DEF: Royce Small-Cap Trust Sets Annual Meeting for Director Elections

Sentiment:

Proxy Statement 18 August 2025 3:23 PM

📋All filings for Royce Small-cap Trust, INC

Royce Small-Cap Trust, Inc. announced its Annual Meeting of Stockholders for October 8, 2025, primarily to elect two Class II Directors and address corporate governance matters.

Summary

The Annual Meeting of Stockholders will be held on Wednesday, October 8, 2025, at 11:00 a.m. Eastern Time, at the Fund's offices in New York, New York.
The primary purpose of the meeting is to elect two Class II Directors, Patricia W. Chadwick and Michael K. Shields, for a three-year term expiring at the Fund's 2028 Annual Meeting of Stockholders.
The record date for determining stockholders entitled to vote is August 5, 2025.
As of the record date, there were 119,627,857 shares of Common Stock outstanding.
The Board of Directors consists of seven Directors, with six being Independent Directors, and Christopher C. Grisanti serving as lead Independent Director.
The Fund's Audit Committee and Nominating Committee are composed solely of Independent Directors, while the Distribution Committee is comprised of Christopher D. Clark, an interested person.
Independent Directors received an annual rate of $18,000 for serving on the Board, plus $1,000 for each Board meeting attended for the year ended December 31, 2024, with additional compensation for the lead Independent Director ($2,656) and Audit Committee Chair ($1,770).
Aggregate compensation paid to Independent Directors from the Fund Complex for the year ended December 31, 2024, ranged from $223,500 to $724,250 (for G. Peter OBrien, who also served on Legg Mason Funds).
PricewaterhouseCoopers LLP (PWC) served as the independent auditors. Audit fees were $54,040 for the fiscal year ended December 31, 2024, and $52,447 for 2023. Tax fees were $11,509 for 2024 and $11,173 for 2023.
An ongoing legal proceeding related to the Maryland Control Share Acquisition Act (MCSAA) involving Royce Global Trust, Inc. (RGT) and other funds has reached the U.S. Supreme Court, which granted certiorari on June 30, 2025, to resolve a circuit split on implied right of action under the Investment Company Act of 1940.

Sentiment

Score: 7

Explanation: The filing is a standard proxy statement, indicating routine corporate governance. The strong independent board representation and established committee structures are positive. The ongoing litigation, while not directly against the Fund, introduces a degree of uncertainty for the broader fund complex, but it's a known issue being addressed through legal channels. No negative financial performance or operational issues are disclosed.

Positives

The Board maintains a strong independent oversight structure, with six out of seven Directors classified as Independent Directors, exceeding regulatory requirements.
The Board comprises highly experienced professionals with diverse backgrounds in investment, finance, and business, including two designated Audit Committee Financial Experts (Patricia W. Chadwick and Julia W. Poston).
Established corporate governance through dedicated Audit, Nominating, and Distribution Committees, each with defined charters and responsibilities.
The Fund has clear policies for the pre-approval of audit and non-audit services by its independent auditors, enhancing financial transparency and auditor independence.
The Board conducts an annual performance evaluation of itself and its Audit Committee, promoting continuous improvement in governance.

Negatives

One Director attended the Fund's 2024 Annual Meeting of Stockholders, indicating potentially low in-person engagement from the Board at shareholder meetings.
The Distribution Committee is composed solely of an 'interested person' (Christopher D. Clark), which could be perceived as a less independent structure for dividend and capital gains distributions.
The ongoing litigation at the U.S. Supreme Court regarding the Maryland Control Share Acquisition Act, while not directly against Royce Small-Cap Trust, Inc., introduces legal uncertainty for the broader fund complex and could impact future governance practices.

Risks

Legal risk stemming from the ongoing U.S. Supreme Court case concerning the Maryland Control Share Acquisition Act, which could establish precedents affecting investment company governance and shareholder rights across the industry.
Operational risk of potential meeting adjournments if sufficient votes are not received for the director elections, although the Bylaws permit such actions.
Inherent risk that the Board's oversight role does not make it a guarantor of the Fund's investments or activities, meaning shareholders bear investment performance and other operational risks.

Future Outlook

The Fund anticipates making its Semiannual Report for the six-month period ended June 30, 2025, available to stockholders in late August 2025. Stockholder proposals intended for the 2026 Annual Meeting must be received by April 17, 2026, for inclusion in the proxy statement, with advance notice for nominations or other business required between April 24, 2026, and May 24, 2026.

