497 1 d27638.htm 497

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROSPECTUS

 

 

 

Service Class Shares

 

 

 

 

 

 

 

 

JANUARY 3, 2011

 

 

 

 

 

 

 

 




 

 

 

 

 

 

 

Fund

 

 

 

 



 

 

 

Royce Global Dividend Value Fund

RGVDX     

 

 

 



 

 

 

Royce International Premier Fund

RYIPX     

 

 

 



 

 

 

Royce International Micro-Cap Fund

ROIMX     

 

 

 



 

 

 

Royce Special Equity Multi-Cap Fund

RSEMX     

 

 

 



 

 

 

 

 

 

 

 

As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved of these securities, or determined that the information in this prospectus is accurate or complete. It is a crime to represent otherwise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(TheRoyceFunds LOGO)

 

 

 

 

 

 

www.roycefunds.com

 

 

 

 

 

 

 

 

 

 

 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




 

 

 

 

 

 

 

Table of Contents

 

 

 

   

 

 

 

 

 

 

 

 

Royce Global Dividend Value Fund

2

 

 

 

Royce International Premier Fund

5

 

 

 

Royce International Micro-Cap Fund

8

 

 

 

Royce Special Equity Multi-Cap Fund

11

 

 

 

Investing in Smaller Companies

13

 

 

 

Investing in International Securities

14

 

 

 

Management of the Funds

16

 

 

 

General Shareholder Information

18

 

 

 

Guide for Direct Shareholders

23

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

The Service Class is offered without sales charges.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(R LOGO)

 

 

 

 

 

 

 

 

 

 

 

The Royce Fund Prospectus 2011  |  1




 

Royce Global Dividend Value Fund

 

 

Investment Goals

Royce Global Dividend Value Fund’s investment goals are long-term growth of capital and current income.

 

Fees and Expenses of the Fund

The following table presents the fees and expenses that you may pay if you buy and hold shares of the Fund.


 

 

 

 

 

 

 

 

SHAREHOLDER FEES (fees paid directly from your investment)

 

 

 





Maximum sales charge (load) imposed on purchases

 

0.00

%





Maximum deferred sales charge

 

0.00

%





Maximum sales charge (load) imposed on reinvested dividends

 

0.00

%





Redemption fee (as a percentage of amount redeemed on shares held for less than 180 days)

 

2.00

%





 

 

 

 

ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment)





Management fees

 

1.25

%

Distribution (12b-1) fees

 

0.25

%

Other expenses

 

0.38

%

Acquired fund fees and expenses

 

0.19

%





Total annual Fund operating expenses

 

2.07

%





Fee waivers and/or expense reimbursements

 

(0.19

)%





Total annual Fund operating expenses after fee waivers and/or expense reimbursements

 

1.88

%





 

 

 

 

Royce has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.69% through April 30, 2014.

Expenses have been estimated for the current fiscal year.


 

 

 

 

 

 

EXAMPLE

 

 

 

 

 







This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s total operating expenses (net of fee waivers

 

and/or expense reimbursements) remain the same. Although your actual costs may be higher or lower, based on the assumptions your costs would be:

 

 

 

 

 

 

1 Year

3 Years

 

 

 





 

$191

$591

 

 

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. Because the Fund will commence operations on January 3, 2011, no portfolio turnover rate is included in this prospectus.

 

2  |  The Royce Fund Prospectus 2011




 

Royce Global Dividend Value Fund (continued)

 

 

Principal Investment Strategy

Royce & Associates, LLC (“Royce”), the Fund’s investment adviser, invests the Fund’s assets primarily in dividend-paying securities of micro-cap, small-cap and/or mid-cap companies with market capitalizations up to $5 billion that it believes are trading significantly below its estimate of their current worth, basing this assessment chiefly on balance sheet quality and cash flow levels. Investing in such securities may tend to stabilize the volatility inherent in the prices of micro-cap, small-cap and mid-cap securities.

     Normally, the Fund invests at least 80% of its net assets in equity securities that produce dividend income to the Fund, and at least 65% will be issued by companies with stock market capitalizations of up to $5 billion (micro-cap, small-cap and mid-cap companies) at the time of investment. The Fund may invest in other investment companies that invest in equity securities.
     Under normal market circumstances, the Fund will invest at least 40% of its net assets in the equity securities of companies domiciled in at least three different countries outside of the United States. During periods when market conditions are not deemed favorable by Royce, the Fund will invest at least 30% of its net assets in such companies. From time to time, a substantial portion of the Fund’s assets may be invested in companies domiciled in a single country. The Fund may also invest up to 35% of its net assets in U.S. and non-U.S. non-convertible debt or preferred stock. Although there are no geographic limits on the Fund’s investments, no more than 35% of the Fund’s net assets may be invested in the securities of companies domiciled in “developing countries,” also known as emerging markets. Generally, developing countries, sometimes also referred to as emerging market countries, include every country in the world other than the United States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore and Western European countries (as defined in the Fund’s Statement of Additional Information). In selecting securities for the Fund, Royce uses a bottom-up, value approach. Royce primarily focuses on company-specific criteria rather than on political, economic or other country-specific factors. 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 any foreign securities that it purchases. The Fund may sell securities to, among other things, secure gains, limit losses, redeploy assets into what Royce deems to be more appropriate opportunities and/or manage cash levels in the Fund’s portfolio.

 

Primary Risks for Fund Investors

As with any mutual fund that invests in common stocks, Royce Global Dividend Value Fund is subject to market risk—the possibility that common stock prices will decline over short or extended periods of time. As a result, the value of your investment

 

in the Fund will fluctuate with the market, and you could lose money over short or long periods of time.
     Royce’s estimate of a company’s current worth may prove to be inaccurate, or this estimate may not be recognized by other investors, which could lead to portfolio losses.
     The prices of micro-cap, small-cap and mid-cap securities are generally more volatile and their markets are less liquid relative to larger-cap securities. 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. There is no assurance that there will be net investment income to distribute, and/or that the Fund will achieve its investment goals.
     In addition to general market risk, foreign securities may be subject to different risks than investments in U.S. securities, including adverse political, social, economic or other developments that are unique to a particular country or region. Prices of foreign securities in particular countries or regions may, at times, move in a different direction and/or be more volatile than those of U.S. securities. The Fund’s investments are usually denominated in or tied to the currencies of the countries in which they are primarily traded. Because the Fund does not intend to hedge its foreign currency exposure, the U.S. dollar value of the Fund’s investments may be harmed by declines in the value of foreign currencies in relation to the U.S. dollar. This may occur even if the value of the investment in the currency’s home country has not declined. These risk factors may affect the prices of foreign securities issued by companies domiciled in developing countries more than those domiciled in developed countries. For example, many developing countries have in the past experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries, and there may be delays in settlement procedures.
     To the extent that the Fund’s investments in the securities of foreign companies consists of non-U.S. domiciled companies that trade on a U.S. exchange, some or all of the above-stated risks of investing in foreign companies may not apply.
     Investments in the Fund are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

 

 

Performance

Because the Fund will commence operations on January 3, 2011, it does not have any historical performance, and therefore no return information is included in this Prospectus. Current month-end performance information may be obtained at www.roycefunds.com or by calling Investor Services at (800) 221-4268.




The Royce Fund Prospectus 2011  |  3



 

Royce Global Dividend Value Fund (concluded)

 

Investment Adviser and Portfolio Management
Royce serves as investment adviser to the Fund. Charles M. Royce, President and Co-Chief Investment Officer of Royce, manages the Fund, assisted by David A. Nadel. Mr. Royce and Mr. Nadel have served as the Fund’s portfolio manager and assistant portfolio manager, respectively, since its commencement of operations on January 3, 2011.

How to Purchase and Sell Fund Shares
Minimum initial investments for shares of the Fund’s Service Class purchased directly from The Royce Fund:

 

 

 

 

 

Account Type

 

Minimum

 





 

Regular Account

 

 

$2,000

 





 

IRA

 

 

$1,000

 





 

Automatic Investment or Direct Deposit Plan Accounts

 

 

$1,000

 





 

401(k) Accounts

 

 

None

 





The minimum for subsequent investments is $50, regardless of account type.

     You may sell shares in your account at any time and make requests online, by telephone and by mail. You may also purchase or sell Fund shares through a third party, such as a discount or full-service broker-dealer, bank or other financial intermediary.

Tax Information
The Fund intends to make distributions that may be taxable as ordinary income or capital gains.

Financial Intermediary Compensation
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.



4 | The Royce Fund Prospectus 2011


 

Royce International Premier Fund

 

Investment Goal
Royce International Premier Fund’s investment goal is long-term growth of capital.

Fees and Expenses of the Fund
The following table presents the fees and expenses that you may pay if you buy and hold shares of the Fund.

 

 

 

 

 

SHAREHOLDER FEES (fees paid directly from your investment)

 

 

 

 






Maximum sales charge (load) imposed on purchases

 

 

0.00

%






Maximum deferred sales charge

 

 

0.00

%






Maximum sales charge (load) imposed on reinvested dividends

 

 

0.00

%






Redemption fee (as a percentage of amount redeemed on shares held for less than 180 days)

 

 

2.00

%






 

 

 

 

 

ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment)






Management fees

 

 

1.25

%

Distribution (12b-1) fees

 

 

0.25

%

Other expenses

 

 

0.38

%






Acquired fund fees and expenses

 

 

0.19

%






Total annual Fund operating expenses

 

 

2.07

%






Fee waivers and/or expense reimbursements

 

 

(0.19

)%






Total annual Fund operating expenses after fee waivers and/or expense reimbursements

 

 

1.88

%






Royce has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.69% through April 30, 2014.

Expenses have been estimated for the current fiscal year.

 

 

 

 

 

 

EXAMPLE

 

 

 

 

 







 

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s total operating expenses (net of fee waivers and/or expense reimbursements) remain the same. Although

 

your actual costs may be higher or lower, based on the assumptions your costs would be:

 

 

 

 

 

 

1 Year

3 Years

 

 

 





 

$191

$591

 

 

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. Because the Fund will commence operations on January 3, 2011, no portfolio turnover rate is included in this prospectus.

 

 

The Royce Fund Prospectus 2011 | 5


 

Royce International Premier Fund (continued)

 

Principal Investment Strategy
Royce & Associates, LLC (“Royce”), the Fund’s investment adviser, invests the Fund’s assets in a limited number (generally less than 100) of the equity securities of small-cap companies, those with stock market capitalizations from $500 million to $2.5 billion, issued by non-U.S. (“international”) companies—i.e. companies domiciled outside of the United States. Royce looks for companies that it considers “premier”—those that have excellent business strengths and/or prospects for growth, high internal rates of return and low leverage, and that are trading significantly below its estimate of their current worth.
     Normally, the Fund invests at least 80% of its net assets in the equity securities of such premier companies. At least 65% of these securities will be issued by companies with stock market capitalizations up to $2.5 billion at the time of investment. The Fund may invest in other investment companies that invest in equity securities.
     Under normal market circumstances, at least 65% of the Fund’s net assets will be invested in the equity securities of international companies domiciled in at least three different countries. From time to time, a substantial portion of the Fund’s assets may be invested in international companies domiciled in a single country. Although there are no geographic limits on the Fund’s international investments, no more than 35% of the Fund’s net assets may be invested in the securities of companies domiciled in “developing countries,” also known as emerging markets. Generally, developing countries include every country in the world other than the United States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore, South Korea, Taiwan and Western European countries (as defined in the Fund’s Statement of Additional Information). In selecting securities for the Fund, Royce uses a bottom-up, value approach. Royce primarily focuses on company-specific criteria rather than on political, economic or other country-specific factors. 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 any foreign securities that it purchases. The Fund may sell securities to, among other things, secure gains, limit losses, redeploy assets into what Royce deems to be more appropriate opportunities and/or manage cash levels in the Fund’s portfolio.

Primary Risks for Fund Investors
As with any mutual fund that invests in common stocks, Royce International Premier Fund is subject to market risk—the possibility that common stock prices will decline over short or extended periods of time. As a result, the value of your investment in the Fund will fluctuate with the market, and you could lose money over short or long periods of time.
     Royce’s estimate of a company’s current worth may prove to be inaccurate, or this estimate may not be recognized by other investors, which could lead to portfolio losses.
     The prices of small-cap securities are generally more volatile and their markets are less liquid relative to larger-cap securities. 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. The Fund’s limited portfolio may also involve more risk to investors than a more broadly diversified portfolio of small-cap securities because it may be more susceptible to any single corporate, economic, political, regulatory or market event.
     In addition to general market risk, securities of international companies may be subject to different risks than investments in U.S. securities, including adverse political, social, economic or other developments that are unique to a particular country or region. Prices of international securities in particular countries or regions may, at times, move in a different direction and/or be more volatile than those of U.S. securities. The Fund’s investments are usually denominated in or tied to the currencies of the countries in which they are primarily traded. Because the Fund does not intend to hedge its foreign currency exposure, the U.S. dollar value of the Fund’s investments may be harmed by declines in the value of foreign currencies in relation to the U.S. dollar. This may occur even if the value of the investment in the currency’s home country has not declined. These risk factors may affect the prices of international securities issued by companies domiciled in developing countries more than those domiciled in developed countries. For example, many developing countries have in the past experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries, and there may be delays in settlement procedures.
     To the extent that the Fund’s investments in the securities of international companies consists of non-U.S. domiciled companies that trade on a U.S. exchange, some or all of the above-stated risks of investing in international companies may not apply.
     Investments in the Fund are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Performance
Because the Fund will commence operations on January 3, 2011, it does not have any historical performance, and therefore no return information is included in this Prospectus. Current month-end performance information may be obtained at www.roycefunds.com or by calling Investor Services at (800) 221-4268.


6 | The Royce Fund Prospectus 2011


 

Royce International Premier Fund (concluded)

 

Investment Adviser and Portfolio Management
Royce serves as investment adviser to the Fund. David A. Nadel, Portfolio Manager and Director of International Research of Royce, manages the Fund, assisted by George U. Wyper. Mr. Nadel and Mr. Wyper have served as the Fund’s portfolio manager and assistant portfolio manager, respectively, since its commencement of operations on January 3, 2011.

How to Purchase and Sell Fund Shares
Minimum initial investments for shares of the Fund’s Service Class purchased directly from The Royce Fund:

 

 

 

 

 

Account Type

 

Minimum

 




 

Regular Account

 

 

$2,000

 





 

IRA

 

 

$1,000

 





 

Automatic Investment or Direct Deposit Plan Accounts

 

 

$1,000

 





 

401(k) Accounts

 

 

None

 





 

The minimum for subsequent investments is $50, regardless of account type.

     You may sell shares in your account at any time and make requests online, by telephone and by mail. You may also purchase or sell Fund shares through a third party, such as a discount or full-service broker-dealer, bank or other financial intermediary.

Tax Information
The Fund intends to make distributions that may be taxable as ordinary income or capital gains.

Financial Intermediary Compensation
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.



The Royce Fund Prospectus 2011 | 7


 

Royce International Micro-Cap Fund

 

Investment Goal
Royce International Micro-Cap Fund’s investment goal is long-term growth of capital.

Fees and Expenses of the Fund
The following table presents the fees and expenses that you may pay if you buy and hold shares of the Fund.

 

 

 

 

SHAREHOLDER FEES (fees paid directly from your investment)

 

 

 





Maximum sales charge (load) imposed on purchases

 

0.00

%





Maximum deferred sales charge

 

0.00

%





Maximum sales charge (load) imposed on reinvested dividends

 

0.00

%





Redemption fee (as a percentage of amount redeemed on shares held for less than 180 days)

 

2.00

%





 

 

 

 

ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment)

 

 

 





Management fees

 

1.30

%

Distribution (12b-1) fees

 

0.25

%

Other expenses

 

0.38

%

Acquired fund fees and expenses

 

0.19

%





Total annual Fund operating expenses

 

2.12

%





Fee waivers and/or expense reimbursements

 

(0.24

)%





Total annual Fund operating expenses after fee waivers and/or expense reimbursements

 

1.88

%





Royce has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.69% through April 30, 2014.

Expenses have been estimated for the current fiscal year.

 

 

 

 

 

 

EXAMPLE

 

 

 

 

 







 

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s total operating expenses (net of fee waivers

 

and/or expense reimbursements) remain the same. Although your actual costs may be higher or lower, based on the assumptions your costs would be:

 

 

 

 

 

 

1 Year

3 Years

 

 

 





 

$191

$591

 

 

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. Because the Fund will commence operations on January 3, 2011, no portfolio turnover rate is included in this prospectus.

8 | The Royce Fund Prospectus 2011



 

Royce International Micro-Cap Fund (continued)

 

 

Principal Investment Strategy
Royce & Associates, LLC (“Royce”), the Fund’s investment adviser, invests the Fund’s assets primarily in equity securities of micro-cap companies, those with stock market capitalizations up to $500 million, issued by non-U.S. (“international”) companies—i.e. companies domiciled outside of the United States. Using its value approach, Royce generally focuses on micro-cap companies that it believes have excellent business strengths and/or prospects for growth, high internal rates of return and low leverage, and that are trading significantly below its estimate of their current worth. The Fund may invest in other investment companies that invest in equity securities.
     Normally, the Fund invests at least 80% of its net assets in the equity securities of companies with stock market capitalizations up to $500 million, and at least 65% of the Fund’s net assets will be invested in the equity securities of international companies domiciled in at least three different countries. From time to time, a substantial portion of the Fund’s assets may be invested in international companies domiciled in a single country. Although there are no geographic limits on the Fund’s international investments, no more than 35% of the Fund’s net assets may be invested in the securities of companies domiciled in “developing countries,” also known as emerging markets. Generally, developing countries include every country in the world other than the United States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore, South Korea, Taiwan and Western European countries (as defined in the Fund’s Statement of Additional Information). In selecting securities for the Fund, Royce uses a bottom-up, value approach. Royce primarily focuses on company-specific criteria rather than on political, economic or other country-specific factors. 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 any foreign securities that it purchases. The Fund may sell securities to, among other things, secure gains, limit losses, redeploy assets into what Royce deems to be more appropriate opportunities and/or manage cash levels in the Fund’s portfolio.

Primary Risks for Fund Investors
As with any mutual fund that invests in common stocks, Royce International Micro-Cap Fund is subject to market risk—the possibility that common stock prices will decline over short or extended periods of time. As a result, the value of your investment in the Fund will fluctuate with the market, and you could lose money over short or long periods of time.
     Royce’s estimate of a company’s current worth may prove to be inaccurate, or this estimate may not be recognized by other investors, which could lead to portfolio losses.

     The prices of micro-cap securities are generally more volatile and their markets are less liquid relative to larger-cap securities. Therefore, the Fund may involve considerably more risk of loss and its returns may differ significantly from funds investing in larger-cap companies or other asset classes.
     In addition to general market risk, securities of international companies may be subject to different risks than investments in U.S. securities, including adverse political, social, economic or other developments that are unique to a particular country or region. Prices of international securities in particular countries or regions may, at times, move in a different direction and/or be more volatile than those of U.S. securities. The Fund’s investments are usually denominated in or tied to the currencies of the countries in which they are primarily traded. Because the Fund does not intend to hedge its foreign currency exposure, the U.S. dollar value of the Fund’s investments may be harmed by declines in the value of foreign currencies in relation to the U.S. dollar. This may occur even if the value of the investment in the currency’s home country has not declined. These risk factors may affect the prices of international securities issued by companies domiciled in developing countries more than those domiciled in developed countries. For example, many developing countries have in the past experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries, and there may be delays in settlement procedures.
     To the extent that the Fund’s investment in the securities of international companies consists of non-U.S. domiciled companies that trade on a U.S. exchange, some or all of the above-stated risks of investing in international companies may not apply.
     Investments in the Fund are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Performance
Because the Fund will commence operations on January 3, 2011, it does not have any historical performance, and therefore no return information is included in this Prospectus. Current month-end performance information may be obtained at www.roycefunds.com or by calling Investor Services at (800) 221-4268.

Investment Adviser and Portfolio Management
Royce serves as investment adviser to the Fund. David A. Nadel, Portfolio Manager and Director of International Research of Royce, manages the Fund, assisted by James J. Harvey and Jenifer L. Taylor. Mr. Nadel has served as portfolio manager, and Mr. Harvey and Ms. Taylor have served as assistant portfolio managers for the Fund since its commencement of operations on January 3, 2011.



