as a percentage of the Fund's net asset value per share of Common Stock at the beginning of such period and shall mean and be the sum of: (i) the change in the Fund's net asset value per share of Common Stock during such period; (ii) the value of the Fund's cash distributions per share of Common Stock accumulated to the end of such period; and (iii) the value of capital gains taxes per share of Common Stock paid or payable on undistributed realized long-term capital gains accumulated to the end of such period. For this purpose, the value of distributions per share of Common Stock of realized capital gains, of dividends per share of Common Stock paid from investment income and the capital gains taxes per share of Common Stock paid or payable on undistributed realized long-term capital gains shall be treated as reinvested in shares of the Fund at the net asset value per share of Common Stock in effect at the close of business on the record date for the payment of such distributions and dividends and the date on which provision is made for such taxes, after giving effect to such distribution, dividends and taxes. Notwithstanding any provisions of this subparagraph (b) or of the other subparagraphs of Paragraph 4 hereof to the contrary, the investment performance of the Fund for any period shall not include, and there shall be excluded from the change in the Fund's net asset value per share of Common Stock during such period and the value of the Fund's cash distributions per share of Common Stock accumulated to the end of such period shall be adjusted for, any increase or decrease in the investment performance of the Fund for such period computed as set forth in the preceding two A-2 sentences and resulting from the Fund's issuance, sale or repurchase of any shares of any class of the capital stock or any other securities of the Fund. (c) The investment record of the Index for any period, expressed as a percentage of the Index level at the beginning of such period, shall mean and be the sum of (i) the change in the level of the Index during such period; and (ii) the value, computed consistently with the Index, of cash distributions made by companies whose securities comprise the Index accumulated to the end of such period. For this purpose, cash distributions on the securities which comprise the Index shall be treated as reinvested in the Index at the end of each calendar month following the payment of the dividend. (d) Any calculation of the investment performance of the Fund and the investment record of the Index shall be in accordance with any then applicable rules of the Securities and Exchange Commission. (e) In the event of any termination of this Agreement, the fee provided for in this Paragraph 4 shall be calculated on the basis of a period ending on the last day on which this Agreement is in effect, subject to a pro rata adjustment based on the number of days elapsed in the current period as a percentage of the total number of days in such period. 5. Excess Brokerage Commissions. The Adviser is hereby authorized, to the fullest extent now or hereafter permitted by law, to cause the Fund to pay a member of a national securities exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of such exchange, broker or dealer would have charged for effecting that transaction, if the Adviser determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and/or research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or its over-all responsibilities with respect to the Fund and its other accounts. 6. Limitations on the Employment of the Adviser. The services of the Adviser to the Fund shall not be deemed exclusive, and the Adviser may engage in any other business or render similar or different services to others so long as its services to the Fund hereunder are not impaired thereby, and nothing in this Agreement shall limit or restrict the right of any director, officer or employee of the Adviser to engage in any other business or to devote his time and attention in part to any other business, whether of a similar or dissimilar nature. So long as this Agreement or any extension, renewal or amendment remains in effect, the Adviser shall be the only investment adviser to the Fund, subject to the Adviser's right to enter into sub-advisory agreements. The Adviser assumes no responsibility under this Agreement other than to render the services called for hereunder, and shall not be responsible for any action of or directly by the Board of Directors of the Fund, or any committee thereof, unless such action has been caused by the Adviser's gross negligence, willful malfeasance, bad faith or reckless disregard of its obligations and duties under this Agreement. 7. Responsibility of Dual Directors, Officers and/or Employees. If any person who is a director, officer or employee of the Adviser is or becomes a director, officer and/or employee of the Fund and acts as such in any business of the Fund pursuant to this Agreement, then such director, officer and/or employee of the Adviser shall be deemed to be acting in such capacity solely for the Fund, and not as a director, officer and/or employee of the Adviser or under the control or direction of the Adviser, although paid by the Adviser. 8. Protection of the Adviser. The Adviser shall not be liable to the Fund for any action taken or omitted to be taken by the Adviser in connection with the performance of any of its duties or obligations under this Agreement or otherwise as an investment adviser of the Fund, and the Fund shall indemnify the Adviser and hold it harmless from and against all damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) incurred by the Adviser in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding (including an action or suit by or in the right of the Fund or its security holders) arising out of or otherwise based upon any action actually or allegedly taken or omitted to be taken by the Adviser in A-3 connection with the performance of any of its duties or obligations under this Agreement or otherwise as an investment adviser of the Fund. Notwithstanding the preceding sentence of this Paragraph 8 to the contrary, nothing contained herein shall protect or be deemed to protect the Adviser against or entitle or be deemed to entitle the Adviser to indemnification in respect of, any liability to the Fund or its security holders to which the Adviser would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its duties and obligations under this Agreement. Determinations of whether and the extent to which the Adviser is entitled to indemnification hereunder shall be made by reasonable and fair means, including (a) a final decision on the merits by a court or other body before whom the action, suit or other proceeding was brought that the Adviser was not liable by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties or (b) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that the Adviser was not liable by reason of such misconduct by (i) the vote of a majority of a quorum of the directors of the Fund who are neither "interested persons" of the Fund (as defined in Section 2(a)(19) of the Investment Company Act of 1940) nor parties to the action, suit or other proceeding or (ii) an independent legal counsel in a written opinion. 