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<SEC-DOCUMENT>0000949377-05-000513.txt : 20050510
<SEC-HEADER>0000949377-05-000513.hdr.sgml : 20050510
<ACCEPTANCE-DATETIME>20050510170212
ACCESSION NUMBER:		0000949377-05-000513
CONFORMED SUBMISSION TYPE:	497
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20050510
DATE AS OF CHANGE:		20050510
EFFECTIVENESS DATE:		20050510

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ROYCE FOCUS TRUST INC
		CENTRAL INDEX KEY:			0000825202
		IRS NUMBER:				592876580
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		497
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-123047
		FILM NUMBER:		05817646

	BUSINESS ADDRESS:	
		STREET 1:		1414 AVENUE OF THE AMERICAS
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10019
		BUSINESS PHONE:		2125084578

	MAIL ADDRESS:	
		STREET 1:		C/O ROYCE & ASSOCIATES, LLC
		STREET 2:		1414 AVENUE OF THE AMERICAS
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10019

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ROYCE GLOBAL TRUST INC
		DATE OF NAME CHANGE:	19961203

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ALL SEASONS GLOBAL FUND INC
		DATE OF NAME CHANGE:	19950803

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	AMERICAS ALL SEASON FUND INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>e70851a.htm
<TEXT>
<p align="center"><font face="Times New Roman" size="2"><b>ROYCE FOCUS TRUST, INC.
<br>2,189,498 Shares of Common Stock<br>Issuable upon Exercise of Non-Transferable
<br>Rights to Subscribe for such Shares of Common Stock</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce Focus
 Trust, Inc. (the &#147;Fund&#148;) is offering to its Common Stockholders of record
 as of May 6, 2005 non-transferable Rights. These Rights will allow you to subscribe
 for one (1) share of the Fund&#146;s Common Stock for each five (5) Rights held.
 You will receive one Right for each whole share of Common Stock that you hold of
 record as of May 6, 2005, rounded up to the nearest number of Rights evenly divisible
 by five. The Rights will not be listed for trading on the Nasdaq National Market
 (&#147;Nasdaq&#148;) or on any exchange.<b>The Subscription Price will be the lower
 of (i) $0.25 below the last reported sale price of a share of the Fund&#146;s Common
 Stock on Nasdaq on the Pricing Date, which is June 13, 2005, or (ii) the net asset
 value of a share of the Fund&#146;s Common Stock at the close of business on that
 date.</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<b>Rights
 may be exercised at any time until 5:00 p.m., Eastern time, on June 10, 2005, unless
 the subscription period is extended. Since the Offer closes prior to the Pricing
 Date, stockholders who exercise their Rights will not know the Subscription Price
 at the time they exercise their Rights.</b></font></p>
<p align="right"><font face="Times New Roman" size="2">(Continued on following page)</font></p>
<p><font face="Times New Roman" size="2"><b>INVESTING IN THE FUND&#146;S COMMON STOCK
 INVOLVES RISKS. SEE &#147;PROSPECTUS SUMMARY &#151; RISK FACTORS AND SPECIAL CONSIDERATIONS
 AT A GLANCE&#148; BEGINNING ON PAGE 5 AND &#147;INVESTMENT GOAL, POLICIES AND RISKS&#148; BEGINNING ON PAGE 15.</b></font></p>
<p align="center"><font face="Times New Roman" size="2"><b>__________________________
</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund may
 increase the number of shares of Common Stock subject to subscription by up to 20%,
 or up to an additional 437,899 Shares, for an aggregate total of 2,627,397 Shares.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="70%" align="center">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center" colspan="3"><font face="Times New Roman" size="2">Estimated
<br><u>Subscription Price</u></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><u>Sales
 Load</u></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td  colspan="3" valign="bottom" align="center"><font face="Times New Roman" size="2">Proceeds,
 before<br>expenses, to the<br><u>Fund(1)(2)</u></font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Per Share</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">8.50</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">8.50</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Total</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="5%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td width="3%" valign="bottom" align="left"><font face="Times New Roman" size="2">18,610,733</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="5%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="10%" valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="5%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td width="4%" valign="bottom" align="left"><font face="Times New Roman" size="2">18,610,733</font></td>
<td width="4%"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" align="left" colspan="2"><hr size="1" color="#000000" noshade width="11%"></td>
</tr>
<tr>
<td valign="bottom" align="left" width="2%"><font face="Times New Roman" size="1">(1)</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="1">Before deduction
 of expenses payable by the Fund, estimated at$200,000, which will be charged against
 paid-in capital of the Fund.</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="1">(2)</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="1">If the Fund
 increases the number of shares subject to subscription by 20%, the Proceeds, before
 expenses, to the Fund will be$22,332,875.</font></td>
</tr>
</table>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Neither the
 SEC nor any state securities commission has approved or disapproved of these securities
 or determined if this Prospectus is truthful or complete. Any representation to
 the contrary is a criminal offense.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Shares
 will be ready for delivery on or about June 28, 2005.</font></p>
<p align="center"><font face="Times New Roman" size="2">____________________<br><br>
The date of this Prospectus is April 28, 2005.</font></p>
<hr size="3" color="gray">
<page>
<p><font face="Times New Roman" size="2">(Continued from previous page)</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 a closed-end registered investment company, whose shares of Common Stock are listed
 and traded on Nasdaq under the symbol &#147;FUND.&#148; The Fund&#146;s primary
 investment goal is long-term capital growth. The Fund normally invests at least
 65% of its assets in equity securities. The net asset value per share of the Fund&#146;s Common Stock at the close of business on April 15, 2005 was $8.49, and the
 last reported sales price of a share of the Fund&#146;s Common Stock on Nasdaq on
 that date was $8.74.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This Prospectus
 sets forth concisely the information about the Fund you should know before investing,
 including information about risks. Please read it before you invest and keep it
 for future reference.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;A Statement
 of Additional Information dated April 28, 2005 (the &#147;SAI&#148;) has been filed
 with the Securities and Exchange Commission (the &#147;SEC&#148;) and is incorporated
 by reference in this Prospectus. A copy of the SAI and copies of the Fund&#146;s
 semi-annual and annual reports may be obtained without charge by writing to the
 Fund at its address at 1414 Avenue of the Americas, New York, New York 10019, or
 by calling the Fund toll-free at (800) 221-4268. In addition, you may request other
 information about the Fund or make stockholder inquiries by calling the Fund toll-free
 at (800) 221-4268. Copies of the SAI and the Fund&#146;s semi-annual and annual
 reports are also available free of charge on the Fund&#146;s Web site (http://www.roycefunds.com).
 In addition, the SEC maintains a Web site (http://www.sec.gov) that contains the
 Statement of Additional Information, material incorporated by reference, and other
 information regarding registrants that file electronically with the Commission.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stockholders
 who do not fully exercise their Rights will own a smaller proportional interest
 in the Fund. In addition, because the Subscription Price may be less than the net
 asset value per share as of the Pricing Date, the Offer may result in an immediate
 dilution of the net asset value per share for all stockholders. See &#147;Risk Factors
 and Special Considerations at a Glance&#148; on page 5 of this Prospectus.</font></p>
<p align="center"><font face="Times New Roman" size="2">2</font></p>
<hr size="3" color="gray">
<page>
<p align="center"><font face="Times New Roman" size="2"><b>PROSPECTUS SUMMARY</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>You should
 consider the matters discussed in this summary before investing in the Fund through
 the Offer. This summary is qualified in its entirety by reference to the detailed
 information included in this Prospectus and the related Statement of Additional
 Information.</i></font></p>
<p align="center"><font face="Times New Roman" size="2"><b>THE OFFER AT A GLANCE</b></font></p>
<p><font face="Times New Roman" size="2"><b>The Offer</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 offering to its Common Stockholders of record as of May 6, 2005 non-transferable
 Rights. These Rights will allow you to subscribe for one (1) share of Common Stock
 for each five (5) Rights held. You will receive one Right for each whole share of
 Common Stock that you hold of record as of May 6, 2005, rounded up to the nearest
 number of Rights evenly divisible by five. The Rights will not be listed for trading
 on Nasdaq or on any exchange. Rights may be exercised at any time from May 10, 2005
 through 5:00 p.m., Eastern time, on June 10, 2005, unless extended. Since the Expiration
 Date is prior to the Pricing Date, stockholders who exercise their Rights will not
 know the Subscription Price at the time they exercise their Rights. The Fund may
 increase the number of shares of Common Stock subject to subscription (the &#147;Shares&#148;) by up to 20% of the Shares (any such additional Shares are referred to as
 &#147;Additional Shares&#148;). See &#147;The Offer.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Subscription Price</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Subscription
 Price will be the lower of (i) $0.25 below the last reported sale price of a share
 of the Fund&#146;s Common Stock on Nasdaq on the Pricing Date or (ii) the net asset
 value of a share of the Fund&#146;s Common Stock at the close of business on that
 date. See &#147;The Offer &#151; Subscription Price.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Over-Subscription Privilege</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If you fully
 exercise all Rights issued to you, you will be entitled to subscribe for additional
 Shares that were not subscribed for by other stockholders. If sufficient Shares
 are available, all stockholders&#146; over-subscription requests will be honored
 in full. If these requests for additional Shares exceed the Shares available, the
 available Shares, including any Additional Shares, will be allocated pro rata among
 stockholders who over-subscribe based on the number of Rights originally issued
 to them by the Fund. See &#147;The Offer &#151; Over-Subscription Privilege.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Use of Proceeds</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We estimate
 the net proceeds of the Offer to be approximately $18,410,733 ($22,132,875 if all
 of the Additional Shares are available for subscription). These figures assume (i)
 all Rights are exercised in full, (ii) a Subscription Price of $8.50 and (iii) payment
 of offering expenses of approximately $200,000.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce &#038;
 Associates, LLC (&#147;Royce&#148;), the Fund&#146;s investment adviser, anticipates
 that investment of the net proceeds of the Offer in accordance with the Fund&#146;s
 investment goal and policies will take up to six months from their receipt by the
 Fund, depending on market conditions and the availability of appropriate securities.
 See &#147;Use of Proceeds.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Obtaining Subscription Information</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If you have
 any questions or requests for assistance, please contact Georgeson Shareholder Communications,
 Inc., the Information Agent, (toll free) at (866) 328-5443. You may also call the
 Fund (toll free) at (800) 221-4268, or contact your broker or Nominee for information
 with respect to the Offer. See &#147;The Offer &#151; Information Agent.&#148;</font></p>
<p align="center"><font face="Times New Roman" size="2">3</font></p>
<hr size="3" color="gray">
<page>
<p align="center"><font face="Times New Roman" size="2"><b>Important Dates to Remember
</b></font></p>
<table border="0" cellpadding="0" cellspacing="0" width="70%">
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><u>Event
</u></font></td>
<td width="10%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left" width="45%"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<u>Date</u></font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Record Date</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">May 6, 2005</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Subscription
 Period</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">May 10, 2005
 through June 10, 2005*</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Expiration
 Date</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">June 10, 2005*</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Pricing Date</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">June 13, 2005*</font></td>
</tr>
<tr>
<td width="50%" valign="bottom" align="left"><p style="margin-left:10px; text-indent:-10px;"><font face="Times New Roman" size="2">Nominee
 Subscription Certificate and Payment for Shares Due Pursuant to Notice of Guaranteed
 Delivery</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">June 15, 2005*</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Confirmation
 to Participants</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">June 20, 2005*</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Final Payment
 for Shares</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">June 28, 2005*</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">*Unless the
 Offer is extended.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2"><b>Tax Consequences</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;For Federal
 income tax purposes, neither the receipt nor the exercise of the Rights will result
 in taxable income to<br>you. You will not realize a taxable loss if your Rights
 expire without being exercised. See &#147;The Offer &#151; Federal Income Tax Consequences
 of the Offer.&#148;</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>THE FUND AT A GLANCE</b></font></p>
<p><font face="Times New Roman" size="2"><b>The Fund</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 a registered closed-end diversified management investment company.</font></p>
<p><font face="Times New Roman" size="2"><b>Investment Goal and Policies</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 primary investment goal is long-term capital growth. Royce normally invests more
 than 65% of the Fund&#146;s assets in equity securities. The Fund may also invest
 up to 35% of its assets in non-convertible fixed income securities. Royce uses a
 value approach to invest the Fund&#146;s assets in a limited number of domestic
 and foreign companies. While the Fund is not restricted as to stock market capitalization,
 Royce focuses the Fund&#146;s investments primarily in small-cap companies (companies
 with stock market capitalizations between $500 million and $2.5 billion) and micro-cap
 companies (companies with stock market capitalizations below $500 million) with
 significant business activities in the United States. See &#147;Investment Goal,
 Policies and Risks.&#148; An investment in the Fund is not appropriate for all investors.
 There can be no assurance that the Fund&#146;s investment goal will be realized.</font></p>
<p><font face="Times New Roman" size="2"><b>Capital Stock</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 Common Stock is listed and traded on Nasdaq. As of April 15, 2005, the Fund had
 10,947,490 shares of Common Stock, par value $0.001 per share and 1,000,000 shares
 of 6.00% Cumulative Preferred Stock, par value $0.001 per share (the &#147;6.00%
 Preferred Stock&#148;) issued and outstanding. The 6.00% Preferred Stock has an
 initial aggregate liquidation preference of $25 million. See &#147;Description of
 Capital Stock.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Distributions</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 policy is to make quarterly distributions to its Common Stockholders at the annual
 rate of 5% of the rolling average of the prior four calendar quarter-end net asset
 values of the Fund&#146;s Common Stock, with the fourth quarter distribution being
 the greater of 1.25% of the rolling average or the distribution required for treatment
 as a regulated investment company under the Internal Revenue Code of 1986 (the &#147;Code&#148;). These distributions are not tied to the Fund&#146;s investment
 income or capital gains, do not necessarily represent yield or investment return
 on the Fund&#146;s portfolio, and may include a return of capital. These quarterly
 distributions are generally reinvested in additional full and fractional shares
 of Common Stock through the Fund&#146;s Dividend Reinvestment and Cash Purchase
 Plan. The Fund&#146;s quarterly distribution policy may be changed by the Board
 of Directors without stockholder approval. See &#147;Dividends, Distributions and
 Reinvestment Plan.&#148;</font></p>
<p align="center"><font face="Times New Roman" size="2">4</font></p>
<hr size="3" color="gray">
<page>

<p><font face="Times New Roman" size="2"><b>Investment Adviser</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce has
 served as the investment adviser to the Fund since November 1, 1996. Royce also
 serves as investment adviser to other registered management investment companies,
 privately offered funds and institutional accounts. As of December 31, 2004, Royce
 managed approximately $22.7 billion in assets, including $20.9 billion in open-end
 and closed-end fund assets.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As compensation
 for its services under the Investment Advisory Agreement, Royce is entitled to receive
 a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the Fund&#146;s
 average net assets (which includes net assets applicable to both Common Stock and
 Preferred Stock) for each month during the term of such Agreement.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce has
 voluntarily committed to waive the portion of its investment advisory fee attributable
 to an issue of the Fund&#146;s Preferred Stock for any month in which the Fund&#146;s
 average annual NAV total return since issuance of the Preferred Stock fails to exceed
 the applicable Preferred Stock&#146;s dividend rate. See &#147;Investment Advisory
 and Other Services &#151; Advisory Fee.&#148;</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>RISK FACTORS AND SPECIAL
 CONSIDERATIONS AT A GLANCE</b></font></p>
<p><font face="Times New Roman" size="2"><b>Dilution &#150; Net Asset Value and Non-Participation
 in the Offer</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If you do
 not fully exercise your Rights, you should expect that you will, at the completion
 of the Offer, own a smaller proportional interest in the Fund than would otherwise
 be the case had you exercised your Rights. Further, if you do not submit a subscription
 request pursuant to the Over-Subscription Privilege, you may also experience dilution
 in your Fund ownership if the Fund offers Additional Shares for subscription. The
 Fund will sell Additional Shares to stockholders only if and to the extent that
 shares sold through the Offer would not dilute (reduce) the net asset value of its
 Common Stock by 2.0% or more. We cannot state precisely the amount of any dilution
 because we do not know at this time how many Shares will be subscribed for or what
 the net asset value or market price per Share will be at the Pricing Date. As of
 April 15, 2005, the Fund&#146;s shares traded at a 2.9% premium above net asset
 value. If the Fund&#146;s shares trade at a premium above net asset value as of
 the Pricing Date, the Fund estimates that such dilution would be minimal. See &#147;The
 Offer.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Market Risk</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As with any
 investment company that invests in common stocks, the Fund is subject to market
 risk &#151; the possibility that common stock prices will decline over short or
 extended periods of time. As a result, the value of an investment in the Fund&#146;s
 Common Stock will fluctuate with the market, and you could lose money over short
 or long periods of time.</font></p>
<p><font face="Times New Roman" size="2"><b>Small- and Micro-Cap Risk</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The prices
 of small- and micro-cap companies are generally more volatile and their markets
 are generally less liquid relative to larger-cap companies. Therefore, the Fund
 may involve more risk of loss and its returns may differ significantly from funds
 investing in larger-cap companies or other asset classes. See &#147;Investment Goal
 and Policies &#151; Risk Factors &#151; Investing in Small- and Micro-Cap Companies.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Selection Risk</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Different
 types of stocks tend to shift into and out of favor with stock market investors,
 depending on market and economic conditions. The performance of funds that invest
 in value-style stocks may at times be better or worse than the performance of stock
 funds that focus on other types of stocks or that have a broader investment style.</font></p>
<p><font face="Times New Roman" size="2"><b>Market Price of Shares</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Although the
 Fund&#146;s shares of Common Stock have recently traded on Nasdaq at a market price
 above their net asset value (a premium), the Fund&#146;s shares have traded in the
 market below (a discount), at and above net asset value since the commencement of
 the Fund&#146;s operations. There can be no assurance that the Fund&#146;s shares
 will trade at a premium in the future, or that any such premium is sustainable.
 The Fund&#146;s shares have traded at discounts of as much as 25.66% in the past
 five years. Market price risk is a risk separate and distinct from the risk that
 the Fund&#146;s net asset value will decrease. In the year ended December 31, 2004,
 the Fund&#146;s shares traded in the market at an average discount to net asset
 value of 2.95%. As of December 31, 2004, the premium above net asset value was 7.38%.
 In the quarter ended March 31, 2005, the Fund&#146;s shares traded in the market
 at an average premium to net asset value of 6.6%. As of March 31, 2005, the premium
 above net asset value was 8.3%.</font></p>
<p align="center"><font face="Times New Roman" size="2">5</font></p>
<hr size="3" color="gray">
<page>
<p><font face="Times New Roman" size="2"><b>Risk Factors &#150; Risk of Investment
 in a Limited Number of Companies</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Because the
 Fund invests in a limited number of companies, developments affecting an individual
 issuer are likely to have a greater impact on the Fund&#146;s net asset value and
 the market price of its Common Stock.</font></p>
<p><font face="Times New Roman" size="2"><b>Risk Factors &#150; Foreign Investments
</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund invests
 a portion of its assets in securities of foreign issuers. Foreign investments involve
 certain risks which typically are not present in securities of domestic issuers.
 There may be less information available about a foreign company than a domestic
 company; foreign companies may not be subject to accounting, auditing and reporting
 standards and requirements comparable to those applicable to domestic companies;
 and foreign markets, brokers and issuers are generally subject to less extensive
 government regulation than their domestic counterparts. Foreign securities may be
 less liquid and may be subject to greater price volatility than domestic securities.
 Foreign investments also may be subject to local economic and political risks which
 might adversely affect the Fund&#146;s ability to realize on its investments in
 such securities. No assurance can be given that Royce will be able to anticipate
 these potential events or counter their effects.</font></p>
<p><font face="Times New Roman" size="2"><b>Leverage and Borrowing</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 authorized to borrow money. So long as the Fund&#146;s 6.00% Preferred Stock is
 rated by Moody&#146;s, the Fund cannot borrow for investment leverage purposes.
 Borrowings create an opportunity for greater capital appreciation with respect to
 the Fund&#146;s investment portfolio, but at the same time such borrowing is speculative
 in that it will increase the Fund&#146;s exposure to capital risk. In addition,
 borrowed funds are subject to interest costs that may offset or exceed the return
 earned on the borrowed funds. See &#147;Investment Goal and Policies &#151; Risks
 to Common Stockholders of Borrowing Money and Issuing Senior Securities.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Preferred Stock &#150; Leverage Risk</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 leverage resulting from the issuance of 6.00% Preferred Stock and any other Preferred
 Stock creates risks for holders of Common Stock, including higher volatility of
 both the net asset values and market prices of the Common Stock. If the Fund is
 able to realize a net return on its investment portfolio in excess of the dividend
 rate of the Preferred Stock, the effect of leverage permits holders of Common Stock
 to realize a higher current rate of return than if the Fund were not leveraged.
 On the other hand, if the dividend rate on the Preferred Stock exceeds the net return
 on the Fund&#146;s investment portfolio, the Fund&#146;s leveraged capital structure
 will result in a lower rate of return to holders of Common Stock than if the Fund
 were not leveraged. Similarly, because any decline in the value of the Fund&#146;s
 investments will be borne entirely by holders of Common Stock, the effect of leverage
 in a declining market results in a greater decrease in net asset value to holders
 of Common Stock than if the Fund were not leveraged, which would likely be reflected
 in a greater decline in the market price for shares of Common Stock. See &#147;Investment
 Goal and Policies &#151; Risks to Common Stockholders of Borrowing Money and Issuing
 Senior Securities.&#148; Leveraging through the issuance of Preferred Stock requires
 that the holders of the Preferred Stock have class voting rights on various matters
 that could make it more difficult for the holders of the Common Stock to change
 the investment goal or other fundamental policies of the Fund, to convert the Fund
 to an open-end fund or make certain other changes. See &#147;Investment Goal and
 Policies &#151; Changes in Investment Goal and Methods/Policies&#148; and &#147;Description
 of Capital Stock &#151; Certain Corporate Governance Provisions.&#148;</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Because Royce&#146;s fee is based on the average net assets of the Fund (which include net assets
 applicable to both Common Stock and Preferred Stock), Royce has generally benefited
 from the Fund&#146;s issuance of the Preferred. See &#147;Investment Advisory and
 Other Services &#151; Advisory Fee.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Certain Corporate Governance Provisions
</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The seven
 Fund Directors who are elected by the holders of Common Stock and 6.00% Preferred
 Stock voting together are divided into three classes, each having a staggered term
 of three years. The two Directors elected only by the holders of 6.00% Preferred
 Stock stand for election at each annual meeting of stockholders. Accordingly, it
 likely would take a number of years to change a majority of the Board of Directors.
 Vacancies on the Board of Directors for one or more of the classified positions
 may be filled by the remaining Directors for the balance of the term of the class.
 In addition, the Fund&#146;s Bylaws permit stockholders to call a special meeting
 of stockholders only if certain procedural requirements are met and the request
 is made by stockholders entitled to cast at least a majority of the votes entitled
 to be cast at such a meeting. These provisions may have the effect of maintaining
 the continuity of management and thus may make it more difficult for the Fund&#146;s
 stockholders to change the majority of Directors. See &#147;Certain Corporate Governance
 Provisions.&#148;</font></p>
<p align="center"><font face="Times New Roman" size="2">6</font></p>
<hr size="3" color="gray">
<page>
<p align="center"><font face="Times New Roman" size="2"><b>FUND EXPENSES</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following
 tables are intended to assist investors in understanding the various costs and expenses
 that a stockholder of the Fund will bear, directly or indirectly.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="80%">
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Stockholder
 Transaction Expenses</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Sales
 Load</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="2" align="center"><font face="Times New Roman" size="2">
None</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Distribution
 Reinvestment and Cash Purchase Plan Fees</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="2" align="center"><font face="Times New Roman" size="2">
None</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:10px; text-indent:-10px;"><font face="Times New Roman" size="2">Annual
 Expenses (as a percentage of average net assets applicable to Common Stock)</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Investment
 Advisory Fees(1)</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.22</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Other
 Expenses(1)</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.21</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:30px; text-indent:-10px;"><font face="Times New Roman" size="2">Total
 Annual Expenses(1,2)</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.43</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" align="left" colspan="2"><hr size="1" color="#000000" noshade width="11%"></td>
</tr>
<tr>
<td valign="top" align="left" width="2%"><font face="Times New Roman" size="2">(1)</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Assumes the
 Issued Preferred remains outstanding for the year ending December 31, 2005. See
 &#147;Risk Factors and Special Considerations at a Glance &#150; Preferred Stock
 &#150; Leverage Risk.&#148; If the Fund redeems the Issued Preferred, it is estimated
 that, as a percentage of net assets attributable to Common Stock, the Investment
 Advisory Fees would be 1.0%. Other Expenses would be 0.21% and Total Annual Expenses
 would be 1.21%.</font></td>
</tr>
<tr>
<td width="2%" valign="top" align="left"><font face="Times New Roman" size="2">(2)</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">The indicated
 1.43% expense ratio assumes that the Offer (including the Over-Subscription Privilege)
 is fully subscribed and assumes estimated net proceeds from the Offer of approximately$22.1
 million (assuming an estimated Subscription Price of$8.50).</font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2"><b>Example</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following
 Example demonstrates the projected dollar amount of total cumulative expense that
 would be incurred over various periods with respect to a hypothetical investment
 in the Fund&#146;s Common Stock. These amounts are based upon payment by the Fund
 of investment advisory fees and other expenses at the levels set forth in the above
 table.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;An investor
 would directly or indirectly pay the following expenses on a $1,000 investment in
 shares of the Fund&#146;s Common Stock, assuming (i) the market price at the time
 of investment was equal to the net asset value (&#147;NAV&#148;) per share, (ii)
 a 5% annual return and (iii) reinvestment of all distributions at NAV:</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="50%" align="center">
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>One Year
</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Three
 Years</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Five
 Years</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Ten Years
</b></font></td>
</tr>
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>$15</b></font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>&#160;</b></font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>$45</b></font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>&#160;</b></font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>$78</b></font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>&#160;</b></font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>$171</b></font></td>
</tr>
</table>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This Example
 assumes that the percentage amounts listed under Annual Expenses remain the same
 in the years shown. The above tables and the assumption in the Example of a 5% annual
 return and reinvestment at NAV are required by regulation of the SEC and are applicable
 to all registered management investment companies, and the assumed 5% annual return
 is not a prediction of, and does not represent, the projected performance of the
 Fund&#146;s Common Stock. Actual expenses and annual rates of return may be more
 or less than those allowed for purposes of this Example. This Example assumes that
 the Offer (including the Over-Subscription Privilege) is fully subscribed. If the
 Fund issues fewer shares of its Common Stock, all other things being equal, these
 expenses would increase. In addition, while the Example assumes reinvestment of
 all distributions at NAV, the Fund&#146;s Distribution Reinvestment and Cash Purchase
 Plan contemplates payment of net investment income dividends and capital gain distributions
 in shares of the Fund&#146;s Common Stock (unless a stockholder elects to receive
 payments in cash), based on the lower of the market price or NAV on the valuation
 date, except that distributions may not be reinvested for less than 95% of the market
 price.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<b>This Example
 should not be considered a representation of future expenses. The Fund&#146;s actual
 expenses may be more or less than those shown.</b></font></p>
<p align="center"><font face="Times New Roman" size="2"><b>FINANCIAL HIGHLIGHTS</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The financial
 highlights table is intended to help you understand the Fund&#146;s financial performance
 for the periods presented and reflects financial results for a single share of the
 Fund&#146;s Common Stock. The total returns in the table represent the rate that
 an investor would have earned on an investment in the Fund&#146;s Common Stock (assuming
 reinvestment of all dividends and distributions and full primary participation in
 all rights offerings). The information for each of the five years in the period
 ended December 31, 2004 has been audited by Tait, Weller &#038; Baker, whose report,
 along with the Fund&#146;s financial statements, is included in the Fund&#146;s
 2004 Annual Report to Stockholders, which is available upon request.</font></p>
<p align="center"><font face="Times New Roman" size="2">7</font></p>
<hr size="3" color="gray">
<br>
<page>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="39" align="center"><font face="Times New Roman" size="2">
Years ended December 31,</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="39"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
2004</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
2003</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
2002</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
2001</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
2000</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
1999</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
1998</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
1997</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
1996+</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
1995</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:10px; text-indent:-10px;"><font face="Times New Roman" size="2"><b>
NET ASSET VALUE, BEGINNING OF PERIOD</b></font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$9.00</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$6.27</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
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<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
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<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.03</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.01</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.16</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
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<tr>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.14</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.13</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.13</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.14</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.17</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.02</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.01</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
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<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.16</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.16</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.17</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.17</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.18</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.18</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.01</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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</tr>
<tr>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.41</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.19</font></td>
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<tr>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:10px; text-indent:-10px;"><font face="Times New Roman" size="2">Net
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.12</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.16</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:10px; text-indent:-10px;"><font face="Times New Roman" size="2"> Net
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.14</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.41</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.01</font></td>
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</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.62</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.14</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.34</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.15</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.53</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.17</font></td>
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</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="39"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"><b>CAPITAL
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Effect
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.01</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.03</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.01</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.02</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.04</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.02</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.04</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2"> Effect
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.11</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.10</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.02</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.07</font></td>
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</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.01</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.14</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.01</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.02</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.04</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.02</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">(0.14</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.02</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.07</font></td>
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</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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</tr>
<tr>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">22.3</font></td>
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</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">20.9</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">8.7</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"><b>RATIOS
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"><b>NET ASSETS
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"><b>COMMON
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.62</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.94</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">2.14</font></td>
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</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.27</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.14</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.13</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.11</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.00</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.00</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.14</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.39</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.83</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.00</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.26</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.43</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.75</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.36</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.44</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.51</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.48</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.55</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.08</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.14</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.24</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.07</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0.70</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.93</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.47</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.95</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.35</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.80</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">2.80</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"><b>SUPPLEMENTAL
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>