The Royce Fund Prospectus 2011  |  9


 

Royce International Micro-Cap Fund (concluded)

 

 

How to Purchase and Sell Fund Shares
Minimum initial investments for shares of the Fund’s Service Class purchased directly from The Royce Fund:

 

 

 

 

Account Type

 

Minimum

 




 

Regular Account

 

$2,000

 




 

IRA

 

$1,000

 




 

Automatic Investment or Direct Deposit Plan Accounts

 

$1,000

 




 

401(k) Accounts

 

None

 




 

The minimum for subsequent investments is $50, regardless of account type.

     You may sell shares in your account at any time and make requests online, by telephone and by mail. You may also purchase or sell Fund shares through a third party, such as a discount or full-service broker-dealer, bank or other financial intermediary.

Tax Information
The Fund intends to make distributions that may be taxable as ordinary income or capital gains.

Financial Intermediary Compensation
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.



10  |  The Royce Fund Prospectus 2011



 

Royce Special Equity Multi-Cap Fund

 

Investment Goal
Royce Special Equity Multi-Cap Fund’s investment goal is long-term growth of capital.

Fees and Expenses of the Fund
The following table presents the fees and expenses that you may pay if you buy and hold shares of the Fund.

 

 

 

 

 

 

 

SHAREHOLDER FEES (fees paid directly from your investment)






Maximum sales charge (load) imposed on purchases

 

 

 

0.00

%

 








Maximum deferred sales charge

 

 

 

0.00

%

 








Maximum sales charge (load) imposed on reinvested dividends

 

 

 

0.00

%

 








Redemption fee (as a percentage of amount redeemed on shares held for less than 180 days)

 

 

 

1.00

%

 








 

 

 

 

 

 

 

ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment)








Management fees

 

 

 

1.00

%

 

Distribution (12b-1) fees

 

 

 

0.25

%

 

Other expenses

 

 

 

0.27

%

 








Total annual Fund operating expenses

 

 

 

1.52

%

 








Fee waivers and/or expense reimbursements

 

 

 

(0.13

)%

 








Total annual Fund operating expenses after fee waivers and/or expense reimbursements

 

 

 

1.39

%

 








Royce has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund’s net annual operating expenses at or below 1.39% through April 30, 2014.

Expenses have been estimated for the current fiscal year.

 

EXAMPLE



This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s total operating expenses (net of fee

waivers and/or expense reimbursements) remain the same. Although your actual costs may be higher or lower, based on the assumptions your costs would be:

 

 

1 Year

3 Years



$142

$440





Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. Because the Fund will commence operations on January 3, 2011, no portfolio turnover rate is included in this prospectus.

The Royce Fund Prospectus 2011 | 11



 

Royce Special Equity Multi-Cap Fund (concluded)

 

Principal Investment Strategy
Royce & Associates, LLC (“Royce”), the Fund’s investment adviser, invests the Fund’s assets primarily in equity securities. The portfolio manager applies an intensive value approach in managing the Fund’s assets. This approach, which attempts to combine classic value analysis, the identification of good businesses and accounting cynicism, has its roots in the teachings of Benjamin Graham and Abraham Briloff.
     Normally, the Fund invests at least 80% of its net assets in equity securities. Although the Fund may invest in the equity securities of companies of any market capitalization, Royce expects that a significant portion of the Fund’s assets may be invested in the equity securities of mid- and larger-cap companies with market capitalizations of more than $5 billion. Although the Fund normally focuses on the securities of U.S. companies, it may invest up to 25% of its net assets in foreign securities. The Fund may sell securities to, among other things, secure gains, limit losses, redeploy assets into what Royce deems to be more appropriate opportunities and/or manage cash levels in the Fund’s portfolio.

Primary Risks for Fund Investors
As with any mutual fund that invests in common stocks, Royce Special Equity Multi-Cap Fund is subject to market risk—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 will fluctuate with the market, and you could lose money over short or long periods of time.
     The Fund’s intensive value approach may not be successful and could result in portfolio losses.

     The prices of mid-cap securities are generally more volatile and their markets are less liquid relative to larger-cap securities. Therefore, the Fund may involve considerably more risk of loss and its returns may differ significantly from funds investing exclusively in larger-cap companies or other asset classes.
      Investment in foreign securities involves risks that may not be encountered in U.S. investments, including adverse political, social, economic or other developments that are unique to a particular region or country. Prices of foreign securities in particular countries or regions may, at times, move in a different direction and/or be more volatile than those of U.S. securities. Because the Fund does not intend to hedge its foreign currency exposure, the U.S. dollar value of the Fund’s investments may be harmed by declines in the value of foreign currencies in relation to the U.S. dollar.
     Investments in the Fund are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Performance
Because the Fund will commence operations on January 3, 2011, it does not have any historical performance, and therefore no return information is included in this Prospectus. Current month-end performance information may be obtained at www.roycefunds.com or by calling Investor Services at (800) 221-4268.

Investment Adviser and Portfolio Management
Royce serves as investment adviser to the Fund. Charles R. Dreifus, Principal and Portfolio Manager of Royce, manages the Fund. Mr. Dreifus has managed the Fund since its commencement of operations on January 3, 2011.

How to Purchase and Sell Fund Shares
Minimum initial investments for shares of the Fund’s Service Class purchased directly from The Royce Fund:

 

 

 

 

 

Account Type

 

Minimum

 






Regular Account

 

$

2,000

 






IRA

 

$

1,000

 






Automatic Investment or Direct Deposit Plan Accounts

 

$

1,000

 






401(k) Accounts

 

 

None

 






The minimum for subsequent investments is $50, regardless of account type.

     You may sell shares in your account at any time and make requests online, by telephone and by mail. You may also purchase or sell Fund shares through a third party, such as a discount or full-service broker-dealer, bank or other financial intermediary.

Tax Information
The Fund intends to make distributions that may be taxable as ordinary income or capital gains.

Financial Intermediary Compensation
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.



12 | The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

Smaller-capitalization stocks are those issued by companies with

 

 

 

 

 

market capitalizations of up to $15 billion.

 

 

 

 

 

 

 

 

Investing in Smaller Companies

 

 

 

 

 

Micro-Cap, Small-Cap and Mid-Cap Stocks

 

Royce views the large and diverse universe of smaller companies available for investment by the Funds as having three investment segments or tiers—micro-cap, small-cap and mid-cap. Royce refers to the segment of companies with market capitalizations up to $500 million as micro-cap. We define the next tier, the small-cap universe, as those companies with market capitalizations between $500 million and $2.5 billion. Finally, Royce defines mid-cap as those companies with market caps between $2.5 billion and $15 billion.

 

     Smaller 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 the securities of larger capitalization companies.

 

     As a result, the purchase or sale of more than a limited number of shares of the securities of a smaller company 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 Royce-managed accounts or other investors are also seeking to purchase or sell them. Accordingly, Royce’s investment focus on the securities of smaller companies generally leads it to have a long-term investment outlook of at least two years for a portfolio security.

 

     The U.S. micro-cap segment consists of more than 3,100 companies, and the non-U.S. micro-cap segment includes more than 13,000 companies. These companies are followed by 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 small-cap and mid-cap securities, and Royce may be able to deal with only a few market-makers when purchasing and selling micro-cap 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’s estimate of the company’s current worth, also involve increased risk.

 

     The U.S. small-cap tier consists of more than 1,200 companies, and the non-U.S. small-cap segment includes more than 1,800 companies. In this segment, there is a relatively higher level of institutional investor ownership and more research coverage by securities analysts than generally exists for micro-cap companies. This greater attention makes the market for such securities more efficient compared to micro-cap securities because they have somewhat greater trading volumes and narrower bid/ask prices.
     Royce Global Dividend Value Fund may also invest in mid-cap securities, and Royce Special Equity Multi-Cap Fund may invest in mid- and large-cap securities. Royce defines mid-cap as those companies with market capitalizations between $2.5 billion and $15 billion, a sector that includes more than 500 U.S. companies and more than 800 non-U.S. companies. In general, mid-caps share many of the same characteristics as those companies with market caps

Market capitalization is the

number of a company’s

outstanding shares of stock

multiplied by its most recent

closing price per share.


The Russell 2000 and

Russell 2500 are unmanaged

indices of U.S. smaller-

company common

stocks that Royce and

others use to benchmark the

performance of smaller-

company funds.

They include the smallest

2,000 and 2,500 companies,

respectively (based on market

capitalization), among the

largest 3,000 companies

tracked by Russell

Investments.



(Image)



The Royce Fund Prospectus 2011 | 13



 

 

 

 

 

 

 

 

 

 

between $500 million and $2.5 billion. As a result, Royce normally employs a more concentrated approach when investing in these companies, holding proportionately larger positions in a relatively limited number of securities.

 

 

     The Funds may also invest in foreign securities. The foreign smaller company market consists of more than 15,000 micro-cap, small-cap and mid-cap companies in developed countries. For more information regarding investing in foreign securities, see below.

 

 

 

 

 

Value Investing

 

 

Royce’s portfolio managers use various value methods in managing the Funds’ assets. In selecting securities for the Funds, they evaluate the quality of a company’s balance sheet, the level of its cash flows and other measures of a company’s financial condition and profitability. The portfolio managers may also consider other factors, such as a company’s unrecognized asset values, its future growth prospects or its turnaround potential following an earnings disappointment or other business difficulties. The portfolio managers then use these factors to assess the company’s current worth, basing this assessment on either what they believe a knowledgeable buyer might pay to acquire the entire company or what they think the value of the company should be in the stock market.

 

 

     Royce’s portfolio managers generally invest in securities of companies that are trading significantly below their estimate of the company’s current worth in an attempt to reduce the risk of overpaying for such companies. Seeking long-term growth of capital, they also evaluate the prospects for the market price of the company’s securities to increase over a two- to five-year period toward this estimate.

 

 

     Royce’s value approach strives to reduce some of the other risks of investing in the securities of smaller companies (for each Fund’s portfolio taken as a whole) by evaluating other risk factors. For example, its portfolio managers generally attempt to lessen financial risk by buying companies with strong balance sheets and low leverage. Royce attempts to mitigate company-specific risk in its micro-cap investments by broadly diversifying its micro-cap holdings in Royce International Micro-Cap Fund.

 

 

     While there can be no assurance that this risk-averse value approach will be successful, Royce believes that it can reduce some of the risks of investing in micro-cap, small-cap and mid-cap companies, which are inherently fragile in nature and whose securities have substantially greater market price volatility. For more information regarding the specific approach used for each Fund’s portfolio, see pages 2-12.

 

 

     Although Royce’s approach to security selection seeks to reduce downside risk to Fund portfolios, especially during periods of broad smaller-company stock market declines, it may also potentially have the effect of limiting gains in strong smaller-company up markets.

 

 

 

 

 

Temporary Investments

 

 

Each of the Funds may invest in short-term fixed income securities for temporary defensive purposes, to invest uncommitted cash balances or to maintain liquidity to meet shareholder redemptions. If a Fund should implement a temporary investment policy, it may not achieve its investment goal while that policy is in effect.

 

 

 

 

 

Investing in International Securities

 

 

 

 

 

 

Non-U.S. Securities

 

 

Royce defines “international” as those equity securities issued by non-U.S. companies—i.e., as companies domiciled outside of the United States. Foreign securities generally include

 

14 | The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

those international securities that do not trade on a U.S. exchange. Royce believes that investing in international and/or foreign securities offers both enhanced investment opportunities and additional risks beyond those present in U.S. securities. Investing in international and/or foreign securities may provide increased diversification by adding securities from various foreign countries (i) that offer different investment opportunities, (ii) that generally are affected by different economic trends and (iii) whose stock markets do not generally move in a manner parallel to U.S. markets. At the same time, these opportunities and trends involve risks that may not be encountered in U.S. investments.

 

      The following considerations comprise both risks and opportunities not typically associated with investing in U.S. securities: fluctuations in exchange rates of foreign currencies; possible imposition of exchange control regulations or currency restrictions that would prevent cash from being brought back to the United States; less public information with respect to issuers of securities; less government supervision of stock exchanges, securities brokers and issuers of securities; lack of uniform accounting, auditing and financial reporting standards; lack of uniform settlement periods and trading practices; less liquidity and frequently greater price volatility in foreign markets than in the United States; possible imposition of foreign taxes; the possibility of expropriation or confiscatory taxation, seizure or nationalization of foreign bank deposits or other assets, the adoption of foreign government restrictions and other adverse political, social or diplomatic developments that could affect investment; sometimes less advantageous legal, operational and financial protections applicable to foreign sub-custodial arrangements; and the historically lower level of responsiveness of foreign management to shareholder concerns (such as dividends and return on investment).

 

 

 

Developing Countries

 

The risks described above for international and/or foreign securities, including the risks of nationalization and expropriation of assets, are typically increased to the extent that a Fund invests in companies located in developing, or emerging market, countries. Investments in securities of companies located in such countries may be considered speculative and subject to certain special risks. The political and economic structures in many of these countries may be in their infancy and developing rapidly, and such countries may lack the social, political and economic characteristics of more developed countries. Certain of these countries have in the past failed to recognize private property rights and have at times nationalized and expropriated the assets of private companies. Some countries have inhibited the conversion of their currency to another. The currencies of certain developing countries have experienced devaluation relative to the U.S. dollar, and future devaluations may adversely affect the value of a Fund’s assets denominated in such currencies. Some developing countries have experienced substantial rates of inflation for many years. Continued inflation may adversely affect the economies and securities markets of such countries. In addition, unanticipated political or social developments may affect the value of a Fund’s investments in these countries and the availability to the Fund of additional investments in these countries. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make a Fund’s investments in such countries illiquid and more volatile than investments in more developed countries, and the Fund may be required to establish special custodial or other arrangements before making investments in these countries. There may be little financial or accounting information available with respect to companies domiciled in these countries, and it may be difficult as a result to assess the value or prospects of an investment in such companies.


The MSCI Europe Small Core

and MSCI WORLD Small Core

are unmanaged indices of,

respectively, European and

global small-cap stocks

that Royce and others

use to benchmark the

performance of smaller-

company funds with

international, foreign

and/or domestic securities.

Each index includes stocks

chosen by MSCI Barra

based on a combination of

market capitalization,

geographic region and

liquidity factors.






(Image)



The Royce Fund Prospectus 2011 15



(Image)

Charles R. Dreifus and
     Charles M. Royce

Royce invests in the equity

securities of smaller companies

that are trading significantly

below our assessment of their

current worth, with the

expectation that their market

prices should increase toward this

estimate, resulting in capital

appreciation for Fund investors.

 

 

Management of the Funds

 

 

 

 

Royce & Associates, LLC (“Royce”) is the Funds’ investment adviser and is responsible for the management of their assets. Royce has been investing in smaller-company securities with a value approach for more than 35 years. Its offices are located at 745 Fifth Avenue, New York, NY 10151. Charles M. Royce has been the firm’s President and Chief Investment Officer during this period. He serves as portfolio manager for Royce Global Dividend Value Fund.

 

     Royce’s senior investment staff includes Charles R. Dreifus, Principal, who serves as portfolio manager for Royce Special Equity Multi-Cap Fund. Mr. Dreifus joined Royce in 1998 as a Portfolio Manager and previously was Managing Director of Lazard Freres & Co., LLC.

 

     Royce’s investment staff also includes: David A. Nadel, Director of International Research, who serves as assistant portfolio manager for Royce Global Dividend Value Fund and portfolio manager for Royce International Premier Fund and Royce International Micro-Cap Fund; James J. Harvey, who serves as assistant portfolio manager for Royce International Micro-Cap Fund; Jenifer L. Taylor, who serves as assistant portfolio manager for Royce International Micro-Cap Fund; and George U. Wyper, who serves as assistant portfolio manager for Royce International Premier Fund.

 

     Mr. Nadel joined Royce in 2006. Previously, he was a Senior Portfolio Manager at Neuberger Berman, Inc. (2004-2006) and a Senior Analyst at Pequot Capital Management, Inc. (2001-2003). Mr. Harvey joined Royce in 1999 as an Analyst. Ms. Taylor joined Royce in 2000 as an Analyst. Previously, she was an analyst at Credit Lyonnaise Securities (since 1999) and prior to that was an analyst for the Special Situations Fund (1994-1999). Mr. Wyper joined Royce in April 2010 and was previously the founder of Wyper Capital Management (since 1998) and prior to that was a Senior Managing Director at Warburg Pincus Counsellors, Inc. and a member of E.M. Warburg Pincus & Co., LLC. Assistant portfolio managers may have investment discretion over a portion of a Fund’s portfolio subject to supervision by the Fund’s portfolio manager.

 



16 The Royce Fund Prospectus 2011



 

 

     The Fund’s Statement of Additional Information provides more information about the structure of the portfolio managers’ compensation, other accounts that they manage and their ownership of shares in the Fund(s) that each manages.
     Royce Fund Services, Inc. (“RFS”) distributes the Funds’ shares. The Royce Fund has adopted a distribution plan for the Service Class of the Funds under Rule 12b-1. Under the plan, the Service Class is obligated to pay a fee to RFS at the annual rate of up to 0.25% of its average net assets. RFS will use these fees primarily to cover sales-related and account maintenance costs and to pay service and other fees to broker-dealers that introduce investors to the Service Class of these Funds.
     State Street Bank and Trust Company is the custodian of the Funds’ securities, cash and other assets. Boston Financial Data Services–Midwest (“BFDS”) is the Funds’ transfer agent.

Investment Advisory Services Provided By Royce
Royce receives advisory fees monthly as compensation for its services to the Funds. The annual rates of these fees, before any waiver to cap the expense ratios for certain Funds at specified levels as shown in the Fees and Expenses tables, are as follows:

 

 

ANNUAL RATE OF FUND’S AVERAGE NET ASSETS



Royce International Micro-Cap Fund



• 1.30% of the first $2,000,000,000

• 1.20% of the next $2,000,000,000

• 1.25% of the next $2,000,000,000

• 1.15% of any additional average net assets

 

Royce Global Dividend Value Fund and Royce International Premier Fund


• 1.25% of the first $2,000,000,000

• 1.15% of the next $2,000,000,000

• 1.20% of the next $2,000,000,000

• 1.10% of any additional average net assets

 

 

Royce Special Equity Multi-Cap Fund



• 1.00% of the first $2,000,000,000

• 0.90% of the next $2,000,000,000

• 0.95% of the next $2,000,000,000

• 0.85% of any additional average net assets



A discussion of the basis of the Board of Trustees’ approval of the Funds’ investment advisory agreements will be found in the Funds’ 2011 Semiannual Report to Shareholders.



 

(PHOTO OF DAVID A. NADEL, JAMES J. HARVEY, JENIFER L. TAYLOR, AND GEORGE U. WYPER)


(From Top to Bottom)

 

David A. Nadel, James J. Harvey,

 

Jenifer L. Taylor, and George U. Wyper



The Royce Fund Prospectus 2011  |  17



 

 

 

 

 

 

 

 

Net Asset Value (NAV) is the value of each Class of a Fund’s net

 

 

 

 

 

assets divided by the number of its outstanding shares.

 

 

 

 

 

 

 

 

 

Total return is the

percentage rate of return on

an amount invested in a fund

from the beginning to the

end of the stated period and

includes the reinvestment of

distributions.

 

General Shareholder Information

 

 

 

 

 

 

 

 

For a more detailed discussion of The Royce Fund policies regarding direct ownership of the Service Classes of Fund shares, including information on opening accounts, buying, redeeming, exchanging and transferring ownership of Fund shares, please see the Guide for Direct Shareholders, which begins on page 23.

 

 

 

 

 

Purchasing Shares

 

 

The Funds offered through this Prospectus are no-load, meaning that you pay no sales fees to buy shares directly from The Royce Fund. The Funds do pay their own management fees and other operating expenses as outlined in this Prospectus.

 

 

     If you purchase Fund shares through a third party, such as a discount or full-service broker-dealer, bank or other financial intermediary, or through a firm that provides recordkeeping and other shareholder services to employee benefit plans (“Retirement Plan Recordkeepers”), investment minimums, commissions, fees, policies and procedures may differ from those described in this Prospectus.

 

 

     If you purchase Fund shares through a third party, the shares may be held in the name of that party on the Fund’s books. RFS and/or Royce may compensate broker-dealers, Retirement Plan Recordkeepers, and other financial intermediaries that introduce investors to the Fund, provide the opportunity to distribute the Fund through their sales personnel, provide access to their sales personnel and branch offices, and/or provide certain administrative services to their customers who own Fund shares. These payments are sometimes referred to as “revenue sharing.” In addition, The Royce Fund’s Board of Trustees has authorized the Funds to compensate such third parties to the extent the Board has determined that any of the services which these parties render to a Fund are non-distribution-related shareholder services, including recordkeeping and account maintenance services.