9. Effectiveness, Duration and Termination of Agreement. The Prior Agreement (other than the provisions of Paragraph 8 thereof, which shall remain in full force and effect) shall terminate at the close of business on December 31, 1996. This Agreement shall become effective on January 1, 1997, and shall remain in effect until April 30, 1998 and thereafter shall continue automatically for successive annual periods from May 1 to April 30, provided that such continuance is specifically approved at least annually by (a) the vote of the Fund's directors, including a majority of such directors who are not parties to this Agreement or "interested persons" (as such term is defined in Section 2(a)(19) of the Investment Company Act of 1940) of any such party, cast in person at a meeting called for the purpose of voting on such approval, or (b) the vote of a majority of the outstanding voting securities of the Fund and the vote of the Fund's directors, including a majority of such directors who are not parties to this Agreement or "interested persons" (as so defined) of any such party. This Agreement may be terminated at any time, without the payment of any penalty, on sixty (60) days' written notice by the vote of a majority of the outstanding voting securities of the Fund or by the vote of a majority of the Fund's directors or by the Adviser, and will automatically terminate in the event of its "assignment" (as such term is defined for purposes of Section 15(a)(4) of the Investment Company Act of 1940); provided, however, that the provisions of Paragraph 8 of this Agreement shall remain in full force and effect, and the Adviser shall remain entitled to the benefits thereof, notwithstanding any such termination. 10. Name. The Fund may, so long as this Agreement remains in effect, use "Royce" as part of its name. The Adviser may, upon termination of this Agreement, require the Fund to refrain from using the name "Royce" in any form or combination in its name or in its business, and the Fund shall, as soon as practicable following its receipt of any such request from the Adviser, so refrain from using such name. 11. Notices. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed, postage prepaid, to the other party at its principal office. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed the day and year first above written. Royce Micro-Cap Trust, Inc. By: ----------------------------------- Quest Advisory Corp. By: ----------------------------------- A-4 PROXY ROYCE MICRO-CAP TRUST, INC. PROXY 1414 Avenue of the Americas New York, N.Y. 10019 This Proxy is solicited on behalf of the Board of Directors. The undersigned hereby appoints Charles M. Royce and John E. Denneen, 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 on the reverse, all shares of the Fund held of record by the undersigned on November 5, 1996, at the Special Meeting of Stockholders to be held on December 3, 1996, or at any adjournment thereof. - - ----------------------------------------------------------------------------- PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. - - ----------------------------------------------------------------------------- Please sign exactly as name appears on other side. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person. - - ----------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - - ------------------------------------ --------------------------------- - - ------------------------------------ --------------------------------- - - ------------------------------------ --------------------------------- PROXY ROYCE MICRO-CAP TRUST, INC. PROXY 1414 Avenue of the Americas New York, N.Y. 10019 This Proxy is solicited on behalf of the Board of Directors. The undersigned hereby appoints Charles M. Royce and John E. Denneen, 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 on the reverse, all shares of the Fund held of record by the undersigned on November 5, 1996, at the Special Meeting of Stockholders to be held on December 3, 1996, or at any adjournment thereof. - - ----------------------------------------------------------------------------- PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. - - ------------------------------------------------------------------------------ Please sign exactly as name appears on other side. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person. - - ------------------------------------------------------------------------------ HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - - ------------------------------------ ---------------------------------- - - ------------------------------------ ---------------------------------- - - ------------------------------------ ---------------------------------- LEFT COLUMN [X] PLEASE MARK VOTES AS IN THIS EXAMPLE - - ----------------------------------------------------- REGISTRATION - - ----------------------------------------------------- Please be sure to sign and date this Proxy. Date - - ----------------------------------------------------- ____Shareholder sign here_______Co-owner sign here___ RIGHT COLUMN For Against Abstain 1. APPROVAL OF NEW INVESTMENT [ ] [ ] [ ] ADVISORY AGREEMENT. 2. THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING. 