<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$105,853</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$87,012</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$57,956</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$66,654</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$60,933</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$51,003</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$47,457</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$50,893</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$44,154</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$41,385</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$20,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$20,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$20,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$20,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$20,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$20,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">52</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">49</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">61</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">54</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">69</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">60</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">90</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">74</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">159</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">76</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">.0500</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">.0486</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">$0.0482</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$0.0517</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$0.0597</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$0.0607</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
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</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td valign="bottom" align="right"><font face="Times New Roman" size="2">1,000,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1,000,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">800,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">800,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">800,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">800,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">800,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">800,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$112.01</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$97.44</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$88.62</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25.00</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25.45</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2"> 7.45%
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25.53</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25.64</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25.09</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$22.23</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$24.00</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25.16</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">$25.25</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" align="left" colspan="3"><hr size="1" color="#000000" noshade width="100%"></td>
</tr>
<tr>
<td width="2%" valign="bottom" align="left"><font face="Times New Roman" size="2">+</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2">Royce has
 served as the investment adviser to the Fund since November 1, 1996.</font></p></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left" width="2%"><font face="Times New Roman" size="2">(a)</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2">The Market
 Value Total Return is calculated assuming a purchase of Common Stock on the opening
 of the first business day and a sale on the closing of the last business day of
 each period reported. Dividends and distributions, if any, are assumed for the purposes
 of this calculation, to be reinvested at prices obtained under the Fund&#146;s Distribution
 Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated
 on the same basis, except that the Fund&#146;s net asset value is used on the purchase
 and sale dates instead of market value. For years prior to 1997, the Net Asset Value
 Total Return is not available.</font></p></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">(b)</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2">Expense ratios
 based on total average net assets including liquidation value of Preferred Stock
 were 1.21%, 1.20%, 1.43%, 1.11%, 1.05%, 1.06%, 1.16%, 0.90%, 1.91% and 2.14%, for
 the years ended December 31, 2004, 2003, 2002, 2001, 2000, 1999, 1998, 1997, 1996
 and 1995, respectively.</font></p></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">(c)</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2">Expense ratios
 based on average net assets applicable to Common Stockholders before waivers of
 fees by the investment adviser would have been 1.73%, 2.06%, 1.69%, 1.81%, 1.93%,
 1.88%, 1.60% and 2.08% for the years ended December 31, 2003, 2002, 2001, 2000,
 1999, 1998, 1997 and 1996, respectively.</font></p></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">(d)</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">For fiscal
 years beginning after October 1, 1995, the Fund is required to disclose its average
 commission rate paid per share for purchases and sales of investments.</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">(e)</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">The average
 of month-end market values during the period that the preferred stock was outstanding.</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2">8</font></p>
<hr size="3" color="gray">
<page>

<p align="center"><font face="Times New Roman" size="2"><b>THE OFFER</b></font></p>
<p><font face="Times New Roman" size="2"><b>Terms of the Offer</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 offering (the &#147;Offer&#148;) to its Common Stockholders of record (&#147;Stockholders&#148;) as of the close of business on May 6, 2005 (the &#147;Record Date&#148;)
 non-transferable rights (the &#147;Rights&#148;) to subscribe for an aggregate of
 2,189,498 shares of Common Stock (the &#147;Shares&#148;) of the Fund. The Fund
 may increase the number of shares of Common Stock subject to subscription by up
 to 20% of the Shares, or up to 437,899 Additional Shares, for an aggregate total
 of 2,627,397 shares. However, the Fund will sell Additional Shares to Stockholders
 only if and to the extent that shares issued through the Offer would not dilute
 (reduce) the net asset value of its Common Stock by 2.0% or more. The Shares and
 the Additional Shares are sometimes referred to herein as the &#147;Shares&#148;.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Each Stockholder
 is being issued one (1) Right for each whole share of Common Stock owned on the
 Record Date. The Rights entitle a Stockholder to acquire at the Subscription Price
 one (1) Share for each five (5) Rights held, rounded up to the nearest number of
 Rights evenly divisible by five. Fractional Shares will not be issued upon the exercise
 of Rights. In the case of shares held of record by a broker-dealer, bank or other
 financial intermediary (each, a &#147;Nominee&#148;), the number of Rights issued
 to such Nominee will be adjusted to permit rounding up (to the nearest number of
 Rights evenly divisible by five) of the Rights to be received by each of the beneficial
 owners for whom it is the holder of record only if the Nominee provides to the Fund,
 on or before the close of business on June 3, 2005, a written representation of
 the number of Rights required for such rounding.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Rights may
 be exercised at any time during the Subscription Period, which commences on May
 10, 2005 and ends as of 5:00 p.m., Eastern time, on June 10, 2005, unless extended
 by the Fund (such date, as it may be extended, is referred to in this Prospectus
 as the &#147;Expiration Date&#148;). A Stockholder&#146;s right to acquire one (1)
 additional Share for each five (5) Rights held during the Subscription Period at
 the Subscription Price is referred to as the &#147;Primary Subscription.&#148; The
 Rights are evidenced by Subscription Certificates, which will be mailed to Stockholders.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In addition,
 any Stockholder who fully exercises all Rights issued to him or her is entitled
 to subscribe for additional Shares, which were not otherwise subscribed for in the
 Primary Subscription, at the Subscription Price (the &#147;Over-Subscription Privilege&#148;). Shares acquired pursuant to the Over-Subscription Privilege are subject
 to allotment and may be subject to increase, which is more fully discussed below
 under &#147;The Offer &#151; Over-Subscription Privilege.&#148;</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Subscription
 Price will be the lower of (i) $0.25 below the last reported sale price of a share
 of the Fund&#146;s Common Stock on Nasdaq on June 13, 2005 (the &#147;Pricing Date&#148;) or (ii) the net asset value (&#147;NAV&#148;) of a share of the Fund&#146;s
 Common Stock at the close of business on the Pricing Date. Since the time of the
 close of the Offer on the Expiration Date is prior to the Pricing Date, holders
 who choose to exercise their Rights will not know the Subscription Price at the
 time they exercise their Rights.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Rights
 are non-transferable. Therefore, only the underlying Shares, and not the Rights,
 will be listed for trading on Nasdaq.</font></p>
<p><font face="Times New Roman" size="2"><b>Purposes of the Offer</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Board
 of Directors of the Fund has determined that it would be in the best interests of
 the Fund and its stockholders to continue to increase the assets of the Fund available
 for current and future investment opportunities. In addition, the Offer seeks to
 reward the long-term stockholder by giving existing Stockholders Rights to purchase
 additional Shares at a below market price. Increasing the size of the Fund also
 might result in lowering the Fund&#146;s expenses as a percentage of average net
 assets applicable to Common Stockholders. Royce expects to take up to six months
 from the Fund&#146;s receipt of the proceeds of the Offer following the Expiration
 Date to fully invest them in accordance with the Fund&#146;s investment goal and
 policies.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Subscription
 Price will be determined at the close of the first business day subsequent to the
 Expiration Date in order to ensure that the Offer will attract maximum Stockholder
 participation with minimum dilution to non-participating Stockholders.</font></p>
<p align="center"><font face="Times New Roman" size="2">9</font></p>
<hr size="3" color="gray">
<page>

<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 Board of Directors voted unanimously to approve the terms of the Offer. Two of the
 Fund&#146;s Directors who voted to authorize the Offer are affiliated with Royce
 and, therefore, could benefit indirectly from the Offer. The other seven directors
 are not &#147;interested persons&#148; of the Fund within the meaning of the Investment
 Company Act of 1940, as amended (the &#147;1940 Act&#148;). Royce may also benefit
 from the Offer because its fee is based on the net assets of the Fund. See &#147;Investment
 Advisory and Other Services &#151; Advisory Fee.&#148; It is not possible to state
 precisely the amount of additional compensation Royce might receive as a result
 of the Offer because it is not known how many Shares will be subscribed for and
 because the proceeds of the Offer will be invested in additional portfolio securities,
 which will fluctuate in value.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund may,
 in the future, choose to make additional rights offerings from time to time for
 a number of shares and on terms that may or may not be similar to this Offer. Any
 such future rights offerings will be made in accordance with the then applicable
 requirements of the 1940 Act and the Securities Act of 1933, as amended.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;There can
 be no assurance that the Fund or its stockholders will achieve any of the foregoing
 objectives or benefits through the Offer.</font></p>
<p><font face="Times New Roman" size="2"><b>Over-Subscription Privilege</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If some Stockholders
 do not exercise all of the Rights initially issued to them, any Shares for which
 subscriptions have not been received from Stockholders will be offered by means
 of the Over-Subscription Privilege to those Stockholders who have exercised all
 of the Rights initially issued to them and who wish to acquire additional Shares.
 Stockholders who exercise all of the Rights initially issued to them should indicate
 on the Subscription Certificate how many Shares they are willing to acquire through
 this Over-Subscription Privilege. If sufficient Shares remain after completion of
 the Primary Subscription, all over-subscription requests will be honored in full.
 However, if sufficient Shares are not available to honor all over-subscription requests,
 the Fund may issue up to an additional 20% of the initial Shares (the &#147;Additional
 Shares&#148;), in order to honor such over-subscription requests. However, the Fund
 will sell Additional Shares to stockholders only if and to the extent that shares
 issued through the Offer would not dilute (reduce) the net asset value of its Common
 Stock by 2.0% or more. To the extent that there are not sufficient Shares to honor
 all over-subscription requests, the available Shares will be allocated among those
 who over-subscribe based on the number of Rights originally issued to them by the
 Fund, so that the number of Shares issued to Stockholders who subscribe through
 the Over-Subscription Privilege will generally be in proportion to the number of
 Shares of the Fund owned by them on the Record Date. The percentage of remaining
 Shares each over-subscribing Stockholder may acquire may be rounded up or down to
 result in delivery of whole Shares. The allocation process may involve a series
 of allocations in order to ensure that the total number of Shares available for
 over-subscriptions is distributed, as nearly as may be practicable, on a pro rata
 basis. The combination of the Over-Subscription Privilege and the Fund&#146;s election
 to issue Additional Shares may result in additional dilution of interest and voting
 rights to Stockholders, and additional reduction in the Fund&#146;s NAV per share.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Charles M.
 Royce, W. Whitney George and certain other officers and employees of Royce may purchase
 Shares in the Primary Subscription and the Over-Subscription Privilege. Any such
 purchases will be made on the same terms applicable to other Stockholders.</font></p>
<p><font face="Times New Roman" size="2"><b>Subscription Price</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Subscription
 Price for the Shares to be issued pursuant to the Offer will be the lower of (i)
 $0.25 below the last reported sale price of a share of the Fund&#146;s Common Stock
 on Nasdaq on the Pricing Date or (ii) the NAV of a share of the Fund&#146;s Common
 Stock at the close of business on the Pricing Date. For example, if the last reported
 sale price of a share of the Fund&#146;s Common Stock on Nasdaq on the Pricing Date
 is $8.74 and the NAV of a share of the Fund&#146;s Common Stock on that date is
 $8.48, the Subscription Price will be $8.48. However, if the NAV of a share of the
 Fund&#146;s Common Stock on that date is $8.60, then the Subscription Price will
 be $8.49.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund announced
 the Offer after the close of trading on Nasdaq on February 16, 2005. The NAV per
 share of the Fund&#146;s Common Stock at the close of business on December 31, 2004
 and April 15, 2005 were</font></p>
<p align="center"><font face="Times New Roman" size="2">10</font></p>
<hr size="3" color="gray">
<page>

<p><font face="Times New Roman" size="2">$9.75 and $8.49, respectively, and the last
 reported sales prices of a share of the Fund&#146;s Common Stock on Nasdaq on those
 dates were $10.47 and $8.74, respectively.</font></p>
<p><font face="Times New Roman" size="2"><b>Expiration of the Offer</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Expiration
 Date is 5:00 p.m., Eastern time, on June 10, 2005, unless extended by the Fund.
 The Rights will expire on the Expiration Date and may not be exercised after that
 date. Since the time of the close of the Offer on the Expiration Date is prior to
 the Pricing Date, Stockholders who choose to exercise their Rights will not know
 the Subscription Price when they decide whether to acquire Shares in the Primary
 Subscription or through the Over-Subscription Privilege.</font></p>
<p><font face="Times New Roman" size="2"><b>Subscription Agent</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Subscription
 Agent for the Offer is Equiserve Trust Company, N.A. (&#147;Equiserve&#148;), which
 will receive, for its administrative, processing, invoicing and other services as
 Subscription Agent, an estimated fee of $15,000 as well as reimbursement for all
 out-of-pocket expenses related to the Offer. The Subscription Agent is also the
 Fund&#146;s Transfer Agent. Stockholder inquiries may be directed to Georgeson Shareholder
 Communications, Inc., the Information Agent, (toll free) at (866) 328-5443.<b>
SIGNED SUBSCRIPTION CERTIFICATES SHOULD BE SENT TO EQUISERVE TRUST COMPANY, N.A.</b>
, by one of the following methods:</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">(1)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">BY FIRST CLASS
 MAIL:</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Equiserve
 Trust Company, N.A.</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Attn: Corporate
 Actions</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">P.O. Box 859208</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Braintree,
 MA 02185</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">(2)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">BY EXPRESS
 MAIL OR OVERNIGHT COURIER:</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Equiserve
 Trust Company, N.A.</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Attn: Corporate
 Actions</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">161 Baystate
 Drive</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Braintree,
 MA 02184</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">(3)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">BY HAND:</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Equiserve
 Trust Company, NA</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Attn: Corporate
 Actions</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">17 Battery
 Park Place, 11<sup>th</sup> Floor</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">New York,
 NY 10004</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"><b>Delivery
 to an address other than the above does not constitute good delivery.</b></font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2"><b>Information Agent Coordinator</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Any questions
 or requests for assistance may be directed to the Information Agent at its telephone
 number listed below:</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>Georgeson Shareholder
 Communications, Inc.<br>Toll Free: (866) 328-5443</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stockholders
 may also call the Fund (toll free) at (800) 221-4268 or contact their Nominees,
 who hold shares for the account of others, for information with respect to the Offer.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund will
 pay a fee of $12,000 to Georgeson Shareholder Communications, Inc. and will reimburse
 it for all out-of-pocket expenses related to its services as Information Agent.</font></p>
<p align="center"><font face="Times New Roman" size="2">11</font></p>
<hr size="3" color="gray">
<page>

<p><font face="Times New Roman" size="2"><b>Method for Exercising Rights</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Rights may
 be exercised by Stockholders who fill in and sign the accompanying Subscription
 Certificate and mail it in the envelope provided or deliver the completed and signed
 Subscription Certificate to the Subscription Agent, together with any required payment
 for the Shares as described below under &#147;Payment for Shares.&#148; Rights may
 also be exercised by a Stockholder&#146;s contacting his or her broker, bank, trust
 company or other nominee, which can arrange, on the Stockholder&#146;s behalf, to
 guarantee delivery (using a &#147;Notice of Guaranteed Delivery&#148;) of a properly
 completed and executed Subscription Certificate and payment for the Shares. The
 broker, bank, trust company or other nominee may charge a fee for this service.
 Fractional Shares will not be issued. Completed Subscription Certificates must be
 received by the Subscription Agent prior to 5:00 p.m., Eastern time, on the Expiration
 Date (unless payment is to be effected by means of a Notice of Guaranteed Delivery
 (see &#147;Payment for Shares&#148;)) at the offices of the Subscription Agent.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="5%" valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2"><i>Stockholders
 who are Record Owners</i>. Stockholders who are record owners can choose between
 either option set forth below under &#147;Payment for Shares.&#148; If time is of
 the essence, option (1) will permit delivery of the Subscription Certificate and
 payment after the Expiration Date.</font></p></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2"><i>Investors
 Whose Shares Are Held Through A Nominee</i>. Stockholders whose shares are held
 by a Nominee such as a broker, bank or trust company, must contact that Nominee
 to exercise their Rights. In that case, the Nominee will complete the Subscription
 Certificate on behalf of the Stockholder and arrange for proper payment by one of
 the methods set forth below under &#147;Payment for Shares.&#148;</font></p></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2"><i>Nominees.
</i> Nominees, who hold shares for the account of others, should notify the respective
 beneficial owners of such shares as soon as possible to ascertain such beneficial
 owners&#146; intentions and to obtain instructions with respect to the Rights. If
 the beneficial owner so instructs, the Nominee should complete the Subscription
 Certificate and submit it to the Subscription Agent, together with the proper payment
 described below under &#147;Payment for Shares.&#148;</font></p></td>
</tr>
</table>
<p><font face="Times New Roman" size="2"><b>Payment for Shares</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stockholders
 who acquire Shares in the Primary Subscription or pursuant to the Over-Subscription
 Privilege may choose between the following methods of payment:</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="8%" valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">(1)</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2">If, prior
 to 5:00 p.m., Eastern time, on the Expiration Date, the Subscription Agent has received
 a Notice of Guaranteed Delivery by facsimile or otherwise, from a bank, trust company
 or New York Stock Exchange (&#147;NYSE&#148;) member firm, guaranteeing delivery
 of (a) payment of the full Subscription Price for the Shares subscribed for in the
 Primary Subscription and any additional Shares subscribed for through the Over-Subscription
 Privilege and (b) a properly completed and executed Subscription Certificate, the
 subscription will be accepted by the Subscription Agent. The Subscription Agent
 will not honor a Notice of Guaranteed Delivery if a properly completed and executed
 Subscription Certificate together with full payment is not received by the Subscription
 Agent by the close of business on the third (3<sup>rd</sup>) business day after
 the Expiration Date (June 15, 2005 unless the offer is extended).</font></p></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">(2)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><p align="justify"><font face="Times New Roman" size="2">Alternatively,
 a record owner can send payment for the Shares acquired in the Primary Subscription
 and any additional Shares subscribed for pursuant to the OverSubscription Privilege,
 together with the Subscription Certificate, to the Subscription Agent based on
 an assumed Subscription Price of$8.50 per Share. To be accepted, such payment, together
 with the Subscription Certificate, must be received by the Subscription Agent prior
 to 5:00 p.m., Eastern time, on the Expiration Date.</font></p></td>
</tr>
</table>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<b>IF THE
 SECOND METHOD DESCRIBED ABOVE IS USED, PAYMENT BY CHECK CERTIFICATE OR MONEY ORDER
 MUST ACCOMPANY ANY SUBSCRIPTION CERTIFICATE FOR THE SUBSCRIPTION TO BE ACCEPTED.
</b></font></p>
<p align="center"><font face="Times New Roman" size="2">12</font></p>
<hr size="3" color="gray">
<page>