 

 

     Payments to third parties (each a “financial intermediary”) may be more or less than the payments received by these parties with respect to other mutual funds, and may influence the intermediary to make a Fund available over other mutual funds. You may ask your intermediary about these differing interests and how it is compensated for administering

 


 

 

 

 

 

         

 

PURCHASING SERVICE CLASS SHARES

 

 

 

 


Minimum initial investments for shares purchased directly from The Royce Fund:*

 

 

 

 


Regular Account

 

$

2,000

 


IRA

 

$

1,000

 


Automatic Investment or Direct Deposit Plan Accounts

 

$

1,000

 


401(k) Accounts

 

 

None

 


The minimum for subsequent investments is $50, regardless of account type.

18  |  The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

 

 

your Fund investment. Revenue-sharing payments may benefit Royce to the extent that the payments result in more assets, on which fees are charged by Royce, being invested in a Fund.
      More information about these arrangements can be found in the Fund’s Statement of Additional Information.
     The Royce Fund reserves the right both to suspend the offering of any Fund’s shares to new investors and to reject any specific purchase request. The Funds do not offer their shares for sale outside of the United States.

 

 

 

 

 

Customer Identification Program

 

 

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you open a new account to buy shares of a Fund, the Fund or your financial intermediary may ask for your name, address, date of birth and other information that will allow the Fund to identify you. If the Fund or your financial intermediary is unable to adequately verify your identity within the time frames set forth in the law, your shares may be automatically redeemed. If the net asset value per share has decreased since your purchase, you will lose money as a result of this redemption.

 

 

 

 

 

Redeeming Shares

 

 

You may redeem shares in your account at any time. The Funds, however, are intended primarily for long-term investment purposes and are not intended to provide a means of speculating on short-term market movements.

 

 

 

 

 

Early Redemption Fee

 

 

In order to discourage short-term trading, The Royce Fund assesses an early redemption fee of 2% on redemptions of the Service Class of shares of any Fund (1% for Royce Special Equity Multi-Cap Fund) that you held for less than 180 days. Each fee is payable to the Fund out of the proceeds otherwise payable to you.

 

 

     The “first-in, first-out” method is used to determine the holding period by comparing the date of the redemption with the earliest dates of the share purchases in an account. For accounts registered on the books of the Funds’ transfer agent, the anniversary day of an account transaction determines the 180-day holding period, so that if you purchased a Fund’s shares on June 1, 2011, these shares would be subject to the fee if you were to redeem them prior to November 28, 2011. In this example, the shares would not be subject to a fee if you were to redeem the shares on or after November 28, 2011.

 

 

     You will incur no fee on shares that you acquire through distribution reinvestment. The redemption fee will apply to shares that you exchange into another Royce Fund. The following types of shareholders and accounts are exempt from the early redemption fee: participants in Automatic Investment or Withdrawal Plans; retirement plans; certain pre-approved group investment plans and charitable organizations; and omnibus or similar account customers of certain pre-approved broker-dealers and other institutions.

 

 

 

 

 

Other Redemption Information

 

 

The Royce Fund may suspend redemption privileges or postpone payment for the Funds when the New York Stock Exchange is closed or during what the Securities and Exchange Commission determines are emergency circumstances.

 

 

     The Funds will normally make redemptions in cash, but The Royce Fund reserves the right to satisfy a Fund shareholder’s redemption request by delivering selected shares or units of portfolio securities—redemption in kind—under certain circumstances.

 

The Royce Fund Prospectus 2011  |  19



 

 

 

 

 

 

 

 

 

 

 

 

 

 

     The Royce Fund reserves the right to involuntarily redeem Fund shares in any account that falls below the minimum initial investment due to redemptions by the shareholder. If at any time the balance in an account does not have a value at least equal to the minimum initial investment, you may be notified that the value of your account is below the Fund’s minimum account balance requirement. You would have 60 days to increase your account balance before the account is closed. Proceeds would be paid promptly to the shareholder.

 

 

 

     The Royce Fund also reserves the right to revise or suspend the exchange privilege at any time.

 

 

 

 

 

 

 

Frequent Trading of Fund Shares

 

 

 

Large and frequent short-term trades in a Fund’s shares increase the administrative costs associated with processing its shareholder transactions. This kind of trading may also potentially interfere with the efficient management of a Fund’s portfolio and increase the costs associated with trading its portfolio securities. In addition, under certain circumstances frequent trading may dilute the returns earned on shares held by a Fund’s other shareholders.

 

 

 

     The Funds’ Board of Trustees has determined that the Funds are not designed to serve as vehicles for frequent trading in response to short-term fluctuations in the securities markets, and has therefore adopted a policy intended to discourage shareholders from trading that could be detrimental to long-term shareholders of the Funds (the “Policy”).

 

 

 

     The Policy provides that the Funds will monitor shareholder trading activity and will seek to restrict a shareholder’s trading privileges in a Fund if that shareholder is found to have engaged in multiple “Round Trip” transactions. A “Round Trip” is defined as a purchase (including exchanges) into a Fund followed by a sale (including exchanges) of the same or a similar number of shares out of the Fund within 30 days of the purchase. The Funds will make inquiries or take action against any such shareholder whose trading appears inconsistent with the Policy. Purchases and sales of Fund shares made through an automatic investment plan or systematic withdrawal plan are not considered when determining Round Trips. In addition, as described above, the Funds impose a redemption fee on certain short-term redemptions to discourage frequent trading.

 

 

 

     The Funds may reject any purchase or exchange order by any investor for any reason, including orders the Funds believe are made by short-term investors. In particular, under the Policy the Funds reserve the right to restrict or reject purchases of shares (including exchanges) without prior notice whenever they detect a pattern of excessive trading.

 

(IMAGE)

 

     With respect to accounts where shareholder transactions are processed, or records are kept, by third-party intermediaries, the Funds use reasonable efforts to monitor such accounts to detect suspicious trading patterns. Transactions placed through the same financial intermediary or omnibus account may be deemed part of a group for this purpose and therefore be rejected. For any account that is so identified, the Funds will make further inquiries and take any other necessary actions to enforce the Policy against the shareholder(s) trading through this account and, if necessary, the third-party intermediary maintaining this account. However, the Funds may not be able to determine that a specific order, especially an order made through an omnibus, retirement plan or similar account, is short term or excessive and whether it may be disruptive to the Funds. There is no assurance, therefore, that the Funds will reject all such orders. The Funds do not have any arrangements with any investor or financial intermediary to permit frequent purchases and redemptions of their shares. The Funds may accept undertakings from intermediaries to enforce frequent trading policies on behalf of the Funds that provide a substantially similar level of protection against excessive trading.

 

20  |  The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

 

 

     Although the Funds will monitor shareholder transactions for certain patterns of excessive trading activity, there can be no assurance that all such trading activity can be identified, prevented or terminated.

 

 

 

 

 

Net Asset Value per Share

 

 

Net asset value per share (NAV) is calculated by dividing the value of a Fund’s net assets by the number of its outstanding shares. Each Fund’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 Royce Fund’s Board of Trustees. In certain cases, market value may be determined using information provided by a pricing service approved by the Board of Trustees. Valuing securities at their fair values involves greater reliance on judgment than valuation of securities based on readily available market quotations. When using fair value methods to price securities, the Funds may value those securities higher or lower than another fund using not readily available market quotations or its own fair value methods to price the same securities. There can be no assurance that the Funds could obtain the fair value price assigned to a security if it were to sell the security at approximately the time at which the Fund determines its net asset value. Because trading hours for certain non-U.S. securities end before the close of the New York Stock Exchange (NYSE) (generally 4 p.m. Eastern time), closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If an issuer-specific event has occurred during this time that, in Royce’s judgment, is likely to have affected the closing price of a security, it may fair value the security. The Funds use an independent pricing service to provide fair value estimates for relevant non-U.S. equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and other indications to estimate the fair value of relevant non-U.S. securities. The Funds value their non-U.S. securities in U.S. dollars on the basis of foreign currency exchange rates provided to the Funds by their custodian, State Street Bank and Trust Company. When fair value pricing is employed, the price of securities used by a Fund may differ from quotes or published prices for the same security. Certain bonds and other fixed income securities may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. Investments in money market funds are valued at net asset value per share.

 

 

     The date on which your purchase, redemption or exchange of shares is processed is the trade date, and the price used for the transaction is based on the next calculation of net asset value after the order is processed. The NAV for each Class of a Fund is calculated as of the close of regular trading on the NYSE (generally 4 p.m. Eastern time) and is determined every day that the NYSE is open. Securities in each Fund’s portfolio that primarily trade on a foreign exchange may change in value on a day that the Exchange is closed and the Fund’s shareholders are not able to redeem shares in the Fund. If the Fund, its transfer agent or any other authorized agent receives your trade order by the close of regular trading on the NYSE, your order will receive that day’s NAV. If your order is received after the close of regular trading, it will receive the next business day’s NAV. If you place your order through a financial intermediary rather than with the Fund or its transfer agent directly, the financial intermediary is responsible for transmitting your order to the Fund’s transfer agent in a timely manner.

 

The Royce Fund Prospectus 2011  |  21



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio Disclosure Policy

 

 

 

A description of the Funds’ policy and procedures with respect to the disclosure of its portfolio securities holdings is available in the Funds’ Statement of Additional Information on The Royce Funds’ website, www.roycefunds.com. The Funds’ complete portfolio holdings are also available on The Royce Funds’ website approximately 15 to 20 days after each calendar quarter end and remain available until the next quarter’s holdings are posted. The Funds’ portfolio holdings are also available on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the end of the Funds’ first and third quarters and can be obtained at www.sec.gov.

 

 

 

 

 

 

 

Reports

 

 

 

The Royce Fund mails shareholder reports semiannually and, to reduce expenses, may mail only one copy to shareholders with the same last name and sharing the same address. Directly registered shareholders can choose to receive separate report copies for accounts registered to different members of the same household by calling Investor Services at (800) 221-4268. Please allow 30 days for your request to be processed. Shareholders may also elect to receive these reports electronically. Please go to www.roycefunds.com/edelivery for more details.

 

 

 

 

 

 

 

Dividends, Distributions and Taxes

 

 

 

Royce Global Dividend Value Fund pays dividends, if any, from net investment income on a quarterly basis and makes any distributions from net realized capital gains annually in December. The other Funds pay any dividends from net investment income and make any distributions from net realized capital gains each year in December.

 

 

 

     Unless the shareholder chooses otherwise, dividends and distributions will be reinvested automatically in additional shares of the applicable Fund. Unless your account is an IRA or is otherwise exempt from taxation, dividends and distributions will be taxable to you whether paid in cash or reinvested in additional shares. The tax character of distributions (as ordinary income or capital gain) is determined at the Fund level and is not related to how long you have owned a Fund’s shares.

 

 

 

     Selling or exchanging shares is a taxable event, and a shareholder may realize a taxable gain or loss. Each Fund will report to shareholders the proceeds of their redemption(s). The tax consequences of a redemption also depend on the shareholder’s cost basis and holding period, so shareholders should retain all account statements for use in determining the tax consequences of redemptions.

 

 

 

     If you redeem shares of a Fund held for six months or less, and you received a capital gain distribution from the Fund during the time you held the shares, you will be required to treat any loss you have on the redemption as a long-term capital loss up to the amount of the distribution.

 

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     You should carefully consider the tax implications of purchasing shares shortly before a distribution. At the time of purchase, a Fund’s net asset value may include undistributed income or capital gains. When the Fund subsequently distributes these amounts, they are taxable to you, even though the distribution is economically a return of part of your investment.

 

 

     The IRS requires that a Fund withhold 28% (as of May 1, 2010) of taxable dividends, capital gain distributions and redemptions paid to non-corporate shareholders who have not complied with IRS regulations regarding taxpayer identification.

 

 

     Always consult a tax advisor with questions about federal, state or local tax consequences.

 

22  |  The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

This Guide for Direct Shareholders describes the shareholder

 

 

 

 

 

services available to direct shareholders of the Investment and

 

 

 

 

 

Service Classes of The Royce Funds.

 

 

 

 

 

 

 

 

 

 

Guide For Direct Shareholders

 

 

 

 

 

 

 

 

Services and Policies

 

 

This Guide for Direct Shareholders describes the shareholder services available to direct shareholders of the Investment and Service Classes of The Royce Funds. It also provides important policy information regarding Royce Fund accounts.

 

 

     If you purchase Fund shares through a third-party intermediary, such as a mutual fund supermarket, broker-dealer, bank or other financial intermediary, account minimums, fees, policies and procedures may differ from those described in this Guide. Fund shares purchased through a third-party intermediary may be held in the name of that party on the Fund’s books. Royce Fund Services, Inc. (RFS), the distributor of Fund shares, Royce & Associates, LLC, the Fund’s investment adviser, and/or the Funds may pay fees to broker-dealers, financial intermediaries and other service providers that introduce investors to the Funds and/or provide certain administrative services to its customers who own Fund shares.

 

 

     For information and policies on Individual Retirement Accounts (IRA), please refer also to the booklet that deals separately with them, as many services offered in this guide are not available for those types of accounts. You must use separate applications and other forms to open these accounts. Please call Investor Services at (800) 221-4268 or visit our website, www.roycefunds.com, to obtain these materials.

 

 

 

 

 

Account Information

 

 

The Funds pay their own management fees and other operating expenses as outlined in their respective Prospectuses.

 

 

 

Customer Identification and Verification

 

 

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person’s name appears on government lists of known or suspected terrorists and terrorist organizations. As a result, the Funds may not open a new account without obtaining the following minimum identifying information for each person that opens a new account:

 

 

Full name

 

 

Date of birth

 

 

Permanent residential or business street address (a P.O. Box is not acceptable other than a military P.O. Box)

 

 

Social Security or Taxpayer Identification Number

 

 

Additional information required for corporate accounts.

 

 

 

 

 

 

     Please note that your application will be returned if any information is missing. If a Fund is unable to verify your identity, it may be required to close or not open your account. If you need help completing your application, please call Investor Services at (800) 221-4268.

 

The Royce Fund Prospectus 2011  |  23



 

 

 

 

 

 

 

 

 

 

 

 

 

 

BOSTON FINANCIAL DATA
Services—Midwest (BFDS)
BFDS serves as the Funds’ transfer agent. State Street Bank and Trust Company is the custodian for securities, cash and other assets of the Funds.

ONLINE ACCOUNT ACCESS
You can set up an account
online by visiting our website, www.roycefunds.com/invest and selecting OPEN A NEW ACCOUNT.

 

    Please mail all account-related correspondence, including Account Applications, subsequent investments and written requests for redemption—

 

 

 

 

 

by regular mail to:

by registered mail or overnight courier to:

 

 



 

 

The Royce Funds

The Royce Funds

 

 

c/o BFDS – Midwest

c/o BFDS – Midwest

 

 

PO Box 219012

330 West 9th Street

 

 

Kansas City, MO 64121-6012

Kansas City, MO 64105

 

 

 

How to Open an Account

 

 

You may open an account online at www.roycefunds.com/invest, by mail, or through a financial intermediary. Once you are a direct Royce Fund shareholder (that is, you opened your account directly through The Royce Funds and not through a financial intermediary), you can also open additional accounts online.

 

 

 

 

 

By Online Account Access

 

 

You can set up an account online by visiting www.roycefunds.com/invest and selecting OPEN A NEW ACCOUNT.

 

 

 

     You can also download a Prospectus, Shareholder Guide and Account Application from www.roycefunds.com/literature.

 

 

 

     Online Account Access also allows you to manage your account online once you have registered (see "Managing Your Account Online" below for more details).

 

 

 

 

 

 

 

By Mail

 

 

 

Complete and sign the enclosed Account Application. Make your check payable to The Royce Fund and mail it, together with your Application, to The Royce Funds, c/o BFDS (see mailing addresses above).

 

 

 

 

 

 

 

Special Notice To Non-U.S. Investors

 

 

 

The Funds do not offer their shares for sale outside of the United States. We mail prospectuses and other information to U.S. addresses only, and we can accept new account requests from U.S. addresses only.

 

 

 

 

 

 

 

Managing Your Account Online

 

 

 

Online Account Access allows you to open new accounts directly online and gives you the ability to manage your account(s) online. To access, or register for, online services go to www.roycefunds.com and select Account Access. First-time users need to register for the services by creating a Username and Password. Once registered, you can login with your unique Username. You then have the ability to:

 

 

 

1.

Check your most recent account value

 

 

 

2.

Sign up for eDelivery to have Prospectuses, Financial Reports, semiannual account statements, transaction confirmation statements, duplicate confirmation statements and tax forms e-mailed to you.

 

 

 

3.

Review your recent account history, including distributions

 

 

 

4.

Change your address (a redemption restriction of 30 days applies)

 

 

 

5.

Make subsequent purchases ($50 minimum)

 

 

 

6.

Exchange between funds

 

 

 

7.

Redeem fund shares ($50,000 maximum)

 

 

 

8.

Establish an Automatic Investment Plan

 

 

 

9.

View average cost and tax summary information

 

24  |  The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

 

 

 

 

 

About Online Security

 

AUTOMATED CLEARING HOUSE

 

Your Username and Password allow you to login and access portfolio information. Both your Username and Password are encrypted when you login to Account Access.

 

Known as ACH, effects
electronic
transfers between
banks and Royce
Fund
accounts. Before signing up
for
any automated account
services, find out if your bank is
a
member of ACH. Banks
generally
charge no fees for
ACH transactions.
Passbook
savings accounts may
not be
eligible for ACH services.

BANK WIRE
Transfers funds from one
financial institution to another
via the federal funds wire
transfer
system. It is a fast and
convenient
method, but some
banks charge
a fee to send
and/or receive wires.

 

     Royce & Associates uses industry best practices to ensure the confidentiality and safety of your information and transactions. Shareholders who use Account Access must have a secure web browser that uses Secure Sockets Layer (SSL) technology with 128-bit encryption. This helps to keep your use of Account Access confidential.

 

 

 

 

 

Your Username and Password are Encrypted

 

 

When you login to Account Access, your Username and Password are both encrypted. Although you will not see an "https" address or the lock symbol at the bottom of your browser window until you have logged in, we assure you that your personal information is secure as it is accepted by our transfer agent’s secure server.

 

 

 

 

 

Three Wrong Passwords and You’re Out

 

 

We have limited to 3 the number of times that a user can enter an incorrect Password in order to deter unauthorized users. Once your Password has been entered incorrectly 3 times, you will be locked out of the system. To re-establish access, you need to telephone Shareholder Services at (800) 841-1180, Monday through Friday, 9 a.m. to 6 p.m. Eastern Time.

 

 

     Also, if there is no activity for 15 minutes, you will be automatically logged off the system. If you leave your computer unattended, this time-out feature helps to prevent an unauthorized user from accessing the account(s).

 

 

 

 

 

How to Purchase Additional Shares

 

 

You may purchase additional Fund shares online, by telephone, and by mail.

 

 

 

 

 

By Online Account Access

 

 

Once you have registered for online Account Access, you can purchase Fund shares by going to www.roycefunds.com and selecting Account Access. Login to Account Access and select Purchase from the dropdown menu or choose OPEN A NEW ACCOUNT at the top. Funds are debited from your bank checking account through ACH. ($50 minimum—bank information must be established on your account before purchasing shares.)

 

 

By Telephone

 

 

To pay using the Automated Clearing House (ACH):

 

 

By establishing the Expedited Purchase option on your Account Application, a telephone call allows you to have funds automatically debited from your bank checking account through ACH. Call Shareholder Services at (800) 841-1180 between 9 a.m. and 5 p.m. Eastern time or call our automated Royce Infoline at (800) 78-ROYCE at any time to buy additional Fund shares ($50 minimum).

 

 

 

 

 

To pay by bank wire:

 

 

 

Call Shareholder Services between Monday and Friday at (800) 841-1180 before the close of trading on the New York Stock Exchange (NYSE) (generally 4 p.m. Eastern time). A Royce Representative will give you a confirming order number for your wire purchase.
     Please note that payments for wire purchases must be received on the same day on which the order is placed ($500 minimum).