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 Proposal 1. ROYCE MICRO-CAP TRUST, INC. Mark box at right if comments or address change have [ ] been noted on the reverse side of this card. RECORD DATE SHARES: LEFT COLUMN [X] PLEASE MARK VOTES AS IN THIS EXAMPLE - - ----------------------------------------------------- REGISTRATION - - ----------------------------------------------------- Please be sure to sign and date this Proxy. Date - - ----------------------------------------------------- ____Shareholder sign here_______Co-owner sign here___ RIGHT COLUMN For Against Abstain 1. APPROVAL OF NEW INVESTMENT [ ] [ ] [ ] ADVISORY AGREEMENT. 2. THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING. 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 Proposal 1. ROYCE MICRO-CAP TRUST, INC. Mark box at right if comments or address change have [ ] been noted on the reverse side of this card. RECORD DATE SHARES: EX-99 4 AMENDED AND RESTATED BYLAWS OF ROYCE MICRO-CAP TRUST, INC. A Maryland Corporation ARTICLE I STOCKHOLDERS SECTION 1. Annual Meetings. The annual meeting of the stockholders of Royce Micro-Cap Trust, Inc. (the "Corporation") shall be held on a date fixed from time to time by the Board of Directors within the thirty-one (31) day period ending on April 30 of each calendar year. An annual meeting may be held at any place in the United States, in or out of the State of Maryland, as may be determined by the Board of Directors, and shall be designated in the notice of the meeting, and at the time specified by the Board of Directors. Unless otherwise provided by statute, the Corporation's Articles of Incorporation or these Bylaws, any business of the Corporation may be transacted at an annual meeting without being specifically designated in the notice. SECTION 2. Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute or by the Corporation's Articles of Incorporation, may be held at any place within the United States, and may be called at any time by the Board of Directors or by the President, and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors or at the request in writing of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting upon payment by such stockholders to the Corporation of the reasonably estimated cost of preparing and mailing a notice of the meeting (which estimated cost shall be provided to such stockholders by the Secretary of the Corporation). SECTION 3. Notice of Meetings. Written or printed notice of the purpose or purposes, in the case of a special meeting, and of the time and place of every meeting of the stockholders shall be given by the Secretary of the Corporation to each stockholder of record entitled to vote at the meeting, by placing the notice in the mail at least ten (10) days, but not more than ninety (90) days, prior to the date designated for the meeting, addressed to each stockholder at his address appearing on the books of the Corporation or supplied by the stockholder to the Corporation for the purpose of notice. The notice of any meeting of stockholders may be accompanied by a form of proxy approved by the Board of Directors in favor of the actions or persons as the Board of Directors may select. Notice of any meeting of stockholders shall be deemed waived by any stockholder who attends the meeting in person or by proxy, or who before or after the meeting submits a signed waiver of notice that is filed with the records of the meeting. SECTION 4. Quorum. The presence in person or by proxy of stockholders of the Corporation entitled to cast at least a majority of the votes entitled to be cast shall constitute a quorum at each meeting of the stockholders, and all questions shall be decided by a majority of the votes cast on the question (except with respect to the election of directors, which shall be by plurality of the votes cast), unless otherwise required by the laws of the State of Maryland, the Investment Company Act of 1940, as amended, or the Corporation's Articles of Incorporation. In the absence of a quorum, the stockholders present in person or by proxy at the meeting, by majority vote and without notice other than by announcement at the meeting, may adjourn the meeting from time to time as provided in Section 5 of this Article I until a quorum shall attend. The stockholders present at any duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. The lack of presence at any meeting in person or by proxy of holders of the number of shares of stock of the Corporation of the proportion that may be required by the laws of the State of Maryland, the Investment Company Act of 1940, as amended, or other applicable statute, the Corporation's Articles of Incorporation or these Bylaws, for action upon any given matter shall not prevent action at the meeting on any other matter or matters that may properly come before the meeting, so long as there are present, in person or by proxy, holders of the number of shares of stock of the Corporation required for action upon the other matter or matters. SECTION 5. Adjournment. Any meeting of the stockholders may be adjourned from time to time, without notice other than by announcement at the meeting at which the adjournment is taken. At any adjourned meeting at which a quorum shall be present, any action may be taken that could have been taken at the meeting originally called. A meeting of the stockholders may not be adjourned to a date more than one hundred twenty (120) days after the original record date, unless a new record date is set by the Board of Directors and further notice is provided to the stockholders. SECTION 6. Organization. At every meeting of the stockholders, the President, or in his absence or inability to act, a Vice President, or in the absence or inability to act of the President and all the Vice Presidents, a chairman chosen by the stockholders, shall act as chairman of the meeting. The Secretary, or in his absence or inability to act, a person appointed by the chairman of the meeting, shall act as secretary of the meeting and keep the minutes of the meeting. SECTION 7. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. SECTION 8. Voting. Except as otherwise provided by statute or the Corporation's Articles of Incorporation, each holder of record of shares of stock of the Corporation having voting power shall be entitled at each meeting of the stockholders to one (1) vote for every full share of stock, and proportional voting rights for fractional shares of stock, standing in his name on the records of the Corporation as of the record date determined pursuant to Section 9 of this Article I. Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for him by a proxy signed by the stockholder or his attorney-in-fact. A stockholder may authorize another person or persons to act as proxy by transmitting, or authorizing the transmission of, a telegram, cablegram, datagram or other means of electronic transmission to the person or persons authorized to act as proxy or to a proxy solicitation firm, proxy support service organization or other person authorized by the person or persons who will act as proxy to receive the transmission. No proxy shall be valid after the expiration of eleven (11) months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the stockholder executing it, except in those cases in which the proxy states that it is irrevocable and in which an irrevocable proxy is permitted by law. SECTION 9. Fixing of Record Date for Determining Stockholders Entitled to Notice and to Vote at Meeting. The Board of Directors may set a record date for the purpose of determining stockholders entitled to notice of, and to vote at, any meeting of the stockholders. The record date for a particular meeting shall be not more than ninety (90) nor fewer than ten (10) days before the date of the meeting. All persons who were holders of record of shares as of the record date of a meeting, and no others, shall be entitled to vote at such meeting and any adjournment thereof. SECTION 10. Inspectors. The Board of Directors may, in advance of any meeting of stockholders, appoint one (1) or more inspectors to act at the meeting or at any adjournment of the meeting. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the chairman of the meeting may appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall, if required by the chairman of the meeting, take and sign an oath to execute faithfully the duties of inspector of the meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each share, the number of shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result and do those acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote at the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as inspector of an election of directors. Inspectors need not be stockholders of the Corporation. SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as otherwise provided by statute or the Corporation's Articles of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action that may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if the following are filed with the records of stockholders' meetings: (a) a unanimous written consent that sets forth the action and is signed by each stockholder entitled to vote on the matter and (b) a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote at the meeting. ARTICLE II BOARD OF DIRECTORS SECTION 1. General Powers. Except as otherwise provided in the Corporation's Articles of Incorporation, the business and affairs of the Corporation shall be managed under the direction of the Board of Directors. All powers of the Corporation may be exercised by or under authority of the Board of Directors except as conferred on or reserved to the stockholders by law, by the Corporation's Articles of Incorporation or by these Bylaws. SECTION 2. Number, Election and Term of Directors. The number of directors shall be fixed from time to time by resolution of the Board of Directors adopted by a majority of the directors then in office; provided, however, that the number of directors shall in no event be fewer than three (3) nor, subject to the charter of the Corporation, more than eleven (11). Directors shall hold office for one year or until the first annual election following their election and until their successors are duly elected and qualify. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 5 of this Article, and each director elected shall hold office until his successor shall have been elected and shall have qualified, until his death or until he shall have resigned or have been removed as provided in these Bylaws, or as otherwise provided by statute or the Corporation's Articles of Incorporation. Any vacancy created by an increase in directors may be filled in accordance with Section 5 of this Article II. No reduction in the number of directors shall have the effect of removing any director from office prior to the expiration of his term unless the director is specifically removed pursuant to Section 4 of this Article II at the time of the decrease. A director need not be a stockholder of the Corporation, a citizen of the United States or a resident of the State of Maryland. SECTION 3. Resignation. A director of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors or to the President or the Secretary of the Corporation. Any resignation shall take effect at the time specified in it or, should the time when it is to become effective not be specified in it, immediately upon its receipt. Unless the resignation states otherwise, acceptance of a resignation shall not be necessary to make it effective. SECTION 4. Removal of Directors. Any director of the Corporation may be removed by the stockholders, with or without cause, by a vote of a majority of the votes entitled to be cast for the election of directors. SECTION 5. Vacancies. Subject to the provisions of the Investment Company Act of 1940, as amended, any vacancies in the Board of Directors, whether arising from death, resignation, removal or any other cause except an increase in the number of directors, shall be filled by a vote of the majority of the directors then in office even though that majority is less than a quorum, provided that no vacancy or vacancies shall be filled by action of the remaining directors if, after the filling of the vacancy or vacancies, fewer than two-thirds of the directors then holding office shall have been elected by the stockholders of the Corporation. A majority of the entire Board in office at the time of the increase may fill a vacancy that results from an increase in the number of directors. In the event that at any time a vacancy exists in any office of a director that may not be filled by the remaining directors, a special meeting of the stockholders shall be held as promptly as possible and in any event within sixty (60) days, for the purpose of filling the vacancy or vacancies. Any director appointed by the Board of Directors to fill a vacancy shall hold office only until the next annual meeting of stockholders of the Corporation and until a successor has been elected and qualifies or until his earlier death, resignation or removal. SECTION 6. Place of Meetings. Meetings of the Board of Directors may be held at any place that the Board of Directors may from time to time determine or that is specified in the notice of the meeting. SECTION 7. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at the time and place determined by the Board of Directors. SECTION 8. Special Meetings. Special meetings of the Board of Directors may be called by a majority of the directors of the Corporation or by the President. SECTION 9. Annual Meeting. The annual meeting of the Board of Directors shall be held as soon as practicable after the meeting of stockholders at which the directors were elected. No notice of such annual meeting shall be necessary if held immediately after the adjournment, and at the site, of the meeting of stockholders. If not so held, notice shall be given as hereinafter provided for special meetings of the Board of Directors. SECTION 10. Notice of Special Meetings. Notice of each special meeting of the Board of Directors shall be given by the Secretary or the President as hereinafter provided. Each notice shall state the time and place of the meeting and shall be delivered to each director, either personally or by telephone or other standard form of telecommunication, at least twenty-four (24) hours before the time at which the meeting is to be held, or by first-class mail, postage prepaid, addressed to the director at his residence or usual place of business, and mailed at least three (3) days before the day on which the meeting is to be held. SECTION 11. Waiver of Notice of Meetings. Notice of any special meeting need not be given to any director who shall, either before or after the meeting, sign a written waiver of notice that is filed with the records of the meeting or who shall attend the meeting. SECTION 12. Quorum and Voting. One-third (1/3) of the members of the entire Board of Directors shall be present in person at any meeting of the Board so as to constitute a quorum for the transaction of business at the meeting, and, except as otherwise expressly required by statute, the Corporation's Articles of Incorporation, these Bylaws, the Investment Company Act of 1940, as amended, or any other applicable statute, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum at any meeting of the Board, a majority of the directors present may adjourn the meeting to another time and place, and notice of any adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place were announced at the meeting at which the adjournment was taken, to the other directors. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called. SECTION 13. Organization. The President or, in his absence or inability to act, another director chosen by a majority of the directors present shall act as chairman of the meeting and preside at the meeting. The Secretary (or, in his absence or inability to act, any person appointed by the chairman) shall act as secretary of the meeting and keep the minutes of the meeting. SECTION 14. Committees. The Board of Directors may designate one (1) or more committees of the Board of Directors, each consisting of one (1) or more directors. To the extent provided in the resolution and permitted by law, the committee or committees shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation. Any committee or committees shall have the name or names determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and provide those minutes to the Board of Directors when required. The members of a committee present at any meeting, whether or not they constitute a quorum, may appoint a director to act in the place of an absent member. SECTION 15. Written Consent of Directors in Lieu of a Meeting. Subject to the provisions of the Investment Company Act of 1940, as amended, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee. SECTION 16. Telephone Conference. Members of the Board of Directors or any committee of the Board may participate in any Board or committee meeting by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at the meeting. SECTION 17. Compensation. Each director shall be entitled to receive such compensation, if any, as may from time to time be fixed by the Board of Directors, including a fee for each meeting of the Board or any committee thereof, regular or special, he attends. Directors may also be reimbursed by the Corporation for all reasonable expenses incurred in traveling to and from the place of a Board or committee meeting. ARTICLE III OFFICERS, AGENTS AND EMPLOYEES SECTION 1. Number and Qualifications. The officers of the Corporation shall be a President, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. The Board of Directors may elect or appoint one (1) or more Vice Presidents and may also appoint any other officers, agents and employees it deems necessary or proper. Any two (2) or more offices may be held by the same person, except the office of President and Vice President, but no officer shall execute, acknowledge or verify in more than one capacity any instrument required by law to be executed, acknowledged or verified in more than one capacity. Officers shall be elected by the Board of Directors each year at its first meeting held after the annual meeting of stockholders, each to hold office until the meeting of the Board following the next annual meeting of the stockholders and until his successor shall have been duly elected and shall have qualified, until his death or until he shall have resigned or have been removed, as provided by these Bylaws. The Board of Directors may from time to time elect such officers (including one or more Assistant Vice Presidents, one or more Assistant Treasurers and one or more Assistant Secretaries) and may appoint, or delegate to the President the power to appoint, such agents as may be necessary or desirable for the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as may be prescribed by the Board or by the appointing authority. SECTION 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the President or the Secretary. Any resignation shall take effect at the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. Unless otherwise stated in the resignation, the acceptance of a resignation shall not be necessary to make it effective. SECTION 3. Removal of Officer, Agent or Employee. Any officer, agent or employee of the Corporation may be removed by the Board of