<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<b>Stockholders
 will have no right to rescind their subscription after receipt by the Subscription
 Agent of a Notice of Guaranteed Delivery or their payment for Shares, except as
 provided below under &#147;Notice of Net Asset Value Decline / Possible Suspension
 or Withdrawal of the Offer.&#148;</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<b>The method
 of delivery of Subscription Certificates and payment of the Subscription Price to
 the Fund will be at the election and risk of the Rights holders, but if sent by
 mail it is recommended that such Subscription Certificates and payment be sent by
 registered mail, properly insured, with return receipt requested, and that a sufficient
 number of days be allowed to ensure delivery to the Fund and clearance of payment
 prior to 5:00 p.m., Eastern time, on the Expiration Date. Because uncertified personal
 checks may take at least five business days to clear and may, at the discretion
 of the Fund, not be accepted if not cleared prior to the Expiration Date, you are
 strongly encouraged to pay, or arrange for payment, by means of certified or bank
 cashier&#146;s check or a money order.</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;A confirmation
 will be sent by the Subscription Agent to each Stockholder (or, if the Fund&#146;s
 Shares on the Record Date are held by a Nominee, to such Nominee) by June 20, 2005,
 showing (i) the number of Shares acquired pursuant to the Primary Subscription;
 (ii) the number of Shares, if any, acquired through the Over-Subscription Privilege;
 (iii) the per Share and total purchase price for the Shares; and (iv) any additional
 amount payable by the Stockholder to the Fund or any excess to be refunded by the
 Fund to the Stockholder, in each case based on the Subscription Price as determined
 on the Pricing Date. Any additional payment required from a Stockholder must be
 received by the Subscription Agent within ten (10) days after the Confirmation Date.
 Any excess payment to be refunded by the Fund to a Stockholder will be mailed by
 the Subscription Agent to such Stockholder as promptly as possible within ten (10)
 business days after the Confirmation Date. All payments by a Stockholder must be
 made in United States dollars by money order or check drawn on a bank located in
 the United States of America and payable to ROYCE FOCUS TRUST, INC.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Issuance and
 delivery of certificates for the Shares purchased are subject to collection of checks
 and actual payment through any Notice of Guaranteed Delivery.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If a Stockholder
 who acquires Shares pursuant to the Primary Subscription or Over-Subscription Privilege
 does not make payment of all amounts due by the 10<sup>th</sup> day after the Confirmation
 Date, the Fund reserves the right to (i) find other purchasers for such subscribed
 and unpaid Shares; (ii) apply any payment actually received by it toward the purchase
 of the greatest number of whole Shares which could be acquired by such Stockholder
 upon exercise of the Primary Subscription and/or Over-Subscription Privilege; and/or
 (iii) exercise any and all other rights and/or remedies to which it may be entitled,
 including, without limitation, the right to set-off against payments actually received
 by it with respect to such subscribed Shares.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;All questions
 concerning the timeliness, validity, form and eligibility of any exercise of Rights
 will be determined by the Fund, whose determinations will be final and binding.
 The Fund in its sole discretion may waive any defect or irregularity, or permit
 a defect or irregularity to be corrected within such time as it may determine, or
 reject the purported exercise of any Right. Subscriptions will not be deemed to
 have been received or accepted until all irregularities have been waived or cured
 within such time as the Fund determines in its sole discretion. The Fund will not
 be under any duty to give notification of any defect or irregularity in connection
 with the submission of Subscription Certificates or incur any liability for failure
 to give such notification.</font></p>
<p><font face="Times New Roman" size="2"><b>Notice of Net Asset Value Decline / Possible
 Suspension or Withdrawal of the Offer</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund has,
 as required by the SEC&#146;s registration form, undertaken to suspend the Offer
 until it amends this Prospectus if, subsequent to April 28, 2005, the effective
 date of the Fund&#146;s Registration Statement, the Fund&#146;s NAV declines more
 than 10% from its NAV, adjusted for any distributions, as of April 28, 2005. Accordingly,
 the Fund will notify Stockholders of any such decline and thereby permit them to
 cancel their exercise of Rights.</font></p>
<p><font face="Times New Roman" size="2"><b>Delivery of Share Certificates</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Participants
 in the Fund&#146;s Distribution Reinvestment and Cash Purchase Plan (the &#147;Plan&#148;) will have any Shares acquired in the Primary Subscription and pursuant to
 the Over-Subscription Privilege credited to their accounts in the Plan. Stock certificates
 will not be issued for Shares credited to Plan accounts. Stockholders whose</font></p>
<p align="center"><font face="Times New Roman" size="2">13</font></p>
<hr size="3" color="gray">
<page>
<p><font face="Times New Roman" size="2">Shares are held of record by a Nominee on
 their behalf will have any Shares acquired in the Primary Subscription and pursuant
 to the Over-Subscription Privilege credited to the account of such Nominee. For
 all other Stockholders, stock certificates for all Shares acquired will be mailed
 promptly after full payment for the subscribed Shares has been received and cleared.</font></p>
<p><font face="Times New Roman" size="2"><b>Federal Income Tax Consequences of the
 Offer</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stockholders
 who receive Rights pursuant to the Offer will not recognize taxable income for U.S.
 Federal income tax purposes upon their receipt of the Rights. If Rights issued to
 a Stockholder expire without being exercised, no basis will be allocated to such
 Rights, and such stockholder will not recognize any gain or loss for U.S. Federal
 income tax purposes upon such expiration.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The tax basis
 of a Stockholder&#146;s Common Stock will remain unchanged, and the Stockholder&#146;s basis in the Rights will be zero. A Stockholder who exercises Rights will
 not recognize any gain or loss for U.S. Federal income tax purposes upon the exercise.
 The basis of the newly acquired Common Stock will equal the Subscription Price paid
 for the Common Stock. Upon a sale or exchange of the Common Stock so acquired, the
 Stockholder will recognize gain or loss measured by the difference between the proceeds
 of the sale or exchange and the cost basis of such Common Stock. Assuming the Stockholder
 holds the Common Stock as a capital asset, any gain or loss realized upon its sale
 will generally be treated as a capital gain or loss, which gain or loss will be
 short-term or long-term, depending on the length of the Stockholder&#146;s holding
 period for such Common Stock. However, any loss recognized upon the sale of shares
 of Common Stock with a tax holding period of 6 months or less will be treated as
 a long-term capital loss to the extent of any capital gain distribution previously
 received by the Stockholder with respect to such Shares, and a loss may be disallowed
 under wash sale rules to the extent that the Stockholder purchases additional Common
 Stock (including by reinvestment of distributions) within 30 days before or after
 the sale date. The holding period for Common Stock acquired upon the exercise of
 Rights will begin on the date of exercise of the Rights.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The foregoing
 is a summary of the material U.S. Federal income tax consequences of the Offer under
 the provisions of the U.S. Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), and applicable existing and proposed regulations thereunder, all as currently
 in effect and all subject to change at any time, perhaps with retroactive effect.
 It does not include any state, local or foreign tax consequences of the Offer. This
 summary is generally applicable to Stockholders that are United States persons as
 defined in the Code. Further, this summary is not intended to be, nor should it
 be, construed as legal or tax advice, and stockholders are urged to consult their
 own tax advisors to determine the tax consequences to them of the Offer and their
 ownership of Rights and Common Stock.</font></p>
<p><font face="Times New Roman" size="2"><b>Dilution</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If you do
 not fully exercise your Rights, you should expect that you will, at the completion
 of the Offer, own a smaller proportional interest in the Fund than would otherwise
 be the case if you exercised your Rights. We cannot determine the extent of this
 dilution at this time because we do not know what proportion of the Fund&#146;s
 Shares will be purchased as a result of the Offer.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;You may experience
 dilution in your holdings because you will indirectly bear the expenses of the Offer.
 Further, if you do not submit subscription requests pursuant to the Over-Subscription
 Privilege, you may also experience dilution in your holdings if the Fund offers
 Additional Shares for subscription. We cannot state precisely the amount of any
 such decrease in NAV because we do not know at this time how many Shares will be
 subscribed for or what the NAV or market price per share will be at the Pricing
 Date. As of April 15, 2005, the Fund&#146;s shares traded at a 2.9% premium above
 NAV. If the Fund&#146;s shares trade at a premium above NAV as of the Pricing Date,
 the Fund estimates that such dilution would be minimal. See &#147;Risk Factors and
 Special Considerations at a<br>Glance &#151; Dilution &#151; Net Asset Value and
 Non-Participation in the Offer.&#148; Except as described in this Prospectus, you
 will have no right to rescind your subscription requests after receipt by the Subscription
 Agent of your payment for Shares or a Notice of Guaranteed Delivery.</font></p>
<p align="center"><font face="Times New Roman" size="2">14</font></p>
<hr size="3" color="gray">
<page>
<p><font face="Times New Roman" size="2"><b>Other Rights Offerings</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund may
 have similar rights offerings in the future. Any such future rights offerings would
 be separately registered with the SEC and made by means of separate prospectuses.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>USE OF PROCEEDS</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We estimate
 the net proceeds of the Offer to be approximately $18,410,733 ($22,132,875 if all
 of the Additional Shares are available for subscription). These figures assume (i)
 all Rights are exercised in full, (ii) a Subscription Price of $8.50 and (iii) payment
 of offering expenses of approximately $200,000. Royce expects to invest the net
 proceeds of the Offer in accordance with the Fund&#146;s investment goal and policies
 and anticipates that such investment will take up to six months from June 30, 2005,
 depending on market conditions and the availability of appropriate securities. Pending
 investment, the net proceeds of the Offer will be held in the types of short-term
 debt securities and instruments in which the Fund may invest. See &#147;Investment
 Goal and Policies &#151; Investment Methods/Policies.&#148; As a result of this
 short-term investment of the proceeds, a lower yield may be realized.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>THE FUND</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 a closed-end diversified management investment company. It was incorporated under
 the name &#147;America&#146;s All Season Fund, Inc.&#148; under the laws of the
 State of Maryland on October 30, 1987 and registered under the 1940 Act. The Fund
 commenced operations in March 1988. Since November 1, 1996, when Royce became its
 investment adviser, the Fund&#146;s investment goal has been long-term capital growth.
 The Fund&#146;s principal office is located at 1414 Avenue of the Americas, New
 York, New York 10019, and its telephone number is (800) 221-4268.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>INVESTMENT GOAL, POLICIES
 AND RISKS</b></font></p>
<p><font face="Times New Roman" size="2"><b>Investment Goal</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 investment goal and one of its fundamental policies is long-term capital growth.
 Royce normally invests at least 65% of the Fund&#146;s assets in equity securities.
 Royce uses a value approach to invest the Fund&#146;s assets in a limited number
 of domestic and foreign companies. While the Fund is not restricted as to stock
 market capitalization, Royce focuses the Fund&#146;s investments primarily in small-cap
 companies (companies with stock market capitalizations between $500 million and
 $2.5 billion) and micro-cap companies (companies with stock market capitalizations
 below $500 million) with significant business activities in the United States. Stock
 market capitalization is calculated by multiplying the total number of common shares
 issued and outstanding by the per share market price of the common stock.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund may
 invest up to 35% of its assets in direct obligations of the U.S. Government, its
 agencies or foreign governments, and in the non-convertible preferred stocks and
 debt securities of domestic and foreign companies.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;There are
 market risks inherent in any investment, and no assurance can be given that the
 Fund&#146;s investment goal will be achieved.</font></p>
<p><font face="Times New Roman" size="2"><b>Investment Policies</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce invests
 the Fund&#146;s assets primarily in a limited number of companies selected using
 a value approach. While it does not limit the stock market capitalizations of the
 companies in which the Fund may invest, Royce has historically focused on small-cap
 and micro-cap equity securities.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce uses
 a value method in managing the Fund&#146;s assets. In selecting equity securities
 for the Fund, Royce evaluates the quality of a company&#146;s balance sheet, the
 level of its cash flows and various measures of a company&#146;s profitability.
 Royce then uses these factors to assess the company&#146;s current worth, basing
 this assessment on either what it believes a knowledgeable buyer might pay to acquire
 the entire company or what it thinks the value</font></p>
<p align="center"><font face="Times New Roman" size="2">15</font></p>
<hr size="3" color="gray">
<page>
<p><font face="Times New Roman" size="2">of the company should be in the stock market.
 This analysis takes a number of factors into consideration, including the company&#146;s future growth prospects and current financial condition.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce invests
 in the equity securities of companies that are trading significantly below its estimate
 of the company&#146;s &#147;current worth&#148; in an attempt to reduce the risk
 of overpaying for such companies. Royce&#146;s value approach strives to reduce
 some of the other risks of investing in small-cap companies (for the Fund&#146;s
 portfolio taken as a whole) by evaluating various other risk factors. Royce attempts
 to lessen financial risk by buying companies with strong balance sheets. While no
 assurance can be given that this risk-averse value approach will be successful,
 Royce believes that it can reduce some of the risks of investing in the securities
 of small-cap companies, which are inherently fragile in nature and whose securities
 have substantially greater market price volatility. Although Royce&#146;s approach
 to security selection seeks to reduce downside risk to the Fund&#146;s portfolio,
 especially during periods of broad small-cap market declines, it may also potentially
 have the effect of limiting gains in strong small-cap up markets.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Foreign
 Investments</i>. The Fund invests a portion of its assets in securities of foreign
 issuers. In most instances, investments will be made in companies principally based,
 or whose securities are traded in, the United States or the other developed countries
 of North America, Europe, Asia, Australia and New Zealand and not in emerging markets
 countries.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Foreign investments
 involve certain risks which typically are not present in securities of domestic
 issuers. There may be less information available about a foreign company than a
 domestic company; foreign companies may not be subject to accounting, auditing and
 reporting standards and requirements comparable to those applicable to domestic
 companies; and foreign markets, brokers and issuers are generally subject to less
 extensive government regulation than their domestic counterparts. Foreign securities
 may be less liquid and may be subject to greater price volatility than domestic
 securities. Foreign investments also may be subject to local economic and political
 risks which might adversely affect the Fund&#146;s ability to realize on its investment
 in such securities. No assurance can be given that Royce will be able to anticipate
 these potential events or counter their effects.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund does
 not expect to purchase or sell foreign currencies to hedge against declines in the
 U.S. dollar or to lock in the value of the foreign securities it purchases, and
 its foreign investments may be adversely affected by changes in foreign currency
 rates. Consequently, the risks associated with such investments may be greater than
 if the Fund did engage in foreign currency transactions for hedging purposes.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Income earned
 or received by the Fund from sources within foreign countries may be subject to
 withholding and other taxes imposed by such countries. See &#147;Taxation&#148;
 below and in the Statement of Additional Information.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Depositary
 Receipts</i>. The Fund may invest in the securities of foreign issuers in the form
 of sponsored or unsponsored ADRs, European Depositary Receipts (&#147;EDRs&#148;)
 and Global Depositary Receipts (&#147;GDRs&#148;) (collectively, &#147;Depositary
 Receipts&#148;) or other securities exchangeable for securities of foreign issuers.
 Depositary Receipts may not necessarily be denominated in the same currency as the
 underlying securities for which they may be exchanged. ADRs are receipts typically
 issued by an American bank or trust company that evidence ownership of underlying
 securities issued by a foreign corporation. EDRs are receipts issued in Europe that
 evidence a similar ownership arrangement. GDRs are receipts issued throughout the
 world that evidence a similar arrangement. Generally, ADRs, in registered form,
 are designed for use in the U.S. securities markets, and EDRs, in bearer form, are
 designed for use in European securities markets. GDRs are tradeable both in the
 U.S. and in Europe and are designed for use throughout the world. Depositary Receipts
 are alternatives to the purchase of the underlying foreign securities in their national
 markets and currencies. The Fund may invest in unsponsored Depositary Receipts.
 The issuers of unsponsored Depositary Receipts are not obligated to disclose material
 information in the United States and, therefore, there may be less information available
 regarding such issuers and there may not be a correlation between such information
 and the market value of the Depositary Receipts. Depositary Receipts also involve
 the risks associated with other investments in foreign securities, as discussed
 above.</font></p>
<p align="center"><font face="Times New Roman" size="2">16</font></p>
<hr size="3" color="gray">
<page>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Fixed Income
 Securities</i>. Up to 35% of the Fund&#146;s assets may be invested in direct obligations
 of the U.S. Government, its agencies or foreign governments, and in non-convertible
 preferred stocks and debt securities of various domestic and foreign issuers, including
 up to 5% of its assets in below investment-grade debt securities, also known as
 high-yield/high-risk securities. There are no limits on the maturity or duration
 of the fixed income securities in which the Fund may invest.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Two of the
 main risks of investing in fixed income securities are credit risk and interest
 rate risk. Below investment-grade debt securities may be in the lowest-rated categories
 of recognized rating agencies (C in the case of Moody&#146;s or D in the case of
 S&#038;P) or may be unrated. Such high-yield/high-risk investments are primarily
 speculative and may entail substantial risk of loss of principal and non-payment
 of interest, but may also produce above-average returns for the Fund. Debt securities
 rated C or D may be in default as to the payment of interest or repayment of principal.
 As of the date of this Prospectus, interest rates are near historical lows, which
 makes it more likely that they will increase in the future, which could, in turn,
 result in a decline in the market value of the fixed income securities held by the
 Fund.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Warrants,
 Rights or Options</i>. The Fund may invest up to 5% of its assets in warrants, rights
 or options. A warrant, right or call option entitles the holder to purchase a given
 security within a specified period for a specified price and does not represent
 an ownership interest in the underlying security. A put option gives the holder
 the right to sell a particular security at a specified price during the term of
 the option. These securities have no voting rights, pay no dividends and have no
 liquidation rights. In addition, market prices of warrants, rights or call options
 do not necessarily move parallel to the market prices of the underlying securities;
 market prices of put options tend to move inversely to the market prices of the
 underlying securities.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Securities
 Lending</i>. The Fund may lend up to 25% of its assets to brokers, dealers and other
 financial institutions. However, under the Rating Agency Guidelines, the Fund may
 not lend portfolio securities in excess of 15% of its total assets. See &#147;Preferred
 Stock &#151; Rating Agency Guidelines&#148; below. The Rating Agency Guidelines
 may in the future be amended to permit the Fund to lend a greater percentage of
 its total assets. Securities lending allows the Fund to retain ownership of the
 securities loaned and, at the same time, to earn additional income. Since there
 may be delays in the recovery of loaned securities or even a loss of rights in collateral
 supplied should the borrower fail financially, loans will be made only to parties
 that participate in a global securities lending program organized and monitored
 by the Fund&#146;s custodian and who are deemed by it to be of good standing. Furthermore,
 such loans will be made only if, in Royce&#146;s judgment, the consideration to
 be earned from such loans would justify the risk.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The current
 view of the staff of the SEC is that a fund may engage in such loan transactions
 only under the following conditions: (i) the fund must receive 100% collateral in
 the form of cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
 borrower; (ii) the borrower must increase the collateral whenever the market value
 of the securities loaned (determined on a daily basis at the close of regular trading)
 rises above the value of the collateral; (iii) after giving notice, the fund must
 be able to terminate the loan at any time; (iv) the fund must receive reasonable
 interest on the loan or a flat fee from the borrower, as well as amounts equivalent
 to any dividends, interest or other distributions on the securities loaned; (v)
 the fund may pay only reasonable custodian fees in connection with the loan; and
 (vi) the fund must be able to vote proxies on the securities loaned, either by terminating
 the loan or by entering into an alternative arrangement with the borrower.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Reverse
 Repurchase Agreements</i>. The Fund is also authorized to enter into reverse repurchase
 agreements. However, the Rating Agency Guidelines prohibit such transactions. Such
 agreements involve the sale of securities held by the Fund pursuant to an agreement
 to repurchase the securities at an agreed-upon price, date and interest payment.
 When effecting reverse repurchase transactions, liquid securities of a dollar amount
 equal in value to the securities subject to the agreement are required to be maintained
 in a segregated account with the Fund&#146;s custodian bank, and the reverse repurchase
 agreement is required to be marked to market each day.</font></p>
<p align="center"><font face="Times New Roman" size="2">17</font></p>
<hr size="3" color="gray">
<page>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Temporary
 Investments</i>. The assets of the Fund are normally invested as described above.
 However, for temporary defensive purposes (i.e., when Royce determines that market
 conditions warrant) or when it has uncommitted cash balances, the Fund may also
 invest in U.S. Treasury bills, domestic bank certificates of deposit, repurchase
 agreements with recognized securities dealers and banks covering U.S. Treasury and
 agency obligations having a term of not more than one week, high-quality commercial
 paper and money market funds registered under the 1940 Act or retain all or part
 of its assets in cash. Accordingly, the composition of the Fund&#146;s portfolio
 may vary from time to time.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Repurchase
 agreements are in effect loans by the Fund to a securities dealer or bank counterparty,
 and the agreements for such transactions require the counterparty to maintain securities
 having a value at least equal to the amount loaned as collateral. Repurchase agreements
 could involve certain risks if the counterparty defaults or becomes insolvent, including
 possible delays or restrictions upon the Fund&#146;s ability to dispose of collateral.</font></p>
<p><font face="Times New Roman" size="2"><b>Changes in Investment Goal and Policies
</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 investment goal of long-term capital growth is a fundamental policy of the Fund
 and may not be changed without approvals of the holders of a majority of the Fund&#146;s outstanding shares of Common Stock and 6.00% Preferred Stock and any other
 Preferred Stock, voting together as a single class, and a majority of the 6.00%
 Preferred Stock and any other Preferred Stock, voting as a separate class (which
 for this purpose and under the 1940 Act means the lesser of (i) 67% or more of the
 relevant shares of capital stock of the Fund present or represented at a meeting
 of stockholders, at which the holders of more than 50% of the outstanding relevant
 shares of capital stock are present or represented, or (ii) more than 50% of the
 outstanding relevant shares of capital stock of the Fund). Except as indicated under
 &#147;Investment Restrictions&#148; in the Statement of Additional Information,
 the Fund does not consider its other policies to be fundamental, and such policies
 may be changed by the Board of Directors without stockholder approval or prior notice
 to stockholders.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 investment policies are subject to certain restrictions. See &#147;Investment Restrictions&#148; in the Statement of Additional Information.</font></p>
<p align="center"><font face="Times New Roman" size="2">________________</font></p>
<p><font face="Times New Roman" size="2"><b>Risk Factors &#150; Investing in Small-
 and Micro-Cap Companies</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce views
 the large and diverse universe of small-cap companies as having two investment segments
 or tiers. Royce defines small-cap as those companies with market capitalizations
 between $500 million and $2.5 billion; it refers to the segment with market capitalizations
 less than $500 million as micro-cap.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The securities
 of small- and micro-cap companies offer investment opportunities and additional
 risks. They may not be well known to the investing public, may not be significantly
 owned by institutional investors and may not have steady earnings growth. In addition,
 the securities of such companies may be more volatile in price, have wider spreads
 between their bid and ask prices and have significantly lower trading volumes than
 larger capitalization stocks. As a result, the purchase or sale of more than a limited
 number of shares of a small- or micro-cap security may affect its market price.
 Royce may need a considerable amount of time to purchase or sell its positions in
 these securities, particularly when other accounts managed by Royce or other investors
 are also seeking to purchase or sell them. Accordingly, Royce&#146;s investment
 focus on small- and micro-cap companies generally requires it to have a long-term
 (at least three years) investment outlook for a portfolio security.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The micro-cap
 segment consists of more than 5,900 companies. These companies are followed by relatively
 few, if any, securities analysts, and there tends to be less publicly available
 information about them. Their securities generally have even more limited trading
 volumes and are subject to even more abrupt or erratic market price movements than
 are the securities in the upper tier, and Royce may be able to deal with only a
 few market-makers when purchasing and selling these securities. Such companies may
 also have limited markets, financial resources or product lines, may lack management
 depth and may be more vulnerable to adverse business or market developments. These
 conditions, which create greater opportunities to find securities trading well below
 Royce&#146;s estimate of the company&#146;s current worth, also involve increased
 risk. This may lead Royce to hold proportionately smaller positions in more companies
 in the micro-cap segment.</font></p>
<p align="center"><font face="Times New Roman" size="2">18</font></p>
<hr size="3" color="gray">
<page>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The upper
 tier of the small-cap universe of securities consists of approximately 1,800 companies.
 In this segment, there is a relatively higher level of ownership by institutional
 investors and more research coverage by securities analysts than generally exists
 for micro-cap companies. This greater attention makes the market for these securities
 more efficient than that of micro-cap companies because they have somewhat greater
 trading volumes and narrower bid/ask spreads. As a result, Royce normally holds
 proportionately larger positions in a relatively limited number of securities in
 the upper-tier of small-caps.</font></p>
<p><font face="Times New Roman" size="2"><b>Risk Factors &#150; Risk of Investing
 in a Limited Number of Companies</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Because the
 Fund invests in a limited number of companies, developments affecting an individual
 issuer are likely to have a greater impact on the Fund&#146;s net asset value and
 the market price of its Common Stock.</font></p>
<p><font face="Times New Roman" size="2"><b>Risks to Common Stockholders of Borrowing
 Money and Issuing Senior Securities</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>General</i>. The 1940 Act and the Fund&#146;s fundamental policies (see &#147;Investment
 Restrictions&#148; in the Statement of Additional Information) permit the Fund to
 issue and sell senior securities representing indebtedness or consisting of Preferred
 Stock if various requirements are met. Such requirements include initial asset coverage
 tests of 300% for indebtedness (see &#147;Risk Factors and Special Considerations
 &#151; Risks to Common Stockholders of Borrowing Money and Issuing Senior Securities
 &#151; Asset Coverage Test&#148; in the Statement of Additional Information) and
 200% for Preferred Stock and restrictive provisions concerning Common Stock dividend
 payments, other Common Stock distributions, stock repurchases and maintenance of
 asset coverage and giving certain senior security holders the right to elect directors
 in the event specified asset coverage tests are not met or dividends are not paid.
 As of December 31, 2004, the aggregate involuntary liquidation preference of the
 6.00% Preferred Stock was $25 million. At this level, a decrease of 62% of the Fund&#146;s total assets (including preferred assets) or 53% of its net assets applicable
 to common stockholders would be necessary to reduce the asset coverage for the 6.00%
 Preferred Stock to less than 200%. The issuance and sale of senior securities allows
 the Fund to raise additional cash for investments. It is a speculative investment
 technique, involving the risk considerations of leverage and increased share price
 volatility. So long as the 6.00% Preferred Stock is rated by Moody&#146;s, the Fund
 cannot borrow for investment leverage purposes.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Borrowings</i>. The following factors could increase the investment risk and the volatility
 of the price of the Fund&#146;s shares of Common Stock: (i) leveraging exaggerates
 any increase or decrease in the value of the Fund&#146;s portfolio; (ii) the costs
 of borrowing may exceed the income from the portfolio securities purchased with
 the borrowed money; (iii) a decline in NAV results if the investment performance
 of the additional securities purchased fails to cover their cost to the Fund (including
 any interest paid on the money borrowed); (iv) a decline in NAV could affect the
 ability of the Fund to make Common Stock dividend payments; (v) a failure to pay
 net investment income dividends or make capital gains distributions could result
 in the Fund&#146;s ceasing to qualify as a regulated investment company under the
 Code, or in its having to pay certain entity level taxes even if it maintains its
 status as a regulated investment company (see &#147;Taxation&#148; in this Prospectus
 and in the Statement of Additional Information); and (vi) if the asset coverage
 for debt securities declines to less than 300% (as a result of market fluctuations
 or otherwise), the Fund may be required to sell a portion of its investments when
 it may be disadvantageous to do so.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Preferred
 Stock</i>. The 6.00% Preferred Stock and any other Preferred Stock issued by the
 Fund may result in higher volatility of the NAV of the Common Stock and potentially
 more volatility in the market price of the Common Stock. Holders of Common Stock
 will realize a higher current rate of return than if the Fund were not leveraged
 only so long as the Fund, after accounting for its costs and operating expenses,
 is able to realize a higher net return on its investment portfolio than the then
 current dividend rates paid on Preferred Stock. To the extent that the dividend
 rates on Preferred Stock approach the net return on the Fund&#146;s investment portfolio,
 the benefit of leverage to holders of Common Stock will be decreased. (If the dividend
 rates on Preferred Stock were to exceed the net return on the Fund&#146;s portfolio,
 holders of Common Stock would receive a lower rate of return than if the Fund were
 not leveraged.) Similarly, since both the cost of issuing Preferred Stock and any
 decline in the value of the Fund&#146;s investments (including investments purchased
 with the proceeds from Preferred Stock offerings) is borne entirely by holders of
 Common Stock, the effect of leverage in a declining market would result in a greater
 decrease in NAV to holders of Common Stock than if the Fund were not leveraged.
 Such decrease in NAV likely would be reflected in a greater decline in the market
 price for shares of the Fund&#146;s Common Stock. If the Fund is liquidated, holders
 of Preferred Stock will be entitled to receive liquidating distributions before
 any distribution is made to holders of Common Stock. Redemption of Preferred Stock
 or insufficient investment income to make dividend</font></p>
<p align="center"><font face="Times New Roman" size="2">19</font></p>
<hr size="3" color="gray">
<page>
<p><font face="Times New Roman" size="2">payments may reduce the NAV of the Common
 Stock by requiring the Fund to liquidate a portion of its investments at a time
 when it may be disadvantageous to do so.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In an extreme
 case, a decline in NAV could affect the Fund&#146;s ability to pay dividends on
 the Common Stock. Failure to make such dividend payments could adversely affect
 the Fund&#146;s qualification as a regulated investment company under the Code.
 See &#147;Taxation&#148; in this Prospectus and in the Statement of Additional Information.
 However, the Fund intends to take all measures necessary to make such Common Stock
 dividend payments. If the Fund&#146;s current investment income is ever insufficient
 to meet dividend payments on either the Common Stock or the Preferred Stock, the
 Fund may have to liquidate certain of its investments. In addition, the Fund will
 have the authority to redeem the 6.00% Preferred for any reason on or after October
 17, 2008, and may redeem all or part of the Preferred prior to such dates to the
 extent required by the 1940 Act and the terms of the Preferred. See &#147;Description
 of Capital Stock &#151; Preferred Stock &#151; Redemption.&#148;</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The class
 and other voting rights of the Preferred Stock could make it more difficult for
 the Fund to take certain actions that may, in the future, be proposed by the Board
 of Directors and/or the holders of Common Stock, such as (i) a merger, exchange
 of securities, liquidation or alteration of the rights of a class of the Fund&#146;s
 securities if such actions would be adverse to the Preferred Stock, (ii) converting
 the Fund to an open-end investment company or acting inconsistently with its fundamental
 investment restrictions or other fundamental policies or (iii) seeking to operate
 other than as an investment company.</font></p>
<p align="center"><font face="Times New Roman" size="2">________________</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On December
 31, 2004, the Fund had 10,855,871 shares of Common Stock issued and outstanding,
 with an aggregate NAV of $9.75, and 1,000,000 shares of the 6.00% Preferred Stock,
 with an aggregate initial liquidation preference of $25,000,000, issued and outstanding,
 and no outstanding indebtedness. Accordingly, as of such date, the Fund could have,
 under the above policies and restrictions, issued and sold senior securities representing
 indebtedness of up to $65,426,296 or additional shares of Preferred Stock having
 an aggregate involuntary liquidation preference of up to $80,852,592 or various
 combinations of lesser amounts of both securities representing indebtedness and
 Preferred Stock.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Effects
 of Preferred Stock Leverage on Common Stockholders</i>. Dividends are payable on
 the 6.00% Preferred Stock at the annual rate of 6.00%. The Fund&#146;s portfolio
 must experience a return of 1.1% after expenses for the year ending December 31,
 2005 in order to cover that year&#146;s dividend on the Preferred.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The fees paid
 to Royce for investment advisory services are higher than if the Fund did not have
 Preferred Stock outstanding because they are calculated on the basis of the Fund&#146;s average net assets applicable to Common Stockholders plus the liquidation
 value of the Fund&#146;s outstanding Preferred Stock. See &#147;Investment Advisory
 and Other Services.&#148;</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following
 table is designed to illustrate the effect on the return to a holder of the Fund&#146;s Common Stock of the leverage obtained with the 6.00% Preferred Stock, assuming
 hypothetical annual returns on the Fund&#146;s portfolio of minus 15% to plus 15%.
 As the table shows, leverage generally increases the return to stockholders when
 portfolio return is positive and decreases the return when portfolio return is negative.
 The figures appearing in the following table are hypothetical. Actual returns may
 be greater or less than those appearing in the table.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" align="left"><p style="margin-left:10px; text-indent:-10px;"><font face="Times New Roman" size="2">Assumed
 return on portfolio (net of expenses)</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-15%</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-10%</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-5%</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0%</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">5%</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">10%</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">15%</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"></font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:10px; text-indent:-10px;"><font face="Times New Roman" size="2">Corresponding
 NAV return to Common Stockholder</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-19.96</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-13.78</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-7.60</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-1.42</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">4.76</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">10.94</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">17.13</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2"><b>INVESTMENT ADVISORY AND
 OTHER SERVICES</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce &#038;
 Associates, LLC (which term as used in this Prospectus includes its corporate predecessor)
 (&#147;Royce&#148;), a Delaware limited liability company, is an investment advisory
 firm whose predecessor was organized in February 1967. Royce is registered as an
 investment adviser under Investment Advisers Act of 1940, as amended. Royce became
 investment adviser of the Fund in November 1996. Royce also serves as investment</font></p>
<p align="center"><font face="Times New Roman" size="2">20</font></p>
<hr size="3" color="gray">
<page>
<p><font face="Times New Roman" size="2"> adviser to other registered management
 investment companies and institutional accounts. As of December 31, 2004, Royce
 managed approximately $22.7 billion in assets, including approximately $20.9 billion
 in open-end and closed-end fund assets. Substantially all of Royce&#146;s client
 accounts are managed as small- and micro-cap investment products.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On October
 1, 2001, Royce became an indirect wholly-owned subsidiary of Legg Mason, Inc. (&#147;Legg Mason&#148;). On March 31, 2002, Royce&#146;s corporate predecessor was
 merged into Royce Holdings, LLC (a wholly-owned subsidiary of Legg Mason), which
 then changed its name to Royce &#038; Associates, LLC. As a result of this merger,
 Royce &#038; Associates, LLC became the Fund&#146;s investment adviser and a direct
 wholly-owned subsidiary of Legg Mason. Founded in 1899, Legg Mason is a publicly-held
 financial services company primarily engaged in providing asset management, securities
 brokerage, investment banking and related financial services through its subsidiaries.
 As of December 31, 2004, Legg Mason&#146;s asset management subsidiaries had aggregate
 assets under management of approximately $360 billion.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Under the
 Fund&#146;s Articles of Incorporation, as amended and supplemented (the &#147;Charter&#148;), and Maryland law, the Fund&#146;s business and affairs are managed under
 the direction of its Board of Directors. Investment decisions for the Fund are made
 by Royce, subject to any direction it may receive from the Fund&#146;s Board of
 Directors, which periodically reviews the Fund&#146;s investment performance.</font></p>
<p><font face="Times New Roman" size="2"><b>Portfolio Management</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce is responsible
 for the management of the Fund&#146;s assets. Royce has been investing in small-cap
 companies with a value approach for more than 30 years. Its offices are located
 at 1414 Avenue of the Americas, New York, NY 10019. Charles M. Royce has been the
 firm&#146;s President and Chief Investment Officer during this period.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce&#146;s
 investment staff includes Senior Portfolio Manager, Managing Director and Vice President,
 W. Whitney George, who is the Fund&#146;s portfolio manager. Mr. George has been
 a Portfolio Manager at Royce since 2000, and prior thereto was a Senior Analyst.
 He has been employed by Royce since 1991. Royce&#146;s investment staff also includes
 two other Senior Portfolio Managers, and 11 portfolio managers, assistant portfolio
 managers and analysts.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Statement
 of Additional Information provides additional information about the Fund&#146;s
 portfolio manager&#146;s compensation, other accounts managed by the portfolio manager
 and the portfolio manager&#146;s ownership of securities in the Fund.</font></p>
<p><font face="Times New Roman" size="2"><b>Investment Advisory Agreement</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Under the
 Investment Advisory Agreement between the Fund and Royce, Royce determines the composition
 of the Fund&#146;s portfolio, the nature and timing of the changes in it and the
 manner of implementing such changes; provides the Fund with investment advisory,
 research and related services for the investment of its assets; and pays all expenses
 incurred in performing its investment advisory duties under the Agreement.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund pays
 all of its own administrative and other costs and expenses attributable to its operations
 and transactions (except those set forth above), 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, stockholder reports and notices; Federal
 and state registration fees; 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. Thus, unlike most other
 investment companies, the Fund is required to pay substantially all of its expenses,
 and Royce does not incur substantial fixed expenses.</font></p>
<p><font face="Times New Roman" size="2"><b>Advisory Fee</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As compensation
 for its services under the Investment Advisory Agreement, Royce is entitled to receive
 a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of
 the net assets of the Fund (which includes net assets applicable to both Common
 Stock and Preferred Stock) for each month during the term of the agreement. Because
 the fee is computed based on the Fund&#146;s net assets and not on its total assets,
 Royce will not</font></p>
<p align="center"><font face="Times New Roman" size="2">21</font></p>
<hr size="3" color="gray">
<page>