 

(Image)

 

 

The Royce Fund Prospectus 2011  |  25



 

 

 

 

 

 

 

 

 

 

 

Wiring instructions are:

 

 


 

 

State Street Bank and Trust Co., Inc.

 

 

ABA # 011000028

 

 

Credit DDA # 9904-712-8

 

 

Name of Royce Fund–Investment or Service Class

 

 

Confirming Order Number

 

 

Account Name

 

 

 

 

 

By Mail

 

 

Make your check—$50 minimum—payable to The Royce Fund. Fill out the amount of your purchase on the investment form found at the bottom of your latest statement. If you do not have a form, simply write the name of the Fund in which you are investing and your account number clearly on the check. Mail to The Royce Funds, c/o BFDS (see mailing addresses on page 24).

 

 

     Please note that the Funds do not accept third-party checks, "starter" checks or money orders for initial or subsequent purchases.

 

 

 

 

 

Convenient Methods of Making Regular, Automatic Expedited Purchases

 

 

Select the following services on your Account Application or, if you have an existing Royce Funds account, call Investor Services at (800) 221-4268 for an enrollment form or download one at www.roycefunds.com/literature. You may also establish these services through online Account Access.

 

 

 

 

 

Automatic Investment Plan

 

 

You can make regular purchases to your Royce Fund account directly from your bank account through ACH on a monthly or quarterly basis on the date you select ($50 minimum).

 

 

 

 

 

Direct Deposit Payroll Deduction Plan

 

 

You can make investments from your payroll or government check into your Royce Fund account each payment or pay period. Your employer must have direct deposit through ACH available for employees. You may cancel the option by giving written notice to your employer or government agency, as appropriate. The Fund is not responsible for the efficiency of the employer or government agency making the payment or of any financial institution transmitting payments. To sign up, you need to complete an Authorization for Direct Deposit form, which you can download by going to www.roycefunds.com/literature and clicking on Special Forms or by calling Investor Services at (800) 221-4268.

 

 

 

 

 

 

 

 

 

 

 

Important Information about Purchases

 

 

If your check or wire does not clear, or if the Funds or their transfer agent do not receive payment for any telephone or online Account Access purchase, the transaction will be cancelled and you will be responsible for any loss that the Fund incurs. If you are already a shareholder, the Fund can redeem shares from any identically registered Royce Fund account as reimbursement for any loss.

 

 

The Funds do not accept third-party checks, "starter" checks or money orders for initial or subsequent purchases.

 

 

In order to avoid lengthy processing delays caused by clearing foreign checks, the Funds will only accept a foreign check that has been drawn in U.S. dollars and has been issued by a foreign bank with a U.S. correspondent bank.

 

 

The Funds reserve the right both to suspend the offering of Fund shares to new investors and to reject any specific purchase request.

 

26   |  The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

 

 

 

 

 

 

You may have your bank account information taken from your initial investment check. Otherwise, you must include a voided check with your Account Application for Expedited Purchases and Redemptions. It can take up to three weeks to establish these services; you will receive confirmation of their activation by mail.

 

MEDALLION GUARANTEES
A medallion guarantee protects
shareholders and The Royce Fund against fraudulent transactions. You may obtain one at most banks and brokerage firms. A notary public cannot provide you with a medallion guarantee.

 

 

 

 

 

Important Information about Telephone and Online Transactions

 

 

Neither the Funds nor their transfer agent will be liable for following instructions reasonably believed to be genuine that are received by telephone or made online. The transfer agent uses certain procedures designed to confirm that instructions are genuine. Procedures may include requiring some form of personal identification prior to acting on the instructions, such as providing written confirmation of the transaction and/or recording incoming calls. If the Funds or their transfer agent do not follow such procedures, then they may be liable for any losses due to unauthorized or fraudulent transactions.

 

 

 

 

 

How to Sell Shares

 

 

You may sell shares in your account at any time and make requests online, by telephone and by mail. BFDS will generally send the proceeds within two business days of receiving the request.

 

 

     Redemptions from Royce-sponsored retirement plan accounts—IRA—and from accounts for which share certificates are outstanding must be made in writing.

 

 

     Certain other redemption requests must be made in writing and also require a medallion guarantee of the signature(s) of the shareholder(s). These include redemption requests for $50,000 or more, for a payee(s) other than the shareholder(s) or for proceeds to be sent to an address other than the address of record.

 

 

 

 

 

 

 

By Online Account Access

 

 

 

Once you have registered for online Account Access at www.roycefunds.com/account, click on Account Access. Login and click the Fund you want to sell and select Redeem from the Account Options dropdown menu. Proceeds may be sent by check, by bank wire or through ACH.

 

 

 

 

 

 

 

By Telephone

 

 

 

For any amount less than $50,000, you may call Shareholder Services at (800) 841-1180 between 9 a.m. and 5 p.m. Eastern time or call the automated Royce Infoline at (800) 78-ROYCE at any time and BFDS will mail a check to the address of record on the account. You may also establish the Expedited Redemption option, which allows you to have proceeds sent to your bank by wire—usually credited within one business day—and/or by ACH—usually credited within two business days.

 

 

 

 

 

 

 

By Mail

 

 

 

Mail your letter to The Royce Funds, c/o BFDS (see page 24 for mailing addresses). Written requests must be in Good Order, meaning that the request meets the Fund’s legal and processing requirements.

 

(Image)

 

 

 

 

All written requests to sell shares must contain at least the following to be in Good Order:

 

 

The name(s) and signature(s) of each shareholder named in the account registration with medallion guarantee(s) if required

 

 

The Fund name and account number

 

 

The dollar or share amount you want to sell

 

 

The address to which you want proceeds sent

 

 

Certificates, if you are holding any

 

The Royce Fund Prospectus 2011  |  27



 

 

 

 

 

 

 

 

 

 

 

In addition:

 

 

Trusts and Corporate Retirement Plan Accounts require a letter of instruction signed by the trustee(s) named in the account registration. Redemptions involving third parties, trustees not named in the account registration, successor trustees or other situations require additional documentation. Please call Shareholder Services at (800) 841-1180 with any questions.

 

 

Corporate Accounts require a letter of instruction signed by an officer of the corporation and a certified copy of a Corporate Resolution that authorizes the assigning officer to effect transactions. The same party cannot certify the Corporate Resolution and sign the letter of instruction.

 

 

Partnership/Sole Proprietorship Accounts require a letter of instruction signed by the general partner(s)/sole proprietor named in the account registration.

 

 

Nominee Accounts require a medallion-guaranteed letter of instruction signed by a general partner or a nominee facsimile stamp.

 

 

Transfer on Death Accounts require a medallion-guaranteed letter of instruction signed by the beneficiary(ies) named in the account registration, a certified copy of the deceased shareholder’s Death Certificate, a tax waiver if required by the deceased’s former state of residence and an affidavit signed by the beneficiary(ies) that states: “Under penalty of perjury, I/we swear that there are no known disputes as to the persons entitled to a distribution under the nonprobate transfer or the amounts to be distributed to each person and no known claims that would affect the distribution requested.”

 

 

Administrators/executors of shareholder estates must provide a medallion-guaranteed letter of instruction, certified copy of Letters Testamentary, which authorize the signing party to act on behalf of the deceased shareholder and, if required by the deceased’s state of former residence, a certified tax waiver.

 

 

 

 

 

 

     If you have any questions about how to ensure that your written redemption request is in Good Order, please call Shareholder Services at (800) 841-1180, or e-mail us at www.roycefunds.com/contact.

 

 

 

 

 

Automatic Withdrawal Plan

 

 

This option allows you to automatically redeem shares from your Fund account and have the proceeds transferred directly to your bank account through ACH on a monthly, quarterly or annual basis on the 15th day of the month. You must have at least $25,000 in a Fund account to be eligible for this feature.

 

 

 

 

 

Important Information About Redemptions

 

 

Telephone and online redemptions will not be permitted for 30 days after a change in the address of record.

 

 

If you are redeeming shares recently purchased by check or through ACH, proceeds may not be sent until payment for the purchase is collected, which may take up to 15 calendar days. Otherwise, redemption proceeds must be sent to you within seven days of receipt of your request in Good Order.

 

 

If you have difficulty making a redemption by telephone or by online Account Access, you may want to make your redemption request by regular or express mail (See “How to Sell Shares: By Mail” on page 27 for processing information). The Funds reserve the right to revise or terminate telephone or online Account Access redemption privileges at any time.

 

28  |  The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

 

 

 

The Funds may suspend redemption privileges or postpone payment when the NYSE is closed or during what the Securities and Exchange Commission determines are emergency circumstances.

 

 

The Funds will normally make redemptions in cash, but reserve the right to satisfy a redemption request by delivering shares of portfolio securities—redemption in kind—under certain circumstances.

 

 

 

 

 

 

How to Exchange Shares

 

 

You may make exchanges between Royce Funds in the same class, as well as between Funds in the Investment and Service Classes. However, you must meet a Fund Class’s minimum initial investment when you open an account by exchange. This is important because the minimum initial investment differs significantly for Investment Class shares of Royce Heritage, Dividend Value, Value, 100, Low-Priced Stock and Value Plus Funds from that of the other Funds in the Investment and Service Classes (see those Funds’ Statutory Prospectus dated May 1, 2010 for more information on minimum initial investment). Also, exchanges are not permitted to or from Royce Select Fund I, Select Fund II, Global Select, SMid-Cap Select and Opportunity Select Funds, or to or from GiftShare Accounts in Royce Heritage Fund.

 

 

     You may make exchanges by online Account Access, by telephone and by mail. An exchange involves a purchase and a redemption; therefore you may realize a taxable gain or loss. Exchanges are subject to the Funds’ early redemption fee and are permitted only if both the registration and the Social Security or Taxpayer Identification Number of the two accounts are identical. You may make an exchange only for shares of a class or series offered for sale in your state of residence. The Fund reserves the right to revise or suspend the exchange privilege at any time.

 

 

 

 

 

How to Transfer Ownership

 

 

You may transfer the ownership of any of your Fund shares to another person by writing to The Royce Funds, c/o BFDS.

 

 

     As with selling shares, your request must be in Good Order (see How To Sell Shares for information regarding Good Order). Please call Shareholder Services at (800) 841-1180 for instructions.

 

 

 

Statements and Reports

 

 

A confirmation statement is sent to you, electronically or by mail, each time there is a transaction in your account. You can also review your recent account history once you have registered for online Account Access.

 

 

Year-to-date account statements are sent semiannually.

 

 

The Royce Fund mails shareholder reports semiannually and, to reduce expenses, may mail only one copy to shareholders with the same last name and sharing the same address. Directly registered shareholders can choose to receive separate report copies for accounts registered to different members of the same household by calling Investor Services at (800) 221-4268. Please allow 30 days for your request to be processed. Shareholders may also elect to receive these reports via eDelivery. Please go to www.roycefunds.com/edelivery for more details.

 

 

 

 

 

 

Other Information

 

 

Certificates

 

 

The Funds do not issue certificates.

 

The Royce Fund Prospectus 2011  |  29



 

 

 

 

 

 

 

 

 

 

Minimum Account Balance

 

 

Due to the relatively high cost of maintaining low-balance accounts, The Funds reserve the right to redeem shares in the account of any Fund if the account falls below the minimum initial investment because of redemptions by the shareholder.

 

 

     The Fund may notify you if, due to redemption(s), the balance in your account is less than the appropriate minimum initial investment (see page 18), or if you discontinue an Automatic Investment Plan before your account reaches the $2,000 minimum initial investment. You would then have 60 days to increase your balance before the Fund would close your account.

 

 

     In each of the cases described above, the Fund would promptly pay redemption proceeds to the shareholder.

 

 

 

     If you have any questions about the material in this Shareholder Guide, please call Investor Services at (800) 221-4268, or e-mail us at www.roycefunds.com.

 

30   |  The Royce Fund Prospectus 2011


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The Royce Fund Prospectus 2011  |  31


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32   |  The Royce Fund Prospectus 2011



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

More information on The Royce Fund is available free upon request, including the following:

 

 

 

 

 

 

 

Annual/Semiannual Reports

 

 

 

Additional information about a Fund’s investments, together with a discussion of market conditions and investment strategies that significantly affected the Fund’s performance, is available in the Funds’ annual and semiannual reports to shareholders. These reports are also available online at www.roycefunds.com.

 

 

 

 

 

 

 

Statement of Additional Information ("SAI")

 

 

 

Provides more details about The Royce Fund and its policies. A current SAI is available at www.roycefunds.com. It is also on file with the Securities and Exchange Commission (“SEC”) and is incorporated by reference (is legally considered part of this prospectus).

 

 

 

 

 

 

 

To obtain more information:

 

 

 

 

 

 

 

By mail The Royce Funds, 745 Fifth Avenue, New York, NY 10151

 

 

 

 

 

 

 

By telephone (800) 221-4268

 

 

 

 

 

 

 

Through the Internet Prospectuses, applications, IRA forms and additional information are available through our website at www.roycefunds.com.

 

 

 

 

 

 

 

Text only versions of the Funds’ prospectus, SAI and other documents filed with the SEC can be viewed online or downloaded from: www.sec.gov.

 

 

 

 

 

 

 

You can also obtain copies of documents filed with the SEC by visiting the SEC’s Public Reference Room in Washington, DC (telephone (202) 551-8090) or by sending your request and a duplicating fee to the SEC’s Public Reference Section, Washington, DC 20549-1520. You may also make your request by e-mail at publicinfo@sec.gov after paying a duplicating fee.

 

 

 

 

 

 

 

 

 

 

 

(LOGO Go Paperless Sign for Delivery At)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOGO The Royce Funds)

 

 

 

SEC File # 811-03599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



THE ROYCE FUND
STATEMENT OF ADDITIONAL INFORMATION

THE ROYCE FUND (the “Trust”), a Delaware statutory trust, is a diversified open-end registered management investment company, which offers investors the opportunity to invest in thirty portfolios or series. The thirty series (each, a “Fund” and collectively, the “Funds”), the share classes they offer and their related ticker symbols are:

Royce Pennsylvania Mutual Fund — Investment (PENNX), Service (RYPFX), Consultant (RYPCX), R (RPMRX) and K (RPMKX)
Royce Micro-Cap Fund — Investment (RYOTX), Service (RMCFX) and Consultant (RYMCX)
Royce Premier Fund — Investment (RYPRX), Service (RPFFX), Institutional (RPFIX), Consultant (RPRCX), R (RPRRX), K (RPRKX), and W (RPRWX)

Royce Low-Priced Stock Fund — Investment (RLPHX), Service (RYLPX), Institutional (RLPIX), R (RLPRX) and K (RLPKX)

Royce Total Return Fund — Investment (RYTRX), Service (RYTFX), Institutional (RTRIX), Consultant (RYTCX), R (RTRRX), K (RTRKX) and W (RTRWX)
Royce Heritage Fund — Investment (RHFHX), Service (RGFAX), Institutional, Consultant (RYGCX), R (RHFRX) and K (RHFKX)
Royce Opportunity Fund — Investment (RYPNX), Service (RYOFX), Institutional (ROFIX), Consultant (ROFCX), R (ROFRX) and K (ROFKX)
Royce Special Equity Fund — Investment (RYSEX), Service (RSEFX), Institutional (RSEIX) and Consultant (RSQCX)
Royce Value Fund — Investment (RVVHX),
Service (RYVFX), Institutional (RVFIX), Consultant (RVFCX), R (RVVRX) and K (RVFKX)
Royce Value Plus Fund — Investment (RVPHX), Service (RYVPX), Institutional (RVPIX), Consultant (RVPCX), R (RVPRX) and K (RVPKX)
           
Royce 100 Fund — Investment (ROHHX), Service (RYOHX), Institutional, R (ROHRX) and K (ROHKX)
Royce Discovery Fund — Service (RYDFX)
Royce Financial Services Fund — Service (RYFSX)
Royce Dividend Value Fund — Investment (RDVIX) and Service (RYDVX)
Royce Select Fund I — Investment (RYSFX)
Royce Select Fund II — Investment (RSFDX)
Royce Global Select Fund — Investment (RSFTX)
Royce Global Value Fund — Investment (RGVIX) and Service (RIVFX)
Royce European Smaller-Companies Fund — Service (RISCX)
Royce SMid-Cap Value Fund — Service (RMVSX)
Royce SMid-Cap Select Fund — Investment (RMISX)
Royce International Smaller-Companies Fund — Service (RYGSX)
Royce Focus Value Fund — Service (RYFVX)
Royce Partners Fund — Service (RPTRX)

Royce Mid-Cap Fund — Service (RMIDX)
Royce Opportunity Select Fund — Investment (ROSFX)
Royce Global Dividend Value Fund — Service (RGVDX)
Royce International Premier Fund — Service (RYIPX)
Royce International Micro-Cap Fund — Service (ROIMX)
Royce Special Equity Multi-Cap Fund — Service (RSEMX)
 

This Statement of Additional Information is not a prospectus, but should be read in conjunction with the Trust’s current Prospectuses dated May 1, 2010, September 1, 2010 and January 3, 2011. Please retain this document for future reference. The audited financial statements included in the Funds’ Annual Reports to Shareholders for the fiscal year ended December 31, 2009 (SEC File #10663023) is incorporated herein by reference. The unaudited financial statements included in the Funds’ Semi-Annual Reports to Shareholders for the fiscal period ended June 30, 2010 (SEC File #101046949) is incorporated herein by reference. To obtain an additional copy of a Prospectus or Annual or Semi-Annual Report to Shareholders for any of the Funds, without a charge, please call Investor Information at (800) 221-4268.

Investment Adviser
           
Transfer Agent
Royce & Associates, LLC (“Royce”)
           
Boston Financial Data Services, Inc.
 
Distributor
           
Custodian
Royce Fund Services, Inc. (“RFS”)
           
State Street Bank and Trust Company
 

December 29, 2010



TABLE OF CONTENTS

 
                      
Page
   
OTHER INVESTMENT STRATEGIES
                      
3
   
INVESTMENT POLICIES AND LIMITATIONS
                      
5
   
RISK FACTORS AND SPECIAL CONSIDERATIONS
                      
8
   
MANAGEMENT OF THE TRUST
                      
16
   
PRINCIPAL HOLDERS OF SHARES
                      
24
   
INVESTMENT ADVISORY SERVICES
                      
58
   
ADMINISTRATION AGREEMENT
                      
62
   
PORTFOLIO MANAGERS
                      
63
   
DISTRIBUTION
                      
71
   
CUSTODIAN
                      
75
   
TRANSFER AGENT
                      
75
   
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                      
75
   
PORTFOLIO TRANSACTIONS
                      
75
   
CODE OF ETHICS AND RELATED MATTERS
                      
79
   
PROXY VOTING POLICIES AND PROCEDURES
                      
80
   
PORTFOLIO HOLDINGS DISCLOSURE POLICY
                      
80
   
PRICING OF SHARES BEING OFFERED
                      
82
   
REDEMPTIONS IN KIND
                      
83
   
APPLICATION OF FREQUENT TRADING POLICY TO CERTAIN INVESTORS
                      
83
   
TAXATION
                      
83
   
DESCRIPTION OF THE TRUST
                      
90
   
PERFORMANCE DATA
                      
92
   
EXHIBIT A – PROXY VOTING GUIDELINES AND PROCEDURES
                      
106
   
 

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OTHER INVESTMENT STRATEGIES

In addition to the principal investment strategies described in their respective Prospectuses, each Fund may invest the balance of its assets as described below.

ROYCE PENNSYLVANIA MUTUAL FUND - in securities of companies with stock market capitalizations above $2.5 billion and non-convertible preferred stocks and debt securities. This Fund does not focus its investments in companies that do business in the State of Pennsylvania.

ROYCE MICRO-CAP FUND - in securities of companies with stock market capitalizations above $500 million and non-convertible preferred stocks and debt securities.

ROYCE PREMIER FUND - in securities of companies with stock market capitalizations below $500 million and above $2.5 billion, non-convertible preferred stocks and debt securities.

ROYCE LOW-PRICED STOCK FUND - in stocks of companies with prices higher than $25 per share or market capitalizations above $2.5 billion and non-convertible preferred stocks and debt securities.

ROYCE TOTAL RETURN FUND - in securities with stock market capitalizations above $2.5 billion, non-dividend-paying common stocks and non-convertible securities.

ROYCE HERITAGE FUND - in securities of companies with market capitalizations above $5 billion and non-convertible preferred stocks and debt securities.

ROYCE OPPORTUNITY FUND - in securities of companies with stock market capitalizations above $2.5 billion and non-convertible preferred stocks and debt securities.