Directors, with or without cause, at any time if the Board of Directors in its judgment finds that the best interests of the Corporation will be served thereby, and the Board may delegate the power of removal as to agents and employees not elected or appointed by the Board of Directors. Removal shall be without prejudice to the person's contract rights, if any, but the appointment of any person as an officer, agent or employee of the Corporation shall not of itself create contract rights. SECTION 4. Vacancies. A vacancy in any office, whether arising from death, resignation, removal or any other cause, may be filled for the unexpired portion of the term of the office that shall be vacant, in the manner prescribed in these Bylaws for the regular election or appointment to the office. SECTION 5. Compensation. The compensation of the officers of the Corporation shall be fixed by the Board of Directors, but this power may be delegated to any officer with respect to other officers under his control. SECTION 6. Bonds or Other Security. If required by the Board, any officer, agent or employee of the Corporation shall give a bond or other security for the faithful performance of his duties, in an amount and with any surety or sureties as the Board may require. SECTION 7. President. The President shall be the chief executive officer of the Corporation and shall preside at all meetings of the stockholders and of the Board of Directors. The President shall, subject to the control of the Board of Directors, have general charge of the business and affairs of the Corporation and may employ and discharge employees and agents of the Corporation, except those elected or appointed by the Board, and he may delegate these powers. SECTION 8. Vice President. Each Vice President shall have the powers and perform the duties that the Board of Directors or the President may from time to time prescribe. SECTION 9. Treasurer. Subject to the provisions of any contract that may be entered into with any custodian pursuant to authority granted by the Board of Directors, the Treasurer shall have charge of all receipts and disbursements of the Corporation and shall have or provide for the custody of the Corporation's funds and securities; he shall have full authority to receive and give receipts for all money due and payable to the Corporation, and to endorse checks, drafts and warrants, in its name and on its behalf, and to give full discharge for the same; he shall deposit all funds of the Corporation, except those that may be required for current use, in such banks or other places of deposit as the Board of Directors may from time to time designate; and he shall, in general, perform all duties incident to the office of Treasurer and such other duties as may from time to time be assigned to him by the Board of Directors or the President. SECTION 10. Secretary. The Secretary shall: (a) Keep or cause to be kept, in one or more books provided for the purpose, the minutes of all meetings of the Board of Directors, the committees of the Board and the stockholders; (b) See that all notices are duly given in accordance with the provisions of these Bylaws and as required by law; (c) Be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) See that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and (e) In general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors or the President. SECTION 11. Delegation of Duties. In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board may confer for the time being the powers or duties, or any of them, of such officer upon any other officer or upon any director. ARTICLE IV STOCK SECTION 1. Stock Certificates. To the extent provided by the Board of Directors, each holder of stock of the Corporation shall be entitled to have a certificate or certificates representing shares of stock of the Corporation owned by him. Such certificates shall be in a form approved by the Board, signed by or in the name of the Corporation by the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation. Any or all of the signatures or the seal on the certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before the certificate is issued, it may nevertheless be issued by the Corporation with the same effect as if the officer, transfer agent or registrar was still in office at the date of issue. SECTION 2. Stock Ledger. There shall be maintained a stock ledger containing the name and address of each stockholder and the number of shares of stock of each class the stockholder holds. The stock ledger may be in written form or any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the principal office of the Corporation, at the office of the transfer agent for such shares or at any other office or agency specified by the Board of Directors. SECTION 3. Transfers of Shares. Transfers of shares of stock of the Corporation shall be made on the stock records of the Corporation only by the registered holder of the shares, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates, if issued, for the shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of the share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions and to vote as the owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person. SECTION 4. Regulations. The Board of Directors may authorize the issuance of uncertificated securities if permitted by law. If stock certificates are issued, the Board of Directors may make any additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for shares of stock to bear the signature or signatures of any of them. SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of any certificate representing shares of stock of the Corporation shall immediately notify the Corporation of its loss, destruction or mutilation, and the Corporation may issue a new certificate of stock in the place of any certificate issued by it that has been alleged to have been lost or destroyed or that shall have been mutilated. The Board may, in its absolute discretion, require the owner (or his legal representative) of a lost, destroyed or mutilated certificate to give to the Corporation a bond in a sum, limited or unlimited, and form and with any surety or sureties, as the Board in its absolute discretion shall determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or issuance of a new certificate. Anything herein to the contrary notwithstanding, the Board of