Management Comments

The Board believes that each Director's experience, qualifications, attributes and skills should be evaluated on an individual basis and in consideration of the perspective such Director brings to the entire Board, with no single Director, or particular factor, being indicative of Board effectiveness.
The Board believes that Directors need to have the ability to critically review, evaluate, question and discuss information provided to them, and to interact effectively with Fund management, service providers and counsel, in order to exercise effective business judgment in the performance of their duties; the Board believes that their members satisfy this standard.
The Board has determined that its leadership structure is appropriate in light of the services that Royce and its affiliates provide to the Fund and potential conflicts of interest that could arise from these relationships.
The Board knows of no business other than that stated in Proposal 1 of the Notice of Annual Meeting that will be presented for consideration at the Meeting.

Industry Context

This proxy statement reflects standard corporate governance practices for a U.S. registered investment company, specifically a small-cap trust. The ongoing litigation concerning the Maryland Control Share Acquisition Act highlights a broader industry challenge regarding shareholder rights and anti-takeover provisions within the investment company sector, with the Supreme Court's decision potentially setting a significant precedent for fund governance across the industry.

Comparison to Industry Standards

The Board's composition with 6 out of 7 independent directors (over 85%) exceeds the Investment Company Act requirement of at least 40% and the majority requirement for certain exemptive rules, aligning with best practices for strong independent oversight in the investment fund industry.
The identification of Audit Committee Financial Experts (Patricia W. Chadwick and Julia W. Poston) aligns with SEC regulations and industry best practices for financial oversight.
The compensation structure for independent directors, including annual rates and per-meeting fees, is a common practice in the investment fund industry, though specific amounts vary by fund size and complexity.
The pre-approval policies for audit and non-audit services by PricewaterhouseCoopers LLP are consistent with regulatory requirements (Sarbanes-Oxley Act) and industry standards for maintaining auditor independence.
The ongoing litigation regarding the Maryland Control Share Acquisition Act, while specific to certain funds, reflects a broader legal challenge faced by some closed-end funds in the industry concerning anti-takeover measures and shareholder activism, as seen in similar cases involving Saba Capital.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Class II Director	N/A	Patricia W. Chadwick	October 8, 2025 (if elected)	Nominated for re-election for a three-year term.
Class II Director	N/A	Michael K. Shields	October 8, 2025 (if elected)	Nominated for re-election for a three-year term.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Director Election	Election of two Class II Directors (Patricia W. Chadwick and Michael K. Shields) for a three-year term expiring at the 2028 Annual Meeting of Stockholders.	October 8, 2025 (if elected)	Ensures continuity and stability of the Board's Class II representation.
Board Composition	The Board consists of seven Directors, with six being Independent Directors, exceeding regulatory requirements and promoting strong independent oversight.	Ongoing	Enhances corporate governance and shareholder protection through robust independent representation.
Committee Structure	Maintenance of standing Audit, Nominating, and Distribution Committees with defined charters and responsibilities.	Ongoing	Provides structured oversight for financial reporting, director selection, and dividend distributions.
Audit Committee Financial Experts	Identification of Patricia W. Chadwick and Julia W. Poston as Audit Committee Financial Experts.	Ongoing	Strengthens the financial oversight capabilities of the Audit Committee.
Director Retirement Policy	Independent Directors retire on December 31 of the year they reach age 79, subject to Board waiver.	Ongoing	Ensures periodic refreshment of the Board while allowing for experienced members to continue with Board discretion.
Nominating Committee Charter Amendment	The Nominating Committee Charter was amended on May 5, 2025.	May 5, 2025	Updates the guidelines and procedures for identifying and evaluating potential director nominees, potentially enhancing the nomination process.

Legal Proceedings

An action was filed on June 29, 2023, against Royce Global Trust, Inc. (RGT) and other unrelated funds in Saba Capital Master Funds., Ltd., et al. v. Clearbridge Energy Midstream Opportunity Fund, Inc., et al., No. 1:23-cv-05568 (S.D.N.Y.), seeking rescission of the defendants' election to opt into the provisions of the Maryland Control Share Acquisition Act (MCSAA).
On January 4, 2024, the U.S. District Court for the Southern District of New York declared that the control share resolutions violate a provision of the Investment Company Act and ordered their rescission.
The U.S. Court of Appeals for the Second Circuit affirmed the district court's judgment in full on June 26, 2024.
On or about September 24, 2024, RGT and certain defendants filed a petition with the U.S. Supreme Court for a writ of certiorari to review the Second Circuit's judgment.
On June 30, 2025, the Supreme Court granted certiorari, agreeing to resolve a circuit split over whether private parties have an implied right of action to enforce certain provisions of the Investment Company Act of 1940.