ROYCE SPECIAL EQUITY FUND - in common stocks and convertible securities of companies with market capitalizations above $2.5 billion and non-convertible preferred stocks and debt securities.

ROYCE VALUE FUND - in securities of companies with stock market capitalizations below $500 million and above $5 billion and non-convertible preferred stocks and debt securities.

ROYCE VALUE PLUS FUND - in securities of companies with stock market capitalizations above $5 billion and non-convertible preferred stocks and debt securities.

ROYCE 100 FUND - in securities of companies with stock market capitalizations above $5 billion, non-convertible preferred stocks and debt securities.

ROYCE DISCOVERY FUND - in securities of companies with stock market capitalizations above $500 million and non-convertible preferred stocks and debt securities.

ROYCE FINANCIAL SERVICES FUND - in securities of non-financial services companies, securities of financial services companies with stock market capitalizations above $5 billion and non-convertible preferred stocks and debt securities.

ROYCE DIVIDEND VALUE FUND - in securities with stock market capitalizations above $5 billion, non-dividend paying common stocks and non-convertible securities.

ROYCE SELECT FUND I - in stocks of companies with market capitalizations above $5 billion and non-convertible preferred stocks and debt securities.

ROYCE SELECT FUND II - in stocks of companies with market capitalizations above $5 billion and non-convertible preferred stocks and debt securities.

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ROYCE GLOBAL SELECT FUND - in stocks of companies with market capitalizations above $5 billion and non-convertible preferred stocks and debt securities.

ROYCE GLOBAL VALUE FUND - in non-convertible preferred stocks and debt securities.

ROYCE EUROPEAN SMALLER-COMPANIES FUND - in equity securities of companies with market capitalizations above $5 billion, non-European equity securities, non-convertible preferred stocks and debt securities.

ROYCE SMID-CAP VALUE FUND - in equity securities of companies with market capitalizations below $500 million and above $10 billion, non-convertible preferred stocks and debt securities.

ROYCE SMID-CAP SELECT FUND - in stocks of companies with market capitalizations below $500 million and above $10 billion, non-convertible preferred stocks and debt securities.

ROYCE INTERNATIONAL SMALLER-COMPANIES FUND - in equity securities of companies with market capitalizations above $5 billion, U.S. equity securities, non-convertible preferred stocks and debt securities.

ROYCE FOCUS VALUE FUND - in equity securities of companies with market capitalizations above $10 billion, non-convertible preferred stocks and debt securities.

ROYCE PARTNERS FUND - in equity securities of companies with market capitalizations above $10 billion, non-convertible preferred stocks and debt securities.

ROYCE MID-CAP FUND - in equity securities of companies with market capitalizations below $2.5 billion and above $15 billion, non-convertible preferred stocks and debt securities.

ROYCE OPPORTUNITY SELECT FUND - in securities of companies with stock market capitalizations above $2.5 billion and non-convertible preferred stocks and debt securities.

ROYCE GLOBAL DIVIDEND VALUE FUND - in securities with stock market capitalizations above $5 billion, non-dividend paying common stocks and non-convertible securities.

ROYCE INTERNATIONAL PREMIER FUND - in securities of companies with stock market capitalizations below $500 million and above $2.5 billion, U.S. equity securities, and non-convertible preferred stocks and debt securities.

ROYCE INTERNATIONAL MICRO-CAP FUND - in securities of companies with stock market capitalizations above $500 million, U.S. equity securities, and non-convertible preferred stocks and debt securities.

ROYCE SPECIAL EQUITY MULTI-CAP FUND - in common stocks and convertible securities of companies with market capitalizations below $5 billion and non-convertible preferred stocks and debt securities.

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INVESTMENT POLICIES AND LIMITATIONS

Listed below are the Funds’ fundamental investment policies and limitations. Unless otherwise noted, whenever an investment policy or limitation states a maximum percentage of a Fund’s assets that may be invested in any security or other asset or sets forth a policy regarding quality standards, the percentage limitation or standard will be determined immediately after or at the time of the Fund’s acquisition of the security or other asset. Accordingly, any subsequent change in values, net assets or other circumstances will not be considered in determining whether the investment complies with the Fund’s investment policies and limitations.

A Fund’s fundamental investment policies cannot be changed without the approval of a “majority of the outstanding voting securities” (as defined in the Investment Company Act of 1940 (the “1940 Act”)) of the Fund. Except for the fundamental investment restrictions set forth below, the investment policies and limitations described in this Statement of Additional Information are operating policies and may be changed by the Board of Trustees without shareholder approval.

No Fund may, as a matter of fundamental policy:

1.            
Issue any senior securities, except that in the case of Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund, collateral arrangements with respect to short sales shall not be considered to be the issuance of a senior security for purposes of this restriction;
2.            
Purchase securities on margin or write call options on its portfolio securities, except for Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund, each of which is not subject to the restriction on writing call options;
3.            
Sell securities short, except for Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund, each of which is not subject to this restriction;
4.            
Borrow money, except that (i) each of the Funds may borrow money from banks as a temporary measure for extraordinary or emergency purposes in an amount not exceeding 5% of such Fund’s total assets and (ii) each of Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund may borrow from banks in an amount not to exceed one-third of the value of its total assets;
5.            
Underwrite the securities of other issuers;
6.            
Invest more than 10% of its total assets in the securities of foreign issuers (except for Royce Opportunity Fund and Royce Special Equity Fund, each of which may invest up to 25% of its total assets in such securities, and Royce Pennsylvania Mutual Fund, Royce Micro-Cap Fund, Royce Premier Fund, Royce Low-Priced Stock Fund, Royce Total Return Fund, Royce Heritage Fund, Royce Value Fund, Royce Value Plus Fund, Royce 100 Fund, Royce Financial Services Fund, Royce Dividend Value Fund, Royce Select Fund II, Royce Global Select Fund, Royce Global Value Fund, Royce European Smaller-Companies Fund, Royce SMid-Cap Value Fund, Royce SMid-Cap Select Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund, Royce Global Dividend Value Fund, Royce International Premier Fund, Royce International Micro-Cap Fund and Royce Special Equity Multi-Cap Fund, each of which is not subject to this restriction);
7.            
Invest in restricted securities (except for Royce Opportunity Fund, Royce Value Fund, Royce Value Plus Fund, Royce 100 Fund, Royce Financial Services Fund, Royce Dividend Value Fund, Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce Global Value Fund and Royce European Smaller-Companies Fund, each of which may invest up to 15% of its net assets in illiquid securities, including restricted securities and Royce Pennsylvania Mutual Fund, Royce Micro-Cap
             
 
 

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Fund, Royce Premier Fund, Royce Low-Priced Stock Fund, Royce Total Return Fund, Royce Heritage Fund, Royce SMid-Cap Value Fund, Royce SMid-Cap Select Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund, Royce Global Dividend Value Fund, Royce International Premier Fund and Royce International Micro-Cap Fund and Royce Special Equity Multi-Cap Fund, each of which is not subject to this restriction,) or in repurchase agreements which mature in more than seven days;
8.            
Invest more than 10% (15% for Royce Opportunity Fund, Royce Special Equity Fund, Royce Value Fund, Royce Value Plus Fund, Royce 100 Fund, Royce Discovery Fund, Royce Financial Services Fund, Royce Dividend Value Fund, Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce Global Value Fund, Royce European Smaller-Companies Fund, Royce SMid-Cap Value Fund, Royce SMid-Cap Select Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund, Royce Global Dividend Value Fund, Royce International Premier Fund, Royce International Micro-Cap Fund and Royce Special Equity Multi-Cap Fund) of its assets in securities for which market quotations are not readily available (i.e., illiquid securities) (except for Royce Pennsylvania Mutual Fund, which is not subject to any such limitation);
9.            
Invest, with respect to 75% of its total assets, more than 5% of its assets in the securities of any one issuer (except U.S. Government securities);
10.            
Invest more than 25% of its assets in any one industry (except for Royce Financial Services Fund, which will concentrate and may invest up to 100% of its assets in financial services companies, respectively);
11.            
Acquire more than 10% of the outstanding voting securities of any one issuer;
12.            
Purchase or sell real estate or real estate mortgage loans or invest in the securities of real estate companies unless such securities are publicly-traded;
13.            
Purchase or sell commodities or commodity contracts;
14.            
Make loans, except for purchases of portions of issues of publicly-distributed bonds, debentures and other securities, whether or not such purchases are made upon the original issuance of such securities, and except that each Fund may loan up to 25% of its assets to qualified brokers, dealers or institutions for their use relating to short sales or other securities transactions (provided that such loans are fully collateralized at all times);
15.            
Invest in companies for the purpose of exercising control of management;
16.            
Purchase portfolio securities from or sell such securities directly to any of the Trust’s Trustees, officers, employees or investment adviser, as principal for their own accounts; or
17.            
Invest more than 5% of its total assets in warrants, rights and options.
 

No Fund may, as a matter of operating policy, invest more than 5% of its net assets in lower-rated (high-risk) non-convertible debt securities.

Royce Opportunity Fund may not, as a matter of operating policy, invest more than 10% of its assets in the securities of foreign issuers.

Royce Special Equity Fund may not, as a matter of operating policy:

1.            
Invest more than 5% of its assets in the securities of foreign issuers;
2.            
Invest more than 5% of its assets in securities for which market quotations are not readily available; or

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3.            
Invest more than 5% of its assets in the securities of other investment companies.
 

Royce Pennsylvania Mutual Fund, Royce Micro-Cap Fund, Royce Premier Fund, Royce Low-Priced Stock Fund, Royce Total Return Fund, Royce Heritage Fund, Royce Value Fund, Royce Value Plus Fund, Royce 100 Fund, Royce Dividend Value Fund, Royce Select Fund II, Royce SMid-Cap Value Fund, Royce SMid-Cap Select Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund and Royce Special Equity Multi-Cap Fund may not, as a matter of operating policy, invest more than 25% of their net assets in the securities of foreign issuers.

Royce Financial Services Fund, Royce Focus Value Fund and Royce Partners Fund may not, as a matter of operating policy, invest more than 35% of its net assets in the securities of foreign issuers.

Royce Global Select Fund, Royce Global Value Fund, Royce European Smaller-Companies Fund, Royce International Smaller-Companies Fund, Royce Global Dividend Value Fund, Royce International Premier Fund and Royce International Micro-Cap Fund, may not, as a matter of operating policy, invest more than 35% of their net assets in the securities of companies domiciled in developing countries.

Royce Financial Services Fund, Royce Focus Value Fund and Royce Partners Fund may not, as a matter of operating policy, invest more than 10% of their net assets in the securities of companies that trade on securities exchanges in developing countries.

Royce Pennsylvania Mutual Fund, Royce Micro-Cap Fund, Royce Premier Fund, Royce Low-Priced Stock Fund, Royce Total Return Fund, Royce Heritage Fund, Royce SMid-Cap Value Fund, Royce SMid-Cap Select Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund, Royce Global Dividend Value Fund, Royce International Premier Fund, Royce International Micro-Cap Fund and Royce Special Equity Multi-Cap Fund, may not, as a matter of operating policy, invest more than 15% of their net assets in restricted securities.

Royce Discovery Fund may not, as a matter of operating policy, invest in the securities of other investment companies.

For purposes of Fundamental Policy No. 7, the Trust does not consider securities to be “restricted” if they may be sold by the Funds without restriction in the market in which they are primarily traded, outside the United States.

The Trust interprets Fundamental Policy No. 8 to preclude any Fund from investing more than 10% (15% for Royce Opportunity Fund, Royce Special Equity Fund, Royce Value Fund, Royce Value Plus Fund, Royce 100 Fund and Royce Discovery Fund, Royce Financial Services Fund, Royce Dividend Value Fund, Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce Global Value Fund, Royce European Smaller-Companies Fund, Royce SMid-Cap Value Fund, Royce SMid-Cap Select Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund, Royce Global Dividend Value Fund, Royce International Premier Fund, Royce International Micro-Cap Fund and Royce Special Equity Multi-Cap Fund) of its net assets in illiquid securities.

Neither Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund, may, as a matter of operating policy, write options on its portfolio securities.

For purposes of Fundamental Policy No. 14, the Trust does not consider repurchase agreements or the purchase of debt securities, bank certificates of deposit and other similar securities, in accordance with the Funds’ investment policies, to be loans.

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The Funds may each invest in the securities of other investment companies (open or closed-end) to the extent permitted under the 1940 Act (except for Royce Special Equity Fund which may invest up to 5% of its total assets in the securities of other investment companies and Royce Discovery Fund which is prohibited from investing in the securities of other investment companies). Notwithstanding the above, the Funds as a matter of operating policy are prohibited from purchasing shares of other investment companies in excess of the limits set forth in the 1940 Act in reliance on the following statutory exceptions to such limits: (i) where the acquiring company and the acquired company are part of the same group of investment companies; and (ii) where the acquiring company and its affiliated persons acquire up to 3% of the outstanding stock of an investment company and such acquiring company has not offered or sold and is not proposing to offer or sell any security which includes a sales load of more than 1.5%.

Royce Opportunity Fund, Royce Value Fund, Royce Value Plus Fund, Royce 100 Fund, Royce Discovery Fund, Royce Financial Services Fund, Royce Dividend Value Fund, Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce Global Value Fund, Royce European Smaller-Companies Fund, Royce SMid-Cap Value Fund, Royce SMid-Cap Select Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund, Royce Global Dividend Value Fund, Royce International Premier Fund, Royce International Micro-Cap Fund and Royce Special Equity Multi-Cap Fund may not invest more than 15% of their net assets in illiquid securities. Illiquid securities include securities subject to contractual or legal restrictions on resale because they are not registered under the Securities Act of 1933 (the “Securities Act”) and other securities for which market quotations are not readily available. Securities which are not registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer, a control person of the issuer or another investor holding such securities.

A large institutional market has developed for these unregistered privately placed restricted securities, including foreign securities. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer’s ability to honor a demand for repayment. Notwithstanding the fact that these securities may be subject to contractual or legal restrictions on resale to the general public or to certain institutions, unregistered securities that can be sold in accordance with Rule 144A under the Securities Act will not be considered illiquid so long as Royce determines that an adequate trading market exists for the security. Rule 144A allows an institutional trading market for securities otherwise subject to restriction on resale to the general public. An insufficient number of qualified institutional buyers interested in purchasing certain restricted securities held by the Funds, however, could adversely affect the marketability of such portfolio securities, and the Funds might be unable to dispose of such securities promptly or at reasonable prices.

RISK FACTORS AND SPECIAL CONSIDERATIONS

Funds’ Rights as Stockholders

No Fund may invest in a company for the purpose of exercising control of management. However, a 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 or the Board of Trustees determines that such matters could have a significant effect on the value of the Fund’s investment in the company. The activities that a Fund may engage in, either individually or in conjunction with others, may include, among others, supporting or opposing proposed changes in a company’s corporate structure or business activities; seeking changes in a company’s board of directors or management; seeking changes in a company’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 a 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 Funds and the risk of actual liability if a Fund is involved in litigation. However, no guarantee can be made that litigation against a Fund will not be undertaken or liabilities incurred.

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A 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 Trust’s Board of Trustees determine this to be in the best interests of a Fund’s shareholders.

Securities Lending

Each Fund may lend up to 25% of its assets to brokers, dealers and other financial institutions. 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 Funds’ custodian and who are deemed by it to be of good standing. Furthermore, such loans will be made only if, in Royce’s judgment, the consideration to be earned from such loans would justify the risk.

The current view of the staff of the Securities and Exchange Commission 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 from the borrower; (ii) the borrower must increase the collateral whenever the market value of the securities loaned (determined on a daily basis) 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 and to any increase in market value; (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.

Lower-Rated (High-Risk) and Investment Grade Debt Securities

Each Fund may invest up to 5% of its net assets in lower-rated (high-risk) non-convertible debt securities. They may be rated from Ba to Ca by Moody’s Investors Service, Inc. or from BB to D by Standard & Poor’s or may be 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’s capacity to pay. The market prices of lower-rated (high-risk) 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.

The market for lower-rated (high-risk) 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 lower-rated (high-risk) debt security in which a Fund has invested, the security will then be valued in accordance with procedures established by the Board of Trustees. Judgment plays a greater role in valuing lower-rated (high-risk) 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 a Fund’s ability to dispose of lower-rated (high-risk) debt securities.

Since the risk of default is higher for lower-rated (high-risk) debt securities, Royce’s research and credit analysis may play an important part in managing securities of this type for the Funds. In considering such investments for the Funds, Royce will attempt to identify those issuers of lower-rated (high-risk) debt securities whose financial condition is adequate to meet future obligations, has improved or is expected to improve in the future. Royce’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.

Each of the Funds 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.

9



The Funds may also invest in investment grade non-convertible debt securities. Such securities include those rated Aaa by Moody’s (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’s (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), securities rated A by Moody’s (which are considered to possess adequate factors giving security to principal and interest) and securities rated Baa by Moody’s (which are considered to have an adequate capacity to pay interest and repay principal, but may have some speculative characteristics).

Foreign Investments

Except for Royce Global Select Fund, Royce Global Value Fund, Royce European Smaller-Companies Fund, Royce International Smaller-Companies Fund, Royce Global Dividend Value Fund, Royce International Premier Fund and Royce International Micro-Cap Fund, each of which is not subject to any limitation on investments in securities of foreign issuers, each Fund may invest up to 10% of its total assets (5% for Royce Special Equity Fund, 25% of net assets for Royce Pennsylvania Mutual Fund, Royce Micro-Cap Fund, Royce Premier Fund, Royce Low-Priced Stock Fund, Royce Total Return Fund, Royce Heritage Fund, Royce Value Fund, Royce Value Plus Fund, Royce 100 Fund, Royce Dividend Value Fund, Royce Select Fund II, Royce SMid-Cap Value Fund, Royce SMid-Cap Select Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund and Royce Special Equity Multi-Cap Fund and 35% for Royce Financial Services Fund, Royce Focus Value Fund and Royce Partners Fund) in the securities of foreign issuers. (For purposes of this restriction, securities issued by a foreign domiciled company that are registered with the SEC under Section 12(b) or (g) of the Securities Exchange Act of 1934 are not treated as securities of foreign issuers.) Royce European Smaller-Companies Fund invests at least 80% of its net assets in the equity securities of companies domiciled in, or whose securities trade in, European countries, including Germany, United Kingdom, France, Italy, Spain, Russia, Netherlands, Turkey, Belgium, Sweden, Switzerland, Poland, Norway, Austria, Greece, Denmark, Ireland, Finland, Portugal, Czech Republic, Romania, Hungary, Ukraine, Slovakia, Croatia, Luxembourg, Slovenia, Belarus, Serbia, Bulgaria, Lithuania, Azerbaijan, Latvia, Cyprus, Iceland, Estonia, Bosnia and Herzegovina, Albania, Georgia, Armenia, Republic of Macedonia, Malta, Moldova, Andorra, Liechtenstein, Monaco, Montenegro, San Marino, Vatican City and British Crown Dependencies (Jersey, Guernsey and Isle of Man).

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. Markets for foreign securities may be less liquid and may be subject to greater price volatility than those for domestic securities. Foreign brokerage commissions and custodial fees are generally higher than those in the United States. Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, thereby making it difficult to conduct such transactions. Delays or problems with settlements might affect the liquidity of a Fund’s portfolio. Foreign investments may also be subject to local economic and political risks, political, economic and social instability, military action or unrest or adverse diplomatic developments, and possible nationalization of issuers or expropriation of their assets, which might adversely affect a Fund’s ability to realize on its investment in such securities. Royce may not be able to anticipate these potential events or counter their effects. Furthermore, some foreign securities are subject to brokerage taxes levied by foreign governments, which have the effect of increasing the cost of such investment and reducing the realized gain or increasing the realized loss on such securities at the time of sale.

Although changes in foreign currency rates may adversely affect the Funds’ foreign investments, Royce does not expect to purchase or sell foreign currencies for the Funds to hedge against declines in the U.S. dollar or to lock in the value of any foreign securities they purchase. Consequently, the risks associated with such investments may be greater than if the Funds were to engage in foreign currency transactions for hedging purposes.

10



Exchange control regulations in such foreign markets may also adversely affect the Funds’ foreign investments and the Funds’ ability to make certain distributions necessary to maintain their eligibility as regulated investment companies and avoid the imposition of income and excise taxes may, to that extent, be limited.

The considerations noted above are generally intensified for investments in developing countries. See “Developing Countries” below.