<p><font face="Times New Roman" size="2">receive any fee in respect of those assets
 of the Fund equal to the aggregate unpaid principal amount of any indebtedness of
 the Fund. However, because Preferred Stock is a form of equity for these purposes,
 Royce will receive a fee in respect of any assets of the Fund equal to the initial
 liquidation preference of and any potential redemption premium for any Preferred
 Stock that may be issued and sold by the Fund, including the 6.00% Preferred Stock.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Royce has
 voluntarily committed to waive the portion of its investment advisory fee attributable
 to an issue of the Fund&#146;s Preferred Stock for any month in which the Fund&#146;s
 average annual NAV total return since issuance of the Preferred Stock fails to exceed
 the applicable Preferred Stock&#146;s dividend rate.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Because Royce&#146;s fee is based on the average net assets of the Fund (including net assets
 applicable to both Common Stock and Preferred Stock), Royce has generally benefited
 from the Fund&#146;s issuance of Preferred Stock.</font></p>
<p><font face="Times New Roman" size="2"><b>Code of Ethics</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 Board of Directors has approved a Code of Ethics under Rule 17j-1 of the 1940 Act
 that covers the Fund and Royce. The Code of Ethics establishes procedures for personal
 investing and restricts certain transactions. Employees subject to the Code of Ethics
 may invest in securities for their personal investment accounts, including, in certain
 cases, securities that may be purchased or held by the Fund. See &#147;Code of Ethics
 and Related Matters&#148; in the Statement of Additional Information.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>DESCRIPTION OF CAPITAL
 STOCK</b></font></p>
<p><font face="Times New Roman" size="2"><b>General</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 authorized to issue 100,000,000 shares of Common Stock, par value $.001 per share,
 certain shares of which have been classified and designated as a series of Preferred
 Stock, as discussed below.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following
 table shows as of April 15, 2005, the number of shares of: (i) capital stock authorized,
 (ii) capital stock held by the Fund for its own account and (iii) capital stock
 outstanding for each class of authorized securities of the Fund.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"><b>Title of
 Class</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Amount Authorized</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Amount Held by<br>Fund for its Own<br>Account</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Amount<br>Outstanding<br>(Exclusive of<br>Amount Held by<br>Fund for its Own
<br>Account)</b></font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Common Stock</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="7%" valign="bottom" align="right"><font face="Times New Roman" size="2">99,000,000</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="8%" valign="bottom" align="right"><font face="Times New Roman" size="2">0</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="8%" valign="bottom" align="right"><font face="Times New Roman" size="2">10,947,490</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">6.00% Cumulative
 Preferred Stock</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1,000,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">0</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1,000,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2">See &#147;Investment Goal, Policies and
 Risks &#151; Risks to Common Stockholders of Borrowing Money and Issuing Senior
 Securities.&#148;</font></p>
<p><font face="Times New Roman" size="2"><b>Common Stock</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>General.
</i> Each share of Common Stock has equal voting, dividend, distribution and liquidation
 rights. The shares of Common Stock outstanding are fully paid and non-assessable.
 The shares of Common Stock are not redeemable and have no preemptive, exchange,
 conversion or cumulative voting rights. Under Maryland law and the rules of the
 Nasdaq National Market System, the Fund generally is required to hold annual meetings
 of its stockholders.</font></p>
<p align="center"><font face="Times New Roman" size="2">22</font></p>
<hr size="3" color="gray">
<page>

<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Net Asset
 Values and Sales Prices.</i> The Fund&#146;s shares of Common Stock are listed and
 traded on Nasdaq under the symbol &#147;FUND.&#148; The following table sets forth
 for the periods indicated the high and low sales prices at the close of business
 on Nasdaq per share of Common Stock of the Fund, the NAV per share at the close
 of business on the dates of the market highs and lows and the number of shares traded.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="12" align="center"><font face="Times New Roman" size="2">
<b>Market Price Per Share<br>and Related<br>Discount (-)/Premium (+) (1)(2)</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="6" align="center"><font face="Times New Roman" size="2">
<b>Net Asset Value<br>Per Share on Date<br>of Market High<br>and Low (3)</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Reported<br>Nasdaq Volume<br>(mill sh.)</b></font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="13"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="6"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2"><b>Quarter
 Ended</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="5" align="center"><font face="Times New Roman" size="2">
<b>High</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="7" align="center"><font face="Times New Roman" size="2">
<b>Low</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>High</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td colspan="2" valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Low</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="5"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="7"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="2"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">March 31,
 2003</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%" valign="bottom" align="left"><font face="Times New Roman" size="2">$</font></td>
<td width="3%" valign="bottom" align="right"><font face="Times New Roman" size="2">5.89</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="3%" valign="bottom" align="right"><font face="Times New Roman" size="2">-7.8</font></td>
<td width="1%" valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%" valign="bottom" align="left"><font face="Times New Roman" size="2">$</font></td>
<td width="3%" valign="bottom" align="right"><font face="Times New Roman" size="2">4.98</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="3%" valign="bottom" align="right"><font face="Times New Roman" size="2">-9.1</font></td>
<td width="1%" valign="bottom" align="left"><font face="Times New Roman" size="2">%</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%" valign="bottom" align="left"><font face="Times New Roman" size="2">$</font></td>
<td width="3%" valign="bottom" align="right"><font face="Times New Roman" size="2">6.39</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="3%" valign="bottom" align="center"><font face="Times New Roman" size="2">$5.48</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="3%" valign="bottom" align="right"><font face="Times New Roman" size="2">0.59</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">June 30, 2003</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">6.90</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-9.9</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">5.07</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-13.8</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">7.66</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">5.88</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">2.45</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">September
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">8.04</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-8.4</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">6.73</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-10.5</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">8.78</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">7.52</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.44</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">December 31,
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.06</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-5.2</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">7.68</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-10.5</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.56</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">8.58</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">2.31</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">March 31,
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.72</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">+0.9</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">8.49</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-8.7</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.63</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">9.30</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.83</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">June 30, 2004</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.84</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-1.0</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">7.95</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-12.0</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.94</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">9.03</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.66</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">September
 30, 2004</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.45</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-5.1</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">8.51</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">-7.7</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.96</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">9.22</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">1.83</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">December 31,
 2004</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">11.64</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">+5.3</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.53</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">+1.2</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">11.05</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">9.42</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">3.74</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">March 31,
 2005</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">10.96</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">+12.5</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.32</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">+2.4</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9.74</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">9.18</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">2.48</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" align="left" colspan="2"><hr size="1" color="#000000" noshade width="11%"></td>
</tr>
<tr>
<td width="2%" valign="bottom" align="left"><font face="Times New Roman" size="2">(1)</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">Highest
 and lowest closing market price per share reported on Nasdaq.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">(2)</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2"> &#147;Related
 Discount (-) / Premium (+)&#148; represents the discount or premium from NAV of
 the shares on the close of business on the date of the high and low market price
 for the respective quarter.</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">(3)</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">Based on
 the Fund&#146;s computations.</font></td>
</tr>
</table>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As evidenced
 by the above table, the Fund&#146;s Common Stock has generally traded in the market
 below NAV. On February 16, 2005, when the Offer was publicly announced, the NAV
 per share of Common Stock at the close of business was $9.74, and the closing price
 on Nasdaq was $10.96, representing a premium of 12.5% above NAV. On April 15, 2005,
 such NAV was $8.49, and such closing price was $8.74, representing a premium of
 2.9% above NAV.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;There can
 be no assurance that the Common Stock will trade in the future at, above or below
 NAV.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Distributions.
</i> So long as any shares of Preferred Stock are outstanding, holders of the Fund&#146;s Common Stock will not be entitled to receive any dividends or other distributions
 from the Fund unless all accumulated dividends on outstanding shares of Preferred
 Stock have been paid, and unless asset coverage (as defined in the 1940 Act) with
 respect to such Preferred Stock would be at least 200% after giving effect to such
 distributions.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Net Asset
 Value.</i> The NAV of the Fund&#146;s shares of Common Stock is calculated at the
 close of regular trading on the NYSE (generally 4:00 p.m. Eastern time) every day
 that the NYSE is open. The Fund makes this information available daily by telephone
 (800-221-4268), via its web site (www.roycefunds.com) and through electronic distribution
 for media publication, including major internet-based financial services web sites
 and portals (bloomberg.com, yahoo.com, cbsmarketwatch.com, etc.) under the symbol
 XFUNX. Currently,<i>The Wall Street Journal</i>,<i>The New York Times</i> and
<i>Barron&#146;s</i> publish NAVs for closed-end investment companies weekly.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The NAV per
 share of the Common Stock is calculated by dividing the current value of the Fund&#146;s total assets less the sum of all of its liabilities and the aggregate liquidation
 preferences of its outstanding shares of Preferred Stock, by the total number of
 outstanding shares of Common Stock. The Fund&#146;s investments are valued based
 on market prices or, if market quotations are not readily available, at their fair
 value as determined in good faith under procedures established by the Fund&#146;s
 Board of Directors.</font></p>
<p><font face="Times New Roman" size="2"><b>Preferred Stock</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>General</i>. The Fund&#146;s Board of Directors has authority to classify and reclassify
 any authorized but unissued shares of stock into other classes or series of stock,
 including Preferred Stock, and to cause the Fund to issue such shares. The terms
 of such Preferred Stock would be fixed by the Board of Directors and would materially
 limit and/or qualify the rights of the holders of the Fund&#146;s Common Stock.
 In this regard, the Board of Directors has</font></p>
<p align="center"><font face="Times New Roman" size="2">23</font></p>
<hr size="3" color="gray">
<page>

<p><font face="Times New Roman" size="2">classified and designated 1,000,000 shares
 of Common Stock as the 6.00% Cumulative Preferred Stock, par value $.001 per share.
 As of the date of this Prospectus, all 1,000,000 shares of the 6.00% Preferred Stock
 are issued and outstanding, constituting the only authorized series of Preferred
 Stock. The Board of Directors reserves the right to issue additional shares of the
 6.00% Preferred Stock or other Preferred Stock from time to time, subject to the
 restrictions in the Charter and the 1940 Act. The shares of the 6.00% Preferred
 Stock are fully paid and nonassessable and have no appraisal, preemptive, exchange
 or conversion rights. Any shares of the 6.00% Preferred Stock repurchased or redeemed
 by the Fund will be returned to the status of authorized but unissued Common Stock.
 The Fund may not issue any class of stock senior to the shares of the 6.00% Preferred
 Stock.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Under the
 1940 Act, the Fund is permitted to have outstanding more than one series of Preferred
 Stock so long as no single series has priority over another series as to the distribution
 of assets of the Fund or the payment of dividends. Holders of the Fund&#146;s Preferred
 do not have preemptive rights to purchase any shares of Preferred Stock that might
 be issued.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Distributions</i>. Holders of shares of the 6.00% Preferred Stock are entitled to receive, when,
 as and if declared by the Board of Directors of the Fund out of funds legally available
 therefor, cumulative cash dividends at the annual rate of 6.00% per share of their
 initial liquidation preference of $25.00 per share, payable quarterly. The 6.00%
 Preferred Stock is listed and traded on the NYSE. If the Fund fails to pay dividends
 for two years or more, holders of the 6.00% Preferred Stock will acquire certain
 additional voting rights. See &#147;- Voting Rights&#148; below. Such rights will
 be their exclusive remedy for any such failure.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Redemption</i>. Prior to October 17, 2008, the Fund may not redeem the 6.00% Preferred Stock
 unless failure to do so would cause the Fund to fail to (i) satisfy the asset coverage
 test, (ii) maintain the discounted asset coverage required by Moody&#146;s or (iii)
 continue to qualify for tax treatment as a regulated investment company under the
 Code.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On and after
 October 17, 2008, shares of the 6.00% Preferred Stock will generally be redeemable
 at the option of the Fund at a price equal to their initial liquidation preference
 of $25.00 per share plus an amount equal to all unpaid dividends accumulated to
 and including the date fixed for such redemption (whether or not earned or declared)
 (the &#147;Redemption Price&#148;). Shares of the 6.00% Preferred Stock are subject
 to mandatory redemption at the Redemption Price upon the occurrence of certain specified
 events, such as the failure of the Fund to satisfy the asset coverage test or to
 maintain the discounted asset coverage for the 6.00% Preferred Stock required by
 Moody&#146;s in connection with their issuance of a rating on the 6.00% Preferred
 Stock.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Liquidation
 Rights</i>. Upon a liquidation, dissolution or winding up of the affairs of the
 Fund (whether voluntary or involuntary), holders of then outstanding shares of the
 6.00% Preferred Stock will be entitled to receive out of the assets of the Fund
 available for distribution to stockholders, after satisfying claims of creditors
 but before any distribution or payment of assets is made to holders of the Common
 Stock, a liquidation distribution in the amount of $25.00 per share plus an amount
 equal to all unpaid dividends accumulated to and including the date fixed for such
 distribution or payment (whether or not earned or declared by the Fund, but excluding
 interest thereon) (the &#147;Liquidation Preference&#148;), and such holders will
 be entitled to no further participation in any distribution payment in connection
 with any such liquidation, dissolution or winding up. If, upon any liquidation,
 dissolution or winding up of the affairs of the Fund, whether voluntary or involuntary,
 the assets of the Fund available for distribution among the holders of all outstanding
 shares of the 6.00% Preferred Stock and any other outstanding class or series of
 Preferred Stock ranking on a parity with the 6.00% Preferred Stock as to payment
 upon liquidation will be insufficient to permit the payment in full to such holders
 of the 6.00% Preferred Stock of the Liquidation Preference and the amounts due upon
 liquidation with respect to such other Preferred Stock, then such available assets
 will be distributed among the holders of the 6.00% Preferred Stock and such other
 Preferred Stock ratably in proportion to the respective preferential amounts to
 which they are entitled. Unless and until the Liquidation Preference has been paid
 in full to the holders of the 6.00% Preferred Stock, no dividends or distributions
 will be made to holders of the Common Stock or any other stock of the Fund ranking
 junior to the 6.00% Preferred Stock as to liquidation.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Upon any liquidation,
 the holders of the Common Stock, after required payments to the holders of Preferred
 Stock, will be entitled to participate equally and ratably in the remaining assets
 of the Fund.</font></p>
<p align="center"><font face="Times New Roman" size="2">24</font></p>
<hr size="3" color="gray">
<page>

<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Rating
 Agency Guidelines</i>. The Fund intends that, so long as shares of the 6.00% Preferred
 Stock are outstanding, the composition of its portfolio will reflect guidelines
 established by Moody&#146;s in connection with the Fund&#146;s receipt of a rating
 for the 6.00% Preferred Stock of Aaa from Moody&#146;s. Moody&#146;s issues ratings
 for various securities reflecting the perceived creditworthiness of those securities.
 The guidelines are designed to ensure that assets underlying outstanding debt or
 preferred stock will be sufficiently varied and will be of sufficient quality and
 amount to justify investment grade ratings. The guidelines do not have the force
 of law but have been adopted by the Fund in order to receive the above-described
 rating for shares of the 6.00% Preferred Stock, which rating is generally relied
 upon by investors in purchasing such securities. The guidelines provide a set of
 tests for portfolio composition and asset coverage that supplement (and in some
 cases are more restrictive than) the applicable requirements under the 1940 Act.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund intends
 to maintain a portfolio value at least equal to the discounted value of the assets
 in its portfolio which satisfies minimum values set by Moody&#146;s. Upon any failure
 to do this, the Fund will seek to alter the composition of its portfolio to satisfy
 Moody&#146;s. To the extent it is not able to do so in a timely basis, the Fund
 must redeem shares of the 6.00% Preferred Stock in accordance with their terms.
 Although there is no current intention to do so, under certain circumstances, without
 the vote of Stockholders, the Board of Directors may determine that it is not in
 the best interest of the Fund to continue to comply with the Moody&#146;s guidelines
 and in such event the 6.00% Preferred Stock will no longer be rated by Moody&#146;s.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;A securities
 rating is not a recommendation to buy, sell or hold securities and is subject to
 revision or withdrawal at any time by the assigning rating agency. Each rating should
 be evaluated independently of any other rating.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Voting
 Rights.</i> Except as otherwise stated in this Prospectus and as otherwise required
 by applicable law, holders of shares of 6.00% Preferred Stock and any other Preferred
 Stock will be entitled to one vote per share on each matter submitted to a vote
 of stockholders and will vote together with holders of shares of Common Stock as
 a single class. Also, except as otherwise required by the 1940 Act, (i) holders
 of outstanding shares of 6.00% Preferred Stock will be entitled as a series, to
 the exclusion of the holders of all other securities, including any other hereafter
 issued Preferred, Common Stock and other classes of capital stock of the Fund, to
 vote on matters affecting the 6.00% Preferred Stock that do not materially adversely
 affect any of the contract rights of holders of such other securities, including
 other Preferred Stock, Common Stock and other classes of capital stock, as expressly
 set forth in the Fund&#146;s Charter, and (ii) holders of outstanding shares of
 the 6.00% Preferred Stock will not be entitled to vote on matters affecting any
 other Preferred Stock that do not materially adversely affect any of the contract
 rights of holders of such 6.00% Preferred Stock, as expressly set forth in the Charter.
 The foregoing voting provisions will not apply to any shares of the 6.00% Preferred
 Stock if, at or prior to the time when the act with respect to which such vote otherwise
 would be required will be effected, such shares will have been (i) redeemed or (ii)
 called for redemption and sufficient Funds set aside to effect such redemptions
 as required by the Charter.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In connection
 with the election of the Fund&#146;s Directors, holders of shares of the 6.00% Preferred
 Stock and any other Preferred Stock, voting as a separate class, will be entitled
 at all times to elect two of the Fund&#146;s Directors, and the remaining Directors
 will be elected by holders of shares of Common Stock and holders of shares of the
 6.00% Preferred Stock and any other Preferred Stock, voting together as single class.
 In addition, if at any time dividends on outstanding shares of the 6.00% Preferred
 Stock and/or any other Preferred Stock are unpaid in an amount equal to at least
 two full years&#146; dividends thereon or if at any time holders of any shares of
 other Preferred Stock are entitled, together with the holders of shares of 6.00%
 Preferred Stock, to elect a majority of the Directors of the Fund under the 1940
 Act, then the number of Directors constituting the Board of Directors automatically
 will be increased by the smallest number that, when added to the two Directors elected
 exclusively by the holders of shares of the 6.00% Preferred Stock and any other
 Preferred Stock as described above, would constitute a majority of the Board of
 Directors as so increased by such smallest number. Such additional Directors will
 be elected at a special meeting of stockholders which will be called and held as
 soon as practicable, and at all subsequent meetings at which Directors are to be
 elected, the holders of shares of the 6.00% Preferred Stock and any other Preferred
 Stock, voting as a separate class, will be entitled to elect the smallest number
 of additional Directors that, together with the two Directors which such holders
 in any event will be entitled to elect, constitutes a majority of the total number
 of Directors of the Fund as so increased. The terms of office of the persons who
 are Directors at the time of that election will continue. If the Fund thereafter
 pays, or declares and sets apart for payment in full, all dividends payable on all
 outstanding shares of the 6.00% Preferred Stock and any other Preferred Stock for
 all past dividend periods, the additional voting rights of the holders</font></p>
<p align="center"><font face="Times New Roman" size="2">25</font></p>
<hr size="3" color="gray">
<page>

<p><font face="Times New Roman" size="2">of shares of the 6.00% Preferred Stock and
 any other Preferred Stock as described above will cease, and the terms of office
 of all of the additional Directors elected by the holders of shares of the 6.00%
 Preferred Stock and any other Preferred Stock (but not of the Directors with respect
 to whose election the holders of shares of Common Stock were entitled to vote or
 the two Directors the holders of shares of the 6.00% Preferred Stock and any other
 Preferred Stock have the right to elect in any event) will terminate and the number
 of directors constituting the Board of Directors will automatically decrease accordingly.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;So long as
 shares of the 6.00% Preferred Stock are outstanding, the Fund may not, without the
 affirmative vote of the holders of a majority of the shares of the 6.00% Preferred
 Stock outstanding at the time, voting separately as one class, amend, alter or repeal
 the provisions of the Charter, whether by merger, consolidation or otherwise, so
 as to materially adversely affect any of the contract rights expressly set forth
 in the Charter of holders of shares of the 6.00% Preferred Stock. The Board of Directors,
 however, without stockholder approval, may modify the interpretation or applicability
 of the rating agency guidelines applicable to the 6.00% Preferred Stock in the event
 the Fund receives confirmation from Moody&#146;s that any such modification would
 not impair the rating then assigned to the 6.00% Preferred Stock. Furthermore, under
 certain circumstances, without the vote of stockholders, the Board of Directors
 may determine that it is not in the best interests of the Fund to continue to comply
 with the rating agency guidelines. See &#147;- Rating Agency Guidelines&#148; above.
 The affirmative vote of a majority of the votes entitled to be cast by holders of
 outstanding shares (as defined under &#147;Investment Goal, Policies and Risks
&#151; Changes in Investment Goal and Policies&#148;) of the 6.00% Preferred Stock
 and any other Preferred Stock, voting as a separate class, will be required to approve
 any plan of reorganization adversely affecting such shares or any action requiring
 a vote of security holders under Section 13(a) of the 1940 Act, including, among
 other things, changes in the Fund&#146;s primary investment goal or changes in the
 investment restrictions described as fundamental policies under &#147;Investment
 Restrictions&#148; in the Statement of Additional Information. The class vote of
 holders of shares of the 6.00% Preferred Stock and any other Preferred Stock described
 above in each case will be in addition to a separate vote of the requisite percentage
 of shares of Common Stock, 6.00% Preferred Stock and any other Preferred Stock,
 voting together as a single class, necessary to authorize the action in question.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Issuance
 of Additional Preferred Stock.</i>So long as any shares of the 6.00% Preferred
 Stock are outstanding, the Fund may issue and sell one or more other series of Preferred
 Stock, provided that the Fund maintains the asset coverage requirements of the 6.00%
 Preferred Stock and any other outstanding Preferred Stock and no such additional
 Preferred Stock will have any preference or priority over any other Preferred Stock
 of the Fund upon the distribution of the assets of the Fund or in respect of the
 payment of dividends as required by the Charter.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<i>Repurchase
 of Preferred.</i>The Fund is a closed-end investment company and, as such, holders
 of the 6.00% Preferred Stock do not, and will not, have the right to redeem their
 shares of the Fund. The Fund may, however, repurchase shares of the 6.00% Preferred
 Stock and/or any other Preferred Stock when it is deemed advisable by the Board
 of Directors in compliance with the requirements of the 1940 Act and the rules and
 regulations thereunder.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>CERTAIN CORPORATE GOVERNANCE
 PROVISIONS</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The seven
 Fund Directors who are elected by the holders of Common Stock and Preferred Stock
 voting together are divided into three classes, each serving a staggered term of
 three years and until a successor is elected and qualifies. The two Directors elected
 only by the holders of Preferred Stock stand for election at each annual meeting
 of stockholders. Accordingly, it likely would take a number of years for stockholders
 to change a majority of the Board of Directors. Vacancies on the Board of Directors
 for one or more of the classified positions may be filled by the remaining Directors
 for the balance of the term of the class and until a successor is elected and qualifies.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund&#146;s
 Bylaws permit stockholders to call a special meeting of stockholders only if certain
 procedural requirements are met and the request is made by stockholders entitled
 to cast at least a majority of the votes entitled to be cast at such a meeting.
 The Bylaws also require that advance notice be given to the Fund in the event a
 stockholder desires to nominate a person for election to the Board of Directors
 or to transact any other business at an annual meeting of stockholders. With respect
 to an annual meeting of stockholders, notice of any such nomination or business
 must be delivered to or received at the principal executive offices of the Fund
 not less than 90 calendar days nor more than 120 calendar days prior to the anniversary
 of the date of mailing of the notice for the preceding year&#146;s annual meeting
 (subject to certain exceptions). Any advance notice by a stockholder must</font></p>
<p align="center"><font face="Times New Roman" size="2">26</font></p>
<hr size="3" color="gray">
<page>