Directors may, in its absolute discretion, refuse to issue any such new certificate, except pursuant to legal proceedings under the laws of the State of Maryland. SECTION 6. Fixing of Record Date for Dividends, Distributions, etc. The Board may fix, in advance, a date not more than ninety (90) days preceding the date fixed for the payment of any dividend or the making of any distribution or the allotment of rights to subscribe for securities of the Corporation, or for the delivery of evidences of rights or evidences of interests arising out of any change, conversion or exchange of common stock or other securities, as the record date for the determination of the stockholders entitled to receive any such dividend, distribution, allotment, rights or interests, and in such case only the stockholders of record at the time so fixed shall be entitled to receive such dividend, distribution, allotment, rights or interests. SECTION 7. Information to Stockholders and Others. Any stockholder of the Corporation or his agent may, during the Corporation's usual business hours, inspect and copy the Corporation's Bylaws, minutes of the proceedings of its stockholders, annual statements of its affairs and voting trust agreements on file at its principal office. ARTICLE V INDEMNIFICATION AND INSURANCE SECTION 1. Indemnification of Directors and Officers. Any person who was or is a party or is threatened to be made a party in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is a current or former director or officer of the Corporation, or is or was serving while a director or officer of the Corporation at the request of the Corporation as a director, officer, partner, trustee, employee, agent or fiduciary of another domestic or foreign corporation, partnership, joint venture, trust, enterprise or employee benefit plan shall be indemnified by the Corporation against judgments, penalties, fines, excise taxes, settlements and reasonable expenses (including attorneys' fees) actually incurred by such person in connection with such action, suit or proceeding to the fullest extent permissible under the Maryland General Corporation Law and the Investment Company Act of 1940, as amended, as those statutes are now or hereafter in force, except that such indemnity shall not protect any such person against any liability to the Corporation or any stockholder thereof to which such person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office ("disabling conduct"). SECTION 2. Advances. Any current or former director or officer of the Corporation claiming indemnification within the scope of this Article V shall be entitled to advances from the Corporation for payment of the reasonable expenses incurred by him in connection with proceedings to which he is a party in the manner and to the fullest extent permissible under the Maryland General Corporation Law and the Investment Company Act of 1940, as amended, as those statutes are now or hereafter in force; provided, however, that the person seeking indemnification shall provide to the Corporation a written affirmation of his good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met and a written undertaking to repay any such advance, if it should ultimately be determined that the standard of conduct has not been met, and provided further that at least one (1) of the following additional conditions is met: (a) the person seeking indemnification shall provide a security in form and amount acceptable to the Corporation for his undertaking; (b) the Corporation is insured against losses arising by reason of the advance; or (c) a majority of a quorum of directors of the Corporation who are neither "interested persons" as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, nor parties to the proceeding ("disinterested non-party directors"), or independent legal counsel, in a written opinion, shall determine, based on a review of facts readily-available to the Corporation at the time the advance is proposed to be made, that there is reason to believe that the person seeking indemnification will ultimately be found to be entitled to indemnification. SECTION 3. Procedure. At the request of any current or former director or officer, or any employee or agent whom the Corporation proposes to indemnify, the Board of Directors shall determine, or cause to be determined, in a manner consistent with the Maryland General Corporation Law and the Investment Company Act of 1940, as amended, as those statutes are now or hereafter in force, whether the standards required by this Article V and Section 2-418 of the Maryland General Corporation Law have been met; provided, however, that indemnification shall be made only following: (a) a final decision on the merits by a court or other body before whom the proceeding was brought that the person to be indemnified was not liable by reason of disabling conduct or (b) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that the person to be indemnified was not liable by reason of disabling conduct, by (i) the vote of a majority of a quorum of disinterested non- party directors or (ii) an independent legal counsel in a written opinion. SECTION 4. Indemnification of Employees and Agents. Employees and agents who are not officers or directors of the Corporation may be indemnified, and reasonable expenses may be advanced to such employees or agents, in accordance with the procedures set forth in this Article V to the extent permissible under the Maryland General Corporation Law and the Investment Company Act of 1940, as amended, as those statutes are now or hereafter in force, and to such further extent, consistent with the foregoing, as may be provided by action of the Board of Directors or by contract. SECTION 5. Other Rights. The indemnification provided by this Article V shall not be deemed exclusive of any other right, with respect to indemnification or otherwise, to which those seeking such indemnification may be entitled under any insurance or other agreement, vote of stockholders or disinterested directors or otherwise, both as to action by a director or officer of the Corporation in his capacity as such and as to action by such person in another capacity while holding such office or position, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 6. Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or who, while a director, officer, employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, agent or fiduciary of another domestic or foreign corporation, partnership, joint venture, trust, enterprise or employee benefit plan, against any liability asserted against and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability. ARTICLE VI SEAL The seal of the Corporation shall be circular in form and shall bear the name of the Corporation, the year of its incorporation, the words "Corporate Seal" and "Maryland" and any emblem or device approved by the Board of Directors. The seal may be used by causing it or a facsimile to be impressed or affixed or in any other manner reproduced, or by placing the word "(Seal)" adjacent to the signature of the authorized officer of the Corporation. ARTICLE VII FISCAL YEAR SECTION 1. Fiscal Year. The Corporation's fiscal year shall be fixed by the Board of Directors. SECTION 2. Accountant. (a) The Corporation shall employ an independent public accountant or a nationally-recognized firm of independent public accountants as its Accountant to examine the accounts of the Corporation and to certify financial statements of the Corporation. The Accountant's certificates and reports shall be addressed both to the Board of Directors and to the stockholders. The employment of the Accountant shall be conditioned upon the right of the Corporation to terminate the employment forthwith without any penalty by vote of a majority of the outstanding voting securities at any stockholders' meeting called for that purpose. (b) A majority of the members of the Board of Directors who are not "interested persons" (as such term is defined in the Investment Company Act of 1940, as amended) of the Corporation shall select the Accountant at any meeting held within thirty (30) days before or after the beginning of the fiscal year of the Corporation or before the annual stockholders' meeting in that year. Such selection shall be submitted for ratification or rejection at the next succeeding annual stockholders' meeting. If such meeting shall reject such selection, the Accountant shall be selected by majority vote of the Corporation's outstanding voting securities, either at the meeting at which the rejection occurred or at a subsequent meeting of stockholders called for that purpose. (c) Any vacancy occurring between annual meetings, due to the resignation of the Accountant, may be filled by the vote of a majority of the members of the Board of Directors who are not "interested persons" of the Corporation, as that term is defined in the Investment Company Act of 1940, at a meeting called for the purpose of voting on such action. ARTICLE VIII CUSTODY OF SECURITIES SECTION 1. Employment of a Custodian. The Corporation shall place and at all times maintain in the Custodian (including any sub-custodian for the Custodian) all funds, securities and similar investments owned by the Corporation. The Custodian (and any sub-custodian) shall be an institution conforming to the requirements of Section 17(f) of the Investment Company Act of 1940, as amended, and the rules of the Securities and Exchange Commission thereunder. The Custodian shall be appointed from time to time by the Board of Directors, which shall fix its remuneration. Subject to such rules, regulations and orders as the Securities and Exchange Commission may adopt, the Corporation may direct the Custodian to deposit all or any part of the securities owned by the Corporation in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Securities and Exchange Commission, or otherwise in accordance with the Investment Company Act of 1940, as amended, pursuant to which system all securities of any particular class of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Corporation or the Custodian. SECTION 2. Termination of Custodian Agreement. Upon termination of the Custodian Agreement or inability of the Custodian to continue to serve, the Board of Directors shall promptly appoint a successor Custodian, but in the event that no successor Custodian can be found who has the required qualifications and is willing to serve, the Board of Directors shall call as promptly as possible a special meeting of the stockholders to determine whether the Corporation shall function without a Custodian or shall be liquidated. If so directed by vote of the holders of a majority of the outstanding shares of stock entitled to vote of the Corporation, the Custodian shall deliver and pay over all property of the Corporation held by it as specified in such vote. ARTICLE IX AMENDMENTS These Bylaws may be amended or repealed by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board of Directors, subject to the requirements of the Investment Company Act of 1940, as amended. Dated: December 18, 1996 EX-99 5 N-SAR ATTACHMENT Item 77(C) At a Special Meeting of Stockholders of the Registrant held on December 3, 1996, the Stockholders approved a new Investment Advisory Agreement between the Registrant and Quest Advisory Corp. as follows: Votes Cast For Votes Cast Against Votes Abstained 8,397,503 108,366 57,232 EX-99 6 Board of Directors Royce Micro-Cap Trust, Inc. In planning and performing our audit of the financial statements of Royce Micro-Cap Trust, Inc. for the year ended December 31, 1996, we considered its internal control structure, including procedures for safeguarding securities, in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and to comply with the requirements of Form N-SAR, not to provide assurance on the internal control structure. The management of Royce Micro-Cap Trust, Inc. is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. Two of the objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed in accordance with management's authorization and recorded properly to permit preparation of financial statements in conformity with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that it may become inadequate because of changes in conditions or that the effectiveness of the design and operation may deteriorate. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, we noted no matters involving the internal control structure, including procedures for safeguarding securities, that we consider to be material weaknesses as defined above as of December 31, 1996. This report is intended solely for the information and use of management and the Securities and Exchange Commission. ERNST & YOUNG LLP February 25, 1997 -----END PRIVACY-ENHANCED MESSAGE-----