The Funds may purchase the securities of foreign companies in the form of American Depositary Receipts (ADRs). ADRs are certificates held in trust by a bank or similar financial institution evidencing ownership of securities of a foreign-based issuer. Designed for use in U.S. securities markets, ADRs are alternatives to the purchase of the underlying foreign securities in their national markets and currencies.

Depositories may establish either unsponsored or sponsored ADR facilities. While ADRs issued under these two types of facilities are in some respects similar, there are distinctions between them relating to the rights and obligations of ADR holders and the practices of market participants. A depository may establish an unsponsored facility without participation by (or even necessarily the acquiescence of) the issuer of the deposited securities, although typically the depository requests a letter of non-objection from such issuer prior to the establishment of the facility. Holders of unsponsored ADRs generally bear all the costs of such facilities. The depository usually charges fees upon the deposit and withdrawal of the deposited securities, the conversion of dividends into U.S. dollars, the disposition of non-cash distributions and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited securities or to pass through voting rights to ADR holders in respect of the deposited securities. Depositories create sponsored ADR facilities in generally the same manner as unsponsored facilities, except that the issuer of the deposited securities enters into a deposit agreement with the depository. The deposit agreement sets out the rights and responsibilities of the issuer, the depository and the ADR holders. With sponsored facilities, the issuer of the deposited securities generally will bear some of the costs relating to the facility (such as deposit and withdrawal fees). Under the terms of most sponsored arrangements, depositories agree to distribute notices of shareholder meetings and voting instructions and to provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited securities.

11



Developing Countries

Royce Global Select Fund, Royce Global Value Fund, Royce European Smaller-Companies Fund, Royce International Smaller-Companies Fund, Royce Global Dividend Value Fund, Royce International Premier Fund and Royce International Micro-Cap Fund do not expect to invest more than 35% of each Fund’s net assets in the securities of companies domiciled in developing countries. Royce Financial Services Fund, Royce Focus Value Fund and Royce Partners Fund do not expect to invest more than 10% of each Fund’s net assets in the securities of companies that trade on securities exchanges in developing countries. Generally developing countries include every country in the world other than the United States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore, South Korea, Taiwan and Western European countries (which include, Austria, Belgium, Denmark, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom). The considerations noted above in “Foreign Investments” are generally intensified for investments in developing countries. A number of developing countries restrict, to varying degrees, foreign investment in stocks. Repatriation of investment income, capital, and the proceeds of sales by foreign investors may require governmental registration and approval in some developing countries. A number of the currencies of developing countries have experienced significant declines against the U.S. dollar in recent years, and devaluation may occur subsequent to investment in these countries by the Funds. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain developing countries. Many of the developing securities markets are relatively small or less diverse, have low trading volumes, suffer periods of relative illiquidity and are characterized by significant price volatility. Developing countries may have antiquated legal systems with existing laws and regulations that are inconsistently applied. Generally developing countries are not subject to as extensive and frequent accounting and financial reporting requirements as in the United States. Transaction costs, including brokerage commissions and dealer mark-ups in developing countries may be higher than in the United States or other developed countries. There is a risk in developing countries that a future economic or political crisis could lead to price controls, forced mergers of companies, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies, any of which may have a detrimental effect on the Funds’ investments.

Securities of Exchange-Traded Funds

The Funds may purchase, sell and invest in the securities of exchange-traded funds (“ETFs”). ETFs are ownership interests in unit investment trusts, depositary receipts, and other pooled investment vehicles that are traded on an exchange and that hold a portfolio of securities or other financial instruments (the “Underlying Assets”). The Underlying Assets are typically selected to correspond to the securities that comprise a particular broad based, sector or international index, or to provide exposure to a particular industry sector or asset class. From time to time the Funds may also purchase ETFs that sell short a portfolio of securities or other financial asset. An investment in an ETF involves risks similar to investing directly in the Underlying Assets, including the risk that the value of the Underlying Assets may fluctuate in accordance with changes in the financial condition of their issuers, the value of securities and other financial instruments generally, and other market factors.

The performance of an ETF will be reduced by transaction and other expenses, including fees paid by the ETF to service providers. Investors in ETFs are eligible to receive their portion of dividends, if any, accumulated on the securities held in the portfolio, less fees and expenses of the ETF.

If an ETF is an investment company, unless an exemption has been obtained from the Securities and Exchange Commission, the limitations applicable to the Funds’ ability to purchase securities issued by other investment companies will apply.

12



Repurchase Agreements

In a repurchase agreement, a 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.

The Funds may engage in repurchase agreements provided that such agreements are collateralized by cash or securities issued by the U.S. Government or its agencies. 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 Funds in connection with bankruptcy proceedings), it is the policy of the Trust to enter into repurchase agreements only with recognized securities dealers, banks and Fixed Income Clearing Corporation, a securities clearing agency registered with the Securities and Exchange Commission, each determined by Royce & Associates, LLC to represent minimal credit risk and having a term of seven days or less.

Warrants, Rights and Options

Each 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.

The sale of warrants, rights or options held for more than one year generally results in a long-term capital gain or loss to a 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. 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 S&P Small-Cap 600.

Investing in warrants, rights and call options on a given security allows a 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 a 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 a Fund to incur additional risk and/or to hedge against risk.

Short Sales

Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund may each effect short sales of securities. A short sale is a transaction in which the Fund sells a security it does not own in anticipation that the market price of that security will decline. When the Fund makes a short sale, it must borrow the security sold short to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. The Fund may have to pay a premium to borrow the security and is obligated to pay the lender amounts equal to any dividends or interest that accrue during the period of the loan. If the price of the security sold short increases between the time of the short sale and the time

13




the Fund replaces the borrowed security, the Fund will incur a loss. Conversely, if the price declines, the Fund will realize a gain. Any gain will be decreased, and any loss increased, by the premium and transaction costs described above. Although the Fund’s gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited.

While the short sale is outstanding, the Fund is required to collateralize its borrowing obligations, which has the practical effect of limiting the extent to which the Fund may engage in short sales. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet its margin requirements, until the short position is closed out. Until the Fund closes its short position, the Fund will be required to (a) maintain with its custodian a segregated account which will be marked to market daily, containing cash or liquid securities (which may include equity securities) such that the amount deposited in the segregated account plus the amount retained by the broker as collateral will equal the current market value of the security sold short or (b) otherwise cover the Fund’s short position. The Fund may cover its short position by owning the security sold short or by holding a call option on the security with a strike price no higher than the price at which the security was sold.

Reverse Repurchase Agreements

Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce Global Value Fund, Royce European Smaller-Companies Fund, Royce SMid-Cap Select Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Mid-Cap Fund, Royce Opportunity Select Fund, Royce Global Dividend Value Fund, Royce International Premier Fund, Royce International Micro-Cap Fund and Royce Special Equity Multi-Cap Fund are authorized to enter into reverse repurchase agreements. 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 repurchase transactions, liquid securities of a dollar amount equal in value to the securities subject to the agreement are required to be segregated with the Fund’s custodian bank, and the reverse repurchase agreement is required to be marked to market daily.

Borrowing

Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund may each borrow money from banks to increase its holdings of portfolio securities and other instruments or for liquidity purposes. At all times when borrowings are outstanding, each Fund must maintain at least 300% “asset coverage,” meaning that the total assets of the Fund must have a value of at least 300% of all amounts borrowed. It is anticipated that such borrowings would be pursuant to a negotiated loan agreement with a bank or by means of reverse repurchase agreements with other institutional lenders, such as broker dealers.

14



Financial Services Companies

Royce Financial Services Fund’s emphasis on securities of financial services companies makes it more susceptible to adverse conditions affecting such companies than a fund that does not have its assets invested to a similar degree in such companies. Financial services companies are subject to a variety of factors that may adversely affect their business or operations, including extensive regulation at the federal and/or state level and, to the extent that they operate internationally, in other countries. Each of these companies also may be significantly affected by changes in prevailing interest rates, general economic conditions and industry specific risks. The enactment of new legislation and regulations, as well as changes in the interpretation and enforcement of existing laws and regulations, may directly affect the manner of operations and profitability of companies in the financial services industry. From time to time, changes in law and regulation have permitted greater diversification of their financial products, but the ability of certain financial services companies to expand by acquisition or branching across state lines may be limited. Federal or state law and regulations require banks, bank holding companies, broker dealers and insurance companies to maintain minimum levels of capital and liquidity. Bank regulators have broad authority and can impose sanctions, including conservatorship or receivership, on non-complying banks even when these banks continue to be solvent, thereby possibly resulting in the elimination of stockholders’ equity.

Portfolio Turnover

For the years ended December 31, 2009 and December 31, 2008, Royce Select Fund II’s portfolio turnover rates were 114% and 268%, respectively. While these turnover rates are generally high, the portfolio turnover rate in 2009 was lower than in 2008 as the Fund’s portfolio began to stabilize after, among other things, a large position in a particular security was acquired, the Fund did less short selling and the Fund rotated out of cyclically exposed U.S. companies into certain Asian companies believed by Royce to be better valued.

For the years ended December 31, 2009 and December 31, 2008, Royce SMid-Cap Value Fund’s portfolio turnover rates were 216% and 397%, respectively, and Royce SMid-Cap Select Fund’s portfolio turnover rates were 415% and 764%, respectively. The portfolio turnover rates were substantially higher in 2008 than they were in 2009 due primarily to increased market volatility as well as material redemptions in each of these Funds during 2008. Although lower than those in 2008, portfolio turnover rates in Royce SMid-Cap Value Fund and Royce SMid-Cap Select Fund remained high in 2009 due in part to significant redemption activity.

Investments by Affiliated and Non-Affiliated Funds of Funds in the Funds

Certain affiliated and non-affiliated investment companies may invest in the Funds. These investment companies are referred to as “funds of funds” because they invest primarily in other investment companies.

From time to time, a Fund may experience relatively large redemptions or investments due to rebalancings of the assets of a fund of funds invested in such Fund. In the event of such redemptions or investments, a Fund could be required to sell securities or to invest cash at a time when it is not advantageous to do so. If this were to occur, the effects of the rebalancing trades could adversely affect the Fund’s performance. Redemptions of Fund shares due to rebalancings could also accelerate the realization of taxable capital gains in a Fund and might increase brokerage and/or other transaction costs.

The Funds’ investment adviser, Royce & Associates, LLC, may be subject to potential conflicts of interest in connection with investments by affiliated funds of funds. For example, Royce may have an incentive to permit an affiliated fund of funds to become a more significant shareholder (with the potential to cause greater disruption) than would be permitted for an unaffiliated investor. Royce has committed to the Board of Trustees of the Trust that it will resolve any potential conflict in the best interests of the shareholders of a Fund in accordance with its fiduciary duty to the Fund. As necessary, Royce will take such actions as it deems appropriate to minimize potential adverse impacts, including

15



redemption of shares in-kind, rather than in cash. Similar issues may result from investment in a Fund by 529 plans.

* * *

Royce believes that each of the Funds, except Royce Total Return Fund, Royce Dividend Value Fund and Royce Global Dividend Value Fund, are suitable for investment only by persons who can invest without concern for current income, and that such Funds are suitable only for those investors who are in a financial position to assume above-average risks in search for long-term capital appreciation.

MANAGEMENT OF THE TRUST

The following table sets forth certain information as to each Trustee and officer of the Trust. The Trustees are responsible for the overall supervision of the operations of the Trust and have the various duties imposed on directors of registered investment companies by the 1940 Act.

Name, Age and Address
        Position(s)
Held with
Fund
    Term of
Office** and
Length of
Time Served
    Principal Occupation(s) During
Past 5 Years
    Number of
Portfolios in
Fund Complex
Overseen by
Trustee
    Other Public
Company
Directorships
Charles M. Royce* (71)
745 Fifth Avenue
New York, NY 10151
           
Trustee and
President
   
Since 1982
   
President, Chief Investment Officer, Co-Chief Investment Officer and member of Board of Managers of Royce & Associates, LLC (“Royce”), investment adviser to the Trust, Royce Capital Fund (“RCF”), Royce Focus Trust, Inc. (“RFT”), Royce Micro-Cap Trust, Inc. (“RMT”) and Royce Value Trust, Inc. (“RVT”) (collectively, “The Royce Funds”).
   
35
   
TICC Capital
Corp
Mark R. Fetting* (56)
c/o The Royce Fund
745 Fifth Avenue
New York, NY 10151
           
Trustee
   
Since 2001
   
President and Chief Executive Officer of Legg Mason, Inc. Mr. Fetting’s prior business experience includes having served as a member of the Board of Managers of Royce; Senior Executive Vice President of Legg Mason, Inc.; Division President and Senior Officer of Prudential Financial Group, Inc. and related companies; Partner, Greenwich Associates; and Vice President, T. Rowe Price Group, Inc.
   
48
(Director/Trustee
of all Royce
Funds consisting
of 35 portfolios;
Director/Trustee
of the Legg
Mason Family
of Funds
of 13 portfolios)
   
None
Patricia W. Chadwick (61)
745 Fifth Avenue
New York, NY 10151
           
Trustee
   
Since 2009
   
Consultant and President of Ravengate Partners LLC (since 2000).
   
35
   
Wisconsin
Energy Corp.
and ING
Mutual Funds
Richard M. Galkin (72)
c/o The Royce Fund
745 Fifth Avenue
New York, NY 10151
           
Trustee
   
Since 1982
   
Private investor. Mr. Galkin’s prior business experience includes having served as President of Richard M. Galkin Associates, Inc., telecommunications consultants, President of Manhattan Cable Television (a subsidiary of Time Inc.), President of Haverhills Inc.
   
35
   
None
 

16



Name, Age and Address
        Position(s)
Held with
Fund
    Term of
Office** and
Length of
Time Served
    Principal Occupation(s) During
Past 5 Years
    Number of
Portfolios in
Fund Complex
Overseen by
Trustee
    Other Public
Company
Directorships
 
           
 
   
 
   
(another Time Inc. subsidiary), President of Rhode Island Cable Television and Senior Vice President of Satellite Television Corp. (a subsidiary of Comsat).
   
 
   
 
Stephen L. Isaacs (71)
c/o The Royce Fund
745 Fifth Avenue
New York, NY 10151
           
Trustee
   
Since 1989
   
President of The Center for Health and Social Policy (since September 1996); Attorney and President of Health Policy Associates, Inc., consultants. Mr. Isaacs’s prior business experience includes having served as Director of Columbia University Development Law and Policy Program and Professor at Columbia University (until August 1996).
   
35
   
None
Arthur S. Mehlman (68)
c/o The Royce Fund
745 Fifth Avenue
New York, NY 10151
           
Trustee
   
Since 2004
   
Director of The League for People with Disabilities, Inc.; Director of University of Maryland Foundation (non-profits). Formerly: Director of University of Maryland College Park Foundation (non-profit) (from 1998 to 2005); Partner, KPMG LLP (international accounting firm) (from 1972 to 2002); Director of Maryland Business Roundtable for Education (from July 1984 to June 2002).
   
48
(Director/Trustee
of all Royce
Funds consisting
of 35 portfolios;
Director/Trustee
of the Legg
Mason Family of
Funds consisting
of 13 portfolios)
   
Municipal
Mortgage &
Equity, LLC
David L. Meister (71)
c/o The Royce Fund
745 Fifth Avenue
New York, NY 10151
           
Trustee
   
Since 1982
   
Consultant. Chairman and Chief Executive Officer of The Tennis Channel (from June 2000 to March 2005). Mr. Meister’s prior business experience includes having served as a Chief Executive Officer of Seniorlife.com, a consultant to the communications industry, President of Financial News Network, Senior Vice President of HBO, President of Time-Life Films and Head of Broadcasting for Major League Baseball.
   
35
   
None
G. Peter O’Brien (65)
c/o The Royce Fund
745 Fifth Avenue
New York, NY 10151
           
Trustee
   
Since 2001
   
Director, Bridges School (since 2006); Trustee Emeritus of Colgate University (since 2005); Board Member of Hill House, Inc. (since 1999); Formerly: Trustee of Colgate University (from 1996 to 2005), President of Hill House, Inc. (from 2001 to 2005) and Managing Director/Equity Capital Markets Group of Merrill Lynch & Co. (from 1971 to 1999).
   
48
(Director/Trustee
of all Royce
Funds consisting
of 35 portfolios;
Director/Trustee
of the Legg
Mason Family of
Funds consisting
of 13 portfolios)
   
TICC Capital
Corp.

17



Name, Age and Address
        Position(s)
Held with
Fund
    Term of
Office** and
Length of
Time Served
    Principal Occupation(s) During
Past 5 Years
    Number of
Portfolios in
Fund Complex
Overseen by
Trustee
    Other Public
Company
Directorships
John D. Diederich.* (59)
745 Fifth Avenue
New York, NY 10151
           
Vice President
and Treasurer
   
Since 2001
   
Chief Operating Officer, Managing Director and member of the Board of Managers of Royce; Chief Financial Officer of Royce; Director of Administration of The Royce Funds; and President of Royce Fund Services, Inc. (“RFS”), having been employed by Royce since April 1993.
   
N/A
   
None
Jack E. Fockler, Jr.* (52)
745 Fifth Avenue
New York, NY 10151
           
Vice President
   
Since 1995
   
Managing Director and Vice President of Royce; and Vice President of RFS, having been employed by Royce since October 1989.
   
N/A
   
None
W. Whitney George*(52)
745 Fifth Avenue
New York, NY 10151
           
Vice President
   
Since 1995
   
Co-Chief Investment Officer, Managing Director and Vice President of Royce, having been employed by Royce since October 1991.
   
N/A
   
None
Daniel A. O’Byrne* (48)
745 Fifth Avenue
New York, NY 10151
           
Vice President and Assistant Secretary
   
Since 1994
   
Principal and Vice President of Royce, having been employed by Royce since October 1986.
   
N/A
   
None
John E. Denneen* (43)
745 Fifth Avenue
New York, NY 10151
           
Secretary and Chief Legal Officer
   
1996–2001 and since April 2002
   
General Counsel, Principal, Chief Legal and Compliance Officer and Secretary of Royce; Secretary and Chief Legal Officer of The Royce Funds.
   
N/A
   
None
Lisa Curcio* (51)
745 Fifth Avenue
New York, NY 10151
           
Chief Compliance Officer
   
Since October 1, 2004
   
Chief Compliance Officer of The Royce Funds (since October 2004) and Compliance Officer of Royce (since June 2004).
   
N/A
   
None
 


*  
  An “interested person” of the Trust and/or Royce under Section 2(a)(19) of the 1940 Act.
**  
  Each trustee will hold office until their successors have been duly elected and qualified or until their earlier resignation or removal. Each officer will hold office for the year ending December 31, 2010 and thereafter until their respective successors are duly elected and qualified. All of the Trust’s trustees are also directors/trustees of RVT, RMT, RFT and RCF.

Additional information about each Trustee follows (supplementing the information provided in the table above) that describes some of the specific experiences, qualifications, attributes or skills that each Trustee possesses which the Board of Trustees (the “Board”) believes has prepared them to be effective Trustees.

•  
  Charles M. Royce — In addition to his tenure as a Trustee of The Royce Funds, Mr. Royce serves as the President, Co-Chief Investment Officer and as a member of the Board of Managers of Royce, having been President of Royce since 1972. Mr. Royce has over 40 years of investment and business experience.

•  
  Mark R. Fetting — In addition to his tenure as a Trustee of The Royce Funds and of the Legg Mason Family of Funds, Mr. Fetting serves as the Chairman, President and Chief Executive Officer of Legg Mason, Inc. and has served as a member of the Board of Managers of Royce. Mr. Fetting has over 30 years of investment and business experience.

•  
  Patricia W. Chadwick — In addition to her tenure as a Trustee of The Royce Funds, Ms. Chadwick is designated as an Audit Committee Financial Expert. Ms. Chadwick has over 30

18



  years of investment and business experience, including extensive experience in the financial sector and as a consultant to business and non-profit entities. In addition, Ms. Chadwick has served on the boards of a variety of public and private companies and non-profit entities, including currently serving on the board of two public companies.

•  
  Richard M. Galkin - In addition to his tenure as a Trustee of The Royce Funds, Mr. Galkin has served as the Chairman of the Board’s Audit Committee for more than 15 years, acting as liaison between the Boards and the Funds’ independent registered public accountants and as co-Chairman of the Boards’ Nominating Committee. Mr. Galkin has over 40 years of business experience, including extensive experience in the telecommunications industry.