Related Party Transactions

The Distribution Committee is comprised of Christopher D. Clark, who is an interested person of the Fund as defined in the Investment Company Act of 1940, due to his position with Royce & Associates, LP, the Fund's investment adviser.

Stakeholder Impact

Shareholders will participate in the election of directors, directly influencing the Fund's governance. The outcome of the ongoing MCSAA litigation could impact shareholder voting rights and control share provisions in the future.
Management and Directors' roles and responsibilities are defined by the election process and established governance structures, with their compensation disclosed.
The Investment Adviser, Royce & Associates, LP, continues to manage the Fund, with its officers also serving as Fund officers. The legal proceedings related to MCSAA could affect the broader fund complex managed by Royce.
Auditors, PricewaterhouseCoopers LLP, continue to provide audit and tax services, with their fees disclosed and pre-approval policies in place, ensuring financial oversight.

Next Steps

Stockholders are encouraged to vote on Director nominees by October 7, 2025, via internet, telephone, or mail, or in person on October 8, 2025.
The Annual Meeting of Stockholders will be held on October 8, 2025.
The Semiannual Report for the six-month period ended June 30, 2025, will be made available to stockholders in late August 2025.
Stockholder proposals for the 2026 Annual Meeting must be received by April 17, 2026, for inclusion in the Fund's Proxy Statement.
Advance notice for nominations or other business intended for the 2026 Annual Meeting must be received between April 24, 2026, and May 24, 2026.
The U.S. Supreme Court is expected to resolve a circuit split on whether private parties have an implied right of action to enforce certain provisions of the Investment Company Act of 1940, following the grant of certiorari on June 30, 2025.