<p align="justify"><font face="Times New Roman" size="2">be accompanied
 by certain information as provided in the Bylaws. The Bylaws contain similar advance
 notice provisions with respect to special meetings of stockholders.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Certain provisions
 of the 1940 Act and the Charter require a separate additional vote of the holders
 of Preferred Stock to approve certain transactions, including certain mergers, asset
 dispositions and conversion of the Fund to open-end status.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;These provisions
 may have the effect of maintaining the continuity of management and thus may make
 it more difficult for the Fund&#146;s stockholders to change the majority of Directors.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>REPURCHASES OF SECURITIES
</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 a closed-end diversified management investment company and, as such, its stockholders
 do not, and will not, have the right to redeem their shares of the Fund. Although
 the Fund will not offer to repurchase shares of its Common Stock and/or Preferred
 on a periodic basis, it may repurchase shares of its Common Stock and/or Preferred
 on such occasions when it is deemed advisable by the Fund. Under the 1940 Act, the
 Fund may repurchase its securities (i) on a securities exchange or such other open
 market designated by the SEC (provided that the Fund has, in the case of purchases
 of its stock, informed holders of the class of stock involved within the preceding
 six months of its intention to repurchase such stock), (ii) by a tender offer open
 to all holders of the class of securities involved or (iii) as otherwise permitted
 by the SEC. Where a repurchase of shares of the Fund is to be made that is not to
 be effected on a securities exchange or an open market or by the making of a tender
 offer, the 1940 Act provides that certain conditions must be met regarding, among
 other things, distribution of net income, identity of the seller, price paid, brokerage
 commissions, prior notice to holders of the class of its securities involved of
 an intention to purchase such securities and the purchase not being made in a manner
 or on a basis which discriminates unfairly against the other holders of such class.
 The Fund may incur debt, in an amount not exceeding 10% of its total assets, to
 finance share repurchase transactions. Any related interest charges will be paid
 by the Fund and borne pro rata by the stockholders indirectly through their interest
 in the Fund. See &#147;Investment Goal and Policies &#151; Risks to Common Stockholders
 of Borrowing Money and Issuing Senior Securities.&#148;</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If the Fund
 repurchases shares of its Common Stock for a price below their NAV, the NAV of those
 shares of Common Stock that remain outstanding would be enhanced, but this does
 not necessarily mean that the market price of those outstanding shares would be
 affected, either positively or negatively. Repurchases of shares of Common Stock
 by the Fund would also decrease its total assets and accordingly may increase its
 expenses as a percentage of average net assets. Further, interest on any borrowings
 to finance any such share repurchase transactions would reduce the Fund&#146;s net
 income.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Board
 of Directors of the Fund has authorized the Fund to repurchase up to 300,000 shares
 of its Common Stock and up to 10% of the Preferred during the year ending December
 31, 2005. Any such repurchases would take place at then prevailing prices in the
 open market or in other transactions. Common Stock repurchases would be effected
 at a price per share that is less than the share&#146;s then current NAV, and Preferred
 Stock repurchases would be effected at a price per share that is less than the share&#146;s liquidation preference.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>DIVIDENDS, DISTRIBUTIONS
 AND REINVESTMENT PLAN</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund currently
 has a policy of paying quarterly distributions to its Common Stockholders. Distributions
 are currently being made at the annual rate of 5% of the rolling average of the
 prior four calendar quarter-end NAVs of the Fund&#146;s Common Stock, with the fourth
 quarter distribution being the greater of 1.25% of the rolling average or the distribution
 required for treatment as a regulated investment company under the Code. The Fund&#146;s final distribution for each calendar year will include any remaining net
 investment income and net realized capital gains deemed, for Federal income tax
 purposes, undistributed during the year, and may, but need not, include all net
 long-term capital gains realized during the year. If, for any calendar year, the
 total distributions exceed net investment income and net realized capital gains,
 the excess will generally be treated as a tax-free return of capital (up to the
 amount of the stockholder&#146;s tax basis in his or her shares). The amount treated
 as a tax-free return of capital will reduce a stockholder&#146;s adjusted basis
 in his or her shares, thereby increasing his or her potential gain or reducing his
 or her potential loss on the sale of his or her shares. Pursuant to the requirements
 of the 1940 Act and other applicable laws, a notice will accompany each quarterly
 distribution with respect to the estimated</font></p>
<p align="center"><font face="Times New Roman" size="2">27</font></p>
<hr size="3" color="gray">
<page>

<p><font face="Times New Roman" size="2">source of the distribution made. Such distribution
 policy may, under certain circumstances, have certain adverse consequences to the
 Fund and its stockholders. In addition, in order to make such distributions, the
 Fund may have to sell a portion of its investment portfolio at a time when independent
 investment judgment might not dictate such action. The Fund&#146;s quarterly distribution
 policy may be changed by the Board of Directors without stockholder approval.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund has
 adopted a Distribution Reinvestment and Cash Purchase Plan (the &#147;Plan&#148;),
 through which all such net investment income dividends and capital gains distributions
 are paid to Common Stockholders in the form of additional shares of the Fund&#146;s
 Common Stock (plus cash in lieu of any fractional shares which otherwise would have
 been issuable), unless a stockholder elects to receive cash as provided below. In
 this way, a stockholder can maintain an undiluted investment in the Fund and still
 allow the Fund to pay out the required distributable income.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;No action
 is required on the part of a registered stockholder to receive a distribution in
 shares of Common Stock of the Fund. A registered stockholder may elect to receive
 an entire distribution in cash by notifying Equiserve, the Plan Agent and the Fund&#146;s transfer agent and registrar, in writing so that such notice is received
 by Equiserve no later than 10 days prior to the record date for distributions to
 stockholders. Equiserve will set up an account for shares acquired through the Plan
 for each stockholder who has not elected to receive distributions in cash (&#147;Participant&#148;) and hold such shares in non-certificated form. Upon request by a Participant,
 received in writing not less than 10 days prior to the record date, Equiserve will,
 instead of crediting shares to the Participant&#146;s account, issue a certificate
 registered in the Participant&#146;s name for the number of whole shares of the
 Fund&#146;s Common Stock and a check for any fractional share. Contact information
 for the Plan Agreement is set forth under &#147;Custodian, Transfer Agent and Registrar.&#148;</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Those stockholders
 whose shares are held by a broker or other financial intermediary may receive distributions
 in cash by notifying their broker or other financial intermediary.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund uses
 only newly-issued shares to implement the Plan, whether its shares are trading at
 a premium or at a discount to NAV. The number of shares to be issued to a stockholder
 is determined by dividing the total dollar amount of the distribution payable to
 such stockholder by the market price per share of the Fund&#146;s Common Stock at
 the close of regular trading on Nasdaq on the valuation date for such distribution.
 Market price per share on that date will be the closing price for such shares on
 Nasdaq or, if no sale is reported for such day, at the average of their electronically-reported
 bid and asked prices. The number of shares of the Fund&#146;s Common Stock to be
 outstanding after giving effect to payment of the distribution cannot be established
 until the value per share at which additional shares will be issued has been determined
 and elections of the Fund&#146;s stockholders have been tabulated.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;There is no
 charge to stockholders for receiving their distributions in the form of additional
 shares of the Fund&#146;s Common Stock. Equiserve&#146;s fees for handling distributions
 in stock are paid by the Fund. There are no brokerage charges with respect to shares
 issued directly by the Fund as a result of distributions payable in stock. If a
 Participant elects by written notice to Equiserve to have Equiserve sell part or
 all of the shares held by Equiserve in the Participant&#146;s account and remit
 the proceeds to the Participant, Equiserve is authorized to deduct a $2.50 transaction
 fee plus brokerage commissions from the proceeds.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stockholders
 who receive distributions in the form of stock are subject to the same Federal,
 state and local tax consequences as are stockholders who elect to receive their
 distributions in cash. A stockholder&#146;s basis for determining gain or loss upon
 the sale of stock received in a distribution from the Fund will be equal to the
 total dollar amount of the distribution paid to the stockholder in the form of additional
 shares.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Distributions
 to Preferred Stockholders are recorded on an accrual basis and paid quarterly. See
 &#147;Description of Capital Stock &#151; Preferred Stock &#151; Distributions.&#148;</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>TAXATION</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund intends
 to continue to qualify for the special tax treatment afforded regulated investment
 companies (&#147;RICs&#148;) under the Code. As long as it so qualifies, in any
 taxable year in which it distributes at least 90% of its investment company taxable
 income (&#147;ICTI&#148;) (as that term is defined in the Code without regard to
 the</font></p>
<p align="center"><font face="Times New Roman" size="2">28</font></p>
<hr size="3" color="gray">
<page>

<p><font face="Times New Roman" size="2">deduction for dividends paid) for such taxable
 year, the Fund will not be subject to Federal income tax on the part of its ICTI
 and net capital gains (i.e., the excess of the Fund&#146;s net realized long-term
 capital gains over its net realized short-term capital losses), if any, that it
 distributes to its stockholders in each taxable year. The Fund intends to distribute
 substantially all of such income.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Fund distributions
 comprised of dividends from domestic corporations and certain foreign corporations
 (generally, corporations incorporated in a possession of the United States, some
 corporations eligible for treaty benefits under a treaty with the United States
 and corporations whose stock is readily tradable on an established securities market
 in the United States) are eligible for taxation at a maximum tax rate of 15% also
 applicable to capital gains in the hands of non-corporate shareholders. Capital
 gain dividends likewise, are taxed at the reduced maximum rate of 15% for non-corporate
 taxpayers. These tax rates are scheduled to apply through 2008. Not later than 60
 days after the close of its taxable year, the Fund will provide its stockholders
 with a written notice designating the amounts of any long-term capital gains, qualified
 dividend income and other ordinary income.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If the Fund
 does not meet the asset coverage requirements of the 1940 Act or the Charter, the
 Fund will be required to suspend distributions to holders of its Common Stock until
 the asset coverage is restored. Such a suspension of distributions might prevent
 the Fund from distributing 90% of its ICTI, as is required in order to avoid Fund-level
 taxation of such income. Upon any failure to meet the asset coverage requirements
 of the 1940 Act or the Charter, the Fund may, and in certain circumstances will
 be required to, partially redeem shares of its 6.00% Preferred Stock in order to
 maintain or restore the requisite asset coverage and avoid the adverse consequences
 to the Fund and its stockholders of failing to qualify as a RIC. If asset coverage
 were restored, the Fund would again be able to pay dividends and might be able to
 avoid Fund-level taxation of its income.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Internal
 Revenue Service (the &#147;IRS&#148;) currently requires that a RIC that has two
 or more classes of stock allocate to each class proportionate amounts of each type
 of its income (<i>e.g</i>., capital gains, qualified dividend income and other ordinary
 income). Accordingly, the Fund intends to designate dividends paid to holders of
 each class of the Fund&#146;s stock as comprised of capital gains, qualified dividend
 income and/or other ordinary income, as applicable, in proportion to such class&#146;s share of total dividends paid during the year.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If the Fund
 pays a dividend in January which was declared in the previous October, November
 or December to stockholders of record on a specified date in one of such months,
 then such dividend will be treated for tax purposes as being paid by the Fund and
 received by its stockholders on December 31 of the year in which such dividend was
 declared.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stockholders
 may be entitled to offset their capital gain dividends with capital losses. There
 are a number of statutory provisions affecting when capital losses may be offset
 against capital gains, and limiting the use of losses from certain investments and
 activities. Accordingly, stockholders with capital losses are urged to consult their
 tax advisers.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Ordinary income
 dividends (but not capital gain dividends) paid to stockholders who are non-resident
 aliens or foreign entities generally will be subject to a 30% United States withholding
 tax unless a lower treaty rate applies.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Dividends
 and interest received by the Fund may give rise to withholding and other taxes imposed
 by foreign countries. Tax conventions between certain countries and the United States
 may reduce or eliminate such taxes. Stockholders may be able to claim a credit or
 take a deduction for foreign taxes paid by the Fund if certain requirements are
 met.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;By law, unless
 you qualify for an exemption from backup withholding (for instance, if you are a
 corporation), your dividends and redemption proceeds will be subject to a backup
 withholding tax if you have not provided a tax identification number or social security
 number or if the number you have provided is incorrect.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This section
 summarizes some of the consequences under Federal tax law of an investment in the
 Fund. It is not a substitute for personal tax advice. Consult your personal tax
 adviser about the potential tax consequences of purchasing and holding Common Stock
 in the Fund under all applicable tax laws. For additional tax discussion, see &#147;Taxation&#148; in the Statement of Additional Information.</font></p>
<p align="center"><font face="Times New Roman" size="2">29</font></p>
<hr size="3" color="gray">
<page>

<p align="center"><font face="Times New Roman" size="2"><b>CUSTODIAN, TRANSFER AGENT
 AND REGISTRAR</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;State Street
 Bank and Trust Company, Two Heritage Drive, North Quincy, Massachusetts 02171, acts
 as custodian of the cash and other assets of the Fund. Equiserve Trust Company,
 N.A., 225 Franklin Street, Boston, Massachusetts 02110, acts as transfer agent and
 registrar for the Fund&#146;s shares and as Plan Agent under its Plan. Stockholder
 inquiries should be directed to P.O. Box 8200, Boston, Massachusetts 02266-8200
 (Tel. No. (800) 426-5523).</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>LEGAL MATTERS</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Certain matters
 concerning the legality under Maryland law of the Shares will be passed on by Sidley
 Austin Brown &#038; Wood LLP, Washington, D.C.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>EXPERTS</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Tait, Weller
 &#038; Baker, independent registered public accountants, are the independent registered
 public accountants of the Fund. The audited financial statements of the Fund and
 certain of the information appearing under the caption &#147;Financial Highlights&#148; included in this Prospectus have been audited by Tait, Weller &#038; Baker
 and Ernst &#038; Young LLP for the periods indicated in their reports with respect
 thereto, and are included in reliance upon such reports and upon the authority of
 such firms as experts in accounting and auditing. Tait, Weller &#038; Baker has
 an office at 1818 Market Street, Suite 2400, Philadelphia, Pennsylvania 19103, and
 also performs tax and other professional services for the Fund.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>ADDITIONAL INFORMATION
</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Fund is
 subject to the informational requirements of the Exchange Act and the 1940 Act and,
 in accordance therewith, files reports and other information with the SEC. Reports,
 proxy statements and other information filed by the Fund with the SEC pursuant to
 the information requirements of such Acts can be inspected and copied at the public
 reference facilities maintained by the SEC, 450 Fifth Street, N.W., Washington,
 D.C. 20549. The SEC maintains a Web site at http://www.sec.gov containing reports,
 proxy and information statements and other information regarding registrants, including
 the Fund, that file electronically with the SEC.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This Prospectus
 constitutes part of a Registration Statement filed by the Fund with the SEC under
 the Securities Act and the 1940 Act. This Prospectus omits certain of the information
 contained in the Registration Statement, and reference is hereby made to the Registration
 Statement and related exhibits for further information with respect to the Fund
 and its Common Stock. Any statements contained herein concerning the provisions
 of any document are not necessarily complete and, in each instance, reference is
 made to the copy of such document filed as an exhibit to the Registration Statement
 or otherwise filed with the SEC. Each such statement is qualified in its entirety
 by such reference. The complete Registration Statement may be obtained from the
 SEC upon payment of the fee prescribed by its rules and regulations or free of charge
 through the SEC&#146;s web site (http://www.sec.gov).</font></p>
<p align="center"><font face="Times New Roman" size="2">30</font></p>
<hr size="3" color="gray">
<page>

<p align="center"><font face="Times New Roman" size="2"><b>TABLE OF CONTENTS OF STATEMENT
 OF ADDITIONAL INFORMATION</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;A Statement
 of Additional Information dated April 28, 2005 has been filed with the SEC and is
 incorporated by reference in this Prospectus. The Table of Contents of the Statement
 of Additional Information is as follows:</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="50%" align="center">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="5%" valign="bottom" align="left"><font face="Times New Roman" size="2"><u>Page</u></font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Risk Factors
 and Special Considerations</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-2</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Investment
 Restrictions</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-4</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Principal
 Stockholders</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-6</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Directors
 and Officers</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-7</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Code of Ethics
 and Related Matters</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-14</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Investment
 Advisory and Other Services</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-15</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Taxation</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-18</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Brokerage
 Allocation and Other Practices</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-21</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Proxy Voting
 Policies and Procedures</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-22</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Net Asset
 Value</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-23</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Financial
 Statements</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-24</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2">31</font></p>
<hr size="3" color="gray">
<br>
<page>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" colspan="3"><hr size="2" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="2"><hr size="2" color="#000000" noshade></td>
</tr>
<tr>
<td colspan="11"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td width="48%" valign="bottom" colspan="3" rowspan="10"><p align="justify"><font face="Times New Roman" size="2">
<b>You should rely only on the information contained in this Prospectus and the
 related Statement of Additional Information. We have not authorized any other person
 to provide you with different information. If anyone provides you with different
 or inconsistent information, you should not rely on it. We are not making an offer
 to sell these securities in any jurisdiction where the offer or sale is not permitted.
 You should assume that the information appearing in this Prospectus and the related
 Statement of Additional Information is accurate only as of the date on the front
 cover pages of this Prospectus and the related Statement of Additional Information.
 Our business, financial condition, results of operations and prospects may have
 changed since that date.</b></font></p></td>