•  
  Stephen L. Isaacs - In addition to his tenure as a Trustee of The Royce Funds, Mr. Isaacs serves as Attorney and President of a private consulting firm. Mr. Isaacs has over 40 years of business and academic experience, including extensive experience related to public health and philanthropy.

•  
  Arthur S. Mehlman - In addition to his tenure as a Trustee of The Royce Funds and of the Legg Mason Family of Funds, Mr. Mehlman is designated as an Audit Committee Financial Expert. Mr. Mehlman has over 35 years of business experience, including as Partner of an international accounting firm and a Director for various private companies and non-profit entities.

•  
  David L. Meister - In addition to his tenure as a Trustee of The Royce Funds, Mr. Meister has over 40 years of business experience, including extensive experience as an executive officer in and consultant to the communications industry.

•  
  G. Peter O’Brien - In addition to his tenure as a Trustee of The Royce Funds and of the Legg Mason Family of Funds, Mr. O’Brien serves as co-Chairman of the Boards’ Nominating Committee. Mr. O’Brien has over 35 years of business experience, including extensive experience in the financial sector. In addition, Mr. O’Brien has served on the boards of public companies and non-profit entities.

The Board believes that each Trustee’s experience, qualifications, attributes and skills should be evaluated on an individual basis and in consideration of the perspective such Trustee brings to the entire Board, with no single Trustee, or particular factor, being indicative of Board effectiveness. However, the Board believes that Trustees 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. Experience relevant to having this ability may be achieved through a Trustee’s educational background; business, professional training or practice, public service or academic positions; experience from service as a board member (including the Board of the Fund) or as an executive of investment funds, public companies or significant private or non-profit entities or other organizations; and/or other life experiences. The charter for the Boards’ Nominating Committee contains certain other specific factors considered by the Nominating Committee in identifying and selecting Trustee candidates (as described below).

To assist them in evaluating matters under federal and state law, the Trustees are counseled by their own independent legal counsel, who participates in Board meetings and interacts with Royce, and also may benefit from information provided by Royce’s internal counsel; both Board and Royce’s internal counsel have significant experience advising funds and fund board members. The Board and its committees have the ability to engage other experts as appropriate. The Board evaluates its performance on an annual basis.

Board Composition and Leadership Structure

The 1940 Act requires that at least 40% of a Fund’s trustees not be “interested persons” (as defined in the 1940 Act) of the Fund and as such are not affiliated with the Fund’s investment adviser (“Independent

19




Trustees”). To rely on certain exemptive rules under the 1940 Act, a majority of a Fund’s trustees must be Independent Trustees, and for certain important matters, such as the approval of investment advisory agreements or transactions with affiliates, the 1940 Act or the rules thereunder require the approval of a majority of the Independent Trustees. Currently, 75% of the Fund’s Trustees are Independent Trustees. The Board does not have a chairman, but the President, Mr. Royce, an interested person of the Fund, acts as chairman at the Board meetings. The Independent Trustees have not designated a lead Independent Trustee, but the Chairman of the Audit Committee, Mr. Galkin, generally acts as chairman of meetings or executive sessions of the Independent Trustees and, when appropriate, represents the views of the Independent Trustees to management. 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.

Information relating to each Trustee’s share ownership in the Funds and in the other funds in the group of registered investment companies comprising The Royce Funds that are overseen by the respective Trustee as of December 31, 2009 is set forth in the tables below.

Charles M. Royce
                                       
Fund
           
Aggregate Dollar Range of
Ownership in the Fund
   
Aggregate Dollar Range of
Ownership in The Royce Funds
Royce Pennsylvania Mutual Fund
           
Over $100,000
               
Royce Premier Fund
           
Over $100,000
               
Royce Low-Priced Stock Fund
           
$50,000 – $100,000
               
Royce Total Return Fund
           
Over $100,000
               
Royce Heritage Fund
           
Over $100,000
               
Royce Opportunity Fund
           
Over $100,000
               
Royce Value Fund
           
Over $100,000
               
Royce Value Plus Fund
           
$50,001 – $100,000
               
Royce 100 Fund
           
Over $100,000
               
Royce Discovery Fund
           
Over $100,000
               
Royce Financial Services Fund
           
Over $100,000
               
Royce Dividend Value Fund
           
Over $100,000
               
Royce Select Fund I
           
Over $100,000
               
Royce Select Fund II
           
Over $100,000
               
Royce Global Value Fund
           
$1 – $10,000
               
Royce European Smaller- Companies Fund
           
Over $100,000
               
Royce SMid-Cap Value Fund
           
Over $100,000
               
Royce SMid-Cap Select Fund
           
Over $100,000
               
Royce International Smaller-Companies Fund
           
Over $100,000
               
               
Royce Partners Fund
           
Over $100,000
               
 
           
 
   
 
The Royce Funds
           
 
   
Over $100,000
 

20



Mark R. Fetting
                                       
Fund
           
Aggregate Dollar Range of
Ownership in the Fund
   
Aggregate Dollar Range of
Ownership in The Royce Funds
Royce Pennsylvania Mutual Fund
           
Over $100,000
               
Royce Total Return Fund
           
$10,001 – $50,000
               
 
           
 
   
 
The Royce Funds
           
 
   
Over $100,000
 
                                       
Patricia W. Chadwick*
                                       
Fund
           
Aggregate Dollar Range of
Ownership in the Fund
   
Aggregate Dollar Range of
Ownership in The Royce Funds
None
           
None
   
None
 
                                       
Richard M. Galkin
                                       
Fund
           
Aggregate Dollar Range of
Ownership in the Fund
   
Aggregate Dollar Range of
Ownership in The Royce Funds
Royce Premier Fund
           
Over $100,000
               
Royce Total Return Fund
           
Over $100,000
               
Royce Value Fund
           
Over $100,000
               
Royce 100 Fund
           
Over $100,000
               
 
           
 
   
 
The Royce Funds
           
 
   
Over $100,000
 
                                       
Stephen L. Isaacs
                                       
Fund
           
Aggregate Dollar Range of
Ownership in the Fund
   
Aggregate Dollar Range of
Ownership in The Royce Funds
Royce Pennsylvania Mutual Fund
           
$50,001 – $100,000
               
Royce Micro-Cap Fund
           
$10,001 – $50,000
               
Royce Premier Fund
           
$10,001 – $50,000
               
Royce Special Equity Fund
           
$50,001 – $100,000
               
Royce Low-Priced Stock Fund
           
$10,001 – $50,000
               
Royce Total Return Fund
           
Over $100,000
               
Royce Opportunity Fund
           
$1 – $10,000
               
Royce Dividend Value Fund
           
$10,001 – $50,000
               
Royce Financial Services Fund
           
$1 – $10,000
               
Royce Global Value Fund
           
$10,001 – $50,000
               
Royce European Smaller-Companies Fund
           
$10,001 – $50,000
               
 
           
 
   
 
The Royce Funds
           
 
   
Over $100,000
 
                                       
Arthur S. Mehlman
                                       
Fund
           
Aggregate Dollar Range of
Ownership in the Fund
   
Aggregate Dollar Range of
Ownership in The Royce Funds
Royce Low-Priced Stock Fund
           
$10,001 – $50,000
               
Royce Total Return Fund
           
$10,001 – $50,000
               
Royce Value Fund
           
$10,001 – $50,000
               
 
           
 
   
 
The Royce Funds
           
 
   
Over $100,000

21



David L. Meister
                                       
Fund
           
Aggregate Dollar Range of
Ownership in the Fund
   
Aggregate Dollar Range of
Ownership in The Royce Funds
Royce Premier Fund
           
$50,001 – $100,000
               
Royce Total Return Fund
           
$50,001 – $100,000
               
Royce Opportunity Fund
           
Over $100,000
               
Royce Special Equity Fund
           
$50,001 – $100,000
               
Royce Value Plus Fund
           
$10,001 – $50,000
               
Royce Dividend Value Fund
           
$10,001 – $50,000
               
Royce 100 Fund
           
$10,001 – $50,000
               
 
           
 
   
 
The Royce Funds
           
 
   
Over $100,000
 
                                       
G. Peter O’Brien
                                       
Fund
           
Aggregate Dollar Range of
Ownership in the Fund
   
Aggregate Dollar Range of
Ownership in The Royce Funds
Royce Pennsylvania Mutual Fund
           
$10,001 – $50,000
               
Royce Premier Fund
           
$50,001 – $100,000
               
Royce Low-Priced Stock Fund
           
Over $100,000
               
Royce Total Return Fund
           
Over $100,000
               
Royce Opportunity Fund
           
Over $100,000
               
Royce Special Equity Fund
           
$50,001 – $100,000
               
Royce Select Fund I
           
$50,001 – $100,000
               
Royce Select Fund II
           
$10,001 – $50,000
               
Royce Global Select Fund
           
$50,001 – $100,000
               
Royce Value Plus Fund
           
$10,001 – $50,000
               
 
           
 
   
 
The Royce Funds
           
 
   
Over $100,000
 


* Ms. Chadwick was elected by the Board as a Trustee of the Trust effective December 3, 2009. As of September 30, 2010, Ms. Chadwick’s Aggregate Dollar Range of Ownership in series of the Trust was over $100,000 in each of Royce Value Fund, Royce 100 Fund and Royce Global Value Fund. In addition, as of that same date, Ms. Chadwick’s Aggregate Dollar Range of Ownership in The Royce Funds was over $100,000.

The Board of Trustees has an Audit Committee, comprised of Patricia W. Chadwick, Richard M. Galkin, Stephen L. Isaacs, Arthur S. Mehlman, David L. Meister and G. Peter O’Brien. The Audit Committee is responsible for, among other things, recommending the selection and nomination of the Funds’ independent accountants and for conducting post-audit reviews of the Funds’ financial statements with such independent accountants. The Trust has adopted an Audit Committee charter. Mr. Galkin serves as Chairman of the Audit Committee and Mr. Mehlman and Ms. Chadwick are designated as Audit Committee Financial Experts, as defined under Securities and Exchange Commission Regulations. During the year ended December 31, 2009, the Audit Committee held two meetings.

The Board of Trustees has a Nominating Committee, comprised of Patricia W. Chadwick, Richard M. Galkin, Stephen L. Isaacs, Arthur S. Mehlman, David L. Meister and G. Peter O’Brien. The Nominating Committee is responsible for, among other things, identifying individuals qualified to serve as Independent Trustees of the Fund and recommending its nominees for consideration by the Fund’s full Board of Trustees. The Trust has adopted a Nominating Committee charter. Messrs. Galkin and O’Brien serve as co-Chairman of the Nominating Committee. During the year ended December 31, 2009, the Nominating Committee met one time. In addition, members of the Nominating Committee discussed proposed nominees during two executive sessions of the Fund’s Independent Trustees during the year. Finally, individual members of the Nominating Committee met separately on a number of occasions to interview Board nominees during 2009. While the Committee is solely responsible for the selection and nomination of the Fund’s Independent Trustees, the Committee will review and consider nominations for the office of Trustee made by management and by Fund shareholders as it deems appropriate. Shareholders who wish to recommend a nominee should send their suggestions to the Secretary of the Fund, which should include biographical information and set forth their proposed nominee’s qualifications.

22



The Nominating Committee charter requires the Nominating Committee to identify individuals qualified to serve as Independent Trustees of the Fund and to recommend its nominees for consideration by the Board. 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’s business and professional experience, education and such other factors as the Committee may consider relevant, including but not limited to whether a potential nominee’s personal and professional qualities and attributes would provide a beneficial diversity of skills, experience and/or perspective to the Board; (ii) the character and integrity of the person; (iii) whether or not the person is an “interested person” as defined in the 1940 Act and whether the person is otherwise qualified under applicable laws and regulations to serve as a Trustee or Independent Trustee of the Fund; (iv) whether or not the person has any relationships that might impair his or her 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 stock exchange 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 Trustee of the Fund; and (viii) whether or not the selection and nomination of the person would be in the best interest of the Fund in light of the requirements of the Fund’s retirement policies. While the Nominating Committee does not have a formal policy regarding diversity, as noted above, it may consider the diversity of skills, experience and/or perspective a potential nominee will bring to the Board as part of its evaluation of the contribution such potential nominee will make to the Board. Such factors will be considered in light of the other factors described above and in the context of the Board’s existing membership at the time such potential candidate is considered.

Board’s Oversight Role in Management

The Board’s role in management of the Fund is oversight. As is the case with virtually all investment companies (as distinguished from operating companies), service providers to the Fund, primarily Royce and its affiliates, have responsibility for the day-to-day management of the Fund, which includes responsibility for risk management (including management of investment performance and investment risk, valuation risk, issuer and counterparty credit risk, compliance risk and operational risk). As part of its oversight, each Board, acting at its scheduled meetings, or the Chairman of the Audit Committee, acting between Board meetings, regularly interacts with and receives reports from senior personnel of service providers, including the Fund’s and Royce’s Chief Compliance Officer and portfolio management personnel. The Board’s Audit Committee (which consists of the six Independent Trustees) meets during its scheduled meetings, and between meetings the Chairman of the Audit Committee maintains contact with the Fund’s independent registered public accounting firm and the Fund’s Vice President and Treasurer. The Board also receives periodic presentations from senior personnel of Royce or its affiliates regarding risk management generally, as well as periodic presentations regarding specific operational, compliance or investment areas such as business continuity, anti-money laundering, personal trading, valuation, investment research and securities lending. The Board also receives reports from counsel to Royce and the Board’s own independent legal counsel regarding regulatory compliance and governance matters. The Board’s oversight role does not make the Board a guarantor of the Fund’s investments or activities.

23



For the year ended December 31, 2009, the following trustees, received compensation from the Trust and/or the other funds in the group of registered investment companies comprising The Royce Funds:

Name
        Aggregate
Compensation
from the Trust
Pension or
Retirement Benefits
Accrued As Part of
Trust Expenses
    Total
Compensation from
The Royce Funds
paid to
Trustees/Directors
    Total
Compensation from
Fund Complex*
   
Patricia W. Chadwick, Trustee**
               $12,208   
N/A
   
$13,308
   
$13,308
   
Richard M. Galkin, Trustee
                 101,000   
N/A
   
137,800
   
137,800
   
Stephen L. Isaacs, Trustee
                 101,000   
N/A
   
137,800
   
137,800
   
Arthur S. Mehlman, Trustee
                 101,000   
N/A
   
137,800
   
261,550
   
David L. Meister, Trustee
                 101,000   
N/A
   
137,800
   
137,800
   
G. Peter O’Brien, Trustee
                 101,000   
N/A
   
137,800
   
251,550
   
 

*  
  Represents aggregate compensation paid to each trustee during the calendar year ended December 31, 2009 from the Fund Complex. The Fund Complex includes the 35 portfolios of The Royce Funds and the 13 portfolios of the Legg Mason Funds.

**  
  Ms. Chadwick became a Trustee of The Royce Fund, effective December 3, 2009.

Effective January 1, 2010, each of the non-interested Trustees receives a fee of $77,500 per year for serving on the Trust’s Board of Trustees plus $6,500 for each meeting of the Board attended.

Information Concerning Royce

On October 1, 2001, Royce & Associates, Inc., the Funds’ investment adviser, became an indirect wholly-owned subsidiary of Legg Mason, Inc. (“Legg Mason”). On March 31, 2002, Royce & Associates, Inc. was merged into Royce Holdings, LLC (a wholly-owned subsidiary of Legg Mason), which then changed its name to Royce & Associates, LLC. As a result of this merger, Royce & Associates, LLC became the Funds’ 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 and related financial services through its subsidiaries. As of December 31, 2009, Legg Mason’s asset management subsidiaries had aggregate assets under management of approximately $681.6 billion.

PRINCIPAL HOLDERS OF SHARES

As of September 10, 2010, the following persons were known to the Trust to be the record and/or beneficial owners of 5% or more of the outstanding shares of certain of its Funds:

24



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
Royce Pennsylvania Mutual Fund
Investment Class
                                                       
 
National Financial Services
           
76,306,861
   
Record
   
19.27%
FEBO Our Customers
                                                       
200 Liberty St, 1 World Fin. Ctr
                                                       
Attn: Mutual Fund Dept.
                                                       
New York, NY 10281
                                                       
 
Charles Schwab & Co., Inc.
           
47,541,064
   
Record
   
12.01%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Pershing LLC
           
22,661,263
   
Record
   
5.72%
P.O. Box 2052
                                                       
Jersey City, NJ 07303-2052
                                                       
 
Royce Pennsylvania Mutual Fund
Consultant Class
                                                       
 
Citigroup Global Markets
           
36,629,980
   
Record
   
44.54%
House Account
                                                       
700 Reed Brook Blvd.
                                                       
Owings Mills, MD 21117-5184
                                                       
 
Royce Pennsylvania Mutual Fund
Service Class
                                                       
 
National Financial Services
           
56,676,427
   
Record
   
77.20%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin. Ctr
                                                       
Attn: Mutual Fund Dept., 5th Fl.
                                                       
New York, NY 10281
                                                       
 
Royce Pennsylvania Mutual Fund
R Class
                                                       
 
ING Life Insurance Annuity Co.
           
147,058
   
Record
   
9.47%
1 Orange Way
                                                       
Windsor, CT 06095-4773
                                                       
 
Charles Schwab & Co., Inc.
           
121,308
   
Record
   
7.81%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
           

25



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Emjayco FBO Strategic Insight
           
97,797
   
Record
   
6.30%
8515 East Orchard Rd., 2T2
                                                       
Greenwood Village, CO 80111-5002
                                                       
 
Royce Pennsylvania Mutual Fund
K Class
                                                       
 
Nationwide Trust Company FSB
           
114,915
   
Record
   
33.58%
c/o IPO Portfolio Accounting
                                                       
P.O. Box 180229
                                                       
Columbus, OH 43218-2029
                                                       
 
MLPF&S For The Sole Benefit of
           
107,322
   
Record
   
31.36%
Its Customers
                                                       
Attn: Fund Administration
                                                       
4800 Deer Lake Drive E, Fl. 2
                                                       
Jacksonville, FL 32246-6484
                                                       
 
Fidelity Investments Institutional
           
80,746
   
Record
   
23.60%
Operations Company Inc FBO
                                                       
Actividentity 401(K) PSP
                                                       
100 Magellan Way KWIC
                                                       
Covington, KY 41015-1999
                                                       
 
Royce Micro-Cap Fund
Investment Class
                                                       
 
Charles Schwab & Co., Inc.
           
12,654,799
   
Record
   
21.00%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
National Financial Services
           
8,063,403
   
Record
   
13.38%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Citigroup Global Markets Inc.
           
6,862,709
   
Record
   
11.39%
388 Greenwich Street
                                                       
New York, NY 10013-2375
                                                       
Pershing LLC
           
4,119,998
   
Record
   
6.84%
P.O. Box 2052
                                                       
Jersey City, NJ 07303-2052
                                                       
 
Royce Micro-Cap Fund
Consultant Class
                                                       
 
Citigroup Global Markets
           
5,979,188
   
Record
   
51.22%
House Account
                                                       
700 Red Brook Blvd.
                                                       
Owings Mills, MD 21117-5184
           

26



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Royce Micro-Cap Fund
Service Class
                                                       
 
National Financial Services
           
2,383,946
   
Record
   
34.23%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Charles Schwab & Co. Inc.
           
1,388,769
   
Record
   
19.94%
Special Custody A/C FBO Customers
                                                       
Attn: Mutual Funds
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
New York Life Trust Company
           
886,345
   
Record
   
12.73%
169 Lackawanna Avenue
                                                       
Trust Admin., 2nd Floor
                                                       
Parsippany, NJ 07054-1007
                                                       
 
Royce Premier Fund
Investment Class
                                                       
 
Charles Schwab & Co., Inc.
           
55,453,397
   
Record
   
23.25%
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
National Financial Services
           
44,972,368
   
Record
   
18.85%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Citigroup Global Markets Inc.
           
27,270,270
   
Record
   
11.43%
388 Greenwich Street
                                                       
New York, NY 10013-2375
                                                       
 
Royce Premier Fund
Service Class
                                                       
 
National Financial Services
           
7,560,716
   
Record
   
28.75%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
           

27



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
ICMA Retirement Services
           
4,122,905
   
Record
   
15.68%
Vantage Trust NAV
                                                       
777 N. Capitol St., NE, Suite 600
                                                       
Washington, DC 20002-4240
                                                       
 
Saxon and Co.
           