Key Dates

Date	Description
1986	Internal Revenue Code of 1986, as amended, referenced for compliance with Subchapter M.
1992	Michael K. Shields' tenure at Scudder, Stevens & Clark began.
1994	Christopher C. Grisanti's tenure at Spears Benzak, Salomon & Farrell began; Daniel A. OByrne became Vice President of the Fund.
1996	John E. Denneen became Secretary and Chief Legal Officer of the Fund (first tenure).
1997	Michael K. Shields' tenure at Campbell, Cowperthwait & Co. began.
1999	Christopher C. Grisanti co-founded Grisanti Capital Management LLC; G. Peter OBrien joined Hill House, Inc. Board.
2000	Patricia W. Chadwick became Consultant and President of Ravengate Partners LLC; Audit Committee Charter adopted.
2001	John E. Denneen's first tenure as Secretary and Chief Legal Officer ended.
2002	John E. Denneen resumed role as Secretary and Chief Legal Officer; Julia W. Poston became Senior Client Partner at Ernst & Young, LLP.
2003	G. Peter OBrien became Director of TICC Capital Corp.
2004	Nominating Committee Charter adopted.
2005	G. Peter OBrien became Trustee Emeritus of Colgate University; Michael K. Shields became President and CEO of Eastover Capital Management.
2006	Francis D. Gannon joined Royce; G. Peter OBrien became Director of Bridges School.
2007	Christopher D. Clark joined Royce.
2010	Michael K. Shields became Owner of Shields Advisors; Julia W. Poston became Director and Founder of Cincinnati Womens Executive Forum.
2011	Patricia W. Chadwick and G. Peter OBrien became Class II and Class I Directors, respectively; Michael K. Shields became Chairman of Halftime Carolinas Board.
2012	Cecile B. Harper became Board Member of Pyramid Peak Foundation; Michael K. Shields became President and CEO of Piedmont Trust Company.
2013	John P. Schwartz became Associate General Counsel and Compliance Officer of Royce; Cecile B. Harper became Board Member of Regional One Health Foundation.
2014	Christopher D. Clark became President and Co-Chief Investment Officer of Royce; Francis D. Gannon became Co-Chief Investment Officer of Royce; Christopher D. Clark became President and Member of Board of Directors/Trustees of the Fund.
2015	Christopher D. Clark became Member of the Board of Managers of Royce; Peter K. Hoglund became Treasurer of the Fund; Michael K. Shields became Class II Director.
2016	Christopher D. Clark became Chief Executive Officer of Royce; Michael K. Shields became Chairman of UNC Charlotte Investment Fund Board.
2017	Christopher C. Grisanti became Class III Director; G. Peter OBrien's tenure at TICC Capital Corp. ended.
2018	G. Peter OBrien's tenure at Bridges School ended.
2019	Audit Committee Charter amended; G. Peter OBrien became Emeritus Board Member of Hill House, Inc.; Cecile B. Harper became Chief Financial Officer and Chief Operating Officer of College Foundation at the University of Virginia.
2020	Christopher C. Grisanti joined MAI Capital Management LLC; Cecile B. Harper became Class I Director; Julia W. Poston became Director of Merus Corporation.
2021	Julia W. Poston became Director of Master Fluid Solutions; Shares of the Fund's common stock acquired prior to January 25, 2021, would not be control shares under the MCSAA.
2022	Patricia W. Chadwick's tenure at Wisconsin Energy Corp. ended; Cecile B. Harper's tenure at Pyramid Peak Foundation ended; John P. Schwartz became Chief Compliance Officer of The Royce Funds; Julia W. Poston became Trustee of AuguStar Variable Insurance Products Fund, Inc. and The James Advantage Funds.
June 29, 2023	Action filed against RGT and other funds in Saba Capital Master Funds., Ltd., et al. v. Clearbridge Energy Midstream Opportunity Fund, Inc., et al., No. 1:23-cv-05568 (S.D.N.Y.), seeking rescission of the defendants' election to opt into the provisions of the MCSAA.
2023	Julia W. Poston became Class I Director.
December 31, 2023	Michael K. Shields' tenure at Piedmont Trust Company ended.
January 4, 2024	U.S. District Court for the Southern District of New York issued an opinion and order declaring control share resolutions violate the Investment Company Act and ordered rescission.
April 2024	Michael K. Shields became Chief Investment Officer of National Christian Foundation.
May 2024	Cecile B. Harper became Director of Alarm.com Holdings, Inc.
June 26, 2024	U.S. Court of Appeals for the Second Circuit affirmed the district court's judgment regarding MCSAA litigation.
September 24, 2024	RGT and certain defendants filed a petition with the U.S. Supreme Court for a writ of certiorari regarding MCSAA litigation.
September 30, 2024	Date of beneficial ownership information for Morgan Stanley.
October 8, 2024	Date of the Fund's 2024 Annual Meeting of Stockholders (implied by Director attendance section).
November 8, 2024	Date Morgan Stanley filed Schedule 13G.
December 31, 2024	End of fiscal year for which financial statements were audited; end of period for Director compensation reporting; date of beneficial ownership information for Bank of America Corporation.
February 14, 2025	Date Bank of America Corporation filed Schedule 13G.
February 19, 2025	Audit Committee reviewed and discussed the audit of the Fund's financial statements for fiscal year ended December 31, 2024.
May 5, 2025	Nominating Committee Charter amended.
June 30, 2025	U.S. Supreme Court granted certiorari for MCSAA litigation; end of six-month period for Semiannual Report.
August 5, 2025	Record date for determining stockholders entitled to vote at the Annual Meeting.
August 18, 2025	Date of the Proxy Statement.
August 22, 2025	Approximate initial mailing date of the Notice of Internet Availability of Proxy Materials.
Late August 2025	Semiannual Report for the six-month period ended June 30, 2025, will be made available.
October 7, 2025	Deadline to vote by Internet for the Annual Meeting.
October 8, 2025	Date of the Annual Meeting of Stockholders.
December 3, 2025	Latest possible adjournment date if a quorum is not present (120 days after Record Date).
December 31, 2025	End of year for which Independent Directors will continue to receive compensation; retirement policy for Independent Directors reaching age 79.
April 17, 2026	Deadline for stockholder proposals for the 2026 Annual Meeting to be included in the Proxy Statement.
April 24, 2026	Start of window for advance notice of nominations or other business for 2026 Annual Meeting.
May 24, 2026	End of window for advance notice of nominations or other business for 2026 Annual Meeting.
2026	Current term expires for Class III Directors (Christopher D. Clark, Christopher C. Grisanti).
2027	Current term expires for Class I Directors (Cecile B. Harper, G. Peter OBrien, Julia W. Poston).
2028	Term expiration for elected Class II Directors (Patricia W. Chadwick, Michael K. Shields).

Recommendation

hold

This filing is a routine proxy statement for an annual meeting, primarily focused on director elections and corporate governance. It does not contain information on financial performance, strategic shifts, or other material events that would typically warrant a 'buy' or 'sell' recommendation. The ongoing legal proceedings related to the Maryland Control Share Acquisition Act, while significant for the broader fund complex, are a known issue and do not present new, immediate risks that would alter the investment thesis for Royce Small-Cap Trust based solely on this filing. Therefore, a 'hold' recommendation is appropriate as there's no new information to change an existing position.

Keywords

Royce Small-Cap Trust, SEC filing, proxy statement, annual meeting, director election, corporate governance, investment company, small-cap, fund management, audit committee, nominating committee, Maryland Control Share Acquisition Act, MCSAA, shareholder vote, financial reporting, PricewaterhouseCoopers, Royce Investment Partners

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