<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="1%" align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="47%" valign="top" rowspan="10" align="center"><font face="Times New Roman" size="3">
<b>2,189,498 Shares of <br>Common Stock Issuable <br>Upon Exercise of <br>Non-Transferable Rights<br>
 to Subscribe for such <br>Shares of Common Stock</b></font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">____________________</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>TABLE
 OF CONTENTS</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2"><u><b>Page
</b></u></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Prospectus
 Summary</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">3</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">The Offer
 at a Glance</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">3</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">The Funds
 at a Glance</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">4</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" rowspan="8" align="center"><font face="Times New Roman" size="5">
<b>ROYCE FOCUS<br>TRUST, INC.</b></font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Risk Factors
 and Special Considerations at a Glance</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">5</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Fund Expenses</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">7</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Financial
 Highlights</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">7</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">The Offer</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">9</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Use of Proceeds</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">15</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">The Fund</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">15</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Investment
 Goal, Policies and Risks</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">15</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Investment
 Advisory and Other Services</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">20</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Description
 of Capital Stock</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">22</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><hr size="1" color="#000000" noshade width="30%"></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Certain Corporate
 Governance Provisions</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">26</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td rowspan="2" valign="top" align="center"><font face="Times New Roman" size="4">
<b>PROSPECTUS</b></font><hr size="1" color="#000000" noshade width="30%"></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Repurchases
 of Securities</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">27</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Dividends,
 Distributions and Reinvestment Plan</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">27</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Taxation</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">28</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>April
 28, 2005</b></font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Custodian,
 Transfer Agent and Registrar</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">30</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Legal Matters</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">30</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Experts</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">30</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Additional
 Information</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">30</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Table of Contents
 of Statement of Additional Information</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">31</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" colspan="3"><hr size="2" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="2"><hr size="2" color="#000000" noshade></td>
</tr>
</table>
<hr size="3" color="gray">
<br>
<page>
<p align="center"><font face="Times New Roman" size="2"><b>ROYCE FOCUS TRUST, INC.
</b></font></p>
<p align="center"><font face="Times New Roman" size="2"><b>STATEMENT OF ADDITIONAL
 INFORMATION</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;ROYCE
 FOCUS TRUST, INC. (the &#147;Fund&#148;) is a registered closed-end diversified
 management investment company, whose shares of Common Stock are listed and traded
 on the Nasdaq National Market under the symbol &#147;FUND.&#148; Its primary investment
 goal is long-term capital growth.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;This
 Statement of Additional Information is not a prospectus, but should be read in conjunction
 with the Fund&#146;s Prospectus dated April 28, 2005. Please retain this document
 for future reference. To obtain a copy of the Prospectus or the Fund&#146;s Annual
 Report to Stockholders for the year ended December 31, 2004 please call Investor
 Information at 1-800-221-4268.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>TABLE OF CONTENTS</b></font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2"><u>Page</u></font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Risk Factors
 and Special Considerations</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-2</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Investment
 Restrictions</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-4</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Principal
 Stockholders</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-6</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Directors
 and Officers</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-7</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Code of Ethics
 and Related Matters</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-14</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Investment
 Advisory and Other Services</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-15</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Taxation</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-18</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Brokerage
 Allocation and Other Practices</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-21</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Proxy Voting
 Policies and Procedures</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-22</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Net Asset
 Value</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-23</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Financial
 Statements</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">B-24</font></td>
</tr>
</table>
<p  align="center"><font face="Times New Roman" size="2"><b>April
  28, 2005</b></font></p>
<hr size="3" color="gray"><br>
<page>
<p  align="center"><font face="Times New Roman" size="2"><b>RISK FACTORS AND SPECIAL CONSIDERATIONS</b></font>
</p>
<p align="justify"><font face="Times New Roman" size="2"><b>Fund&#146;s Rights as Stockholder</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 Fund may not invest in a company for the purpose of exercising control or management.
 However, the Fund may exercise its rights as a stockholder and communicate its views
 on important matters of policy to management, the board of directors and/or stockholders
 if Royce &#038; Associates, LLC (which term as used in this Statement of Additional
 Information includes its corporate predecessor) (&#147;Royce&#148; or the &#147;Investment
 Adviser&#148;) or the Board of Directors determines that such matters could have
 a significant effect on the value of the Fund&#146;s investment in the company.
 The activities that the Fund may engage in, either individually or in conjunction
 with others, may include, among others, supporting or opposing proposed changes
 in a company&#146;s corporate structure or business activities; seeking changes
 in a company&#146;s board of directors or management; seeking changes in a company&#146;s direction or policies; seeking the sale or reorganization of a company or
 a portion of its assets; or supporting or opposing third party takeover attempts.
 This area of corporate activity is increasingly prone to litigation, and it is possible
 that the Fund could be involved in lawsuits related to such activities. Royce will
 monitor such activities with a view to mitigating, to the extent possible, the risk
 of litigation against the Fund and the risk of actual liability if the Fund is involved
 in litigation. However, no assurance can be given that litigation against the Fund
 will not be undertaken or liabilities incurred.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 Fund may, at its expense or in conjunction with others, pursue litigation or otherwise
 exercise its rights as a security holder to seek to protect the interests of security
 holders if Royce and the Board of Directors determine this to be in the best interests
 of the Fund&#146;s stockholders.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>High-Yield and Investment Grade Debt
 Securities</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Up
 to 35% of the Fund&#146;s assets may be invested in non-convertible debt securities
 of various domestic and foreign issuers. Within this category, up to 5% of the Fund&#146;s assets may be invested in below investment-grade debt securities, also known
 as high-yield/high risk securities. These securities may be rated from Ba to Ca
 by Moody&#146;s or from BB to D by Standard &#038; Poor&#146;s (&#147;S&#038;P&#148;)
 or unrated. These securities have poor protection with respect to the payment of
 interest and repayment of principal and may be in default as to the payment of principal
 or interest. These securities are often speculative and involve greater risk of
 loss or price changes due to changes in the issuer&#146;s capacity to pay. The market
 prices of high-yield debt securities may fluctuate more than those of higher-rated
 debt securities and may decline significantly in periods of general economic difficulty,
 which may follow periods of rising interest rates.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 market for high-yield debt securities may be thinner and less active than that for
 higher-rated debt securities, which can adversely affect the prices at which the
 former are sold. If market quotations cease to be readily available for a high-yield
 debt security in which the Fund has invested, the security will then be valued in
 accordance with procedures established by the Board of Directors. Judgment may play
 a greater role in valuing high-yield debt securities than is the case for securities
 for which more external sources for quotations and last sale information are available.
 Adverse publicity and changing investor perceptions may affect the Fund&#146;s ability
 to dispose of high-yield debt securities.
<br><br>&#160;&#160;&#160;&#160;&#160;Since the risk of default is higher for high-yield debt securities, Royce&#146;s
 research and credit analysis may play an important part in managing securities of
 this type for the Fund. In considering such investments for the Fund, Royce will
 attempt to identify those issuers of high-yield debt securities whose financial
 condition is adequate to meet future obligations, has improved or is expected to
 improve in the future. Royce&#146;s analysis may focus on relative values based
 on such factors as interest or dividend coverage, asset coverage, earnings prospects
 and the experience and managerial strength of the issuer.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 Fund may also invest in non-convertible debt securities in the lowest rated category
 of investment grade debt. Such securities may have speculative characteristics,
 and adverse changes in economic conditions or other circumstances are more likely
 to lead to a weakened capacity to make principal and interest payments than is the
 case with higher grade securities.</font></p>
<p align="center"><font face="Times New Roman" size="2">B-2</font></p>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 Fund may also invest in higher rated investment grade non-convertible debt securities.
 Such securities include those rated Aaa by Moody&#146;s or AAA by S&#038;P (which
 are considered to be of the highest credit quality and where the capacity to pay
 interest and repay principal is extremely strong), those rated Aa by Moody&#146;s
 or AA by S&#038;P (where the capacity to repay principal is considered very strong,
 although elements may exist that make risks appear somewhat larger than expected
 with securities rated Aaa or AAA), securities rated A by Moody&#146;s or A by S
&#038;P (which are considered to possess adequate factors giving security to principal
 and interest) and securities rated Baa by Moody&#146;s or BBB by S&#038;P (which
 are considered to have an adequate capacity to pay interest and repay principal,
 but may have some speculative characteristics).</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Repurchase Agreements</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;In
 a repurchase agreement, the Fund in effect makes a loan by purchasing a security
 and simultaneously committing to resell that security to the seller at an agreed
 upon price on an agreed upon date within a number of days (usually not more than
 seven) from the date of purchase. The resale price reflects the purchase price plus
 an agreed upon incremental amount which is unrelated to the coupon rate or maturity
 of the purchased security. A repurchase agreement requires or obligates the seller
 to pay the agreed upon price, which obligation is in effect secured by the value
 (at least equal to the amount of the agreed upon resale price and marked to market
 daily) of the underlying security.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 Fund may engage in repurchase agreements, provided that such agreements are collateralized
 by cash or securities issued by the U.S. Government or its agencies having a value
 at least equal to the amount loaned. Repurchase agreements could involve certain
 risks if the counterparty defaults or becomes insolvent, including possible delays
 or restrictions upon the Fund&#146;s ability to dispose of collateral. While it
 does not presently appear possible to eliminate all risks from these transactions
 (particularly the possibility of a decline in the market value of the underlying
 securities, as well as delays and costs to the Fund in connection with bankruptcy
 proceedings), it is the policy of the Fund to enter into repurchase agreements only
 recognized securities dealers and banks determined by Royce to represent minimal
 credit risk, and having a term of seven days or less.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Warrants, Rights and Options</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 Fund may invest up to 5% of its total assets in warrants, rights and options. A
 warrant, right or call option entitles the holder to purchase a given security within
 a specified period for a specified price and does not represent an ownership interest.
 A put option gives the holder the right to sell a particular security at a specified
 price during the term of the option. These securities have no voting rights, pay
 no dividends and have no liquidation rights. In addition, their market prices do
 not necessarily move parallel to the market prices of the underlying securities.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 sale of warrants, rights or options held for more than one year generally results
 in a long-term capital gain or loss to the Fund, and the sale of warrants, rights
 or options held for one year or less generally results in a short term capital gain
 or loss to the Fund. The holding period for securities acquired upon exercise of
 a warrant, right or call option, however, generally begins on the day after the
 date of exercise, regardless of how long the warrant, right or option was held.
 The securities underlying warrants, rights and options could include shares of common
 stock of a single company or securities market indices representing shares of the
 common stocks of a group of companies, such as the Russell 2000.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Investing
 in warrants, rights and call options on a given security allows the Fund to hold
 an interest in that security without having to commit assets equal to the market
 price of the underlying security and, in the case of securities market indices,
 to participate in a market without having to purchase all of the securities comprising
 the index. Put options, whether on shares of common stock of a single company or
 on a securities market index, would permit the Fund to protect the value of a portfolio
 security against a decline in its market price and/or to benefit from an anticipated
 decline in the market price of a given security or of a market. Thus, investing
 in warrants, rights and options permits the Fund to incur additional risk and/or
 to hedge against risk.</font></p>
<p align="center"><font face="Times New Roman" size="2">B-3</font></p>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2"><b>Investment in Other Investment Companies
</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 Fund also may indirectly invest in the securities of domestic and foreign companies
 by investing in the securities of other investment companies that invest primarily
 in such companies. The other investment companies in which the Fund may invest may
 be domestic companies registered under the 1940 Act or foreign companies that are
 not so registered or otherwise regulated. Such investment companies usually have
 their own management fees and expenses, and Royce will also earn its own fee on
 Fund assets invested in such other companies, which would result in a duplication
 of fees to the extent of any such investment. However, Royce will waive its management
 fee on any Fund assets invested in open-end investment companies (other than exchange-traded
 funds), and no sales charge will be incurred on such an investment. See &#147;Investment
 Advisory and Other Services &#151; Advisory Fee&#148; in the Prospectus.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;In
 accordance with the 1940 Act, the Fund may invest up to 10% of its total assets
 in securities of other investment companies. In addition, under the 1940 Act the
 Fund may not own more than 3% of the total outstanding voting stock of any investment
 company and not more than 5% of the value of the Fund&#146;s total assets may be
 invested in securities of any one investment company. See also &#147;Investment
 Restrictions&#148; below.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Risks to Common Stockholders of Borrowing
 Money and Issuing Senior Securities</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;<i>
Asset Coverage Test</i>. Section 18(a)(1) of the 1940 Act permits a registered closed-end
 company such as the Fund to issue and sell a class of senior securities (such as
 the Preferred) only if, immediately after such issuance and sale, the net asset
 value (&#147;NAV&#148;) of the Fund&#146;s portfolio is at least 200% of the liquidation
 preference of the 6.00% Preferred Stock. Section 18(g) of the 1940 Act defines a
 senior security to mean any stock of a class having priority over any other class
 as to distribution of assets or payment of dividends. Under Section 18(h) of the
 1940 Act, asset coverage of a class of senior securities of an issuer which is a
 stock means the ratio which the value of the issuer&#146;s total assets, less all
 of its liabilities and indebtedness not represented by senior securities, bears
 to the aggregate amount of the issuer&#146;s senior securities representing indebtedness
 plus the aggregate of the involuntary liquidation preference of such class of senior
 security which is a stock. Section 18(a)(1) of the 1940 Act also prevents the Fund
 from declaring any cash or other non-stock dividends or distributions on its Common
 Stock or purchasing any shares of its capital stock if, immediately thereafter,
 the NAV of the Fund&#146;s portfolio (determined after deducting the amount of such
 dividend or distribution) is at least 200% of the liquidation preference of its
 outstanding Preferred Stock.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;If
 the asset coverage for outstanding Preferred Stock as of the last day of March,
 June, September or December in any calendar year should fall below 200%, the Fund
 would redeem such Preferred Stock at a price equal to its liquidation preference
 plus accumulated but unpaid dividends to the date of redemption and/or any other
 senior securities of the Fund then outstanding to the extent necessary to restore
 such asset coverage to at least 200%. See &#147;Description of Capital Stock &#151;
 Preferred Stock &#151; Redemption&#148; in the Prospectus.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 Articles Supplementary (the &#147;Articles Supplementary&#148;) governing the outstanding
 6.00% Cumulative Preferred Stock (the &#147;6.00% Preferred Stock&#148;) contains
 more restrictive provisions concerning the Fund&#146;s obligation to maintain asset
 coverage for the 6.00% Preferred Stock than those required by Section 18(a)(1) of
 the 1940 Act. See &#147;Description of Capital Stock &#151; Preferred Stock &#151;
 Rating Agency Guidelines&#148; in the Prospectus.</font></p>
<p align="center"><font face="Times New Roman" size="2">________________</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce
 believes that the Fund is suitable for investment only by persons who can invest
 without concern for current income and who are in a financial position to assume
 above-average risks in search for long-term capital appreciation.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>INVESTMENT
 RESTRICTIONS</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The
 policies set forth below are fundamental policies of the Fund and may not be changed
 without the affirmative vote of the holders of a majority of the Fund&#146;s outstanding
 voting securities, as indicated in the</font></p>
 <p align="center"><font face="Times New Roman" size="2">B-4</font></p>
<hr size="3" color="gray">
<br>
<page>
<p><font face="Times New Roman" size="2">Prospectus under &#147;Investment Goal,
 Policies and Risks &#151; Changes in Investment Goal and Policies.&#148; The Fund
 may not:</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="2%" valign="top" align="left"><font face="Times New Roman" size="2">1.</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">As to 75%
 of the Fund&#146;s total assets, invest more than 5% of its total assets in the
 securities of any one issuer. (This limitation does not apply to cash and cash items
 or to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.)</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">2.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Invest in
 any investment company if a purchase of its shares would result in the Fund and
 its affiliates owning more than 3% of the total outstanding stock of such company.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">3.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Purchase more
 than 10% of the voting securities or more than 10% of any class of securities of
 any issuer. For purposes of this restriction, all outstanding fixed income securities
 of an issuer are considered as one class.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">4.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Purchase or
 sell commodities or commodity future contracts. (This restriction does not limit
 the Fund&#146;s use of financial futures and options thereon, or the investment
 of not more than 25% of the Fund&#146;s assets in gold and silver bullion or certificates
 for such precious metals. Illiquid investments in either gold, silver or certificates
 for gold or silver are limited to 10% of the Fund&#146;s assets.)</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">5.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Make loans
 of money or securities, except (i) by the purchase of fixed income obligations in
 which the Fund may invest consistent with its investment objective and policies;
 (ii) by entering into securities lending transactions described in &#147;Investment
 Goal, Policies and Risks&#148; in the Prospectus; and (iii) by entering into repurchase
 agreements, as described in &#147;Investment Goal, Policies and Risks&#148; in the
 Prospectus.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">6.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Invest in
 the securities of any company if, to the knowledge of the Fund, any officer or director
 of the Fund or the investment adviser owns more than5% of the outstanding securities
 of such company and such officers and directors (who own more than5%) in the aggregate
 own more than 5% of the outstanding securities of such company.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">7.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Borrow money,
 except to the extent that it may (i) borrow from banks for temporary or emergency
 purposes in an amount not exceeding 5% of the Fund&#146;s assets or (ii) borrow
 in an amount up to 33 1/3% of the value of the Fund&#146;s total assets (including
 the amount borrowed) valued at market less liabilities (not including the amount
 borrowed) at the time the borrowing was made; provided that the Fund is authorized
 to enter into reverse repurchase agreements (but may not do so under the Rating
 Agency Guidelines), as set forth in &#147;Investment Goal, Policies and Risks&#148;
 in the Prospectus.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">8.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Pledge, hypothecate,
 mortgage or otherwise encumber its assets, except in an amount up to 33 1/3% of
 the value of its net assets, but only to secure borrowings authorized by Restriction
 7 above.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">9.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Engage in
 the underwriting of securities, except insofar as the Fund may be deemed an underwriter
 under the Securities Act of 1933 in disposing of a portfolio security.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">10.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Purchase or
 sell real estate or interests therein, although it may purchase securities of issuers
 which engage in real estate operations and securities which are secured by real
 estate or interests therein.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">11.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Invest for
 the purpose of exercising control or management of another company.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">12.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Purchase oil,
 gas or other mineral leases, rights or royalty contracts or exploration or development
 programs, except that the Fund may invest in the securities of companies which invest
 in or sponsor such programs.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">13.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Concentrate
 its investments in any industry.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">14.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Make purchases
 of securities on &#147;margin&#148; from an affiliated person, provided that the
 Fund may engage in short sales and may satisfy margin requirements with respect
 to futures transactions.</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2">B-5</font>
<hr size="3" color="gray">
<br>
<page>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="2%" valign="top" align="left"><font face="Times New Roman" size="2">15.</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Issue any
 class of senior security, or sell any such security of which it is the issuer, except
 as permitted by the 1940 Act.</font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Notwithstanding
 Restriction 4 above, the Fund has no current intention of investing in financial
 futures and options thereon, gold and silver bullion or certificates for such precious
 metals.</font></p>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The policies
 set forth below are operating policies of the Fund and may be changed by the Board
 of Directors without stockholder approval or prior notice to stockholders. The Fund
 may not:</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="4%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">a.&#160;&#160;&#160;&#160; Make investments
 which would cause more than 50% of the Fund&#146;s assets to be invested in equity
 securities traded exclusively in markets outside the United States.</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">b.&#160;&#160;&#160;&#160; Invest
 in emerging market countries.</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Limitations
 a. and b. above do not prevent the Fund from purchasing sponsored or unsponsored
 depository receipts trading within the U.S. and/or developed markets in Europe which
 represent an interest in foreign equity securities trading in other markets, including
 securities of issuers located or trading in emerging market countries.</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">c.&#160;&#160;&#160;&#160;Make investments
 which would cause more that 25% of the Fund&#146;s assets to be invested in non-equity
 securities traded exclusively in markets outside the U.S.</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">d.&#160;&#160;&#160;&#160; Make investments
 which would cause more than 5% of the Fund&#146;s assets to be invested in below
 investment grade non-convertible debt securities.</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">e.&#160;&#160;&#160;&#160; Deal in
 foreign currency futures, either for speculative or hedging purposes.</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">f. &#160;&#160;&#160;&#160;Engage
 in &#147;swaps,&#148; or invest more than 10% of its assets in illiquid securities.</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">g.&#160;&#160;&#160;&#160; Make short
 sales of securities, other than short sales against-the-box in which, at the time
 of the short sale, the Fund holds or has an unrestricted right to receive the security
 to be sold short.</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">h.&#160;&#160;&#160;&#160; Invest
 in derivative securities of a speculative nature. (This limitation is not intended
 to prevent the Fund from making investments in repurchase agreements, reverse repurchase
 agreements, warrants, rights, options and convertible securities.)</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">i.&#160;&#160;&#160;&#160;Borrow
 from banks for leveraging purposes. (The Fund may, however, issue other senior securities
 under Section 18 of the 1940 Act.)</font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If a percentage
 restriction is met at the time of investment, a later increase or decrease in percentage
 resulting from a change in values of portfolio securities or amount of total assets
 is not considered a violation of any of the above restrictions.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>PRINCIPAL STOCKHOLDERS
</b></font></p>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;As of April
 15, 2005, there were 10,947,490 shares of Common Stock and 1,000,000 shares of 6.00%
 Preferred Stock of the Fund outstanding. 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 or 6.00% Preferred Stock as of the Record Date:</font></p>
<p align="center"><font face="Times New Roman" size="2">B-6</font>
<hr size="3" color="gray">
<br>
<page>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Amount and Nature</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="4" align="center"><font face="Times New Roman" size="2">
<b>Percent of</b></font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2"><b>Name and
 Address of Owner</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Class/Series of Stock</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>of Ownership</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="4" align="center"><font face="Times New Roman" size="2">
<b>Class/Series</b></font></td>
</tr>
<tr>
<td valign="bottom"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="4"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td width="18%" valign="top" align="left"><font face="Times New Roman" size="2">Charles M.
 Royce</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
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<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">1,252,497
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<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="4%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="6%" valign="bottom" align="right"><font face="Times New Roman" size="2">11.44</font></td>
<td width="2%" valign="top" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">1414 Avenue
 of the Americas</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">New York,
 NY 10019</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">W. Whitney
 George</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">Common Stock</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">724,528
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">6.62</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">1414 Avenue
 of the Americas New York, NY 10019</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Cede &#038;
 Co.**</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">Common Stock</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">10,211,006
 shares - Record</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">93.27</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Depository
 Trust Company</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">P.O. Box #20</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Bowling Green
 Station</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">6.00% Preferred
 Stock</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">1,000,000
 shares - Record</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="right"><font face="Times New Roman" size="2">100</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">%</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">New York,
 NY 10028</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="top" colspan="3" align="left"><font face="Times New Roman" size="2">_____________________</font></td>
</tr>
<tr>
<td valign="top" align="left" width="1%"><font face="Times New Roman" size="2"> *</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Includes 246,143
 shares held by Royce Family Fund, Inc., a charitable foundation established by Mr.
 Royce and members of his family.</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">**</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Shares held
 by brokerage firms, banks and other financial intermediaries on behalf of beneficial
 owners are registered in the name of Cede &#038; Co.</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2"><b>DIRECTORS AND OFFICERS
</b></font></p>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Board
 of Directors of the Fund is comprised of the nine individuals named below. Two of
 the Directors, Stephen Isaacs and David L. Meister, are elected annually by the
 holders of the 6.00% Preferred Stock, voting as a separate class. The remaining
 seven Directors are divided into three classes and are elected by the holders of
 Common Stock and 6.00% Preferred Stock, voting together as a single class. The Class
 I Directors, Charles M. Royce and G. Peter O&#146;Brien, have terms that expire
 in 2006; the Class II Directors, Mark R. Fetting, Richard M. Galkin and Arthur S.
 Mehlman, have terms that expire in 2007; and the Class III Directors, Donald R.
 Dwight and William L. Koke, have terms that expire in 2005. To the extent permitted
 by the 1940 Act and Maryland law, vacancies on the Board can be filled by the remaining
 Directors for the remainder of the term of the respective Board position.</font></p>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;There are
 no family relationships between any of the Fund&#146;s Directors and officers. Each
 Director will hold office until his term expires and his successor has been duly
 elected or until his earlier resignation or removal. Each of the Fund&#146;s Directors
 is also a director/trustee of the other management investment companies comprising
 The Royce Funds, which have twenty portfolios.</font></p>
<p><font face="Times New Roman" size="2"><b>Directors</b></font></p>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;<i>Interested
 Directors</i>. Certain biographical and other information concerning the Directors
 who are &#147;interested persons&#148; as defined in the 1940 Act, of the Fund,
 including their designated classes, is set forth below. Officers are elected by
 and serve at the pleasure of the Board of Directors. Each officer will hold office
 for the year ending December 31, 2005, and thereafter until his respective successor
 is duly elected and qualified.</font></p>
<p align="center"><font face="Times New Roman" size="2">B-7</font>
<hr size="3" color="gray">
<br>
<page>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Number of Portfolios</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Other Public</b></font></td>
</tr>
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Name,
 Age</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Position(s) With</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Term Of Office</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>in Fund Complex</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Principal Occupations During</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Company Directorships</b></font></td>
</tr>
<tr>
<td width="9%" valign="bottom" align="center"><font face="Times New Roman" size="2"><b>And Address*
</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="12%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>The Fund</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>And Length Of Time Served</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Overseen by Director</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Past Five Years</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Held By Director</b></font></td>
</tr>
<tr>
<td valign="bottom"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Charles M.
 Royce** (65)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Class I Director
 and President</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Term as
 Director expires 2006; Director and Officer since 1996</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">21</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">President,
 Chief Investment Officer and Member of Board of Managers of Royce; and Director/Trustee
 and President of The Royce Funds.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Director
 of Technology Investment Capital Corp.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Mark R. Fetting**(50)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Class II
 Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Term as
 Director expires 2007; Director since 2001</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">21</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Executive
 Vice President of Legg Mason; Member of Board of Managers of Royce; and Division
 President and Senior Officer of Prudential Financial Group, Inc. and related companies,
 including Fund Boards and consulting services to subsidiary companies (from 1991
 to 2000). Mr. Fetting&#146;s prior business experience also includes having served
 as Partner, Greenwich Associates, and Vice President, T. Rowe Price Group, Inc.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Director/Trustee
 of registered investment companies constituting 23 Legg Mason Funds</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="top" colspan="4" align="left"><font face="Times New Roman" size="2">_____________</font></td>
</tr>
<tr>
<td valign="top" align="left" width="1%"><font face="Times New Roman" size="2"> *</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Mr. Royce&#146;s address is c/o Royce, 1414 Avenue of the Americas, New York, New York 10019.
 Mr. Fetting&#146;s address is c/o Legg Mason, 100 Light Street, Baltimore, Maryland
 21202.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">**</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Messrs. Royce
 and Fetting are &#147;interested persons&#148; of the Fund within the meaning of
 Section 2(a)(19) of the 1940 Act due to the positions they hold with Royce and,
 for Mr. Fetting, Legg Mason, and their ownership of Legg Mason stock.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;<i>Non-Interested
 Directors</i>. Certain biographical and other information concerning the Fund Directors
 who are not &#147;interested persons,&#148; as defined in the 1940 Act, of the Fund,
 including their designated classes, is set forth below. Each non-interested Director
 is also a member of the Fund&#146;s audit committee.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Number of Portfolios</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Principal</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Other Public</b></font></td>
</tr>
<tr>
<td valign="top" align="center"><font face="Times New Roman" size="2"><b>Name,
 Age</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Position(s) With</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Term Of Office And</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>in Fund Complex</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Occupations During</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Company Directorships</b></font></td>
</tr>
<tr>
<td width="9%" valign="bottom" align="center"><font face="Times New Roman" size="2"><b>And Address*
</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="12%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>The Fund</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Length Of Time Served</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Overseen by Director</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Past Five Years</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Held By Director</b></font></td>
</tr>
<tr>
<td valign="bottom"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Donald R.
 Dwight (73)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Class III
 Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Term as
 Director expires 2005; Director since 1998</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">21</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">President
 of Dwight Partners, Inc., corporate communications consultants; and Chairman (from
 1982 until March 1998) and Chairman Emeritus (since March 1998) of Newspapers of
 New England, Inc. Mr. Dwight&#146;s prior experience includes having served as Lieutenant
 Governor of the Commonwealth of Massachusetts, as President and Publisher of Minneapolis
 Star and Tribune Company and as a trustee of the registered investment companies
 constituting the Eaton Vance Funds.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Richard M.
 Galkin (66)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Class II
 Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Term as
 Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">21</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Private investor.
 Mr. Galkin&#146;s prior business experience includes having served as President</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2">B-8</font>
<hr size="3" color="gray">
<br>
<page>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Number of Portfolios</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Principal</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Other Public</b></font></td>
</tr>
<tr>
<td valign="top" align="center"><font face="Times New Roman" size="2"><b>Name,
 Age</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Position(s) With</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Term Of Office And</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>in Fund Complex</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Occupations During</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Company Directorships</b></font></td>
</tr>
<tr>
<td width="9%" valign="bottom" align="center"><font face="Times New Roman" size="2"><b>And Address*
</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="12%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>The Fund</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Length Of Time Served</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Overseen by Director</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Past Five Years</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Held By Director</b></font></td>
</tr>
<tr>
<td valign="bottom"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">of Richard M. Galkin Associates, Inc., telecommunications consultants, President
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Stephen L.
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Term as
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">William L.
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
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<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Arthur S.
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Director of
 The League for People with Disabilities, Inc.; Director of University of Maryland
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">David L. Meister
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">21</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Private investor.
 Chairman and Chief Executive Officer of The Tennis Channel (June 2000 &#150; March
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 Senior Vice President of HBO, President of Time-Life Films and Head of Broadcasting
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2">B-9</font>
<hr size="3" color="gray">
<br>
<page>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="2">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Number of Portfolios</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Principal</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Other Public</b></font></td>
</tr>
<tr>
<td valign="top" align="center"><font face="Times New Roman" size="2"><b>Name,
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Position(s) With</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Term Of Office And</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>in Fund Complex</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Occupations During</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
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</tr>
<tr>
<td width="9%" valign="bottom" align="center"><font face="Times New Roman" size="2"><b>And Address*
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<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
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<b>The Fund</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Length Of Time Served</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Overseen by Director</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
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<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="15%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Held By Director</b></font></td>
</tr>
<tr>
<td valign="bottom"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
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<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">G. Peter O&#146;Brien (58)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Class I
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">21</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Trustee of
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<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Director/
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 Director of Renaissance Capital Greenwich Funds; Director of Technology Investment
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<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td colspan="3" valign="top" align="left"><font face="Times New Roman" size="2">____________</font></td>
</tr>
<tr>
<td valign="top" align="left" width="1%"><font face="Times New Roman" size="2">*</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Messrs. Dwight,
 Galkin, Isaacs, Koke, Mehlman, Meister and O&#146;Brien&#146;s address is c/o Royce,
 1414 Avenue of the Americas, New York, New York 10019.</font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2"><b>Officers</b></font></p>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Certain biographical
 and other information concerning the officers of the Fund is set forth below. Officers
 are elected by and serve at the pleasure of the Board of Directors. Each officer
 will hold office for the year ending December 31, 2005, and thereafter until his
 respective successor is duly elected and qualified.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="top" align="center"><font face="Times New Roman" size="2"><b>Name,
 Age</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Position(s) With</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Term Of Office And</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Principal Occupations During</b></font></td>
</tr>
<tr>
<td width="18%" valign="top" align="center"><font face="Times New Roman" size="2"><b>And Address*
</b></font></td>
<td width="2%" ><font face="Times New Roman" size="1">&#160;</font></td>
<td width="10%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>The Fund</b></font></td>
<td width="2%" ><font face="Times New Roman" size="1">&#160;</font></td>
<td width="18%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Length Of Time Served</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Past Five Years</b></font></td>
</tr>
<tr>
<td valign="bottom"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">John D. Diederich
 (53)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Vice President,
 Director of Administration and Treasurer</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Officer
 since 2001</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Member of
 Board of Managers, Chief Operating Officer (since October 2001), Chief Financial
 Officer (since March 2002) and Managing Director of Royce; Vice President, Treasurer
 and Director of Administration of the other Royce Funds; and President of Royce
 Fund Services, Inc.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Jack E. Fockler,
 Jr. (45)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Vice President</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Officer
 since 1995</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Managing Director
 and Vice President of Royce; Vice President of The Royce Funds.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">W. Whitney
 George (46)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Vice President
 and Senior Portfolio Manager</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Officer
 since 1995</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Managing Director
 and Vice President of Royce; Vice President of The Royce Funds.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Daniel A.
 O&#146;Byrne (42)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Vice President
 and Assistant Secretary</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Officer
 since 1994</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Principal
 and Vice President of Royce; Vice President of The Royce Funds.</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2">B-10</font>
<hr size="3" color="gray">
<br>
<page>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="top" align="center"><font face="Times New Roman" size="2"><b>Name,
 Age</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Position(s) With</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Term Of Office And</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Principal Occupations During</b></font></td>
</tr>
<tr>
<td width="18%" valign="top" align="center"><font face="Times New Roman" size="2"><b>And Address*
</b></font></td>
<td width="2%" ><font face="Times New Roman" size="1">&#160;</font></td>
<td width="10%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>The Fund</b></font></td>
<td width="2%" ><font face="Times New Roman" size="1">&#160;</font></td>
<td width="18%" valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Length Of Time Served</b></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Past Five Years</b></font></td>
</tr>
<tr>
<td valign="bottom"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">John E. Denneen
 (38)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Secretary
 and Chief Legal Officer</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Officer
 from 1996 to 2001 and since April 2002</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">General Counsel
 of Royce (since January 2003); Deputy General Counsel, Principal, Chief Compliance
 Officer and Secretary of Royce (since March 2002); Secretary of The Royce Funds
 (1996-2001 and since April 2002); Associate General Counsel, Principal and Chief
 Compliance Officer of Royce (1996-2001); and Principal of Credit Suisse First Boston
 Private Equity (2001-2002).</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2">Lisa Curcio
 (45)</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Chief Compliance
 Officer</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Officer
 since 2004</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">Vice President,
 The Bank of New York (February 2001-June 2004); Director of Compliance, Lord Abbett
 (August 2000-February 2001); Senior Vice President, Compliance Officer and Secretary,
 Lexington Global Asset Managers, Inc. (April 1985-August 2000).</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td colspan="3" valign="top" align="left"><font face="Times New Roman" size="2">____________</font></td>
</tr>
<tr>
<td valign="top" align="left" width="1%"><font face="Times New Roman" size="2">*</font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="left"><font face="Times New Roman" size="2">The address
 of each officer is c/o Royce, 1414 Avenue of the Americas, New York, New York 10019.</font></td>
</tr>
</table>
<p><font face="Times New Roman" size="2"><b>Ownership of Securities</b></font></p>
<p><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Information
 relating to each Director&#146;s share ownership in the Fund and in The Royce Funds
 as of December 31, 2004 is set forth in the tables below.</font></p>