2,034,553
   
Record
   
7.74%
P.O. Box 7780-1888
                                                       
Philadelphia, PA 19182-0001
                                                       
 
ICMA Retirement Services
           
1,456,711
   
Record
   
5.54%
Vantage Trust UNITIZED
                                                       
777 N. Capitol St., NE, Suite 600
                                                       
Washington, DC 20002-4240
                                                       
 
Charles Schwab & Co., Inc.
           
1,434,222
   
Record
   
5.45%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Royce Premier Fund
Institutional Class
                                                       
 
National Financial Services
           
8,746,177
   
Record
   
26.46%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
JP Morgan Chase Bank
           
6,314,394
   
Record
   
19.10%
c/o JPM/AC RPS
                                                       
The Interpublic Group of Co. Inc.
                                                       
Savings Plan 01/01/2003
                                                       
Attn: Management Reporting Team
                                                       
P.O. Box 419784
                                                       
Kansas City, MO 64141-6784
                                                       
 
State Street Bank and Trust TFEE
           
4,174,015
   
Record
   
12.63%
UBS Svngs & Investment Plan
                                                       
105 Rosemont Road
                                                       
Westwood, MA 02090-2318
                                                       
 
The Northern Trust Company
           
3,218,715
   
Record
   
9.74%
as Trustee FBO Nortel — DV
                                                       
P.O. Box 92994
                                                       
Chicago, IL 60675-0001
                                                       
 
Charles Schwab & Co., Inc.
           
1,655,153
   
Record
   
5.01%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
           

28



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Royce Premier Fund
W Class
                                                       
 
Prudential Investment Management
           
9,238,756
   
Record
   
48.74%
Service FBO of Mutual Fund Clients
                                                       
Attn: Pru Choice Unit
                                                       
Mail Stop 194-201
                                                       
3 Gateway Center — Suite 11
                                                       
Newark, NJ 07102-4000
                                                       
 
Wells Fargo Bank, NA FBO
           
8,387,752
   
Record
   
44.25%
Omnibus Account Cash/Cash
                                                       
P.O. Box 1533
                                                       
Minneapolis, MN 55480-1533
                                                       
 
Royce Premier Fund
R Class
                                                       
 
Charles Schwab & Co., Inc.
           
132,267
   
Record
   
34.37%
Special Custody A/C
                                                       
FBO Customers
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
TD Ameritrade Trust Company
           
62,677
   
Record
   
16.29%
P.O. Box 17748
                                                       
Denver, CO 80217-0748
                                                       
 
Emjayco
           
27,698
   
Record
   
7.20%
FBO Merritt Management
                                                       
401(k) Plan
                                                       
P.O. Box 170910
                                                       
Milwaukee, WI 53217-0909
                                                       
 
Frontier Trust Company FBO
           
25,122
   
Record
   
6.53%
Downey Communications, Inc.
                                                       
401(K)
                                                       
P.O. Box 10758
                                                       
Fargo, ND 58106-0758
                                                       
 
National Financial Services
           
20,002
   
Record
   
5.20%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
PIMS/Prudential Retirement
           
19,519
   
Record
   
5.07%
As Nominee For the TTEE/Cust
                                                       
Pl. 108
                                                       
Oblon, Spivak, McClelland, Maier
                                                       
1940 Duke Street
                                                       
Alexandria, VA 22314-3451
           

29



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Royce Premier Fund
Consultant Class
                                                       
 
Citigroup Global Markets
           
1,915,456
   
Record
   
47.87%
House Account
                                                       
700 Red Brook Blvd.
                                                       
Owings Mills, MD 21117-5184
                                                       
 
Royce Premier Fund
K Class
                                                       
 
Orchard Trust Co. LLC
           
202,709
   
Record
   
65.57%
TRUST/CUST Retirement Plans
                                                       
8515 E. Orchard Rd. 2T2
                                                       
Greenwood Vlg, CO 80111-5002
                                                       
 
Orchard Trust Co. TTEE
           
44,402
   
Record
   
14.36%
Employee Benefits Clients
                                                       
8515 E. Orchard Rd. 2T2
                                                       
Greenwood Village, CO 80111-5002
                                                       
 
Charles Schwab & Co., Inc.
           
29,056
   
Record
   
9.40%
Special Custody A/C FBO
                                                       
Customers
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Royce Low-Priced Stock Fund
Service Class
                                                       
 
National Financial Services
           
55,977,502
   
Record
   
30.26%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Charles Schwab & Co., Inc.
           
50,984,534
   
Record
   
27.56%
Reinvestment Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Royce Low-Priced Stock Fund
Institutional Class
                                                       
 
National Financial Services
           
29,578,428
   
Record
   
59.71%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       

30



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
State Street Bank & Trust Co.
           
12,794,355
   
Record
   
25.83%
Ford Motor Co. Mast TR Fund
                                                       
105 Rosemont Rd.
                                                       
Westwood, MA 02090-2318
                                                       
 
Royce Low-Priced Stock Fund
Investment Class
                                                       
 
Charles Schwab & Co. Inc.
           
2,157,615
   
Record
   
31.55%
Attn: Mutual Funds
                                                       
101 Montgomery St.
                                                       
San Francisco, CA 94104-4151
                                                       
 
National Financial Services
           
1,785,607
   
Record
   
26.11%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
MLPF&S For the Sole Benefit of
           
887,602
   
Record
   
12.98%
Its Customers
                                                       
Merrill Lynch Financial Data SV
                                                       
Attn: Fund Administration
                                                       
4800 Deer Lake Dr. E, Fl. 2
                                                       
Jacksonville, FL 32246-6484
                                                       
 
Royce Low-Priced Stock Fund
R Class
                                                       
 
Oppenheimer & Co. Inc.
           
32,100
   
Record
   
25.06%
FBO IBEW Local Union #527-PSP
                                                       
Annuity Trust FD Strategies ACC
                                                       
6820 FM 1765
                                                       
Texas City, TX 77591
                                                       
 
Dan Gold, Lars Bader, Nicholas
           
23,153
   
Record
   
18.07%
Brumm, Tracy Fu FBO
                                                       
QVT Financial LP 401K PSP
                                                       
1177 Ave. of the Americas, 9th Fl.
                                                       
New York, NY 10036-2714
                                                       
 
Charles Schwab & Co. Inc.
           
16,501
   
Record
   
12.88%
Special Custody A/C FBO
                                                       
Customers
                                                       
Attn: Mutual Funds
                                                       
101 Montgomery St.
                                                       
San Francisco, CA 94104-4151
                                                       
 
National Financial Services
           
8,291
   
Record
   
6.47%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin. Ctr
                                                       
Attn: Mutual Fund Dept. , 5th Floor
                                                       
New York, NY 10281
                                                       

31



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Royce Low-Priced Stock Fund
K Class
                                                       
 
Nationwide Trust Company FSB
           
151,157
   
Record
   
43.11%
c/o IPO Portfolio Accounting
                                                       
P.O. Box 182029
                                                       
Columbus, OH 43218-2029
                                                       
 
Frontier Trust Company FBO
           
91,074
   
Record
   
25.97%
Colorado Rockies 401K Svngs
                                                       
P.O. Box 10758
                                                       
Fargo, ND 58106-0758
                                                       
 
T. Rowe Price Trust Co.
           
49,149
   
Record
   
14.02%
FBO Retirement Plan Clients
                                                       
DTD 03/01/01
                                                       
P.O. Box 17215
                                                       
Baltimore, MD 21297-1215
                                                       
 
Charles Schwab & Co. Inc.
           
23,224
   
Record
   
6.62%
Special Custody A/C FBO
                                                       
Customers
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Royce Total Return Fund
Investment Class
                                                       
 
Charles Schwab & Co. Inc.
           
62,921,099
   
Record
   
23.01%
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
National Financial Services
           
51,120,509
   
Record
   
18.70%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Pershing LLC
           
22,427,524
   
Record
   
8.20%
P.O. Box 2052
                                                       
Jersey City, NJ 07303-2052
                                                       
 
Royce Total Return Fund
Consultant Class
                                                       
 
Citigroup Global Markets
           
15,502,813
   
Record
   
50.39%
House Account
                                                       
700 Red Brook Blvd.
                                                       
Owings Mills, MD 21117-5184
                                                       

32



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Royce Total Return Fund
Service Class
                                                       
 
National Financial Services
           
4,624,155
   
Record
   
21.20%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Vanguard Fiduciary Trust Company
           
3,983,182
   
Record
   
18.26%
Royce Funds Omnibus
                                                       
P.O. Box 2600 VM 613
                                                       
Attn: Outside Funds
                                                       
Valley Forge, PA 19482-2600
                                                       
 
Massachusetts Mutual Insurance Co.
           
1,305,078
   
Record
   
5.98%
1295 State Street
                                                       
Springfield, MA 01111-0001
                                                       
 
Charles Schwab & Co. Inc.
           
1,127,161
   
Record
   
5.17%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Royce Total Return Fund
Institutional Class
                                                       
 
Charles Schwab & Co. Inc.
           
4,446,317
   
Record
   
15.97%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
National Financial Services
           
4,284,503
   
Record
   
15.39%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
State Street Bank & Trust Company
           
3,982,353
   
Record
   
14.30%
FBO Cummins Inc. & Affiliates
                                                       
Retirement & Savings Plan
                                                       
Master Trust
                                                       
1 Heritage Drive
                                                       
Quincy, MA 02171-2105
                                                       
 
Vanguard Fiduciary Trust Company
           
2,967,341
   
Record
   
10.66%
Royce Funds Omnibus
                                                       
P.O. Box 2600 VM 613
                                                       
Attn: Outside Funds
                                                       
Valley Forge, PA 19482-2600
                                                       

33



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Wilmonton Trust RISC TEE FBO
           
2,714,207
   
Record
   
9.75%
Group Health Permanent
401K SD/MPG
                                                       
P.O. Box 52129
                                                       
Phoenix, AZ 85072-2129
                                                       
 
Parbanc Co.
           
1,741,458
   
Record
   
6.25%
514 Market Street
                                                       
Parkersburg, WV 26101-5144
                                                       
 
Royce Total Return Fund
W Class
                                                       
 
Prudential Investment Management
           
4,959,572
   
Record
   
88.94%
Service FBO of Mutual Fund Clients
                                                       
Attn: Pru Choice Unit
                                                       
Mail Stop 194-201
                                                       
3 Gateway Center, Suite 11
                                                       
Newark, NJ 07102-4000
                                                       
 
Wells Fargo Bank, NA FBO
           
512,761
   
Record
   
9.20%
Omnibus Account Cash/Cash
                                                       
P.O. Box 1533
                                                       
Minneapolis, MN 55480-1533
                                                       
 
Royce Total Return Fund
R Class
                                                       
 
Hartford Life Ins. Co.
           
299,521
   
Record
   
30.59%
Separate Account
                                                       
Attn: UIT Operations
                                                       
P.O. Box 2999
                                                       
Hartford, CT 06104-2999
                                                       
 
MG Trust Company Cust. FBO
           
92,740
   
Record
   
9.47%
The J. Craig Venter Science
                                                       
700 17th Street, Suite 300
                                                       
Denver, CO 80202-3531
                                                       
 
MG Trust Company Cust. FBO
           
89,437
   
Record
   
8.22%
McAngus, Goudelock & Courie
                                                       
700 17th Street — Suite 300
                                                       
Denver, CO 80202-3531
                                                       
 
Orchard Trust Co. TTEE
           
79,889
   
Record
   
8.16%
Employee Benefits Clients
                                                       
8515 E. Orchard Rd. 2T2
                                                       
Greenwood Village, CO 80111-5002
                                                       
 
National Financial Services
           
52,693
   
Record
   
5.38%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       

34



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
ING National Trust
           
50,053
   
Record
   
5.11%
1 Orange Way
                                                       
Windsor, CT 06095-4773
                                                       
 
Royce Total Return Fund
K Class
                                                       
 
Great West Life & Annuity
           
2,914,165
   
Record
   
49.97%
c/o Fascore LLC
                                                       
8515 E. Orchard Rd. 2T2
                                                       
Greenwood Village, CO 80111-5002
                                                       
 
Orchard Trust Co. TTEE
           
1,935,042
   
Record
   
33.18%
Employee Benefits Clients
                                                       
8515 E. Orchard Rd. 2T2
                                                       
Greenwood Village, CO 80111-5002
                                                       
 
Royce Heritage Fund
Consultant Class
                                                       
 
Citigroup Global Markets
           
392,144
   
Record
   
44.02%
House Account
                                                       
700 Red Brook Blvd.
                                                       
Owings Mills, MD 21117-5184
                                                       
 
Royce Heritage Fund
Investment Class
                                                       
 
Royce Family Investments, LLC
           
136,879
   
Record
   
16.65%
8 Sound Shore Drive, Suite 140
                                                       
Greenwich, CT 06830-7259
                                                       
 
National Financial Services
           
88,073
   
Record
   
10.71%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Trade Ctr.
                                                       
Attn: Mutual Fund Dept., 5th Fl.
                                                       
New York, NY 10281
                                                       
 
Michael Hveem TTEE
           
87,585
   
Record
   
10.65%
Marilyn J. Royce 2002 Trust
                                                       
8 Sound Shore Drive, Suite 140
                                                       
Greenwich, CT 06830-7259
                                                       
 
Charles Schwab & Co., Inc.
           
65,619
   
Record
   
7.98%
Attn: Mutual Funds
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Bea & Company Partnership
           
70,817
   
Record
   
8.61%
P.O. Box 100
                                                       
Beatrice, NE 68310-0100
           

35



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Michael Hveem TTEE
           
43,534
   
Record
   
5.29%
Amanda B. Royce 2002 Trust
                                                       
8 Sound Shore Drive, Suite 140
                                                       
Greenwich, CT 06830-7259
                                                       
 
Michael Hveem TTEE
           
43,534
   
Record
   
5.29%
Charles M. Royce Jr. 2002 Trust
                                                       
8 Sound Shore Drive, Suite 140
                                                       
Greenwich, CT 06830-7259
                                                       
 
Michael Hveem TTEE
           
43,534
   
Record
   
5.29%
Jennifer H. Royce 2002 Trust
                                                       
8 Sound Shore Drive, Suite 140
                                                       
Greenwich, CT 06830-7259
                                                       
 
Charles Schwab & Co. Inc.
           
6,175,162
   
Record
   
39.31%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Royce Heritage Fund
R Class
                                                       
 
National Financial Services
           
122,088
   
Record
   
83.98%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Frontier Trust Company FBO
           
12,254
   
Record
   
8.43%
Med Staff, Inc. 401(K) Plan
                                                       
P.O. Box 10758
                                                       
Fargo, ND 58106-0758
                                                       
 
Royce Heritage Fund
K Class
                                                       
 
Nationwide Trust Company FSB
           
313,416
   
Record
   
93.53%
c/o IPO Portfolio Accounting
                                                       
P.O. Box 182029
                                                       
Columbus, OH 43218-2029
                                                       
 
Royce Opportunity Fund
Investment Class
                                                       
 
National Financial Services
           
22,927,130
   
Record
   
22.15%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Charles Schwab & Co. Inc.
           
19,251,688
   
Record
   
18.60%
Attn. Mutual Fund Dept.
                                                       
101 Montgomery St.
                                                       
San Francisco, CA 94104-4151
           

36



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
John Hancock Life Insurance
           
13,476,442
   
Record
   
13.02%
Co. USA
                                                       
SEG Funds & Accounting ET7
                                                       
601 Congress Street
                                                       
Boston, MA 02210-2804
                                                       
 
Royce Opportunity Fund
Service Class
                                                       
 
National Financial Services
           
13,739,211
   
Record
   
52.10%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
JP Morgan Chase Bank TTEE
           
1,913,558
   
Record
   
7.26%
FBO Perot Systems Corporation
                                                       
Retirement Savings Plan
                                                       
Dated 01/01/2004
                                                       
P.O. Box 419784
                                                       
Kansas City, MO 64141-6784
                                                       
 
Charles Schwab & Co. Inc.
           
1,876,883
   
Record
   
7.12%
Reinvest Account
                                                       
Attn. Mutual Fund Dept.
                                                       
101 Montgomery St.
                                                       
San Francisco, CA 94104-4151
                                                       
 
Pershing LLC
           
1,569,241
   
Record
   
5.95%
P.O. Box 2052
                                                       
Jersey City, NJ 07303-2052
                                                       
 
Vanguard Fiduciary Trust Company
           
1,333,160
   
Record
   
5.66%
Royce Funds Omnibus
                                                       
P.O. Box 2600 VM 613
                                                       
Attn: Outside Funds
                                                       
Valley Forge, PA 19482-2600
                                                       
 
Royce Opportunity Fund
Institutional Class
                                                       
 
The Northern Trust Co.
           
27,662,559
   
Record
   
49.68%
Accenture LLP
                                                       
P.O. Box 92994
                                                       
Chicago, IL 60675-0001
                                                       

37



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Reliance Trust Company
           
7,590,328
   
Record
   
13.63%
FBO North Shore Long Island
                                                       
Jewish Health System 403B Plan
                                                       
c/o Fascorp.
                                                       
8515 E. Orchard Rd, 2T2
                                                       
Greenwood Vlg, CO 80111-5002
                                                       
 
FEBO Our Customers
           
7,485,027
   
Record
   
13.44%
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Royce Opportunity Fund
Consultant Class
                                                       
 
Citigroup Global Markets
           
443,963
   
Record
   
41.34%
House Account
                                                       
700 Red Brook Blvd.
                                                       
Owings Mills, MD 21117-5184
                                                       
 
Royce Opportunity Fund
R Class
                                                       
 
Counsel Trust DBA MATC FBO
           
14,959
   
Record
   
18.95%
Schagrin Gas Co. 401(K) Profit
                                                       
Sharing Plan & Trust
                                                       
1251 Waterfront Pl, Suite 525
                                                       
Pittsburgh, PA 15222-4228
                                                       
 
ING National Trust
           
11,283
   
Record
   
14.30%
1 Orange Way
                                                       
Windsor, CT 06095-4773
                                                       
 
Jeff McMahon FBO Mario
           
7,047
   
Record
   
8.93%
Camacho Foods, LLC 401(K)
                                                       
Profit Sharing Plan & Trust
                                                       
2502 Walden Woods Dr.
                                                       
Plant City, FL 33566-7167
                                                       
 
ING
           
5,632
   
Record
   
7.14%
Enhanced K-Choice
                                                       
Trustee: Reliance Trust Company
                                                       
400 Atrium Drive
                                                       
Somerset, NJ 08873-4162
                                                       
 
MG Trust Company Cust. FBO
           
4,815
   
Record
   
6.10%
Val’s Ocean Pacific Seafood Inc.
                                                       
700 17th Street, Suite 300
                                                       
Denver, CO 80202-3531
                                                       

38



Fund
        Number
of Shares
    Type of
Ownership
    Percentage of
Outstanding Shares
                                           
Royce Opportunity Fund
K Class
                                                       
 
National Financial Services
           
260,483
   
Record
   
57.87%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
Nationwide Trust Company FSB
           
111,726
   
Record
   
24.82%
c/o IPO Portfolio Accounting
                                                       
P.O. Box 182029
                                                       
Columbus, OH 43218-2029
                                                       
 
ING National Trust
           
59,080
   
Record
   
13.13%
1 Orange Way
                                                       
Windsor, CT 06095-4773
                                                       
 
Royce Special Equity Fund
Service Class
                                                       
 
Charles Schwab & Co. Inc.
           
1,653,649
   
Record
   
24.08%
Reinvest Account
                                                       
Attn: Mutual Fund Dept.
                                                       
101 Montgomery Street
                                                       
San Francisco, CA 94104-4151
                                                       
 
Pershing LLC
           
678,493
   
Record
   
9.88%
P.O. Box 2052
                                                       
Jersey City, NJ 07303-2052
                                                       
 
National Financial Services
           
552,462
   
Record
   
8.05%
FEBO Our Customers
                                                       
200 Liberty St., 1 World Fin Ctr
                                                       
Attn: Mutual Fund Dept., 5th Floor
                                                       
New York, NY 10281
                                                       
 
DCGT as Ttee and/or Cust
           
408,641
   
Record
   
5.95%
FBO Principal Financial Group
                                                       
Qualified FIA Omnibus
                                                       
Attn: NPIO Trade Desk
                                                       
711 High Street
                                                       
Des Moines, IA 50392-0001
           

39



Fund
        Number
of Shares
    Type of
Ownership