<table border="0" cellpadding="0" cellspacing="0" width="90%">
<tr><td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2"><b>Aggregate
 Dollar Range of Equity</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2"><b>Aggregate
 Dollar Range of Equity</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="center"><font face="Times New Roman" size="2"><u><b>Name
</b></u></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="25%" valign="top" align="center"><font face="Times New Roman" size="2"><u><b>Securities
 in the Fund</b></u></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="4%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="25%" valign="top" align="center"><font face="Times New Roman" size="2"><u><b>Securities
 in The Royce Funds</b></u></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2"><i>Interested
 Directors</i></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Charles
 M. Royce</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Mark
 R. Fetting</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">$10,001-$50,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2"><i>Non-Interested
 Directors</i></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Donald
 R. Dwight</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">$1-$10,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Richard
 M. Galkin</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">$1-$10,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Stephen
 L. Isaacs</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">$1-$10,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">William
 L. Koke</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">$10,001-$50,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">Arthur
 S. Mehlman</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">$10,001-$50,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">David
 L. Meister</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><p style="margin-left:20px; text-indent:-10px;"><font face="Times New Roman" size="2">G.
 Peter O&#146;Brien</font></p></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">$10,001-$50,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="top" align="center"><font face="Times New Roman" size="2">Over $100,000</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<p align="justify"><font face="Times New Roman" size="2">Mr. Royce has sole voting
 power and sole investment power as to the shares beneficially owned by him. As of
 December 31, 2004, all Directors and officers of the Fund as a group (15 persons)
 beneficially owned 1,977,007 shares of the Fund&#146;s Common Stock, constituting
 18.21% of the outstanding shares, and no shares of its 6.00% Preferred Stock. As
 of the date of this Statement of Additional Information, none of the non-interested
 Directors of the Fund nor any of their immediate family members owned beneficially
 or of record any securities issued by Legg Mason or any of its affiliates (other
 than registered investment companies).</font></p>
<p align="center"><font face="Times New Roman" size="2">B-11</font>
<hr size="3" color="gray">
<br>
<page>
<p><font face="Times New Roman" size="2"><b>Board Committees and Meetings</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Board
 of Directors has an Audit Committee, comprised of Donald R. Dwight, Richard M. Galkin,
 Stephen L. Isaacs, William L. Koke, David L. Meister, Arthur S. Mehlman (since April
 15, 2004) and G. Peter O&#146;Brien. The Audit Committee is responsible for, among
 other things, the appointment, compensation and oversight of the work of the Fund&#146;s independent accountants, including the resolution of disagreements regarding
 financial reporting between Fund management and such independent accountants. The
 Fund has adopted an Audit Committee charter. Mr. Galkin serves as Chairman of the
 Audit Committee and Mr. Mehlman is designated as the Audit Committee Financial Expert,
 as defined under SEC regulations. The members of the Audit Committee are &#147;independent&#148; within the meaning of the 1940 Act and the New York Stock Exchange and Nasdaq
 corporate governance standards for audit committees. The Fund&#146;s Audit Committee
 held three meetings during the year ended December 31, 2004.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Board
 of Directors has a Nominating Committee comprised of seven Directors who are not
 &#147;interested persons&#148; as defined in the 1940 Act, namely Messrs. Dwight,
 Galkin, Isaacs, Koke, Mehlman (since April 15, 2004), Meister and O&#146;Brien.
 The Nominating Committee is responsible for identifying and recommending to the
 Board of Directors individuals believed to be qualified to become Board members
 in the event that a position is vacated or created. The Nominating Committee will
 consider Director candidates recommended by stockholders. In considering potential
 Nominees, the Nominating Committee will take into consideration (i) the contribution
 which the person can make to the Board, with consideration given to the person&#146;s
 business and professional experience, education and such other factors as the Committee
 may consider relevant; (ii) the character and integrity of the person; (iii) whether
 or not the person is an &#147;interested person&#148; of the Fund, as defined in
 the applicable laws and regulations; (iv) whether or not the person has any relationships
 that might impair his independence, such as any business, financial or family relationships
 with Fund management, the investment adviser of the Fund, Fund service providers
 or their affiliates; (v) whether or not the person is financially literate pursuant
 to the New York Stock Exchange&#146;s audit committee membership standards; (vi)
 whether or not the person serves on boards of, or is otherwise affiliated with,
 competing financial service organizations or their related investment company complexes;
 (vii) whether or not the person is willing to serve as, and willing and able to
 commit the time necessary for the performance of the duties of, a Director of the
 Fund; and (viii) whether or not the selection and nomination of the person would
 be consistent with the requirements of the Fund&#146;s retirement policies. The
 Fund&#146;s Nominating Committee held three meetings during the year ended December
 31, 2004.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;To have a
 candidate considered by the Nominating Committee, a stockholder must submit the
 recommendation in writing and must include biographical information and set forth
 the qualifications of the proposed nominee. The stockholder recommendation and information
 described above must be sent to the Fund&#146;s Secretary, John E. Denneen, c/o
 Royce Focus Trust, Inc., 1414 Avenue of the Americas, New York, NY 10019.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Although the
 Board of Directors does not have a standing compensation committee, the Directors
 who are not &#147;interested persons&#148; review compensation annually.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Compensation of Directors</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;For the year
 ended December 31, 2004, the following Directors of the Fund received compensation
 from the Fund and The Royce Funds, as follows:</font></p>
<p align="center"><font face="Times New Roman" size="2">B-12</font>
<hr size="3" color="gray">
<br>
<page>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Aggregate</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Pension or Retirement</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Estimated</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Total Compensation</b></font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Compensation</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Benefits Accrued as</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>Annual Benefits</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b>from The Royce Funds</b></font></td>
</tr>
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><u><b>Name
</b></u></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2">
<b><u>from Fund</u></b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2"><u>
<b>Part of Fund Expenses</b></u></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2"><u>
<b>upon Retirement</b></u></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" colspan="3" align="center"><font face="Times New Roman" size="2"><u>
<b>paid to Directors</b></u></font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Donald R.
 Dwight, Director<sup>1</sup></font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="4%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td width="5%" valign="bottom" align="left"><font face="Times New Roman" size="2">2,900</font></td>
<td width="3%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="12%" valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="12%" valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="6%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td width="4%" valign="bottom" align="left"><font face="Times New Roman" size="2">75,600</font></td>
<td width="5%"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Richard M.
 Galkin, Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">2,900</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">75,600</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Stephen L.
 Isaacs, Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">2,900</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">75,600</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">William L.
 Koke, Director<sup>2</sup></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">2,900</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">75,600</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Arthur S.
 Mehlman, Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">2,173</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">56,971</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">David L. Meister,
 Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">2,900</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">75,600</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">G. Peter O&#146;Brien, Director</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">2,900</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" valign="bottom" align="right"><font face="Times New Roman" size="2">$</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">75,600</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
</table>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom" align="left" colspan="3"><font face="Times New Roman" size="2">______________</font></td>
</tr>
<tr>
<td valign="top" align="left" width="1%"><font face="Times New Roman" size="2"><sup>1</sup></font></td>
<td width="1%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">Includes $435
 from the Fund ($10,350 from the Fund and other Royce Funds) deferred during 2004
 at the election of Mr. Dwight under The Royce Funds&#146; Deferred Compensation
 Plan for Trustees/Directors.</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="left"><font face="Times New Roman" size="2"><sup>2</sup></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">Includes $40,000
 from other Royce Funds deferred during 2004 at the election of Mr. Koke under The
 Royce Funds&#146; Deferred Compensation Plan for Trustees/Directors.</font></td>
</tr>
</table>
<p align="justify"><font face="Times New Roman" size="2"><b>Directors&#146; Consideration of Investment
 Advisory Agreement</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Board
 of Directors determined at meetings held on June 10 and 11, 2004, to approve the
 continuance of the Fund&#146;s current Investment Advisory Agreement with Royce.
 In making their determination, the Directors considered a wide range of information
 of the type they regularly consider when determining whether to continue a fund&#146;s advisory arrangements as in effect from year to year. In its consideration
 of the current Investment Advisory Agreement, the Board of Directors focused on
 information it had received relating to, among other things: (a) the nature, quality
 and extent of the advisory and other services to be provided to the Fund by Royce,
 (b) comparative data with respect to advisory fees paid by other funds with similar
 investment objectives, (c) the operating expenses and expense ratio of the Fund
 compared to funds with similar investment objectives, (d) the performance of the
 Fund as compared to such comparable funds, including risk-adjusted performance information
 prepared by Morningstar Inc., (e) the relative profitability of the arrangements
 to Royce, (f) information about the services to be performed and the personnel performing
 such services under the current Investment Advisory Agreement, (g) the general reputation
 and financial resources of Royce and Legg Mason, (h) any compensation payable by
 the Fund to affiliates of Royce for other services and (i) Royce&#146;s practices
 regarding the selection and compensation of brokers that execute portfolio transactions
 for the Fund and the brokers&#146; provision of brokerage and research services
 to Royce.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;In particular,
 the Board of Directors compared the investment advisory fee rate, the annual net
 expense ratio and the risk-adjusted investment performance of the Fund to a peer
 group selected by Morningstar that consisted of 14 other funds with substantially
 similar investment objectives and policies and 391 funds in Morningstar&#146;s small
 blend category. As set forth in the Prospectus under the heading &#147;Investment
 Advisory and Other Services &#151; Advisory Fee,&#148; Royce is entitled to receive
 a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the Fund&#146;s
 average net assets (which include net assets applicable both to Common Stock and
 Preferred Stock) for each month during the term of the agreement.</font></p>
<p align="center"><font face="Times New Roman" size="2">B-13</font>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Board
 of Directors noted that the Fund&#146;s annual net expense ratio applicable to total
 net assets (which includes net assets applicable to both Common Stock and Preferred
 Stock) was lower than 10 of the 15 funds in its peer group. The Board of Directors
 also considered the fact that Royce has voluntarily committed to waive the portion
 of its investment advisory fee attributable to an issue of the Fund&#146;s Preferred
 Stock for any month in which the Fund&#146;s average annual NAV total return since
 issuance of the Preferred Stock fails to exceed the applicable Preferred Stock&#146;s
 dividend rate.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Because the
 Fund uses a risk-averse approach to investing, the Board of Directors believed that
 risk-adjusted performance continued to be an appropriate measure of the Fund&#146;s
 investment performance. For the most recent one-year and five-year period, the Fund&#146;s risk-adjusted investment performance exceeded the averages for the peer group
 and Morningstar&#146;s small blend category, placing the Fund within the second
 quartile for funds in the peer group and Morningstar&#146;s small blend category.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;After its
 review of the above-described matters, the Board of Directors approved the continuation
 of the Investment Advisory Agreement between the Fund and Royce. The Board of Directors
 was advised by separate legal counsel in connection with its review of the investment
 advisory arrangements of the Fund.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Information Concerning Royce</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;On October
 1, 2001, Royce became an indirect wholly-owned subsidiary of Legg Mason. On March
 31, 2002, Royce&#146;s corporate predecessor was merged into Royce Holdings, LLC
 (a wholly-owned subsidiary of Legg Mason), which then changed its name to Royce
 &#038; Associates, LLC. As a result of this merger, Royce &#038; Associates, LLC
 became the Fund&#146;s investment adviser and a direct wholly-owned subsidiary of
 Legg Mason.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>CODE OF ETHICS AND RELATED
 MATTERS</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce and
 the Fund have adopted a Code of Ethics under which directors (other than non-management
 directors), officers and employees of Royce (&#147;Royce-related persons&#148;)
 and interested trustees/directors, officers and employees of the Fund are generally
 prohibited from personal trading in any security which is then being purchased or
 sold or considered for purchase or sale by the Fund or any other Royce client account.
 The Code of Ethics permits such persons to engage in other personal securities transactions
 if (i) the securities involved are certain debt securities, money market instruments,
 shares of non-affiliated registered open-end investment companies or shares acquired
 from an issuer in a rights offering or under an automatic dividend reinvestment,
 employer-sponsored automatic payroll deduction cash purchase plan or other automatic
 investment plan, (ii) the transactions are either non-volitional or are effected
 in an account over which such person has no direct or indirect influence or control
 or (iii) they first obtain permission to trade from Royce&#146;s Compliance Officer
 and either an executive officer or Senior Portfolio Manager of Royce. The Code of
 Ethics contains standards for the granting of such permission, and permission to
 trade will usually be granted only in accordance with such standards.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce&#146;s
 client accounts include several private investment companies in which Royce, Royce-related
 persons and/or other Legg Mason affiliates have (and, therefore, may be deemed to
 beneficially own) a share of up to 15% of the company&#146;s realized and unrealized
 net capital gains from securities transactions, but less than 25% of the company&#146;s equity interests. The Code of Ethics does not restrict transactions effected
 by Royce for such private investment company accounts, and transactions for such
 accounts are subject to Royce&#146;s allocation policies and procedures. See &#147;Brokerage
 Allocation and Other Practices.&#148;</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;As of March
 31, 2005, Royce-related persons, interested trustees/directors, officers and employees
 of The Royce Funds and members of their immediate families beneficially owned shares
 of The Royce Funds having a total value of over $87.9 million, and such persons
 beneficially owned equity interests in Royce-related private investment companies
 totaling approximately $11.8 million.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Code of
 Ethics may be reviewed and copied at the SEC&#146;s Public Reference Room in Washington,
 D.C. Call 1-202-942-8090 for information on the operation of the Public Reference
 Room. The Code of Ethics is also available on the EDGAR Database on the SEC&#146;s
 Internet site at http://www.sec.gov, and copies may be</font></p>
<p align="center"><font face="Times New Roman" size="2">B-14</font>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2"> obtained upon payment of a duplicating fee by
 electronic request at the following E-mail address: publicinfo@sec.gov,
 or by writing the SEC&#146;s Public Reference Section, Washington, D.C. 20549-0102.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>INVESTMENT ADVISORY AND
 OTHER SERVICES</b></font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Advisory Fee</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;As set forth
 in the Prospectus under the heading &#147;Investment Advisory and Other Services
 &#151; Advisory Fee,&#148; Royce is entitled to receive a monthly fee equal to 1/12
 of 1% (1% on an annualized basis) of the Fund&#146;s average net assets (which includes
 net assets applicable to both Common Stock and Preferred Stock) for each month during
 the term of the agreement. For the years ended December 31, 2004, 2003 and 2002,
 Royce received investment advisory fees from the Fund of $1,197,732, $784,090 and
 $715,813 (net of $0, $116,163 and $117,259 voluntarily waived by Royce), respectively.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Other</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Investment
 Advisory Agreement provides that the Fund may use &#147;Royce&#148; as part of its
 name only for as long as the Investment Advisory Agreement remains in effect. The
 name &#147;Royce&#148; is a property right of Royce, and it may at any time permit
 others, including other investment entities, to use such name.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Investment
 Advisory Agreement protects and indemnifies Royce against liability to the Fund,
 its stockholders or others for any action taken or omitted to be taken by Royce
 in connection with the performance of any of its duties or obligations under Investment
 Advisory Agreement or otherwise as an investment adviser to the Fund. However, Royce
 is not protected or indemnified against liabilities to which it would otherwise
 be subject by reason of willful malfeasance, bad faith or gross negligence in the
 performance of its duties or by reason of its reckless disregard of its duties and
 obligations under the Investment Advisory Agreement.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce&#146;s services to
 the Fund are not deemed to be exclusive, and Royce or any of its affiliates may
 provide similar services to other investment companies and other clients or engage
 in other activities.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Investment Advisory Agreement
 will remain in effect until June 30, 2005 and may be continued in effect from year to year thereafter
 if such continuance is specifically approved at least annually by the Board of Directors
 or by the vote of a majority of the Fund&#146;s outstanding voting securities and,
 in either case, by a majority of the directors who are not parties to the Agreement
 or interested persons of any such party. The Investment Advisory Agreement will
 automatically terminate if it is assigned (as defined by the 1940 Act and the rules
 thereunder) and may be terminated without penalty by vote of a majority of the Fund&#146;s outstanding voting securities or by either party thereto on not less than
 60 days&#146; written notice.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Portfolio Manager</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;W. Whitney
 George beneficially owned over $1,000,000 of the Fund&#146;s shares as of December
 31, 2004.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Description of Portfolio Manager Compensation
 Structure</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce seeks
 to maintain a compensation program that is competitively positioned to attract and
 retain high-caliber investment professionals. The Fund&#146;s Portfolio Manager,
 W. Whitney George, receives from Royce a base salary, a performance bonus, a Firm
 Bonus based primarily on registered investment company and other client account
 revenues generated by Royce, other compensation described below and a benefits package.
 Mr. George&#146;s compensation is reviewed and may be modified from time to time
 as appropriate to reflect changes in the market, as well as to adjust the factors
 used to determine bonuses. Mr. George&#146;s compensation consists of the following
 elements:</font></p>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="2%" valign="top" align="right"><font face="Times New Roman" size="1">&#149;</font></td>
<td width="2%" valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">
BASE SALARY. Mr. George is paid a base salary. In setting the base salary, Royce seeks
 to be competitive in light of the particular Portfolio Manager&#146;s experience
 and responsibilities.</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2">B-15</font>
<hr size="3" color="gray">
<br>
<page>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="2%" valign="top" align="right"><font face="Times New Roman" size="1">&#149;</font></td>
<td width="2%" valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">
&#160;PERFORMANCE BONUS. Mr. George receives a quarterly Performance Bonus that is revenue based and
 therefore determined in part on the value of the accounts&#146; net assets, determined
 with reference to each of the registered investment company and other client accounts
 he is managing. The revenue-based Performance Bonus applicable to the Fund and the
 other registered investment company accounts managed by Mr. George is subject to
 upward or downward adjustment or elimination based on a combination of 3-year and
 5-year risk-adjusted pre-tax returns of such accounts relative to all small-cap
 objective funds with three years of listings tracked by Morningstar (as of December
 31, 2004 there were 387 such funds tracked by Morningstar) and the 5-year absolute
 returns of such accounts relative to 5-year U.S. Treasury Notes. The revenue-based
 Performance Bonus applicable to non-registered investment company accounts managed
 by Mr. George is not subject to performance-related adjustment.</font></td></tr>
<tr>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">
Payment of the Performance Bonus may be deferred, and any amounts deferred are forfeitable,
 if Mr. George is terminated by Royce with or without cause or resigns. The amount
 of the deferred Performance Bonus will appreciate or depreciate during the deferral
 period, based on the total return performance of one or more Royce-managed registered
 investment company accounts selected by Mr. George at the beginning of the deferral
 period. The amount deferred will depend on Mr. George&#146;s total direct, indirect,
 beneficial and deferred unvested bonus investments in the Royce registered investment
 company account for which he is receiving portfolio management compensation.</font></td></tr>
<tr>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="right"><font face="Times New Roman" size="1">&#149;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">
FIRM BONUS. Mr. George receives a bonus relating to Royce&#146;s operating revenues.</font></td></tr>
<tr>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="right"><font face="Times New Roman" size="1">&#149;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">
 BENEFIT PACKAGE. Mr. George receives
 benefits standard for all Royce employees, including health care and other insurance
 benefits, and participation in Royce&#146;s 401(k) Plan and Money Purchase Pension
 Plan.</font></td></tr>
<tr>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="top" align="right"><font face="Times New Roman" size="1">&#149;</font></td>
<td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="justify"><font face="Times New Roman" size="2">
ADDITIONAL COMPENSATION. Mr. George receives a bonus based on Royce&#146;s retained pre-tax
 operating profit. This bonus, along with the Performance Bonus, generally represents
 the most significant element of his compensation. Finally, Mr. George also receives
 bonuses from Royce relating to the sale of Royce to Legg Mason, Inc. on October
 1, 2001. Such bonuses are payable pursuant to an Employment Agreement entered into
 with Royce in connection with the sale.</font></td></tr>
</table>
<p align="justify"><font face="Times New Roman" size="2"><b>Other Portfolio Manager Accounts</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The following
 chart contains information, as of December 31, 2004, regarding all Royce client
 accounts for which the Fund&#146;s Portfolio Manager, W. Whitney George, has day-to-day
 management responsibilities. Accounts are grouped into three categories: (i) registered
 investment companies, (ii) private pooled investment vehicles and (iii) other accounts.
 To the extent that any of these accounts pay advisory fees that are based on account
 performance (&#147;performance-based fees&#148;), information on those accounts
 is specifically broken out.</font></p>
<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr><td valign="bottom"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Number
 of Accounts</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Value
 of Managed</b></font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Managed
 for which</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Accounts
 for which</b></font></td>
</tr>
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Name
 of</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Number
 of</b></font></td>

<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Total
 Assets</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Advisory
 Fee is</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Advisory
 Fee is</b></font></td>
</tr>
<tr>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Portfolio
 Manager</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Type
 of Account</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Accounts
 Managed</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Managed
</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Performance-Based
</b></font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2"><b>Performance-Based
</b></font></td>
</tr>
<tr>
<td valign="bottom" colspan="12"><hr size="1" color="#000000" noshade></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">W. Whitney
 George</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td width="2%" align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Registered
 investment companies</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">9</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">$11,318,933,281</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">1</font></td>
<td width="2%"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">$1,000,000</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Private pooled
 investment vehicles</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">1</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">$87,220,624</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">1</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">$87,220,624</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
</tr>
<tr>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td align="left"><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="left"><font face="Times New Roman" size="2">Other accounts</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">1</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">$3,055,073</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">None</font></td>
<td><font face="Times New Roman" size="1">&#160;</font></td>
<td valign="bottom" align="center"><font face="Times New Roman" size="2">-</font></td>
</tr>
</table>
<p align="center"><font face="Times New Roman" size="2">B-16</font>
<hr size="3" color="gray">
<br>
<page>

<p align="justify"><font face="Times New Roman" size="2"><b>Potential Conflicts of Interest</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The fact that
 the Fund&#146;s Portfolio Manager has day-to-day management responsibility for more
 than one Royce client account may create actual, potential or only apparent conflicts
 of interest. For example, the Portfolio Manager may have an opportunity to purchase
 securities of limited availability. In this circumstance, the Portfolio Manager
 is expected to review each account&#146;s investment guidelines, restrictions, tax
 considerations, cash balances, liquidity needs and other factors to determine the
 suitability of the investment for each account and to ensure that his or her managed
 accounts are treated equitably. The Portfolio Manager may also decide to purchase
 or sell the same security for multiple managed accounts at approximately the same
 time. To address any conflicts that this situation may create, the Portfolio Manager
 will generally combine managed account orders (i.e., enter a &#147;bunched&#148;
 order) in an effort to obtain best execution or a more favorable commission rate.
 In addition, if orders to buy or sell a security for multiple accounts managed by
 the same Portfolio Manager on the same day are executed at different prices or commission
 rates, the transactions will generally be allocated by Royce to each of such managed
 accounts at the weighted average execution price and commission. In circumstances
 where a bunched order is not completely filled, each account will normally receive
 a pro-rated portion of the securities based upon the account&#146;s level of participation
 in the order. Royce may under certain circumstances allocate securities in a manner
 other than pro-rata if it determines that the allocation is fair and equitable under
 the circumstances and does not discriminate against any account. See also, &#147;Portfolio
 Transactions&#148; below.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;As described
 above, there is a revenue-based component of Mr. George&#146;s Performance Bonus
 and he also receives a &#147;Partners Pool&#148; participation based on revenues
 (adjusted for certain imputed expenses) generated by Royce. In addition, he receives
 a bonus based on Royce&#146;s retained pre-tax profits from operations. As a result,
 Mr. George may receive a greater relative benefit from activities that increase
 the value to Royce of the Funds and/or other Royce client accounts, including, but
 not limited to, increases in sales of Fund shares and assets under management.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Also, as described
 above, Mr. George, and other Royce Portfolio Managers, generally manage more than
 one Royce client account, including, among others, registered investment company
 accounts, separate accounts and private pooled accounts managed on behalf of institutions
 (e.g., pension funds, endowments and foundations) and for high-net-worth individuals.
 The appearance of a conflict of interest may arise where Royce has an incentive,
 such as a performance-based management fee (or any other variation in the level
 of fees payable by Funds or other Royce client accounts to Royce), which relates
 to the management of one or more Funds or accounts with respect to which the same
 Portfolio Manager has day-to-day management responsibilities. Mr. George receives
 no compensation tied to performance fees earned by Royce for the management of any
 one client account. Although bonuses and other compensation derived from Royce revenues
 or profits are impacted to some extent, the impact is relatively minor given the
 small percentage of Royce firm assets under management for which Royce receives
 performance-measured compensation.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Finally, conflicts
 of interest may arise when a Portfolio Manager personally buys, holds or sells securities
 held or to be purchased or sold for a Fund or other Royce client account or personally
 buys, holds or sells the shares of one or more of The Royce Funds. To address this,
 Royce has adopted a written Code of Ethics designed to prevent and detect personal
 trading activities that may interfere or conflict with client interests (including
 Fund shareholders&#146; interests). See &#147;Code of Ethics and Related Matters&#148; below. Royce generally does not permit its Portfolio Managers to purchase
 small- or micro-cap securities in their personal investment portfolios.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce and
 The Royce Funds have adopted certain compliance procedures which are designed to
 address the above-described types of conflicts. However, there is no guarantee that
 such procedures will detect each and every situation in which a conflict arises.</font></p>
<p align="justify"><font face="Times New Roman" size="2"><b>Service Contract with State Street</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;State Street
 Bank and Trust Company (&#147;State Street&#148;), the custodian of the Fund&#146;s
 assets, provides certain management-related services to the Fund. Such services
 include keeping books of accounts and rendering such financial and other statements
 as may be requested by the Fund from time to time, generally assisting in the preparation
 of reports to the Fund&#146;s stockholders, to the SEC and others and in the auditing
 of accounts and in other ministerial matters of like nature, as agreed to between
 the Fund and State Street. For the fiscal years ended December 31, 2004, 2003 and
 2002, the Fund paid $52,202, $47,517 and $46,083 in fees to the Fund&#146;s custodian.</font></p>
<p align="center"><font face="Times New Roman" size="2">B-17</font>
<hr size="3" color="gray">
<br>
<page>

<p align="center"><font face="Times New Roman" size="2"><b>TAXATION</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Fund has
 elected to be treated as a regulated investment company (&#147;RIC&#148;) under
 the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), and has qualified
 and intends to continue to qualify for the special tax treatment afforded RICs under
 the Code. As long as it so qualifies, in any taxable year in which it distributes
 at least 90% of its investment company taxable income (&#147;ICTI&#148;) (as that
 term is defined in the Code without regard to the deduction for dividends paid)
 for such taxable year, the Fund will not be subject to Federal income tax on the
 part of its ICTI and net capital gains (i.e., the excess of the Fund&#146;s net
 realized long-term capital gains over its net realized short-term capital losses),
 if any, that it distributes to its stockholders in each taxable year. The Fund intends
 to distribute substantially all of such income.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Code requires
 RIC to pay a non-deductible 4% excise tax to the extent the RIC does not distribute,
 during each calendar year, 98% of its ordinary income, determined on a calendar
 year basis, and 98% of its capital gains, determined, in general, on an October
 31 year end, plus 100% of undistributed amounts from previous years. For these purposes,
 the Fund will be deemed to have distributed any income or gains on which it paid
 corporate income tax. While the Fund intends to distribute its ordinary income and
 capital gains in the manner necessary to minimize imposition of the 4% excise tax,
 there can be no assurance that sufficient amounts of the Fund&#146;s ordinary income
 and capital gains will be distributed to avoid entirely the imposition of the tax.
 In such event, the Fund will be liable for the tax only on the amount by which it
 does not meet the foregoing distribution requirements.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Dividends
 paid by the Fund from its ICTI (such dividends are referred to in this section as
 &#147;ordinary income dividends&#148;) are taxable to stockholders as ordinary income
 (some of which may represent qualified dividend income, taxable at a reduced rate,
 as discussed below) to the extent of the Fund&#146;s earnings and profits. Distributions
 made from net capital gains (including gains or losses from certain transactions
 in warrants, rights and options) and properly designated by the Fund (such distributions
 are referred to in this section as &#147;capital gain dividends&#148;) are taxable
 to stockholders as long-term capital gains, regardless of the length of time the
 stockholder has owned Fund shares. Distributions in excess of the Fund&#146;s earnings
 and profits will first reduce the adjusted tax basis of a holder&#146;s shares and,
 after such adjusted tax basis is reduced to zero, will constitute capital gains
 to such holder (assuming the shares are held as a capital asset).</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Fund may
 elect to retain its net capital gains or a portion thereof for investment and be
 taxed at corporate rates on the amount retained. In such case, it may designate
 the retained amount as undistributed capital gains in a notice to its stockholders,
 who will be treated as if each received a distribution of his pro rata share of
 such gains, with the result that each stockholder will (i) be required to report
 his pro rata share of such gains on his tax return as long-term capital gain, (ii)
 receive a refundable tax credit for his pro rata share of tax paid by the Fund on
 the gains and (iii) increase the tax basis for his shares by an amount equal to
 the deemed distributions less the tax credit.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Gain or loss,
 if any, recognized on the sale or other disposition of shares of the Fund will be
 taxed as a capital gain or loss if the shares are capital assets in the stockholder&#146;s hands. Such gain or loss will be long-term or short-term, depending upon
 the stockholder&#146;s holding period for the shares. Generally, a stockholder&#146;s
 gain or loss will be a long-term gain or loss if the shares have been held for more
 than one year. Any loss realized upon the sale or exchange of Fund shares will be
 disallowed to the extent the shares disposed of are replaced within a period of
 61 days beginning 30 days before and ending 30 days after disposition of the original
 shares. In such case, the basis of the shares acquired will be adjusted to reflect
 the disallowed loss. Any loss realized upon the sale or exchange of Fund shares
 held for six months or less will be treated as long-term capital loss to the extent
 of any capital gain dividends received by the stockholder (or amounts credited to
 the stockholder as undistributed capital gains) with respect to such shares.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Fund distributions
 comprised of dividends from domestic corporations and certain foreign corporations
 (generally, corporations incorporated in a possession of the United States, some
 corporations eligible for treaty benefits under a treaty with the United States
 and corporations whose stock is readily tradable on an established securities market
 in the United States) are eligible for taxation at a maximum tax rate of 15% also
 applicable to capital gains in the hands of individual stockholders, provided holding
 period and other requirements are satisfied. Capital gain dividends likewise, are
 taxed at the reduced maximum rate of 15% for non-corporate</font></p>
<p align="center"><font face="Times New Roman" size="2">B-18</font>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2">
taxpayers. The 15% income tax rate applicable to capital gains and qualified dividend income is scheduled
 to expire after December 31, 2008. After this date, absent extension or modification
 of the relevant legislative provisions, long-term capital gain dividends paid by
 the Fund generally will be taxable at the previously applicable maximum 20% rate
 and distributions attributable to qualified dividend income will be taxed to the
 stockholder at his or her marginal Federal income tax rate (which generally will
 be higher than 15%).</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;A portion
 of the Fund&#146;s ordinary income dividends may be eligible for the dividends received
 deduction (&#147;DRD&#148;) allowed to corporations under the Code, if certain requirements
 are met. For these purposes, the Fund will allocate any dividends eligible and any
 other Preferred Stock for the DRD between the holders of Common Stock, 6.00% Preferred
 and any other Preferred Stock in proportion to the total dividends paid to each
 class during the taxable year, or otherwise as required by applicable law. A holder
 of shares of Common Stock (a) that is taxed as a corporation for Federal income
 tax purposes, (b) meets applicable holding period and taxable income requirements
 of section 246 of the Code, (c) is not subject to the &#147;debt-financed portfolio
 stock&#148; rules of section 246A of the Code with respect to an investment in the
 Fund and (d) is otherwise entitled to the DRD can claim a deduction equal to 70%
 of the dividends received on the 6.00% Preferred which are designated by the Fund
 as qualifying for the DRD.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The IRS has
 taken the position in Revenue Ruling 89-81 that if a RIC has more than one class
 of shares, it may designate distributions made to each class in any year as consisting
 of no more than such class&#146;s proportionate share of particular types of income,
 such as long-term capital gains and qualified dividend income. A class&#146;s proportionate
 share of a particular type of income is determined according to the percentage of
 total dividends paid by the RIC during such year that was paid to such class. Consequently,
 the Fund will designate distributions made to the Common Stock and 6.00% Preferred
 and any other Preferred Stock as consisting of particular types of income in accordance
 with the classes&#146; proportionate shares of such income. The amount of long-term
 capital gains, qualified dividend income, and other ordinary income allocable among
 the 6.00% Preferred, other Preferred Stock, and the Common Stock will depend upon
 the amount of such long-term capital gains, qualified dividend income, and other
 ordinary income realized by the Fund and the total dividends paid by the Fund on
 shares of Common Stock, 6.00% Preferred and other Preferred Stock during a taxable
 year.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;In the opinion
 of Sidley Austin Brown &#038; Wood LLP, under current law, the manner in which the
 Fund intends to allocate long-term capital gains, qualified dividend income and
 other ordinary income among shares of Common Stock, 6.00% Preferred and other Preferred
 Stock will be respected for Federal income tax purposes. However, there is currently
 no direct guidance from the IRS or other sources specifically addressing whether
 the Fund&#146;s method of allocation will be respected for Federal income tax purposes,
 and it is possible that the IRS could disagree with counsel&#146;s opinion and attempt
 to reallocate the Fund&#146;s long-term capital gains, qualified dividend income
 or other ordinary income. Sidley Austin Brown &#038; Wood LLP has advised the Fund
 that, in its opinion, if the IRS were to challenge in court the Fund&#146;s allocations,
 the IRS would be unlikely to prevail. The opinion of Sidley Austin Brown &#038;
 Wood LLP, however, represents only its best legal judgment and is not binding on
 the IRS or courts.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;If the Fund
 does not meet the asset coverage requirements of the 1940 Act or the Charter, the
 Fund will be required to suspend distributions to the holders of the Common Stock
 until the asset coverage is restored. Such a suspension of distributions might prevent
 the Fund from distributing 90% of its ICTI, as is required in order to avoid Fund-level
 taxation of such income, or might prevent it from distributing enough ordinary income
 and capital gains to avoid completely imposition of the excise tax. Upon any failure
 to meet the asset coverage requirements of the 1940 Act or the Charter, the Fund
 may, and in certain circumstances will be required to, partially redeem shares of
 6.00% Preferred in order to maintain or restore the requisite asset coverage and
 avoid the adverse consequences to the Fund and its stockholders of failing to qualify
 as a RIC. If asset coverage were restored, the Fund would again be able to pay dividends
 and might be able to avoid Fund-level taxation of its income.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Qualification
 as a RIC requires, among other things, that at least 90% of the Fund&#146;s gross
 income in each taxable year consist of certain types of income, including dividends,
 interest, gains from the disposition of stocks and securities and other investment-type
 income. In addition, the Fund&#146;s investments must meet certain diversification
 standards. If the Fund were unable to satisfy the 90% distribution requirement or
 otherwise were to fail to qualify to be taxed as a RIC in any year, it would be
 subject to tax in such year on all of its taxable income,</font></p>
<p align="center"><font face="Times New Roman" size="2">B-19</font>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2"> whether or not the Fund
 made any distributions. To qualify again to be taxed as a RIC in a subsequent year,
 the Fund would be required to distribute to 6.00% Preferred Stockholders and Common
 Stockholders as an ordinary income dividend, its earnings and profits attributable
 to non-RIC years reduced by an interest charge on 50% of such earnings and profits
 payable by the Fund to the IRS. In addition, if the Fund failed to qualify as a
 RIC for a period greater than one taxable year, the Fund would be required to recognize
 and pay tax on any net built-in gains (the excess of aggregate gains, including
 items of income, over aggregate losses that would have been realized if the Fund
 had been liquidated) or, alternatively, to elect to be subject to taxation on such
 built-in-gains recognized for a period of 10 years, in order to qualify as a RIC
 in a subsequent year.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Fund may
 invest in debt obligations purchased at a discount with the result that the Fund
 may be required to accrue income (and to distribute such income in accordance with
 the distribution requirements of the Code) for Federal income tax purposes before
 amounts due under the obligations are paid. The Fund may also invest in securities
 rated in the medium to lower rating categories of nationally recognized rating organizations,
 and in unrated securities (&#147;high yield securities&#148;). A portion of the
 interest payments on such high yield securities may be treated as dividends for
 Federal income tax purposes.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Certain transactions
 entered into by the Fund are subject to complex federal income tax provisions that
 may, among other things, a) affect the character of gains and losses realized, b)
 disallow, suspend or otherwise limit the allowance of certain losses or deductions,
 and c) accelerate the recognition of income. Operation of these rules could, therefore,
 affect the character, amount and timing of distributions to stockholders. The Fund
 will monitor its transactions and may make certain tax elections in order to mitigate
 the effect of these provisions.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Foreign currency
 gains or losses from certain debt instruments or arising from delays between accrual
 and receipt of investment income will generally be treated as ordinary income or
 loss, and will therefore generally increase or decrease the amount of the Fund&#146;s
 net investment income available for distribution as ordinary income dividends. If
 substantial in relation to net investment income, such foreign currency losses could
 affect the ability of the Fund to distribute ordinary income dividends in a taxable
 year, and could require all or a portion of distributions made before the losses
 were realized, but in the same taxable year, to be recharacterized as a return of
 capital.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;If the Fund
 invests in stock of a passive foreign investment company (&#147;PFIC&#148;), it
 may be subject to Federal income tax at ordinary rates and an additional charge
 in the nature of interest, on a portion of its distributions from the PFIC and on
 gain from the disposition of the shares of the PFIC, even if such distributions
 and gain are paid by the Fund as a dividend to its stockholders. In some cases,
 the Fund may be able to elect to include annually in income its pro rata share of
 the ordinary earnings and capital gains (whether or not distributed) of the PFIC.
 Alternatively, the Fund could elect to mark to market at the end of each taxable
 year its shares in PFICs; in this case, the Fund would recognize as ordinary income
 any increase in the value of such shares, and as ordinary loss any decrease in such
 value to the extent it did not exceed prior increases included in income. Under
 either election, the Fund might be required to recognize in a year income in excess
 of its distributions from PFICs and its proceeds from dispositions of PFIC stock
 during that year. Dividends paid by PFICs will not qualify as qualified dividend
 income eligible for taxation at reduced rates.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Under certain
 provisions of the Code, some stockholders may be subject to a withholding tax on
 ordinary income dividends, capital gain dividends and redemption payments (&#147;backup
 withholding&#148;). A stockholder, however, may generally avoid becoming subject
 to this requirement by filing an appropriate form with the payor (i.e., the financial
 institution or brokerage firm where the stockholder maintains his or her account),
 certifying under penalties of perjury that such stockholder&#146;s taxpayer identification
 number is correct and that such stockholder (i) has never been notified by the IRS
 that he or she is subject to backup withholding, (ii) has been notified by the IRS
 that he or she is no longer subject to backup withholding, or (iii) is exempt from
 backup withholding. Corporate stockholders and certain other stockholders are exempt
 from backup withholding. Backup withholding is not an additional tax. Any amounts
 withheld under the backup withholding rules from payments made to a stockholder
 may be refunded or credited against such stockholder&#146;s Federal income tax liability,
 provided the required information is furnished to the IRS.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Ordinary income
 dividends (but not capital gain dividends) paid to stockholders who are non-resident
 aliens or foreign entities generally will be subject to a 30% United States withholding
 tax under existing provisions of the Code applicable to foreign individuals and
 entities unless a reduced rate of withholding or a withholding</font></p>
<p align="center"><font face="Times New Roman" size="2">B-20</font>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2"> exemption is provided
 under applicable treaty law. However, if ordinary income dividends or capital gain
 dividends received by a non-resident stockholder are effectively connected with
 the conduct by such stockholder of a trade or business in the United States, the
 dividends will be subject to United States federal income tax at regular income
 tax rates. Non-resident stockholders are urged to consult their own tax advisers
 concerning the applicability of the United States withholding and income taxes.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Dividends
 and interest received by the Fund may give rise to withholding and other taxes imposed
 by foreign countries. Tax conventions between certain countries and the United States
 may reduce or eliminate such taxes. Stockholders may be able to claim a deduction
 or United States foreign tax credit with respect to such taxes, subject to certain
 conditions and limitations contained in the Code. For example, certain retirement
 accounts cannot claim foreign tax credits on investments in foreign securities held
 in the Fund. In addition, a foreign tax credit may be claimed with respect to withholding
 tax on a dividend paid by the Fund only if the stockholder meets certain holding
 period requirements with respect to its Fund stock. The Fund also must meet these
 holding period requirements with respect to its foreign securities in order to be
 able to &#147;pass through&#148; to stockholders the ability to claim a credit or
 a deduction for the related foreign taxes paid by the Fund. If the Fund satisfies
 the holding period requirements, qualifies for the special treatment afforded RICs
 under the Code and more than 50% in value of its total assets at the close of its
 taxable year consists of securities of foreign corporations, the Fund will be eligible,
 and intends, to file an election with the IRS pursuant to which stockholders of
 the Fund (i) will be required to include their proportionate shares of such foreign
 taxes in their United States income tax returns as gross income, (ii) will treat
 such proportionate shares as taxes paid by them, and (iii) will deduct such proportionate
 shares in computing their taxable incomes or, alternatively, use them as foreign
 tax credits against their United States income taxes. No deductions for foreign
 taxes, however, may be claimed by noncorporate stockholders who do not itemize deductions.
 A stockholder that is a nonresident alien individual or a foreign corporation may
 be subject to United States withholding tax on the income resulting from the Fund&#146;s election described in this paragraph but may not be able to claim a credit
 or deduction against such United States tax for the foreign taxes treated as having
 been paid by such stockholder. The Fund will report annually to its stockholders
 the amount per share of such foreign taxes and other information needed to claim
 the deduction or foreign tax credit.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Under Treasury
 regulations, if a stockholder recognizes a loss on the disposition of shares of
 stock of $2 million or more for an individual stockholder or $10 million or more
 for a corporate stockholder in any single taxable year (or a greater loss over a
 combination of years), the stockholder must file with the IRS a disclosure statement
 on Form 8886. The fact that a loss is reportable under these regulations does not
 affect the legal determination of whether the taxpayer&#146;s treatment of the loss
 is proper. Stockholders should consult their tax advisers to determine the applicability
 of these regulations in light of their individual circumstances.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The foregoing
 is a general and abbreviated summary of the applicable provisions of the Code and
 Treasury regulations presently in effect and discusses some of the consequences
 under Federal tax law of an investment in Common Stock of the Fund. For the complete
 provisions, reference should be made to the pertinent Code sections and the Treasury
 regulations promulgated thereunder. The Code and the Treasury regulations are subject
 to change by legislative, judicial or administrative action, either prospectively
 or retroactively. The discussion above is not a substitute for personal tax advice.
 Distributions may also be subject to additional state, local and foreign taxes,
 depending on each stockholder&#146;s particular situation. Stockholders are advised
 to consult their own tax advisers with respect to the particular tax consequences
 to them of an investment in the Common Stock.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>BROKERAGE ALLOCATION AND
 OTHER PRACTICES</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce is responsible
 for selecting the brokers who effect the purchases and sales of the Fund&#146;s
 portfolio securities. No broker is selected to effect a securities transaction for
 the Fund unless such broker is believed by Royce to be capable of obtaining the
 best price for the security involved in the transaction.&#160;Best price and execution
 is comprised of several factors, including the liquidity of the security, the commission
 charged, the promptness and reliability of execution, priority accorded the order
 and other factors affecting the overall benefit obtained. In addition to considering
 a broker&#146;s execution capability, Royce generally considers the brokerage and
 research services which the broker has provided to it, including any research relating
 to the security involved in the transaction and/or to other securities. Such services
 may include general economic research, market and statistical information, industry
 and technical research, strategy and company research and performance measurement,
 and</font></p>
<p align="center"><font face="Times New Roman" size="2">B-21</font>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2"> may be written,
 electronic or oral. Brokers that provide both research and execution
 services are generally paid higher commissions than those paid to brokers who do
 not provide such research and execution services. Royce determines the overall reasonableness
 of brokerage commissions paid, after considering the amount another broker might
 have charged for effecting the transaction and the value placed by Royce upon the
 brokerage and/or research services provided by such broker, viewed in terms of either
 that particular transaction or Royce&#146;s overall responsibilities with respect
 to its accounts.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce is authorized,
 under Section 28(e) of the Securities Exchange Act of 1934 and under its Investment
 Advisory Agreement with the Fund, to pay a broker a commission in excess of that
 which another broker might have charged for effecting the same transaction, in recognition
 of the value of brokerage and research services provided by the broker.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Brokerage
 and research services furnished by brokers through whom the Fund effects securities
 transactions may be used by Royce in servicing all of its accounts, and not all
 of such services may be used by Royce in connection with the Fund.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Even though
 investment decisions for the Fund are made independently from those for the other
 accounts managed by Royce, securities of the same issuer are frequently purchased,
 held or sold by more than one Royce account because the same security may be suitable
 for all of them. When the same security is being purchased or sold for more than
 one Royce account on the same trading day, Royce may seek to average the transactions
 as to price and allocate them as to amount in a manner believed to be equitable
 to each. Such purchases and sales of the same security are generally effected pursuant
 to Royce&#146;s Trade Allocation Guidelines and Procedures. Under such Guidelines
 and Procedures, unallocated orders are placed with and executed by broker-dealers
 during the trading day. The securities purchased or sold in such transactions are
 then allocated to one or more of Royce&#146;s accounts at or shortly following the
 close of trading, using the average net price obtained. Such allocations are done
 based on a number of judgmental factors that Royce believes should result in fair
 and equitable treatment to those of its accounts for which the securities may be
 deemed suitable. In some cases, this procedure may adversely affect the price paid
 or received by the Fund or the size of the position obtained for the Fund. In addition,
 from time to time, certain other Royce accounts managed by Royce portfolio managers
 other than W. Whitney George, may establish short positions in securities in which
 the Fund has a long position.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The Fund may
 effect brokerage transactions on a securities exchange with Legg Mason Wood Walker,
 Incorporated (&#147;Legg Mason Wood Walker&#148;) and any other affiliated broker-dealers
 in accordance with the procedures and requirements set forth in Rule 17e-1 under
 the 1940 Act. Any such transactions would involve the use of the affiliated broker-dealer
 for execution purposes only and/or for locating the purchasers or sellers involved
 in the transaction. The affiliated broker-dealer would not be compensated because
 of any other research-related service or product provided or to be provided by it
 and may not be used to effect brokerage transactions in Nasdaq or other over-the-counter
 securities. Although the Fund will not effect any principal transactions with any
 affiliated broker-dealers, they may purchase securities that are offered in certain
 underwritings in which an affiliated broker-dealer is a participant in accordance
 with the procedures and requirements set forth in Rule 10f-3 under the 1940 Act.
 Charles M. Royce and/or trusts primarily for the benefit of members of his family
 may own or acquire substantial amounts of Legg Mason common stock.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;During the
 year ended December 31, 2004, the Fund did not acquire any securities of any of
 its regular brokers (as defined in Rule 10b-1 under the 1940 Act) or of any of their
 parents.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;During each
 of the three years ended December 31, 2004, 2003 and 2002, the Fund paid brokerage
 commissions of approximately $183,848, $227,138 and $263,061, respectively, none
 of which the Fund paid to Legg Mason Wood Walker or to any other affiliates of Legg
 Mason.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>PROXY VOTING POLICIES
 AND PROCEDURES</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce has
 adopted written proxy voting policies and procedures (the &#147;Proxy Voting Procedures&#148;)
for itself, the Fund, and all other Royce Funds and clients accounts for
 which Royce is responsible for voting proxies.</font></p>
<p align="center"><font face="Times New Roman" size="2">B-22</font>
<hr size="3" color="gray">
<br>
<page>
<p align="justify"><font face="Times New Roman" size="2"> The Board of Directors of the Fund
 has delegated all proxy voting decisions to Royce. In voting proxies, Royce is guided
 by general fiduciary principles. Royce&#146;s goal is to act prudently, solely in
 the best interest of the beneficial owners of the accounts it manages. Royce attempts
 to consider all factors of its vote that could affect the value of the investment
 and will vote proxies in the manner it believes will be consistent with efforts
 to enhance and/or protect stockholder value.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Royce personnel
 are responsible for monitoring receipt of all proxies and ensuring that proxies
 are received for all securities for which Royce has proxy voting responsibility.
 Royce divides proxies into &#147;regularly recurring&#148; and &#147;non-regularly
 recurring&#148; matters. Examples of regularly recurring matters include non-contested
 elections of directors and non-contested approvals of independent auditors. Regularly
 recurring matters are usually voted as recommended by the issuer&#146;s board of
 directors or management. Non-regularly recurring matters are brought to the attention
 of portfolio manager(s) for the applicable account(s) and, after giving consideration
 to advisories provided by an independent third party research firm, the portfolio
 manager(s) directs that such matters be voted in a way that he believes should better
 protect or enhance the value of the investment. If the portfolio manager determines
 that information relating to a proxy requires additional analysis, is missing, or
 is incomplete, the portfolio manager will give the proxy to an analyst or another
 portfolio manager for review and analysis. Under certain circumstances, Royce may
 vote against a proposal from the issuer&#146;s board of directors or management.
 Royce&#146;s portfolio managers decide these issues on a case-by-case-basis. A Royce
 portfolio manager may, on occasion, decide to abstain from voting a proxy or a specific
 proxy item when he or she concludes that the potential benefit of voting is outweighed
 by the cost or when it is not in the client account&#146;s best interest to vote.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;In furtherance
 of Royce&#146;s goal to vote proxies in the best interests of its client accounts,
 Royce follows specific procedures outlined in the Proxy Voting Procedures to identify,
 assess and address material conflicts that may arise between Royce&#146;s interests
 and those of its client accounts before voting proxies on behalf of such client
 accounts. In the event such a material conflict of interest is identified, the proxy
 will be voted by Royce in accordance with the recommendation given by the third
 party research firm.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;Information
 regarding how the Fund voted proxies relating to portfolio securities during the
 12-month period ended June 30, 2004 is available without charge upon request, by
 calling the Fund toll-free at (800) 221-4268 and on the SEC&#146;s Internet site
 at http://www.sec.gov.</font></p>
<p align="center"><font face="Times New Roman" size="2"><b>NET ASSET VALUE</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The net asset
 value (&#147;NAV&#148;) of the Fund&#146;s shares of Common Stock is calculated
 at the close of regular trading on the New York Stock Exchange (&#147;NYSE&#148;)
 (generally 4:00 p.m. Eastern time) every day that the NYSE is open. The Fund makes
 this information available daily by telephone (800-221-4268) and via its web site
 (www.roycefunds.com) and through electronic distribution for media publication,
 including major internet-based financial services web sites and portals (bloomberg.com,
 yahoo.com, cbsmarketwatch.com, etc.) Currently,<i>The Wall Street Journal</i>,
<i>The New York Times</i> and<i>Barron&#146;s</i> publish NAVs for closed-end investment
 companies weekly.</font></p>
<p align="justify"><font face="Times New Roman" size="2">&#160;&#160;&#160;&#160;&#160;The NAV per
 share of the Fund&#146;s Common Stock is calculated by dividing the current value
 of the Fund&#146;s total assets less the sum of all of its liabilities and the aggregate
 liquidation preferences of its outstanding shares of Preferred Stock, by the total
 number of outstanding shares of Common Stock. The Fund&#146;s investments are valued
 based on market value or, if market quotations are not readily available, at their
 fair value as determined in good faith under procedures established by the Fund&#146;s Board of Directors. The Fund may also use fair value pricing instead of market
 quotations to value securities if, because of special circumstances, the Fund believes
 that the fair value pricing would more accurately reflect the price it could expect
 to obtain on a current sale of the securities. The Fund will value its foreign securities
 in U.S. dollars on the basis of foreign currency exchange rates provided to the
 Fund by its custodian, State Street Bank &#038; Trust Company. The foreign currency
 exchange rates are determined by the Fund&#146;s custodian prior to the close of
 trading on the New York Stock Exchange, generally at 12:00 p.m. Eastern time.</font></p>
<p align="center"><font face="Times New Roman" size="2">B-23</font>
<hr size="3" color="gray">
<br>
<page>
<p align="center"><font face="Times New Roman" size="2"><b>FINANCIAL STATEMENTS</b></font></p>
<p align="justify"><font face="Times New Roman" size="2">The audited financial statements
 included in the Annual Report to the Fund&#146;s Stockholders for the fiscal year
 ended December 31, 2004, together with the report of Tait, Weller &#038; Baker thereon, are incorporated herein by reference.</font></p>
<p align="center"><font face="Times New Roman" size="2">B-24</font>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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